1 00:00:00,240 --> 00:00:02,920 Speaker 1: This is Bloomberg Wall Street Week. I mean may not 2 00:00:03,040 --> 00:00:05,280 Speaker 1: have an overall recession, We're having a rolling recession. To 3 00:00:05,360 --> 00:00:07,040 Speaker 1: kind of roll looks pretty strongly it is when it 4 00:00:07,080 --> 00:00:07,680 Speaker 1: comes to jobs. 5 00:00:07,720 --> 00:00:09,840 Speaker 2: The financial stories that shape our world. 6 00:00:09,960 --> 00:00:13,640 Speaker 1: Three major regional bank failures send shockwaves through the banking system. 7 00:00:13,680 --> 00:00:15,440 Speaker 1: We're all trying to figure out what to make of 8 00:00:15,600 --> 00:00:17,000 Speaker 1: generative AI. 9 00:00:16,920 --> 00:00:19,320 Speaker 2: Through the eyes of the most influential voices. 10 00:00:19,440 --> 00:00:22,400 Speaker 1: Welcome down, Doctor Paul Krugman, Ryan moynihan, a Bank of America, 11 00:00:22,560 --> 00:00:25,279 Speaker 1: deebro Lair of the Paulson Institute, well Then Hubbard of 12 00:00:25,280 --> 00:00:26,280 Speaker 1: the Columbia Business School. 13 00:00:26,280 --> 00:00:30,120 Speaker 2: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 14 00:00:30,320 --> 00:00:33,159 Speaker 1: Fed up with an auto industry not sharing enough of 15 00:00:33,200 --> 00:00:36,000 Speaker 1: its profits, with a government that keeps spending money like 16 00:00:36,040 --> 00:00:39,199 Speaker 1: a drunken sailor, and with an internet retailer that's just 17 00:00:39,320 --> 00:00:42,239 Speaker 1: too big for the government's comfort. This is Bloomberg Wall 18 00:00:42,240 --> 00:00:45,960 Speaker 1: Street Week. I'm David Weston. This week is Zanny Minton 19 00:00:46,040 --> 00:00:48,800 Speaker 1: Vedows of the Economists. I'm getting the best out of 20 00:00:48,840 --> 00:00:51,960 Speaker 1: technology without losing too many workers along the way. 21 00:00:52,159 --> 00:00:54,200 Speaker 3: With unions, there's a bit of a sense of let's 22 00:00:54,200 --> 00:00:56,000 Speaker 3: stop history. I want to get off and that's the 23 00:00:56,000 --> 00:00:56,560 Speaker 3: worrying thing. 24 00:00:56,800 --> 00:01:01,120 Speaker 1: Portiamopori of HPS Investments on what higher rates and yields 25 00:01:01,120 --> 00:01:03,760 Speaker 1: mean for the world of credit. And Usher Sharma of 26 00:01:03,840 --> 00:01:07,080 Speaker 1: Rockefeller International on whether the US is running out of 27 00:01:07,080 --> 00:01:09,760 Speaker 1: fiscal steam and what that means for the rest of 28 00:01:09,800 --> 00:01:10,240 Speaker 1: the world. 29 00:01:10,440 --> 00:01:13,000 Speaker 4: Because for fifty years we have run these deficits, the 30 00:01:13,080 --> 00:01:15,839 Speaker 4: attitude has come to be a policy makers of deficits. 31 00:01:15,920 --> 00:01:30,959 Speaker 1: Going backive Global Wall Street spent some time this week 32 00:01:31,040 --> 00:01:34,199 Speaker 1: watching a range of people who felt things had gone 33 00:01:34,280 --> 00:01:37,840 Speaker 1: far enough. President Biden and former President Trump tried to 34 00:01:37,920 --> 00:01:41,200 Speaker 1: outdo one another in traveling to Detroit with the message 35 00:01:41,200 --> 00:01:43,920 Speaker 1: that the auto companies needed to step up and share 36 00:01:43,959 --> 00:01:45,840 Speaker 1: their profits with the American workers. 37 00:01:46,840 --> 00:01:49,640 Speaker 5: Her what you've heard, you've heard a hell rot more. 38 00:01:49,720 --> 00:01:50,600 Speaker 6: You're going to pray now. 39 00:01:50,840 --> 00:01:53,840 Speaker 7: You built this country, you love this country. 40 00:01:53,880 --> 00:01:56,640 Speaker 8: And you are the ones that make our country run. 41 00:01:56,880 --> 00:02:00,360 Speaker 1: And the UAW responded on Friday by expanding its strike 42 00:02:00,440 --> 00:02:04,280 Speaker 1: even further. The studios apparently decided that the writer's strike 43 00:02:04,360 --> 00:02:07,880 Speaker 1: had gone on long enough, so it's settled with a WGA. 44 00:02:08,120 --> 00:02:10,320 Speaker 9: It is all at a divorce where you're like, whoever 45 00:02:10,360 --> 00:02:11,720 Speaker 9: comes out of the room smiling. 46 00:02:11,880 --> 00:02:13,639 Speaker 8: I felt like the dank a good one. 47 00:02:13,680 --> 00:02:16,320 Speaker 1: Smiling well, the actors still have a way to go. 48 00:02:16,639 --> 00:02:20,160 Speaker 1: The FTC decided that Amazon had grown more than enough, 49 00:02:20,440 --> 00:02:22,960 Speaker 1: filing a lawsuit claiming that it had violated the anti 50 00:02:22,960 --> 00:02:26,080 Speaker 1: trust laws by using anti competitive practices to build and 51 00:02:26,240 --> 00:02:29,320 Speaker 1: hold its dominant position in online retailing. 52 00:02:29,480 --> 00:02:32,119 Speaker 10: These there are a set of tactics, but ultimately Amazon 53 00:02:32,120 --> 00:02:36,760 Speaker 10: has pursued them to deprive actual and potential competitors of 54 00:02:36,800 --> 00:02:40,160 Speaker 10: the ability to gain the scale and momentum needed to 55 00:02:40,320 --> 00:02:42,200 Speaker 10: effectively compete online. 56 00:02:42,320 --> 00:02:45,040 Speaker 1: And the United States Congress, or at least some members 57 00:02:45,040 --> 00:02:47,720 Speaker 1: of it, decided that the government had gone way too 58 00:02:47,760 --> 00:02:51,000 Speaker 1: far in spending money, and so they moved toward shutting 59 00:02:51,080 --> 00:02:53,880 Speaker 1: it all down, something that just about no one thought 60 00:02:54,160 --> 00:02:54,960 Speaker 1: made any sense. 61 00:02:55,400 --> 00:02:59,760 Speaker 5: The failure of House Republicans to act would hurt American 62 00:02:59,760 --> 00:03:04,959 Speaker 5: FIS families, and because economic kid wins, the S and P. 63 00:03:05,040 --> 00:03:07,920 Speaker 1: Five hundred didn't think much of all that disruption. This week, 64 00:03:08,040 --> 00:03:10,960 Speaker 1: ending down another point seventy four percent, marking its longest 65 00:03:11,000 --> 00:03:14,080 Speaker 1: losing street this year and moving further south through the 66 00:03:14,160 --> 00:03:17,160 Speaker 1: median year end number. Our Bloomberg L's are projecting that's 67 00:03:17,240 --> 00:03:20,079 Speaker 1: forty four to thirty five, while the nasdek eked out 68 00:03:20,120 --> 00:03:22,880 Speaker 1: a positive result of point oh six percent. But the 69 00:03:22,919 --> 00:03:25,280 Speaker 1: market story for the week really was in bonds, where 70 00:03:25,320 --> 00:03:28,480 Speaker 1: the yield on the tenure was up almost fifteen basis points, 71 00:03:28,560 --> 00:03:31,200 Speaker 1: all the way up to four point five eight. That's 72 00:03:31,240 --> 00:03:34,520 Speaker 1: after touching your four point seven on Thursday. Take us 73 00:03:34,520 --> 00:03:37,080 Speaker 1: through the week in the markets. Welcome back now, Rebecca Patterson, 74 00:03:37,120 --> 00:03:40,360 Speaker 1: former chief investment strategist for Bridgewater, So welcome back, Rebecca. 75 00:03:40,400 --> 00:03:42,080 Speaker 1: Always great to have you here. So I think a 76 00:03:42,120 --> 00:03:44,240 Speaker 1: lot of us talk this week was about the yield 77 00:03:44,320 --> 00:03:47,360 Speaker 1: on the tenure higher for longer The main thing not 78 00:03:47,440 --> 00:03:50,320 Speaker 1: so much higher, but longer, How high and for how 79 00:03:50,320 --> 00:03:51,960 Speaker 1: long do you think are we looking at? Well? 80 00:03:52,080 --> 00:03:53,080 Speaker 8: The Fed put. 81 00:03:52,920 --> 00:03:56,400 Speaker 9: In one more possible hike in its projections for this year, 82 00:03:56,800 --> 00:03:58,680 Speaker 9: and I think it did that really to give itself 83 00:03:58,720 --> 00:04:02,840 Speaker 9: optionality in case the consumers stronger than expected, wage inflation's 84 00:04:02,880 --> 00:04:05,680 Speaker 9: higher than expected. But I think they also did that 85 00:04:05,760 --> 00:04:09,560 Speaker 9: one extra dot, one extra possible hike, to prevent financial 86 00:04:09,560 --> 00:04:12,120 Speaker 9: conditions from working against them. If they had given the 87 00:04:12,160 --> 00:04:15,400 Speaker 9: all clear signal, we probably would have had marginally higher 88 00:04:15,440 --> 00:04:18,440 Speaker 9: stock markets, lower yields as people priced in the easing 89 00:04:18,520 --> 00:04:21,200 Speaker 9: to come, and that would have worked directly against the 90 00:04:21,240 --> 00:04:23,560 Speaker 9: Fed's goal. And then for next year, and I think, 91 00:04:23,680 --> 00:04:26,760 Speaker 9: to your point, this is the bigger deal. Next year. 92 00:04:26,800 --> 00:04:29,359 Speaker 9: The FED went from projecting one hundred bases points of 93 00:04:29,400 --> 00:04:32,920 Speaker 9: cuts to fifty, so definitely higher for longer than we 94 00:04:33,000 --> 00:04:35,160 Speaker 9: had previously thought. And so part of what we saw 95 00:04:35,279 --> 00:04:37,839 Speaker 9: in the market this week, particularly in the bond market, 96 00:04:38,400 --> 00:04:41,120 Speaker 9: was an adjustment to this new FED expectation. 