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Job Switchers, Not Stayers, Will Get The Wage Increases: Slok · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. We
• 0:32
  Speaker 1: did get those jobs numbers earlier today. They were great
• 0:36
  Speaker 1: by almost all accounts, with you participation increasing the job
• 0:41
  Speaker 1: right following to the lowest and two thousand and even
• 0:44
  Speaker 1: wages accelerating. But Kennis continue and what does this mean
• 0:47
  Speaker 1: about the path fed rate hikes? To answer all of
• 0:50
  Speaker 1: these questions for us, I want to bring in Torsten Slock.
• 0:53
  Speaker 1: He's chief international economist at Deutsche Bank, also a publisher
• 0:58
  Speaker 1: of charts that are ex jraordinary and timely tours and
• 1:01
  Speaker 1: thank you so much for joining us. So first, just
• 1:04
  Speaker 1: can you please just give us your take on today's
• 1:07
  Speaker 1: jobs report. No, absolutely, you just summarized it very well.
• 1:11
  Speaker 1: This is indeed some very good numbers, both on the headline,
• 1:15
  Speaker 1: of course, a number of jobs creative, the unemploying rate falling,
• 1:18
  Speaker 1: and most importantly we've been waiting for wages to go up,
• 1:22
  Speaker 1: and it's in some sense finally happening after quite some time,
• 1:27
  Speaker 1: and in some sense it's a really good day for
• 1:29
  Speaker 1: the economics profession. We have been looking for wages to
• 1:32
  Speaker 1: go up. We've seen in the number of indicators, the
• 1:34
  Speaker 1: employment cousindics have gone up, the quitch rate has been high,
• 1:37
  Speaker 1: and now we're finally also seeing the last few drop
• 1:39
  Speaker 1: here in the average old learning Stata today also checking higher.
• 1:43
  Speaker 1: So overall it is it is very good news both
• 1:46
  Speaker 1: for the American consumer and for the US economy. Are
• 1:48
  Speaker 1: you basically saying that the Phillips curve works? Yes, So
• 1:51
  Speaker 1: now of course the forensics can begin that we can
• 1:54
  Speaker 1: begin to discuss why has it not worked, or has
• 1:56
  Speaker 1: it been dead, or is it waking up, or what
• 1:59
  Speaker 1: was the reason why it took so long time. One
• 2:02
  Speaker 1: answer to that is that we have seen a structural
• 2:05
  Speaker 1: change over the last several years where the number of
• 2:09
  Speaker 1: people who are staying in their jobs. If you do that,
• 2:13
  Speaker 1: you tend to get basically very little weight increase. So
• 2:16
  Speaker 1: what we have seen more recently is that the number
• 2:18
  Speaker 1: of people who are quitting jobs, they have tended to
• 2:21
  Speaker 1: get higher weight growth, and the fact that the data
• 2:24
  Speaker 1: to day shows you that we are at the highest
• 2:26
  Speaker 1: level of people who voluntarily are leaving their jobs in
• 2:30
  Speaker 1: twenty years. And that's also voting quote unquote wealth for
• 2:33
  Speaker 1: more wage pressure going forward, simply because people who stay
• 2:37
  Speaker 1: in their jobs tend to get very little weight increase,
• 2:39
  Speaker 1: whereas if you switch jobs, that's when you get the
• 2:41
  Speaker 1: big wage books. And the more people who are switching jobs,
• 2:44
  Speaker 1: the more we will see wege increase. In some sense,
• 2:46
  Speaker 1: looking at it today, it does make sense to say
• 2:48
  Speaker 1: that wages have been going up because the Phillips curve
• 2:51
  Speaker 1: structurally changed so that you had to be a job
• 2:54
  Speaker 1: switcher to see an increase in wages. Rather if you
• 2:57
  Speaker 1: were a job stayer, then you would not see an
• 2:59
  Speaker 1: increa reacent wages. So it's implicitly a recommendation for everyone
• 3:03
  Speaker 1: here to go out and switch jobs, because this is
• 3:05
  Speaker 1: the main way today to get away increase. Okay, let's
• 3:08
  Speaker 1: say you don't want to switch a job. Let's say
• 3:10
  Speaker 1: you're just looking for a job, or indeed you're out
• 3:12
  Speaker 1: of the labor force. What's your thought about the labor
• 3:14
  Speaker 1: force participation rate? Yes, so that has as you implicitly
• 3:20
  Speaker 1: having your question that has been not been tacking up
• 3:22
  Speaker 1: as much as we all would have thought. But that
• 3:26
  Speaker 1: being said, there are a number of reasons why people
• 3:28
  Speaker 1: are still outside the labor market. Some people are structurally
• 3:32
  Speaker 1: difficult to get into the labor market again. But we
• 3:35
  Speaker 1: are beginning to see, and this was in the basebook
• 3:38
  Speaker 1: this week, anecdotes that the employers are beginning to relax
• 3:42
  Speaker 1: conditions for drug testing and also conditions for criminal records testing,
• 3:48
  Speaker 1: and those anecdotes are telling us very importantly that we
• 3:51
  Speaker 1: are beginning to reach the outer stock of the labor
• 3:56
  Speaker 1: force in terms of how much available labor there is.
• 3:59
  Speaker 1: So I understand that the participation rate could potentially be
• 4:02
  Speaker 1: slightly higher, but the generally speaking, the fact that wages
• 4:05
  Speaker 1: are going up is indeed already selling us that if
• 4:08
  Speaker 1: there really were all these people sitting outside the labor market,
• 4:11
  Speaker 1: then we would not see where just go up at
• 4:13
  Speaker 1: this point, So we still believe that the labor market
• 4:16
  Speaker 1: is very tight, and therefore that we are again going
• 4:19
  Speaker 1: to see more upward pressure on wages going forward, so
• 4:21
  Speaker 1: towards in. One thing that struck me was that the
• 4:24
  Speaker 1: yield curve flattened after this report. In other words, the
• 4:28
  Speaker 1: gap between ten and two year treasury yields flatten. It's
• 4:32
  Speaker 1: about the lowest since two thousands seven. It seems to
• 4:35
  Speaker 1: indicate the people think that the Federal Reserve is going
• 4:37
  Speaker 1: to high rates more frequently this year then basically stimmy
• 4:42
  Speaker 1: growth in the longer term and pause and not hike
• 4:45
  Speaker 1: more in the years after. Do you think that that
• 4:47
  Speaker 1: is an accurate assessment? Yeah, So the challenge here is
• 4:52
  Speaker 1: that the front end of the cove UT two year
• 4:54
  Speaker 1: rates and and even should in have been driven a
• 4:57
  Speaker 1: lot by fit expectations and fattic between just generally have
• 5:01
  Speaker 1: been and including today, driven a lot by what is
• 5:04
  Speaker 1: the macro data telling us for the US, and the
• 5:06
  Speaker 1: data today basically says, you know what, the Fed has
• 5:09
  Speaker 1: been right, The Fed has been on the right trajectory,
• 5:13
  Speaker 1: and it's actually probably likely that they will be raising
• 5:17
  Speaker 1: race that they have the way that they have promised us.
• 5:19
  Speaker 1: What's more complicated, and which is in a very important
• 5:22
  Speaker 1: part of of your point here, and that is to
• 5:25
  Speaker 1: think about what a long rate doing A long rate
• 5:27
  Speaker 1: in the US of course this week in particular, but
• 5:30
  Speaker 1: generally move around for global reasons and for reasons that
• 5:33
  Speaker 1: are unrelated to what's going on in the US economic data.
• 5:37
  Speaker 1: So the fact that the Yell curve has moved away
• 5:40
  Speaker 1: it has today, I think it just tells you that
• 5:42
  Speaker 1: for now, the market is back to believing, and you
• 5:45
  Speaker 1: could also see on your Bloomberg screen expectations to what
• 5:49
  Speaker 1: the FIT will do over the coming meetings, that the
• 5:51
  Speaker 1: market is back to believing, that the FIT is still
• 5:54
  Speaker 1: raising rates, and we are still on an upward trajectory,
• 5:57
  Speaker 1: and for now that continues to be a race strong
• 6:00
  Speaker 1: outlook for the US economy overall. That's simplicit in that Towardsten.
• 6:03
  Speaker 1: But I wonder if we could just switch topics for
• 6:05
  Speaker 1: a second and get your thoughts about Italy. We've got
• 6:08
  Speaker 1: the swearing in of the new government, President Sergio Mazzarella
• 6:13
  Speaker 1: at the Quernale Palace swearing in the new government today.
• 6:16
  Speaker 1: What are your thoughts about what that means for the
• 6:19
  Speaker 1: euro and the European Central Bank. So, of course, the
• 6:23
  Speaker 1: challenge for the ECB here is that they have been
• 6:26
  Speaker 1: for a long time now on track to say that
• 6:29
  Speaker 1: they would end quee later this year. You can discuss
• 6:32
  Speaker 1: if it's September or December, and then they would most
• 6:35
  Speaker 1: likely they have also been saying that several members of
• 6:38
  Speaker 1: the Governing Council have been saying at the ECB have
• 6:40
  Speaker 1: been saying that they would probably high rate sometime by
• 6:43
  Speaker 1: the second quarter of next year. The good news is
• 6:46
  Speaker 1: that we now have a government in Italy. This is
• 6:49
  Speaker 1: at least more clarity and much less turbulent than what
• 6:52
  Speaker 1: we had earlier this week, where we had a lot
• 6:54
  Speaker 1: more uncertainty. So in some sense that's probably a bit
• 7:00
  Speaker 1: of a sigh of relief at the ECB today that
• 7:02
  Speaker 1: then now we can go back both of the c
• 7:04
  Speaker 1: B and in markets and look at the economic data.
• 7:06
  Speaker 1: Inflation was a little bit better in Germany and the
• 7:08
  Speaker 1: your area this week, including also in Spain, and if
• 7:13
  Speaker 1: the fundamentals still justify it, which we absolutely believe, then
• 7:17
  Speaker 1: we do still think that the CB is on track
• 7:19
  Speaker 1: here to gradually exit with ending queue later this year
• 7:23
  Speaker 1: and raising rates sometime in the second quarter of next year.
• 7:26
  Speaker 1: But it is complicated situation, of course, where you have
• 7:29
  Speaker 1: on the one side all the economics, which in some
• 7:32
  Speaker 1: sense it's very simple because that's telling you should they
• 7:34
  Speaker 1: exit or should they not exit, and on the other
• 7:37
  Speaker 1: side of the table you basically have these political winds
• 7:41
  Speaker 1: and forces and the epp and tide of different things
• 7:43
  Speaker 1: that are happening. That makes a quantification of those risks
• 7:47
  Speaker 1: rather complicated. Thank you very much for being with us.
• 7:50
  Speaker 1: Touristen Slock is the chief International economist at Deutsche Bank,
• 7:55
  Speaker 1: talking about today's non farm payrolls report as well as
• 7:59
  Speaker 1: events in Europe. American workers are finally starting to see
• 8:19
  Speaker 1: their paychecks increase. According to the jobs numbers that we
• 8:22
  Speaker 1: got out earlier this morning, average hourly earnings increased by
• 8:26
  Speaker 1: two point seven percent from a year earlier. That is
• 8:29
  Speaker 1: more than projected. But are these wages increasing quickly enough?
• 8:33
  Speaker 1: And why have they been so slow to rise? To
• 8:36
  Speaker 1: answer some of these questions, I want to bring in
• 8:38
  Speaker 1: David While. He is dean of the Heller School for
• 8:40
  Speaker 1: Social Policy and Management at Brandeis University, also the former
• 8:44
  Speaker 1: head of the Wage in Our division of the US
• 8:46
  Speaker 1: Department of Labor back in two fourteen. Dean While, thank
• 8:52
  Speaker 1: you so much for joining us. So I want to
• 8:54
  Speaker 1: get your take first on the numbers that we got
• 8:56
  Speaker 1: out this morning. Uh from the Labor Department, pretty much
• 9:00
  Speaker 1: across the board solid read what's your take? Uh? Yeah,
• 9:05
  Speaker 1: I think that's right. I mean, it's certainly good news
• 9:07
  Speaker 1: when the economy adds that many jobs to the economy
• 9:11
  Speaker 1: and UH and when the unemployment rate falls so overall,
• 9:16
  Speaker 1: you know, we have the long recovery that certainly began
• 9:19
  Speaker 1: well into UH back in the Obama administration. UM. I
• 9:24
  Speaker 1: think the continuing concern is with unemployment rates as low
• 9:29
  Speaker 1: as they are, just the fact that wages still look
• 9:32
  Speaker 1: very slow in recovering, very different than what we've seen
• 9:36
  Speaker 1: in the past. I wonder if you could speak a
• 9:38
  Speaker 1: little bit about the labor force participation rate and when
• 9:42
  Speaker 1: maybe your students come to you and say, can you
• 9:44
  Speaker 1: explain why it remains low? Well, the labor force participation
• 9:50
  Speaker 1: rate really is about whether people's optimism about whether or
• 9:54
  Speaker 1: not they're going to be able to find the kind
• 9:56
  Speaker 1: of employment they're looking at in the labor market. And
• 9:59
  Speaker 1: it's measure of the difficulty and the continuing difficulty of
• 10:04
  Speaker 1: coaxing UM. You know, an important part of our labor
• 10:06
  Speaker 1: force back into the labor market. And I think one
• 10:10
  Speaker 1: of the reasons we again have seen what looks like
• 10:13
  Speaker 1: historically lower rates of labor force participation than in past recoveries, UM,
• 10:19
  Speaker 1: is the kinds of jobs that are out there, the
• 10:22
  Speaker 1: kinds of opportunities that people are seeking, um, just are
• 10:26
  Speaker 1: not as attractive as they once were. We've really restructured
• 10:29
  Speaker 1: our economy in ways that just are are less and
• 10:34
  Speaker 1: less favorable to working people. So, but that said, we
• 10:38
  Speaker 1: are seeing, uh, we are seeing what we just increase
• 10:41
  Speaker 1: at this point. So I'm wondering, you know, first of all,
• 10:44
  Speaker 1: is it enough because we have seen rents increase at
• 10:47
  Speaker 1: a much faster pace, for example, than wages, as well
• 10:51
  Speaker 1: as energy costs of late and other sort of fixed
• 10:54
  Speaker 1: costs in people's lives. Is a two point seven percent
• 10:58
  Speaker 1: increase enough in your view? Uh, well, it's not, and
• 11:02
  Speaker 1: it's not for both the short term reasons you site.
• 11:05
  Speaker 1: I mean, there's a lot of costs, particularly that lower
• 11:09
  Speaker 1: income households are vulnerable to, like the cost of gasoline
• 11:13
  Speaker 1: and housing, um. But there's even a more fundamental, longer
• 11:18
  Speaker 1: term reason why these levels of wage growth just aren't sufficient,
• 11:21
  Speaker 1: and that's that real wages for working people for decades
• 11:25
  Speaker 1: have stagnated and there's just an immense there's a wage
• 11:30
  Speaker 1: gap that we really need to recover. There's just a
• 11:33
  Speaker 1: big part of the growth of the economy that in
• 11:37
  Speaker 1: the past workers shared with people who you know, owned
• 11:42
  Speaker 1: own capital and and and who had labor they shared
• 11:46
  Speaker 1: those games. That hasn't happened. This is a really important
• 11:49
  Speaker 1: point why. I mean, this is not a past five
• 11:52
  Speaker 1: years issue of past ten years issue. This is a
• 11:54
  Speaker 1: decades long issue. Why that's that's exactly right it is. Uh,
• 11:59
  Speaker 1: it really goes back to the late nineteen seventies and
• 12:02
  Speaker 1: the eighties and and grew much more in the post
• 12:07
  Speaker 1: Great Recession period. And that the answer to your question
• 12:10
  Speaker 1: is employment now looks really different than it used to look.
• 12:14
  Speaker 1: Employers used to the major businesses that drive our economy
• 12:18
  Speaker 1: across the different sectors. Manufacturing service used to directly employ
• 12:23
  Speaker 1: millions and millions of workers. That is no longer the case.
• 12:27
  Speaker 1: That the whole structure of employment has shifted out, whether
• 12:31
  Speaker 1: it's through outsourcing or subcontracting or third party management. Uh.
• 12:35
  Speaker 1: And it used to just be about low wage workers. Now,
• 12:39
  Speaker 1: with what people like to call the gig economy that
• 12:42
  Speaker 1: goes way beyond just the digital platform world. Uh, there
• 12:46
  Speaker 1: are more and more jobs where the people who actually
• 12:48
  Speaker 1: employ you are no longer the main companies that really
• 12:52
  Speaker 1: still drive the economy. And that means the way wages
• 12:56
  Speaker 1: are set look really different. A lot of those gains
• 13:00
  Speaker 1: that go from increasing productivity and expansion of our economy
• 13:04
  Speaker 1: are no longer being shared because the people setting those
• 13:07
  Speaker 1: wages are are sometimes these lower level subcontractors or other
• 13:11
  Speaker 1: parties who simply cannot pass on the wage gains the
• 13:15
  Speaker 1: way they used to. But is it possible that they
• 13:18
  Speaker 1: can't pass along the increased cost because as you describe,
• 13:22
  Speaker 1: you have a new economy wh there's always someone else
• 13:24
  Speaker 1: breathing down your neck that doesn't have legacy costs or
• 13:27
  Speaker 1: legacy employees that they have to shoulder the burden for
• 13:32
  Speaker 1: absolutely right, and unfortunately many of the reasons why you
• 13:36
  Speaker 1: have leading companies in the retail sector and manufacturing and
• 13:40
  Speaker 1: hotel industry really across the board shifted out those jobs
• 13:44
  Speaker 1: as they wanted to get rid of those legacy costs.
• 13:47
  Speaker 1: They wanted to get rid of the costs of expensive
• 13:50
  Speaker 1: costs about employing people. Um that used to be part
• 13:54
  Speaker 1: of the social contract that we thought this was part
• 13:56
  Speaker 1: of employment. You kind of shared the burdens of whether
• 13:59
  Speaker 1: it was employment insurance or worker compensation or just meeting
• 14:03
  Speaker 1: basic wage and our requirements. That used to be my
• 14:06
  Speaker 1: job in the labor department. Um that has been we
• 14:12
  Speaker 1: our laws and the structuring of our economy have allowed
• 14:15
  Speaker 1: that burden to be shifted out two employers who, as
• 14:19
  Speaker 1: you correctly say, are in direct competition with a bunch
• 14:22
  Speaker 1: of other employers who are less able of doing that,
• 14:25
  Speaker 1: and uh, the party that bears the burden. The risks
• 14:29
  Speaker 1: that have been shifted more and more are on on
• 14:32
  Speaker 1: working people. Just quickly give you ten seconds. Is there
• 14:36
  Speaker 1: a role that the government will play or do you
• 14:37
  Speaker 1: believe that that's over as well? Well? I think uh,
• 14:41
  Speaker 1: you know, certainly in the next few years, I would
• 14:44
  Speaker 1: would doubt it, although we're seeing at the state level
• 14:47
  Speaker 1: government is jumping in with increases in minimum wage and
• 14:50
  Speaker 1: other kinds of ways of helping helping working people. In
• 14:53
  Speaker 1: the long term, I think government is going to have
• 14:55
  Speaker 1: to play a role. Uh. In really writing this, I
• 14:59
  Speaker 1: want to thank you for very much for spending time
• 15:01
  Speaker 1: with us. David Wild, dean of the Heller School for
• 15:04
  Speaker 1: a Social Policy and Management at Brandeis University, former head
• 15:09
  Speaker 1: of the Wage and Our Division of the U. S
• 15:11
  Speaker 1: Department of Labor. In March of our next guest UH
• 15:32
  Speaker 1: was before the US Senate Select Committee on Intelligence hearing
• 15:36
  Speaker 1: the topic disinformation, a primer in Russian active measures and
• 15:42
  Speaker 1: influence campaigns. Clint Wants is a Senior Fellow for the
• 15:46
  Speaker 1: Foreign Policy Research Institute. He's also Senior Fellow at the
• 15:49
  Speaker 1: Center for Cyber and Homeland Security at the George Washington University.
• 15:54
  Speaker 1: He can be followed on Twitter at Selected Wisdom, and
• 15:58
  Speaker 1: he is the author of a new book, and I
• 16:00
  Speaker 1: Messing with the Enemy, Surviving in a social media world
• 16:04
  Speaker 1: of hackers, terrorists, and Russians and fake news. Watts, thank
• 16:09
  Speaker 1: you very much, thanks for having Why did you write
• 16:11
  Speaker 1: this book? I actually had a proposal for the book
• 16:15
  Speaker 1: together before I testified, and no one wanted it. They
• 16:18
  Speaker 1: were not interested. And getting people interested in the Russian
• 16:21
  Speaker 1: descent fo in Sen was very difficult. Uh, the Islamic
• 16:25
  Speaker 1: State was the focus of everything. People weren't buying into
• 16:28
  Speaker 1: the Russian stuffor that it mattered, and that all changed
• 16:31
  Speaker 1: in about a year. And I wanted people to understand
• 16:34
  Speaker 1: that a lot of these phenomenons had played out repeatedly.
• 16:37
  Speaker 1: So the Arab spring, if you remember that was the
• 16:39
  Speaker 1: Facebook revolution, didn't really turn out that way. In the end, UH,
• 16:42
  Speaker 1: the Islamic State overtook al Qaeda on social media. If
• 16:45
  Speaker 1: you look at our own politics, social media populism, the
• 16:48
  Speaker 1: Trump wave overtook the GOP and now you look at
• 16:52
  Speaker 1: the resistance and sort of it's offspring, you know, with
• 16:55
  Speaker 1: the Democratic Party. So we're seeing the social media populism
• 16:58
  Speaker 1: pop up in different contexts around the world. You said
• 17:00
  Speaker 1: that the book introduces us to a frightening world in
• 17:04
  Speaker 1: which terrorists and cybercriminals don't hack your computer, they hack
• 17:08
  Speaker 1: your mind. What does that mean? I mean? And what's
• 17:11
  Speaker 1: the difference between hacking your mind and disinformation and just
• 17:15
  Speaker 1: a good campaign? Right, So that we used to always
• 17:19
  Speaker 1: worry about, for example, hackers hacking into the US power grid, uh,
• 17:23
  Speaker 1: you know, and turning it off or or breaking it down,
• 17:25
  Speaker 1: our foreign country doing it. The real art of it
• 17:27
  Speaker 1: now is you can convince an American potentially unwittingly to
• 17:31
  Speaker 1: turn the power grid off for you. That's the different
• 17:33
  Speaker 1: objective because it also gives you plausible deniability of actually
• 17:36
  Speaker 1: doing it. And you're using an unwitting ally, which is
• 17:39
  Speaker 1: a low cost and very effective way to achieve your objectives.
• 17:43
  Speaker 1: And that's really what the Russians figured out was they
• 17:45
  Speaker 1: combined some different techniques. If you remember anonymous and lull sect.
• 17:49
  Speaker 1: The original hackers, they were going around stealing people's information
• 17:52
  Speaker 1: and dumping it out onto the internet. The Russians understood
• 17:55
  Speaker 1: that too. They've they've been doing compromising information for a
• 17:58
  Speaker 1: long long time. So when they hit the d n C,
• 18:00
  Speaker 1: John Podesta, General Breed Love, they understood, I'm going to
• 18:03
  Speaker 1: do this out there, but rather than try and hack
• 18:05
  Speaker 1: just for the information, I'm going to use it to
• 18:07
  Speaker 1: drive influence. And it's a much more powerful technique because
• 18:10
  Speaker 1: you're changing the way the audience that you're targeting is
• 18:13
  Speaker 1: perceiving not only information, but their own politics, or own country,
• 18:16
  Speaker 1: their own institutions. I want to mention that you're a
• 18:19
  Speaker 1: graduate of West Point, US Military Academy. You served in
• 18:23
  Speaker 1: the infantry. Thank you very much for your your service. UH.
• 18:27
  Speaker 1: You also worked as a special agent for the Federal
• 18:30
  Speaker 1: Bureau of Investigation and served on the Joint Terrorism Task Force.
• 18:36
  Speaker 1: Do we face terrorism or do we face criminals? You
• 18:41
  Speaker 1: face both, and it really comes down to you know
• 18:44
  Speaker 1: what their objectives are in the objective is either money
• 18:46
  Speaker 1: or is it ideology? You know, changing governments, taking down
• 18:50
  Speaker 1: uh the United States. We face both and what's interesting
• 18:54
  Speaker 1: is that they learned from each other. So criminals activists
• 18:58
  Speaker 1: they both learned from each other in terms the tools.
• 19:00
  Speaker 1: You know, when we look at criminal hackers, they came
• 19:03
  Speaker 1: after if you remember the old activists, the hackers, you know,
• 19:05
  Speaker 1: the people that did it for fun and for just learning.
• 19:08
  Speaker 1: Criminals recognized that and said, well, you know what else
• 19:10
  Speaker 1: we could use this for. We see the same thing
• 19:12
  Speaker 1: going on now, by the way, with disinformation. The Russians
• 19:15
  Speaker 1: are brilliant at the art of disinformation, but now everybody
• 19:18
  Speaker 1: is copying their playbooks. So I've been talking a lot
• 19:21
  Speaker 1: about the elections. I'm not so worried about the Russians
• 19:24
  Speaker 1: as I am. Everybody else's copying it. And so what
• 19:27
  Speaker 1: you're seeing is those who can amass data from lots
• 19:30
  Speaker 1: of social media companies you're purchasing preferences, and use advanced
• 19:33
  Speaker 1: technology like machine learning. They have cutting edge ability to
• 19:37
  Speaker 1: do influence campaigns on steroids and do them much quicker.
• 19:40
  Speaker 1: So those that are you know, political public relations companies,
• 19:44
  Speaker 1: are political campaigns, they really will have more capability on
• 19:47
  Speaker 1: the horizon than any of these nation states we've been
• 19:49
  Speaker 1: worrying about so far. Yeah, and when you add artificial
• 19:52
  Speaker 1: intelligence into it, you can start to imagine that this
• 19:55
  Speaker 1: disinformation becomes incredibly effective. I'm just wondering, you know, what
• 19:59
  Speaker 1: is sort of the counterbalance to this, How how is
• 20:02
  Speaker 1: there anything that could kind of, I don't know, get
• 20:05
  Speaker 1: in the middle of this, because basically this is just
• 20:07
  Speaker 1: the old propaganda campaigns on steroids, right, it is just
• 20:11
  Speaker 1: taking it to cyberspace, where you have it's much more
• 20:14
  Speaker 1: cost effective and much more effective in terms of moving populations.
• 20:18
  Speaker 1: I think we've seen that ultimately. I think, you know,
• 20:21
  Speaker 1: sort of a big part of the book is what
• 20:23
  Speaker 1: happens to us over time when we're in this and
• 20:25
  Speaker 1: you start to see what I call preference bubbles, and
• 20:27
  Speaker 1: so you see social media nations emerge that overtake physical nations.
• 20:31
  Speaker 1: And by that, I mean if you're spending three to
• 20:34
  Speaker 1: five hours a day on your cell phone, you were
• 20:36
  Speaker 1: with virtual connections more than physical connections, and you're starting
• 20:39
  Speaker 1: to build relationships online that overtake your neighbors. And so
• 20:43
  Speaker 1: that is truly devastating for real companies and countries, uh
• 20:48
  Speaker 1: in terms of how they do their business. Who governs cyberspace?
• 20:51
  Speaker 1: I think we saw with social media companies there are
• 20:54
  Speaker 1: only they're the only ones that really understand how their
• 20:56
  Speaker 1: systems work. Governments are struggling to regulate them or understand
• 21:00
  Speaker 1: the dangers that are there. And I think for the
• 21:02
  Speaker 1: private sectors, a big issue with banks and law firms.
• 21:05
  Speaker 1: If you want to do a compromising campaign where our
• 21:08
  Speaker 1: secrets held and seek secrets are held at banks and
• 21:11
  Speaker 1: law firms, that's where the information warfare battlefield really takes place.
• 21:15
  Speaker 1: So the implications are devastating and will ultimately come down
• 21:19
  Speaker 1: to civil society to solve this. And we have to
• 21:22
  Speaker 1: get a you know, we have to restore a basis
• 21:24
  Speaker 1: of fact and fiction. You can't have policy debate if
• 21:27
  Speaker 1: you have your facts and I have my facts, and
• 21:28
  Speaker 1: we're debating about whose facts are right. You can't even
• 21:30
  Speaker 1: debate the policy because we don't even agree on where
• 21:33
  Speaker 1: the playing field is. And we're seeing that today. The
• 21:36
  Speaker 1: other thing is we're seeing these bubbles start to emerge
• 21:39
  Speaker 1: in the information space where I like you, you like me.
• 21:42
  Speaker 1: We build our own nation, we build our own history,
• 21:46
  Speaker 1: we start our own institutions which reinforce our preferred facts
• 21:49
  Speaker 1: and our preferred science, and we don't come together and
• 21:52
  Speaker 1: we don't discuss, so we'll have implications for science. They
• 21:55
  Speaker 1: will have amplifications for government. And really it's about do
• 21:59
  Speaker 1: you want to your relationships in the virtual world to
• 22:02
  Speaker 1: be about people who look like you and talk like you,
• 22:05
  Speaker 1: or do you want it to be about your fellow Americans.
• 22:07
  Speaker 1: And that's really the challenge moving forward. We have to
• 22:09
  Speaker 1: restore what we believe in as a country and and
• 22:12
  Speaker 1: really what we want to push around the world and
• 22:15
  Speaker 1: about the Is there any nation or group of people
• 22:21
  Speaker 1: that are doing this better than we are here in
• 22:24
  Speaker 1: the United States in terms of meeting these challenges. Yes,
• 22:28
  Speaker 1: I think European countries they are actually smaller, they move quicker, uh,
• 22:32
  Speaker 1: they understand how to talk to their nations and what
• 22:36
  Speaker 1: their value stand for. Sweden is a good example. They've
• 22:38
  Speaker 1: been much more resilient to this. A lot of the
• 22:41
  Speaker 1: Scandinavian countries in the Baltics, they've been dealing with disinformation
• 22:44
  Speaker 1: for a long time, so they're just better equipped to
• 22:46
  Speaker 1: deal with this over the over the near term at
• 22:48
  Speaker 1: least and maybe breaking some of the uh. I don't know,
• 22:52
  Speaker 1: smartphone addiction. I'm serious, it's just if you think about it,
• 22:55
  Speaker 1: if people spend five to six hours online. I actually
• 22:58
  Speaker 1: saw a survey today of him that showed that teenagers
• 23:02
  Speaker 1: that almost half say that they're nearly always online when
• 23:06
  Speaker 1: they are awake. Clint Watts, I could speak with you
• 23:09
  Speaker 1: for the next hour. Thank you so much for being
• 23:11
  Speaker 1: with us. Truly a fascinating topic and I look forward
• 23:15
  Speaker 1: to reading your book. Clint Watts, Senior Fellow at the
• 23:17
  Speaker 1: Foreign Policy Research Institute. He's also a Senior Fellow at
• 23:20
  Speaker 1: the Center for Cyber and Homeland Security at the George
• 23:23
  Speaker 1: Washington University. Author of new book, Messing with the Enemy,
• 23:27
  Speaker 1: Surviving in a social media world of hackers, terrorists, Russians,
• 23:31
  Speaker 1: and fake news. Steel and aluminum tariffs what do they
• 23:50
  Speaker 1: mean for producers in the United States? Well? Debbie sean
• 23:53
  Speaker 1: is a partner a trade lawyer at Quinn Emmanuel based
• 23:56
  Speaker 1: in Washington, d C. Previously, MS sean On was the
• 24:01
  Speaker 1: Vice president of International Trade in Public Policy at U S.
• 24:04
  Speaker 1: Steal and a trade official in the Clinton administration. WI Sean,
• 24:08
  Speaker 1: thank you very much for being with us. Uh, do
• 24:12
  Speaker 1: these trade is sanctions, these tariffs on on aluminum and steal,
• 24:17
  Speaker 1: did they actually help anyone? Well, thank you very much. UM. Well,
• 24:23
  Speaker 1: we know this. UM. It's not a zero sum game.
• 24:26
  Speaker 1: It's much too complex In the global trade community to
• 24:29
  Speaker 1: distill it into a winter losers situation. But we do
• 24:33
  Speaker 1: know in the short run there are two games, and
• 24:36
  Speaker 1: that's the political gain for an administration who's delivered on
• 24:39
  Speaker 1: a political campaign promise which almost two years to the date,
• 24:43
  Speaker 1: UM he enunciated in a rally ticking off all the
• 24:47
  Speaker 1: trade tools he was going to use commercially. As you
• 24:50
  Speaker 1: wanted to address him. Is that for the protected industry,
• 24:55
  Speaker 1: so will be an uptick on sales prices will increase UH,
• 24:59
  Speaker 1: and their stock values will likely go up as well. UM.
• 25:03
  Speaker 1: The consumer UH and also the downstream UM suppliers and
• 25:10
  Speaker 1: consumers that actually purchase steel in a luminium will see
• 25:14
  Speaker 1: higher prices. So that will affect the construction industry, transportation industry,
• 25:18
  Speaker 1: equipment industry. So the downside is UM, it will be UH.
• 25:25
  Speaker 1: Well will also surface UM in the short term. Well, Debbie,
• 25:29
  Speaker 1: you know, I guess that I'm wondering what's the right
• 25:31
  Speaker 1: question to ask in order to understand and observe the
• 25:35
  Speaker 1: consequences of these tariffs. So a lot of people are
• 25:38
  Speaker 1: pointing to the decline in economic output UH and that
• 25:42
  Speaker 1: it's diminimus in the long run. Other people point to
• 25:46
  Speaker 1: UH sort of higher steel lumber prices and other commodities
• 25:50
  Speaker 1: um and and sort of bleeding into higher higher consumer prices.
• 25:53
  Speaker 1: What what metric are you looking at determine how big
• 25:56
  Speaker 1: of effect this has? Well, we obviously all of your
• 26:00
  Speaker 1: show um and those economists around the globe, but that
• 26:03
  Speaker 1: try to um calculate um numerically what the impact will
• 26:08
  Speaker 1: be on different economies. As a lawyer, I look at
• 26:12
  Speaker 1: how it impacts clients as well as the market UM.
• 26:17
  Speaker 1: So the short term as I sort of enunciate it,
• 26:19
  Speaker 1: which is the commercial and the political gain, but the
• 26:21
  Speaker 1: damage is also incalculable on the long term. The long
• 26:25
  Speaker 1: term damage that is our standing in the world, which
• 26:27
  Speaker 1: are manifest in the view of our allies as being
• 26:30
  Speaker 1: untrustworthy perhaps and also places at risk UM our own
• 26:35
  Speaker 1: standing as the world's largest and most open economy. But
• 26:39
  Speaker 1: by erecting barriers, you diminish that the the trade um
• 26:46
  Speaker 1: the trade with other nations and uh and and consequently
• 26:50
  Speaker 1: handcuffed your own economy. UM. So we're looking at it
• 26:54
  Speaker 1: on not only a commercial legal but also the to
• 26:57
  Speaker 1: the geo political as well. But it is consistent with
• 27:00
  Speaker 1: this president's view of the world. I mean I'll share it.
• 27:03
  Speaker 1: But he's been very consistent since day one. And what's
• 27:07
  Speaker 1: interesting is the outliers China, and instead we are focusing
• 27:12
  Speaker 1: our our tariffs on our allies. So it appears at
• 27:16
  Speaker 1: least the optics that we're coddling our adversaries will harming
• 27:20
  Speaker 1: our allies. But which all the one second, I'm sorry
• 27:23
  Speaker 1: to break in here, but you know, the geopolitical side
• 27:26
  Speaker 1: is an important one. But I want to talk about
• 27:28
  Speaker 1: what you mentioned. I want to pick up on a
• 27:30
  Speaker 1: point that you said, which is when you talk to
• 27:32
  Speaker 1: your clients about this, and you work with some of
• 27:34
  Speaker 1: the biggest companies in the US, what are they saying
• 27:36
  Speaker 1: about this. Well, those who are in the protected industries
• 27:41
  Speaker 1: are have actually have actually advocated for these different political
• 27:48
  Speaker 1: tools to be used in order to advance and what
• 27:51
  Speaker 1: we what has been always stated as leveling the playing field.
• 27:56
  Speaker 1: Much of this happens um as a result of a
• 28:00
  Speaker 1: view of the of the United States and being put
• 28:05
  Speaker 1: upon right this is this is the view that is
• 28:08
  Speaker 1: articulated the narrative of grievances of how we've been taken
• 28:11
  Speaker 1: advantage of. Except this, what what's happening is is the
• 28:16
  Speaker 1: administration is actually treating a symptom, not the disease. So
• 28:20
  Speaker 1: if if the structure, if the In fact, I think
• 28:23
  Speaker 1: yesterday the director of the World Trade Organization articulated this,
• 28:27
  Speaker 1: it's time for these constructs to actually come into the
• 28:29
  Speaker 1: twenty first century and deal with a lot of the
• 28:32
  Speaker 1: issues that have hamstrung the domestic industries in the United
• 28:36
  Speaker 1: States from getting their fair share or getting their day
• 28:40
  Speaker 1: in court. So, whether it's the trade laws that haven't
• 28:43
  Speaker 1: kept up and have been written since nineteen seventy nine,
• 28:46
  Speaker 1: I think it's time for a modernization and and bringing
• 28:50
  Speaker 1: these these tools into the twenty first century because many
• 28:53
  Speaker 1: of the tactics that are being used were never thought
• 28:56
  Speaker 1: of or never even envisioned when these laws were created.
• 29:01
  Speaker 1: By Sean, thank you so much for being with us
• 29:03
  Speaker 1: t B. Sean is partner and trade lawyer at Quinn
• 29:05
  Speaker 1: Emmanuel Law Firm in Washington, d C. She also was
• 29:09
  Speaker 1: formerly the vice president of International Trade and Public Policy
• 29:12
  Speaker 1: at US Steel and It's a trade official in the
• 29:16
  Speaker 1: Clinton administration. Thanks for listening to the Bloomberg p m
• 29:22
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 29:25
  Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
• 29:30
  Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on
• 29:33
  Speaker 1: Twitter at Lisa Abramowits one before the podcast. You can
• 29:37
  Speaker 1: always catch us worldwide on Bloomberg Radio