WEBVTT - Bloomberg Wall Street Week: August 26, 2022 0:00:00.560 --> 0:00:03.760 This is Bloomberg Wall Street Week. We turn our attention 0:00:03.880 --> 0:00:07.120 to the markets this week. U s CPI never's reinforcing 0:00:07.160 --> 0:00:10.639 concerns about inflation. The financial stories that chief are worth 0:00:10.720 --> 0:00:13.480 a really different reaction to Mark. It's more indications of 0:00:13.640 --> 0:00:16.239 just how hot the U. S. Economy really is through 0:00:16.239 --> 0:00:19.439 the eyes of the most influential voices. Larry Summer was 0:00:19.440 --> 0:00:22.279 the former Triptor Secretary Katherine Keating, CEO of v n 0:00:22.400 --> 0:00:26.160 Y Mom, Sam's l Sharmon and founder of Equatic Group Investment. 0:00:26.200 --> 0:00:30.240 In Bloomberg Wall Street Week with David Weston from Bloomberg Radio, 0:00:30.360 --> 0:00:33.800 It's all about time, twenty years since we last saw 0:00:33.920 --> 0:00:36.839 euro dollar parody, six months of a ground war in 0:00:36.840 --> 0:00:39.680 Europe and counting down less than thirty days to the 0:00:39.720 --> 0:00:42.720 next FED decision. This is Bloomberg Wall Street Week. I'm 0:00:42.800 --> 0:00:46.600 David Weston. This week contributers Larry Summers of Harvard on 0:00:46.760 --> 0:00:50.560 his reaction to Chair J. Pale's Jackson Hole remark, look, 0:00:50.640 --> 0:00:53.640 I think he did what he needed to do, and 0:00:53.720 --> 0:00:57.520 former IBM CEO Sam Paulmisano how to make the Chips 0:00:57.520 --> 0:01:00.600 and Science Act live up to its name. You need 0:01:00.600 --> 0:01:15.560 to get the bureaucracy out of the way. This is 0:01:15.600 --> 0:01:18.920 a week to mark anniversaries and look forward to deadlines, 0:01:19.240 --> 0:01:22.200 starting with Dr Anthony Fauci's decision to step away from 0:01:22.200 --> 0:01:26.000 his ni A I D responsibilities after serving seven presidents 0:01:26.160 --> 0:01:29.160 over fifty four years. I tried, as you know, my 0:01:29.319 --> 0:01:33.479 very best to have the facts and the science guide us. 0:01:33.959 --> 0:01:37.119 A very different anniversary came with the euro falling below 0:01:37.200 --> 0:01:40.080 parody with US dollar for the first time in twenty years, 0:01:40.240 --> 0:01:43.200 driven in part by the looming energy crisis and prospects 0:01:43.200 --> 0:01:46.199 for the recession that it may cause something. Ian Shepherdson 0:01:46.240 --> 0:01:50.160 of Pantheon macro Economics thinks he's already here in reception 0:01:50.200 --> 0:01:52.360 now already. I mean, that's that's pretty obvious. Now we 0:01:52.440 --> 0:01:54.440 see that last thing for a while. We also passed 0:01:54.440 --> 0:01:57.720 the six month anniversary of Russia's invasion of Ukraine, as 0:01:57.760 --> 0:02:00.640 Prutent's forces has struck a train station in the eastern 0:02:00.640 --> 0:02:03.200 part of the country. On the thirty first anniversary of 0:02:03.320 --> 0:02:06.880 Ukrainians independence from Russia, a Russia that is trying to 0:02:06.920 --> 0:02:09.680 take it back. That's an irony not lost on Amanda 0:02:09.760 --> 0:02:13.400 Slope of the National Security Council. It's a sobering reminder 0:02:13.560 --> 0:02:15.680 that just as the Ukrainian people had to fight to 0:02:15.720 --> 0:02:18.959 defend themselves and get their independence of thirty one years ago. 0:02:19.080 --> 0:02:22.040 They are unfortunately in a similar position today. But it 0:02:22.080 --> 0:02:24.480 was also a week for celebration, at least for those 0:02:24.680 --> 0:02:28.400 saddled with student loan debt, with President Biden fulfilling his 0:02:28.480 --> 0:02:32.079 promise to give them some relief. I made a commitment 0:02:32.160 --> 0:02:35.960 that we provide student debt relief, and I'm honoring that 0:02:36.000 --> 0:02:41.320 commitment today we will forgive ten thousand dollars in outstanding 0:02:41.440 --> 0:02:44.959 federal student loans. But for Global Wall Street, there was 0:02:45.000 --> 0:02:48.320 really only one story this week, despite all the commemoration, 0:02:48.480 --> 0:02:50.640 and it came from Jackson Hole, and it came from 0:02:50.760 --> 0:02:54.160 Chair J. Powell. As markets eagerly sought answers to their 0:02:54.240 --> 0:02:57.880 questions about US monetary policy coming less than three weeks 0:02:57.919 --> 0:03:00.359 from when the f on MC meets again, and the 0:03:00.440 --> 0:03:03.760 Chair stepped up to the podium and basically said, we'd 0:03:03.760 --> 0:03:06.880 all have to wait. Our decision that September meeting will 0:03:06.919 --> 0:03:09.520 depend on the totality of the incoming data and the 0:03:09.560 --> 0:03:13.359 evolving outlook. But as much as the Fed says it 0:03:13.400 --> 0:03:15.680 will pay attention to the data, the markets, the markets 0:03:15.680 --> 0:03:17.840 got the message that they shouldn't expect any relief from 0:03:17.880 --> 0:03:20.600 tightening anytime soon, as the SMP five hundred who was 0:03:20.639 --> 0:03:22.799 down just over four percent for the week, and over 0:03:22.960 --> 0:03:25.520 three of that came on Friday alone. In response to 0:03:25.600 --> 0:03:28.880 chair Pal, the Nazadac fared even worse, down four point 0:03:28.919 --> 0:03:32.240 four percent, and again almost four of that came on 0:03:32.280 --> 0:03:35.480 Friday alone. The bond market was a bit more complicated, 0:03:35.720 --> 0:03:37.600 with the yield and the tenure up to just over 0:03:37.720 --> 0:03:40.280 three percent, barely up for the week, but the yield 0:03:40.320 --> 0:03:42.800 on the two year reacted much more to the Fed news, 0:03:42.880 --> 0:03:46.080 ending the week at three point four that's up sixteen 0:03:46.160 --> 0:03:48.560 basis points for the week. To help us understand what 0:03:48.600 --> 0:03:50.320 the markets are trying to tell us, we welcome to 0:03:50.440 --> 0:03:53.640 Peter Krauss, he's founder, chairman and CEO of Aperture Investors, 0:03:53.640 --> 0:03:57.160 and liz An Sanders, chief investment strategist for Charles Schwab. 0:03:57.320 --> 0:03:59.680 So listen, give us your take on what happened here. 0:04:00.080 --> 0:04:02.280 The markets were expecting more the same, they, sir, sure 0:04:02.280 --> 0:04:05.360 didn't react that way. Well, I think you know the 0:04:05.440 --> 0:04:09.240 narrative around the basis for the rally that started in 0:04:09.360 --> 0:04:11.640 mid June. Some of it had to do with the 0:04:12.280 --> 0:04:14.400 peak and the tenures around three and a half percent. 0:04:14.480 --> 0:04:16.680 But this narrative that was created around the notion of 0:04:16.680 --> 0:04:20.080 a FED pivot, we never bought into that narrative. I 0:04:20.120 --> 0:04:23.000 think a pause is something we should talk about at 0:04:23.000 --> 0:04:25.760 some point, as did Powell today, but a pivot to 0:04:25.839 --> 0:04:28.800 aggressive rate cuts as early as the beginning of next year, 0:04:29.440 --> 0:04:31.520 that the only reason the FED would have the green 0:04:31.640 --> 0:04:35.040 light to do that would be a significant deterioration the 0:04:35.120 --> 0:04:38.479 labor market from here and or a much more significant 0:04:38.520 --> 0:04:42.279 deterioration in the economy, and for now we haven't seen that. 0:04:42.400 --> 0:04:45.960 So it wasn't a surprise to see him really forcefully 0:04:46.040 --> 0:04:49.800 push back against the the idea of a pivot that 0:04:49.920 --> 0:04:53.880 once they get to whatever the sort of final hike is, 0:04:54.160 --> 0:04:55.719 they're going to stay there for a while. And I 0:04:55.720 --> 0:04:58.520 think the market had troubled digesting that, so, Peter, if 0:04:58.560 --> 0:05:00.760 you look at the markets, they haven't highly given up 0:05:00.760 --> 0:05:02.320 on that cut. Actually they backed off of its some 0:05:02.560 --> 0:05:05.479 after the power marks, but not were you surprised at 0:05:05.480 --> 0:05:07.919 the market reaction? Now? I was, and I was a 0:05:07.920 --> 0:05:12.240 little surprised with August uh Games. I mean, it was 0:05:12.279 --> 0:05:15.039 really sort of a melt up and sort of persistently 0:05:15.839 --> 0:05:19.599 was a risk on type of market, and as Lisianne said, 0:05:19.920 --> 0:05:22.839 it really wasn't any reason to believe that PAL was 0:05:22.920 --> 0:05:26.520 going to somehow give some credence to the idea that 0:05:26.560 --> 0:05:28.960 the FED was about to reduce rates in the next 0:05:29.000 --> 0:05:32.200 six months. So I think the market sort of just 0:05:32.560 --> 0:05:36.520 realized that it was rising in a at a level 0:05:36.760 --> 0:05:39.240 that was not sustainable given where interest rates are likely 0:05:39.279 --> 0:05:43.040 to go, and we haven't really seen enough economic weakness 0:05:43.080 --> 0:05:46.320 to signal that rates are going to modify. So the 0:05:46.360 --> 0:05:49.799 market reacted to that, and I suspect it may follow 0:05:49.839 --> 0:05:52.280 through with more of a reaction until we get into 0:05:52.279 --> 0:05:55.960 September and there's real volume and real players in the marketplace. 0:05:56.000 --> 0:05:58.800 And right now we're still in a very very thinly 0:05:58.839 --> 0:06:03.520 traded market. Peter, if if the FED was trying to 0:06:03.560 --> 0:06:05.400 get out of the business and really affecting the market, 0:06:05.440 --> 0:06:07.320 it's not succeeding very much. I mean, obviously, the central 0:06:07.320 --> 0:06:09.559 banks around the world really got involved a lot starting 0:06:09.600 --> 0:06:11.719 with a great financial crisis, and some people thought they 0:06:11.720 --> 0:06:13.360 were trying to pull out of it, including with the 0:06:13.400 --> 0:06:16.000 balance sheet rundown. But right now, how much of this 0:06:16.080 --> 0:06:19.520 is just driven by the central banks themselves Peter, Well, 0:06:19.560 --> 0:06:24.240 we have not seen a return to fundamental investing. We're 0:06:24.240 --> 0:06:29.279 still in markets that are captivated by headline risks and 0:06:29.400 --> 0:06:32.640 headline commentary. Whether it's the said, whether it's the Russia 0:06:32.760 --> 0:06:37.040 Ukraine War, or whether it's China's COVID policies. We're still 0:06:37.040 --> 0:06:41.440 being driven by headlines and not enough fundamental analysis. I 0:06:41.520 --> 0:06:44.480 suspect that we're going to come to a market where 0:06:44.480 --> 0:06:47.919 fundamental analysis will have much more of an impact on 0:06:48.040 --> 0:06:51.279 what investors actually invest in. But we're gonna have to 0:06:51.320 --> 0:06:55.000 get to some level of the bottom here, and I 0:06:55.080 --> 0:06:58.200 don't think the markets fight there yet, but it's forming about. Okay, 0:06:58.240 --> 0:07:00.400 Listen and Saunders and Peter Kraft will be staying with 0:07:00.480 --> 0:07:02.599 us as we turn to how investors might make some 0:07:02.720 --> 0:07:05.200 sense at this uncertain time. That's going up next on 0:07:05.279 --> 0:07:10.320 Wall Street Week on Bloomberg. This is Bloomberg Wall Street 0:07:10.360 --> 0:07:22.760 Week with David Weston from Bloomberg Radio. Call it the 0:07:22.800 --> 0:07:26.960 next space race. The push for public funding for semiconductors 0:07:27.240 --> 0:07:30.840 starting with President GE's program described by former US Ambassador 0:07:30.840 --> 0:07:34.559 to China Max Baucus, their help in pursuing their China 0:07:34.880 --> 0:07:39.520 two thousand plan, where China will focus on technologies of 0:07:39.560 --> 0:07:43.000 the future to enhance their economy, and followed by Europe's 0:07:43.040 --> 0:07:46.840 own version, described by Margaret Astaire of the European Commission. 0:07:47.160 --> 0:07:49.600 I have been impressed with is that sort of the 0:07:49.680 --> 0:07:53.520 first important project of common European interests that we have 0:07:53.680 --> 0:07:58.880 on semiconductors. Here about two billions of public supports crowded 0:07:58.920 --> 0:08:03.240 in six point five billion of private investment. Now the 0:08:03.320 --> 0:08:07.040 United States has its own version, the Chips and Science Act, 0:08:07.280 --> 0:08:10.320 just signed into law by President Biden. The United States 0:08:10.400 --> 0:08:13.000 must lead the world on the production of these advanced chips. 0:08:13.000 --> 0:08:16.640 This law will do exactly that, and, as in Europe, 0:08:16.760 --> 0:08:20.400 Commerce Secretary Gina Romando predicts, the public funds will prime 0:08:20.480 --> 0:08:23.520 the pump for much more to come from the private sector. 0:08:23.760 --> 0:08:26.760 As big as fifty two billion is, it is a 0:08:26.840 --> 0:08:28.600 drop in the book, get a very big drop in 0:08:28.680 --> 0:08:32.880 the bucket towards what this economy needs. All of which 0:08:33.000 --> 0:08:35.559 leaves us to focus on how fast the money can 0:08:35.600 --> 0:08:38.560 get out the government door, whether it will let loose 0:08:38.640 --> 0:08:42.520 the private sector, and whether it all will be spent wisely. 0:08:42.840 --> 0:08:47.000 Go looking for really talented, experienced people in a wide 0:08:47.080 --> 0:08:51.160 range of ages who understand these technologies and get them 0:08:51.160 --> 0:08:53.920 on board, either as employees or advisors, so to help 0:08:53.960 --> 0:08:57.160 guide the process of making these investments as high potential 0:08:57.160 --> 0:09:04.160 and productive as they can be, and to help us 0:09:04.240 --> 0:09:07.480 understand this world of global competition and technology, and particularly 0:09:07.520 --> 0:09:10.040 the role governments might play. And welcome to somebody who 0:09:10.120 --> 0:09:12.000 spent a good part of his career in the middle 0:09:12.040 --> 0:09:15.760 of that competition. He's Sam Paulisano, the former IBM CEO 0:09:15.880 --> 0:09:18.720 and chairman. Now he's the chairman of the Center for 0:09:18.800 --> 0:09:21.520 Global Enterprise. So welcome back. Great to have you on 0:09:21.600 --> 0:09:23.800 Wall Street week, Sam, as I say, this is not 0:09:23.880 --> 0:09:26.959 the first time we've had governments involved in tech by 0:09:26.960 --> 0:09:30.400 any means. Going back to Media and Japan DARPA, Defense Department, 0:09:30.920 --> 0:09:33.280 what have we learned from that? What should we have 0:09:33.360 --> 0:09:35.679 learned from those experiences? Well, David, I think it's it's 0:09:35.679 --> 0:09:37.800 a great analogy that you drawn. You seem to be 0:09:37.840 --> 0:09:40.520 his starting of our industry. I actually was living in 0:09:40.679 --> 0:09:43.360 Japan during the Memory Wars. I was living in Tokens 0:09:43.360 --> 0:09:46.840 that time, working in IBM Japan. Now today things have changed, 0:09:46.920 --> 0:09:50.560 I mean clearly because it's not Japan who was part 0:09:50.600 --> 0:09:55.520 of the worldwide economic and government systems. It's China and China, 0:09:55.640 --> 0:09:59.640 as you know, is fast growing economy, investing trillions of 0:09:59.640 --> 0:10:03.480 dollars and technology. They want to lead the West. They 0:10:03.480 --> 0:10:08.959 want to be the worldwide leader in semiconductors and microelectronics, 0:10:09.000 --> 0:10:12.360 and the majority of our capacity in this Asia, and 0:10:12.360 --> 0:10:14.600 it's not exactly a stable part of the world, so 0:10:14.640 --> 0:10:18.239 it's quite different. So it's more than just government involvement 0:10:18.360 --> 0:10:21.080 and adding stimulus to get an investment in these key 0:10:21.080 --> 0:10:25.160 critical areas you have. They have the geopolitics at play, 0:10:25.400 --> 0:10:27.559 so it's very complicated, much more so than it was 0:10:27.600 --> 0:10:30.160 in the past. But it doesn't always worked as it 0:10:30.240 --> 0:10:32.000 I mean, I think a lot of people think that 0:10:32.040 --> 0:10:35.600 the media experiment over in Japan actually ultimately was not successful. 0:10:35.600 --> 0:10:38.960 In Japan is not a dominant player in semi conductors today, 0:10:39.240 --> 0:10:42.720 that's correct. I mean, I would argue that the execution 0:10:42.800 --> 0:10:45.439 by government then was very poor. I was. I used 0:10:45.480 --> 0:10:49.040 to meet with media and they were stronger in electronics, 0:10:49.200 --> 0:10:52.600 and they still are stronger manufacturing electronics, but the fill 0:10:52.640 --> 0:10:55.760 in what was required from the industry's perspective. You also 0:10:55.760 --> 0:10:58.559 had to have soltware capability, and they were weak. So 0:10:58.600 --> 0:11:02.480 many times I think the government doesn't understand what's required 0:11:02.559 --> 0:11:05.640 to actually uh, not just in this, but to lead 0:11:05.760 --> 0:11:08.640 and then the discipline that's required to execute these things 0:11:08.640 --> 0:11:11.360 with precision. So same as you suggest and mean, China 0:11:11.440 --> 0:11:14.200 really has changed the game, I think, in technology in 0:11:14.240 --> 0:11:18.600 all sorts of ways, and given its authoritarian aspect, which 0:11:18.600 --> 0:11:20.560 means it can do pretty much whatever it wants to do, 0:11:21.120 --> 0:11:23.520 as well as the massive amounts of money involved doesn't 0:11:23.559 --> 0:11:26.080 make it almost essential. The United States and for that 0:11:26.120 --> 0:11:28.920 matter of Europe also some way step up to the bar. 0:11:29.760 --> 0:11:31.240 I think it's key now. I know many of my 0:11:31.320 --> 0:11:33.880 colleagues and private sector will find that that strange for 0:11:34.040 --> 0:11:37.080 somebody that ran IMBM to say those things. But this 0:11:37.160 --> 0:11:40.600 transition is very, very expensive, and I don't think it's 0:11:40.840 --> 0:11:43.839 you can. You could have a company, regardless of how 0:11:43.880 --> 0:11:48.600 successful they are, Intel, a M D, SML in Europe, etcetera, 0:11:48.920 --> 0:11:51.560 do this on their own. They're taking on a sovereign nation. 0:11:52.160 --> 0:11:54.400 And when you're when you're taking on a sovereign nation, 0:11:54.520 --> 0:11:57.040 it's not like competing in your industry space. So there 0:11:57.120 --> 0:11:59.760 is a role for government. Now the question is what 0:12:00.080 --> 0:12:02.720 is the role for government? And I think we all know, 0:12:02.840 --> 0:12:06.200 we've all learned that government picking winners and looterers, losers. 0:12:06.200 --> 0:12:08.600 Even if you're an authoritarian government like Chanda gone at 0:12:08.679 --> 0:12:13.200 quickly doesn't always work for lots of different reasons. But 0:12:13.360 --> 0:12:15.600 I think you need to have this partnership and not 0:12:15.760 --> 0:12:19.840 have the government pick and choose who the political winners 0:12:19.880 --> 0:12:22.720 or losers happen to be based upon votes per state 0:12:22.760 --> 0:12:25.120 and all the things that they consider beyond just what 0:12:25.240 --> 0:12:27.560 it takes to make this business successful and what it 0:12:27.600 --> 0:12:30.240 takes the lead in technology in the world. Sam, it's 0:12:30.240 --> 0:12:31.720 always a pleasure to have you with us on Walter. 0:12:32.040 --> 0:12:34.040 Thank you so much. As Sam PAULA Summer. He is 0:12:34.080 --> 0:12:39.320 the chairman of the Center for Global Enterprise. Coming up, 0:12:39.360 --> 0:12:41.640 we wrap up the week with our special contributor Larry 0:12:41.679 --> 0:12:46.439 Summers of Harvard. This is Wall Street Week on Bloomberg. 0:12:48.480 --> 0:12:52.480 This is Bloomberg Wall Street Week with David Weston from 0:12:52.600 --> 0:13:05.079 Bloomberg Radio. Call it the Next Space Race. The push 0:13:05.120 --> 0:13:09.160 for public funding for semiconductors, starting with Presidents GE's program 0:13:09.240 --> 0:13:12.840 described by former US Ambassador of China Max Baucus, their 0:13:13.000 --> 0:13:17.440 help and pursuing their China two thousand five plan, where 0:13:17.559 --> 0:13:20.920 China will focus on technologies of the future to enhance 0:13:20.960 --> 0:13:24.600 their economy, and followed by Europe's own version, described by 0:13:24.640 --> 0:13:28.400 Margaret Astair of the European Commission. I have been impressed 0:13:28.440 --> 0:13:32.040 with is that sort of the first important project of 0:13:32.120 --> 0:13:36.560 common European interests that we have on semiconductors. Here about 0:13:36.600 --> 0:13:40.280 two billions of public supports crowded in six point five 0:13:40.520 --> 0:13:44.640 billion of private investments. Now the United States has its 0:13:44.640 --> 0:13:48.320 own version, the Chips and Science Act, just signed into 0:13:48.400 --> 0:13:51.160 law by President Biden. The United States must lead the 0:13:51.160 --> 0:13:53.720 world on the production of these advanced chips. This law 0:13:53.800 --> 0:13:57.720 will do exactly that, and, as in Europe, Commerce Secretary 0:13:57.800 --> 0:14:01.079 Ginia Romando predicts, the public funds will prime the pump 0:14:01.200 --> 0:14:04.120 for much more to come from the private sector. As 0:14:04.160 --> 0:14:07.280 big as fifty two billion is, it is a drop 0:14:07.320 --> 0:14:08.920 from the book, get a very big drop in the 0:14:08.960 --> 0:14:13.520 bucket towards what this economy needs. All of which leaves 0:14:13.600 --> 0:14:15.959 us to focus on how fast the money can get 0:14:15.960 --> 0:14:18.920 out the government door, whether it will let loose the 0:14:18.920 --> 0:14:22.720 private sector, and whether it all will be spent wisely. 0:14:23.040 --> 0:14:27.200 Go looking for really talented, experienced people in a wide 0:14:27.280 --> 0:14:31.360 range of ages who understand these technologies, and get them 0:14:31.360 --> 0:14:34.080 on board either as employees or advisors, so to help 0:14:34.120 --> 0:14:37.360 guide the process of making these investments as high potential 0:14:37.360 --> 0:14:44.360 and productive as they can be, and to help us 0:14:44.440 --> 0:14:47.680 understand this world of global competition and technology, and particularly 0:14:47.720 --> 0:14:50.240 the role governments might plan. And welcome to somebody who 0:14:50.320 --> 0:14:52.200 spent a good part of his career in the middle 0:14:52.240 --> 0:14:55.960 of that competition. He's Sam Paulusana, the former IBM CEO 0:14:56.080 --> 0:14:58.920 and chairman. Now he's a chairman of the Center for 0:14:59.000 --> 0:15:01.520 Global and a Price. So welcome back. Great to have 0:15:01.560 --> 0:15:03.760 you on Wall Street, wink Stamp. As I say, this 0:15:03.840 --> 0:15:06.240 is not the first time we've had governments involved in 0:15:06.400 --> 0:15:09.640 tech by any means. Going back to Media and Japan DARPA, 0:15:09.800 --> 0:15:13.320 Defense Department, What have we learned from that? What should 0:15:13.320 --> 0:15:15.520 we have learned from those experiences? Well, Dave, I think 0:15:15.520 --> 0:15:17.800 it's it's a great analogy that you're drawn. You seem 0:15:17.840 --> 0:15:19.920 to be his starian of our industry. I actually was 0:15:20.000 --> 0:15:23.000 living in Japan during the Memory Wars. I was living 0:15:23.000 --> 0:15:26.120 in tokens of time working in IBM Japan. Now today 0:15:26.160 --> 0:15:29.200 things have changed, I mean clearly because it's not Japan 0:15:30.040 --> 0:15:33.360 who was part of the worldwide economic and government systems. 0:15:33.600 --> 0:15:38.160 It's China, and China, as you know, is fast growing 0:15:38.200 --> 0:15:42.320 economy investing trillions of dollars in technology. They want to 0:15:42.400 --> 0:15:46.120 lead the West. They want to be the worldwide leader 0:15:46.160 --> 0:15:51.560 in semiconductors and microelectronics, and the majority of our capacity 0:15:51.640 --> 0:15:53.920 in this Asia, and it's not exactly a stable part 0:15:53.920 --> 0:15:56.240 of the world, so it's quite different. So it's more 0:15:56.280 --> 0:16:00.160 than just government involvement and adding stimulus to an get 0:16:00.160 --> 0:16:03.320 an investment in these key critical areas you have. They 0:16:03.360 --> 0:16:07.080 have the geopolitics at play, so it's very complicated, much 0:16:07.080 --> 0:16:09.120 more so than it was in the past. But it 0:16:09.160 --> 0:16:11.320 doesn't always work, does it. I mean, I think a 0:16:11.360 --> 0:16:13.960 lot of people think that the media experiment over in 0:16:14.040 --> 0:16:17.120 Japan actually ultimately not successful. Japan is not a dominant 0:16:17.120 --> 0:16:20.880 player in semiconductors today, that's correct. I mean, I would 0:16:20.960 --> 0:16:24.720 argue that the execution by government then was very poor. 0:16:24.880 --> 0:16:27.400 I was. I used to meet with media and they 0:16:27.440 --> 0:16:32.160 were stronger in electronics and they still are stronger manufactured electronics, 0:16:32.200 --> 0:16:35.600 but the fill in what was required from the industry's perspective. 0:16:35.640 --> 0:16:38.000 You also have to have soltware capability, and they were weak. 0:16:38.600 --> 0:16:42.120 So many times, I think the government doesn't understand what's 0:16:42.160 --> 0:16:45.840 required to actually uh not just invest, but to lead 0:16:45.960 --> 0:16:48.760 and then the discipline that's required to execute these things 0:16:48.800 --> 0:16:51.560 with precision. So same as you suggest, I mean, China 0:16:51.640 --> 0:16:54.400 really has changed the game I think in technology in 0:16:54.440 --> 0:16:58.800 all sorts of ways, and given its authoritarian aspect, which 0:16:58.800 --> 0:17:00.760 means they can do pretty much whatever wants to do, 0:17:01.320 --> 0:17:03.720 as well as the massive amounts of money involved doesn't 0:17:03.760 --> 0:17:06.280 make it almost essential. The United States and for that 0:17:06.320 --> 0:17:09.120 matter of Europe also some way step up to the bar. 0:17:09.960 --> 0:17:11.439 I think it's key now. I know many of my 0:17:11.520 --> 0:17:14.080 colleagues and private sector will find that that's strange for 0:17:14.240 --> 0:17:17.280 somebody that ran IMBM to say those things. But this 0:17:17.359 --> 0:17:20.800 transition is very, very expensive, and I don't think it's 0:17:21.040 --> 0:17:24.040 you can. You could have a company, regardless of how 0:17:24.080 --> 0:17:28.800 successful they are, Intel, A M D, s mL in Europe, etcetera, 0:17:29.119 --> 0:17:31.760 do this on their own. They're taking on a sovereign nation. 0:17:32.359 --> 0:17:34.600 And when you're when you're taking on a sovereign nation, 0:17:34.720 --> 0:17:37.240 it's not like competing in your industry space. So there 0:17:37.320 --> 0:17:40.000 is a role for government. Now the question is what 0:17:40.200 --> 0:17:42.800 is the role for government? And I think we all 0:17:42.840 --> 0:17:46.400 know we've all learned that government picking winners and looterers losers, 0:17:46.400 --> 0:17:48.680 Even if you're an authoritarian government like Chinda gone A 0:17:48.840 --> 0:17:53.399 quickly doesn't always work for lots of different reasons. But 0:17:53.560 --> 0:17:55.800 I think you need to have this partnership and not 0:17:55.960 --> 0:18:00.000 have the government pick and choose who the political winners 0:18:00.000 --> 0:18:02.920 your losers happen to be based upon votes per state 0:18:02.960 --> 0:18:05.320 and all the things that they consider beyond just what 0:18:05.440 --> 0:18:07.760 it takes to make this business successful and what it 0:18:07.800 --> 0:18:10.440 takes the lead in technology in the world. Sam, it's 0:18:10.440 --> 0:18:11.960 always a pleasure to have you with us on Walster. 0:18:12.240 --> 0:18:14.239 Thank you so much. As Sam PAULA. Summer. He is 0:18:14.280 --> 0:18:19.520 the chairman of the Center for Global Enterprise. Coming up, 0:18:19.560 --> 0:18:21.840 we wrap up the week with our special contributor Larry 0:18:21.880 --> 0:18:26.639 Summers of Harvard. This is Wall Street Week on Bloomberg. 0:18:47.200 --> 0:18:51.160 This is Bloomberg Wall Street Week with David Weston from 0:18:51.280 --> 0:19:00.440 Bloomberg Radio. This is Wall Street Week. I'm and Western 0:19:00.480 --> 0:19:02.600 were joined once again by our special contributor here in 0:19:02.600 --> 0:19:06.040 Wall Street Week. He is Dr Larry Summers of Harvard. So, Larry, 0:19:06.080 --> 0:19:08.280 we heard from j. Powell. We've heard from the last 0:19:08.280 --> 0:19:10.600 three years in Jackson Hall. You weren't too pleased when 0:19:10.600 --> 0:19:12.119 he had his framework a couple of years ago. We 0:19:12.160 --> 0:19:14.840 weren't too pleased about his transitory talk, did you feel 0:19:14.840 --> 0:19:17.320 a little better this year? Look? I think he did 0:19:17.359 --> 0:19:21.880 what he needed to do. It was clear that inflation 0:19:22.320 --> 0:19:28.040 is the overwhelming priority. It was clear, despite some earlier 0:19:28.119 --> 0:19:32.160 confused talk about neutral, that he was under no illusion 0:19:32.680 --> 0:19:36.760 that monetary policy was in an appropriate place right now. 0:19:37.760 --> 0:19:43.040 It was clear that whatever the academic arguments about demand 0:19:43.080 --> 0:19:48.960 shocks versus supply shocks said, the FED couldn't accept UH 0:19:49.119 --> 0:19:53.119 continuing high inflation and had to act until it was 0:19:53.240 --> 0:20:00.919 clear that that was going away. The remarks were very concise. 0:20:01.760 --> 0:20:08.680 There wasn't a lot of uh more academic UH discussion, 0:20:09.359 --> 0:20:17.280 but there was a statement of being resolute UH. So 0:20:17.320 --> 0:20:21.680 I think that's just right. So I think the Fed 0:20:21.880 --> 0:20:26.800 is positioned UH as well as it can be given 0:20:26.840 --> 0:20:31.960 the credibility losses and mistakes that there have been UH. 0:20:32.080 --> 0:20:35.520 With these remarks to manage things going forward. The chair 0:20:35.600 --> 0:20:37.600 never used the word recession at the same time. You 0:20:37.640 --> 0:20:40.200 did talk about below trend growth for an extended period time, 0:20:40.280 --> 0:20:43.560 also in elevated interest race for a good time to come? 0:20:43.800 --> 0:20:46.440 Is he really pointing to recessions between the lines saying 0:20:46.560 --> 0:20:48.679 get ready for it? I think he also had a 0:20:48.760 --> 0:20:53.119 reference to the fact that there was going to be pain. 0:20:53.760 --> 0:20:58.280 He wasn't predicting recession, and after all, even someone who's 0:20:58.400 --> 0:21:02.560 quite pessimistic about the situation like me, is saying that 0:21:02.640 --> 0:21:07.719 there's a seventy chance of recession in the next two years. 0:21:08.200 --> 0:21:15.240 But he was clearly showing an awareness of the possibility, uh, indeed, 0:21:15.280 --> 0:21:19.560 possibly even the likelihood of recession. And I think that 0:21:19.640 --> 0:21:24.720 was very important because saying you're against inflation when there's 0:21:24.760 --> 0:21:29.720 no price to have to resisting inflation or bringing down 0:21:29.760 --> 0:21:37.479 inflation isn't a consequential statement. Today, he prioritized inflation, making 0:21:37.600 --> 0:21:43.480 clear that he recognized that that prioritization would have short 0:21:43.640 --> 0:21:50.720 term adverse consequences that wouldn't be easy, but that by 0:21:50.880 --> 0:21:54.840 bringing down inflation, ultimately there were going to be more 0:21:54.960 --> 0:22:00.640 jobs with higher real wages for more people, and after all, 0:22:00.640 --> 0:22:05.840 what economic policy is all about. It was a big 0:22:05.960 --> 0:22:08.920 change from the J. Powell of a couple of years ago, 0:22:09.640 --> 0:22:16.080 who was speaking about the importance of maximizing employment without 0:22:16.119 --> 0:22:21.600 an awareness of the issues of sustainability, um and long 0:22:21.680 --> 0:22:28.240 run economic performance. So I was quite pleased with uh 0:22:28.560 --> 0:22:31.359 these remarks. So let let's go over to Europe for 0:22:31.400 --> 0:22:33.480 a moment, because they have their own problems over there. 0:22:33.520 --> 0:22:35.679 The e CP is indicating further titan perhaps at the 0:22:35.680 --> 0:22:38.560 same time, they're in for what looks like a substantial 0:22:38.720 --> 0:22:41.359 energy supply shock, particularly as we get into the winner. 0:22:41.600 --> 0:22:44.520 Are we properly appraising what is going on in Europe 0:22:44.520 --> 0:22:47.960 and how bad it could be. Christine Lagarde's got a 0:22:48.040 --> 0:22:51.680 much harder job right now than UH J. Powell does. 0:22:52.359 --> 0:22:57.760 She's got the dilemmas of inflation, but she's got a 0:22:57.840 --> 0:23:02.480 truly massive supply shock with what's happened there with natural 0:23:02.560 --> 0:23:07.159 gas and electricity prices. She has the set of challenges 0:23:07.240 --> 0:23:12.720 of monetary union, problematic politics in is in Italy, very 0:23:12.840 --> 0:23:19.240 high debts in UH the European UH periphery, so they've 0:23:19.240 --> 0:23:22.119 got a very very difficult set of balances, and they 0:23:22.160 --> 0:23:26.119 also have the challenge of a credible currency as the 0:23:26.160 --> 0:23:33.080 euro moves UH to and through parity with the dollar. 0:23:33.640 --> 0:23:36.919 So I think it's going to be a very difficult 0:23:37.200 --> 0:23:44.720 road for them to UH walk in Europe. My suspicion 0:23:44.800 --> 0:23:49.320 would be that they're gonna have to raise rates more 0:23:49.359 --> 0:23:54.439 than is currently priced in, but that that's gonna come 0:23:55.040 --> 0:24:00.800 at a time when there's very substantial recessionary forces UH 0:24:00.880 --> 0:24:04.560 in Europe, and I'm concerned about what that's gonna mean 0:24:04.760 --> 0:24:10.560 for intra European politics. And I'm also concerned ultimately, and 0:24:10.600 --> 0:24:14.159