WEBVTT - Bloomberg Wall Street Week - December 29th, 2023 0:00:00.240 --> 0:00:02.640 This is Bloomberg Wall Street Week. 0:00:02.480 --> 0:00:04.400 And we may not have an overall recession, we're having 0:00:04.400 --> 0:00:06.720 a rolling recession to kind of roll looks pretty strongly 0:00:06.720 --> 0:00:08.879 it is when it comes to jobs, the financial stories 0:00:08.920 --> 0:00:11.960 that shape our world. Three major regional bank failures send 0:00:12.000 --> 0:00:14.680 shockwaves through the banking system. We're all trying to figure 0:00:14.680 --> 0:00:17.600 out what to make of generative AI through the eyes 0:00:17.680 --> 0:00:20.800 of the most influential voices. Welcome down, Doctor Paul Krugman, 0:00:20.920 --> 0:00:23.600 Ryan moynihan, a Bank of America, deebro Lair of the 0:00:23.640 --> 0:00:26.280 Paulson Institute, well Then Hubbard of the Columbia Business School. 0:00:26.280 --> 0:00:30.120 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.320 --> 0:00:33.120 Christmas and New Year's come to much of the world, 0:00:33.200 --> 0:00:36.360 but war takes no holiday in the Middle East or 0:00:36.400 --> 0:00:39.199 in Eastern Europe. This is Bloomberg Wall Street Week. I'm 0:00:39.280 --> 0:00:42.839 David Weston, this week's special contributor to Larry Summers of 0:00:42.880 --> 0:00:45.839 Harvard on why we didn't get that recession we expected 0:00:45.880 --> 0:00:46.680 this year, but. 0:00:46.760 --> 0:00:51.000 I'm not terribly surprised that we haven't seen a recession 0:00:51.280 --> 0:00:53.120 in twenty twenty three. 0:00:53.560 --> 0:00:56.920 Very Lovely of the Peterson Institute on China's continuing economic 0:00:57.000 --> 0:01:00.120 struggle to rebound from the COVID lockdown, the Deeps and 0:01:00.200 --> 0:01:00.840 some Malays. 0:01:00.880 --> 0:01:04.520 We think still lies within the population and within people's 0:01:04.560 --> 0:01:05.880 expectations for the future. 0:01:06.120 --> 0:01:08.760 And Scott Bach of Greenhill on what's really going on 0:01:08.880 --> 0:01:10.760 in places like penn and Harvard. 0:01:11.000 --> 0:01:14.520 Dollars are absolutely free to give to whatever organizations they 0:01:14.560 --> 0:01:16.679 want or not to went to withhold for any reason 0:01:16.760 --> 0:01:18.960 they choose to, but they're not shareholders, so I don't 0:01:19.000 --> 0:01:21.440 think they should have a particularly loud voice, and how 0:01:21.440 --> 0:01:33.440 a university is a run. 0:01:35.319 --> 0:01:38.319 Most of global Wall Street spent the week celebrating the holidays, 0:01:38.360 --> 0:01:40.959 taking a break from earnings reports and the FED and 0:01:41.040 --> 0:01:43.760 the eco data, but there was no break for those 0:01:43.800 --> 0:01:47.320 waging war in Ukraine and in Gaza, as Ukrainian forces 0:01:47.400 --> 0:01:50.279 hit a Russian warship and shot down several fighter jets, 0:01:50.480 --> 0:01:53.160 and in the Middle East, Israeli forces continued to seek 0:01:53.160 --> 0:01:56.440 out Hamas militants and Huthi rebels hit targets in the 0:01:56.440 --> 0:02:00.200 Red Sea, disrupting shipping in the region. Huh we will 0:02:00.240 --> 0:02:04.000 contain a ship fleet now currently no longer going through 0:02:04.040 --> 0:02:06.919 the Red Seats. In the world of commerce, holiday shopping 0:02:07.000 --> 0:02:09.840 appeared to be holding up, showing the consumers still have 0:02:10.040 --> 0:02:11.120 some money to spend. 0:02:11.639 --> 0:02:15.200 Unlike the last couple of holiday shopping seasons, we had 0:02:15.240 --> 0:02:16.440 to wait until the very. 0:02:16.360 --> 0:02:19.519 Last minute to see those consumer dollars flow through well. 0:02:19.600 --> 0:02:22.679 Apple got a temporary reprieve of the ban on its 0:02:22.680 --> 0:02:25.040 watches as the Court of Appeals sorts out whether it 0:02:25.120 --> 0:02:29.080 infringe japan covering sensors to monitor blood oxygen levels. 0:02:29.320 --> 0:02:32.040 They have to stay until the US Customs makes a 0:02:32.080 --> 0:02:36.840 decision on a software fix that Apple submitted to the government. 0:02:38.639 --> 0:02:41.600 Equity markets eked out another up week despite a bit 0:02:41.600 --> 0:02:44.280 of a selloff on Friday, as SMP five hundred gained 0:02:44.400 --> 0:02:46.320 just over three tenths of one percent for the week, 0:02:46.400 --> 0:02:49.280 but that put it up a whopping twenty four percent 0:02:49.320 --> 0:02:51.440 for the year as a whole, ending at forty seven 0:02:51.600 --> 0:02:54.280 sixty nine. That's way above the median estimate of our 0:02:54.320 --> 0:02:56.880 Bloomberg els for this year and only a bit under 0:02:56.880 --> 0:02:58.480 the estimate of forty eight to thirty two for the 0:02:58.600 --> 0:03:01.520 end of next year. The NASDAC game just over one 0:03:01.600 --> 0:03:04.200 tenth percent this week, but was up over forty three 0:03:04.240 --> 0:03:06.720 percent for the year overall. It was a very different 0:03:06.760 --> 0:03:09.640 story for bonds, with the yield on the tenure all 0:03:09.720 --> 0:03:12.600 over the place in twenty twenty three, but it ended 0:03:12.639 --> 0:03:14.920 up just about where it started a year ago, just 0:03:15.200 --> 0:03:17.760 under three point nine percent. Take us through it all. 0:03:17.880 --> 0:03:21.519 Welcome now, Chris Ayleman, Chief Investment Officer counselor So, Chris, yeah, 0:03:21.520 --> 0:03:23.400 I have to say you've put me to shame here 0:03:23.520 --> 0:03:26.720 that dashing texedo, your black tie and your champagne boy. 0:03:26.800 --> 0:03:27.680 Happy new year to. 0:03:27.639 --> 0:03:31.960 You, well, apple slider, But that's okay, Happy new year 0:03:32.000 --> 0:03:34.480 to you, David. And it really the year that deserves 0:03:34.480 --> 0:03:36.640 the toast. I'm right there with Larry. 0:03:36.680 --> 0:03:37.560 I mean, I. 0:03:37.480 --> 0:03:40.760 Expected a recession, but we certainly didn't have one. And 0:03:40.800 --> 0:03:44.280 it's a spectacular year of twenty double digit, twenty percent, 0:03:44.720 --> 0:03:45.320 just amazing. 0:03:45.600 --> 0:03:48.080 So what about on the equity side of over twenty 0:03:48.120 --> 0:03:51.600 percent or even over forty percent on the NASDAK how 0:03:51.680 --> 0:03:53.920 much of that was just the anticipation of FED cuts. 0:03:55.040 --> 0:03:58.320 Well, you know, it all happened in the last quarter 0:03:58.400 --> 0:04:00.720 of the year, because really, when you look at the 0:04:00.760 --> 0:04:04.440 equally weighted SMP five hundred that was actually negative back 0:04:04.440 --> 0:04:07.160 at Halloween and then had a huge rally here at 0:04:07.200 --> 0:04:10.840 the end. It was really those seven magnificent socks and 0:04:10.880 --> 0:04:14.160 on the Nasdaq. That really shows up. Best year since 0:04:14.240 --> 0:04:16.800 ninety nine. Now that's a lot to celebrate. But wait 0:04:16.839 --> 0:04:19.240 a minute, think about nineteen ninety nine. For those of 0:04:19.279 --> 0:04:21.800 those that were in the market, you can't forget two 0:04:21.800 --> 0:04:25.400 thousand and one two, so it was a difficult time. 0:04:25.480 --> 0:04:28.920 We'll see how this carries through. But what an incredible 0:04:29.000 --> 0:04:32.279 year for equities. I was wrong. I predicted David that 0:04:32.360 --> 0:04:35.080 the markets would be down this year because well, gee, 0:04:35.080 --> 0:04:38.160 the Fed raised interest rates five hundred and twenty five percent. 0:04:38.520 --> 0:04:41.000 Should have had a rough market. And let's be clear, 0:04:41.279 --> 0:04:44.040 the Fed has an eased ras, but the bond market 0:04:44.080 --> 0:04:46.600 has done it for them, you pointed out, and sorry 0:04:46.640 --> 0:04:49.200 back for it started the year. But my goodness, the 0:04:49.279 --> 0:04:52.320 long bomb dropped almost one hundred basis points since the 0:04:52.360 --> 0:04:56.160 Fed pivot. That's amazing in such a short period of time. 0:04:56.480 --> 0:04:58.440 So what does that say to set up next year 0:04:58.520 --> 0:05:00.479 twenty twenty four? For you? You have a lot of money 0:05:00.480 --> 0:05:02.600 at work. How are you taking a look at twenty 0:05:02.600 --> 0:05:04.200 twenty four? How are you positioning yourself? 0:05:05.160 --> 0:05:08.480 Well, first, I'm celebrating because thanks to this market, all 0:05:08.560 --> 0:05:11.040 time record high for our fund three hundred and twenty 0:05:11.080 --> 0:05:14.120 seven billion dollars, but I have to tell you there 0:05:14.120 --> 0:05:17.320 are certainly dark clouds on the horizon. I think the 0:05:17.360 --> 0:05:20.720 FED has pulled off the soft landing, but we still 0:05:20.720 --> 0:05:22.599 have a lot of risks that we have to get through. 0:05:22.680 --> 0:05:26.400 And you know, hope does triumph over experience. I know 0:05:27.600 --> 0:05:30.240 Larry Summers likes to say that it shouldn't, but sometimes 0:05:30.240 --> 0:05:32.800 it does. And right now I'm hopeful. I think the 0:05:32.839 --> 0:05:35.240 Fed's pulled it off. But when you stepped back and 0:05:35.240 --> 0:05:38.040 look at this market, we've now created a double top 0:05:38.080 --> 0:05:40.279 in the S and P five hundred in December of 0:05:40.360 --> 0:05:44.360 twenty one and now in twenty three. As a as 0:05:44.400 --> 0:05:46.680 an old time technician, that makes me a bit worry. 0:05:47.400 --> 0:05:49.520 That doesn't mean we should have a bear market, but 0:05:49.640 --> 0:05:53.800 I think the president's election cycle we know in history 0:05:53.960 --> 0:05:57.160 is at best a low single digit return in the 0:05:57.240 --> 0:06:02.000 SMP five hundred, I would expect, like the elves, barely 0:06:02.120 --> 0:06:05.920 positive to some of our forecasts that we've looked at 0:06:05.960 --> 0:06:10.040 are slightly negative. So right now people's expectations are certainly 0:06:10.120 --> 0:06:13.760 damped down. In the next year, I hope the public 0:06:13.960 --> 0:06:17.760 and the private markets finally opened back up, because private 0:06:17.800 --> 0:06:21.039 equity and real estate really had a struggle last year. 0:06:21.200 --> 0:06:24.560 The markets were almost frozen. We're starting to see a 0:06:24.600 --> 0:06:30.200 few transactions, but certainly in the commercial office market values 0:06:30.320 --> 0:06:34.240 are going to reprice down dramatically. And then in private 0:06:34.240 --> 0:06:37.159 equity we're starting to see merger Monday here in December, 0:06:37.200 --> 0:06:40.000 every Monday, a few announcements. That's a good sign that 0:06:40.040 --> 0:06:40.920 maybe that market. 0:06:40.720 --> 0:06:41.560 Will open back up. 0:06:41.800 --> 0:06:43.120 So Chris, I'm going to let you get back to 0:06:43.120 --> 0:06:45.160 your celebrations. Really great to have you with us once again. 0:06:45.200 --> 0:06:47.560 Happy New Year, my friend. Great to have you with us. 0:06:48.240 --> 0:06:50.640 Happy New Year and toil walls three week. Thank you 0:06:50.720 --> 0:06:52.040 very much. David, good to see you. 0:06:52.160 --> 0:06:55.760 That's Chris Allen of Calsh's. Year ago, China was emerging 0:06:55.760 --> 0:06:58.600 from its COVID lockdown and just about everyone expected a 0:06:58.600 --> 0:07:01.960 sharp economic upturn. It didn't quite work out that way. 0:07:02.200 --> 0:07:04.080 To explain what happened and give us a sense of 0:07:04.120 --> 0:07:06.400 what's likely to come in the new year, we welcome 0:07:06.440 --> 0:07:08.920 back now Mary Lovely. She's a senior fellow at the 0:07:08.960 --> 0:07:12.120 Peterson Institute for International Economics. Mary, great to have you 0:07:12.160 --> 0:07:15.560 with you, a true China expert. So give us a sense, 0:07:15.600 --> 0:07:18.200 first of all, what went wrong for China economically in 0:07:18.240 --> 0:07:20.240 twenty twenty three because it didn't. It wasn't as good 0:07:20.240 --> 0:07:21.040 as people expected. 0:07:21.920 --> 0:07:24.480 Well, I mean, in some sense, it had things that 0:07:24.520 --> 0:07:26.400 went wrong and things that went right. I mean what 0:07:26.480 --> 0:07:29.440 went wrong, of course, is that one estimated one point 0:07:29.480 --> 0:07:31.640 four million people died from the quick spread of the 0:07:32.400 --> 0:07:34.960 virus through the economy through the population. 0:07:36.200 --> 0:07:37.280 On the other hand, it. 0:07:37.200 --> 0:07:41.360 Did go through the country at very rapid pace, and 0:07:41.600 --> 0:07:44.000 recovery began before I think many of. 0:07:44.000 --> 0:07:45.680 Us expected that it would. 0:07:46.400 --> 0:07:50.760 The second quarter was particularly tough, high levels of unemployment 0:07:51.280 --> 0:07:56.640 fall and industrial production falling consumption. But then by probably 0:07:56.680 --> 0:07:59.440 by the middle of summer, you know, they had basically 0:07:59.520 --> 0:08:03.600 hit the atom and we're beginning to bounce back. The 0:08:03.720 --> 0:08:08.520 bounce has been significant. They're on track to record about 0:08:08.680 --> 0:08:12.160 five or five point two percent GDP growth for twenty 0:08:12.200 --> 0:08:15.560 twenty three. But a deep sense of malaise, we think 0:08:15.640 --> 0:08:19.640 still lies within the population and within people's expectations for 0:08:19.720 --> 0:08:22.880 the future, and that looks ahead to twenty twenty four. 0:08:23.440 --> 0:08:26.320 Mary, you refer to a general malaise going on. What 0:08:26.360 --> 0:08:29.400 can the government, what can presidentation pin do to address 0:08:29.440 --> 0:08:30.080 that malaise. 0:08:31.160 --> 0:08:34.400 I think one of the main things that private businesses 0:08:34.520 --> 0:08:38.200 want is more clarity on how private businesses are going 0:08:38.280 --> 0:08:42.319 to be regulated and how the push toward economic securitization 0:08:43.000 --> 0:08:46.600 is going to impact their businesses. We saw the rollout 0:08:46.760 --> 0:08:50.640 of the counter espionage rule this year that gave a 0:08:50.679 --> 0:08:53.600 lot of businesses a pause. 0:08:54.120 --> 0:08:55.880 What kind of data. 0:08:55.559 --> 0:08:57.240 Could be transferred into. 0:08:57.040 --> 0:09:03.520 Whom It's very unclear what happens when one does transfer 0:09:03.679 --> 0:09:07.080 data that the government decides x posts should not have 0:09:07.160 --> 0:09:11.760 been transferred. I think the government has tried to clarify this, 0:09:11.960 --> 0:09:15.600 but part of the way Chinese legal system works is 0:09:15.640 --> 0:09:19.120 to allow for a significant amount of interpretation. 0:09:19.520 --> 0:09:21.800 And that means, from the point of view. 0:09:21.640 --> 0:09:29.240 Of businesses, vulnerabilities ambiguities that raise uncertainty for them that 0:09:29.600 --> 0:09:30.800 it has a chilling effect. 0:09:31.280 --> 0:09:34.240 What about the debt situation? We hear a lot about 0:09:34.240 --> 0:09:38.160 the debt born, particularly by local governments, and there's some 0:09:38.240 --> 0:09:40.640 move for the national government to take over some of 0:09:40.640 --> 0:09:42.680 the debt design understand it, but there's a lot of 0:09:42.720 --> 0:09:47.520 debt overhanging in China. Is that limit presidencies options in 0:09:47.600 --> 0:09:49.959 dealing with the Malays well, the. 0:09:49.760 --> 0:09:52.840 Central government has taken the unusual step of issuing bonds 0:09:52.880 --> 0:09:55.680 and then providing them to the local governments to spend 0:09:56.800 --> 0:10:00.920 so I think the central government recognizes that, you know, 0:10:00.960 --> 0:10:03.079 local government finances. 0:10:02.480 --> 0:10:03.600 Are quite fragile. 0:10:04.400 --> 0:10:10.320 They have moved also to ask state banks to provide 0:10:10.400 --> 0:10:17.240 more credit for property developers, particularly to complete units which 0:10:17.280 --> 0:10:18.559 have already been purchased. 0:10:19.760 --> 0:10:23.000 So what this does is it. 0:10:22.559 --> 0:10:26.040 Gives new cash to companies which may be unable to 0:10:26.080 --> 0:10:30.200 pay old loans, and it really begins to absorb that 0:10:30.360 --> 0:10:32.640 debt within the state banking system. 0:10:32.640 --> 0:10:34.320 Mary, thank you so very much, really great to have 0:10:34.360 --> 0:10:37.160 you with us. That is Mary Lovely, senior fellow at 0:10:37.160 --> 0:10:41.400 the Peterson Institute. And this is Walter's Week on Bloomberg. 0:10:44.880 --> 0:10:49.120 This is Bloomberg Wall Street Week with David Weston from 0:10:49.240 --> 0:10:50.160 Bloomberg Radio. 0:10:56.880 --> 0:10:59.040 This is Wall Street Week. I'm David Weston, and take 0:10:59.120 --> 0:11:01.720 us through this year that is now ending twenty twenty 0:11:01.760 --> 0:11:03.640 three and look forward to twenty twenty four. We welcome 0:11:03.640 --> 0:11:06.160 to our very special contributor here on wal Street. He's 0:11:06.240 --> 0:11:08.560 Larry Summers of Harvard. So Larry, thanks so much for 0:11:08.600 --> 0:11:10.040 being with us at the very end of the year. 0:11:10.120 --> 0:11:13.480 Here looking back at twenty twenty three, there was an 0:11:13.559 --> 0:11:16.520 issue about inflation, about how we can get on control 0:11:16.559 --> 0:11:19.680 what caused it, and team Transitory led perhaps by Paul 0:11:19.760 --> 0:11:22.000 Krugman said it really was a supply chain thing. You 0:11:22.040 --> 0:11:25.520 would go away. You were more concerned about exactly the 0:11:25.600 --> 0:11:28.640 demand side and what the FED needed to do. Looking 0:11:28.720 --> 0:11:30.720 back on it, which was right, what was wrong? 0:11:31.720 --> 0:11:33.000 I think there's some of both. 0:11:33.960 --> 0:11:37.640 Look to start with, we basically got an outcome that 0:11:37.800 --> 0:11:44.000 was closer to Team Transittories prediction. Inflation came down with policy. 0:11:44.720 --> 0:11:48.800 That is what their opponents were insisting on interest rates, 0:11:48.840 --> 0:11:52.839 far beyond what they were recommending, far beyond what the 0:11:52.880 --> 0:11:57.360 FED was predicting as of almost any date in the 0:11:57.440 --> 0:11:58.280 recent past. 0:11:58.880 --> 0:12:00.960 So the record's a bit ambiguous. 0:12:01.640 --> 0:12:07.400 Yes, absolutely, there have been important supply elements. I have 0:12:07.559 --> 0:12:11.199 always stressed that we never were an eight percent or 0:12:11.240 --> 0:12:15.839 a seven percent inflation country that because of bottlenecks, a 0:12:15.920 --> 0:12:20.480 variety of prices went up, adding to inflation, and they 0:12:20.520 --> 0:12:26.000 would then come down subtracting from inflation. I'm not sure 0:12:26.040 --> 0:12:30.160 we're really a two percent target inflation country in any 0:12:30.280 --> 0:12:33.880 durable sense. I look, for example, at the five point 0:12:33.960 --> 0:12:36.559 two percent wage increase the federal. 0:12:36.200 --> 0:12:39.480 Government just gave at strike activity. 0:12:39.600 --> 0:12:42.520 It's more than it's been in. 0:12:42.400 --> 0:12:46.720 A decade, at still tight labor. 0:12:46.520 --> 0:12:51.840 Markets, at potential geopolitical risks in commodity markets, at the 0:12:51.880 --> 0:12:57.000 fact that house prices have really started to turn back up, 0:12:57.120 --> 0:12:58.640 and I'm far. 0:12:58.400 --> 0:13:02.160 From sure where we're going to go on inflation. 0:13:02.520 --> 0:13:07.480 So to declare that proverbial soft landing to have taken 0:13:07.600 --> 0:13:09.800 place seems. 0:13:09.480 --> 0:13:12.480 To me to be premature. 0:13:13.160 --> 0:13:17.560 So I think we're still in an ambiguous situation. I've 0:13:17.600 --> 0:13:21.800 been saying, David on your show for close to a 0:13:21.920 --> 0:13:26.960 year now that there are three possibilities that the economy. 0:13:26.800 --> 0:13:30.199 Turns down quickly, that. 0:13:30.240 --> 0:13:34.920 The economy achieves the proverbial soft landing, and that in 0:13:34.960 --> 0:13:38.800 a sense, we don't ever achieve a secure landing, and 0:13:38.880 --> 0:13:44.640 inflation never really gets down to target and even reaccelerates. Obviously, 0:13:44.679 --> 0:13:48.760 we didn't see the hard landing in twenty twenty three. 0:13:49.320 --> 0:13:52.160 I was never as sure as many people were that 0:13:52.160 --> 0:13:55.760 that would come, because, as you also know, I've been 0:13:55.880 --> 0:14:00.920 arguing that neutral interest rates have gone up, so policies 0:14:01.000 --> 0:14:05.120 not as contractionary as many people expect, and that the 0:14:05.280 --> 0:14:09.880 impact of interest rates are lower than many people have expected. 0:14:09.960 --> 0:14:14.040 So I'm not terribly surprised that we haven't seen a 0:14:14.120 --> 0:14:20.120 recession in twenty twenty three, and I think there are 0:14:20.840 --> 0:14:23.600 risks looking at some of the credit figures for the 0:14:23.640 --> 0:14:28.680 next While we may achieve that soft landing, I'd certainly 0:14:28.720 --> 0:14:32.560 say it looks better and more likely that it did 0:14:32.800 --> 0:14:36.600 six or eight months ago. I always said that soft 0:14:36.720 --> 0:14:40.760 landings were the triumph of hope over experience, But occasionally 0:14:41.400 --> 0:14:45.280 hope may triumph over experience. And I think there's still 0:14:45.280 --> 0:14:50.560 a risk that the market is probably underestimating that we're 0:14:50.600 --> 0:14:53.440 not going to quite make as much progress on inflation. 0:14:54.120 --> 0:14:56.040 So Lariy, we look at these questions not only because 0:14:56.040 --> 0:14:58.640 they're interesting historically, but to give us some direction for 0:14:58.680 --> 0:15:01.040 the future where we should be had. And so as 0:15:01.080 --> 0:15:03.040 you look at the risk as you describe them, what 0:15:03.080 --> 0:15:05.160 about the symmetry of them, Because some people are concerned 0:15:05.160 --> 0:15:06.800 that we have a bigger risk of a recession if 0:15:06.800 --> 0:15:10.200 we keep type policy than we do of inflation running away. 0:15:10.400 --> 0:15:12.520 Where do you put the balance of the risk between 0:15:12.800 --> 0:15:17.160 recession by overly restrictive policy as opposed to letting inflation 0:15:17.200 --> 0:15:18.000 get ahead of us. 0:15:20.440 --> 0:15:22.520 I think they're both very real risks. 0:15:22.640 --> 0:15:26.119 I'm a little surprised by the view that puts primary 0:15:26.160 --> 0:15:32.200 emphasis on the recession risk, given what's happened to financial 0:15:32.240 --> 0:15:37.200 conditions in the last two months, the stock market's taken 0:15:37.240 --> 0:15:42.360 off again. House prices are now rising at a six 0:15:42.480 --> 0:15:49.360 or seven percent annual rate, long term interest rates and 0:15:49.480 --> 0:15:55.040 with them mortgage rates have come down substantially. I think 0:15:55.120 --> 0:15:59.880 that in a way we've already seen a substantial easy 0:16:00.120 --> 0:16:04.000 the financial conditions, and so I think we'd better be 0:16:04.080 --> 0:16:11.880 a bit careful with respect to the inflation prospect, and 0:16:11.920 --> 0:16:16.560 that continues to be a source of concern for me. 0:16:17.080 --> 0:16:19.760 And finally, Larry, twenty twenty three was a year of 0:16:19.800 --> 0:16:23.480 geopolitical strife. We started it with the war in Ukraine continuing. 0:16:23.720 --> 0:16:26.680 We added then the attack of Hamas on Israel and 0:16:26.720 --> 0:16:29.080 the difficulties that's raised in the Middle East for so 0:16:29.160 --> 0:16:32.000 many people. We have continued tension with China. As you 0:16:32.040 --> 0:16:35.480 look at the macroeconomics of twenty twenty four, how did 0:16:35.520 --> 0:16:36.760 geopolitics fit in. 0:16:40.200 --> 0:16:45.560 The post Cold War? Holiday from history is over. 0:16:46.720 --> 0:16:51.960 The world is once again a very dangerous place, with 0:16:52.080 --> 0:16:59.680 the prospect of war between major powers. The way and 0:16:59.720 --> 0:17:06.280 which which the United States has conceived itself in terms 0:17:06.359 --> 0:17:09.560 of national security. 0:17:09.160 --> 0:17:11.160 Is no longer viable. 0:17:11.960 --> 0:17:16.680 We are going to have to invest substantially more in 0:17:16.800 --> 0:17:24.720 all aspects of national security that ranges from increased defense 0:17:24.800 --> 0:17:32.640 spending well above current projections, to thinking about national security 0:17:32.680 --> 0:17:39.000 issues as we think about our educational system as we 0:17:39.119 --> 0:17:50.440 did after Sputnik, to thinking about our investment in connections 0:17:50.480 --> 0:17:53.280 all over the world. 0:17:53.840 --> 0:17:55.399 Larry, thank you so much for being with us here 0:17:55.400 --> 0:17:56.520 at the end of the year, but thank you for 0:17:56.560 --> 0:17:59.119 all your contributions on Wall Street throughout the year. That 0:17:59.240 --> 0:18:01.640 is Larry Summers, our special contributor. He is, of course 0:18:01.680 --> 0:18:06.480 from Harvard. Coming up the Hamas attack on Israel and 0:18:06.520 --> 0:18:09.480 October led to dramatic developments in the Middle East that 0:18:09.640 --> 0:18:12.840 spilled over on the college campuses in the United States. 0:18:13.080 --> 0:18:15.159 We'll talk with Scott Bock, the former chair of the 0:18:15.280 --> 0:18:18.440 University of Pennsylvania's Board of Trustees, about what happened at 0:18:18.440 --> 0:18:20.280 PENS and what we should learn from it. 0:18:20.720 --> 0:18:24.320 And I don't think trustee should overreact in this situation 0:18:24.400 --> 0:18:26.720 of what could be a short term crisis. 0:18:27.880 --> 0:18:30.119 That's next on Wall Street Week on Bloomberg. 0:18:32.080 --> 0:18:36.320 This is Bloomberg Wall Street Week with David Weston from 0:18:36.400 --> 0:18:37.359 Bloomberg Radio. 0:18:44.200 --> 0:18:47.719 Unrest on college campuses in the aftermath of the Hamas 0:18:47.760 --> 0:18:51.320 attacks on Israel, American University has been thrust into a 0:18:51.440 --> 0:18:55.960 national fight over lines between healthy debate and destructive invective. 0:18:56.560 --> 0:19:00.520 We've had major donors condemned administrations for tolerating co where 0:19:00.560 --> 0:19:02.879 some students no longer feel safe. 0:19:03.160 --> 0:19:06.879 The underlying culture that permitted this to happen is just 0:19:06.920 --> 0:19:09.600 so strong, and until there is a moment of self 0:19:09.600 --> 0:19:12.720 reflection where we're not dealing with just anti Semitism, we're 0:19:12.760 --> 0:19:15.360 dealing with the culture that allowed this to happen, there 0:19:15.400 --> 0:19:17.359 really is going to be no progress, and to date 0:19:17.760 --> 0:19:19.919 there's been no progress. There's really not a question of 0:19:19.960 --> 0:19:23.679 free speech. This is a question of favored speech and 0:19:23.720 --> 0:19:28.199 disfavored speech, and an institutional psychology and an institutional culture. 0:19:28.400 --> 0:19:31.639 We've had college presidents called before Congress and asked to 0:19:31.680 --> 0:19:33.880 condemn calls for genocide. 0:19:34.119 --> 0:19:38.120 I am asking specifically calling for the genocide of Jews? 0:19:38.720 --> 0:19:41.320 Does that constitute bullying? Harassment? 0:19:41.920 --> 0:19:45.200 If it is directed and severer pervasive, it is harassment. 0:19:45.720 --> 0:19:46.800 So the answer is yes. 0:19:47.720 --> 0:19:48.160 It is a. 0:19:48.119 --> 0:19:50.720 Context dependent decision, Congresswoman, It's. 0:19:50.560 --> 0:19:54.040 A context dependent decision. That's your testimony today. Calling for 0:19:54.080 --> 0:19:57.719 the genocide of Jews is depending upon the context, that 0:19:57.840 --> 0:19:59.320 is not bullying or harassment. 0:20:00.160 --> 0:20:02.840 We've had former college presidents insists that there's been a 0:20:02.880 --> 0:20:06.600 basic breakdown in who's responsible for what's going on in 0:20:06.640 --> 0:20:08.280 our academic communities. 0:20:08.520 --> 0:20:14.119 I think for some years now they have been substantially 0:20:14.720 --> 0:20:21.600 a wall, a wall as the climate of hypersensitivity has developed, 0:20:22.560 --> 0:20:27.679 a wall as the relationship between the university and external 0:20:27.720 --> 0:20:31.600 communities has broken. 0:20:31.200 --> 0:20:34.240 Down, leaving us to yearn for a world where we 0:20:34.240 --> 0:20:39.360 can disagree, even strongly disagree, without deterring others from speaking out. 0:20:39.840 --> 0:20:42.159 I suspect something will happen, but I don't know that 0:20:42.280 --> 0:20:45.000 Congress will do anything. I think the university boards are 0:20:45.040 --> 0:20:47.440 probably going to be more sensitive to these issues. There 0:20:47.520 --> 0:20:49.480 is going to be more security for certain students there 0:20:49.520 --> 0:20:51.240 for sure, But I think there'll be more of a 0:20:51.560 --> 0:20:54.280 move towards a University of Cago approach where more people 0:20:54.320 --> 0:20:56.719 are allowed to say what they think without feeling that 0:20:56.760 --> 0:21:03.520 if they say something that's unpopular they'll be criticized or harmful, and. 0:21:03.520 --> 0:21:05.520 To take us through what some of these speechs look 0:21:05.560 --> 0:21:07.960 like from the inside. Welcome now, Scott back. He is 0:21:08.080 --> 0:21:11.280 chairman of Green Hill. Until recently he was chair of 0:21:11.320 --> 0:21:14.439 the Board of Trustees of the University of Pennsylvania. Welcome 0:21:14.440 --> 0:21:16.639 to Wall Street. WEEG really appreciate you being here, Scott, 0:21:16.960 --> 0:21:18.400 First of all, give us a sense from the insight, 0:21:18.440 --> 0:21:20.000 because yourself from the inside. What do you think is 0:21:20.080 --> 0:21:22.719 going on and what should we learn from the experience? 0:21:24.040 --> 0:21:25.679 Well, look, I think we've had a bit of a 0:21:25.720 --> 0:21:29.000 crisis on some of the leading elite universities in America 0:21:29.160 --> 0:21:31.479 in the last few months, and we haven't had one 0:21:31.520 --> 0:21:33.840 of a long time. It's really been a long period 0:21:33.880 --> 0:21:37.360 of quiet and progress at those schools. And so there 0:21:37.359 --> 0:21:39.200 are a number of questions that have been raised and 0:21:39.240 --> 0:21:39.960 haven't been raised. 0:21:39.840 --> 0:21:40.480 In quite a while. 0:21:41.480 --> 0:21:44.399 And what about the response to people a little rusty? 0:21:44.440 --> 0:21:46.440 I mean, I went to school back in the seventies 0:21:46.440 --> 0:21:49.000 when there was a lot of this going on. In fact, 0:21:49.119 --> 0:21:52.120 the administrations were used to dealing with demonstrations. Is part 0:21:52.119 --> 0:21:54.520 of the issues that, in fact the administrations haven't been 0:21:54.560 --> 0:21:55.879 used to this day is to have to get the 0:21:55.920 --> 0:21:56.760 rule book back out. 0:21:58.000 --> 0:21:59.200 I think that's exactly right. 0:21:59.240 --> 0:22:02.320 And frankly, trust these having given governance a thought in 0:22:02.359 --> 0:22:03.920 a very long period of time, you don't tend to 0:22:03.960 --> 0:22:06.280 think about governance where everything's going great. But when you 0:22:06.359 --> 0:22:09.880 have something that creates a controversy, suddenly people look back 0:22:09.920 --> 0:22:12.040 at that. And I think a lot of trustees. You know, 0:22:12.160 --> 0:22:15.120 maybe have forgotten that the way universities are governed, that's 0:22:15.160 --> 0:22:18.959 a combination of trustees, a president, and the administration, and 0:22:19.000 --> 0:22:20.920 also the faculty play an important role. 0:22:21.440 --> 0:22:24.359