WEBVTT - Surveillance: Fed's Mester Says U.S. Reopening Will Take Time 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.800 Bloomberg dot Com, and of course on the Bloomberg We 0:00:27.880 --> 0:00:30.080 can catch up. A good friend of this program's Tony 0:00:30.120 --> 0:00:33.479 da of counter coach genuitcy Tony, you've been quiet for 0:00:33.520 --> 0:00:37.879 a solid week. Where have you been. I don't know. 0:00:37.920 --> 0:00:41.080 I don't feel so quiet. Uh So I'm in this 0:00:41.320 --> 0:00:45.080 funky position because we've been expecting a relief rally and 0:00:45.120 --> 0:00:47.400 we got it right. We got a relief rally that 0:00:47.520 --> 0:00:50.880 is historic. We've retraced about fifty of what we've lost 0:00:51.440 --> 0:00:56.280 during the crash in March and that that really is extraordinary. 0:00:56.480 --> 0:00:59.240 So what you know, I'm trying to figure out if 0:00:59.240 --> 0:01:03.360 a tactical rally, meaning based on an over soul condition 0:01:03.440 --> 0:01:07.560 of hope, uh, if that's going to become a fundamental rally, 0:01:07.720 --> 0:01:11.399 and I'm not clear on that at this point. I 0:01:11.520 --> 0:01:15.840 looked Tony at the equity markets and what I perceive 0:01:15.959 --> 0:01:21.800 as a narrowness of this rally. How narrow is narrow? Well? 0:01:21.800 --> 0:01:25.200 The last two days have seen the downside by him 0:01:25.240 --> 0:01:29.280 significantly outweighing the upside by him. So you had you 0:01:29.400 --> 0:01:34.160 had two really bad quote unquote market days, but megacap 0:01:34.280 --> 0:01:37.959 Tech was leading. So the thing that's the most interesting 0:01:38.000 --> 0:01:41.520 about that megacap Tech at this point is it's actually 0:01:42.040 --> 0:01:46.840 considered defensive. So for those that have gone on offense, right. 0:01:46.880 --> 0:01:48.720 We we downgraded the market, as you guys know in 0:01:48.800 --> 0:01:52.960 January and expected once you got that panic low, which 0:01:53.000 --> 0:01:56.160 was identifiable, we expect the relief rally, and we got it. 0:01:56.160 --> 0:01:59.160 It's been a lot more than I thought it would be, 0:01:59.560 --> 0:02:02.680 but the wrong groups are leading it. If you're if 0:02:02.720 --> 0:02:06.600 you're expecting a good fundamentally driven bull market, they usually 0:02:06.600 --> 0:02:11.639 are kicked off with small cap stocks leading, with offensive 0:02:11.720 --> 0:02:18.240 sectors like financials, industrials, consumer discretionary, with those areas leading, 0:02:18.760 --> 0:02:23.639 but they're lagging. So there's basically to make it very 0:02:23.680 --> 0:02:27.720 clear for the listeners, because this sounds really complicated coming 0:02:27.720 --> 0:02:30.480 off of a major bear market low. You want to 0:02:30.560 --> 0:02:34.080 see the more aggressive areas do better, but that's not 0:02:34.240 --> 0:02:37.000 been the case in the rally, and that was evidence time, 0:02:37.000 --> 0:02:39.160 as you suggested, by the narrowness of the last couple 0:02:39.200 --> 0:02:42.120 of days, Tony. As you talk, it strikes me that 0:02:42.160 --> 0:02:44.799 perhaps we can look at this in another way that 0:02:44.880 --> 0:02:47.680 when we say the stock market is rallying despite the 0:02:47.760 --> 0:02:51.320 horrific data that we keep getting out of the real economy, 0:02:51.360 --> 0:02:54.040 perhaps this is a couple of key tech names that 0:02:54.080 --> 0:02:57.560 are rallying well. The rest of the stocks completely lagged behind, 0:02:57.600 --> 0:03:01.120 the small caps down year to date, and it doesn't 0:03:01.160 --> 0:03:05.359 necessarily indicate anything positive, even hope for the economy and 0:03:05.440 --> 0:03:08.280 the month's ahead. Is that a better way to understand 0:03:08.280 --> 0:03:11.480 the rally that we're seeing in equities right now? Yes, 0:03:11.600 --> 0:03:14.440 it's really born out of an extreme oversoul condition when 0:03:14.440 --> 0:03:17.120 everybody got too bearish all at once, and that's what 0:03:17.160 --> 0:03:20.600 we identified as quote unquote the