matt: welcome to "bloomberg markets." let's get a quick check on the markets. s&p 500 that is down again. 1.3% the drop to 4133. we will talk to abigail doolittle in a second. if you look at the rsi, we will be oversold. well below the 200 day moving average. fallen everyday except for two in the last two weeks. the nasdaq off more than 2% here as tech doing a lot of the

selloff today after disappointing earnings news from facebook owner meta. please fact amazon after the belt and i think the street is prepared for some disappointing news as well. nasdaq 100 down 2.2%. that is just a concentrated version of the ccmp. abigail doolittle has a look at the earnings that have driven these losses today and the effect on volatility. abigail: pretty brutal stretch. the declines you were talking about, we have the major indexes down for the second day in a row. i don't think the s&p 500 is oversold yet. there could be more selling ahead. this is since j.p. morgan kicked off earnings season, down 5%. the worst stretch of the year. the bears are in control. looks like we will have a third-down month in a row for the s&p 500. relative to the earnings that are pressuring this week has every thing to do with big tech.

yesterday was alphabet and today is meta and alphabet and amazon. meta down about 5%, the worst day going back to december of last year. the quarter was actually pretty decent. it is the outlook having to do with the possibility that the geopolitical macro situation could weigh on ad spending. amazon after the bell. there is alphabet. we did not get a bounce back rally. as was the case for you amazon yesterday -- alphabet yesterday. not today though. we have alphabet in correction territory. amazon after the bill will have everything to do with whether or not they can hit the low double digit sales growth plus the cloud. are they going to be on microsoft or are they going to be and alphabet? we will know not so long from now. there are other movers and decliners. you can see align technology, the worst day since may of last year. they basically dropped the

outlook relative to cash flow. whirlpool down 16%. they cut the profit view, having more promotions to get folks tobuy appliances. hasbro down 10.2%. they lowered the sales view ahead of the holiday season. investors definitely not liking that. kenview down 5.5%. the worst day of the year and they cut their outlook. analysts calling the disappointing. when we put this together for volatility we have the vix waking up. we had so much of a suppressed volatility situation here is the vix. below 20 for much of the last couple of months, even only have these indices down. you can see it is now at a 22 almost with the s&p 500 going back into a range. it would not be surprising if we see the vix continue to shoot higher. with everything going on for the micro to the macro, a 22 vix is still pretty suppressed.

maybe we will see the s&p 500 go to the bottom of the range and that would put it below 4000. matt: you are correct. the s&p trading at 30.8 on the rsi. i believe it has to touch 30 to be oversold. in fact, we don't see the nasdaq or the nasdaq 100 and oversold territory. pretty interesting with the down moves we have seen. let's talk about autos. ford earnings come out after the bell. last night much more importantly the united auto workers reached a tentative deal with ford. the automaker agreeing to a record 25% hourly wage hike over the life of the contract. joining us with the latest is bloomberg auto reporter gabriel coppola, who was covering this story on the streets of the metro detroit area. what do we know about this deal? pretty decent hike and paper another 32 hour workweek they were fighting for.

not the return of defined benefit pensions they were fighting for. gabriel: that's right. if you think about comparing this deal to the last one in 2019, uaw president said this last night, this deal is worth four times with the 2019 deal was. right off the bat people are going to get an 11% wage hike in the first year. this should address a lot of the inflation pain people have been feeling. while many other workers in this economy got raises, the uaw members did not because they were locked into a contract. still, i'm not taking for granted this has to be ratified by the members. to me it seems like a pretty generous deal. just over the course of my reporting in the last six weeks i heard anecdotally people saying they would be happy with

even lower wage increases than the 25% ford is offering. i have also heard it's always the most unhappy people that are the loudest but some people are complaining it is not enough, especially those that are falling behind on their bills. i will wait and see and talked of our members and see how people feel about this. we also have to see if gm and stellantis do the same thing. matt: more portly, workers will go back to the kentucky truck plant and start building super dutys. they will go back to the michigan asante plant and start building broncos again. ford will come back to full speed well gm and stellantis are still stuck in strike. some of the highest margin plants. does that push them to make a deal today, tomorrow, this week? veronica: absolutely -- gabriel: absolutely. there is a competitive -- there's a lot of competitive

