1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: I mean may not have an overall recession. We're having 3 00:00:04,400 --> 00:00:06,680 Speaker 2: a rolling recession. To kin of Rowl looks pretty strongly. 4 00:00:06,720 --> 00:00:07,400 Speaker 2: It is when it comes to. 5 00:00:07,400 --> 00:00:09,840 Speaker 3: Jobs the financial stories that shape our word. 6 00:00:09,960 --> 00:00:13,640 Speaker 2: Three major regional bank failures sent shockwaves through the banking system. 7 00:00:13,680 --> 00:00:15,440 Speaker 2: We're all trying to figure out what to make of 8 00:00:15,600 --> 00:00:17,000 Speaker 2: generative AI. 9 00:00:16,920 --> 00:00:19,320 Speaker 3: Through the eyes of the most influential voices. 10 00:00:19,440 --> 00:00:22,439 Speaker 2: Welcome down, Doctor Paul Krugman, Ryan Moynahan, Bank of America, 11 00:00:22,520 --> 00:00:25,360 Speaker 2: deebro Lair of the Paulson Institute, Glen Hubbard of the 12 00:00:25,360 --> 00:00:26,280 Speaker 2: Columbia Business School. 13 00:00:26,280 --> 00:00:30,120 Speaker 3: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 14 00:00:30,320 --> 00:00:33,680 Speaker 2: Up in the Air on whether Elon Musk moves to Texas, 15 00:00:33,800 --> 00:00:36,320 Speaker 2: on the future of Boeing, on when tech we'll see 16 00:00:36,320 --> 00:00:39,360 Speaker 2: that AI payoff, and on when the Fed we'll get. 17 00:00:39,280 --> 00:00:41,879 Speaker 1: A move on. This is Bloomberg Wall Street Week. I'm 18 00:00:41,960 --> 00:00:42,720 Speaker 1: David Weston. 19 00:00:43,520 --> 00:00:46,800 Speaker 2: This week special contributor Larry Summers on US jobs numbers. 20 00:00:47,479 --> 00:00:52,080 Speaker 4: I was surprised, not shocked that the job numbers came 21 00:00:52,159 --> 00:00:52,840 Speaker 4: in that way. 22 00:00:53,680 --> 00:00:57,880 Speaker 2: Shipwar author Chris Miller of Tufts on governments funding the tech. 23 00:00:57,760 --> 00:01:01,360 Speaker 5: Race, all of the world's governments, from the US to Japan, 24 00:01:01,520 --> 00:01:04,440 Speaker 5: to Europe to China, are pouring tens of billions of 25 00:01:04,440 --> 00:01:06,080 Speaker 5: dollars into their own ship industries. 26 00:01:06,600 --> 00:01:09,720 Speaker 2: And Nobel economist Paul Krugman of Cunei on what the 27 00:01:09,760 --> 00:01:12,200 Speaker 2: election could mean for US trade policy. 28 00:01:12,720 --> 00:01:17,080 Speaker 6: Tariffs don't eliminate trade deficits unless they get so high 29 00:01:17,120 --> 00:01:19,240 Speaker 6: as to basically make trade impossible. 30 00:01:32,160 --> 00:01:34,600 Speaker 2: Gold Wall Street looked at a lot of questions this week, 31 00:01:34,680 --> 00:01:37,920 Speaker 2: but did not get many answers, as Elon Musk threatened 32 00:01:37,959 --> 00:01:40,720 Speaker 2: to take his marbles along with his Tesla and go 33 00:01:40,800 --> 00:01:43,480 Speaker 2: home to Texas after a Delaware court said he couldn't 34 00:01:43,520 --> 00:01:46,520 Speaker 2: take home that fifty five billion dollar pay package his 35 00:01:46,600 --> 00:01:47,760 Speaker 2: board had promised him. 36 00:01:48,200 --> 00:01:51,440 Speaker 1: If shareholders, upon the board's recommendation, decide to move to Nevada, 37 00:01:51,520 --> 00:01:53,400 Speaker 1: they have a right to do that, but it's not 38 00:01:53,440 --> 00:01:54,400 Speaker 1: a Musk decision. 39 00:01:54,720 --> 00:01:57,200 Speaker 2: Boweling's crisis over the seven thirty seven Max and nine 40 00:01:57,240 --> 00:02:01,160 Speaker 2: aircraft is far from resolved, as the government limited future production. 41 00:02:01,440 --> 00:02:03,040 Speaker 2: The companies said it would take a day off to 42 00:02:03,080 --> 00:02:06,160 Speaker 2: reflect on what happened, and its chief executive admitted it 43 00:02:06,280 --> 00:02:10,280 Speaker 2: was at fault. We carved the problems and we understand that, 44 00:02:10,480 --> 00:02:14,240 Speaker 2: and we instituted additional quality controls and inspections at Going 45 00:02:14,760 --> 00:02:18,519 Speaker 2: and at our supplier. Big Tech announced earnings this week, 46 00:02:18,560 --> 00:02:21,240 Speaker 2: and although they were strong, they didn't entirely measure up 47 00:02:21,280 --> 00:02:24,240 Speaker 2: to what some had hoped, leaving open the question of 48 00:02:24,400 --> 00:02:27,239 Speaker 2: just when those promised AI profits are likely to hit 49 00:02:27,520 --> 00:02:28,600 Speaker 2: the bottom line. 50 00:02:28,919 --> 00:02:32,560 Speaker 7: The earnings that came out last night were excellent earnings 51 00:02:32,560 --> 00:02:35,000 Speaker 7: by any measure, They just maybe didn't meet. 52 00:02:34,919 --> 00:02:40,080 Speaker 2: The gaftiest of lofty expectations, and the Fed surprised absolutely 53 00:02:40,120 --> 00:02:43,240 Speaker 2: no one by not moving at all or giving much 54 00:02:43,320 --> 00:02:44,040 Speaker 2: real sense. 55 00:02:43,840 --> 00:02:44,560 Speaker 1: Of when it will. 56 00:02:44,880 --> 00:02:47,760 Speaker 8: I don't think it's likely that the Committee will reach 57 00:02:47,800 --> 00:02:49,760 Speaker 8: a level of confidence by the time of the March 58 00:02:49,840 --> 00:02:52,640 Speaker 8: meeting to identify March as the time to do that, 59 00:02:53,160 --> 00:02:55,240 Speaker 8: but that's to be seen. 60 00:02:56,680 --> 00:02:56,840 Speaker 4: Then. 61 00:02:56,880 --> 00:02:59,880 Speaker 2: On Friday, US jobs numbers underscored why the Fed may 62 00:02:59,880 --> 00:03:02,519 Speaker 2: be reluctant to cut rates in the near future, as 63 00:03:02,560 --> 00:03:05,600 Speaker 2: three hundred and fifty thousand new jobs were almost double 64 00:03:05,639 --> 00:03:08,440 Speaker 2: what people had expected and the unemployment rates stayed at 65 00:03:08,440 --> 00:03:11,200 Speaker 2: a very low three point seven percent. After an up 66 00:03:11,200 --> 00:03:13,200 Speaker 2: and down week, the equity markets were off to the 67 00:03:13,280 --> 00:03:15,120 Speaker 2: races on the jobs news, with the S and p 68 00:03:15,160 --> 00:03:17,679 Speaker 2: five hundred and he got just under one point four 69 00:03:17,720 --> 00:03:20,040 Speaker 2: percent up for the week, a new record, and that 70 00:03:20,160 --> 00:03:22,680 Speaker 2: beats the median number of our Bloomberg alves for the 71 00:03:22,840 --> 00:03:25,919 Speaker 2: end of the year, while the Nasdaq added over one 72 00:03:25,960 --> 00:03:29,320 Speaker 2: percent and the Yeald the Tenure jumped fifteen basis points 73 00:03:29,360 --> 00:03:31,680 Speaker 2: on Friday alone, though for the week it was actually 74 00:03:31,720 --> 00:03:35,200 Speaker 2: down twelve basis points to end just over four percent. 75 00:03:35,520 --> 00:03:36,520 Speaker 2: Take us through the week. 76 00:03:36,320 --> 00:03:36,800 Speaker 1: Of the markets. 77 00:03:36,880 --> 00:03:40,200 Speaker 2: Welcome back, now, Sonal Desai. She's Franklin Templeton's fixed income 78 00:03:40,280 --> 00:03:45,080 Speaker 2: CIO and Peter Krause, founder, chair and CEO of Aperture Investors. So, Sonawka, 79 00:03:45,080 --> 00:03:46,720 Speaker 2: why don't you give us your take on what we 80 00:03:46,760 --> 00:03:49,000 Speaker 2: saw in the markets this week up to the clothes 81 00:03:49,080 --> 00:03:49,640 Speaker 2: on Friday. 82 00:03:50,560 --> 00:03:54,440 Speaker 7: Well, you know, the market has been so positioned, so 83 00:03:54,640 --> 00:03:59,240 Speaker 7: positioned for and it's not entirely shield on the back 84 00:03:59,280 --> 00:04:04,440 Speaker 7: of walk positioned for massive early FED rate cuts that 85 00:04:04,880 --> 00:04:07,800 Speaker 7: wasn't going to happen. And in many ways, what Powell 86 00:04:07,840 --> 00:04:11,960 Speaker 7: said during his press conference he left the door open 87 00:04:12,040 --> 00:04:14,880 Speaker 7: for potentially cutting. I don't think he should and I 88 00:04:14,880 --> 00:04:18,800 Speaker 7: don't think they will. But the immediate reaction to Powell's 89 00:04:18,800 --> 00:04:22,120 Speaker 7: statement was still a bit of a rally before they started, 90 00:04:22,160 --> 00:04:28,560 Speaker 7: before one market started selling off. Eventually, overall, I think, unfortunately, 91 00:04:28,680 --> 00:04:31,000 Speaker 7: it still is the case that in December the FED 92 00:04:31,120 --> 00:04:35,640 Speaker 7: reinserted itself into the story of the market, and we 93 00:04:35,760 --> 00:04:39,520 Speaker 7: continue to see an easing of financial conditions, which certainly 94 00:04:39,600 --> 00:04:42,679 Speaker 7: makes the Fed's job somewhat harder in terms of deciding 95 00:04:42,680 --> 00:04:44,799 Speaker 7: when to cut. And they want to cut. That's clear. 