Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: can catch you with Tony two. I right now kind
Speaker 1: of call genuity equity strategist Tony. He's starting to feel
Speaker 1: I'm comfortable with where this market as is right now,
Speaker 1: given what he's going around all around the world, around us,
Speaker 1: in Europe, in the United States, even more so in
Speaker 1: the last twenty four hours. It just is um It's
Speaker 1: disheartening to hear, but it just goes to show what
Speaker 1: drives the market is money. It's always driven the market,
Speaker 1: and it's unfortunately the social side of it isn't as
Speaker 1: important as the excess liquidity side of it, and the
Speaker 1: access liquidity side of it, as you guys know, is
Speaker 1: absolutely extraordinary. But just a quick comment John on the dollar.
Speaker 1: So if you look back over the last since two
Speaker 1: thousand nine, since the Great Financial Crisis, there's been three
Speaker 1: other periods of such a pronouncedly weak dollar. Historically when
Speaker 1: it gets down more than eight percent, which it did
Speaker 1: in the summertime. It ends up going down between thirteen
Speaker 1: to seventeen percent, And of course I'm talking about the
Speaker 1: US dollar index, and the reason that that's important is
Speaker 1: people always try to make it about deficits and access debt,
Speaker 1: and what it always comes down to is the dollar
Speaker 1: gets weaker in that second leg lower where it goes
Speaker 1: down into the mid teens, because it starts to understand
Speaker 1: and accept that there is a synchronized global recovery, and
Speaker 1: that I believe is the movement of the dollar versus
Speaker 1: some kind of panic over Brexit or panic over access debt. Tony,
Speaker 1: good morning. Your number one call is own stocks until
Speaker 1: there's a recession. Are you gonna sell stocks because you
Speaker 1: see a recession coming, tom We are in the beginning
Speaker 1: beginning of a new economic and market cycle. Um. If
Speaker 1: you look back at at how the markets acting and
Speaker 1: how all the indicators are acting, it's very similar to
Speaker 1: what happened towards the end of two thousand and nine
Speaker 1: where you had back if I take you back there,
Speaker 1: there was historic access liquidity just like there is now,
Speaker 1: and you had this synchronized global recovery coming out of
Speaker 1: the Great financial crisis. So even though the market was
Speaker 1: up fifty in the summertime at two thousand and nine,
Speaker 1: it kept going up because there was this excess liquidity
Speaker 1: and this understanding that the globe was recovering all at
Speaker 1: the same time. And that's that's been the impact of
Speaker 1: the pandemic globally, is that everything shut down in March,
Speaker 1: like the whole world shut down. And now we're coming
Speaker 1: off of that low alow. You know, obviously there's gonna
Speaker 1: be fits and starts of the very near term here.
Speaker 1: So a lot of equity strategists, yourself include did have
Speaker 1: been pointing to signs of euphoria extreme buying, particularly in
Speaker 1: this moment, based on those terrible numbers that we're getting
Speaker 1: out of hospitals and deaths on the heels of the
Speaker 1: COVID pandemic. What do you do as a longer term investor.
Speaker 1: Do you just ignore it and basically say long term,
Speaker 1: it's all gonna work out, or do you try to
Speaker 1: play this in the real time? At least, I'm not
Speaker 1: very good at chasing excessive optimism and strength, and again,
Speaker 1: it's not a sign that we're about to collapse. Going
Speaker 1: back to Tom's question, this is the only time you
Speaker 1: really get sustainably defensive on equities. In other words, cell
Speaker 1: cell cell is when you can predict the recessions coming,
Speaker 1: and you can do that through the Yeld curve. When
Speaker 1: you have an inversion of the yield curve. Is one
Speaker 1: of the reasons we downgraded the market in January of
Speaker 1: this year. The Yeld curve. Remember the heel curvet inverted
Speaker 1: last August, so at least that the yel curve is
Speaker 1: just st deepening, right, that's a sign, just like it's
Speaker 1: a sign of a recession is coming when it inverts.
