risk of reaching the legal limit on. in two weeks. -- limit on debt in two weeks. he was told to pressure democratic leaders to raise the debt because the gop will not cooperate. chuck schumer planned another vote as early as today on a plan to suspend the debt ceiling. infectious disease specialist and the county said the u.s. is turning the corner on the latest coronavirus surge. he told abc news that more people need to get vaccinated to keep infections on a declining trend. he said the key risk is that 70 million eligible people in the u.s. haven't gotten the shot. biontech ceo said the new formula will likely be needed by mid next year to protect against future virus mutations. that is according to financial times.

it is said the variants in circulation did not undermine the adequacy -- the advocacy of the current shots. a cabinet spoke person said some religious activities or dining should be further eased as long as they meet virus containment guidance in taiwan. once local case numbers drop, people will be able to take off their masks on mountains and at seaside. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is a bloomberg.

alix: it is 1:00 p.m. in new york, scott p.m. in new york. i'm alix steel. welcome to "bloomberg markets." equity selloff underway, u.s. stocks tumbling with tech stocks leading the losses. we will dig deeper. plus a seven-year high in wpi oil, opec remaining its gradual monthly increases, triggering the surge. you will hear from ken griffin, founder of citadel on inflation and return to offices and work for -- work order flow. nasdaq 100 off. a lot of the heaviness will come from facebook, a hearing on the hill about a whistleblower. moderna gets whacked again, down below the 100 moving average. in the s&p, seeing that down 1.6% when every sector in the

red, with the exception of energies. how much can this divergence really take hold? at some point you will get oversold. tugging -- taking a look at the 10 year yield, we had a rise of four basis points in the treasury market but that has come down to over one basis point. i don't feel the fear and the treasury market or in gold that you would think if you see a selloff in the equity market. let's get more on that positioning level. the managing partner in founder of -- strategies joins us now. where is the downside and cap to the selloff? katie: the mentor him we have seen, we have had a losses of short-term momentum -- the momentum we have seen, we have seen losses of short-term momentum.

the downside momentum is the worst of its kind since we came off of the march 2020 low. it has been driven by the mega cap technology stocks and a huge footprint in the major indices. while they pull back, it is difficult for the s&p 500 or the nasdaq 100 to get out on the downside as well. we have seen some breakdown. 50 day moving averages were out and now we are seeing breakdowns below what we call cloud-based support, minor support levels. the more minor breakdowns we see the more of a setback see with the major indices. the s&p 500, we are looking for a test of resistance, around 4238. that would be a natural case for

that to develop. alix: i did mention energy come out performing. i wonder how overextended is the s&p of energy sector right now? katie: we are overweight energy and we believe it has an intermediate turnaround and would be encouraging if crude oil or wti could get about $77 a barrel. however, from a short-term perspective, a lot of those are showing signs of exhaustion, meaning they should consolidate for a couple weeks by just the gains and that should ultimately refresh the intermediate term turnarounds. the indicators that we use, we are not looking for -- alix: if there is some digestion for energy, does that mean -- takes a break also? katie: it could do that.

we have been looking for those in technology and they are not widespread as of yet. we do not have any affirmation of the oversold conditions to suggest we will get a big bounce or rally. we will watch the market internal measures for any extremes. we had some major extremes generated quickly and the pullback has been different in that we haven't gotten those extremes. if we were to see that, that would be indicative of some low and that is what we will keep an eye on. the vix is one example. alix: the vix, 24 42 is that accurate in the equity market? katie: when we see it trending higher a means major indices could trend lower. when we see the vix clear 25, we start thinking about entering a

higher volatility cycle. the market has been in a low volatility cycle, at least since march if not earlier than that aced on the vix and it has been in that range. a breakout would suggest we are into a more difficult environment for trading and is not overtly bearish for the major indices that would suggest we will see more types of these swings that are difficult to navigate. we have already seen a breakout in that nature and the nasdaq. alix: in terms of say gold and the 10 year and the dollar, we are not getting the flight to safety might have expected. what do you make of what the 10 year is not doing? katie: it has been wild. you would expect utilities to have done better than they have certainly. that influence from 10 year treasury yields or treasury

yields broadly, they come into resistance. now they are stalling and folks aren't dipping their toes into those more defensive sectors. i think it is probably just a matter of time before that actually happens. once folks realize treasury yields are not off to the races, they do face resistance. we ultimately expect them to clear that we do not for the same kind of movement we have seen and that would be unusual. alix: so good to get your perspective. katie stockton of fairly the strategies. opec agreeing to the monthly increase. i missed this last rally aired i was home on maternity leave and now i get to finally experience it. you can see how we were oversold above 70 and oversold for a while before we broke low that

in 2015. now we are touching the oversold level. at what oil price does opec-plus get nervous? javier: $80 a barrel. we are beginning to see demand in emerging countries, like india, bangladesh. it will get concern if prices move higher because that will affect demand going into 2022. alix: where is the supply response and i wonder if that is why we are seeing this holly -- powerful rally in wti because you will need to see higher prices? demand is one thing but supply response is another. javier: the supply response is not there.

opec is responding. you look at production in november after the agreement will reach 9.9 billion barrels a day by the end of the year. that is above where saudi production was before the pandemic. what we don't have is the reaction not only from the shale industry but places in columbia and china not responding because investments are not keen for oil companies to put more oil into production. they just have sheol companies -- shale companies. we do not want to see more duction. alix: it is an amazing thing when you see the price curve broken and signaled capacity. thank you very much, javier. coming up, president biden seeks a path out of gridlock in resetting the clock for his agenda.

will he be successful? this is bloomberg. ♪

>> as soon as this week, your savings in your pocketbook could be directly impacted by this republican stunt. alix: this is "bloomberg markets." i'm alix steel. that is president joe biden say we could break the debt limit. washington is fighting it out. investors are less interested in the debt side and what it costs. right now, borrowing costs have

been falling good it is cheap to service big debt after decades of falling rates. the question is, what happens if rates rise? it was said rates are going to stay low for a long time, 2%, 3%, 4%. for more i want to bring in henrietta treyz, director of economic policy. the low rates that we have right now in the u.s. is very different from what we saw in 2011 with the debt ceiling limit. did that change the possible effect here? henrietta: absolutely. in 2011, we were talking about developing ways to cut $1 trillion from federal spending. we were so concerned with the deficit, which is different than the debt ceiling, and we were focused on how to reduce spending and we negotiated four months with republicans and democrats to cut spending that

is very different than the dynamic happening in d.c. right now. right now there is no talk about cutting spending in any capacity. it is pure politics, whether you do it alone or a reconciliation or the democrats and president biden trying to get republicans to increase the debt ceiling via a suspension which is just a date, no dollar value. the fact that they are not talking about how to stream it spending or actual government funding metric is very telling that this is purely politics. alix: that is a great point, and really good insight into what is happening in d.c. and the narrative between the parties. with all the debt we are servicing was run up during president trump's administration how will they use debt as a

football for infrastructure? henrietta: the way to think about the debt ceiling because interest rates are low and nobody has a problem borrowing in a political way, but what we are doing from the minority leader is the longer and the harder you can make it for democrats to pass $1.2 trillion infrastructure bill, or the substantial reconciliation package or avert a government shutdown or deal with the debt ceiling or extend the transit station authority. anything else you can put on their plate that makes it harder and takes longer to pass there build back better program for the structure bill, the better, from the perspective of the public and congress. right now it is to delay and a very powerful messaging to say that the democrats are spenders and those are all the talking points and will be a huge focus

of the 2022 midterm elections and the presidential in 2024 as well. alix: the democrat has enough problems of their own and it feels like a human infrastructure bill is being held hostage and president biden cannot bring them together. who has control of the party? henrietta: right now, i would say it is a pretty even mix between progressive who are asserting their authority in the way we have never seen them assert it before and the moderate or the quote unquote established democrats. we saw president biden come to the house of representatives in major show for conciliatory let's get this together and operate as a team mentality. one of the things investors have failed in is that even the democrats technically have a

democrat -- a majority in the house and senate, but the majority is so slim they have effectively and nonfunctioning majority. that is why we still haven't passed a reconciliation bill. there is a long wait to go from here. the most constructive thing i can say is as an investor looking in, your rule of thumb should be nothing is going to happen until it has to. on the debt ceiling, secretary yellen would like to see it done by the 18th. does it have to be done by the 18th? i don't think so but your best bet is to respect that deadline. it is distinctly possible they will exceed the 18th deadline. the next deadline is october 30. and it is a big deal. 37 hundred people furloughed at the end of last week for a day. that could happen again. alix: based on that, i wonder

whether markets are most missed christ for a continuous environment -- mispriced for a continued environment a political uncertainty? henrietta: there is a very serious understanding that the cost of the democrats' bill is going to go down. i think the numbers are starting to come back down to earth a little bit, which is very helpful. i do think there is a path. my expectation is 70% odds we will see a reconciliation bill. we should expect that to continue. the urge to get the infrastructure bill through and the necessity of not seeing the funding is critical. i think will be successful in watching the democrats pull this off, but the community is bringing down from an ashen article space and what it was expecting and expected to come in at a lower level. alix: so good to catch up with

you. henrietta treyz, director of economic policy at veta partners. a formal announcement in an auto. our stock of the hour,. next. this is bloomberg. ♪

alix: this is "bloomberg markets." i'm alix steel. the sec has been urged by senator elizabeth warren to investigate trading by fed officials and to see whether personal investments made by fed officials violated insider trading rules. she is speaking of two who have resigned within hours of each other for different reasons. they both have done trading that was above board the ethics

standard but a lot of eyebrow raising from the market. we also learned device chair, richard clarida, traded between one main dollars and $5 million out of a bond fund into stocks before j follow -- before jay powell made an announcement and is raising red flags as well. warren is urging the sec to investigate them for breaking rules. the stock of the hour, a lot of market action happening. over the weekend, tesla announced the shortage and ipo and the outlook from gm. totally rare on a day where everything is down so hard. >> there are a lot of moving parts going on. on gm, a meeting with investors this week talking about plans to move to electric vehicles and

self driving cars. in advance of that, we have people familiar with the matter tell us that the focus on the self-driving part of the business, they are looking at, and that is the self-driving robo taxis reaching potentially $50 billion in sales down the line and expect to start charging next year. the other piece is engine number one, the firm that managed to get board seats on exxon mobil. they disclosed in the first quarter that they had a stake in gm but the wall street journal reporting that they came out with a white paper backing gm's push in the self-driving technology. alix: a bit different than what they did at exxon. ipo news. david: let's take tesla before we get to that. the numbers are so staggering.

talking about more than 240 thousand vehicles in their latest quarter. that 20% increase from the previous quarter, above what analysts were looking for, and that helped tesla a lot. shares got above $800. in terms of people betting against the stock, they are just not doing it. the numbers from late last week showed more than 1% of stock available for trading has been sold short, the lowest percentage since the company went public in 2010. and the initial public offerings. -- planning and going public with backing from amazon.com. and the others robo cars controlled by chinese companies. he could understand why they

would want to go ahead and go public on their own. as it happens they want to take something like $3 billion and put it towards going all electric and selling directly to consumers. you know who does that? alix: tesla. thanks a lot. bloomberg's dave wilson. coming up we will speak to ken griffin from citadel. erik schatzker will be joining us with that. that selloff continues, 2.3% down on the nasdaq. energy still in the green. 10 year yields going nowhere despite the selloff in the equity market. that is a mandate for you. this is bloomberg. ♪

alix: i'm alix steel. welcome to "bloomberg markets." we will speak to kenneth griffin on inflation and a return to offices and whether he believes in cryptocurrency. it is a messy monday shaping up in the equity markets. major averages, nasdaq 100 down the worst performer, down by 2.45%. the s&p down by over one put 5%. the nasdaq 100 getting hit hard. a part of that is maternal, that stuck down another 4.5 percentage points. you had a pfizer booster for adults cleared and dharna some but still getting beaten up from the merck covid bill -- pill that was very positive friday. facebook as well down. also the 10 year, a lot of nothing. no buying seeing in the 10 year,

gold or the dollar. crude the outperformer come up by a three -- up by a full three percentage point. that is something the s&p 500 energy sector. on the flipside, you have to wonder how much more oil can rally without affecting the broader sentiment as well. as we head into earnings season, that is going to be critical, because oil is exemplary of the cost increase when you look at gas or labor or supply chains or crude prices, continued to get higher, squeezing margins. you have to see which will depend on operating costs and tamp down costs and who can't. i was speaking to a restaurant eur said that they had to close because they have to fight for labor and you have certain costs that are superhigh and a half to juggle the menu every day to make it work.

it has been brutal for individuals. a risk off monday, pretty messy there. waiting for a new season of the vix, stay elevated. i'm interesting to see what happens into the close. it could help support equities into the close. but retail buyers have not been in the market in the same kind of way in terms of opening the robinhood accounts, for example. that is a real question, who is going to wind up buying vix? let's get some other stories. here is your bloomberg bullishness flash. tesla inflicting pain on short-sellers and many giving up. shares of the company rose as the company reported another record quarter since it had the 2021 low in march, a measure of short interest. interest has slumped to the lowest since 2010.

facebook falling to the lowest level since june. the social network down 13% from the peak last month. the decline came after a product manager told 60 minutes they prioritize profits over the well-being of its users. that is your bloomberg business flash. i want to go to the economic hub of chicago could the citadel ceo and founder kenneth griffin speaking with bloomberg's eric schatzker. erik: much of our conversation is going to turn on politics or policy and one way or another. everyone here in our audience knows that over the years you have become increasingly active and involved in politics and policymaking, both as an advisor and as a funder on the local state and national level. think it makes sense, because it is probably a question for everyone here for me to ask,

before we get into the details, do you have any political ambitions? [laughter] that is the --kenneth: that is the outer field question. i have three young children and a great full-time job. i am going to stay focused on my family and my work. i am involved in politics because regretfully that has become such an important part of day-to-day life in america. erik: i have been involved in supporting a variety of charity causes for a long time. it is heartbreaking to see hard earned gains wiped out with the stroke of a pen from a thoughtless politician. i have become in politician -- politics because i'm trying to protect the american dream and the opportunity that everyone in this country should have to have a great life, a great education, and to have a life well lived. [applause]

erik: as you may imagine, ken and i will return to politics but i want to talk about the pandemic. you have been deeply involved in the fight against covid-19. you personally lobbied the trump administration at the highest levels to fund vaccine developing by pre-purchasing doses and multiple drug companies, and you pull levers to push the fda to speed approval of covid-19 treatments. how the virus when only 56% of americans are fully vaccinated? kenneth: -- let me reframe the question, the great part of working with the trump administration is you could reason with the individuals who ran our country, and with operation warp speed, it was a

very simple concept that spending a few billion dollars without knowing which vaccines were going to work, but to start the manufacturing process before we had fda approval would greatly compress time to market. so if we had a vaccine that was going to be successful, we could bring that to americans far faster than the alternative. and that worked beautifully. the united states come out of the gate, had the supply of vaccine that was unparalleled in the rest of the large companies around the world. operation warp speed was a homerun and it goes back to having people in the white house, whether it was the president or jared kushner or vice president pence who are able to understand the concept of option theory and apply that to save american lives. $9 billion was spent on operation warp speed, hundreds of thousands of lives were saved. it was one of the great accomplishments of the trump

administration. and coming up with the strategy that is so impacted our country for the better. having said that, one of the frustrations is that vaccination rates in the united states have plateaued in an unacceptably low level. if you look at my firm, where we have one of the great biotech investment teams in the world, we are about 98% vaccinated. or you have the facts, hard data , the unequivocal scientific judgment to make a decision and educate your team around why you should be vaccinated, we saw a voluntary vaccination rate, not mandated at the citadel, of 90%. i think we have fallen short as a country in communicating to the population just how important the vaccines are to change the destiny of this disease if you are infected.

erik: you haven't had to impose a mandate at the citadel. what about everybody else? do you believe in vaccine mandates? kenneth: now that we have fda approval, we will face hard decisions as a company as to whether or not we vaccinate people mandatorily. if you are in health care in nursing homes and in occupations that you are going to touch the lives of others who may be immunocompromised, older in years, you are going to have to be vaccinated. hopefully we will get an fda approval, not just emergency use authorization and approval for children which will allow us to mandate vaccines for school-age children, just as we do for a number of other diseases. this should help to reduce the service area in which the virus can thrive and reduce the risk of mutations and other impacts that go with the endemic nature

of the disease we face today. erik: there are people in this room and watching live around the world who are struggling with government leaders and what decisions to make. should i mandate a vaccine question mark in other words, no jab, no job. should private employers have that freedom and should governments be able to do that? kenneth: you need to respect people's religious right to refuse a vaccine. it cannot be as a country that everyone has to be vaccinated, because we as a nation have a deep respect for people's individual and the just rights. having put that aside, where people are in frequent contact with others and in particular with others who would be greatly adversely impacted by the disease, i think the issue of public safety dominance and it is appropriate in those realms. i would really like to think as

a nation that we can use and sometimes celebrities and influencers and politicians and business leaders to drive home the point that the best decision you can make to protect your health, your loved ones health is to be vaccinated. one of my friends runs the surgery center and people come and sit with covid and dino know the first thing they ask is? -- and do you know the first thing they ask is? can i get vaccinated. it is the single most common question for people sick with covid who walk into a major hospital in the united states. you are too late. we need to get past the education and conspiracy theories that are really undermining the acceptance of this vaccine amongst our broader population. erik: big companies across the

country have pushed the return to office back to november and december and in some cases into 2022. talk to me about the approach you've taken at citadel and citadel securities and whether you think it's a model others should follow. kenneth: you asked the question exactly right. big companies have pushed back the return to work. smaller companies are back at work. in some sense, it's a pretty straightforward reason. small companies are always on the edge of their own existence. they don't have a big consumer brand name. if you are a small business, you are trying to make it day today and we tweak in trying to realize your dream and make your business successful. the productivity hit of being in a remote environment by zoom, you're just not going to be successful. we see a very stark difference

in the return to office programs between small and medium enterprises and the large, global multinationals. at the citadel who have been 100% back to work since june and we were at 2% back to work to most of the pandemic. there was the initial phase where we were shut down like the rest of the country. we were fortunately able to literally fill the trading floor in five days and we brought 100 people down to florida and ran a substantial part of the capital markets from a hotel in the middle of south florida. that is a real credit to my team for their engineering ingenuity and ability to get the job done. i really appreciate my team members who made that happen. it was incredibly important to the strong function of the u.s. barclays and fixed incomes -- of the u.s. -- and fixed incomes.

if you are early in your career, you are making a grave mistake not being back at work. it's incredibly difficult to have the managerial experiences and interpersonal experiences that you need to have a take your career forward in a work remotely environment. work remotely as good at maintaining the status quo, but the world is not static. competitive pressures from around the world will put american businesses continually under pressure. chinese have been back to work from almost the start. they are evolving at a rapid rate of innovation. we are in many ways stuck in patterns from 18 months ago because it is so much harder to innovate and create in a remote working environment. for the youngest members of our workforce, i am gravely concerned that the loss of early

career opportunities is going to cost us dearly over the decades to come. that is where i think the biggest hit is going to be in america, working from home has a working on it -- has it economic effect. the ceos -- erik: the ceos i speak with our struggling with another group and that is the top producers, the senior workers who do not want to go back to the office who are much happier working at home in the hamptons or from palm beach or aspen. when they don't go back to the office, the young people we talked about dragging back in don't get the apprenticeship you are exactly right. and leadership matters. this is where the ceo being in the office is important. it is the tone from the top that

we are going to get back to work. i wish the president of the united states would make this part of a keynote address. it is time for america to get back to work. [applause] and in the meantime, that burden of responsibility falls on corporate leadership and civic leadership to do the same thing, absolutely. what is disheartening is when you see some corporate leaders like jamie dimon trying to push the return work message, the blowback from the popular press. do you think that is why other ceos are not doing it? ken: i know it. if you talk to other ceos, they live in fear of being publicly persecuted for delivering the message, it is time to go back to work. erik: why shouldn't they be scared? ken: they are scared. and from a leadership

perspective if the president were to address this grave concern, i think as a country we would be much better off. in the u.k., the civil service message is cut and dry, it is time to get back to work. we need the same message in washington. we need for the government workers, corporate leaders. it is time to get back at it. erik: there is a huge divide between the camp that thinks the economy still needs more stimulus to recover from the pandemic and the other camp that thinks the government has done far too much stimulating already. i think i know what you are going to say, but what camp are you in? ken: i was in the white house in march 2020 and president trump put forth the proposal for a tax holiday on social security. and i had to point out to the president the issue wasn't people at work, the issue was

people who could not work, the waitress, the hotel staff member, people in the travel industry who like a light switch flicked and they were out of work. we all know the stats of the reports from population that hasn't savings. it is not a pleasant place to be to disagree with president trump, but i had to drive home the point that we needed to get checks in the hands of americans as fast as we possibly could who had lost any ability to maintain their basic needs in life. this pandemic was going to wipe out tens and millions of households that had no savings and no prospects of working for an unknown period of time. i take my hat off to washington moving quickly on the first stimulus package. when we got those checks out the door and we protected people's ability to have the basic needs

of life addressed. this has grown and grown over time to a plethora of programs and you and i both know of the number of people today until recently who are making more money on the government handouts than they were in full-time employment. that has crippled the supply chain in america. i was at a restaurant in chicago with one of my friends, who is in the audience, and we ordered dinner and the owner came out after an hour, a hispanic man, and you could feel the emotional angst. he said, i am so sorry that you are having such an awful experience. we hadn't even complained, but he just knew that the things weren't right. this should be a great moment for my business. i can't hire people and i can't

keep people. just the anguish in his face was heartbreaking. that is what so many small businesses are facing today in america. it is so hard to find people to come back to work to do the jobs we need to have done, whether it is working in the energy industry, delivering products and packages, being in manufacturing facilities, we are struggling. we are struggling to find people to do jobs. erik: how does that get fixed? is it a matter of turning on the physical and monitor -- the fiscal and monetary? ken: from a classic economic perspective that you would keep some level of government support in place to help us get back to full employment. so your monetary approach is the general way to doing that, the ultra low interest rates in america and very aggressive

asset purchase programs being run by the fed. the problem is that in washington, the fiscal policies are disincentivizing. we are undermining all the work at the fed by creating so many incentives to not work. that's what we need to change. we need to align the fiscal policies with go back to work and here is why with the monetary policies that are effective at encouraging capital formation and growth. erik: just so i am clear and there are people would like to know, monetary policy that the fed has pursued and is pursuing, you are fine with. you are aware there are people who think they should've taper asset purchases long ago in the next meeting is far too late and that we should be talking about the path to normalization for interest rates.

ken: it is a job i would be so happy not to have. i am so grateful i don't have that job. it is a no-win job right now. the fed has a dual mandate of price stability and managing to have is at full employment. that is the only mandate of the fed, price stability and full employment. let's be clear, we don't have price stability. inflation of 5% is amongst the highest numbers that many in this room have ever seen in their lifetime. and the bet is that it is transitory and that is a big bet. the fed is in a tough box and the challenge is the fed has to take the regulatory and fiscal policies of washington as a given. they can't influence those policies. to the extent those policies are

working against with the fed is trying to accomplish, they are really in no man's land in terms of a struggle. i inc. -- i think if i am chairman powell, they are really in no man's land. i think if i am chairman powell, i state the course we are on, as unnerving as it is, because to see inflation running this hat is really unsettling. there is a fear that we untangle inflation -- unanchor that, it will unquestionably plunge us into a recession. erik: a huge risk what you think the fed under chairman fall should state the course? ken: i think he has to stay the

course, given his dual mandate. it is not what we would want to do, it is what he is directed to dubai mandate. -- directed to do by that mandate. once we changed the fed's mandate to something more nebulous, the opportunity for government -- erik: there was a lot of talk that the fed had become politicized. do you think the fed has become sufficiently de-politicized? ken: the only time i publicly spoke out against trump was defending jay powell. i think trump's efforts to control the fed were improper. we need to maintain the belief in the separation of the fed from the whims of washington to maintain a strong dollar. it is just that simple. so every time a politician goes

after the fed and a very personal and inappropriate way, if you are part of the financial community, you need to push back on that and make it clear that we need the separation between the halls of washington and the choices made in the federal reserve board. there is a geopolitical factor -- erik: there is a geopolitical factor weighing in that is china. there are many americans who believe that we are locked in an existential battle with china, a battle that will defined the 21st century and that it is high time we fought back. that is what they think. i want to be clear, and in fact more importantly, i want you to be clear, but as i understand it, you believe the united states is making a huge mistake trying to decouple this economy

from china's, and you believe it is just as existential to question. am i correct? ken: i thing in many ways we have already decoupled, by restricting chinese access to american semiconductors and to american software, we have pushed them into a national campaign to eliminate their dependency on the west and technology. you can imagine a world where there are two completely independent hardware and software stacks. for example, it is intel, windows, and that is the software ecosystem that lives on top of that that is used by so much of the western society come from germany to france canada to japan to australia. the united states' dominance in

technology the last 50 years has been just stunning, and a huge source of economic growth in our country. by cutting the chinese off from access to american technology, we are forcing them to in some sense, their space race is to become technologically independent. and in their space race, they are going to win. they are going to make this happen. they graduate about two times as many from college as we do, half of whom have degrees. in contrast, 22% in the united states. they are graduating five times more engineering, talented professionals than we are. the belief that we will be technologically dominant against those statistics is simply naive, misplaced. as the chinese build out there semiconductors of this decade and there technology of this

decade, not only will they use it in the biggest market in the world, which is their own of 1.4 billion people, but they will push it to all the trading partners, the brazils and chile's of the world. i can picture a world in 30 to 40 years we have in some sense divided the world between east and west technologically. given the massive scale economies they have, i don't like our position in that outcome. erik: you're aware that there is some skepticism about china's ability to compete on even footing with the west when it comes to advanced technologies like putting wires on tiny semiconductors pair they haven't gotten there yet and there are very few companies in the west -- semiconductors.

they haven't gotten there yet and there are very few companies in the west. ken: i think it is nonsense. the world's leading country in semiconductors is perhaps taiwan . china will argue it is part of china. so you have an interesting quagmire right there. but there is one of the greatest manufacturers of semiconductors and they don't have the entire solution. they buy a variety of equipment from around the world. but talk about being a powerhouse. the chip that is the dominant chip in the intel amd war is made by tsmc. and going back to my point earlier, china views taiwan as part of china. there is no way they will be technologically impotent

compared to america over the next 20 years. they will get there one way or another. erik: what do you say to americans who are angry that engagement with china, until now, has been on china's terms and partly, if not largely a result of that dynamic, the united states has lost some of its technological superiority. what do they understand about china? ken: there is a farmer troubling part of this story. let's go back to the theory of the case. china is going to evolve towards capitalism. the united states erases that transfer -- embraces that wholeheartedly because our theory was that as they became capitalistic, they would embrace democracy. and we were clearly willing to leave a value on the table for chinese for that journey, because they have the most populist country in the world be part of the western ethos of

is incredibly strategically important. and it is a much better outcome than facing the dynamic we faced between us and the soviet union for 50 years post-world war ii. which path would you pick? you want to bring them into our sphere and our belief was that them becoming capitalists would inevitably bring them into being a democracy. when we wrote the rules with them, we did it with this mindset of making that happen. now, let's take a step back. unquestionably, the american consumers at large won huge. china became a huge source of goods that we consume in the united states at an incredibly low cost. i mean, a giant consumer windfall for americans. you walk into walmart, flip everything over, made in china, made in china, made in china.