Speaker 1: This is Bloomberg Wall Street Week. What's the state of
Speaker 1: corporate governance? The deficit is a real issue. The US
Speaker 1: economy continues to send mixed signals. The financial stories that
Speaker 1: cheap our world, fed action to con concerns over dollar liquidity,
Speaker 1: and encouraging China data. The five hundred wealthiest people in
Speaker 1: the world. Through the eyes of the most influential voices
Speaker 1: Larry Summers, the former Treasury Secretary, star Ward CEO, Kevin
Speaker 1: Johnson sec Chairman J Clayton. Bloomberg wool Street Week with
Speaker 1: David Weston from Bloomberg Radio. A nation recoils in horror
Speaker 1: and the markets look the other way on hopes of
Speaker 1: a brighter tomorrow. This is Bloomberg Wall Street Week. I'm
Speaker 1: David Weston. Just when you thought it couldn't get any worse,
Speaker 1: it did. On top of a pandemic and a cratering economy,
Speaker 1: we faced a week of demonstrations and riots as people
Speaker 1: took to the streets to protest the brutal killing of
Speaker 1: a black man in Minneapolis, and President Trump he said
Speaker 1: he would send in federal troops to quell the disturbances.
Speaker 1: We asked Columbia Economy Jeffrey Sachs about the causes of
Speaker 1: this chronic inequality and what could be done about it.
Speaker 1: I think digitization has played a big role in both
Speaker 1: raising overall output but shifting it to a smaller and
Speaker 1: smaller part of society, and the COVID epidemic is probably
Speaker 1: going to result in a dramatic increased concentration of wealth.
Speaker 1: Think about it. Jeffrey Dizos, owner of Amazon, founder of Amazon,
Speaker 1: has increased his wealth by an estimated thirty five billion
Speaker 1: dollars since the start of this year, at a time
Speaker 1: that we have mass unemployment. We have the greatest unemployment,
Speaker 1: the largest loss of jobs since the Great Depression, rivaling
Speaker 1: the Great Depression. And yet the stock market is up
Speaker 1: and uh some of the big tech UH Titans are
Speaker 1: booming in their wealth. So what's happening, I think, is
Speaker 1: that we're seeing this dramatic wiping out of a large
Speaker 1: part of our economy, the brick and mortar sector, a
Speaker 1: huge amount of shifting online, and that is part of
Speaker 1: this digital trend that already has been leading to the
Speaker 1: concentration of income and wealth. When the dust settles, I'm
Speaker 1: afraid we're gonna probably have the greatest increase of inequality
Speaker 1: that we've ever had in a short period of time,
Speaker 1: which is saying a good deal because going into this
Speaker 1: before the pandemic, we were not in great shape, and
Speaker 1: inequality it was growing to a substantial degree. There are
Speaker 1: remarkable statistics. I know you've seen that. For example, back
Speaker 1: in seventeen, the net worth of the media and African
Speaker 1: American family was ten percent that of the median white family.
Speaker 1: So we had a problem going in and then, as
Speaker 1: you point out, if you look at the COVID loss
Speaker 1: of jobs, it was greatly disproportionate on Hispanics and on blacks.
Speaker 1: What can we do to remedy that at this point
Speaker 1: because what we're seeing right now I think it is
Speaker 1: certainly about police brutality, but it's about much more. It's
Speaker 1: probably the case that when the calculations are made carefully,
Speaker 1: that the richest twenty Americans or so all white I
Speaker 1: believe to be the case, have more net worth than
Speaker 1: all the financial wealth of the African American forty million
Speaker 1: people in American society. Don't. I don't guarantee the number.
Speaker 1: I say this has to be looked at. But these
Speaker 1: are the relative orders of magnitude that we're talking about
Speaker 1: the top billionaires. If you take the top twenty thirty,
Speaker 1: I have well over a trillion dollars of net worth.
Speaker 1: That's something like the financial wealth in the African American
Speaker 1: community of forty million people. It's unning what is happening
Speaker 1: in terms of the shocking, unbelievable, unprecedented wealth at the
Speaker 1: very very top. He's himself with a hundred fifty billion
Speaker 1: dollars of net worth, something we cannot get our heads around.
Speaker 1: And then people losing jobs by the tens of millions,
Speaker 1: with absolutely a disproportionate burden being felt by minority communities.
Speaker 1: This is desperate. What do we have to do about it?
Speaker 1: We have to become a decent society where everybody has
Speaker 1: access to healthcare, everybody has access to education. Uh, you
Speaker 1: don't have a generation of the students with one and
Speaker 1: a half trillion dollars of debt now completely unpayable because
Speaker 1: the prospects have worsened dramatically, But it was unpayable beforehand.
Speaker 1: And that requires companies like Amazon to pay some taxes,
Speaker 1: not to ask for tax breaks from around the country,
Speaker 1: but to pay their taxes. It requires the richest people
Speaker 1: to pay taxes. It requires, in my view of tax
Speaker 1: on wealth, which is so concentrated right now, that we're
Speaker 1: going to wake up. In fact, we're not even waking up.
Speaker 1: We know it, we see it. We're awake right now
Speaker 1: that the budget deficit will be some of GDP perhaps,
Speaker 1: and then we're going to be told by the Conservatives
Speaker 1: representing the voices of the richest people, Oh, we can't
Speaker 1: do anymore. We're gonna have to cut benefits to the
Speaker 1: poor because of the large budget deficits. So it's an
Speaker 1: extraordinary time by any standard, David. And the concentration of
Speaker 1: wealth not a deliberate part of this epidemic, but it
Speaker 1: seems to be the fallout of the epidemic is extraordinary.
Speaker 1: One more point I would add on this. The FED has,
Speaker 1: of course issue the trillions of dollars of new credits,
Speaker 1: but the way our system works, it's not credits for
Speaker 1: broad society. It's credits that go through the already large
Speaker 1: concentrations of wealth and allow them to buy up even
Speaker 1: more of the assets on a fire sale basis so easy.
Speaker 1: FED credits after two thousand and eight was part of
Speaker 1: the increased concentration of wealth after two thousand eight. Now
Speaker 1: we're seeing it again in two thousand twenty that what
Speaker 1: the FEDS doing to keep the economy from collapsing is
Speaker 1: also going to have an effect on increasing the already
Speaker 1: almost unimaginable inequality of wealth. That was Professor Jeffrey Sachs
Speaker 1: of Columbia. Coming up, we hear from the Chairman of
Speaker 1: the SEC, J Clayton, about how the markets are working
Speaker 1: despite all the bad news and the volatility. That's next
Speaker 1: on Wall Street Week on bloom Board. This is Bloomberg
Speaker 1: Will Street Week with David Weston from Bloomberg Radio. The
Speaker 1: markets have been put through their paces this year so far,
Speaker 1: from a pandemic to an academic collapse to civil unrest,
Speaker 1: but through it all, the man responsible for overseeing those markets,
Speaker 1: SEC Chairman Jay Clayton says that they have held up well.
Speaker 1: The bedrock of our system is good financial information UM
Speaker 1: and this this asymmetry, you can call it, an on
Speaker 1: level playing field with Chinese listed companies versus other companies
Speaker 1: from non US jurisdictions listed, has gone on for too
Speaker 1: long and first step, let's make sure investors understand it.
Speaker 1: Second step, and the administration is now looking at this.
Speaker 1: UH Senator Kennedy and Van hollend have a bill that
Speaker 1: has a very sensible approach to this, which is give
Speaker 1: people time to level that asymmetric or on level playing field. Uh,
Speaker 1: now we know about it. Now we gotta figure out
Speaker 1: what we're gonna do about it. Well, it is disclosure
Speaker 1: enough in this situation as a practical letter. I mean
Speaker 1: there there are now proposals up on the hill as
Speaker 1: you know, the Senate has passed it would say if
Speaker 1: a company, I think it's the rules. If you don't
Speaker 1: allow access to the audit papers for three concent of years,
Speaker 1: you get delisted. Do you need that kind of power? Well,
Speaker 1: first step disclosure. But I but I do think that
Speaker 1: consider whether more to level the playing field. And I
Speaker 1: think the bill you mentioned that, the Kennedy van Hollenville,
Speaker 1: it's very sensible way to look at this if you're
Speaker 1: going to do more, because it gives people a period
Speaker 1: of time, uh to level the playing field before you
Speaker 1: would take any action. Uh. You know, I'm not a
Speaker 1: guy who wants to take like precipitous Uh, you know,
Speaker 1: hit the nail on the head with the hammer tomorrow.
Speaker 1: But you know, I like the way they've approached it
Speaker 1: and that there's a period of time to come into
Speaker 1: compliance and if you don't, then it's time to um
Speaker 1: take take measures beyond us disclosed j from You're having
Speaker 1: watched this over some period of time. Uh, And I
Speaker 1: know you don't want to name any individual companies, so
Speaker 1: I won't name any individual companies. But is it across
Speaker 1: the board with Chinese public trading companies or is it
Speaker 1: more problem with some of the smaller or maybe up
Speaker 1: and coming ones as opposed to some of the really
Speaker 1: big megacap companies that we all know the names of
Speaker 1: that have been publicly traded for a while. Well, well, David,
Speaker 1: you you you bring up a good question. Uh, but
Speaker 1: a point that applies in every market. Financial controls, audit
Speaker 1: procedures and the like. They're different for larger companies than
Speaker 1: they are for smaller companies. And uh, there are a
Speaker 1: lot of smaller companies from that have operations in China
Speaker 1: that are listed on our markets, and investors might look
Speaker 1: at those differently from the multi caaps or or from
Speaker 1: state owned enterprises. And uh, I'm not I'm not an
Speaker 1: expert on international investing, but I but I do know
Speaker 1: enough to know that you shouldn't look at a particular
Speaker 1: jurisdiction in a monolithic way. Uh, you shouldn't. You should
Speaker 1: look at that as to whether you're looking at a
Speaker 1: smaller company, Uh, an international company that derives a lot
Speaker 1: of its revenues from outside of that jurisdiction, or a
Speaker 1: state of enterprises which has its own risks and reward profiles. Jay,
Speaker 1: do you talk with your counterparts who are security regulars
Speaker 1: in Beijing? In China? I mean, there have been times
Speaker 1: when the Chinese government said, we really want to try
Speaker 1: to coordinate, we want to harmonize, we want to open
Speaker 1: up our markets, our securities markets. Is there any prospect
Speaker 1: of actually some of that harmonization coming about? Uh? Look,
Speaker 1: we do talk. UM talked to my my counterparts around
Speaker 1: the world. Um. There's nothing that I have said to
Speaker 1: you that I that I haven't said to them, and
Speaker 1: that this is a problem that I believe needs to
Speaker 1: be addressed. Um, And Uh, I hope it can be.
Speaker 1: Are you hopeful do you think it will be? I'm look,
Speaker 1: I'm an optimistic guy, but I'm but I'm optimistic because
Speaker 1: I know that at some point, Uh. You know, I
Speaker 1: hope is not a strato of ge You gotta you
Speaker 1: gotta do other things as well. So you said the
Speaker 1: legislations pending has been passed in the Senate. Uh sense,
Speaker 1: I think you said, sensible way of approaching it? Is
Speaker 1: it doable? Is it's something as you look at the
Speaker 1: SEC could enforce without too much difficulty? Oh? Oh yes,
Speaker 1: Now it's a it's a it's a sensible piece of
Speaker 1: legislation and it and it uh captures the issue in
Speaker 1: a way like I I try very hard not to
Speaker 1: uh to tell Congress what to do. It's the other
Speaker 1: way around, they tell what to do. Um. But this
Speaker 1: is a this is a very sensible way to approach
Speaker 1: a parliament's been around for a while. What about some
Speaker 1: of the issues you're working on before the pandemic came up,
Speaker 1: talk about like reviving revisions to proxy rules. Do those
Speaker 1: continue a pace or do you have to put those
Speaker 1: to one side? Now? We we have not put our
Speaker 1: policy making agenda to the side. Um. We are we
Speaker 1: are a very when you talk about organizations um being
Speaker 1: affected in different ways by the operational constraints of social
Speaker 1: distancing and uh uh the health and safety uh structures
Speaker 1: that we live by. We're a very lucky organization where
Speaker 1: we're we can operate fairly effectively UM in a remote
Speaker 1: UH capacity, and we've been doing so. And look the
Speaker 1: women and men in those policy making divisions. UH, they're
Speaker 1: committed to improving our markets and modernizing our markets. I'm
Speaker 1: not going to put that on hold unless i have to.
Speaker 1: And so, for example, the proxy rules, where do they
Speaker 1: stand now? We're in there are are there are our
Speaker 1: agenda to be finished in this fiscal year, and I
Speaker 1: expect to haven't finished in this fiscal year. UH. I'm
Speaker 1: so pleased with the rigor that our staff has applied
Speaker 1: to all the comments we've received, and I think we're
Speaker 1: on schedule to finish them UH during the fiscal year. UM.
Speaker 1: People don't know about the SEC fifical year, so by
Speaker 1: the end of this by the end of this period.
Speaker 1: And how do you feel about bringing people back to
Speaker 1: work at the SEC. I think you said at least
Speaker 1: until July fifteen. Do you think that that's realistic? Well, David,
Speaker 1: I do think it's UM. It is realistic because we
Speaker 1: are able to function. Every organization is different, and I'm
Speaker 1: not making choices for other organizations, but this organization functions
Speaker 1: very well in a virtual environment. There are a number
Speaker 1: of functions that we have that would improve UM with
Speaker 1: people on site. There are some functions where you do
Speaker 1: need people inside. Look, we live in a we live
Speaker 1: in a country where due process is important, and we
Speaker 1: have people whom we're bringing actions against, and if they
Speaker 1: want the benefit of being interviewed face to face or
Speaker 1: being able to in as virtual face to face environment
Speaker 1: as possible, we need to provide that to him. We're
Speaker 1: you know, we believe in due process. So those types
Speaker 1: of things, UM, we have to do. But by and law,
Speaker 1: we can operate very effectively remotely. And what I want
Speaker 1: to do is as as things get back to normal,
Speaker 1: I hope they do. I hope they do bring bring
Speaker 1: people back in those areas that are most acutely affected
Speaker 1: by remote working, and then go from there. UM, keeping
Speaker 1: health and safety front of mind at all times. So
Speaker 1: I have the luxury of that given the way we work.
Speaker 1: I know others others don't, UM, but That's how I'm
Speaker 1: looking at it. Here that was SEC Chairman Jay Clayton
Speaker 1: coming up. We ask Washington veteran former Defense Secretary Leon
Speaker 1: Panetta what the government needs to do to address a pandemic,
Speaker 1: a steep economic downturn and still unrest coming all at
Speaker 1: the same time. That's next on Wall Street Weekend on
Speaker 1: Bloomberger This is Bloomberg Willis week with David Weston from
Speaker 1: Bloomberg Radio. For the first time in history, the United
Speaker 1: States faces a pandemic, an economic downturn, and civil unrest
Speaker 1: all at the same time. Leon Panetta faced his share
Speaker 1: of crisis when he served in government, including as chief
Speaker 1: of Staff to President Clinton when Jesse Jackson was giving
Speaker 1: those remarks on the Mall. He went on to serve
Speaker 1: as the Director of the CIA and the Secretary of Defense,
Speaker 1: and his experience taught him how an administration deals with
Speaker 1: a series of crises that come all at the same time. Well,
Speaker 1: I I always found, uh, chief of Staff and then
Speaker 1: later at CIA Director and Secretary of Defense, that when
Speaker 1: facing a crisis, and when facing a series of crisis
Speaker 1: as we are now, the best approaches to gather the
Speaker 1: National Security Council together UH and determine what the best
Speaker 1: strategy is to deal with each of these crises UH,
Speaker 1: and to develop auctions obviously to present to the President,
Speaker 1: but to try to develop at least a common strategy
Speaker 1: that everybody can support and and that is in the
Speaker 1: best interests of the country in terms of dealing with
Speaker 1: that crisis. So I think this is a moment when
Speaker 1: the president needs to listen to the advice of his
Speaker 1: most experienced advisers. That's critically important at a time when
Speaker 1: you're facing this kind of serious threat to the country. Well,
Speaker 1: we heard from one senior advisor to day in a
Speaker 1: Secretary Defense, but it was public, it wasn't behind closed doors.
Speaker 1: Is there any doubt that the president has the authority
Speaker 1: of the authority to send in photo troops if he
Speaker 1: so chooses. There is this Insurrection Act, Well, look, I
Speaker 1: think it's it's clear that the president could assert the
Speaker 1: Insurrection Act. But again, uh, this country has recognized that
Speaker 1: the purpose of our military is to be trained to
Speaker 1: confront foreign adversaries in combat, not to be used for
Speaker 1: a control or law enforcement. A posse Commentatis Act was
Speaker 1: passed in the eighteen hundreds for the purpose of making
Speaker 1: clear that the US military ought not to take the
Speaker 1: place of of law enforcement. And so for that reason,
Speaker 1: I commend Secretary of the Secretary of Defense esper Or
Speaker 1: taking the position that he took, because military leaders almost
Speaker 1: in unison, UH, do not believe that our military ought
Speaker 1: to be used, uh to to fight our own people.
Speaker 1: It ought to be used to fight foreign enemies. Our
Speaker 1: federal troops even trained to do this. I mean to
Speaker 1: pick up on your point. Are they trained to deal
Speaker 1: with crowd control and things like that? Because we have,
Speaker 1: sadly in our history seen instances where some military brunn
Speaker 1: and who are not properly trained and we had some
Speaker 1: tragic results such as can't stay You know the military, well,
Speaker 1: the federal troops. Are some of the federal troops trained
Speaker 1: to really be effective in this situation? Is this the
Speaker 1: best tool in the tool kit? I don't believe it is,
Speaker 1: because what why we train our military is to engage
Speaker 1: in combat with a foreign adversary. That's what they're trained
Speaker 1: to do. They're not trained on riot control, They're not
Speaker 1: trained on crowd control, they're not trained on law enforcement.
Speaker 1: At the same time, we have a difficult problem here
Speaker 1: that I'm know I'm sure you appreciate, which is we
Speaker 1: have I think the vast majority of protesters who are
Speaker 1: peaceful are exercising their first Amment rights to petition for
Speaker 1: redressing agreevances. But there are clearly some bad actors in
Speaker 1: some of these demonstrations who are prone to violence and
Speaker 1: trying to instigate something. But put aside the federal military
Speaker 1: as a tool, what is the best way for the government,
Speaker 1: the federal government, state governed to sort those two things out,
Speaker 1: so we maintain law and order, we protect people and property,
Speaker 1: but we also preserve the rights of those who want
Speaker 1: to peacefully protest that horrific instance out in Minneapolis. Well,
Speaker 1: I think it would be preferable rather than the president
Speaker 1: asserting that somehow he'll take control of the situation if
Speaker 1: others don't, I think the president ought to be offering
Speaker 1: law enforcement assistance to states and local communities so that
Speaker 1: they can in fact determine whether or not there are
Speaker 1: criminal elements that are trying to take advantage of these protests.
Speaker 1: That's a law enforcement issue, that's an FBI issue, that's
Speaker 1: an intelligence issue. Frankly, Uh, the federal government gets good
Speaker 1: intelligence on those that are trying to conduct those kinds
Speaker 1: of criminal activities, and so that ought to be shared
Speaker 1: with with state and local law enforcement so that they
Speaker 1: can play the primary role in trying to maintain order
Speaker 1: in their communities and in their states. Mrs Secretary, what
Speaker 1: could we as a country learn from the military on
Speaker 1: the subject of race, put aside their active involvement in
Speaker 1: any peace commum missions. But but the the U. S.
Speaker 1: Military was there ahead of allow of the rest of
Speaker 1: the of the society, going back to the days of
Speaker 1: Harry S. Truman when he was president, in integrating the military,
Speaker 1: you have a much more integrated, I think military than
Speaker 1: most companies do across the country. What have you learned
Speaker 1: from that? What could you teach society? Because goodness knows,
Speaker 1: pas we need to learn some things fast. I think
Speaker 1: the military is a is a good example for the
Speaker 1: rest of the country in terms of allowing allowing minorities,
Speaker 1: allowing others to be able to serve their country. Uh,
Speaker 1: and to be part of a unit working together to
Speaker 1: accomplish a common mission. UH. My experiences that you know,
Speaker 1: whether you're whether you're black, or whether you're brown, or
Speaker 1: whether you're a woman. Uh, that you should have the
Speaker 1: opportunity to serve this country. That was former Secretary of
Speaker 1: Defense Leon Poeta. Coming up, We wrap up the week
Speaker 1: with our special contributor Larry Summers. This is Wall Street
Speaker 1: Read on Bloomberg. This is Bloomberg Wall Street Week with
Speaker 1: David Weston from Bloomberg Radio. We wrap up our week
Speaker 1: with Harvard's Larry Summers, who, of course was Second of
Speaker 1: the Treasury and our is our very own special contributor
Speaker 1: here on Wall Street Week. So, Larry, this has been
Speaker 1: a tumultuous week. I think it's very to say. Every
Speaker 1: day we've seen the video of demonstrations and yes riots
Speaker 1: and yes looting across the country in response that tragic
Speaker 1: instance in Minneapolis. At the same time, the equity mark
Speaker 1: has just kept climbing higher and higher and higher. Why
Speaker 1: don't the markets pay any attention to the evening news? Look,
Speaker 1: it's as extraordinary a week as I've ever uh seen.
Speaker 1: Someone said that we're living through the pandemic, the nine
Speaker 1: economic collapse, the nineteen sixty eight civil unrest across America,
Speaker 1: and the Andrew Jackson presidency all at once. I haven't
Speaker 1: seen anything, lie kid. And before we talk about markets,
Speaker 1: I think we have to acknowledge that the racial injustice
Speaker 1: that has been pointed up uh by the dramatic events
Speaker 1: now almost two weeks uh old, is something that our
Speaker 1: country has been wrestling with for a long time and
Speaker 1: is going to be wrestling with for a very long
Speaker 1: uh time, uh to come. What happened on the streets
Speaker 1: of Minneapolis just can't keep happening, and there's just been
Speaker 1: a huge outpouring of anger and upset. And the critical
Speaker 1: question for our democracy is going to be whether all
Speaker 1: of that anguish and anger is channeled to instructively UH
Speaker 1: into positive change or doesn't bring about that kind of progress,
Speaker 1: in which case the cleavages in our society are only
Speaker 1: going UH to get worse. The market really doesn't seem
Speaker 1: like a very big thing relative to all of that.
Speaker 1: The market's job is to make a judgment about the
Speaker 1: profits that companies UH will learn, and in approximate sense
Speaker 1: is cosmically important. As these events are, they probably don't
Speaker 1: change UM what those earnings are going to be over
Speaker 1: some interval. But I would caution that over long time
Speaker 1: periods this kind of thing makes a very big difference.
Speaker 1: If you think back, the country almost unraveled in UH
Speaker 1: the late nineteen sixties behind the because of cleavage is
Speaker 1: associated with the Vietnam War, because of strife over issues
Speaker 1: of racial justice, and not immediately you know, if you
Speaker 1: look at what happened to the level of stock prices
Speaker 1: relative to other prices, the real sn p UH five hundred,
Speaker 1: it had its worst long decade UM in the last
Speaker 1: six or seven decades. In the decade that followed what
Speaker 1: happened in nineteen sixty eight, you saw a huge drop
Speaker 1: into seventy four or five with the Walster Watergate episode,
Speaker 1: the oil shocks, all that, and then you saw further,
Speaker 1: very steep UH decline UH into UH two. And so
Speaker 1: how America deals with all this is going to be
Speaker 1: profoundly important, I believe for America's health, and I don't
Speaker 1: think America's corporations can be healthy if America is not
Speaker 1: UM healthy. And I think enlightened business leaders have recognized that.
Speaker 1: You've seen many many CEOs UH making that point UH
Speaker 1: this week. UH. So the markets are optimistic, and I
Speaker 1: hope the markets are right in their optimism about COVID.
Speaker 1: I hope the markets are right in their optimism about
Speaker 1: the society UH coming together. UM. I'm not sure they
Speaker 1: are UH right. It seems to me there's a lot
Speaker 1: of optimism right now, and I worry that people who
Speaker 1: were very nervous two months ago are fearful of missing out.
Speaker 1: And it's that kind into fomo that may be driving
Speaker 1: a fair amount of uh this UH market strength. You know,
Speaker 1: if you think about almost all financial error, David. It
Speaker 1: comes from people doing today what they wish they had
Speaker 1: done yesterday. And everybody who was too scared to buy
Speaker 1: at the end of March regrets it. And there are
Speaker 1: a lot of people who think they're rectifying that error
Speaker 1: by buying now, and maybe they'll turn out to be right.
Speaker 1: But I'm not sure that's something, uh that we can
Speaker 1: entirely uh count on. I think we've got a long
Speaker 1: way to go with respect COVID, and an even longer
Speaker 1: way to go with respect to having a unified and
Speaker 1: in a profound sense, uh functional society living to its potential. So, Larry,
Speaker 1: if we want to talk about people being right and wrong,
Speaker 1: to take a look at the people who were estimating
Speaker 1: the jobs numbers this week. They were wildly wrong by
Speaker 1: ten million jobs, and they thought they were gonna lose
Speaker 1: seven point five million in the United States. We actually
Speaker 1: gained two point five Man, what do you make of that?
Speaker 1: How could that have happened? What does that tell us
Speaker 1: about where we're headed? Look, it should give us, all
Speaker 1: of us who were involved in economic forecasting, a very
Speaker 1: great sense of uh humility, And obviously it's a welcome
Speaker 1: development for ten million American families and for America more generally.
Speaker 1: But I think it would be a mistake two over interpret.
Speaker 1: We knew that the whole country was locked down in
Speaker 1: mid April, late April, or even early May in a
Speaker 1: way that was not going to be sustained, and so
Speaker 1: we knew that there was going to be a bounce back.
Speaker 1: We knew that um businesses that employ millions of people
Speaker 1: had received grants basically, but in order for those grants
Speaker 1: to be grants without an obligation to pay back, they
Speaker 1: had to rehire a large number of employees. So when
Speaker 1: I thought about these numbers, as I did through the day,
Speaker 1: I asked myself how much of this changed my view
Speaker 1: about where the economy would be at the end of
Speaker 1: the year, and how much of this what represented an
Speaker 1: earlier bounced back from the floor then most people had expected.
Speaker 1: And I think it's more earlier bounds than it is
Speaker 1: stronger and bigger bounce. So it's certainly good news. But
Speaker 1: when the President starts talking about how it's gonna be
Speaker 1: faster than a v and the economy is going to
Speaker 1: be a rocket ship and all of that, maybe no one.
Speaker 1: No one can know h for sure, but the fundamental
Speaker 1: constraints on the economy. Uh, some sectors aren't going to
Speaker 1: be able to come back as long as COVID is pervasive.
Speaker 1: There's a risk of a second wave of COVID. There's
Speaker 1: substantial financial overexposure and leverage, and especially in the real
Speaker 1: estate sector where tenants aren't paying and landlords aren't positions
Speaker 1: to pay mortgages, and that's putting strain on the financial system.
Speaker 1: Those problems aren't resolved, and they're not really closer to
Speaker 1: being resolved because we've got a good employment report. So yes,
Speaker 1: faster bounce, but I'm not sure the ultimate uh place
Speaker 1: we get is going to be very different. Finally, Larry,
Speaker 1: we need to spend one minute here at the end
Speaker 1: to connect those two points out. Which is the striking
Speaker 1: thing to me of these numbers was the unemployment for
Speaker 1: black Americans did actually went up as it went down
Speaker 1: for both whites and Hispanics. What causes that? It's the
Speaker 1: old adage, David, I suspect, uh, last hired, first fired,
Speaker 1: and in this case it's first fired, last hired, And
Speaker 1: that's what we're and uh, that's what we're seeing. I
Speaker 1: don't know whether we can reach a firm interpretation on
Speaker 1: the basis of one month's numbers. But God knows, UM,
Speaker 1: it's not right, um that African Americans are doing as
Speaker 1: much delivering as they're doing and as little being delivered
Speaker 1: too as is taking place. And that's got something to
Speaker 1: do with uh, the patterns uh that we are that
Speaker 1: we are, that we are seeing, and we're gonna need
Speaker 1: to do something about that. And we're gonna need to
Speaker 1: address uh, these questions of inclusion if we're going to
Speaker 1: have a kind of economy that we all want. Yeah,
Speaker 1: and all the weeks for that to happen, this was
Speaker 1: not the one to have it happen. But so true, Larry,
Speaker 1: they are larger issues here that we're gonna have to
Speaker 1: come back and address again and again. Many thanks to
Speaker 1: our special contresor Larry Summers Harbored, former Secretary of the Treasury.
Speaker 1: This has been another edition of Wall Street Week. See
Speaker 1: you next week.