Surveillance: Yield Curve Control With Fed's Bullard

held court in St. Louis. It has been an extraordinary set of opinions by Mr Bullard over those twelve years. And of course landmark was his a number of years ago discussion of regime change and what that means for the FED. What can be said of every other president, every other governor, indeed of the various and sundry chairman,

nobody nailed the dot plot like Jim Bullard. What you see now in the lousy dot plot, and everybody knows my opinion on it is right where Jim Billard thought we would be, with some real worries of disinflation and deflation. Jim Bullard joins us today, the president of the St. Louis Fed, Jim Bullard, are we so messed up? Right now? That we're finally wanting and for all going to shift to the targeting of nominal GDP instead of a real GDP analysis. I bet an advocate as you know, nominal

GDP targeting and it's close cousin price level targeting. UH. The Committee is still formulating about its framework review and hopefully we'll get some statement out on that UH sometime during the rest of this year. But it's up to the Chairman to drive that process. Mr Orfan nineties year ago wrote a landmark paper I believe in the Greenspan FED about the tool kits that are out there and tool kits that are available. What does the bullard in

the FED tool kit look right now? It seems like you've exhausted an awful lot of the useful tools, and I think there are other things we can still do UM, but we have deployed a lot of good tools for this situation. I think the policy response has been quite good to the pandemic, both on the monetary policy side the liquidity programs, plus a good response from the political side to get fiscal relief to those that are disrupted

by the pandemic. So I think all of this has actually gone given the nature of this shock and the depth of the shock is all gone pretty well so far, and I think July onet is a good checkpoint because I've long advocated that this is the main impact would be the second quarter of and it's a third quarter will be um kind of the opposite of the first quarter first cars, a big declined third quarter will be a big increase as many businesses come back online safely

in a way that keeps the pandemic under control. Jams Jonathan here. Another committee is thinking a little bit more about forward guidance. A quarta with President Meister and President Williams in the last month, and yield curve control was a bigger part of the conversation. Can you walk me through how you would characterize yeld curve control from your perspective? Is that a compliment to forward guidance or is that

something bold up where you cap you to the longer end. Yeah, the US had yeld curve control during World War two UH, and then after the war UH, the exit from the yold curve control was very difficult, so it kind of ended in tears. So I think that's one of the main concerns about going in this direction. Japan as we know, has done you know, curve control. But one of the things that they wanted to do was it out of the quantitative easing program. They've they've scaled that back dramatically

by just targeting yields directly. So I think there are a lot more questions and answers around the control right now. What do you think the ulptimate approach to forward godess is then, Jim Well, I think we're giving great forward guidance right now, and I think there's really no problem with where we are today. We're projecting low rates of you know, policy rate far out into the future. Longer

term yields are also quite low. Global yields are quite low, so and we have the advantage in the current situation that we already built up credibility for low rates and

commitments to low rates through the last crisis. In the last crisis, there was, as you might recall, coming out of that in twelve, the markets were always expecting that yields would leak back higher at any moment, and the Committee tried to fight back against that and keep yields low all up by by promising low rates further into the future. But in the end we built up a lot of credibility that we really meant it that we're going to keep rates low. And so this time we

have a lot of credibility on this issue. And I think, I just think we're in great shape for right now because of the credible we built up last time around. Jim, the market definitely is buying the rates will remain low for a long time. Back in you raise the issue of asset bubbles that will come on the heels potentially of leaving rates so low for so long, given how much corporate debt issuance we have seen. What's different now? Yeah, I mean, bubbles is always always an issue, and I

do keep my eye on it. But again, I'm just not seeing things that are on the same magnitude as as what happened in the late nineteen nineties. Uh, the internet so called dot com bubble that that blew up on us, and then the much more serious housing bubble in the mid two thousands that also blew up and turned into a global crisis. But I'm not seeing anything like that right now. Do keep we do watch it closely. Uh. You know, I understand that companies are taking on debt.

