WEBVTT - CPI, The Economy, And Energy (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.880 at Bloomberg dot com slash podcast. Let's get these uh 0:00:23.160 --> 0:00:26.239 some handle, get a handle on these markets, which they 0:00:26.239 --> 0:00:29.600 continue to rip. The SMP five up about one point 0:00:29.680 --> 0:00:33.400 five percent, NASDAC even stronger, up point one point nine 0:00:33.760 --> 0:00:35.680 per cents on the back of that better than expected 0:00:35.680 --> 0:00:39.560 inflation data. Let's check in with Vince Signarolla, global macro 0:00:39.680 --> 0:00:43.640 strategist with Bloomberg News. Vince, I mean, you know, we 0:00:43.720 --> 0:00:46.640 had really good jobs numbers last week. We got better 0:00:46.680 --> 0:00:50.000 than expected inflation here. The White House is rightfully so 0:00:50.120 --> 0:00:52.839 taking victory lapse here. What do you make of it 0:00:52.880 --> 0:00:55.400 and what do you make of the markets response? Well, 0:00:55.440 --> 0:00:58.400 I think the market response is somewhat appropriate. We're seeing 0:00:58.400 --> 0:00:59.920 a couple of things. We're always been seeing a bit 0:00:59.920 --> 0:01:02.480 of risk with seeing energy prices coming off as inflation 0:01:02.560 --> 0:01:05.560 balls over. Interesting thing is I'm talking to some traders 0:01:05.560 --> 0:01:08.960 this morning. They're a little confused about the treasury market 0:01:08.959 --> 0:01:12.200 move is selling in the in the back end. But 0:01:12.319 --> 0:01:15.120 what that represents is there's been such a big trade 0:01:15.160 --> 0:01:18.320 on inflation being sort of just here for the next 0:01:18.360 --> 0:01:20.360 six maybe twelve months, and so there's been a lot 0:01:20.400 --> 0:01:22.760 of selling in the front end um buying in the 0:01:22.800 --> 0:01:25.360 back end. The traders now reversing that trade, and so 0:01:25.440 --> 0:01:29.720 we're seeing some widening, uh narrowing of the inversion in 0:01:29.760 --> 0:01:32.839 the two tents. And that's what's driving that I would 0:01:32.840 --> 0:01:34.680 like to point out, and you know, I've been beating 0:01:34.680 --> 0:01:36.880 this room for a while now about how the FITS 0:01:36.920 --> 0:01:41.000 forecasts been terrible and that this is a transient situation 0:01:41.120 --> 0:01:44.240 and they're just just rushing into something and not giving 0:01:44.240 --> 0:01:48.440 the economy a chance to catch up from the pandemic 0:01:48.520 --> 0:01:52.680 confusion of a huge amount of money and keeping weights 0:01:53.120 --> 0:01:55.360 basically far too well for too long with a higher 0:01:55.400 --> 0:01:58.320 balance sheet. The ft is actually operating. If you look 0:01:58.320 --> 0:02:01.960 at this situation eight to this to the Fed being 0:02:02.000 --> 0:02:05.760 like a Fortune five hundred company. They're trying to match 0:02:06.920 --> 0:02:10.720 quarterly estimates to what the market is expecting and they 0:02:10.880 --> 0:02:12.960 keep missing the mark. And for the Fed, it's an 0:02:12.960 --> 0:02:15.359 even worst case basis, because they're being held accountable for 0:02:15.480 --> 0:02:18.639 monthly numbers, and so we keep hearing from them. Don't 0:02:18.680 --> 0:02:21.239 watch monthly numbers. Don't watch monthly numbers. We've got a 0:02:21.320 --> 0:02:23.600 high jobs report. What do they do? Oh, we have 0:02:23.639 --> 0:02:26.280 to say higher for longer because of higher jobs. They 0:02:26.520 --> 0:02:29.080 they're just not incredible. I I honestly just don't know 0:02:29.160 --> 0:02:32.080 why people keep trying to trade what the FED says 0:02:32.200 --> 0:02:35.560 and losing money by by that. For for example, when 0:02:36.480 --> 0:02:39.120 it's it's insane. I mean, there are academics who've never 0:02:39.160 --> 0:02:43.280 said the word done but bence. So you don't expect 0:02:43.360 --> 0:02:47.400 the FED to stick to a vulcal like um rate 0:02:47.600 --> 0:02:51.120 rise regime. You think at some point this Fed is 0:02:51.160 --> 0:02:54.600 going to turn around and start cutting rates. I don't 0:02:54.639 --> 0:02:56.840 know that they're going to cut rates per se, because 0:02:56.880 --> 0:03:00.280 we still have inflation a long long way away from 0:03:00.320 --> 0:03:02.000 where they want to see it, so there's no real 0:03:02.040 --> 0:03:04.800 reason to cut rates. But they really need to stop 0:03:05.080 --> 0:03:07.840 and give the monetary policy a chance to work its 0:03:07.880 --> 0:03:10.480 way through the system. Monetary policy. But we're only at 0:03:10.480 --> 0:03:13.440 two and a half percent, like that's still still nothing, 0:03:14.320 --> 0:03:16.520 of course, But why is everybody in such a hurry 0:03:16.520 --> 0:03:19.880 to get rates to five percent. Monetary policy doesn't react 0:03:19.880 --> 0:03:22.919 on a daily basis. I saw a tweet from someone 0:03:22.960 --> 0:03:25.160 today who said, oh, my cup of coffee went down 0:03:25.160 --> 0:03:29.560 for me. I mean prices to come I mean to 0:03:29.639 --> 0:03:32.240 expect prices to come down. Paul checks the gas prices 0:03:32.360 --> 0:03:36.160 every single day, plus he checks regular and we all 0:03:36.160 --> 0:03:39.400 know that he tanks premium. So yeah, like see that's 0:03:39.480 --> 0:03:41.600 I feel sorry for those out there on the premium scale. 0:03:41.600 --> 0:03:43.680 But but but but so so that we've heard a 0:03:43.680 --> 0:03:47.200 lot of FED speakers talk about the importance of front loading. 0:03:47.280 --> 0:03:50.000 I don't personally know what it is why they want to, 0:03:50.880 --> 0:03:54.000 but because they think that inflation is going to go 0:03:54.240 --> 0:03:58.280 to and stay there, they could not be more dead along. 0:03:58.480 --> 0:04:01.119 And I'll tell you exactly why and why this isn't 0:04:01.120 --> 0:04:02.760 the seventies. And if I hear at one boy thought, 0:04:02.760 --> 0:04:05.839 I'm gonna throw a textbook at so much. If you 0:04:05.920 --> 0:04:09.960 have wage games that are not above capital letters above 0:04:10.080 --> 0:04:14.360 the inflation rate, you cannot have sustaining inflation. The consumer 0:04:14.520 --> 0:04:18.040 will pull back. They have absolutely no choice. I can't 0:04:18.080 --> 0:04:22.360 spend what you don't have. Savings of creator disposable income 0:04:22.440 --> 0:04:26.159 is creator wages are to keep your place with inflation revolving. 0:04:26.200 --> 0:04:28.479 Credit is the highest that's been in two thousand eight, 0:04:28.520 --> 0:04:31.880 and that's credit card. That where does the Fed think 0:04:32.000 --> 0:04:34.640 this money is coming from. It's certainly ain't coming to 0:04:34.720 --> 0:04:38.599 my next pay hike from Bloomberg. Well, I mean, well, 0:04:38.680 --> 0:04:40.960 yesterday we watched the President sign a bill that's going 0:04:41.000 --> 0:04:45.520 to give fifty two billion dollars in subsidies to chip makers. 0:04:45.560 --> 0:04:49.560 Those are private companies, you know, owned by shareholders, not 0:04:49.720 --> 0:04:52.800 government companies. Um, so he's gonna give them the biggest 0:04:52.839 --> 0:04:55.720 subsidy boost we've ever seen the federal government hand out. 0:04:56.360 --> 0:04:58.920 That's one place the money can come from. Two things 0:04:58.960 --> 0:05:01.520 about that build Number One, they've got more chips than 0:05:01.560 --> 0:05:03.240 they know what to do with right now because they 0:05:03.279 --> 0:05:08.400 frontloaded lovely phrase. They're buying from Taiwan because they thought 0:05:08.400 --> 0:05:11.279 there was going to be this indefinite shortage. The US 0:05:11.320 --> 0:05:14.479 companies in the chip industry are are are They still 0:05:14.520 --> 0:05:17.400 get their chips from Taiwan and then they reperp them 0:05:17.400 --> 0:05:20.640 through their customers there, so their end units users are 0:05:20.680 --> 0:05:23.240 still paying hot crisis. The subsidies are going to be 0:05:23.240 --> 0:05:26.880 a future situation, which will of course help curb inflation 0:05:26.920 --> 0:05:29.320 because that will bring prices down. The other part of 0:05:29.320 --> 0:05:32.080 that bill, which I love, which was the e V makers. 0:05:33.520 --> 0:05:37.640 Auto analysts are basically saying, hardly any cars are going 0:05:37.680 --> 0:05:39.800 to meet the standards as the government has put in 0:05:39.839 --> 0:05:42.880 that bill to meet the credit. Well, I don't I 0:05:42.880 --> 0:05:46.360 don't know, Vince. I mean, they're extending a credit or 0:05:46.400 --> 0:05:50.560 giving a broader credit to automakers or two to consumers 0:05:50.640 --> 0:05:54.479 rather um to buy e vs that are already sold 0:05:54.480 --> 0:05:57.159 out with a two year waiting list. So they're just 0:05:57.240 --> 0:06:00.839 pumping so much money into this system. A lot of 0:06:00.839 --> 0:06:05.280 people would argue for no reason, and that's what causes inflation. 0:06:05.400 --> 0:06:07.320 There's a very there's a very good reason. We have 0:06:07.360 --> 0:06:09.480 mid term elections coming up to November. That's the only 0:06:09.520 --> 0:06:11.680 reason for this bill. And it's the only reason why 0:06:11.720 --> 0:06:15.160 all those credits don't show up until because if they 0:06:15.200 --> 0:06:17.160 showed up now and no one could buy those cars 0:06:17.160 --> 0:06:19.919 because they can't either find them or the credit doesn't 0:06:19.920 --> 0:06:22.080 apply to them, it wouldn't do it. Damn things. So 0:06:22.240 --> 0:06:24.880 the whole thing was the whole thing is ridiculous, by 0:06:24.920 --> 0:06:26.960 the way, by the way, you want to hear ridiculous, 0:06:27.360 --> 0:06:30.440 They're gonna so extend the credit. It's a seventy five 0:06:30.760 --> 0:06:35.560 hundred dollar federal credit for electric vehicles like the Ford Lightning. 0:06:36.240 --> 0:06:38.159 Paul and I are big fans of the Ford Lightning. 0:06:38.160 --> 0:06:40.480 It's an awesome car. It's a hundred thousand dollar truck, 0:06:41.360 --> 0:06:43.560 and Ford just raised the price of it by eight 0:06:43.560 --> 0:06:47.159 thousand five d There you go. I saw that yesterday 0:06:47.200 --> 0:06:51.960 exactly so. But you're gonna who's who's that? Who's that 0:06:52.040 --> 0:06:54.800 subsidy for? You know what? The most interesting thing that 0:06:55.279 --> 0:06:57.520 absolutely no one is talking about. It was a few 0:06:57.600 --> 0:07:00.960 days ago the New York said, did their consumer expectation surfeit? 0:07:01.279 --> 0:07:04.520 Do you know of which income group sees the inflation 0:07:04.640 --> 0:07:08.719 moderating the most? Those people who make less than fifty dollars, 0:07:08.960 --> 0:07:13.120 The people most impacted by inflation, who live paycheck to paycheck, 0:07:13.560 --> 0:07:16.560 expect prices to come down. And why because they're beginning 0:07:16.560 --> 0:07:19.200 to see it. They wouldn't expect it otherwise. So where 0:07:19.280 --> 0:07:22.560 is this inflation coming from? You get fed smester saying 0:07:22.560 --> 0:07:24.760 it's not affecting me. Well, thank you very much. Nice 0:07:24.800 --> 0:07:27.560 to be in the one person where you can afford 0:07:29.320 --> 0:07:31.160 she said. She said, I know prices are going up, 0:07:31.160 --> 0:07:33.280 and it doesn't bother me because I have enough money. 0:07:33.480 --> 0:07:35.880 I'll tell you. I'll tell you a truth. When I 0:07:35.920 --> 0:07:39.239 was trading at US Bank, we replaced the global effex 0:07:39.280 --> 0:07:42.960 manager with a lawyer who knew nothing about effects and rates. 0:07:43.240 --> 0:07:45.400 My cousin was training at City Bank to five. I 0:07:45.440 --> 0:07:47.480 told him what was going on. He said, best you 0:07:47.520 --> 0:07:51.080 start looking for a job because anyone who's never said 0:07:51.080 --> 0:07:53.400 the word done is not somebody you want to work 0:07:53.440 --> 0:07:56.080 for in a risk market. So we are trying to 0:07:56.200 --> 0:07:58.760 follow a fet We're the only person who's ever had 0:07:58.760 --> 0:08:01.400 a real job is Powell. And they keep telling us 0:08:01.440 --> 0:08:03.360 what's going to happen to the weights and efex and 0:08:03.400 --> 0:08:05.640 they've never thought a trade in their looks? Why does 0:08:05.680 --> 0:08:07.960 that make me feel good about these people? Why? Why 0:08:08.040 --> 0:08:12.440 are they credible to anybody? So just ten ten seconds? 0:08:12.680 --> 0:08:15.520 What context do you say done as a trader? Done 0:08:15.520 --> 0:08:17.560 as a trader as you actually do a trade. Somebody 0:08:17.560 --> 0:08:19.240 says that you make me a price, you do the 0:08:19.280 --> 0:08:23.240 deal and say done. You know about that? That's traders 0:08:23.240 --> 0:08:25.800 speak there, This is what we Why's why we have 0:08:25.840 --> 0:08:29.120 you on. Vince shot out of a Ken and Vince Cignarella. 0:08:29.200 --> 0:08:32.520 He does all the strategy stuff. He's traded rates, he's 0:08:32.520 --> 0:08:35.600 traded FX. God knows what else he's traded, probably, you know, 0:08:35.760 --> 0:08:38.559 standing in the pitch trading crude oil for all we know. 0:08:38.679 --> 0:08:41.800 But he's a bloomberg at News. He talks to traders 0:08:41.880 --> 0:08:44.160 all the time, and we'd love to get his call 0:08:44.280 --> 0:08:46.400 on these markets, particularly when you got a big, big 0:08:46.400 --> 0:08:53.160 move like we do today. It's bringing Lindsay Piegsa. She 0:08:53.440 --> 0:08:57.800 is the chief economist for stephle Lindsay, you know, I'm 0:08:57.840 --> 0:09:01.760 not an economist, thank goodness, um, but I do know 0:09:01.800 --> 0:09:03.920 a good labor market. Last week, I do see the 0:09:03.920 --> 0:09:08.400 print here on inflation. Today things look pretty good. How 0:09:08.400 --> 0:09:11.240 do you put it all together? Well, I think from 0:09:11.240 --> 0:09:14.760 the standpoint of the labor market. Last friday's job stumpers showed, 0:09:14.840 --> 0:09:18.000 as the Fed has described, the labor market still solid growth, 0:09:18.480 --> 0:09:22.839 keeping the FEDS eye on the inflation ball at this point, 0:09:22.880 --> 0:09:25.360 while we could argue that the recessionary boxes have been 0:09:25.440 --> 0:09:30.199 checked for the consumer, for manufacturing, for housing, the labor 0:09:30.240 --> 0:09:33.560 market has really been that silver lining. But from an 0:09:33.600 --> 0:09:37.240 inflationary standpoint, this morning's number was a little bit mixed. 0:09:37.600 --> 0:09:41.320 It did give the more dubbish a lean as we 0:09:41.360 --> 0:09:43.480 look at some of those numbers. Now the reprieve was 0:09:43.600 --> 0:09:46.679 very minimal, and for the average American households at lower 0:09:46.720 --> 0:09:50.880 gas prices, while welcomed, does not offset the painfully high 0:09:51.000 --> 0:09:54.800 costs on nearly every other component of their monthly expenditures. 0:09:54.840 --> 0:09:57.080 But still it was a step in the right direction. 0:09:57.200 --> 0:10:00.120 So looking at investors bets, we do see that being 0:10:00.160 --> 0:10:02.920 towards a smaller fifty basis point increase as opposed to 0:10:02.960 --> 0:10:07.520 seventy five next month. But why but if you're the Fed, um, 0:10:07.600 --> 0:10:10.320 wouldn't you want to just stay on course regardless of this? 0:10:10.480 --> 0:10:12.800 You know, one data point does not a trend make 0:10:13.800 --> 0:10:17.120 Oh absolutely, So this this is the problem. The market 0:10:17.280 --> 0:10:19.960 is anxious to call a peak in inflation. The market 0:10:20.040 --> 0:10:22.920 is anxious for the Fed to signal there almost done 0:10:22.920 --> 0:10:26.000 fighting inflation, they're going to start to decelerate. But the 0:10:26.040 --> 0:10:29.560 Fed has been very clear that they're keeping their eye 0:10:29.720 --> 0:10:32.040 on the ball. They're going to continue to raise rates 0:10:32.080 --> 0:10:36.800 until they're convinced by several consecutive reports that inflation is 0:10:36.920 --> 0:10:41.160 on a meaningful and sustainable downward trend back towards that 0:10:41.240 --> 0:10:45.679 two inflation targets. So right now the market is questioning 0:10:45.679 --> 0:10:49.360 the Fed's resolved to remain resilient the FED says it will. 0:10:49.880 --> 0:10:53.480 Whichever blinks first is going to determine the directional momentum 0:10:53.520 --> 0:10:55.880 of raps from By the way, lindsay, I also am 0:10:55.920 --> 0:11:00.400 anxious to have seen the peak in inflation, and I'm 0:11:00.440 --> 0:11:04.000 anxious to see the FED slow down its rate hikes. 0:11:04.040 --> 0:11:08.040 But um, does it really Is it really a bad 0:11:08.080 --> 0:11:11.080 thing for the economy if the Fed keeps raking rate 0:11:11.200 --> 0:11:14.880 hiking rates so long as inflation continues to come down 0:11:14.920 --> 0:11:18.800 and we have these you know, five thousand job editions, Well, 0:11:18.840 --> 0:11:20.400 I suppose it depends if you want to take your 0:11:20.400 --> 0:11:22.200 medicine now or if you want to kick that down 0:11:22.240 --> 0:11:24.520 the road. If the FED decides to take a more 0:11:24.600 --> 0:11:29.120 benign policy pathway and doesn't root out the inflation dragon, 0:11:29.480 --> 0:11:32.720 then we may run into the scenario of still elevated prices, 0:11:32.760 --> 0:11:36.079 but now we have much more a much more prolonged 0:11:36.200 --> 0:11:40.440 period of very minimal growth, or the conditions lining up 0:11:40.480 --> 0:11:43.800 for stagflation. If, however, the FED is willing to push 0:11:43.880 --> 0:11:49.280 us into maybe a temporarily deeper recessionary position but get 0:11:49.320 --> 0:11:52.120 inflation under control, then we can talk about a more 0:11:52.280 --> 0:11:55.439 robust recovery. On the flip side, lindsay, I'm trying to 0:11:55.520 --> 0:11:57.800 make the case to my boss is that they should 0:11:57.800 --> 0:12:01.080 send me out to Jackson Hole, Wyoming. Um, tell us 0:12:01.160 --> 0:12:03.439 what happens in Jackson Hall, Wyoming in the month of 0:12:03.480 --> 0:12:07.959 August every year, and should we pay attention? Well, Traditionally 0:12:08.080 --> 0:12:11.840 the FED has used the Jackson Hole meeting to give 0:12:12.040 --> 0:12:15.440 an increased assessment or an updated assessment of where policy 0:12:15.480 --> 0:12:18.360 makers are in terms of the longer term view for 0:12:18.400 --> 0:12:22.400 the policy pathway. But this time around it's unlikely to 0:12:22.480 --> 0:12:26.319 warrant much attention, as we've already heard from the Chairman 0:12:26.679 --> 0:12:29.760 that decisions on policy are not being made on a 0:12:29.840 --> 0:12:34.480 longer term, a longer term assessment of the economy, but 0:12:34.520 --> 0:12:37.360 they're being made meeting to meeting. So just like the 0:12:37.400 --> 0:12:41.400 market is overreacting arguably to one data point, so too 0:12:41.520 --> 0:12:45.560 is the FED basing next month's decision on the incoming data, 0:12:45.640 --> 0:12:50.800 the latest incoming data. Alright, So what are your expectations, lindsay, 0:12:50.880 --> 0:12:55.720 for the US economy? Um, do we see in inflation 0:12:55.800 --> 0:12:59.200 cooling back down closer to the two percent level? And 0:12:59.440 --> 0:13:03.480 do we have recession? Well, that's that's those are some 0:13:03.520 --> 0:13:06.080 big questions there. First off, I do think that growth 0:13:06.120 --> 0:13:09.960 remains very minimal, throughout the year, and I do think 0:13:10.000 --> 0:13:13.960 that looking backwards, the NBR will eventually acknowledge a recession 0:13:14.000 --> 0:13:17.160 started either in the first or the second quarter from 0:13:17.200 --> 0:13:22.280 an inflation from unemployment, absolutely, because I think the three 0:13:22.320 --> 0:13:25.800 and a half percent unemployment rate is not necessarily capturing 0:13:26.280 --> 0:13:28.959 the full, the full sense of what's happening in the 0:13:29.040 --> 0:13:32.000 labor market. Remember, the growth that we've seen in job 0:13:32.080 --> 0:13:37.920 creation is less about new jobs being created and more 0:13:37.960 --> 0:13:41.880 about old jobs being replaced. Remember as of July, that's 0:13:41.920 --> 0:13:45.200 when we recaptured the full twenty two million jobs lost 0:13:45.280 --> 0:13:47.840 during the Great Recessions. So over the past eighty months, 0:13:48.280 --> 0:13:51.480 essentially we've just clawed back to where we were. We're 0:13:51.480 --> 0:13:54.440 not talking about new job creation above and beyond the 0:13:54.480 --> 0:13:56.880 one's loss. So I do think when we look at 0:13:56.920 --> 0:14:00.079 the loss of real income, the decline and manufacturing, the 0:14:00.160 --> 0:14:03.720 laws of real spending, top line GDP, and negative territory, 0:14:04.040 --> 0:14:07.640 even though the employment numbers are giving us an artificial 0:14:07.720 --> 0:14:11.880 sense of solidity, I think that we are in processionary condition. 0:14:12.040 --> 0:14:14.559 I don't know my my third of my fourth children 0:14:14.760 --> 0:14:17.120 actually got a real, real job as they call it. 0:14:17.200 --> 0:14:20.480 So to me, that is a wicked strong labor market 0:14:20.560 --> 0:14:22.880 so nz PA, thanks so much for joining US. Chief 0:14:22.880 --> 0:14:27.200 econras managing director at Steve giving us her thoughts here. 0:14:27.200 --> 0:14:30.160 We love talking to Lindsay a nice perspective to the 0:14:30.200 --> 0:14:35.680 market here. We were just talking to Bloomberg's Bevince Signarolla 0:14:36.240 --> 0:14:38.880 just earlier this morning and he was making a comment 0:14:38.920 --> 0:14:41.840 talking about chips, and he sent along some news here. 0:14:41.920 --> 0:14:45.040 Demand for chips is collapsing, just as President Biden signs 0:14:45.040 --> 0:14:48.880 a bill to jump start more US chip making, which 0:14:48.920 --> 0:14:51.240 is very interesting because we've got some very mixed the 0:14:51.400 --> 0:14:53.400 bad numbers coming out of some of these chipmakers over 0:14:53.400 --> 0:14:55.320 the last a few days and kind of just kind 0:14:55.320 --> 0:14:58.120 of goes to this, you know, strategic importance of having 0:14:58.400 --> 0:15:02.280 chip manufacturing in the U. Keith Croc joins us. He's 0:15:02.280 --> 0:15:06.560 a fan of Croc Institute for Tech Diplomacy at Purdue 0:15:06.800 --> 0:15:10.280 University West Lafayette, Indiana. Some really good stuff there. They do. 0:15:10.320 --> 0:15:13.640 It produced some smart engineering geeks that perdue, no question 0:15:13.720 --> 0:15:16.640 about it. Hey, Cai talked to us about this chip 0:15:16.800 --> 0:15:19.080 business because at the beginning of the pandemic, when China 0:15:19.160 --> 0:15:22.080 shut down, we all the whole world shut down. We said, 0:15:22.080 --> 0:15:25.760 oh boy, we need chips for a lot of stuff, 0:15:25.800 --> 0:15:27.600 and we don't really make a lot of chips here. 0:15:27.640 --> 0:15:30.080 So the talk really ramped up of you know, kind 0:15:30.080 --> 0:15:34.200 of on shoring some chip manufacturing capability. And I think 0:15:34.240 --> 0:15:37.520 that's what the Chips Act UH does. How should we 0:15:37.560 --> 0:15:41.920 think about that? Well, I'll tell you what fellas I'm 0:15:41.960 --> 0:15:45.360 here in Washington, d C. I was invited yesterday by 0:15:45.400 --> 0:15:49.200 the White House UH for the for the signing. It 0:15:49.280 --> 0:15:52.960 was a great deal for America, for national security, for 0:15:53.040 --> 0:15:57.520 global economic security, and long term prosperity. You know, when 0:15:57.560 --> 0:16:01.720 you talk about UH these quarterly results for the chip makers, 0:16:01.760 --> 0:16:04.920 I would not be worried about that at all, because 0:16:04.960 --> 0:16:08.400 this chip business is growing so fast. You know, a 0:16:08.520 --> 0:16:11.200 slowdown from that means in on the average, it goes 0:16:11.240 --> 0:16:16.760 from growth down to growth. We're under the capacity now, 0:16:17.680 --> 0:16:20.760 you know. Let me tell you why, UH, this is 0:16:20.920 --> 0:16:24.920 such an important bipartisan you know, two utter an eighty 0:16:24.960 --> 0:16:28.920 billion dollar bill. First of all, it's about securing the 0:16:29.080 --> 0:16:34.480 semiconductor supply chain that is critical for national security. The 0:16:34.640 --> 0:16:38.360 second is this investment, which now is going to result 0:16:38.440 --> 0:16:42.720 in a three fifty billion dollars UH in the in 0:16:42.720 --> 0:16:47.880 in chip manufacturing in the United States and to help 0:16:48.000 --> 0:16:50.800 US maintain that lead as well as a two billion 0:16:50.840 --> 0:16:54.640 dollar investment UH with direct funds in R and D. 0:16:55.160 --> 0:16:58.080 And what that's gonna drive is jobs, jobs, jobs, and 0:16:58.200 --> 0:17:03.040 not just any kind of jobs, highly skilled jobs. And 0:17:03.280 --> 0:17:06.919 I think I think you fellas understand that. You know, 0:17:07.200 --> 0:17:14.080 our adversaries pay an a four dimensional game of diplomatic, economic, military, 0:17:14.200 --> 0:17:17.679 and cultural chess. That's john and they're playing well. And 0:17:17.800 --> 0:17:19.800 they they're doing it the same way we are. Right 0:17:19.800 --> 0:17:23.440 they had this centrally controlled economy. They're just passing out 0:17:23.480 --> 0:17:27.160 money to companies and deciding who are winners and losers. 0:17:27.480 --> 0:17:30.280 I don't understand this. I don't get why. And you 0:17:30.359 --> 0:17:32.760 got your mba Harvard, so you probably know better than 0:17:32.800 --> 0:17:35.119 I do. Know. He recently got a pH d and 0:17:35.240 --> 0:17:38.720 some engineering stuff. So why on the economic side, why 0:17:38.720 --> 0:17:41.480 don't we let the market, the free market decide, or 0:17:41.520 --> 0:17:43.800 if it's such a national security issue, why don't we 0:17:43.840 --> 0:17:46.600 take over this industry? Like why are we halfway here 0:17:46.640 --> 0:17:51.600 between like um state controlled socialism and free market capitalism? 0:17:51.720 --> 0:17:54.359 What are we doing Keith? These companies already make a 0:17:54.359 --> 0:17:56.680 lot of money, These shareholders have already gotten very rich. 0:17:56.760 --> 0:17:59.639 Why are we giving them, you know, billions tens and 0:17:59.720 --> 0:18:05.120 ten of billions of dollars in government subsidies. Right, I'll 0:18:05.119 --> 0:18:09.040 tell you exactly why. So my last role was under 0:18:09.040 --> 0:18:13.520 Secretary of State for Economic Growth, Energy and the Environment. 0:18:13.560 --> 0:18:17.040 Before that, I ran three public companies. I've been in 0:18:17.119 --> 0:18:21.800 Silicon Valley most of my of my career. And here's 0:18:21.920 --> 0:18:27.320 was happen. We invented the semi conductor business. Here's what happened. Countries, 0:18:27.400 --> 0:18:31.240 particularly Asian countries, realized how strategic it is, and they 0:18:31.400 --> 0:18:36.720 subsidized the semiconductors. So they literally pulled it off our shores. 0:18:36.920 --> 0:18:42.560 And the investment that goes into these manufacturing facilities is humongous. 0:18:42.720 --> 0:18:45.439 We did the largest onshore in history when I was 0:18:45.880 --> 0:18:50.080 under Secretary of State, twelve billion dollars for one of 0:18:50.080 --> 0:18:54.120 the most sophisticated chip plants ever. And by the way, 0:18:54.240 --> 0:18:59.040 that has fifteen hundred workers on the production plot and 0:18:59.720 --> 0:19:04.159 sit super said of them are either master's degrees or PhDs. 0:19:04.320 --> 0:19:08.159 And we lost that talent alright, So give us a 0:19:08.200 --> 0:19:12.199 sense of just how strategic you think ensuring some of 0:19:12.240 --> 0:19:16.520 this capability is. Because again it became acutely aware even 0:19:16.560 --> 0:19:19.840 to lay people like myself that uh, you know when 0:19:19.920 --> 0:19:24.160 China shuts down, Taiwan shuts down for whatever reason. That's 0:19:24.160 --> 0:19:27.400 a problem. Matt Miller can't get his well for other 0:19:27.440 --> 0:19:30.720 industries should we be doing exactly It's taking me so 0:19:30.760 --> 0:19:34.080 long to get this truck from Chevrolet. I'm very excited. 0:19:34.160 --> 0:19:37.000 It's apparently coming up this month and I cannot wait. 0:19:37.040 --> 0:19:39.840 It's the z R two UM, which I'm so pumped about. 0:19:39.880 --> 0:19:43.040 But you know, if we're doing this for chips, why 0:19:43.080 --> 0:19:49.320 aren't we doing it for planes or trains or automobiles. Well, 0:19:50.000 --> 0:19:55.240 this is first of all, semiconductors is the most important 0:19:55.400 --> 0:19:59.320 industry in the world because it lays the foundation not 0:20:00.040 --> 0:20:04.280 only for everything in the tech area, but as you 0:20:04.280 --> 0:20:07.200 guys say, in the in the automotive field, in the 0:20:07.359 --> 0:20:12.400 energy field, you know, in the aerospace UH field. So 0:20:12.480 --> 0:20:18.119 the important thing is to secure uh this supply line. 0:20:18.320 --> 0:20:21.880 You guys saw what happened during during the pandemic, so 0:20:22.640 --> 0:20:26.440 uh And and the other thing that is is absolutely 0:20:26.520 --> 0:20:32.760 killed key is this skill set um you know, UH 0:20:32.960 --> 0:20:36.840 we lost We've lost it uh here in the United States, 0:20:36.880 --> 0:20:40.680 and now this is gonna bring it back. One other 0:20:40.720 --> 0:20:45.320 great thing about this UH Chips and Science Act, it 0:20:45.520 --> 0:20:52.880 also is funding UH research in critical national security sectors 0:20:53.280 --> 0:20:59.400 like quantum computing, like six G, like biotech, and this 0:20:59.480 --> 0:21:02.240 is this is in the area where you know, the 0:21:02.320 --> 0:21:04.560 United States used to be number one in R and D. 0:21:04.960 --> 0:21:09.160 We were down a number nine. And one last thing 0:21:09.520 --> 0:21:12.719 is that when we presented we are when we architected 0:21:12.760 --> 0:21:16.120 this bill, we presented the Senator Schumer and Senator Young 0:21:16.680 --> 0:21:19.760 and what we showed them is with this level of investment, 0:21:20.080 --> 0:21:25.000 you're gonna get it three times uh three, full additional 0:21:25.040 --> 0:21:29.080 investment from the private sector. Keith, let me quickly ask you. 0:21:29.320 --> 0:21:31.879 We only got thirty seconds here, but what do you 0:21:31.920 --> 0:21:34.920 think about the e V credits? Is that subsidy also 0:21:35.000 --> 0:21:40.440 important for American jobs and carmakers? Well, I can, I can, 0:21:40.680 --> 0:21:42.800 I can tell you what I think being you know, 0:21:42.880 --> 0:21:46.960 former CEO Docum signed and the REBA is that these 0:21:46.960 --> 0:21:50.520 guys are on the ninety days shot clock, right, and 0:21:50.640 --> 0:21:54.680 so to be this enables you to look long term, 0:21:54.960 --> 0:21:57.199 and that's key. And by the way, for the for 0:21:57.280 --> 0:22:01.320 the e V credits is long is that technology is 0:22:01.359 --> 0:22:05.600 developed in the US. Because Shina owns solar panels, so 0:22:05.680 --> 0:22:08.800 we've got to do something about that, all right, Keith, 0:22:08.840 --> 0:22:12.600 great stuff really appreciate getting your perspective. Keith Croc, founder 0:22:12.640 --> 0:22:16.880 of the Croc Institute for Tech Diplomacy at Perdue UH. 0:22:16.920 --> 0:22:20.000 He was also the former US Under Secretary of State 0:22:20.040 --> 0:22:24.320 for Economic Growth, Energy, and the Environment. Million jobs, million degrees. 0:22:24.560 --> 0:22:26.760 The guy used to be a VP at General Motors 0:22:26.760 --> 0:22:28.439 as well. I know, I've got to get him back on. 0:22:28.440 --> 0:22:30.000 He's done everything you gotta get. We'll get him back on. 0:22:30.040 --> 0:22:31.440 We'll get him next time he's in a sign, We'll 0:22:31.440 --> 0:22:37.640 get him here in the studio again. Some good economic 0:22:37.680 --> 0:22:39.480 data for the past few days. Let's check in with 0:22:39.560 --> 0:22:41.679 Jeff Cleveland. He does this for a living. He's a 0:22:41.720 --> 0:22:44.560 director in chief economist for Peyton and Regal. Hey, Jeff, 0:22:44.560 --> 0:22:48.000 you put today's CPI data together with you know, a 0:22:48.080 --> 0:22:52.320 really strong jobs report last week. I don't know what 0:22:52.400 --> 0:22:55.800 do you take away from that? Well, you know, it's 0:22:55.840 --> 0:23:00.199 interesting the month to month reading on core cp I, 0:23:00.920 --> 0:23:03.960 which slowed to point three. It could be just a 0:23:04.000 --> 0:23:06.760 fake out. We had a similar slow down back in 0:23:06.800 --> 0:23:09.359