1 00:00:00,160 --> 00:00:03,040 Speaker 1: Well, John, this is the inflation that you're looking for, 2 00:00:03,120 --> 00:00:07,520 Speaker 1: and it comes in harder than anticipated. CPI up eight 3 00:00:07,520 --> 00:00:10,360 Speaker 1: tenths of eight percent. That pushes the year over year 4 00:00:10,440 --> 00:00:13,520 Speaker 1: CPI to four point two percent. Let's take a look 5 00:00:13,520 --> 00:00:16,880 Speaker 1: at the core rate up nine tenths of a percent. 6 00:00:17,280 --> 00:00:19,840 Speaker 1: There's the one that's gonna worry Wall Street. It's three 7 00:00:19,840 --> 00:00:22,239 Speaker 1: times the amount in March, and on a year over 8 00:00:22,280 --> 00:00:29,480 Speaker 1: your basis, we're up to Hello, and welcome to Stephanomics, 9 00:00:29,480 --> 00:00:32,120 Speaker 1: the podcast that brings the global economy to you. If 10 00:00:32,120 --> 00:00:35,199 Speaker 1: you're under forty five listening to this in America, Europe 11 00:00:35,280 --> 00:00:38,000 Speaker 1: or Japan, it's a fair bet you've never given much 12 00:00:38,000 --> 00:00:41,040 Speaker 1: thought to inflation. The price of some things like a 13 00:00:41,080 --> 00:00:44,120 Speaker 1: college education, has gone up a lot in your lifetime, 14 00:00:44,600 --> 00:00:46,479 Speaker 1: but by and large, the price of things we buy 15 00:00:46,520 --> 00:00:50,480 Speaker 1: every day has been fairly stable, even gone down. In fact, 16 00:00:50,640 --> 00:00:54,720 Speaker 1: it is deflation falling prices that's more often kept policymakers 17 00:00:54,800 --> 00:00:58,040 Speaker 1: up at night, not the kind of double digit inflation 18 00:00:58,120 --> 00:01:00,920 Speaker 1: rates we saw in the nineteen seventies. But is that 19 00:01:01,120 --> 00:01:04,640 Speaker 1: all about to change? Well that's the fear that started 20 00:01:04,640 --> 00:01:08,920 Speaker 1: to rattle financial markets this week, especially after that unexpectedly 21 00:01:09,000 --> 00:01:12,319 Speaker 1: high April inflation number came through in the US. That 22 00:01:12,440 --> 00:01:15,200 Speaker 1: headline annual rate of four point two percent that you 23 00:01:15,319 --> 00:01:18,479 Speaker 1: just heard about is the highest since two thousand and nine. 24 00:01:19,440 --> 00:01:22,880 Speaker 1: It's also been seized on by Joe Biden's political opponents, 25 00:01:22,920 --> 00:01:26,679 Speaker 1: who put it together with recent disappointingly weak jobs growth 26 00:01:27,000 --> 00:01:29,880 Speaker 1: and say his spending plans are going to bring on 27 00:01:30,080 --> 00:01:35,080 Speaker 1: seventies style stag inflation. Doesn't help that drivers in parts 28 00:01:35,080 --> 00:01:37,800 Speaker 1: of the US have been reminded of that era this 29 00:01:37,840 --> 00:01:40,800 Speaker 1: week waiting in long lines for a tank of gas 30 00:01:41,080 --> 00:01:44,280 Speaker 1: thanks to a cyber attack on a big fuel pipeline. 31 00:01:44,520 --> 00:01:46,640 Speaker 1: Now we'll get the full story on that in a 32 00:01:46,680 --> 00:01:51,080 Speaker 1: minute from Bloomberg Energy supremo Javier Blasts. I'm also going 33 00:01:51,120 --> 00:01:53,240 Speaker 1: to talk to a Wall Street economist with his own 34 00:01:53,280 --> 00:01:57,040 Speaker 1: take on the great inflation debate. But first we go 35 00:01:57,120 --> 00:02:01,000 Speaker 1: to Chief Asia Economy correspondent and occurrent in Hong Kong 36 00:02:01,480 --> 00:02:04,240 Speaker 1: to find out where at least some of this inflation 37 00:02:04,280 --> 00:02:18,760 Speaker 1: pressure has been coming from. US Exporters are crying foul 38 00:02:18,919 --> 00:02:23,040 Speaker 1: as the price of shipping containers spikes are Semiconductors are 39 00:02:23,080 --> 00:02:26,000 Speaker 1: the brains that power technology, and right now there is 40 00:02:26,040 --> 00:02:29,480 Speaker 1: a message shortage of those brains. This is now day four, 41 00:02:29,680 --> 00:02:33,520 Speaker 1: one of the world's largest container ships, completely bringing traffic 42 00:02:33,560 --> 00:02:36,640 Speaker 1: in the Suez Canal to a standstill. It's hard to 43 00:02:36,680 --> 00:02:40,480 Speaker 1: imagine China's factories have spent months absorbing shocks from soaring 44 00:02:40,520 --> 00:02:44,720 Speaker 1: prices for shipping containers under raw materials, a scramble for 45 00:02:44,760 --> 00:02:49,760 Speaker 1: semi conductors, and even the blockage of the Suez Canal. Now, 46 00:02:50,120 --> 00:02:54,200 Speaker 1: manufacturers in the world's biggest trading nation are under pressure 47 00:02:54,280 --> 00:02:58,400 Speaker 1: to pass on these charges to their overseas customers, potentially 48 00:02:58,440 --> 00:03:02,600 Speaker 1: adding to global inflation pressu years Briant Chan is president 49 00:03:02,760 --> 00:03:06,959 Speaker 1: of Windward Corporation Limited and among the manufacturers grappling with 50 00:03:07,200 --> 00:03:10,200 Speaker 1: the price surge. I went to visit his officers in 51 00:03:10,280 --> 00:03:15,440 Speaker 1: Hong Kong to hear what's happening. One has been very 52 00:03:15,520 --> 00:03:18,320 Speaker 1: challenging year and this time around. You know, we are 53 00:03:18,360 --> 00:03:22,280 Speaker 1: seeing increases in pretty much everything that we we we 54 00:03:22,440 --> 00:03:29,800 Speaker 1: purchase the plastic resin, We're seeing increases in electronic components, packaging, 55 00:03:30,520 --> 00:03:34,839 Speaker 1: metal parts, so pretty much, you know, everything that it's 56 00:03:34,880 --> 00:03:37,440 Speaker 1: needed to to you know, go into the manufacturing of 57 00:03:37,440 --> 00:03:41,760 Speaker 1: a product. Manufacturers in China are well used to volatile 58 00:03:41,800 --> 00:03:45,000 Speaker 1: price wings, but this time, they say the breath of 59 00:03:45,120 --> 00:03:48,680 Speaker 1: cost increases is unusual, So I'm just going to use 60 00:03:48,720 --> 00:03:52,160 Speaker 1: sort of a random product. It's more like a consumer product. 61 00:03:52,200 --> 00:03:55,480 Speaker 1: This is a camera that a hunter will will typically 62 00:03:55,600 --> 00:03:59,600 Speaker 1: use to track the motions of animals in the wild, 63 00:03:59,680 --> 00:04:01,960 Speaker 1: so you know, to help them when they go hunting. 64 00:04:02,280 --> 00:04:07,120 Speaker 1: The electronics components make up about the cameras costs and 65 00:04:07,200 --> 00:04:11,400 Speaker 1: have risen roughly ten Other components, such as the packaging, 66 00:04:11,800 --> 00:04:14,640 Speaker 1: make up over tenth of total costs, and those have 67 00:04:14,760 --> 00:04:17,760 Speaker 1: also risen about ten percent in price. So when we 68 00:04:17,880 --> 00:04:21,960 Speaker 1: factor in all the different categories of material and the 69 00:04:22,279 --> 00:04:26,840 Speaker 1: respective increases, this comes in out of US increasing costs 70 00:04:26,880 --> 00:04:32,760 Speaker 1: for US. The big unknown is how long these higher 71 00:04:32,800 --> 00:04:36,680 Speaker 1: costs will last. The optimistic view is that the supply 72 00:04:36,800 --> 00:04:41,080 Speaker 1: chain blockages caused by COVID nineteen disruption might just smooth out. 73 00:04:41,520 --> 00:04:45,000 Speaker 1: Manufacturers say they're looking for workarounds and cost savings to 74 00:04:45,120 --> 00:04:48,200 Speaker 1: limit the need to pass on costs. Christopher Say is 75 00:04:48,279 --> 00:04:52,479 Speaker 1: chief executive officer of Musical Electronics Limited, which makes products 76 00:04:52,520 --> 00:04:55,560 Speaker 1: such as Bluetooth speakers and high powered home stereos for 77 00:04:55,600 --> 00:04:58,120 Speaker 1: the US market. We have two ways to do it. 78 00:04:58,640 --> 00:05:01,080 Speaker 1: First of all, you used to do the re engineering 79 00:05:01,720 --> 00:05:04,960 Speaker 1: trying to save some courses from the re engineering. And 80 00:05:05,000 --> 00:05:08,520 Speaker 1: the second is how to do it in a better way. 81 00:05:08,839 --> 00:05:12,720 Speaker 1: That means how it can be more efficiency in production, 82 00:05:13,160 --> 00:05:15,679 Speaker 1: so that may save some money. But he also says 83 00:05:15,720 --> 00:05:18,760 Speaker 1: the pressures are real. He cites, for example, a shortage 84 00:05:18,800 --> 00:05:22,840 Speaker 1: of integrated circuits, which are crucial components for electronics. It 85 00:05:23,040 --> 00:05:27,080 Speaker 1: can be raised up from a year ago, let's say 86 00:05:27,200 --> 00:05:31,640 Speaker 1: ten dara to twenty dollars to even fairly or folly dollars, 87 00:05:32,440 --> 00:05:36,159 Speaker 1: so the difference could be very big and healed. Not 88 00:05:36,279 --> 00:05:39,840 Speaker 1: only that, also the delivery the time is much longer 89 00:05:39,880 --> 00:05:44,200 Speaker 1: than what we are expecting. Uh, it's very difficult. We 90 00:05:44,360 --> 00:05:48,080 Speaker 1: have to inform the customer that for the current business 91 00:05:48,200 --> 00:05:50,719 Speaker 1: that we have taken the orders, we have no choice. 92 00:05:50,760 --> 00:05:55,760 Speaker 1: Will uh just manufacturing according to the price that we 93 00:05:55,839 --> 00:05:59,480 Speaker 1: have come, that we have a creed. But a year later, 94 00:05:59,640 --> 00:06:02,640 Speaker 1: on nine months later, a sthority that we have to 95 00:06:02,839 --> 00:06:08,760 Speaker 1: increase our past all our increase the courses to our customers. 96 00:06:09,400 --> 00:06:13,880 Speaker 1: Chang Chu, Bloomberg Economics Chief Asia Economists, says the soaring 97 00:06:13,920 --> 00:06:17,120 Speaker 1: producer price index in China is only one part of 98 00:06:17,160 --> 00:06:22,000 Speaker 1: a global jigsaw. My sense is at this point China's 99 00:06:22,120 --> 00:06:26,200 Speaker 1: PPR development is part of the global story rather than 100 00:06:26,279 --> 00:06:29,800 Speaker 1: being the single factor driving it, and that several things 101 00:06:29,880 --> 00:06:34,159 Speaker 1: going on for the global producer prices um Clearly there's 102 00:06:34,200 --> 00:06:38,720 Speaker 1: a search in demand. Economies are coming back, they are 103 00:06:38,760 --> 00:06:44,919 Speaker 1: opening up, the global manufacturing sector is booming. I also 104 00:06:44,920 --> 00:06:48,120 Speaker 1: spoke to Ding Chuang, he's chief economist for Greater China 105 00:06:48,160 --> 00:06:51,800 Speaker 1: and North Asia at Standard Chartered. His research shows a 106 00:06:51,839 --> 00:06:56,279 Speaker 1: correlation between China's producer prices and the US consumer inflation, 107 00:06:56,760 --> 00:07:00,400 Speaker 1: so we may see PPR inflation at seven percent handle 108 00:07:00,839 --> 00:07:04,320 Speaker 1: around in the middle of the year. We cannot conclude 109 00:07:04,480 --> 00:07:09,880 Speaker 1: for sure that China's PPI increase causes higher CPI inflation 110 00:07:09,880 --> 00:07:12,360 Speaker 1: in the US and the rest of the rest of 111 00:07:12,360 --> 00:07:16,320 Speaker 1: the world, but there is anecdotal evidence that the Chinese 112 00:07:16,520 --> 00:07:21,120 Speaker 1: exporters have gained pricing power recently. And he says where 113 00:07:21,200 --> 00:07:24,880 Speaker 1: China goes, the world follows because the fact that China 114 00:07:24,960 --> 00:07:28,880 Speaker 1: recovered faster than the rest of the world inflation indicating 115 00:07:29,240 --> 00:07:34,160 Speaker 1: in China may have a leading role in predicting inflation 116 00:07:34,280 --> 00:07:37,880 Speaker 1: in the rest of the world. However it plays out, 117 00:07:38,160 --> 00:07:40,960 Speaker 1: the last few months have been pretty volatile for China's 118 00:07:41,000 --> 00:07:45,680 Speaker 1: manufacturers and few expect a circuit breaker anytime soon. When 119 00:07:45,760 --> 00:07:48,840 Speaker 1: woods chance, he's higher prices as inevitable. But in the 120 00:07:48,920 --> 00:07:53,680 Speaker 1: situation where increases are across a range of