1 00:00:00,160 --> 00:00:03,360 Speaker 1: This is Bloomberg Wall Street Week. What's the state of 2 00:00:03,400 --> 00:00:06,360 Speaker 1: corporate governance? The deficit is a real issue. The US 3 00:00:06,400 --> 00:00:09,800 Speaker 1: economy continues to send mixed signals to the financial stories 4 00:00:09,800 --> 00:00:12,680 Speaker 1: that cheap our world fed action to con concerns over 5 00:00:12,760 --> 00:00:16,240 Speaker 1: dollar liquidity and encouraging China data. The five hundred wealthiest 6 00:00:16,239 --> 00:00:18,360 Speaker 1: people in the world. Through the eyes of the most 7 00:00:18,480 --> 00:00:22,520 Speaker 1: influential voices Larry Summers, the former Treasury Secretary, Star CEO, 8 00:00:22,640 --> 00:00:26,360 Speaker 1: Kevin Johnson sec Chairman j Clayton. Bloomberg wool Street Week 9 00:00:26,480 --> 00:00:30,960 Speaker 1: with David Weston from Bloomberg Radio Science gave us some hope. 10 00:00:31,520 --> 00:00:35,640 Speaker 1: The economic numbers they gave us none. This is Bloomberg 11 00:00:35,680 --> 00:00:39,640 Speaker 1: Wall Street Week. I'm David Weston. Welcome back. Equity markets 12 00:00:39,640 --> 00:00:42,839 Speaker 1: held up pretty well this week, although below the surface 13 00:00:43,000 --> 00:00:45,440 Speaker 1: there are clearly some winners and some losers who are 14 00:00:45,440 --> 00:00:48,080 Speaker 1: emerging and judging for what we saw this week, big 15 00:00:48,120 --> 00:00:50,720 Speaker 1: tech is tending to come out on top. That's something 16 00:00:50,720 --> 00:00:53,680 Speaker 1: we talked with Wall Street Week contributor Sam Paulmisano about. 17 00:00:53,920 --> 00:00:57,480 Speaker 1: He is the former CEO of IBM. It's interesting, Dave, 18 00:00:57,520 --> 00:00:59,360 Speaker 1: if you watch what's going on. I mean, the guys 19 00:00:59,440 --> 00:01:02,440 Speaker 1: that are well position into the pandemic are continuing to 20 00:01:02,520 --> 00:01:05,720 Speaker 1: do well, especially those that are providing services like you 21 00:01:05,720 --> 00:01:10,000 Speaker 1: were mentioning connectivity in business as well as to the individual, 22 00:01:10,040 --> 00:01:12,160 Speaker 1: and we all connect with our families that way. In 23 00:01:12,160 --> 00:01:17,720 Speaker 1: this environment, issues associated with the entertainment in the home 24 00:01:17,800 --> 00:01:20,280 Speaker 1: and those kinds of things facilitating that. And you see 25 00:01:20,280 --> 00:01:23,160 Speaker 1: that also in the large tech companies, especially those that 26 00:01:23,200 --> 00:01:26,200 Speaker 1: are have other business models, but also like YouTube with 27 00:01:26,319 --> 00:01:29,920 Speaker 1: part of Google, etcetera, etcetera. Alphabet now, so fundamentally, you know, 28 00:01:29,959 --> 00:01:31,679 Speaker 1: you see a lot of that going on. I think 29 00:01:31,720 --> 00:01:35,559 Speaker 1: that the broader trend long term for tech is how 30 00:01:35,800 --> 00:01:40,480 Speaker 1: behavior is changing and how tech isn't facilitating that change. 31 00:01:40,959 --> 00:01:45,080 Speaker 1: There's some classic examples. One I think that leaps off 32 00:01:45,120 --> 00:01:49,320 Speaker 1: the charts is telemedicine. I mean telling medicine obviously uses 33 00:01:49,360 --> 00:01:53,240 Speaker 1: the connectivity technology, whether that be web bacs or zoom 34 00:01:53,360 --> 00:01:55,640 Speaker 1: or whatever it happens to be, but fundamentally, at the 35 00:01:55,720 --> 00:01:57,520 Speaker 1: end of the day, it's a whole different web of 36 00:01:57,520 --> 00:02:00,320 Speaker 1: practicing medicine. Now, this has been around for a while, 37 00:02:00,400 --> 00:02:02,720 Speaker 1: and their companies like Hell that I've known quite well, 38 00:02:03,040 --> 00:02:05,320 Speaker 1: have been around, but as soon as it was approved 39 00:02:05,360 --> 00:02:08,679 Speaker 1: from a payment perspective, the insurance companies in medicare, etcetera. 40 00:02:09,120 --> 00:02:12,560 Speaker 1: These now approaches have lit up. Now that the point 41 00:02:12,560 --> 00:02:14,480 Speaker 1: of that is that people will get used to that. 42 00:02:14,840 --> 00:02:16,680 Speaker 1: And if you have the option of not going to 43 00:02:16,720 --> 00:02:19,919 Speaker 1: the doctor's office and waiting and waiting in the reception 44 00:02:20,000 --> 00:02:22,040 Speaker 1: area for as you know, a very long time sometimes 45 00:02:22,080 --> 00:02:25,440 Speaker 1: because things happen, uh, you'll that could be attracted to you. 46 00:02:25,520 --> 00:02:27,440 Speaker 1: It doesn't mean you'll never go see a doctor again, 47 00:02:27,480 --> 00:02:30,880 Speaker 1: but it could be an attractive alternative. Uh. You look 48 00:02:30,880 --> 00:02:32,520 Speaker 1: at things that are going on in commerce. Of course, 49 00:02:32,560 --> 00:02:35,320 Speaker 1: everybody talks about the big commerce player being Amazon, and 50 00:02:35,360 --> 00:02:37,880 Speaker 1: what they've been able to do in non prescription drugs 51 00:02:37,960 --> 00:02:40,640 Speaker 1: is like a ninefold growth, if I'm not mistaken. But 52 00:02:40,720 --> 00:02:43,680 Speaker 1: even small small groceries, small retailers and the stuff at 53 00:02:43,760 --> 00:02:46,480 Speaker 1: least in our environment are using things like insta cart 54 00:02:46,760 --> 00:02:49,040 Speaker 1: you can order and deliver everything to the home. So 55 00:02:49,400 --> 00:02:52,799 Speaker 1: all those patterns are going to continue to expand. Tele 56 00:02:52,960 --> 00:02:57,239 Speaker 1: medicine touched with payments, e commerce, those sorted down to 57 00:02:57,280 --> 00:02:59,960 Speaker 1: the small retailers, while grocers those kinds of things I've 58 00:03:00,120 --> 00:03:02,840 Speaker 1: leave that the consumer will change and as a result 59 00:03:02,880 --> 00:03:06,320 Speaker 1: of the consumer changing their consumption patterns, it creates opportunities 60 00:03:06,320 --> 00:03:08,480 Speaker 1: for big tech. Sam talk to us as the former 61 00:03:08,520 --> 00:03:10,760 Speaker 1: head of a big public company as well, about the 62 00:03:10,880 --> 00:03:13,280 Speaker 1: role of a public company in this In this world, 63 00:03:13,320 --> 00:03:15,320 Speaker 1: we now have the government handing out a lot of money, 64 00:03:15,480 --> 00:03:18,160 Speaker 1: sometimes in exchange for equity. At the same time, some 65 00:03:18,200 --> 00:03:21,639 Speaker 1: companies are becoming criticized if they're not socially responsible. Is 66 00:03:21,680 --> 00:03:23,760 Speaker 1: e s G more important than ever? First of all, 67 00:03:23,800 --> 00:03:27,119 Speaker 1: I'll start with e s G or social responsibility. Connecting 68 00:03:27,120 --> 00:03:31,200 Speaker 1: to your society was always fundamentally important. We can argue 69 00:03:31,240 --> 00:03:34,080 Speaker 1: about the extent that people did that or not did that. 70 00:03:34,120 --> 00:03:37,840 Speaker 1: We could talk about the pressure of short term investment, etcetera, etcetera, 71 00:03:37,880 --> 00:03:40,720 Speaker 1: But fundamentally it's it's it was strategically important to your 72 00:03:40,760 --> 00:03:43,760 Speaker 1: brand because if you do things that are valuable to 73 00:03:43,880 --> 00:03:47,520 Speaker 1: your individual customers or to society, your brand will be enhanced, 74 00:03:47,560 --> 00:03:49,520 Speaker 1: Your value will be created that will show up in 75 00:03:49,520 --> 00:03:51,720 Speaker 1: your shareholder price as well. So I think it's always 76 00:03:51,720 --> 00:03:55,360 Speaker 1: been important. I believe, quite honestly, large companies that have 77 00:03:55,360 --> 00:03:58,640 Speaker 1: been extremely responsible. If you look at what people are doing, 78 00:03:58,720 --> 00:04:01,840 Speaker 1: whether it's three AM or whether it's going on in biotech. 