Speaker 1: I like and the incident we're in to be like
Speaker 1: in The Wizard of Oz where Dorothy got sucked up
Speaker 1: in the hurricane with their house and it's spinning around
Speaker 1: and you don't know where it will come down. And
Speaker 1: I think that's where our social political economic system is
Speaker 1: at the moment. I mean, I think there's a lot
Speaker 1: of uncertainty and it's probably not in the pro growth direction. Hello,
Speaker 1: and welcome to Stephanomics, the podcast that brings the COVID
Speaker 1: global economy to you. And what you just heard it
Speaker 1: was a very distinguished US economist Ken Rogoff telling you
Speaker 1: we're not in Kansas anymore. At the start of this pandemic,
Speaker 1: economists thought they pretty much knew what we were in for.
Speaker 1: A short sharp shock COVID nineteen might kill the economy
Speaker 1: dead in the short term, but it wouldn't take long
Speaker 1: to bounce back. They don't say anymore. But now Rogoff
Speaker 1: and fellow economist Carmen Reinhardt, I think it could be
Speaker 1: years before we make up the ground we've lost. Reinhardt
Speaker 1: has just this week been named the new Chief economist
Speaker 1: of the World Bank. People tend to pay attention to
Speaker 1: what she and Rogoff think since they wrote the definitive
Speaker 1: history of eight hundred years of financial crisis. What these
Speaker 1: two are saying today is that anyone betting on a
Speaker 1: V shaped recovery from this crisis should think again. Bloomberg's
Speaker 1: executive editor for Economic Simon Kennedy had a long chat
Speaker 1: with them for the latest issue of Bloomberg Markets Magazine.
Speaker 1: We're playing you some of that interview later, but first,
Speaker 1: I have news of new jobs. Yes, you heard that right.
Speaker 1: COVID nineteen is creating some new jobs amid the ocean
Speaker 1: of layoffs. Except they're not jobs that your school career
Speaker 1: adviser would ever have told you about. To fancy being
Speaker 1: a thermal scanner, or a contact tracer perhaps, or a
Speaker 1: decontamination technician. Bloomberg Business reporter Jeff Green and Federal Reserve
Speaker 1: reporter Steve Matthews decided to find out who was doing
Speaker 1: these jobs and how they felt about them. Jeff is
Speaker 1: in Michigan and he's with me now. Jeff, tell me
Speaker 1: about these new jobs. How many are we talking about? Well,
Speaker 1: if you talk about the types of jobs, you know,
Speaker 1: you maybe talking about a dozen kinds of classifications that
Speaker 1: fit into sort of this broad umbrella of sort of
Speaker 1: a COVID you know, related job. Um In terms of
Speaker 1: the number of people, it's not gonna be thirty six million.
Speaker 1: We're not going to offset unemployment with this. But one
Speaker 1: job called the tracer, where you try to find people
Speaker 1: who have been exposed to COVID, they're talking about a
Speaker 1: quarter of a million of those people needed, because you
Speaker 1: basically need to have somebody in every jurisdiction to try
Speaker 1: and stop the virus as it gets started. Some of
Speaker 1: the other jobs, I mean, the thermal scanner, which is
Speaker 1: a fancy name for some of you who takes temperatures,
Speaker 1: those are gonna be pretty much every company is going
Speaker 1: to have somebody like that trying to make sure that
Speaker 1: people with fevers don't come into the work site. So
Speaker 1: you were talking thousands, but I don't think millions though,
Speaker 1: and I was struck actually in your piece. There are
Speaker 1: some jobs or other old fashioned jobs that might be
Speaker 1: coming back into fashion because of the social distance seeing rules.
Speaker 1: JP Morgan had talked about bringing back elevator attendance. I
Speaker 1: guess we'll have a few things like that where we
Speaker 1: actually have people checking that we're doing the right thing
Speaker 1: in context, where previously everything has been automated. Yeah, doorman,
Speaker 1: elevator operator, maybe even people from the mail room will
Speaker 1: have a whole different sort of importance and role that
Speaker 1: you know has been kind of fading until this. So
Speaker 1: let's let's hear more. I mean, you talked to quite
Speaker 1: a wide range of people across the country, you and
Speaker 1: your colleague Steve Matthews. But this was Mark Scofield, who's
Speaker 1: a retired Air Force special agent now working as a
Speaker 1: thermal scanner. So I guess that's a temperature taker at
Speaker 1: a retail distribution center in North Salt Lake in Utah.
