Speaker 1: This is Bloomberg Wall Street Week. What's the state of
Speaker 1: corporate governance? A defresent is a real issue to use.
Speaker 1: Economy continues to send mixed signals, the financial stories that
Speaker 1: cheap our world fed action to con concerns over dollar
Speaker 1: liquidity and encouraging China data. The five hundred wealthiest people
Speaker 1: in the world. Through the eyes of the most influential
Speaker 1: voices Larry Summers, the former Treasury Secretary, Starbard, CEO, Kevin
Speaker 1: Johnson sec Chairman j Clayton, Bloomberg Wall Street Week with
Speaker 1: David Weston from Bloomberg Radio. Finally almost US stimulus steal
Speaker 1: is all but done, and at Brexit deal appears to
Speaker 1: be within reach. But the one thing we know for
Speaker 1: sure is that we have a vaccine. This is Bloomberg
Speaker 1: Wall Street Week. I'm David Weston. Well, the Federal Reserve
Speaker 1: is going to try and lower interest rates. That will help.
Speaker 1: That will bring some figger back to the economy, but
Speaker 1: it can only be mended by an increasing willingness on
Speaker 1: the part of the public to buy goods, general confidence
Speaker 1: in the system itself, and much of that has been
Speaker 1: voted over a number of years. That was Pimco's bill
Speaker 1: gross back in the Federal Reserve met again this week,
Speaker 1: but gone in the days when it can restore vigors
Speaker 1: the economy by cutting interest rates. Instead, FED chair j
Speaker 1: pal tried to restore that vigor by assuring the markets
Speaker 1: that the FED will continue to buy bonds until the
Speaker 1: economy is substantially better than it is today. We asked
Speaker 1: black Rocks rick reader whether those words were likely to
Speaker 1: do the trick. I mean, I mean, they're they're on
Speaker 1: a persistent movement to support the economy. I think there
Speaker 1: was there was a lot of analysis that had said
Speaker 1: that the FED was hawkish because they didn't increase the
Speaker 1: weighted average maturity or they didn't actually increase YESID purchase program.
Speaker 1: Anybody who describes this vet as hawkish is so misguided.
Speaker 1: This is a fan that is just going to continue
Speaker 1: to be there and be as accommodative. They know. They
Speaker 1: said they're going to continue to ask a purchase program
Speaker 1: at least as large, both in treasuries and mortgages. By
Speaker 1: the way, I don't even think they need to increase
Speaker 1: mortgages out all. I think they can shrink them. But
Speaker 1: they're gonna They're gonna keep going, and they're going to
Speaker 1: be incredibly supportive of the new administration and the fiscal stimulus.
Speaker 1: From here, well, let's pick up on that exactly where
Speaker 1: why are they sticking with this allocation for mortgages? You know?
Speaker 1: I mean, I actually, well, I think the Fed is
Speaker 1: doing a brilliant job this. I don't think they need
Speaker 1: to do that. I mean, if you think about more,
Speaker 1: there aren't enough mortgagees to purchase from what they're what
Speaker 1: they're doing, the banks are dying for those assets and uh,
Speaker 1: and the levels are incredibly low. And even if they
Speaker 1: slowed down, the purchase program rates aren't mortgage rates aren't
Speaker 1: moving higher. The demand for mortgage product is incredible. And
Speaker 1: then you take the other side of it. The housing
Speaker 1: market is an incredibly good shape. And if you think
Speaker 1: about it, you know, one of the things that is
Speaker 1: a risk for a particularly lower and middle income is
Speaker 1: the housing market is doing so well that you'll continuously
Speaker 1: increased home prices, which I would argue that is the
Speaker 1: one part of inflation that I actually think is real.
Speaker 1: And then quite frankly, it's burdensome to a lot of
Speaker 1: the economy, a lot of particularly lower middle income. So anyway,
Speaker 1: that part I don't other than signaling we're just not
Speaker 1: gonna we're not gonna pull any accommodation. Um. I don't
Speaker 1: think they need to do that. So, as I say,
Speaker 1: the message out of the FED I thought was we
Speaker 1: think it's going to start getting better, presumably large but
Speaker 1: because of the vaccine, which we're hoping for so much.
Speaker 1: At the same time, there's a real divergence, maybe even
Speaker 1: a bifurcation in the marketplace, but whether it's individuals or
Speaker 1: its companies between some people who are doing very very
Speaker 1: well and some people are doing very very badly. Yeah.
Speaker 1: I mean, David, you hit the nail on the head. Listen.
Speaker 1: But I think this is you know what the central
Speaker 1: bank does is you know, it's tools are blunt and
Speaker 1: a lot of what happens is it lifts financial assets
Speaker 1: and it creates a this bifurcation as you describe, and
Speaker 1: it doesn't you know what the FED can do is
Speaker 1: it sort of paves the runway for for other policy
Speaker 1: to come in. Now you really need the fiscal and
Speaker 1: the fiscal is where you can direct tax policy, where
Speaker 1: you can direct where the stimulus gets to things like
Speaker 1: state and local things like healthcare, spending, education, spending, etcetera.
Speaker 1: Things that can actually a close that gap. I mean,
Speaker 1: you know, now we actually are going to get what
Speaker 1: I think, particularly when you think about chair yelling, I
Speaker 1: still call it chair yelling the Treasury secretary. And now
Speaker 1: you've got functionally two FED chairs that are going to
Speaker 1: operate in concert with one another. And that's where you
Speaker 1: get really effective policy when when fiscal monetary work hand
Speaker 1: to glo up with one another. So is that constructive
Speaker 1: or does that undermine the independence of the FED? I mean,
Speaker 1: how closely do you want the two of them to
Speaker 1: operate together You've called a sort of pilot and copilot. Yeah,
Speaker 1: it's a great question. I do believe in the in
Speaker 1: the independence and I certainly know that people at the
Speaker 1: FED really believe in the independence of the FED. However,
Speaker 1: you know, you do create some coordination. By the way,
Speaker 1: having where they're where they're not talking that is that
Speaker 1: is a problem, um, but having some coordination coordination makes sense,
Speaker 1: particularly as you described earlier, we've got a problem in
Speaker 1: the country that we need to put more people to work.
Speaker 1: You know, until vaccine starts to really get implemented, we
Speaker 1: need to put more people to work, and we need
Speaker 1: stabilize and account of employment dynamic that is real. And
Speaker 1: so you know that that idea that the FED is
Speaker 1: going to neutralize the debt, that the that the that
Speaker 1: the fiscal is going to put on. And by the way,
Speaker 1: you know, I think I think of Larry Summer is
Speaker 1: gonna talk about this, their paper that they wrote on
Speaker 1: the system can actually withstand more debt is a hundred
Speaker 1: percent right and as long as and a big part
Speaker 1: of it is the FED is keeping rates low, so
Speaker 1: the interest burden on the economy is not onerous. Yeah,
Speaker 1: no question. And this goes to Larry Summer's secular stagnation
Speaker 1: that the problem we have is too much savings, not
Speaker 1: too little, that we need to actually be investing in
Speaker 1: spending some money. The question always is, isn't it how
Speaker 1: do you spend that money? Okay, you can borrow really cheap,
Speaker 1: but it depends on how you how you spend it
Speaker 1: or invest it. It's definitely right. By the way, I
Speaker 1: think we're at a point in time today. What Larry
Speaker 1: says is dead right is the amount of savings. I mean,
Speaker 1: you think about the liquidity in the system, what's been created,
Speaker 1: the aging demographic. I know we've talked about for years pensions,
Speaker 1: life insurance companies that need the ability to fund is
Speaker 1: extraordinary savings do outweigh the sets by a lot, and
Speaker 1: that's why you're seeing appreciation and so many assets across
Speaker 1: across different markets. But you're right, I mean there's different
Speaker 1: return on equities as it were, uh return on equity
Speaker 1: possibility spending on how the government spends the money. I
Speaker 1: actually think we're at a point in time today that
Speaker 1: the velocity of tax dollars working their way through that
Speaker 1: comes on the backside of fiscal um quite tranquility, lowers
Speaker 1: the bar for what those returns need to be for
Speaker 1: those government programs. But like you say, some are obviously
Speaker 1: much more efficacious than others. And but I truly think
Speaker 1: that that quite frankly, most of the fiscal stimas you
Speaker 1: put in today, is gonna It's gonna create a velocity
Speaker 1: and which impacts the monetary base that the FED is
Speaker 1: created in a very positive way. That was Rick Reader's
Speaker 1: CIO for Global fixed Income and head of the Global
Speaker 1: Allocation Investment team at black Rock, coming up a major
Speaker 1: cyber attack on the U. S. Government, pointing out again
Speaker 1: how vulnerable we are, something that Sam Paulisano, the former
Speaker 1: head of IBM, knows about that's next on Wall Street
Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with
Speaker 1: David Weston from Bloomberg Radio. We learned this week about
Speaker 1: a massive hack of government computers, and we still don't know, frankly,
Speaker 1: how many were hacked or how much data was taken.
Speaker 1: It was bad enough that the National Security Advisor had
Speaker 1: to come back from his trip overseas to try to
Speaker 1: assess the situation. To help us assess the situation, we
Speaker 1: now have the former chairman and CEO of IBM, Sam Paulisano.
Speaker 1: Sam also served as the vice chair at Prison Obama's
Speaker 1: Commission trying to deal with cybersecurity, knows just a little
Speaker 1: bit about it, and now as an institute to try
Speaker 1: to address the issues. So when you heard this this week,
Speaker 1: what did you make of it? My first reaction when
Speaker 1: I heard about it, quite honestly, I thought it was
Speaker 1: the Chinese. And I'll tell you why. I say that,
Speaker 1: because if you look at his stark, stark pattern of
Speaker 1: the various types of attacks have occurred in the past,
Speaker 1: that this is more like the Chinese trying to get
Speaker 1: access to information and data, and then the Russians had
Speaker 1: their own strategies and we can talk about you know, uh,
Speaker 1: election interference and the like, as well as in the
Speaker 1: financial side of transactions. So however, obviously that's not the case.
Speaker 1: I mean, this time it was the Russians and whatever
Speaker 1: they call themselves, Cozy Bear Apt. Twenty nine, whatever it
Speaker 1: happens to be. I think that from what I've read
Speaker 1: and what I hear from my friends in the government,
Speaker 1: that they're pretty confident that's who it was this time. Now,
Speaker 1: having said all that, I mean, I think it does
Speaker 1: wake the nation up to the risk we faced if
Speaker 1: we don't do something better cybersecurity and our infrastructures. So
Speaker 1: how does this happen? Sam? And for those of us
Speaker 1: who don't understand this world the way you do, this
Speaker 1: is not the first hack we've told we've heard about,
Speaker 1: either of government computers or often of private sector computers,
Speaker 1: and yet it seems it was quite vulnerable. This organization,
Speaker 1: solar Wins, a private company, has something like two or
Speaker 1: seventy five or three hundred thousand different customers, about eighteen
Speaker 1: thousands they say might have been affected here, but it
Speaker 1: included things like the Treasury Department and the State Department,
Speaker 1: and that the Department of Homeland Security. The I R s,
Speaker 1: how how can we need that vulnerable at this point? Well,
Speaker 1: I mean, actually, David, if you if you kind of
Speaker 1: stand back from this hack, uh, And there's a pattern
Speaker 1: of this. In fact, we study this in the Obama
Speaker 1: Commission and my my as you mentioned, my faint Tank
Speaker 1: is focused on this as well. I think about it
Speaker 1: as your supply chain. In this particular case. Solar Wind
Speaker 1: is a provider of services, network services, but services to
Speaker 1: all these various entities, and that's the nature of their business. However,
Speaker 1: there's they're very innovative, they're very good, they're growing very
Speaker 1: very quickly. But but perhaps they weren't as thorough as
Speaker 1: they needed to be as far as securing their particular
Speaker 1: platform itself. I don't know that. But the suspicion is
Speaker 1: that they were able to get in. Uh. The hackers
Speaker 1: were able to get in and to what they would
Speaker 1: call a backdoor or vulnerability, and then through that vulnerability
Speaker 1: they were in there for a long time. And that's
Speaker 1: where they go on detected. Which is the complexity of
Speaker 1: trying to figure out how this happened and who they
Speaker 1: are and what the impact is because they've been kind
Speaker 1: of invisible, the all of a sudden something happens with
Speaker 1: they become apparent. Uh neither a big data sets start
Speaker 1: to disappear or wherever that happens to be, or the
Speaker 1: government sees what's going on and they have to begin
Speaker 1: to react. But the point of it is is the
Speaker 1: key is the vulnerability of people's supply chains. I mean,
Speaker 1: if you were going to go hack the US government,
Speaker 1: you wouldn't go hack the military or n s A
Speaker 1: or c i A. You would hack the civilion side
Speaker 1: of government, which is not nearly as secure coming through
Speaker 1: one of their providers, their service providers. No different than
Speaker 1: if you're going to attack hack a bank. I mean,
Speaker 1: to go after a bank that's spending billions of dollars
Speaker 1: or hundreds of millions of dollars to protect their infrastructure
Speaker 1: is very challenging. However, if you go through someone within
Speaker 1: their supply chains, from small innovative company that they're using
Speaker 1: to either help with technology or just sell their products
Speaker 1: and those sorts of things, they're the ones that are
Speaker 1: the most vulnerable, and then therefore you your entity is
Speaker 1: vulnerable because they're part of your operations. Well, that was
Speaker 1: the question. How dependent are we in the government on
Speaker 1: those independent contractors, and not just the contractors, but the
Speaker 1: subcontractors and the subcontracts to the subcontractors. We're very dependent
Speaker 1: on them. And you saw that not just in cyber
Speaker 1: go back to the pandemic when all of a sudden
Speaker 1: we couldn't get PPE and those sorts of things. So
Speaker 1: there's a total dependency on the supply chain and those
Speaker 1: suppliers within the government. That's not a bad thing, I mean,
Speaker 1: quite honestly. But what it what it requires is the
Speaker 1: government established standards, just like a company would establish standards
Speaker 1: that if you're going to be a provider of services
Speaker 1: to us, whether that's software, people, whatever it happens to be,
Speaker 1: you have to comply with these cyber standards. Now, there's
Speaker 1: a standard that was established called NISTS by in the
Speaker 1: Commerce Department that we worked on years ago. That's a
Speaker 1: very good standard by the way to secure the infrastructure,
Speaker 1: and a lot of the privact sector companies are complying
Speaker 1: with that. What we did in my little think tank
Speaker 1: would think of the cyber readiest incident. We felt that
Speaker 1: people were going to focus on these very small businesses
Speaker 1: so we created a whole set of tools that we
Speaker 1: distribute for free. I mean they're actually for freeworred nonprofits.
Speaker 1: So we can do these sorts of things, and we
Speaker 1: probably have hundreds of thousands of subscribers now, even small
Speaker 1: spots with three or four employees, not just companies or
Speaker 1: government agencies, to give them a basic level of protection
Speaker 1: when it comes to cyber threats. Now, the point of
Speaker 1: it again is why are we doing this? Is because
Speaker 1: if your General Motors or Exonmobile or some large entity,
Speaker 1: you have all these small little partners involved in your infrastructure,
Speaker 1: drilling operation, card dealerships, etcetera, etcetera. So you want to
Speaker 1: be able to protect yourself from their vulnerabilities, not just
Speaker 1: your own. From a cyber perspective, we have a president
Speaker 1: like Biden coming to office January twenty. Who does he
Speaker 1: have responsible for this? Or who does the current president,
Speaker 1: President Trump have response to this? Who does he call
Speaker 1: up when he hears about something like this? Well, that's
Speaker 1: a great thing. That is a great question, my friend,
Speaker 1: that is unbelievably a great question. I would say they
Speaker 1: should start with somebody within the White House staff. But
Speaker 1: let's talk about it as it is. Today versus as
Speaker 1: maybe a point of view, as it should be. As
Speaker 1: it is today, there is an agency UH called the
Speaker 1: Cybersecurity and infash Structure Security Agency. It's part of the
Speaker 1: Department of Homeland Security that it's responsible for these kinds
Speaker 1: of hacks, for agency protection, pandemics, all sorts of things.
Speaker 1: But they are the responsible agency that does these things.
Speaker 1: As you might recall, there's nobody leading that agency at
Speaker 1: this point in time because they were all fired. So
Speaker 1: there's no one in the agency at the agency level
Speaker 1: who is in charge of leading these operations. There's also
Speaker 1: no one in the White House staff either, by the way,
Speaker 1: because as UH it was part of the focus in
Speaker 1: the National Security Council of all administration. We are proposed
Speaker 1: in the Executive Order that they elevate it to give
Speaker 1: it established a higher set of priorities. That would be
Speaker 1: a visible way to create priority within the government is
Speaker 1: elevate that person or that individual. Since then, that actually
Speaker 1: has been kind of lessen. Their responsibilities have been lessened,
Speaker 1: and therefore obviously their focused and their impact has been lesson.
Speaker 1: So I'm the President of the United States, sitting President
Speaker 1: United States, and I wanted to call somebody from my
Speaker 1: staff in my office. Is that tell me, hey, what's
Speaker 1: going on? What should we be doing? There's no one there.
Speaker 1: Do we have the people in the United States government
Speaker 1: somewhere working somewhere who have the technical expertise to deal
Speaker 1: with this? I mean, this is very special stuff. Certainly
Speaker 1: I wouldn't know how to go about dealing with it.
Speaker 1: But do we have the level of sophistication in the
Speaker 1: people we have employed in the government. Yes, we do,
Speaker 1: but it's it's it's more and I'll call it the
Speaker 1: National Security and the Defense establishment. They really are excellent skills.
Speaker 1: If you look at what they referred to as dot mill,
Speaker 1: you know, uh U S Government, Dot Mill, Brouss, dot gov,
Speaker 1: which is the civilian side, they're very very good at this.
Speaker 1: They have good infrastructure. They actually do a pretty good
Speaker 1: job in defending their own infrastructure as well as our country.
Speaker 1: It's when you get to the civilian side of government.
Speaker 1: You know, you mentioned Treasury. The previous acts were hacks,
Speaker 1: were OPI, the Office of Personnel and Management O p M,
Speaker 1: I R S, etcetera, etcetera. They don't have the same
Speaker 1: level as skill and their infrastructure is very antiquated. That
Speaker 1: was Sam Paulisano, former chairman and CEO of IBM coming up.
Speaker 1: The vaccine is good news, but how good is it?
Speaker 1: And what do we need to do until everybody gets it?
Speaker 1: This is Wall Street Week on Bloomberg. This is Bloomberg
Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. Well,
Speaker 1: every single day seems to bring new news about vaccines,
Speaker 1: but also new instances of COVID nineteen infections and hospitalizations
Speaker 1: and yes, deaths. The question then, is how do we
Speaker 1: get from the current crisis to the time when we
Speaker 1: can start to get our lives back together again. Well,
Speaker 1: partners in Health is leading the way in that with
Speaker 1: its pioneering and the in testing and in tracing across
Speaker 1: the country. Welcome to the CEO of Partner's Health. She
Speaker 1: is Dr Sheila Davis. So, Dr Davis, thank you so
Speaker 1: much for being with us. Give us a sense of
Speaker 1: what you were doing at partners in Health. Yeah, in
Speaker 1: the US, we've been working closely, certainly through the in
Speaker 1: the state of Massachusetts at the invitation of Governor Baker,
Speaker 1: and then in eleven other jurisdictions in the US who
Speaker 1: have asked us to come in and help, and we've
Speaker 1: taken lessons learned from our work around the world in
Speaker 1: Haiti and Sierra Leone in other places on how to
Speaker 1: actually do contact tracing as one piece of a comprehensive plan.
Speaker 1: We really need a strong public health system, and this
Speaker 1: COVID nineteen has illuminated I think that in the U
Speaker 1: s we're really lacking a robust public health response. Well,
Speaker 1: that's one of the interesting things here. I heard someone say,
Speaker 1: I think Larry Summers actually said we've over invested in
Speaker 1: private health, under investment in public health, as you say,
Speaker 1: partners in health. Originally really in Haiti, but you've done
Speaker 1: an extensive word in other countries, including Rwanda, elsewhere around
Speaker 1: the world. What can we learn from some of the
Speaker 1: less developed countries that can really be applied and we
Speaker 1: need here in the United States of America. Yeah, I
Speaker 1: think it's a great question. You know, there's a lot
Speaker 1: we can learn. We know that other countries that do
Speaker 1: not have the same investment in health have done much
Speaker 1: better through this pandemic. And I think a lot of
Speaker 1: it is because there is a comprehensive healthcare system that
Speaker 1: have a public health model that includes contact tracing, that
Speaker 1: includes much more of people embedded in the community like
Speaker 1: community health workers. We still need high tech i c
Speaker 1: u s in all the places that we work, but
Speaker 1: we definitely can have lessons learned from Rwanda, which has
Speaker 1: done a fantastic pantemic control and other places, and how
Speaker 1: do we infuse those into the US health system and
Speaker 1: really build a system that's not reliant just on hospitals
Speaker 1: as the pinnacle of all of the healthcare. We've seen
Speaker 1: the testing ramp up from very very modest origins, and
Speaker 1: now it seems to be moving along in most of
Speaker 1: the United States. At the same time, I wonder about
Speaker 1: the tracing part of it, because I know you're very
Speaker 1: involved in that. We have reports, for example out of
Speaker 1: New Jersey, for example, where we had reports from Governor
Speaker 1: Murphy that maybe sev the people contacted don't comply, don't
Speaker 1: cooperate in helping with the tracing, you know. I think
Speaker 1: what we've found is that when people are when we're
Speaker 1: able to also assess up their needs are a lot
Speaker 1: of people are not able to isolate a quarantine safely
Speaker 1: if they don't have the social support that's needed. People
Speaker 1: need diapers, people need formula, people need food. So a
Speaker 1: core component of what we embedded in the Massachusetts program
Speaker 1: as well as um with other places we're working, is
Speaker 1: that there's a direct connection to when our contact tracers
Speaker 1: reach out, which is the advantage of versus a text
Speaker 1: or some other type of of tech option, and assessing
Speaker 1: do people need help, that they need a place to
Speaker 1: say where they can safely isolate from their family members.
Speaker 1: So it really is has to be a more of
Speaker 1: a safety net model. So I think most people do
Speaker 1: want to comply, but many people don't have the ability
Speaker 1: to have a separate wing in their home or a
Speaker 1: separate way to have food brought in. Now that sounds
Speaker 1: like a pretty labor intensive effort. As you say, it's
Speaker 1: not just a technological fix to figure out who's got
Speaker 1: it and who might give it to somebody, But how
Speaker 1: do we support you in fact you have and you
Speaker 1: have to isolate or you have to quarantine somehow. How
Speaker 1: labor intensive is this? How many people do have working
Speaker 1: on this, you know in Massachusetts in collaboration with other
Speaker 1: members of the state agencies, which has been a phenomenal
Speaker 1: experience for us, and we've learned a lot. We have
Speaker 1: now over two thousand people who are working on this effort,
Speaker 1: But really there are people who are picking up the
Speaker 1: phone talking to people um, you know, assessing what their
Speaker 1: needs are and connecting them to existing resources in the state.
Speaker 1: So a lot of it was not Certainly some new
Speaker 1: money was infused for the social support efforts, but part
Speaker 1: of it was also making sure that we're connecting the dots.
Speaker 1: And if we look at the overall cost of what
Speaker 1: it costs to have robots public health programs, it's much
Speaker 1: cheaper in the long run than a few days, weeks
Speaker 1: or months in a hospital, which is the most expensive
Speaker 1: place certainly to have care. How widely distributed is this
Speaker 1: the United States? I mean you've mentioned Massachusetts. I remember
Speaker 1: the Governor of Massachusetts at the news conference announcing early
Speaker 1: on that he was going to turn to partners and
Speaker 1: help to help them on the tracing how far beyond
Speaker 1: Massachusetts it's gone. So we're now currently working in eleven
Speaker 1: different jurisdictions, and it's anywhere from states to counties to
Speaker 1: working with mayor's office of offices. And we're also taking
Speaker 1: lessons learned and having a learning collaborative, which is an
Speaker 1: open sourced ability for UM lessons learned to be shared
Speaker 1: from Illinois to North Carolina and in a way that
Speaker 1: we're continuing to learn from each other. So we have
Speaker 1: staff embedded in all of these different places and they
Speaker 1: are providing technical support. They're looking at um connecting for convening,
Speaker 1: for knowledge sharing, and also we're really um committed to
Speaker 1: advocacy and that we're using this moment to also look
Speaker 1: at how do we have a better health system in
Speaker 1: the US that really focuses on those who are who
Speaker 1: need it most and those who have been most disproportionately
Speaker 1: impacted by COVID nineteen. That was Dr Sheila Davis, CEO
Speaker 1: of Partners and Health, coming off. We wrap up our
Speaker 1: week as we do every week, with Larry Summer's off Harvard.
Speaker 1: This is Wall Street Week on Bloomberg. This is Bloomberg
Speaker 1: Wall Street Week with David Weston from Bloomberg Radio. As
Speaker 1: we do every week, we conclude our week with Larry Summers,
Speaker 1: our special contributor, former treasure Secretary of Harvard. So Larry,
Speaker 1: great to have you back with us. We finally, finally
Speaker 1: are gonna get that stimulus about nine billion dollars. What
Speaker 1: do you make of it? Better than the alternative? Good
Speaker 1: insurance against things going wrong? Glad to see more investments
Speaker 1: in testing. Really sorry to see that we're not supporting
Speaker 1: state and local governments. It's not a healthy thing that
Speaker 1: we couldn't reach some kind of compromise on the liability
Speaker 1: issue and the state and local government issue. That's really
Speaker 1: a very poor reflection on our system, and I'm not
Speaker 1: sure we need it. And across the word set of
Speaker 1: checks for households at this date, given the vaccine is
Speaker 1: on the way, given that there's very substantial accumulated savings
Speaker 1: in large parts of the household sector. So I'm glad
Speaker 1: to see that stimulus is coming. I'm glad to see
Speaker 1: help for small business. I'm glad to see continuation of
Speaker 1: unemployment insurance. But this is not as good a bill
Speaker 1: as we could have had. Still, it's better than I expected,
Speaker 1: uh two weeks ago, and we should be grateful for that.
Speaker 1: So so pick up on your point about checks going
Speaker 1: to everybody, regardless of what their particular needs are not.
Speaker 1: We heard from Chair J. Powell of the Federal Reserve
Speaker 1: this week saying he thinks overall that the prospects are
Speaker 1: brightening for these economy in we have a rough patch
Speaker 1: to go through, but we do have a vaccine coming.
Speaker 1: But he also pointed out that really below that top
Speaker 1: line number or there are some people doing very very well,
Speaker 1: whether it's individuals or corporations or and other people doing
Speaker 1: really not well at all. What can we do about
Speaker 1: that part of the problem. Look, it's a case shaped recovery.
Speaker 1: There's no question that for people who can sit in
Speaker 1: the solitary splendor of their homes uh doing their work
Speaker 1: by zoom, having their groceries uh delivered um with more
Speaker 1: family around than uh usual, this has not been an
Speaker 1: agonizing period. For others who work with their hands, who
Speaker 1: are providing uh those uh deliveries, who don't have a
Speaker 1: kind of space to be fully safe, and may not
Speaker 1: even have a kind of cash flow to be able
Speaker 1: to buy both their medicines and their food, it's been
Speaker 1: a very very difficult period. This is why we need
Speaker 1: a more just and generous society. We need a stronger
Speaker 1: set of refundable tax credits, particularly the childcare tax credit.
Speaker 1: Above all, though, we need to run this economy strong
Speaker 1: and have an economy where the dominant theme is jobs
Speaker 1: trying to find workers rather than the dominant theme being
Speaker 1: workers trying to find jobs. If we do that then
Speaker 1: the engine of capitalism will be harnessed UH towards fairness.
Speaker 1: People will be sending buses into disadvantaged communities to find
Speaker 1: an attract and pull out employees. People will be providing
Speaker 1: second chance training programs for falons for others who may
Speaker 1: not have traditionally attractive credentials for work. But if you
Speaker 1: can run the economy to the point where people are
Speaker 1: sufficiently eager for workers, you can cause all kinds of
Speaker 1: good social things to happen. Larry, as you just laid out,
Speaker 1: the Biden administration as it comes in next month, has
Speaker 1: a long list on its agenda economically for the United States.
Speaker 1: At the same time, I wonder about globally, can we
Speaker 1: really succeed in the long term in the United States
Speaker 1: without having the global economy recover what lessons are there
Speaker 1: from the vandemic for the global economy. I used to
Speaker 1: say when I was Treasury Secretary that the world economy
Speaker 1: couldn't fly forever on a single American UH engine, or
Speaker 1: that no nation can be an oasis of prosperity in
Speaker 1: a troubled world. I think we're going to reap very
Speaker 1: substantial consequences from the fact that after decades when developing
Speaker 1: countries were developing and we're catching up with the world's
Speaker 1: major economies. That trend is going into reverse UH right now,
Speaker 1: given the difficulties they're having and managing COVID, managing reduced exports,
Speaker 1: managing heavy debts, managing reduced remittances, and we need to
Speaker 1: step up on that. We need to step up with
Speaker 1: very substantial global financial support provided through the international financial institutions.
Speaker 1: We need to UH step up with an SDR special
Speaker 1: drawing right allocation from the i m F. We need
Speaker 1: to step up with much more investment in making sure
Speaker 1: that there's not another pandemic, and while we're at it,
Speaker 1: making sure that there really are the resources to get
Speaker 1: vaccine to all the people on the planet, not just
Speaker 1: the people in the rich countries UM as quickly as possible.
Speaker 1: We've got to k shaped recovery problems. We need to
Speaker 1: fight a case shaped recovery problem in America and the
Speaker 1: case shaped recovery problem globally. And ultimately it's gonna be
Speaker 1: cheaper for us to fight that fight to support developing
Speaker 1: countries sooner rather than to support the UH later. And
Speaker 1: I hope that one of the first initiatives of the
Speaker 1: Biden administration will be bringing the global dimension to the
Speaker 1: COVID recovery effort. So that's a global perspective. Let's go
Speaker 1: local now we talk about global Wall Street, Let's talk
Speaker 1: about New York Wall Street and particularly New York City,
Speaker 1: the metropolitan area. What is going to happen to some
Speaker 1: of the vibran cities like New York there are also
Speaker 1: a high price San Francisco is another example. What's gonna
Speaker 1: happen as the result of this pandemic. We're seeing surveys
Speaker 1: now of various people, both people who hire and the
Speaker 1: workers themselves, saying they think they're gonna be working from
Speaker 1: home a lot more. Look, I think in terms of cities,
Speaker 1: the tendency has been for the last several decades in
Speaker 1: the United States for the rich to get richer, for
Speaker 1: the force to be sent center in rather than center out.
Speaker 1: I think that may change the combination of people being
Speaker 1: uncomfortable with density even post COVID, having seen what technology
Speaker 1: in terms of working at home can enable, the fact
Speaker 1: that there's no longer state and local tax deductibility means
Speaker 1: that the tax burdens associated with their major cities are
Speaker 1: much more burdensome for the affluent people who UH live
Speaker 1: in them, a sense that people are moving out rather
Speaker 1: than moving in, which then creates a kind of self
Speaker 1: fulfilling prophecy. UH. I would expect that if you look
Speaker 1: at great cities like New York, like San Francisco, like
Speaker 1: uh Los Angeles, that it's likely to be a difficult
Speaker 1: UH few years of declining public services, declining in migration,
Speaker 1: increasing UH out migration. And so my guesses we're going
Speaker 1: to see a quite substantial term doesn't give me any
Speaker 1: pleasure to make that forecasts. And in many ways, I
Speaker 1: think those concentrations of talent have been what pushed our
Speaker 1: country forward. But I think you're gonna see quite dramatic
Speaker 1: changes in traditional patterns of economic geography. We always like
Speaker 1: to end the week with a lightning round of Summer says,
Speaker 1: Let's take a three questions here. Number one, we heard
Speaker 1: j Powell, the tariff of the Fed, to this week
Speaker 1: say he's not going to back up bond buying until
Speaker 1: we really restore a lot of the employment. What are
Speaker 1: we going to move back to a four percent unemployment
Speaker 1: rate in this country end of twenty two? And what
Speaker 1: about inflation? He also talked about inflation. One won't be
Speaker 1: back over two percent inflation in the United States sometime
Speaker 1: during two will see at least several months because of
Speaker 1: some combination of specific factors where the inflation rate will
Speaker 1: get above above two percent um would be my guests.
Speaker 1: I think that may come sooner than people think. And Larry,
Speaker 1: finally we've seen yet again the markets really hold up
Speaker 1: no matter what's going on. In the respect of COVID
Speaker 1: nineteen as it spreads rapidly throughout the country. Are the
Speaker 1: marketing equity markets in particular, are they justified right now?
Speaker 1: Are they price about right? Are they overpriced? Where do
Speaker 1: you think they are? Many people think they're overpriced because
Speaker 1: they look at a very strong, very high price earnings ratio.
Speaker 1: I think that the kind of analysis the German Powell
Speaker 1: offered in his testimony on Wednesday UM or his press
Speaker 1: conference on Tuesday or Wednesday was right when he emphasized
Speaker 1: you have to look at price earnings ratios in the
Speaker 1: context of real interest rates, and that with real interest
Speaker 1: rates low for what I think are quite deep seated
Speaker 1: structural reasons. My guess is that you're going to uh
Speaker 1: see markets uh priced uh not unreasonably. That doesn't mean
Speaker 1: they're going to keep going up as fast as they
Speaker 1: have in the last six months. But I don't have
Speaker 1: a sense of extremely precarious ball. What does that due
Speaker 1: to price discovery and the equity markets. Is a practical
Speaker 1: matter because the low interest rates are true for everybody,
Speaker 1: whether you're a well run company or a poorly run company.
Speaker 1: Are we sustaining some and sometimes they call hi zombie
Speaker 1: companies who don't have enough e butit debt? It really
Speaker 1: sed to really service the debt. Is there a risk
Speaker 1: here to economy on the long run that we don't
Speaker 1: have prices coming really starting out the sheep from the goats,
Speaker 1: if I can put it that way. Incorporating it may
Speaker 1: be a bit of that, David, But I actually think
Speaker 1: the larger effect is probably that low interest rates mean
Speaker 1: lower discounting of the future, and so everybody is encouraged
Speaker 1: to take a longer view in their economic decision making,
Speaker 1: and it's that forward looking activity that's most likely to
Speaker 1: deliver large external benefits to the economies. So I think
Speaker 1: one should see these low interest rates more as an
Speaker 1: opportunity that is a burden, Okay, Larry Summers, It's always
Speaker 1: a light to end the week with you. That is
Speaker 1: our special contribuer to Larry Summers, former treasure Secretary of Harvard.
Speaker 1: That does it for this episode of Wall String Week.
Speaker 1: I'm David Weston. This is Bloomberg. See you next week.