WEBVTT - Surveillance: Rate Expectations With Dudley 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jaily, we bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot com, 0:00:23.920 --> 0:00:31.240 and of course, on the Bloomberg Terminal. William Dudley is 0:00:31.280 --> 0:00:33.320 a former president in the New York Fat of course 0:00:33.360 --> 0:00:36.680 for years, legendary at Goldman Sachs writing for Bloomberg Opinion. 0:00:36.760 --> 0:00:39.920 We're thrilled that Bill Dudley could brief us this morning. 0:00:39.960 --> 0:00:43.519 Bill Dudley, I want to talk about policy rule, inertia, 0:00:43.760 --> 0:00:47.920 the physics envy of guys like you. You do Newtonian mechanics, 0:00:47.960 --> 0:00:51.000 and up we go. Interest rates start moving up and 0:00:51.040 --> 0:00:54.960 we start talking about inertia. What's the inertia look like 0:00:55.120 --> 0:00:59.000 right now to hire interest rates? Well, the short ending inertia, 0:00:59.040 --> 0:01:01.000 there's no enough, there's a the inertia of keeping short 0:01:01.080 --> 0:01:03.160 term rates steady. The feed is said that they're going 0:01:03.200 --> 0:01:05.720 to be very slow to raise interest rates. They're not 0:01:05.720 --> 0:01:08.160 going to begin to raise interest rates until they get 0:01:08.200 --> 0:01:10.760 to full employment to percent inflation, and they're confident that 0:01:10.800 --> 0:01:13.120 inflation is going to go aboff TOWERC. We know that's 0:01:13.120 --> 0:01:15.160 going to take a while to convince some of that. 0:01:15.680 --> 0:01:17.880 Once they start, however, they're gonna be late and they're 0:01:17.880 --> 0:01:20.040 gonna have to catch up, and so this is gonna 0:01:20.080 --> 0:01:21.480 be a period of slow and then it's going to 0:01:21.520 --> 0:01:23.040 be a period of fast. And I think the thing 0:01:23.080 --> 0:01:26.080 that people don't really fully appreciate is when they actually 0:01:26.160 --> 0:01:28.240 have to catch up, the level of short term rates 0:01:28.319 --> 0:01:30.440 is going to climb much higher than what's currently priced 0:01:30.440 --> 0:01:33.679 in financial mark What you just heard there's, folks, is 0:01:33.720 --> 0:01:37.000 a synthesis of history with economics that Bill Dudley was 0:01:37.120 --> 0:01:40.840 legendary for with McKelvey at Goldman Sachs. Bill Dudley, I'm 0:01:40.840 --> 0:01:43.679 gonna cut to the chase and your wonderful essay. You 0:01:43.720 --> 0:01:47.560 talk about that process of moving from the reality ex 0:01:47.680 --> 0:01:51.800 post we're behind and forward you talk about talking and 0:01:51.840 --> 0:01:55.840 then the Federal Act and finally they will do higher rates, 0:01:56.160 --> 0:01:58.880 Well they do it in a measured way or do 0:01:58.960 --> 0:02:01.560 we literally go back Arthur Burns where they're gonna be 0:02:01.640 --> 0:02:05.960 talking about eighth point or higher moves. I think they're 0:02:06.000 --> 0:02:10.000 gonna have to move relatively quickly because liftoff in terms 0:02:10.040 --> 0:02:12.320 of short term rates isn't going to happen until the 0:02:12.320 --> 0:02:14.679 economy is already at full employment. So there's gonna be 0:02:14.720 --> 0:02:17.480 a big gap between where they are starting where they 0:02:17.520 --> 0:02:20.520 need to be to keep the economy from overheating. So 0:02:20.560 --> 0:02:22.600 it seems to me that at least a quarter point 0:02:22.600 --> 0:02:26.160 of meeting seems like the most likely UH template. Think 0:02:26.160 --> 0:02:27.920 about what happened in two thousand and four to two 0:02:27.960 --> 0:02:30.240 thousand and six. The Fed raised the quarter point of 0:02:30.240 --> 0:02:33.720 meeting for there was seventeen meetings in a row, taking 0:02:33.760 --> 0:02:36.400 the federal fund rate from one percent to five and percent. 