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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily

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Speaker 1: we bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. It

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Speaker 1: was a book of the Year a few years ago,

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Speaker 1: and it is a book that has aged well across

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Speaker 1: the financial crisis. The Age of Oversupply Daniel Albert joins

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Speaker 1: us in Westwood Capital. UH this morning. Daniel, It's been

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Speaker 1: an extraordinary year, a year everybody wants to forget as

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Speaker 1: we slide into two thousand twenty one. Where is the

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Speaker 1: output gap? Where is the dynamics of our oversupply? Well,

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Speaker 1: I think we what we've seen recently, which is fascinating,

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Speaker 1: is the huge resurgence in imports from China and the country.

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Speaker 1: So what we haven't seen is the reshoring of manufacturing,

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Speaker 1: the reshoring of production channel. UH. And when I look

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Speaker 1: at the when I look at the import export data,

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Speaker 1: it's it's just fascinating to me how much we are

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Speaker 1: reliant on exaginous oversupply. UH. And of course, at the

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Speaker 1: worst possible time, when a good deal of our labor

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Speaker 1: force is underemployed and unemployed. Well, I want to sorry

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Speaker 1: where I wanted to go, Daniel Airport. Many of us

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Speaker 1: folks have projects for two thousand twenty that we have

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Speaker 1: not accomplished. Dan Alpert is the opposite with Cornell Law.

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Speaker 1: He has put together a terrific analysis of the labor

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Speaker 1: dynamics of the nation. Dan Albert, how bad is it? Well,

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Speaker 1: we have, you know, somewhere around twelve million people who

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Speaker 1: are not employed, whereas prior to the pandemic they were.

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Speaker 1: I think that that masks considerable softness in the labor

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Speaker 1: force that's exhibited every week when we look at unemployed

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Speaker 1: the claims. These unemployment claims are no longer original layoffs,

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Speaker 1: Meaning if you aggregate the entire amount of unemployment claims today,

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Speaker 1: you're nearly thirty of the labor force. And clearly we

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Speaker 1: don't have thirty of the labor force unemployed. So what

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Speaker 1: you're seeing is incredible instability and the ability of workers

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Speaker 1: to hold on to jobs. And you know, classic example

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Speaker 1: of that, obviously is what happened in the restaurant industry

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Speaker 1: over the summer. Uh, you know, warm weather and what

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Speaker 1: have you allowed people to re emerge, open their restaurants,

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Speaker 1: and now you're seeing the same thing play out in reverse. Um.

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Speaker 1: So not just the restaurant sector, but throughout the economy.

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Speaker 1: You're seeing repeat layoffs, repeat unemployment. The same people, many

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Speaker 1: of the same people who filed in the spring, are

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Speaker 1: being forced to refile again. Daniel. How far does this

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Speaker 1: nine billion dollar stimulus effort in Washington, d C. Go

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Speaker 1: to bridge the gap for all of these individuals that

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Speaker 1: you're talking about. It well, as a calendar matter, obviously,

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Speaker 1: it goes through the first quarter, UM And it's clearly uh,

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Speaker 1: you know, enormously enormously necessary. Uh. The three weekly benefit

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Speaker 1: for a weekly supplement for unemployment is urgently needed. These

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Speaker 1: these people are going to go many of these pupplements,

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Speaker 1: all of their benefits. So the extension of the benefits

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Speaker 1: and the addition of the three hundred supplement, it was

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Speaker 1: clearly needed. My big concern right now is the re

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Speaker 1: the re establishment of the PPP program. It's interesting because

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Speaker 1: the PPP program really was an alternative way of getting

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Speaker 1: payroll back to people have not actually been called back

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Speaker 1: to work, but we're given the opportunity to receive funds.

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Speaker 1: The problem this time around isn't so much that the

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Speaker 1: unemployment system isn't working. This three supplements really going to

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Speaker 1: help UH and and we're going to get that. We

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Speaker 1: clearly have a fairly high level household savings. It's gradually

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Speaker 1: burning off. The problem right now is how the businesses

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Speaker 1: are going to survive. So I'm very interested to see

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Speaker 1: the language in the bill, specifically with regard to the

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Speaker 1: use of the new PPP proceeds, Meaning I think it's

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Speaker 1: about two and thirty billion dollars, whether or not businesses

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Speaker 1: are going to be able to use these proceeds not

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Speaker 1: just to supplement or put people back on payroll who

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Speaker 1: they currently can't employ um, but also whether or not

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Speaker 1: they're going to be able to use it for other

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Speaker 1: expenses such as rent and other payables that they've accrued

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Speaker 1: over the last several months. Well, you talked about, in

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Speaker 1: addition to the companies and their concerns, the high savings

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Speaker 1: rate among individuals. Do you think that the direct payments

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Speaker 1: to individuals will be effective given the fact that they

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Speaker 1: will target the people who are most vulnerable, or do

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Speaker 1: you think that that money would have been more efficient elsewhere?

