WEBVTT - Bloomberg Wall Street Week - September 1st, 2023 0:00:00.240 --> 0:00:02.440 This is Bloomberg Wall Street Week. 0:00:02.480 --> 0:00:04.400 And we may not have an overall recession, we're having 0:00:04.400 --> 0:00:06.720 a rolling recession. To kind of roll looks pretty strongly. 0:00:06.720 --> 0:00:08.840 It is when it comes to jobs, the financial stories 0:00:08.920 --> 0:00:09.840 that shape our world. 0:00:09.960 --> 0:00:13.640 Three major regional bank failures send shockwaves through the banking system. 0:00:13.680 --> 0:00:15.440 We're all trying to figure out what to make of 0:00:15.600 --> 0:00:17.000 generative AI. 0:00:16.920 --> 0:00:19.320 Through the eyes of the most influential voices. 0:00:19.440 --> 0:00:22.400 Welcome down, Doctor Paul Krugman, Ryan moynihan, Bank of America, 0:00:22.560 --> 0:00:25.279 deebro Lair of the Paulson Institute, well then Hubbard of 0:00:25.280 --> 0:00:26.280 the Columbia Business School. 0:00:26.280 --> 0:00:30.120 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.280 --> 0:00:33.560 It is all about the regulation for China, for banks, 0:00:33.560 --> 0:00:37.040 for drugs, and certainly for crypto. This is Bloomberg Wall 0:00:37.040 --> 0:00:40.920 Street Week. I'm David Weston. This week special contributor Larry 0:00:41.000 --> 0:00:43.800 Summers of Harvard on the jobs numbers out on the 0:00:43.840 --> 0:00:45.120 eve of Labor Day. 0:00:45.560 --> 0:00:48.239 I still think the road to a soft landing is 0:00:48.280 --> 0:00:52.280 a very difficult one, but this was a step down 0:00:52.440 --> 0:00:53.000 that road. 0:00:53.640 --> 0:00:57.279 Chipwar author Chris Miller, on which chips matter in our 0:00:57.360 --> 0:00:58.560 race with China. 0:00:58.560 --> 0:01:02.520 Holding China back has taken on more prominence in recent. 0:01:02.360 --> 0:01:05.240 Years and former cars are Steve Rattner of will A 0:01:05.280 --> 0:01:08.120 Advisors on what's at stake in the Joya W's battle 0:01:08.200 --> 0:01:11.319 with automakers, including a potential strike of one hundred and 0:01:11.319 --> 0:01:12.640 fifty thousand workers. 0:01:13.000 --> 0:01:15.200 This is certainly the most the highest likely good of 0:01:15.240 --> 0:01:17.640 the strike in a number of years, and probably more 0:01:17.680 --> 0:01:18.920 than fifty percent. 0:01:31.440 --> 0:01:31.840 Global. 0:01:31.840 --> 0:01:34.920 Wall Street spent this last week of summer focused on regulation, 0:01:35.160 --> 0:01:38.200 at least for those not getting a few remaining days 0:01:38.240 --> 0:01:41.160 at the beach. Regulation was certainly high on the agenda 0:01:41.200 --> 0:01:44.280 for Commerce Secretary Romando on her China visit this week, 0:01:44.360 --> 0:01:48.520 telling authorities there that regulatory uncertainty is driving investment away. 0:01:49.200 --> 0:01:54.120 I hear about, you know, unfairness, arbitrary decisions, a lack 0:01:54.160 --> 0:01:56.960 of due process, raids on their businesses that don't want 0:01:57.000 --> 0:02:00.280 to explain, tens of millions of dollars in fines for 0:02:00.520 --> 0:02:03.520 reasons that aren't clear. And as long as that is 0:02:03.560 --> 0:02:06.120 happening on the ground, that makes it very risky for 0:02:06.160 --> 0:02:07.400 you as businesses to do business. 0:02:07.440 --> 0:02:07.560 Yes. 0:02:07.840 --> 0:02:11.760 Back in Washington, President Biden proudly unveiled new regulations to 0:02:11.800 --> 0:02:15.160 start negotiations with drug companies over prices for a list 0:02:15.200 --> 0:02:16.919 of popular pharmaceuticals. 0:02:17.200 --> 0:02:20.560 In January of twenty twenty six, the new prices will 0:02:20.600 --> 0:02:24.840 go into effect. We're not stopping there. Next year, medicaires 0:02:24.919 --> 0:02:29.000 will select more drugs for negotiations, so more America get 0:02:29.040 --> 0:02:31.799 more savors on life saving medications they need deserve. 0:02:32.080 --> 0:02:35.880 While across town, the fdiic imposed new demands on regional 0:02:35.880 --> 0:02:39.160 banks holding long term debt, even though the banks themselves 0:02:39.200 --> 0:02:40.280 don't see the need. 0:02:40.720 --> 0:02:45.320 I see this as a real debate between the banking 0:02:45.360 --> 0:02:50.240 industry and the regulators. And the regulators are rightfully on 0:02:50.440 --> 0:02:53.840 course to ensure a resilient banking system when you look 0:02:53.880 --> 0:02:56.120 at the history of the last fifty years. But the 0:02:56.160 --> 0:02:58.400 bank industry is correct and say look at the last 0:02:58.400 --> 0:03:01.800 ten years and low losses are half at the prior level. 0:03:01.919 --> 0:03:04.600 And a federal appeals court down in Atlanta pushed the 0:03:04.639 --> 0:03:09.000 SEC a big step closer to approving cryptocurrency ETFs, something 0:03:09.040 --> 0:03:11.960 companies like a Gray Scale have been pursuing for a 0:03:11.960 --> 0:03:12.800 good long time. 0:03:13.240 --> 0:03:16.000 We purposely decided to set up shop in the US, 0:03:16.200 --> 0:03:19.280 make use of existing rules and regulations, and it's our 0:03:19.440 --> 0:03:22.960 intention to continue to do so right enabling investors to 0:03:23.000 --> 0:03:25.280 access this innovative asset class, but in a way that 0:03:25.320 --> 0:03:29.280 feels traditional, familiar, and again within those regulatory constraint to 0:03:29.360 --> 0:03:30.639 say that they're often used to. 0:03:31.919 --> 0:03:33.960 What all, those regulations did not get in the way 0:03:34.000 --> 0:03:35.720 of the jobs marker, at least not this month, as 0:03:35.760 --> 0:03:38.880 the US added another one hundred and eighty seven thousand jobs. 0:03:38.880 --> 0:03:41.320 The revisions to last month took that number down some 0:03:41.720 --> 0:03:44.160 and unemployment went up from three point five to three 0:03:44.200 --> 0:03:47.000 point eight percent, but simply because more people were coming 0:03:47.040 --> 0:03:49.840 into the workforce, the markets were entirely sure what to 0:03:49.960 --> 0:03:52.560 make of the numbers, ending the day a bit mixed, 0:03:52.640 --> 0:03:55.560 but for the week overall it was all good, with 0:03:55.640 --> 0:03:57.000 the S and P five hundred and up two and 0:03:57.040 --> 0:03:59.400 a half percent, ending the week at forty five to fifteen. 0:03:59.400 --> 0:04:03.320 That's fifteen points above the median number where our Bloomberg 0:04:03.480 --> 0:04:05.760 ls think will end up the year. Well, the NATSUK 0:04:05.840 --> 0:04:07.840 was up three point twenty five percent and the ten 0:04:07.920 --> 0:04:10.760 year yield lost six basis points to end up just 0:04:10.880 --> 0:04:13.080 over four point one point seven. To help us make 0:04:13.160 --> 0:04:15.280 sense of all this, we welcome now Peter Borish. He's 0:04:15.360 --> 0:04:18.359 chairman and CEO of Computer Trading Corporation. Peter thank you 0:04:18.400 --> 0:04:20.279 so much for being on Wall Street week. Welcome. 0:04:20.480 --> 0:04:23.000 So it's pleasure of bulls. 0:04:22.480 --> 0:04:24.920 A lot of bulls about equities right now. You have 0:04:25.040 --> 0:04:29.480 some doubts about it. Why do you have some doubts, Peter, Well, 0:04:29.520 --> 0:04:30.240 when you look at. 0:04:30.200 --> 0:04:34.240 The strength of the markets, in particularly the interest rate market, 0:04:34.760 --> 0:04:37.960 and as well as what the FED GDP now came 0:04:37.960 --> 0:04:41.159 out today with growth over five percent, it's hard to 0:04:41.200 --> 0:04:44.000 think that the Fed is going to pause right here. 0:04:45.000 --> 0:04:49.080 And in fact, our thinking is that the Fed may raise, 0:04:49.279 --> 0:04:51.680 it may hold on. I don't think it's going to 0:04:51.800 --> 0:04:54.360 raise again the rest of this year, but there's very 0:04:54.400 --> 0:04:58.880 low probability that the Fed cuts between now and election day, 0:04:59.520 --> 0:05:02.720 and the yield curve itself, which as we know has 0:05:02.760 --> 0:05:06.679 been inverted, is likely to move back towards its normal state. 0:05:07.160 --> 0:05:09.000 And if you think about that, if you have four 0:05:09.040 --> 0:05:12.440 percent nominal growth, then the FED now was over five 0:05:12.960 --> 0:05:15.800 and then you have two percent real interest rates, you 0:05:15.800 --> 0:05:18.640 could see that the ten year, which is at four 0:05:18.800 --> 0:05:22.120 seventeen as you just showed, could easily go towards where 0:05:22.120 --> 0:05:24.000 the FED funds rate is, which is five and a 0:05:24.040 --> 0:05:26.880 half to six percent, by the middle of the next year. 0:05:27.160 --> 0:05:29.560 And those higher rates are just about never good for 0:05:29.560 --> 0:05:31.960 accuracies now, But there are other issues out there as well. 0:05:31.960 --> 0:05:34.839 We have a looming possible strike with you, maybe a 0:05:34.880 --> 0:05:37.360 government shutdown. But what are the risks in the fourth 0:05:37.440 --> 0:05:38.479 quarter for the economy? 0:05:39.839 --> 0:05:43.280 Well, if we have a government shutdown and you know 0:05:43.360 --> 0:05:47.360 that Congress comes back in next week, and think about 0:05:47.400 --> 0:05:50.600 all the spending that needs to take place. You had 0:05:50.640 --> 0:05:54.160 the hurricane in Florida, you had the tragedy in Hawaii. 0:05:54.360 --> 0:05:57.279 If all of that is shut down, that could really 0:05:57.320 --> 0:06:01.279 significantly slow the economy. But it's temporar, so the FED 0:06:01.560 --> 0:06:04.320 is not likely to do anything or go off course. 0:06:04.800 --> 0:06:09.320 That could then be very challenging for equity markets because 0:06:09.760 --> 0:06:14.280 with government spending going down, aggregate demand will be reduced 0:06:14.320 --> 0:06:17.600 in proportion and that will hurt stocks. 0:06:18.080 --> 0:06:20.159 So, Peter, what does that tell you as an investor? 0:06:20.160 --> 0:06:22.080 Where do you run to hide if in fact we 0:06:22.200 --> 0:06:23.719 have some of these risks out there. 0:06:25.120 --> 0:06:27.919 Well of the great places to hide, of course, is 0:06:27.920 --> 0:06:31.560 in short term treasuries because they're paying a high yield, 0:06:31.920 --> 0:06:34.679 they're safe. It keeps you out of the whole debate 0:06:34.720 --> 0:06:36.760 of you know, are they going to raise is the 0:06:36.839 --> 0:06:40.240 yield career going to move? And I always say, the 0:06:40.320 --> 0:06:44.279 hardest thing in life is to rebalance a portfolio. And 0:06:44.320 --> 0:06:47.320 if you've had a great run this year, particularly in 0:06:47.400 --> 0:06:51.200 some of the tech names going back and rewaiting your 0:06:51.279 --> 0:06:54.760 portfolio to where your weights should be as an investor 0:06:55.839 --> 0:06:59.680 is something to do. It's always a challenge to do 0:06:59.760 --> 0:07:04.839 that because everybody thinks that it's going to continue to 0:07:04.880 --> 0:07:08.479 go higher. But with volatility goes up, those stocks that 0:07:08.520 --> 0:07:11.520 have gone up the most are also likely to be 0:07:11.560 --> 0:07:12.320 the most volable. 0:07:12.520 --> 0:07:15.680 So with volatility, if in fact does go up, Peter, 0:07:15.760 --> 0:07:17.200 does that mean you want to be as short term 0:07:17.200 --> 0:07:18.960 as you can across the board, whether it's cash or 0:07:19.080 --> 0:07:20.800 short term bombs, whether it's something else. 0:07:22.680 --> 0:07:24.880 I think you want to go shorter term because that's 0:07:24.920 --> 0:07:29.280 the nature of volatility and uncertainty. And from that cut 0:07:29.400 --> 0:07:33.360 type of perspective, when you look at the breakout of energy, 0:07:33.600 --> 0:07:36.720 when you look at the strength of the dollar, these 0:07:36.760 --> 0:07:40.680 things are all telling you that the US economy is 0:07:40.760 --> 0:07:43.480 far stronger relative to the rest of the world, and 0:07:43.520 --> 0:07:48.239 that's going to continue to put pressure on rates, particularly 0:07:48.800 --> 0:07:51.520 on the longer end, and that will likely add to 0:07:51.760 --> 0:07:53.080 stress in the equity market. 0:07:53.440 --> 0:07:56.480 Peter. One last one here, China. China's the news just 0:07:56.520 --> 0:07:58.560 about every single day. The economy is not going as 0:07:58.600 --> 0:08:00.560 well as President you would like it, keep trying to 0:08:00.560 --> 0:08:02.679 do something to show it up. How does that affect 0:08:02.800 --> 0:08:07.560 the United States economy? And for that mare US investors, Well. 0:08:07.600 --> 0:08:11.880 China is kind of exporting deflation. You could see that 0:08:12.040 --> 0:08:15.160 in the relative value of the wand versus the dollar, 0:08:15.520 --> 0:08:20.400 and in markets all marginal demand matters. If China is 0:08:20.440 --> 0:08:24.320 not supplying that in their case being the largest or 0:08:24.320 --> 0:08:27.320 the second largest economy, depending on how you measure it, 0:08:27.840 --> 0:08:31.240 that will then put stress on prices, and that in 0:08:31.280 --> 0:08:35.840 itself is a little deflationary, which is ironic right. Higher 0:08:35.960 --> 0:08:41.360 energy prices where demand is an elastic, causes some substitution effect. 0:08:41.520 --> 0:08:46.240 A stronger dollar is also deflationary, and that too could 0:08:46.320 --> 0:08:51.959 be a stress point for profit margins for companies as 0:08:52.000 --> 0:08:54.320 we go into fourth quarter earnings in October. 0:08:54.559 --> 0:08:56.319 Peter, really great to have you please come back for 0:08:56.360 --> 0:08:59.679 wall streaming. That's Peter Borsh of computer trading. And as 0:08:59.679 --> 0:09:01.960 we get into this Labor Day weekend in the United States, 0:09:01.960 --> 0:09:04.280 we turned to Lewis Rockeiser remind us about what this 0:09:04.320 --> 0:09:07.040 weekend looked like back in nineteen eighty nine, a time 0:09:07.160 --> 0:09:09.680 like now when the dollar was strong, but when consumer 0:09:09.720 --> 0:09:11.559 debt was on the way down rather than on the 0:09:11.600 --> 0:09:12.000 way up. 0:09:16.200 --> 0:09:19.520 Indeed, this Labor Day week found all the financial markets 0:09:20.000 --> 0:09:24.600 laboring a bit themselves, while bonds encouraged by a husky dollar, 0:09:25.160 --> 0:09:28.200 and the late report on lower consumer debt finished with 0:09:28.240 --> 0:09:31.680 a gain. Stocks went down for the first time in 0:09:31.880 --> 0:09:33.040 ten weeks. 0:09:34.679 --> 0:09:36.760 This is Wall Street Week on Bloomberg. 0:09:39.080 --> 0:09:43.320 This is Bloomberg Wall Street Week with David Weston from 0:09:43.440 --> 0:09:46.000 Bloomberg Radio. 0:09:50.880 --> 0:09:52.960 This is Wall Street Week. I'm David Weston. We're joined 0:09:53.000 --> 0:09:54.920 once again by our very special contributor here in Wall 0:09:54.920 --> 0:09:57.080 Street Week. He is Larry Summers of Harvard. So, Larry, 0:09:57.360 --> 0:10:00.679 you have been concerned about inflation for some time now, 0:10:00.960 --> 0:10:02.920 and you suggested that maybe we need to see a 0:10:02.920 --> 0:10:04.840 little looser labor market if we're going to get our 0:10:04.880 --> 0:10:07.400 arms right. Given the jobs numbers that came out on Friday, 0:10:07.440 --> 0:10:10.680 are you feeling a little more sanguine about inflation today? 0:10:11.440 --> 0:10:16.160 I think these were good numbers. The economy still looks strong, 0:10:16.840 --> 0:10:23.280 with reasonably robust employment growth slightly greater than expected. Hours 0:10:24.200 --> 0:10:29.480 per week ticked up, which is another favorable indicator. Yes, 0:10:29.600 --> 0:10:32.800 the unemployment rate went up but it was driven by 0:10:32.800 --> 0:10:35.320 the fact that more people want to be working and 0:10:35.440 --> 0:10:39.800 have been pulled into the labor force, and that all 0:10:39.880 --> 0:10:45.160 happened with wage growth slightly less than was expected. So 0:10:45.520 --> 0:10:49.600 I think it's a mistake to make definite judgments based 0:10:49.640 --> 0:10:54.920 on one number. But this is certainly a favorable set 0:10:54.960 --> 0:11:00.280 of numbers, which should please policymakers both on Constitutional you 0:11:01.679 --> 0:11:06.520 and on Pennsylvania Avenue. I still think the road to 0:11:06.600 --> 0:11:10.559 a soft landing is a very difficult one, but this 0:11:10.760 --> 0:11:15.880 was a step down down that road. 0:11:16.040 --> 0:11:17.920 So let me pick up an analogy, and you've used 0:11:17.920 --> 0:11:20.319 on this program before about trying to land the plane. 