96 00:04:45,120 --> 00:04:45,560 Speaker 7: That's clear. 97 00:04:46,040 --> 00:04:47,160 Speaker 1: So Peter explained one thing. 98 00:04:47,200 --> 00:04:49,160 Speaker 2: We had a sort of unusual week where we had 99 00:04:49,480 --> 00:04:52,479 Speaker 2: rates up in the form of the yield and equities 100 00:04:52,560 --> 00:04:53,240 Speaker 2: up at the same time. 101 00:04:53,279 --> 00:04:54,520 Speaker 1: How do you explain those two things. 102 00:04:55,080 --> 00:04:57,200 Speaker 9: Well, first of all, you made an interesting point that 103 00:04:57,480 --> 00:05:03,640 Speaker 9: rates are up today but actually up relative to the week. Secondly, normally, 104 00:05:03,640 --> 00:05:05,840 Speaker 9: when rates move have that big a move, the markets 105 00:05:05,839 --> 00:05:09,640 Speaker 9: do actually go down. That's been the recent consensus move. 106 00:05:09,920 --> 00:05:12,560 Speaker 9: But as you saw today, there are two really big. 107 00:05:12,279 --> 00:05:15,480 Speaker 10: Stocks, Amazon and Meta that were up. 108 00:05:15,480 --> 00:05:19,120 Speaker 9: Dramatically during the day, and if you actually adjust for that, 109 00:05:19,200 --> 00:05:21,239 Speaker 9: I'm not sure the market was up much at all. 110 00:05:21,480 --> 00:05:23,679 Speaker 9: And the Russell of course was down forty basis points. 111 00:05:23,720 --> 00:05:27,440 Speaker 9: So I actually think the markets are reacting somewhat negatively 112 00:05:27,520 --> 00:05:31,040 Speaker 9: to Pal taking his foot off the gas of cutting rates, 113 00:05:31,279 --> 00:05:33,280 Speaker 9: But I agree with so now, and I've said for 114 00:05:33,320 --> 00:05:35,200 Speaker 9: a while I don't think the FED is going to 115 00:05:35,279 --> 00:05:37,479 Speaker 9: cut rates early. I think they're going to wait for 116 00:05:37,520 --> 00:05:41,000 Speaker 9: inflation to actually break. I think inflation is done better, 117 00:05:41,080 --> 00:05:43,400 Speaker 9: but it is still elevated, and you see job growth 118 00:05:43,440 --> 00:05:44,480 Speaker 9: and you see wage growth. 119 00:05:45,320 --> 00:05:47,320 Speaker 2: So so now I think you too are agreeing that 120 00:05:47,360 --> 00:05:49,320 Speaker 2: there are going to be cuts. The question is how 121 00:05:49,360 --> 00:05:51,880 Speaker 2: big and how soon? What do you expect for this 122 00:05:51,960 --> 00:05:52,680 Speaker 2: the rest of the year. 123 00:05:53,400 --> 00:05:55,599 Speaker 7: You know, I haven't changed my views now for quite 124 00:05:55,640 --> 00:05:59,000 Speaker 7: a while, and I was in the fifty basis point 125 00:05:59,040 --> 00:06:02,680 Speaker 7: cam in this in December and powers Folk it became 126 00:06:02,720 --> 00:06:05,200 Speaker 7: pretty clear that the FED would like to do seventy five. 127 00:06:05,360 --> 00:06:07,760 Speaker 7: I think maybe they'll do seventy five, but it's going 128 00:06:07,800 --> 00:06:09,920 Speaker 7: to be in the second half of the year. I'm 129 00:06:09,960 --> 00:06:12,479 Speaker 7: not changing any of that really, because it's not that 130 00:06:12,560 --> 00:06:15,240 Speaker 7: I expect inplation to run away or pick up strongly, 131 00:06:15,560 --> 00:06:17,120 Speaker 7: and I just don't think it's going to come down 132 00:06:17,279 --> 00:06:22,200 Speaker 7: convincingly enough to allow for early rate cuts. And definitely 133 00:06:22,240 --> 00:06:25,839 Speaker 7: the political calendar complicates this, But abstracting from that, I 134 00:06:25,839 --> 00:06:28,279 Speaker 7: think as second half and seventy five business on this 135 00:06:28,320 --> 00:06:28,520 Speaker 7: is well. 136 00:06:28,520 --> 00:06:29,760 Speaker 1: I don't quite an experien in Sampeter. 137 00:06:29,839 --> 00:06:32,080 Speaker 2: When you've got this kind of growth, which is very robust, 138 00:06:32,160 --> 00:06:35,320 Speaker 2: and this kind of employment what we're seeing right now, why. 139 00:06:35,160 --> 00:06:36,280 Speaker 1: Is there a need to cut rates? 140 00:06:36,440 --> 00:06:38,520 Speaker 2: Why do you need to stimulate the economies through monetary 141 00:06:38,520 --> 00:06:39,280 Speaker 2: policy right now? 142 00:06:39,440 --> 00:06:39,680 Speaker 1: Yeah? 143 00:06:39,760 --> 00:06:42,000 Speaker 9: I think that's a good point. I do think that 144 00:06:42,240 --> 00:06:46,599 Speaker 9: we're seeing a very strong and resilient economy up and 145 00:06:46,680 --> 00:06:51,160 Speaker 9: down the income spectrum. And although there are some delinquencies 146 00:06:51,200 --> 00:06:53,719 Speaker 9: that are rising in the consumer world, we still have 147 00:06:53,800 --> 00:06:56,440 Speaker 9: people well employed with jobs. 148 00:06:56,120 --> 00:06:58,400 Speaker 10: That are paying even more than they paid last year. 149 00:06:58,960 --> 00:07:01,960 Speaker 9: So the FED is looking that inflation, and inflation has 150 00:07:01,960 --> 00:07:04,599 Speaker 9: come down from eight percent or seven percent down to four, 151 00:07:04,960 --> 00:07:06,960 Speaker 9: down to three, But is it really. 152 00:07:06,760 --> 00:07:07,799 Speaker 10: Going to fall much faster? 153 00:07:07,960 --> 00:07:09,960 Speaker 9: And so I think the FED is going to be 154 00:07:10,080 --> 00:07:12,880 Speaker 9: very careful about taking short rates down. And I think 155 00:07:12,880 --> 00:07:16,800 Speaker 9: it's quite possible that longer rates go up from here, 156 00:07:17,040 --> 00:07:18,360 Speaker 9: not down from here. 157 00:07:19,040 --> 00:07:21,239 Speaker 2: So, given what you just said, Peter, why don't people 158 00:07:21,360 --> 00:07:24,280 Speaker 2: feel better about it? Because everything we see and all 159 00:07:24,320 --> 00:07:26,840 Speaker 2: the polls taken, people don't feel that great about the economy. 160 00:07:26,960 --> 00:07:28,680 Speaker 1: You describe an economy it's pretty good. 161 00:07:29,080 --> 00:07:31,760 Speaker 9: Yeah, I think that's the question that many people have asked, 162 00:07:31,760 --> 00:07:34,760 Speaker 9: and I myself am a bit confused about it, but 163 00:07:34,800 --> 00:07:39,280 Speaker 9: I think the answer really falls in how inflation affects 164 00:07:39,320 --> 00:07:44,160 Speaker 9: people's spending capability. So, yes, wages are up, but remember 165 00:07:44,200 --> 00:07:47,280 Speaker 9: wages are up following a very high period of inflation, 166 00:07:47,560 --> 00:07:50,960 Speaker 9: which change the ability for consumers to actually spend money. 167 00:07:51,160 --> 00:07:54,280 Speaker 9: It really changed their discretionary spending patterns, and it changed 168 00:07:54,560 --> 00:07:57,200 Speaker 9: what they had left over to actually use for something else. 169 00:07:57,640 --> 00:07:59,440 Speaker 9: So if you have to spend more money on food, 170 00:07:59,440 --> 00:08:00,800 Speaker 9: and you have to spend more money on gas, and 171 00:08:00,840 --> 00:08:02,200 Speaker 9: you have to spend money on the things that you 172 00:08:02,280 --> 00:08:04,560 Speaker 9: have to spend money on, then you have a lot 173 00:08:04,640 --> 00:08:07,280 Speaker 9: less for everything else, and people feel pinched. And that's 174 00:08:07,360 --> 00:08:10,560 Speaker 9: not going to change until you get enough wage growth 175 00:08:10,600 --> 00:08:15,240 Speaker 9: to actually overcome the effect of that inflation on your 176 00:08:15,360 --> 00:08:16,400 Speaker 9: actual living expenses. 177 00:08:16,400 --> 00:08:17,600 Speaker 10: Remember, we don't have deflation. 178 00:08:17,840 --> 00:08:20,600 Speaker 9: Prices aren't coming down, they're just not going up faster. 