Speaker 1: For a personal perspective, for me, I haven't been sick
Speaker 1: for twenty years. I think I'm old enough. Communities had
Speaker 1: most of its effect to me, so I don't I
Speaker 1: personally don't feel any dangers that people I work with.
Speaker 1: We don't feel any danger you feel. We're secure in
Speaker 1: our little our booth or if we go out to
Speaker 1: say something. Some of them, some of the truckers are
Speaker 1: really fun. Get to know him a little bit, and
Speaker 1: they want to talk to you and tell you a joke.
Speaker 1: And so we'll stand outside this job with our six
Speaker 1: feet apart and we'll chat for a few minutes and
Speaker 1: then I'll go do that thing. I think everybody in
Speaker 1: my shift there's very comfortable before we do. The interesting
Speaker 1: thing about him is he actually was working for Kelly Services,
Speaker 1: which is who's getting a lot of these people placed.
Speaker 1: They don't necessarily say for who, but a lot of
Speaker 1: Fortune five kind of companies are are are needing these
Speaker 1: these positions. But he was a substitute teacher for them
Speaker 1: prior to taking on this role, so I mean he
Speaker 1: had just been doing that on the side. He had
Speaker 1: a background in it, so he would take substitute teaching
Speaker 1: gigs from from time to time, but there wasn't much
Speaker 1: call for that in this in this situation, so when
Speaker 1: it came up, he kind of raised his hand and said, yeah,
Speaker 1: I'll do this. And he's a big guy, military guy,
Speaker 1: clearly feels pretty impervious. So I think it's he's an
Speaker 1: interesting character. And you made the point rightly, Jeff, that
Speaker 1: this is still a drop in the bucket, these new
Speaker 1: jobs compared to the ones that are being lost, the
Speaker 1: thirty six million and counting lost jobs. But of course
Speaker 1: I think people will be glad to hear that any
Speaker 1: jobs are being created in this environment. Do you do.
Speaker 1: You get the impression from the other people you talked
Speaker 1: to that they're happy to do it, although they're worried
Speaker 1: about the potential risks in some of these jobs. I mean,
Speaker 1: everybody who's doing it seems to have a different way.
Speaker 1: They've sort of rationalized or or just dealt with it
Speaker 1: as not being something they're worried about, either because of
Speaker 1: the protective measures or where they see themselves in sort
Speaker 1: of their health. I Mean, one of the things that's
Speaker 1: pretty much true across the board is this is more
Speaker 1: money than they might be making in their day to
Speaker 1: day job. I mean, these are usually twenty dollars or
Speaker 1: more an hour, and a lot of the people taking
Speaker 1: these jobs were probably in sort of the fifteen dollar
Speaker 1: an hour or less category. So you're you're looking at
Speaker 1: people who are able to um get a raise basically
Speaker 1: to do something that seems somewhat risky, but risky in
Speaker 1: a sense that you're wearing full protective equipment and you're
Speaker 1: usually behind plexiglass and maybe more protective than you are
Speaker 1: when you go back to work if you didn't have
Speaker 1: this job. But I guess we should add but you've
Speaker 1: also got a new job that you didn't have a
Speaker 1: few months ago when we're not supposed to moonlight here
Speaker 1: at Bloombow. But I think in this case the bosses
Speaker 1: have approved. You've been You've been working away yourself on
Speaker 1: something on the anti COVID effort, Is that right? Yeah?
Speaker 1: I mean I have a three D printer or two
Speaker 1: or three. It's a hobby, you know, And I've been
Speaker 1: working from home, so they're literally right behind me through
Speaker 1: a door. And I've been working with some local people,
Speaker 1: some nonprofits just to kind of make personal protection equipment. Um.
