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First Move with Julia Chatterley
Almost One In Every 100 Americans Has Tested Positive For Coronavirus; U.S. Companies Brace For The Worst Results Since The Financial Crisis; China Retaliates Targeting Leading U.S. Politicians. Aired 9-10a ET
Aired July 13, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:25]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here is your need-to-know.
States surge. Almost one in every 100 Americans has tested positive for coronavirus.
Earnings eke. U.S. companies brace for the worst results since the financial crisis.
And Senate sanctions. China retaliates targeting leading U.S. politicians.
It's Monday. Let's make a move.
Welcome once again to FIRST MOVE wherever you are joining us from in the world. Lots coming up today, as always, including, we have a prize winning
economist, Paul Krugman giving his take on the economic outlook just a day after a new record rise in COVID cases around the world, 230,000 plus
cases, in fact, according to the World Health Organization.
What does this mean for the global economy? And what does it mean for the global consumer? We've got the CFO of soft drink and snack giant PepsiCo
coming up with his take, too.
Global stocks, meanwhile have some fizz. I have to say at the beginning of a fresh week, we're looking at a higher U.S. open buoyed by more vaccine
optimism in fact. This time, it's Pfizer and German biotech BioNTech granting fast track designation by the F.D.A. for two, in fact, of their
vaccine candidates. So that driving some optimism, I think more broadly.
The NASDAQ beginning the week up record highs as earning season begins and expectations, I have to say, are pretty bleak.
But of course, that is in the past. That was Q2, the key is now, what they say about the future, if anything.
Pay close attention, too, to the bank earnings for a sense of the real underlying economic damage. Remember, they face consumers around the world.
Very important for the U.S. consumer, too.
Now, a key acknowledgment perhaps of the ongoing uncertainties out there, the fear gauge, the VIX Volatility Index has risen as well. The real
outperformer though, take a look at what's going on in China. Stock markets building on last week's seven percent advance there. The setting aside,
fears on Friday that Chinese officials now may want to slow the pace of that stock market rally.
The world awaits Thursday's look at Q2 Chinese growth numbers, too, a bounce into positive territory expected after a weak Q1.
Now, the mark of a true V-shaped recovery, perhaps, something that feels increasingly remote here in the United States as COVID cases continue to
rise and that's where we begin the drivers.
In Florida, in fact, shattering the U.S. record for coronavirus cases in a single day, there were over 15,000 cases reported on Saturday. That's more
than Greece and Australia combined for the entire pandemic, just to give you a sense of scale. Rosa Flores reports.
(BEGIN VIDEOTAPE)
ROSA FLORES, CNN CORRESPONDENT (voice over): Florida coronavirus cases surging. More than 15,000 cases announced on Sunday alone, marking the
highest daily number of confirmed cases in the state ever.
The test positivity rate in Florida has not dipped below 15 percent since June 25th. Governor Ron DeSantis suggested over the weekend that Florida
will not proceed to the next phase of reopening.
(BEGIN VIDEO CLIP)
GOV. RON DESANTIS (R-FL): Right now, we're not making any changes. Status quo. We want to get this positivity rate down and as we get in a more
stable situation, you know, then we'll take a look at it.
(END VIDEO CLIP)
FLORES (voice over): Hospitals in Miami Beach are nearing full capacity.
(BEGIN VIDEO CLIP)
MAYOR DAN GELBER (D), MIAMI BEACH, FLORIDA: We're going to have to start moving regular beds into ICU beds, so we're clearly being strained at this
point and there's obviously an impact on non-COVID cases, which also need to be taken care of.
So, this is really straining our healthcare system dramatically.
(END VIDEO CLIP)
FLORES (voice over): Walt Disneyworld reopening some parks despite the surge. Making masks mandatory and barring anyone displaying COVID symptoms.
Georgia is seeing an increase in new cases over the past two weeks, after being one of the first states to start reopening.
Atlanta Mayor Keisha Lance Bottoms said she was moving the city's reopening back to Phase 1 telling residents to stay home except for essential needs.
Governor Brian Kemp calling this merely guidance and says the mayor cannot issue her own restrictions.
And in Northwest Michigan, this Fourth of July event with hundreds packing the beach, causing the Health Department to issue a possible public
exposure advisory after some partygoers tested positive.
And in Texas, many hospitals are nearing capacity and Governor Greg Abbott warns that things will get worse in the coming week.
Thirty five states across the country are experiencing an increase in weekly coronavirus cases. But administration officials continue to downplay
the surge.
[09:05:20]
(BEGIN VIDEO CLIP)
ADMIRAL BRETT GIROIR, H.H.S. ASSISTANT SECRETARY: We are all very concerned about the rise in cases, no doubt about that. That's why we're meeting
regularly. We are surging in assistance, but we are in a much better place. This is not out of control.
(END VIDEO CLIP)
FLORES (voice over): And despite warnings from health experts and school officials, Education Secretary Betsy DeVos brushing off the risks of
reopening schools.
(BEGIN VIDEO CLIP)
BETSY DEVOS, U.S. EDUCATION SECRETARY: There is nothing in the data that would suggest that kids being back in school is dangerous to them. In fact,
it's more a matter of their health and wellbeing that they be back in school.
(END VIDEO CLIP)
FLORES (voice over): House Speaker Nancy Pelosi firing back, saying DeVos is putting children and teachers at risk and ignoring the science.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D-CA): I think what we heard from the Secretary was malfeasance and dereliction of duty. We all want our children to go back to
school. Teachers do. Parents do and children do. But they must go back safely.
(END VIDEOTAPE)
CHATTERLEY: Rosa Flores reporting there. So many mixed messages. They are not the only thing investors have to deal with this week, kicking off what
could be the worst earnings season since 2008 financial crisis.
Netflix, Goldman-Sachs, PepsiCo and others reporting results for the first full quarter since the pandemic began. Christine Romans joins me now.
Christine, we're expecting to see earnings drop by almost half in the second quarter, though I've made the point and I'll make it again, that's
backward looking. The key is what, if anything, we hear about the future.
CHRISTINE ROMANS, CNN CORRESPONDENT: I think guidance is really going to be key here. I really want to hear from these CEOs about what they're seeing
and how they're feeling about reopenings and what kind of recovery they're expecting in the American economy, just how long this misery is going to go
on.
Because the second quarter was the coronavirus quarter. I mean, it's all in there, all of that misery of coronavirus and what it has done to the
American economy, so we'll get a really good look at what happened and we're going to want to hear where we're going here.
I'm going to be really closely watching the banks, of course. I mean, their bank profitability just crushed by these low interest rates, the zero
interest rate policy world, the zip world. That's going to be the here for the foreseeable future here.
And they're taking out a lot of loan risk, right? All of this lending activity, because of the coronavirus. So I'm going to be really interested
to see what the banks are going to say. I mean, I think bank earnings are expected to be cut in half at least, right, for some of these big banks.
Overall, earnings will be expected to be the worst since the great recession, maybe down 40 percent, 45 percent.
CHATTERLEY: Yes, I mean, these are astonishing numbers. Christine, you said it, Q2 was the pandemic quarter. The sad fact is, Q3 is the pandemic
quarter. The difference is whether or not we can resist lockdown on some greater scale than of course we saw across vast swathes of the economy in
Q2. That remains the big question as we see big states in big trouble.
ROMANS: And going in the wrong direction. There are Harvard researchers this morning who are saying there are eight states that should be back in
lockdown. Eight states that should be back in lockdown, and we know there's not a lot of political will for lockdowns again.
In fact, from the White House and from the Trump administration, you have this big push to get kids back into school and to get things back to normal
so that the economy can continue to open up.
These cases in Florida, very interesting. You go back in time two weeks or three weeks to how loose the restrictions were in Florida and now, you see
what's happening in hospitals and with the number of cases here.
And it's not just testing and finding new cases, but you've got a really high rate of positivity among these cases and hospitalizations that are
still rising.
So, we are still in the thick of it here. I think the earnings numbers are going to be really ugly. We all know that. The guidance is going to be
clear, especially since you've got these hot spots in the United States right now.
What are CEOs going to be saying about what they feel will happen next?
CHATTERLEY: Yes, and the likelihood of greater lockdowns accelerates as your medical systems become overloaded. It's not about caseloads, it is not
about deaths, it's about simply not being able to deal with the number of cases that the medical system is presented with.
Fascinating to see Disney in Florida saying we feel like, despite the rise in cases, very different scenario to what they faced with reopenings in
Tokyo, in Shanghai. They felt confident enough in Florida to reopen.
ROMANS: They reopened two -- two of the parks reopened there and two more, Epcot and Disney Hollywood Studios will open on Wednesday. We know they're
at 25 percent capacity. We know it looks a little different in there.
When you hear from people who have been inside the park, some are disappointed that there aren't parades and there aren't fireworks. When you
go on "The Pirates of the Caribbean" ride, there are rows of seats that are blocked off.
They're trying to maintain social distancing. They're requiring people to wear masks and the Disney team has really been working hard to be very
upbeat in communicating to people, no, you must wear your mask and it has to be over both your mouth and your nose.
Look, there are people who are inside that park who actually are saying it's just what they needed after just these months of lockdown. They needed
that sunshine, right, that magic from the Magic Kingdom. But there are questions about whether this is the right time to do this when the cases in
Florida are so severe.
And when that county in particular is a hot spot at the moment -- is this the right time to do it? The new head of the Parks Division there telling
CNN this is the new normal. They're going to try to show that you can operate safely in this environment going forward.
[09:10:43]
CHATTERLEY: Yes, and that remains to be seen. A little sparkle though and a little happiness, I have to say, goes a long way, but not at the cost of
lives and health. Christine Romans, thank you so much for that.
To China now, Beijing says it's imposing sanctions on U.S. Senators Marco Rubio and Ted Cruz, among others. It's in retaliation after the U.S.
accused Chinese officials of human rights abuses against Uyghur Muslims in Western China.
David Culver is live in Beijing for us. I feel like China -- and David, great to have you with us -- have defined the term tit-for-tat throughout
this U.S. presidency, responding in a proportional manner, trying not to escalate, but clearly we've seen some pretty bold actions overnight.
DAVID CULVER, CNN CORRESPONDENT: Indeed, and this has been announced, Julia, from the Foreign Ministry here. Essentially they're describing this
as reciprocal actions taken against the U.S., the two biggest names in those sanctions, of course, as you mentioned, Senator Cruz and Senator
Rubio.
Now, both of those individuals have been strong critics against China, in particular with what's happening in Xinjiang. Now, the U.S. State
Department has alleged that inhumane treatment of some one million Uyghurs, this is the ethnic minority in that far western region. It has been taking
place there for some time.
And we've seen increased action, at least vocally, from the U.S., and action in some of the policy, including the sanctions that came last week
against Chinese officials.
Now, the Foreign Ministry didn't go into details as to what it's going to mean for, for example, Senator Cruz and Senator Rubio, however if it's
reciprocal, it would look like what the U.S. did to Chinese officials, and that essentially says, look, you and your family can't come to China.
And so that may be part of this or there could be more coming down. They say they'll go into details and they're not denying that they would put
more actions into place coming forward if they deem it appropriate.
But that's the latest where it stands with the back and forth in the U.S.- China tensions portion of all of this. Meantime, they've got an investigation under way here with the pandemic sourcing.
CHATTERLEY: Yes, and that's the critical thing, too. I have to say, as far as Ted Cruz and Marco Rubio are concerned, I am sure they were not
intending to go to China at any point soon, so they would be rolling their eyes at this, but as far as the World Health Organization is, we do want to
get to the bottom of what happened as far as the virus outbreak is concerned and we've got a party there now in china investigating.
CULVER We do. And we've been trying to get some more information on this. I've got to be honest, it's been difficult to get information as to what
the itinerary is going to look like and what exactly they'll be doing while they're here.
And I put those questions not only to Chinese officials, but also to World Health Organization and as of now, the only thing that's been confirmed
from Chinese officials is that two individuals have arrived from the W.H.O.
We know one of them is an animal health expert, the other an epidemiologist. As far as what exactly they'll do, it's been kept rather
vague. Source tracing, Chinese officials are saying they're going to do this in every country that has been deemed impacted early on with the novel
coronavirus outbreak.
But no question, when it comes to China and it's role, a lot of questions have been put to early handling or mishandling as the U.S. has certainly
alleged, covers-ups as we have reported from the local level, from Wuhan officials.
And so, part of that may play into this. That's going to be -- the overarching question is, is the W.H.O. and this team in particular going to
address that.
Now, this is an advance team, so we expect more individuals to be coming in months to come, but it's certainly a start to what many in the
international community, not just the U.S., have been calling for, and that is an investigation into the origins of how this pandemic started -- Julia.
CHATTERLEY: Yes, and even when we get the results, I think there will still be deep skepticism and that's going to be the ongoing challenge here. David
Culver, thank you so much for that.
To the biggest merger deal so far this year in the United States, chip maker, Analog Devices has agreed to buy rival, Maxim for around $21
billion. The deal will expand their market share in automotive and 5G chip making.
Clare Sebastian has all the details for us. Clare, we'll talk about the whys and the wherefores here, but just talk us through the deal first and
foremost. It's a big one.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: It's pretty big, Julia. It values Maxim Integrated Products at around $21 billion, which is about a
more than 20 percent premium on their market cap as of Friday. So clearly, ADI, Analog Devices is prepared to pay for this.
I think this is part of the landscape that we continue to see within semiconductors, obviously, not a lot over the past few months of
consolidation as demand grows significantly more and more connected devices and autonomous vehicles, 5G, things like that.
[09:15:31]
SEBASTIAN: This creates a company with an enterprise value of about $68 billion, so a pretty big player within this industry. It is an all-stock
deal and they do expect that there will be some regulatory hurdles that they'll have to cross.
They expect the deal will close in the summer of next year. But clearly, this is about ADI and Analog Devices wanting to diversify their portfolio
and bring costs down.
They say that they expect cost synergies of $275 million by the end of year two.
CHATTERLEY: Yes, And Maxim has got an army of hardware engineers as well that they want to access as well.
What about competition concerns here, because I look at the big competitor here, it's Texas Instruments, and I mean, their market cap is ginormous,
almost double the size still. Any competition worries here?
SEBASTIAN: Well, I think that is one of the things that regulators are going to look at, as we look over the past few years, Julia, of
semiconductor deals. There have been a lot of them, but there have been ones that have stalled because of regulatory issues.
But I think because this deal doesn't bring the combined company anywhere close to the size of Texas Instruments; that should help their cause.
Plus, they are well, sort of complimentary in certain areas. They are similar in some areas. They also are in different areas. The CEO of ADI was
keen to point out on a call that they just held at short notice this morning that Maxim has thrived in certain areas where ADI hasn't.
For example, in automotive and things like electrified vehicles and infotainment systems for them, safety systems for them. So I think, they
are looking at bringing in a more diverse portfolio and that may help with the competition concerns as well.
CHATTERLEY: Fantastic. Clare Sebastian, thank you so much for being all over that story for us.
All right, let me bring you up to speed with some of the other news making headlines around the world.
In Poland, conservative President, Andrzej Duda won re-election by a narrow margin, with the count almost complete, he had over 51 percent of the votes
with liberal candidate, Rafal Trzaskowski on less than 49 percent. Mr. Duda had backed a nationalist government whose conservative agenda has divided
Poland and led to tensions with the European Union.
In India, three generations of a high-profile Bollywood family are being treated for coronavirus. The legendary actor, Amitabh Bachchan was
hospitalized with his, Abhishek after testing positive.
His daughter-in-law, actress, Aishwarya Rai Bachchan and granddaughter are self-quarantining at home.
Actress Kelly Preston has died after a two-year battle with breast cancer. Her husband, John Travolta said she fought the disease courageously.
Preston who was 57 years old and was known for roles in "Jerry Maguire" and "For Love of the Game."
We'll be back after this.
(COMMERCIAL BREAK)
[09:21:07]
CHATTERLEY: Welcome back to FIRST MOVE where your stocks are set to build on last week's gains buoyed by positive vaccine news and that multibillion
tech merger that we mentioned as well.
The NASDAQ is set to hit fresh all-time highs. It's now up almost 20 percent year-to-date. That said, sectors whose fortune depend on successful
reopenings remain pretty volatile, including the airlines.
Just take a look at what we're seeing for American, if we've got that for you, it rose or fell by more than six percent three times last week.
There you go. That's the performance just to give you a sense of the volatility here.
All right, let's go back to oil now. I'm getting mixed up and I can show you this. There we go.
A little bit weaker in the session this morning, too. Reports say Saudi Arabia and other key producers are in favor of easing production cuts that
have helped support prices during the pandemic.
The question is, has the global economy recovered and strengthened enough to handle that increased supplies? It's all about the supply and the
demand, of course, that is certainly something that we're going to be watching this week.
All right, let's head to Brazil now, the number two virus hot spot in the world nearing two million diagnosed coronavirus cases. Indigenous people in
Brazil are dying at an alarming rate amid a battle for their land and for their lives. CNN's Bill Weir has more.
(BEGIN VIDEOTAPE)
BILL WEIR, CNN CORRESPONDENT (voice over): A long lens found Brazil's most famous COVID-19 patient up and about this weekend and this Twitter selfie
was part of a post that informed the nation they are on the verge of recession as he called for families to de-politicize the pandemic, after so
much, quote, "misinformation was used as a weapon."
To his critics, that is outrageous since President Bolsonaro often defied a judge's order to wear a mask in public and pushed out two Health Ministers
who disagreed with him.
Well, he now has a team of doctors in his own palace ICU at the ready. Hospitals across his country are jammed.
Here in the geographic center of Brazil, a husband and wife suffer in adjoining beds, a son comforts his ailing father, and their doctor is still
regaining his strength after ten days in intensive care.
(BEGIN VIDEO CLIP)
DR. WILSON VILELA, DOCTOR IN BRAZIL: So today my boss, our boss is inside with the ventilation, with tube.
WEIR: Really?
VILELA: Yes. Be better.
WEIR: Oh my gosh.
VILELA: And not responding to chloroquine.
(END VIDEO CLIP)
WEIR (voice over): Chloroquine is among the cheap, abundant antimalarial drugs pushed by Bolsonaro as a COVID cure, along with vitamins, steroids
and medication for parasitic worms.
Dr. Vilela says he has tried them all with wildly mixed results.
(BEGIN VIDEO CLIP)
VILELA: I don't know what to do, but I do. Water.
WEIR: Yes, water.
VILELA: Yes.
WEIR: You have very little, so you're trying everything you can.
VILELA: Yes, yes. It's a new disease. It's a new pandemic so we don't have things to do.
WEIR: Right.
(END VIDEO CLIP)
WEIR (voice over): He says it's more challenging treating the indigenous Brazilians who once had this edge of the Amazon to themselves, but are now
surrounded by farms and ranches. A soybean trucker first brought COVID-19 to this region and it is tearing through a community, already struggling
with vulnerable immune systems, diabetes, and a deep mistrust to the outside world.
"I would like Jair Bolsonaro to stop talking stupid nonsense." Crisanto Rudzo tells me. "The doctors have to prescribe, not the President. His
government did not take prevention seriously, it did not prepare."
The indigenous leader was on a ventilator when his mother died of COVID-19.
[09:25:10]
WEIR (voice over): "We have a very strong spirituality, so she was there and took my hand and told me that I'll get out of this to take care of my
people. Five days later, my father died."
As the pandemic spread, Brazil's Congress passed a Bill that would provide clean water, disinfectant and hospital beds for this country's 850,000
indigenous natives.
Last week the efforts were vote vetoed by Jair Bolsonaro.
(END VIDEOTAPE)
CHATTERLEY: Bill Weir reporting there. All right, news this morning, too. The NFL, the National Football League's Washington Redskins has announced
it will change its name and logo amid renewed protest against systemic racism here in the United States.
The name has long been criticized as insulting by Native American groups. The team says it will continue its search for a new name and a logo, but
will change this morning after much protest.
All right, we're counting down to the market open this morning. We are expecting a positive open. A big week for earnings of course, too, amid the
broader challenges of coronavirus.
Plenty of analysis coming up shortly. Stay with us. We're back after this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. PepsiCo reporting Q2 earnings and revenues that topped expectations. Sales fell some three percent overall
due to weakness in beverages demand, but snack and food sales were strong.
And in Asia-Pacific, sales soared some 10 percent. PepsiCo, one of the many companies that have withdrawn guidance because of the COVID related
uncertainty.
Hugh Johnston is Vice Chair and CFO at PepsiCo and he joins us now. Hugh, fantastic to have you with us, as always. Many challenges at different
stages all around the world. These results show clear resilience, I think. You must be pleased.
[09:30:09]
HUGH JOHNSTON, VICE CHAIR AND CFO, PEPSICO: Yes, we actually felt like it was a pretty good quarter, Julia. I think our portfolio actually manages
well through the crisis.
What we've seen is, as lockdowns happen, we tend to see the snack and food business lift up a little bit, the beverage business obviously doesn't do
as well because of lack of mobility.
Then as mobility becomes more positive, we've seen the beverage business pick up. The food business loses a little bit, but also stays quite
positive.
So as we look at it, the portfolio does work well in what's obviously a very challenging environment.
CHATTERLEY: It's a tale of two halves for the United States as well as you quite rightly mentioned, the beverage business suffering most, offset by
the gains in the snack business and in Quaker, too.
Is this where you see most uncertainty going forward, just whether it's in terms of consumer demand, consumer behavior, or of course what we're seeing
in terms of the health crisis itself?
JOHNSTON: Yes, it's obviously quite difficult to predict and that's true both in the U.S. and obviously in many countries around the world.
Recently, obviously, we've seen the infection rate rise in the U.S., it's also clearly a challenge in a number of markets, and particularly a number
of developing and emerging markets.
So the uncertainty factor beyond a couple of months out, unfortunately, is quite high, which is why we withdrew the guidance.
However, we do see some trends that seem to be sustaining. Consumers have clearly moved from smaller brands to sort of the big trusted brands that
they've known of the past, and that pattern seems to be staying in place.
We also see eating at home particularly in the morning as a trend that we think is going to continue for quite some time to come, which obviously
benefits our Quaker business. And then last, one of the bigger shifts we've seen is many, many new shoppers have tried e-commerce and many are finding
they like it.
The e-commerce business that we launched about five years ago will this year do about $3 billion in sales. So, clearly the e-commerce trend is one
that's here to stay.
CHATTERLEY: Yes, it's certainly a dominant theme in Asia as well, and I mentioned the strength that you saw there specifically. Clearly, they
handled the virus very differently. They were earlier than other nations around the world like the United States, like Europe as well.
Talk to me about consumer behavior specifically there. Are we approaching, dare I say it, some form of normality?
JOHNSTON: Yes, it's clearly opened up more, but you still see consumers and shoppers operating in a more cautious manner. And I'm not just talking
about spending, I'm really talking about how they go about their day, how they spend their time.
You don't see people getting into large gatherings yet. So we do think of it as a new normal, but the new normal is not exactly the same as the old
normal. That said, there clearly is a move towards a bit more openness as we learn more about how to protect ourselves from the virus.
CHATTERLEY: It's fascinating to hear how consumers are changing their behavior, but also some aspects are more towards comfort levels, porridge
or oatmeal for breakfast, for example, as you just alluded to there.
What does this all mean for your marketing? Your spending plans in the third quarter and the fourth quarter? And did PepsiCo join the Facebook ad
bans that we've seen from many other big companies? Can you give us some clarity on that?
JOHNSTON: Sure, happy to. In terms of the consumer consumption patterns, initially we saw a move towards indulgence, as you note. As the quarter got
to an end, we now see more of a balance where this is still a tendency toward some level of indulgence, typically later in the day.
But at the same time balancing that with a more nutritious profile, especially earlier in the day, looking for things like immunity, which
obviously orange juice tends to give, looking to go start the day with a healthy breakfast, which Quaker oats obviously has been providing.
So I think you do see sort of a rebalancing in that regard, but with the comfort of those big brands.
Regarding marketing and your question specifically on Facebook, we did not join the boycott, but we did announce that we were suspending our social
media marketing spending.
You have to keep in mind, for us, you know, PepsiCo is a business that really brings small joys to people and brings happiness to people with the
products that we sell.
We want our products to be positioned in places where people are receptive to those messages, and as social media goes through its evolution, we'll
continue to evaluate what it is that they're doing and we'll decide when and how to make sure that our products are positioned in a place that we're
comfortable or consistent with the way we want people to receive them.
CHATTERLEY: Yes, and customers are comfortable with as well. Thank you so much for chatting with us this morning, Hugh. Congratulations on the
results. Hugh Johnston there, the Vice Chairman and CFO of PepsiCo.
Stay with us. We're back after this.
(COMMERCIAL BREAK)
[09:38:15]
CHATTERLEY: Welcome back to FIRST MOVE. One out of 100 Americans have tested positive for COVID-19. That's just the latest marker of how deeply
the virus has taken a grip in the United States.
Our next guest says it's a war the country has already lost and that America is like the Titanic steering towards the iceberg. Joining us now is
Nobel Laureate, Paul Krugman. He is a "New York Times" columnist and author of several books, the latest called, "Arguing With Zombies: Economics,
Politics and the Fight for a Better Future."
Paul, fantastic to have you with us, as always.
PAUL KRUGMAN, NOBEL PRIZE WINNER: Hi.
CHATTERLEY: Your op-eds, I think, increasingly in the last few weeks have shown your discomfort, your concern with what we're seeing politically, but
also how that corresponds to what we're seeing in terms of the economy. Just spell that out for us.
KRUGMAN: Okay. The rest of the advanced world has followed a pretty clear pattern. The coronavirus hit hard, they locked down -- they locked down.
Most countries locked down long enough to bring it to quite low levels, had more or less managed to control it. They're starting to reopen.
The United States blew it. We rushed to reopen. We rushed to reopen stupidly, not even doing facemasks, opening bars, which is the worst kind
of thing to do.
The result now is that we are basically moving back into lockdown. We squandered whatever we achieved at the beginning. We are completely off the
charts, literally actually, compared with the rest of the advanced world in terms of cases.
And economically it turns out that, as was predicted by many people, including myself that failing to deal with this at the beginning actually
makes the economic impact worse because the coronavirus slump goes on and on.
So yes, I mean, it's kind of stunning how badly the United States has handled all of this.
[09:40:10]
CHATTERLEY: There's been a deal of celebration in certain quarters from the jobs that we've seen regained, 7.5 million jobs in May and June, around
one-third of those that were lost during the pandemic.
You could also argue the price for those jobs being regained is, as you point out, a health situation now that feels pretty out of control.
What is the risk now for the stalling economy, even perhaps job losses in the coming months?
KRUGMAN: It looks quite -- yes, it looks quite high. I mean, I never thought we would be in a situation where monthly data is just too low
frequency, too far lagged to keep track of what's happening, but that's where we are right now.
And I never knew in the past, I don't think I ever paid attention, what week do the Job Reports correspond to? And the Job Report for June is
actually a report for the second week of June, and that's already ancient history.
So it already looks from the various kinds of high frequency data we have, credit card use, mobility data, restaurant reservations, as if recovery has
slowed, maybe even stalled later in June and that where we are now is nothing like.
So we had two months when it was like people coming back from summer vacation. We had two months of rapid return, but which brought back about
one-third of the jobs, but it wasn't sustainable because we haven't actually brought the virus under control, and now, the prospects for a
really long period, maybe a year of double-digit unemployment, though no one can be sure about any of that, are far higher than I thought they would
be.
I mean, I was an optimist about a V-shaped recovery given the condition that we actually got the virus under control. But we didn't, and so now,
it's kind of grim.
CHATTERLEY: The data is always backward looking, but you're saying in this case, it's just terribly late because things are moving so quickly, whether
it's the economy or the virus.
KRUGMAN: Yes, we are going to be on COVID time. Things move so fast that the fact that the monthly data is just too coarse to keep track of what's
happening.
CHATTERLEY: What about policy response? This is a critical month where we're approaching a cash cliff in terms of the stimulus and the financial
support that was given by Congress to individuals, but also to small businesses as well.
What needs to be done here and what is the risk of actually still those in congress on the Republican side that don't want to provide the support --
the increase of support?
KRUGMAN: Yes, we actually did, grading on a curve, the U.S. did a remarkably good job by historical standards of coping with this. Actually,
it looks like poverty may actually have gone down.
Largely, I think the most important factor was unemployment benefits and then some other programs as well, PPP and so on.
But all of that comes to a screeching halt. The expanded unemployment insurance comes to an end. Again, dates matter in a way that they didn't
used to. It comes to an end on July 31st, but because of the pay period ending on, it actually means that a lot of workers are going to be cut off
from their safety net around the 25th, which is just less than two weeks away.
And Congress, the trouble is -- I'm not an expert in legislative process, but it's hard to imagine that we're going to get anything sufficient in
time because -- and the point is that Republicans were really set on the notion that we're all going to get back to work and they didn't like the
unemployment benefits because they thought, although there's no evidence of this, that it was discouraging people from returning to work.
But we don't want people to go back to work because we've got an out of control virus, but making that 180 on policy, just renewing the crucial
pieces of aid and then also aiding state and local governments, it should be a no-brainer right now.
But unfortunately, we've got a lot of no brains in the legislative branch. So I don't know. I mean, I am looking at -- I think we're looking at a very
severe hit to consumer incomes and consumer spending just three weeks from now.
CHATTERLEY: Do you think it makes a difference that what we saw initially was particularly the burden falling on Democratic-led cities, and now we're
seeing Republican-led states facing significant pressures in terms of pressure on rising cases, on medical systems, to the point where
conversations about perhaps needing to see lockdown is happening? Does that change the calculus here on the support, if not now, in the future?
KRUGMAN: I think it does, although the trouble is that, yes, there was this clear sense, oh, this is a New York problem or it's a northeast problem and
sort of belated recognition that actually the virus doesn't care what color your state is politically.
But part of the problem now is that it's very difficult for politicians to admit that they got something like this completely wrong, even implicitly.
[09:45:01]
KRUGMAN: So, we're having a very delayed response even though the cases are clear. So, the fact that Florida isn't in a complete all-hands-on-deck, do
whatever it takes effort to control the virus is insane, but has a lot to do with the fact that the Governor of Florida stuck his neck out on this is
not a problem. We have it under control. It's very hard for him to reverse.
I mean, I give credit to the Governor of Texas for at least sounding halfway sane, which is hard to do when you've gotten things so wrong
before.
So, yes, now, will the calculus change? I think it will in time. I think as it becomes undeniable that there's basically -- that Florida in July is
like New York in March, then eventually there will be a change.
But it's really hard and it's astonishing that we still don't have statewide mask requirements in some of these afflicted states, that bars
are still open in some places. This is absolutely crazy.
But it's a testament to the difficulty that politicians have in admitting that they were wrong.
CHATTERLEY: Yes, and finding that balance between supporting the economy and allowing people to keep the economy going, versus protecting lives and
people's health, and we've simply not found the appropriate balance yet, to your point and we need to find it desperately.
KRUGMAN: It's not hard. I mean, we can support people. We're a very rich country. We can get people through a period of lockdown and avoid a severe
hardship, but we've chosen not to.
CHATTERLEY: Sir, always great to have you on the show and get your insights.
KRUGMAN: Thank you.
CHATTERLEY: Paul Krugman, great to have you on.
KRUGMAN: Thank you.
CHATTERLEY: Thank you.
KRUGMAN: Take care.
CHATTERLEY: Stay safe. All right, after the break, billions of dollars and thousands of jobs are at risk if international students are kicked out of
the United States. Some alarming numbers and some surprises in there, after the break. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. The higher education in the United States could lose as much as $4.5 billion. That's if international students
are banned from staying in the United States because their courses are becoming online only.
There are over a million international students in the United States and most come from places like China, India, and South Korea. In total, they
contributed nearly $41 billion to the U.S. economy last year, creating or supporting more than 458,000 jobs.
It's also estimated that three U.S. jobs are created for every seven international students.
NAFSA is the association of international educators and Esther Brimmer is the organization's CEO and joins us now. Esther, fantastic to have you on
the show.
These are some incredible numbers that I don't think necessarily people understood when they saw that announcement suggesting that international
students wouldn't be welcome if they weren't going to be physically in school. There's a high cost to this.
[09:50:01]
ESTHER BRIMMER, EXECUTIVE DIRECTOR AND CEO, NAFSA: Hello, Julia. It's great to talk to you about such an important subject. Indeed, international
students are absolutely vital for the United States. They bring innovation to our classrooms. That's good for American students.
But many people don't realize they also bring an important economic contribution to the United States.
As you've indicated, they account for 458,000 jobs, according to NAFSA's most recent figures. And actually, international education is the fifth
largest service export of the United States.
This is important for our economic vitality and for intellectual stimulation. So, efforts to the proposed regulation, which would in effect
say to students they have to choose between their health and deportation is devastating.
It's wrong for international students and it's wrong for the country because international students are important for this country.
CHATTERLEY: It's also putting pressure on the colleges and the universities, surely, to sort of force themselves to operate some form of
classes in person, which has health potential implications as well in order to get the money in from these students if they decide if they can't be in
the United States with this particular school, they have to go somewhere where they can operate in person. It's creating a whole host of issues down
the line as well.
BRIMMER: Julia, you are so right, because indeed you have institutions that want to make their decisions about whether to have classes online, in-
person, a combination.
They want to make that decision based on knowledge. After all, colleges and universities are knowledge-based institutions. They want to rely on the
best science and the local conditions to make their decision how best to provide the important education that they provide, but also to do it
respecting the health of students, scholars, professors and others.
But this proposed regulation pushes them, forces them to trying to decide how to respond. And remember, it is also extremely short notice.
Colleges and universities have been waiting for guidance for months. It is now July. Many institutions open in August. The deadline is this Wednesday,
the 15th of July, barely days after the announcement. And institutions are in a quandary about how to respond.
And remember, many of these institutions dug into their own pockets to support international students during the spring. For institutions in many
cases, international students stayed in the United States because they wanted to be ready to participate in the fall.
We estimate, based on a survey that NAFSA did in April, that institutions spent over $638 million of their own money to help support international
students who were eager to remain part of the educational community in this country.
We don't want to force those students to say is it my health or am I going to be deported. Those students, as I say, bring innovation. They help
American students learn about the world and they contribute overall to our economy.
Did you know that one-quarter of the people who founded the unicorn companies that are worth a billion dollars started as international
students? That's fantastic.
We want to be sure those students can continue their education and are not forced to choose between their health or their status. It's just too
important to the country. We've got to get this right. We've got to push back against this proposed regulation.
CHATTERLEY: I mean, you also make a good point that they've provided support over this period, this very difficult period, but there's incentive
because they bring in huge fees. I mean, they also provide the ability to support domestic students, American students, and many of those are
subsidized, too.
So there's a give and take here. What do you want to see international students do here? What can they do to say, look, we want to come or if
we're not coming, we still want to be able to go to these incredible colleges, because America is known for brilliant colleges for a reason?
What do you want to see from students?
BRIMMER: Indeed, it's great if students speak up, share their experiences. They can be out on social media, places like #YouAreWelcomeHere to share
their stories. And they can talk to their friends and colleagues.
So many people are voting constituents who know international students. International students are in all of our communities. So people who know
students, who have students as their neighbors. Maybe they, themselves, were exchange students should speak up about how important international
education is to be able to make clear to Members of Congress and the public that this is very important.
This is important for the United States. This is important for the global community. This is important for your local community, because those
international students bring such benefit to our communities across the country.
[09:55:10]
CHATTERLEY: Yes, in the short term and in the longer term, too. Esther, great to have you with us. Please keep us updated with what you're hearing
and seeing.
Esther Brimmer there, the CEO of NAFSA. Great to have you with us. Thank you for that.
All right, a quick look at what we are seeing for the markets this morning. We have opened up in positive territory, as I mentioned. We've got some
deal making going on in the chip sector. Also vaccine hopes once again, I think supporting optimism ahead of what is going to be a bumper week for
earnings.
All eyes on the bounce. It is expected to be an incredibly tough earnings season, but what if anything, do these companies have to say about the
outlook? That will be key, too.
All right, that's it for the show. Thank you for watching. You've been watching FIRST MOVE. I'm Julia Chatterley. Stay safe and I'll see you
tomorrow.
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[10:00:00]
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