Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg We
Speaker 1: can catch up. A good friend of this program's Tony
Speaker 1: da of counter coach genuitcy Tony, you've been quiet for
Speaker 1: a solid week. Where have you been. I don't know.
Speaker 1: I don't feel so quiet. Uh So I'm in this
Speaker 1: funky position because we've been expecting a relief rally and
Speaker 1: we got it right. We got a relief rally that
Speaker 1: is historic. We've retraced about fifty of what we've lost
Speaker 1: during the crash in March and that that really is extraordinary.
Speaker 1: So what you know, I'm trying to figure out if
Speaker 1: a tactical rally, meaning based on an over soul condition
Speaker 1: of hope, uh, if that's going to become a fundamental rally,
Speaker 1: and I'm not clear on that at this point. I
Speaker 1: looked Tony at the equity markets and what I perceive
Speaker 1: as a narrowness of this rally. How narrow is narrow? Well?
Speaker 1: The last two days have seen the downside by him
Speaker 1: significantly outweighing the upside by him. So you had you
Speaker 1: had two really bad quote unquote market days, but megacap
Speaker 1: Tech was leading. So the thing that's the most interesting
Speaker 1: about that megacap Tech at this point is it's actually
Speaker 1: considered defensive. So for those that have gone on offense, right.
Speaker 1: We we downgraded the market, as you guys know in
Speaker 1: January and expected once you got that panic low, which
Speaker 1: was identifiable, we expect the relief rally, and we got it.
Speaker 1: It's been a lot more than I thought it would be,
Speaker 1: but the wrong groups are leading it. If you're if
Speaker 1: you're expecting a good fundamentally driven bull market, they usually
Speaker 1: are kicked off with small cap stocks leading, with offensive
Speaker 1: sectors like financials, industrials, consumer discretionary, with those areas leading,
Speaker 1: but they're lagging. So there's basically to make it very
Speaker 1: clear for the listeners, because this sounds really complicated coming
Speaker 1: off of a major bear market low. You want to
Speaker 1: see the more aggressive areas do better, but that's not
Speaker 1: been the case in the rally, and that was evidence time,
Speaker 1: as you suggested, by the narrowness of the last couple
Speaker 1: of days, Tony. As you talk, it strikes me that
Speaker 1: perhaps we can look at this in another way that
Speaker 1: when we say the stock market is rallying despite the
Speaker 1: horrific data that we keep getting out of the real economy,
Speaker 1: perhaps this is a couple of key tech names that
Speaker 1: are rallying well. The rest of the stocks completely lagged behind,
Speaker 1: the small caps down year to date, and it doesn't
Speaker 1: necessarily indicate anything positive, even hope for the economy and
Speaker 1: the month's ahead. Is that a better way to understand
Speaker 1: the rally that we're seeing in equities right now? Yes,
Speaker 1: it's really born out of an extreme oversoul condition when
Speaker 1: everybody got too bearish all at once, and that's what
Speaker 1: we identified as quote unquote the panic low. You know,
Speaker 1: you have you kick off a human nature. There's times
Speaker 1: when human nature is the driver of the market activity,
Speaker 1: and then there's times for fundamentals. For the last ten years,
Speaker 1: it's been a fundamentally driven positive credit backdrop, good earnings
Speaker 1: driven rally. Right now, it's basically everybody got too shortened
Speaker 1: to too out of the market too quickly. Okay, but
Speaker 1: where are we right now on this Friday? Is everybody's
Speaker 1: gonna go home? This weekend like John Farrow and trying
Speaker 1: to figure out what to do with their two oh
Speaker 1: one k. That's true, what's excuse lost my head? I
Speaker 1: went out yesterday for the first time in ten days.
Speaker 1: I was fully protected. Has yep. I know I had
Speaker 1: it has met yep. I had the two things on
Speaker 1: the side, and vet Ye tech came over to tech
Speaker 1: came over to tweak my No tech him over the
Speaker 1: instant vet build than me, Tony, I want to talk
Speaker 1: about what I do this weekend with my four oh
Speaker 1: one k allocation. How enthused are you to reallocate right now,
Speaker 1: to rebalance right now? I'm not really enthused. I would
Speaker 1: have been down despite the economic backdrop, because that was
Speaker 1: down too far too fast. Now I think we've gone
Speaker 1: up too far too fast. So again, Tom, you do
Speaker 1: not want to bet against the guy's printing their money.