Some of that, you know, liquidity driven to get through the pandemic. Here Um, they're drawing on lines of credit and and other sources to make sure that they can survive and thrive through a time of low UH, low revenue for their business. So um, so far, so good, But we certainly certainly watched this closely, Jim. Are there no negative consequences then to keeping rates basically at zero

for the indefinite future? Yeah, you know, there's always inflation risk lurking out there, but we haven't had an inflation problem in the US or globally UH since UH, longer than most of us can remember sitting here. So um, the problem has been on the low side and the threat of disinflation or deflation on that score, I think

we're also avoiding that risk, at least for now. I see tips break even moving back up in in recent weeks, UH, which seems to suggest that the Committee retains credibility around its two percent inflation target. Even though we've missed that target somewhat to the low side. It hasn't been as good as we wanted, but we have kept it relatively close, and I think we we'll be able to do that this time as well. Jim, it's not the presence of bubbles that I think gets my attention. It's the absence

of creative destruction. And I want to ask you an important question, why the FETE seems to have lost confidence in the transformational powers of capitalism. Well, you'll have to talk to others. I have not lost faith in the transforational powers of capitalism. I think. Uh, what you're seeing today is tremendous adjustment by so many businesses, too unwelcome development. Where we had this disease to send upon us. We've

learned a lot about it in the last ninety days. Uh. We're figuring out how to run businesses, deliver goods and services in all kinds of nooks and crannies around the economy in ways that keep everybody healthy, keep the customers safe, keep the workers safe, and still uh you know, keep household incomes up, and keep people employed. Uh. So I

think we can be successful in this. To measure, there are a few businesses where where the pandemic is really throwing them a curve ball and they really have to hustle all their sleeves in order to think about how they can deliver their product in this new environment. But most businesses. I think they'll be up and running in

the second half of the year. Jim might tell we appreciate the motives of the Federal Reserve to do what the committee has done over the last couple of months, but I think we do need to talk about the consequences. Once you introduce the price incentitive buyer into the credit market, you are interfering in the transformational powers of capitalism. You are stopping the money from flowing away from bad businesses the good ones. Do you not appreciate that, Jim? No,

I do. But I think the key question here is UH is you know bad businesses? What do you mean by bad businesses? If they were if they were viable and successful before the pandemic came. Most of those I think are going to continue to be viable and successful in the UH in the world ahead where we have to deal with the with the disease. There maybe a

few that don't manage to make that transition. I don't know, but the demand for those products is still there, and I would say for most firms there, they want to maintain liquidity during the crisis here, and they'll be able to get back up and running UH with some changes to how they deliver goods and services. In the second half, we welcome all of you extended conversation with Jim Bullard

here under simulcast on Bloomberg Television in Bloomberg Radio. He is the president of St. Louis FED and has been exceptionally acute in his research over his twelve years at the FED, advancing not controversy, but just the argument of the moment. That argument of the moment, I have to revisit a dr bullet his yield curve control. And what I find so distortive here is the FED will make

an action. The FED will make a statement, There'll be a speech, there'll be some form of announcement, and you know better than anyone, the market will react to that. Can't the markets adapt to yield crook curve control and diffuse any benefit of it, diminish any benefit of it. I do not think that the markets would undo what the FED is trying to do. I think it's an equilibrium. I think we've enforced that equilibrium by trying to be more transparent about the debates and ideas that are going

on on the on the committee. In the analysis, I think there's a lot of give and take between markets and policymakers much different than it would have been in the very shrouded days and then I teen eighties, we barely barely said anything um to infer what was going on. So I think I think that transparency is useful. Um. I think we're wrestling with these ideas just like everyone else. But but I think that it helps inform the equilibrium to be as transparent ast But this extremely well said

Dr Bullard. Now we have Dr Williams of the New York Fed and Governor Brainerd, and they've made some comments on the efficacy of yield capped. I look at you and others more circumspect as well. If we do yield curve control and we distribute that out the yield curve, and I don't know what year or month or day you're gonna extend it out to, do we set ourselves up to be more vulnerable to any given exogen is

shock Uh, I'm not sure about that. You you'd have to you know, it kind of depends how you interpret the Japanese experience of the last few years, a few other kind trees that have have tried this in the modern era. UM. You know, I just think you know, right now there are more questions than answers about this, and I don't really think, uh, this is a pending thing for the committee because we're already expecting rates to be low for quite a while. So I'm not sure

that you need to put caps in everything else. You've already got the lower expected rates that you desire for this situation. Very quickly. Dr Bullard, what does yield curve control mean to retirees and savers in the St. Louis District? Yeah, longstanding issue is that, uh, we should be thinking about the correct interest rates, not the lowest interest rates. And a lot of the discussion, popular discussion always always seems

to assume lower rates are better. I think you do want to get to the uh, the equilibrium rate that makes sense for the current environment. Um, But the current environment is one globally a very low rates all around the world, and that's the world we're living in. I think people have adjusted to that since it's been around

since two thousand, two thousand nine. President. A lot of questions coming through on the Bloomberg terminal that many people want to ask, including Mr Gaping over at Barclays, who I think recognizes what a lot of people pointed out after the last fat decision in the dot plot, why the long term dot was still at to fifty? President, But why wasn't that adjusted? And you anticipate it will be in the coming meetings. Yeah, you guys may remember, I don't put in a long term dot. I'm the

only guy that doesn't do it. So I'm a rebel, maybe without a cause here, but I don't don't think we know enough to put down that long term dot, and it it affects expectations, and it affects thinking in markets. Um. But it's also the object for which there is the most uncertainty. So I would prefer not to put down uh, some kind of gas about where we're gonna be ten years from now no one knows, and talk more about the relevant time horizon for monetary policy, which is probably

about two years, possibly three years at the very most. So. Um, So I'm the wrong guy to talk about the long run. President Bollard. You are the right person to talk about inflation, and you said that the FED does retain its credibility around a two percent inflation goal. Are we measuring inflation right or should we be taking into account asset price inflation, the inflation, housing costs, the inflation and medical and education

costs and even food. Yeah, great, great question. The measurement issues around inflation are very serious at hashment studied extensively, but if you really get into the issues about how to construct a price index, it gets very hairy, very fast.

And one thing I've just mentioned on this measurement issue but right now is that during the second quarter, you have a lot of good that were trade we're really not traded, uh, you know, in in the normal volumes that they would have been or violunes went all the way to zero. So what should you do with those in the price index? You know, because they're always weighted

by the shares of expenditure. Well, the share of expenditure went to zero, so you're not going to count those prices or what are you gonna do because you have markets that kind of shut down completely in that environment. So um so, I think they're fascinating issues right now, just in the last few months about how to interpret

the inflation numbers. If you look at something like the Dallas Fed trimming, which throws out the most extreme observations, is still hanging right around two percent, and I think that's probably informing the market expectations about where they think we're going to end up with inflation. Well, there's a question also about good inflation and bad inflation. A lot of people looking at the fact that wages are not increasing as quickly as some of these necessary costs that

everybody faces on a regular basis. Are you seeing more bad inflation than good inflate inflation, especially as there is this protectionist shift and people do bring supply chain back home. Yeah, I think we were getting better wage growth before the pandemic. I think during the pandemic here obviously, we've asked people to stay at home invest in the national health. We've asked businesses to temporarily shut down to invest in the

national health. They've received uh, probably somewhat inefficiently, but they've generally speaking, they have received relief from the federal government for their efforts to to slow down the economy. Um. So it's a little hard to measure wages or total income of households and businesses really during this time period. So I didn't think we have to wait for the dust to settle. I think the third quarter will be

a transition quarter. Like I said, I think most businesses will get backed up and running and be uh actually be close to the kind of production that they had previous to the pandemic. And then a few businesses will struggle more than that. But so far, so good. I actually I think we're I think we're doing all right given the nature and size of this shock. I would say one other thing I just wanted to mention, and I don't know if you guys want to talk about that.

I actually think for a public policy point of view, we should not be emphasizing vaccines and therapeutics. I hope they get they happen, and uh, you know, you know, God bless people that are working on I think they're uh, they're doing great work and everything, but these are tough scientific problems, and that affects from my point of view. I'm the I'm the economics guy that's affecting expectations and

affects how people behave. So I think what you should tell people instead is, uh, we're gonna have to manage the disease. We're gonna have to manage the risk that's out there. It's unpleasant, but there's a new mortality risk, and businesses have to app Housholts have to adapt, and

everyone's doing that. We know that, and we see that, but we shouldn't promise that there's some kind of goal at the end of the rainbow, President Bullard, That's exactly where I wanted to go, this idea that we have a very long road ahead of us, and there's a question about how resilient bank balance sheets are to deal with this, and it's something very much at the forefront of people's minds ahead of the stress test results that are coming out by the Federal Reserve later this week.

Would you support having banks curb any dividend payments in order to shore up their balance sheets further ahead of whatever secondary effects tertiary effects we can expect from the pandemic. Yeah, this is a decided for the Board of Governors, So uh, it's separate from the Open Market Committee, which I'm on, UM, so it's not really my purview. I would comment, however, that I think markets have probably already priced this end.

My sense is that, uh, you know, the Europeans have already ended dividend payments, and markets finally expect something like that to happen in the US. But but it's up to the governors onto how they want to look at that. We've got the stress test, who's also coming up shortly here, and I think that'll inform how how the governors want to go on this going forward. Jim Bullard, thank you so much, very generous of you to be with us for this extended conversation. James Bullard is the president of

the St. Louis FED. Jonathan got of credit swas moves his price target from to thirty two hundred. I'm not sure if he'll like that characterization, so we'll let John tell his own story. He joins us. Now, Jonathan, good morning, Let's start with a short want why well, I mean, if there's a simple story here, it's it's not that I think that the economy is going to be magnificently better.

It's that the fact that we've taken out these downside risks, all of these government actions have eliminated or at least diminished the potential for this thing to double dip down to the levels that we've seen before. So I think that the upside when we were calling for about three upside through your end, I think the upside has been limited, but the risk to the downside has been And John, you and I were talking about before we got what we went live. That the single chart that's important to me.

On your Bloomberg terminal, you can see the number of bankruptcies that have been filed and if you go to max on that to see it, you know, including the downturn in O eight oh nine, that during big recessions you see a massive spike in bankruptcies, and that is not happening here at all. Businesses are not going under because of all these actions. And that's one of the reasons why I think that we're not going to double dip,

even if the upside is not. There another reason why the next thirty days is so important on the policy front. What do you need to say, John, Uh, yeah, I think right, there's um, there's two big issues. I think they're important. This p p P program. This is the money that's going to small businesses to keep them afloat

that rolls off at the beginning of July. And then you have this government supplement of the six dollars a month that's going to people who are unemployed, and both of those are rolling off in the month of July, the unemployment running at the end of the month. Those are going to be a real political football. And if they are not rolled over and we see the consumer whallet it takes a head that is going to be a real big problem for the economy near term, and

the market will absolutely not take that well. The problem is is that Congress is not going to be debating these issues until sometime in July, so we're going to feel pretty uncomfortable about these before it gets resolved one way or another. John Go, I want to cut you some major major slack on, you know, the cheap shots the media is taken on. He was barishing. Now he's bullish and all that. But what I'm fascinated by is is what would be the next tronch of optimism from you?

Where's it come on the income statement? Does it come from revenue growth doing better? Or is it corporations adapting to this pandemic, to this economic crisis and they make margins better. Which is it to get you to the next tronch of optimism? If you're asking what what would make me if I were to if we were to be talking in six months months from now and you were to say this is what happened, that that's going

to make this the upside much more. It's not going to be this more liquidity because I think that we've already seen the market's response. The question is how quickly do we get back to an economy that's running at um? And so let's ask a question. When is it that that commuters are comfortable going back into New York again? Um? When is it that we're comfortable get on airplanes again? Um? When you know, when is it that we can get over twenty million people that have been unemployed back to work?

And the answer to each of those is longer than you would think. So the worst cases at were the improvements equentionally off the bottom. We know that that's gonna be good. The p M this morning are gonna be good. The question is if you're looking up at the sky, not down at where you were when there was when we were staying at home, that's what's going to really drive the market. What are the banks do here? You do a great sector analysis. Where are you on the financials? Yeah?

You know what I was speaking to, Susan Catskews. Our our bank analysis is terrific. I mean one of the challenges, first of all, the good news is if the economy is going from pretty well, um, the credit losses probably don't end up being as bad as as we all think, and that that's a positive story. On the other hand, UM, net interest margins for banks are are a problem longer term if you have really low interest rates. So um the banks I think are going to be a little

bit more more challenging. But here's the key. The not different than the last crisis. Banks are not going to need to raise the loot of capital. There's not going to be a reregulation environment. All the really ugly stuff that happened is not there. The question is, is you know what is the profit margin profit model look like in a lower rate environment, especially one um where economic

growth longer term maybe a little bit weaker. When you talk about credit losses being mitigated by the fact that we're probably not going to get shut downs and that the stimulus has mitigated the worst case scenario, I'm wondering what the increase in virus counts in places like Texas where the governor's come out and said that it's unacceptable, how quickly it's spreading, and the potential for additional shutdowns,

how that factors into your thesis. Is that factored in or do you think that that's a bear case that is sort of an outlier. At this point, No said this, We are obsessing on this issue. And so my team just ransom numbers last night, and what they found was that the first of all two things are happening. The number of cases is spiking, primarily in the southern half of the US and California, and in the north in

the number of new cases continues to fall um. However, the deaths are not going up anywhere or anywhere in any of the major regions. So even in areas where the case counts is going up, and a lot of people are saying is yes, but that's a delay and it's going to happen later, we don't think. So. What you're finding is that the people who are getting sick now are younger people who are going out because they're

not concerned about the downsides of getting the virus. And so the people who are getting sick are not showing up in intensive care uns are at the hospital, and they're not dying. So it's very possible that we're seeing or not very possible. I think what we're seeing is pretty rational behavior. People who know that they could survive this are going out, they're living their lives, they're getting sick, but not in a way that that's going to be um,

that's going to cause another shutdown. And this is what it's going to feel like in an environment where we're going to have to live with this for for a long period of time. So I think that the we're not going to be seeing a anything which looks like a national shutdown. Could we see individual local markets or city or region for a very short time maybe, but even that, I don't think it's gonna happen. If we did go and see a shutdown, that's obviously a really

big problem. But I think that I don't think these numbers are inconsistent with each other. Jonathan Call, Kordi Swayze, John a pretty you're honestate transparency and your time this morning, send o best of to tell you, Kredi Swayze, Jonathan Call, Credit Swayze. Megan Green joins us now from Harvard Kennedy School. And Megan, what's so important is you synthesize the experience orients of the United Kingdom of that shock of Brexit, over the shock that we're all living now with the pandemic.

How do we extract ourselves from a pandemic. Is it an act of God and we move quickly or is it going to be a long and slow process. Well, unfortunately, I think we're looking at a pretty long, slow, hard slog. You know, the data has bounced pretty quickly um in May and June in particular, so some people might be tempted to say, hey, look, this looks like a V shaped recovery. But getting the first of those who lost their jobs back into the workforce is a lot easier

than getting the last back in. And and there's a host of downside risks as well, both in Europe and in the US. I mean, no one or the markets don't seem to have noticed that the number of new COVID nineteen cases in the US has gone up by in the past week. And I think that's a huge risk that isn't being priced in. We saw confusion over you know, trade with China and the US all so um,

causing jitters markets. But you know, there's gonna be tree tensions as as a selection comes closer regardless of heart. Brexit is another downside risk, and none of this seems to be priced in. You know, Megan and W. T. O folks out moments ago. I think a negative eighteen percent statistic on world trade. We're still checking on that, Megan Green. I look at the slow down and the bounce back, and what it comes down to is, to

use the word and efficacy of fiscal placement. The great critics of mm T would say, you can't do fiscal stimulus in a narrow, concerted manner. Can we prove that this time is the exception, this time is different. We can win with fiscal policy. Uh, fiscal policy can certainly help here. And as we look at the US stimulus pipeline, it looks like it's it's drying out, and it will make a huge difference whether we reap some of that

or not in the US. But certainly, I mean, the more targeted we can make fiscal stimulus the best or The problem is we mainly have top down tools, so we've had to provide things like checks that aren't targeted at all. But I'm constantly asked whether we're doing m M T UM and m M T isn't really something you do. It's it's more kind of a school of thought. But I do think to some degree what the M M T here's get right, is that we don't have to raise the money in order to spend it. We

can just deficit spend. And that's the obvious answer for any major economies who are facing incredibly low borrowing costs for the foreseeable future, like the UK and the US and even even the Eurozone to some degree. So you know, I think we are right to be deficit spending like mad to try to dig ourselves out of this hole and to try to fill the whole first of all, and then to try to prompt recovery. And yeah, Megan, the policy effort seems to be really lumpy, particularly in

the United States. So caught up with Bridgewater in the last twenty four hours. So we're catching up with Bob Prince tomorrow for the Bloomberg Investment Conference. For anyone that wants to watch that the duration mismatches something they're focused on. Bob Prince over there mentioned thing that we keep applying these three months bandids to something that could last eighteen months and maybe longer. Megan, what do you make of

that approach? I think that's absolutely right. In fact, I don't even think we're applying a three months band aid. We've applied a two months band aid for the most part in the US, for small companies and for those who have been laid off. And I think this is going to be a much longer, harder slog as I mentioned before. So we're either going to have to re keep re upping it and investors are going to trust that we're gonna keep re upping it, or there's going

to be some kind of market dislocation. And I think

there is a problem in politics. We saw in two thousand and eight two thousand nine that at a certain point policymakers start asking questions about how we're going to pay for this, And again that's a totally inappropriate question to be asking in the middle of it, and we can ask it afterwards, how we how we figured this out, and the answer is deficit spending, particularly for the US UM But you know, if we end up having policymakers wringing their hands and refusing to pass more stimulus, then

that's going to have a huge impact on our recovery. And I think it will be an even longer, harder slog than it otherwise would have been. And this is why we need automatic stabilizers. I think to term programs on and also to make sure they don't get turned off too soon so that it's not a political process that just happens based on the data. And there's some work being you know, done on trying to implement automatic

stabilizers in the US. Europe gets this a bit better than we do here, but hopefully we can build some of those in um for the next crisis, even if it's a bit too late for this one. Well, Megan, what worries me is that some policy make has taken their cues from markets right now because markets relevated, some

people don't feel the urgency to do more. How instructive is the economic dat to itself over the last month for policy makers as they try and calibrate, well the next move should be so to be honest, most of our economic indicators are pretty backwards looking and out of date by the time they come out, but they're already starting to show a bounce. Uh. And a lot of the alternative data, high frequency data that we're looking at also shows a bounce, so that takes pressure off of

policymakers as well. And as I said, it looks like a V shape recovery right now. That was always going to happen. We're always going to have the best growth figures for all kinds of things ever off of a really really low bottom um, and that will be politicized. So President Trump and the Republicans will highlight how're we've got the best growth data ever. The Democrats will highlight that it's from the worst base ever, and both sides

will be right. That will be really confusing for people, and I think that will moddle the debate on whether to do more. So I don't actually think the economic data is going to be helping in the short term. And as I said, that quick bounce was inevitable, but it should slow down. It's gonna be much harder to pull people into work the longer this goes on. Megan, you said that the U s should be deficit spending like crazy? Should individuals? Should corporations be deficit spending like crazy?

Because they are, They're borrowing a ton and there's a question is this just prolonging the pain that is inevitable anyway? So no, UM, sovereigns are different from households and companies and that they never die. UM, they never actually have to pay that debt back. They don't usually pay that debt back, they just roll it over um for years and years and years, and households and companies can't do that,

so the same rules don't apply. Um that we have seen record corporate debt issuance, and you know, could that be a problem coming down the line. Absolutely. We we started this off with a bit of a bubble in corporate debts. At some point that will come home to roost, but not while rates are going to be pretty much at zero for the foreseeable future. I think that pushes

that problem further out into the future. If the US doesn't continue fiscal stimulus with additional rounds of checks and re up to enhanced unemployment benefits, could we see this come home to roost sooner? In other words, could this bubble pop in a way that becomes problematic from markets on the economy? Oh definitely. I mean, don't forget that

our economy is consumption um. And if we don't re up unemployment insurance benefits and check um, but particularly unemployment insurance benefits UM the PDP program, which has been extended a bit um, that's we're facing a cliff edge in terms of people having jobs and being able to spend on top of that, you know, I really hope we see something for state and local funding coming from the federal government. Without that, I think it would be very

difficult to avoid a double differcession. So fiscal policy really will make a difference here. Mike and Green of the hob A Kennedy School, Magan, always fantastic to catch up with you. Thanks for jointing us this morning. I appreciate your time right now. Someone Washington loves to hate what's known in Washington as you get a quick read, a quick little paragraph, a little snippet of the gossip out there, and the acclaimed Christopher Krueger of Cowen goes the other way.

He writes hyper detailed research notes that you swear out on a Friday evening because you know you're gonna waste an hour and a half on Saturday reading them. Mr Krueger joined us right now, Chris, I loved your research on unemployment dynamics in the swing states. To me, that's absolutely fascinated and speaks right to the fulcome of the full calm rather of this election. What do you see in those swing states right now? Well, we saw those six key states, and the six are three in the

Rust Belt, three in the Sun Belt. So you've got Arizona, Florida, Michigan, North Carolina, Pennsylvania, Wisconsin. That's going to determine who's the president next year. Donald Trump won those states in sen by a little over four hundred and fifty thousand votes. Uh. And in the last thirteen weeks there have almost been nine million unemployment claims. Wow, I mean that's what is Chris, What is the pandemic overlay on the history of two thousand sixteen. How does the pandemic fold in to those

six swing states? Well, I mean, I think it's it's not just the unemployment numbers here or I mean, you know, not not to be morbid, but you also have you know, enormous, enormous death tolls here. What you've also seen, particularly in a state like Florida, which is an absolute must win. If there's one state that Trump cannot afford to lose,

it's Florida. Uh. And you're seeing now, Joe Biden. Uh. You know above with the five thirty eight aggregate poll numbers, outside of the margin of error, what you're seeing in Florida is that absolutely vital sixty five and older age Cohort breaking against Trump towards the Vice president. I think you have to, you know, extrapolate that that is a direct result of of the pandemic and sadly, those those

death totals. Chris, how much does the employment issue suck the oxygen away from trade issues which were so important in and will likely be very much on the forefront

heading into November. It's a great question. I mean, look, you know, the Iowa caucuses were, you know, less than a hundred and fifty days ago, and the President was was gearing up for a re election campaign based on prosperity, UH and security, with the China Phase one trade deal as a as a central sort of lynchpin, you know, to that re election that was going to be delivered

via the MAGA rallies. And now you know, I think that the Phase one deal, which you you referenced in the beginning of the show, has become a political vulnerability for the president. I think both the vice former Vice president and President Trump are going to attempt to use China really as the ultimate bipartisan foil. Here. You have a very hawkish Congress with Hong Kong as probably the

next big catalyst. Reports as well that that new quote unquote national Security law might be implemented as early as July, not as September. So I think the China narrative is going to be. UH is certainly going to stay with us through the fall and longer. He'll stay with us. It'll stay with us. The question is with the tenor of it will be and what the focus will be. There's a question about culpability. I know the Senate is

holding a hearing on that later today. There's a question about tech supremacy, and then there's a question about increasing protectionism that we've seen and certainly was a major driver in sixteen. How much is that still a major driver given the economic outcome of some of the policies put in place over the past four years. I mean, I think it's really kind of it's gone, you know, you know, it's a paraphrase spinal tap, it's really gone to win eleven.

Before COVID, you had a bipartisan consensus that China was was no longer a UH, you know, a strategic partner. They were a strategic competitor. And you saw that with with high text, specifically with five G. But you're going to see that later this month with new export controls. You saw that with Huawei, and you've seen that on

some of the human rights issues. But now with a pandemic, you have folks like uh, you know, Tom Cotton, Republican from Arkansas, Josh Holly, Republican from Missouri, really making almost sort of a reparation style push against the Chinese Communist Party for their culpability in the pandemic. So it's really sort of across the board. Uh. And then when you look at Vice President Biden, I mean, at the time I thought it was a huge issue, but so much

else was going on. Vice President Biden referred to Sherriman she as a stug in the March Democratic primary. Democrats tend to look at China more through the prism of of human rights, labor, and the environment. So it's, um, it's a pretty tough forecast really, regardless of of who wins the presidency. Chris Krieg try to catch you with you, said Chris Crocker, that of Cowen. 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 Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio