caroline: from bloomberg world headquarters in new york, i'm caroline hyde. romaine: the s&p 500 did fall for a fourth straight day amid concerns about covid-19 and fiscal stimulus. the question is global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and

analysts in more than 120 countries. areline: the talks bipartisan in nature and lawmakers are looking like they may be able to strike a deal for covid relief, but politicians are speaking on the same day that we are reminded of the global fight against the virus. that's in the united states alone passing the grim milestone of 300,000. hope, though, is on the way. now we need a financial shot in the arm. at the same time, it could potentially push inflation a little higher. before we even get on to the question of inflation or whether it's just a mirage, is the question of a stimulus bill a mirage? joe: we might have an answer by the end of the week. a bipartisan group of senators just in the last hour once again talking about their proposal for something on the order of $900 billion plus trying to establish

some sort of compromise involving state and local. small business aids -- that's not particularly controversial. -- somehow balance liability protections with state and local spending. romaine: liability protection seem to be the sticking point. progress on a final bill. caroline: meanwhile, let's get the economic take. it almost feels as though the stumbling blocks -- companies are just trying to keep their doors open. how important is stimulus right now? >> i think it is absolutely important. and quite urgent as well.

we are facing a repeat of what happens in the first quarter of this year. track for an positive rating and all the sudden, things started to deteriorate and that resulted in a negative trend for gdp growth. we started the quarter at quite and growth is going to slow according to our projections. but if we start talking about complete shutdown like we heard , thenhe new york governor we will probably see some negative trends. not in the first quarter. things could deteriorate quite rapidly and the fiscal stimulus is a must at this point. joe: a lot of people think that

willtime at q1 or q2 we able to go back to normal. let's say we skip ahead a year and it's december, 2021. how does the economy look different with or without a truelus package before the return to normal can begin? yelena: i think we will still -- easing of monetary policy setting. the fed will not rush to raise rates. i think inflation will continue to run. despite some recent market reactions and comment from different analysts. we remain in the disinflationary camp because the employment rate will continue to be elevated. it just takes time to get back

to more normal levels. i think we will get some good and the impact of what happened during the pandemic by that time. morene: is there anything the fed itself can do? do more,he fed can course. compositionft the to maturities and increase the size of purchases, but i don't think this will happen at this coming december meeting. just to see what happens with the fiscal package, we may get some news by the end of the week and if the economy needs more help, they will not hesitate but i don't think it is coming at this meeting. we will continue this

conversation. and we are going to delve into what our next guest called the big miss about inflation. this is bloomberg. ♪

romaine: welcome back to global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. romaine: welcome back to "what'd you miss?" now, it's going to poke its head out. a lot of misconceptions about inflation or popular beliefs, and one is the money printing

central bank activity causes it. --s hard to find that link japan is the classic case. in the white line, you don't see any inflation at all. no link between the two lines. to talk more about this disconnect and the persistence in the belief that they are connected, we are going to speak jensns nor vague -- nordvig. why does this myth refuse to die? it has been in the textbooks for decades and you can just go and google it. you will get almost all the top hits -- if there's some kind of mathematical certainty, it's going to translate into inflation in a simple way and we

had very strong evidence of that over the last decade where banks haveentral experienced more less aggressively and we've had very little inflation. myth to time for this die and that's why we started the blog. most of our content is behind a pay wall. outall it money inside and debate for into the a big audience and this was one of the first ones we wanted to put out and maybe next year will be different. caroline: you hoped to spark debate through this blog. did you get any fight back to your perspective? we've definitely gotten a

lot of commentary, so we will have to decide what we do with the comment section. if we answered all the comments, we would be very busy the whole day. have is onen we where we have a combination of monetary and fiscal policies and right different now is were the financial crisis monetary policy was alone, there's much more -- fiscal policy will have to do more of the heavy lifting. that could potentially generate something new. about are wete going to have 900 billion of fiscal stimulus -- those amounts, if we compare to the it's a we discuss,

pretty big amount. mindset on a new fiscal, aggressive fiscal stimulus and a fed saying we are not going to do anything preemptively, that has the inflationgenerate preemptively. romaine: i don't mean to split hairs but i wonder if there is a distinction between that type of stimulus -- quantitative easing stimulus,e fiscal what the fed has effectively not even up to today is printing money as much as it is facilitating the rotation of assets more or less. i think the key distinction is what i would call qe the fed buys a bunch of bonds and inject some

bank reserve into the system. that doesn't really impact the economy that much. but if we have a situation where the fed is buying bonds and the government spends that extra cash either in the form of infrastructure -- it's a totally different impact on the economy. ultimately, the most important path of inflation for the that has notmer, been moving very much so far. impact ofs a demand the overall policy set up, it could be different. i'm not saying we are going to have massive inflation, what i'm policyis this type of

has a chance of generating inflation over time in market participants need to be careful because it's not priced right. you said earlier what could drive inflation would be consistently stimulative fiscal policy. details on ag possible stimulus right now, but it is also one off. it's a lot of money and then presumably we go back to fiscal policy is normal. or would itff do it have to be a meaningful change in how we approach fiscal policy to get change in the inflation trajectory? key: i think consistency is and you will find a lot of key bidenic policy in the administration has learned a lot from a post-financial crisis

time. you don't want to take back stimulus to early. we are seeing it in europe as well. we are famous for having a tight fiscal framework. to treaty, you don't have obey the fiscal rules next year, so they want to generate some consistency in fiscal stimulus there. it's part of this framework where fiscal policy is getting more emphasis and rightly so and i think you are right to point and in the u.s., this lame-duck stimulus is important to give the economy momentum. but it's not you'd as the last ditch. we have a new administration coming in and presumably they will be aggressive. infrastructure is a big thing and that will come on later on. joe: go check out the new newsletter -- a lot of provocative arguments there.

coming up, the last fed decision of the year set for wednesday. we look at the macro look for 2021 next. this is bloomberg. ♪

caroline: today, our focus is on stimulus. the latest attempt to translate the deadlocks, the fed will be meeting as they decide how they will approach the economy in the year ahead. a simultaneous risk on rally and it sort of feels off. joe: you can see the reflation in the market very clearly. this incredible stock market recovery -- that's the white line. the orange line is 10 year

breakevens with increased expectations for inflation over the coming years. you can really see what is driving stocks and the question is can it go further? joining us for more is the author of the chief convection in blog. we've seen this reflation. breakevens10 year getting close to 1.9 or 2%. important pre-condition for a stockmarket rally? i think it can continue because one of the things that is interesting about what will this -- what will be this recovery as opposed to recoveries in the past is the fed is going to lean into it more than it traditionally has. given the fact we are 20 across allows amarket, it range of where asset markets can

trade and i think the key will be in terms of allowing this reflationary rally to continue his for the fed to maintain that its function is here to stay. romaine: do you think that's realistic? if you believe what powell and the fed have been saying, there is an inflation reaction they would have should you start to see it materialize in a meaningful way. we can argue about how long that would take but at some point, you would think the fed's hand would be forced. one of the potentially interesting narratives going q2, q3 boomar, this -- that is the cage match between average inflationary targets versus the upside risks. probably end up being

the fedw and i think pots resolve may surprise people. governor brain art in a speech in february which predates the covid shock came up with the idea of opportunistic reflation which would be the leaning into the outsized temporary inflation moves and using that as a their goalo get to and inflation expectations back to 32%. it sort of speaks slightly to -- we talk about it a lot, the inequality that has been so painfully obvious. it something we heard jay powell speak about even prior to covid, driving unemployment quite so low started to mean more and more people were in a fitting. iss the fact joe biden

looking to put that upon jay powell, is that some sort of role in the federal reserve to drive down inequality -- can we see that is credence to the economy that's been allowed to run hot? jonathan: i think that's a good point. one of the things that's interesting about the fed's reaction function is that it predates covid and they were on this path of trying to reinforce the hot economy, one where policy control was cyclically extended and as the fed recovers , saying their semi-barriers and tightening, that allows the policy to extend vital interest rates. that's what we've seen in the i thinkn rally --

that's a testament to the fact the market does relieve this reaction function is here to stay and the fed is serious about it. i think further progress on the credenceont will add to the fact that it looks difference from the 2008, 2009 joe: joe: one. we expect to see some sort of economic boom in q3 or q4 thanks to the vaccine. prove tohe outlook may be not optimistic enough. we know small businesses are closing and there's been a long gap in aid. it's going to be tough with more lockdowns. to the supplyiew side -- businesses shutting and the economy being supply constrained when we come out because of the loss of various businesses during this difficult time? is for sure risk.

x president was out saying that insolvency was a risk in the post-covid world and this is really where fiscal policy will have to durably stay the course. is part of the theme that it is different this time is outside of the u.s., fiscal policy has remained fairly durable. even into mitigation measures in europe, we've seen australia commit to forward guidance for fiscal policy, we have seen korea promise an expansionary budget. places that were traditionally fiscally cautious are showing they are in the long game and of theould offset some cycle. when it comes to the u.s.,

hopefully when we get something done before year end, one of the things that will be interesting is the market has a level of trust the private sector can take over. i think it is much more durable in the u.s. and that can get combined with more fiscal thatmodation abroad and this be a good backdrop time around. to jonathan.ks you can check more of his dots on the latest episode of the podcast i cohost with tracy alloway. check it out on apple podcast or wherever else you get your podcast. where do you get yours? the bloomberg terminal. --: stay

romaine: that's all for "what'd you miss?" bloomberg technology is up next in the u.s.. this is bloomberg. ♪

emily: i'm emily chang in san francisco. this is "bloomberg technology." joe biden on the verge of clinching enough electoral votes to officially win the u.s. presidency. this as signs of stimulus life from congress emerge. and right on time. as new york city nears the threshold for another shutdown. plus, u.s. at risk.