Speaker 1: The FED told you they're going to continue to support everything,
Speaker 1: but stocks don't bet against. I would not bet against
Speaker 1: the market, but at this point I also wouldn't chase
Speaker 1: the kind of Relly, not just that it's over a
Speaker 1: very short period of time, but also the kind were
Speaker 1: Lisa engine. Small cap stocks are underperforming and the more
Speaker 1: economically sensitive sectors are also underperforming. Well, let's talk about
Speaker 1: what's working then, what's working really both in the United
Speaker 1: States and Europe, And you saw it pretty pronounced in
Speaker 1: yesterday's price action I T and healthcare, what's lacking? What's
Speaker 1: uply financials and energy? You're just saying, stick with the
Speaker 1: stuff that's working. That's at this point, you would that
Speaker 1: would that's the leadership. Um, Honestly, I'd be pretty sector
Speaker 1: neutral right now. I think that there are there are
Speaker 1: times where you can have a high conviction call and
Speaker 1: there's times when you don't. And this is as you
Speaker 1: guys know, we've been doing this for a number of years.
Speaker 1: I'm pretty happy to make a high conviction call when
Speaker 1: I have one. At this point, this is a tactical rally. UM,
Speaker 1: I don't think I would chase the strength and I think, uh,
Speaker 1: it's just a good time it to just be neutral
Speaker 1: and wait for more economic data. Sonny, always appreciate your
Speaker 1: honesty and thanks for it. Signed this morning, I hope
Speaker 1: you and you also doing pretty well, Tony to that
Speaker 1: of kind of cogenency for our audience worldwide on Bloomberg
Speaker 1: TV and on Bloomberg Radio. I'm very pleased to say that.
Speaker 1: We're joined now by the president of the Cleveland Bank
Speaker 1: of the Federal Reserve, alongside Bloomberg's Michael McKee, who would
Speaker 1: join us for this interview. The Cleveland Fed president joined
Speaker 1: us now. The rdamester fantastic to catch up with you.
Speaker 1: I just want to reflect on the data that we've
Speaker 1: had for this economy because it has been brutal, twenty
Speaker 1: two million jobless claims in a single month, wiping out
Speaker 1: a decade of jobs growth. I want you to help
Speaker 1: us understand how you see the future path for policy
Speaker 1: together with this recovery as these economies slowly normalize at
Speaker 1: the back end of this year. Yeah, so you're right,
Speaker 1: the data is very ugly. UM not unexpected given what
Speaker 1: we've decided as a country to do in the best
Speaker 1: interest of public health, which is of course social distancing
Speaker 1: and shutting down um in the medical expert tell us
Speaker 1: that's the best way to control the virus. So what
Speaker 1: you've seen is all the numbers coming in basically reflect
Speaker 1: that shutdown and activity, the fact that many firms are
Speaker 1: furlowing workers. You see that in initial claims numbers, you
Speaker 1: see workers being laid off. This is very very painful
Speaker 1: for everyone. UM. Not only do you have to deal
Speaker 1: with illness and sickness, but then you also have to
Speaker 1: worry about, um, your financial well being. So you know,
Speaker 1: small businesses throughout our district, in the fourth district the
Speaker 1: Midwest are telling us, you know, this is an incredibly
Speaker 1: unprecedented event for them. So I'm not that surprised about
Speaker 1: the actual numbers per se, because we we've engineered this shutdown.
Speaker 1: The question is going forward, can we put in policies?
Speaker 1: And I think the said in the federal government have
Speaker 1: been trying to do this to get people from the
Speaker 1: economy that looked good in February through this pandemic shutdown
Speaker 1: period so that when economy begins to open up again,
Speaker 1: they have the wherewithal um to sort of have the
Speaker 1: recovery come on board. And so a lot of the
Speaker 1: things that the SET is doing is to try and
Speaker 1: to make sure that there's a good foundation in terms
Speaker 1: of functioning markets, which of course is vital for an
Speaker 1: economy to get you know, credit UM and lending to
Speaker 1: the households and businesses that need it UM to reduce
Speaker 1: collateral damage UM and mitigate some of the impacts from
Speaker 1: the shutdown, so that when we get to the point
Speaker 1: where the economy reopens, the recovery is in the best
Speaker 1: possible place it can be given this unprecedented shutdown and activity. Laretta,
Speaker 1: This is Michael. Um. When you talk about when we're
Speaker 1: going to open up, what are CEOs in your district
Speaker 1: and you're the heart of manufacturing country in the US.
Speaker 1: What are they telling you about the damage they see
Speaker 1: now and when they think they can reopen, and what
Speaker 1: the economy will look like when we do. Will they
Speaker 1: have customers? Well, they ramp up rapidly. What do you
Speaker 1: see from Cleveland? Right, So we're all working on this
Speaker 1: right now. Um. As you know, Governor Dawine of Ohio
Speaker 1: is doing daily press conferences and he yesterday said that
Speaker 1: he's aiming for May first for some type of reopening.
Speaker 1: But of course that reopening is going to be done
Speaker 1: very carefully in stage because no one wants to go backward. Um.
Speaker 1: And so really it's really thinking through now what those
Speaker 1: criteria would be, you know, And we have some examples
Speaker 1: of firms that did stay open as essential companies of
Speaker 1: how they've been able to do it, for example, grocery stores.
Speaker 1: So taking some of the lessons about how do you
Speaker 1: do social distancing within a store, how do you do
Speaker 1: social distancing within a manufacturing plan, and trying to apply
Speaker 1: those So, you know, my view and talking to the
Speaker 1: firms is everyone realizes that everyone wants to kind of
Speaker 1: get back to work, but everyone realizes that how you
Speaker 1: do that u UM really is has to be done
Speaker 1: very carefully. And so we're you know, we expect to
Speaker 1: see social distancing practices continue. UM certainly you know, uh,
Speaker 1: personal protective equipment like maths and gloves will be part
Speaker 1: of that. So it's got to be done very thoughtfully.
Speaker 1: Some things will be able to reopen that make it
Speaker 1: you know that can do social distancing more easily than others. UM.
Speaker 1: You wouldn't expect to see big conventions or or even uh,
Speaker 1: you know, conferences where you have people, um, a lot
Speaker 1: of people around. You have to be very careful about
Speaker 1: how you do it. But everyone kind of has a
Speaker 1: goal of wanting to kind of get back to opening
Speaker 1: up activity. You know, partly because when you think about it,
Speaker 1: this is very painful for so you know, small businesses. UM,
Speaker 1: you know some of them have had to shut down,
Speaker 1: very painful for people that you know have you know,
Speaker 1: have lost their jobs in certain sectors are bearing the
Speaker 1: brunt of this and so um. This is why I
Speaker 1: think you've seen unprecedented act and at both the federal
Speaker 1: Reserve and at the federal government level of trying to
Speaker 1: mitigate the negatives um on the economy from the appropriate
Speaker 1: policy of social distancing and shutting down the activity in
Speaker 1: order to get the virus under control. Well, do you
Speaker 1: think maybe markets are getting a little bit ahead of
Speaker 1: themselves in pricing in a very rapid recovery at this point,
Speaker 1: when do you think we start growing again and and
Speaker 1: how quickly? Yeah? So, I mean, as you've seen, I
Speaker 1: think that there are going to be different parts of
Speaker 1: the country that are going to feel that they're capable
Speaker 1: of bringing back some businesses when the virus has kind
Speaker 1: of gotten to a point where the curve starts to
Speaker 1: flatten and then move down. So you're going to see
Speaker 1: that not all of businesses and not all parts of
Speaker 1: the coming opening at the same time. So as that happens,
Speaker 1: you would expect to see at least in terms of numbers,
Speaker 1: in terms of percentages, looking like they're they're moving back up.
Speaker 1: Right when you go from zero base to activity. You're
Speaker 1: going to see some increase in terms of the percentage
Speaker 1: rise in some of those numbers, but that nowhere need
Speaker 1: nowhere implies that, right we've made up what we lost
Speaker 1: by the shutdown, and so you know, you might see
Speaker 1: some of the numbers of like percentage grows an output
Speaker 1: looking like they're coming back, you know, maybe in the
Speaker 1: third quarters if things start to open up in certain areas,
Speaker 1: But again, that doesn't mean that you're truly back to
Speaker 1: you know, activity, being back to normal. It's just gonna
Speaker 1: take time. Right if you're a manufacturing plant, um, and
Speaker 1: you don't have you know, supplies, um, it's gonna take
Speaker 1: time for you to kind of bring back your workers,
Speaker 1: you know, get the supply of inputs that you need
Speaker 1: to start picking out activity. And then of course it
Speaker 1: depends on what demand you're going to say, so I
Speaker 1: think it will take some time where the economy to
Speaker 1: kind of pick back up. And right now we're in
Speaker 1: this still in the phase of making sure we get
Speaker 1: to that point without you know, as as best we can.
Speaker 1: We're trying to limit the damage, um, the economic damage,
Speaker 1: and get people so that they can sort of resume
Speaker 1: things in the best way possible, Lorendo, we're up against
Speaker 1: the clocks. I want to jump in and get as
Speaker 1: many questions in as possible if we can. I don't
Speaker 1: want to be toned deaf to what's happening in the markets.
Speaker 1: Right now. We have a seventeen handle on w t
Speaker 1: I crude, we have some real risk and high yield
Speaker 1: space of defaults. Yet people have been encouraged to pile
Speaker 1: on that risk in the last week because the Federal
Speaker 1: Reserve has suggested it will go into high yield. Can
Speaker 1: you see why that's encouraging risky behavior at a time
Speaker 1: when maybe we shouldn't be doing that. So we're in
Speaker 1: a you know, a real unprecedented, incredibly deep, deep shock
Speaker 1: to the economy, and I think if the Who's us,
Speaker 1: that the send to really use our tools as best
Speaker 1: we can to get us through this pandemic shutdown period,
Speaker 1: mitigating the negative impact on the economy so that the
Speaker 1: recovery can be as deaf as it can be when
Speaker 1: we get to that point. Yes, we are moving into
Speaker 1: unprecedented territories, but remember we're trying to then lend a
Speaker 1: firms um that, through no fault of their own, were
Speaker 1: impacted by the virus, and so there are you know,
Speaker 1: we are going into, for example, UM corporate debt progments
Speaker 1: which we haven't done before UM, and we are going
Speaker 1: to include some fallen angels right that, you know, kind
Speaker 1: of investment grade rating before the virus sits. So you're
Speaker 1: right that we are doing things that we hadn't done before.
Speaker 1: But at this point, I don't think we can be
Speaker 1: that concerned about UM those kind of moral hazards. I
Speaker 1: really think we have to really look at this is
Speaker 1: a hugely impactful and negatively impactful shock, and we have
Speaker 1: to do all we can to make sure that we're
Speaker 1: not doing permanent damage to the underlying fundamentals of the
Speaker 1: economy so that when the time comes and activity can
Speaker 1: pick up, we can get a d sent recovery out
Speaker 1: of this. A lot of what you just said will
Speaker 1: make sense to a lot of people where people struggle, though, Loretta,
Speaker 1: and maybe you can help us. Buying double B credits
Speaker 1: that were triple B before this might make sense to
Speaker 1: tons of people. The huge employers buying high yield ETFs
Speaker 1: that have triple C credit in them, exposed to a
Speaker 1: very shaky energy sector that weren't on firm footing before
Speaker 1: this doesn't make sense, why the decision by jun ytfs. Yeah,
Speaker 1: so part of what we're doing and all the things
Speaker 1: that we're doing are twofold. One is right. We're trying
Speaker 1: to make sure that the markets say functioning. So some
Speaker 1: of the efforts of the set is done right are
Speaker 1: really geared at market functioning and some of them are
Speaker 1: geared to make sure that right we mitigate the negative
Speaker 1: effects on households and businesses by making sure that we
Speaker 1: have credit flowing to those businesses. So I look at
Speaker 1: the E t F. Part of that is a market
Speaker 1: functioning issue, um and so, and we're continuing need to
Speaker 1: look for gaps to make sure that our markets are functioning.
Speaker 1: And I would say that some of the efforts that
Speaker 1: we've taken already have improved functioning in the market. So
Speaker 1: there's two things going on. One of us is making
Speaker 1: sure that and this is the FED responsibility, right, is
Speaker 1: to make sure that we have markets that are well
Speaker 1: functioning so that credit can flow right and do what
Speaker 1: it can to help shore up the economy to prepare
Speaker 1: it for the recovery. So, you know, we can get
Speaker 1: and we can disagree on kind of what the right
Speaker 1: way to do that is, but part of what we're
Speaker 1: doing is to try to make sure that we have
Speaker 1: functioning financial markets precisely because those are an essential ingredient
Speaker 1: for the economy. For that any other policies that we
Speaker 1: do can flow through, so there's a transmission to the
Speaker 1: households and businesses that need those fundings. We got about
Speaker 1: two minutes left Lare and I know that at this
Speaker 1: point the FED is all in doing everything it can
Speaker 1: to try to support the economy. When we get to
Speaker 1: that quarter maybe reopening and it's time to stimulate the economy,
Speaker 1: is there more you think you need to do or
Speaker 1: can do, and what would that be? So I think
Speaker 1: we're going to have to see how um, what it
Speaker 1: looks like when we get there. I don't think we're
Speaker 1: up against any kind of constraint on what we can do,
Speaker 1: as you've seem that we we I think we acted
Speaker 1: um appropriately rapidly, um in an unprecedented rapidly way really
Speaker 1: because of the recognition of how deep this this shock
Speaker 1: was um and engineered because of the investment we're making
Speaker 1: in public health. Right. So when we get to that point,
Speaker 1: we're going to look at our tools do what we
Speaker 1: can again. To support some of the programs that the
Speaker 1: federal government is doing UM in terms of like the
Speaker 1: p PP, the Paycheck Protection Program, etcetera. And then be
Speaker 1: prepared to use our tools as appropriate to make sure
Speaker 1: one market function and two that we're supporting the economy
Speaker 1: as we all nes do UM, so that we can
Speaker 1: get back to a normal sustainable growth with UM, full
Speaker 1: employment and price stability. And so that's what our goal
Speaker 1: is going to be. That's what our goals always are UM,
Speaker 1: and we have tools to do that. We have forward guidings,
Speaker 1: we have our interest rate tools that we're doing right
Speaker 1: now at zero UM, and we're going to move those
Speaker 1: things around as appropriate UM to make sure that the
Speaker 1: economy can recover and get back to a sustainable growth path. Laura,
Speaker 1: we have to leave it that and I have to
Speaker 1: say thank you to you for your time a conversation.
Speaker 1: We will continue la right amester that the President of
Speaker 1: the Federal Reserve Bank of Cleveland a special thanks to
Speaker 1: our already in some blind Bug TV and a blind
Speaker 1: Bug Radio. This is with our question, our definitive discussion
Speaker 1: this week and the microbiology and the virology of this endemic.
Speaker 1: Andrew Pallis is out of Rutger's in Pen He is
Speaker 1: at the Johns Hopkins University Bloomberg School of Public Health.
Speaker 1: I should point out that Mr Bloomberg has provided philanthropy
Speaker 1: to his Johns Hopkins University, and of course as the
Speaker 1: founder of Bloomberg Gulp and this television and radio station.
Speaker 1: This is an extraordinary expert on microbiology and vera virology.
Speaker 1: Let's listen to Professor Pelkos. This virus is truly interesting
Speaker 1: in the sense that it causes this broad spectrum of diseases.
Speaker 1: So it's very true that the vast majority of people
Speaker 1: will suffer what we call sort of mild to moderate diseases,
Speaker 1: maybe even know symptoms at all. But when you look
Speaker 1: at UM, the vulnerable portions of the population, the elderly,
Speaker 1: when you look at people with secondary medical conditions such
Speaker 1: as diabetes, heart disease, of a lung disease, and to
Speaker 1: be honest, even when you look at relatively healthy individuals UM,
Speaker 1: there are a significant a number of part of the
Speaker 1: population that has very severe disease requiring, if not a
Speaker 1: hospital visit, um um admission into the hospital. So it
Speaker 1: runs in a huge spectrum in terms of how it
Speaker 1: presents after infection. I don't want to talk enzymes on
Speaker 1: a Friday, and I certainly don't want to talk RNA
Speaker 1: transcript taste and the other necessities of doing a test.
Speaker 1: But I would suggest, respectfully, doctor that America from a
Speaker 1: top down doesn't understand the sophisticated chemistry and biochemistry of tests.
Speaker 1: How hard is it to do a test and millions
Speaker 1: of tests for this virus. So we know in a
Speaker 1: lot about the virus, and you certainly can do good testing.
Speaker 1: It requires not only a good test, but it also
Speaker 1: requires a good laboratory that's validated, that knows how to detesting,
Speaker 1: that knows how to do the controls, and knows how
Speaker 1: to show that they can reproducibly perform the tests well.
Speaker 1: So that's where it's really important to be focused in
Speaker 1: on public health agencies and medical institutions that know how
Speaker 1: to do these tests. Professor Pekosh talk to us about
Speaker 1: reinfection and immunity. Are people that have had the virus
Speaker 1: really getting infected twice? Yeah? So right now, um, it's
Speaker 1: still a little bit unclear, but this is this gets
Speaker 1: back to the testing issue. Oftentimes, what I've seeing is
Speaker 1: people who are testing positive by the you know the
Speaker 1: test that tells you if you're infected, which is a
Speaker 1: PCR test that the text the virus. That doesn't necessarily
Speaker 1: mean you've been reinfected. It may simply mean that there's
Speaker 1: small amounts of the virus that are still in your
Speaker 1: system UM from the infection that you've already controlled a
Speaker 1: few days ago or a week or so ago. So
Speaker 1: right now, there really is no good evidence to suggest
Speaker 1: that you're getting reinfected after your first exposure. May simply
Speaker 1: be that the virus is hanging around and you see
Speaker 1: vestiges of the virus there after you you've controlled the
Speaker 1: initial infection. But it's something that's very important to understand
Speaker 1: as we think about rolling back in and coming UH
Speaker 1: leaving some of our public health interventions. Do we have
Speaker 1: a credible test to test immunity. There's gonna be a
Speaker 1: two part UH phase to that. Many of the tests
Speaker 1: that are out there will tell you if you've had
Speaker 1: an infection and if you have antibodies UM. Now that's
Speaker 1: important because that'll tell us how many people were infected
Speaker 1: the first time this barus moves through the population. But
Speaker 1: most of those tests don't really tell you if you're
Speaker 1: protected from reinfection. That's going to take a second set
Speaker 1: of tests that are done more in laboratory settings that
Speaker 1: take a little bit of time to develop, but that
Speaker 1: will differentiate people who just have some antibodies to it
Speaker 1: versus the people that have antibodies that we think will
Speaker 1: protect you from reinfection. We'd like to think that those
Speaker 1: are going to be very closely related, but we have
Speaker 1: to do those experiments to be percent sure that the
Speaker 1: rapid tests that people are establishing are really telling you
Speaker 1: that you're protected from infection or reinfection. Help me with
Speaker 1: reject the true or accept the false of this testing.
Speaker 1: How it risks is America to type one and type
Speaker 1: two malfunction in our testing. So again it gets back
Speaker 1: to the laboratories that are doing the testing and making
Speaker 1: sure that the tests are being performed in m rigorous,
Speaker 1: controlled environments. UM. You can have two types of errors, right.
Speaker 1: You can have a false positive, meaning that you test
Speaker 1: positive when you really aren't infected UM And the other
Speaker 1: type of error is that you test negative when you
Speaker 1: really are infected. And it's that latter group that's really
Speaker 1: the most important to be aware of because that really
Speaker 1: means that you're telling people who are infected that they
Speaker 1: can go back out in the population and behave you know,
Speaker 1: and not take extra precautions. And again, laboratories that know
Speaker 1: how to perform these tests do something called validation, right,
Speaker 1: so they go through and they test with known samples
Speaker 1: both types of error and report back what exactly they
Speaker 1: expect those errors to be. Um other laboratories that are
Speaker 1: just sort of fly by night may not be reporting
Speaker 1: that rigorously. And that's where some of the danger comes in.
Speaker 1: With Francine Laquid and myself, he's with JOHNS. Hopkins University
Speaker 1: of Bloomberg School of Public Health. Jared Bernstein's listening to scoring.
Speaker 1: Why am I on faring say, scratching his head. Jared
Speaker 1: Bernstein knows that Vice President Biden of course will probably
Speaker 1: take Fargo. We'll see how that goes in the election.
Speaker 1: Mr Bernstein was economic advisor to the Vice President in
Speaker 1: his definitive in Washington on policy years ago at the
Speaker 1: Economic Policy Institute and now the Center on Budget and
Speaker 1: Policy Priorities. Dr Bernstein is someone everybody reads right, left
Speaker 1: and in the middle as well. Jared John Farrell brought
Speaker 1: it up today, and John, as a British guy, doesn't
Speaker 1: understand the American ethos, the distrust of our federal system.
Speaker 1: Will that maintain in the coming weeks, or can we
Speaker 1: get a federal statement of assistance to Americans like we
Speaker 1: knew in times long past. I think there are those
Speaker 1: who are very skeptical, as you suggested, of the government
Speaker 1: in normal times, But in times like this, people really
Speaker 1: do turn to the federal sector for the kinds of
Speaker 1: help we need meeting existential challenges precisely like this one.
Speaker 1: It's the same as in war time. One thing we've
Speaker 1: certainly seen is a level of bipartisanship in Congress. You know,
Speaker 1: the Cares Act past nine six to zero in the Senate.
Speaker 1: When was the last time something like that happened? So,
Speaker 1: at least for now, I think many Americans walking around
Speaker 1: thinking we shouted government, and probably and probably thinking we
Speaker 1: need a more competent governance down the road. Jared, your
Speaker 1: work was path breaking a decade ago at the Economic
Speaker 1: Policy Institute of saying we need to get money into
Speaker 1: people's hands at certain emergent times. Why is Washington so
Speaker 1: reticent about income replacement? Yeah? Well, I think the main
Speaker 1: reason for that is just a real skepticism about giving
Speaker 1: money to directly to people because of the fear that
Speaker 1: it will cause them to alter their labor supply. I
Speaker 1: think many American policymakers in our commist really overestimate that
Speaker 1: quote labor supply elasticity that says if you give people
Speaker 1: a dollar, they're gonna work less. Well, in fact, most
Speaker 1: people in America, their paychecks are such that they just
Speaker 1: have to keep working if they're going to get by.
Speaker 1: And by the way, right now, we don't want people
Speaker 1: to go to work. So that's one of the reasons
Speaker 1: why folks really need to put that sort of older
Speaker 1: thinking but behind behind right now. The usually statements Jared
Speaker 1: made by people who have never grown up around a
Speaker 1: working class environment and have no clue because most people,
Speaker 1: in fact, everybody I grew up with, wanted the job.
Speaker 1: They didn't want to hand out from the government. And
Speaker 1: as you say, people are being told they have to
Speaker 1: stay at home, businesses are being told they have to
Speaker 1: shut makes me wonder why we're sitting here asking questions
Speaker 1: about why Congress won't top up the paycheck protection program
Speaker 1: for the small business administration. Jared, why are we even
Speaker 1: having the conversation and asking the question, Well, first of all,
Speaker 1: let me just say you're exactly right in the first
Speaker 1: part of your comments right there. I started in some ways.
Speaker 1: I think I'm probably a rare economist, and that I
Speaker 1: started out as a social worker, and one of the
Speaker 1: first things I learned is that people simply can't begin
Speaker 1: to get by on the money they get, at least
Speaker 1: from the American social assistance system. May be different in
Speaker 1: some other countries. Look, I think the scene in Congress
Speaker 1: right now is that both parties want to plus up
Speaker 1: the Paycheck Protection Act because frankly, that money got out
Speaker 1: the door really quickly and it's starting to meet some needs.
Speaker 1: But the Democrats want to add some other pieces that
Speaker 1: are quite necessary to the next phase of the stimulus plan,
Speaker 1: and the Republicans are resisting. So that's what they're squabbling
Speaker 1: about right now. So, Jared, as we have that backdrop,
Speaker 1: we have the unemployment figures that keep coming out with
Speaker 1: jaw dropping numbers. Yesterday the sort of five point two
Speaker 1: million coming in a little low expectations, still mind blowing.
Speaker 1: And you're the perfect person to speak to about how
Speaker 1: quickly these jobs can come back. After your writing getting
Speaker 1: back to full employment in the state of Working America
Speaker 1: a decade of jobs lost in four weeks, how quickly
Speaker 1: can we get them back? You know, it's really an
Speaker 1: epidemiological question more than an economic one. Probably more quickly
Speaker 1: than you'd think, because at least from the information we have,
Speaker 1: many of these folks are on a temporary layoff or furloughed.
Speaker 1: So we're there there's the potential to bounce back, but
Speaker 1: that can only happen. I believe if we get the
Speaker 1: green light, or at least the yellow light. That's more realistic,
Speaker 1: if we get the yellow light from health officials and
Speaker 1: then from governors to do so. I do think that
Speaker 1: any reopening will be a very gradual one. But that's
Speaker 1: why the measures we were just talking about, these measures
Speaker 1: to help keep families and businesses kind of intact between
Speaker 1: now and then, so that there's an economy on the
Speaker 1: other side of this that's capable of bouncing back. Jared,
Speaker 1: this is the key question. It's interesting to hear you
Speaker 1: say this because I've been reading a number of reports
Speaker 1: with people expecting the unemployment rate to remain at about
Speaker 1: ten percent for a prolonged period of time in the
Speaker 1: United States. Are you saying that those estimates are are
Speaker 1: perhaps a little bit too pessimistic. No, I mean, I
Speaker 1: think the unemployment rate is probably above ten percent now,
Speaker 1: and I think we'll be lucky if we if we
Speaker 1: peek out at I know that's a scary number, but
Speaker 1: I think that's the fact that the case. What I'm
Speaker 1: saying is that if you look at some focus our
Speaker 1: friend jan hat C s Obert Goldman, they actually have
Speaker 1: kind of a V shape bounce back built in. But
Speaker 1: that's based on an assumption that we're doing a lot
Speaker 1: more testing and tracing than we're anywhere close to now.
Speaker 1: So I think the answer to your question is just
Speaker 1: conditional on getting the yellow light from the medical community.
Speaker 1: And if you read those folks, they're still quite skeptical
Speaker 1: because we're so far behind the curb on testing. I
Speaker 1: just think that if we do the right thing in
Speaker 1: terms of social and stimulative policy, or maybe call it
Speaker 1: relief policy, to keep households in businesses at least somewhat intact,
Speaker 1: then at least we know when we get the yellow light,
Speaker 1: there'll be in a current it's capable of bouncing back
Speaker 1: on the other side. Jared, quickly, I've got to ask
Speaker 1: the question. The world has changed, America has changed, what's
Speaker 1: the word steam prediction for what's a Burns Burnstein prescription
Speaker 1: for Vice President Biden? What's he need to do right now?
Speaker 1: You know, I thought President Obama said it well in
Speaker 1: his uh in his endorsement the other day, which is
Speaker 1: really worth watching because he actually gets into that precise question. Um,
Speaker 1: he said he wouldn't run on the same platform he
Speaker 1: did in oh eight. And we know that Biden has
Speaker 1: been very influenced by his work with President Obama. So
Speaker 1: this is the time it gets back to your first question.
Speaker 1: This is the time where the country needs and wants
Speaker 1: an amply funded federal sector that is highly competent to
Speaker 1: meet the challenges we face repeatedly these days. Hundred day floods,
Speaker 1: the hundred year floods come every two years. Your sector.
Speaker 1: You know what I'm saying. I mean, we face real challenges, Jared, which,
Speaker 1: thank you so much, Jared Burnstein with us of course
Speaker 1: as the Center on Budget and Policy for Priorities. Thanks
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen
Speaker 1: to interviews on Apple podcast, SoundCloud, or whichever podcast platform
Speaker 1: you prefer. I'm on Twitter at Tom Keene. Before the podcast,
Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio.