Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley.
Speaker 1: We bring you insight from the best in economics, finance, investment,
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Speaker 1: tend the attention now unlock those debates to policy tomp
Speaker 1: Kate and we sent to Bloomberg's Malcolm McKay for more
Speaker 1: him Mike. Good morning, John, and we are joined this
Speaker 1: morning by Thomas Barkin. He is the President of the
Speaker 1: Federal Reserve Bank of Richmond. And we welcome you to
Speaker 1: Bloomberg Radio and Television worldwide. And I will tell you
Speaker 1: that I will not talk over you or or insult
Speaker 1: you this morning. But one of them, one of the
Speaker 1: questions that is um well sometimes asking Washington these days,
Speaker 1: but always on Wall Street, is has the economy started
Speaker 1: to slow in the latter half of the summer going
Speaker 1: into the fall. From your perch in Richmond, what do
Speaker 1: you see? Well, the economy took a deep dive, as
Speaker 1: you know, and it did come back quickly when we
Speaker 1: open things up, but naturally you would expect to see
Speaker 1: that recovery be a little more gradual. Where I see
Speaker 1: the real challenge now is getting the last five of
Speaker 1: Americans back into the workforce, and that's where I've got
Speaker 1: my focus. Well, is that going to happen? What are
Speaker 1: ceo s business leaders telling you about their plans to
Speaker 1: hire and to invest, to spend more money. Well, there's
Speaker 1: a lot of uncertainties, starting of course with the virus,
Speaker 1: but also what the demand picture is going to look
Speaker 1: like next year. And in that context, I do think
Speaker 1: companies are streamlining um taking the last five or in
Speaker 1: finding those efficiencies. I am starting to hear them in
Speaker 1: the last month or so some amount of pivoting to tomorrow.
Speaker 1: And what I mean by that is, Okay, we're going
Speaker 1: to get this behind us. Let's now talk about where
Speaker 1: we go from here. So I do think they've streamlined,
Speaker 1: but I'm at least hopeful that as we get it
Speaker 1: in next year, you're going to see them starting to
Speaker 1: grow again. Do we see growth, uh, significant growth in
Speaker 1: the coming year? Do you think, oh? Sure? I mean,
Speaker 1: first of all, you've got a significant drop, and so
Speaker 1: we're going to grow out of that significant drop. I
Speaker 1: think you'll see a very strong third core for example,
Speaker 1: But even going into next year. I think part of
Speaker 1: the legacy of rounding over the comps we have from
Speaker 1: this year is you'll you'll see growth numbers that look
Speaker 1: that look strong. Um, I look at more level than
Speaker 1: growth rates, and so I do think then the question
Speaker 1: is going to be what do we look like year
Speaker 1: every year? And I still think, you know, by the
Speaker 1: end of the fourth quarter this year will still be
Speaker 1: down year every year, and it'll be hard to get
Speaker 1: back to where we were until sometime around the end
Speaker 1: of next year. Well is your forecast assuming we get
Speaker 1: a fiscal stimulus package, what happens if we don't. Well,
Speaker 1: I don't try to assume anything in terms of what
Speaker 1: happens in Washington one way or the other. So, um,
Speaker 1: you know they're talking and think we'll let them figure
Speaker 1: out whether it's going to be a stimulus package if
Speaker 1: there isn't one. In the short term, obviously there's some
Speaker 1: people down on their luck who are going to get
Speaker 1: less support then they otherwise need. I'm more focused on
Speaker 1: some of the long term issues, or maybe even medium
Speaker 1: term issues. We have a lot of people who used
Speaker 1: to be you know, waiters or working amusement park who
Speaker 1: now need new jobs, and their classic next job would
Speaker 1: have been working you know, at a retailer or maybe
Speaker 1: working uh at another restaurant. If those places aren't hiring,
Speaker 1: how do we get them redeployed? And issues of job retraining,
Speaker 1: issues of getting pell grants and getting them funded. Those
Speaker 1: are the kinds of things I think that are important
Speaker 1: if we're gonna bring the economy all the way back. Well,
Speaker 1: another major issue, and you have one of America's biggest
Speaker 1: banks in your district, that is whether or not the
Speaker 1: economy can withstand as forbearance comes to an end, and
Speaker 1: we see rising business debts and increased default, particularly for
Speaker 1: commercial real estate. How do you see that playing out? Well?
Speaker 1: I do think this fiscal stimulus that we've done has
Speaker 1: been quite helpful to the financial industry. We ah, there
Speaker 1: are people who have been down in their luck who
Speaker 1: have gotten stimulus payments, and you actually see credit card
Speaker 1: outstandings down. You have some small businesses that would have
Speaker 1: gone under they got PPP money. You've got bigger industries
Speaker 1: like airlines that might have been much more significantly challenged
Speaker 1: if they hadn't gotten the money they've gotten. And I
Speaker 1: think so far, knock on wood, Uh, what at least
Speaker 1: I'm seeing from the banks is still pretty healthy. What
Speaker 1: about in terms of their loans and lending, though there
Speaker 1: have been concerns expressed that, particularly in commercial real estate,
Speaker 1: you're going to have a wave of default. I think
Speaker 1: there will be challenges in commercial real estate, particularly on
Speaker 1: the retail side, as you could imagine um. But then
Speaker 1: the question is just are those defaults going to overwhelm
Speaker 1: the capital of the system. And my senses there's been
Speaker 1: a lot of capital building in the last ten years,
Speaker 1: and the exposures they're compared to the capital in the
Speaker 1: system don't seem to compare. If the economy is slowing,
Speaker 1: if things do turn south, is there anything more the
Speaker 1: FED can do? Or is it pretty much up to
Speaker 1: the folks in Washington. Now, Well, we have done a lot,
Speaker 1: and I like to think, as I learned in college,
Speaker 1: that there's fiscal and there's monetary, and you want to
Speaker 1: pull both of them as strongly as you can. Um
Speaker 1: I'd say, in this particular crisis, you could put public
Speaker 1: health on that list, and I think all three of
Speaker 1: those are levers. Will want to pull as hard as
Speaker 1: we can, and the FED has done a lot. There's,
Speaker 1: of course still more we could either do additionally or
Speaker 1: continue to do. But I'm actually more hopeful on where
Speaker 1: we're headed next year, and I'm hopeful that what we've done,
Speaker 1: and also fiscal and the public health authorities will put
Speaker 1: us in a much better place. Well, are you seeing
Speaker 1: demand for credit out there? There is some demand for credit, Certainly,
Speaker 1: auto credit has been very strong. Mortgage credit has been
Speaker 1: very strong. On the business side. I do think people
Speaker 1: took down their lines in March and April. They've you know,
Speaker 1: now repaid those and I'm not seeing quite as much
Speaker 1: demand on the business side, in part because they spend
Speaker 1: most of the year pretty with pretty strong cash positions.
Speaker 1: One of the big questions about lending is over the
Speaker 1: main Street Learning program that the FED runs. The issued
Speaker 1: a special senior loan officers survey last night that's had
Speaker 1: banks saying overly restrictive terms for borrowers are discouraging them
Speaker 1: from approving more loans, and others cited the unattractive terms
Speaker 1: for lenders for not even making loans at all, not
Speaker 1: offering them. What do you do about that? Well, I
Speaker 1: haven't seen that survey, but we designed the main Street
Speaker 1: Learning facility to play a particular role. Um it maybe
Speaker 1: it'll be a bigger role if you know, bad news
Speaker 1: happens in the economy goes south. But if their loans
Speaker 1: coming into banks, um, they get the option of whether
Speaker 1: to keep them or whether to sell off into our
Speaker 1: main street facility. Um. And I'm not sure it's bad
Speaker 1: news if they're making those loans and keeping them right. Uh.
Speaker 1: The Fed in June banned buy backs by banks and
Speaker 1: cap their dividends into the third quarter. Should that ban
Speaker 1: and cap be extended? Big debate right now? Well, I
Speaker 1: think we've put in place a protocol that allows us
Speaker 1: to have a deep investigation into the quality of the
Speaker 1: capital levels of the various banks. And and my view
Speaker 1: is we ought to do whatever we do want a
Speaker 1: bank by bank basis, and those banks that need to
Speaker 1: conserve capital ought to be conserving capital, and those banks
Speaker 1: that have sufficient capital ought to be free to distribute it.
Speaker 1: And I gotta ask you about the new framework and
Speaker 1: your view that things are going to pick up in
Speaker 1: the economy going forward, does that mean inflation is going
Speaker 1: to pick up as well? Well? There may well be
Speaker 1: some inflation, particularly in the near term, if demand comes
Speaker 1: back stronger than people think at a time where supply
Speaker 1: chains are stretched. But you know, our framework is not
Speaker 1: a round any particular month or quarters inflation. It's much
Speaker 1: more around where we headed in long term inflation expectations,
Speaker 1: and my hope is that those will start to creep
Speaker 1: up back toward our two percent target. Well, the new
Speaker 1: policy is that, of course, appropriate monetary policy, in your words,
Speaker 1: will likely aim to achieve inflation moderately above two percent
Speaker 1: for some time. For Tom Barkin, what does moderately mean
Speaker 1: and how far above two percent? Well, let's see when
Speaker 1: we get there. But I think I gave a speech, Mike,
Speaker 1: you were there in Idaho a year ago where I said,
Speaker 1: I'm very supportive of a range around two percent, in
Speaker 1: a moderate range around two percent, whether that's one and
Speaker 1: a half to two and a half or one to three.
Speaker 1: I think I said, is I'm not that focused on
Speaker 1: the difference between them, but that's something close to or
Speaker 1: is somebody put I think recently the word moderate means moderate. Yeah,
Speaker 1: that somebody was the chairman who also took pains to
Speaker 1: say over and over in his news conference that the
Speaker 1: new guidance is strong and powerful, which does not seem
Speaker 1: to be the read on Wall Street Why do you
Speaker 1: think there's a disconnect there. Oh, I don't know if
Speaker 1: there is a disconnect. The the analysis on Wall Street
Speaker 1: basically is that you can move interest rates, but you're
Speaker 1: not going to have much impact on the economy unless
Speaker 1: demand for credit picks up, unless something is done out
Speaker 1: of Capitol Hill. Well, I just say there's a difference
Speaker 1: between looking backwards and looking forwards. I think for the
Speaker 1: last six months, uh, we've gone pretty strong in terms
Speaker 1: of what we can do to support the economy, and
Speaker 1: now we're looking forward over the next year or two. UM.
Speaker 1: I think the four guidances particularly powerful as the economy
Speaker 1: comes back as I think it's going to. And so
Speaker 1: if you do see a strength and economy, if you
Speaker 1: do see modest overshoots of inflation, I think we're gonna
Speaker 1: be having a different conversation. One of the other things
Speaker 1: that people are watching in terms of overshoots is the
Speaker 1: equity markets lower for longer, raising financial stability concerns, particularly
Speaker 1: with pe ratios getting to where they are. Are you
Speaker 1: worried at all that your money that you're putting into
Speaker 1: the economy maybe ending up in the wrong place. Stimulating
Speaker 1: equity acquisition and share buy backs and things like that
Speaker 1: instead of stimulating growth. Well, I'm not a believer that, uh,
Speaker 1: you know, lower for longer means zero forever. I do think, um,
Speaker 1: I want to normalize at some point, and I want
Speaker 1: to normalize in part as a response to a healthy economy.