97 00:04:41,880 --> 00:04:44,080 Speaker 1: Where are we inflation? What kind of inflation pressure we 98 00:04:44,160 --> 00:04:46,120 Speaker 1: see right now? We obviously have gas prices really going 99 00:04:46,200 --> 00:04:49,680 Speaker 1: up substantially, but inflation hasn't gone away, No, not at all. 100 00:04:49,720 --> 00:04:52,640 Speaker 9: It's interesting. The market took a lot of solace today 101 00:04:52,800 --> 00:04:56,600 Speaker 9: in that core PCE figure, the Fed's preferred inflation measure, 102 00:04:56,960 --> 00:04:59,080 Speaker 9: because it came down as expected and the month on 103 00:04:59,200 --> 00:05:01,760 Speaker 9: month number was just a little bit better than expected. 104 00:05:02,080 --> 00:05:04,120 Speaker 9: But when you take a step back from that, right 105 00:05:04,160 --> 00:05:06,440 Speaker 9: the FED is trying to get to two, we're still 106 00:05:06,480 --> 00:05:08,599 Speaker 9: well over two. And to your point, you've got some 107 00:05:08,800 --> 00:05:11,880 Speaker 9: risks out there, one from the service sector wages which 108 00:05:11,880 --> 00:05:14,359 Speaker 9: are still rising, you know, depending on how you measure 109 00:05:14,400 --> 00:05:17,960 Speaker 9: around five percent annually. The FED has suggested it that 110 00:05:18,000 --> 00:05:20,039 Speaker 9: needs to get down around three to be in line 111 00:05:20,080 --> 00:05:23,200 Speaker 9: with their target. And then to your point, commodities. You know, 112 00:05:23,240 --> 00:05:26,240 Speaker 9: the FED tries to look through commodities in the short term, 113 00:05:26,560 --> 00:05:30,200 Speaker 9: but oil and food especially have an outsized impact on 114 00:05:30,240 --> 00:05:32,599 Speaker 9: the economy through the consumer. We spend so much of 115 00:05:32,640 --> 00:05:36,159 Speaker 9: our disposable income on those things. And if oil keeps going, 116 00:05:36,200 --> 00:05:38,719 Speaker 9: we're at ninety five ninety six dollars a barrel on 117 00:05:38,760 --> 00:05:41,479 Speaker 9: Brent crude right now, we go to one hundred. Hold 118 00:05:41,520 --> 00:05:44,880 Speaker 9: around those levels for a while. It hurts disposable income, 119 00:05:45,040 --> 00:05:49,080 Speaker 9: it raises inflation and inflation expectations, and that again is 120 00:05:49,120 --> 00:05:51,000 Speaker 9: going to work against what the Fed's hoping to do 121 00:05:51,080 --> 00:05:52,159 Speaker 9: with its soft landing. 122 00:05:52,720 --> 00:05:53,880 Speaker 1: So much of this has been tight up for the 123 00:05:53,960 --> 00:05:56,080 Speaker 1: labor market, and we've heard repeatedly how tight the labor 124 00:05:56,080 --> 00:05:58,120 Speaker 1: market is. Loosened up some, but it still is a 125 00:05:58,160 --> 00:06:00,720 Speaker 1: fairly tight labor market. What do we need to see? 126 00:06:00,760 --> 00:06:02,200 Speaker 1: What does the FED need to see out of the 127 00:06:02,240 --> 00:06:04,960 Speaker 1: labor market first to have that proverbial soft landing. 128 00:06:05,160 --> 00:06:07,440 Speaker 9: Yeah, so, you know, the soft landing, the idea that 129 00:06:07,440 --> 00:06:10,400 Speaker 9: we can get inflation back down closer to two percent 130 00:06:10,760 --> 00:06:13,880 Speaker 9: without a recession. That was what the FED projected last week. 131 00:06:14,200 --> 00:06:17,160 Speaker 9: I think you need to see labor market normalization that 132 00:06:17,240 --> 00:06:21,400 Speaker 9: comes mainly through a reduction of openings and increase in participation, 133 00:06:21,960 --> 00:06:25,000 Speaker 9: with very few layoffs. Now to the Feds, no one 134 00:06:25,200 --> 00:06:27,000 Speaker 9: that's off the Fed's credit. They didn't do this, but 135 00:06:27,120 --> 00:06:29,960 Speaker 9: so far that is kind of what's happening. Participation has 136 00:06:30,000 --> 00:06:33,600 Speaker 9: inched a little bit higher. Job openings had been twelve million, 137 00:06:33,640 --> 00:06:36,599 Speaker 9: We're down to about nine. We get another report next week, 138 00:06:36,800 --> 00:06:40,240 Speaker 9: it'll probably be around eight or nine. But pre pandemic, 139 00:06:40,279 --> 00:06:43,560 Speaker 9: those openings were closer to five million, So we still 140 00:06:43,600 --> 00:06:46,599 Speaker 9: have a long way to go if that happens. Think 141 00:06:46,600 --> 00:06:49,880 Speaker 9: about it. If we just reduce openings, it reduces competition 142 00:06:50,000 --> 00:06:52,760 Speaker 9: for workers, reduces wage inflation, but everyone who has a 143 00:06:52,839 --> 00:06:56,400 Speaker 9: job and income keeps it. That's their soft landing scenario. 144 00:06:56,920 --> 00:06:59,599 Speaker 9: But what's probably more reasonable is you get some of 145 00:06:59,640 --> 00:07:02,920 Speaker 9: that and some job layoffs. And layoffs have been very, 146 00:07:03,040 --> 00:07:07,360 Speaker 9: very modest so far, but we're seeing consumers get more cautious, 147 00:07:07,360 --> 00:07:10,680 Speaker 9: We're seeing companies get more cautious and business sentiment surveys. 148 00:07:10,880 --> 00:07:14,440 Speaker 9: If that translates into more layoffs going forward, then it's 149 00:07:14,440 --> 00:07:16,120 Speaker 9: going to be harder for the FED to get that 150 00:07:16,240 --> 00:07:19,560 Speaker 9: soft landing it'll be a greater risk that companies consumers 151 00:07:19,640 --> 00:07:22,400 Speaker 9: keep pulling back and we have probably a modest recession 152 00:07:22,640 --> 00:07:24,480 Speaker 9: at some point in the year ahead. That would probably 153 00:07:24,520 --> 00:07:26,240 Speaker 9: be my base case, but I think it's going to 154 00:07:26,280 --> 00:07:27,000 Speaker 9: be a close call. 155 00:07:27,200 --> 00:07:28,960 Speaker 1: Rebecca. It's always such a treat to heavy with us. 156 00:07:28,960 --> 00:07:31,440 Speaker 1: Thank you for being here this, Rebecca Patterson. The market 157 00:07:31,480 --> 00:07:33,480 Speaker 1: spent much of the week trying to come to terms 158 00:07:33,520 --> 00:07:35,440 Speaker 1: with higher rates that may well be with us for 159 00:07:35,480 --> 00:07:37,520 Speaker 1: a good long time. To give us a sense of 160 00:07:37,560 --> 00:07:39,680 Speaker 1: how that may affect the credit world, we welcome to 161 00:07:39,680 --> 00:07:43,720 Speaker 1: down Purntum a poori HPS Investment Partners, governing partner and 162 00:07:43,880 --> 00:07:46,680 Speaker 1: head of Liquid Credits. So great to have you here 163 00:07:46,720 --> 00:07:48,800 Speaker 1: in person. We've talked in remote but not in person. 164 00:07:48,840 --> 00:07:51,200 Speaker 1: Wonderfully have you here, so so give us your sense 165 00:07:51,200 --> 00:07:54,760 Speaker 1: about if we have rates that go up, and if 166 00:07:54,800 --> 00:07:56,360 Speaker 1: they stay there for a long time, what does it 167 00:07:56,400 --> 00:07:58,160 Speaker 1: do the world of credit? And which is more important 168 00:07:58,200 --> 00:07:59,640 Speaker 1: how high it is or how long it is. 169 00:08:00,840 --> 00:08:02,560 Speaker 11: So that's a good question. I think I think what's 170 00:08:02,560 --> 00:08:04,160 Speaker 11: more important is how long it is in terms of 171 00:08:04,200 --> 00:08:06,160 Speaker 11: the impact of credit. So a couple of things. One is, 172 00:08:06,920 --> 00:08:09,480 Speaker 11: you know, I I think the world's changed its narrative 173 00:08:09,680 --> 00:08:12,680 Speaker 11: in instead of whether or not rates go up, it's 174 00:08:12,680 --> 00:08:16,800 Speaker 11: how long rates stay up. And for corporate credit balance sheets, 175 00:08:16,800 --> 00:08:18,680 Speaker 11: I think there's two things that are happening. The first 176 00:08:18,720 --> 00:08:22,440 Speaker 11: is that there's a lot of investment grade and high 177 00:08:22,520 --> 00:08:26,040 Speaker 11: yield and loans that will reprice over the course of 178 00:08:26,120 --> 00:08:29,880 Speaker 11: time to into this higher rate environment. So that's one thing. 