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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Hello and welcome to another episode of the Authoughts podcast.

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Speaker 2: I'm Tracy Alloway.

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Speaker 1: And I'm Joe. Why isn't thal so Joe.

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Speaker 2: Trump nominated Kevin Worsh to be FED chair last week.

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Speaker 2: We've been talking about it on the show. Obviously, this

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Speaker 2: has big market implications, but I'm starting to think that

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Speaker 2: the sociological, yeah, questions and aspects of this are kind

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Speaker 2: of more interesting.

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Speaker 1: I'm so intrigued by the constellation of people who have

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Speaker 1: come out either in support or opposition of this name.

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Speaker 1: It is not like any other nominee that I can recall,

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Speaker 1: where you have fairly sort of mainstream, even sort of

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Speaker 1: liberal names like Jason Furman or Geita Gopinath say there's

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Speaker 1: a great pick, et cetera. And then you have Paul

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Speaker 1: Krugman and Neil Dudda say is a terrible pick and

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Speaker 1: so forth. It is. It cuts in ways that I

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Speaker 1: would not have necessarily anticipated, not like any other Trump

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Speaker 1: pick that I recall.

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Speaker 2: Yeah, it is very split, and it feels like there's

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Speaker 2: a split within Worsh's own thinking as well. Right, because

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Speaker 2: here we have a guy who has talked about wanting

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Speaker 2: to overhaul the FED right and even break some heads.

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Speaker 2: I think it was a direct quote that we've mentioned before.

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Speaker 2: He has given a speech that is literally titled an

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Speaker 2: ode to independence the Central Bank. But at the same time,

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Speaker 2: there's a big question mark about how and why he

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Speaker 2: has suddenly seemingly gone from an inflation hawk to someone

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Speaker 2: who's advocating for low rates totally.

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Speaker 1: And of course I think I mean, for you know,

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Speaker 1: just to be blunt, this would have been something that

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Speaker 1: any nominee from this administration, to some extent, there would

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Speaker 1: have been question marks around because you know, obviously Trump

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Speaker 1: has been very critical of Jerome Powell, despite the fact

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Speaker 1: that he nominated him himself, and it's clear that he

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Speaker 1: wants a low rates now kind of guy in there.

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Speaker 1: He said after the nomination, he's like, you know, he

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Speaker 1: didn't make many promises, but he's gonna I think he's

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Speaker 1: gonna be a low rates guy. And then he joked

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Speaker 1: a couple of days later that he was going to

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Speaker 1: sue but that wasn't you know, he was joking. He

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Speaker 1: said he was going to sue if worship. Yeah, joke, Aircus,

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Speaker 1: you don't know. But this has been the big thing.

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Speaker 1: And so the question is the degree to which an

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Speaker 1: incoming FED chair presume if he passes the Senate, which

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Speaker 1: isn't guaranteed, but if he passes the Senate, can establish

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Speaker 1: his commitment to what he's long talked about. It just

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Speaker 1: FED independence, while also you know, not immediately angering the

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Speaker 1: guy who nominated him, exactly the extent that matters.

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Speaker 2: Exactly right, So we need to talk about all of this,

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Speaker 2: get a little bit more color on I guess fedboard culture, yeah,

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Speaker 2: and politicals as well, and market implications of course, And

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Speaker 2: we really do have the perfect guest. We're going to

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Speaker 2: be speaking with, Richard Clarida. He is, of course global

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Speaker 2: economic advisor at PIMCO, a professor of economics at Columbia,

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Speaker 2: and most importantly for the purpose of this particular conversation,

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Speaker 2: he's a former vice chair of the Federal Reserve Board.

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Speaker 2: So honestly the perfect guest. Rich Thanks for coming back

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Speaker 2: on the show.

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Speaker 3: Thank you, looking forward to our discussion.

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Speaker 2: So why don't I just start with the very obvious

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Speaker 2: question and we can dig in from there. But last

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Speaker 2: week when the news broke about worsh being selected by Trump,

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Speaker 2: what was the first thought that went through your head.

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Speaker 3: I think it's a very sensible chance. It makes sense

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Speaker 3: along important dimensions. In particular, it's important because I think,

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Speaker 3: based upon background and what he's been writing recently, that

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Speaker 3: Warsh will work very well with Scott Bessett at the Treasury.

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Speaker 3: There is Fed independence that get into, but it's important.

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Speaker 3: It's a practical matter that the FED work well with

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Speaker 3: the Treasury, and so it makes sense along a lot

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Speaker 3: of dimensions.

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Speaker 1: Actually, let's just get into that, because I do find

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Speaker 1: that to be very interesting. Say more about working with

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Speaker 1: the Treasury. You know, some people would say that is

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Speaker 1: not the Fed's job. In fact, I would say, you know,

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Speaker 1: Kevin Worrish, going back to the immediate post Great Financial

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Speaker 1: Crisis era, had talked about how, for example, it's not

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Speaker 1: the Fed's job to backstop fiscal policy. It's not the

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Speaker 1: Fed's job to enable larger deficits, which I believe saw

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Speaker 1: QI is enabling. But from your perspective, talk to us

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Speaker 1: about what a positive relationship between the FED share and

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Speaker 1: the Treasury Secretary looks like.

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Speaker 4: Yeah, thank you for letting me add some color to that,

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Speaker 4: because their dimensions and domains where it would actually be

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Speaker 4: a very bad idea for the FED to be domin

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Speaker 4: NATed by the Treasury, but along several dimensions. A collaborative

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Speaker 4: working relationship is important, and i'll name names several. First,

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Speaker 4: is the FED, going back to its founding, is the

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Speaker 4: fiscal agent of the government. It has a responsibility to

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Speaker 4: make sure that the treasury market has adequate liquidity, that

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Speaker 4: it functions properly, and so that that's an important element

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Speaker 4: of the job and always has been. It's also important

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Speaker 4: because the FED has an important role in bank regulation,

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Speaker 4: but not a not a monopoly role. The control of

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Speaker 4: the currency, which is within Treasury, also has a regulation

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Speaker 4: responsibility as to fdi C. So as a matter of

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Speaker 4: necessity on bank regulation there needs to be a degree

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Speaker 4: of coordination, and so I would really highlight those two areas.

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Speaker 2: So I mentioned at the beginning that I'm kind of

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Speaker 2: interested in the inner functioning of the FED board. From

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Speaker 2: your perspective, how does communication between the and the Treasury

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Speaker 2: actually happened. I'm sort of envisioning, like, I don't know,

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Speaker 2: a WhatsApp or signal group group chat.

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Speaker 4: There is a tradition, it's not in statute, There is

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Speaker 4: a tradition that the Treasury Secretary and the FED chair

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Speaker 4: meet on a regular basis, oftentimes over breakfast.

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Speaker 3: And so during my time that.

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Speaker 4: Was the primary point of contact was bilateral between when

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Speaker 4: I was there, a Jay Poll and Stephen Mnuchen and

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Speaker 4: then when Janet Yellen became a Treasury secretary. So that's informal.

