Speaker 1: This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes.
Speaker 1: The economy is in the process of rebounding. Will the
Speaker 1: flutter reserve of its own digital currency? The financial stories
Speaker 1: that cheap hard work. Many people think the eels are
Speaker 1: just going to keep marching up. We have more spending
Speaker 1: coming out of Congress. One of the big questions I
Speaker 1: think on investor's minds inflation through the eyes of the
Speaker 1: most influential voices. Larry Summer is the former Treasury Secretary
Speaker 1: Bryan Wynhan a back of America, Will Smart CEO Charlie Sharp.
Speaker 1: Bloomberg wool Street Week with David Weston from Bloomberg Radio.
Speaker 1: Suspended animation as the world puts aside issues of inflation
Speaker 1: and earnings and FED policy and even COVID for a
Speaker 1: week consumed with war in Ukraine. This is Bloomberg Wall
Speaker 1: Street Week. I'm David Weston. This week, there was plenty
Speaker 1: going on, from the price of oil, as Dan Y're
Speaker 1: gonna h s market discussed, Some say we're gonna have
Speaker 1: over a hundred dollar oil for much of the year,
Speaker 1: to what Jeffrey You of b n Y Melon says,
Speaker 1: is the central banks concerned about inflation expectations becoming unanchored.
Speaker 1: This strikes at the heart of what central banks are
Speaker 1: worried about right now, as in a d anchoring of
Speaker 1: infacion expectations. But despite all that was happening around us,
Speaker 1: we spent the week focused on the geopolitical crisis in Ukraine.
Speaker 1: As President Putin recognized what purported to be independent republics
Speaker 1: in the eastern part of the country, the West imposed
Speaker 1: limited sanctions. In response, I'm going to begin to impose
Speaker 1: sanctions and response far beyond the steps we and our
Speaker 1: allies and partners implemented. And then on Thursday, Russia did
Speaker 1: with the United States had been warning about. It launched
Speaker 1: a full scale invasion of Ukraine, triggering much broader sanctions
Speaker 1: from the West and plunging Europe into the largest armed
Speaker 1: conflict in de Gates, he has much larger ambitions in Ukraine.
Speaker 1: He wants to, in fact, re established the former Soviet Union.
Speaker 1: For her sense of where this crisis his head, and
Speaker 1: we turned out to Jane Harmon. She's President Emerita of
Speaker 1: the Wilson Center and she's the author of Insanity Events
Speaker 1: about foreign policy for the United States. Jane, thank you
Speaker 1: so much for being with us. What is your initial take.
Speaker 1: We have a lot of developments yet to come, but
Speaker 1: as of right now, where do you think this is unfolding? Well,
Speaker 1: let me say that the book you just plugged, thank
Speaker 1: you David for always doing that, makes the point that
Speaker 1: when the Cold War ended, we had no strategy for
Speaker 1: what the world would look like. We thought we won,
Speaker 1: Russia lost, and everybody wants to be us. Well, oops,
Speaker 1: we missed the rise of terrorism, we missed the rise
Speaker 1: of China, which doesn't want to be us, and we
Speaker 1: missed the sense of huge grievance that Vladimir Putin is
Speaker 1: now uh following through with by Russia, which did lose.
Speaker 1: But unlike World War Two, where we helped those we
Speaker 1: conquered become allies and friends Germany and Japan, this time
Speaker 1: we just rub rubbed Russia's nose in it. And so
Speaker 1: we're now paying a penalty for all three things. What
Speaker 1: do I think is going to happen? Uh? It looks
Speaker 1: pretty certain that Putin has outgunned, out classed the the
Speaker 1: the the fight of of Ukrainians, and in some way
Speaker 1: in the next few days there will be some bad
Speaker 1: resolution in Ukraine. I just hope that the courageous leader
Speaker 1: there Zelenski, who has shown so much fight and so
Speaker 1: much bravery, unlike Gani in Afghanistan, who escaped the country
Speaker 1: before it fell. UH will be safe. I hope he
Speaker 1: will be safe. UM. But I don't think this is
Speaker 1: where it stops. I think the ambitions of of Putin.
Speaker 1: Maybe we should give him a red hat that says
Speaker 1: nate Russia great again, our way beyond this, and he's
Speaker 1: trying to take down the liberal world order that we
Speaker 1: formed after and take advantage of the fact that there
Speaker 1: is still some disagreement among Europeans and European institutions at US.
Speaker 1: I commend President by for lashing US up to partners
Speaker 1: and allies and UH doing with them everything that's doable.
Speaker 1: And I do think there will be more sanctions by
Speaker 1: all of them and US, both on individuals and on
Speaker 1: UH banks and institutions, and those sanctions will bite. I
Speaker 1: don't want them to bite the Russian people. I really
Speaker 1: want them to bite Putin and the collector Prats who
Speaker 1: are doing this. Jane, you mentioned Afghanistan in a more
Speaker 1: recent time, but let's go back a little bit of Afghanistan.
Speaker 1: Because Russia went into Afghanistan at one point they spent
Speaker 1: quite a few years in there and it came to
Speaker 1: tears in the end. Do we have any sense do
Speaker 1: you have any sense at this point of the likelihood
Speaker 1: that infect Russia will simply be able to make you
Speaker 1: create a vassal state and that's done with, or they
Speaker 1: could have a protracted conflict the way they did in Afghanistan.
Speaker 1: I think this could be even worse than Afghanistan. Um
Speaker 1: I was on the magn that's the square in in
Speaker 1: uh In, Ukraine and Kiev in looking at the little
Speaker 1: memorials that were put up to the folks who gave
Speaker 1: their lives to topple this Russian puppet Janakovich, and that
Speaker 1: led to free and fair elections first of Poorshenko, who's
Speaker 1: there uh In in Ukraine right now strapping on his weapon,
Speaker 1: and then following him to Zelenski, And so Ukraine has
Speaker 1: been a Western free democracy for seven plus years, even
Speaker 1: with Russian interference in the eastern part the don Bus.
Speaker 1: And I don't think these folks are going away or
Speaker 1: given up. And I think this is gonna be an
Speaker 1: ugly story if if, if Russia tries to occupy the country,
Speaker 1: and I don't think Ukraine is gonna surrender easily, and
Speaker 1: this is not going to be just not gonna be
Speaker 1: a cake walk for Russia. Jane Len double back on
Speaker 1: something you said that you thought that this one was
Speaker 1: not necessarily the end for President Putin's point view of
Speaker 1: horry wants to go. That's something that's certainly President Biden
Speaker 1: said this week. So how nervous does President Putin have
Speaker 1: to be about triggering that Article five of NATO if
Speaker 1: it goes into places like Poland for example. Well, it's
Speaker 1: it's interesting, Um, the NATO was only invoked Article five once,
Speaker 1: and that was after nine eleven. We didn't ask for it,
Speaker 1: Nick Burns. Uh, this mutual friend of our, David who
Speaker 1: was going to represent the Sun China was then the
Speaker 1: ambassador to NATO, and they didn't ask us. They just
Speaker 1: voked Article five to come to our defense after nine eleven. Um,
Speaker 1: since then it's never been invoked. But you're right, Uh,
Speaker 1: Poland is a NATO country. We're sending additional troops and
Speaker 1: the whole compliment of NATO troops is increasing. Thank you
Speaker 1: so much, Jane, Really wonderful to have you with us
Speaker 1: at Jane Harmon, She's President Emerita of the Wilson Center.
Speaker 1: Let me come back. The Market's response to the war
Speaker 1: in Ukraine with Kate Moore, Black Rock and Rebecca Patterson
Speaker 1: of Bridgewater Associates. This is Bloomberg Wall Street Reek. I'm
Speaker 1: David Weston. This is Bloomberg Wall Street Week with David
Speaker 1: Weston from Bloomberg Radio. Ukraine dominated a tumultuous week of trading,
Speaker 1: with the SMP five hundred falling into correction Territory and
Speaker 1: Thursday only to climb back up to two for the week.
Speaker 1: The Nasdaq was up also by one point six percent,
Speaker 1: while the Tenure veered from a yield of under one
Speaker 1: point eight five to over two point oh, ending the
Speaker 1: way just under the two point oh mark. An oil Oil,
Speaker 1: of course, got hit the most by the uncertainty over Ukraine.
Speaker 1: Brent shot up to over one five dollars of barrel
Speaker 1: after news of the invasion hit on Thursday, and then
Speaker 1: settled back down to nine dollars of barrel when it
Speaker 1: appeared that sanctions wouldn't hit the energy sector as hard
Speaker 1: as was thought, at least for now. To to help
Speaker 1: us understand the market reactions welcomed now. Kate Moore she's
Speaker 1: head of Thematic Strategies at black Rock Financial Management, and
Speaker 1: Rebecca Patterson Bridgewater, director of Investment Research. So let me
Speaker 1: start with you, Rebecca, what about what happened with equities
Speaker 1: this week? It was all over the place. Well, you know,
Speaker 1: obviously we were all focused on the Ukraine and what
Speaker 1: was happening there, But UM, I think it's important to
Speaker 1: remember that the markets are always being driven by a
Speaker 1: myriad of factors. Ukraine was front and center, but we
Speaker 1: also were in a period where we had a lot
Speaker 1: of buybacks going on. A lot of those tech companies
Speaker 1: that had sold off a lot probably benefited from that
Speaker 1: as we got into end of the week, and of
Speaker 1: course we're going into month and rebalancing, and so that
Speaker 1: can also cause a lot of trading. So even when
Speaker 1: things are very whippy and you don't always say, how
Speaker 1: does this tie to the headlines with Ukraine, it's important
Speaker 1: to remember that there's a lot of things going on
Speaker 1: behind the scenes. In addition to that, obviously that was
Speaker 1: the most important thing, and as you said, the possibility
Speaker 1: that sanctions won't be as hard as they might be
Speaker 1: at least for now, UM might have also helped us
Speaker 1: get a little bit of a reprieve towards the end
Speaker 1: of the week. Kate, Yeah, I know, you're very interesting
Speaker 1: resources companies. What happened with resources companies? We actually had
Speaker 1: a phenomenal week once again for resources companies. You know,
Speaker 1: in the US, the x m E, which is the
Speaker 1: sp by D Mining E t F, hit a ten
Speaker 1: year high uh and globally we've seen the same kind
Speaker 1: of thing across resources companies. You know, it has been
Speaker 1: a phenomenal rally driven by both good supply demand dynamics
Speaker 1: as well as some concern over ongoing supply disruptions, particularly
Speaker 1: from the rush of Ukraine situation. So you have both
Speaker 1: the geopolitical and the fundamental side really backing up an
Speaker 1: incredibly strong rally in a sector. When you think about
Speaker 1: the miners in particular that have been so unloved for
Speaker 1: so long. It was a place I played in in
Speaker 1: a many parts of my career. I had a dust
Speaker 1: off some of my playbooks and some of my skills there.
Speaker 1: One thing I'd add to what Kate just said on
Speaker 1: some of these resource companies is even before Ukraine and
Speaker 1: the threat to supplies that that implies, we already had
Speaker 1: a situation where demand obviously very very strong with all
Speaker 1: the fiscal and monetary stimulus after COVID, But then on
Speaker 1: top of that, a lot of these sectors has seen
Speaker 1: under investment for years, so supplies were already somewhat low
Speaker 1: before we had this demand shock, and now we're in
Speaker 1: a situation where supplies aren't even close to what we need.
Speaker 1: Whether we're talking about oil with under investment both in
Speaker 1: the US and by OPEC countries, whether we're talking about
Speaker 1: a lot of crops. We've seen under investment in the
Speaker 1: last couple of years, partly a weather situation, but supplies
Speaker 1: very low and in the metals, and so demand is
Speaker 1: improving after o macrons starting to fade. Hopefully the Ukraine
Speaker 1: situation won't dent that too much. So you have strong
Speaker 1: demand and these supplies that can't keep up, and this
Speaker 1: just creates an additional risk on supply. So I think
Speaker 1: to Kate's point, some of these companies look like a
Speaker 1: good inflation hedge, and they're also just in a great
Speaker 1: position to benefit from that increased demand. Yeah. I would
Speaker 1: add on to something else for Becca saying, which is
Speaker 1: in addition to what's happening in the very near term
Speaker 1: around supply demand. There's also a longer term demand story.
Speaker 1: A lot of these miners produce metals that are actually
Speaker 1: incredibly important for the energy transition and for electric vehicles,
Speaker 1: and we're seeing them undersupplied in the market. We've also
Speaker 1: seen like some metals like aluminium, for example, or some
Speaker 1: resources like aluminum um, you know how, kind of a
Speaker 1: bit of a backlash against you know how some of
Speaker 1: the that is produced, and so aluminum producers that use
Speaker 1: natural gas or cleaner energy to produce are coming into favor.
Speaker 1: It is a place where I think we'll see continued
Speaker 1: support for prices over the medium term. Rebecca, this is
Speaker 1: a geopolitical crisis with a specific location, which is Europe,
Speaker 1: and we saw at various times this week a really
Speaker 1: different reaction in the markets depending on Europe versus the
Speaker 1: United States. Do you think that will persist? Unfortunately, I do.
Speaker 1: You know, we we don't know the duration or the
Speaker 1: degree of the Ukraine crisis, and so obviously that matters.
Speaker 1: But even if there aren't the worst possible sanctions on energy,
Speaker 1: they want to get the energy flows to Europe. A
Speaker 1: third of Russians oil exports go through the Ukraine. So
Speaker 1: if you have a situation where they can't get the
Speaker 1: flows through, You're gonna see higher prices no matter what's
Speaker 1: going on with the sanctions. So what Europe seeing is
Speaker 1: greater risk of what I'd call a stagflationary shock, where inflation,
Speaker 1: which is already more than double the ECB the European
Speaker 1: Central Banks target, is going higher and at the same
Speaker 1: time growth is going lower. Part of it is a
Speaker 1: sentiment shock, but part of it is the inflation eroding
Speaker 1: people's disposable income. Do they just have less to spend?
Speaker 1: So the good news is that going into this shock,
Speaker 1: growth was improving, so they're starting from a strong place.
Speaker 1: The question is how far does this pull them back?
Speaker 1: And then how does the European Central Bank respond more
Speaker 1: to growth or more to the inflation. They're in a
Speaker 1: really difficult position. Okay, I wonder about Europe in general,
Speaker 1: because before this all happened, there were those who were
Speaker 1: saying this was gonna be the year for Europe. Finally
Speaker 1: we're gonna have the year for Europe because valuations were
Speaker 1: very attractive, there was gonna be better growth. Does this
Speaker 1: change that dynamic or did you believe in it to
Speaker 1: begin with? Yeah, David, I never believed in it to
Speaker 1: begin with, and I think those folks that work with
Speaker 1: me know that, well, let's not call myself a euroskeptic,
Speaker 1: but someone who doesn't believe that buying European index exposure
Speaker 1: makes sense in most scenarios. When you buy Europe, get
Speaker 1: a lot of exposure to what I would consider lower quality,
Speaker 1: lower growth companies, big exposure to the Bank's, big exposure
Speaker 1: to some you know, companies that I would think of
Speaker 1: as having more stagnant business models and don't have kind
Speaker 1: of dynamic flow. So it was not something I was
Speaker 1: really excited about to begin with. And I think one
Speaker 1: of the things that's not fully priced into European equities
Speaker 1: right now is the extent to which that which this
Speaker 1: Russia Ukraine conflict UH could lead through into European growth.
Speaker 1: I think it's incredibly important to be selected in your
Speaker 1: European investments at this point. There are plenty of great,
Speaker 1: high quality companies that are not just going to be
Speaker 1: geared towards domestic growth, and I think that's where we
Speaker 1: need to focus our attention when we think about exposure
Speaker 1: to the region. One thing I'd add to your point, Kate,
Speaker 1: if we're looking for catalysts that could affect our outlook
Speaker 1: on growth in Europe would be what happens fiscally. So
Speaker 1: Europe is getting its act together this year. They're all
Speaker 1: talking about what should our fiscal framework be. Their fiscal
Speaker 1: policy right now, they're set to start imposing their old policies.
Speaker 1: Pre pandemic policy is next year, but they may decide
Speaker 1: because of the Russia Ukraine conflict, to give another extension,
Speaker 1: so letting governments spend a little bit longer, not putting
Speaker 1: that austerity straight jack and back on. If they do that,
Speaker 1: that could be another support to growth that I don't
Speaker 1: think is discounted in prices right now. We should know
Speaker 1: that around mid year, So in addition to what the
Speaker 1: European Central Bank does, how they respond, this would be
Speaker 1: another important catalyst that I think could affect views. Again,
Speaker 1: I agree with you, Kate, certain stocks more than others.
Speaker 1: Many thanks that a Kate Moore, Black Rock and Rebecca
Speaker 1: Patterson of Bridgewater Associates, Director of Investment Research. Coming up,
Speaker 1: Debra Lair of the Pulse and Institute on the China
Speaker 1: piece of the puzzle that's coming up next on Wall
Speaker 1: Street Week, and we are on Bloomberg this is Bloomberg
Speaker 1: Wall Street Week with David Weston from Bloomberg Radio China.
Speaker 1: It's been the economic success story of the last half century,
Speaker 1: as g d P and per capita GDP have gone
Speaker 1: up faster than any economy in history. But now some
Speaker 1: people see some problems developing. Whether it's the struggling property
Speaker 1: sector flagged by investors like George Soros, China is facing
Speaker 1: an economic crisis centered under real estate rclipt, which has
Speaker 1: been the main engineer of growth ever since she Deven
Speaker 1: came to power, or the policy at zero tolerance for
Speaker 1: COVID that experts like Amish Adelage of Johns Hopkins find
Speaker 1: just plain wrong. COVID zero was wrong from the beginning.
Speaker 1: If someone wrote that on an essay question on a test,
Speaker 1: I would say that's a wrong answer to how you
Speaker 1: deal with this type of a virus. Factors that lead
Speaker 1: our special Wall Street we contributor Larry Summers to suggest
Speaker 1: we may be overestimating China's economic strength and underestimating its problems.
Speaker 1: Consider the possibility that we may be underestimating uh China
Speaker 1: his challenges now, and we need to be particularly careful
Speaker 1: about being overly provocative too. And for more on China.
Speaker 1: We're going to turn out to I'll call her our
Speaker 1: resident expert on China. She's Deborah Laire. She is the
Speaker 1: CEO of Edelman Global Advisory as well as the executive
Speaker 1: director of The Pulse Sinister. Welcome back to Wall Street.
Speaker 1: It's good to have you here, very delighted. So you
Speaker 1: understand President gy and China better than most Americans do.
Speaker 1: Give us a sense of how he looks at this
Speaker 1: year going into two. Well, this is a really important
Speaker 1: year for she didn't paying for many different reasons. It's
Speaker 1: he started his reselection campaign leading up to a potential
Speaker 1: third term as president. He is still managing the economy
Speaker 1: coming out of COVID. He is facing the big question
Speaker 1: of how to reopen after the zero tolerance policy and
Speaker 1: COVID lockdown, and now his new friend Ladimir Putin has
Speaker 1: put him in a very difficult position as he has
Speaker 1: to choose between the relationship with Russia and the relationship
Speaker 1: still with the West then particularly the United States. So
Speaker 1: what about that relationship. We saw the two of them
Speaker 1: together at the beginning of the Winter Olympics, sort of
Speaker 1: pledging their troth if I can put it that way,
Speaker 1: They're really supporting one another at the same time, Often
Speaker 1: people who are autocratic don't like violations of boundaries. And
Speaker 1: now we have Russia invading Ukraine. What is China's position
Speaker 1: here and to what extent will they help Russia out
Speaker 1: by buying things like oil and wheat? Great, Well, you know,
Speaker 1: it's it's I guess a certain irony that it's the
Speaker 1: fiftieth year to celebrate Nixon's kind of visit to China
Speaker 1: and the reopening of the relationship, which was really driven
Speaker 1: um as a way to counterbalance Russia. And we're now
Speaker 1: back in looking at this triangle. Russia's move has put
Speaker 1: to Jumping in a very difficult position because traditionally the
Speaker 1: Chinese position is not to violate national sovereignty. On the
Speaker 1: other hand, Vladimir Putin is making certain arguments about a
Speaker 1: historical legacy that resonate for China when it comes to
Speaker 1: its position on Taiwan. But China is still very dependent
Speaker 1: on the West. Looking ahead at the economy, you know,
Speaker 1: we've we've talked a lot and there's been a lot
Speaker 1: of discussion about what the impact of COVID in the
Speaker 1: lockdown has been on the Chinese economy. Well, it's we've
Speaker 1: looked really at some of the fundamentals, not as much
Speaker 1: as you would be led to believe that the real
Speaker 1: drags on the economy have been a tight monetary policy.
Speaker 1: They have been the lack of semiconductor chips because of
Speaker 1: U S sanctions, and the energy shortage. She has been
Speaker 1: starting to address all of that. They're looking at ramping
Speaker 1: up monetary policy with a stimulus program in this first
Speaker 1: quarter because that will start to hit come October November,
Speaker 1: just as he is standing for his reselection. But also
Speaker 1: he's been addressing the energy shortage, looking at what's going
Speaker 1: to happen with rush to China just signed long term
Speaker 1: contracts when Vladimir Putin was there in early February at
Speaker 1: the start of the Olympics for wheat where Russia and
Speaker 1: the Ukraine or some of the largest growers, and for oil.
Speaker 1: But if the oil prices go up to you know,
Speaker 1: they're already hitting a hundred a hundred and fifty, people
Speaker 1: are speculating even two hundred. This is going to have
Speaker 1: a significant impact on the Chinese economy and their ability
Speaker 1: to maintain even what we speculate will be a five
Speaker 1: percent goal of growth this year. What about the growth level,
Speaker 1: because China has really been an engine for growth globally,
Speaker 1: not just within China. Globally it is slowing down somehow
Speaker 1: badly is it slowing down? Well, if you look at
Speaker 1: last year and you talk about the effect of COVID
Speaker 1: putting aside kind of this, these talks of the lockdown
Speaker 1: in the supply chain, if you look at the numbers,
Speaker 1: it's unbelievable. They had an absolute banner year when it
Speaker 1: came to production and when it came to exports. So
Speaker 1: the supply chain kind of hold ups weren't necessarily from China,
Speaker 1: accept in some isolated cases when they did close down
Speaker 1: a port for a COVID scare or something like that.
Speaker 1: They really were an engine of growth with the rest
Speaker 1: of the world. Now this is going to be a
Speaker 1: supply shock to the rest of the world, and what
Speaker 1: Russia has done is going to have an impact on
Speaker 1: global growth and that is definitely getting hit China because
Speaker 1: they still are dependent on these export markets. Okay, thank
Speaker 1: you so much, Devor. That's Deborah Lair of the Pulse
Speaker 1: and Institute. Coming up. We wrap up the week with
Speaker 1: special contributor Larry Summers of Harvard. This is Wall Street
Speaker 1: Week on Bloomberg. This is Bloomberg Wall Street Week with
Speaker 1: David Weston from Bloomberg Radio. This is Wall Street Week.
Speaker 1: I'm David Weston. We're joined once again by our very
Speaker 1: special contributor for Wall Street Week. He is Dr Larry
Speaker 1: Summers of Harvard. So, Larry, it's good to see you again.
Speaker 1: This has been a rough week. I think it's fair
Speaker 1: to say the big event of the week was that
Speaker 1: a full scale invasion the likes of which we haven't
Speaker 1: seen since World War Two of Russia into Ukraine. What
Speaker 1: are your thoughts overall what we've seen this week From
Speaker 1: the perspective of six months ago, this is a shock
Speaker 1: from the perspective of what had been unfolding and what U.
Speaker 1: S Intelligence had been telling us. Um it wasn't that
Speaker 1: surprising when it came, But make no mistake, I think
Speaker 1: there's a real chance that this is going to be
Speaker 1: one of those moments like January six, like nine eleven,
Speaker 1: like November two, that echoes through UH history that this
Speaker 1: kind of naked aggression could take place in UH Europe,
Speaker 1: that there could be the kind of emerging alliance that
Speaker 1: we have seen between Russia and China. At the same
Speaker 1: time means that we are in a very different world
Speaker 1: than many of us had thought we were headed into.
Speaker 1: The United States faces far graver challenges to its security
Speaker 1: than anyone would have thought likely even UH several years ago,
Speaker 1: and that's going to have ramifications or needs to have
Speaker 1: ramifications for almost every aspect of our national life. History
Speaker 1: has not ended. We are engaged in the kind of
Speaker 1: struggle that Lincoln UH spoke of about whether government by
Speaker 1: the people for the people can long endure. That is
Speaker 1: a challenge domestically, that is a challenge globally, and anyone
Speaker 1: who thinks that it is not a challenge to their
Speaker 1: ability to flourish and profit as a business is making
Speaker 1: an enormous mistake, because if we lose this UH struggle,
Speaker 1: it is not only our freedom and our security, but
Speaker 1: our prosperity that will be at peril. The thoughts of
Speaker 1: all of us, I'm sure our first with the men,
Speaker 1: women and yes children Ukraine and what they are going
Speaker 1: through right now, and also the issues of the world
Speaker 1: order that you're raising, which are very profound. At the
Speaker 1: same time, this could have as well some profound economic consequences,
Speaker 1: particularly in the world in the United states, particularly where
Speaker 1: we have a fair amount of inflation. What do you
Speaker 1: think the economic implications of this geopolitical crisis could be, David,
Speaker 1: It's not gonna be good. UM. The direction is stagflationary.
Speaker 1: The direction is both to raise prices. We're seeing that
Speaker 1: in oil and energy and other commodity markets. The direction
Speaker 1: is also to UM reduce reduce the level of demand
Speaker 1: and spending as those price increases, UH sap purchasing UH power.
Speaker 1: So the very difficult job that the FED had already
Speaker 1: made for itself by falling so far behind UH the
Speaker 1: curve has become that much more difficult with what we
Speaker 1: have seen. The danger is that Team Transitory will morph
Speaker 1: into Team It's a supply shock caused by oil and
Speaker 1: find further excuse to avoid taking the necessary steps to
Speaker 1: UH contain inflation, and therefore postpone the ultimate UH reckoning
Speaker 1: and make more serious What is what needs to be
Speaker 1: done UH to UH contain inflation. The argument will be
Speaker 1: made that we can't afford restrictive policies. The problem is
Speaker 1: that we also can't afford an entirely unsustainable economic path
Speaker 1: that will ultimately set the stage for more economic distress,
Speaker 1: more pain, and more UH, reduction in employment for the
Speaker 1: most vulnerable people in our society. This is a very
Speaker 1: serious moment, and it's a moment when policy makers have
Speaker 1: great responsibility to do things that are not easy. Larry,
Speaker 1: I don't know if his team transitory or app but
Speaker 1: respected economists I know you respect him. A former classmate.
Speaker 1: Here's Paul Krugman weighed in on the inflation question, at
Speaker 1: least one aspect of it this week in the New
Speaker 1: York Times, where he essentially, if I can summarize it,
Speaker 1: took issues with what he called sort of technocrats who
Speaker 1: were distancing themselves from the Biden administration by criticizing some
Speaker 1: of the politically popular things that have been suggested, such as,
Speaker 1: for example, suspending the tax on gasoline, something you commented
Speaker 1: on last weekend this program. I got a reaction from you.
Speaker 1: I saw on Twitter. Paul's a brilliant guy, but on
Speaker 1: this I think he is way off base. We would
Speaker 1: not be where we are if any of the economists
Speaker 1: who saw inflationary danger last summer had been prepared to
Speaker 1: speak up and express UH their concerns. By giving air
Speaker 1: to the bogus view that inflation has something to do
Speaker 1: with greed. Distinguished economists are delaying the moment at which
Speaker 1: it will be confronted in a serious UH way. I
Speaker 1: am not worried about independent economists speaking their mind when
Speaker 1: they're out of government, rather than maintaining some kind of
Speaker 1: loyalty to a political UH viewpoint. I am worried about
Speaker 1: columnists who choose to use their influence is distinguished economists
Speaker 1: only to reinforce the prejudices and instincts of a particular
Speaker 1: political constituency that I think is a much greater UH danger.
Speaker 1: Paul Krugman is the world's most distinguished international economists. Let's
Speaker 1: hear his views opposing protectionism. Let's hear his views recognizing
Speaker 1: the importance of international interconnection in holding down UH prices.
Speaker 1: Let's hear him. Let's hear him UH be prepared to
Speaker 1: challenge policy approaches that almost all economists recognize are misguided.
Speaker 1: So letry Let's take a moment here at the end
Speaker 1: to look forward to next week. We're gonna have the
Speaker 1: first You'll Stay in the Union dress from President Biden
Speaker 1: on Tuesday evening. That's always an important and yes, challenging
Speaker 1: speech for a president. It's going to be particularly so
Speaker 1: I suspect this. You're given what you've just been saying
Speaker 1: about inflation, but also the war in Ukraine. What would
Speaker 1: you like to hear from President Biden on Tuesday? You know,
Speaker 1: I think there are things that are more important than
Speaker 1: the usual laundry list of UH policy proposals. I'm hoping
Speaker 1: to see a real change in tone from the president.
Speaker 1: At a certain point, President Roosevelt shifted from being the
Speaker 1: end of depression president to being the win the war president.
Speaker 1: President Biden needs to shift from being the protect the
Speaker 1: middle class from the pandemic president to being prepare America
Speaker 1: for the strong uggle ahead of President. We don't need
Speaker 1: a middle class foreign policy now. We need a safe
Speaker 1: and secure world UH policy. UH. Now, we don't need
Speaker 1: efforts to provide particular tax cuts or particular benefits to
Speaker 1: particular constituencies. We need a return to the spirit of
Speaker 1: President Kennedy, who, at a moment when the country was challenged,
Speaker 1: asked America not what their country could do for them,
Speaker 1: but what they could do for their country. And so
Speaker 1: I hope that President Biden will recognize the gravity of
Speaker 1: UH the moment, will signal the necessary UH pivot given
Speaker 1: what is happening in Russia, What is happening in Nina,
Speaker 1: What is happening to the two of them together, And
Speaker 1: what is happening to our own democracy? Our own democracy.
Speaker 1: When a former president just fourteen months thirteen months out
Speaker 1: of office is calling the leader of a country who
Speaker 1: launches a world war a genius, that is a grave
Speaker 1: threat and it points to a kind of polarization in
Speaker 1: our society that the president needs to address. That doesn't
Speaker 1: mean particular issues about particular aspects of the way registration
Speaker 1: rules work in particular states. It means the broad character
Speaker 1: of our democracy. Important moment, well said, thank you very
Speaker 1: much to Larry Summer at Harvard are very special contributor
Speaker 1: here on Wall Street Weak and this is Wall Street
Speaker 1: Week on Bloombrook