179 00:08:30,160 --> 00:08:32,600 Speaker 11: And two is companies are living in this higher rate environment, 180 00:08:32,640 --> 00:08:34,800 Speaker 11: which means they're getting cash flow squeezed a little bit 181 00:08:34,840 --> 00:08:37,640 Speaker 11: as they're repricing their debt, and you'll see that across 182 00:08:37,679 --> 00:08:39,600 Speaker 11: investment grade. I think you'll see it across high yield. 183 00:08:39,640 --> 00:08:42,400 Speaker 11: Now the loan market's floating rate, so they're participating in 184 00:08:42,440 --> 00:08:44,880 Speaker 11: the rate move. Uh, you know, they participate in the 185 00:08:44,920 --> 00:08:47,120 Speaker 11: last year and are continuing to participate. But really it's 186 00:08:47,200 --> 00:08:49,719 Speaker 11: high yield and investment grade and fixed rate assets that 187 00:08:49,760 --> 00:08:51,800 Speaker 11: are starting to to reprice and you're going to start 188 00:08:51,840 --> 00:08:52,600 Speaker 11: to see the impact. 189 00:08:52,679 --> 00:08:55,560 Speaker 1: So interestation we're really low for a long time. To 190 00:08:55,559 --> 00:08:57,920 Speaker 1: what extent did the corporations go and say, let's lock 191 00:08:58,000 --> 00:09:00,800 Speaker 1: in a lot of long term debt really low rates, 192 00:09:00,840 --> 00:09:02,720 Speaker 1: and so they're protected. I guess it's for some period 193 00:09:02,760 --> 00:09:03,520 Speaker 1: of time to come. 194 00:09:03,640 --> 00:09:05,480 Speaker 11: A lot of them did it, and they are protected 195 00:09:05,520 --> 00:09:07,560 Speaker 11: and there is a you know, you'll hear the words 196 00:09:07,600 --> 00:09:10,160 Speaker 11: maturity wall, but you're certainly starting to see that cliff 197 00:09:10,200 --> 00:09:13,400 Speaker 11: come into play, not necessarily in twenty twenty four, but 198 00:09:13,440 --> 00:09:15,760 Speaker 11: in twenty five and twenty six. And mind you that 199 00:09:15,920 --> 00:09:18,720 Speaker 11: most companies don't wait until the maturity to refinance they're dead. 200 00:09:18,880 --> 00:09:22,320 Speaker 11: So oftentimes you're seeing companies refinance twelve months inside, eighteen 201 00:09:22,320 --> 00:09:24,920 Speaker 11: months inside. So the numbers are pretty big in that. 202 00:09:25,080 --> 00:09:27,400 Speaker 11: In that, you know, the estimates are anywhere from thirty 203 00:09:27,440 --> 00:09:30,319 Speaker 11: to forty percent of investment grade and high yield repricing 204 00:09:30,360 --> 00:09:32,760 Speaker 11: into this higher rate environment over the next call it, 205 00:09:33,120 --> 00:09:34,240 Speaker 11: you know, eighteen months plus. 206 00:09:34,280 --> 00:09:35,920 Speaker 8: Remind us, so, what are. 207 00:09:35,920 --> 00:09:38,680 Speaker 1: The most active parts of your business right now? In credit, 208 00:09:39,360 --> 00:09:40,679 Speaker 1: where's the most activity. 209 00:09:41,400 --> 00:09:43,439 Speaker 11: There's a lot of activity in the private credit world. 210 00:09:44,280 --> 00:09:46,079 Speaker 11: I think you've probably read a lot about that also, 211 00:09:46,840 --> 00:09:49,840 Speaker 11: but you know, that's a very very active world right now, 212 00:09:50,200 --> 00:09:50,960 Speaker 11: the private credit. 213 00:09:51,160 --> 00:09:51,319 Speaker 1: Look. 214 00:09:51,360 --> 00:09:53,320 Speaker 11: Private credit has been around for a long time, and 215 00:09:53,400 --> 00:09:55,920 Speaker 11: private credit has taken share from the banks and they're 216 00:09:55,920 --> 00:09:58,559 Speaker 11: taking share from the syndicated markets. So there's a ton 217 00:09:58,600 --> 00:10:02,400 Speaker 11: of activity there up and down the capital structure and 218 00:10:02,679 --> 00:10:06,320 Speaker 11: I would say there's more interest and activity across corporate credit. 219 00:10:06,920 --> 00:10:10,400 Speaker 11: Certainly when you look at equities versus credit, there's been 220 00:10:10,559 --> 00:10:13,160 Speaker 11: a veer towards credit because number one, the base rate 221 00:10:13,280 --> 00:10:16,720 Speaker 11: environment is so high it's likely to stay high. And 222 00:10:16,800 --> 00:10:20,400 Speaker 11: number two, they're spread across the market. Now, spread's not 223 00:10:20,480 --> 00:10:23,000 Speaker 11: terribly attractive in and of itself, but yields are so 224 00:10:23,360 --> 00:10:25,959 Speaker 11: investment grade, high yield levered loans. There's you know, the 225 00:10:26,320 --> 00:10:28,200 Speaker 11: high old markets training at you know, four twenty four 226 00:10:28,240 --> 00:10:30,480 Speaker 11: to thirty over in the loan market just around five 227 00:10:30,480 --> 00:10:32,240 Speaker 11: point fifty over. So you're looking at eight to ten 228 00:10:32,280 --> 00:10:34,560 Speaker 11: percent yields and high yield and loans, and in the 229 00:10:34,559 --> 00:10:37,439 Speaker 11: private world, you know, it's it's a couple hundred basis points. 230 00:10:37,480 --> 00:10:38,000 Speaker 3: On top of that. 231 00:10:38,160 --> 00:10:39,599 Speaker 1: Thank you so much, really great to have you with 232 00:10:39,640 --> 00:10:44,800 Speaker 1: this plano. It's pretty much POORI of HPS investments coming up, 233 00:10:44,880 --> 00:10:47,800 Speaker 1: the summer of strikes turns into the autumn of strikes. 234 00:10:48,000 --> 00:10:51,120 Speaker 1: We talk with Zanni mitten Vettos of the Economists about 235 00:10:51,160 --> 00:10:54,360 Speaker 1: whether there's more at stake this time. That's next on 236 00:10:54,400 --> 00:10:55,920 Speaker 1: Wall Street Week on Bloomberg. 237 00:10:57,960 --> 00:11:03,400 Speaker 2: This is Bloomberg Wall Street Week with David Weston from Bloomberg. 238 00:11:02,920 --> 00:11:15,360 Speaker 8: Radio workers on the March. 239 00:11:15,679 --> 00:11:18,600 Speaker 1: The US has just been through the summer of strikes. 240 00:11:19,320 --> 00:11:22,559 Speaker 11: We're hopeful, we're hearing good things that they're making progress, 241 00:11:22,760 --> 00:11:26,200 Speaker 11: but the UAW is at the table bargaining in good faith. 242 00:11:26,600 --> 00:11:29,760 Speaker 10: This could end today, it could end a few months 243 00:11:29,760 --> 00:11:30,600 Speaker 10: from now. 244 00:11:30,760 --> 00:11:33,440 Speaker 1: And we're not out of it yet. The Writer's Guild 245 00:11:33,480 --> 00:11:35,439 Speaker 1: has apparently come to terms with the studios. 246 00:11:35,559 --> 00:11:37,680 Speaker 6: They got what they wanted basically, which is that the 247 00:11:37,679 --> 00:11:41,000 Speaker 6: Hollywood studios agreed that they're not going to you know, 248 00:11:41,080 --> 00:11:44,439 Speaker 6: feed of Bunshow's scripts into the AI machine and come 249 00:11:44,480 --> 00:11:46,920 Speaker 6: back and credit a movie to an AI. 250 00:11:47,480 --> 00:11:51,480 Speaker 1: But the actors are still out. Let's get it done. 251 00:11:51,800 --> 00:11:54,040 Speaker 5: Unions haven't been sexy for a really long time, but 252 00:11:54,080 --> 00:11:56,760 Speaker 5: I've always considered it a privilege to be part of 253 00:11:56,800 --> 00:11:57,520 Speaker 5: this union. 254 00:11:58,120 --> 00:12:00,800 Speaker 1: And the auto workers look to be ramped things up 255 00:12:00,960 --> 00:12:03,800 Speaker 1: rather than down, as we've now seen both a sitting 256 00:12:03,800 --> 00:12:06,439 Speaker 1: president and a former president make trips to Detroit to 257 00:12:06,480 --> 00:12:10,080 Speaker 1: show their support. Wall Street did norma country, the middle class, 258 00:12:10,080 --> 00:12:10,960 Speaker 1: PILMA count. 259 00:12:13,920 --> 00:12:14,479 Speaker 8: Class. 260 00:12:15,640 --> 00:12:18,480 Speaker 5: I side with the Auto Workers of American with those 261 00:12:18,520 --> 00:12:20,880 Speaker 5: who want to make America great again. 262 00:12:20,720 --> 00:12:25,079 Speaker 1: And I always will, but this time may truly be different. Sure, 263 00:12:25,200 --> 00:12:28,000 Speaker 1: it's about wages and benefits, but it's also about the 264 00:12:28,040 --> 00:12:30,800 Speaker 1: future and the worker's place in a world that technology 265 00:12:30,840 --> 00:12:34,680 Speaker 1: is transforming faster than we may know. From writers concerned 266 00:12:34,679 --> 00:12:37,760 Speaker 1: about artificial intelligence taking their jobs, the. 267 00:12:37,800 --> 00:12:41,280 Speaker 8: Clash that you're seeing with the writers. 268 00:12:40,960 --> 00:12:43,240 Speaker 1: And the actors is that, of course that means the 269 00:12:43,280 --> 00:12:48,000 Speaker 1: studios and networks may require fewer people to auto workers 270 00:12:48,000 --> 00:12:50,720 Speaker 1: who know that those electric vehicles won't need as many 271 00:12:50,760 --> 00:12:52,679 Speaker 1: of them on the job as before. 272 00:12:53,200 --> 00:12:58,960 Speaker 5: I fear that between the fact that electric vehicles take 273 00:12:59,360 --> 00:13:03,560 Speaker 5: about four two percent fewer workers per automobile and the 274 00:13:03,600 --> 00:13:06,080 Speaker 5: fact that a large part of the action in the 275 00:13:06,120 --> 00:13:11,319 Speaker 5: automobile industry is moving to the southern part of our country, 276 00:13:11,679 --> 00:13:16,319 Speaker 5: the industrial belt part of the country is gonna shrink 277 00:13:16,679 --> 00:13:17,520 Speaker 5: no matter. 278 00:13:17,280 --> 00:13:21,000 Speaker 1: What, leaving us wondering whether this time we can embrace 279 00:13:21,040 --> 00:13:24,840 Speaker 1: all that technology offers without leaving workers behind. 280 00:13:25,200 --> 00:13:28,959 Speaker 8: Looking out into the future, we're starting to ask ourselves, 281 00:13:29,280 --> 00:13:32,120 Speaker 8: when are these computers going to be as smart as 282 00:13:32,160 --> 00:13:33,960 Speaker 8: we are? 283 00:13:32,960 --> 00:13:37,440 Speaker 1: And to take us through what is going on with 284 00:13:37,520 --> 00:13:39,719 Speaker 1: the labor markets, particularly in the United States. Welcome now 285 00:13:39,840 --> 00:13:42,720 Speaker 1: back Zanni Mintenbto. She is the editor in chief of 286 00:13:42,760 --> 00:13:44,520 Speaker 1: the Economist Danny. Great to have you back on Wall 287 00:13:44,520 --> 00:13:46,800 Speaker 1: Street week. Thank you. So what are we seeing here? 288 00:13:46,800 --> 00:13:49,000 Speaker 1: It has been a summer of strikes, We're not done 289 00:13:49,040 --> 00:13:51,400 Speaker 1: even as we go into the autumn. But how much 290 00:13:51,400 --> 00:13:53,080 Speaker 1: of this do you think is because of a basic 291 00:13:53,160 --> 00:13:55,800 Speaker 1: shift in power toward labor. How much of it is 292 00:13:55,880 --> 00:13:57,440 Speaker 1: new technology on the horizon. 293 00:13:57,720 --> 00:13:59,560 Speaker 3: Well, Fasiva, it is great to be back here with you. 294 00:14:00,120 --> 00:14:02,520 Speaker 3: I think it's a bit of both. I think there 295 00:14:02,600 --> 00:14:05,200 Speaker 3: is definitely a sense that, you know, labor is in 296 00:14:05,240 --> 00:14:07,400 Speaker 3: a stronger position than it has been for much of 297 00:14:07,400 --> 00:14:11,160 Speaker 3: the past few decades. Unemployment is very low, the economy 298 00:14:11,200 --> 00:14:13,000 Speaker 3: is very strong, there's the shortage of labor. The labor 299 00:14:13,040 --> 00:14:15,440 Speaker 3: market has changed after the pandemic, and so there's a 300 00:14:15,480 --> 00:14:18,000 Speaker 3: sense that labor is in a stronger position. But I 301 00:14:18,040 --> 00:14:21,760 Speaker 3: think part of the motivation is also a concern about 302 00:14:21,840 --> 00:14:25,360 Speaker 3: what the next wave of technology means, whether it's you know, 303 00:14:25,440 --> 00:14:28,360 Speaker 3: with the UAW, whether it's EVS and the shift in 304 00:14:28,400 --> 00:14:31,760 Speaker 3: the nature of car manufacturing, whether it's AI. All these 305 00:14:31,800 --> 00:14:35,120 Speaker 3: technologies on the horizon, and there's a sense of concern 306 00:14:35,160 --> 00:14:37,600 Speaker 3: about that change and a kind of grabbing of the 307 00:14:37,640 --> 00:14:40,720 Speaker 3: gains while you can, and perhaps also as so often. 308 00:14:41,240 --> 00:14:44,440 Speaker 3: Unfortunately with unions, there's a bit of a sense of stop, 309 00:14:44,520 --> 00:14:45,400 Speaker 3: let's stop history. 310 00:14:45,440 --> 00:14:46,120 Speaker 11: I want to get off. 311 00:14:46,160 --> 00:14:47,200 Speaker 3: And that's the worrying bit. 312 00:14:47,520 --> 00:14:50,240 Speaker 1: We lost out, particularly manufacturing jobs in the United States 313 00:14:50,240 --> 00:14:53,320 Speaker 1: of America. Is there anything that can be done by corporations, 314 00:14:53,320 --> 00:14:55,880 Speaker 1: by the government to try to avoid the problem that 315 00:14:55,880 --> 00:14:56,640 Speaker 1: we had last time? 316 00:14:57,200 --> 00:14:59,720 Speaker 3: Absolutely there is. But first I think it's understanding what 317 00:14:59,840 --> 00:15:02,200 Speaker 3: is going on right now. And you're right that in 318 00:15:02,240 --> 00:15:04,840 Speaker 3: the past few decades two things were happening. There was 319 00:15:04,880 --> 00:15:08,440 Speaker 3: a bunch of technological change, and there was globalization. There 320 00:15:08,480 --> 00:15:09,720 Speaker 3: was competition from abroad. 321 00:15:10,040 --> 00:15:10,800 Speaker 1: And what we're. 322 00:15:10,600 --> 00:15:14,200 Speaker 3: Seeing now in the kind of backlash against globalization in 323 00:15:14,200 --> 00:15:16,560 Speaker 3: the US, and we're seeing it in both parties, is 324 00:15:16,640 --> 00:15:19,480 Speaker 3: a much greater focus on protectionism. And if you look 325 00:15:19,520 --> 00:15:22,640 Speaker 3: at Bidenomics, if you will, one of the problems with 326 00:15:22,680 --> 00:15:26,240 Speaker 3: the president's policy is that they're conflating a whole bunch 327 00:15:26,280 --> 00:15:29,440 Speaker 3: of things. There's a lot of subsidies to accelerate the 328 00:15:29,480 --> 00:15:33,040 Speaker 3: green transition, to accelerate the shift to electrification. At the 329 00:15:33,080 --> 00:15:35,640 Speaker 3: same time, there's quite a lot of protectionism in there, 330 00:15:35,640 --> 00:15:40,080 Speaker 3: which is of course works at odds with the attempt 331 00:15:40,120 --> 00:15:43,040 Speaker 3: to accelerate that transition. So what I think is important 332 00:15:43,120 --> 00:15:46,640 Speaker 3: is to separate this out. I'm a free trader at heart, 333 00:15:46,640 --> 00:15:48,560 Speaker 3: always have been. That's what we fought for for one 334 00:15:48,640 --> 00:15:52,400 Speaker 3: hundred and eighty years. I don't think protectionism and tariffs 335 00:15:52,840 --> 00:15:56,200 Speaker 3: is a sensible medium or indeed long term strategy for 336 00:15:56,280 --> 00:15:59,040 Speaker 3: helping US workers. I think the goal needs to be 337 00:15:59,600 --> 00:16:03,560 Speaker 3: how to to prepare workers to enable them to take 338 00:16:03,600 --> 00:16:07,000 Speaker 3: advantage of new technologies. And so that's easily said, and 339 00:16:07,080 --> 00:16:08,800 Speaker 3: you know, it's easy to say, well, yeah, yeah, yeah, 340 00:16:08,800 --> 00:16:11,160 Speaker 3: you know you need to retrain, but you do need 341 00:16:11,200 --> 00:16:13,440 Speaker 3: to work out what are the skills that people will 342 00:16:13,520 --> 00:16:15,880 Speaker 3: need to thrive in the new economy and kind of 343 00:16:16,160 --> 00:16:20,640 Speaker 3: stopping technology from being adopted is a very short sided solution. 344 00:16:21,040 --> 00:16:23,240 Speaker 3: So I think that the challenge now, and we didn't 345 00:16:23,240 --> 00:16:26,280 Speaker 3: get it right in the nineties. In the two thousands, 346 00:16:26,280 --> 00:16:30,080 Speaker 3: we definitely didn't do enough to equip workers for new technologies. 347 00:16:30,080 --> 00:16:33,400 Speaker 3: To think about from the education system, to the training system, 348 00:16:33,640 --> 00:16:35,680 Speaker 3: to the kind of adoption and the factory, what is 349 00:16:35,720 --> 00:16:38,800 Speaker 3: it that needs to be done to ensure that we 350 00:16:38,920 --> 00:16:40,960 Speaker 3: have the workforce as needed. And to put this in 351 00:16:41,080 --> 00:16:44,280 Speaker 3: very concretely, the context right now, if you look at 352 00:16:44,520 --> 00:16:48,000 Speaker 3: the ambitions of the IRA, the ambitions of the elect 353 00:16:48,040 --> 00:16:50,240 Speaker 3: for the electrification of this country. There are a huge 354 00:16:50,360 --> 00:16:52,720 Speaker 3: number of jobs that are going to be created, whether 355 00:16:52,720 --> 00:16:55,640 Speaker 3: it's in building the factories, whether it's then in actually 356 00:16:55,680 --> 00:16:58,360 Speaker 3: manning the factories, and at the moment, the concerns are 357 00:16:58,440 --> 00:17:01,560 Speaker 3: where will those people come from? And so rather than 358 00:17:01,600 --> 00:17:04,560 Speaker 3: trying to stop that shift, I think the challenge for 359 00:17:04,680 --> 00:17:08,159 Speaker 3: both unions and for companies is how do we ensure 360 00:17:08,160 --> 00:17:10,080 Speaker 3: that we've got the right workers with the right skills 361 00:17:10,119 --> 00:17:12,399 Speaker 3: that we will need, so that we aren't slowed in 362 00:17:12,480 --> 00:17:14,960 Speaker 3: that transition by not having the right kind of people. 363 00:17:15,119 --> 00:17:16,879 Speaker 1: So come back to something you talked about, and that 364 00:17:17,000 --> 00:17:20,160 Speaker 1: is President Biden's plan and Inflation Reduction Act. They're moving 365 00:17:20,160 --> 00:17:23,360 Speaker 1: towards so called green He has caught a little bit 366 00:17:23,440 --> 00:17:25,600 Speaker 1: between two stools here. On the one hand, he wants 367 00:17:25,600 --> 00:17:28,200 Speaker 1: to go to electric vehicles really fast. On the other hand, 368 00:17:28,200 --> 00:17:30,440 Speaker 1: people tell us they probably will need something like forty 369 00:17:30,480 --> 00:17:34,159 Speaker 1: percent fewer workers. Is that as zero sum game? Is 370 00:17:34,160 --> 00:17:37,560 Speaker 1: there a way to have both workers getting good wages, 371 00:17:37,720 --> 00:17:41,199 Speaker 1: having good jobs, and moved to electric vehicles? 372 00:17:40,960 --> 00:17:44,040 Speaker 3: The OGS answer is yes, of course, because there will 373 00:17:44,040 --> 00:17:46,400 Speaker 3: be demand for workers. They may just be doing different jobs. 374 00:17:46,440 --> 00:17:48,480 Speaker 3: They maybe even be in different industries. But I think 375 00:17:48,520 --> 00:17:51,520 Speaker 3: will you put your finger on a challenge that President 376 00:17:51,520 --> 00:17:56,760 Speaker 3: Biden has because he has wrapped his push to green 377 00:17:56,880 --> 00:17:59,920 Speaker 3: vehicles and his green transition in the Inflation Reduction Act 378 00:18:00,440 --> 00:18:02,639 Speaker 3: in a kind of context of this is good for 379 00:18:02,680 --> 00:18:04,399 Speaker 3: the American worker, and not just it's good for the 380 00:18:04,400 --> 00:18:07,000 Speaker 3: American worker, it's good for the union worker and good 381 00:18:07,000 --> 00:18:10,800 Speaker 3: for union jobs. And so he's that's where he's caught 382 00:18:10,840 --> 00:18:13,280 Speaker 3: in a bit of a bind because he's trying to 383 00:18:13,320 --> 00:18:16,840 Speaker 3: say that one policy is great for today's union jobs 384 00:18:17,080 --> 00:18:19,399 Speaker 3: and is going to accelerate the green transition, and there 385 00:18:19,440 --> 00:18:21,320 Speaker 3: really is a bit of a trade off there. I 386 00:18:21,359 --> 00:18:26,359 Speaker 3: think the importance of accelerating the green transition means there 387 00:18:26,440 --> 00:18:29,480 Speaker 3: will be good jobs in the future. The US will 388 00:18:29,520 --> 00:18:32,720 Speaker 3: be greener, cleaner, and will be a stronger twenty first 389 00:18:32,720 --> 00:18:35,840 Speaker 3: century economy, but it doesn't mean that the exact jobs 390 00:18:35,880 --> 00:18:37,560 Speaker 3: that we have today will still be the jobs that 391 00:18:37,600 --> 00:18:38,280 Speaker 3: are there tomorrow. 392 00:18:38,400 --> 00:18:41,399 Speaker 1: Artificial intelligence, at least has the potential to disrupt a 393 00:18:41,480 --> 00:18:44,040 Speaker 1: very different part of the labor force. People who are 394 00:18:44,119 --> 00:18:46,000 Speaker 1: much more trained, a lot of people who are college 395 00:18:46,119 --> 00:18:49,440 Speaker 1: educated and who could really lose their jobs because it's 396 00:18:49,480 --> 00:18:53,320 Speaker 1: being done by generative AI. How do we address that 397 00:18:53,440 --> 00:18:56,119 Speaker 1: problem because you may have a different segment of society 398 00:18:56,280 --> 00:18:58,439 Speaker 1: that is dislocated in the next ten years. 399 00:18:58,520 --> 00:19:01,840 Speaker 3: Absolutely, and the answer, I think the answer is that 400 00:19:01,880 --> 00:19:04,919 Speaker 3: we don't know quite how big that group will be 401 00:19:05,080 --> 00:19:07,320 Speaker 3: or exactly where it will be. Potentially, I think AI 402 00:19:07,400 --> 00:19:11,160 Speaker 3: will disrupt huge swaths of the economy. It will probably 403 00:19:11,240 --> 00:19:13,920 Speaker 3: take longer than many people right now in the midst 404 00:19:13,960 --> 00:19:17,080 Speaker 3: of the hype belief, because quite often if you look 405 00:19:17,080 --> 00:19:20,239 Speaker 3: at technologies, they take a little longer to integrate than 406 00:19:20,280 --> 00:19:23,440 Speaker 3: people think, but then they have a much more fundamental impact. 407 00:19:23,800 --> 00:19:26,240 Speaker 3: So I don't know exactly which industry is the impact 408 00:19:26,280 --> 00:19:29,080 Speaker 3: will be biggest fastest, but it clearly will be there. 409 00:19:29,960 --> 00:19:32,160 Speaker 3: I think the answer is and I think that sounds 410 00:19:32,160 --> 00:19:33,720 Speaker 3: a bit like a broken record, but the answer is 411 00:19:33,720 --> 00:19:36,399 Speaker 3: the same one, which is not to try and stop 412 00:19:36,440 --> 00:19:40,240 Speaker 3: the adoption of the technology, because that yields the productivity improvements, 413 00:19:40,280 --> 00:19:43,680 Speaker 3: which yield the economic growth, which yield the resources which 414 00:19:43,800 --> 00:19:46,840 Speaker 3: enable you then to invest in and create new jobs. 415 00:19:46,920 --> 00:19:50,280 Speaker 3: But it is to equip people with the means and 416 00:19:50,359 --> 00:19:52,760 Speaker 3: the skills for the new kind of jobs. And I 417 00:19:52,800 --> 00:19:55,879 Speaker 3: actually think that AI interestingly, is likely to be a 418 00:19:55,920 --> 00:19:57,800 Speaker 3: big enhancer for many jobs. 419 00:19:58,160 --> 00:19:59,880 Speaker 1: Say, and it's such a treat to have you on WILS. 420 00:20:00,000 --> 00:20:02,439 Speaker 1: We've got Zanni Battis. She is the editor in chief 421 00:20:02,480 --> 00:20:07,560 Speaker 1: of the Economists. Coming up, the summer of strikes turns 422 00:20:07,560 --> 00:20:10,359 Speaker 1: into the autumn of strikes. We talk with Zanni Mitton 423 00:20:10,400 --> 00:20:13,600 Speaker 1: Beadows of the Economists about whether there's more at stake 424 00:20:13,840 --> 00:20:17,119 Speaker 1: this time. That's the next time Wall Street Week. I'm Bloomberg. 425 00:20:18,920 --> 00:20:23,160 Speaker 2: This is Bloomberg Wall Street Week with David Weston from 426 00:20:23,280 --> 00:20:24,200 Speaker 2: Bloomberg Radio. 427 00:20:31,040 --> 00:20:33,359 Speaker 1: This is Wall Street Week. I'm David Weston. The US 428 00:20:33,359 --> 00:20:37,240 Speaker 1: economy has thus far defied the gravity of higher interest rates, 429 00:20:37,320 --> 00:20:40,920 Speaker 1: in part because of substantial fiscal stimulus, but that may 430 00:20:41,080 --> 00:20:43,200 Speaker 1: be coming to an end. To take us through what 431 00:20:43,440 --> 00:20:45,400 Speaker 1: that could mean to the United States and for that matter, 432 00:20:45,440 --> 00:20:47,720 Speaker 1: for the rest of the world. Welcome back now, Rusher Sharma, 433 00:20:47,800 --> 00:20:50,560 Speaker 1: he's chairman of Rockefeller International. Sure, thank you so much 434 00:20:50,560 --> 00:20:52,720 Speaker 1: for being back on Wall Street Week. So you've written 435 00:20:52,720 --> 00:20:55,520 Speaker 1: an article ECTRA on this very subject. Where are we 436 00:20:55,680 --> 00:20:58,840 Speaker 1: fiscal stimulus? It lasted a little bit longer than maybe 437 00:20:58,880 --> 00:21:00,080 Speaker 1: we understood, so. 438 00:21:00,160 --> 00:21:02,040 Speaker 4: Much bigger in terms of the take up of some 439 00:21:02,119 --> 00:21:05,600 Speaker 4: of these Biden plans was much higher than what anyone anticipated. 440 00:21:06,040 --> 00:21:08,080 Speaker 4: So if you look at it at this time last year, 441 00:21:08,480 --> 00:21:11,439 Speaker 4: the consensus forecast was that the US economy would be 442 00:21:11,880 --> 00:21:15,760 Speaker 4: contracting by now in a recession. Instead, for this quarter, 443 00:21:15,840 --> 00:21:18,400 Speaker 4: it looks like the US economy would have grown by 444 00:21:18,440 --> 00:21:19,439 Speaker 4: more than three percent. 445 00:21:19,840 --> 00:21:21,000 Speaker 1: I can't remember. 446 00:21:20,680 --> 00:21:23,679 Speaker 4: A period in history where the forecasters have been this 447 00:21:23,840 --> 00:21:26,480 Speaker 4: wrong in terms of what they were predicting and what 448 00:21:26,640 --> 00:21:27,880 Speaker 4: actually happened. 449 00:21:27,920 --> 00:21:31,080 Speaker 1: And substantio ABOB trend yes, three percent, the substantial ABOB trend, 450 00:21:31,160 --> 00:21:31,639 Speaker 1: yes exactly. 451 00:21:31,640 --> 00:21:32,920 Speaker 4: I think the US trend is closer to one and 452 00:21:32,920 --> 00:21:34,520 Speaker 4: a half percent. This is like three percent. 453 00:21:34,760 --> 00:21:35,680 Speaker 8: So why did this happen? 454 00:21:35,720 --> 00:21:37,800 Speaker 4: As you only pointed out that a lot of this 455 00:21:37,960 --> 00:21:41,040 Speaker 4: was because the fiscal stimulus was much bigger than I 456 00:21:41,040 --> 00:21:44,480 Speaker 4: think what people expected. There are some estimates that the 457 00:21:44,520 --> 00:21:47,520 Speaker 4: fiscal stimulus may have added one and a half percentage 458 00:21:47,520 --> 00:21:51,600 Speaker 4: points to GDP growth. That's a substantial amount, you know, 459 00:21:51,640 --> 00:21:54,399 Speaker 4: like in terms of adding to economic growth. And then 460 00:21:54,440 --> 00:21:57,399 Speaker 4: the US consumer has ended up being much more resilient, 461 00:21:57,600 --> 00:22:00,240 Speaker 4: partly because so much of the borrowing that the US 462 00:22:00,280 --> 00:22:03,280 Speaker 4: consumer does now is really at fixed rates, so it 463 00:22:03,320 --> 00:22:06,199 Speaker 4: takes a long time for them to refinance and for 464 00:22:06,240 --> 00:22:08,560 Speaker 4: the higher rates to bite them. On the other hand, 465 00:22:08,600 --> 00:22:11,520 Speaker 4: they're earning much higher interest on their deposits in the bank, 466 00:22:11,800 --> 00:22:14,720 Speaker 4: so it's ended up being much softer the blow of 467 00:22:14,800 --> 00:22:18,320 Speaker 4: higher interest rates. But I think the fiscal shock in 468 00:22:18,359 --> 00:22:21,159 Speaker 4: some way, which is so much bigger than what anybody 469 00:22:21,240 --> 00:22:23,680 Speaker 4: had in their models a year ago, is the main 470 00:22:23,760 --> 00:22:27,120 Speaker 4: reason why the US economy has done far better than 471 00:22:27,119 --> 00:22:30,600 Speaker 4: what people expected. The only problem is this that you've 472 00:22:30,640 --> 00:22:35,280 Speaker 4: done this once again by financing it by loads loads 473 00:22:35,320 --> 00:22:38,000 Speaker 4: of debt. The bond market is beginning to sort of 474 00:22:38,040 --> 00:22:40,840 Speaker 4: get troubled by the amount of supply that's coming their way, 475 00:22:41,280 --> 00:22:44,840 Speaker 4: leading to even higher interest rates, and then this fiscal 476 00:22:44,840 --> 00:22:48,080 Speaker 4: stimulus is bound to fade also because some of the 477 00:22:48,160 --> 00:22:51,119 Speaker 4: stimulus is that some of these pandemic programs that we 478 00:22:51,200 --> 00:22:53,560 Speaker 4: had were still rolling on. 479 00:22:53,720 --> 00:22:56,080 Speaker 1: But it's not just the bond market. It's paying attention. 480 00:22:56,600 --> 00:22:59,360 Speaker 1: Certain members of Congress are as well. As we're proceeding 481 00:22:59,359 --> 00:23:03,040 Speaker 1: towards shutting down the government because of that issue. What 482 00:23:03,160 --> 00:23:05,480 Speaker 1: does that portend for the US economy? 483 00:23:05,800 --> 00:23:08,080 Speaker 4: But it is an actual shutdown obviously, sort of it 484 00:23:08,119 --> 00:23:10,760 Speaker 4: begins to detract from growth. But I think that so 485 00:23:10,880 --> 00:23:13,160 Speaker 4: far most people think that the impact will be rather 486 00:23:13,280 --> 00:23:16,840 Speaker 4: modest and the worst will be averted. But every week 487 00:23:16,880 --> 00:23:20,160 Speaker 4: that we have the shutdown, it will obviously have an impact. 488 00:23:20,560 --> 00:23:22,320 Speaker 4: The issue here is that no one is doing this 489 00:23:22,400 --> 00:23:24,760 Speaker 4: on any great principled way, which is the fact that, 490 00:23:24,800 --> 00:23:27,159 Speaker 4: as we have discussed in the past, that if you 491 00:23:27,160 --> 00:23:29,920 Speaker 4: look at the last fifty years, the US has run 492 00:23:29,960 --> 00:23:33,960 Speaker 4: a budget deficit practically every year in the last fifty years, 493 00:23:34,200 --> 00:23:38,080 Speaker 4: no matter if you've had a Republican or a Democrat president, 494 00:23:38,240 --> 00:23:42,119 Speaker 4: or whoever's been in Congress. And that's what's happened that 495 00:23:42,240 --> 00:23:44,960 Speaker 4: because for fifty years we have run these deficits, the 496 00:23:45,080 --> 00:23:47,840 Speaker 4: attitude has come to be of policy makers that deficits 497 00:23:47,880 --> 00:23:48,520 Speaker 4: don't matter. 498 00:23:48,800 --> 00:23:50,880 Speaker 1: In one of the changes has been the interest rate. 499 00:23:51,440 --> 00:23:53,800 Speaker 1: If you go back two years, four years, five years, 500 00:23:53,800 --> 00:23:56,200 Speaker 1: we were told by policymakers, don't worry so much about 501 00:23:56,200 --> 00:23:58,560 Speaker 1: the deficit. It doesn't really matter, as you say, because 502 00:23:58,600 --> 00:24:00,960 Speaker 1: interest rates are essentially zero or very close to it. 503 00:24:01,000 --> 00:24:03,399 Speaker 1: They're not zero anymore. So what does that start to 504 00:24:03,440 --> 00:24:06,280 Speaker 1: do about US expenditures and our budget if we have 505 00:24:06,359 --> 00:24:08,199 Speaker 1: to have that large a debt service. 506 00:24:08,600 --> 00:24:10,359 Speaker 4: I think at some point in time it's going to 507 00:24:10,359 --> 00:24:14,520 Speaker 4: start to impair other spending, including social spending, because this 508 00:24:14,600 --> 00:24:16,280 Speaker 4: cost is going to go up and up, right, that's 509 00:24:16,280 --> 00:24:18,400 Speaker 4: what the bond market is currently pricing in that we're 510 00:24:18,400 --> 00:24:21,320 Speaker 4: going to have rates for higher for much longer. So 511 00:24:21,520 --> 00:24:24,640 Speaker 4: at some point in time then that begins to eat 512 00:24:24,720 --> 00:24:29,200 Speaker 4: up a significant part of the total budget. And if 513 00:24:29,240 --> 00:24:31,560 Speaker 4: you look at the cross sectional evidence of what happened 514 00:24:31,560 --> 00:24:35,440 Speaker 4: in other countries, once interest payments is a share of 515 00:24:36,320 --> 00:24:40,360 Speaker 4: the total budget exceed a particular amount, then the pressure 516 00:24:40,720 --> 00:24:44,240 Speaker 4: comes on to cut social programs. As I said, the 517 00:24:44,280 --> 00:24:49,359 Speaker 4: central question here is this, when do international investors say 518 00:24:49,480 --> 00:24:53,440 Speaker 4: enough is enough and they stop funding this kind of deficit. 