1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,200 --> 00:00:13,200 Speaker 1: with Jonathan Ferroll and Lisa Brownwitz. Daily we bring you 3 00:00:13,280 --> 00:00:18,600 Speaker 1: insight from the best and economics, finance, investment, and international relations. 4 00:00:18,960 --> 00:00:23,799 Speaker 1: Find Bloomberg Surveillance on Apple Podcast, SoundCloud, Bloomberg dot Com, 5 00:00:23,920 --> 00:00:30,800 Speaker 1: and of course, on the Bloomberg Terminal. Adam Posen should 6 00:00:30,840 --> 00:00:33,479 Speaker 1: always be with us in Washington. He's president of the 7 00:00:33,520 --> 00:00:38,360 Speaker 1: Peterson Institute, former Bank of England Policy Committee member, and 8 00:00:38,640 --> 00:00:42,839 Speaker 1: with the Peterson Institute has provided terrific economic leadership and 9 00:00:42,920 --> 00:00:46,519 Speaker 1: right now timely Brexit leadership as well. He had a 10 00:00:46,560 --> 00:00:49,320 Speaker 1: root canal done at the Royal College of Surgeons recently 11 00:00:49,320 --> 00:00:52,760 Speaker 1: with the Peterson Institute and gave an important speech. You 12 00:00:53,000 --> 00:00:57,160 Speaker 1: spoke what Prime Minister Johnson wants to do, which is 13 00:00:57,200 --> 00:01:00,840 Speaker 1: making a global Britain. How much damage as Prime Minister 14 00:01:01,280 --> 00:01:04,959 Speaker 1: caused and the effort of the United Kingdom to move forward. 15 00:01:05,360 --> 00:01:08,319 Speaker 1: Thanks for having me, Tom, and this president excuse me, 16 00:01:08,360 --> 00:01:11,760 Speaker 1: this prime minister who thinks he's a president, has caused 17 00:01:11,840 --> 00:01:16,680 Speaker 1: untold damage the Brexit situation by doing brinksmanship with the 18 00:01:16,680 --> 00:01:21,600 Speaker 1: EU over Northern Ireland was huge. Undermines trust and undermine 19 00:01:21,680 --> 00:01:25,480 Speaker 1: certainty for investment. It shows how damaging Brexit is that 20 00:01:25,800 --> 00:01:28,040 Speaker 1: on the one hand, Northern Ireland is doing better than 21 00:01:28,080 --> 00:01:31,120 Speaker 1: the rest of the UK because of the non implementation. 22 00:01:31,520 --> 00:01:35,119 Speaker 1: And even as crazy Briggs and Minister Rhese Moggs said, 23 00:01:35,160 --> 00:01:37,920 Speaker 1: I can't fully implement brexitause it will just make inflation 24 00:01:37,959 --> 00:01:42,039 Speaker 1: go higher. Can the parliamentary system, the present structure, survive 25 00:01:42,400 --> 00:01:47,200 Speaker 1: modern news flow, modern acuity, the speed of information today? 26 00:01:47,480 --> 00:01:49,400 Speaker 1: It seems I make a joke about the wars of 27 00:01:49,440 --> 00:01:52,640 Speaker 1: the Roses. This is not funny. Lancasters in New York. 28 00:01:53,080 --> 00:01:55,920 Speaker 1: York has had time to breathe. Yeah, this glorious summer 29 00:01:56,080 --> 00:01:58,480 Speaker 1: of the Son of York is already coming to an end. 30 00:01:58,760 --> 00:02:02,040 Speaker 1: And as Jonathan was just saying, you've got turnover and 31 00:02:02,080 --> 00:02:05,560 Speaker 1: prime ministers so repeatedly fast. But it's not just there, right, 32 00:02:05,600 --> 00:02:08,480 Speaker 1: I mean, we have politicians disliked on both parties in 33 00:02:08,520 --> 00:02:11,280 Speaker 1: the US. We have in France mccron go from a 34 00:02:11,360 --> 00:02:14,880 Speaker 1: win to a few weeks later a complete setback in parliament. 35 00:02:15,160 --> 00:02:19,799 Speaker 1: We have a genuine like the seventies crisis of democracy. 36 00:02:19,840 --> 00:02:22,120 Speaker 1: There was a famous report Tom, You're two young, but 37 00:02:22,240 --> 00:02:25,119 Speaker 1: Sam Huntington and others wrote for the Trial Atteral Commission 38 00:02:25,160 --> 00:02:31,320 Speaker 1: back in the seventy three about the crisis. You're just 39 00:02:31,440 --> 00:02:36,440 Speaker 1: killing me. You're clashing with me. I'm gonna save you both. 40 00:02:36,480 --> 00:02:40,000 Speaker 1: You don't clash anymore. On the policy front. On fiscal policy, 41 00:02:40,120 --> 00:02:42,480 Speaker 1: there's a mechanism to deal with this. Yeah, you understand 42 00:02:42,480 --> 00:02:44,600 Speaker 1: the perspective here. There will be a new leader of 43 00:02:44,639 --> 00:02:46,600 Speaker 1: the party, there will be a new Prime minister, there 44 00:02:46,600 --> 00:02:48,960 Speaker 1: will be immense pressure to call for an election. I 45 00:02:48,960 --> 00:02:50,919 Speaker 1: have no idea if that's going to happen. What we 46 00:02:50,960 --> 00:02:52,840 Speaker 1: need to work out from the fiscal side is what 47 00:02:52,919 --> 00:02:56,160 Speaker 1: is the optimal fiscal policy right now to address the 48 00:02:56,160 --> 00:02:59,079 Speaker 1: problems we have in this economic problems that are not 49 00:02:59,200 --> 00:03:01,760 Speaker 1: just unique to the UK, that's similar to Europe and 50 00:03:01,919 --> 00:03:04,520 Speaker 1: in the United States as well. I can't work out 51 00:03:04,560 --> 00:03:07,640 Speaker 1: what that policy setting should actually look like, what we 52 00:03:07,639 --> 00:03:12,200 Speaker 1: should be asking from the next government. It's a tough situation, Johnathan. 53 00:03:12,200 --> 00:03:14,920 Speaker 1: You're absolutely right. In the UK, because it's shrunk itself 54 00:03:14,960 --> 00:03:18,560 Speaker 1: through Brexit, it's more vulnerable to being an echo chamber 55 00:03:18,600 --> 00:03:21,600 Speaker 1: for shocks. So, as I argued last month, when the 56 00:03:21,600 --> 00:03:25,240 Speaker 1: inflation hits the same as everybody else gets the inflation, 57 00:03:25,680 --> 00:03:28,600 Speaker 1: it resonates more and amplifies more in rattling around in 58 00:03:28,639 --> 00:03:30,840 Speaker 1: the UK because you've got a more limited labor market 59 00:03:30,880 --> 00:03:33,680 Speaker 1: because they've shut out the EU workers. You've got less 60 00:03:33,680 --> 00:03:37,120 Speaker 1: inputs and more expense to get inputs because of the 61 00:03:37,120 --> 00:03:40,640 Speaker 1: Brexit red tape as well as the pricing. So what 62 00:03:40,800 --> 00:03:42,920 Speaker 1: you need is a fiscal policy that simply has to 63 00:03:42,960 --> 00:03:45,960 Speaker 1: accept that that's the reality. And the biggest thing that 64 00:03:46,000 --> 00:03:50,280 Speaker 1: they can do is keep the fiscal balance on the 65 00:03:50,360 --> 00:03:53,040 Speaker 1: right track. Because they are small now and you can 66 00:03:53,080 --> 00:03:55,080 Speaker 1: see the pressure on the pound. It may have popped 67 00:03:55,160 --> 00:03:59,520 Speaker 1: up a little with the prospect of Boris Johnson's departure, 68 00:04:00,080 --> 00:04:02,400 Speaker 1: but in the end they're not gonna They have to 69 00:04:02,440 --> 00:04:05,920 Speaker 1: avoid overheating more than anybody else of this size. The 70 00:04:05,960 --> 00:04:08,400 Speaker 1: Governor County I remember bringing up a few years ago 71 00:04:08,440 --> 00:04:10,240 Speaker 1: he said the speed limit of the UK the British 72 00:04:10,280 --> 00:04:14,680 Speaker 1: economy has changed that once you become supply constraint, and 73 00:04:14,720 --> 00:04:17,960 Speaker 1: perhaps permanently so, then you start to bump against this 74 00:04:18,080 --> 00:04:21,640 Speaker 1: inflation problem, perhaps more often than not. And I wonder 75 00:04:21,640 --> 00:04:24,520 Speaker 1: whether we've broken into perhaps a new regime that's going 76 00:04:24,560 --> 00:04:26,640 Speaker 1: to stick around. And I'm just wondering how you're thinking 77 00:04:26,640 --> 00:04:28,760 Speaker 1: about that dynamic and whether that's unique to the UK 78 00:04:28,880 --> 00:04:31,039 Speaker 1: or is that a problem we all share. No, I 79 00:04:31,080 --> 00:04:33,720 Speaker 1: think it's more unique to the UK. More unique isn't 80 00:04:33,720 --> 00:04:36,120 Speaker 1: a real word, but anyway, I think it's primarily UK 81 00:04:36,800 --> 00:04:39,159 Speaker 1: and not US or Europe. I think people are making 82 00:04:39,160 --> 00:04:41,560 Speaker 1: a mistake if they think we're in a new inflation regime. 83 00:04:41,839 --> 00:04:44,200 Speaker 1: In general, I think we're going to fall back, but 84 00:04:44,360 --> 00:04:47,600 Speaker 1: in the UK you've fallen back towards the seventies, so 85 00:04:47,640 --> 00:04:50,000 Speaker 1: it is a new regime and they have to worry more. 86 00:04:50,040 --> 00:04:52,640 Speaker 1: I've been saying this since Brexit. The Bank of England 87 00:04:52,680 --> 00:04:54,360 Speaker 1: and we're seeing it now has to keep one eye 88 00:04:54,360 --> 00:04:57,359 Speaker 1: on the pound, one eye on inflation expectations in a 89 00:04:57,440 --> 00:05:00,120 Speaker 1: way that they didn't before. I want to coach up 90 00:05:00,160 --> 00:05:02,839 Speaker 1: here under the real ad imposing theme of the last 91 00:05:02,880 --> 00:05:05,200 Speaker 1: couple of years. And no one has captured this more 92 00:05:05,240 --> 00:05:07,839 Speaker 1: than you. Olivier Blanchard had the courage at the I 93 00:05:07,960 --> 00:05:11,400 Speaker 1: M F. Stiglet's to begin to consider four percent inflation 94 00:05:11,839 --> 00:05:14,400 Speaker 1: is a goose out of the great financial crisis. You 95 00:05:14,600 --> 00:05:17,360 Speaker 1: carry that forward to say the new two percent is 96 00:05:17,360 --> 00:05:20,400 Speaker 1: three percent, And I see an entire world and entire 97 00:05:20,520 --> 00:05:24,440 Speaker 1: zeiteguys catching up with that. Imposing refresh that. Right now, 98 00:05:24,560 --> 00:05:26,760 Speaker 1: does your own Powell have to go to three percent 99 00:05:27,160 --> 00:05:30,200 Speaker 1: or institutionally does he have to stick with two percent? 100 00:05:30,760 --> 00:05:33,200 Speaker 1: In name, he's going to have to stick with two percent. Tom. 101 00:05:33,440 --> 00:05:35,520 Speaker 1: What I had been hoping was we would have a 102 00:05:35,560 --> 00:05:37,960 Speaker 1: little bit of inflation and that would allow them to 103 00:05:38,000 --> 00:05:40,840 Speaker 1: opportunistically say, Okay, we're above three. We're not going to 104 00:05:40,920 --> 00:05:44,240 Speaker 1: go all the way down the two. Given the credibility concerns, 105 00:05:44,279 --> 00:05:46,840 Speaker 1: which I think are overdone but for the moment are real. 106 00:05:47,520 --> 00:05:49,560 Speaker 1: They're not gonna be able to say that. They probably 107 00:05:49,560 --> 00:05:52,320 Speaker 1: can't say that until the next strategic review, which is 108 00:05:52,320 --> 00:05:58,480 Speaker 1: what What they can do, however, is what's likely to happen, 109 00:05:58,520 --> 00:06:01,200 Speaker 1: which is they're going to bring inflation and down it. 110 00:06:01,279 --> 00:06:04,799 Speaker 1: Maybe second quarter of twenty three and maybe third quarter 111 00:06:04,839 --> 00:06:06,960 Speaker 1: of twenty three. They'll get it down, so it starting 112 00:06:06,960 --> 00:06:09,240 Speaker 1: with a three handle, and there may be a recession 113 00:06:09,279 --> 00:06:11,760 Speaker 1: that goes with it, and at that point they're not 114 00:06:11,760 --> 00:06:13,719 Speaker 1: going to ease up before then. That they'll ease up 115 00:06:13,760 --> 00:06:15,800 Speaker 1: then and it will be de facto looking like three 116 00:06:15,960 --> 00:06:18,160 Speaker 1: for Global Wall Street. And I've got to be very careful, 117 00:06:18,160 --> 00:06:20,400 Speaker 1: your folks. We have a cardinal surveillance rule We do 118 00:06:20,480 --> 00:06:22,919 Speaker 1: not do differential equations with the White House in the 119 00:06:22,920 --> 00:06:26,799 Speaker 1: background ever. All but the math here is really important. 120 00:06:26,800 --> 00:06:30,560 Speaker 1: We're it's a nine percent inflation. It's highly non linear, 121 00:06:30,839 --> 00:06:35,000 Speaker 1: highly non smooth to bring it down. Which inflation point 122 00:06:35,080 --> 00:06:37,920 Speaker 1: matters to you right now? Is it getting to five percent? 123 00:06:38,360 --> 00:06:40,560 Speaker 1: Is it making that first tick down or do we 124 00:06:40,560 --> 00:06:43,119 Speaker 1: have to wait, wait, wait to get down to three 125 00:06:43,160 --> 00:06:46,159 Speaker 1: percent to get any sense of market calm. No. I 126 00:06:46,200 --> 00:06:48,919 Speaker 1: think once you're on five and it's clearly trend below 127 00:06:48,960 --> 00:06:51,680 Speaker 1: five and it's clearly trending down, you should have the 128 00:06:51,720 --> 00:06:54,719 Speaker 1: market calm. And you're already seeing the calm frankly in 129 00:06:54,720 --> 00:06:58,479 Speaker 1: the long bond um. Not calm about the recession, but 130 00:06:58,560 --> 00:07:02,200 Speaker 1: calm about inflation in the forwards. That's what you're seeing. 131 00:07:02,400 --> 00:07:05,800 Speaker 1: And so I think they just have to The big issue, 132 00:07:06,040 --> 00:07:09,200 Speaker 1: which goes to my colleague Blanchard and Summers, is how 133 00:07:09,279 --> 00:07:11,120 Speaker 1: much wage inflation is there going to be? The big 134 00:07:11,160 --> 00:07:13,840 Speaker 1: difference right now is not that we all got that 135 00:07:14,000 --> 00:07:16,880 Speaker 1: right in Peterson that the inflation was gonna be much higher, 136 00:07:17,280 --> 00:07:19,800 Speaker 1: and Larry and Olivier did their job great and did 137 00:07:19,840 --> 00:07:22,840 Speaker 1: that Um. But the issue is how costly it is 138 00:07:23,000 --> 00:07:25,240 Speaker 1: to bring it down how high the terminal rate has 139 00:07:25,280 --> 00:07:28,120 Speaker 1: to be. And I still take the under versus Larry 140 00:07:28,120 --> 00:07:30,880 Speaker 1: and Olivier because I think the wage inflation is going 141 00:07:30,920 --> 00:07:33,680 Speaker 1: to tail off now. If it turns out unit labor 142 00:07:33,720 --> 00:07:36,560 Speaker 1: costs are still going up, you know, in a few months, 143 00:07:37,000 --> 00:07:39,640 Speaker 1: rather than starting to trend down, then Olivia and Larry 144 00:07:39,640 --> 00:07:41,840 Speaker 1: are probably right, in which case we're going to see 145 00:07:42,520 --> 00:07:45,160 Speaker 1: real You're gonna have to have positive real rates. They 146 00:07:45,240 --> 00:07:46,760 Speaker 1: still hope we don't have to go all the way 147 00:07:46,800 --> 00:07:49,280 Speaker 1: there the payrolls tomorrow, let's talk about the incoming danks 148 00:07:49,400 --> 00:07:52,000 Speaker 1: rather than last several months. What we have said is 149 00:07:52,040 --> 00:07:55,560 Speaker 1: decent gangs on the payrolls front. Unemployment has actually still 150 00:07:55,880 --> 00:07:58,680 Speaker 1: coming down even as we've achieved that, and white just 151 00:07:58,760 --> 00:08:03,120 Speaker 1: haven't accelerates it. Some paper sitting cab might say, maybe 152 00:08:03,120 --> 00:08:05,560 Speaker 1: this labor market is not as tight as we perhaps 153 00:08:05,600 --> 00:08:07,560 Speaker 1: thought it was. What would your take me from just 154 00:08:07,600 --> 00:08:09,440 Speaker 1: looking at data the last couple of months. Well, to 155 00:08:09,480 --> 00:08:11,679 Speaker 1: be honest, just looking at the data, das and it's 156 00:08:11,680 --> 00:08:14,480 Speaker 1: it's screwy data. I mean, what we've got is the 157 00:08:14,560 --> 00:08:17,600 Speaker 1: labor market numbers, which generally have been the most reliable 158 00:08:17,680 --> 00:08:20,400 Speaker 1: data for the US or any major economy. You rely 159 00:08:20,480 --> 00:08:22,640 Speaker 1: on your labor market numbers and tell you what's going on, 160 00:08:23,040 --> 00:08:25,880 Speaker 1: and they've been really completely out of whack because remember 161 00:08:25,920 --> 00:08:28,760 Speaker 1: we had at least on paper contraction in the first quarter, 162 00:08:29,280 --> 00:08:32,800 Speaker 1: and yet we see these incredible labor market numbers. So 163 00:08:32,840 --> 00:08:36,360 Speaker 1: we see vacancy ratios too, meaning number of jobs available 164 00:08:36,360 --> 00:08:39,800 Speaker 1: to job seekers at levels we've never seen before. We 165 00:08:39,880 --> 00:08:42,120 Speaker 1: have a new paper, as it happens, coming up from Peterson, 166 00:08:42,160 --> 00:08:44,240 Speaker 1: from Blanchard and Summer's looking at this. It will be 167 00:08:44,240 --> 00:08:47,800 Speaker 1: out probably next week um and they basically say, you've 168 00:08:47,800 --> 00:08:50,600 Speaker 1: got to take this seriously. Labor market is genuinely very tight. 169 00:08:51,280 --> 00:08:53,640 Speaker 1: I'm more of the persuasion. You look at the numbers. 170 00:08:53,640 --> 00:08:56,959 Speaker 1: If they don't make sense, there's something wrong with the numbers. 171 00:08:56,960 --> 00:08:59,080 Speaker 1: So if you're a policy make for again, how would 172 00:08:59,080 --> 00:09:01,200 Speaker 1: you interpret the account information? What would you look at 173 00:09:01,280 --> 00:09:04,080 Speaker 1: We've had from Chaman Pal who's looked at things like 174 00:09:04,160 --> 00:09:08,560 Speaker 1: consumer expectations on inflation, and you, Mitch, that's new to 175 00:09:08,640 --> 00:09:10,839 Speaker 1: all of us. That's a little thing in a day 176 00:09:10,880 --> 00:09:12,760 Speaker 1: to point that we kind of use the pad attention to. 177 00:09:13,160 --> 00:09:15,520 Speaker 1: And that's the difference between fifty basis points and Steff 178 00:09:15,720 --> 00:09:18,240 Speaker 1: I think I think that focusing on that one data 179 00:09:18,280 --> 00:09:21,120 Speaker 1: point and using that to explain the vers fifty, I 180 00:09:21,120 --> 00:09:23,959 Speaker 1: think it was a mistake in communication. Frankly, I think 181 00:09:23,960 --> 00:09:25,959 Speaker 1: what they've got to be focused on are two things. 182 00:09:26,320 --> 00:09:28,520 Speaker 1: They've got to be focused on, trends and unit labor 183 00:09:28,600 --> 00:09:32,959 Speaker 1: cross meaning productivity wages net of productivity. And the second 184 00:09:33,000 --> 00:09:36,240 Speaker 1: thing they've got to be looking at is the longer 185 00:09:36,320 --> 00:09:39,640 Speaker 1: term expectations in the bond market. Both of those are 186 00:09:39,760 --> 00:09:44,200 Speaker 1: looking flattish to down very quickly. Here we have an 187 00:09:44,240 --> 00:09:49,080 Speaker 1: experiment underway behind us, a central bank or Secretary of Treasury. 188 00:09:49,160 --> 00:09:54,720 Speaker 1: How's the yellowing experiment going. I think her signature issue, 189 00:09:54,880 --> 00:09:59,120 Speaker 1: which is the International corporate tax deal is was the 190 00:09:59,200 --> 00:10:02,160 Speaker 1: right priority for her and for this country. I think 191 00:10:02,240 --> 00:10:03,959 Speaker 1: she did a good job of getting as far as 192 00:10:03,960 --> 00:10:06,680 Speaker 1: it has gone, but now somehow you have to get 193 00:10:06,679 --> 00:10:10,840 Speaker 1: the Senate to buy it. I think the American rescue 194 00:10:10,880 --> 00:10:14,720 Speaker 1: package was too big and too short a time, but 195 00:10:15,200 --> 00:10:21,680 Speaker 1: that was for ordained. I don't I don't talk about individuals. 196 00:10:21,920 --> 00:10:25,520 Speaker 1: I don't even individuals I respect greatly, or because individuals 197 00:10:26,040 --> 00:10:29,280 Speaker 1: ask me every day. I ask you that someone's going 198 00:10:30,600 --> 00:10:32,200 Speaker 1: It's like Trump, They're gonna have to drag him out, 199 00:10:32,240 --> 00:10:35,480 Speaker 1: kicking into it, tims like Trump and we can we 200 00:10:35,520 --> 00:10:37,760 Speaker 1: clip that just like that out for the rest of 201 00:10:37,760 --> 00:10:40,080 Speaker 1: this day. I just wonder at him and just briefly, 202 00:10:40,400 --> 00:10:44,320 Speaker 1: would you even call the American rescue plan the yelling experiment? No, 203 00:10:44,679 --> 00:10:47,439 Speaker 1: it was, it was. That was exactly my point. I'm 204 00:10:47,440 --> 00:10:50,439 Speaker 1: sorry I didn't get it out. Really, it was Pelosi 205 00:10:50,440 --> 00:10:53,280 Speaker 1: and humor with Biden's acceptance that that was the plan. 206 00:10:54,320 --> 00:10:57,000 Speaker 1: It whether or not I have no idea what went 207 00:10:57,040 --> 00:10:59,320 Speaker 1: on in the White House and Treasury and the decision. 208 00:10:59,720 --> 00:11:02,439 Speaker 1: But the biggest issue was once that plan was clear, 209 00:11:02,840 --> 00:11:04,640 Speaker 1: it falls on the feed. The feed should have been 210 00:11:04,640 --> 00:11:07,760 Speaker 1: tightening and worrying more and forecasting more inflation once that plan. 211 00:11:08,120 --> 00:11:11,000 Speaker 1: This has been a wonderful kind of the Institute. Adam, 212 00:11:11,040 --> 00:11:20,080 Speaker 1: thank you. We need to drive for the conversation on 213 00:11:20,320 --> 00:11:24,079 Speaker 1: the nation. We do so with Briandese's National Economic Council Director, 214 00:11:24,280 --> 00:11:26,880 Speaker 1: of course, working for years with Gene Sperling. And what 215 00:11:27,000 --> 00:11:28,920 Speaker 1: is most important here and part of the act of 216 00:11:28,920 --> 00:11:31,320 Speaker 1: Bloomberg surveillance and what we did with Bloomberg on the 217 00:11:31,360 --> 00:11:35,600 Speaker 1: economy is microeconomics matters. There's too many people out there 218 00:11:35,600 --> 00:11:39,480 Speaker 1: blathering the big picture without the foundations under it. Mr 219 00:11:39,559 --> 00:11:44,720 Speaker 1: d snows some Middlebury one economics micro economics matters. I 220 00:11:44,720 --> 00:11:48,240 Speaker 1: would suggest the price theory is going in your direction. 221 00:11:48,520 --> 00:11:53,280 Speaker 1: There's little indications that maybe the pain is over. Not 222 00:11:53,440 --> 00:11:57,280 Speaker 1: all clear, but you can you say there's some constructive 223 00:11:57,320 --> 00:12:00,199 Speaker 1: elements out there that you see, we'll look to start. 224 00:12:00,200 --> 00:12:03,960 Speaker 1: Prices are unacceptably high, we are also seeing some moderation, 225 00:12:04,120 --> 00:12:07,200 Speaker 1: and that moderation is important. You've seen it in core 226 00:12:07,720 --> 00:12:11,479 Speaker 1: PCE that that that the metric that the Fed traditionally 227 00:12:11,720 --> 00:12:15,200 Speaker 1: relies on moderation over the last three months, particularly compared 228 00:12:15,240 --> 00:12:18,520 Speaker 1: to the prior and as you mentioned, we're seeing for 229 00:12:18,679 --> 00:12:21,520 Speaker 1: the typical American consumer a little bit of relief at 230 00:12:21,520 --> 00:12:23,840 Speaker 1: the gas pump, prices down to about four seventy five, 231 00:12:24,600 --> 00:12:28,080 Speaker 1: down from you know, down more than five cents. But 232 00:12:28,640 --> 00:12:32,320 Speaker 1: let's be let's be clear, they're still unacceptably I we've 233 00:12:32,320 --> 00:12:34,040 Speaker 1: got a long way to go, and so we've got 234 00:12:34,120 --> 00:12:36,160 Speaker 1: to keep our head down and keep a focus on 235 00:12:36,559 --> 00:12:40,000 Speaker 1: bringing prices down while not giving up all the economic 236 00:12:40,040 --> 00:12:42,560 Speaker 1: gains that we've made. One of our wonderful guests, Jim Bion, 237 00:12:42,600 --> 00:12:46,400 Speaker 1: Uncle of Chicago, or a whip inflation now button on 238 00:12:46,440 --> 00:12:49,800 Speaker 1: the show the other day, you people have avoided the 239 00:12:49,840 --> 00:12:53,160 Speaker 1: idiocy of the early nineties seventies. But with that, the 240 00:12:53,200 --> 00:12:57,120 Speaker 1: president has to provide a morale boost two people hammered 241 00:12:57,120 --> 00:12:59,840 Speaker 1: by inflation. How do you do that. It's not just 242 00:12:59,880 --> 00:13:01,760 Speaker 1: a morale boost, and we have to act, and we 243 00:13:01,800 --> 00:13:05,240 Speaker 1: have to show action on bath of the American people. 244 00:13:05,240 --> 00:13:07,559 Speaker 1: And that's exactly what the president is doing. He's saying, 245 00:13:07,640 --> 00:13:10,280 Speaker 1: bringing prices down is his trap priority, and every day 246 00:13:10,320 --> 00:13:13,520 Speaker 1: he's focused on practical things that he can do. So 247 00:13:13,559 --> 00:13:16,600 Speaker 1: the release of oil from the Strategic Petroleum Reserve sounds 248 00:13:16,760 --> 00:13:19,400 Speaker 1: esoteric to people, but you know, oil market analysts you've 249 00:13:19,400 --> 00:13:21,640 Speaker 1: had on this show will say it was single handedly responsible. 250 00:13:21,679 --> 00:13:25,120 Speaker 1: From keeping keeping oil prices going higher, moving to work 251 00:13:25,120 --> 00:13:28,120 Speaker 1: with the refineries to try to keep refinery capacity online, 252 00:13:28,559 --> 00:13:31,640 Speaker 1: that is important. It makes a difference, and as we're seeing, 253 00:13:31,640 --> 00:13:33,880 Speaker 1: we're starting to see a little bit of that moderation 254 00:13:33,920 --> 00:13:36,160 Speaker 1: at the pump. The President is saying, let's do more, 255 00:13:36,240 --> 00:13:38,640 Speaker 1: Let's do everything we possibly can. He called for a 256 00:13:38,640 --> 00:13:41,120 Speaker 1: temporary holiday for the gas tax. That's not going to 257 00:13:41,200 --> 00:13:43,160 Speaker 1: solve every issue. That would make a little bit of 258 00:13:43,160 --> 00:13:45,640 Speaker 1: difference as well. So you need a president who's going 259 00:13:45,679 --> 00:13:48,000 Speaker 1: to keep at it and who's going to communicate clear 260 00:13:48,040 --> 00:13:50,800 Speaker 1: to the American people that we are making progress, that 261 00:13:50,880 --> 00:13:54,160 Speaker 1: we have made enormous economic progress, but that he's not satisfied, 262 00:13:54,160 --> 00:13:55,960 Speaker 1: and we're gonna stay at it. You know, satisfied either. 263 00:13:55,960 --> 00:13:58,319 Speaker 1: But you've talked about a high aggult. You've talked about 264 00:13:58,320 --> 00:14:01,360 Speaker 1: defending the world lived for Lauder and that we had 265 00:14:01,400 --> 00:14:04,199 Speaker 1: to stand firm. What did you mean by that, Well, 266 00:14:04,240 --> 00:14:07,959 Speaker 1: let's be very clear, that's a concept that Republicans and 267 00:14:08,000 --> 00:14:12,000 Speaker 1: Democrats have embraced four years and it's about democracy. It's 268 00:14:12,040 --> 00:14:15,120 Speaker 1: about the democracy and the democratic tradition that grew out 269 00:14:15,160 --> 00:14:18,080 Speaker 1: of World War Two, and it has served our national 270 00:14:18,120 --> 00:14:21,120 Speaker 1: security interests, in economic interests well. And standing up for 271 00:14:21,160 --> 00:14:24,120 Speaker 1: democracy is something that this president feels strongly about. And 272 00:14:24,160 --> 00:14:26,600 Speaker 1: so we are going to fight to bring prices down, 273 00:14:26,640 --> 00:14:29,120 Speaker 1: We're going to fight to get increased oil supply on 274 00:14:29,160 --> 00:14:31,440 Speaker 1: the market. But what we're not going to do is 275 00:14:31,440 --> 00:14:33,320 Speaker 1: to suggest that the only way to do that is 276 00:14:33,360 --> 00:14:35,680 Speaker 1: to actually step away from the Ukrainian people, to step 277 00:14:35,720 --> 00:14:38,280 Speaker 1: away from fighting for democracy and everything that that if 278 00:14:38,280 --> 00:14:40,960 Speaker 1: standing up for democracy is tritty paramount, and you've quite 279 00:14:40,960 --> 00:14:44,640 Speaker 1: clearly just suggested, it is, why is this administration considering 280 00:14:45,000 --> 00:14:48,200 Speaker 1: removing tariffs on the Chinese Communist Party, which is anything 281 00:14:48,280 --> 00:14:52,040 Speaker 1: but a democracy, and it's also a government that you've 282 00:14:52,040 --> 00:14:55,800 Speaker 1: accused of genocide. Why is that a consideration and how 283 00:14:55,800 --> 00:14:58,360 Speaker 1: does that reconcile with this view that this is about 284 00:14:58,360 --> 00:15:02,240 Speaker 1: standing up for democracy. Our economic policy should be about 285 00:15:02,440 --> 00:15:08,000 Speaker 1: promoting economic security for American workers, American businesses, American families, 286 00:15:08,200 --> 00:15:10,440 Speaker 1: and so we have to look at everything through that lens. 287 00:15:10,720 --> 00:15:14,040 Speaker 1: In the prior administration, they took an approach to escalating 288 00:15:14,320 --> 00:15:17,280 Speaker 1: trade tensions and a trade war with China that ultimately 289 00:15:17,280 --> 00:15:20,720 Speaker 1: what didn't serve the perfect that purpose, didn't help our 290 00:15:20,760 --> 00:15:23,560 Speaker 1: farmers and our ranchers, didn't help many sectors of the economy. 291 00:15:23,920 --> 00:15:26,880 Speaker 1: So President Biden came into office committed to the proposition 292 00:15:26,920 --> 00:15:28,840 Speaker 1: that we need to get tough on China. There are 293 00:15:28,880 --> 00:15:31,920 Speaker 1: places where we need to be tougher and clearer about 294 00:15:31,960 --> 00:15:35,880 Speaker 1: their non market practices, about their human rights abuses, but 295 00:15:35,920 --> 00:15:37,680 Speaker 1: we also need to be smarter about how to do 296 00:15:37,720 --> 00:15:39,960 Speaker 1: this as well. Why is that smarter? And let's got 297 00:15:39,960 --> 00:15:42,040 Speaker 1: back to the question again and let things out. Clearly, 298 00:15:42,920 --> 00:15:46,600 Speaker 1: you've accused the Chinese Communist Party of genocide. You're saying 299 00:15:46,760 --> 00:15:50,200 Speaker 1: that what is paramount here is defending democracy and the 300 00:15:50,320 --> 00:15:54,200 Speaker 1: defending the liberal world order is more important than the 301 00:15:54,240 --> 00:15:56,880 Speaker 1: pain that people fail at the pump, and ultimately this 302 00:15:56,960 --> 00:16:01,640 Speaker 1: administration is considering removing town riffs. I wasn't convinced by 303 00:16:01,640 --> 00:16:03,360 Speaker 1: the last dounce, so I don't think many of us 304 00:16:03,360 --> 00:16:06,520 Speaker 1: will either. This is an awkward moment, I know, but 305 00:16:06,560 --> 00:16:09,000 Speaker 1: I really need to understand from you what makes sense 306 00:16:09,040 --> 00:16:13,320 Speaker 1: for this administration to consider removing tariffs on a country 307 00:16:13,680 --> 00:16:16,400 Speaker 1: that you're accusing of genocide. First of all, I want 308 00:16:16,400 --> 00:16:19,400 Speaker 1: to be you, you miscaraschist. My positions are want to 309 00:16:19,400 --> 00:16:22,320 Speaker 1: clarify faced bringing prices down for American people as the 310 00:16:22,360 --> 00:16:25,240 Speaker 1: President's top priority. He's focused on it every day, and 311 00:16:25,360 --> 00:16:28,080 Speaker 1: it's because he understands the pain that people are feeling 312 00:16:28,280 --> 00:16:30,560 Speaker 1: at the gas plump and around the kitchen table. At 313 00:16:30,600 --> 00:16:33,160 Speaker 1: the same time, he does not believe that the way 314 00:16:33,200 --> 00:16:34,960 Speaker 1: to do that would be to step back from our 315 00:16:35,000 --> 00:16:38,840 Speaker 1: democratic values or to step back from protecting UH the 316 00:16:38,920 --> 00:16:42,480 Speaker 1: Ukrainians against the invasion from Vladimir Putin. He does not 317 00:16:42,560 --> 00:16:46,520 Speaker 1: believe that that is an acceptable or an appropriate choice. So, 318 00:16:46,800 --> 00:16:50,240 Speaker 1: given that our focus is on how can we actually 319 00:16:50,240 --> 00:16:53,720 Speaker 1: advance the ball And you're seeing the President in action 320 00:16:53,840 --> 00:16:56,360 Speaker 1: right now doing that. The actions that he's taken around 321 00:16:56,400 --> 00:16:59,200 Speaker 1: oil supply, the actions that he has taken around refineries, 322 00:16:59,200 --> 00:17:01,640 Speaker 1: the actions that he has calling for around tax productions, 323 00:17:02,000 --> 00:17:03,720 Speaker 1: they all would make a difference, and they make a 324 00:17:03,760 --> 00:17:05,840 Speaker 1: difference for American family. Let's sit on Chinese just for 325 00:17:05,920 --> 00:17:08,080 Speaker 1: one final question and try and focus on policy. And 326 00:17:08,080 --> 00:17:10,960 Speaker 1: I appreciate you follow up as let's talk about what 327 00:17:11,040 --> 00:17:13,239 Speaker 1: you can do, because what we understand is that you're 328 00:17:13,280 --> 00:17:15,840 Speaker 1: looking to remove some tariffs on certain goods, but perhaps 329 00:17:15,960 --> 00:17:18,720 Speaker 1: double down the effort elsewhere. Can you give me a 330 00:17:18,720 --> 00:17:20,800 Speaker 1: deeper understanding of where the current thinking of this White 331 00:17:20,800 --> 00:17:23,800 Speaker 1: House is and the direction of travel for policy, Well, 332 00:17:23,840 --> 00:17:26,000 Speaker 1: there's no question that if you look at what the 333 00:17:26,080 --> 00:17:29,880 Speaker 1: Chinese economy and the non market practices that the Chinese 334 00:17:30,280 --> 00:17:33,920 Speaker 1: uh the Chinese leadership are undertaking, that there are sectors 335 00:17:33,920 --> 00:17:37,560 Speaker 1: of the economy where they are engaged in on acceptable activities, 336 00:17:37,720 --> 00:17:41,440 Speaker 1: and that those are present a strategic risk to our 337 00:17:41,480 --> 00:17:44,119 Speaker 1: economy and our national security. And so those are the 338 00:17:44,160 --> 00:17:47,320 Speaker 1: places where we need to focus on using all of 339 00:17:47,320 --> 00:17:49,840 Speaker 1: the tools at our disposal. Tariffs are one tool but 340 00:17:49,880 --> 00:17:52,040 Speaker 1: we have other tools as well to make sure that 341 00:17:52,080 --> 00:17:55,080 Speaker 1: we are protecting key sectors of the American economy and 342 00:17:55,119 --> 00:17:58,160 Speaker 1: that we are holding to account for those. You look 343 00:17:58,160 --> 00:18:00,639 Speaker 1: at something like semi conductors, which we've talked about before 344 00:18:00,880 --> 00:18:03,439 Speaker 1: and which is incredibly salient. We of course need to 345 00:18:03,480 --> 00:18:06,560 Speaker 1: act here in the United States to invest in building 346 00:18:06,600 --> 00:18:09,120 Speaker 1: our own domestic resilience, but we also have to take 347 00:18:09,160 --> 00:18:11,679 Speaker 1: seriously that some of the actions that China are taking 348 00:18:12,119 --> 00:18:15,359 Speaker 1: expose us more deeply, and we need to counter those. 349 00:18:15,680 --> 00:18:18,080 Speaker 1: Brande's wanted for to catch up the director of the 350 00:18:18,160 --> 00:18:25,800 Speaker 1: National Economic Council. We need to talk about this market, 351 00:18:25,960 --> 00:18:27,920 Speaker 1: and we can do that with the LEFIA. Door Wada, 352 00:18:27,960 --> 00:18:31,359 Speaker 1: the managing director of Rock Creep Group A Lefia. Can 353 00:18:31,400 --> 00:18:34,520 Speaker 1: we start here the Everything pain portfolio. I mean, it's 354 00:18:34,520 --> 00:18:38,440 Speaker 1: anything working this year. I mean you talked about uncertainty 355 00:18:38,520 --> 00:18:41,480 Speaker 1: polit on the political front just as much in the markets, right. 356 00:18:41,480 --> 00:18:43,719 Speaker 1: I mean, there's three themes that everyone's talking about, and 357 00:18:43,720 --> 00:18:45,760 Speaker 1: it used to be short term themes. Now it's going 358 00:18:45,840 --> 00:18:47,960 Speaker 1: to affect the portfolio for the next two, three or 359 00:18:47,960 --> 00:18:52,000 Speaker 1: four years. Right, slowing global economy, monetary tightening and inflation, 360 00:18:52,280 --> 00:18:54,520 Speaker 1: and the impact from the Ukraine Russia War. Nothing has 361 00:18:54,520 --> 00:18:57,240 Speaker 1: been resolved there, We're still in the same oil hundred 362 00:18:57,280 --> 00:19:02,199 Speaker 1: dollars hundred and five? Does matter? You and a Shani 363 00:19:02,240 --> 00:19:05,160 Speaker 1: are too young to remember seventy nine and the glory 364 00:19:05,160 --> 00:19:08,960 Speaker 1: of the bond bear market. Then you people advise on 365 00:19:09,200 --> 00:19:12,960 Speaker 1: quiet money. You have never seen bond losses like this. 366 00:19:13,760 --> 00:19:18,960 Speaker 1: How does quiet money recover in bonds price up, yield down? 367 00:19:19,160 --> 00:19:21,879 Speaker 1: What is the actual mechanism to do that? Well, you know, 368 00:19:21,880 --> 00:19:24,119 Speaker 1: it's very interesting, and so thank you for calling me 369 00:19:24,160 --> 00:19:26,040 Speaker 1: so young. First of all, I appreciate that. I don't 370 00:19:26,040 --> 00:19:29,000 Speaker 1: know if some of my colleagues will be flattered. I 371 00:19:29,000 --> 00:19:30,600 Speaker 1: think a lot of us can remember some of the 372 00:19:30,600 --> 00:19:32,640 Speaker 1: pain points in the markets though, And I think one 373 00:19:32,640 --> 00:19:35,000 Speaker 1: of the interesting things about the fixed income markets today 374 00:19:35,080 --> 00:19:38,399 Speaker 1: is we're very looking, very very closely at where is 375 00:19:38,440 --> 00:19:40,840 Speaker 1: the ten uere yield going to go? What time line 376 00:19:40,880 --> 00:19:42,600 Speaker 1: do we have, and how do we start to manage 377 00:19:42,640 --> 00:19:46,920 Speaker 1: our fixed in You're engaging very institutionally of full faith 378 00:19:46,960 --> 00:19:50,720 Speaker 1: and credit. Yes, for now, we haven't started to see 379 00:19:50,720 --> 00:19:53,480 Speaker 1: a ton of signs of distress, but there are a 380 00:19:53,480 --> 00:19:55,639 Speaker 1: lot of indicies that we're looking at, a lot of metrics. 381 00:19:55,680 --> 00:19:58,040 Speaker 1: We're looking at to see if the corporate bond market 382 00:19:58,040 --> 00:20:00,480 Speaker 1: is starting to crap? Would you describe in we've taken 383 00:20:00,520 --> 00:20:05,119 Speaker 1: out the wides of like about five fifty through those levels. 384 00:20:05,200 --> 00:20:07,639 Speaker 1: That was enough for this Federal reserve back then to pivot. Clearly, 385 00:20:07,640 --> 00:20:11,520 Speaker 1: different world, different inflation level. How do you judge what 386 00:20:11,720 --> 00:20:15,480 Speaker 1: is stressful this time compared to what was stressful then? Yeah? Well, 387 00:20:15,520 --> 00:20:17,119 Speaker 1: you know, we have the benefit of investing in a 388 00:20:17,119 --> 00:20:19,960 Speaker 1: lot of debt financing types of strategies, right, so we're 389 00:20:20,000 --> 00:20:22,360 Speaker 1: looking to see what is the underwriting, has it loosened? 390 00:20:22,520 --> 00:20:24,399 Speaker 1: We're looking to see where will the cracks be. We're 391 00:20:24,400 --> 00:20:26,639 Speaker 1: looking at the high yield market, I mean spreads up 392 00:20:26,640 --> 00:20:29,080 Speaker 1: wide and over five hundred basis points right in the 393 00:20:29,160 --> 00:20:31,280 Speaker 1: last few months. We're looking to see where the relative 394 00:20:31,280 --> 00:20:33,560 Speaker 1: opportunities and are you getting paid for that risk? There's 395 00:20:33,560 --> 00:20:35,640 Speaker 1: going to be risk in the market, right but defaults 396 00:20:35,640 --> 00:20:38,320 Speaker 1: would have to double if we wanted to see a 397 00:20:38,440 --> 00:20:40,439 Speaker 1: huge loss in our high yield portfolio. So is it 398 00:20:40,480 --> 00:20:42,160 Speaker 1: the right time to start stepping in. I'm not saying 399 00:20:42,160 --> 00:20:44,080 Speaker 1: we're doing anything right now. I think it's a wait 400 00:20:44,080 --> 00:20:46,199 Speaker 1: and see moment, and I think we're gonna have to 401 00:20:46,200 --> 00:20:49,240 Speaker 1: wait and see where things you know, shake out. But 402 00:20:49,320 --> 00:20:51,960 Speaker 1: there are pockets of opportunity that we are starting to see. 403 00:20:51,960 --> 00:20:53,520 Speaker 1: And I don't think we have to worry as much 404 00:20:53,520 --> 00:20:55,600 Speaker 1: about credit risk in our fixting come portfolio as we 405 00:20:55,640 --> 00:20:58,240 Speaker 1: do about duration. What are you waiting for? Talking about 406 00:20:58,280 --> 00:21:00,000 Speaker 1: what you're waiting for? You stress we're not doing anything 407 00:21:00,119 --> 00:21:03,520 Speaker 1: right now? Went off inflation. I think it's been clear 408 00:21:03,640 --> 00:21:05,680 Speaker 1: by the FED that that is their target. They're looking 409 00:21:05,720 --> 00:21:09,040 Speaker 1: at inflation, and everything's hinging around inflation, and consumer demand 410 00:21:09,160 --> 00:21:11,200 Speaker 1: is going to hinge around inflation. We have a huge 411 00:21:11,200 --> 00:21:13,840 Speaker 1: earning season coming up right, I mean July is going 412 00:21:13,880 --> 00:21:17,960 Speaker 1: to be a bellweather of inflation. UM expectations, what our 413 00:21:17,960 --> 00:21:20,280 Speaker 1: companies seeing, what our corporates pricing in Q one was 414 00:21:20,320 --> 00:21:23,639 Speaker 1: pretty good. Everyone can I can admit to that Q 415 00:21:23,800 --> 00:21:27,119 Speaker 1: two probably not as good. Q three expectations are going 416 00:21:27,160 --> 00:21:30,120 Speaker 1: to be worse. If consumer demand starts to fall, then 417 00:21:30,160 --> 00:21:32,680 Speaker 1: I think that we will continue to see pain in 418 00:21:32,720 --> 00:21:34,840 Speaker 1: the market, and where we want to see the market 419 00:21:34,920 --> 00:21:37,320 Speaker 1: shake out a little more in pain before we start 420 00:21:37,359 --> 00:21:40,439 Speaker 1: making real investment. The heritage of Rock Creek, when we 421 00:21:40,480 --> 00:21:44,720 Speaker 1: meet with Asani and Davos, is natural gas. She owns 422 00:21:44,800 --> 00:21:49,600 Speaker 1: the high ground on the dynamics of gas and hydrocarbons 423 00:21:49,680 --> 00:21:53,679 Speaker 1: as well. What is your response to the surge that 424 00:21:53,720 --> 00:21:57,200 Speaker 1: they're living in continental Europe about natural gas? I mean, 425 00:21:57,200 --> 00:22:02,200 Speaker 1: it's it's standard deviations out, isn't it. The entire energy 426 00:22:02,240 --> 00:22:04,760 Speaker 1: complex were in a different world right, and there are 427 00:22:04,800 --> 00:22:08,040 Speaker 1: a ton of investment opportunities, as you've heard from us before, 428 00:22:08,320 --> 00:22:11,119 Speaker 1: in terms of the energy complex, in terms of natural gas, 429 00:22:11,119 --> 00:22:14,080 Speaker 1: in terms of the tail winds for renewable energy, wind solar, 430 00:22:14,440 --> 00:22:16,720 Speaker 1: There is so much that we can look at in 431 00:22:16,800 --> 00:22:18,880 Speaker 1: terms of the next five ten years, and we're positioning 432 00:22:18,880 --> 00:22:21,080 Speaker 1: our portfolios to take advantage of all of that, and 433 00:22:21,160 --> 00:22:23,920 Speaker 1: unfortunately Europe is going to take the pain in the interim. 434 00:22:24,119 --> 00:22:26,800 Speaker 1: You're you're advising Rock Creek wanders into the White House 435 00:22:26,840 --> 00:22:30,840 Speaker 1: to day to meet with almost and President Biden here 436 00:22:30,960 --> 00:22:35,480 Speaker 1: on Llergy. Can you be optimistic that Lergy can rescue 437 00:22:35,600 --> 00:22:39,159 Speaker 1: Europe by December? Not by December? I think that's a 438 00:22:39,320 --> 00:22:42,080 Speaker 1: that's a heavy task. I think that everything that is 439 00:22:42,080 --> 00:22:45,119 Speaker 1: going on within Russia and Europe is going to dictate 440 00:22:45,119 --> 00:22:48,200 Speaker 1: whether Europe comes out ahead at the end of the year. 441 00:22:48,200 --> 00:22:50,000 Speaker 1: But I'll tell you we're not, you know, bullish on 442 00:22:50,040 --> 00:22:53,159 Speaker 1: Europe despite valuations, and it's because of the geopolitical tensions 443 00:22:53,200 --> 00:22:55,280 Speaker 1: and the energy complex. How can you really be overweight 444 00:22:55,320 --> 00:22:58,000 Speaker 1: Europe today? That's the difficult question that a lot of 445 00:22:58,000 --> 00:23:00,280 Speaker 1: people have, and some of that mats to the right. 446 00:23:00,320 --> 00:23:02,800 Speaker 1: Differentials even matter to the year when you count. Tell 447 00:23:02,840 --> 00:23:04,600 Speaker 1: me where the proces gast this year? Rent, you know 448 00:23:04,640 --> 00:23:14,679 Speaker 1: where I feel on this differentials and spreads. Heather Bauchet 449 00:23:14,800 --> 00:23:17,240 Speaker 1: with us right now. To say she's a member of 450 00:23:17,240 --> 00:23:21,720 Speaker 1: the Council of Economic Advisors doesn't describe how important her 451 00:23:21,760 --> 00:23:25,720 Speaker 1: position is. Her book Unbound stopped economic traffic a number 452 00:23:25,760 --> 00:23:28,639 Speaker 1: of years ago and looking at the inequalities of the nation. 453 00:23:29,040 --> 00:23:32,760 Speaker 1: And she has an economic pedigree very different from most, 454 00:23:33,040 --> 00:23:36,399 Speaker 1: including working at the University of Hile, Bronner and Bernstein, 455 00:23:36,720 --> 00:23:41,000 Speaker 1: the New School of Social Research in Washington. Are you 456 00:23:41,119 --> 00:23:45,400 Speaker 1: treated how are you treated by the fancy academics from 457 00:23:45,440 --> 00:23:48,080 Speaker 1: fancy schools. They wouldn't know that, you know, the New 458 00:23:48,160 --> 00:23:51,760 Speaker 1: School of Social Research if it hit him over the head. Well, 459 00:23:51,840 --> 00:23:54,359 Speaker 1: you know, in econ circles, I think what matters is, 460 00:23:54,520 --> 00:23:57,159 Speaker 1: you know, how will we talked about the economy? And 461 00:23:57,240 --> 00:24:01,760 Speaker 1: I think I have not experienced discrimination based on my pedigree. 462 00:24:01,800 --> 00:24:04,199 Speaker 1: We're ALcom to talk about jobs claims. That's inappropriate right 463 00:24:04,200 --> 00:24:06,520 Speaker 1: now given the policies of the White House. But we 464 00:24:06,560 --> 00:24:09,320 Speaker 1: can talk about the state of inequality in this nation 465 00:24:09,560 --> 00:24:12,040 Speaker 1: when you speak to the President, when you advise others 466 00:24:12,040 --> 00:24:14,399 Speaker 1: in the White House. What is the character of our 467 00:24:14,520 --> 00:24:17,800 Speaker 1: labor inequality right now? Well, one of the things that 468 00:24:17,840 --> 00:24:20,520 Speaker 1: we've seen since the President took office is in large 469 00:24:20,520 --> 00:24:23,320 Speaker 1: part due to policies like the American Rescue Plan, like 470 00:24:23,400 --> 00:24:26,399 Speaker 1: making sure that we wrapped our hands around the pandemic 471 00:24:26,440 --> 00:24:29,719 Speaker 1: and got the job market back in motion. We've actually 472 00:24:29,720 --> 00:24:33,280 Speaker 1: seen that this has been good for addressing inequality over 473 00:24:33,320 --> 00:24:35,880 Speaker 1: the past over the past or year and a half. 474 00:24:36,480 --> 00:24:38,320 Speaker 1: What remains to be seen is whether or not we 475 00:24:38,359 --> 00:24:41,960 Speaker 1: can continue those trends. But certainly the President was focused 476 00:24:42,000 --> 00:24:44,600 Speaker 1: first and foremost on getting people back to work. And 477 00:24:44,640 --> 00:24:47,399 Speaker 1: we know that for the vast majority of Americans, the 478 00:24:47,480 --> 00:24:50,000 Speaker 1: vast majority of their income comes from their job. So 479 00:24:50,040 --> 00:24:52,920 Speaker 1: if people have jobs, and especially jobs in an economic 480 00:24:53,000 --> 00:24:56,520 Speaker 1: or wages arising, that is that is so important. We 481 00:24:56,560 --> 00:24:59,359 Speaker 1: don't we forget, we're so jaded in our Bloomberg world. 482 00:24:59,560 --> 00:25:02,080 Speaker 1: If you're open two or three hundred thousand jobs a month, 483 00:25:02,200 --> 00:25:05,240 Speaker 1: nine farm payrolls. For any president, that's a success. I 484 00:25:05,240 --> 00:25:07,640 Speaker 1: would say the difference between Wall Streight and Main Street, 485 00:25:07,600 --> 00:25:09,280 Speaker 1: and there are many, Let's be clear about that. On 486 00:25:09,400 --> 00:25:12,240 Speaker 1: Wall Street is an addiction to trying off headline numbers 487 00:25:12,520 --> 00:25:15,560 Speaker 1: and not talking about the disparity beneath those headline numbers. 488 00:25:16,200 --> 00:25:19,520 Speaker 1: We hear phrases like the consumers strong, the labor market 489 00:25:19,640 --> 00:25:22,960 Speaker 1: is is tight. Do you characterize those two things quite 490 00:25:22,960 --> 00:25:25,520 Speaker 1: the same way. I think what we are looking at, 491 00:25:25,520 --> 00:25:27,760 Speaker 1: and certainly what the Council of Economic Advisors is looking 492 00:25:27,760 --> 00:25:31,600 Speaker 1: at more generally, is you know, how how many people 493 00:25:31,640 --> 00:25:34,040 Speaker 1: have jobs? Where are those jobs? What does that look 494 00:25:34,040 --> 00:25:36,960 Speaker 1: like for people? What is family economic security? Because that's 495 00:25:36,960 --> 00:25:42,160 Speaker 1: the foundation of spending across our economy, consumer spending GDP, 496 00:25:42,760 --> 00:25:45,800 Speaker 1: So making sure that we are attending to that basic 497 00:25:45,800 --> 00:25:48,680 Speaker 1: fundamental fact. You know, the President said it so many 498 00:25:48,720 --> 00:25:50,760 Speaker 1: times now that his goal is to build an economy 499 00:25:50,800 --> 00:25:53,000 Speaker 1: from the bottom up, in middle out and that's a 500 00:25:53,040 --> 00:25:54,919 Speaker 1: promise that he has made to the American people and 501 00:25:54,960 --> 00:25:56,880 Speaker 1: one that he's working each and every day to keep. 502 00:25:57,080 --> 00:25:58,919 Speaker 1: This is a difficult question to answer to grant it, 503 00:25:58,960 --> 00:26:01,480 Speaker 1: but I imagine you've done so research on this. When 504 00:26:01,560 --> 00:26:05,040 Speaker 1: you look at incomes right now, particularly for lower income Americans, 505 00:26:05,040 --> 00:26:08,199 Speaker 1: what proportion of that wallet are they now spending on energy? 506 00:26:08,440 --> 00:26:11,200 Speaker 1: Just how bad is it out there for them? Certainly 507 00:26:11,359 --> 00:26:15,639 Speaker 1: the high prices and energy and also food affect lower 508 00:26:15,640 --> 00:26:18,680 Speaker 1: income families more so than hiring compliments because a big 509 00:26:18,680 --> 00:26:21,439 Speaker 1: portion of their income. And it's also money that they 510 00:26:21,480 --> 00:26:23,359 Speaker 1: have to spend. If you have to put gas in 511 00:26:23,440 --> 00:26:25,920 Speaker 1: your car in order to get to your job, that's 512 00:26:25,960 --> 00:26:28,160 Speaker 1: not that's not something that you have a choice over. 513 00:26:28,280 --> 00:26:30,360 Speaker 1: So this is one of the reasons why the President 514 00:26:30,440 --> 00:26:34,080 Speaker 1: has prioritized doing everything he can to get inflation down 515 00:26:34,320 --> 00:26:36,600 Speaker 1: and to doing everything he can to get gas prices down, 516 00:26:36,720 --> 00:26:40,280 Speaker 1: noting that we are here because we've been recovering from 517 00:26:40,320 --> 00:26:43,720 Speaker 1: a global pandemic that has led to supply chain challenges 518 00:26:43,760 --> 00:26:46,359 Speaker 1: around the world. This inflation is global, it's not just 519 00:26:46,440 --> 00:26:48,480 Speaker 1: in the United States. And of course you add to 520 00:26:48,560 --> 00:26:51,159 Speaker 1: that the war in the Ukraine that Putin is waging. 521 00:26:51,280 --> 00:26:54,080 Speaker 1: All of these things are making it harder for especially 522 00:26:54,440 --> 00:26:57,080 Speaker 1: moderate and low income Americans. What they can do is 523 00:26:57,080 --> 00:26:59,800 Speaker 1: a question that we've been asking or morning, what can 524 00:26:59,880 --> 00:27:02,720 Speaker 1: you do? What can you do to actually offset any 525 00:27:02,760 --> 00:27:05,560 Speaker 1: of this pain? For Americans right now. We've talked about 526 00:27:05,600 --> 00:27:08,160 Speaker 1: the trial balloons that are floating outside the White House 527 00:27:08,160 --> 00:27:10,440 Speaker 1: on almost the weekly basis right now. We've heard about 528 00:27:10,480 --> 00:27:12,880 Speaker 1: a fuel rebate, We've heard about all kinds of things, 529 00:27:12,880 --> 00:27:17,639 Speaker 1: removal of Chinese tariffs, proposals that aren't being executed on 530 00:27:17,720 --> 00:27:19,760 Speaker 1: at least I haven't seen them. What can you do 531 00:27:19,800 --> 00:27:21,520 Speaker 1: and what do you expect to happen? Well, so the 532 00:27:21,520 --> 00:27:23,919 Speaker 1: President has been very clear and focusing on what he 533 00:27:24,000 --> 00:27:26,159 Speaker 1: has control over. So one of the things that he 534 00:27:26,200 --> 00:27:28,760 Speaker 1: did early on that I think it's been incredibly important 535 00:27:28,800 --> 00:27:32,120 Speaker 1: has been releasing oil from the Strategic Petroleum Reserve, so 536 00:27:32,240 --> 00:27:35,600 Speaker 1: working with our allies around the world, making sure that 537 00:27:35,720 --> 00:27:37,919 Speaker 1: oil was available in this time of need when we 538 00:27:37,960 --> 00:27:41,520 Speaker 1: do have the supply chain supply side shortages. The President 539 00:27:41,600 --> 00:27:44,439 Speaker 1: is also over the past couple of weeks been working 540 00:27:44,440 --> 00:27:47,480 Speaker 1: with refiners. We know that one of the challenges is 541 00:27:47,560 --> 00:27:51,160 Speaker 1: that many refineries, too many shut down over the pandemic. 542 00:27:51,200 --> 00:27:54,880 Speaker 1: Capacity has been constrained. The President is working and is 543 00:27:55,000 --> 00:27:58,760 Speaker 1: and is asked his Energy secretary to work with refiners 544 00:27:58,800 --> 00:28:01,320 Speaker 1: to see what they can do to get things flowing again, 545 00:28:01,440 --> 00:28:06,080 Speaker 1: but also noting that because of high oil prices because 546 00:28:06,080 --> 00:28:07,920 Speaker 1: of my gas prices. These folks are making a lot 547 00:28:07,920 --> 00:28:10,240 Speaker 1: of money, so they have resources to make those investments. 548 00:28:10,400 --> 00:28:12,560 Speaker 1: On the hall from your office in the White House 549 00:28:12,920 --> 00:28:16,920 Speaker 1: is a political raging battle oversay. How to take Pennsylvania 550 00:28:16,920 --> 00:28:19,600 Speaker 1: at the mid terms, How to take Pennsylvania in two 551 00:28:19,640 --> 00:28:22,800 Speaker 1: thousand twenty four. All of that is about the rage 552 00:28:22,800 --> 00:28:26,080 Speaker 1: of the middle class, either Republican or Democrat, or the 553 00:28:26,160 --> 00:28:30,080 Speaker 1: inequalities which you've written about in your claim book Unbound. 554 00:28:30,720 --> 00:28:34,080 Speaker 1: How do we address in this nation the idea that 555 00:28:34,160 --> 00:28:39,760 Speaker 1: technology benefits the havels. Technology maybe benefits all of society, 556 00:28:39,800 --> 00:28:44,600 Speaker 1: but technology burdens and lowers the outcome the standard of 557 00:28:44,640 --> 00:28:47,440 Speaker 1: living for the great middle class. How do we make 558 00:28:47,880 --> 00:28:53,040 Speaker 1: technology a friend of people that want to vote Democrat. Well, 559 00:28:53,640 --> 00:28:55,920 Speaker 1: a number of things that the President has focused on 560 00:28:56,040 --> 00:28:59,200 Speaker 1: are about that um and maybe your your viewers don't 561 00:28:59,240 --> 00:29:01,240 Speaker 1: quite see the connection, and so let me like outline 562 00:29:01,240 --> 00:29:03,880 Speaker 1: of them. So one of them is early on the 563 00:29:03,880 --> 00:29:07,320 Speaker 1: President put out an all of government effort around market 564 00:29:07,320 --> 00:29:10,760 Speaker 1: structure and competition. Let's make sure that markets are fair 565 00:29:11,040 --> 00:29:13,720 Speaker 1: and that they deliver for the American people, including But 566 00:29:14,800 --> 00:29:17,600 Speaker 1: this is important. There's a huge body of people of 567 00:29:17,680 --> 00:29:21,800 Speaker 1: all political persuasions who feel it's rigged. It's rigged here 568 00:29:21,800 --> 00:29:25,800 Speaker 1: at Lafayette Square, it's rigged in the inner Northwest district 569 00:29:25,840 --> 00:29:29,160 Speaker 1: of Washington as well. How do we regain the trust 570 00:29:29,240 --> 00:29:32,840 Speaker 1: of the middle class that institutions can lead to a 571 00:29:32,840 --> 00:29:35,239 Speaker 1: better life. You do You do it by delivering. So 572 00:29:35,280 --> 00:29:36,760 Speaker 1: you think of some of the things that the presidents 573 00:29:36,760 --> 00:29:39,640 Speaker 1: delivered on just in recent months, things like making sure 574 00:29:39,760 --> 00:29:43,000 Speaker 1: that prices on ocean shipping are fair. And so many 575 00:29:43,040 --> 00:29:44,840 Speaker 1: of the things that we buy come on a ship 576 00:29:44,880 --> 00:29:49,840 Speaker 1: that comes from overseas, but that process has been circumscribed 577 00:29:49,880 --> 00:29:52,080 Speaker 1: by a small number firms. So the President is using 578 00:29:52,160 --> 00:29:54,840 Speaker 1: his tools to say, let's make sure that those prices 579 00:29:54,880 --> 00:29:58,240 Speaker 1: that people are paying are fair. Is he blocked by Republicans. 580 00:29:58,280 --> 00:30:00,880 Speaker 1: So here's the thing. The get A branch does have 581 00:30:00,920 --> 00:30:04,360 Speaker 1: a lot of power when it comes to enforcing antitrust laws. 582 00:30:04,400 --> 00:30:08,080 Speaker 1: The President is made clear that that that price fairness 583 00:30:08,280 --> 00:30:10,080 Speaker 1: is a number one goal and that feeds to the 584 00:30:10,080 --> 00:30:13,640 Speaker 1: whole economy. And he's also prioritized making sure that if 585 00:30:13,680 --> 00:30:16,320 Speaker 1: you are a worker in a market where there are 586 00:30:16,440 --> 00:30:19,959 Speaker 1: few employers for your services, that those markets can be 587 00:30:20,240 --> 00:30:23,120 Speaker 1: more fair, more open. And I think That's one of 588 00:30:23,120 --> 00:30:26,120 Speaker 1: the ways that you can see the role of technology 589 00:30:26,320 --> 00:30:30,120 Speaker 1: in the kinds of algorithms that affect who's hired, who's fired, 590 00:30:30,160 --> 00:30:32,760 Speaker 1: what pay is. These are issues that the President is 591 00:30:32,800 --> 00:30:34,760 Speaker 1: bringing is brought to the fore. But the other thing 592 00:30:34,800 --> 00:30:38,720 Speaker 1: that he's prioritized day in and day out is allowing 593 00:30:38,800 --> 00:30:41,640 Speaker 1: workers to join unions. That's one of the ways that 594 00:30:41,640 --> 00:30:43,480 Speaker 1: we address in equality. It's one of the ways that 595 00:30:43,520 --> 00:30:46,480 Speaker 1: we think about how the economy can deliver for working 596 00:30:46,520 --> 00:30:48,720 Speaker 1: people and how it can be fair and build that 597 00:30:48,840 --> 00:30:52,480 Speaker 1: trust through democratic institutions on the ground, in workplaces all across. 598 00:30:52,840 --> 00:30:55,160 Speaker 1: That word fair and you and I have had this 599 00:30:55,200 --> 00:30:59,720 Speaker 1: conversation before. It sometimes makes it sound like something nefarious 600 00:30:59,760 --> 00:31:03,280 Speaker 1: has in certain places. The President of the weekend said this, 601 00:31:03,800 --> 00:31:06,479 Speaker 1: My message to the companies running gas stations and setting 602 00:31:06,480 --> 00:31:08,680 Speaker 1: prices at the pump is simple. This is a time 603 00:31:08,680 --> 00:31:10,760 Speaker 1: of war and global peril. Bring down the price you 604 00:31:10,800 --> 00:31:12,600 Speaker 1: are charging at the pump to reflect the cost you're 605 00:31:12,600 --> 00:31:15,080 Speaker 1: paying for the product, and do it now. Jeff Bezos 606 00:31:15,560 --> 00:31:17,360 Speaker 1: came out and tweeted the following up, Sure you read it. 607 00:31:17,640 --> 00:31:19,760 Speaker 1: Inflation is far too important a problem for the White 608 00:31:19,760 --> 00:31:22,320 Speaker 1: House to keep making statements like this. It's either straight 609 00:31:22,320 --> 00:31:27,400 Speaker 1: ahead misdirection or a deep misunderstanding of basic market dynamics. 610 00:31:27,760 --> 00:31:29,720 Speaker 1: I'm not going to accuse you of the latter. I 611 00:31:29,760 --> 00:31:32,200 Speaker 1: want to talk about the former. Where's that messaging coming 612 00:31:32,240 --> 00:31:35,560 Speaker 1: from the President has made clear that his number one 613 00:31:35,560 --> 00:31:37,880 Speaker 1: goal is delivering for the American people. We are in 614 00:31:37,960 --> 00:31:39,760 Speaker 1: a time of crisis. We are in a time of 615 00:31:39,840 --> 00:31:43,160 Speaker 1: war where where the president or allies we are supporting 616 00:31:43,160 --> 00:31:46,320 Speaker 1: the Ukrainian people. Congress has engaged in this effort, both 617 00:31:46,320 --> 00:31:48,760 Speaker 1: says the Aisle to say, this is an important priority 618 00:31:49,080 --> 00:31:51,960 Speaker 1: and one of the consequences is this high price of 619 00:31:51,960 --> 00:31:55,959 Speaker 1: oil because of global trans answer his important should everyone 620 00:31:56,000 --> 00:31:58,480 Speaker 1: either everyone in the nation wants to know the answer 621 00:31:58,720 --> 00:32:01,480 Speaker 1: to the question Mr Ferrell just asked you, which is 622 00:32:01,520 --> 00:32:09,000 Speaker 1: who is advising the president unshockingly naive price theory over 623 00:32:09,080 --> 00:32:12,560 Speaker 1: a gallon of gas? So the President is not shockingly naive, 624 00:32:13,120 --> 00:32:16,240 Speaker 1: and we are in this moment of global crisis in 625 00:32:16,360 --> 00:32:19,080 Speaker 1: terms of energy, and he is using the tools at 626 00:32:19,120 --> 00:32:22,360 Speaker 1: his disposable disposal to make sure that the prices that 627 00:32:22,360 --> 00:32:24,840 Speaker 1: people pay at the prompt are fair. So what we 628 00:32:24,920 --> 00:32:28,760 Speaker 1: know in oil prices is that the prices can they 629 00:32:28,760 --> 00:32:31,080 Speaker 1: can rise very quickly. It can take a long time 630 00:32:31,120 --> 00:32:33,240 Speaker 1: for those prices to recalibrate and to come back down. 631 00:32:33,240 --> 00:32:35,800 Speaker 1: And he's saying, do that faster. You have the capacity 632 00:32:35,840 --> 00:32:38,440 Speaker 1: to do so you're making profits. But the important thing 633 00:32:38,440 --> 00:32:40,640 Speaker 1: is that he's using the tools at his disposal given 634 00:32:40,680 --> 00:32:43,440 Speaker 1: this very challenging central planning. Now, is that what this 635 00:32:43,520 --> 00:32:45,800 Speaker 1: has come to, that central planing to sit here and 636 00:32:45,800 --> 00:32:48,120 Speaker 1: decide what's fair, what's not fair, and then go on 637 00:32:48,160 --> 00:32:50,480 Speaker 1: Twitter and say this is unfair, bring your prices down. 638 00:32:50,760 --> 00:32:52,560 Speaker 1: But it's markets or is it not markets as a 639 00:32:52,600 --> 00:32:55,880 Speaker 1: capitalism or is it central planning? Where's this warehouse going. 640 00:32:56,400 --> 00:32:59,320 Speaker 1: One of the things that the President has prioritized is 641 00:32:59,440 --> 00:33:02,800 Speaker 1: understanding the way the concentration across markets has affected the 642 00:33:02,800 --> 00:33:06,160 Speaker 1: American people. Is affecting markets. We know when there are 643 00:33:06,240 --> 00:33:08,600 Speaker 1: very few players, this is econ one O one. You 644 00:33:08,640 --> 00:33:10,680 Speaker 1: know when there's a monopoly that that there is more 645 00:33:10,720 --> 00:33:13,000 Speaker 1: price setting power. And that's one of the things that 646 00:33:13,040 --> 00:33:16,920 Speaker 1: we know about what I think on a calendarful what 647 00:33:17,080 --> 00:33:19,080 Speaker 1: I want? Had a fantastic at the catch up with you, 648 00:33:25,160 --> 00:33:28,800 Speaker 1: Stephanie Aaronson had of economics at Brookings and of course 649 00:33:28,840 --> 00:33:32,120 Speaker 1: at Brookings Institution. That stopped the world of think tanks 650 00:33:32,440 --> 00:33:35,240 Speaker 1: a number of years ago, when down one hallway you 651 00:33:35,360 --> 00:33:38,040 Speaker 1: had a shingle that said Bernanke and a shingle that 652 00:33:38,080 --> 00:33:40,800 Speaker 1: said yelling as well. What was it like for you 653 00:33:41,160 --> 00:33:44,000 Speaker 1: to wander in a daily basis and have a cup 654 00:33:44,040 --> 00:33:47,280 Speaker 1: of coffee with the Bernankey yelling access. It's funny because 655 00:33:47,320 --> 00:33:50,200 Speaker 1: I'd had the opportunity to work with both of them 656 00:33:50,280 --> 00:33:53,200 Speaker 1: when I worked at the Federal Reserve, and then to 657 00:33:53,240 --> 00:33:56,560 Speaker 1: see them in this context was really a treaty once? 658 00:33:56,640 --> 00:34:00,000 Speaker 1: Was it a talk where Bernanke once said I announced him, 659 00:34:00,120 --> 00:34:03,600 Speaker 1: introduced him at the conference, and then he said, Stephanie 660 00:34:03,680 --> 00:34:06,240 Speaker 1: used to work for me, and now I work for Stephanie. 661 00:34:06,320 --> 00:34:10,200 Speaker 1: So the climate yellow now Secretary yelling? Is this word 662 00:34:10,360 --> 00:34:15,400 Speaker 1: slack the measurement of the inefficiencies within the American economy. 663 00:34:16,040 --> 00:34:20,439 Speaker 1: Many in society, including those that support President Biden, would say, 664 00:34:20,440 --> 00:34:23,839 Speaker 1: there is still slack in our labor economy? Is there? 665 00:34:24,600 --> 00:34:28,120 Speaker 1: I think by some measures there is some slack. In particular, 666 00:34:28,200 --> 00:34:32,560 Speaker 1: the labor force participation rate is still a bit low 667 00:34:32,920 --> 00:34:35,360 Speaker 1: relative to where we would think, even given the fact 668 00:34:35,400 --> 00:34:39,520 Speaker 1: that the trend in participation is going down. But unfortunately, 669 00:34:39,560 --> 00:34:43,040 Speaker 1: now the Fed also has to worry about inflation, and 670 00:34:43,120 --> 00:34:46,080 Speaker 1: so they can't, you know, make the labor market perfect. 671 00:34:46,080 --> 00:34:48,120 Speaker 1: I think at this point back a company is we 672 00:34:48,200 --> 00:34:50,440 Speaker 1: were talking about getting back to where we were, getting 673 00:34:50,480 --> 00:34:53,600 Speaker 1: that employment to population ratio back to where we were. 674 00:34:54,160 --> 00:34:57,359 Speaker 1: Clearly inflation has interrupted that ultimate objective that so many 675 00:34:57,360 --> 00:34:59,759 Speaker 1: of these people had. But what has happened? Do you 676 00:34:59,800 --> 00:35:01,680 Speaker 1: think there was wild and I was part of the 677 00:35:01,680 --> 00:35:03,920 Speaker 1: conversation used to ask the question is it the benefits 678 00:35:03,960 --> 00:35:06,200 Speaker 1: the excess benefits with sending to people that are keeping 679 00:35:06,200 --> 00:35:08,359 Speaker 1: them out of the labor force. Doesn't seem like it 680 00:35:08,400 --> 00:35:10,359 Speaker 1: was that we asked that question a million times. What 681 00:35:10,400 --> 00:35:12,239 Speaker 1: do you think it is? My McKay, they're just talking 682 00:35:12,239 --> 00:35:14,560 Speaker 1: about the I S M services yesterday. Send them with 683 00:35:14,640 --> 00:35:17,640 Speaker 1: I have a demand problem, we still have a supply problem. 684 00:35:17,640 --> 00:35:20,000 Speaker 1: Where are they? I mean, I think one of the 685 00:35:20,080 --> 00:35:23,719 Speaker 1: things is that when the pandemic hit, a lot of 686 00:35:23,719 --> 00:35:26,799 Speaker 1: people were forced to leave the labor force, and then 687 00:35:26,800 --> 00:35:29,480 Speaker 1: they make decisions that are keeping them out now. So 688 00:35:29,560 --> 00:35:31,640 Speaker 1: people can decide to stay home and take care of 689 00:35:31,680 --> 00:35:35,480 Speaker 1: their children or their elderly parents, they go back to school. 690 00:35:35,880 --> 00:35:39,040 Speaker 1: And I like to say that these decisions are sticky 691 00:35:39,200 --> 00:35:42,239 Speaker 1: and so you know, even though maybe there are more 692 00:35:42,239 --> 00:35:45,080 Speaker 1: opportunities in the labor force now, people have just changed 693 00:35:45,120 --> 00:35:48,279 Speaker 1: their behavior in a way that is causing them not 694 00:35:48,400 --> 00:35:51,040 Speaker 1: to look for employment. Now. It may be over time 695 00:35:51,080 --> 00:35:55,040 Speaker 1: if the you know, employment continues to expand, unemployment rates 696 00:35:55,120 --> 00:35:57,839 Speaker 1: days low, some of these people will be brought back 697 00:35:57,840 --> 00:36:00,399 Speaker 1: into the labor force, but that will just take time. 698 00:36:00,480 --> 00:36:02,239 Speaker 1: How high does the price need to go to change 699 00:36:02,239 --> 00:36:05,160 Speaker 1: that behavior? I'm not talking about inflation, I'm talking about whites. 700 00:36:05,560 --> 00:36:07,759 Speaker 1: How high does that need to go to ultimately get 701 00:36:07,760 --> 00:36:10,120 Speaker 1: that supply side response that we just haven't seen in 702 00:36:10,120 --> 00:36:12,880 Speaker 1: a profound way. Yeah, I think no one knows the number. 703 00:36:12,920 --> 00:36:16,360 Speaker 1: But it's clear that workers in the United States are underpaid. 704 00:36:16,400 --> 00:36:19,920 Speaker 1: They hadn't had you know, wage gains in real terms 705 00:36:19,920 --> 00:36:23,160 Speaker 1: for decades, and we're making up for some lost time now, 706 00:36:23,200 --> 00:36:25,359 Speaker 1: but it's clear we haven't made up enough. I got 707 00:36:25,400 --> 00:36:26,800 Speaker 1: eight ways to go here. I'm gonna go to the 708 00:36:26,880 --> 00:36:29,000 Speaker 1: lawyer Paul Romer at n y U and the idea 709 00:36:29,000 --> 00:36:33,040 Speaker 1: of technology and the impact of compensation. Where executives now 710 00:36:33,040 --> 00:36:36,680 Speaker 1: are salary and bonus, and you'd say, over fifteen years, 711 00:36:37,000 --> 00:36:40,200 Speaker 1: they know they don't get that bonus if labor gets 712 00:36:40,239 --> 00:36:43,280 Speaker 1: that pay raise. Are we at, as Bullard would say, 713 00:36:43,320 --> 00:36:46,640 Speaker 1: are we at a regime change now in labor and 714 00:36:46,760 --> 00:36:50,760 Speaker 1: finally lower deciles can begin to catch up. That's certainly 715 00:36:50,760 --> 00:36:53,360 Speaker 1: what it has seemed like in the wake of the pandemic. 716 00:36:53,400 --> 00:36:55,960 Speaker 1: I think one of the big questions is whether that 717 00:36:56,000 --> 00:37:01,759 Speaker 1: will persist as the economy slows. But the basic observation 718 00:37:01,920 --> 00:37:04,080 Speaker 1: John and I get tons of mail on this all 719 00:37:04,120 --> 00:37:08,279 Speaker 1: the time. Chee's we can't hire name the job shortstops 720 00:37:08,280 --> 00:37:12,800 Speaker 1: for for the Washington Nationals, whatever. If that's the case, 721 00:37:13,280 --> 00:37:16,960 Speaker 1: just pay them more. If you pay them more, do 722 00:37:17,080 --> 00:37:21,640 Speaker 1: they show up? Workers show up if you paid them more? 723 00:37:21,680 --> 00:37:24,560 Speaker 1: And I agree, I think you have identified a big puzzle. 724 00:37:24,680 --> 00:37:28,439 Speaker 1: It's often in surveys of businesses they say they can't 725 00:37:28,480 --> 00:37:31,840 Speaker 1: hire workers, and then when you know, the question comes 726 00:37:31,840 --> 00:37:34,600 Speaker 1: to have you raised wages, they say no, what do 727 00:37:34,680 --> 00:37:38,640 Speaker 1: they expect? It's to me generationalizes are with this in mind? 728 00:37:39,320 --> 00:37:41,000 Speaker 1: What do you make of what the Federals is trying 729 00:37:41,000 --> 00:37:44,920 Speaker 1: to achieve. I think they're trying to achieve something very difficult. 730 00:37:45,239 --> 00:37:49,040 Speaker 1: I think it's not impossible. You know, clearly they need 731 00:37:49,080 --> 00:37:52,440 Speaker 1: to slow the economy in order to bring down inflation. 732 00:37:52,840 --> 00:37:54,920 Speaker 1: Part of the problem is that a lot of the 733 00:37:55,360 --> 00:37:57,719 Speaker 1: you know, causes of inflation right now are on the 734 00:37:57,760 --> 00:38:01,280 Speaker 1: supply side, and the FITS tools are not really good 735 00:38:01,360 --> 00:38:06,080 Speaker 1: for lowering oil prices or food prices. You know. All 736 00:38:06,120 --> 00:38:09,080 Speaker 1: they can do is try to slow demand. So I 737 00:38:09,120 --> 00:38:11,000 Speaker 1: think that it will be difficult for them to do, 738 00:38:11,080 --> 00:38:13,279 Speaker 1: but it's certainly not impossible. I'm just bringing up their 739 00:38:13,320 --> 00:38:17,719 Speaker 1: forecasts for unemployment on the Blimberg terminal three point two 740 00:38:18,360 --> 00:38:20,719 Speaker 1: twenty three. It ticks up to three point nine, then 741 00:38:20,960 --> 00:38:23,640 Speaker 1: four point one. We've asked the million guests this question. 742 00:38:24,239 --> 00:38:27,960 Speaker 1: Is that aspirational overly optimistic? Some people might say fanciful, 743 00:38:28,000 --> 00:38:31,799 Speaker 1: what do you call it? I think that they would 744 00:38:31,840 --> 00:38:35,160 Speaker 1: have to be very lucky to achieve that. The truth is, 745 00:38:35,920 --> 00:38:38,560 Speaker 1: at times when the FED has really wanted to bring 746 00:38:38,600 --> 00:38:43,759 Speaker 1: down inflation, they've ended up causing a recession. And I 747 00:38:43,800 --> 00:38:46,040 Speaker 1: don't expect if we do, you know, go that route. 748 00:38:46,040 --> 00:38:48,160 Speaker 1: I don't expect it to be very deep. We're not 749 00:38:48,200 --> 00:38:51,120 Speaker 1: looking at, you know, the vulgar recession of the early 750 00:38:51,200 --> 00:38:54,320 Speaker 1: nineteen eighties or the Great Recession. But I think it 751 00:38:54,360 --> 00:38:57,960 Speaker 1: will be hard for them to substantially slow the economy. 752 00:38:58,480 --> 00:39:02,560 Speaker 1: You know, typically when the employment rate rises like that, right, 753 00:39:02,840 --> 00:39:04,440 Speaker 1: you want to get a quote on a ten ure 754 00:39:04,520 --> 00:39:06,439 Speaker 1: to you at a four decimal places, But we won't 755 00:39:06,480 --> 00:39:09,319 Speaker 1: do that. Instead, we'll say, does someone fancy like you 756 00:39:09,440 --> 00:39:14,200 Speaker 1: look at jobless claims? I think the jobless claims are 757 00:39:14,320 --> 00:39:16,839 Speaker 1: not that helpful. I think, I mean, part of it 758 00:39:16,920 --> 00:39:20,320 Speaker 1: is that a lot of the slowing early on comes 759 00:39:20,360 --> 00:39:24,440 Speaker 1: from firms stopping to hire. So the first thing we're 760 00:39:24,440 --> 00:39:26,920 Speaker 1: gonna see if we're really you know, the the labor 761 00:39:26,920 --> 00:39:30,520 Speaker 1: market cools is firms are going to reduce their hiring 762 00:39:31,520 --> 00:39:34,160 Speaker 1: and job openings should go down, and we know the 763 00:39:34,200 --> 00:39:38,000 Speaker 1: FED is counting on that, and then eventually firms do 764 00:39:38,160 --> 00:39:41,040 Speaker 1: start to lay off workers and the claims numbers will 765 00:39:41,080 --> 00:39:43,640 Speaker 1: go up. You know, we've seen a little bit of 766 00:39:43,680 --> 00:39:46,600 Speaker 1: an increase, But I don't put too much weight on 767 00:39:46,680 --> 00:39:51,480 Speaker 1: that five. I mean perspective, hits set five historically something well, 768 00:39:51,640 --> 00:39:57,160 Speaker 1: not even not even number. What's your favorite chart right now? 769 00:39:57,160 --> 00:39:59,399 Speaker 1: What's the chart that tells the greatest story right now 770 00:39:59,400 --> 00:40:02,319 Speaker 1: of the American labor economy? I mean, actually I have 771 00:40:02,360 --> 00:40:04,680 Speaker 1: to side with yelling here and say I really like 772 00:40:04,840 --> 00:40:08,480 Speaker 1: the quits because I think the quits rate says something 773 00:40:08,520 --> 00:40:12,480 Speaker 1: about how confident workers are feeling in the economy, and 774 00:40:12,520 --> 00:40:15,440 Speaker 1: the quits rate is high and in May the latest 775 00:40:15,520 --> 00:40:18,840 Speaker 1: data we have it kind of side ways. So the 776 00:40:18,880 --> 00:40:21,279 Speaker 1: confidence right now is still there. They feel good about 777 00:40:21,320 --> 00:40:23,440 Speaker 1: quitting the job, but ultimately they're not happy with the economy. 778 00:40:23,600 --> 00:40:26,239 Speaker 1: Can you reconcile? No, I can't. I go to a 779 00:40:26,280 --> 00:40:29,000 Speaker 1: death sile's time for this, but I go to a 780 00:40:29,080 --> 00:40:34,440 Speaker 1: dec sile analysis. We should extend the decile is different, 781 00:40:34,600 --> 00:40:39,759 Speaker 1: Stephanie Alison Stefanitely. Thanks you. This is the Bloomberg Surveillance Podcast. 782 00:40:40,040 --> 00:40:43,400 Speaker 1: Thanks for listening. Join us live weekdays from seven to 783 00:40:43,480 --> 00:40:47,560 Speaker 1: ten am Eastern on Bloomberg Radio and on Bloomberg Television 784 00:40:47,880 --> 00:40:51,920 Speaker 1: each day from six to nine am for insight from 785 00:40:51,920 --> 00:40:56,520 Speaker 1: the best in economics, finance, investment, and international relations. And 786 00:40:56,560 --> 00:41:01,000 Speaker 1: subscribe to the Surveillance podcast on apple Pie, podcast, SoundCloud, 787 00:41:01,239 --> 00:41:04,799 Speaker 1: Bloomberg dot com, and of course on the terminal. I'm 788 00:41:04,840 --> 00:41:14,800 Speaker 1: Tom keene In. This is Bloomberg m