Wall Street Week - Full Show 01/20/2023
Inflation, a slowing economy, a climate on the brink and a new world order in the making. But the great and the good still find room for optimism as they gather in Switzerland. This is a special Davos edition of Wall Street Week.
I'm David Westin. This week, we talk with the leaders of global Wall Street about the economy. Business. There's clear evidence inflation has, in fact, peaked and is coming down. It's a funny thing when people say inflation has peaked.
Inflation is just going to grow slower. And why the big issues like inequality and climate and geopolitics matter for both of those. We are trying to address the misconceptions. A transition has to always be fair and just well, it's got a number of major transitions that we're getting. Our focus is treatments and points out the way and actually roll up our sleeves and get on with the hard work.
And we speak to our special contributor, Larry Summers on the potential for default on U.S. debt. This is potential tragedy as far as it would be catastrophic and inconceivable for the United States to default. Every winter pandemic permitting global Wall Street makes the trek to the Swiss Alps for the World Economic Forum, an organization started 42 two years ago by Swiss engineer and economist Klaus Schwab to gather leaders of business, government and academia to, as he put it, improve the state of the world. He spoke at the beginning of the conference about some of the thorniest issues today. Hotspots of Cecile economically moldering high inflation, high inflation, increasing interest rates and growing national debt.
This is particularly hurting low middle income groups. It is accelerating societal augmentation, as Klaus Schwab says, we have some global economic issues to deal with. Starting with at least the possibility of a recession, something that Citi CEO Jane Fraser told us she anticipates, though it may not be a bad one. We do have we do what we are seeing as different countries are very different places. You actually cannot speak in generalities. We expect to see a rolling series of country recessions, but short of anything crazy happening geopolitically and this time last year, we wouldn't have predicted what happened in the Ukraine. You've seen the tales come in and so
you've seen the overoptimism from some about soft landings and the economy's doing well. But we've seen the downs, the severe case downside also coming in. I think the general view in the states, certainly one we hold at city is we expect to see a mild recession and largely driven by the painfully persistent service inflation. It's coming off, but it's still pretty high. And we do expect to see central banks continue tightening as a result. But the vulnerabilities that amplified previous recessions around the world are not present yet. Banks are in very good shape.
Consumer balance sheets are in good shape. Corporate balance sheets are in good shape. And I think that opens well for a mild recessions when they come rather than ones that we have to be worried about. Jane Fraser sees a rolling recession around the world, but maybe, just maybe, it won't roll to Europe after all.
After German Chancellor Olive Schultz told our editor in chief of John Micklethwait that he does not anticipate a recession in Germany this year. And Gary Cohn, he's now vice chair of IBM, agrees with him. I thought that the risk to Germany was really the energy situation going into the winter to the extent that we had a very cold winter and they had to start rationing energy and they had to cut back industrial Germany to keep people warm. I felt that that was a really tough situation potentially. We're now deep enough into the winter
and we sort of know where we are. We know what's in reserve, in storage. I think Germany is going to get through the winter very fairly easily with energy. And I think they're going to continue to power through this. I'm in agreement with the chancellor. All of which led to a somewhat more positive outlook at the World Economic Forum than some had anticipated. As observed by Mary Callahan, IRDA is responsible for investing four point one trillion dollars, a J.P.
Morgan asset and wealth management. I would say the tone here, having come here for the past decade, is is less depressed than it than it often is, which is a good sign of hope of what's happening out there in the world. Having come off of the most difficult year for a balanced portfolio, 60 40, whether you were in stocks or bonds or anything in between, it was pretty rough sledding. And so I think everyone's. Happy that that's behind us. I'm looking forward.
And the job of what all of us at JP Morgan do is work on advising clients through the cycle. So we're gonna have lots of boom and bust cycles. You've had a few people on today talking about it. And I think the most important thing is to stay focused on diversification, opportunity, not getting wedded to any one thing that looks like it worked in the past.
It may not work in the future. And so we're spent we're spending a lot of time on that. I mean, one of the things that really manifested itself through Covid was the problem of home country bias, which creeps into almost everybody's portfolios.
And you have to be very aware and conscious of diversifying out of it. So not only home country bias in terms of the stocks and the bonds you buy, but also the currency. And I think it's now a really important time that people think about how to get all of that and opportunities that they may have missed and other parts of the world, especially parts of the world that are reopening and making it very interesting.
Morgan Stanley's James Gorman agreed that there is room for optimism, not least because of China. Well, I think, you know, I've seen I've seen a lot of cycles in my career and I've seen some really, really dark periods. You know, the financial crisis after September 11, even though, you know, the early recessions in the US in 93, 94, the market bust in 1870, I go back, I'm a lot older and you go back a long way. And, you know, I think what we've been through, if you stack up the negative stuff that happened first flame war in Europe in 70 years, first global pandemic in a century and highest rate increase because of inflation in 40 years. That's a lot to throw at people.
And where are we now so bad that babies will appear? Recession will be short and shallow. Nobody's saying we go in depression, right? Everybody's saying we can kind of deal with this. And two things I think have changed in the last month, which is causes echo chamber we live in here in Davos, where everybody's basically repeating back to each other what they've heard from the last person. Let's be honest, I'm not hopefully, but most people are is. Two things have changed. Number one, the inflation numbers are definitely there's clear evidence inflation has, in fact, peaked and is coming down. Right.
How quickly would the Fed will get us to 2 percent and when remains the debate, but is clearly the slope of the line is pause. It is terrible is Faber. And the second is not just the opening up of China, but China has embraced the rest of the world more aggressively in the last few weeks, witnessed by the vice premier meeting with Treasury Secretary Yellen in a way that we haven't seen for some time. So the big question coming out of the party, Congress and President Xi, you know, being real re re-elected by the Congress was where does China go from here? Does common prosperity mean effectively dividing the pie up so everybody gets a piece of it or by growing the pie? And what we're seeing is the tilt is now from divide the pie to grow the pie. Bank of America chief Brian Moynihan agreed with others about the likelihood of recession, but at the same time in not being too severe, be based on the strength of the consumer and also the strong labor market in the US. Our research team, which is the best in the business, has a mild recession predicted sort of mid this year into next year. They push that out and so why they keep
pushing out. It's the strength of U.S. consumer. They have the Fed getting over, you know, 5 5 percent, 5 a quarter. Just this week, they moved that to 3 25
basis point rate rise as opposed to 50, meaning again. The Fed can slow down a little bit because you see inflation over. And so that's what we haven't. So this year ends up being positive. Next year ends up being positive. You have a little trough in the middle
and that really is reflective what you saw this morning. Employment still strong. People are working. They're getting paid more, but they've got to get inflation.
So they have to keep the rate structure up here for a fair amount time until they get the service aside. Inflation down in the market. Maybe we misreading how fast that will take. But on the other hand, we're a heck of a lot better shape than always other economies. I talked to. That's for sure. So pushed out the possible recession. Your research team did it. Is it also looking shallower because the economy is more resilient than we thought it was? Well, the consumer is very resilient.
And you look new claims for unemployment. We're down in one 190000 before the 2000s. You know, 70 recession, great recession, financial crisis. They've been 330000 each posting. So think about that difference in the workforce, about 20 percent bigger.
These are down in numbers consistent where they were in 50 years ago when the workforce was half as big. So employment still strong. Now, are we all being more careful about hiring or trimming our headcount by attrition or are we all flattening out in some industries are actually taking headcount down? So that may change. It hasn't changed yet. The money in our accounts is still there and it's come down a little bit to start to spend it. But on the other hand, it's multiples of where it was pre pandemic. They have lots of borrowing capacity. Now, what's gone quickly stopping.
Obviously, mortgage mortgages got expensive. Purchases stopped, but the dollar value of housing that won't shut up after the recovery. Yes, it's come down, but still way above. It wasn't 19. And so people have to think about this in perspective. Long term growth rates that fell and then shot up with all the stimulus and now are settling in and the Fed has to bring inflation down because inflation will eat away purchasing power. And that's really not good for especially median income household. Coming up, we move from the economy to
another big topic for global Wall Street geopolitics. That's next on this special edition of Bloomberg Wall Street Week. From the World Economic Forum. This is a special edition of Wall Street Week from the World Economic Forum in Switzerland. I'm David Westin.
Leaders gathered here this week against the backdrop of the largest ground war in Europe since World War Two. Sanctions imposed on Russia for its invasion of Ukraine prevented any Russians who were actually attending. And China was represented by its vice premier there, her not its president, as in years past. But China, nevertheless, was very much a topic of conversation at the World Economic Forum. Has little her actually left Davos to go over to Zurich to meet with Janet Yellen, the U.S. treasury secretary, raising the prospect of maybe better relations between the United States and China.
We asked U.S. Trade Representative Catherine Tai about her take on what was accomplished by that meeting with respect to trade. I think that expectations for everyone, workers, families, businesses in America, in China, around the world should be that President Biden is committed to bringing a thoughtful, deliberate, strategic and ultimately effective approach to the challenges that we have, as well as the opportunities that we have in this profoundly consequential trade relationship. WTO director and goes on Kojo Walla is encouraged by possible thawing between the United States and China.
There's quite a bit of optimism that has been attached to the opening up of China, and I think that made the meeting of Yellen and Lu is a good sign. But I think we should also keep it in check. Mary Callahan, overdose of JP Morgan says she's seeing some hopeful signs out of China already having come back from Hong Kong just a few weeks ago. You can just see the pent up demand of what's there. People wanting to go in country, people wanting to come out of country to travel around the world. I think the opening up of China, while
it will have its ups and downs. It will hopefully be a net exporter of deflation, which would be good for the world. Getting all of those kinks out of the system and really bringing back growth and in a positive way. So I'm looking forward to that. I just say for us to JP Morgan, getting to see our people who are on the ground in China and have been working so hard throughout these many years of us not being able to travel. And we're really excited about that. We're looking forward to lots of good reunions and the like.
But people are really excited. And I think it means a lot of things, a tone that you're hearing from many that are that are either going in already and or are just listening to some of the conversations here today are really positive about what could be happening. And of course, there's all sorts of negotiations that have to happen to make sure that people do things in the right way, that people work forward to cooperation on a fair and even playing field. And I think that those are the important
conversations that had to be that have to be had. But now that we can do them in person, it's going to be a hell of a lot more fruitful to be able to do it that way than to try and do these things on some kind of flat screen where you're not you're not able to have those personal connections that are so important when you're going through these negotiations. But the WTO director general's concerns about trade do not end at China, as she says that the WTO has calculated just how much the global economy would be hurt if we move from a global economy to one broke up into trading blocs, the costs of the world fragmented into two trading blocs very high. We've actually done some simulations of they said the WTO, and we've seen that if we break into two trading blocs, the world global GDP is going to decrease by 5 percent in the longer term. It's not just trade that has people's attention when it comes to globalization or the lack thereof.
We talked with Nick Clegg. He's president of Metta Global Affairs. He's the former UK deputy prime minister about whether we were headed toward a world where China is separate from the rest of world when it comes to the Internet. I think they really have bifurcating. We don't have a we don't have a global Internet. People keep talking about the global Internet. It doesn't exist. You have a Chinese Internet, which by its own on its own terms is highly successful.
It's walled off from the rest of the world. It's subject to a great deal of internal surveillance. But he doesn't he doesn't welcome for instance, Facebook is not allowed to operate in China whilst he calls Chinese. Social media companies are allowed to operate in the United States.
Tick tock, tick, tock, tick, tick, tick, tock. How big a risk is that? A national security risk? Because many in Washington think it really is. Look, I'll leave that to the national security experts. What I would observe, though, to your earlier question, which is, you know, that there isn't a level playing field in Chinese social media.
Companies are able to operate both in China and in Europe and America. We're able to operate in American Europe, but not in China. So, you know, at the moment, there's an imbalance, imbalance there, which doesn't, I think, in the long run make make a whole lot of sense.
And they and it's partly because the the approach to data. The approach. To privacy is just very, very different culturally and legally and politically in China than it is elsewhere. And then there are slightly more subtle, narrower differences between the EU and the US as well. And I think one of the interesting dynamics you have is that you have the European Union now leading on new rules, need leading on new regulation, but not leading technologically or commercially.
You don't have all the big tech giants either in the United States or China. And yet it's Europe that doesn't have the big tech giants that is inventing the rules for them. So it's a very interesting jigsaw where I would I would actually add a fourth element. I think India I think you have Europe, America, China and India. Those are the four great big sort of jigsaw pieces that make up how the Internet operates in the modern world. Coming up, environmental, social and
governance, investing has been our topic at Davos for years, but never has it been as controversial politically. We take a look at how global Wall Street is dealing with the issue. That's next on Wall Street week on Bloomberg. This is a special edition of Wall Street Week from the World Economic Forum in Switzerland. I'm David Westin four years
environmental, social and governance, investing. It was all the rage, but it's become something of a political hot potato recently, with 18 states now either enacting or proposing legislation to bar state governments from dealing with a financial institutions that take ESG into account in their investing. We asked Jane Fraser, CEO of Citi, whether her bank has lost any money because of ESG, and she had a very simple, direct answer. No.
But I think that's not really where we're focused. So when we look at it, the world's got a number of major transitions that we're going through. And to your point, these aren't these aren't easy ones. So where we're focused on is helping it. Let's take climate. We're trying to make sure that there is both the realization of energy security for the well, which is critically important for economic growth. At the same time, is it there is the investment and the innovation required in sustainable green sources of energy and cleaner sources of energy. And we've got to solve both of them
together. They're not mutually exclusive. So our focus is trying to move the noise out of the way and actually roll up our sleeves and get on with the hard work of how do we help support our clients who are investing in the innovations, get them to scale that will get those cleaner technologies that we need up and running at the same time as supporting clients who are also critical sources of energy for the world right now and helping them with that transition. But recognizing this takes time. BlackRock CEO Larry Fink went even further to say that at least in Europe, if you do not have a lens towards decarbonisation, you're not going to win one one year old business. You know, we are one of the largest hydrocarbon, if not the largest hydrocarbon investor in the world because we're the largest indexer and we work with all these different companies at the same time. We're one of the fastest growing
companies related to decarbonisation. Let's be clear, the IRA in the United States is a game changer to whether banks are losing money or making money from ESG. The one thing every category and we need to know what it is and by the way, how to measure it. Something that Brian Moynihan, the head of Bank of America, has been working on in his capacity as chair of the National Business Council for the World Economic Forum. We started many years ago thinking about how the private sector had to make the changes to to drive the economies. And if it was all going on in the public sector with all going on and debt levels and all this. And so we sat there and said, OK, what
do you need to do that? And what you need to do that was define a set of standards that we believe are the right standards. And then we got to stop from having a uplift nation standard service. At one point, there's can be 600 in 2020 or schedule B, I think in North America, like 600 seminars on metrics. Yes, if you've got stuff. So we come off a straightforward metrics that match the FTSE and these other things that people talk about, the straightforward metrics that say, you know, are we good for our our customers? Yes.
Are we good for our teammates? Yes. Are we good for shareholders? Yes. Are we good for society? Yes.
You know that that's how we drive a company. And so we're saying if you disclose those metrics, then people can see what you're doing. It is not just investors and financial firms that are concerned with climate and what can be done about it. Tech is also moving into the area. As we talked to Gary Cohen, he's now vice chair of IBM. So environments is really important. It is a technology company. We think about how we can help our
clients and we look at the we look at climate, no different than any other sort of business operation. First of all, it's a data problem. It's a big data problem. So you have to collect the data and you have to get it into a usable format. That's something that IBM really thrives on, is we help people collect data. We help getting it into a usable format. Once you have the data, you need the technology, you need the software, you need the analytic tools to start evaluating the data.
So you've not got a baseline, you're evaluating your data. You know how much carbon you're admitted. Now, once you know how much carbon you're admitting, you can go through policies and procedures to change the way you're running your business, how you're running your business, and you can measure success. So you operationalize it and you become much more efficient at running your business. Once you had the technology, once you have the data and in a way that's useful to you as a company, as global Wall Street talked about climate in Davos. One of the main topics of conversation were those electric vehicle tax credits in the Inflation Reduction Act, which I say says is a big step toward clean energy.
But Europe is very concerned that it's actually protectionist because the favorable treatment it gives for U.S. manufactured batteries. Democratic Senator Joe Manchin of West Virginia came to Davos to talk about energy and why he thinks the U.S. approach makes really good sense. They've been coming to me for years saying you've got to have a carbon tax, you've got to have a carbon fee. And I said we don't have any any other choices except to use fossil right now because we don't have the horsepower to run our economy in our country. But you want to penalize people thinking it'll make them do it quicker. I never used.
I never thought that that would work. I thought incentives work better. And guess what? The Europeans have used the carbon tax and carbon fees forever. We come along all of a sudden and do something and we says, we're going to incentivize you. We're gonna help be your partner and take some of the risk out. But you're gonna have to invest. We're not send you a check.
You've got to have a production tax credits or desperate investment. Tell me which way you're going. We're going to work with you. You can have a 10 year runway, but that 10 year runway where the ISE Ray and I know the administration has been touting this as an environmental bill. Environmental bill. This is truly an energy security bill. And we need everything. But we need the horsepower from fossil
for 10 years when I mean, not when, but as far as coal, gas and oil. But do it cleaner than anywhere. That's climate that's helping the climate. Coming up, we turn to what we learned in Davos about inclusive growth and what global Wall Street can do for developing countries falling behind. This is a special edition of Wall Street Week from the World Economic Forum.
I'm David Westin go to Wall Street wasn't just focused on the developed world when it came to Davos. The developing world also got a fair amount of attention, starting with sub-Saharan Africa, which cities Jane Fraser says is very much on her clients mind. A lot of the discussions we're having, particularly interestingly with a lot of our Middle Eastern clients, is what are they doing about Africa? I think Africa is one that we've all got to keep our mind on, because that is where the net growth in the workforce is going to come over the next few decades.
If we get it right, it's a wonderful opportunity. If we don't, it's going to cause a lot of problems both in Africa as well as in Europe as well as other parts of the world. And so looking at how do we build out transmission networks, greener supply chains there and the Biden this echoes what city is hearing from its clients as the United States Trade Representative, Catherine Tighe, laid out plans to support and engage Africa and described the great opportunities for the world economy there. President Biden hosted the African leaders at a summit in December in Washington, D.C., and I think it came at just the right time. The message that we wanted to send across the board, across the administration, was that America is ready to partner with Africa, to work for Africa, with Africa on trade. We've got our baseline trade program.
It's a preference program. It's called the African Growth and Opportunity Act. It is set to be reauthorized in 2025. Now is exactly the right time to be reviewing what performance has been like. How effective has this been in stimulating and fostering development, economic development and investment in our partner economies? And then also to start thinking how do we make this better and more effective? It is very clear from all of the engagements that we had last December in Washington, D.C., including my trip to Nairobi for President Ruto, his
inauguration in September. The future really is Africa, the resources in Africa, whether they are in the ground or that they are the human beings, the people of Africa. The potential is tremendous. If we can find the way through trade, economics, investment, finance to unlock the potential of Africa and its people. Africa could be the engine that drives economic growth and prosperity for the next phase of globalization. But it is going to require us to think big and to be creative, because the tools that we have so far haven't done what we know we need to do in this next phase. President Obama also just recently
traveled to Mexico City for a North American summit meeting with the head of Canada, Mexico, as well as president. But there are trade issues pending under the UMC, USMC and other places involving energy. Where do those stand? Are they being resolved? What's the timetable? So there is an energy consultation that we are engaged in right now. Both the United States and Canada have requested consultations with with Mexico. Those consultations are ongoing. We
have certainly gotten Mexico's attention. They know we care deeply about this. Our economies are and have been inextricably linked for many decades now. And we are the clean of partners. We are neighbors. Geography is never going to change. We are going to be neighbors forever. So these are really important conversations.
They are about energy policy. They are about our vision for a competitive North American future. We are still in consultations and we are committed to finding a solution here using whatever tools are available, including the ones under the USMC. The pandemic drove home. So the great disparities between the
developing and the developed world. Pfizer chairman and CEO Albert Burleigh explained how the MRSA vaccine that his company developed with Beyond Tech was made available for free and how that has led to a much broader initiative. The vaccine spreads the global vaccine. Those countries of the world will offer completely free through a brave move that the government made.
The U.S. government, they bought 1 billion doses from its course and they offered it for free to the world. Unfortunately, they were not able to absorb it because there's not the money for those works in Shery Ahn. Unfortunately, the poorest of the countries, but never to the list, but gave us the whole story with GAVI since it does. Even more so. Nine months ago here in Davos, we launched in a court where we said. Pfizer will offer all of the pattern protective products, which means that for IBEX, the generic manufacturers cannot make copies at cost.
And they say its course is manufactured and sent. No regulatory, no compliance, no legal nor administrative, no research to one point two billion people living in the 45 first congressional vote about copying it nine months ago and already by the end of the year had sent products to some of these countries. What we did yesterday was even more smart. We announced not all our patent
protection, but all of these moves, at least from twenty three products to over five hundred miles. So it's not just the ones pending patent protected. Its it's great products. Guy Johnson. We were hearing when we're what it will give, for example would give them may be the most prescribed risk crops that made this into the war high technology, but they will say Kevin Cirilli surrounded by RTX will have meats for the products it thinks will grow, meats for anesthetics or basic chemotherapy. And we have them and then we do
everything. I might say that sounds wonderful. Absolute wonder if we wondered why did you do it? Because we all do. I don't think it is. There is no reason why the poorest countries in the world right now want to have access to the same medicines that the kids in America or in France are living. One of the reasons I think Pfizer has been as successful has been because there's been investment in science. Basically, what about larger for the U.S.
government and other governments are reinvesting enough in basic already. Could that help you? I think we can. And I think there is a lot of work happening, particularly in the US. And this is why in the U.S., because I trust that all the research investments
over the private sector, if you see what is going on, even in companies that there are European companies are doing most of their research in the U.S. because this is where things are happening. I think there it is, the crown jewel of the U.S. industry. The life sciences know healthcare so
terribly well. Dr. Berlin, let me ask you what you think the biggest challenges in actually having the drugs, the pharmaceuticals to administer, or is it actually the infrastructure to get it really? You mentioned earlier that you actually couldn't get some of the polio vaccine, some countries that needed it. No, there is no doubt in Africa. It is not the availability of the products. Of course, you need to have them and you need to Covid the prices that you can pay. But once you do, all of which we just did.
You are going to have very big problems with infrastructure. You don't have the right to healthcare professionals to administer to make the diagnoses. This is where we should tell. This is where it should go. I included one of the ways those the
developing world are addressing the needs that they have is by migrating something that has created a crisis, the United States along the southern border. But Bank of America CEO Brian Moynihan says that the biggest challenge ahead for the U.S. economy is not keeping people out, but getting more workers into the country. I think we're getting a lesson right now in the fact that America is this wonderful place for people to work and live and prosper. And, you know, the problem is we need more people. We just need more capacity.
And the point I always say, when people say this, everything says it will takes 18 European 18 years to get an 18 year old. That is science and nobody can refute. OK, so if we're going to have enough workers to do all this, all this often near shoring, all this on shoring to put up the, you know, the windmills all over Texas and Oklahoma and places that are being built that put up the solar fields to build the pipelines, we've got to get some people this country. And so we have to figure out a way to do it that works, surprisingly, given the tight job market for the United States.
The challenge of making sure workers at the bottom are making a living wage is not going away. NAYLOR Richardson, she's chief economist at ADP, came to Switzerland to address this very issue. There is a big gap between market wages, minimum wage jobs that are instituted by governments and what it takes to actually survive in this world in terms of housing, basic necessities, food, clothing, shelter and in the context of high inflation, even as it moderate, it doesn't mean that those prices are going down. They've already gone up. They're just going to grow more slowly. So for the typical worker, their wages
haven't kept up with inflation. And even before the pandemic, their wages weren't keeping up for the lower end of that of the paid workers with just basic necessities. So this is a global issue and it deserves the world's attention. Okay.
So let's assume the world actually pays attention. I hope it does. What does it do about it? Well, there's actually benefits to paying people fairly. Believe it or not, it when companies and there have been companies that have been very prominent on this issue. Adecco was on our panel, the CEO
Unilever made comments and on living wages when on his panel on the cost of living crisis. And what they've identified is those actually benefits to paying people fairly. It leads to more engagement. It leads to more retention and at least
to something that the world's really want right now, social stability when we're. Secure so at a time when there's labor shortages in advanced economies, paying people fairly makes good bottom line sense for companies as well. OK, so Unilever says, yes, we think it's good to people. Will or is a private sector solution the
solution? A solution is that public sector does have to be both. Has to be both. It really has to be both. Governments have to really intervene because when there is a gap between a market wage and a living wage, that is the perfect context for government intervention. Whenever you see these gaps in our economy and so the governments can do a lot of things. Several states, more than 20 of them have raised minimum wages just this year because of inflation, because of the recognition that with really high housing prices and just the lift costs of living crisis, that people are not making enough to cover the basics.
So governments do have a role. Companies have a role as well. Coming up, we'll hear from special prosecutor Larry Summers of Harvard on the big issues facing global Wall Street and why he may just may be a little bit more optimistic than he's been. This is a special Davos edition of Wall Street Week.
I'm David Westin Larry Summers, our regular contributor here on Wall Street. He came with us to Davos to talk about some of the big issues on the agenda. And we started with him about that debt ceiling crisis back in United States that is getting so much attention right here at the World Economic Forum. This is potential tragedy as far as it would be catastrophic and inconceivable for the United States to default. It's not what anybody serious does. We have problems that our family or discussions about how my kids spend money. Maybe my kids will pay off.
Maybe I will pay off these. But the idea that the family should stiff fees because we can't agree is absurd. Similarly, the debt limit. I've been through a lot of these. I think at the end of the day, we will meet our obligations and not cause substantial disruption. But God, I wish we could move past this. Like Senator McConnell showed real leadership in doing some time ago because he would be catastrophic for the United States and for our sense is a serious country if we would actually default.
Another big story here in Davos, but more globally actually is now. You heard the vice premier premier of China meeting with Janet Yellen just over in Zurich, not far from here, in part because look who is here, as I understand it, in Davos, to at least start a discussion. What do you make of that? I think it's encouraging. I had a chance to speak with him here in Davos. Look, I think it's always better to be talking whether you're agreeing, whether you're disagreeing. You get to better places with mutual
understanding. And so I welcomed that. I think the right approach is small victories. We're not going to have a broad rapprochement or a transformation of the relationship. But if we have small victories, we
identify areas of progress. We have specific accomplishments. I'd like to see that with respect to the debt problems and debt resolution of some of the poorest countries in the world. I'd like to see that. With respect to climate finance, I in the developing world, I think we can make progress if we set our expectations and aspirations right towards small victories. You're a macro economist. You're not a politician. As far as I know. It's central.
You know, politics in Washington. Can we make even those small steps of progress on either side with her maintaining support from President Xi and Janet Yellen maintain supporting ISE because there's a lot, as you know, political summit against China. I think if we're making concessions to China. Probably not. If we're working with China to work out an African debt problem or to support an energy transition, then I think we can think we need to get out of the zero sum mindset. And by focusing on the issues in third countries, I think we've got a much better chance of doing that. I think it'll be much harder on the direct commercial issues between our two countries. Go.
Wall Street has all come here to Davos. And another topic is our conversation is the economy overall where we are on inflation and the likelihood of recession in the United States and for that matter, around the world. You've been warning about the possibly recession for some time, even saying it's more likely than not at the same time. Things have been getting a little better on some of the eco numbers.
Where are you right now? I'm still cautious, David, but with a little bit more hope than I had before. Soft landing. So the triumph of hope over experience. But sometimes hope does triumph over experience. And we have seen some slowing of inflation indicators. At the same time, we've seen continued strength. And that's got to be what we all
want to see. I still think it's going to be hard because we need a substantial amount of disinflation that goes beyond volatile components receding. But you have to recognize that the figures are better than somebody like me would have expected three months ago.
So it's still a very, very difficult job for the Fed, but the situation does look a bit better. Larry, the World Economic Forum has started 42 years ago and its purpose was to try to help the globe. And goodness knows, I think right now as we look around the globe, it could use a little bit of help. And it brought together business leaders, liberal government. Would you certainly have been also
leading academics, which you are as well. Let's look at the larger issues, graphs, which are looking at some which you have addressed before on Wall Street week, things like a global public good, preventing the next pandemic, worrying about the less fortunate countries around the world and how they may be being left behind. As important as the geopolitical conflicts around Russia or between the United States and China are, we've got an agenda now that includes planetary security. That's with respect to pandemics.
That's with respect to climate change. That's with respect to huge refugee flows. That's with respect to nuclear proliferation. And we've got to address that agenda. And we've got tools for doing it. The IMF, the World Bank, the United
Nations. But we need some boldness and vision if we're going to get there in terms of doing it. And that's something that President Biden has been very much behind.
And I hope in his next two years as president, we're going to see some real vision for the international architecture and the international institutions coming from the United States, because I think there's vast potential to support a green transition in particular. Extraordinary things have happened with technology, but they're not going to be self actualizing. It's going to need finance. It's going to need a push. It's going to need global collaboration.
And I think that's an area where the United States can show some important leadership. But it's going to have to be willing to consult and listen and adapt to the ideas of others. I including China. But with what's happening in technology,
there is vast potential for human betterment. In this moment, and I hope we can seize that opportunity. I want to go back to inclusive growth. If I could, which is what a lot of people talk about. And let's talk about technology
specifically. Technology has already improved the lives of many Americans and people around the world. I'm not sure it's always been pro equality. I'm not sure everyone's been brought along with that. You could argue that sometimes has had the reverse effect.
It's made the rich richer and maybe the poor poorer, looking at things like quantum computing, like open A.I., artificial intelligence. Is there a way at this stage we can take a look at that and say, let's make sure we bring along everyone? Because as you point out, Larry, it's not just the right thing to do. It's also the smart thing to do economically to have more inclusive growth.
I nobody can. Nobody can know for sure. But I think the great thing about A.I. and some of this is that it has the potential to augment the capacity of people in doing their jobs rather than to replace people doing their jobs. They're going to be all kinds of tasks which still require humans to do them. But I think people are going to be able to do them much more effectively. Think, for example, of a small
technology. The spell checker and the way in which that's augmented, the ability of a large number of people and made them more productive because they're able to write things and produce letters and produce documents in a way that was much harder for them before. And I think we have to think about how to make technology like that spell checker on a grand scale. And I'm guardedly optimistic that that's
something that's going to be possible. There's headlines now almost a century ago in The New York Times in 1928 about how mechanisation and automation were going to take away jobs from all the people. Their stories like that in President Johnson had a commission that was exactly about all of that. And yet we kept making progress. And I'm optimistic that there's that possibility in the future. That was special. Wall Street, we contribute.
Larry Summers of Harvard. Coming up, we reflect back on the legacy of Scott Miner, one of the mainstays of Davos who was not here this year. We talked with Scott's successor, Ann Walsh, about what he meant for Guggenheim, but the financial industry and for the global issues that Scott came to Davos to discuss. This is Wall Street week on Bloomberg. Ah, one more thought this week is about a colleague and friend who sadly did not join us in Davos this year, Guggenheim's chief investment officer, Scott Miner, and passed away suddenly last month. We talked with his successor, Ann Walsh, about the loss and the legacy of Scott Maynard. It was quite a shock to learn of his passing.
Scott and I worked together and were friends for over 20 years, and the industry lost a tremendous visionary. And I've lost a dear friend, but there are several legacies that he left. The most important to me, of course, is is the investment process that he helped craft and develop at Guggenheim. And it's a team based approach based on behavioral finance. We have a deep bench of investment professionals.
We have about a thousand employees and nearly 300 billion dollars of assets under management. You know, I've been at the firm for almost 16 years and together we've built that investment process. I've stood in and shepherded the investment process and the team members, along with Scott for all these years. That's going to be an incredible legacy
that we're going to continue and we're going to continue to deliver the client excellence and service that our our clients have come to expect. And and we'll remember Scott forever. Well, Scott obviously left a very large footprint behind him on Wall Street. Bloomberg certainly on Guggenheim. He also had a real presence at Davos. He had interests that went beyond what
we would think of typically as Wall Street interests, global interests that are taking over Davos to talk about what he did at Davos and what is left behind of what he worked on here. Well, he had a personal as well as Guggenheim has a continuing ongoing commitment to sustainability. He believed in it. We believe in it. And we think the future is one where we have to do all collectively to create value and preserve, you know, all of the aspects of nature. And he was particularly interested in the Arctic and the preservation of the Arctic, as well as understanding how climate affected the Arctic.
So we ourselves to our infrastructure team have continued that work and we'll continue the work that Scott started. That was Ann Walsh of Guggenheim remembering Scott Miner, a towering presence on Wall Street and in Davos. That concludes this special edition of Wall Street Week.
I'm David Westin. This is Bloomberg. See you next week.