79 00:04:01,880 --> 00:04:03,840 Speaker 1: You just heard about talking about Gilead, what they've been 80 00:04:03,880 --> 00:04:05,640 Speaker 1: able to do in a very short period of time 81 00:04:05,720 --> 00:04:08,720 Speaker 1: as well. You talk about what other guys are doing 82 00:04:08,760 --> 00:04:11,160 Speaker 1: to help in the pandemic. Even the energy companies that 83 00:04:11,160 --> 00:04:15,360 Speaker 1: are constantly maligned, you know from sustainability activists and those 84 00:04:15,400 --> 00:04:18,279 Speaker 1: sorts of things, turned over their chemical facilities to produce 85 00:04:18,320 --> 00:04:21,240 Speaker 1: the chemicals that go into the products such as PPE 86 00:04:21,279 --> 00:04:23,960 Speaker 1: and those kinds of things. So and automotive with four 87 00:04:24,040 --> 00:04:26,480 Speaker 1: GM and ventilators, all those things. I mean, those guys 88 00:04:26,480 --> 00:04:29,360 Speaker 1: have been phenomenally responsible. So I believe that you know 89 00:04:29,520 --> 00:04:32,080 Speaker 1: that kind of behavior. When you get into a crisis, 90 00:04:32,520 --> 00:04:35,120 Speaker 1: big companies are stepping up. I mean yeah, I mean 91 00:04:35,880 --> 00:04:39,599 Speaker 1: there's there's no business case to justify some of these 92 00:04:39,640 --> 00:04:42,080 Speaker 1: things in this environment, which we do all do understand, 93 00:04:42,400 --> 00:04:46,080 Speaker 1: but fundamentally they're doing the responsible thing. You even see 94 00:04:46,120 --> 00:04:49,119 Speaker 1: some creative things in small companies. Uh there's a small 95 00:04:49,160 --> 00:04:51,839 Speaker 1: little company in Connecticut in New York. It's actually created 96 00:04:51,839 --> 00:04:54,839 Speaker 1: the platform and technology that allows people to get back 97 00:04:54,839 --> 00:04:56,920 Speaker 1: to work faster. I mean I won't go take it 98 00:04:56,960 --> 00:04:59,200 Speaker 1: through all the details, but basically it certifies your test 99 00:04:59,200 --> 00:05:01,680 Speaker 1: results in your hell and whether you're working in the 100 00:05:01,680 --> 00:05:03,720 Speaker 1: work or you're going into a restaurant for that matter, 101 00:05:03,760 --> 00:05:06,279 Speaker 1: or you and I in the studio again, it'll say, hey, 102 00:05:06,320 --> 00:05:10,360 Speaker 1: Sam's technically healthy. He's passed all these tests, and it's 103 00:05:10,400 --> 00:05:12,039 Speaker 1: on his phone, and you let him in and he 104 00:05:12,080 --> 00:05:13,479 Speaker 1: goes on and we can do this again like we 105 00:05:13,560 --> 00:05:15,680 Speaker 1: used to do it live in your studio. Sam, You've 106 00:05:15,680 --> 00:05:17,440 Speaker 1: had a lot of experience with supply chains and a 107 00:05:17,440 --> 00:05:20,520 Speaker 1: lot of experience with China. Do you anticipate that one 108 00:05:20,560 --> 00:05:22,840 Speaker 1: of the consequences of this pandemic when we come out 109 00:05:22,839 --> 00:05:24,640 Speaker 1: of it, which we will at some point, will be 110 00:05:24,680 --> 00:05:27,520 Speaker 1: some permanent changes in our relations are business relations with 111 00:05:27,600 --> 00:05:30,400 Speaker 1: China and for that matter, and extended supply chains around 112 00:05:30,440 --> 00:05:34,640 Speaker 1: the world. Supply chains should have been designed for resiliency. 113 00:05:34,800 --> 00:05:37,080 Speaker 1: By that, I mean you have multiple alternatives. So you 114 00:05:37,120 --> 00:05:39,560 Speaker 1: weren't you weren't you didn't have a major component in 115 00:05:39,640 --> 00:05:42,839 Speaker 1: one geography wherever it happened to be, so you could 116 00:05:42,880 --> 00:05:44,880 Speaker 1: read balance. If a crisis occurred, that could have been 117 00:05:44,920 --> 00:05:46,760 Speaker 1: a tsunami, it could be whether it could be lots 118 00:05:46,760 --> 00:05:49,280 Speaker 1: of things, it could have been a military action, and 119 00:05:49,400 --> 00:05:51,920 Speaker 1: we all designed our supply chains so if those events 120 00:05:51,920 --> 00:05:54,640 Speaker 1: occurred on the global basis, you could readjust if you 121 00:05:54,680 --> 00:05:56,960 Speaker 1: look at the companies that have not been as impacted 122 00:05:56,960 --> 00:05:59,400 Speaker 1: as dramatically by this. They're the ones that had a 123 00:05:59,480 --> 00:06:03,240 Speaker 1: I'll called resilient balance supply chain. What's good at what's 124 00:06:03,320 --> 00:06:06,400 Speaker 1: driving the changes to the supply chain, quite honestly, David, 125 00:06:06,880 --> 00:06:09,760 Speaker 1: is the fact that technology more so than low cost. 126 00:06:10,360 --> 00:06:13,480 Speaker 1: Uh So, therefore, which drove it up until I'd say 127 00:06:13,560 --> 00:06:16,960 Speaker 1: maybe ten years ago was cost. Where do you locate 128 00:06:17,000 --> 00:06:18,920 Speaker 1: for costs? And you see that over the world, Yes, 129 00:06:18,960 --> 00:06:22,279 Speaker 1: a lot with the China. China became the manufacturing hub 130 00:06:22,279 --> 00:06:24,640 Speaker 1: of the world, There's no doubt about it. However, that 131 00:06:24,720 --> 00:06:28,120 Speaker 1: was more of a cost driven scenario. It started with 132 00:06:28,160 --> 00:06:31,120 Speaker 1: the trade negotiations, but fundamentally people were looking at this 133 00:06:31,200 --> 00:06:33,159 Speaker 1: thing and say, look, I need to have flexibility in 134 00:06:33,200 --> 00:06:35,520 Speaker 1: my supply chain. I also want to be close to 135 00:06:35,560 --> 00:06:37,880 Speaker 1: the market so I could respond quickly. That was Wall 136 00:06:37,920 --> 00:06:42,000 Speaker 1: Street Week contributor Sam Paulmisano coming up on Wall Street Week. 137 00:06:42,440 --> 00:06:44,760 Speaker 1: China is two months ahead of the United States in 138 00:06:44,800 --> 00:06:48,600 Speaker 1: dealing with the coronavirus, and Starbucks is seeing both sides. 139 00:06:49,120 --> 00:06:52,440 Speaker 1: We talked with CEO Kevin Johnson about what their experience 140 00:06:52,440 --> 00:06:55,120 Speaker 1: in China taught them about getting back to business in 141 00:06:55,160 --> 00:06:58,760 Speaker 1: the United States. That's next on Wall Street Week on Bloomberg. 142 00:07:03,960 --> 00:07:08,200 Speaker 1: This is Bloomberg Will Street Week with David Weston from 143 00:07:08,279 --> 00:07:11,400 Speaker 1: Bloomberg Radio. Businesses in the United States have been closed 144 00:07:11,400 --> 00:07:14,600 Speaker 1: for about seven weeks now, but in China it's been 145 00:07:14,640 --> 00:07:17,760 Speaker 1: closer to fifteen weeks, and China is well on its 146 00:07:17,800 --> 00:07:21,040 Speaker 1: way back in many of its businesses. Starbucks has seen 147 00:07:21,080 --> 00:07:24,200 Speaker 1: it in both places, and we talked with Starbucks CEO 148 00:07:24,320 --> 00:07:27,400 Speaker 1: and president Kevin Johnson about what they learned in China 149 00:07:27,840 --> 00:07:29,640 Speaker 1: that might help us get back to business here in 150 00:07:29,680 --> 00:07:32,800 Speaker 1: the United States. We started working on the COVID nineteam 151 00:07:32,800 --> 00:07:36,080 Speaker 1: response in China in mid January, and so we're now 152 00:07:36,080 --> 00:07:38,960 Speaker 1: in week fifteen in China, and we've learned some very 153 00:07:39,000 --> 00:07:41,560 Speaker 1: important things from that experience. You know. The first is 154 00:07:41,640 --> 00:07:45,080 Speaker 1: that there are phases that everyone, every market around the 155 00:07:45,120 --> 00:07:48,000 Speaker 1: world goes through. And the first phase, you know, we 156 00:07:48,000 --> 00:07:50,120 Speaker 1: we really refer to that as sort of the mitigate 157 00:07:50,160 --> 00:07:53,240 Speaker 1: and contain phase, and that's that period lasted for three 158 00:07:53,280 --> 00:07:56,880 Speaker 1: weeks in China where uh people were asked to shelter 159 00:07:56,960 --> 00:08:00,640 Speaker 1: at home, businesses were shut down, social distancing all with 160 00:08:00,720 --> 00:08:04,160 Speaker 1: the focus on how to flatten the curve and slow 161 00:08:04,440 --> 00:08:08,280 Speaker 1: the spread of the virus. Coming out of the mitigating 162 00:08:08,280 --> 00:08:10,880 Speaker 1: contained phase in China, we then transition into a phase 163 00:08:10,880 --> 00:08:14,040 Speaker 1: that we call monitor and adapt. And monitor and adapt 164 00:08:14,040 --> 00:08:17,040 Speaker 1: basically means we begin to reopen stores, but we reopened 165 00:08:17,080 --> 00:08:22,440 Speaker 1: them with different store protocols, you know, amplifying safety. Oftentimes 166 00:08:22,480 --> 00:08:25,960 Speaker 1: it's for mobile order for pickup only UH and and 167 00:08:26,000 --> 00:08:27,960 Speaker 1: we did that in China, while at the same time 168 00:08:27,960 --> 00:08:31,200 Speaker 1: we monitor the number of COVID cases that that that 169 00:08:31,320 --> 00:08:35,680 Speaker 1: might pop up in certain in cities around China and UH. 170 00:08:35,760 --> 00:08:38,200 Speaker 1: In the US here we are now just coming out 171 00:08:38,240 --> 00:08:40,560 Speaker 1: of the mitigating contained phase. We've been in that for 172 00:08:40,600 --> 00:08:43,679 Speaker 1: six weeks now in the US, and as we transition 173 00:08:44,000 --> 00:08:46,400 Speaker 1: into this monitor and adapt phase, you know, we plan 174 00:08:46,520 --> 00:08:51,760 Speaker 1: to open reopen over our Starbucks stores by early June. 175 00:08:51,760 --> 00:08:54,080 Speaker 1: In fact, next week, the majority of those stores in 176 00:08:54,080 --> 00:08:58,160 Speaker 1: the United States will reopen, and we will reopen using 177 00:08:58,200 --> 00:09:01,280 Speaker 1: safety protocols that we developed in China and have adapted 178 00:09:01,280 --> 00:09:04,120 Speaker 1: for the US. We'll reopen in a way that provides 179 00:09:04,160 --> 00:09:08,320 Speaker 1: our customers a safe, familiar, and convenient experience. And so 180 00:09:08,400 --> 00:09:11,200 Speaker 1: we're excited for next week. Many of our Starbucks partners 181 00:09:11,200 --> 00:09:13,800 Speaker 1: are referring to it as homecoming week. Because they too, 182 00:09:13,840 --> 00:09:16,520 Speaker 1: like all of us, have been sheltering at home, and 183 00:09:16,520 --> 00:09:18,640 Speaker 1: we're ready to to to get out and do something, 184 00:09:18,640 --> 00:09:21,400 Speaker 1: but do something that's safe and responsible. And that's the 185 00:09:21,440 --> 00:09:23,760 Speaker 1: balance that we work to strike in this monitor and 186 00:09:23,800 --> 00:09:26,240 Speaker 1: adapt phase. As you say, Kevin, as you came back 187 00:09:26,320 --> 00:09:28,240 Speaker 1: online and you have the vast majority of your stores 188 00:09:28,240 --> 00:09:30,199 Speaker 1: now in China back up and running, as I understand 189 00:09:30,320 --> 00:09:33,000 Speaker 1: you have modified your hours, modified how many people can 190 00:09:33,000 --> 00:09:35,360 Speaker 1: be there. I see that the same store sales, even 191 00:09:35,360 --> 00:09:37,760 Speaker 1: though you have almost all the stores open, are down somewhat. 192 00:09:37,800 --> 00:09:40,240 Speaker 1: Can you tell how much of that is just reluctance 193 00:09:40,280 --> 00:09:42,040 Speaker 1: on the part of consumers to come back out and 194 00:09:42,040 --> 00:09:44,280 Speaker 1: buy things, as opposed to just having fewer people in 195 00:09:44,320 --> 00:09:47,400 Speaker 1: the stores and shorter hours. Yeah, it's a combination of 196 00:09:47,559 --> 00:09:49,760 Speaker 1: all of those things, David, and I can't I can't 197 00:09:49,760 --> 00:09:52,080 Speaker 1: necessarily attribute it to anyone, although I do know that 198 00:09:52,360 --> 00:09:55,679 Speaker 1: you know in our store protocols, for example, UH, in China, 199 00:09:55,800 --> 00:09:59,120 Speaker 1: you know most stores are not open for seating. They're 200 00:09:59,160 --> 00:10:02,439 Speaker 1: open for customer was to come in for takeaway in China, 201 00:10:02,559 --> 00:10:05,800 Speaker 1: and some stores have limited seating so that we can 202 00:10:05,880 --> 00:10:09,319 Speaker 1: enforce social distancing. UH. And one of the differences between 203 00:10:09,400 --> 00:10:12,960 Speaker 1: China and the US. In the US pre COVID, over 204 00:10:13,720 --> 00:10:16,880 Speaker 1: of our customer occasions in the US were for takeaway 205 00:10:16,960 --> 00:10:20,440 Speaker 1: or to go, and so, uh, the US consumer was 206 00:10:20,559 --> 00:10:23,120 Speaker 1: much more sort of on the go, and so we 207 00:10:23,200 --> 00:10:25,559 Speaker 1: think opening in the US, we're going to get a 208 00:10:25,720 --> 00:10:29,600 Speaker 1: very significant result. But the positive news is every week 209 00:10:29,640 --> 00:10:32,720 Speaker 1: we see continuous improvement in China as we monitor and adapt. 210 00:10:32,800 --> 00:10:35,040 Speaker 1: We turned the dial up slowly and start to open 211 00:10:35,040 --> 00:10:38,520 Speaker 1: limited seating, open other services. And now as we begin 212 00:10:38,600 --> 00:10:41,200 Speaker 1: that path in the US, we're very optimistic that uh, 213 00:10:41,480 --> 00:10:43,240 Speaker 1: you know, by the end of the end of May, 214 00:10:43,280 --> 00:10:45,520 Speaker 1: early June, you know, we're gonna have a much better 215 00:10:45,559 --> 00:10:48,880 Speaker 1: perspective on how quickly this is going to recover. Kevin, 216 00:10:48,880 --> 00:10:50,960 Speaker 1: do you have any projections on how the overall state 217 00:10:50,960 --> 00:10:54,000 Speaker 1: of the economy and the employment situation might affect the 218 00:10:54,200 --> 00:10:56,240 Speaker 1: consumers coming back to Starbucks stories, but right here in 219 00:10:56,240 --> 00:10:58,880 Speaker 1: the United States, we now know officially we are intercession. 220 00:10:59,040 --> 00:11:01,439 Speaker 1: It's going to get worse. Is this something that really 221 00:11:01,440 --> 00:11:05,040 Speaker 1: could put pressure downward pressure on your volume? Well, you know, certainly, Starbucks, 222 00:11:05,080 --> 00:11:07,600 Speaker 1: we've we've gone through recessions in the past, and if 223 00:11:07,679 --> 00:11:11,640 Speaker 1: the past is an indicator of of of how customers behave. Uh. 224 00:11:11,679 --> 00:11:12,839 Speaker 1: You know, we think we're going to be in a 225 00:11:12,960 --> 00:11:15,320 Speaker 1: very very strong position. We work to have a premium 226 00:11:15,320 --> 00:11:19,480 Speaker 1: experience uh and build long term loyal customers and you 227 00:11:19,480 --> 00:11:21,880 Speaker 1: know what we offer as an affordable luxury and even 228 00:11:21,880 --> 00:11:25,400 Speaker 1: in times uh you know of a recession. Uh, you know, 229 00:11:25,840 --> 00:11:28,760 Speaker 1: customers are looking for something to uplift the every day 230 00:11:28,840 --> 00:11:31,760 Speaker 1: and if it's if it's their daily Starbucks, or maybe 231 00:11:32,320 --> 00:11:35,160 Speaker 1: they cut back a little bit, but there's an affinity 232 00:11:35,200 --> 00:11:38,680 Speaker 1: that customers have for Starbucks and we work hard to 233 00:11:38,800 --> 00:11:41,400 Speaker 1: earn that loyalty and that trust, and and that's what 234 00:11:41,520 --> 00:11:44,600 Speaker 1: has carried us through recessions in the past. But I 235 00:11:44,640 --> 00:11:48,400 Speaker 1: think competitively, we we understand that we differentiate by by 236 00:11:48,559 --> 00:11:50,439 Speaker 1: the work that we do to create a great customer 237 00:11:50,440 --> 00:11:53,840 Speaker 1: experience in our stores through the beverage innovation and through 238 00:11:53,840 --> 00:11:57,760 Speaker 1: those digital customer relationships. And that model was working pre COVID. 239 00:11:57,800 --> 00:12:00,480 Speaker 1: In fact, the first part of this UH this quarter 240 00:12:00,559 --> 00:12:02,920 Speaker 1: in the United States, we were posting an eight comp 241 00:12:03,240 --> 00:12:06,840 Speaker 1: with four percent growth and transaction. And so going through COVID, 242 00:12:06,840 --> 00:12:11,319 Speaker 1: being responsible, thoughtful, focusing on that safe, familiar, convenient experience, 243 00:12:11,400 --> 00:12:13,760 Speaker 1: we think that's going to become the on ramp, and 244 00:12:13,800 --> 00:12:16,120 Speaker 1: then as we go forward, we're going to continue to 245 00:12:16,240 --> 00:12:19,360 Speaker 1: do everything we can to provide that great experience to customers. 246 00:12:19,360 --> 00:12:21,640 Speaker 1: And in the past that has gotten us through recessions 247 00:12:21,640 --> 00:12:24,600 Speaker 1: and I think that's gonna that's gonna play out through 248 00:12:24,600 --> 00:12:26,679 Speaker 1: this one as well. Kevin, you have any sense at 249 00:12:26,720 --> 00:12:29,480 Speaker 1: this point what what might be permanent or long term 250 00:12:29,559 --> 00:12:32,680 Speaker 1: changes in Starbucks business, For example, percentage of digital orders, 251 00:12:32,880 --> 00:12:35,440 Speaker 1: percentage of takeouts. You said it was already high in 252 00:12:35,440 --> 00:12:37,800 Speaker 1: the United States, But are we facing a world where 253 00:12:37,800 --> 00:12:40,400 Speaker 1: maybe we won't have any sit down in Starbucks stores. Well, 254 00:12:40,400 --> 00:12:42,600 Speaker 1: I don't think it's gonna be that extreme, but certainly 255 00:12:42,720 --> 00:12:45,920 Speaker 1: right now, what customers are going to look for safe, familiar, 256 00:12:45,920 --> 00:12:48,319 Speaker 1: and convenient. And you know, we've all been sheltering in 257 00:12:48,360 --> 00:12:50,640 Speaker 1: our homes for six weeks. We've got a little stir crazy. 258 00:12:50,679 --> 00:12:53,079 Speaker 1: People want to get out and do something, but they 259 00:12:53,120 --> 00:12:55,560 Speaker 1: want to be responsible. They don't want to, you know, 260 00:12:55,640 --> 00:12:58,840 Speaker 1: create an unsafe situation or do things that create sort 261 00:12:58,880 --> 00:13:02,360 Speaker 1: of reignite the spread of the virus. And so that's 262 00:13:02,360 --> 00:13:06,160 Speaker 1: what we've tuned these initial experiences for. But longer term, 263 00:13:06,360 --> 00:13:08,079 Speaker 1: you know, you think about you know, once we get 264 00:13:08,080 --> 00:13:10,960 Speaker 1: a vaccine and treatments for this, then I think consumer 265 00:13:11,040 --> 00:13:15,040 Speaker 1: behavior can start to adapt even more. And it'll take time. 266 00:13:15,280 --> 00:13:17,959 Speaker 1: You know, the effect in this experience of COVID nineteam 267 00:13:17,960 --> 00:13:20,400 Speaker 1: will affect all of us for the rest of our lifetimes. 268 00:13:20,880 --> 00:13:23,840 Speaker 1: But the fact is that as human beings, we have 269 00:13:23,920 --> 00:13:27,760 Speaker 1: this natural gravitational pull to interact with other humans, and 270 00:13:27,880 --> 00:13:30,560 Speaker 1: so the need state of community and feeling a part 271 00:13:30,559 --> 00:13:33,040 Speaker 1: of the community really is what the third place is about. 272 00:13:33,160 --> 00:13:36,840 Speaker 1: It's a mindset and UH and and people people have 273 00:13:37,040 --> 00:13:40,280 Speaker 1: that inherent in them as just part of humanity. And 274 00:13:40,360 --> 00:13:42,760 Speaker 1: so as we focus on being safe and familiar and 275 00:13:42,760 --> 00:13:45,200 Speaker 1: convenient coming out of this, we're gonna slowly open up 276 00:13:45,240 --> 00:13:48,680 Speaker 1: stores and uh provide the opportunity for customers to connect 277 00:13:48,720 --> 00:13:51,080 Speaker 1: with one another in a in a safe and social 278 00:13:51,120 --> 00:13:54,480 Speaker 1: distance way. But I think, uh, you know, I think 279 00:13:54,559 --> 00:13:58,440 Speaker 1: long term the Starbucks third Place is going to be 280 00:13:58,520 --> 00:14:01,640 Speaker 1: as relevant as ever. It's just gonna take time. So 281 00:14:01,760 --> 00:14:03,920 Speaker 1: as a last question, Kevin, talk about the long term 282 00:14:03,960 --> 00:14:07,480 Speaker 1: about growth for Starbucks in this new world. Where do 283 00:14:07,520 --> 00:14:09,319 Speaker 1: you see growth? And let me be a very specific. 