1 00:00:00,560 --> 00:00:03,760 Speaker 1: This is Bloomberg Wall Street Week. We turn our attention 2 00:00:03,880 --> 00:00:07,120 Speaker 1: to the markets this week. U s CPI never's reinforcing 3 00:00:07,160 --> 00:00:10,560 Speaker 1: concerns about inflation. The financial stories that cheap are were 4 00:00:10,720 --> 00:00:13,720 Speaker 1: a really different reaction to Mark. More indications of just 5 00:00:13,960 --> 00:00:16,360 Speaker 1: how hot the U. S. Economy really is. Through the 6 00:00:16,400 --> 00:00:19,799 Speaker 1: eyes of the most influential voices Larry Summers, the former 7 00:00:19,840 --> 00:00:22,920 Speaker 1: Treachery Secretary, Katherine Keating, CEO of v n Y Moms, 8 00:00:22,960 --> 00:00:26,880 Speaker 1: Sam's l Shairman, and founder of Equity Group Investment. Bloomberg 9 00:00:26,920 --> 00:00:31,840 Speaker 1: Wolves Street Weet with David Weston from Bloomberg Radio. Continued 10 00:00:31,840 --> 00:00:35,320 Speaker 1: war in Ukraine, senseless violence in a subway in Brooklyn, 11 00:00:35,360 --> 00:00:38,440 Speaker 1: the tax man cometh, inflation really is as bad as 12 00:00:38,440 --> 00:00:41,560 Speaker 1: we feared. And oh yes, Elon Musk has decided he 13 00:00:41,600 --> 00:00:44,560 Speaker 1: wants to buy all of Twitter. This is Bloomberg Wall 14 00:00:44,560 --> 00:01:00,800 Speaker 1: Street Week. I'm David Weston. It was a shortened trading 15 00:01:00,840 --> 00:01:03,440 Speaker 1: week in the United States because the Good Friday holiday, 16 00:01:03,480 --> 00:01:06,959 Speaker 1: which postponed the day of tax reckoning until April eighteen. 17 00:01:07,280 --> 00:01:10,560 Speaker 1: But holidays and taxes did not slow down preparations for 18 00:01:10,600 --> 00:01:14,040 Speaker 1: a showdown in eastern Ukraine that retired Brigadier General Mark 19 00:01:14,120 --> 00:01:18,520 Speaker 1: Kimmitt says could be decisive. I see this third phase 20 00:01:18,680 --> 00:01:22,240 Speaker 1: concentrating their forces in the Dawn Boss potentially be a 21 00:01:22,280 --> 00:01:24,800 Speaker 1: game change. But I also think there's some opportunities for 22 00:01:24,840 --> 00:01:29,560 Speaker 1: the Ukrainians in this phase as well. And sadly, there 23 00:01:29,680 --> 00:01:32,320 Speaker 1: was no stopping a man from detonating smoke bombs and 24 00:01:32,440 --> 00:01:36,200 Speaker 1: opening fire on a crowded subway train in Brooklyn, shooting 25 00:01:36,319 --> 00:01:39,520 Speaker 1: ten people, A man who, by Wednesday, New York's police 26 00:01:39,520 --> 00:01:44,319 Speaker 1: commissioner and mayor were confident they had in custody. We 27 00:01:44,319 --> 00:01:48,000 Speaker 1: were able to shrink his world quickly. There was nowhere 28 00:01:48,080 --> 00:01:54,760 Speaker 1: left for him to run. We are. The much anticipated 29 00:01:54,800 --> 00:01:58,440 Speaker 1: inflation numbers came in every bit as hot as anticipated. 30 00:01:59,200 --> 00:02:02,760 Speaker 1: In March, the CPI went up one percent, That's what 31 00:02:02,840 --> 00:02:05,200 Speaker 1: was forecast. It was up eight tenths of a percent 32 00:02:05,520 --> 00:02:09,840 Speaker 1: the month before, and on a year over year basis, 33 00:02:09,919 --> 00:02:13,520 Speaker 1: we're up eight point five percent. Those some like Jim 34 00:02:13,520 --> 00:02:16,360 Speaker 1: Paulson of Louthold, expressed hope that this might just be 35 00:02:16,680 --> 00:02:20,560 Speaker 1: the peak. I still think, though this is a is 36 00:02:20,639 --> 00:02:23,280 Speaker 1: likely to roll over in the second half of this year, 37 00:02:23,680 --> 00:02:26,560 Speaker 1: and we might be seeing this morning the peak and 38 00:02:27,080 --> 00:02:32,800 Speaker 1: CPI inflation rate. Five of the big banks reported their 39 00:02:32,840 --> 00:02:36,000 Speaker 1: second quarter earnings this week, and with all but Wells 40 00:02:36,000 --> 00:02:39,880 Speaker 1: Fargo exceeding expectations. Trading coming in particularly strong at Goldman 41 00:02:39,880 --> 00:02:43,560 Speaker 1: Sachs and Morgan Stanley, but overall overall, the markets were 42 00:02:43,600 --> 00:02:45,360 Speaker 1: in a selling mood for much of the week, with 43 00:02:45,440 --> 00:02:47,959 Speaker 1: stocks down the SMP by two point four percent, in 44 00:02:48,000 --> 00:02:51,359 Speaker 1: the Nasdaq by almost four percent, driven once again by 45 00:02:51,360 --> 00:02:54,040 Speaker 1: the rise in bond yield, and the ten year Treasury 46 00:02:54,120 --> 00:02:57,440 Speaker 1: added almost thirteen basis points on Thursday to end the 47 00:02:57,480 --> 00:03:00,680 Speaker 1: trading week just over two point eight sense. To take 48 00:03:00,760 --> 00:03:03,440 Speaker 1: us through what we saw in this shortened trading week, 49 00:03:03,639 --> 00:03:06,280 Speaker 1: we welcome Dow Jullian Tad Financial Times, chair of the 50 00:03:06,360 --> 00:03:10,000 Speaker 1: editorial board and editor at large US and Peter Kraus 51 00:03:10,040 --> 00:03:12,919 Speaker 1: Aperture Investors Chairman and CEO. So, Peter, let me start 52 00:03:12,960 --> 00:03:14,480 Speaker 1: with you. What were the markets trying to teach us 53 00:03:14,720 --> 00:03:17,200 Speaker 1: this week and didn't have to go beyond bonds? Or 54 00:03:17,240 --> 00:03:19,600 Speaker 1: was it really all about bonds? In the end, the 55 00:03:19,680 --> 00:03:22,400 Speaker 1: market is right now is all about what is the 56 00:03:22,440 --> 00:03:26,560 Speaker 1: growth rate going forward and where is inflation going to peak? 57 00:03:27,400 --> 00:03:31,079 Speaker 1: And that is what's driving the yield curve, and it's 58 00:03:31,080 --> 00:03:34,280 Speaker 1: also driving what will ultimately be fed's behavior in terms 59 00:03:34,320 --> 00:03:38,119 Speaker 1: of interest rate hikes and in terms of the cessation 60 00:03:38,160 --> 00:03:41,160 Speaker 1: of bond purchases and the reduction of the balance sheet. 61 00:03:41,760 --> 00:03:44,880 Speaker 1: Those two things together, that's what's causing the interest rate 62 00:03:44,920 --> 00:03:48,200 Speaker 1: curve to actually stepen. Uh And you saw a consumer 63 00:03:48,600 --> 00:03:51,760 Speaker 1: conditions come out the University of Michigan Current conditions Michigan 64 00:03:51,800 --> 00:03:55,800 Speaker 1: expectations and expectations for inflation were actually more optimistic than 65 00:03:55,840 --> 00:03:59,360 Speaker 1: what than what was expected. So I think we probably 66 00:03:59,440 --> 00:04:02,200 Speaker 1: have a little bit of a contrarian here. We probably 67 00:04:02,280 --> 00:04:04,640 Speaker 1: have not a recession. We probably have a slow down 68 00:04:04,720 --> 00:04:08,200 Speaker 1: in growth but a persistent expansion, but that has got 69 00:04:08,200 --> 00:04:11,600 Speaker 1: to be accompanied by significant increases in interest rates and 70 00:04:11,680 --> 00:04:16,040 Speaker 1: a reduction in queue, and that is what we expect. So, Julian, 71 00:04:16,080 --> 00:04:18,520 Speaker 1: can you have that significant increase in rates and the 72 00:04:18,560 --> 00:04:20,760 Speaker 1: reduction about ship and not have a recession because a 73 00:04:20,800 --> 00:04:23,240 Speaker 1: lot of people are concerned about that. Well, I think 74 00:04:23,279 --> 00:04:26,720 Speaker 1: there is certainly a very significant risk that we're heading 75 00:04:26,760 --> 00:04:30,280 Speaker 1: towards stag inflation, which is something that frankly, most investors 76 00:04:30,279 --> 00:04:32,599 Speaker 1: don't actually know how to deal with because we've not 77 00:04:32,720 --> 00:04:35,680 Speaker 1: seen it since the nineteen seventies, and there aren't that 78 00:04:35,760 --> 00:04:38,440 Speaker 1: many people around have actually traded actively who are still 79 00:04:38,480 --> 00:04:41,880 Speaker 1: on trading desks. Um. You know, I slightly disagree with Peter. 80 00:04:41,960 --> 00:04:44,480 Speaker 1: I think the FED has got way behind the curve, 81 00:04:45,160 --> 00:04:48,080 Speaker 1: and I think that this is really the week when 82 00:04:48,080 --> 00:04:51,000 Speaker 1: the markets began to wake up to that and really 83 00:04:51,080 --> 00:04:53,920 Speaker 1: understand that there is going to be a series of 84 00:04:54,080 --> 00:04:59,240 Speaker 1: potentially quite dramatic interest rate rises this year. Um, we 85 00:04:59,320 --> 00:05:02,000 Speaker 1: cannot get t that that's going to not put the 86 00:05:02,000 --> 00:05:05,080 Speaker 1: economy into recession. We've had people like Jim Ballads come 87 00:05:05,120 --> 00:05:07,120 Speaker 1: out and say this this week that it would be 88 00:05:07,160 --> 00:05:10,480 Speaker 1: a complete fantasy to think that you can actually take 89 00:05:10,520 --> 00:05:12,799 Speaker 1: away this level of inflation and bring it back down 90 00:05:13,360 --> 00:05:16,120 Speaker 1: just by tinkering with a few interest rate rises from 91 00:05:16,160 --> 00:05:20,080 Speaker 1: the Fed. Really signalings and quite serious um interest rate 92 00:05:20,160 --> 00:05:22,520 Speaker 1: risers coming down the track. And I think the thing 93 00:05:22,560 --> 00:05:25,920 Speaker 1: that's really alarming for people right now is that although 94 00:05:25,960 --> 00:05:28,200 Speaker 1: it would be convenient to blaze all of these price 95 00:05:28,279 --> 00:05:32,279 Speaker 1: hikes on Vladimir Putin and the energy complex, if you 96 00:05:32,360 --> 00:05:35,240 Speaker 1: talk to people in business today who are dealing with 97 00:05:35,360 --> 00:05:39,520 Speaker 1: supply chains, with warehouses, with trying to hire people, there 98 00:05:39,600 --> 00:05:43,760 Speaker 1: is an absolutely universal message coming across that wages are 99 00:05:43,800 --> 00:05:49,000 Speaker 1: going up, conditions are tight, and inflation is anything but transitory. 100 00:05:49,160 --> 00:05:51,680 Speaker 1: To use that phrase. It was tossed around last year, 101 00:05:51,960 --> 00:05:55,840 Speaker 1: and you can't just blame that on the Russian invasions, right. 102 00:05:55,920 --> 00:05:58,840 Speaker 1: But the controversy in the data is that if wages 103 00:05:58,880 --> 00:06:02,240 Speaker 1: are going up and labor conditions are tight and unemployment 104 00:06:02,320 --> 00:06:05,680 Speaker 1: is dropping, that is not a condition for recession. The 105 00:06:05,720 --> 00:06:09,559 Speaker 1: condition for recession is wages are flat and going down. 106 00:06:10,040 --> 00:06:13,320 Speaker 1: You're losing jobs. People are then therefore not going to 107 00:06:13,400 --> 00:06:16,000 Speaker 1: spend and that's what causes a recession. So we don't 108 00:06:16,040 --> 00:06:19,520 Speaker 1: have a recession. We have growth. Now. Whether we have 109 00:06:19,560 --> 00:06:22,640 Speaker 1: stagflation or not an interesting question. We haven't seen stagflation 110 00:06:22,680 --> 00:06:25,760 Speaker 1: frankly since the seventies in the eighties, and that was 111 00:06:25,800 --> 00:06:28,960 Speaker 1: accompanied by a significant oil shock, much much greater than 112 00:06:29,000 --> 00:06:32,039 Speaker 1: we have today. So I'm a I'm a bit dubious 113 00:06:32,080 --> 00:06:34,440 Speaker 1: about stagflation. I do think we're going to see a 114 00:06:34,440 --> 00:06:37,480 Speaker 1: significant rise in interest rates. But let's just examine that 115 00:06:37,520 --> 00:06:40,440 Speaker 1: for a second. If the two to ten year was 116 00:06:40,480 --> 00:06:43,159 Speaker 1: a hundred basis points in difference, which is actually not 117 00:06:43,160 --> 00:06:47,120 Speaker 1: not not abnormal, quite normal, you would have a tenure 118 00:06:47,200 --> 00:06:50,040 Speaker 1: rate of three point four percent, which would be sixty 119 00:06:50,040 --> 00:06:52,360 Speaker 1: basis points higher than we it is today a substantial 120 00:06:52,480 --> 00:06:55,520 Speaker 1: rise that wouldn't be unusual. Okay, Peter Krause and Julian's 121 00:06:55,520 --> 00:06:57,799 Speaker 1: had You're staying with us as we turn from markets 122 00:06:57,880 --> 00:06:59,719 Speaker 1: this week to the effect of the war in ukran 123 00:07:00,000 --> 00:07:02,919 Speaker 1: Sters next week and beyond. That's gonna have next on 124 00:07:02,920 --> 00:07:11,360 Speaker 1: Wall Street Week on Bloomberg. This is Bloomberg Wall Street 125 00:07:11,400 --> 00:07:16,360 Speaker 1: Week with David Weston from Bloomberg Radio. The truth is 126 00:07:16,400 --> 00:07:21,560 Speaker 1: that the American tradition, despite our globally renowned fundness for firearms, 127 00:07:22,040 --> 00:07:26,320 Speaker 1: has profound strains of pacifism and isolationism at its core. 128 00:07:27,280 --> 00:07:32,400 Speaker 1: From our founding father's outspoken commitment to no entangling alliances 129 00:07:33,120 --> 00:07:36,480 Speaker 1: right through to the excesses of the America Firsters, this 130 00:07:36,600 --> 00:07:40,880 Speaker 1: has been a nation historically suspicious of international involvements and 131 00:07:40,920 --> 00:07:44,560 Speaker 1: so reluctant to race into battle that we were conspicuously 132 00:07:44,680 --> 00:07:48,400 Speaker 1: late entrance into both world Wars. That was Lewis Sir 133 00:07:48,440 --> 00:07:52,160 Speaker 1: Guiser on Wall Street way back in expressing his concern 134 00:07:52,320 --> 00:07:55,000 Speaker 1: over possible US withdrawal from the world stage at a 135 00:07:55,080 --> 00:07:57,680 Speaker 1: time that looks very different from now, when the United 136 00:07:57,720 --> 00:08:00,440 Speaker 1: States is sending hundreds of millions of dollars with armans 137 00:08:00,440 --> 00:08:03,240 Speaker 1: to Ukraine and leading a coalition of countries to impose 138 00:08:03,320 --> 00:08:06,680 Speaker 1: severe economic sanctions on Russia for its invasion. Peter Crasts 139 00:08:06,720 --> 00:08:09,160 Speaker 1: of Aperture Investors and Jillian Tet of the Financial Times 140 00:08:09,240 --> 00:08:11,280 Speaker 1: are still will the sogiliant. Let me turn first to 141 00:08:11,360 --> 00:08:13,240 Speaker 1: you as I look at that, and I look what's 142 00:08:13,280 --> 00:08:15,200 Speaker 1: going on right now, and look at what this means 143 00:08:15,200 --> 00:08:17,560 Speaker 1: for investors. We do have a big war going on 144 00:08:17,760 --> 00:08:19,960 Speaker 1: with a lot of tragedy and a lot of potential 145 00:08:20,160 --> 00:08:24,240 Speaker 1: consequences for geopolitics. Are we seeing potentially a change in 146 00:08:24,280 --> 00:08:28,360 Speaker 1: the world economic order as well? We're absolutely seeing a 147 00:08:28,440 --> 00:08:31,760 Speaker 1: change the world economic order. Um. You know that wonderful 148 00:08:31,920 --> 00:08:34,280 Speaker 1: Francis fog I'm afrase that we lived in the end 149 00:08:34,320 --> 00:08:36,559 Speaker 1: of history at the beginning or the end of the 150 00:08:36,559 --> 00:08:39,120 Speaker 1: twenties center begin the twenty century has been shown to 151 00:08:39,160 --> 00:08:43,080 Speaker 1: be completely wrong, because essentially history has been going backwards 152 00:08:43,160 --> 00:08:45,760 Speaker 1: and we're seeing what we thought was a world that 153 00:08:45,800 --> 00:08:51,280 Speaker 1: was globalizing as a whole, essentially fragmenting into the use China, 154 00:08:51,360 --> 00:08:55,160 Speaker 1: spears of influence, the so called Bamboo Curtain to cite 155 00:08:55,440 --> 00:09:00,280 Speaker 1: um Hank Paulson, and the increasing split between the Western 156 00:09:00,360 --> 00:09:03,240 Speaker 1: Block and the Slavic Russian block, if you like to know, 157 00:09:03,320 --> 00:09:06,800 Speaker 1: the new caveat curtain Um. So you're essentially seeing two 158 00:09:06,800 --> 00:09:09,720 Speaker 1: and a half, potentially three different areas emerging, and that 159 00:09:09,920 --> 00:09:12,640 Speaker 1: is really a very big shift that we haven't seen 160 00:09:12,679 --> 00:09:17,200 Speaker 1: this kind of magnitude of upheaval for several decades. Peter, 161 00:09:17,240 --> 00:09:19,440 Speaker 1: we had Larry think recently saying anything to the end 162 00:09:19,440 --> 00:09:21,200 Speaker 1: of globalization, which I think a lot of people thought 163 00:09:21,240 --> 00:09:23,600 Speaker 1: was overblown. That's way too soon to call that. But 164 00:09:23,720 --> 00:09:26,440 Speaker 1: are we seeing, as Jillian suggests, perhaps at least a 165 00:09:26,520 --> 00:09:29,320 Speaker 1: dividing up in part into some blocks around the world, 166 00:09:29,320 --> 00:09:33,040 Speaker 1: which is quite different from where we thought we were headed. Yeah. Look, 167 00:09:33,080 --> 00:09:37,440 Speaker 1: I I do think that this Russian incursion in the 168 00:09:37,559 --> 00:09:41,040 Speaker 1: Ukraine that has created a geopolitical shift, it's going to 169 00:09:41,120 --> 00:09:48,679 Speaker 1: reverberate through not only political affiliations but also economic affiliations. 170 00:09:49,120 --> 00:09:52,920 Speaker 1: I think to say that globalization is dead is way overblown. 171 00:09:53,840 --> 00:09:56,880 Speaker 1: I don't think that that's even in the cards. But 172 00:09:56,960 --> 00:10:00,000 Speaker 1: I do think that they're going to be numerous places 173 00:10:00,080 --> 00:10:03,080 Speaker 1: is in which companies are going to decide to actually 174 00:10:03,080 --> 00:10:06,959 Speaker 1: accept the higher cost of manufacturer and thinking they can 175 00:10:07,000 --> 00:10:09,880 Speaker 1: pass that through to the to the consumer, and so 176 00:10:10,240 --> 00:10:13,559 Speaker 1: you're gonna have higher structural inflation as a result of that. Now, 177 00:10:13,600 --> 00:10:18,079 Speaker 1: will that structural inflation be offset by technology, technological advances 178 00:10:18,120 --> 00:10:22,480 Speaker 1: and innovations. It may well be, but I think clearly 179 00:10:22,520 --> 00:10:24,920 Speaker 1: we're going to see a change. The more interesting question 180 00:10:24,920 --> 00:10:27,920 Speaker 1: to me about VSAV globalization is this trading block point 181 00:10:27,960 --> 00:10:31,439 Speaker 1: that you raise. China has attempted and still attempts to 182 00:10:31,480 --> 00:10:35,520 Speaker 1: actually establish a contrary trading block to the US and 183 00:10:35,559 --> 00:10:38,040 Speaker 1: its allies. The U S and its allies are far 184 00:10:38,120 --> 00:10:41,520 Speaker 1: far bigger. If the US and its allies, through this 185 00:10:41,559 --> 00:10:46,000 Speaker 1: geopolitical change, decide to actually operate in a more concerted 186 00:10:46,040 --> 00:10:49,040 Speaker 1: fashion as happened after World War Two, that's going to 187 00:10:49,120 --> 00:10:53,079 Speaker 1: create an enormous issue for the Chinese and other people 188 00:10:53,160 --> 00:10:55,880 Speaker 1: in that other block because they need to trade with this, 189 00:10:56,040 --> 00:10:58,880 Speaker 1: with this Western bloc, and they need to trade significantly 190 00:10:58,920 --> 00:11:01,240 Speaker 1: with it. So it's so it's sort of up to 191 00:11:01,640 --> 00:11:04,880 Speaker 1: the Western democracies and the Asian democracies about how they 192 00:11:04,880 --> 00:11:07,719 Speaker 1: play this. If it all balkanizes and people go their 193 00:11:07,760 --> 00:11:10,840 Speaker 1: separate ways, that's probably not a good thing for the 194 00:11:10,880 --> 00:11:14,280 Speaker 1: economics and for the markets. If there is some sense 195 00:11:14,320 --> 00:11:17,320 Speaker 1: of cohesion and an attempt to create more free trade 196 00:11:17,360 --> 00:11:21,240 Speaker 1: capability between that Plock, I think that's actually an increase 197 00:11:21,280 --> 00:11:25,200 Speaker 1: in economic activity and good for markets. Jillian. Is it 198 00:11:25,200 --> 00:11:28,920 Speaker 1: possible that we might give up in sort of convenient 199 00:11:29,000 --> 00:11:31,240 Speaker 1: dealing in or other where some countries will be made 200 00:11:31,280 --> 00:11:33,360 Speaker 1: up for in other places. That is to say, is 201 00:11:33,360 --> 00:11:36,160 Speaker 1: it likely this would drive a closer union with for example, 202 00:11:36,240 --> 00:11:41,360 Speaker 1: Western Europe, Japan, South Korea, even Taiwan. Well, there is 203 00:11:41,440 --> 00:11:45,120 Speaker 1: an optimistic scenario, which is, you know, tossed around say 204 00:11:45,200 --> 00:11:48,600 Speaker 1: the chip sector or various parts of industry right now, 205 00:11:48,679 --> 00:11:52,160 Speaker 1: which is that, Okay, so America can no longer count 206 00:11:52,200 --> 00:11:54,920 Speaker 1: on China as being the factory of the world. The 207 00:11:55,000 --> 00:11:58,080 Speaker 1: can a lot account and having this labor supplies side 208 00:11:58,080 --> 00:12:00,839 Speaker 1: shock where suddenly wages are to press because you can 209 00:12:00,880 --> 00:12:03,760 Speaker 1: outsource everything to China. Let's bring it back into into 210 00:12:03,800 --> 00:12:07,320 Speaker 1: North America. Maybe put more factories into Mexico. You'll create 211 00:12:07,360 --> 00:12:09,719 Speaker 1: more jobs back in the US, and guess what, you'll 212 00:12:09,760 --> 00:12:12,280 Speaker 1: be environmentally more green as well because you won't be 213 00:12:13,080 --> 00:12:15,800 Speaker 1: moving things around so much. That's the kind of optimistic 214 00:12:15,840 --> 00:12:22,160 Speaker 1: scenario of essentially this reshuffling of the geopolitical order. The 215 00:12:22,200 --> 00:12:25,559 Speaker 1: person mystic scenario though, is that, of course many commodities 216 00:12:25,559 --> 00:12:29,319 Speaker 1: and raw materials are not found within the Allied trading 217 00:12:29,360 --> 00:12:32,640 Speaker 1: block at the moment, and you can't suddenly create Lithian 218 00:12:32,720 --> 00:12:35,560 Speaker 1: minds overnight, even though Elon must tweeted that he'd like 219 00:12:35,640 --> 00:12:39,000 Speaker 1: to um this week. Another problem is that it's not 220 00:12:39,040 --> 00:12:42,560 Speaker 1: clear that America has a workforce for even supporting some 221 00:12:42,760 --> 00:12:47,560 Speaker 1: massive reshoring of its manufacturing industrial base. And yes, maybe 222 00:12:47,559 --> 00:12:50,320 Speaker 1: you can give it order robots, um, but you know 223 00:12:50,520 --> 00:12:53,920 Speaker 1: even robots can't necessarily be the easy answer right now. 224 00:12:54,120 --> 00:12:55,880 Speaker 1: So so Peter, let me ask you. This is Wall 225 00:12:55,840 --> 00:12:58,200 Speaker 1: Street week, after all, help me make some money here. 226 00:12:58,240 --> 00:13:00,000 Speaker 1: If in fact there is what Jillian is called him 227 00:13:00,000 --> 00:13:01,959 Speaker 1: reshuffling of the world order, where does that tell me 228 00:13:02,000 --> 00:13:05,840 Speaker 1: I should put my money right now? Look, you can't 229 00:13:06,280 --> 00:13:08,520 Speaker 1: answer that question and say put your money here for 230 00:13:08,559 --> 00:13:10,520 Speaker 1: the next two weeks, three weeks, a month, whatever. You 231 00:13:10,520 --> 00:13:12,160 Speaker 1: have to look at this over a longer period of time. 232 00:13:12,200 --> 00:13:16,280 Speaker 1: But like Europe has clearly made the statement that they're 233 00:13:16,280 --> 00:13:20,160 Speaker 1: going to invest in their energy infrastructure, which means alternative energy, 234 00:13:20,320 --> 00:13:24,120 Speaker 1: they're gonna invest in defense. Uh, and those two areas 235 00:13:24,160 --> 00:13:29,080 Speaker 1: have enormous um tentacles throughout their economies and all kinds 236 00:13:29,080 --> 00:13:31,800 Speaker 1: of companies that will benefit from that. I do think 237 00:13:31,840 --> 00:13:34,400 Speaker 1: there will be some attempt in the United States to 238 00:13:34,480 --> 00:13:40,560 Speaker 1: actually build some UH semiconductor and chip capability that people 239 00:13:40,920 --> 00:13:43,720 Speaker 1: are concerned about as having have been off short. So 240 00:13:43,760 --> 00:13:45,559 Speaker 1: you're gonna see investments in that. You can see it 241 00:13:45,600 --> 00:13:48,400 Speaker 1: in the Intel announcements and the attempt to build large 242 00:13:48,440 --> 00:13:51,120 Speaker 1: plants in the South. So I don't think it takes 243 00:13:51,120 --> 00:13:53,319 Speaker 1: a great deal of imagination to see where to put 244 00:13:53,360 --> 00:13:55,920 Speaker 1: your money over the long term. I still think this 245 00:13:56,040 --> 00:13:58,559 Speaker 1: question is geopolitical question that the Chilian and I are 246 00:13:58,559 --> 00:14:01,720 Speaker 1: sort of touching on is a big deal, and the 247 00:14:01,840 --> 00:14:05,040 Speaker 1: longer term trends and the bigger opportunity to make money 248 00:14:05,200 --> 00:14:08,440 Speaker 1: is trying to figure out where that is going to fall. Peter, 249 00:14:08,520 --> 00:14:10,880 Speaker 1: there was one other event that certainly shook those of 250 00:14:10,960 --> 00:14:12,800 Speaker 1: us in New York and around Wall Street this week, 251 00:14:12,840 --> 00:14:16,000 Speaker 1: and that was that shooting in the crowded Brooklyn subway 252 00:14:16,360 --> 00:14:18,960 Speaker 1: US someone who spent so much time on Wall Street, 253 00:14:19,160 --> 00:14:21,240 Speaker 1: do you think that may have longer term effects, particularly 254 00:14:21,280 --> 00:14:23,440 Speaker 1: we try to bring workers back to work. It's shaken 255 00:14:23,480 --> 00:14:26,720 Speaker 1: up a lot of people. I used a terrible tragedy 256 00:14:26,840 --> 00:14:30,480 Speaker 1: and terrible for New York, but New York survived nine eleven, 257 00:14:30,560 --> 00:14:32,880 Speaker 1: it survived many other things, and we will survive this 258 00:14:33,040 --> 00:14:36,360 Speaker 1: and we will continue on. Okay, thank you so very much. 259 00:14:36,400 --> 00:14:39,160 Speaker 1: The Jillian Tett of the Financial Times and Peter Krauss 260 00:14:39,200 --> 00:14:43,960 Speaker 1: of Aperture Investors. Coming up. It's tax time in the 261 00:14:44,040 --> 00:14:46,960 Speaker 1: United States, and we've turned to the man most identified 262 00:14:47,000 --> 00:14:51,280 Speaker 1: with getting our taxes down, Rover Norkwist, President of Americans 263 00:14:51,320 --> 00:14:55,160 Speaker 1: for Tax Reform. That next on Wall Street Week on Bloomberg. 