1 00:00:00,200 --> 00:00:04,320 Speaker 1: I like and the incident we're in to be like 2 00:00:04,920 --> 00:00:08,920 Speaker 1: in The Wizard of Oz where Dorothy got sucked up 3 00:00:08,960 --> 00:00:11,680 Speaker 1: in the hurricane with their house and it's spinning around 4 00:00:11,720 --> 00:00:13,520 Speaker 1: and you don't know where it will come down. And 5 00:00:13,560 --> 00:00:18,040 Speaker 1: I think that's where our social political economic system is 6 00:00:18,120 --> 00:00:20,000 Speaker 1: at the moment. I mean, I think there's a lot 7 00:00:20,000 --> 00:00:28,520 Speaker 1: of uncertainty and it's probably not in the pro growth direction. Hello, 8 00:00:28,560 --> 00:00:31,560 Speaker 1: and welcome to Stephanomics, the podcast that brings the COVID 9 00:00:31,600 --> 00:00:34,800 Speaker 1: global economy to you. And what you just heard it 10 00:00:34,920 --> 00:00:38,360 Speaker 1: was a very distinguished US economist Ken Rogoff telling you 11 00:00:38,360 --> 00:00:42,000 Speaker 1: we're not in Kansas anymore. At the start of this pandemic, 12 00:00:42,280 --> 00:00:44,760 Speaker 1: economists thought they pretty much knew what we were in for. 13 00:00:45,200 --> 00:00:49,480 Speaker 1: A short sharp shock COVID nineteen might kill the economy 14 00:00:49,640 --> 00:00:52,279 Speaker 1: dead in the short term, but it wouldn't take long 15 00:00:52,360 --> 00:00:56,279 Speaker 1: to bounce back. They don't say anymore. But now Rogoff 16 00:00:56,280 --> 00:00:59,160 Speaker 1: and fellow economist Carmen Reinhardt, I think it could be 17 00:00:59,280 --> 00:01:02,560 Speaker 1: years before we make up the ground we've lost. Reinhardt 18 00:01:02,800 --> 00:01:05,559 Speaker 1: has just this week been named the new Chief economist 19 00:01:05,600 --> 00:01:08,640 Speaker 1: of the World Bank. People tend to pay attention to 20 00:01:08,640 --> 00:01:11,559 Speaker 1: what she and Rogoff think since they wrote the definitive 21 00:01:11,640 --> 00:01:15,440 Speaker 1: history of eight hundred years of financial crisis. What these 22 00:01:15,480 --> 00:01:18,200 Speaker 1: two are saying today is that anyone betting on a 23 00:01:18,280 --> 00:01:22,600 Speaker 1: V shaped recovery from this crisis should think again. Bloomberg's 24 00:01:22,600 --> 00:01:25,480 Speaker 1: executive editor for Economic Simon Kennedy had a long chat 25 00:01:25,520 --> 00:01:28,000 Speaker 1: with them for the latest issue of Bloomberg Markets Magazine. 26 00:01:28,360 --> 00:01:31,120 Speaker 1: We're playing you some of that interview later, but first, 27 00:01:31,319 --> 00:01:34,560 Speaker 1: I have news of new jobs. Yes, you heard that right. 28 00:01:34,600 --> 00:01:39,040 Speaker 1: COVID nineteen is creating some new jobs amid the ocean 29 00:01:39,120 --> 00:01:42,639 Speaker 1: of layoffs. Except they're not jobs that your school career 30 00:01:42,680 --> 00:01:46,160 Speaker 1: adviser would ever have told you about. To fancy being 31 00:01:46,200 --> 00:01:50,640 Speaker 1: a thermal scanner, or a contact tracer perhaps, or a 32 00:01:50,720 --> 00:01:55,680 Speaker 1: decontamination technician. Bloomberg Business reporter Jeff Green and Federal Reserve 33 00:01:55,760 --> 00:01:59,240 Speaker 1: reporter Steve Matthews decided to find out who was doing 34 00:01:59,280 --> 00:02:01,800 Speaker 1: these jobs and how they felt about them. Jeff is 35 00:02:01,800 --> 00:02:05,320 Speaker 1: in Michigan and he's with me now. Jeff, tell me 36 00:02:05,320 --> 00:02:08,639 Speaker 1: about these new jobs. How many are we talking about? Well, 37 00:02:08,639 --> 00:02:10,680 Speaker 1: if you talk about the types of jobs, you know, 38 00:02:10,919 --> 00:02:13,760 Speaker 1: you maybe talking about a dozen kinds of classifications that 39 00:02:13,840 --> 00:02:16,400 Speaker 1: fit into sort of this broad umbrella of sort of 40 00:02:16,400 --> 00:02:20,440 Speaker 1: a COVID you know, related job. Um In terms of 41 00:02:20,480 --> 00:02:22,480 Speaker 1: the number of people, it's not gonna be thirty six million. 42 00:02:22,520 --> 00:02:26,079 Speaker 1: We're not going to offset unemployment with this. But one 43 00:02:26,200 --> 00:02:28,480 Speaker 1: job called the tracer, where you try to find people 44 00:02:28,480 --> 00:02:30,519 Speaker 1: who have been exposed to COVID, they're talking about a 45 00:02:30,600 --> 00:02:33,000 Speaker 1: quarter of a million of those people needed, because you 46 00:02:33,080 --> 00:02:36,440 Speaker 1: basically need to have somebody in every jurisdiction to try 47 00:02:36,520 --> 00:02:38,960 Speaker 1: and stop the virus as it gets started. Some of 48 00:02:38,960 --> 00:02:40,959 Speaker 1: the other jobs, I mean, the thermal scanner, which is 49 00:02:41,000 --> 00:02:43,000 Speaker 1: a fancy name for some of you who takes temperatures, 50 00:02:43,000 --> 00:02:45,200 Speaker 1: those are gonna be pretty much every company is going 51 00:02:45,240 --> 00:02:47,120 Speaker 1: to have somebody like that trying to make sure that 52 00:02:47,160 --> 00:02:49,320 Speaker 1: people with fevers don't come into the work site. So 53 00:02:49,600 --> 00:02:52,440 Speaker 1: you were talking thousands, but I don't think millions though, 54 00:02:53,240 --> 00:02:55,120 Speaker 1: and I was struck actually in your piece. There are 55 00:02:55,160 --> 00:02:57,200 Speaker 1: some jobs or other old fashioned jobs that might be 56 00:02:57,240 --> 00:03:01,000 Speaker 1: coming back into fashion because of the social distance seeing rules. 