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Speaker 4: They're typically not staff in the room for that. There's

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Speaker 4: also the Financial Stability Oversight Council, which was a creation

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Speaker 4: in Dodd Frank which by statute is chaired by the

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Speaker 4: Treasury Secretary, and then they're the FED among other agencies,

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Speaker 4: also participates in that process. And then thirdly, as I mentioned,

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Speaker 4: anything involving a bank regulation is typically going to involve

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Speaker 4: if the senior or even device to share for supervision

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Speaker 4: level interaction on bank regulation.

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Speaker 1: You know, let's get into some of the I guess

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Speaker 1: criticisms or perhaps questions about Kevin Worshon. There's a few

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Speaker 1: different dimensions. One is, of course, there's perception that he's

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Speaker 1: long been an inflation hawk and suddenly he sounded more

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Speaker 1: dubvish over the last twelve eighteen months or whatever. Setting

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Speaker 1: that aside, though, you know, some of the criticisms start

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Speaker 1: early on, including his judgment around the Great Financial crisis

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Speaker 1: concerned more about inflation, you know, even up into fall

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Speaker 1: two thousand and eight than employment right on the eve

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Speaker 1: of collapse, also seemed to get very anxious about inflation

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Speaker 1: soon coming out of the worst of it, etc. Like

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Speaker 1: when you think about, okay, like his qualifications and what

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Speaker 1: we can expect from him, how much like when you

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Speaker 1: go back to that era, how much should we hold

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Speaker 1: that against him, perhaps either that he was off the

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Speaker 1: mark or that he was at least very far out

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Speaker 1: of consensus at the time.

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Speaker 3: Well, I think you have to look at the entire picture.

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Speaker 4: And Kevin was also very involved with Ben and Tim

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Speaker 4: Geidner and Dudley and the crisis response to the global

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Speaker 4: financial crisis, which really played out over a period of

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Speaker 4: twelve to eighteen months. And I think by most accounts,

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Speaker 4: in my judgment, that he actually added a lot of

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Speaker 4: value in the fog of war inflation. As I myself learned,

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Speaker 4: especially in periods of crisis and unusual large shocks, inflation

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Speaker 4: forecasting can be challenging. So I don't think I would

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Speaker 4: hold that particular episode against them. I think it does

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Speaker 4: fairly characterize the way that most of us think about

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Speaker 4: Kevin throughout during that period and really the last fifteen

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Speaker 4: years is he has been a pretty consistent critic of

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Speaker 4: the FED under the second half of Bernanky and then

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Speaker 4: Yelling and Powell, and typically the criticism has come from

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Speaker 4: the hawkish direction, and certainly in that episode his criticism

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Speaker 4: of the FED was that some certain quotes would indicate that.

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Speaker 3: Hawkish inclination as well.

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Speaker 4: Maybe just I can follow up because in your earlier

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Speaker 4: comment you also mentioned his recent advocacy.

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Speaker 3: For lower rates.

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Speaker 4: Now it's important this is in the context of a

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Speaker 4: committee that under Pale's leadership, beginning in September of twenty

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Speaker 4: twenty four, already began to cut rates. In fact, when

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Speaker 4: I did your show earlier and we were talking about

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Speaker 4: that right after I think the initial rate cuts under Powell,

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Speaker 4: I made reference to what I've been calling for some

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Speaker 4: time now, a FED.

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Speaker 3: Is running what I call the quote two points.

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Speaker 4: Something inflation target, which was they don't like it to

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Speaker 4: start with the three, four, five, six or seven, but

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Speaker 4: if inflation gets down to two points something, they can

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Speaker 4: start to talk and think about rate cuts, as they

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Speaker 4: did under Pale. And importantly at the December FED meeting,

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Speaker 4: so just about six weeks ago, the FED indicated through

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Speaker 4: those very imperfect dot plots that a majority of the committee,

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Speaker 4: of that existing committee, which Kevin will inherit, felt that

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Speaker 4: at least one more ray cut this year, given the circumstances,

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Speaker 4: would be appropriate. So, yes, Kevin has come out in

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Speaker 4: favor of ray cuts in his public comments. Don't know

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Speaker 4: what he said privately to the President, but I doubt

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Speaker 4: that they differed what he said publicly. But that's in

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Speaker 4: the context of a committee that at least a majority

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Speaker 4: of whom think that in this year it'll be appropriate

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Speaker 4: to cut at least once.

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Speaker 2: I'm just going to keep pretending to be an anthropologist

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Speaker 2: and ask a bunch of cultural questions. But what actually

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Speaker 2: is the role of FED chair when you're in a

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Speaker 2: monetary policy meeting? So, you know, let's say that Warsh

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Speaker 2: has some sort of outlier opinion. I don't know, he's

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Speaker 2: prioritizing employment versus prices or whatever. Can he convince everyone

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Speaker 2: at the table, all the voting members to actually change

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Speaker 2: their minds?

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Speaker 3: Crazy.

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Speaker 4: It's a great question because a point that I like

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Speaker 4: to make, at least in my professional time, which goes

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Speaker 4: back to Paul Vulker. We tend to talk about the

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Speaker 4: FED as the Vulgar FED, the Greenspan FED, pal Yellen,

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Speaker 4: Bernank FED. And that's appropriate because in this era FED

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Speaker 4: shares have been persuasive and they've usually got their way.

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Speaker 3: But importantly, the.

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Speaker 4: FED as an institution was specifically designed by the Congress

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Speaker 4: in the nineteen thirties in such a way that any

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Speaker 4: material monetary policy decision do they raise or lower interest rates,

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Speaker 4: or do they buy or sell treasuries requires an affirmative

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Speaker 4: vote of a committee comprised of twelve members.

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Speaker 3: And so, as I'd like to say, and I'll say it.

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Speaker 4: Again, really, the power of the FED chair is the

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Speaker 4: power of persuasion, because at the end of the day,

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Speaker 4: he or she only has one vote. Now, it's often

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Speaker 4: argued that, well, rich, that's silly, because rarely do FED

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Speaker 4: shares get out voted, And that's true. It happened once

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Speaker 4: or twice under Vulgar, it happened way back in the

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Speaker 4: nineteen forties.

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Speaker 3: And so yes, empirically it.

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Speaker 4: May appear as though chairs always get their way, but

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Speaker 4: remember FED chairs know where the committee is leaning, and oftentimes,

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Speaker 4: or certain circumstances, they may themselves decide not to be

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Speaker 4: on the losing end of a particular vote, but to

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Speaker 4: try to persuade the committee over time to move in.

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Speaker 3: Their a direction.

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Speaker 4: Now one thing I can't really speak to the Greenspan FED,

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Speaker 4: but beginning under Bernanki and continuing under Yellen, and certainly

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Speaker 4: with Jay Powell, there is a lot of pre meeting

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Speaker 4: FMC meeting communication and indeed Powell during my time there

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Speaker 4: would have individual bilateral discussions with the other eighteen people,

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Speaker 4: not just the voters, but you know there are twelve

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Speaker 4: voters and another seven Reserve Bank presidents who don't vote

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Speaker 4: in a particular year. So Powell would have eighteen individual

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Speaker 4: phone calls or face to face meetings before every meeting.

