1 00:00:00,240 --> 00:00:05,000 Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 2 00:00:05,040 --> 00:00:07,400 Speaker 1: The economy is in the process of rebounding. Will the 3 00:00:07,480 --> 00:00:10,479 Speaker 1: utter reserve have its own digital currency? The financial stories 4 00:00:10,520 --> 00:00:12,879 Speaker 1: that cheap hard work. Many people think the yields are 5 00:00:12,880 --> 00:00:15,080 Speaker 1: just going to keep marching up. We have more spending 6 00:00:15,120 --> 00:00:17,200 Speaker 1: coming out of Congress. One of the big questions I 7 00:00:17,200 --> 00:00:19,880 Speaker 1: think on investor's mind inflation through the eyes of the 8 00:00:19,920 --> 00:00:23,560 Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary, 9 00:00:23,640 --> 00:00:27,240 Speaker 1: Bryan wynahand back of America, Will Smart, CEO of Charlie Sharp. 10 00:00:27,360 --> 00:00:31,560 Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio. 11 00:00:32,040 --> 00:00:35,680 Speaker 1: COVID takes its toll on the healthcare system, on the economy, 12 00:00:35,760 --> 00:00:39,120 Speaker 1: on the markets, on us all. This is Bloomberg Wall 13 00:00:39,120 --> 00:00:42,520 Speaker 1: Street Week. I'm David Weston, and the markets this week 14 00:00:42,560 --> 00:00:44,400 Speaker 1: may have given just a little bit of a hint 15 00:00:44,400 --> 00:00:47,159 Speaker 1: of a reaction to that continuing threat from COVID as 16 00:00:47,200 --> 00:00:49,880 Speaker 1: equities moved down at least a bit, with the SMP 17 00:00:50,000 --> 00:00:53,200 Speaker 1: five having its worst week since June, dropping every day 18 00:00:53,320 --> 00:00:56,120 Speaker 1: in this holiday shortened week, but treasury yields on the 19 00:00:56,240 --> 00:00:58,720 Speaker 1: hand actually rose a bit, although it wasn't clear whether 20 00:00:58,800 --> 00:01:01,880 Speaker 1: that was about risk appetae or increased supply. To take 21 00:01:01,960 --> 00:01:03,960 Speaker 1: us through what the markets are trying to tell us, 22 00:01:04,240 --> 00:01:06,720 Speaker 1: we welcome now Rick Reader. He's black Rock CEO for 23 00:01:06,800 --> 00:01:09,319 Speaker 1: fixed income and a head of its global allocation team. 24 00:01:09,600 --> 00:01:12,960 Speaker 1: And Sunny bachelors Rock Creek founder and CEO. So Sunny, 25 00:01:13,040 --> 00:01:15,840 Speaker 1: let me start with you. Were the markets reacting to 26 00:01:15,880 --> 00:01:17,600 Speaker 1: COVID Do you think what do you think happened this week? 27 00:01:17,760 --> 00:01:21,600 Speaker 1: You know, it was sort of back to school and UM, 28 00:01:21,680 --> 00:01:24,280 Speaker 1: COVID obviously has been a problem, but it seemed like 29 00:01:24,680 --> 00:01:28,080 Speaker 1: it really came to hit people as if it's not 30 00:01:28,160 --> 00:01:32,560 Speaker 1: going away and um, and it's with us. It's impacting 31 00:01:32,680 --> 00:01:36,319 Speaker 1: not just markets, but we've had Dr Fauci on, you've 32 00:01:36,360 --> 00:01:39,319 Speaker 1: had him on and uh, and now we're moving not 33 00:01:39,440 --> 00:01:43,200 Speaker 1: just from the delta variants but potentially other variants. So 34 00:01:43,240 --> 00:01:47,280 Speaker 1: the market is starting to be concerned about that. Also. UM, 35 00:01:47,720 --> 00:01:51,520 Speaker 1: other big item, which is the other big elephant in 36 00:01:51,560 --> 00:01:55,280 Speaker 1: the room, that started impacting markets more this week was 37 00:01:55,360 --> 00:01:59,000 Speaker 1: obviously things like inflation. The big growth numbers that got 38 00:01:59,040 --> 00:02:03,360 Speaker 1: adjusted from from much higher numbers too much lower numbers, 39 00:02:03,400 --> 00:02:06,080 Speaker 1: whether we were looking at fat numbers or Goldman or 40 00:02:06,080 --> 00:02:08,720 Speaker 1: Morgan Style or other numbers. So I think all of 41 00:02:08,760 --> 00:02:11,400 Speaker 1: those came together at this speek. So we're let's pick 42 00:02:11,480 --> 00:02:13,120 Speaker 1: up exactly where Sani was because I was going to 43 00:02:13,160 --> 00:02:15,800 Speaker 1: ask about Goldman, Morgan, Stanley, the various numbers that are 44 00:02:15,840 --> 00:02:19,240 Speaker 1: coming in. Do you anticipate growth may actually not be 45 00:02:19,400 --> 00:02:21,760 Speaker 1: as fast as we thought were because of COVID And 46 00:02:21,800 --> 00:02:23,520 Speaker 1: if so, how do you take that into account as 47 00:02:23,520 --> 00:02:26,359 Speaker 1: an investment? So I think there's two things that are 48 00:02:26,400 --> 00:02:29,839 Speaker 1: slow in growth today that are and you know, it's 49 00:02:29,840 --> 00:02:32,240 Speaker 1: hard to always, you know, try and simplify things into 50 00:02:32,320 --> 00:02:34,079 Speaker 1: component parts, which is always hard to do. But I 51 00:02:34,080 --> 00:02:37,400 Speaker 1: think there are two things. One you have that clearly COVID, 52 00:02:38,280 --> 00:02:40,520 Speaker 1: and you look at parts of the travel sector and 53 00:02:40,639 --> 00:02:45,079 Speaker 1: leisure restaurants, etcetera. There's clearly some caution that's that's coming 54 00:02:45,080 --> 00:02:47,639 Speaker 1: to the system that's created some growth slow down. However, 55 00:02:47,760 --> 00:02:51,720 Speaker 1: the biggest driver of growth slow down by far, and 56 00:02:52,080 --> 00:02:55,360 Speaker 1: quite frankly, more than anything I've ever seen, is supply. 57 00:02:55,919 --> 00:02:59,600 Speaker 1: There's not enough supply of product. This actually demand if 58 00:02:59,600 --> 00:03:02,040 Speaker 1: you look at economy what is happening, and you see 59 00:03:02,040 --> 00:03:03,440 Speaker 1: this in all the earnings reports too, So on the 60 00:03:03,480 --> 00:03:05,520 Speaker 1: home builders this week, you see in the autos parvitually 61 00:03:05,600 --> 00:03:09,600 Speaker 1: every auto company about semiconductor supply shortage. It's actually a 62 00:03:09,600 --> 00:03:13,239 Speaker 1: remarkable thing. It's not demand. Demand is actually as high 63 00:03:13,320 --> 00:03:15,800 Speaker 1: as I've ever seen it. Now there's some transition because 64 00:03:15,800 --> 00:03:18,600 Speaker 1: of COVID into things that are online, etcetera. But it's 65 00:03:18,639 --> 00:03:22,160 Speaker 1: actually supply. Companies can't fulfill the demand. And so a 66 00:03:22,240 --> 00:03:24,679 Speaker 1: bunch of what's impacted some of the equities of these 67 00:03:24,680 --> 00:03:27,120 Speaker 1: companies is that they just can't get the goods, they 68 00:03:27,120 --> 00:03:29,520 Speaker 1: can't get the input, they can't get the labor. And 69 00:03:29,560 --> 00:03:32,200 Speaker 1: that's been been, quite frankly, the most extraordinary thing I've 70 00:03:32,200 --> 00:03:34,880 Speaker 1: seen in my career thirt or five years of doing this. 71 00:03:34,920 --> 00:03:38,160 Speaker 1: I've never seen where the economy modulate demand. Uh and 72 00:03:38,360 --> 00:03:40,920 Speaker 1: what the central MICTU does modulate the end. But it's 73 00:03:40,960 --> 00:03:44,280 Speaker 1: actually supply that's that's creating this dynamic today. Okay, So Rick, 74 00:03:44,360 --> 00:03:47,800 Speaker 1: let me commit heresy in financial journalism. Is it possible 75 00:03:47,800 --> 00:03:50,240 Speaker 1: we're paying too much attention to the FED given that, 76 00:03:50,600 --> 00:03:52,520 Speaker 1: because as you just suggest that the FED can't do 77 00:03:52,560 --> 00:03:56,120 Speaker 1: a whole lot about supply. I mean, it's it's actually 78 00:03:56,160 --> 00:03:59,520 Speaker 1: remarkable because when any piece of economic data comes out 79 00:03:59,600 --> 00:04:02,600 Speaker 1: like the employment and like the number of last this 80 00:04:02,880 --> 00:04:05,040 Speaker 1: last week came in a bit softer. There were some 81 00:04:05,080 --> 00:04:07,200 Speaker 1: reasons why it came in software, including some of the 82 00:04:07,240 --> 00:04:10,000 Speaker 1: seasonal of some education jobs that will take a bit 83 00:04:10,040 --> 00:04:12,400 Speaker 1: of time to come in. But there's a kneat jerk 84 00:04:12,400 --> 00:04:14,520 Speaker 1: reaction in markets because this is the way we've operated 85 00:04:14,560 --> 00:04:18,960 Speaker 1: for decades. Softer data, Oh my god, we need central 86 00:04:19,000 --> 00:04:21,240 Speaker 1: bank policy. The fact of the matter is, quantity of 87 00:04:21,240 --> 00:04:24,400 Speaker 1: easing is not doing anything to create to create any 88 00:04:24,480 --> 00:04:28,039 Speaker 1: any increase in supply chain. It's not doing anything to 89 00:04:28,080 --> 00:04:32,280 Speaker 1: actually increase the supply of labor. Unemployment benefits rolling off. 90 00:04:32,279 --> 00:04:34,480 Speaker 1: Will the summer ending when people come back to work, 91 00:04:34,600 --> 00:04:38,200 Speaker 1: that will. But monetary policy has actually no influence in 92 00:04:38,400 --> 00:04:41,400 Speaker 1: modulates demand. But we don't need to modulate demand today. 93 00:04:41,400 --> 00:04:44,640 Speaker 1: We've got this incredible tail wind CAPEX spending, R and 94 00:04:44,760 --> 00:04:48,160 Speaker 1: D spunding from companies. Consumer that is has cash on hand, 95 00:04:48,240 --> 00:04:50,560 Speaker 1: is delivered their houses, and is in great It was 96 00:04:50,600 --> 00:04:52,480 Speaker 1: a big part of the wealth component US. I don't 97 00:04:52,480 --> 00:04:54,719 Speaker 1: know if it's applier demand, but we're certainly getting news 98 00:04:54,760 --> 00:04:57,560 Speaker 1: out of Beijing. We got more news this week as 99 00:04:57,600 --> 00:05:00,599 Speaker 1: we have presidents you're really clamping down on one part 100 00:05:00,600 --> 00:05:02,880 Speaker 1: of the industry after another. What is going on and 101 00:05:03,000 --> 00:05:05,880 Speaker 1: what is it telling investors? Is China investable right now? 102 00:05:06,000 --> 00:05:08,920 Speaker 1: You know a lot of investors are looking at China 103 00:05:09,000 --> 00:05:12,120 Speaker 1: really carefully and wondering whether it's time to maybe go 104 00:05:12,279 --> 00:05:15,520 Speaker 1: neutral or reduce or take the feed off the pedal. 105 00:05:15,640 --> 00:05:18,520 Speaker 1: At the moment um, Now that may or may not 106 00:05:18,600 --> 00:05:21,880 Speaker 1: make a big difference because foreign investors in China may 107 00:05:21,920 --> 00:05:24,760 Speaker 1: only account depending on which Chinese market you're looking at, 108 00:05:24,800 --> 00:05:29,400 Speaker 1: anything from five to approximately of the total market, so 109 00:05:29,839 --> 00:05:32,240 Speaker 1: they will there will be an impact, and obviously the 110 00:05:32,360 --> 00:05:36,839 Speaker 1: Chinese want that foreign investment in their market, both private 111 00:05:36,920 --> 00:05:40,760 Speaker 1: and public markets. But it's really interesting. I think the 112 00:05:40,760 --> 00:05:43,000 Speaker 1: thing to me that was the most worrisome was not 113 00:05:43,160 --> 00:05:46,400 Speaker 1: all the things we've been reading about on clampdowns. Maybe 114 00:05:46,480 --> 00:05:50,200 Speaker 1: they do need better regulation after stock markets and across 115 00:05:50,240 --> 00:05:53,600 Speaker 1: the board all the markets in China, but when they 116 00:05:53,640 --> 00:05:58,240 Speaker 1: said they're going to start having government ownership in certain companies, 117 00:05:58,240 --> 00:06:00,960 Speaker 1: whether they steady or others, it's sort of I don't 118 00:06:01,000 --> 00:06:03,200 Speaker 1: want to take it back to put In and German 119 00:06:03,279 --> 00:06:06,120 Speaker 1: and Russia, but you know, it does remind you a 120 00:06:06,120 --> 00:06:10,200 Speaker 1: little bit of a very different scenario, and that can 121 00:06:10,240 --> 00:06:14,080 Speaker 1: be very, very worrisome if that trend continues. At the 122 00:06:14,120 --> 00:06:16,839 Speaker 1: same time, let's not forget as Rick was saying and 123 00:06:16,880 --> 00:06:19,880 Speaker 1: you were saying, David Um and a friend of the 124 00:06:19,960 --> 00:06:23,719 Speaker 1: program has recently written Dan Jerrikin on supply chain problems 125 00:06:23,920 --> 00:06:26,960 Speaker 1: the ports, right, whether you're looking at China, whether you're 126 00:06:26,960 --> 00:06:31,840 Speaker 1: looking in California, are railways, Um, They're all clocked right, 127 00:06:31,880 --> 00:06:35,200 Speaker 1: So regardless of what agreements are made between the two countries, 128 00:06:35,600 --> 00:06:38,760 Speaker 1: those are not going away unless we have a really 129 00:06:38,800 --> 00:06:41,920 Speaker 1: good infrastructure build here and start building infrastructure. But that's 130 00:06:41,960 --> 00:06:44,440 Speaker 1: going to take a few years. That's Rock Creek CEO 131 00:06:44,560 --> 00:06:47,839 Speaker 1: of Sonny Bachelas and Black Rock ce IO of Fixed Income. 132 00:06:47,960 --> 00:06:51,120 Speaker 1: Rick Reader coming up. The round table stays with us 133 00:06:51,160 --> 00:06:54,159 Speaker 1: as we continue our conversation on the market. That's next. 134 00:06:54,440 --> 00:07:02,919 Speaker 1: This is Wall Street Week on Bloomberg. This is Bloomberg 135 00:07:03,000 --> 00:07:07,120 Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. This 136 00:07:07,160 --> 00:07:09,840 Speaker 1: week we saw a del uge in bond issuance, with 137 00:07:09,960 --> 00:07:13,080 Speaker 1: the record twenty one deals on Monday and nearly eighty 138 00:07:13,160 --> 00:07:15,320 Speaker 1: billion dollars in new issuance over the course of a 139 00:07:15,360 --> 00:07:18,360 Speaker 1: short week. Around Table of Sonny Becheliss of Rock Creek 140 00:07:18,400 --> 00:07:20,480 Speaker 1: and Rick, reader of black Rock, have stayed with us. 141 00:07:20,640 --> 00:07:22,880 Speaker 1: So Rick, at what point do we get nervous that 142 00:07:22,960 --> 00:07:25,480 Speaker 1: companies are buying this much money? You know, David, I 143 00:07:25,520 --> 00:07:27,000 Speaker 1: mean I think quite frankly, if you said to me, 144 00:07:27,040 --> 00:07:28,440 Speaker 1: what are the top stories of the week, I actually 145 00:07:28,520 --> 00:07:33,000 Speaker 1: think the amount of digestion of of of product was extraordinary. 146 00:07:33,160 --> 00:07:35,400 Speaker 1: The amount of investment grade credit supply that's coming to 147 00:07:35,400 --> 00:07:38,000 Speaker 1: mark We're gonna get a roughly a hundred fifty billion 148 00:07:38,680 --> 00:07:40,960 Speaker 1: this month. The amount of high yield supply that's coming 149 00:07:40,960 --> 00:07:42,880 Speaker 1: to the market that just keeps breaking records, The amount 150 00:07:42,880 --> 00:07:44,760 Speaker 1: of treasury supply that keeps breaking records, by the way, 151 00:07:44,800 --> 00:07:46,960 Speaker 1: equity supply. It's where it port of puts in a 152 00:07:47,040 --> 00:07:49,600 Speaker 1: perspective why I always find the irony of you know, 153 00:07:49,680 --> 00:07:52,720 Speaker 1: keep talking about as a fedget a taper fifteen billion 154 00:07:53,320 --> 00:07:55,400 Speaker 1: a month of treasuries. We're getting a hundred and fifty 155 00:07:55,400 --> 00:07:58,720 Speaker 1: billion of investment grades supply. But the market has an 156 00:07:58,760 --> 00:08:02,720 Speaker 1: incredible reset tivity to all this paper. And it's because 157 00:08:02,760 --> 00:08:05,920 Speaker 1: I think people underestimate that a the demographic condition that 158 00:08:05,960 --> 00:08:09,160 Speaker 1: we're in, the liquidity condition we're in, and there's actually 159 00:08:09,160 --> 00:08:12,920 Speaker 1: not enough assets for pension funds, for insurance companies for 160 00:08:13,040 --> 00:08:15,720 Speaker 1: international investors at the right yield. Today's part of I 161 00:08:15,840 --> 00:08:18,880 Speaker 1: talk all quite a bit about the crowding out dynamic 162 00:08:18,920 --> 00:08:22,720 Speaker 1: and central banks. There is extrudin amount advantage. The interesting 163 00:08:22,720 --> 00:08:24,480 Speaker 1: thing this week, you so the e c B pulled back, 164 00:08:24,520 --> 00:08:27,040 Speaker 1: as you said earlier, on their buying, what did rates do? 165 00:08:27,200 --> 00:08:29,640 Speaker 1: Rates moderately rallied on the back side of it. We 166 00:08:29,680 --> 00:08:34,040 Speaker 1: don't need that additional buying. The system can absorb amazing 167 00:08:34,120 --> 00:08:37,200 Speaker 1: amounts of product, and we're in a unique point in 168 00:08:37,280 --> 00:08:39,560 Speaker 1: time that that it's not going to go away tomorrow. 169 00:08:39,640 --> 00:08:42,040 Speaker 1: So anyway, I thought that was the biggest The biggest 170 00:08:42,040 --> 00:08:44,360 Speaker 1: story of the week is just watching all this product. Gosh, 171 00:08:44,400 --> 00:08:45,920 Speaker 1: we were you know, I think I think a lot 172 00:08:45,960 --> 00:08:49,320 Speaker 1: of investors, like ourselves have built up cash anticipating the 173 00:08:49,320 --> 00:08:51,920 Speaker 1: supply that's coming and going. You saw that paper getting 174 00:08:51,920 --> 00:08:54,880 Speaker 1: absorbed readily across markets this week. So I've Sunday, as 175 00:08:54,880 --> 00:08:57,000 Speaker 1: you know so well. I get nervous when we say 176 00:08:57,040 --> 00:08:59,480 Speaker 1: it's different this time. I mean normally, I think when 177 00:08:59,600 --> 00:09:02,240 Speaker 1: companies are borrowing that much money, the balance sheet really 178 00:09:02,240 --> 00:09:04,760 Speaker 1: gets skewed and there's a piper to pay somewhere down 179 00:09:04,840 --> 00:09:07,040 Speaker 1: the road. And my wrong is the world different in 180 00:09:07,080 --> 00:09:10,679 Speaker 1: partecuse of the demographic reasons that we're just identified. Certainly, 181 00:09:10,679 --> 00:09:13,560 Speaker 1: the interest rates are low, but should we be concerned 182 00:09:13,600 --> 00:09:15,240 Speaker 1: as you invest in companies, do you take a hard 183 00:09:15,280 --> 00:09:18,280 Speaker 1: look at the balance sheet. Certainly are looking at UH 184 00:09:18,880 --> 00:09:21,360 Speaker 1: the credit rating and companies more and more and more 185 00:09:21,520 --> 00:09:24,280 Speaker 1: as we're going along and looking at UH, you know, 186 00:09:24,640 --> 00:09:27,880 Speaker 1: the higher end more and more for the very reason 187 00:09:28,000 --> 00:09:31,600 Speaker 1: that you just said, David. The two things. That's obviously 188 00:09:31,800 --> 00:09:34,000 Speaker 1: you know, if you have such cheap money right now, 189 00:09:34,080 --> 00:09:36,760 Speaker 1: and there is an expectation of rates going up, no 190 00:09:36,920 --> 00:09:40,520 Speaker 1: question that companies are going to raise raised bond issues, 191 00:09:40,920 --> 00:09:43,720 Speaker 1: whether they needed immediately, whether they don't, they're going to 192 00:09:43,760 --> 00:09:46,600 Speaker 1: do it right now. The other thing that is interesting, 193 00:09:46,760 --> 00:09:49,800 Speaker 1: and we saw also with Verizon and Walmart, was that 194 00:09:49,840 --> 00:09:52,520 Speaker 1: they're also increasing their issues of E S G and 195 00:09:52,600 --> 00:09:56,040 Speaker 1: green bonds and UM and those actually have higher yields, 196 00:09:56,040 --> 00:09:59,839 Speaker 1: which surprised us. But that was also an interesting factor 197 00:10:00,040 --> 00:10:03,520 Speaker 1: given the amount, and that also got absorbed very very 198 00:10:03,600 --> 00:10:06,319 Speaker 1: quickly and easily. So I think I agree very much 199 00:10:06,320 --> 00:10:09,440 Speaker 1: also with what wek is saying. Liquidity is enormous in 200 00:10:09,480 --> 00:10:14,280 Speaker 1: the market and people are looking for assets across the board, bonds, equities, 201 00:10:14,360 --> 00:10:18,679 Speaker 1: you know, real assets. Uh, and so that is pushing 202 00:10:18,720 --> 00:10:24,240 Speaker 1: people towards towards whatever size bond issues are going out, 203 00:10:24,559 --> 00:10:28,320 Speaker 1: They're getting absorbed even faster. In terms of concern, I 204 00:10:28,360 --> 00:10:31,160 Speaker 1: think no question that you have to start looking at 205 00:10:31,160 --> 00:10:34,040 Speaker 1: the quality of companies compared to you know, in the 206 00:10:34,080 --> 00:10:37,800 Speaker 1: beginning of this cycle or you know, beginning of the 207 00:10:37,880 --> 00:10:41,600 Speaker 1: liquidity jump and um. And I think everyone is doing 208 00:10:41,600 --> 00:10:43,320 Speaker 1: that right now. So I kind of want to come 209 00:10:43,320 --> 00:10:45,240 Speaker 1: back to inflation. Maybe we've talked about it too much 210 00:10:45,240 --> 00:10:46,559 Speaker 1: on this program, but I want to come back to 211 00:10:46,559 --> 00:10:49,640 Speaker 1: that again. Ken Rogoff from Harvard wrote a piece this 212 00:10:49,679 --> 00:10:51,960 Speaker 1: week who said we should be a little bit nervous 213 00:10:52,040 --> 00:10:54,640 Speaker 1: because with all this leverage coming in, it mg limit 214 00:10:54,720 --> 00:10:57,600 Speaker 1: the optionality of FED if they do need to react 215 00:10:57,640 --> 00:11:00,640 Speaker 1: to inflation, because if they start raising, it's it's really 216 00:11:00,679 --> 00:11:03,000 Speaker 1: gonna cause mischief. Are you concerned about that? Does it 217 00:11:03,120 --> 00:11:06,280 Speaker 1: limit the options available to FED? I mean part of 218 00:11:06,280 --> 00:11:08,160 Speaker 1: why I think I think there's a really tricky thing 219 00:11:08,160 --> 00:11:09,480 Speaker 1: at the fun and part of why I think they 220 00:11:09,480 --> 00:11:11,719 Speaker 1: need to start moving. I think they do do need 221 00:11:11,760 --> 00:11:13,720 Speaker 1: to build in some optionality. Listen, interest rates are gonna 222 00:11:13,760 --> 00:11:15,880 Speaker 1: stay low for a really long time. You know, I think, 223 00:11:16,160 --> 00:11:18,480 Speaker 1: you know, you are getting more inflation working its way 224 00:11:18,480 --> 00:11:21,439 Speaker 1: in another system. I think, I don't really think inflation 225 00:11:21,520 --> 00:11:23,760 Speaker 1: is going to create tremendous stress. However, I don't think 226 00:11:23,760 --> 00:11:27,360 Speaker 1: we should overdo it on monetary policy, but I think 227 00:11:27,360 --> 00:11:29,520 Speaker 1: the FED needs to be thoughtful about to think about 228 00:11:29,600 --> 00:11:31,319 Speaker 1: the you know, the tail winds we talked about it 229 00:11:31,440 --> 00:11:34,600 Speaker 1: or in the economy today from all the monetary policy stimulus, 230 00:11:34,640 --> 00:11:36,600 Speaker 1: all the fiscal policy stimulus, and we're gonna get more 231 00:11:36,679 --> 00:11:39,480 Speaker 1: your debate the size, We're gonna get more fiscal policy stimulus. 232 00:11:39,880 --> 00:11:43,079 Speaker 1: And you think about cash on hand at companies that 233 00:11:43,200 --> 00:11:46,640 Speaker 1: wherewithal for them to spend defends in a tricky spot 234 00:11:46,640 --> 00:11:48,000 Speaker 1: if you you know, when we look at the next 235 00:11:48,000 --> 00:11:50,880 Speaker 1: FED meeting and you look at their expectations where interestates 236 00:11:50,880 --> 00:11:54,720 Speaker 1: are gonna be two thousand four, the expectations that they're 237 00:11:54,720 --> 00:11:57,600 Speaker 1: gonna be raising rates in two thousand twenty four, now 238 00:11:57,720 --> 00:12:00,600 Speaker 1: is when you have the tailwind. The economy could very 239 00:12:00,600 --> 00:12:03,439 Speaker 1: well slow two years hence, and then your FEN is 240 00:12:03,480 --> 00:12:04,959 Speaker 1: going to be in a position which, gosh, now we've 241 00:12:04,960 --> 00:12:07,680 Speaker 1: got to raise rates when we don't have those series 242 00:12:07,720 --> 00:12:10,400 Speaker 1: of catalysts driving economic growth. So part of what I 243 00:12:10,400 --> 00:12:12,680 Speaker 1: think that if it needs to build some optionality today 244 00:12:13,280 --> 00:12:15,720 Speaker 1: is you've got all these hill winds. You know growth 245 00:12:15,840 --> 00:12:17,360 Speaker 1: is going to be durable. You know hiring is gonna 246 00:12:17,360 --> 00:12:20,680 Speaker 1: be durable when you see those sort of indicators in surveys, 247 00:12:20,720 --> 00:12:23,320 Speaker 1: and so build some optionality. And I think you're seeing this. 248 00:12:23,480 --> 00:12:25,400 Speaker 1: We talked about the ECB, we talk about banking bank 249 00:12:25,360 --> 00:12:27,240 Speaker 1: account of the Bank of England, the Bank of Korea 250 00:12:27,480 --> 00:12:30,320 Speaker 1: pulled back a bit on emergency policy because you need 251 00:12:30,320 --> 00:12:34,000 Speaker 1: to be thoughtful about future optionality. So give us some 252 00:12:34,040 --> 00:12:37,760 Speaker 1: investment advice here, Where are their options? Where is the 253 00:12:37,880 --> 00:12:40,480 Speaker 1: return to be gotten? And given all the liquidity going 254 00:12:40,520 --> 00:12:43,800 Speaker 1: on that drives down returns, typically where their opportunities out 255 00:12:43,840 --> 00:12:46,840 Speaker 1: there to get returned. So I think on the negative side, 256 00:12:46,840 --> 00:12:48,880 Speaker 1: we just talked about bonds, I think, and you asked 257 00:12:48,920 --> 00:12:51,160 Speaker 1: about credits, So those are probably areas you want to 258 00:12:51,160 --> 00:12:53,920 Speaker 1: be really careful about on the high yield side, and 259 00:12:54,000 --> 00:12:56,360 Speaker 1: Rick knows about that a lot more than anybody else. 260 00:12:56,840 --> 00:13:00,719 Speaker 1: Um On the positive side, again, I think because of 261 00:13:00,760 --> 00:13:04,280 Speaker 1: what we just heard from break that huge amount of liquidity, 262 00:13:04,320 --> 00:13:07,480 Speaker 1: there will be a lot of pressures on the equity markets, 263 00:13:07,480 --> 00:13:12,240 Speaker 1: but equity markets certain parts of them, particularly better companies 264 00:13:12,240 --> 00:13:14,880 Speaker 1: with better balance sheets I think, will still be desirable 265 00:13:14,920 --> 00:13:19,240 Speaker 1: to people. And then moving on, Europe probably is a 266 00:13:19,280 --> 00:13:22,920 Speaker 1: really interesting place because they've been behind us, uh and 267 00:13:22,960 --> 00:13:25,960 Speaker 1: as they are getting out of the same pressures as 268 00:13:26,000 --> 00:13:29,400 Speaker 1: we just talked about Europe, European equities will be also 269 00:13:29,520 --> 00:13:32,840 Speaker 1: very interesting. Last, but not least obviously. Um. As I've 270 00:13:33,000 --> 00:13:36,360 Speaker 1: said before, we still think that the biggest opportunities are 271 00:13:36,360 --> 00:13:40,920 Speaker 1: in that intersection of technology, with the education and health 272 00:13:41,160 --> 00:13:45,280 Speaker 1: and climate related property tech, all those kinds of things 273 00:13:45,559 --> 00:13:48,160 Speaker 1: as our lives are getting changed. So we're the same question. 274 00:13:48,240 --> 00:13:50,679 Speaker 1: You you probably put more money actually work than anybody 275 00:13:50,720 --> 00:13:52,800 Speaker 1: I know, not to take anything with her, Sonny, but 276 00:13:52,800 --> 00:13:54,120 Speaker 1: you have an awful lot of money put to work. 277 00:13:54,320 --> 00:13:56,520 Speaker 1: We're the opportunities that you're looking at. I mean, I 278 00:13:56,559 --> 00:13:58,760 Speaker 1: agree with the revers everything of sunny Side and and 279 00:13:59,240 --> 00:14:01,920 Speaker 1: from I don't think the equity market is too high. 280 00:14:02,040 --> 00:14:03,560 Speaker 1: I actually think I mean, there are a number of 281 00:14:03,600 --> 00:14:05,720 Speaker 1: companies there are. You can find some equities that traded 282 00:14:05,760 --> 00:14:08,040 Speaker 1: to high a multiple. But boy, you know, when you 283 00:14:08,080 --> 00:14:10,240 Speaker 1: look at companies throwing off the sort of free cash 284 00:14:10,240 --> 00:14:14,480 Speaker 1: flow that they're throwing off the earnings power that they're 285 00:14:14,480 --> 00:14:15,800 Speaker 1: throwing off that I move. We find a lot of 286 00:14:15,840 --> 00:14:20,760 Speaker 1: companies return on equity and they're multiples. You know, in 287 00:14:20,800 --> 00:14:22,880 Speaker 1: that environment, when you're long that much cash, you do 288 00:14:23,080 --> 00:14:25,360 Speaker 1: M and A, you do Capex, you could do R 289 00:14:25,440 --> 00:14:27,640 Speaker 1: and D well. I don't think the equity market in 290 00:14:27,680 --> 00:14:29,560 Speaker 1: aggregates too high. What I do worry about a little 291 00:14:29,560 --> 00:14:32,040 Speaker 1: bit is we talked about there's not a lot of 292 00:14:32,120 --> 00:14:35,280 Speaker 1: inequality fixed income, there's not a lot of value. But 293 00:14:35,320 --> 00:14:37,320 Speaker 1: what happens is everybody shifts to one side of the boat, 294 00:14:37,320 --> 00:14:40,280 Speaker 1: which can create, you know, some tricky dynamics, which is 295 00:14:40,320 --> 00:14:42,120 Speaker 1: something that that we're keeping an eye on. Thanks to 296 00:14:42,200 --> 00:14:45,680 Speaker 1: Rock Creek CEO off Sani Bechelas and Rick Reader of 297 00:14:45,760 --> 00:14:48,840 Speaker 1: Black Rock. Coming up, we reflect back on what happened 298 00:14:48,880 --> 00:14:51,680 Speaker 1: twenty years ago when Wall Street and the nation were 299 00:14:51,720 --> 00:14:54,960 Speaker 1: attacked on nine eleven, with Roger Ferguson, who was the 300 00:14:54,960 --> 00:14:57,640 Speaker 1: FED Vice chair who led the response of the financial 301 00:14:57,640 --> 00:15:00,440 Speaker 1: system to the crisis. That's next on Walls three week 302 00:15:00,720 --> 00:15:09,280 Speaker 1: on Bloomberg. This is Bloomberg Wall Street Week with David 303 00:15:09,320 --> 00:15:14,680 Speaker 1: Weston from Bloomberg Radio America. Heard the news as it 304 00:15:14,760 --> 00:15:18,080 Speaker 1: was going to work, going to school, or just waking up. 305 00:15:18,680 --> 00:15:23,800 Speaker 1: An airplane is reportedly has crashed into the World Trade Center. 306 00:15:23,920 --> 00:15:27,880 Speaker 1: That is a live shot. Seventeen minutes after the first 307 00:15:27,920 --> 00:15:31,120 Speaker 1: plane hit the World Trade Center's North tower, a second 308 00:15:31,160 --> 00:15:36,640 Speaker 1: plane hit the South tower. President Push was in Florida 309 00:15:36,920 --> 00:15:40,000 Speaker 1: visiting an elementary school. His chief of staff leaned over 310 00:15:40,040 --> 00:15:45,160 Speaker 1: and whispered, America is under attack. A third plane crashed 311 00:15:45,200 --> 00:15:48,080 Speaker 1: into the Pentagon. A fourth plane appeared to be heading 312 00:15:48,120 --> 00:15:52,040 Speaker 1: to Washington, but it crashed in Pennsylvania after passengers and 313 00:15:52,080 --> 00:15:56,440 Speaker 1: crew tried to regain control from the hijackers. By then, 314 00:15:56,560 --> 00:16:00,000 Speaker 1: the f a A had taken an unprecedented step. Every 315 00:16:00,160 --> 00:16:02,880 Speaker 1: airline in US air space was ordered to land at 316 00:16:02,920 --> 00:16:06,800 Speaker 1: the nearest airport. Three days later, President Bush went to 317 00:16:06,880 --> 00:16:10,400 Speaker 1: Ground Zero. What became known as the Global War on 318 00:16:10,560 --> 00:16:14,800 Speaker 1: Terrorism was about to begin. I can hear you the 319 00:16:14,960 --> 00:16:17,880 Speaker 1: rest of the while here. You and the people are 320 00:16:18,000 --> 00:16:21,640 Speaker 1: not these buildings down. We'll hear all of us soon. 321 00:16:28,160 --> 00:16:30,960 Speaker 1: Wall Street never opened on nine eleven. The open was 322 00:16:31,000 --> 00:16:34,360 Speaker 1: delayed after the first plane struck, and then canceled after 323 00:16:34,400 --> 00:16:38,600 Speaker 1: the second plane crashed. Markets wouldn't open until the following Monday. 324 00:16:39,120 --> 00:16:42,880 Speaker 1: It was the longest shutdown since the Great Depression. Once 325 00:16:42,920 --> 00:16:46,160 Speaker 1: trading resumed, there was a massive sell off, the biggest 326 00:16:46,200 --> 00:16:48,520 Speaker 1: one day loss in the history of the New York 327 00:16:48,560 --> 00:16:52,840 Speaker 1: Stock Exchange. The Dow Jones industrials were down four but 328 00:16:52,960 --> 00:16:55,800 Speaker 1: by early October stocks were back up to where they'd 329 00:16:55,840 --> 00:17:03,119 Speaker 1: been the day before the attacks. Almost an entire generation 330 00:17:03,200 --> 00:17:06,920 Speaker 1: has grown up since nine eleven. On this twentieth anniversary, 331 00:17:07,240 --> 00:17:10,520 Speaker 1: many will join those who can never forget that day 332 00:17:10,880 --> 00:17:14,560 Speaker 1: and remember the nearly three thousand people who were lost 333 00:17:16,840 --> 00:17:20,359 Speaker 1: when the planes hit On nine eleven. Roger Ferguson was 334 00:17:20,400 --> 00:17:22,520 Speaker 1: serving as the vice chair of the Federal Reserve, and 335 00:17:22,600 --> 00:17:25,880 Speaker 1: he was the only Reserve governor on duty in Washington, 336 00:17:25,920 --> 00:17:28,600 Speaker 1: so it fell to him to fashion an immediate response 337 00:17:28,600 --> 00:17:31,600 Speaker 1: to something none of us had ever seen. Were delighted 338 00:17:31,600 --> 00:17:34,200 Speaker 1: now to welcome Roger Ferguson back to Wall Street Week. 339 00:17:34,440 --> 00:17:36,800 Speaker 1: Thanks for being with us. Roger, take us back twenty 340 00:17:36,880 --> 00:17:39,760 Speaker 1: years now. I know you've thought about it a fair amount. 341 00:17:39,840 --> 00:17:43,520 Speaker 1: What did you face? What did you do? As you said, 342 00:17:43,960 --> 00:17:47,760 Speaker 1: the context was met fronting in real time a set 343 00:17:47,800 --> 00:17:50,840 Speaker 1: of circumstances that none of us could ever imagined. The 344 00:17:50,880 --> 00:17:52,840 Speaker 1: good news was, in some ways my wife called me 345 00:17:52,880 --> 00:17:55,439 Speaker 1: at about nine o'clock or so uh to let me 346 00:17:55,480 --> 00:17:58,040 Speaker 1: know that something was going on. UM. I saw the 347 00:17:58,160 --> 00:18:01,879 Speaker 1: second plane go into the second tower and knew immediately 348 00:18:02,080 --> 00:18:04,920 Speaker 1: that there was going to be chaos in and around 349 00:18:04,960 --> 00:18:08,399 Speaker 1: Wall Street. Obviously I didn't foresee the eventuality of the 350 00:18:08,440 --> 00:18:12,400 Speaker 1: towers falling. But my first step, literally at about nine 351 00:18:12,480 --> 00:18:14,840 Speaker 1: ten or nine fifteen, was to call a woman named 352 00:18:14,840 --> 00:18:18,840 Speaker 1: Louise Roseman, not a household name, but she was responsible 353 00:18:18,920 --> 00:18:23,359 Speaker 1: for Reserve Bank operations and for payment systems UM, and 354 00:18:23,400 --> 00:18:26,800 Speaker 1: you know I work with her, And immediately four we 355 00:18:26,840 --> 00:18:29,439 Speaker 1: put out a statement, the first or several statements that 356 00:18:29,480 --> 00:18:33,080 Speaker 1: we made on that day UM that indicated that UM, 357 00:18:33,440 --> 00:18:36,240 Speaker 1: something called fed wire was operating and it would stay 358 00:18:36,240 --> 00:18:40,320 Speaker 1: open as late as necessary for orderly transitions. Now, for 359 00:18:40,400 --> 00:18:44,159 Speaker 1: the average person that wouldn't mean very much. For individuals 360 00:18:44,440 --> 00:18:49,240 Speaker 1: in the financial markets, it meant that the veins, the otteries, 361 00:18:49,240 --> 00:18:53,960 Speaker 1: the plumbing of the financial payment system was still operating, 362 00:18:54,119 --> 00:18:57,320 Speaker 1: which was critically important for moving payments around, which was 363 00:18:57,359 --> 00:19:01,000 Speaker 1: the most important thing. So after that, at the next 364 00:19:01,040 --> 00:19:05,439 Speaker 1: step was to say the particularly once we saw the 365 00:19:05,520 --> 00:19:09,000 Speaker 1: tower's fall, UM, what's the FEDS were actually going to 366 00:19:09,080 --> 00:19:13,080 Speaker 1: be UM, and what we did was convened a discussion. UM. 367 00:19:13,119 --> 00:19:16,360 Speaker 1: I had a statement all prepared that was very brief, 368 00:19:17,040 --> 00:19:19,840 Speaker 1: and that second statement said, and this was for the public, 369 00:19:20,440 --> 00:19:23,879 Speaker 1: that the Federal Reserve is open and operating sentence one 370 00:19:23,960 --> 00:19:28,480 Speaker 1: and sentenced to which was more for the technician, that 371 00:19:28,560 --> 00:19:31,080 Speaker 1: the discount window would be available. So what does that 372 00:19:31,119 --> 00:19:34,200 Speaker 1: mean a normal speak open and operating is pretty clear. 373 00:19:34,960 --> 00:19:38,320 Speaker 1: What it meant in the second part was not only 374 00:19:38,400 --> 00:19:41,840 Speaker 1: was the payment system that the veins in the arts working, 375 00:19:41,880 --> 00:19:45,200 Speaker 1: but that we the Federal Reserve, were prepared to pump 376 00:19:45,280 --> 00:19:49,440 Speaker 1: the lifeblood, the liquidity into that system to keep it functioning. 377 00:19:49,840 --> 00:19:52,159 Speaker 1: In times of crisis. We draw upon what we know, 378 00:19:52,320 --> 00:19:55,560 Speaker 1: what we understand. How fortunate were we were in the 379 00:19:55,600 --> 00:19:58,240 Speaker 1: country that had you, particularly in that position, because your 380 00:19:58,240 --> 00:20:00,800 Speaker 1: background actually had had something to do of the payment system. 381 00:20:01,040 --> 00:20:04,040 Speaker 1: You knew the plumbing, as you just put it, pretty well, 382 00:20:04,040 --> 00:20:06,159 Speaker 1: perhaps better than others might have. I think it's a 383 00:20:06,160 --> 00:20:08,560 Speaker 1: fair statement. This is not a reflection on me, because 384 00:20:08,760 --> 00:20:11,840 Speaker 1: I quickly point out that you know, the first lesson 385 00:20:11,880 --> 00:20:14,720 Speaker 1: that this was a scene mattered, but in this case 386 00:20:14,760 --> 00:20:17,560 Speaker 1: it actually was true. I had spent a fair amount 387 00:20:17,560 --> 00:20:19,960 Speaker 1: of my time on the FED not just thinking about 388 00:20:20,000 --> 00:20:23,800 Speaker 1: monetary policy, but thinking about these issues of how the 389 00:20:23,840 --> 00:20:28,000 Speaker 1: payment systems operated. I think, frankly, I was the only 390 00:20:28,040 --> 00:20:31,000 Speaker 1: governor would ever gone to see one of the least 391 00:20:31,080 --> 00:20:33,840 Speaker 1: diamous parts of the Fell Reserve, which is a process 392 00:20:33,880 --> 00:20:38,040 Speaker 1: of clearing checks overnight. You know, I went to twelve 393 00:20:38,080 --> 00:20:41,840 Speaker 1: thirty one o'clock to actually see that process, and so 394 00:20:41,920 --> 00:20:44,160 Speaker 1: I had, in fact, I spent a lot of time 395 00:20:44,520 --> 00:20:47,840 Speaker 1: before and during our period the FED trying to understand 396 00:20:47,840 --> 00:20:52,720 Speaker 1: the intricacies of this back office activity, the plumbing that 397 00:20:52,920 --> 00:20:55,679 Speaker 1: was the central issue of the day. Roger, thank you 398 00:20:55,720 --> 00:20:57,680 Speaker 1: so very much for being with us on Wall Street Week. 399 00:20:57,880 --> 00:21:01,399 Speaker 1: As Roger Ferguson, he's the former president CEO of t 400 00:21:01,680 --> 00:21:04,240 Speaker 1: i A A coming up, we wrap up the week 401 00:21:04,280 --> 00:21:07,360 Speaker 1: with our special contributor Larry Summers of Harvard, as Wall 402 00:21:07,400 --> 00:21:14,800 Speaker 1: Street Week continues on Bloomberg. This is Bloomberg Wall Street 403 00:21:14,840 --> 00:21:18,280 Speaker 1: Week with David Weston from Bloomberg Radio. We're going to 404 00:21:18,359 --> 00:21:20,320 Speaker 1: conclude the week, as we always do, with our special 405 00:21:20,359 --> 00:21:23,240 Speaker 1: contributor here in Wall Street Week. He is Larry Summers 406 00:21:23,240 --> 00:21:25,159 Speaker 1: of Harvard. So Larry, thank you so much for being 407 00:21:25,240 --> 00:21:27,240 Speaker 1: with us. One of the big developments. I think of 408 00:21:27,240 --> 00:21:28,800 Speaker 1: the week really had to do about COVID in so 409 00:21:28,840 --> 00:21:31,479 Speaker 1: many different ways, but one of them was President Biden 410 00:21:31,560 --> 00:21:34,040 Speaker 1: speaking to the country late in the week, really setting 411 00:21:34,040 --> 00:21:37,080 Speaker 1: out a fairly extensive program to sort of almost do 412 00:21:37,160 --> 00:21:40,439 Speaker 1: a reset on our attack on this pandemic. What do 413 00:21:40,480 --> 00:21:42,680 Speaker 1: you make of what the President is proposing. I think 414 00:21:42,680 --> 00:21:45,359 Speaker 1: he did the right thing. I think this is going 415 00:21:45,400 --> 00:21:48,480 Speaker 1: to be with us in very serious ways for a 416 00:21:48,560 --> 00:21:52,000 Speaker 1: very long time unless we get the vaccination rate up. 417 00:21:52,560 --> 00:21:56,000 Speaker 1: And what he did is necessary to get the vaccination 418 00:21:56,160 --> 00:21:59,240 Speaker 1: rate up. I think it's supported by the vast majority 419 00:21:59,280 --> 00:22:03,440 Speaker 1: of American and I think it will be accepted ultimately 420 00:22:04,040 --> 00:22:07,600 Speaker 1: by most other Americans. This is like fluoride in the water. 421 00:22:08,080 --> 00:22:10,760 Speaker 1: This is like the tests that our kids have to 422 00:22:10,800 --> 00:22:15,640 Speaker 1: take to go to camp or uh go to school. 423 00:22:16,119 --> 00:22:21,280 Speaker 1: This is like going through security at airlines are more 424 00:22:21,359 --> 00:22:25,639 Speaker 1: complicated and dangerous world requires things that didn't used to 425 00:22:25,640 --> 00:22:30,480 Speaker 1: be required, and this is an example uh of that, 426 00:22:30,920 --> 00:22:34,720 Speaker 1: and we are struck that he's doing it right now. 427 00:22:35,400 --> 00:22:38,040 Speaker 1: UH two years from now, it'll be hard to imagine 428 00:22:38,440 --> 00:22:44,879 Speaker 1: a world where there haven't been vaccination UH requirements. Good 429 00:22:44,880 --> 00:22:49,880 Speaker 1: for the administration. I do think that There's a crucial 430 00:22:49,880 --> 00:22:54,480 Speaker 1: dimension of all of this, which is what's happening globally 431 00:22:55,119 --> 00:22:59,040 Speaker 1: that is still not getting enough attention. And this has 432 00:22:59,080 --> 00:23:02,000 Speaker 1: been something I've been focused on for a long time 433 00:23:02,440 --> 00:23:07,119 Speaker 1: leading up to the G twenty with our panel UH 434 00:23:07,160 --> 00:23:12,840 Speaker 1: on that we need much more global vaccination, We need 435 00:23:13,119 --> 00:23:20,879 Speaker 1: much more preparation for the next pandemic. And this is 436 00:23:21,080 --> 00:23:26,560 Speaker 1: the biggest vulnerability for our national security from the rest 437 00:23:26,600 --> 00:23:30,879 Speaker 1: of the world over the next decade, that the virus mutates, 438 00:23:31,400 --> 00:23:34,480 Speaker 1: that the virus takes a new form, that a different 439 00:23:34,520 --> 00:23:39,440 Speaker 1: pathogen UH comes along, and that we are not ready. 440 00:23:39,480 --> 00:23:44,360 Speaker 1: That is the by far a greater risk of Americans 441 00:23:44,400 --> 00:23:49,399 Speaker 1: losing their lives prematurely from a foreign threat relative to 442 00:23:49,440 --> 00:23:53,879 Speaker 1: military conflict, relative to terrorism, even for the next few years, 443 00:23:54,480 --> 00:24:00,639 Speaker 1: relative to climate change. And we just need a a 444 00:24:00,720 --> 00:24:06,800 Speaker 1: major effort to stop this threat. Larry. Another significant set 445 00:24:06,800 --> 00:24:08,600 Speaker 1: of developments over the week has been what's been going 446 00:24:08,600 --> 00:24:11,920 Speaker 1: on in China and what we're now calling disorderly capital 447 00:24:12,040 --> 00:24:14,359 Speaker 1: from Beijing. They call it disorder capital as they continue 448 00:24:14,400 --> 00:24:16,800 Speaker 1: to clamp down in various parts of their industry. At 449 00:24:16,800 --> 00:24:18,879 Speaker 1: the same time, President Biden now has reached out to 450 00:24:18,920 --> 00:24:21,639 Speaker 1: President g They've had a long conversation, although I do 451 00:24:21,720 --> 00:24:23,760 Speaker 1: note I don't think we have a China policy yet 452 00:24:23,760 --> 00:24:25,960 Speaker 1: in the Biden administration. What do you make of China? 453 00:24:26,040 --> 00:24:28,680 Speaker 1: How big a problem is it for the US economy 454 00:24:28,720 --> 00:24:31,640 Speaker 1: and for me for US business? Look, I I think 455 00:24:31,680 --> 00:24:36,239 Speaker 1: the the glory days of doing business in China and 456 00:24:36,280 --> 00:24:41,200 Speaker 1: getting rich for most American businesses were never fully there, 457 00:24:41,280 --> 00:24:44,040 Speaker 1: And to whatever extent they were there, I think that's 458 00:24:44,040 --> 00:24:49,919 Speaker 1: going to be very attenuated going forward. The predictability and 459 00:24:50,640 --> 00:24:55,639 Speaker 1: of a Chinese business environment is not anything that anybody 460 00:24:55,720 --> 00:24:58,160 Speaker 1: is going to be able to rely on for quite 461 00:24:58,160 --> 00:25:02,200 Speaker 1: a while after the mag intitude of the sudden changes 462 00:25:03,000 --> 00:25:07,160 Speaker 1: the This is surely going to have implications in terms 463 00:25:07,160 --> 00:25:11,480 Speaker 1: of predictability, in terms of reliability of enforcement for any 464 00:25:11,560 --> 00:25:15,920 Speaker 1: idea that the Chinese currency or some Chinese digital currency 465 00:25:16,040 --> 00:25:20,480 Speaker 1: is going to be a threat to the dollar. And 466 00:25:20,800 --> 00:25:24,960 Speaker 1: we need to understand that what's happening in China is 467 00:25:25,040 --> 00:25:29,479 Speaker 1: not mostly about us. It is about the imperatives of 468 00:25:30,119 --> 00:25:37,840 Speaker 1: UH cohesion in an extraordinarily complex and very rapidly transforming society. 469 00:25:37,960 --> 00:25:41,040 Speaker 1: So what we need to do is take the temperature down, 470 00:25:41,880 --> 00:25:49,399 Speaker 1: demand UH less, set our most crucial priorities insist on 471 00:25:50,119 --> 00:25:56,600 Speaker 1: our UH core interests, which cannot be every concern UH 472 00:25:56,760 --> 00:26:02,600 Speaker 1: that we have, and have a prag mattic UH relationship 473 00:26:02,800 --> 00:26:08,880 Speaker 1: with UH China. It would be a grave mistake if 474 00:26:08,960 --> 00:26:16,080 Speaker 1: we were to seek across the board confrontation with China. 475 00:26:16,240 --> 00:26:17,960 Speaker 1: You mentioned the temperature with China. Let's talk about the 476 00:26:18,000 --> 00:26:20,560 Speaker 1: temperature with inflation. Back here is something we've talked about 477 00:26:20,600 --> 00:26:23,560 Speaker 1: pretty much every week. Here your concerns about inflation. I 478 00:26:23,600 --> 00:26:25,960 Speaker 1: see some other people are starting to echo what you said. 479 00:26:26,000 --> 00:26:27,800 Speaker 1: In fact, we had Ken Rogoff you pointed out in 480 00:26:27,840 --> 00:26:31,280 Speaker 1: your tweet. Ken Rogoff wrote on this for Project Syndicate, saying, 481 00:26:31,280 --> 00:26:34,119 Speaker 1: there are some parallels actually with the sixties and seventies, 482 00:26:34,200 --> 00:26:37,040 Speaker 1: including even our withdrawal disorderly. I think it's fairy to 483 00:26:37,080 --> 00:26:39,480 Speaker 1: say withdrawal from Afghanistan and what happened in Vietnam, what 484 00:26:39,600 --> 00:26:43,240 Speaker 1: happened with productivity, various aspects. How concerned should we be 485 00:26:43,400 --> 00:26:46,240 Speaker 1: right now that we could actually have a repeat of 486 00:26:46,280 --> 00:26:50,080 Speaker 1: the sixties and seventies. Look, I don't think we're anywhere 487 00:26:50,200 --> 00:26:57,640 Speaker 1: close to the kind of UH Carter era double digit inflation, 488 00:26:58,600 --> 00:27:03,080 Speaker 1: but I do think we're in very serious danger of 489 00:27:03,160 --> 00:27:07,679 Speaker 1: repeating almost all the mistakes of the nineteen sixties and 490 00:27:08,080 --> 00:27:13,600 Speaker 1: early nineteen seventies. I'm particularly you you mentioned rightly, David, 491 00:27:14,040 --> 00:27:20,960 Speaker 1: the parallel with Afghanistan and Vietnam. There's the parallel with 492 00:27:21,119 --> 00:27:29,320 Speaker 1: an ambitious progressive administration also facing national security challenges. And 493 00:27:29,920 --> 00:27:36,240 Speaker 1: there's a parallel in a growing chorus of voices saying 494 00:27:36,760 --> 00:27:43,159 Speaker 1: that accepting more inflation because you've gotten more inflation is 495 00:27:44,040 --> 00:27:47,600 Speaker 1: the lesser of evils, and that you should just accept 496 00:27:47,800 --> 00:27:51,919 Speaker 1: more inflation and promise that eventually you will stop it. 497 00:27:52,760 --> 00:27:57,399 Speaker 1: And that I think is in some ways the deepest 498 00:27:57,480 --> 00:28:01,640 Speaker 1: of parallel. And so as I see more and more 499 00:28:01,720 --> 00:28:08,280 Speaker 1: economists starting to say, well, if the inflation target moves 500 00:28:08,440 --> 00:28:13,320 Speaker 1: from two percent to three percent, then uh, that'll be 501 00:28:13,640 --> 00:28:19,119 Speaker 1: That'll be okay. We can't risk doing anything that um 502 00:28:19,600 --> 00:28:24,439 Speaker 1: might hurt Uh the economy that I think is setting 503 00:28:24,520 --> 00:28:29,480 Speaker 1: us up for some very substantial difficulties uh down the road. 504 00:28:30,240 --> 00:28:33,119 Speaker 1: And final, Larry, we're marking, of course, the twentieth anniversary 505 00:28:33,160 --> 00:28:35,360 Speaker 1: of the nine eleven attacks in the United States. It's 506 00:28:35,359 --> 00:28:37,680 Speaker 1: a time for reflection about what happened twenty years ago, 507 00:28:37,720 --> 00:28:40,040 Speaker 1: but also a time to think about what we've learned 508 00:28:40,040 --> 00:28:42,440 Speaker 1: in the twenty years in between. What do you think 509 00:28:42,520 --> 00:28:45,960 Speaker 1: we've learned? David, I'm gonna say something different than a 510 00:28:46,000 --> 00:28:50,440 Speaker 1: lot of the commentary, which emphasizes the various successes of 511 00:28:50,480 --> 00:28:53,960 Speaker 1: our response. And I don't disagree with any of that. 512 00:28:54,920 --> 00:28:59,920 Speaker 1: But I remember asking a very wide range of x 513 00:29:00,080 --> 00:29:04,600 Speaker 1: birts knowledgeable people UH in the aftermath of nine eleven 514 00:29:05,160 --> 00:29:09,320 Speaker 1: what they thought the prospects for terror attacks were over 515 00:29:09,360 --> 00:29:12,680 Speaker 1: the subsequent period. And I don't think you could have 516 00:29:12,680 --> 00:29:15,600 Speaker 1: found anyone in the fall of two thousand and one 517 00:29:16,320 --> 00:29:19,520 Speaker 1: who would have expected that we would have been as 518 00:29:19,600 --> 00:29:26,960 Speaker 1: successful in avoiding terrorist attacks in our country and successful 519 00:29:27,000 --> 00:29:33,480 Speaker 1: in avoiding terrorist attacks in our allies as we have been. 520 00:29:34,160 --> 00:29:39,480 Speaker 1: And I think all of us who are not UH 521 00:29:39,720 --> 00:29:47,240 Speaker 1: directly involved in national defense and national security, oh, thanks 522 00:29:47,960 --> 00:29:53,440 Speaker 1: to UH, those who have worn uniforms, those who have 523 00:29:53,480 --> 00:30:00,880 Speaker 1: protected us, those who have mounted UH the necessary investigate asians. 524 00:30:00,960 --> 00:30:06,360 Speaker 1: And that's a perspective that we need to have, even 525 00:30:06,440 --> 00:30:12,480 Speaker 1: as we do recognize the UH many mistakes that we 526 00:30:12,560 --> 00:30:15,640 Speaker 1: have made. Okay, Larry, thank you so very much. That's 527 00:30:15,640 --> 00:30:20,000 Speaker 1: our special Wall Street Week contributor is Larry Summers of Harvard. Finally, 528 00:30:20,120 --> 00:30:23,680 Speaker 1: one more thought, once in a lifetime, or or maybe not. 529 00:30:24,240 --> 00:30:26,840 Speaker 1: Twenty years ago, our world was rocked in a way 530 00:30:26,920 --> 00:30:30,000 Speaker 1: we knew would never have it again. Those of us 531 00:30:30,040 --> 00:30:32,640 Speaker 1: old enough to have followed what happened on nine eleven 532 00:30:32,680 --> 00:30:36,120 Speaker 1: experienced a shock to just about every part of our world, 533 00:30:36,560 --> 00:30:41,040 Speaker 1: an unprecedented attack on innocent civilians, on US soil, symbols 534 00:30:41,080 --> 00:30:45,200 Speaker 1: of US commercial and military power destroyed or burning, and 535 00:30:45,280 --> 00:30:48,040 Speaker 1: most of all, the loss of family members and friends, 536 00:30:48,040 --> 00:30:51,800 Speaker 1: including three of our colleagues right here at Bloomberg. The 537 00:30:51,840 --> 00:30:54,440 Speaker 1: financial system was rocked to the core, with the stock 538 00:30:54,480 --> 00:30:59,000 Speaker 1: exchange shuttered and stocks plumbering. At the time, we knew 539 00:30:59,040 --> 00:31:01,840 Speaker 1: we would never see it happen again, and we were 540 00:31:01,920 --> 00:31:06,320 Speaker 1: partly right, but partly wrong, because over the last twenty years, 541 00:31:06,440 --> 00:31:09,440 Speaker 1: once in a lifetime events have happened more often than 542 00:31:09,560 --> 00:31:12,600 Speaker 1: once in our lifetime, from the Great financial Crisis of 543 00:31:12,640 --> 00:31:16,640 Speaker 1: two eight to the collapse of economies and markets when 544 00:31:16,640 --> 00:31:20,880 Speaker 1: the pandemic hit in George Santayana was surely right that 545 00:31:21,000 --> 00:31:23,920 Speaker 1: history does not repeat itself. We have not seen more 546 00:31:23,960 --> 00:31:27,960 Speaker 1: commercial airliners crashing into office hours, but it does rhyme. 547 00:31:28,640 --> 00:31:31,280 Speaker 1: The good news is that we've proven more resilient than 548 00:31:31,320 --> 00:31:35,479 Speaker 1: perhaps we knew. Certainly, our financial markets have rebounded faster 549 00:31:35,560 --> 00:31:38,960 Speaker 1: than we'd expected. But there are two ways in which 550 00:31:39,080 --> 00:31:43,000 Speaker 1: things may be truly different this time. First, the risk 551 00:31:43,080 --> 00:31:45,400 Speaker 1: to our systems this time may not be physical. They 552 00:31:45,480 --> 00:31:48,720 Speaker 1: may come from cyber and we haven't really seen how 553 00:31:48,760 --> 00:31:52,320 Speaker 1: resilient we are to a massive cyber attack. And Second, 554 00:31:52,360 --> 00:31:55,400 Speaker 1: twenty years ago, the nation came together to respond to 555 00:31:55,400 --> 00:31:57,760 Speaker 1: the nine eleven attacks, at least for a while. We 556 00:31:57,880 --> 00:32:01,040 Speaker 1: put aside partisan divisions and you united to confront a 557 00:32:01,120 --> 00:32:05,280 Speaker 1: common enemy. This time, a virus is proving far more 558 00:32:05,400 --> 00:32:08,959 Speaker 1: deadly than the hijackers of nine eleven. But it's dividing 559 00:32:09,080 --> 00:32:12,560 Speaker 1: us rather than bring us together, as we make questions 560 00:32:12,560 --> 00:32:16,720 Speaker 1: of vaccinations and wearing masks political symbols rather than ways 561 00:32:16,800 --> 00:32:20,760 Speaker 1: of defending ourselves. We're far from done with the latest 562 00:32:20,800 --> 00:32:23,920 Speaker 1: defense of our homeland. The question is whether we can 563 00:32:24,040 --> 00:32:27,480 Speaker 1: overcome the risk of this time without uniting the way 564 00:32:27,600 --> 00:32:30,520 Speaker 1: we did last time. That does it? For this episode 565 00:32:30,520 --> 00:32:33,080 Speaker 1: of Wall Street Week, I'm David Weston. This is Bloomberg. 566 00:32:33,440 --> 00:32:35,080 Speaker 1: See you next week.