519 00:24:53,520 --> 00:24:56,080 Speaker 4: We haven't quite reached the point as yet because the 520 00:24:56,160 --> 00:25:01,400 Speaker 4: dollar is still relatively strong. At some point in time, 521 00:25:01,440 --> 00:25:04,040 Speaker 4: I think we could reach that point, and that's when 522 00:25:04,080 --> 00:25:05,879 Speaker 4: it really begins to count. Is for the US is 523 00:25:05,920 --> 00:25:09,119 Speaker 4: concerned that you can't run budget deficits of six percent 524 00:25:09,160 --> 00:25:12,280 Speaker 4: of GDP every year and have a current account deficit, 525 00:25:12,840 --> 00:25:14,639 Speaker 4: you know, which is three or four percent of GDP 526 00:25:14,720 --> 00:25:18,399 Speaker 4: a year, a twin deficit of ten percent of GDP 527 00:25:18,520 --> 00:25:21,000 Speaker 4: a year. At some point in time, maybe much sooner 528 00:25:21,040 --> 00:25:23,000 Speaker 4: than we think that will begin to count Rushia. 529 00:25:23,040 --> 00:25:25,119 Speaker 1: There's a follow one question I think too, when do 530 00:25:25,200 --> 00:25:28,240 Speaker 1: investors stop funding that, which is, if they're not putting 531 00:25:28,240 --> 00:25:30,720 Speaker 1: the money into US treasurers, where are they putting the money? 532 00:25:30,800 --> 00:25:33,800 Speaker 1: If you look around the world right now, some prospects 533 00:25:33,840 --> 00:25:36,159 Speaker 1: such as China for example, does not seem to be 534 00:25:36,200 --> 00:25:38,840 Speaker 1: as attractive a place for foreign direct investment. So where 535 00:25:38,840 --> 00:25:41,120 Speaker 1: does the money go if it doesn't come into US treasurers? 536 00:25:41,480 --> 00:25:45,320 Speaker 4: Well, that's what's really helping the US that it continues 537 00:25:45,359 --> 00:25:48,480 Speaker 4: to be perceived as the best house in a bad neighborhood, 538 00:25:48,520 --> 00:25:53,119 Speaker 4: right because you got in terms of China in trouble Europe, 539 00:25:53,640 --> 00:25:58,280 Speaker 4: the perennial problem child of the global economy, Like it's 540 00:25:58,320 --> 00:26:00,960 Speaker 4: the first country to sort of enter ric possibly even 541 00:26:00,960 --> 00:26:05,640 Speaker 4: in this cycle. So I think that you seeing some 542 00:26:06,080 --> 00:26:08,479 Speaker 4: other signs of life and other places like Japan is 543 00:26:08,480 --> 00:26:12,080 Speaker 4: doing you know, much better, It's done much better this year. 544 00:26:12,359 --> 00:26:14,840 Speaker 4: I think some of the emerging markets outside of China 545 00:26:15,240 --> 00:26:19,400 Speaker 4: have done relatively well. These include places like India, include 546 00:26:19,440 --> 00:26:23,919 Speaker 4: places like Indonesia, Mexico, Brazil, and even some places in 547 00:26:23,960 --> 00:26:27,800 Speaker 4: Eastern Europe like Greece and even Poland. These countries have 548 00:26:27,880 --> 00:26:31,680 Speaker 4: done well. Still relatively small to absorb too much capital. 549 00:26:32,000 --> 00:26:34,400 Speaker 4: But you can see that this sort of new era 550 00:26:34,760 --> 00:26:37,960 Speaker 4: is beginning. It takes a while, you know, for this 551 00:26:38,040 --> 00:26:40,480 Speaker 4: to happen, but I think that that there will be 552 00:26:40,520 --> 00:26:43,800 Speaker 4: a times pretty so I think soon this decade when 553 00:26:43,800 --> 00:26:47,080 Speaker 4: you will see a much better environment for international investing 554 00:26:47,080 --> 00:26:51,639 Speaker 4: because the dollar stops appreciating. Currently, the dollar keeps reacting 555 00:26:51,640 --> 00:26:54,359 Speaker 4: to the fact that years are going higher, so it's like, okay, 556 00:26:54,600 --> 00:26:57,120 Speaker 4: we must bid the dollar higher. Having said that, it's 557 00:26:57,160 --> 00:26:59,320 Speaker 4: very it's quite interesting that even though the perception is 558 00:26:59,320 --> 00:27:02,280 Speaker 4: that the dollar is the appreciating compared to the increase 559 00:27:02,320 --> 00:27:05,400 Speaker 4: in yields that's taken place, the dollar hasn't gone up 560 00:27:05,600 --> 00:27:08,760 Speaker 4: that much this time. The dollar is still well below 561 00:27:09,200 --> 00:27:12,440 Speaker 4: the highs it hit in September October of last year. 562 00:27:12,520 --> 00:27:14,040 Speaker 4: If you look at the DXY. 563 00:27:13,920 --> 00:27:16,200 Speaker 1: Well, investors start to look for other places to put 564 00:27:16,240 --> 00:27:21,000 Speaker 1: the money. As you say, for example, India, Japan, Indonesia, 565 00:27:21,520 --> 00:27:24,639 Speaker 1: places like that. Often you get into geopolitical questions. Not 566 00:27:24,680 --> 00:27:28,199 Speaker 1: so much in Japan, but certainly Vietnam is an example 567 00:27:28,240 --> 00:27:32,280 Speaker 1: where that's true. And India we've talked about before. Is 568 00:27:32,760 --> 00:27:34,960 Speaker 1: moti getting is act together as a word to make 569 00:27:35,080 --> 00:27:37,440 Speaker 1: India a more attractive place for forid director investment. In 570 00:27:37,480 --> 00:27:40,200 Speaker 1: the past, you've expressed list of some questions about that. 571 00:27:40,359 --> 00:27:42,560 Speaker 4: Yeah, I think like in India's case, the entire issue 572 00:27:42,600 --> 00:27:45,400 Speaker 4: is that there's still a very strong socialist DNA no 573 00:27:45,440 --> 00:27:48,119 Speaker 4: matter which government is in power. Having said that, in India, 574 00:27:48,119 --> 00:27:51,480 Speaker 4: we've seen some pretty significant revolutions that have taken place, 575 00:27:51,520 --> 00:27:54,679 Speaker 4: the entire digital revolution that's taken place in India. I 576 00:27:54,680 --> 00:27:58,080 Speaker 4: think that's very significant in terms of how it's benefiting 577 00:27:58,119 --> 00:28:01,240 Speaker 4: people out there, and how even welfare programs are now 578 00:28:01,280 --> 00:28:04,359 Speaker 4: reaching the people in a more significant way. And just 579 00:28:04,400 --> 00:28:07,359 Speaker 4: the fact that India in terms of currently is seen 580 00:28:07,520 --> 00:28:10,440 Speaker 4: as the one large emerging market where you can heage 581 00:28:10,440 --> 00:28:13,800 Speaker 4: your bit rather than be in China sort of really 582 00:28:14,000 --> 00:28:17,359 Speaker 4: helps India a lot out here. The only issue with India, 583 00:28:17,400 --> 00:28:19,080 Speaker 4: but this has always been an issue with that it's 584 00:28:19,080 --> 00:28:20,640 Speaker 4: the most expensive. 585 00:28:20,359 --> 00:28:21,160 Speaker 1: Market in the world. 586 00:28:21,240 --> 00:28:25,000 Speaker 4: Just now, if we just we fret about the multiples 587 00:28:25,000 --> 00:28:29,240 Speaker 4: of the US market being high, India's at a twenty 588 00:28:29,240 --> 00:28:32,200 Speaker 4: percent premium to even the US market, which is arguably 589 00:28:32,240 --> 00:28:35,480 Speaker 4: the most expensive market in the developed world. So I 590 00:28:35,520 --> 00:28:37,560 Speaker 4: think that the only issue is that expectations out of 591 00:28:37,560 --> 00:28:41,160 Speaker 4: India are very high. But the fundamental Indian story, driven 592 00:28:41,240 --> 00:28:47,240 Speaker 4: by digitization, demographics and geography, I think is still very strong. 593 00:28:47,560 --> 00:28:49,440 Speaker 1: Sure's always so good to have you with us. Thank 594 00:28:49,440 --> 00:28:52,560 Speaker 1: you so much, that's for sure. Sharma of Rockefeller International 595 00:28:54,320 --> 00:28:56,880 Speaker 1: coming up. Sometimes is not just the other side you 596 00:28:56,920 --> 00:28:59,440 Speaker 1: have to worry about. The bullets may be coming. 597 00:28:59,200 --> 00:28:59,960 Speaker 8: From your own troop. 598 00:29:01,840 --> 00:29:03,920 Speaker 1: This is Wall Street Week on Bloomberg. 599 00:29:05,760 --> 00:29:09,920 Speaker 2: This is Bloomberg Wall Street Week with David Weston from 600 00:29:10,080 --> 00:29:11,160 Speaker 2: Bloomberg Radio. 