WEBVTT - Inflation, Supply Chain, And Wall Street (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.560 at Bloomberg dot com slash podcast. Let's bring into Ed 0:00:22.600 --> 0:00:25.120 Price right now. He's a senior fellow and UH at 0:00:25.200 --> 0:00:28.440 n y U and a former British trade official. Also, 0:00:28.880 --> 0:00:32.559 UM has been an advisory posts for a lot of 0:00:32.680 --> 0:00:37.199 very important bodies like the European Parliament. UH and Ed, 0:00:37.360 --> 0:00:41.040 I we got to talk first about well, maybe only 0:00:41.159 --> 0:00:44.440 about inflation, right, whether it's here or there. Um, what 0:00:44.479 --> 0:00:47.880 do you think about the numbers that we saw today? Um? 0:00:47.920 --> 0:00:50.720 Eight point six percent is the headline number, and it 0:00:50.760 --> 0:00:54.960 makes me wonder can the FED really afford to still 0:00:55.440 --> 0:00:58.520 prefer core pc E or do they have to look 0:00:58.600 --> 0:01:02.360 at headline cp I the latter and quickly and immediately 0:01:02.480 --> 0:01:04.800 and fast, and like, I feel like I'm repeating myself 0:01:04.800 --> 0:01:06.200 on your show. So if I'm getting bored and kicked 0:01:06.200 --> 0:01:08.520 me out, but like, let's do this right, let's hike, 0:01:08.800 --> 0:01:11.640 let's hike quickly. Um, but you mentioned Europe, and I 0:01:11.680 --> 0:01:14.760 feel like if the problem over here is a sort 0:01:14.800 --> 0:01:18.360 of traditional inflationary spiral, that a you know, that's a 0:01:18.360 --> 0:01:21.080 traditional way for a central bank to get past that, 0:01:21.080 --> 0:01:23.200 which is a recession. I think they've got other problems 0:01:23.200 --> 0:01:25.319 in Europe. As we were saying, right, yeah, so this 0:01:25.400 --> 0:01:29.639 is like yesterday the ECB meeting. I was watching it. 0:01:29.800 --> 0:01:33.759 Wait was it yesterday? Yeah? Yeah, okay, yesterday. It seems 0:01:33.760 --> 0:01:36.720 like forever ago. I was watching it and thinking, Um, 0:01:36.920 --> 0:01:41.440 Leguard has no way to stop inflation if she wants 0:01:41.440 --> 0:01:43.840 to avoid what we're calling fragmentation. Now, by the way, 0:01:43.880 --> 0:01:45.679 that's a new term for me. I did not know that. 0:01:45.720 --> 0:01:49.280 But basically it means the peripheral bond spreads are blowing out. 0:01:49.800 --> 0:01:52.320 Um or if she wants to worry about that, inflation 0:01:52.400 --> 0:01:54.760 is going to run buck wild. Let me stay here 0:01:54.760 --> 0:01:59.560 in America, right, So, Um, what happens either basically the 0:01:59.600 --> 0:02:03.000 whole system has to change, right, because they can't continue 0:02:03.040 --> 0:02:06.120 operating monetary policy for Europe as a whole and have 0:02:06.240 --> 0:02:10.440 each individual country run its own budget and lending and borrowing. Right, So, 0:02:10.440 --> 0:02:13.280 when you say that they're they're running monetary policy for 0:02:13.320 --> 0:02:15.600 Europe as a whole, that's right. And what they're thinking 0:02:15.639 --> 0:02:19.440 about is not just the nineteen member Eurozone economy, but 0:02:19.480 --> 0:02:22.680 they're also thinking about the single currency itself. And you know, 0:02:22.720 --> 0:02:25.440 we were saying before, before I came on ten years ago, 0:02:25.880 --> 0:02:28.680 we were we were seriously talking about the Euro Area 0:02:28.880 --> 0:02:31.680 breaking apart, which is when Drag said he'll do whatever 0:02:31.720 --> 0:02:35.160 it takes, whatever it takes, baby, right, absolutely, Um, can 0:02:35.200 --> 0:02:37.519 they do whatever it takes now? And what is whatever 0:02:37.560 --> 0:02:39.960 it takes? What? What would it be? So if you 0:02:39.960 --> 0:02:42.360 look at you know, CPO inflation in the euro Area 0:02:42.440 --> 0:02:44.440 eight point one, you look at their four point nine 0:02:44.480 --> 0:02:48.799 trillion euro balance sheet, it's sort of a bad cyclical story. 0:02:49.080 --> 0:02:52.200 And BTP spreads getting close to three, closer and closer 0:02:52.240 --> 0:02:57.000 to the danger zone. The danger zone exactly, which is spread. 