WEBVTT - Bloomberg Wall Street Week: Murphy, Rieder and Summers 0:00:00.160 --> 0:00:03.360 This is Bloomberg Wall Street Week. What's the state of 0:00:03.400 --> 0:00:06.360 corporate governance? The deficit is a real issue. The US 0:00:06.400 --> 0:00:09.800 economy continues to send mixed signals to the financial stories 0:00:09.800 --> 0:00:12.680 that cheap our world fed action to con concerns over 0:00:12.760 --> 0:00:16.239 dollar liquidity and encouraging China data. The five hundred wealthiest 0:00:16.239 --> 0:00:18.360 people in the world. Through the eyes of the most 0:00:18.480 --> 0:00:22.520 influential voices Larry Summers, the former Treasury Secretary, star Ward CEO, 0:00:22.640 --> 0:00:26.360 Kevin Johnson sec Chairman j Clayton. Bloomberg wool Street Week 0:00:26.480 --> 0:00:30.440 with David Weston from Bloomberg Radio. Markets get their hopes 0:00:30.480 --> 0:00:33.680 up investors look past fears of a cold war with 0:00:33.760 --> 0:00:37.400 China and a possible second wave of COVID. This is 0:00:37.400 --> 0:00:40.800 Bloomberg Wall Street Week. I'm David Weston. It was a 0:00:40.800 --> 0:00:44.320 week of hope, but is it hope triumphing over experience. 0:00:44.720 --> 0:00:47.720 Equities continue to climb higher, but lurking in the background 0:00:47.800 --> 0:00:51.280 are those growing tensions between Beijing and Washington, and as 0:00:51.320 --> 0:00:53.560 well a fear that there might be a second wave 0:00:53.640 --> 0:00:56.240 of a pandemic that as of this week, has claimed 0:00:56.240 --> 0:01:00.720 a hundred thousand American lives. The economic numbers are stunning 0:01:01.040 --> 0:01:04.120 to be sure. This week, jobless claims fell for the 0:01:04.120 --> 0:01:06.280 first time in two and a half months, but during 0:01:06.319 --> 0:01:10.520 that period of time, over forty million Americans have become unemployed. 0:01:11.000 --> 0:01:14.600 Fiscal and monetary authorities continue to look for more solutions. 0:01:14.640 --> 0:01:17.760 That's after they've already thrown trillions of dollars into the 0:01:17.800 --> 0:01:21.800 stew of government support. So which story isn't we should 0:01:21.800 --> 0:01:25.160 believe the hopeful one of the equity markets back almost 0:01:25.200 --> 0:01:27.800 to the level they were pre COVID, or the one 0:01:27.800 --> 0:01:29.840 that tells us that we are not yet out of 0:01:29.880 --> 0:01:33.240 the woods. Rick Reader of Black Rock, really knows rates 0:01:33.280 --> 0:01:35.600 like no one else in this new world, and he 0:01:35.680 --> 0:01:38.800 sees the effect of FED action on yields right across 0:01:38.880 --> 0:01:41.160 the yield curve. But the FED has done has been 0:01:41.160 --> 0:01:43.920 pretty powerful. But you know, there is something that I 0:01:43.959 --> 0:01:46.240 think people underestimate when you when you think about what 0:01:46.280 --> 0:01:48.040 the FED does with central banks can do. When they 0:01:48.120 --> 0:01:50.680 before they wheel out the bazooka and say this is 0:01:50.720 --> 0:01:53.520 what we will do if we need to, the markets 0:01:53.560 --> 0:01:55.680 tend to take them at their word. Particularly is FED 0:01:55.720 --> 0:01:57.160 that has a lot of credibility to day. So the 0:01:57.160 --> 0:01:59.280 FED actually hasn't done a lot in the credit markets 0:01:59.480 --> 0:02:02.320 at all. But what's happening is there's a sense that 0:02:02.440 --> 0:02:05.560 the FED will be there for emergency reasons or to 0:02:05.680 --> 0:02:09.800 provide for markets to actually function effectively. So what's happening 0:02:09.840 --> 0:02:12.600 now is you're seeing a manifestation of what the FED 0:02:12.680 --> 0:02:15.840 has done. Let's take interest rates to zero. They're gonna 0:02:15.880 --> 0:02:18.240 keep them at zero for an extended period of time. 0:02:18.280 --> 0:02:21.799 And what it's as long as the economy is reasonably 0:02:21.960 --> 0:02:25.720 stable than this demand for income and we've talked about 0:02:25.760 --> 0:02:27.440 a bunch of times, the demand for income in the 0:02:27.480 --> 0:02:30.880 world because of the aging, demographic, etcetera, is so profound. 