Speaker 1: This is Bloomberg Wall Street Week. We turn our attention
Speaker 1: to the markets this week. U S CPI members reinforcing
Speaker 1: concerns about inflation. The financial stories that chief are worth
Speaker 1: a really different reaction to mark its more indications of
Speaker 1: just how hot the U s economy really is. Through
Speaker 1: the eyes of the most influential voices. Larry Summers, the
Speaker 1: former Treatory Secretary, Katherine Keening, CEO of the n Y
Speaker 1: mallin Sam's l Sharmon and founder of Equatic Group Investment.
Speaker 1: In Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 1: Cooperation with Europe, competition with China, and conflict with Russia.
Speaker 1: But it always comes back to inflation one way or another.
Speaker 1: This is Bloomberg Wall Street Week. I'm David Weston. This
Speaker 1: week special contributor Larry Summers of Harvard on how close
Speaker 1: we may be to a recession here in the United States.
Speaker 1: I think the risks of a two recession are significantly
Speaker 1: higher than I would have judged uh six or nine
Speaker 1: weeks ago. And Deborah Lair of Edelman Global Advisory on
Speaker 1: just how much China has changed in the twenty five
Speaker 1: years since it took back Hong Kong. We've come a
Speaker 1: long way as they've built a world class legal system
Speaker 1: and trade systems. Much of the week was consumed with
Speaker 1: global events, as President Biden traveled to Germany to try
Speaker 1: to persuade other leaders of the G seven, like French
Speaker 1: President Makron, that they should live at how much the
Speaker 1: world pays for Russian oil in Our ministers will continue
Speaker 1: following the initiative of the United States to work so
Speaker 1: that such a ceiling can exist by applying the broadest
Speaker 1: possible alliance of buyers. And then moved on to Madrid
Speaker 1: to work with Turkey to admit Sweden and Finland into
Speaker 1: the NATO Alliance. It's been historic twenty four hours here
Speaker 1: in Madrid as Natal leaders gathered. Turkish President it Urduan
Speaker 1: has lifted his objections for Finland and Sweden to join
Speaker 1: the NATO Alliance. We looked to Europe even for the
Speaker 1: latest on the FED, where Chair j Powell appeared at
Speaker 1: CenTra with other central bankers and reaffirmed his commitment to
Speaker 1: beat inflation no matter the risk. We're very strongly committed
Speaker 1: to using our tools to get inflation to come down.
Speaker 1: The way to do that is to slow down growth,
Speaker 1: ideally keep it positive. Is there a risk that we
Speaker 1: would go too far? Certainly there's a risk, but I
Speaker 1: wouldn't agree that it's the biggest risk to the economy.
Speaker 1: And just as things wound down in Europe, they moved
Speaker 1: on to Hong Kong, where President g traveled outside mainland
Speaker 1: China for the first time at eight hundred ninety three
Speaker 1: days to celebrate the twenty anniversary of the handover from Britain.
Speaker 1: Fog Don hung Jin. Hong Kong enjoys a unique position,
Speaker 1: favorable conditions and broad space for development. The central authorities
Speaker 1: fully support Hong Kong and seizing the historic opportunities presented
Speaker 1: by our country's development. But Washington wasn't left without its
Speaker 1: own fair share of drama this week, as a former
Speaker 1: aide to President Trump's chief of staff gave dramatic testimony
Speaker 1: about Mr Trump's reported willingness to let the mob gather
Speaker 1: on January six, even if they did have weapons, housing
Speaker 1: the dicinity of a conversation where I overheard the President
Speaker 1: say something to the effective you know, I don't even
Speaker 1: care that they have weapons. They're not here to hurt me.
Speaker 1: But with all that was going on around the world.
Speaker 1: In the end, it came back to inflation and the
Speaker 1: economy and growing fears of recession. For the week, the
Speaker 1: equity markets were down, with the SMP off over two
Speaker 1: percent since Monday and the NASDACK down over four and
Speaker 1: that was after a rally on Friday while bonds were
Speaker 1: being bought, leaving the yield on the ten year under
Speaker 1: two point nine, down five basis points. But the bigger
Speaker 1: story of the week ended on Thursday, the close of
Speaker 1: the first half, which ended up being the worst for
Speaker 1: the equity market since nineteen sixty two and the worst
Speaker 1: for ten year treasuries since Get this, they were first
Speaker 1: sold back in seven teen eight. Here they help us
Speaker 1: sort it all out. Our Jillian Tet, Financial Times editor
Speaker 1: at Large and US Editorial board chair, and Peter Krause,
Speaker 1: chairman and CEO of Aperture Investors. Julian, let me start
Speaker 1: with you, actually and what we saw in the markets.
Speaker 1: What's driving the markets from your perspective right now, Well,
Speaker 1: the best way to make sense of the equity markets
Speaker 1: is to recognize that a month ago investors had a
Speaker 1: nasty shock when they realize that rates were going up.
Speaker 1: You know, the inflation numbers have beencoming much higher than expected,
Speaker 1: and the fat has really accelerated. What we're seeing today, though,
Speaker 1: is an investor realizing the earnings are being hurt by
Speaker 1: the underlying economic slowdown, and that is really when they're
Speaker 1: starting to drag on people as they worry not just
Speaker 1: about inflation but sac inflation. The combination of price growth
Speaker 1: and slowing sorry, price increases and slowing growth. Then, frankly,
Speaker 1: we've not seen in the nineteen seventies. So, Peter, the
Speaker 1: question I really wants to know is how bad is
Speaker 1: it going to get? How far are we into this decline?
Speaker 1: In your judgment, I think there's two answers to that.
Speaker 1: One is how far the markets down into their ultimate
Speaker 1: decline and how far are we, from an economic point
Speaker 1: of view, into slowing growth slash recession. I think on
Speaker 1: the former point, we're probably two thirds are a little
Speaker 1: bit more of the way to a bottom. In financial markets,
Speaker 1: it's likely there's another ten percent and equity markets find
Speaker 1: markets perhaps a little closer to their natier. But we're
Speaker 1: going to continue to have that volatility until there is
Speaker 1: some clarity regarding how much the FED is going to
Speaker 1: raise rates, because that really is what investors as Jillian
Speaker 1: points out, are watching as it relates to the economy itself.
Speaker 1: I think it is a good argument that we're already
Speaker 1: either entering a recession or in a recession. Manufacturing activity
Speaker 1: has dropped significantly. We've seen leading indicators also decline. We've
Speaker 1: seen consumption activity fall, and CEOs are beginning to predict
Speaker 1: that the second half of their economic activity to their
Speaker 1: companies is going to be a lot lower. So, Jillian,
Speaker 1: what about that We pick one of the things that
Speaker 1: Peter talked about it, and that is consumption numbers. We
Speaker 1: had personal consumption numbers are really softened in the United
Speaker 1: States this week, and also of course we have the
Speaker 1: consumer confidence numbers which are softening as well. That is
Speaker 1: a big driver, as we all know of the U
Speaker 1: S economy. How big a risk is that at this
Speaker 1: point for the US economy, Well, there are two or
Speaker 1: three factors right now whichuld make it incredibly hard to
Speaker 1: work out what's going on. One is the fact that yes,
Speaker 1: you're seeing a real loss of consumer competence, really quite
Speaker 1: staggering decline and consumer confidence. And that kind of makes
Speaker 1: sense given the scale of price shock and inflation shock.