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Speaker 1: But what I do think is going to happen is

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Speaker 1: we're going to see an increase in the savings rate

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Speaker 1: in the first quarters. So you have the six you

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Speaker 1: have the six in a dollar per person checks for

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Speaker 1: the middle class and working class. Those will go out,

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Speaker 1: Those may get expended or they may not. As as

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Speaker 1: the lockdown period demonstrated. In that period we had a

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Speaker 1: huge increase in retention of funds um Right now, given

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Speaker 1: the viral surge, you have to ask yourself whether or

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Speaker 1: not the h this period is going to see the

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Speaker 1: first quarter is going to see an increase in consumption

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Speaker 1: as opposed to savings because if people are sitting at

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Speaker 1: home and worried about the virus and not getting vaccinated

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Speaker 1: until the second or third quarter, um, you know you're

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Speaker 1: you're probably going to see at least some of the

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Speaker 1: same phenomena you saw in in March through June. Dan,

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Speaker 1: congratulations on your work with Cornell Law this year. Truly

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Speaker 1: adding value to the view of our labor economy. Daniel

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Speaker 1: Otforts with Westwood Capital. I can't say enough about it, really,

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Speaker 1: what has become a timeless book over a decade age

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Speaker 1: of oversupply on the fixed income market. George Bori, he

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Speaker 1: is with Wells Fargo and is hugely attuned to the

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Speaker 1: clipping of coupons and the search for total return. George

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Speaker 1: boy In two twenty one, and I contempt to clip

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Speaker 1: a coupon, what little it is, or dare I can say,

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Speaker 1: I'm looking to try to find total return. Yeah, good morning, Tom,

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Speaker 1: and thank you very much, calling from Wells Fargo Asset

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Speaker 1: Management to kind of talk you through fixed income. And

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Speaker 1: as you point out, yields are still very low. But

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Speaker 1: as we said, just mentioned, you can't give up on

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Speaker 1: bonds just yet, whether it's the dollar or U S treasuries.

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Speaker 1: You know, when people get uncertain, you know, bonds to

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Speaker 1: you know, bonds rally and they tend to really be

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Speaker 1: the anchor for your portfolio as we think about next year,

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Speaker 1: what you're seeing right now is a little bit of

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Speaker 1: a reversal of the trend that's been pretty well established.

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Speaker 1: In our view is that as we get into next year,

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Speaker 1: that view is going to continue. Yields are likely to

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Speaker 1: continue to creep a bit higher. And I say a

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Speaker 1: bit because there are a lot of very strong forces

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Speaker 1: you mentioned several already limited inflation growth that's uncertain, the

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Speaker 1: trajectory of COVID it's very difficult to just simply, you know,

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Speaker 1: throw in the towel and give up on your bond trade.

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Speaker 1: Bond yields are low for a very good reason. They're

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Speaker 1: likely to stay pretty low, but we'll see a little

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Speaker 1: bit of incremental move up. So for us, your biggest job,

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Speaker 1: your most important job as a bond investor is number one.

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Speaker 1: It is capital preservation, making sure you maintain the games

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Speaker 1: you've captured over the last one, three, five, ten, twelve,

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Speaker 1: thirty years, bonds have had a great run. Uh, but

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Speaker 1: look for extra income, look for that coupon, look for

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Speaker 1: that just the little bit of payment that's coming your direction.

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Speaker 1: It's not easy, but you know, we do find corners

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Speaker 1: of the market pockets to try and add that in

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Speaker 1: to the portfolio. Georgia, I'm struck by what one noted

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Speaker 1: bond manager said last week, Scott Minor, who came out

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Speaker 1: and said, you don't want to hire an optimistic bond

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Speaker 1: manager because you just want to get paid back. And

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Speaker 1: I'm looking right now, and bond managers seem to be

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Speaker 1: really optimistic when you look at what people are demanding

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Speaker 1: to own the lowest rated debt. Given the fact that

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Speaker 1: companies are still struggling. The economy is not back to normal.

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Speaker 1: Do you feel like people have gotten a little bit

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Speaker 1: exuberant when they've gone into this lowest rated debt given

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Speaker 1: that it's paying almost record low yields at this point,

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Speaker 1: there's a big assumption baked into the markets, and that's

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Speaker 1: that's both fixed income in equities and the first the

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Speaker 1: first big assumption is that the Fed's got your back.

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Speaker 1: The FED is going to be with you every step

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Speaker 1: of the way, and they're they're not going to allow

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Speaker 1: yields to rise significantly. The second is that interest that

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Speaker 1: inflation is going to remain very well contained. Those those

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Speaker 1: are the two factors that I think, you know, we

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Speaker 1: think underpin you know, kind of that bond market enthusiasm,

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Speaker 1: if you will. There's good reason for both of those,

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Speaker 1: as we said, you know, as you mentioned that data

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Speaker 1: looks to support the inflation uh story, And the Fed

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Speaker 1: was pretty committal last week in terms of its willingness

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Speaker 1: to support support the market. So I don't know if

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Speaker 1: it's a it's an optimistic bond investor, but they're certainly content,

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Speaker 1: and there is there is a certain amount of complacency

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Speaker 1: in the market that does concern US, and and and

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Speaker 1: in spots to the market. We think the markets run

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Speaker 1: a little too far, a little too fast. Investment grade

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Speaker 1: corporate debt is one of those parts of the market.

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Speaker 1: If you look this year, an interesting stat you know,

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Speaker 1: spreads are basically credit spreads for corporates are just about

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Speaker 1: back to where they were at the beginning of the year.

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Speaker 1: You're over here, one of the smallest changes in credit

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Speaker 1: spreads almost in history, but one of the largest ranges

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Speaker 1: from top to bottom over the course of the year.

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Speaker 1: So if you look at this in the history books,

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Speaker 1: you're going to say not much happen for investment grade

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Speaker 1: credits spreads in two thousand twenty, But anyone that lives

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Speaker 1: through it knows it's been one heck of a wild ride.

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Speaker 1: Spreads there look tight. We want to take some profits,

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Speaker 1: not sell at all, but take some profits and move

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Speaker 1: that money into other things, maybe a more kind of

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Speaker 1: conservative position in mortgage backed securities higher rated or even

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Speaker 1: go down in quality. And it will take some optimistic,

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Speaker 1: optimistic check optimistic strategies in high yield, which again, but

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Speaker 1: we gotta find We've got to find those coupons. George,

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Speaker 1: just keep plowing through. That's what we all do. I

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Speaker 1: will say, you know, that's that's well done that morning.

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Speaker 1: So if we gotten to the point where safe bonds

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Speaker 1: aren't so safe anymore, well that's a great point, Lisa.

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Speaker 1: And based on that sort of belief about the fan

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Speaker 1: and interest rates, your biggest challenge today is not so

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Speaker 1: much your your sort of your your corporate behavior, but

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Speaker 1: just very long durations. You know, the long maturity you

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Speaker 1: have in a bond with very low yields means any

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Speaker 1: marginal increase in yields could represent a pretty big loss

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Speaker 1: in your portfolio. So we're watching that. As I mentioned

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Speaker 1: capital preservation, you have to be very careful about where

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Speaker 1: you position along the curve. We do have a preference

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Speaker 1: for short to intermediate dated bonds that provides you with

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Speaker 1: a little bit of protection. Long dated purchases need to

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Speaker 1: be for long dated investment. These are these are investments

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Speaker 1: and pensions in saving in very long term savings accounts

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Speaker 1: and for longer duration insurance companies. We want to be

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Speaker 1: careful at the long end of the curve. We want

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Speaker 1: to try and maximize as much yield as possible at

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Speaker 1: the front end. And I think that we think that's

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Speaker 1: a that's a sensible strategy right now, George. I've been

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Speaker 1: doing this way back to fleet and one of the

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Speaker 1: things that upsets me no end is the belief that

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Speaker 1: bond money will move into equities. What is your experience

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Speaker 1: of psychological bond money all of a sudden finding the

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Speaker 1: equity market. Does that actually happen? It happened, not, not

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Speaker 1: not as much as as maybe we think, I mean,

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Speaker 1: there there does you know? Obviously there's there's very large

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Speaker 1: asset allocation teams that are constantly managing between bonds and stocks,

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Speaker 1: and as one runs ahead of the other, you know,

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Speaker 1: they'll allocate back and forth. We have a whole team

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Speaker 1: that does that, many of our competitors do, and that

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Speaker 1: is sort of the balance of the market. The big

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Speaker 1: run up in equities, you know, has driven a fair

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Speaker 1: bit of money into bonds. We expect that trend to continue.