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Speaker 4: I don't think that was the practice under green Span,

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Speaker 4: for example. And so part of really what a FED

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Speaker 4: chair does is to get a sense of where individuals

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Speaker 4: on the committee are. But really an important power that

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Speaker 4: the chair does have is the chair sets the agenda

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Speaker 4: for the meeting, and the staff briefings, for the most part,

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Speaker 4: are prepared by the board staff, sometimes with input from

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Speaker 4: the Reserve Bank presidents, and the board staff reports to

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Speaker 4: the chair, and so the agenda for the meeting and

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Speaker 4: oftentimes details about the sort of analysis that would be

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Speaker 4: useful for the discussion will be something that the chair

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Speaker 4: will have a view. No during you asked for anecdotes,

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Speaker 4: you know, during during my time because of my background

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Speaker 4: in monetary economics, Chair Palel J. Palell did ask me

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Speaker 4: to take a pretty hands on role in interfacing between

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Speaker 4: himself and the staff, in particular the forecasting in the

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Speaker 4: monetary affairs groups. But ultimately my role was really you know,

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Speaker 4: in service to what he wanted to do to produce

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Speaker 4: a successful meeting.

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Speaker 3: The final thing, I'll say, you got me sort of

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Speaker 3: wound up.

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Speaker 1: It was all great.

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Speaker 3: The final thing I'll.

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Speaker 4: Say is, and I think this has been publicly reported,

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Speaker 4: but it's at a typical FED meeting, there is a

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Speaker 4: policy announcement that comes out a two PM that's a decision,

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Speaker 4: and the committee of course is discussing that decision, but

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Speaker 4: it's discussing other options. And at a typical meeting, in

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Speaker 4: addition to the the FED statement and the policy action

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Speaker 4: that was the outcome of the meeting, the committee is

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Speaker 4: also discussing alternatives, actually tangible altern is, alternative A, alternative B,

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Speaker 4: alternative C. And there can be quite extensive back and

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Speaker 4: forth in the meetings about those alternatives. And so even

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Speaker 4: at the end of the day with the public sees,

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Speaker 4: the FED decided to keep rates on hold, and there

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Speaker 4: were two descents, was for Governors Myron and Waller. A

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Speaker 4: lot more is being discussed at the meeting as potential

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Speaker 4: alternatives to that statement and that decision, and a lot

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Speaker 4: of discussion in meetings can be about what the committee

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Speaker 4: thinks might be appropriate for the next meeting or the

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Speaker 4: meeting down the road. Indeed, one of the many things

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Speaker 4: I learned, I made a promise to myself when I

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Speaker 4: was in the job to try to learn something new

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Speaker 4: every day, and I usually did. And one of the

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Speaker 4: things I didn't appreciate before I got in to the

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Speaker 4: FED is, especially the chair and the powerfit, you really

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Speaker 4: need to have a sense of the arc of both

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Speaker 4: the year in terms of the data flow you're likely

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Speaker 4: to get it, and the arc of where decisions need

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Speaker 4: to be made and how they're made. And so there's

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Speaker 4: a lot sort of like an imperfect but not completely

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Speaker 4: a bad analogy is we've heard of legendary football coaches

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Speaker 4: who like script the first fifty plays of the game,

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Speaker 4: so sometimes they move away, but they want to have

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Speaker 4: a plan about how they'll react if the defense does

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Speaker 4: a certain thing.

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Speaker 3: Or the other.

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Speaker 4: And it's not dissimilar to the way, at least when

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Speaker 4: I was at the palfed that we would be thinking

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Speaker 4: not only about the January meeting and then start thinking

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Speaker 4: about March, but really the arc of the of the year,

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Speaker 4: you know, based upon your view of the data and

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Speaker 4: a number of other considerations. So those are some tangible

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Speaker 4: examples of the way chairs I think put their imprint

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Speaker 4: on the process.

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Speaker 1: So thinking of calling several plays in a row, we've

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Speaker 1: seen Kevin Warsh very skeptical of forward guidance and some

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Speaker 1: of the monetary policy innovations that occurred in two thousand

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Speaker 1: and eight, two thousand and nine and so forth. I

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Speaker 1: think it's easy maybe for people to forget that things

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Speaker 1: like the dots, the press conference and so forth, these

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Speaker 1: are all very modern. For most of the fed's history,

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Speaker 1: there was none of this stuff.

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Speaker 2: Do you think I remember the invention of the dot plant?

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Speaker 2: Remember that we.

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Speaker 1: Were trying to I still don't get it, but yeah,

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Speaker 1: well we were.

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Speaker 2: Trying to figure out internally at Bloomberg, like the best

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Speaker 2: way to tlate that information.

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Speaker 1: Do you think I mean setting, I said Worsh's view.

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Speaker 1: Do you think there's an argument to be made that

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Speaker 1: some of these communication innovations that maybe made a lot

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Speaker 1: of sense during a period of ZERP where the FED

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Speaker 1: was trying to convince the market that would be on

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Speaker 1: hold for a very long time, that maybe they can

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Speaker 1: be revisited and we don't need so much of this

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Speaker 1: stuff in normal times.

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Speaker 4: Yeah, so I think let's focus now on communication stuff

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Speaker 4: that was your specific question, but perhaps later also talk

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Speaker 4: about Kevin's other critiques, which are broadly the balance sheet

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Speaker 4: and sort of mission create in the size and the

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Speaker 4: composition of balance sheet. And then third critique is is

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Speaker 4: grounding FED policy both actions and communication more towards a

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Speaker 4: policy rules framework and a less moving away from what

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Speaker 4: he calls meeting by meeting discretion. But let's talk about

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Speaker 4: communication and having observed and taught this and actually done

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Speaker 4: it for four years, I want to begin with a

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Speaker 4: historically factual statement that's important to provide some contexts. It

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Speaker 4: is perfectly possible to conduct a very successful monetary policy

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Speaker 4: without any forward guidance. Paul Vulker did it for eight years,

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Speaker 4: and Alan Greenspan did it for seventeen. Now there would

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Speaker 4: be little handsome winks and nods. But forward guidance as

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Speaker 4: we know it today is really something that was not

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Speaker 4: really in the toolkit of Paul Volker or for the

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Speaker 4: first seventeen years Alan Greenspan. No green spans endlesslie fascinating.

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Speaker 4: And one of the fascinating things about green Span is

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Speaker 4: that in his last two years, say not coincidentally at

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Speaker 4: the time that Ben Bernanke was a FAG governor, right

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Speaker 4: at the very end in two thousand and four to six,

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Speaker 4: Greenspan began to dip his toe into forward guidance. But

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Speaker 4: for the most part that was not really part of

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Speaker 4: the toolkit.

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Speaker 3: So why did forward guide? First of all?

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Speaker 4: Then what is forward guidance and why to become part

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Speaker 4: of the toolkit? Well, at its most basic level, forward

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Speaker 4: guidance is providing information to observers and importantly to financial

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Speaker 4: markets about the committee's expectation of the path for interest rates. Now,

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Speaker 4: there's a huge academic literature. I've contributed to it myself,

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Speaker 4: and one of the interesting things that you might find

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Speaker 4: that might be surprising about that literature is it's spent

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Speaker 4: a lot of time twenty years ago arguing that forward

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Speaker 4: guidance was irrelevant because the Feds looking at inflation data,

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Speaker 4: the market's looking at inflation data. Inflation's too damn high,

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Speaker 4: the Federal raise rates if it's low, don't cut rate,

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Speaker 4: So you don't really get any You don't really get

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Speaker 4: any incremental benefit by t telling people what you're going

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Speaker 4: to do if they.

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Speaker 3: Were going to do it anyway.

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Speaker 4: And so the case for forward guidance then has to

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Speaker 4: then rest on something other than it's okay to talk about.

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Speaker 3: What you're going to do.

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Speaker 4: And wherefore guidance really became a focus of the Fed

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Speaker 4: was out of desperation at the zero bound, so rates

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Speaker 4: got cut to zero after Lehman Brothers. The economy was

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Speaker 4: in free fall, the financial system was on the vergic collapse,

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Speaker 4: and the Bernanki Fed couldnot use conventional policy to lower

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Speaker 4: rates because they had hit you a zero bound, and

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Speaker 4: so they began to provide guidance to the markets to

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Speaker 4: essentially reassure markets that they were not on a hair

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Speaker 4: trigger to high rates, because they kept noticing that even

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Speaker 4: though the economy was weak, inflation was low, unemployment was high,

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Speaker 4: the bomb market kept pricing in rate heights that they

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Speaker 4: had no intention of delivering, and so forward guidance really

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Speaker 4: took on an important role when the FED was trapped

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Speaker 4: at the zero bound. Now interesting corollary then is what

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Speaker 4: do you do when you raise rates above zero? And

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Speaker 4: of course the power FED did that beginning well, Yellen

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Speaker 4: and then Powell did that, and I was actually there

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Speaker 4: for the rate hikes in that cycle, and the FED

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Speaker 4: by the time I arrived, importantly because of the dots,

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Speaker 4: the FED had begun to had continued to use forward

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Speaker 4: guidance even after rates got above zero, and oftentimes the

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Speaker 4: dot plot was an input into that, since it provides

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Speaker 4: imperfect but potentially useful information about the committee's intention to

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Speaker 4: adjust rates. Let me say, however, that I think it's

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Speaker 4: entirely appropriate that Kevin Worsh or anyone who becomes a

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Speaker 4: FED chair now think about the cost and benefits of

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Speaker 4: for guidance. Indeed, I've said for at least a decade,

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Speaker 4: including before when I joined the FED, that forward guidance

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Speaker 4: and quantitative easing are not exempt from the laws of economics.

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Speaker 4: They have benefits but also costs. There are probably diminishing returns,

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Speaker 4: and so I don't think it's at all inappropriate for

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Speaker 4: the FED under the leadership of the chair to think

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Speaker 4: about benefits and cost of forward guidance and circumstances when

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Speaker 4: it may be useful, in circumstances when it.

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Speaker 3: May not be. Let me just add a little coda here.

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Speaker 4: Another dimension of FED communication that's changed has really been

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Speaker 4: the result of a change in technology and access. So,

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Speaker 4: you know, if you go back to the nineteen eighties, yes,

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Speaker 4: when Vulker gave a speech, people would read it in

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Speaker 4: the Times, on Wall Street Journal.

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Speaker 3: Would report on it. But other than that, FED communication

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Speaker 3: was pretty limited.

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Speaker 4: And of course now, of course we all have access

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Speaker 4: to the Internet and financial news, and each FED president

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Speaker 4: and FED governor give speeches and so there's a lot

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Speaker 4: more individual discussion of what individuals on the committee think

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Speaker 4: would be appropriate policy, as well as formal guidance as well.

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Speaker 4: I think that's sort of where we are on forward

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Speaker 4: guidance as of today.

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Speaker 2: Just one follow up to that. The way I think

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Speaker 2: about it from a market perspective is that forward guidance,

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Speaker 2: you know, since two thousand and eight two thousand and nine,

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Speaker 2: has had the effect of dampening volatility, especially in the

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Speaker 2: bond market. And now if you have less forward guidance,

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Speaker 2: it would seem perhaps there's a risk that volatility makes

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Speaker 2: a return. Putting on your your PIMCO hat. From the

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Speaker 2: perspective of the bond market, what would less forward guidance

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Speaker 2: actually mean.

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Speaker 3: I think you hit the nail on the head. I

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Speaker 3: think the most robust prediction I would.

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Speaker 4: Make is it would it would increase the stomach extent

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Speaker 4: market volatility, in particular interest rate volatility. And importantly, and

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Speaker 4: I'll just be very direct and blunt, in the decade,

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Speaker 4: remember rates for zero for seven years after the global

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Speaker 4: financial crisis. Janet Yellen did not hype rates until December

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Speaker 4: of twenty fifteen, and they've been on hold for seven years.

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Speaker 4: And so not only was realized rate volatility low at

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Speaker 4: the front end of the curve, but the FED was

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Speaker 4: using a lot of forward guidance and a lot of

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Speaker 4: quantitative easing, and that was suppressing interest rate volatility for

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Speaker 4: a very long period of time. And then even once

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Speaker 4: the FED began to lift off, because it was deploying

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Speaker 4: forward guidance, that also served at the margin to suppress

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Speaker 4: rate volatility.

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Speaker 3: And you see this.

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Speaker 4: For example, the move index, which is basically a bond

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Speaker 4: market index of volatility, got down.

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Speaker 3: To very low levels.

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Speaker 4: So part of what has been happening really in the

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Speaker 4: last several years under the power FED is bond market

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Speaker 4: implied volatility has gone up relative to the suppressed levels

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Speaker 4: of the decade before the pandemic, but not really up

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Speaker 4: to levels that were at all unusual back in the

441
00:24:53,880 --> 00:24:58,399
Speaker 4: nineteen nineties. And so I think my first order assessment

442
00:24:58,560 --> 00:25:01,160
Speaker 4: is we may be going back to what I would

443
00:25:01,160 --> 00:25:04,320
Speaker 4: call more normal or pre GFC levels.

444
00:25:03,960 --> 00:25:05,040
Speaker 3: Of rate volatility.

445
00:25:05,080 --> 00:25:07,680
Speaker 4: Now, the FED is not the only game in talent

446
00:25:07,680 --> 00:25:10,520
Speaker 4: when it comes to rate volatility. There's reasons for rate

447
00:25:10,600 --> 00:25:14,000
Speaker 4: volatility to be elevated because of uncertainty about fiscal policy

448
00:25:14,320 --> 00:25:17,000
Speaker 4: for examples as well.