0:11:20.960 --> 0:11:23.040 Given these numbers, is at least it look like that 0:11:23.120 --> 0:11:25.760 we're on the right glide path. Not saying we'll succeed, 0:11:25.800 --> 0:11:27.080 but we're at least on the right path. 0:11:27.400 --> 0:11:34.040 These numbers are consistent with very optimistic scenarios. I don't 0:11:34.080 --> 0:11:40.600 think they determine that they're in a very optimistic scenario. 0:11:40.920 --> 0:11:44.040 But there are all sorts of things that could have 0:11:44.120 --> 0:11:48.880 been alarm bells in today's numbers that didn't ring. And 0:11:49.400 --> 0:11:54.120 that alarm bell that didn't ring, like Sherlock Holmes proverbial 0:11:54.240 --> 0:12:03.839 dog that didn't bark, is a meaningful that should be recognized, 0:12:04.400 --> 0:12:08.040 you know, David, as I look to the wage picture, though, 0:12:08.760 --> 0:12:11.720 I do see and I think it's very hard for 0:12:11.800 --> 0:12:16.280 anybody to evaluate the significance of this. A degree of 0:12:16.440 --> 0:12:23.040 labor restiveness in our country, potential strike activity that. 0:12:22.960 --> 0:12:25.559 We have not seen in a very long time. 0:12:26.160 --> 0:12:30.800 The Hollywood writers are getting attention, joined by the actors. 0:12:31.240 --> 0:12:31.680 There was a. 0:12:31.720 --> 0:12:38.440 Quite strong wage settlement that was probably not consistent with 0:12:38.600 --> 0:12:44.360 two percent inflation at UPS a few weeks ago. And 0:12:44.400 --> 0:12:48.199 of course the big thing out there is the talks 0:12:48.320 --> 0:12:56.000 between the automobile companies and the auto workers. That's traditionally 0:12:56.080 --> 0:13:00.440 been a major template in the economy. The union is 0:13:00.559 --> 0:13:05.160 very ambitious in what it is asking for, and there's 0:13:05.200 --> 0:13:08.600 been a lot of a lot of workers left behind 0:13:08.720 --> 0:13:12.480 and the companies have done well. So one can understand 0:13:12.920 --> 0:13:17.280 the union being very ambitious. But how that works through, 0:13:18.080 --> 0:13:21.480 both in terms of potential disruption to the economy if 0:13:21.520 --> 0:13:26.760 there's a strike and in terms of inflation pressures is 0:13:26.840 --> 0:13:29.160 going to be something people need to watch over the 0:13:29.200 --> 0:13:29.800 next month. 0:13:30.360 --> 0:13:32.679 Let's turn to the international fraud if we could. We 0:13:32.679 --> 0:13:35.080 were all focused on j Pol and Jackson Hole last week, 0:13:35.320 --> 0:13:37.319 but there were it was the meeting of the Bricks, 0:13:37.320 --> 0:13:40.120 so called Bricks, where they added another six countries. So 0:13:40.200 --> 0:13:43.040 this organization, originally it wasn't an organization at all. It 0:13:43.080 --> 0:13:46.360 was sort of something developed by Goldman Sachs for investment pursoes. 0:13:46.360 --> 0:13:48.839 Now it takes on a life of its own. It's 0:13:48.880 --> 0:13:51.280 a wide range of economies. They've added all the way 0:13:51.280 --> 0:13:53.319 from Argentina on the one hand, to sid Arabia and another. 0:13:53.760 --> 0:13:56.920 Is this a potential economic threat or challenge at least 0:13:56.920 --> 0:13:57.720 to the United States? 0:13:58.600 --> 0:14:01.240 I think right now it's a symptom of our failure. 0:14:02.200 --> 0:14:09.400 It's a symptom of the sin of bipartisan economic nationalism 0:14:09.880 --> 0:14:13.320 in our country. We are not able to sustain support 0:14:13.400 --> 0:14:17.920 for trade agreements. We have great difficulties sustaining support for 0:14:18.240 --> 0:14:27.920 contribution to international organizations. We have lagged in our boldness 0:14:28.200 --> 0:14:34.760 in putting forth proposals to address global challenges. And so 0:14:34.960 --> 0:14:40.280 it's natural that the FORUA where we're seen as leaders 0:14:40.760 --> 0:14:44.040 start to recede, and there starts to be a demand 0:14:44.360 --> 0:14:49.840 for other forums. And so I think if we want 0:14:49.880 --> 0:14:52.880 to address this, we are going to have to move 0:14:52.920 --> 0:14:58.840 away from the economic nationalism that was so central to 0:14:59.520 --> 0:15:03.800 President Trump, that was really the essence of what he said, 0:15:04.040 --> 0:15:08.680 don't cooperate with other nations, just compete with other nations. 0:15:09.240 --> 0:15:14.600 But that, frankly, has been maintained in the last while, 0:15:15.120 --> 0:15:19.480 with our emphasis on various kinds of import restrictions, our 0:15:19.520 --> 0:15:26.720 emphasis on By America policies, our reluctance to introduce trade. 0:15:27.520 --> 0:15:29.440 Okay, Larry, thank you so very much for being back 0:15:29.440 --> 0:15:31.960 with us, as Larry Summers of Harvard our special contributor 0:15:32.000 --> 0:15:36.640 here on Wall Street Week. Commerce Secretary Romando spent part 0:15:36.640 --> 0:15:39.000 of the week in Beijing trying to build a foundation 0:15:39.040 --> 0:15:42.640 for future US China relations, an important part of which 0:15:42.680 --> 0:15:45.400 we'll center on semiconductors, to say us through what is 0:15:45.440 --> 0:15:48.480 at stake and what the realistic options may be. We're 0:15:48.480 --> 0:15:52.080 welcome now, Associate Professor of International History at tuft's Fletcher School, 0:15:52.160 --> 0:15:54.720 Chris Miller. Doctor Miller is the author of Chip War, 0:15:55.200 --> 0:15:58.240 The Fight for the World's most Critical Technology. So, Professor, 0:15:58.240 --> 0:15:59.840 thanks so much for joining us. I've learned what I 0:15:59.920 --> 0:16:02.480 know know about chips mainly from your book, so thank 0:16:02.520 --> 0:16:04.280 you very much for that. Let me start with the 0:16:04.280 --> 0:16:07.240 most basic question. If we talk about a race between 0:16:07.240 --> 0:16:10.280 the United States and China right now in high tech, 0:16:10.520 --> 0:16:14.800 particularly involving these semiconductor these chips. Who's ahead and how far? 0:16:16.240 --> 0:16:20.120 Well, today there's an international coalition of the US, Japan, 0:16:20.240 --> 0:16:24.320 the Netherlands, and Taiwan, all of whom produce technologies that 0:16:24.400 --> 0:16:28.360 are necessary for advanced chip making. The most advanced chips 0:16:28.360 --> 0:16:33.600 themselves are actually manufactured largely in Taiwan, which is multiple 0:16:33.720 --> 0:16:37.120 generations ahead, almost a decade ahead of the capabilities that 0:16:37.320 --> 0:16:38.800 the leading Chinese firms have. 0:16:39.760 --> 0:16:41.440 When we talk about chips, one of the things that 0:16:41.560 --> 0:16:44.120 secuar Armando emphasized, and we've heard it before from the 0:16:44.120 --> 0:16:47.040 adminstration emphasizes this week was we want to separate national 0:16:47.080 --> 0:16:51.600 security concerns from basic commercial concerns in our competition with China. 0:16:51.720 --> 0:16:54.240 Is that doable when we're talking about these very very 0:16:54.320 --> 0:16:55.800 high end, cutting edge chips. 0:16:56.480 --> 0:16:58.720 Well, there are certain types of chips that are only 0:16:58.800 --> 0:17:01.479 used in civilian or old to use the military applications. 0:17:01.520 --> 0:17:03.600 But when you're looking at the chips that are used 0:17:03.640 --> 0:17:07.439 for training AI systems, they're used in both. The exact 0:17:07.520 --> 0:17:09.800 same type of chip that can train a car to 0:17:09.960 --> 0:17:13.280 drive autonomously can also be used to train a drone 0:17:13.359 --> 0:17:17.320 to fly autonomously. There's just no technological way of differentiating. 0:17:17.359 --> 0:17:20.560 And that's why the US controls on the transfer of 0:17:20.600 --> 0:17:22.800 AI chips to China are going to have both a 0:17:22.840 --> 0:17:25.600 military but also a civilian and commercial impact. 0:17:25.920 --> 0:17:29.240 So far, we've been talking about export restrictions, other restrictions 0:17:29.240 --> 0:17:32.240 to keep China from catching up. What about attempts to 0:17:32.280 --> 0:17:34.879 really build up the capability of the United States and 0:17:34.920 --> 0:17:37.640 other Western countries. And let's talk specifically about the Chips 0:17:37.640 --> 0:17:39.800 and Science Act, because that was built of something that 0:17:39.840 --> 0:17:41.560 we needed to do so that we had our own 0:17:41.680 --> 0:17:44.520 home grown How realistic is that we can, through the 0:17:44.600 --> 0:17:47.400 Chips and Science Act and other activities, build up our 0:17:47.400 --> 0:17:50.280 capacity here to match, for example, what we're seeing with 0:17:50.320 --> 0:17:51.920 TSMC over in Taiwan. 0:17:53.119 --> 0:17:55.480 Well, the US is never going to be independent in 0:17:55.520 --> 0:17:58.159 semiconductors because the supply chain is just too and related 0:17:58.240 --> 0:18:01.639 with Taiwan, with Japan, with Europe. But the goal of 0:18:01.640 --> 0:18:04.679 the Chips and Science Act is to put more money 0:18:04.720 --> 0:18:08.119 behind equalizing the cost of producing chips in the US 0:18:08.200 --> 0:18:10.560 relative to other places in Asia. 0:18:10.640 --> 0:18:12.920 Okay, Chris, thank you so much for being this really 0:18:12.920 --> 0:18:16.400 appreciated best. Professor Chris Miller of the Fletcher School at 0:18:16.440 --> 0:18:21.520 Tufts coming up as the US heads into labor day. 0:18:21.600 --> 0:18:24.880 The auto industry heads toward a standoff in two weeks 0:18:25.119 --> 0:18:28.399 with the three major automakers. We go over the bidding 0:18:28.600 --> 0:18:31.160 and the likelihood of a major strike. With the man 0:18:31.160 --> 0:18:34.960 who ran President Obama's successful effort to remake the auto industry, 0:18:35.280 --> 0:18:37.040 Stephen Rattner of Willet. 0:18:36.680 --> 0:18:40.480 Advisors, Hi'm a great believer in unions. While when you 0:18:40.560 --> 0:18:44.560 start talking about work goals, then you start cutting into productivity. 0:18:44.960 --> 0:18:47.200 That's next on Wall Street Week on Bloomberg. 0:18:49.200 --> 0:18:53.400 This is Bloomberg Wall Street Week with David Weston from 0:18:53.520 --> 0:19:00.280 Bloomberg Radio. 0:19:02.000 --> 0:19:05.199 The most pro union president in American history, that's what 0:19:05.320 --> 0:19:07.040 Joe Biden proudly calls himself. 0:19:07.320 --> 0:19:11.040 I made a commitment I'd be the most pro union 0:19:11.080 --> 0:19:14.640 president of American history. I'm keeping that problem. 0:19:14.600 --> 0:19:16.920 And this summer he's getting the chance to prove it, 0:19:17.040 --> 0:19:19.320 as a series of labor disputes have hit the country 0:19:19.320 --> 0:19:22.760 in rapid sequence, starting with the threatened strike of UPS 0:19:22.800 --> 0:19:26.399 workers avoided when management agreed to a very large pay raise. 0:19:26.800 --> 0:19:27.280 First year. 0:19:27.320 --> 0:19:31.080 Analysts eight ya Hearts out UPS drivers could make one 0:19:31.160 --> 0:19:34.280 hundred and seventy thousand dollars a year in annual paying 0:19:34.359 --> 0:19:36.720 benefits thanks to a new five year contrent. 0:19:36.560 --> 0:19:39.640 Added to the ongoing strike by Hollywood writers who were 0:19:39.640 --> 0:19:42.320 followed out the door by the actors, with the prospect 0:19:42.400 --> 0:19:44.280 of it going well into the ball. 0:19:44.680 --> 0:19:47.800 All of our members know that they are fighting for 0:19:47.840 --> 0:19:50.560 something that is existential for them. This is about the 0:19:50.600 --> 0:19:53.719 future of being able to be an actor in this industry. 0:19:53.760 --> 0:19:56.560 It's about making sure AI doesn't take away their jobs. 0:19:56.800 --> 0:19:59.000 And now we have what may be the biggest one 0:19:59.040 --> 0:20:01.320 of all is the un AW is threatened to strike 0:20:01.400 --> 0:20:04.919 forward and perhaps others unless its demands are met. With 0:20:05.000 --> 0:20:07.800 a deadline looming not long after Labor Day. 0:20:07.960 --> 0:20:10.680 We have a potentially massive auto strike on the horizon. 0:20:10.760 --> 0:20:12.600 You have the head of the United Autoworkers Union is 0:20:12.600 --> 0:20:15.439 now threatening to strike against gm Ford and Stilantis, the 0:20:15.480 --> 0:20:18.400 Big Three, unless workers get a forty six percent raise, 0:20:18.720 --> 0:20:21.520 a return to traditional pensions, and a thirty two hour 0:20:21.600 --> 0:20:24.760 work week. 0:20:25.760 --> 0:20:28.959 Liz Schuler, the head of the afavel Cio, says there 0:20:29.000 --> 0:20:31.160 are larger issues at stake for the workers. 0:20:31.600 --> 0:20:35.879 It's about workers feeling taken for granted, having sacrificed through 0:20:35.920 --> 0:20:41.480 a pandemic, workers feeling disrespected knowing that they have sacrificed 0:20:41.520 --> 0:20:45.399 for these companies, and yet the in an era of 0:20:45.480 --> 0:20:48.040 record profits, that these companies can't find just a little 0:20:48.040 --> 0:20:50.120 bit more to take care of the people who are 0:20:50.160 --> 0:20:51.760 making them successful. 0:20:52.040 --> 0:20:55.240 But employers like UPS warned that accommodating all the union 0:20:55.240 --> 0:20:57.720 demands can only hurt their performance. 0:20:58.200 --> 0:21:01.320 Looking at expense in the US sect, the union wage 0:21:01.400 --> 0:21:04.480 rate increases, including in our new labor agreements in the 0:21:04.520 --> 0:21:06.840 first year, are higher than we originally planned. 0:21:07.240 --> 0:21:09.720 However, it all comes out. The one thing that's for 0:21:09.760 --> 0:21:12.879 sure is that taking the uaw's one hundred and fifty 0:21:12.960 --> 0:21:15.720 thousand employees out of the jobs market would pose a 0:21:15.760 --> 0:21:17.840 major problem for the US economy. 0:21:18.200 --> 0:21:20.520 We have our auto sector coming back strong. 0:21:21.040 --> 0:21:25.920 We have deep investments in this transition to electric vehicles, 0:21:26.040 --> 0:21:32.120 so we want to continue those trends going to take 0:21:32.200 --> 0:21:35.160 us through where we are on the UAW negotiations. Welcome 0:21:35.200 --> 0:21:38.199 now someone who knows the US auto industry like few others. 0:21:38.480 --> 0:21:41.720 Stephen Ratner headed President Obama's Task Force on the Auto 0:21:41.720 --> 0:21:44.080 industry in two thousand and nine, leading to its restructuring, 0:21:44.200 --> 0:21:46.840 and many would say it's salvation. He is chairman and 0:21:46.920 --> 0:21:49.359 CEO of Will and Advisors, which invests the personal and 0:21:49.359 --> 0:21:52.119 philanthropic assets of Michael Bloomberg, who of course is our 0:21:52.119 --> 0:21:54.720 founder and majority shareolder Steve, thanks so much for being 0:21:54.760 --> 0:21:58.000 back with us. You do know these things so terribly well. 0:21:58.119 --> 0:21:59.840 Give us your sense for a distance. I understand you 0:22:00.160 --> 0:22:02.680 in the negotiations, But what is separating the two sides 0:22:02.720 --> 0:22:04.680 in UW on the one hand and the big three 0:22:04.720 --> 0:22:05.600 automakers on the other. 0:22:05.920 --> 0:22:07.920 I would say, roughly, there's something the size of the 0:22:07.960 --> 0:22:12.080 Pacific coach. This is really a scary situation. We've had many, 0:22:12.119 --> 0:22:16.080 many labor negotiations between the autoworkers and the UAW of 0:22:16.119 --> 0:22:19.199 over the decades. We've had some strikes, unfortunately, but some 0:22:19.280 --> 0:22:23.280 of them probably were inevitable or even perhaps necessary. This 0:22:23.440 --> 0:22:27.719