Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane jay Ley.
Speaker 1: We bring you insight from the best in economics, finance,
Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com and of course on the Bloomberg Now.
Speaker 1: The coronavirus crisis will shrink London's economy by forty four
Speaker 1: billion pounds and if a rebound could take until summer two.
Speaker 1: Now that's a warning. Today in a new report by
Speaker 1: g l a economics unit at City Hall, with culture, leisure,
Speaker 1: retail and hospitality all hard hit by lockdowns and social
Speaker 1: distancing measures. The report also says one could see a
Speaker 1: four and a half percent drop in the number of
Speaker 1: jobs in the capitol. Well, I'm very pleased to be
Speaker 1: joining joined by the Mayor of London citycon who joins
Speaker 1: us from the historic cutting sark in Granwich. The world's
Speaker 1: only survivor been tea Clipper Mayor, and I think built
Speaker 1: in and I don't know whether it goes to the
Speaker 1: kind of deals that you think London and the UK
Speaker 1: should try and have post brexit. But how damaging would
Speaker 1: a no deal Brexit be for the city of London
Speaker 1: and good morning, good morning, it's great to join you. Okay, Look,
Speaker 1: we as a country of our economy is in the
Speaker 1: professional services, were world leaders in finance and in law,
Speaker 1: in tech, in creative industries, and unfortunately the current deal
Speaker 1: be negotiated by the government that fails to address the
Speaker 1: concerns that these industries have in relation to continue to
Speaker 1: business with our biggest trading partner, partner of the European
Speaker 1: Union as it is, it appears even the flimsy deal
Speaker 1: the government's negotiating may not get over the line. So
Speaker 1: we are very concerned about the possibility of a no
Speaker 1: deal brexit that means not having a deal with our
Speaker 1: biggest trading partner, or a deal that doesn't reflect our economy.
Speaker 1: And the irony, of course is is the USA now
Speaker 1: has a president who's put in the USA back on
Speaker 1: the world stage, and we the UK may become a
Speaker 1: very lonely country in the future. So what's the best
Speaker 1: hope for financial services in this very late stage and
Speaker 1: Brexit talk. Well, at the moment it appears that a
Speaker 1: number of our sectors they were hoping for a good
Speaker 1: deal with the EU aren't included. And so even if
Speaker 1: the deal is reached with the European Union this week,
Speaker 1: and we hope one is the problem is for our
Speaker 1: professional services, finance, legal, tech, creative industries. They will have
Speaker 1: less favorable access to the Single Market than they had
Speaker 1: as members of the EU or during this transition period.
Speaker 1: And that's why it's really important that the UK government
Speaker 1: understands the importance of issues like equivalence, financial passport in
Speaker 1: this issue of attracting talent to London and the fact
Speaker 1: that our ecosystem relies upon people as well as capsule
Speaker 1: and services moving from London to the parts of the
Speaker 1: European Union. If we go back into a lockdown that
Speaker 1: looks more like a Tier three in London, and if
Speaker 1: we have no deal brexit, would that be the perfect store.
Speaker 1: What would job glasses actually look like in that scenario. Well,
Speaker 1: London is very similar to other global cities around the world,
Speaker 1: like New Yorker. We've suffered hugely because of the reduction
Speaker 1: in footfall caused by the pandemic. Think of industries and
Speaker 1: sectors that rely upon footfall retail, hospitality, culture, ledger and
Speaker 1: so there's those sectors which normally contribute hugely to our
Speaker 1: countries coffers, wealth and prosperity have really struggled, and the
Speaker 1: concern is the combination of a continuation of this pandemic. Yes,
Speaker 1: there is great news with the vaccine, but a combination
Speaker 1: of COVID plus a Brexit with no deal or a
Speaker 1: poor deal would be really severe for London and our country.
Speaker 1: As you said, it is a perfect storm, a double Yaman.
Speaker 1: And that's why it's so important that our government wakes
Speaker 1: up and realizes what we're heading tours, rather than sleepwalking
Speaker 1: into a potentially really deep recession. What's the right way
Speaker 1: of doing it? Is it more funds given to London
Speaker 1: and how much of these shifts will actually be permanent?
