Speaker 1: Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keane
Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Paul
Speaker 1: Donovan joins US with UBS, their global chief economists and
Speaker 1: just a wonderful perspective on the Pacific rim. The upside
Speaker 1: surprise Paul Donovan has been China. I want to go
Speaker 1: back to the UBS heritage of Jonathan Anderson from years
Speaker 1: ago in the U b S expertise. I don't want
Speaker 1: to know about Hong Kong, or Shanghai or Beijing. Paul Donovan,
Speaker 1: What does U b SC and the rest of China
Speaker 1: we never speak of. So the Chinese economy we sold
Speaker 1: this morning with the industrial production data, production is kicking,
Speaker 1: my kid. China is is a very interesting comparison to
Speaker 1: what we're seeing in the US and in Europe because
Speaker 1: the US and Europe what's happened is consumers saved money
Speaker 1: during lockdown, and then as lockdowns have ended, they've started
Speaker 1: to spend it because that's what consumers do. But in China,
Speaker 1: the consumer was less able to save money, so the
Speaker 1: domestic economy was sort of a little bit on the
Speaker 1: back foot as it came out of lockdown. Unless you
Speaker 1: were middle class, you didn't really have savings to spend.
Speaker 1: But what's now happening, of course, is that we're seeing
Speaker 1: global consumer demand picking up and that's working its way
Speaker 1: up the supply chains, and we're seeing these better production
Speaker 1: numbers coming out of China beating expectations. I don't have
Speaker 1: a lot of faith at the expectations particularly accurate. The
Speaker 1: range of forecast is very wide, but certainly a decent
Speaker 1: number coming out reflecting that improvement in global activity. Okay,
Speaker 1: you can extrapolate it to Australia, and John Farrell was
Speaker 1: more to the house a long Australia here into the
Speaker 1: end of the year. Can you extrapolate it to the
Speaker 1: rest of the world. Can you extrampolate Chinese better over
Speaker 1: to America and over to the continent of Europe. I
Speaker 1: think it has to be taken a looking at both sides.
Speaker 1: So China is a linking global supply chains. It's now
Speaker 1: the world's largest manufacturer UM, It's a key part of
Speaker 1: global supply chains. So if we're seeing better production in China,
Speaker 1: if we're seeing improvements in the export numbers, that is
Speaker 1: telling us something about global levels of demand. And we're
Speaker 1: seeing it also come through in terms of proper indications
Speaker 1: about confidence in the economy. You're not these useless surveys,
Speaker 1: but detailed behavior of consumers, of individuals in Europe and
Speaker 1: the US is pointing towards a better economic outlook. And
Speaker 1: this is always the case. Markets are always always too
Speaker 1: pessimistic about recovery from a crisis. This was no different
Speaker 1: to previous crisis. The markets have failed to understand the
Speaker 1: speed of the bounce back, the resilience of consumers and
Speaker 1: businesses in the face of a challenge, Paul, is there
Speaker 1: anything unique about the willingness of many people to still
Speaker 1: under appreciate this rebound in this economy? So, I think
Speaker 1: we've got some complications here. Um, So we've got problems
Speaker 1: with the data itself. I mean, the data quality has
Speaker 1: been deteriorating for several years, but it's it's been really
Speaker 1: really bad during this crisis, and we're now seeing the
Speaker 1: inconsistencies in the data. So the fact that different countries
Speaker 1: use different methods to calculate GDP. Your only economists get
Speaker 1: excited about this most of the time. But now it's
Speaker 1: leading to these absolute a normalies in the data when
Speaker 1: you do international comparisons. So that's throwing up a lot
Speaker 1: of problems. But also, of course what's happening throughout all
Speaker 1: of this is the pandemic has accelerated the structural changes
Speaker 1: of the Fourth Industrial Revolution and also the environmental credit crunch.
Speaker 1: Both of those big, big structural issues have been sped
Speaker 1: up throughout this and that means of course that we
Speaker 1: may be failing to capture some of what's going on
Speaker 1: in the economy. So to give just one example, we
Speaker 1: have seen an absolute search in business creation in America,
Speaker 1: in the UK and France, in Japan, in Singapore, huge
Speaker 1: huge increase in business creation since lockdowns ended. That's not
Speaker 1: likely to be properly reflected in the data. You know,
Speaker 1: some of the entrepreneurship is just going to be missed
Speaker 1: because the satisticians aren't going to be looking for it.
Speaker 1: So do you think that right now, going forward, we're
Speaker 1: going to see ongoing improvement in the data, or do
Speaker 1: you think that with the pullback in fiscal support we'll
Speaker 1: see a PLATEAUA I mean, do you think that right
Speaker 1: now people are still getting it wrong and expecting a
Speaker 1: cool down in the recovery, So there will be a
Speaker 1: call down. I mean, let's be realistic. What's what's really
Speaker 1: fueling this is the fact that most people accumulated about
Speaker 1: a month's worth of income in savings while so we're
Speaker 1: stuck in lockdown, unable to do anything. And of course,
Speaker 1: as soon as lockdown ends, you know, you've just spent
Speaker 1: you know whatever it is, two months stuck at home
Speaker 1: with you, your your close family, as as companions. You're
Speaker 1: desperate to get out and get away from them, and
Speaker 1: they go out and spend money. And that's what's happening.
Speaker 1: And that's the surge of the third quarter. Now that's
Speaker 1: not gonna last. It's like a tax rebate. Within six months,
Speaker 1: this money is going to be gone and with them
Speaker 1: back into a more normal pattern of growth. But I
Speaker 1: think that that will still be fairly resilient because the
Speaker 1: labor market is bouncing back more strongly, and we do
Speaker 1: get fiscal support, particularly in Europe obviously, but also potentially
Speaker 1: in the States next year. The other thing to remember is,
Speaker 1: of course, that we've been seeing an awful lot of
Speaker 1: upward revisions to numbers. So once business got a bit
Speaker 1: back to normal, we saw statisticians being able to go
Speaker 1: out and collect data a bit more reliably. And so
Speaker 1: in both Europe and in the United States, there's been
Speaker 1: a lot of upward revisions. Sort of. The the Revision Index,
Speaker 1: which looks at revising data, has ticking up since lockdown ended,
Speaker 1: and that's also telling us that actually things weren't quite
Speaker 1: as bad as we thought in the second quarter. The
Speaker 1: other aspect of this, and you wrote an essay on
Speaker 1: this I thought was fascinating, was that you believe homeworking
Speaker 1: actually boosts growth. Can you talk a little bit about that,
Speaker 1: especially if that growth may not be in the big
Speaker 1: cities that traditionally were the economic engines. So I think
Speaker 1: the first point about this is this was going to
Speaker 1: be happening anyway. The technological changes that the changes of
Speaker 1: the Fourth Industrial Revolution fascinating from an economic point of view,
Speaker 1: in many ways, reverses the social shifts of the First
Speaker 1: Industrial Revolution. You know, we're leaving the cities and going
Speaker 1: back to rural areas or out of town. But what
Speaker 1: that does, of course, is it changes patterns, It changes
Speaker 1: work time. So I'm not traveling to work on London underground,
Speaker 1: spending half an hour to and from work every day,
Speaker 1: stuck on the Central Line. My daily community if I'm
Speaker 1: working here from home, is me stumbling five yards from
Speaker 1: my bedroom to my home office. That's it. So I'm
Speaker 1: saving myself an hour a day. And what am I
Speaker 1: doing with that? Well, you know, I'm looking for entertainment.
Speaker 1: I'm looking for leisure, and I may spend money in
Speaker 1: doing that. And this, of course has been the progression
Speaker 1: throughout the twentieth century. Lord Caine's very famously wrote that
Speaker 1: we'd all be working fifteen our days by the year.
Speaker 1: I'm sure that's that's true for Tom, but we're average
Speaker 1: economist is not working a fifteen day. We're we're really
Speaker 1: having to push the hours. It so Kings was looking
Speaker 1: at this big, big drop in terms of the amount
Speaker 1: of time that people were spending at work, and it happened.
Speaker 1: But it happened because we spent less time doing chores
Speaker 1: outside of work, less time doing housework, less time commuting,
Speaker 1: and we have more leisure. That's what's going to come
Speaker 1: out of this. I think homeworking is not something to
Speaker 1: be shunned. It changes the structured the economy, but it
Speaker 1: changes it in a good way, which gives people more
Speaker 1: free time, and it gives them the opportunity to spend
Speaker 1: money in different ways and to use their standard of John.
Speaker 1: It's just amazing that Paul Donovan, in this pandemic is
Speaker 1: graduated from the muhammadal Area pile on Tom school, he says,
Speaker 1: he pretending it. There's a seventy Just tell everyone go on, go,
Speaker 1: I mean to go, Okay, I'll go. Paul Donovan, what's
Speaker 1: so important here in the time we're in and there's
Speaker 1: such a respect for the holistic nature of your research reports?
Speaker 1: What do we need to focus on on global trade?
Speaker 1: I mean Stigletts talks about the globalization and our discontent
Speaker 1: and all that. What's the thing forward on world trade?
Speaker 1: We need to focus on. So globalization, the rise of
Speaker 1: global trade, of SHRIF of GDP, that's over. That's done, um,
Speaker 1: because the globalization story of the last twenty five years
Speaker 1: was about increasingly complex, increasingly long supply chains and that's
Speaker 1: no longer desirable. And again, this is a change. It's
Speaker 1: not being brought about by the pandemic. It's being accelerated
Speaker 1: by the pandemic, and we're now i think, going to
Speaker 1: see a fairly steady decline in Global Trader of Share GDP.
Speaker 1: But there are two possible ways this happened, and they
Speaker 1: have very very different implications. If we go down the
Speaker 1: route of trade taxes tariffs, that is not good news
Speaker 1: because that is telling companies, right, you've chosen the best
Speaker 1: possible location for your production. We're going to force you
Speaker 1: to go to somewhere that second best. No company wants
Speaker 1: to go to second best. That's less efficient. That's going
Speaker 1: to lead to either squeezed profits or higher prices of
Speaker 1: the consumer, or some combination. But if we see automation, robotics,
Speaker 1: digitization coming in, then what that is going to be
Speaker 1: doing is leading to localization of production. You start producing
Speaker 1: close to the consumer because it is efficient to do so,
Speaker 1: and that's going to be a very very different situation
Speaker 1: because that means lower prices for the consumer, or higher
Speaker 1: profits for the producer, or some combination of the two.
Speaker 1: So what we've got to focus on is look globalization
Speaker 1: as we've recorded it. It's going into reverse. There is
Speaker 1: a negative story around trade taxes and autarchy and all
Speaker 1: that sort of stuff, but there's also a positive story
Speaker 1: about it's just more efficient to be producing closer to
Speaker 1: the consumer because of the technological changes, and so working
Speaker 1: out which of those two options is predominant that's going
Speaker 1: to be key. The shortest nine minute interview we've ever done, Paul,
Speaker 1: it just went too quickly. We're gonna do it much
Speaker 1: much along the next time, Paul Donovan Greater to catch up.
Speaker 1: UBS global chief economists to speak of the American economy.
Speaker 1: Lindsay p Exit joins us right now with Stephile. Their
Speaker 1: chief economists Lindsey John Ferroll brought up twenty minutes ago
Speaker 1: the idea of the all in United Kingdom unemployment rate?
Speaker 1: What is the all in US unemployment rate? Is it
Speaker 1: double digit? It could be right now. Of course, we
Speaker 1: know that the civilian rate, the rate reported from the BLS,
Speaker 1: has come down to eight point four, and we do
Speaker 1: know that there has been vast improvement from that peak
Speaker 1: that we saw early on in the pandemic, but we
Speaker 1: don't know if that's fully capturing what's been happening out
Speaker 1: in the labor market. As you said, the true unemployment
Speaker 1: rate is much likely to be closer to that double
Speaker 1: digit range. But as we wait for the Fed's decision
Speaker 1: later this week tomorrow exactly. We do think that the
Speaker 1: FED is going to emphasize that improvement that we've seen
Speaker 1: in the labor market, that further growth that we've seen
Speaker 1: in terms of hiring, that further decline in the unemployment rate,
Speaker 1: as well as the decline in jobless claims. So the
Speaker 1: FEED is going to be focusing on the improvement that
Speaker 1: we've seen, as opplosed to some of that that more
Speaker 1: tertiary or secondary numbers that suggest a higher level of
Speaker 1: joblessness in the US labor market. And then they they're
Speaker 1: going to get to the November I FED meeting, which
Speaker 1: I assume was going to be a virtually silent meeting
Speaker 1: just with respect to the American election. We may not
Speaker 1: even have results by then. Lindsey, I want you to
Speaker 1: take us out to December and into two thousand twenty one.
Speaker 1: What's the economic run rate right now? Right now, the
Speaker 1: economy does seem to be improving. We are seeing improvement,
Speaker 1: as I mentioned, in the labor market, in the housing market,
Speaker 1: we've seen improvement in the manufacturing numbers. So it does
Speaker 1: suggest that the U s economy is rebounding from that
Speaker 1: extremely low level that we saw in the second quarter,
Speaker 1: But I hesitate to say that we're in the position
Speaker 1: for a v shaped recovery. As the FED is pointed out,
Speaker 1: COVID remains the number one risk to the outlook, so
Speaker 1: we can't get complacent at this point. Yet. There still
Speaker 1: is a tremendous amount of risk that the virus poses
Speaker 1: to the economy, that it poses to the outlook, and
Speaker 1: if we need to, we should remain very vigilant in
Speaker 1: terms of the safety protocols, in terms of wearing masks,
Speaker 1: social distancing, in order to keep the economy open and
Speaker 1: continuing to move towards that point of full employment. But
Speaker 1: I don't think we're there yet, and we do run
Speaker 1: the risk of a second wave of cases, a second
Speaker 1: round of layoffs, which could keep the economy very anemic
Speaker 1: going into one And this is exactly why the FED
Speaker 1: has said that they're not even thinking about thinking about
Speaker 1: raising rates at this point. Interest rates are likely to
Speaker 1: stay in this very near zero range, this very low range,
Speaker 1: for the foreseeable future, for several years to come. Well, NSI,
Speaker 1: let's talk about how they manage that message tomorrow then,
Speaker 1: because tomorrow, surely the unemployment forecast has to get an
Speaker 1: upgrade given where unemployment has come down to absolutely that
Speaker 1: we do get that summary of economic projections, and the
Speaker 1: unemployment rate is likely to be lowered in terms of
Speaker 1: the FEDS forecast reflecting the improvement that we have seen
Speaker 1: in the labor market. I wouldn't expect much change around
Speaker 1: the inflation figure. I wouldn't expect much more optimism to
Speaker 1: be priced in terms of their GDP forecast, But you're
Speaker 1: right the unemployment rate their forecast is likely to come
Speaker 1: down again reflecting that improvement. But I think it's more
Speaker 1: important what we hear from the chairman during the press conference,
Speaker 1: and he's going to be very careful to walk that
Speaker 1: line between patting the FED on the back, saying the
Speaker 1: swift and decisive action that we took helped stem a
Speaker 1: further downturn, so the the conditions that we saw in
Speaker 1: the second quarter could have been much more dire, and
Speaker 1: again balancing that against the risk as I mentioned, the
Speaker 1: virus still remains out there. Businesses have been able to
Speaker 1: stem that bridge uh in terms of staying open for
Speaker 1: several months. But if we don't see a meaningful way
Speaker 1: of separating the healthy from the sick, or if we
Speaker 1: don't see additional fiscal stimulus to help bridge that gap
Speaker 1: for businesses and the American families. It's going to be
Speaker 1: very difficult to keep the U. S economy on this
Speaker 1: pathway back to a more prosperous and sustainable growth level. Lindsay,
Speaker 1: there seems to be a divergence between the C suite
Speaker 1: in America and economists. The C suite saying we're seeing
Speaker 1: petter than expected business performance across the board, and you
Speaker 1: have economists saying, well, you do now, but as this
Speaker 1: fiscal support runs off, you will see it lose a
Speaker 1: lot of luster. Have economists lost credibility in a meaningful
Speaker 1: way or are are they looking at something that perhaps
Speaker 1: the C suite isn't seeing? I think right now, I
Speaker 1: think most of management, most of corporate America is focused
Speaker 1: on the near term outlook, and they're focused on the
Speaker 1: minimal improvement that we have seen from those low levels
Speaker 1: at the onset of the pandemic. I think economists are
Speaker 1: taking more of a longer term picture, a longer term
Speaker 1: view of where the economy is headed. Remember, the economy
Speaker 1: was already losing momentum as we were heading into We
Speaker 1: had slowed from a three percent growth rate down to
Speaker 1: two percent, Yet corporate America was still elated with the
Speaker 1: prospects of continuing the expansion. So economists were already recognizing
Speaker 1: that loss of momentum. And I think that loss of
Speaker 1: momentum has carried through and kept the economy in this
Speaker 1: extremely fragile position. Then you layer on this pandemic and
Speaker 1: it's going to be increasingly difficult for us to get
Speaker 1: back to a more sustainable organ ne level of growth.
Speaker 1: So it could also be that corporate America has become
Speaker 1: complacent with this unprecedented support from monetary and fiscal policies. Okay,
Speaker 1: so we don't get another fiscal round of support. Where
Speaker 1: do you see the year ending with respect to the
Speaker 1: US unemployment rate. I think that it's going to remain
Speaker 1: elevated in this eight to nine percent level. I don't
Speaker 1: think we've pushed back towards that double digit level that
Speaker 1: we saw again at the onset of the pandemic. But
Speaker 1: the labor market still is under an extreme amount of pressure. Again,
Speaker 1: businesses have been able to recall some workers, we have
Speaker 1: been able to see some new payrolls created. But if
Speaker 1: we don't see additional fiscal stimas if we don't see
Speaker 1: additional federal funding. If we don't see that vaccine, it's
Speaker 1: going to be difficult to continue these conditions that have
Speaker 1: allowed businesses to take on those new hires or to
Speaker 1: rehire some of those workers that have been pushed to
Speaker 1: the sideline. So we could actually see a second wave
Speaker 1: of layoffs or furloughs towards the end of the year,
Speaker 1: which would keep that unemployment rate artificially high in that
Speaker 1: eight to nine that range Lindsey Pa. Yesterday, William Gross
Speaker 1: talked about a six trillion dollar need, a six trillion
Speaker 1: dollar deficit call others have you know come up about
Speaker 1: that number as well. We're talking one and two trillion.
Speaker 1: Is an arguing point. Are we able to go out
Speaker 1: and find three or four or five or six trillion
Speaker 1: of new debt to fold under the American balance sheet?
Speaker 1: I think we could. The question is do we want
Speaker 1: to We have to be very careful. We want to
Speaker 1: make sure that we're finding enough stimulus in the near
Speaker 1: term to get the economy back on track, but we
Speaker 1: also don't want to create additional barriers on the back
Speaker 1: end when the economy does begin to recover. Are we
Speaker 1: are we struggling under this insurmountable amount of debt that
Speaker 1: creates future barriers for growth and future generation. So I
Speaker 1: do think it's a it's a delicate balance. We want
Speaker 1: to make sure again that we get the economy back
Speaker 1: on track, but not just in the short term, that
Speaker 1: we're putting it on a longer term ur tect jury
Speaker 1: towards a higher level of prosperity. Lindsay half delicate is
Speaker 1: that balance right now and asked to no seriousness with
Speaker 1: ten yere yields at the moment at zero point six.
Speaker 1: I think it's extremely delicate. As we've seen the deficit,
Speaker 1: the total debt held by the American public at record levels.
Speaker 1: In fact, debt to GDP is the highest level that
Speaker 1: we've seen in post World War two history. So we
Speaker 1: are on an unsustainable trajectory in terms of continuing to
Speaker 1: load debt onto the balance sheet. That being said, there's
Speaker 1: not much we can do during these unprecedented times. We
Speaker 1: have to take on additional debt, but we don't need
Speaker 1: to be irresponsible about it. We want to make sure
Speaker 1: that the programs that the federal government is putting into
Speaker 1: into play is going to those that is going to
Speaker 1: the businesses that need it to to continue to bridge
Speaker 1: this gap. We don't want fraud or we don't want
Speaker 1: abuse of these programs. That's very important at this point,
Speaker 1: and I think the American public has a much lower
Speaker 1: tolerance at this point for any sort of lot around
Speaker 1: those programs, given what we did see with the first
Speaker 1: round in the pp prief program as well. Oh absolutely,
Speaker 1: I think most people would agree with that sentiment. Lindsay,
Speaker 1: great to catch up, Lindsay, p x of that A
Speaker 1: staffel Robert for a few seconds with Jones Day. He's
Speaker 1: head of mergers and acquisitions, but that barely describes his
Speaker 1: decades as many decades experience in all different shades of
Speaker 1: M and A. We're thrilled he could join us again above.
Speaker 1: It's been way, way, way too long since you've been on.
Speaker 1: What's different this time around? In the many billions of
Speaker 1: the M and A Derby, Well, the biggest difference I
Speaker 1: think is obviously the markets have been fabulous in many respects.
Speaker 1: Everybody focuses on the equity capital markets, but the debt
Speaker 1: markets are just mind blowing way supportive. Now, you know,
Speaker 1: the others on your show always talk about out how
Speaker 1: that supports the equity markets too. But it really is
Speaker 1: is A is a great bone for M and A.
Speaker 1: Um And you know, if you if you stand back
Speaker 1: over those decades, M and A generally tracks what the
Speaker 1: equity markets, uh do um and I think we're starting
Speaker 1: to see that now. A lot of people said, well,
Speaker 1: yesterday is a one off thing. TikTok is political, not
Speaker 1: an economic event. Um. Uh. The soft Bank deal, it
Speaker 1: was kind of a for sale because of other issues
Speaker 1: that that the soft Bank has. Well, yeah, that's true,
Speaker 1: but there was a lot of other stuff. All the
Speaker 1: headline deals got of course the headlines, but there were
Speaker 1: many other deals or including including a deal for Verizon,
Speaker 1: the New York Mets. They are all sorts of stuff.
Speaker 1: So it's it's much more active, no question about it.
Speaker 1: Well that's great. Are we at the point Robert Busk
Speaker 1: where we're seeing transactions so the other guy doesn't get
Speaker 1: the company, like Steve Cohen goes out and takes some
Speaker 1: metso Hilarion can't buy them. I mean, are we at
Speaker 1: that point across all of them and A? Well, yes,
Speaker 1: we're at a. M and A is strategic right now.
Speaker 1: There's there's a lot of financial transactions. In fact, I
Speaker 1: at least in my my personal world. It started for
Speaker 1: to pick up again in August with some private equity deals,
Speaker 1: but it's mostly strategic. Um. I don't think that they
Speaker 1: deal probably was not even mentioned yesterday. The Verizon deal. Um,
Speaker 1: And that's a not a huge deal at least by
Speaker 1: comparison to the others. But it was almost seven billion
Speaker 1: and it's and it's uh designed to build out a
Speaker 1: part of the Horizons platform. They don't have the prepaid
Speaker 1: phone prepaid cards. For sure. There are a lot of
Speaker 1: deals that are strategic and looking to buy revenue at
Speaker 1: a time of meager growth. But things have gotten a
Speaker 1: lot more political, and I'm wondering how much TikTok is
Speaker 1: representative of the increase recently politicized m and a backdrop
Speaker 1: versus a sort of idiosyncratic affair. Uh. There's no question
Speaker 1: that nationalism um is a factor. You wouldn't have said
Speaker 1: this before the current administration, but um, it isn't just
Speaker 1: the USUM. And nationalism is a real issue in terms
Speaker 1: of cross border deals, UM, no question about it. Um.
Speaker 1: And how we deal with how we deal with this
Speaker 1: stuff going forward could have an impact whenever a significant
Speaker 1: cross border transaction shows up in the boardroom, you got
Speaker 1: a lot of directors kind of you know, saying, do
Speaker 1: we really want to go through this? Because, um, because
Speaker 1: because it is a factor. Um, the the TikTok deals
Speaker 1: is unique. But but if this is a real issue
Speaker 1: with cross border deals, which of course is most deals
Speaker 1: have some element of that, but bobb, it may may
Speaker 1: well push bigger companies to get with bigger companies. Now,
Speaker 1: another has been regulatory issues antitrust issues down in Washington,
Speaker 1: d C. Around big tech. But let's think about how
Speaker 1: this story is evolving. In Europe. Is a huge conversation
Speaker 1: about whether they should move away and move towards from
Speaker 1: this national champions to European champions that can compete with
Speaker 1: China and compete with heavyweights in the United States as well.
Speaker 1: And I wonder if that's something that grips the United
Speaker 1: States to push forward and allow the big to get
Speaker 1: bicker through acquisitions so they can compete with Chinese companies.
Speaker 1: But how are you thinking about that at the moment? Uh,
Speaker 1: That's that's an interesting topic for a for a frankly
Speaker 1: kind of law school debate. Um. I don't think that
Speaker 1: that that has maybe has more traction in the EU
Speaker 1: because EU obviously, see you it thinks about things in
Speaker 1: those in that way. Um and you know there's been
Speaker 1: rumors again recently about um uh ubs and credit suite,
Speaker 1: you know, and obviously that would raise a regulatory and
Speaker 1: other issues, but maybe that would be something that would
Speaker 1: fall into the that kind of category. The US is different. Um. Yeah,
Speaker 1: politics plays a role, and when the President says something
Speaker 1: about a deal, the staff people who deal with these
Speaker 1: things think about it. But but it really works out
Speaker 1: in a much more, much more granular technical way. In
Speaker 1: the US. It's it's done by people who are largely
Speaker 1: a political I know that's hard to believe in the
Speaker 1: today's world, but there, you know, these are many, many
Speaker 1: cases a career staff people who are trying to do
Speaker 1: the right thing rather than follow the political winds. I'm
Speaker 1: just wander now quickly. That changes. Bob's gribe to catch
Speaker 1: up with you as always, Robert for fu sack that
Speaker 1: Jones Day had of mergers and acquisitions right now a
Speaker 1: two hour conversation was Scott Stringer. He went to the
Speaker 1: Bella Bella Absug School of charm and became a politician
Speaker 1: on the Island of Manhattan. Has been comptroller and now
Speaker 1: we'll run for mayor. There's forty seven things to talk
Speaker 1: to him about, and of course with a Shinali Bassek
Speaker 1: of Bloomberg as well, because there's a lot to talk
Speaker 1: about right now, Scott, I must start with your aspiration
Speaker 1: to be the mayor of this great city. What is
Speaker 1: the stringer plan to drag this city out of this pandemic?
Speaker 1: That is the number one priority is We're going to
Speaker 1: have to do a lot at the same time. One,
Speaker 1: we have to use our financial chops to slowly and
Speaker 1: carefully turn the economy on. I would argue that we
Speaker 1: can't turn the economy on the same way we closed it.
Speaker 1: We have to be more thoughtful about how we invest
Speaker 1: in infrastructure, how we invest in the neighborhoods that have
Speaker 1: just been ripped apart by COVID. So the next mayor
Speaker 1: is going to have to govern in a serious way
Speaker 1: to get this economy going. For me, the priority has
Speaker 1: to be closing budget deficits in a way that start
Speaker 1: as economic development and growth in all of our communities.
Speaker 1: And it's something I'm thinking about not just as a
Speaker 1: mayor candidate, but as control of the chief financial officer
Speaker 1: of the city. Within the liberal ethos of New York City.
Speaker 1: Can you go after the rich people? My view is,
Speaker 1: look cans the state of play. We have a four
Speaker 1: point two billion dollar deficit in our city budget for
Speaker 1: next year. It's top but manageable. So we have to
Speaker 1: use all the levels at our disposed to close that
Speaker 1: budget again. So, for example, we have billions of dollars
Speaker 1: and reserves. We can draw it down on those reserves.
Speaker 1: We have the opportunity to find more efficiencies in our
Speaker 1: agencies that our mayor has never gone through an exercise
Speaker 1: looking to save money year and year out. So there's
Speaker 1: a lot that we can do simply by being good
Speaker 1: uditors and saving hundreds of millions of dollars. I also
Speaker 1: have put on the table, as we should uh people
Speaker 1: of great wealth who did great in the city over
Speaker 1: the last ten twenty years, they should be prepared, if necessary,
Speaker 1: to step up and help out as well. When that happens,
Speaker 1: and we have a balanced approach to balancing the budget,
Speaker 1: then we're on for something, but everyone has to help it.
Speaker 1: I would make the argument that we in New York
Speaker 1: City have watched heroes every single day. This pandemic started
Speaker 1: with us. We saw a frontline workers going uh to
Speaker 1: save lives. They didn't have mass they didn't have protection.
Speaker 1: They went out. Some people lost their lives. And I
Speaker 1: think the business community, you know, come on, step up,
Speaker 1: we need We're all in this together. Do you have
Speaker 1: any concerns about members of the business community, members of
Speaker 1: the wealthier class in New York leaving New York? Should
Speaker 1: you raise taxes on them? Look, we've had a fiscal crisis.
Speaker 1: Uh as far back as the nineteen seventy when I
Speaker 1: was growing up with the fact right my cousin Bell
Speaker 1: abs a brand from Mayor of New York City, people fled.
Speaker 1: I remember they left as a kid. They came back.
Speaker 1: After that eleven people fled, but they came back. After
Speaker 1: two thousand and eight recession, people left, they came back.
Speaker 1: There will be some that will leave. But everyone, at
Speaker 1: the end of the day, wants to be in the
Speaker 1: center of the universe. No disrespect to London. They want
Speaker 1: to live in New York City. The next mayor has
Speaker 1: to continue to build quality of life, economic stability, and
Speaker 1: also reimagine what the city can look like, whether it's
Speaker 1: transportation or helping communities most in need. And once that happens,
Speaker 1: I believe people could come rowing back here. By the way,
Speaker 1: what I would say to people with a lot of money,
Speaker 1: why would you risk your life going to Texas or
Speaker 1: Florida or any place where you have governors who who
Speaker 1: just ignore health health safety laws. You've gotta be nuts
Speaker 1: to go there. Stay where you are in New York
Speaker 1: City is the safest place in the world right now.
Speaker 1: The thing is who we're moving there even before the
Speaker 1: pandemic had even started, and before there was a greater
Speaker 1: push for these taxes. And I'm wondering there are some
Speaker 1: executives in the financial industry now that are talking about
Speaker 1: moving some of their jobs there to potentially lower cost
Speaker 1: locations for their employees. Are you concerned about that? Realistically?
Speaker 1: What can we do to keep the New York City
Speaker 1: jobs in the financial industry? Well, look, we have to
Speaker 1: continue to build a city that attracts business, attracts entrepreneurship.
Speaker 1: We have to invest in tech community. We're starting to
Speaker 1: do that. Life sciences has always been something that has
Speaker 1: been a foundation for a future economy. We've got to
Speaker 1: build our schools and invest in our universities because that's
Speaker 1: why young people from around the world want to come
Speaker 1: and get educated here, and when they come here, they
Speaker 1: always stayed here. So we need a strong plan to
Speaker 1: make sure that we have a robust business community. But
Speaker 1: we also have to remind ourselves and we have six
Speaker 1: and six thousand small businesses in New York City. They
Speaker 1: employ seven hunder thousand people. I don't want to see
Speaker 1: them get squeezed or lost. You know, I do have
Speaker 1: great expectation that Amazon is going to do just by Facebook.
Speaker 1: We'll do just bying for me. We have to double
Speaker 1: down on our small businesses. There's middle businesses that committe
Speaker 1: the difference of people flee or people saying, but we
Speaker 1: need a mayor with the plan and somebody who has
Speaker 1: the strength of management jobs to get a suit these
Speaker 1: very tough times stronger. I don't know if I've missed it.
Speaker 1: I want to go, you know, back to some of
Speaker 1: the costing efficiencies you're talking about. But first, would you
Speaker 1: raise taxes for the wealthy? I said that we should
Speaker 1: put everything on the table. Wealthy people if needed to
Speaker 1: pay a little more to get us through this crisis.
Speaker 1: We have asked our frontline workers to make the ultimate sacrifice.
Speaker 1: Seems reasonable that people who have great wealth, who want
Speaker 1: to help the city where they city in which they
Speaker 1: made money at. I don't understand this notion of throwing
Speaker 1: your hands up and running away. This is the time
Speaker 1: to stay in fight and we build back the city.
Speaker 1: This is the city that made you great. It's the
Speaker 1: greatest city in the world. Let's all do it together,
Speaker 1: and let's all be heroes. As we struggle to get
Speaker 1: our deficits under control and our economy under control. Without
Speaker 1: New York City, the national economy will struggle. We send
Speaker 1: twenty two billion dollars more to our federal government than
Speaker 1: we get back, and all we're asking for it on
Speaker 1: a federal level is the stimulant back. It recognizes the political,
Speaker 1: uh not the political, but certainly the economic might of
Speaker 1: New York City. You're mentioning spending inefficiencies, where how much
Speaker 1: can you save by getting that back in order? I
Speaker 1: I estimate that you could spend You could save up
Speaker 1: to five a million to one billion dollars, depending on
Speaker 1: how deep you go with those efficiencies. Again, these are
Speaker 1: not layoffs. These are not efficiencies that woul hurt essential services.
Speaker 1: We have that much fat in our budget. I've done
Speaker 1: the audits of all the agencies. It exists. We have
Speaker 1: to collect it out and then reinvest that money and
Speaker 1: the things that we need to keep going services in
Speaker 1: our city, but also to close our budget depths. You know,
Speaker 1: here's the deal. In my office, we did a four
Speaker 1: percent cut. I returned millions of dollars from the Controls office,
Speaker 1: gave it to the city general fund without the eve
Speaker 1: been asking. And it's not that hard. You take a scalpel,
Speaker 1: not a sledgehammer, do the hard work of finding those efficiencies,
Speaker 1: and then you bring them into the general fund to
Speaker 1: offset the depths of the Other thing that I've offered
Speaker 1: to do with the mayor is doing the kind of
Speaker 1: refinancings of our city that we have low interest rate.
Speaker 1: I estimate that we can realize four hundred million dollars
Speaker 1: in financing, perhaps another five from a million next year.
Speaker 1: So there's a lot that we can do to stem
Speaker 1: the tide. It's not just raising taxes. That could be
Speaker 1: a component. It's not just borrowing, but that could be
Speaker 1: a component. We have a lot sitting out there to
Speaker 1: get this depsit under control. We just need the political will.
Speaker 1: We just need to get to work and do the savings.
Speaker 1: To what extent are we facing a New York City
Speaker 1: that's like the nineteen seventies. Today, we're not. Uh, what
Speaker 1: I worry about is that we could create our own
Speaker 1: nineteen seventies story if we don't take decisive action. But
Speaker 1: we are not on the edge of bankruptcy. Look, I
Speaker 1: still believe that even with all of the saving measures
Speaker 1: I'm talking about on your show today, Biden will become president.
Speaker 1: We will have a real stimulus package that will help
Speaker 1: government a local and state governments. That's ultimately the way
Speaker 1: we get out of this. But in the meantime, I'm
Speaker 1: New York City will do it share as well. I'm
Speaker 1: sure other little calbuns around the country that Donald Trump
Speaker 1: has given up on his hometown long before the pandemic,
Speaker 1: and he has been the chief architect of literally poisoning
Speaker 1: hundreds of thousands of people, and that era hopefully comes
Speaker 1: to an end. Politically, we just have to hold on
Speaker 1: until help is on the way, and hopefully that will
Speaker 1: come in November. Mr Springer, thank you so much. Scott
Speaker 1: Stringers in New York City, Controller Son and Alibasa, thank
Speaker 1: you so much as well. Thanks for listening to the
Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio