[MUSIC] >> Dr.
Shankar: WE'VE BEEN HIT WITH WHAT I CALL A DOUBLE-WHAMMY TSUNAMI, BECAUSE WE HAVE THE OIL PRICES CRASHING, PLUS THE CORONAVIRUS PANDEMIC.
>> Dr.
Hallermann: THERE WILL BE A MUCH QUICKER RECOVERY THAN WHAT WE SAW IN 2008, THAN WHAT WE SAW IN THE GREAT DEPRESSION.
>> Dr.
Robertson: FROM AN ECONOMIC POINT OF VIEW, THIS IS A TIME OF TREMENDOUS EXPERIMENTATION.
>> Chancellor Sharp: WELCOME TO OUR SHOW.
I'M JOHN SHARP, CHANCELLOR OF THE TEXAS A&M UNIVERSITY SYSTEM, AND YOUR HOST FOR THE NEXT HALF-HOUR.
WITH THE CALENDAR TURNING FROM APRIL TO MAY, SOME BUSINESSES ACROSS TEXAS ARE POISED TO REOPEN AT ONLY ONE-FOURTH OF THEIR USUAL CUSTOMER CAPACITY, AS GOVERNOR GREG ABBOTT AND THE REST OF US TRY TO FIND THE RIGHT BALANCE BETWEEN PROTECTING OUR HEALTH AND PROTECTING OUR LIVELIHOODS.
THE U.
S.
BENCHMARK FOR CRUDE OIL, WEST TEXAS INTERMEDIATE, IS TRADING AT RECORD LOWS — EVEN DIPPING INTO THE NEGATIVE PRICE TERRITORY THE OTHER DAY.
MANY WORKERS' PAYCHECKS ARE SLASHED.
WE'VE SEEN MASSIVE INCREASES IN THE UNEMPLOYMENT ROLLS.
LOTS OF BUSINESSES REMAIN SHUTTERED.
CERTAINLY SOME OF THEM WILL CEASE TO EXIST BY THE TIME THIS PANDEMIC IS OVER, UNFORTUNATELY.
WITH SO MUCH HAPPENING SO FAST, IT'S HARD TO SORT IT OUT THE LONGER-TERM ECONOMIC IMPLICATIONS.
RECENTLY, WE GAVE IT A TRY.
IN A MOMENT, YOU'LL SEE MY DISCUSSION WITH THREE TEXAS A&M SCHOLARS WHO ANALYZED THE ECONOMIC IMPACT OF THIS UNPRECEDENTED TIME.
WITH ME IN THE KAMU STUDIO IN COLLEGE STATION, TWO PROFESSORS FROM THE MAYS BUSINESS SCHOOL.
DR.
DETLEF HALLERMANN, DIRECTOR OF THE RELIANT ENERGY TRADE CENTER.
HE'S AN EXPERT IN ENERGY TRADING, ENERGY ECONOMICS, AND THE TRANSPORTATION OF ENERGY AND ENERGY PRODUCTS.
DR.
VENKY SHANKAR IS DIRECTOR OF RESEARCH AT THE CENTER FOR RETAILING STUDIES.
HIS EXPERTISE INCLUDES CRISIS MANAGEMENT, ARTIFICIAL INTELLIGENCE, AND RETAILING.
AND ALSO JOINING US DR.
RAYMOND ROBERTSON, DIRECTOR OF THE MOSBACHER INSTITUTE FOR TRADE, ECONOMICS, AND PUBLIC POLICY AT THE BUSH SCHOOL OF GOVERNMENT AND PUBLIC SERVICE.
DR.
ROBERTSON STUDIES THE IMPACT OF INTERNATIONAL TRADE AND ECONOMIC EVENTS ON LABOR MARKETS.
HE'S IN ST.
PAUL, MINNESOTA, WHERE HE'S WORKING REMOTELY.
SO HOW DOES THIS COMPARE WITH THE 2008 CRISIS, WITH THE GREAT DEPRESSION, WITH ANYTHING THAT'S HAPPENED HISTORICALLY? THE MOBILIZATION AFTER WORLD WAR II, ALL THAT KIND OF STUFF? HAVE ANY THOUGHTS ABOUT WHERE WE ARE IN COMPARISON WITH HISTORY? >> Dr.
Shankar: YEAH, I FEEL LIKE THIS IS ONCE IN A CENTURY CRISIS.
WE CALL IT A BLACK SWAN EVENT.
AN EVENT THAT HAS A VERY LOW PROBABILITY, VERY HIGH IMPACT.
IN THIS CASE, VERY HIGH ADVERSE IMPACT.
THE GREAT RECESSION OF THE 2007-2009 WAS A VERY UNFORTUNATE EVENT.
BUT IT WAS NOT LIKE A ONCE IN A CENTURY KIND OF EVENT.
PLUS, THIS IS CAUSED BY AN EXOGENOUS SHOCK, SOMETHING THAT NOBODY COULD HAVE PREDICTED.
WHEREAS THE RECESSION OF 2007 AND '09 WAS MORE OF A RECESSION THAT WAS BREWING BECAUSE THERE WERE PLAYERS, ACTORS IN THE BANKING SYSTEM, FINANCIAL SYSTEM, AND ALSO THERE WAS AN ASSET BUBBLE AT THAT POINT IN TIME.
AND THAT WAS MAINLY FINANCIAL.
HERE, WE ARE LOOKING AT A MEDICAL GLOBAL EMERGENCY, AND THAT IMPACT ON ECONOMICS.
SO THAT'S THE BIGGEST DIFFERENCE.
>> Chancellor Sharp: DOCTOR HALLERMANN? >> Dr.
Hallermann: I TEND TO BE A LITTLE BIT MORE OPTIMISTIC THAN VENKY IN REGARDS TO, AS YOU SAID, THIS BEING AN EXOGENOUS SHOCK.
WE'RE NOT SEEING AN ISSUE WHERE OUR FINANCIAL SYSTEM IS IN DEGRADATION.
WHERE OUR FINANCIAL SYSTEM IS AT RISK.
AND THEREFORE, MY VIEW, MY BELIEF IS AS WE COME OUT OF THIS, THAT THERE WILL BE A MUCH QUICKER RECOVERY THAN WHAT WE SAW IN 2008, THAN WHAT WE SAW IN THE GREAT DEPRESSION.
THERE, RECOVERIES TOOK YEARS.
HERE, WE'RE TALKING ABOUT WHETHER THE ECONOMIC RECOVERIES WILL TAKE MONTHS, AND HOW MANY MONTHS? >> Chancellor Sharp: SO IF YOU HAD TO TAKE A GUESS, YOU WOULD SAY A YEAR FROM NOW, THE DOW WILL BE BACK AT 30, 000? >> Dr.
Hallermann: I'D SAY A YEAR FROM NOW, WE'RE SIGNIFICANTLY INTO THE RECOVERY.
I'M NOT WILLING TO — A FRIEND OF MINE WHO'S A BROKER AND A TRADER ALWAYS SAYS “NEVER PIN TIMES AND NUMBERS, ” RIGHT? BUT I WILL SAY THAT I THINK OUR LIFE IS VERY SIMILAR ONE YEAR FROM NOW TO WHERE WE WERE THREE MONTHS AGO.
>> Dr.
Robertson: JUST NOT TOO MANY MONTHS AGO, I WAS DOING AN INTERVIEW HERE IN COLLEGE STATION, AND I WAS SAYING THAT THESE ARE THE BEST ECONOMIC TIMES WE'RE EVER GOING TO SEE, THAT WE'VE SEEN IN 50 YEARS.
THE UNEMPLOYMENT RATE WAS JUST 3.
5 PERCENT, AND HADN'T BEEN THAT LOW SINCE THE '60S.
NOW WE'RE LOOKING AT TOPPING 12, MAYBE 14 PERCENT, JUST MAYBE EVEN THIS MONTH OR NEXT MONTH.
THIS IS DRAMATICALLY DIFFERENT THAN ANYTHING WE'VE EXPERIENCED.
I AGREE WITH THE OTHER PROFESSORS THAT THIS IS DEFINITELY A ONCE IN A CENTURY EVENT.
I ALSO AGREE WITH PROFESSOR HALLERMANN, THOUGH, THAT THIS IS NOT CAUSED BY THE FUNDAMENTAL LACK OF CAPITAL OR ASSET VALUE IN THE ECONOMY AS WE SAW IN THESE OTHER CRISES, RIGHT? THIS IS SOMETHING THAT WAS A STOP IMPOSED BASICALLY BY THE GOVERNMENT, TELLING PEOPLE TO STAY AT HOME.
WE HAD TO STOP, STOP INTERACTING, STOP SHOPPING.
AND THAT IS SOMETHING THAT COULD BE REVERSED.
WE CAN TELL PEOPLE TO GO BACK TO WORK.
>> Chancellor Sharp: DOCTOR ROBERTSON, HOW EFFECTIVE DO YOU THINK THE FEDERAL STIMULUS IS GOING TO BE, AND WHAT ELSE, IF ANYTHING, DOES THE GOVERNMENT NEED TO BE DOING TO AID THE ECONOMY? >> Dr.
Robertson: THAT'S A GREAT QUESTION, AND I THINK WE'RE ALL REALLY INTERESTED IN THAT.
I THINK THE BOTTOM LINE IS, UNFORTUNATELY, THE STIMULUS WON'T BE ENOUGH TO STAVE OFF THE UNEMPLOYMENT.
I THINK IT'S GOING TO HELP WITH THE RECOVERY.
THE THING ABOUT THE STIMULUS IS THAT WE'RE DOING THE BEST WE CAN.
WE HAVE A SET OF POLICY TOOLS THAT WE HAVE AT OUR DISPOSAL TO ADDRESS CRISES LIKE THIS.
IT'S THE FISCAL POLICY, THE MONETARY POLICY, AND WE'RE USING THOSE TO THE BEST OF OUR ABILITY.
IT WON'T PROBABLY BE ENOUGH TO STOP THE CRISIS, BUT IT WILL HELP A GREAT DEAL.
I THINK IT'S GOING TO BE VERY EFFECTIVE IN MITIGATING THE PROBLEM.
>> Chancellor Sharp: DOCTOR SHANKAR? >> Dr.
Shankar: I THINK THIS IS A STEP IN THE RIGHT DIRECTION.
WE NEED THE IMMEDIATE RELIEF TO THE WORKERS.
THE UNEMPLOYMENT HAS SHOT UP TO 10 MILLION ALREADY.
IT COULD GO UP TO ANOTHER 15 MILLION OR SO.
AND WE NEED THAT RELIEF.
WE NEED THE RELIEF FOR SMALL BUSINESSES.
BUT IS IT ADEQUATE — IT MAY NOT BE ADEQUATE BECAUSE WE NEED ANOTHER SOURCE OF RELIEF, AND I THINK THE CONGRESS IS WORKING ON ANOTHER RELIEF PACKAGE, TOO.
>> Dr.
Hallermann: I AGREE WITH BOTH OF MY COLLEAGUES HERE.
I THINK ONE OF THE THINGS THAT WILL DETERMINE THE RECOVERY AND HOW QUICKLY THE STIMULUS WILL WORK IS WHETHER OR NOT WE CAN SUSTAIN THE VIABILITY OF THE SMALL BUSINESS OWNER.
IF YOU DRIVE AROUND HERE IN COLLEGE STATION, YOU'RE SEEING RESTAURANTS THAT ARE CLOSED, AND APARTMENT COMPLEXES THAT ARE LOOKING LIKE THEY'RE AT 20, 30 PERCENT, BECAUSE THE STUDENTS AREN'T HERE.
