Surveillance: Stringer Urges NYC’s Wealthy To Set Up

surprise Paul Donovan has been China. I want to go back to the UBS heritage of Jonathan Anderson from years ago in the U b S expertise. I don't want to know about Hong Kong, or Shanghai or Beijing. Paul Donovan, What does U b SC and the rest of China we never speak of. So the Chinese economy we sold this morning with the industrial production data, production is kicking,

my kid. China is is a very interesting comparison to what we're seeing in the US and in Europe because the US and Europe what's happened is consumers saved money during lockdown, and then as lockdowns have ended, they've started to spend it because that's what consumers do. But in China, the consumer was less able to save money, so the domestic economy was sort of a little bit on the back foot as it came out of lockdown. Unless you were middle class, you didn't really have savings to spend.

But what's now happening, of course, is that we're seeing global consumer demand picking up and that's working its way up the supply chains, and we're seeing these better production numbers coming out of China beating expectations. I don't have a lot of faith at the expectations particularly accurate. The range of forecast is very wide, but certainly a decent

number coming out reflecting that improvement in global activity. Okay, you can extrapolate it to Australia, and John Farrell was more to the house a long Australia here into the end of the year. Can you extrapolate it to the rest of the world. Can you extrampolate Chinese better over to America and over to the continent of Europe. I think it has to be taken a looking at both sides. So China is a linking global supply chains. It's now the world's largest manufacturer UM, It's a key part of

global supply chains. So if we're seeing better production in China, if we're seeing improvements in the export numbers, that is telling us something about global levels of demand. And we're seeing it also come through in terms of proper indications about confidence in the economy. You're not these useless surveys, but detailed behavior of consumers, of individuals in Europe and the US is pointing towards a better economic outlook. And this is always the case. Markets are always always too

pessimistic about recovery from a crisis. This was no different to previous crisis. The markets have failed to understand the speed of the bounce back, the resilience of consumers and businesses in the face of a challenge, Paul, is there anything unique about the willingness of many people to still under appreciate this rebound in this economy? So, I think we've got some complications here. Um, So we've got problems

with the data itself. I mean, the data quality has been deteriorating for several years, but it's it's been really really bad during this crisis, and we're now seeing the inconsistencies in the data. So the fact that different countries use different methods to calculate GDP. Your only economists get excited about this most of the time. But now it's leading to these absolute a normalies in the data when you do international comparisons. So that's throwing up a lot

of problems. But also, of course what's happening throughout all of this is the pandemic has accelerated the structural changes of the Fourth Industrial Revolution and also the environmental credit crunch. Both of those big, big structural issues have been sped up throughout this and that means of course that we may be failing to capture some of what's going on

in the economy. So to give just one example, we have seen an absolute search in business creation in America, in the UK and France, in Japan, in Singapore, huge huge increase in business creation since lockdowns ended. That's not likely to be properly reflected in the data. You know, some of the entrepreneurship is just going to be missed because the satisticians aren't going to be looking for it.

So do you think that right now, going forward, we're going to see ongoing improvement in the data, or do you think that with the pullback in fiscal support we'll see a PLATEAUA I mean, do you think that right now people are still getting it wrong and expecting a cool down in the recovery, So there will be a call down. I mean, let's be realistic. What's what's really fueling this is the fact that most people accumulated about a month's worth of income in savings while so we're

stuck in lockdown, unable to do anything. And of course, as soon as lockdown ends, you know, you've just spent you know whatever it is, two months stuck at home with you, your your close family, as as companions. You're desperate to get out and get away from them, and they go out and spend money. And that's what's happening. And that's the surge of the third quarter. Now that's not gonna last. It's like a tax rebate. Within six months, this money is going to be gone and with them

back into a more normal pattern of growth. But I think that that will still be fairly resilient because the labor market is bouncing back more strongly, and we do get fiscal support, particularly in Europe obviously, but also potentially in the States next year. The other thing to remember is, of course, that we've been seeing an awful lot of upward revisions to numbers. So once business got a bit back to normal, we saw statisticians being able to go

out and collect data a bit more reliably. And so in both Europe and in the United States, there's been a lot of upward revisions. Sort of. The the Revision Index, which looks at revising data, has ticking up since lockdown ended, and that's also telling us that actually things weren't quite as bad as we thought in the second quarter. The other aspect of this, and you wrote an essay on this I thought was fascinating, was that you believe homeworking

actually boosts growth. Can you talk a little bit about that, especially if that growth may not be in the big cities that traditionally were the economic engines. So I think the first point about this is this was going to be happening anyway. The technological changes that the changes of the Fourth Industrial Revolution fascinating from an economic point of view, in many ways, reverses the social shifts of the First Industrial Revolution. You know, we're leaving the cities and going

back to rural areas or out of town. But what that does, of course, is it changes patterns, It changes work time. So I'm not traveling to work on London underground, spending half an hour to and from work every day, stuck on the Central Line. My daily community if I'm working here from home, is me stumbling five yards from my bedroom to my home office. That's it. So I'm saving myself an hour a day. And what am I doing with that? Well, you know, I'm looking for entertainment.

I'm looking for leisure, and I may spend money in doing that. And this, of course has been the progression throughout the twentieth century. Lord Caine's very famously wrote that we'd all be working fifteen our days by the year. I'm sure that's that's true for Tom, but we're average economist is not working a fifteen day. We're we're really having to push the hours. It so Kings was looking at this big, big drop in terms of the amount of time that people were spending at work, and it happened.

But it happened because we spent less time doing chores outside of work, less time doing housework, less time commuting, and we have more leisure. That's what's going to come out of this. I think homeworking is not something to be shunned. It changes the structured the economy, but it changes it in a good way, which gives people more free time, and it gives them the opportunity to spend money in different ways and to use their standard of John.

It's just amazing that Paul Donovan, in this pandemic is graduated from the muhammadal Area pile on Tom school, he says, he pretending it. There's a seventy Just tell everyone go on, go, I mean to go, Okay, I'll go. Paul Donovan, what's so important here in the time we're in and there's such a respect for the holistic nature of your research reports? What do we need to focus on on global trade? I mean Stigletts talks about the globalization and our discontent

and all that. What's the thing forward on world trade? We need to focus on. So globalization, the rise of global trade, of SHRIF of GDP, that's over. That's done, um, because the globalization story of the last twenty five years was about increasingly complex, increasingly long supply chains and that's no longer desirable. And again, this is a change. It's

not being brought about by the pandemic. It's being accelerated by the pandemic, and we're now i think, going to see a fairly steady decline in Global Trader of Share GDP. But there are two possible ways this happened, and they have very very different implications. If we go down the route of trade taxes tariffs, that is not good news because that is telling companies, right, you've chosen the best possible location for your production. We're going to force you

to go to somewhere that second best. No company wants to go to second best. That's less efficient. That's going to lead to either squeezed profits or higher prices of the consumer, or some combination. But if we see automation, robotics, digitization coming in, then what that is going to be

doing is leading to localization of production. You start producing close to the consumer because it is efficient to do so, and that's going to be a very very different situation because that means lower prices for the consumer, or higher profits for the producer, or some combination of the two. So what we've got to focus on is look globalization

as we've recorded it. It's going into reverse. There is a negative story around trade taxes and autarchy and all that sort of stuff, but there's also a positive story about it's just more efficient to be producing closer to the consumer because of the technological changes, and so working out which of those two options is predominant that's going to be key. The shortest nine minute interview we've ever done, Paul,

it just went too quickly. We're gonna do it much much along the next time, Paul Donovan Greater to catch up. UBS global chief economists to speak of the American economy. Lindsay p Exit joins us right now with Stephile. Their chief economists Lindsey John Ferroll brought up twenty minutes ago the idea of the all in United Kingdom unemployment rate? What is the all in US unemployment rate? Is it

double digit? It could be right now. Of course, we know that the civilian rate, the rate reported from the BLS, has come down to eight point four, and we do know that there has been vast improvement from that peak that we saw early on in the pandemic, but we don't know if that's fully capturing what's been happening out in the labor market. As you said, the true unemployment rate is much likely to be closer to that double digit range. But as we wait for the Fed's decision

later this week tomorrow exactly. We do think that the FED is going to emphasize that improvement that we've seen in the labor market, that further growth that we've seen in terms of hiring, that further decline in the unemployment rate, as well as the decline in jobless claims. So the FEED is going to be focusing on the improvement that we've seen, as opplosed to some of that that more tertiary or secondary numbers that suggest a higher level of

joblessness in the US labor market. And then they they're going to get to the November I FED meeting, which I assume was going to be a virtually silent meeting just with respect to the American election. We may not even have results by then. Lindsey, I want you to take us out to December and into two thousand twenty one. What's the economic run rate right now? Right now, the economy does seem to be improving. We are seeing improvement, as I mentioned, in the labor market, in the housing market,

we've seen improvement in the manufacturing numbers. So it does suggest that the U s economy is rebounding from that extremely low level that we saw in the second quarter, But I hesitate to say that we're in the position for a v shaped recovery. As the FED is pointed out, COVID remains the number one risk to the outlook, so

we can't get complacent at this point. Yet. There still is a tremendous amount of risk that the virus poses to the economy, that it poses to the outlook, and if we need to, we should remain very vigilant in terms of the safety protocols, in terms of wearing masks, social distancing, in order to keep the economy open and

continuing to move towards that point of full employment. But I don't think we're there yet, and we do run the risk of a second wave of cases, a second round of layoffs, which could keep the economy very anemic going into one And this is exactly why the FED has said that they're not even thinking about thinking about raising rates at this point. Interest rates are likely to stay in this very near zero range, this very low range,

for the foreseeable future, for several years to come. Well, NSI, let's talk about how they manage that message tomorrow then, because tomorrow, surely the unemployment forecast has to get an upgrade given where unemployment has come down to absolutely that we do get that summary of economic projections, and the unemployment rate is likely to be lowered in terms of the FEDS forecast reflecting the improvement that we have seen in the labor market. I wouldn't expect much change around

the inflation figure. I wouldn't expect much more optimism to be priced in terms of their GDP forecast, But you're right the unemployment rate their forecast is likely to come

down again reflecting that improvement. But I think it's more important what we hear from the chairman during the press conference, and he's going to be very careful to walk that line between patting the FED on the back, saying the swift and decisive action that we took helped stem a further downturn, so the the conditions that we saw in the second quarter could have been much more dire, and again balancing that against the risk as I mentioned, the

virus still remains out there. Businesses have been able to stem that bridge uh in terms of staying open for several months. But if we don't see a meaningful way of separating the healthy from the sick, or if we don't see additional fiscal stimulus to help bridge that gap for businesses and the American families. It's going to be very difficult to keep the U. S economy on this

pathway back to a more prosperous and sustainable growth level. Lindsay, there seems to be a divergence between the C suite in America and economists. The C suite saying we're seeing petter than expected business performance across the board, and you have economists saying, well, you do now, but as this fiscal support runs off, you will see it lose a lot of luster. Have economists lost credibility in a meaningful way or are are they looking at something that perhaps

the C suite isn't seeing? I think right now, I think most of management, most of corporate America is focused on the near term outlook, and they're focused on the minimal improvement that we have seen from those low levels at the onset of the pandemic. I think economists are taking more of a longer term picture, a longer term

view of where the economy is headed. Remember, the economy was already losing momentum as we were heading into We had slowed from a three percent growth rate down to two percent, Yet corporate America was still elated with the prospects of continuing the expansion. So economists were already recognizing that loss of momentum. And I think that loss of momentum has carried through and kept the economy in this

extremely fragile position. Then you layer on this pandemic and it's going to be increasingly difficult for us to get back to a more sustainable organ ne level of growth. So it could also be that corporate America has become complacent with this unprecedented support from monetary and fiscal policies. Okay, so we don't get another fiscal round of support. Where do you see the year ending with respect to the US unemployment rate. I think that it's going to remain

elevated in this eight to nine percent level. I don't think we've pushed back towards that double digit level that we saw again at the onset of the pandemic. But the labor market still is under an extreme amount of pressure. Again, businesses have been able to recall some workers, we have been able to see some new payrolls created. But if we don't see additional fiscal stimas if we don't see

additional federal funding. If we don't see that vaccine, it's going to be difficult to continue these conditions that have allowed businesses to take on those new hires or to rehire some of those workers that have been pushed to the sideline. So we could actually see a second wave of layoffs or furloughs towards the end of the year, which would keep that unemployment rate artificially high in that

eight to nine that range Lindsey Pa. Yesterday, William Gross talked about a six trillion dollar need, a six trillion dollar deficit call others have you know come up about that number as well. We're talking one and two trillion. Is an arguing point. Are we able to go out and find three or four or five or six trillion of new debt to fold under the American balance sheet? I think we could. The question is do we want

to We have to be very careful. We want to make sure that we're finding enough stimulus in the near term to get the economy back on track, but we also don't want to create additional barriers on the back end when the economy does begin to recover. Are we are we struggling under this insurmountable amount of debt that creates future barriers for growth and future generation. So I

do think it's a it's a delicate balance. We want to make sure again that we get the economy back on track, but not just in the short term, that we're putting it on a longer term ur tect jury towards a higher level of prosperity. Lindsay half delicate is that balance right now and asked to no seriousness with ten yere yields at the moment at zero point six. I think it's extremely delicate. As we've seen the deficit, the total debt held by the American public at record levels.

In fact, debt to GDP is the highest level that we've seen in post World War two history. So we are on an unsustainable trajectory in terms of continuing to load debt onto the balance sheet. That being said, there's not much we can do during these unprecedented times. We have to take on additional debt, but we don't need

to be irresponsible about it. We want to make sure that the programs that the federal government is putting into into play is going to those that is going to the businesses that need it to to continue to bridge this gap. We don't want fraud or we don't want abuse of these programs. That's very important at this point, and I think the American public has a much lower tolerance at this point for any sort of lot around those programs, given what we did see with the first

round in the pp prief program as well. Oh absolutely, I think most people would agree with that sentiment. Lindsay, great to catch up, Lindsay, p x of that A staffel Robert for a few seconds with Jones Day. He's head of mergers and acquisitions, but that barely describes his decades as many decades experience in all different shades of M and A. We're thrilled he could join us again above. It's been way, way, way too long since you've been on.

What's different this time around? In the many billions of the M and A Derby, Well, the biggest difference I think is obviously the markets have been fabulous in many respects. Everybody focuses on the equity capital markets, but the debt markets are just mind blowing way supportive. Now, you know, the others on your show always talk about out how

that supports the equity markets too. But it really is is A is a great bone for M and A. Um And you know, if you if you stand back over those decades, M and A generally tracks what the equity markets, uh do um and I think we're starting to see that now. A lot of people said, well, yesterday is a one off thing. TikTok is political, not an economic event. Um. Uh. The soft Bank deal, it was kind of a for sale because of other issues that that the soft Bank has. Well, yeah, that's true,

but there was a lot of other stuff. All the headline deals got of course the headlines, but there were many other deals or including including a deal for Verizon, the New York Mets. They are all sorts of stuff. So it's it's much more active, no question about it. Well that's great. Are we at the point Robert Busk where we're seeing transactions so the other guy doesn't get the company, like Steve Cohen goes out and takes some metso Hilarion can't buy them. I mean, are we at

that point across all of them and A? Well, yes, we're at a. M and A is strategic right now. There's there's a lot of financial transactions. In fact, I at least in my my personal world. It started for to pick up again in August with some private equity deals, but it's mostly strategic. Um. I don't think that they deal probably was not even mentioned yesterday. The Verizon deal. Um, And that's a not a huge deal at least by

comparison to the others. But it was almost seven billion and it's and it's uh designed to build out a part of the Horizons platform. They don't have the prepaid phone prepaid cards. For sure. There are a lot of deals that are strategic and looking to buy revenue at a time of meager growth. But things have gotten a lot more political, and I'm wondering how much TikTok is representative of the increase recently politicized m and a backdrop

versus a sort of idiosyncratic affair. Uh. There's no question that nationalism um is a factor. You wouldn't have said this before the current administration, but um, it isn't just the USUM. And nationalism is a real issue in terms of cross border deals, UM, no question about it. Um. And how we deal with how we deal with this stuff going forward could have an impact whenever a significant cross border transaction shows up in the boardroom, you got a lot of directors kind of you know, saying, do

we really want to go through this? Because, um, because because it is a factor. Um, the the TikTok deals is unique. But but if this is a real issue with cross border deals, which of course is most deals have some element of that, but bobb, it may may well push bigger companies to get with bigger companies. Now, another has been regulatory issues antitrust issues down in Washington, d C. Around big tech. But let's think about how

this story is evolving. In Europe. Is a huge conversation about whether they should move away and move towards from this national champions to European champions that can compete with China and compete with heavyweights in the United States as well. And I wonder if that's something that grips the United States to push forward and allow the big to get bicker through acquisitions so they can compete with Chinese companies.

But how are you thinking about that at the moment? Uh, That's that's an interesting topic for a for a frankly kind of law school debate. Um. I don't think that that that has maybe has more traction in the EU because EU obviously, see you it thinks about things in those in that way. Um and you know there's been rumors again recently about um uh ubs and credit suite, you know, and obviously that would raise a regulatory and other issues, but maybe that would be something that would

fall into the that kind of category. The US is different. Um. Yeah, politics plays a role, and when the President says something about a deal, the staff people who deal with these things think about it. But but it really works out in a much more, much more granular technical way. In the US. It's it's done by people who are largely a political I know that's hard to believe in the today's world, but there, you know, these are many, many cases a career staff people who are trying to do

the right thing rather than follow the political winds. I'm just wander now quickly. That changes. Bob's gribe to catch up with you as always, Robert for fu sack that Jones Day had of mergers and acquisitions right now a two hour conversation was Scott Stringer. He went to the Bella Bella Absug School of charm and became a politician on the Island of Manhattan. Has been comptroller and now

we'll run for mayor. There's forty seven things to talk to him about, and of course with a Shinali Bassek of Bloomberg as well, because there's a lot to talk about right now, Scott, I must start with your aspiration to be the mayor of this great city. What is the stringer plan to drag this city out of this pandemic? That is the number one priority is We're going to have to do a lot at the same time. One, we have to use our financial chops to slowly and

carefully turn the economy on. I would argue that we can't turn the economy on the same way we closed it. We have to be more thoughtful about how we invest in infrastructure, how we invest in the neighborhoods that have just been ripped apart by COVID. So the next mayor is going to have to govern in a serious way to get this economy going. For me, the priority has to be closing budget deficits in a way that start as economic development and growth in all of our communities.

And it's something I'm thinking about not just as a mayor candidate, but as control of the chief financial officer of the city. Within the liberal ethos of New York City. Can you go after the rich people? My view is, look cans the state of play. We have a four point two billion dollar deficit in our city budget for next year. It's top but manageable. So we have to use all the levels at our disposed to close that budget again. So, for example, we have billions of dollars

and reserves. We can draw it down on those reserves. We have the opportunity to find more efficiencies in our agencies that our mayor has never gone through an exercise looking to save money year and year out. So there's a lot that we can do simply by being good uditors and saving hundreds of millions of dollars. I also have put on the table, as we should uh people of great wealth who did great in the city over the last ten twenty years, they should be prepared, if necessary,

to step up and help out as well. When that happens, and we have a balanced approach to balancing the budget, then we're on for something, but everyone has to help it. I would make the argument that we in New York City have watched heroes every single day. This pandemic started with us. We saw a frontline workers going uh to save lives. They didn't have mass they didn't have protection. They went out. Some people lost their lives. And I think the business community, you know, come on, step up,

we need We're all in this together. Do you have any concerns about members of the business community, members of the wealthier class in New York leaving New York? Should you raise taxes on them? Look, we've had a fiscal crisis. Uh as far back as the nineteen seventy when I was growing up with the fact right my cousin Bell abs a brand from Mayor of New York City, people fled. I remember they left as a kid. They came back.

After that eleven people fled, but they came back. After two thousand and eight recession, people left, they came back. There will be some that will leave. But everyone, at the end of the day, wants to be in the center of the universe. No disrespect to London. They want to live in New York City. The next mayor has to continue to build quality of life, economic stability, and also reimagine what the city can look like, whether it's

transportation or helping communities most in need. And once that happens, I believe people could come rowing back here. By the way, what I would say to people with a lot of money, why would you risk your life going to Texas or Florida or any place where you have governors who who just ignore health health safety laws. You've gotta be nuts to go there. Stay where you are in New York City is the safest place in the world right now.

The thing is who we're moving there even before the pandemic had even started, and before there was a greater push for these taxes. And I'm wondering there are some executives in the financial industry now that are talking about moving some of their jobs there to potentially lower cost locations for their employees. Are you concerned about that? Realistically? What can we do to keep the New York City

jobs in the financial industry? Well, look, we have to continue to build a city that attracts business, attracts entrepreneurship. We have to invest in tech community. We're starting to do that. Life sciences has always been something that has been a foundation for a future economy. We've got to build our schools and invest in our universities because that's why young people from around the world want to come and get educated here, and when they come here, they

always stayed here. So we need a strong plan to make sure that we have a robust business community. But we also have to remind ourselves and we have six and six thousand small businesses in New York City. They employ seven hunder thousand people. I don't want to see them get squeezed or lost. You know, I do have great expectation that Amazon is going to do just by Facebook. We'll do just bying for me. We have to double

down on our small businesses. There's middle businesses that committe the difference of people flee or people saying, but we need a mayor with the plan and somebody who has the strength of management jobs to get a suit these very tough times stronger. I don't know if I've missed it. I want to go, you know, back to some of the costing efficiencies you're talking about. But first, would you raise taxes for the wealthy? I said that we should

put everything on the table. Wealthy people if needed to pay a little more to get us through this crisis. We have asked our frontline workers to make the ultimate sacrifice. Seems reasonable that people who have great wealth, who want to help the city where they city in which they made money at. I don't understand this notion of throwing your hands up and running away. This is the time to stay in fight and we build back the city. This is the city that made you great. It's the

greatest city in the world. Let's all do it together, and let's all be heroes. As we struggle to get our deficits under control and our economy under control. Without New York City, the national economy will struggle. We send twenty two billion dollars more to our federal government than we get back, and all we're asking for it on a federal level is the stimulant back. It recognizes the political, uh not the political, but certainly the economic might of

New York City. You're mentioning spending inefficiencies, where how much can you save by getting that back in order? I I estimate that you could spend You could save up to five a million to one billion dollars, depending on how deep you go with those efficiencies. Again, these are not layoffs. These are not efficiencies that woul hurt essential services. We have that much fat in our budget. I've done

the audits of all the agencies. It exists. We have to collect it out and then reinvest that money and the things that we need to keep going services in our city, but also to close our budget depths. You know, here's the deal. In my office, we did a four percent cut. I returned millions of dollars from the Controls office, gave it to the city general fund without the eve

been asking. And it's not that hard. You take a scalpel, not a sledgehammer, do the hard work of finding those efficiencies, and then you bring them into the general fund to offset the depths of the Other thing that I've offered to do with the mayor is doing the kind of refinancings of our city that we have low interest rate. I estimate that we can realize four hundred million dollars in financing, perhaps another five from a million next year. So there's a lot that we can do to stem

the tide. It's not just raising taxes. That could be a component. It's not just borrowing, but that could be a component. We have a lot sitting out there to get this depsit under control. We just need the political will. We just need to get to work and do the savings. To what extent are we facing a New York City that's like the nineteen seventies. Today, we're not. Uh, what I worry about is that we could create our own nineteen seventies story if we don't take decisive action. But

we are not on the edge of bankruptcy. Look, I still believe that even with all of the saving measures I'm talking about on your show today, Biden will become president. We will have a real stimulus package that will help government a local and state governments. That's ultimately the way we get out of this. But in the meantime, I'm

New York City will do it share as well. I'm sure other little calbuns around the country that Donald Trump has given up on his hometown long before the pandemic, and he has been the chief architect of literally poisoning hundreds of thousands of people, and that era hopefully comes to an end. Politically, we just have to hold on until help is on the way, and hopefully that will come in November. Mr Springer, thank you so much. Scott Stringers in New York City, Controller Son and Alibasa, thank

you so much as well. 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