449
00:25:17,080 --> 00:25:18,520
Speaker 1: You know, first of all, I want to say, you know,

450
00:25:18,560 --> 00:25:21,240
Speaker 1: I remember the concern that the FED had in two

451
00:25:21,280 --> 00:25:23,640
Speaker 1: thousand and nine about does the market see the FED

452
00:25:23,680 --> 00:25:26,159
Speaker 1: as a hair trigger out inflation. I don't think a

453
00:25:26,160 --> 00:25:28,840
Speaker 1: lot of people remember this, but in early two thousand

454
00:25:28,840 --> 00:25:31,920
Speaker 1: and nine, the market was pricing in rate hikes by

455
00:25:31,920 --> 00:25:34,680
Speaker 1: the end of two thousand and nine, which seems almost

456
00:25:34,840 --> 00:25:38,320
Speaker 1: unbelievable in retrospect when you remind us that the FED

457
00:25:38,359 --> 00:25:41,199
Speaker 1: went seven years without a hike. So there really was

458
00:25:41,240 --> 00:25:44,880
Speaker 1: a very intense challenge on the Fed's hand to convince

459
00:25:44,920 --> 00:25:47,320
Speaker 1: the market that it was going to stay on hold

460
00:25:47,359 --> 00:25:49,520
Speaker 1: for a very long time, and I think for guidance

461
00:25:49,600 --> 00:25:53,760
Speaker 1: clearly played a sort of specific tech role there. Let's

462
00:25:53,760 --> 00:25:57,439
Speaker 1: talk now about balance sheet. Bill Dudley wrote a column

463
00:25:57,440 --> 00:26:00,440
Speaker 1: for Bloomberg Opinion after the Warst nomination. He was sort

464
00:26:00,440 --> 00:26:02,520
Speaker 1: of critical. He said he didn't think that Worsh was

465
00:26:02,520 --> 00:26:05,080
Speaker 1: going to be able to shrink the balance sheet much

466
00:26:05,160 --> 00:26:08,480
Speaker 1: further and less there were some other changes, perhaps relating

467
00:26:08,480 --> 00:26:12,880
Speaker 1: to banks capital requirements, et cetera. Worsh's own criticisms of

468
00:26:13,000 --> 00:26:15,800
Speaker 1: the balance sheet seem a little bit of a moving

469
00:26:15,840 --> 00:26:19,040
Speaker 1: target at some point. How well do you I mean,

470
00:26:19,160 --> 00:26:21,520
Speaker 1: maybe I would ask how well does any economist have

471
00:26:21,600 --> 00:26:24,280
Speaker 1: a handle on the effects of balance sheet policy? But

472
00:26:24,359 --> 00:26:27,520
Speaker 1: what's your read on sort of the reality of Worsh's

473
00:26:27,600 --> 00:26:30,200
Speaker 1: coming intersection perhaps with the balance sheet?

474
00:26:31,200 --> 00:26:31,440
Speaker 3: Yeah?

475
00:26:31,480 --> 00:26:34,320
Speaker 4: So, I think there are two related but distinct elements

476
00:26:34,320 --> 00:26:38,760
Speaker 4: to this thing. First is that Kevin has been publicly

477
00:26:38,840 --> 00:26:43,440
Speaker 4: and consistently critical of every expansion in the Fed's balance

478
00:26:43,440 --> 00:26:47,040
Speaker 4: sheet since the first Q one program. So he very

479
00:26:47,080 --> 00:26:50,200
Speaker 4: famously said he was opposed to the q E two

480
00:26:50,320 --> 00:26:53,960
Speaker 4: program in twenty ten. Although I think he did vote

481
00:26:54,000 --> 00:26:57,080
Speaker 4: for it, but then he left soon after, and so

482
00:26:57,119 --> 00:27:00,840
Speaker 4: there's the issue of backward looking. Oh, the FED should

483
00:27:00,880 --> 00:27:03,680
Speaker 4: not have been buying treasuries and mortgages as it did,

484
00:27:04,200 --> 00:27:06,840
Speaker 4: and I think there's no reason to think he's changed

485
00:27:06,880 --> 00:27:10,399
Speaker 4: his mind. Indeed, Secretary Bessant wrote a piece with a

486
00:27:10,480 --> 00:27:13,120
Speaker 4: very provocative title, the Fed's you know, gain of function

487
00:27:13,560 --> 00:27:17,960
Speaker 4: monetary policy, and he was also critical in retrospect of.

488
00:27:18,000 --> 00:27:19,960
Speaker 3: The expansion in the Fed's balance sheet.

489
00:27:20,200 --> 00:27:23,159
Speaker 4: The important question, of course, for odd lots listeners and

490
00:27:23,200 --> 00:27:27,200
Speaker 4: for markets is okay, that's the past looking ahead. And

491
00:27:27,240 --> 00:27:30,160
Speaker 4: one of the many interesting things that Kevin Warsh said

492
00:27:30,400 --> 00:27:34,199
Speaker 4: during his I guess campaign to become FED share was

493
00:27:34,240 --> 00:27:37,639
Speaker 4: to call for a new accord between the Treasury and

494
00:27:37,680 --> 00:27:39,920
Speaker 4: the Fed with regards to the balance sheet.

495
00:27:39,960 --> 00:27:42,880
Speaker 3: Now he hasn't provided a lot of details.

496
00:27:43,359 --> 00:27:45,480
Speaker 4: What we do know is what the first accord between

497
00:27:45,520 --> 00:27:48,080
Speaker 4: the FED and the Treasury looked like, which was back

498
00:27:48,080 --> 00:27:50,600
Speaker 4: in nineteen fifty one. And what was interesting about that

499
00:27:50,720 --> 00:27:54,600
Speaker 4: it was essentially the Fed's declaration of independence to raise

500
00:27:54,680 --> 00:27:58,400
Speaker 4: rates without getting approval from the Treasury, which is why

501
00:27:58,440 --> 00:28:00,960
Speaker 4: Fed historians think of it as really a signal event

502
00:28:01,040 --> 00:28:02,240
Speaker 4: in FED history.

503
00:28:02,280 --> 00:28:04,880
Speaker 3: So I don't think that's really an issue. Now.

504
00:28:05,240 --> 00:28:08,120
Speaker 4: Presumably what Kevin means when he talks about an accord

505
00:28:09,040 --> 00:28:12,240
Speaker 4: is a mutual understanding between the FED and the Treasury

506
00:28:12,720 --> 00:28:14,040
Speaker 4: about the.

507
00:28:13,720 --> 00:28:16,879
Speaker 3: Size and composition of its balance sheet.

508
00:28:16,920 --> 00:28:19,280
Speaker 4: And so, for example, you could agree that the FED

509
00:28:19,359 --> 00:28:22,119
Speaker 4: needs to have the current size balance sheet, but it

510
00:28:22,160 --> 00:28:25,720
Speaker 4: should not own mortgage backed securities or thirty year treasury issues,

511
00:28:25,720 --> 00:28:28,320
Speaker 4: should own t Bill. So that's a conversation you can have.

512
00:28:28,359 --> 00:28:30,560
Speaker 4: You can I also have a conversation about the FED

513
00:28:30,600 --> 00:28:34,760
Speaker 4: having a smaller balance sheet. Admirer of Bill and I

514
00:28:34,800 --> 00:28:37,280
Speaker 4: read that column and agreed with almost all of it.

515
00:28:37,680 --> 00:28:41,760
Speaker 4: The point being is to get from here to there

516
00:28:42,480 --> 00:28:46,880
Speaker 4: is not straightforward. In particular, it involves the banking system

517
00:28:46,920 --> 00:28:50,400
Speaker 4: in terms of the level of reserves and the backing system.

518
00:28:50,680 --> 00:28:54,000
Speaker 4: The FED has been very reticent, although it's been tempted,

519
00:28:54,040 --> 00:28:57,280
Speaker 4: and it's discussed selling mortgage backed securities. You can find

520
00:28:57,280 --> 00:29:01,240
Speaker 4: it in the transcripts going back a dozen years, two years.

521
00:29:01,960 --> 00:29:04,840
Speaker 4: And so right now there is no appetite in the

522
00:29:04,920 --> 00:29:07,680
Speaker 4: existing FED to think about shrinking the balance sheet through

523
00:29:07,680 --> 00:29:10,720
Speaker 4: any sort of any sort of a sale. And then, finally,

524
00:29:10,800 --> 00:29:12,600
Speaker 4: and I do want to get this on the table,

525
00:29:12,640 --> 00:29:15,880
Speaker 4: because I think it's a very important point that is

526
00:29:15,960 --> 00:29:21,160
Speaker 4: often imperfectly appreciated, is the following. In two thousand and eight,

527
00:29:21,320 --> 00:29:25,840
Speaker 4: coincident with the global financial crisis, the FED also achieved

528
00:29:25,840 --> 00:29:29,840
Speaker 4: from Congress the statutory authority to pay interest on bank reserves.

529
00:29:29,920 --> 00:29:34,200
Speaker 4: Until that point, the FED created reserves by buying securities,

530
00:29:34,240 --> 00:29:37,920
Speaker 4: but they earned a zero interest rates. And that not

531
00:29:38,000 --> 00:29:40,239
Speaker 4: just the FED, but most other central banks now pay

532
00:29:40,280 --> 00:29:42,960
Speaker 4: a market rate of interest on bank reserves. And the

533
00:29:43,000 --> 00:29:46,480
Speaker 4: reason why that's important is the following. What it means

534
00:29:46,640 --> 00:29:50,000
Speaker 4: is that when the FED does do a QE program,

535
00:29:50,040 --> 00:29:53,760
Speaker 4: when it buys a mortgage security or a treasury, it's

536
00:29:53,800 --> 00:29:56,320
Speaker 4: not really printing money in the sort of money in

537
00:29:56,400 --> 00:29:59,040
Speaker 4: banking sense that you're buying a coupon and paying for

538
00:29:59,080 --> 00:30:01,520
Speaker 4: it with one hundred dollars bill and thus extinguishing the

539
00:30:01,920 --> 00:30:04,520
Speaker 4: coupon payment. What you're really what the FED really does

540
00:30:04,560 --> 00:30:08,720
Speaker 4: now with modern QE and interest on reserves, is it's

541
00:30:08,760 --> 00:30:12,640
Speaker 4: not extinguishing government debt. It's just changing the maturity composition

542
00:30:12,680 --> 00:30:15,080
Speaker 4: of government debt from fixed to floating. Because at the

543
00:30:15,160 --> 00:30:17,479
Speaker 4: end of the day, the Fed's balance sheet and the

544
00:30:17,480 --> 00:30:22,520
Speaker 4: Treasury's balance sheet are consolidated. When the fed's profitable, the

545
00:30:22,560 --> 00:30:26,000
Speaker 4: Treasury gets that interest income. In recent years, the FED

546
00:30:26,040 --> 00:30:29,440
Speaker 4: has not been profitable, and it's been withholding those remittances.

547
00:30:29,440 --> 00:30:32,560
Speaker 4: And so once you think of it that way, then

548
00:30:32,600 --> 00:30:35,400
Speaker 4: you start to think about a scenario where a Treasury

549
00:30:35,440 --> 00:30:38,160
Speaker 4: secretary could if he chose to say, you know what,

550
00:30:38,760 --> 00:30:40,320
Speaker 4: I want to be the big sheriff in.

551
00:30:40,280 --> 00:30:42,920
Speaker 3: Town when it comes to maturity composition.

552
00:30:43,160 --> 00:30:45,600
Speaker 4: So if I think there are too many thirty year treasuries,

553
00:30:46,000 --> 00:30:48,720
Speaker 4: I'll buy them and sell tea bills, and the FED

554
00:30:48,800 --> 00:30:51,760
Speaker 4: can buy the tea bills. And so there are scenarios

555
00:30:51,800 --> 00:30:55,240
Speaker 4: over time where we could rethink what QE is in

556
00:30:55,280 --> 00:30:57,360
Speaker 4: addition to what the size of the balance sheet is.

557
00:30:57,840 --> 00:31:00,239
Speaker 4: But this is not you know, a thirty men it

558
00:31:00,400 --> 00:31:02,720
Speaker 4: or you know, a one week exercise. This will be

559
00:31:02,760 --> 00:31:06,120
Speaker 4: a pretty complicated, intricate process. But I don't want to

560
00:31:06,200 --> 00:31:10,200
Speaker 4: rule out out of hand that it's something that is,

561
00:31:10,280 --> 00:31:12,360
Speaker 4: you know, beyond considering or discussing.

562
00:31:27,960 --> 00:31:32,000
Speaker 2: So other than his distaste for the size and potentially

563
00:31:32,080 --> 00:31:34,680
Speaker 2: composition of the FED balance sheet, there's something else that

564
00:31:34,720 --> 00:31:37,920
Speaker 2: Warsh doesn't seem to like, and that's I guess, traditional

565
00:31:38,040 --> 00:31:41,760
Speaker 2: economic models. So he's been critical of the Phillips curve.

566
00:31:41,840 --> 00:31:46,280
Speaker 2: For instance, He's been critical of data dependency at the FED,

567
00:31:46,800 --> 00:31:50,800
Speaker 2: which kind of leaves the question, if you're not going

568
00:31:50,880 --> 00:31:53,400
Speaker 2: to focus on data and you're not going to focus

569
00:31:53,440 --> 00:31:58,680
Speaker 2: on models, what are you actually using to formulate monetary policy?

570
00:31:58,720 --> 00:32:01,840
Speaker 2: Do you have any read on what that could be?

571
00:32:02,600 --> 00:32:05,000
Speaker 4: I think, you know, and I've known Kevin, I think

572
00:32:05,040 --> 00:32:08,520
Speaker 4: for a dozen years. I didn't our terms as FED

573
00:32:08,560 --> 00:32:11,640
Speaker 4: officials did not coincide, But I've gotten to know him since,

574
00:32:11,720 --> 00:32:15,080
Speaker 4: and we've met many times in ad many conversations, and they'll.

575
00:32:15,520 --> 00:32:18,080
Speaker 3: Like and I read most of not all that he writes.

576
00:32:18,120 --> 00:32:23,480
Speaker 4: You know, My sense is really that his critique is

577
00:32:23,800 --> 00:32:28,560
Speaker 4: that a lot of economic models in macro tend to

578
00:32:28,600 --> 00:32:30,240
Speaker 4: put a lot of emphasis on the.

579
00:32:30,200 --> 00:32:31,719
Speaker 3: Demand side of the economy.

580
00:32:31,800 --> 00:32:34,800
Speaker 4: Now I can point you to my first speech has

581
00:32:34,800 --> 00:32:37,880
Speaker 4: FED Vice chair in October twenty eighteen, where I also

582
00:32:37,960 --> 00:32:40,760
Speaker 4: put on the table that policy need to think about

583
00:32:40,760 --> 00:32:44,400
Speaker 4: the supply side of the economy, and the FED doesn't

584
00:32:44,440 --> 00:32:46,600
Speaker 4: want to be in the business of raising rates because

585
00:32:46,640 --> 00:32:49,880
Speaker 4: too many people have a job if that's not inflationary.

586
00:32:49,920 --> 00:32:52,520
Speaker 4: And the way you sort of score that circle is

587
00:32:52,520 --> 00:32:55,880
Speaker 4: your outlook on productivity and so it is correct that

588
00:32:55,960 --> 00:32:58,160
Speaker 4: if you get more growth because you've got a more

589
00:32:58,200 --> 00:33:03,680
Speaker 4: productive economy, either through invation or deregulation, then the FED

590
00:33:03,720 --> 00:33:06,520
Speaker 4: should not get in the way of that. And indeed,

591
00:33:06,560 --> 00:33:10,600
Speaker 4: during my time the power FED didn't you know, the models,

592
00:33:11,160 --> 00:33:14,560
Speaker 4: both in the FED and outside in twenty nineteen were

593
00:33:14,640 --> 00:33:17,400
Speaker 4: saying and indeed, if you look at FED communication in

594
00:33:17,480 --> 00:33:20,440
Speaker 4: twenty seventeen, it was saying, if the unemployment rate falls

595
00:33:20,440 --> 00:33:23,560
Speaker 4: below five percent, we'll have to hike rates because that's

596
00:33:23,560 --> 00:33:25,640
Speaker 4: going to be inflationary. And by the time I got there,

597
00:33:25,680 --> 00:33:27,960
Speaker 4: the unemployment rate was in the fours and we didn't

598
00:33:27,960 --> 00:33:30,080
Speaker 4: have inflation, and it got down to the low threes.

599
00:33:30,120 --> 00:33:32,800
Speaker 4: And so it is correct that there is a supply

600
00:33:32,840 --> 00:33:35,280
Speaker 4: as well as a demand side to the economy, and

601
00:33:35,320 --> 00:33:38,840
Speaker 4: if the supply side can grow faster with higher employment

602
00:33:39,120 --> 00:33:41,400
Speaker 4: with that inflation, the FED should not get in the

603
00:33:41,440 --> 00:33:43,800
Speaker 4: way with that. So I one hundred percent agree with

604
00:33:44,200 --> 00:33:47,520
Speaker 4: with that. Now, the challenge is the economy. As Jay

605
00:33:47,520 --> 00:33:50,840
Speaker 4: Powill said, the economy is constantly changing.

606
00:33:51,320 --> 00:33:53,440
Speaker 3: And maybe just a little.

607
00:33:53,240 --> 00:33:56,760
Speaker 4: Bit of a wonkish comment for the walks in your audience,

608
00:33:57,480 --> 00:33:59,800
Speaker 4: and let me set the record straight. You know, the

609
00:33:59,840 --> 00:34:04,400
Speaker 4: old sayings, facts are stubborn things, and we all live.

610
00:34:04,520 --> 00:34:07,080
Speaker 4: You know where three of us were around the nineteen nineties,

611
00:34:07,400 --> 00:34:09,560
Speaker 4: and green Span is justly.

612
00:34:09,840 --> 00:34:11,279
Speaker 3: Complimented as he should be.

613
00:34:11,360 --> 00:34:15,440
Speaker 4: Indeed, what I teach this material is emphasize this period

614
00:34:15,960 --> 00:34:19,520
Speaker 4: for recognizing that because of the Internet and connectivity and

615
00:34:19,560 --> 00:34:24,160
Speaker 4: personal computing, that there potentially was an eminent increase in

616
00:34:24,200 --> 00:34:27,600
Speaker 4: pick up in productivity. And the staff and other governors

617
00:34:27,600 --> 00:34:29,400
Speaker 4: were saying we should hike rates in green Span, and

618
00:34:29,440 --> 00:34:31,680
Speaker 4: I said, no, let's see, we may get this may

619
00:34:31,680 --> 00:34:32,000
Speaker 4: be a.

620
00:34:31,960 --> 00:34:33,480
Speaker 3: Productivity led boom.

621
00:34:34,040 --> 00:34:37,920
Speaker 4: And that's indeed the story between nineteen ninety five and

622
00:34:38,040 --> 00:34:40,960
Speaker 4: nineteen ninety nine. But if you look at the Greenspan

623
00:34:41,080 --> 00:34:45,600
Speaker 4: fed in nineteen ninety nine, it was hiking rates even

624
00:34:45,600 --> 00:34:48,520
Speaker 4: though we had very strong productivity growth and we had

625
00:34:48,600 --> 00:34:51,720
Speaker 4: strong economic growth in the face of a very buoyant

626
00:34:51,719 --> 00:34:56,400
Speaker 4: stock market. And what people forget is that by two thousand,

627
00:34:56,640 --> 00:34:59,680
Speaker 4: the federal funds rate was at six and a half percent.

628
00:35:00,000 --> 00:35:02,239
Speaker 4: So it is true that green Span did hold off

629
00:35:02,280 --> 00:35:05,640
Speaker 4: for several years, but by the end of that of

630
00:35:05,680 --> 00:35:10,560
Speaker 4: that tech internet boom and dare I say, irrational zuberants

631
00:35:10,719 --> 00:35:15,799
Speaker 4: his famous phraseology green Span was hiking rates very aggressively

632
00:35:15,880 --> 00:35:18,839
Speaker 4: in the face of very strong productivity growth. So when

633
00:35:18,880 --> 00:35:22,959
Speaker 4: people refer to that period approvingly as a reason for

634
00:35:23,200 --> 00:35:25,759
Speaker 4: the FED to hold off from, you know, hiking or

635
00:35:25,800 --> 00:35:28,560
Speaker 4: certainly or continue to cut rates because of productivity, you

636
00:35:28,680 --> 00:35:31,440
Speaker 4: have to look at the entire decade. You just cherry

637
00:35:31,440 --> 00:35:33,520
Speaker 4: pick three or four years.

638
00:35:33,920 --> 00:35:37,040
Speaker 1: These interesting you know, just while we're here talking about

639
00:35:37,080 --> 00:35:40,600
Speaker 1: green green Span, I mean, why did he raise rates

640
00:35:40,600 --> 00:35:44,320
Speaker 1: so aggressively And did Greenspan's own rate hikes in the

641
00:35:44,400 --> 00:35:49,000
Speaker 1: late nineties not really gel with his own comments about

642
00:35:49,040 --> 00:35:51,720
Speaker 1: the capacity for the economy to grow during a time

643
00:35:51,760 --> 00:35:53,600
Speaker 1: of expanding productivity.