284 00:14:09,320 --> 00:14:10,600 Speaker 1: You and I have talked in the past about how 285 00:14:10,600 --> 00:14:12,559 Speaker 1: many stories you're opening in China. Is it gonna be 286 00:14:12,600 --> 00:14:14,680 Speaker 1: fewer stories you're opening in China? I saw luck and 287 00:14:14,760 --> 00:14:17,120 Speaker 1: is really having some trouble. Can you take market share there? Well, 288 00:14:17,200 --> 00:14:19,280 Speaker 1: you know, I think we've been taking market share, you know, 289 00:14:19,360 --> 00:14:22,600 Speaker 1: throughout this entire period and Uh, but what's important is 290 00:14:22,600 --> 00:14:24,880 Speaker 1: we've been in China for for over twenty years now, David, 291 00:14:25,400 --> 00:14:28,240 Speaker 1: and throughout that twenty year period, we have worked to 292 00:14:28,600 --> 00:14:32,640 Speaker 1: establish an admired and trusted brand UH in a way 293 00:14:32,680 --> 00:14:36,080 Speaker 1: that resonates with our with our Chinese customers. And and 294 00:14:36,120 --> 00:14:39,120 Speaker 1: that's by showing respect to the Chinese culture. It's it's 295 00:14:39,200 --> 00:14:41,640 Speaker 1: it's designing stores that are that are that are appropriate, 296 00:14:41,640 --> 00:14:46,119 Speaker 1: that that have you know, artwork and built by local craftsmen. 297 00:14:46,640 --> 00:14:49,760 Speaker 1: And our our partners in China are fantastic. They create 298 00:14:49,840 --> 00:14:54,480 Speaker 1: that magical Starbucks experience. That was Starbucks President CEO Kevin Johnson. 299 00:14:54,840 --> 00:14:58,000 Speaker 1: Coming up, We've talked with our Wall Street contributor and 300 00:14:58,200 --> 00:15:02,280 Speaker 1: senior executive editor for Economic It's at Bloomberg, Stephanie Flanders, 301 00:15:02,320 --> 00:15:05,680 Speaker 1: about just how bad those European numbers are. That's next 302 00:15:05,720 --> 00:15:13,960 Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall 303 00:15:14,040 --> 00:15:18,480 Speaker 1: Street Week with David Western from Bloomberg Radio. The economic 304 00:15:18,560 --> 00:15:22,320 Speaker 1: numbers kept coming in worse this week, and the central bankers, well, 305 00:15:22,440 --> 00:15:25,160 Speaker 1: they were listening. We talked with our Wall Street Week 306 00:15:25,200 --> 00:15:30,320 Speaker 1: contributor and Senior executive editor for Economics at Bloomberg, Stephanie Flanders, 307 00:15:30,360 --> 00:15:33,720 Speaker 1: about just how bad those European numbers are. I am 308 00:15:33,760 --> 00:15:36,240 Speaker 1: a little bit assured in the funny kind of way 309 00:15:36,280 --> 00:15:39,680 Speaker 1: by these numbers, which obviously relate to the first quarter, 310 00:15:39,760 --> 00:15:42,400 Speaker 1: so not even before we had some of the biggest 311 00:15:42,400 --> 00:15:46,600 Speaker 1: lockdown measures in some of the economies, because it suggests 312 00:15:46,640 --> 00:15:49,200 Speaker 1: that we have a handle on how this is affecting 313 00:15:49,200 --> 00:15:52,520 Speaker 1: the economy. It's not much of a silver lining, but actually, 314 00:15:52,880 --> 00:15:55,680 Speaker 1: our economist at Bloomberg Economics we have been looking at 315 00:15:55,680 --> 00:15:59,040 Speaker 1: more high frequency data and looking at some data that 316 00:15:59,080 --> 00:16:01,960 Speaker 1: the French Ship School together on the impact of lockdown, 317 00:16:02,400 --> 00:16:05,720 Speaker 1: and our numbers were a bit bigger than the consensus, 318 00:16:05,760 --> 00:16:07,600 Speaker 1: and they've been kind of borne out by this. So 319 00:16:08,000 --> 00:16:10,360 Speaker 1: not not to gloat, but at least it suggests that 320 00:16:10,400 --> 00:16:12,920 Speaker 1: we have a handle on what the second quarter is 321 00:16:12,960 --> 00:16:15,280 Speaker 1: going to look like, what the impact of these broader 322 00:16:15,320 --> 00:16:18,120 Speaker 1: lockdowns is going to be, and we might also start 323 00:16:18,160 --> 00:16:22,280 Speaker 1: to take some heart from the high frequency numbers. We're looking, 324 00:16:22,320 --> 00:16:26,280 Speaker 1: for example at Germany where electricity usage is starting to 325 00:16:26,280 --> 00:16:29,480 Speaker 1: pick back up. You know, we are starting to see 326 00:16:29,520 --> 00:16:33,480 Speaker 1: some benefits from that slow move away from total lockdown, 327 00:16:33,560 --> 00:16:36,520 Speaker 1: but of course the big picture is still a historic 328 00:16:36,600 --> 00:16:40,600 Speaker 1: decline Stefinitely. You have a handle perhaps on the numbers 329 00:16:40,640 --> 00:16:42,640 Speaker 1: and how bad they're like to get. Do we have 330 00:16:42,720 --> 00:16:44,360 Speaker 1: a handle on what needs to be done about it. 331 00:16:44,400 --> 00:16:45,760 Speaker 1: We had the e c V come out and make 332 00:16:45,840 --> 00:16:47,880 Speaker 1: some changes today to try to help things. At the 333 00:16:47,920 --> 00:16:50,480 Speaker 1: same time, Animal Guard said we really need a coordinated 334 00:16:50,520 --> 00:16:52,880 Speaker 1: fiscal stimulus. I think it's fair to say that both 335 00:16:52,880 --> 00:16:55,400 Speaker 1: the United States ever in Europe, the first responses we 336 00:16:55,480 --> 00:16:57,600 Speaker 1: have to supply a fact I have to really protect 337 00:16:57,640 --> 00:17:00,000 Speaker 1: the supply side. But how do we get the demand 338 00:17:00,040 --> 00:17:02,240 Speaker 1: and going in well, all the consumers having sat home 339 00:17:02,280 --> 00:17:05,840 Speaker 1: for so long and frankly being concerned about their health. Yeah, 340 00:17:05,840 --> 00:17:08,359 Speaker 1: and we've seen that as you know, and Mohan, some 341 00:17:08,440 --> 00:17:11,080 Speaker 1: of the places that have had, you know, a removal 342 00:17:11,119 --> 00:17:13,399 Speaker 1: of the supply side shock if you're like, you know, 343 00:17:13,440 --> 00:17:15,840 Speaker 1: people are going to work there in the factories, but 344 00:17:15,960 --> 00:17:18,360 Speaker 1: the demands not coming back. People are not going back 345 00:17:18,400 --> 00:17:20,840 Speaker 1: to restaurants and not going out suspense of course that 346 00:17:21,000 --> 00:17:24,360 Speaker 1: is a worry, and I think the fiscal programs so far, 347 00:17:24,400 --> 00:17:28,600 Speaker 1: the national policies have been all about keeping the economy 348 00:17:28,720 --> 00:17:32,760 Speaker 1: and suspended animation, keeping jobs in place, and they've been 349 00:17:32,840 --> 00:17:35,640 Speaker 1: quite successful at that, I think, probably more successful than 350 00:17:35,680 --> 00:17:38,840 Speaker 1: the stakes. But where they may be missing, and where 351 00:17:38,920 --> 00:17:41,840 Speaker 1: certainly Leguard the European Central Bank will be looking for 352 00:17:41,960 --> 00:17:45,320 Speaker 1: more for governments than from the European Commission. Is that 353 00:17:45,480 --> 00:17:48,359 Speaker 1: piece you're talking about, the spiny list. Once we start 354 00:17:48,440 --> 00:17:52,560 Speaker 1: to see economy slowly moving out of lockdown as we 355 00:17:52,680 --> 00:17:56,160 Speaker 1: now are, what's going to be there to actually stimulate 356 00:17:56,200 --> 00:18:00,520 Speaker 1: economies as opposed to just keeping them keeping them on hold, 357 00:18:00,600 --> 00:18:02,960 Speaker 1: which is effectively what they've been doing for this seriod 358 00:18:03,040 --> 00:18:06,439 Speaker 1: of lockdown. But so many, so much uncertainty about the 359 00:18:06,480 --> 00:18:10,600 Speaker 1: path of that lockdown from here, because we know Germany, 360 00:18:10,680 --> 00:18:12,879 Speaker 1: for example, is starting to see a push back up 361 00:18:12,880 --> 00:18:15,639 Speaker 1: an infection, so other countries are looking and saying, maybe 362 00:18:15,640 --> 00:18:19,440 Speaker 1: we can't follow some Germany's footsteps. So Stephanie to bring 363 00:18:19,480 --> 00:18:21,000 Speaker 1: it back to the United States for a moment and 364 00:18:21,119 --> 00:18:23,159 Speaker 1: compare and contrast. We heard from the FED and the 365 00:18:23,200 --> 00:18:25,440 Speaker 1: FED chair j Pal yesterday, and one of the things 366 00:18:25,520 --> 00:18:27,800 Speaker 1: he said was over the medium term, not just the 367 00:18:27,800 --> 00:18:30,200 Speaker 1: short term. The medium term, we really health challenges, and 368 00:18:30,240 --> 00:18:32,600 Speaker 1: he's suggested even there might be longer turn damage. We 369 00:18:32,680 --> 00:18:35,000 Speaker 1: have had the fiscal stimulus, at least a lot of 370 00:18:35,000 --> 00:18:37,359 Speaker 1: it here in the United States. How can we learn 371 00:18:37,440 --> 00:18:40,520 Speaker 1: from the US experience as it applies to Europe? You know, 372 00:18:40,560 --> 00:18:42,080 Speaker 1: I think it's took me. I mean, I think we 373 00:18:42,160 --> 00:18:45,640 Speaker 1: have seen a thing. If you'd like to have more 374 00:18:45,720 --> 00:18:48,959 Speaker 1: people learning out employment soles and then increase that support 375 00:18:49,000 --> 00:18:51,480 Speaker 1: for people who aren't employed, so we have more double 376 00:18:51,480 --> 00:18:54,200 Speaker 1: acclaimed numbers today from the US. You know, that's been 377 00:18:54,240 --> 00:18:56,720 Speaker 1: if you like the US way, that they've been less 378 00:18:56,720 --> 00:19:00,119 Speaker 1: protective of employment but pushing a lot more money to 379 00:19:00,240 --> 00:19:03,280 Speaker 1: the economy and perhaps getting into businesses as well, though 380 00:19:03,280 --> 00:19:05,760 Speaker 1: we know not some states more than others, So I 381 00:19:05,800 --> 00:19:07,840 Speaker 1: guess there is a lesson there. But the worry that 382 00:19:07,920 --> 00:19:10,960 Speaker 1: said is stating is putting all these people out of work. 383 00:19:11,000 --> 00:19:13,119 Speaker 1: You know, it would be nice to think that a 384 00:19:13,160 --> 00:19:16,000 Speaker 1: lot of this work will immediately spring back. You know, 385 00:19:16,119 --> 00:19:20,159 Speaker 1: big workers, younger workers may be able to be flexible, 386 00:19:20,480 --> 00:19:23,520 Speaker 1: but we know historically once you lose your job, even 387 00:19:23,680 --> 00:19:26,479 Speaker 1: especially if perhaps if you're at the beginning of your career. 388 00:19:26,880 --> 00:19:29,080 Speaker 1: You can have a permanent hit in terms of wages, 389 00:19:29,119 --> 00:19:31,400 Speaker 1: and you can find it permanently harder to get jobs. 390 00:19:31,400 --> 00:19:34,479 Speaker 1: So that's the kind of longer term hits that the 391 00:19:34,480 --> 00:19:37,800 Speaker 1: FED is talking about, and thankfully why they're seeing maybe 392 00:19:37,920 --> 00:19:40,920 Speaker 1: unemployment not getting back in the four or five range 393 00:19:41,000 --> 00:19:43,919 Speaker 1: for several years. And it's a hit that is not 394 00:19:44,000 --> 00:19:47,479 Speaker 1: necessarily evenly distributed. We're seeing dispersion. For example, let's just 395 00:19:47,520 --> 00:19:50,240 Speaker 1: take big tech in the United States. It's doing really, 396 00:19:50,280 --> 00:19:52,439 Speaker 1: really well. We've had earnings out this week are very 397 00:19:52,480 --> 00:19:54,280 Speaker 1: very good. Are you seeing that in Europe as well 398 00:19:54,320 --> 00:19:56,359 Speaker 1: as the United States? In effect, you're seeing some parts 399 00:19:56,359 --> 00:19:58,119 Speaker 1: of the economy that are likely to come back faster 400 00:19:58,240 --> 00:20:02,560 Speaker 1: and better, others are really much more challenged. Yeah, I mean, 401 00:20:02,560 --> 00:20:04,360 Speaker 1: it's one of those things. Of course, we've also had 402 00:20:04,400 --> 00:20:06,560 Speaker 1: that of a story of the sort of market performance 403 00:20:06,560 --> 00:20:08,399 Speaker 1: of the lab few years, like one of the reasons 404 00:20:08,480 --> 00:20:11,320 Speaker 1: why Europe has consistently lagged because it was the tech 405 00:20:11,359 --> 00:20:12,960 Speaker 1: sector that was doing so well, and you have just 406 00:20:13,040 --> 00:20:16,240 Speaker 1: had a smaller tech sector. So that's definitely a concern 407 00:20:16,280 --> 00:20:18,359 Speaker 1: if you think that that one that sector is the 408 00:20:18,359 --> 00:20:20,840 Speaker 1: one that's also coming out of the strongest I think 409 00:20:20,920 --> 00:20:23,439 Speaker 1: in Europe's favor was the point and made earlier, that 410 00:20:23,520 --> 00:20:25,640 Speaker 1: you are they have perhaps done a better job of 411 00:20:25,640 --> 00:20:28,840 Speaker 1: preserving work in places like Germany and face that you 412 00:20:28,880 --> 00:20:32,120 Speaker 1: can get the demand back, you possibly don't have quite 413 00:20:32,119 --> 00:20:34,440 Speaker 1: such a health decline in terms of getting people back 414 00:20:34,480 --> 00:20:37,800 Speaker 1: into work. But I think that sexual breakdown is going 415 00:20:37,840 --> 00:20:40,280 Speaker 1: to be a concern in the US as well, because 416 00:20:40,320 --> 00:20:43,560 Speaker 1: we know that for example, you know women and lower 417 00:20:43,600 --> 00:20:46,440 Speaker 1: paid workers who had actually been doing a bit better 418 00:20:46,520 --> 00:20:48,920 Speaker 1: the last four or five years in the US after 419 00:20:48,960 --> 00:20:51,720 Speaker 1: a long time of problems. But that certainly to the 420 00:20:51,720 --> 00:20:54,639 Speaker 1: low wage sector. It's that bit of the labor market 421 00:20:54,680 --> 00:20:56,639 Speaker 1: that has now been really hit and of course you 422 00:20:56,680 --> 00:20:59,119 Speaker 1: have to worry about that on both sides of the Atlantis. 423 00:20:59,400 --> 00:21:03,439 Speaker 1: That was words Stephanie Flanders coming up the Central Banks 424 00:21:03,480 --> 00:21:06,200 Speaker 1: got to work. This week. We talked with former FED 425 00:21:06,280 --> 00:21:10,240 Speaker 1: chairman Alan Greenspan about how different it is this time. 426 00:21:10,880 --> 00:21:19,480 Speaker 1: That's next on Wall Street Week on Bloomberg. This is 427 00:21:19,520 --> 00:21:23,920 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 428 00:21:24,359 --> 00:21:26,680 Speaker 1: One thing that the FED confirmed for us this week 429 00:21:26,760 --> 00:21:28,920 Speaker 1: is that the old rules, well they've sort of gone 430 00:21:28,920 --> 00:21:31,240 Speaker 1: away at least for the time being, including things like 431 00:21:31,320 --> 00:21:34,760 Speaker 1: concern or a fiscal discipline. We talked with former FED 432 00:21:34,880 --> 00:21:39,800 Speaker 1: Chairman Alan Greenspan about whether this pandemic crisis maybe fundamentally 433 00:21:39,840 --> 00:21:43,359 Speaker 1: altering the way the government regulates the economy. Well, I 434 00:21:43,400 --> 00:21:46,520 Speaker 1: think it's going to be longer ways expect, largely because 435 00:21:47,320 --> 00:21:51,679 Speaker 1: the defining characteristic of the next century will be an 436 00:21:51,720 --> 00:21:58,720 Speaker 1: inexorable aging of the population. More than of the population 437 00:21:59,600 --> 00:22:04,040 Speaker 1: of the industrialized countries of the world are age sixty 438 00:22:04,160 --> 00:22:08,520 Speaker 1: five and older, and until the last century, the vast 439 00:22:08,600 --> 00:22:14,959 Speaker 1: proportion of the population worked until they died. Retirement was 440 00:22:15,200 --> 00:22:19,879 Speaker 1: a rare outcome. As a consequence of this, the US 441 00:22:19,960 --> 00:22:27,920 Speaker 1: retirement benefits, especially social security and health care, have escalated 442 00:22:28,400 --> 00:22:34,919 Speaker 1: significantly and are projected to expand materially further in the 443 00:22:35,040 --> 00:22:40,520 Speaker 1: decades has it And that is an issue which I 444 00:22:40,520 --> 00:22:44,080 Speaker 1: can explain in some considerable details for you after what 445 00:22:44,160 --> 00:22:46,520 Speaker 1: I think is going to happen. But I think it's 446 00:22:46,520 --> 00:22:50,159 Speaker 1: going to be a dominant force in slowing down the 447 00:22:50,280 --> 00:22:57,280 Speaker 1: rate of growth. And it's unclear at this stage whether 448 00:22:57,359 --> 00:22:59,919 Speaker 1: we are going to be looking at the type of 449 00:23:00,080 --> 00:23:03,800 Speaker 1: Gotturn that Sweden looked out for a number of years 450 00:23:04,440 --> 00:23:08,640 Speaker 1: and cured were we're going to be in trouble. But 451 00:23:08,640 --> 00:23:11,840 Speaker 1: but but Mr Chairman, what is the solution to that 452 00:23:12,000 --> 00:23:14,600 Speaker 1: or the answer to that? Because if anything, this pandemic 453 00:23:14,680 --> 00:23:17,119 Speaker 1: I think will push countries, the United States and other 454 00:23:17,160 --> 00:23:21,280 Speaker 1: countries perhaps in the direction of greater social support, of 455 00:23:21,440 --> 00:23:24,640 Speaker 1: greater social benefit programs because so many people are being 456 00:23:24,720 --> 00:23:28,600 Speaker 1: hurt so badly. I absolutely agree with that. I think 457 00:23:28,640 --> 00:23:37,399 Speaker 1: that uh um. The bottom line as a retirement benefits 458 00:23:37,640 --> 00:23:41,719 Speaker 1: and essentially social security and medicare in the life are 459 00:23:41,960 --> 00:23:47,359 Speaker 1: going to be major forces in the years ahead and 460 00:23:47,880 --> 00:23:53,480 Speaker 1: in government programs. At the same time, as the Federal 461 00:23:53,520 --> 00:23:57,679 Speaker 1: Reserve meets today, should they be more concerned about deflation? 462 00:23:57,760 --> 00:24:00,520 Speaker 1: At this point in inflation we've had as you, oil 463 00:24:00,640 --> 00:24:04,639 Speaker 1: futures contracts actually trade well into the negative numbers, commodities 464 00:24:04,680 --> 00:24:07,920 Speaker 1: are weak around the world, and the go forward inflation 465 00:24:08,000 --> 00:24:11,240 Speaker 1: numbers are quite disturbing. Is there a real risk of 466 00:24:11,440 --> 00:24:15,280 Speaker 1: deflation right now in the United States and globally? Let 467 00:24:15,320 --> 00:24:19,520 Speaker 1: me just say, I'll answer it generically, but uh Since 468 00:24:19,640 --> 00:24:23,200 Speaker 1: I was left office, I've been very scrupulous and not 469 00:24:23,440 --> 00:24:31,480 Speaker 1: commenting specifically on what my successors we're doing. But as 470 00:24:31,520 --> 00:24:39,680 Speaker 1: a general question, there's no doubt that the problems involved was. 471 00:24:39,760 --> 00:24:46,920 Speaker 1: The difficulties of recent weeks are having a profound effect, 472 00:24:47,920 --> 00:24:50,840 Speaker 1: and you can judge them as well as any are there. 473 00:24:53,119 --> 00:24:56,000 Speaker 1: Glenn Hubbard, whom you know the economists now at Columbia, 474 00:24:56,160 --> 00:25:00,080 Speaker 1: has warn't warned about demand destruction and the possibility what 475 00:25:00,160 --> 00:25:02,919 Speaker 1: he calls a doom loop. Do we face even the 476 00:25:02,960 --> 00:25:07,440 Speaker 1: procect of possible depression, not just recession, and not that 477 00:25:07,440 --> 00:25:12,040 Speaker 1: that's a little bit that presumes that we don't do 478 00:25:13,160 --> 00:25:18,920 Speaker 1: take the type of actions that Sweden did and resolved 479 00:25:19,000 --> 00:25:22,360 Speaker 1: the problems which are very similar to those in which 480 00:25:22,400 --> 00:25:28,000 Speaker 1: we have been confronted with. And what that would be 481 00:25:28,320 --> 00:25:37,560 Speaker 1: fundamentally entail is solving the whole question of how you 482 00:25:38,359 --> 00:25:44,280 Speaker 1: go from us socialist society and which Sweden was and 483 00:25:44,520 --> 00:25:52,240 Speaker 1: it finally came collapsed in the ratees h and made 484 00:25:52,480 --> 00:25:56,760 Speaker 1: major visions of the type that were we to make, 485 00:25:57,440 --> 00:26:03,800 Speaker 1: would make our social security medicure and other problems are resolved. 486 00:26:04,359 --> 00:26:08,720 Speaker 1: But we have nowhere near that as yet. And it's 487 00:26:09,720 --> 00:26:13,760 Speaker 1: a lot of issues which I'm not sure we wanted 488 00:26:13,800 --> 00:26:21,320 Speaker 1: get into, but the problems are aren't there, and right 489 00:26:22,520 --> 00:26:25,800 Speaker 1: I hope we come to grips certain sooner rather than later. 490 00:26:26,680 --> 00:26:30,080 Speaker 1: But I wonder Dr Greensman, whether we haven't taken a step, 491 00:26:30,119 --> 00:26:31,919 Speaker 1: and maybe it was the right step, but a step 492 00:26:32,280 --> 00:26:36,600 Speaker 1: in the direction of what you call socialized economy, uh, 493 00:26:36,840 --> 00:26:38,440 Speaker 1: starting with the two thousand eight, two and nine, but 494 00:26:38,560 --> 00:26:41,960 Speaker 1: certainly now with the extent in which the federal government, 495 00:26:42,000 --> 00:26:45,880 Speaker 1: through fiscal means, is really intervening into the economy very regularly, 496 00:26:46,080 --> 00:26:47,919 Speaker 1: and for that matter, the central banks, not just the 497 00:26:47,920 --> 00:26:50,520 Speaker 1: Federal Reserve but others, have grown their balance sheet to 498 00:26:51,200 --> 00:26:55,239 Speaker 1: increasing degree. Investment decisions even depend as much on what 499 00:26:55,280 --> 00:26:57,639 Speaker 1: we think the government's going to do, is on what 500 00:26:57,680 --> 00:27:00,880 Speaker 1: we think the economy is doing or the consumer. Well 501 00:27:00,920 --> 00:27:05,840 Speaker 1: we've been I would say the investment process of of 502 00:27:05,880 --> 00:27:09,320 Speaker 1: all the companies with whom I doubt I could not 503 00:27:09,480 --> 00:27:13,040 Speaker 1: get around the fact that what the government is doing 504 00:27:13,200 --> 00:27:18,679 Speaker 1: is having a very significant impact on financial world. And 505 00:27:18,720 --> 00:27:22,000 Speaker 1: the financial world is where the bottom line and this 506 00:27:22,200 --> 00:27:26,640 Speaker 1: profits and which you're working at. So our fully can 507 00:27:26,640 --> 00:27:34,800 Speaker 1: concur what you're saying, and we we are moving in 508 00:27:34,960 --> 00:27:42,879 Speaker 1: directions which are quite surprising, and obviously the virus issue 509 00:27:43,040 --> 00:27:46,639 Speaker 1: coming up has made us a very much more difficult 510 00:27:46,680 --> 00:27:50,720 Speaker 1: problem to deal with. But how we come out of 511 00:27:50,840 --> 00:27:56,360 Speaker 1: this thing, it's going to depend very much on fundamental 512 00:27:56,520 --> 00:28:02,639 Speaker 1: issues with dispect the government. And it seems ironic, but 513 00:28:02,840 --> 00:28:06,040 Speaker 1: I'm saying we ought to be looking at Sweden, which 514 00:28:06,160 --> 00:28:13,160 Speaker 1: used to be the crintessential socialist society, as a measure 515 00:28:14,119 --> 00:28:18,400 Speaker 1: which we are to direct ourselves to get our system 516 00:28:18,680 --> 00:28:24,320 Speaker 1: and more balanced. And I speak to a lot of people, 517 00:28:25,000 --> 00:28:29,840 Speaker 1: pres people listen. Well, so we're listening and we want 518 00:28:29,880 --> 00:28:33,040 Speaker 1: to hear what you have to suggest, because any crisis, 519 00:28:33,840 --> 00:28:37,680 Speaker 1: from from what I've read in history, can give opportunities 520 00:28:37,720 --> 00:28:41,720 Speaker 1: as well as real perils. If we were to forgive 521 00:28:41,760 --> 00:28:46,040 Speaker 1: the expression, use this crisis to move the economy, move 522 00:28:46,160 --> 00:28:49,040 Speaker 1: the government in the direction you think would be more constructive, 523 00:28:49,080 --> 00:28:52,280 Speaker 1: how would we do that? Well, I think the first 524 00:28:52,320 --> 00:29:00,000 Speaker 1: thing is to recognize that, uh, what the data are 525 00:29:00,080 --> 00:29:04,520 Speaker 1: arkably show is that for the last fifty years, AH 526 00:29:05,720 --> 00:29:11,280 Speaker 1: social benefits have been crowding out gross domestic savings in 527 00:29:11,320 --> 00:29:16,640 Speaker 1: the United States, uh, dollar for dollar. And that is 528 00:29:16,680 --> 00:29:21,640 Speaker 1: meant effectively that if gross domestic savings is being reduced, 529 00:29:22,200 --> 00:29:28,840 Speaker 1: that's being the major source of gross domestic investment. Then 530 00:29:28,880 --> 00:29:33,880 Speaker 1: we are dealing with the situation where productivity growth slows down, 531 00:29:34,360 --> 00:29:39,320 Speaker 1: which is precisely what has been happening, and if what 532 00:29:39,400 --> 00:29:43,400 Speaker 1: we need to do. We're now at a one percent 533 00:29:43,640 --> 00:29:51,080 Speaker 1: annual rate productivity growth that's intolerably low and unlessen until 534 00:29:51,280 --> 00:29:54,479 Speaker 1: we can turn it up, and the only way we 535 00:29:54,520 --> 00:30:02,520 Speaker 1: can do that is by structuring our investment towards capital goods, 536 00:30:03,320 --> 00:30:06,520 Speaker 1: and we're not doing that and then does not earth 537 00:30:06,600 --> 00:30:10,600 Speaker 1: At the moment. There are some who are very concerned 538 00:30:10,600 --> 00:30:12,200 Speaker 1: about what's going on in the government right now because 539 00:30:12,240 --> 00:30:15,400 Speaker 1: of what is called moral hazard that in the effort 540 00:30:15,400 --> 00:30:18,800 Speaker 1: to bail out companies that we are bailing out some 541 00:30:18,880 --> 00:30:22,000 Speaker 1: who have been profligate, not just those who have been prudent, uh, 542 00:30:22,240 --> 00:30:24,720 Speaker 1: including investing in things like high yield bonds and things 543 00:30:24,760 --> 00:30:27,040 Speaker 1: like that. Is this a time to be concerned about 544 00:30:27,080 --> 00:30:29,360 Speaker 1: moral hazard or should we put that to one side 545 00:30:29,400 --> 00:30:32,360 Speaker 1: and deal with the much bigger hazard of the coronavirus. 546 00:30:33,240 --> 00:30:40,000 Speaker 1: I think that's it's not. I mean, I agree it's 547 00:30:40,040 --> 00:30:43,360 Speaker 1: an issue, but there are lots of issues which we 548 00:30:43,560 --> 00:30:51,760 Speaker 1: can deal with without really being concerned about. And Dr Greenspan, 549 00:30:51,920 --> 00:30:54,680 Speaker 1: how do you assess the situation with unemployment? Obviously, we've 550 00:30:54,680 --> 00:30:57,840 Speaker 1: lost twenty six million jobs or so in five weeks 551 00:30:57,840 --> 00:31:00,600 Speaker 1: and projections it will get worse, some people saying it 552 00:31:00,640 --> 00:31:03,160 Speaker 1: may even get to an unemployment level that beats what 553 00:31:03,240 --> 00:31:06,160 Speaker 1: was going on during the Great Depression. What do you 554 00:31:06,240 --> 00:31:11,080 Speaker 1: project in terms of unemployment through the rest of the years. 555 00:31:11,160 --> 00:31:16,400 Speaker 1: The problem basically is, uh, we we actually are looking 556 00:31:16,440 --> 00:31:23,880 Speaker 1: at the terrible first quarter. Obviously second quarters pretty awful. 557 00:31:24,520 --> 00:31:29,920 Speaker 1: But if the issue of the virus works, it's way 558 00:31:30,000 --> 00:31:33,360 Speaker 1: we the way we expect. We probably have a very 559 00:31:33,400 --> 00:31:39,760 Speaker 1: strong third quarter. But my concern is going is the 560 00:31:39,840 --> 00:31:44,640 Speaker 1: fourth quarter and beyond Uh, it's it's the years they 561 00:31:44,680 --> 00:31:48,760 Speaker 1: had where the changes have got to be made. Uh. 562 00:31:48,840 --> 00:31:52,520 Speaker 1: And I would be less concerned about many of the 563 00:31:52,600 --> 00:31:58,200 Speaker 1: issues which confront us today, although I dude say importantly 564 00:31:59,200 --> 00:32:03,440 Speaker 1: the Irish issue has got to be resolved in a 565 00:32:03,600 --> 00:32:10,720 Speaker 1: rational and sensible matter and change, for examples, social security 566 00:32:10,760 --> 00:32:15,280 Speaker 1: benefits and the way they are paid so that we 567 00:32:15,320 --> 00:32:19,200 Speaker 1: don't run in to the crisis that's reading right into 568 00:32:19,280 --> 00:32:23,120 Speaker 1: as a consequence that was former FED chair Alan Greensband. 569 00:32:23,560 --> 00:32:25,960 Speaker 1: This has been another edition of Wall Street Week. See 570 00:32:26,000 --> 00:32:26,840 Speaker 1: you next week.