0:02:36.720 --> 0:02:38.560 Probably not gonna go quite that high this time, but 0:02:38.600 --> 0:02:40.200 we're gonna go quite a bit higher, I think than 0:02:40.240 --> 0:02:43.359 the two percent is currently priced into financial market. So, Bill, 0:02:43.400 --> 0:02:45.320 how would you charunterize this? Is this a race back 0:02:45.360 --> 0:02:49.280 to neutral once you do start, or a race through neutral? Well, 0:02:49.320 --> 0:02:51.200 you have to go beyond neutral because you're starting because 0:02:51.240 --> 0:02:54.040 you're already at full employment and inflation is likely to 0:02:54.040 --> 0:02:57.000 go above your two percent inflation objective. You actually have 0:02:57.040 --> 0:02:58.720 to go to how much was stately forced? Do you 0:02:58.720 --> 0:03:00.320 think the market would be in that environ man, just 0:03:00.360 --> 0:03:03.000 having a look back at is a case study to 0:03:03.000 --> 0:03:05.600 think about. Well, it's gonna be interesting to see how 0:03:05.600 --> 0:03:07.360 the market reactions. That's the one thing that could slow 0:03:07.360 --> 0:03:09.280 the FED down if the market reacts really poorly than 0:03:09.320 --> 0:03:12.800 the federals. Sort of well back a little bit, Well, well, 0:03:12.840 --> 0:03:14.840 look what happened between two thousand and four and two 0:03:14.880 --> 0:03:18.400 thousand six. FED tightened every meeting for over two years, 0:03:18.520 --> 0:03:21.200 and I guess what happened. The stock market was fine 0:03:21.200 --> 0:03:23.600 and the bond market was fine. So you're absolutely right 0:03:23.600 --> 0:03:26.919 how the markets react will affect the pace of tightening 0:03:27.320 --> 0:03:30.320 when the FED starts. Are you advocating for a change 0:03:30.320 --> 0:03:32.880 of policy then, Bill, or just highlighting where you think 0:03:32.919 --> 0:03:35.480 the risk lie? I think I'm just highlighting where the 0:03:35.560 --> 0:03:37.080 risk lie. I mean, there are there are benefits of 0:03:37.080 --> 0:03:38.760 what the Fed is doing. It's going to keep inflation 0:03:38.800 --> 0:03:42.200 expectations better anchored. It's going to get those eight million 0:03:42.240 --> 0:03:45.480 people that are still out of work post COVID back 0:03:45.520 --> 0:03:47.880 to work more quickly. But there are there are costs 0:03:47.880 --> 0:03:50.560 on the other side, and people in financial markets do 0:03:50.760 --> 0:03:52.480 need to be cognizant of that of those some of 0:03:52.520 --> 0:03:54.520 those downside risks, which thing let's cost on than it. 0:03:54.960 --> 0:03:56.760 Drug Miller is out in the Ball Street Journal Stanley 0:03:56.800 --> 0:03:59.360 drug A Miller, famed investor of course, a legendary hedge 0:03:59.360 --> 0:04:01.360 fund managers, and the following the long term risk from 0:04:01.360 --> 0:04:04.520 asset bubbles and fiscal dominance dwarf the short term risk 0:04:04.560 --> 0:04:07.080 of putting the brakes on a booming economy in twenty two. 0:04:07.320 --> 0:04:09.960 What do you make of that aspect of it, Bill? 0:04:09.960 --> 0:04:12.480 I think the fan is does recognize that financial markets 0:04:12.520 --> 0:04:15.680 are frothy, but they're looking through that because they especially 0:04:15.680 --> 0:04:17.880 for the equity market. They say the equity market, if 0:04:17.880 --> 0:04:19.560 the equity market wrey to go down to some future 0:04:19.600 --> 0:04:21.200 point in time, they don't see as a big risk 0:04:21.240 --> 0:04:24.720 of financial stability because people investors in the equity market 0:04:24.760 --> 0:04:27.560 typically don't do so on a highly leveraged basis. Remember 0:04:27.560 --> 0:04:30.000 what happened to Great Financial Crisis. It was leverage that 0:04:30.160 --> 0:04:32.839 killed us. So you know, the fans to view is 0:04:32.880 --> 0:04:34.640 if we tighten and the stock market goes down to 0:04:34.720 --> 0:04:37.960 some subsequent period of time, that will tighten financial conditions 0:04:38.000 --> 0:04:41.000 and we may then have to tighten monentrec passy as much. 0:04:41.000 --> 0:04:43.359 But you know, they agree that markets are frothy, but 0:04:43.400 --> 0:04:45.640 they're looking through that. They're determined to keep rates low 0:04:45.680 --> 0:04:47.719 until they actually get a lot more people back to work. 0:04:48.040 --> 0:04:50.120 Bill Dudley, don't want to digress. We just talked to 0:04:50.200 --> 0:04:52.840 Jared Bernstein to the White House about this, the arch 0:04:52.960 --> 0:04:56.080 conservative fear that we're not going to be able to 0:04:56.160 --> 0:04:59.200 grow our way, or the growth won't participate in our 0:04:59.240 --> 0:05:03.000 debt our deficit solutions. And this goes back to out 0:05:03.000 --> 0:05:05.600 on at Berkeley where you were Chip Jones and others 0:05:05.600 --> 0:05:08.520 and solo at M I, T, etcetera. The idea that 0:05:08.640 --> 0:05:12.680 just this fear that the growth won't be there frame 0:05:12.960 --> 0:05:17.160 your optimism that growth economic growth of this nation will 0:05:17.200 --> 0:05:22.520 assist in helping us with this pandemic debt and deficit. Well, 0:05:22.560 --> 0:05:24.919 I think it will help because we have excess capacity 0:05:24.920 --> 0:05:27.400 in the labor market. Uh. And I think you know, 0:05:27.440 --> 0:05:29.160 if you look at the pro tivty numbers, I mean, 0:05:29.200 --> 0:05:30.880 it's hard to read them through the pandemic, but they 0:05:30.880 --> 0:05:33.640 actually seem to be better than what people expected. End 0:05:33.640 --> 0:05:37.560 of the day, growth is about resources and proctivity. Resources 0:05:37.800 --> 0:05:40.400 not so much in the sense that the population growth 0:05:40.400 --> 0:05:43.120 in the US is pretty modest, so labor force growth 0:05:43.160 --> 0:05:44.520 is only but a half a percent a year. But 0:05:44.520 --> 0:05:47.680 proctivity growth, that's the key and if pro tivty growth 0:05:47.760 --> 0:05:50.200 takes up thing, you'll have stronger growth. But which is 0:05:50.200 --> 0:05:52.039 finally final question. We've got to get your take on 0:05:52.040 --> 0:05:54.680 that pyrosal pull from Friday. How would you be processing 0:05:54.680 --> 0:05:57.560 that if you're on the FED right now, I think 0:05:57.560 --> 0:06:00.919 you'd say, Wow, that was surprisingly weak. But you know, 0:06:00.960 --> 0:06:03.040 we don't have a lot of experience coming out of pandemics, 0:06:03.520 --> 0:06:05.800 and you know, it's very possible that is weak because 0:06:05.839 --> 0:06:07.839 people don't want to go back to work quite yet, 0:06:08.400 --> 0:06:10.200 because they can't gonna have people to take you know, 0:06:10.279 --> 0:06:12.640 they don't have people to take care of their telling 0:06:12.680 --> 0:06:15.839 me because schools are still out of session. Um so 0:06:15.920 --> 0:06:17.880 I think it's gonna just take a while to understand 0:06:17.920 --> 0:06:21.680 what's really happenings to the pandemic. I don't think they're 0:06:21.680 --> 0:06:23.719 gonna put a lot of weight on one month's uh 0:06:24.040 --> 0:06:27.320 weakness in terms of ferals. Oh A, tomny Pace would 0:06:28.120 --> 0:06:30.920 the former Federal Reserve Bank of New York President, Thank you, Bill. 0:06:31.240 --> 0:06:39.040 Look forward to catching up soon. It is a wonderful 0:06:39.080 --> 0:06:41.280 time to move on from the jobs reporting catch up 0:06:41.279 --> 0:06:44.120 with Jared Bernstein, member of the White House Council on 0:06:44.240 --> 0:06:49.120 Economic Advisors. Dr Bernstein has been definitive on socio economics 0:06:49.160 --> 0:06:51.640 with his work at the Center on Budget and Policy 0:06:51.680 --> 0:06:55.240 Priorities in e P I before that, an advisor to 0:06:55.520 --> 0:06:59.360 Vice President Biden, now holding court at the White House. Jared, 0:06:59.400 --> 0:07:01.800 thank you so much for joining us today. Jared, I 0:07:01.839 --> 0:07:04.880 want to go back to the arch conservative fear. It 0:07:04.960 --> 0:07:07.479 has been there from the time of David Ricardo and 0:07:07.560 --> 0:07:11.559 John Stewart Mill. We will not grow our way out 0:07:11.600 --> 0:07:16.160 of our challenges. Everyone in the middle, everyone liberal, including 0:07:16.240 --> 0:07:19.920 Joe Stiglets, a laureate, has battled disc for years, including 0:07:19.960 --> 0:07:24.720 solo at m I t N describe right now this 0:07:25.000 --> 0:07:28.920 fear that we can't grow our way out of our challenges. Well, 0:07:28.920 --> 0:07:32.880 that's certainly not a fear I share, and in fact, 0:07:33.360 --> 0:07:37.800 I think the administration's policies thus far are very much 0:07:37.920 --> 0:07:41.480 targeted at not just growing our way out of this, 0:07:41.640 --> 0:07:44.760 because that's always going to be just a part of 0:07:44.760 --> 0:07:48.400 the solution, but making sure that that growth is equitable, 0:07:48.440 --> 0:07:51.080 that it's reaching people that hasn't reached before. One of 0:07:51.120 --> 0:07:55.160 the touchstones of President Biden's economic policy will always be 0:07:55.720 --> 0:07:59.600 GDP growth, stock market growth. Even lower unemployment by itself 0:07:59.720 --> 0:08:02.440 is not enough. It has to reach the middle class 0:08:02.440 --> 0:08:05.000 that has to reach lower income people, and they need 0:08:05.040 --> 0:08:07.680 the bargaining clouds so they can claim they're fair share 0:08:07.680 --> 0:08:10.120 of the growth, which by the way, was six point 0:08:10.160 --> 0:08:12.880 four percent in the first quarter, and the and the 0:08:12.920 --> 0:08:16.000 fingerprints of the Rescue Plan are all over that getting 0:08:16.000 --> 0:08:19.000 to the other side of the crisis begat the building 0:08:19.040 --> 0:08:22.120 Back Better agenda, which is a much longer term set 0:08:22.160 --> 0:08:26.480 of investments. Jared, what does the Biden warning in America 0:08:26.640 --> 0:08:28.840 look like? You know, I think the way to think 0:08:28.880 --> 0:08:32.040 of that is uh kind of shifting from the American 0:08:32.120 --> 0:08:35.600 Rescue Plan to the Jobs and Family Plan. The Rescue 0:08:35.600 --> 0:08:38.400 Plan was always intended to do precisely what it's doing, 0:08:38.440 --> 0:08:40.679 get us to the other side of the crisis as 0:08:40.760 --> 0:08:43.960 quickly as possible by getting shots and arms checks in 0:08:44.000 --> 0:08:47.640 pockets and making sure families and businesses and childcare providers 0:08:47.679 --> 0:08:49.960 are intact on the other side of the crisis. But 0:08:50.120 --> 0:08:53.520 simply getting back to where we were is wholly insufficient 0:08:53.559 --> 0:08:56.600 for this administration. There needs to be a deep, ten 0:08:56.720 --> 0:08:59.920 year set of investments embedded in the Jobs and Family 0:09:00.080 --> 0:09:03.360 Plan to make sure that what I described in my 0:09:03.440 --> 0:09:06.440 first answer to you occurs, which is that we pull along. 0:09:06.760 --> 0:09:10.760 Folks have historically left behind by deep investments in education 0:09:10.840 --> 0:09:13.640 and an opportunity in neighborhoods that have been left behind, 0:09:13.679 --> 0:09:17.120 and clean energy, in manufacturing, and standing up a care 0:09:17.200 --> 0:09:21.439 sector for childcare and elder care. Those are all keystones 0:09:21.520 --> 0:09:25.240 of the jobs and family clans Montana, South Carolina, Arkansas, 0:09:25.240 --> 0:09:28.120 and now North Dakota Jacks, you'll be familiar with this 0:09:28.200 --> 0:09:32.760 story that push him back against the additional UI unemployment insurance. 0:09:32.960 --> 0:09:35.679 Have you spoken to the governors of those states? I 0:09:35.720 --> 0:09:38.360 have not personally spoken to the governors, but that's the president. 0:09:39.480 --> 0:09:42.360 There are people within the administration. I don't know how 0:09:42.360 --> 0:09:46.040 to read out of precisely who, but I do know that, yes, 0:09:46.080 --> 0:09:48.400 the presidents talks to talks to governors all the time. 0:09:48.480 --> 0:09:51.640 Do you think that's the wrong decision. Yeah, I do 0:09:51.760 --> 0:09:54.480 think it's the wrong decision. I think the right decision 0:09:54.559 --> 0:09:57.560 is what the President talked about yesterday, which is a 0:09:57.559 --> 0:10:01.120 twofold to make sure we take down any barriers that 0:10:01.240 --> 0:10:04.360 stand between people and getting back to work, with childcare 0:10:04.440 --> 0:10:07.199 being the most prominent. To make sure that the rules 0:10:07.240 --> 0:10:10.720 of the UI system are followed. If people are offered 0:10:11.000 --> 0:10:14.160 a suitable job, the rules say they need to take it. 0:10:14.240 --> 0:10:18.120 And suitable, by the way, means a job that is 0:10:18.640 --> 0:10:20.760 enables them to go back to work safely. And then 0:10:20.880 --> 0:10:24.880 and and and and recognizes that people have childcare obligations 0:10:24.880 --> 0:10:27.200 that they can't always meet, so helping to take down 0:10:27.240 --> 0:10:30.199 those barriers getting folks back to work, and recognizing that 0:10:30.240 --> 0:10:33.880 the UI system is classic insurance for people who don't 0:10:33.880 --> 0:10:36.720 have income from for work and it's been a huge 0:10:36.800 --> 0:10:40.520 boon to unemployed Americans throughout this period. If it's the 0:10:40.520 --> 0:10:43.920 wrong decision, let's stress test them. What would the consequences 0:10:43.960 --> 0:10:47.959 be this month and next month when these policies are introduced. Yeah, 0:10:48.040 --> 0:10:50.280 that's a great question. So I think they're twofold. One 0:10:50.360 --> 0:10:53.760 is that you'll see people really experience a level of 0:10:53.760 --> 0:10:57.240 economic hardship that wouldn't have occurred if they maintained their 0:10:57.320 --> 0:11:00.200 enhanced benefits. And the other is that you're not going 0:11:00.240 --> 0:11:04.800 to see much difference between uh, the labor market outcomes 0:11:05.040 --> 0:11:07.840 in these areas versus others. So if we dig into 0:11:07.840 --> 0:11:10.640 the data, thus far, I should say thus far, because 0:11:10.640 --> 0:11:13.520 these things change month to month. We don't see a 0:11:13.559 --> 0:11:18.559 negative correlation between places where unemployment insurance replacement rates, meaning 0:11:18.840 --> 0:11:21.400 the extent to which it's replacing the wage. We don't 0:11:21.440 --> 0:11:25.600 see a negative correlation between replacement rates and labor market outcomes, 0:11:25.640 --> 0:11:28.960 so that would suggest that UI is not the problem. 0:11:28.960 --> 0:11:31.800 And we know that people are facing barriers to childcare 0:11:31.800 --> 0:11:34.160 at to school. We know there's concerned about the virus 0:11:34.200 --> 0:11:36.800 out there. If you actually look at the vaccination rates 0:11:36.840 --> 0:11:40.600 among working age people, they're obviously a lot lower than 0:11:40.640 --> 0:11:45.280 the broader adult population. Dr Bernstein, you are eminently qualified 0:11:45.320 --> 0:11:47.480 to speak to those on the right and the left 0:11:47.640 --> 0:11:51.920 with your PhD and social welfare from Columbia. Folks. That 0:11:52.040 --> 0:11:55.319 is a history and inheritage that speaks of a long century. 0:11:55.720 --> 0:12:00.120 Dr Bernstein, frame right now on childcare, the debate of 0:12:00.160 --> 0:12:04.320 a federal solution versus states rights to decide what their 0:12:04.400 --> 0:12:07.480 child care would be. Where does that stand now and 0:12:07.520 --> 0:12:11.319 where does President Biden wanted to go. Probably the best 0:12:11.320 --> 0:12:13.800 way to answer that question is to look at every 0:12:13.840 --> 0:12:17.520 other advanced economy and recognize that they have stood up 0:12:17.520 --> 0:12:21.000 an accessible and affordable child care sector. And in the 0:12:21.080 --> 0:12:24.920 vast majority of those economies, the labor force participation rate 0:12:24.920 --> 0:12:28.920 among care takers, particularly women, is many percentage points higher 0:12:28.920 --> 0:12:32.680 than ours. This is not, you know, a a classical 0:12:32.800 --> 0:12:35.199 sort of federal state, right, And this is a classical 0:12:35.280 --> 0:12:41.240 missing markets problem. Even the most mainstream economics recognizes that 0:12:41.280 --> 0:12:43.760 when a market is missing, there's a role for the 0:12:43.760 --> 0:12:47.080 federal government to come in and fix that externality. And 0:12:47.120 --> 0:12:50.600 here the negative externality is a barrier to work for 0:12:50.679 --> 0:12:53.079 people who want to get into the labor market. So 0:12:53.120 --> 0:12:56.840 this is just a very simple solution to a market failure. 0:12:57.200 --> 0:12:59.880 I look, Jared, at the solution to a market failure, 0:13:00.000 --> 0:13:01.760 and I look at the politics. You don't have to 0:13:01.760 --> 0:13:05.400 worry about two thousand twenty two. Your boss does as well. 0:13:05.960 --> 0:13:10.400 How is the White House adapting economically to the reality 0:13:10.440 --> 0:13:15.440 of an election coming ever closer in two thousand twenty two. Yeah, 0:13:15.480 --> 0:13:19.400 that's an easy one. If you just watch the where 0:13:19.440 --> 0:13:21.800 the president and the Vice president are going and listen 0:13:21.840 --> 0:13:24.200 to what they're saying. They're taking their message to the 0:13:24.240 --> 0:13:28.440 American people, and if you look at the American people. Okay, 0:13:28.480 --> 0:13:30.360 I don't mean to interrupt, Jerry, but you've nailed it. 0:13:30.679 --> 0:13:34.840 How do they sell this to Republicans who support what 0:13:34.920 --> 0:13:39.640 you're talking about, yet the leadership that they have is 0:13:39.800 --> 0:13:44.160 dead set against it. How does that metric, that dialectric work, Well, 0:13:44.200 --> 0:13:46.760 I think you know, you don't have to sell things 0:13:46.800 --> 0:13:49.080 to people. If there are things that people want to need, 0:13:49.160 --> 0:13:51.040 you just have to tell them about it. So I 0:13:51.040 --> 0:13:54.040 think it's it's less sell and more tell. Explain to 0:13:54.160 --> 0:13:57.679 constituents why what you're trying to do. And what we 0:13:57.760 --> 0:14:01.360 found from the polling is that telling, uh does not 0:14:01.520 --> 0:14:05.680 require selling. When it's childcare, when it's safely reopening schools, 0:14:05.840 --> 0:14:08.760 when it's beating the vaccine, when it's providing people the 0:14:08.800 --> 0:14:10.640 resources they need to get to the other side of 0:14:10.679 --> 0:14:14.000 this crisis, and when it's making historic investments in the 0:14:14.080 --> 0:14:17.400 jobs and families plans, in their lives and their opportunities. 0:14:17.600 --> 0:14:20.480 Now you know what goes on in partisan circles in 0:14:20.480 --> 0:14:22.920 in d C. We have to show that out for 0:14:22.960 --> 0:14:26.320 what it is. But the President vice President are keeping 0:14:26.320 --> 0:14:28.640 their heads down meeting the needs of the American people 0:14:28.640 --> 0:14:30.560 on all sides of the aisle. When the President will 0:14:30.560 --> 0:14:32.640 be making with a big full in the White House 0:14:32.680 --> 0:14:36.160 tomorrow and change we're told about childcare. Are you determined 0:14:36.240 --> 0:14:40.000 to make childcare and policies addressing childcare issues a part 0:14:40.040 --> 0:14:43.760 of a broad to infrastructure package. Unquestionably so, And in fact, 0:14:43.760 --> 0:14:45.920 if you look at the jobs Plan and the Families Plan. 0:14:46.000 --> 0:14:48.320 You see that right at the heart of those plans. 0:14:48.520 --> 0:14:50.280 And I should be very clear about this. As I 0:14:50.280 --> 0:14:54.160 said before, I think sometimes this childcare story takes on 0:14:54.360 --> 0:14:55.920 a life of its own in the way that Tom 0:14:55.960 --> 0:14:59.760 was referring to. Otherwise, for us, it's providing an accessible 0:14:59.800 --> 0:15:03.160 and affordable path to get into the job market for 0:15:03.200 --> 0:15:06.160 care takers who want to do so. Some will want to, 0:15:06.240 --> 0:15:08.360 others will not want to. But if you want to 0:15:08.480 --> 0:15:11.000 and you need to get back to work, it is 0:15:11.040 --> 0:15:13.880 not hard to find care takers today who say I 0:15:13.960 --> 0:15:16.080 can't get back to the job market because I can 0:15:16.120 --> 0:15:19.400 find accessible, affordable care. It is a missing market and 0:15:19.440 --> 0:15:21.440 we have to stand that market up, and that's what 0:15:21.480 --> 0:15:24.280 our plans do. I'm not here to advocate for anyone's policies. 0:15:24.320 --> 0:15:26.800 You clearly aren't out and that's understandable in your positions. 0:15:27.160 --> 0:15:29.280 But when it comes to tomorrow, is that a redline 0:15:29.400 --> 0:15:33.600 for this administration? Childcare as part of a broader infrastructure package. 0:15:33.680 --> 0:15:36.440 Is that a redline? Well, you know, I'm not in 0:15:36.480 --> 0:15:39.280 a position of setting legislative redlines. I'm okay, I'm on 0:15:39.320 --> 0:15:42.280 the economics team, and I'm talking about the economic graphical 0:15:42.360 --> 0:15:46.480 President community hold on. It is at the core of 0:15:46.880 --> 0:15:50.240 everything that the President has talked about from the campaign, 0:15:50.280 --> 0:15:54.360 by the way, until through the American Jobs and Families plans, 0:15:54.360 --> 0:15:56.760 trying to get you to other privacies out to understand 0:15:56.760 --> 0:15:58.880 that you can't negotiate on behalf of the president. But 0:15:58.920 --> 0:16:02.240 when you sit around with the form, your understanding still 0:16:02.280 --> 0:16:07.240 a core pot of communications and negotiations with Republicans, very 0:16:07.320 --> 0:16:09.480 much so. And I think if you look again, I 0:16:09.520 --> 0:16:11.640 think one of the I don't always like to cite 0:16:11.640 --> 0:16:14.120 the polls because I think you can pick and choose 0:16:14.120 --> 0:16:16.920 what you want, But on this issue, you can't find 0:16:16.960 --> 0:16:20.360 a poll that doesn't show a majority of people saying 0:16:20.800 --> 0:16:23.280 this is really important to us to be able to 0:16:23.320 --> 0:16:26.160 access an affordable child If you actually look at the 0:16:26.200 --> 0:16:29.000 amount of income that a middle or a low income 0:16:29.040 --> 0:16:31.640 family has to pay for childcare, you're gonna start to 0:16:31.680 --> 0:16:35.680 get into ten of their income in some cases, and 0:16:35.720 --> 0:16:39.160 that is simply unsustainable for working families. And that's why 0:16:39.160 --> 0:16:42.360 the President is targeting this issue. John, and we appreciate 0:16:42.360 --> 0:16:44.960 your time to communicate the goes of this administration and 0:16:45.000 --> 0:16:47.200 look forward to catching up soon. John burnstaining that from 0:16:47.200 --> 0:16:55.440 the White House Council of Economic Advices. We get smarter 0:16:55.560 --> 0:16:58.360 now and we win with Francisco Blanche of Bank of 0:16:58.360 --> 0:17:03.280 America's securities out of Globe Commodities and Derivatives Research. Francisco, 0:17:03.280 --> 0:17:05.920 it has been way way too long. I want you 0:17:06.000 --> 0:17:09.560 to color now. We have all these legacy issues we're 0:17:09.560 --> 0:17:14.000 dealing with. Our collective memory of commodities are collective memories 0:17:14.040 --> 0:17:17.119 of supercycles. And you say, wait a minute, it's a 0:17:17.200 --> 0:17:22.640 split supercycle upon us, what do you mean by that? Well, Tom, 0:17:22.680 --> 0:17:24.800 thank you for having me. I think I think the 0:17:24.800 --> 0:17:27.880 there's certain there's a sector of metals and materials which 0:17:27.920 --> 0:17:31.479 is clearly in a in a supercyclical app swing, and 0:17:31.480 --> 0:17:34.080 we're seeing record prices and we'll continue see record prices 0:17:34.119 --> 0:17:36.720 for all of the raw materials there. But when it 0:17:36.720 --> 0:17:40.200 comes to energy we are we're not and in fact, 0:17:40.320 --> 0:17:43.719 I doubt we're gonna see record prices in this cycle. 0:17:43.760 --> 0:17:47.440 I think we're just seeing cyclical upside swings across the board, 0:17:47.640 --> 0:17:49.639 although as you pointed out, we're down today in oil. 0:17:50.200 --> 0:17:52.800 But really the story is that when it comes to 0:17:53.080 --> 0:17:56.760 materials um like like timber, we are now at the 0:17:56.800 --> 0:18:00.639 point where supply is extremely low in entories are extremely 0:18:00.760 --> 0:18:06.120 low um and and demand's roaring, so prices are extraordinarily volatile. 0:18:06.680 --> 0:18:10.439 Copper he's having in that direction with inventories declining quickly 0:18:10.480 --> 0:18:14.480 and also moving into demand ration. While as oil um 0:18:14.640 --> 0:18:18.320 primarily is still still very well supplied, OPEC is holding 0:18:18.320 --> 0:18:22.080 that capacity. So we are still trying to figure out 0:18:22.080 --> 0:18:24.399 what to do with all those spare barrels. Keeping some 0:18:24.480 --> 0:18:28.120 numbers on this forest, then Francisco, this split supercycle. Let's 0:18:28.119 --> 0:18:30.240 deal with the metal side of it. Copper right now 0:18:30.320 --> 0:18:33.400 is at ten five on eleven K. Watch now seemingly 0:18:33.520 --> 0:18:35.520 what are you looking for through the next six months 0:18:35.520 --> 0:18:39.280 two half months? So for copper, we're looking at basically 0:18:39.480 --> 0:18:44.240 a dollar uh breton, and we think we could go 0:18:44.240 --> 0:18:47.879 as highest twenty breton if the supply of scrap metal 0:18:48.040 --> 0:18:52.439 scrap copper doesn't make it. Just say, you're modeling a 0:18:52.560 --> 0:18:56.880 double off of leemy copper. We you know, we're we're 0:18:56.880 --> 0:19:02.840 our our official target is okay um. But we see 0:19:02.840 --> 0:19:04.720 a case over the next couple of years if we 0:19:04.760 --> 0:19:08.520 do not get enough scrap metal um coming out coming 0:19:08.520 --> 0:19:11.359 into a copper market, because remember a large chunk of 0:19:11.440 --> 0:19:13.920 the copper market of our corret is scraped right, So 0:19:14.160 --> 0:19:17.080 if we cannot scrap in off copper back into recycling, 0:19:17.119 --> 0:19:19.800 back into the market, I'm talking about the the copper 0:19:19.920 --> 0:19:22.240 that we get from past uses, not the copper that 0:19:22.280 --> 0:19:25.520 we are mining. The copper ores. Those are very tight, 0:19:25.600 --> 0:19:27.919 so we need to keep pushing prices higher also to 0:19:28.040 --> 0:19:31.040 create more supply. And that's the that's the crazy dynamic 0:19:31.040 --> 0:19:35.399 that's garning copper right now. Um. So, so remember, copper 0:19:35.520 --> 0:19:38.880 is critical to all the applications that we have um 0:19:39.480 --> 0:19:42.840 lining up for the decorganization of transportation, to the coorganization 0:19:43.080 --> 0:19:47.119 of industry, and the decorganization of the electricity sectors. So 0:19:47.160 --> 0:19:49.400 all of those require a lot of copper. Francis gonna 0:19:49.640 --> 0:19:51.119 champ in because we've gotta cut through these numbs a 0:19:51.119 --> 0:19:54.280 little bit more. We've got thirteen k as your base case. 0:19:54.520 --> 0:19:57.200 We've got twenty k. Is this big bolt case. Can 0:19:57.240 --> 0:20:00.359 you help us understand how big a falce rese kling 0:20:00.840 --> 0:20:03.800 of componentually is in the comper market and whether you 0:20:03.880 --> 0:20:07.119 expect that to actually materialize? Right so, so so it's 0:20:07.119 --> 0:20:09.800 about a quarter, I mean, it's it's hard to tell 0:20:09.800 --> 0:20:13.080 at this point. Remember, um, there's a lot of different 0:20:13.480 --> 0:20:17.680 uses they are going to recycling here, and it's it's 0:20:17.760 --> 0:20:23.080 possible that happens. I um, I do think that copper 0:20:23.200 --> 0:20:26.680 is probably the most constructive commodity out there from from 0:20:26.720 --> 0:20:30.000 medals perspective. But but there are others, right, I mean, 0:20:30.240 --> 0:20:33.520 remember we are at the stage were as I said before, 0:20:33.560 --> 0:20:37.439 we just printed way too much money. Um, so we 0:20:37.520 --> 0:20:39.679 never quite had a recession when it came when it 0:20:39.680 --> 0:20:41.840 comes to goods and when it comes to the demand 0:20:41.880 --> 0:20:45.119 for stuff and demand for industry. We already had an 0:20:45.119 --> 0:20:48.640 ip recession last year. So all of this is really booming, 0:20:48.840 --> 0:20:52.560 uh from from a most perspective, and copperate hours are 0:20:52.600 --> 0:20:55.000 actually degrading quite a bit. So so if you look 0:20:55.040 --> 0:20:58.520 at the supply of horses is declining across across Chilean 0:20:58.560 --> 0:21:00.960 prew we have elections so well and crew coming up 0:21:01.119 --> 0:21:05.600 right where where there is potential fears of sector nationalization. 0:21:06.000 --> 0:21:07.760 And this is also the kind of behavior you start 0:21:07.800 --> 0:21:10.600 to get when prices get out of control and and 0:21:10.720 --> 0:21:13.320 government suddenly see a lot of money in this command market, 0:21:13.320 --> 0:21:16.359