179 00:08:21,000 --> 00:08:22,600 Speaker 9: So it's going to take some time and people are 180 00:08:22,640 --> 00:08:24,200 Speaker 9: not going to feel great about it for a while. 181 00:08:30,480 --> 00:08:31,240 Speaker 1: This is Wall Straight Week. 182 00:08:31,280 --> 00:08:33,320 Speaker 2: I'm David weston Son, I'll the side of Franklin Temple 183 00:08:33,360 --> 00:08:35,720 Speaker 2: and Peter Krause of Aperture Investors have stayed with us 184 00:08:35,840 --> 00:08:38,000 Speaker 2: We've talked on this program, Peter in the past about 185 00:08:38,040 --> 00:08:40,559 Speaker 2: the growth of private credit and private equity. It seems 186 00:08:40,559 --> 00:08:42,960 Speaker 2: sometimes like the trees are growing to the sky. I 187 00:08:43,000 --> 00:08:45,199 Speaker 2: know you've just gotten back from Miami talking to MFA 188 00:08:45,320 --> 00:08:48,400 Speaker 2: conference about a portfolio allegation. Is there a point at 189 00:08:48,400 --> 00:08:52,400 Speaker 2: which maybe we start not rushing forward in private quite 190 00:08:52,440 --> 00:08:52,920 Speaker 2: so fast? 191 00:08:53,200 --> 00:08:55,199 Speaker 10: Yeah, I think we are at that point. 192 00:08:55,320 --> 00:08:58,720 Speaker 9: I think that in the last fifteen years, we've had 193 00:08:58,840 --> 00:09:03,200 Speaker 9: declining interest rates, benign credit environments and very low yields, 194 00:09:03,440 --> 00:09:05,720 Speaker 9: and the place where you could get more yield was 195 00:09:05,760 --> 00:09:06,120 Speaker 9: in the. 196 00:09:06,000 --> 00:09:08,280 Speaker 10: Private space, particularly in private credit. 197 00:09:08,320 --> 00:09:10,720 Speaker 9: And the place where you got more return inequity was 198 00:09:10,720 --> 00:09:12,520 Speaker 9: in private equity, and a lot of that was in 199 00:09:12,559 --> 00:09:16,680 Speaker 9: growth investing venture capital. I think at this point we 200 00:09:16,920 --> 00:09:20,280 Speaker 9: have to be more cautious about those spaces, and the 201 00:09:20,320 --> 00:09:23,079 Speaker 9: liquidity coming out of those areas that you invested in 202 00:09:23,160 --> 00:09:24,720 Speaker 9: has slowed down dramatically. 203 00:09:25,040 --> 00:09:26,599 Speaker 10: We know that there's a lot less M and A. 204 00:09:26,880 --> 00:09:28,560 Speaker 10: We know there's a lot less. 205 00:09:28,520 --> 00:09:32,160 Speaker 9: IPOs in the private equity space. There are continuation funds 206 00:09:32,160 --> 00:09:34,560 Speaker 9: being talked about in credit, so maybe your credit comes 207 00:09:34,559 --> 00:09:37,480 Speaker 9: back slower than you thought so, And I do think 208 00:09:37,520 --> 00:09:40,480 Speaker 9: we said this in the earlier session is that yields 209 00:09:40,480 --> 00:09:44,120 Speaker 9: in the liquid space have grown dramatically, and so if 210 00:09:44,120 --> 00:09:46,760 Speaker 9: you're thinking about where you're going to allocate your next dollar, 211 00:09:47,040 --> 00:09:49,320 Speaker 9: would it really be in that private space? 212 00:09:49,559 --> 00:09:51,679 Speaker 10: Where would it make more sense. 213 00:09:51,400 --> 00:09:54,480 Speaker 9: To actually be opportunistic in the liquid space and find 214 00:09:54,840 --> 00:09:57,800 Speaker 9: a place to actually get reasonable yields with liquidity in 215 00:09:58,360 --> 00:09:58,760 Speaker 9: that area. 216 00:09:59,000 --> 00:10:01,720 Speaker 2: So so now in here from the fixed income side, 217 00:10:01,760 --> 00:10:04,200 Speaker 2: how does this play out in fixed income, private credits, 218 00:10:04,240 --> 00:10:06,680 Speaker 2: syndicated loans, liquid credit? 219 00:10:06,720 --> 00:10:07,560 Speaker 1: How does it play out? 220 00:10:08,360 --> 00:10:11,640 Speaker 7: So basically it is it is exactly true. For the 221 00:10:11,679 --> 00:10:17,959 Speaker 7: last fifteen years, illiquidity was almost sought after because liquid 222 00:10:18,240 --> 00:10:22,200 Speaker 7: liquid acids yielded so little. What I would say is 223 00:10:22,240 --> 00:10:25,040 Speaker 7: today with with liquid assets, I look at high yield 224 00:10:25,080 --> 00:10:29,160 Speaker 7: for example, and even with the current of compression, you 225 00:10:29,240 --> 00:10:31,520 Speaker 7: are getting all in returns of something like seven and 226 00:10:31,559 --> 00:10:33,760 Speaker 7: a half percent. If you look at bank loans or 227 00:10:33,760 --> 00:10:35,839 Speaker 7: floating rate you know, which is a little bit even 228 00:10:36,160 --> 00:10:39,520 Speaker 7: you know it's very short duration, it's looking good at 229 00:10:39,559 --> 00:10:44,600 Speaker 7: around nine percent or so. I think that private markets 230 00:10:44,640 --> 00:10:48,040 Speaker 7: are going to need to give a significant premium for 231 00:10:48,080 --> 00:10:52,480 Speaker 7: the ill liquidity in a period when liquidity starts compressing, 232 00:10:52,679 --> 00:10:57,120 Speaker 7: as central banks start ending their periods of QE and 233 00:10:57,160 --> 00:11:01,480 Speaker 7: so on. So that's one element. But against this background, 234 00:11:01,559 --> 00:11:06,240 Speaker 7: there are many institutional investors who quite like having assets 235 00:11:06,240 --> 00:11:09,080 Speaker 7: which are not marked to market because you don't see 236 00:11:09,120 --> 00:11:12,600 Speaker 7: the volatility constantly, right, So I think there's a bit 237 00:11:12,600 --> 00:11:16,160 Speaker 7: of a trade off there. Nonetheless, with liquid markets liquid 238 00:11:16,200 --> 00:11:19,280 Speaker 7: fixed in markets yielding as well as they currently are, 239 00:11:19,640 --> 00:11:22,480 Speaker 7: I'm very optimistic about fixed income over the next few 240 00:11:22,520 --> 00:11:24,600 Speaker 7: years relative to last decade. 241 00:11:24,800 --> 00:11:27,560 Speaker 9: I think there's some risk in marking to market assets 242 00:11:28,280 --> 00:11:31,840 Speaker 9: at the end. Oh yeah, I fully get that I 243 00:11:31,840 --> 00:11:33,560 Speaker 9: don't want to see my assets go up and down. 244 00:11:33,600 --> 00:11:35,800 Speaker 10: I fully get that it's nice to smooth them. 245 00:11:36,120 --> 00:11:37,280 Speaker 9: But at the end of the day, if you actually 246 00:11:37,280 --> 00:11:39,720 Speaker 9: don't know what the values are, that's not exactly a 247 00:11:39,720 --> 00:11:42,440 Speaker 9: good place to be. And I also think that we've 248 00:11:42,480 --> 00:11:46,080 Speaker 9: had very few periods in the last fifteen years we've 249 00:11:46,120 --> 00:11:49,240 Speaker 9: had extended period of time when asset values are hard 250 00:11:49,240 --> 00:11:53,920 Speaker 9: to determine. We've had short reductions and very rapid increases. 251 00:11:54,120 --> 00:11:56,079 Speaker 10: But if you go for two years where. 252 00:11:55,880 --> 00:11:58,760 Speaker 9: Your assets are kind of difficult to value, that's a 253 00:11:58,760 --> 00:12:00,319 Speaker 9: tough place for any fiduciar be. 254 00:12:00,480 --> 00:12:02,080 Speaker 2: Yeah, not knowing the value maybe part of the reason 255 00:12:02,080 --> 00:12:03,880 Speaker 2: why they're not distributed cash back right. 256 00:12:04,800 --> 00:12:07,080 Speaker 10: And because they don't have the cash. 257 00:12:06,920 --> 00:12:09,080 Speaker 2: Exactly and when they sold them it might not be 258 00:12:09,120 --> 00:12:11,120 Speaker 2: as much as they thought. Okay, many thanks now that 259 00:12:11,200 --> 00:12:15,240 Speaker 2: Peter Krause of Aperture Investors and Sonal Desi of Franklin Templeton. 260 00:12:17,960 --> 00:12:20,880 Speaker 2: Coming up the race for governments to subsidize chip production 261 00:12:21,000 --> 00:12:24,280 Speaker 2: around the world, We talk with Chris Miller of Tufts University, 262 00:12:24,480 --> 00:12:29,280 Speaker 2: author of Chip Wars. That's next on Wall Street Week 263 00:12:29,400 --> 00:12:30,080 Speaker 2: on Bloomberg. 264 00:12:51,000 --> 00:12:55,200 Speaker 3: This is Bloomberg Walls Street Week with David Weston from 265 00:12:55,320 --> 00:12:56,280 Speaker 3: Bloomberg Radio. 266 00:13:02,559 --> 00:13:06,360 Speaker 11: What a reversal today, when Japanese manufacturers have been so 267 00:13:06,559 --> 00:13:10,720 Speaker 11: brilliantly successful at selling to and in many cases even 268 00:13:10,920 --> 00:13:15,320 Speaker 11: taking over American markets that practically every politician in the 269 00:13:15,440 --> 00:13:20,080 Speaker 11: US is scrambling to touch our nerves of xenophobia and 270 00:13:20,160 --> 00:13:23,920 Speaker 11: to find a way of restricting and weakening these seemingly 271 00:13:24,000 --> 00:13:28,080 Speaker 11: omnipotent foreign devils. Or look at the all two typical furor, 272 00:13:28,440 --> 00:13:32,680 Speaker 11: this time involving Japanese chip producers who accused this week 273 00:13:32,800 --> 00:13:36,920 Speaker 11: of the awful crime of selling their semiconductors outside the 274 00:13:37,040 --> 00:13:38,880 Speaker 11: US at steep discounts. 275 00:13:40,480 --> 00:13:42,600 Speaker 2: That was Lewis Rocheiser on Wall Street Week back in 276 00:13:42,679 --> 00:13:45,520 Speaker 2: nineteen eighty six, when the issue was computer chips coming 277 00:13:45,520 --> 00:13:50,280 Speaker 2: from Japan. Today it's Chinese chips that has Washington concerned, 278 00:13:50,440 --> 00:13:53,040 Speaker 2: something laid out by Chris Miller of Tufts University in 279 00:13:53,080 --> 00:13:55,720 Speaker 2: his book Chip War. We asked him for an update 280 00:13:55,760 --> 00:13:58,439 Speaker 2: given the billions of dollars in US subsidies about to 281 00:13:58,480 --> 00:14:00,800 Speaker 2: be announced under the Chips and Science Act. 282 00:14:02,880 --> 00:14:06,640 Speaker 5: The boom and investment in artificial intelligence has impacted the 283 00:14:06,679 --> 00:14:09,520 Speaker 5: chip industry too, and today there's actually a shortage of 284 00:14:09,559 --> 00:14:13,000 Speaker 5: the types of chips that are used to train AI systems. 285 00:14:13,000 --> 00:14:16,320 Speaker 5: Even the biggest companies in the world Microsoft, Amazon, Google 286 00:14:16,400 --> 00:14:19,400 Speaker 5: can't get enough of these specialized AI chips, and in 287 00:14:19,440 --> 00:14:22,360 Speaker 5: part because of this, all of the world's governments, from 288 00:14:22,360 --> 00:14:25,600 Speaker 5: the US to Japan, to Europe to China, are pouring 289 00:14:25,680 --> 00:14:28,200 Speaker 5: tens of billions of dollars into their own chip industries, 290 00:14:28,240 --> 00:14:31,920 Speaker 5: trying to make sure they've got that competitive ability to 291 00:14:32,160 --> 00:14:36,120 Speaker 5: stay up with regard to these chip making capabilities that 292 00:14:36,160 --> 00:14:38,360 Speaker 5: are needed for AI chips. 293 00:14:38,880 --> 00:14:40,920 Speaker 2: At the same time, there have been various actions taken 294 00:14:40,960 --> 00:14:44,200 Speaker 2: by the US government and others to restrict China's access 295 00:14:44,240 --> 00:14:46,560 Speaker 2: to some of the machinery, if I can put it 296 00:14:46,600 --> 00:14:48,800 Speaker 2: that way, with the technology to develop these chips, how 297 00:14:48,800 --> 00:14:49,680 Speaker 2: effective is that? 298 00:14:49,720 --> 00:14:50,120 Speaker 1: Do we know? 299 00:14:50,840 --> 00:14:50,960 Speaker 4: Well? 300 00:14:51,000 --> 00:14:53,200 Speaker 5: I think the honest answer is that it's still pretty 301 00:14:53,200 --> 00:14:56,600 Speaker 5: early in the process. The restrictions went into place in 302 00:14:56,720 --> 00:14:59,680 Speaker 5: late twenty twenty two, and the goal the restrictions was 303 00:15:00,120 --> 00:15:03,320 Speaker 5: not really to stop China in its tracks, but rather 304 00:15:03,440 --> 00:15:07,240 Speaker 5: to slow its progress over time. And so China's continuing 305 00:15:07,240 --> 00:15:10,840 Speaker 5: to make progress. SMIC, the leading Chinese chip maker, is 306 00:15:10,920 --> 00:15:14,080 Speaker 5: moving forward and its technological capabilities, but I think it's 307 00:15:14,120 --> 00:15:16,800 Speaker 5: already likely the case that it's moving forward at a 308 00:15:16,840 --> 00:15:19,880 Speaker 5: slower rate than it would have had these controls not 309 00:15:19,960 --> 00:15:22,240 Speaker 5: been in place. And the key is not really where 310 00:15:22,320 --> 00:15:25,200 Speaker 5: is China, but it's where is China relative to the 311 00:15:25,240 --> 00:15:28,000 Speaker 5: most advanced capabilities in Taiwan, or in the United States, 312 00:15:28,120 --> 00:15:30,800 Speaker 5: or in South Korea. And there you see that China 313 00:15:30,880 --> 00:15:33,520 Speaker 5: is making some progress closing the gap, but a really 314 00:15:33,560 --> 00:15:34,880 Speaker 5: sizeable gap remains. 315 00:15:35,200 --> 00:15:37,200 Speaker 2: A lot of these hips actually put into other products 316 00:15:37,240 --> 00:15:39,760 Speaker 2: that get important. Do we know where the chips are 317 00:15:39,800 --> 00:15:40,360 Speaker 2: coming from? 318 00:15:40,920 --> 00:15:43,160 Speaker 5: Well, I think that's part of the challenge. You're right 319 00:15:43,200 --> 00:15:45,520 Speaker 5: to say that the US and Europe and Japan is 320 00:15:45,560 --> 00:15:48,840 Speaker 5: saying we don't actually import many chips from China directly. 321 00:15:49,160 --> 00:15:51,800 Speaker 5: Most of the Chinese chips in our systems are actually 322 00:15:52,200 --> 00:15:54,400 Speaker 5: first sent to Vietnam, then to the Philippines and to 323 00:15:54,520 --> 00:15:58,160 Speaker 5: Malaysia and some countries. Some companies don't always know the 324 00:15:58,200 --> 00:16:01,520 Speaker 5: origins of every single component inside of their system, and 325 00:16:01,560 --> 00:16:04,640 Speaker 5: that's why a traditional anti dumping tariff might be less 326 00:16:04,680 --> 00:16:05,880 Speaker 5: relevant in this case. 327 00:16:06,400 --> 00:16:08,880 Speaker 2: It's not just the United States and China, but also 328 00:16:08,960 --> 00:16:12,360 Speaker 2: I've read now about Japan actually investing in at least 329 00:16:12,400 --> 00:16:15,280 Speaker 2: the precursors to some of the chip manufacturing. What is 330 00:16:15,320 --> 00:16:18,200 Speaker 2: the role of Japan potentially in subsidizing some of the 331 00:16:18,480 --> 00:16:19,560 Speaker 2: more advanced chips. 332 00:16:20,120 --> 00:16:23,280 Speaker 5: Well, today, Japan doesn't produce any of the most advanced 333 00:16:23,320 --> 00:16:26,840 Speaker 5: ships domestically, but it plays a major role in producing 334 00:16:26,880 --> 00:16:30,280 Speaker 5: the machines and also the chemicals that are needed in 335 00:16:30,320 --> 00:16:33,640 Speaker 5: cutting edge chip making. And there's some really unique expertise 336 00:16:33,720 --> 00:16:37,640 Speaker 5: among a handful of Japanese firms, especially in the chemicals sphere, 337 00:16:38,040 --> 00:16:42,880 Speaker 5: where Japan has very high levels of market share and 338 00:16:43,080 --> 00:16:46,520 Speaker 5: limited competition because they've been investing in this sphere for 339 00:16:47,040 --> 00:16:49,600 Speaker 5: now several decades. And that's where the Japanese government is 340 00:16:49,600 --> 00:16:52,560 Speaker 5: focusing a lot of its efforts and retaining its advantages 341 00:16:52,600 --> 00:16:55,520 Speaker 5: that it has over other countries and these chemicals. 342 00:16:57,320 --> 00:16:58,800 Speaker 1: That was Chris Miller of Tufts. 343 00:17:05,640 --> 00:17:09,560 Speaker 2: Elections have consequences, including for business and the economy. 344 00:17:09,880 --> 00:17:10,919 Speaker 1: When President Trump was. 345 00:17:10,880 --> 00:17:15,240 Speaker 2: Elected in twenty sixteen, markets reacted violently and turned out 346 00:17:15,280 --> 00:17:16,639 Speaker 2: to be violently wrong. 347 00:17:17,240 --> 00:17:18,760 Speaker 9: But you'll remember a lot of us kind of got 348 00:17:18,760 --> 00:17:21,160 Speaker 9: this wrong on election night when it looked like Trump 349 00:17:21,200 --> 00:17:22,959 Speaker 9: was going to win, and initially the market crash. Then 350 00:17:22,960 --> 00:17:25,080 Speaker 9: people said, wait a minute, the markets sort up again, 351 00:17:25,119 --> 00:17:27,080 Speaker 9: and it kind of took off from there, and. 352 00:17:27,119 --> 00:17:29,280 Speaker 2: Right now it looks like we may get a second 353 00:17:29,320 --> 00:17:31,960 Speaker 2: look at mister Trump's approach to the economy as he 354 00:17:32,000 --> 00:17:35,360 Speaker 2: appears to be headed to renomination as the Republican candidate, 355 00:17:35,920 --> 00:17:39,400 Speaker 2: and if nominated, would be a serious contender to replace 356 00:17:39,480 --> 00:17:43,360 Speaker 2: President Biden. Some say that the Biden record on economics 357 00:17:43,400 --> 00:17:46,160 Speaker 2: stacks up favorably to former President Trump's. 358 00:17:46,400 --> 00:17:49,320 Speaker 12: For the first time in history, we have two candidates 359 00:17:49,480 --> 00:17:52,760 Speaker 12: that had been president, So you have a track record 360 00:17:52,760 --> 00:17:55,320 Speaker 12: of what to expect. In the case of President Biden, 361 00:17:55,720 --> 00:17:58,919 Speaker 12: You've had so far three years of steadiness, good growth. 362 00:17:58,960 --> 00:18:02,240 Speaker 12: Market said at all time home, I think it's underappreciated 363 00:18:02,480 --> 00:18:03,880 Speaker 12: what has gone on with the economy. 364 00:18:04,440 --> 00:18:08,000 Speaker 2: Others see President Biden's policies insufficiently pro growth. 365 00:18:08,280 --> 00:18:11,080 Speaker 13: People are frustrated, and it's the economic policies the Biden 366 00:18:11,119 --> 00:18:14,360 Speaker 13: administration that has brought us here. Is the president's policies 367 00:18:15,080 --> 00:18:17,800 Speaker 13: of paying people not to work after the pandemic, massive 368 00:18:17,880 --> 00:18:21,280 Speaker 13: multi trillion dollars spending bills that drove inflation. And the 369 00:18:21,359 --> 00:18:23,879 Speaker 13: end result is if you speak to people here in Wisconsin, 370 00:18:24,200 --> 00:18:27,040 Speaker 13: regular folks on the street, they're getting collaborated by Bidenomics, 371 00:18:27,040 --> 00:18:28,800 Speaker 13: and they want to see Washington change course. 372 00:18:29,560 --> 00:18:32,320 Speaker 2: And then you have experts like Glenn Hubbard who worry 373 00:18:32,359 --> 00:18:35,000 Speaker 2: that there isn't a big enough difference between the two. 374 00:18:35,720 --> 00:18:39,000 Speaker 14: What strikes me, in looking at least at President Biden 375 00:18:39,040 --> 00:18:43,040 Speaker 14: and former President Trump's policies is less how different they 376 00:18:43,080 --> 00:18:47,160 Speaker 14: are than how similar they are. So in terms of protectionism, 377 00:18:47,800 --> 00:18:51,639 Speaker 14: in terms of a fondness for industrial pulse, in terms 378 00:18:51,640 --> 00:18:54,960 Speaker 14: of intervention in financial markets, the two men are more 379 00:18:55,000 --> 00:18:56,399 Speaker 14: similar than they are different. 380 00:18:56,680 --> 00:18:59,800 Speaker 2: But whoever gets the presidential nod this year, they're going 381 00:18:59,840 --> 00:19:02,439 Speaker 2: to be faced with some big issues of the federal 382 00:19:02,480 --> 00:19:06,199 Speaker 2: deficits and debt. The problem is that's led us two 383 00:19:06,280 --> 00:19:07,800 Speaker 2: years and years of borrowing too much. 384 00:19:07,840 --> 00:19:10,040 Speaker 14: We now have a debt that's about to be at 385 00:19:10,040 --> 00:19:10,720 Speaker 14: record levels. 386 00:19:10,760 --> 00:19:13,680 Speaker 15: I think we're in a terrible place because, unfortunately, once 387 00:19:13,720 --> 00:19:16,560 Speaker 15: you get to legislating, there's a lot of talk, but 388 00:19:16,600 --> 00:19:21,119 Speaker 15: the talk is always divided politically between the Republicans who 389 00:19:21,119 --> 00:19:23,960 Speaker 15: refuse to raise taxes and the Democrats who. 390 00:19:23,840 --> 00:19:24,880 Speaker 1: Won't deal with titlements. 391 00:19:25,000 --> 00:19:27,000 Speaker 15: I do think when we eventually get to doing this, 392 00:19:27,560 --> 00:19:31,280 Speaker 15: about sixty percent or something of the increase in the 393 00:19:31,359 --> 00:19:35,199 Speaker 15: debt from thousand to twenty twenty two was because of 394 00:19:35,240 --> 00:19:35,840 Speaker 15: the tax cuts. 395 00:19:40,720 --> 00:19:43,280 Speaker 2: For his thoughts on what difference the election out could 396 00:19:43,280 --> 00:19:45,679 Speaker 2: could make for the economy were welcome, Dowt Doctor Paul Krugman, 397 00:19:45,880 --> 00:19:49,440 Speaker 2: Nobel Laureate Economics and Distinguished Professor at the City University 398 00:19:49,440 --> 00:19:51,920 Speaker 2: of New York Graduate Center. So, doctor Kruman, thank you 399 00:19:51,960 --> 00:19:53,840 Speaker 2: so much for being back with this. Before we talk 400 00:19:53,840 --> 00:19:56,679 Speaker 2: about what differences there may be in the leading candidates 401 00:19:56,760 --> 00:19:58,520 Speaker 2: right now in November, give us your sense of the 402 00:19:58,560 --> 00:20:01,399 Speaker 2: economy overall and what we're likely to need over the 403 00:20:01,440 --> 00:20:03,360 Speaker 2: next four years. Then we can talk about who might 404 00:20:03,520 --> 00:20:04,640 Speaker 2: be most likely to provided. 405 00:20:05,760 --> 00:20:10,760 Speaker 6: Okay, so we are in an extraordinarily good immediate position. 406 00:20:11,040 --> 00:20:13,119 Speaker 6: I've been arguing with people who say, you know, this 407 00:20:13,160 --> 00:20:14,600 Speaker 6: is a Goldilock's. 408 00:20:14,000 --> 00:20:15,280 Speaker 10: Economy, and that's that's wrong. 409 00:20:15,400 --> 00:20:18,920 Speaker 6: Goldilocks found a partis that was neither too hot nor 410 00:20:18,960 --> 00:20:21,399 Speaker 6: too cold. We've got an economy that's hot where you 411 00:20:21,440 --> 00:20:24,080 Speaker 6: wanted to be hot, like in GDP growth, and cold 412 00:20:24,080 --> 00:20:26,800 Speaker 6: where you wanted to be cold on inflation. So this is, 413 00:20:27,240 --> 00:20:30,600 Speaker 6: you know right now, is this is a lotways the 414 00:20:30,640 --> 00:20:35,320 Speaker 6: best short run economy we've had since since the nineteen nineties. 415 00:20:37,640 --> 00:20:40,359 Speaker 6: So what we need for the next four years is 416 00:20:41,119 --> 00:20:42,560 Speaker 6: to be thinking about the long run. 417 00:20:43,160 --> 00:20:45,440 Speaker 2: Do we need to at least start to think about 418 00:20:45,480 --> 00:20:48,600 Speaker 2: the deficit and the debt that's accumulating because right now, 419 00:20:48,640 --> 00:20:50,520 Speaker 2: as you look at Donald Trump and Joe Biden, the 420 00:20:50,520 --> 00:20:53,840 Speaker 2: two leading candidates, neither one seems to be willing to 421 00:20:53,840 --> 00:20:56,119 Speaker 2: address that. By the way, this week Congress did do 422 00:20:56,200 --> 00:20:59,440 Speaker 2: something on taxation which was actually actually it was negative 423 00:20:59,480 --> 00:21:01,840 Speaker 2: in terms of the deficit. So do we need to 424 00:21:01,840 --> 00:21:02,720 Speaker 2: address that question? 425 00:21:02,760 --> 00:21:03,800 Speaker 1: And if so, when. 426 00:21:05,560 --> 00:21:09,240 Speaker 6: You know, I'm not a complete deficits never matter, guy, 427 00:21:10,560 --> 00:21:11,480 Speaker 6: but I'm not. 428 00:21:12,200 --> 00:21:14,800 Speaker 10: It still doesn't look like a first rank issue. 429 00:21:14,840 --> 00:21:17,240 Speaker 6: Despite the you know, the enormous numbers but you know, 430 00:21:17,280 --> 00:21:23,919 Speaker 6: everything about America is enormous, and particularly there is a 431 00:21:23,960 --> 00:21:26,879 Speaker 6: lot of the sustainability of debt depends a lot on 432 00:21:27,600 --> 00:21:31,760 Speaker 6: comparison between interest rates and the economy's growth rate. And 433 00:21:31,920 --> 00:21:34,159 Speaker 6: right now what we have is interest rates seem to 434 00:21:34,200 --> 00:21:38,480 Speaker 6: be coming down. Growth seems to you know, productivity growth 435 00:21:38,520 --> 00:21:41,879 Speaker 6: is looking really good. There are high hopes for AI. 436 00:21:42,040 --> 00:21:45,479 Speaker 6: All of which means that despite the huge size of 437 00:21:45,520 --> 00:21:49,080 Speaker 6: those raw debt numbers, I actually don't think that there's 438 00:21:49,119 --> 00:21:49,960 Speaker 6: any urgency. 439 00:21:50,760 --> 00:21:52,840 Speaker 2: History we're told does not repeat itself, but it does 440 00:21:52,920 --> 00:21:55,560 Speaker 2: rhyme sometimes. Is there a rhyme with nineteen ninety three, 441 00:21:55,640 --> 00:21:57,280 Speaker 2: because if you go back to nineteenninety three you talked 442 00:21:57,280 --> 00:22:00,360 Speaker 2: to Bob Rubin about what happened with President Clinton, It's 443 00:22:00,359 --> 00:22:02,240 Speaker 2: thought that we got a lot of growth out of 444 00:22:02,320 --> 00:22:05,080 Speaker 2: the nineties in part because we both increased some taxes 445 00:22:05,119 --> 00:22:07,880 Speaker 2: and cut some spending. Is there a similar opportunity here 446 00:22:07,920 --> 00:22:09,399 Speaker 2: for pro growth policies. 447 00:22:10,560 --> 00:22:12,880 Speaker 6: I'm a great admirer of Bob Rubin, but I don't 448 00:22:12,880 --> 00:22:17,199 Speaker 6: believe that story for a minute. It's just not what 449 00:22:16,840 --> 00:22:20,280 Speaker 6: you what looks like actually happened in the nineties. What 450 00:22:20,359 --> 00:22:24,240 Speaker 6: actually happened in the nineties was that businesses finally figured 451 00:22:24,240 --> 00:22:27,320 Speaker 6: out what to do with these computer things, and we 452 00:22:27,440 --> 00:22:31,280 Speaker 6: got a decade of good productivity growth because we finally 453 00:22:31,280 --> 00:22:34,520 Speaker 6: figured out how to make productive use of it. And 454 00:22:34,960 --> 00:22:39,280 Speaker 6: I actually don't think that Clint administration policies made. 455 00:22:39,240 --> 00:22:40,600 Speaker 10: Much difference one way or the other. 456 00:22:41,240 --> 00:22:44,439 Speaker 6: So I just don't buy that it's just And we 457 00:22:44,520 --> 00:22:47,399 Speaker 6: may be approaching another moment like that. Again, the recent 458 00:22:47,440 --> 00:22:52,320 Speaker 6: productivity numbers are really quite good. AI. Maybe it's either 459 00:22:52,359 --> 00:22:56,160 Speaker 6: going to destroy us or or possibly give us another 460 00:22:56,280 --> 00:22:59,399 Speaker 6: decade of good productivity growth. So no, I just don't 461 00:23:00,240 --> 00:23:05,440 Speaker 6: that whole responsible fiscal policy was responsible for the Roaring nineties. 462 00:23:06,320 --> 00:23:09,679 Speaker 6: It's a lovely narrative. I don't think there's anything to 463 00:23:09,680 --> 00:23:10,199 Speaker 6: support it. 464 00:23:10,359 --> 00:23:13,320 Speaker 2: President Trump, former President Trump, has said that he would 465 00:23:13,400 --> 00:23:16,160 Speaker 2: favor a ten percent across the board, not just China, 466 00:23:16,200 --> 00:23:19,879 Speaker 2: across the board tariff and Infortant and actually Joe Lightehyser 467 00:23:20,000 --> 00:23:23,480 Speaker 2: is advisors section. Maybe we increase that to eliminate trade deficit. 468 00:23:23,680 --> 00:23:26,200 Speaker 1: What would that do to the growth of the American economy? 469 00:23:26,920 --> 00:23:31,720 Speaker 6: Okay, Now, dirty little secret of international trade economics is 470 00:23:31,760 --> 00:23:37,679 Speaker 6: that moderate tariff rates do not, at least according to 471 00:23:37,720 --> 00:23:39,880 Speaker 6: our models and as far as we can tell, in practice, 472 00:23:40,160 --> 00:23:45,320 Speaker 6: don't have huge growth effects. They distort consumption. 473 00:23:45,280 --> 00:23:46,560 Speaker 10: And production choices. 474 00:23:46,640 --> 00:23:51,160 Speaker 6: They do some damage, but to get really big numbers 475 00:23:51,200 --> 00:23:55,480 Speaker 6: you have to get well beyond ten percent. So of course, 476 00:23:55,560 --> 00:23:59,720 Speaker 6: if the goal is to eliminate the trade deficit, lightheyder 477 00:24:00,119 --> 00:24:04,800 Speaker 6: to have us a surprise, because tariffs don't eliminate trade 478 00:24:04,840 --> 00:24:08,200 Speaker 6: deficits unless they get so high as to basically make 479 00:24:08,280 --> 00:24:12,200 Speaker 6: trade impossible. So we would be talking about much much 480 00:24:12,240 --> 00:24:13,680 Speaker 6: higher tariff rates potentially. 481 00:24:14,720 --> 00:24:17,440 Speaker 10: What worries me is not I. 482 00:24:17,359 --> 00:24:20,480 Speaker 6: Mean, I think there are a lot of really negative 483 00:24:20,480 --> 00:24:23,199 Speaker 6: consequences if the US does a ten percent tariff, but 484 00:24:23,240 --> 00:24:25,720 Speaker 6: they have they're sort of geopolitical more than anything else. 485 00:24:25,760 --> 00:24:26,880 Speaker 10: They would mean that the United. 486 00:24:26,720 --> 00:24:29,719 Speaker 6: States is basically saying, well, we're opting out of our 487 00:24:29,840 --> 00:24:32,720 Speaker 6: role as a leader of the global economy. 488 00:24:32,760 --> 00:24:34,920 Speaker 10: It would have a lot of bad effects. 489 00:24:34,800 --> 00:24:37,040 Speaker 6: In terms of the economic impact. I mean, I'm hearing 490 00:24:37,560 --> 00:24:40,439 Speaker 6: talk about, well, let's have sixty percent terroriffs on imports 491 00:24:40,480 --> 00:24:46,640 Speaker 6: from China, and you know, tariff roughly speaking, the adverse 492 00:24:46,680 --> 00:24:49,159 Speaker 6: effects of a tariff are proportionals something like the square 493 00:24:49,240 --> 00:24:52,240 Speaker 6: of the tariff rates. So as sixty percent tariff is 494 00:24:52,280 --> 00:24:55,040 Speaker 6: you know, thirty thirty six percent times as bad as 495 00:24:55,040 --> 00:24:57,040 Speaker 6: a ten percent TERRAF. So if we start to get 496 00:24:57,040 --> 00:24:59,439 Speaker 6: into those kinds of tariffs, yeah, then we are actually 497 00:24:59,480 --> 00:25:01,560 Speaker 6: talking about significant negative impacts. 498 00:25:02,240 --> 00:25:04,119 Speaker 2: Doctor Carrey, thank you so very much for being Wall 499 00:25:04,160 --> 00:25:07,840 Speaker 2: Street Week. I really appreciate that. Is Nobel laureate. Paul Krugman. 500 00:25:09,480 --> 00:25:09,919 Speaker 1: Coming up. 501 00:25:10,000 --> 00:25:12,440 Speaker 2: We wrap up the week with special contributor Larry Summers 502 00:25:12,480 --> 00:25:13,240 Speaker 2: of Harvard. 503 00:25:13,600 --> 00:25:20,920 Speaker 4: I'm much less prepared to declare that it's all over then, 504 00:25:21,320 --> 00:25:25,600 Speaker 4: I think, Paul is that's next on. 505 00:25:25,480 --> 00:25:26,879 Speaker 1: Wall Street Week on Bloomberg. 506 00:25:29,320 --> 00:25:33,520 Speaker 3: This is Bloomberg Wall Street Week with David Weston from 507 00:25:33,640 --> 00:25:34,600 Speaker 3: Bloomberg Radio. 508 00:25:41,280 --> 00:25:43,080 Speaker 2: This is Wall Street Week. I'm David western We are 509 00:25:43,160 --> 00:25:45,480 Speaker 2: joined once again this week. We're our very special contributor 510 00:25:45,560 --> 00:25:47,640 Speaker 2: Larry Summers of Harvard. Larry, thanks so much for being 511 00:25:47,680 --> 00:25:49,679 Speaker 2: being this. We have to start with those wow, as 512 00:25:49,680 --> 00:25:51,640 Speaker 2: some people are calling them jobs numbers. They came out 513 00:25:51,840 --> 00:25:54,360 Speaker 2: way above expectation. What did you make of them? 514 00:25:54,720 --> 00:25:57,600 Speaker 4: Look, the economy has been surprising on the upside for 515 00:25:57,640 --> 00:26:01,520 Speaker 4: a while, so I was surprised not that the job 516 00:26:01,600 --> 00:26:05,879 Speaker 4: numbers came in that way. It was a pretty broadly 517 00:26:06,080 --> 00:26:14,520 Speaker 4: strong report. Household Survey Business Survey wage numbers, especially given 518 00:26:14,560 --> 00:26:17,040 Speaker 4: that the weather was pretty bad in January in many 519 00:26:17,080 --> 00:26:20,159 Speaker 4: parts of the country, which probably held the numbers down 520 00:26:20,680 --> 00:26:23,479 Speaker 4: below what would have been their normal level. And what 521 00:26:23,520 --> 00:26:27,280 Speaker 4: that suggests is that despite the interest rate hikes of 522 00:26:27,320 --> 00:26:33,120 Speaker 4: the Fed, there's a lot of strength in the economy. 523 00:26:33,720 --> 00:26:37,480 Speaker 4: My instinct is that that is telling you, as I've 524 00:26:37,520 --> 00:26:41,200 Speaker 4: been saying for some time on your show, David, that 525 00:26:41,520 --> 00:26:47,159 Speaker 4: some combination of a higher neutral rate is the world 526 00:26:47,240 --> 00:26:54,399 Speaker 4: we're living in, and possibly, quite possibly spending has become 527 00:26:54,520 --> 00:27:00,560 Speaker 4: less intrasensitive over time because there's less how in the 528 00:27:00,600 --> 00:27:04,800 Speaker 4: economy relative to GDP, because durable goods are less durable 529 00:27:05,119 --> 00:27:08,200 Speaker 4: and so long lives than they used to be, because 530 00:27:08,200 --> 00:27:12,600 Speaker 4: there's more flow of income to the rest of the 531 00:27:12,640 --> 00:27:17,640 Speaker 4: economy from larger government debts, and that makes interest rates 532 00:27:18,080 --> 00:27:22,520 Speaker 4: operate in the other direction. So I think what we've 533 00:27:22,680 --> 00:27:25,880 Speaker 4: learned is that what we might have thought would be 534 00:27:26,000 --> 00:27:31,119 Speaker 4: substantially restrictive monetary policy based on the magnitude of the 535 00:27:31,200 --> 00:27:34,440 Speaker 4: interstrate hikes, really wasn't well. 536 00:27:34,480 --> 00:27:36,840 Speaker 2: And we heard from the treasure six Ary Janet Yellen 537 00:27:36,880 --> 00:27:39,480 Speaker 2: this week saying she's not sure that the introducers the 538 00:27:39,520 --> 00:27:42,080 Speaker 2: longer term interest rates will come back down, they may 539 00:27:42,080 --> 00:27:44,840 Speaker 2: remain elevated, in part because of how robust the economies. 540 00:27:44,880 --> 00:27:47,679 Speaker 1: We also heard the FED Chair J. Powell say his 541 00:27:47,720 --> 00:27:48,480 Speaker 1: concern isn't. 542 00:27:48,280 --> 00:27:50,760 Speaker 2: So much about reacceleration of inflation, but it just won't 543 00:27:50,800 --> 00:27:52,920 Speaker 2: come all the way down. On the other hand, despite 544 00:27:52,920 --> 00:27:56,400 Speaker 2: the wage increases, productivity is at high levels right now. 545 00:27:56,440 --> 00:27:56,920 Speaker 1: I just checked it. 546 00:27:56,920 --> 00:27:58,680 Speaker 2: I think it's like three point two percent right now. 547 00:27:58,960 --> 00:27:59,880 Speaker 1: Might that save us? 548 00:28:00,960 --> 00:28:05,639 Speaker 4: The answer is yes, yes, and yes. I welcome Secretary 549 00:28:05,760 --> 00:28:13,280 Speaker 4: Yellen's recognition that given prospective budget deficits, given perspective increases 550 00:28:13,359 --> 00:28:19,240 Speaker 4: in investment demand, we really don't know where neutral interest 551 00:28:19,320 --> 00:28:22,480 Speaker 4: rates are going to be. I'll be interested in seeing 552 00:28:22,840 --> 00:28:28,560 Speaker 4: what's in the Administration forecast when it comes out. I 553 00:28:28,600 --> 00:28:34,920 Speaker 4: think one would want to be guessing that Treasury bill 554 00:28:35,000 --> 00:28:40,680 Speaker 4: rates will be averaging well above three percent through the 555 00:28:40,680 --> 00:28:42,080 Speaker 4: rest of this decade. 556 00:28:42,560 --> 00:28:45,640 Speaker 2: Larry, We talked with your economist colleague Paul Krookman this 557 00:28:45,720 --> 00:28:48,480 Speaker 2: week about inflation and what we should have expected, and 558 00:28:48,520 --> 00:28:51,520 Speaker 2: he admitted that he actually underestimated the issue of inflation. 559 00:28:51,920 --> 00:28:54,280 Speaker 2: He thought it would not be as big and glasses long, 560 00:28:54,680 --> 00:28:56,440 Speaker 2: and he sort of called you up by name saying 561 00:28:56,480 --> 00:28:59,360 Speaker 2: he thought you'd stayed too long on the old models, 562 00:28:59,360 --> 00:29:01,600 Speaker 2: that you had topreciated that this was really a once 563 00:29:01,640 --> 00:29:04,560 Speaker 2: in a lifetime experience with the pandemic and the shutdown 564 00:29:04,560 --> 00:29:06,320 Speaker 2: of the supply. What do you have to say about that? 565 00:29:06,400 --> 00:29:08,600 Speaker 2: Do you in retrospect, did you over predict the need 566 00:29:08,760 --> 00:29:10,720 Speaker 2: for unemployment to get inflation down? 567 00:29:11,320 --> 00:29:15,800 Speaker 4: Look, I think we're having a softer landing than I 568 00:29:15,840 --> 00:29:21,800 Speaker 4: would have expected so far. We'll see how inflation settles out, 569 00:29:22,280 --> 00:29:22,840 Speaker 4: but we. 570 00:29:22,880 --> 00:29:23,760 Speaker 1: Are having that. 571 00:29:24,760 --> 00:29:28,080 Speaker 4: I think Paul tends to attribute it to a whole 572 00:29:28,120 --> 00:29:31,720 Speaker 4: set of stuff on the supply side. I see the 573 00:29:31,920 --> 00:29:36,040 Speaker 4: largest fiscal stimulus by far since World War Two. I 574 00:29:36,080 --> 00:29:41,840 Speaker 4: see nominal GDP growth rising in double digits. I see 575 00:29:41,880 --> 00:29:47,040 Speaker 4: an economy that gives evidence of booming and gave evidence 576 00:29:47,080 --> 00:29:51,240 Speaker 4: of booming before the supply stuff was fixed. And so 577 00:29:51,360 --> 00:29:56,840 Speaker 4: I think demand is a pretty big part of the story. 578 00:29:57,200 --> 00:30:03,960 Speaker 4: But yes, the outcome has been more benign than those 579 00:30:04,000 --> 00:30:09,440 Speaker 4: of us who drew the implications from standard models predicted. 580 00:30:09,920 --> 00:30:12,800 Speaker 4: I think if you look back, we recognize that there 581 00:30:13,000 --> 00:30:20,040 Speaker 4: was enormous uncertainty. But yes, things did come back in 582 00:30:20,080 --> 00:30:25,440 Speaker 4: a way that was more favorable than standard models would 583 00:30:25,440 --> 00:30:31,280 Speaker 4: have expected, though I'm much less prepared to declare that 584 00:30:31,360 --> 00:30:37,560 Speaker 4: it's all over. We have not yet landed this plane. 585 00:30:37,800 --> 00:30:41,040 Speaker 4: No one, to my knowledge thinks the kind of job 586 00:30:41,080 --> 00:30:45,440 Speaker 4: growth we've seen over this month or over the last 587 00:30:46,400 --> 00:30:51,800 Speaker 4: quarter is medium term sustainable. And that means and no 588 00:30:51,840 --> 00:30:55,040 Speaker 4: one thinks we're all the way back to two percent 589 00:30:55,160 --> 00:31:00,280 Speaker 4: inflation on a durable basis, and so that means that 590 00:31:00,320 --> 00:31:02,480 Speaker 4: there are still issues around the landing. 591 00:31:02,840 --> 00:31:05,280 Speaker 2: What's your take on what really happened in the nineteen 592 00:31:05,320 --> 00:31:08,000 Speaker 2: nineties and the relationship between that ninety three Act and 593 00:31:08,080 --> 00:31:10,560 Speaker 2: the tax increases and spending cuts on the one hand, 594 00:31:10,600 --> 00:31:11,360 Speaker 2: and growth on the other. 595 00:31:12,280 --> 00:31:16,400 Speaker 4: Look, there's no question that the economy hit good fortune 596 00:31:16,760 --> 00:31:20,960 Speaker 4: from technology in the nineteen nineties, and that's an important part. 597 00:31:20,800 --> 00:31:21,480 Speaker 1: Of the story. 598 00:31:22,200 --> 00:31:26,480 Speaker 4: But you know, when you bring down capital costs, that's 599 00:31:26,560 --> 00:31:30,680 Speaker 4: when people tend to take a longer view. That's when 600 00:31:30,720 --> 00:31:36,800 Speaker 4: there's more investment in technology that produces growth. And I 601 00:31:36,840 --> 00:31:39,840 Speaker 4: think what those of us who were in the Clinton 602 00:31:39,880 --> 00:31:46,320 Speaker 4: administration always felt was that by cutting interest rates, you 603 00:31:46,360 --> 00:31:51,520 Speaker 4: could turn a vicious cycle of high capital costs and 604 00:31:51,640 --> 00:31:57,960 Speaker 4: low investment into a virtuous circle of lower capital costs, 605 00:31:58,160 --> 00:32:03,960 Speaker 4: more investments, more growth. Lower deficits and the cycle goes 606 00:32:04,080 --> 00:32:09,480 Speaker 4: round again. And I think you can never replay history. 607 00:32:09,960 --> 00:32:13,200 Speaker 4: But gosh, I think if we had failed to act 608 00:32:13,240 --> 00:32:17,000 Speaker 4: strongly with respect to the deficit in nineteen ninety three, 609 00:32:17,560 --> 00:32:20,200 Speaker 4: I don't think we would have seen the kind of 610 00:32:20,240 --> 00:32:27,640 Speaker 4: economic miracle that happened in the nineteen nineties. At the 611 00:32:27,680 --> 00:32:31,560 Speaker 4: same time, look, I think on shows like this, people 612 00:32:31,640 --> 00:32:36,920 Speaker 4: in markets do have a tendency to put all the 613 00:32:37,000 --> 00:32:41,840 Speaker 4: emphasis on the short run tools of monetary and fiscal policies, 614 00:32:42,360 --> 00:32:50,480 Speaker 4: and it's a mistake to recognize structure and technology as 615 00:32:50,600 --> 00:32:53,960 Speaker 4: driving forces of what happens in the economy. And I 616 00:32:53,960 --> 00:32:58,560 Speaker 4: think in that area, the Clinton administration was fortunate in 617 00:32:59,440 --> 00:33:03,000 Speaker 4: just what was happening in the private sector, but also 618 00:33:03,520 --> 00:33:06,800 Speaker 4: whether it was telecommunications, whether it was the approach that 619 00:33:06,960 --> 00:33:13,640 Speaker 4: was taken to the internet, acted wisely in creating an 620 00:33:13,760 --> 00:33:17,320 Speaker 4: environment that made it very attractive for the private sector 621 00:33:17,400 --> 00:33:20,160 Speaker 4: to invest. And in all honesty, I think they are 622 00:33:20,520 --> 00:33:27,640 Speaker 4: important lessons from that moderate progressive approach for policy going forward. 623 00:33:28,400 --> 00:33:30,320 Speaker 1: Larry, thank you so very much. SS. Larry Summer is 624 00:33:30,320 --> 00:33:32,560 Speaker 1: our very special contributor here on Wall Street Week. He's 625 00:33:32,560 --> 00:33:33,280 Speaker 1: from Harvard. 626 00:33:34,520 --> 00:33:38,280 Speaker 2: Finally, one more thought author Orn Woodward says, he who 627 00:33:38,320 --> 00:33:42,240 Speaker 2: controls the fool's gold controls the fool. All of us 628 00:33:42,280 --> 00:33:44,320 Speaker 2: are looking for some pot of gold at the end 629 00:33:44,320 --> 00:33:47,440 Speaker 2: of our rainbow, whether it's intangible wealth or in something 630 00:33:47,480 --> 00:33:50,000 Speaker 2: a bit less tangible. So we pay a lot of 631 00:33:50,040 --> 00:33:53,120 Speaker 2: attention to those who do particularly well for themselves, like, 632 00:33:53,200 --> 00:33:56,000 Speaker 2: for example, Elon Musk becoming the richest man in the 633 00:33:56,040 --> 00:33:59,960 Speaker 2: world through his Tesla electric vehicles and SpaceX satellite launch. 634 00:34:00,480 --> 00:34:03,560 Speaker 7: Elon Muskus seeing his own network jump by more than anyone. 635 00:34:03,640 --> 00:34:06,160 Speaker 7: So far this year, he and the world's five hundred 636 00:34:06,200 --> 00:34:08,720 Speaker 7: visious people have gained more than eight hundred and fifty 637 00:34:08,840 --> 00:34:10,040 Speaker 7: billion dollars wealth. 638 00:34:10,239 --> 00:34:13,720 Speaker 2: Or the late doctor Paul Farmer realizing a lifelong dream 639 00:34:14,000 --> 00:34:15,280 Speaker 2: to change the world. 640 00:34:15,520 --> 00:34:20,680 Speaker 4: People shouldn't die of a readily treatable disease because they're poor. 641 00:34:21,120 --> 00:34:24,640 Speaker 2: But sometimes, and maybe too often, when it first appears 642 00:34:24,680 --> 00:34:27,240 Speaker 2: to be a truly great deal, ends up too good 643 00:34:27,440 --> 00:34:30,720 Speaker 2: to be true. That's certainly what Bernie Madoff's investors learned 644 00:34:30,800 --> 00:34:31,600 Speaker 2: the hard way. 645 00:34:31,920 --> 00:34:35,040 Speaker 16: This is the real tragedy. This is where the human 646 00:34:35,080 --> 00:34:38,640 Speaker 16: tragedy comes in. Those people organize their lives around the 647 00:34:38,680 --> 00:34:41,920 Speaker 16: fact that they had real profits when in fact, there 648 00:34:41,960 --> 00:34:44,480 Speaker 16: were never any, never, any assets at all beyond that 649 00:34:44,520 --> 00:34:46,120 Speaker 16: which they put in. 650 00:34:46,320 --> 00:34:49,759 Speaker 2: As did investors in Enron, Developing a new technology to 651 00:34:49,840 --> 00:34:52,520 Speaker 2: diagnose what ails us through a single drop of blood 652 00:34:52,560 --> 00:34:56,680 Speaker 2: seemed a god send to patients and investors alike, until 653 00:34:56,680 --> 00:35:01,240 Speaker 2: it turned out that Elizabeth Holmes Fharanos was all unallowed fraud. 654 00:35:01,120 --> 00:35:03,960 Speaker 17: So government prosecutes is. This was put plainly as a 655 00:35:04,040 --> 00:35:06,640 Speaker 17: case about fraud. They said it was a story about 656 00:35:06,640 --> 00:35:09,840 Speaker 17: a Silicon Valley founder and executive who had lied and 657 00:35:09,920 --> 00:35:12,680 Speaker 17: cheated in order to raise money from investors and at 658 00:35:12,719 --> 00:35:17,120 Speaker 17: the same time deceived customers and doctors about the capabilities 659 00:35:17,280 --> 00:35:18,600 Speaker 17: of Pharnos's technology. 660 00:35:18,880 --> 00:35:21,279 Speaker 2: Even Elon Musk may in the end find out that 661 00:35:21,400 --> 00:35:24,560 Speaker 2: his quest for X that's formally known as Twitter leaves 662 00:35:24,640 --> 00:35:27,360 Speaker 2: him with more fools gold than real gold. 663 00:35:27,640 --> 00:35:32,960 Speaker 12: I'm wondering how much Elin Mask is regretting this impassive 664 00:35:33,080 --> 00:35:34,560 Speaker 12: decision to buy tweeter. 665 00:35:34,960 --> 00:35:37,400 Speaker 2: This week, we got a particularly powerful reminder of the 666 00:35:37,480 --> 00:35:40,440 Speaker 2: dangers in letting our ambition or our greed get the 667 00:35:40,480 --> 00:35:43,480 Speaker 2: better of us when news came out of Minnesota about 668 00:35:43,480 --> 00:35:47,080 Speaker 2: a Ruby slippers caper. It appears that mister Terry Martin 669 00:35:47,120 --> 00:35:50,640 Speaker 2: of Grand Rapids, Minnesota, that's the hometown of Judy Garland, 670 00:35:51,040 --> 00:35:53,520 Speaker 2: bought into a plan to steal an original pair of 671 00:35:53,560 --> 00:35:56,520 Speaker 2: the ruby slippers worn by miss Garland when she played 672 00:35:56,520 --> 00:36:03,000 Speaker 2: Dorothy in the Wizard of Oz. The seventy two year 673 00:36:03,000 --> 00:36:06,439 Speaker 2: old mister Martin had past experience with stealing jewels, having 674 00:36:06,520 --> 00:36:10,720 Speaker 2: served prison time for burglary, but unfortunately that past experience 675 00:36:10,760 --> 00:36:13,840 Speaker 2: did not include having actually seen The Wizard of Oz, 676 00:36:14,200 --> 00:36:16,320 Speaker 2: and so when he was approached by what his lawyer 677 00:36:16,360 --> 00:36:19,799 Speaker 2: called an old mob associate, he willingly believed that they 678 00:36:19,840 --> 00:36:23,480 Speaker 2: were called ruby slippers because they were just that covered 679 00:36:23,520 --> 00:36:26,719 Speaker 2: with real rubies. Why else would they be insured for 680 00:36:26,800 --> 00:36:29,920 Speaker 2: one million dollars. So you can imagine his surprise when 681 00:36:29,920 --> 00:36:32,480 Speaker 2: his old mob associated took one look at the shoes 682 00:36:32,640 --> 00:36:36,799 Speaker 2: and told them those supposed rubies were really only colored glass. Disappointed, 683 00:36:36,880 --> 00:36:41,000 Speaker 2: Martin walked away, leaving them with his partner in crime. Eventually, 684 00:36:41,040 --> 00:36:42,960 Speaker 2: the slippers made it back to the museum after the 685 00:36:42,960 --> 00:36:46,360 Speaker 2: insurance company offered a two hundred thousand dollars reward, and 686 00:36:46,440 --> 00:36:49,400 Speaker 2: mister Martin, who is in hospice care and not expected 687 00:36:49,440 --> 00:36:52,000 Speaker 2: to live long, got off with time served and one 688 00:36:52,080 --> 00:36:55,640 Speaker 2: year of supervised release, so in the end, like Dorothy 689 00:36:56,000 --> 00:36:59,120 Speaker 2: Terry Martin of Grand Rapids, Minnesota, can return home. 690 00:36:59,360 --> 00:37:02,280 Speaker 6: After all, there's no place. 691 00:37:02,120 --> 00:37:06,719 Speaker 1: Like that, does it. For this episode of Wall Street Week, 692 00:37:06,760 --> 00:37:09,479 Speaker 1: I'm David Weston. This is Bloomberg. See you next week.