WEBVTT - Surveillance: Negative Rates In U.S. With Chang 0:00:09.840 --> 0:00:12.960 Welcome to the Bloomberg Surveillance Podcast and I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.440 Bloomberg dot Com, and of course on the Bloomberg. Joyce 0:00:27.520 --> 0:00:31.360 cheg with us now a head of research at JP Morgan. 0:00:31.880 --> 0:00:35.200 Joyce has wonderful mathematical abilities out of Berkeley. We're thrilled 0:00:35.280 --> 0:00:37.320 that she could join us. That's one of Joyce. We 0:00:37.360 --> 0:00:39.720 had the honors talking to John Leoy's recently. It was 0:00:39.760 --> 0:00:43.120 my research paper the summer, not on a forecast, but 0:00:43.280 --> 0:00:47.000 on a model about the US tenure yield with migrate 0:00:47.080 --> 0:00:50.120 lower and lower and dare I say JP Morgan alluded 0:00:50.159 --> 0:00:54.520 to us UH negative interest rates as a possibility. Can 0:00:54.760 --> 0:01:02.080 can the United States culturally, socially, financially handle negative interest rates? 0:01:02.080 --> 0:01:06.840 Are we prepared to be like Germany and Switzerland? I 0:01:06.880 --> 0:01:08.880 think in the US, I mean you could see negative 0:01:08.920 --> 0:01:11.400 yields happen because we're just so close to that edge. 0:01:11.400 --> 0:01:14.480 But as a matter of policy, negative deposit rates, I 0:01:14.520 --> 0:01:16.880 do not see the Feds going there at all. Now 0:01:16.920 --> 0:01:19.319 they're gonna have to stay with DROO rates. You know, 0:01:19.360 --> 0:01:22.560 the forward guidance increasing the purchases is I think the 0:01:22.680 --> 0:01:25.480 routes that are going to go and even yield curve control. 0:01:25.520 --> 0:01:27.280 But I think the seed's going to go through a 0:01:27.319 --> 0:01:29.319 lot more of the tool kit before they think that 0:01:29.360 --> 0:01:31.280 would be the right option to take. And I think 0:01:31.280 --> 0:01:34.120 pl comments would mean not very clear Joyce. There's an 0:01:34.120 --> 0:01:38.679 interesting distinction here between market determined negative rates as we're 0:01:38.680 --> 0:01:41.080 seeing in the United Kingdom and frankly as we have 0:01:41.120 --> 0:01:44.280 seen in the US, perhaps not at sale but certainly 0:01:44.400 --> 0:01:49.240 in post sale trading, and the actual policy rate. How 0:01:49.280 --> 0:01:53.040 long can this continue where the market is pricing in 0:01:53.520 --> 0:01:57.320 negative yields while the policy were at rate remains positive. 0:01:58.600 --> 0:02:00.640 Everybody's going to just have to take a look at 0:02:00.720 --> 0:02:04.200 what kind of recovery lies ahead. Now we're looking at 0:02:04.240 --> 0:02:07.160 a third quarter rebound um that we think could be 0:02:07.200 --> 0:02:10.399 around thirty seven percent annual live After going down so 0:02:10.480 --> 0:02:13.320 hard in the first app now you're starting to see 0:02:13.400 --> 0:02:16.720 the recovery take place. So you're gonna have a discussion 0:02:16.760 --> 0:02:19.120 on just the path of the recovery. You know, we're 0:02:19.120 --> 0:02:21.600 still a long ways from talking about inflation as being 0:02:21.600 --> 0:02:25.440 a problem. There's a whole discussion on you know, deflationary risk. 0:02:25.639 --> 0:02:28.040 You know that's really heating up in Japan in particular, 0:02:28.520 --> 0:02:30.880 and so I think that, you know, this is something 0:02:30.919 --> 0:02:33.160 that is going to take time. You could have negative 0:02:33.480 --> 0:02:35.960 yields and flirting with those negative fields there for quite 0:02:35.960 --> 0:02:38.919 some scient time, and we saw that happened after the 0:02:38.919 --> 0:02:42.440 global financial crisis, and it's enduring now. So I don't 0:02:42.440 --> 0:02:44.800 think that we're going to go away from this topic 0:02:44.840 --> 0:02:47.080 anytime soon. Yeah, this is a question I've raised on 0:02:47.080 --> 0:02:49.600 this program a couple of times. In Europe, we saw 0:02:49.600 --> 0:02:52.400 that in twelve the front end of a lot of 0:02:52.400 --> 0:02:55.760 core European sovereign debt markets was negative, several years before 0:02:55.800 --> 0:03:00.160 negative rights actually became a reality at the policy levels. 0:03:00.200 --> 0:03:02.360 What I think is quite interesting going forward is we 0:03:02.400 --> 0:03:04.800 do face the very real prospect of the UK joining 0:03:04.800 --> 0:03:07.440 the club. We've had two policymakers in the last few 0:03:07.480 --> 0:03:10.080 days alone start to talk up negative interest rates. So 0:03:10.160 --> 0:03:12.200 let's game this out a little bit. You can have 0:03:12.200 --> 0:03:14.640 a negative policy rate the e c B, a negative 0:03:14.639 --> 0:03:17.399 policy rate at the BOJ potentially, and at the Bank 0:03:17.440 --> 0:03:20.600 of England all three, and then look at the Federal Reserve. 0:03:20.639 --> 0:03:22.880 I see no willingness whatsoever to go there. We all 0:03:22.880 --> 0:03:25.000 hope they don't. But let's talk about what they could 0:03:25.040 --> 0:03:28.240 mean for the treasury market. If we have several big 0:03:28.240 --> 0:03:32.280 and important central banks in the world with negative interest rates, 0:03:32.440 --> 0:03:37.560 how that shapes the front end of the treasury market. Yeah, yeah, Look, 0:03:37.720 --> 0:03:40.000 I think what you've seen that the Treasury do is 0:03:40.000 --> 0:03:43.040 they announced for this quarter just record issuance. I mean 0:03:43.120 --> 0:03:46.000 three trillion dollars. We haven't ever seen anything like that. 0:03:46.000 --> 0:03:48.120 That I think is going to be very hard to 0:03:48.200 --> 0:03:51.000 absorb you on the long end of it. But I 0:03:51.040 --> 0:03:52.960 think you're right on the front end. Everybody is looking 0:03:53.000 --> 0:03:56.120 at this global dynamic right now and the fact that 0:03:56.120 --> 0:03:59.120 you have even emerging market central banks from learning the 0:03:59.240 --> 0:04:02.160 qv right now, and still that you yields are coming 0:04:02.200 --> 0:04:04.720 down there, so you know that you're going to move 0:04:04.760 --> 0:04:07.880 into negative yields even if it's not the liberate policy, 0:04:08.240 --> 0:04:10.520 I think it's just a reality that's with us right now. 0:04:11.000 --> 0:04:14.000 Can you flip the reciprocal Joyce chain? Can you take 0:04:14.080 --> 0:04:16.160 all this bond talk. I mean, that's all Pharaoll wants 0:04:16.160 --> 0:04:20.159 to do, folks as bond talk, because look, for the 0:04:20.240 --> 0:04:24.520 real dull this conversation, the real yield under discussion to 0:04:24.680 --> 0:04:29.320 return Joyce chain. Can you flip the reciprocal and get 0:04:29.360 --> 0:04:32.920 yourself to huge valuations for equities? I mean, I don't 0:04:32.920 --> 0:04:34.440 even know what you do with a negative rate and 0:04:34.480 --> 0:04:37.400 a flip reciprocal to get to a multiple of thirty 0:04:37.480 --> 0:04:40.320 forty for a utility. But can you can you just 0:04:40.600 --> 0:04:44.480 keep the linkage with bonds and equities intact? Well, I 0:04:44.560 --> 0:04:47.040 think you're still going to see a winner takes all 0:04:47.320 --> 0:04:50.839 UM strategy play out in equity. So the texaster has 0:04:50.880 --> 0:04:53.599 moved away from the rest of the market that was 0:04:53.640 --> 0:04:56.560 in place even before the pandemics, and now you're seeing 0:04:56.600 --> 0:04:59.920 that even more exaggerated. So you know, on the equity 0:05:00.000 --> 0:05:04.200 market there's going to be a focus on your earning dividends. 0:05:04.279 --> 0:05:07.680 We've seen dividends being suspended in thirty three companies. We've 0:05:07.720 --> 0:05:12.080 seen them being cut in um more companies as well. 0:05:12.400 --> 0:05:16.080 So I think on the equity market, the focus is 0:05:16.279 --> 0:05:18.400 once again going to be winner takes all. A lot 0:05:18.400 --> 0:05:20.800 of the tech sector, you know, at the farm sector 0:05:21.120 --> 0:05:24.800 has sort of moved away from where the rest of 0:05:24.800 --> 0:05:28.520 the market is, and I think the debate will you 0:05:28.640 --> 0:05:31.640 actually look at what's the what's the impact UM that 0:05:31.720 --> 0:05:33.640 this is going to have as far as the duration 0:05:34.240 --> 0:05:36.960 um and as you said with Europe, this went on 0:05:37.080 --> 0:05:40.279 for you know, years, and is something that became Is 0:05:40.279 --> 0:05:43.479 it exceptional? Is this like a fast um You'll fall 0:05:43.640 --> 0:05:46.880 down in the in the GDP numbers and we're gonna 0:05:46.880 --> 0:05:49.240 have a quick backup and we're normalizing to something or 0:05:49.240 --> 0:05:51.080 are we really stuck in something that's much more in 0:05:51.160 --> 0:05:53.600 the ways that could go on for a longer period 0:05:53.600 --> 0:05:55.760 of time. Tom, I'm really glad you brought this up. 0:05:55.760 --> 0:05:57.440 I've actually been giving a lot of thought to this, 0:05:57.520 --> 0:05:59.640 and I was looking at sort of the fed bottle, 0:05:59.720 --> 0:06:02.200 at the dividend yield, the earnings yield on the SMP 0:06:02.400 --> 0:06:05.839 for example, versus treasuries and the problem that I have, 0:06:06.279 --> 0:06:08.840 and Tom, maybe you've done more research on this than I. 0:06:09.400 --> 0:06:12.640 The problem I have is how much is that dividend 0:06:12.720 --> 0:06:16.760 yield forward looking? And how much have stock investors already 0:06:16.760 --> 0:06:19.360 priced in some of the cuts that we're seeing Haliburton, 0:06:19.400 --> 0:06:23.760 for example, today reducing its dividend by scent. You know, 0:06:23.839 --> 0:06:26.840 how much is the bond market pricing in well more 0:06:27.320 --> 0:06:30.040 than the dividend yield currently is. But this is brilliant 0:06:30.080 --> 0:06:32.559 Joyce because what This comes down to your point, Joyce 0:06:32.600 --> 0:06:35.600 Chang and winner takes all. Is the idea that we're 0:06:35.600 --> 0:06:38.880 gonna have these few companies with persistent cash flows that 0:06:38.960 --> 0:06:42.080 can lead to that dividend growth belief that Lisa is 0:06:42.120 --> 0:06:45.560 talking about to get to a higher valuation. Joyce. Michael 0:06:45.600 --> 0:06:49.440 Mabusian years ago at Credit Swiezen, like Mason, was brilliant 0:06:49.480 --> 0:06:51.760 on this is that where we're heading, Joyce? And is 0:06:51.760 --> 0:06:54.160 it just fewer winners? I mean, is that all this 0:06:54.240 --> 0:06:56.520 is coming. It's not gonna be SMP five hundred, John, 0:06:56.520 --> 0:07:01.159 It's gonna be SMP. Well, I think that's what we're seeing, 0:07:01.200 --> 0:07:03.960 is that there's just more consolidation that's going on as 0:07:03.960 --> 0:07:06.760 a result of this crisis. And you know, I think 0:07:06.760 --> 0:07:08.400 a lot of people still look at the equity market 0:07:08.440 --> 0:07:11.120 and say, look, this doesn't really reflect the growth expectations. 0:07:11.200 --> 0:07:13.680 It's in line with the credit spread tightening. So this 0:07:13.760 --> 0:07:16.640 still it goes back to the policy support that we're 0:07:16.640 --> 0:07:19.560 seeing the said facilities, the fact that you've got you know, 0:07:19.640 --> 0:07:22.280 high grade bond issue in this year hitting a record 0:07:22.400 --> 0:07:25.160 one point six trillion, So is it about the growth 0:07:25.320 --> 0:07:27.840 or is it about the credit spread tightening? The said 0:07:27.880 --> 0:07:31.480 facilities um and um. Is this something where we're just 0:07:31.480 --> 0:07:34.120 going to see greater concentration, which happens after a lot 0:07:34.160 --> 0:07:38.040 of crisis. It's the survival of the fittest joyce fun 0:07:38.080 --> 0:07:46.680 sense to catch the joyce of global research right now 0:07:46.840 --> 0:07:49.760 out of physics at Yale in case Western is Matthew 0:07:49.760 --> 0:07:54.000 Harrison and Morgan Stanley, who has an acuity on biotech 0:07:54.240 --> 0:07:58.119 like no one out there. Matthew, what's the biggest hot 0:07:58.160 --> 0:08:00.760 air you see right now? To John's point, and I 0:08:00.800 --> 0:08:03.679 don't mean to pick on moderna, but what's the hot 0:08:03.720 --> 0:08:09.440 arab biotechnology right now that you dismissed the most? Um? 0:08:09.480 --> 0:08:13.000 I mean you're asking specifically related to COVID tom or 0:08:13.200 --> 0:08:16.200 or something just to COVID. I mean COVID what we're 0:08:16.200 --> 0:08:18.440 focused on. Matthew, Let's stay with that. What's the thing 0:08:18.520 --> 0:08:22.480 that well, I don't think there's something that upsets me 0:08:22.560 --> 0:08:24.840 the most. I mean I think I think the thing 0:08:24.880 --> 0:08:28.920 for everybody to remember here is is twofold one. There's 0:08:28.960 --> 0:08:31.600 a lot of early data and everybody is very focused 0:08:31.640 --> 0:08:34.080 on looking for treatments, and I think companies are doing 0:08:34.120 --> 0:08:36.520 the best job they can, but we should be careful 0:08:36.559 --> 0:08:40.920 in understanding that data is early in data is subject 0:08:40.920 --> 0:08:43.520 to change, and just being realistic about that. I think, 0:08:43.760 --> 0:08:46.360 you know, you've got a lot of generalists and people 0:08:46.400 --> 0:08:50.319 who don't typically look at these stocks, and so understanding 0:08:50.920 --> 0:08:53.480 what we know and what we don't know, um, I 0:08:53.520 --> 0:08:55.720 think is important. And I think it's a skill that 0:08:55.760 --> 0:08:57.760 people are maybe getting used to because they didn't always 0:08:57.800 --> 0:09:00.440 have to look at early data sets like this. So, Matt, 0:09:00.480 --> 0:09:03.680 help us build their skill because I think it's absolutely critical. 0:09:03.679 --> 0:09:05.760 It's a blind spot for so many of us. It's 0:09:05.800 --> 0:09:09.520 your world, and I think at the moment, subconsciously people 0:09:09.520 --> 0:09:12.880 are biased because they really want these potential vaccines to work. 0:09:12.960 --> 0:09:15.360 We all want to believe they'll work. I also think 0:09:15.360 --> 0:09:19.199 it's an obvious social stigma attached to journalists and analysts 0:09:19.240 --> 0:09:21.400 and people more broadly. You aren't familiar with these names 0:09:21.600 --> 0:09:24.960 to ask necessary questions to be skeptical. So can you 0:09:25.000 --> 0:09:27.440 help establish some guard rails for us as for when 0:09:27.440 --> 0:09:30.440 this news comes out again, this kind of news, how 0:09:30.480 --> 0:09:33.680 we can look at it a little bit more critically. Yeah, 0:09:33.720 --> 0:09:36.200 I think it's I think that the biggest understanding is 0:09:36.200 --> 0:09:37.839 to know what we know and we know and so 0:09:38.320 --> 0:09:40.360 I would say the core of the debate right now 0:09:41.040 --> 0:09:44.520 is that we don't we still don't know what level 0:09:44.520 --> 0:09:48.319 of antibodies are protective for people with COVID, and so 0:09:48.520 --> 0:09:53.920 comparing results from vaccine studies or other clinical studies against 0:09:53.960 --> 0:09:56.840 surrogate endpoints, right because what's been reported so far as 0:09:56.840 --> 0:09:59.560 a surrogate end point, usually in a large scale study, 0:09:59.600 --> 0:10:01.599 you're going to just test people who didn't get a 0:10:01.640 --> 0:10:03.800 vaccine and people who got a vaccine and find out 0:10:04.240 --> 0:10:06.760 if less people got infected with the disease who got 0:10:06.760 --> 0:10:09.440 the vaccine. That's the that's the truth, the true sort 0:10:09.440 --> 0:10:12.520 of market. But right now we're relying on surrogate endpoints, 0:10:13.120 --> 0:10:16.040 and because we're so early in the stages of of 0:10:16.120 --> 0:10:18.720 the outbreak, all of the work has not been done 0:10:18.760 --> 0:10:22.360 to establish exactly what level of antibodies are protected. People 0:10:22.400 --> 0:10:25.200 have guesses, we have ideas, we know what we should 0:10:25.280 --> 0:10:27.920 focus on in terms of that, but I don't think 0:10:27.920 --> 0:10:32.280 scientifically that debate has been settled, and so therefore, in 0:10:32.400 --> 0:10:37.560 trying to understand um how to interpret results, that scientific 0:10:37.559 --> 0:10:40.240 debate I think spills out into the media. I love 0:10:40.320 --> 0:10:43.280 this line and a Drew Armstrong story of Bloomberg News. 0:10:43.320 --> 0:10:46.560 By the standards of medical studies, such early partial data 0:10:46.600 --> 0:10:50.160 are considered the territory of specialists and day traders. I 0:10:50.160 --> 0:10:53.120 want to talk about the share sale that Moderna completed 0:10:53.520 --> 0:10:57.600 late Monday, one point three billion dollars of stock sold, 0:10:57.800 --> 0:11:01.720 arguably perhaps at the highs at of the recent moment, 0:11:01.840 --> 0:11:05.199 and I'm wondering it, can you give us a pathway 0:11:05.240 --> 0:11:10.280 from a vaccine, Matthew, to profits and how investors can 0:11:10.360 --> 0:11:15.079 really value a first mover kind of advantage here. Sure, 0:11:15.120 --> 0:11:17.719 we we've tried to think about what the market may 0:11:17.760 --> 0:11:20.400 look like, and I described the market in two ways. Right, 0:11:20.440 --> 0:11:23.800 there's in our view, there's going to be the pandemic market, 0:11:24.120 --> 0:11:28.360 which probably lasts through two and then the endemic market. 0:11:28.400 --> 0:11:30.680 And what I mean the difference there is, once you 0:11:30.720 --> 0:11:34.120 get through the pandemic period and you have to vaccinate everybody, 0:11:34.520 --> 0:11:37.559 try to vaccinate everybody, there's likely to be portions of 0:11:37.600 --> 0:11:42.040 the population that haven't been vaccinated. These might mutate. Children 0:11:42.040 --> 0:11:43.880 who are born need to be vaccinated, So that's going 0:11:43.920 --> 0:11:46.120 to be smaller, but that might be a longer tail. 0:11:46.320 --> 0:11:49.839 And so we've tried to price the vaccine, you know, 0:11:49.880 --> 0:11:52.760 at least theoretically around the pricing of flu vaccines, which 0:11:52.800 --> 0:11:56.160 are among the lowest of vaccines available, and so the 0:11:56.240 --> 0:12:00.840 numbers we put the pandemic period is like between ten 0:12:00.960 --> 0:12:04.320 and thirty billion dollars and the endemic period of somewhere 0:12:04.360 --> 0:12:07.400 between two and twenty five. The reason for that wide range, 0:12:07.440 --> 0:12:11.040 especially in the endemic period, is because we don't really 0:12:11.080 --> 0:12:14.240 know how much of the population needs to be revaccinated, 0:12:14.280 --> 0:12:18.160 either on an annual or or some other basis. Matthew, 0:12:18.240 --> 0:12:20.960 what will the big companies do? I mean, there's the 0:12:21.040 --> 0:12:26.040 idea of traditional pharmacology and then your esoteric world of biotech, 0:12:26.480 --> 0:12:28.840 and everybody gets all leathered up and they go to lunch, 0:12:28.840 --> 0:12:31.880 just to society which biotech company to buy? Is that? 0:12:31.920 --> 0:12:35.480 What's the future of feeding frenzy of the bigger companies, 0:12:35.520 --> 0:12:40.560 A bigger pharmacology companies buying up the biotechs. I think 0:12:40.600 --> 0:12:42.760 that's a I think that's a theme right that that 0:12:42.840 --> 0:12:47.400 we've we've observed for a while. UM. Biotech companies tend 0:12:47.400 --> 0:12:50.199 to be more entrepreneurial, tend to take more risk, tend 0:12:50.240 --> 0:12:55.000 to use new technologies and once they're proven and you know, 0:12:55.320 --> 0:12:58.400 they might be a new a new way to move 0:12:58.480 --> 0:13:01.520 quicker or move faster. Large companies tend to look at them, 0:13:01.520 --> 0:13:05.440 and I think that the biggest differences. Sometimes smaller companies 0:13:05.480 --> 0:13:08.199 have resources to focus on one small area where their 0:13:08.280 --> 0:13:10.679 technology could work. But once you prove that, a big 0:13:10.679 --> 0:13:12.360 company can say, well I can apply that for ten 0:13:12.440 --> 0:13:16.280 or twenty ways, and they have the massive amount of 0:13:16.360 --> 0:13:19.839 ability to push that forward. Matthew Harrison, thank you so much. 0:13:19.840 --> 0:13:23.480 With Morgan Stanley today, I'm Ada and all of biotech. 0:13:27.400 --> 0:13:30.680 Megan Dreen has had a wonderful set of academics and 0:13:30.720 --> 0:13:33.760 then work in market economics, and now she has her 0:13:33.840 --> 0:13:36.760 parchment out at the Harvard Kennedy School where she is 0:13:36.800 --> 0:13:40.520 a senior fellow. Megan, are we still in the United 0:13:40.600 --> 0:13:46.120 States where all this policy is stimulus? Are we finally 0:13:46.320 --> 0:13:48.480 getting to the point where we're going to admit it's 0:13:48.520 --> 0:13:54.080 about three million javas claims in its income substitution, wage substitution, 0:13:54.480 --> 0:13:59.439 and and indeed demand assistance. So I think we are 0:13:59.440 --> 0:14:02.800 getting to the ladder actually um and you can see 0:14:02.800 --> 0:14:06.240 it in terms of you know who Joe Biden has 0:14:06.280 --> 0:14:09.480 been bringing on to advise him, for example, So there 0:14:09.480 --> 0:14:12.680 are signs that there might be a shift further towards 0:14:12.679 --> 0:14:15.640 the last bringing people on like Stephanie Keelton, right, who's 0:14:15.720 --> 0:14:19.400 a big MMT proponent. There. It's just the beginning of 0:14:19.440 --> 0:14:22.920 a kernel of a hint that actually the Democratic Party 0:14:22.960 --> 0:14:25.240 is starting to think maybe kind of a right to 0:14:25.440 --> 0:14:29.040 point isn't gonna do it. We're gonna need to rethink 0:14:29.080 --> 0:14:32.320 how we approached the economy because a lot of people, 0:14:32.400 --> 0:14:35.119 you know, we're outraged that you know, half of Americans 0:14:35.120 --> 0:14:38.000 made more now on this unemployment insurance and they did 0:14:38.040 --> 0:14:39.800 in their regular jobs and thought that meant there was 0:14:39.840 --> 0:14:42.760 a problem with the unemployment insurance. But that's not the problem. 0:14:42.880 --> 0:14:45.040 The problem is that we've been paying people so little 0:14:45.080 --> 0:14:47.200 to begin with, and now lots of them don't even 0:14:47.240 --> 0:14:52.080 have jobs, so that we're looking at demand boosting, Megan brilliant. 0:14:52.120 --> 0:14:54.920 But if if, if Mr Biden swings to a policy 0:14:54.960 --> 0:14:58.760 prescription much like Europe, is the rest of America gonna 0:14:58.800 --> 0:15:01.359 go with him? Or is he gonna hey the presidency 0:15:01.400 --> 0:15:05.400 to a conservative America that flat out doesn't agree with 0:15:05.480 --> 0:15:09.920 that prescription. Well that's a great question, and I think 0:15:09.960 --> 0:15:12.880 anyone would be crazy to try to handicap the election 0:15:13.360 --> 0:15:15.840 at this point. But sure, at Harvard, so you can 0:15:15.880 --> 0:15:19.680 do that. I am at Harvard, But I think it's 0:15:19.680 --> 0:15:22.960 honestly too too difficult to tell. Um. I do think 0:15:22.960 --> 0:15:25.880 that people are realizing with this crisis that they weren't 0:15:25.880 --> 0:15:29.640 before that you know, a lot about our economy is broken, right, 0:15:29.640 --> 0:15:33.800 our healthcare is broken, our education is broken, We protect 0:15:33.840 --> 0:15:36.680 the most vulnerable is broken. And so I do think, 0:15:36.720 --> 0:15:38.920 you know, whether it's from the left side or maybe 0:15:38.960 --> 0:15:41.320 even the right side, we're all going to have a 0:15:41.360 --> 0:15:44.040 bigger role for the government in our lives. And that's 0:15:44.120 --> 0:15:46.480 generally a pernicious thing. We don't like that. I mean, 0:15:46.640 --> 0:15:50.360 higher taxes and maybe surveillance, contact tracing, all kinds of 0:15:50.440 --> 0:15:54.120 negative things, but there could be a positive implications and 0:15:54.160 --> 0:15:56.840 that maybe we start to rethink our economy and figure 0:15:56.880 --> 0:15:59.720 out how to protect those most vulnerable, and perhaps we 0:15:59.720 --> 0:16:01.840 should be doing that. But there is this terrible habit 0:16:02.040 --> 0:16:03.680 and not saying you're doing it, Megan, because I know 0:16:03.720 --> 0:16:05.440 you're not. There's just a terrible habit at the moment 0:16:05.480 --> 0:16:09.400 of looking down your nose at people who are taking entitlement, 0:16:09.480 --> 0:16:12.600 spending if it's benefits, whatever it is, welfare, if its 0:16:12.600 --> 0:16:16.400 employment benefits, and believing that somehow people would rather be 0:16:16.480 --> 0:16:19.800 on that than have a job. I don't know anyone 0:16:20.000 --> 0:16:23.040 that would prefer to have a handout over having a 0:16:23.160 --> 0:16:27.000 job and having that empowering moment of going to work. 0:16:27.000 --> 0:16:29.320 And for me, Megan, the story going into November is 0:16:29.560 --> 0:16:31.800 who's got the message to say that we're going to 0:16:31.880 --> 0:16:34.840 create the most jobs, They're going to be well paid jobs, 0:16:34.880 --> 0:16:37.920 and this is how we're going to do it. Yeah, 0:16:37.960 --> 0:16:40.960 and this time really is different in that you can 0:16:40.960 --> 0:16:44.320 easily look and say, actually, all these people out of work, 0:16:44.360 --> 0:16:47.280 it is not their fault, right, the virus is nobody's fault. 0:16:47.320 --> 0:16:49.840 And so that doesn't mean there is opportunity for kind 0:16:49.880 --> 0:16:52.920 of social mobilization here in a way that there hasn't 0:16:52.960 --> 0:16:55.000 been in the past. Um So I do. I do 0:16:55.080 --> 0:16:57.320 think there could be hoped for some kind of change 0:16:57.400 --> 0:16:59.440 on that front. And if you look at history, right, 0:16:59.520 --> 0:17:01.760 to be any guests and Council's Last of the UK 0:17:01.960 --> 0:17:04.520 came out of World Wars, Social security came out of 0:17:04.560 --> 0:17:07.800 the Great Depression. So stranger things have happened. I will 0:17:07.800 --> 0:17:10.399 say that, Megan. The conversation in Washington seems to be shifting, 0:17:10.440 --> 0:17:14.520 at least among Republicans to tying the next phase of 0:17:14.760 --> 0:17:19.480 rescue financing to employment with a payroll tax cut. Or 0:17:19.520 --> 0:17:24.159 other types of sort of employment contingent benefits. How do 0:17:24.200 --> 0:17:28.160 you see that factoring into the next phase of recovery, 0:17:28.200 --> 0:17:30.720 if at all, given that the previous rounds were really 0:17:30.760 --> 0:17:33.879 focused on the unemployed, the people who are furloughed or 0:17:33.920 --> 0:17:37.600 lost their jobs as a result of the pandemic. Yeah, 0:17:37.640 --> 0:17:39.640 I think you point out a weakness and the approach 0:17:39.680 --> 0:17:43.360 going forward, and there's also an inherent reticence among Republicans 0:17:43.400 --> 0:17:46.440 it seems to actually spend much more money. We saw 0:17:46.440 --> 0:17:48.480 this in two thousand and eight, two thousand nine as well, 0:17:48.520 --> 0:17:50.800 where you've got a few rounds of funding past and 0:17:50.880 --> 0:17:53.320 everyone figured we would just do the rest and perfect 0:17:53.320 --> 0:17:56.600 this UM in future rounds, and then quickly discovered the 0:17:56.600 --> 0:18:00.320 political capital wasn't really there to pass more ouns. And 0:18:00.840 --> 0:18:03.240 I think we'll have more rounds of this still stimulus here, 0:18:03.280 --> 0:18:06.960 but I think that the conversation is increasingly shifting, UM 0:18:07.000 --> 0:18:09.480 towards the skeptical side on spending more money on this 0:18:09.600 --> 0:18:11.920 in the way it's being directed, as you point out, 0:18:11.960 --> 0:18:13.960 as towards you know, tax tweaks that aren't really going 0:18:14.000 --> 0:18:18.000 to help people who don't have jobs or pensioners for example. Um, 0:18:18.200 --> 0:18:20.840 that's worrisome. I think no one should be actually worried 0:18:20.840 --> 0:18:22.720 about how to pay for this war right now. That's 0:18:22.720 --> 0:18:25.399 a totally inappropriate question to be asking at this point. 0:18:25.720 --> 0:18:29.720 Defin financing is the answer for the US. Megan Green, 0:18:29.840 --> 0:18:34.120 what's the Green Genie coefficient look like for America? I mean, 0:18:34.200 --> 0:18:37.360 it's a it's a complex math and it's a complex geometry, 0:18:37.680 --> 0:18:40.840 but it's real simple. Inequalities are gonna widen. James Diamond 0:18:40.880 --> 0:18:43.399 is talking about it and others. Is it just simple 0:18:43.480 --> 0:18:48.240 you would believe out of this pandemic inequality widens yep. 0:18:48.359 --> 0:18:51.280 I think unfortunately, inequality gets worse. Um, the people who 0:18:51.320 --> 0:18:54.120 lost their jobs were the hourly service workers who's never 0:18:54.160 --> 0:18:56.680 got wage games in the past recoveries, so they hadn't 0:18:56.680 --> 0:18:59.120 even gotten back on their feet since the last crisis 0:18:59.160 --> 0:19:02.720 and now they've been n sut down again. Market concentration 0:19:02.920 --> 0:19:07.000 should increase significantly, which undermines workers ability to negotiate their 0:19:07.000 --> 0:19:10.520 wages with big companies with access to capital markets take 0:19:10.640 --> 0:19:13.160 over for the small independent shops that are getting wiped 0:19:13.200 --> 0:19:16.960 out by this. Unfortunately, I think there will be greater inequality, 0:19:17.160 --> 0:19:19.480 will have higher taxes off the back of this, So 0:19:19.640 --> 0:19:22.399 maybe there will be some distribution to off set a 0:19:22.440 --> 0:19:25.200 bit of that, But generally I think the US has 0:19:25.200 --> 0:19:27.680 had a problem with income inequality going into this. The 0:19:27.800 --> 0:19:31.920 Genie coefficient is just under point five percent in the US, 0:19:31.960 --> 0:19:36.160 which is pretty high and rising, and it's just gonna 0:19:36.200 --> 0:19:38.919 go higher. Is the FED exacerbating that? I mean, the 0:19:38.920 --> 0:19:42.320 focus really very much on the Federal Reserve and its actions, 0:19:42.440 --> 0:19:46.240 especially given the disagreements in Congress. But a lot of 0:19:46.240 --> 0:19:49.560 the FED stimulus has really gone toward corporations, and I'm 0:19:49.560 --> 0:19:52.640 wondering how much that's factoring in here to the wealth gap. 0:19:54.320 --> 0:19:59.160 So yeah, every action by the FED has distributed effects, UM, 0:19:59.240 --> 0:20:02.639 and it ad exacerbating that. Although the FED is also 0:20:03.040 --> 0:20:06.480 providing funding the small businesses UM and so that feeds 0:20:06.480 --> 0:20:10.520 through into those who are more vulnerable. UM. That being said, 0:20:10.640 --> 0:20:13.320 you know, the set half stepped in, So I actually 0:20:13.359 --> 0:20:16.440 think we can't blame the FET on this one. UM. 0:20:16.480 --> 0:20:18.520 Maybe further down the line we'll figure I need to 0:20:18.520 --> 0:20:21.200 figure out how to tweak this. But the FED right 0:20:21.240 --> 0:20:24.840 now had to step into get rid of market dislocations, 0:20:24.880 --> 0:20:27.800 without which we would have had UM an even bigger 0:20:27.840 --> 0:20:30.919 crisis that would have hit the most vulnerable. Evening you 0:20:30.960 --> 0:20:32.399 know better than that. We will find a way of 0:20:32.440 --> 0:20:37.280 blaming the Federal Reserve. And they've been at Harvard for 0:20:37.280 --> 0:20:39.879 a little while. But that's not how this works. You 0:20:39.880 --> 0:20:43.680 know that we find ways to blame the feed. That's 0:20:43.680 --> 0:20:46.479 what we do on shows like this. She had her 0:20:46.560 --> 0:20:48.919 choice of like six schools, and she just took the 0:20:48.920 --> 0:20:52.320 one closest to Fenway Park. I know exactly the reasoning 0:20:52.720 --> 0:20:54.520 of it, but I just you know, you know, being 0:20:54.560 --> 0:20:57.000 around academia just a month too long. That's what we 0:20:57.080 --> 0:20:59.600 do here. We blame the feed for stuff. Megan, We 0:20:59.720 --> 0:21:02.960 love thank you for joining us. Megan Green. Of Harvard 0:21:07.600 --> 0:21:10.160 away from the Bloomberg School of Public Health is their 0:21:10.359 --> 0:21:15.280 huge medical establishment. Lawrence is expert at j h U 0:21:15.480 --> 0:21:19.480 in emergency medicine, and I asked her not about the death, 0:21:20.080 --> 0:21:24.840 but about the case dynamics right now here is Lawrence soer. 0:21:25.440 --> 0:21:29.399 We're seeing a lot of cases of um middle aged 0:21:29.440 --> 0:21:33.679 Americans who have these co morbidities, but we're also seeing 0:21:33.720 --> 0:21:36.879 younger people as well. UM. So, I think the early 0:21:36.960 --> 0:21:39.720 data that that we saw that this is all affecting 0:21:39.760 --> 0:21:43.119 the elderly with the co morbid populations is not necessarily true. 0:21:43.119 --> 0:21:46.040 We have a wide age range UM in our population, 0:21:46.119 --> 0:21:50.080