Speaker 1: But something that we haven't really seen before in previous
Speaker 1: economic cycles. Is that a lot of consumers are sitting
Speaker 1: on fat cushions of savings compared to the thought past
Speaker 1: because of the fiscal stimulus. Jillian Ted and Peter Kraus
Speaker 1: will be staying with us as we get some investment
Speaker 1: advice in these turbulent times. That's gonna have the next
Speaker 1: watter releasing Hun Bloomberg. This is Bloomberg Wall Street Week
Speaker 1: with David Weston from Bloomberg Radio. Let's take some time
Speaker 1: out to go traveling, not the camel route to Iraq,
Speaker 1: but the financial route to a buck. Not only does
Speaker 1: the dollar to buy less at the supermarket than it
Speaker 1: used to, it also buys less in terms of other
Speaker 1: currencies than it did ten years ago, a period that
Speaker 1: has included two official devaluations of the dollar. That of
Speaker 1: course is Lewis Rohaiser on Wall Street Gate that was
Speaker 1: back in and once again that buck is buying less
Speaker 1: at the supermarket, but it sure isn't buying less in
Speaker 1: terms of foreign exchange. Peter Cress of Aperture Investors and
Speaker 1: Jillian Ted. If the financial times are still with us,
Speaker 1: so Peter, it's hard to know where the markets are
Speaker 1: going but the one thing I think we can say
Speaker 1: is they are turbulent. In these turbulent times, where do
Speaker 1: you put your bucks at this point, where does it
Speaker 1: make sense? Well, look, you're not gonna be able to
Speaker 1: put your money anywhere that is going to be unaffected
Speaker 1: by the volatility. So if the objective is find someplace
Speaker 1: to invest where you don't have volatility, that's the zero
Speaker 1: sum game. On the other hand, equities will go up
Speaker 1: over time and credit has gotten a lot cheaper, and
Speaker 1: so if you're looking for incremental places to invest, even
Speaker 1: large institutional investors, you have to be beginning to look
Speaker 1: at putting some money back into the equity markets they're
Speaker 1: down thirty plus percent, and some money into the fixed
Speaker 1: income markets because spreads have moved out pretty dramatically. But
Speaker 1: you're not gonna be able to do that without volatility,
Speaker 1: and you're not gonna able to do that with probably
Speaker 1: without additional draw downs. So you need to be cautious
Speaker 1: about how much you've commit well, and Julie, I wonder
Speaker 1: if you're you're gonna be able to do without additional risk.
Speaker 1: I mean, Peter says that credit is cheaper now, it's
Speaker 1: a better buy. You can get better returns. There may
Speaker 1: be a reason for that. What is the risk of defaults?
Speaker 1: We haven't had defaults in a while now, Well, we're
Speaker 1: going incredibly retro in all kinds of ways right now. Um.
Speaker 1: You haven't yet got the sideburns unfortunately, David. But I
Speaker 1: hope we hear that soon of your former host. Um.
Speaker 1: But you know, one of the things that investors have
Speaker 1: not had to worry about for a very long time
Speaker 1: our corporate defaults UM and risks in the high yield market. Um,
Speaker 1: we're still not seeing that. The default rate right now
Speaker 1: is incredibly low, UM, in spite of all the falls
Speaker 1: from the equity market and concern about recession. But what
Speaker 1: you're seeing a number of bankers and lawyers and others
Speaker 1: talk about is a likelihood that as rates keep going up, UM,
Speaker 1: we're going to start to see more and more pressure
Speaker 1: on risky companies. Now, it's hard to predict exactly when
Speaker 1: that is going to strike because most risky companies, most
Speaker 1: high yield companies, or leverage loans have been essentially refinancing
Speaker 1: themselves or locked in financing for quite a while. So
Speaker 1: it really only begin to bite when the refinancings come up. Um,
Speaker 1: and that's a sort of staggered timetail because each company
Speaker 1: is different. But when you do see those refinancing occurs,
Speaker 1: you can because see the very nasty shock for investors,
Speaker 1: and you're he seeing the high yield bond market react
Speaker 1: to that. But in some ways that's the clearest part
Speaker 1: of the markets where you've actually seen a reaction to
Speaker 1: the tightening of the quid deconditions. So that is absolutely
Speaker 1: something that in bestor should be looking too in the
Speaker 1: next year or so as one of the big risks
Speaker 1: that are waiting us all. Peter, I wonder if we're
Speaker 1: getting an accurate read full on the full market right
Speaker 1: now in this sense, I'm back, by the way, I
Speaker 1: was just starting law school. I did have sideburns. For
Speaker 1: the record, they were quite as well, but I did
Speaker 1: have them. But one different thing. It's actually I'll try
Speaker 1: to bring it back. I did be a lot whiter
Speaker 1: that now. But but Peter, I wonder one of the
Speaker 1: changes that we've seen since nineteen five is how much
Speaker 1: the markets are private rather than public. We said, a
Speaker 1: big shift, and I wonder whether we really are getting
Speaker 1: an accurate read on all that private capital. No, we
Speaker 1: are not, By the way. I never had good sideburns.
