Surveillance: Stimulus Standoff With Furman

two thousand and nine. I remember I was sitting in an industrial um industrial company conference and they were going through multiple slides of what their contingency plans were. This was in the summer of two thousand nine, so the market was up, but you were still kind of in the grip of the Great Financial Crisis and people were looking at each other, son, how can the market be up so much? So this conferences companies talking about what could their contingency plans on what could go wrong if

when it goes wrong. I raised my hand and I said, have you guys got a contingency plan of what could go right? And then what could go right? Is always revolved around credit, and I was reading a Bloomberg story. I'm gonna look away from the camera for one second just so I can read a little bit out of the story. Um Alphabet Chevron. Chevron priced a two year bond yield yesterday with a point three three three coupon.

You had on the high yield side. Aluminum packaging company Ball Corp. Sold one point three billion of ten year notes at two point eight seven high yield two. So you go into an economic and market kind of catastrophe or problem when you have a need for money with limited or no access to it. Clearly that's not the case. How do you stand full of the credit market? Keep on stocks? Yeah, that's I hate to listen the guys

printing the money keep telling us their game plan. They're they're not even thinking about thinking about thinking about I mean, you can go on and on about not thinking about raising race. It's for guidance and potentially for the rest of my career unless you get a major surge of inflation that's sustainable. Remember the tenure inflation break evens are still at about one point six percent. They want core

inflation at an average of two percent. These guys are going to have their foot on the pedal until the fur for the foreseeable future, and as a result of that, the need for returns and pension plans is creating a demand equation. Is Lisa pointed out not just for treasurieson is that Bloomberg story pointed out for for investment grade

and speculative credit. Tony, When does the real economy matter? Well, so this is an incredible time, Lisa, because what we have is this access liquidity we've never seen before, coupled with At the same time, if you look at the o e c D, which is the Organization of Economic Cooperation and Development, they tracked thirty seven countries as of their end of June data and it works with a

six week lags, so it's really mid May. At the end of June, they were saying that there were zero of the thirty seven economies that were showing positive or above average UM composite leading indicators that pivoted to month to month. So we have an economy that has largely been in collapse that is just beginning to pivot higher.

Whenever that's happened in the past, you've had to sustained economic recovery so it's really important that we don't need an incredible surgeon economic activity, because that would that would change the whole dynamic of credit. You want what we're getting well a little better than we're getting, especially for the small businesses than people that need the money. You are beginning to get that inflection higher. You've got to concept to some degree that the economic story is beneath

the index. With text all absolutely ripping. I think the tech sector up about yet today the KBW Bank index is still down around about That's not because the economy is doing well, it's because it isn't. Yeah, there is discretion, certainly that is beneath the surface of some of these indexes.

Hard pressed to find the discretion though in a junk bond yielding two point eight seven five, Hard to find the discretion in a record amount of issue ends across the board, in more junk bond issue in so far year to date than all of last year. Tony. Looking forward, there is a question here of how sustainable this is, especially in light of some pretty serious potholes. For example, there is no deal in Washington, and the time is

ticking and the pain is deepening. Can you imagine Washington is not going to come to a deal, and they're gonna let the only purpose of the government is to support people, and they're gonna let everybody fail. So our underlying assumption is they will get. Pain is the motivate motivator for change and growth. They will get, and enough pain the feedwill back loop will become negative enough that they will come to a deal. But again, we've got to separate what um is good or bad, right or wrong.

Those don't matter, Okay, I frankly, I don't think this incredible use of debt ultimately is going to be a good thing, but that doesn't matter. It is. So what I try to guide our institutional clients and wealth management clients overseas is try to get by what intuitively seems good or bad, right or wrong, and just focus on

what is. We've had almost one or two frillion dollars of corporate credit new issues, which allows those companies to bridge the gap until we get the continued pivot and economic activity that historically, when you look back at periods of similar high volatility followed by a drop, you know a retracement of the volatility. When you see correlations as high as they were in March. Those are periods where it's the beginning of a new economic and market cycle,

and that's really the differentiator. Is it the beginning of a new and economic and market cycle? And the data that we have suggests that it is. It's only something's gotta break. And I'm just wondering what breaks first. Is it the market and the market rally over the last few months, or is it the resolve down in Washington, Because right now, I'm with you, of course they've got

to get something done. But at the moment, this economic dates in America is fairly resilient relative to what people expected to see coming into Walkers And I'm just wondering what breaks the resolve down in Washington again, John, Like, if you look at the t s A numbers, even with the increasing case of COVID nineteen over the last month, the T s A numbers are still going up. So what's happening is you've taken something that's gone from extraordinary

and it's moving more towards normal. And at the same time, like I said, you're going to get this pressure in Washington to actually get something done. But again, with all of that in the game, you're having incredible money pushed into the system that bridges the gap. Now, of course you're gonna have to have a deal in Washington. You're gonna have to have the economy recover. And that's where you have to when you look at the historical data, when it is set up like it is, you do

get those things to happen. I will say it's the tao of Tony Dwyer. Just look at what is and that is the wall of money. If you're looking at the wall of money, why not just invest in small cap stocks and call it a day. Say, eventually the rally will get to some of the less loved sectors and that's where you're gonna actually get the biggest returns. And that's that's our call. So when when John asked, you know what breaks first the market, Let's define the market.

So here's what we have. We have the stay at home stocks which are now defensive in nature, the megacap fang stocks which are now defensive in nature. So let's say the economy gets a lot better, they should correct. As the economy is what's been happening over the last couple of weeks, where the economically sensitive small cap emerging markets do way better because you're starting to price in return economic activity. While it's it's into this very interesting.

People keep thinking that this is like the bubble of the dot com boom because only a few stocks are driving the index gains. But it's totally opposite when you look at the average stock. The ny SC composite uh New New uh ny SC advanced to client line cumulative advanced to client line. I think made a new high this week, all time high. It was in a two year down trend by the time you hit the dot com bubble peak. So yes, a few stocks are definitely

driving the gains, and I think it's far. It's excessive, there's no question. However, a lot of stocks, even the banks, if you look at from the low, they're highly there's still a high correlation because they've been going up, just

not as much. And that's where the opportunity exists, is where you get some of the fang stocks maybe to go sideways, consolidate their gains with economic activity improving, while these other areas, the economically sensitive recovery areas really start to ramp Tony, you am more than welcome to join

us anytime you like to it. It's a Bloomberg story in the morning, whenever your life just a little bit, just a little bit, Tony, send my best to the family trying to catch out Tony to of countercur generite. Thank you very much. Joining us now is the wonderful Lisa Hornby Investments US Fixed income portfolio manager Lisa HORNBI fantastic to catch up with you. Policy has been the bigg issue this year in I could have told you every single data point and many people still would have

got the market call wrong. What's the policy focus for you right now, Lisa, I mean, it's clearly an extension of these benefits. UM. You know, I think the points you both were making, or you three were making right before I came on, we're right. Will the will the central government get it together and UM continue these unemployment benefits? I mean right now, the to me is surviving on stimulus. You know, you think about UM some of the packages that are going to that are going to be rolling

off potentially the unemployment benefits. The question as to whether or not state and local government to get release. I mean, these are some of the big economic questions we're asking ourselves in state and local governments. Employee eighteen million people um small businesses right, they employed sixty million people. Surveys there are showing that optimism and hiring plans are well

below where they were pre pandemic. These are the kind of questions that we're asking, Are we going to see some kind of fiscal relief package that continues what we've

seen before, that potentially even expands on it. From a fixed income investors standpoint, do you bet on the FED poot just the idea that, no matter what, there is going to be a pinning of treasure yields roughly where they are regardless of policy, Or do you really look to some sort of resurgence and inflation and some sort of economic data to sort of get your guidelines um To an extent, there's a FED put So we we first and foremost look at evaluations when we're evaluating markets,

when we're evaluating credit um, and valuations today tell us they're more or less median level. So things are not expensive, things are not cheap. But what keeps us engaged in the markets despite them being just fair value is the fact that we do have this tremendous liquidity environment. So the FED keeps us perhaps more engaged in fixed income because we do think there is some degree of a backstop.

But we will continue to become or we will become much more cautious if we start to see spreads really wretched in here, because there is still a tremendous dislocation between where markets are trading today and what the underlying economy tells us. And this is not something that we think will be gone in just a couple of months time. There are going to be sustaining pressures on certain points

of the economy for a long time to come. There's a question about the intelligence of buying treasuries as an investment right now given the negative real yields. Where are you on that? I mean, do you see treasuries is truly acting as a hedge against equity volatility going forward? Um? You know, we're fairly neutral duration here in our portfolios. I think the FED is the backstop. I find it really difficult to see rates moving aggressively, to be honest,

in either direction. Um, at this point in time, I think we're kind of in a range. And you know, yes, I think that you want to have some treasuries in your portfolio if we do have another risk off event. But equally, I think that we're going to see the government response very very quickly, both on the FED and the fiscal side, if we do have another major downturn in financial assets. I think they learned their lesson this

time around. I mean, the magnitude and the briskness of the response was just incredible, and that's what stabilized markets in a in an actually very short period of time. Lisa Homeby this market is taken down a tremendous amount of supply on both the sulfon and the credit side. Are you seeing any signs of it? Take whatsoever? You know? From my perspective, it seems that investors just can't get enough.

I mean, the US is still the highest yielding developed market in the world bar italy um, and so we are still seeing that international demand. Hedging costs have gone all the way down, you know, a couple of percentage points if you look back over the last eighteen months. So we are still seeing that international demand. It seems insatiable. And we're even seeing domestic um sort of retail demand as well. Uh So, right now, it seems that people are just can't get enough of credit. You look at

the deals that have come um in the market. Over the last few weeks, the concessions have been completely erased. I mean in many cases they're coming twenty basis points through where the initial price talk is. So the demand is still there. Um, you know, the FED is still there as a back stop. People, I think are looking through this congressional impass at the moment and thinking something

will get done. Um. And you know, I think some of that risk premium is probably not I think there should be a somewhat greater degree of risk premium in markets, just given some of the uncertainty that's out there. But at the moment, you know, it's kind of it's a little bit to kind of calm. Lisa Hollby, just a final question from me. We face this really strange dynamic and credit right now. It feels like a momentum trade where lower yields get lower yields, and the strong gets

stronger the week get weaker. And when I say to people what's the money being used for when they issue this debt, they'll sets to lock in low rates. And that's a good thing because average borrowing costs are lower, and therefore I want to buy the credit. But Lisa, that just tells me you want to buy the credit because average boring costs are lower, so you buy the credit. Then they issue some more than boring costs come lower again,

so you buy some more. At least, it just feels like this weird cycle where leverage might be going up, but because average boring costs are lower, people want to buy Lisa. What breaks that trend? I mean, that's that's been the story of the last ten years, if you think about it right. Rates have been going down for that almost entire period of time, and companies have been issuing more debt UM. I think what breaks if there's

a few things that break it? Um the central banks starting to deliver a different message than the one which they're delivering now, so that they're no longer going to be as supportive as they were. I think inflation coming through UM in a material, material and very sustained way, nothing like what we saw yesterday that was just you know, one data print. I think that you need to see

serious inflation for them to change their tune. UM. You know, there's a million other potential variables that could change things. But that's why I think you use valuations as your guide. And as as credit becomes more expensive, Um, you have to be really judicious about which companies you own. There are certainly still companies out there that are buying back debt that that are actually taking some of the higher coupon debt out of the market, so leverage, you know,

maybe more or less unchanged. They have large cash buffers as well. Um. So I think you just have to be cautious about which companies you're buying and stick to high quality, more defensive names. Lisa. Before we let you go, can we sec congratulations from my family, the Bloombergs of Veileance family to yours and stand. There's a new little Hornby in the family. What's his name, Alexander? Thank you very much. He's a he's a proud but Bloomberg watcher.

He's been watching between the last few months at He's a lucky little boys. Have a great mom. Lisa. Fantastic to catch up with you as always, are best to your family, Lisa, Hornbie there of Schroeder's. A little bit later this week, there will be a conversation between the United States and China on the Phase one agreement. We understand that China would also like to bring in We chatted TikTok into the chat as well. This is what

the Wall Street Journal reported this morning. We reported it a little bit earlier on let me repeat it again for you. This from the Wall Street Journal a couple of hours ago. More than a dozen major US multinational companies raised concerns in a call with White House officials just yesterday about the potential broad scope and impact of Mr Trump's executive order targeting we chat set to take effect in the next month. On that coal arrange of

companies including Apple and the Walt Disney Company joining us. Now, a man who understands this issue better than most. It's Lee the Miller of China based book Leland. Great to catch up with you, sir. Let's start there the tension between these two countries over this specific issue tech. Where is this heading, Leland? Well, A lot of it depends on whether or not we see the trade deal last through the election. That's holding a lot of this back.

But on the tech side specifically, the problem is the White House wants to do something. It wants to take ownership of the issue. It wants to push back on some some very legitimate national security issues related to TikTok and related to wa chat. But it hasn't really fleshed them out. And I mean it's not an accident that we saw forty five day kick out on any action on TikTok and wheat Chat, particularly when you're talking about

wheat Chat. They just don't know how to pull it back to to to restrict parts of it and not dramatically hurt us companies like Apple and others who used the watch at the payment of ration for for huge chunks of their sale. So they haven't really thought this through. They want to be aggressive, but but there's but the jury still out of which direction they're gonna go on this? Which direction they're gonna go on this? Does this mean that you expect them to pull it back? Does this

just imagine? Do you expect that they're going to put provisions within the band that allow the companies like Apple to sell we chat on on their eye store Apple Store? Was it E store? I like that? Yeah. Look, I think look TikTok should have a sale. I think that could end this if if you see a sale within within the coming weeks, I think that's very likely. We chats a much more difficult issue, and I think that the chances are that you see a broad based aggressive

solution is very low. I think there's a chance that this thing gets kicked out past the election. They're gonna have to do something, but there are plenty of remedial actions from Cyphius and others in which they can sort of tweak things at the margins. The more they're getting into this issue, the more they realize that they don't

understand the second and third order effects. So they want the political om from doing a big, broad anti China action, but they're not prepared for the fallout, so I think it'll be less than people expect. Headline cross on a Bloomberg Leland, let me bring it to you that India is set to be poised a band Huawei and z t A from five G network trials. This is not just about the United States and China, Leland, It's about China and a whole host of countries. How are they

handling this right now? And do you think President she has pushed things a little bit too far? Yeah, I think that they're handling us about as poorly as you could possibly handle this issue. One of the mistakes people make is is thinking that Huawei and zt are just another Chinese company or two, they're not, They're there, and

there are five. You know, Huawei in particular is the Chinese semiconductor champion uh in terms of building out five G, and so you have an enormous nation national security issue where where countries are now becoming aware of just how dangerous it might be to to integrate Huawei into all

of their new next generation telecommunications. The US has has been pushing on the but it wasn't until China really antagonize the entire universe during and in the aftermath of their COVID hit that that that that the countries are really taking notice on this. So, you know, this is something in which Chijn Ping, I think has overplayed his cards. He just this is just going in the wrong direction for China. It's a real problem because they're not going to be able to pull this back if if UAWE

gets cut off. The narrative over the past few months has been that China will recover faster than the rest of the world from the pandemic because they clamped down harder and there, and they had the virus first. Is what you're saying that that is not necessarily the case because they are facing these other pressures due to some of their international trade policies. Well, they may recover faster and first, but recovery no longer means what people think

it used to mean. So you know, if you're looking at at a month on month improvement qure and quarter improvement, we're seeing that in our data. You're seeing that in the p M I s. What you're not seeing is a return to normalcy. You're not seeing on your growth. Our last data show no on your growth whatsoever. And and and quite frankly, that's not what the p M eyes are showing either. People have decided they don't understand how to read the p M I s, which have no

bearing on your and your trends. So I think you are seeing recovery partly because China was hit with COVID first and so they're emerging fastest, But you're not seeing a real recovery. And then you've got all these geo political tensions and trade tensions and technology tensions they're adding on to this. So I would be very hesited about declaring this a banner recovery story, even if they're doing better than most. I love the p M I shade.

That's such a blimperg conversation Leland, It's okay. I appreciate it. Little bit of that of the China Facebook. Thank you, sir, Thank you very much. Let's get to a Lennon shall wait of BMO Capital Markets see joins us right now in your thoughts on the trajectory of the recovery and what you're seeing in the Tyson right now. Well, when I take a look at the economic data, we see a pause in some of the improvement that we have

been seeing, which is troubling. And the reason that it's so troubling is because we're entering this period where the market is not going to trust the economic data, not because of data collection issues, but rather because the recent spike in COVID nineteen cases hasn't ultimately flowed through to

the labor market. I think that the August non farm payrolls report is going to be very telling, and to a large extent, the market is going to be in a holding pattern and tell then, at least in treasury space, obviously we see what's going on with the equity market. They seem to be trading off of an entirely different set of facts and expectations as we have in rates

at the moment. You know, it's important to bring up just the idea that there is this pessimism based into the rates market, that yields are so low, not just because of a FED poot, but because people have very low expectations for the US economy. There wasn't much of a market response to this better than expected unemployment report, but the tenure yields did turn up, price down, yields higher. For I believe a fifth day ian. If we do see a better than expected trend in the data, how

high could those yields go. Well. I think it's important to keep in context that yesterday we had the August refunding auction of new ten years, and we get new thirty years today. So a bit of what's going on right now is an auction, an auction concession, so pricing a new supply. In the event that the data does turn and sentiment broadly improves, there's nothing to keep a move toward the seventy five basis point level in TINS from occurring over the course of the next six to

eight weeks. We do have constructive seasonals for treasuries between now and the middle of the necessisis point coal I have a two months basically that already, Um, I mean, we're not going to one per cent in the next two months. I agree with you on what you're saying here. I understand what you're trying to say. I don't necessarily agree with the call, but we slam bang in the middle of the range of the last two or three months fifty basis point the low end of the range.

We saw that last week, the top end of the range ninety basis points from the beginning of June. There's an idea that some people have that somehow the Fed can cap the long end and not just anker the front end. And what's your thoughts on that. Well, they are in actively buying treasuries certainly further out of the curve as well, so quee in and of itself creates

a structural demand. Now, whether they can actually cap ten in thirty year yields using their monetary policy in the front end, it's an open question, but an operation twist or overweighting purchases further out of the curve would do it. And frankly, at this moment, what's really driving ten thirty year yields even though they are within that defined will range is global growth and inflation expectations. So an uptick in inflation comparable to what we saw yesterday, that that extends.

I think that would be the missing ingredient to really reprice the longer and entire and a lot of people would agree with you HSBC coming out and saying, if the Fed hadn't stepped in treasure, yields may actually be even lower, not higher, than where they are now because growth would be that much slower. Which brings me to the balance sheet. A lot of people when the FED was originally ramping up its program in response to the pandemic, we're expecting the balance sheet to get to ten trillion

dollars by the end of the year. Right now, it's a little bit around seven trillion dollars. It's kind of bouncing up and down depending on the week. It seems to have stabilized. Have you rotchet to back your expectations of how many assets the Fed will have to or want to buy before your end in order to support markets. I think at this point the Fed has told us the pace that they're going to continue purchasing at, and that does keep a target um growing in trillions by

one on the table. I don't think that what's playing out right now in the real economy is giving the FED any confidence that they'll need to buy less. And if anything, as the economic data continues to unfold throughth balanced the year, will probably see a risk for an expansion of some of the existing programs rather than a contraction unless there's a decidedly positive turn that I don't

think anyone in the market is currently expecting. And at this point, given where we are given more borrowing costs, are is a fens effort doing anything to actually help

the economy. Well, what the SET is doing is they're trying to push investors further out the yield curve, further out the credit curve, and further through the capital structure, which is why we're seeing equities performing the way that the way that they are at the moment, and ideally that then provides an incentive for FUR to continue to expand and higher back, or to expand and higher back. Some of the people that were laid off, recall, we

lost twenty five million jobs. We've only gained back of that, so there's still a lot of work left to go, and the FETE has made it clear that they're okay risking bubbles at this point, given that the reality is that they need to re employ the labor force, writes to catch up. As oh, I stand touchwa you in linen that of being a capital markets now joining us to talk about fiscal action. As Jason Furman, he's Harvard Kennedy School professor and from a chairman of the Council

of Economic Advisors during the ADMABA administration. Jason, thank you for joining us. When you look at how far apart Democrats and Republicans actually are, I think it's over one trillion dollars. Is it a bit like Europe? They're far apart. They're the overture as I get shot down. But at the end of the day, they'll find a deal in the eleventh hour or is it different Frenzying, It is past midnight already. UM. One of these programs expired at the end of June. The other program expired at the

end of July. And you know, the lead negotiator for one of the sides has now gone on vacation. So I am very worried about you know, when the two sides will come together. I assume at some point they will, UM, but I think it could you know it's unlikely to happen this month, Jason doesn't make a difference. So we understand that one of the biggest sticking points is actually

aided to stay in local governments. Does it make it or how much of a different does it make if we have something in August or if we have something in September? Is it Is it going to scar the economy? Yeah? I think it makes a big difference. I think we're already doing irreversible or not irreversible, but persistent harm to the economy. UM states and localities should have had this aid months and months ago before they set their budgets

for this year. The school year has begun in many states in the United States, and they have enormous expenditures they need to make in order to make schools safe. If they can't make school safe, they can't have the students, which makes it harder for their parents to work, which has another um not gone effect on the economy, where right now in the largest fiscal contraction the United States has ever seen, as the Cares Act, which was roughly five billion dollars a month, has gone down to what

I would estimated at about forty five billion dollars. Given the president's executive order, that's about how much stimulus UM that is worth. So a huge fiscal contraction state behind the curve knock on effects for parents working UM. This is not at all good for the US economy, Jason.

People on the other side would argue, we're seeing a pretty rapid improvement, that we're seeing jobless claims fall from their peaks, that the unemployment rate, while still incredibly high based on historical normalcy, is still a lot lower than it was during the peak of the shutdowns. What would you say to people saying we're just on the path to recovery. Sit tight, Wait, don't increase the deficit because

we're getting there. I would say to those people that all of those economic data and it has been a rapid recovery varies. Employments recovered less than half, consumer spending has gone almost all the way UM. But all of that rapid recovery has been in the face of a massive, massive policy response. And if you end that massive policy response, the prop underlying that will be gone. Disposable personal income was up ten not even at an annual rate in

the second quarter. That's why consumption got all the way back to where it was a year ago. That helped support the job recovery. That didn't happen on its own. That happened because people had massive amounts of cash, and we're now about to take that away, all right, Jason. There's an argument that if they add to the extra six hundred dollars a week or six hundred dollars an extra stimulus for people who are unemployed, that that will actually lead to people not going back to the workforce.

But there was a study done by the University of Chicago and fivety eight that suggested that actually a decrease in unemployment benefits would lead to an increase in joblessness. Do you agree? Does that make sense to you? I think the higher the unemployment benefit, the debt or the economy is in the next couple of months because people have more money to spend, and that's the most important

direct effect. I think at some point it has a labor disincentive, and so I personally would taper that number down, start reducing it from six hundred dollars a week um To date that it's been completely fine, all the evidences, it's completely fine. I don't think six hundred dollars a week is the right number for December. Something more like four hundred dollars a week would both support consumption but have a better balance with the work incentives that will

matter more in the future than they have in the past. Jason, when should we start worrying about deficits? Not not this year, probably not next year. Interest rates are really low. In fact, they're negative adjusted for inflation. The economy is way below where it should be. I just don't think that needs to be a concern for a while, unless, for in seeing, you're you're passing something permanent. If you want to do a new health reform that last forever, I think you

should be paying for that. But if these are temporary measure is um people want to lend money at a negative interest rate, we should be taking those loans and

not worrying about them. And Jason, you know what you did at is as much as money that the fight between Republicans and the Democrats is actually how about you know the economy Wolffair in the months ahead, if we don't have a stimulus, what's your base case for what the US economy will look like at the end of the year without a stimulus, you have a w shaped recovery, because consumption, as I said, is back to where it

was pre crisis. Even though the unemployment rate is ten percent, you would have expected consumption to be down about ten given the state of the labor market. That's what would happen if there's no new stimulus and a ten percent decline and consumption would be a very sharp contraction, might show up in Q three, might show up in Q four, would be compounded by further cutbacks at the state and

local level. Francy and really interesting to see that we were expected to be talking about the phase two of the trade deal between the US and China. Right now we are still talking about Phase one, and we're going to be assessing Phase one. US and China negotiators meeting on Saturday, still with us to talk about some of the international implications here. Jason Furman, Harvard Kennedy School professor and former chair of the Council of Economical Advisors under

President Obama's era. I'm wondering, Jason, from your perspective, how significant are these Phase one trade talks given the fact that we're supposedly we're supposed to have a deal that China isn't really close to complying with it based on the pandemic, and that tension seemed to be rising between the two nations. I agree with everything you said, except that based on the pandemic caveat, I didn't expect China

to comply with it. I didn't think it made sense even to negotiate this type of managed trade where they promise to buy certain things. The whole US approach to China has failed because it's been entirely unilateral, ignored. The w t O hasn't worked with our allies, has focused on illegitimate objective, which is these purchasing goals, and we need to change all of that because it's really important to put pressure on China to do it in a consistent,

effective and multilateral manner. Well, President Trump wretchetting up the pressure on China, particular banning US companies from doing business with we Chat of ten Cent as well as TikTok, and trying to understand here why we're not seeing this reflected markets. Given the fact that Apple among other companies, have said that this could potentially be a big hit to their profitability for a business that accounts for nearly

a fifth of the revenues yeah. And I think what President Trump is doing, you know, when he talks for getting a share of the revenue on the TikTok deal, is just sending exactly the wrong message to the Chinese. We should be sending him message of consistent adherents to law, neutral treatment, um and the like. So I think it's terrible. He also has a record, though, President Trump, of backtracking when he needs to, especially for the sake of the market.

I think one author called it the Trump put and that's what the market seems to expect will happen here, or maybe they think Joe Biden will save them with its policy. It's gonna be very tough on China, but not I wouldn't expect as erratic and inconsistent as what we've seen in recent years. And Jason, how would you advise a Biden administration in their dealings with China. I would say that the United States does not have enough

leverage all by itself. So let's settle the trade wars with Canada, with Mexico, with Germany, with other countries around the world, and let's make common cause and let's reorient the objectives. It isn't how much American stuffed China buys Germany isn't gonna help negotiate a deal for China to buy Boeing jets UM. It's China's intellectual property rules, neutral treatment under the law, UM and the like. So a renewed US multilateralism can actually be stronger in pushing China,

but pushing it in a more principled and rules based manner. Jason, when you look at the pandemic, and you know the way, it's kind of resetting what maybe some of our priorities are. It could be health, it could be investing in climate change, it could be all sorts of things. Will it actually will this pandemic end our obsession with economic growth? I

don't think it's gonna end our obsestion with employment. UM. That is a problem now, and I think in all of our economies in Europe, the United States, a year, two years, three years from now, we're gonna have vary success unemployment and bringing that down will be a major of jective. The public policy is going to struggle with

UM for years to come. And you know, we've also seen you giving people cash, whether through unemployment, through checks, through other mechanisms, has to some degree helps solve this problem, at least in the short run for many households, and so I don't think this is going to make cash and money any less important than it was before. Wait, Jason, are you advocating for some sort of MMT, some sort

of modern monetary theory? Here? Modern monetary theory is like a stopped clock that's right twice a day, and now is one of those rights. So you're not saying going forward that this is your your policy. What do you think about the de globalization shift in general and in the possibility that it's going to increase prices and purchasing decreased purchasing power for the average consumer in the US. Is that something you're worried about. I'm a little bit

worried about it. I mean, it's two types of deglobalization. One is an artificial one because where incapable of getting along as countries. I think that's a big problem. Um. The other is a natural one that you know. It turns out the cost of globalization just to your balance sheet, your bottom line is a bit higher than your thought because of these unexpected events happening a little bit more often around the world. And so I think there's some

natural retrenchment. But I also do think that the economic benefits of globalization are so enormous that in any scenario, companies consumers are going to find a way to have a lot of it. Jason, if we don't have stimulus in the US, will the Democrats be blamed for it? The Republicans will blame the Democrats. The Democrats will blame the Republicans. I think ultimately, UM, the president, fairly or unfairly in this case, I would say fairly, UM bears

the blame when there's dysfunction and failure. All right, Jason, thank you as always for joining us Jason Firm and their Harvard Kennedy School professor and former chairman the Council of Economic Advisor. 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.