panic low. You know, 0:03:20.680 --> 0:03:23.640 you have you kick off a human nature. There's times 0:03:23.639 --> 0:03:26.440 when human nature is the driver of the market activity, 0:03:26.440 --> 0:03:29.240 and then there's times for fundamentals. For the last ten years, 0:03:29.240 --> 0:03:33.760 it's been a fundamentally driven positive credit backdrop, good earnings 0:03:33.880 --> 0:03:38.360 driven rally. Right now, it's basically everybody got too shortened 0:03:38.360 --> 0:03:41.120 to too out of the market too quickly. Okay, but 0:03:41.160 --> 0:03:44.000 where are we right now on this Friday? Is everybody's 0:03:44.000 --> 0:03:46.040 gonna go home? This weekend like John Farrow and trying 0:03:46.040 --> 0:03:47.360 to figure out what to do with their two oh 0:03:47.400 --> 0:03:53.800 one k. That's true, what's excuse lost my head? I 0:03:53.880 --> 0:03:55.960 went out yesterday for the first time in ten days. 0:03:57.280 --> 0:04:01.040 I was fully protected. Has yep. I know I had 0:04:01.040 --> 0:04:02.760 it has met yep. I had the two things on 0:04:02.800 --> 0:04:07.760 the side, and vet Ye tech came over to tech 0:04:07.800 --> 0:04:11.640 came over to tweak my No tech him over the 0:04:13.560 --> 0:04:16.800 instant vet build than me, Tony, I want to talk 0:04:16.839 --> 0:04:20.000 about what I do this weekend with my four oh 0:04:20.040 --> 0:04:25.200 one k allocation. How enthused are you to reallocate right now, 0:04:25.240 --> 0:04:30.360 to rebalance right now? I'm not really enthused. I would 0:04:30.360 --> 0:04:35.000 have been down despite the economic backdrop, because that was 0:04:35.080 --> 0:04:37.680 down too far too fast. Now I think we've gone 0:04:37.839 --> 0:04:40.920 up too far too fast. So again, Tom, you do 0:04:41.000 --> 0:04:43.159 not want to bet against the guy's printing their money. 0:04:43.160 --> 0:04:46.799 The FED told you they're going to continue to support everything, 0:04:46.880 --> 0:04:49.799 but stocks don't bet against. I would not bet against 0:04:49.839 --> 0:04:52.880 the market, but at this point I also wouldn't chase 0:04:53.040 --> 0:04:56.520 the kind of Relly, not just that it's over a 0:04:56.600 --> 0:04:59.320 very short period of time, but also the kind were 0:04:59.560 --> 0:05:03.400 Lisa engine. Small cap stocks are underperforming and the more 0:05:03.520 --> 0:05:07.400 economically sensitive sectors are also underperforming. Well, let's talk about 0:05:07.400 --> 0:05:09.680 what's working then, what's working really both in the United 0:05:09.720 --> 0:05:11.880 States and Europe, And you saw it pretty pronounced in 0:05:11.960 --> 0:05:15.480 yesterday's price action I T and healthcare, what's lacking? What's 0:05:15.560 --> 0:05:18.160 uply financials and energy? You're just saying, stick with the 0:05:18.160 --> 0:05:22.159 stuff that's working. That's at this point, you would that 0:05:22.200 --> 0:05:25.720 would that's the leadership. Um, Honestly, I'd be pretty sector 0:05:25.760 --> 0:05:28.240 neutral right now. I think that there are there are 0:05:28.279 --> 0:05:30.320 times where you can have a high conviction call and 0:05:30.360 --> 0:05:32.479 there's times when you don't. And this is as you 0:05:32.520 --> 0:05:34.440 guys know, we've been doing this for a number of years. 0:05:34.440 --> 0:05:36.520 I'm pretty happy to make a high conviction call when 0:05:36.560 --> 0:05:40.480 I have one. At this point, this is a tactical rally. UM, 0:05:40.640 --> 0:05:44.359 I don't think I would chase the strength and I think, uh, 0:05:44.440 --> 0:05:47.360 it's just a good time it to just be neutral 0:05:47.680 --> 0:05:50.760 and wait for more economic data. Sonny, always appreciate your 0:05:50.800 --> 0:05:52.600 honesty and thanks for it. Signed this morning, I hope 0:05:52.600 --> 0:05:54.760 you and you also doing pretty well, Tony to that 0:05:55.000 --> 0:06:08.880 of kind of cogenency for our audience worldwide on Bloomberg 0:06:08.920 --> 0:06:12.120 TV and on Bloomberg Radio. I'm very pleased to say that. 0:06:12.120 --> 0:06:15.599 We're joined