tom: this morning, call it the monday blame game. the president goes after dr. fauci and china. congress, democrats are in the news media. title called mr. trump president."o i get the genie back in the balance sheet bottle. talk with a, i vice chairman. is with usat taylor today. francine lacqua out today.

much to talk about here, but part of it is the market reaction. rollovernd then a year. taylor: i'm thinking 10 million barrels a day is not enough. we increasingly hear calls for 20 and 30. the drop in oil prices is also affecting the credit markets as you take a look at that downgrade cycle that is underway. 200 billionking at dollars of bonds that are set to lose their investment grade rating. looking at some of the biggest down rates cycle underway. oil andcourse, into the permanent base, it will be challenging. in this hour, michael mckee and i will speak with richard clear. i'm going to take a broader view, and i know michael mckee, which he does at the press conferences, will ask press conference like questions.

with first word news, here is verve -- viviana hurtado. a: now, the focus shifts to other the cut will be enough to shrink the massive glut of oil. johnson, he thinks the national health service for saving his life after a week in the hospital for the coronavirus. p.m. johnson was released. in a video he says "things could have gone either way." prime minister johnson is still too weak to resume leadership of the government. we end with this, parts of the u.s. could reopen in may. this is according to dr. anthony fauci, but the infectious disease chief warning there is no universal light switch to flip on. dr. fauci telling cnn, the availability of widespread testing would be the key to relaxing social isolation. he also said there is a

possibility coronavirus could rebound in the fall. day, onews, 24 hours a air and at quick take by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado, this is bloomberg. tom: i'm going to keep the data check real short to get to michael darda and the vice chairman as well. two year yield comes in, futures weight. there is a weight to the short-term paper space. a lot of firms adjusting their economic forecasting down here as we go into the middle of april. what do you see in the data? taylor: small-cap domestic stocks really getting hit hardest as we take a look at futures down more than two person as the u.s. economy struggles to hang in. i'm taking a look at credit, which is catching a bid after the fed last week so they are going to be supporting the fallen angel market. they do have the biggest high-yield market we have seen.

down 86 basis pains or so. so.cent spread -- points or spread. the fed so they will be stopping in and buying the short-term market to help some of those local governments engage in some affordable deficit financing. tom: very good. what we are going to do, at the bottom of the hour, michael mckee and i will speak with the vice chairman. we are thrilled that michael darda could join us right now. every second is precious. the arch question is, they are doing all of this and they have to get all of these programs, all of this debt, up to $6 trillion or even more back in the bottle. he wrote in your research note over the weekend that you are optimistic they can do that. how will they affect that process? michael: thanks for having me on. marketswe know that

believe that most of these actions, while historic and aggressive, are temporary. as it relates to the lending facilities, they will simply self liquidate at some point. even the asset purchases that the fed has announced as being essentially unlimited, they are still bound to the fed's dual mandate. natures a temporary relate to all of this. you can see that in inflation expectations. they have been moving up and improving. they are not soaring. i think it is important to evaluate what the fed is doing in that context. tom: yogi berra talked about theory and practice and said

basically in practice, there is no theory. what is the theory right now the central bank? michael: i think the theory is to not allow a supply-side shock, a natural disaster or a pandemic, to morse into a deflationary depression. -- morph into a deflationary depression. from early march to late march, we were seeing scary signs of a massive dollar liquidity panic that initially seemed to overwhelm the fed's efforts, but now, the tide is starting to turn because of the feds very aggressive and open-ended actions. that is good news because the last thing you need is for a nasty supply-side shock, which is essentially, an act of god, a global pandemic, to then be massively compounded and exacerbated by a monetary shock. that is what the fed is there to prevent and that is what they are doing. i think they have done a good

job in that sense and should be commended instead of being criticized. i see a lot of ankle biting criticism from folks that frankly do not understand monetary policy. taylor: you mentioned the word deflation. my textbooks told me five years ago that when you print unlimited money, you get inflation. you get cpi data last friday that shows an underwhelming sense of inflation, or a beginning of a disinflationary environment. what are you going to be more surprised by, deflationary environment or perhaps some potential upside price shock on the inflation side? michael: yes. good question. i think as it relates to all the macro data, what we are going to see first is a big plunge. the federal reserve in fiscal authorities can't stop that in real time. what they can do is lay the foundation for a strong rebound, whether it is a v or a u, we can

debate that. it is going to be dictated by the evolution of the pandemic itself, but eventually, when the pandemic dies down, we should have a strong rebound. that is when you will see some reflationary momentum. in the very near term, the macro data, whether inflation data or output and employment, we are going to get data on retail sales and employment this week, it's going to go straight down. if you look at a forward-looking barometer like tips inflation breakevens spreads, what you will see is they plunged coming into the year as the crisis started to unfold. recently, as the fed has gotten traction, with some of these liquidity facilities in the unlimited bond buying, they are starting to recover. that is a very good sign. they are not at high levels or alarming levels. they are moving up and so we are moving out of a potential deflationary shock. that is what the fed's job is.

that is a very good sign. taylor: thinking about my generation and the generation that is going to come behind me, what are the long-term consequences of the massive debt loads we are taking and this fiscal deficit that we seem to not worry about in war times? michael: right. sorts,fighting a war of typically run ups and deficits in the way we are seeing now, would be a wartime situation. how you deal with that over the very long term is typically a combination of economic growth and may be a bit of inflation and austerity. later.that comes we have an emergency here, a crisis. people need to be protected. we need to shield that blow. it is basically a planned shutdown of the economy, self-induced, but necessary.

we need to try to cushion the blow. we can do that with historically low interest rates. necessary, it will run up the debt, but hopefully, with stronger growth in the future, that is one way to deal with it. and austerity, but not now. the austerity comes later. darda with us. again, in 20 minutes, the vice chairman of the federal reserve system, richard clarida of columbia university. you know him working with pemco as their global strategist for years. hpc,ow, advising the advising jay powell on a daily basis. this is bloomberg. ♪

taylor: i am taylor riggs with york.ene here in new the opec-plus alliance has come to an agreement to cut global output by 9.7 million barrels today after a weeklong of oilateral calls and vide conferences to tackle the impact of the pandemic on oil demand. joining us now is brenda schaefer, a senior advisor for the energy for defense of democracies. my first question happens to be, is 10 million barrels enough? brenda: 10 billion isn't enough. this might delay the inevitable, but the inevitable, nonetheless, will continue the climb as oil prices we see today, the very tepid response to the agreement. decline inverall

demand of 30 million, so 10 million really can't, more than a drop in the barrel. on the other hand, we really do need to be thinking forward. and really be careful what you wish for because with the continued low oil prices, once economic activity does resume, these low prices will be causing shutdowns. they will be causing delays in new investment decisions. and probably when economic activity picks up in the third and fourth quarter, that oil isn't going to be there for the demand. taylor: how much more cuts do need to see in the interim while we are in a lack of demand period to slow down how quickly we are filling up the storage tanks? late april,ably by mid-may, most of storage around the world will be filled. in a sense, this is more of a

declaration of a process that is happening. one storage is completely filled, and pipelines are filled, there is no way that producers can continue to produce oil. we are already seeing some of .hese shutdowns taking place it was a $30 million drop in demand, they are going to have to be continued shutdowns. to have you.l nine years ago, you put out energy politics, a definitive on the politics of the moment. i don't believe you had a chapter on opec-plus, but you did begin in energy politics. you began your book about mixing politics with oil. it is unprecedented what the president of the united states has done. how has his mixture of politics and oil going? brenda: thank you for reading

the book. the big headline from this weekend is more about what this can do for u.s. standing and the world. for all of the critics that say the u.s. isn't a leader anymore, the u.s. doesn't have influence, if anyone could have imagined 10 years ago or even a year ago that the u.s. president would be the main go-between in negotiating a deal between the major producers of the world and the u.s. will be the leading producer of oil, it really does say something for the standing of the united states. i think if the u.s. wants to do something to address the oil price, probably would be for congress to allow the administration to fill the strategic reserve. just good sense. tom: how does the cartel work in game theory when it is not a cartel, their outside players,

16, 17, 18, even 20 players involved. how game theory work? thata: i don't think anyone can really model that. if a model would have predicted that mexico would have been a stickler for the deal and keep those meetings alive for three days, that would be pretty impossible to model. i would say also that the other message is be careful what you wish for. the goal here was actually to prop up prices. listening to the guest that preceded me, we are seeing already economic activity returning to china. once there is a medical development that allows return of economic activity in the u.s. and europe, we are going to see demand for oil going up. as we mentioned before, these shutdowns and the lack of new investment in oil will make sure the oil isn't there when the

demand goes up. we are going to be talking in six months about what do we do about high oil prices. tom: so you say. brenda: i hope. tom: thank you so much. dr. brenda schaefer. we are going to continue forward. darda will be with us with nothing on the pandemic with the vice president of the fed. stay with us. this is bloomberg. ♪

tom: good morning, everyone. thrilled you are with us on this monday morning, a historic weekend for the nation. certainly going into this week, looking at the effects of this pandemic, and of course, what we see in economics, finance and investment. the vice president of the federal reserve system will join us in the second. i am thrilled that michael mckee will assist me in that interview. right now, a little more perspective with michael darda. i don't want to get into a lot of mumbo-jumbo theory.

your research note this weekend on manley johnson, the, former governor from another time and , was over 20 years ago profound. the arch matter is, should we look at real interest rates and real gdp, or should we look at the whole pie, inflation plus the economy as a whole, the nominal rate? which is it? michael: i think you want to look at the whole pie. shocks, itt hit with can be highly illustrative to look at the components of what is driving the treasury yield. what we were writing about over the weekend is, if you look at what was happening between the sixth of march in the 19th, we had a very big liquidity shock. that was represented by a big surge in the real rate on tip securities, but a plunge in inflation expectations.

islnis a textbook liquidity shock. that has been largely reversed thanks to the fed's efforts. there are times when some of that old-school analysis can be quite helpful. goingthink about policy forward, nominal magnitudes are going to be critical. the key question is, can we get the nominal economy, the total level of aggregate demand, back up to its precrisis trend growth pass in a reasonable timeframe if and when the pandemic ends. that really has to be the key question for policymakers in thinking about how to shape policy on a go forward basis. sure that michael mckee will ask all of the rude questions in our interview. he is famous for that. one of the rude questions at the

moment is what's next? what would you like to see next for this fed after the the issuance of alphabet soup? advocating,ave been along with some of the so-called market monetarists for a nominal gdp level packs target. but is sort of a mouthful, it basically relates to what i just mentioned before. strongd be -- within its assist from policymakers, the fed committing to keep policies supportive until we are back up to the pre-pandemic growth trend for the nominal economy, growth plus inflation. could make policy more credible and more effective, and that is really what we are going for here. stuck.t that the fed is

tom: let's do this. we are going to speak to the vice president of the fed. mr. darda will join us again later in this hour. we are looking at a 10-11 minute interview with the vice president. oil is fragile and opec and all of that, but the two year yield has come in. very quietly, that short-term full credit peace has come in a little bit. please stay with us. coming up next, michael mckee and myself in conversation with the vice chairman of the federal reserve system, richard clarida of columbia university. this is bloomberg. ♪ you doing okay?

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tom: good morning, everyone and good morning on bloomberg radio and bloomberg television worldwide. a conversation with the vice president of the fed, richard clarida. joining me again as our chief international economic mckee.ondent, michael you know him from the press conference with chairman powell, usually bringing the room to a bit of a quiet. i'm thrilled mike could join me this morning. every moment here is precious. it is indeed a historic time. let me ask the question that i saw in so much research and reading over the weekend. that the fed can move the balance sheet back to normal down the road after this pandemic after a number of years of economic growth, how do you get the genie back in the bottle? v.p. clarida: thank you for the question. i enjoy doing your show, as always. first and foremost, i think we

have to recognize that we are in situation.ique the coronavirus pandemic is taking a tragic human troll in the u.s. around the world. we have asked people to step back from economic activity investing in public health. there is going to be a hit to economic activity. what we have indicated is that we have put in place these lending facilities under our authority to act under unusual and exigent circumstances. it is an ambitious and entirely appropriate and forceful use of monetary policy in these times. but to your specific question, yes, i am very confident that as the economy recovers from this hit and begins to return and recover, that we, at the appropriate time, will be able to unwind these programs. there is nothing fundamentally wrong with the u.s. economy, it came into the year in a very strong position both in terms of employment and growth and financial markets. i'm confident we can get back

there, and at the appropriate time, we can scale back these programs. michael: let me follow up on that and ask you this. with probably billions of dollars in loans out to companies at near zero for over four years, are you ever going to be able to raise interest rates again or are we looking at essentially the fed doing yield curve control now? v.p. clarida: right now, we are not doing yield curve control, but we indicated in our march statement that we are going to keep rates where they are, which is basically very close to zero. until the economy is on track to achieve its maximum employment priced abilities. the path of the economy is going to dictate ultimately the path of rates. these facilities will be in place during the period when the economy is being impacted by the virus. term sheets, you will see that to stoplities are due

lending in september of this year. obviously, we can extend that is needed. those loans will be in place and we will have a return of several years. at the appropriate time, i do not think we will have -- that that will be a challenge when it is appropriate. again, that is a long way down the road. we think where rates are now is where they need to be given where the economy is. michael: tom mentioned the notes he is getting from people asking questions. the one i get most often is, why did he feel it necessary to go into buying junk? v.p. clarida: we have put in place no fewer than nine facilities over the past several weeks. first and foremost, our focus in these facilities is making sure their credit is flowing to businesses and households. in thely, we are commercial paper market,

financing auto loans and credit cards. main street lending program will be partnering with banks to provide financing. the vast bulk of these programs is really focused on new lending. there is an element of one of these programs that will be purchasing assets in the secondary market. i think an important point for your listeners and viewers to recognize is that several important companies in the u.s. for investment-grade up until this crisis hit. what we have said on our programs is, if they have been downgraded after the date of the crisis, they will have access to these facilities. that really is our focus in these programs. the elasticity here, the of this pandemic is extraordinary. what i would suggest is, we

don't know the speed of outcome. what do you do if we get a more optimistic outcome? what do you do as an institution if there is a rapidity to our recovery? v.p. clarida: obviously, we are looking on a very wide range of scenarios, as i'm sure our other central banks and policymakers. we have gotten a lot of bad news in the last couple of weeks in terms of the spread of the virus and impact in the labor market with 16 million initial claims over the last several weeks. the economy is taking a hit because there is nothing wrong with the economy. we have asked people to step back from economic activity. there are scenarios that are more optimistic. obviously, we certainly hope and pray that they materialize. if they do, that will be a good situation to be in. we will have in place programs that are essentially -- we are building a bridge until the

economy can get to the other side and begin to recover. if that happens sooner, we will certainly know what to do at that time. tom: let's get out on the bridge right now. you know michael mckee is only in charge of rude questions to the chairman at the press conference. let me ask a rude question to you. what does the bridge look like out here from the fed meetings onward and from the minutes of the fed we will see, how will that debate unfold within your federal reserve system? v.p. clarida: obviously, those discussions are private. we can discuss, as i do my own views, but our meetings i think serve a very useful purpose. we have had to do a couple of meetings in march by videoconference. that was necessary given the rapidity with which the situation was changing. at our committee,, we will be discussing i am sure, the new facilities we have announced and

discuss about putting them in place, and then we will get a briefing on the economic outlook and looking up for scenarios both positive and negative. i think the flmc serves a very important role in our policy discussions. the board of governors, of which i'm a member, also plays a role in actually approving and designing these programs. and facilities. michael: you are the model guy. tom put me in charge of asking the rude questions. let me ask you about pessimism. what do you see is the worst case scenario, and do you think we get a damaging disinflationary impulse out of this? going toida: i'm not go through scenarios now. we only have 10 minutes and i would take longer. what i will say, and i think it is an excellent question because you will see there was some discussion back in january and february that were we to be hit coronavirus, and it is

important to remember that the first fatality in the u.s. was in very late february or early march. as a result, there was some speculation at the time but if we got hit with the pandemic, that because of supply chains, it was an adverse supply shock, which would be inflationary. i never believed that or bought into it. i was thought if we got hit with the virus spread, it would, in that, be a shock to aggregate demand. demand is impacting very adversely. we are trying to upset that with policies. i think our net is do you -- disinflationary. i think we have the tools to keep the u.s. economy out of and to support the economy through this challenging period. it is definitely more of a demand shock, i believe. michael: to follow up on tom's question about what the fed

discussion is in the future, i know you had to put the fire out. have you not created the mother of all moral hazard now that you will end up with a lot more dangerous risk-taking because everybody knows that if something goes wrong, the fed is there to backstop them? v.p. clarida: i really don't believe that is the case. i think moral hazard, in past circumstances when it has been associated with excesses, is obviously something to assess and think about. this is entirely an exogenous event. businesses are closing and people are unemployed not due to any fault of their own.this is the clearest possible case that those are not relevant considerations. again, with the chair has indicated and what we sent publicly as we have these lending facilities in place because of these unusual and exigent circumstances. we will use our authority forcefully and aggressively

until the economy has recovered. at that point, we will be prepared and be able to put these tools away when the economy as well on their way to the road of recovery. i do not see that as being an issue in the present circumstance. tom: one more question quickly, if i could, there will be a point where things will be calmer and your columbia talking about this. are we forever moving away from a rules-based debate? his discretion the future for any central bank? v.p. clarida: it is an excellent question, and you and i have discussed it many times on your show.the reality of central banking is it has always been about constrained discretion and a rules are an important part of communication and thinking about the application of discretion. again, obviously in these circumstances, the central bank needs the discretion to put in place policies under unusual and exigent circumstances.

i think it is entirely appropriate that we have exercise that now. richard clarida, thank you so much. greatly appreciated this morning. the former vice president, thank you so much as well. michael mckee, as well. please stay with us, from new york worldwide and across this nation. this is bloomberg. ♪

tom: good morning, everyone. too short of time here with michael darda after we have spoken to richard clarida, the vice chairman of the fed. very quickly, the idea of a path back to inflation, what is your

prediction on that mix of deflation, but particularly, disinflation in goods and services and getting back to some kind of inflation? michael: sure, tom. the shock hits, basically we have a planned shutdown of the economy. prices,employment, everything falls and policymakers cannot completely offset that in real time. as i mentioned before, what they can do is to put a highly supportive foundation in place so that if and when and as the pandemic eases, there is a rapid rebound to full health. we can debate about v-shaped or u-shaped recoveries, but if it is l-shaped, that is a policy failure. in the near term, we are going to see a lot more bad data. gdp and jobs are going to be awful. gamut of macro

indicators is going straight south. that will not last forever. some of these important financial market indicators have suggested we were on the front edge of a display scenario -- deflationary shock and have responded to with the fed is doing. that is a good sign. tom: what did you hear from the vice chairman? chairman powell talked about being a lender. i heard that from vice chairman claret as well. what was the nuance you heard -- claret as well. what was the nuance you heard? michael: i think the important nuance was that in thinking about a pandemic, whether it is a supply shock or demand shock, the way this was playing out was as a demand side shock, a hit to aggregate demand. in that sense, it is the federal reserve's responsibility to react to it. that is where i don't really understand some of the criticism

of the fed. for them to simply stand there and sit still and allow a deflationary shock to radiate through the economy, would be an aggregation of duty. and so, i think that was an important point. did a goodk that he job in emphasizing the fact that you guys were asking him, will the fed ever be able to reverse course? they have already proven that they have the ability and willingness to reverse course. they did raise rates nine times after all and take half $1 trillion out of the balance sheet. were too those actions soon and too aggressive if we were undershooting the fed's inflation target going into this. he didn't say that, but i think it is interesting because the criticism of the fed is all of this nonsense, one in fact, markets know that these programs and the open market operations, qe are all predicated on being

temporary. if that were not the case, we would have very different readings than we do today. tom: i would suggest that maybe what we saw was an experiment towards what you do with the balance sheet that will hold us in good stead over say the next 10 years. michael darda, great privilege to have you with us today before and after we heard from a vice chairman of the fed. we have much more to talk about. we do want to turn to one of our experts, on this pandemic from johns hopkins university. please stay with us, worldwide, this is bloomberg. ♪

good morning, everyone. we are looking at the markets. oil quite fragile. futures negative today. we are also looking at a pandemic. let me state, i was wrong. i mentioned over the weekend that without question here on the east side of central park near mount sinai hospital, i believe i heard less sirens.

i can report to you on a monday morning, that is wrong. there have been too many into the first light of this new york city. joining us now from john hopkins university and their bloomberg school of public health is someone we spoke to last week, joshua sharfstein. i should mention the philanthropy of michael bloomberg comes from bloomberg lp. mr. bloomberg is the founder not only of our terminal business, but also this television and radio network as well. dr. sharfstein, i need an update, and i need an update on something that was in the press over this holiday weekend, this weekend of religion. it appears that so many people are in the hospital desperately recover,then when they but then they fade again. did you observe that in baltimore? yetsharfstein: we are not at new york levels in baltimore.

i certainly have heard of what you have talked about, that there is a moment sort of midway in the illness where some people get quite sick. at that point, they can even proceed to death. obviously,ery scary, for the medical team. it is terrible tragedy in every case that happens. i think what people are wondering is if there is something that can be done to focus on that moment in terms of therapeutic to prevent what may be an overwhelming immune reaction that is leading to that second decline. tom: what is the idea of a secondary or reinfection? this is something out of the influenza of 100 years ago, but do you think it is a valid worry for our listeners and viewers? this idea that there is a virus and then we reengage with society, and we come up again

against the same virus a second or even third time? there is a lot we don't know about this virus, but in general, somebody who has fought the virus off and recovered is unlikely to get that same kind of infection again. i think it would be very unusual for that to be the case. even the reports of sometimes people may have a cover above virus later, are not quite the same as saying people can really get sick twice. i think that we will have to see what the data is, but it is probably a reasonable assumption of this point that people who were at least reasonably sick and got better, are unlikely to get that sick again. tom: the prime minister was exceptionally eloquent. i read in the telegraph this morning about the nurse from new zealand, and i believe the nurse from portugal as well, who literally said kept him alive.

give us on update on what you see at johns hopkins among the staff, the nurses and all the others assisting the doctors. dr. sharfstein: it is an incredible dedication at johns hopkins. isple have felt that this their calling, this is their responsibility. veryedical center has been supportive in terms of making sure there is protective equipment and all kinds of other mental health resources for staff. it is not just the doctors and nurses, there is a real sense of purpose for everybody working there. this is a moment in a way that many people have been training for, even if they didn't realize it at the time. tom: one final question if i could. the great fear that is out there

is there are things here in new york, particularly in the bureau of queens that have been quite horrific. what is the ability of this virus to spread to secondary cities and tertiary locations across the nation? what is really remarkable to me is how so many people believe that what is happening there, meaning somewhere else, isn't going to happen here, meaning where i live. nobody should really have that sense of confidence. people felt like, well, if it is in china, it couldn't come to italy, if it was in italy, it couldn't go to the u.s.. it can go anywhere. letting our guard down here, it would be a terrible mistake. certainly, in baltimore and washington and other cities, we are seeing increases in cases. we realize how much is at stake. i think we are going to be obviously in touch with people

in new york and learning a lot from new york's experience. think theys that couldn't have this problem are risking quite a lot. tom: thank you so much. dr. sharfstein with us from johns hopkins university school -- bloomberg school of public health. i have the entire bloomberg terminal off my cell phone. futures, -29. the vick is up almost three big figures, 44.34 as well. yield is in. this is bloomberg. good morning. ♪

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alix: we'll deal size versus duration. opec+ -- oil deal size versus duration. opec+ delivers. earnings angst. first quarter reporting's season kicks off this week. it will be bad. just how bad? it is a make it or break it week. investors bracing for a slew of economic data like retail sales, chinese gdp. welcome to "bloomberg daybreak: americas" on this monday, april 13. it is pretty quiet in the market. europe is closed. there's not a lot of volume. we had the best week last week in decades, so no doubt coming off of that level. yen moving higher. it is a mixed dollar story in the g10 space.