Surveillance: Powerful Recovery Underway, Spence Says

The sport of economics is led by Michael Spence, the laureate and founder of Education Quality at Stanford University and of course General Atlantic Senior Adviser, Professor Spence thrilled to have you with us this morning. Michael Spence, we see a white house looking at wages. We see a white house looking for wage lift. And one of the great thinkings, including what we saw from Jamie Diamond's letter, was the

ability to get wage growth in America. How do you get wage growth given technology and how do you get wage growth given the concentration of wages like Amazon and like others which you guys call monopsony. Right, Well, it's a complicated, uh challenge, but I think you know there are a number of things that are important. You have

the tax system, which isn't directly wages but effect incomes. Second, Um, you need to strengthen the UH, the institutions that you know support unions UH and and and and change the bargaining power um. And that's especially important when you have big monopsony sort of buying power. And and and Third, you have to deal with this skills challenge that we

that we face. I mean, you know, wages are going to reflect the you know, the the value of various kinds of labor in the marketplace, regardless of these changes in sort of bargaining power. And and we know that as our economy transforms digitally that we need a new set of skills and we need institutions public and private that get that help us get that done. Professor, off of your wonderful book, The next convergence of a decade ago,

what is the next labor convergence? Do you perceive globally as you write with Stiglets and others about a K shaped economy, do you see any power for labor to reaffirm what we see in our nostalgia? Yes, I do. Actually, you know, I think we're in for you know a couple of things. One is a very powerful recovery that's underway in America and I think will come with a slight lag here in Europe. Second, we have you know, um,

productivity enhancing technology that's ready for prime time. UM. And Third, we have governments that have decided that that they need to use their fiscal power to make sure that the demand side of the market, and particularly the employment side, is good. So UM, if we convince you know, a sufficiently large part of the economy to engage in in this process of innovation, I think we could have an employment and productivity boom and a real change in the

dynamics that we've been seeing for the last couple of decades. Michael, do a minimum But does a minimum wage gap or the idea here of some sort of minimum wage that's higher than where it is now lead to higher wages, fewer jobs or both. Well, I mean this is controversial within the economics profession, so um, and you'll get views on all sides, sometimes politically motivated and sometimes just because people reach different conclusions, Lisa, But I mean bottom line

is minimum wages probably don't cost us much employment. They affect the incomes at the lower end of the income spectrum UM, but they don't actually have much of an effect on, you know, the this challenge we face and sort of raising middle income incomes relative to the sort of the top um. So it's an important tool. I think we should use it to the extent our political system allows us. But it's only part of the solution.

And I asked, because you know, Tom asked the right question to start this out with, which is the technical technological innovation. It's going to leave a lot of people without the skills, without perhaps a role in a labor market the way that they once did, and certainly if they have a role, it will be at a much lower rate. What do we do with those people? I'm not saying it's sort of it's a lot of people. We all have people in our circles who belong there

and their question is do you do your training? Do you have some sort of universal U income? What's your view? I think he used all available weapons, Lisa um. So you know, I'm not sure which version of a universal basic income you know, will finally emerge. But I think we have to put a floor and just on tolerated

situation in which we have poor people. But but I think we need an all hands on deck I led by government, but with engagement from business and education to tackle to tackle the skills transitions that we need as well. So I'm I'm this. This challenge is so important um to the kind of cohesiveness of our society that I think it's an all hands on deck. You use all the instruments you've got to try to deal with it.

But we have to reverse these trends. Michael Spence. In the time that we've got left with you, I think we must turn to your focus over the last decade on China. There's a lot of fears out there. I'm gonna say there's some misinformation, but what I mostly note is a careful considered study of the access between Beijing and Washington. How much power does Beijing have? Well, they have tom They have a lot of power now because

they have a big, thriving economy. It's recovering quickly. It's technologically, in in other ways dynamic. I mean, you know in every country, including China. You know, if they make some big policy mistakes, um, they could screw it up. But on balanced, they have an enormous amount of power that stems from primarily their big domestic market which people want to have access to as investors and as in terms

of trade. So they're powerful and we have to deal with them as a powerful potential trading and investment partner and and and competitor. I look, I look Michael at China, and I look at Hong Kong and how it's changed. What would you recommend if you were consulting to the major Western banks on Hong Kong. Should they sustain in Hong Kong or take a different strategy? No, I think that you know they will. They will. I would recommend that they try to hang in there and comply with

the laws. But I mean Bill wrench Uh made some very interesting remarks I think in reporting the Congress. He basically said, you know, we're we're approaching you know, kind of slow motion train wreck in which the major multi nationals, including the banks, are going to find themselves, you know, straddling borders and and and one way or another, you know, not in compliance with the laws and regulations of where

they sit. Uh, either way they go. So I think they need to be aware of that and the risks are associated with that. But I wouldn't recommend a precipitous withdrawal at this point, Michael, stay close. I just want to summarize the pace coming out of the White House right now about the labor market and average whites. Told me you you might find this interesting. A couple of weeks ago, we had your Bernstein put out a pace on the base effects ahead of the inflation report and Cecity arounds.

The chaman of the Council that we can convise this out for the White House is put out a pace just on average whites. Really really intuitive, I think easy to understand for people with an economics background, perhaps counterintuitive for other people looking at what happened last year April, because of compositional effects and the labor market, we had a lot of the low earners drop out of the labor force and wages actually searched at a time of

immense weakness in the economy. And I think what they're preparing people for tom is just to indicate when that labor composition shifts the other way, you could get negative wage growth in the United States of America and essentially concluding it's nothing to worry about. So we've had a Jared Bernstein piece a couple of weeks ago ahead of an inflation print, preparing everyone to say this is just

base effects. And now we have a secili rouse piece coming out from the White House in a blog basically preparing people for weaker wages because of compositional effects. Michael, if I can bring you back in just quickly, the economy is going to be pretty complex and nuanced in one This seems to be a big effort from the White House to help everybody understand the signaling that we

should take or maybe shouldn't take from economic data. How important do you think that is for this year, just in terms of how we response react on Main Street to things like headline inflation economic disa every single month. Well, I think it's very important. I mean, the narrative really matters.

And and they're right. You know, if we get a major, major recovery in the shutdown sectors you know that we've talked about many times before, which tend to employ the lower end of the wage spectrum folks, if they come back into the labor market or just re employed, um, then you could get something that looks like a bad signal in you know, from the point of view an administration that's that is essentially said one of their high priorities is dealing with a employment and be you know,

a fairer set of outcomes in terms of so they want they want the recovery, but they don't want people to misinterpret the signals that are coming out of the prices in the labor market or elsewhere in the economy. So I think it's really important Michael's good to match up, especially to get a final thought on that, because not cogree with you. I think it's important to Michael Spence that on the latest in this economy worldwide and the

domestic story in America. Say right now, not only the conversation of the day for us on vaccination and COVID, but this is the most serious conversation. Is all of us attend the end of a pandemic? Or for Levy is with Boston's Children Hospital. That barely describes his assertive work in pediatrics and in vaccinations and precision vaccinations for children. He is an FDA Advisory Panel member as well. Dr Levy, thank you so much for joining us. Now is it safe now for an eight year old to get the

first shot and then the second shot? Thank you for that. Um, Look, we are blessed here in the United States to have three vaccines under emergency you so authorization. The J and J is on pause. Um. However, the youngest age group that can currently receive any of these vaccines are sixteen year old for the Fiser product. At the moment, nobody under the age of sixteen years is eligible to receive

a vaccine. There are ongoing clinical trials to assess safety and efficacy of the coronavirus vaccines in those younger than sixteen years of age, and to my view as a pediatrician, that's very important my time of say Leninger biochem and all that. It comes up to this medical phrase tighter t I T E R. Or maybe it's simply the dosage allowed. Do we just assume it's the same vaccine for children, just a smaller dosage for little people. No,

kids are not just little adults. Uh. You know, from the day we're born to the day we die, the only constant thing in life is change, and our immune system is no different when you look at a baby all the way through an elderly individual. The immune system

keeps evolving. So we cannot assume that a vaccine that's safe and effective in one age group is safe and effective in another age group, and often dose may be different, and immunogenicity the ability of a vaccine tosspect if anybodies could be different, Well, how much higher is the bar in terms of side effects for children given the fact that they don't present with the same degree of illness

on average? Thank you for that. We we view it as very important to remember the future our children when considering this pandemic. And there are multiple reasons to want to have vaccines against COVID for kids. Although it's uncommon, severe COVID does occur in children in the form of a multi system inflammatory syndrome, and children are mis c Children do become infected and they excrete the virus, and

they could infect parents or teachers or other children. And because childhood infection is often symptomatic, other precautions won't suffice. And you know, the majority of vaccines in the world are given to kids. The majority of the global vaccine market is a pediatric market, and the infrastructure to deliver vaccines across the world is by and larger a pediatric infrastructure. So if you want to get a high percentage of

a population immunized around the globe for any infection. Pediatric immunization is often the path um and and so we view this as a very important component of the fight

against this pandemic. Well, I want to dovetail this conversation with a J and J issue, and this is a delicate topic, but the idea that the J and J vaccine was paused and its distribution because of six known cases of this rare thrombosis out of seven million inoculations given, is the bar that much higher for unusual developments, even if they are marginal and very rare, when you're inoculating

a population that is not as at risk. And I'm thinking about a possible recommendation by the f d A by Friday that perhaps the J and J vaccine can go to people who are older than the age of fifty, but not younger. Well, you know, vaccines are something that you give to healthy people, so they've got to be safe, and so there there is a very big emphasis on

safety and that continues even after an authorization. Even after an authorization and you scale the vaccine and you're pushing it out to the population, there are passive and active systems to to monitor, to surveillance for safety. And if there is a signal, even if it's a small and rare signal was as was the case with A J and J, it needs to be pursued. So although the pause is awkward in my view, it's the right decision and in the long run that will lead to confidence

in the public. Federal authorities are taking safety seriously, and of course, when you're developing a vaccine product for kids, safety will come first, and that's why there are rigorous clinical trials now that are double blinded, placebo controlled prospective studies to assess safety and efficacy. And when the sponsors such as Fiser leave, they have the right data to indicate that they will submit to f d A and FDA may convene the Advisory Committee to look at those data.

And as you know, those briefing documents are made publicly available to any Americans, so we have a very good and transparent process. Dr Lovey, thank you so much, Joe for Levy where it's too short of visit. We look forward to another conversation soon. He's at Boston's Children Hospital, the Precision Vaccine program, Michael Kushner said the show. Right now, he's with Margain Sale and their chief investment officer and radio and television someone with perspective, Michael. Over the weekend,

I saw a massive rerationalization of worry. There's no other way to put it. What is the outcome when you see so many people worrying about our collective set of worries. It's quite quite interesting. But if you look at global aiman number of positivity cases arising. India's got problems on the several countries are on the world. Turkey, UM has has issues. UH. The United States has had the largest vaccine rollout out of side of a few small countries and UM. I think that's one reason why UM. The

US is doing a little better right now. Things look a little up and up on the US, except for bonds, which are looking a little bit on the down and down. I mean, I looked Michael at what to do here, and I guess equity markets is one of our focuses. But you're working in fixed term as if fixed income. We've seen this yield lower, move price up, yield down. Is it tradeable, it's it's it's very difficult. We still think longer term the trending yields is higher. I'm not

sure how much higher. We were talking about two percent kind of a longer term term rate for ten year ten year treasuries. But in the short term we had a lot, a lot of positive news on the economy, a surge of of of of positivity in terms of the data in in March, and the market got ahead of itself in terms of predicting when the Fed was going to move. Put at one point in March, you're

predicting a rate hike in two thousand twenty two. And the FETE has successfully, i think, pushed against that logic and that narrative such that now it's being pushed back out again. If the market is continues to trade short and the and the fight continues to double down on it's no no rate hikes sol mid two thousand twenty three or late even later than that, then the treasury market has room to stay, you know, stay stay firm,

I mean yield staying on the low side. Michael, can you talk about the relationship between the U S treasury market in Europe right now? We've had some really interesting kills the Bloomberg team over in London putting them together BMP, Parabound Manual Life looking for tenure yields in Germany, to maybe turn positive by year end then get back towards zero. What would that mean for the treasury market, Michael as

a very good point. One another reason why I think treasuries have done so well in the last several weeks is that yields are exceptionally high in the US relative to the rest of the world. And with the vaccines roll out accelerating in Europe and getting better lockdowns presumably ending at some point in the in the late spring, that Europe will catch up. So one constraint I think that's been on the for the rise of tenure treasures has been the low level of yields outside the US.

So and if that narrative is some merit to it, then in order to get US heels higher, European deals have to go higher first in order to catch up a bit with the U S. So. Yes, I think if you if you're looking for higher U S yields, you probably have to look for higher European heels um first. What if I'm looking for income right now, Michael, where

am I going right now? That the place to go is in is in credit markets, whether it's an in structured credit like mortgage backed securities and or um investment grade credit, corporate credit, or high yield credit. In a world of stability, are we entering a kind of goldilocks period where things are slowing down? Remember the Chinese economy is slowing down. It's very likely on an annual basis, will be growing slower than the US in the first

half of this year. That's good news for the global economy. We don't want to to the boom being too strong such that central banks actually need to push higher rates

higher sooner than otherwise. So a slow down and China relative to the rest of the world emerging markets not doing that well in the short run relative developed markets also softens the surgeon and seeing an impact of the surgeon spending in the United States, which lengthens the business cycle, which lengthens the probability that credit spreads will stay stay low. I have to ask this, Michael, because we are seeing a post credit crisis tights on spreads basically the extra

yield that investors earned to own credit over rates. Is there any sign of froth? Are there any pockets or is this all making sense to you based on where we are. It makes sense to me if you look at the history of credit spreads. They are the tight end of the range. In many cases they are in depending upon the security company and rating they are near. They're all time loads, which we saw in the very early two thousands or in the mid nineties. However, we

are in a relatively unique economic situation. Historically, when do you see credits for his widening and see significant underperformance, whether it's high yield er i g. Is when we're nearing the end of the business cycle and the feed is raising rates. You look historically that's what you see, and right now it looks pretty clear to me that the feed is not raising rates till at least probably the end of two twenty three. Michael is going to

see you, as always good to hear from you. Michaelkushmer markin Stanley ce IO of global fixed income yields in last week by seven or sub basis points on a tenure this morning, unchanged tom at a one fifty eight on tens on thirties, you'll yield. You know, if the gloom of the weekend John to really yield from a negative point eight one to a negative point seven nine. I guess that's a little bit of a movi here in a recalibration as well. To me, it's what you

see with Coca Cola and also with Harley Davidson. I mean, it's a discreet, smaller story unique to motorcycles, John, around the world and across America. But I'm sorry when you shift your revenue guestimate any responsible manager from twenty two and a half up ten four points to that vector, that dynamic gets your get your attention at leasta raising the outlook on about one how many times we've seen that.

I'm struggling right now because i know you're gonna make fun of me for being a Debbie downer, But I'm just trying to understand the consequences of the moral hazard of allowing companies to pile on debt at very low costs. It keeps them alive for longer. What does it do down the line? Have we forever prolonged a credit default cycle? Or is this going to be something that we will feel at a later date? And there is a question

of the president that the FETE has set. Are they part of the fundamentals as you've asked before, John, in terms of swooping in and saving credit markets if everything goes south, well, every dollar to a debt is not equal. So let's think about where the dollar of debt has gone so far, and we mentioned last week on this show the amount of that's gone to refinancing. Yet today for high yield so sent according to Barkleys, more than seventy percent of high yield issuance has gone to refinancing.

So these are we are thrilled and Michael should joins us right now with market field asset management of course has great affection for one of those super League teams, Manchester United. Michael, I want you to bring this into the arc of this asset boom that we're in. Is the super leaguing of English football, of European football just another symbol of the global financialization of these times. I

mean the short answer is yes. I mean, you know, the commercialization of sports, you know, has has has accelerated over over the last over the last twenty years. Uh you know, and I think that you know, the COVID period, Um, you know, you know who's who's you know, I think crystallize the needs of the largest clubs to make sure that they know that they can continue to increase their share of whatever their venue is available. Um, you know,

as JP Morgan. I'll point out the JP Morgan once for banks that finance free leverage buyout of Manchester United back in two thousand and five, um, you know, which was a transaction that nobody actually thought could get done. Um. So you know, JP Morgan has had a hand in the commercialization of of of English football back to that period of time. And you know, I would look at that LBO of man United ass as one of the sort of key, you know, key moments which have got

us to this sad story today. Michael. We've been familiar with this conversation now for the best part of two decades, and I think this feels very different as I read through these headlines again that JP Morgan is underwriting this, but the clubs themselves have signed to a binding deal that was key to JP Morgan's backing, and that's according to our sources. Michael. So this isn't just a threat anymore, is it. This feels real, you know, it does feel real.

I mean it's possible that the some kind of political intervention will will you make it harder? I mean you could you could have a windfall acts put on the clubs or something of that nature and I'm sure any binding agreement has some sort of forced masure clause, you know, clause within it. But no, I think this is a you know, this is a genuine attempt to recast who

owned sport. Um And you know this is somewhat you know, it's a more radical version of the Premier League itself, which was an attempt of the larger clubs to take control of English football away from the league. In this case, it would be European clubs taking control of the sport away from the UEFA, which is the you know, which is the European League. Um. But but no, but this

feels like a definite attempt to change things. Um. It is possible that this particular proposal you know, you know, gets diverted, but it will only get diverted by another massive shift of revenue and control towards the largest clubs within you know, you know, within Europe, and you know this change is coming. Well, Michael, let's talk about what

could jeopardize this just briefly. There has been a push from the domestic leagues to say that if you go ahead and do this, you won't be able to participate in the domestic competition. But I think The bigger threat is a threat that hangs over the players that participate in this, which is from FIFA. That could mean that these players wouldn't participate in the international game anymore and

represent their country. Now, Michael, as you look through sports, can you think of a president here before and whether that is an effective stick to stop this from happening. You know, it did happen in cricket, Thicke. It's a

very very different game. It was not heavily commercialized in the nineteen seventies and an Australian TV mogul, Kobe Packer, you know, did create his own you know, better paid you know, Australian Cricket league and did get some of the best global players to play him that league and for a period of time they did not play test cricket. Now you know, that lasted a few years, was fairly successful. Some players didn't join the league something and stayed playing

international crickets. Some players did and you know, everything merged together again. Um, you know, but I think you know, you know, at this point in time, the players themselves are so much more commercialized and the agents themselves are are you big businesses? You know, you know, with within themselves. And my guess is that there's been a lot of behind the scenes conversations about this, so I think that most of the best players would bioritize playing in the

best club football over international football. I don't think it's universal,

but I think enough of them would. Um that all that would happen if you ban them in the international game is the international game itself would become you know, something of a backwater and you end up with two tier sport, domestic sport club together with with international sport, and then above it the sort of super Pan you know, Pan European League, which really would be you know, garnering the best you know, the best TV slots, the best ratings,

for best sponsorship, um, you know, and that's what the world would look like. Well, Michael, let's pick up on the TV slots point. I'm really looking forward to hearing from Paul Sweeney a little bit later on this morning to see what he's going to say about where this leaves the broadcasters tom who have signed multi year tracks for some of these broadcasting issues in the league's like the Premier League in the UK for that matter, over in Spain too, I know recently one must just signed

for Seria over in Italy. Now you're telling me those broadcasters will stick to those deals or won't. Try and come back again and say, hold on a minute. If you've not got Manchester United, if you've not got Real Madrid playing, you've not got Barcelona playing? What am I paying for? And we'll have to see and we welcome all of you on radio and television this historic moment where an American bank JP Morgan will finance the changing of English football and of course all of European football

as well. Lisa, Yeah, well, this is the question here, the idea of US banks moving into financing European football. Is this the investment opportunity? Is this a rejiggering of the entire financing of the major European sport? Michael, what's your view on that in terms of European sports as a potential investment opportunity and US banks having increasingly heavy

hand in financing it. You know, the story of football has been that as as revenues increase, you know, there's the sort of you know, so much of the money ends up leaving the game two players, you know, two players and agents. So I mean, I think this would be you know, this would be similar to what's happened when when the value of TV rights as has exploded. Yes,

the clubs generate more revenue. Um, you know, they end up spending it greatly on player compensation, agent compensation and um, you know, you know, transfer fees, which is the you know, European football phenomenon. Um. You know, do you know do some of the sort of superclubs managed to to you know,

to continue to sort of increase their value. Yes, probably, um, But I don't think, you know, I think that that at the end of the day, you know, European clubs probably closed the gap on their large on the between their values and the and the values of the largest American franchises. But you know, it wouldn't make European football

more valuable than say the NFL or the NBA. I mean I think, you know, I think that you know, it would it would simply close the gap between one and events is right now over in training over in Milan are up by ran about this. Market likes what it hears and Tom, I think the real tragedy of this, if there is one, for many people, is what happens to the smaller clubs. The smaller teams. They get left behind in all of this and don't get to compete or at least even try to get access to compete

in Europe's largest sport on Europe's biggest stage. Well this is important. Michael Shawl against Stephen from Hong Kong emails Z and says you haven't mentioned worst him. Michael shaw I believe west Ham is not a Super League team. I mean, how do we keep west Ham and the others motivated to be part of elite football? I mean you can't in that situation. You can create a second tier competition, you know, which is competitive. And you know,

as I said, this happened in the English game. English game used to be more more, more, more unified until the Pamier League came along. Um. You know, I think as they say, it just becomes they say it does become a two tier. You know, it does become a two tier sport. Um. You know, I think there would be enough in there would be enough interest outside of this super league to maintain something below it, but it

would be you know, it would be second tier. Um, and retaining young players would be much more you know, would be much more difficult. So they say I don't think you'd see the illumination of this second tier, but it would be a much drearier, less hopeful place. Um funnily enough, on a st a day to day basis, you know it can still be. You know it can still be, it can still be enjoyable, but you know

there's a sadness to it. But you know at the moment, any club, over a period of time, with the right financing and the right management, can theoretically become a very successful club at the highest level. Michael, fantastic to get you on the program, to get your thoughts on this. Just a really important change for the world's biggest sport, Michael, Shall their market field assid management see wonderful right now and I've been really anticipating in thanks Paris for bringing

in Sr. Prasadas with us. He's at Cornell. That barely describes the fact he's definitive on China, with his tour of duty at the International Monetary Fund, his work at Brown in Chicago as well. We're thrilled the Professor Prasad could join us. Uh this morning. Sure I have all sorts of books on China right now. Stravitis and Ackerman's two thousand thirty four The Bookmaker Shure Marble Bonnie, the book by George Magnus. And within all of this is

amateurs like me, oversimplifying, of getting things too simple. Give us one window into the complexities of this modern China. So China certainly wants to drive the debate on a variety of issues. On the multilateral front, China's hope before the COVID pandemic hit was to pitch itself as the great globalizer in contrast to the previous administration which was against multilateralism, which was against globalization. But now things are

shifting UM. There is pushback against China, including from many of its close training partners such as Australia UM, and it looks like multilateralism is slowly making its way back into Washington. Whether the world is going to buy Washington's move towards multilateralism after what happened over the last four years remains to be seen, but certainly China is going to be a very important player in terms of driving

the rules in international trade and finance. And whether the US is going to try to fill the void that it left for the last few years is going to be the key power play for the next three or four years, the professor, Let's talk about where that void has been more pronounced in the last five years, and that's within the Asian region. There was a conversation just for a brief moment of time about the United States establishing some kind of partnership with Asian countries to have

tried in the same way that maybe Europe does. At least I was a story for the future, Professor. Then the previous administration left that behind. Do you see them re establishing that down in DC an effort to put a stronger out within the region in Asia, to attract those countries to deal with the United States in a way that they haven't been able to. So, as she correctly put it, Jonathan, there wasn't a pivot towards Asia and then a pivot away from Asia and indeed from

the rest of the world. And now I think we will see a more gradual pivote back towards Asia because that's where a lot of the action is. And the Biden administration has made it clear while it is willing to talk about multi letters, so it is going to take a tough line in particular against China, so on trade issues, the baseline of conflict that it came into China that is going to remain the baseline. So it's

not going to go off the baseline. If anything, they're going to bring a larger set of issials into that discussion. And the recent discussion with the Japanese leadership of course points out that the US is trying to strategically bring

its allies around. Now the problem of countries in Asias whether they can really trust the US because they did trust the US earlier, even though they have very close relationships with China, both trade, financial um and political um, and they concern now about whether they can really trust the US to watch their back. So I think what the Biden administration does in terms of not just talk but action in the next two or three years is

going to be really crucial. I want to do tell this conversation with a book that you just wrote on digital currencies, the idea that China is launching a digital un. How much does a digital un give China an upper hand in economic dominance? So the book is coming in September. I wish it was here already, would have been a great time. But thank you for mentioning that um the digital Yuan is something that is crucial for domestic purposes

in China. I think the Chinese government is very concerned about ali pay and reach at they're dominating the payment space. They want an alternative. They want to keep retail central bank money relevant in China, but it's just going to

able the dollar's dominants and innovate. Not really. Most international payments are already digital, and ultimately what matters for the currency's role in international payments is how deep the country's financial markets are, how much investors trusted, especially trust its institutional framework such as an independent central bank and institutionalized system of checks and balances and so on. China doesn't

quite have that. So certainly the digital you want, in addition to China's cross board and inter bank payment system, which is the payment system that can talk with other countries payment systems, will help the un become a more important international currency, but a larger reserve currency that will take a lot more. So we hope that when you come back that is populished and we can have that

conversation then as well. For sat There, the Cornal University City Professor of Trying Policy, this is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live week days from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

Bloomberg dot com, and of course, on the terminal. I'm Tom keene In. This is Bloomberg