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For the Coronavirus Economy, This Time Truly Is Different · Stephanomics

• 0:00
  Speaker 1: I like and the incident we're in to be like
• 0:04
  Speaker 1: in The Wizard of Oz where Dorothy got sucked up
• 0:08
  Speaker 1: in the hurricane with their house and it's spinning around
• 0:11
  Speaker 1: and you don't know where it will come down. And
• 0:13
  Speaker 1: I think that's where our social political economic system is
• 0:18
  Speaker 1: at the moment. I mean, I think there's a lot
• 0:20
  Speaker 1: of uncertainty and it's probably not in the pro growth direction. Hello,
• 0:28
  Speaker 1: and welcome to Stephanomics, the podcast that brings the COVID
• 0:31
  Speaker 1: global economy to you. And what you just heard it
• 0:34
  Speaker 1: was a very distinguished US economist Ken Rogoff telling you
• 0:38
  Speaker 1: we're not in Kansas anymore. At the start of this pandemic,
• 0:42
  Speaker 1: economists thought they pretty much knew what we were in for.
• 0:45
  Speaker 1: A short sharp shock COVID nineteen might kill the economy
• 0:49
  Speaker 1: dead in the short term, but it wouldn't take long
• 0:52
  Speaker 1: to bounce back. They don't say anymore. But now Rogoff
• 0:56
  Speaker 1: and fellow economist Carmen Reinhardt, I think it could be
• 0:59
  Speaker 1: years before we make up the ground we've lost. Reinhardt
• 1:02
  Speaker 1: has just this week been named the new Chief economist
• 1:05
  Speaker 1: of the World Bank. People tend to pay attention to
• 1:08
  Speaker 1: what she and Rogoff think since they wrote the definitive
• 1:11
  Speaker 1: history of eight hundred years of financial crisis. What these
• 1:15
  Speaker 1: two are saying today is that anyone betting on a
• 1:18
  Speaker 1: V shaped recovery from this crisis should think again. Bloomberg's
• 1:22
  Speaker 1: executive editor for Economic Simon Kennedy had a long chat
• 1:25
  Speaker 1: with them for the latest issue of Bloomberg Markets Magazine.
• 1:28
  Speaker 1: We're playing you some of that interview later, but first,
• 1:31
  Speaker 1: I have news of new jobs. Yes, you heard that right.
• 1:34
  Speaker 1: COVID nineteen is creating some new jobs amid the ocean
• 1:39
  Speaker 1: of layoffs. Except they're not jobs that your school career
• 1:42
  Speaker 1: adviser would ever have told you about. To fancy being
• 1:46
  Speaker 1: a thermal scanner, or a contact tracer perhaps, or a
• 1:50
  Speaker 1: decontamination technician. Bloomberg Business reporter Jeff Green and Federal Reserve
• 1:55
  Speaker 1: reporter Steve Matthews decided to find out who was doing
• 1:59
  Speaker 1: these jobs and how they felt about them. Jeff is
• 2:01
  Speaker 1: in Michigan and he's with me now. Jeff, tell me
• 2:05
  Speaker 1: about these new jobs. How many are we talking about? Well,
• 2:08
  Speaker 1: if you talk about the types of jobs, you know,
• 2:10
  Speaker 1: you maybe talking about a dozen kinds of classifications that
• 2:13
  Speaker 1: fit into sort of this broad umbrella of sort of
• 2:16
  Speaker 1: a COVID you know, related job. Um In terms of
• 2:20
  Speaker 1: the number of people, it's not gonna be thirty six million.
• 2:22
  Speaker 1: We're not going to offset unemployment with this. But one
• 2:26
  Speaker 1: job called the tracer, where you try to find people
• 2:28
  Speaker 1: who have been exposed to COVID, they're talking about a
• 2:30
  Speaker 1: quarter of a million of those people needed, because you
• 2:33
  Speaker 1: basically need to have somebody in every jurisdiction to try
• 2:36
  Speaker 1: and stop the virus as it gets started. Some of
• 2:38
  Speaker 1: the other jobs, I mean, the thermal scanner, which is
• 2:41
  Speaker 1: a fancy name for some of you who takes temperatures,
• 2:43
  Speaker 1: those are gonna be pretty much every company is going
• 2:45
  Speaker 1: to have somebody like that trying to make sure that
• 2:47
  Speaker 1: people with fevers don't come into the work site. So
• 2:49
  Speaker 1: you were talking thousands, but I don't think millions though,
• 2:53
  Speaker 1: and I was struck actually in your piece. There are
• 2:55
  Speaker 1: some jobs or other old fashioned jobs that might be
• 2:57
  Speaker 1: coming back into fashion because of the social distance seeing rules.
• 3:01
  Speaker 1: JP Morgan had talked about bringing back elevator attendance. I
• 3:06
  Speaker 1: guess we'll have a few things like that where we
• 3:07
  Speaker 1: actually have people checking that we're doing the right thing
• 3:11
  Speaker 1: in context, where previously everything has been automated. Yeah, doorman,
• 3:16
  Speaker 1: elevator operator, maybe even people from the mail room will
• 3:19
  Speaker 1: have a whole different sort of importance and role that
• 3:22
  Speaker 1: you know has been kind of fading until this. So
• 3:25
  Speaker 1: let's let's hear more. I mean, you talked to quite
• 3:27
  Speaker 1: a wide range of people across the country, you and
• 3:30
  Speaker 1: your colleague Steve Matthews. But this was Mark Scofield, who's
• 3:34
  Speaker 1: a retired Air Force special agent now working as a
• 3:38
  Speaker 1: thermal scanner. So I guess that's a temperature taker at
• 3:41
  Speaker 1: a retail distribution center in North Salt Lake in Utah.
• 3:45
  Speaker 1: For a personal perspective, for me, I haven't been sick
• 3:47
  Speaker 1: for twenty years. I think I'm old enough. Communities had
• 3:53
  Speaker 1: most of its effect to me, so I don't I
• 3:57
  Speaker 1: personally don't feel any dangers that people I work with.
• 4:00
  Speaker 1: We don't feel any danger you feel. We're secure in
• 4:03
  Speaker 1: our little our booth or if we go out to
• 4:08
  Speaker 1: say something. Some of them, some of the truckers are
• 4:11
  Speaker 1: really fun. Get to know him a little bit, and
• 4:13
  Speaker 1: they want to talk to you and tell you a joke.
• 4:15
  Speaker 1: And so we'll stand outside this job with our six
• 4:17
  Speaker 1: feet apart and we'll chat for a few minutes and
• 4:20
  Speaker 1: then I'll go do that thing. I think everybody in
• 4:22
  Speaker 1: my shift there's very comfortable before we do. The interesting
• 4:26
  Speaker 1: thing about him is he actually was working for Kelly Services,
• 4:29
  Speaker 1: which is who's getting a lot of these people placed.
• 4:32
  Speaker 1: They don't necessarily say for who, but a lot of
• 4:34
  Speaker 1: Fortune five kind of companies are are are needing these
• 4:38
  Speaker 1: these positions. But he was a substitute teacher for them
• 4:42
  Speaker 1: prior to taking on this role, so I mean he
• 4:45
  Speaker 1: had just been doing that on the side. He had
• 4:48
  Speaker 1: a background in it, so he would take substitute teaching
• 4:50
  Speaker 1: gigs from from time to time, but there wasn't much
• 4:53
  Speaker 1: call for that in this in this situation, so when
• 4:55
  Speaker 1: it came up, he kind of raised his hand and said, yeah,
• 4:57
  Speaker 1: I'll do this. And he's a big guy, military guy,
• 5:02
  Speaker 1: clearly feels pretty impervious. So I think it's he's an
• 5:04
  Speaker 1: interesting character. And you made the point rightly, Jeff, that
• 5:08
  Speaker 1: this is still a drop in the bucket, these new
• 5:11
  Speaker 1: jobs compared to the ones that are being lost, the
• 5:14
  Speaker 1: thirty six million and counting lost jobs. But of course
• 5:18
  Speaker 1: I think people will be glad to hear that any
• 5:20
  Speaker 1: jobs are being created in this environment. Do you do.
• 5:22
  Speaker 1: You get the impression from the other people you talked
• 5:25
  Speaker 1: to that they're happy to do it, although they're worried
• 5:28
  Speaker 1: about the potential risks in some of these jobs. I mean,
• 5:32
  Speaker 1: everybody who's doing it seems to have a different way.
• 5:34
  Speaker 1: They've sort of rationalized or or just dealt with it
• 5:37
  Speaker 1: as not being something they're worried about, either because of
• 5:40
  Speaker 1: the protective measures or where they see themselves in sort
• 5:43
  Speaker 1: of their health. I Mean, one of the things that's
• 5:45
  Speaker 1: pretty much true across the board is this is more
• 5:48
  Speaker 1: money than they might be making in their day to
• 5:49
  Speaker 1: day job. I mean, these are usually twenty dollars or
• 5:51
  Speaker 1: more an hour, and a lot of the people taking
• 5:54
  Speaker 1: these jobs were probably in sort of the fifteen dollar
• 5:56
  Speaker 1: an hour or less category. So you're you're looking at
• 6:00
  Speaker 1: people who are able to um get a raise basically
• 6:03
  Speaker 1: to do something that seems somewhat risky, but risky in
• 6:06
  Speaker 1: a sense that you're wearing full protective equipment and you're
• 6:09
  Speaker 1: usually behind plexiglass and maybe more protective than you are
• 6:12
  Speaker 1: when you go back to work if you didn't have
• 6:14
  Speaker 1: this job. But I guess we should add but you've
• 6:17
  Speaker 1: also got a new job that you didn't have a
• 6:20
  Speaker 1: few months ago when we're not supposed to moonlight here
• 6:23
  Speaker 1: at Bloombow. But I think in this case the bosses
• 6:24
  Speaker 1: have approved. You've been You've been working away yourself on
• 6:27
  Speaker 1: something on the anti COVID effort, Is that right? Yeah?
• 6:30
  Speaker 1: I mean I have a three D printer or two
• 6:33
  Speaker 1: or three. It's a hobby, you know, And I've been
• 6:35
  Speaker 1: working from home, so they're literally right behind me through
• 6:37
  Speaker 1: a door. And I've been working with some local people,
• 6:40
  Speaker 1: some nonprofits just to kind of make personal protection equipment. Um.
• 6:44
  Speaker 1: You know, thankfully, there's a lot less demand for the
• 6:46
  Speaker 1: really heavy duty stuff. We were doing a lot of
• 6:48
  Speaker 1: face shields at first. Now it's mostly they call them
• 6:51
  Speaker 1: ear savers. It's so that when people wear masks all day,
• 6:53
  Speaker 1: it doesn't rub their ears raw. And there's a high
• 6:56
  Speaker 1: demand for that from people who are, you know, basically
• 6:59
  Speaker 1: wearing masks everywhere. How many originally of the mask do
• 7:02
  Speaker 1: you think you made in the early stages, About three
• 7:05
  Speaker 1: and fifty of the straps for the masks. Um, they
• 7:09
  Speaker 1: were like printed with a special plastic that's easier to
• 7:12
  Speaker 1: disinfect than than somebody else put on a face shield. Um,
• 7:16
  Speaker 1: just over a thousand of the ear protectors right now.
• 7:19
  Speaker 1: We're still doing those, probably winding that down soon, but
• 7:22
  Speaker 1: I'm trying to get another thousand done so they can
• 7:24
  Speaker 1: because people are sending them all over the country where
• 7:26
  Speaker 1: you know where, they're having trouble finding them. Well, I'm
• 7:28
  Speaker 1: glad that you're not doing the really urgent stuff anymore
• 7:31
  Speaker 1: because we've made you turn off your machines in order
• 7:33
  Speaker 1: to do this. But I should let you get back
• 7:34
  Speaker 1: to that and your and your work for blue Bird.
• 7:36
  Speaker 1: Jeff Green, thanks very much, thank you. Now. When Carmen
• 7:47
  Speaker 1: Reinhart and Ken Rogoff wrote their history of financial Crises
• 7:50
  Speaker 1: in late two thousand and nine, their title was ironic,
• 7:53
  Speaker 1: this time is different. Eight centuries of financial folly reminded
• 7:58
  Speaker 1: readers that it really was different, and the catastrophic two
• 8:02
  Speaker 1: thousand and eight nine credit crisis wasn't unique. Rogolf is
• 8:06
  Speaker 1: a former I m F Chief economist who is now
• 8:08
  Speaker 1: a professor at Harvard, and right now, Reinhardt is also
• 8:12
  Speaker 1: a professor at Harvard, but as we heard earlier, she's
• 8:14
  Speaker 1: about to be Chief economist of the World Bank, right
• 8:17
  Speaker 1: in the middle of what feels like a one of
• 8:19
  Speaker 1: a kind crisis. So my colleague Simon Kennedy started his
• 8:23
  Speaker 1: interview by asking the obvious question, is this time really different.
• 8:35
  Speaker 1: It's certainly different from prior pandemics in terms of the economy,
• 8:40
  Speaker 1: the policy response to shutdown. The other thing that I
• 8:44
  Speaker 1: like to highlight that is very different is the suddenness,
• 8:49
  Speaker 1: how sudden this has been. If you look at US
• 8:53
  Speaker 1: unemployment claims in six weeks, we've had what it took
• 9:00
  Speaker 1: sixty weeks in terms of the run up. If you
• 9:05
  Speaker 1: look at capital flows to emerging markets, the same story.
• 9:10
  Speaker 1: You know, the reversal and capital flows in the four
• 9:16
  Speaker 1: weeks ending in March that the decline matched what during
• 9:21
  Speaker 1: the global financial crisis took a year. So the suddenness,
• 9:26
  Speaker 1: the abruptness of it, is also a factor that is
• 9:30
  Speaker 1: a byproduct of the widespread shutdowns which we had not
• 9:34
  Speaker 1: seen before. Certainly the global nature of it, and as
• 9:39
  Speaker 1: highlights the speed point bursting out across the whole world,
• 9:44
  Speaker 1: the first global recession, the crisis really since the Great Depression,
• 9:50
  Speaker 1: because the two thousand made was the rich countries and
• 9:55
  Speaker 1: not the purchased markets had a good crisis in two
• 9:58
  Speaker 1: thousand eight, and they're not going to this time, regardless
• 10:02
  Speaker 1: of how the virus hits them and the policy response.
• 10:06
  Speaker 1: Think about China. Can you imagine if this had hit
• 10:10
  Speaker 1: fifty years ago? Can you imagine trying having the state
• 10:14
  Speaker 1: capacity to shut down Hubei Province to feed nearly sixty
• 10:19
  Speaker 1: million people, give them food and water, and concentrate medical attention.
• 10:25
  Speaker 1: So there's a policy option that we have, and I
• 10:29
  Speaker 1: think most countries have felt it's the choice that had
• 10:33
  Speaker 1: to be taken to try to try to protect ourselves.
• 10:38
  Speaker 1: How degrade the policy responses? What do you what do
• 10:41
  Speaker 1: you make of them? Um? No, if I think the
• 10:44
  Speaker 1: policy response has been massive and called for that absolutely necessary.
• 10:52
  Speaker 1: You can quibble between the European style sort of try
• 10:59
  Speaker 1: to preserve firms and workers and their current jobs, the
• 11:03
  Speaker 1: US version, which is to try to address it as
• 11:07
  Speaker 1: a natural catastrophe and try to subsidize people but allow
• 11:11
  Speaker 1: higher unemployment. I think they're actually not that different. If
• 11:15
  Speaker 1: this thing persists, then a lot of those European firms
• 11:20
  Speaker 1: will end up having to let their workers go when
• 11:23
  Speaker 1: the crisis passes. If it doesn't, a lot of the
• 11:25
  Speaker 1: U S firms will end up rehiring their workers. But
• 11:30
  Speaker 1: certainly the aggressive crisis response reflects lessons learned in two
• 11:35
  Speaker 1: thousand and eight and common does that aggressive policy? Does
• 11:40
  Speaker 1: that explain the markets? Stock markets particularly of You wouldn't
• 11:43
  Speaker 1: necessarily if I'd shown you the chart at the start
• 11:46
  Speaker 1: of the year, you would have wondered what the collapse was,
• 11:48
  Speaker 1: but you wouldn't necessarily have You wouldn't necessarily We've been
• 11:51
  Speaker 1: hit by a global pandemic. If you looked at look
• 11:53
  Speaker 1: at Wall Street, what's behind? What's that break between the markets?
• 11:58
  Speaker 1: And UM? I would say, partially, partially, how much of
• 12:05
  Speaker 1: the resilience, if you will, if not a brilliance in
• 12:08
  Speaker 1: the market is is policy driven? I think a lot
• 12:13
  Speaker 1: of it is. UH. That you know, UH, let's take
• 12:18
  Speaker 1: monetary policy. UM. Before the pandemic, the US unemployment was
• 12:25
  Speaker 1: at its lowest level since the nineteen sixties. By most metrics,
• 12:29
  Speaker 1: the US was at or near full employment, which very plausible.
• 12:33
  Speaker 1: That you know, your path was one towards rising rates UM.
• 12:39
  Speaker 1: Clearly that has been completely replaced by a view that
• 12:46
  Speaker 1: rates are zero now that that they've come down, UH,
• 12:50
  Speaker 1: and that they're gonna stay low for a very long, long,
• 12:55
  Speaker 1: indeterminate period of time with a lot of liquidity or
• 13:00
  Speaker 1: from from the Federal Reserve. So that's a big game
• 13:02
  Speaker 1: changer for you know, discount discounting futures, you know, stream
• 13:07
  Speaker 1: of dividends and and and and so on um for
• 13:12
  Speaker 1: the markets. Let me just point out another issue in
• 13:16
  Speaker 1: terms of the policy response. The policy response, again, the
• 13:22
  Speaker 1: FED has established a lot of facilities that are now
• 13:26
  Speaker 1: providing support not only to corporates, but to corporates on
• 13:31
  Speaker 1: a much lower grade in terms of their ratings, you know,
• 13:35
  Speaker 1: the fallen angels, the higher risk that the you know,
• 13:39
  Speaker 1: the the kind of risk gear corporates than certainly was
• 13:45
  Speaker 1: even envisioned at the outset of the pandemic um And
• 13:50
  Speaker 1: I think what this does is the market is really
• 13:56
  Speaker 1: counting on a lot of rescues. Of course, the FED
• 14:01
  Speaker 1: lower forever is part of part of it, but I
• 14:05
  Speaker 1: also feel the markets have a very sanguine view of
• 14:09
  Speaker 1: the virus and what's going to happen and how quickly
• 14:14
  Speaker 1: we can return to normal, or maybe how quickly we
• 14:17
  Speaker 1: will choose to return to whatever normal is, how quickly
• 14:21
  Speaker 1: the lockdowns will will lend um and it seems very
• 14:26
  Speaker 1: uncertain to me. The virologist and epidemiologists I respect, you know,
• 14:32
  Speaker 1: always start out their comments by saying, you know, we're
• 14:35
  Speaker 1: in the second inning where we might, if we're lucky,
• 14:38
  Speaker 1: be at the end of the beginning of the epidemic.
• 14:41
  Speaker 1: That sort of thing, and and and that rings true.
• 14:46
  Speaker 1: I don't know how we're coming back to two thousand
• 14:49
  Speaker 1: nineteen levels in any near term. The ECB gave a
• 14:54
  Speaker 1: I think a three year projection that'd be great. That
• 14:57
  Speaker 1: seems quite optimistic to me. And I thin the true
• 15:01
  Speaker 1: fall and g d p U economic historians will debate
• 15:06
  Speaker 1: for years. It's probably much larger than a measured fall.
• 15:11
  Speaker 1: It's not just the people not working, but what's the
• 15:14
  Speaker 1: efficiency of the people that are working. And then the
• 15:18
  Speaker 1: monetary response is done hand in hand with the Treasury.
• 15:21
  Speaker 1: This this level of UH guaranteeing private debt and municible
• 15:26
  Speaker 1: debt that Treasury owns, the Federal Reserve, and it's completely uh,
• 15:31
  Speaker 1: you know, working together on this. But it's banking on
• 15:36
  Speaker 1: this V shaped recovery, something pretty good happening. If you're
• 15:39
  Speaker 1: you can't keep expanding all the credits that you're guaranteeing
• 15:43
  Speaker 1: in the economy. And definitely if a lot of the
• 15:45
  Speaker 1: firms aren't aren't aren't coming back, So it remains to
• 15:49
  Speaker 1: be seen what they will do going forward. I think
• 15:54
  Speaker 1: we're going to see a lot of work for bankruptcy lawyers,
• 15:57
  Speaker 1: and you know, going across a lot of industries, we
• 16:01
  Speaker 1: see one retailer after another entering Chapter eleven already, and
• 16:05
  Speaker 1: that's probably just the beginning. The numbers are gonna look
• 16:08
  Speaker 1: spectacularly great in some months. Simply because you're coming out
• 16:14
  Speaker 1: from a base that was pretty devastated. That doesn't imply
• 16:20
  Speaker 1: that per capita incomes are going to go back in
• 16:25
  Speaker 1: V shape two what they were before. You know, it's
• 16:34
  Speaker 1: very critical. Characteristic of all of this shock has been
• 16:40
  Speaker 1: that it has disrupted supply chains globally, big time um trade.
• 16:48
  Speaker 1: You know, if you look at the w t O projections,
• 16:53
  Speaker 1: they tell you, well, it can decline anywhere between thirteen
• 16:55
  Speaker 1: and thirty two. So I don't think you just break
• 17:02
  Speaker 1: and re recreate supply chains, you know, at the drop
• 17:07
  Speaker 1: of a hat. I think that there is a lot
• 17:10
  Speaker 1: of geographical changes that are that are being necessitated because
• 17:15
  Speaker 1: if the economic downturn has been synchronous, the disease itself
• 17:21
  Speaker 1: hasn't been synchronous. It started in China, hate Korea, hate
• 17:26
  Speaker 1: parts of Asia, moved to Europe, moved to the US.
• 17:31
  Speaker 1: So the idea that the disease is going to be
• 17:36
  Speaker 1: dealt with globally in such a synchronous and rapid way
• 17:40
  Speaker 1: that it allowed for V shape, I find that dubious.
• 17:44
  Speaker 1: The second part that I find the V shaped story
• 17:48
  Speaker 1: dubious is what Ken was already alluding to the chapter elevens.
• 17:54
  Speaker 1: You know, we are all living in economies that have
• 17:57
  Speaker 1: a huge important service component. How do we know which
• 18:01
  Speaker 1: retailers are going to come back, which restaurants are going
• 18:04
  Speaker 1: to come back? Uh, cinemas and and so when this
• 18:11
  Speaker 1: crisis began to morph from a pandemic, from a medical
• 18:17
  Speaker 1: problem into a financial crisis, then I think the roots
• 18:22
  Speaker 1: for it having more longer lived effects we're set, And
• 18:27
  Speaker 1: I think those two factors are going to make for
• 18:30
  Speaker 1: more protracted recovery. Yes, I go back to the e
• 18:35
  Speaker 1: CBS forecast for three years uh to go back to
• 18:40
  Speaker 1: the same the same income as the beginning, which is
• 18:43
  Speaker 1: what Carmen and I use is the definition of recovery
• 18:46
  Speaker 1: in our book that, by the way, is really not
• 18:49
  Speaker 1: the Wall Street definition of recovery, where recovery is going
• 18:52
  Speaker 1: back to where the trend was which is typical in
• 18:56
  Speaker 1: a recession. We use a much more modest for inever povery.
• 19:00
  Speaker 1: And still with post war financial crises before two thousand
• 19:05
  Speaker 1: eight nine the average was four years, and for the
• 19:11
  Speaker 1: Great Depression ten years. And there are many ways this
• 19:14
  Speaker 1: feels more like the Great Depression when you look at
• 19:18
  Speaker 1: the de globalization which seems so likely to follow this,
• 19:23
  Speaker 1: Whether say in the United States the Republicans are in
• 19:26
  Speaker 1: power the Democrats, that seems like one thing they have
• 19:30
  Speaker 1: a consensus about getting back to something. We wrote gosh
• 19:43
  Speaker 1: and late late March. I think we were very early
• 19:46
  Speaker 1: in on this point that you probably need a debt
• 19:49
  Speaker 1: moratorium that's fairly widespread for emerging markets and developing economies.
• 19:55
  Speaker 1: And an analogy the the I m f H were
• 20:00
  Speaker 1: Chapter eleven. Bankruptcy is very good at dealing with a
• 20:03
  Speaker 1: couple of countries or a couple of firms at a time.
• 20:06
  Speaker 1: But just the way the hospitals can't handle all the
• 20:09
  Speaker 1: COVID nineteen patients showing up in the same week, neither
• 20:14
  Speaker 1: can our bankruptcy system. Neither can the international financial institutions.
• 20:20
  Speaker 1: So there are going to be phenomenal frictions coming out
• 20:24
  Speaker 1: of this wave of bankruptcies to faults again. If we
• 20:28
  Speaker 1: can get a super v recovery, it'll all be forgotten.
• 20:32
  Speaker 1: The policymakers will look like geniuses. Uh not. I'm not
• 20:36
  Speaker 1: saying they've done anything but a good job that I
• 20:38
  Speaker 1: think they have done a good job. But you know
• 20:41
  Speaker 1: they'll be you know, have saved the day. But it's
• 20:45
  Speaker 1: it's probably that's probably not going to happen. It's probably
• 20:48
  Speaker 1: going to be at best you shape recovery. And I
• 20:53
  Speaker 1: don't know how long it's going to take us to
• 20:55
  Speaker 1: get back to the two thousand nineteen per capital g
• 20:58
  Speaker 1: d P I. I would say, looking at it now,
• 21:00
  Speaker 1: certainly world, you know, for the world, five years would
• 21:04
  Speaker 1: seem like a good outcome out of this. Um. What
• 21:07
  Speaker 1: about the debts in the in the major com you
• 21:09
  Speaker 1: mentioned Italy but also elsewhere. At the moment, there's definitely
• 21:13
  Speaker 1: that mentality that this is a price worth paying. How
• 21:17
  Speaker 1: worried are you about the debts in the longer term? Yeah,
• 21:20
  Speaker 1: it's not a free lunch we had, but we had
• 21:23
  Speaker 1: there's no choice. The whole point of having a strong
• 21:28
  Speaker 1: balance sheet, of being able to borrow freely, is to
• 21:32
  Speaker 1: be able to do it with abandoned in situations like this.
• 21:36
  Speaker 1: This is like I wore, naturally staggering, natural catastrophe, whatever
• 21:42
  Speaker 1: you want to call it. There's no debate that they
• 21:46
  Speaker 1: should be doing all they can to try to maintain
• 21:48
  Speaker 1: political and social cohesion to maintain economies. But what lies
• 21:53
  Speaker 1: at the other end. I go back to my Wizard
• 21:56
  Speaker 1: of oz an analogy, UH with Darthy up there. The
• 22:01
  Speaker 1: financial markets think there's no chance interest rates will go up,
• 22:05
  Speaker 1: there's no chance inflation will go up if they're right
• 22:09
  Speaker 1: in that last five years. And by the way, if
• 22:13
  Speaker 1: another shoe doesn't drop, if we you know, don't have
• 22:17
  Speaker 1: another global problem in the meantime, I mean, it'll be fine,
• 22:21
  Speaker 1: but we could have costs from this. We're talking about
• 22:25
  Speaker 1: economy shrinking by and per year, and those are just
• 22:33
  Speaker 1: staggering compared to the depth burden costs, whatever they are.
• 22:38
  Speaker 1: So you know, certainly we would strongly endorse doing what
• 22:43
  Speaker 1: they're doing. But then the summer selling it as a
• 22:46
  Speaker 1: free lunch, that's stupefyingly naive. Early on, you a talking
• 22:53
  Speaker 1: about inflation. I think there's a projects into column. Those
• 22:57
  Speaker 1: still your views that that could be an inflation first
• 23:00
  Speaker 1: the end of this, well, I don't think where we
• 23:03
  Speaker 1: we don't know where will come out. So the probabilities
• 23:08
  Speaker 1: for the foreseeable future will have deflation, because you know,
• 23:13
  Speaker 1: that's where we are. But at the end of this,
• 23:16
  Speaker 1: I think we're going to have experience an extremely negative
• 23:20
  Speaker 1: productivity shock with declobalization. Even if the vaccine magically appears,
• 23:26
  Speaker 1: the deglobalization will be the last the deglobalization and probably
• 23:32
  Speaker 1: the political social political ramifications, which may be good overall
• 23:37
  Speaker 1: for society, but in terms of growth and productivity, they
• 23:41
  Speaker 1: will be lasting negative shocks, and demand may come back
• 23:47
  Speaker 1: and and many of the forces that have led to
• 23:51
  Speaker 1: very low inflation may have gone into reverse either because
• 23:54
  Speaker 1: of declobalization, or workers will strengthen their rights and unions
• 24:00
  Speaker 1: will be kind of stronger, which it becomes possible in
• 24:03
  Speaker 1: a more deglobalized world. It's easier to rebuild union strength
• 24:08
  Speaker 1: when you're not competing with foreign terms. And of course
• 24:12
  Speaker 1: inflation is a is a possibility, but the market for
• 24:16
  Speaker 1: a season like essentially zero chance of ever having inflation again.
• 24:21
  Speaker 1: And I think that's uh, you know, it was very wrong.
• 24:32
  Speaker 1: Thanks for listening to Stephanomics. We'll be back next week
• 24:34
  Speaker 1: with more on how COVID nineteen is turning the global
• 24:37
  Speaker 1: economy upside down. Remember you can always find us on
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  Speaker 1: at my Stephanomics. This episode was produced by Magnus Hendrickson.
• 24:54
  Speaker 1: The interview you just heard was conducted by Simon Kennedy,
• 24:57
  Speaker 1: and the published version of the transcript im Bomberg Markets
• 25:00
  Speaker 1: Magazine was edited by Stryker Maguire. Special thanks to Jeff Green,
• 25:05
  Speaker 1: Steve Matthews, Mark Scofield, Carmen Reinhardt, and Ken Rogoff. Scott
• 25:10
  Speaker 1: Lanman is the executive producer of Stephanomics and the head
• 25:13
  Speaker 1: of Bloomberg Podcast is Francesca Levy.