WHAT HAPPENS WHEN WE GET TO FOOTBALL SEASON, AND ALL OF A SUDDEN, THE SURGE IN ECONOMY THAT WE NORMALLY HAVE IN THE COMMUNITY ISN'T THERE? THAT DECIMATES COMPANIES, WHICH THEN DECIMATES EMPLOYMENT, AND THEN WE TRULY CAN HAVE A SITUATION WHERE WE HAVE SOMETHING LIKE THE GREAT DEPRESSION, BECAUSE WE'VE ALLOWED THESE SMALL BUSINESSES AND THESE SMALLER CORPORATIONS THAT HIRE SO MANY PEOPLE TO NO LONGER BE VIABLE.
THEREFORE, NO LONGER THOSE JOBS ARE THERE.
THAT, I THINK, WOULD KICK OFF WHAT WE WERE TALKING ABOUT IN TERMS OF PARALLELS TO THE GREAT DEPRESSION.
THAT WOULD BE MY CONCERN.
>> Chancellor Sharp: WHAT DO YOU THINK IS THE TIME FRAME THAT DETERMINES THAT? >> Dr.
Hallermann: I'D REALLY LIKE TO SEE US STARTING TO TURN AROUND IN MAY, BY THE END OF MAY.
IF WE GO INTO JUNE, JULY, AND AUGUST, AND WE'RE STILL IN SHELTER-IN-PLACE, IT BECOMES MORE AND MORE DIFFICULT FOR THESE SMALL BUSINESSES TO HOLD ON.
AT THAT POINT, I WOULD ARGUE THAT THE FEDERAL GOVERNMENT MAY NEED TO WORK WITH THE BANKS, FOR THE BANKS NOT TO JUST ALLOW PEOPLE TO DEFER THEIR PAYMENTS, AND THEN IN SIX MONTHS, MAKE A FULL-SCALE PAYMENT.
BUT TO ACTUALLY DEFER THE PRINCIPAL PAYMENT AND ROLL OVER THE INTEREST AND JUST TAG THAT ON TO THE BACK OF THE LOAN.
SO THAT WAY, THESE COMPANIES AREN'T WORRIED ABOUT HOW AM I GOING TO MAKE MY DEBT PAYMENT THIS MONTH, NEXT MONTH, AND THE MONTH AFTER, TWO, THREE, FOUR MONTHS AFTER I GET STARTED, WHERE THEY HAVE THAT ADDITIONAL WEIGHT ON THEM.
BUT THEY CAN BASICALLY ALMOST HAVE A RESET BUTTON AND CONTINUE FORWARD.
>> Chancellor Sharp: SPEAKING OF DEBT, I'VE TAKEN TO TELLING MY FRIENDS LATELY THAT THE PRIMARY DIFFERENCE BETWEEN REPUBLICANS AND DEMOCRATS WHEN IT COMES TO SPENDING MONEY IS THAT BOTH OF THEM WILL SPEND EVERY DIME IN THE TREASURY, PLUS SOME, BUT REPUBLICANS AT LEAST FEEL BAD ABOUT IT.
BUT NOW NOBODY EVEN FEELS BAD ABOUT IT.
THERE'S A TRILLION-DOLLAR BILL.
THEY'RE THINKING ABOUT ANOTHER TRILLION-DOLLAR BILL, AN INFRASTRUCTURE BILL.
OBVIOUSLY, NOBODY IN THE WORLD THAT CAN PAY OFF THE DEBT THAT THEY HAVE.
IS THAT GOING TO CAUSE INFLATION DOWN THE ROAD? >> Dr.
Hallermann: IN 2008, IF YOU WERE TO LOOK AT THE WORLD DEBT VERSUS THE WORLD GDP, THE WORLD DEBT WAS 2.
3 TIMES THE SIZE OF THE WORLD GDP.
ULTIMATELY, I THINK THERE'S GOING TO BE A POINT WHERE THE CURRENCIES ALL HAVE TO RESET.
AND THIS DEBT THAT IS OVER-HANGING ALL OF OUR ECONOMIES HAS TO BE ADDRESSED.
HOW THAT LOOKS, I'M AFRAID TO ASK.
>> Chancellor Sharp: IF YOU'RE THE HOLDER OF THOSE BONDS, YOU'RE REALLY AFRAID TO ASK.
>> Dr.
Hallermann: I'M VERY AFRAID TO ASK, YES.
>> Dr.
Shankar: RIGHT NOW, THE SHORT-TERM FOCUS OF THE WHOLE WORLD IS HOW TO REALLY BEAT CORONAVIRUS.
SO WHATEVER SHORT-TERM MEASURES WE TAKE, LET'S GET OUT OF THIS.
AND THEN THEY ARE GOING TO FOCUS ON, “GEE, NOW WE HAVE ALL THIS DEBT.
HOW DO WE REALLY PARE IT DOWN?” SO I SEE THEM AS A SECOND PRIORITY RIGHT NOW FOR MOST ECONOMIES IN THE WORLD.
BUT IT IS A VERY IMPORTANT ISSUE IN THE MEDIUM-TERM AND THE LONG-TERM FOR COUNTRIES TO LOOK AT.
BECAUSE THIS IS NOT — WE CAN'T JUST DEFICIT FINANCE OUR WAY OUT OF FINANCIAL DISTRESS ALL THE TIME.
NOW, DIGITAL IS REDEFINING A LOT OF THINGS.
CONSUMER LIFESTYLES ARE CHANGING.
THEIR SHOPPING HABITS ARE CHANGING.
WE'RE NOW THE LAST BASTION OF ONLINE SHOPPING, OR E-COMMERCE, IS GROCERY SHOPPING, IS NOW BECOMING ONLINE.
PEOPLE ARE INCREASINGLY COMFORTABLE NOW ORDERING AND GETTING IT DELIVERED AT THEIR DOORS OR PICKING IT UP.
AND WE SEE A NUMBER OF PROFESSIONS, INCLUDING EDUCATION, NOW TURNING ONLINE.
THE RATE AT WHICH IT IS GOING, WE'RE GOING TO HAVE LOT MORE OF THIS CHANGING OUR BEHAVIOR, AND THAT COULD ACTUALLY IMPROVE PRODUCTIVITY, SO MUCH SO THAT WE HAVE A.
I.
AND AUTOMATION WHICH WILL HELP COMPLETELY REDEFINE THAT.
THAT OFFERS A HOPE WHEN WE HAVE PRODUCTIVITY, THEN WE'LL HAVE MORE GDP, AND PEOPLE HAVE MORE RELIEF OUT OF THE ECONOMIC DISTRESS.
>> Chancellor Sharp: I WOULD SUSPECT THIS IS NOT GOOD NEWS FOR COMMERCIAL OFFICE BUILDINGS, BECAUSE THERE'S A WHOLE BUNCH OF FOLKS THAT ARE LOOKING INTO THIS NOW, SAYING, “HEY, WORK'S PRETTY GOOD, ALL THESE FOLKS AT HOME.
I REALLY DON'T NEED ALL OF THIS OFFICE SPACE, ” AND THINGS LIKE THAT.
AND THE PEOPLE THAT ARE AT HOME ARE GOING, “HEY, I'M JUST AS PRODUCTIVE.
MY BOSS KNOWS EXACTLY WHAT I'M DOING, ” AND THINGS LIKE THAT.
IN PARTICULAR, WITH THE ONLINE EDUCATION.
I MEAN, I REMEMBER 8 YEARS AGO WHEN I FIRST GOT HERE, THERE WAS SERIOUS RESISTANCE TO ONLINE EDUCATION.
ALL OF A SUDDEN, WE PUT 58, 000 KIDS ON ONLINE EDUCATION IN EIGHT DAYS.
ABSOLUTELY AMAZING WORK BY THE FACULTY AND STAFF HERE AT A&M AND THE UNIVERSITY SYSTEM.
I DON'T THINK THAT'S GOING TO GO AWAY AT THE END OF THIS CRISIS.
I THINK PEOPLE ARE LOOKING AT THAT AND SAYING, “YOU KNOW, THAT 300-PERSON BIOLOGY CLASS IS ACTUALLY MORE PERSONAL ONLINE THAN IT IS SITTING BACK, WAY BACK IN THE BACK ROW AND LOOKING AT A PROFESSOR THAT I BARELY CAN SEE.
” >> Dr.
Robertson: ONLINE TEACHING AND THE OTHER ONLINE PRODUCTIVITY ISSUES, I AGREE WITH YOU COMPLETELY.
THAT THIS IS A FANTASTIC TIME — OUR HEARTS GO OUT TO THE FAMILIES THAT ARE AFFECTED BY THE VIRUS, OF COURSE.
BUT FROM AN ECONOMIC POINT OF VIEW, THIS IS A TIME OF TREMENDOUS EXPERIMENTATION.
WE ARE GOING TO LEARN SO MUCH ABOUT WHAT WORKS AND WHAT DOESN'T.
I THINK WE'RE GOING TO FIND THAT SOME CLASSES DO WORK BETTER ONLINE, AND SOME DON'T WORK VERY WELL ONLINE.
>> Chancellor Sharp: LET'S TALK ABOUT TEXAS A LITTLE BIT.
YOU'RE A PETROLEUM ENGINEER, DR.
HALLERMANN.
MAYBE WE'LL START WITH YOU.
TELL US ABOUT OIL.
TELL US ABOUT WHAT'S GOING ON.
>> Dr.
Hallermann: GOING INTO 2020, THERE WAS A SLIGHT SURPLUS OVER, WHERE PRODUCERS WERE PRODUCING MORE THAN THE WORLD DEMANDS.
SO THE WORLD DEMAND IS AROUND 100 MILLION BARRELS A DAY.
AND WE WERE SLIGHTLY OVER IN PRODUCTION, AND PRICES WERE AT 50.
THEN THE VIRUS AFFECTED CHINA, AND WHEN THAT HAPPENED, THE CHINESE REFINERIES SHUT DOWN.
SO THE CHINESE GOVERNMENT BASICALLY SHUT DOWN ITS ENTIRE ECONOMY WITH THE CHINESE NEW YEAR.
SO NOW WE'VE GONE FROM BEING SLIGHTLY IMBALANCED TO BEING ABOUT 20 MILLION BARRELS A DAY IN OVER-SUPPLY.
SO WHEN YOU THINK OUR MARKET USED TO BE AT 100 MILLION BARRELS A DAY TO BE AT EQUILIBRIUM, NOW IMAGINE WE'RE AT 80 MILLION BARRELS A DAY, AND WE'RE STILL PRODUCING 100 MILLION BARRELS A DAY.
SO THIS 20 MILLION BARREL A DAY OVERHANG IS SOMETHING THAT IS REALLY BECOMING A CONCERN IN MANY ASPECTS, BECAUSE COMPANIES ARE NOW CHARTERING TANKERS JUST TO HOLD CRUDE FOR THE NEXT 6 TO 8 MONTHS.
AND YOU'RE SEEING PRODUCERS THAT ARE BEING TOLD BY PIPELINES THAT THEY HAVE TO SHUT IN, BECAUSE THEIR PIPELINES ARE FULL, AND THEY HAVE NO PLACE TO PUT IT IN TERMS OF STORAGE ONCE IT GETS TO ITS DESTINATION TO THE REFINERIES.
AS WE COME OUT OF THE SHELTER-IN-PLACE, WE SHOULD EXPECT TO SEE THAT DEMAND SHOULD RAMP ITS WAY BACK UP.
SO BY THE END OF THE YEAR, I THINK OVERALL DEMAND WILL BE BACK UP TO ABOUT 90, 95 MILLION BARRELS A DAY, AS OPPOSED TO 100 MILLION BARRELS A DAY.
SO WE WON'T HAVE FULL RECOVERY, BUT WE'LL BE CLOSE.
>> Chancellor Sharp: WHAT'S THAT TRANSLATE INTO OIL PRICE? >> Dr.
Hallermann: I'VE SEEN RANGES, BUT I WOULD ARGUE THAT BY THE END OF THE YEAR, WE'RE PROBABLY NEAR $40 A BARREL.
>> Chancellor Sharp: I'M NOT SURE HOW MUCH IT MATTERS RIGHT NOW, BECAUSE DEMAND IS SO WEAK UNTIL BUSINESSES GET BACK GOING AGAIN.
DR.
ROBERTSON, YOU WANT TO TALK ABOUT THINGS YOU SEE THAT MIGHT HAVE AN EFFECT ON TEXAS? >> Dr.
Robertson: THE INITIAL WAVE OF LAYOFFS IN TEXAS REALLY HIT FOOD SERVICE, TRANSPORTATION, MANUFACTURING, CONSTRUCTION REALLY HARD.
AND THAT WAS JUST IN THE FIRST REAL WEEK OF LAYOFFS.
I THINK AS AN ECONOMY AS A WHOLE, I THINK WE'RE FACING SOME VERY SERIOUS PROBLEMS.
ONE OF THE CONCERNS THAT WE HAVE IS THAT, AS YOU KNOW, THE ECONOMY IS LIKE A SET OF DOMINOS, RIGHT? ONCE THE FIRST ONE FALLS, THE OTHERS START FALLING VERY QUICKLY AFTERWARDS.
SO WE'RE SEEING THE RIPPLE EFFECTS NOT JUST AFFECT TEXAS, BUT ALSO OUR RELATIONSHIP WITH MEXICO AS WELL.
LAREDO, THE PORTS, RIGHT, ARE VERY CRITICAL AND THE REDUCTION IN TRADE IS HITTING OUR BORDER CITIES REALLY HARD.
>> Dr.
Shankar: THIS IS LEADING TO A NEW NORMAL IN THE ENERGY SPACE AS WELL AS NON-ENERGY SPACE.
IF YOU LOOK AT FROM TEXAS ECONOMY POINT OF VIEW, WE'VE BEEN HIT WITH WHAT I CALL A DOUBLE-WHAMMY TSUNAMI.
BECAUSE WE HAVE THE OIL PRICES CRASHING, PLUS THE CORONAVIRUS PANDEMIC TRYING TO THREATEN OUR PRODUCTIVITY.
BUT THIS GIVES US AN OPPORTUNITY TO LOOK AT OTHER SPACES, FOR US TO EXPAND OUR ECONOMY.
WE ARE THE SECOND-LARGEST STATES IN TERMS OF ECONOMIC OUTPUT.
GDP, WE CONTRIBUTE ABOUT 10 PERCENT OF $2 TRILLION TO THE U.
S.
ECONOMY.
WE ARE THE SECOND LARGEST IN POPULATION.
SO WE HAVE VIBRANT WORKFORCE.
WE HAVE GREAT SET OF INDUSTRIES.
SO I THINK THIS CRISIS, BOTH OIL AND PANDEMIC, IS SOMEWHAT CREATING THE CONDITIONS FOR US AS A STATE TO MOVE IN ECONOMIC GDP, IN OTHER SECTORS, WHERE WE COULD BE ACTUALLY LEADING THE OTHER STATES IN THE U.
S.
I SEE THAT'S GOING TO HAPPEN IN THE NEXT TWO TO THREE YEARS.
>> Chancellor Sharp: WHAT ABOUT BUSINESSES? IS THIS AN OPPORTUNITY? OBVIOUSLY, THERE'S BEEN A LOT OF BUSINESSES MOVE THEIR MANUFACTURING FACILITIES FROM THE UNITED STATES TO CHINA.
I HAVE TO BELIEVE THAT THE FEDERAL GOVERNMENT IS RETHINKING WHETHER IT IS WISE TO HAVE PHARMACEUTICALS COMPANIES IN CHINA.
WHETHER IT IS WISE TO HAVE MASK, N-95 MASK PRODUCTION FACILITIES IN CHINA.
AND THAT I SUSPECT THAT MOST AMERICANS ARE LIKE ME IN SAYING, “HEY, I WOULD PAY MORE FOR A MASK.
I WOULD PAY MORE FOR MY PHARMACEUTICALS IF YOU WOULD MANUFACTURE THEM HERE.
” IS TEXAS A PLACE THAT CAN CAPITALIZE ON THAT? >> Dr.
Shankar: THERE'S GOING TO BE REBALANCING ON GLOBAL SUPPLY CHAINS.
THE U.
S.
ESPECIALLY HAS REALIZED ITS DEPENDENCY ON NOT JUST CHINA, BUT WHOLE DIFFERENT PARTS OF THE WORLD FOR A LOT OF THE RAW MATERIALS.
THAT MIGHT TAKE A COUPLE YEARS, BUT THIS IS A GREAT OPPORTUNITY FOR TEXAS.
>> Dr.
Robertson: I'VE BEEN WORKING ON A RESEARCH PROJECT WITH BOB SHANDLEY HERE AT TEXAS A&M TO LOOK AT THE MOVEMENT OF THE SUPPLY CHAINS BACK TO THE TEXAS BORDER REGION.
SO WE'VE BEEN DOWN IN McALLEN.
WE'VE BEEN DOWN IN LAREDO.
WE'RE TALKING TO FOLKS THERE.
THEY'RE VERY OPTIMISTIC ABOUT THE POTENTIAL FOR CAPTURING A LOT OF THE PRODUCTION AND EMPLOYMENT IN THE SUPPLY CHAINS COMING OUT OF CHINA.
THIS, OF COURSE, COMES OUT OF THE EARLIER DISPUTE THAT WE HAD WITH CHINA.
THIS PROCESS HAD ALREADY BEEN UNDER WAY.
BUT I THINK THE CORONAVIRUS WILL ACCELERATE IT.
I THINK IT'S A GREAT OPPORTUNITY FOR TEXAS TO INVEST IN THE KINDS OF NEW SKILLS THAT ARE GOING TO BE REQUIRED, AND NEW DEFINITELY TECHNOLOGY.
I THINK TEXAS A&M HAS A GREAT OPPORTUNITY TO LEAD THE WAY IN THAT EDUCATION AND TRAINING.
>> Dr.
Hallermann: THERE'S BEEN A HISTORICAL PRECEDENT FROM THE LATE '80S FORWARD TOWARDS GLOBALIZATION.
I THINK THIS EXOGENOUS EVENT, THE VIRUS HAS KIND OF SHOWN WHERE THAT'S FLAWED.
WHAT I MEAN BY THAT IS FROM A GOVERNMENT POINT OF VIEW, YES, WE NEED TO MAKE SURE OUR SUPPLY CHAINS ARE WHERE WE NEED THEM TO BE.
BUT I ALSO THINK FROM A CORPORATE POINT OF VIEW, IF I'M CHOOSING WHERE I'M GOING TO PUT MY NEXT FACTORY, I NOW HAVE TO TAKE INTO ACCOUNT WHAT HAPPENS WHEN THAT FACTORY IS SHUT DOWN BY THE GOVERNMENT BECAUSE OF A VIRUS.
>> Chancellor Sharp: WHAT DO YOU THINK WE HAVE TO SEE, DR.
ROBERTSON, THAT IS THE INDICATION THAT WE NEED TO REOPEN THE ECONOMY? >> Dr.
Robertson: WE'VE SEEN THE PATTERN OF THE PROGRESSION OF THE VIRUS IN OTHER COUNTRIES.
WE SAW IT IN CHINA AND ITALY AND GERMANY, IN EUROPE.
SO WE KNOW WHEN THE VIRUS IS SLOWING DOWN ENOUGH TO BE ABLE TO GET PEOPLE BACK TO WORK.
EVEN ONCE WE START GOING BACK TO WORK, THE BEST PREDICTIONS ARE NOW THAT THERE'S GOING TO BE MULTIPLE WAVES OF THE VIRUS, AS IT RESURGES, AND PEOPLE PULL BACK, AND WE HAVE SORT OF A SAWTOOTH PATTERN.
I'M HOPING WITH THE REST OF YOU THAT WE'RE GOING BACK SOON.
>> Dr.
Shankar: IT ALL DEPENDS ON THE PROGRESS WE MAKE IN FIGHTING THIS VIRUS.
SO THAT MEANS WE HAVE TO TEST AS MANY PEOPLE AS POSSIBLE AS QUICKLY AS POSSIBLE.
THE EXPERIENCE IN COUNTRIES LIKE SOUTH KOREA, AND EVEN CHINA WHICH IS OPEN AFTER ONLY 75 DAYS, AFTER EVEN A COMPLETE LOCKDOWN, SUGGESTS THAT IN ORDER FOR US TO BE COMPLETELY CONFIDENT THAT WE CAN ACTUALLY MOVE FORWARD STRONG WITH THE ECONOMY, WE HAVE TO ENSURE CERTAIN THINGS IN PLACE.
THAT IS COMPLETE TESTING THAT MAKING SURE THAT THE NUMBER OF NEW CASES — THAT'S A KEY METRIC.
THE NUMBER OF NEW CASES DOES NOT GROW.
>> Dr.
Hallermann: AGAIN, I'M GOING TO BE A LITTLE BIT MORE OPTIMISTIC, AND THE ONE NICE THING IS, THIS VIRUS APPEARS TO BE VERY CONSISTENT IN ITS BEHAVIOR IN THE SENSE THAT IT FOLLOWS A NORMAL DISTRIBUTION.
MEANING THE CASES GO UP, THEY PLATEAU, AND THEY FALL.
I WOULD LIKE TO SEE US USE A LITTLE BIT MORE OF A MORE AGGRESSIVE APPROACH TO STARTING UP THE ECONOMY, WHERE IN AREAS WHERE WE'RE SEEING THE FALL IN THE VIRUSES AND THE DROP IN THE VIRUSES THAT ARE LESS DENSELY POPULATED, THAT WE KIND OF START KICKING THE POPULATION, OR KICKING THE ECONOMY THERE IN THOSE AREAS.
>> Chancellor Sharp: DOCTOR ROBERTSON, WHAT PART OF THE ECONOMY, IF YOU WILL, DO YOU THINK ARE JUST GOING TO CHANGE FOREVER AS A RESULT OF THIS CRISIS? >> Dr.
Robertson: I THINK RETAIL IS DEFINITELY GOING TO BE CHANGING PERMANENTLY.
I THINK WE ALSO HAVE SEEN EDUCATION IS GOING TO BE CHANGING PERMANENTLY AS WELL, BECAUSE, AS I SAID, WE'RE EXPERIMENTING WITH NEW TECHNOLOGIES.
SOME OF THESE ARE GOING TO STICK.
I ALSO THINK THAT THE GLOBAL VALUE CHAINS, JUST INTERNATIONAL TRADE, OUR TRADE RELATIONSHIPS, ARE GOING TO BE FUNDAMENTALLY ALTERED PERMANENTLY AS A RESULT.
>> Dr.
Hallermann: TWO AREAS THAT ARE GOING TO SUFFER? FIRST OFF IS COMMERCIAL REAL ESTATE, AS YOU SAID.
PEOPLE ARE GOING TO BE MORE AND MORE INCLINED TO WORK FROM HOME.
I THINK THAT DOES TWO THINGS IN THE PETROLEUM DEMAND SECTOR.
I THINK GASOLINE IN MORE DENSELY POPULATED AREAS ARE GOING TO GO DOWN AS PEOPLE COMMUTE LESS INTO THE OFFICE.
BUT I ALSO AM SEEING, IN CHINA, FOR EXAMPLE, YOU'RE STARTING TO SEE AN INCREASE IN USE OF PERSONAL TRANSPORTATION OVER PUBLIC TRANSPORTATION, WHERE PEOPLE ARE ESCHEWING PUBLIC TRANSPORTATION FOR PURPOSES OF TRAVELING BY THEMSELVES, OR IN SMALL GROUPS.
I THINK JET FUEL AND THE AIRLINES ARE GOING TO HAVE A LONGER RECOVERY BACK THAN SOME OF THE OTHER AREAS.
WE'RE GOING TO BE MORE INCLINED TO DO MEETINGS VIA TELECOMMUNICATION, VERSUS HOPPING ON A PLANE TO GO SEE SOMEBODY.
THE GOOD NEWS IS I THINK RUSH-HOUR TRAFFIC MAY NOT BE AS BAD AS IT USED TO BE, AS PEOPLE ARE WORKING MORE OUT OF THE HOUSE.
>> Dr.
Shankar: I SEE TWO INDUSTRIES SEVERELY IMPACTED.
RETAILING IS GOING TO SEE A NEW NORMAL.
AS IT IS, A LOT OF RETAILERS WERE GOING OUT OF BUSINESS.
MALL-BASED RETAILERS, A LOT OF DEPARTMENT STORES THAT WERE OVER-STORED, AND THIS IS REALLY THE FINAL NAIL IN THE COFFIN.
NOW WE HAVE TO THINK ABOUT TRAVELING, WHETHER WE NEED TO TRAVEL OR NOT.
AND THEN HOTELS, AIR B&Bs, ALL OF THEM WILL HAVE TO BRACE THEMSELVES FOR VERY REDUCED DEMAND.
I ALSO WANT TO CAUTION THAT WE'RE ALL REACTING NOW ASSUMING THAT THE PANDEMIC IS GOING TO STAY FOR A LONG TIME, BUT ONCE WE GET THE VACCINE MOVING, WE'LL BE BACK AGAIN, AND PEOPLE WILL START WORRYING LESS ABOUT IT AND THEY'LL START MEETING.
THAT'S WHEN THE TOURISM AND TRAVEL INDUSTRY WILL PICK UP.
IF YOU REMEMBER THE 9/11, AFTER THAT, FOR A COUPLE YEARS, EVERYBODY WAS HURTING.
TRAVEL WAS HURTING, AND IT TOOK A WHILE FOR THE CONFIDENCE TO COME BACK.
>> Chancellor Sharp: EVERYBODY THINKS THIS THE FIRST TIME A&M HAS BEEN SHUT DOWN.
IT'S ACTUALLY THE FOURTH TIME.
IN 1897, IT WAS SHUT DOWN.
I THINK IT WAS PNEUMONIA, BUT THEY CALLED IT THE GRIPPE BACK THEN.
IN 1918 FOR THE SPANISH FLU, IT WAS SHUT DOWN.
FIFTY-NINE STUDENTS WERE KILLED WITH THE SPANISH FLU.
HERE, THE WHOLE, WHERE THE WEST CAMPUS IS NOW, WAS TENTS AND COTS WHERE THEY PUT STUDENTS OUT THERE TO DIE.
I MEAN, IT WAS JUST A MESS.
IN 1956, IT WAS SHUT DOWN FOR THE INFLUENZA, AND THEN THIS PARTICULAR TIME.
WHAT PARTS OF THE ECONOMY DO YOU FOLKS THINK WILL COME BACK FIRST? >> Dr.
Robertson: I DEFINITELY SEE THE ENTERTAINMENT AND HOSPITALITY INDUSTRIES COMING BACK RIGHT AWAY.
I THINK THERE'S A HUGE AMOUNT OF PENT-UP FRUSTRATION.
PEOPLE WANT TO GET LINE DANCING AGAIN.
THEY WANT TO GET BACK TO THE BAR.
I THINK THAT AS SOON AS WE'RE ABLE TO GO OUT AGAIN, PEOPLE ARE GOING TO GO OUT AND START SOCIALIZING.
I THINK PEOPLE REALLY MISS THAT.
THAT WILL CAUSE THIS BEGINNING OF THE REVERSE DOMINO EFFECT.
>> Dr.
Hallermann: THE SMALLER BUSINESSES WILL ACTUALLY RESPOND FASTER THAN THE LARGER BUSINESSES.
THEY TEND TO ACT MORE QUICKLY.
I'LL GIVE TWO EXAMPLES.
FIRST IS, I HAVE A FRIEND OF MINE WHO OWNS A CONSTRUCTION COMPANY.
AND BECAUSE OF THE STIMULUS, MANY OF HIS EMPLOYEES REALIZED THEY WERE ACTUALLY BETTER OFF QUITTING, TAKING UNEMPLOYMENT, AND THEY WOULD RECEIVE MORE PAY THAN IF THEY CONTINUED WORKING.
SO EVEN THOUGH HE HAD WORK FOR THEM TO DO, A MAJORITY OF HIS WORKFORCE ENDED UP QUITTING BECAUSE OF THE STIMULUS PACKAGE.
I EXPECT THAT ONCE WE REMOVE THE STIMULUS PACKAGE, THOSE PEOPLE ARE GOING TO COME RIGHT BACK TO THE WORKFORCE, AND THERE'S GOING TO BE WORK AVAILABLE FOR THEM FAIRLY QUICKLY.
>> Dr.
Shankar: I SEE A LOT OF DISPLACEMENT OF JOBS, PEOPLE MOVING TO TECH, BECAUSE THEY WOULD NOW FIND WORKING IN TECHNOLOGY-INTENSIVE JOBS EASIER.
PEOPLE MIGHT TAKE THE UNEMPLOYMENT INSURANCE, THEY MAY BE OUT OF JOBS, THEY MAY RETRAIN THEMSELVES AND START WORKING FROM HOME ON A LOT OF TECHNOLOGY SUPPORT JOBS.
I WOULD SEE THAT TECH-RELATED RECOVERY TO EMERGE FIRST.
>> Chancellor Sharp: WHAT DO YOU TELL PEOPLE THAT — I MEAN, THERE'S STILL A DIVIDE.
THERE'S PEOPLE FROM RURAL TEXAS WHO ARE MY FRIENDS THAT ARE CALLING, GOING, “HEY, WHAT'S THIS ALL ABOUT? WE DON'T KNOW ANYBODY THAT HAS THIS STUFF IN OUR LITTLE TOWN, ” AND STUFF LIKE THAT.
WHAT DO YOU TELL THOSE FOLKS? >> Dr.
Hallermann: HERE IN COLLEGE STATION, MY NEIGHBOR TWO DOORS DOWN HAS HAD IT.
ACTUALLY CAME TO ME AND SAID, “IF YOU GET IT, I'LL DO YOUR GROCERY SHOPPING FOR YOU.
I HAVE THE ANTIBODIES.
” I WILL ALSO SAY I'VE SEEN MODELS THAT ARE PROJECTING THAT WE'RE MISSING THE TOTAL NUMBER OF PEOPLE THAT HAVE THIS VIRUS BY AN ORDER OF MAGNITUDE, WHERE THEY'RE SAYING IT'S NOT 1.
2 OR 1.
3 OR 1.
4 MILLION THAT HAVE IT IN THE WORLD OR HAVE RECEIVED IT IN THE WORLD, BUT 13 MILLION, 14 MILLION, BECAUSE SO FEW OR SO MANY OF THE CASES ARE NOT BEING RECOGNIZED AS COVID-19.
WHICH PROBABLY IS BENEFICIAL IN THE SENSE THAT IT PROBABLY TELLS US THAT THE POTENTIAL OF RECOVERY IS MUCH, MUCH HIGHER IF WE'RE NOT IDENTIFYING THOSE PEOPLE AS HAVING HAD THE VIRUS.
AT THIS POINT IN TIME, STEADY AS SHE GOES.
>> Chancellor Sharp: I THINK ONE OF THE THINGS YOU JUST MENTIONED IS GOING TO START HAPPENING, AND THAT IS ANTIBODY TESTING.
I THINK YOU'RE EXACTLY RIGHT.
I THINK THERE ARE MILLIONS OF PEOPLE, MAYBE US INCLUDED, THAT HAVE HAD CORONAVIRUS, THAT HAVE HAD ABSOLUTELY NO SYMPTOMS, BUT HAVE THE ANTIBODIES TO DO IT.
THOSE TESTS ARE GOING TO BE REQUIRED.
IN MY OPINION, GET THOSE PEOPLE BACK TO WORK, AND WHERE THEY'RE NOT IN HARM'S WAY.
>> Dr.
Hallermann: YOU BRING UP A GREAT POINT IN TERMS OF THE RECOVERY, AND THAT IS DO WE TAKE PEOPLE WHO'VE HAD THE VIRUS, THAT WE KNOW HAVE HAD THE VIRUS AND RECOVERED, AND MAKE THEM THE FIRST LINE OF RECOVERY, IF THAT MAKES SENSE? IF YOU HAVE BASICALLY A CORONAVIRUS BADGE CARD, DOES THAT MEAN YOU CAN NOW REMOVE YOURSELF FROM SHELTER-IN-PLACE? >> Dr.
Shankar: THE DANGER IS THAT ALL WE KNOW IS THAT IT TAKES JUST ONE PERSON TO START INFECTING.
ONCE IT HAPPENS, IN SMALLER PLACES, THE PROBLEM IS YOU DON'T HAVE THE INFRASTRUCTURE.
AND IF IT CASCADES VERY FAST, THEN WE CAN'T FLATTEN THE CURVE.
SO THAT'S THE WARNING.
BUT WE COULD USE THE PEOPLE WHO HAVE ALREADY RECOVERED FROM IT AS THE FIRST LINE OF DEFENSE.
>> Dr.
Robertson: THERE'S SO MANY ANECDOTES ABOUT PEOPLE WHO DIDN'T BELIEVE IN IT, AND THEN TURNED OUT TO BE DEVASTATING.
SO IT IS HARD TO IMAGINE, IF YOU'RE NOT EXPERIENCING IT DIRECTLY.
BUT I WOULD TRY TO ENCOURAGE EVERYONE WE KNOW IN THE RURAL AREAS THAT IT IS REAL, AND YOU COULD DIE.
BUT IT'S NOT DEFINITELY — IT'S NOT SOMETHING YOU SHOULD LIVE YOUR LIFE IN FEAR FOR THE REST OF YOUR LIFE.
THERE'S REASONABLE STEPS THAT YOU CAN TAKE.
AND AS LONG AS YOU TAKE REASONABLE PRECAUTIONS, YOU CAN MINIMIZE THAT RISK.
>> Chancellor Sharp: THE BEST ANSWER I GOT WAS FROM A DOCTOR.
I ASKED HIM, “JUST HOW SERIOUS IS THIS?” COUPLE WEEKS AGO.
AND HE SAID, “THE CASINOS ARE CLOSED.
THE VATICAN IS CLOSED.
AND ANY TIME HEAVEN AND HELL CAN AGREE ON SOMETHING, IT'S SERIOUS.
” [LAUGHTER] I FIGURED THAT.
ON THAT, THANK YOU VERY MUCH FOR PARTICIPATING IN THIS.
WE APPRECIATE YOUR WORK ON BEHALF OF THE STATE OF TEXAS AND TEXAS A&M UNIVERSITY.
THANK YOU FOR BEING WITH US.
>> Dr.
Shankar: THANK YOU, CHANCELLOR.
>> Dr.
Hallermann: THANK YOU.
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