1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene. Daily 2 00:00:13,960 --> 00:00:17,560 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,720 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Time 5 00:00:27,760 --> 00:00:30,960 Speaker 1: flies when you're rooting for the St. Louis Cardinals. It 6 00:00:30,960 --> 00:00:34,760 Speaker 1: has been twelve years. Twelve years, says Jim Bullard is 7 00:00:34,840 --> 00:00:38,720 Speaker 1: held court in St. Louis. It has been an extraordinary 8 00:00:38,760 --> 00:00:42,040 Speaker 1: set of opinions by Mr Bullard over those twelve years. 9 00:00:42,320 --> 00:00:45,480 Speaker 1: And of course landmark was his a number of years 10 00:00:45,479 --> 00:00:49,199 Speaker 1: ago discussion of regime change and what that means for 11 00:00:49,240 --> 00:00:52,440 Speaker 1: the FED. What can be said of every other president, 12 00:00:52,960 --> 00:00:56,600 Speaker 1: every other governor, indeed of the various and sundry chairman, 13 00:00:57,200 --> 00:01:01,680 Speaker 1: nobody nailed the dot plot like Jim Bullard. What you 14 00:01:01,720 --> 00:01:04,480 Speaker 1: see now in the lousy dot plot, and everybody knows 15 00:01:04,520 --> 00:01:07,280 Speaker 1: my opinion on it is right where Jim Billard thought 16 00:01:07,360 --> 00:01:11,560 Speaker 1: we would be, with some real worries of disinflation and deflation. 17 00:01:11,680 --> 00:01:14,600 Speaker 1: Jim Bullard joins us today, the president of the St. 18 00:01:14,680 --> 00:01:18,959 Speaker 1: Louis Fed, Jim Bullard, are we so messed up? Right now? 19 00:01:19,440 --> 00:01:22,480 Speaker 1: That we're finally wanting and for all going to shift 20 00:01:22,880 --> 00:01:26,920 Speaker 1: to the targeting of nominal GDP instead of a real 21 00:01:27,000 --> 00:01:31,960 Speaker 1: GDP analysis. I bet an advocate as you know, nominal 22 00:01:32,040 --> 00:01:37,400 Speaker 1: GDP targeting and it's close cousin price level targeting. UH. 23 00:01:37,600 --> 00:01:42,759 Speaker 1: The Committee is still formulating about its framework review and 24 00:01:42,959 --> 00:01:48,240 Speaker 1: hopefully we'll get some statement out on that UH sometime 25 00:01:48,320 --> 00:01:50,000 Speaker 1: during the rest of this year. But it's up to 26 00:01:50,040 --> 00:01:53,440 Speaker 1: the Chairman to drive that process. Mr Orfan nineties year 27 00:01:53,520 --> 00:01:56,720 Speaker 1: ago wrote a landmark paper I believe in the Greenspan 28 00:01:56,840 --> 00:01:59,840 Speaker 1: FED about the tool kits that are out there and 29 00:02:00,080 --> 00:02:03,160 Speaker 1: tool kits that are available. What does the bullard in 30 00:02:03,240 --> 00:02:06,600 Speaker 1: the FED tool kit look right now? It seems like 31 00:02:06,640 --> 00:02:10,280 Speaker 1: you've exhausted an awful lot of the useful tools, and 32 00:02:10,880 --> 00:02:14,480 Speaker 1: I think there are other things we can still do UM, 33 00:02:14,520 --> 00:02:18,840 Speaker 1: but we have deployed a lot of good tools for 34 00:02:18,880 --> 00:02:22,680 Speaker 1: this situation. I think the policy response has been quite 35 00:02:22,760 --> 00:02:26,800 Speaker 1: good to the pandemic, both on the monetary policy side 36 00:02:27,480 --> 00:02:32,919 Speaker 1: the liquidity programs, plus a good response from the political 37 00:02:33,040 --> 00:02:38,640 Speaker 1: side to get fiscal relief to those that are disrupted 38 00:02:38,680 --> 00:02:41,320 Speaker 1: by the pandemic. So I think all of this has 39 00:02:41,360 --> 00:02:44,720 Speaker 1: actually gone given the nature of this shock and the 40 00:02:44,760 --> 00:02:47,800 Speaker 1: depth of the shock is all gone pretty well so far, 41 00:02:48,960 --> 00:02:51,760 Speaker 1: and I think July onet is a good checkpoint because 42 00:02:51,760 --> 00:02:54,519 Speaker 1: I've long advocated that this is the main impact would 43 00:02:54,520 --> 00:02:58,760 Speaker 1: be the second quarter of and it's a third quarter 44 00:02:58,760 --> 00:03:02,320 Speaker 1: will be um kind of the opposite of the first 45 00:03:02,360 --> 00:03:04,960 Speaker 1: quarter first cars, a big declined third quarter will be 46 00:03:04,960 --> 00:03:10,079 Speaker 1: a big increase as many businesses come back online safely 47 00:03:10,320 --> 00:03:13,600 Speaker 1: in a way that keeps the pandemic under control. Jams 48 00:03:13,680 --> 00:03:15,840 Speaker 1: Jonathan here. Another committee is thinking a little bit more 49 00:03:15,880 --> 00:03:18,800 Speaker 1: about forward guidance. A quarta with President Meister and President 50 00:03:18,840 --> 00:03:21,359 Speaker 1: Williams in the last month, and yield curve control was 51 00:03:21,400 --> 00:03:23,880 Speaker 1: a bigger part of the conversation. Can you walk me 52 00:03:23,919 --> 00:03:26,880 Speaker 1: through how you would characterize yeld curve control from your perspective? 53 00:03:27,120 --> 00:03:29,760 Speaker 1: Is that a compliment to forward guidance or is that 54 00:03:29,880 --> 00:03:33,160 Speaker 1: something bold up where you cap you to the longer end. Yeah, 55 00:03:33,200 --> 00:03:38,200 Speaker 1: the US had yeld curve control during World War two UH, 56 00:03:38,240 --> 00:03:42,880 Speaker 1: and then after the war UH, the exit from the 57 00:03:42,960 --> 00:03:46,080 Speaker 1: yold curve control was very difficult, so it kind of 58 00:03:46,160 --> 00:03:49,600 Speaker 1: ended in tears. So I think that's one of the 59 00:03:49,640 --> 00:03:53,280 Speaker 1: main concerns about going in this direction. Japan as we know, 60 00:03:54,040 --> 00:03:56,120 Speaker 1: has done you know, curve control. But one of the 61 00:03:56,160 --> 00:04:00,480 Speaker 1: things that they wanted to do was it out of 62 00:04:00,520 --> 00:04:04,680 Speaker 1: the quantitative easing program. They've they've scaled that back dramatically 63 00:04:04,720 --> 00:04:08,320 Speaker 1: by just targeting yields directly. So I think there are 64 00:04:08,360 --> 00:04:11,680 Speaker 1: a lot more questions and answers around the control right now. 65 00:04:12,120 --> 00:04:14,240 Speaker 1: What do you think the ulptimate approach to forward godess 66 00:04:14,320 --> 00:04:17,120 Speaker 1: is then, Jim Well, I think we're giving great forward 67 00:04:17,120 --> 00:04:20,200 Speaker 1: guidance right now, and I think there's really no problem 68 00:04:21,320 --> 00:04:24,000 Speaker 1: with where we are today. We're projecting low rates of 69 00:04:24,360 --> 00:04:27,520 Speaker 1: you know, policy rate far out into the future. Longer 70 00:04:27,600 --> 00:04:31,200 Speaker 1: term yields are also quite low. Global yields are quite low, 71 00:04:31,279 --> 00:04:34,960 Speaker 1: so and we have the advantage in the current situation 72 00:04:35,760 --> 00:04:38,719 Speaker 1: that we already built up credibility for low rates and 73 00:04:38,760 --> 00:04:42,320 Speaker 1: commitments to low rates through the last crisis. In the 74 00:04:42,360 --> 00:04:45,400 Speaker 1: last crisis, there was, as you might recall, coming out 75 00:04:45,400 --> 00:04:49,920 Speaker 1: of that in twelve, the markets were always expecting that 76 00:04:50,480 --> 00:04:53,520 Speaker 1: yields would leak back higher at any moment, and the 77 00:04:53,760 --> 00:04:57,280 Speaker 1: Committee tried to fight back against that and keep yields 78 00:04:57,640 --> 00:05:01,960 Speaker 1: low all up by by promising low rates further into 79 00:05:02,040 --> 00:05:04,880 Speaker 1: the future. But in the end we built up a 80 00:05:04,880 --> 00:05:07,159 Speaker 1: lot of credibility that we really meant it that we're 81 00:05:07,160 --> 00:05:09,839 Speaker 1: going to keep rates low. And so this time we 82 00:05:09,920 --> 00:05:12,680 Speaker 1: have a lot of credibility on this issue. And I think, 83 00:05:12,920 --> 00:05:14,799 Speaker 1: I just think we're in great shape for right now 84 00:05:14,880 --> 00:05:18,240 Speaker 1: because of the credible we built up last time around. Jim, 85 00:05:18,279 --> 00:05:21,000 Speaker 1: the market definitely is buying the rates will remain low 86 00:05:21,040 --> 00:05:24,240 Speaker 1: for a long time. Back in you raise the issue 87 00:05:24,240 --> 00:05:27,200 Speaker 1: of asset bubbles that will come on the heels potentially 88 00:05:27,279 --> 00:05:30,520 Speaker 1: of leaving rates so low for so long, given how 89 00:05:30,560 --> 00:05:34,600 Speaker 1: much corporate debt issuance we have seen. What's different now? Yeah, 90 00:05:34,640 --> 00:05:38,400 Speaker 1: I mean, bubbles is always always an issue, and I 91 00:05:38,440 --> 00:05:41,039 Speaker 1: do keep my eye on it. But again, I'm just 92 00:05:41,160 --> 00:05:44,360 Speaker 1: not seeing things that are on the same magnitude as 93 00:05:44,520 --> 00:05:47,600 Speaker 1: as what happened in the late nineteen nineties. Uh, the 94 00:05:47,600 --> 00:05:50,480 Speaker 1: internet so called dot com bubble that that blew up 95 00:05:50,520 --> 00:05:53,400 Speaker 1: on us, and then the much more serious housing bubble 96 00:05:53,560 --> 00:05:56,480 Speaker 1: in the mid two thousands that also blew up and 97 00:05:56,839 --> 00:05:59,280 Speaker 1: turned into a global crisis. But I'm not seeing anything 98 00:05:59,400 --> 00:06:04,159 Speaker 1: like that right now. Do keep we do watch it closely. Uh. 99 00:06:04,320 --> 00:06:06,719 Speaker 1: You know, I understand that companies are taking on debt. 100 00:06:06,760 --> 00:06:09,880 Speaker 1: Some of that, you know, liquidity driven to get through 101 00:06:09,920 --> 00:06:14,520 Speaker 1: the pandemic. Here Um, they're drawing on lines of credit 102 00:06:14,640 --> 00:06:17,720 Speaker 1: and and other sources to make sure that they can 103 00:06:18,160 --> 00:06:21,719 Speaker 1: survive and thrive through a time of low UH, low 104 00:06:21,800 --> 00:06:25,200 Speaker 1: revenue for their business. So um, so far, so good, 105 00:06:25,240 --> 00:06:28,400 Speaker 1: But we certainly certainly watched this closely, Jim. Are there 106 00:06:28,400 --> 00:06:32,320 Speaker 1: no negative consequences then to keeping rates basically at zero 107 00:06:32,400 --> 00:06:36,120 Speaker 1: for the indefinite future? Yeah, you know, there's always inflation 108 00:06:36,240 --> 00:06:39,200 Speaker 1: risk lurking out there, but we haven't had an inflation 109 00:06:39,279 --> 00:06:44,040 Speaker 1: problem in the US or globally UH since UH, longer 110 00:06:44,080 --> 00:06:47,480 Speaker 1: than most of us can remember sitting here. So um, 111 00:06:47,680 --> 00:06:49,800 Speaker 1: the problem has been on the low side and the 112 00:06:49,880 --> 00:06:55,120 Speaker 1: threat of disinflation or deflation on that score, I think 113 00:06:55,120 --> 00:06:58,159 Speaker 1: we're also avoiding that risk, at least for now. I 114 00:06:58,200 --> 00:07:03,120 Speaker 1: see tips break even moving back up in in recent weeks, UH, 115 00:07:03,560 --> 00:07:07,320 Speaker 1: which seems to suggest that the Committee retains credibility around 116 00:07:07,360 --> 00:07:10,400 Speaker 1: its two percent inflation target. Even though we've missed that 117 00:07:10,440 --> 00:07:13,400 Speaker 1: target somewhat to the low side. It hasn't been as 118 00:07:13,440 --> 00:07:16,920 Speaker 1: good as we wanted, but we have kept it relatively close, 119 00:07:17,000 --> 00:07:18,400 Speaker 1: and I think we we'll be able to do that 120 00:07:18,440 --> 00:07:21,360 Speaker 1: this time as well. Jim, it's not the presence of 121 00:07:21,400 --> 00:07:24,040 Speaker 1: bubbles that I think gets my attention. It's the absence 122 00:07:24,040 --> 00:07:26,520 Speaker 1: of creative destruction. And I want to ask you an 123 00:07:26,520 --> 00:07:29,920 Speaker 1: important question, why the FETE seems to have lost confidence 124 00:07:30,360 --> 00:07:34,160 Speaker 1: in the transformational powers of capitalism. Well, you'll have to 125 00:07:34,200 --> 00:07:37,360 Speaker 1: talk to others. I have not lost faith in the 126 00:07:37,400 --> 00:07:42,160 Speaker 1: transforational powers of capitalism. I think. Uh, what you're seeing 127 00:07:42,160 --> 00:07:50,000 Speaker 1: today is tremendous adjustment by so many businesses, too unwelcome development. 128 00:07:50,040 --> 00:07:53,400 Speaker 1: Where we had this disease to send upon us. We've 129 00:07:53,480 --> 00:07:56,760 Speaker 1: learned a lot about it in the last ninety days. Uh. 130 00:07:57,440 --> 00:08:00,400 Speaker 1: We're figuring out how to run businesses, deliver goods and 131 00:08:00,440 --> 00:08:03,640 Speaker 1: services in all kinds of nooks and crannies around the 132 00:08:03,680 --> 00:08:07,559 Speaker 1: economy in ways that keep everybody healthy, keep the customers safe, 133 00:08:07,680 --> 00:08:12,120 Speaker 1: keep the workers safe, and still uh you know, keep 134 00:08:12,160 --> 00:08:16,480 Speaker 1: household incomes up, and keep people employed. Uh. So I 135 00:08:16,520 --> 00:08:18,880 Speaker 1: think we can be successful in this. To measure, there 136 00:08:18,880 --> 00:08:22,720 Speaker 1: are a few businesses where where the pandemic is really 137 00:08:22,760 --> 00:08:24,680 Speaker 1: throwing them a curve ball and they really have to 138 00:08:24,720 --> 00:08:27,760 Speaker 1: hustle all their sleeves in order to think about how 139 00:08:27,800 --> 00:08:30,160 Speaker 1: they can deliver their product in this new environment. But 140 00:08:31,040 --> 00:08:33,720 Speaker 1: most businesses. I think they'll be up and running in 141 00:08:33,760 --> 00:08:35,839 Speaker 1: the second half of the year. Jim might tell we 142 00:08:35,880 --> 00:08:39,000 Speaker 1: appreciate the motives of the Federal Reserve to do what 143 00:08:39,040 --> 00:08:41,440 Speaker 1: the committee has done over the last couple of months, 144 00:08:41,440 --> 00:08:43,520 Speaker 1: but I think we do need to talk about the consequences. 145 00:08:43,800 --> 00:08:47,440 Speaker 1: Once you introduce the price incentitive buyer into the credit market, 146 00:08:47,880 --> 00:08:51,839 Speaker 1: you are interfering in the transformational powers of capitalism. You 147 00:08:51,880 --> 00:08:54,480 Speaker 1: are stopping the money from flowing away from bad businesses 148 00:08:54,520 --> 00:08:57,000 Speaker 1: the good ones. Do you not appreciate that, Jim? No, 149 00:08:57,120 --> 00:08:59,840 Speaker 1: I do. But I think the key question here is 150 00:09:00,240 --> 00:09:03,440 Speaker 1: UH is you know bad businesses? What do you mean 151 00:09:03,440 --> 00:09:07,360 Speaker 1: by bad businesses? If they were if they were viable 152 00:09:07,520 --> 00:09:12,000 Speaker 1: and successful before the pandemic came. Most of those I 153 00:09:12,040 --> 00:09:14,880 Speaker 1: think are going to continue to be viable and successful 154 00:09:15,040 --> 00:09:18,640 Speaker 1: in the UH in the world ahead where we have 155 00:09:18,720 --> 00:09:21,000 Speaker 1: to deal with the with the disease. There maybe a 156 00:09:21,040 --> 00:09:24,320 Speaker 1: few that don't manage to make that transition. I don't know, 157 00:09:25,280 --> 00:09:28,400 Speaker 1: but the demand for those products is still there, and 158 00:09:28,920 --> 00:09:32,960 Speaker 1: I would say for most firms there, they want to 159 00:09:33,040 --> 00:09:36,560 Speaker 1: maintain liquidity during the crisis here, and they'll be able 160 00:09:36,600 --> 00:09:41,400 Speaker 1: to get back up and running UH with some changes 161 00:09:41,440 --> 00:09:44,320 Speaker 1: to how they deliver goods and services. In the second half, 162 00:09:44,640 --> 00:09:48,319 Speaker 1: we welcome all of you extended conversation with Jim Bullard 163 00:09:48,360 --> 00:09:52,000 Speaker 1: here under simulcast on Bloomberg Television in Bloomberg Radio. He 164 00:09:52,080 --> 00:09:54,800 Speaker 1: is the president of St. Louis FED and has been 165 00:09:54,880 --> 00:09:59,439 Speaker 1: exceptionally acute in his research over his twelve years at 166 00:09:59,440 --> 00:10:03,760 Speaker 1: the FED, advancing not controversy, but just the argument of 167 00:10:03,800 --> 00:10:05,920 Speaker 1: the moment. That argument of the moment, I have to 168 00:10:05,960 --> 00:10:09,200 Speaker 1: revisit a dr bullet his yield curve control. And what 169 00:10:09,320 --> 00:10:13,160 Speaker 1: I find so distortive here is the FED will make 170 00:10:13,240 --> 00:10:16,800 Speaker 1: an action. The FED will make a statement, There'll be 171 00:10:16,840 --> 00:10:20,559 Speaker 1: a speech, there'll be some form of announcement, and you 172 00:10:20,640 --> 00:10:23,680 Speaker 1: know better than anyone, the market will react to that. 173 00:10:24,240 --> 00:10:28,560 Speaker 1: Can't the markets adapt to yield crook curve control and 174 00:10:28,640 --> 00:10:32,160 Speaker 1: diffuse any benefit of it, diminish any benefit of it. 175 00:10:33,800 --> 00:10:38,120 Speaker 1: I do not think that the markets would undo what 176 00:10:38,240 --> 00:10:41,080 Speaker 1: the FED is trying to do. I think it's an equilibrium. 177 00:10:41,520 --> 00:10:44,600 Speaker 1: I think we've enforced that equilibrium by trying to be 178 00:10:44,679 --> 00:10:48,440 Speaker 1: more transparent about the debates and ideas that are going 179 00:10:48,480 --> 00:10:50,880 Speaker 1: on on the on the committee. In the analysis, I 180 00:10:50,880 --> 00:10:54,760 Speaker 1: think there's a lot of give and take between markets 181 00:10:54,760 --> 00:10:57,760 Speaker 1: and policymakers much different than it would have been in 182 00:10:57,800 --> 00:11:01,160 Speaker 1: the very shrouded days and then I teen eighties, we 183 00:11:01,360 --> 00:11:06,000 Speaker 1: barely barely said anything um to infer what was going on. 184 00:11:06,080 --> 00:11:10,000 Speaker 1: So I think I think that transparency is useful. Um. 185 00:11:10,040 --> 00:11:12,959 Speaker 1: I think we're wrestling with these ideas just like everyone else. 186 00:11:13,960 --> 00:11:17,040 Speaker 1: But but I think that it helps inform the equilibrium 187 00:11:17,080 --> 00:11:20,439 Speaker 1: to be as transparent ast But this extremely well said 188 00:11:20,559 --> 00:11:22,720 Speaker 1: Dr Bullard. Now we have Dr Williams of the New 189 00:11:22,800 --> 00:11:25,480 Speaker 1: York Fed and Governor Brainerd, and they've made some comments 190 00:11:25,480 --> 00:11:28,160 Speaker 1: on the efficacy of yield capped. I look at you 191 00:11:28,200 --> 00:11:32,080 Speaker 1: and others more circumspect as well. If we do yield 192 00:11:32,120 --> 00:11:35,600 Speaker 1: curve control and we distribute that out the yield curve, 193 00:11:35,679 --> 00:11:37,920 Speaker 1: and I don't know what year or month or day 194 00:11:37,960 --> 00:11:41,720 Speaker 1: you're gonna extend it out to, do we set ourselves 195 00:11:41,920 --> 00:11:46,520 Speaker 1: up to be more vulnerable to any given exogen is 196 00:11:46,600 --> 00:11:50,640 Speaker 1: shock Uh, I'm not sure about that. You you'd have 197 00:11:50,720 --> 00:11:53,679 Speaker 1: to you know, it kind of depends how you interpret 198 00:11:53,800 --> 00:11:59,520 Speaker 1: the Japanese experience of the last few years, a few 199 00:11:59,520 --> 00:12:02,160 Speaker 1: other kind trees that have have tried this in the 200 00:12:02,200 --> 00:12:06,400 Speaker 1: modern era. UM. You know, I just think you know, 201 00:12:06,520 --> 00:12:09,520 Speaker 1: right now there are more questions than answers about this, 202 00:12:09,600 --> 00:12:13,079 Speaker 1: and I don't really think, uh, this is a pending 203 00:12:13,160 --> 00:12:16,400 Speaker 1: thing for the committee because we're already expecting rates to 204 00:12:16,440 --> 00:12:19,400 Speaker 1: be low for quite a while. So I'm not sure 205 00:12:19,440 --> 00:12:23,840 Speaker 1: that you need to put caps in everything else. You've 206 00:12:23,880 --> 00:12:27,360 Speaker 1: already got the lower expected rates that you desire for 207 00:12:27,400 --> 00:12:31,120 Speaker 1: this situation. Very quickly. Dr Bullard, what does yield curve 208 00:12:31,200 --> 00:12:36,800 Speaker 1: control mean to retirees and savers in the St. Louis District? Yeah, 209 00:12:36,960 --> 00:12:40,600 Speaker 1: longstanding issue is that, uh, we should be thinking about 210 00:12:40,720 --> 00:12:44,280 Speaker 1: the correct interest rates, not the lowest interest rates. And 211 00:12:44,400 --> 00:12:48,320 Speaker 1: a lot of the discussion, popular discussion always always seems 212 00:12:48,320 --> 00:12:51,160 Speaker 1: to assume lower rates are better. I think you do 213 00:12:51,240 --> 00:12:54,760 Speaker 1: want to get to the uh, the equilibrium rate that 214 00:12:54,800 --> 00:12:58,320 Speaker 1: makes sense for the current environment. Um, But the current 215 00:12:58,400 --> 00:13:02,160 Speaker 1: environment is one globally a very low rates all around 216 00:13:02,160 --> 00:13:05,320 Speaker 1: the world, and that's the world we're living in. I 217 00:13:05,320 --> 00:13:07,840 Speaker 1: think people have adjusted to that since it's been around 218 00:13:08,559 --> 00:13:12,040 Speaker 1: since two thousand, two thousand nine. President. A lot of 219 00:13:12,120 --> 00:13:14,680 Speaker 1: questions coming through on the Bloomberg terminal that many people 220 00:13:14,720 --> 00:13:18,240 Speaker 1: want to ask, including Mr Gaping over at Barclays, who 221 00:13:18,280 --> 00:13:20,800 Speaker 1: I think recognizes what a lot of people pointed out 222 00:13:20,840 --> 00:13:23,240 Speaker 1: after the last fat decision in the dot plot, why 223 00:13:23,280 --> 00:13:26,680 Speaker 1: the long term dot was still at to fifty? President, 224 00:13:26,720 --> 00:13:29,320 Speaker 1: But why wasn't that adjusted? And you anticipate it will 225 00:13:29,360 --> 00:13:33,079 Speaker 1: be in the coming meetings. Yeah, you guys may remember, 226 00:13:33,120 --> 00:13:35,320 Speaker 1: I don't put in a long term dot. I'm the 227 00:13:35,320 --> 00:13:38,160 Speaker 1: only guy that doesn't do it. So I'm a rebel, 228 00:13:38,400 --> 00:13:41,480 Speaker 1: maybe without a cause here, but I don't don't think 229 00:13:41,559 --> 00:13:45,000 Speaker 1: we know enough to put down that long term dot, 230 00:13:45,200 --> 00:13:50,480 Speaker 1: and it it affects expectations, and it affects thinking in markets. Um. 231 00:13:51,160 --> 00:13:53,920 Speaker 1: But it's also the object for which there is the 232 00:13:53,920 --> 00:13:58,040 Speaker 1: most uncertainty. So I would prefer not to put down uh, 233 00:13:59,040 --> 00:14:01,400 Speaker 1: some kind of gas about where we're gonna be ten 234 00:14:01,480 --> 00:14:04,959 Speaker 1: years from now no one knows, and talk more about 235 00:14:05,000 --> 00:14:08,440 Speaker 1: the relevant time horizon for monetary policy, which is probably 236 00:14:08,440 --> 00:14:12,840 Speaker 1: about two years, possibly three years at the very most. So. Um, 237 00:14:12,880 --> 00:14:15,560 Speaker 1: So I'm the wrong guy to talk about the long run. 238 00:14:16,040 --> 00:14:18,760 Speaker 1: President Bollard. You are the right person to talk about inflation, 239 00:14:18,800 --> 00:14:21,160 Speaker 1: and you said that the FED does retain its credibility 240 00:14:21,200 --> 00:14:25,400 Speaker 1: around a two percent inflation goal. Are we measuring inflation 241 00:14:25,560 --> 00:14:28,680 Speaker 1: right or should we be taking into account asset price inflation, 242 00:14:29,040 --> 00:14:33,120 Speaker 1: the inflation, housing costs, the inflation and medical and education 243 00:14:33,240 --> 00:14:38,880 Speaker 1: costs and even food. Yeah, great, great question. The measurement 244 00:14:38,960 --> 00:14:44,560 Speaker 1: issues around inflation are very serious at hashment studied extensively, 245 00:14:44,680 --> 00:14:47,000 Speaker 1: but if you really get into the issues about how 246 00:14:47,000 --> 00:14:51,880 Speaker 1: to construct a price index, it gets very hairy, very fast. 247 00:14:51,960 --> 00:14:55,400 Speaker 1: And one thing I've just mentioned on this measurement issue 248 00:14:55,640 --> 00:14:59,040 Speaker 1: but right now is that during the second quarter, you 249 00:14:59,080 --> 00:15:01,760 Speaker 1: have a lot of good that were trade we're really 250 00:15:01,800 --> 00:15:05,160 Speaker 1: not traded, uh, you know, in in the normal volumes 251 00:15:05,160 --> 00:15:07,440 Speaker 1: that they would have been or violunes went all the 252 00:15:07,480 --> 00:15:09,760 Speaker 1: way to zero. So what should you do with those 253 00:15:09,880 --> 00:15:13,560 Speaker 1: in the price index? You know, because they're always weighted 254 00:15:13,560 --> 00:15:16,880 Speaker 1: by the shares of expenditure. Well, the share of expenditure 255 00:15:16,960 --> 00:15:18,800 Speaker 1: went to zero, so you're not going to count those 256 00:15:18,840 --> 00:15:22,280 Speaker 1: prices or what are you gonna do because you have 257 00:15:22,400 --> 00:15:25,920 Speaker 1: markets that kind of shut down completely in that environment. 258 00:15:26,000 --> 00:15:29,280 Speaker 1: So um so, I think they're fascinating issues right now, 259 00:15:29,680 --> 00:15:31,800 Speaker 1: just in the last few months about how to interpret 260 00:15:31,840 --> 00:15:34,840 Speaker 1: the inflation numbers. If you look at something like the 261 00:15:34,880 --> 00:15:38,760 Speaker 1: Dallas Fed trimming, which throws out the most extreme observations, 262 00:15:38,840 --> 00:15:42,000 Speaker 1: is still hanging right around two percent, and I think 263 00:15:42,040 --> 00:15:45,560 Speaker 1: that's probably informing the market expectations about where they think 264 00:15:45,600 --> 00:15:48,800 Speaker 1: we're going to end up with inflation. Well, there's a 265 00:15:48,840 --> 00:15:51,160 Speaker 1: question also about good inflation and bad inflation. A lot 266 00:15:51,160 --> 00:15:53,600 Speaker 1: of people looking at the fact that wages are not 267 00:15:53,680 --> 00:15:56,880 Speaker 1: increasing as quickly as some of these necessary costs that 268 00:15:56,920 --> 00:16:00,920 Speaker 1: everybody faces on a regular basis. Are you seeing more 269 00:16:01,000 --> 00:16:04,680 Speaker 1: bad inflation than good inflate inflation, especially as there is 270 00:16:04,720 --> 00:16:09,760 Speaker 1: this protectionist shift and people do bring supply chain back home. Yeah, 271 00:16:09,800 --> 00:16:14,480 Speaker 1: I think we were getting better wage growth before the pandemic. 272 00:16:14,600 --> 00:16:18,560 Speaker 1: I think during the pandemic here obviously, we've asked people 273 00:16:18,640 --> 00:16:22,040 Speaker 1: to stay at home invest in the national health. We've 274 00:16:22,080 --> 00:16:26,160 Speaker 1: asked businesses to temporarily shut down to invest in the 275 00:16:26,240 --> 00:16:33,200 Speaker 1: national health. They've received uh, probably somewhat inefficiently, but they've 276 00:16:33,520 --> 00:16:36,720 Speaker 1: generally speaking, they have received relief from the federal government 277 00:16:36,840 --> 00:16:41,400 Speaker 1: for their efforts to to slow down the economy. Um. 278 00:16:41,520 --> 00:16:45,120 Speaker 1: So it's a little hard to measure wages or total 279 00:16:45,160 --> 00:16:48,680 Speaker 1: income of households and businesses really during this time period. 280 00:16:49,120 --> 00:16:50,600 Speaker 1: So I didn't think we have to wait for the 281 00:16:50,680 --> 00:16:53,520 Speaker 1: dust to settle. I think the third quarter will be 282 00:16:53,560 --> 00:16:56,760 Speaker 1: a transition quarter. Like I said, I think most businesses 283 00:16:56,800 --> 00:17:00,280 Speaker 1: will get backed up and running and be uh actually 284 00:17:00,360 --> 00:17:02,880 Speaker 1: be close to the kind of production that they had 285 00:17:03,360 --> 00:17:06,480 Speaker 1: previous to the pandemic. And then a few businesses will 286 00:17:06,480 --> 00:17:09,600 Speaker 1: struggle more than that. But so far, so good. I 287 00:17:09,600 --> 00:17:12,400 Speaker 1: actually I think we're I think we're doing all right 288 00:17:13,119 --> 00:17:16,040 Speaker 1: given the nature and size of this shock. I would 289 00:17:16,080 --> 00:17:18,399 Speaker 1: say one other thing I just wanted to mention, and 290 00:17:18,400 --> 00:17:19,879 Speaker 1: I don't know if you guys want to talk about that. 291 00:17:20,480 --> 00:17:23,160 Speaker 1: I actually think for a public policy point of view, 292 00:17:23,160 --> 00:17:28,080 Speaker 1: we should not be emphasizing vaccines and therapeutics. I hope 293 00:17:28,119 --> 00:17:31,919 Speaker 1: they get they happen, and uh, you know, you know, 294 00:17:32,000 --> 00:17:35,280 Speaker 1: God bless people that are working on I think they're uh, 295 00:17:35,320 --> 00:17:37,520 Speaker 1: they're doing great work and everything, but these are tough 296 00:17:37,560 --> 00:17:41,120 Speaker 1: scientific problems, and that affects from my point of view. 297 00:17:41,119 --> 00:17:45,320 Speaker 1: I'm the I'm the economics guy that's affecting expectations and 298 00:17:45,440 --> 00:17:48,200 Speaker 1: affects how people behave. So I think what you should 299 00:17:48,200 --> 00:17:52,440 Speaker 1: tell people instead is, uh, we're gonna have to manage 300 00:17:52,440 --> 00:17:55,000 Speaker 1: the disease. We're gonna have to manage the risk that's 301 00:17:55,040 --> 00:17:57,960 Speaker 1: out there. It's unpleasant, but there's a new mortality risk, 302 00:17:58,160 --> 00:18:02,520 Speaker 1: and businesses have to app Housholts have to adapt, and 303 00:18:02,560 --> 00:18:05,199 Speaker 1: everyone's doing that. We know that, and we see that, 304 00:18:05,280 --> 00:18:07,760 Speaker 1: but we shouldn't promise that there's some kind of goal 305 00:18:07,840 --> 00:18:10,520 Speaker 1: at the end of the rainbow, President Bullard, That's exactly 306 00:18:10,560 --> 00:18:12,520 Speaker 1: where I wanted to go, this idea that we have 307 00:18:12,600 --> 00:18:14,520 Speaker 1: a very long road ahead of us, and there's a 308 00:18:14,600 --> 00:18:18,080 Speaker 1: question about how resilient bank balance sheets are to deal 309 00:18:18,160 --> 00:18:20,400 Speaker 1: with this, and it's something very much at the forefront 310 00:18:20,400 --> 00:18:22,639 Speaker 1: of people's minds ahead of the stress test results that 311 00:18:22,680 --> 00:18:25,440 Speaker 1: are coming out by the Federal Reserve later this week. 312 00:18:25,480 --> 00:18:29,800 Speaker 1: Would you support having banks curb any dividend payments in 313 00:18:29,920 --> 00:18:32,639 Speaker 1: order to shore up their balance sheets further ahead of 314 00:18:32,680 --> 00:18:37,399 Speaker 1: whatever secondary effects tertiary effects we can expect from the pandemic. Yeah, 315 00:18:37,440 --> 00:18:41,199 Speaker 1: this is a decided for the Board of Governors, So uh, 316 00:18:41,480 --> 00:18:45,639 Speaker 1: it's separate from the Open Market Committee, which I'm on, UM, 317 00:18:45,640 --> 00:18:50,520 Speaker 1: so it's not really my purview. I would comment, however, 318 00:18:50,680 --> 00:18:54,160 Speaker 1: that I think markets have probably already priced this end. 319 00:18:54,760 --> 00:18:57,760 Speaker 1: My sense is that, uh, you know, the Europeans have 320 00:18:57,840 --> 00:19:02,879 Speaker 1: already ended dividend payments, and markets finally expect something like 321 00:19:03,040 --> 00:19:05,719 Speaker 1: that to happen in the US. But but it's up 322 00:19:05,760 --> 00:19:09,040 Speaker 1: to the governors onto how they want to look at that. 323 00:19:09,119 --> 00:19:12,680 Speaker 1: We've got the stress test, who's also coming up shortly here, 324 00:19:13,200 --> 00:19:16,680 Speaker 1: and I think that'll inform how how the governors want 325 00:19:16,720 --> 00:19:19,399 Speaker 1: to go on this going forward. Jim Bullard, thank you 326 00:19:19,480 --> 00:19:21,399 Speaker 1: so much, very generous of you to be with us 327 00:19:21,440 --> 00:19:25,439 Speaker 1: for this extended conversation. James Bullard is the president of 328 00:19:25,520 --> 00:19:32,720 Speaker 1: the St. Louis FED. Jonathan got of credit swas moves 329 00:19:32,720 --> 00:19:36,919 Speaker 1: his price target from to thirty two hundred. I'm not 330 00:19:36,960 --> 00:19:40,040 Speaker 1: sure if he'll like that characterization, so we'll let John 331 00:19:40,040 --> 00:19:42,480 Speaker 1: tell his own story. He joins us. Now, Jonathan, good morning, 332 00:19:42,720 --> 00:19:45,240 Speaker 1: Let's start with a short want why well, I mean, 333 00:19:45,640 --> 00:19:48,480 Speaker 1: if there's a simple story here, it's it's not that 334 00:19:48,600 --> 00:19:53,000 Speaker 1: I think that the economy is going to be magnificently better. 335 00:19:53,560 --> 00:19:57,080 Speaker 1: It's that the fact that we've taken out these downside risks, 336 00:19:57,119 --> 00:20:01,440 Speaker 1: all of these government actions have eliminated or at least 337 00:20:01,440 --> 00:20:05,160 Speaker 1: diminished the potential for this thing to double dip down 338 00:20:05,200 --> 00:20:08,160 Speaker 1: to the levels that we've seen before. So I think 339 00:20:08,200 --> 00:20:10,680 Speaker 1: that the upside when we were calling for about three 340 00:20:11,160 --> 00:20:14,440 Speaker 1: upside through your end, I think the upside has been limited, 341 00:20:14,560 --> 00:20:18,080 Speaker 1: but the risk to the downside has been And John, 342 00:20:18,080 --> 00:20:20,119 Speaker 1: you and I were talking about before we got what 343 00:20:20,240 --> 00:20:23,760 Speaker 1: we went live. That the single chart that's important to me. 344 00:20:24,359 --> 00:20:26,879 Speaker 1: On your Bloomberg terminal, you can see the number of 345 00:20:27,000 --> 00:20:29,879 Speaker 1: bankruptcies that have been filed and if you go to 346 00:20:30,000 --> 00:20:33,680 Speaker 1: max on that to see it, you know, including the 347 00:20:34,240 --> 00:20:38,119 Speaker 1: downturn in O eight oh nine, that during big recessions 348 00:20:38,160 --> 00:20:41,520 Speaker 1: you see a massive spike in bankruptcies, and that is 349 00:20:41,520 --> 00:20:44,480 Speaker 1: not happening here at all. Businesses are not going under 350 00:20:44,800 --> 00:20:47,119 Speaker 1: because of all these actions. And that's one of the 351 00:20:47,160 --> 00:20:50,680 Speaker 1: reasons why I think that we're not going to double dip, 352 00:20:50,840 --> 00:20:53,520 Speaker 1: even if the upside is not. There another reason why 353 00:20:53,520 --> 00:20:56,240 Speaker 1: the next thirty days is so important on the policy front. 354 00:20:56,640 --> 00:20:59,480 Speaker 1: What do you need to say, John, Uh, yeah, I 355 00:20:59,800 --> 00:21:04,360 Speaker 1: think right, there's um, there's two big issues. I think 356 00:21:04,359 --> 00:21:06,560 Speaker 1: they're important. This p p P program. This is the 357 00:21:06,600 --> 00:21:10,639 Speaker 1: money that's going to small businesses to keep them afloat 358 00:21:11,080 --> 00:21:14,600 Speaker 1: that rolls off at the beginning of July. And then 359 00:21:14,680 --> 00:21:18,280 Speaker 1: you have this government supplement of the six dollars a 360 00:21:18,320 --> 00:21:22,560 Speaker 1: month that's going to people who are unemployed, and both 361 00:21:22,600 --> 00:21:24,920 Speaker 1: of those are rolling off in the month of July, 362 00:21:24,960 --> 00:21:27,800 Speaker 1: the unemployment running at the end of the month. Those 363 00:21:27,840 --> 00:21:31,280 Speaker 1: are going to be a real political football. And if 364 00:21:31,320 --> 00:21:34,119 Speaker 1: they are not rolled over and we see the consumer 365 00:21:34,440 --> 00:21:37,280 Speaker 1: whallet it takes a head that is going to be 366 00:21:37,400 --> 00:21:40,399 Speaker 1: a real big problem for the economy near term, and 367 00:21:40,440 --> 00:21:43,920 Speaker 1: the market will absolutely not take that well. The problem 368 00:21:44,040 --> 00:21:46,600 Speaker 1: is is that Congress is not going to be debating 369 00:21:46,640 --> 00:21:50,879 Speaker 1: these issues until sometime in July, so we're going to 370 00:21:50,960 --> 00:21:54,600 Speaker 1: feel pretty uncomfortable about these before it gets resolved one 371 00:21:54,600 --> 00:21:56,680 Speaker 1: way or another. John Go, I want to cut you 372 00:21:56,800 --> 00:22:00,000 Speaker 1: some major major slack on, you know, the cheap shots 373 00:22:00,000 --> 00:22:02,320 Speaker 1: the media is taken on. He was barishing. Now he's 374 00:22:02,359 --> 00:22:06,199 Speaker 1: bullish and all that. But what I'm fascinated by is 375 00:22:06,280 --> 00:22:09,639 Speaker 1: is what would be the next tronch of optimism from you? 376 00:22:10,000 --> 00:22:12,440 Speaker 1: Where's it come on the income statement? Does it come 377 00:22:12,760 --> 00:22:16,679 Speaker 1: from revenue growth doing better? Or is it corporations adapting 378 00:22:16,680 --> 00:22:20,280 Speaker 1: to this pandemic, to this economic crisis and they make 379 00:22:20,480 --> 00:22:23,199 Speaker 1: margins better. Which is it to get you to the 380 00:22:23,240 --> 00:22:27,639 Speaker 1: next tronch of optimism? If you're asking what what would 381 00:22:27,720 --> 00:22:30,040 Speaker 1: make me if I were to if we were to 382 00:22:30,080 --> 00:22:33,000 Speaker 1: be talking in six months months from now and you 383 00:22:33,000 --> 00:22:36,679 Speaker 1: were to say this is what happened, that that's going 384 00:22:36,720 --> 00:22:38,679 Speaker 1: to make this the upside much more. It's not going 385 00:22:38,720 --> 00:22:41,160 Speaker 1: to be this more liquidity because I think that we've 386 00:22:41,200 --> 00:22:45,040 Speaker 1: already seen the market's response. The question is how quickly 387 00:22:45,040 --> 00:22:49,640 Speaker 1: do we get back to an economy that's running at um? 388 00:22:49,760 --> 00:22:53,160 Speaker 1: And so let's ask a question. When is it that 389 00:22:53,160 --> 00:22:57,960 Speaker 1: that commuters are comfortable going back into New York again? Um? 390 00:22:58,040 --> 00:23:03,040 Speaker 1: When is it that we're comfortable get on airplanes again? Um? 391 00:23:03,160 --> 00:23:05,359 Speaker 1: When you know, when is it that we can get 392 00:23:05,880 --> 00:23:09,600 Speaker 1: over twenty million people that have been unemployed back to work? 393 00:23:09,600 --> 00:23:12,720 Speaker 1: And the answer to each of those is longer than 394 00:23:12,800 --> 00:23:15,399 Speaker 1: you would think. So the worst cases at were the 395 00:23:15,560 --> 00:23:18,200 Speaker 1: improvements equentionally off the bottom. We know that that's gonna 396 00:23:18,200 --> 00:23:20,879 Speaker 1: be good. The p M this morning are gonna be good. 397 00:23:21,200 --> 00:23:24,080 Speaker 1: The question is if you're looking up at the sky, 398 00:23:24,320 --> 00:23:26,160 Speaker 1: not down at where you were when there was when 399 00:23:26,200 --> 00:23:28,600 Speaker 1: we were staying at home, that's what's going to really 400 00:23:28,680 --> 00:23:31,080 Speaker 1: drive the market. What are the banks do here? You 401 00:23:31,200 --> 00:23:34,840 Speaker 1: do a great sector analysis. Where are you on the financials? Yeah? 402 00:23:34,920 --> 00:23:37,000 Speaker 1: You know what I was speaking to, Susan Catskews. Our 403 00:23:37,040 --> 00:23:39,800 Speaker 1: our bank analysis is terrific. I mean one of the challenges, 404 00:23:39,880 --> 00:23:41,960 Speaker 1: first of all, the good news is if the economy 405 00:23:42,040 --> 00:23:47,400 Speaker 1: is going from pretty well, um, the credit losses probably 406 00:23:47,480 --> 00:23:50,080 Speaker 1: don't end up being as bad as as we all think, 407 00:23:50,080 --> 00:23:53,920 Speaker 1: and that that's a positive story. On the other hand, UM, 408 00:23:54,080 --> 00:23:57,439 Speaker 1: net interest margins for banks are are a problem longer 409 00:23:57,560 --> 00:24:01,400 Speaker 1: term if you have really low interest rates. So um 410 00:24:01,480 --> 00:24:04,200 Speaker 1: the banks I think are going to be a little 411 00:24:04,200 --> 00:24:08,160 Speaker 1: bit more more challenging. But here's the key. The not 412 00:24:08,520 --> 00:24:10,720 Speaker 1: different than the last crisis. Banks are not going to 413 00:24:10,840 --> 00:24:13,720 Speaker 1: need to raise the loot of capital. There's not going 414 00:24:13,800 --> 00:24:16,840 Speaker 1: to be a reregulation environment. All the really ugly stuff 415 00:24:16,880 --> 00:24:19,760 Speaker 1: that happened is not there. The question is, is you 416 00:24:19,800 --> 00:24:22,679 Speaker 1: know what is the profit margin profit model look like 417 00:24:23,200 --> 00:24:28,400 Speaker 1: in a lower rate environment, especially one um where economic 418 00:24:28,440 --> 00:24:30,800 Speaker 1: growth longer term maybe a little bit weaker. When you 419 00:24:30,840 --> 00:24:34,199 Speaker 1: talk about credit losses being mitigated by the fact that 420 00:24:34,200 --> 00:24:36,240 Speaker 1: we're probably not going to get shut downs and that 421 00:24:36,359 --> 00:24:40,160 Speaker 1: the stimulus has mitigated the worst case scenario, I'm wondering 422 00:24:40,480 --> 00:24:44,320 Speaker 1: what the increase in virus counts in places like Texas 423 00:24:44,359 --> 00:24:46,880 Speaker 1: where the governor's come out and said that it's unacceptable, 424 00:24:46,920 --> 00:24:50,520 Speaker 1: how quickly it's spreading, and the potential for additional shutdowns, 425 00:24:50,520 --> 00:24:54,080 Speaker 1: how that factors into your thesis. Is that factored in 426 00:24:54,440 --> 00:24:57,280 Speaker 1: or do you think that that's a bear case that 427 00:24:57,480 --> 00:25:01,080 Speaker 1: is sort of an outlier. At this point, No said this, 428 00:25:01,359 --> 00:25:04,800 Speaker 1: We are obsessing on this issue. And so my team 429 00:25:04,880 --> 00:25:08,439 Speaker 1: just ransom numbers last night, and what they found was 430 00:25:09,040 --> 00:25:11,000 Speaker 1: that the first of all two things are happening. The 431 00:25:11,080 --> 00:25:14,640 Speaker 1: number of cases is spiking, primarily in the southern half 432 00:25:14,680 --> 00:25:17,119 Speaker 1: of the US and California, and in the north in 433 00:25:17,160 --> 00:25:20,960 Speaker 1: the number of new cases continues to fall um. However, 434 00:25:21,160 --> 00:25:26,240 Speaker 1: the deaths are not going up anywhere or anywhere in 435 00:25:26,280 --> 00:25:28,920 Speaker 1: any of the major regions. So even in areas where 436 00:25:28,920 --> 00:25:30,600 Speaker 1: the case counts is going up, and a lot of 437 00:25:30,600 --> 00:25:32,760 Speaker 1: people are saying is yes, but that's a delay and 438 00:25:32,800 --> 00:25:35,199 Speaker 1: it's going to happen later, we don't think. So. What 439 00:25:35,320 --> 00:25:37,960 Speaker 1: you're finding is that the people who are getting sick 440 00:25:38,000 --> 00:25:41,480 Speaker 1: now are younger people who are going out because they're 441 00:25:41,480 --> 00:25:45,640 Speaker 1: not concerned about the downsides of getting the virus. And 442 00:25:45,720 --> 00:25:49,160 Speaker 1: so the people who are getting sick are not showing 443 00:25:49,240 --> 00:25:52,520 Speaker 1: up in intensive care uns are at the hospital, and 444 00:25:52,520 --> 00:25:56,800 Speaker 1: they're not dying. So it's very possible that we're seeing 445 00:25:56,920 --> 00:25:58,480 Speaker 1: or not very possible. I think what we're seeing is 446 00:25:58,480 --> 00:26:01,760 Speaker 1: pretty rational behavior. People who know that they could survive 447 00:26:01,840 --> 00:26:05,200 Speaker 1: this are going out, they're living their lives, they're getting sick, 448 00:26:05,240 --> 00:26:08,360 Speaker 1: but not in a way that that's going to be um, 449 00:26:08,400 --> 00:26:10,960 Speaker 1: that's going to cause another shutdown. And this is what 450 00:26:11,000 --> 00:26:14,239 Speaker 1: it's going to feel like in an environment where we're 451 00:26:14,280 --> 00:26:15,840 Speaker 1: going to have to live with this for for a 452 00:26:15,840 --> 00:26:18,920 Speaker 1: long period of time. So I think that the we're 453 00:26:18,960 --> 00:26:22,679 Speaker 1: not going to be seeing a anything which looks like 454 00:26:22,720 --> 00:26:27,600 Speaker 1: a national shutdown. Could we see individual local markets or 455 00:26:27,720 --> 00:26:31,040 Speaker 1: city or region for a very short time maybe, but 456 00:26:31,200 --> 00:26:33,159 Speaker 1: even that, I don't think it's gonna happen. If we 457 00:26:33,240 --> 00:26:36,480 Speaker 1: did go and see a shutdown, that's obviously a really 458 00:26:36,520 --> 00:26:39,199 Speaker 1: big problem. But I think that I don't think these 459 00:26:39,280 --> 00:26:42,480 Speaker 1: numbers are inconsistent with each other. Jonathan Call, Kordi Swayze, 460 00:26:42,560 --> 00:26:45,399 Speaker 1: John a pretty you're honestate transparency and your time this morning, 461 00:26:45,400 --> 00:26:47,520 Speaker 1: send o best of to tell you, Kredi Swayze, Jonathan Call, 462 00:26:47,920 --> 00:26:56,080 Speaker 1: Credit Swayze. Megan Green joins us now from Harvard Kennedy School. 463 00:26:56,359 --> 00:27:00,000 Speaker 1: And Megan, what's so important is you synthesize the experience 464 00:27:00,000 --> 00:27:03,639 Speaker 1: orients of the United Kingdom of that shock of Brexit, 465 00:27:04,160 --> 00:27:07,760 Speaker 1: over the shock that we're all living now with the pandemic. 466 00:27:08,160 --> 00:27:11,760 Speaker 1: How do we extract ourselves from a pandemic. Is it 467 00:27:11,800 --> 00:27:14,240 Speaker 1: an act of God and we move quickly or is 468 00:27:14,280 --> 00:27:17,679 Speaker 1: it going to be a long and slow process. Well, unfortunately, 469 00:27:17,760 --> 00:27:21,360 Speaker 1: I think we're looking at a pretty long, slow, hard slog. 470 00:27:22,119 --> 00:27:25,600 Speaker 1: You know, the data has bounced pretty quickly um in 471 00:27:25,720 --> 00:27:28,800 Speaker 1: May and June in particular, so some people might be 472 00:27:28,840 --> 00:27:30,800 Speaker 1: tempted to say, hey, look, this looks like a V 473 00:27:30,880 --> 00:27:34,840 Speaker 1: shaped recovery. But getting the first of those who lost 474 00:27:34,880 --> 00:27:37,360 Speaker 1: their jobs back into the workforce is a lot easier 475 00:27:37,400 --> 00:27:40,800 Speaker 1: than getting the last back in. And and there's a 476 00:27:40,880 --> 00:27:44,239 Speaker 1: host of downside risks as well, both in Europe and 477 00:27:44,280 --> 00:27:46,400 Speaker 1: in the US. I mean, no one or the markets 478 00:27:46,440 --> 00:27:48,520 Speaker 1: don't seem to have noticed that the number of new 479 00:27:49,000 --> 00:27:51,640 Speaker 1: COVID nineteen cases in the US has gone up by 480 00:27:52,400 --> 00:27:54,200 Speaker 1: in the past week. And I think that's a huge 481 00:27:54,280 --> 00:27:57,200 Speaker 1: risk that isn't being priced in. We saw confusion over 482 00:27:57,760 --> 00:28:00,679 Speaker 1: you know, trade with China and the US all so um, 483 00:28:00,840 --> 00:28:04,960 Speaker 1: causing jitters markets. But you know, there's gonna be tree 484 00:28:05,040 --> 00:28:09,200 Speaker 1: tensions as as a selection comes closer regardless of heart. 485 00:28:09,200 --> 00:28:11,800 Speaker 1: Brexit is another downside risk, and none of this seems 486 00:28:11,840 --> 00:28:14,520 Speaker 1: to be priced in. You know, Megan and W. T. 487 00:28:14,680 --> 00:28:17,280 Speaker 1: O folks out moments ago. I think a negative eighteen 488 00:28:17,320 --> 00:28:20,480 Speaker 1: percent statistic on world trade. We're still checking on that, 489 00:28:20,600 --> 00:28:23,240 Speaker 1: Megan Green. I look at the slow down and the 490 00:28:23,320 --> 00:28:25,359 Speaker 1: bounce back, and what it comes down to is, to 491 00:28:25,440 --> 00:28:28,760 Speaker 1: use the word and efficacy of fiscal placement. The great 492 00:28:28,800 --> 00:28:32,160 Speaker 1: critics of mm T would say, you can't do fiscal 493 00:28:32,240 --> 00:28:36,520 Speaker 1: stimulus in a narrow, concerted manner. Can we prove that 494 00:28:36,640 --> 00:28:39,600 Speaker 1: this time is the exception, this time is different. We 495 00:28:39,640 --> 00:28:44,720 Speaker 1: can win with fiscal policy. Uh, fiscal policy can certainly 496 00:28:44,760 --> 00:28:49,280 Speaker 1: help here. And as we look at the US stimulus pipeline, 497 00:28:49,320 --> 00:28:52,120 Speaker 1: it looks like it's it's drying out, and it will 498 00:28:52,160 --> 00:28:54,640 Speaker 1: make a huge difference whether we reap some of that 499 00:28:55,240 --> 00:28:57,680 Speaker 1: or not in the US. But certainly, I mean, the 500 00:28:57,720 --> 00:29:00,200 Speaker 1: more targeted we can make fiscal stimulus the best or 501 00:29:00,240 --> 00:29:03,080 Speaker 1: The problem is we mainly have top down tools, so 502 00:29:03,120 --> 00:29:05,680 Speaker 1: we've had to provide things like checks that aren't targeted 503 00:29:05,760 --> 00:29:08,800 Speaker 1: at all. But I'm constantly asked whether we're doing m 504 00:29:08,920 --> 00:29:11,080 Speaker 1: M T UM and m M T isn't really something 505 00:29:11,120 --> 00:29:14,400 Speaker 1: you do. It's it's more kind of a school of thought. 506 00:29:15,000 --> 00:29:17,240 Speaker 1: But I do think to some degree what the M 507 00:29:17,320 --> 00:29:19,320 Speaker 1: M T here's get right, is that we don't have 508 00:29:19,360 --> 00:29:21,239 Speaker 1: to raise the money in order to spend it. We 509 00:29:21,280 --> 00:29:25,440 Speaker 1: can just deficit spend. And that's the obvious answer for 510 00:29:25,520 --> 00:29:29,000 Speaker 1: any major economies who are facing incredibly low borrowing costs 511 00:29:29,000 --> 00:29:32,320 Speaker 1: for the foreseeable future, like the UK and the US 512 00:29:32,400 --> 00:29:35,280 Speaker 1: and even even the Eurozone to some degree. So you know, 513 00:29:35,360 --> 00:29:37,520 Speaker 1: I think we are right to be deficit spending like 514 00:29:37,640 --> 00:29:39,960 Speaker 1: mad to try to dig ourselves out of this hole 515 00:29:40,000 --> 00:29:41,680 Speaker 1: and to try to fill the whole first of all, 516 00:29:41,960 --> 00:29:45,000 Speaker 1: and then to try to prompt recovery. And yeah, Megan, 517 00:29:45,040 --> 00:29:47,840 Speaker 1: the policy effort seems to be really lumpy, particularly in 518 00:29:47,880 --> 00:29:50,000 Speaker 1: the United States. So caught up with Bridgewater in the 519 00:29:50,080 --> 00:29:51,760 Speaker 1: last twenty four hours. So we're catching up with Bob 520 00:29:51,760 --> 00:29:55,000 Speaker 1: Prince tomorrow for the Bloomberg Investment Conference. For anyone that 521 00:29:55,040 --> 00:29:58,680 Speaker 1: wants to watch that the duration mismatches something they're focused on. 522 00:29:58,800 --> 00:30:01,280 Speaker 1: Bob Prince over there mentioned thing that we keep applying 523 00:30:01,360 --> 00:30:04,360 Speaker 1: these three months bandids to something that could last eighteen 524 00:30:04,400 --> 00:30:07,040 Speaker 1: months and maybe longer. Megan, what do you make of 525 00:30:07,080 --> 00:30:09,240 Speaker 1: that approach? I think that's absolutely right. In fact, I 526 00:30:09,280 --> 00:30:11,320 Speaker 1: don't even think we're applying a three months band aid. 527 00:30:11,360 --> 00:30:13,360 Speaker 1: We've applied a two months band aid for the most 528 00:30:13,400 --> 00:30:16,360 Speaker 1: part in the US, for small companies and for those 529 00:30:16,400 --> 00:30:18,680 Speaker 1: who have been laid off. And I think this is 530 00:30:18,720 --> 00:30:20,640 Speaker 1: going to be a much longer, harder slog as I 531 00:30:20,680 --> 00:30:23,240 Speaker 1: mentioned before. So we're either going to have to re 532 00:30:23,600 --> 00:30:25,960 Speaker 1: keep re upping it and investors are going to trust 533 00:30:26,000 --> 00:30:28,560 Speaker 1: that we're gonna keep re upping it, or there's going 534 00:30:28,600 --> 00:30:30,560 Speaker 1: to be some kind of market dislocation. And I think 535 00:30:30,560 --> 00:30:32,600 Speaker 1: there is a problem in politics. We saw in two 536 00:30:32,600 --> 00:30:34,920 Speaker 1: thousand and eight two thousand nine that at a certain 537 00:30:34,960 --> 00:30:37,600 Speaker 1: point policymakers start asking questions about how we're going to 538 00:30:37,680 --> 00:30:40,360 Speaker 1: pay for this, And again that's a totally inappropriate question 539 00:30:40,760 --> 00:30:42,600 Speaker 1: to be asking in the middle of it, and we 540 00:30:42,640 --> 00:30:45,080 Speaker 1: can ask it afterwards, how we how we figured this out, 541 00:30:45,080 --> 00:30:48,360 Speaker 1: and the answer is deficit spending, particularly for the US 542 00:30:48,920 --> 00:30:52,000 Speaker 1: UM But you know, if we end up having policymakers 543 00:30:52,000 --> 00:30:54,960 Speaker 1: wringing their hands and refusing to pass more stimulus, then 544 00:30:55,520 --> 00:30:57,960 Speaker 1: that's going to have a huge impact on our recovery. 545 00:30:58,000 --> 00:30:59,960 Speaker 1: And I think it will be an even longer, harder 546 00:31:00,120 --> 00:31:02,800 Speaker 1: slog than it otherwise would have been. And this is 547 00:31:02,840 --> 00:31:05,880 Speaker 1: why we need automatic stabilizers. I think to term programs 548 00:31:05,880 --> 00:31:08,480 Speaker 1: on and also to make sure they don't get turned 549 00:31:08,480 --> 00:31:11,400 Speaker 1: off too soon so that it's not a political process 550 00:31:11,440 --> 00:31:13,840 Speaker 1: that just happens based on the data. And there's some 551 00:31:13,920 --> 00:31:18,120 Speaker 1: work being you know, done on trying to implement automatic 552 00:31:18,160 --> 00:31:20,800 Speaker 1: stabilizers in the US. Europe gets this a bit better 553 00:31:21,160 --> 00:31:23,840 Speaker 1: than we do here, but hopefully we can build some 554 00:31:23,880 --> 00:31:26,719 Speaker 1: of those in um for the next crisis, even if 555 00:31:26,760 --> 00:31:28,600 Speaker 1: it's a bit too late for this one. Well, Megan, 556 00:31:28,640 --> 00:31:30,760 Speaker 1: what worries me is that some policy make has taken 557 00:31:30,760 --> 00:31:34,080 Speaker 1: their cues from markets right now because markets relevated, some 558 00:31:34,120 --> 00:31:37,240 Speaker 1: people don't feel the urgency to do more. How instructive 559 00:31:37,280 --> 00:31:39,680 Speaker 1: is the economic dat to itself over the last month 560 00:31:39,720 --> 00:31:42,080 Speaker 1: for policy makers as they try and calibrate, well the 561 00:31:42,080 --> 00:31:44,840 Speaker 1: next move should be so to be honest, most of 562 00:31:44,880 --> 00:31:47,720 Speaker 1: our economic indicators are pretty backwards looking and out of 563 00:31:47,800 --> 00:31:50,600 Speaker 1: date by the time they come out, but they're already 564 00:31:50,600 --> 00:31:53,280 Speaker 1: starting to show a bounce. Uh. And a lot of 565 00:31:53,320 --> 00:31:56,320 Speaker 1: the alternative data, high frequency data that we're looking at 566 00:31:56,360 --> 00:31:58,720 Speaker 1: also shows a bounce, so that takes pressure off of 567 00:31:59,200 --> 00:32:01,760 Speaker 1: policymakers as well. And as I said, it looks like 568 00:32:01,800 --> 00:32:04,160 Speaker 1: a V shape recovery right now. That was always going 569 00:32:04,200 --> 00:32:06,760 Speaker 1: to happen. We're always going to have the best growth 570 00:32:06,800 --> 00:32:10,040 Speaker 1: figures for all kinds of things ever off of a 571 00:32:10,160 --> 00:32:13,480 Speaker 1: really really low bottom um, and that will be politicized. 572 00:32:13,560 --> 00:32:16,840 Speaker 1: So President Trump and the Republicans will highlight how're we've 573 00:32:16,840 --> 00:32:19,880 Speaker 1: got the best growth data ever. The Democrats will highlight 574 00:32:19,920 --> 00:32:23,080 Speaker 1: that it's from the worst base ever, and both sides 575 00:32:23,120 --> 00:32:25,400 Speaker 1: will be right. That will be really confusing for people, 576 00:32:25,760 --> 00:32:27,600 Speaker 1: and I think that will moddle the debate on whether 577 00:32:27,680 --> 00:32:30,040 Speaker 1: to do more. So I don't actually think the economic 578 00:32:30,080 --> 00:32:32,320 Speaker 1: data is going to be helping in the short term. 579 00:32:32,360 --> 00:32:35,880 Speaker 1: And as I said, that quick bounce was inevitable, but 580 00:32:36,040 --> 00:32:38,040 Speaker 1: it should slow down. It's gonna be much harder to 581 00:32:38,040 --> 00:32:41,080 Speaker 1: pull people into work the longer this goes on. Megan, 582 00:32:41,160 --> 00:32:43,400 Speaker 1: you said that the U s should be deficit spending 583 00:32:43,480 --> 00:32:48,480 Speaker 1: like crazy? Should individuals? Should corporations be deficit spending like crazy? 584 00:32:48,520 --> 00:32:51,560 Speaker 1: Because they are, They're borrowing a ton and there's a 585 00:32:51,640 --> 00:32:55,600 Speaker 1: question is this just prolonging the pain that is inevitable anyway? 586 00:32:55,840 --> 00:32:59,840 Speaker 1: So no, UM, sovereigns are different from households and companies 587 00:32:59,840 --> 00:33:03,120 Speaker 1: and that they never die. UM, they never actually have 588 00:33:03,240 --> 00:33:05,880 Speaker 1: to pay that debt back. They don't usually pay that 589 00:33:06,000 --> 00:33:08,640 Speaker 1: debt back, they just roll it over um for years 590 00:33:08,680 --> 00:33:11,400 Speaker 1: and years and years, and households and companies can't do that, 591 00:33:11,480 --> 00:33:14,160 Speaker 1: so the same rules don't apply. Um that we have 592 00:33:14,320 --> 00:33:17,760 Speaker 1: seen record corporate debt issuance, and you know, could that 593 00:33:17,840 --> 00:33:20,720 Speaker 1: be a problem coming down the line. Absolutely. We we 594 00:33:20,800 --> 00:33:23,320 Speaker 1: started this off with a bit of a bubble in 595 00:33:23,360 --> 00:33:26,280 Speaker 1: corporate debts. At some point that will come home to roost, 596 00:33:26,320 --> 00:33:28,960 Speaker 1: but not while rates are going to be pretty much 597 00:33:28,960 --> 00:33:31,880 Speaker 1: at zero for the foreseeable future. I think that pushes 598 00:33:31,880 --> 00:33:35,280 Speaker 1: that problem further out into the future. If the US 599 00:33:35,400 --> 00:33:39,640 Speaker 1: doesn't continue fiscal stimulus with additional rounds of checks and 600 00:33:39,720 --> 00:33:43,320 Speaker 1: re up to enhanced unemployment benefits, could we see this 601 00:33:43,400 --> 00:33:45,880 Speaker 1: come home to roost sooner? In other words, could this 602 00:33:46,000 --> 00:33:49,800 Speaker 1: bubble pop in a way that becomes problematic from markets 603 00:33:49,800 --> 00:33:52,360 Speaker 1: on the economy? Oh definitely. I mean, don't forget that 604 00:33:53,320 --> 00:33:56,320 Speaker 1: our economy is consumption um. And if we don't re 605 00:33:56,520 --> 00:34:02,200 Speaker 1: up unemployment insurance benefits and check um, but particularly unemployment 606 00:34:02,240 --> 00:34:05,880 Speaker 1: insurance benefits UM the PDP program, which has been extended 607 00:34:05,920 --> 00:34:09,200 Speaker 1: a bit um, that's we're facing a cliff edge in 608 00:34:09,280 --> 00:34:11,880 Speaker 1: terms of people having jobs and being able to spend 609 00:34:12,080 --> 00:34:13,960 Speaker 1: on top of that, you know, I really hope we 610 00:34:14,000 --> 00:34:16,680 Speaker 1: see something for state and local funding coming from the 611 00:34:16,719 --> 00:34:19,680 Speaker 1: federal government. Without that, I think it would be very 612 00:34:19,680 --> 00:34:23,000 Speaker 1: difficult to avoid a double differcession. So fiscal policy really 613 00:34:23,000 --> 00:34:25,120 Speaker 1: will make a difference here. Mike and Green of the 614 00:34:25,160 --> 00:34:27,440 Speaker 1: hob A Kennedy School, Magan, always fantastic to catch up 615 00:34:27,440 --> 00:34:29,280 Speaker 1: with you. Thanks for jointing us this morning. I appreciate 616 00:34:29,320 --> 00:34:37,680 Speaker 1: your time right now. Someone Washington loves to hate what's 617 00:34:37,719 --> 00:34:39,880 Speaker 1: known in Washington as you get a quick read, a 618 00:34:39,960 --> 00:34:43,160 Speaker 1: quick little paragraph, a little snippet of the gossip out there, 619 00:34:43,640 --> 00:34:48,640 Speaker 1: and the acclaimed Christopher Krueger of Cowen goes the other way. 620 00:34:48,920 --> 00:34:53,359 Speaker 1: He writes hyper detailed research notes that you swear out 621 00:34:53,400 --> 00:34:55,959 Speaker 1: on a Friday evening because you know you're gonna waste 622 00:34:55,960 --> 00:34:58,640 Speaker 1: an hour and a half on Saturday reading them. Mr 623 00:34:58,760 --> 00:35:03,200 Speaker 1: Krueger joined us right now, Chris, I loved your research 624 00:35:03,840 --> 00:35:08,879 Speaker 1: on unemployment dynamics in the swing states. To me, that's 625 00:35:08,920 --> 00:35:13,319 Speaker 1: absolutely fascinated and speaks right to the fulcome of the 626 00:35:13,400 --> 00:35:16,080 Speaker 1: full calm rather of this election. What do you see 627 00:35:16,120 --> 00:35:19,160 Speaker 1: in those swing states right now? Well, we saw those 628 00:35:19,200 --> 00:35:21,960 Speaker 1: six key states, and the six are three in the 629 00:35:22,040 --> 00:35:26,400 Speaker 1: Rust Belt, three in the Sun Belt. So you've got Arizona, Florida, Michigan, 630 00:35:26,440 --> 00:35:30,480 Speaker 1: North Carolina, Pennsylvania, Wisconsin. That's going to determine who's the 631 00:35:30,520 --> 00:35:34,680 Speaker 1: president next year. Donald Trump won those states in sen 632 00:35:34,760 --> 00:35:37,960 Speaker 1: by a little over four hundred and fifty thousand votes. Uh. 633 00:35:38,000 --> 00:35:40,239 Speaker 1: And in the last thirteen weeks there have almost been 634 00:35:40,360 --> 00:35:46,720 Speaker 1: nine million unemployment claims. Wow, I mean that's what is Chris, 635 00:35:46,719 --> 00:35:50,560 Speaker 1: What is the pandemic overlay on the history of two 636 00:35:50,600 --> 00:35:54,439 Speaker 1: thousand sixteen. How does the pandemic fold in to those 637 00:35:54,440 --> 00:35:57,200 Speaker 1: six swing states? Well, I mean, I think it's it's 638 00:35:57,239 --> 00:36:00,799 Speaker 1: not just the unemployment numbers here or I mean, you know, 639 00:36:00,880 --> 00:36:04,440 Speaker 1: not not to be morbid, but you also have you know, enormous, 640 00:36:04,719 --> 00:36:08,440 Speaker 1: enormous death tolls here. What you've also seen, particularly in 641 00:36:08,480 --> 00:36:11,480 Speaker 1: a state like Florida, which is an absolute must win. 642 00:36:11,520 --> 00:36:14,000 Speaker 1: If there's one state that Trump cannot afford to lose, 643 00:36:14,040 --> 00:36:18,160 Speaker 1: it's Florida. Uh. And you're seeing now, Joe Biden. Uh. 644 00:36:18,200 --> 00:36:22,560 Speaker 1: You know above with the five thirty eight aggregate poll numbers, 645 00:36:22,600 --> 00:36:25,160 Speaker 1: outside of the margin of error, what you're seeing in 646 00:36:25,200 --> 00:36:29,440 Speaker 1: Florida is that absolutely vital sixty five and older age 647 00:36:29,480 --> 00:36:34,839 Speaker 1: Cohort breaking against Trump towards the Vice president. I think 648 00:36:34,920 --> 00:36:38,080 Speaker 1: you have to, you know, extrapolate that that is a 649 00:36:38,160 --> 00:36:41,640 Speaker 1: direct result of of the pandemic and sadly, those those 650 00:36:41,680 --> 00:36:45,359 Speaker 1: death totals. Chris, how much does the employment issue suck 651 00:36:45,480 --> 00:36:48,600 Speaker 1: the oxygen away from trade issues which were so important 652 00:36:48,600 --> 00:36:51,880 Speaker 1: in and will likely be very much on the forefront 653 00:36:51,960 --> 00:36:54,480 Speaker 1: heading into November. It's a great question. I mean, look, 654 00:36:54,920 --> 00:36:58,480 Speaker 1: you know, the Iowa caucuses were, you know, less than 655 00:36:58,480 --> 00:37:01,480 Speaker 1: a hundred and fifty days ago, and the President was 656 00:37:01,480 --> 00:37:07,000 Speaker 1: was gearing up for a re election campaign based on prosperity, 657 00:37:07,400 --> 00:37:11,120 Speaker 1: UH and security, with the China Phase one trade deal 658 00:37:11,239 --> 00:37:14,160 Speaker 1: as a as a central sort of lynchpin, you know, 659 00:37:14,280 --> 00:37:17,040 Speaker 1: to that re election that was going to be delivered 660 00:37:17,120 --> 00:37:20,200 Speaker 1: via the MAGA rallies. And now you know, I think 661 00:37:20,239 --> 00:37:22,920 Speaker 1: that the Phase one deal, which you you referenced in 662 00:37:23,000 --> 00:37:26,760 Speaker 1: the beginning of the show, has become a political vulnerability 663 00:37:26,840 --> 00:37:30,439 Speaker 1: for the president. I think both the vice former Vice 664 00:37:30,440 --> 00:37:34,680 Speaker 1: president and President Trump are going to attempt to use 665 00:37:34,840 --> 00:37:38,719 Speaker 1: China really as the ultimate bipartisan foil. Here. You have 666 00:37:38,800 --> 00:37:43,080 Speaker 1: a very hawkish Congress with Hong Kong as probably the 667 00:37:43,160 --> 00:37:47,640 Speaker 1: next big catalyst. Reports as well that that new quote 668 00:37:47,680 --> 00:37:51,600 Speaker 1: unquote national Security law might be implemented as early as July, 669 00:37:51,840 --> 00:37:55,200 Speaker 1: not as September. So I think the China narrative is 670 00:37:55,239 --> 00:37:58,319 Speaker 1: going to be. UH is certainly going to stay with 671 00:37:58,400 --> 00:38:02,240 Speaker 1: us through the fall and longer. He'll stay with us. 672 00:38:02,320 --> 00:38:04,080 Speaker 1: It'll stay with us. The question is with the tenor 673 00:38:04,120 --> 00:38:05,719 Speaker 1: of it will be and what the focus will be. 674 00:38:05,760 --> 00:38:08,440 Speaker 1: There's a question about culpability. I know the Senate is 675 00:38:08,440 --> 00:38:11,120 Speaker 1: holding a hearing on that later today. There's a question 676 00:38:11,160 --> 00:38:15,279 Speaker 1: about tech supremacy, and then there's a question about increasing 677 00:38:15,320 --> 00:38:18,399 Speaker 1: protectionism that we've seen and certainly was a major driver 678 00:38:18,480 --> 00:38:22,040 Speaker 1: in sixteen. How much is that still a major driver 679 00:38:22,280 --> 00:38:25,279 Speaker 1: given the economic outcome of some of the policies put 680 00:38:25,320 --> 00:38:27,799 Speaker 1: in place over the past four years. I mean, I 681 00:38:27,840 --> 00:38:31,120 Speaker 1: think it's really kind of it's gone, you know, you know, 682 00:38:31,320 --> 00:38:34,080 Speaker 1: it's a paraphrase spinal tap, it's really gone to win eleven. 683 00:38:34,440 --> 00:38:39,280 Speaker 1: Before COVID, you had a bipartisan consensus that China was 684 00:38:39,280 --> 00:38:43,160 Speaker 1: was no longer a UH, you know, a strategic partner. 685 00:38:43,200 --> 00:38:46,600 Speaker 1: They were a strategic competitor. And you saw that with 686 00:38:47,320 --> 00:38:50,400 Speaker 1: with high text, specifically with five G. But you're going 687 00:38:50,480 --> 00:38:53,320 Speaker 1: to see that later this month with new export controls. 688 00:38:53,640 --> 00:38:56,680 Speaker 1: You saw that with Huawei, and you've seen that on 689 00:38:56,760 --> 00:39:00,799 Speaker 1: some of the human rights issues. But now with a pandemic, 690 00:39:01,120 --> 00:39:05,320 Speaker 1: you have folks like uh, you know, Tom Cotton, Republican 691 00:39:05,440 --> 00:39:10,320 Speaker 1: from Arkansas, Josh Holly, Republican from Missouri, really making almost 692 00:39:10,360 --> 00:39:14,520 Speaker 1: sort of a reparation style push against the Chinese Communist 693 00:39:14,600 --> 00:39:19,160 Speaker 1: Party for their culpability in the pandemic. So it's really 694 00:39:19,200 --> 00:39:22,640 Speaker 1: sort of across the board. Uh. And then when you 695 00:39:22,680 --> 00:39:25,680 Speaker 1: look at Vice President Biden, I mean, at the time 696 00:39:25,800 --> 00:39:27,799 Speaker 1: I thought it was a huge issue, but so much 697 00:39:27,880 --> 00:39:31,440 Speaker 1: else was going on. Vice President Biden referred to Sherriman 698 00:39:31,560 --> 00:39:36,640 Speaker 1: she as a stug in the March Democratic primary. Democrats 699 00:39:36,680 --> 00:39:39,360 Speaker 1: tend to look at China more through the prism of 700 00:39:39,360 --> 00:39:44,520 Speaker 1: of human rights, labor, and the environment. So it's, um, 701 00:39:44,560 --> 00:39:48,080 Speaker 1: it's a pretty tough forecast really, regardless of of who 702 00:39:48,080 --> 00:39:51,200 Speaker 1: wins the presidency. Chris Krieg try to catch you with you, 703 00:39:51,200 --> 00:39:54,319 Speaker 1: said Chris Crocker, that of Cowen. Thanks for listening to 704 00:39:54,400 --> 00:39:58,920 Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on 705 00:39:58,960 --> 00:40:04,799 Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm 706 00:40:04,840 --> 00:40:08,080 Speaker 1: on Twitter at Tom Keene before the podcast. You can 707 00:40:08,200 --> 00:40:11,360 Speaker 1: always catch us worldwide. I'm Bloomberg Radio