WEBVTT - Bloomberg Wall Street Week: Harman, Patterson, Lehr 0:00:00.240 --> 0:00:05.000 This is Bloomberg Wall Street Week. Market shruggle, higher consumer prizes. 0:00:05.040 --> 0:00:07.400 The economy is in the process of rebounding. Will the 0:00:07.400 --> 0:00:10.479 flutter reserve of its own digital currency? The financial stories 0:00:10.520 --> 0:00:12.879 that cheap hard work. Many people think the eels are 0:00:12.880 --> 0:00:15.080 just going to keep marching up. We have more spending 0:00:15.120 --> 0:00:17.160 coming out of Congress. One of the big questions I 0:00:17.200 --> 0:00:19.880 think on investor's minds inflation through the eyes of the 0:00:19.920 --> 0:00:23.560 most influential voices. Larry Summer is the former Treasury Secretary 0:00:23.640 --> 0:00:27.240 Bryan Wynhan a back of America, Will Smart CEO Charlie Sharp. 0:00:27.360 --> 0:00:31.560 Bloomberg wool Street Week with David Weston from Bloomberg Radio. 0:00:32.200 --> 0:00:36.320 Suspended animation as the world puts aside issues of inflation 0:00:36.440 --> 0:00:39.600 and earnings and FED policy and even COVID for a 0:00:39.640 --> 0:00:43.520 week consumed with war in Ukraine. This is Bloomberg Wall 0:00:43.520 --> 0:00:59.920 Street Week. I'm David Weston. This week, there was plenty 0:01:00.080 --> 0:01:02.560 going on, from the price of oil, as Dan Y're 0:01:02.560 --> 0:01:06.200 gonna h s market discussed, Some say we're gonna have 0:01:06.240 --> 0:01:08.360 over a hundred dollar oil for much of the year, 0:01:08.560 --> 0:01:10.880 to what Jeffrey You of b n Y Melon says, 0:01:10.959 --> 0:01:15.000 is the central banks concerned about inflation expectations becoming unanchored. 0:01:16.160 --> 0:01:18.399 This strikes at the heart of what central banks are 0:01:18.400 --> 0:01:21.319 worried about right now, as in a d anchoring of 0:01:21.360 --> 0:01:25.160 infacion expectations. But despite all that was happening around us, 0:01:25.280 --> 0:01:28.959 we spent the week focused on the geopolitical crisis in Ukraine. 0:01:29.319 --> 0:01:33.360 As President Putin recognized what purported to be independent republics 0:01:33.440 --> 0:01:36.160 in the eastern part of the country, the West imposed 0:01:36.280 --> 0:01:40.080 limited sanctions. In response, I'm going to begin to impose 0:01:40.160 --> 0:01:44.000 sanctions and response far beyond the steps we and our 0:01:44.040 --> 0:01:49.040 allies and partners implemented. And then on Thursday, Russia did 0:01:49.080 --> 0:01:51.639 with the United States had been warning about. It launched 0:01:51.640 --> 0:01:55.440 a full scale invasion of Ukraine, triggering much broader sanctions 0:01:55.480 --> 0:01:58.840 from the West and plunging Europe into the largest armed 0:01:58.880 --> 0:02:03.520 conflict in de Gates, he has much larger ambitions in Ukraine. 0:02:03.560 --> 0:02:07.240 He wants to, in fact, re established the former Soviet Union. 0:02:07.560 --> 0:02:09.520 For her sense of where this crisis his head, and 0:02:09.560 --> 0:02:12.240 we turned out to Jane Harmon. She's President Emerita of 0:02:12.240 --> 0:02:15.040 the Wilson Center and she's the author of Insanity Events 0:02:15.320 --> 0:02:17.880 about foreign policy for the United States. Jane, thank you 0:02:17.919 --> 0:02:20.480 so much for being with us. What is your initial take. 0:02:20.520 --> 0:02:22.240 We have a lot of developments yet to come, but 0:02:22.360 --> 0:02:26.120 as of right now, where do you think this is unfolding? Well, 0:02:26.200 --> 0:02:28.240 let me say that the book you just plugged, thank 0:02:28.280 --> 0:02:31.040 you David for always doing that, makes the point that 0:02:31.120 --> 0:02:34.320 when the Cold War ended, we had no strategy for 0:02:34.400 --> 0:02:36.480 what the world would look like. We thought we won, 0:02:37.120 --> 0:02:41.040 Russia lost, and everybody wants to be us. Well, oops, 0:02:41.080 --> 0:02:43.959 we missed the rise of terrorism, we missed the rise 0:02:44.000 --> 0:02:46.040 of China, which doesn't want to be us, and we 0:02:46.160 --> 0:02:50.720 missed the sense of huge grievance that Vladimir Putin is 0:02:50.800 --> 0:02:55.160 now uh following through with by Russia, which did lose. 0:02:55.280 --> 0:02:57.960 But unlike World War Two, where we helped those we 0:02:58.040 --> 0:03:03.680 conquered become allies and friends Germany and Japan, this time 0:03:03.720 --> 0:03:06.320 we just rub rubbed Russia's nose in it. And so 0:03:07.160 --> 0:03:10.240 we're now paying a penalty for all three things. What 0:03:10.280 --> 0:03:12.760 do I think is going to happen? Uh? It looks 0:03:13.240 --> 0:03:19.040 pretty certain that Putin has outgunned, out classed the the 0:03:19.320 --> 0:03:23.760 the the fight of of Ukrainians, and in some way 0:03:23.800 --> 0:03:26.240 in the next few days there will be some bad 0:03:26.320 --> 0:03:30.680 resolution in Ukraine. I just hope that the courageous leader 0:03:30.720 --> 0:03:33.840 there Zelenski, who has shown so much fight and so 0:03:33.960 --> 0:03:38.760 much bravery, unlike Gani in Afghanistan, who escaped the country 0:03:38.840 --> 0:03:43.240 before it fell. UH will be safe. I hope he 0:03:43.360 --> 0:03:45.640 will be safe. UM. But I don't think this is 0:03:45.680 --> 0:03:49.400 where it stops. I think the ambitions of of Putin. 0:03:49.440 --> 0:03:51.080 Maybe we should give him a red hat that says 0:03:51.160 --> 0:03:54.760 nate Russia great again, our way beyond this, and he's 0:03:54.800 --> 0:03:57.600 trying to take down the liberal world order that we 0:03:57.720 --> 0:04:02.840 formed after and take advantage of the fact that there 0:04:02.960 --> 0:04:06.960 is still some disagreement among Europeans and European institutions at US. 0:04:07.280 --> 0:04:11.840 I commend President by for lashing US up to partners 0:04:11.840 --> 0:04:16.360 and allies and UH doing with them everything that's doable. 0:04:16.440 --> 0:04:19.400 And I do think there will be more sanctions by 0:04:19.440 --> 0:04:23.359 all of them and US, both on individuals and on 0:04:23.800 --> 0:04:28.960 UH banks and institutions, and those sanctions will bite. I 0:04:29.040 --> 0:04:31.719 don't want them to bite the Russian people. I really 0:04:31.720 --> 0:04:34.480 want them to bite Putin and the collector Prats who 0:04:34.520 --> 0:04:38.080 are doing this. Jane, you mentioned Afghanistan in a more 0:04:38.120 --> 0:04:40.280 recent time, but let's go back a little bit of Afghanistan. 0:04:40.320 --> 0:04:42.680 Because Russia went into Afghanistan at one point they spent 0:04:42.760 --> 0:04:44.159 quite a few years in there and it came to 0:04:44.240 --> 0:04:46.200 tears in the end. Do we have any sense do 0:04:46.240 --> 0:04:48.120 you have any sense at this point of the likelihood 0:04:48.120 --> 0:04:50.240 that infect Russia will simply be able to make you 0:04:50.279 --> 0:04:53.280 create a vassal state and that's done with, or they 0:04:53.279 --> 0:04:56.080 could have a protracted conflict the way they did in Afghanistan. 0:04:56.760 --> 0:05:00.320 I think this could be even worse than Afghanistan. Um 0:05:00.360 --> 0:05:02.960 I was on the magn that's the square in in 0:05:03.200 --> 0:05:07.799 uh In, Ukraine and Kiev in looking at the little 0:05:07.839 --> 0:05:11.400 memorials that were put up to the folks who gave 0:05:11.440 --> 0:05:15.920 their lives to topple this Russian puppet Janakovich, and that 0:05:16.000 --> 0:05:19.400 led to free and fair elections first of Poorshenko, who's 0:05:19.440 --> 0:05:23.200 there uh In in Ukraine right now strapping on his weapon, 0:05:23.640 --> 0:05:29.039 and then following him to Zelenski, And so Ukraine has 0:05:29.080 --> 0:05:33.560 been a Western free democracy for seven plus years, even 0:05:33.640 --> 0:05:36.760 with Russian interference in the eastern part the don Bus. 0:05:37.040 --> 0:05:39.479 And I don't think these folks are going away or 0:05:39.480 --> 0:05:42.040 given up. And I think this is gonna be an 0:05:42.160 --> 0:05:47.800 ugly story if if, if Russia tries to occupy the country, 0:05:47.880 --> 0:05:51.440 and I don't think Ukraine is gonna surrender easily, and 0:05:51.560 --> 0:05:54.320 this is not going to be just not gonna be 0:05:54.600 --> 0:05:57.120 a cake walk for Russia. Jane Len double back on 0:05:57.160 --> 0:05:58.840 something you said that you thought that this one was 0:05:58.920 --> 0:06:01.080 not necessarily the end for President Putin's point view of 0:06:01.120 --> 0:06:03.720 horry wants to go. That's something that's certainly President Biden 0:06:03.800 --> 0:06:07.359 said this week. So how nervous does President Putin have 0:06:07.440 --> 0:06:09.840 to be about triggering that Article five of NATO if 0:06:09.839 --> 0:06:13.320 it goes into places like Poland for example. Well, it's 0:06:13.400 --> 0:06:17.600 it's interesting, Um, the NATO was only invoked Article five once, 0:06:17.800 --> 0:06:20.359 and that was after nine eleven. We didn't ask for it, 0:06:20.480 --> 0:06:23.240 Nick Burns. Uh, this mutual friend of our, David who 0:06:23.320 --> 0:06:25.760 was going to represent the Sun China was then the 0:06:25.760 --> 0:06:28.720 ambassador to NATO, and they didn't ask us. They just 0:06:28.920 --> 0:06:33.120 voked Article five to come to our defense after nine eleven. Um, 0:06:33.160 --> 0:06:36.800 since then it's never been invoked. But you're right, Uh, 0:06:36.880 --> 0:06:40.200 Poland is a NATO country. We're sending additional troops and 0:06:40.360 --> 0:06:44.520 the whole compliment of NATO troops is increasing. Thank you 0:06:44.560 --> 0:06:46.279 so much, Jane, Really wonderful to have you with us 0:06:46.320 --> 0:06:49.320 at Jane Harmon, She's President Emerita of the Wilson Center. 0:06:49.560 --> 0:06:51.960 Let me come back. The Market's response to the war 0:06:52.000 --> 0:06:54.960 in Ukraine with Kate Moore, Black Rock and Rebecca Patterson 0:06:55.000 --> 0:06:58.000 of Bridgewater Associates. This is Bloomberg Wall Street Reek. I'm 0:06:58.040 --> 0:07:04.320 David Weston. This is Bloomberg Wall Street Week with David 0:07:04.320 --> 0:07:09.000 Weston from Bloomberg Radio. Ukraine dominated a tumultuous week of trading, 0:07:09.040 --> 0:07:11.680 with the SMP five hundred falling into correction Territory and 0:07:11.760 --> 0:07:15.480 Thursday only to climb back up to two for the week. 0:07:15.680 --> 0:07:18.200 The Nasdaq was up also by one point six percent, 0:07:18.360 --> 0:07:21.040 while the Tenure veered from a yield of under one 0:07:21.040 --> 0:07:23.600 point eight five to over two point oh, ending the 0:07:23.640 --> 0:07:26.680 way just under the two point oh mark. An oil Oil, 0:07:26.720 --> 0:07:29.640 of course, got hit the most by the uncertainty over Ukraine. 0:07:29.800 --> 0:07:32.760 Brent shot up to over one five dollars of barrel 0:07:32.800 --> 0:07:35.000 after news of the invasion hit on Thursday, and then 0:07:35.040 --> 0:07:37.880 settled back down to nine dollars of barrel when it 0:07:37.880 --> 0:07:40.920 appeared that sanctions wouldn't hit the energy sector as hard 0:07:40.960 --> 0:07:43.680 as was thought, at least for now. To to help 0:07:43.760 --> 0:07:46.600 us understand the market reactions welcomed now. Kate Moore she's 0:07:46.640 --> 0:07:49.880 head of Thematic Strategies at black Rock Financial Management, and 0:07:50.160 --> 0:07:53.520 Rebecca Patterson Bridgewater, director of Investment Research. So let me 0:07:53.560 --> 0:07:55.880 start with you, Rebecca, what about what happened with equities 0:07:55.880 --> 0:07:58.240 this week? It was all over the place. Well, you know, 0:07:58.560 --> 0:08:00.920 obviously we were all focused on the Ukraine and what 0:08:01.080 --> 0:08:04.160 was happening there, But UM, I think it's important to 0:08:04.160 --> 0:08:06.440 remember that the markets are always being driven by a 0:08:06.480 --> 0:08:09.120 myriad of factors. Ukraine was front and center, but we 0:08:09.200 --> 0:08:11.080 also were in a period where we had a lot 0:08:11.080 --> 0:08:13.920 of buybacks going on. A lot of those tech companies 0:08:13.920 --> 0:08:16.080 that had sold off a lot probably benefited from that 0:08:16.080 --> 0:08:17.640 as we got into end of the week, and of 0:08:17.680 --> 0:08:20.600 course we're going into month and rebalancing, and so that 0:08:20.680 --> 0:08:23.200 can also cause a lot of trading. So even when 0:08:23.200 --> 0:08:25.320 things are very whippy and you don't always say, how 0:08:25.320 --> 0:08:28.480 does this tie to the headlines with Ukraine, it's important 0:08:28.480 --> 0:08:30.520 to remember that there's a lot of things going on 0:08:30.600 --> 0:08:33.200 behind the scenes. In addition to that, obviously that was 0:08:33.280 --> 0:08:36.400 the most important thing, and as you said, the possibility 0:08:36.440 --> 0:08:39.120 that sanctions won't be as hard as they might be 0:08:39.240 --> 0:08:41.920 at least for now, UM might have also helped us 0:08:41.920 --> 0:08:43.640 get a little bit of a reprieve towards the end 0:08:43.640 --> 0:08:46.680 of the week. Kate, Yeah, I know, you're very interesting 0:08:46.720 --> 0:08:50.680 resources companies. What happened with resources companies? We actually had 0:08:50.679 --> 0:08:53.960 a phenomenal week once again for resources companies. You know, 0:08:54.120 --> 0:08:56.200 in the US, the x m E, which is the 0:08:56.320 --> 0:08:58.480 sp by D Mining E t F, hit a ten 0:08:58.559 --> 0:09:01.680 year high uh and globally we've seen the same kind 0:09:01.679 --> 0:09:05.040 of thing across resources companies. You know, it has been 0:09:05.080 --> 0:09:09.760 a phenomenal rally driven by both good supply demand dynamics 0:09:09.800 --> 0:09:14.760 as well as some concern over ongoing supply disruptions, particularly 0:09:14.760 --> 0:09:17.720 from the rush of Ukraine situation. So you have both 0:09:17.720 --> 0:09:21.200 the geopolitical and the fundamental side really backing up an 0:09:21.200 --> 0:09:24.320 incredibly strong rally in a sector. When you think about 0:09:24.360 --> 0:09:26.920 the miners in particular that have been so unloved for 0:09:27.000 --> 0:09:29.360 so long. It was a place I played in in 0:09:29.400 --> 0:09:31.600 a many parts of my career. I had a dust 0:09:31.600 --> 0:09:34.080 off some of my playbooks and some of my skills there. 0:09:34.679 --> 0:09:36.880 One thing I'd add to what Kate just said on 0:09:37.000 --> 0:09:40.120 some of these resource companies is even before Ukraine and 0:09:40.160 --> 0:09:43.440 the threat to supplies that that implies, we already had 0:09:43.480 --> 0:09:46.720 a situation where demand obviously very very strong with all 0:09:46.760 --> 0:09:49.920 the fiscal and monetary stimulus after COVID, But then on 0:09:50.000 --> 0:09:52.400 top of that, a lot of these sectors has seen 0:09:52.520 --> 0:09:56.560 under investment for years, so supplies were already somewhat low 0:09:56.679 --> 0:09:59.240 before we had this demand shock, and now we're in 0:09:59.240 --> 0:10:02.079 a situation where supplies aren't even close to what we need. 0:10:02.440 --> 0:10:05.599 Whether we're talking about oil with under investment both in 0:10:05.640 --> 0:10:08.559 the US and by OPEC countries, whether we're talking about 0:10:08.559 --> 0:10:10.559 a lot of crops. We've seen under investment in the 0:10:10.600 --> 0:10:13.280 last couple of years, partly a weather situation, but supplies 0:10:13.400 --> 0:10:16.480 very low and in the metals, and so demand is 0:10:16.559 --> 0:10:20.640 improving after o macrons starting to fade. Hopefully the Ukraine 0:10:20.679 --> 0:10:23.240 situation won't dent that too much. So you have strong 0:10:23.320 --> 0:10:25.360 demand and these supplies that can't keep up, and this 0:10:25.520 --> 0:10:28.360 just creates an additional risk on supply. So I think 0:10:28.360 --> 0:10:30.800 to Kate's point, some of these companies look like a 0:10:30.800 --> 0:10:33.280 good inflation hedge, and they're also just in a great 0:10:33.320 --> 0:10:36.840 position to benefit from that increased demand. Yeah. I would 0:10:36.840 --> 0:10:38.880 add on to something else for Becca saying, which is 0:10:39.000 --> 0:10:41.240 in addition to what's happening in the very near term 0:10:41.320 --> 0:10:45.040 around supply demand. There's also a longer term demand story. 0:10:45.360 --> 0:10:48.240 A lot of these miners produce metals that are actually 0:10:48.280 --> 0:10:52.680 incredibly important for the energy transition and for electric vehicles, 0:10:53.120 --> 0:10:56.440 and we're seeing them undersupplied in the market. We've also 0:10:56.520 --> 0:10:59.800 seen like some metals like aluminium, for example, or some 0:11:00.080 --> 0:11:02.959 resources like aluminum um, you know how, kind of a 0:11:02.960 --> 0:11:04.760 bit of a backlash against you know how some of 0:11:04.800 --> 0:11:09.120 the that is produced, and so aluminum producers that use 0:11:09.200 --> 0:11:13.800 natural gas or cleaner energy to produce are coming into favor. 0:11:14.200 --> 0:11:16.679 It is a place where I think we'll see continued 0:11:17.200 --> 0:11:20.320 support for prices over the medium term. Rebecca, this is 0:11:20.320 --> 0:11:23.640 a geopolitical crisis with a specific location, which is Europe, 0:11:23.679 --> 0:11:26.240 and we saw at various times this week a really 0:11:26.320 --> 0:11:29.000 different reaction in the markets depending on Europe versus the 0:11:29.080 --> 0:11:32.040 United States. Do you think that will persist? Unfortunately, I do. 0:11:32.480 --> 0:11:34.720 You know, we we don't know the duration or the 0:11:34.760 --> 0:11:38.000 degree of the Ukraine crisis, and so obviously that matters. 0:11:38.080 --> 0:11:41.680 But even if there aren't the worst possible sanctions on energy, 0:11:41.720 --> 0:11:43.960 they want to get the energy flows to Europe. A 0:11:44.080 --> 0:11:47.679 third of Russians oil exports go through the Ukraine. So 0:11:47.840 --> 0:11:49.920 if you have a situation where they can't get the 0:11:49.960 --> 0:11:52.680 flows through, You're gonna see higher prices no matter what's 0:11:52.720 --> 0:11:55.240 going on with the sanctions. So what Europe seeing is 0:11:55.400 --> 0:11:59.119 greater risk of what I'd call a stagflationary shock, where inflation, 0:11:59.160 --> 0:12:01.680 which is already more than double the ECB the European 0:12:01.720 --> 0:12:04.920 Central Banks target, is going higher and at the same 0:12:04.960 --> 0:12:06.960 time growth is going lower. Part of it is a 0:12:07.000 --> 0:12:10.040 sentiment shock, but part of it is the inflation eroding 0:12:10.080 --> 0:12:13.120 people's disposable income. Do they just have less to spend? 0:12:13.480 --> 0:12:16.160 So the good news is that going into this shock, 0:12:16.440 --> 0:12:19.760 growth was improving, so they're starting from a strong place. 0:12:19.880 --> 0:12:22.040 The question is how far does this pull them back? 0:12:22.240 --> 0:12:24.559 And then how does the European Central Bank respond more 0:12:24.600 --> 0:12:26.600 to growth or more to the inflation. They're in a 0:12:26.679 --> 0:12:30.040 really difficult position. Okay, I wonder about Europe in general, 0:12:30.120 --> 0:12:32.720 because before this all happened, there were those who were 0:12:32.720 --> 0:12:34.400 saying this was gonna be the year for Europe. Finally 0:12:34.440 --> 0:12:36.800 we're gonna have the year for Europe because valuations were 0:12:36.880 --> 0:12:39.320 very attractive, there was gonna be better growth. Does this 0:12:39.480 --> 0:12:41.480 change that dynamic or did you believe in it to 0:12:41.520 --> 0:12:44.280 begin with? Yeah, David, I never believed in it to 0:12:44.360 --> 0:12:46.600 begin with, and I think those folks that work with 0:12:46.640 --> 0:12:49.559 me know that, well, let's not call myself a euroskeptic, 0:12:49.840 --> 0:12:53.319 but someone who doesn't believe that buying European index exposure 0:12:53.400 --> 0:12:56.760 makes sense in most scenarios. When you buy Europe, get 0:12:56.760 --> 0:12:59.920 a lot of exposure to what I would consider lower quality, 0:13:00.080 --> 0:13:03.960 lower growth companies, big exposure to the Bank's, big exposure 0:13:04.040 --> 0:13:06.080 to some you know, companies that I would think of 0:13:06.720 --> 0:13:10.160 as having more stagnant business models and don't have kind 0:13:10.160 --> 0:13:13.839 of dynamic flow. So it was not something I was 0:13:13.920 --> 0:13:16.240 really excited about to begin with. And I think one 0:13:16.240 --> 0:13:18.520 of the things that's not fully priced into European equities 0:13:18.640 --> 0:13:20.400 right now is the extent to which that which this 0:13:20.520 --> 0:13:25.440 Russia Ukraine conflict UH could lead through into European growth. 0:13:25.840 --> 0:13:28.319 I think it's incredibly important to be selected in your 0:13:28.320 --> 0:13:31.120 European investments at this point. There are plenty of great, 0:13:31.240 --> 0:13:33.760 high quality companies that are not just going to be 0:13:33.840 --> 0:13:36.520 geared towards domestic growth, and I think that's where we 0:13:36.520 --> 0:13:39.359 need to focus our attention when we think about exposure 0:13:39.400 --> 0:13:42.560 to the region. One thing I'd add to your point, Kate, 0:13:42.760 --> 0:13:45.600 if we're looking for catalysts that could affect our outlook 0:13:45.640 --> 0:13:49.040 on growth in Europe would be what happens fiscally. So 0:13:49.200 --> 0:13:51.679 Europe is getting its act together this year. They're all 0:13:51.720 --> 0:13:54.800 talking about what should our fiscal framework be. Their fiscal 0:13:54.840 --> 0:13:58.920 policy right now, they're set to start imposing their old policies. 0:13:58.960 --> 0:14:02.720 Pre pandemic policy is next year, but they may decide 0:14:02.760 --> 0:14:05.920 because of the Russia Ukraine conflict, to give another extension, 0:14:06.200 --> 0:14:08.920 so letting governments spend a little bit longer, not putting 0:14:08.960 --> 0:14:12.120 that austerity straight jack and back on. If they do that, 0:14:12.120 --> 0:14:14.400 that could be another support to growth that I don't 0:14:14.400 --> 0:14:17.160 think is discounted in prices right now. We should know 0:14:17.240 --> 0:14:19.360 that around mid year, So in addition to what the 0:14:19.400 --> 0:14:22.440 European Central Bank does, how they respond, this would be 0:14:22.480 --> 0:14:25.840 another important catalyst that I think could affect views. Again, 0:14:25.920 --> 0:14:28.120 I agree with you, Kate, certain stocks more than others. 0:14:28.360 --> 0:14:30.760 Many thanks that a Kate Moore, Black Rock and Rebecca 0:14:30.800 --> 0:14:34.480 Patterson of Bridgewater Associates, Director of Investment Research. Coming up, 0:14:34.640 --> 0:14:37.240 Debra Lair of the Pulse and Institute on the China 0:14:37.280 --> 0:14:39.760 piece of the puzzle that's coming up next on Wall 0:14:39.760 --> 0:14:49.800 Street Week, and we are on Bloomberg this is Bloomberg 0:14:49.880 --> 0:14:57.120 Wall Street Week with David Weston from Bloomberg Radio China. 0:14:57.520 --> 0:15:00.800 It's been the economic success story of the last half century, 0:15:01.080 --> 0:15:04.080 as g d P and per capita GDP have gone 0:15:04.160 --> 0:15:07.960 up faster than any economy in history. But now some 0:15:08.040 --> 0:15:11.800 people see some problems developing. Whether it's the struggling property 0:15:11.840 --> 0:15:16.440 sector flagged by investors like George Soros, China is facing 0:15:16.440 --> 0:15:22.600 an economic crisis centered under real estate rclipt, which has 0:15:22.680 --> 0:15:26.880 been the main engineer of growth ever since she Deven 0:15:27.040 --> 0:15:30.280 came to power, or the policy at zero tolerance for 0:15:30.320 --> 0:15:33.840 COVID that experts like Amish Adelage of Johns Hopkins find 0:15:34.040 --> 0:15:37.560 just plain wrong. COVID zero was wrong from the beginning. 0:15:37.600 --> 0:15:39.680 If someone wrote that on an essay question on a test, 0:15:39.680 --> 0:15:41.840 I would say that's a wrong answer to how you 0:15:41.880 --> 0:15:44.920 deal with this type of a virus. Factors that lead 0:15:44.920 --> 0:15:48.240 our special Wall Street we contributor Larry Summers to suggest 0:15:48.280 --> 0:15:53.760 we may be overestimating China's economic strength and underestimating its problems. 0:15:54.080 --> 0:15:59.920 Consider the possibility that we may be underestimating uh China 0:16:00.120 --> 0:16:04.880 his challenges now, and we need to be particularly careful 0:16:05.440 --> 0:16:16.200 about being overly provocative too. And for more on China. 0:16:16.280 --> 0:16:17.960 We're going to turn out to I'll call her our 0:16:18.040 --> 0:16:21.040 resident expert on China. She's Deborah Laire. She is the 0:16:21.080 --> 0:16:24.640 CEO of Edelman Global Advisory as well as the executive 0:16:24.680 --> 0:16:27.160 director of The Pulse Sinister. Welcome back to Wall Street. 0:16:27.160 --> 0:16:29.360 It's good to have you here, very delighted. So you 0:16:29.480 --> 0:16:33.840 understand President gy and China better than most Americans do. 0:16:34.000 --> 0:16:35.800 Give us a sense of how he looks at this 0:16:35.920 --> 0:16:39.200 year going into two. Well, this is a really important 0:16:39.280 --> 0:16:42.120 year for she didn't paying for many different reasons. It's 0:16:42.120 --> 0:16:46.160 he started his reselection campaign leading up to a potential 0:16:46.200 --> 0:16:49.680 third term as president. He is still managing the economy 0:16:49.760 --> 0:16:53.000 coming out of COVID. He is facing the big question 0:16:53.080 --> 0:16:56.680 of how to reopen after the zero tolerance policy and 0:16:56.720 --> 0:17:01.040 COVID lockdown, and now his new friend Ladimir Putin has 0:17:01.040 --> 0:17:03.880 put him in a very difficult position as he has 0:17:03.920 --> 0:17:09.160 to choose between the relationship with Russia and the relationship 0:17:09.280 --> 0:17:12.800 still with the West then particularly the United States. So 0:17:12.880 --> 0:17:14.920 what about that relationship. We saw the two of them 0:17:14.920 --> 0:17:16.960 together at the beginning of the Winter Olympics, sort of 0:17:16.960 --> 0:17:18.880 pledging their troth if I can put it that way, 0:17:19.040 --> 0:17:22.280 They're really supporting one another at the same time, Often 0:17:22.320 --> 0:17:25.959 people who are autocratic don't like violations of boundaries. And 0:17:26.000 --> 0:17:30.320 now we have Russia invading Ukraine. What is China's position 0:17:30.359 --> 0:17:32.720 here and to what extent will they help Russia out 0:17:33.080 --> 0:17:36.080 by buying things like oil and wheat? Great, Well, you know, 0:17:36.119 --> 0:17:38.639 it's it's I guess a certain irony that it's the 0:17:38.680 --> 0:17:43.520 fiftieth year to celebrate Nixon's kind of visit to China 0:17:43.600 --> 0:17:46.160 and the reopening of the relationship, which was really driven 0:17:46.840 --> 0:17:49.600 um as a way to counterbalance Russia. And we're now 0:17:49.760 --> 0:17:54.080 back in looking at this triangle. Russia's move has put 0:17:54.119 --> 0:17:56.840 to Jumping in a very difficult position because traditionally the 0:17:56.920 --> 0:18:00.760 Chinese position is not to violate national sovereignty. On the 0:18:00.800 --> 0:18:04.560 other hand, Vladimir Putin is making certain arguments about a 0:18:04.600 --> 0:18:08.560 historical legacy that resonate for China when it comes to 0:18:08.640 --> 0:18:12.880 its position on Taiwan. But China is still very dependent 0:18:12.960 --> 0:18:17.399 on the West. Looking ahead at the economy, you know, 0:18:17.480 --> 0:18:19.199 we've we've talked a lot and there's been a lot 0:18:19.240 --> 0:18:21.560 of discussion about what the impact of COVID in the 0:18:21.600 --> 0:18:26.520 lockdown has been on the Chinese economy. Well, it's we've 0:18:26.560 --> 0:18:29.040 looked really at some of the fundamentals, not as much 0:18:29.040 --> 0:18:31.440 as you would be led to believe that the real 0:18:31.640 --> 0:18:34.400 drags on the economy have been a tight monetary policy. 0:18:34.960 --> 0:18:38.680 They have been the lack of semiconductor chips because of 0:18:38.800 --> 0:18:41.800 U S sanctions, and the energy shortage. She has been 0:18:41.840 --> 0:18:44.280 starting to address all of that. They're looking at ramping 0:18:44.359 --> 0:18:47.720 up monetary policy with a stimulus program in this first 0:18:47.800 --> 0:18:51.520 quarter because that will start to hit come October November, 0:18:51.640 --> 0:18:55.439 just as he is standing for his reselection. But also 0:18:55.600 --> 0:18:59.159 he's been addressing the energy shortage, looking at what's going 0:18:59.240 --> 0:19:02.400 to happen with rush to China just signed long term 0:19:02.440 --> 0:19:05.119 contracts when Vladimir Putin was there in early February at 0:19:05.119 --> 0:19:08.200 the start of the Olympics for wheat where Russia and 0:19:08.200 --> 0:19:11.240 the Ukraine or some of the largest growers, and for oil. 0:19:11.800 --> 0:19:14.280 But if the oil prices go up to you know, 0:19:14.280 --> 0:19:16.840 they're already hitting a hundred a hundred and fifty, people 0:19:16.840 --> 0:19:19.040 are speculating even two hundred. This is going to have 0:19:19.080 --> 0:19:23.200 a significant impact on the Chinese economy and their ability 0:19:23.280 --> 0:19:26.320 to maintain even what we speculate will be a five 0:19:26.359 --> 0:19:28.800 percent goal of growth this year. What about the growth level, 0:19:28.840 --> 0:19:31.520 because China has really been an engine for growth globally, 0:19:31.600 --> 0:19:34.760 not just within China. Globally it is slowing down somehow 0:19:34.920 --> 0:19:37.080 badly is it slowing down? Well, if you look at 0:19:37.200 --> 0:19:39.280 last year and you talk about the effect of COVID 0:19:40.359 --> 0:19:43.360 putting aside kind of this, these talks of the lockdown 0:19:43.440 --> 0:19:45.800 in the supply chain, if you look at the numbers, 0:19:45.840 --> 0:19:49.399 it's unbelievable. They had an absolute banner year when it 0:19:49.440 --> 0:19:52.480 came to production and when it came to exports. So 0:19:52.600 --> 0:19:57.520 the supply chain kind of hold ups weren't necessarily from China, 0:19:57.600 --> 0:20:00.200 accept in some isolated cases when they did close down 0:20:00.200 --> 0:20:02.480 a port for a COVID scare or something like that. 0:20:03.040 --> 0:20:05.200 They really were an engine of growth with the rest 0:20:05.200 --> 0:20:08.800 of the world. Now this is going to be a 0:20:09.640 --> 0:20:12.000 supply shock to the rest of the world, and what 0:20:12.080 --> 0:20:13.919 Russia has done is going to have an impact on 0:20:13.960 --> 0:20:16.800 global growth and that is definitely getting hit China because 0:20:17.280 --> 0:20:20.840 they still are dependent on these export markets. Okay, thank 0:20:20.880 --> 0:20:23.480 you so much, Devor. That's Deborah Lair of the Pulse 0:20:23.560 --> 0:20:27.560 and Institute. Coming up. We wrap up the week with 0:20:27.600 --> 0:20:31.680 special contributor Larry Summers of Harvard. This is Wall Street 0:20:31.680 --> 0:20:37.080 Week on Bloomberg. This is Bloomberg Wall Street Week with 0:20:37.240 --> 0:20:40.760 David Weston from Bloomberg Radio. This is Wall Street Week. 0:20:40.760 --> 0:20:43.359 I'm David Weston. We're joined once again by our very 0:20:43.400 --> 0:20:46.280 special contributor for Wall Street Week. He is Dr Larry 0:20:46.320 --> 0:20:49.320 Summers of Harvard. So, Larry, it's good to see you again. 0:20:49.400 --> 0:20:51.160 This has been a rough week. I think it's fair 0:20:51.200 --> 0:20:53.080 to say the big event of the week was that 0:20:53.359 --> 0:20:55.800 a full scale invasion the likes of which we haven't 0:20:55.800 --> 0:20:58.760 seen since World War Two of Russia into Ukraine. What 0:20:58.840 --> 0:21:01.560 are your thoughts overall what we've seen this week From 0:21:01.560 --> 0:21:05.000 the perspective of six months ago, this is a shock 0:21:05.840 --> 0:21:09.800 from the perspective of what had been unfolding and what U. 0:21:09.880 --> 0:21:13.919 S Intelligence had been telling us. Um it wasn't that 0:21:14.080 --> 0:21:20.880 surprising when it came, But make no mistake, I think 0:21:20.920 --> 0:21:23.560 there's a real chance that this is going to be 0:21:23.640 --> 0:21:28.960 one of those moments like January six, like nine eleven, 0:21:29.200 --> 0:21:37.640 like November two, that echoes through UH history that this 0:21:37.840 --> 0:21:44.280 kind of naked aggression could take place in UH Europe, 0:21:45.240 --> 0:21:50.840 that there could be the kind of emerging alliance that 0:21:50.920 --> 0:21:56.399 we have seen between Russia and China. At the same 0:21:56.440 --> 0:22:01.520 time means that we are in a very different world 0:22:02.359 --> 0:22:07.879 than many of us had thought we were headed into. 0:22:08.520 --> 0:22:16.280 The United States faces far graver challenges to its security 0:22:16.400 --> 0:22:24.840 than anyone would have thought likely even UH several years ago, 0:22:25.800 --> 0:22:29.280 and that's going to have ramifications or needs to have 0:22:30.000 --> 0:22:38.360 ramifications for almost every aspect of our national life. History 0:22:38.400 --> 0:22:43.920