WEBVTT - For the Coronavirus Economy, This Time Truly Is Different 0:00:00.200 --> 0:00:04.320 I like and the incident we're in to be like 0:00:04.920 --> 0:00:08.920 in The Wizard of Oz where Dorothy got sucked up 0:00:08.960 --> 0:00:11.680 in the hurricane with their house and it's spinning around 0:00:11.720 --> 0:00:13.520 and you don't know where it will come down. And 0:00:13.560 --> 0:00:18.040 I think that's where our social political economic system is 0:00:18.120 --> 0:00:20.000 at the moment. I mean, I think there's a lot 0:00:20.000 --> 0:00:28.520 of uncertainty and it's probably not in the pro growth direction. Hello, 0:00:28.560 --> 0:00:31.560 and welcome to Stephanomics, the podcast that brings the COVID 0:00:31.600 --> 0:00:34.800 global economy to you. And what you just heard it 0:00:34.920 --> 0:00:38.360 was a very distinguished US economist Ken Rogoff telling you 0:00:38.360 --> 0:00:42.000 we're not in Kansas anymore. At the start of this pandemic, 0:00:42.280 --> 0:00:44.760 economists thought they pretty much knew what we were in for. 0:00:45.200 --> 0:00:49.480 A short sharp shock COVID nineteen might kill the economy 0:00:49.640 --> 0:00:52.279 dead in the short term, but it wouldn't take long 0:00:52.360 --> 0:00:56.279 to bounce back. They don't say anymore. But now Rogoff 0:00:56.280 --> 0:00:59.160 and fellow economist Carmen Reinhardt, I think it could be 0:00:59.280 --> 0:01:02.560 years before we make up the ground we've lost. Reinhardt 0:01:02.800 --> 0:01:05.559 has just this week been named the new Chief economist 0:01:05.600 --> 0:01:08.640 of the World Bank. People tend to pay attention to 0:01:08.640 --> 0:01:11.559 what she and Rogoff think since they wrote the definitive 0:01:11.640 --> 0:01:15.440 history of eight hundred years of financial crisis. What these 0:01:15.480 --> 0:01:18.200 two are saying today is that anyone betting on a 0:01:18.280 --> 0:01:22.600 V shaped recovery from this crisis should think again. Bloomberg's 0:01:22.600 --> 0:01:25.480 executive editor for Economic Simon Kennedy had a long chat 0:01:25.520 --> 0:01:28.000 with them for the latest issue of Bloomberg Markets Magazine. 0:01:28.360 --> 0:01:31.120 We're playing you some of that interview later, but first, 0:01:31.319 --> 0:01:34.560 I have news of new jobs. Yes, you heard that right. 0:01:34.600 --> 0:01:39.040 COVID nineteen is creating some new jobs amid the ocean 0:01:39.120 --> 0:01:42.639 of layoffs. Except they're not jobs that your school career 0:01:42.680 --> 0:01:46.160 adviser would ever have told you about. To fancy being 0:01:46.200 --> 0:01:50.640 a thermal scanner, or a contact tracer perhaps, or a 0:01:50.720 --> 0:01:55.680 decontamination technician. Bloomberg Business reporter Jeff Green and Federal Reserve 0:01:55.760 --> 0:01:59.240 reporter Steve Matthews decided to find out who was doing 0:01:59.280 --> 0:02:01.800 these jobs and how they felt about them. Jeff is 0:02:01.800 --> 0:02:05.320 in Michigan and he's with me now. Jeff, tell me 0:02:05.320 --> 0:02:08.639 about these new jobs. How many are we talking about? Well, 0:02:08.639 --> 0:02:10.680 if you talk about the types of jobs, you know, 0:02:10.919 --> 0:02:13.760 you maybe talking about a dozen kinds of classifications that 0:02:13.840 --> 0:02:16.400 fit into sort of this broad umbrella of sort of 0:02:16.400 --> 0:02:20.440 a COVID you know, related job. Um In terms of 0:02:20.480 --> 0:02:22.480 the number of people, it's not gonna be thirty six million. 0:02:22.520 --> 0:02:26.079 We're not going to offset unemployment with this. But one 0:02:26.200 --> 0:02:28.480 job called the tracer, where you try to find people 0:02:28.480 --> 0:02:30.519 who have been exposed to COVID, they're talking about a 0:02:30.600 --> 0:02:33.000 quarter of a million of those people needed, because you 0:02:33.080 --> 0:02:36.440 basically need to have somebody in every jurisdiction to try 0:02:36.520 --> 0:02:38.960 and stop the virus as it gets started. Some of 0:02:38.960 --> 0:02:40.959 the other jobs, I mean, the thermal scanner, which is 0:02:41.000 --> 0:02:43.000 a fancy name for some of you who takes temperatures, 0:02:43.000 --> 0:02:45.200 those are gonna be pretty much every company is going 0:02:45.240 --> 0:02:47.120 to have somebody like that trying to make sure that 0:02:47.160 --> 0:02:49.320 people with fevers don't come into the work site. So 0:02:49.600 --> 0:02:52.440 you were talking thousands, but I don't think millions though, 0:02:53.240 --> 0:02:55.120 and I was struck actually in your piece. There are 0:02:55.160 --> 0:02:57.200 some jobs or other old fashioned jobs that might be 0:02:57.240 --> 0:03:01.000 coming back into fashion because of the social distance seeing rules. 0:03:01.440 --> 0:03:06.040 JP Morgan had talked about bringing back elevator attendance. I 0:03:06.080 --> 0:03:07.680 guess we'll have a few things like that where we 0:03:07.680 --> 0:03:10.800 actually have people checking that we're doing the right thing 0:03:11.080 --> 0:03:16.160 in context, where previously everything has been automated. Yeah, doorman, 0:03:16.360 --> 0:03:19.480 elevator operator, maybe even people from the mail room will 0:03:19.480 --> 0:03:22.280 have a whole different sort of importance and role that 0:03:22.320 --> 0:03:25.040 you know has been kind of fading until this. So 0:03:25.160 --> 0:03:27.200 let's let's hear more. I mean, you talked to quite 0:03:27.200 --> 0:03:30.280 a wide range of people across the country, you and 0:03:30.320 --> 0:03:34.320 your colleague Steve Matthews. But this was Mark Scofield, who's 0:03:34.320 --> 0:03:38.120 a retired Air Force special agent now working as a 0:03:38.160 --> 0:03:41.560 thermal scanner. So I guess that's a temperature taker at 0:03:41.600 --> 0:03:45.040 a retail distribution center in North Salt Lake in Utah. 0:03:45.720 --> 0:03:47.920 For a personal perspective, for me, I haven't been sick 0:03:47.960 --> 0:03:53.520 for twenty years. I think I'm old enough. Communities had 0:03:53.560 --> 0:03:56.960 most of its effect to me, so I don't I 0:03:57.000 --> 0:03:59.320 personally don't feel any dangers that people I work with. 0:04:00.040 --> 0:04:02.960 We don't feel any danger you feel. We're secure in 0:04:03.000 --> 0:04:08.520 our little our booth or if we go out to 0:04:08.520 --> 0:04:11.200 say something. Some of them, some of the truckers are 0:04:11.240 --> 0:04:13.280 really fun. Get to know him a little bit, and 0:04:13.280 --> 0:04:15.120 they want to talk to you and tell you a joke. 0:04:15.280 --> 0:04:17.880 And so we'll stand outside this job with our six 0:04:17.880 --> 0:04:19.760 feet apart and we'll chat for a few minutes and 0:04:20.760 --> 0:04:22.720 then I'll go do that thing. I think everybody in 0:04:22.800 --> 0:04:26.279 my shift there's very comfortable before we do. The interesting 0:04:26.320 --> 0:04:29.880 thing about him is he actually was working for Kelly Services, 0:04:29.880 --> 0:04:32.240 which is who's getting a lot of these people placed. 0:04:32.360 --> 0:04:34.440 They don't necessarily say for who, but a lot of 0:04:34.440 --> 0:04:38.839 Fortune five kind of companies are are are needing these 0:04:38.880 --> 0:04:42.799 these positions. But he was a substitute teacher for them 0:04:42.839 --> 0:04:45.640 prior to taking on this role, so I mean he 0:04:45.680 --> 0:04:48.080 had just been doing that on the side. He had 0:04:48.080 --> 0:04:50.719 a background in it, so he would take substitute teaching 0:04:50.760 --> 0:04:53.000 gigs from from time to time, but there wasn't much 0:04:53.040 --> 0:04:55.800 call for that in this in this situation, so when 0:04:55.800 --> 0:04:57.800 it came up, he kind of raised his hand and said, yeah, 0:04:57.800 --> 0:05:01.720 I'll do this. And he's a big guy, military guy, 0:05:02.000 --> 0:05:04.560 clearly feels pretty impervious. So I think it's he's an 0:05:04.600 --> 0:05:08.479 interesting character. And you made the point rightly, Jeff, that 0:05:08.640 --> 0:05:11.280 this is still a drop in the bucket, these new 0:05:11.400 --> 0:05:14.679 jobs compared to the ones that are being lost, the 0:05:14.720 --> 0:05:18.440 thirty six million and counting lost jobs. But of course 0:05:18.480 --> 0:05:20.000 I think people will be glad to hear that any 0:05:20.080 --> 0:05:22.560 jobs are being created in this environment. Do you do. 0:05:22.560 --> 0:05:25.480 You get the impression from the other people you talked 0:05:25.520 --> 0:05:28.000 to that they're happy to do it, although they're worried 0:05:28.040 --> 0:05:31.960 about the potential risks in some of these jobs. I mean, 0:05:32.000 --> 0:05:34.400 everybody who's doing it seems to have a different way. 0:05:34.400 --> 0:05:37.360 They've sort of rationalized or or just dealt with it 0:05:37.680 --> 0:05:40.240 as not being something they're worried about, either because of 0:05:40.279 --> 0:05:43.200 the protective measures or where they see themselves in sort 0:05:43.240 --> 0:05:45.240 of their health. I Mean, one of the things that's 0:05:45.400 --> 0:05:48.000 pretty much true across the board is this is more 0:05:48.080 --> 0:05:49.839 money than they might be making in their day to 0:05:49.880 --> 0:05:51.719 day job. I mean, these are usually twenty dollars or 0:05:51.720 --> 0:05:54.000 more an hour, and a lot of the people taking 0:05:54.040 --> 0:05:56.880 these jobs were probably in sort of the fifteen dollar 0:05:56.920 --> 0:06:00.159 an hour or less category. So you're you're looking at 0:06:00.200 --> 0:06:03.680 people who are able to um get a raise basically 0:06:03.720 --> 0:06:06.960 to do something that seems somewhat risky, but risky in 0:06:06.960 --> 0:06:09.479 a sense that you're wearing full protective equipment and you're 0:06:09.560 --> 0:06:12.760 usually behind plexiglass and maybe more protective than you are 0:06:12.920 --> 0:06:14.640 when you go back to work if you didn't have 0:06:14.720 --> 0:06:17.440 this job. But I guess we should add but you've 0:06:17.480 --> 0:06:20.719 also got a new job that you didn't have a 0:06:20.720 --> 0:06:23.040 few months ago when we're not supposed to moonlight here 0:06:23.040 --> 0:06:24.839 at Bloombow. But I think in this case the bosses 0:06:24.839 --> 0:06:27.560 have approved. You've been You've been working away yourself on 0:06:27.640 --> 0:06:30.720 something on the anti COVID effort, Is that right? Yeah? 0:06:30.760 --> 0:06:33.120 I mean I have a three D printer or two 0:06:33.240 --> 0:06:35.400 or three. It's a hobby, you know, And I've been 0:06:35.400 --> 0:06:37.839 working from home, so they're literally right behind me through 0:06:37.839 --> 0:06:40.600 a door. And I've been working with some local people, 0:06:40.640 --> 0:06:44.520 some nonprofits just to kind of make personal protection equipment. Um. 0:06:44.560 --> 0:06:46.720 You know, thankfully, there's a lot less demand for the 0:06:46.800 --> 0:06:48.599 really heavy duty stuff. We were doing a lot of 0:06:48.600 --> 0:06:51.440 face shields at first. Now it's mostly they call them 0:06:51.480 --> 0:06:53.760 ear savers. It's so that when people wear masks all day, 0:06:53.800 --> 0:06:56.920 it doesn't rub their ears raw. And there's a high 0:06:56.960 --> 0:06:59.200 demand for that from people who are, you know, basically 0:06:59.240 --> 0:07:02.080 wearing masks everywhere. How many originally of the mask do 0:07:02.080 --> 0:07:05.120 you think you made in the early stages, About three 0:07:05.520 --> 0:07:09.080 and fifty of the straps for the masks. Um, they 0:07:09.080 --> 0:07:12.040 were like printed with a special plastic that's easier to 0:07:12.080 --> 0:07:16.200 disinfect than than somebody else put on a face shield. Um, 0:07:16.240 --> 0:07:19.080 just over a thousand of the ear protectors right now. 0:07:19.080 --> 0:07:21.920 We're still doing those, probably winding that down soon, but 0:07:22.040 --> 0:07:24.040 I'm trying to get another thousand done so they can 0:07:24.080 --> 0:07:26.160 because people are sending them all over the country where 0:07:26.200 --> 0:07:28.800 you know where, they're having trouble finding them. Well, I'm 0:07:28.800 --> 0:07:31.119 glad that you're not doing the really urgent stuff anymore 0:07:31.120 --> 0:07:33.040 because we've made you turn off your machines in order 0:07:33.080 --> 0:07:34.400 to do this. But I should let you get back 0:07:34.440 --> 0:07:36.160 to that and your and your work for blue Bird. 0:07:36.720 --> 0:07:47.000 Jeff Green, thanks very much, thank you. Now. When Carmen 0:07:47.000 --> 0:07:49.960 Reinhart and Ken Rogoff wrote their history of financial Crises 0:07:50.000 --> 0:07:53.240 in late two thousand and nine, their title was ironic, 0:07:53.880 --> 0:07:58.320 this time is different. Eight centuries of financial folly reminded 0:07:58.320 --> 0:08:02.040 readers that it really was different, and the catastrophic two 0:08:02.120 --> 0:08:06.880 thousand and eight nine credit crisis wasn't unique. Rogolf is 0:08:06.880 --> 0:08:08.840 a former I m F Chief economist who is now 0:08:08.880 --> 0:08:12.040 a professor at Harvard, and right now, Reinhardt is also 0:08:12.080 --> 0:08:14.280 a professor at Harvard, but as we heard earlier, she's 0:08:14.280 --> 0:08:17.160 about to be Chief economist of the World Bank, right 0:08:17.200 --> 0:08:19.400 in the middle of what feels like a one of 0:08:19.400 --> 0:08:23.480 a kind crisis. So my colleague Simon Kennedy started his 0:08:23.600 --> 0:08:28.600 interview by asking the obvious question, is this time really different. 0:08:35.360 --> 0:08:40.719 It's certainly different from prior pandemics in terms of the economy, 0:08:40.800 --> 0:08:44.599 the policy response to shutdown. The other thing that I 0:08:44.720 --> 0:08:49.160 like to highlight that is very different is the suddenness, 0:08:49.720 --> 0:08:53.839 how sudden this has been. If you look at US 0:08:53.960 --> 0:08:59.720 unemployment claims in six weeks, we've had what it took 0:09:00.080 --> 0:09:05.080 sixty weeks in terms of the run up. If you 0:09:05.240 --> 0:09:10.360 look at capital flows to emerging markets, the same story. 0:09:10.760 --> 0:09:16.120 You know, the reversal and capital flows in the four 0:09:16.200 --> 0:09:21.760 weeks ending in March that the decline matched what during 0:09:21.840 --> 0:09:26.520 the global financial crisis took a year. So the suddenness, 0:09:26.640 --> 0:09:30.560 the abruptness of it, is also a factor that is 0:09:30.679 --> 0:09:34.680 a byproduct of the widespread shutdowns which we had not 0:09:34.760 --> 0:09:38.480 seen before. Certainly the global nature of it, and as 0:09:39.240 --> 0:09:43.959 highlights the speed point bursting out across the whole world, 0:09:44.480 --> 0:09:50.559 the first global recession, the crisis really since the Great Depression, 0:09:50.720 --> 0:09:55.319 because the two thousand made was the rich countries and 0:09:55.600 --> 0:09:58.240 not the purchased markets had a good crisis in two 0:09:58.280 --> 0:10:02.079 thousand eight, and they're not going to this time, regardless 0:10:02.160 --> 0:10:06.199 of how the virus hits them and the policy response. 0:10:06.679 --> 0:10:10.200 Think about China. Can you imagine if this had hit 0:10:10.679 --> 0:10:14.199 fifty years ago? Can you imagine trying having the state 0:10:14.280 --> 0:10:19.400 capacity to shut down Hubei Province to feed nearly sixty 0:10:19.440 --> 0:10:24.679 million people, give them food and water, and concentrate medical attention. 0:10:25.400 --> 0:10:29.600 So there's a policy option that we have, and I 0:10:29.640 --> 0:10:33.480 think most countries have felt it's the choice that had 0:10:33.520 --> 0:10:37.760 to be taken to try to try to protect ourselves. 0:10:38.160 --> 0:10:40.960 How degrade the policy responses? What do you what do 0:10:41.000 --> 0:10:43.679 you make of them? Um? No, if I think the 0:10:44.320 --> 0:10:52.760 policy response has been massive and called for that absolutely necessary. 0:10:52.840 --> 0:10:59.400 You can quibble between the European style sort of try 0:10:59.480 --> 0:11:03.520 to preserve firms and workers and their current jobs, the 0:11:03.640 --> 0:11:07.520 US version, which is to try to address it as 0:11:07.520 --> 0:11:11.480 a natural catastrophe and try to subsidize people but allow 0:11:11.640 --> 0:11:15.560 higher unemployment. I think they're actually not that different. If 0:11:15.640 --> 0:11:19.960 this thing persists, then a lot of those European firms 0:11:20.000 --> 0:11:23.320 will end up having to let their workers go when 0:11:23.360 --> 0:11:25.840 the crisis passes. If it doesn't, a lot of the 0:11:25.920 --> 0:11:29.480 U S firms will end up rehiring their workers. But 0:11:30.280 --> 0:11:35.839 certainly the aggressive crisis response reflects lessons learned in two 0:11:35.920 --> 0:11:40.080 thousand and eight and common does that aggressive policy? Does 0:11:40.120 --> 0:11:43.840 that explain the markets? Stock markets particularly of You wouldn't 0:11:43.840 --> 0:11:46.480 necessarily if I'd shown you the chart at the start 0:11:46.520 --> 0:11:48.400 of the year, you would have wondered what the collapse was, 0:11:48.440 --> 0:11:51.600 but you wouldn't necessarily have You wouldn't necessarily We've been 0:11:51.640 --> 0:11:53.520 hit by a global pandemic. If you looked at look 0:11:53.520 --> 0:11:58.120 at Wall Street, what's behind? What's that break between the markets? 0:11:58.160 --> 0:12:05.120 And UM? I would say, partially, partially, how much of 0:12:05.160 --> 0:12:08.719 the resilience, if you will, if not a brilliance in 0:12:08.840 --> 0:12:13.160 the market is is policy driven? I think a lot 0:12:13.160 --> 0:12:18.040 of it is. UH. That you know, UH, let's take 0:12:18.120 --> 0:12:25.160 monetary policy. UM. Before the pandemic, the US unemployment was 0:12:25.200 --> 0:12:29.079 at its lowest level since the nineteen sixties. By most metrics, 0:12:29.160 --> 0:12:33.240 the US was at or near full employment, which very plausible. 0:12:33.320 --> 0:12:39.439 That you know, your path was one towards rising rates UM. 0:12:39.440 --> 0:12:46.200 Clearly that has been completely replaced by a view that 0:12:46.480 --> 0:12:50.720 rates are zero now that that they've come down, UH, 0:12:50.760 --> 0:12:55.360 and that they're gonna stay low for a very long, long, 0:12:55.600 --> 0:13:00.240 indeterminate period of time with a lot of liquidity or 0:13:00.360 --> 0:13:02.760 from from the Federal Reserve. So that's a big game 0:13:02.840 --> 0:13:07.200 changer for you know, discount discounting futures, you know, stream 0:13:07.200 --> 0:13:11.880 of dividends and and and and so on um for 0:13:12.000 --> 0:13:16.080 the markets. Let me just point out another issue in 0:13:16.280 --> 0:13:22.800 terms of the policy response. The policy response, again, the 0:13:22.840 --> 0:13:25.840 FED has established a lot of facilities that are now 0:13:26.360 --> 0:13:31.240 providing support not only to corporates, but to corporates on 0:13:31.280 --> 0:13:34.880 a much lower grade in terms of their ratings, you know, 0:13:35.000 --> 0:13:39.120 the fallen angels, the higher risk that the you know, 0:13:39.200 --> 0:13:45.760 the the kind of risk gear corporates than certainly was 0:13:45.880 --> 0:13:49.880 even envisioned at the outset of the pandemic um And 0:13:50.480 --> 0:13:56.839 I think what this does is the market is really 0:13:56.960 --> 0:14:01.000 counting on a lot of rescues. Of course, the FED 0:14:01.360 --> 0:14:05.360 lower forever is part of part of it, but I 0:14:05.960 --> 0:14:09.920 also feel the markets have a very sanguine view of 0:14:09.960 --> 0:14:13.920 the virus and what's going to happen and how quickly 0:14:14.000 --> 0:14:17.760 we can return to normal, or maybe how quickly we 0:14:17.800 --> 0:14:21.520 will choose to return to whatever normal is, how quickly 0:14:21.560 --> 0:14:26.320 the lockdowns will will lend um and it seems very 0:14:26.400 --> 0:14:31.960 uncertain to me. The virologist and epidemiologists I respect, you know, 0:14:32.160 --> 0:14:35.120 always start out their comments by saying, you know, we're 0:14:35.120 --> 0:14:38.520 in the second inning where we might, if we're lucky, 0:14:38.640 --> 0:14:41.560 be at the end of the beginning of the epidemic. 0:14:41.800 --> 0:14:44.520 That sort of thing, and and and that rings true. 0:14:46.080 --> 0:14:49.360 I don't know how we're coming back to two thousand 0:14:49.560 --> 0:14:53.840 nineteen levels in any near term. The ECB gave a 0:14:54.160 --> 0:14:57.520 I think a three year projection that'd be great. That 0:14:57.560 --> 0:15:01.080 seems quite optimistic to me. And I thin the true 0:15:01.080 --> 0:15:06.040 fall and g d p U economic historians will debate 0:15:06.120 --> 0:15:11.440 for years. It's probably much larger than a measured fall. 0:15:11.960 --> 0:15:14.800 It's not just the people not working, but what's the 0:15:14.840 --> 0:15:17.960 efficiency of the people that are working. And then the 0:15:18.000 --> 0:15:21.040 monetary response is done hand in hand with the Treasury. 0:15:21.280 --> 0:15:26.840 This this level of UH guaranteeing private debt and municible 0:15:26.920 --> 0:15:31.360 debt that Treasury owns, the Federal Reserve, and it's completely uh, 0:15:31.520 --> 0:15:35.440 you know, working together on this. But it's banking on 0:15:36.000 --> 0:15:39.200 this V shaped recovery, something pretty good happening. If you're 0:15:39.560 --> 0:15:43.000 you can't keep expanding all the credits that you're guaranteeing 0:15:43.040 --> 0:15:45.680 in the economy. And definitely if a lot of the 0:15:45.720 --> 0:15:49.200 firms aren't aren't aren't coming back, So it remains to 0:15:49.240 --> 0:15:54.040 be seen what they will do going forward. I think 0:15:54.120 --> 0:15:57.880 we're going to see a lot of work for bankruptcy lawyers, 0:15:57.960 --> 0:16:01.040 and you know, going across a lot of industries, we 0:16:01.080 --> 0:16:05.400 see one retailer after another entering Chapter eleven already, and 0:16:05.440 --> 0:16:08.720 that's probably just the beginning. The numbers are gonna look 0:16:08.840 --> 0:16:14.760 spectacularly great in some months. Simply because you're coming out 0:16:14.840 --> 0:16:19.480 from a base that was pretty devastated. That doesn't imply 0:16:20.440 --> 0:16:25.520 that per capita incomes are going to go back in 0:16:25.720 --> 0:16:33.200 V shape two what they were before. You know, it's 0:16:34.000 --> 0:16:39.920 very critical. Characteristic of all of this shock has been 0:16:40.160 --> 0:16:48.720 that it has disrupted supply chains globally, big time um trade. 0:16:48.800 --> 0:16:53.080 You know, if you look at the w t O projections, 0:16:53.080 --> 0:16:55.960 they tell you, well, it can decline anywhere between thirteen 0:16:55.960 --> 0:17:01.880 and thirty two. So I don't think you just break 0:17:02.200 --> 0:17:07.240 and re recreate supply chains, you know, at the drop 0:17:07.280 --> 0:17:10.160 of a hat. I think that there is a lot 0:17:10.200 --> 0:17:14.920 of geographical changes that are that are being necessitated because 0:17:15.880 --> 0:17:21.719 if the economic downturn has been synchronous, the disease itself 0:17:21.840 --> 0:17:26.879 hasn't been synchronous. It started in China, hate Korea, hate 0:17:26.920 --> 0:17:31.520 parts of Asia, moved to Europe, moved to the US. 0:17:31.720 --> 0:17:35.159 So the idea that the disease is going to be 0:17:36.119 --> 0:17:40.359 dealt with globally in such a synchronous and rapid way 0:17:40.440 --> 0:17:44.080 that it allowed for V shape, I find that dubious. 0:17:44.240 --> 0:17:48.360 The second part that I find the V shaped story 0:17:48.560 --> 0:17:53.879 dubious is what Ken was already alluding to the chapter elevens. 0:17:54.200 --> 0:17:56.960 You know, we are all living in economies that have 0:17:57.080 --> 0:18:01.840 a huge important service component. How do we know which 0:18:01.960 --> 0:18:04.840 retailers are going to come back, which restaurants are going 0:18:04.880 --> 0:18:11.000 to come back? Uh, cinemas and and so when this 0:18:11.200 --> 0:18:17.320 crisis began to morph from a pandemic, from a medical 0:18:17.480 --> 0:18:22.520 problem into a financial crisis, then I think the roots 0:18:22.680 --> 0:18:27.320 for it having more longer lived effects we're set, And 0:18:27.400 --> 0:18:29.840 I think those two factors are going to make for 0:18:30.000 --> 0:18:35.679 more protracted recovery. Yes, I go back to the e 0:18:35.720 --> 0:18:40.160 CBS forecast for three years uh to go back to 0:18:40.200 --> 0:18:43.159 the same the same income as the beginning, which is 0:18:43.200 --> 0:18:46.640 what Carmen and I use is the definition of recovery 0:18:46.960 --> 0:18:49.080 in our book that, by the way, is really not 0:18:49.160 --> 0:18:52.440 the Wall Street definition of recovery, where recovery is going 0:18:52.480 --> 0:18:56.000 back to where the trend was which is typical in 0:18:56.000 --> 0:19:00.359 a recession. We use a much more modest for inever povery. 0:19:00.400 --> 0:19:05.040 And still with post war financial crises before two thousand 0:19:05.640 --> 0:19:11.119 eight nine the average was four years, and for the 0:19:11.160 --> 0:19:14.719 Great Depression ten years. And there are many ways this 0:19:14.840 --> 0:19:18.000 feels more like the Great Depression when you look at 0:19:18.000 --> 0:19:22.240 the de globalization which seems so likely to follow this, 0:19:23.040 --> 0:19:26.159 Whether say in the United States the Republicans are in 0:19:26.200 --> 0:19:30.359 power the Democrats, that seems like one thing they have 0:19:30.600 --> 0:19:43.000 a consensus about getting back to something. We wrote gosh 0:19:43.040 --> 0:19:46.399 and late late March. I think we were very early 0:19:46.440 --> 0:19:49.520 in on this point that you probably need a debt 0:19:49.600 --> 0:19:55.240 moratorium that's fairly widespread for emerging markets and developing economies. 0:19:55.280 --> 0:19:59.680 And an analogy the the I m f H were 0:20:00.119 --> 0:20:03.359 Chapter eleven. Bankruptcy is very good at dealing with a 0:20:03.359 --> 0:20:06.040 couple of countries or a couple of firms at a time. 0:20:06.960 --> 0:20:09.840 But just the way the hospitals can't handle all the 0:20:09.920 --> 0:20:14.720 COVID nineteen patients showing up in the same week, neither 0:20:14.880 --> 0:20:20.359 can our bankruptcy system. Neither can the international financial institutions. 0:20:20.720 --> 0:20:24.440 So there are going to be phenomenal frictions coming out 0:20:24.480 --> 0:20:27.919 of this wave of bankruptcies to faults again. If we 0:20:28.000 --> 0:20:32.280 can get a super v recovery, it'll all be forgotten. 0:20:32.320 --> 0:20:36.479 The policymakers will look like geniuses. Uh not. I'm not 0:20:36.600 --> 0:20:38.840 saying they've done anything but a good job that I 0:20:38.920 --> 0:20:41.000 think they have done a good job. But you know 0:20:41.200 --> 0:20:45.200 they'll be you know, have saved the day. But it's 0:20:45.680 --> 0:20:48.400 it's probably that's probably not going to happen. It's probably 0:20:48.400 --> 0:20:53.280 going to be at best you shape recovery. And I 0:20:53.320 --> 0:20:55.320 don't know how long it's going to take us to 0:20:55.359 --> 0:20:58.000 get back to the two thousand nineteen per capital g 0:20:58.119 --> 0:21:00.560 d P I. I would say, looking at it now, 0:21:00.960 --> 0:21:04.040 certainly world, you know, for the world, five years would 0:21:04.040 --> 0:21:07.040 seem like a good outcome out of this. Um. What 0:21:07.119 --> 0:21:09.760 about the debts in the in the major com you 0:21:09.800 --> 0:21:13.240 mentioned Italy but also elsewhere. At the moment, there's definitely 0:21:13.320 --> 0:21:17.119 that mentality that this is a price worth paying. How 0:21:17.440 --> 0:21:20.680 worried are you about the debts in the longer term? Yeah, 0:21:20.800 --> 0:21:23.040 it's not a free lunch we had, but we had 0:21:23.520 --> 0:21:28.679 there's no choice. The whole point of having a strong 0:21:28.880 --> 0:21:32.679 balance sheet, of being able to borrow freely, is to 0:21:32.720 --> 0:21:36.439 be able to do it with abandoned in situations like this. 0:21:36.440 --> 0:21:42.560 This is like I wore, naturally staggering, natural catastrophe, whatever 0:21:42.600 --> 0:21:46.120 you want to call it. There's no debate that they 0:21:46.160 --> 0:21:48.840 should be doing all they can to try to maintain 0:21:48.920 --> 0:21:53.879 political and social cohesion to maintain economies. But what lies 0:21:53.960 --> 0:21:56.480 at the other end. I go back to my Wizard 0:21:56.520 --> 0:22:01.359 of oz an analogy, UH with Darthy up there. The 0:22:01.400 --> 0:22:05.199 financial markets think there's no chance interest rates will go up, 0:22:05.600 --> 0:22:09.040 there's no chance inflation will go up if they're right 0:22:09.160 --> 0:22:13.240 in that last five years. And by the way, if 0:22:13.280 --> 0:22:17.200 another shoe doesn't drop, if we you know, don't have 0:22:17.400 --> 0:22:21.080 another global problem in the meantime, I mean, it'll be fine, 0:22:21.240 --> 0:22:25.720 but we could have costs from this. We're talking about 0:22:25.760 --> 0:22:33.280 economy shrinking by and per year, and those are just 0:22:33.400 --> 0:22:37.960 staggering compared to the depth burden costs, whatever they are. 0:22:38.960 --> 0:22:43.320 So you know, certainly we would strongly endorse doing what 0:22:43.359 --> 0:22:46.879 they're doing. But then the summer selling it as a 0:22:46.960 --> 0:22:53.480 free lunch, that's stupefyingly naive. Early on, you a talking 0:22:53.480 --> 0:22:57.280 about inflation. I think there's a projects into column. Those 0:22:57.320 --> 0:23:00.000 still your views that that could be an inflation first 0:23:00.000 --> 0:23:03.680 the end of this, well, I don't think where we 0:23:03.680 --> 0:23:07.760 we don't know where will come out. So the probabilities 0:23:08.000 --> 0:23:12.800 for the foreseeable future will have deflation, because you know, 0:23:13.000 --> 0:23:15.840 that's where we are. But at the end of this, 0:23:16.520 --> 0:23:20.240 I think we're going to have experience an extremely negative 0:23:20.240 --> 0:23:26.080 productivity shock with declobalization. Even if the vaccine magically appears, 0:23:26.880 --> 0:23:31.879 the deglobalization will be the last the deglobalization and probably 0:23:32.040 --> 0:23:37.560 the political social political ramifications, which may be good overall 0:23:37.680 --> 0:23:41.199 for society, but in terms of growth and productivity, they 0:23:41.240 --> 0:23:46.840 will be lasting negative shocks, and demand may come back 0:23:47.400 --> 0:23:50.760 and and many of the forces that have led to 0:23:51.119 --> 0:23:54.919 very low inflation may have gone into reverse either because 0:23:54.920 --> 0:23:59.919 of declobalization, or workers will strengthen their rights and unions 0:24:00.080 --> 0:24:03.320 will be kind of stronger, which it becomes possible in 0:24:03.359 --> 0:24:08.000 a more deglobalized world. It's easier to rebuild union strength 0:24:08.040 --> 0:24:11.840 when you're not competing with foreign terms. And of course 0:24:12.400 --> 0:24:16.320 inflation is a is a possibility, but the market for 0:24:16.400 --> 0:24:20.480 a season like essentially zero chance of ever having inflation again. 0:24:21.040 --> 0:24:24.960 And I think that's uh, you know, it was very wrong. 0:24:32.000 --> 0:24:34.280 Thanks for listening to Stephanomics. We'll be back next week 0:24:34.320 --> 0:24:37.240 with more on how COVID nineteen is turning the global 0:24:37.280 --> 0:24:40.520 economy upside down. Remember you can always find us on 0:24:40.560 --> 0:24:44.160 the Bloomberg Terminal, website, app or wherever you get your podcasts, 0:24:44.480 --> 0:24:47.520 and for more news and analysis from Bloomberg Economics, follow 0:24:47.640 --> 0:24:50.480 as Economics on Twitter. You can also find me on 0:24:50.600 --> 0:24:54.400 at my Stephanomics. This episode was produced by Magnus Hendrickson. 0:24:54.680 --> 0:24:57.560 The interview you just heard was conducted by Simon Kennedy, 0:24:57.840 --> 0:25:00.760 and the published version of the transcript im Bomberg Markets 0:25:00.760 --> 0:25:04.840 Magazine was edited by Stryker Maguire. Special thanks to Jeff Green, 0:25:05.160 --> 0:25:10.439 Steve Matthews, Mark Scofield, Carmen Reinhardt, and Ken Rogoff. Scott 0:25:10.480 --> 0:25:13.520 Lanman is the executive producer of Stephanomics and the head 0:25:13.560 --> 0:25:16.600 of Bloomberg Podcast is Francesca Levy.