0:02:31.000 --> 0:02:34.320 And as long as people feel like, gosh, I need 0:02:34.360 --> 0:02:36.680 to that the economy is gonna be stable, I can 0:02:36.720 --> 0:02:38.560 start to go and get that income. And then when 0:02:38.600 --> 0:02:40.400 you think about the size of the high yield market, 0:02:40.960 --> 0:02:42.679 it's only a trillion dollar market. Do you think about 0:02:42.680 --> 0:02:45.200 the market cap of Amazon, it's more it's been uh 0:02:45.240 --> 0:02:48.160 And you think about it's a bigger Amazon is bigger 0:02:48.160 --> 0:02:50.160 than the entire high you horning there's not enough income 0:02:50.200 --> 0:02:52.440 in the world, And so what you're seeing is this 0:02:52.440 --> 0:02:56.000 is Gosh, I gotta get income. Economies doing fatter. I'm 0:02:56.000 --> 0:02:58.519 anticipating will continue to do better, and so the surge 0:02:58.520 --> 0:03:01.080 of money that's commenced been restive to say the least. 0:03:02.960 --> 0:03:05.600 So as a result, yields are really suppressed, I would say, 0:03:05.639 --> 0:03:08.360 and it's reasonably cheap still to borrow money despite everything 0:03:08.360 --> 0:03:10.720 that's happened. Does that sort of give government to blank 0:03:10.800 --> 0:03:14.119 check for stimulus? We had to former central bankers Carston's 0:03:14.360 --> 0:03:17.040 and Vabor come out and say this is really dangerous 0:03:17.040 --> 0:03:19.360 because we're basically gonna have the central banks funding the 0:03:19.360 --> 0:03:24.839 government debt. So you know that it has a long 0:03:24.960 --> 0:03:27.200 complicated discussion, and I would say a couple of things 0:03:27.240 --> 0:03:30.399 that are really important. One is there is something that's 0:03:30.440 --> 0:03:32.840 really profound about the ability for the governments to actually 0:03:32.880 --> 0:03:34.840 borrow today. I'm not saying there's an unlimited amount of 0:03:34.840 --> 0:03:37.360 the governments can borrow. They have to be conscious of. 0:03:37.960 --> 0:03:39.520 You can put too much doubt on the system. You 0:03:39.520 --> 0:03:43.520 create a crowding out effect for the corporate sector, household financials, etcetera. 0:03:43.760 --> 0:03:45.880 But today, because of the demograph, we can talk about 0:03:45.880 --> 0:03:47.800 the system is actually set up to be a lender. 0:03:47.840 --> 0:03:51.160 Insurance companies, pension funds actually need the assets and actually 0:03:51.200 --> 0:03:53.880 need to lend. And what's happened when you drop rates 0:03:53.920 --> 0:03:57.200 to so low, um, it's causing people to say, gosh, 0:03:57.280 --> 0:03:59.440 where do I go to actually be a lender? And 0:03:59.480 --> 0:04:02.760 so into day's environment, you can actually, you can actually 0:04:02.800 --> 0:04:05.680 create some more debt on the system as long as 0:04:05.800 --> 0:04:08.280 you're creating nominal GDP, which I would argue in the 0:04:08.400 --> 0:04:12.000 US we will have some some improvements, significant improvement and 0:04:12.080 --> 0:04:14.920 nominal GDP to pay down the debt over time. But 0:04:15.440 --> 0:04:17.640 I think it's fair to say we shouldn't go too far, 0:04:18.080 --> 0:04:19.719 but to put a bit more down on the system, 0:04:19.800 --> 0:04:22.960 given the circumstances, is actually not as scary as it's 0:04:22.960 --> 0:04:24.400 been historically. Think about it. When we were back in 0:04:24.440 --> 0:04:27.279 oh six, oh seven, the households were indebted because the 0:04:27.320 --> 0:04:30.080 housing market, the financials were indebted. We're in a better 0:04:30.279 --> 0:04:32.880 position today, happening side. You've always got to be pragmatic 0:04:32.920 --> 0:04:35.760 about you can't just keep doing it. And but we 0:04:35.760 --> 0:04:37.640 can afford to do a little more debt, certainly to 0:04:37.680 --> 0:04:39.160 get to the other side of what is a shock 0:04:39.240 --> 0:04:43.440 to the economic system. So with that, that's the fixed 0:04:43.440 --> 0:04:45.920 income side of your book. Let's go to the equity side, 0:04:45.920 --> 0:04:47.920 because a lot of people saying, boy, the equities look 0:04:47.960 --> 0:04:50.360 like they're pretty high considering what we're really seeing in 0:04:50.400 --> 0:04:54.800 the economy, the equities telling us something meaningful about the recovery. 0:04:55.880 --> 0:04:57.279 But the first as we can't leave the fixed thing 0:04:57.360 --> 0:04:59.360 in side, because as part of why the equities are doing, 0:04:59.480 --> 0:05:02.040 uh doing a they're doing. When you move interest rates 0:05:02.120 --> 0:05:05.880 to to to zero, then you're basically telling people you 0:05:06.120 --> 0:05:08.600 need to find something else to do. And and when 0:05:08.640 --> 0:05:10.480 you can't create income in other ways, you need to 0:05:10.520 --> 0:05:13.360 find something else to do, and you create this transmission 0:05:13.360 --> 0:05:15.640 effect that gets into the discount rate on equities, that 0:05:15.720 --> 0:05:20.120 gets into the alternative assets that equities are. And listen, 0:05:20.120 --> 0:05:23.400 I think the equity market is too high on a 0:05:23.440 --> 0:05:25.960 short term basis given what the economy is telling you. 0:05:26.440 --> 0:05:28.480 But part of what I think people have been maybe 0:05:28.600 --> 0:05:31.320 maybe a bit short sighted about is you don't buy 0:05:31.360 --> 0:05:33.360 equities for the next quarter, and people talk a lot 0:05:33.400 --> 0:05:37.080 about next quarter and p ratio offer this year. If 0:05:37.080 --> 0:05:39.320 you go over the intermediate term and think about guess 0:05:39.400 --> 0:05:41.360 you've got we don't have interest low interest rates for 0:05:41.400 --> 0:05:44.040 a long time, and you think about where earnings are 0:05:44.040 --> 0:05:46.160 going to be over a long period of time. These 0:05:46.160 --> 0:05:49.040 equities are a long duration the longest duration asset there 0:05:49.160 --> 0:05:53.159 is equity valuations when you take equity risk premium and 0:05:53.200 --> 0:05:56.000 think about where we are versus on a low interest rate, 0:05:56.200 --> 0:05:58.400 on a low level where companies can borrow and actually 0:05:58.400 --> 0:06:00.920 buy back their stock if they want to. Equities are 0:06:00.920 --> 0:06:02.719 not high. I mean, I think they can go higher 0:06:02.760 --> 0:06:04.320 in the near terms. I think they should pull back 0:06:04.400 --> 0:06:07.360 a little bit probably, But you know, if you're building 0:06:07.400 --> 0:06:10.240 balance in your portfolio and you're a long term investor 0:06:10.120 --> 0:06:13.040 and medium term investor, to hold equities in the portfolio, 0:06:13.400 --> 0:06:15.640 you know, versus owning you're not gonna make any money 0:06:15.640 --> 0:06:18.080 owning the ten year Treasury note at sixty eight basis 0:06:18.080 --> 0:06:21.240 points sixty nine basis points. So I do think that 0:06:21.240 --> 0:06:23.400 that equities makes sense as long as you're an investor 0:06:23.480 --> 0:06:25.280 and can be thoughtful about. Gosh, I'm not gonna look 0:06:25.279 --> 0:06:27.000 at you know, could I go down in the next 0:06:27.000 --> 0:06:28.600 week or so. You could go down a bit, But 0:06:28.960 --> 0:06:31.200 I think people are under estimating equities for the for 0:06:31.240 --> 0:06:34.680 the intermediate to long haul are actually still okay value here. 0:06:35.040 --> 0:06:38.120 That was Rick Reader of black Rock coming up. We 0:06:38.240 --> 0:06:39.920 talked with the governor of one of the states hit 0:06:39.960 --> 0:06:43.359 hardest by the coronavirus as it moves cautiously to open 0:06:43.400 --> 0:06:47.200 back up, Governor Phil Murphy of New Jersey. That's next 0:06:47.240 --> 0:06:56.520 on Wall Street Week on Bloomberg. This is Bloomberg Will 0:06:56.640 --> 0:07:01.080 Street Week with David Weston from Bloomberg. Ready, New Jersey 0:07:01.120 --> 0:07:04.040 has been one of the state's hardest hit by the coronavirus, 0:07:04.320 --> 0:07:06.720 and Governor Phil Murphy has been on the front lines 0:07:07.000 --> 0:07:10.800 organizing efforts to bend the curve, comforting those afflicted, and, 0:07:10.880 --> 0:07:14.240 as he says, playing moneyball by sticking to the science. 0:07:14.600 --> 0:07:19.160 I hope what we can offer, folks um is that 0:07:19.840 --> 0:07:23.360 you know some basic sort of themes, which is number one, 0:07:23.480 --> 0:07:27.920 public health creates economic health. Inasmuch as we're all chopping 0:07:27.960 --> 0:07:31.520 at the bit to get everything opened again. If we 0:07:31.760 --> 0:07:34.800 if we transpose those steps or we jumped the gun, 0:07:35.400 --> 0:07:37.400 I think we throw gasoline on the fire. And I 0:07:37.400 --> 0:07:40.920 think we've been very deliberate. And the second handed glove 0:07:40.960 --> 0:07:43.920 with that is we say all the time that data 0:07:44.200 --> 0:07:47.960 determines dates. So inasmuch as we don't ever want this 0:07:48.080 --> 0:07:51.400 to be abstracted. In fact, we eulogize a handful of 0:07:51.440 --> 0:07:54.160 people every day. I call families every day to make 0:07:54.160 --> 0:07:58.600 sure it always stays personal. Having said that this is moneyball, 0:07:58.960 --> 0:08:01.559 this is what's the day to telling us and what's 0:08:01.560 --> 0:08:04.080 it allowed that data allow us to do? And I 0:08:04.680 --> 0:08:07.920 hope that that we get that right. So far, so good, 0:08:08.240 --> 0:08:10.440 and just about every one of those briefings that I've seen, 0:08:10.480 --> 0:08:12.200 at least. You also give credit to people in New 0:08:12.280 --> 0:08:15.480 Jersey for complying with the restrictions that are not easy 0:08:15.480 --> 0:08:17.600 to comply with. You mentioned chomping in the bit. People 0:08:17.640 --> 0:08:19.920 are chomping to put in New Jersey and elsewhere as well. 0:08:20.200 --> 0:08:22.240 As you start to back off, and it's not just 0:08:22.320 --> 0:08:25.320 an on off switch, it's by measures. How do you 0:08:25.440 --> 0:08:28.440 ensure compliance? It's going to get harder and harder. Yeah, 0:08:28.520 --> 0:08:32.320 it probably is. But I have to say both individuals, David, 0:08:32.480 --> 0:08:34.920 in terms of staying at home and staying away from 0:08:34.920 --> 0:08:38.720 each other and wearing face coverings, as well as businesses 0:08:38.960 --> 0:08:43.520 both big and small, the compliance has been overwhelming relative 0:08:43.640 --> 0:08:48.640 to any expectation. Now, clearly as the weather has gotten warmer, 0:08:49.320 --> 0:08:53.120 as the clock has continued to tick, as folks see 0:08:53.160 --> 0:08:56.320 other states that have been less hard hit than New 0:08:56.400 --> 0:08:58.959 Jersey and New York, as they you know, that's all 0:08:59.080 --> 0:09:02.440 human nature, and I I get that. Are there more 0:09:02.480 --> 0:09:05.959 folks today than there were a month ago? Uh, saying 0:09:06.040 --> 0:09:08.199 you know, I'm gonna open on June something. Yeah, there 0:09:08.200 --> 0:09:11.160 are some more, but I will say this, and by 0:09:11.200 --> 0:09:12.679 the way, I think the other point I would make 0:09:12.760 --> 0:09:15.360 is that we have we've done, We've started to open up. 0:09:15.400 --> 0:09:17.640 We've not this is not uh, you know, we we 0:09:17.760 --> 0:09:20.920 recognize that we need to take steps. For the most part, 0:09:20.960 --> 0:09:23.400 folks have done the right thing. What about the politics 0:09:23.440 --> 0:09:25.120 of it within New Jersey? We've seen, at least in 0:09:25.160 --> 0:09:27.760 some other places some of the states, a fair amount 0:09:27.800 --> 0:09:29.800 of politics involved where some people are really not just 0:09:29.840 --> 0:09:33.120 clamoring to get back, but really demonstrating pretty active in it. 0:09:33.240 --> 0:09:35.360 What's been the politics New Jersey? Do you have the 0:09:35.440 --> 0:09:38.120 legislature with you? Do you have the politicians back in 0:09:38.200 --> 0:09:40.720 you here? Yeah, for the most part, we do. There's 0:09:40.720 --> 0:09:43.960 been some demonstrations, There's no question about it. Nothing at 0:09:44.000 --> 0:09:46.200 the scale that we've seen in a place like Michigan, 0:09:46.280 --> 0:09:49.880 for instance, But they have been pretty regular demonstrations. And 0:09:50.040 --> 0:09:53.040 I don't begrudge that we never have. I would prefer 0:09:53.120 --> 0:09:57.280 folks to them virtually that they don't congregate, But that 0:09:57.600 --> 0:10:00.760 bothers me more than the demonstrations. Uh, you know, there's 0:10:00.800 --> 0:10:04.000 always exceptions with any legislature. But we we've had a 0:10:04.080 --> 0:10:08.280 very good across the aisle, give and take, generally strong support, 0:10:08.840 --> 0:10:10.600 and we've needed them. You know, we need laws to 0:10:10.640 --> 0:10:12.720 get past. We need to for instance, we need an 0:10:12.760 --> 0:10:17.280 ability to borrow money to fill up the enormous budget 0:10:17.280 --> 0:10:20.079 hole that we have as an example. But so far, 0:10:20.240 --> 0:10:22.959 so good. Again, there are some folks who, naturally, in 0:10:23.000 --> 0:10:26.400 any democratic reality, are gonna go off and say and 0:10:26.400 --> 0:10:28.280 do their own things. But for the most part, we're 0:10:28.360 --> 0:10:31.080 we've been in a good place. One of the tricky 0:10:31.120 --> 0:10:35.480 things everyone is confronting is reopening at the schools, and unfortunately, 0:10:35.520 --> 0:10:37.480 with the summer most people are not going to school anyway. 0:10:37.520 --> 0:10:39.520 But you've got the fall coming up. It's a lot 0:10:39.600 --> 0:10:42.160 of uncertainty about how that's gonna work. As you approach 0:10:42.240 --> 0:10:44.800 that question, what are the criteria're gonna use, What are 0:10:44.840 --> 0:10:47.840 the things you're considering about how and when to open 0:10:47.840 --> 0:10:51.320 your schools? You know, we've promised folks by sort of 0:10:51.400 --> 0:10:54.960 mid June, we're gonna give them guidance, uh at least 0:10:55.040 --> 0:10:58.480 on pre K through twelve, And we're clearly talking to 0:10:58.559 --> 0:11:03.800 the universities and higher in community constantly as well. Um, 0:11:03.960 --> 0:11:07.280 and it's it's my bias, David strongly is that we 0:11:07.320 --> 0:11:10.959 get back to school. Uh. We've done the virtual stuff 0:11:11.000 --> 0:11:13.760 as well as any American state, but there's for a 0:11:13.800 --> 0:11:17.120 whole host of reasons, including mental health, the richness of 0:11:17.120 --> 0:11:19.880 the experience. I'd like, I want to see us back 0:11:20.280 --> 0:11:22.280 in school, but it's got to be a new normal 0:11:22.559 --> 0:11:25.200 if you ask me a different question. But relatedly, what's 0:11:25.240 --> 0:11:28.560 my biggest what what's the hardest nut to crack? I 0:11:28.600 --> 0:11:35.320 think it's gonna it's going to be the young, healthy, asymmetric, asymptomatic, 0:11:35.679 --> 0:11:41.600 unwitting student who could pass this virus to an older educator, administrator, 0:11:41.760 --> 0:11:45.040 someone with underlying health challenges. That's got to be the 0:11:45.080 --> 0:11:47.240 one piece of this that we've got to get right. 0:11:47.400 --> 0:11:52.040 I think we can with social distancing, face coverings, maybe 0:11:52.160 --> 0:11:56.240 virtual instruction, even within the in the bricks and mortar reality, 0:11:56.320 --> 0:11:57.880 but we've got to make sure we get that right. 0:11:58.480 --> 0:11:59.920 One of the things you said is a particular chan 0:12:00.000 --> 0:12:02.480 elenge of New Jersey is long term care facilities. It 0:12:02.520 --> 0:12:04.200 is not unique j New Jersey, but you've had a 0:12:04.200 --> 0:12:06.520 big issue with that. What are you doing about that? 0:12:06.640 --> 0:12:09.880 How can you really going forward sort of protect some 0:12:09.960 --> 0:12:11.319 of our elderly, some of the people with some of 0:12:11.360 --> 0:12:15.240 the underlying conditions. Yeah, we've been clabbored in long term care. 0:12:15.320 --> 0:12:18.559 We're not alone for sure. But uh. Of the eleven thousand, 0:12:18.559 --> 0:12:22.000 four one deaths, almost five thousand of them are from 0:12:22.040 --> 0:12:25.480 long term care facilities. Uh. And by the way, early on, 0:12:25.520 --> 0:12:28.560 when I just mentioned about schools early on, that was 0:12:28.640 --> 0:12:31.760 sort of the the spark that created the fire, the 0:12:32.320 --> 0:12:37.480 symptomatic unwitting heroic by I might add, healthcare employee or 0:12:37.600 --> 0:12:41.200 love one visiting and unwittingly passing it on. So we've 0:12:41.240 --> 0:12:44.960 thrown the kitchen sink at this, including at the uneven 0:12:45.040 --> 0:12:49.920 operator performance. The Attorney General has got an investigation outstanding. 0:12:50.280 --> 0:12:52.800 The National Guard, I'm very happy to say the President 0:12:52.920 --> 0:12:56.200 is just re up the funding to extend the National Guard. 0:12:56.200 --> 0:12:58.599 They're in a lot of our long term care facilities. 0:12:58.880 --> 0:13:02.800 The Federal Veterans Administration has come in and helped us out, 0:13:02.840 --> 0:13:05.439 not just in our veterans homes which have been hit, 0:13:05.520 --> 0:13:09.600 but also in other homes. We hired a nationally renowned firm. 0:13:09.920 --> 0:13:13.400 We're now we're now in the process of universal testing 0:13:13.480 --> 0:13:18.760 and re testing, cohorting, separating patients positive from non positive. 0:13:19.480 --> 0:13:22.120 We've learned a lot of lessons. The in that industry 0:13:22.120 --> 0:13:25.239 has learned a lot. We all have the hard way unfortunately. 0:13:25.400 --> 0:13:29.240 But it's also an economic issue. Without adat, we are 0:13:29.320 --> 0:13:33.160 getting increasing numbers of unemployed and the inclusion New Jersey, 0:13:33.200 --> 0:13:35.000 I think is that one in nine. Now you're up to. 0:13:35.960 --> 0:13:37.760 At what point do you still expect this is going 0:13:37.800 --> 0:13:40.719 to bottom out? Do you see a bottom to this unemployment? 0:13:40.720 --> 0:13:43.680 And it's starting to turn back around? Please God sooner 0:13:43.679 --> 0:13:48.240 than later. Uh. I think it's correlated with a couple 0:13:48.240 --> 0:13:53.920 of things. David number one, the responsible continued responsible reopening 0:13:54.040 --> 0:13:56.280 that we get that right that we don't have. You know, 0:13:56.280 --> 0:13:58.040 we're going down on one way street. I don't want 0:13:58.040 --> 0:14:01.560 to turn the car around and go back the other way. Uh. 0:14:01.600 --> 0:14:04.520 And secondly, I'll give you a big game changer, and 0:14:04.600 --> 0:14:09.760 that is direct federal cash assistance to states and municipalities. Uh. 0:14:09.800 --> 0:14:12.480 It's talked about. There are a couple of bills, including 0:14:12.840 --> 0:14:16.560 Bob Menendez, one of our great senators co sponsor with 0:14:16.559 --> 0:14:20.760 a Republican colleague, Bill Cassidy in Louisiana. UH is a 0:14:20.760 --> 0:14:24.640 good example, Speaker Pelosi with the Heroes Act. UH. We 0:14:24.720 --> 0:14:27.360 need that, Uh, not just a blue state, not just 0:14:27.400 --> 0:14:31.320 New Jersey, all American states need that. And and frankly, 0:14:31.400 --> 0:14:36.320 that's the biggest potential accelerant that's available to us right 0:14:36.320 --> 0:14:39.600 now to reboot our economy and get as close to 0:14:39.680 --> 0:14:45.520 that that long uh long sought after V shaped recovery. 0:14:45.560 --> 0:14:48.120 That's to me the biggest game changer available. That was 0:14:48.160 --> 0:14:51.640 Governor Phil Murphy of New Jersey. Coming up. Europe finally 0:14:51.680 --> 0:14:54.680 gets its act together for a fiscal stimulus package. That's 0:14:54.720 --> 0:15:03.440 next on Wall Street Week on Bloomberg. This is Bloomberg 0:15:03.480 --> 0:15:07.400 Wall Street Week with David Weston from Bloomberg Radio. We 0:15:07.520 --> 0:15:10.520 wrap up the week with our very special contributor Larry Summers. 0:15:10.560 --> 0:15:12.680 As always so Larry, welcome, Good to have you here. 0:15:13.200 --> 0:15:15.280 Af Throughout the entire week, markets were sort of a 0:15:15.280 --> 0:15:17.200 little nervous about China, and then at the very end 0:15:17.200 --> 0:15:19.240 of the week, President Trump had a big news conference 0:15:19.440 --> 0:15:20.960 at the White House and he said, boy, there are 0:15:21.040 --> 0:15:23.440 bad things coming from China. He did withdraw from the 0:15:23.560 --> 0:15:25.520 w h oh, so there's gonna be sanctions, but the 0:15:25.560 --> 0:15:28.240 markets could have shriped it off. Is this real or 0:15:28.320 --> 0:15:32.320 is it saber rattling some of both uh our withdrawal 0:15:32.360 --> 0:15:37.120 from the W HO is probably not as consequential as 0:15:37.120 --> 0:15:39.600 when the United States decided not to join the League 0:15:39.640 --> 0:15:44.080 of Nations after the First World War, but it may 0:15:44.160 --> 0:15:51.080 be the most important withdrawal from internationalism that the United 0:15:51.120 --> 0:15:55.080 States has engaged in since the Second World War. It's 0:15:55.120 --> 0:15:59.920 a completely irresponsible act that will set back the effort 0:16:00.160 --> 0:16:04.600 to combat disease in the world and will ultimately hurt 0:16:05.480 --> 0:16:10.160 our security. God knows the w h O is deeply flawed, 0:16:10.480 --> 0:16:14.240 but the United States should be fixing it, not abandoning it, 0:16:14.480 --> 0:16:19.080 and future generations will regret this decision and the lack 0:16:19.120 --> 0:16:22.400 of trust uh that comes from it. It's not something 0:16:22.440 --> 0:16:25.640 that affects the profits of companies over the next several years, 0:16:25.680 --> 0:16:28.480 so it doesn't affect the stock market. But that's the 0:16:28.560 --> 0:16:34.400 really consequential thing. The sparring on Hong Kong doesn't involve 0:16:34.560 --> 0:16:38.280 something that is going to concretely hurt corporate profits. That's 0:16:38.280 --> 0:16:43.320 why the market didn't react, and the market has been 0:16:43.360 --> 0:16:47.440 pricing in the fact that the United States and China 0:16:47.920 --> 0:16:51.800 are at deep blogger heads in a way they haven't 0:16:51.880 --> 0:16:56.760 been since Nixon opened to China fifty years ago, and 0:16:56.840 --> 0:17:01.520 that's what's continuing to play out. But think that the 0:17:01.560 --> 0:17:06.800 fact that there's no market response shouldn't make people complacent, 0:17:07.359 --> 0:17:11.200 not about the United States abandoning the world's health organization, 0:17:11.720 --> 0:17:16.639 and not about the state of the US China relationship, 0:17:16.760 --> 0:17:21.639 which I believe if history goes wrong, goes off track 0:17:22.359 --> 0:17:26.119 in this decade, the far and away the most likely 0:17:26.240 --> 0:17:29.720 way in which that will happen is fissures between the 0:17:29.800 --> 0:17:32.960 United States and China. So, Larry, if the goal is 0:17:33.000 --> 0:17:35.760 to modify China's behavior in some way, shape or form, 0:17:36.480 --> 0:17:38.040 is there a way to do that? As a practic man, 0:17:38.040 --> 0:17:39.920 it looks like President she has decided what he wants 0:17:39.920 --> 0:17:41.680 to do, whether it's in Hong Kong and other places. 0:17:41.760 --> 0:17:43.879 It doesn't look like anything we're doing is changing his 0:17:44.000 --> 0:17:48.159 mind any Look. I think one of a lessons of 0:17:49.000 --> 0:17:53.280 human life, and it's also a lesson of global life, 0:17:53.840 --> 0:17:58.280 is that it's harder to change people and it's harder 0:17:58.320 --> 0:18:02.880 to change nations then we often hope it would be, 0:18:03.560 --> 0:18:10.399 and that threats and scolding are not all that effective 0:18:11.000 --> 0:18:16.480 as UH tactics, And so I'm not surprised that this 0:18:16.560 --> 0:18:20.639 isn't working very well with respect to China, And of 0:18:20.680 --> 0:18:25.280 course it creates all the wrong incentives over the medium 0:18:25.320 --> 0:18:30.639 and UH long term. It strengthens the people who say 0:18:30.680 --> 0:18:34.080 in China that any kind of inter relationship with the 0:18:34.160 --> 0:18:38.280 United States is a mistake against those who want to 0:18:38.359 --> 0:18:43.000 be more intertwined UH with UH the United States. It 0:18:43.080 --> 0:18:47.280 teaches China that they need to avoid any kind of 0:18:47.359 --> 0:18:51.960 vulnerability to US, which means they will put more emphasis 0:18:52.080 --> 0:18:58.680 on splintering UH their technologies and their economic approach from 0:18:58.720 --> 0:19:04.280 anything that's global and is involved U with US. But 0:19:04.600 --> 0:19:09.200 in fairness, UH, these are really hard problems, and it's 0:19:09.720 --> 0:19:15.040 much easier to object to particular means that are being 0:19:15.160 --> 0:19:20.760 pursued UH than it is UH to propose ways that 0:19:20.840 --> 0:19:24.880 will be effective. I think over time, we're gonna have 0:19:25.080 --> 0:19:28.960 to reduce our aspirations for how much we're going to 0:19:29.040 --> 0:19:34.560 change China and concentrate on the set of issues that 0:19:34.760 --> 0:19:41.520 most directly UH impact on our security. And we're gonna 0:19:41.560 --> 0:19:46.400 have to think about aspects of our own behavior UH 0:19:46.440 --> 0:19:51.119 that at times are provocative and recognized that in a 0:19:51.240 --> 0:19:55.040 bargain UH you have to demand, you get to demand things, 0:19:55.080 --> 0:20:00.320 but you also have to respond to uh the other 0:20:00.440 --> 0:20:04.720 side's concerns, and that our concept can't be that we 0:20:04.840 --> 0:20:08.679 run the world and China gets to decide how exactly 0:20:08.720 --> 0:20:12.840 it wants to fit into the world we run. That's 0:20:12.840 --> 0:20:18.080 probably not gonna work given China's current strength and UH 0:20:18.560 --> 0:20:26.919 broad economic power. The one other thing, one other that's 0:20:27.040 --> 0:20:30.120 one other thing if I could, Uh, David, I think 0:20:30.280 --> 0:20:34.960 probably the single most serious farm policy error that the 0:20:35.000 --> 0:20:40.720 Trump administration has made is the more you think that 0:20:41.000 --> 0:20:45.720 China is, in various ways a serious threat, the more 0:20:45.800 --> 0:20:51.520 important it is that we have strong global alliances with 0:20:51.600 --> 0:20:55.720 all the other countries in the world. And so what 0:20:56.000 --> 0:21:02.879 is odd is a strategy of UH elevating the Chinese 0:21:02.960 --> 0:21:10.639 China threat and at the same time not aggressively trying 0:21:10.720 --> 0:21:15.000 to get close to all the other countries and instead, 0:21:15.080 --> 0:21:21.919 in many ways abrogating commitments UH to them and lashing 0:21:21.960 --> 0:21:26.560 out at them UH in various ways. In a world 0:21:26.600 --> 0:21:31.320 where we want to put trade sanctions on China, what 0:21:31.480 --> 0:21:36.439 could be dumber than threatening trade sanctions on Canada and 0:21:36.560 --> 0:21:39.639 Europe and all the other countries who we need to 0:21:39.720 --> 0:21:43.240 cooperate with us if we're to have a realistic chance 0:21:43.280 --> 0:21:46.520 of influencing China's behavior. Larry, I want to come back 0:21:46.520 --> 0:21:48.200 to the unit statis just for a couple of minutes 0:21:48.200 --> 0:21:50.840 here because you've expressed concern about how quickly we're coming back, 0:21:50.880 --> 0:21:52.840 at least in some parts of the country, whether we're ready, 0:21:53.000 --> 0:21:55.359 whether we have the testing, the contact tracing, things like that. 0:21:55.600 --> 0:21:57.600 We are starting to open back up, even here in 0:21:57.640 --> 0:21:59.960 New York. Now we're hearing New York City maybe open 0:22:00.040 --> 0:22:02.840 with the next couple of weeks. How will it be 0:22:03.000 --> 0:22:05.800 different these cities now, these big cities are a lot 0:22:05.840 --> 0:22:07.600 of talk now, But what are these cities like New 0:22:07.680 --> 0:22:10.080 York City, like Boston, the places, whether they'll ever be 0:22:10.160 --> 0:22:14.560 the same again. Look, I think to two separate questions there, 0:22:14.840 --> 0:22:20.640 uh David. Several weeks ago um a set of criteria 0:22:20.760 --> 0:22:24.280 were laid out. There seemed to be a consensus around 0:22:24.280 --> 0:22:28.240 those criteria. In fact, the Trump administration laid them out 0:22:28.359 --> 0:22:31.720 for how much progress we had to make with respect 0:22:31.800 --> 0:22:34.840 to health, how much death counts had to come down, 0:22:35.160 --> 0:22:39.879 how much testing had to be in place. None of 0:22:39.920 --> 0:22:43.840 those criteria have been matched, and we're still moving ahead. 0:22:44.920 --> 0:22:47.800 And I think those were probably reasonable criteria when we 0:22:47.880 --> 0:22:51.679 laid them out, and I think it's therefore quite risky 0:22:52.200 --> 0:22:55.600