601 00:29:11,760 --> 00:29:14,040 Speaker 1: We asked our international economics and policy course, but I'm 602 00:29:14,040 --> 00:29:16,480 Speaker 1: Michael McKee to look back at other times when the 603 00:29:16,480 --> 00:29:19,560 Speaker 1: government moved to shut down and what the consequences were. 604 00:29:20,520 --> 00:29:23,120 Speaker 7: Mister Rukaiser was worried about the fight over a six 605 00:29:23,240 --> 00:29:26,480 Speaker 7: hundred ninety five billion dollar budget. The budget they're fighting 606 00:29:26,520 --> 00:29:29,200 Speaker 7: over up on Capitol Hill today is six point nine 607 00:29:29,520 --> 00:29:33,680 Speaker 7: trillion dollars, ten times bigger. Does that worry Wall Street? Well, 608 00:29:33,720 --> 00:29:37,080 Speaker 7: not so much. Shutdowns have become an almost regular thing, 609 00:29:37,240 --> 00:29:40,640 Speaker 7: with twenty since nineteen seventy seven. Most of them have 610 00:29:40,720 --> 00:29:42,840 Speaker 7: lasted only a couple of days, but even the two 611 00:29:42,880 --> 00:29:46,440 Speaker 7: longest in nineteen ninety five in twenty eighteen produced only 612 00:29:46,520 --> 00:29:49,240 Speaker 7: a yawn in the markets a brief dip and then 613 00:29:49,280 --> 00:29:52,880 Speaker 7: a gain for stocks, So you might well ask, what's 614 00:29:52,880 --> 00:29:56,720 Speaker 7: one more and you'd be right unless, well, here's what 615 00:29:56,760 --> 00:30:00,240 Speaker 7: could go wrong first, and lets say this shutdown would 616 00:30:00,280 --> 00:30:03,560 Speaker 7: last a lot longer. It's not a fight between Democrats 617 00:30:03,600 --> 00:30:08,320 Speaker 7: and Republicans, but between Republicans and republicans first, until they 618 00:30:08,360 --> 00:30:11,560 Speaker 7: can agree. They can't even begin to fight with Democrats. 619 00:30:12,200 --> 00:30:14,760 Speaker 7: While the government is in what the Congressional Budget Office 620 00:30:14,840 --> 00:30:19,520 Speaker 7: euphemistically calls a funding gap, roughly three million federal workers 621 00:30:19,560 --> 00:30:22,280 Speaker 7: won't be paid. Many of them, including more than a 622 00:30:22,440 --> 00:30:25,960 Speaker 7: million servicemen and women, will still have to work, but 623 00:30:26,120 --> 00:30:29,880 Speaker 7: for free. Normally, it's a problem for those workers that 624 00:30:30,040 --> 00:30:32,840 Speaker 7: is solved when the shutdown ends and they get back paid. 625 00:30:33,120 --> 00:30:34,800 Speaker 7: But if this goes on for a month or so, 626 00:30:35,360 --> 00:30:39,480 Speaker 7: it will affect consumer spending. While so far shutdowns have 627 00:30:39,600 --> 00:30:42,680 Speaker 7: not hurt overall confidence in the economy, a long one 628 00:30:42,880 --> 00:30:45,720 Speaker 7: might just do that. You can't see any of the 629 00:30:45,760 --> 00:30:49,480 Speaker 7: other prior incidents in GDP, but there's a recession risk 630 00:30:49,560 --> 00:30:53,960 Speaker 7: in a fragile economy these days. Also, a short shutdown 631 00:30:54,040 --> 00:30:56,719 Speaker 7: won't affect the FED, which will be open, but a 632 00:30:56,760 --> 00:31:00,600 Speaker 7: long one, although the economic data for September have been collected, 633 00:31:00,880 --> 00:31:03,160 Speaker 7: the numbers can't be released if no one is there 634 00:31:03,200 --> 00:31:06,040 Speaker 7: to release them. We may not have data on jobs 635 00:31:06,200 --> 00:31:09,440 Speaker 7: or inflation before the next FED meeting on November first. 636 00:31:09,840 --> 00:31:12,840 Speaker 7: Even worse, if the shutdown were to last through October 637 00:31:12,960 --> 00:31:16,160 Speaker 7: or god forbid November, a lot of data won't even 638 00:31:16,200 --> 00:31:19,880 Speaker 7: be collected. Or, as one observer put it, how do 639 00:31:19,960 --> 00:31:24,040 Speaker 7: you achieve a soft landing if the pilots are blind David. 640 00:31:25,680 --> 00:31:29,840 Speaker 1: Thanks to Bloomberg's Michael McKee, friendly fire would hurt just 641 00:31:29,920 --> 00:31:32,960 Speaker 1: as bad as enemy fire, so wrote Tom Clancy in 642 00:31:33,040 --> 00:31:36,720 Speaker 1: his novel Locked On, and history has plenty of examples, 643 00:31:36,880 --> 00:31:40,120 Speaker 1: like Robert E. Lee losing his best General Stonewall Jackson, 644 00:31:40,320 --> 00:31:43,040 Speaker 1: shot by his own troops when returning to his lines 645 00:31:43,080 --> 00:31:46,600 Speaker 1: after a nighttime reconnaissance mission during the Battle of Chancellorsville, 646 00:31:46,640 --> 00:31:49,720 Speaker 1: And who can forget when someone at City mistakenly sent 647 00:31:49,920 --> 00:31:54,000 Speaker 1: nine hundred million dollars to Revlon creditors and spent years 648 00:31:54,040 --> 00:31:56,720 Speaker 1: suing to get it back. This week we had two 649 00:31:56,760 --> 00:31:59,920 Speaker 1: more examples of just how painful friendly fire can be. 650 00:32:00,320 --> 00:32:03,720 Speaker 1: The Canadian Parliament invited President Zelensky Ukraine to Ottawa to 651 00:32:03,760 --> 00:32:06,680 Speaker 1: speak in its August Chamber and the Speaker of the 652 00:32:06,680 --> 00:32:09,360 Speaker 1: House of Commons took the occasion to honor a constituent, 653 00:32:09,640 --> 00:32:12,160 Speaker 1: a ninety eight year old from Ukraine who had become 654 00:32:12,160 --> 00:32:15,480 Speaker 1: a Canadian citizen, someone the Speaker termed a hero of 655 00:32:15,520 --> 00:32:19,320 Speaker 1: both Ukraine and Canada. Unfortunately, he turned out to have 656 00:32:19,320 --> 00:32:22,160 Speaker 1: been a hero for the wrong side, having served in 657 00:32:22,200 --> 00:32:25,400 Speaker 1: a Nazi SS unit in World War II. The leader 658 00:32:25,400 --> 00:32:27,880 Speaker 1: of the Opposition blamed Prime Minister Justin Trudeau. 659 00:32:28,200 --> 00:32:31,240 Speaker 8: Prime Minister is responsible. He is in Ottawa today. 660 00:32:31,280 --> 00:32:34,000 Speaker 1: He can get on his feet and answer for his 661 00:32:34,320 --> 00:32:41,480 Speaker 1: massive diplomatic embarrassment and shame. And the Prime Minister duly apologized. 662 00:32:41,680 --> 00:32:46,640 Speaker 12: The Speaker has acknowledged his mistake and has apologized. But 663 00:32:46,720 --> 00:32:49,720 Speaker 12: this is something that is deeply embarrassing to the Parliament 664 00:32:49,720 --> 00:32:52,880 Speaker 12: of Canada and by extension, to all Canadians. 665 00:32:52,520 --> 00:32:55,520 Speaker 1: Turning what should have been an important and uplifting moment 666 00:32:55,560 --> 00:32:58,080 Speaker 1: for a Prime minister, who after all, has other problems 667 00:32:58,080 --> 00:33:00,959 Speaker 1: to address, into something far from what he wanted it 668 00:33:01,000 --> 00:33:03,360 Speaker 1: to be. And then there's the case of the United 669 00:33:03,360 --> 00:33:06,520 Speaker 1: States senator keeping his savings at home. Majority of leader 670 00:33:06,560 --> 00:33:09,440 Speaker 1: Chuck Schumer already had his hands full. What was trying 671 00:33:09,440 --> 00:33:11,840 Speaker 1: to keep the government funded and trying to hold on 672 00:33:11,880 --> 00:33:15,040 Speaker 1: to his very slim Democratic majority. But this week, the 673 00:33:15,080 --> 00:33:18,160 Speaker 1: majority leader learned that one of the senior members of 674 00:33:18,200 --> 00:33:21,560 Speaker 1: his team, Senator Robert Menendez of New Jersey, the chair 675 00:33:21,640 --> 00:33:24,640 Speaker 1: of the Foreign Relations Committee, had been caught with four 676 00:33:24,720 --> 00:33:27,840 Speaker 1: hundred and eighty six thousand dollars in cash along with 677 00:33:27,920 --> 00:33:30,920 Speaker 1: some gold bars in his house, with a cash stuffed 678 00:33:30,920 --> 00:33:34,520 Speaker 1: into various items of his clothing. Senator Menendez was promptly 679 00:33:34,520 --> 00:33:38,240 Speaker 1: indicted for bribery, leading his own Democratic colleagues to call 680 00:33:38,280 --> 00:33:41,120 Speaker 1: for him to step down, though Senator Mendez doesn't seem 681 00:33:41,120 --> 00:33:44,880 Speaker 1: inclined to take their advice. But as we've learned, you 682 00:33:44,920 --> 00:33:46,280 Speaker 1: know this is never about the gold. 683 00:33:46,320 --> 00:33:49,040 Speaker 8: Whatever helps you sleep a night, sweetheart, that does it. 684 00:33:49,080 --> 00:33:51,240 Speaker 1: For this episode of Wall Street Week, I'm David Weston. 685 00:33:51,240 --> 00:33:54,680 Speaker 1: This is Bloomberg. See you next week.