Speaker 1: You know, thankfully, there's a lot less demand for the
Speaker 1: really heavy duty stuff. We were doing a lot of
Speaker 1: face shields at first. Now it's mostly they call them
Speaker 1: ear savers. It's so that when people wear masks all day,
Speaker 1: it doesn't rub their ears raw. And there's a high
Speaker 1: demand for that from people who are, you know, basically
Speaker 1: wearing masks everywhere. How many originally of the mask do
Speaker 1: you think you made in the early stages, About three
Speaker 1: and fifty of the straps for the masks. Um, they
Speaker 1: were like printed with a special plastic that's easier to
Speaker 1: disinfect than than somebody else put on a face shield. Um,
Speaker 1: just over a thousand of the ear protectors right now.
Speaker 1: We're still doing those, probably winding that down soon, but
Speaker 1: I'm trying to get another thousand done so they can
Speaker 1: because people are sending them all over the country where
Speaker 1: you know where, they're having trouble finding them. Well, I'm
Speaker 1: glad that you're not doing the really urgent stuff anymore
Speaker 1: because we've made you turn off your machines in order
Speaker 1: to do this. But I should let you get back
Speaker 1: to that and your and your work for blue Bird.
Speaker 1: Jeff Green, thanks very much, thank you. Now. When Carmen
Speaker 1: Reinhart and Ken Rogoff wrote their history of financial Crises
Speaker 1: in late two thousand and nine, their title was ironic,
Speaker 1: this time is different. Eight centuries of financial folly reminded
Speaker 1: readers that it really was different, and the catastrophic two
Speaker 1: thousand and eight nine credit crisis wasn't unique. Rogolf is
Speaker 1: a former I m F Chief economist who is now
Speaker 1: a professor at Harvard, and right now, Reinhardt is also
Speaker 1: a professor at Harvard, but as we heard earlier, she's
Speaker 1: about to be Chief economist of the World Bank, right
Speaker 1: in the middle of what feels like a one of
Speaker 1: a kind crisis. So my colleague Simon Kennedy started his
Speaker 1: interview by asking the obvious question, is this time really different.
Speaker 1: It's certainly different from prior pandemics in terms of the economy,
Speaker 1: the policy response to shutdown. The other thing that I
Speaker 1: like to highlight that is very different is the suddenness,
Speaker 1: how sudden this has been. If you look at US
Speaker 1: unemployment claims in six weeks, we've had what it took
Speaker 1: sixty weeks in terms of the run up. If you
Speaker 1: look at capital flows to emerging markets, the same story.
Speaker 1: You know, the reversal and capital flows in the four
Speaker 1: weeks ending in March that the decline matched what during
Speaker 1: the global financial crisis took a year. So the suddenness,
Speaker 1: the abruptness of it, is also a factor that is
Speaker 1: a byproduct of the widespread shutdowns which we had not
Speaker 1: seen before. Certainly the global nature of it, and as
Speaker 1: highlights the speed point bursting out across the whole world,
Speaker 1: the first global recession, the crisis really since the Great Depression,
Speaker 1: because the two thousand made was the rich countries and
Speaker 1: not the purchased markets had a good crisis in two
Speaker 1: thousand eight, and they're not going to this time, regardless
Speaker 1: of how the virus hits them and the policy response.
Speaker 1: Think about China. Can you imagine if this had hit
Speaker 1: fifty years ago? Can you imagine trying having the state
Speaker 1: capacity to shut down Hubei Province to feed nearly sixty
Speaker 1: million people, give them food and water, and concentrate medical attention.
Speaker 1: So there's a policy option that we have, and I
Speaker 1: think most countries have felt it's the choice that had
Speaker 1: to be taken to try to try to protect ourselves.
Speaker 1: How degrade the policy responses? What do you what do
Speaker 1: you make of them? Um? No, if I think the
Speaker 1: policy response has been massive and called for that absolutely necessary.
Speaker 1: You can quibble between the European style sort of try
Speaker 1: to preserve firms and workers and their current jobs, the
Speaker 1: US version, which is to try to address it as
Speaker 1: a natural catastrophe and try to subsidize people but allow
Speaker 1: higher unemployment. I think they're actually not that different. If
Speaker 1: this thing persists, then a lot of those European firms
Speaker 1: will end up having to let their workers go when
Speaker 1: the crisis passes. If it doesn't, a lot of the
Speaker 1: U S firms will end up rehiring their workers. But
Speaker 1: certainly the aggressive crisis response reflects lessons learned in two
Speaker 1: thousand and eight and common does that aggressive policy? Does
Speaker 1: that explain the markets? Stock markets particularly of You wouldn't
Speaker 1: necessarily if I'd shown you the chart at the start
Speaker 1: of the year, you would have wondered what the collapse was,
Speaker 1: but you wouldn't necessarily have You wouldn't necessarily We've been
Speaker 1: hit by a global pandemic. If you looked at look
Speaker 1: at Wall Street, what's behind? What's that break between the markets?
Speaker 1: And UM? I would say, partially, partially, how much of
Speaker 1: the resilience, if you will, if not a brilliance in
Speaker 1: the market is is policy driven? I think a lot
Speaker 1: of it is. UH. That you know, UH, let's take
Speaker 1: monetary policy. UM. Before the pandemic, the US unemployment was
Speaker 1: at its lowest level since the nineteen sixties. By most metrics,
Speaker 1: the US was at or near full employment, which very plausible.
Speaker 1: That you know, your path was one towards rising rates UM.
Speaker 1: Clearly that has been completely replaced by a view that
Speaker 1: rates are zero now that that they've come down, UH,
Speaker 1: and that they're gonna stay low for a very long, long,
Speaker 1: indeterminate period of time with a lot of liquidity or
Speaker 1: from from the Federal Reserve. So that's a big game
Speaker 1: changer for you know, discount discounting futures, you know, stream
Speaker 1: of dividends and and and and so on um for
Speaker 1: the markets. Let me just point out another issue in
Speaker 1: terms of the policy response. The policy response, again, the
Speaker 1: FED has established a lot of facilities that are now
Speaker 1: providing support not only to corporates, but to corporates on
Speaker 1: a much lower grade in terms of their ratings, you know,
Speaker 1: the fallen angels, the higher risk that the you know,
Speaker 1: the the kind of risk gear corporates than certainly was
Speaker 1: even envisioned at the outset of the pandemic um And
Speaker 1: I think what this does is the market is really
Speaker 1: counting on a lot of rescues. Of course, the FED
Speaker 1: lower forever is part of part of it, but I
Speaker 1: also feel the markets have a very sanguine view of
Speaker 1: the virus and what's going to happen and how quickly
Speaker 1: we can return to normal, or maybe how quickly we
Speaker 1: will choose to return to whatever normal is, how quickly
Speaker 1: the lockdowns will will lend um and it seems very
Speaker 1: uncertain to me. The virologist and epidemiologists I respect, you know,
Speaker 1: always start out their comments by saying, you know, we're
Speaker 1: in the second inning where we might, if we're lucky,
Speaker 1: be at the end of the beginning of the epidemic.
Speaker 1: That sort of thing, and and and that rings true.
Speaker 1: I don't know how we're coming back to two thousand
Speaker 1: nineteen levels in any near term. The ECB gave a
Speaker 1: I think a three year projection that'd be great. That
Speaker 1: seems quite optimistic to me. And I thin the true
Speaker 1: fall and g d p U economic historians will debate
Speaker 1: for years. It's probably much larger than a measured fall.
Speaker 1: It's not just the people not working, but what's the
Speaker 1: efficiency of the people that are working. And then the
Speaker 1: monetary response is done hand in hand with the Treasury.
Speaker 1: This this level of UH guaranteeing private debt and municible
Speaker 1: debt that Treasury owns, the Federal Reserve, and it's completely uh,
Speaker 1: you know, working together on this. But it's banking on
Speaker 1: this V shaped recovery, something pretty good happening. If you're
Speaker 1: you can't keep expanding all the credits that you're guaranteeing
Speaker 1: in the economy. And definitely if a lot of the
Speaker 1: firms aren't aren't aren't coming back, So it remains to
Speaker 1: be seen what they will do going forward. I think
Speaker 1: we're going to see a lot of work for bankruptcy lawyers,
Speaker 1: and you know, going across a lot of industries, we
Speaker 1: see one retailer after another entering Chapter eleven already, and
Speaker 1: that's probably just the beginning. The numbers are gonna look
Speaker 1: spectacularly great in some months. Simply because you're coming out
Speaker 1: from a base that was pretty devastated. That doesn't imply
Speaker 1: that per capita incomes are going to go back in
Speaker 1: V shape two what they were before. You know, it's
Speaker 1: very critical. Characteristic of all of this shock has been
Speaker 1: that it has disrupted supply chains globally, big time um trade.
Speaker 1: You know, if you look at the w t O projections,
Speaker 1: they tell you, well, it can decline anywhere between thirteen
Speaker 1: and thirty two. So I don't think you just break
Speaker 1: and re recreate supply chains, you know, at the drop
Speaker 1: of a hat. I think that there is a lot
Speaker 1: of geographical changes that are that are being necessitated because
Speaker 1: if the economic downturn has been synchronous, the disease itself
Speaker 1: hasn't been synchronous. It started in China, hate Korea, hate
Speaker 1: parts of Asia, moved to Europe, moved to the US.
Speaker 1: So the idea that the disease is going to be
Speaker 1: dealt with globally in such a synchronous and rapid way
Speaker 1: that it allowed for V shape, I find that dubious.
Speaker 1: The second part that I find the V shaped story
Speaker 1: dubious is what Ken was already alluding to the chapter elevens.
Speaker 1: You know, we are all living in economies that have
Speaker 1: a huge important service component. How do we know which
Speaker 1: retailers are going to come back, which restaurants are going
Speaker 1: to come back? Uh, cinemas and and so when this
Speaker 1: crisis began to morph from a pandemic, from a medical
Speaker 1: problem into a financial crisis, then I think the roots
Speaker 1: for it having more longer lived effects we're set, And
Speaker 1: I think those two factors are going to make for
Speaker 1: more protracted recovery. Yes, I go back to the e
Speaker 1: CBS forecast for three years uh to go back to
Speaker 1: the same the same income as the beginning, which is
Speaker 1: what Carmen and I use is the definition of recovery
Speaker 1: in our book that, by the way, is really not
Speaker 1: the Wall Street definition of recovery, where recovery is going
Speaker 1: back to where the trend was which is typical in
Speaker 1: a recession. We use a much more modest for inever povery.
Speaker 1: And still with post war financial crises before two thousand
Speaker 1: eight nine the average was four years, and for the
Speaker 1: Great Depression ten years. And there are many ways this
Speaker 1: feels more like the Great Depression when you look at
Speaker 1: the de globalization which seems so likely to follow this,
Speaker 1: Whether say in the United States the Republicans are in
Speaker 1: power the Democrats, that seems like one thing they have
Speaker 1: a consensus about getting back to something. We wrote gosh
Speaker 1: and late late March. I think we were very early
Speaker 1: in on this point that you probably need a debt
Speaker 1: moratorium that's fairly widespread for emerging markets and developing economies.
Speaker 1: And an analogy the the I m f H were
Speaker 1: Chapter eleven. Bankruptcy is very good at dealing with a
Speaker 1: couple of countries or a couple of firms at a time.
Speaker 1: But just the way the hospitals can't handle all the
Speaker 1: COVID nineteen patients showing up in the same week, neither
Speaker 1: can our bankruptcy system. Neither can the international financial institutions.
Speaker 1: So there are going to be phenomenal frictions coming out
Speaker 1: of this wave of bankruptcies to faults again. If we
Speaker 1: can get a super v recovery, it'll all be forgotten.
Speaker 1: The policymakers will look like geniuses. Uh not. I'm not
Speaker 1: saying they've done anything but a good job that I
Speaker 1: think they have done a good job. But you know
Speaker 1: they'll be you know, have saved the day. But it's
Speaker 1: it's probably that's probably not going to happen. It's probably
Speaker 1: going to be at best you shape recovery. And I
Speaker 1: don't know how long it's going to take us to
Speaker 1: get back to the two thousand nineteen per capital g
Speaker 1: d P I. I would say, looking at it now,
Speaker 1: certainly world, you know, for the world, five years would
Speaker 1: seem like a good outcome out of this. Um. What
Speaker 1: about the debts in the in the major com you
Speaker 1: mentioned Italy but also elsewhere. At the moment, there's definitely
Speaker 1: that mentality that this is a price worth paying. How
Speaker 1: worried are you about the debts in the longer term? Yeah,
Speaker 1: it's not a free lunch we had, but we had
Speaker 1: there's no choice. The whole point of having a strong
Speaker 1: balance sheet, of being able to borrow freely, is to
Speaker 1: be able to do it with abandoned in situations like this.
Speaker 1: This is like I wore, naturally staggering, natural catastrophe, whatever
Speaker 1: you want to call it. There's no debate that they
Speaker 1: should be doing all they can to try to maintain
Speaker 1: political and social cohesion to maintain economies. But what lies
Speaker 1: at the other end. I go back to my Wizard
Speaker 1: of oz an analogy, UH with Darthy up there. The
Speaker 1: financial markets think there's no chance interest rates will go up,
Speaker 1: there's no chance inflation will go up if they're right
Speaker 1: in that last five years. And by the way, if
Speaker 1: another shoe doesn't drop, if we you know, don't have
Speaker 1: another global problem in the meantime, I mean, it'll be fine,
Speaker 1: but we could have costs from this. We're talking about
Speaker 1: economy shrinking by and per year, and those are just
Speaker 1: staggering compared to the depth burden costs, whatever they are.
Speaker 1: So you know, certainly we would strongly endorse doing what
Speaker 1: they're doing. But then the summer selling it as a
Speaker 1: free lunch, that's stupefyingly naive. Early on, you a talking
Speaker 1: about inflation. I think there's a projects into column. Those
Speaker 1: still your views that that could be an inflation first
Speaker 1: the end of this, well, I don't think where we
Speaker 1: we don't know where will come out. So the probabilities
Speaker 1: for the foreseeable future will have deflation, because you know,
Speaker 1: that's where we are. But at the end of this,
Speaker 1: I think we're going to have experience an extremely negative
Speaker 1: productivity shock with declobalization. Even if the vaccine magically appears,
Speaker 1: the deglobalization will be the last the deglobalization and probably
Speaker 1: the political social political ramifications, which may be good overall
Speaker 1: for society, but in terms of growth and productivity, they
Speaker 1: will be lasting negative shocks, and demand may come back
Speaker 1: and and many of the forces that have led to
Speaker 1: very low inflation may have gone into reverse either because
Speaker 1: of declobalization, or workers will strengthen their rights and unions
Speaker 1: will be kind of stronger, which it becomes possible in
Speaker 1: a more deglobalized world. It's easier to rebuild union strength
Speaker 1: when you're not competing with foreign terms. And of course
Speaker 1: inflation is a is a possibility, but the market for
Speaker 1: a season like essentially zero chance of ever having inflation again.
Speaker 1: And I think that's uh, you know, it was very wrong.
Speaker 1: Thanks for listening to Stephanomics. We'll be back next week
Speaker 1: with more on how COVID nineteen is turning the global
Speaker 1: economy upside down. Remember you can always find us on
Speaker 1: the Bloomberg Terminal, website, app or wherever you get your podcasts,
Speaker 1: and for more news and analysis from Bloomberg Economics, follow
Speaker 1: as Economics on Twitter. You can also find me on
Speaker 1: at my Stephanomics. This episode was produced by Magnus Hendrickson.
Speaker 1: The interview you just heard was conducted by Simon Kennedy,
Speaker 1: and the published version of the transcript im Bomberg Markets
Speaker 1: Magazine was edited by Stryker Maguire. Special thanks to Jeff Green,
Speaker 1: Steve Matthews, Mark Scofield, Carmen Reinhardt, and Ken Rogoff. Scott
Speaker 1: Lanman is the executive producer of Stephanomics and the head
Speaker 1: of Bloomberg Podcast is Francesca Levy.