0:02:57.080 --> 0:03:01.000 So that's Italian borrowing right now costs for ten years 0:03:01.040 --> 0:03:04.440 I think three hundred and fifty basis points and the 0:03:04.480 --> 0:03:07.680 buns are at a hundred and change. So the spread 0:03:08.000 --> 0:03:10.080 is two and a half percent, okay, which is something 0:03:10.080 --> 0:03:12.080 that we saw. We used to call that the frayed rope. 0:03:12.120 --> 0:03:14.640 If you remember that the spread between the periphery and 0:03:14.639 --> 0:03:17.280 the center, and you're afraid. Not I'm afraid and not right, 0:03:17.280 --> 0:03:18.840 I'll go back and dig out some of my dusty 0:03:18.919 --> 0:03:22.079 lectures Highland do you have? But but basically, like this 0:03:22.120 --> 0:03:25.440 is one of the key risk indicators for the basically 0:03:25.480 --> 0:03:28.240 the existence of the Euro itself. Right, if it becomes 0:03:28.280 --> 0:03:32.160 too expensive for your area countries on the periphery to borrow, 0:03:32.560 --> 0:03:34.360 and those countries, by the way, often need to borrow 0:03:34.520 --> 0:03:37.840 more than your average central European country, at some point 0:03:38.280 --> 0:03:40.560 somebody in their finance ministry says, you know what, maybe 0:03:40.560 --> 0:03:43.640 we should just leave this currency. Well, in fact, in 0:03:43.680 --> 0:03:47.200 two thousand and eleven, um, the concern was that that 0:03:47.440 --> 0:03:52.080 exactly that would happen, right, the whole up project i'll 0:03:52.080 --> 0:03:55.839 still call it, would break up. Now I'm thinking post pandemic, 0:03:55.960 --> 0:03:58.560 especially after we had the I think seven fifty billion 0:03:58.560 --> 0:04:01.840 euro stimulus. Now I could go the other way. They 0:04:01.840 --> 0:04:05.480 could become the United States of Europe if the richer 0:04:05.520 --> 0:04:09.560 countries were willing to play along. Right, that's my central case. Now, um, 0:04:09.600 --> 0:04:11.440 not everyone will agree with that, but I think that 0:04:11.440 --> 0:04:13.720 that's the direction of travel. And I think there's two 0:04:13.760 --> 0:04:16.839 things to say. One, of course, that involves some sort 0:04:16.920 --> 0:04:19.800 of German consent on the fiscal side. But I think 0:04:19.800 --> 0:04:21.159 the other thing is that if you look at the 0:04:21.200 --> 0:04:25.000 logic of any currency um the size and importance of 0:04:25.000 --> 0:04:27.720 the Euro, we're going to have to move the capital 0:04:27.720 --> 0:04:31.080 market situation in Europe in a sort of open, an 0:04:31.080 --> 0:04:32.960 open direction in order that they can create the sort 0:04:32.960 --> 0:04:35.000 of depth and liquidity that you see in the US 0:04:35.040 --> 0:04:37.200 and the UK. So that's a bit of a contradiction 0:04:37.240 --> 0:04:39.120 because on the one hand you've got the German instinct, 0:04:39.160 --> 0:04:41.640 which is top down economic policy, and on the other 0:04:41.680 --> 0:04:44.040 hand you need what they would say is Anglo Saxon 0:04:44.120 --> 0:04:47.800 market forces. What would prompt Germany to take a bigger 0:04:47.880 --> 0:04:50.760 role to allow that to happen, to allow the United 0:04:50.800 --> 0:04:53.720 States of Europe, Well, I think it would be some 0:04:53.760 --> 0:04:55.560 sort of shift and mat will know more about this 0:04:55.600 --> 0:04:57.800 having having been in Germany for so long, some sort 0:04:57.839 --> 0:05:01.760 of shift in the German mentality as to leadership, which 0:05:01.800 --> 0:05:04.039 is I think a word in German that you don't 0:05:04.040 --> 0:05:06.240 always want to use. Right, you could argue they were 0:05:06.279 --> 0:05:10.240 taking their changing their views leadership leadership. Right, you could 0:05:10.320 --> 0:05:12.839 argue with their changing their views on the military. Here 0:05:12.880 --> 0:05:15.960 with they're changing their views didn't. Did they spend a 0:05:15.960 --> 0:05:18.560 lot to support the europe during the pandemic and things 0:05:18.560 --> 0:05:21.400 like that? Yeah, there's I think they are. I think 0:05:21.400 --> 0:05:24.960 there's like a hundred billion euro defense fund that the 0:05:24.960 --> 0:05:26.920 Germans have now agreed to and that they're of course 0:05:26.920 --> 0:05:28.479 going to meet the two they agree to it in 0:05:28.480 --> 0:05:32.000 two thousand twelve. They're finally fulfilling that. They're finally fulfilling it, right, 0:05:32.040 --> 0:05:34.200 So there's there's an external pressure that's kind of pushing 0:05:34.240 --> 0:05:36.400 them in the right direction. But my question is what's 0:05:36.400 --> 0:05:38.000 the stick are going to be on those tanks? Is 0:05:38.040 --> 0:05:40.039 it going to be the German cross or is it 0:05:40.040 --> 0:05:42.840 going to be the European Union flag? Um, it has 0:05:42.880 --> 0:05:46.480 to be the European Unions because even you know, German 0:05:46.560 --> 0:05:49.479 voters won't allow on the iron cross to come back. 0:05:49.640 --> 0:05:52.120 I want to just finally ask you about America. Get 0:05:52.120 --> 0:05:54.160 back to the u S. Here we had the University 0:05:54.160 --> 0:05:57.520 of Michigan consumer sentiment UM gauge come in at a 0:05:57.600 --> 0:06:01.400 record low. What the change has to happen? Here is 0:06:01.440 --> 0:06:04.160 Biden rewriting his speech furiously right now on the U 0:06:04.360 --> 0:06:06.880 S S Iowa. He may well be I don't know, 0:06:06.960 --> 0:06:10.040 I wish showing you um that those reads were terrible. 0:06:10.080 --> 0:06:12.400 I mean, that's really scary stuff. What's the opposite of 0:06:12.400 --> 0:06:15.960 Buck Wilde. I don't know, I don't know, but it's 0:06:15.960 --> 0:06:19.000 not good, right, No, No, it's tough. So yeah, I 0:06:19.040 --> 0:06:21.960 mean the consumers out there are you know, that's inflations 0:06:22.000 --> 0:06:23.920 hitting them. But you know there's some We had Jonathan 0:06:23.920 --> 0:06:27.800 Goliban earlier from I believe he's where's it now, Chris. 0:06:29.000 --> 0:06:31.520 He says economy is still strong, got a strong labor 0:06:31.560 --> 0:06:35.520 market and so on. He's been a bull for twenty years, 0:06:35.520 --> 0:06:39.160 no offense. He's in my motorcycle gang to me, Jonathan 0:06:39.200 --> 0:06:42.520 gollub Lefkovich, Binky Chatta. We had a gang back in 0:06:42.520 --> 0:06:45.719 the day. Alright, Ed Price, senior fellow in former trade official. 0:06:46.040 --> 0:06:47.880 He's at n y U now, but he comes up 0:06:47.880 --> 0:06:54.320 and sees us every once in a while. Well. Our 0:06:54.360 --> 0:06:57.400 next guest, Matt. She got her NBA from Darden that's 0:06:57.440 --> 0:07:00.000 the University of Virginia's business school, and I went down 0:07:00.000 --> 0:07:03.520 there to visit there. They said, we work harder than 0:07:03.600 --> 0:07:07.000 anybody else. It is the tough workload, but it makes 0:07:07.000 --> 0:07:09.320 you a better person. I said, that's the last thing 0:07:09.320 --> 0:07:11.760 I'm looking for. Exactly. You're dressed in the in the 0:07:11.800 --> 0:07:13.840 UVA color, So I want to do instead the NBA 0:07:13.880 --> 0:07:15.960 folks they it darted and they worked way too hard. 0:07:15.960 --> 0:07:19.120 But Naeseta Henry joins us. She's a chief Innovation officer 0:07:19.160 --> 0:07:23.800 for Deloitte Consulting UM Nasheta. We're parting through here like 0:07:23.840 --> 0:07:26.480 a lot of investors are kind of this really hot 0:07:26.520 --> 0:07:29.440 inflation uh data point that we got today, and we're 0:07:29.480 --> 0:07:32.720 also paying attention to the Port of Los Angeles, where 0:07:32.760 --> 0:07:35.120 the President is going today, as we think about supply 0:07:35.200 --> 0:07:38.520 chain issues and how they contribute to inflation. I love 0:07:38.560 --> 0:07:41.480 to get your thoughts because this is something you look at, 0:07:41.720 --> 0:07:43.840 your thoughts on the supply chain and kind of what 0:07:43.920 --> 0:07:48.920 you're hearing from your clients, what you're telling your clients. Absolutely, 0:07:48.960 --> 0:07:51.880 thanks for having me today. UM. You know, supply chain, 0:07:52.000 --> 0:07:54.200 it's an interesting thing. No one really thought about it 0:07:54.280 --> 0:07:57.600 before the pandemic, and then as they got disrupted and 0:07:57.640 --> 0:07:59.880 you couldn't get what you needed on the store. Shehell 0:08:00.000 --> 0:08:03.600 of there, you had to wait months to order big equipment. 0:08:04.120 --> 0:08:07.640 It became a reality to everyday Americans, UM and everyday 0:08:07.680 --> 0:08:10.440 citizens around the globe. And what we're seeing more and 0:08:10.520 --> 0:08:15.000 more is that factories really haven't modernized and taken advantage 0:08:15.080 --> 0:08:18.280 of industry for auto technologies in a way that helps 0:08:18.320 --> 0:08:22.320 them better predict demand, better adjust in real time to 0:08:22.520 --> 0:08:27.000 disruptions like UM in availability of raw material or machines 0:08:27.040 --> 0:08:30.560 going down or labor shortages UM. And we're all about 0:08:30.600 --> 0:08:35.560 helping the manufacturing industry UM embrace at scale those technologies 0:08:35.600 --> 0:08:38.160 that are going to enable them to create more efficient 0:08:38.200 --> 0:08:41.800 and predictive supply chains. So so you're the chief Innovation 0:08:41.800 --> 0:08:45.200 officer at Deloitte Consulting, but you're also working on the 0:08:45.280 --> 0:08:49.800 smart Factory at Wichita. What is that? Absolutely? Yeah. So 0:08:49.880 --> 0:08:54.480 as a chief Innovation officer, my role is to invest in, incubate, 0:08:54.960 --> 0:08:58.800 and test and scale new businesses for our firm UM. 0:08:58.840 --> 0:09:01.720 And one of those things in involved the Smart Factory, 0:09:01.800 --> 0:09:05.120 which is a physical experience as well as a digital 0:09:05.120 --> 0:09:09.760 platform UM. The physical experiences in Whichita Kansas in conjunction 0:09:09.880 --> 0:09:14.320 with over twenty ecosystem partners that we've curated to come 0:09:14.320 --> 0:09:18.040 together to create a one of a kind industry for 0:09:18.240 --> 0:09:21.520 BATO Factory of the Future UM. And the exciting thing 0:09:21.600 --> 0:09:24.760 there is it's a real working production facility. We are 0:09:24.800 --> 0:09:28.120 making smart Rover kits um that actually we will be 0:09:28.400 --> 0:09:32.120 providing into communities UM to impact over the next four 0:09:32.200 --> 0:09:35.880 years eight hundred thousand UM young people to get interested 0:09:35.880 --> 0:09:39.240 in STEM fields. So it is a dual purpose facility 0:09:39.240 --> 0:09:42.360 where we get to demonstrate new technology of the future 0:09:42.400 --> 0:09:45.679 for industry portat oh, we get to actually manufacture and 0:09:45.679 --> 0:09:48.920 in real time have the same challenges our clients do. 0:09:49.679 --> 0:09:52.719 We get to implement a platform that connects all of 0:09:52.760 --> 0:09:56.560 the physical to the digital, and we get to impact 0:09:56.960 --> 0:09:59.920 young people and uh, you know, hopefully help with upcoming 0:10:00.440 --> 0:10:04.400 uh you know, labor challenges UM actually current labor challenges, 0:10:04.800 --> 0:10:08.720 but that we're breaking through through new techniques. Hey, Nishida 0:10:08.880 --> 0:10:12.199 is just in time inventory dead? I mean Matt Miller's 0:10:12.200 --> 0:10:15.480 gotta wait months to get a Chevy Silverado. I'm just 0:10:15.520 --> 0:10:18.680 not sure this pandemic didn't lay bare some of the 0:10:18.760 --> 0:10:23.960 real real weaknesses of just in time inventory. Yeah. Absolutely, Well, 0:10:23.960 --> 0:10:26.920 what's interesting is, you know the just in time inventory 0:10:27.080 --> 0:10:30.680 either people plan to tightly UM, they can't predict demand 0:10:30.720 --> 0:10:33.120 well enough. So you know, just in time means that 0:10:33.160 --> 0:10:37.120 you've actually made plans um several months in advance in 0:10:37.240 --> 0:10:40.839 order to make sure that inventory gets there just in time. Um. 0:10:40.880 --> 0:10:43.480 And so it's not just just in time at the 0:10:43.640 --> 0:10:47.360 end point, it's just in time all along the value chain. UM. 0:10:47.440 --> 0:10:50.120 And you know sometimes actually just listening to the morning 0:10:50.120 --> 0:10:52.599 news a few days ago, there's a lot of excess inventory. 0:10:52.720 --> 0:10:56.400 There's excess inventory of leisure clothes, right because we couldn't 0:10:56.400 --> 0:10:58.920 predict that people wouldn't want to wear leisure clothes after 0:10:58.920 --> 0:11:01.719 the pandemic. I know, I want to do many right UM. 0:11:01.760 --> 0:11:03.880 And so I think it works both ways that the 0:11:03.920 --> 0:11:07.200 incremental approaches have actually been just add more inventory, add 0:11:07.200 --> 0:11:10.520 more capacity. And we're saying, actually, no, just in time 0:11:10.559 --> 0:11:12.880 can work. But you need better data, you need better 0:11:12.880 --> 0:11:15.880 connectivity um, and you need better insights in order to 0:11:15.920 --> 0:11:17.520 make that work. And this has been the issue for 0:11:17.600 --> 0:11:21.280 Walmart and Target and everything is out of whack. When 0:11:21.320 --> 0:11:24.920 do you think the supply chain comes back in order? Now, 0:11:25.000 --> 0:11:27.080 that's a great question. I wish I could predict the future, 0:11:27.120 --> 0:11:30.280 but I think in the next um three to six months. 0:11:30.320 --> 0:11:33.480 You know, people have been UM working hard in order 0:11:33.520 --> 0:11:35.960 to get the front part of the chain working right, 0:11:36.000 --> 0:11:39.840 whether it's more raw materials, it's better core assemblies to 0:11:39.880 --> 0:11:42.319 create the end products. But I think it's going to 0:11:42.440 --> 0:11:44.360 take US, UM, you know, a couple of years to 0:11:44.440 --> 0:11:48.000 really be on this transformation journey to get to a 0:11:48.040 --> 0:11:51.360 point where disruptions like the pandemic won't cause these supply 0:11:51.440 --> 0:11:53.960 chain issues. Right, We're gonna come out of these supply 0:11:54.040 --> 0:11:56.480 chain issues because the world will be getting back to 0:11:56.640 --> 0:12:00.800 semi more normal paces. Um, even if we have continued 0:12:00.880 --> 0:12:04.320 global you know, upheavals and around geo political issues, etcetera. 0:12:04.840 --> 0:12:06.640 But we have to be able to adjust to future 0:12:06.640 --> 0:12:09.400 disruptions for which we know there will be all right, Sheeta, 0:12:09.440 --> 0:12:11.800 good stuff. Thanks so much for joining us. Really appreciate 0:12:11.840 --> 0:12:15.400 getting your insights there. No, Sheeta Henry, chief Innovation Officer 0:12:15.440 --> 0:12:22.000 at de Lloyd Consulting, so much for the quiet Friday 0:12:22.080 --> 0:12:24.560 here at the beginning of summer of the CPI data 0:12:24.640 --> 0:12:27.520 kind of you know, really coming in hotter than expected 0:12:27.559 --> 0:12:30.160 all the core. Maybe you could argue the core has peaked. 0:12:30.160 --> 0:12:33.680 We'll talk about that. The University of Michigan sentiment stuff 0:12:33.720 --> 0:12:36.280 that got my attention came in much weaker than expected. 0:12:36.360 --> 0:12:38.800 So some really negative data that we're seeing reflected in 0:12:38.840 --> 0:12:40.560 the market. Of course, what do I do? I blame 0:12:40.600 --> 0:12:44.559 the economists and along chief US economists for Bloomberg's economics 0:12:44.600 --> 0:12:48.120 joints is and it's all your fault, no question about it. 0:12:48.400 --> 0:12:51.680 What do you take away from you know, the inflation 0:12:51.760 --> 0:12:54.320 data today, the University of Michigan data today. What are 0:12:54.320 --> 0:12:59.839 your takeaways? Yeah, So with inflation data, the upsides of 0:13:00.040 --> 0:13:04.000 prices UH so large that I think, uh it pushes 0:13:04.120 --> 0:13:07.480 the peak further out UM. And we could still see 0:13:08.640 --> 0:13:14.320 inflation pushing up, possibly breaching nine percent in September. So 0:13:14.520 --> 0:13:17.800 that quhes any notion that the said will be pausing 0:13:17.880 --> 0:13:21.680 in September. As anything, there's probably put the seventy five 0:13:21.720 --> 0:13:24.120 bits back on the table. But for later this year, 0:13:24.200 --> 0:13:27.960 we um and we expect now in our baseline that 0:13:28.280 --> 0:13:31.040 uh fifty bits would be in the September meeting as 0:13:31.080 --> 0:13:35.280 well as in the November meeting and the consumer sentiment report. 0:13:35.679 --> 0:13:39.800 You know, America just really hates inflation um. But that 0:13:39.920 --> 0:13:44.480 does not always translate into spending actions UM. And you 0:13:44.480 --> 0:13:53.600 know over sea from nine nationality in the inflationary sentiments 0:13:53.840 --> 0:13:56.880 and that people just feel like something is taken away 0:13:56.920 --> 0:14:01.200 from them if inflation rising, even though even if nominal 0:14:01.240 --> 0:14:04.680 wage were to uh, you know, rises on par with inflatiently, 0:14:05.320 --> 0:14:08.559 it's true because I feel that way too. Yep, absolutely, 0:14:08.760 --> 0:14:11.680 uh and uh. We were talking about the possibility of 0:14:11.679 --> 0:14:15.640 the FED raising at a quicker pace or maybe um 0:14:15.640 --> 0:14:19.840 in bigger clips seventy five basis points. Somebody suggested that 0:14:19.840 --> 0:14:22.520 that Paul was talking about earlier. So I was thinking, 0:14:22.760 --> 0:14:26.760 what's the most the FED has ever raised rates by? 0:14:26.880 --> 0:14:29.400 And I looked back, um, in the data. I only 0:14:29.440 --> 0:14:32.200 got back to when I saw that Vulcar in February 0:14:32.240 --> 0:14:37.680 of that year raised five percent at one meeting. Yeah, um, 0:14:37.760 --> 0:14:43.120 what do you expect from our Federal Reserve? Well, you know, um, 0:14:43.360 --> 0:14:46.760 Larry Summers put out a paper earlier this week showing 0:14:46.880 --> 0:14:50.280 that if you adjust to the pychnology of CPI, in fact, 0:14:50.360 --> 0:14:53.480 the amount of disinflation the FED has to do today 0:14:53.600 --> 0:14:56.400 is the same as what the Vulcar has to do. 0:14:56.880 --> 0:14:59.440 But our own team number David Wilcox looked at that 0:14:59.600 --> 0:15:04.400 and UM argue that the said actually follows PCE deflators 0:15:04.480 --> 0:15:07.600 rather than c p I, and that in that you 0:15:07.600 --> 0:15:11.480 know that measure, the PPE A deflator would show that 0:15:12.000 --> 0:15:16.320 inflation problem is half as today is half as smart 0:15:16.480 --> 0:15:19.520 as back in the looker days, which means that the 0:15:19.560 --> 0:15:22.680 said probably has to do less than the vocer compared 0:15:22.720 --> 0:15:25.600 to the vocal years. And on top of that, inflation 0:15:25.680 --> 0:15:30.200 expectations measures show that the expectations have not an anchored yet. 0:15:30.720 --> 0:15:34.440 So that also is another argument for what that does 0:15:34.480 --> 0:15:36.680 not need to do as much as Paul Boker that 0:15:36.960 --> 0:15:42.360 is and in reality and there's real tangible limits to 0:15:42.400 --> 0:15:44.520 what this feeder reserve can do visa the inflation because 0:15:44.520 --> 0:15:47.440 so much of the headline stuff was you know, energy 0:15:47.600 --> 0:15:50.360 and what I hear there's just not enough refining capacity 0:15:50.360 --> 0:15:53.640 out there in the world given the demand uh food, Um, 0:15:53.680 --> 0:15:55.360 there's not what you can do about the supply chain 0:15:55.400 --> 0:15:57.520 and maybe the war Ukraine. So there's some things that 0:15:57.560 --> 0:16:00.800 are out of the FEDS kind of you know, kind 0:16:00.800 --> 0:16:04.360 of Bailey Wick here. So, um, what kind of message 0:16:04.840 --> 0:16:07.480 when we hear from Chairman Power when he answers questions 0:16:07.520 --> 0:16:08.960 next week? What do you think we're going to hear 0:16:09.000 --> 0:16:12.160 from this FED? I think that Chairman Pow would would 0:16:12.280 --> 0:16:16.120 reiterate the lesson that they had learned last year from 0:16:16.240 --> 0:16:19.920 that mistake from not not raising rates early enough, which 0:16:19.960 --> 0:16:23.440 is that the FETs job is to affect price stability 0:16:23.520 --> 0:16:26.760 through demand channels, and they should just take all the 0:16:26.840 --> 0:16:30.600 fiscal policy and supply shocks as given, and what they 0:16:30.640 --> 0:16:33.560 could do is to keep their eyes on the wall 0:16:33.600 --> 0:16:38.880 of price stability and reduced demand in order to change uh, 0:16:38.920 --> 0:16:41.960 you know, lower places. So you said, yeah, the Fed 0:16:42.040 --> 0:16:45.800 cannot do anything about gas prices or food prices, but 0:16:46.280 --> 0:16:51.480 they can do something about inflation expectations. And even if 0:16:51.520 --> 0:16:55.000 that means that unfortunately they have to lower demand in 0:16:55.160 --> 0:16:58.600 order to cool the prices, they will have to do that. Well, 0:16:58.600 --> 0:17:02.200 the government definitely can do something about gas prices. My 0:17:02.280 --> 0:17:05.280 boss was just in the studio um telling us that 0:17:05.320 --> 0:17:09.920 he drove through Massachusetts to get to Connecticut before he 0:17:10.000 --> 0:17:14.000 filled up because they've cut the tax There any chance 0:17:14.080 --> 0:17:19.800 that this administration or state governments are gonna start doing 0:17:19.840 --> 0:17:24.560 that on mass cutting taxes. Yeah, you know, that's actually 0:17:24.640 --> 0:17:28.280 really good point. So part of the stimulus um um 0:17:28.520 --> 0:17:32.240 went into state government government budgets, and it looks like 0:17:32.320 --> 0:17:35.200 that a lot of them have not used them up yet. 0:17:35.280 --> 0:17:38.760 That's why state budgets are are actually looking very good 0:17:38.920 --> 0:17:42.840 this year. Also partly because property taxes has has has 0:17:42.840 --> 0:17:45.720 been generating a lot more revenues given given the hot 0:17:45.720 --> 0:17:49.480 housing lots. From your mouth to God's ears and along, 0:17:49.920 --> 0:17:52.600 is there any chance that I'm going to get back 0:17:52.720 --> 0:17:58.320 the state and local tax deduction stolen from me back 0:17:58.359 --> 0:18:01.720 in what was it, two thousand seventeen. I mean, I 0:18:01.800 --> 0:18:06.160 don't know how much longer I can live with these taxes. Well, 0:18:06.560 --> 0:18:09.600 you have student debts, Maybe you have students that would 0:18:09.600 --> 0:18:12.600 give you back some money. Sadly, I mean, I'm glad 0:18:12.640 --> 0:18:15.520 I don't have student debt. Um thanks to my mom, 0:18:15.560 --> 0:18:19.040 who is a professor at a Great Lakes College Association, 0:18:19.119 --> 0:18:22.000 I was granted free tuition at another Great Lakes College 0:18:22.000 --> 0:18:25.040 Association school. Um, so I'm lucky in that sense. But 0:18:25.119 --> 0:18:28.000 there's no my student debt if I had, it wouldn't 0:18:28.040 --> 0:18:32.760 be as high as my annual property taxes in Scarsdale. 0:18:32.840 --> 0:18:37.680 It's insane. Well, I'm sure you your your income would 0:18:37.720 --> 0:18:42.880 be enough to to support your spending on other areas, 0:18:43.119 --> 0:18:46.200 all right. And so we've got this inflation print here. 0:18:46.520 --> 0:18:49.560 I'm wondering about the labor side of the equation. Are 0:18:49.600 --> 0:18:52.760 we going to see you or are we seeing wage 0:18:52.800 --> 0:18:56.040 inflation here? If so, is this spiral thing? Is that 0:18:56.240 --> 0:19:00.240 a risk? Well, um, you know a lot of cost 0:19:00.320 --> 0:19:06.040 of index measures linked to nominal wage growth is index 0:19:06.119 --> 0:19:09.480 to c P I. So if the c p I is, 0:19:09.960 --> 0:19:13.680 you know, going out and continuing on upward trajectory, the 0:19:13.920 --> 0:19:16.720 kind of alarming bills that we should be looking at 0:19:16.760 --> 0:19:19.920 for For wage price FIRO is if you see wages 0:19:19.960 --> 0:19:25.000 being index two more and more, you know we wage 0:19:25.400 --> 0:19:29.320 wage contracts are index to c p i UM and 0:19:29.520 --> 0:19:32.000 uh yeah, I think, I think if if, if, if 0:19:32.040 --> 0:19:35.800 gas prices continue to be at this, at this this trajectory, 0:19:35.840 --> 0:19:39.240 even reaching one seventy per barrel or two hundred later 0:19:39.320 --> 0:19:42.960 this year, we would have a risk of expectations on 0:19:43.080 --> 0:19:47.280 anchoring generating a wage price fire. All right, good stuff. 0:19:47.280 --> 0:19:52.320 Anna Wong, chief US economists from Bloomberg Economics, PhD from 0:19:52.359 --> 0:19:54.399 the University of Chicago, love Clinis out every time it is. 0:19:54.400 --> 0:19:57.119 It's really cool because those people are wicked smat and 0:19:57.160 --> 0:19:58.800 they're very good with the numbers. And b A and 0:19:58.840 --> 0:20:05.320 Economics from Berkeley joining Sun our studios are a Wall 0:20:05.320 --> 0:20:08.800 Street reporters Shownalie Bassettionalie, I know you sat down with 0:20:08.880 --> 0:20:11.760 Goldman's sex CEO David Salomon recently. What did you two 0:20:12.040 --> 0:20:14.360 two kids talk about. Well, what's interesting is actually it's 0:20:14.359 --> 0:20:16.520 not just him. It was a Jane Fraser of City 0:20:16.520 --> 0:20:20.879 Group and David Siegel of two Sigma and Naz Dack CEO. Yeah, well, 0:20:20.880 --> 0:20:23.359 it's so fascinating. They they did an exercise with me 0:20:23.440 --> 0:20:26.800 for the thirtieth anniversary of Markets magazine to look forward 0:20:27.200 --> 0:20:30.800 Markets Magazine exactly to look forward the next thirty years. 0:20:30.880 --> 0:20:32.639 And what they really thought of is, Okay, what is 0:20:32.680 --> 0:20:35.159 in the early stages of innovation like the Internet was 0:20:35.200 --> 0:20:41.000 in the early nineties. Crypto, well, none of only keep only. 0:20:41.160 --> 0:20:44.760 David Siegel of two Sigma mentioned crypto by name. The 0:20:44.840 --> 0:20:48.240 rest had talked about digital assets a lot. Jane Fraser, 0:20:48.480 --> 0:20:50.920 the CEO of City Digital Assets. When you talk about 0:20:50.960 --> 0:20:53.440 digital assets, you're basically talking about crypto right there, talking 0:20:53.440 --> 0:20:58.360 about blockchain based assets. Blockchain based assets. Tokenization is what 0:20:58.480 --> 0:21:01.240 Jane Fraser talked about. She said this that we are 0:21:01.320 --> 0:21:05.720 moving towards a boundless virtual economy in which markets do 0:21:05.800 --> 0:21:09.040 not open or clothes and so one thing is certain, 0:21:09.080 --> 0:21:11.639 she said, will be virtual and it will be boundless. 0:21:11.960 --> 0:21:16.240 So actually, Adina Freeman of NASDAK said technology will exist 0:21:16.440 --> 0:21:20.520 for every asset on the planet to be digitized. And 0:21:20.760 --> 0:21:23.239 David Solomon, he actually talked more about energies. We can 0:21:23.280 --> 0:21:25.320 talk about that in a second, but as it pertains 0:21:25.359 --> 0:21:27.480 to blockchain. The one thing you did say is that 0:21:27.560 --> 0:21:30.560 while the technology is good for many things, it really 0:21:30.600 --> 0:21:33.240 needs to be more scalable, and scalability is one of 0:21:33.280 --> 0:21:36.800 the big challenges moving forward to see if blockchain will 0:21:36.840 --> 0:21:39.560 really be one of the main technologies of the next 0:21:39.800 --> 0:21:41.680 I just want to quickly ask about how we get 0:21:41.720 --> 0:21:43.720 hold of this. I mean, obviously, I know, being in 0:21:43.760 --> 0:21:46.240 this building, I can just grab a Bloomberg Markets magazine. 0:21:46.520 --> 0:21:49.480 But I also suspect there's an online component, because I 0:21:49.520 --> 0:21:53.240 know you have um audio at the very least of 0:21:53.560 --> 0:21:55.480 these interget I just read it on Bloomberg dot com 0:21:55.560 --> 0:21:57.520 or on the terminal. You know it's on. It's on 0:21:57.560 --> 0:22:00.399 the Bloomberg dot com. We get Marx magazine there. I 0:22:00.440 --> 0:22:02.480 never go on the website because obviously at the terminal 0:22:02.520 --> 0:22:04.520 in front of me, Yeah, these stories are online. It's 0:22:04.560 --> 0:22:06.879 it's being very well read and shared right now. We 0:22:07.000 --> 0:22:10.400 also spoke to let me mention the energy thing, guys, 0:22:10.880 --> 0:22:12.480 because we did have three out of the six c 0:22:12.600 --> 0:22:15.680