Speaker 1: You're listening to the Bloomberg Opinion podcast. Catch us Saturdays
Speaker 1: at one and seven pm Eastern on Bloomberg dot Com,
Speaker 1: the iHeartRadio app and the Bloomberg Business App, or listen
Speaker 1: on demand wherever you get your podcast. Welcome to Bloomberg Opinion.
Speaker 1: I'm Amy Morris. We continue to watch the turmoil in
Speaker 1: the banking sector, but today we're going to look at
Speaker 1: it from a couple of different angles. First, we'll learn
Speaker 1: more about the government's role in all of this and
Speaker 1: what lessons that might be learned in the future once
Speaker 1: the dust settles. Also, later in this show, we'll be
Speaker 1: looking at the impact the uncertainty has on the European
Speaker 1: luxury market, and we'll be talking about President Biden's chip
Speaker 1: making bill and why some believe it could wind up
Speaker 1: being a failure. Let's get started. We begin in Israel,
Speaker 1: where Prime Minister Benjamin Netnah who's administration moved to weaken
Speaker 1: the judiciary, igniting waves of protests and labor strikes. And
Speaker 1: it all came to a head this past week when
Speaker 1: Necktnyah who fired his defense minister, and a nation and
Speaker 1: wide walk out ground many operations to a halt. Nat
Speaker 1: Yahoo put the policy on pause, Triosha Shultz when there's
Speaker 1: an opportunity to avoid civil war through dialogue, I as
Speaker 1: Prime Minister and taking a time out for dialogue. Now,
Speaker 1: let's get some insight from Bobby go She is a
Speaker 1: Bloomberg opinion columnist specializing in foreign affairs. Now set us
Speaker 1: straight with something, Bobby. For decades, the US has seen
Speaker 1: Israel as the Middle East's only democracy, and you argue
Speaker 1: in your column that that assertion can be easily disproved. Yeah,
Speaker 1: it's something that Israeli politicians have claimed with pride for
Speaker 1: for many decades now, and American leaders, from presidents on
Speaker 1: town have sort of repeated it without relief, interrogating that
Speaker 1: claim very closely. But the fact is that there have
Speaker 1: been democracies in Israel's neighborhood for even longer than Israel
Speaker 1: has existed. Turkey is one example, Lebanon is another. There
Speaker 1: are other democracies in the region. And argue about how
Speaker 1: perfect they are, and many of them are far from perfect.
Speaker 1: But that leads me to my second point, which is
Speaker 1: that Israel's democracy in itself is far from perfect. Nearly
Speaker 1: twenty percent of the population of the country, which comprises
Speaker 1: of Palestinians don't have the same rights as as a
Speaker 1: Jewish israelis, which in my book makes it questionable whether
Speaker 1: we can call it a true democracy. You know, I
Speaker 1: was going to ask, Israel has pre elections, its population
Speaker 1: is protesting to the point where they've actually affected change,
Speaker 1: And I was going to ask, isn't that how a
Speaker 1: democracy works, your point being that's not how it works
Speaker 1: for everyone. Yes, that's true, and when when Israeli's protests,
Speaker 1: that's to be commended, especially when the protests of peastfool.
Speaker 1: But we've also seen what happens when Palestinians protest and
Speaker 1: the responses from security forces to those kinds of products.
Speaker 1: But beyond that, there's a larger point to be. The
Speaker 1: elections are very important in a democracy. The right to
Speaker 1: protest is very important in a democracy, in any free society,
Speaker 1: but these are only two of many tests of democracy.
Speaker 1: Freedom for all is I would argue, perhaps the most
Speaker 1: important test, and in that respect, Israel is all short
Speaker 1: of the stat the ability of institutions to stand up
Speaker 1: against authoritary and tendencies amongst politicians. That's very important that scenario.
Speaker 1: Where As Weel has done very well this pasti week.
Speaker 1: As you said in your introduction, we've seen how institutions,
Speaker 1: civil service organizations, civil service unions have stood up to
Speaker 1: Prime Minister that nah who am this very controversial proposal,
Speaker 1: and there as much as the protests in the streets
Speaker 1: have forced him to reconsiderately. Do you find that the
Speaker 1: events of the past few months, particularly those that you
Speaker 1: just atomized, there are a reflection of Israel's government as
Speaker 1: a whole in just how things are or is this
Speaker 1: specifically about the net Nahoo administration. Well, this is something
Speaker 1: that net Niya who personally and the far right. His
Speaker 1: administration is made up mostly of far right parties. These
Speaker 1: are proposals that have been discussed by the far right
Speaker 1: for quite a long time. They see Israel's judiciary as
Speaker 1: too independent. They fear that the judiciary keeps blocking their
Speaker 1: attempts to pursue the far right agenda. But as we've
Speaker 1: seen with this protest, there is an enormous section of
Speaker 1: the population that wants to see the judiciary remain independent. Israel,
Speaker 1: as a country that does have a written constitution, the
Speaker 1: judicially act as a kind of check against the government,
Speaker 1: which here in the US is something that we are
Speaker 1: very comfortable and which many many Israelis want to see continued,
Speaker 1: despite the efforts of Prime Minister Etnia who to change
Speaker 1: that stings. People always want to try to extrapolate and
Speaker 1: figure out where do things go from here? But one
Speaker 1: way to do that is to look at where things
Speaker 1: have been. So have we seen this before? Is this unprecedented?
Speaker 1: Is there some historic context you can put this in? Well,
Speaker 1: we've seen this in other parts of the Middle East,
Speaker 1: not so much in Israel itself, not recently, but we
Speaker 1: saw it. We saw it in the Arab Spring, where
Speaker 1: popular protest against authoritarian governments brought those governments down. In
Speaker 1: some cases Tunisia comes to mind. We saw how civil
Speaker 1: groups as well as trade unions back the protesters, enforced
Speaker 1: the governments to back. Now we've seen this recently in
Speaker 1: places like Lebanon and in Iraq, but the fact that
Speaker 1: we've seen this happen over and over again tells a
Speaker 1: story in itself. It tells you that in many parts
Speaker 1: of the Middle East, people are not satisfied with what
Speaker 1: they're getting from elections, that elections by themselves are not
Speaker 1: a solution, which the point of is making earlier elections
Speaker 1: are an important indicator of democracy. But that's not about
Speaker 1: how are these events in Israel playing out across the region,
Speaker 1: particularly with the Arab nations that sign the Abraham Accords.
Speaker 1: But they're being watched very closely. Countries in particularly the
Speaker 1: states in those neighborhood are are looking very closely at
Speaker 1: what happens. For several one is there's a concern that
Speaker 1: if Latnia Who can push through his far right agenda,
Speaker 1: there will be harsh consequences for Palestinians, and there is
Speaker 1: Arab solidarity, if not at the government level, then certainly
Speaker 1: at the level of Arab civilians. There's Arab solidarity for
Speaker 1: the Palestinians, for the countries that sign the Abram Accords,
Speaker 1: particularly the United Arab Emirates bheign. They're concerned that some
Speaker 1: of the far right partners in latnia Who's coalition are
Speaker 1: so overtly hostile towards Arabs, not just Arabs within the
Speaker 1: Israeli society, but Arabs in general, and that they are
Speaker 1: so openly Islamophobic that it makes them very uncomfortable to
Speaker 1: be in any kind of partnership with his. Other Arabs
Speaker 1: who did not sign those are courts like Albi Arabia,
Speaker 1: for instance, right now are feeling quite vindicated. They're thinking
Speaker 1: to themselves, well, it's a jolly good thing we didn't
Speaker 1: sign those are cords, because then we'd have to explain
Speaker 1: to our populations why we are partnered with the country
Speaker 1: where the government is so hostile to Islama, to Arabs.
Speaker 1: That hostility you referenced, is that bound to change or
Speaker 1: is it gaining more traction? Which way is that wind blowing? Well,
Speaker 1: it's always been there. There have been been factions within
Speaker 1: the Israeli far right that have openly expressed this kind
Speaker 1: of hostility for debt. The nature of coalition politics, which
Speaker 1: is a characteristicsm Israel is that extreme voices sometimes get
Speaker 1: platforms in the mainstream, and that's what we're seeing right now.
Speaker 1: Whether or not, if we'll continue, and whether it will
Speaker 1: get amplified, we'll have to see Latia who is beholden
Speaker 1: to some of these far right parties. These coalitions cannot stand,
Speaker 1: cannot remain in power without them. But against that you
Speaker 1: have not just the voices of all the Israelis who
Speaker 1: we've seen protesting over several months, but also as well
Speaker 1: as friends and partners abroad, the United States, the Biden
Speaker 1: administration has made it clear. The President himself has said
Speaker 1: that he does not think that these proposals to overhaul
Speaker 1: the judiciary are a good idea that he hopes let
Speaker 1: mea who back away from it. So all of his
Speaker 1: pressure is building up on left mea who is. What
Speaker 1: he does over the next few days and weeks will
Speaker 1: be very very interesting to watch. How might this impact
Speaker 1: the relationship with the US well, So let me I
Speaker 1: was in a very difficult position. On the one hand,
Speaker 1: the United States is far and away the most important
Speaker 1: ally and partner that Hasrael had security point of view,
Speaker 1: consural point of view, from point of view, war of trade,
Speaker 1: an investment. But at the same time, the United States
Speaker 1: is not going to keep let Miah who empower. People
Speaker 1: who are going to keep him in power are those
Speaker 1: small our right parties, And so he has to balance
Speaker 1: the national interest against his personal political interest. In the past,
Speaker 1: when faced with that kind of the fork in the road,
Speaker 1: let Bia who has always opted for the latter, which
Speaker 1: is to look out, look out for his own interest.
