1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 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 --> 00:00:27,240 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg We 5 00:00:27,280 --> 00:00:29,000 Speaker 1: can catch you with Tony two. I right now kind 6 00:00:29,000 --> 00:00:32,880 Speaker 1: of call genuity equity strategist Tony. He's starting to feel 7 00:00:32,920 --> 00:00:36,120 Speaker 1: I'm comfortable with where this market as is right now, 8 00:00:36,240 --> 00:00:39,639 Speaker 1: given what he's going around all around the world, around us, 9 00:00:39,640 --> 00:00:42,040 Speaker 1: in Europe, in the United States, even more so in 10 00:00:42,040 --> 00:00:46,680 Speaker 1: the last twenty four hours. It just is um It's 11 00:00:46,720 --> 00:00:50,280 Speaker 1: disheartening to hear, but it just goes to show what 12 00:00:50,600 --> 00:00:52,960 Speaker 1: drives the market is money. It's always driven the market, 13 00:00:52,960 --> 00:00:56,840 Speaker 1: and it's unfortunately the social side of it isn't as 14 00:00:56,880 --> 00:00:59,840 Speaker 1: important as the excess liquidity side of it, and the 15 00:01:00,000 --> 00:01:02,120 Speaker 1: access liquidity side of it, as you guys know, is 16 00:01:02,160 --> 00:01:05,520 Speaker 1: absolutely extraordinary. But just a quick comment John on the dollar. 17 00:01:06,080 --> 00:01:08,479 Speaker 1: So if you look back over the last since two 18 00:01:08,560 --> 00:01:13,240 Speaker 1: thousand nine, since the Great Financial Crisis, there's been three 19 00:01:13,280 --> 00:01:17,200 Speaker 1: other periods of such a pronouncedly weak dollar. Historically when 20 00:01:17,240 --> 00:01:19,240 Speaker 1: it gets down more than eight percent, which it did 21 00:01:19,280 --> 00:01:22,560 Speaker 1: in the summertime. It ends up going down between thirteen 22 00:01:22,600 --> 00:01:24,520 Speaker 1: to seventeen percent, And of course I'm talking about the 23 00:01:24,600 --> 00:01:27,560 Speaker 1: US dollar index, and the reason that that's important is 24 00:01:28,120 --> 00:01:31,800 Speaker 1: people always try to make it about deficits and access debt, 25 00:01:32,040 --> 00:01:35,000 Speaker 1: and what it always comes down to is the dollar 26 00:01:35,080 --> 00:01:38,839 Speaker 1: gets weaker in that second leg lower where it goes 27 00:01:38,840 --> 00:01:42,480 Speaker 1: down into the mid teens, because it starts to understand 28 00:01:42,520 --> 00:01:46,679 Speaker 1: and accept that there is a synchronized global recovery, and 29 00:01:46,840 --> 00:01:49,400 Speaker 1: that I believe is the movement of the dollar versus 30 00:01:49,440 --> 00:01:55,760 Speaker 1: some kind of panic over Brexit or panic over access debt. Tony, 31 00:01:55,840 --> 00:01:59,960 Speaker 1: good morning. Your number one call is own stocks until 32 00:02:00,040 --> 00:02:03,200 Speaker 1: there's a recession. Are you gonna sell stocks because you 33 00:02:03,280 --> 00:02:07,160 Speaker 1: see a recession coming, tom We are in the beginning 34 00:02:07,520 --> 00:02:11,240 Speaker 1: beginning of a new economic and market cycle. Um. If 35 00:02:11,240 --> 00:02:13,400 Speaker 1: you look back at at how the markets acting and 36 00:02:13,440 --> 00:02:16,440 Speaker 1: how all the indicators are acting, it's very similar to 37 00:02:16,480 --> 00:02:18,519 Speaker 1: what happened towards the end of two thousand and nine 38 00:02:19,040 --> 00:02:21,800 Speaker 1: where you had back if I take you back there, 39 00:02:22,120 --> 00:02:25,359 Speaker 1: there was historic access liquidity just like there is now, 40 00:02:25,760 --> 00:02:28,400 Speaker 1: and you had this synchronized global recovery coming out of 41 00:02:28,400 --> 00:02:31,959 Speaker 1: the Great financial crisis. So even though the market was 42 00:02:32,040 --> 00:02:34,480 Speaker 1: up fifty in the summertime at two thousand and nine, 43 00:02:34,880 --> 00:02:38,760 Speaker 1: it kept going up because there was this excess liquidity 44 00:02:38,800 --> 00:02:42,600 Speaker 1: and this understanding that the globe was recovering all at 45 00:02:42,639 --> 00:02:45,840 Speaker 1: the same time. And that's that's been the impact of 46 00:02:45,880 --> 00:02:49,400 Speaker 1: the pandemic globally, is that everything shut down in March, 47 00:02:49,520 --> 00:02:52,840 Speaker 1: like the whole world shut down. And now we're coming 48 00:02:52,880 --> 00:02:55,480 Speaker 1: off of that low alow. You know, obviously there's gonna 49 00:02:55,480 --> 00:02:57,320 Speaker 1: be fits and starts of the very near term here. 50 00:02:57,600 --> 00:03:00,440 Speaker 1: So a lot of equity strategists, yourself include did have 51 00:03:00,600 --> 00:03:05,000 Speaker 1: been pointing to signs of euphoria extreme buying, particularly in 52 00:03:05,040 --> 00:03:07,760 Speaker 1: this moment, based on those terrible numbers that we're getting 53 00:03:07,960 --> 00:03:11,280 Speaker 1: out of hospitals and deaths on the heels of the 54 00:03:11,320 --> 00:03:14,680 Speaker 1: COVID pandemic. What do you do as a longer term investor. 55 00:03:14,760 --> 00:03:17,520 Speaker 1: Do you just ignore it and basically say long term, 56 00:03:17,600 --> 00:03:19,400 Speaker 1: it's all gonna work out, or do you try to 57 00:03:19,440 --> 00:03:23,480 Speaker 1: play this in the real time? At least, I'm not 58 00:03:23,840 --> 00:03:27,919 Speaker 1: very good at chasing excessive optimism and strength, and again, 59 00:03:27,960 --> 00:03:29,959 Speaker 1: it's not a sign that we're about to collapse. Going 60 00:03:29,960 --> 00:03:33,080 Speaker 1: back to Tom's question, this is the only time you 61 00:03:33,160 --> 00:03:36,920 Speaker 1: really get sustainably defensive on equities. In other words, cell 62 00:03:36,960 --> 00:03:40,960 Speaker 1: cell cell is when you can predict the recessions coming, 63 00:03:40,960 --> 00:03:43,680 Speaker 1: and you can do that through the Yeld curve. When 64 00:03:43,680 --> 00:03:45,280 Speaker 1: you have an inversion of the yield curve. Is one 65 00:03:45,280 --> 00:03:48,040 Speaker 1: of the reasons we downgraded the market in January of 66 00:03:48,040 --> 00:03:50,840 Speaker 1: this year. The Yeld curve. Remember the heel curvet inverted 67 00:03:50,920 --> 00:03:53,400 Speaker 1: last August, so at least that the yel curve is 68 00:03:53,480 --> 00:03:56,520 Speaker 1: just st deepening, right, that's a sign, just like it's 69 00:03:56,520 --> 00:03:59,160 Speaker 1: a sign of a recession is coming when it inverts. 70 00:03:59,360 --> 00:04:02,600 Speaker 1: When it goes from an inversion back to a positive slope, 71 00:04:02,840 --> 00:04:06,440 Speaker 1: it's a sign of economic activity. So our play is 72 00:04:06,520 --> 00:04:10,920 Speaker 1: to buy periods of weakness like the September swoon where 73 00:04:10,920 --> 00:04:12,880 Speaker 1: the market was dead since he was down ten percent, 74 00:04:13,240 --> 00:04:16,960 Speaker 1: and the October wash where the market was down eight 75 00:04:16,960 --> 00:04:19,800 Speaker 1: percent in two weeks. Those are the kind of environments 76 00:04:19,800 --> 00:04:22,920 Speaker 1: where I think you want to attack the opportunity versus 77 00:04:23,000 --> 00:04:26,280 Speaker 1: feeling like your quote unquote missing something and chasing this 78 00:04:26,360 --> 00:04:29,839 Speaker 1: kind of optimism that's out there, Tony. Isn't that a 79 00:04:29,839 --> 00:04:32,360 Speaker 1: story for everyone? Though everyone's waiting for the pullback to buy, 80 00:04:32,520 --> 00:04:34,600 Speaker 1: Everyone's got the same trade on right now, I'm trying 81 00:04:34,640 --> 00:04:36,880 Speaker 1: to work out what would test the patience of this 82 00:04:37,000 --> 00:04:39,599 Speaker 1: market at the moment to actually lead to some kind 83 00:04:39,640 --> 00:04:42,160 Speaker 1: of pulled back. The data has been soft on claims 84 00:04:42,160 --> 00:04:44,279 Speaker 1: over the last couple of weeks. Maybe it's softer again 85 00:04:44,520 --> 00:04:46,200 Speaker 1: this morning as well. It just seems to me that 86 00:04:46,200 --> 00:04:49,800 Speaker 1: everything is so firmly anchored by the expectation that vaccinations 87 00:04:49,800 --> 00:04:52,720 Speaker 1: will begin in the UK next week, in America maybe 88 00:04:52,760 --> 00:04:56,120 Speaker 1: the next couple of weeks, Tony John. As you guys know, 89 00:04:56,960 --> 00:04:59,360 Speaker 1: it always comes out of nowhere. People like me are 90 00:04:59,400 --> 00:05:01,400 Speaker 1: famous for I'm on TV and saying, oh, I think 91 00:05:01,440 --> 00:05:03,640 Speaker 1: this is gonna call it. It's not. It's not predictable. 92 00:05:04,000 --> 00:05:06,960 Speaker 1: What causes, you know, a real kind of sharp two 93 00:05:06,960 --> 00:05:10,760 Speaker 1: weeks sell off, and again I'm not expecting anything too dramatic, 94 00:05:11,200 --> 00:05:13,480 Speaker 1: is when you it's it's a news item that you 95 00:05:13,520 --> 00:05:17,000 Speaker 1: can't predict and it comes from well. While folks like us, 96 00:05:17,080 --> 00:05:18,400 Speaker 1: you guys in the media and me and the in 97 00:05:18,440 --> 00:05:21,200 Speaker 1: the Cell Side Strategy group are saying, Okay, the markets 98 00:05:21,240 --> 00:05:24,200 Speaker 1: due for a pullback, investors aren't playing it that way 99 00:05:24,240 --> 00:05:27,200 Speaker 1: because that optimism is so high. We we trecked this 100 00:05:27,240 --> 00:05:30,280 Speaker 1: thing called the National Association of Active Independent Managers. It 101 00:05:30,279 --> 00:05:33,400 Speaker 1: looks like it looks at active money managers, real money 102 00:05:33,440 --> 00:05:36,760 Speaker 1: movers um that are that range from small to large, 103 00:05:37,000 --> 00:05:40,680 Speaker 1: and it's at a level that was the most recent 104 00:05:40,720 --> 00:05:42,920 Speaker 1: time it was there was around the August peak, right 105 00:05:42,920 --> 00:05:45,880 Speaker 1: before we had that time percent decline, and again before 106 00:05:45,920 --> 00:05:49,280 Speaker 1: that about three years ago. So optimism is very high 107 00:05:49,360 --> 00:05:53,040 Speaker 1: among actual investors, which is actually a good thing when 108 00:05:53,040 --> 00:05:56,800 Speaker 1: you're corting off of a historic flow. Tony, fantastic it 109 00:05:56,839 --> 00:05:59,360 Speaker 1: catch up. You're always looking well, tony to that kind 110 00:05:59,360 --> 00:06:05,159 Speaker 1: of gently, thank you sir. Right now, the bond dynamic 111 00:06:05,560 --> 00:06:08,400 Speaker 1: is John mentioned. Kathleen Jones joins us right now with 112 00:06:08,480 --> 00:06:12,480 Speaker 1: Schwab and their Center for Financial Research. Kathy Jones, we're 113 00:06:12,520 --> 00:06:15,839 Speaker 1: seeing the bon move. I see the Bloomberg Barkley's Total 114 00:06:15,880 --> 00:06:19,320 Speaker 1: Return Index up, up, up. It doesn't compare to the 115 00:06:19,320 --> 00:06:23,720 Speaker 1: equity markets, but still it's been an extraordinary two year 116 00:06:23,880 --> 00:06:27,719 Speaker 1: run for bonds. When the bonds breathe and we see 117 00:06:27,760 --> 00:06:31,159 Speaker 1: price down and yield up, I think we're starting to 118 00:06:31,200 --> 00:06:33,359 Speaker 1: see it, particularly in the long end. Now you know, 119 00:06:33,400 --> 00:06:37,480 Speaker 1: we've seen the steepening of the curve with a tenure 120 00:06:37,520 --> 00:06:40,919 Speaker 1: treasury pushing up against that one percent, and we're looking 121 00:06:40,960 --> 00:06:43,719 Speaker 1: for a further stepening, that bear stepening where the fat 122 00:06:43,839 --> 00:06:47,280 Speaker 1: is anchored short term rates near zero, long term rates 123 00:06:47,320 --> 00:06:51,120 Speaker 1: try to edge higher. Not looking for a huge move 124 00:06:51,600 --> 00:06:53,800 Speaker 1: at this stage of the game, because the economy still 125 00:06:53,800 --> 00:06:57,479 Speaker 1: has a pretty dark period to go through here. But 126 00:06:57,560 --> 00:06:59,440 Speaker 1: I think as we look into the second half of 127 00:06:59,520 --> 00:07:02,960 Speaker 1: next year, if we really get the vaccines distributed and 128 00:07:03,000 --> 00:07:06,640 Speaker 1: the economy fully reopens, people get back to work, it's 129 00:07:06,640 --> 00:07:09,640 Speaker 1: not unlikely that tenure yields her in that one to 130 00:07:09,720 --> 00:07:12,400 Speaker 1: one and a half percent area. There's a consensus in 131 00:07:12,440 --> 00:07:15,000 Speaker 1: markets that bond yield to be much higher if it 132 00:07:15,040 --> 00:07:17,760 Speaker 1: weren't for the widespread belief that the FED will step 133 00:07:17,840 --> 00:07:21,480 Speaker 1: in and suppress yields if they climb too high. What 134 00:07:21,800 --> 00:07:26,320 Speaker 1: is that level that triggers the Fed's concerned. Yeah, I 135 00:07:26,680 --> 00:07:28,920 Speaker 1: wish I knew. I wish there was like a line 136 00:07:28,960 --> 00:07:31,120 Speaker 1: in the sand that they're going to draw, But I 137 00:07:31,160 --> 00:07:34,480 Speaker 1: don't think that that's realistic. I think it's more likely 138 00:07:34,520 --> 00:07:37,800 Speaker 1: that the FED looks at the rate of change and 139 00:07:37,840 --> 00:07:40,680 Speaker 1: the underlying nature of what's driving it. So if you're 140 00:07:40,680 --> 00:07:42,680 Speaker 1: sitting at the FED and you see rates move up 141 00:07:42,680 --> 00:07:45,240 Speaker 1: to one and a quarter, and it's off the back 142 00:07:45,280 --> 00:07:49,880 Speaker 1: of good economic data, falling unemployment, rising consumption. You might 143 00:07:49,960 --> 00:07:54,360 Speaker 1: destroy your shelf and say that's not a terrible thing. Um. 144 00:07:54,400 --> 00:07:59,280 Speaker 1: If it's disorderly and a sudden jump because inflation expectations 145 00:07:59,280 --> 00:08:02,200 Speaker 1: are really become one board, then it might be an 146 00:08:02,280 --> 00:08:04,520 Speaker 1: area to worry about. But at this dame of the game, 147 00:08:04,600 --> 00:08:07,880 Speaker 1: financial conditions are really easy, and even with a quarter 148 00:08:08,000 --> 00:08:12,640 Speaker 1: point move from here, they'd still probably be pretty easy. Cathey, 149 00:08:12,680 --> 00:08:15,160 Speaker 1: expectations matter, though, and you and I know a ton 150 00:08:15,200 --> 00:08:17,560 Speaker 1: of people who believe that yields won't gone much higher 151 00:08:17,800 --> 00:08:21,240 Speaker 1: because the Fed will step in December six and extend 152 00:08:21,240 --> 00:08:24,080 Speaker 1: the average maturity they're bond buying. I'm wondering if they 153 00:08:24,120 --> 00:08:29,920 Speaker 1: don't how big the air pocket is for treasuries. Yeah, 154 00:08:30,160 --> 00:08:32,960 Speaker 1: there does seem to be a widespread consensus about that. 155 00:08:33,040 --> 00:08:35,160 Speaker 1: I'm not really sure why. When I read the minutes 156 00:08:35,200 --> 00:08:37,520 Speaker 1: of the last meeting, I don't get the sense that 157 00:08:37,559 --> 00:08:39,800 Speaker 1: they're eager to jump in at the stage of the 158 00:08:39,840 --> 00:08:43,080 Speaker 1: game or to extend duration. Um. So maybe that does 159 00:08:43,160 --> 00:08:45,520 Speaker 1: give us a bit of a pop here, But the 160 00:08:45,600 --> 00:08:49,360 Speaker 1: realistic situation is we still have a lot of a 161 00:08:49,400 --> 00:08:51,880 Speaker 1: lot of bad news to get through over the next 162 00:08:52,000 --> 00:08:54,080 Speaker 1: quarter or so, and I think that that in and 163 00:08:54,120 --> 00:08:57,240 Speaker 1: of itself would probably limit the appreciation in terms of 164 00:08:57,320 --> 00:09:00,520 Speaker 1: yields from here. So it's interesting to make Kathy that 165 00:09:00,600 --> 00:09:03,680 Speaker 1: the disruption of the next few months would keep a 166 00:09:03,720 --> 00:09:06,760 Speaker 1: lid on treasury yields, but it won't keep a floor 167 00:09:06,800 --> 00:09:10,240 Speaker 1: on how tight credit spreads can go. Credit keeps rallying, 168 00:09:10,679 --> 00:09:14,280 Speaker 1: but yields are limited on treasuries. Square that for me. 169 00:09:14,400 --> 00:09:17,760 Speaker 1: Kathy makes sense of that for me. If it matters 170 00:09:17,800 --> 00:09:21,720 Speaker 1: for treasuries, why doesn't it matter for credit. Yeah, I 171 00:09:21,760 --> 00:09:24,160 Speaker 1: think credit spreads are about as tight as they can 172 00:09:24,200 --> 00:09:27,400 Speaker 1: go for the time being, particularly in high yield. Maybe 173 00:09:27,400 --> 00:09:29,640 Speaker 1: they can extend a bit further. You know, the market 174 00:09:30,080 --> 00:09:33,240 Speaker 1: it's certainly high yield, and and much of the world 175 00:09:33,280 --> 00:09:35,640 Speaker 1: of credit it's much more like the stock market than 176 00:09:35,760 --> 00:09:39,160 Speaker 1: the treasury market, and so they're looking forward at earnings 177 00:09:39,200 --> 00:09:42,800 Speaker 1: coming back and cash flows improving the search for yield. 178 00:09:42,840 --> 00:09:47,720 Speaker 1: It's all driving this sort of cyclical rallially in um credit, 179 00:09:48,120 --> 00:09:50,920 Speaker 1: and I think it continues over the next six months 180 00:09:50,960 --> 00:09:53,480 Speaker 1: to a year or so, but a lot of it's 181 00:09:53,480 --> 00:09:56,720 Speaker 1: been done already, and the lower credit quality is certainly 182 00:09:56,840 --> 00:10:01,760 Speaker 1: vulnerable to some sort of bad news here, because, particularly 183 00:10:01,760 --> 00:10:05,679 Speaker 1: in the high yield world, the lowest rated bonds of 184 00:10:05,760 --> 00:10:09,079 Speaker 1: triple seas, etcetera. Have rallied so much there's not much 185 00:10:09,200 --> 00:10:12,840 Speaker 1: in the way of reward left for the risk. Kathy, 186 00:10:12,920 --> 00:10:16,000 Speaker 1: what are people actually doing with their money? Now? Schwab 187 00:10:16,120 --> 00:10:19,720 Speaker 1: has a wonderful ability to see not what we say, 188 00:10:19,840 --> 00:10:23,240 Speaker 1: not what we talk, but what we do. What are 189 00:10:23,280 --> 00:10:28,360 Speaker 1: we doing when you look at bond bill and note flows. Yeah, 190 00:10:28,400 --> 00:10:32,160 Speaker 1: we we see a lot of our clients sticking with 191 00:10:32,280 --> 00:10:37,560 Speaker 1: shorter duration, higher quality bonds UM. They like munis UM. 192 00:10:37,600 --> 00:10:41,760 Speaker 1: You know, we have a pretty large cohort of retirees 193 00:10:41,880 --> 00:10:45,120 Speaker 1: or people near retirement and there is still committed to 194 00:10:45,160 --> 00:10:49,760 Speaker 1: their municipal bonds, UM bond ladders. Uh. They really haven't 195 00:10:49,840 --> 00:10:52,680 Speaker 1: changed the way they look at things. But shortening duration, 196 00:10:52,840 --> 00:10:56,640 Speaker 1: keeping durations short, waiting for yields to move up seems 197 00:10:56,679 --> 00:11:01,160 Speaker 1: to be the major trend amongst the bonding serves. So 198 00:11:01,200 --> 00:11:02,880 Speaker 1: I want to go to something that John was talking 199 00:11:02,880 --> 00:11:05,160 Speaker 1: about earlier when he started this segment and was looking 200 00:11:05,160 --> 00:11:08,000 Speaker 1: at the equity market and said, this doesn't feel comfortable. 201 00:11:08,280 --> 00:11:10,280 Speaker 1: And I'm looking at credit markets, and I'm looking at 202 00:11:10,320 --> 00:11:13,640 Speaker 1: triple C of bond yields. Basically, these are the bonds 203 00:11:13,640 --> 00:11:16,840 Speaker 1: that are the riskiest of risky. They're the closest to default, 204 00:11:17,040 --> 00:11:19,640 Speaker 1: and yields on this debt are the lowest since two 205 00:11:19,720 --> 00:11:22,920 Speaker 1: thousand and fourteen. I'm also looking at the fact that 206 00:11:22,960 --> 00:11:26,520 Speaker 1: you have companies burning through cash an increasing number before 207 00:11:26,520 --> 00:11:29,920 Speaker 1: they even pay interest in other expenses. At what point 208 00:11:30,080 --> 00:11:33,280 Speaker 1: is this unsustainable? In other words, how long do they 209 00:11:33,320 --> 00:11:36,400 Speaker 1: have before we have to get that vaccine or something 210 00:11:36,520 --> 00:11:41,400 Speaker 1: to end the pandemic for them to stay in business. Yeah, 211 00:11:41,440 --> 00:11:43,960 Speaker 1: and this is the worrisome part about high yield. The 212 00:11:44,040 --> 00:11:48,559 Speaker 1: real risk um that cash burn is really picking up, 213 00:11:48,679 --> 00:11:52,360 Speaker 1: and the leverage is very high, and so they need 214 00:11:52,400 --> 00:11:55,600 Speaker 1: to get things to improve pretty quickly. I would say, 215 00:11:55,600 --> 00:11:57,720 Speaker 1: if we don't get real light at the end of 216 00:11:57,720 --> 00:12:00,559 Speaker 1: the tunnel in the first quarters, so we're gonna see 217 00:12:00,600 --> 00:12:03,679 Speaker 1: those bankruptcies picked up and those defaults increase. And what 218 00:12:03,679 --> 00:12:06,160 Speaker 1: we're worried about in the default side of the recovery 219 00:12:06,240 --> 00:12:08,240 Speaker 1: rates are going to be quite low. And that's why 220 00:12:08,240 --> 00:12:11,240 Speaker 1: we're really pretty cautious about the high yield market. Kathy, 221 00:12:11,320 --> 00:12:15,360 Speaker 1: Who's going to bear the brunt of those losses? Oh, 222 00:12:15,440 --> 00:12:19,880 Speaker 1: gosh um uh. You know it's gonna be probably spread 223 00:12:19,880 --> 00:12:24,000 Speaker 1: out pretty well. We have a pretty wide swap of 224 00:12:24,040 --> 00:12:27,400 Speaker 1: people who have been in the ets. So if you're 225 00:12:27,440 --> 00:12:30,440 Speaker 1: in a broad based high yield E t U, there's 226 00:12:30,559 --> 00:12:34,320 Speaker 1: defaults and losses, you're gonna feel it in any index 227 00:12:34,400 --> 00:12:40,800 Speaker 1: following up um investment. But also some of the specialized funds. 228 00:12:40,800 --> 00:12:43,240 Speaker 1: You know, they active managers always like to tell you 229 00:12:43,280 --> 00:12:46,360 Speaker 1: that they know which are the good bonds and which 230 00:12:46,360 --> 00:12:50,920 Speaker 1: are not, so we'll see all they do, but then 231 00:12:51,440 --> 00:12:54,640 Speaker 1: shade any of the creditors. Uh, you known feel the 232 00:12:54,880 --> 00:12:59,680 Speaker 1: up I'm just reflecting what I'm told that I hate 233 00:12:59,679 --> 00:13:02,400 Speaker 1: the sec think, Kathy, they always held the good bonds, 234 00:13:02,920 --> 00:13:06,599 Speaker 1: they never held the bad bank you Kathy Jones a 235 00:13:06,720 --> 00:13:14,319 Speaker 1: cha Swab the Center for Financial Research. Right now, we've 236 00:13:14,320 --> 00:13:17,000 Speaker 1: been talking about this cel morning. Perfect timing to speak 237 00:13:17,040 --> 00:13:20,640 Speaker 1: to kid Juice because the scientists general yes, and foreign exchange, 238 00:13:20,679 --> 00:13:24,200 Speaker 1: but he wonderfully folds it into the political economies of 239 00:13:24,440 --> 00:13:27,520 Speaker 1: the world's financial system. Kit Jukes, let me start with 240 00:13:27,559 --> 00:13:32,560 Speaker 1: the why why is the euro appreciating? I think the 241 00:13:32,600 --> 00:13:38,040 Speaker 1: euro is appreciating because the dollars falling, simple, simple starting point, 242 00:13:38,440 --> 00:13:41,280 Speaker 1: because the real interest rate advantage that the dollar built 243 00:13:41,400 --> 00:13:45,360 Speaker 1: up against the euros since two thousand and eleven has collapsed. 244 00:13:46,080 --> 00:13:49,199 Speaker 1: Um and as the global economy starts to look forward 245 00:13:49,280 --> 00:13:52,720 Speaker 1: to the better tomorrow with vaccines, we can't have the 246 00:13:52,720 --> 00:13:57,280 Speaker 1: euro this undervalued against the dollar. Most of the move 247 00:13:57,320 --> 00:13:59,680 Speaker 1: has to come from a week of dollar But but 248 00:14:00,080 --> 00:14:03,320 Speaker 1: that that relationship is wrong, and you can see it 249 00:14:03,360 --> 00:14:06,320 Speaker 1: in so many ways that the capital flows that kept 250 00:14:06,320 --> 00:14:10,440 Speaker 1: the Euro down are beginning to unwind um and yeah, 251 00:14:10,520 --> 00:14:12,319 Speaker 1: we we we need to end up in two years 252 00:14:12,320 --> 00:14:15,920 Speaker 1: time at one thirty four year a dollar somehow, kit 253 00:14:16,320 --> 00:14:18,679 Speaker 1: the roads are one thirty. Where's the pain threshold for 254 00:14:18,720 --> 00:14:20,680 Speaker 1: the e c P? Is it the pace? The level? 255 00:14:20,800 --> 00:14:25,560 Speaker 1: What are you looking for? It's the pace and um 256 00:14:25,600 --> 00:14:29,360 Speaker 1: and how it happens so pace because you affect obviously 257 00:14:29,400 --> 00:14:32,680 Speaker 1: exporters and also inflation, which is huge. So Philip Laine 258 00:14:32,800 --> 00:14:34,560 Speaker 1: really really wanted to put the brakes on when we 259 00:14:34,640 --> 00:14:37,680 Speaker 1: moved up to one twenty quickly in the summer. That 260 00:14:37,680 --> 00:14:40,560 Speaker 1: that worked, so we can go back there now without 261 00:14:40,600 --> 00:14:43,560 Speaker 1: too much pain. But he'll be worried again because the 262 00:14:43,600 --> 00:14:47,680 Speaker 1: Europeans don't want any more disinflation deflation um. And then 263 00:14:47,760 --> 00:14:49,880 Speaker 1: and then and then the way it's made up, because 264 00:14:50,280 --> 00:14:52,800 Speaker 1: what really matters for the economy is going to be 265 00:14:52,840 --> 00:14:56,800 Speaker 1: the trade weighted Euro and not just Euro dollar. The 266 00:14:56,840 --> 00:15:00,120 Speaker 1: biggest the biggest unit in a trade weighted europ row 267 00:15:00,280 --> 00:15:03,000 Speaker 1: is a Chinese yuan, which you've been talking about. If 268 00:15:03,080 --> 00:15:06,040 Speaker 1: the Chinese will let their currency appreciate, you can get 269 00:15:06,080 --> 00:15:09,520 Speaker 1: to one pretty much faster. It's likely they won't let 270 00:15:09,520 --> 00:15:12,160 Speaker 1: it get much further at all than we are now, 271 00:15:12,720 --> 00:15:15,160 Speaker 1: and that is why the whole thing has to happen 272 00:15:15,160 --> 00:15:17,320 Speaker 1: really slowly. But but at the other side of all 273 00:15:17,360 --> 00:15:19,880 Speaker 1: of this, you know that the Euro when it was 274 00:15:19,960 --> 00:15:25,080 Speaker 1: trading one oh five one fifteen was very artificially very 275 00:15:25,120 --> 00:15:29,280 Speaker 1: weak as a result of ECB policies in fifteen, and 276 00:15:29,400 --> 00:15:31,520 Speaker 1: we have to go back and remember that it is 277 00:15:31,560 --> 00:15:35,480 Speaker 1: down here because of quantitative easing and negative interest rates 278 00:15:35,600 --> 00:15:39,560 Speaker 1: under Mario dragging kid Jukes. The only reason I'm talking 279 00:15:39,560 --> 00:15:41,440 Speaker 1: about the Chinese currency is because you talk about it, 280 00:15:41,440 --> 00:15:43,320 Speaker 1: and you taught me everything I know about effects about 281 00:15:43,320 --> 00:15:46,240 Speaker 1: eight years ago. I'm looking at euro China right now, 282 00:15:46,440 --> 00:15:49,440 Speaker 1: five days five days kit we've had a move on 283 00:15:49,560 --> 00:15:52,640 Speaker 1: Euro un Now, I understand that the previous few weeks 284 00:15:52,680 --> 00:15:55,600 Speaker 1: was a lot about dollar broad based dollar weakness. The 285 00:15:55,680 --> 00:15:58,920 Speaker 1: last couple of days though, China started to break down 286 00:15:58,960 --> 00:16:00,840 Speaker 1: a little bit as well against the euro. How do 287 00:16:00,840 --> 00:16:02,320 Speaker 1: you think they sets us up next week for the 288 00:16:02,320 --> 00:16:05,720 Speaker 1: e c B here, I think it means that they 289 00:16:05,720 --> 00:16:07,960 Speaker 1: continue to be dolish. I think they'll say something about 290 00:16:08,000 --> 00:16:09,520 Speaker 1: the euro at some point to try to spell this 291 00:16:09,640 --> 00:16:13,040 Speaker 1: down unless it steadies. So you know, we've broken above 292 00:16:13,120 --> 00:16:15,760 Speaker 1: one twenty, but I don't think we can just break 293 00:16:15,840 --> 00:16:18,560 Speaker 1: quickly to one. I think we have to stop here 294 00:16:18,880 --> 00:16:21,280 Speaker 1: because there is no doubt that the ECP wants to 295 00:16:21,280 --> 00:16:24,560 Speaker 1: do more. The problem for the ECB to some degree, 296 00:16:24,600 --> 00:16:27,040 Speaker 1: and they'll talk about it quite a lot. Is that, 297 00:16:27,120 --> 00:16:30,000 Speaker 1: as as they've said lots of times, that they don't 298 00:16:30,000 --> 00:16:34,280 Speaker 1: have that much room in terms of policy maneuver from here. 299 00:16:34,800 --> 00:16:36,680 Speaker 1: What what do you get by getting rates a bit 300 00:16:36,680 --> 00:16:38,440 Speaker 1: more negative? What do you get with a bit more 301 00:16:38,520 --> 00:16:43,440 Speaker 1: quantitative easing? What Europe needs is is easier fiscal policy. Um, 302 00:16:43,480 --> 00:16:45,480 Speaker 1: so they can't you know that they don't have a 303 00:16:45,800 --> 00:16:48,720 Speaker 1: they don't have the magic bullet they had fourteen of 304 00:16:49,200 --> 00:16:51,640 Speaker 1: let's buy all the bonds and cut rates to negatives 305 00:16:51,680 --> 00:16:53,400 Speaker 1: so that you all have to put your money somewhere 306 00:16:53,400 --> 00:16:56,840 Speaker 1: else that's not available. But but they will push back 307 00:16:57,120 --> 00:17:00,480 Speaker 1: and resist, um and and they will come out with 308 00:17:00,560 --> 00:17:03,120 Speaker 1: some more some more accommodation of some kind. This is 309 00:17:03,160 --> 00:17:05,280 Speaker 1: exactly where I wanted to go. The question of the 310 00:17:05,320 --> 00:17:08,680 Speaker 1: efficacy of central bank policy on FX moves, and there's 311 00:17:08,720 --> 00:17:11,879 Speaker 1: a question have central banks and their policies lost the 312 00:17:11,920 --> 00:17:15,760 Speaker 1: same efficacy in uh perhaps manipulating I don't want to 313 00:17:15,800 --> 00:17:19,639 Speaker 1: use that word loaded word, excuse me, in affecting FX 314 00:17:19,760 --> 00:17:23,000 Speaker 1: rates or are we looking right now and actually the 315 00:17:23,040 --> 00:17:28,400 Speaker 1: economy that's determining where we are seeing currencies valued? Yeah, 316 00:17:28,480 --> 00:17:30,119 Speaker 1: I think we'll I think we're going back to a 317 00:17:30,160 --> 00:17:31,919 Speaker 1: world where if we all look, if we all have 318 00:17:32,280 --> 00:17:34,520 Speaker 1: zero interest rates and let's call them zero bondials to 319 00:17:34,600 --> 00:17:38,000 Speaker 1: keep ourselves happy, then then all the countries with big 320 00:17:38,040 --> 00:17:42,160 Speaker 1: current account surpoces will end up with overvalued currencies because um, 321 00:17:42,240 --> 00:17:46,119 Speaker 1: you know that they won't have an incentive to recycle those. 322 00:17:46,560 --> 00:17:50,040 Speaker 1: What we've done for a while is we've kind of 323 00:17:50,080 --> 00:17:52,320 Speaker 1: played with that and sort of change it around with rates. 324 00:17:52,320 --> 00:17:54,560 Speaker 1: So um, you know, you've managed to get to person 325 00:17:54,720 --> 00:17:58,080 Speaker 1: that the Japanese with with the ebonomics, managed to get 326 00:17:58,080 --> 00:18:01,439 Speaker 1: a very weak currency with your curve and role bond buying, 327 00:18:01,680 --> 00:18:05,760 Speaker 1: equity buying negative rates there as well, um and all 328 00:18:05,800 --> 00:18:08,399 Speaker 1: of this, all of this becomes less effective. If you 329 00:18:08,520 --> 00:18:11,600 Speaker 1: wanted a model for how it's not so bad, Dolly 330 00:18:11,680 --> 00:18:14,960 Speaker 1: Yan went from under eighty to over a hundred and twenty. 331 00:18:15,200 --> 00:18:18,240 Speaker 1: And as we've eroded all those relative interest rates away, 332 00:18:18,240 --> 00:18:20,960 Speaker 1: as we've all started doing what the Japanese have been doing, 333 00:18:21,200 --> 00:18:24,520 Speaker 1: we're only back at a hundred and four. So in 334 00:18:24,560 --> 00:18:27,440 Speaker 1: a sense, you know, the Japanese are still keeping their 335 00:18:27,480 --> 00:18:31,399 Speaker 1: currency competitive here um. You know, for longer than I 336 00:18:31,600 --> 00:18:35,679 Speaker 1: thought that they would manage um because because of of 337 00:18:35,800 --> 00:18:38,000 Speaker 1: the you know, their aggression in terms of what they've done. 338 00:18:38,240 --> 00:18:39,960 Speaker 1: So I think they still you know that the central 339 00:18:40,000 --> 00:18:43,640 Speaker 1: banks aren't powerless. But the problem is you can't fight 340 00:18:43,680 --> 00:18:46,639 Speaker 1: the current in the same way because what was so 341 00:18:46,720 --> 00:18:51,240 Speaker 1: successful was I moved my rates relative to yours. We 342 00:18:51,320 --> 00:18:53,840 Speaker 1: all have the same rates now almost yeah, there rates 343 00:18:53,880 --> 00:18:56,080 Speaker 1: to the bottom. And so there's a question for the 344 00:18:56,119 --> 00:18:59,760 Speaker 1: ECB next week that pay perhaps is what you're seeing 345 00:19:00,000 --> 00:19:03,159 Speaker 1: in your own whereas currently being valued that if they 346 00:19:03,200 --> 00:19:06,440 Speaker 1: can't really do that much to stave off the strengthening, 347 00:19:06,720 --> 00:19:11,760 Speaker 1: why not jump on this consensus trade is that your view, um, 348 00:19:12,160 --> 00:19:14,800 Speaker 1: My view is the consensus trade, you know, has to 349 00:19:14,840 --> 00:19:17,920 Speaker 1: happen that that the market, the consensus trade is they 350 00:19:17,960 --> 00:19:21,400 Speaker 1: work because when when we change a regime let's call 351 00:19:21,480 --> 00:19:24,879 Speaker 1: this the regime of of U of post COVID zero 352 00:19:25,040 --> 00:19:28,600 Speaker 1: rate for a long time, um, the consensus tends to 353 00:19:28,640 --> 00:19:31,480 Speaker 1: be quite good once that regime change is clear. And 354 00:19:31,560 --> 00:19:34,840 Speaker 1: the danger is that as as the consensus starts to 355 00:19:34,920 --> 00:19:38,040 Speaker 1: make money, everybody gets on board it because as you know, 356 00:19:38,080 --> 00:19:41,240 Speaker 1: all the dausers start start realizing what's happening, um, and 357 00:19:41,240 --> 00:19:43,560 Speaker 1: then you can't stop it. But if I'm a central bank, 358 00:19:43,680 --> 00:19:46,520 Speaker 1: my only goal is to slow this down as much 359 00:19:46,560 --> 00:19:49,800 Speaker 1: as possible, just like the Japanese. A kid, it's great 360 00:19:49,800 --> 00:19:51,480 Speaker 1: that we talk to effects with you, and you know 361 00:19:51,520 --> 00:19:53,400 Speaker 1: I can look at, you know, the history being made 362 00:19:53,400 --> 00:19:55,480 Speaker 1: here as we back, go back to the nines and 363 00:19:55,520 --> 00:19:58,159 Speaker 1: the Plaza chord. Kid, I've got to note a small 364 00:19:58,240 --> 00:20:01,520 Speaker 1: soccer match this weekend. I call the Derby feral cause 365 00:20:01,560 --> 00:20:04,560 Speaker 1: of the derby and I can't believe Arsenals on the 366 00:20:04,680 --> 00:20:08,119 Speaker 1: edge of relegation. I thought we'd never get here. They 367 00:20:08,200 --> 00:20:10,840 Speaker 1: got to play the Tarts. What is their chance against 368 00:20:10,880 --> 00:20:14,960 Speaker 1: the tarts. Oh there are better side against good sides 369 00:20:15,040 --> 00:20:17,560 Speaker 1: than against mediocre sides. At the moment, I think if 370 00:20:17,560 --> 00:20:20,520 Speaker 1: I'm probably to get myself some comfort, we we you know. 371 00:20:20,680 --> 00:20:25,480 Speaker 1: I hope that that game puts some put some steel 372 00:20:25,720 --> 00:20:28,960 Speaker 1: into the into the boots of the Arsenal players and 373 00:20:28,960 --> 00:20:32,040 Speaker 1: they realize what there is their duty to look over 374 00:20:32,480 --> 00:20:40,520 Speaker 1: happiness of people like me. You're just drawing jo John 375 00:20:40,560 --> 00:20:43,120 Speaker 1: Farrell jump in here on the importance of this game 376 00:20:43,200 --> 00:20:45,960 Speaker 1: to London. We've got to let him go. But let 377 00:20:45,960 --> 00:20:48,280 Speaker 1: me say thanks to Kit and then I'll talk about that, Kitukes, 378 00:20:48,280 --> 00:20:52,400 Speaker 1: thank you. The importance of North London. Let's be clear 379 00:20:52,400 --> 00:20:55,000 Speaker 1: about this, Tom, this is North London. It is the 380 00:20:55,080 --> 00:20:59,120 Speaker 1: North London Derby between Tottenham Hospice and Arsenal. You pick 381 00:20:59,160 --> 00:21:01,480 Speaker 1: a side, typic Lee, if you live in North London, 382 00:21:01,560 --> 00:21:05,080 Speaker 1: which side a North London resident? Kit jukes him south 383 00:21:05,119 --> 00:21:08,040 Speaker 1: has clearly picked Arsenal. That is his site, So it's 384 00:21:08,040 --> 00:21:11,200 Speaker 1: a big North London derby. Tom. Typically, over the years, 385 00:21:11,280 --> 00:21:14,440 Speaker 1: Arsenal has come out on top in lead position. This 386 00:21:14,520 --> 00:21:16,480 Speaker 1: year and over the last few years, Spurs have been 387 00:21:16,520 --> 00:21:20,280 Speaker 1: far more competitive, particularly this year, fighting for the title. 388 00:21:20,359 --> 00:21:22,800 Speaker 1: Maybe Tom, you're taught doing a whole lot better than 389 00:21:23,240 --> 00:21:28,440 Speaker 1: Lisa's Arsenal good explanation. Did that help? That helped a lot, 390 00:21:28,880 --> 00:21:32,159 Speaker 1: just didn't help to grind Lisa into the ground. I mean, Lisa, 391 00:21:32,680 --> 00:21:34,800 Speaker 1: is there needs to be a coaching switch at Arsenal. 392 00:21:35,640 --> 00:21:38,639 Speaker 1: I just know that I picked a losing team yet again, 393 00:21:39,000 --> 00:21:41,320 Speaker 1: after all of the New York teams, Lisa, You've picked 394 00:21:41,359 --> 00:21:49,400 Speaker 1: me and John. That's enough said right there. I must ask, 395 00:21:49,600 --> 00:21:53,640 Speaker 1: Mr Secretary, have you been contacted by the Biden administration 396 00:21:54,000 --> 00:21:59,760 Speaker 1: about service there? As we've seen from Vice President Carry 397 00:22:00,080 --> 00:22:01,359 Speaker 1: have a lot of friends who are going to be 398 00:22:01,359 --> 00:22:05,800 Speaker 1: in the new administration, from the top through the leadership levels. 399 00:22:06,160 --> 00:22:10,000 Speaker 1: I'm happy to offer my advice whenever asked, and we'll 400 00:22:10,000 --> 00:22:12,760 Speaker 1: continue to do so. Let us speak of stimulus, Jack 401 00:22:12,840 --> 00:22:15,879 Speaker 1: Lou as we can. In the Friedman article in the 402 00:22:15,880 --> 00:22:19,359 Speaker 1: New York Times, a president elect makes clear he's willing 403 00:22:19,400 --> 00:22:22,800 Speaker 1: to compromise with McConnell. He does not want to embarrass McConnell. 404 00:22:23,080 --> 00:22:26,080 Speaker 1: What is the common ground that they can find quickly 405 00:22:26,560 --> 00:22:30,200 Speaker 1: on stimulus? On the common ground has been clear for 406 00:22:30,240 --> 00:22:34,200 Speaker 1: a very long time, and finally in the last we've 407 00:22:34,200 --> 00:22:38,320 Speaker 1: seen a conversation beginning looking to find it um. Since 408 00:22:38,359 --> 00:22:42,440 Speaker 1: the expiration of extended and supplemental and employment benefits, since 409 00:22:42,480 --> 00:22:47,800 Speaker 1: the expiration of protections on on eviction, we've seen a 410 00:22:47,920 --> 00:22:50,920 Speaker 1: train coming right at us. And it's been far too 411 00:22:50,960 --> 00:22:54,240 Speaker 1: long since Congress has had a serious Congress conversation. The 412 00:22:54,240 --> 00:22:58,280 Speaker 1: House passed legislation in May, and we've seen virtually nothing 413 00:22:58,320 --> 00:23:01,320 Speaker 1: since then. Let's us to remember what the facts are 414 00:23:01,320 --> 00:23:05,080 Speaker 1: in Chairman Powell described it so well in those opening comments. 415 00:23:05,320 --> 00:23:08,760 Speaker 1: With nearly ten million people unemployed and a large fraction 416 00:23:08,800 --> 00:23:13,119 Speaker 1: of them five to ten million people facing eviction, the 417 00:23:13,119 --> 00:23:17,080 Speaker 1: degree of crisis here is not small. It's very large. 418 00:23:17,119 --> 00:23:20,119 Speaker 1: It's large in macro terms, and it's just enormous in 419 00:23:20,200 --> 00:23:23,360 Speaker 1: terms of personal terms. If people lose their homes, if 420 00:23:23,359 --> 00:23:26,600 Speaker 1: people are homeless at the end of this crisis, their 421 00:23:26,640 --> 00:23:29,520 Speaker 1: recovery period will not be months. It will be very long, 422 00:23:29,560 --> 00:23:31,639 Speaker 1: and it will be very hard. That is going to 423 00:23:31,680 --> 00:23:34,640 Speaker 1: be a social problem in an economic problem. So Commerce 424 00:23:34,800 --> 00:23:39,320 Speaker 1: has to deal now before the inauguration with the multiple 425 00:23:39,400 --> 00:23:42,639 Speaker 1: challenges of keeping people in their homes with eviction protection, 426 00:23:42,720 --> 00:23:46,480 Speaker 1: giving them support to pay mortgages and rent, helping keep 427 00:23:46,560 --> 00:23:49,960 Speaker 1: food on the table through a combination of unemployment benefits 428 00:23:49,960 --> 00:23:52,880 Speaker 1: and food assistance and dealing with the problems that stake 429 00:23:52,960 --> 00:23:55,160 Speaker 1: in local government, which are going to mean to cut 430 00:23:55,160 --> 00:23:57,399 Speaker 1: back in services and a loss of employment at the 431 00:23:57,400 --> 00:24:01,000 Speaker 1: worst time. We went through the last high point of 432 00:24:01,040 --> 00:24:05,080 Speaker 1: the COVID crisis, the low point of the economy. Um, 433 00:24:05,080 --> 00:24:08,600 Speaker 1: with enormous government support. That's over. So if we go 434 00:24:08,720 --> 00:24:11,439 Speaker 1: through the long hard winter that we see ahead without 435 00:24:11,480 --> 00:24:16,720 Speaker 1: additional support, it's a long time before January fa Mr Secretary. 436 00:24:16,800 --> 00:24:20,440 Speaker 1: How do we span the great distrust of the rural 437 00:24:20,680 --> 00:24:24,520 Speaker 1: urban divide in this nation? You have tackled that for 438 00:24:24,600 --> 00:24:28,639 Speaker 1: years again, going back to the Commonwealth of Massachusetts ages ago, 439 00:24:28,880 --> 00:24:33,760 Speaker 1: there's just an immense distrust of those cities and those democrats. 440 00:24:33,760 --> 00:24:36,280 Speaker 1: It's right out of the nineteenth century. How do we 441 00:24:36,359 --> 00:24:40,800 Speaker 1: break that distrust and come to meaningful compromise. It's a 442 00:24:40,840 --> 00:24:43,640 Speaker 1: good question, Tom, And you know it used to be 443 00:24:43,800 --> 00:24:46,720 Speaker 1: that food assistance was one of the areas that brought 444 00:24:47,040 --> 00:24:50,560 Speaker 1: people together. Um. You know, the original food stand program 445 00:24:50,960 --> 00:24:55,720 Speaker 1: was a compromise between the agricultural community and people advocating 446 00:24:55,800 --> 00:25:00,119 Speaker 1: on behalf of poor people. Um. We could see something 447 00:25:00,280 --> 00:25:03,879 Speaker 1: like that. Again, the truth of the matter is working people, 448 00:25:04,040 --> 00:25:07,240 Speaker 1: regardless of whether they live in cities or in rural areas, 449 00:25:07,280 --> 00:25:10,520 Speaker 1: face common challenges. You look at the team the Vice 450 00:25:10,560 --> 00:25:13,560 Speaker 1: President President elect Biden has put together. It's a group 451 00:25:13,600 --> 00:25:16,520 Speaker 1: of people who focus on what does it take to 452 00:25:16,560 --> 00:25:19,960 Speaker 1: make work produce a decent standard of living for people, 453 00:25:20,280 --> 00:25:23,560 Speaker 1: regardless of where they live. Starting with Janet Yellen and 454 00:25:23,600 --> 00:25:26,520 Speaker 1: her deputy Wali YadA Yamo, the chair of the Council 455 00:25:26,640 --> 00:25:30,159 Speaker 1: of Economic Advisors, Celia Rouse, the head of the Office 456 00:25:30,160 --> 00:25:32,960 Speaker 1: of Management Budget near A Tandon. These are all people 457 00:25:32,960 --> 00:25:36,920 Speaker 1: who understand the problems that working people face, whether they're 458 00:25:36,960 --> 00:25:39,879 Speaker 1: in cities or in rural areas. I hope we can 459 00:25:39,920 --> 00:25:43,960 Speaker 1: begin that conversation that their life experiences help them to 460 00:25:44,040 --> 00:25:48,040 Speaker 1: connect with people both in the communities where people like 461 00:25:48,320 --> 00:25:50,960 Speaker 1: you and I live and in rural areas where the 462 00:25:51,000 --> 00:25:56,439 Speaker 1: problems are not as different as they seem. But Jackie, 463 00:25:56,680 --> 00:25:59,080 Speaker 1: going back to the stimulus and good morning to you. 464 00:25:59,119 --> 00:26:02,960 Speaker 1: Are you worried that Republicans are rediscovering their traditional concerns 465 00:26:03,000 --> 00:26:08,280 Speaker 1: over debt and thus won't do enough on stimulus. So, Francine, 466 00:26:08,480 --> 00:26:10,520 Speaker 1: you know I've spent most of my career trying to 467 00:26:10,560 --> 00:26:14,119 Speaker 1: strike the right balance between government having the resources to 468 00:26:14,200 --> 00:26:16,480 Speaker 1: do what it needs in a fiscally responsible way to 469 00:26:16,520 --> 00:26:20,159 Speaker 1: make this a better country, and and at times of 470 00:26:20,240 --> 00:26:23,600 Speaker 1: crisis saying we need to do what it takes to 471 00:26:23,640 --> 00:26:26,440 Speaker 1: get through the crisis. This is a moment of crisis. 472 00:26:27,119 --> 00:26:29,520 Speaker 1: This is a time when we should not be worrying 473 00:26:29,720 --> 00:26:33,360 Speaker 1: about a hundred billion dollars here are a hundred there. 474 00:26:34,080 --> 00:26:36,560 Speaker 1: My own view, my own view is the bigger the better. 475 00:26:36,880 --> 00:26:40,520 Speaker 1: But big is better than nothing, So I'm glad there's 476 00:26:40,520 --> 00:26:44,239 Speaker 1: a conversation going on. The content of it matters. The 477 00:26:44,280 --> 00:26:47,359 Speaker 1: fact that they're now talking about targeting money along the 478 00:26:47,400 --> 00:26:50,560 Speaker 1: lines of the bipartisan compromise of where it's most needed 479 00:26:50,600 --> 00:26:53,560 Speaker 1: and not in the places that are inefficient. That makes 480 00:26:53,600 --> 00:26:56,320 Speaker 1: it possible to have a very effective package at the 481 00:26:56,440 --> 00:26:59,399 Speaker 1: size that somewhat smaller. But this is not the moment 482 00:26:59,440 --> 00:27:02,240 Speaker 1: to be worrying about the deficit. That moment will come. 483 00:27:02,600 --> 00:27:05,880 Speaker 1: It came and passed when the tax bill was enacted 484 00:27:05,920 --> 00:27:08,479 Speaker 1: a couple of years ago, when it was almost two 485 00:27:08,560 --> 00:27:12,400 Speaker 1: trillion dollars for in my view, very inefficient and unfair 486 00:27:12,440 --> 00:27:15,440 Speaker 1: tax policies that added two trillion dollars to the debt 487 00:27:15,600 --> 00:27:18,480 Speaker 1: in a period of growth. We're in the worst economic 488 00:27:18,560 --> 00:27:23,040 Speaker 1: period in my lifetime, and this is the moment to 489 00:27:23,240 --> 00:27:26,200 Speaker 1: use fiscal resources. So I would go bigger now rather 490 00:27:26,240 --> 00:27:29,240 Speaker 1: than smaller. And when the crisis is over, talked in 491 00:27:29,280 --> 00:27:31,560 Speaker 1: a in a reasonable way about how to get back 492 00:27:31,600 --> 00:27:34,520 Speaker 1: to a sustainable path. And I just want to be clear, 493 00:27:35,119 --> 00:27:38,000 Speaker 1: the crisis being over is when most of those ten 494 00:27:38,040 --> 00:27:40,480 Speaker 1: million people are getting back to work and the unemployment 495 00:27:40,600 --> 00:27:43,159 Speaker 1: rate is starting to look the way he did before COVID. 496 00:27:44,880 --> 00:27:47,240 Speaker 1: But do you think in your eyes that they're worried 497 00:27:47,240 --> 00:27:50,120 Speaker 1: about debt, which in your eyes you think is wrong, 498 00:27:50,440 --> 00:27:52,760 Speaker 1: or do they not want to give a win for 499 00:27:52,840 --> 00:27:58,399 Speaker 1: the Democrats? Oh? Hi, look there there's certainly politics going on, 500 00:27:58,480 --> 00:28:01,880 Speaker 1: and with the Georgia elections in January, frankly, it could 501 00:28:01,880 --> 00:28:05,679 Speaker 1: cut both ways, you know. I I'm it's hard for 502 00:28:05,680 --> 00:28:07,960 Speaker 1: me to understand how it helps somebody running in an 503 00:28:08,000 --> 00:28:10,119 Speaker 1: election now to say to people who are scared that 504 00:28:10,119 --> 00:28:12,320 Speaker 1: they're gonna lose their homes, we're not willing to do 505 00:28:12,359 --> 00:28:15,440 Speaker 1: anything for you. So I don't fully understand the politics, 506 00:28:15,480 --> 00:28:19,280 Speaker 1: but obviously it is a factor um in terms of 507 00:28:19,280 --> 00:28:23,440 Speaker 1: the economy and the impact of debt on the economy. Um, 508 00:28:23,800 --> 00:28:27,080 Speaker 1: the total debt stock is growing it's larger now than 509 00:28:27,119 --> 00:28:29,800 Speaker 1: it's been since World War Two. It's also the worst 510 00:28:29,880 --> 00:28:34,600 Speaker 1: economic crisis we've had since then. And the reality is 511 00:28:34,840 --> 00:28:37,919 Speaker 1: this is not the moment to worry. The time to 512 00:28:38,000 --> 00:28:40,360 Speaker 1: worry is when we get through this crisis. I don't 513 00:28:40,360 --> 00:28:42,800 Speaker 1: think Chairman Powell would be talking about the need for 514 00:28:42,840 --> 00:28:45,760 Speaker 1: fiscal stimulus the way he has been, even the way 515 00:28:45,760 --> 00:28:49,920 Speaker 1: he did yesterday. If if it was not a question 516 00:28:49,960 --> 00:28:53,800 Speaker 1: that people who are responsible for economic stewardship on both sides, 517 00:28:53,840 --> 00:28:56,320 Speaker 1: who are taking what I think is a reasonable view, 518 00:28:56,920 --> 00:28:59,960 Speaker 1: are thinking um. That doesn't mean there's not a series 519 00:29:00,080 --> 00:29:03,800 Speaker 1: is issue um in terms of not having sufficient revenue 520 00:29:03,920 --> 00:29:07,840 Speaker 1: to meet the spending requirements that our country needs, and 521 00:29:08,040 --> 00:29:10,680 Speaker 1: in some cases not taking the heart and review on 522 00:29:10,760 --> 00:29:13,800 Speaker 1: some of the spending issues. Jack blu, I want to 523 00:29:13,840 --> 00:29:17,440 Speaker 1: go searching for the middle. Someone suggests that the President elect, 524 00:29:17,600 --> 00:29:20,360 Speaker 1: with his August age, is the last of a generation. 525 00:29:20,960 --> 00:29:23,560 Speaker 1: You were weaned by Joe Moakley, who was on the 526 00:29:23,600 --> 00:29:28,120 Speaker 1: ground south Boston down to Brockton. Congressman, how do we 527 00:29:28,200 --> 00:29:34,240 Speaker 1: find the Mowkeley middle, whether Democrat or Republican. Look, you know, 528 00:29:34,240 --> 00:29:37,200 Speaker 1: I came to Washington in the nineteen seventies, and it 529 00:29:37,240 --> 00:29:40,560 Speaker 1: feels like centuries ago. But I just want to remind 530 00:29:40,720 --> 00:29:44,520 Speaker 1: everyone that the nineteen eighties and the nineteen nineties we're 531 00:29:44,560 --> 00:29:47,960 Speaker 1: considered the most partisan era that we've ever gotten through, 532 00:29:48,920 --> 00:29:51,400 Speaker 1: going a little beyond the years when I worked for 533 00:29:51,440 --> 00:29:54,959 Speaker 1: Congressman Mowkley, years I worked for Speaker O'Neil. Um, the 534 00:29:55,040 --> 00:29:59,280 Speaker 1: battles in to eighty two between O'Neil and Reagan were 535 00:29:59,320 --> 00:30:03,720 Speaker 1: considered yper partisan. Um. What happened in two was a 536 00:30:03,760 --> 00:30:07,960 Speaker 1: congressional election that divided government, that told both men that 537 00:30:08,320 --> 00:30:10,960 Speaker 1: the only way to make progress is to do it together. 538 00:30:11,360 --> 00:30:14,960 Speaker 1: I want to be clear, Speaker O'Neil did not obstruct 539 00:30:15,240 --> 00:30:19,560 Speaker 1: President Reagan. He lost in the votes. That's a big 540 00:30:19,600 --> 00:30:24,320 Speaker 1: difference Mitch McConnell's obstructing votes. If Mitch McConnell would allow 541 00:30:24,320 --> 00:30:28,160 Speaker 1: a majority to vote, we could actually see bipartisan action 542 00:30:28,640 --> 00:30:32,640 Speaker 1: on stimulus on issues like immigration. So the challenge here 543 00:30:32,720 --> 00:30:36,240 Speaker 1: is to get back to a tradition that bipartisan majorities 544 00:30:36,320 --> 00:30:39,959 Speaker 1: have to act, not running the House in the Senate 545 00:30:40,640 --> 00:30:45,520 Speaker 1: as a machine to produce a primary safety in one 546 00:30:45,600 --> 00:30:49,360 Speaker 1: or another party and to secure a majority at the 547 00:30:49,360 --> 00:30:53,680 Speaker 1: cost of of functioning government. Gridlock will hurt our country 548 00:30:53,680 --> 00:30:56,000 Speaker 1: if that's where we go again. And I think but 549 00:30:56,400 --> 00:30:59,480 Speaker 1: president like Biden, knows how to compromise. He knows how 550 00:30:59,520 --> 00:31:01,680 Speaker 1: to do it in an honorable way for both sides. 551 00:31:02,200 --> 00:31:04,719 Speaker 1: And Mitch McConnell knows how to do that also, if 552 00:31:04,760 --> 00:31:07,600 Speaker 1: he decides it's in his interest. I dearly hope that 553 00:31:07,640 --> 00:31:10,480 Speaker 1: he decides that it's in his interest. I don't think 554 00:31:10,480 --> 00:31:13,680 Speaker 1: he wants to be remembered in his final years as 555 00:31:13,680 --> 00:31:17,240 Speaker 1: a majority leader or I hope minority leader, as being 556 00:31:17,280 --> 00:31:21,040 Speaker 1: an obstructionist. This country voted for people to work together, 557 00:31:21,360 --> 00:31:23,640 Speaker 1: and Congress needs to let that happen. Thank you so 558 00:31:23,760 --> 00:31:26,080 Speaker 1: much for talking to us this morning at Jacob Leu there, 559 00:31:26,120 --> 00:31:29,360 Speaker 1: the former US Treasury Secretary. Thanks for listening to the 560 00:31:29,360 --> 00:31:35,880 Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 561 00:31:36,200 --> 00:31:40,440 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 562 00:31:40,480 --> 00:31:44,760 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 563 00:31:45,200 --> 00:31:46,280 Speaker 1: I'm Bloomberg Radio