Speaker 1: That's why I went with a beard. But with regards
Speaker 1: to the private markets, I think that that is a
Speaker 1: serious problem, meaning that we know for a fact the
Speaker 1: private markets flag public market valuations. But it's also a
Speaker 1: fact that the assets owned in private hands are also
Speaker 1: being affected by this market change. You cannot have this
Speaker 1: change in the interest rate construct that I spoke about
Speaker 1: briefly before without affecting values. So private equity assets are
Speaker 1: going to decline in value. I've already gone down in
Speaker 1: value but haven't yet been adjusted. And those adjustments, when
Speaker 1: they occur, are going to cause stress for investors. In
Speaker 1: some cases, they could cause liquidity issues. In some cases
Speaker 1: they may actually make raising additional capital much more challenging,
Speaker 1: and in some cases that could cause defaults and ultimate bankruptcies.
Speaker 1: So that that whole private credit and private equity sector
Speaker 1: is a place where we need to be focused on
Speaker 1: risk rising substantially and potential stress coming from a mark
Speaker 1: to market of those assets, Julian, these days we can't
Speaker 1: have a real conversation with investing without talking about China
Speaker 1: in one way or another. Of course, we have the
Speaker 1: anniversary anniversary they hand over is China a place that's
Speaker 1: attractive potentially for investors because they're going the other direction
Speaker 1: from the United States and much of the West. We're tightening,
Speaker 1: they're actually loostening. Well. Absolutely, China is something of an
Speaker 1: enigma in many ways because yes, they are going in
Speaker 1: the opposite direction from most other markets right now in
Speaker 1: terms of loosening. There is great pressure on President G
Speaker 1: to ensure that he tries to hit the GDP growth
Speaker 1: targets because he has the all important Party Congress later
Speaker 1: on this year. Um, and all the signs are that,
Speaker 1: because of the COVID lockdowns, are in danger of missing
Speaker 1: the growth targets. So President G has every incentive to
Speaker 1: try and stimulate the economy going forward in the coming months. Um.
Speaker 1: The problem that really is two or threefold. Firstly, we
Speaker 1: don't know how China will respond if there are more
Speaker 1: COVID outbreaks. Peter, what about it. You've had a career
Speaker 1: now investing your money and other people's money is at a
Speaker 1: a place where we should be putting the money right
Speaker 1: now into China. Can't be sure China right now, just can't.
Speaker 1: Being long China is a challenge for sure, But being short,
Speaker 1: I think is a is a very big risk. Look,
Speaker 1: I also think investors are somewhat circumspect about the motivations
Speaker 1: of the government with regards to the external investor. How
Speaker 1: will they treat the bond investors? How are they going
Speaker 1: to treat equity investors? Visa the regulation and changes to
Speaker 1: companies inside of China that were thought early to be
Speaker 1: leaders and real growers. Those those issues still remain. But
Speaker 1: China is a huge market, very strong economy. When it
Speaker 1: starts to grow, it will come back, COVID will get resolved,
Speaker 1: and it's still it. China is still provides significant exports
Speaker 1: to the world and buys significant imports. What about Europe, Well,
Speaker 1: Europe as ever is a very mix. Um. You've got
Speaker 1: some places like the UK which look really pretty um
Speaker 1: soggy right now, to use a wonderful British phrase, You've
Speaker 1: got other parts of you are doing better. Um. But
Speaker 1: the one thing everyone needs to realize is that Europe
Speaker 1: is very vulnerable to any retaliation or any more retaliation
Speaker 1: on the energy front as a result of Russish invasion
Speaker 1: of Ukraine. So Europe as ever is unlikely to go
Speaker 1: completely up the cliff, but it's unlikely to boom and
Speaker 1: so there's growing concern right now about the price preshous
Speaker 1: building um, and you know that isn't a very safe
Speaker 1: haven either. I guess the real message from all of
Speaker 1: this is that right now we're not dealing with a
Speaker 1: beauty parade in terms of decisions about where to put
Speaker 1: your money. It's really more like an ugly parade, which
Speaker 1: is an ugly place, and probably the only best option
Speaker 1: out of all that is a classic investment advice of diversify,
Speaker 1: hold your breath. Thank you so much to Peter Crass
Speaker 1: of Aperture Investors and Julian Ted of The Financial Times.
