In one of the Fastest Growing jobs categories, we created a certification program. You can earn one of these certificates and build a consortium of Companies Including walmart, bank of america, intel, hulu, and others, so that once you earn this, it is basically a light degree. For us, one of the very important things is each of us has a responsibly to address these issues in society. I think our view is that if we come together and work cross through and ideally private partnerships, we can magnify the impact we have. You will continue to see more of our efforts there. Ian you heard kristalina say we need to g20 to not just do no harm, but they need to coordinate. You are saying the same thing for the private sector. Are you finding that that challenge is more of a lift, both within your sector, companies that have historically been very tough competitors, as well as across sectors when you dont have the connectivity . Ruth i think we are seeing that single Point Solutions are important, but from the extent we can come together and look, for example, at cross industry solutions, we can have a bigger impact. For example, one of the programs that we have developed we have developed with cities to identify what some of their needs are. For example, in the area of Climate Change, cities came to us, and one of the questions they had was what is the Carbon Footprint come as we have created a tool to address and help them identify what is there Carbon Footprint. There are areas like that where, hearing from cities and doing publicprivate partnerships is substantially more potent. In the area of covid, one of the first things we heard was what was going on with social distancing, and where the programs actually working. We created a tool for what is called social mobility that aggregated data into anonymous data that allowed cities to understand, where their programs in fact working. It is these kind of efforts when you can leverage the technology need to magnify. Your impact to magnify your impact. Ian tell us about where you think the biggest breakthroughs are going to be through Artificial Intelligence and helping us to create radical new efficiencies that will allow us all to think about the climate challenge very differently. Ruth we are already applying ai to Climate Change in a number of areas. One that i am particularly excited about is we believe we have the most Efficient Data Centers globally, and yet we challenge ourselves to say how can we improve Energy Consumption in our data center. We infect lowered Energy Consumption by 30 . That is starting from a base we already thought was pretty strong. We have now opened this technology to others to say, how can you similarly apply ai to enhance your Energy Consumption . In floodso using ai protection. That would give you even a bit of an early lead on flooding can save lives, so it is everything from what is going on with crops to what is going on with flooding, how you run your business, and we are continuing to look at ways than ai can improve efficiency and help save lives. Ian an unfair question to you because over the last few years, whenever we see climate scientists, the more we learn, it turns out it is a lot worse than we thought it was. Do you think there is going to be a reversed process, that the more we learn about ai, the more robust our capacity to actually turn all of this back in terms of climate . Place inwill have its helping with Technology Solutions i have already described. One of the most important elements as we are turning to the topic of Climate Change is what does each one of us do, and do we have federal and double polities that are supportive of other efforts, core to what we are doing at google. Ian thank you so much. Now we are right on time for Mike Bloomberg, who everybody knows. Thanks for organizing all of this, mike. Maybe let me start with you by trying to cfo that was alphabets speaking at the Bloomberg New Economy Forum. You can continue following the livem on bloomberg. Com or terminal. The s p is down by 0. 2 . The pound is also giving back a little bit of ground this afternoon. We will talk more about what is happening in the brexit negotiations in just a moment. The covid effect is no manifesting itself there. We have also seen some would argue a return to mainstream economics in the turkish central bank, and that is having a huge impact today, as you can see, on the turkish lira. It has faded a little bit, with the dollar down by one point 7 against the turkish lira today. We have seen 475 basis point being added to the rate in turkey. Alix we will discuss that later on in the hour. Now lets look at all of our top stories we are following today. There are now 56 million cases globally, and 1. 3 5 million deaths. In new york city, Public Schools are now closed, and new York Governor Andrew Cuomo says Indoor Dining and gems could close down again. Max nisen of Bloomberg Opinion joins us now. De blasio in new york saying now it is a question of when, not if. Max that is not a message that surprises me too much given the trajectory here and what we are seeing nationwide. I think it is just a general indication that there seems to be at least some seasonal affective the virus, that as the weather gets colder, it gets harder to control. Just when you have a nationwide wave, even in areas that have done a pretty good job of keeping things contained through december and the fall, we are starting to see an uptick. When you are closing schools, it is pretty hard to justify not shutting down some of these other areas, especially when from a societal standpoint, there is probably a better argument for keeping schools open. The vaccine news is coming thick and fast now. What did we learn from astrazeneca today . Max we got data from a trial that showed a robust effect, and this is lab assessed rather than the real world trial data we have seen from moderna and pfizer, but quite encouraging on a vaccine that is going to be really important. It appeared to predict to protect older people at the similar rates as younger people. Hopefully their full trial data comes in the next couple of months and will measure up to but we are seeing so far. Guy max, thank you very much, indeed. Lets turn to what is happening with brexit. The European Union is facing a grueling battle to overcome a threat endangering billions of euros in pandemic relief as ecb president Christine Lagarde warns of a dangerous delay. Joining us on that subject is chief. Rgs brussels euro walk us through where we need to see progress. Where do the compromises need to come . There are two big problems today. That there is a covid incident in the brexit negotiations, and the second is the recovery fund. The package that was agreed by eu leaders last summer is now been blocked because hungary and poland oppose the kind of disbursements. Haveu leaders are going to a call and hour from now. We dont expect a resolution today. The issue is going to drag on for weeks, maybe months, and it is all but certain now that the stimulus package will be delayed. How long we dont know. It depends whether poland and hungary will insist on their veto were not. Alix Something Else delayed now is brexit talks. Michel barnier tweeted earlier that with david frost, they decided to suspend negotiations. The team will continue their work in full respective guidelines, as some on the team have tested positive for coronavirus. Where are we with the talks . Nikos it is the latest in a series of unfortunate events that have halted these talks from the beginning. The timing is especially sensitive because the two sides were hoping to reach an agreement by early next week to allow enough time for ratification of a potential trade deal by the end of the years. Is this going to be a catalyst, the fact that the two chief negotiators have withdrawn from the process . Probably not because negotiators are at the lower level that continue their work, but it adds another layer of complexity in the process. Alix thank you very much for that report. We are also watching turkey, raising its benchmark Interest Rate by the most in over two years. The move now sparking a rally in the lira. Joining us is bloombergs turkish market reporter. This was the most important decision of Monetary Policy into years in turkey. The turkish lira has seen ups and downs, holding to a new record almost every day. The central bank made an important step today to restore its credibility. The key thing to watch is whether it is able to stick to tight Monetary Policy. Guy so we return to mainstream economics. We will see whether the president sticks to it. What does it mean for the turkish lira . How much momentum do we have their . Over 2 today,p and the bestperforming emergingmarket currency. The currency has a lot of room itappreciate, mainly because has been the worst performing this year, while most emerging markets either gained or studied , so there is room to appreciate. Guy thank you very much. X. Ts carry on, ali alix just a final point here is what we are going to be watching for next. Many analysts saying that hike is the first thing to look out for. Selcuk the key is to keep rates high above the inflation rate. Bank keeps at high and then signals that it may hike rates even further on , then i guess that would be a better policy change for investors. Guy thank you very much. I want to turn to the Bloomberg Economic forum. Mike bloomberg, the founder of bloomberg lp, is now speaking alongside the imf managing cfo. Tor and the alphabet mike in china, i think they do require a lot of people to take a vaccine. We have a very different system in america, and i can only speak to that. I think the ways you get people to do it is slowly have people take it and show that they are living longer, have fewer cases , and it didnt hurt them at all. You have to do it by example, and slowly over time, each day, a few more people will take it. You will get to the point where vaxxers arent going to take it, and they will suffer. It defies explanation why somebody walks away from all of the medicine and all of the science, but we would you but you will get a vast majority of the people as long as you do it slowly and we dont have leaders who are out there speaking falsehoods and trying to excite people to do stupid things. Ian the other piece of this goes squarely to the tech sector and ruth. Because at least on the vaccines, we are going to see the democratic and republican parties all saying this is a good idea, lets take it, but there is a level of absolutely crazy disinformation that continues to explode in the media and in social media that says, no, bill gates is trying to put a chip in your head. What can google do, what can the tech sector do to try to ensure that we actually really reduce this and ive asked this Antivax Movement so that we can get back to our lives as quickly as humanly possible . Ruth disinformation is sadly not new, and we have invested to make sure we are doing everything we possibly can to elevate authoritative information as it relates to, for example, covid. We were very tightly partnered with world health organization, and we continue to do that. Mike made a very important point. Is of the first thing we did aggregate this data and put up some very important points like wear a mask, social distance. Unless we have clarity in our Public Policy statements, it is going to be hard to break through. We are doing a lot of work right now to try to make sure we are elevating authoritative information. One very important element related to covid, one of the things we were excited about was to partner with apple to come up with an app around Contact Tracing, exposure notifications, another very valuable tool in trying to slow down this ghastly disease. Mike was helpful in ensuring that we get this implement it in new york in the tristate area, but social notification Contact Tracing cannot be effective if there is not massive pickup of it. So we need Public Policy consistently around these statements, and then we can amplify with technology in terms of solutions that we have. Ian now a question for you, kristalina. When will debt burdens around andworld begin to bite constrain our ability to make Strategic Investments . Certainly one of the big stories we have not yet talked about is the fact that debt around the world is only going to increase. Interest rates right now are low, probably not forever. How do you think about that from the imf perspective . Ms. Georgieva in some countries, debt burdens are already crushing businesses and economies. What we are seeing around the world is indeed, we started this crisis with high levels of debt, and not surprisingly, we have seen an increase everywhere in advanced economies, public borrowing, Government Debt has gone up by 20 of gdp. Now the countries with 25 of gdp in emerging markets, that 65 , has gone up to around an increase of about 10 . In poor countries, debt levels have gone up to around 50 of gdp. Countries and countries that stepped into this crisis already with unsustainable debt levels that we do need to take action today. Debtve seen two restructurings in ecuador and argentina. We see these discussions around zambia. There are other countries where this issue is pressing today. I want to flag that there is also corporate debt. Right now, the corporates are being helped with policy support. Everybody is being helped with low Interest Rates in most countries. Supporthis policy gradually is reshaped and we and thishealth crisis is withdrawn, there would be debt issues to be sorted out, so what is the imf doing . Hard forave lobbied Debt Service Suspension for the poorest countries. 44 of them have taken advantage of this. So as their economies are in standstill, their Debt Services are in standstill. Ourselves, for our poorest members, provided 29 of the countries that have debt obligations to the imf to not april, actually until depend, is relieved. We work with countries on a casebycase basis to establish how we can bring debt down to a sustainable level, and we work with countries to help goods regimes for dealing with bankruptcies. So there can be credible, prudent exit without harming the broader economy. I can say in conclusion that this topic is going to be with us. But Interest Rates are low, debt eventually has to be paid back. The best way to do that, economic growth, Debt Service Capacity improves. That withe to assume a democratic President Administration coming in, republicans are going to be much more interested in deficit reduction again. Given what is needed in the United States, what is your view on u. S. Debt broadly and how you think an American Administration , a Biden Administration, should go about that . Mike everybody is a debt hawk when they are out of office. When they are in office, they want to give the voters has many goodies as they can so they can stay in office. The republicans will now go from being a prolific party to a party that is worried about the deficit. We are going to have to deal with this. I think it is inconceivable that we could pay this down in any meaningful percentage of time. We will keep rolling it over. We will learn to live with it. As long as america has the currency that the whole world depends on, it is ok. If, however, chinas currency becomes more important than americas, then weve got a very big problem. I dont know that any one administration, a Biden Administration or whoever comes later, is going to have any unique solutions to do something here. What weve got to do is get the economy going back again and have companies generate revenue and pay taxes, and individuals pay taxes, and then stop expanding the expenditures all the time. Growing cities keep growing faster in the number of people that work for them than in the number of people paying taxes, and that is just unsustainable. You look at new york. A lot of wealthy people are moving to lower tax states. If you look at industry around the country, a lot of companies are moving to right to work states. They are trying to do what is right for themselves, and each state is trying to compete with combinationor the that will be the best for their citizens. New york is a high tax state, but i would argue i live here and plan to live here for the rest of my life i get good value for the taxes i pay. I live in the most wonderful city in the world, and i am glad my family is here, but not everybody does that. Everybody is in competition, one state to another, for our companies and our citizens. And then america is in competition with countries all around the world for who is going to make the products. Right now, america buys its chips more and more from china. We are not selfsufficient anymore. You do see Companies Like google and microsoft starting to make their own, apple now making their own, just because the american industry stopped making them. We outsourced this stuff, but nobody wants to be dependent on somebody else. So we are going to have to rethink runoff a lot of what we do here and how we deal with to rethink an awful lot of what we do here and how we deal with i to today,orld war the superpower of the world to not the only superpower. It is going to be us in china. Ian and the new Economy Forum putting that first and foremost. We have talked about how intrusive government should be in the lives of people. You remember back as mayor, telling us that we cant have our 64 ounce cocacola in the stores. On theion for ruth corporate side of this. Should companies mandate programs that incentivize employees to maintain visible health . We see people with preventable conditions. Ting ruth mandating, i dont like demanded. I do want to provide quality information. At google, we spend a lot of time on wellness, and we are looking forward to bringing people back to the office as soon as we can. A lot of the protocol around bringing people back to work is going to be what about social distancing, how you reformat your footprint so we can bring people back to the office safely, what are we going to do with masks. But i wouldnt go to mandating. I say provide quality information on a consistent basis, and hope people make the right choices. That in new york city, we just had another milestone in building out our campus, and we look forward to bringing people back in new york city as well. Ian a lot of nudging in Public Policy, both in the governmental sector and the corporate sector, and even in the g20. Two questions here that are basically from the that are basically the same question. They are both asking how the Global Community can come together to ensure that people are not kind in not left behind in terms of vaccines. But we alsot covax, know that the United States has been driving so much of the and that they will be taken care of first. What do we do about this . Ms. Georgieva i am so grateful that we are at this question withse what i can say strong conviction is vaccine policy is an economic policy. If we do not pursue access to vaccines and improvement in Health Systems everywhere, we cannot get to a point of robust recovery. And it is therefore an enlightened self interest that should drive us to Work Together toward the promotion of access to vaccines. We have seen many leaders stepping up. That the rewarding , manyans, australians emerging markets came together and said we want to be sure that vaccination is not going to be rich countries, rich people, luxury because if it is only for them, it is just not going to work. So what can we do . We can, of course, as a global , do our own response ability our own responsibility do all we can. Obligation to 90 members. We are pressing the message that health and the economy are two sides of the same coin, and that we are so interdependent that if this crisis taught us something, it is that we depend on each other. Point . I add one more ian you can add one more point. Ms. Georgieva thank you. The crisis also taught us prevention is better than cure. Remember the Global Financial crisis . After the Global Financial crisis, we built stronger banking systems. It is more resilient. So my dream is from this crisis to expand this concept of resilience. Resilient people. Mike talked about education. Educated, healthy, everybody having access to Health Systems. Resilient planet, making sure we dont blow up the future of our children with high carbon, low resilience actions. And of course, resilience of how we come together as communities. Respect depends on each other. Last question from social media. Actually, theres a really good one that just came in. I will save that for the end and do one quick one. What key lessons can western and Eastern Countries learn from each other when it comes to public and private sector response to the pandemic . I am so interested in the question i asked to mike, and that the chinese response is so different. Is completely different. I want to ask you. Think they are interesting things americans and the west can and should learn from china in terms of the way we have seen the response to coronavirus play out . Think the message is if everyone gets together and does the right thing, we can conquer a virus. The question is do we want to have a government tell us what to do, and in america we basically do not. We are suffering from more fatalities and more pain and suffering because we are leaving it up to people to make their own decisions. In china they have a form of government where the government decides. The government decides what is right for the people and people fall in line. The chinese laws in many cases make them do it. I am more optimistic. If the virus works and you have a number of different manufacturers, 7. 5 billion people on the planet. If you could have a vaccine for two dollars a person, that is not much money compared to what we are coming up with money to help corporations and Small Businesses. That is just in america. You could give a virus to not everybody, because not everybody would take it, and im not sure we could get it everybody, but enough of the virus would die out. The real question is what will we do to get ready for the next time there is a virus . We now live in a world where people fly around and ship goods all over the world. It is much easier for a virus to spread than ever before. If you go back and see what lessons did we learn from the 1918 spanish flu, which had nothing to do with spain. Into 1920, even Something Like 25 of the worlds population died from the flu. We learned social distancing and masks. If you look at pictures of sporting events from those days, everybody in the audience wore a mask. If you look at pictures of hospitals, they had beds outside spaced apart. Up until the vaccine, that is all we have done. And all of those years we never learned more. I do not know what the right answer is, but we do not focus on it. We never thought about this happening. In all fairness, i think bill gates did predict Something Like this. We have to think about the next thing while we are solving this thing. You are right. One thing that is extraordinary is how quickly, from not knowing the disease, we now have what looks to be several vaccines that will be incredibly effective in rolling it out. Michael nobody thought you could do something this quickly, and there are at least three right away, and probably 20 other Companies Working on vaccines that may be better. Just to take away a little bit from the excitement, we do not know how long the protection will last or how effective it will be or whether people will come down with other things at the same time this vaccine does not prevent. Working and keep depending on science and understand science changes. That is one of the things that makes it so difficult. People say the doctors and scientists said this six month ago and now they are changing. Yes, as we learn, you change. An intelligent person would always accept the change as we learn. Unfortunately, some people find that to mean they did not know what they were talking about. We avenue a head of the theory. It is not a theory. Gravity is a theory. None of these things are what you think they are, nothing will be that quick, we are going in the right direction but we have a lot of pain and suffering we will have to get through before we get there and i hope ruth is right that companies will follow google, get their people back to work. Not only, i believe it is good for the companies, it is must better it is much better to have people together, but we have an obligation to other companies that service our companies. We have an office where our employees are, but we have an obligation to help Small Businesses around our building that are depending on our employees to buy their food, to have their shoes fixed in their store, to go and drink in their bars, whatever it is. We are not in this alone. I do not think company should just worry about their own p l. I think they have an obligation to help their city and their country and their neighborhood. One of the ways to do that is to get the big cities going again. Without that, we do not have a civilization. Thank you very much. The last question i was going to ask is what we are optimistic about in the last few months. I think we are at a point where we can on the lindley where we cannot only see light at the end of the tunnel, we know how long the rest of the tunnel is. That gives us so much more capacity to keep soldiering forward. With that i would like to offer my thanks for a very successful closing town hall, and also the new Economy Forum. The imap alix you been listening to the Bloomberg New Economy Forum Closing Panel with ian bremmer leading that. Trying to end on a more positive note, talking about that we know the length of the tunnel and we can see the end. Nonetheless, it was interesting to see Mike Bloomberg talk about the responsibility of companies to their employees and also the surrounding environment, particularly in new york, when now youre looking at and if, not when situation for when we will be shutting down restaurants. Public schools have already closed. That getting increasingly more difficult as the cold weather wears on. David absent guy absolutely. You can walk around the building i minnen london to appreciate many of the businesses are closed. The city of london almost back to the point where these businesses were back to the point where they can make money. That no longer the case. The markets in many ways focusing on the here and now. The rising case cap, lockdowns we are experiencing around the world. Equity markets trading on that narrative rather than the longterm narrative of the light at the end of the tunnel. Ian bremmer is right on that we know increasingly how long the tunnel is because we now visibility on the timeline surrounding the vaccine. In the here and now, we will see a difficult winter. That is what the markets are focusing on. A move lower and then a sideways drift for european equities. What is interesting is in the states, but we could go last monday when we got the pfizer news, equity markets have gone nowhere. In europe it is much more positive picture. The move higher, that is when the pfizer news came out. Equity markets in europe have moved through that and carried on going higher. U. S. Equity markets have not delivered the same thing, which is fascinating in terms of the relative outperformance we are seeing on both sides of the atlantic. Both focusing on this narrative on what is happening in the here and now. It looks like we have seen a suspension of the talks. I suspect there will be a way of dealing with it, but nevertheless we have seen covid pace on the eu side a covid case on the eu side in those talks have been suspended. I expect downing street to get that sorted out. We are seeing a stronger dollar today, which is indicative of the fact the market is focusing on the nervousness it has around the situation surrounding covid. The turkish lira is one outlier and it has made significant gains against the u. S. Dollar. That pair reversed, up 1. 17 . In terms of the sum of the single stocks, this narrative is clear. A focus on the stayathome stocks. Hello fresh up 6 . Titian crop feeling the pressure in the steel industry. A tougher industry right now. That is being reflected. More jobs will go at this iconic german company. That down 2. 74 . The royal mail, update beneficiary, a greater focus on parcel deliveries at this business providing a positive updraft for its stock, up 3. 32 . A return to the narrative of the virus being in control rather than the vaccine being in control. Guy thanks. Alix thanks. You were mentioning the lira, that was rallying. Lets dig into that. Joining us from london is louis of Citigroup Global markets. The conversation out of the rate hike is finally the Central Banks restoring credibility, they are returning to the mainstream. Is that accurate . Louis it is accurate in the sense the central bank is finally walking the talk. Change of economic cabinets a couple of weeks ago and a few speeches from government officials, including mr. Erdogan. ,he speeches were hawkish probably the most hawkish speeches we have had from timedent erdogan in a long , saying we need inflation instability to sustain growth in the medium term. Today the Central Banks delivered. , it signifies a complex Monetary Policy framework and i think this is probably the biggest gain from todays meeting. Guy clarity provided, returned to the mainstream. I spoke to president erdogan in 2018 and he was far from the current position. He was talking about the link between inflation and Interest Rates. One went up, the other went up. You think the president will stick with it. You think the leopard has changed its spots . Luis it is a 1 trillion question. I believe that as a strategist we knew that does not necessarily delete the challenges turkey has had into 2021. There are imbalances and imbalances will have to be matched. Change ofve the rhetoric here, not only rhetoric , but policy action was probably the most aggressive in the most positive change we have had in a long time. I think that given the fact the participation of foreign capital in turkish lira assets was so low, it does not surprise me at all we have been rallying for the last couple of weeks. Alix the other central bank that had a decision was south africa. Nothing happened in terms of their rate decision. They left Interest Rates unchanged. As the country is dramatically trying to get any kind of money in investment and capital flow into the country, how is that going to happen . Is there anything else in banks can do . Is not a veryrica interesting economy. Obviously it suffers from a different disease compared to economies like turkey. The problem with africa is fiscal. The fiscal trap and the debt load which is suffocating any possibility of shortterm growth rebound. The central bank noted that and turned a corner long before the covid crisis. Outlook, we had aggressive cuts in policy rates this year. The question is will they continue . We believe there is still a pretty good chance of further policy essentially, that does not sort out the fiscal imbalance. The imbalance will have to come down the road and this is the only way south africa will try to get out of the hole. And the philippines indonesia deliver surprise rate cuts earlier on. Will other people look at what has been done and think there is more room to cut and there is the potential to deliver further rate cuts. Our other Central Banks going to take note of what those countries did today . Luis this is a very important note. Where lifting sentiment, at least until last week, was becoming universal. Very positive vaccine news. We know there are massive challenges going into 2021. In the meantime, what we have, we have the example coming from the states where we have the challenge of further restrictions to mobility, the same restrictions we are leaving in the u. K. And the rest of europe. It is a tugofwar. In this tugofwar, the longer we stay here, and i believe the more tempted Central Banks will be in emerging markets to cut rates further. I believe we are going to see further cuts for the easing of policy rates, especially in those cases where we have not seen an acceleration of the standard so far. It is probably the case of russia, it could be the case with other economies in asia. We think this is a First Quarter to Second Quarter movie in 2021. Alix there appears to be some kind of consensus emerging markets is the place to be. There is room to cut rates and fiscal policy working in tandem in a way it is not in the developed markets. At what point is it justified versus we will just be too consensus . You cannot do it. Luis i object to the statement that they handle the virus better. They cannot handle the virus better. Look at the curves in brazil and latin america and even Central Europe which is struggling a lot. I think the markets as an asset class, and given the positive real guilt we had in this asset class, indirectly they are benefiting from aggressive policy action coming from the core markets, coming from the fed, coming from the ecb. This is honestly pushing International Capital rates and we probably continue to see that into the next year. Guy is that really yield advantage starting to fade . Luis it will fate at a certain point if i am right in my prediction we will continue to see rate cuts. Aggressive andis the positive sides in terms of vaccine prospects and how vaccine can propel the economy next year. I think if this is done aggressively and becomes detrimental to currencies, and that is when the factor starts performing. Alix good to talk to you. Luis costa of Citigroup Global markets. In the u. S. What we have seen as we are confused about where we are going in terms of the real economy versus a few months is Investment Grade corporate debt and even highyield debt is still a killer investment for certain individuals. You are seeing a lot of Companies Come back into the bond market, especially in Investment Grade. Carnival going back to the highyield bond market. There has been a borrowing boom, and we are seeing Iconic Companies not earning enough to pop for interest expenses. Earlier today Michael Mckee asked cleveland fed president Loretta Mester if we have a credit problem . Credit losseser have not shown up at the banks as much as they might have so that is a positive for this economy. Do not see the kind of things we might have expected to see given the shock the pandemic was. Thomasoining us is jason , Carlyle Group global head of research with the new report on this very topic talking about the credit issues globally and in the u. S. His Loretta Mester right . To have a credit issue or will we keep posting like this . If we think back to the spring, we have never seen the fed are central bank respond to a shock with that speed or that much force. Within two weeks after a pandemic had been declared, the fed had cut rates to zero, started purchasing treasury securities at an unimaginable clip, and also pledged to backstop the Corporate Credit market. As a result of those actions, businesses, with a few exceptions, but borrow whatever amount of liquidity they needed to cover shortterm operating losses. The poor contention of the carl isle report is the fed actions do not eliminate default so much as flatten the curve. The first wave of defaults is going to be 40 smaller than one might have expected in march or april, but in many cases the defaults have been pushed further into the future. Guy in terms of the impact of the economy, what will that be . We are going to take longer to get through the process of creative destruction. We will have Zombie Companies hanging around for that much longer before they end up defaulting. I am curious as to your sense of what that means in the phase after we get the vaccine, after this is the postcovid phase. What does the Global Economy look like . Phase, inthat initial terms of the policymakers onponse, they wanted to err the side of doing too much. The normal moral hazard concerns that would keep the fed from intervening on that scale were not present because they decided no business could reasonably have been expected to prepare for a pandemic. Over the next two years, the populace is going to change. Policymakers will start to worry about zombies, because zombies introduce disinflationary pressure. It makes it harder to hit your inflation targets. It also means a more productive firms cannot raise prices. It also depresses the economy wide return on capital. What we are going to see in 2021 with the vaccine is a shift in policymakers focus and becoming more sensitized to doing too much. Rates will remain low, make no mistake about that. He we will continue qe will continue, but the backstops are going away. Alix who is going to be at risk for that . Will that be the credit investor, and will they not have their poverty rate we expect, or will it be the Equity Investor, that if the Companies Keep going back to the market, having a big stockpile of cash, is it the Equity Investor more on the hook . Jason what is so fascinating about the market is there is little bit of everything. We always think about credit markets in terms of cycles, but this market defies cyclical characterization. You do have businesses in distress, largely retail, largely energy, those are industries we are facing structural headwinds facing the crisis. We have the businesses that are probably going to benefit from spending,xperience, travel, tourism, live events. Investing in them from the creditors perspective could be a good bet. They are going to grow rapidly at the end of 21. I do want to also mention fastgrowing businesses today in technology, business services, health care. In those capital structures, you have the largest equity contributions weve ever seen. , equityge in 2020 contributions averaging 50 of enterprise value. When the market value of the assets of those businesses falls in have in the creditors are still fully covered in terms of the face value of their liabilities. Answering that question requires appreciation for the dispersion in the market and how different these individual situations have to be. The fed and Central Banks have created an environment where credit has been a nobrainer. With the fed at your back you have been able to make serious money in this space. , ashe fed departs the field other Central Banks depart the field, what does that mean for Credit Investors that have gone down the credits theyll because they are searching for yield, because they are searching for greater pickup, and because they know the Central Banks have got their back. How quickly does this reverse and what does it look like . Jason it looks like increased dispersion. We see dramatic dispersion and real economic outcomes in terms of Performance Across Industries , but because of the Central Bank Backstop we have not seen a commensurate dispersion in pricing. Zombie businesses can issue liabilities at comparable spreads to businesses that are doing very well. The first step in this process, once the market operates without a net and Central Banks pullback the liquidity facilities, is just much more dramatic crosssectional dispersion in spreads come in pricing. That will be a market where it will be attractive for those thestors able to identify spreads that are in some bit of trouble because of the rise in cases and social distancing. Over it does go to threeyear horizon, they will make that up as the pentup demand for travel and tourism and live events manifests itself for dramatic growth and revenues. Alix we just had a pie chart that showed Energy Relief dealing with default much more than any other sector. As we get this dispersion, what sectors will get hit hardest and what are those recovery rates actually look like . We missed the distress cycle this year on the whole. You have prices that fell from 96 down to 76. Those prices recovered in five weeks. The magnitude it took five months. Forward, it was really only energy and retail that was not able to issue this liquidity to cover theres nearterm losses because investors recognized their more structural factors at play. Going forward, it is going to be idiosyncratic. It will be industrial firms that simply accumulated too much debt relative to the enterprise value of the business. It is going to be some of the structural changes in terms of consumers preferences for Digital Services or consuming more content at home that could have an impact on some of the experience sectors, some of the live events. It is going to differ quite a bit on a crosssectional basis. I think that instead of the wave of defaults in Certain Industries or defaults concentrated in time, we are going to see elevated default rates, but they are idiosyncratic. Company specific phenomenon. Guy a lot of people continue to tell me they are surprised stuff was going out the door with the they were going out the door with. What is the recovery going to look like . Jason as we see today in retail and energy, youre looking at recovery rates at alltime lows. Youve seen your loan recovery late rates that have recoveries that look like highyield bonds, and highyield bond recoveries on . 25 to . 30 on the dollar. There is a phenomenon we see. It is important to differentiate between businesses facing structural headwinds, where there is not the going concern value and it is melting like ice cube, versus those businesses that are going to have unsustainable capital structures, they are going to be putting restructuring, but there is actually real value, perhaps after a resolution. Guy jason, thank you for your time. Jason thomas of the Carlyle Group. Thank you. Alix that does it for me and died in new york and london. Coming up that does it for me and guy in new york and london. Oning up balance of power bloomberg tv and radio. Businesses today are looking to tomorrow. Adapting. Innovating. Setting the course. But new ways of working demand a new type of network. One thats more than just fast. You need flexibility to work from anywhere. And manage from everywhere. Advanced technology. With serious security. And reliable coverage, nationwide. Forwardthinking enterprises, deserve forwardthinking solutions. And thats what we deliver. So bounce forward, with comcast business. David from bloomberg World Headquarters in new york to our tv and radio audiences worldwide , i am david westin. Welcome to balance of power for the world of politics meets the world of business. One of the biggest issues in washington is how we will get from a President Trump to a president biden. We have a president elect, but no transition is going on, at least not now, which means a new administration cannot get up and running despite the pandemic. President elect biden i cannot do any of this until i am sworn in or i can convince the president to do now things that should be being done already. There has hardly been a meeting that has taken place in the white house about any of this. David we welcome someone who has run a president ial transition team. Before Valerie Jarrett served as advisor to president obama she was cochair of the obama Transmission Team in 2008, all of which she wrote about in her book finding my voice when the perfect
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