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Speaker 1: This is Bloomberg Wall st Week. What's the state of

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Speaker 1: corporate government? So the deficit is a real issue. The

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Speaker 1: US economy continues to send mixed signals, the financial stories

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Speaker 1: that cheap our world fed action to con concerns over

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Speaker 1: dollar liquidity and encouraging China data the five hundred wealthiest

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Speaker 1: people in the world. Through the eyes of the most

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Speaker 1: influential voices Larry Summers, the former Treasury Secretary, Start CEO,

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Speaker 1: Kevin Johnson sec Chairman j Clayton. Bloomberg wool Street Week

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Speaker 1: with David Weston from Bloomberg Radio. An uncertain economy meets

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Speaker 1: the promise of a vaccine, and markets pretty much take

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Speaker 1: the over on that bet. Welcome to Bloomberg Wall Street Week.

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Speaker 1: I'm David Weston. Twelve years ago, President Obama came to

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Speaker 1: office with a struggling economy and fought to get a

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Speaker 1: stimulus package despite the political hurdles. Austin Gouldsby was a

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Speaker 1: key Obama economic advisor and saw from the inside what

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Speaker 1: it took to get that done. He's now a professor

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Speaker 1: of economics at Chicago's Booth School. There are some parallels

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Speaker 1: in what we're seeing right now with a struggling economy,

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Speaker 1: the need for stimulus. Every seems to agree on some

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Speaker 1: political difficulty in getting it done. How can what advice

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Speaker 1: would you give to the incoming administration about how to

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Speaker 1: do that and how to do it effectively? Well, I

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Speaker 1: do think there are some parallels. If only Mitch McConnell

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Speaker 1: was a thorn in the side of both of those uh,

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Speaker 1: And I think the the thought in two thousand nine,

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Speaker 1: if you remember, was let's do some and if things

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Speaker 1: remain bad, we'll just do more. But Mitch McConnell saw

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Speaker 1: to it that that there would not be more. So

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Speaker 1: I think if you look at the incoming Biden administration,

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Speaker 1: they're probably gonna put some significant focus on try to

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Speaker 1: get as much direct relief as you can, as early

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Speaker 1: as you can, because the economy needs it now. One

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Speaker 1: difference is in two thousand nine, that was traditional stimulus

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Speaker 1: the U the U. S. Government's gonna spend money try

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Speaker 1: to get growth jump started. This is different. I mean,

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Speaker 1: this is a temporary wave that's spread over US and

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Speaker 1: we basically need to figure out a way to hold

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Speaker 1: our breath for six or eight months until the vaccine

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Speaker 1: can be widely available and we can go back to

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Speaker 1: doing what we were doing before. So we're trying. Our

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Speaker 1: goal is to try to prevent permanent damage, which is

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Speaker 1: a little different from stimulus. So I hope that they

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Speaker 1: can agree to do something. I mean, we need the

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Speaker 1: money right now. Well, and that goes to the question

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Speaker 1: that's been pending, frankly since July thirty one. When we

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Speaker 1: when the supplementary unemployment benefits, what a way? The question

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Speaker 1: is do you hold on for the full loaf or

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Speaker 1: take half a loaf? Thus, farther speak of the House,

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Speaker 1: Nancy Pelosi, she's come down off over three point three trillion,

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Speaker 1: but still she's insistent on a lot. Would you advise

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Speaker 1: the incoming president say take what you can get during

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Speaker 1: this lame duck session. I guess I disagree a little

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Speaker 1: bit with the premise of that question. We need as

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Speaker 1: much as we can get, as soon as we can

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Speaker 1: get it. My perception of what's happening is not that

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Speaker 1: the Democrats are holding out. It's that, once again, like

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Speaker 1: in two thousand nine, Mitch McConnell has decided that a

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Speaker 1: deal is not favorable to him before these Georgia runoff elections,

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Speaker 1: and so it's not primarily a dispute about the size

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Speaker 1: of the rescue. It's about one side not wanting there

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Speaker 1: to be a bill at all. So I think if

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Speaker 1: Minuan and Pelosi, we're the only two deciders, they would

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Speaker 1: have been able to reach an agreement. I mean, they

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Speaker 1: were close on on numbers and how long it would last.

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Speaker 1: I just think the politics of this whole thing is

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Speaker 1: is quite complicated in the lame Dock. Well, that that's

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Speaker 1: sobering because, as you suggest, if it's a question of

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Speaker 1: not giving the those side credit for something before those

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Speaker 1: runoff elections, that suggest we're not gonna get anything until

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Speaker 1: into the new year. And I've and I'm quite afraid

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Speaker 1: of that because as you say, look, the unemployment money

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Speaker 1: ran out, the cares agg money through the p p

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Speaker 1: P program that was gonna help give a lifeline to

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Speaker 1: small business, that money's run out, and the Treasury you

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Speaker 1: saw last week said they're gonna withdraw the money for

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Speaker 1: the Fed Main Street lending facility, so that money is

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Speaker 1: not going to be there. So I think this issue

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Speaker 1: that we are we are inches away from having permanent

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Speaker 1: damage that we did not have to have. Um that

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Speaker 1: that that I think everybody should find sobering. So Austin,

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Speaker 1: talk about that permanent damage as you as you put it,

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Speaker 1: because there's a great deal of hope that a vaccine

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Speaker 1: is coming. It's not here yet, it'll probably be at

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Speaker 1: least into the middle of next year before it really

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Speaker 1: is widely disseminated. And so we need a bridge to

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Speaker 1: get there. What kind of damage can happen in the meantime,

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Speaker 1: because some people might say, well, let's just wait, we'll

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Speaker 1: get the vaccine, will be okay in the long run. Yeah,

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Speaker 1: but we need the bridge, like said, and the alternative

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Speaker 1: is falling down in the water. And and there are

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Speaker 1: literally millions of businesses around the country that I would

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Speaker 1: say they're gonna go bankrupt, but as you know, something

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Speaker 1: like nine of business closures never even they can't afford

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Speaker 1: to go through bankruptcy. They just shut the doors and

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Speaker 1: they're never heard from again. And that's a space that

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Speaker 1: we absolutely don't want to have to go down. But

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Speaker 1: right now we're on path to two. In all the

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Speaker 1: states and pretty much all the major cities of the country.

