1 00:00:00,080 --> 00:00:13,040 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,400 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Let's 5 00:00:27,400 --> 00:00:31,200 Speaker 1: bring it tiny percentI shall we Pimco generalist portfolio manager, 6 00:00:31,280 --> 00:00:34,919 Speaker 1: he joins us right now with you, sir brilliant as 7 00:00:35,000 --> 00:00:39,839 Speaker 1: alwise does that strike to resupply MATSA this week? It 8 00:00:39,960 --> 00:00:42,880 Speaker 1: has mattered for years in the sense thataid people always 9 00:00:42,880 --> 00:00:46,320 Speaker 1: ask when will things blow up? And I wrote a 10 00:00:46,320 --> 00:00:49,000 Speaker 1: book about this idea of a Kensie and endpoint. Greece 11 00:00:49,159 --> 00:00:52,960 Speaker 1: reached the Kenzie endpoint almost a decade ago. In other words, 12 00:00:53,360 --> 00:00:57,520 Speaker 1: where couldn't stimulate its economy through physical stimus, it couldn't 13 00:00:57,520 --> 00:01:00,560 Speaker 1: borrow from the world. It had to find another sheet. 14 00:01:00,560 --> 00:01:02,560 Speaker 1: Of course, that was the I M F E. C. 15 00:01:02,720 --> 00:01:06,000 Speaker 1: B Uh and of course the rest of Europe. But 16 00:01:06,080 --> 00:01:07,680 Speaker 1: it hasn't matted a few years in the sense that 17 00:01:08,240 --> 00:01:12,000 Speaker 1: the US, Europe and Japan haven't been able to engage 18 00:01:12,000 --> 00:01:17,440 Speaker 1: in transformative activities, which is to say, infrastructure or investing 19 00:01:17,480 --> 00:01:22,280 Speaker 1: in people and things. Instead, moneys have gone mostly towards consumption. 20 00:01:22,520 --> 00:01:25,199 Speaker 1: I think of the recent stimulus plan, it's the moneys 21 00:01:25,200 --> 00:01:28,520 Speaker 1: that have been distributed absolutely vital. But is there any 22 00:01:28,560 --> 00:01:33,479 Speaker 1: major projects being created in America today to help the future. 23 00:01:33,600 --> 00:01:35,240 Speaker 1: You know, I think you're dead on, TONI. I think 24 00:01:35,240 --> 00:01:37,480 Speaker 1: you're absolutely dead on about the lack of application the 25 00:01:37,560 --> 00:01:40,679 Speaker 1: long term projects and to invest in the country, et cetera. 26 00:01:40,760 --> 00:01:42,280 Speaker 1: Maybe we can see a change of that in the 27 00:01:42,319 --> 00:01:46,240 Speaker 1: next year, A little bit of that in Europe. Okay, 28 00:01:46,240 --> 00:01:48,400 Speaker 1: I'll give him some credit that I need a fifth tunnel. 29 00:01:48,680 --> 00:01:50,880 Speaker 1: You know, we need a tunnel to Staten Island, Tony. 30 00:01:50,960 --> 00:01:53,040 Speaker 1: That's what we need to do for you to get quicker, 31 00:01:53,080 --> 00:01:58,000 Speaker 1: to stay long said instead, we've got the the the 32 00:01:58,000 --> 00:02:01,960 Speaker 1: fifties six year old Arizono. It links Brooklyn to State 33 00:02:02,040 --> 00:02:05,840 Speaker 1: and the show has fallen a part of the light 34 00:02:05,920 --> 00:02:08,359 Speaker 1: speed here with Tony because says it. Tony, I want 35 00:02:08,360 --> 00:02:11,680 Speaker 1: to ask you, Lisa Bramo, it's question which is really important. Actually, 36 00:02:11,919 --> 00:02:15,160 Speaker 1: I have never ever ever cared about treasury supply, full 37 00:02:15,200 --> 00:02:18,560 Speaker 1: faith and credit supply. I don't care about auctions, and 38 00:02:18,639 --> 00:02:21,280 Speaker 1: yet now I really have to, don't I. I mean, 39 00:02:21,400 --> 00:02:26,639 Speaker 1: things have changed. It may be, but remember also the 40 00:02:26,800 --> 00:02:30,480 Speaker 1: world population is another angle. World populations aging. What do 41 00:02:30,520 --> 00:02:32,680 Speaker 1: we do as we age? We move up in the 42 00:02:32,680 --> 00:02:35,359 Speaker 1: so called capital structure. We want less and less risk. 43 00:02:35,440 --> 00:02:37,320 Speaker 1: So there's there's a lot of money that still flows 44 00:02:37,320 --> 00:02:41,079 Speaker 1: into bogs despite the low yields, because people simply want 45 00:02:41,120 --> 00:02:45,280 Speaker 1: to protect the their savings. But they it hasn't mattered. 46 00:02:45,320 --> 00:02:48,560 Speaker 1: Let me give you summer reading tom three books, real 47 00:02:48,639 --> 00:02:52,440 Speaker 1: quick thirty seconds that would describe the current situation. Start, 48 00:02:52,680 --> 00:02:56,520 Speaker 1: let's go back to fifty years. Use Adam Smith, the 49 00:02:56,520 --> 00:02:59,639 Speaker 1: Wealth of Nations, the idea of confidence. There's always a 50 00:02:59,720 --> 00:03:03,200 Speaker 1: knee too, to bridge the gap between the current situation, 51 00:03:03,200 --> 00:03:05,600 Speaker 1: which is bad, and the future, which hopefully is good. 52 00:03:06,080 --> 00:03:08,480 Speaker 1: In the Wealth of Nations out of mid Smith said, basically, 53 00:03:08,480 --> 00:03:10,760 Speaker 1: people will go out of each day try to to 54 00:03:10,919 --> 00:03:14,560 Speaker 1: do better for themselves and thereby build the Wealth of Nations. Then, secondly, 55 00:03:14,720 --> 00:03:17,239 Speaker 1: let's go back about a hundred fifty years Wealth of 56 00:03:17,280 --> 00:03:21,240 Speaker 1: where God, of course Lombard Street liquidity just lend where 57 00:03:21,240 --> 00:03:23,880 Speaker 1: it's needed. Central banks have done that and that's where 58 00:03:24,240 --> 00:03:27,320 Speaker 1: all the ceremonies come from. Finally, there's been a reduction 59 00:03:27,320 --> 00:03:32,119 Speaker 1: and uncertainty. Frank Night years ago in a book UH Risk, 60 00:03:32,200 --> 00:03:35,480 Speaker 1: Providence and Uncertainty, wrote a book about the idea of 61 00:03:35,840 --> 00:03:39,840 Speaker 1: uncertainties being so large that people disengage. Sometimes lately, of 62 00:03:39,880 --> 00:03:42,480 Speaker 1: course that was the case marks certainly there was. There 63 00:03:42,520 --> 00:03:45,680 Speaker 1: was what they call it nightty and uncertainty period. Now 64 00:03:45,720 --> 00:03:48,200 Speaker 1: it's more and it was radical. Now it's a little 65 00:03:48,280 --> 00:03:52,800 Speaker 1: less radical. And so that dissipation of radical uncertainties helping 66 00:03:52,840 --> 00:03:57,400 Speaker 1: market so liquidity confidence and a reduction in radical uncertainties 67 00:03:57,400 --> 00:04:01,360 Speaker 1: which driving markets supply doesn't matter right now so to speak, 68 00:04:01,360 --> 00:04:04,000 Speaker 1: but probably will matter more on the long end, with 69 00:04:04,120 --> 00:04:07,440 Speaker 1: a pivot point for the yield curpose if you want. 70 00:04:07,600 --> 00:04:10,040 Speaker 1: Tony Tom did read The Wealth of Nations and he 71 00:04:10,120 --> 00:04:12,640 Speaker 1: promptly took the message and went out and bought jewelry. 72 00:04:12,760 --> 00:04:14,880 Speaker 1: As we learned this morning, I do want to talk 73 00:04:14,880 --> 00:04:18,960 Speaker 1: about Europe. You're saying that the European plan to possibly 74 00:04:19,000 --> 00:04:21,440 Speaker 1: invest infrastructure is superior to what we're seeing out of 75 00:04:21,480 --> 00:04:23,920 Speaker 1: the US, where they're continues to be gridlock, and yet 76 00:04:23,960 --> 00:04:26,440 Speaker 1: a lot of investors have piled into the Europe story. 77 00:04:26,520 --> 00:04:29,200 Speaker 1: Do you think it has gone too far based on 78 00:04:29,240 --> 00:04:31,640 Speaker 1: the fact that they don't have the tech names to 79 00:04:31,720 --> 00:04:36,039 Speaker 1: basically support this into the new era. Great point. Least, 80 00:04:36,120 --> 00:04:38,400 Speaker 1: in fact, when you're thinking about investing over the next 81 00:04:38,440 --> 00:04:41,640 Speaker 1: five years and which equity market to invest in, you 82 00:04:41,800 --> 00:04:45,560 Speaker 1: probably want to think of think away from Europe and 83 00:04:45,600 --> 00:04:48,120 Speaker 1: towards the US and Asia because a lot of the 84 00:04:48,160 --> 00:04:51,640 Speaker 1: money about of the seven billion euros in grants and 85 00:04:51,720 --> 00:04:54,640 Speaker 1: loans that were recently approved by the European Commission, we'll 86 00:04:54,680 --> 00:04:57,880 Speaker 1: go toward green projects. A lot of those green projects 87 00:04:58,080 --> 00:05:02,200 Speaker 1: call it, let's say, a electric vehicle charging station require 88 00:05:02,279 --> 00:05:05,320 Speaker 1: the use of semi conductors. This will require mining and 89 00:05:05,360 --> 00:05:09,000 Speaker 1: it's just technology. So the same semi sector could grow 90 00:05:09,040 --> 00:05:13,360 Speaker 1: twenty plus for the next five years. But the European 91 00:05:13,440 --> 00:05:17,360 Speaker 1: companies aren't in that realm like America is an Asia 92 00:05:17,920 --> 00:05:20,279 Speaker 1: in other parts of the world. So it's not going 93 00:05:20,320 --> 00:05:22,440 Speaker 1: to be the place where money flows. And it will 94 00:05:22,480 --> 00:05:25,520 Speaker 1: affect the euro over time. In fact, it will keep 95 00:05:25,560 --> 00:05:28,760 Speaker 1: it from raillying more than it otherwise would because money 96 00:05:28,839 --> 00:05:32,599 Speaker 1: won't flow into technology, there will flow elsewhere. Great point, Tounny. 97 00:05:32,640 --> 00:05:34,320 Speaker 1: Let's talk about credit as well. At least it's gonna 98 00:05:34,400 --> 00:05:36,719 Speaker 1: laugh this one. Last week, the high yield issuance, we 99 00:05:36,760 --> 00:05:40,480 Speaker 1: saw of it price with the yield of four percent 100 00:05:40,680 --> 00:05:42,760 Speaker 1: or less at least. I know you're gonna want to 101 00:05:42,760 --> 00:05:44,480 Speaker 1: do this, so I'll let you do this. But the 102 00:05:44,520 --> 00:05:47,760 Speaker 1: issue that we had yesterday ahead you can do this 103 00:05:48,000 --> 00:05:50,920 Speaker 1: is that even high yield, Okay, there is great way. 104 00:05:50,960 --> 00:05:52,640 Speaker 1: Hold on a second for everyone who doesn't know what 105 00:05:52,640 --> 00:05:56,599 Speaker 1: we're talking about. Okay, So here's what we're talking about. 106 00:05:57,000 --> 00:05:59,960 Speaker 1: There was a company, a junk rated company that sold 107 00:06:00,040 --> 00:06:02,800 Speaker 1: to a bond with a coupon of what just north 108 00:06:02,800 --> 00:06:05,320 Speaker 1: of two percent? Is that right? Two point two point 109 00:06:05,360 --> 00:06:08,760 Speaker 1: eight I believe, and ten year notes this idea. That 110 00:06:08,880 --> 00:06:12,599 Speaker 1: was the lowest ever coupon on a high old bond. Alright, 111 00:06:12,720 --> 00:06:16,960 Speaker 1: John Aluminum packaging time, huge demount for it. Right now, 112 00:06:17,080 --> 00:06:20,320 Speaker 1: I'm trying to understand it's just below investment grade. What 113 00:06:20,480 --> 00:06:24,400 Speaker 1: is high yield anymore? Well, of course it's it is. 114 00:06:24,520 --> 00:06:26,760 Speaker 1: It is all relative, but one has to tie you. 115 00:06:26,880 --> 00:06:29,480 Speaker 1: Of course, there is anything below triple be rated. And 116 00:06:30,080 --> 00:06:32,400 Speaker 1: keep in mind two thousand eight, two thousand nine triple 117 00:06:32,520 --> 00:06:35,880 Speaker 1: be rated securities for investors in them, ninety nine and 118 00:06:35,920 --> 00:06:38,560 Speaker 1: a half percent of them got their money back. The 119 00:06:38,640 --> 00:06:42,960 Speaker 1: long long term default rate for all security corporate securities 120 00:06:43,000 --> 00:06:46,520 Speaker 1: about one that includes high yield. So investors are willing 121 00:06:46,600 --> 00:06:50,040 Speaker 1: to take the risk because they generally speaking will get 122 00:06:50,760 --> 00:06:54,800 Speaker 1: there are his horror, its money back. But one has 123 00:06:54,800 --> 00:06:57,360 Speaker 1: to be very scrutinous. Now there's been a lot of 124 00:06:57,520 --> 00:07:00,799 Speaker 1: dead issues. Tom talked about dead issues by the Treasury, 125 00:07:00,800 --> 00:07:03,400 Speaker 1: but it's been also a massive corporate bond issues. There 126 00:07:03,400 --> 00:07:06,760 Speaker 1: are lots of Treasury securities outstanding, lots of corporate bonds outstanding, 127 00:07:07,240 --> 00:07:10,840 Speaker 1: and the stress in two thousand, two thousand twenty, they 128 00:07:10,840 --> 00:07:13,840 Speaker 1: have a common thread that they both ended chaotic. Both 129 00:07:13,880 --> 00:07:18,480 Speaker 1: cycles ended chaotically. Why because the system financial system the 130 00:07:18,520 --> 00:07:22,600 Speaker 1: principle to agent system, meaning when there's one seller, they 131 00:07:22,640 --> 00:07:26,120 Speaker 1: typically go to an agent. So who is the go 132 00:07:26,320 --> 00:07:30,240 Speaker 1: between the intermediary, but the intermediary doesn't isn't playing the 133 00:07:30,680 --> 00:07:35,000 Speaker 1: role that it traditionally played, probably because of regulations, probably 134 00:07:35,000 --> 00:07:38,200 Speaker 1: because of change business models. And so be careful now 135 00:07:38,320 --> 00:07:42,640 Speaker 1: because most cycles are probably going to end chaotically. So 136 00:07:42,760 --> 00:07:45,400 Speaker 1: what an investor wants to do is have a little 137 00:07:45,400 --> 00:07:48,440 Speaker 1: more liquidity, have a more agility and more resilience in 138 00:07:48,440 --> 00:07:50,800 Speaker 1: a portfolio. Tony griants to catch up as always to 139 00:07:51,040 --> 00:08:07,680 Speaker 1: thank John Towns Chicago is not interested in September right now, 140 00:08:07,720 --> 00:08:11,520 Speaker 1: they're interested in August eleven. It has been a challenging 141 00:08:11,600 --> 00:08:14,520 Speaker 1: summer for Chicago and we are thrilled to bring you 142 00:08:14,800 --> 00:08:18,160 Speaker 1: their economist. Diane Swank joins us from Grant Thornton and 143 00:08:18,200 --> 00:08:21,040 Speaker 1: her work at Michigan and then Diane Swank for years 144 00:08:21,080 --> 00:08:23,480 Speaker 1: with Bank One as well. Diane, thank you so much 145 00:08:23,520 --> 00:08:26,920 Speaker 1: for coming on today. It is shocking to have the 146 00:08:27,000 --> 00:08:30,720 Speaker 1: family I have from Chicago, to have the grandfather that 147 00:08:30,880 --> 00:08:33,520 Speaker 1: was in that room in the back of the Art Institute, 148 00:08:33,559 --> 00:08:36,559 Speaker 1: that's trading room they've got stuck in the back corner. 149 00:08:36,920 --> 00:08:40,839 Speaker 1: To see this Chicago in such disarray. Is it just 150 00:08:41,160 --> 00:08:47,560 Speaker 1: about the slowing and collapsing economy. Well, there's a lot 151 00:08:47,640 --> 00:08:50,200 Speaker 1: of issues going on, and it's really devastating to see 152 00:08:50,200 --> 00:08:53,720 Speaker 1: what's happening to Michigan Avenue. Clearly people are out of work, 153 00:08:53,880 --> 00:08:56,200 Speaker 1: they have a lot of time, and also the gangs 154 00:08:56,240 --> 00:08:59,199 Speaker 1: are warring with each other. There's also the looting coming 155 00:08:59,240 --> 00:09:01,559 Speaker 1: from the gangs. But because the drug business has dried 156 00:09:01,640 --> 00:09:06,000 Speaker 1: up over the border, which is all bad on all sides. 157 00:09:06,080 --> 00:09:09,000 Speaker 1: So you know, this is very very hard. It is 158 00:09:09,240 --> 00:09:12,600 Speaker 1: um to see this devastation to the city is very rough. 159 00:09:13,160 --> 00:09:15,280 Speaker 1: But you know, we hope we can make it through it. 160 00:09:15,320 --> 00:09:18,400 Speaker 1: And I'm you know, this is getting harder and harder, Dane. 161 00:09:18,440 --> 00:09:21,160 Speaker 1: The polarization of this is seen in Washington, and a 162 00:09:21,280 --> 00:09:24,880 Speaker 1: stimulus that is halted was the word I saw today 163 00:09:24,920 --> 00:09:28,120 Speaker 1: in the national press. What would be your message, is 164 00:09:28,160 --> 00:09:31,320 Speaker 1: the lead economist of Chicago, with great respect to the 165 00:09:31,320 --> 00:09:35,120 Speaker 1: fellow reserve of Chicago, Diane, what would be your message 166 00:09:35,160 --> 00:09:40,240 Speaker 1: to the politicians in Washington? Well, I think it'd be 167 00:09:40,280 --> 00:09:42,840 Speaker 1: the same as Charlie Evans, the lead of the Chicago Fed, 168 00:09:42,920 --> 00:09:45,760 Speaker 1: and that is this is now um life and death. 169 00:09:45,840 --> 00:09:49,400 Speaker 1: We are talking about a lapse in benefits that is 170 00:09:49,480 --> 00:09:54,280 Speaker 1: already triggering food and security, homelessness, and it's not going 171 00:09:54,320 --> 00:09:57,319 Speaker 1: to be repaired anytime soon. The governor is both Republican 172 00:09:57,360 --> 00:10:00,280 Speaker 1: and Democrats that they cannot do what the and It 173 00:10:00,360 --> 00:10:02,600 Speaker 1: has offered. They need to get back to the table 174 00:10:02,960 --> 00:10:05,960 Speaker 1: and get a deal done. And every minute that goes 175 00:10:06,040 --> 00:10:09,679 Speaker 1: by is compounding the losses. You can't. It's a business. 176 00:10:09,720 --> 00:10:12,000 Speaker 1: You can maybe get a loan to defer the fact 177 00:10:12,000 --> 00:10:14,120 Speaker 1: that you don't have cash coming in the door for 178 00:10:14,160 --> 00:10:17,600 Speaker 1: a little bit, although many businesses are shutting down. But 179 00:10:17,760 --> 00:10:21,680 Speaker 1: for a family, especially for households in the black and 180 00:10:21,760 --> 00:10:25,480 Speaker 1: Hispanic community. This is just insult to injury. It's leaving 181 00:10:25,480 --> 00:10:28,079 Speaker 1: people without money at a critical time and leaving them 182 00:10:28,120 --> 00:10:31,520 Speaker 1: on the streets. We're talking about food and security and homelessness, 183 00:10:31,600 --> 00:10:34,640 Speaker 1: the likes of which we've not seen since the Great Depression. 184 00:10:34,840 --> 00:10:37,240 Speaker 1: This time is the difference between the human approach to economics, 185 00:10:37,280 --> 00:10:39,920 Speaker 1: which is the disparency beneath the aggregate figures, the handline 186 00:10:40,000 --> 00:10:42,319 Speaker 1: numbers and the people that make up those statistics, and 187 00:10:42,400 --> 00:10:45,480 Speaker 1: a market that is just focused on the top line, progressive, 188 00:10:46,000 --> 00:10:49,480 Speaker 1: positive improvement over the last several months. Do you think 189 00:10:49,480 --> 00:10:54,120 Speaker 1: we can maintain the lattic given what's happening with the former? Well, 190 00:10:54,160 --> 00:10:56,760 Speaker 1: you know, the dissonance is really getting to be deafening 191 00:10:56,840 --> 00:10:59,880 Speaker 1: between the financial markets Wall Street and Main Street. And 192 00:11:00,000 --> 00:11:02,520 Speaker 1: I think one of the things that financial markets aren't 193 00:11:02,559 --> 00:11:06,400 Speaker 1: taking into account is the compounding effect that this is having. 194 00:11:06,400 --> 00:11:09,679 Speaker 1: We're talking about an economy where you're shuttering a lot 195 00:11:09,760 --> 00:11:12,600 Speaker 1: of businesses. At least half a million businesses have shut 196 00:11:12,640 --> 00:11:16,559 Speaker 1: down permanently at this point in time in the US. 197 00:11:16,600 --> 00:11:20,520 Speaker 1: That taking away of dynamism consolidation in a few small 198 00:11:20,559 --> 00:11:25,480 Speaker 1: businesses not only undermines the innovation of the U s economy, 199 00:11:25,600 --> 00:11:28,720 Speaker 1: entrepreneurship with the job genera and ability on the other side. 200 00:11:29,000 --> 00:11:31,960 Speaker 1: And it's really notable that we've had trouble getting out 201 00:11:31,960 --> 00:11:35,040 Speaker 1: of even the most mild recessions since the nineteen nineties 202 00:11:35,240 --> 00:11:39,360 Speaker 1: with job generation and to remember, recovery was called the 203 00:11:39,440 --> 00:11:42,160 Speaker 1: jobless recovery coming out of the Great Recession. A lot 204 00:11:42,160 --> 00:11:44,760 Speaker 1: of people thought we'd get a big balance. Instead, we 205 00:11:44,800 --> 00:11:47,680 Speaker 1: didn't because we did not do transfers to state and 206 00:11:47,720 --> 00:11:51,520 Speaker 1: local governments. We've not learned our lessons, and Washington needs 207 00:11:51,520 --> 00:11:53,320 Speaker 1: to get back to the table if they want to 208 00:11:53,360 --> 00:11:57,000 Speaker 1: get out of what is now metastasizing into a much 209 00:11:57,040 --> 00:12:00,840 Speaker 1: more vicious cycle, not just temporary COVID elated losses. Well 210 00:12:00,880 --> 00:12:02,640 Speaker 1: down the administration beliefs that we can have a v 211 00:12:02,720 --> 00:12:05,480 Speaker 1: shaped recovery. I understand that concept is just a channel 212 00:12:05,559 --> 00:12:08,120 Speaker 1: changer for many people. Now they hear it, they turn over, 213 00:12:08,360 --> 00:12:10,600 Speaker 1: and I'm wandering from your perspective, whether we're closer to 214 00:12:10,600 --> 00:12:13,040 Speaker 1: a W given the direction to travel at the moment, 215 00:12:15,400 --> 00:12:17,760 Speaker 1: we're closer to a double dip, which would be a W. 216 00:12:18,000 --> 00:12:20,760 Speaker 1: Although you know we're talking about one quarter of positives 217 00:12:20,760 --> 00:12:23,559 Speaker 1: if we just hold at the June levels and retail 218 00:12:23,600 --> 00:12:27,400 Speaker 1: sales and consumer spending, then we'll have a very strong 219 00:12:27,520 --> 00:12:30,440 Speaker 1: third quarter. That's kind of a false narrative because that's 220 00:12:30,440 --> 00:12:33,840 Speaker 1: really plateau going and not showing any momentum over the summer. 221 00:12:33,920 --> 00:12:37,280 Speaker 1: We could actually lose some momentum in August and September, 222 00:12:37,360 --> 00:12:40,599 Speaker 1: given the lapse in eighteen billion dollars a week that 223 00:12:40,679 --> 00:12:44,560 Speaker 1: consumers were getting in terms of enhanced unemployment benefits to 224 00:12:44,640 --> 00:12:48,480 Speaker 1: support spending in the US economy. So as we go 225 00:12:48,520 --> 00:12:51,480 Speaker 1: into the fourth quarter, when you've got all the seasonals, 226 00:12:51,520 --> 00:12:53,839 Speaker 1: you know, Halloween, the second largest holiday of the year, 227 00:12:54,080 --> 00:12:58,600 Speaker 1: no football season, these college towns really scraping by having 228 00:12:58,679 --> 00:13:02,319 Speaker 1: to come back to class with could foment the increase 229 00:13:02,400 --> 00:13:06,760 Speaker 1: in virus spread. See a very hard second wave. You 230 00:13:06,880 --> 00:13:09,080 Speaker 1: very easily could get back into the negative in the 231 00:13:09,120 --> 00:13:11,920 Speaker 1: second and first quarter until a vaccine is available, and 232 00:13:11,960 --> 00:13:14,280 Speaker 1: we can't just wait for a vaccine. We've seen other 233 00:13:14,320 --> 00:13:18,000 Speaker 1: countries be able to manage their virus so that their 234 00:13:18,040 --> 00:13:21,959 Speaker 1: economy can reopen. Manage the virus, get the economy going 235 00:13:22,000 --> 00:13:25,840 Speaker 1: to health of our individual people. Our population really is 236 00:13:25,880 --> 00:13:28,560 Speaker 1: the driver of the health of the economy. Then there's 237 00:13:28,559 --> 00:13:30,560 Speaker 1: been a shift in narrative and you're really speaking to 238 00:13:30,640 --> 00:13:33,760 Speaker 1: this from this recession can be really short, very deep, 239 00:13:33,760 --> 00:13:36,160 Speaker 1: but short, and we can pull out the other side 240 00:13:36,200 --> 00:13:38,520 Speaker 1: to this is a typical recession, and it's going to 241 00:13:38,559 --> 00:13:41,000 Speaker 1: be very difficult to get back to a normal or 242 00:13:41,080 --> 00:13:44,280 Speaker 1: pre COVID level of unemployment right now. Mark Xandy of 243 00:13:44,320 --> 00:13:47,240 Speaker 1: Moody saying that the unemployment rate in the US probably 244 00:13:47,240 --> 00:13:50,760 Speaker 1: closer to four Do you agree. How long will it 245 00:13:50,800 --> 00:13:55,920 Speaker 1: take to get back to more normalized levels. Well, that's 246 00:13:55,920 --> 00:13:57,640 Speaker 1: a great question, and we've been doing a lot of 247 00:13:57,720 --> 00:14:00,520 Speaker 1: simulations on this. It's really hard because it's um one 248 00:14:00,559 --> 00:14:03,520 Speaker 1: dependent on whether or not Congress will just backfill the 249 00:14:03,520 --> 00:14:07,680 Speaker 1: whole that we're creating by COVID related losses, which we 250 00:14:07,720 --> 00:14:09,640 Speaker 1: need at least a one and a half trillion just 251 00:14:09,800 --> 00:14:12,880 Speaker 1: now without that's without stimulus. On the other side of this, 252 00:14:13,240 --> 00:14:15,520 Speaker 1: if we get one and a half trillion, with the 253 00:14:15,559 --> 00:14:18,320 Speaker 1: delays that we've seen, we won't get back out of 254 00:14:18,360 --> 00:14:22,640 Speaker 1: this on a level of economic activity until mid the 255 00:14:22,640 --> 00:14:26,560 Speaker 1: second quarter of two. That's a long time, and it's 256 00:14:26,600 --> 00:14:29,120 Speaker 1: not this snapback that many had hoped for, and that's 257 00:14:29,160 --> 00:14:32,800 Speaker 1: with some catchup ine as we try to get back online. 258 00:14:32,840 --> 00:14:36,320 Speaker 1: But we're really undermining our ability, our potential to grow. 259 00:14:36,560 --> 00:14:38,720 Speaker 1: On the other side of this, as have often said, 260 00:14:39,080 --> 00:14:41,480 Speaker 1: this is like, you know, COVID is the iceberg for 261 00:14:41,560 --> 00:14:44,320 Speaker 1: us not to be the Titanic. We need lifeboats with 262 00:14:44,400 --> 00:14:47,440 Speaker 1: supplies in the water this time around to traverse these 263 00:14:47,560 --> 00:14:51,800 Speaker 1: much much deeper COVID tainted waters than anyone expected for 264 00:14:51,920 --> 00:14:55,480 Speaker 1: longer because we did not manage the virus itself. Yeah, 265 00:14:55,520 --> 00:14:58,080 Speaker 1: there's an increasingly painful story for people who don't have 266 00:14:58,200 --> 00:15:00,920 Speaker 1: their jobs, and there's increasing fear and people who do 267 00:15:01,160 --> 00:15:03,520 Speaker 1: that they'll see their wages cut or their jobs cut. 268 00:15:03,560 --> 00:15:06,440 Speaker 1: And I'm wondering, Diane. In the United Kingdom, we saw 269 00:15:06,560 --> 00:15:09,760 Speaker 1: data this morning that showed wage deflation for the first 270 00:15:09,800 --> 00:15:12,520 Speaker 1: time since records began since two thousand and one. Are 271 00:15:12,520 --> 00:15:15,440 Speaker 1: we going to see wage deflation in the United States 272 00:15:15,480 --> 00:15:19,640 Speaker 1: in a meaningful way? That's a great question. I mean, 273 00:15:19,720 --> 00:15:21,680 Speaker 1: some of that's because of the people who are employed 274 00:15:21,720 --> 00:15:24,600 Speaker 1: are actually not employed in being paid part of their income, 275 00:15:24,880 --> 00:15:26,600 Speaker 1: so that's why we're seeing it. So it's a bit 276 00:15:26,600 --> 00:15:30,240 Speaker 1: of a statistical residual of the unemployment that's actually in 277 00:15:30,640 --> 00:15:32,920 Speaker 1: the UK. But I think it's very important to understand 278 00:15:33,160 --> 00:15:37,880 Speaker 1: that we saw wage cuts at the onset of this crisis. 279 00:15:37,920 --> 00:15:40,600 Speaker 1: Never see that before nom gonna wage cuts because people 280 00:15:40,600 --> 00:15:43,240 Speaker 1: thought it was temporary. And what firms did is they 281 00:15:43,280 --> 00:15:47,160 Speaker 1: cut white collar wages in order to preserve their jobs, 282 00:15:47,160 --> 00:15:49,720 Speaker 1: to not lose their people after coming off three and 283 00:15:49,720 --> 00:15:52,880 Speaker 1: a half percent unemployment. What's becoming more clear now is 284 00:15:52,920 --> 00:15:55,560 Speaker 1: that could one will likely see a repit of wage 285 00:15:55,560 --> 00:15:58,240 Speaker 1: cuts and unpaid leaves, which is a wage cut as 286 00:15:58,320 --> 00:16:00,880 Speaker 1: well as we go into the fall. We've already seen 287 00:16:00,920 --> 00:16:03,720 Speaker 1: several firms start to call for that, and that could 288 00:16:04,160 --> 00:16:07,440 Speaker 1: further suppress wages in a way that we don't usually 289 00:16:07,480 --> 00:16:10,360 Speaker 1: see in a recession. That whole sticky wage theory gets 290 00:16:10,400 --> 00:16:15,040 Speaker 1: thrown out in a COVID recession, and this is becoming metastasizing. 291 00:16:15,120 --> 00:16:17,600 Speaker 1: I also think it's important to note that white color 292 00:16:17,680 --> 00:16:19,800 Speaker 1: and high wage losses. We always focus on the low 293 00:16:19,840 --> 00:16:22,280 Speaker 1: wage losses because this is largely low wage, but the 294 00:16:22,320 --> 00:16:25,800 Speaker 1: low wage high wage percentage losses and employment are now 295 00:16:25,800 --> 00:16:28,840 Speaker 1: approaching those of the Great Recession. I mean, Diane, this 296 00:16:28,960 --> 00:16:33,360 Speaker 1: is just extremely important. As you mentioned the labor tumult 297 00:16:33,400 --> 00:16:36,960 Speaker 1: in the country. Every kid in America at gunpoint has 298 00:16:37,000 --> 00:16:40,400 Speaker 1: to read Upton Sinclair Uh the jungle, and you read 299 00:16:40,440 --> 00:16:43,560 Speaker 1: about the Chicago labor economy of a hundred and fifty 300 00:16:43,840 --> 00:16:46,360 Speaker 1: years ago. Are we going back to the jungle. There's 301 00:16:46,400 --> 00:16:50,240 Speaker 1: atomization of our labor economy where we have the haves 302 00:16:50,280 --> 00:16:52,720 Speaker 1: and a massive have nots in America that on a 303 00:16:52,800 --> 00:16:59,000 Speaker 1: real basis can't keep up. Well. Unfortunately, we're already there 304 00:16:59,040 --> 00:17:01,200 Speaker 1: at three and a half percent U employment. What COVID 305 00:17:01,280 --> 00:17:05,199 Speaker 1: revealed was um the inequalities that existed in the U. 306 00:17:05,280 --> 00:17:09,760 Speaker 1: S economy in an extraordinary way and then exacerbated those 307 00:17:09,840 --> 00:17:13,520 Speaker 1: inequalities and the idea that we've got, you know, families 308 00:17:13,560 --> 00:17:16,040 Speaker 1: that can't feed their children for a week right now 309 00:17:16,240 --> 00:17:19,600 Speaker 1: in the United States of America because of a health crisis. 310 00:17:19,880 --> 00:17:24,320 Speaker 1: This is now metastasizing into a humanitarian crisis and taking 311 00:17:24,359 --> 00:17:27,439 Speaker 1: on a different kind of nature of a self feeding 312 00:17:27,600 --> 00:17:31,000 Speaker 1: negative cycle that we don't have to do. The reason 313 00:17:31,200 --> 00:17:34,480 Speaker 1: it's worthwhile to go through these scenarios, the downside scenarios, 314 00:17:34,480 --> 00:17:37,080 Speaker 1: as you can see how you could stop it from happening. 315 00:17:37,280 --> 00:17:39,960 Speaker 1: There are still ways we could mitigate the spread of 316 00:17:40,000 --> 00:17:43,600 Speaker 1: the of COVID, especially as we open up colleges and 317 00:17:43,720 --> 00:17:48,080 Speaker 1: older students are highly contagious. We have to mitigate that 318 00:17:48,160 --> 00:17:50,919 Speaker 1: going into the fall so that we don't have to 319 00:17:51,000 --> 00:17:53,280 Speaker 1: keep as much of our economy closed down. We need 320 00:17:53,320 --> 00:17:57,080 Speaker 1: a nationwide testing effort that we need that testing funding 321 00:17:57,119 --> 00:17:59,840 Speaker 1: that would be in a national um the trillion and 322 00:18:00,200 --> 00:18:04,000 Speaker 1: trillion plus planned by Congress. Both sides agree on that. 323 00:18:04,359 --> 00:18:07,080 Speaker 1: I don't understand why we can't get moved forward on 324 00:18:07,280 --> 00:18:10,359 Speaker 1: testing when that would be We're still chasing a moving 325 00:18:10,400 --> 00:18:13,240 Speaker 1: target in that. So there are ways that we could 326 00:18:13,400 --> 00:18:17,600 Speaker 1: escape this becoming worse situation, but we need first we 327 00:18:17,640 --> 00:18:21,199 Speaker 1: need to act today, really yesterday. The clock has already 328 00:18:21,280 --> 00:18:23,720 Speaker 1: run out for me too many people. We need to 329 00:18:23,760 --> 00:18:26,840 Speaker 1: get those lifeboats out there to help the economy. But 330 00:18:26,880 --> 00:18:29,560 Speaker 1: I think it's really important to note that this is 331 00:18:29,640 --> 00:18:32,159 Speaker 1: not where we want to go, and we have a choice. 332 00:18:32,400 --> 00:18:34,080 Speaker 1: Then we're ready lucky to have you on the show 333 00:18:34,080 --> 00:18:36,720 Speaker 1: with us this morning. Thank you. Swung Groundfeld and chief 334 00:18:36,960 --> 00:18:49,800 Speaker 1: Economist Henrietta Trades knows that Vada Partners there director of 335 00:18:49,800 --> 00:18:53,119 Speaker 1: Economic policy is that Mr Meadows hasn't talked to him 336 00:18:53,119 --> 00:18:55,240 Speaker 1: as Pelosi in a very long time. So we'll go 337 00:18:55,280 --> 00:18:58,879 Speaker 1: to her right now on the silence in Washington. Henrietta, 338 00:18:58,960 --> 00:19:02,240 Speaker 1: with all your Washington and experience. How do you break silence. 339 00:19:03,960 --> 00:19:07,399 Speaker 1: You break silence with time and external pressure. So I 340 00:19:07,400 --> 00:19:10,119 Speaker 1: would love to see, you know, unemployment data reports come 341 00:19:10,160 --> 00:19:12,359 Speaker 1: out every single day. I'd like to c GDP report 342 00:19:12,400 --> 00:19:15,440 Speaker 1: every single day. That kind of macro push really helps 343 00:19:15,480 --> 00:19:18,159 Speaker 1: move the NEIL I think. Unfortunately, we have seen a 344 00:19:18,200 --> 00:19:20,920 Speaker 1: lot of action behind the scenes in d C. And 345 00:19:21,000 --> 00:19:25,760 Speaker 1: it's come from Republican campaign downers and major based advocates 346 00:19:25,800 --> 00:19:28,600 Speaker 1: like the Club for Growth or the Heritage Foundation, and 347 00:19:28,640 --> 00:19:32,080 Speaker 1: they've encouraged the Republicans to oppose reaching a big deal 348 00:19:32,080 --> 00:19:35,439 Speaker 1: with Speaker Pelosi and Majority Minority Leader Chuck Schumer. And 349 00:19:35,520 --> 00:19:38,800 Speaker 1: so the action you're referring to has already taken place, 350 00:19:38,880 --> 00:19:42,359 Speaker 1: and it's resulted in, ironically enough, no action. UM. And 351 00:19:42,400 --> 00:19:45,080 Speaker 1: that is the preferred outcome for the Republican conference. That's 352 00:19:45,040 --> 00:19:47,760 Speaker 1: where we are today. UM. There is a sense of 353 00:19:47,800 --> 00:19:50,200 Speaker 1: a bulliance on the Republican side that I haven't seen 354 00:19:50,240 --> 00:19:53,080 Speaker 1: in many months. Just talking with folks that I'm close 355 00:19:53,160 --> 00:19:55,320 Speaker 1: with in the Senator of the House of the Administration 356 00:19:55,359 --> 00:19:58,720 Speaker 1: over the last maybe four days, this is the happiest 357 00:19:58,720 --> 00:20:00,680 Speaker 1: I've seen them in several months, because they were able 358 00:20:00,680 --> 00:20:03,960 Speaker 1: to put to Buck and punt on two trillion dollar 359 00:20:04,000 --> 00:20:07,520 Speaker 1: package that none of their based owners really wanted to see. 360 00:20:07,600 --> 00:20:10,800 Speaker 1: So to talk about breaking the log jam now is 361 00:20:10,840 --> 00:20:14,640 Speaker 1: actually to miss that. Right now, Republicans view this uh 362 00:20:14,760 --> 00:20:17,560 Speaker 1: state of affairs as having one. So it's gonna take 363 00:20:17,640 --> 00:20:18,960 Speaker 1: quite a bit, and I think it's going to be 364 00:20:19,000 --> 00:20:21,160 Speaker 1: at least three weeks into September before we get meeting. 