57 00:03:01,440 --> 00:03:06,040 Speaker 1: JP Morgan had talked about bringing back elevator attendance. I 58 00:03:06,080 --> 00:03:07,680 Speaker 1: guess we'll have a few things like that where we 59 00:03:07,680 --> 00:03:10,800 Speaker 1: actually have people checking that we're doing the right thing 60 00:03:11,080 --> 00:03:16,160 Speaker 1: in context, where previously everything has been automated. Yeah, doorman, 61 00:03:16,360 --> 00:03:19,480 Speaker 1: elevator operator, maybe even people from the mail room will 62 00:03:19,480 --> 00:03:22,280 Speaker 1: have a whole different sort of importance and role that 63 00:03:22,320 --> 00:03:25,040 Speaker 1: you know has been kind of fading until this. So 64 00:03:25,160 --> 00:03:27,200 Speaker 1: let's let's hear more. I mean, you talked to quite 65 00:03:27,200 --> 00:03:30,280 Speaker 1: a wide range of people across the country, you and 66 00:03:30,320 --> 00:03:34,320 Speaker 1: your colleague Steve Matthews. But this was Mark Scofield, who's 67 00:03:34,320 --> 00:03:38,120 Speaker 1: a retired Air Force special agent now working as a 68 00:03:38,160 --> 00:03:41,560 Speaker 1: thermal scanner. So I guess that's a temperature taker at 69 00:03:41,600 --> 00:03:45,040 Speaker 1: a retail distribution center in North Salt Lake in Utah. 70 00:03:45,720 --> 00:03:47,920 Speaker 1: For a personal perspective, for me, I haven't been sick 71 00:03:47,960 --> 00:03:53,520 Speaker 1: for twenty years. I think I'm old enough. Communities had 72 00:03:53,560 --> 00:03:56,960 Speaker 1: most of its effect to me, so I don't I 73 00:03:57,000 --> 00:03:59,320 Speaker 1: personally don't feel any dangers that people I work with. 74 00:04:00,040 --> 00:04:02,960 Speaker 1: We don't feel any danger you feel. We're secure in 75 00:04:03,000 --> 00:04:08,520 Speaker 1: our little our booth or if we go out to 76 00:04:08,520 --> 00:04:11,200 Speaker 1: say something. Some of them, some of the truckers are 77 00:04:11,240 --> 00:04:13,280 Speaker 1: really fun. Get to know him a little bit, and 78 00:04:13,280 --> 00:04:15,120 Speaker 1: they want to talk to you and tell you a joke. 79 00:04:15,280 --> 00:04:17,880 Speaker 1: And so we'll stand outside this job with our six 80 00:04:17,880 --> 00:04:19,760 Speaker 1: feet apart and we'll chat for a few minutes and 81 00:04:20,760 --> 00:04:22,720 Speaker 1: then I'll go do that thing. I think everybody in 82 00:04:22,800 --> 00:04:26,279 Speaker 1: my shift there's very comfortable before we do. The interesting 83 00:04:26,320 --> 00:04:29,880 Speaker 1: thing about him is he actually was working for Kelly Services, 84 00:04:29,880 --> 00:04:32,240 Speaker 1: which is who's getting a lot of these people placed. 85 00:04:32,360 --> 00:04:34,440 Speaker 1: They don't necessarily say for who, but a lot of 86 00:04:34,440 --> 00:04:38,839 Speaker 1: Fortune five kind of companies are are are needing these 87 00:04:38,880 --> 00:04:42,799 Speaker 1: these positions. But he was a substitute teacher for them 88 00:04:42,839 --> 00:04:45,640 Speaker 1: prior to taking on this role, so I mean he 89 00:04:45,680 --> 00:04:48,080 Speaker 1: had just been doing that on the side. He had 90 00:04:48,080 --> 00:04:50,719 Speaker 1: a background in it, so he would take substitute teaching 91 00:04:50,760 --> 00:04:53,000 Speaker 1: gigs from from time to time, but there wasn't much 92 00:04:53,040 --> 00:04:55,800 Speaker 1: call for that in this in this situation, so when 93 00:04:55,800 --> 00:04:57,800 Speaker 1: it came up, he kind of raised his hand and said, yeah, 94 00:04:57,800 --> 00:05:01,720 Speaker 1: I'll do this. And he's a big guy, military guy, 95 00:05:02,000 --> 00:05:04,560 Speaker 1: clearly feels pretty impervious. So I think it's he's an 96 00:05:04,600 --> 00:05:08,479 Speaker 1: interesting character. And you made the point rightly, Jeff, that 97 00:05:08,640 --> 00:05:11,280 Speaker 1: this is still a drop in the bucket, these new 98 00:05:11,400 --> 00:05:14,679 Speaker 1: jobs compared to the ones that are being lost, the 99 00:05:14,720 --> 00:05:18,440 Speaker 1: thirty six million and counting lost jobs. But of course 100 00:05:18,480 --> 00:05:20,000 Speaker 1: I think people will