Speaker 1: How much will the hospitality business suffer longer term? I
Speaker 1: think what the government's got to realize is many of
Speaker 1: these sectors are on life support and they need to
Speaker 1: stay on life support because we can't afford is for
Speaker 1: these businesses to go bust. It's far far easier to
Speaker 1: keep a business fiable with the financial support from the
Speaker 1: government then allowing a business to go bust and hoping
Speaker 1: that people restart businesses. Similarly, it's far easier to keep
Speaker 1: people in work with financial support from the central government
Speaker 1: rather than losing their jobs. Our current estimate is of
Speaker 1: the currnment continues the government continues down this line, we
Speaker 1: could see levels of job losses, levels of businesses going bust.
Speaker 1: We've not seen as a country or city since the
Speaker 1: nineteen eighties. Nobody wants that, and that's why we're lobbying
Speaker 1: the government to do much more, in particular to help
Speaker 1: those sectors like retail, hospitality and culture that have really
Speaker 1: suffered at normally in good times contribute hugely towards our
Speaker 1: wealth and prosperity. When you look at the world famous
Speaker 1: theater industry in London, will it ever come back to
Speaker 1: normally If we have a vaccine and that goes to
Speaker 1: plan and if government support stays at these levels, when
Speaker 1: are you expecting tourism to come back? Yeah? Well, the
Speaker 1: good us and that the light at the end of
Speaker 1: the tunnel is the vaccine. This week Londoners and people
Speaker 1: across our country will start receiving the vaccine and the
Speaker 1: government has done the right thing and ordered vaccines from
Speaker 1: a number of different companies. The combination of the vaccine
Speaker 1: but also we're our starting mass testing of those who
Speaker 1: are asymptomatic leads us have hope towards the new year,
Speaker 1: and that's why it's really important the government gives the support.
Speaker 1: Most businesses are planning next year not to be as good,
Speaker 1: but they want to stay open and viable. We're hoping
Speaker 1: to see tourists return to our city next summer. It's
Speaker 1: really important they do so and safely. And that's why
Speaker 1: it's really important that the government continues to make progress
Speaker 1: on the vaccine, on mass testing, but also we need
Speaker 1: to really get on top of the test trace isolate system.
Speaker 1: It's really important if somebody has the virus, particularly if
Speaker 1: they're asymptomatic, that they know they've got the virus. They
Speaker 1: can isolate the virus being passed. And we've learned a
Speaker 1: lot over the last eight nine months. We've got to
Speaker 1: use those lessons going forward to make sure we can
Speaker 1: have a swift recovery, which is really important for our
Speaker 1: country's well being. How much of it is a risk
Speaker 1: that actually London goes to Tier three and this is
Speaker 1: a tiering system that you know all living in the
Speaker 1: UK will be familiar with, but will you fight to
Speaker 1: keep it in Tier two which is a medium lockdown. Well,
Speaker 1: the tiriert system isn't perfectly across our country. For those
Speaker 1: of you youers outside of the UK, we have three tiers.
Speaker 1: Tier one is a with the least restrictions and Tier
Speaker 1: three is with the most restrictions. London currently is in
Speaker 1: Tier two. We are concerned that there could be an
Speaker 1: increase in the spread of the virus, a surge because
Speaker 1: of a relaxation of the rules during Christmas. And that's
Speaker 1: why it's really important to anybody who is in London
Speaker 1: or visits London follows our rules. When you're using public transport,
Speaker 1: you're in a shop where a face mask, when you're
Speaker 1: in a place where you can't keep you social distance
Speaker 1: where a face mask, you know, it's really important to
Speaker 1: carry hand sanitized, to wash your hands regularly and thoroughly
Speaker 1: follow the rules that would avoid a London going into
Speaker 1: Tier three, because Tier three, because of the additional restrictions,
Speaker 1: would mean that a lot of the progress we've made
Speaker 1: with our businesses like here in the Cutty Sark would
Speaker 1: be undone. That's why it's really important that people follow
Speaker 1: the rules to avoid us either entering Tier three, or
Speaker 1: even worse, our country potentially entering a third national lockdown.
Speaker 1: So they can't thank you so much for your time today.
Speaker 1: Of course, that is the Mayor of London from the
Speaker 1: world famous Cutty Stark, Steve Schevara enjoyed us now federated
Speaker 1: him as portfolio manager State seven or five Eastern time
Speaker 1: has become like therapy for investors in our audience after
Speaker 1: rattling through all the negative news. And I think that's
Speaker 1: been a job at the investor for the market participants
Speaker 1: to almost receive that therapy all this stuff going on
Speaker 1: around us which is absolutely dreadful, and thinking about about
Speaker 1: one you have the therapy state. Yeah, I think I do.
Speaker 1: I mean, I think I think we've been pretty calm
Speaker 1: through the last few months. Look, I mean what you've
Speaker 1: seen in terms of recovery is shocking. I mean, in
Speaker 1: terms of the number of people that have gone back
Speaker 1: to work, in terms of the rebound and retail sales, manufacturing, housing,
Speaker 1: you really do have in a lot of sectors of
Speaker 1: the economy of v shaped recovery with a lot of
Speaker 1: stimulus coming, not just the fiscal stimulus, not just probably
Speaker 1: a little bit more from the Fed in terms of
Speaker 1: extending duration and things of that nature, but the vaccine
Speaker 1: itself represents an enormous stimulus over the course of next
Speaker 1: year as we gradually get acton normal, and I think
Speaker 1: that's what the market is looking through now. That doesn't
Speaker 1: mean we don't need support for certain parts of the
Speaker 1: economy that are really in for it right now with
Speaker 1: these increased restrictions, but that's really about doing the right
Speaker 1: thing for sectors of the economy. The market as a whole,
Speaker 1: I think is in a much healthier place than certain
Speaker 1: sectors are. Steve, I get this argument that we're pricing
Speaker 1: in one and that we're looking toward a period past
Speaker 1: the pandemic. Yet if we've already priced that in, what
Speaker 1: more can we price in to drive a market higher? Well, well,
Speaker 1: at least I don't think we are just pricing in one,
Speaker 1: and I think it's a longer term runway of growth. Remember,
Speaker 1: outside there are no real examples of double dip processions
Speaker 1: since the Great Depression. When you're looking at recoveries and expansions,
Speaker 1: these last three, four or five, six years, sometimes as
Speaker 1: many as ten years. And we just had a recession.
Speaker 1: We've cleared the deck. We're in early cycles. So yes,
Speaker 1: the market's immediate focus is on the recovery in one,
Speaker 1: but in reality, you have to start pricing in the
Speaker 1: idea that we've got a number of years of first
Speaker 1: recovery then expansion, and markets are going to respond well
Speaker 1: to that. Lisa, Tom and I have been going through
Speaker 1: the same story stave over the last several weeks, and
Speaker 1: I've sat here frustrated sometimes board at the outlook because
Speaker 1: it's very say me, and I'm wondering whether the group
Speaker 1: think has actually become group action. Are you worried about
Speaker 1: actual crowding or as far as your concern, the money
Speaker 1: hasn't actually been put to work. This is just talk. Still, Look,
Speaker 1: I think this is this is what the scary part
Speaker 1: about the early part of the cycle, because you'll see
Speaker 1: big percentage moves and thinks that you've missed the whole thing.
Speaker 1: But let's put it in a perspective. Right, small caps
Speaker 1: have outperformed large by let's call it, you know, ten
Speaker 1: of fift since September, but they've underperformed for the last
Speaker 1: five years. They were flat for the last two years.
Speaker 1: Um even if you look at value versus growth, the
Speaker 1: ten and fifteen percent performance you've seen there, value underperformed
Speaker 1: by fifty percent in the first half of this year.
Speaker 1: And so we think it's really those uncomfortable trades around value,
Speaker 1: around small caps, around international which has started to show
Speaker 1: signs of life, and around dividend players that are really
Speaker 1: going to continue over the course of the next year.
Speaker 1: We think that there's still relatively early in their in
Speaker 1: their days. And we think, again, while the market has
Speaker 1: priced in a better twenty one, we don't think that
Speaker 1: the market is priced in, you know, a longer term
Speaker 1: growth trajectory. Steve. This idea of being early earlier a
Speaker 1: word we hear so many times, and this idea of
Speaker 1: it being uncomfortable, and it being uncomfortable to get in
Speaker 1: in the early part of a bull market. And I
Speaker 1: think April was uncomfortable right now? Can you call it
Speaker 1: early when we've got a record high the Russell, a
Speaker 1: record high s and P five hundred and a record
Speaker 1: high the Nastac I mean, just looking at recoveries. You're
Speaker 1: a student of market history much more than I am, Steve.
Speaker 1: You know, when we start an early stage recovery, do
Speaker 1: we start a record highs. We don't get there this quickly, um,
Speaker 1: but you can. For example, if you think about the
Speaker 1: decline in seven, you were back to all time highs
Speaker 1: within about a year of that thirty decline, and I
Speaker 1: can assure you you didn't want to sell in because
Speaker 1: you still had a market bull run until two thousand almost. Um, yes,
Speaker 1: this can happen. Even if you look back at the
Speaker 1: last recession that we went through, right, you got back
Speaker 1: to the all time high, and again, it would have
Speaker 1: been very easy to say, Okay, we're back to the
Speaker 1: all time high, we're long in the two yet another
Speaker 1: get another six years after that. So no, I don't
Speaker 1: think it means that we're late just because we're at
Speaker 1: all time highs. I think it's it's just the nature
Speaker 1: of this recovery and the amount of stimulus that we
Speaker 1: got that allowed us to get back to the highest
Speaker 1: so quickly. I was reading Morgan Stanley's look Ahead yesterday
Speaker 1: Andrew Sheets came out and he said that one reason
Speaker 1: for their bullish outlook is that they expect fiscal and
Speaker 1: monetary policy to work together. Yet they still expect the
Speaker 1: ten year yield to get up to one point four
Speaker 1: or five percent by year end. How high can that
Speaker 1: yield go before to rail as the equity rally look,
Speaker 1: I think it's I think it's a function of what
Speaker 1: the economic context is. Right. So, if you're still in
Speaker 1: an economic malaise or you have slowing economic data and
Speaker 1: you get a surgeon yields because there's expectations that the
Speaker 1: FED won't be as dubblished, then obviously that that's something
Speaker 1: that's bad. Um. If on the other hand, you know,
Speaker 1: we're getting higher yields on the back of stronger and
Speaker 1: stronger economic data, more and more people going back to work,
Speaker 1: more normal levels of activity, I think that's that's fine. Um.
Speaker 1: Right now, both the yield and the spreads are so
Speaker 1: low and so tight that it suggested equity multiples could
Speaker 1: be in the mid to high twenties. We don't need
Speaker 1: them to stay that high. So there is some room,
Speaker 1: I think, within a healthy economic recovery for yields to
Speaker 1: rise and the market to be okay with that. Stafe
Speaker 1: writes to catch up. Is it too addy to say
Speaker 1: Happy Christmas? Just in case? No, enjoy the holiday this year?
Speaker 1: Take the opportunity, my friend, enjoy the holidays. Christmas tea
Speaker 1: chefron Federated irmis thank you, sir. Let's get to this
Speaker 1: brutal pandemic sweeping across the United States of America, joining Ustan.
Speaker 1: Please to say is Mercedes Carnathon, Norwestern University Department of
Speaker 1: Preventative Medicine Vice Chair, Mercedes Professor. Fantastic to get you
Speaker 1: back on the program with us. Thank you for joining us.
Speaker 1: Secretary are over the weekend saying that perhaps by Q
Speaker 1: two all Americans that would like the vaccine would have
Speaker 1: access to the vaccine. Is this the timeline that you're
Speaker 1: putting into your models you're thinking about increasingly as well?
Speaker 1: You know, that is what I have heard as well,
Speaker 1: that hopefully by April, availability of the vaccine will be
Speaker 1: such in production of the vaccine will be such that
Speaker 1: everybody who wants it will start to be introduced to
Speaker 1: the opportunity to get it. Because you have to keep
Speaker 1: in mind, it's two factors. It's how many doses of
Speaker 1: the vaccine vaccine do we have available? And how can
Speaker 1: we get it out to the people rapidly? So let's
Speaker 1: talk about the process of getting it out. We know
Speaker 1: that for responders, people in nursing homes, those are some
Speaker 1: of the first recipients, are like the recipients of the vaccine.
Speaker 1: Where do we go from there? You know, I think
Speaker 1: it's really important to remember that those two populations are
Speaker 1: coming first. So what that really means into one is
Speaker 1: that our behaviors can't change. If you think about it,
Speaker 1: those are not the individuals with the highest likelihood of
Speaker 1: circulating the virus and the population or spreading it. Nursing
Speaker 1: home residents are in nursing homes, They're not out there.
Speaker 1: It's the twenty thirty nine year olds who are not
Speaker 1: being vaccinated early on who are spreading it. So what
Speaker 1: it means is that for the long game, we're looking
Speaker 1: pretty good once we can get this world out, but
Speaker 1: for right now, our behaviors can't change. So mercedies, this
Speaker 1: is the question, right, I mean, how should it be
Speaker 1: rolled out in order to prevent the deaths that are inevitable,
Speaker 1: that are climbing that we're seeing record hospitalizations currently. How
Speaker 1: do we best distribute in order to prevent the rampants
Speaker 1: spread as many people are predicting. You know what I'd
Speaker 1: like to see. I've heard some discussion about essential workers
Speaker 1: who are delivery drivers, who are thrusts facing people in stores,
Speaker 1: being eligible early on for the vaccine, and that would
Speaker 1: solve two problems for for a large proportion of those workers.
Speaker 1: Those individuals um their income isn't as high. They aren't
Speaker 1: able to socially isolate themselves, they don't have vast homes
Speaker 1: to be able to spread out, and those populations are
Speaker 1: often at highest risk for the most severe outcomes and hospitalizations.
Speaker 1: So it would be ideal to see that population in
Speaker 1: the next round. The good news, Professors, We've had months
Speaker 1: to think about this, how to roll it out. What
Speaker 1: I still don't know, Maybe you can help me, is
Speaker 1: how long does this last before we have to go
Speaker 1: back again and get another shot, get another vaccination? So
Speaker 1: as I understand it with fires, so you get one
Speaker 1: shot twenty one days later or so you get another shot.
Speaker 1: What is your immediately like after that? How long the antibodies? Therefore, professor,
Speaker 1: do we know the answers to that? If I had
Speaker 1: the answered of that, I would be making a lot
Speaker 1: of money. I think right now we still are in
Speaker 1: the position where we know what we know and we
Speaker 1: don't know what we don't know, and so I am
Speaker 1: not sure about that answer. How long one will remain immune?
Speaker 1: I think you know that information stands to come out
Speaker 1: at the time when they actually publish their trial results.
Speaker 1: Right now, they're getting emergency use authorization we haven't seen
Speaker 1: the final reports, and hopefully there'll be some hints in there.
Speaker 1: Are you a little worried about the duration that it
Speaker 1: might be? Do you have a range in mind? Professor?
Speaker 1: I apologize of putting you on the spot, because there
Speaker 1: is a belief at the moment, and we all share
Speaker 1: this hope that by the middle of the next year
Speaker 1: in places across the world around the planet, we've got
Speaker 1: society to a position where we can roll back many
Speaker 1: of these restrictions. But I think a big worry for
Speaker 1: people would be if we had to go and do
Speaker 1: this all over again, quarter after quarter to make sure
Speaker 1: this last. That would be a much bigger effort. Do
Speaker 1: you have a time range in mind? That would be
Speaker 1: a much bigger effort. Um, you know. I think what
Speaker 1: I remain hopeful is that this particular vaccine which I hear,
Speaker 1: is a unique approach to vaccination and how it's targeting
Speaker 1: the virus, that it will not be like the flu
Speaker 1: vaccine that wrap so the flu the flu virus um
Speaker 1: mutates quickly. The coronavirus doesn't mutate quite as well I
Speaker 1: think as the flu virus. However, and the way that
Speaker 1: these vaccines have been developed there's something that is targeting
Speaker 1: something a little more central to the virus, so that
Speaker 1: ideally this will last longer than one year. However, I
Speaker 1: haven't seen the final report yet, Mercedes. I just want
Speaker 1: to wrap up with where we are in the pandemic.
Speaker 1: Right now, we are seeing record numbers of cases in
Speaker 1: the United States or seeing hospitalizations we're seeing I see
Speaker 1: you units at capacity. How concerned are you about the
Speaker 1: next month in terms of the worst aspect of this pandemic?
Speaker 1: You know, the worst aspect of this is, you know,
Speaker 1: you can always build field hospitals, but how are you
Speaker 1: going to staff them? As we are filling up the
Speaker 1: hospitals and I see us and using up the life
Speaker 1: saving equipment. We need people to run that equipment, and
Speaker 1: that's where we're actually running short right now. So that
Speaker 1: concerns me a great deal. Our healthcare providers are burnt out,
Speaker 1: they are exhausted. This is emotionally and physically very draining.
Speaker 1: So it's very concerning and the only the best thing
Speaker 1: that we can do is to adhere to mask wearing
Speaker 1: and social distancing so that we can try to tamp
Speaker 1: this down. Professor. We appreciate your hard work and your
Speaker 1: contribution to this program. Thank you, Mersides Knathan of Northwestern University.
Speaker 1: Do you and I folk said the same thing. We
Speaker 1: make the mistake of calling it stimulus. What this really
Speaker 1: is is eight it's an aid package to get us
Speaker 1: to the end of Q two. The stimulus, that's something
Speaker 1: you've got to think about after that. I'm really curious
Speaker 1: to see the details of the plan. We're gonna be
Speaker 1: getting it today, but I'm curious to see whether they're
Speaker 1: going to be any direct payments to individuals. The word
Speaker 1: is there won't be. How they get that aid out
Speaker 1: to small businesses. The details matter, John, especially as the
Speaker 1: pandemic is getting worse, and will we get that one
Speaker 1: hundred and sixty billion dollars in state and locally. Tina
Speaker 1: Fordham joins us now even hest head of global political strategy. Tina,
Speaker 1: let's just start with your read on negotiations down on
Speaker 1: Capitol here. It certainly sounds a lot more constructive over
Speaker 1: the last week or so. What's your take, Tina, um Well,
Speaker 1: I always get worried when it starts to sound constructive
Speaker 1: because part of that, you know, signal that talks are
Speaker 1: going well is in itself just uh reflects the political
Speaker 1: imperative for both sides to be seen to be working
Speaker 1: in the country's best interest during this time of crisis.
Speaker 1: You know, everyone uses the same expression the devil in
Speaker 1: the details. I think, um, the observation about this being
Speaker 1: aid rather than stimulus is a very astute one because
Speaker 1: we forget how toxic um the term physical stimulus can
Speaker 1: be in the US context. So I am less optimistic
Speaker 1: actually now than I was the last time, but then
Speaker 1: I was wrong. So um, I think that it's in
Speaker 1: the it's going to be in Republican interests to be
Speaker 1: seen to be driving a very hard bargain, especially as
Speaker 1: we have this signpost of January five, the Georgia runoffs coming.
Speaker 1: So what's the main opposition here? Is it's still the
Speaker 1: state and local funding. Is that going to be the
Speaker 1: main sticking point? I think that there is room for
Speaker 1: for compromise, but that Republicans will be wanting to be
Speaker 1: seen to be driving the harder bargain. And one of
Speaker 1: the new twists that we've uh, you know, we've experienced
Speaker 1: since the presidential elections is Republicans finding religion again on
Speaker 1: on deficit spending. Right, So this or the size of
Speaker 1: the deficit, so um, they are not going to be
Speaker 1: wont to be giving into Democrats. And that's why I
Speaker 1: worry that markets are getting ahead of the politics on
Speaker 1: this one, because we haven't had a Lane duck session
Speaker 1: quite as contentious as this one is likely to be.
Speaker 1: And I'm worried that the scorched earth tendencies um that
Speaker 1: we've seen thus far might actually bleed into the stimulus discussions.
Speaker 1: I'm struggling to see where you the deficit hawks are
Speaker 1: coming back into play here. I mean, even Mitch McConnell,
Speaker 1: he did propose a skinny bill. He did, there was
Speaker 1: talk about him signing onto the bipartisan agreement once the
Speaker 1: details were hashed out. President Trump seems amenable, open to
Speaker 1: the idea of signing off. Who are the deficit hawks, listen.
Speaker 1: I think that we've seen a different tone in Congress.
Speaker 1: I'm here in London talking to you about global macro um.
Speaker 1: I think that the political imperative to get a stimulus
Speaker 1: deal done was there, um, you know, before the elections,
Speaker 1: and was calling it for them. I'm worried that a
Speaker 1: contentious um, particularly contentious and polarized mood, where we even
Speaker 1: haven't even got people willing to recognize the results of
Speaker 1: the presidential elections in the House gives a lot of
Speaker 1: wiggle room to to say that, you know, we want
Speaker 1: to do the right thing for the country, but we
Speaker 1: just can't get there. Tina, You've mentioned the importance of
Speaker 1: language that it's aid, not stimulus, because that word is
Speaker 1: toxic in parts of the country and parts of the
Speaker 1: politics of the United States of America. When you start
Speaker 1: to hear the words state aid to another person, that's
Speaker 1: just a bailout of poorly rand states. And we've heard
Speaker 1: that so many times from the administration. I heard it
Speaker 1: from them directly on Friday A. Tina, I'm wondering, from
Speaker 1: your perspective, is there any way that they can offer
Speaker 1: ad to states without that being considered a state bailout
Speaker 1: of what many Republicans and the electorate might consider to
Speaker 1: be poorly run states. Well, to me, this is all code.
Speaker 1: You know, I'm an American who's been living outside my
Speaker 1: country for over twenty years. There didn't used to be
Speaker 1: this debate about which states were run well by, you know,
Speaker 1: by governors of which side. So I'm really a worried
Speaker 1: that we're even normalizing this discussion. This is the biggest
Speaker 1: crisis in decades in terms of its impact on lives
Speaker 1: and livelihoods. And to suggest that it's in any way
Speaker 1: rational or reasonable to do anything other than passive stimulus
Speaker 1: right now, I think doesn't put the you know, the
Speaker 1: economic interests of the country at heart, Which is why
Speaker 1: I was saying what I did about the return of
Speaker 1: fiscal discipline and frankly finding pretext to avoid doing what
Speaker 1: needs to be done. The United States in a crisis
Speaker 1: where people are losing their lives shouldn't be differentiated between
Speaker 1: poorly run states and well run states that just happened
Speaker 1: to be led by a leader of a particular political stribe.
Speaker 1: So to me, this is a pretext to not do
Speaker 1: what needs to be done, what every economist, central bankers
Speaker 1: you know have all agreed upon. This is getting held
Speaker 1: up in Congress. Well, I think ta one step further.
Speaker 1: I think what totally exposes the intellectual inconsistency and the
Speaker 1: dishonest state in some parts of the debate is that
Speaker 1: those very same people who are unwilling to offer aid
Speaker 1: to what they consider to be poorly run states are
Speaker 1: also considering offering aid to airlines, which many people on
Speaker 1: Wall Street would consider to be poorly run airlines in
Speaker 1: the context that they have no cash when it hit
Speaker 1: the fact, yes, poorly run enterprises, shanking, shrinking enterprises, even
Speaker 1: dying enterprises. Absolutely, So, I guess I think you kind
Speaker 1: of struck a nerve. I'm just not willing to use
Speaker 1: the current terms to to have this debate. This stimulus
Speaker 1: should be passed um. In Europe where I am, governments
Speaker 1: composed of many political parties are are are finding common
Speaker 1: cause and we're seeing these things past so that people
Speaker 1: can move on with their lives. And we have a
Speaker 1: few more months to go. Now. What really worries me
Speaker 1: about what's happening in the United States is we have
Speaker 1: in some ways the worst of all worlds. We have
Speaker 1: haven't even had, you know, kind of fully fledged lockdowns.
Speaker 1: They've been partial, and they've been late. Of vaccine um,
Speaker 1: you know, miraculously or rather thanks to the hard work
Speaker 1: of scientists and epidemiologists, is coming, but we have many
Speaker 1: months to go before that rollout. And markets are very
Speaker 1: buoyant um on the you know, the amazing news that
Speaker 1: vaccine is coming, but we could have many months delay,
Speaker 1: which is why I worry about what I call vacs
Speaker 1: popular risk. The combination of weak state capacity as in country,
Speaker 1: not individual US states, but weak state capacity combined with
Speaker 1: anti vac sentiment um and you know, compounded by these
Speaker 1: kinds of delays in the stimulus that's necessary, could really
Speaker 1: make things pretty problematic in the coming months. Some challenges
Speaker 1: still to come in the net term, that's for sure. Tina,
Speaker 1: thank you, thank you for your time this morning. Tina
Speaker 1: fordom there of even heard when sense of normal? What
Speaker 1: is normally? Then? Look like, let's bring it down on
Speaker 1: BMP Parabaut Chief US Economists ahead of mac cris strategy down.
Speaker 1: We keep hearing that vaccinations coming back half of twenty one,
Speaker 1: it's about the return to normal. What's normal? In the
Speaker 1: conversations that you have, what is normal sound like in
Speaker 1: the back half of twenty one? Yeah? Normal? Uh, thanks
Speaker 1: for the question. Normal probably means a growth range quote,
Speaker 1: a lot closer to to Launder potential in the you know,
Speaker 1: two to two and a half, maybe well one and
Speaker 1: half range, but not the eye poppingly large double digit
Speaker 1: annualized you know, thirty plus and thirty minus, a type
Speaker 1: of growth that we've seen before. But I think, you know,
Speaker 1: beyond just the simple numbers, though it's a real question
Speaker 1: as to uh, not so much. What happens to to demand? UM?
Speaker 1: You know, we think that UM, a lot of demand
Speaker 1: will will try and renormalize UM. But where are the
Speaker 1: areas where UM were Our supply is going to have
Speaker 1: to adjust to a new reality that demand is never
Speaker 1: going to come back. And we were just hearing about
Speaker 1: about people's uh locational preferences. UM. Does this mean that
Speaker 1: demand for high end luxury condos in Manhattan is going
Speaker 1: to change? Does this mean that people's business travel is
Speaker 1: going to change? Does this mean not just avolving demand,
Speaker 1: but does this mean that demand for digital services UM
Speaker 1: is going to be at a new permanent high UM.
Speaker 1: A lot of companies are going to have to adjust
Speaker 1: to this and UM. While this is opportunities for some
Speaker 1: of these are challenges for a lot of others. And
Speaker 1: it raises a question about inflation. How do you measure
Speaker 1: inflation and fundamentally changing economy into one that is more
Speaker 1: dominant dominated by tech. What do you see in terms
Speaker 1: of inflation picking up? And how should we be measuring it? Yeah? Well,
Speaker 1: the classic ways to try and assess where inflation is
Speaker 1: going This, of course, so looking at the measurement of
Speaker 1: outputs lack in the economy, and we actually just released
Speaker 1: our latest global outlook UM where we see UH technical
Speaker 1: measures of slack in the economy UM close by the
Speaker 1: end of two UM. So we do actually UM see
Speaker 1: a bit higher inflation coming UM, putting aside denomination effects
Speaker 1: starting in UH late early three UM. But really, how
Speaker 1: widespread is this gonna be? Is this going to be
Speaker 1: a general move hiring inflation across the overall economy? Are
Speaker 1: we going to see parts of the economy still in
Speaker 1: the doldrums while others are red hot due to you know,
Speaker 1: more more demand. I think that's gonna be UM. And
Speaker 1: And is that going to translate into higher weight pressure
Speaker 1: more generally or again just in a few segments of
Speaker 1: the labor market UM. I think that's a big question
Speaker 1: that actually the new administration will be asking themselves. And
Speaker 1: it's also really hard to even imagine if you think
Speaker 1: about some of the fiscal support plans and the checks
Speaker 1: that if it's set out to individuals, I mean, if
Speaker 1: the government were to engage in another round of helicopter money,
Speaker 1: essentially with that change fundamentally change your view on inflation.
Speaker 1: The United States. Now, I don't think it will fundamentally
Speaker 1: change it, but I do think it will certainly ward
Speaker 1: off some of the risk that we could fall into
Speaker 1: a deflationary trap. I think inflationary expectations, at least as
Speaker 1: you measure them by by market break evens, that they're
Speaker 1: kind of tettering on the edge of potentially moving lower.
Speaker 1: Um if um, this does look like there's going to
Speaker 1: be lasting scars in the economy, and so the you know,
Speaker 1: the big recovery and break evens that we've seen in
Speaker 1: the last couple of months is I think out of
Speaker 1: hope that the scars will be less damaging as the
Speaker 1: vaccine is around the corner. Um. But the question is, uh,
Speaker 1: can there be enough fiscal ports to tide us through
Speaker 1: this transition until the vaccine arrives in a way that
Speaker 1: will continue to support inflationary explications in the future. UM. So,
Speaker 1: I think that's probably the most important way in which
Speaker 1: just this immediate physical support can nevertheless have long term
Speaker 1: impacts of part of the economy. Well, Dan, let's make
Speaker 1: it really simple and just wrap up with this. And
Speaker 1: I think this is why the two thousand that kind
Speaker 1: of number in payrolls like we've got last week is
Speaker 1: so important. How many jobs do we need to actually
Speaker 1: generate to actually fill the gap of the last nine
Speaker 1: months down? And how long would it take it a
Speaker 1: right two fifty k to get it done. Yeah, we're
Speaker 1: talking about uh millions of jobs are still displaced. Now.
Speaker 1: It's a big open question how much of those are
Speaker 1: going to be perfectly lost and how much of them,
Speaker 1: you know, should be prominently lost. I think that's gonna
Speaker 1: be the real sticking point here. Uh uh. You know,
Speaker 1: there's no question that some kinds of jobs are going
Speaker 1: to have to go away. Um, the more the new normal,
Speaker 1: as you said, or the post pandemic normal looks different
Speaker 1: from the pre pandemic norma. But are those necessarily have
Speaker 1: to go away because the new US supply adjust to
Speaker 1: the new reality, or are they unnecessarily caused um uh,
Speaker 1: you know, because of bankruptcies or liquidity is advents or
Speaker 1: things like that. Um. That's uh uh, I'm sure going
Speaker 1: to be in the minds of UM, not just again
Speaker 1: administration officials, but also a Congress UM as they consider
Speaker 1: UM debating this this new stimulus package. Dann writes cash
Speaker 1: ups as always my best to you and at saying Donna.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg
Speaker 1: Radio