1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,480 --> 00:00:10,479 Speaker 1: utter Reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap our work. Many people think the deals are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,200 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's mind inflations through the eyes of the 8 00:00:19,920 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary, 9 00:00:23,640 --> 00:00:27,240 Speaker 1: Bryan Wynahan back of America, Will Smart CEO Charlie Sharp, 10 00:00:27,360 --> 00:00:31,560 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio. 11 00:00:31,960 --> 00:00:35,360 Speaker 1: Cyber hackers hit our b from retail frenzy hits our 12 00:00:35,479 --> 00:00:39,440 Speaker 1: meme stocks. But it's still all about our jobs. This 13 00:00:39,560 --> 00:00:42,879 Speaker 1: is Bloomberg Wall Street Week. I'm David Weston today. As 14 00:00:42,920 --> 00:00:45,240 Speaker 1: I say, it really is all about us jobs numbers 15 00:00:45,320 --> 00:00:47,800 Speaker 1: five and fifty nine thousand jobs were created, but that 16 00:00:47,880 --> 00:00:49,760 Speaker 1: was less than expected. Let's be honest, there's a lot 17 00:00:49,800 --> 00:00:51,760 Speaker 1: of people still out of work. This is what President 18 00:00:51,760 --> 00:00:54,360 Speaker 1: Biden earlier day had to say about the jobs numbers. Today. 19 00:00:54,480 --> 00:00:58,360 Speaker 1: We received great news for our economy and our recovery 20 00:00:58,760 --> 00:01:01,760 Speaker 1: and for the American people. This morning we learned that 21 00:01:01,800 --> 00:01:06,920 Speaker 1: in May, our economy created five fifty nine thousand new jobs, 22 00:01:07,720 --> 00:01:11,920 Speaker 1: unemployment rate fell to five point eight percent, and wages 23 00:01:11,959 --> 00:01:14,959 Speaker 1: went up for American workers. To give us her analysis, 24 00:01:15,000 --> 00:01:18,640 Speaker 1: welcome to our Constance Hunter KPMG Chief Economy. Because it's 25 00:01:18,840 --> 00:01:21,480 Speaker 1: it's good. We added almost six jobs. That's a good thing. 26 00:01:21,480 --> 00:01:22,880 Speaker 1: At the same time, there are a lot of people 27 00:01:22,920 --> 00:01:25,560 Speaker 1: still without jobs who had them before the pandemic. Why 28 00:01:25,680 --> 00:01:28,280 Speaker 1: isn't it coming back faster? Well, we think that the 29 00:01:28,319 --> 00:01:31,600 Speaker 1: pandemic is the main reason it's causing speed bumps. So 30 00:01:31,680 --> 00:01:34,000 Speaker 1: if we look into the details of the report from 31 00:01:34,000 --> 00:01:37,520 Speaker 1: the BLS, something from the household Survey showed that seven 32 00:01:37,560 --> 00:01:42,000 Speaker 1: point nine million workers um were not at their job 33 00:01:42,040 --> 00:01:44,679 Speaker 1: site because of closure due to the pandemic. So they're 34 00:01:44,720 --> 00:01:46,760 Speaker 1: still employed, but they weren't able to go to work 35 00:01:47,160 --> 00:01:50,640 Speaker 1: during the survey week due to the pandemic. Um When 36 00:01:50,680 --> 00:01:53,680 Speaker 1: we look at the percent of working age adults that 37 00:01:53,760 --> 00:01:57,880 Speaker 1: were that had not received even one shot at the 38 00:01:57,920 --> 00:02:01,040 Speaker 1: time that the survey was taken, it's forty eight percent 39 00:02:01,240 --> 00:02:03,880 Speaker 1: of working age adults. So we think the pandemic is 40 00:02:03,920 --> 00:02:07,400 Speaker 1: really holding back the pace of recovery, even though we've 41 00:02:07,440 --> 00:02:10,800 Speaker 1: made huge progress. Even though you know, we've seen some 42 00:02:10,880 --> 00:02:14,320 Speaker 1: surges in jobs games like we had in March, the 43 00:02:14,360 --> 00:02:18,240 Speaker 1: pandemics really creating speed bumps here for the pace of 44 00:02:18,520 --> 00:02:21,640 Speaker 1: jobs growth, in the pace of the recovery overall concerts. 45 00:02:21,680 --> 00:02:23,800 Speaker 1: Do we have any sense from the numbers about whether 46 00:02:23,840 --> 00:02:25,920 Speaker 1: it makes a difference whether you can work from home 47 00:02:26,160 --> 00:02:27,920 Speaker 1: or whether you have to be in in person. Do 48 00:02:27,919 --> 00:02:31,280 Speaker 1: we have a sense of the unemployment rate between those two. Yes, 49 00:02:31,400 --> 00:02:34,880 Speaker 1: that's one of my favorite indicators that we calculate. So 50 00:02:34,919 --> 00:02:37,360 Speaker 1: if you can work from home, the unemployment rate is 51 00:02:37,440 --> 00:02:40,720 Speaker 1: two point eight percent, so that's pretty close to full employment. 52 00:02:40,960 --> 00:02:43,320 Speaker 1: And we look at a sector like financial services. It 53 00:02:43,360 --> 00:02:46,239 Speaker 1: doesn't employ a lot of people, but wages are up 54 00:02:46,560 --> 00:02:49,480 Speaker 1: three times what they are for the overall population, so 55 00:02:49,600 --> 00:02:53,400 Speaker 1: over six percent wage increases, so there's high demand for 56 00:02:53,440 --> 00:02:57,440 Speaker 1: those workers. Um, and there's a real labor market tightness 57 00:02:57,639 --> 00:03:00,840 Speaker 1: in that portion of the labor market. If you can 58 00:03:00,840 --> 00:03:03,520 Speaker 1: work from your job site, your unemployment rate or you 59 00:03:03,560 --> 00:03:05,519 Speaker 1: have to work from your job site rather your unemployment 60 00:03:05,600 --> 00:03:09,600 Speaker 1: rate is closer to six percent. And um, we still 61 00:03:09,600 --> 00:03:12,480 Speaker 1: see though, some real friction in that part of the 62 00:03:12,560 --> 00:03:16,160 Speaker 1: labor market. Um. And again we think this is largely 63 00:03:16,200 --> 00:03:18,960 Speaker 1: due to the pandemic itself. People are reluctant to go 64 00:03:19,040 --> 00:03:21,760 Speaker 1: back to work. And if we look at leisure and hospitality, 65 00:03:21,840 --> 00:03:25,120 Speaker 1: for example, it makes up ten of the work of 66 00:03:25,240 --> 00:03:29,680 Speaker 1: the jobs. And um, we saw fifty of these jobs 67 00:03:29,680 --> 00:03:32,639 Speaker 1: out of this month came in that sector, so roaring back. 68 00:03:32,919 --> 00:03:36,960 Speaker 1: But people's reservation wage is higher, right, So we've seen 69 00:03:37,080 --> 00:03:40,280 Speaker 1: strong month over month gains in leisure in hospitality, and 70 00:03:40,320 --> 00:03:42,360 Speaker 1: if we look on a twelve month moving average to 71 00:03:42,440 --> 00:03:44,000 Speaker 1: just kind of take out some of the noise of 72 00:03:44,040 --> 00:03:46,840 Speaker 1: the base effects, were up two point four percent year 73 00:03:46,840 --> 00:03:48,920 Speaker 1: over year on these wages. But let's remember these are 74 00:03:49,200 --> 00:03:52,400 Speaker 1: very low paying jobs. Conscience. As we know, women and 75 00:03:52,440 --> 00:03:54,880 Speaker 1: people of color were particularly hard hit when it comes 76 00:03:54,920 --> 00:03:56,960 Speaker 1: to jobs coming out of the pandemic. How are we 77 00:03:57,000 --> 00:03:58,760 Speaker 1: doing on that from these numbers, are they starting to 78 00:03:58,760 --> 00:04:01,680 Speaker 1: come back? Yeah, we saw a nice improvement for women, 79 00:04:01,720 --> 00:04:06,000 Speaker 1: a little over four hundred thousand, um uh jobs coming back. 80 00:04:06,240 --> 00:04:09,160 Speaker 1: And you know, again women, we know we're a little 81 00:04:09,160 --> 00:04:12,440 Speaker 1: bit more hard hit in terms of home responsibilities, whether 82 00:04:12,480 --> 00:04:19,200 Speaker 1: it's online school or additional food preparation. And so there 83 00:04:19,240 --> 00:04:21,080 Speaker 1: were women who dropped out of the labor force in 84 00:04:21,160 --> 00:04:25,800 Speaker 1: larger numbers UM during the pandemic and UM and we 85 00:04:25,880 --> 00:04:29,760 Speaker 1: know the leisure and hospitality sector, the education sector disproportionately 86 00:04:29,800 --> 00:04:32,520 Speaker 1: hires more women, so of course more women were impacted. 87 00:04:32,920 --> 00:04:35,599 Speaker 1: We just heard President Biden talk about wage increases. What 88 00:04:35,600 --> 00:04:38,040 Speaker 1: are we learning about wage increases? Is there an indication 89 00:04:38,040 --> 00:04:42,240 Speaker 1: of wage inflation yet? So it depends on the sector, right, 90 00:04:42,320 --> 00:04:44,680 Speaker 1: So I would say that we we've talked about this 91 00:04:44,800 --> 00:04:47,520 Speaker 1: K shape recovery, and I our last chart book looked 92 00:04:47,520 --> 00:04:50,240 Speaker 1: at what we call the disequilibrium that we see in 93 00:04:50,279 --> 00:04:53,640 Speaker 1: the economy, both on the supply side and the demand side, 94 00:04:53,920 --> 00:04:58,480 Speaker 1: and so in terms of UM that disequilibrium and how 95 00:04:58,520 --> 00:05:02,560 Speaker 1: it impacts wages, the work from home worker is a 96 00:05:02,680 --> 00:05:05,159 Speaker 1: very tight labor market, and we wouldn't be surprised to 97 00:05:05,200 --> 00:05:07,720 Speaker 1: see some more pressures wage pressures and that part of 98 00:05:07,760 --> 00:05:11,760 Speaker 1: the market due to real labor market tightness UM in 99 00:05:11,800 --> 00:05:15,960 Speaker 1: the areas where we see pandemic induced frictions and reluctance 100 00:05:16,000 --> 00:05:19,159 Speaker 1: to work, we do expect those sectors to work through 101 00:05:19,200 --> 00:05:21,479 Speaker 1: that over the next couple of months. And so while 102 00:05:21,520 --> 00:05:24,279 Speaker 1: employers do have to offer a bit more money to 103 00:05:24,400 --> 00:05:27,640 Speaker 1: entice people back while we still have these pandemic speed bumps. 104 00:05:28,040 --> 00:05:31,360 Speaker 1: We don't think that that is necessarily a situation where 105 00:05:31,360 --> 00:05:33,280 Speaker 1: that is going to need to occur year after year. 106 00:05:34,040 --> 00:05:37,320 Speaker 1: So we're adding jobs at a healthy clip, maybe not 107 00:05:37,360 --> 00:05:38,680 Speaker 1: as fast as you would like. We still have a 108 00:05:38,760 --> 00:05:41,240 Speaker 1: lot of people sitting on the sidelines. At the same 109 00:05:41,279 --> 00:05:44,919 Speaker 1: time we have record numbers of open jobs. So is 110 00:05:44,960 --> 00:05:46,479 Speaker 1: that just a matter of time you can over what 111 00:05:46,520 --> 00:05:48,720 Speaker 1: you call a speed bump, or might there be something 112 00:05:48,720 --> 00:05:50,919 Speaker 1: more structural there. We've read, for example, of a lot 113 00:05:50,920 --> 00:05:52,880 Speaker 1: of people decided just to take early retirement, they might 114 00:05:52,880 --> 00:05:55,520 Speaker 1: not cut back. Yeah. So if you look at the 115 00:05:55,600 --> 00:05:59,120 Speaker 1: labor force participation rate for the people over age fifty five, 116 00:05:59,320 --> 00:06:03,080 Speaker 1: we basically lost two million people UM at the start 117 00:06:03,120 --> 00:06:06,560 Speaker 1: of the pandemic, and um you know, tb D if 118 00:06:06,600 --> 00:06:09,160 Speaker 1: all of those people end up coming back. What we 119 00:06:09,240 --> 00:06:11,960 Speaker 1: did learn from the last cycle, though, is that even 120 00:06:12,000 --> 00:06:14,400 Speaker 1: after people drop out of the labor force, sometimes if 121 00:06:14,400 --> 00:06:18,920 Speaker 1: we have a long period of consistent jobs growth, which 122 00:06:18,960 --> 00:06:21,400 Speaker 1: we had a record experience coming out of the global 123 00:06:21,400 --> 00:06:25,719 Speaker 1: financial crisis, then we do see seemed to draw people 124 00:06:25,760 --> 00:06:27,880 Speaker 1: back into the labor market. So some of those people 125 00:06:27,920 --> 00:06:29,680 Speaker 1: may be out of the labor market for now or 126 00:06:29,720 --> 00:06:32,000 Speaker 1: even the next year or two. But if the job 127 00:06:32,040 --> 00:06:34,880 Speaker 1: market stays strong, um, it's very possible they could be 128 00:06:34,920 --> 00:06:36,680 Speaker 1: pulled back in. But this is of course one of 129 00:06:36,720 --> 00:06:41,240 Speaker 1: the great unknowns and really important factor in figuring out 130 00:06:41,279 --> 00:06:43,719 Speaker 1: how much labor market tightness there is going to be 131 00:06:43,920 --> 00:06:46,320 Speaker 1: let's say six months to a year from now. Thank 132 00:06:46,320 --> 00:06:48,520 Speaker 1: you so very much for being with us. That's Constance Funner, 133 00:06:48,560 --> 00:06:53,520 Speaker 1: she's KPMG chief economist. Coming up. AMC shoots the lights out. 134 00:06:53,880 --> 00:06:57,479 Speaker 1: But are these meme stocks anything more than evidence of 135 00:06:57,480 --> 00:07:00,640 Speaker 1: the asset bubble that we've been warned about. That's next 136 00:07:00,640 --> 00:07:09,359 Speaker 1: on Wall Street Week on bloombld. This is Bloomberg Wall 137 00:07:09,440 --> 00:07:13,560 Speaker 1: Street Week with David Weston from Bloomberg Radio. The meme 138 00:07:13,600 --> 00:07:17,640 Speaker 1: stock rally has a new king. Shares of AMC skyrocketed 139 00:07:17,680 --> 00:07:21,920 Speaker 1: by more than one during Wednesday's wild trading session, pushing 140 00:07:21,960 --> 00:07:25,520 Speaker 1: its total gains for the year to nearly three thousand percent. 141 00:07:26,200 --> 00:07:28,880 Speaker 1: To thank its retail investors, AMC is offering a new 142 00:07:28,920 --> 00:07:32,920 Speaker 1: rewards program for its stockholders, which includes free popcorn and 143 00:07:32,960 --> 00:07:38,000 Speaker 1: exclusive screenings. Here's Steve Sassnik from Interactive Brokers. As bitcoin 144 00:07:38,080 --> 00:07:40,600 Speaker 1: and other cryptos have faded a bit. You've seen a 145 00:07:40,600 --> 00:07:44,840 Speaker 1: lot of excitement go back into the meme stocks. On Tuesday, 146 00:07:44,960 --> 00:07:48,520 Speaker 1: AMC announced that it had raised two thirty million dollars 147 00:07:48,560 --> 00:07:51,480 Speaker 1: by selling eight point five million shares to Modrick Capital. 148 00:07:51,880 --> 00:07:53,960 Speaker 1: By the end of the day, the Hedge Fund dumped 149 00:07:53,960 --> 00:07:57,720 Speaker 1: its AMC position, calling the stock overvalued. I think we 150 00:07:57,720 --> 00:08:00,320 Speaker 1: shouldn't be very worried. I think we're living for a 151 00:08:00,400 --> 00:08:03,960 Speaker 1: period of an asset mania, of a market mania. I 152 00:08:04,000 --> 00:08:06,520 Speaker 1: don't think that's complicated. I think that's what we're seeing. 153 00:08:06,840 --> 00:08:09,280 Speaker 1: I don't know how long it will last, um, but 154 00:08:09,400 --> 00:08:11,480 Speaker 1: I think we should be very worried about it. That's 155 00:08:11,520 --> 00:08:14,480 Speaker 1: Peter Fisher from the Dartmouth Tuch School. It wasn't just 156 00:08:14,560 --> 00:08:18,440 Speaker 1: an equity position. Mudrick Capital also profited from buying AMC 157 00:08:18,640 --> 00:08:21,480 Speaker 1: bonds at a discount and converting part of its sake 158 00:08:21,520 --> 00:08:25,360 Speaker 1: into equity earlier this year. The Hedge Fund also loaned 159 00:08:25,400 --> 00:08:28,559 Speaker 1: one hundred billion dollars to AMC last year when theater 160 00:08:28,600 --> 00:08:32,640 Speaker 1: closures threatened to push the company into bankruptcy. Here's Ben Eiffert, 161 00:08:32,760 --> 00:08:36,959 Speaker 1: the founder of q VR Advisers. If anything, you'll you're 162 00:08:37,160 --> 00:08:41,000 Speaker 1: likely to see the company taking advantage of this environment 163 00:08:41,040 --> 00:08:43,880 Speaker 1: to raise cash from the equity market. The looted shareholders 164 00:08:43,880 --> 00:08:46,480 Speaker 1: and paid down that's very heavy duckload. The Dizzey rally 165 00:08:46,520 --> 00:08:50,320 Speaker 1: hasn't changed the fundamentals of AMC's money losing theater business. 166 00:08:50,720 --> 00:08:54,000 Speaker 1: Even as life returns to normal. Analysts expect AMC to 167 00:08:54,080 --> 00:08:56,920 Speaker 1: lose nearly one hundred million dollars over the next twelve months. 168 00:08:57,440 --> 00:09:00,480 Speaker 1: As the stock rallied, the movie theater change saw its 169 00:09:00,559 --> 00:09:03,839 Speaker 1: long term debt nearly triple in just the first three 170 00:09:03,880 --> 00:09:06,880 Speaker 1: months of this year. I think Marcus aren't looking at 171 00:09:06,920 --> 00:09:10,720 Speaker 1: continue to look at what happens after the pandemic actually ends. 172 00:09:10,760 --> 00:09:14,000 Speaker 1: What will valuations look like? Full company by game shocking 173 00:09:14,080 --> 00:09:18,360 Speaker 1: AMC who are bankrupt? Sheet that's ben Emons from Medley Global. 174 00:09:18,720 --> 00:09:22,079 Speaker 1: In January, the Reddit army compelled hedge funds to slash 175 00:09:22,120 --> 00:09:24,920 Speaker 1: their short exposure quickly to the lowest in five years, 176 00:09:25,400 --> 00:09:29,079 Speaker 1: and Citron Research abandoned its long standing practice of publishing 177 00:09:29,160 --> 00:09:34,280 Speaker 1: short seller reports. Here's Citron's Andrew Left. So as of today, 178 00:09:34,480 --> 00:09:37,920 Speaker 1: sit Run Research will no longer be publishing what can 179 00:09:38,000 --> 00:09:41,760 Speaker 1: be considered as short selling reports. It's exciting to watch 180 00:09:41,840 --> 00:09:44,600 Speaker 1: these meme stocks is a skyrocket up, fall back down 181 00:09:44,640 --> 00:09:47,000 Speaker 1: to Earth, and often sky racket back up again. But 182 00:09:47,040 --> 00:09:49,720 Speaker 1: the real question is doesn't have any larger significance at 183 00:09:49,800 --> 00:09:53,120 Speaker 1: least beyond the four corners of the stock being involved. Unfortunately, 184 00:09:53,120 --> 00:09:55,280 Speaker 1: we have someone with some answer to that question. He 185 00:09:55,480 --> 00:09:59,240 Speaker 1: is Peter Atwater of Financial Insight. So is there a 186 00:09:59,280 --> 00:10:01,080 Speaker 1: significance that thing? It is like a MC and what 187 00:10:01,120 --> 00:10:02,800 Speaker 1: we saw this week, is there a sign that goes 188 00:10:02,840 --> 00:10:06,000 Speaker 1: beyond the four corners of that stock? Yeah? I think 189 00:10:06,040 --> 00:10:07,800 Speaker 1: there are a couple of things, David, that are very 190 00:10:07,840 --> 00:10:12,280 Speaker 1: significant to this um. The first is that we only 191 00:10:12,360 --> 00:10:15,720 Speaker 1: tend to see this kind of behavior when the retail 192 00:10:15,800 --> 00:10:20,680 Speaker 1: investor um is drawn into things like a moth to 193 00:10:20,679 --> 00:10:24,480 Speaker 1: to a light um at the very tail end of 194 00:10:24,880 --> 00:10:29,160 Speaker 1: the the investment cycle. So the fact that we've now seen, 195 00:10:29,679 --> 00:10:33,479 Speaker 1: you know, one flash mob with money after another suggests 196 00:10:33,600 --> 00:10:35,640 Speaker 1: to me that we're getting towards the end of an 197 00:10:35,640 --> 00:10:40,520 Speaker 1: asset bubble and that's significant to me. And the other aspect, 198 00:10:40,559 --> 00:10:45,280 Speaker 1: particularly for AMC, is that the tone of this is 199 00:10:45,400 --> 00:10:47,840 Speaker 1: very different from what we saw when you and I 200 00:10:47,920 --> 00:10:51,480 Speaker 1: spoke earlier this year about Game Stop. Game Stop was 201 00:10:51,520 --> 00:10:55,960 Speaker 1: a market stopper. Everybody was focused on it, People were 202 00:10:56,320 --> 00:11:00,120 Speaker 1: drawn into it. There was an energy to it that 203 00:11:00,280 --> 00:11:03,400 Speaker 1: I don't think it's the same today. This feels like 204 00:11:03,640 --> 00:11:08,559 Speaker 1: one asset bubble too many, uh, from a stock investor's perspective. 205 00:11:08,600 --> 00:11:11,680 Speaker 1: And I think the danger here, which AMC disclosed and 206 00:11:11,720 --> 00:11:14,960 Speaker 1: it's filing, is that those who get in you know, 207 00:11:15,920 --> 00:11:18,920 Speaker 1: this week, run the risk of seeing a trail of 208 00:11:18,960 --> 00:11:22,520 Speaker 1: tears ahead. So if the asset bubble does in fact 209 00:11:22,600 --> 00:11:25,679 Speaker 1: burst here, what comes next? Because there's still an awful 210 00:11:25,720 --> 00:11:27,760 Speaker 1: lot of liquid in the marketplace, doesn't that money have 211 00:11:27,800 --> 00:11:30,040 Speaker 1: to go someplace? Yeah? I think that there there are 212 00:11:30,080 --> 00:11:33,120 Speaker 1: a couple of implications to this. One is I wouldn't 213 00:11:33,240 --> 00:11:38,000 Speaker 1: underestimate how angry this retail crowd is likely to become. 214 00:11:38,720 --> 00:11:41,479 Speaker 1: And you know, they've they've made a lot of money. 215 00:11:41,520 --> 00:11:46,640 Speaker 1: But there's also this undercurrent of egalitarianism of sticking it 216 00:11:46,679 --> 00:11:49,960 Speaker 1: to the man. And I think that if we see 217 00:11:50,400 --> 00:11:55,200 Speaker 1: price this price rise bubble, you know, collapse, then I 218 00:11:55,240 --> 00:11:57,480 Speaker 1: think we run the risk of the crowd deciding that 219 00:11:57,520 --> 00:12:00,199 Speaker 1: the real money to be made is on the short side. 220 00:12:00,920 --> 00:12:05,480 Speaker 1: Or even more significant, particularly for policymakers, is the risk 221 00:12:05,559 --> 00:12:09,640 Speaker 1: that they move into the commodity space and they're rising prices, 222 00:12:09,679 --> 00:12:12,760 Speaker 1: as you know, have an enormous impact on the economy 223 00:12:13,040 --> 00:12:15,560 Speaker 1: and what that means for inflation in the FED. The 224 00:12:15,559 --> 00:12:18,200 Speaker 1: commodity space is much bigger than even the equity space 225 00:12:18,200 --> 00:12:19,920 Speaker 1: in the United States as a practical matter, that's a 226 00:12:20,040 --> 00:12:22,600 Speaker 1: lot of money globally. Are they big enough to make 227 00:12:22,600 --> 00:12:25,319 Speaker 1: a difference in the commodity space? I think they are. 228 00:12:25,400 --> 00:12:27,679 Speaker 1: I mean, you you look at the the E T 229 00:12:27,840 --> 00:12:30,240 Speaker 1: f s that are very small in that space on 230 00:12:30,280 --> 00:12:33,520 Speaker 1: a relative basis um. You know, we've not seen the 231 00:12:33,600 --> 00:12:37,760 Speaker 1: retail investor get into this the way we have institutions, 232 00:12:38,200 --> 00:12:40,840 Speaker 1: and so, you know, much like we've seen with with 233 00:12:40,920 --> 00:12:45,040 Speaker 1: these meme stocks. I wouldn't underestimate the force of the crowd, 234 00:12:45,400 --> 00:12:51,720 Speaker 1: particularly in an environment where everyone's sentiment towards inflation is 235 00:12:51,760 --> 00:12:54,559 Speaker 1: the same, and that is that the fear of rising 236 00:12:54,600 --> 00:12:57,920 Speaker 1: inflation feeds upon itself. How much of this is because 237 00:12:58,000 --> 00:13:00,679 Speaker 1: a structural change in the marketplace. It seems like the 238 00:13:00,760 --> 00:13:02,640 Speaker 1: barriers to entry, if I can put it that way, 239 00:13:02,679 --> 00:13:05,280 Speaker 1: for retail visitors have gone down. I mean, we can 240 00:13:05,320 --> 00:13:08,200 Speaker 1: do it instantaneously on our smartphone. Now you can do 241 00:13:08,240 --> 00:13:11,000 Speaker 1: it for free with no commission. Things like that. How much. 242 00:13:11,040 --> 00:13:14,120 Speaker 1: It is just structural and therefore is it really up 243 00:13:14,120 --> 00:13:16,040 Speaker 1: to the regulators to do anything about it. I think 244 00:13:16,080 --> 00:13:20,280 Speaker 1: there are three aspects of this. First is we financialized everything, 245 00:13:20,640 --> 00:13:25,880 Speaker 1: so the ability to invest, you know, short long in 246 00:13:26,040 --> 00:13:29,920 Speaker 1: anything these days is extraordinary like never before. We have 247 00:13:30,120 --> 00:13:32,840 Speaker 1: n f t s and cryptocurrencies and you know we 248 00:13:32,840 --> 00:13:37,040 Speaker 1: we've all but monetized you and me. The second aspect 249 00:13:37,160 --> 00:13:42,640 Speaker 1: is that the the tools, as you suggest, are ever present, 250 00:13:42,760 --> 00:13:46,439 Speaker 1: so our smartphones are giving us twenty four seven access 251 00:13:46,480 --> 00:13:49,200 Speaker 1: to the markets. And the third aspect is that we 252 00:13:49,320 --> 00:13:53,199 Speaker 1: have a generation that has been raised on video games, 253 00:13:53,240 --> 00:13:57,080 Speaker 1: so you've got gamification and I think those three together 254 00:13:57,400 --> 00:14:01,800 Speaker 1: have created this fabulous casino. But one of the things 255 00:14:01,880 --> 00:14:04,319 Speaker 1: that sticks in my mind, having done a lot of 256 00:14:04,559 --> 00:14:08,920 Speaker 1: history reading, was the Panic of eighteen fifty seven, And 257 00:14:08,960 --> 00:14:12,480 Speaker 1: the thing that historians write about that is that it 258 00:14:12,520 --> 00:14:15,680 Speaker 1: was faster than any panic they've seen before. And you 259 00:14:15,760 --> 00:14:20,560 Speaker 1: read further, well, why well it was the telegraph technology 260 00:14:21,080 --> 00:14:25,160 Speaker 1: created an extraordinary change in the speed at which things 261 00:14:25,200 --> 00:14:28,960 Speaker 1: happened in the and the size of the the investor community. 262 00:14:29,040 --> 00:14:32,520 Speaker 1: And I think for policy makers that risk today I 263 00:14:32,560 --> 00:14:37,800 Speaker 1: think is underestimated. We we have a broader investment community 264 00:14:37,840 --> 00:14:42,840 Speaker 1: in larger scale globally now with twenty four seven access 265 00:14:42,840 --> 00:14:45,280 Speaker 1: in their hand, and I don't think we know yet 266 00:14:45,320 --> 00:14:48,080 Speaker 1: what that means in a falling market. Okay, Peter Outwater 267 00:14:48,200 --> 00:14:50,800 Speaker 1: Financial and say thank you so much for joining us today. 268 00:14:51,080 --> 00:14:54,440 Speaker 1: Coming up packing into the largest meat producer in the world, 269 00:14:54,760 --> 00:14:57,880 Speaker 1: the latest in what is becoming an epidemic of assaults 270 00:14:57,920 --> 00:15:01,760 Speaker 1: on our supply chains and infrastructure, with Sam Paulmisano, former 271 00:15:01,840 --> 00:15:06,200 Speaker 1: CEO of IBM. That's next on Wall Street Week on Bloomberg. 272 00:15:11,560 --> 00:15:15,520 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 273 00:15:15,640 --> 00:15:19,120 Speaker 1: Bloomberg Radio. Last week it was the biggest pipeline in 274 00:15:19,120 --> 00:15:22,600 Speaker 1: the country. This week it was the largest meat producer 275 00:15:22,640 --> 00:15:25,280 Speaker 1: in the whole wide world. Both hit by cyber attacks, 276 00:15:25,760 --> 00:15:29,920 Speaker 1: both apparently originating in Russia. And there's a real clear 277 00:15:29,960 --> 00:15:32,080 Speaker 1: and present danger of the United States of America. The 278 00:15:32,200 --> 00:15:34,760 Speaker 1: question is what do we need to do about it. 279 00:15:34,920 --> 00:15:38,040 Speaker 1: Sam Paulmisano was a long time CEO of IBM. He's 280 00:15:38,040 --> 00:15:40,880 Speaker 1: also co chair of the Cyber Rennis Institute, and I'm 281 00:15:40,880 --> 00:15:43,200 Speaker 1: delighted to say he's here with us now. So Sam, 282 00:15:43,320 --> 00:15:46,440 Speaker 1: give us your reaction to this spate, maybe even an 283 00:15:46,440 --> 00:15:50,560 Speaker 1: epidemic of cyber attacks. Where are we Where are we going? Well, David, 284 00:15:50,560 --> 00:15:53,480 Speaker 1: thank you for having me today. Clearly they've accelerated. I 285 00:15:53,520 --> 00:15:56,160 Speaker 1: mean they've always were a serious problem that we face 286 00:15:56,240 --> 00:15:58,960 Speaker 1: in the country as far as protecting the infrastructure, but 287 00:15:59,000 --> 00:16:02,720 Speaker 1: there's certainly excel rating and they're moving beyond let's call 288 00:16:02,920 --> 00:16:06,520 Speaker 1: government agencies and large enterprises to now small businesses and 289 00:16:06,600 --> 00:16:09,200 Speaker 1: state and local that are the most vulnerable. And that's 290 00:16:09,240 --> 00:16:12,040 Speaker 1: why you see I think the volume picking up because 291 00:16:12,120 --> 00:16:14,960 Speaker 1: it's basically it's an easy way to extort money from 292 00:16:15,000 --> 00:16:18,280 Speaker 1: companies who are who don't have the robust systems of 293 00:16:18,320 --> 00:16:21,480 Speaker 1: a large bank or large technology company and those types. 294 00:16:21,960 --> 00:16:24,040 Speaker 1: I know you've told me before that one of the 295 00:16:24,040 --> 00:16:27,280 Speaker 1: biggest vulnerabilities are the small and medium sized companies and 296 00:16:27,320 --> 00:16:29,680 Speaker 1: for that matter, state and local governments, because as you say, 297 00:16:29,720 --> 00:16:32,120 Speaker 1: they don't have the same resources. What do we do 298 00:16:32,280 --> 00:16:35,720 Speaker 1: to combat that particularly vulnerability. Well, I mean we if 299 00:16:35,720 --> 00:16:37,800 Speaker 1: I go back to the Obama Commission day that we 300 00:16:37,800 --> 00:16:41,120 Speaker 1: were all served on, we call that as the largest vulnerability. 301 00:16:41,200 --> 00:16:43,520 Speaker 1: But we also understood and we get the least attention 302 00:16:43,840 --> 00:16:47,640 Speaker 1: as compared to large complex enterprises. But the first thing 303 00:16:47,720 --> 00:16:50,440 Speaker 1: that a small business or a state local government can do. 304 00:16:50,560 --> 00:16:53,840 Speaker 1: There's really four simple things that this would give them 305 00:16:54,240 --> 00:16:57,520 Speaker 1: much more defense than they have today. One is back 306 00:16:57,600 --> 00:17:01,120 Speaker 1: up your systems and your data and disconnect network from 307 00:17:01,160 --> 00:17:05,040 Speaker 1: your other networks so it's actually secure and resilient, so 308 00:17:05,080 --> 00:17:08,320 Speaker 1: you can so once you get hacked, you can recover quickly, 309 00:17:08,359 --> 00:17:10,200 Speaker 1: and it shouldn't take a week or two. It actually 310 00:17:10,200 --> 00:17:12,880 Speaker 1: should take hours. Quite honestly, it should not take as 311 00:17:12,880 --> 00:17:16,640 Speaker 1: long as it takes. Secondarily, how they get into through 312 00:17:16,680 --> 00:17:20,080 Speaker 1: the networks, it's called fishing. Uh So, therefore, educate your 313 00:17:20,119 --> 00:17:22,840 Speaker 1: employees or your workforce why you should not respond to 314 00:17:22,880 --> 00:17:25,560 Speaker 1: these weird emails that you might see in your system 315 00:17:25,600 --> 00:17:28,840 Speaker 1: at their access point. And then lastly, just have strong 316 00:17:28,880 --> 00:17:31,760 Speaker 1: authentications and that knows that you that a person that's entering, 317 00:17:32,200 --> 00:17:35,520 Speaker 1: as well as robust passwords. If you do those four things, 318 00:17:36,000 --> 00:17:39,040 Speaker 1: then you will get rid of eighty or the hacks 319 00:17:39,080 --> 00:17:41,440 Speaker 1: that actually occur. I mean, that's how they get into 320 00:17:41,480 --> 00:17:43,560 Speaker 1: those systems. The other thing you need to do is 321 00:17:43,600 --> 00:17:48,040 Speaker 1: patch your software immediately, because they see the software patches 322 00:17:48,040 --> 00:17:51,160 Speaker 1: because they're all online, and they know how the vulnerabilities 323 00:17:51,160 --> 00:17:53,119 Speaker 1: of the systems. That's another entry point. So if they 324 00:17:53,119 --> 00:17:56,280 Speaker 1: could just do those things, they would be much more secure. 325 00:17:56,520 --> 00:17:58,879 Speaker 1: Now I don't expect them want to remember this, but 326 00:17:58,960 --> 00:18:01,359 Speaker 1: you mentioned the cyber at this institute. If they just 327 00:18:01,440 --> 00:18:04,320 Speaker 1: look up on the internet, it's a nonprofit. All these 328 00:18:04,320 --> 00:18:06,560 Speaker 1: tools are free, all this stuff. All they have to 329 00:18:06,600 --> 00:18:08,520 Speaker 1: do is download it and we'll give them the tools 330 00:18:08,640 --> 00:18:10,719 Speaker 1: and help and the aids they need to do this, 331 00:18:11,040 --> 00:18:13,400 Speaker 1: either state and local or small business, it's all there. 332 00:18:13,480 --> 00:18:15,960 Speaker 1: It's on the it's on the internet. So that makes 333 00:18:16,040 --> 00:18:18,439 Speaker 1: eminally good sense to me. At least everyone should be 334 00:18:18,480 --> 00:18:21,199 Speaker 1: doing that, but as apprecnicent, not everybody will do it. 335 00:18:21,280 --> 00:18:23,760 Speaker 1: That's sort of from bottom up. What about from top down? 336 00:18:24,000 --> 00:18:25,919 Speaker 1: I mean, now I'm going back in time as the 337 00:18:25,960 --> 00:18:28,680 Speaker 1: coach or the vice chair, I should say, with Tom 338 00:18:28,720 --> 00:18:33,160 Speaker 1: Donald and who was National security advisers President Obama, we said, 339 00:18:33,200 --> 00:18:37,520 Speaker 1: then there's no consistent strategy from government that that includes 340 00:18:37,600 --> 00:18:40,640 Speaker 1: all parties. Clearly the private sector has to be included. 341 00:18:41,040 --> 00:18:43,600 Speaker 1: One of the victims of the attacks. Plus they have 342 00:18:43,640 --> 00:18:46,399 Speaker 1: the skills and the expertise, and if you look at 343 00:18:46,400 --> 00:18:49,399 Speaker 1: it today, uh, there is not a strategy. Now I 344 00:18:49,480 --> 00:18:52,760 Speaker 1: have to admit that President I mean President Biden rather 345 00:18:52,840 --> 00:18:55,880 Speaker 1: has actually signed and implemented the executive Order, which does 346 00:18:55,920 --> 00:18:59,520 Speaker 1: address a lot of the shortcompanies commings we recommended years ago. 347 00:19:00,040 --> 00:19:02,240 Speaker 1: But but still the point is there early isn't a 348 00:19:02,320 --> 00:19:05,680 Speaker 1: strategy and there's not a coordination point. Now I could 349 00:19:05,680 --> 00:19:07,800 Speaker 1: get into things like the military and things like that, 350 00:19:07,840 --> 00:19:10,560 Speaker 1: but from the civilian side of government, there's not a 351 00:19:10,640 --> 00:19:15,600 Speaker 1: strategy or a coordination point. We have. I think the 352 00:19:15,640 --> 00:19:18,800 Speaker 1: best tech sector parks lunch. You were an important part 353 00:19:18,840 --> 00:19:21,720 Speaker 1: of it when you were at IBM, So how can 354 00:19:21,760 --> 00:19:23,720 Speaker 1: we tap into that? I mean, we've got the best 355 00:19:23,720 --> 00:19:25,560 Speaker 1: in the brightest in the world, don't we or don't 356 00:19:25,600 --> 00:19:28,240 Speaker 1: we know we do, there's no doubt about it. Uh. 357 00:19:28,280 --> 00:19:32,000 Speaker 1: And clearly when there's a crisis, people tend to cooperate, 358 00:19:32,440 --> 00:19:35,240 Speaker 1: but what they don't do is get ahead of the problem. 359 00:19:35,320 --> 00:19:38,480 Speaker 1: And by that I mean it's it's multiple things that 360 00:19:38,520 --> 00:19:40,280 Speaker 1: need to be addressed as far as the use of 361 00:19:40,280 --> 00:19:43,720 Speaker 1: the technology to make the Internet more resilient, and a 362 00:19:43,760 --> 00:19:46,240 Speaker 1: lot of that's going to require collaboration. I mean, government 363 00:19:46,560 --> 00:19:49,159 Speaker 1: sets the priority sets, the budgets for the agencies and 364 00:19:49,200 --> 00:19:53,359 Speaker 1: the appropriate organizations. The private sector will certainly respond. Uh. 365 00:19:53,960 --> 00:19:56,800 Speaker 1: I worked for years on the n S A Cyber 366 00:19:56,800 --> 00:20:00,159 Speaker 1: Command Center with General Alexander and we all respond to 367 00:20:00,400 --> 00:20:03,800 Speaker 1: those requests, but there needs to be coordination and some 368 00:20:03,920 --> 00:20:07,800 Speaker 1: level of funding within the government agencies because no different 369 00:20:07,800 --> 00:20:10,800 Speaker 1: than small business and state local, they're underfunded. They don't 370 00:20:10,800 --> 00:20:14,159 Speaker 1: have the resources to do this, and so that's a 371 00:20:14,160 --> 00:20:16,679 Speaker 1: part of the challenge that they face. What kind of 372 00:20:16,680 --> 00:20:18,400 Speaker 1: funding are we talking about? I was going to ask 373 00:20:18,440 --> 00:20:20,159 Speaker 1: the question, do we need to spend more money on this? 374 00:20:20,320 --> 00:20:22,439 Speaker 1: Invest more money? If you would look at it from 375 00:20:22,480 --> 00:20:24,840 Speaker 1: the private sector lens, I would say no, because there's 376 00:20:24,880 --> 00:20:28,160 Speaker 1: so much inefficiency in government. I'll give you an example. 377 00:20:28,640 --> 00:20:30,880 Speaker 1: I added them up points when I was working Michael Dell, 378 00:20:30,960 --> 00:20:32,800 Speaker 1: and I added it up. There were over six thousand 379 00:20:32,880 --> 00:20:35,840 Speaker 1: data centers to operate the government. You don't need six 380 00:20:35,880 --> 00:20:39,399 Speaker 1: thousand data centers. I mean, you probably need a couple. 381 00:20:39,480 --> 00:20:41,639 Speaker 1: But let's make it fit. Make it a hundred two 382 00:20:41,680 --> 00:20:44,439 Speaker 1: per state like military basis, and keep everybody happy on 383 00:20:44,480 --> 00:20:47,880 Speaker 1: the hill. That would save hundreds of hundreds of pillions 384 00:20:47,920 --> 00:20:50,680 Speaker 1: of dollars many thanks to Wall Street. We contribute Sam 385 00:20:50,760 --> 00:20:54,880 Speaker 1: Palmisano coming up, China makes an about face on how 386 00:20:54,920 --> 00:20:58,120 Speaker 1: many children it's families should have. What does that tell 387 00:20:58,200 --> 00:21:01,439 Speaker 1: us about its economic future and what it needs to 388 00:21:01,480 --> 00:21:04,359 Speaker 1: do to compete with the United States. We ask Neil 389 00:21:04,400 --> 00:21:08,080 Speaker 1: Ferguson of the Hoover Institution. That's next on Wall Street 390 00:21:08,080 --> 00:21:16,840 Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with 391 00:21:17,000 --> 00:21:20,760 Speaker 1: David Weston from Bloomberg Radio. China this week made a 392 00:21:20,800 --> 00:21:22,600 Speaker 1: big step. It said the couples could have as many 393 00:21:22,600 --> 00:21:25,359 Speaker 1: as three children rather than two. Really as part of 394 00:21:25,400 --> 00:21:28,640 Speaker 1: its ongoing effort to maintain historic competition with the United 395 00:21:28,680 --> 00:21:30,600 Speaker 1: States in the economy as it tries to have its 396 00:21:30,600 --> 00:21:33,960 Speaker 1: economy overtake that of the United States. We are joined 397 00:21:34,000 --> 00:21:37,720 Speaker 1: now by economic historian Neil Ferguson, who is the author 398 00:21:37,960 --> 00:21:41,280 Speaker 1: of a new book, brand new book, Doom, The Politics 399 00:21:41,480 --> 00:21:45,160 Speaker 1: of Catastrophe, also, of course, senior fellow at the Hoover Institution. 400 00:21:45,200 --> 00:21:47,080 Speaker 1: So Neil, thank you so much for being back with us. 401 00:21:47,320 --> 00:21:50,320 Speaker 1: You've looked in your book through history at various catastrophes 402 00:21:50,480 --> 00:21:53,159 Speaker 1: and as important, how the human race has responded to 403 00:21:53,200 --> 00:21:56,720 Speaker 1: those catastrophes. Let's look at the most recent one, the pandemic, 404 00:21:56,960 --> 00:22:00,800 Speaker 1: and contrast, if you will, China Burthens units date. How 405 00:22:00,800 --> 00:22:03,040 Speaker 1: did we handle it differently? How do we handle the 406 00:22:03,080 --> 00:22:06,640 Speaker 1: same we did it better well. Throughout history, catastrophes are 407 00:22:06,720 --> 00:22:09,960 Speaker 1: a kind of moment of revelation. You find out what 408 00:22:10,080 --> 00:22:13,040 Speaker 1: a system is made of, how resilient the society is, 409 00:22:13,560 --> 00:22:16,360 Speaker 1: and COVID has been no exception. Last year, a lot 410 00:22:16,359 --> 00:22:19,360 Speaker 1: of people jumped to the conclusion that China had somehow 411 00:22:19,480 --> 00:22:23,800 Speaker 1: aced this and the United States had completely screwed up. 412 00:22:23,880 --> 00:22:27,119 Speaker 1: And it certainly looked a little like that, because the 413 00:22:27,200 --> 00:22:29,800 Speaker 1: Chinese were able to bring the spread of the pandemic 414 00:22:29,880 --> 00:22:33,480 Speaker 1: under control. It never really went exponential beyond the province 415 00:22:33,480 --> 00:22:35,720 Speaker 1: of Hubei, and we of course are on our way 416 00:22:35,760 --> 00:22:39,800 Speaker 1: to six d tho deaths, and it appeared as if 417 00:22:39,880 --> 00:22:43,879 Speaker 1: we simply couldn't contain the spread even with lockdowns. But 418 00:22:44,000 --> 00:22:46,199 Speaker 1: you know, I couldn't help feeling last year that this 419 00:22:46,320 --> 00:22:50,240 Speaker 1: was probably a premature judgment and that we were maybe 420 00:22:50,520 --> 00:22:55,000 Speaker 1: missing the fund fundamental vulnerabilities that the pandemic exposed in 421 00:22:55,119 --> 00:22:58,320 Speaker 1: China and some of the strengths that the United States 422 00:22:58,359 --> 00:23:01,560 Speaker 1: are still has. And our give you just two quick examples. 423 00:23:01,960 --> 00:23:05,440 Speaker 1: Let's not forget this thing began in China. We thought 424 00:23:05,440 --> 00:23:09,040 Speaker 1: of it as an actual disaster. It increasingly looks man made, 425 00:23:09,160 --> 00:23:12,000 Speaker 1: so we can't be certain if this was a lab 426 00:23:12,080 --> 00:23:15,399 Speaker 1: leak in Wuhan, it seems plausible even if it wasn't. 427 00:23:16,080 --> 00:23:19,320 Speaker 1: Only in a one party communist dictatorship would it have 428 00:23:19,359 --> 00:23:22,320 Speaker 1: been possible to hush up the facts of human to 429 00:23:22,520 --> 00:23:27,080 Speaker 1: humans spread in the way that happened in December into January. 430 00:23:28,200 --> 00:23:31,040 Speaker 1: In a democracy, the press would have reported on this 431 00:23:31,280 --> 00:23:34,520 Speaker 1: and there never would have been such a huge pandemic. Remember, 432 00:23:34,560 --> 00:23:37,920 Speaker 1: for weeks this virus was traveling as the Chinese lunar 433 00:23:37,960 --> 00:23:40,879 Speaker 1: New Year approach all over the world, including directly on 434 00:23:40,960 --> 00:23:44,679 Speaker 1: flights from Wuhan to San Francisco and New York. The 435 00:23:44,720 --> 00:23:47,159 Speaker 1: second point is, although we tend to start badly in 436 00:23:47,160 --> 00:23:50,480 Speaker 1: a crisis, remember Perl Harbor, the United States has a 437 00:23:50,520 --> 00:23:54,040 Speaker 1: remarkable capacity for self repair. And although things went very 438 00:23:54,080 --> 00:23:56,639 Speaker 1: badly wrong last year, and I don't deny all kinds 439 00:23:56,640 --> 00:23:59,480 Speaker 1: of mistakes were made on the most important thing you 440 00:23:59,520 --> 00:24:03,560 Speaker 1: can do in a pandemic, which is developing really efficacious vaccines, 441 00:24:04,000 --> 00:24:07,520 Speaker 1: the US and broadly speaking, the West, did much much 442 00:24:07,560 --> 00:24:10,840 Speaker 1: better than China. So Neil, we heard from President Biden's 443 00:24:10,920 --> 00:24:14,080 Speaker 1: first press conference actually saying that ultimately he regards this 444 00:24:14,200 --> 00:24:17,120 Speaker 1: as a battle was the word he used between democracies 445 00:24:17,160 --> 00:24:20,360 Speaker 1: and autocracies in the twenty one century. Take what you've 446 00:24:20,400 --> 00:24:22,400 Speaker 1: just said here. It was thought for some time China 447 00:24:22,480 --> 00:24:24,960 Speaker 1: had the advantage because it was so centralized, it could 448 00:24:25,000 --> 00:24:27,199 Speaker 1: get its people to do things United States couldn't. Look 449 00:24:27,240 --> 00:24:29,680 Speaker 1: at the United States, we had states really disagreeing about 450 00:24:29,800 --> 00:24:31,840 Speaker 1: how to handle it, a lot of back and forth. 451 00:24:32,280 --> 00:24:35,160 Speaker 1: Do we have any sense about whether the United States 452 00:24:35,200 --> 00:24:37,800 Speaker 1: needs to be more centralized, because the Biden adminstration right 453 00:24:37,800 --> 00:24:40,719 Speaker 1: now is moving I think it's fair to say towards centralization. 454 00:24:40,760 --> 00:24:45,439 Speaker 1: Certainly an economic policy, well, I half agree with Joe Biden. 455 00:24:45,480 --> 00:24:49,280 Speaker 1: I agree that we are in a fundamental struggle against 456 00:24:49,280 --> 00:24:53,679 Speaker 1: a totalitarian, not just authoritarian, it's atalitarian state. That Chinese 457 00:24:53,720 --> 00:24:58,120 Speaker 1: Communist Party in many ways runs China much the same 458 00:24:58,160 --> 00:25:01,240 Speaker 1: way that the Soviet Communist Party around the Soviet Union. 459 00:25:01,280 --> 00:25:03,920 Speaker 1: They have a different economic strategy, the politics is the same, 460 00:25:04,000 --> 00:25:06,840 Speaker 1: the ideology is the same, the repression is the same, 461 00:25:07,280 --> 00:25:11,080 Speaker 1: The labor camps from minorities are remarkably similar. So I 462 00:25:11,119 --> 00:25:13,560 Speaker 1: agree that we're in something that looks quite a lot 463 00:25:13,640 --> 00:25:15,960 Speaker 1: like Cold War two, and I think it already was 464 00:25:16,000 --> 00:25:20,240 Speaker 1: going that way before the pandemic struck the pandemic revealed 465 00:25:20,280 --> 00:25:22,680 Speaker 1: some things about the Chinese regime that many people have 466 00:25:22,840 --> 00:25:26,920 Speaker 1: been in denial about. But but I don't wholly agree 467 00:25:27,359 --> 00:25:29,960 Speaker 1: with Joe Biden that the way to go is to 468 00:25:30,080 --> 00:25:34,720 Speaker 1: copy what China does. It's very striking that plan features 469 00:25:34,800 --> 00:25:39,119 Speaker 1: in all the major legislation that the Biden administration is 470 00:25:39,160 --> 00:25:42,879 Speaker 1: bringing forward. We've got three big multi year plans. Remind 471 00:25:42,880 --> 00:25:46,000 Speaker 1: you of anything. It's also interesting that the Biden administration 472 00:25:46,080 --> 00:25:48,399 Speaker 1: seems to be looking over its children and saying, the 473 00:25:48,480 --> 00:25:51,879 Speaker 1: Chinese are doing a central bank digital currency, shouldn't we. 474 00:25:52,520 --> 00:25:55,320 Speaker 1: And I also think, and this is a really important point, David, 475 00:25:55,560 --> 00:25:57,960 Speaker 1: that last year we made a mistake. We thought that 476 00:25:58,000 --> 00:26:01,879 Speaker 1: we needed to copy the Chinese style of lockdown after 477 00:26:01,920 --> 00:26:05,879 Speaker 1: the virus had really spread through to every state, But 478 00:26:06,000 --> 00:26:08,399 Speaker 1: we were looking at the wrong China. The China that 479 00:26:08,480 --> 00:26:12,000 Speaker 1: really did the best last year was Taiwan. The Republic 480 00:26:12,000 --> 00:26:16,199 Speaker 1: of China, which is a democracy, has great protections for 481 00:26:16,240 --> 00:26:20,800 Speaker 1: individual rights. Nevertheless, was able to contain the spread of 482 00:26:20,880 --> 00:26:24,720 Speaker 1: COVID until a very recent outbreak. But last year basically 483 00:26:24,760 --> 00:26:28,720 Speaker 1: they completely contained it without lockdowns. So I think we 484 00:26:28,760 --> 00:26:30,679 Speaker 1: made a great mistake and we're still making it. We 485 00:26:30,720 --> 00:26:33,600 Speaker 1: think we have to copy China. But no, no, no, 486 00:26:33,720 --> 00:26:38,040 Speaker 1: democracy has great strengths that are centralized one party state lacks. 487 00:26:38,440 --> 00:26:40,800 Speaker 1: And one of the really great lessons of the twentieth century, 488 00:26:40,800 --> 00:26:42,560 Speaker 1: and it was true in both World War Two and 489 00:26:42,600 --> 00:26:46,880 Speaker 1: the Cold War, is you you mustn't become your enemy 490 00:26:46,920 --> 00:26:50,199 Speaker 1: in attempting to compete with your enemy, because that is 491 00:26:50,240 --> 00:26:55,199 Speaker 1: not victory. If you become a centralized state without the 492 00:26:55,240 --> 00:26:58,119 Speaker 1: individual liberties that are crucial to democracy, what kind of 493 00:26:58,119 --> 00:27:01,240 Speaker 1: a victory is that, Neil. Let's take your analysis and 494 00:27:01,280 --> 00:27:04,600 Speaker 1: apply to one very specific issue, very much on everyone's 495 00:27:04,640 --> 00:27:07,080 Speaker 1: mind right now, and that's infrastructure. Because a lot of 496 00:27:07,080 --> 00:27:09,159 Speaker 1: people look at China and say, boy, they really know 497 00:27:09,200 --> 00:27:11,240 Speaker 1: how to do infrastructure. I've been on those high speed 498 00:27:11,320 --> 00:27:13,359 Speaker 1: rails you have that they've built. In the time it 499 00:27:13,400 --> 00:27:15,719 Speaker 1: would are required to get permits in the United States, 500 00:27:15,840 --> 00:27:18,440 Speaker 1: we would have never gotten a built. At the same time, 501 00:27:18,480 --> 00:27:21,000 Speaker 1: some people are saying the Biden approach to infrastructure is 502 00:27:21,040 --> 00:27:23,359 Speaker 1: flawed because it is top down, is federal, and you 503 00:27:23,440 --> 00:27:26,800 Speaker 1: need it really originating from the localities that know what 504 00:27:26,840 --> 00:27:29,600 Speaker 1: they need in infrastructure. Do we need to go more 505 00:27:29,640 --> 00:27:34,199 Speaker 1: central I don't think necessarily that we do. And I 506 00:27:34,280 --> 00:27:36,639 Speaker 1: certainly think it would be a great mistake to think 507 00:27:36,720 --> 00:27:39,360 Speaker 1: that that we need to be China, complete with high 508 00:27:39,400 --> 00:27:43,440 Speaker 1: speed railings. Sometimes I think we get an exaggerated impression 509 00:27:43,720 --> 00:27:46,040 Speaker 1: of the state of our infrastructure because we base our 510 00:27:46,080 --> 00:27:50,160 Speaker 1: commentary on the potholes in New York and Boston rather 511 00:27:50,200 --> 00:27:53,720 Speaker 1: than looking at the country as a whole. Remember, the 512 00:27:53,840 --> 00:27:57,720 Speaker 1: US today runs on a remarkable, uh and hugely successful 513 00:27:57,720 --> 00:28:00,640 Speaker 1: infrastructure program that dates back to the Isle in our era, 514 00:28:00,720 --> 00:28:02,600 Speaker 1: and that was when the Interstates were built. Now, we 515 00:28:02,720 --> 00:28:05,480 Speaker 1: knew how to do infrastructure then, just as we knew 516 00:28:05,480 --> 00:28:09,240 Speaker 1: how to do enormous leaps forward and defense technology. We've 517 00:28:09,280 --> 00:28:13,040 Speaker 1: definitely got worse at that compared with the nineteen fifties. 518 00:28:13,040 --> 00:28:16,119 Speaker 1: And an illustration of this perfect illustration really is the 519 00:28:16,240 --> 00:28:19,800 Speaker 1: chronic inability of the Californian state to sort out it's 520 00:28:19,880 --> 00:28:23,119 Speaker 1: many infrastructure problems. That can build a rail link, it 521 00:28:23,160 --> 00:28:26,800 Speaker 1: can even sort out its chronic problems of of water shortage. 522 00:28:26,960 --> 00:28:29,680 Speaker 1: So I think we need to address our frailties, and 523 00:28:29,720 --> 00:28:33,560 Speaker 1: I've been talking about our degeneration in these respects for 524 00:28:33,640 --> 00:28:37,000 Speaker 1: many years, but not by becoming China. Rather, we have 525 00:28:37,080 --> 00:28:41,960 Speaker 1: to recognize that we've created an excessively complex regulatory system 526 00:28:42,000 --> 00:28:45,920 Speaker 1: that stands in the way of of local and state 527 00:28:46,000 --> 00:28:48,880 Speaker 1: initiatives that everybody on the ground knows are necessary. But 528 00:28:49,160 --> 00:28:52,080 Speaker 1: you know, good luck dealing to take just another Californian 529 00:28:52,120 --> 00:28:55,920 Speaker 1: example with the problem of wildfires, because the regulations on 530 00:28:55,960 --> 00:28:59,480 Speaker 1: the environment made it impossible to do controlled burns. So 531 00:28:59,600 --> 00:29:01,520 Speaker 1: I don't think we need to learn from China. I 532 00:29:01,560 --> 00:29:03,920 Speaker 1: think we need to learn from America. Let's look back 533 00:29:03,920 --> 00:29:05,920 Speaker 1: at our great days when we really knew how to 534 00:29:05,920 --> 00:29:09,000 Speaker 1: do infrastructure programs. Look back in the nineteen fifties, or 535 00:29:09,080 --> 00:29:11,360 Speaker 1: even look back on the Manhattan Project, think of one 536 00:29:11,400 --> 00:29:14,720 Speaker 1: of the great technological leaps forward of all time. We 537 00:29:14,920 --> 00:29:18,720 Speaker 1: used to be able to innovate through federal programs at 538 00:29:18,720 --> 00:29:23,000 Speaker 1: an incredible clip without getting bogged down in immense amounts 539 00:29:23,040 --> 00:29:26,000 Speaker 1: of bureaucracy and regulation. We need to get back to 540 00:29:26,120 --> 00:29:29,400 Speaker 1: that much more nimble federal government that we had in 541 00:29:29,440 --> 00:29:32,760 Speaker 1: the days of Bwight Eisenhower and finally Neil This is 542 00:29:32,800 --> 00:29:35,560 Speaker 1: Bloomberg and this is Wall straight Week. So let's say, 543 00:29:35,600 --> 00:29:37,320 Speaker 1: as an investor, let's just say, when you're going to 544 00:29:37,400 --> 00:29:41,040 Speaker 1: invest in China versus the United States over the next 545 00:29:41,040 --> 00:29:43,320 Speaker 1: ten years, given everything You've said everything you know about 546 00:29:43,360 --> 00:29:46,000 Speaker 1: these two regimes, which is a better bet in a 547 00:29:46,040 --> 00:29:48,840 Speaker 1: better investment for the next ten years. Well, I'm in 548 00:29:48,880 --> 00:29:51,840 Speaker 1: the economic story and I take the long view, and 549 00:29:51,880 --> 00:29:54,200 Speaker 1: you'd be mad to bet against the United States. You'd 550 00:29:54,200 --> 00:29:57,560 Speaker 1: also be mad to bet on a totalitarian, highly centralized 551 00:29:57,640 --> 00:30:01,200 Speaker 1: regime in a networked age. Let me put it really simply. 552 00:30:01,600 --> 00:30:04,840 Speaker 1: Most of America understands that it's heading for Cold War. 553 00:30:05,240 --> 00:30:07,920 Speaker 1: The part of America that doesn't get this is Wall Street. 554 00:30:08,040 --> 00:30:11,960 Speaker 1: Money's pouring into Chinese bonds and stocks, especially tex Stalks. Guys, 555 00:30:11,960 --> 00:30:14,160 Speaker 1: I have bad news for you. They have capital controls. 556 00:30:14,320 --> 00:30:17,720 Speaker 1: It's the Hotel California China style. You're able to check in, 557 00:30:17,760 --> 00:30:20,320 Speaker 1: but good luck checking out. So I think this this 558 00:30:20,360 --> 00:30:23,200 Speaker 1: is a really important long bet that Wall Street is making. 559 00:30:23,200 --> 00:30:25,280 Speaker 1: But it's going to go very sar. And he could 560 00:30:25,320 --> 00:30:27,480 Speaker 1: go sar too if there's a blow up between the 561 00:30:27,520 --> 00:30:29,840 Speaker 1: U S and China over Taiwan. You know, it's always 562 00:30:29,840 --> 00:30:31,680 Speaker 1: such a pleasure to have you with us, as Neil Ferguson, 563 00:30:31,720 --> 00:30:34,760 Speaker 1: his senior fellow at the Hooper Institution and author of Doom, 564 00:30:35,200 --> 00:30:40,040 Speaker 1: The Politics of Catastrophe. Finally, one more thought, make me 565 00:30:40,120 --> 00:30:42,960 Speaker 1: an offer a year ago. We were desperate for a vaccine. 566 00:30:43,040 --> 00:30:45,600 Speaker 1: We were promised, but the experts doubted could get here 567 00:30:45,640 --> 00:30:49,400 Speaker 1: for years to come. And then the mirrorlecle happened, giving 568 00:30:49,480 --> 00:30:52,960 Speaker 1: us not one but several alternatives and offering us the 569 00:30:53,040 --> 00:30:55,400 Speaker 1: keys to get out of the jails that our homes 570 00:30:55,480 --> 00:30:59,360 Speaker 1: had become. And after rationing those shots in the early months, 571 00:30:59,400 --> 00:31:02,120 Speaker 1: we now have a new challenge getting up to that 572 00:31:03,160 --> 00:31:07,200 Speaker 1: goal in getting everyone vaccinated. With President Biden using his 573 00:31:07,240 --> 00:31:10,160 Speaker 1: bully pulpit every way that he can to get us 574 00:31:10,200 --> 00:31:13,480 Speaker 1: there by his July for deadline, we're announcing a month 575 00:31:13,520 --> 00:31:16,800 Speaker 1: long effort to pull all the stops, all the stops 576 00:31:16,840 --> 00:31:20,000 Speaker 1: to free ourselves from the fires and get to a 577 00:31:20,040 --> 00:31:23,640 Speaker 1: dull America's vaccinated. But let's be honest here. People may 578 00:31:23,760 --> 00:31:27,440 Speaker 1: listen to the President, but they're motivated. They're really motivated 579 00:31:27,440 --> 00:31:31,200 Speaker 1: by more tangible incentives. And that's what we're seeing right 580 00:31:31,240 --> 00:31:35,080 Speaker 1: across the country with various states offering cold hard cash. 581 00:31:35,560 --> 00:31:38,720 Speaker 1: Ohio started a lottery that has already paid out one 582 00:31:38,800 --> 00:31:43,120 Speaker 1: million dollars to someone who got vaccinated. California announced a 583 00:31:43,280 --> 00:31:47,000 Speaker 1: range of cash prices up to one point five million dollars, 584 00:31:47,040 --> 00:31:50,200 Speaker 1: and New Mexico thus far getting the prize by saying 585 00:31:50,280 --> 00:31:53,240 Speaker 1: one of its citizens will get five million dollars for 586 00:31:53,320 --> 00:31:57,600 Speaker 1: getting vaccinated. But this is, after all a team effort, Right. 587 00:31:58,360 --> 00:32:00,960 Speaker 1: I get vaccinated to protect myself elf from getting COVID, 588 00:32:01,000 --> 00:32:03,680 Speaker 1: but I also get vaccinated to protect you from catching 589 00:32:03,680 --> 00:32:07,480 Speaker 1: it from me and so annheuser Busch this week announced 590 00:32:07,520 --> 00:32:11,160 Speaker 1: the mother of all vaccine incentive programs, one in which 591 00:32:11,320 --> 00:32:16,200 Speaker 1: every single American can win if we get to that mark. 592 00:32:16,560 --> 00:32:19,840 Speaker 1: That's right, get a shot and have a beer, free 593 00:32:19,840 --> 00:32:22,680 Speaker 1: beer for everyone twenty one years or over, to celebrate 594 00:32:22,720 --> 00:32:25,800 Speaker 1: the independence from the virus. So for all of you 595 00:32:25,840 --> 00:32:28,920 Speaker 1: who haven't gotten your shot yet, you may be the 596 00:32:28,960 --> 00:32:32,520 Speaker 1: one standing between all of us and a cold bud 597 00:32:33,840 --> 00:32:35,680 Speaker 1: that does it. For this episode of Wall Street Week, 598 00:32:35,720 --> 00:32:38,880 Speaker 1: I'm David Weston. This is Bloomberg. See you next week.