1 00:00:00,520 --> 00:00:03,760 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,880 --> 00:00:07,080 Speaker 1: to the markets this week U S CPI nemers reinforcing 3 00:00:07,160 --> 00:00:10,639 Speaker 1: concerns about inflation. The financial stories that chief are worth 4 00:00:10,720 --> 00:00:13,760 Speaker 1: a really different reaction to markets. More indications of just 5 00:00:13,960 --> 00:00:16,319 Speaker 1: how hot the U. S economy really is. Through the 6 00:00:16,400 --> 00:00:19,799 Speaker 1: eyes of the most influential voices Larry Summers, the former 7 00:00:19,800 --> 00:00:22,880 Speaker 1: Treachery Secretary, Katherine Keating, CEO of v n Y Moms, 8 00:00:22,960 --> 00:00:26,239 Speaker 1: Sam's l Sharon and founder of Equity Group Investment. In 9 00:00:26,320 --> 00:00:30,280 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio. 10 00:00:31,000 --> 00:00:33,840 Speaker 1: As fall sets in a decided turn in the air 11 00:00:34,080 --> 00:00:36,760 Speaker 1: for the new British government's designs for the economy, for 12 00:00:36,880 --> 00:00:40,440 Speaker 1: Elon Musk's designs on Twitter, and most decidedly for Mr 13 00:00:40,479 --> 00:00:44,000 Speaker 1: Plutin's designs on Ukraine. This is Bloomberg Wall Street Week. 14 00:00:44,080 --> 00:00:47,400 Speaker 1: I'm David Weston. We had our fair share of about 15 00:00:47,520 --> 00:00:50,440 Speaker 1: faces this week with the Bank of England's quick intervention 16 00:00:50,479 --> 00:00:53,240 Speaker 1: to save the guilt market, as explained by former MPC 17 00:00:53,440 --> 00:00:56,360 Speaker 1: member Kristen Forbes of m I, T seems that they 18 00:00:56,360 --> 00:00:59,560 Speaker 1: are worried that because of the big market moves, there 19 00:00:59,560 --> 00:01:02,720 Speaker 1: could be some margin calls, um some pressures for for 20 00:01:02,920 --> 00:01:05,560 Speaker 1: selling that could cause the guilt market to freeze up, 21 00:01:05,800 --> 00:01:08,440 Speaker 1: and British Prime Minister Liz Trust giving up at least 22 00:01:08,480 --> 00:01:12,039 Speaker 1: part of her economic program. It was becoming a destruction. 23 00:01:12,319 --> 00:01:15,600 Speaker 1: So that's why we immediately change that policy, and that's 24 00:01:15,600 --> 00:01:18,399 Speaker 1: the kind of government we all. But as ugly as 25 00:01:18,400 --> 00:01:21,760 Speaker 1: the situation was in UK markets, it was nothing compared 26 00:01:21,800 --> 00:01:25,120 Speaker 1: with the setbacks for Russian forces in eastern and southern Ukraine, 27 00:01:25,400 --> 00:01:28,920 Speaker 1: with President Putin's efforts to quote annex territory that his 28 00:01:29,040 --> 00:01:32,360 Speaker 1: forces didn't even control, which Admiral John Kirby at the 29 00:01:32,440 --> 00:01:35,360 Speaker 1: NSC looks at as an indication that Mr Putin just 30 00:01:35,480 --> 00:01:39,160 Speaker 1: may be coming to understand how difficult his situation really is. 31 00:01:39,640 --> 00:01:44,480 Speaker 1: The annexation announcements, as well as his announcement of partial mobilization, 32 00:01:44,640 --> 00:01:47,760 Speaker 1: certainly shows the degree to which Mr Putin knows how 33 00:01:47,840 --> 00:01:51,360 Speaker 1: much he's struggling inside Ukraine, and OPEC plus weighed in 34 00:01:51,400 --> 00:01:54,480 Speaker 1: with its own changes, cutting production caps by two million 35 00:01:54,480 --> 00:01:57,840 Speaker 1: barrels a day, or about seven percent, putting even more 36 00:01:57,880 --> 00:02:00,240 Speaker 1: pressure on Europe and the rest of a war world 37 00:02:00,280 --> 00:02:05,240 Speaker 1: already worried about energy, while we were disappointed that OPEC 38 00:02:05,760 --> 00:02:08,639 Speaker 1: made this decision. As the President mentioned, I think it's 39 00:02:09,000 --> 00:02:13,200 Speaker 1: unnecessary if you look at the global environment, where supply 40 00:02:13,400 --> 00:02:17,040 Speaker 1: continues to be the predominant challenge. Then there's Elon Musk. 41 00:02:17,200 --> 00:02:20,400 Speaker 1: He offered forty four billion dollars for Twitter back in April, 42 00:02:20,560 --> 00:02:23,679 Speaker 1: then decided to reneg got sued, and on the eve 43 00:02:23,720 --> 00:02:27,080 Speaker 1: of his deposition, returned to his original offer, even though 44 00:02:27,080 --> 00:02:30,120 Speaker 1: it looks like he's going to be way overpaying in 45 00:02:30,160 --> 00:02:33,359 Speaker 1: many ways. This is almost the most expected outcome of all, 46 00:02:33,360 --> 00:02:36,840 Speaker 1: which is settling on the eve of trial, just before deposition. 47 00:02:36,880 --> 00:02:40,040 Speaker 1: Of the main players, Elon must himself he doesn't want 48 00:02:40,040 --> 00:02:43,120 Speaker 1: to be deposed. He has, you know, probably some embarrassing 49 00:02:43,160 --> 00:02:46,600 Speaker 1: text messages and conflicting statements and all of that would 50 00:02:46,600 --> 00:02:51,120 Speaker 1: make for a very unpleasant decision crowd. But after all 51 00:02:51,160 --> 00:02:53,320 Speaker 1: the back and forth, this week, US jobs and members 52 00:02:53,320 --> 00:02:56,320 Speaker 1: actually came in surprisingly on course, adding two and sixty 53 00:02:56,400 --> 00:02:58,960 Speaker 1: three thousand new jobs, just slightly more than expected, with 54 00:02:59,080 --> 00:03:01,679 Speaker 1: workers paid five percent more than they were last year, 55 00:03:01,800 --> 00:03:04,800 Speaker 1: and a reduction the unemployment rate to three. Here to 56 00:03:04,880 --> 00:03:07,280 Speaker 1: walk us through this week and what got us here 57 00:03:07,400 --> 00:03:10,520 Speaker 1: are Aaron Brown, portfolio manager at PIMCO, and Chris Allman, 58 00:03:10,600 --> 00:03:13,320 Speaker 1: Chief Investment Officer, Ed Kelster. So, Chris, let me start 59 00:03:13,360 --> 00:03:16,480 Speaker 1: with you. Boy, given what we're seeing right now, are 60 00:03:16,480 --> 00:03:20,360 Speaker 1: we looking at a long, cold winter? Would you say? Unfortunately, David, 61 00:03:20,400 --> 00:03:23,080 Speaker 1: I think we are. Um. I think the Fed, you know, 62 00:03:23,120 --> 00:03:25,800 Speaker 1: with these employment numbers, the Fed knows that they have 63 00:03:25,880 --> 00:03:29,680 Speaker 1: to continue this pace of aggressive tightening and they're going 64 00:03:29,720 --> 00:03:32,400 Speaker 1: to do so the next meeting and the next senning 65 00:03:32,440 --> 00:03:35,120 Speaker 1: after that, and I think which the street is pricing in, 66 00:03:35,560 --> 00:03:37,360 Speaker 1: but I think after that they're going to have to 67 00:03:37,440 --> 00:03:39,120 Speaker 1: keep it up and that's going to be into the 68 00:03:39,160 --> 00:03:41,040 Speaker 1: winter and it's going to be a tough time. So 69 00:03:41,120 --> 00:03:43,280 Speaker 1: what do you say, Aaron, is it going to be 70 00:03:43,280 --> 00:03:45,000 Speaker 1: a rough winter? I