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Speaker 1: This is Bloomberg Wall Street Week. We turn our attention

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Speaker 1: to the markets this week. U S CPI members reinforcing

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Speaker 1: concerns about inflation. The financial stories that chief are worth

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Speaker 1: a really different reaction to mark its more indications of

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Speaker 1: just how hot the U s economy really is. Through

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Speaker 1: the eyes of the most influential voices. Larry Summers, the

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Speaker 1: former Treatory Secretary, Katherine Keening, CEO of the n Y

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Speaker 1: mallin Sam's l Sharmon and founder of Equatic Group Investment.

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Speaker 1: In Bloomberg Wall Street Week with David Weston from Bloomberg Radio.

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Speaker 1: Cooperation with Europe, competition with China, and conflict with Russia.

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Speaker 1: But it always comes back to inflation one way or another.

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Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. This

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Speaker 1: week special contributor Larry Summers of Harvard on how close

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Speaker 1: we may be to a recession here in the United States.

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Speaker 1: I think the risks of a two recession are significantly

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Speaker 1: higher than I would have judged uh six or nine

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Speaker 1: weeks ago. And Deborah Lair of Edelman Global Advisory on

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Speaker 1: just how much China has changed in the twenty five

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Speaker 1: years since it took back Hong Kong. We've come a

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Speaker 1: long way as they've built a world class legal system

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Speaker 1: and trade systems. Much of the week was consumed with

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Speaker 1: global events, as President Biden traveled to Germany to try

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Speaker 1: to persuade other leaders of the G seven, like French

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Speaker 1: President Makron, that they should live at how much the

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Speaker 1: world pays for Russian oil in Our ministers will continue

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Speaker 1: following the initiative of the United States to work so

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Speaker 1: that such a ceiling can exist by applying the broadest

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Speaker 1: possible alliance of buyers. And then moved on to Madrid

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Speaker 1: to work with Turkey to admit Sweden and Finland into

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Speaker 1: the NATO Alliance. It's been historic twenty four hours here

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Speaker 1: in Madrid as Natal leaders gathered. Turkish President it Urduan

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Speaker 1: has lifted his objections for Finland and Sweden to join

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Speaker 1: the NATO Alliance. We looked to Europe even for the

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Speaker 1: latest on the FED, where Chair j Powell appeared at

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Speaker 1: CenTra with other central bankers and reaffirmed his commitment to

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Speaker 1: beat inflation no matter the risk. We're very strongly committed

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Speaker 1: to using our tools to get inflation to come down.

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Speaker 1: The way to do that is to slow down growth,

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Speaker 1: ideally keep it positive. Is there a risk that we

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Speaker 1: would go too far? Certainly there's a risk, but I

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Speaker 1: wouldn't agree that it's the biggest risk to the economy.

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Speaker 1: And just as things wound down in Europe, they moved

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Speaker 1: on to Hong Kong, where President g traveled outside mainland

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Speaker 1: China for the first time at eight hundred ninety three

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Speaker 1: days to celebrate the twenty anniversary of the handover from Britain.

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Speaker 1: Fog Don hung Jin. Hong Kong enjoys a unique position,

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Speaker 1: favorable conditions and broad space for development. The central authorities

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Speaker 1: fully support Hong Kong and seizing the historic opportunities presented

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Speaker 1: by our country's development. But Washington wasn't left without its

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Speaker 1: own fair share of drama this week, as a former

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Speaker 1: aide to President Trump's chief of staff gave dramatic testimony

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Speaker 1: about Mr Trump's reported willingness to let the mob gather

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Speaker 1: on January six, even if they did have weapons, housing

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Speaker 1: the dicinity of a conversation where I overheard the President

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Speaker 1: say something to the effective you know, I don't even

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Speaker 1: care that they have weapons. They're not here to hurt me.

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Speaker 1: But with all that was going on around the world.

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Speaker 1: In the end, it came back to inflation and the

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Speaker 1: economy and growing fears of recession. For the week, the

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Speaker 1: equity markets were down, with the SMP off over two

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Speaker 1: percent since Monday and the NASDACK down over four and

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Speaker 1: that was after a rally on Friday while bonds were

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Speaker 1: being bought, leaving the yield on the ten year under

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Speaker 1: two point nine, down five basis points. But the bigger

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Speaker 1: story of the week ended on Thursday, the close of

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Speaker 1: the first half, which ended up being the worst for

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Speaker 1: the equity market since nineteen sixty two and the worst

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Speaker 1: for ten year treasuries since Get this, they were first

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Speaker 1: sold back in seven teen eight. Here they help us

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Speaker 1: sort it all out. Our Jillian Tet, Financial Times editor

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Speaker 1: at Large and US Editorial board chair, and Peter Krause,

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Speaker 1: chairman and CEO of Aperture Investors. Julian, let me start

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Speaker 1: with you, actually and what we saw in the markets.

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Speaker 1: What's driving the markets from your perspective right now, Well,

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Speaker 1: the best way to make sense of the equity markets

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Speaker 1: is to recognize that a month ago investors had a

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Speaker 1: nasty shock when they realize that rates were going up.

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Speaker 1: You know, the inflation numbers have beencoming much higher than expected,

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Speaker 1: and the fat has really accelerated. What we're seeing today, though,

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Speaker 1: is an investor realizing the earnings are being hurt by

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Speaker 1: the underlying economic slowdown, and that is really when they're

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Speaker 1: starting to drag on people as they worry not just

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Speaker 1: about inflation but sac inflation. The combination of price growth

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Speaker 1: and slowing sorry, price increases and slowing growth. Then, frankly,

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Speaker 1: we've not seen in the nineteen seventies. So, Peter, the

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Speaker 1: question I really wants to know is how bad is

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Speaker 1: it going to get? How far are we into this decline?

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Speaker 1: In your judgment, I think there's two answers to that.

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Speaker 1: One is how far the markets down into their ultimate

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Speaker 1: decline and how far are we, from an economic point

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Speaker 1: of view, into slowing growth slash recession. I think on

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Speaker 1: the former point, we're probably two thirds are a little

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Speaker 1: bit more of the way to a bottom. In financial markets,

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Speaker 1: it's likely there's another ten percent and equity markets find

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Speaker 1: markets perhaps a little closer to their natier. But we're

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Speaker 1: going to continue to have that volatility until there is

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Speaker 1: some clarity regarding how much the FED is going to

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Speaker 1: raise rates, because that really is what investors as Jillian

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Speaker 1: points out, are watching as it relates to the economy itself.

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Speaker 1: I think it is a good argument that we're already

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Speaker 1: either entering a recession or in a recession. Manufacturing activity

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Speaker 1: has dropped significantly. We've seen leading indicators also decline. We've

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Speaker 1: seen consumption activity fall, and CEOs are beginning to predict

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Speaker 1: that the second half of their economic activity to their

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Speaker 1: companies is going to be a lot lower. So, Jillian,

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Speaker 1: what about that We pick one of the things that

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Speaker 1: Peter talked about it, and that is consumption numbers. We

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Speaker 1: had personal consumption numbers are really softened in the United

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Speaker 1: States this week, and also of course we have the

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Speaker 1: consumer confidence numbers which are softening as well. That is

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Speaker 1: a big driver, as we all know of the U

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Speaker 1: S economy. How big a risk is that at this

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Speaker 1: point for the US economy, Well, there are two or

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Speaker 1: three factors right now whichuld make it incredibly hard to

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Speaker 1: work out what's going on. One is the fact that yes,

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Speaker 1: you're seeing a real loss of consumer competence, really quite

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Speaker 1: staggering decline and consumer confidence. And that kind of makes

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Speaker 1: sense given the scale of price shock and inflation shock.

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Speaker 1: But something that we haven't really seen before in previous

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Speaker 1: economic cycles. Is that a lot of consumers are sitting

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Speaker 1: on fat cushions of savings compared to the thought past

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Speaker 1: because of the fiscal stimulus. Jillian Ted and Peter Kraus

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Speaker 1: will be staying with us as we get some investment

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Speaker 1: advice in these turbulent times. That's gonna have the next

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Speaker 1: watter releasing Hun Bloomberg. This is Bloomberg Wall Street Week

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Speaker 1: with David Weston from Bloomberg Radio. Let's take some time

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Speaker 1: out to go traveling, not the camel route to Iraq,

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Speaker 1: but the financial route to a buck. Not only does

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Speaker 1: the dollar to buy less at the supermarket than it

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Speaker 1: used to, it also buys less in terms of other

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Speaker 1: currencies than it did ten years ago, a period that

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Speaker 1: has included two official devaluations of the dollar. That of

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Speaker 1: course is Lewis Rohaiser on Wall Street Gate that was

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Speaker 1: back in and once again that buck is buying less

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Speaker 1: at the supermarket, but it sure isn't buying less in

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Speaker 1: terms of foreign exchange. Peter Cress of Aperture Investors and

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Speaker 1: Jillian Ted. If the financial times are still with us,

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Speaker 1: so Peter, it's hard to know where the markets are

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Speaker 1: going but the one thing I think we can say

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Speaker 1: is they are turbulent. In these turbulent times, where do

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Speaker 1: you put your bucks at this point, where does it

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Speaker 1: make sense? Well, look, you're not gonna be able to

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Speaker 1: put your money anywhere that is going to be unaffected

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Speaker 1: by the volatility. So if the objective is find someplace

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Speaker 1: to invest where you don't have volatility, that's the zero

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Speaker 1: sum game. On the other hand, equities will go up

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Speaker 1: over time and credit has gotten a lot cheaper, and

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Speaker 1: so if you're looking for incremental places to invest, even

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Speaker 1: large institutional investors, you have to be beginning to look

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Speaker 1: at putting some money back into the equity markets they're

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Speaker 1: down thirty plus percent, and some money into the fixed

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Speaker 1: income markets because spreads have moved out pretty dramatically. But

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Speaker 1: you're not gonna be able to do that without volatility,

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Speaker 1: and you're not gonna able to do that with probably

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Speaker 1: without additional draw downs. So you need to be cautious

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Speaker 1: about how much you've commit well, and Julie, I wonder

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Speaker 1: if you're you're gonna be able to do without additional risk.

