Stephanomics

When visiting El Salvador, be sure to bring sunscreen, a long-lens camera to memorialize its bountiful biodiversity and … Bitcoin. But have some U.S. dollars on hand just in case local merchants don’t accept it.

On this week’s episode, we dive into the disparate ways in which global leaders approach digital currencies, from the Salvadoran embrace to the tentative exploration by central banks. Tiny El Salvador, population 6.5 million, was the first country to make Bitcoin legal tender, providing a test case for its widespread use. Bloomberg reporter Michael McDonald filed a dispatch from the Central American nation after testing Bitcoin at various restaurants, rental car agencies and street vendors. While some transactions went through just fine, McDonald reports, many Salvadoran merchants have sworn off crypto and are sticking with the country’s other legal tender, the U.S. greenback.

Elsewhere, Stephanie finds central bankers and economists to be more circumspect about whether and how to create central bank digital currencies. Such crypto would be regulated by a country’s central bank and theoretically offer price stability. In a discussion sponsored by the Bank for International Settlements, a central banker from Sweden, the chief executive of Santander Bank and a Yale University finance professor weigh in on how to protect consumers while exploring this alternative form of payment.

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Last year, Larry Summers famously shot down one of the Federal Reserve's favorite buzzwords, "transitory." This year, he's taking aim at "soft landing."

The Harvard University professor, former Treasury secretary and paid Bloomberg contributor says a combination of high inflation and low unemployment historically has spawned a recession. So, he's skeptical that the Fed can chart a path that will see the country out of its inflationary funk without causing an economic downturn. Once again, Summers is more pessimistic than his peers, with economists pegging the chance of recession in the next year at just 27.5% in a recent Bloomberg survey.

This week, Summers shares his thoughts on why the Fed needs to be more willing to acknowledge what he calls its monetary policy failures. He also comments on why he thinks some recent Biden administration moves to ease prices increases will be ineffectual, and about why he thinks Americans need to sacrifice more in order to punish Russia for the "worst threat in 75 years of naked aggression."

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We may live in a global economy, but beyond the war in Ukraine, what's front-of-mind for policymakers in the U.S., Europe and China is very different. For China it’s Covid-19; for Europe, it’s the price of energy; and for the U.S., it's inflation. 

In the first episode of the new season, Stephanie Flanders takes us on a tour of the world economy, opening a window on the top concerns in all three regions. Bloomberg Chief Economist Tom Orlik reveals what’s behind his growth forecasts and how geopolitical tensions may affect globalization. Senior Reporter Shawn Donnan visits Indiana, where the red hot jobs market has laid bare the reality of finding workers for U.S. factories, and the perks needed to get them in the door.

In Europe, reporters Carolynn Look and Jana Randow explore how Russia's invasion is overturning long-held views on both economic and foreign policy. And finally, Chief Asia Economics Correspondent Enda Curran turns his gaze to his long-time home of Hong Kong, and questions its future path amid increasingly aggressive interventions by Beijing. 

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With his poll numbers falling, U.S. President Joe Biden is under pressure to do something—anything—to get inflation under control. That’s led his administration to scrutinize the prices you pay at the grocery store, even if some critics argue alleged price-gouging by consumer products giants is a convenient bogeyman.

This week’s episode dives into the debate around corporate consolidation and whether it’s giving too much power to those companies. First, Bloomberg editor Molly Smith visits a New Jersey butcher shop where the owner suspects greedy multinational firms are behind the doubling of prices for some cuts of meat. The companies are pleading innocent, blaming instead labor shortages and soaring demand. But Bill Baer, a former antitrust chief at both the Justice Department and the Federal Trade Commission, sides with the butcher. He tells host Stephanie Flanders that some companies in concentrated industries are boosting prices well beyond just covering their extra costs.

Finally, Rome-based reporter Alessandra Migliaccio reports on the “Groundhog Day” nature of the Italian government, with its long history of cyclical political crisis, salvation, infighting and crisis again. With Prime Minister Mario Draghi potentially leaving his post to become Italy’s next president, a more ceremonial role, many worry it won’t be long until the cycle begins again. 

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When facing an economic crisis, the Fed's playbook normally skews toward juicing the economy too much rather than too little. After all, in the last go-round in 2007, being too stingy might have helped trigger a depression. Fifteen years later though, America's central bankers face the opposite problem: they need to move fast to cool inflation.

That's one of the takeaways from a panel discussion among economists this week, moderated by Stephanie. With U.S. inflation at 7%, the Fed needs to do more than expected, said Bill Dudley, a former president of the New York Federal Reserve Bank and senior adviser to Bloomberg Economics. Dramatically raising interest rates by a half-point in March is worth a look, Dudley said, though unlikely to happen. 

Meantime, Bloomberg chief U.S. economist Anna Wong explains why U.S. workers, who've gone missing lately, are likely to rejoin the labor force soon. And, chief global economist Tom Orlik shares why President Xi Jinping isn't about to let China's economy implode while he seeks to cement lifetime power. Finally, on a lighter note, reporter David Hood shares everyone's frustrations with the IRS, where customer service is so bad that some tax professionals are hiring robots to wait in line for them.

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Closed schools. Empty shelves. Workers out sick. Almost two years after Covid-19 overturned the U.S. economy, "it's like deja vu all over again,'' in the words of baseball great and eminent wordsmith Yogi Berra. This week, we dive into how the omicron variant is likely to disrupt plans across America this winter. But we also explore how another country is bouncing back, as Stephanie chats with French Finance Minister Bruno Le Maire about his nation's robust economic comeback. 

But first, senior reporter Shawn Donnan gets a firsthand look at omicron's disruption at a Washington-area pizzeria. He explains why one economist likens the current infection surge to the "mother of all winter storms," one that cancels flights and causes supermarket shortages of everything from chicken to tofu. 

Next, we size up French President Emmanuel Macron's reelection chances this spring and a campaign centered on the nation's humming economy. Le Maire tells Flanders that France's employment rate, its highest in 50 years, is a sign of Macron's success. Paris-based economics reporter Will Horobin shares why the nation's economic recovery may sway France's voters more than its culture-war clashes. 

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With shortages at the grocery store and not enough people willing to work, 2022 is starting to look a lot like 2020. But beneath the ugly exterior, the world's economies have learned to cope with Covid's fallout, and the supply chain debacle in particular. One country is even thriving. 

In the first episode of the new year, we offer two fairly optimistic assessments. Bloomberg Senior Editor Brendan Murray shares with Stephanie Flanders how companies are adapting to the fast-spreading omicron variant and finding ways to function as more workers fall ill. He also explains that the success of China's zero tolerance policy may determine the length of the supply chain crisis.

We then travel to Mexico and the Chihuahuan Desert, where U.S. companies can't build factories fast enough. Tired of backups at Los Angeles-area ports and no-shows by American workers, manufacturers are moving production to the booming border town of Ciudad Juarez, Bloomberg manufacturing reporter Thomas Black reports, in a pandemic victory for Mexico's economy. 

Finally, Tokyo-based economics reporter Yoshiaki Nohara brings us a dispatch about the side effects of moving toward a greener future. Japan's leadership is trying develop its renewable energy industry by putting offshore wind farms near places like Iki island, off Japan's southwestern coast. But fishermen worry the noise and radio waves will drive away all the fish and cripple their industry.

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While still recovering from a coronavirus-induced recession, the U.S. may be rushing into a new downturn, this time thanks to inflation. Its economy faces no shortage of potential peril in 2022, Bloomberg chief economist Tom Orlik says, with the Federal Reserve looking set to raise interest rates to fight rising prices, and as Congress seems unlikely to pass any more big spending bills. That's one of the takeaways from the Stephanomics global preview of 2022, in which Stephanie and a panel of experts look into their crystal balls for political and economic insights.

On the political front, French President Emmanuel Macron looks poised to win reelection in France next spring, but U.K. Prime Minister Boris Johnson faces a 40% chance of losing power, with "strong upward pressure" on that number, says Mujtaba Rahman of the political risk consultancy Eurasia Group. In the U.S., the fate of President Joe Biden and fellow Democrats may depend on inflation. With midterm elections on the horizon, they could be toast if it lingers too long, Bloomberg White House reporter Nancy Cook says.

Bloomberg Green editor Aaron Rutkoff sees Biden being powerless to improve U.S. emissions if he can't get the climate component of his Build Back Better agenda passed. And Orlik sees a novelty in the U.S.-China relationship, where China will probably go its own way and cut interest rates while the U.S. raises them.

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Economically at least, this holiday season feels a bit more like it belongs to Ebenezer Scrooge than Santa Claus. Amid a resurgent pandemic, there are shortages at the grocery store and the highest inflation in almost 40 years. So who better to sum up 2021 and forecast 2022 than Larry Summers, whose contrarian warnings about inflation have, at least at this point, largely proven accurate.

On this special holiday edition of Stephanomics, the former U.S. Treasury Secretary shares with host Stephanie Flanders how he arrived at his prediction that inflation would run higher than most everyone else expected, and why he fears "we are already reaching a point where it will be challenging to reduce inflation without giving rise to recession.” Summers, a Harvard University professor and paid Bloomberg contributor, also explains why he thinks "running the economy hot" is unlikely to help U.S. workers get a larger slice of the economic pie.

If inflation isn't enough to further dampen your spirits, Summers also tells Flanders why the nation may see a double whammy of recession and "secular stagnation," an unappealing mix of weak growth and persistently low interest rates.

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The so-called great resignation that’s confounding businesses in the West has a counterpart in a most unlikely place: China. This week, we offer a double dose of China’s “lie flat” movement, which is challenging the nation’s historic industriousness, as well as a glimpse into how America’s massive pandemic bailout juiced spending, especially among historically disadvantaged groups.

First, Hong Kong-based economics reporter Tom Hancock explains why many Chinese workers are suddenly whiling away the hours playing online games instead of toiling on the factory floor. After years of clocking in at 9 a.m. and clocking out at 9 p.m., six days a week, some are saying enough is enough. Bloomberg Opinion columnist Shuli Ren shares how President Xi Jinping isn’t amused with this trend. China’s leadership meanwhile is eager to stop pumping out so many university graduates, preferring instead to steer youth into vocational training and high-value manufacturing. The hope is to replicate Germany’s success.

Next, data reporter Andre Tartar unearths some revealing credit and debit card numbers to show how government payments during the pandemic boosted spending by Black Americans as much as 40% over 2019 levels. For a time at least, it shrunk the nation's persistent racial wealth gap. Finally, Hong Kong reporter Oanh Ha shares why some big food producers are betting that soon you may be getting some of your protein from crickets.

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