inter-dynamics. the union has been very thoughtful in their strategy of how they have conducted this. not only in picking certain plants to stretch their strike fund but now they want to reward them and incentivize gm and stellantis to come along. that is what is happening today. they are at the table. gm is at the table and stellantis and they are working to pressure those two the fall in line and follow the pattern they got with ford. matt: you are sitting in a tesla right now, a nonunion car. how does it look to workers -- gabriel: it's not mine. matt: how does his -- does this look to workers? nonunion workers? is the uaw going to build up their membership? gabriel: i think that is their vision. that is there hope, their plan. that was the driving force in

these negotiations. as my colleagues and i reported a few weeks ago, 30% increase was seen as kind of a magic number to be able to appeal to other nonunion autoworkers. if you take this 25% raise plus the cost-of-living adjustment, you do get to around 30% increase. the uaw folks say they have gotten a lot of interest from workers who heard shawn fain's message. he's a compelling speaker. whether or not they agree with his policies you cannot deny he has really shook up the auto history and stood up to the carmakers and pushed them way further than anybody thought they were going to go. that fact really resonates with people. whether it is enough to make them join the uaw, i don't know. we will have to see what the uaw does next and what happens with gm and stellantis. matt: absolutely.

that looks like how it is playing out. it will be interesting to see with the other shops do and what gm and stellantis do. thank you for your reporting. gabriella coppola from detroit. our conversation with james gorman. we also talked to his successor, the ceo to be ted pick. this is bloomberg. ♪

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matt: this is "bloomberg markets ." changes of the top at morgan stanley. announcing the next ceo will be ted pick. the current ceo james gorman saying the change feels right. sonali basak sat down with gorman and pick at the firm's offices in new york where they covered everything from the economy to the business going forward. james: the u.s. has stage the recession. the fed is very close to being final within probably 25 basis points. we are starting to see the chevron deal we announced the other day. we are seeing activity in different sectors. it is coming alive.

i think the next couple of years will be great. what i care about is over the really long run. we set about on this journey, we were not focused on a quarter. if the stock takes a dip and a quarter, i say that is kind of good news. we are buying back stock. every share you buyback you are retiring a dividend. shareholders who hang tough are getting a 4.5% yield and we are buying back stock in the stock is cheap. it is kind of a good situation to be in. medium-term, no. i think the firm will degrade. sonali: what are the biggest challenges for you as you navigate the environment? ted: there is so much opportunity. we are in a new paradigm. interest rates will be higher for longer and the world has gotten smaller, which means the clients need advice. they need it in the wealth and asset-management space. corporate clients. we will have lots of activity around those clients. i want to make sure we are completely aligned with the business strategy we have in place.

something james has painstakingly put together for 14 years. i'm incredibly optimistic over the next couple of years. sonali: you have long been the number one inequities trading. lately goldman has surpassed morgan stanley in a couple of quarters while jp morgan and goldman have been faring better with m&a and underwriting. do you plan to be number one again? ted: we have some great competitors in equities and fixed income and across investment banking. we are focused on being number one. we want to have the right people in place. we have been investing for the next cycle. that will banking-led. you want to be one or two every quarter as we have been for the last decade. we are a fixed income is this. we are now top five business. investment banking will lead the next cycle. there will be a lot of m&a consolidation. the world has gotten smaller. there's a new cost of capital. we want to be a leader, a global leader in all the spaces. sonali: james has hinted to the

possibility of more mergers and acquisitions for morgan stanley. you have already done some very transformative ones. do you feel it is a matter of time in the ceo seat before you can do a significant deal? do you feel like you can jump right in? ted: we have now done three major acquisitions in the last 15 years. all of which were in james's vision. smith barney after the financial crisis, e*trade at the dawn of the pandemic and vance. those are three major integrations. we like what we have. the business strategy is in place. let's execute on what we have, keep the strategy in place. we talk about acquisition candidates but that is often the future. -- off into the future. matt: ted pick and james gorman both speaking with r-star wall street reporter sonali basak. let's talk right now with mike mayo about the transition and the performance of morgan stanley. he's managing director for u.s.

large-cap banks at wells fargo. thank you for coming on set in joining us. what you think about this? for so long gorman has talked about how he wants -- how he wants his succession to be after some messy successions in the past. he seems to think he has achieved it. mike: the good news is, this has been very well telegraphed. the new ceo ted pick is very well known. he has performed exceptionally. after the global financial crisis, morgan stanley was days away from failing. especially due to their fixed income business which ted pick restructured and has grown. equities came back very strong. morgan stanley, when you look at their institutional securities business, banking and markets, they are a dominant top five if not dominant top three and many times number one. that half of the company is great and that story is very good. matt: i'm looking at the stock going back to 2012. that is when you said either

this guy has to go, gorman, or the stock has to move up. back then it was trading for $12 a share. $11 or $12 a share. it is now $72. how do you feel about your call on morgan stanley and their performance over the past 13 years? 12 years? mike: i went from cell to buy in july of 2012 -- sell to buy in july of 2012. today they're not as good as people think they are. there is too much extrapolation of some of their success. it has been a 14-year bull market. not to take away from what james gorman has done, and exceptional job, but when you look at their businesses, the most recent quarter in their core business where worst in class among the big five players. when you look at wealth management, their inflows were not much in the third quarter. there are headwinds there. at least there was a question if

they get there $1 trillion target of inflows in the next three years. they have headwind on their spread revenues in the business, just like other banks have earlier. asset-management, they had some outflows and eaton vance was not well-timed. there is some cyclical issues that raise some questions. ted pick is not inheriting this company is the ideal time. by the way, his old boss is still "executor chairman." if something doesn't go right, what is james gorman do in a quarter or year or year and a half? matt: john mack stayed on for a couple of years. gorman said i don't know how long it will be here but hopefully the short basically. a lot of people think they have achieved great success -- successions and then they look back a year or two later and it has gotten messy and in some cases i had to come back. how do you will see this in the future? mike: base case is james gorman will be around for a year or two

and goes off into the sunset. having said that, today on bloomberg it looked like they were taking a victory lap. we pulled off the succession. the measure of whether they pulled it off or not will be in two or three years based on how their performances going and not today when they announce it. today is just the start of the next phase of morgan stanley. you had phil purcell, john mack, james gorman, and now ted pick. this is the next leg of the journey. we have to watch a little more closely than they were before and moving pieces. moving around alliances. i think morgan stanley is one of the more cohesive firms but they are not perfect either. matt: you mentioned victory lap and i want to switch gears for a second. you have had a victory recently in your personal life. everybody knows you as this big bank analyst. you're probably the most well-known bank analyst on the street but you have a hobby and fitness and lifting.

we have a great picture here. look at that strength. unbelievable. tell us about the powerlifting. you are saying some people like to do marathons and you like to go to a meat. -- meet. mike: this job has a lot of pressure and stress and long hours. during the pandemic i made a strength training and powerlifting my hobby and i worked on three years to go ahead and compete in nationals where i got second place last month. that is part of the worklife balance i have at my firm. and they provide me, which is nice. matt: in total, you lifted over 1000 pounds and all three of the different lifts. mike: right. thank you for asking me about this but i did qualify for the 1000 pound club. they don't call it the aarp but the older category. that helped take out some of the stress of analyzing this very volatile sector with major

changes like the change of the garden morgan stanley. you work late hours to analyze the applications of that and strength training is one form of exercise to work off the stress. matt: thanks so much for joining us. mike mayo, wells fargo securities managing director for u.s. large-cap banks talking about the succession that morgan stanley and powerlifting. we count down to our conversation with u.s. treasury secretary janet yellen and ticket deep dive into the state of the u.s. economy. this is bloomberg. -- take a deep dive into the state of the u.s. economy. ♪

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matt: this is "bloomberg markets ." in just a few moments we will hear from treasury secretary janet yellen. bloomberg news will interview her. we will bring you those comments live shortly after 1:30 p.m. new york time. before we get to that i want to

discuss the state of the u.s. economy. we have had some pretty incredible data showing that we grew 4.9% in the third quarter, the fastest pace in nearly two years thanks to robust consumer spending. never cannot the u.s. consumer. let's bring in international economics and policy corresponded mike mckee in washington, d.c. and veronica clark. i want to start on the gdp number. what has driven us to this? of all the government spending, i think of the fiscal stimulus. i thought that was gone. savings rates have come back down but the consumer continues to power the economy. mike: absolutely, at least through the third quarter. you can bet janet yellen will make this one of her talking points today. it's a great opportunity for the biden administration to claim that bidenomics is working.

we don't get a lot of clues to that in today's numbers. consumer spending, 4%. that is a huge number. it is unlikely to continue. how far does a drop off? the pessimists say will have a recession because consumers are out of money. they just do keep spending. morbid based on wages than any kind of savings at this point. business spending fell off a cliff. what is it about business spending? why do businesses all of a sudden quit? will they come back? a lot of questions come out of this. more questions probably than answers. we will have to watch the data as they come in for the fourth quarter to see what it tells us. matt: veronica, your take on the u.s. consumer? the consumer keeps on spending but a lot more of that spending is going on credit cards and a

lot more of those purchases are falling behind in terms of monthly payments. how do you see it? veronica: we were watching some signs that maybe the consumer would be weakening. in the last month or so we have at the restart of student loan payments. maybe that is also a reason to think we don't get quite a strong consumption in q4. q3 spending was exceptionally strong. i think it does have to do with the labor market that is very strong. until that turns i imagine consumption remains pretty supportive. matt: the labor market looks fantastic, michael. we continue to get beats out of the nonfarm payrolls reports and better claims numbers in the market was anticipating. at some point it has to turn around, right? mike: well, history would tell you so but so far it hasn't. the interesting thing about claims is we have not seen a significant rise in initial claims for the auto workers

strike. if you're on strike you cannot claim benefits. if your plant is shut down because others are on strike, you can. that has not jumped up. some of the continuing claims increase is probably auto company employees who were able to file for benefits. at this point have not come back to work and i'm not really looking for work because they know they will go back to their plants when the strike is over. you are right about nonfarm payrolls. it's interesting to look at what at the moment is expected for next friday. 185,000. that is a significant number. economists have been revising down month by month what they thought we were going to get. we keep beating that. they have thrown in the towel looks like and decided we will still see strong hiring. as long as we still see strong hiring and wages in the 3.5% to 4% range, that gives people money to spend. matt: the whisper number at whis

on the terminal for different stats. that is for 202,000 in terms of nonfarm payrolls. how much of this is driven by government spending? you and i talked about this earlier and you said it does not shine through in the gdp reports. veronica, we are running a $2 trillion deficit now this year. we run deficits every year but it seems to ramp up more and more as we get a 5% gdp print. his government spending driving this question mark veronica: i think there is a physical element to some of this. it is hard to put a number on what size that is. we probably are seeing it in things like investment and manufacturing facilities. building manufacturing facilities to build semi conductors in the u.s. maybe that is chips act related. residual strength even from the pandemic. excess savings of households is tied to fiscal policies. at this point i don't know if i would expect too much additional

boost from fiscal but we are probably looking through some of that report. matt: yields have been amazing to watch. obviously the fed has raised rates 550 basis points in the last couple of years. we are looking at more than 5% on the two's and the 30's. really across the curve is this going to slow the economy down? we are seeing mortgages at a percent plus. -- 8% plus. mike: that is the argument the fed is making that we are seeing some breaking the economy from the rate increases they have made. they made them so quickly that they had not hit that hard. we did see housing -- existing home sales drop off because people did not want to sell and get into a much higher mortgage. that effect has already happened. cars may slow down and the personal loans people take out and certainly businesses refinancing could slow down.

that is the argument that some at the fedor making about why they don't need to raise rates anymore. let's see what happens with the rates we have. the issuance of treasury debt is another question. what is that going to mean for the economy? higher rates means the government has to pay more. there are questions about impact that's going to have in the treasury market. that is one of the questions janet yellen is going to get asked today. matt: it will be interesting. we will take the interview live. let's go right now to u.s. treasury secretary janet yellen who joins bloomberg news and washington, d.c. for a conversation around the economy moderated by our washington bureau chief peggy collins. peggy: i think we will start with the economic data this morning. third-quarter gdp's growing -- showing a robust growth rate in the third quarter. when you look at the figures do

you think we have likely avoided a recession, or do you think it is too good to be true because inflation is still so high? sec. yellen: it's a good number and chosen economy doing very well. it is just one quarter's number. i'm not expecting growth at that pace to continue. but we do have good solid growth. probably the year will come in close to 2.5%. i would not be surprised if we see that. we have solid job creation, below on a planet right -- a low on an planet rate. labor force participation is strong. more people want to work. inflation is coming down. you don't really see any sign of recession here. i have been saying for a long time that i believed there was a

path to bring inflation down in the context of the strong labor market. frankly it is about a year ago since i believe bloomberg models predicted that by october of 2023, now namely the odds of recession at 100%. i do think we have that. what we have looks like a soft landing with very good outcomes for the u.s. economy. i think there is a lot to be pleased about. you see good strong consumer spending. consumers still have substantial wealth. it is up substantially since the pandemic. i think it is supporting good strong spending and the economy is doing well. u.s. growth is making a contribution to stronger global outcomes as well. peggy: you just pointed to a number of things that are

positive about the u.s. economy. we have done a lot of reporting in recent months here at bloomberg. we sent reporters across the country. but we are hearing on the ground is when you ask about their personal finances they feel pretty good for a lot of the reasons you mentioned. the labor market durability. when you ask about the direction of the u.s. economy, the sentiment is much more downbeat. what can you do to close the gap on the positive side in terms of how people feel about the u.s. economy, especially into an election year? sec. yellen: i think americans have run through a lot with the -- have been through a lot with the pandemic and the lockdown for almost two years, then a period of high inflation. as you say, they do seem to feel good about their own personal finances. surveys of job satisfaction suggest people feel good about

their work, too. we have rarely seen higher numbers on job satisfaction. they seem very worried about the economy and that things are not doing well. the u.s. economy is suffering from structural problems for a very long time. a significant share of the population, particularly those who have not had a college education have really not seen meaningful growth in their real income and have seen a decline in job opportunities over really approaching 50 years. i think what americans need to know is that the biden-harris administration is really decisively changing that. we are investing in america. we have passed three trifecta of

legislation that people will increasingly see who have been suffering from a shortage of job opportunities. i think they are really going to see things change. first of all, we are spending an enormous amount to repair america's infrastructure. increasingly people are going to see their roads that they get hung up on everyday, it's hard to commute, potholes everywhere. it will be fixed. bridges are going to be improved. airports. people are going to within the next several years virtually every american will have access to good internet. improving digital economy. we have seen in a norma of investments announced in response -- enormous investments

announced in response to the semiconductor act and the inflation reduction act and clean energy. jobs are being created. what we see in the past year is that a disproportionate share of the jobs that are being created are in communities that have had less economic opportunity. communities with below average incomes and with a below-average share of people who have a college education. this means opportunity will increasingly come to people who really have not gotten a fair shake over the last 50 years as they have seen jobs disappear. president biden and vice president harris and i really believe you ought to have access to a good job even if you don't have a college education.

increasingly i think people will see the good opportunities are being created. certainly the president is trying to go out and explain to people what this longer-term medium-term agenda,. he would say it is a matter of growing the economy from the bottom up and the middle out. what we have had is too much trying to grow the economy through trickle-down with gains going to the top with the hope it will trickle down. i think we are beginning to see the fruits of these investments beginning to pay off. i think americans have a lot to look forward to and are beginning to see this in their daily lives. peggy: we were just talking about america's perception of the economy. another thing we follow closely a bloomberg globally is

investors perception of the economy. i want to ask you a little bit about the rise in yields we have seen. we have seen yields surging in the last few weeks. the 10-year treasury rose above 5% earlier this week. what is your view on what is driving that surge and how much is connected to investors's concerns about the u.s. deficit? sec. yellen: i don't think much of it is connected to that. this is a global phenomenon in advanced countries. we are seeing yields go up in most advanced countries of the world. largely i think it is a reflection of the resilience that people are seeing in the u.s. economy that we are not having a recession. consumer spending and demand continue to be strong. the economy is continuing to show tremendous robustness.

that suggests that interest rates are likely to stay higher for longer. part of the increase in yields i think is simply a reflection of the strength of the economy, the notion that interest rates will be higher for longer. whether or not that is really true if we look at five or 10 years what are interest rates likely to do, honestly for a long time we have felt that interest rates over decades had been coming down. real interest rates. they were deep structural reasons for that. in part relating to demographics. those underlying trends are still there. they are still in force. i think it is perfectly possible that we will see longer-term yields go down, but nobody really knows for sure. i see the higher yields as certainly importantly a

reflection of a stronger economy. peggy: when you think about the deficit one of your preferred metrics for assessing u.s. fiscal stability is to look at the net interest outlays as adjusted for inflation. right now i think you said those levels seem good to you. sec. yellen: in real terms it's about 1%, a little under that. peggy: that is helpful in the next figure i was going to mention. several economists are forecasting that figure by 2030 could be well north of 2%. at that level would you be alarmed in terms of the sustained fiscal sustainability? sec. yellen: fiscal sustainability is critical. president biden is committed to putting forward a fiscal plan that shows fiscal sustainability. uncertainty about interest rates. interest rates do influence the path of that real net interest

is going to be. there is a bigger challenge if the interest rate path stays higher. president biden has already supported deficit reduction measures in the pact raising the debt ceiling and the inflation reduction act. there is $1 trillion of deficit reduction. he proposed a budget that both invests in america, continues to do that, and also has revenue raising measures that would result in another $2.5 trillion of deficit reduction over the next decade. yes, we have to put forward fiscal plans that will keep the deficit manageable and keep this real net interest cost.

i would say well below 2%. the higher the interest rate path the more that we need to do. peggy: i want to take a moment and turned to the global outlook. with the israel-hamas were happening in the middle east there is a concern by some that the work could spread or expand to broader in the region. i know that is not your base case. if that was to happen, could you walk us through your risk scenario for what that might mean to the global economy? sec. yellen: i guess i have to say my focus as i look now at what is happening to the middle east really is the tragedy, the human tragedy that is taking place with the israelis who have suffered and we are worried about casualties in gaza as israel pursues its war against

thomas. -- hamas. it is the human suffering that should be our focus in countering terrorism. we are monitoring the economic consequences carefully. so far i would say we have not yet seen much that has global consequences. oil prices are largely flat. what could happen if the work spans, of course there could be more meaningful consequences but i think it is premature to speculate against -- about those. i think our focus should be keeping this contained and not spreading. peggy: on hamas, the treasury department has taken further moves in the last few weeks to restrict financing to hamas.

brian nelson is in the middle east right now. do you think there is room for further restricting or eliminating financing to hamas? if so, can you tell us what might be the next steps? sec. yellen: i cannot comment on any specifics concerning sanctions we have not yet put in place. what i can say is we have taken a large number of steps just over the last year to put in place sanctions to try to reduce the avenues for financing of hamas. in the aftermath of this attack last week we put additional sanctions in place. my undersecretary will be in the middle east. deputy secretary is leaving tonight for a trip to europe to

also discuss working with our allies on sanctions. we are certainly looking at further opportunities we see to try to reduce the flow of financing to hamas. we are all over this and are likely to do more. peggy: one final question of the middle east before return to other topics. on iran, can you help us understand are the $6 billion in iranian oil proceed assets locked right now as they sit in a qatari account? sec. yellen: all i can tell he was that not a penny of that money has been touched. the trump administration agreed to allow iran to sell oil. the sales were largely to korea.

the proceeds were held in a korean bank account and only permitted to be used for humanitarian purposes. without any direct funding ever going to iran. those proceeds were moved from korea to qatar. they still sit there. they can only be used for humanitarian purposes. they have not been used. i don't feel comfortable saying more about diplomatic conversations that are taking place. iran has not touched those funds. peggy: you mentioned diplomacy. so much of your role as secretary has been actually traveling around the world. we often think of the treasury department as domestic but so much of what you have done is international. you are seen as a liberal economists supportive of free

trade. i wanted your thoughts on how concerned are you that some of the biden policies may be ceiling a mistress of -- sealing a global mistrust of globalization? sec. yellen: that's a great question. i have talked about a concept i call friendshoring. i i think as a consequence partly of the pandemic and partly russia's invasion of ukraine, we have come to the realization that our supply chains, america's supply chains are not secure. in some cases we are overly dependent on countries like china. what we need to do is to take steps as a country to reduce our own mobility and to diversify

our supply chains. to some extent that involves reassuring things to the united states in doing more here. -- re-shoring things to the united states. the inflation reduction act has incentives to do more in the united states. the desire in part is to create in good jobs in -- create good jobs and industries that are drivers of future growth. whether it is semiconductors or clean energy. we don't want to forgo global benefits of globalization and trade. so the idea friendshoring is we want to be able to rely on a broader set of countries to do trade and investment to deepen our trade and investment relationships with countries we feel are trustworthy, that can

be reliable parts of the global supply chain that we take part in. part of what i have been doing is traveling around the world talking to countries about developing our supply chain relations. we are very close partners with europe, with canada, mexico, other countries with whom we have free trade areas. but many more countries we are deepening our relationships with india, vietnam. we want this to be broad. we understand the international division of labor with countries taking advantage of the benefits of comparative advantage doing what you are most efficient at relatively efficient at, that this is a great set of benefits both for the added states and also -- the united states and also countries that are given the opportunity to trade.

that contributes to their growth. we don't want to forgo that. we do want to maintain the benefits of globalization but without the vulnerability that comes from undue reliance on a few countries that may restrict trade for political or other reasons. peggy: you mentioned running our network of friends we can have partnerships with but also china. you took a trip to china, to beijing this summer. you talk to but how are policies should be around diversifying rather than decoupling. what is the current status of that? do you think the chinese have adopted that and feel like they can trust us on that front? are they still thinking we are in a competition with them first and foremost? sec. yellen: we have articulated a strategy.

it involves de-risking in some areas. -- areas where we are overly dependent on china. clean energy is a good example. we also intend to focus on national security. that is an area we are not willing to compromise on. we do have export controls. we continue to review them. we are working on a set of restrictions on outbound investment to china. we have discussed this with them. put out a proposal that is in the public domain. comments just closed on it. our objective is to target what we do as narrowly as possible so it really focuses on national security. that it is not an intention to

harm the prospects of chinese economic development in the welfare of the chinese people. we intend to have healthy competition and mutually beneficial trade and investment with china in the -- in many areas. importantly, the third prong is we need to work together on global problems. debt relief is one of those problems. climate change is another. there are many examples. that is what we are trying to do in terms of our strategy. president biden and president xi met in bali just over a year ago. i was at the meeting. almost no senior-level contact had taken place during the pandemic between china and the united states. i think that was a dangerous

situation. especially when there are disagreements. it's important to be able to discuss them, to talk through, to see the other country's point of view and to discuss areas where you are not in sync. it was recognized by both sides that we needed to talk more to deepen our discussions, exchange information, and particularly in economic areas, macroeconomic performance, financial markets where our behavior has spillovers back and forth to one another. also our decisions affect the global outlook as a whole. that is what i tried to begin in my meetings that i had in china. things have continued very positively from there. we formed working groups. they report to me and my chinese

counterpart. one concerns economic matters. the other is financial matters. the working groups met earlier this week, both of them met. we now have a set of very constructive and deepening discussions about areas of mutual concern. it is good to have contacts throughout our chain. it levels -- at levels below secretary. staff level discussions. channels of communication where when a problem arises each side can pick up the phone and discuss it before it rises to the level of really serious disagreement. this agenda is working. we certainly will continue to deepen our economic relationship

and discussions. i'm feeling very good about how things are going there. peggy: turning back to the u.s., you have described the biden administration's economic policies as something you refer to as modern supply-side economics. with those policies they are aiming to increase the productive capacity in the u.s.. that's a pretty big goal. can you talk to me a little bit about how long you think it is going to take her some of those policies to become entrenched enough that they stick and have a real impact on people? i'm looking ahead to next year. the election is coming up. what is at stake if the democrats don't retain the white house in terms of the abilities for some of those policies to take hold/ ? sec. yellen: modern supply-side economics is a strategy and that is something republicans and democrats i think share a desire

to see wages and incomes increase, to see economic welfare for the broad set of americans to improve over time, and economic growth or "supply site strategy." -- supply side strategy." it's our country's ability to improve services over the medium to long-term. we agree on that. it is widely accepted. the republican strategy has been largely a trickle down strategy of giving tax breaks and deregulation to the rich and corporations in the expectation or hope benefits would trickle down more broadly. i see that as a failed strategy and one that is really not

successful in creating broad prosperity. i see modern supply-side economics as having the same objective but proceeding in a different way. there are many factors that are inputs into growth besides private investment. for too long we ignored infrastructure. investing in america's infrastructure produces benefits. r&d. after having decades in which the u.s. spent on research and development, certainly at the federal level, had fallen to very low levels we were no longer one of the leading countries in terms of the resources we devote to r&d. we have stepped that up substantially in the legislation that has been passed. what we want is also growth that

is equitable. addressing inequality for over 50 years, essentially median americans saw little growth, little or no growth in their real income. we want to change that. we want to make sure opportunities are created, especially for those who don't have a college education and live in places. we have had so much growth on the coasts but many parts of the country, geographies, it seems progress has passed by. if you look at the legislation that has been passed and the investment plans that have been announced we have seen over $600 billion in new investments that have been announced. it takes a while to get those in place. look at where those investments occur.

they are occurring in parts of the country that have not seen that kind of investment. we are seeing electric vehicle production and battery production in many parts of the country that have been sorely hurting for good jobs. it will take a while for americans to see the benefits of this, but even now i think many americans can see good jobs are being created in manufacturing, which has not done well over decades in the united states. i believe opportunities will be created and people will be able to see that over time in their daily lives. peggy: secretary, you have been a public service nearly five decades now, holding the -- [laughter] sec. yellen: that's a long time. peggy: a lot of working years.

i will say you have held the top economic posts across the cea, the fed and now treasury. you are also known as a technocrat and policymaker rather than a political animal per se. when you look at the divisiveness in washington, and we have just seen the past few weeks just on capitol hill, are you concerned there is less and less-- less and less room for a person like you to come into washington and make a notable difference at the highest levels, if you are not as politically driven as policy driven? sec. yellen: you know, i guess i see that we have a government that is filled with people who are professional, technically proficient, and dedicated to good policy. and