Speaker 1: When it goes from an inversion back to a positive slope,
Speaker 1: it's a sign of economic activity. So our play is
Speaker 1: to buy periods of weakness like the September swoon where
Speaker 1: the market was dead since he was down ten percent,
Speaker 1: and the October wash where the market was down eight
Speaker 1: percent in two weeks. Those are the kind of environments
Speaker 1: where I think you want to attack the opportunity versus
Speaker 1: feeling like your quote unquote missing something and chasing this
Speaker 1: kind of optimism that's out there, Tony. Isn't that a
Speaker 1: story for everyone? Though everyone's waiting for the pullback to buy,
Speaker 1: Everyone's got the same trade on right now, I'm trying
Speaker 1: to work out what would test the patience of this
Speaker 1: market at the moment to actually lead to some kind
Speaker 1: of pulled back. The data has been soft on claims
Speaker 1: over the last couple of weeks. Maybe it's softer again
Speaker 1: this morning as well. It just seems to me that
Speaker 1: everything is so firmly anchored by the expectation that vaccinations
Speaker 1: will begin in the UK next week, in America maybe
Speaker 1: the next couple of weeks, Tony John. As you guys know,
Speaker 1: it always comes out of nowhere. People like me are
Speaker 1: famous for I'm on TV and saying, oh, I think
Speaker 1: this is gonna call it. It's not. It's not predictable.
Speaker 1: What causes, you know, a real kind of sharp two
Speaker 1: weeks sell off, and again I'm not expecting anything too dramatic,
Speaker 1: is when you it's it's a news item that you
Speaker 1: can't predict and it comes from well. While folks like us,
Speaker 1: you guys in the media and me and the in
Speaker 1: the Cell Side Strategy group are saying, Okay, the markets
Speaker 1: due for a pullback, investors aren't playing it that way
Speaker 1: because that optimism is so high. We we trecked this
Speaker 1: thing called the National Association of Active Independent Managers. It
Speaker 1: looks like it looks at active money managers, real money
Speaker 1: movers um that are that range from small to large,
Speaker 1: and it's at a level that was the most recent
Speaker 1: time it was there was around the August peak, right
Speaker 1: before we had that time percent decline, and again before
Speaker 1: that about three years ago. So optimism is very high
Speaker 1: among actual investors, which is actually a good thing when
Speaker 1: you're corting off of a historic flow. Tony, fantastic it
Speaker 1: catch up. You're always looking well, tony to that kind
Speaker 1: of gently, thank you sir. Right now, the bond dynamic
Speaker 1: is John mentioned. Kathleen Jones joins us right now with
Speaker 1: Schwab and their Center for Financial Research. Kathy Jones, we're
Speaker 1: seeing the bon move. I see the Bloomberg Barkley's Total
Speaker 1: Return Index up, up, up. It doesn't compare to the
Speaker 1: equity markets, but still it's been an extraordinary two year
Speaker 1: run for bonds. When the bonds breathe and we see
Speaker 1: price down and yield up, I think we're starting to
Speaker 1: see it, particularly in the long end. Now you know,
Speaker 1: we've seen the steepening of the curve with a tenure
Speaker 1: treasury pushing up against that one percent, and we're looking
Speaker 1: for a further stepening, that bear stepening where the fat
Speaker 1: is anchored short term rates near zero, long term rates
Speaker 1: try to edge higher. Not looking for a huge move
Speaker 1: at this stage of the game, because the economy still
Speaker 1: has a pretty dark period to go through here. But
Speaker 1: I think as we look into the second half of
Speaker 1: next year, if we really get the vaccines distributed and
Speaker 1: the economy fully reopens, people get back to work, it's
Speaker 1: not unlikely that tenure yields her in that one to
Speaker 1: one and a half percent area. There's a consensus in
Speaker 1: markets that bond yield to be much higher if it
Speaker 1: weren't for the widespread belief that the FED will step
Speaker 1: in and suppress yields if they climb too high. What
Speaker 1: is that level that triggers the Fed's concerned. Yeah, I
Speaker 1: wish I knew. I wish there was like a line
Speaker 1: in the sand that they're going to draw, But I
Speaker 1: don't think that that's realistic. I think it's more likely
Speaker 1: that the FED looks at the rate of change and
Speaker 1: the underlying nature of what's driving it. So if you're
Speaker 1: sitting at the FED and you see rates move up
Speaker 1: to one and a quarter, and it's off the back
Speaker 1: of good economic data, falling unemployment, rising consumption. You might
Speaker 1: destroy your shelf and say that's not a terrible thing. Um.
Speaker 1: If it's disorderly and a sudden jump because inflation expectations
Speaker 1: are really become one board, then it might be an
Speaker 1: area to worry about. But at this dame of the game,
Speaker 1: financial conditions are really easy, and even with a quarter
Speaker 1: point move from here, they'd still probably be pretty easy. Cathey,
Speaker 1: expectations matter, though, and you and I know a ton
Speaker 1: of people who believe that yields won't gone much higher
Speaker 1: because the Fed will step in December six and extend
Speaker 1: the average maturity they're bond buying. I'm wondering if they
Speaker 1: don't how big the air pocket is for treasuries. Yeah,
Speaker 1: there does seem to be a widespread consensus about that.
Speaker 1: I'm not really sure why. When I read the minutes
Speaker 1: of the last meeting, I don't get the sense that
Speaker 1: they're eager to jump in at the stage of the
Speaker 1: game or to extend duration. Um. So maybe that does
Speaker 1: give us a bit of a pop here, But the
Speaker 1: realistic situation is we still have a lot of a
Speaker 1: lot of bad news to get through over the next
Speaker 1: quarter or so, and I think that that in and
Speaker 1: of itself would probably limit the appreciation in terms of
Speaker 1: yields from here. So it's interesting to make Kathy that
Speaker 1: the disruption of the next few months would keep a
Speaker 1: lid on treasury yields, but it won't keep a floor
Speaker 1: on how tight credit spreads can go. Credit keeps rallying,
Speaker 1: but yields are limited on treasuries. Square that for me.
Speaker 1: Kathy makes sense of that for me. If it matters
Speaker 1: for treasuries, why doesn't it matter for credit. Yeah, I
Speaker 1: think credit spreads are about as tight as they can
Speaker 1: go for the time being, particularly in high yield. Maybe
Speaker 1: they can extend a bit further. You know, the market
Speaker 1: it's certainly high yield, and and much of the world
Speaker 1: of credit it's much more like the stock market than
Speaker 1: the treasury market, and so they're looking forward at earnings
Speaker 1: coming back and cash flows improving the search for yield.
Speaker 1: It's all driving this sort of cyclical rallially in um credit,
Speaker 1: and I think it continues over the next six months
Speaker 1: to a year or so, but a lot of it's
Speaker 1: been done already, and the lower credit quality is certainly
Speaker 1: vulnerable to some sort of bad news here, because, particularly
Speaker 1: in the high yield world, the lowest rated bonds of
Speaker 1: triple seas, etcetera. Have rallied so much there's not much
Speaker 1: in the way of reward left for the risk. Kathy,
Speaker 1: what are people actually doing with their money? Now? Schwab
Speaker 1: has a wonderful ability to see not what we say,
Speaker 1: not what we talk, but what we do. What are
Speaker 1: we doing when you look at bond bill and note flows. Yeah,
Speaker 1: we we see a lot of our clients sticking with
Speaker 1: shorter duration, higher quality bonds UM. They like munis UM.
Speaker 1: You know, we have a pretty large cohort of retirees
Speaker 1: or people near retirement and there is still committed to
Speaker 1: their municipal bonds, UM bond ladders. Uh. They really haven't
Speaker 1: changed the way they look at things. But shortening duration,
Speaker 1: keeping durations short, waiting for yields to move up seems
Speaker 1: to be the major trend amongst the bonding serves. So
Speaker 1: I want to go to something that John was talking
Speaker 1: about earlier when he started this segment and was looking
Speaker 1: at the equity market and said, this doesn't feel comfortable.
Speaker 1: And I'm looking at credit markets, and I'm looking at
Speaker 1: triple C of bond yields. Basically, these are the bonds
Speaker 1: that are the riskiest of risky. They're the closest to default,
Speaker 1: and yields on this debt are the lowest since two
Speaker 1: thousand and fourteen. I'm also looking at the fact that
Speaker 1: you have companies burning through cash an increasing number before
Speaker 1: they even pay interest in other expenses. At what point
Speaker 1: is this unsustainable? In other words, how long do they
Speaker 1: have before we have to get that vaccine or something
Speaker 1: to end the pandemic for them to stay in business. Yeah,
Speaker 1: and this is the worrisome part about high yield. The
Speaker 1: real risk um that cash burn is really picking up,
Speaker 1: and the leverage is very high, and so they need
Speaker 1: to get things to improve pretty quickly. I would say,
Speaker 1: if we don't get real light at the end of
Speaker 1: the tunnel in the first quarters, so we're gonna see
Speaker 1: those bankruptcies picked up and those defaults increase. And what
Speaker 1: we're worried about in the default side of the recovery
Speaker 1: rates are going to be quite low. And that's why
Speaker 1: we're really pretty cautious about the high yield market. Kathy,
Speaker 1: Who's going to bear the brunt of those losses? Oh,
Speaker 1: gosh um uh. You know it's gonna be probably spread
Speaker 1: out pretty well. We have a pretty wide swap of
Speaker 1: people who have been in the ets. So if you're
Speaker 1: in a broad based high yield E t U, there's
Speaker 1: defaults and losses, you're gonna feel it in any index
Speaker 1: following up um investment. But also some of the specialized funds.
Speaker 1: You know, they active managers always like to tell you
Speaker 1: that they know which are the good bonds and which
Speaker 1: are not, so we'll see all they do, but then
Speaker 1: shade any of the creditors. Uh, you known feel the
Speaker 1: up I'm just reflecting what I'm told that I hate
Speaker 1: the sec think, Kathy, they always held the good bonds,
Speaker 1: they never held the bad bank you Kathy Jones a
Speaker 1: cha Swab the Center for Financial Research. Right now, we've
Speaker 1: been talking about this cel morning. Perfect timing to speak
Speaker 1: to kid Juice because the scientists general yes, and foreign exchange,
Speaker 1: but he wonderfully folds it into the political economies of
Speaker 1: the world's financial system. Kit Jukes, let me start with
Speaker 1: the why why is the euro appreciating? I think the
Speaker 1: euro is appreciating because the dollars falling, simple, simple starting point,
Speaker 1: because the real interest rate advantage that the dollar built
Speaker 1: up against the euros since two thousand and eleven has collapsed.
Speaker 1: Um and as the global economy starts to look forward
Speaker 1: to the better tomorrow with vaccines, we can't have the
Speaker 1: euro this undervalued against the dollar. Most of the move
Speaker 1: has to come from a week of dollar But but
Speaker 1: that that relationship is wrong, and you can see it
Speaker 1: in so many ways that the capital flows that kept
Speaker 1: the Euro down are beginning to unwind um and yeah,
Speaker 1: we we we need to end up in two years
Speaker 1: time at one thirty four year a dollar somehow, kit
Speaker 1: the roads are one thirty. Where's the pain threshold for
Speaker 1: the e c P? Is it the pace? The level?
Speaker 1: What are you looking for? It's the pace and um
Speaker 1: and how it happens so pace because you affect obviously
Speaker 1: exporters and also inflation, which is huge. So Philip Laine
Speaker 1: really really wanted to put the brakes on when we
Speaker 1: moved up to one twenty quickly in the summer. That
Speaker 1: that worked, so we can go back there now without
Speaker 1: too much pain. But he'll be worried again because the
Speaker 1: Europeans don't want any more disinflation deflation um. And then
Speaker 1: and then and then the way it's made up, because
Speaker 1: what really matters for the economy is going to be
Speaker 1: the trade weighted Euro and not just Euro dollar. The
Speaker 1: biggest the biggest unit in a trade weighted europ row
Speaker 1: is a Chinese yuan, which you've been talking about. If
Speaker 1: the Chinese will let their currency appreciate, you can get
Speaker 1: to one pretty much faster. It's likely they won't let
Speaker 1: it get much further at all than we are now,
Speaker 1: and that is why the whole thing has to happen
Speaker 1: really slowly. But but at the other side of all
Speaker 1: of this, you know that the Euro when it was
Speaker 1: trading one oh five one fifteen was very artificially very
Speaker 1: weak as a result of ECB policies in fifteen, and
Speaker 1: we have to go back and remember that it is
Speaker 1: down here because of quantitative easing and negative interest rates
Speaker 1: under Mario dragging kid Jukes. The only reason I'm talking
Speaker 1: about the Chinese currency is because you talk about it,
Speaker 1: and you taught me everything I know about effects about
Speaker 1: eight years ago. I'm looking at euro China right now,
Speaker 1: five days five days kit we've had a move on
Speaker 1: Euro un Now, I understand that the previous few weeks
Speaker 1: was a lot about dollar broad based dollar weakness. The
Speaker 1: last couple of days though, China started to break down
Speaker 1: a little bit as well against the euro. How do
Speaker 1: you think they sets us up next week for the
Speaker 1: e c B here, I think it means that they
Speaker 1: continue to be dolish. I think they'll say something about
Speaker 1: the euro at some point to try to spell this
Speaker 1: down unless it steadies. So you know, we've broken above
Speaker 1: one twenty, but I don't think we can just break
Speaker 1: quickly to one. I think we have to stop here
Speaker 1: because there is no doubt that the ECP wants to
Speaker 1: do more. The problem for the ECB to some degree,
Speaker 1: and they'll talk about it quite a lot. Is that,
Speaker 1: as as they've said lots of times, that they don't
Speaker 1: have that much room in terms of policy maneuver from here.
Speaker 1: What what do you get by getting rates a bit
Speaker 1: more negative? What do you get with a bit more
Speaker 1: quantitative easing? What Europe needs is is easier fiscal policy. Um,
Speaker 1: so they can't you know that they don't have a
Speaker 1: they don't have the magic bullet they had fourteen of
Speaker 1: let's buy all the bonds and cut rates to negatives
Speaker 1: so that you all have to put your money somewhere
Speaker 1: else that's not available. But but they will push back
Speaker 1: and resist, um and and they will come out with
Speaker 1: some more some more accommodation of some kind. This is
Speaker 1: exactly where I wanted to go. The question of the
Speaker 1: efficacy of central bank policy on FX moves, and there's
Speaker 1: a question have central banks and their policies lost the
Speaker 1: same efficacy in uh perhaps manipulating I don't want to
Speaker 1: use that word loaded word, excuse me, in affecting FX
Speaker 1: rates or are we looking right now and actually the
Speaker 1: economy that's determining where we are seeing currencies valued? Yeah,
Speaker 1: I think we'll I think we're going back to a
Speaker 1: world where if we all look, if we all have
Speaker 1: zero interest rates and let's call them zero bondials to
Speaker 1: keep ourselves happy, then then all the countries with big
Speaker 1: current account surpoces will end up with overvalued currencies because um,
Speaker 1: you know that they won't have an incentive to recycle those.
Speaker 1: What we've done for a while is we've kind of
Speaker 1: played with that and sort of change it around with rates.
Speaker 1: So um, you know, you've managed to get to person
Speaker 1: that the Japanese with with the ebonomics, managed to get
Speaker 1: a very weak currency with your curve and role bond buying,
Speaker 1: equity buying negative rates there as well, um and all
Speaker 1: of this, all of this becomes less effective. If you
Speaker 1: wanted a model for how it's not so bad, Dolly
Speaker 1: Yan went from under eighty to over a hundred and twenty.
Speaker 1: And as we've eroded all those relative interest rates away,
Speaker 1: as we've all started doing what the Japanese have been doing,
Speaker 1: we're only back at a hundred and four. So in
Speaker 1: a sense, you know, the Japanese are still keeping their
Speaker 1: currency competitive here um. You know, for longer than I
Speaker 1: thought that they would manage um because because of of
Speaker 1: the you know, their aggression in terms of what they've done.
Speaker 1: So I think they still you know that the central
Speaker 1: banks aren't powerless. But the problem is you can't fight
Speaker 1: the current in the same way because what was so
Speaker 1: successful was I moved my rates relative to yours. We
Speaker 1: all have the same rates now almost yeah, there rates
Speaker 1: to the bottom. And so there's a question for the
Speaker 1: ECB next week that pay perhaps is what you're seeing
Speaker 1: in your own whereas currently being valued that if they
Speaker 1: can't really do that much to stave off the strengthening,
Speaker 1: why not jump on this consensus trade is that your view, um,
Speaker 1: My view is the consensus trade, you know, has to
Speaker 1: happen that that the market, the consensus trade is they
Speaker 1: work because when when we change a regime let's call
Speaker 1: this the regime of of U of post COVID zero
Speaker 1: rate for a long time, um, the consensus tends to
Speaker 1: be quite good once that regime change is clear. And
Speaker 1: the danger is that as as the consensus starts to
Speaker 1: make money, everybody gets on board it because as you know,
Speaker 1: all the dausers start start realizing what's happening, um, and
Speaker 1: then you can't stop it. But if I'm a central bank,
Speaker 1: my only goal is to slow this down as much
Speaker 1: as possible, just like the Japanese. A kid, it's great
Speaker 1: that we talk to effects with you, and you know
Speaker 1: I can look at, you know, the history being made
Speaker 1: here as we back, go back to the nines and
Speaker 1: the Plaza chord. Kid, I've got to note a small
Speaker 1: soccer match this weekend. I call the Derby feral cause
Speaker 1: of the derby and I can't believe Arsenals on the
Speaker 1: edge of relegation. I thought we'd never get here. They
Speaker 1: got to play the Tarts. What is their chance against
Speaker 1: the tarts. Oh there are better side against good sides
Speaker 1: than against mediocre sides. At the moment, I think if
Speaker 1: I'm probably to get myself some comfort, we we you know.
Speaker 1: I hope that that game puts some put some steel
Speaker 1: into the into the boots of the Arsenal players and
Speaker 1: they realize what there is their duty to look over
Speaker 1: happiness of people like me. You're just drawing jo John
Speaker 1: Farrell jump in here on the importance of this game
Speaker 1: to London. We've got to let him go. But let
Speaker 1: me say thanks to Kit and then I'll talk about that, Kitukes,
Speaker 1: thank you. The importance of North London. Let's be clear
Speaker 1: about this, Tom, this is North London. It is the
Speaker 1: North London Derby between Tottenham Hospice and Arsenal. You pick
Speaker 1: a side, typic Lee, if you live in North London,
Speaker 1: which side a North London resident? Kit jukes him south
Speaker 1: has clearly picked Arsenal. That is his site, So it's
Speaker 1: a big North London derby. Tom. Typically, over the years,
Speaker 1: Arsenal has come out on top in lead position. This
Speaker 1: year and over the last few years, Spurs have been
Speaker 1: far more competitive, particularly this year, fighting for the title.
Speaker 1: Maybe Tom, you're taught doing a whole lot better than
Speaker 1: Lisa's Arsenal good explanation. Did that help? That helped a lot,
Speaker 1: just didn't help to grind Lisa into the ground. I mean, Lisa,
Speaker 1: is there needs to be a coaching switch at Arsenal.
Speaker 1: I just know that I picked a losing team yet again,
Speaker 1: after all of the New York teams, Lisa, You've picked
Speaker 1: me and John. That's enough said right there. I must ask,
Speaker 1: Mr Secretary, have you been contacted by the Biden administration
Speaker 1: about service there? As we've seen from Vice President Carry
Speaker 1: have a lot of friends who are going to be
Speaker 1: in the new administration, from the top through the leadership levels.
Speaker 1: I'm happy to offer my advice whenever asked, and we'll
Speaker 1: continue to do so. Let us speak of stimulus, Jack
Speaker 1: Lou as we can. In the Friedman article in the
Speaker 1: New York Times, a president elect makes clear he's willing
Speaker 1: to compromise with McConnell. He does not want to embarrass McConnell.
Speaker 1: What is the common ground that they can find quickly
Speaker 1: on stimulus? On the common ground has been clear for
Speaker 1: a very long time, and finally in the last we've
Speaker 1: seen a conversation beginning looking to find it um. Since
Speaker 1: the expiration of extended and supplemental and employment benefits, since
Speaker 1: the expiration of protections on on eviction, we've seen a
Speaker 1: train coming right at us. And it's been far too
Speaker 1: long since Congress has had a serious Congress conversation. The
Speaker 1: House passed legislation in May, and we've seen virtually nothing
Speaker 1: since then. Let's us to remember what the facts are
Speaker 1: in Chairman Powell described it so well in those opening comments.
Speaker 1: With nearly ten million people unemployed and a large fraction
Speaker 1: of them five to ten million people facing eviction, the
Speaker 1: degree of crisis here is not small. It's very large.
Speaker 1: It's large in macro terms, and it's just enormous in
Speaker 1: terms of personal terms. If people lose their homes, if
Speaker 1: people are homeless at the end of this crisis, their
Speaker 1: recovery period will not be months. It will be very long,
Speaker 1: and it will be very hard. That is going to
Speaker 1: be a social problem in an economic problem. So Commerce
Speaker 1: has to deal now before the inauguration with the multiple
Speaker 1: challenges of keeping people in their homes with eviction protection,
Speaker 1: giving them support to pay mortgages and rent, helping keep
Speaker 1: food on the table through a combination of unemployment benefits
Speaker 1: and food assistance and dealing with the problems that stake
Speaker 1: in local government, which are going to mean to cut
Speaker 1: back in services and a loss of employment at the
Speaker 1: worst time. We went through the last high point of
Speaker 1: the COVID crisis, the low point of the economy. Um,
Speaker 1: with enormous government support. That's over. So if we go
Speaker 1: through the long hard winter that we see ahead without
Speaker 1: additional support, it's a long time before January fa Mr Secretary.
Speaker 1: How do we span the great distrust of the rural
Speaker 1: urban divide in this nation? You have tackled that for
Speaker 1: years again, going back to the Commonwealth of Massachusetts ages ago,
Speaker 1: there's just an immense distrust of those cities and those democrats.
Speaker 1: It's right out of the nineteenth century. How do we
Speaker 1: break that distrust and come to meaningful compromise. It's a
Speaker 1: good question, Tom, And you know it used to be
Speaker 1: that food assistance was one of the areas that brought
Speaker 1: people together. Um. You know, the original food stand program
Speaker 1: was a compromise between the agricultural community and people advocating
Speaker 1: on behalf of poor people. Um. We could see something
Speaker 1: like that. Again, the truth of the matter is working people,
Speaker 1: regardless of whether they live in cities or in rural areas,
Speaker 1: face common challenges. You look at the team the Vice
Speaker 1: President President elect Biden has put together. It's a group
Speaker 1: of people who focus on what does it take to
Speaker 1: make work produce a decent standard of living for people,
Speaker 1: regardless of where they live. Starting with Janet Yellen and
Speaker 1: her deputy Wali YadA Yamo, the chair of the Council
Speaker 1: of Economic Advisors, Celia Rouse, the head of the Office
Speaker 1: of Management Budget near A Tandon. These are all people
Speaker 1: who understand the problems that working people face, whether they're
Speaker 1: in cities or in rural areas. I hope we can
Speaker 1: begin that conversation that their life experiences help them to
Speaker 1: connect with people both in the communities where people like
Speaker 1: you and I live and in rural areas where the
Speaker 1: problems are not as different as they seem. But Jackie,
Speaker 1: going back to the stimulus and good morning to you.
Speaker 1: Are you worried that Republicans are rediscovering their traditional concerns
Speaker 1: over debt and thus won't do enough on stimulus. So, Francine,
Speaker 1: you know I've spent most of my career trying to
Speaker 1: strike the right balance between government having the resources to
Speaker 1: do what it needs in a fiscally responsible way to
Speaker 1: make this a better country, and and at times of
Speaker 1: crisis saying we need to do what it takes to
Speaker 1: get through the crisis. This is a moment of crisis.
Speaker 1: This is a time when we should not be worrying
Speaker 1: about a hundred billion dollars here are a hundred there.
Speaker 1: My own view, my own view is the bigger the better.
Speaker 1: But big is better than nothing, So I'm glad there's
Speaker 1: a conversation going on. The content of it matters. The
Speaker 1: fact that they're now talking about targeting money along the
Speaker 1: lines of the bipartisan compromise of where it's most needed
Speaker 1: and not in the places that are inefficient. That makes
Speaker 1: it possible to have a very effective package at the
Speaker 1: size that somewhat smaller. But this is not the moment
Speaker 1: to be worrying about the deficit. That moment will come.
Speaker 1: It came and passed when the tax bill was enacted
Speaker 1: a couple of years ago, when it was almost two
Speaker 1: trillion dollars for in my view, very inefficient and unfair
Speaker 1: tax policies that added two trillion dollars to the debt
Speaker 1: in a period of growth. We're in the worst economic
Speaker 1: period in my lifetime, and this is the moment to
Speaker 1: use fiscal resources. So I would go bigger now rather
Speaker 1: than smaller. And when the crisis is over, talked in
Speaker 1: a in a reasonable way about how to get back
Speaker 1: to a sustainable path. And I just want to be clear,
Speaker 1: the crisis being over is when most of those ten
Speaker 1: million people are getting back to work and the unemployment
Speaker 1: rate is starting to look the way he did before COVID.
Speaker 1: But do you think in your eyes that they're worried
Speaker 1: about debt, which in your eyes you think is wrong,
Speaker 1: or do they not want to give a win for
Speaker 1: the Democrats? Oh? Hi, look there there's certainly politics going on,
Speaker 1: and with the Georgia elections in January, frankly, it could
Speaker 1: cut both ways, you know. I I'm it's hard for
Speaker 1: me to understand how it helps somebody running in an
Speaker 1: election now to say to people who are scared that
Speaker 1: they're gonna lose their homes, we're not willing to do
Speaker 1: anything for you. So I don't fully understand the politics,
Speaker 1: but obviously it is a factor um in terms of
Speaker 1: the economy and the impact of debt on the economy. Um,
Speaker 1: the total debt stock is growing it's larger now than
Speaker 1: it's been since World War Two. It's also the worst
Speaker 1: economic crisis we've had since then. And the reality is
Speaker 1: this is not the moment to worry. The time to
Speaker 1: worry is when we get through this crisis. I don't
Speaker 1: think Chairman Powell would be talking about the need for
Speaker 1: fiscal stimulus the way he has been, even the way
Speaker 1: he did yesterday. If if it was not a question
Speaker 1: that people who are responsible for economic stewardship on both sides,
Speaker 1: who are taking what I think is a reasonable view,
Speaker 1: are thinking um. That doesn't mean there's not a series
Speaker 1: is issue um in terms of not having sufficient revenue
Speaker 1: to meet the spending requirements that our country needs, and
Speaker 1: in some cases not taking the heart and review on
Speaker 1: some of the spending issues. Jack blu, I want to
Speaker 1: go searching for the middle. Someone suggests that the President elect,
Speaker 1: with his August age, is the last of a generation.
Speaker 1: You were weaned by Joe Moakley, who was on the
Speaker 1: ground south Boston down to Brockton. Congressman, how do we
Speaker 1: find the Mowkeley middle, whether Democrat or Republican. Look, you know,
Speaker 1: I came to Washington in the nineteen seventies, and it
Speaker 1: feels like centuries ago. But I just want to remind
Speaker 1: everyone that the nineteen eighties and the nineteen nineties we're
Speaker 1: considered the most partisan era that we've ever gotten through,
Speaker 1: going a little beyond the years when I worked for
Speaker 1: Congressman Mowkley, years I worked for Speaker O'Neil. Um, the
Speaker 1: battles in to eighty two between O'Neil and Reagan were
Speaker 1: considered yper partisan. Um. What happened in two was a
Speaker 1: congressional election that divided government, that told both men that
Speaker 1: the only way to make progress is to do it together.
Speaker 1: I want to be clear, Speaker O'Neil did not obstruct
Speaker 1: President Reagan. He lost in the votes. That's a big
Speaker 1: difference Mitch McConnell's obstructing votes. If Mitch McConnell would allow
Speaker 1: a majority to vote, we could actually see bipartisan action
Speaker 1: on stimulus on issues like immigration. So the challenge here
Speaker 1: is to get back to a tradition that bipartisan majorities
Speaker 1: have to act, not running the House in the Senate
Speaker 1: as a machine to produce a primary safety in one
Speaker 1: or another party and to secure a majority at the
Speaker 1: cost of of functioning government. Gridlock will hurt our country
Speaker 1: if that's where we go again. And I think but
Speaker 1: president like Biden, knows how to compromise. He knows how
Speaker 1: to do it in an honorable way for both sides.
Speaker 1: And Mitch McConnell knows how to do that also, if
Speaker 1: he decides it's in his interest. I dearly hope that
Speaker 1: he decides that it's in his interest. I don't think
Speaker 1: he wants to be remembered in his final years as
Speaker 1: a majority leader or I hope minority leader, as being
Speaker 1: an obstructionist. This country voted for people to work together,
Speaker 1: and Congress needs to let that happen. Thank you so
Speaker 1: much for talking to us this morning at Jacob Leu there,
Speaker 1: the former US Treasury Secretary. Thanks for listening to the
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio