Surveillance: Stimulus Bets With Lew

we're thrilled Dr Bremer could join us this morning. And I'm going to start with Lebanon. I know there are many other themes to touch here as well. I want to go to Henry Kissinger's World Order, that wonderful book of a few years ago where Dr Kissinger uh speaks about the decline of the state. Lebanon is a card carrying decline of the state right now? How do they right the ship of what was once the jewel of the Levant? And my God, Tom, I mean any of

us that have been to Beirut. You know, it's our favorite city in the Middle East. It's so cosmopolitan and so lively. It brings together so many different civilizations and cultures. But the government is a disaster, and I mean, frankly, you know, coronavirus doesn't even hit their top three right now, right it's a massive financial crisis, incredible economic contraction and social descent across the country, big corruption and now uh

likely through mismanagement. I mean, if you see what they've done with the banking system, if you've seen what they're done with their sanitation system, it shouldn't surprise anyone that they have no capacity to deal with has of the materials um and you see the the the untold deaths, the destruction of a good swat of of the jewel of the tree end of the region just leveled yesterday, and it's it's horrifying what they can do. I mean, they're not gonna have it's hard for them to have

hesblaws in the government. The IMAX has a hard time working with them, and the Gulf States are are certainly not going to provide the kind of support that they've been able to historically. How are they going to rebuilding that environment? They to go back into your book of two thousand fifteen superpower. We need to make a choice of how we project from Istanbul down to those Gulf states. How do we project what is a choice that a second term Trump or first term Biden will have to make.

It feels like less involvement in the Middle East. I mean, Biden had a very solid, uh non controversial tweet yesterday is saying his heart goes out to these people. The United States needs to provide humanitarian aid. Absolutely, But I mean, compared to when my book came out, the United States is now the world's largest energy producer. Um, We're much less interested in what's going on in the Middle East than we used to. We're much more concerned about China,

much more on the Pacific. So I just whether it's okay. I think it's hard to imagine the US is going to be increasing its footprint anytime soon in this region. Ian let's moved to China then, And of course the provocative act of a member of the cabinet of the Trump administration will attend Taipei, maybe the first major visit of a US representative in forty years. How will that be taken by Beijing? Well, less badly than if it was say Secretary of State Pompeo or Secretary of Defense Esper.

I mean, you know you're not You're not talking about someone who is in particularly controversial in his mandate. You're gonna go over talking about coronavirus and the great response the Taiwan indeed was behind. But what we should recognize is this is all of the escalations out This is completely gratuitous, is completely unnecessary. It's not like the response on TikTok, which has a real national security concerned Huawei, where the Americans are behind in five get we need

to do something. I mean those you understand why the Americans are doing that, why they're doing it now we're in the case of Taiwan, it's purely rallied around the flag, drive a spike into China's core interests right before American elections, and it makes the next couple of months very dangerous. The Chinese will certainly respond. They might respond by hitting some American companies doing business in Taiwan. They might respond

with a show of military force in the region. And let's keep in mind an anti Chinese sentiment, anti mainland Chinese sentiment in Taiwan, especially on the back of the new National Security law impost in Hong Kong is incredibly high right now, So you really didn't need these tensions. I tweeted last night, let's not start a war. Let's not get into a war over Taiwan. We had a problems with China right now that we didn't need to

take this step. But and you understand better than most people that come on this program, the People's Republic of China is frozen Taiwan out of multilateral organizations. And for most people in the medical industry, here's a place that seems to have handled this pandemic fantastically. They have reported just seven deaths for a population at twenty four million. And because China insists that they have no part in multilateral organizations, there has been very little done to find

out why Taiwan has been successful. Isn't it a good thing the Secretary asar is actually going there to find out. I think you could do that much more effectively by having a lot of engagement at the less than secretary level. You don't need the symbolism of a cabinet secretary to do exactly what you just suggested. Also, let's keep in mind that yes, Taiwan is not allowed to join the World Health Organization or they can exchange some information because

China keeps them out. And I think that's an appalling reality. Having said that, President Trump has said he's withdrawing from the World Health Organization because they're in China's pocket, And the idea that the United States president would leave the wh show in the middle of a pandemic shows that the argument that you're making is probably not at the top of President Trump's in gender right now. And there is a strange double standard here though, that I know

resonates with you. When we talk about things like TikTok, the Chinese talk about theft, and people everywhere else outside of China basically laughing saying you want to talk about the theft of technology, you want to talk about these kind of things, talk about irony, And then I think it's a delicate moment whereby if you have business in China, you can no longer talk about what is happening in China.

And I'm sure this is something that resonates with you directly because as far as I understand, and you have no business in China and you're able to speak company about China, and you know that if you have business there, you wouldn't be would you trying to be much more difficult? And I think it's a real problem. I mean for the banks, for the consulting firms, for all the people that ostensibly do independent research, but what can they say

about China because it's going to undermine their business. I mean, you saw Lebron James, huge advocate for Black Lives Matter, but on Hong Kong he's towing the PRC line, and not that he knows anything about it. But the point is everyone that does business in China understands it's a big market and the rules change. They determine what the

rules will be on TikTok specifically. You know, we need to understand that it's not just about China's national security issues and their control of data um, which you know, you have to prove that we have evidence as an open question. But it's also a reciprocity. The Chinese government does not allow key American tech firms to do business

as usual in the world's largest data market. Whether you're talking about Facebook, whether you're talking about Google, whether you're talking about Wikipedia or Reddit, none of them are allowed um inside mainland China with you know, a billion one point for a billion people, uh, and a majority of them online. So I mean, why would you allow Chinese tech firms to have openness with the United States in

that environment. You asked me about my book Superpower, But you know, the book that I think is more relevant for this is one I wrote about ten years ago called the End of the Free Market. And if you're in a world where the soon to the largest economy is authoritarian and state capitalists, you don't have a global free market anymore, and I did. The United States is gonna pretend that we do, and we're gonna give the Chinese complete access to the American consumer base and database.

This ludicrous on its space. Iana, There's a question about how markets priced these rising US China tensions. They've been more general in nature, and when you talk about five G or tech predominance, it's it's hard to price that in. It's easier to price in a trade deal, or a trade deal that's falling apart. In Senior US and Chinese officials are getting together to discuss the progress of the Phase one trade deal. Do you expect it to be

thrown out? Well, I mean, first of all, I think that the Phase one trade deal is increasingly marginal to the US China relationship. And I'm glad you've framed the question and the interview you've done with me that way, because most of the times you're talking to you guys, Um, you know, it's in the last few months, it's all been about what about the Phase one trade deal? And I understand that if we get rid of it, the tariffs are going up and that's going to affect American

voters American consumers. But the reality is that the moment, no, it may well get thrown out in the next three months, especially if Trump feels like he's losing as we get closer to the election. But much more concerning is the potential that we really come to blows with the Chinese, that the mistakes lead to escalation, and then you're not talking about the Phase one deal. You're talking about you know, Ken large swats of Americans travel to China still, but

we have to pull our expats out. Will it be a dangerous environment for them? Um? You know? Will will baseline trade between our two countries be disrupted? Will companies have non terror UH moves against them that make it impossible for large US companies to still do business in China? What's the future of owl? You know, for example, companies like that those things are so much broader and deeper than the continued existence of an important but you know,

still modest and incremental phase one trade deal. What we do know is that there ain't no phase to trade deal. That's pretty clear. I think we can don't agree on that.

And right to catch up if you're checking notes at home, all these back and foresters in Lisa Johnomy, what their talks of out as correlations and there's no one better to speak to and Andrews Sheets and Morgan Stanley not so much on bonds, not so much on equities, but the linkage is of equities, bonds, currencies come out and these Mr Sheets joins us uh this morning, Andrew Sheets, what correlations did you see in the market that give you some form of signposts to the end of the year. Yeah.

So I think what's actually really fascinating is that you know, so much of the market, as you just alluded to, is is driving off of the same trade, is driving off of a long duration trade. And I think that's wrapped up everything from from the NASDAK to gold even things like emerging markets, right which I think we're historically associated as you know, these kind of deep cyclical a

deep cyclical asset class. But if you look at what's driving e m uh, it's it's a very narrow rally driven by very large technology names in some ways kind of similar to to what's happening in the US. So I think there remains a dominant theme that investors are are very confident in in the yield outlook. Are are still very concerned about growth, but are are optimistic around the idea that real yields remain low for a long

period of time. Well said, in the M space, turkishly or just moments ago weakens out to a seven or three. For the pros, that's a big deal, Andrew Sheets, that's all great, But the juxtaposition here is ample and Amazon to the moon versus Gold to the moon. How are safe havens playing right now? Well, I think what's actually very kind of fascinating is the way that those real yields are falling right because the nominal yield is more

or less stable or just can't fall very much. And so the driver of those lower real interest rates has actually been inflation expectations going up. And and I would consider those higher inflation expectations actually consistent with kind of a better economy within more normal recovery than than the opposite. And and where I think that's important is if I think you take an asset like goal, I think a

lot of people view it as as a hedge. I'm buying this because I'm worried about the state of the economy. I'm worried about the state of the world. It's going to protect my portfolio things do worse. But actually, I think the way that gold is performing is performing much more like a cyclical asset. It's it's benefiting from higher inflation expectations. It's going up when the market's going up

like like is happening today. So I think that's an important thing to keep in mind with some of these assets that that they are, they might be less diversifying to each other than expected because of how they're they're performing relative to some of these factors. Andrew, you looking to reduce risk exposure At the moment, we are, Yes, I think that we still remain quite comfortable with the the overall economic recovery. And we at Morgan Stanley have been and remain and I think kind of an out

of consensus V shaped recovery camp. But you know, we were coming off of a very strong performance, certainly up through July, and and you know, we've we've voiced concerned that August and September look like a more difficult environment. That I think we're losing some of the positive catalysts we had last month. We're obviously higher and prices leaving

less upside to our our price targets. And even though I think overall the economic momentum is still sustainable, I'm probably most worried that we see some pausing of that economic momentum over the last over the next two months, especially in the US, where you have seen a worse

COVID dynamic than our initial forecast expected. So, Andrew, what to find interesting about the thinking of more Can Stanley at the moment is that even if the recovery slows, so long as the momentum is positive and things go in the right direction, you think that sufficient for risk. Andrew Y, Well, I do think, you know, I think a couple of factors are going on. I think first is I think we kind of step back, and especially kind of step back from from the next month or so.

I think I think big picture, I think we're still seeing a lot of relatively encouraging early cycle dynamics in the market. You have very easy policy, you have weak but improving data, you have relatively light investor positioning. You know, I think a reasonable amount of investor caution. These are all, I think aacteristics that are very common, you know, during or right after recessions, and I think that they ultimately mean that I think the recovery that we're seeing is

going to be sustainable. That um, that this is not, you know, just a flash in the pan um. And so yes, I think the market that I would expect to have a more challenging environment over the next couple of months, but I think stepping back from that, a sustainable recovery, a very supportive policy response, I think relatively kind of balanced investor positioning. All I think argue that this will be ultimately be a sustainable recovery if we

look out over the next six or twelve months. Six or twelve months is a long term and the short term we face a lot of volatility. President Trump is saying on Fox and Friends this morning that a big job number is coming on Friday, putting aside this sort of breaking with former protocol of presidents and people administration not talking about jobs data before it comes out. I'm curious about the trading activity or seeing yields on thirty

year treasuries breaking out to the upside. Not much action in stock futures. How do you trade an upside surprise and labor data at this point? Does it just mean higher inflation and already baked into equities? Yeah? So, I I actually think, you know, the price action that we're seeing this morning, the price action that we saw on Monday, where you saw yields higher, yield curve steeper, and and market and equity markets higher, I think that's actually the

much healthier dynamic. I think that's the much more normal dynamic. And and I think you know, we've done a lot of analysis that's all very consistent with the idea that markets are completely fine with the yields being higher uh many times, because those yields are rising in response to better economic optimism, and that better economic optimism can can easily offset challenges that might come from that slightly higher discount rate. So I actually don't see any uh inconsistency there.

And I think actually the more abnormal environment is where we've been, where you've seen rising markets and really declining yields. I think that's much more unusual than the market often gives credit for the dynamic that we're seeing either this morning or or on Monday is a more normal, I

think sustainable, robust dynamic for the market. And Andrew, this is one of the key narratives of the market right now that equities are pricing in optimism, that bond markets are simply ignoring, and that yields are going to rise, particularly on the longer end. But at what point does the rise and longer end yields lead to a sell off and equities based on the relative value argument that people say, where you're just there is no alternative and

you've got to go into risk assets. Well, I I still think, I think big picture, I think we're actually still some ways away from that, you know. I think given where we are in the US, you know, ten year at at around fifty basis points, it certainly real yields as as you mentioned earlier, at minus a hundred basis points. I think, you know, I think you actually

have you know, fifty fifty basis points plus. I think where those yields can go before you're I think generating you know, any sort of real valuation pressure and again that there's just an enormous amount of market history that if yields arising because of higher economic enthusiasm, then then you know, equity markets, credit markets can be completely fine

with that. Now. I do think that dynamic you and you you mentioned though, could involve a major shift in leadership right because that the types of stocks that people are buying because they think yields will remain low for a very long period of time, I think are very different stocks than they would buy if they thought, actually

the recovery was sustainable. Things are getting but maybe it might get back to normal next year, and I think that would be the big story that you've seen, you know, within the market this year, a huge divergence, a very kind of narrow market that I think a more sustainable, the more sustainable the recovery, the broader that should be, and I think it would drive potentially major leadership shifts both in the U S and globally and right to

catch up. So Andre states for more constanley on the view there to reduce risk in the NIT right now, a really really important conversation if you're worried about the stresses of this pandemic Louisiana has been incredibly hit with a legitimate second spike in cases and deaths as well. They have the correct Senator to monitor his Louisiana and that is William Cassidy. Bill Cassidy, the Republican from Louisiana who long ago and far away studied medicine and long

ago far away supported Mike Delcocus and Paul Sagas. Dr Cassidy, we are thrilled to have you with us today, and I want to speak about your Louisiana State University. They want to get their football season started, they want to open their college, and yet you have a pandemic. You're the expert on this in Congress. Should l s U have a football season? They're delay in the season and up until September. Obviously they're taking it as it should, but keep in mind, this pandemic may stay with us

for another year or a year and a half. We're hoping vaccines become available. We don't know that. We're really asking ourselves, are we going to put everything on hold for a year and a half or are we gonna say you're out how to safely live with this and conduct our lives? I think we need to figure out how to safely live with it. It's going to take a lot of adjustment, but we have to figure out with it. Dr Cassidy our David Weston will be speaking with Dr Fauci here uh in a bit. Do you

support Dr Faucci and Dr Berks's efforts on the pandemic. Yes. On the other hand, you can see that they have learned as they have gone along. I once asked Dr Fauci, do we really expect five and six year old not to go to school for another year? And within three weeks after considering, he goes No, they must go back to school. That is a wise decision. So we see the two of them evolving as we understand the scope

of the epidemic. Senator, right now in Washington, d C. Everyone is focused on the idea of a second round of stimulus, of fiscal bailout for the states and local governments as the Democrats want. I'm wondering from the Republican standpoint, has the view shifted on the six hundred dollar and hands unemployment benefit extra benefit that people are getting based on the fact that President Trump has come out seemingly

in support of that. So um Republicans in the Senate understand one, you have to support families through this rough patch. But if you pay people a lot more not to work than the work, that's a distance in it the work, and that's negative for the person, negative for their future employment possibilities, etcetera. Keep in mind some people, depending on your state, we're making two are more relative to what they would have earned a working now. That's not good

for them. If you if you say that, oh wait, I'm not gonna work. Short term decision, that's wise. Long term you loose sen you already you lose your job skills. Statistically, the longer you're unemployed, the harder it is to render

the workforce, the worse your life becomes. Sat Hold on one second there, because zealous FED President Robert Kaplan came on and said that he has heard from certain business officials that this is a concern that people aren't coming back to the workforce because of how much they're getting paid on unemployment. However, there is no data to support that, and he said in the long run, the increase in income would offset the detraction that could be felt in

the short run. Is there any evidence that you've seen that points to people not entering the workforce, that businesses are unduly hampered with rehiring people due to the size of the inhanesc unemployment benefit. You know, sometimes things are so self evident that you shouldn't have to prove it. If you're paying somebody two more than they would working did not work, they're not going to work, by the way, that has been previously written about by Larry Summers and

Paul Krugman, two left of center economists. And in my hometown, in my home state, you will see signs we are hiring uh. And if you talk to employers, they will talk about job applicants that are just refusing to be interviewed. Now, at some point, common sense has to rain two times more than you would make working to not work. People are going to make a rational short term decision. Why

can't we compromise? I mean, you're sitting in a hospital, Dr. Cassidy, and you've got to compromise every day with a grievously ill patient. Where is the art of compromise? Where? Where? Where did it go? You know? Right now? Pelosius said that she wants her heroes act period and she's a

lot and so when when Republicans. When the White House says, we will allow a six hundred dollar a week continuing for a week while we negotiate, she says no. When Republicans say, wait a second, we will allow a four hundred dollar for several for two months. Uh so, well we negotiate, she says no. She wants her entire package, a package, by the way, that mentions marijuana more than

it mentions jobs. So there's a lot of policy in their unrelated to COVID that Republicans are looking at, saying, wait, we're gonna do long term policy on a short term issue. No, that okay, But Sender Cassidy, you've taken a real middle ground over even though Louisiana is now dominantly Republican, you've got an inter steing cross party heritage. Does President Trump and frankly the leader leader McConnell, do they risk giving

up the Senate to the Democrats? Well, of course, we're in a tough year and it's gonna be tough one incumbents people expect more and I think that's from Pelosi's banking on again. She would rather the pain be on the unemployed. So she gets her bigger package at some point, I just remember my doctor roots we take care of the patient right now. The patient is the person who doesn't have a job and needs help, and so how do we best help them? And we can argue about

marijuana at a later point. And that's my perspective. Senator, Thank you so much. Senator Cassidy there with an update on l s U football and a few other matters as well. The gentleman from Louisiana. Right now, we're gonna

do what we haven't done today. We looked at the stimulus, We've looked at all the different news and horrific tragedy in Beirut, and there is this idea I made a joke about it earlier of tick talk in Microsoft to get a broader view, uh, Sarah Hendley joins US with mcquarie group on software, but a broader view, not so much bi hold cell here, but sort of on where the industry is going. Sarah, let me start with a million dollar question. There's a lot of angst about China, Huawei,

TikTok and many more. Is it justified? Do we have evidence that they're playing with our software? That's a very fair question, and yes, we actually have seen history in the past of Chinese corruption of supply chain um issues, and we've a longstanding had an issue with with piracy

over in China as well. But I think what you're seeing here in this particular station a situation where we're talking about TikTok is the government's perspective is that because TikTok is built using a series of algorithms that lever is the data that users are uploading into the system around their short videos, that they can apply that AI to that data for potentially nefarious purposes facial recognition, you're giving them access to your camera, You're giving them access

to your microphone, location tracking, and search history tracking. So we do, indeed have a history of concerns with data privacy, software usage, software piracy with the Chinese government, and I think there are some legitimate reasons for the US government to be concerned about US consumer data usage, especially given the escalating tensions with China occurring right now. Sarah not there.

Certainly there's a geopolitical issue, and this is something that President Trump has talked about and there will be discussions ongoing. But then there's a business element. Microsoft coming in and saying that it is interested in purchasing the US arm of TikTok. Yesterday, Axis reporting that Apple was getting in on it and had expressed interest. Apple rebutted that and sod that that was not the case. Sarah, do you buy that Apple would get involved or perhaps should get

involved based on their efforts to get into content. I do think that every single major technology player at this point in time, when there's a forced sale of an asset that's scaling to what they're reporting to be roughly a billion dollars in revenues with fifty of US teenagers on the application, should call their bankers and should ask to be either engaged in a conversation or at least understand what the dynamics of the deal flow are in

regards to the force sale of TikTok. So, certainly, I do believe that most tech companies will, should, or can take a look at this asset. But it is my opinion that Microsoft would be the most viable buyer given its history of extraordinary performance with its recent acquisitions under Satia Nadela, including LinkedIn and GitHub. What's the price that you think would be adequate for TikTok? Are the US operations? I should say I think it will be something north

of billion. I mean, it isn't just stressed for sale. Time sales is a pretty large multiple, but it's not out of the ballpark of where Microsoft has paid in the past, especially if you look at geth hub and by the way, it hearkens back to what Facebook did in two thousand and fourteen was WhatsApp throwing down eighteen billion dollars on a company pre monetization. Sarah. One final question by old Sell, what's your favorite effort right now? With the moon shot we've seen in technology? Can you

can you still be enthusiastic about one security? Absolutely? I think that there is a reason to look at the software sector and say, listen, this is the sector of it's enabling work from home, this is the sector of it's enabling school from home. Business continuity planning is going to continue to remain very dependent on ongoing cloud usage, security,

and all linds of other important features that technology is bringing. Yes, the sector is rich, but that's driven by, as you've talked about on your show, this incredible fiscal and monetary environments that we're living in today. So yeah, there are names that I would own. I happen to really like Microsoft here and think it's a compelling buy. I also really like Service now and think it's a very very valuable, powerful recurring SASS assets in the I T operation space.

Very good, Sarah Hendon, and thank you so much. With McCary, I grew up here on TikTok and the gentle politics of Massachusetts. That would be Joe Morkley, and that would be Tip O'Neil of another time and place where it was about negotiation and compromise. The former Treasury secretary joins us this morning, Jack, is the process change is a negotiation and compromise. Now the same on the hill is

when you worked for the Massachusetts contingent. Well, the to be with your time of fan Seine and the negotiation has always been hard, um. But the refutal to talk when there's a crisis coming is different. Um. You know, respond to the beginning of this crisis a kind of reversion to the old by carters in spirit that when there's a crisis would come together. And in this round it's been months months that you know, the House Democrats passed the bill and the Republicans wouldn't take it up,

wouldn't talk. They waited until days before people were going to lose their unemployment checks, days before they were gonna lose their protection against eviction, in order to start a conversation, and now they're surprised that they're running out of time. This is not something that you can easily do. And it's there too. They should have been working on this for two months. But now not the time to look back.

It's the time to look forward. There was a little bit of encouraging news that yesterday's meeting the parties were coming together to talk about compromise, and compromise means addressing the problem, doing but things that are most important and showing the country the government from work at a time when you've got millions, millions of children living in households that can't pay the rent, and millions of children living in households that don't have enough food to crown the table.

This is an emergency. We need to respond, and we need to respond now. It's already too late. It's going to take weeks for states to get benefits back up and running once they've last jack Low. The heart of the matter here, and we saw it in the primaries last night, is a reassertion of the middle ground. Do you have an optimism that the the nascent middle ground of the Democratic Party called on the edge of Scoop Jackson, the nascent middle ground of the Republican Party, which is

pretty dim. Do you have an optimism they can recover through this crisis to a better place in our polity. So I think the results last night and I have to apologize and not have all the latest facts give some competing pieces of results. I was pleased to see event bothan primary and Missouri went towards a more moderate candidate, because, frankly that the thing that has driven our politics to the place where at is not equally on both sides.

It's that the Republican Party has become an extreme party, meeting on its primary politics to take it to a place that makes it impossible to govern in an effective way working across party lines. I know that we've seen a number of Democratic issues shift, including you know the district the Mr O'Neill uh you know represented in part in the last cycle, two more assertive candidates who are more from the left, progressive and of the party. I

think we'll see some movement in both residents. I hope the Democratic Party stays the party of the Big Tent where moderate and progressives and you know, extremes to keep focused on working together on things they can all agree on. I think that's possible. I think that the way in Antholosi is master and masterful bringing this coalition together to function effectively. So it can't happen. But it's not equal

on both sides. But Mr Leui, is the democrats strategy on an unemployment benefits a smart tactic or could it actually backfire politically? Well? I think the pressure can't take of being days in man hours away from expiration created um this sense uh that let's do something to just get it through another week. When you look behind the curtain, it doesn't work that way. We have fifty three state

and territory unemployment programs. They run on computer systems that are probably older than you are, and they can't be reprogrammed overnight you turned them off. It takes a while to turn them back time. You can't say we're gonna do this, We're gonna need that. You know, you need to find people can program and cope on basics to change the way they work. So the idea of a week extension once it's laughs, I don't even think works. So it was it was a tactic on the other side.

But the Democrats have been doing and I think correctly is saying that it's a matter of macro economic policy. We cannot take away to support the families that can spend the money because they need to spend the money without having a terrible economic impact and in the household creating complete crisis in terms of failure and inability to feed a family and pay one. Where do these massive deficits, What are they going to do to the country's long

term finances? When should we start worrying about that? Look, and I said, most of my career trying to live in that narrow middle ground is a progressive who believes government has a huge role to play, believing that would have to be able to over time player of bills

in order to sustain the economy and the effort of government. Yeah, in in my view, a crisis like this is the moment when you need to dig deep into the reserves, because if you don't and the economy slows down further or goes into a depression, it causes more damage, more loss of revenue than you're spending in terms of keeping things moving, leave aside the human hardship just in terms

of the economics now it can go on forever. At the end of the crisis, we're going to have a pile of bills to pay, and yes it's going to take our get to over GDP faster than the striative. That's not the end of the world, if we get back on our economic fee and have then a balanced economic program and fiscal policy going forward. I was mult troubled by the tax cut in seventeen, which spent two trillion dollars without any real purpose in my view, and doug a hole that we didn't need to dig. This

is what macro economic policy is for. This is what fiscal space is for. I think we can afford it now, and frankly, I think we can afford to do what we need to do to get out of this. What we can afford to do is very much depression that happened. Secretary Louy, I'm assuming that Tip O'Neill and Joe Maulkeley never worried about the zero bound, but here we are

at the zero bound. The markets are speaking, Jack, I'd like you to speak to the Wall Street right now and the global markets who have priced bonds to perfection? Is John Templeton put it years ago? What is it signal to you to see bonds priced to perfection? Look, I I think that the expectations for growth and inflation remain very moderate. Um to the extent that the large increases in debt to support government fiscal policy are concerned. It's not showing up yet in bond price is um.

You know, what I think we have to be attuned to is that things are fine until they're not. And you know, my advice, which I offer to those who ask for it, is spend what you need to spend now, but be prepared to stop when the crisis is over. And you have to be clear, the crisis won't end the minute there's a vaccine. There's likely to be a recession that goes beyond the health crisis because we're gonna have a demand induced, you know, a business cycle to

deal with. I mean, if people are not working and not spending normally, that's going to have an impact that goes beyond the day you get back to normal, which won't, as we know, be a day. So I think the bond markets are are are you know, looking at the current state of affairs and making the judgments that we see. What I don't understand is the equity markets. You know, where where uh, there's kind of because of being near the zero back on, there's a sense that values that

can go up forever. You know. I think, I think that if I was looking for a place to caution, that's what good caution. Well stockbroker jacklu helping us out today, equity strategist Jack Blue Jack, I want to talk about the voice of conservative concern over the burgeoning debt and deficit. You've been very clear there will be a price to pay. What is the political mechanism you see to pay down the debt? As Secretary Guitner said years ago, time will

heal a lot of wounds. Is it just time marching on or will there need to be an overt policy to pay down these trillions of dollars of debt. Well, Tom, let's let's just remember that while we're in this period of very low interest rates, there is the ability to support more debt than there would have benefits period of

three or four percent interest rate. So if we're able to pivot when the crisis is over, and if the you know, average maturities have have have been managed to have a lot of the debt, you know, on a longer term, which they are being managed to have a lot of the debt on a longer term basis. We have some time to deal with the overhang issue. What has to happen, and this is true in any any UH fiscal scenario, is there has to be a moment

when you say stop. And to me, that moment is when the economy is back on its seat, unemployment is back headed towards a normal place, when the economy can function health in a healthy way on its own. It's hard, it's hard to change if you're used to spending three and five trillion dollars, you know, to deal with the things that people think need to be dealt with. It's hard to say, now we have to start paying for

what we're doing before you reduce the episode. You have to not let it become a habit to do this two years from now, three years from now. But it's not in the next three to six months. It's longer than that, I believe. And on the longer term, how much of the damage to to the workforce and businesses do you think is actually forever? That is permanent damage. Well, I think that there's different ways to look at the

damage on an individual basis. You know, I worry about people who are starting out, who are losing the beginning of their career. We know that that sets you back and another generation, you know, gets there before you did, and and sometimes you never catch up, and we have to make sure we don't let that happen. I worry about people who are advanced in in their careers, who who's work that they had before the crisis may not

come back and adjustment becomes more difficult. So there's going to be a lot of individual challenges to deal with. If you look at the workplace, some of these changes that we're seeing will have a lingering impact. I don't know, and no one knows whether remote work will become the norm. My own view, there's going to be a hybrid that's different. What does that mean in terms of real estate and

office work. So there's going to be changes, But if we get to the point where the crisis is over, it will be managed through the normal, healthy processes of the economy. Um, we can't manage it until we get the health crisis under control, and we're not near that. The United States, Jack Louis, You're a trooper to come to us in the blackout of the Eastern Seaboard off of this horrific tropical storm. Jack Louill making the effort to be with us today. We greatly appreciate that. Thanks

for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.