Speaker 1: So I watched I don't really watch the equity markets
Speaker 1: as much as I watched leverage levels. And the thing
Speaker 1: I would be nervous about is if you start seeing
Speaker 1: leverage in particular sectors that may be concerned. I don't
Speaker 1: think that's where we are. Yet you're not seeing dangerous
Speaker 1: changes in borrowing patterns, and well, actually credit card outstandings
Speaker 1: are down, um uh. And you know, as I said before,
Speaker 1: the pipelines on the business side aren't overwhelming the bank.
Speaker 1: So I don't think at this moment in time, and
Speaker 1: that's what you're saying. But of course, when you do
Speaker 1: have low rates, that's one of the things you want
Speaker 1: to watch. Um. But again, I think at this point
Speaker 1: the banks are tightening standards, not the other way around,
Speaker 1: and so I don't really see that as today's issue.
Speaker 1: Before I let you go, I gotta ask you, because
Speaker 1: I know this is an area of interest for you.
Speaker 1: Has the financial crisis we're undergoing now changed the dynamic
Speaker 1: for the economy in terms of inequality. A lot of
Speaker 1: talk these days about a K shaped recovery. Well, if
Speaker 1: you look at the last thirty or forty years, the
Speaker 1: mega story has been the decline in middle income jobs
Speaker 1: and the growth of both the high end jobs and
Speaker 1: those at the low end. And the sad part about
Speaker 1: this crisis is those low end jobs which are disproportionately
Speaker 1: UM low income. Personal service, personal contact workers UM, you know, uh, waiters,
Speaker 1: amusement parks, um, you know, pete, retail folks. Uh. Those
Speaker 1: are the jobs that have been hit the hardest. And
Speaker 1: I do worry that that group of people who have
Speaker 1: been brought in off the sidelines over the last five
Speaker 1: or ten years of a healthy economy are now displaced
Speaker 1: and their next best job is also displaced. And so
Speaker 1: this question of you know, what are the things we
Speaker 1: can do to help those people re engage in the
Speaker 1: workforce and rebuild their careers UM into some of the
Speaker 1: places perhaps that are you know, hotter, whether they be
Speaker 1: healthcare or manufacturing, or or construction or whatever. That's a
Speaker 1: pretty important thing for us to work on. And if
Speaker 1: we don't do that. I do worry about what that's
Speaker 1: gonna do for inequality. Tom Barkin, Richmond, Fed President, thank
Speaker 1: you very much for joining us this morning here on
Speaker 1: Bloomberg on Place to site. Joining us now, Lisa Shallott
Speaker 1: markin Stanley, se Lisa griants to catch up with you.
Speaker 1: You're calling this a policy micas correction. What is a
Speaker 1: policy micas correction? Well, look, I mean I think that
Speaker 1: as we know, it's really been the policymakers herculean efforts
Speaker 1: over the last six months that are unprecedented that have
Speaker 1: allowed us to rebound and retrace and and even uh,
Speaker 1: you know, by September two hit new fresh all time
Speaker 1: highs in the spire. But I think that they also
Speaker 1: you know, set the bar very very high, and uh
Speaker 1: many investors expected them to continue to follow through. And
Speaker 1: I think as uh, you know, the days of September
Speaker 1: war on, it became very clear that some of the
Speaker 1: gifts that we were given in March, April and May
Speaker 1: were perhaps gonna going to be a little bit tougher
Speaker 1: to procure. And that's really around the certainty of what
Speaker 1: policy is. And so you know, we've talked about kind
Speaker 1: of three things. Um, you know, We've talked about the
Speaker 1: fact that that we're quite frankly shocked at that that
Speaker 1: the market isn't more tumultuous given what looks like could
Speaker 1: potentially not just be a delay in the Cares acts,
Speaker 1: but but in um, you know, uh, a materially reduced
Speaker 1: and watered down version of it, when so many people
Speaker 1: in the June and July timeframe we're saying, oh, yeah,
Speaker 1: we're definitely going to get another trillion trillion and a
Speaker 1: half dollars UM and that's not forthcoming. And at your
Speaker 1: point that that you all were talking about for unemployed,
Speaker 1: for states, municipalities who've dealt with COVID, for uh, you know,
Speaker 1: many of the small businesses that are now beginning to
Speaker 1: to have to, uh, you know, make decisions about shuttering. Um.
Speaker 1: This stimulus matters, and it matters a lot um and
Speaker 1: it was in most people's forecasts. Lisa, push this forward.
Speaker 1: Does this mean in your view the market needs to
Speaker 1: sell off further in order to adequately reflect the lack
Speaker 1: of additional fiscal support from Washington. Yeah. So, so look,
Speaker 1: we've we've had this pull back from you know, seven
Speaker 1: eight percent from extraordinary which on September two, UM you know,
Speaker 1: our thought was that you know, you could get up
Speaker 1: something you know, much closer to a ten to fifteent
Speaker 1: zip code from those levels you know potentially you know,
Speaker 1: with being more um uh So, so yes, we do
Speaker 1: see that that there's downside to this market. So Carris
Speaker 1: was one of the disappointment on on the timing of
Speaker 1: cares and potentially the size of Carros. Uh is the
Speaker 1: first thing. The second thing is we know um has
Speaker 1: been you know, kind of where the FED is and
Speaker 1: and some of the ambiguity in their in their guidance. UM.
Speaker 1: I think you know clearly at Jackson Hole. Uh. You know,
Speaker 1: Chairman Powell fired a big bazooken and you know you
Speaker 1: all have been been talking about that very thoroughly over
Speaker 1: the last monta. This is you know, the end of
Speaker 1: forty years of of bucer ideology and and you know
Speaker 1: we're we're no longer going to fight to keep inflation
Speaker 1: below two percent. Was going to somehow aim for some
Speaker 1: thing that average inflation targeting, but the FED is not
Speaker 1: yet really specified how we're going to measure that over
Speaker 1: what time period, using what metrics. I think the market
Speaker 1: is frustrated about that, because how do you really try
Speaker 1: to guess at what inflation or inflation expectations are going
Speaker 1: to do and therefore what might trigger a height. Lisa,
Speaker 1: you got one excuse me, Lisa, just this is a
Speaker 1: good morning and I'm just fired up about this. Look, Lisa,
Speaker 1: you've got the best bio on Wall Street. You start
Speaker 1: off with your protest leftist burning of buildings at Brown
Speaker 1: University a million years ago, and how you're working for
Speaker 1: James Gorman on Wall Street. Lisa, it really works. That
Speaker 1: emotion is out there right now. We certainly saw that
Speaker 1: emotion last night. How will the sea officers of all
Speaker 1: our corporations and adapt and adjust to what they witnessed
Speaker 1: last night? Do they make plans? Did they sit back?
Speaker 1: Do they cut CAPEX by half? Or do they go
Speaker 1: out and say, hey there's optimism here, let's go Well,
Speaker 1: I don't know that they that that there was any
Speaker 1: optimism to be seen. Look, you know, without getting into
Speaker 1: the politics of it, you know, my observation is, and
Speaker 1: I think you know, some of the folks said it
Speaker 1: this morning on some of the other you know news
Speaker 1: out with you know that the dignity and democracy are
Speaker 1: the things that took a big hit m night right.
Speaker 1: And so I think from that perspective, you know, if
Speaker 1: I'm sitting in the c suite uh and and talking
Speaker 1: about what does this all mean? You know, I think
Speaker 1: it's it's preparing uh your teams for the fact that
Speaker 1: there could be material uncertainty uh, you know between November
Speaker 1: and January. UM, and that's volatility in markets. And it's
Speaker 1: potentially you know, in decision by your clients, customers, um uh,
Speaker 1: partners in in in in the economy and so um
Speaker 1: That's what I've been talking about. Leaks always guite to
Speaker 1: cash out with you Entertainment, Morgan Stanley, at least shout that.
Speaker 1: Morgan Stanley. See, we are privileged at Bloomberg Surveillance for radio,
Speaker 1: for television worldwide to bring you a lot of fancy people.
Speaker 1: I don't mean fancy meals, fancy dinners. I'm talking fancy economics,
Speaker 1: fancy politics, lots of fancy degrees. None of that matters.
Speaker 1: If you're a kid out of Leon and you're a
Speaker 1: chef and you build a food restaurant empire in this pandemic,
Speaker 1: what you're observing really really matters. This is without question,
Speaker 1: our most important interview of the day for small business
Speaker 1: America and those trying to survive this pandemic. He is
Speaker 1: Daniel Bellud. You know him from his restaurants, UH, and
Speaker 1: he joins us this morning, what are you gonna do, sir?
Speaker 1: And then the good morning wonderful to have you with us,
Speaker 1: what are you gonna do? And the next thirty days
Speaker 1: to keep your team employed, to keep going forward and
Speaker 1: to avoid the reality of this pandemic in New York City.
Speaker 1: We are getting ready for tonight for the opening inside.
Speaker 1: For of course that occupancy is unsustainable when it comes
Speaker 1: to the economic it's unsustainable for any business, and some
Speaker 1: of them not They are not able to reopen period,
Speaker 1: but we are. I decided to transform the restaurant into
Speaker 1: sort of a UH. I missed going in the South
Speaker 1: of France this summer, and I go every year, and
Speaker 1: I said, well, maybe I should bring a glimpse of
Speaker 1: the South of France. So, of course it's always starts
Speaker 1: with the food, but we also put out the decore.
Speaker 1: Young architect and artist stephaniely got to help me set
Speaker 1: up a decore. I raised a little bit of money
Speaker 1: with sponsors to make sure that you know, my priority
Speaker 1: was to protect my staff and to be able to
Speaker 1: bring back more stuff. From a business standpoint, is it
Speaker 1: more efficacious to receive assistance from the government and wait
Speaker 1: for the VACS scene or is it better to struggle
Speaker 1: forward with this limited occupancy. It didn't really think of
Speaker 1: the first. I went for the second, and we have
Speaker 1: been struggling. It has not been easy. We lost a
Speaker 1: lot of stuff and we are we but I'm very
Speaker 1: positive in a sense that having started early by doing
Speaker 1: a lot of initiatives, from doing charity meals with Food
Speaker 1: First Foundation and uh SL Green, to opening two of
Speaker 1: our restaurants in New York, to take one of our restaurant,
Speaker 1: Cafe Blue, to the countryside, I have brought almost certified
Speaker 1: for the certified percent of my staff, and I think
Speaker 1: I am I'm very proud of that. And that's not
Speaker 1: mean the economic and beautiful, but at least we are
Speaker 1: protecting the business and the jobs. Yes, so Chef Blued.
Speaker 1: As you reopen a capacity, there's a lot of discussion
Speaker 1: about the state of New York City, people moving out,
Speaker 1: clients not taking their business members out for dinner, or
Speaker 1: the clients still there for you to eventually reopen to
Speaker 1: the same degree that you once were. One we have
Speaker 1: so many regular customers who say, please let me know
Speaker 1: when we open inside. What we want is our customer
Speaker 1: to be very disciplined, very careful, and we want ourselves.
Speaker 1: I mean, of course, we train our staff, our staff
Speaker 1: and our team to be also very careful and very
Speaker 1: discipline with the process. We have also made alteration to
Speaker 1: our h v a C. We have done, of course,
Speaker 1: many different steps to ensure that safety come first, of course,
Speaker 1: and also for our staff as well. We have a
Speaker 1: regular checkup all the time with our staff. We want
Speaker 1: to make sure and guests and cause guests an employees
Speaker 1: feel very safe to be inside. And I think that's
Speaker 1: the case of every restaurate today. They try to really
Speaker 1: be on par with their responsibility of opening inside. Daniel,
Speaker 1: before we let you go. Forgive me for getting a
Speaker 1: little bit sentimental, but I grew up in this industry.
Speaker 1: I watched my father run several restaurants and how tough
Speaker 1: it is. But I also know what it means to
Speaker 1: people who work in this industry as well. It's a
Speaker 1: sanctuary for people down on their luck. It's where people
Speaker 1: go when they've lost the job. It's where people go
Speaker 1: to get the first job, and for young aspiring chefs
Speaker 1: in their teenage years right now, Chef, I'm just wondering
Speaker 1: what's the message for them as they want to get
Speaker 1: on the chef's side of the past. What do you
Speaker 1: say to them right now as they look around and
Speaker 1: see our world being decimated now, people who love the hospitality,
Speaker 1: the restaurant business, cooking and service, I think they should
Speaker 1: try to find a job at any level. You don't
Speaker 1: matter what type of restaurant it is or what type
Speaker 1: of business. I think it's important to have experienced right
Speaker 1: now and to be offul and positive because I think
Speaker 1: we get out of this dynamic and we will be stronger,
Speaker 1: and we certainly will have learned a lot through it.
Speaker 1: But I am my my My message is to stay
Speaker 1: positive and try to keep learning in any which way
Speaker 1: they can about their profession they're cooking. I mean, choosing
Speaker 1: to be a chef is it shouldn't be a very
Speaker 1: expensive proposition to go to always to go to school.
Speaker 1: You can directly apply into a restaurant and start cooking
Speaker 1: as well. Chef fantastic to catch up with you today,
Speaker 1: Come back soon. Chef Daniel followed that on the situation
Speaker 1: in New York City, and beyond. This is so so
Speaker 1: tough for so many people in this industry right now,
Speaker 1: and I think we always forget the other side of
Speaker 1: the industry. For many people, this is where they turn
Speaker 1: to get a job when they're really desperate for a job.
Speaker 1: And this time around, when you hear about those layoffs,
Speaker 1: the likes of the Walt Disney Company, some those jobs
Speaker 1: won't be there to fall back on in the way
Speaker 1: that they used to pay Right now, Noria will being
Speaker 1: here with us joining from Israel today, with New York
Speaker 1: University of course, no real today, dot com neural. Every
Speaker 1: administration has its own character. Indeed, i'll use the word
Speaker 1: respectfully dysfunctions as well. You observe the debate last night,
Speaker 1: how do we get forward on policy whomever wins this
Speaker 1: November election? But the major problem is I'm not gonna
Speaker 1: know November third one because the markets are done in
Speaker 1: Europe and the US future down because people are realizing
Speaker 1: that the election night is going to become election weeks
Speaker 1: or weeks or maybe months if it's up to Trump.
Speaker 1: Last night was the guest debate ever and the President
Speaker 1: behaved like a bully, interrupting and attacking, but by them
Speaker 1: in the moderator. I mean from the point of the markets,
Speaker 1: and that's why they're gonna go further down. The uys
Speaker 1: not right now, looks like a public is run by
Speaker 1: I wanna be caw deal or dictator. Is literally planning
Speaker 1: an institutional coup. He said that mail in ballots are
Speaker 1: gonna be and through them he's gonna claim against them.
Speaker 1: He said, it's not gonna have an orderly transition. He
Speaker 1: told these militia white supremacist that well, all right, stand by.
Speaker 1: He's gonna start the Supreme Court. He's gonna use the
Speaker 1: Insurrection Act. And it's telling the bunch of the city
Speaker 1: is already anarchies. This is the beginning of civil unrest, violence,
Speaker 1: if not civil war. This is gonna be the earliest
Speaker 1: election ever. We're not gonna know we won an election night.
Speaker 1: That's why the markets are down. In the case of
Speaker 1: God versus Bush, the market was done percent. This timarund
Speaker 1: is gonna be much worse. Snoil, your heritage here is
Speaker 1: Jeff Sex at Harvard, working with Secretary Gutner, working with
Speaker 1: Lawrence Somers as well, and then time in the Clinton administration.
Speaker 1: I think we understand where you fit into the political landscape.
Speaker 1: The fact is a president of the United States represents
Speaker 1: a large body of America who is not seeing economic growth.
Speaker 1: Do you detect a Democratic Party plan, whether the middle
Speaker 1: ground is espoused by Vice President Biden last night or
Speaker 1: by as Mr Trump calls them, the radical left. I
Speaker 1: think that the plans are Biden are gonna be quite
Speaker 1: moderate and centric. I progressive. First of all, he is
Speaker 1: a centrist. Secondly, has chosen another centrist as a running mate.
Speaker 1: Third of all, the median senator Democrat if the Democrats
Speaker 1: win the Senate is more moderate than the left of
Speaker 1: the party. So radical things like Medicare for all and
Speaker 1: no private plans and the Green New Deal are not
Speaker 1: gonna pass. And he has a plan. He's a plan
Speaker 1: for a massive physical steamers that we need to pay
Speaker 1: for it by raising moderately taxes on corporates from twenty
Speaker 1: one to twenty percent, reducing loop so we're not gonna
Speaker 1: runaway budget deficits, investing infrastructure, investing in renewables, investing into
Speaker 1: increasing minimum wages and incomes for workers so there is
Speaker 1: more consumptual growth and the markets. Until August when by
Speaker 1: there was a the pak of his poles were actually
Speaker 1: going higher. The needs that markets do realize that actually
Speaker 1: is politic goal to lead to stronger economic growth, and
Speaker 1: any hits on profits and earnings coming from slightly higher
Speaker 1: taxes on the corporate sector are going to be counterbalanced
Speaker 1: by a stimulus gonna lead to stronger economic growth. So on.
Speaker 1: Net I think the markets are quite calm about the
Speaker 1: prospects or Biden winning or even a switch, but nereal
Speaker 1: what priced in the markets right now? How close will
Speaker 1: the selection be? Well, first of all, as I pointed out,
Speaker 1: the correction occurred in September, it's not just the US
Speaker 1: election risk, but what's happening with the new cases, with
Speaker 1: the worry about the third wave, with the risk of
Speaker 1: a fiscal cliff, with the on me nowtstalling and so
Speaker 1: on and so on. But now in the last few
Speaker 1: days and what has happened overnight, I think that people
Speaker 1: are gonna start realizing the the US electoral list or
Speaker 1: severe If you look at the VIGs, the VIGs for
Speaker 1: November and December, the future one is much higher than
Speaker 1: this right now, options on very types of effects trading
Speaker 1: as suggesting people trying to adge those things going into
Speaker 1: November and December. So certain investors are signaling that are
Speaker 1: worried about a long, ugly contested election and they've started
Speaker 1: to take protection against it. What's the number one risk
Speaker 1: in real in the next five to six months. Is
Speaker 1: it a posy mistake, is it a stimulus, Is it
Speaker 1: the U S elections, or is it Brexit? Well, in
Speaker 1: my view, is going to be initially the US election
Speaker 1: because most likely we're not gonna know who's the winner,
Speaker 1: is going to be contested for weeks, if not for months.
Speaker 1: You could have a ten percent correction just because of that.
Speaker 1: If you have a very severe, protracted, ugly and con
Speaker 1: as that situation, I think the braxing matters for the
Speaker 1: UK and for Europe. That's another risk. But the other
Speaker 1: risk is that unfortunately the second wave is not stopping
Speaker 1: and we're going into fall and winter where everything knows
Speaker 1: it's gonna be a third wave and the scientist I
Speaker 1: saying we're not gonna get safe and effective vaccine by
Speaker 1: the spring of next year. That's is to the economy
Speaker 1: and to the market as well. Nora Beanie, thank you
Speaker 1: so much for New York University and noral Today dot Com.
Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and
Speaker 1: listen to interviews on Apple podcast, SoundCloud, or whichever podcast
Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before
Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg
Speaker 1: Radio