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Speaker 1: They're having revenue shortages like they've never seen, with expenses

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Speaker 1: that are up dramatically because of the pandemic, and they're

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Speaker 1: going to have to start laying off policemen, firefighters, teachers,

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Speaker 1: and a whole bunch of state services that we kind

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Speaker 1: of need at a moment like this. So I think

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Speaker 1: those are the two big speed bumps, uh that I fear.

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Speaker 1: And and then the third is underlying this whole thing.

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Speaker 1: The virus is the boss. And if you cannot get

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Speaker 1: control of the spread of this virus until the middle

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Speaker 1: of next year when the vaccine comes, there's gonna be thousands.

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Speaker 1: There will be thousands of people who die unnecessarily. There

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Speaker 1: will be tens of thousands of people who are hospitalized

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Speaker 1: or suffer permanent health damage permanently unnecessarily. So I really

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Speaker 1: hope that Congress does as big a package of relief

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Speaker 1: as they can, as rapidly as possible, so we don't

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Speaker 1: get people evicted from their homes. I mean, millions of

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Speaker 1: people are gonna get evicted. That was Austin gouls Be,

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Speaker 1: a professor of economics at Chicago's Booth School. Coming up. Oh,

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Speaker 1: PEC plus decides to ease off the brakes, but very

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Speaker 1: gradually we talked with Daniel Jurgin about what difference it

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Speaker 1: will really make. That's next on Wall Street Week on Bloomberg.

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Speaker 1: This is Bloomberg Wall Street Week with David Weston from

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Speaker 1: Bloomberg Radio. We think that energy prices are at equilibrium

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Speaker 1: somewhere in the high team's low twenties. I also think

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Speaker 1: it's a little bit of a hedge. We have seen

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Speaker 1: a very short production in energy prices. By the way,

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Speaker 1: that is stimulative to the economy, So thank you for that.

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Speaker 1: That was Abby Joseph Cohen of Goldman Sachs on Wall

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Speaker 1: Street Week back in two thousand two. Eighteen years later,

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Speaker 1: the price of oil is double what it was back then,

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Speaker 1: and we don't look at low oil prices so much

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Speaker 1: for how they can stimulate the economy as for what

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Speaker 1: they may say about the strength of global demand, particularly

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Speaker 1: in the time of the pandemic. Daniel Jurgen of I

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Speaker 1: H S Market wrote the book on oil, and we

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Speaker 1: asked him whether this week's latest opeque plus agreement to

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Speaker 1: gradually ease production curves is what the market needs. What

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Speaker 1: it does is basically says that the deal is not

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Speaker 1: going to break up. When you have twenty three nations

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Speaker 1: that come together and looking at an abyss a negative

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Speaker 1: oil prices, they make a deal. Everybody sticks together. Other

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Speaker 1: as prices start going up, people start looking at their

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Speaker 1: own interests. Saudi Arabia has one view, Russia another view, UH,

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Speaker 1: the UAE another view. But I think that they could

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Speaker 1: not afford to not have a deal, and there are

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Speaker 1: a lot of digital bilaterals that had to happen to

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Speaker 1: make this happen. But this kind of is a is

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Speaker 1: a gradual one that does ultimately get to what they'd

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Speaker 1: agreed to in terms of bringing production back. But it

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Speaker 1: just shows you, David, how hard it is to bring

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Speaker 1: seven and a half million barrels of oil over a

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Speaker 1: year back into the market exactly, particularly given this market

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Speaker 1: just one part of forgive the expression criminal knowledge here.

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Speaker 1: I'm hearing some people say it was important that Russia

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Speaker 1: was presiding they were chairing the meeting around the Saudi Arabia.

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Speaker 1: Do you put any stock in that. I think so.

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Speaker 1: I think Minister Novak was one of the architects of

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Speaker 1: the whole deal, the Russian and UM, the Saudi coach share, UH,

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Speaker 1: the petroleum minister Ulzi spend Salomon decided he didn't want

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Speaker 1: to be in the chair, and so the your of

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Speaker 1: stability was somebody who's not part of OPEC. But part

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Speaker 1: of the non OPEC group, So it sends a message

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Speaker 1: about the Russians focus on stability. So they had to

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Speaker 1: delay the meeting because there was enough contention they couldn't

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Speaker 1: really get to an agreement quite And the contention, as

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Speaker 1: I understand it, came from a quarter that I didn't appreciate,

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Speaker 1: which is Saudi Arabia and U a E. Usually I

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Speaker 1: think it's Saudi Arabia and Russia. What was the bone

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Speaker 1: of contention between Saudi Arabia and the United Arab Emirates. Yeah,

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Speaker 1: they actually Saudi Arabia and Russia has been the basis

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Speaker 1: of this whole agreement from the beginning. Uh. The U

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Speaker 1: a E has said that they want to increase production.

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Speaker 1: They didn't like the fact that other countries were cheating. Uh,

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Speaker 1: they seemed to want to They've raised questions about what's

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Speaker 1: the framework here. I think they want to monetize their oils.

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Speaker 1: So there was a degree of tension between those two

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Speaker 1: countries in terms of their point of view, which normally

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Speaker 1: they're pretty much in locksteps. So that's the example of

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Speaker 1: the divergence of interest that exists, particularly as prices start

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Speaker 1: going up again in anticipation of vaccine. Well that and

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Speaker 1: that's key. It seems to be as you say, the

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Speaker 1: prices started going up again because I took a look

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Speaker 1: at oil over a period of time of the course

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Speaker 1: of the year, and it has been moving its way

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Speaker 1: back up. Is that really triggering the dispute right now

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Speaker 1: about whether it increased production? Yes, I could. I think

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Speaker 1: when prices start going up the divergence of interests. I mean,

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Speaker 1: the oil price has basically been stuck on what I

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Speaker 1: call the virus alley, and like a lot of other

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Speaker 1: parts of the economy, and in terms of getting out,

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Speaker 1: it's been torn between the one hand, now vaccine optimism

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Speaker 1: and the other hand virus pessimism. But as it's now

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Speaker 1: basically looking towards the springtime, when it's possible that a

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Speaker 1: lot of people in countries where you have had economic

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Speaker 1: shutdown like the United States or Europe, will be back

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Speaker 1: in motor cars and demand will be going up again.

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Speaker 1: Then we spent almost every day looking at the equity markets,

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Speaker 1: at least here in the United States and how they've

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Speaker 1: been going up, and it's generally thought that's because we

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Speaker 1: are anticipating a vaccine sometimes at least towards the middle

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Speaker 1: of next year, does the all market work that way?

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Speaker 1: I mean all this is being affected already by the

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Speaker 1: prospect of a wider distributive vaccine by the middle of

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Speaker 1: absolutely it's signaling it, and that that, uh, that's when

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Speaker 1: you'll start to see demand going up. Of course, there's

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Speaker 1: some things hanging out there. For instance, that the Biden

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Speaker 1: administration starts to move to try and reopen the door

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Speaker 1: with Iran, that could mean a lot of Iranian oil

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Speaker 1: coming back into the market. So there's a whole geopolitical

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Speaker 1: drama that's happening at the same time. But it's certainly

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Speaker 1: expectations of a vaccine and kind of confidence and hope

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Speaker 1: beyond what looks like a very difficult twelve weeks that

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Speaker 1: we have a head from a health point of view.

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Speaker 1: At the same time, we see China coming back faster.

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Speaker 1: I think it's fair to say in the United States

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Speaker 1: and Europe, is that helping drive the price of oil

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Speaker 1: in and of itself right now? It gives a sense

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Speaker 1: of what the China resurgence is doing. Yeah, it's uh

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Speaker 1: sent a message that was not expected because people thought,

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Speaker 1: you know, demand would be weak. Chinese oil demand now

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Speaker 1: So I think that is figuring in that people see

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Speaker 1: that you get recovery, and with recovery comes increased demand.

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Speaker 1: And uh, you know, this is a market that has

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Speaker 1: of the free snymp of activity, and there seems to

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Speaker 1: be indication that demand is is really back in India

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Speaker 1: as well, and that's another signal that the market's looking at.

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Speaker 1: Moving over to the supply side, you mentioned the possibility

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Speaker 1: administration comes to terms of them. Libby already, as I understand,

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Speaker 1: it is producing again more than it was before. How

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Speaker 1: in on the production side, Well, if you add what

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Speaker 1: has been out because of the OPAQ plus deal at

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Speaker 1: this point that's seven a half million barrels, then you

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Speaker 1: have another that all won't come back at once. They're

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Speaker 1: trying to have a structure for that, but you could

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Speaker 1: have three million barrels a day of Iranian oil coming back,

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Speaker 1: and possibly something with Venezuela too. So that is hanging

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Speaker 1: out there, and it looks like the Trump administration is

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Speaker 1: doing everything you can to put together an anti stronger,

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Speaker 1: anti Iranian coalition to make things more difficult for a

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Speaker 1: Biden administration. What is the effect at this point of

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Speaker 1: the U S shale. I mean, it's been a huge effect.

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Speaker 1: You you have it in the new Map, your new

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Speaker 1: book about the effect of US shale. How is that

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Speaker 1: affecting the oil market right now? Well, shale has come

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Speaker 1: down a lot. We reached an incredible high point of

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Speaker 1: thirteen million barrels a day in February, ahead of Saudi Arabia,

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Speaker 1: ahead Russia. We're still out of Saudi Arabia in Russia

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Speaker 1: because of their cutbacks, but it's down about two million

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Speaker 1: barrels a day, and I don't think we'll see a

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Speaker 1: recovery until the middle of next year, until you start

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Speaker 1: to see a demand going up and prices getting really

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Speaker 1: getting out of virus Alley Dan, As you suggest, the

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Speaker 1: big issue I think it's for the world, but certainly

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Speaker 1: for the oil industry, is what happens with the vaccine

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Speaker 1: and the vaccine coming back on. We also have a

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Speaker 1: change in administrations coming up here in the United States,

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Speaker 1: and we have what looks to be quite a different

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Speaker 1: approach to energy coming in from a President Leiden when

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Speaker 1: he takes office January twenty. How big a factor is

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Speaker 1: that likely to be? Well, well, I think in a way.

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Speaker 1: I think the way obviously listening to your previous interview

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Speaker 1: and thinking that really the presidential election really isn't over

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Speaker 1: until January five, and we know the outcome of Georgia,

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Speaker 1: because that will affect what the Biden administration can and

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Speaker 1: can't do it on climate. But it is said that

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Speaker 1: climate is one of its four priorities. John Kerry has

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Speaker 1: been appointed as Climate Envoy. Every Cabinet secretary will have

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Speaker 1: a climate objective so and the United States will re

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Speaker 1: engage with the Global Climate Paris Consensus. So it will

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Speaker 1: be a pretty big change, I think. But he's also

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Speaker 1: made clear that there's no ban on fracking, that there'll

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Speaker 1: be more regulation. That was Daniel Jurgen, author of the

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Speaker 1: New Map Energy, Climate and the Clash of Nations. Coming up,

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Speaker 1: We're down to the wire on Brexit. Bloomberg Senior executivetor

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Speaker 1: for Economics Stephanie Flanders on what's at stake that's next

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Speaker 1: on Wall Street Week on Bloomberg. This is Bloomberg Wall

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Speaker 1: Street Week with David Weston from Bloomberg Radio Less than

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Speaker 1: a month ago until the United Kingdom leaves the European

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Speaker 1: Union with or without a deal. After years of back

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Speaker 1: and forth, it's hard to see how the parties have

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Speaker 1: truly narrowed their differences over harmonizing regulations over the Irish

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Speaker 1: border or over those fish. As Wall Street Week contributor

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Speaker 1: and Bloomberg Senior executive editor for Economic Stephanie Flanders says,

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Speaker 1: it's time to make some decisions. Well, and of course

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Speaker 1: it's those kind of phrases that have been used over

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Speaker 1: the last few weeks as we've had increasingly felt that

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Speaker 1: we were just on the edge of an agreement, and

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Speaker 1: that was true last week, and we know that it

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Speaker 1: was delayed. Any any final furlough was was delayed by

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Speaker 1: the fact that one of the negotiators actually was exposed

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Speaker 1: to COVID and everyone had to go into quarantine for

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Speaker 1: some period of time. But every day now we've all

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Speaker 1: to our reporters and the world on the street, we

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Speaker 1: are hearing that it's about to come a deal. I

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Speaker 1: have to say, the move music the last few days

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Speaker 1: has actually been less positive, and I think that's partly

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Speaker 1: the feeling that hang on a minute, we thought we

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Speaker 1: knew what needed to happen. You mentioned those three deals.

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Speaker 1: You know the general perception is, but on those three

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Speaker 1: sticking points, it's Britain, probably Boris Johnson himself, who will

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Speaker 1: need to give a little bit on this language around

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Speaker 1: a level playing field where Britain sort of promises that

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Speaker 1: it's not going to try and use its new freedom

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Speaker 1: to get an enormous competitive advantage against Europe in return

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Speaker 1: for the Europeans then asking for what the British would

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Speaker 1: say was a more reasonable amount of access to British waters.

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Speaker 1: It's amazing how important this not point one percent of

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Speaker 1: the economy, the fishing has become in this negotiation, and

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Speaker 1: of course many in the financial sector. The city is

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Speaker 1: so important. I would say, hang on a minute. We

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Speaker 1: were sold down the river years ago and you're still

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Speaker 1: the fish fishermen are still in their battling away for

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Speaker 1: their rights. It does seem like a very topsy turvy negotiations.

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Speaker 1: As we would say, them's politics, it's a practical matter.

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Speaker 1: But we have the British on the one side, and

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Speaker 1: I think it's pretty to say the British position is

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Speaker 1: not always been perfectly consistent. But on the other hand,

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Speaker 1: are we having dissension over the European side because now

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Speaker 1: there are reports that maybe they don't think Michelle Barnier

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Speaker 1: is really including them in and what the terms are.

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Speaker 1: There was even a Bloomberg report saying that in fact,

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Speaker 1: France might be threatened to vita whatever Mr Barnier negotiate.

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Speaker 1: You know, the Friends have always had a very have

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Speaker 1: been the sort of the muscular side of the negotiations

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Speaker 1: and certainly have had more muscular rhetoric feisty rhetoric throughout

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Speaker 1: this process. We know they've quite actively talked about taking

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Speaker 1: advantages for paris Is financial sector for this for sure,

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Speaker 1: but also about Britain being you know, being absolutely sure

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Speaker 1: that Britain doesn't get a deal that any other country

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Speaker 1: might look at and say, oh, I'd like I want

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Speaker 1: one like that. Whether that's sort of classic, not to

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Speaker 1: play to too many stereotypes, but is it the sort

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Speaker 1: of you know, gallic desire to sound to sound matcho

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Speaker 1: or whether there's something more fundamental They're a real disagreement.

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Speaker 1: I'm not so sure. And what has been really striking

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Speaker 1: throughout you pointed to the inconsistency on the British side

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Speaker 1: in general the Europeans. This is a lot of countries

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Speaker 1: with a lot of different interests in this negotiation have

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Speaker 1: been remarkably of one voice throughout, and I suspect that

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Speaker 1: will continue even if you get a little muttering around

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Speaker 1: the edges. What is the real deadline? I mean, there

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Speaker 1: are so many deadlines now I'm hearing like December eighteen,

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Speaker 1: because they do have to get ratification right after they

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Speaker 1: get a deal done. Yeah, And it's been interesting because

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Speaker 1: that the British said the deadline of October, middle of

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Speaker 1: October a while ago, so that was the sort of

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Speaker 1: drop dead date. Um the Europeans were always a bit

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Speaker 1: sort of po pooed that. Then it went through November.

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Speaker 1: I interviewed the Irish Prime Minister a few weeks ago

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Speaker 1: for the Bloomberg New Economy Forum. He thought the deadline

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Speaker 1: could slip into the middle of December. Now they are

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Speaker 1: talking about a bit later. I think the idea is,

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Speaker 1: once you get into that un of territory, everything would

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Speaker 1: be provisional. You wouldn't be able to get ratification in

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Speaker 1: the European Parliament, and in the sense you would be

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Speaker 1: prolonging the agony because you would you would still be

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Speaker 1: having to go back and finalize this deal that you

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Speaker 1: did already in the final hour. So I think people

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Speaker 1: are hoping that we won't be pushing those further deadlines,

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Speaker 1: not least because that the new vaccine that Britain has

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Speaker 1: just confirmed has to we haven't got it from but

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Speaker 1: Belgium yet, and we certainly don't want to get shipments

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Speaker 1: to be interfered with come January. So we're all going

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Speaker 1: to need to be watching this very very closely over

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Speaker 1: the coming days and weeks. By the way, if they

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Speaker 1: don't get a deal done by by December thirty one,

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Speaker 1: can they just keep negotiating into new year? I understand

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Speaker 1: w t R restrictions will come into effect, but why

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Speaker 1: couldn't they deal want to do a deal on January

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Speaker 1: fifteen or January You know, we've we found that before

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Speaker 1: that these things can be can be more flexible. I

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Speaker 1: think that the problem is that the potential of extending

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Speaker 1: the transition period was absolutely ruled out after the summer.

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Speaker 1: There was a deadline. I think it was in August

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Speaker 1: where the British to apply for an extension and they said,

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Speaker 1: despite COVID, despite everything else, the government was adamant it

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Speaker 1: wouldn't have an extension. So legally, you're right that the

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Speaker 1: change has to happen on January one. Whether you'd have

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Speaker 1: enough goodwill, enough desire to negotiate with the same kind

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Speaker 1: of pace and energy when you've already crashed through that

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Speaker 1: crucial legal deadline, I'm not so sure. But yet technically

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Speaker 1: they could carry on talking. That was Stephanie Flanders, Bloomberg

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Speaker 1: Senior Executive editor for Economics. Coming up, we wrap up

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Speaker 1: the week with our special contributor Larry Summers of Harvard.

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Speaker 1: That's next on Wall Street Week on Bloomberg. This is

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Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.

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Speaker 1: Every week we ran things up with our special contribute

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Speaker 1: Larry Summers, Harvard. So Larry, welcome. I must say this

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Speaker 1: week instructs me. It strikes me that the big developments

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Speaker 1: were on the fiscal side rather than the monetary side.

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Speaker 1: We did hear from j Pale said there are some

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Speaker 1: uncertain about the economy, but it was really apparent progress

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Speaker 1: to a compromise on some fiscal stimus were on that

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Speaker 1: nine hundred eight billion dollar proposal from some Democrats and

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Speaker 1: some Republicans in the Senate. Is it possible that in fact,

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Speaker 1: the Republicans have been right all around long, and then

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Speaker 1: we shouldn't have done the three point three trillion last spring,

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Speaker 1: and it was right to wait, because nine eight billion

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Speaker 1: maybe enough. I think the three point three trade was

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Speaker 1: always a negotiating position. We certainly should have done stimulus

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Speaker 1: in the summer. We would have come into this difficult

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Speaker 1: period with a stronger economy. We would have had even

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Speaker 1: more rapid growth. We would have helped a lot of

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Speaker 1: children who are going hungry. We would have prevented a

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Speaker 1: lot of layoffs from state and local governments. But look, David,

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Speaker 1: what's important now is to look forward, not backward. And

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Speaker 1: you saw it employment figures. You see it in what's

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Speaker 1: happening with COVID. This economy needs relief, and it needs

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Speaker 1: it now. It needs it for hungry children, needs it

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Speaker 1: for people who are unemployed. Needs it to compensate those

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Speaker 1: who are going to need to stay home if we're

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Speaker 1: all going to state safe. It needs it to pay

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Speaker 1: for much more testing than UH we're having. It needs

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Speaker 1: it to pay for more contract tracing than we're now doing.

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Speaker 1: It needs it to pay for the monitoring and assuring

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Speaker 1: that people are wearing UH masks and it needs it

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Speaker 1: to make sure that we deliver those vaccines every bit

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Speaker 1: as rapidly as we conceivably can. This cannot possibly be

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Speaker 1: a moment for UH sitting still. It would be the

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Speaker 1: highest irresponsibility if Washington was not able to find a compromise.

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Speaker 1: That means cutting out peripheral issues that may be very

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Speaker 1: important economic issues but are not central to the stimulus challenge,

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Speaker 1: and it means getting with the program and recognizing that

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Speaker 1: America needs help. I hope it will happen in the

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Speaker 1: next several weeks. It looks more likely than it did,

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Speaker 1: but there are no certain and teach and it is

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Speaker 1: a real test of goodwill and the capacity of Washington's function. Larry,

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Speaker 1: one of the things we like to do here in

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Speaker 1: Wall Street is look at the week, but also look

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Speaker 1: beyond the week too. Larger patterns here, and when anybody

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Speaker 1: mentions a paradigm shift for me, it certainly gets my attention.

434
00:23:15,720 --> 00:23:17,879
Speaker 1: I read that book a long time ago about Paradigi

435
00:23:18,160 --> 00:23:20,160
Speaker 1: and their suggestion there may have been a paradigm ship

436
00:23:20,200 --> 00:23:22,520
Speaker 1: when it comes to physical cities. It comes from Olivia

437
00:23:22,560 --> 00:23:25,120
Speaker 1: Well and Shard referring to you, saying that there there

438
00:23:25,200 --> 00:23:28,399
Speaker 1: might be a paradigm shift. The large agreement between Larry Summers,

439
00:23:28,480 --> 00:23:31,439
Speaker 1: Jason Firman, Ben bernanke Ken Rogoff, and him tell us

440
00:23:31,480 --> 00:23:34,280
Speaker 1: about that paradigm shift. I think the paradigm shift is

441
00:23:34,320 --> 00:23:38,480
Speaker 1: what I've talked about on your show before, Uh, David Uh.

442
00:23:38,640 --> 00:23:42,159
Speaker 1: For forty years, since the inflation of the seventies, the

443
00:23:42,280 --> 00:23:47,480
Speaker 1: preoccupation of macro economic policy has been with monetary discipline

444
00:23:47,520 --> 00:23:53,000
Speaker 1: to avoid inflation and fiscal discipline to prevent crowding out. Now,

445
00:23:53,040 --> 00:23:56,359
Speaker 1: when we've got zero interest rates and zero interest rates

446
00:23:56,440 --> 00:23:59,760
Speaker 1: projected for a very long, very low interest rates for

447
00:24:00,040 --> 00:24:04,680
Speaker 1: acted for ver long time, we're in a different paradigm

448
00:24:04,680 --> 00:24:08,520
Speaker 1: where in a paradigm where the challenge is absorbing all

449
00:24:08,560 --> 00:24:13,920
Speaker 1: the savings that an unequal and uncertain private sector generates,

450
00:24:14,040 --> 00:24:16,560
Speaker 1: and that means we're gonna have to think about fiscal

451
00:24:16,640 --> 00:24:20,560
Speaker 1: policy not just as a countercyclical tool, but as a

452
00:24:20,640 --> 00:24:25,880
Speaker 1: chronic instrument that we're gonna need to use to maintain demand.

453
00:24:26,400 --> 00:24:30,359
Speaker 1: If we don't have fiscal policy, we're gonna have pathologically

454
00:24:30,400 --> 00:24:35,080
Speaker 1: low interest rates. We're gonna have with those pathologically interest rates,

455
00:24:35,400 --> 00:24:37,439
Speaker 1: savers who don't have a chance to make it for

456
00:24:37,480 --> 00:24:44,600
Speaker 1: their retirement exploding asset prices and potential financial instability, rising

457
00:24:45,000 --> 00:24:51,080
Speaker 1: uh inequality, and economies that aren't going to reach their

458
00:24:51,119 --> 00:24:55,440
Speaker 1: full potential. So the right way is to provide more

459
00:24:55,480 --> 00:24:59,280
Speaker 1: stimulus to the economy, and we probably can't provide it

460
00:24:59,320 --> 00:25:02,920
Speaker 1: with monetary policy, and even if we could, the side

461
00:25:02,920 --> 00:25:07,679
Speaker 1: effects would be catastrophic in terms of financial instability. So

462
00:25:07,760 --> 00:25:11,080
Speaker 1: we need to think about fiscal policy as a permanent

463
00:25:11,200 --> 00:25:16,000
Speaker 1: tool of maintaining demand management. That is a very different

464
00:25:16,240 --> 00:25:19,040
Speaker 1: view than the one we've had. It may not it

465
00:25:19,080 --> 00:25:22,440
Speaker 1: may well not be the right view forever, but it's

466
00:25:22,480 --> 00:25:25,359
Speaker 1: the right view for coming decades. So so apply that

467
00:25:25,440 --> 00:25:28,240
Speaker 1: approach the fiscal policy, which it would be a paradigm shift,

468
00:25:28,280 --> 00:25:30,439
Speaker 1: as you say, to what we're facing right now, what

469
00:25:30,600 --> 00:25:33,040
Speaker 1: Roger All referred to as a split screen economy, where

470
00:25:33,040 --> 00:25:36,560
Speaker 1: we're looking at three or four months of really tough times,

471
00:25:36,560 --> 00:25:39,200
Speaker 1: perhaps with a snap back if a vaccine is why

472
00:25:39,240 --> 00:25:41,960
Speaker 1: they distributed towards the middle to the end of next year.

473
00:25:42,200 --> 00:25:44,359
Speaker 1: Can we have one fiscal policy that handles both of

474
00:25:44,359 --> 00:25:48,119
Speaker 1: those very different conditions. I think so, because even with

475
00:25:48,280 --> 00:25:52,200
Speaker 1: the snap back, even with a very good period of growth,

476
00:25:52,840 --> 00:25:55,200
Speaker 1: we're still going to be short in terms of total

477
00:25:55,280 --> 00:25:58,199
Speaker 1: number of jobs where we thought we were. We're going

478
00:25:58,240 --> 00:26:01,520
Speaker 1: to be short in terms of output of where we

479
00:26:01,600 --> 00:26:07,600
Speaker 1: thought uh we would uh be, and we are going

480
00:26:07,720 --> 00:26:12,440
Speaker 1: to need to run deficits of a kind larger than

481
00:26:12,480 --> 00:26:17,159
Speaker 1: people used to think we're appropriate. Um. And the truth

482
00:26:17,280 --> 00:26:19,920
Speaker 1: is it's gonna be okay, because we're gonna be able

483
00:26:19,960 --> 00:26:24,440
Speaker 1: to run uh those deficits given how much savings there

484
00:26:24,560 --> 00:26:28,280
Speaker 1: is to absorb them, and given how little pressure there

485
00:26:28,480 --> 00:26:33,440
Speaker 1: is uh coming from credit markets. So I don't think

486
00:26:33,440 --> 00:26:37,800
Speaker 1: this is an alarming prospect. In many ways, low costs

487
00:26:37,880 --> 00:26:41,679
Speaker 1: to borrow for public investments are a boon, are a

488
00:26:41,680 --> 00:26:45,480
Speaker 1: good thing, just like businesses regard low borrowing costs is

489
00:26:45,520 --> 00:26:48,800
Speaker 1: a good thing, and all of us as homeowners regard

490
00:26:48,840 --> 00:26:52,400
Speaker 1: the ability to refinance our mortgages, the ability to get

491
00:26:53,400 --> 00:26:55,919
Speaker 1: a larger home or a second home at a lower

492
00:26:55,960 --> 00:26:59,240
Speaker 1: carrying costs because of low interest rates. We regard those

493
00:26:59,560 --> 00:27:04,520
Speaker 1: as positive things, and the same thing is operative in

494
00:27:04,600 --> 00:27:07,239
Speaker 1: terms of public investment. So I don't think that this

495
00:27:07,359 --> 00:27:11,760
Speaker 1: is necessarily a bad uh thing. Low interest rates are

496
00:27:11,800 --> 00:27:14,960
Speaker 1: an opportunity to do all kinds of things we probably

497
00:27:15,000 --> 00:27:18,440
Speaker 1: should have done a long time ago, whether it's green investments,

498
00:27:18,520 --> 00:27:24,520
Speaker 1: or investing in our children, or fixing our infrastructure. I've

499
00:27:24,600 --> 00:27:28,560
Speaker 1: used this example before. When I started flying from Harvard

500
00:27:28,600 --> 00:27:31,200
Speaker 1: to Washington to give advice, it took an hour and

501
00:27:31,240 --> 00:27:34,040
Speaker 1: a quarter. Now it takes over an hour and a half.

502
00:27:34,640 --> 00:27:38,760
Speaker 1: And it hasn't gotten any further. And airplane technology hasn't

503
00:27:38,800 --> 00:27:42,640
Speaker 1: gotten worse. What's gotten worse is our air traffic control

504
00:27:42,720 --> 00:27:46,600
Speaker 1: systems ability to manage all the traffic that's got to

505
00:27:46,680 --> 00:27:51,280
Speaker 1: not make any sense. That is one of many, many

506
00:27:51,320 --> 00:27:56,280
Speaker 1: examples of where we need to strengthen our country's infrastructure.

507
00:27:56,560 --> 00:28:00,480
Speaker 1: Another example is our kids who are uh not able

508
00:28:00,520 --> 00:28:03,600
Speaker 1: to go to school and in so many cases don't

509
00:28:03,600 --> 00:28:07,359
Speaker 1: really have decent access to education because they lack the

510
00:28:07,880 --> 00:28:11,960
Speaker 1: broadband access that is kind of part of being part

511
00:28:11,960 --> 00:28:15,399
Speaker 1: of the economy, in the same way that electrification was

512
00:28:15,680 --> 00:28:19,920
Speaker 1: a necessity to be part of the economy a century ago. Okay,

513
00:28:19,920 --> 00:28:22,119
Speaker 1: so Larry, just a little over a minute left here.

514
00:28:22,160 --> 00:28:23,760
Speaker 1: I want to do a couple of quick Summer says

515
00:28:23,840 --> 00:28:25,959
Speaker 1: is that we love to do. Number One, when are

516
00:28:25,960 --> 00:28:28,080
Speaker 1: we going to have a defects of vaccine which is

517
00:28:28,200 --> 00:28:31,679
Speaker 1: so widely distribute it affects American population? When will that

518
00:28:31,720 --> 00:28:36,159
Speaker 1: happen June one. That's that's pretty But is that the

519
00:28:36,160 --> 00:28:40,400
Speaker 1: second inoculation or just the first, second and second inoculations

520
00:28:40,520 --> 00:28:44,600
Speaker 1: for enough of the population that COVID will be down

521
00:28:44,960 --> 00:28:50,200
Speaker 1: from current levels by June one, is my prediction. I mean,

522
00:28:50,200 --> 00:28:52,520
Speaker 1: there are people who are saying we're gonna get a

523
00:28:52,600 --> 00:28:55,040
Speaker 1: third of the way by February, and if we come

524
00:28:55,120 --> 00:28:57,120
Speaker 1: close to that, we'll get the rest of the way

525
00:28:57,520 --> 00:28:59,479
Speaker 1: for sure by June. Well, I for one, would take

526
00:28:59,520 --> 00:29:02,000
Speaker 1: that deal without question. I'm an optimist. Well, I like

527
00:29:02,080 --> 00:29:05,000
Speaker 1: your optimism. That's terrific. Clary, you've been warnings about COVID nineteen.

528
00:29:05,040 --> 00:29:06,960
Speaker 1: It's good if there's a way out of this second

529
00:29:07,000 --> 00:29:09,440
Speaker 1: one when we're gonna were gonna see the ten year

530
00:29:09,520 --> 00:29:12,640
Speaker 1: yield up about one. We really saw it move up

531
00:29:13,480 --> 00:29:16,680
Speaker 1: significany this week. I think that's gonna be until next year.

532
00:29:17,360 --> 00:29:20,760
Speaker 1: I don't think the fans gonna want to see that happen.

533
00:29:21,320 --> 00:29:23,080
Speaker 1: I think there's gonna be a lot of pressure to

534
00:29:23,160 --> 00:29:28,719
Speaker 1: keep rates, uh, keep rates low to maintain financial stability

535
00:29:29,160 --> 00:29:32,240
Speaker 1: and make sure that we're getting all the stimulus to

536
00:29:32,520 --> 00:29:42,960
Speaker 1: investment that we can February one, by next year one, yeah, yeah, exactly,

537
00:29:43,000 --> 00:29:45,760
Speaker 1: but does that mean that the reflation trade maybe over

538
00:29:46,200 --> 00:29:50,040
Speaker 1: oversold as a possibility. Uh No, there's a lot more

539
00:29:50,120 --> 00:29:52,880
Speaker 1: room above one per cent than there is. That's parallel

540
00:29:52,920 --> 00:29:57,720
Speaker 1: where we are where we are now, But I don't

541
00:29:57,720 --> 00:30:01,200
Speaker 1: think it's a good short run. Thank you so much

542
00:30:01,200 --> 00:30:03,680
Speaker 1: to Special Wall Street. We contributor Larry Summers of Harvard,

543
00:30:03,680 --> 00:30:07,400
Speaker 1: always so great to have him with us. Finally, one

544
00:30:07,440 --> 00:30:11,480
Speaker 1: more thought, the irresistible force of COVID meets the immovable

545
00:30:11,480 --> 00:30:14,840
Speaker 1: object of American football. All of our lives have been

546
00:30:14,920 --> 00:30:17,480
Speaker 1: upended in ways we could not have imagined just a

547
00:30:17,560 --> 00:30:20,400
Speaker 1: year ago. But it's one thing to work from home,

548
00:30:20,720 --> 00:30:24,920
Speaker 1: or miss graduations and family gatherings or forego vacations. It's

549
00:30:24,960 --> 00:30:29,160
Speaker 1: something else, altogether to do without our football. So the

550
00:30:29,280 --> 00:30:31,800
Speaker 1: NFL came up with a plan to push ahead, to

551
00:30:31,880 --> 00:30:36,160
Speaker 1: test everyone daily where masks even in practices, limit all

552
00:30:36,280 --> 00:30:40,200
Speaker 1: outside activities, and punish anyone who doesn't comply. The only

553
00:30:40,240 --> 00:30:44,080
Speaker 1: problem is football is played by people, and people don't

554
00:30:44,120 --> 00:30:47,640
Speaker 1: always play by the rules. Even in football, they had

555
00:30:47,680 --> 00:30:50,600
Speaker 1: a good protocol, good strategy in place. At the end

556
00:30:50,600 --> 00:30:53,560
Speaker 1: of the day, they're working with people, and human beings

557
00:30:53,600 --> 00:30:56,840
Speaker 1: make errors. And so this week we had the Pittsburgh

558
00:30:56,840 --> 00:31:00,400
Speaker 1: Steelers play the Baltimore Ravens on a Wednesday afternoon, the

559
00:31:00,520 --> 00:31:03,080
Speaker 1: third time the game had been rescheduled because a good

560
00:31:03,080 --> 00:31:06,280
Speaker 1: part of the Ravens roster tested positive and the Denver

561
00:31:06,360 --> 00:31:09,560
Speaker 1: Broncos lost all of their quarterbacks not to COVID, but

562
00:31:09,680 --> 00:31:13,120
Speaker 1: to violating the rules on COVID, leaving a wide receiver

563
00:31:13,200 --> 00:31:15,560
Speaker 1: to run the team, one who hadn't taken a snap

564
00:31:15,640 --> 00:31:18,760
Speaker 1: under center since his days in college at Wake Forest.

565
00:31:19,640 --> 00:31:22,720
Speaker 1: It would be easy to say just stopped playing, But

566
00:31:22,800 --> 00:31:25,720
Speaker 1: as Hall of Fame cornerback Darryl Green put it, it's

567
00:31:25,760 --> 00:31:28,360
Speaker 1: not just about a game. For many of us, it's

568
00:31:28,360 --> 00:31:33,560
Speaker 1: about who we are. How can we keep moving certain

569
00:31:33,600 --> 00:31:37,520
Speaker 1: things that has to continue to move that makes us

570
00:31:37,560 --> 00:31:41,080
Speaker 1: who we are as an American society. So whether you

571
00:31:41,200 --> 00:31:43,640
Speaker 1: love football the way some of us do or not,

572
00:31:44,360 --> 00:31:47,040
Speaker 1: we all share the need not to let a virus

573
00:31:47,080 --> 00:31:51,920
Speaker 1: that's changed what we do change who we are. That

574
00:31:51,960 --> 00:31:53,960
Speaker 1: does it. For this episode of Wall Street Week, I'm

575
00:31:54,040 --> 00:32:03,440
Speaker 1: David Weston. This is Bloomberg. See you next week,