be glad to hear that any 101 00:05:20,080 --> 00:05:22,560 Speaker 1: jobs are being created in this environment. Do you do. 102 00:05:22,560 --> 00:05:25,480 Speaker 1: You get the impression from the other people you talked 103 00:05:25,520 --> 00:05:28,000 Speaker 1: to that they're happy to do it, although they're worried 104 00:05:28,040 --> 00:05:31,960 Speaker 1: about the potential risks in some of these jobs. I mean, 105 00:05:32,000 --> 00:05:34,400 Speaker 1: everybody who's doing it seems to have a different way. 106 00:05:34,400 --> 00:05:37,360 Speaker 1: They've sort of rationalized or or just dealt with it 107 00:05:37,680 --> 00:05:40,240 Speaker 1: as not being something they're worried about, either because of 108 00:05:40,279 --> 00:05:43,200 Speaker 1: the protective measures or where they see themselves in sort 109 00:05:43,240 --> 00:05:45,240 Speaker 1: of their health. I Mean, one of the things that's 110 00:05:45,400 --> 00:05:48,000 Speaker 1: pretty much true across the board is this is more 111 00:05:48,080 --> 00:05:49,839 Speaker 1: money than they might be making in their day to 112 00:05:49,880 --> 00:05:51,719 Speaker 1: day job. I mean, these are usually twenty dollars or 113 00:05:51,720 --> 00:05:54,000 Speaker 1: more an hour, and a lot of the people taking 114 00:05:54,040 --> 00:05:56,880 Speaker 1: these jobs were probably in sort of the fifteen dollar 115 00:05:56,920 --> 00:06:00,159 Speaker 1: an hour or less category. So you're you're looking at 116 00:06:00,200 --> 00:06:03,680 Speaker 1: people who are able to um get a raise basically 117 00:06:03,720 --> 00:06:06,960 Speaker 1: to do something that seems somewhat risky, but risky in 118 00:06:06,960 --> 00:06:09,479 Speaker 1: a sense that you're wearing full protective equipment and you're 119 00:06:09,560 --> 00:06:12,760 Speaker 1: usually behind plexiglass and maybe more protective than you are 120 00:06:12,920 --> 00:06:14,640 Speaker 1: when you go back to work if you didn't have 121 00:06:14,720 --> 00:06:17,440 Speaker 1: this job. But I guess we should add but you've 122 00:06:17,480 --> 00:06:20,719 Speaker 1: also got a new job that you didn't have a 123 00:06:20,720 --> 00:06:23,040 Speaker 1: few months ago when we're not supposed to moonlight here 124 00:06:23,040 --> 00:06:24,839 Speaker 1: at Bloombow. But I think in this case the bosses 125 00:06:24,839 --> 00:06:27,560 Speaker 1: have approved. You've been You've been working away yourself on 126 00:06:27,640 --> 00:06:30,720 Speaker 1: something on the anti COVID effort, Is that right? Yeah? 127 00:06:30,760 --> 00:06:33,120 Speaker 1: I mean I have a three D printer or two 128 00:06:33,240 --> 00:06:35,400 Speaker 1: or three. It's a hobby, you know, And I've been 129 00:06:35,400 --> 00:06:37,839 Speaker 1: working from home, so they're literally right behind me through 130 00:06:37,839 --> 00:06:40,600 Speaker 1: a door. And I've been working with some local people, 131 00:06:40,640 --> 00:06:44,520 Speaker 1: some nonprofits just to kind of make personal protection equipment. Um. 132 00:06:44,560 --> 00:06:46,720 Speaker 1: You know, thankfully, there's a lot less demand for the 133 00:06:46,800 --> 00:06:48,599 Speaker 1: really heavy duty stuff. We were doing a lot of 134 00:06:48,600 --> 00:06:51,440 Speaker 1: face shields at first. Now it's mostly they call them 135 00:06:51,480 --> 00:06:53,760 Speaker 1: ear savers. It's so that when people wear masks all day, 136 00:06:53,800 --> 00:06:56,920 Speaker 1: it doesn't rub their ears raw. And there's a high 137 00:06:56,960 --> 00:06:59,200 Speaker 1: demand for that from people who are, you know, basically 138 00:06:59,240 --> 00:07:02,080 Speaker 1: wearing masks everywhere. How many originally of the mask do 139 00:07:02,080 --> 00:07:05,120 Speaker 1: you think you made in the early stages, About three 140 00:07:05,520 --> 00:07:09,080 Speaker 1: and fifty of the straps for the masks. Um, they 141 00:07:09,080 --> 00:07:12,040 Speaker 1: were like printed with a special plastic that's easier to 142 00:07:12,080 --> 00:07:16,200 Speaker 1: disinfect than than somebody else put on a face shield. Um, 143 00:07:16,240 --> 00:07:19,080 Speaker 1: just over a thousand of the ear protectors right now. 144 00:07:19,080 --> 00:07:21,920 Speaker 1: We're still doing those, probably winding that down soon, but 145 00:07:22,040 --> 00:07:24,040 Speaker 1: I'm trying to get another thousand done so they can 146 00:07:24,080 --> 00:07:26,160 Speaker 1: because people are sending them all over the country where 147 00:07:26,200 --> 00:07:28,800 Speaker 1: you know where, they're having trouble finding them. Well, I'm 148 00:07:28,800 --> 00:07:31,119 Speaker 1: glad that you're not doing the really urgent stuff anymore 149 00:07:31,120 --> 00:07:33,040 Speaker 1: because we've made you turn off your machines in order 150 00:07:33,080 --> 00:07:34,400 Speaker 1: to do this. But I should let you get back 151 00:07:34,440 --> 00:07:36,160 Speaker 1: to that and your and your work for blue Bird. 152 00:07:36,720 --> 00:07:47,000 Speaker 1: Jeff Green, thanks very much, thank you. Now. When Carmen 153 00:07:47,000 --> 00:07:49,960 Speaker 1: Reinhart and Ken Rogoff wrote their history of financial Crises 154 00:07:50,000 --> 00:07:53,240 Speaker 1: in late two thousand and nine, their title was ironic, 155 00:07:53,880 --> 00:07:58,320 Speaker 1: this time is different. Eight centuries of financial folly reminded 156 00:07:58,320 --> 00:08:02,040 Speaker 1: readers that it really was different, and the catastrophic two 157 00:08:02,120 --> 00:08:06,880 Speaker 1: thousand and eight nine credit crisis wasn't unique. Rogolf is 158 00:08:06,880 --> 00:08:08,840 Speaker 1: a former I m F Chief economist who is now 159 00:08:08,880 --> 00:08:12,040 Speaker 1: a professor at Harvard, and right now, Reinhardt is also 160 00:08:12,080 --> 00:08:14,280 Speaker 1: a professor at Harvard, but as we heard earlier, she's 161 00:08:14,280 --> 00:08:17,160 Speaker 1: about to be Chief economist of the World Bank, right 162 00:08:17,200 --> 00:08:19,400 Speaker 1: in the middle of what feels like a one of 163 00:08:19,400 --> 00:08:23,480 Speaker 1: a kind crisis. So my colleague Simon Kennedy started his 164 00:08:23,600 --> 00:08:28,600 Speaker 1: interview by asking the obvious question, is this time really different. 165 00:08:35,360 --> 00:08:40,719 Speaker 1: It's certainly different from prior pandemics in terms of the economy, 166 00:08:40,800 --> 00:08:44,599 Speaker 1: the policy response to shutdown. The other thing that I 167 00:08:44,720 --> 00:08:49,160 Speaker 1: like to highlight that is very different is the suddenness, 168 00:08:49,720 --> 00:08:53,839 Speaker 1: how sudden this has been. If you look at US 169 00:08:53,960 --> 00:08:59,720 Speaker 1: unemployment claims in six weeks, we've had what it took 170 00:09:00,080 --> 00:09:05,080 Speaker 1: sixty weeks in terms of the run up. If you 171 00:09:05,240 --> 00:09:10,360 Speaker 1: look at capital flows to emerging markets, the same story. 172 00:09:10,760 --> 00:09:16,120 Speaker 1: You know, the reversal and capital flows in the four 173 00:09:16,200 --> 00:09:21,760 Speaker 1: weeks ending in March that the decline matched what during 174 00:09:21,840 --> 00:09:26,520 Speaker 1: the global financial crisis took a year. So the suddenness, 175 00:09:26,640 --> 00:09:30,560 Speaker 1: the abruptness of it, is also a factor that is 176 00:09:30,679 --> 00:09:34,680 Speaker 1: a byproduct of the widespread shutdowns which we had not 177 00:09:34,760 --> 00:09:38,480 Speaker 1: seen before. Certainly the global nature of it, and as 178 00:09:39,240 --> 00:09:43,959 Speaker 1: highlights the speed point bursting out across the whole world, 179 00:09:44,480 --> 00:09:50,559 Speaker 1: the first global recession, the crisis really since the Great Depression, 180 00:09:50,720 --> 00:09:55,319 Speaker 1: because the two thousand made was the rich countries and 181 00:09:55,600 --> 00:09:58,240 Speaker 1: not the purchased markets had a good crisis in two 182 00:09:58,280 --> 00:10:02,079 Speaker 1: thousand eight, and they're not going to this time, regardless 183 00:10:02,160 --> 00:10:06,199 Speaker 1: of how the virus hits them and the policy response. 184 00:10:06,679 --> 00:10:10,200 Speaker 1: Think about China. Can you imagine if this had hit 185 00:10:10,679 --> 00:10:14,199 Speaker 1: fifty years ago? Can you imagine trying having the state 186 00:10:14,280 --> 00:10:19,400 Speaker 1: capacity to shut down Hubei Province to feed nearly sixty 187 00:10:19,440 --> 00:10:24,679 Speaker 1: million people, give them food and water, and concentrate medical attention. 188 00:10:25,400 --> 00:10:29,600 Speaker 1: So there's a policy option that we have, and I 189 00:10:29,640 --> 00:10:33,480 Speaker 1: think most countries have felt it's the choice that had 190 00:10:33,520 --> 00:10:37,760 Speaker 1: to be taken to try to try to protect ourselves. 191 00:10:38,160 --> 00:10:40,960 Speaker 1: How degrade the policy responses? What do you what do 192 00:10:41,000 --> 00:10:43,679 Speaker 1: you make of them? Um? No, if I think the 193 00:10:44,320 --> 00:10:52,760 Speaker 1: policy response has been massive and called for that absolutely necessary. 194 00:10:52,840 --> 00:10:59,400 Speaker 1: You can quibble between the European style sort of try 195 00:10:59,480 --> 00:11:03,520 Speaker 1: to preserve firms and workers and their current jobs, the 196 00:11:03,640 --> 00:11:07,520 Speaker 1: US version, which is to try to address it as 197 00:11:07,520 --> 00:11:11,480 Speaker 1: a natural catastrophe and try to subsidize people but allow 198 00:11:11,640 --> 00:11:15,560 Speaker 1: higher unemployment. I think they're actually not that different. If 199 00:11:15,640 --> 00:11:19,960 Speaker 1: this thing persists, then a lot of those European firms 200 00:11:20,000 --> 00:11:23,320 Speaker 1: will end up having to let their workers go when 201 00:11:23,360 --> 00:11:25,840 Speaker 1: the crisis passes. If it doesn't, a lot of the 202 00:11:25,920 --> 00:11:29,480 Speaker 1: U S firms will end up rehiring their workers. But 203 00:11:30,280 --> 00:11:35,839 Speaker 1: certainly the aggressive crisis response reflects lessons learned in two 204 00:11:35,920 --> 00:11:40,080 Speaker 1: thousand and eight and common does that aggressive policy? Does 205 00:11:40,120 --> 00:11:43,840 Speaker 1: that explain the markets? Stock markets particularly of You wouldn't 206 00:11:43,840 --> 00:11:46,480 Speaker 1: necessarily if I'd shown you the chart at the start 207 00:11:46,520 --> 00:11:48,400 Speaker 1: of the year, you would have wondered what the collapse was, 208 00:11:48,440 --> 00:11:51,600 Speaker 1: but you wouldn't necessarily have You wouldn't necessarily We've been 209 00:11:51,640 --> 00:11:53,520 Speaker 1: hit by a global pandemic. If you looked at look 210 00:11:53,520 --> 00:11:58,120 Speaker 1: at Wall Street, what's behind? What's that break between the markets? 211 00:11:58,160 --> 00:12:05,120 Speaker 1: And UM? I would say, partially, partially, how much of 212 00:12:05,160 --> 00:12:08,719 Speaker 1: the resilience, if you will, if not a brilliance in 213 00:12:08,840 --> 00:12:13,160 Speaker 1: the market is is policy driven? I think a lot 214 00:12:13,160 --> 00:12:18,040 Speaker 1: of it is. UH. That you know, UH, let's take 215 00:12:18,120 --> 00:12:25,160 Speaker 1: monetary policy. UM. Before the pandemic, the US unemployment was 216 00:12:25,200 --> 00:12:29,079 Speaker 1: at its lowest level since the nineteen sixties. By most metrics, 217 00:12:29,160 --> 00:12:33,240 Speaker 1: the US was at or near full employment, which very plausible. 218 00:12:33,320 --> 00:12:39,439 Speaker 1: That you know, your path was one towards rising rates UM. 219 00:12:39,440 --> 00:12:46,200 Speaker 1: Clearly that has been completely replaced by a view that 220 00:12:46,480 --> 00:12:50,720 Speaker 1: rates are zero now that that they've come down, UH, 221 00:12:50,760 --> 00:12:55,360 Speaker 1: and that they're gonna stay low for a very long, long, 222 00:12:55,600 --> 00:13:00,240 Speaker 1: indeterminate period of time with a lot of liquidity or 223 00:13:00,360 --> 00:13:02,760 Speaker 1: from from the Federal Reserve. So that's a big game 224 00:13:02,840 --> 00:13:07,200 Speaker 1: changer for you know, discount discounting futures, you know, stream 225 00:13:07,200 --> 00:13:11,880 Speaker 1: of dividends and and and and so on um for 226 00:13:12,000 --> 00:13:16,080 Speaker 1: the markets. Let me just point out another issue in 227 00:13:16,280 --> 00:13:22,800 Speaker 1: terms of the policy response. The policy response, again, the 228 00:13:22,840 --> 00:13:25,840 Speaker 1: FED has established a lot of facilities that are now 229 00:13:26,360 --> 00:13:31,240 Speaker 1: providing support not only to corporates, but to corporates on 230 00:13:31,280 --> 00:13:34,880 Speaker 1: a much lower grade in terms of their ratings, you know, 231 00:13:35,000 --> 00:13:39,120 Speaker 1: the fallen angels, the higher risk that the you know, 232 00:13:39,200 --> 00:13:45,760 Speaker 1: the the kind of risk gear corporates than certainly was 233 00:13:45,880 --> 00:13:49,880 Speaker 1: even envisioned at the outset of the pandemic um And 234 00:13:50,480 --> 00:13:56,839 Speaker 1: I think what this does is the market is really 235 00:13:56,960 --> 00:14:01,000 Speaker 1: counting on a lot of rescues. Of course, the FED 236 00:14:01,360 --> 00:14:05,360 Speaker 1: lower forever is part of part of it, but I 237 00:14:05,960 --> 00:14:09,920 Speaker 1: also feel the markets have a very sanguine view of 238 00:14:09,960 --> 00:14:13,920 Speaker 1: the virus and what's going to happen and how quickly 239 00:14:14,000 --> 00:14:17,760 Speaker 1: we can return to normal, or maybe how quickly we 240 00:14:17,800 --> 00:14:21,520 Speaker 1: will choose to return to whatever normal is, how quickly 241 00:14:21,560 --> 00:14:26,320 Speaker 1: the lockdowns will will lend um and it seems very 242 00:14:26,400 --> 00:14:31,960 Speaker 1: uncertain to me. The virologist and epidemiologists I respect, you know, 243 00:14:32,160 --> 00:14:35,120 Speaker 1: always start out their comments by saying, you know, we're 244 00:14:35,120 --> 00:14:38,520 Speaker 1: in the second inning where we might, if we're lucky, 245 00:14:38,640 --> 00:14:41,560 Speaker 1: be at the end of the beginning of the epidemic. 246 00:14:41,800 --> 00:14:44,520 Speaker 1: That sort of thing, and and and that rings true. 247 00:14:46,080 --> 00:14:49,360 Speaker 1: I don't know how we're coming back to two thousand 248 00:14:49,560 --> 00:14:53,840 Speaker 1: nineteen levels in any near term. The ECB gave a 249 00:14:54,160 --> 00:14:57,520 Speaker 1: I think a three year projection that'd be great. That 250 00:14:57,560 --> 00:15:01,080 Speaker 1: seems quite optimistic to me. And I thin the true 251 00:15:01,080 --> 00:15:06,040 Speaker 1: fall and g d p U economic historians will debate 252 00:15:06,120 --> 00:15:11,440 Speaker 1: for years. It's probably much larger than a measured fall. 253 00:15:11,960 --> 00:15:14,800 Speaker 1: It's not just the people not working, but what's the 254 00:15:14,840 --> 00:15:17,960 Speaker 1: efficiency of the people that are working. And then the 255 00:15:18,000 --> 00:15:21,040 Speaker 1: monetary response is done hand in hand with the Treasury. 256 00:15:21,280 --> 00:15:26,840 Speaker 1: This this level of UH guaranteeing private debt and municible 257 00:15:26,920 --> 00:15:31,360 Speaker 1: debt that Treasury owns, the Federal Reserve, and it's completely uh, 258 00:15:31,520 --> 00:15:35,440 Speaker 1: you know, working together on this. But it's banking on 259 00:15:36,000 --> 00:15:39,200 Speaker 1: this V shaped recovery, something pretty good happening. If you're 260 00:15:39,560 --> 00:15:43,000 Speaker 1: you can't keep expanding all the credits that you're guaranteeing 261 00:15:43,040 --> 00:15:45,680 Speaker 1: in the economy. And definitely if a lot of the 262 00:15:45,720 --> 00:15:49,200 Speaker 1: firms aren't aren't aren't coming back, So it remains to 263 00:15:49,240 --> 00:15:54,040 Speaker 1: be seen what they will do going forward. I think 264 00:15:54,120 --> 00:15:57,880 Speaker 1: we're going to see a lot of work for bankruptcy lawyers, 265 00:15:57,960 --> 00:16:01,040 Speaker 1: and you know, going across a lot of industries, we 266 00:16:01,080 --> 00:16:05,400 Speaker 1: see one retailer after another entering Chapter eleven already, and 267 00:16:05,440 --> 00:16:08,720 Speaker 1: that's probably just the beginning. The numbers are gonna look 268 00:16:08,840 --> 00:16:14,760 Speaker 1: spectacularly great in some months. Simply because you're coming out 269 00:16:14,840 --> 00:16:19,480 Speaker 1: from a base that was pretty devastated. That doesn't imply 270 00:16:20,440 --> 00:16:25,520 Speaker 1: that per capita incomes are going to go back in 271 00:16:25,720 --> 00:16:33,200 Speaker 1: V shape two what they were before. You know, it's 272 00:16:34,000 --> 00:16:39,920 Speaker 1: very critical. Characteristic of all of this shock has been 273 00:16:40,160 --> 00:16:48,720 Speaker 1: that it has disrupted supply chains globally, big time um trade. 274 00:16:48,800 --> 00:16:53,080 Speaker 1: You know, if you look at the w t O projections, 275 00:16:53,080 --> 00:16:55,960 Speaker 1: they tell you, well, it can decline anywhere between thirteen 276 00:16:55,960 --> 00:17:01,880 Speaker 1: and thirty two. So I don't think you just break 277 00:17:02,200 --> 00:17:07,240 Speaker 1: and re recreate supply chains, you know, at the drop 278 00:17:07,280 --> 00:17:10,160 Speaker 1: of a hat. I think that there is a lot 279 00:17:10,200 --> 00:17:14,920 Speaker 1: of geographical changes that are that are being necessitated because 280 00:17:15,880 --> 00:17:21,719 Speaker 1: if the economic downturn has been synchronous, the disease itself 281 00:17:21,840 --> 00:17:26,879 Speaker 1: hasn't been synchronous. It started in China, hate Korea, hate 282 00:17:26,920 --> 00:17:31,520 Speaker 1: parts of Asia, moved to Europe, moved to the US. 283 00:17:31,720 --> 00:17:35,159 Speaker 1: So the idea that the disease is going to be 284 00:17:36,119 --> 00:17:40,359 Speaker 1: dealt with globally in such a synchronous and rapid way 285 00:17:40,440 --> 00:17:44,080 Speaker 1: that it allowed for V shape, I find that dubious. 286 00:17:44,240 --> 00:17:48,360 Speaker 1: The second part that I find the V shaped story 287 00:17:48,560 --> 00:17:53,879 Speaker 1: dubious is what Ken was already alluding to the chapter elevens. 288 00:17:54,200 --> 00:17:56,960 Speaker 1: You know, we are all living in economies that have 289 00:17:57,080 --> 00:18:01,840 Speaker 1: a huge important service component. How do we know which 290 00:18:01,960 --> 00:18:04,840 Speaker 1: retailers are going to come back, which restaurants are going 291 00:18:04,880 --> 00:18:11,000 Speaker 1: to come back? Uh, cinemas and and so when this 292 00:18:11,200 --> 00:18:17,320 Speaker 1: crisis began to morph from a pandemic, from a medical 293 00:18:17,480 --> 00:18:22,520 Speaker 1: problem into a financial crisis, then I think the roots 294 00:18:22,680 --> 00:18:27,320 Speaker 1: for it having more longer lived effects we're set, And 295 00:18:27,400 --> 00:18:29,840 Speaker 1: I think those two factors are going to make for 296 00:18:30,000 --> 00:18:35,679 Speaker 1: more protracted recovery. Yes, I go back to the e 297 00:18:35,720 --> 00:18:40,160 Speaker 1: CBS forecast for three years uh to go back to 298 00:18:40,200 --> 00:18:43,159 Speaker 1: the same the same income as the beginning, which is 299 00:18:43,200 --> 00:18:46,640 Speaker 1: what Carmen and I use is the definition of recovery 300 00:18:46,960 --> 00:18:49,080 Speaker 1: in our book that, by the way, is really not 301 00:18:49,160 --> 00:18:52,440 Speaker 1: the Wall Street definition of recovery, where recovery is going 302 00:18:52,480 --> 00:18:56,000 Speaker 1: back to where the trend was which is typical in 303 00:18:56,000 --> 00:19:00,359 Speaker 1: a recession. We use a much more modest for inever povery. 304 00:19:00,400 --> 00:19:05,040 Speaker 1: And still with post war financial crises before two thousand 305 00:19:05,640 --> 00:19:11,119 Speaker 1: eight nine the average was four years, and for the 306 00:19:11,160 --> 00:19:14,719 Speaker 1: Great Depression ten years. And there are many ways this 307 00:19:14,840 --> 00:19:18,000 Speaker 1: feels more like the Great Depression when you look at 308 00:19:18,000 --> 00:19:22,240 Speaker 1: the de globalization which seems so likely to follow this, 309 00:19:23,040 --> 00:19:26,159 Speaker 1: Whether say in the United States the Republicans are in 310 00:19:26,200 --> 00:19:30,359 Speaker 1: power the Democrats, that seems like one thing they have 311 00:19:30,600 --> 00:19:43,000 Speaker 1: a consensus about getting back to something. We wrote gosh 312 00:19:43,040 --> 00:19:46,399 Speaker 1: and late late March. I think we were very early 313 00:19:46,440 --> 00:19:49,520 Speaker 1: in on this point that you probably need a debt 314 00:19:49,600 --> 00:19:55,240 Speaker 1: moratorium that's fairly widespread for emerging markets and developing economies. 315 00:19:55,280 --> 00:19:59,680 Speaker 1: And an analogy the the I m f H were 316 00:20:00,119 --> 00:20:03,359 Speaker 1: Chapter eleven. Bankruptcy is very good at dealing with a 317 00:20:03,359 --> 00:20:06,040 Speaker 1: couple of countries or a couple of firms at a time. 318 00:20:06,960 --> 00:20:09,840 Speaker 1: But just the way the hospitals can't handle all the 319 00:20:09,920 --> 00:20:14,720 Speaker 1: COVID nineteen patients showing up in the same week, neither 320 00:20:14,880 --> 00:20:20,359 Speaker 1: can our bankruptcy system. Neither can the international financial institutions. 321 00:20:20,720 --> 00:20:24,440 Speaker 1: So there are going to be phenomenal frictions coming out 322 00:20:24,480 --> 00:20:27,919 Speaker 1: of this wave of bankruptcies to faults again. If we 323 00:20:28,000 --> 00:20:32,280 Speaker 1: can get a super v recovery, it'll all be forgotten. 324 00:20:32,320 --> 00:20:36,479 Speaker 1: The policymakers will look like geniuses. Uh not. I'm not 325 00:20:36,600 --> 00:20:38,840 Speaker 1: saying they've done anything but a good job that I 326 00:20:38,920 --> 00:20:41,000 Speaker 1: think they have done a good job. But you know 327 00:20:41,200 --> 00:20:45,200 Speaker 1: they'll be you know, have saved the day. But it's 328 00:20:45,680 --> 00:20:48,400 Speaker 1: it's probably that's probably not going to happen. It's probably 329 00:20:48,400 --> 00:20:53,280 Speaker 1: going to be at best you shape recovery. And I 330 00:20:53,320 --> 00:20:55,320 Speaker 1: don't know how long it's going to take us to 331 00:20:55,359 --> 00:20:58,000 Speaker 1: get back to the two thousand nineteen per capital g 332 00:20:58,119 --> 00:21:00,560 Speaker 1: d P I. I would say, looking at it now, 333 00:21:00,960 --> 00:21:04,040 Speaker 1: certainly world, you know, for the world, five years would 334 00:21:04,040 --> 00:21:07,040 Speaker 1: seem like a good outcome out of this. Um. What 335 00:21:07,119 --> 00:21:09,760 Speaker 1: about the debts in the in the major com you 336 00:21:09,800 --> 00:21:13,240 Speaker 1: mentioned Italy but also elsewhere. At the moment, there's definitely 337 00:21:13,320 --> 00:21:17,119 Speaker 1: that mentality that this is a price worth paying. How 338 00:21:17,440 --> 00:21:20,680 Speaker 1: worried are you about the debts in the longer term? Yeah, 339 00:21:20,800 --> 00:21:23,040 Speaker 1: it's not a free lunch we had, but we had 340 00:21:23,520 --> 00:21:28,679 Speaker 1: there's no choice. The whole point of having a strong 341 00:21:28,880 --> 00:21:32,679 Speaker 1: balance sheet, of being able to borrow freely, is to 342 00:21:32,720 --> 00:21:36,439 Speaker 1: be able to do it with abandoned in situations like this. 343 00:21:36,440 --> 00:21:42,560 Speaker 1: This is like I wore, naturally staggering, natural catastrophe, whatever 344 00:21:42,600 --> 00:21:46,120 Speaker 1: you want to call it. There's no debate that they 345 00:21:46,160 --> 00:21:48,840 Speaker 1: should be doing all they can to try to maintain 346 00:21:48,920 --> 00:21:53,879 Speaker 1: political and social cohesion to maintain economies. But what lies 347 00:21:53,960 --> 00:21:56,480 Speaker 1: at the other end. I go back to my Wizard 348 00:21:56,520 --> 00:22:01,359 Speaker 1: of oz an analogy, UH with Darthy up there. The 349 00:22:01,400 --> 00:22:05,199 Speaker 1: financial markets think there's no chance interest rates will go up, 350 00:22:05,600 --> 00:22:09,040 Speaker 1: there's no chance inflation will go up if they're right 351 00:22:09,160 --> 00:22:13,240 Speaker 1: in that last five years. And by the way, if 352 00:22:13,280 --> 00:22:17,200 Speaker 1: another shoe doesn't drop, if we you know, don't have 353 00:22:17,400 --> 00:22:21,080 Speaker 1: another global problem in the meantime, I mean, it'll be fine, 354 00:22:21,240 --> 00:22:25,720 Speaker 1: but we could have costs from this. We're talking about 355 00:22:25,760 --> 00:22:33,280 Speaker 1: economy shrinking by and per year, and those are just 356 00:22:33,400 --> 00:22:37,960 Speaker 1: staggering compared to the depth burden costs, whatever they are. 357 00:22:38,960 --> 00:22:43,320 Speaker 1: So you know, certainly we would strongly endorse doing what 358 00:22:43,359 --> 00:22:46,879 Speaker 1: they're doing. But then the summer selling it as a 359 00:22:46,960 --> 00:22:53,480 Speaker 1: free lunch, that's stupefyingly naive. Early on, you a talking 360 00:22:53,480 --> 00:22:57,280 Speaker 1: about inflation. I think there's a projects into column. Those 361 00:22:57,320 --> 00:23:00,000 Speaker 1: still your views that that could be an inflation first 362 00:23:00,000 --> 00:23:03,680 Speaker 1: the end of this, well, I don't think where we 363 00:23:03,680 --> 00:23:07,760 Speaker 1: we don't know where will come out. So the probabilities 364 00:23:08,000 --> 00:23:12,800 Speaker 1: for the foreseeable future will have deflation, because you know, 365 00:23:13,000 --> 00:23:15,840 Speaker 1: that's where we are. But at the end of this, 366 00:23:16,520 --> 00:23:20,240 Speaker 1: I think we're going to have experience an extremely negative 367 00:23:20,240 --> 00:23:26,080 Speaker 1: productivity shock with declobalization. Even if the vaccine magically appears, 368 00:23:26,880 --> 00:23:31,879 Speaker 1: the deglobalization will be the last the deglobalization and probably 369 00:23:32,040 --> 00:23:37,560 Speaker 1: the political social political ramifications, which may be good overall 370 00:23:37,680 --> 00:23:41,199 Speaker 1: for society, but in terms of growth and productivity, they 371 00:23:41,240 --> 00:23:46,840 Speaker 1: will be lasting negative shocks, and demand may come back 372 00:23:47,400 --> 00:23:50,760 Speaker 1: and and many of the forces that have led to 373 00:23:51,119 --> 00:23:54,919 Speaker 1: very low inflation may have gone into reverse either because 374 00:23:54,920 --> 00:23:59,919 Speaker 1: of declobalization, or workers will strengthen their rights and unions 375 00:24:00,080 --> 00:24:03,320 Speaker 1: will be kind of stronger, which it becomes possible in 376 00:24:03,359 --> 00:24:08,000 Speaker 1: a more deglobalized world. It's easier to rebuild union strength 377 00:24:08,040 --> 00:24:11,840 Speaker 1: when you're not competing with foreign terms. And of course 378 00:24:12,400 --> 00:24:16,320 Speaker 1: inflation is a is a possibility, but the market for 379 00:24:16,400 --> 00:24:20,480 Speaker 1: a season like essentially zero chance of ever having inflation again. 380 00:24:21,040 --> 00:24:24,960 Speaker 1: And I think that's uh, you know, it was very wrong. 381 00:24:32,000 --> 00:24:34,280 Speaker 1: Thanks for listening to Stephanomics. We'll be back next week 382 00:24:34,320 --> 00:24:37,240 Speaker 1: with more on how COVID nineteen is turning the global 383 00:24:37,280 --> 00:24:40,520 Speaker 1: economy upside down. Remember you can always find us on 384 00:24:40,560 --> 00:24:44,160 Speaker 1: the Bloomberg Terminal, website, app or wherever you get your podcasts, 385 00:24:44,480 --> 00:24:47,520 Speaker 1: and for more news and analysis from Bloomberg Economics, follow 386 00:24:47,640 --> 00:24:50,480 Speaker 1: as Economics on Twitter. You can also find me on 387 00:24:50,600 --> 00:24:54,400 Speaker 1: at my Stephanomics. This episode was produced by Magnus Hendrickson. 388 00:24:54,680 --> 00:24:57,560 Speaker 1: The interview you just heard was conducted by Simon Kennedy, 389 00:24:57,840 --> 00:25:00,760 Speaker 1: and the published version of the transcript im Bomberg Markets 390 00:25:00,760 --> 00:25:04,840 Speaker 1: Magazine was edited by Stryker Maguire. Special thanks to Jeff Green, 391 00:25:05,160 --> 00:25:10,439 Speaker 1: Steve Matthews, Mark Scofield, Carmen Reinhardt, and Ken Rogoff. Scott 392 00:25:10,480 --> 00:25:13,520 Speaker 1: Lanman is the executive producer of Stephanomics and the head 393 00:25:13,560 --> 00:25:16,600 Speaker 1: of Bloomberg Podcast is Francesca Levy.