1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: I mean may not have an overall recession. We're having 3 00:00:04,400 --> 00:00:06,840 Speaker 2: a rolling recession. Econd of roll looks pretty strongly is 4 00:00:06,840 --> 00:00:07,680 Speaker 2: when it comes to jobs. 5 00:00:07,720 --> 00:00:09,840 Speaker 1: The financial story is that shape our world. 6 00:00:09,960 --> 00:00:13,640 Speaker 2: Three major regional bank failures send shockwaves through the banking system. 7 00:00:13,680 --> 00:00:15,480 Speaker 2: We're all trying to figure out what to make of 8 00:00:15,600 --> 00:00:17,000 Speaker 2: generative AI. 9 00:00:16,920 --> 00:00:19,320 Speaker 1: Through the eyes of the most influential voices. 10 00:00:19,440 --> 00:00:22,400 Speaker 2: Welcome down doctor Paul Krugman, Ryan moynihan, a Bank of America, 11 00:00:22,560 --> 00:00:25,279 Speaker 2: Zebro Lair of the Paulson Institute, well then Hubbard of 12 00:00:25,280 --> 00:00:26,280 Speaker 2: the Columbia Business School. 13 00:00:26,280 --> 00:00:30,160 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 14 00:00:30,560 --> 00:00:33,760 Speaker 2: Israel at war with hamas the House unable to agree 15 00:00:33,760 --> 00:00:36,239 Speaker 2: on a speaker. Bank earnings come in mixed, but it 16 00:00:36,320 --> 00:00:39,800 Speaker 2: all comes against the backdrop of a surprisingly strong US economy. 17 00:00:40,040 --> 00:00:42,839 Speaker 2: And we ask FED Chair J. Powell, why if you. 18 00:00:42,800 --> 00:00:45,560 Speaker 3: Think back a year, many forecasts called for the US 19 00:00:45,560 --> 00:00:48,159 Speaker 3: economy to be in recession this year, Not only has 20 00:00:48,200 --> 00:00:51,200 Speaker 3: that not happened, growth is now running for this year 21 00:00:51,680 --> 00:00:53,400 Speaker 3: above it's longer run trends. 22 00:00:53,520 --> 00:00:55,360 Speaker 4: So the evidence of your eyes. 23 00:00:55,280 --> 00:00:58,560 Speaker 3: Is that the economy is handling much higher rates at 24 00:00:58,600 --> 00:01:00,600 Speaker 3: least for now without difficulty. 25 00:01:00,840 --> 00:01:03,600 Speaker 2: This is Bloomberg Wall Street Week. I'm David weston. 26 00:01:16,080 --> 00:01:16,399 Speaker 4: Global. 27 00:01:16,400 --> 00:01:18,600 Speaker 2: Wall Street had plenty to pay attention to this week 28 00:01:18,800 --> 00:01:21,640 Speaker 2: is the horrific situation in Israel and guys that continue 29 00:01:21,680 --> 00:01:24,880 Speaker 2: to play out. With more information about the Hamas attack. 30 00:01:25,319 --> 00:01:30,240 Speaker 5: There is no excuse for hitting a hospital full of civilians. 31 00:01:30,560 --> 00:01:34,440 Speaker 5: All facts need to be established and those responsible must 32 00:01:34,480 --> 00:01:35,440 Speaker 5: be held accountable. 33 00:01:35,720 --> 00:01:38,360 Speaker 2: And news of an explosion at a hospital in Gaza 34 00:01:38,440 --> 00:01:41,040 Speaker 2: which each side blamed the other four. 35 00:01:41,240 --> 00:01:44,080 Speaker 6: And based on what I've seen in years ago, it 36 00:01:44,240 --> 00:01:46,480 Speaker 6: was done by the other team, not you. 37 00:01:47,160 --> 00:01:50,600 Speaker 7: Disaggression against our people must stop and these crimes must 38 00:01:50,680 --> 00:01:51,480 Speaker 7: come to an end. 39 00:01:51,680 --> 00:01:55,280 Speaker 2: President Biden continued to express his staunch support for Israel, 40 00:01:55,480 --> 00:01:57,760 Speaker 2: making a trip to Jerusalem to meet with Prime Minister 41 00:01:57,840 --> 00:02:02,000 Speaker 2: Netan Yahoo, his cabinet, and victim. While the President was 42 00:02:02,040 --> 00:02:04,840 Speaker 2: in Israel, Republicans in the House of Representatives back in 43 00:02:05,000 --> 00:02:08,840 Speaker 2: Washington were declining to elect a speaker repeatedly Yes. 44 00:02:08,720 --> 00:02:09,960 Speaker 8: Jim Jordan's out of the race. 45 00:02:10,400 --> 00:02:12,640 Speaker 3: We're supposed to come back for a candidate forum on 46 00:02:12,720 --> 00:02:13,680 Speaker 3: Monday at six thirty. 47 00:02:14,240 --> 00:02:16,440 Speaker 2: And we got more bank earnings with Bank of America 48 00:02:16,520 --> 00:02:17,720 Speaker 2: surprising in a good way. 49 00:02:18,320 --> 00:02:22,000 Speaker 9: We've seen our deposit base and the commercial businesses start 50 00:02:22,000 --> 00:02:24,880 Speaker 9: to grow again after six quarters of basically being. 51 00:02:24,760 --> 00:02:27,720 Speaker 2: Flat, Goldman Sachs limping a bit, Goldman. 52 00:02:27,480 --> 00:02:32,040 Speaker 5: Sachs where the story still remains subper profitability. 53 00:02:31,520 --> 00:02:34,200 Speaker 2: And Morgan Stanley surprising in not so good a way. 54 00:02:34,440 --> 00:02:36,640 Speaker 2: But for Global Wall Street, the biggest story was what 55 00:02:36,800 --> 00:02:39,919 Speaker 2: was going on in the economy and the markets, as 56 00:02:40,000 --> 00:02:42,280 Speaker 2: retail sales were way better than expected. 57 00:02:42,720 --> 00:02:45,280 Speaker 10: Much of that is really because the consumer has on 58 00:02:45,320 --> 00:02:49,320 Speaker 10: the whole not been affected by the increase in interest rates. 59 00:02:50,080 --> 00:02:53,119 Speaker 2: On Thursday, Wall Street we got the opportunity to sit 60 00:02:53,200 --> 00:02:55,600 Speaker 2: down with the man responsible for monetary policy in the 61 00:02:55,680 --> 00:02:59,200 Speaker 2: United States, FED Chair J. Powell after his remarks to 62 00:02:59,240 --> 00:03:01,840 Speaker 2: the Economic Club of New York, and we began by 63 00:03:01,919 --> 00:03:04,920 Speaker 2: asking him how he accounted for the remarkable resilience of 64 00:03:04,919 --> 00:03:07,320 Speaker 2: the US economy in the phase of all those rate 65 00:03:07,400 --> 00:03:08,640 Speaker 2: ikes he's imposed. 66 00:03:10,440 --> 00:03:14,600 Speaker 3: We certainly have a very resilient economy on our hands. 67 00:03:14,639 --> 00:03:18,200 Speaker 3: We've got the economy growing strongly. If you think back 68 00:03:18,240 --> 00:03:21,040 Speaker 3: a year, many forecasts called for the US economy to 69 00:03:21,040 --> 00:03:23,880 Speaker 3: be in recession this year. Not only has that not happened, 70 00:03:24,320 --> 00:03:27,480 Speaker 3: growth is now running for this year above its longer 71 00:03:27,560 --> 00:03:30,839 Speaker 3: run trend. So that's been a surprise, driven largely by 72 00:03:31,120 --> 00:03:34,720 Speaker 3: consumer spending, driven by a very strong job market with 73 00:03:35,320 --> 00:03:38,560 Speaker 3: people getting jobs with high first timeh nominal wages, and 74 00:03:38,560 --> 00:03:41,320 Speaker 3: that as inflation has come down real wages, which is 75 00:03:41,320 --> 00:03:44,320 Speaker 3: spurring spending, and we've also had inflation coming down, so 76 00:03:45,000 --> 00:03:48,360 Speaker 3: you know that's it really is a story of much 77 00:03:48,400 --> 00:03:49,200 Speaker 3: stronger demand. 78 00:03:49,560 --> 00:03:50,520 Speaker 4: There may also. 79 00:03:50,320 --> 00:03:52,720 Speaker 3: Be there may be some ways in which the economy 80 00:03:52,880 --> 00:03:57,920 Speaker 3: is less affected by interest rates. It's hard to know precisely, 81 00:03:57,960 --> 00:04:00,880 Speaker 3: but for example, is any company with on market access 82 00:04:00,960 --> 00:04:04,160 Speaker 3: will have termed out its debt right and therefore may 83 00:04:04,200 --> 00:04:06,280 Speaker 3: not be feeling the effects of higher rates. 84 00:04:06,320 --> 00:04:07,680 Speaker 4: The same may be true of. 85 00:04:07,720 --> 00:04:11,480 Speaker 3: Homeowners who have a long term, fixed rate, low rate mortgage, 86 00:04:11,840 --> 00:04:14,400 Speaker 3: who then are therefore not because it's not an adjustable 87 00:04:14,480 --> 00:04:18,080 Speaker 3: rate or a higher rate, they're not feeling that increase 88 00:04:18,080 --> 00:04:22,360 Speaker 3: in rates. So the economy may be somewhat less susceptible 89 00:04:22,400 --> 00:04:23,320 Speaker 3: to the effects. 90 00:04:23,000 --> 00:04:23,719 Speaker 4: Of rate increases. 91 00:04:23,800 --> 00:04:26,560 Speaker 3: On the other hand, if you look at look at 92 00:04:26,560 --> 00:04:31,200 Speaker 3: interra sensitive spending, these are very much the places where 93 00:04:31,200 --> 00:04:34,120 Speaker 3: we see where we expect to see and do see effects. 94 00:04:34,160 --> 00:04:38,200 Speaker 3: So for example, in housing or in you know, the 95 00:04:38,240 --> 00:04:40,839 Speaker 3: housing effector has been sector has been very affected by 96 00:04:40,920 --> 00:04:44,760 Speaker 3: higher rates as purchases of durable goods. If you look 97 00:04:44,760 --> 00:04:47,039 Speaker 3: at surveys, people will not say that it's a good 98 00:04:47,040 --> 00:04:49,240 Speaker 3: time to buy a car or a house. Quite the contrary. 99 00:04:49,720 --> 00:04:53,960 Speaker 3: So we see policy working through its usual channels. It 100 00:04:54,000 --> 00:04:56,000 Speaker 3: may just be that rates haven't been high enough for 101 00:04:56,160 --> 00:04:58,800 Speaker 3: long enough. And again it's all happening in the context 102 00:04:58,920 --> 00:04:59,680 Speaker 3: of very. 103 00:04:59,520 --> 00:05:03,000 Speaker 2: Strongm And do you see historical precedents for having a 104 00:05:03,200 --> 00:05:06,880 Speaker 2: growing economy with high rates over a long period of time, 105 00:05:07,080 --> 00:05:08,560 Speaker 2: I mean as you look back, I mean it like 106 00:05:08,600 --> 00:05:12,000 Speaker 2: the late nineties, for example. What analogies do you draw 107 00:05:12,120 --> 00:05:14,000 Speaker 2: as you try to determine what this might be doing 108 00:05:14,000 --> 00:05:15,360 Speaker 2: at the economy with a longer term. 109 00:05:15,440 --> 00:05:17,840 Speaker 3: So that's really a question about what the level of 110 00:05:17,920 --> 00:05:20,520 Speaker 3: rates will be going for what the neutral level will be. 111 00:05:20,600 --> 00:05:23,800 Speaker 3: And I think it's very hard to know confidently what 112 00:05:23,839 --> 00:05:26,680 Speaker 3: the answer to that will be in five years. Some 113 00:05:26,760 --> 00:05:29,200 Speaker 3: of the reasons why rates were low for the last 114 00:05:29,200 --> 00:05:32,280 Speaker 3: twenty five years were just the aging of the global 115 00:05:32,320 --> 00:05:37,880 Speaker 3: population and globalization and so lots of savings and relatively 116 00:05:38,520 --> 00:05:41,880 Speaker 3: with an aging population, savings greater than investments. So rates 117 00:05:41,880 --> 00:05:44,960 Speaker 3: are lower. So all of those led to low interest rates. 118 00:05:45,200 --> 00:05:48,039 Speaker 3: So what has changed with the pandemic. You might see 119 00:05:48,480 --> 00:05:52,440 Speaker 3: less effects from globalization, certainly demographics that the aging of 120 00:05:52,440 --> 00:05:56,599 Speaker 3: the global population has not changed. I mean, this is 121 00:05:56,640 --> 00:05:59,080 Speaker 3: a discussion we're having on an ongoing basis. It doesn't 122 00:05:59,120 --> 00:06:03,279 Speaker 3: really affect policy. But where will rates settle out? What 123 00:06:03,320 --> 00:06:06,880 Speaker 3: will be at a normal rate? So if a typical 124 00:06:07,040 --> 00:06:10,400 Speaker 3: FED tightening cycle would leave you at five or six percent, 125 00:06:10,600 --> 00:06:14,000 Speaker 3: and this is in the before the pandemic and before 126 00:06:14,040 --> 00:06:16,960 Speaker 3: this the low inflation period, you would have had had 127 00:06:17,520 --> 00:06:20,359 Speaker 3: FED rates in four or five percent or even higher. Frequently, 128 00:06:20,520 --> 00:06:22,000 Speaker 3: are we going back to that? I really don't I 129 00:06:22,000 --> 00:06:24,480 Speaker 3: wouldn't want to speculate. I mean, my guess is it'll 130 00:06:24,480 --> 00:06:25,400 Speaker 3: be somewhere in the middle. 131 00:06:25,480 --> 00:06:27,680 Speaker 4: But I don't know. I mean, I think we can. 132 00:06:27,600 --> 00:06:32,000 Speaker 3: Say this now, the effective lower bound is not an issue. 133 00:06:32,040 --> 00:06:33,880 Speaker 4: You know, we were very concerned about that. 134 00:06:34,000 --> 00:06:36,520 Speaker 3: Right now we're very far from the effective lower bound 135 00:06:36,760 --> 00:06:39,520 Speaker 3: and the economy is handling it just fine. But that's 136 00:06:39,720 --> 00:06:42,000 Speaker 3: you know, that's because we're at a time of really 137 00:06:42,040 --> 00:06:46,400 Speaker 3: elevated demand coming out of the pandemic. As we reopened 138 00:06:46,400 --> 00:06:48,960 Speaker 3: with fiscal stimulus, and monetary stimulus. We have very strong 139 00:06:49,000 --> 00:06:52,600 Speaker 3: demand the United States. Hard to know what the economy 140 00:06:52,640 --> 00:06:55,080 Speaker 3: will want in the way of interest rates when five 141 00:06:55,160 --> 00:06:57,120 Speaker 3: years from now in all of the effects of the. 142 00:06:57,200 --> 00:06:58,280 Speaker 4: Pandemic are behind us. 143 00:06:58,360 --> 00:07:01,120 Speaker 2: You mentioned the long term librium rate, which you've talked 144 00:07:01,120 --> 00:07:03,919 Speaker 2: about again back in Jackson Hole in August of twenty twenty. 145 00:07:04,040 --> 00:07:05,840 Speaker 2: Back then you said you thought it had the sort 146 00:07:05,839 --> 00:07:08,200 Speaker 2: of consensus had come down. I think it was from 147 00:07:08,240 --> 00:07:10,720 Speaker 2: like four point twenty five percent to two point five percent. 148 00:07:10,840 --> 00:07:11,560 Speaker 4: Where is it today? 149 00:07:12,080 --> 00:07:15,200 Speaker 3: I think, by any reckoning, long term interest rates and 150 00:07:15,280 --> 00:07:19,080 Speaker 3: the neutral interest rate came down steadily over the course 151 00:07:19,120 --> 00:07:21,960 Speaker 3: of several decades. So where is it today? 152 00:07:22,040 --> 00:07:25,600 Speaker 4: I don't know. You know, we're finding it. 153 00:07:26,520 --> 00:07:32,560 Speaker 3: Basically, the idea was, I think the median indication of 154 00:07:32,600 --> 00:07:35,320 Speaker 3: what the real neutral rate was around fifty basis points 155 00:07:35,320 --> 00:07:38,560 Speaker 3: before the pandemic. It may have risen in the near term. 156 00:07:38,600 --> 00:07:41,040 Speaker 3: The real question that matters, though, is will it rise 157 00:07:41,080 --> 00:07:43,200 Speaker 3: in the long term, And that we don't know. 158 00:07:44,360 --> 00:07:45,680 Speaker 2: But do you need to know it in order to 159 00:07:45,680 --> 00:07:46,800 Speaker 2: conduct monetary bussy. 160 00:07:46,960 --> 00:07:49,680 Speaker 3: So we all write down our estimates of the longer 161 00:07:49,760 --> 00:07:53,080 Speaker 3: run neutral rate every quarter in the Summary of Economic Projections. 162 00:07:53,120 --> 00:07:55,320 Speaker 4: And that's based on models. 163 00:07:55,320 --> 00:07:59,160 Speaker 3: It's based on also looking out the window and including lags, 164 00:07:59,200 --> 00:08:02,360 Speaker 3: thinking how are our current rates affecting the economy. So 165 00:08:02,600 --> 00:08:04,960 Speaker 3: the evidence of your eyes is that the economy is 166 00:08:05,360 --> 00:08:09,440 Speaker 3: handling much higher rates, at least for now, without difficulties. 167 00:08:09,480 --> 00:08:13,280 Speaker 3: So notionally that that might tell you that the neutral 168 00:08:13,360 --> 00:08:15,000 Speaker 3: rate has risen, or it may just tell you that 169 00:08:15,080 --> 00:08:16,400 Speaker 3: we haven't had rates. 170 00:08:16,360 --> 00:08:17,520 Speaker 4: High enough for long enough. 171 00:08:18,480 --> 00:08:21,600 Speaker 3: You're right, though, but you know, we have models for everything, 172 00:08:21,640 --> 00:08:25,120 Speaker 3: we have formulists for everything. Ultimately, as a practitioner, we 173 00:08:25,240 --> 00:08:28,080 Speaker 3: have to, you know, focused on what the economy is 174 00:08:28,120 --> 00:08:31,480 Speaker 3: telling us, even taking legs into account. What's it telling us? 175 00:08:31,640 --> 00:08:33,840 Speaker 3: Does it feel like policy. 176 00:08:33,480 --> 00:08:35,560 Speaker 4: Is too tight right now? I wouldn't have to say no. 177 00:08:36,120 --> 00:08:38,160 Speaker 3: I think the evidence is not that policy is too 178 00:08:38,160 --> 00:08:42,040 Speaker 3: tight right now. So word five five and a quarter 179 00:08:42,080 --> 00:08:42,920 Speaker 3: to five and a half percent. 180 00:08:43,400 --> 00:08:46,040 Speaker 2: One of the things you're most concerned about is the 181 00:08:46,040 --> 00:08:48,160 Speaker 2: real economy, what's going on in the real economy. You 182 00:08:48,200 --> 00:08:50,240 Speaker 2: distinguish yourself from some of your predecessors and that you 183 00:08:50,320 --> 00:08:54,840 Speaker 2: have a significant exposure to the private sector, not just academics. 184 00:08:55,200 --> 00:08:58,559 Speaker 2: As you talk to CEOs people in business, what are 185 00:08:58,559 --> 00:09:01,160 Speaker 2: you hearing about the cost of capital, because these bond 186 00:09:01,160 --> 00:09:04,240 Speaker 2: prices are really affecting cost to capital for the. 187 00:09:04,160 --> 00:09:05,000 Speaker 4: First time in a while. 188 00:09:05,080 --> 00:09:06,720 Speaker 2: There was a long time the cost of capital felt 189 00:09:06,720 --> 00:09:09,640 Speaker 2: like was almost zero, and business changes an awful lot 190 00:09:09,679 --> 00:09:11,719 Speaker 2: when you really when the price of money goes up. 191 00:09:13,080 --> 00:09:18,000 Speaker 3: I talked to several people this week who run companies, 192 00:09:18,160 --> 00:09:21,800 Speaker 3: and they each said that the economy remains strong and 193 00:09:21,880 --> 00:09:23,520 Speaker 3: that they don't see the consumer. 194 00:09:24,440 --> 00:09:26,240 Speaker 4: You know, you see. 195 00:09:27,240 --> 00:09:31,840 Speaker 3: There's some areas where we're spending is softening, but overall, 196 00:09:31,840 --> 00:09:33,520 Speaker 3: I mean, look at the retail sales. Number of the 197 00:09:33,679 --> 00:09:38,880 Speaker 3: consumer is strong. Volume is not going up very much. 198 00:09:38,960 --> 00:09:42,920 Speaker 3: But companies are profitable, you don't. You know, now if 199 00:09:42,920 --> 00:09:44,840 Speaker 3: you get to where I think the cost of capital 200 00:09:44,840 --> 00:09:48,160 Speaker 3: would really matter would be for smaller companies and early 201 00:09:48,200 --> 00:09:51,560 Speaker 3: stage companies, and that really does matter. So, you know, 202 00:09:51,600 --> 00:09:54,280 Speaker 3: we don't have a lot of tools. We have interest rates, and. 203 00:09:54,400 --> 00:09:55,960 Speaker 4: They're far from perfect perfect. 204 00:09:56,040 --> 00:09:59,160 Speaker 3: It's famously a blunt tool, but it's what we have 205 00:09:59,280 --> 00:10:03,360 Speaker 3: to get inflation down, and really the world counts on 206 00:10:03,440 --> 00:10:06,480 Speaker 3: us to deliver low and stable inflation. That's what we 207 00:10:06,559 --> 00:10:09,520 Speaker 3: have to do. And at a time like this, there 208 00:10:09,520 --> 00:10:11,520 Speaker 3: are you know, we know that we're having negative effects 209 00:10:11,600 --> 00:10:13,520 Speaker 3: on you know, we had the home builders in this week. 210 00:10:13,559 --> 00:10:15,400 Speaker 3: It's a very tough time in the whole home building 211 00:10:15,440 --> 00:10:20,480 Speaker 3: industry and we know that. But ultimately what we want 212 00:10:20,520 --> 00:10:22,360 Speaker 3: to get back to is a long. 213 00:10:22,160 --> 00:10:23,800 Speaker 4: Period of price stability. 214 00:10:24,120 --> 00:10:26,200 Speaker 3: That's the best thing we can provide, and that that 215 00:10:26,640 --> 00:10:30,440 Speaker 3: policy makers and businesses and everyone can and people can 216 00:10:30,840 --> 00:10:33,120 Speaker 3: just lead their lives not worrying about inflation. This is 217 00:10:33,120 --> 00:10:35,040 Speaker 3: what we can deliver, it's what we have to deliver, 218 00:10:35,440 --> 00:10:38,120 Speaker 3: and this is the time. You know, our independence is 219 00:10:38,240 --> 00:10:40,959 Speaker 3: not for times when we're really popular. It's for when 220 00:10:41,000 --> 00:10:43,800 Speaker 3: we're now, when we're doing something that that that really 221 00:10:43,880 --> 00:10:47,160 Speaker 3: the public counts on us to do. Notwithstanding that, it's 222 00:10:47,160 --> 00:10:50,160 Speaker 3: that it's challenging and difficult and and you know, higher 223 00:10:50,240 --> 00:10:52,480 Speaker 3: interest rates are difficult for everybody. 224 00:10:54,280 --> 00:10:56,560 Speaker 2: Coming up, we'll have more with share Powe and his 225 00:10:56,679 --> 00:11:00,760 Speaker 2: views on a post pandemic economy. That's on Wall Street 226 00:11:00,760 --> 00:11:01,800 Speaker 2: Week on Bloomberg. 227 00:11:03,120 --> 00:11:07,360 Speaker 1: This is Bloomberg Well Street Week with David Weston from 228 00:11:07,480 --> 00:11:08,400 Speaker 1: Bloomberg Radio. 229 00:11:15,160 --> 00:11:17,520 Speaker 2: This is Wall Street Week. I'm David Weston. When we 230 00:11:17,600 --> 00:11:19,720 Speaker 2: sat with FED chair J Powell this week at the 231 00:11:19,760 --> 00:11:22,120 Speaker 2: Economic Club of New York, we talked about what he 232 00:11:22,200 --> 00:11:24,640 Speaker 2: has learned about the economy over the last three years, 233 00:11:24,760 --> 00:11:28,320 Speaker 2: about inflation and its connection to labor, and what may 234 00:11:28,360 --> 00:11:30,720 Speaker 2: be lasting in the effects of the pandemic. 235 00:11:32,679 --> 00:11:35,839 Speaker 3: The hindsight is always a wonderful thing, right. I think 236 00:11:35,880 --> 00:11:38,360 Speaker 3: the fair way to judge the actions that were taken 237 00:11:39,200 --> 00:11:44,599 Speaker 3: is to put yourself in the place of legislators and 238 00:11:45,120 --> 00:11:48,360 Speaker 3: policy of other you know, and central bankers around the world. 239 00:11:48,720 --> 00:11:51,600 Speaker 3: And there was there was no playbook. You know, we've 240 00:11:51,640 --> 00:11:55,240 Speaker 3: never seen. We hadn't seen a global economic shutdown. People 241 00:11:55,280 --> 00:11:58,880 Speaker 3: were thinking that the pandemic might kill a whole lot 242 00:11:58,880 --> 00:12:00,640 Speaker 3: of people, and then we wouldn't have a vaccine for 243 00:12:00,640 --> 00:12:02,800 Speaker 3: five years. We might now have an economy for five years. 244 00:12:02,840 --> 00:12:05,560 Speaker 3: So these things were all very possible in March of 245 00:12:05,600 --> 00:12:08,880 Speaker 3: twenty twenty, and so we pulled out all the stops 246 00:12:08,920 --> 00:12:11,520 Speaker 3: in Congress, put at all the stops. With the benefit 247 00:12:11,559 --> 00:12:13,959 Speaker 3: of hindsight, Could we have done a little bit less 248 00:12:14,120 --> 00:12:15,400 Speaker 3: and had a little bit of inflation. 249 00:12:15,480 --> 00:12:16,199 Speaker 4: I guess we could. 250 00:12:16,679 --> 00:12:18,720 Speaker 3: But I think if you look overall at the performance 251 00:12:18,760 --> 00:12:23,240 Speaker 3: of the US economy, our economy is the strongest we have. 252 00:12:24,360 --> 00:12:26,760 Speaker 3: We're actually also making the most progress on inflation. But 253 00:12:26,800 --> 00:12:30,839 Speaker 3: we certainly have the strongest growth. We're back to prior 254 00:12:30,960 --> 00:12:34,960 Speaker 3: growth trend, you know, not just the level of where 255 00:12:34,960 --> 00:12:38,760 Speaker 3: we were, were actually back to the prior trend. The labor market. 256 00:12:38,920 --> 00:12:41,800 Speaker 3: The last time we had this many consecutive months of 257 00:12:41,880 --> 00:12:45,240 Speaker 3: unemployment below four percent was in the late nineteen sixties, 258 00:12:45,320 --> 00:12:46,760 Speaker 3: so it's more than fifty years ago. 259 00:12:47,080 --> 00:12:49,600 Speaker 4: So our economy is doing very well from all of that. 260 00:12:49,880 --> 00:12:52,960 Speaker 3: But if you had perfect hindsight, you might have you 261 00:12:53,040 --> 00:12:55,520 Speaker 3: might not have had as much inflation if we'd done less, 262 00:12:55,800 --> 00:12:58,480 Speaker 3: although other countries who didn't do as much as we 263 00:12:58,559 --> 00:13:00,640 Speaker 3: did also had substantial problems. 264 00:13:00,840 --> 00:13:03,200 Speaker 2: So let's talk about the labor market. You refer to 265 00:13:03,240 --> 00:13:06,120 Speaker 2: that in your marks as well. And as you say, 266 00:13:06,559 --> 00:13:10,120 Speaker 2: vacancies have come down some, although they still are pretty elevated. 267 00:13:10,640 --> 00:13:12,520 Speaker 2: If I'm not mistaken, quits have actually. 268 00:13:12,240 --> 00:13:12,760 Speaker 4: Gone up some. 269 00:13:13,160 --> 00:13:14,600 Speaker 2: It seems to be a type of the labor marker. 270 00:13:14,720 --> 00:13:16,120 Speaker 2: What do you make of what's going on the labor 271 00:13:16,160 --> 00:13:16,800 Speaker 2: murder right now? 272 00:13:17,520 --> 00:13:20,760 Speaker 3: Labor market has been extraordinarily strong. So what happened in 273 00:13:20,760 --> 00:13:23,959 Speaker 3: the pandemic was we had a negative labor supply shock 274 00:13:24,200 --> 00:13:26,080 Speaker 3: is one way to think about it. So a whole 275 00:13:26,120 --> 00:13:28,640 Speaker 3: lot of people left the labor market when the pandemic 276 00:13:28,679 --> 00:13:31,439 Speaker 3: happened and then didn't come back, and so when the 277 00:13:31,480 --> 00:13:34,200 Speaker 3: economy reopened and everybody, you know, there was re member, 278 00:13:34,280 --> 00:13:39,319 Speaker 3: there was revenge, travel and revenge. Everything, very strong demand, 279 00:13:39,080 --> 00:13:42,040 Speaker 3: and there just weren't the people. So you had two 280 00:13:42,200 --> 00:13:45,760 Speaker 3: job openings for every person actively seeking employment. We've never 281 00:13:45,760 --> 00:13:48,120 Speaker 3: been any where you're close to that. There was panic 282 00:13:48,800 --> 00:13:51,640 Speaker 3: that you know, and wages and bonuses, and particularly in 283 00:13:51,800 --> 00:13:55,720 Speaker 3: things like in person services where people had not gotten 284 00:13:55,720 --> 00:13:57,760 Speaker 3: big wage increases and didn't want to come back to work. 285 00:13:57,840 --> 00:13:59,600 Speaker 4: So that's where we were. 286 00:14:00,040 --> 00:14:02,760 Speaker 3: So since then, there are very many signs that the 287 00:14:02,800 --> 00:14:05,000 Speaker 3: labor market is getting back into balance, and I talked 288 00:14:05,000 --> 00:14:08,840 Speaker 3: about some of that in my remarks. Surveys of you know, 289 00:14:08,880 --> 00:14:11,839 Speaker 3: we survey businesses. We don't do it, but other people 290 00:14:11,880 --> 00:14:15,360 Speaker 3: survey businesses and say, are workers plentiful? And that measure 291 00:14:15,480 --> 00:14:18,800 Speaker 3: that measure was no. But now it's back to pre 292 00:14:18,880 --> 00:14:23,280 Speaker 3: pandemic levels. Survey workers are jobs plentiful, And that was 293 00:14:23,400 --> 00:14:25,280 Speaker 3: at an all time high and now it's still high, 294 00:14:25,320 --> 00:14:28,800 Speaker 3: but back. So wage increases are coming back down to 295 00:14:28,840 --> 00:14:31,520 Speaker 3: more normal levels. Job openings are down from two to 296 00:14:31,520 --> 00:14:34,480 Speaker 3: one point four. They were at one point two in 297 00:14:34,600 --> 00:14:38,240 Speaker 3: the very tight labor market of twenty nineteen by somebody, 298 00:14:38,360 --> 00:14:40,800 Speaker 3: you know, the work week, by so many measures, the 299 00:14:40,880 --> 00:14:43,200 Speaker 3: labor market is gradually cooling. 300 00:14:43,240 --> 00:14:44,560 Speaker 4: And part of that is this. 301 00:14:45,280 --> 00:14:47,520 Speaker 3: All through twenty twenty two, we thought we were going 302 00:14:47,560 --> 00:14:50,640 Speaker 3: to get more labor supply and we didn't, and I 303 00:14:50,720 --> 00:14:52,920 Speaker 3: personally thought, well, I guess we won't get any and 304 00:14:52,960 --> 00:14:56,680 Speaker 3: then we've gotten a substantial amount this year. The female 305 00:14:56,760 --> 00:15:00,880 Speaker 3: label for participation is at in prime workers is at 306 00:15:00,880 --> 00:15:03,760 Speaker 3: an all time high, which has to be related in 307 00:15:04,200 --> 00:15:08,360 Speaker 3: some way to work from home. But labor force participation increased, 308 00:15:09,120 --> 00:15:13,280 Speaker 3: immigration increased, and now you see that in the overall 309 00:15:13,360 --> 00:15:15,920 Speaker 3: cooling of the labor market. So even though job creation 310 00:15:16,040 --> 00:15:18,040 Speaker 3: is still very high, there are the workers to fill 311 00:15:18,080 --> 00:15:21,040 Speaker 3: those jobs. And again businesses will tell you that it's 312 00:15:21,160 --> 00:15:23,360 Speaker 3: very different. It's still a very tight labor market, but 313 00:15:23,600 --> 00:15:24,280 Speaker 3: it's loosening. 314 00:15:24,680 --> 00:15:26,800 Speaker 2: Coming back to your goal of two percent inflation, what 315 00:15:26,840 --> 00:15:29,400 Speaker 2: have you learned from this experience about the relationship between 316 00:15:29,400 --> 00:15:31,400 Speaker 2: inflation and labor. I mean, there's a lot of talk 317 00:15:31,440 --> 00:15:33,880 Speaker 2: about Phillips curve, whether it still applies, whether it's weaker, 318 00:15:33,960 --> 00:15:36,480 Speaker 2: what is it. What's your hypothesis right now with the 319 00:15:36,520 --> 00:15:38,640 Speaker 2: relationship between inflation and labor market. 320 00:15:38,840 --> 00:15:40,400 Speaker 4: Let me tell you what it was before. 321 00:15:40,480 --> 00:15:44,480 Speaker 3: So one of my favorite charts is just the slope 322 00:15:44,520 --> 00:15:46,680 Speaker 3: of the Phillips curve over forty years, and so it 323 00:15:46,720 --> 00:15:49,920 Speaker 3: shows the relationship between unemployment and inflation. If you go 324 00:15:50,000 --> 00:15:52,360 Speaker 3: back to the high inflation of the seventies, it was 325 00:15:52,400 --> 00:15:55,720 Speaker 3: a very tight relationship, and that relationships went down and 326 00:15:55,760 --> 00:15:57,440 Speaker 3: down and down to the fact where the Phillips curve 327 00:15:57,440 --> 00:16:01,280 Speaker 3: there was almost no relationship, meaning the Phillips curve was 328 00:16:01,360 --> 00:16:06,640 Speaker 3: very very flat. Now actually, if you just ignore cause 329 00:16:06,680 --> 00:16:08,680 Speaker 3: and just look at the data, it will tell you 330 00:16:08,920 --> 00:16:12,800 Speaker 3: that the relationship is back. Do we really think that's 331 00:16:12,840 --> 00:16:13,720 Speaker 3: a sustainable thing? 332 00:16:13,760 --> 00:16:14,320 Speaker 4: I don't know. 333 00:16:14,720 --> 00:16:19,200 Speaker 3: What happened though, was that people came to seriously expect 334 00:16:19,200 --> 00:16:22,680 Speaker 3: two percent inflation, something like two percent inflation. And if 335 00:16:22,720 --> 00:16:26,400 Speaker 3: people expect that, if companies expected, and workers expected, and 336 00:16:26,440 --> 00:16:29,280 Speaker 3: you expect that in your shopping, then that's what will happen. 337 00:16:31,640 --> 00:16:34,400 Speaker 2: That was Fedshair Jaypowell, talking with Wall Street Week at 338 00:16:34,400 --> 00:16:37,640 Speaker 2: the Economic Club of New York this week. Listening to 339 00:16:37,720 --> 00:16:40,280 Speaker 2: fed chairs can sometimes feel a little like going to 340 00:16:40,320 --> 00:16:43,400 Speaker 2: the oracle at Delphi. They convey wisdom, but it's not 341 00:16:43,440 --> 00:16:46,040 Speaker 2: always immediately a parent, how to apply it to help 342 00:16:46,120 --> 00:16:48,280 Speaker 2: us understand how we should take what we heard from 343 00:16:48,360 --> 00:16:51,240 Speaker 2: Jay Powell this week. Welcome now, doctor jan Eberley. She's 344 00:16:51,320 --> 00:16:55,200 Speaker 2: professor of finance at Northwestern's Kellogg School of Management. So, professor, 345 00:16:55,200 --> 00:16:57,960 Speaker 2: thank you so much for joining us. Let's talk specifically 346 00:16:58,040 --> 00:17:01,640 Speaker 2: about what you think we have learned should have learned 347 00:17:01,680 --> 00:17:04,320 Speaker 2: about the economy, how we manage the economy from this 348 00:17:04,600 --> 00:17:07,280 Speaker 2: tumultuous time we've had with the pandemic and the post 349 00:17:07,280 --> 00:17:08,200 Speaker 2: pandemic effects. 350 00:17:08,880 --> 00:17:12,880 Speaker 11: The Chairman yesterday took advantage of the longer format with 351 00:17:12,960 --> 00:17:16,119 Speaker 11: you to lay out of a more holistic view of 352 00:17:16,200 --> 00:17:21,280 Speaker 11: monetary policy rather than to make news about the next meeting. 353 00:17:21,600 --> 00:17:25,240 Speaker 11: And when you asked him about the longer run lessons, 354 00:17:25,640 --> 00:17:29,439 Speaker 11: he pointed out that the global economy faces a wide 355 00:17:29,520 --> 00:17:34,680 Speaker 11: range of risks, and COVID really came out of the 356 00:17:34,720 --> 00:17:40,439 Speaker 11: broader range than we usually see. And importantly, the experience 357 00:17:40,480 --> 00:17:45,119 Speaker 11: with COVID wasn't really present in the standard historical data 358 00:17:45,200 --> 00:17:49,520 Speaker 11: that we use to do quantitative analysis or from which 359 00:17:49,560 --> 00:17:55,720 Speaker 11: policymakers have formed their economic intuition or their heuristics. And 360 00:17:56,760 --> 00:18:00,440 Speaker 11: so now looking back and seeing how COVID affected the 361 00:18:01,440 --> 00:18:04,200 Speaker 11: economy and how it's showing up in the data. There 362 00:18:04,200 --> 00:18:08,040 Speaker 11: were supply shocks, there were reallocation shocks, which just have 363 00:18:08,320 --> 00:18:16,000 Speaker 11: not been a historical regularity in the data, and so 364 00:18:16,440 --> 00:18:20,600 Speaker 11: you know, economists and policymakers are very reluctant to say 365 00:18:20,640 --> 00:18:26,320 Speaker 11: this time is different. It seems opportunistic, and rein Hard 366 00:18:26,359 --> 00:18:29,480 Speaker 11: and Rogoff have a famous book with that title, which 367 00:18:29,560 --> 00:18:34,560 Speaker 11: was meant with irony. But what the Chairman was pointing 368 00:18:34,560 --> 00:18:37,520 Speaker 11: out is something that economists have been thinking about for 369 00:18:37,640 --> 00:18:41,160 Speaker 11: quite a while is what was different about COVID and 370 00:18:41,200 --> 00:18:46,199 Speaker 11: how does that bear on policy? And in particular, things 371 00:18:46,440 --> 00:18:51,919 Speaker 11: like the supply shocks and the reallocation shocks allowed a 372 00:18:52,040 --> 00:18:58,720 Speaker 11: confluence of both tighter monetary policy, rising rates, lowering inflation, 373 00:18:59,040 --> 00:19:02,000 Speaker 11: and at the same time i'm a robust labor market. 374 00:19:02,080 --> 00:19:04,280 Speaker 2: Well, a couple of other aspects that may be somewhat 375 00:19:04,320 --> 00:19:07,680 Speaker 2: different from twenty nineteen. Our number one geopolitical risk, which 376 00:19:07,760 --> 00:19:10,959 Speaker 2: is really really popped up, which does have economic effects 377 00:19:11,000 --> 00:19:13,200 Speaker 2: obviously as we increase defense spending, not just in the 378 00:19:13,320 --> 00:19:16,520 Speaker 2: United States but around the world. Climate has always been there, 379 00:19:16,560 --> 00:19:18,240 Speaker 2: but it's getting more and more imminent. There's got a 380 00:19:18,240 --> 00:19:20,200 Speaker 2: lot of investment that has to be done. And also 381 00:19:20,200 --> 00:19:23,440 Speaker 2: there are some iramifications of I won't call it deglobalization, 382 00:19:23,560 --> 00:19:26,760 Speaker 2: but maybe more regionalization, not quite as globalized as before. 383 00:19:26,920 --> 00:19:29,680 Speaker 2: Does that indicate that, in fact the paradigm is shifting 384 00:19:29,960 --> 00:19:31,680 Speaker 2: toward a higher rate environment. 385 00:19:32,359 --> 00:19:36,679 Speaker 11: There's a deep discussion now about what our star is, 386 00:19:36,840 --> 00:19:41,040 Speaker 11: what the neutral, long run real rate of interest will be, 387 00:19:41,800 --> 00:19:45,000 Speaker 11: and I think there's been a tendency to think that 388 00:19:45,240 --> 00:19:48,320 Speaker 11: it's a bit higher. That we're moving away from the 389 00:19:48,400 --> 00:19:54,760 Speaker 11: sort of secular stagnation concept or model that kept rates 390 00:19:54,920 --> 00:20:00,360 Speaker 11: very low for a long time and into a riskier, 391 00:20:00,480 --> 00:20:05,000 Speaker 11: potentially higher investment environment, which would be consistent with a 392 00:20:05,040 --> 00:20:06,520 Speaker 11: higher rate of interest for us. 393 00:20:06,720 --> 00:20:08,240 Speaker 2: Thank you so very much for joining us. So it's 394 00:20:08,320 --> 00:20:10,800 Speaker 2: really helpful in interpreting what we have heard. That is 395 00:20:10,800 --> 00:20:16,399 Speaker 2: Professor Janis Everley of the Kellogg School at Northwestern. Coming up, 396 00:20:16,480 --> 00:20:18,159 Speaker 2: we'll take a look at what the markets had to 397 00:20:18,200 --> 00:20:20,760 Speaker 2: tell us this week with Chris Alman of Calsters. That's 398 00:20:20,840 --> 00:20:22,760 Speaker 2: next do on Wall Street Week on Bloomberg. 399 00:20:23,960 --> 00:20:28,200 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 400 00:20:28,320 --> 00:20:29,240 Speaker 1: Bloomberg Radio. 401 00:20:31,720 --> 00:20:34,800 Speaker 2: The Middle East once again is at the center of 402 00:20:34,880 --> 00:20:38,600 Speaker 2: world events as a horrific attack by Hamas in southern 403 00:20:38,680 --> 00:20:41,760 Speaker 2: Israel has triggered outrage throughout Israel to. 404 00:20:41,680 --> 00:20:44,520 Speaker 6: Those who are living in limbo waiting desperately to learn 405 00:20:44,560 --> 00:20:47,440 Speaker 6: the fate of a loved one, especially to families of 406 00:20:47,480 --> 00:20:48,280 Speaker 6: the hostages. 407 00:20:48,720 --> 00:20:52,640 Speaker 3: If you're not alone and around the world, I found 408 00:20:52,640 --> 00:20:56,639 Speaker 3: the attack on Israel horrifying, as is the prospect for 409 00:20:56,760 --> 00:20:58,159 Speaker 3: more loss of innocent wives. 410 00:20:58,600 --> 00:21:02,280 Speaker 2: We have witnessed a humananitarian nightmare, and thus far the 411 00:21:02,280 --> 00:21:05,840 Speaker 2: markets have responded with relative calm, waiting to see what 412 00:21:06,000 --> 00:21:06,720 Speaker 2: comes next. 413 00:21:07,160 --> 00:21:10,200 Speaker 7: The big issue in a place like the Middle East 414 00:21:10,200 --> 00:21:14,440 Speaker 7: today for investors is does it expand will it move 415 00:21:14,480 --> 00:21:18,480 Speaker 7: into a regional conflict, bringing in nation states like Iran 416 00:21:19,240 --> 00:21:22,040 Speaker 7: and then ultimately impacting things like the price of oil 417 00:21:22,119 --> 00:21:24,320 Speaker 7: that would have an impact on the global economy. 418 00:21:24,520 --> 00:21:28,440 Speaker 2: But war always brings with it risks for the economy. 419 00:21:28,200 --> 00:21:31,800 Speaker 10: Any economic side. You know. Israel, with a reserve army 420 00:21:32,960 --> 00:21:37,200 Speaker 10: cannot really withstand the long term mobilization of its forces 421 00:21:37,240 --> 00:21:41,560 Speaker 10: because much of the economy shuts down. Many stores were 422 00:21:41,560 --> 00:21:44,880 Speaker 10: closed down. Those stores that are open are seeing their 423 00:21:44,880 --> 00:21:48,359 Speaker 10: shelves cleared of goods as people's Stockwhile when. 424 00:21:48,240 --> 00:21:51,080 Speaker 2: It comes to Israel, the effects may be particularly important 425 00:21:51,119 --> 00:21:52,080 Speaker 2: in the tech sector. 426 00:21:52,240 --> 00:21:56,720 Speaker 12: About eighteen percent of our GDP driven by the hepech industry, about. 427 00:21:56,520 --> 00:21:58,840 Speaker 7: Half of our exports during a certain percentage of the 428 00:21:58,880 --> 00:21:59,840 Speaker 7: workforce which. 429 00:21:59,680 --> 00:22:04,560 Speaker 8: Has been lifted into reserve duty. We estimate that number 430 00:22:04,600 --> 00:22:05,760 Speaker 8: to be about fifteen. 431 00:22:05,440 --> 00:22:09,080 Speaker 4: Percent of the workforce in high tech. You have to 432 00:22:09,119 --> 00:22:11,560 Speaker 4: remember if you're a startup company, and that number. 433 00:22:11,280 --> 00:22:14,200 Speaker 8: Can go up to twenty five percent or more. 434 00:22:14,440 --> 00:22:18,280 Speaker 2: And given Israel's key role in the international tech ecosystem, 435 00:22:18,400 --> 00:22:22,480 Speaker 2: those effects could reverberate far beyond the Middle East itself. 436 00:22:23,000 --> 00:22:27,600 Speaker 13: It's hard to find any significant venture players who aren't 437 00:22:27,640 --> 00:22:31,480 Speaker 13: active in terms of backing Israeli companies. You know, Israel 438 00:22:31,520 --> 00:22:35,840 Speaker 13: has this huge delegation of companies traded in New York today, 439 00:22:35,880 --> 00:22:39,360 Speaker 13: one hundred unicorns are operational in Israel. We are already 440 00:22:39,400 --> 00:22:43,280 Speaker 13: in a capital constrained environment where companies are cutting their costs, 441 00:22:43,359 --> 00:22:47,199 Speaker 13: letting people go, you know, trying very very hard to 442 00:22:47,240 --> 00:22:49,920 Speaker 13: make sure that they can you know, get to break 443 00:22:50,000 --> 00:22:52,520 Speaker 13: even or close and then make sure they can continue 444 00:22:52,520 --> 00:22:56,280 Speaker 13: to develop their businesses. Then this comes along, and this 445 00:22:56,400 --> 00:22:57,440 Speaker 13: is not great. 446 00:22:57,320 --> 00:22:59,840 Speaker 10: In terms of a capital raising environment. 447 00:23:04,080 --> 00:23:06,320 Speaker 2: Joining us now is Dan Senor. He is a former 448 00:23:06,400 --> 00:23:09,520 Speaker 2: foreign polity advisor to President George W. Bush and author 449 00:23:09,560 --> 00:23:11,919 Speaker 2: of the Genius of Israel, a new book that is 450 00:23:11,920 --> 00:23:13,840 Speaker 2: coming out next month. So, Dan, thank you so much 451 00:23:13,880 --> 00:23:17,320 Speaker 2: for joining us. You know this region terribly well, having served, 452 00:23:17,320 --> 00:23:20,200 Speaker 2: among other things, as a spokesperson for the coalition in Iraq. 453 00:23:20,600 --> 00:23:23,679 Speaker 2: We had the horrific explosion of the hospital in Gaza 454 00:23:23,720 --> 00:23:27,119 Speaker 2: this week. It's a fog of war. Do we know 455 00:23:27,200 --> 00:23:30,280 Speaker 2: what happened? Will we ever know what happened in that hospital? 456 00:23:30,359 --> 00:23:34,600 Speaker 8: Well, Hamas historically and in this case, in this war, 457 00:23:34,680 --> 00:23:38,720 Speaker 8: the same will be true. Hamas historically co locates its 458 00:23:38,760 --> 00:23:43,560 Speaker 8: offensive weapons capabilities and the offices, the personnel offices of 459 00:23:43,600 --> 00:23:46,400 Speaker 8: its senior military commanders, its war rooms where decision making 460 00:23:46,480 --> 00:23:52,160 Speaker 8: is being made, in hospitals, in un run schools, in 461 00:23:52,320 --> 00:23:57,040 Speaker 8: various childcare facilities. Basically, they try to co locate these 462 00:23:57,720 --> 00:24:03,280 Speaker 8: co locate with high areas that have high concentrations of civilians, 463 00:24:03,760 --> 00:24:07,080 Speaker 8: with the hope that if they fire from there, these people, 464 00:24:07,119 --> 00:24:10,359 Speaker 8: these innocent civilians around them in hospitals and schools and elsewhere, 465 00:24:10,520 --> 00:24:12,960 Speaker 8: will effectively be human shields. That is to say that 466 00:24:13,040 --> 00:24:16,640 Speaker 8: one either Israel responds to take out the offensive military 467 00:24:16,680 --> 00:24:20,280 Speaker 8: capability or the hamas commanders and in the process kills 468 00:24:20,280 --> 00:24:23,800 Speaker 8: a bunch of civilians quote unquote innocent civilians that then 469 00:24:23,800 --> 00:24:26,800 Speaker 8: could become a pr win or b that Israel then 470 00:24:26,840 --> 00:24:29,160 Speaker 8: becomes reticent to do it because they they don't want 471 00:24:29,200 --> 00:24:31,240 Speaker 8: to do it. And I think, and I dealt with 472 00:24:31,320 --> 00:24:35,560 Speaker 8: versions of this in Iraq, not this exact situation, but 473 00:24:35,680 --> 00:24:38,080 Speaker 8: versions of this. I just had to spend a lot 474 00:24:38,080 --> 00:24:40,560 Speaker 8: of time, like just trying to educate the press and 475 00:24:40,600 --> 00:24:43,040 Speaker 8: the public about how these terror organizations work. 476 00:24:43,240 --> 00:24:44,760 Speaker 2: Damn, let me pick up on something you talked about 477 00:24:44,760 --> 00:24:47,720 Speaker 2: the pr effect of these things. Again, You've been in 478 00:24:47,760 --> 00:24:50,240 Speaker 2: these conflict zones. One of the priory SERNI in the 479 00:24:50,320 --> 00:24:52,679 Speaker 2: United States government is to try to limit this conflict 480 00:24:53,040 --> 00:24:56,040 Speaker 2: so that doesn't spread to places alike has Bola up 481 00:24:56,040 --> 00:25:00,080 Speaker 2: in the north and goodness knows not into Iran. What 482 00:25:00,160 --> 00:25:02,320 Speaker 2: is the danger now, given what we saw happened this 483 00:25:02,400 --> 00:25:05,639 Speaker 2: week where the Arab country s apparently pulled back during 484 00:25:05,640 --> 00:25:07,679 Speaker 2: President Biden's visit, what is the danger that it almost 485 00:25:07,720 --> 00:25:10,800 Speaker 2: doesn't matter what really happened. The damage has been done. 486 00:25:11,040 --> 00:25:13,960 Speaker 8: There's are these two issues here. One is I think 487 00:25:14,000 --> 00:25:18,639 Speaker 8: the US Saudi normalization track was moving quickly, and I 488 00:25:18,680 --> 00:25:21,320 Speaker 8: think it was moving even more quickly than press reports 489 00:25:21,440 --> 00:25:25,920 Speaker 8: were ex reflecting, and I think that was possibly. I 490 00:25:25,960 --> 00:25:28,520 Speaker 8: think there were three motivations for October seventh that we 491 00:25:28,560 --> 00:25:32,240 Speaker 8: know of. One was Israel's enemies wanted to do something 492 00:25:32,240 --> 00:25:34,240 Speaker 8: big and dramatic on the end of fifty year anniversary 493 00:25:34,280 --> 00:25:38,600 Speaker 8: of the Yunki Poor War. Two, I think that the 494 00:25:38,640 --> 00:25:42,520 Speaker 8: Israel's enemies believed that Israel was particularly vulnerable at this 495 00:25:42,640 --> 00:25:45,200 Speaker 8: time because of the protest movement in Israel over the 496 00:25:45,240 --> 00:25:46,840 Speaker 8: last nine months, and they thought they had seen in 497 00:25:46,960 --> 00:25:49,360 Speaker 8: Israel unprecedented division and that this was a good time 498 00:25:49,400 --> 00:25:53,480 Speaker 8: to strike. And then three, that the Saudi normalization process 499 00:25:53,600 --> 00:25:55,720 Speaker 8: was moving and had a lot of momentum and they 500 00:25:55,720 --> 00:25:57,800 Speaker 8: wanted to disrupt it. And one way to disrupt it 501 00:25:57,840 --> 00:25:59,359 Speaker 8: is to light up the Arab street. How do you 502 00:25:59,440 --> 00:26:02,119 Speaker 8: light up the air street create a situation where Israel 503 00:26:02,200 --> 00:26:04,600 Speaker 8: is in some very messy war with the Palestinians, and 504 00:26:04,600 --> 00:26:08,840 Speaker 8: that you know, concern for Palestinian life becomes a becomes 505 00:26:08,840 --> 00:26:11,520 Speaker 8: a very highly charged political issue on the Arab street. 506 00:26:11,720 --> 00:26:13,679 Speaker 8: So I think that is a risk right now in 507 00:26:13,760 --> 00:26:14,880 Speaker 8: many of the Arab countries. 508 00:26:15,640 --> 00:26:18,200 Speaker 2: So Daniel in addition to the Genius of Israel coming 509 00:26:18,200 --> 00:26:22,000 Speaker 2: out next month. You wrote earlier Startup Nation, talk to 510 00:26:22,119 --> 00:26:25,320 Speaker 2: us about what likely effects the conflict we're seeing right 511 00:26:25,320 --> 00:26:27,399 Speaker 2: now will have on the startup nation, if I can 512 00:26:27,440 --> 00:26:29,640 Speaker 2: call it that in Israel, that is the tech startups 513 00:26:29,680 --> 00:26:32,040 Speaker 2: over there that have been such an engine for growth 514 00:26:32,040 --> 00:26:33,160 Speaker 2: in the Israeli economy. 515 00:26:33,320 --> 00:26:35,800 Speaker 8: First of all, if you just the macroeconomics, the Bank 516 00:26:35,840 --> 00:26:39,119 Speaker 8: of Israel has announced that they think about one percent 517 00:26:39,200 --> 00:26:41,800 Speaker 8: of GDP is going to get shaved off so far 518 00:26:41,920 --> 00:26:44,159 Speaker 8: from this war. And that has nothing that's let's to 519 00:26:44,160 --> 00:26:46,440 Speaker 8: do about the tech economy, but just tourism shut down. 520 00:26:46,840 --> 00:26:50,000 Speaker 8: There's no real you know, the private economy, the non 521 00:26:50,040 --> 00:26:52,360 Speaker 8: tech economy in Israel is just not doing much. It's 522 00:26:52,680 --> 00:26:54,200 Speaker 8: pretty much shut down. When you have three hundred to 523 00:26:54,240 --> 00:26:57,200 Speaker 8: three hundred and fifty thousand reservists being called up, that's 524 00:26:57,240 --> 00:27:00,720 Speaker 8: a that's an unbelievably high percentage of the overall labor force. 525 00:27:00,920 --> 00:27:02,800 Speaker 8: So it's just work is just ground to a halt. 526 00:27:02,800 --> 00:27:05,240 Speaker 8: In most parts of the economy. Is there's the tiny 527 00:27:05,240 --> 00:27:07,720 Speaker 8: countries you know, about nine point three million people, has 528 00:27:07,760 --> 00:27:11,720 Speaker 8: no real domestic market, so most of the economy is 529 00:27:11,760 --> 00:27:15,360 Speaker 8: an export, export focused, and tech is the biggest part 530 00:27:15,440 --> 00:27:18,040 Speaker 8: of that my sense. So far as most of the 531 00:27:18,080 --> 00:27:20,960 Speaker 8: tech companies are going to continue to operate, obviously they'll 532 00:27:20,960 --> 00:27:23,720 Speaker 8: have to adjust. It's gonna feel a little bit like COVID. 533 00:27:23,800 --> 00:27:25,520 Speaker 8: Those I speak to in the text in Israel says 534 00:27:25,520 --> 00:27:28,240 Speaker 8: it's back to remote work a because it's not safe 535 00:27:28,280 --> 00:27:30,600 Speaker 8: to be going into the office and b because schools 536 00:27:30,600 --> 00:27:32,520 Speaker 8: are shut down, so they're back to remote learning so 537 00:27:32,560 --> 00:27:35,640 Speaker 8: they have to be home. But the tech companies are 538 00:27:35,720 --> 00:27:38,800 Speaker 8: still basically working. I've looked at a couple of investments 539 00:27:39,600 --> 00:27:43,920 Speaker 8: where they're still fundraising. Fundraising hasn't stopped the big multinational companies. 540 00:27:44,200 --> 00:27:46,119 Speaker 8: You know, there's between four hundred and four hundred and 541 00:27:46,119 --> 00:27:52,400 Speaker 8: fifty multinationals that have major major innovation centers in Israel. Microsoft, Google, Meta, 542 00:27:52,760 --> 00:27:55,280 Speaker 8: I mean, you go, the major auto companies, even non 543 00:27:55,280 --> 00:27:58,200 Speaker 8: tech companies like Walmart, Procter and Gamble, Coca Cola, all 544 00:27:58,240 --> 00:28:01,360 Speaker 8: these companies have major R and D operations in Israel, 545 00:28:01,680 --> 00:28:04,680 Speaker 8: and talking to them, nothing shut down. They're still functioning, 546 00:28:04,720 --> 00:28:06,320 Speaker 8: their people are still there. They're going to keep doing 547 00:28:06,359 --> 00:28:09,000 Speaker 8: what they're doing. I will say, David, you know, but 548 00:28:09,040 --> 00:28:13,560 Speaker 8: there's a that said this is an adversarial situation. So 549 00:28:13,560 --> 00:28:16,160 Speaker 8: so things will slow down a little bit, but they're 550 00:28:16,320 --> 00:28:18,119 Speaker 8: My point is they're not going to grind to a halt. 551 00:28:18,560 --> 00:28:23,600 Speaker 8: I would say there's one encouraging piece here. In nineteen 552 00:28:23,680 --> 00:28:26,119 Speaker 8: ninety one, during the First Golf War, as you recall, 553 00:28:26,240 --> 00:28:30,080 Speaker 8: scud missiles were landing on Israel and Israel shut down. 554 00:28:30,400 --> 00:28:33,960 Speaker 8: Everyone was in gas masks, in sealed rooms, no businesses 555 00:28:33,960 --> 00:28:37,080 Speaker 8: were functioning. Intel at the time, the Intel Corporation had 556 00:28:37,119 --> 00:28:39,720 Speaker 8: a major operation in Israel, and it's where most of 557 00:28:39,720 --> 00:28:42,520 Speaker 8: the most important R and D for chips was being 558 00:28:43,040 --> 00:28:47,960 Speaker 8: worked on. And Intel Israel stayed open despite the scud missiles, 559 00:28:48,240 --> 00:28:50,000 Speaker 8: and they worked twenty four hours a day. They set 560 00:28:50,080 --> 00:28:52,440 Speaker 8: up volunteer kindergarten so people could bring their kids in, 561 00:28:52,480 --> 00:28:54,440 Speaker 8: and they had other workers volunteering to take care of 562 00:28:54,480 --> 00:28:57,680 Speaker 8: kids while others were working in fabs and whatnot. And 563 00:28:57,720 --> 00:29:00,400 Speaker 8: they never missed a deadline. Everything stayed on scale. And 564 00:29:00,440 --> 00:29:03,120 Speaker 8: they sent a message to Silicon Valley in that particular case, 565 00:29:03,120 --> 00:29:06,960 Speaker 8: to Santa Clara to Intel headquarters, don't worry no matter 566 00:29:06,960 --> 00:29:10,680 Speaker 8: what they throw at us, we will keep getting it done. 567 00:29:10,840 --> 00:29:13,320 Speaker 8: And so I do. And so it's that lesson that 568 00:29:13,600 --> 00:29:15,080 Speaker 8: we wrote about in our last book, and we write 569 00:29:15,120 --> 00:29:16,720 Speaker 8: about a little bit in our next book. That was 570 00:29:16,760 --> 00:29:20,320 Speaker 8: like a reminder that Israelis can be through a lot, 571 00:29:20,440 --> 00:29:24,800 Speaker 8: or at least their tech community, and still keep chugging along. 572 00:29:25,000 --> 00:29:27,480 Speaker 8: One encouraging note, and again it's hard to use the 573 00:29:27,480 --> 00:29:31,240 Speaker 8: word encouraging in this environment we're in right now, is 574 00:29:31,280 --> 00:29:35,760 Speaker 8: the tech community, the startup nation community has come together 575 00:29:35,840 --> 00:29:38,600 Speaker 8: in a way that you would be hard pressed to 576 00:29:38,600 --> 00:29:40,360 Speaker 8: find in any other country. And they're a big part 577 00:29:40,360 --> 00:29:43,480 Speaker 8: of the civilian mobilization and volunteering, and even if they're 578 00:29:43,520 --> 00:29:46,160 Speaker 8: not called up for reserves, they're helping on every way possible. 579 00:29:46,640 --> 00:29:49,840 Speaker 8: And I do think that gives them a kind of 580 00:29:50,600 --> 00:29:54,240 Speaker 8: a grit and a determination and a whole series of 581 00:29:54,240 --> 00:29:56,880 Speaker 8: skills in dealing with crisis, because I think can only 582 00:29:56,960 --> 00:29:59,920 Speaker 8: help them whatever they do after this war, God willing 583 00:30:00,120 --> 00:30:03,920 Speaker 8: is over, whether it's their startups are working for big multinationals, 584 00:30:03,920 --> 00:30:07,400 Speaker 8: So I think near term bumpy for obvious reasons, but manageable, 585 00:30:07,800 --> 00:30:10,640 Speaker 8: medium term and long term. I'm actually even more bullish 586 00:30:10,720 --> 00:30:13,920 Speaker 8: on Israel's startup economy than I was before October seventh. 587 00:30:14,480 --> 00:30:16,240 Speaker 2: Dan, thank you so very much for your time. Really 588 00:30:16,280 --> 00:30:19,400 Speaker 2: appreciate that Stan Senior's former foreign policy advisor to President 589 00:30:19,440 --> 00:30:21,960 Speaker 2: Georgerry Bush and the author of the forthcoming book The 590 00:30:22,080 --> 00:30:26,960 Speaker 2: Genius of Israel, coming up looking for leaders who can 591 00:30:26,960 --> 00:30:31,880 Speaker 2: give us some hope. That's next on Wall Street Week 592 00:30:32,000 --> 00:30:32,760 Speaker 2: on Bloomberg. 593 00:30:34,120 --> 00:30:38,320 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 594 00:30:38,440 --> 00:30:39,400 Speaker 1: Bloomberg Radio. 595 00:30:46,160 --> 00:30:50,120 Speaker 2: Finally, one more thought. A leader is a dealer in hope, 596 00:30:50,320 --> 00:30:53,680 Speaker 2: so said Napoleon Bonaparte. And looking around the world today, boy, 597 00:30:53,800 --> 00:30:56,160 Speaker 2: do we need our leaders to bring us some hope. 598 00:30:56,320 --> 00:30:58,760 Speaker 2: Hope that we can give workers their fair piece of 599 00:30:58,760 --> 00:31:02,200 Speaker 2: the pie without destroying the automobile industry in the process. 600 00:31:02,400 --> 00:31:07,040 Speaker 14: Today, as the UAW strike against Ford continues, we are 601 00:31:07,080 --> 00:31:11,640 Speaker 14: at a crossroads. Choosing the right path isn't just about 602 00:31:11,680 --> 00:31:15,640 Speaker 14: Ford's future and our ability to compete. This is about 603 00:31:15,640 --> 00:31:18,520 Speaker 14: the future of the American automobile industry. 604 00:31:18,680 --> 00:31:20,360 Speaker 2: Hope that the FED can bring us in for that 605 00:31:20,480 --> 00:31:24,200 Speaker 2: soft landing with inflation under control and no recession. 606 00:31:24,480 --> 00:31:26,840 Speaker 9: Frankly, the FED is won the battle with the American 607 00:31:26,880 --> 00:31:28,880 Speaker 9: consumer and they're slowing down. 608 00:31:29,000 --> 00:31:31,400 Speaker 2: Hope that all this money we're borrowing will really be 609 00:31:31,480 --> 00:31:33,800 Speaker 2: invested in the future of our economy. 610 00:31:34,000 --> 00:31:37,000 Speaker 11: The whole point of this is to increase innovation, research 611 00:31:37,000 --> 00:31:38,560 Speaker 11: and development in the industry. 612 00:31:38,680 --> 00:31:40,640 Speaker 8: We're not giving you taxpayer money. 613 00:31:40,360 --> 00:31:44,800 Speaker 11: To fluff your pillow and increase your profit and give 614 00:31:44,840 --> 00:31:45,960 Speaker 11: it away to your shareholders. 615 00:31:46,200 --> 00:31:47,920 Speaker 2: We're giving it to you to invest in our and 616 00:31:48,000 --> 00:31:51,600 Speaker 2: d and most especially right now, looking for some glimmer 617 00:31:51,640 --> 00:31:54,680 Speaker 2: of hope in the Middle East when things look so bleak. 618 00:31:55,040 --> 00:31:58,000 Speaker 6: I was outraiged, saddened by the enormous loss of life 619 00:31:58,080 --> 00:32:01,080 Speaker 6: yesterday in the hospital in Gaza and the information we've 620 00:32:01,120 --> 00:32:02,800 Speaker 6: seen to day it appear as a result of an 621 00:32:02,840 --> 00:32:05,360 Speaker 6: airant rocket fired by a terrorist group in Gaza. 622 00:32:05,680 --> 00:32:07,960 Speaker 2: But at a time when we're looking desperately for hope, 623 00:32:07,960 --> 00:32:10,680 Speaker 2: it sometimes seems as if some of our important leaders 624 00:32:10,680 --> 00:32:13,600 Speaker 2: have gone missing, as for example, we've seen with college 625 00:32:13,640 --> 00:32:17,040 Speaker 2: presidents who faced with the admittedly difficult lines that draw 626 00:32:17,080 --> 00:32:19,800 Speaker 2: between free speech and the moral high ground, have gone 627 00:32:19,840 --> 00:32:23,440 Speaker 2: strangely silent, at least for a time at Harvard. 628 00:32:23,800 --> 00:32:28,400 Speaker 15: Given the number of issues on which leadership at Harvard 629 00:32:28,480 --> 00:32:34,640 Speaker 15: and other universities have spoken out, to fail to speak 630 00:32:34,720 --> 00:32:39,720 Speaker 15: out with equal vigor when it is terror towards Israel 631 00:32:40,680 --> 00:32:44,560 Speaker 15: was I thought a real moral failing and. 632 00:32:44,600 --> 00:32:47,080 Speaker 2: At the University of Pennsylvania. 633 00:32:46,640 --> 00:32:51,920 Speaker 12: The university president, Liz miguel. I think she's a good person. 634 00:32:52,000 --> 00:32:54,960 Speaker 12: I don't think she's anti Semitic. I do think she 635 00:32:55,080 --> 00:32:58,080 Speaker 12: made some mistakes here, some of which she's acknowledged. But 636 00:32:58,160 --> 00:33:00,880 Speaker 12: the decision about her future eyes with the board of 637 00:33:00,920 --> 00:33:02,360 Speaker 12: Trustees at penn. 638 00:33:02,280 --> 00:33:04,720 Speaker 2: But the biggest absence of all may be in our 639 00:33:04,760 --> 00:33:08,920 Speaker 2: political leadership, particularly in the House of Representatives, which, faced 640 00:33:08,920 --> 00:33:11,080 Speaker 2: with the prospect of a continuing war in Ukraine and 641 00:33:11,160 --> 00:33:14,200 Speaker 2: yet another government shut down a month from now, decided 642 00:33:14,200 --> 00:33:16,680 Speaker 2: to do something it had never done before in history. 643 00:33:17,120 --> 00:33:20,560 Speaker 2: Fire its speaker, the most senior elected member of Congress 644 00:33:20,560 --> 00:33:22,680 Speaker 2: and third in line for the presidency. 645 00:33:23,120 --> 00:33:27,840 Speaker 16: The Ya's are two sixteen, the nays are two ten. 646 00:33:28,240 --> 00:33:31,840 Speaker 16: The office of Speaker of the House of the United 647 00:33:31,880 --> 00:33:36,080 Speaker 16: States House of Representatives is hereby declared vacant. 648 00:33:36,760 --> 00:33:39,760 Speaker 2: And this week after a war begun when Hamas attacked 649 00:33:39,880 --> 00:33:42,920 Speaker 2: Israel and President Biden asked for emergency funding in an 650 00:33:42,920 --> 00:33:44,480 Speaker 2: Oval office address. 651 00:33:44,240 --> 00:33:47,480 Speaker 6: Hamas and putin represent different threats, but they share this 652 00:33:47,560 --> 00:33:51,959 Speaker 6: in common. They both want to completely annihilate in neighboring democracy. 653 00:33:52,040 --> 00:33:53,120 Speaker 6: Completely annihilated. 654 00:33:53,360 --> 00:33:56,800 Speaker 2: Republicans repeatedly failed to pull themselves together to name someone 655 00:33:56,840 --> 00:34:00,680 Speaker 2: to fill the speaker's all important job, first reject Represented 656 00:34:00,720 --> 00:34:03,840 Speaker 2: Steve Scalise and then refusing to give it to Representative 657 00:34:03,920 --> 00:34:04,720 Speaker 2: Jim Jordan. 658 00:34:05,120 --> 00:34:07,920 Speaker 7: No person having received a majority the whole number of 659 00:34:08,040 --> 00:34:12,120 Speaker 7: votes cast by surname a speaker has not been elected. 660 00:34:12,440 --> 00:34:14,680 Speaker 2: We may need our leaders to give us hope at 661 00:34:14,680 --> 00:34:17,880 Speaker 2: this critical time. But then again, as then Senator Hillary 662 00:34:17,880 --> 00:34:20,279 Speaker 2: Clinton said about a different war in the Middle East, 663 00:34:20,719 --> 00:34:23,680 Speaker 2: hope is not a strategy that does it. For this 664 00:34:23,719 --> 00:34:26,160 Speaker 2: episode of Wall Street Week, I'm David Weston. See you 665 00:34:26,200 --> 00:34:26,640 Speaker 2: next week.