Speaker 1: If he continues to do that, well, things with the
Speaker 1: United States are bound google a little more sour. But
Speaker 1: if he can rise above his own interests now and
Speaker 1: pursue the interest of his country. Then the relationship will
Speaker 1: remain solid. All right, Bobby, thank you so much for
Speaker 1: taking the time with us today. Thanks so happy. Habby
Speaker 1: Coach is a Bloomberg Opinion columnist specializing in foreign affairs.
Speaker 1: Coming up, we're going to take a look at the
Speaker 1: fallout of the banking sector and the role of the
Speaker 1: federal government, not just in the recovery, but in the
Speaker 1: mindset of free money. Are just getting started. You're listening
Speaker 1: to Bloomberg Opinion. You're listening to the Bloomberg Opinion podcast.
Speaker 1: Catch us Saturdays at one and seven pm Eastern on
Speaker 1: Bloomberg dot Com, the I Heart Radio app and the
Speaker 1: Bloomberg Business App, or listen on demand wherever you get
Speaker 1: your podcasts. You're listening to Bloomberg Opinion. I'm Amy Morris,
Speaker 1: and we continue to follow the fallout of the turmoil
Speaker 1: in the banking sector. Investors are still assessing how the
Speaker 1: recent turmoil in regional banks will affect the broader economy
Speaker 1: in the US and how policymakers might respond. There is
Speaker 1: a calmer mood now of late in the banking sector,
Speaker 1: but there are also lessons to be learned. Meanwhile, President
Speaker 1: Biden continued to reassure the public that banking in the
Speaker 1: US remains safe and stable. It's pretty much under control.
Speaker 1: Now remands to be seen. We're looking to see whether
Speaker 1: we've done further legislation now, as President Biden on the
Speaker 1: safety of banking in the US this as Congress this
Speaker 1: past week held hearings on the bank failures, the impact
Speaker 1: on the country's financial system, and how they can try
Speaker 1: to keep this from happening again. Republican Senator Tim Scott
Speaker 1: of South Carolina wanted to hear more from bank officials
Speaker 1: themselves and from Biden administration officials, including FED Chair J Powell.
Speaker 1: I think it's incredibly important that we hear from the
Speaker 1: folks specifically and uniquely responsible for the failure of these banks.
Speaker 1: That's Republican Senator Tim Scott of South Carolina. Now, later
Speaker 1: this hour, we will look at the impact on the
Speaker 1: luxury goods sector and where that might be going this year.
Speaker 1: But right now, we want to look at the US
Speaker 1: government's role in all of this, not so much the
Speaker 1: bailout of the banks, but how the government seemed to
Speaker 1: behave over the past several years. As many consumers and
Speaker 1: bankers did, acting as though interest rates would remain at
Speaker 1: zero forever. Joining US Now Bloomberg opinion columnist Alice and Schreeger,
Speaker 1: she covers economics. Alison, thanks for joining us Now. You
Speaker 1: write in your column on the Bloomberg Terminal that the
Speaker 1: US federal government has been borrowing and spending as though
Speaker 1: rates would remain low forever, and you say they're still
Speaker 1: counting on that. What are you seeing now? Well, what
Speaker 1: we're seeing is Biden's leader's budget was six point nine
Speaker 1: trillion dollars. We still see big plans to expand a
Speaker 1: lot of entitlements and not even touched reforming the entitlements
Speaker 1: we do have. They're set a run out of money.
Speaker 1: It's just, you know, it seems like, you know, for
Speaker 1: a lot of years, when we at very low rates,
Speaker 1: you didn't really have to think about trade offs. Effectively,
Speaker 1: you could spend for free, and it doesn't seem like
Speaker 1: there's any acknowledgement that those days might be over. The
Speaker 1: attitude dates back fifteen years, though it's not anything new.
Speaker 1: We I mean, you can follow this back all the
Speaker 1: way to the two thousand date financial crisis. What have
Speaker 1: you found as you go back through your notes and
Speaker 1: through the historical parts of this, well, it does seem
Speaker 1: like as evolution, you know, because for most of American
Speaker 1: history we couldn't spend that way. You know, rates were
Speaker 1: significantly higher, but they've been trending down for forty years.
Speaker 1: And after the financial crisis, you know, there's you know,
Speaker 1: economists started to look around and be like, wow, rates
Speaker 1: are really low. You know, we can afford to make
Speaker 1: more investment in the economy. But it's one thing to
Speaker 1: make an investment in the economy, like build a bridge
Speaker 1: or a highway, and to actually commit to an ongoing entitlement.
Speaker 1: So I think, you know, we were a little slow
Speaker 1: to catch on, but over the years it's been building
Speaker 1: up of hey, we can spend as much as we want.
Speaker 1: We can spend as much as we want. And you know,
Speaker 1: I feel like now that reality has changed, and we're
Speaker 1: kind of slow to catch on to that too. So
Speaker 1: reality hasn't then sunk in yet, Is that what you're saying. Yeah,
Speaker 1: I mean, and I think to be fair, there's an
Speaker 1: expectation that maybe when we get through inflation, rates maybe
Speaker 1: will go back down to zero. I mean, I think
Speaker 1: it seems like the FED is counting on that. I
Speaker 1: looked at the CBO report, they expect, after you account
Speaker 1: for inflation, that ten year rates will only be one
Speaker 1: point eight percent. So it does if they are being
Speaker 1: intellectually consistent. But I think hoping that the zero rates
Speaker 1: we're kind of our new normal and that we're going
Speaker 1: to go back to that normal. Is there a lesson
Speaker 1: to be learned for the Biden administration here? Yeah? I
Speaker 1: think it is that you know interest rate risk is real,
Speaker 1: and that interest rates change a lot. You can't count
Speaker 1: on high rates forever, you can't count on low rates forever. Said,
Speaker 1: I don't think that we're going to going back to
Speaker 1: zero rates, and you maybe they're right, maybe I'm right,
Speaker 1: but one thing is for sure, we do not know,
Speaker 1: and you cannot sort of plan you're spending around the
Speaker 1: best case scenario. If you said you're a company and
Speaker 1: rates we're a rising, and you said, well, I'm just
Speaker 1: going to assume rate you're going to backtown to zero
Speaker 1: and sort of spend it that way, you'd be considered
Speaker 1: really irresponsible. Yeah, borrowing and spending with abandon would be
Speaker 1: considered irresponsible. But it's there's something to be said then
Speaker 1: for that investment that you would referred to earlier, you know,
Speaker 1: putting it into improvements in the infrastructure, that sort of thing.
Speaker 1: Is there some sort of happy medium, is what I'm
Speaker 1: getting at. Yeah, for sure, And I mean certainly not
Speaker 1: arguing we need to cut off all spending, you know.
Speaker 1: I mean it is that rates are historically still not
Speaker 1: even that high. You certainly can justify making productive investments
Speaker 1: in the economy, although you know those you know, those
Speaker 1: are hard to find and hard to execute, for sure.
Speaker 1: But I think the responsible thing to do would certainly
Speaker 1: would not be to cut off spending, but to sort
Speaker 1: of really think about the long term obligations. When you
Speaker 1: commit to an entitlement that's an ongoing expense forever, that's
Speaker 1: very very hard to cut. So if you're going to
Speaker 1: make that sort of commitment in a low rate environment,
Speaker 1: you really have to think about how can you finance
Speaker 1: this in a higher rate environment. Is there an argument
Speaker 1: to be made that that may be something that was
Speaker 1: underlying when they made the decision to bail out the banks,
Speaker 1: to step in and cover all of the deposits that
Speaker 1: were in SVB and Signature Bank that were at risk.
Speaker 1: I mean, I'm not sure that that was that they
Speaker 1: were being I think they were just responding in the moment,
Speaker 1: sort of setting the loop bleeding. But there is definitely
Speaker 1: a risk that you know, you can I mean, we
Speaker 1: saw this in the UK in the fall, that you know,
Speaker 1: when you end up with trouble in sort of the
Speaker 1: long term bond sector, that market can freeze up and
Speaker 1: then rates can get really high, and then that's that's
Speaker 1: you know. I think that was sort of the second
Speaker 1: order concern in the moment, but longer term that is
Speaker 1: a very real concern. So it sounds like all of
Speaker 1: this is really just a mindset. Everybody, including the federal government,
Speaker 1: maybe got comfortable with those super low zero interest rates.
Speaker 1: So at this point, then what would it take to
Speaker 1: adjust and amend that outlook. Well, it might be, as
Speaker 1: I said, I think we were slow to realize that
Speaker 1: rates were low, and we're probably going to be slow
Speaker 1: to realize rates will be high and probably I mean
Speaker 1: it's unfortunate, but maybe sort of having to put a
Speaker 1: lot more of a budget towards enters payments will be
Speaker 1: the wake up call people need. I mean, it would
Speaker 1: be better to realize that sooner rather than later, but
Speaker 1: sometimes you have to have that experience to realize it.
Speaker 1: When you are watching this and how this is unfolding,
Speaker 1: what do you expect to come about over the next
Speaker 1: quarter or maybe even the next year. I mean, this
Speaker 1: doesn't sound like something that's going to be wrapping up
Speaker 1: ending dust settling anytime soon. No, I mean, I think
Speaker 1: you know the dust will only settle really when we
Speaker 1: sort of end up with whatever our new inflation reality
Speaker 1: is said. If inflation is going to be permanently higher,
Speaker 1: then rache are going to be permanently highed too, And
Speaker 1: so I think everyone's just still wishing and hoping that
Speaker 1: everything goes back hu normal, and I think we have
Speaker 1: to wait and see if that happens. But it does
Speaker 1: seem in the meantime before we know that the government
Speaker 1: is still planning understanding a lot. And can we just
Speaker 1: clarify when you were talking about the government currently, you've
Speaker 1: got the Biden administration, would you apply this also to
Speaker 1: other administrations in the past, whether it be the Clinton,
Speaker 1: the Bush, the Obama, the Trump administrations, they've all sort
Speaker 1: of fallen into that trap of the low interest rates. Well, no,
Speaker 1: I mean the Climent administration faced higher indust rates and
Speaker 1: they actually ran a surplus. So of all the presidents
Speaker 1: you've named, they've been the most fiscally responsible by far,
Speaker 1: but each administration after that sort of gotten more and
Speaker 1: more progressively irresponsible. It said, like, you know, tax cuts
Speaker 1: are the other side of the coin of you know,
Speaker 1: more spending. It's also fiscally irresponsible. Alison Schrager is a
Speaker 1: Bloomberg Opinion columnist who covers economics, and you can find
Speaker 1: Allison's column. Biden has to learn the same lesson as
Speaker 1: SVB on the Bloomberg terminal. Now, stay with us, we
Speaker 1: have much more still to come. We'll be talking with
Speaker 1: Bloomberg Opinion editor Timothy Lavin about President Biden's chip making bill. Now,
Speaker 1: the President spent most of the past week on an
Speaker 1: Investing in America tour, touting his legislation, which provides subsidies
Speaker 1: for semiconduct from manufacturers across the country, and highlighting his
Speaker 1: economic agenda. Now, that so called ship bill has often
Speaker 1: been referred to as a win for Democrats, but could
Speaker 1: it actually wind up becoming a failure. There's a lot
Speaker 1: more work ahead, and we're going to get to it.
Speaker 1: That's coming up. Don't forget. We are also available as
Speaker 1: a podcast on Apple, Spotify, or your favorite podcast platform.
Speaker 1: This is Bloomberg Opinion. You're listening to the Bloomberg Opinion podcast.
Speaker 1: Catch us Saturdays at one and seven pm Eastern on
Speaker 1: Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App,
Speaker 1: or listen on demand wherever you get your podcast. This
Speaker 1: is Bloomberg Opinion. I'm Amy Morris. The Biden administration is
Speaker 1: quick to tout the Chips and Science Act. It's considered
Speaker 1: a victory for Democrats, a bill that passed with bipartisan
Speaker 1: support with high hopes to revive the chip making capacity
Speaker 1: in the US. President Biden says the bill will help
Speaker 1: the US regain its edge. Erica lost its edge, and
Speaker 1: manufacturing lost its edge across the board, and we did
Speaker 1: that for decades. Now we're creating jobs, we're exporting jobs.
Speaker 1: No longer American products are being made here. We're growing
Speaker 1: the economy. But there are signs now that the legislation
Speaker 1: might not work. Let's bring in Bloomberg Opinion editor Timothy Leavin,
Speaker 1: a member of the Bloomberg Editorial Board covering technology and politics. Timothy,
Speaker 1: thank you very much for taking the time with us. Whatever,
Speaker 1: why do you believe that it won't work as intended. Well,
Speaker 1: I think this bill was a response to genuine concerns.
Speaker 1: You know, the chip making capacity is very heavily concentrated
Speaker 1: in East Asia. These chips are obviously essential to every
Speaker 1: part of modern economy. They're essential for a national defense.
Speaker 1: I think that you know, the Pentagon uses something like
Speaker 1: two billion chips a year for its its purposes. UM.
Speaker 1: So you know, there are genuine concerns that we don't
Speaker 1: have enough manufacturing capacity here at home UM, and that
Speaker 1: we're taking seriously. The problem is UM, US chip makers
Speaker 1: are not very competitive with overseas chip makers, and there
Speaker 1: are a lot of reasons for that. There are a
Speaker 1: lot of sort of deep um structural reasons in the
Speaker 1: US economy, in particularly with the US US politics, that
Speaker 1: makes it very difficult for manufacturers making chips here to
Speaker 1: compete with those overseas. The problem with this bill is
Speaker 1: that it writes a big check UM, but it really
Speaker 1: does not address any of those underlying problems. In many ways,
Speaker 1: it makes them worse. So I worry that while this
Speaker 1: bill was obviously quite well intentioned, as by partis et um,
Speaker 1: you know, I worry that it's very unlikely to end
Speaker 1: up producing, um, you know, a thriving chip making industry
Speaker 1: in the United States unless we start, you know, tackling
Speaker 1: the real underlying problems. You say, it's a microcosm of
Speaker 1: all that is wrong with America's approach to building things.
Speaker 1: And what I'm getting from you is we tend to
Speaker 1: throw money at something and hope it works. That's right. Uh.
Speaker 1: You know, there are a lot of reasons that we
Speaker 1: have difficulty building things in this country doing it, particularly
Speaker 1: building things quickly and building you know, things on a
Speaker 1: reasonable budget a huge problem. There's a huge problem across
Speaker 1: the board. If you recall them. The last Congress, we
Speaker 1: had a bunch of very, very big, ambitious piece of
Speaker 1: legislation that would have to do a trillions of dollars
Speaker 1: in spending on everything from green energy to um infrastructure
Speaker 1: to this building, particularly about jimming m. The problem is
Speaker 1: we tend to write these big checks um and you know,
Speaker 1: we often end up spinning our wheels and not achieving
Speaker 1: the goals of the of these of these big bills
Speaker 1: because we're not doing the hard work to change polish
Speaker 1: that's going to make these bills effective. So, in the
Speaker 1: case of chip making, some of the things we identify.
Speaker 1: You know, there's there's an enormous amount of red tape
Speaker 1: in the United States. There's a suite of environmental laws
Speaker 1: that we're passing the seventies that you know now make
Speaker 1: it extraordinarily difficult to break ground on a big new
Speaker 1: construction projects are very time consuming. Uh, there's a lot
Speaker 1: of busy work involved this kind of thing that makes
Speaker 1: it difficult for chipmakers can compete overseas. It takes it
Speaker 1: takes much longer to build a new factory here than
Speaker 1: it would in Korea or Taiwan, for instance. Um So
Speaker 1: when I say it's a microcosm, you know, there's a
Speaker 1: reason that we're having difficulty in this country building new things.
Speaker 1: And the Chips Act, unfortunately, sort of exemplifies a lot
Speaker 1: of those underlying problems. You mentioned the red tape and
Speaker 1: the regulations that sort of hold everything up. But there's
Speaker 1: also the issue that we've been seeing across the board,
Speaker 1: and that's labor shortages. Is that also applicable here? Yeah,
Speaker 1: I mean I think a big missing piece here is
Speaker 1: immigration reform. We need more high school immigrants. Unfortunately, US
Speaker 1: schools are not graduating uh, you know, enough qualified people
Speaker 1: in the in the fields that we need, particularly in semiconductors. UM.
Speaker 1: There are a very large number of UM overseas students
Speaker 1: studying in American schools, studying in relevant fields. UM, but
Speaker 1: we make it very difficult for them to stay here
Speaker 1: and work. And that's that's that's because our high school
Speaker 1: immigration system is not working as it should. A lot
Speaker 1: a lot of people want to come here, high skilled
Speaker 1: people across the world want to come to the United States. Uh,
Speaker 1: it's a great strength of ours. Unfortunately, our immigration system
Speaker 1: makes it quite difficult for those needlessly difficult for those
Speaker 1: people to come here, to stay here, to raise their
Speaker 1: families here. So that that's when I say they're underlying problems.
Speaker 1: That that's something that needs to change if we want
Speaker 1: to have a thriving ship making industry, if we want
Speaker 1: to continue leaving leading the world in various other technologies. UM,
Speaker 1: you know, we need we need to we need to
Speaker 1: start getting the skilled labor that that these projects require.
Speaker 1: But you believe this is all very solvable, I think so.
Speaker 1: I mean, you know, unfortunately, it's it's very easy in
Speaker 1: Congress to write a check and to go to ribbon
Speaker 1: cunning ceremony and everybody pass themselves on the back. Um,
Speaker 1: it's it's much harder when you get down to the
Speaker 1: nitty gritty details and you have competing interests and you
Speaker 1: need to make difficult judgment quotes that sort of thing.
Speaker 1: Congress is not great at doing that. But there are ways,
Speaker 1: there are, you know, precise discrete ways that you can
Speaker 1: address these problems. Um. You know, there are ways that
Speaker 1: you can fast track construction projects, that you can limit
Speaker 1: the amount of red tape that's imposed on projects in
Speaker 1: the national interest, fixing immigration should not be that difficult
Speaker 1: to welcome more high skilled immigrants, to exempt them from
Speaker 1: the cap on green card allotments, for instance. UM. I
Speaker 1: think these things are very achievable, and in fact, there's
Speaker 1: a lot of bipartisan support, but it requires a lot
Speaker 1: of hard work and a lot of ambition, and unfortunately
Speaker 1: that's been sort of the missing piece so far. Let
Speaker 1: me get into that just for a minute. The bill
Speaker 1: itself had tremendous bipartisan support, as you alluded to, and
Speaker 1: that is unusual in this rather politically entrenched environment. Those
Speaker 1: solutions that you've been referencing, would they also get similar support.
Speaker 1: They would also need to get that bipartisan support so
Speaker 1: that they can make it work. Sure. I mean, I'm
Speaker 1: optimistic about this, other people to maybe less. Um. You know,
Speaker 1: it's it's easy to get bipartisan support when you're writing
Speaker 1: a big check. It's hard when you know you need
Speaker 1: to make like I said, judgment calls between competing interests. Um.
Speaker 1: But if you look for Senator Joe Manchin has been
Speaker 1: a strong advocate for permitting and reform, that is, for
Speaker 1: making it much easier to to to build things by
Speaker 1: cutting down on needless bureaucratic red tape. Is this has
Speaker 1: been a big problem for President Biden's Green Energy Plan.
Speaker 1: A lot of these projects have a ton of money
Speaker 1: behind them, but they're held up for in some cases
Speaker 1: for years, for more than a decade, on these sort
Speaker 1: of needless environmental reviews. Uh. You know, this is a
Speaker 1: process that is, you know, impeding national priorities across the board.
Speaker 1: It might be needlessly so, and I think that that's
Speaker 1: the sort of thing that should not it should not
Speaker 1: be hard to get bipartisan support. Forum. Like I said,
Speaker 1: you know, it's going to require a leadership, It's going
Speaker 1: to require hard work, it's going to require a lot
Speaker 1: of a lot of ambition. But like I said, I'm
Speaker 1: an optimist on this. I do think it can get done.
Speaker 1: It just requires a lot of will. But you've mentioned
Speaker 1: more than just semiconductors. I mean, ostensibly we started this
Speaker 1: interview talking specifically about semiconductors the Chips and Science Act,
Speaker 1: but this seems to really go beyond it. This seems
Speaker 1: to be sort of endemic to how things don't get done.
Speaker 1: That's right, you know, these these are problems across the board.
Speaker 1: Like I said, these are problems for all those ambitious
Speaker 1: bills at the last Congress past. If you want to
Speaker 1: build infrastructure and this coming country, which we spent you know,
Speaker 1: a trillion dollars on. If you want to build a
Speaker 1: green energy economy, which again we know one hundreds of
Speaker 1: billions of dollars float out and as Congress toward all
Speaker 1: these projects. If you want really to you know, accomplish
Speaker 1: things that we need to do to be a prosperous,
Speaker 1: ambitious country, well these are the sorts of very difficult,
Speaker 1: very detailed, very sort of nitty gritty policy reforms that
Speaker 1: need to happen. Just writing the big checks is very
Speaker 1: unlikely to effectively accomplish the goals that we have, and
Speaker 1: doing that requires much harder, much harder work, and much more,
Speaker 1: much more ambition. I'm hopeful that this is starting to
Speaker 1: dawn on our policymakers and so, like I said, I'm
Speaker 1: an optimist on this, but again, it's going to take
Speaker 1: really quite a lot of hard work. Timothy. Before we
Speaker 1: let you go, I just want you to get kind
Speaker 1: of specific here and just name one thing that must
Speaker 1: happen to get those wheels turning again. Although this is
Speaker 1: very nerdish and wonks, it's permitting reform. We need to
Speaker 1: make it easier to build stuff in this country. It
Speaker 1: takes way too long, it cost way too much. And
Speaker 1: this is something that is purely in the national interest.
Speaker 1: It's it's in all of our interests, and I think
Speaker 1: it should be a top priori. Nerdy and wonky is
Speaker 1: what we do here at Bloomberg Opinion. We love it.
Speaker 1: Thank you so much, Timothy for taking the time with us.
Speaker 1: Thank you. Timothy Lavin is a member of the Bloomberg
Speaker 1: Editorial Board. He covers technology and politics. Regular Bloomberg Radio
Speaker 1: listeners know that we have been following the turmoil in
Speaker 1: the banking industry very closely. We continue to see more
Speaker 1: ripple effects as this drama unfolds. And today we're going
Speaker 1: to take this from a different angle. Roiling markets and
Speaker 1: fears of further contagion are not good news for big
Speaker 1: European luxury companies. We want to learn more about the impact.
Speaker 1: We welcome Bloomberg opinion columnist Andrea Felsted to the program.
Speaker 1: Andrea covers consumer goods and the retail industry. And Andrea,
Speaker 1: the US has been the big driver for luxury over
Speaker 1: the past two years. Will this have an impact? We
Speaker 1: are seeing some signs of weakening in the US luxury markets,
Speaker 1: but it's mainly been younger, simply affluent people rather than
Speaker 1: the super rich, the super richest still living in their
Speaker 1: own world. If those younger, perhaps not quite as wealthy
Speaker 1: consumers who spent stimulus checks or crypto gains on utikers
Speaker 1: or Gucci handbags, they're started to slow a little bit.
Speaker 1: Now the big question is whether with the banking issues,
Speaker 1: with the tech job losses, that starts to work its
Speaker 1: way up the income stale to those really truly wealthy
Speaker 1: shoppers who have kept spending all the way through on
Speaker 1: working bags and Rolex watches. Walk me through how banking
Speaker 1: crisis on the West Coast or a banking crisis in
Speaker 1: Europe might impact those who want to buy those high
Speaker 1: ticket luxury items. What's the sequence of events there? We
Speaker 1: luxury does well when we feel happy and wealthy. It's
Speaker 1: very correlated to how well off we feel, to stock market,
Speaker 1: increasingly to crypto. So when we see, you know, bank tremors,
Speaker 1: worries about is the center affect credit, that all starts
Speaker 1: to make us feel a little bit more nervous. That's
Speaker 1: not the best environment to be spending thousands of pounds
Speaker 1: on a watch or a handbag. Is there the possibility though,
Speaker 1: that other places like say China and those consumers can
Speaker 1: help take up the slack that is now the big issue.
Speaker 1: So what's happens is when China was in various states
Speaker 1: of lockdown, the US consumer really stepped up and was
Speaker 1: a great stop gap. The China will be ultimately the
Speaker 1: big driver of the luxury industry. While Chinese consumers perhaps
Speaker 1: taking a break, the US steps in. So what we've
Speaker 1: got to see now is whether China can pick up
Speaker 1: that billing bat on once more. So we will all
Speaker 1: be watching now to see whether China picks it up. Now.
Speaker 1: The early indications are good. Some of the commentary from
Speaker 1: the Luxury Group has been that the early signs are
Speaker 1: encouraging that Chinese shoppers are coming out, but we've got
Speaker 1: to see how that progresses over the year, and importantly
Speaker 1: whether they start to leave China and travel to Europe,
Speaker 1: because that's where they tend to spend the most. Thinking
Speaker 1: of when the luxury consumer good market is impacted, could
Speaker 1: that trickle down in other ways. The big European groups are,
Speaker 1: you know, the big sellers of luxury, so it's going
Speaker 1: to have its real impact on them first, and we'll
Speaker 1: see first. I think it will start on the aspirational customer,
Speaker 1: which we're already seeing. Then it will work its way
Speaker 1: up to the truly wealthy customers. So it will really
Speaker 1: have an impact on those big European luxury groups. You
Speaker 1: have some luxury in the US, the big department stores,
Speaker 1: but it will really be felt in those big European
Speaker 1: luxury names and they will all start to report their
Speaker 1: first couture results, so we will start to see that
Speaker 1: coming through. Andrea Felstead is a Bloomberg opinion columnist covering
Speaker 1: consumer goods and the retail industry, and that does it
Speaker 1: for this week's Bloomberg Opinion. We're produced by Eric mollow
Speaker 1: and you can find all of these columns on the
Speaker 1: Bloomberg Terminal. And we're available as a podcast on Apple, Spotify,
Speaker 1: or your favorite podcast platform. And stay with us. Today's
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