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Speaker 1: I mean, Peter says that credit is cheaper now, it's

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Speaker 1: a better buy. You can get better returns. There may

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Speaker 1: be a reason for that. What is the risk of defaults?

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Speaker 1: We haven't had defaults in a while now, Well, we're

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Speaker 1: going incredibly retro in all kinds of ways right now. Um.

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Speaker 1: You haven't yet got the sideburns unfortunately, David. But I

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Speaker 1: hope we hear that soon of your former host. Um.

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Speaker 1: But you know, one of the things that investors have

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Speaker 1: not had to worry about for a very long time

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Speaker 1: our corporate defaults UM and risks in the high yield market. Um,

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Speaker 1: we're still not seeing that. The default rate right now

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Speaker 1: is incredibly low, UM, in spite of all the falls

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Speaker 1: from the equity market and concern about recession. But what

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Speaker 1: you're seeing a number of bankers and lawyers and others

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Speaker 1: talk about is a likelihood that as rates keep going up, UM,

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Speaker 1: we're going to start to see more and more pressure

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Speaker 1: on risky companies. Now, it's hard to predict exactly when

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Speaker 1: that is going to strike because most risky companies, most

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Speaker 1: high yield companies, or leverage loans have been essentially refinancing

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Speaker 1: themselves or locked in financing for quite a while. So

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Speaker 1: it really only begin to bite when the refinancings come up. Um,

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Speaker 1: and that's a sort of staggered timetail because each company

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Speaker 1: is different. But when you do see those refinancing occurs,

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Speaker 1: you can because see the very nasty shock for investors,

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Speaker 1: and you're he seeing the high yield bond market react

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Speaker 1: to that. But in some ways that's the clearest part

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Speaker 1: of the markets where you've actually seen a reaction to

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Speaker 1: the tightening of the quid deconditions. So that is absolutely

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Speaker 1: something that in bestor should be looking too in the

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Speaker 1: next year or so as one of the big risks

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Speaker 1: that are waiting us all. Peter, I wonder if we're

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Speaker 1: getting an accurate read full on the full market right

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Speaker 1: now in this sense, I'm back, by the way, I

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Speaker 1: was just starting law school. I did have sideburns. For

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Speaker 1: the record, they were quite as well, but I did

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Speaker 1: have them. But one different thing. It's actually I'll try

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Speaker 1: to bring it back. I did be a lot whiter

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Speaker 1: that now. But but Peter, I wonder one of the

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Speaker 1: changes that we've seen since nineteen five is how much

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Speaker 1: the markets are private rather than public. We said, a

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Speaker 1: big shift, and I wonder whether we really are getting

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Speaker 1: an accurate read on all that private capital. No, we

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Speaker 1: are not, By the way. I never had good sideburns.

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Speaker 1: That's why I went with a beard. But with regards

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Speaker 1: to the private markets, I think that that is a

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Speaker 1: serious problem, meaning that we know for a fact the

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Speaker 1: private markets flag public market valuations. But it's also a

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Speaker 1: fact that the assets owned in private hands are also

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Speaker 1: being affected by this market change. You cannot have this

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Speaker 1: change in the interest rate construct that I spoke about

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Speaker 1: briefly before without affecting values. So private equity assets are

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Speaker 1: going to decline in value. I've already gone down in

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Speaker 1: value but haven't yet been adjusted. And those adjustments, when

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Speaker 1: they occur, are going to cause stress for investors. In

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Speaker 1: some cases, they could cause liquidity issues. In some cases

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Speaker 1: they may actually make raising additional capital much more challenging,

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Speaker 1: and in some cases that could cause defaults and ultimate bankruptcies.

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Speaker 1: So that that whole private credit and private equity sector

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Speaker 1: is a place where we need to be focused on

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Speaker 1: risk rising substantially and potential stress coming from a mark

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Speaker 1: to market of those assets, Julian, these days we can't

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Speaker 1: have a real conversation with investing without talking about China

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Speaker 1: in one way or another. Of course, we have the

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Speaker 1: anniversary anniversary they hand over is China a place that's

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Speaker 1: attractive potentially for investors because they're going the other direction

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Speaker 1: from the United States and much of the West. We're tightening,

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Speaker 1: they're actually loostening. Well. Absolutely, China is something of an

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Speaker 1: enigma in many ways because yes, they are going in

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Speaker 1: the opposite direction from most other markets right now in

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Speaker 1: terms of loosening. There is great pressure on President G

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Speaker 1: to ensure that he tries to hit the GDP growth

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Speaker 1: targets because he has the all important Party Congress later

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Speaker 1: on this year. Um, and all the signs are that,

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Speaker 1: because of the COVID lockdowns, are in danger of missing

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Speaker 1: the growth targets. So President G has every incentive to

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Speaker 1: try and stimulate the economy going forward in the coming months. Um.

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Speaker 1: The problem that really is two or threefold. Firstly, we

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Speaker 1: don't know how China will respond if there are more

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Speaker 1: COVID outbreaks. Peter, what about it. You've had a career

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Speaker 1: now investing your money and other people's money is at a

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Speaker 1: a place where we should be putting the money right

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Speaker 1: now into China. Can't be sure China right now, just can't.

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Speaker 1: Being long China is a challenge for sure, But being short,

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Speaker 1: I think is a is a very big risk. Look,

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Speaker 1: I also think investors are somewhat circumspect about the motivations

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Speaker 1: of the government with regards to the external investor. How

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Speaker 1: will they treat the bond investors? How are they going

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Speaker 1: to treat equity investors? Visa the regulation and changes to

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Speaker 1: companies inside of China that were thought early to be

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Speaker 1: leaders and real growers. Those those issues still remain. But

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Speaker 1: China is a huge market, very strong economy. When it

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Speaker 1: starts to grow, it will come back, COVID will get resolved,

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Speaker 1: and it's still it. China is still provides significant exports

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Speaker 1: to the world and buys significant imports. What about Europe, Well,

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Speaker 1: Europe as ever is a very mix. Um. You've got

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Speaker 1: some places like the UK which look really pretty um

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Speaker 1: soggy right now, to use a wonderful British phrase, You've

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Speaker 1: got other parts of you are doing better. Um. But

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Speaker 1: the one thing everyone needs to realize is that Europe

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Speaker 1: is very vulnerable to any retaliation or any more retaliation

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Speaker 1: on the energy front as a result of Russish invasion

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Speaker 1: of Ukraine. So Europe as ever is unlikely to go

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Speaker 1: completely up the cliff, but it's unlikely to boom and

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Speaker 1: so there's growing concern right now about the price preshous

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Speaker 1: building um, and you know that isn't a very safe

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Speaker 1: haven either. I guess the real message from all of

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Speaker 1: this is that right now we're not dealing with a

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Speaker 1: beauty parade in terms of decisions about where to put

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Speaker 1: your money. It's really more like an ugly parade, which

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Speaker 1: is an ugly place, and probably the only best option

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Speaker 1: out of all that is a classic investment advice of diversify,

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Speaker 1: hold your breath. Thank you so much to Peter Crass

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Speaker 1: of Aperture Investors and Julian Ted of The Financial Times.

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Speaker 1: Coming up twenty five years after China took back Hong Kong,

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Speaker 1: what has changed? We had a Debora layer of Edelman

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Speaker 1: Global Advisors. That's next Wall Street Week on Bloomberg. On

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Speaker 1: a stormy night on July one, British rule over Hong

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Speaker 1: Kong came to an end, replaced by the regime of

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Speaker 1: one country, two systems, something they and the last British governor,

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Speaker 1: Lord Patton, had high hopes for at the time. I

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Speaker 1: hoped for the best. You couldn't leave thinking anything but that.

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Speaker 1: I think it's just in the last ten years or

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Speaker 1: so that the things have taken a turn for the worst,

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Speaker 1: as I think we have in China overall. Twenty five

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Speaker 1: years later, Hong Kong is a very different place. Its

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Speaker 1: economy has doubled, and it is ruled by a China

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Speaker 1: that is more assertive in Hong Kong and in its

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Speaker 1: relations with the rest of the world, with the Chinese

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Speaker 1: Defense Minister warning of possible conflict over Taiwan. If anyone

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Speaker 1: dares to succeed Taiwan from China, we will not hesitate

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Speaker 1: to fight. We will fight at all costs, and we

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Speaker 1: will fight to the very end. This is the utterly

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Speaker 1: choice for China, and today the United States is using

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Speaker 1: economic weapons, such as trade restrictions to influence China's behavior.

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Speaker 1: As explained by United States Trade Representative Katherine Tie, the

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Speaker 1: China tariffs are, in my view, significant piece of leverage.

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Speaker 1: We need to use our tools more effectively. We need

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Speaker 1: new tools. Even as President g warns against what he

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Speaker 1: calls weaponizing the world economy, politicizing, instrumentalizing, and weaponizing the

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Speaker 1: world economy, using a dominant position in the global financial system,

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Speaker 1: to wantonly impose sanctions would only hurt others as well

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Speaker 1: as one self. And to take us through China as

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Speaker 1: it is today twenty five years after that handover in

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Speaker 1: Hong Kong. We're welcome Deborah Lair, she's the CEO of

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Speaker 1: Edelman Global Advisory. Debor, you really are a China expert.

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Speaker 1: Weill always love it when you're on. Give us a

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Speaker 1: sense how China has changed in the laste years. And

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Speaker 1: one way I can start actually is COVID. COVID has

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Speaker 1: changed us all. What about President's Jane's reaction to COVID

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Speaker 1: and zero COVID It's called well, really excellent question, and David,

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Speaker 1: it's so nice to see you again. Thanks for having

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Speaker 1: me on. China has changed unbelievably in the last twenty

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Speaker 1: five years. As I look back when I was doing

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Speaker 1: trade negotiations at that time, one of the most fundamental

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Speaker 1: um concessions that we got from the Chinese, just to

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Speaker 1: give you an example and put this in context, is

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Speaker 1: the fact that they would actually have to publish their

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Speaker 1: trade laws and only once that we're published were enforceable.

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Speaker 1: So we've come a long way as they've built a

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Speaker 1: world class legal system and trade system now enforcements a

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Speaker 1: whole other question, but it shows the significant changes that

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Speaker 1: we've seen over time in the development of the economy.

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Speaker 1: COVID is a whole other issue. She reiterated his position

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Speaker 1: on following a dynamic COVID policy. They have definite concerns

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Speaker 1: about the impact that has had on the economy, but

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Speaker 1: he had reiterated the fact that people were willing to

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Speaker 1: sacrifice on the social and economic cost given the potential

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Speaker 1: of deaths. And China had an article recently in Nature

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Speaker 1: magazine where they estimated that if a macron were allowed

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Speaker 1: to go free, essentially in China, it could result in

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Speaker 1: one point six million deaths. China is not going to

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Speaker 1: stand for that, particularly in the lead up to the

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Speaker 1: Party plenum, this likely this November. So for She, they

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Speaker 1: now look at what has the impact on the economy.

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Speaker 1: As he looks last year. Last year was a banner

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Speaker 1: year for China. They were the largest source of direct

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Speaker 1: foreign investments. Most foreign companies who were there reiterated they

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Speaker 1: were going to stay. The majority of them were profitable,

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Speaker 1: They were positive about the prospects. She went into two

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Speaker 1: in a very strong position and with a view that

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Speaker 1: his policy around COVID was the best in the world.

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Speaker 1: Now hits Ukraine, Brush's invasion world potential recession and then

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Speaker 1: the lockdown in Shanghai definitely was over zealous officials who

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Speaker 1: were going after that, but that had both a psychological

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Speaker 1: impact when it was a city is sophisticated and as

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Speaker 1: crucial to China as Shanghai, but also to the rest

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Speaker 1: of the world, and it's really causing ripples through the economy.

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Speaker 1: We're likely to only see zero percent, well negative growth.

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Speaker 1: There's zero percent growth in the second quarter, and they

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Speaker 1: definitely will not hit their targets of five point five

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Speaker 1: that they had four this year. But I want to

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Speaker 1: say one last thing too. When Si Jumping made his

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Speaker 1: comments debbling down, and he was in Wuhan obviously where

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Speaker 1: COVID first broke out, to make these comments, the most

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Speaker 1: important thing that the Chinese did was actually put out

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Speaker 1: a policy to try and govern and create guidelines for

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Speaker 1: actions at local officials to take if there's a COVID

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Speaker 1: breakout in their city. And this is an attempt to

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Speaker 1: address this issue of over zealous officials to limit the

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Speaker 1: economic impact where possible when there are just a few breakouts.

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Speaker 1: So Debora, that's interesting sort of a cabin as it were,

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Speaker 1: some of the activities of local officials. At the same time,

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Speaker 1: a lot of Western experts that we talked to here

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Speaker 1: on Bloomberg say, you know, President's approach on zero Covia

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Speaker 1: is just wrong. He's gonna have to change. You have

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Speaker 1: to go over to vaccinations. He's gonna have to change

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Speaker 1: his economic approach overall. If you just look at that part,

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Speaker 1: how well China has done compared to other countries. If

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Speaker 1: I can't say whether she honestly believes it's the right

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Speaker 1: policy or not, but there's no question they're not going

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Speaker 1: to change. It has been so terribly helpful, as it

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Speaker 1: always is. I must say thank you so much for

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Speaker 1: being back on Wall Street Week. That's Deborah Lare She's

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Speaker 1: the CEO of Edelman Global Advisory. Coming up, we wrap

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Speaker 1: up our week once again with special contributor Larry Suburbs

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Speaker 1: of Harvard. That's next on Wall Street Week on Bloomberg.

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Speaker 1: This is Bloomberg Wall Street Week with David Weston from

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Speaker 1: Bloomberg Radio. We are joined thankfully once again by our

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Speaker 1: very special contributor Larry Summers of Harvard. So Larry, thanks

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Speaker 1: for being back with us. Let's start with some of

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Speaker 1: the big news in the economy this week, which is

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Speaker 1: consumer spending in that states, It is softening clearly. Also

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Speaker 1: consumer confidences down there are those who say that means

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Speaker 1: maybe the Fed doesn't need to hike as much, maybe

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Speaker 1: even they get the cuts sooner than we thought. What

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Speaker 1: do you think about consumer spending right now? Look, I

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Speaker 1: think we're seeing that inflation which is eroded people's purchasing power,

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Speaker 1: the end of the fiscal stimulus that gave people a

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Speaker 1: lot of cash UH last year, higher interest rates that

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Speaker 1: are discouraging housing and housing allied UH kinds of spending,

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Speaker 1: generalized increases in uncertainty, and just a bit more feeling

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Speaker 1: of insecurity. UH. All of that is taking a toll

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Speaker 1: on spending. My guess is that that's gonna continue for

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Speaker 1: some time. And I think you have to say that

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Speaker 1: whatever you thought about recession risks a month ago, the

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Speaker 1: recession risks through the year two have to have gone

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Speaker 1: up in a quate material way. I felt for a

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Speaker 1: long time, as you know, David, that we're not gonna

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Speaker 1: have inflation returned near target without a significant economic downturn.

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Speaker 1: But that downturn could happen either because interest rates UH

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Speaker 1: set by the FED rise very very sharply, or it

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Speaker 1: could happen because of a kind of self fulfilling process

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Speaker 1: coming out of the high inflation and reductions some people's incomes.

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Speaker 1: And the latter possibility is looking like is looking more

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Speaker 1: likely today uh than it was. And of course, if

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Speaker 1: the economy did go into recession in the next six

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Speaker 1: to nine months, uh, then you probably see a reduction

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Speaker 1: in inflationary pressures and you'd see, uh the Fed probably

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Speaker 1: feel that it had to push rates up less than

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Speaker 1: it would if the economy was continuing to grow strongly

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Speaker 1: and labor was and there was very very strong demand, uh,

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Speaker 1: pushing up wages and prices. So so I just want

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Speaker 1: to be very precise here because you and I have

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Speaker 1: talked quite a bit about the likelihood of recession this

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Speaker 1: year and next, and you said next year, you think

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Speaker 1: it's much more likely than that, But thus far you

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Speaker 1: said this year maybe not so much. Are you saying,

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Speaker 1: given the data coming in, perhaps a recession or as

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Speaker 1: it gonna downturn, whether it's a technical recession on maybe

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Speaker 1: coming faster than you thought. Yeah, I think the risks

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Speaker 1: of a two recession are significantly higher uh than I

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Speaker 1: would have judged, uh, six or nine weeks ago. Look David,

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Speaker 1: We've got the first quarter numbers in the bank. UH.

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Speaker 1: They are negative for g d P. There are many

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Speaker 1: forecasters who believe that the second quarter also had negative

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Speaker 1: GDP growth. It's not really the formal definition of recession,

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Speaker 1: but people often say it's a recession when you have

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Speaker 1: two quarters of negative GDP growth in a row, and

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Speaker 1: there's I think it's probably close to a chance. Maybe

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Speaker 1: it's a bit less than that that we've had two

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Speaker 1: negative quarters in a row. So I think you have

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Speaker 1: to say that the chance that a recession is ultimately

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Speaker 1: dated as having begun UH during UH has UH gone up,

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Speaker 1: going up significantly. We've got time yet the structure of

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Speaker 1: the economy has changed, so I'm not at all UH

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Speaker 1: confident about it, but I would say the nearer term

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00:25:14,359 --> 00:25:19,119
Speaker 1: risks have UH certainly gone up. You know, you saw

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00:25:19,240 --> 00:25:25,159
Speaker 1: something in reports. Used to be just target. Now there

436
00:25:25,160 --> 00:25:29,080
Speaker 1: are reports coming out of other retailers, reports coming out

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00:25:29,119 --> 00:25:35,719
Speaker 1: of semiconductors suggesting fairly drastic reductions in demand and fairly

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00:25:35,800 --> 00:25:41,280
Speaker 1: substantial build ups in excess inventories, which will then lead

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00:25:42,040 --> 00:25:47,600
Speaker 1: UH to things on sale and will lead to reduced production. Larry,

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00:25:47,640 --> 00:25:49,880
Speaker 1: one of the things that God US. Here is obviously

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Speaker 1: inflation and the question of supply chain problems, and you've

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Speaker 1: been emphatic that they are not so transitory. Whether transitory

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00:25:56,640 --> 00:25:59,440
Speaker 1: or not, Why are they lasting as long as they are?

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00:25:59,640 --> 00:26:03,120
Speaker 1: Why are we getting more employees in airports and more

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00:26:03,200 --> 00:26:05,760
Speaker 1: people flying airplanes and all the things we're seeing around

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00:26:06,000 --> 00:26:08,560
Speaker 1: the country. By the way, in here in in New York,

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00:26:08,840 --> 00:26:10,800
Speaker 1: we're having to shut some public pools because we can't

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Speaker 1: find lifeguards. It's a combination of things. We've restricted immigration

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00:26:16,080 --> 00:26:20,240
Speaker 1: in various ways relative to where it was. That means

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00:26:20,600 --> 00:26:25,719
Speaker 1: fewer people here and working. We've got a variety of

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00:26:25,920 --> 00:26:31,679
Speaker 1: problems in terms of reliable production and transportation. Uh. Coming

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00:26:31,720 --> 00:26:37,560
Speaker 1: out of uh China, we have uh you know, a

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00:26:37,680 --> 00:26:42,719
Speaker 1: non trivial number of people with UH long COVID and

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00:26:43,000 --> 00:26:47,560
Speaker 1: unable to work. There are a larger number of people

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00:26:47,560 --> 00:26:52,640
Speaker 1: who want to do jobs where uh you can uh

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00:26:53,080 --> 00:26:59,760
Speaker 1: work at home. Employers are reluctant to pay what it

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00:27:00,000 --> 00:27:03,080
Speaker 1: aches to fill those vacancies quickly because they think it's

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00:27:03,560 --> 00:27:08,040
Speaker 1: more profitable to ultimately have some vacancies and turn some

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00:27:08,160 --> 00:27:14,000
Speaker 1: people away than it is to raise raise wagses across

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00:27:14,080 --> 00:27:18,280
Speaker 1: the board. I think all of these UH things are

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00:27:18,320 --> 00:27:22,440
Speaker 1: contributing factors, and I think with respect to airlines UH.

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00:27:22,520 --> 00:27:26,720
Speaker 1: While a lot of it is on the labor side,

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00:27:27,520 --> 00:27:32,720
Speaker 1: there are also some very substantial infrastructure issues that the

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00:27:32,760 --> 00:27:36,240
Speaker 1: country is under invested in UH for a long time.

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00:27:36,840 --> 00:27:40,119
Speaker 1: And finally, Hilarry, we had NATO meetings, maybe historic meetings.

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Speaker 1: They really changed their strategy this week. And I wonder

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Speaker 1: as we look at the war in Ukraine that Russia

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00:27:45,720 --> 00:27:48,480
Speaker 1: has perpetrated there, do you think there may be long

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00:27:48,680 --> 00:27:51,480
Speaker 1: term really long term effects on the global economies. Certainly

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00:27:51,520 --> 00:27:54,160
Speaker 1: have been the short term. What about longer term? Well,

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00:27:54,640 --> 00:28:00,600
Speaker 1: historians will debate whether the Russia Ukraine war as a

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00:28:00,840 --> 00:28:06,320
Speaker 1: cause of big changes or was a consequence of tectonic

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Speaker 1: forces that has been operating for some time. But I

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Speaker 1: was very struck when you had a NATO meeting that

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00:28:16,200 --> 00:28:19,439
Speaker 1: for the first time invited a number of countries in

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00:28:19,520 --> 00:28:26,960
Speaker 1: Asia to participate in it and identified UH China as

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00:28:27,200 --> 00:28:34,920
Speaker 1: a security risk that had to be UH prepared for

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00:28:35,440 --> 00:28:41,600
Speaker 1: alongside Russia. It did very much have the feeling of

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00:28:41,640 --> 00:28:48,520
Speaker 1: a world that was forming blocks and choosing up teams,

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00:28:49,200 --> 00:28:54,000
Speaker 1: not unlike or in some ways not unlike UH. The

481
00:28:54,080 --> 00:28:59,520
Speaker 1: alignment that existed uh in the fifties and UH the

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00:28:59,640 --> 00:29:04,400
Speaker 1: six to East when Russia and China were allied and

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00:29:04,720 --> 00:29:08,440
Speaker 1: there was a mobilization of Western countries along with some

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00:29:08,520 --> 00:29:13,440
Speaker 1: Asian countries against them, and that seemed to be away

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00:29:13,480 --> 00:29:19,240
Speaker 1: in which things, uh, things were moving. And that's gonna

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00:29:19,360 --> 00:29:22,000
Speaker 1: be a quite different world than the world we've had

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00:29:22,080 --> 00:29:24,600
Speaker 1: for the last twenty five or thirty five years. Okay,

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00:29:24,640 --> 00:29:26,760
Speaker 1: thank you so very much. The Larry Summers at Harvard

489
00:29:26,760 --> 00:29:30,160
Speaker 1: are very special contributor right here on Wall Street week Finally,

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00:29:30,320 --> 00:29:35,240
Speaker 1: one more thought the potentially toxic mix of politics and sports.

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00:29:35,480 --> 00:29:37,840
Speaker 1: It's the long Fourth of July weekend in the United States,

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00:29:37,920 --> 00:29:41,040
Speaker 1: that summertime holiday when we look forward to fireworks a

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00:29:41,120 --> 00:29:44,760
Speaker 1: company in Boston, by the famed Boston Pops concert on

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00:29:44,800 --> 00:29:50,240
Speaker 1: the Charles River, two politicians giving speeches. Today we celebrate America,

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00:29:53,240 --> 00:29:58,440
Speaker 1: our freedom, our liberty, our independence, to picnics, and not

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00:29:58,680 --> 00:30:04,320
Speaker 1: least to sports, whether it's baseball with both the Yankees

497
00:30:04,360 --> 00:30:06,880
Speaker 1: and the Mets on top of their divisions, or golf

498
00:30:07,120 --> 00:30:10,959
Speaker 1: John Dear Classic out in Illinois, or the early rounds

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00:30:11,040 --> 00:30:13,560
Speaker 1: of Wimbledon. I think the last couple of points that

500
00:30:13,760 --> 00:30:20,000
Speaker 1: was really suffering there tirant now. So, with the country

501
00:30:20,120 --> 00:30:24,480
Speaker 1: seemingly more divided than it's ever been, defriding the electoral account,

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Speaker 1: I believe we can fix it on the way. I'm

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Speaker 1: with all of you. Let's do this together. It's a

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00:30:30,920 --> 00:30:33,640
Speaker 1: good time to put all that political strike behind this

505
00:30:33,920 --> 00:30:38,480
Speaker 1: and just get caught up in the game. Right. Well,

506
00:30:38,680 --> 00:30:41,120
Speaker 1: maybe not so fast, because it turns out that even

507
00:30:41,200 --> 00:30:44,440
Speaker 1: as you root for your favorite athlete or team, the

508
00:30:44,560 --> 00:30:47,480
Speaker 1: powers that be maybe angling to use your sports to

509
00:30:47,560 --> 00:30:50,440
Speaker 1: get their own edge, an edge that goes way beyond

510
00:30:50,480 --> 00:30:54,360
Speaker 1: the points. Read take Wimbledon for example, this year, competitors

511
00:30:54,360 --> 00:30:57,480
Speaker 1: from Russia and Belarus will be barred from competing as

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00:30:57,520 --> 00:31:02,520
Speaker 1: punishment for Russia's invading Ukraine. That I feel good being

513
00:31:03,200 --> 00:31:09,080
Speaker 1: at the tournament without having to see players from that

514
00:31:09,280 --> 00:31:13,040
Speaker 1: country segain and China has just changed its sports law

515
00:31:13,120 --> 00:31:18,040
Speaker 1: to authorize retaliation against anyone who shows the Middle Kingdom disrespect,

516
00:31:18,520 --> 00:31:22,680
Speaker 1: though what that means is anyone's guess. And even golf

517
00:31:23,040 --> 00:31:26,200
Speaker 1: isn't immune from politics, with a major feud between the

518
00:31:26,200 --> 00:31:29,240
Speaker 1: p g A and the upstart Live Golf, which is

519
00:31:29,280 --> 00:31:32,080
Speaker 1: back by the Saudi Well Fund. The PGA tour in

520
00:31:32,120 --> 00:31:36,880
Speaker 1: American institution can't compete with a foreign monarchy that is

521
00:31:36,920 --> 00:31:40,240
Speaker 1: spending billions of dollars an attempt to buy the game

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00:31:40,760 --> 00:31:44,000
Speaker 1: of golf. And it turns out none other than the

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00:31:44,040 --> 00:31:47,640
Speaker 1: former golfer in chief, One Donald J. Trump, as he

524
00:31:47,680 --> 00:31:50,600
Speaker 1: welcomes the tour to his home course in Bedminster, New Jersey,

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00:31:50,720 --> 00:31:54,160
Speaker 1: hun July twenty nine. But all that's almost a month away.

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00:31:54,560 --> 00:31:57,440
Speaker 1: In the meantime, let's try and leave politics out of

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00:31:57,440 --> 00:32:06,160
Speaker 1: it and just enjoy the holiday that does it. For

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00:32:06,160 --> 00:32:08,400
Speaker 1: this episode of Wall Street Week, I'm David Weston. This

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Speaker 1: is Bloomberg. See you next week. M