WEBVTT - Bloomberg Wall Street Week - January 13, 2023 0:00:00.520 --> 0:00:03.760 This is Bloomberg Wall Street Week. We turn our attention 0:00:03.840 --> 0:00:06.399 to the markets this week at U S CPI nevers 0:00:06.440 --> 0:00:10.280 reinforcing concerns about inflation. The financial stories that cheap are 0:00:10.360 --> 0:00:13.400 worth a really different reaction to Mark two. More indications 0:00:13.400 --> 0:00:15.960 of just how hot the U. S. Economy really is 0:00:16.000 --> 0:00:19.439 through the eyes of the most influential voices Larry Summers, 0:00:19.480 --> 0:00:22.279 the former Treachery Secretary, Katherine Keening, CEO of v n 0:00:22.440 --> 0:00:25.600 Y Moms, Sam's l Sharmon and founder of Equatic Group 0:00:25.720 --> 0:00:29.200 Investment in Bloomberg Wall Street Week with David Weston from 0:00:29.320 --> 0:00:34.640 Bloomberg Radio. Inflation easing odds or European recession dropping and 0:00:34.800 --> 0:00:38.800 North America coming together? Maybe just a gleam of optimism 0:00:38.880 --> 0:00:41.360 for the new year. This is Bloomberg Wall Street Week. 0:00:41.440 --> 0:00:45.640 I'm David Weston. This week's special contributor Larry Summers on 0:00:45.680 --> 0:00:48.120 whether we're seeing light at the end of the inflation 0:00:48.159 --> 0:00:51.720 tunnel or a false dawn if you think about it. 0:00:51.840 --> 0:00:56.120 The good news was inflation running in the sixes. That's 0:00:56.160 --> 0:01:02.080 still inconceivably high. Former IBM CEO Sam paulmisano On CEO 0:01:02.200 --> 0:01:05.440 is facing a very different world. Do it's necessary to 0:01:05.480 --> 0:01:09.319 maintain strategic growth and dry productivity at the same time. 0:01:09.680 --> 0:01:12.720 And economist Melissa Carney of the University of Maryland on 0:01:12.880 --> 0:01:15.440 what declining births in the United States could mean for 0:01:15.520 --> 0:01:21.160 economic growth. You have fewer people of working age. More worryingly, 0:01:21.200 --> 0:01:38.600 it could mean lower GDP per capita. Maybe it was 0:01:38.680 --> 0:01:40.960 just the promise of a new year, or maybe just 0:01:41.120 --> 0:01:44.520 maybe things really are starting to look a little bit better. 0:01:44.880 --> 0:01:47.080 As the leaders of the three nations of North America 0:01:47.160 --> 0:01:50.360 gathered in Mexico City this week and sought cooperation on 0:01:50.440 --> 0:01:53.920 a host of issues. Above all, we both committed to 0:01:53.960 --> 0:01:57.640 pursuing a better future, one grounded on peace and prosperity 0:01:57.960 --> 0:02:01.040 for all of our people. We're one of those inflection points, 0:02:01.480 --> 0:02:03.200 or what we do in the next several years is 0:02:03.240 --> 0:02:06.280 going to dechairmine what the world looks like the next two, three, 0:02:06.320 --> 0:02:10.000 four decades. In Europe, odds of recession are dropping, at 0:02:10.040 --> 0:02:12.720 least according to the Belgian Prime Minister. If you look 0:02:12.720 --> 0:02:17.640 at the economic indicators UM in needs, the fearful recession 0:02:18.600 --> 0:02:21.040 is diminishing UM and there are good reasons for that. 0:02:21.680 --> 0:02:25.040 And in the United States, inflation signals reinforced what we 0:02:25.160 --> 0:02:28.080 thought we saw at the end of last year, inflation 0:02:28.240 --> 0:02:32.000 may just may be truly coming back down a month 0:02:32.040 --> 0:02:36.040 over month CPI print negative. This number was bang on 0:02:36.120 --> 0:02:40.839 the screws. When he finally got the job, Speaker Kevin 0:02:40.919 --> 0:02:44.280 McCarthy got up to a surprisingly bipartisan start, with the 0:02:44.320 --> 0:02:48.200 House almost unanimous in improving a new select committee to 0:02:48.240 --> 0:02:51.000 look at the threats posed by China. We know that 0:02:51.120 --> 0:02:53.720 China right now is what would be called our pacing threat. 0:02:54.000 --> 0:02:56.720 This is something not just from the military perspective, but 0:02:56.760 --> 0:03:00.239 also from an economic perspective that we've seen our vulnerability days, 0:03:00.240 --> 0:03:03.280 particularly over the last couple of years. Both things weren't 0:03:03.360 --> 0:03:06.240 quite as smooth for all the other lawmakers as the 0:03:06.280 --> 0:03:09.560 new Republican member from Long Island, George Santos, faces a 0:03:09.720 --> 0:03:13.400 range of investigations and growing calls for him to step aside, 0:03:13.840 --> 0:03:18.360 including from Republicans on behalf of the Nissa County Republican Committee. 