365 00:20:21,200 --> 00:20:26,080 Speaker 1: The negotiations going on three weeks into September, Henrietta. Yeah, well, 366 00:20:26,160 --> 00:20:28,640 Speaker 1: let's just walk through it. I mean, this week is nothing. 367 00:20:28,760 --> 00:20:32,359 Speaker 1: Everybody's gone, Uh, everybody's in the d n C, next 368 00:20:32,359 --> 00:20:34,720 Speaker 1: week the RNC. The week after that it's Labor Day. 369 00:20:34,800 --> 00:20:37,760 Speaker 1: So you're already at September eight. It's going to take 370 00:20:37,800 --> 00:20:39,919 Speaker 1: them at least two weeks to have a conversation that 371 00:20:40,000 --> 00:20:43,080 Speaker 1: yields one trillion dollar package, let alone a two trillion 372 00:20:43,080 --> 00:20:46,639 Speaker 1: dollar package, and you're looking at expired unemployment insurance benefits, 373 00:20:46,680 --> 00:20:49,840 Speaker 1: even if states go through the forty four billion dollars 374 00:20:49,880 --> 00:20:52,600 Speaker 1: and PIMA funds that you just referenced. So we're gonna 375 00:20:52,600 --> 00:20:55,320 Speaker 1: be right back at this table in mid till late 376 00:20:55,320 --> 00:20:57,640 Speaker 1: September anyway you cut it. The chieftain is a chance 377 00:20:57,640 --> 00:21:00,800 Speaker 1: we just don't get a deal. I think the chance 378 00:21:00,840 --> 00:21:03,160 Speaker 1: has grown. My odds of a deal being reached dropped 379 00:21:03,160 --> 00:21:10,720 Speaker 1: from I am already hearing some tidbits of what negotiations 380 00:21:10,800 --> 00:21:14,480 Speaker 1: might ultimately look like here. Um, for instance, the payroll 381 00:21:14,560 --> 00:21:19,120 Speaker 1: tax piece that is so unworkable for employers and requires 382 00:21:19,160 --> 00:21:22,359 Speaker 1: that they, you know, withhold or not withhold any of 383 00:21:22,400 --> 00:21:26,240 Speaker 1: the payroll tax um, that is super complicated just because 384 00:21:26,280 --> 00:21:28,000 Speaker 1: eventually people are going to have to pay that back. 385 00:21:28,040 --> 00:21:30,600 Speaker 1: The President doesn't have the authority to change tax codes. 386 00:21:31,080 --> 00:21:35,040 Speaker 1: So um, what they're already considering is providing some sort 387 00:21:35,040 --> 00:21:39,840 Speaker 1: of a payroll excuse me, a stimulus check in September 388 00:21:40,280 --> 00:21:45,240 Speaker 1: that eliminates the payroll tax suspension that the President just 389 00:21:45,440 --> 00:21:48,439 Speaker 1: put out in his executive action over the weekend. So 390 00:21:48,480 --> 00:21:51,119 Speaker 1: they're already trying to find workarounds to the stuff that 391 00:21:51,160 --> 00:21:54,320 Speaker 1: the President rolled out on Saturday, and that does point 392 00:21:54,359 --> 00:21:56,920 Speaker 1: to a deal. Um, So I'm optimistic that we will 393 00:21:56,920 --> 00:21:59,920 Speaker 1: get one again odds, but that is down versus a 394 00:22:00,200 --> 00:22:02,640 Speaker 1: five percent, which was you know, as close to certainty 395 00:22:02,640 --> 00:22:04,440 Speaker 1: as you can be in DC that we would have 396 00:22:04,480 --> 00:22:07,879 Speaker 1: gotten a package in the last few weeks. Obviously, the 397 00:22:07,920 --> 00:22:12,920 Speaker 1: actions of the political calculations, the elections and the Republican 398 00:22:12,960 --> 00:22:15,920 Speaker 1: base really drove a lack of progress on a deal, 399 00:22:15,960 --> 00:22:18,679 Speaker 1: and again that's considered right now a win for the 400 00:22:18,680 --> 00:22:21,639 Speaker 1: Republican Conference in particular the White House. What kind of 401 00:22:21,680 --> 00:22:24,440 Speaker 1: concessions are the Republicans willing to make on state and 402 00:22:24,680 --> 00:22:31,000 Speaker 1: municipal funding? Um? Not the ones that Democrats have asked for. 403 00:22:31,200 --> 00:22:35,680 Speaker 1: Um specifically, and I've spoken with Democratic leadership on Sunday. 404 00:22:35,720 --> 00:22:38,000 Speaker 1: They are going to be looking for election security and 405 00:22:38,040 --> 00:22:42,639 Speaker 1: post office security and more funding for hours and a 406 00:22:42,800 --> 00:22:47,000 Speaker 1: rollback of the regulatory reforms that have been recently instituted there. 407 00:22:47,040 --> 00:22:49,600 Speaker 1: That's their primary focus on the state side. And I 408 00:22:49,640 --> 00:22:52,359 Speaker 1: have not seen any give from Republicans there, So I 409 00:22:52,400 --> 00:22:54,960 Speaker 1: know that's going to be a major sticking point, Henritta. 410 00:22:55,040 --> 00:22:57,000 Speaker 1: That goes right to where I wanted to go. Give 411 00:22:57,119 --> 00:22:59,920 Speaker 1: by Republicans or for that matter, give by Democrats. We 412 00:23:00,000 --> 00:23:03,040 Speaker 1: at Bloomberg struggle each day to try to be impartial. 413 00:23:03,520 --> 00:23:08,480 Speaker 1: Let's look at the Republicans. Are the Senate majority Republicans 414 00:23:09,200 --> 00:23:15,040 Speaker 1: on the same page, is the House minority Republicans? That's 415 00:23:15,080 --> 00:23:18,719 Speaker 1: an interesting question. Um, I don't. I don't know that 416 00:23:18,760 --> 00:23:22,960 Speaker 1: it much matters just because the Senate majority is the 417 00:23:23,000 --> 00:23:25,760 Speaker 1: majority party and the Republicans in the House can't get rolled, 418 00:23:26,040 --> 00:23:28,239 Speaker 1: They're not going to need to provide many votes for 419 00:23:28,280 --> 00:23:32,080 Speaker 1: this anyway. UM. I would anticipate somewhere in they thirty 420 00:23:32,320 --> 00:23:34,639 Speaker 1: forty we're lucky Republicans in the House are going to 421 00:23:34,720 --> 00:23:37,359 Speaker 1: ultimately vote for this package. UM. And I think the 422 00:23:37,400 --> 00:23:39,399 Speaker 1: sticking point we saw from Majority Leader McConnell is that 423 00:23:39,400 --> 00:23:42,760 Speaker 1: he's having a really tough time corralling his conference. UM. 424 00:23:42,800 --> 00:23:44,719 Speaker 1: But I am reminded of something that I've heard from 425 00:23:44,760 --> 00:23:47,159 Speaker 1: Majority Leader ofcconnell's office for years now, which is that 426 00:23:47,240 --> 00:23:50,359 Speaker 1: winning has a tendency to really pull the caucus together. 427 00:23:50,840 --> 00:23:53,280 Speaker 1: So now that they have won on this, you know, 428 00:23:53,359 --> 00:23:56,480 Speaker 1: bucking Pelosi event, I think it should create some goodwill 429 00:23:56,600 --> 00:23:59,199 Speaker 1: and actually how Majority Leader McConnell try to find some 430 00:23:59,240 --> 00:24:01,960 Speaker 1: middle ground for a package in September. UM. So that 431 00:24:02,040 --> 00:24:05,080 Speaker 1: sort of idea that winning begets winning will help smooth 432 00:24:05,080 --> 00:24:07,840 Speaker 1: over some tension, could go a long way to helping 433 00:24:07,920 --> 00:24:12,520 Speaker 1: Kevin McCarthy, the minority leader in the House, who has 434 00:24:12,600 --> 00:24:15,399 Speaker 1: already come under some sort of political challenges as a 435 00:24:15,440 --> 00:24:19,040 Speaker 1: result of potentially reaching another Cares Act two point oh 436 00:24:19,119 --> 00:24:21,560 Speaker 1: deal with Speaker Pelosi. So I think this idea that 437 00:24:21,600 --> 00:24:24,120 Speaker 1: winning begets winning is something that we should be monitoring. 438 00:24:24,160 --> 00:24:26,920 Speaker 1: It may make it easier for majority lean in McConnell 439 00:24:27,000 --> 00:24:30,639 Speaker 1: to pull aside his votes from the House Republican Conference 440 00:24:30,680 --> 00:24:32,920 Speaker 1: and also the Senate Republican Conference to make them feel 441 00:24:32,920 --> 00:24:35,200 Speaker 1: as though they're in the majority again. Um. And that's 442 00:24:35,240 --> 00:24:37,840 Speaker 1: also afraid I heard a lot from Republican Senate staff 443 00:24:37,880 --> 00:24:40,399 Speaker 1: this weekend. Look, we're in the majority, we have the 444 00:24:40,440 --> 00:24:43,760 Speaker 1: White House, we have the Senate Republicans. UM. In the majority, 445 00:24:44,080 --> 00:24:46,119 Speaker 1: we're gonna be the ones that run this show. So 446 00:24:46,240 --> 00:24:49,560 Speaker 1: we want unemployment at three hundred four hundred macs. Uh, 447 00:24:49,760 --> 00:24:53,400 Speaker 1: we don't want these massive aid to state packages going out. 448 00:24:53,720 --> 00:24:56,760 Speaker 1: You cannot have any policy writers in here. Um. You 449 00:24:56,840 --> 00:24:59,360 Speaker 1: really got to recognize that you're in the minority. Of course, 450 00:24:59,359 --> 00:25:01,520 Speaker 1: Speaker Pelos, he knows that in d C being in 451 00:25:01,560 --> 00:25:04,080 Speaker 1: the minority is actually a much more powerful position. So 452 00:25:04,359 --> 00:25:07,000 Speaker 1: it's this dichotomy that we are now obviously going to 453 00:25:07,080 --> 00:25:10,120 Speaker 1: have to wait another five or six weeks to get through. UM. 454 00:25:10,119 --> 00:25:12,040 Speaker 1: But it is good news for the Republican Conference that 455 00:25:12,080 --> 00:25:14,400 Speaker 1: they see this as a win because it may make 456 00:25:14,440 --> 00:25:17,000 Speaker 1: majority of McConnell's job. He's here down the road and 457 00:25:17,000 --> 00:25:18,880 Speaker 1: we had it. Don't be a stranger, come back soon. 458 00:25:18,880 --> 00:25:20,480 Speaker 1: It's great A catchhop of you and read a trace 459 00:25:20,480 --> 00:25:23,840 Speaker 1: there effect upon as the director of Economic Policy Research. 460 00:25:34,320 --> 00:25:37,000 Speaker 1: We're gonna talk here at Taiwan in the Strait with 461 00:25:37,160 --> 00:25:40,320 Speaker 1: Admiral's Venus. James Tavita's joining us with his wonderful books. 462 00:25:40,320 --> 00:25:43,800 Speaker 1: I can't say enough about him. But first, d Well, 463 00:25:43,920 --> 00:25:48,600 Speaker 1: I need to talk about your wonderful essay on Brentskcraft, 464 00:25:48,640 --> 00:25:50,840 Speaker 1: who I was a huge, huge fan of. I met 465 00:25:50,880 --> 00:25:54,200 Speaker 1: him and interviewed him a number of times, and I 466 00:25:54,520 --> 00:25:58,520 Speaker 1: want to go right to the majesty of a world transformed. 467 00:25:58,880 --> 00:26:04,159 Speaker 1: He and Jim baik Or helped President Bush transform the world. 468 00:26:04,520 --> 00:26:07,679 Speaker 1: How did they do that? What did Skolcroft do to 469 00:26:07,800 --> 00:26:13,320 Speaker 1: assist America to end the Cold War? First and foremost, 470 00:26:13,600 --> 00:26:18,200 Speaker 1: he recognized that the greatest comparative advantage the United States 471 00:26:18,400 --> 00:26:22,760 Speaker 1: has and will always have tom is our network of allies, 472 00:26:22,840 --> 00:26:25,239 Speaker 1: partners and friends. And I think it would have been 473 00:26:25,280 --> 00:26:28,400 Speaker 1: easy for President Bush, the first President Bush, to sort 474 00:26:28,400 --> 00:26:30,800 Speaker 1: of spike the football at the end of the Cold 475 00:26:30,840 --> 00:26:34,480 Speaker 1: warrant say America uber Allas. That really would have been 476 00:26:34,520 --> 00:26:38,800 Speaker 1: the quote America first moment unquote. Brian Skocroft took it 477 00:26:38,840 --> 00:26:42,399 Speaker 1: in the opposite direction. He said, all of this, the 478 00:26:42,520 --> 00:26:46,080 Speaker 1: victory in the Cold War was a team effort, an 479 00:26:46,080 --> 00:26:49,119 Speaker 1: allied effort, and so I think practically speaking, both he 480 00:26:49,280 --> 00:26:53,680 Speaker 1: and Secretary of State Jim Baker helped energize those allies, 481 00:26:53,720 --> 00:26:57,240 Speaker 1: partners and friends. That was the secret sauce is national 482 00:26:57,359 --> 00:27:02,000 Speaker 1: security advisor. He was someone who had warned the uniform. 483 00:27:02,119 --> 00:27:05,200 Speaker 1: How I talked to Ambassador Bolton about this the other day. 484 00:27:05,480 --> 00:27:09,680 Speaker 1: We're everating Mr Bolton right now to speak on General Skullcroft. 485 00:27:09,800 --> 00:27:13,359 Speaker 1: But why is it different for n s A to 486 00:27:13,480 --> 00:27:18,520 Speaker 1: be someone who wore a uniform versus nut There are 487 00:27:18,560 --> 00:27:23,320 Speaker 1: certainly examples on both sides of very strong national security advisors. 488 00:27:23,320 --> 00:27:26,680 Speaker 1: But I, for one believe that having put on the 489 00:27:26,720 --> 00:27:29,800 Speaker 1: cloth of the nation, as the saying goes, and made 490 00:27:29,840 --> 00:27:33,000 Speaker 1: that set of sacrifices. And don't forget Brince go Kroft 491 00:27:33,119 --> 00:27:36,520 Speaker 1: started life as a fighter pilot, had a terrible crash 492 00:27:36,640 --> 00:27:40,040 Speaker 1: that put him in the hospital. He knew sacrifice, he 493 00:27:40,160 --> 00:27:42,880 Speaker 1: knew what it meant to order men and women into combat. 494 00:27:43,119 --> 00:27:47,240 Speaker 1: That's an important quality. So Admiral. You know you mentioned 495 00:27:47,280 --> 00:27:50,080 Speaker 1: the America First policy, which seems to be uh the 496 00:27:50,160 --> 00:27:52,639 Speaker 1: vogue right now. How do you think General Skokroft kind 497 00:27:52,680 --> 00:27:55,240 Speaker 1: of I would think of that? I guess, I guess 498 00:27:55,280 --> 00:27:58,240 Speaker 1: what's his view of that? Well, I know what he 499 00:27:58,280 --> 00:28:00,520 Speaker 1: thought because I had a chance to talk to him 500 00:28:00,560 --> 00:28:04,600 Speaker 1: about it. He was one who a was always humble, 501 00:28:04,960 --> 00:28:08,840 Speaker 1: especially in moments of victory. So I think he disliked 502 00:28:08,840 --> 00:28:12,480 Speaker 1: the kind of implied in overt arrogance that comes out 503 00:28:12,480 --> 00:28:16,040 Speaker 1: of that. Number two, General scot Cropt was very analytic. 504 00:28:16,119 --> 00:28:19,040 Speaker 1: He didn't let his emotions run away with things. He 505 00:28:19,200 --> 00:28:22,360 Speaker 1: was all about real politique. And number three, as Tom 506 00:28:22,400 --> 00:28:25,320 Speaker 1: and I were just talking about Paul Um, he understood 507 00:28:25,359 --> 00:28:29,520 Speaker 1: better than anybody that we can't just walk away from allies, 508 00:28:29,640 --> 00:28:32,560 Speaker 1: partners and friends. It's a huge mistake. So he was 509 00:28:32,760 --> 00:28:36,480 Speaker 1: not a fan of the America First period of the case. 510 00:28:36,640 --> 00:28:38,800 Speaker 1: If you were US, James Trevitis, we welcome all of 511 00:28:38,840 --> 00:28:42,160 Speaker 1: you worldwide. Admiral there there was a point where the 512 00:28:42,200 --> 00:28:46,680 Speaker 1: Kitty Hawk became a pawn in the harbor of Hong Kong, 513 00:28:47,280 --> 00:28:50,840 Speaker 1: and all of this devolved down to the foremost illustrated. 514 00:28:50,880 --> 00:28:53,960 Speaker 1: It's narrowest I believe eighty one miles. Do we need 515 00:28:53,960 --> 00:28:59,240 Speaker 1: to walts walace kitty hawks through the Taiwan straight? Do 516 00:28:59,320 --> 00:29:02,760 Speaker 1: we need to give a larger presence with our aircraft carriers? Now? 517 00:29:03,800 --> 00:29:06,240 Speaker 1: I think the way to picture this, Tom is yeah, 518 00:29:06,240 --> 00:29:09,560 Speaker 1: it's about a hundred miles between Taiwan and the mainland 519 00:29:09,600 --> 00:29:13,720 Speaker 1: of China. And yes we need to operate our ships there, 520 00:29:13,800 --> 00:29:17,040 Speaker 1: not just or aircraft carriers, but our destroyers, are cruisers, 521 00:29:17,040 --> 00:29:21,479 Speaker 1: are submarines. And here's why. Because those are international high seas. 522 00:29:21,840 --> 00:29:25,240 Speaker 1: And if we start acting like, oh well, we're nervous 523 00:29:25,280 --> 00:29:28,320 Speaker 1: about doing that, or we might confront China there, that's 524 00:29:28,320 --> 00:29:32,200 Speaker 1: the wrong approach that these are high seas, international waters, 525 00:29:32,320 --> 00:29:35,560 Speaker 1: and we have to demonstrate that under international law where 526 00:29:35,600 --> 00:29:39,240 Speaker 1: we give voice to Chinese claims of ownership in the 527 00:29:39,280 --> 00:29:42,480 Speaker 1: South China Sea. So yes, we need to I wouldn't 528 00:29:42,480 --> 00:29:45,200 Speaker 1: say waltz the ships through, Tom. It was being non 529 00:29:45,480 --> 00:29:48,080 Speaker 1: excuse me, I have not worn the uniform, as you 530 00:29:48,080 --> 00:29:50,840 Speaker 1: can tell say. This is why you probably wouldn't be 531 00:29:50,840 --> 00:29:54,800 Speaker 1: the National Security Bolton told me that the other day 532 00:29:54,840 --> 00:29:58,400 Speaker 1: as well. Well. The correct term is we should steam. 533 00:30:00,280 --> 00:30:03,600 Speaker 1: I'll use that next time we embarrassed myself. So ad 534 00:30:03,920 --> 00:30:07,240 Speaker 1: just just broadly speaking, Admiral, give us your assessment of 535 00:30:07,320 --> 00:30:09,320 Speaker 1: kind of where we are. We've had so much rhetoric 536 00:30:09,360 --> 00:30:12,240 Speaker 1: between the US and China over the last time. We 537 00:30:12,280 --> 00:30:15,200 Speaker 1: could do with embassies being closed and consulates and the like. 538 00:30:15,360 --> 00:30:16,960 Speaker 1: Kind of just give us your thoughts about how things 539 00:30:16,960 --> 00:30:19,760 Speaker 1: are developing there. Hey, I wish I had good news, 540 00:30:19,760 --> 00:30:23,840 Speaker 1: but I don't. It's a deteriorating set of relationships. The 541 00:30:23,840 --> 00:30:27,080 Speaker 1: political cycle here in the United States unfortunately, both on 542 00:30:27,080 --> 00:30:29,600 Speaker 1: the Trump side but also from the Biden campaign. You're 543 00:30:29,600 --> 00:30:32,720 Speaker 1: gonna see them use China like a pinata between now 544 00:30:32,760 --> 00:30:35,480 Speaker 1: and November and just beat the hell out of it. 545 00:30:36,200 --> 00:30:40,240 Speaker 1: Hopefully post election we can start repairing things. We need 546 00:30:40,240 --> 00:30:43,120 Speaker 1: to confront China where we have to about things like 547 00:30:43,200 --> 00:30:46,280 Speaker 1: the South China see claims which are preposterous. But we 548 00:30:46,320 --> 00:30:48,479 Speaker 1: need to find ways to cooperate with China. We want 549 00:30:48,480 --> 00:30:51,160 Speaker 1: to get a trade deal done eventually with China. I 550 00:30:51,200 --> 00:30:53,400 Speaker 1: think post election is where we have a chance of 551 00:30:53,520 --> 00:30:59,360 Speaker 1: doing that, But right now, deteriorating relationship yellow light flashing atmospherous. 552 00:30:59,400 --> 00:31:03,320 Speaker 1: One final question here, what are the distinctions of Susan 553 00:31:03,400 --> 00:31:08,240 Speaker 1: Rice that Vice President Biden, you should consider um ready 554 00:31:08,480 --> 00:31:11,200 Speaker 1: for the job on day one. She has spent a 555 00:31:11,320 --> 00:31:14,120 Speaker 1: huge amount of time in the Oval Um. Don't forget 556 00:31:14,160 --> 00:31:17,160 Speaker 1: she was an ambassador to the United Nations. She understands 557 00:31:17,200 --> 00:31:20,800 Speaker 1: the international world extremely well. And in all of my 558 00:31:21,160 --> 00:31:25,000 Speaker 1: interactions both with the Vice President and with Susan Rice 559 00:31:25,200 --> 00:31:28,160 Speaker 1: in the situation room in the Oval Office, there's a 560 00:31:28,240 --> 00:31:31,080 Speaker 1: comfort factor there that I think we're very significant. He'll 561 00:31:31,120 --> 00:31:33,920 Speaker 1: think about all those things, and probably she's read the 562 00:31:33,960 --> 00:31:38,280 Speaker 1: Leader's bookshelf as well. James, thank you so much, greatly 563 00:31:38,320 --> 00:31:43,080 Speaker 1: appreciate your comments there. Thanks for listening to the Bloomberg 564 00:31:43,160 --> 00:31:49,120 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 565 00:31:49,480 --> 00:31:53,680 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 566 00:31:53,760 --> 00:31:58,000 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 567 00:31:58,440 --> 00:32:07,800 Speaker 1: I'm Bloomberg Radio S