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Speaker 1: We have not seen the trend go the other way,

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Speaker 1: at least not yet. There are some discussions about why

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Speaker 1: you hold bonds and how long you should hold them for,

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Speaker 1: but as it stands today, there's still a bias to

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Speaker 1: move out of equities and into bonds and trying to

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Speaker 1: immunize portfolios as you move through time. So in my

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Speaker 1: long tenure, uh, it's been mostly the other way. And

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Speaker 1: although there's a lot of discussion about it this year,

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Speaker 1: we've yet to really see a meaningful shift going from

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Speaker 1: bonds into equities. But we really don't think that's going

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Speaker 1: to happen just yet. Great Monday briefing, particularly in this market,

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Speaker 1: tomul George Boy, thank you so much, as well as

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Speaker 1: Fertile Asset Management. Mercedes Carnathon is the Northwestern University in Chicago.

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Speaker 1: I should say Evanston. They like to say Evanston, not Chicago.

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Speaker 1: Excuse me, professor and joins us on preventative medicine. Right now, Mercedes,

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Speaker 1: I want you to address to our public on radio

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Speaker 1: and television, how you have less of a fear of

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Speaker 1: mutation of variant as we look at the United Kingdom

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Speaker 1: this morning, how do you, as a pro and preventative

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Speaker 1: medicine treat the known that there will be mutations. Yes,

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Speaker 1: that's a really good point. You know, it is certainly

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Speaker 1: scary to us and concerning when we hear about these mutations,

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Speaker 1: especially when that message is coupled with knew that it

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Speaker 1: is spreading more rapidly. But we've known from multiple viruses

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Speaker 1: over time that they do mutate. That's how they managed

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Speaker 1: to stay alive. They've got to keep changing so that

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Speaker 1: they can keep infecting people and preferably keep their stream

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Speaker 1: of people UH as open as possible by even changing

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Speaker 1: in the long run enough so that they can start

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Speaker 1: to reinfect people. So we do expect this, But why

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Speaker 1: it doesn't concern me quite as much is that the

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Speaker 1: types of vaccines right now that are being developed can

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Speaker 1: address that directly. They they're different than the flu vaccine,

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Speaker 1: which have to be repeated annually um, and so they

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Speaker 1: will right now. We still believe they'll be effective even

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Speaker 1: with mutations. So there's a question about the vaccine, Mercedes,

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Speaker 1: But there's also a question of just how long it

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Speaker 1: will be before we can get back to normal, And

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Speaker 1: given the schedule of the vaccinations, the fact that we've

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Speaker 1: seen a little bit of a delay here in the

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Speaker 1: United States, there's a question about supply chains with the

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Speaker 1: recent lockdown in the United Kingdom. How much does this

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Speaker 1: new strain of the virus prolong the pandemic as we

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Speaker 1: know it. Currently right now, there's no evidence to suggest

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Speaker 1: that the current micro RNA vaccines will not be effective

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Speaker 1: against this new strain, and so I wouldn't say that

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Speaker 1: that's likely to be the delay in our return to normal.

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Speaker 1: What's going to happen. What the delay will be is

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Speaker 1: if our behaviors don't continue to hold the line on

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Speaker 1: social distancing and masking. Because as you think about our

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Speaker 1: vaccine rollout strategy here in the United States, we're first

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Speaker 1: protecting the infrastructure, and that's the medical infrastructure by vaccinating

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Speaker 1: healthcare workers, and then knows with the highest risk of death.

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Speaker 1: So individuals who are older or in nursing homes, but

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Speaker 1: who we aren't vaccinating first are the people we think

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Speaker 1: are the super spreaders. And so as long as that

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Speaker 1: twenty to nine year old group is not being vaccinated,

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Speaker 1: we think they're the ones who are spreading it. And

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Speaker 1: so that's what's going to slow down our return to normal. Mercedes,

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Speaker 1: the success smallpox, of ramis of polio, do you do

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Speaker 1: you place this tragedy in that group and that we

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Speaker 1: can be successful with this vaccine and literally eradicate COVID.

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Speaker 1: You know it's possible. Um However, doing so it's going

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Speaker 1: to take is going to require a global strategy. You know,

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Speaker 1: I was reading concerning reports coming out of Africa, coming

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Speaker 1: out of other developing um out of the continent of Africa,

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Speaker 1: and then coming out of developing world countries where they

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Speaker 1: don't have a vaccine right now, they certainly don't have

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Speaker 1: to have the ability to maintain a vaccine a negative

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Speaker 1: eighty degree celsius, which which is what's required of these

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Speaker 1: two vaccines. And because of global travel eradication is going

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Speaker 1: to be hard if we don't focus our attention on

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Speaker 1: reaching every corner of the world. Mercedes, just quickly here.

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Speaker 1: I'm wondering what you think of the schedule of the

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Speaker 1: vaccinations as they've been laid out. Who is essential and

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Speaker 1: how quickly can they get vaccinated? Yeah? No, I am

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Speaker 1: pleased with the schedule because I think protecting the infrastructure

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Speaker 1: of healthcare workers who have to interact directly with patients

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Speaker 1: who have COVID does need to be our highest priority. Next,

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Speaker 1: we do need to address those who have the highest

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Speaker 1: rate of death or poor outcomes, and so I'm pleased

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Speaker 1: with that. I was also pleased over the weekend to

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Speaker 1: see that essential workers were prioritized. Those individuals who are

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Speaker 1: educating our our children, those individuals who are providing food

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Speaker 1: and manufacturing services that cannot be done from home, so

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Speaker 1: I do think that that is the right route. And

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Speaker 1: if we can bolster the supply chain to get things

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Speaker 1: out to as many people as who want this vaccine

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Speaker 1: by late spring, early summer, perhaps by fall, we can

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Speaker 1: start to see somewhat over return to normal. Mercedes, thank

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Speaker 1: you so much. She's too short of visit today, Sadies

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Speaker 1: Carnithon of Northwestern University and Preventive Medicine. The news here

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Speaker 1: is extraordinary out of the United Kingdom where they are

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Speaker 1: simply overwhelmed with a mutation of variant of the COVID

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Speaker 1: nineteen virus, and there is a shutdown of the United

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Speaker 1: Kingdom with all other nations reacting. One of those best

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Speaker 1: qualified to speak on this is Megan Green, with her

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Speaker 1: time in the United Kingdom now at Harvard Kennedy School

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Speaker 1: and a senior fellow there as well. Megan, with the

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Speaker 1: news of the virus. The stimulus has just been subsumed

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Speaker 1: as well. And am I reading last night and into

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Speaker 1: this morning on the stimulus. It's stunning to me how

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Speaker 1: quickly it will all end. Do you just assume it's

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Speaker 1: almost a stop gip stimulus until we get out to

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Speaker 1: March or April or May. Yes, So the stimulus package

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Speaker 1: Tom was always meant to bridge to the other side,

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Speaker 1: and the other side is a vaccine, which thankfully we

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Speaker 1: have a lot of good news on though I do

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Speaker 1: think this new contagious strain in the UK does raise

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Speaker 1: questions about how quickly this virus will mutate, and whether

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Speaker 1: the vaccine you know, will be effective on it, how

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Speaker 1: often we have to update the vaccine, all those things.

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Speaker 1: But this stimulus really is a stop gap. It's come

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Speaker 1: really late, and it's a little lame. Honestly, it's It's

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Speaker 1: not as big as I would have liked, but it's

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Speaker 1: better than no stimulus the end of the year at all.

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Speaker 1: If we had waited into till the new administration had

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Speaker 1: come into power, particularly if the Republicans control the Senate,

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Speaker 1: then it probably would have been even smaller. So I

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Speaker 1: think this was probably the best that we could have

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Speaker 1: realistically hoped for. Do you expect that policy will be

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Speaker 1: committed within the Biden administration. I know you're gonna say,

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Speaker 1: we gotta wait to see the Georgia elections plural. I

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Speaker 1: get that, But are you optimistic about policy or will

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Speaker 1: it be gridlock as seen for years? So I do

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Speaker 1: think the Biden administer as is committed to both managing

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Speaker 1: this virus, containing it as a top priority, and then

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Speaker 1: to building back better, so taking a more medium term outlook,

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Speaker 1: so not just filling in the hole that we all

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Speaker 1: fell down when we shut down our economies this year,

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Speaker 1: but also looking towards how to upgrade the labor force,

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Speaker 1: how to fundamentally retool our economy for stain sustainability, those

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Speaker 1: kinds of things. But the Biden folks are coming in.

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Speaker 1: They had a really ambitious spending plan, and I think

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Speaker 1: that will be significantly curtailed, so things like healthcare reform,

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Speaker 1: tax reform, that's gonna be a lot harder um now

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Speaker 1: than than it would have been if there had been

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Speaker 1: any kind of significant majority in the Senate, particularly for

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Speaker 1: the Democrats. But whoever wins in Georgia, it's going to

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Speaker 1: be a razor slim majority. So that will mean that,

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Speaker 1: you know, the Biden administration can do everything it wanted

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Speaker 1: to do. So, Megan, you said that this fiscal support

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Speaker 1: bill was a little lame, which I imagine is high

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Speaker 1: level cf A speak, But there is a question of

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Speaker 1: the efficacy and the directness of this support. Do you

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Speaker 1: call it a little lame simply because of the size,

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Speaker 1: because you'd like to have seen it be bigger, or

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Speaker 1: is it because of the type of support being delivered.

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Speaker 1: So both because of the size, I think it should

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Speaker 1: have been somewhere between one and one and a half trillion,

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Speaker 1: and it's it's below that, clearly, but also because it

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Speaker 1: left out any kind of real direct support to state

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Speaker 1: and local governments. So it did offer some indirect support

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Speaker 1: in terms of education, virus um measures, also testing and tracing,

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Speaker 1: but they were generally pretty small. I mean, they devoted

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Speaker 1: less money to um testing and tracing and the vaccine

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Speaker 1: than they did to the airlines, although the airlines, to

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Speaker 1: be fair, was for kind of payroll support, so it's

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Speaker 1: not um useless. But I'm surprised by how little was

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Speaker 1: actually devoted to the virus itself, because unless we can

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Speaker 1: actually contain this virus, we're just going to keep having

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Speaker 1: to do this over and over and over again, passing

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Speaker 1: stimulus after stimulus. So go ahead, Well, no, I mean

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Speaker 1: this such a politicized point, This question of what's the

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Speaker 1: best source of or what's the best method of financing here?

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Speaker 1: Is it to give direct payments to individuals and households,

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Speaker 1: or is it to give money to state and local governments.

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Speaker 1: And it's been so highly politicized because Democrats have been

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Speaker 1: for that state and local funding and Republicans have been

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Speaker 1: adamantly against it. Yet economists have come out also pretty

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Speaker 1: much on either side, with some people saying direct infusions

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Speaker 1: into lower income households is a very direct injection of

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Speaker 1: cash into the economy and others saying that satan local

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Speaker 1: governments need it more. Where do you weigh in on

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Speaker 1: this debate? I think we should have done both. Real

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Speaker 1: borrowing costs are negative, the markets are begging the government

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Speaker 1: to borrow. The FED is begging the government to borrow

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Speaker 1: to fight this war. So I think the answer is

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Speaker 1: we shouldn't have felt strained in the size and we

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Speaker 1: should have allocated money to both. But policy is generally

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Speaker 1: a question of trade offs, and so you know, I

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Speaker 1: think in this case it was inappropriate that we felt

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Speaker 1: we had to accept some trede offs. I think we

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Speaker 1: could have did both. I think another really interesting point

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Speaker 1: in this is the reaction to the FEDS facilities. I

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Speaker 1: think the FED has got to be worried about its

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Speaker 1: own independence down it's through that the Republicans are going

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Speaker 1: to be attacking the FED um throughout this administration, so

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Speaker 1: I think that's a concern as well. Well, let's rip

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Speaker 1: up the scripture, folks. I was going to go through

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Speaker 1: other ways with Megan Green, including Red Sox baseball, but

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Speaker 1: this is more important and Red Sox Baseball, Megan Green.

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Speaker 1: It's another shot at the FED independence. How does the

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Speaker 1: FED defend itself against the battle of independence? Back to

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Speaker 1: mc chesne Martin, so, I think the fan has to

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Speaker 1: be creative in this case. In particular, if the FED

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Speaker 1: can't provide the same kind of cookie cutter programs, then

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Speaker 1: it's just going to have to innovate more. But in

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Speaker 1: an era when you know, central banks globally are trying

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Speaker 1: to not be the only game in town, and they're

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Speaker 1: asking fiscal authorities to step in. If fiscal authorities don't

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Speaker 1: step in, the reality is is that central banks will

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Speaker 1: have to be the only game in town. And to

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Speaker 1: do that, they're going to have to do really unorthodox things.

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Speaker 1: We've already seen that happen in Europe. BCB is offering teltro's,

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Speaker 1: which are subsidies to the banks um and so you

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Speaker 1: know we're gonna need to see Central Bank gyefy and

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Speaker 1: that's gonna be a lot harder for the FED in particular,

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Speaker 1: and the Fed's gonna be much more sensitive to moving

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Speaker 1: into fiscal spy if the Republicans are constantly taking shots

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Speaker 1: at its independence. And we're gonna rip up the script

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Speaker 1: twice with Megan Green. We rarely do that except with

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Speaker 1: Megan Green. And that is Russia with the headline out

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Speaker 1: looking for an output lift on OPEC as well. Brent

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Speaker 1: Crude reacts a little bit. We'll see above fifty and

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Speaker 1: it goes down. I don't want to overplay the movement here,

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Speaker 1: but Megan Green. My book of the year, Daniel jurg

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Speaker 1: In The New Map, and it's real simple. He talks

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Speaker 1: about the new map of OPEC, the new map of Russia,

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Speaker 1: the United States, Saudi Arabia and the rest. Does oil

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Speaker 1: politics matter anymore in your world? Or is that a

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Speaker 1: legacy of another time and place don't matter for who?

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Speaker 1: I guess is the question. It matters less for the

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Speaker 1: US now that shale production means we're a net exporter,

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Speaker 1: but it's still certainly matters. We saw that in March

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Speaker 1: when oil prices started going negative. Kind of what it

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Speaker 1: did to the markets, and also what it started to

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Speaker 1: do to the oil catch Um. It started to prompt

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Speaker 1: much more consolidation. So oil certainly matters, but less for

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Speaker 1: the US, and I didn't Yeah, Lisa, why don't you

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Speaker 1: jump in here and please rip up the script for

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Speaker 1: a third time. We might as well do that. It's

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Speaker 1: a hat trick. I'll rip up the script for a

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Speaker 1: third time. Let's talk consensus and consensus being turned on

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Speaker 1: its head, because that's really been the theme of today,

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Speaker 1: this question of whether a blip in the market's a

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Speaker 1: blip and sentiment really calls into question the consensus that

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Speaker 1: has been so dominant in the economics world. The consensus

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Speaker 1: is that next year will be a lot better and

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Speaker 1: that will continue to grow and potentially start to grow

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Speaker 1: out of the pain that we saw in Where are

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Speaker 1: the cracks in that consensus? Megan, Yes, So I've got

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Speaker 1: to say I've never seen such an overwhelming consensus among

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Speaker 1: economists going into a new year. UM. And so I

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Speaker 1: agree with the consensus. It's hard to disagree that there

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Speaker 1: will be pent up demand released next year off the

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Speaker 1: back of a widely distributed vaccine hopefully UM, and that

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Speaker 1: that should drive at these VON deal is a bit

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Speaker 1: higher the U s L or lower. I think the

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Speaker 1: major potential shortfall of that is is that inflation could

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Speaker 1: pick up, and I actually will die on this hill.

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Speaker 1: I don't think inflation will pick up, but there is

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Speaker 1: a chance that as you get pent up sending released,

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Speaker 1: you could end up getting a small uptick in inflation.

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Speaker 1: Um if if you ended up having central banks feel

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Speaker 1: like they had to hike into that, then a lot

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Speaker 1: of leveraged companies, a lot of countries in e M

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Speaker 1: will get into big trouble. And so I think that's

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Speaker 1: the most vulnerable point in that consensus view. Megga Green,

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Speaker 1: thank you so much so, Harvard Kennedy School, Senior Fellow

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Speaker 1: with Us. Thanks for listening to the Bloomberg Savannas podcast.

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Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

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Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

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Speaker 1: Keene before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio