1 00:00:00,040 --> 00:00:07,000 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,920 --> 00:00:10,320 Speaker 2: Okay, folks, what we're going to talk about you, We're 3 00:00:10,320 --> 00:00:13,160 Speaker 2: not going to talk DSGE. We're not going to talk 4 00:00:13,280 --> 00:00:17,239 Speaker 2: integals within intergals or derivatives. The matthewness that Richard Claret 5 00:00:17,280 --> 00:00:19,880 Speaker 2: has acclaimed for the former vice chairman of the FED. 6 00:00:20,239 --> 00:00:21,960 Speaker 2: I don't want to know when the Fed's going to 7 00:00:22,000 --> 00:00:24,680 Speaker 2: cut rates or all that. We're going to talk about 8 00:00:24,680 --> 00:00:28,000 Speaker 2: what you did at Columbia. Okay, Richard Claret, of folks 9 00:00:28,120 --> 00:00:33,519 Speaker 2: went into Columbia with some massive hires in retention of 10 00:00:33,600 --> 00:00:36,400 Speaker 2: one of the best faculties in the planet. It goes 11 00:00:36,440 --> 00:00:39,120 Speaker 2: back to Leuven in Belgium, it goes back to some 12 00:00:39,200 --> 00:00:42,880 Speaker 2: of the way back work in Germany, and of course 13 00:00:42,920 --> 00:00:47,159 Speaker 2: the combine out of England is well, you retained a 14 00:00:47,280 --> 00:00:52,199 Speaker 2: laureate Stiglitz, You dealt with Jeff Sachs with all of 15 00:00:52,240 --> 00:00:55,640 Speaker 2: his ability. In that you have ned Phelps with this 16 00:00:55,920 --> 00:01:03,000 Speaker 2: massive eclectic view over time. Column Umbia owns the social analysis. 17 00:01:03,040 --> 00:01:06,840 Speaker 2: Good morning Chicago, and mister Becker, you own the social 18 00:01:06,959 --> 00:01:11,000 Speaker 2: analysis of this case shaped economy. Jeff Sachs wrote a 19 00:01:11,000 --> 00:01:13,679 Speaker 2: book twenty years ago. I'm going to say that was 20 00:01:13,800 --> 00:01:17,560 Speaker 2: way out front on this How case shaped are we 21 00:01:18,120 --> 00:01:22,240 Speaker 2: when you talk to your friends and Romans and countrymen 22 00:01:22,280 --> 00:01:25,000 Speaker 2: in Colombia, how K shaped are we now? Doctor Claardon. 23 00:01:25,120 --> 00:01:28,880 Speaker 1: Well, and also you left out Bob Mandel truly a 24 00:01:28,959 --> 00:01:33,840 Speaker 1: giant and international monetary economics. So it certainly has been 25 00:01:33,840 --> 00:01:36,640 Speaker 1: a treat to be at Columbia all these years. We're 26 00:01:36,640 --> 00:01:40,160 Speaker 1: definitely in a K shape economy. I think we've been 27 00:01:40,160 --> 00:01:43,280 Speaker 1: moving in that direction for thirty years, not in a 28 00:01:43,319 --> 00:01:47,480 Speaker 1: straight line, but the trend has definitely been in that direction. 29 00:01:47,640 --> 00:01:51,400 Speaker 1: I think the events with the pandemic, the policy response, 30 00:01:52,280 --> 00:01:56,960 Speaker 1: and the like amplified some of those trends. You know, 31 00:01:57,040 --> 00:02:00,800 Speaker 1: in America, if you own your home, as sixty percent 32 00:02:00,840 --> 00:02:03,800 Speaker 1: of people do, and if you own stock, you've had 33 00:02:03,800 --> 00:02:06,920 Speaker 1: a very good run. But that means there's a substantial 34 00:02:07,040 --> 00:02:10,519 Speaker 1: fraction of the country that has not been participating. Maybe 35 00:02:10,560 --> 00:02:12,600 Speaker 1: if I can just parachute a bit in on this. 36 00:02:13,720 --> 00:02:15,919 Speaker 1: You know, at the FED, when the economy slows, you 37 00:02:16,000 --> 00:02:18,480 Speaker 1: cut rates, and I certainly did that at my time 38 00:02:18,520 --> 00:02:21,440 Speaker 1: at the FED, and the FED understands it. When it 39 00:02:21,520 --> 00:02:24,480 Speaker 1: lowers rates, it's going to support the labor market, which 40 00:02:24,520 --> 00:02:26,800 Speaker 1: is good and for a lot of people. That is 41 00:02:26,880 --> 00:02:29,919 Speaker 1: their stake in the economy, is their job. But low 42 00:02:30,000 --> 00:02:33,880 Speaker 1: rates also lead to higher acid valuations and also leads 43 00:02:34,000 --> 00:02:36,440 Speaker 1: to some of the trends that you've mentioned in the 44 00:02:36,520 --> 00:02:40,359 Speaker 1: case shape economy. And so I think central bankers understand that, 45 00:02:40,440 --> 00:02:43,000 Speaker 1: but their toolkit is really pretty limited. So I think 46 00:02:43,040 --> 00:02:44,920 Speaker 1: that's how we end up with this dynamic. 47 00:02:45,760 --> 00:02:47,720 Speaker 3: How does it FED, a reserve or any central bank 48 00:02:48,320 --> 00:02:50,960 Speaker 3: deal with a black swan like, oh, I don't know, 49 00:02:51,000 --> 00:02:53,600 Speaker 3: a war andrant that came out of nowhere. I mean, 50 00:02:53,919 --> 00:02:56,800 Speaker 3: how does a FED typically look at those types of events. 51 00:02:58,280 --> 00:03:02,799 Speaker 1: It's difficult to predict back swamp black swans almost by definition. 52 00:03:03,520 --> 00:03:05,120 Speaker 1: So what you try to do is you try to 53 00:03:05,160 --> 00:03:07,960 Speaker 1: do analysis. You try to look back at history. You know, 54 00:03:08,840 --> 00:03:12,560 Speaker 1: history doesn't repeat, but it rhymes as the saying goes. 55 00:03:12,639 --> 00:03:14,600 Speaker 1: And so I'm sure at the FED they're looking at 56 00:03:14,639 --> 00:03:18,760 Speaker 1: past oil shocks, past Middle East conflicts. But they'll also 57 00:03:18,800 --> 00:03:21,440 Speaker 1: have to fix factor in, Paul, that it's a different 58 00:03:21,560 --> 00:03:24,080 Speaker 1: US economy than you know back in my college years 59 00:03:24,120 --> 00:03:27,160 Speaker 1: in the nineteen seventies, in particular of the US is 60 00:03:27,160 --> 00:03:32,959 Speaker 1: a net energy export. Important however, is in the FEDCE 61 00:03:33,120 --> 00:03:36,560 Speaker 1: models it's still the case that when energy prices go up, 62 00:03:36,960 --> 00:03:39,600 Speaker 1: the economy slows, and I think the main reason for 63 00:03:39,680 --> 00:03:42,400 Speaker 1: that is that erods real incomes for a lot of workers. 64 00:03:43,600 --> 00:03:46,320 Speaker 1: Also the fact that the US imports a lot of 65 00:03:46,400 --> 00:03:49,520 Speaker 1: goods that have a high energy content, and so yes, 66 00:03:49,800 --> 00:03:52,040 Speaker 1: you'd better be an exporter than an importer. But the 67 00:03:52,160 --> 00:03:54,080 Speaker 1: US is not insulated from this shock. 68 00:03:54,320 --> 00:03:57,160 Speaker 2: Might Karl Marx comes from the giant Thomas soul Out 69 00:03:57,160 --> 00:04:00,800 Speaker 2: at Hoover. Yeah, and also from my great mentor in London, 70 00:04:00,880 --> 00:04:04,520 Speaker 2: Megnum Desaia, who we lost last year, Karl Marx said 71 00:04:04,560 --> 00:04:07,720 Speaker 2: in the British Museum reading room and wrote a treatise 72 00:04:08,160 --> 00:04:11,320 Speaker 2: on the end of capitalism, and the bottom line is, 73 00:04:11,360 --> 00:04:15,680 Speaker 2: by definition we become ever more k shaped, evermore divided, 74 00:04:15,960 --> 00:04:20,080 Speaker 2: and there's corrective solutions. Do you worry that within all 75 00:04:20,120 --> 00:04:23,720 Speaker 2: of the institutions of you've as you've represented, that we're 76 00:04:23,760 --> 00:04:26,520 Speaker 2: getting to stress points where it falls apart. 77 00:04:28,360 --> 00:04:31,000 Speaker 1: Well, I'm not sure of that, but certainly the trends, 78 00:04:31,400 --> 00:04:35,240 Speaker 1: as I mentioned, since twenty twenty have definitely moved more 79 00:04:35,240 --> 00:04:38,680 Speaker 1: in that direction. I would point out though, that we 80 00:04:38,760 --> 00:04:41,120 Speaker 1: have had periods not all that long ago, you know, 81 00:04:41,200 --> 00:04:45,680 Speaker 1: certainly in the last part of Obama and during the 82 00:04:45,720 --> 00:04:50,080 Speaker 1: first Trump term, before the before the pandemic, you actually 83 00:04:50,120 --> 00:04:52,040 Speaker 1: had some of those K shaped trends. 84 00:04:51,760 --> 00:04:54,279 Speaker 2: Reverses the lower desk post. 85 00:04:54,400 --> 00:04:56,440 Speaker 1: And I can certainly tell you that during my time 86 00:04:56,480 --> 00:04:59,120 Speaker 1: at the FED, it was one of my focuses. That's 87 00:04:59,160 --> 00:05:01,320 Speaker 1: one reason why the FED got a lot of criticism 88 00:05:01,360 --> 00:05:05,040 Speaker 1: for cutting rates in twenty nineteen, because the unemployment rate 89 00:05:05,080 --> 00:05:07,960 Speaker 1: was below four percent and some models were saying, oh, 90 00:05:08,000 --> 00:05:11,000 Speaker 1: you can't operate the economy below four percent unemployment, and 91 00:05:11,480 --> 00:05:14,279 Speaker 1: our attitude, well, let's see how the economy operates. And 92 00:05:14,360 --> 00:05:17,359 Speaker 1: I think that was a positive development. And so I 93 00:05:17,360 --> 00:05:20,440 Speaker 1: think policymakers do need when they are in a healthy 94 00:05:20,480 --> 00:05:24,720 Speaker 1: economy to allow the economy to reach its potential. 95 00:05:25,160 --> 00:05:28,440 Speaker 3: One could argue, I mean the war. Notwithstanding the economy 96 00:05:28,520 --> 00:05:32,120 Speaker 3: is generally performing well in terms of growth, the unemployment 97 00:05:32,400 --> 00:05:35,800 Speaker 3: still looks like at our near full employment. Sure, I 98 00:05:35,839 --> 00:05:37,720 Speaker 3: guess that's a recipe for the FED to say, all right, 99 00:05:37,800 --> 00:05:40,440 Speaker 3: we're doing our job and maybe we can just sit down, 100 00:05:40,680 --> 00:05:42,559 Speaker 3: stand down a little bit. Is that what you expect 101 00:05:42,600 --> 00:05:44,000 Speaker 3: the FED to do over the next several meetings. 102 00:05:44,480 --> 00:05:44,839 Speaker 2: I do. 103 00:05:45,040 --> 00:05:48,640 Speaker 1: I think that they've pretty much signaled that the existing 104 00:05:48,720 --> 00:05:52,720 Speaker 1: FED before Kevin Warsh arrives. It is happy right now 105 00:05:53,160 --> 00:05:56,719 Speaker 1: to step back see how the economy evolves with its 106 00:05:56,839 --> 00:06:01,919 Speaker 1: energy shock. It is interesting that they did indicate that 107 00:06:02,160 --> 00:06:04,240 Speaker 1: most of the members of the committee still see at 108 00:06:04,320 --> 00:06:07,960 Speaker 1: least one cut this year and next year as appropriate, 109 00:06:08,080 --> 00:06:11,599 Speaker 1: and so I would think that over time Kevin Warsh 110 00:06:11,640 --> 00:06:13,880 Speaker 1: will be able to get the Committee to cut rates 111 00:06:13,960 --> 00:06:16,320 Speaker 1: at least a couple more times, but it may not 112 00:06:16,440 --> 00:06:18,520 Speaker 1: happen for for a while. 113 00:06:18,720 --> 00:06:21,120 Speaker 2: Richard Clarita with his folks of Columbia of course of 114 00:06:21,279 --> 00:06:25,159 Speaker 2: Pimco as well global economic advisor and the former chair 115 00:06:25,240 --> 00:06:28,000 Speaker 2: of the Federal former vice chair, I was gonna give 116 00:06:28,000 --> 00:06:31,760 Speaker 2: you a promotion there, sorry forbervice chair the Federal system 117 00:06:31,800 --> 00:06:34,200 Speaker 2: as well. Okay, I gotta get you in trouble Myron 118 00:06:34,320 --> 00:06:36,520 Speaker 2: was and Governor Myron was in with John Farrell, John 119 00:06:36,520 --> 00:06:42,200 Speaker 2: I thought was great. Gildham, there's a FED reacting after 120 00:06:42,279 --> 00:06:44,839 Speaker 2: the fact, folks, John Tucker told me the Latin his 121 00:06:44,920 --> 00:06:47,839 Speaker 2: ex post and then there's this whole dream of getting 122 00:06:47,880 --> 00:06:50,680 Speaker 2: out front and fixing it before it screws up, called 123 00:06:50,720 --> 00:06:54,600 Speaker 2: ex ante. I would suggest Governor Myron is not nearly 124 00:06:54,839 --> 00:06:59,080 Speaker 2: ex post. Is his brethren at the FED. He genuinely 125 00:06:59,120 --> 00:07:02,400 Speaker 2: wants to get anti Is there any evidence of a 126 00:07:02,440 --> 00:07:06,760 Speaker 2: successful central bank trying to get out front of the model. 127 00:07:08,440 --> 00:07:12,440 Speaker 1: Well, you have to look pretty long and hard to 128 00:07:12,440 --> 00:07:12,880 Speaker 1: find that. 129 00:07:15,400 --> 00:07:15,880 Speaker 2: Testament. 130 00:07:16,080 --> 00:07:19,680 Speaker 1: Yeah, you know, models are tools, but they're backward looking, 131 00:07:19,800 --> 00:07:24,600 Speaker 1: and in particular, I think oftentimes the argument that Governor 132 00:07:24,680 --> 00:07:27,760 Speaker 1: Myron has made is he he has a personal individual 133 00:07:27,800 --> 00:07:31,080 Speaker 1: belief that the neutral interest rate in the US is 134 00:07:31,120 --> 00:07:33,560 Speaker 1: well below the current level and well below where the 135 00:07:33,560 --> 00:07:37,080 Speaker 1: committee believes. You know, he could be right, but I 136 00:07:37,120 --> 00:07:39,720 Speaker 1: don't think that is the view on the committee, so 137 00:07:39,760 --> 00:07:44,320 Speaker 1: I think he'll continue to be a minority view on that. 138 00:07:44,960 --> 00:07:49,680 Speaker 3: You mentioned mister Warsh taking the FED chair seat later 139 00:07:49,800 --> 00:07:52,240 Speaker 3: this year, in several months time. I'm not sure we've 140 00:07:52,280 --> 00:07:54,400 Speaker 3: got a path for that to happen. How concerned are 141 00:07:54,440 --> 00:07:57,640 Speaker 3: you about some of the noise surrounding that whole. 142 00:07:57,680 --> 00:08:00,720 Speaker 1: Well, I think it's it's pretty clear now that in 143 00:08:00,840 --> 00:08:02,400 Speaker 1: order to become a FED chair you've got to be 144 00:08:02,480 --> 00:08:05,040 Speaker 1: confirmed by the Senate, and to be confirmed by the Senate, 145 00:08:05,080 --> 00:08:07,520 Speaker 1: you have to have an affirmative vote in the Banking Committee, 146 00:08:07,560 --> 00:08:12,240 Speaker 1: and right now Senator Tillis has indicated he will not 147 00:08:12,280 --> 00:08:15,520 Speaker 1: support any FED nominee, including Warsh, who he thinks would 148 00:08:15,560 --> 00:08:20,720 Speaker 1: be a good choice until the current situation with the 149 00:08:20,840 --> 00:08:24,640 Speaker 1: Justice Department subpoenas and the FED is resolved. And Power 150 00:08:24,680 --> 00:08:26,800 Speaker 1: more or less said that himself that he's not going 151 00:08:26,800 --> 00:08:30,880 Speaker 1: anywhere until it's resolved. We do think it will be resolved. 152 00:08:31,720 --> 00:08:34,560 Speaker 1: We do think eventually Warsh becomes chair. The timing of 153 00:08:34,600 --> 00:08:36,840 Speaker 1: that is uncertain. Whether or not it happens in time 154 00:08:36,920 --> 00:08:39,199 Speaker 1: for the June meeting is too soon to tell, but 155 00:08:39,600 --> 00:08:42,760 Speaker 1: we do think eventually that it will get resolved. 156 00:08:42,800 --> 00:08:45,880 Speaker 2: The first thing I did with AI, Yeah, Tom Secunda, 157 00:08:45,920 --> 00:08:48,960 Speaker 2: wee our founders grabbed me by the cheese its rack 158 00:08:49,000 --> 00:08:50,960 Speaker 2: and the food court, so that we need a briefing 159 00:08:51,040 --> 00:08:55,280 Speaker 2: and mister Secunda's leadership, folks on AI is noted across 160 00:08:55,280 --> 00:08:59,760 Speaker 2: a ten state area. Richard Clarity. He said, here's AI. 161 00:09:00,320 --> 00:09:02,559 Speaker 2: Get up to speed on it, Richard Clair, It is 162 00:09:02,640 --> 00:09:05,800 Speaker 2: up to speed on AI right now. Is it a 163 00:09:05,920 --> 00:09:09,120 Speaker 2: job creator or is it a job loser? 164 00:09:09,800 --> 00:09:14,440 Speaker 1: Well, right now doesn't appear to be either in the data. 165 00:09:14,960 --> 00:09:18,240 Speaker 1: And I think there are as many opinions on this 166 00:09:18,280 --> 00:09:22,240 Speaker 1: as there are people that you talk to. Myself, I 167 00:09:22,280 --> 00:09:25,560 Speaker 1: am I'm skeptical that in the next year or so 168 00:09:25,640 --> 00:09:28,000 Speaker 1: we're going to see a dramatic change in the labor 169 00:09:28,120 --> 00:09:32,680 Speaker 1: market because of AI. The models are impressive, but the 170 00:09:32,760 --> 00:09:36,440 Speaker 1: analogy I like to use is even their developers admit 171 00:09:36,559 --> 00:09:39,800 Speaker 1: that they hallucinate. Hallucination is a feature, not a bug. 172 00:09:39,840 --> 00:09:41,400 Speaker 1: And I don't know about you at Bloomber, but I 173 00:09:41,400 --> 00:09:44,480 Speaker 1: can tell you at PIMCO, we don't hire a lot 174 00:09:44,480 --> 00:09:47,559 Speaker 1: of employees who say part of my job description is 175 00:09:47,559 --> 00:09:49,839 Speaker 1: I'm going to hallucinate, and so I think until they 176 00:09:49,840 --> 00:09:52,440 Speaker 1: figure that out, it may not have as much an 177 00:09:52,440 --> 00:09:54,360 Speaker 1: effect on the labor market as people think. 178 00:09:54,480 --> 00:09:57,440 Speaker 2: You and I used a kufulinser slide roll. Okay, the 179 00:09:57,480 --> 00:09:59,640 Speaker 2: only way you can learn logs is a slide role. 180 00:10:00,000 --> 00:10:03,640 Speaker 2: Remember when the Hewlett packard, the rich kids had the 181 00:10:03,679 --> 00:10:08,200 Speaker 2: Hewlett Packard. What was it called reverse polish? Reverse Polish. 182 00:10:08,840 --> 00:10:11,760 Speaker 2: I got one on my phone here. But to me, 183 00:10:11,840 --> 00:10:14,280 Speaker 2: it's the same shift where the professors are going mental 184 00:10:14,320 --> 00:10:17,560 Speaker 2: in clash and use your calculator and all that, and 185 00:10:17,640 --> 00:10:19,480 Speaker 2: we're just going to get We're gonna deal with it. 186 00:10:19,720 --> 00:10:20,760 Speaker 2: I think we're gonna. 187 00:10:20,440 --> 00:10:23,280 Speaker 1: Deal with it and remember that near term in order 188 00:10:23,280 --> 00:10:26,040 Speaker 1: to get the nirvana of AI benefits. There has to 189 00:10:26,040 --> 00:10:29,679 Speaker 1: be a lot of capital spending, data centers, power generation, 190 00:10:29,800 --> 00:10:32,480 Speaker 1: and so the the interesting thing about AI right now 191 00:10:33,160 --> 00:10:35,439 Speaker 1: is that it's really a driver of a lot of 192 00:10:35,480 --> 00:10:37,840 Speaker 1: the old traditional bricks and mortar economy. 193 00:10:38,120 --> 00:10:41,840 Speaker 2: One final question, Yes, sir Jerome Powell, you've been a 194 00:10:41,880 --> 00:10:45,160 Speaker 2: staunch defender of him. He's had a pretty good ten 195 00:10:45,280 --> 00:10:49,640 Speaker 2: days week here. Yeah, and and so uh the governor 196 00:10:50,000 --> 00:10:54,360 Speaker 2: as well, under duress. What's his value add to the 197 00:10:54,360 --> 00:10:58,120 Speaker 2: American people to serve out all of his different tenures. 198 00:10:59,600 --> 00:11:01,680 Speaker 1: Well, I think it's important. I think I think J. 199 00:11:01,880 --> 00:11:06,840 Speaker 1: Powell recognizes that, you know, the first sentence, and eventually, 200 00:11:06,880 --> 00:11:10,200 Speaker 1: whenever his New York Times obituary is written, is he 201 00:11:10,240 --> 00:11:12,200 Speaker 1: wants to make sure that it says something along the 202 00:11:12,240 --> 00:11:16,520 Speaker 1: lines as chair Powell Report restored price stability and maintained 203 00:11:16,520 --> 00:11:20,680 Speaker 1: the Fed's independence. And I think that he is going 204 00:11:20,760 --> 00:11:21,560 Speaker 1: to achieve that. 205 00:11:22,160 --> 00:11:24,640 Speaker 2: Thank you so much, Richard Claire to coming was this 206 00:11:24,720 --> 00:11:27,040 Speaker 2: okay that we didn't do monetary part of the game. 207 00:11:27,320 --> 00:11:29,600 Speaker 1: And I also say it must be opening day because 208 00:11:29,640 --> 00:11:34,400 Speaker 1: mister Kean's wearing a tomorrow probably mister Sweeney, of course, 209 00:11:34,440 --> 00:11:37,720 Speaker 1: my god, where's the Duke? I know are you going 210 00:11:37,720 --> 00:11:38,200 Speaker 1: to the game? 211 00:11:38,360 --> 00:11:40,000 Speaker 3: Not going to the game, but it'll be a great 212 00:11:40,000 --> 00:11:40,840 Speaker 3: game against. 213 00:11:40,760 --> 00:11:42,960 Speaker 2: I'm afraid to ask. How's your bracket? 214 00:11:43,160 --> 00:11:46,400 Speaker 1: Yes, well, I'm a loyal alum of the University of 215 00:11:46,440 --> 00:11:49,240 Speaker 1: Illinois and I picked them. At least on that part 216 00:11:49,240 --> 00:11:51,320 Speaker 1: of the bracket. I'm doing pretty well. Although I got 217 00:11:51,320 --> 00:11:54,320 Speaker 1: to tell you, what is this playing a tournament game 218 00:11:54,400 --> 00:11:56,480 Speaker 1: on a home court for the number two? 219 00:11:57,240 --> 00:12:02,000 Speaker 2: Do they have a bracket pool at the FED? Oh? Ye, PhDs, 220 00:12:02,080 --> 00:12:04,920 Speaker 2: all the stuff and all that. I think so there's 221 00:12:04,960 --> 00:12:07,600 Speaker 2: a some ringer there that you know, like Vince Ryan 222 00:12:07,640 --> 00:12:09,960 Speaker 2: Hard years ago was winning three years in a row. 223 00:12:11,160 --> 00:12:15,520 Speaker 1: Anyway, go line on, okay, Richard Claire, thank you so much, greatly, 224 00:12:15,559 --> 00:12:16,559 Speaker 1: greatly appreciate it.