different categories 121 00:07:53,800 --> 00:07:57,120 Speaker 1: and at a very steep rate, it's certainly not something 122 00:07:57,160 --> 00:08:06,960 Speaker 1: that a manufacturer is able to bear. You know a well, 123 00:08:07,120 --> 00:08:10,400 Speaker 1: talking of supply bottlenecks and the potential for inflation, you 124 00:08:10,480 --> 00:08:14,200 Speaker 1: might remember I spoke to Bloomberg's chief energy correspondent, Heavier Blasts, 125 00:08:14,240 --> 00:08:17,200 Speaker 1: earlier in the year when that big ship got stuck 126 00:08:17,240 --> 00:08:20,920 Speaker 1: in the Panama Canal. We talked then about the key 127 00:08:20,960 --> 00:08:24,480 Speaker 1: bits of US infrastructure which could really hurt if they 128 00:08:24,520 --> 00:08:28,360 Speaker 1: got interrupted. Somewhat unnervingly, one of them, the country's biggest 129 00:08:28,360 --> 00:08:32,440 Speaker 1: petroleum pipeline, has just been hit by a massive cyber attack, 130 00:08:32,920 --> 00:08:35,920 Speaker 1: raising fears that gas stations all over the US could 131 00:08:35,960 --> 00:08:39,480 Speaker 1: start to run dry. Have you just tell us quickly? 132 00:08:39,480 --> 00:08:41,880 Speaker 1: I guess you know what happened and why is this 133 00:08:41,960 --> 00:08:46,400 Speaker 1: pipeline so important? The Colonial Pipeline is the most important 134 00:08:46,800 --> 00:08:49,599 Speaker 1: oil products by a line in the United States. It 135 00:08:49,720 --> 00:08:54,640 Speaker 1: transports gasoline, diesel, and get fuel from the US Gulf 136 00:08:54,640 --> 00:08:57,080 Speaker 1: of Mexico Coast, where most of the refiners in the 137 00:08:57,200 --> 00:09:02,840 Speaker 1: US are located into the cities and big suburbs of 138 00:09:03,080 --> 00:09:06,520 Speaker 1: the East cause of the United States. So everything from 139 00:09:06,679 --> 00:09:10,000 Speaker 1: think about Atlanta all the way up to New York 140 00:09:10,080 --> 00:09:13,040 Speaker 1: and and be John and and it transport about two 141 00:09:13,120 --> 00:09:16,480 Speaker 1: point five million barrels a day of refined products. Used 142 00:09:16,520 --> 00:09:19,800 Speaker 1: to put that in context, that's more than the old 143 00:09:19,800 --> 00:09:23,720 Speaker 1: the oil demand of Germany, just in one single pipeline. 144 00:09:24,080 --> 00:09:27,199 Speaker 1: And what happened is that the pipeline company called Colonial 145 00:09:27,320 --> 00:09:31,560 Speaker 1: got hacked on a cyber attack on Friday, and since 146 00:09:31,600 --> 00:09:36,000 Speaker 1: then the pipeline has been shut down and UM refined 147 00:09:36,040 --> 00:09:38,680 Speaker 1: products are beginning to run quite shortly in the United States. 148 00:09:39,120 --> 00:09:41,959 Speaker 1: So that means that that means gas stations, petrol stations 149 00:09:42,000 --> 00:09:44,560 Speaker 1: up and down the country actually finding they're running out 150 00:09:44,600 --> 00:09:48,640 Speaker 1: of petrol. Yes, and and there are two concerns here. 151 00:09:48,800 --> 00:09:53,040 Speaker 1: One is that obviously those gasoline UM those fuel stations 152 00:09:53,080 --> 00:09:56,720 Speaker 1: are not getting the supply as regularly as they used 153 00:09:56,720 --> 00:10:00,160 Speaker 1: to uh, and they're draining down their stocks. But all so, 154 00:10:00,240 --> 00:10:03,000 Speaker 1: because many citizens are hearing the news about the hack, 155 00:10:03,520 --> 00:10:06,920 Speaker 1: the first thing that they're they're they're doing is well, 156 00:10:07,080 --> 00:10:09,800 Speaker 1: I should just put more gasoline on my car. They're 157 00:10:09,880 --> 00:10:12,120 Speaker 1: going into the gas stations, and there's a bit of 158 00:10:12,200 --> 00:10:15,400 Speaker 1: panic buying and that is accelerating the demands. Who is 159 00:10:15,400 --> 00:10:17,560 Speaker 1: making the things a bit worse? So when's it going 160 00:10:17,600 --> 00:10:21,320 Speaker 1: to be fixed? While Colonial has said that they're hoping 161 00:10:21,400 --> 00:10:27,240 Speaker 1: to restore substantially all services by the end of the week, 162 00:10:27,679 --> 00:10:30,439 Speaker 1: but they're not telling much to their customers, the big 163 00:10:30,480 --> 00:10:34,480 Speaker 1: oil companies, the big gas station companies and um and 164 00:10:34,640 --> 00:10:38,200 Speaker 1: and the consign is that this maybe go a bit longer. 165 00:10:38,480 --> 00:10:42,680 Speaker 1: It's also not very clear whether Colonial really have a 166 00:10:42,760 --> 00:10:45,840 Speaker 1: plan to restore everything. At the moment, they have been 167 00:10:45,880 --> 00:10:48,520 Speaker 1: able to restore service on a very small portion of 168 00:10:48,559 --> 00:10:51,839 Speaker 1: the pipeline, and they're doing it manually rather than using 169 00:10:51,880 --> 00:10:55,679 Speaker 1: any technology and anything automatic. And then when people listening 170 00:10:55,720 --> 00:10:57,080 Speaker 1: to this, it could be that it will have been 171 00:10:57,240 --> 00:10:59,320 Speaker 1: it will have been resolved, but of course it's still 172 00:10:59,400 --> 00:11:04,400 Speaker 1: raise questions. Is about longer term how well prepared this 173 00:11:04,600 --> 00:11:08,600 Speaker 1: pipeline other key bits of infrastructure are against this kind 174 00:11:08,640 --> 00:11:12,959 Speaker 1: of attack. Yes, and and Colonial is not unique. I mean, 175 00:11:12,960 --> 00:11:15,760 Speaker 1: it's a very large pipeline, but around the world there 176 00:11:15,760 --> 00:11:20,360 Speaker 1: are similar key pieces of infrastructure that we take for 177 00:11:20,440 --> 00:11:25,880 Speaker 1: granted to transport crude oil, refined products, sometimes natural gas, 178 00:11:26,080 --> 00:11:29,679 Speaker 1: or the electricity in network agreed, and the fact that 179 00:11:29,920 --> 00:11:34,840 Speaker 1: Colonial was suffered this cyber attack and it was in 180 00:11:34,840 --> 00:11:39,000 Speaker 1: a way easy to shut down completely. The whole pipeline 181 00:11:39,240 --> 00:11:41,080 Speaker 1: is really getting a lot of people in the oil 182 00:11:41,120 --> 00:11:44,839 Speaker 1: industry and the wider energy industry very consigned because they 183 00:11:44,880 --> 00:11:47,920 Speaker 1: think that it is possible that happened to Colonial, it 184 00:11:47,960 --> 00:11:51,080 Speaker 1: may be possible in other pieces of key infrastructure. Do 185 00:11:51,120 --> 00:11:53,240 Speaker 1: we think they've paid ransom? Is that going to be 186 00:11:53,320 --> 00:11:57,240 Speaker 1: part of the solution. Well, certainly they have been attacked 187 00:11:57,240 --> 00:11:59,960 Speaker 1: by a ransomware that they are being asked to pay. 188 00:12:00,040 --> 00:12:04,000 Speaker 1: It's on some money, um. And interestingly, the United States 189 00:12:04,040 --> 00:12:07,760 Speaker 1: government is saying publicly that they are not advising one 190 00:12:07,840 --> 00:12:10,840 Speaker 1: way or the other to the company, which I suppose 191 00:12:10,920 --> 00:12:14,160 Speaker 1: that it means that at some point perhaps Colonial will pay, 192 00:12:14,360 --> 00:12:16,360 Speaker 1: so they're not. So it is interesting they're not saying 193 00:12:16,520 --> 00:12:18,880 Speaker 1: what they would normally do when people, when people get 194 00:12:19,600 --> 00:12:22,320 Speaker 1: taking hostage, that you that you mustn't given. Is this 195 00:12:22,400 --> 00:12:24,840 Speaker 1: by far the biggest attack on this kind of critical 196 00:12:24,840 --> 00:12:27,880 Speaker 1: infrastructure that we've seen? Has there been Have there been 197 00:12:27,920 --> 00:12:31,680 Speaker 1: other attacks in other countries. It's certainly the biggest attack 198 00:12:31,760 --> 00:12:34,040 Speaker 1: of this kind that we have seen in the United States. 199 00:12:34,080 --> 00:12:39,080 Speaker 1: We have seen attacks to the electricity network and developing countries, 200 00:12:39,440 --> 00:12:42,040 Speaker 1: and we saw a couple of very big and prominent 201 00:12:42,040 --> 00:12:47,479 Speaker 1: attacks in Saudi Arabia against Saudia Arangko and another petrochemical company, 202 00:12:47,520 --> 00:12:51,040 Speaker 1: but that they didn't affect production, but they really affected 203 00:12:51,400 --> 00:12:55,560 Speaker 1: lots of computers in in in offices and and and 204 00:12:55,679 --> 00:12:58,079 Speaker 1: more kind of the back and and and middle office 205 00:12:58,120 --> 00:13:01,000 Speaker 1: of those companies. So certainly the this is UH, this 206 00:13:01,080 --> 00:13:04,560 Speaker 1: is an escalation, but this is not the first time 207 00:13:04,600 --> 00:13:08,920 Speaker 1: that we have seen UH cyber criminals targetting the energy infrastructure. 208 00:13:09,240 --> 00:13:14,400 Speaker 1: I guess finally, we're obviously thinking in this program about inflation, 209 00:13:15,080 --> 00:13:20,480 Speaker 1: long term risk of or possibility that inflation is really 210 00:13:20,480 --> 00:13:24,840 Speaker 1: coming back. Should we expect gas prices to rise as 211 00:13:24,840 --> 00:13:26,320 Speaker 1: a result of this? You think there's gonna be any 212 00:13:26,400 --> 00:13:31,640 Speaker 1: lasting effect. We have seen already UM an increasing casual 213 00:13:31,720 --> 00:13:35,600 Speaker 1: in prices, retail prices in the United States on average 214 00:13:35,600 --> 00:13:39,240 Speaker 1: in the country heat on Tuesday at six and a 215 00:13:39,240 --> 00:13:43,160 Speaker 1: half year high of almost three dollar per gallon, and 216 00:13:43,240 --> 00:13:46,320 Speaker 1: we probably we're going to see sustain sustained prices for 217 00:13:46,360 --> 00:13:50,240 Speaker 1: the next few days until the situation is resolved. Beyond that, 218 00:13:50,800 --> 00:13:53,000 Speaker 1: it's a bit of a question mark. But with with 219 00:13:53,080 --> 00:13:56,280 Speaker 1: the U S economy opening up and more people hitting 220 00:13:56,320 --> 00:13:59,280 Speaker 1: the roads, probably we're going to continue to see pressure 221 00:13:59,320 --> 00:14:02,599 Speaker 1: on on gasual prices, and I will not be surprising 222 00:14:02,679 --> 00:14:06,760 Speaker 1: we see three aspergallon um for most of the of 223 00:14:06,880 --> 00:14:09,240 Speaker 1: the of the salmony in the US that that will 224 00:14:09,320 --> 00:14:12,679 Speaker 1: be the highest prices that US drivers have phase since 225 00:14:12,720 --> 00:14:15,760 Speaker 1: two thousand and fourteen, and in many other parts of 226 00:14:15,800 --> 00:14:18,320 Speaker 1: the world, certainly in Europe, that would be such a bargain. 227 00:14:19,000 --> 00:14:22,400 Speaker 1: Have your blast, Thank you very much, as ever my pleasure. 228 00:14:30,080 --> 00:14:33,640 Speaker 1: Now on Stephanomics, we tend to talk often to academic 229 00:14:33,680 --> 00:14:38,240 Speaker 1: economists and policy makers about the trends shaping the global economy, 230 00:14:38,480 --> 00:14:42,040 Speaker 1: but of course anyone investing long term in businesses in 231 00:14:42,080 --> 00:14:44,600 Speaker 1: the US and around the world also has to have 232 00:14:44,600 --> 00:14:46,480 Speaker 1: a view on much of that, which is why I 233 00:14:46,480 --> 00:14:49,280 Speaker 1: thought we'd check in with Jason Thomas, the head of 234 00:14:49,320 --> 00:14:54,000 Speaker 1: global research at the Carlisle Group, the US based investment company, 235 00:14:54,400 --> 00:14:58,000 Speaker 1: and Jason, we're going to talk about the very long term. 236 00:14:58,000 --> 00:15:00,440 Speaker 1: But what's your what's your response to the this week's 237 00:15:00,440 --> 00:15:04,600 Speaker 1: inflation news was it? Was it as dramatic as all that? Well, 238 00:15:04,800 --> 00:15:07,320 Speaker 1: I think this is something that that we anticipated there 239 00:15:07,440 --> 00:15:11,320 Speaker 1: there's two effects at work. Number one, base effects, when 240 00:15:11,320 --> 00:15:15,400 Speaker 1: when you look at April one, you're measured relative to 241 00:15:15,960 --> 00:15:19,120 Speaker 1: a lockdown economy twelve months ago, So so you over 242 00:15:19,160 --> 00:15:21,600 Speaker 1: your inflation is going to be higher as a consequence 243 00:15:21,640 --> 00:15:26,280 Speaker 1: of that. Secondly, there is genuine inflationary pressure, and it's 244 00:15:26,280 --> 00:15:31,120 Speaker 1: related to shortages and under production of durable goods in 245 00:15:32,320 --> 00:15:35,800 Speaker 1: relative to demand for for many of those products, and 246 00:15:35,840 --> 00:15:39,600 Speaker 1: so this is ongoing. I think that the shortages persist, 247 00:15:39,720 --> 00:15:42,640 Speaker 1: the price pressures persist, and I think that we're going 248 00:15:42,680 --> 00:15:46,880 Speaker 1: to see in months ahead inflation somewhat above the FEDS 249 00:15:46,880 --> 00:15:50,320 Speaker 1: two percent target. But if there's if there's a relative 250 00:15:50,360 --> 00:15:53,240 Speaker 1: shortage of things that people want to buy, shouldn't we 251 00:15:53,280 --> 00:15:56,520 Speaker 1: worry about that getting a lot worse when the economy 252 00:15:56,520 --> 00:16:01,440 Speaker 1: starts to reopens. No, you know it really interestingly, reopening 253 00:16:01,680 --> 00:16:04,640 Speaker 1: it is not the problem. In fact, it's the solution. 254 00:16:05,640 --> 00:16:08,280 Speaker 1: So I think the more that one studies the origin 255 00:16:08,520 --> 00:16:12,400 Speaker 1: of this inflationary pressure, the more comfortable here she is 256 00:16:12,960 --> 00:16:16,760 Speaker 1: that it's ultimately transitory in nature. And the reason I 257 00:16:16,800 --> 00:16:19,880 Speaker 1: say that is when we look back at you had 258 00:16:19,920 --> 00:16:24,840 Speaker 1: a very big decline in the production of durable goods 259 00:16:24,840 --> 00:16:29,560 Speaker 1: and manufacturing and essentially manufacturers they locked down initially for 260 00:16:29,560 --> 00:16:32,960 Speaker 1: for public health reasons, of course, but we're very slow 261 00:16:33,080 --> 00:16:36,680 Speaker 1: to scale back production because many of them feared that 262 00:16:37,760 --> 00:16:40,880 Speaker 1: the pandemic was going to be essentially a replay of 263 00:16:40,920 --> 00:16:44,040 Speaker 1: the global financial crisis, where there was a sudden stop 264 00:16:44,120 --> 00:16:48,520 Speaker 1: of economic activity, huge plunge in sales of durable goods. 265 00:16:49,040 --> 00:16:52,000 Speaker 1: But interestingly, as it turned out, it was almost the 266 00:16:52,000 --> 00:16:57,360 Speaker 1: exact opposite, because after that initial decline in demand in 267 00:16:57,560 --> 00:17:02,680 Speaker 1: March April into May, we found that households actually because 268 00:17:02,920 --> 00:17:08,840 Speaker 1: they they're spending on travel, tourism, live of events, was 269 00:17:09,119 --> 00:17:12,440 Speaker 1: so depressed and in fact so pressed by by social 270 00:17:12,520 --> 00:17:18,159 Speaker 1: distancing and public health regulations that they actually that that 271 00:17:18,320 --> 00:17:22,200 Speaker 1: savings really financed the boom endurable goods. So you had 272 00:17:22,200 --> 00:17:25,000 Speaker 1: a new and used car sales that were up seventeen percent. 273 00:17:25,640 --> 00:17:29,240 Speaker 1: You have things like motorcycle sales up thirty eight percent 274 00:17:29,359 --> 00:17:32,199 Speaker 1: relative to the pandemic. We had hot tub sales up 275 00:17:32,200 --> 00:17:37,000 Speaker 1: by a comparable magnitude, appliances, furniture, So so it's really 276 00:17:37,000 --> 00:17:40,240 Speaker 1: this interaction where you had a big decline in the 277 00:17:40,280 --> 00:17:44,880 Speaker 1: output and capacity. Because business managers manufacturers are really risk 278 00:17:44,960 --> 00:17:49,480 Speaker 1: averse concerned about the outlook at the same time that 279 00:17:49,480 --> 00:17:53,400 Speaker 1: that you had a boom in the household sector, so reopening. 280 00:17:54,000 --> 00:17:57,640 Speaker 1: What that means is that household spending is going to normalize. 281 00:17:58,200 --> 00:18:01,240 Speaker 1: So you're you're very likely to see on declines in 282 00:18:01,680 --> 00:18:05,240 Speaker 1: purchases of things like hot tubs or or home renovations 283 00:18:05,440 --> 00:18:12,320 Speaker 1: or motorcycle sales. There's more money goes towards theater tickets, airfares, 284 00:18:12,920 --> 00:18:15,639 Speaker 1: hotel stays, etcetera. So so I think that you're going 285 00:18:15,680 --> 00:18:17,800 Speaker 1: to have a moderation and spending at the same time 286 00:18:18,160 --> 00:18:22,920 Speaker 1: that capacity and output rises back to two pre pandemic levels, 287 00:18:23,000 --> 00:18:26,159 Speaker 1: and by the fall of this year, perhaps into the winter, 288 00:18:26,600 --> 00:18:29,280 Speaker 1: you'll have a moderation and some of these price trends. 289 00:18:29,600 --> 00:18:31,880 Speaker 1: E certainly sympathize with that as someone who spent much 290 00:18:31,920 --> 00:18:35,720 Speaker 1: more on on tents and outdoor fire pits in the 291 00:18:35,760 --> 00:18:39,640 Speaker 1: last few months than I might have anticipated spending. One 292 00:18:39,680 --> 00:18:44,800 Speaker 1: thing that clearly has some of President Biden's opponents quite 293 00:18:44,800 --> 00:18:47,720 Speaker 1: fired up is the idea that you know, you've got 294 00:18:47,760 --> 00:18:52,680 Speaker 1: this potential for for inflation and then several trillion dollars 295 00:18:52,680 --> 00:18:55,760 Speaker 1: of additional spending coming down the track. Kind of fiscal 296 00:18:55,920 --> 00:18:59,720 Speaker 1: spending that we've not seen in a long time. Um, 297 00:18:59,840 --> 00:19:02,359 Speaker 1: is is that something that we should worry about as 298 00:19:02,400 --> 00:19:06,000 Speaker 1: something that will give us inflation? Well, I think that 299 00:19:06,320 --> 00:19:09,520 Speaker 1: what's been passed so far, uh, there was one point 300 00:19:09,600 --> 00:19:13,119 Speaker 1: nine trillion dollar stimulus, uh, and that the the estimates 301 00:19:13,119 --> 00:19:15,640 Speaker 1: suggests that about one point one trillion of that, about 302 00:19:16,040 --> 00:19:18,159 Speaker 1: five almost five and a half percent of g d 303 00:19:18,280 --> 00:19:21,600 Speaker 1: p H is going to be injected into the economy 304 00:19:21,760 --> 00:19:24,960 Speaker 1: in this year one. But really the bulk of it 305 00:19:25,040 --> 00:19:27,600 Speaker 1: has already come and gone. In that it was the 306 00:19:29,240 --> 00:19:33,520 Speaker 1: stimulus payments that hit bank accounts starting in March fourteen 307 00:19:33,760 --> 00:19:36,800 Speaker 1: into into April with some of the physical checks and 308 00:19:36,840 --> 00:19:41,199 Speaker 1: then the ongoing unemployment insurance benefits. But but that's not 309 00:19:41,280 --> 00:19:43,680 Speaker 1: something that I expect to be sustained, you know. I 310 00:19:43,720 --> 00:19:46,040 Speaker 1: think it's a it's a one time that the money arrives, 311 00:19:46,160 --> 00:19:49,320 Speaker 1: it's it's spent. So so I'm not not terribly worried 312 00:19:49,359 --> 00:19:52,600 Speaker 1: there now. If there's ongoing spending, If if we have 313 00:19:53,400 --> 00:19:56,480 Speaker 1: additional programs that are that are enacted where whether the 314 00:19:56,560 --> 00:19:59,639 Speaker 1: spending you know, can can reach very high levels at 315 00:19:59,680 --> 00:20:03,080 Speaker 1: some point, there is there's reason to suspect that that 316 00:20:03,160 --> 00:20:07,680 Speaker 1: we could have sustained aggregate demand at outstrips that have 317 00:20:08,080 --> 00:20:11,200 Speaker 1: the ability to supply to to adjust. But but we're 318 00:20:11,240 --> 00:20:15,040 Speaker 1: certainly not close to mean there yet, and I suspect 319 00:20:15,119 --> 00:20:18,360 Speaker 1: that that most of the spending that's contemplated going forward 320 00:20:19,080 --> 00:20:23,119 Speaker 1: is going to be very unlike in that it's going 321 00:20:23,160 --> 00:20:25,720 Speaker 1: to be phased over a tenure window so as to 322 00:20:26,400 --> 00:20:29,720 Speaker 1: make that risk less likely. We have been mainly talking 323 00:20:29,720 --> 00:20:32,680 Speaker 1: about the next year or two, but when you think 324 00:20:32,720 --> 00:20:37,040 Speaker 1: about the next sort of five, ten, twenty years, are 325 00:20:37,080 --> 00:20:40,080 Speaker 1: you thinking that this is going to going to continue 326 00:20:40,160 --> 00:20:44,040 Speaker 1: to be like the last ten or twenty years, and 327 00:20:44,080 --> 00:20:47,399 Speaker 1: that inflation has just not really been the issue that 328 00:20:47,480 --> 00:20:51,280 Speaker 1: we've been mainly worried more about. If anything, deflation, falling prices, 329 00:20:51,280 --> 00:20:53,840 Speaker 1: and rising prices are used when you look ahead, do 330 00:20:53,880 --> 00:20:57,040 Speaker 1: you think that the future is gonna look fairly like 331 00:20:57,160 --> 00:20:59,360 Speaker 1: that or do you think there is potentially a more 332 00:20:59,480 --> 00:21:04,000 Speaker 1: long term change underway. You know that I would say 333 00:21:04,000 --> 00:21:07,320 Speaker 1: the biggest change, or one of the biggest changes in 334 00:21:07,359 --> 00:21:11,240 Speaker 1: global macroeconomics over the past twenty years, has been the 335 00:21:11,280 --> 00:21:16,760 Speaker 1: way that we interpret the Japanese situation. Twenty years ago, 336 00:21:17,080 --> 00:21:20,400 Speaker 1: Japan was viewed as sui generous, that this was a 337 00:21:20,480 --> 00:21:26,240 Speaker 1: specific context and it was very specific to two Japanese institutions, cultures, 338 00:21:26,440 --> 00:21:29,240 Speaker 1: some of some of the frictions that exist, the fact 339 00:21:29,240 --> 00:21:31,520 Speaker 1: that they had, the fact they had falling prices. It 340 00:21:31,600 --> 00:21:34,480 Speaker 1: was like a Japan and an inability the central bank 341 00:21:34,560 --> 00:21:38,760 Speaker 1: to stimulate demand. Uh, it just seemed that they were 342 00:21:38,840 --> 00:21:42,359 Speaker 1: they had this this conundrum that that seemed again to 343 00:21:42,480 --> 00:21:46,240 Speaker 1: be very specific to Japan, that the effect of a 344 00:21:46,320 --> 00:21:49,359 Speaker 1: negative demand shock would would be too following wages in 345 00:21:49,400 --> 00:21:53,080 Speaker 1: the way that that created a very specific psychology that 346 00:21:53,080 --> 00:21:58,240 Speaker 1: that is ultimately disinflationary and in fact deflationary. But today 347 00:21:58,320 --> 00:22:02,280 Speaker 1: I think that lobal macroeconomics is now open to the 348 00:22:02,320 --> 00:22:06,640 Speaker 1: possibility and in fact many people believe that that rather 349 00:22:06,720 --> 00:22:10,240 Speaker 1: than specific to Japan, Japan was really just the vanguard, 350 00:22:11,400 --> 00:22:16,400 Speaker 1: the first economy to experience what other advanced economies are 351 00:22:16,400 --> 00:22:19,160 Speaker 1: are now getting a taste of in differing degrees, certainly 352 00:22:19,160 --> 00:22:22,640 Speaker 1: the Eurozone far more than than the United States thus far. 353 00:22:23,560 --> 00:22:27,560 Speaker 1: You also have technology, and technology has a very profound 354 00:22:27,600 --> 00:22:33,880 Speaker 1: disinflationary effect in two ways. First, the data transmission, data storage, 355 00:22:34,040 --> 00:22:39,919 Speaker 1: communications technology prices really declined very steadily each year, and 356 00:22:39,960 --> 00:22:43,440 Speaker 1: as that accounts for a larger share of the capital inputs. 357 00:22:44,000 --> 00:22:46,560 Speaker 1: You essentially have a situation where a hundred dollars of 358 00:22:46,600 --> 00:22:50,280 Speaker 1: current cash flow buys you a hundred and twelve dollars 359 00:22:50,280 --> 00:22:54,639 Speaker 1: of capital equipment. So so that increases businesses cash flow 360 00:22:55,119 --> 00:23:00,000 Speaker 1: and and also business savings while also having the disinflationary 361 00:23:00,480 --> 00:23:05,400 Speaker 1: on the price of their goods and services. Secondly, technology 362 00:23:05,480 --> 00:23:09,119 Speaker 1: is allowed for the emergence of digital platforms. Businesses that 363 00:23:09,160 --> 00:23:12,160 Speaker 1: are in many ways infinitely scalable. That is to say 364 00:23:12,160 --> 00:23:17,439 Speaker 1: that they can increase revenues with little to know in 365 00:23:17,440 --> 00:23:22,840 Speaker 1: incremental investment, little to know incremental hiring, and and those 366 00:23:22,880 --> 00:23:26,639 Speaker 1: sorts of businesses really are now the largest businesses in 367 00:23:26,680 --> 00:23:31,399 Speaker 1: the US economy by market capitalization, and they're quite different today. 368 00:23:31,400 --> 00:23:35,440 Speaker 1: They generate cash from operations that make cases is for 369 00:23:35,720 --> 00:23:38,760 Speaker 1: to six times the amount of money that they reinvest 370 00:23:38,920 --> 00:23:41,119 Speaker 1: in the business after accounting for for R and B 371 00:23:41,240 --> 00:23:45,560 Speaker 1: and other current expenditures. That that's quite different than the 372 00:23:45,640 --> 00:23:50,399 Speaker 1: largest from the largest businesses in our economy UH forty 373 00:23:50,520 --> 00:23:54,400 Speaker 1: years ago, which are largely industrial conglomerates that when they 374 00:23:54,480 --> 00:23:59,840 Speaker 1: reached pathy, they had to go to financial moral UH 375 00:24:00,119 --> 00:24:03,880 Speaker 1: to get the the money necessary to build new plants 376 00:24:03,920 --> 00:24:07,280 Speaker 1: by new equipment scale up capacity, when when they reach capacity, 377 00:24:07,520 --> 00:24:10,399 Speaker 1: they had to raise wages so as to bid labor 378 00:24:10,480 --> 00:24:15,560 Speaker 1: away from competitors or actually businesses and other industries. These 379 00:24:15,600 --> 00:24:20,120 Speaker 1: are profound structural changes to the economy that I think 380 00:24:20,119 --> 00:24:23,320 Speaker 1: are overwhelmingly disinflationary, and I don't see any reason to 381 00:24:23,400 --> 00:24:27,440 Speaker 1: suspect that that they're going to reverse anytime soon. It's 382 00:24:27,480 --> 00:24:29,760 Speaker 1: interesting that you say that, and elviously, it chimes with 383 00:24:29,920 --> 00:24:33,879 Speaker 1: some of the discussion we had in UM last week's podcast, 384 00:24:33,920 --> 00:24:35,960 Speaker 1: because we were looking at this sort of changing global 385 00:24:36,040 --> 00:24:40,200 Speaker 1: corporate landscape and what the the biggest fifty companies in 386 00:24:40,240 --> 00:24:45,440 Speaker 1: the world now relative to UH and how much less 387 00:24:45,480 --> 00:24:47,520 Speaker 1: capital intensive they were, and many of the things that 388 00:24:47,560 --> 00:24:50,800 Speaker 1: you've just been been saying. There are those though, who 389 00:24:50,800 --> 00:24:54,199 Speaker 1: would point to some of those trends, but also the 390 00:24:54,359 --> 00:24:57,840 Speaker 1: very the disinflationary impact that China, for example, has had 391 00:24:57,880 --> 00:25:00,640 Speaker 1: over the last twenty or thirty years and say, actually, 392 00:25:00,680 --> 00:25:03,320 Speaker 1: those things are going into reverse. We've heard about it 393 00:25:03,359 --> 00:25:06,439 Speaker 1: in Asia on this program, but you know, not just 394 00:25:06,520 --> 00:25:09,200 Speaker 1: short term, but wages going up in some of these 395 00:25:09,240 --> 00:25:14,600 Speaker 1: low cost production company countries, UM labor shortages appearing in 396 00:25:14,680 --> 00:25:18,520 Speaker 1: the US, but also at at a global level, just 397 00:25:18,560 --> 00:25:20,960 Speaker 1: to push back a bit. You know, you underestimating that. 398 00:25:21,040 --> 00:25:22,600 Speaker 1: I mean, yes, all the things that you said have 399 00:25:22,760 --> 00:25:24,240 Speaker 1: been true, but are they going to be a bit 400 00:25:24,320 --> 00:25:29,960 Speaker 1: less true in the future. China was a major contributor 401 00:25:30,240 --> 00:25:34,200 Speaker 1: to the disinflation and advanced economies over the past twenty 402 00:25:34,240 --> 00:25:37,720 Speaker 1: five years. That that is undeniable. But but I think 403 00:25:37,720 --> 00:25:41,919 Speaker 1: it's that it doesn't necessarily imply that rising wages in 404 00:25:42,000 --> 00:25:46,320 Speaker 1: China or the demographic issues in China will necessarily lead 405 00:25:46,640 --> 00:25:50,640 Speaker 1: to higher in prices or higher structural inflation going forward. 406 00:25:51,160 --> 00:25:54,600 Speaker 1: And I think that that's the key fallacy among many 407 00:25:54,680 --> 00:25:57,399 Speaker 1: who are propounding this argument, which is to say that 408 00:25:57,440 --> 00:26:03,240 Speaker 1: they as as Chinese wages rise, as the demographic shortfall 409 00:26:03,640 --> 00:26:06,840 Speaker 1: starts to create a shortage of workers in China, the 410 00:26:06,840 --> 00:26:10,280 Speaker 1: the advanced economy trend, inflation rates are going to rise 411 00:26:10,320 --> 00:26:12,919 Speaker 1: as a result as there's worker shortage. The reason I 412 00:26:12,920 --> 00:26:15,560 Speaker 1: think that this is not true is because when you 413 00:26:15,600 --> 00:26:20,560 Speaker 1: look at the trade offs among manufacturers today, it's very 414 00:26:20,600 --> 00:26:27,480 Speaker 1: often labor intensive manufacturing processes in emerging market economies where 415 00:26:27,480 --> 00:26:34,320 Speaker 1: the wage rates are relatively low relative to automate, automation intensive, 416 00:26:34,760 --> 00:26:39,680 Speaker 1: robotic intensive manufacturing processes and advanced economies and you see 417 00:26:39,680 --> 00:26:42,640 Speaker 1: that when you look at robot intensity robots per capita, 418 00:26:43,200 --> 00:26:46,119 Speaker 1: very often it is in those high wage economies that 419 00:26:46,160 --> 00:26:51,800 Speaker 1: are having demographic shortfalls. Of course, East Asia, UH, Japan, 420 00:26:52,320 --> 00:26:57,080 Speaker 1: Korea at Germany also with with higher higher robots per capita. 421 00:26:57,359 --> 00:27:01,359 Speaker 1: So you know, going forward, I think that this demographic 422 00:27:01,520 --> 00:27:05,720 Speaker 1: shortfall is and this shortage of workers is going to 423 00:27:05,720 --> 00:27:09,359 Speaker 1: to really increase the capital intensity of some of these 424 00:27:09,720 --> 00:27:14,760 Speaker 1: manufacturing processes, and rather than upward pressure on on inflation, 425 00:27:15,760 --> 00:27:18,920 Speaker 1: it's actually just going to accelerate some of these trends 426 00:27:18,920 --> 00:27:23,720 Speaker 1: that that were witnessing. I guess the final question would 427 00:27:23,760 --> 00:27:27,679 Speaker 1: be what all this means for wages? I mean, the 428 00:27:27,720 --> 00:27:30,520 Speaker 1: other for many you know that the positive side of 429 00:27:30,560 --> 00:27:33,840 Speaker 1: inflation fears is wage hopes that they might finally get 430 00:27:33,840 --> 00:27:36,720 Speaker 1: a pay rise. So what's the what's the implication of 431 00:27:36,760 --> 00:27:40,320 Speaker 1: what you're saying for wages in the USA? What I 432 00:27:40,359 --> 00:27:43,240 Speaker 1: think longer term, the FED is trying to do is 433 00:27:43,320 --> 00:27:48,200 Speaker 1: to not choke off recoveries and expansions just as real 434 00:27:48,240 --> 00:27:50,960 Speaker 1: wages are finally growing and and so you know, when 435 00:27:50,960 --> 00:27:53,960 Speaker 1: when the FED took a look back on the last 436 00:27:53,960 --> 00:27:57,600 Speaker 1: ten years, they decided that policy wasn't too accommodative. As 437 00:27:57,640 --> 00:28:02,040 Speaker 1: many analysts feared policy he was actually too tight, and 438 00:28:02,200 --> 00:28:05,879 Speaker 1: they looked at the current framework and implemented over the 439 00:28:05,960 --> 00:28:09,560 Speaker 1: last decade, there would have been far fewer rate hikes. 440 00:28:10,160 --> 00:28:16,880 Speaker 1: Maybe really in that nineteen period there would have probably 441 00:28:16,920 --> 00:28:21,000 Speaker 1: been one third as many rate hikes as they actually implemented. 442 00:28:21,040 --> 00:28:25,400 Speaker 1: So if the FED takes this more patient accommodative approach, 443 00:28:25,920 --> 00:28:30,560 Speaker 1: that as the the payroll employment reaches and then exceeds 444 00:28:30,760 --> 00:28:33,719 Speaker 1: pre pandemic levels, that will actually start to see some 445 00:28:33,840 --> 00:28:37,840 Speaker 1: sustained wage gains. But in general, I do think that 446 00:28:37,920 --> 00:28:42,400 Speaker 1: more macro models and more macro economists are really trying 447 00:28:42,400 --> 00:28:48,320 Speaker 1: to take account labor heterogen eighty and realizing that aggregates 448 00:28:48,480 --> 00:28:51,440 Speaker 1: or averages as it relates to wages are really not 449 00:28:51,560 --> 00:28:54,680 Speaker 1: telling the story. And I think that that's also why 450 00:28:55,120 --> 00:28:58,560 Speaker 1: the FED has become much more focused on equitable and 451 00:28:58,640 --> 00:29:03,080 Speaker 1: inclusive growth, because we don't want you very high returns 452 00:29:03,120 --> 00:29:05,920 Speaker 1: on human capital or skilled labor to in any way 453 00:29:06,320 --> 00:29:10,280 Speaker 1: um disguise what it could be languishing wages in other 454 00:29:10,360 --> 00:29:13,560 Speaker 1: segments of the market. Well, that is a very important 455 00:29:13,560 --> 00:29:15,080 Speaker 1: note to end on, and it certainly is that it 456 00:29:15,320 --> 00:29:17,720 Speaker 1: is the lesson of a lot possibly of the last 457 00:29:17,720 --> 00:29:20,160 Speaker 1: twenty or thirty years, that the averages can look a 458 00:29:20,240 --> 00:29:24,800 Speaker 1: lot better than what's going on beneath the surface. Jason Thomas, 459 00:29:24,840 --> 00:29:32,480 Speaker 1: thank you very much. Thank you for having me. Now, 460 00:29:32,520 --> 00:29:35,640 Speaker 1: if you're interested in hearing exactly the opposite take on 461 00:29:35,720 --> 00:29:38,480 Speaker 1: what's going to happen to inflation, you should flick back 462 00:29:38,480 --> 00:29:41,760 Speaker 1: in your Stephanomics archives. I know you have them to 463 00:29:41,880 --> 00:29:45,920 Speaker 1: November last year, my interview with Charles Goodheart and Manage Pradam. 464 00:29:46,280 --> 00:29:48,960 Speaker 1: They literally wrote the book on the subject. Now that 465 00:29:49,160 --> 00:29:51,760 Speaker 1: is it for this episode of Stephanomics. I'll be back 466 00:29:51,800 --> 00:29:54,040 Speaker 1: next week with a lot more from around the world. 467 00:29:54,520 --> 00:29:57,960 Speaker 1: In the meantime, please rate the program. Thank you, and 468 00:29:58,000 --> 00:29:59,760 Speaker 1: should you feel the need, you can always get more 469 00:29:59,800 --> 00:30:02,800 Speaker 1: new us an analysis from Bloomberg Economics by following at 470 00:30:02,880 --> 00:30:06,840 Speaker 1: Economics on Twitter. This episode was produced by Magnus Hendrickson, 471 00:30:06,920 --> 00:30:09,959 Speaker 1: with special thanks to Jason Thomas and Brittany Berliner at 472 00:30:10,000 --> 00:30:14,040 Speaker 1: the Carlisle Group, Javier Blast and Ender Current. The head 473 00:30:14,040 --> 00:30:17,640 Speaker 1: of bloombow podcast is Francesco Levy and this was Lucy 474 00:30:17,720 --> 00:30:21,760 Speaker 1: meekins last week as the executive producer of Stephanomics, so 475 00:30:21,840 --> 00:30:24,560 Speaker 1: thank you to her for all her hard work, and 476 00:30:24,600 --> 00:30:27,120 Speaker 1: good luck, Lucy with your new job on Bloomberg. Di