0:03:19.000 --> 0:03:23.200 I am calling for his immediate resignation. We must call 0:03:23.560 --> 0:03:27.600 for the resignation of Congressman George Santos. Calling for George 0:03:27.600 --> 0:03:31.880 Santos to resign, Calling on George Santos to resign, demand 0:03:31.960 --> 0:03:35.800 the George Santos steps down, calling him to step aside. 0:03:35.880 --> 0:03:40.000 You should design. My office will have no interaction with 0:03:40.040 --> 0:03:45.600 George Santos or his staff until he resigns. In the end, 0:03:45.720 --> 0:03:48.160 the markets this week saw the half full part of 0:03:48.200 --> 0:03:51.240 the glass, with the SMP gaining two point seven percent 0:03:51.280 --> 0:03:54.240 for the week and the NAZAC up four point eight percent, 0:03:54.520 --> 0:03:57.320 while bonds strengthened as well, with the yield on the 0:03:57.320 --> 0:04:00.800 ten year down six basis points, ending at just about 0:04:01.000 --> 0:04:03.400 three point five percent. Take us through the week in 0:04:03.440 --> 0:04:06.240 the numbers. Welcome to Sanny Bechela CEO of Rock Creek 0:04:06.520 --> 0:04:09.720 and David Bianco, DWS Group ce IO for the America. 0:04:09.800 --> 0:04:11.640 So welcome back both of you. It's good to have 0:04:11.640 --> 0:04:15.000 you here. David, we start with you CPN Nembers encouraging inflation. 0:04:15.280 --> 0:04:17.839 Is that what's driving the markets right now? It is 0:04:18.080 --> 0:04:19.800 UM and we knew that going into the week that 0:04:19.839 --> 0:04:22.920 investors would be focused on the inflation report. There were 0:04:22.920 --> 0:04:25.839 whispers that the inflation report with surprise to the downside. 0:04:26.120 --> 0:04:29.760 It didn't a King Bengan on target UM, but it 0:04:29.800 --> 0:04:33.680 confirms that inflation is continuing to come down. However, the 0:04:33.720 --> 0:04:36.960 battle is not over, and I think investors should and 0:04:37.080 --> 0:04:41.120 certainly the Fed will likely stay focused on the labor market, 0:04:41.640 --> 0:04:44.560 and we still see wages really running red hot, so 0:04:44.640 --> 0:04:47.240 the inflation fights not over. We probably have a few 0:04:47.240 --> 0:04:49.799 more hikes ahead of about basis points, So that's interesting. 0:04:49.800 --> 0:04:51.960 I'm signing a few more hikes ahead. The question for 0:04:52.040 --> 0:04:54.120 me is it may not be over, but how close 0:04:54.360 --> 0:04:55.760 is it to being over? What do you think the 0:04:55.760 --> 0:04:57.520 FED is going to think when they meet at the 0:04:57.520 --> 0:05:02.279 beginning of February. I think the FED is still trying 0:05:02.320 --> 0:05:06.719 to remain relatively hawkish and um and as David said, 0:05:07.560 --> 0:05:10.520 pretty sure they will do that twenty five basis points 0:05:10.560 --> 0:05:13.200 in their next meeting. They are looking, as he said, 0:05:13.440 --> 0:05:17.520 um at the employment numbers really carefully and um and 0:05:17.640 --> 0:05:20.880 also of course at earning the reports that are coming 0:05:20.920 --> 0:05:24.760 out as we speak. So so I think those two 0:05:24.800 --> 0:05:28.960 items will be important. Wage growth is starting to show 0:05:29.000 --> 0:05:33.760 a little bit of maybe softening. We're seeing people starting 0:05:33.800 --> 0:05:36.680 to talk about laying off in certain sectors like finance 0:05:36.720 --> 0:05:39.560 and technology. So I think all of that will factor 0:05:39.640 --> 0:05:43.720 into the next conversation about ray tips. So so, David, 0:05:43.800 --> 0:05:45.680 We're all focused on the FED, and we will be 0:05:45.800 --> 0:05:47.760 for some time to come, but I know you think 0:05:47.800 --> 0:05:50.839 that we also should be look at other parts of Washington. 0:05:50.880 --> 0:05:55.320 It may actually be affecting the investment quiteria right now. 0:05:55.480 --> 0:05:57.320 And what should we be focusing on as we're going 0:05:57.320 --> 0:05:59.840 to well, well, there's a lot of things going on 0:06:00.200 --> 0:06:03.160 with inflation. I would argue that the near term focus 0:06:03.200 --> 0:06:05.200 really should be on the labor market. We do have 0:06:05.279 --> 0:06:08.560 disinflation on goods, and we've had some on commodities, but 0:06:08.600 --> 0:06:11.920 the disinflation on goods is because we are entering a 0:06:12.040 --> 0:06:16.560 goods consumption and goods production recession, and I think we'll 0:06:16.600 --> 0:06:19.159 hear more about that during earning season. So in the 0:06:19.200 --> 0:06:22.440 near term, stay focused on the labor market for where 0:06:22.440 --> 0:06:25.400 inflation goes, what the FED needs to do about it. 0:06:25.440 --> 0:06:28.600 But longer term, yes, I agree that the longer term 0:06:28.640 --> 0:06:32.000 inflation outlook has a lot to do with policies both 0:06:32.040 --> 0:06:35.400 at home and worldwide, but policies that relate to how 0:06:35.440 --> 0:06:38.280 well we spend, what type of return on investment we 0:06:38.320 --> 0:06:42.880 get on things like energy, energy transition, um, even defense 0:06:42.920 --> 0:06:44.600 and so on and so forth. So I t when 0:06:44.600 --> 0:06:46.880 we hear energy, we think of you. Necessarily, You've had 0:06:46.920 --> 0:06:49.159 a lot of your career tied up with energy. You 0:06:49.200 --> 0:06:51.520 studied it, as I recall at Oxford as well, tell 0:06:51.600 --> 0:06:54.600 us about the federal policies right now in energy how 0:06:54.640 --> 0:06:58.920 they may be affecting some investment decisions. The interesting thing is, 0:06:58.960 --> 0:07:04.159 obviously when we talk about about policymakers, we think about 0:07:04.200 --> 0:07:07.359 the Inflation Act. But just before we go there, I 0:07:07.360 --> 0:07:11.880 think what's interesting is the concentration of of the market 0:07:11.920 --> 0:07:14.600 has been on what the Fed is doing. And what 0:07:14.840 --> 0:07:18.200 is interesting is President Biden and UM and his team 0:07:18.240 --> 0:07:21.440 have been equally focused on removing some of the supply 0:07:21.520 --> 0:07:24.679 chain problems. We saw what they did with for example, 0:07:24.760 --> 0:07:30.160 the trains unions, UM. We saw that, for example, the 0:07:30.360 --> 0:07:35.360 energy reserves that were released and UH and and where 0:07:35.440 --> 0:07:37.680 one of that was one of the reasons that gas 0:07:37.680 --> 0:07:40.320 prices are where they are, among other reasons. Of course, 0:07:40.520 --> 0:07:45.000 so government has been much more proactive when it comes 0:07:45.080 --> 0:07:48.040 to different areas, but in terms of his policies, but 0:07:48.080 --> 0:07:51.360 particularly when it comes to energy and UM and I 0:07:51.400 --> 0:07:56.040 think it has quietly been quite effective in keeping energy 0:07:56.080 --> 0:07:58.720 prices down. We've seen, by the way, similar things in 0:07:58.760 --> 0:08:02.240 Germany and UM. Then coming back to the IRA, of 0:08:02.280 --> 0:08:06.200 course that is huge because there's the direct impact of 0:08:06.240 --> 0:08:09.440 the IRA, which is uh, you know, over three billion, 0:08:09.920 --> 0:08:12.480 but there's also the leverage impact in the sense that 0:08:12.520 --> 0:08:15.960 we're seeing already a lot of private sector deals happening, 0:08:16.360 --> 0:08:18.760 whether you look at big private equity firms that are 0:08:18.800 --> 0:08:23.480 doing very large projects, people investing in in clean energy, 0:08:23.800 --> 0:08:27.200 but also in things like all energy terminals to for 0:08:27.240 --> 0:08:30.080 the for the short term, and then last but not least, 0:08:30.920 --> 0:08:34.800 venture firms are looking at hydrogen projects because they're seeing 0:08:34.840 --> 0:08:37.480 again with the i RA that there is potential some 0:08:37.600 --> 0:08:41.400 of these investments that are longer term investments some day 0:08:41.400 --> 0:08:43.680 that when we talk about energy, we have two sides 0:08:43.679 --> 0:08:46.040 of the house. One is the fossil fuel side. This 0:08:46.240 --> 0:08:49.960 question of that released from the SPR the strategicroll certainly 0:08:49.960 --> 0:08:52.200 effect that, but you also have investment decisions like ion 0:08:52.280 --> 0:08:54.559 ear now is something like a seven million dollar loan 0:08:54.800 --> 0:08:58.520 in the private energy tied to that investment Inflational Production Act. 0:08:58.679 --> 0:09:01.120 So as an investor, what should we be looking at. 0:09:02.160 --> 0:09:04.000 As an investor, what you want to do is look 0:09:04.040 --> 0:09:07.720 at the prospects for return on capital, and we would 0:09:07.760 --> 0:09:11.040 expect that there will be a lot of investment spending 0:09:11.400 --> 0:09:13.880 through government programs like the Inflation Reduction Act, but the 0:09:13.960 --> 0:09:16.880 CHIPS Act investments spending that's done by the energy sector 0:09:16.880 --> 0:09:19.680 of the alternative energy sector, the electric vehicle sector, the 0:09:19.800 --> 0:09:24.640 utility space, UH semiconductors. But the question that investors have 0:09:24.840 --> 0:09:27.560 is what's the return on investment going to be? And 0:09:27.640 --> 0:09:33.320 certain industries have a history of producing poor returns on investment. Energy, auto, 0:09:33.960 --> 0:09:36.520 UH and I and others have done better or at 0:09:36.600 --> 0:09:39.960 least are regulated like utilities. So we do expect a 0:09:40.000 --> 0:09:43.440 lot of investment spending to come in this space. We 0:09:43.520 --> 0:09:45.880 have yet to really figure out will this be good 0:09:45.960 --> 0:09:48.000 for investors and what time of the type of return 0:09:48.000 --> 0:09:51.160 on investment we would get. Ask you the most basic 0:09:51.240 --> 0:09:53.400 question when it comes to the green energy area that 0:09:53.440 --> 0:09:55.320 now is going to get some subside in the US government, 0:09:55.600 --> 0:10:00.000 is that inflationary or deflationary depends on you know how 0:10:00.280 --> 0:10:03.600 if if it brings down total energy prices, that would 0:10:03.600 --> 0:10:08.319 be obviously um, not inflationary, right. Um. In the meantime, 0:10:08.480 --> 0:10:11.360 if you say that it's creating by some accounts nine 0:10:11.480 --> 0:10:14.160 million new jobs over time, of course, over a long 0:10:14.160 --> 0:10:16.880 period of time, you could say that that could have 0:10:16.960 --> 0:10:21.400 an impact on people having a larger ability to to 0:10:21.480 --> 0:10:24.200 spend and consume. But I think that's much longer term. 0:10:24.240 --> 0:10:26.800 I think in the short run, if it starts bringing 0:10:26.840 --> 0:10:29.600 down the cost overall costs of energy. That is good 0:10:29.840 --> 0:10:32.880 in terms of our words about inflation. David the Uncle 0:10:32.880 --> 0:10:34.840 of DWS Group, Thank you so much, David for being 0:10:34.840 --> 0:10:37.280 back with us. Coming up, fertility rates are declining in 0:10:37.280 --> 0:10:39.280 the United States and don't appear likely to come back. 0:10:39.440 --> 0:10:41.360 We're talking to Melissa Karney at the University of maryll 0:10:41.400 --> 0:10:44.160 about why this is and what could mean for investors. 0:10:44.360 --> 0:10:57.600 And this is Wall Street Week on Bloomberg, your first 0:10:57.760 --> 0:11:00.560 in depth look at global market and business new We 0:11:00.600 --> 0:11:02.439 have one big item of corporate news to tell you 0:11:02.480 --> 0:11:05.640 about this morning. Karen Moscow, you're up. Equities are falling hard. 0:11:05.800 --> 0:11:08.840 Nathan Hagar, the Federal Reserve may have to unleash even 0:11:08.920 --> 0:11:12.040 further tightening. Bloomberg Day Break one, the Wall Street Firm 0:11:12.120 --> 0:11:14.839 sees more paint a head for investors. Wake up with 0:11:14.960 --> 0:11:18.800 us weekday mornings at five Easter. Another roller coaster riding 0:11:18.960 --> 0:11:23.000 Yesterday's session on Bloomberg Radio, the Bloomberg Business App and 0:11:23.040 --> 0:11:28.160 Bloomberg Radio dot Com. Seeing through the eyes of experts 0:11:28.280 --> 0:11:30.400 gives you a better view. Can we both give ourselves 0:11:30.400 --> 0:11:32.640 boosters and make sure the rest of the world gets vaccinated? 0:11:32.679 --> 0:11:36.240 And a Bloomberg Our market vision is twenty so let's 0:11:36.240 --> 0:11:38.240 talk about the paint's right. I am shocked by the 0:11:38.280 --> 0:11:40.280 moves that we're seeing in the rates market. The inslation 0:11:40.320 --> 0:11:44.240 debate continues Bloomberg Radio, the Bloomberg Business App, and Bloomberg 0:11:44.320 --> 0:11:48.080 Radio dot Com. When Paul Sweeney and Matt Miller bring 0:11:48.120 --> 0:11:50.800 you the day's market news. How do you think investors 0:11:50.800 --> 0:11:54.080 should view bitcoin? You can count on some travol, Matt. 0:11:54.120 --> 0:11:56.240 Did you know that you and I are special? I 0:11:56.280 --> 0:12:03.000 feel special? Bloomberg Markets extensive, essential, and endlessly entertaining. Well, No, 0:12:03.160 --> 0:12:05.160 I hired the guy and then we started hanging out 0:12:05.200 --> 0:12:07.800 for beers. We don't really work on training now we're 0:12:07.840 --> 0:12:11.559 just buddies. Week Team warnings at ten Eastern on Bloomberg Radio, 0:12:11.760 --> 0:12:16.480 the Bloomberg Business App, and Bloomberg Radio dot Com. This 0:12:16.960 --> 0:12:21.480 is Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:12:28.080 --> 0:12:30.360 This is Wall Street Week. I'm David Weston. Every year, 0:12:30.480 --> 0:12:33.680 the Aspen Economic Strategy Group comes out with a monograph 0:12:33.760 --> 0:12:36.199 describing with the state of economy and most importantly, what 0:12:36.280 --> 0:12:38.480 are the big issues that we face. They've just come 0:12:38.480 --> 0:12:40.800 out with the most recent edition. We're welcome to the 0:12:40.840 --> 0:12:43.640 Director of that group. She is Melissa Carney. She's professor 0:12:43.640 --> 0:12:46.480 of economics at the University of Maryland. So Wellisa, thank 0:12:46.520 --> 0:12:48.800 you so much for being back on Wall Street week. 0:12:49.280 --> 0:12:51.640 This is a fascinating report from beginning to end, but 0:12:51.679 --> 0:12:55.000 particularly images in part you authored, which has to do 0:12:55.080 --> 0:12:57.360 with fertility rates in the United States and what that 0:12:57.400 --> 0:12:59.680 could do for economic growth. First of all, give us 0:12:59.720 --> 0:13:02.240 US an where we are on utility fertility rates in 0:13:02.240 --> 0:13:04.719 the United States and whether this is a temporary thing 0:13:04.840 --> 0:13:08.079 or it may take care of itself. Sure, So, the 0:13:08.160 --> 0:13:11.680 US fertility rate has plummeted for the past fifteen years, 0:13:12.120 --> 0:13:14.559 and so the problem here is that now we are 0:13:14.640 --> 0:13:16.840 at a level of fertility in this country that is 0:13:17.040 --> 0:13:23.679 below replacement level, meaning without immigration, the population will not 0:13:24.440 --> 0:13:28.080 maintain our size. And so what's been happening is for 0:13:28.480 --> 0:13:31.480 fifteen years, annual birth rates have gone down, and now 0:13:31.520 --> 0:13:35.160 we're at a point where the average number of children 0:13:35.200 --> 0:13:38.079 born to a woman in the US is substantially below 0:13:38.240 --> 0:13:40.840 the sort of magic number of two point one that 0:13:40.880 --> 0:13:44.200 would keep us at replacement population level. It's now one 0:13:44.280 --> 0:13:48.000 point six seven. My look at the data suggests that 0:13:48.720 --> 0:13:52.560 it's unlikely to turn around anytime soon. So what we've 0:13:52.600 --> 0:13:56.160 really seen is that the decrease in births is very widespread. 0:13:56.280 --> 0:14:01.080 It's coming from across demographic groups, it's coming across the country. 0:14:01.520 --> 0:14:03.920 It doesn't seem to be driven by any sort of 0:14:04.120 --> 0:14:08.960 sharp policy or economic change in the past fifteen years. Rather, 0:14:09.080 --> 0:14:13.000 it seems to reflect more recent cohorts of young adults 0:14:13.360 --> 0:14:19.000 having fewer children or remaining childless more often than cohorts 0:14:19.000 --> 0:14:22.120 in the previous past um And so this suggests that 0:14:22.160 --> 0:14:25.720 there's been a general trend away from having children, from 0:14:25.760 --> 0:14:28.600 having multiple children, And if we look to other high 0:14:28.600 --> 0:14:31.200 income countries that have been dealing with this for decades, 0:14:31.680 --> 0:14:34.360 it's it's probably going to be stubbornly low. That's my 0:14:34.480 --> 0:14:37.720 best guess. So Professor here on Walter, we speak to 0:14:37.760 --> 0:14:40.800 investors in particular, what are the possible consequences of that 0:14:40.840 --> 0:14:43.160 in terms of economic growth, because it really we have 0:14:43.280 --> 0:14:46.560 to depend upon future economic growth. What is that decline 0:14:46.640 --> 0:14:50.440 particularly likely to do to us? The decline in birth 0:14:50.520 --> 0:14:55.200 rates has meant a decline in population growth, and the 0:14:55.240 --> 0:14:58.240 most immediate effect of this is likely to be a 0:14:58.360 --> 0:15:02.440 shrinking size of the working age population. So the working 0:15:02.480 --> 0:15:05.640 age population in the US has been stagnant for for 0:15:05.680 --> 0:15:08.920 over a decade now, and given the decrease in birth 0:15:09.000 --> 0:15:11.760 rates we've been experiencing for the past fifteen years, in 0:15:11.800 --> 0:15:16.120 the not too distant future again, absent and increase in immigration, 0:15:16.480 --> 0:15:19.680 we're simply going to have fewer people of working age. 0:15:20.040 --> 0:15:23.280 Now that that's consequential of both in a fiscal sense, 0:15:23.480 --> 0:15:26.240 meaning that it's going to put fiscal pressures on our 0:15:26.440 --> 0:15:32.040 social social security system, funding for Medicare disability insurance. But 0:15:32.120 --> 0:15:36.000 it also it also poses economic headwinds in the sense 0:15:36.040 --> 0:15:39.760 that you have fewer people of working age, and that 0:15:39.880 --> 0:15:45.320 doesn't necessarily just mean fewer people to produce stuff, lower 0:15:45.360 --> 0:15:50.440 economic lower economic activity overall. More worryingly, it could mean 0:15:51.200 --> 0:15:56.560 lower GDP per capita or reduction in in productivity per person, 0:15:56.880 --> 0:16:00.600 reduction and living standards, which could have profound effect obviously 0:16:00.640 --> 0:16:03.280 on investment in particularly United States. So what can we 0:16:03.320 --> 0:16:05.680 do about it? Can we get that fertility rate back 0:16:05.760 --> 0:16:08.600 up or do we have to find a work around? Yeah, 0:16:08.720 --> 0:16:12.840 So here's where I think we can draw lessons from 0:16:12.840 --> 0:16:18.560 other high income countries Japan, UK, Canada, other countries in Europe, 0:16:18.600 --> 0:16:22.800 including Scandinavian countries um that have been dealing with below 0:16:22.840 --> 0:16:26.480 replacement level fertility for many decades. You know, the first 0:16:26.480 --> 0:16:29.920 thing I would note is that despite efforts to turn 0:16:30.000 --> 0:16:34.320 things around, fertility has remained below replacement level in those 0:16:34.320 --> 0:16:38.640 countries for many decades. A lot of those places have 0:16:38.760 --> 0:16:44.280 implemented explicitly pro natalist policies, things like baby bonuses or 0:16:44.520 --> 0:16:49.320 child tax credits, expanded parental leave, expanded subsidies for childcare, 0:16:49.360 --> 0:16:53.000 all things that should make the cost of having children 0:16:53.160 --> 0:16:57.040 lower um or the ability to combine work in kids easier. 0:16:57.600 --> 0:17:02.000 And yet the evidence from those kinds of incremental policies 0:17:02.120 --> 0:17:06.000 is that they might lead to some modest increase in 0:17:06.080 --> 0:17:09.640 birth rates in the short run, in particular, perhaps not persistently, 0:17:10.040 --> 0:17:12.600 but nothing of the size that we would need to 0:17:13.160 --> 0:17:17.159 really lead to a dramatic reversal of the decline in 0:17:17.200 --> 0:17:20.840 fertility or the stubbornly low fertility rates um anytime soon. 0:17:21.440 --> 0:17:24.359 So you know, that suggests that it would be hard 0:17:24.400 --> 0:17:27.679 to turn things around. And again, because it looks like 0:17:27.720 --> 0:17:31.600 what we're seeing is really just a move away from 0:17:31.640 --> 0:17:34.840 having children, are having multiple children, as opposed to any 0:17:34.880 --> 0:17:39.040 sort of temporary response to some to some you know, 0:17:39.119 --> 0:17:41.159 discrete change. So just that it's going to be really 0:17:41.200 --> 0:17:43.800 hard to turn the fertility rate around. So where does 0:17:43.800 --> 0:17:47.080 that leave us, Well, the obvious thing is to think 0:17:47.119 --> 0:17:50.960 about increasing immigration now Easier said than done in this country. 0:17:51.040 --> 0:17:53.439 Congress has been sort of derelict when it comes to 0:17:53.480 --> 0:17:57.879 immigration reform for far too long now. But given these 0:17:58.000 --> 0:18:03.520 demographic trends, the parative for immigration reform for allowing more 0:18:03.560 --> 0:18:07.440 people to legally enter or stay in the country becomes 0:18:07.440 --> 0:18:10.800 that much stronger. And and there's lots of sensible reforms 0:18:11.280 --> 0:18:13.399 for reform proposals out their ways. We could do this. 0:18:13.880 --> 0:18:17.640 We could certainly have more of an employment driven immigration 0:18:17.800 --> 0:18:20.920 system where you know, like other countries do, including Canada, 0:18:21.040 --> 0:18:25.800 where we allow more people in who are reasonably likely 0:18:25.880 --> 0:18:29.159 to contribute right away to our economic productivity. Um. We 0:18:29.200 --> 0:18:32.520 could also increase per country caps on the number of 0:18:32.960 --> 0:18:35.840 family members who are allowed to immigrate to the country 0:18:35.920 --> 0:18:40.280 or stay in the country. Beyond immigration, of course, um. Again, 0:18:40.320 --> 0:18:46.240 these demographic headwinds emphasize the need for policies and conditions 0:18:46.280 --> 0:18:50.359 that promote innovation and productivity growth. Easier said than done, 0:18:50.960 --> 0:18:56.240 though recent spending bills in Congress aimed at investments in infrastructure, 0:18:56.359 --> 0:19:01.240 increases in spending on scientific development, all of those are encouraging. 0:19:01.400 --> 0:19:04.159 All of those are steps in the right direction. But 0:19:04.240 --> 0:19:07.680 getting innovation policy right is very hard, UH, and it's 0:19:07.760 --> 0:19:10.200 and it's about it will require a lot more than 0:19:10.240 --> 0:19:14.080 just spending UM. It requires having the conditions in place 0:19:14.480 --> 0:19:20.960 for competitive companies UM and innovators to flourish and thrive. 0:19:21.119 --> 0:19:22.800 This is something that we take up in our in 0:19:22.840 --> 0:19:25.480 our report that you mentioned UM. And of course it 0:19:25.960 --> 0:19:29.719 will require a lot of investment in talent, not just 0:19:29.840 --> 0:19:34.320 important global talent through more immigration, but also really building 0:19:34.359 --> 0:19:38.479 the talent pool UM among our native born population here 0:19:38.480 --> 0:19:41.280 in the US. That report is from the Aspen Economic 0:19:41.359 --> 0:19:44.200 Strategy Group, and I really highly recommended. It's fascinating reading, 0:19:44.240 --> 0:19:46.720 it's really terribly important. Thank you so much for sharing 0:19:46.720 --> 0:19:49.600 it with us today. As Melissa carneyhis professor of economics 0:19:49.720 --> 0:19:53.200 at the University of Maryland. And we're going to continue 0:19:53.200 --> 0:19:56.159 this discussion about changes fundamental changes will effect of the 0:19:56.400 --> 0:19:59.840 plight of ceo s. Particularly we're gonna talk to Sam Pomisan, 0:20:00.080 --> 0:20:02.679 the former chairman and CEO of IVM, about how the 0:20:02.680 --> 0:20:06.160 paradigm has shifted for the average American CEO. That's gonna 0:20:06.160 --> 0:20:18.359 have next on Wall Street Week on Bloomberg. This is 0:20:18.359 --> 0:20:20.520 Wall Street Week. I'm David Weston. We're joining once again 0:20:20.520 --> 0:20:23.600 by our very special contribute Larry Summers of Harvard. So Larry, 0:20:23.640 --> 0:20:25.720 great to have you back with us. And there's a 0:20:25.720 --> 0:20:28.080 lot of good news this week. I must say, reopening 0:20:28.080 --> 0:20:30.840 of China. We've got a warmer window than expected. In Europe, 0:20:30.840 --> 0:20:33.080 maybe not a recession over there. In the United States, 0:20:33.080 --> 0:20:35.720 inflation numbers are coming down. Are you rethinking someone what 0:20:35.800 --> 0:20:37.840 you said in the past about the likelihood of recession. 0:20:38.240 --> 0:20:42.200 I think it is uh good news and the evidence 0:20:42.240 --> 0:20:45.440 that there's been some wage restraint as part of uh 0:20:45.760 --> 0:20:47.960 the good part of the part of the good news. 0:20:48.600 --> 0:20:50.359 But at the same time, I think one has to 0:20:50.400 --> 0:20:55.400 be careful of uh false dawns. And if you think 0:20:55.440 --> 0:20:59.000 about it, it it the good news was inflation running in 0:20:59.080 --> 0:21:05.440 the sixes, and that's still inconceivably high by the standards 0:21:05.600 --> 0:21:08.399 of two or three years ago. So I would stick 0:21:08.440 --> 0:21:10.960 with my view that a recession this year is more 0:21:11.000 --> 0:21:16.600 likely uh than not. But certainly, looking at some of 0:21:16.640 --> 0:21:20.920 these trends, one has to think that, uh, the Fed's 0:21:21.040 --> 0:21:24.400 job is much much closer to being done, feels much 0:21:24.680 --> 0:21:28.360 much closer to being done. In terms of disinflation than 0:21:28.400 --> 0:21:31.840 it did a few months ago. And I think the 0:21:31.920 --> 0:21:35.879 more optimistic possibilities, while they still would not be my bet, 0:21:36.320 --> 0:21:40.440 look more plausible today, uh than they did several months ago. 0:21:40.560 --> 0:21:43.560 And that's got to be encouraged. And we'll have to 0:21:43.560 --> 0:21:47.200 be watching the data very very closely. And the most 0:21:47.240 --> 0:21:51.720 important day of this month, by far from a macroeconomic 0:21:51.800 --> 0:21:54.600 point of view, will be the last day of the month, 0:21:55.040 --> 0:21:58.960 when the Employment cost Index H comes out. That's the 0:21:59.000 --> 0:22:04.479 gold standard measure of labor costs and waves pressure, and 0:22:04.520 --> 0:22:07.440 that's a number they'll be studying very very closely at 0:22:07.440 --> 0:22:10.920 the FED, and I suspect on Wall Street and I'll 0:22:10.920 --> 0:22:14.359 certainly be up early that morning to get that number. 0:22:14.760 --> 0:22:17.639 So right after that, actually early in February, we're going 0:22:17.720 --> 0:22:21.000 to have the meeting of the Federal Reserve. Given where 0:22:21.040 --> 0:22:23.640 we are right now and it's always data dependent, should 0:22:23.680 --> 0:22:25.679 they at least be talking about a pause, if not 0:22:25.760 --> 0:22:28.720 in February coming after that, I think we're still not 0:22:28.920 --> 0:22:34.240 quite at uh that point. Uh. I don't think a 0:22:34.320 --> 0:22:39.120 pause in February would be well advised, and I don't 0:22:39.119 --> 0:22:43.480 think we have to make a definite decision beyond beyond 0:22:43.640 --> 0:22:49.879 February for right now again, I think the most important 0:22:49.920 --> 0:22:53.640 thing is to make sure that the job of containing 0:22:53.680 --> 0:23:02.840 inflation UH gets done and that they preserve UH their credibility. 0:23:03.400 --> 0:23:07.360 So I think it's a little bit premature at this 0:23:07.440 --> 0:23:11.040 point to be thinking about pausing, But we're getting much 0:23:11.119 --> 0:23:14.240 closer to that day, Larry. Another big story this week 0:23:14.320 --> 0:23:16.600 had to deal with air traffic in the United States, 0:23:16.600 --> 0:23:18.639 as we had to ground all the airplanes because of 0:23:18.680 --> 0:23:21.040 an apparent problem with the f A A system. This 0:23:21.160 --> 0:23:23.040 is something you've referred to in the past. Actually, some 0:23:23.080 --> 0:23:26.760 doubts about the system. This is raised larger questions about 0:23:26.760 --> 0:23:28.359 the systems we have in the government at the f 0:23:28.480 --> 0:23:30.080 A and perhaps other places as well, like the I 0:23:30.200 --> 0:23:33.120 R S and the need for investment. Look, I think 0:23:33.160 --> 0:23:36.000 it refers to two things, David. I think it refers 0:23:36.040 --> 0:23:39.679 to the quantity of resources that we invest, and it 0:23:39.760 --> 0:23:45.320 refers to the competence with which we invest. Something is 0:23:45.400 --> 0:23:49.280 wrong when tens of millions of returns sit opened at 0:23:49.280 --> 0:23:52.359 the I R S. Something is wrong when the I 0:23:52.600 --> 0:23:56.040