Speaker 1: Coming up twenty five years after China took back Hong Kong,
Speaker 1: what has changed? We had a Debora layer of Edelman
Speaker 1: Global Advisors. That's next Wall Street Week on Bloomberg. On
Speaker 1: a stormy night on July one, British rule over Hong
Speaker 1: Kong came to an end, replaced by the regime of
Speaker 1: one country, two systems, something they and the last British governor,
Speaker 1: Lord Patton, had high hopes for at the time. I
Speaker 1: hoped for the best. You couldn't leave thinking anything but that.
Speaker 1: I think it's just in the last ten years or
Speaker 1: so that the things have taken a turn for the worst,
Speaker 1: as I think we have in China overall. Twenty five
Speaker 1: years later, Hong Kong is a very different place. Its
Speaker 1: economy has doubled, and it is ruled by a China
Speaker 1: that is more assertive in Hong Kong and in its
Speaker 1: relations with the rest of the world, with the Chinese
Speaker 1: Defense Minister warning of possible conflict over Taiwan. If anyone
Speaker 1: dares to succeed Taiwan from China, we will not hesitate
Speaker 1: to fight. We will fight at all costs, and we
Speaker 1: will fight to the very end. This is the utterly
Speaker 1: choice for China, and today the United States is using
Speaker 1: economic weapons, such as trade restrictions to influence China's behavior.
Speaker 1: As explained by United States Trade Representative Katherine Tie, the
Speaker 1: China tariffs are, in my view, significant piece of leverage.
Speaker 1: We need to use our tools more effectively. We need
Speaker 1: new tools. Even as President g warns against what he
Speaker 1: calls weaponizing the world economy, politicizing, instrumentalizing, and weaponizing the
Speaker 1: world economy, using a dominant position in the global financial system,
Speaker 1: to wantonly impose sanctions would only hurt others as well
Speaker 1: as one self. And to take us through China as
Speaker 1: it is today twenty five years after that handover in
Speaker 1: Hong Kong. We're welcome Deborah Lair, she's the CEO of
Speaker 1: Edelman Global Advisory. Debor, you really are a China expert.
Speaker 1: Weill always love it when you're on. Give us a
Speaker 1: sense how China has changed in the laste years. And
Speaker 1: one way I can start actually is COVID. COVID has
Speaker 1: changed us all. What about President's Jane's reaction to COVID
Speaker 1: and zero COVID It's called well, really excellent question, and David,
Speaker 1: it's so nice to see you again. Thanks for having
Speaker 1: me on. China has changed unbelievably in the last twenty
Speaker 1: five years. As I look back when I was doing
Speaker 1: trade negotiations at that time, one of the most fundamental
Speaker 1: um concessions that we got from the Chinese, just to
Speaker 1: give you an example and put this in context, is
Speaker 1: the fact that they would actually have to publish their
Speaker 1: trade laws and only once that we're published were enforceable.
Speaker 1: So we've come a long way as they've built a
Speaker 1: world class legal system and trade system now enforcements a
Speaker 1: whole other question, but it shows the significant changes that
Speaker 1: we've seen over time in the development of the economy.
Speaker 1: COVID is a whole other issue. She reiterated his position
Speaker 1: on following a dynamic COVID policy. They have definite concerns
Speaker 1: about the impact that has had on the economy, but
Speaker 1: he had reiterated the fact that people were willing to
Speaker 1: sacrifice on the social and economic cost given the potential
Speaker 1: of deaths. And China had an article recently in Nature
Speaker 1: magazine where they estimated that if a macron were allowed
Speaker 1: to go free, essentially in China, it could result in
Speaker 1: one point six million deaths. China is not going to
Speaker 1: stand for that, particularly in the lead up to the
Speaker 1: Party plenum, this likely this November. So for She, they
Speaker 1: now look at what has the impact on the economy.
Speaker 1: As he looks last year. Last year was a banner
Speaker 1: year for China. They were the largest source of direct
Speaker 1: foreign investments. Most foreign companies who were there reiterated they
Speaker 1: were going to stay. The majority of them were profitable,
Speaker 1: They were positive about the prospects. She went into two
Speaker 1: in a very strong position and with a view that
Speaker 1: his policy around COVID was the best in the world.
Speaker 1: Now hits Ukraine, Brush's invasion world potential recession and then
Speaker 1: the lockdown in Shanghai definitely was over zealous officials who
Speaker 1: were going after that, but that had both a psychological
Speaker 1: impact when it was a city is sophisticated and as
Speaker 1: crucial to China as Shanghai, but also to the rest
Speaker 1: of the world, and it's really causing ripples through the economy.
Speaker 1: We're likely to only see zero percent, well negative growth.
Speaker 1: There's zero percent growth in the second quarter, and they
Speaker 1: definitely will not hit their targets of five point five
Speaker 1: that they had four this year. But I want to
Speaker 1: say one last thing too. When Si Jumping made his
Speaker 1: comments debbling down, and he was in Wuhan obviously where
Speaker 1: COVID first broke out, to make these comments, the most
Speaker 1: important thing that the Chinese did was actually put out
Speaker 1: a policy to try and govern and create guidelines for
Speaker 1: actions at local officials to take if there's a COVID
Speaker 1: breakout in their city. And this is an attempt to
Speaker 1: address this issue of over zealous officials to limit the
Speaker 1: economic impact where possible when there are just a few breakouts.
Speaker 1: So Debora, that's interesting sort of a cabin as it were,
Speaker 1: some of the activities of local officials. At the same time,
Speaker 1: a lot of Western experts that we talked to here
Speaker 1: on Bloomberg say, you know, President's approach on zero Covia
Speaker 1: is just wrong. He's gonna have to change. You have
Speaker 1: to go over to vaccinations. He's gonna have to change
Speaker 1: his economic approach overall. If you just look at that part,
Speaker 1: how well China has done compared to other countries. If
Speaker 1: I can't say whether she honestly believes it's the right
Speaker 1: policy or not, but there's no question they're not going
Speaker 1: to change. It has been so terribly helpful, as it
Speaker 1: always is. I must say thank you so much for
Speaker 1: being back on Wall Street Week. That's Deborah Lare She's
Speaker 1: the CEO of Edelman Global Advisory. Coming up, we wrap
Speaker 1: up our week once again with special contributor Larry Suburbs
Speaker 1: of Harvard. That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio. We are joined thankfully once again by our
Speaker 1: very special contributor Larry Summers of Harvard. So Larry, thanks
Speaker 1: for being back with us. Let's start with some of
Speaker 1: the big news in the economy this week, which is
Speaker 1: consumer spending in that states, It is softening clearly. Also
Speaker 1: consumer confidences down there are those who say that means
Speaker 1: maybe the Fed doesn't need to hike as much, maybe
Speaker 1: even they get the cuts sooner than we thought. What
Speaker 1: do you think about consumer spending right now? Look, I
Speaker 1: think we're seeing that inflation which is eroded people's purchasing power,
Speaker 1: the end of the fiscal stimulus that gave people a
Speaker 1: lot of cash UH last year, higher interest rates that
Speaker 1: are discouraging housing and housing allied UH kinds of spending,
Speaker 1: generalized increases in uncertainty, and just a bit more feeling
Speaker 1: of insecurity. UH. All of that is taking a toll
Speaker 1: on spending. My guess is that that's gonna continue for
Speaker 1: some time. And I think you have to say that
Speaker 1: whatever you thought about recession risks a month ago, the
Speaker 1: recession risks through the year two have to have gone
Speaker 1: up in a quate material way. I felt for a
Speaker 1: long time, as you know, David, that we're not gonna
Speaker 1: have inflation returned near target without a significant economic downturn.
Speaker 1: But that downturn could happen either because interest rates UH
Speaker 1: set by the FED rise very very sharply, or it
Speaker 1: could happen because of a kind of self fulfilling process
Speaker 1: coming out of the high inflation and reductions some people's incomes.
Speaker 1: And the latter possibility is looking like is looking more
Speaker 1: likely today uh than it was. And of course, if
Speaker 1: the economy did go into recession in the next six
Speaker 1: to nine months, uh, then you probably see a reduction
Speaker 1: in inflationary pressures and you'd see, uh the Fed probably
Speaker 1: feel that it had to push rates up less than
Speaker 1: it would if the economy was continuing to grow strongly
Speaker 1: and labor was and there was very very strong demand, uh,
Speaker 1: pushing up wages and prices. So so I just want
Speaker 1: to be very precise here because you and I have
Speaker 1: talked quite a bit about the likelihood of recession this
Speaker 1: year and next, and you said next year, you think
Speaker 1: it's much more likely than that, But thus far you
Speaker 1: said this year maybe not so much. Are you saying,
Speaker 1: given the data coming in, perhaps a recession or as
Speaker 1: it gonna downturn, whether it's a technical recession on maybe
Speaker 1: coming faster than you thought. Yeah, I think the risks
Speaker 1: of a two recession are significantly higher uh than I
Speaker 1: would have judged, uh, six or nine weeks ago. Look David,
Speaker 1: We've got the first quarter numbers in the bank. UH.
Speaker 1: They are negative for g d P. There are many
Speaker 1: forecasters who believe that the second quarter also had negative
Speaker 1: GDP growth. It's not really the formal definition of recession,
Speaker 1: but people often say it's a recession when you have
Speaker 1: two quarters of negative GDP growth in a row, and
Speaker 1: there's I think it's probably close to a chance. Maybe
Speaker 1: it's a bit less than that that we've had two
Speaker 1: negative quarters in a row. So I think you have
Speaker 1: to say that the chance that a recession is ultimately
Speaker 1: dated as having begun UH during UH has UH gone up,
Speaker 1: going up significantly. We've got time yet the structure of
Speaker 1: the economy has changed, so I'm not at all UH
Speaker 1: confident about it, but I would say the nearer term
Speaker 1: risks have UH certainly gone up. You know, you saw
Speaker 1: something in reports. Used to be just target. Now there
Speaker 1: are reports coming out of other retailers, reports coming out
Speaker 1: of semiconductors suggesting fairly drastic reductions in demand and fairly
Speaker 1: substantial build ups in excess inventories, which will then lead
Speaker 1: UH to things on sale and will lead to reduced production. Larry,
Speaker 1: one of the things that God US. Here is obviously
Speaker 1: inflation and the question of supply chain problems, and you've
Speaker 1: been emphatic that they are not so transitory. Whether transitory
Speaker 1: or not, Why are they lasting as long as they are?
Speaker 1: Why are we getting more employees in airports and more
Speaker 1: people flying airplanes and all the things we're seeing around
Speaker 1: the country. By the way, in here in in New York,
Speaker 1: we're having to shut some public pools because we can't
Speaker 1: find lifeguards. It's a combination of things. We've restricted immigration
Speaker 1: in various ways relative to where it was. That means
Speaker 1: fewer people here and working. We've got a variety of
Speaker 1: problems in terms of reliable production and transportation. Uh. Coming
Speaker 1: out of uh China, we have uh you know, a
Speaker 1: non trivial number of people with UH long COVID and
Speaker 1: unable to work. There are a larger number of people
Speaker 1: who want to do jobs where uh you can uh
Speaker 1: work at home. Employers are reluctant to pay what it
Speaker 1: aches to fill those vacancies quickly because they think it's
Speaker 1: more profitable to ultimately have some vacancies and turn some
Speaker 1: people away than it is to raise raise wagses across
Speaker 1: the board. I think all of these UH things are
Speaker 1: contributing factors, and I think with respect to airlines UH.
Speaker 1: While a lot of it is on the labor side,
Speaker 1: there are also some very substantial infrastructure issues that the
Speaker 1: country is under invested in UH for a long time.
Speaker 1: And finally, Hilarry, we had NATO meetings, maybe historic meetings.
Speaker 1: They really changed their strategy this week. And I wonder
Speaker 1: as we look at the war in Ukraine that Russia
Speaker 1: has perpetrated there, do you think there may be long
Speaker 1: term really long term effects on the global economies. Certainly
Speaker 1: have been the short term. What about longer term? Well,
Speaker 1: historians will debate whether the Russia Ukraine war as a
Speaker 1: cause of big changes or was a consequence of tectonic
Speaker 1: forces that has been operating for some time. But I
Speaker 1: was very struck when you had a NATO meeting that
Speaker 1: for the first time invited a number of countries in
Speaker 1: Asia to participate in it and identified UH China as
Speaker 1: a security risk that had to be UH prepared for
Speaker 1: alongside Russia. It did very much have the feeling of
Speaker 1: a world that was forming blocks and choosing up teams,
Speaker 1: not unlike or in some ways not unlike UH. The
Speaker 1: alignment that existed uh in the fifties and UH the
Speaker 1: six to East when Russia and China were allied and
Speaker 1: there was a mobilization of Western countries along with some
Speaker 1: Asian countries against them, and that seemed to be away
Speaker 1: in which things, uh, things were moving. And that's gonna
Speaker 1: be a quite different world than the world we've had
Speaker 1: for the last twenty five or thirty five years. Okay,
Speaker 1: thank you so very much. The Larry Summers at Harvard
Speaker 1: are very special contributor right here on Wall Street week Finally,
Speaker 1: one more thought the potentially toxic mix of politics and sports.
Speaker 1: It's the long Fourth of July weekend in the United States,
Speaker 1: that summertime holiday when we look forward to fireworks a
Speaker 1: company in Boston, by the famed Boston Pops concert on
Speaker 1: the Charles River, two politicians giving speeches. Today we celebrate America,
Speaker 1: our freedom, our liberty, our independence, to picnics, and not
Speaker 1: least to sports, whether it's baseball with both the Yankees
Speaker 1: and the Mets on top of their divisions, or golf
Speaker 1: John Dear Classic out in Illinois, or the early rounds
Speaker 1: of Wimbledon. I think the last couple of points that
Speaker 1: was really suffering there tirant now. So, with the country
Speaker 1: seemingly more divided than it's ever been, defriding the electoral account,
Speaker 1: I believe we can fix it on the way. I'm
Speaker 1: with all of you. Let's do this together. It's a
Speaker 1: good time to put all that political strike behind this
Speaker 1: and just get caught up in the game. Right. Well,
Speaker 1: maybe not so fast, because it turns out that even
Speaker 1: as you root for your favorite athlete or team, the
Speaker 1: powers that be maybe angling to use your sports to
Speaker 1: get their own edge, an edge that goes way beyond
Speaker 1: the points. Read take Wimbledon for example, this year, competitors
Speaker 1: from Russia and Belarus will be barred from competing as
Speaker 1: punishment for Russia's invading Ukraine. That I feel good being
Speaker 1: at the tournament without having to see players from that
Speaker 1: country segain and China has just changed its sports law
Speaker 1: to authorize retaliation against anyone who shows the Middle Kingdom disrespect,
Speaker 1: though what that means is anyone's guess. And even golf
Speaker 1: isn't immune from politics, with a major feud between the
Speaker 1: p g A and the upstart Live Golf, which is
Speaker 1: back by the Saudi Well Fund. The PGA tour in
Speaker 1: American institution can't compete with a foreign monarchy that is
Speaker 1: spending billions of dollars an attempt to buy the game
Speaker 1: of golf. And it turns out none other than the
Speaker 1: former golfer in chief, One Donald J. Trump, as he
Speaker 1: welcomes the tour to his home course in Bedminster, New Jersey,
Speaker 1: hun July twenty nine. But all that's almost a month away.
Speaker 1: In the meantime, let's try and leave politics out of
Speaker 1: it and just enjoy the holiday that does it. For
Speaker 1: this episode of Wall Street Week, I'm David Weston. This
Speaker 1: is Bloomberg. See you next week. M