think it is going to be 71 00:03:45,040 --> 00:03:47,480 Speaker 1: a rough winter. I think that they're fans of uncertainty 72 00:03:47,480 --> 00:03:50,440 Speaker 1: are quite wide. For next year, the Fed is tightening 73 00:03:50,760 --> 00:03:53,920 Speaker 1: into an economic slowdown and we haven't even seen the 74 00:03:53,960 --> 00:03:56,880 Speaker 1: real impact of that slowdown yet. We're just starting to 75 00:03:56,920 --> 00:04:00,880 Speaker 1: see signs of a gradual slowing, but like will continue 76 00:04:00,920 --> 00:04:03,400 Speaker 1: to see that into next year, and we think that 77 00:04:03,440 --> 00:04:07,640 Speaker 1: we're heading into a recession into early and at that 78 00:04:07,760 --> 00:04:11,080 Speaker 1: same point, just given the level of inflation, the Federal 79 00:04:11,160 --> 00:04:14,280 Speaker 1: Reserve is now really challenged to be able to arrest 80 00:04:14,320 --> 00:04:17,640 Speaker 1: that inflation get it under control despite what happens to 81 00:04:17,680 --> 00:04:20,160 Speaker 1: the economy. So I think that really poses a challenge 82 00:04:20,200 --> 00:04:24,240 Speaker 1: for the FED, and we'll likely see something that's fairly unprecedented, 83 00:04:24,279 --> 00:04:28,799 Speaker 1: which is continued financial conditions tightening and FED tightening into 84 00:04:28,839 --> 00:04:32,960 Speaker 1: an economic slowdown, even if it really leads to a 85 00:04:33,040 --> 00:04:36,760 Speaker 1: harder landing than what the Fed's anticipating. And Aarin I 86 00:04:36,839 --> 00:04:39,000 Speaker 1: pushed back a little bit. I actually think we're in 87 00:04:39,040 --> 00:04:42,800 Speaker 1: a recession right now. It's not a very strong one, um, 88 00:04:42,839 --> 00:04:44,440 Speaker 1: and it doesn't hurt a lot. I would so an 89 00:04:44,440 --> 00:04:47,279 Speaker 1: employment growing, you know, but we did have a negative 90 00:04:47,320 --> 00:04:51,000 Speaker 1: GDP in the second quarter, third quarters mild to me, 91 00:04:51,080 --> 00:04:54,120 Speaker 1: anything below one percent in the USA feels like a recession. 92 00:04:54,600 --> 00:04:56,640 Speaker 1: But so what you're saying is you think it's going 93 00:04:56,680 --> 00:04:59,160 Speaker 1: to be a really will actually have a good, traditional 94 00:04:59,240 --> 00:05:04,240 Speaker 1: hard get overse session with rising unemployment, which is exactly 95 00:05:04,279 --> 00:05:07,920 Speaker 1: what Powell has said. I mean that's his forecast. Yeah, 96 00:05:07,960 --> 00:05:10,600 Speaker 1: I think that's right. I mean, my our view at 97 00:05:10,600 --> 00:05:13,760 Speaker 1: PIMCO is that will likely see unemployment rise to about 98 00:05:13,800 --> 00:05:18,000 Speaker 1: five percent by the end of and so right now 99 00:05:18,120 --> 00:05:20,800 Speaker 1: we're sort of seeing some of those early signs, but 100 00:05:20,839 --> 00:05:23,679 Speaker 1: we really haven't seen the full brunt of financial condition 101 00:05:23,760 --> 00:05:27,159 Speaker 1: tightening yet. That's more to come. So we are going 102 00:05:27,200 --> 00:05:29,440 Speaker 1: to continue to see as slow down, and I think 103 00:05:29,440 --> 00:05:31,680 Speaker 1: that's really going to hit in the first quarter of 104 00:05:31,800 --> 00:05:35,400 Speaker 1: next year and into the second quarter of Chris, given 105 00:05:35,440 --> 00:05:37,320 Speaker 1: where we are with inflation right now. Loo concerns about 106 00:05:37,320 --> 00:05:39,560 Speaker 1: inflation if we are heading an inter session or even 107 00:05:39,560 --> 00:05:41,960 Speaker 1: are already in one, no matter how long it is 108 00:05:42,040 --> 00:05:44,040 Speaker 1: or how short it is, what are the tools the 109 00:05:44,120 --> 00:05:46,039 Speaker 1: Fed has to use, Because typically you turn to the 110 00:05:46,040 --> 00:05:48,080 Speaker 1: Fed and say, okay, start cutting interest rates. It doesn't 111 00:05:48,080 --> 00:05:49,760 Speaker 1: look like they're going to do that. In the likelihood 112 00:05:50,920 --> 00:05:53,359 Speaker 1: they're gonna raise interest rates. They only have one tool 113 00:05:53,680 --> 00:05:56,559 Speaker 1: they have well, they have their mouth that can job 114 00:05:56,680 --> 00:05:58,599 Speaker 1: on the market, which is what they're doing. They have 115 00:05:58,640 --> 00:06:01,400 Speaker 1: the dot plot, which is going to indicate or direct 116 00:06:01,440 --> 00:06:03,680 Speaker 1: the market, but there really the only tool they have 117 00:06:03,720 --> 00:06:06,640 Speaker 1: is short term ingistrates and the FED funds rate. Uh 118 00:06:06,680 --> 00:06:09,480 Speaker 1: and that's what they're using aggressively. I mean, good Greek 119 00:06:09,560 --> 00:06:13,279 Speaker 1: seventy basis points. Those are big balances. Do you know 120 00:06:13,400 --> 00:06:16,000 Speaker 1: through history you've gotta go way back before you have 121 00:06:16,080 --> 00:06:19,560 Speaker 1: that aggressive tightening of monetary policy and they have to 122 00:06:19,640 --> 00:06:23,560 Speaker 1: shrink the balance sheet. So as they moved through that, 123 00:06:23,920 --> 00:06:26,560 Speaker 1: you know, he's already said he's going to hurt employment. 124 00:06:27,279 --> 00:06:30,279 Speaker 1: Yet we have stronger numbers. I think the numbers there's 125 00:06:30,320 --> 00:06:33,760 Speaker 1: something strange in the numbers this week, just like last month. 126 00:06:33,839 --> 00:06:37,520 Speaker 1: But we'll see how that balances out. We're gonna have 127 00:06:38,080 --> 00:06:41,440 Speaker 1: a tougher time, and you know, I think the question 128 00:06:41,520 --> 00:06:43,600 Speaker 1: is going to be about corporate earnings. You've got cp 129 00:06:43,640 --> 00:06:45,680 Speaker 1: I next week, and then you've got the bank starting 130 00:06:45,720 --> 00:06:48,040 Speaker 1: to roll out with their earnings. Okay, we're gonna pick 131 00:06:48,120 --> 00:06:50,640 Speaker 1: up exactly that question, where do you hide in this environment? 132 00:06:51,040 --> 00:06:53,120 Speaker 1: Chris Ailman and Aaron Brown will be staying with us. 133 00:06:53,240 --> 00:06:56,080 Speaker 1: We're gonna ask for them them for some investment advice. 134 00:06:56,120 --> 00:06:57,760 Speaker 1: We could use it, that's for sure. That's the next 135 00:06:57,800 --> 00:07:04,360 Speaker 1: time Wall Street Week here on Bloomberg. This is Bloomberg 136 00:07:04,440 --> 00:07:09,440 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. The 137 00:07:09,520 --> 00:07:12,640 Speaker 1: facts on unemployment seemed clear enough, or at least as 138 00:07:12,680 --> 00:07:16,640 Speaker 1: clear as that changing social definition ever can be. The 139 00:07:16,720 --> 00:07:20,320 Speaker 1: situation is gained a little better, but not much. The 140 00:07:20,400 --> 00:07:23,680 Speaker 1: government announced today that the overall unemployment rate last month 141 00:07:23,840 --> 00:07:27,200 Speaker 1: was six pot nine. The official unemployment rate has been 142 00:07:27,240 --> 00:07:30,440 Speaker 1: stuck within a tenth of seven percent for six months, 143 00:07:30,880 --> 00:07:35,120 Speaker 1: and that scarcely represents the massive reduction of unemployment that 144 00:07:35,240 --> 00:07:37,640 Speaker 1: at least some folks thought they heard Jimmy Carter promise 145 00:07:37,920 --> 00:07:41,600 Speaker 1: a year ago. That was Lewis Kaiser on Wall Street 146 00:07:41,600 --> 00:07:44,960 Speaker 1: week back in October of ninety seven, when the unemployment 147 00:07:45,080 --> 00:07:47,320 Speaker 1: rate was twice what it is today and we were 148 00:07:47,360 --> 00:07:50,040 Speaker 1: trying to get it down rather than focusing on inflation 149 00:07:50,120 --> 00:07:52,480 Speaker 1: whatever that ends up meaning for employment. And if that 150 00:07:52,560 --> 00:07:55,160 Speaker 1: seems like a galaxy far far away, well maybe that's 151 00:07:55,160 --> 00:07:59,000 Speaker 1: no accident. The top movie this week back in was 152 00:07:59,080 --> 00:08:01,920 Speaker 1: Star Wars, and the top song on the charts was 153 00:08:02,120 --> 00:08:04,800 Speaker 1: You Got It the Star Wars theme. Still with us 154 00:08:04,800 --> 00:08:07,760 Speaker 1: are Aaron Brown and Pimco and Chris Ailment of Calistro. So, Aaron, 155 00:08:07,800 --> 00:08:09,040 Speaker 1: let me turn to you and pick up on where 156 00:08:09,040 --> 00:08:11,080 Speaker 1: we were talking just now with Chris. But where you 157 00:08:11,200 --> 00:08:13,960 Speaker 1: hide if you're really an asset here? You said cash 158 00:08:14,040 --> 00:08:17,040 Speaker 1: is one alternative? Are there things though, that involve at 159 00:08:17,120 --> 00:08:19,280 Speaker 1: least some risk that you go to? And how much 160 00:08:19,280 --> 00:08:21,320 Speaker 1: it depends on what you think the recovery is gonna 161 00:08:21,320 --> 00:08:23,080 Speaker 1: look like whenever it comes. So I'm gonna flip that 162 00:08:23,160 --> 00:08:26,440 Speaker 1: sort of question and answer the second question first, which 163 00:08:26,480 --> 00:08:30,160 Speaker 1: is unlike prior recessions that we've seen in very recent history. 164 00:08:30,240 --> 00:08:32,600 Speaker 1: So think of the global financial crisis or even the 165 00:08:32,640 --> 00:08:35,920 Speaker 1: pandemic of I don't think this is going to be 166 00:08:35,920 --> 00:08:38,160 Speaker 1: a V shaped recovery. I think this is going to 167 00:08:38,240 --> 00:08:40,880 Speaker 1: be more of a pro monged you know, sort of 168 00:08:41,000 --> 00:08:43,920 Speaker 1: stalling of the economy and more of an L shaped 169 00:08:43,960 --> 00:08:46,560 Speaker 1: recovery than what we've seen in the past. And the 170 00:08:46,640 --> 00:08:50,079 Speaker 1: reason for that is because inflation is high and it's 171 00:08:50,160 --> 00:08:53,200 Speaker 1: likely to persist at high levels, You're not going to 172 00:08:53,280 --> 00:08:55,960 Speaker 1: come in and see the FED start cutting, you know, 173 00:08:56,080 --> 00:08:59,800 Speaker 1: as the unemployment rises like we've seen in the past. Instead, 174 00:09:00,280 --> 00:09:02,960 Speaker 1: because the the FED is you know, moved from a 175 00:09:03,040 --> 00:09:05,960 Speaker 1: dual mandate FED to a single mandate FED, really just 176 00:09:06,040 --> 00:09:09,640 Speaker 1: focus on getting the inflation right down, you'll likely see 177 00:09:10,400 --> 00:09:13,040 Speaker 1: you won't see this sort of immediate relief that we've 178 00:09:13,040 --> 00:09:15,320 Speaker 1: seen in recent history. And so that does change a 179 00:09:15,320 --> 00:09:17,760 Speaker 1: little bit the landscape of how you think about investing. 180 00:09:18,000 --> 00:09:21,280 Speaker 1: You know, Historically, as we start to get closer to 181 00:09:21,480 --> 00:09:23,839 Speaker 1: what we expect the bottom level of the SMP five 182 00:09:23,920 --> 00:09:26,800 Speaker 1: hundred to be we start to you know, scale risk 183 00:09:26,880 --> 00:09:29,720 Speaker 1: back up, start to move back into equity investments to 184 00:09:29,760 --> 00:09:32,640 Speaker 1: catch that recovery to the upside. And this time around, 185 00:09:32,679 --> 00:09:34,480 Speaker 1: I think you have to be a little bit more patient. 186 00:09:34,960 --> 00:09:38,400 Speaker 1: So instead, what we're really looking at is fixed income 187 00:09:38,440 --> 00:09:40,680 Speaker 1: investments that we think are going to be able to 188 00:09:40,720 --> 00:09:44,240 Speaker 1: sort of stand at the test of time, be able 189 00:09:44,280 --> 00:09:47,200 Speaker 1: to sort of hide out in a safe haven assets. 190 00:09:47,480 --> 00:09:49,920 Speaker 1: So beyond just looking at cash, we're looking at high 191 00:09:49,960 --> 00:09:54,640 Speaker 1: quality investment grade corporates. We're looking at municipalities, municipal bonds, 192 00:09:54,840 --> 00:09:57,880 Speaker 1: you know, particularly for those who are can take advantage 193 00:09:57,880 --> 00:10:01,000 Speaker 1: of the tax advantages. Tax advantage bonds UM we think 194 00:10:01,040 --> 00:10:03,800 Speaker 1: offer good value there at a sort of after tax 195 00:10:03,880 --> 00:10:06,800 Speaker 1: yield of six and a half percent, you know. In addition, 196 00:10:06,880 --> 00:10:10,680 Speaker 1: we also like UM some mortgage agency bonds and structured 197 00:10:10,679 --> 00:10:14,160 Speaker 1: credit bonds as well. And then sort of high quality 198 00:10:14,200 --> 00:10:18,840 Speaker 1: equities that are defensive equities, high free cash flow, dividend growth, 199 00:10:19,040 --> 00:10:22,200 Speaker 1: strong balance sheets we also think to do well in 200 00:10:22,200 --> 00:10:24,760 Speaker 1: this environment. But you know, it is a sort of 201 00:10:24,840 --> 00:10:28,520 Speaker 1: challenging time for investors where you have to skew more 202 00:10:28,600 --> 00:10:32,240 Speaker 1: towards fixed income in order to have stability of return 203 00:10:32,640 --> 00:10:35,559 Speaker 1: as opposed to looking for a quick snapback in equities. 204 00:10:35,559 --> 00:10:37,720 Speaker 1: But you know, I posed a question to Chris because 205 00:10:37,760 --> 00:10:41,719 Speaker 1: I know he also manages a diversified portfolio. Chris, where 206 00:10:41,760 --> 00:10:44,600 Speaker 1: are you looking at? What type of sort of diversification 207 00:10:45,000 --> 00:10:47,360 Speaker 1: that are you looking at in order to sort of 208 00:10:47,440 --> 00:10:51,040 Speaker 1: hide out over the next couple of quarters. Well, Aaron, 209 00:10:51,120 --> 00:10:52,920 Speaker 1: you know, I've got the benefit of being able to 210 00:10:52,960 --> 00:10:56,040 Speaker 1: go into private security. So I've got a good sized 211 00:10:56,080 --> 00:10:59,720 Speaker 1: real estate portfolio. We have a large private equity portfolios. 212 00:10:59,760 --> 00:11:02,880 Speaker 1: Sure it's gonna have right downs, but its value is 213 00:11:03,000 --> 00:11:06,400 Speaker 1: a bit more stable than we see in the public markets. Um, 214 00:11:06,520 --> 00:11:08,719 Speaker 1: we have a cash position, but the problem is for 215 00:11:08,880 --> 00:11:13,320 Speaker 1: US cash is not outperforming inflation. So the old adage 216 00:11:13,360 --> 00:11:16,640 Speaker 1: cash is trash is still true. Um. We do like 217 00:11:16,960 --> 00:11:19,079 Speaker 1: private credit. You were kind of hitting on that that, 218 00:11:19,280 --> 00:11:23,920 Speaker 1: you know, variable rate debt, short term debt with high quality, 219 00:11:24,000 --> 00:11:27,320 Speaker 1: and I think collateral is going to be key because, 220 00:11:27,400 --> 00:11:30,439 Speaker 1: as you said, we're gonna have a long rough winter. Uh, 221 00:11:30,480 --> 00:11:32,360 Speaker 1: so you don't want to be loaning money to everybody. 222 00:11:32,400 --> 00:11:35,560 Speaker 1: You have to do care about covenance, but it is 223 00:11:35,600 --> 00:11:38,560 Speaker 1: tough in this environment. I mean, you know, if the 224 00:11:38,600 --> 00:11:42,760 Speaker 1: economy is slowing, and inflation is still strong. That's stag inflation. 225 00:11:43,200 --> 00:11:46,080 Speaker 1: And you look back in the seventies. I gotta say, 226 00:11:47,080 --> 00:11:49,360 Speaker 1: I love that suit that that Lou had. I don't 227 00:11:49,360 --> 00:11:51,440 Speaker 1: know where you get that back in the seventies, but 228 00:11:51,920 --> 00:11:54,880 Speaker 1: I'm stunned by it. But you know, you look back 229 00:11:54,880 --> 00:11:57,800 Speaker 1: in that time period, returns in seventies seven were terrible. 230 00:11:58,000 --> 00:12:01,120 Speaker 1: We're hard places to It was just a very tough 231 00:12:01,160 --> 00:12:05,320 Speaker 1: time to hide anywhere. Yeah, So I'm curious though exactly, 232 00:12:05,320 --> 00:12:07,240 Speaker 1: But when you go into fixed income do you think 233 00:12:07,280 --> 00:12:11,720 Speaker 1: the price is attractive now in some fixed income Chris Well, 234 00:12:11,800 --> 00:12:13,880 Speaker 1: I agree with Aaron. I'm gonna go short. I'm not 235 00:12:13,880 --> 00:12:18,200 Speaker 1: gonna go long fixed income and take duration exposure short 236 00:12:18,320 --> 00:12:20,320 Speaker 1: term credits. I mean, you've can hold a credit for 237 00:12:20,320 --> 00:12:23,439 Speaker 1: two to three years and then it's money good. And 238 00:12:23,559 --> 00:12:26,480 Speaker 1: as she said, you're gonna put it in a spread products. 239 00:12:26,480 --> 00:12:29,439 Speaker 1: So you pick up a couple of basis points by 240 00:12:29,480 --> 00:12:32,480 Speaker 1: being in the corporate You're okay. There's still a lot 241 00:12:32,480 --> 00:12:35,160 Speaker 1: of money, David, international money that wants to come into 242 00:12:35,240 --> 00:12:38,480 Speaker 1: this market, non us rather that wants to come into 243 00:12:38,520 --> 00:12:40,880 Speaker 1: the market. You saw it in the this week where 244 00:12:40,920 --> 00:12:43,760 Speaker 1: it suddenly comes rushing in. So I would give the 245 00:12:43,800 --> 00:12:46,800 Speaker 1: advice to the average investors, You've got to slowly average 246 00:12:46,840 --> 00:12:49,120 Speaker 1: cost in. You're not gonna be able to call the bottom. 247 00:12:49,840 --> 00:12:52,200 Speaker 1: As much as Aaron I think there's a support number, 248 00:12:52,600 --> 00:12:54,720 Speaker 1: it may not hit that at all, and the market 249 00:12:54,760 --> 00:12:57,640 Speaker 1: is going to just bounce along and and an Aaron's 250 00:12:57,720 --> 00:13:00,599 Speaker 1: example of an L and L goes on forever and 251 00:13:00,559 --> 00:13:02,640 Speaker 1: it's just flat. I hope we don't have to live 252 00:13:02,679 --> 00:13:05,640 Speaker 1: in a flat recession for years and years that I 253 00:13:05,679 --> 00:13:07,280 Speaker 1: think this is going to be a tough market to 254 00:13:07,280 --> 00:13:10,440 Speaker 1: find any kind of growth opportunities. Uh So, you want 255 00:13:10,440 --> 00:13:12,920 Speaker 1: a protection and a return of your money rather than 256 00:13:12,960 --> 00:13:14,760 Speaker 1: return on your money are in. One of the big 257 00:13:14,800 --> 00:13:17,120 Speaker 1: development this week was OPEC plus and what they did 258 00:13:17,520 --> 00:13:19,600 Speaker 1: it certainly seemed to stun the White House of the time. 259 00:13:20,120 --> 00:13:23,600 Speaker 1: What it tells about geopolitical risk generally and specifically energy. 260 00:13:23,880 --> 00:13:25,600 Speaker 1: It looks like oil princes are going to stay up 261 00:13:25,640 --> 00:13:27,160 Speaker 1: there for a while. I think that's one of the 262 00:13:27,200 --> 00:13:29,880 Speaker 1: things that the market is really mispricing right now. If 263 00:13:29,920 --> 00:13:32,360 Speaker 1: you look at the throw word curve for oil, the 264 00:13:32,520 --> 00:13:35,480 Speaker 1: risk is really in the sort of very short term 265 00:13:35,559 --> 00:13:37,400 Speaker 1: where the market expects that oil is going to be 266 00:13:37,440 --> 00:13:40,120 Speaker 1: elevated for the short term, but it really hasn't extrapolated 267 00:13:40,200 --> 00:13:44,480 Speaker 1: or extended that expectation out the next one to two years. 268 00:13:44,720 --> 00:13:46,720 Speaker 1: And I think that there's a real value in sort 269 00:13:46,720 --> 00:13:48,920 Speaker 1: of the back end of the curve for oil because 270 00:13:49,160 --> 00:13:51,720 Speaker 1: I think that these oil challenges are going to persist 271 00:13:51,920 --> 00:13:55,200 Speaker 1: much longer than what the markets anticipating. One of the 272 00:13:55,200 --> 00:13:57,319 Speaker 1: reasons for that is, you know, first we saw out 273 00:13:57,320 --> 00:14:01,040 Speaker 1: of oil OPEC plus this week, our intention to keep 274 00:14:01,080 --> 00:14:04,200 Speaker 1: prices elevated. But I think the other challenges is that 275 00:14:04,240 --> 00:14:06,840 Speaker 1: we really haven't invested here in the US or on 276 00:14:06,880 --> 00:14:10,360 Speaker 1: a global basis on energy infrastructure, so that capacity is 277 00:14:10,400 --> 00:14:13,960 Speaker 1: really constrained over the next couple of years. Even if 278 00:14:14,000 --> 00:14:17,200 Speaker 1: we wanted to expand capacity, or oil producers wanted to 279 00:14:17,240 --> 00:14:20,200 Speaker 1: expand capacity, they don't have the ability to do so 280 00:14:20,440 --> 00:14:23,320 Speaker 1: in the immediate term, and that's going to keep oil 281 00:14:23,320 --> 00:14:26,880 Speaker 1: prices elevated. So the risk for oil, then the risk 282 00:14:26,920 --> 00:14:30,320 Speaker 1: for the energy complex broadly isn't just this winter, but 283 00:14:30,400 --> 00:14:33,680 Speaker 1: it's next winter as well, and next winter's challenges are 284 00:14:33,680 --> 00:14:36,160 Speaker 1: going to be even more difficult, particularly on the shores 285 00:14:36,200 --> 00:14:39,360 Speaker 1: of Europe um than what we're experiencing this winter, And 286 00:14:39,400 --> 00:14:42,760 Speaker 1: so that's what I think the challenges and you know why, 287 00:14:42,880 --> 00:14:45,400 Speaker 1: I think this is something that's going to persist much 288 00:14:45,480 --> 00:14:48,000 Speaker 1: longer than what the market is currently priced in. Thank 289 00:14:48,040 --> 00:14:52,200 Speaker 1: you so much to Aaron Brown and Chris Alman. Coming up, 290 00:14:52,240 --> 00:14:54,320 Speaker 1: we'll wrap up the week with our special contributor to 291 00:14:54,360 --> 00:14:56,880 Speaker 1: Larry Summers are Harvard. That's really up next on Wall 292 00:14:56,880 --> 00:15:03,160 Speaker 1: Street Week on Bloomberg. This is Bloomberg Wall Street Week 293 00:15:03,360 --> 00:15:07,320 Speaker 1: with David Weston from Bloomberg Radio. Every week we turned 294 00:15:07,320 --> 00:15:09,760 Speaker 1: to Larry Summers of Harvard, are very special contributor here 295 00:15:09,760 --> 00:15:11,640 Speaker 1: on Wall Street Week to help us some up the 296 00:15:11,760 --> 00:15:14,040 Speaker 1: major events of the weekend. Once again, we welcome back 297 00:15:14,160 --> 00:15:16,280 Speaker 1: Larry Summer. So, Larry, I think we should start with 298 00:15:16,280 --> 00:15:19,080 Speaker 1: the jobs numbers out on Friday in the United States. 299 00:15:19,200 --> 00:15:21,960 Speaker 1: I mean, some say not too hot, not too cold. 300 00:15:22,560 --> 00:15:24,520 Speaker 1: Some people say, isn't this good? At least it's not 301 00:15:24,560 --> 00:15:26,640 Speaker 1: getting worse. I guess my real question you is, I 302 00:15:26,720 --> 00:15:29,120 Speaker 1: may not be getting worse. Was there a danger just 303 00:15:29,240 --> 00:15:30,880 Speaker 1: in the inflation where many where it is we have 304 00:15:31,040 --> 00:15:35,400 Speaker 1: five percent year over year increasing wages. I think these 305 00:15:35,480 --> 00:15:40,200 Speaker 1: numbers were about what we expected, and the sensible judgment 306 00:15:40,560 --> 00:15:45,200 Speaker 1: was that we've got an inflation problem. Core inflation figures 307 00:15:45,320 --> 00:15:49,280 Speaker 1: look artificially good. They're better than media and inflation. And 308 00:15:49,400 --> 00:15:52,880 Speaker 1: yet core inflation ran at a seven percent rate last month, 309 00:15:53,360 --> 00:15:56,160 Speaker 1: and that was more than for the quarter, and the 310 00:15:56,240 --> 00:15:58,160 Speaker 1: quarter was more than for the half year, and the 311 00:15:58,200 --> 00:16:01,600 Speaker 1: half year was more than for the whole year. So 312 00:16:01,960 --> 00:16:06,960 Speaker 1: we're not in a controlled place with respect to inflation. 313 00:16:07,520 --> 00:16:11,080 Speaker 1: And there wasn't really anything in this report to suggest 314 00:16:11,280 --> 00:16:15,960 Speaker 1: that we were coming into UH a controlled place. UH. 315 00:16:16,040 --> 00:16:20,040 Speaker 1: The monthly wage number was relatively favorable, but it was 316 00:16:20,040 --> 00:16:22,720 Speaker 1: pretty clearly distorted by the fact that you had a 317 00:16:22,720 --> 00:16:26,720 Speaker 1: lot more workers coming in and leisure and hospitality, and 318 00:16:26,840 --> 00:16:31,920 Speaker 1: those are low wage workers. The workers where wages are 319 00:16:31,960 --> 00:16:36,640 Speaker 1: most flexible are going up more rapidly. So I don't 320 00:16:36,640 --> 00:16:40,840 Speaker 1: think this is a number that changed, UH the picture 321 00:16:41,000 --> 00:16:46,120 Speaker 1: that we've got an economy that is too strong to 322 00:16:46,600 --> 00:16:50,680 Speaker 1: be an economy where inflation is going down, but that 323 00:16:50,920 --> 00:16:56,040 Speaker 1: is maintaining its UH robustness. But I think we are 324 00:16:56,120 --> 00:16:59,400 Speaker 1: headed for a collision of some kind or other, and 325 00:16:59,480 --> 00:17:02,840 Speaker 1: we've just got to manage that collision carefully. And I 326 00:17:02,840 --> 00:17:07,040 Speaker 1: think the sooner we start UH managing for a slope, 327 00:17:07,080 --> 00:17:10,480 Speaker 1: managing for some slowdown, the better we're gonna do. I 328 00:17:10,480 --> 00:17:13,920 Speaker 1: think Chairman Powell was way late to come to that recognition, 329 00:17:14,400 --> 00:17:17,399 Speaker 1: but he now has that recognition and he should be 330 00:17:17,440 --> 00:17:20,680 Speaker 1: supported in that. So what do you think Chai Powell 331 00:17:20,760 --> 00:17:22,800 Speaker 1: and the Federal Reserve will make of these numbers? How 332 00:17:22,840 --> 00:17:26,080 Speaker 1: will it affect what they do in early November? I 333 00:17:26,080 --> 00:17:29,600 Speaker 1: don't think these numbers are going to change what the Fed, 334 00:17:30,040 --> 00:17:33,919 Speaker 1: uh does? You know, you never know what's going to happen, 335 00:17:34,000 --> 00:17:39,440 Speaker 1: and certainly there's risk of some kind of financially traumatic event, 336 00:17:39,680 --> 00:17:43,000 Speaker 1: but I think the chances of something that is large 337 00:17:43,119 --> 00:17:47,840 Speaker 1: enough to divert the FED are really quite low. So 338 00:17:48,200 --> 00:17:52,880 Speaker 1: I'd be expecting that uh, the market, which is anticipating 339 00:17:54,040 --> 00:17:59,959 Speaker 1: basis points in November and is anticipating fifty more in December. 340 00:18:00,520 --> 00:18:05,800 Speaker 1: That would correspond to my best guess at this moment 341 00:18:06,040 --> 00:18:09,439 Speaker 1: as well. And I think that kind of thing is 342 00:18:10,000 --> 00:18:14,560 Speaker 1: going to be appropriate if we achieve disinflation. Larry, there's 343 00:18:14,560 --> 00:18:17,960 Speaker 1: another strain of discussion I've seen certainly this week. In fact, 344 00:18:18,000 --> 00:18:20,199 Speaker 1: there was even some FED staff work at the New 345 00:18:20,240 --> 00:18:23,160 Speaker 1: York FED suggesting that we better be careful because in fact, 346 00:18:23,480 --> 00:18:25,640 Speaker 1: the rate that we may need and already get down 347 00:18:25,640 --> 00:18:29,080 Speaker 1: to two percent, maybe so high it will cause financial instability. 348 00:18:29,119 --> 00:18:31,199 Speaker 1: There is a really safety and sound as issue. What 349 00:18:31,280 --> 00:18:33,040 Speaker 1: do you make of that? Is it possible the Fed 350 00:18:33,080 --> 00:18:35,280 Speaker 1: will have to choose between financial stability in the one 351 00:18:35,280 --> 00:18:39,359 Speaker 1: hand and getting inflation down on the other. First, I 352 00:18:39,400 --> 00:18:42,280 Speaker 1: think that should be the occasion for some soul searching. 353 00:18:43,200 --> 00:18:46,760 Speaker 1: If we have an economy where we think there's going 354 00:18:46,800 --> 00:18:52,240 Speaker 1: to be substantial financial breakage because the FED lifts the 355 00:18:52,280 --> 00:18:55,960 Speaker 1: FED funds rate to four and a half percent, then 356 00:18:56,000 --> 00:19:03,320 Speaker 1: we have an inadequately supervised financial system and insufficiently active 357 00:19:03,880 --> 00:19:09,200 Speaker 1: financial regulator. And so if anyone believes that, along with 358 00:19:09,280 --> 00:19:14,000 Speaker 1: whatever monetary policy implication they draw, they better tell us 359 00:19:14,040 --> 00:19:16,479 Speaker 1: how we think how they think we ought to be 360 00:19:16,520 --> 00:19:23,040 Speaker 1: repairing the regulation of the financial system. David might sense 361 00:19:23,200 --> 00:19:29,560 Speaker 1: is that you can never rule out these kinds of risks. 362 00:19:30,359 --> 00:19:34,000 Speaker 1: But the Fed has more than one instrument. It has 363 00:19:34,080 --> 00:19:40,760 Speaker 1: instruments for specific guaranteed lending. We've seen that used a 364 00:19:40,920 --> 00:19:47,440 Speaker 1: number of times, and each time we're surprised by how 365 00:19:47,520 --> 00:19:52,359 Speaker 1: much the economy retains its robustness. In retrospect, we cut 366 00:19:52,400 --> 00:19:55,960 Speaker 1: interest rates too much and kept them too low when 367 00:19:56,000 --> 00:20:00,880 Speaker 1: we were supporting the financial system. After COVID. In retrospect, 368 00:20:01,040 --> 00:20:04,960 Speaker 1: we kept interest rates too low and blew up a 369 00:20:05,040 --> 00:20:09,000 Speaker 1: bubble when we were supporting the economy with low interest rates. 370 00:20:09,520 --> 00:20:15,080 Speaker 1: After Asia and LTCF in retrospect, we were surprised, amazed 371 00:20:15,640 --> 00:20:19,760 Speaker 1: by how rapidly the economy grew when the Fed uh 372 00:20:19,960 --> 00:20:24,840 Speaker 1: did what was necessary after the seven stock market crash. 373 00:20:25,440 --> 00:20:29,639 Speaker 1: So we need to regulate right to preserve financial stability. 374 00:20:30,080 --> 00:20:35,040 Speaker 1: We need to have a very strong firefighting force in 375 00:20:35,200 --> 00:20:41,760 Speaker 1: order to respond if and when financial accidents happened. Larry's 376 00:20:41,840 --> 00:20:43,960 Speaker 1: always so helpful to have you on each week, and 377 00:20:44,240 --> 00:20:45,960 Speaker 1: Delia said, d larious, I was gonna be staying with 378 00:20:46,040 --> 00:20:49,200 Speaker 1: us as we bring in Professor Brad DeLong, professor of 379 00:20:49,240 --> 00:20:53,480 Speaker 1: economics from UC Berkeley on his new book Slouching Towards Utopia. 380 00:20:53,480 --> 00:20:55,440 Speaker 1: That's an economic history of the toy a century. That's 381 00:20:55,440 --> 00:21:00,919 Speaker 1: gonna up next on Wall Street Week on Bloomberg. This 382 00:21:01,400 --> 00:21:05,879 Speaker 1: is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 383 00:21:06,200 --> 00:21:08,760 Speaker 1: Are very special contributor at Larry Summers of Harvard has 384 00:21:08,800 --> 00:21:11,200 Speaker 1: stayed with us because we're gonna bring in now professor 385 00:21:11,200 --> 00:21:13,840 Speaker 1: of economics from it you see Berkeley, he's Brad DeLong, 386 00:21:14,119 --> 00:21:17,200 Speaker 1: the author of a new book, Slouching toward Utopia and 387 00:21:17,280 --> 00:21:20,240 Speaker 1: Economic History of the twentieth Century. So, professor, welcome for 388 00:21:20,320 --> 00:21:22,200 Speaker 1: joining us. It's really good to have you here. I've 389 00:21:22,200 --> 00:21:24,840 Speaker 1: read this fascinating and really sort of protein book. It's 390 00:21:24,840 --> 00:21:27,639 Speaker 1: really quite a book. Let's set it up first, because 391 00:21:27,640 --> 00:21:29,640 Speaker 1: it's a history of the the twentieth century. But you don't 392 00:21:29,640 --> 00:21:32,600 Speaker 1: necessarily define the twentieth century as from nineteen hundred to 393 00:21:32,640 --> 00:21:35,560 Speaker 1: two thousand. You start in eighteen seventy, un end up 394 00:21:35,600 --> 00:21:40,000 Speaker 1: in why Well, the big thing that happens happens in 395 00:21:40,080 --> 00:21:44,800 Speaker 1: eighteen seventy. Right before eighteen seventy, the world's poor, and 396 00:21:44,840 --> 00:21:48,479 Speaker 1: there's no prospect for the world being anything other than poor. 397 00:21:49,040 --> 00:21:54,560 Speaker 1: After eighteen seventy, every single generation, humanity's technical competence doubles 398 00:21:55,080 --> 00:21:58,520 Speaker 1: and then doubles again in the following generation. And such 399 00:21:58,520 --> 00:22:02,440 Speaker 1: an enormous pace of tech chnological events raises the possibility, 400 00:22:02,480 --> 00:22:05,040 Speaker 1: for the first time, of a world in which we 401 00:22:05,080 --> 00:22:08,560 Speaker 1: can bake a sufficiently large economic pie for everyone to 402 00:22:08,640 --> 00:22:12,240 Speaker 1: have enough. And that was nothing that humanity had ever 403 00:22:12,280 --> 00:22:15,760 Speaker 1: seen before. One of the remarkable things, Brad, that you 404 00:22:15,960 --> 00:22:20,760 Speaker 1: highlight is that it really wasn't very different to live 405 00:22:20,760 --> 00:22:24,960 Speaker 1: in the United Kingdom in the nineteenth century than it 406 00:22:25,040 --> 00:22:28,880 Speaker 1: had been to live in the ancient world two thousand 407 00:22:29,040 --> 00:22:35,600 Speaker 1: years before. Say something about that acceleration of growth that 408 00:22:35,720 --> 00:22:39,239 Speaker 1: you see is happening in the twentieth century, well, you know, 409 00:22:39,320 --> 00:22:43,280 Speaker 1: I mean it was British economist John Stuart mill right. 410 00:22:43,400 --> 00:22:46,920 Speaker 1: He was writing in eighteen seventy one about how all 411 00:22:47,040 --> 00:22:50,840 Speaker 1: the Industrial Revolution had done was it had created a 412 00:22:50,960 --> 00:22:55,840 Speaker 1: somewhat larger middle class, and it had allowed manufacturers and 413 00:22:55,880 --> 00:22:59,560 Speaker 1: the rich to earn greater fortunes, but that the overwhelming 414 00:22:59,600 --> 00:23:03,320 Speaker 1: massive humanity was still confined to the same life of 415 00:23:03,400 --> 00:23:06,919 Speaker 1: drudgery and imprisonment um than they had been before. That 416 00:23:07,000 --> 00:23:09,800 Speaker 1: they had been in before um and before all the 417 00:23:09,840 --> 00:23:13,359 Speaker 1: way back into deep time. It was very clear by 418 00:23:13,440 --> 00:23:17,359 Speaker 1: nineteen hundred that things had changed. You know. John Maynard Keynes, 419 00:23:17,400 --> 00:23:20,439 Speaker 1: writing in nineteen nineteen, looks back and says, starting in 420 00:23:20,520 --> 00:23:24,600 Speaker 1: eighteen seventy we entered economic El Dorado, and that now 421 00:23:24,640 --> 00:23:27,320 Speaker 1: our chief task after World War One was figuring out 422 00:23:27,359 --> 00:23:29,919 Speaker 1: why we tried to blow it up and try to 423 00:23:29,960 --> 00:23:32,919 Speaker 1: get desperately back to what was good was going on 424 00:23:33,080 --> 00:23:38,160 Speaker 1: after eighteen seventy. Fortunately, we eventually did, and so things 425 00:23:38,359 --> 00:23:42,000 Speaker 1: rolled through up until our day. First of all, gives 426 00:23:42,040 --> 00:23:43,760 Speaker 1: a sense of what happened in eighteen seventy. They brought 427 00:23:43,800 --> 00:23:46,240 Speaker 1: all us about. There were some three driving forces in 428 00:23:46,240 --> 00:23:49,639 Speaker 1: your book. Well, you know, everyone has an idea about 429 00:23:49,720 --> 00:23:52,879 Speaker 1: just what it is that's made us as a civilization 430 00:23:53,000 --> 00:23:56,960 Speaker 1: so wealthy, that makes our economy so productive. And you know, 431 00:23:57,080 --> 00:24:00,399 Speaker 1: different people have different things, and they all go back, 432 00:24:01,000 --> 00:24:04,280 Speaker 1: some of them back even to say the year ten seventy, 433 00:24:04,480 --> 00:24:06,960 Speaker 1: when it turns out that the law applies to a 434 00:24:07,000 --> 00:24:10,080 Speaker 1: German emperor standing in the snow outside of the castle 435 00:24:10,160 --> 00:24:13,119 Speaker 1: that allaws and his tool. But instead it could be 436 00:24:13,400 --> 00:24:17,640 Speaker 1: that the law proatlies to everybody. But you've got three 437 00:24:17,680 --> 00:24:21,399 Speaker 1: things that fall into place in eighteen seventy that set 438 00:24:21,520 --> 00:24:25,679 Speaker 1: technological progress into a much higher gear than ever before. 439 00:24:26,480 --> 00:24:29,080 Speaker 1: And they are the industrial research lab so that you 440 00:24:29,119 --> 00:24:33,520 Speaker 1: can rationalize and routinize the discovery and development of technology. 441 00:24:33,600 --> 00:24:36,760 Speaker 1: And then the corporation as we know it um, which 442 00:24:36,880 --> 00:24:41,640 Speaker 1: rationalizes the development and deployment of technology. And combine that 443 00:24:41,720 --> 00:24:44,760 Speaker 1: with the globalized economy, with the telegraph and the eye 444 00:24:44,840 --> 00:24:48,159 Speaker 1: railroad and the ironholed ocean going steamship and all of 445 00:24:48,200 --> 00:24:52,879 Speaker 1: a sudden, the incentives to deploy technology worldwide for production 446 00:24:53,440 --> 00:24:57,280 Speaker 1: are so overwhelming, and people turn their minds to how 447 00:24:57,320 --> 00:25:00,600 Speaker 1: to do this that everything explodes and way it never 448 00:25:00,680 --> 00:25:05,040 Speaker 1: had before. Brad Um. Much of the academic discussion of 449 00:25:05,080 --> 00:25:08,520 Speaker 1: your book has centered on this idea of a pivot 450 00:25:08,600 --> 00:25:13,159 Speaker 1: point in eighteen seventy. But I want to ask about 451 00:25:13,160 --> 00:25:16,560 Speaker 1: a different judgment you make, which is that there was 452 00:25:16,720 --> 00:25:22,800 Speaker 1: this major era and that the major era ended in 453 00:25:23,400 --> 00:25:28,680 Speaker 1: UH twenty ten. I would have thought that the world 454 00:25:28,960 --> 00:25:35,600 Speaker 1: was growing, it was becoming more integrated with technology. There 455 00:25:35,640 --> 00:25:41,199 Speaker 1: were important political struggles. Um. That was the stuff of 456 00:25:41,320 --> 00:25:45,399 Speaker 1: history through the twentieth century, much better in the second 457 00:25:45,400 --> 00:25:49,720 Speaker 1: half of the century than in the first half of 458 00:25:49,760 --> 00:25:53,040 Speaker 1: the century. The and the Cold War was a very 459 00:25:53,080 --> 00:25:55,760 Speaker 1: different war than World War One or World War Two. 460 00:25:55,840 --> 00:25:59,080 Speaker 1: It was cold, but I would have thought that was 461 00:25:59,119 --> 00:26:04,359 Speaker 1: a continuing process with substantial challenges. And yet you see 462 00:26:04,440 --> 00:26:08,960 Speaker 1: us as now being in a quite different era. What's 463 00:26:09,040 --> 00:26:12,760 Speaker 1: different about the era we're in than the era you 464 00:26:12,800 --> 00:26:16,359 Speaker 1: wrote the history of other than more of the kind 465 00:26:16,400 --> 00:26:22,760 Speaker 1: of progress and change that you saw as happening every generation. Um, Well, 466 00:26:22,800 --> 00:26:25,520 Speaker 1: I'm pleased you disagree here and I'm very pleased you 467 00:26:25,600 --> 00:26:30,200 Speaker 1: disagree in our story. I had optimist here about our future, UM, 468 00:26:30,240 --> 00:26:33,000 Speaker 1: because look, I've been had losing arguments in person with 469 00:26:33,040 --> 00:26:36,280 Speaker 1: you for forty two years, even when I think I'm 470 00:26:36,359 --> 00:26:40,119 Speaker 1: right afterwards, and here I'm genuinely uncertain, and I actually 471 00:26:40,200 --> 00:26:44,879 Speaker 1: very much hope you are really right this time. My 472 00:26:45,000 --> 00:26:48,080 Speaker 1: thinking was, I've been listening to our friend John fern 473 00:26:48,119 --> 00:26:52,400 Speaker 1: Old about how the underlying pace of technological progress has 474 00:26:52,520 --> 00:26:56,520 Speaker 1: more or less have since two thousand and five compared 475 00:26:56,560 --> 00:26:59,960 Speaker 1: to what we were used to beforehand saving those year 476 00:27:00,160 --> 00:27:04,200 Speaker 1: is from nineteen seventy five to nineteen ninety, when technology 477 00:27:04,320 --> 00:27:08,640 Speaker 1: was crawling toward a more energy efficient and environmentally friendly 478 00:27:08,920 --> 00:27:13,479 Speaker 1: UM configuration rather than focusing on labor saving. You know, 479 00:27:13,640 --> 00:27:17,280 Speaker 1: but after two thousand and after two thousand, we seem 480 00:27:17,359 --> 00:27:23,680 Speaker 1: to have a substantial loss of social and economic knowledge 481 00:27:23,680 --> 00:27:28,080 Speaker 1: about how to run things. Things about financial regulation that 482 00:27:28,160 --> 00:27:31,040 Speaker 1: I thought were in trend, that were known in the 483 00:27:31,080 --> 00:27:34,639 Speaker 1: bones UM turned out to have been completely forgotten in 484 00:27:34,680 --> 00:27:39,320 Speaker 1: two thousand and eight. Things about the proper tools for 485 00:27:39,440 --> 00:27:44,199 Speaker 1: macroeconomic policy that I thought were in where were ingrained 486 00:27:44,240 --> 00:27:47,800 Speaker 1: in the bone, were also forgotten. After two thousand and ten, 487 00:27:48,280 --> 00:27:51,040 Speaker 1: and I remember you and I whimpering in two thousand 488 00:27:51,040 --> 00:27:54,960 Speaker 1: and twelve that no for more expansionary fiscal policy was 489 00:27:55,040 --> 00:27:58,600 Speaker 1: not then um a thing that ran any risks whatsoever. 490 00:27:58,760 --> 00:28:00,840 Speaker 1: So as I say so, we're more couple. Book. It's 491 00:28:00,880 --> 00:28:03,879 Speaker 1: slouching towards utopia and economic history of the twenty century. 492 00:28:03,880 --> 00:28:05,280 Speaker 1: Thank you so much for bringing with it. We can 493 00:28:05,320 --> 00:28:07,639 Speaker 1: only really touch upon it today. I urge you everybody 494 00:28:07,720 --> 00:28:09,720 Speaker 1: to read it. It's really worth the effort. Thank you 495 00:28:09,760 --> 00:28:13,199 Speaker 1: so much. That's Professor Brad DeLong of UC Berkeley, and 496 00:28:13,240 --> 00:28:17,159 Speaker 1: of course to our very special contributor Larry Summers of Harvard. Finally, 497 00:28:17,280 --> 00:28:21,560 Speaker 1: one more thought, the fine line between being steady and 498 00:28:21,640 --> 00:28:25,240 Speaker 1: being stubborn. We've all admired those leaders through the years 499 00:28:25,280 --> 00:28:27,640 Speaker 1: who have stuck to their guns when times got tough. 500 00:28:27,880 --> 00:28:30,720 Speaker 1: British leaders like Winston Churchill and the darkest days of 501 00:28:30,720 --> 00:28:34,280 Speaker 1: World War Two which he'll fight in the hill, which 502 00:28:34,320 --> 00:28:38,560 Speaker 1: you'll never horrender. And Churchill's successor Margaret Thatcher, who was 503 00:28:38,640 --> 00:28:41,560 Speaker 1: known for sticking to her guns no matter what he wanted, 504 00:28:41,600 --> 00:28:46,040 Speaker 1: the Council of Ministers to be the Senate No No. 505 00:28:47,320 --> 00:28:50,520 Speaker 1: And American leaders like President Reagan at the Brandenburg Gate, 506 00:28:50,640 --> 00:28:53,400 Speaker 1: demanding that the Soviet and tear down the Burling Wall 507 00:28:53,440 --> 00:28:55,840 Speaker 1: when it seemed that was the farthest thing from Mr 508 00:28:55,840 --> 00:29:08,160 Speaker 1: Gorbatchaw's mind. Mr garbut Schaw open this gate, Mr Garbutchev, 509 00:29:09,080 --> 00:29:14,560 Speaker 1: tear down this war. But those were the times when 510 00:29:14,600 --> 00:29:18,440 Speaker 1: the steadfast were ultimately proven right by history. What happens 511 00:29:18,440 --> 00:29:21,840 Speaker 1: when bold proclamations don't hold up quite as well, such 512 00:29:21,840 --> 00:29:25,160 Speaker 1: as George Herbert Walker Bush's insistence he would never ever 513 00:29:25,360 --> 00:29:30,640 Speaker 1: raise taxes, and they'll push again, and I'll say to them, 514 00:29:30,880 --> 00:29:38,080 Speaker 1: read my lips. And then there are those bold pronouncements 515 00:29:38,080 --> 00:29:40,240 Speaker 1: that have yet to be proven out one way or 516 00:29:40,280 --> 00:29:43,720 Speaker 1: the other. Like President Je's insistence that his zero COVID 517 00:29:43,760 --> 00:29:46,239 Speaker 1: policy is the right one for his country, but if 518 00:29:46,240 --> 00:29:49,400 Speaker 1: you just look at the COVID zero protocols, it requires 519 00:29:49,440 --> 00:29:52,960 Speaker 1: all people returning from abroad to have ten days of quarantine. 520 00:29:53,200 --> 00:29:56,480 Speaker 1: Or President Putin insisting that he will ultimately still prevail 521 00:29:56,680 --> 00:29:59,880 Speaker 1: in Ukraine. He thinks he's losing and may lose his 522 00:30:00,680 --> 00:30:05,760 Speaker 1: his office and even life. Then he could become completely unpredictable. 523 00:30:05,880 --> 00:30:08,200 Speaker 1: But this week, this week we saw something a bit different. 524 00:30:08,440 --> 00:30:12,200 Speaker 1: Big Bowl pronouncements being completely reversed not long after they 525 00:30:12,240 --> 00:30:14,960 Speaker 1: were made. A big one was, of course, Elon Musk's 526 00:30:15,040 --> 00:30:18,040 Speaker 1: change of mind again on whether he'd pony up forty 527 00:30:18,120 --> 00:30:20,320 Speaker 1: four billion dollars for Twitter for now here in that 528 00:30:20,400 --> 00:30:23,840 Speaker 1: Elon Musk and Twitter, of course, that resolution really said 529 00:30:23,840 --> 00:30:27,400 Speaker 1: to be sticking on the contingency of getting that debt financing, 530 00:30:27,560 --> 00:30:29,760 Speaker 1: and that is going to be the key clause that 531 00:30:29,800 --> 00:30:32,600 Speaker 1: we're focused on going forward. But at least Mr Musk 532 00:30:32,640 --> 00:30:35,200 Speaker 1: took a few months for his change of heart. Over 533 00:30:35,200 --> 00:30:37,600 Speaker 1: in Great Britain we saw a new government lay out 534 00:30:37,640 --> 00:30:40,640 Speaker 1: a new budget that included big tax cuts, starting with 535 00:30:40,680 --> 00:30:43,640 Speaker 1: the top tax bracket. We loved the tax cutting, but 536 00:30:43,760 --> 00:30:46,560 Speaker 1: not to this time. This is just absolutely the wrong 537 00:30:46,600 --> 00:30:49,600 Speaker 1: time to do this, bringing immediate and violent reaction in 538 00:30:49,640 --> 00:30:52,560 Speaker 1: the markets. He's trying to get the markeys behind those 539 00:30:52,600 --> 00:30:55,720 Speaker 1: two lass of factors probably significantly more difficult, and the 540 00:30:55,760 --> 00:30:59,200 Speaker 1: Bank of England stepping in for the rescue. So suddenly 541 00:30:59,440 --> 00:31:02,800 Speaker 1: the Bank of England signed itself in the ECB situation. 542 00:31:03,320 --> 00:31:06,080 Speaker 1: So Prime Minister trust is newly minted Chancellor of the 543 00:31:06,120 --> 00:31:08,840 Speaker 1: Exchequer had to admit publicly that they had been wrong, 544 00:31:09,000 --> 00:31:12,720 Speaker 1: clearly and dramatically wrong. At least on those top tax rates. 545 00:31:12,960 --> 00:31:15,840 Speaker 1: And it came only days after he and Prime Minister 546 00:31:15,880 --> 00:31:19,200 Speaker 1: Trust had gone so big and so bold. I think 547 00:31:19,200 --> 00:31:21,760 Speaker 1: it was a destruction. Uh And I think and I 548 00:31:21,760 --> 00:31:24,160 Speaker 1: think I think it was. It was the wrong thing 549 00:31:24,200 --> 00:31:26,920 Speaker 1: to do. One can hardly fall to government for listening 550 00:31:26,960 --> 00:31:29,320 Speaker 1: to its people, even if the listening might have come 551 00:31:29,360 --> 00:31:32,600 Speaker 1: better before the deciding. But whatever the right answer, the 552 00:31:32,720 --> 00:31:35,800 Speaker 1: one thing for certain is that, at least in this respect, 553 00:31:36,040 --> 00:31:40,600 Speaker 1: Mistrust is no Margaret Thatcher. To those waiting with bated 554 00:31:40,680 --> 00:31:45,520 Speaker 1: breaths for that favorite media catchphrase, the U turn, I 555 00:31:45,600 --> 00:31:49,320 Speaker 1: have only one thing to say, you turn if you 556 00:31:49,400 --> 00:31:57,400 Speaker 1: want to the latest not for turning. That does it 557 00:31:57,520 --> 00:31:59,719 Speaker 1: for this episode of Wall Street Week, I'm David Weston. 558 00:31:59,840 --> 00:32:10,440 Speaker 1: This is Bloomberg. See you next week. M hm.