now by the president of the Cleveland Bank 0:06:15.760 --> 0:06:19.360 of the Federal Reserve, alongside Bloomberg's Michael McKee, who would 0:06:19.400 --> 0:06:21.760 join us for this interview. The Cleveland Fed president joined 0:06:21.839 --> 0:06:24.720 us now. The rdamester fantastic to catch up with you. 0:06:24.960 --> 0:06:26.600 I just want to reflect on the data that we've 0:06:26.640 --> 0:06:29.920 had for this economy because it has been brutal, twenty 0:06:30.040 --> 0:06:33.839 two million jobless claims in a single month, wiping out 0:06:33.880 --> 0:06:36.520 a decade of jobs growth. I want you to help 0:06:36.600 --> 0:06:39.600 us understand how you see the future path for policy 0:06:39.880 --> 0:06:43.480 together with this recovery as these economies slowly normalize at 0:06:43.520 --> 0:06:46.960 the back end of this year. Yeah, so you're right, 0:06:47.040 --> 0:06:51.880 the data is very ugly. UM not unexpected given what 0:06:51.920 --> 0:06:54.120 we've decided as a country to do in the best 0:06:54.160 --> 0:06:56.839 interest of public health, which is of course social distancing 0:06:56.880 --> 0:07:00.520 and shutting down um in the medical expert tell us 0:07:00.560 --> 0:07:03.000 that's the best way to control the virus. So what 0:07:03.040 --> 0:07:06.920 you've seen is all the numbers coming in basically reflect 0:07:06.960 --> 0:07:10.400 that shutdown and activity, the fact that many firms are 0:07:10.400 --> 0:07:13.840 furlowing workers. You see that in initial claims numbers, you 0:07:13.880 --> 0:07:17.640 see workers being laid off. This is very very painful 0:07:17.880 --> 0:07:21.160 for everyone. UM. Not only do you have to deal 0:07:21.200 --> 0:07:23.560 with illness and sickness, but then you also have to 0:07:23.600 --> 0:07:27.400 worry about, um, your financial well being. So you know, 0:07:27.560 --> 0:07:30.240 small businesses throughout our district, in the fourth district the 0:07:30.240 --> 0:07:33.120 Midwest are telling us, you know, this is an incredibly 0:07:33.240 --> 0:07:38.000 unprecedented event for them. So I'm not that surprised about 0:07:38.000 --> 0:07:43.440 the actual numbers per se, because we we've engineered this shutdown. 0:07:43.520 --> 0:07:48.000 The question is going forward, can we put in policies? 0:07:48.040 --> 0:07:50.000 And I think the said in the federal government have 0:07:50.120 --> 0:07:53.400 been trying to do this to get people from the 0:07:53.480 --> 0:07:58.040 economy that looked good in February through this pandemic shutdown 0:07:58.120 --> 0:08:01.760 period so that when economy begins to open up again, 0:08:02.040 --> 0:08:05.280 they have the wherewithal um to sort of have the 0:08:05.360 --> 0:08:08.360 recovery come on board. And so a lot of the 0:08:08.440 --> 0:08:10.360 things that the SET is doing is to try and 0:08:10.360 --> 0:08:12.680 to make sure that there's a good foundation in terms 0:08:12.760 --> 0:08:16.720 of functioning markets, which of course is vital for an 0:08:16.760 --> 0:08:20.840 economy to get you know, credit UM and lending to 0:08:21.480 --> 0:08:25.280 the households and businesses that need it UM to reduce 0:08:25.440 --> 0:08:29.120 collateral damage UM and mitigate some of the impacts from 0:08:29.160 --> 0:08:31.840 the shutdown, so that when we get to the point 0:08:31.880 --> 0:08:35.280 where the economy reopens, the recovery is in the best 0:08:35.320 --> 0:08:41.520 possible place it can be given this unprecedented shutdown and activity. Laretta, 0:08:41.600 --> 0:08:45.160 This is Michael. Um. When you talk about when we're 0:08:45.160 --> 0:08:47.680 going to open up, what are CEOs in your district 0:08:47.720 --> 0:08:50.120 and you're the heart of manufacturing country in the US. 0:08:50.160 --> 0:08:52.520 What are they telling you about the damage they see 0:08:52.559 --> 0:08:56.080 now and when they think they can reopen, and what 0:08:56.240 --> 0:08:59.160 the economy will look like when we do. Will they 0:08:59.200 --> 0:09:02.880 have customers? Well, they ramp up rapidly. What do you 0:09:02.880 --> 0:09:06.320 see from Cleveland? Right, So we're all working on this 0:09:06.480 --> 0:09:10.040 right now. Um. As you know, Governor Dawine of Ohio 0:09:10.880 --> 0:09:14.320 is doing daily press conferences and he yesterday said that 0:09:14.360 --> 0:09:18.920 he's aiming for May first for some type of reopening. 0:09:18.920 --> 0:09:21.640 But of course that reopening is going to be done 0:09:21.840 --> 0:09:26.640 very carefully in stage because no one wants to go backward. Um. 0:09:26.720 --> 0:09:29.800 And so really it's really thinking through now what those 0:09:29.800 --> 0:09:33.040 criteria would be, you know, And we have some examples 0:09:33.080 --> 0:09:35.840 of firms that did stay open as essential companies of 0:09:35.880 --> 0:09:38.480 how they've been able to do it, for example, grocery stores. 0:09:38.559 --> 0:09:41.800 So taking some of the lessons about how do you 0:09:41.840 --> 0:09:45.720 do social distancing within a store, how do you do 0:09:45.800 --> 0:09:48.920 social distancing within a manufacturing plan, and trying to apply 0:09:49.120 --> 0:09:52.000 those So, you know, my view and talking to the 0:09:52.040 --> 0:09:55.320 firms is everyone realizes that everyone wants to kind of 0:09:55.360 --> 0:09:58.520 get back to work, but everyone realizes that how you 0:09:58.600 --> 0:10:02.320 do that u UM really is has to be done 0:10:02.400 --> 0:10:05.120 very carefully. And so we're you know, we expect to 0:10:05.160 --> 0:10:10.400 see social distancing practices continue. UM certainly you know, uh, 0:10:10.600 --> 0:10:13.880 personal protective equipment like maths and gloves will be part 0:10:13.920 --> 0:10:16.959 of that. So it's got to be done very thoughtfully. 0:10:17.160 --> 0:10:20.960 Some things will be able to reopen that make it 0:10:21.240 --> 0:10:25.400 you know that can do social distancing more easily than others. UM. 0:10:25.440 --> 0:10:29.520 You wouldn't expect to see big conventions or or even uh, 0:10:29.600 --> 0:10:32.400 you know, conferences where you have people, um, a lot 0:10:32.400 --> 0:10:35.200 of people around. You have to be very careful about 0:10:35.200 --> 0:10:37.040 how you do it. But everyone kind of has a 0:10:37.080 --> 0:10:39.640 goal of wanting to kind of get back to opening 0:10:39.679 --> 0:10:42.480 up activity. You know, partly because when you think about it, 0:10:42.559 --> 0:10:46.640 this is very painful for so you know, small businesses. UM, 0:10:46.679 --> 0:10:48.520 you know some of them have had to shut down, 0:10:49.320 --> 0:10:52.440 very painful for people that you know have you know, 0:10:52.480 --> 0:10:55.000 have lost their jobs in certain sectors are bearing the 0:10:55.040 --> 0:10:58.320 brunt of this and so um. This is why I 0:10:58.360 --> 0:11:00.960 think you've seen unprecedented act and at both the federal 0:11:01.000 --> 0:11:03.880 Reserve and at the federal government level of trying to 0:11:03.960 --> 0:11:09.559 mitigate the negatives um on the economy from the appropriate 0:11:09.600 --> 0:11:13.040 policy of social distancing and shutting down the activity in 0:11:13.160 --> 0:11:16.280 order to get the virus under control. Well, do you 0:11:16.280 --> 0:11:19.200 think maybe markets are getting a little bit ahead of 0:11:19.720 --> 0:11:23.840 themselves in pricing in a very rapid recovery at this point, 0:11:24.280 --> 0:11:26.560 when do you think we start growing again and and 0:11:26.720 --> 0:11:31.480 how quickly? Yeah? So, I mean, as you've seen, I 0:11:31.520 --> 0:11:33.360 think that there are going to be different parts of 0:11:33.360 --> 0:11:36.280 the country that are going to feel that they're capable 0:11:36.360 --> 0:11:40.600 of bringing back some businesses when the virus has kind 0:11:40.600 --> 0:11:42.960 of gotten to a point where the curve starts to 0:11:43.040 --> 0:11:45.600 flatten and then move down. So you're going to see 0:11:45.600 --> 0:11:48.640 that not all of businesses and not all parts of 0:11:48.679 --> 0:11:52.319 the coming opening at the same time. So as that happens, 0:11:53.040 --> 0:11:56.080 you would expect to see at least in terms of numbers, 0:11:56.120 --> 0:12:00.400 in terms of percentages, looking like they're they're moving back up. 0:12:00.600 --> 0:12:03.960 Right when you go from zero base to activity. You're 0:12:04.000 --> 0:12:06.560 going to see some increase in terms of the percentage 0:12:06.679 --> 0:12:09.400 rise in some of those numbers, but that nowhere need 0:12:10.240 --> 0:12:13.760 nowhere implies that, right we've made up what we lost 0:12:13.800 --> 0:12:16.480 by the shutdown, and so you know, you might see 0:12:16.520 --> 0:12:19.319 some of the numbers of like percentage grows an output 0:12:19.400 --> 0:12:22.200 looking like they're coming back, you know, maybe in the 0:12:22.280 --> 0:12:25.920 third quarters if things start to open up in certain areas, 0:12:25.960 --> 0:12:28.880 But again, that doesn't mean that you're truly back to 0:12:29.679 --> 0:12:31.800 you know, activity, being back to normal. It's just gonna 0:12:31.800 --> 0:12:34.840 take time. Right if you're a manufacturing plant, um, and 0:12:34.920 --> 0:12:38.520 you don't have you know, supplies, um, it's gonna take 0:12:38.559 --> 0:12:41.079 time for you to kind of bring back your workers, 0:12:41.640 --> 0:12:44.320 you know, get the supply of inputs that you need 0:12:44.360 --> 0:12:46.600 to start picking out activity. And then of course it 0:12:46.600 --> 0:12:48.440 depends on what demand you're going to say, so I 0:12:48.480 --> 0:12:51.559 think it will take some time where the economy to 0:12:51.679 --> 0:12:53.640 kind of pick back up. And right now we're in 0:12:53.679 --> 0:12:56.360 this still in the phase of making sure we get 0:12:56.400 --> 0:13:01.160 to that point without you know, as as best we can. 0:13:01.280 --> 0:13:05.160 We're trying to limit the damage, um, the economic damage, 0:13:05.160 --> 0:13:07.640 and get people so that they can sort of resume 0:13:07.800 --> 0:13:12.720 things in the best way possible, Lorendo, we're up against 0:13:12.720 --> 0:13:14.080 the clocks. I want to jump in and get as 0:13:14.080 --> 0:13:16.600 many questions in as possible if we can. I don't 0:13:16.600 --> 0:13:18.480 want to be toned deaf to what's happening in the markets. 0:13:18.720 --> 0:13:21.440 Right now. We have a seventeen handle on w t 0:13:21.520 --> 0:13:24.160 I crude, we have some real risk and high yield 0:13:24.240 --> 0:13:27.200 space of defaults. Yet people have been encouraged to pile 0:13:27.240 --> 0:13:29.000 on that risk in the last week because the Federal 0:13:29.000 --> 0:13:32.520 Reserve has suggested it will go into high yield. Can 0:13:32.600 --> 0:13:35.800 you see why that's encouraging risky behavior at a time 0:13:35.840 --> 0:13:39.959 when maybe we shouldn't be doing that. So we're in 0:13:40.040 --> 0:13:45.000 a you know, a real unprecedented, incredibly deep, deep shock 0:13:45.080 --> 0:13:47.920 to the economy, and I think if the Who's us, 0:13:47.960 --> 0:13:51.640 that the send to really use our tools as best 0:13:51.679 --> 0:13:55.679 we can to get us through this pandemic shutdown period, 0:13:56.280 --> 0:13:59.839 mitigating the negative impact on the economy so that the 0:14:00.040 --> 0:14:02.920 recovery can be as deaf as it can be when 0:14:02.920 --> 0:14:05.920 we get to that point. Yes, we are moving into 0:14:06.040 --> 0:14:09.920 unprecedented territories, but remember we're trying to then lend a 0:14:10.040 --> 0:14:14.040 firms um that, through no fault of their own, were 0:14:14.080 --> 0:14:17.240 impacted by the virus, and so there are you know, 0:14:17.320 --> 0:14:20.320 we are going into, for example, UM corporate debt progments 0:14:20.320 --> 0:14:22.800 which we haven't done before UM, and we are going 0:14:22.800 --> 0:14:26.840 to include some fallen angels right that, you know, kind 0:14:26.840 --> 0:14:31.760 of investment grade rating before the virus sits. So you're 0:14:31.840 --> 0:14:34.840 right that we are doing things that we hadn't done before. 0:14:35.280 --> 0:14:37.560 But at this point, I don't think we can be 0:14:37.760 --> 0:14:41.480 that concerned about UM those kind of moral hazards. I 0:14:41.520 --> 0:14:43.800 really think we have to really look at this is 0:14:43.840 --> 0:14:48.240 a hugely impactful and negatively impactful shock, and we have 0:14:48.320 --> 0:14:50.800 to do all we can to make sure that we're 0:14:50.840 --> 0:14:55.280 not doing permanent damage to the underlying fundamentals of the 0:14:55.280 --> 0:14:58.200 economy so that when the time comes and activity can 0:14:58.200 --> 0:15:01.040 pick up, we can get a d sent recovery out 0:15:01.040 --> 0:15:04.320 of this. A lot of what you just said will 0:15:04.360 --> 0:15:07.320 make sense to a lot of people where people struggle, though, Loretta, 0:15:07.360 --> 0:15:09.960 and maybe you can help us. Buying double B credits 0:15:10.000 --> 0:15:12.760 that were triple B before this might make sense to 0:15:12.800 --> 0:15:16.480 tons of people. The huge employers buying high yield ETFs 0:15:17.240 --> 0:15:19.960 that have triple C credit in them, exposed to a 0:15:20.080 --> 0:15:23.000 very shaky energy sector that weren't on firm footing before 0:15:23.040 --> 0:15:29.400 this doesn't make sense, why the decision by jun ytfs. Yeah, 0:15:29.640 --> 0:15:31.960 so part of what we're doing and all the things 0:15:32.000 --> 0:15:35.160 that we're doing are twofold. One is right. We're trying 0:15:35.200 --> 0:15:40.000 to make sure that the markets say functioning. So some 0:15:40.040 --> 0:15:42.560 of the efforts of the set is done right are 0:15:42.600 --> 0:15:45.480 really geared at market functioning and some of them are 0:15:45.520 --> 0:15:48.840 geared to make sure that right we mitigate the negative 0:15:48.840 --> 0:15:51.960 effects on households and businesses by making sure that we 0:15:52.040 --> 0:15:55.080 have credit flowing to those businesses. So I look at 0:15:55.120 --> 0:15:57.120 the E t F. Part of that is a market 0:15:57.200 --> 0:16:00.280 functioning issue, um and so, and we're continuing need to 0:16:00.320 --> 0:16:03.320 look for gaps to make sure that our markets are functioning. 0:16:03.360 --> 0:16:04.920 And I would say that some of the efforts that 0:16:04.920 --> 0:16:09.080 we've taken already have improved functioning in the market. So 0:16:09.240 --> 0:16:11.880 there's two things going on. One of us is making 0:16:11.920 --> 0:16:15.400 sure that and this is the FED responsibility, right, is 0:16:15.440 --> 0:16:17.480 to make sure that we have markets that are well 0:16:17.560 --> 0:16:21.560 functioning so that credit can flow right and do what 0:16:21.680 --> 0:16:25.040 it can to help shore up the economy to prepare 0:16:25.080 --> 0:16:28.240 it for the recovery. So, you know, we can get 0:16:28.280 --> 0:16:30.360 and we can disagree on kind of what the right 0:16:30.400 --> 0:16:32.040 way to do that is, but part of what we're 0:16:32.080 --> 0:16:33.840 doing is to try to make sure that we have 0:16:34.040 --> 0:16:39.040 functioning financial markets precisely because those are an essential ingredient 0:16:39.920 --> 0:16:42.640 for the economy. For that any other policies that we 0:16:42.680 --> 0:16:46.360 do can flow through, so there's a transmission to the 0:16:46.440 --> 0:16:51.160 households and businesses that need those fundings. We got about 0:16:51.240 --> 0:16:54.240 two minutes left Lare and I know that at this 0:16:54.320 --> 0:16:57.240 point the FED is all in doing everything it can 0:16:57.280 --> 0:16:59.600 to try to support the economy. When we get to 0:16:59.680 --> 0:17:04.400 that quarter maybe reopening and it's time to stimulate the economy, 0:17:04.440 --> 0:17:06.760 is there more you think you need to do or 0:17:06.960 --> 0:17:10.840 can do, and what would that be? So I think 0:17:10.880 --> 0:17:13.159 we're going to have to see how um, what it 0:17:13.200 --> 0:17:15.320 looks like when we get there. I don't think we're 0:17:15.400 --> 0:17:17.960 up against any kind of constraint on what we can do, 0:17:18.080 --> 0:17:21.439 as you've seem that we we I think we acted 0:17:21.720 --> 0:17:28.800 um appropriately rapidly, um in an unprecedented rapidly way really 0:17:28.840 --> 0:17:32.800 because of the recognition of how deep this this shock 0:17:33.160 --> 0:17:36.960 was um and engineered because of the investment we're making 0:17:36.960 --> 0:17:40.080 in public health. Right. So when we get to that point, 0:17:40.160 --> 0:17:42.600 we're going to look at our tools do what we 0:17:42.720 --> 0:17:45.879 can again. To support some of the programs that the 0:17:45.880 --> 0:17:48.760 federal government is doing UM in terms of like the 0:17:48.800 --> 0:17:52.040 p PP, the Paycheck Protection Program, etcetera. And then be 0:17:52.160 --> 0:17:56.240 prepared to use our tools as appropriate to make sure 0:17:56.240 --> 0:17:59.280 one market function and two that we're supporting the economy 0:17:59.359 --> 0:18:02.480 as we all nes do UM, so that we can 0:18:02.520 --> 0:18:07.280 get back to a normal sustainable growth with UM, full 0:18:07.359 --> 0:18:10.960 employment and price stability. And so that's what our goal 0:18:11.080 --> 0:18:13.960 is going to be. That's what our goals always are UM, 0:18:14.000 --> 0:18:16.640 and we have tools to do that. We have forward guidings, 0:18:16.720 --> 0:18:19.440 we have our interest rate tools that we're doing right 0:18:19.480 --> 0:18:22.200 now at zero UM, and we're going to move those 0:18:22.240 --> 0:18:25.720 things around as appropriate UM to make sure that the 0:18:25.760 --> 0:18:32.959 economy can recover and get back to a sustainable growth path. Laura, 0:18:33.080 --> 0:18:34.240 we have to leave it that and I have to 0:18:34.280 --> 0:18:36.159 say thank you to you for your time a conversation. 0:18:36.240 --> 0:18:38.760 We will continue la right amester that the President of 0:18:38.800 --> 0:18:41.439 the Federal Reserve Bank of Cleveland a special thanks to 0:18:41.440 --> 0:18:43.400 our already in some blind Bug TV and a blind 0:18:43.400 --> 0:18:56.119 Bug Radio. This is with our question, our definitive discussion 0:18:56.200 --> 0:19:00.520 this week and the microbiology and the virology of this endemic. 0:19:00.600 --> 0:19:03.639 Andrew Pallis is out of Rutger's in Pen He is 0:19:03.640 --> 0:19:07.120 at the Johns Hopkins University Bloomberg School of Public Health. 0:19:07.160 --> 0:19:10.440 I should point out that Mr Bloomberg has provided philanthropy 0:19:10.520 --> 0:19:13.080 to his Johns Hopkins University, and of course as the 0:19:13.119 --> 0:19:16.800 founder of Bloomberg Gulp and this television and radio station. 0:19:17.320 --> 0:19:23.760 This is an extraordinary expert on microbiology and vera virology. 0:19:23.840 --> 0:19:29.920 Let's listen to Professor Pelkos. This virus is truly interesting 0:19:29.920 --> 0:19:33.840 in the sense that it causes this broad spectrum of diseases. 0:19:34.000 --> 0:19:37.119 So it's very true that the vast majority of people 0:19:37.160 --> 0:19:40.040 will suffer what we call sort of mild to moderate diseases, 0:19:40.560 --> 0:19:43.440 maybe even know symptoms at all. But when you look 0:19:43.520 --> 0:19:48.480 at UM, the vulnerable portions of the population, the elderly, 0:19:49.080 --> 0:19:52.160 when you look at people with secondary medical conditions such 0:19:52.160 --> 0:19:55.119 as diabetes, heart disease, of a lung disease, and to 0:19:55.160 --> 0:19:58.520 be honest, even when you look at relatively healthy individuals UM, 0:19:58.880 --> 0:20:01.040 there are a significant a number of part of the 0:20:01.040 --> 0:20:04.760 population that has very severe disease requiring, if not a 0:20:04.840 --> 0:20:09.720 hospital visit, um um admission into the hospital. So it 0:20:09.840 --> 0:20:12.879 runs in a huge spectrum in terms of how it 0:20:12.960 --> 0:20:16.439 presents after infection. I don't want to talk enzymes on 0:20:16.480 --> 0:20:18.879 a Friday, and I certainly don't want to talk RNA 0:20:18.960 --> 0:20:23.560 transcript taste and the other necessities of doing a test. 0:20:24.240 --> 0:20:28.359 But I would suggest, respectfully, doctor that America from a 0:20:28.440 --> 0:20:36.480 top down doesn't understand the sophisticated chemistry and biochemistry of tests. 0:20:37.000 --> 0:20:40.200 How hard is it to do a test and millions 0:20:40.240 --> 0:20:44.480 of tests for this virus. So we know in a 0:20:44.600 --> 0:20:48.640 lot about the virus, and you certainly can do good testing. 0:20:48.960 --> 0:20:51.520 It requires not only a good test, but it also 0:20:51.600 --> 0:20:56.679 requires a good laboratory that's validated, that knows how to detesting, 0:20:56.960 --> 0:20:59.240 that knows how to do the controls, and knows how 0:20:59.320 --> 0:21:03.160 to show that they can reproducibly perform the tests well. 0:21:03.840 --> 0:21:06.320 So that's where it's really important to be focused in 0:21:06.400 --> 0:21:10.120 on public health agencies and medical institutions that know how 0:21:10.119 --> 0:21:13.200 to do these tests. Professor Pekosh talk to us about 0:21:13.200 --> 0:21:17.159 reinfection and immunity. Are people that have had the virus 0:21:17.359 --> 0:21:21.560 really getting infected twice? Yeah? So right now, um, it's 0:21:21.600 --> 0:21:25.800 still a little bit unclear, but this is this gets 0:21:25.800 --> 0:21:29.320 back to the testing issue. Oftentimes, what I've seeing is 0:21:29.359 --> 0:21:32.879 people who are testing positive by the you know the 0:21:32.880 --> 0:21:35.320 test that tells you if you're infected, which is a 0:21:35.359 --> 0:21:38.919 PCR test that the text the virus. That doesn't necessarily 0:21:38.960 --> 0:21:41.360 mean you've been reinfected. It may simply mean that there's 0:21:41.400 --> 0:21:44.160 small amounts of the virus that are still in your 0:21:44.160 --> 0:21:47.679 system UM from the infection that you've already controlled a 0:21:47.720 --> 0:21:50.360 few days ago or a week or so ago. So 0:21:51.080 --> 0:21:53.680 right now, there really is no good evidence to suggest 0:21:53.720 --> 0:21:57.760 that you're getting reinfected after your first exposure. May simply 0:21:57.760 --> 0:22:00.600 be that the virus is hanging around and you see 0:22:00.760 --> 0:22:03.879 vestiges of the virus there after you you've controlled the 0:22:03.920 --> 0:22:07.119 initial infection. But it's something that's very important to understand 0:22:07.440 --> 0:22:11.560 as we think about rolling back in and coming UH 0:22:12.080 --> 0:22:15.000 leaving some of our public health interventions. Do we have 0:22:15.080 --> 0:22:18.000 a credible test to test immunity. There's gonna be a 0:22:18.040 --> 0:22:21.560 two part UH phase to that. Many of the tests 0:22:21.560 --> 0:22:23.720 that are out there will tell you if you've had 0:22:24.200 --> 0:22:28.240 an infection and if you have antibodies UM. Now that's 0:22:28.240 --> 0:22:31.040 important because that'll tell us how many people were infected 0:22:31.080 --> 0:22:34.040 the first time this barus moves through the population. But 0:22:34.160 --> 0:22:36.600 most of those tests don't really tell you if you're 0:22:36.640 --> 0:22:40.040 protected from reinfection. That's going to take a second set 0:22:40.080 --> 0:22:43.879 of tests that are done more in laboratory settings that 0:22:43.960 --> 0:22:46.000 take a little bit of time to develop, but that 0:22:46.040 --> 0:22:49.480 will differentiate people who just have some antibodies to it 0:22:49.680 --> 0:22:52.080 versus the people that have antibodies that we think will 0:22:52.119 --> 0:22:55.520 protect you from reinfection. We'd like to think that those 0:22:55.560 --> 0:22:58.600 are going to be very closely related, but we have 0:22:58.680 --> 0:23:01.920 to do those experiments to be percent sure that the 0:23:02.000 --> 0:23:05.000 rapid tests that people are establishing are really telling you 0:23:05.040 --> 0:23:08.480 that you're protected from infection or reinfection. Help me with 0:23:08.800 --> 0:23:13.640 reject the true or accept the false of this testing. 0:23:14.080 --> 0:23:18.000 How it risks is America to type one and type 0:23:18.040 --> 0:23:22.760 two malfunction in our testing. So again it gets back 0:23:22.800 --> 0:23:25.800