264 00:14:56,440 --> 00:15:00,440 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 265 00:15:00,560 --> 00:15:03,800 Speaker 1: Bloomberg Radio. April fifteen is the time of year when 266 00:15:03,840 --> 00:15:06,360 Speaker 1: most of those us in the United States turned to taxes, 267 00:15:06,720 --> 00:15:09,240 Speaker 1: though this year the Good Friday holiday gives us an 268 00:15:09,280 --> 00:15:12,040 Speaker 1: extra weekend to get them done. But whatever the time 269 00:15:12,080 --> 00:15:15,200 Speaker 1: of year and wherever you are, taxes loom large for 270 00:15:15,320 --> 00:15:18,520 Speaker 1: all investors. What do tax rates mean for how much 271 00:15:18,560 --> 00:15:21,160 Speaker 1: we invest? What do they mean for when we invest 272 00:15:21,240 --> 00:15:23,840 Speaker 1: and for that matter, when we cash out? And how 273 00:15:23,880 --> 00:15:27,080 Speaker 1: does the structure of the tax code affect where we invest? 274 00:15:27,360 --> 00:15:30,600 Speaker 1: Grover Norquist has devoted his career to addressing questions just 275 00:15:30,720 --> 00:15:33,760 Speaker 1: like these. He is the founder and president of Americans 276 00:15:33,800 --> 00:15:36,920 Speaker 1: for Tax Reform. That's an organization that President Ronald Reagan 277 00:15:37,080 --> 00:15:40,840 Speaker 1: urged him to start back in So, Grover, thank you 278 00:15:40,920 --> 00:15:43,040 Speaker 1: so much for joining us. Really appreciated. You are the 279 00:15:43,080 --> 00:15:45,120 Speaker 1: man on taxes. And let me ask you, going all 280 00:15:45,120 --> 00:15:47,000 Speaker 1: the way back to nine five, when I look at 281 00:15:47,040 --> 00:15:51,360 Speaker 1: the percentage of federal revenues as a percentage of GDP 282 00:15:51,760 --> 00:15:54,280 Speaker 1: throughout that period of time, it has not gone up, 283 00:15:54,360 --> 00:15:56,960 Speaker 1: even from the days of Ronald Reagan. Have you succeeded? 284 00:15:57,000 --> 00:16:01,000 Speaker 1: Should you declare a victory? Yes? And the sentence uh? Uh. 285 00:16:01,040 --> 00:16:03,240 Speaker 1: The goal is to have the government take less of 286 00:16:03,280 --> 00:16:06,320 Speaker 1: people's resources and allow them to have more freedom and 287 00:16:06,360 --> 00:16:09,560 Speaker 1: more liberty, and to have businesses invest based on what's 288 00:16:09,560 --> 00:16:14,120 Speaker 1: a good investment. Uh. Not you know what tax policies are. 289 00:16:14,560 --> 00:16:18,120 Speaker 1: So I'm happy that we've stopped a lot. We've taken 290 00:16:18,120 --> 00:16:21,440 Speaker 1: the rates down dramatically. Member top rate was seventy when 291 00:16:21,440 --> 00:16:24,640 Speaker 1: Reagan walked in the door. Uh. It got down as 292 00:16:24,640 --> 00:16:27,600 Speaker 1: low as twenty eight percent. Unfortunately Bush let that back up. 293 00:16:27,960 --> 00:16:31,320 Speaker 1: But there's more to be done. At the national level. 294 00:16:31,680 --> 00:16:34,520 Speaker 1: The reduction of the corporate income tax that the Republicans 295 00:16:34,520 --> 00:16:38,640 Speaker 1: did in seventeen made us more competitive with China. The 296 00:16:38,760 --> 00:16:42,240 Speaker 1: danger with the tax increase. One of the tax increases 297 00:16:42,280 --> 00:16:46,680 Speaker 1: that Biden is looking at, taking the top rate corporate rate, 298 00:16:46,800 --> 00:16:50,080 Speaker 1: the corporate that would put it up higher than China, 299 00:16:50,520 --> 00:16:53,520 Speaker 1: higher than anyone we compete with in Europe. When we 300 00:16:53,520 --> 00:16:55,640 Speaker 1: were at twenty one, we were much more competitive. We 301 00:16:55,680 --> 00:16:57,680 Speaker 1: are at twenty one now. But if we go back 302 00:16:57,720 --> 00:17:00,520 Speaker 1: up to twenty and you have to add more states 303 00:17:00,560 --> 00:17:04,640 Speaker 1: have a state corporate income tax, we become very uncompetitive 304 00:17:04,640 --> 00:17:08,439 Speaker 1: with China, Japan, Europe. As you know better than I, 305 00:17:08,560 --> 00:17:10,600 Speaker 1: it's not just the marginal rate that counts, it's the 306 00:17:10,640 --> 00:17:12,840 Speaker 1: total tax burden. And if you look at O E 307 00:17:12,960 --> 00:17:15,760 Speaker 1: c D countries, in fact, they have v A T taxes, 308 00:17:15,800 --> 00:17:18,359 Speaker 1: other taxes they pay, and there's a Peterson Institute study 309 00:17:18,400 --> 00:17:20,120 Speaker 1: that actually says we're at the bottom of the pack 310 00:17:20,280 --> 00:17:22,440 Speaker 1: when it comes to O E c D countries to competitors. 311 00:17:22,480 --> 00:17:24,560 Speaker 1: What do you say about those numbers, Well, we have 312 00:17:25,240 --> 00:17:29,080 Speaker 1: less spending, less taxation as a percentage of our income 313 00:17:29,119 --> 00:17:33,200 Speaker 1: as a percentage of our assets, which is good. That's 314 00:17:33,280 --> 00:17:36,600 Speaker 1: why we've historically grown faster than Europe. That's why we're 315 00:17:37,000 --> 00:17:39,080 Speaker 1: the g d P is stronger in the United States 316 00:17:39,119 --> 00:17:42,920 Speaker 1: per capita than in other places. UH The value added 317 00:17:43,000 --> 00:17:46,520 Speaker 1: tax that they have in Europe is how they got 318 00:17:46,560 --> 00:17:48,920 Speaker 1: government bigger. There's a certain point at which you can't 319 00:17:48,960 --> 00:17:51,760 Speaker 1: get any more blood out of the turnip with individual 320 00:17:51,800 --> 00:17:55,560 Speaker 1: tax rates, both on companies and on individuals. We're probably 321 00:17:55,600 --> 00:17:59,600 Speaker 1: above that point now, but the Europeans have decided you 322 00:17:59,680 --> 00:18:03,080 Speaker 1: can increase the size of the government with a value 323 00:18:03,080 --> 00:18:07,840 Speaker 1: out of tax, which is in some cases in Europe 324 00:18:07,840 --> 00:18:11,080 Speaker 1: it's a sales tax at all levels of production. And 325 00:18:11,720 --> 00:18:15,639 Speaker 1: that's one of the ideas that some in America have. 326 00:18:15,720 --> 00:18:18,159 Speaker 1: Why don't we have a carbon tax, which would then 327 00:18:18,200 --> 00:18:21,320 Speaker 1: become the VAT tax. Then we'd look like Europe. And 328 00:18:21,359 --> 00:18:24,200 Speaker 1: I guess my argument is, if you want to see innovation, growth, 329 00:18:24,320 --> 00:18:28,119 Speaker 1: job creation, you don't want to look like Europe. Is 330 00:18:28,160 --> 00:18:31,639 Speaker 1: there a right number for the percentage of GDP that 331 00:18:31,720 --> 00:18:34,240 Speaker 1: should be tax? I mean, there's something called Houser's Law 332 00:18:34,280 --> 00:18:36,399 Speaker 1: that I've read about that says, basically, no matter what 333 00:18:36,440 --> 00:18:38,239 Speaker 1: the marginal rate is in the United States, going back 334 00:18:38,280 --> 00:18:42,199 Speaker 1: to we come up with someone between seventeen and right now, 335 00:18:42,240 --> 00:18:44,720 Speaker 1: I think we're about seventeen point nine percent. Is there 336 00:18:44,720 --> 00:18:47,440 Speaker 1: a right number? I think you you find that out 337 00:18:47,520 --> 00:18:49,639 Speaker 1: by bringing it down and seeing if it gets you 338 00:18:49,720 --> 00:18:53,600 Speaker 1: more growth. You certainly saw when Coolidge cut tax rates, 339 00:18:53,600 --> 00:18:57,680 Speaker 1: you saw strong economic growth until Hoover raised them. Uh. 340 00:18:57,720 --> 00:19:00,920 Speaker 1: And then when John F. Kennedy cut original tax rates, 341 00:19:00,920 --> 00:19:04,840 Speaker 1: you had strong growth until Nixon raised taxes. And with 342 00:19:04,880 --> 00:19:07,520 Speaker 1: Reagan you have the strong growth until Bush and then 343 00:19:07,600 --> 00:19:12,080 Speaker 1: Clinton raised taxes. So it's we've been getting towards a 344 00:19:12,160 --> 00:19:16,040 Speaker 1: point which may maximize revene. I'm not sure maximizing revenue 345 00:19:16,080 --> 00:19:18,680 Speaker 1: is the key. I'd like to maximize growth and job 346 00:19:18,760 --> 00:19:23,680 Speaker 1: creation UH and innovation. UH. Certainly we learn a lot 347 00:19:23,680 --> 00:19:26,639 Speaker 1: from the states. They're fifty states. Eight of them have 348 00:19:26,760 --> 00:19:29,439 Speaker 1: no personal income tax at all, and they tend to 349 00:19:29,480 --> 00:19:32,480 Speaker 1: be doing better than other states. People move to Texas 350 00:19:32,480 --> 00:19:36,760 Speaker 1: and Tennessee and Washington State UH and Florida uh. And 351 00:19:36,800 --> 00:19:39,080 Speaker 1: now there are another and there are another eight states 352 00:19:39,119 --> 00:19:44,119 Speaker 1: that have single rate taxes. So even democrat or progressive 353 00:19:44,160 --> 00:19:50,120 Speaker 1: states like Massachusetts and Illinois have lower income tax rates 354 00:19:50,160 --> 00:19:53,480 Speaker 1: on individuals five percent in Massachusetts, about four percent in 355 00:19:53,880 --> 00:19:58,520 Speaker 1: Illinois because it's a flat rate tax and that's difficult 356 00:19:58,520 --> 00:20:02,560 Speaker 1: for politicians to raise, easier to reduce. But there are 357 00:20:02,560 --> 00:20:05,640 Speaker 1: now eight states that have income taxes that are phasing 358 00:20:05,680 --> 00:20:08,040 Speaker 1: those out. You just saw the vote in Georgia to 359 00:20:08,119 --> 00:20:12,680 Speaker 1: begin phasing out uh the income tax to zero. Mississippi 360 00:20:12,720 --> 00:20:16,520 Speaker 1: has done the same thing Louisiana did last year. Iowa 361 00:20:17,040 --> 00:20:19,399 Speaker 1: top rate individuals six and a half down to a 362 00:20:19,480 --> 00:20:22,480 Speaker 1: four percent under four percent flat rate, with the goal 363 00:20:22,520 --> 00:20:25,720 Speaker 1: of them taking it down to zero. It's awfully hard 364 00:20:25,760 --> 00:20:27,600 Speaker 1: to have a meaningful discussion of taxes without talking to 365 00:20:27,600 --> 00:20:30,119 Speaker 1: Grover Norquist. Grow. Thank you so much for your time. Today, 366 00:20:30,200 --> 00:20:33,480 Speaker 1: let's Grover north Quick as president and founder of American's 367 00:20:33,520 --> 00:20:38,800 Speaker 1: four tax reform. Coming up, we wrap up the shortened 368 00:20:38,800 --> 00:20:43,600 Speaker 1: holiday week with Larry Summers of Harvard. This is Wall 369 00:20:43,640 --> 00:20:53,000 Speaker 1: Street Week on Bloomberg. This is Wall Street Week. I'm 370 00:20:53,080 --> 00:20:55,159 Speaker 1: David Weston. We are joined once again this week for 371 00:20:55,240 --> 00:20:58,760 Speaker 1: our very special contributor, Larry Summers of Harvard. So, Larry, 372 00:20:58,800 --> 00:21:00,760 Speaker 1: we got those CPI numbers out. They came in just 373 00:21:00,800 --> 00:21:03,359 Speaker 1: as bad as every expected they would. Let me ask you, 374 00:21:03,560 --> 00:21:05,399 Speaker 1: do you think we're peaking in the inflation because some 375 00:21:05,440 --> 00:21:07,600 Speaker 1: people think this is about the peak. I think we're 376 00:21:07,640 --> 00:21:10,800 Speaker 1: probably peaking for the next several months. There was a 377 00:21:10,920 --> 00:21:14,920 Speaker 1: huge component from gasoline this month that I don't think 378 00:21:14,960 --> 00:21:17,720 Speaker 1: will be repeated in the next several because of the 379 00:21:17,760 --> 00:21:20,360 Speaker 1: baser effects. I think the number is gonna come down. 380 00:21:21,000 --> 00:21:25,440 Speaker 1: Whether we're peaking indefinitely, I'm not a rule. I'm not 381 00:21:25,920 --> 00:21:29,000 Speaker 1: certain that that's going to happen. It will depend on 382 00:21:29,200 --> 00:21:32,320 Speaker 1: lock and it will also depend on the decisions that 383 00:21:32,840 --> 00:21:36,280 Speaker 1: UH the Federal Reserve makes. And one of the questions 384 00:21:36,280 --> 00:21:38,480 Speaker 1: I was sticky it's going to be. There's this trimmed 385 00:21:38,600 --> 00:21:41,440 Speaker 1: mean way of calculating inflation, which is now about six percent. 386 00:21:41,640 --> 00:21:44,119 Speaker 1: It's the longest in history sometimes four What do you 387 00:21:44,200 --> 00:21:47,640 Speaker 1: make of that? Look, there's been an effort, as there 388 00:21:47,720 --> 00:21:51,440 Speaker 1: always is when you have inflation, to dismiss it as 389 00:21:51,560 --> 00:21:56,800 Speaker 1: due to specific or temporary UH factors. That is much 390 00:21:56,880 --> 00:22:00,640 Speaker 1: more wrong than right. You can see when you take 391 00:22:00,680 --> 00:22:04,240 Speaker 1: out all the extreme observations in both directions as that 392 00:22:04,359 --> 00:22:08,640 Speaker 1: calculation does. You can see it, as I'm emphasized, by 393 00:22:09,240 --> 00:22:14,119 Speaker 1: looking at the wage wages, which are the ultimate source 394 00:22:14,200 --> 00:22:19,440 Speaker 1: of costs UH in UH the economy. We've got a 395 00:22:19,560 --> 00:22:26,000 Speaker 1: pretty fundamental UH inflation UH problem in our country. You know, David, 396 00:22:26,080 --> 00:22:30,520 Speaker 1: I saw something recently that brought this home to me. UH. 397 00:22:30,840 --> 00:22:34,479 Speaker 1: People think of US as having had thirteen fourteen percent 398 00:22:34,600 --> 00:22:38,560 Speaker 1: inflation in the nineteen seventies, but that's only because of 399 00:22:38,640 --> 00:22:42,040 Speaker 1: the way it was calculated. Then, if you use the 400 00:22:42,160 --> 00:22:46,720 Speaker 1: same way we calculate inflation now, it got just above 401 00:22:46,880 --> 00:22:51,160 Speaker 1: ten percent in the nineteen seventies, So getting to eight 402 00:22:51,240 --> 00:22:55,240 Speaker 1: and a half, we're actually closer to being back there 403 00:22:55,680 --> 00:22:59,200 Speaker 1: than I think most people realize. So given that, and 404 00:22:59,320 --> 00:23:01,080 Speaker 1: that's a really same fact, I must say I did 405 00:23:01,160 --> 00:23:04,280 Speaker 1: not know that. Given that, what should the FEDS realistic 406 00:23:04,400 --> 00:23:06,440 Speaker 1: goal be right now? I mean they cannot get it 407 00:23:06,480 --> 00:23:09,360 Speaker 1: back to two percent by next month? Goodness nose. Now, Look, 408 00:23:09,440 --> 00:23:12,240 Speaker 1: I think we need to go back to the old 409 00:23:12,359 --> 00:23:16,120 Speaker 1: idea of price stability as being when people aren't thinking 410 00:23:16,160 --> 00:23:20,240 Speaker 1: about inflation as part of regular economic calculations, and we 411 00:23:20,359 --> 00:23:25,120 Speaker 1: need to move away from the detailed fixation with numerical targets, 412 00:23:25,200 --> 00:23:29,600 Speaker 1: which it seems to me has led us to unhealthy places. 413 00:23:29,680 --> 00:23:33,679 Speaker 1: So I'd go back to a general definition of price stability. 414 00:23:34,080 --> 00:23:39,240 Speaker 1: But we are nowhere close uh to that uh right now. 415 00:23:39,480 --> 00:23:44,040 Speaker 1: And I would worry about the clamor of voices that 416 00:23:44,160 --> 00:23:48,560 Speaker 1: are saying that, you know, four percent inflation could be okay, 417 00:23:48,920 --> 00:23:53,400 Speaker 1: or even that inflation above three uh could be okay. 418 00:23:53,960 --> 00:23:56,400 Speaker 1: I think we need to be very determined to come 419 00:23:56,480 --> 00:24:00,119 Speaker 1: way down from where we are right now. Larry. Was 420 00:24:00,160 --> 00:24:03,240 Speaker 1: a Bank of America survey of fund managers out this week, 421 00:24:03,680 --> 00:24:07,680 Speaker 1: and the big headline was concerns about stagflation. It's higher 422 00:24:07,720 --> 00:24:09,879 Speaker 1: than it's been since certainly two thousand eight or so. 423 00:24:10,600 --> 00:24:14,120 Speaker 1: How concerned should we be about stagflation? I think it's 424 00:24:14,200 --> 00:24:19,040 Speaker 1: the most likely place we're gonna be if stagflation means 425 00:24:20,200 --> 00:24:24,480 Speaker 1: rising unemployment and still high inflation. I think that's the 426 00:24:24,560 --> 00:24:28,040 Speaker 1: preponderant probability as to where we're going to get over 427 00:24:28,119 --> 00:24:31,520 Speaker 1: the last couple of years. Is I've over the next 428 00:24:31,600 --> 00:24:34,399 Speaker 1: couple of years. As I've said before on your show, David, 429 00:24:35,200 --> 00:24:40,680 Speaker 1: the painful fact that needs to inform our view is 430 00:24:40,760 --> 00:24:45,000 Speaker 1: that we've never had a moment when unemployment was below for, 431 00:24:45,520 --> 00:24:49,280 Speaker 1: inflation was above for, and we avoided recession for the 432 00:24:49,359 --> 00:24:54,160 Speaker 1: next two subsequent two years. And right now unemployments well 433 00:24:54,280 --> 00:24:58,760 Speaker 1: below for and inflation is well above for. Lots of 434 00:24:58,840 --> 00:25:02,239 Speaker 1: people say, look, the job market is so strong, why 435 00:25:02,320 --> 00:25:05,280 Speaker 1: would anyone think we're going to have a recession. What 436 00:25:05,440 --> 00:25:08,920 Speaker 1: the data show is that the lower unemployment is, the 437 00:25:09,040 --> 00:25:12,880 Speaker 1: more likely it is that that's going to uh turn 438 00:25:13,040 --> 00:25:16,560 Speaker 1: down in subsequent months, So that was last week. Next week, 439 00:25:16,600 --> 00:25:18,600 Speaker 1: of course, we have those meetings in Washington, I m 440 00:25:18,680 --> 00:25:21,119 Speaker 1: F and the World Bank. In anticipation of that. It 441 00:25:21,200 --> 00:25:24,240 Speaker 1: appears the Secretary of Treasury, Janet Yellen had a speech 442 00:25:24,280 --> 00:25:27,200 Speaker 1: before the Atlanta Council this week in which she really said, 443 00:25:27,280 --> 00:25:30,119 Speaker 1: we've got to decide which side we're on, apparently pointing 444 00:25:30,160 --> 00:25:32,080 Speaker 1: her fingers sort of a China saying you need to 445 00:25:32,160 --> 00:25:34,480 Speaker 1: decide where you're going to come out because of the 446 00:25:34,560 --> 00:25:38,200 Speaker 1: conflict with Russia over Ukraine. What about the use of 447 00:25:38,480 --> 00:25:42,560 Speaker 1: international economic and monetary form so really address things like 448 00:25:42,680 --> 00:25:45,520 Speaker 1: national security. Look, there's plenty we need to work out 449 00:25:45,640 --> 00:25:50,200 Speaker 1: with respect to China. But let's start with the fact 450 00:25:50,359 --> 00:25:55,960 Speaker 1: that the United States has now committed no funds to 451 00:25:56,160 --> 00:26:00,399 Speaker 1: international COVID relief efforts. Let's start with the fact that 452 00:26:00,480 --> 00:26:04,119 Speaker 1: the United States is a massive laggard with respect to 453 00:26:04,440 --> 00:26:07,400 Speaker 1: climate change commitments because we haven't been able to pass 454 00:26:07,560 --> 00:26:13,240 Speaker 1: anything through Congress. Let's start with the fact that Russia 455 00:26:13,720 --> 00:26:18,040 Speaker 1: is earning more export revenue than it was before the war, 456 00:26:18,720 --> 00:26:21,560 Speaker 1: and the ruble was stronger than it was because our 457 00:26:21,600 --> 00:26:28,920 Speaker 1: European allies are continuing to import oil on a substantial scale. 458 00:26:29,400 --> 00:26:34,160 Speaker 1: I think we need to start in those places before 459 00:26:34,680 --> 00:26:38,600 Speaker 1: UH we go after China. I think Secretary Yellen has 460 00:26:38,680 --> 00:26:45,080 Speaker 1: been enormously successful in her leadership on global tax issues, 461 00:26:45,200 --> 00:26:50,119 Speaker 1: including bringing China into that regime, but the US Congress 462 00:26:50,520 --> 00:26:56,040 Speaker 1: UH isn't there, and I think that's a hugely important thing. 463 00:26:56,760 --> 00:27:01,280 Speaker 1: I think that we do need to UH address the 464 00:27:01,440 --> 00:27:04,960 Speaker 1: Chinese in a strong UH way, But we need to 465 00:27:05,040 --> 00:27:09,440 Speaker 1: make a decision as to whether the U S strategy 466 00:27:10,400 --> 00:27:15,600 Speaker 1: is to use international financial institutions as a strategy and 467 00:27:15,680 --> 00:27:20,800 Speaker 1: a route to cooperating with China in those spheres where 468 00:27:20,920 --> 00:27:26,480 Speaker 1: cooperation remains possible, or we need to conceptualize those institutions 469 00:27:27,320 --> 00:27:34,040 Speaker 1: entirely as means of containing, disciplining, and limiting UH China. 470 00:27:34,680 --> 00:27:38,200 Speaker 1: We haven't really given entirely clear signals on that. I 471 00:27:38,359 --> 00:27:42,000 Speaker 1: think we should still be trying to take UH the 472 00:27:42,200 --> 00:27:47,159 Speaker 1: former approach of using them as tools for engaging China. Finally, 473 00:27:47,320 --> 00:27:51,160 Speaker 1: I hope that we're gonna see in the next month's 474 00:27:51,720 --> 00:27:57,879 Speaker 1: a US strategy that's clear and explicit towards the World Bank. 475 00:27:58,560 --> 00:28:02,720 Speaker 1: It seems to me that has climate change has loomed 476 00:28:02,840 --> 00:28:06,680 Speaker 1: larger and larger as a problem as there has been 477 00:28:07,320 --> 00:28:12,880 Speaker 1: a major pandemic UH issue. As the need for relief 478 00:28:13,200 --> 00:28:19,080 Speaker 1: around the world has stepped up, the bank has really 479 00:28:19,240 --> 00:28:23,520 Speaker 1: not UH stepped up as a major player. And given 480 00:28:23,560 --> 00:28:27,920 Speaker 1: that the US is the largest shareholder and appoints the president, 481 00:28:28,119 --> 00:28:32,200 Speaker 1: the US has a responsibility at this point to energize 482 00:28:32,240 --> 00:28:34,399 Speaker 1: the bank. Thank you so much, hilarious sumers are very 483 00:28:34,400 --> 00:28:44,520 Speaker 1: special triblier on Wall Street Week. Finally, one more thought, 484 00:28:44,960 --> 00:28:48,600 Speaker 1: death and taxes. Benjamin Franklin famously wrote that they were 485 00:28:48,680 --> 00:28:51,680 Speaker 1: the only things that were truly certain, though it turns 486 00:28:51,720 --> 00:28:54,520 Speaker 1: out he took that truism from an earlier writer back 487 00:28:54,560 --> 00:28:57,880 Speaker 1: in seventeen sixteen. But when it comes to taxes, it's 488 00:28:57,920 --> 00:29:00,240 Speaker 1: more than just the need to pay them that's certain. 489 00:29:00,600 --> 00:29:03,960 Speaker 1: There's also the certainty of the debate about them, usually 490 00:29:04,040 --> 00:29:05,960 Speaker 1: between the need to cut them and they need to 491 00:29:06,040 --> 00:29:09,600 Speaker 1: make sure everyone is paying their quote fair share. For 492 00:29:09,760 --> 00:29:13,040 Speaker 1: too long, we've lived with a tax system that is 493 00:29:13,080 --> 00:29:15,760 Speaker 1: a blot, a stain on the shining mantle of our 494 00:29:15,800 --> 00:29:19,480 Speaker 1: democratic government. Wall Street didn't build this country. The middle 495 00:29:19,600 --> 00:29:21,720 Speaker 1: class built the country. I think you should be able 496 00:29:21,720 --> 00:29:25,040 Speaker 1: to become a billionaire in a millionaire, but pay your 497 00:29:25,080 --> 00:29:28,600 Speaker 1: fair share and just as certain is the pledge to 498 00:29:28,720 --> 00:29:31,480 Speaker 1: reform how we pay our taxes, not just get the 499 00:29:31,600 --> 00:29:36,000 Speaker 1: overall level right, leading us to a recurrent debate, for example, 500 00:29:36,120 --> 00:29:39,320 Speaker 1: over deductions for state and local taxes that's so called 501 00:29:39,440 --> 00:29:44,200 Speaker 1: salted deduction. The President Trump severely cut back, and the Democrats, 502 00:29:44,320 --> 00:29:48,040 Speaker 1: particularly from the Northeast, keep saying they will restore. This 503 00:29:48,160 --> 00:29:51,040 Speaker 1: all speaks to the challenge that Democrats have before them. 504 00:29:51,120 --> 00:29:54,280 Speaker 1: You did hear a restatement from a number of Democrats 505 00:29:54,360 --> 00:29:56,720 Speaker 1: saying that they would not support legislation that does not 506 00:29:56,880 --> 00:29:59,280 Speaker 1: have the salt tax in it. And of course there's 507 00:29:59,320 --> 00:30:02,400 Speaker 1: the recurrent playing over the capital gains treatment for so 508 00:30:02,600 --> 00:30:06,600 Speaker 1: called carried interests for private equity income. Maybe the one 509 00:30:06,720 --> 00:30:10,520 Speaker 1: thing that President Trump and President Biden could actually agree on. 510 00:30:11,120 --> 00:30:14,840 Speaker 1: The President very specifically campaigned against carried interest for hedge 511 00:30:14,880 --> 00:30:18,760 Speaker 1: funds and for that that that industry. Um, that's really 512 00:30:18,840 --> 00:30:24,000 Speaker 1: what he's focused on. Keeping this tax loophole, which leads 513 00:30:24,040 --> 00:30:28,920 Speaker 1: to uh, folks who are doing very well paying lower 514 00:30:29,040 --> 00:30:34,920 Speaker 1: rates than their secretaries, is not in anymonsterable way improving 515 00:30:34,960 --> 00:30:37,440 Speaker 1: our economy. And now we have a new candidate for 516 00:30:37,520 --> 00:30:40,960 Speaker 1: so called tax reform. It's a billionaires tax that would 517 00:30:41,000 --> 00:30:44,320 Speaker 1: make the very wealthy pay for appreciation in their assets 518 00:30:44,400 --> 00:30:47,600 Speaker 1: every year, whether or not they actually get the cash. 519 00:30:48,200 --> 00:30:51,440 Speaker 1: Right now, billionaires pay an average rate of eight percent 520 00:30:51,680 --> 00:30:54,920 Speaker 1: on their total income. My budget contains a billionaire minimum tax. 521 00:30:55,000 --> 00:30:58,400 Speaker 1: Because of that minimum tax, it applies only to the 522 00:30:58,480 --> 00:31:04,840 Speaker 1: top one percy Americans will pay this tax. And so 523 00:31:05,160 --> 00:31:08,080 Speaker 1: this year, as we pay those inevitable taxes, we can 524 00:31:08,160 --> 00:31:10,800 Speaker 1: rest easy that people will keep talking about some kind 525 00:31:10,880 --> 00:31:14,560 Speaker 1: of reform that never comes. But then again, the late 526 00:31:14,680 --> 00:31:17,920 Speaker 1: great Art buck Wald warned that tax reform is taking 527 00:31:17,960 --> 00:31:20,080 Speaker 1: the taxes off things that have been taxed in the 528 00:31:20,160 --> 00:31:24,000 Speaker 1: past and putting taxes on things that haven't been taxed before. 529 00:31:24,640 --> 00:31:27,120 Speaker 1: So maybe we shouldn't be in too big a rush 530 00:31:27,400 --> 00:31:30,440 Speaker 1: for tax reform after all. That does it for this 531 00:31:30,520 --> 00:31:33,200 Speaker 1: episode of Wall Street Week, I'm David Weston. This is Bloomberg. 532 00:31:33,440 --> 00:31:34,200 Speaker 1: See you next week.