644
00:35:53,880 --> 00:35:57,000
Speaker 4: The explanation, I would argue was really was really twofold.

645
00:35:57,480 --> 00:35:59,960
Speaker 4: I do think by that time, although I haven't memory

646
00:36:00,280 --> 00:36:04,040
Speaker 4: the memoir, but I think by that time the irrational

647
00:36:04,080 --> 00:36:06,520
Speaker 4: exuberance piece was a factor.

648
00:36:06,840 --> 00:36:08,320
Speaker 3: Is there is a wealth effect.

649
00:36:08,400 --> 00:36:10,440
Speaker 4: So if stocks are going up, people are wealthy, they

650
00:36:10,480 --> 00:36:13,840
Speaker 4: spend more, and so central banks don't like to be

651
00:36:13,880 --> 00:36:17,640
Speaker 4: in the business of pricking bubbles. But there is a

652
00:36:17,680 --> 00:36:21,480
Speaker 4: connectivity between a very very fully valued stock market and

653
00:36:21,520 --> 00:36:24,640
Speaker 4: your macro out look. You know, we all remember some

654
00:36:24,680 --> 00:36:26,280
Speaker 4: of us remember pets dot com.

655
00:36:26,320 --> 00:36:28,560
Speaker 3: You know, the sock puppet super Bowl commercials.

656
00:36:29,040 --> 00:36:32,200
Speaker 4: And also I just think by that point, although inflation

657
00:36:32,360 --> 00:36:35,120
Speaker 4: had not moved above I should also mention the other

658
00:36:35,160 --> 00:36:37,919
Speaker 4: fashioning thing about that period is it's clear now from

659
00:36:37,920 --> 00:36:40,560
Speaker 4: the transcripts that the green Span Fed by the mid

660
00:36:40,560 --> 00:36:42,919
Speaker 4: to late nineties was in essence running what we would

661
00:36:42,960 --> 00:36:46,240
Speaker 4: now call an inflation targeting regime, and that the target

662
00:36:46,320 --> 00:36:50,759
Speaker 4: was two But green Span was always resistant to the

663
00:36:50,760 --> 00:36:53,239
Speaker 4: idea the FED should ever publicly say that they were

664
00:36:53,239 --> 00:36:55,920
Speaker 4: targeting two percent inflation. But by the late nineties you

665
00:36:55,960 --> 00:36:59,279
Speaker 4: have inflation moving up close to two percent, and you

666
00:36:59,320 --> 00:37:01,399
Speaker 4: could really thank you. This is a period where green

667
00:37:01,440 --> 00:37:03,680
Speaker 4: SPAN's basically saying, I don't want to go back to

668
00:37:03,760 --> 00:37:08,120
Speaker 4: the battle days of eight seven five percent inflation. And

669
00:37:08,200 --> 00:37:12,520
Speaker 4: so it was probably preemptive as well, not resisting the

670
00:37:12,600 --> 00:37:17,200
Speaker 4: productivity but merely trying to keep the economy and bound.

671
00:37:17,239 --> 00:37:19,720
Speaker 4: And then the final thing I'll say, sorry to be wonky,

672
00:37:19,840 --> 00:37:23,360
Speaker 4: is that, as a matter of economic modeling, other things

673
00:37:23,400 --> 00:37:27,360
Speaker 4: being equal, if you've got faster productivity growth, you'd expect

674
00:37:27,360 --> 00:37:30,359
Speaker 4: that to move up what economists called the neutral rate

675
00:37:30,400 --> 00:37:33,399
Speaker 4: of interest anyway, And I think actually Bill Dudley made

676
00:37:33,440 --> 00:37:36,480
Speaker 4: that point in his column as well.

677
00:37:36,880 --> 00:37:41,560
Speaker 2: Never apologize for being a wonky on this show. I

678
00:37:41,560 --> 00:37:44,719
Speaker 2: want to go back to the question of central bank independence.

679
00:37:44,760 --> 00:37:50,239
Speaker 2: So if we assume that Warsh truly wants to do

680
00:37:50,360 --> 00:37:54,440
Speaker 2: his own thing outside of presidential influence, and again there

681
00:37:54,480 --> 00:37:57,799
Speaker 2: are some people who doubt that is the case. But

682
00:37:57,960 --> 00:38:02,879
Speaker 2: if we take that premise, how does he actually display

683
00:38:03,840 --> 00:38:07,719
Speaker 2: or demonstrate the central banks independence when you have a

684
00:38:07,840 --> 00:38:11,239
Speaker 2: president who likes to talk about interest rates and likes

685
00:38:11,280 --> 00:38:13,879
Speaker 2: to joke, as we were saying earlier about you know,

686
00:38:14,120 --> 00:38:16,319
Speaker 2: I'm going to sue Worsh if he doesn't lower rate.

687
00:38:16,480 --> 00:38:19,800
Speaker 1: You also use the word campaign in Kevin Worsh's campaign,

688
00:38:19,880 --> 00:38:22,279
Speaker 1: which I thought was an interesting choice of words to

689
00:38:22,320 --> 00:38:23,920
Speaker 1: describe the last several months.

690
00:38:24,000 --> 00:38:28,400
Speaker 4: That's okay, that's he's he's a very he's a good choice.

691
00:38:28,440 --> 00:38:32,440
Speaker 4: And there were three other candidates, and and it worked.

692
00:38:32,640 --> 00:38:34,520
Speaker 4: I think I think there'll be a couple of things

693
00:38:34,760 --> 00:38:38,840
Speaker 4: Tracy that we'll we'll see pretty soon. In fact, i'll

694
00:38:38,920 --> 00:38:41,399
Speaker 4: let you and your listeners society if it's it's a joke.

695
00:38:41,480 --> 00:38:43,360
Speaker 4: But one thing I find humorous I'll share with you

696
00:38:43,440 --> 00:38:46,320
Speaker 4: is that, you know, if if Jay Powell really wanted

697
00:38:46,360 --> 00:38:50,799
Speaker 4: to complicate the situation for his successor you know, he

698
00:38:50,920 --> 00:38:53,640
Speaker 4: cut race at the march in the in the April

699
00:38:54,160 --> 00:38:56,480
Speaker 4: meeting to get the funds rate down to the level

700
00:38:56,480 --> 00:38:59,520
Speaker 4: where at least the committee seems to think is the destination,

701
00:38:59,719 --> 00:39:02,400
Speaker 4: so that there's nothing for the next person to do.

702
00:39:02,480 --> 00:39:04,600
Speaker 4: I don't think Kyle's going to do that because I

703
00:39:04,640 --> 00:39:05,280
Speaker 4: don't think it's.

704
00:39:05,120 --> 00:39:07,640
Speaker 1: A monetary policy by trolling. I don't know if that's

705
00:39:07,880 --> 00:39:09,879
Speaker 1: that doesn't sound like a Powell thing, but that would

706
00:39:09,880 --> 00:39:10,560
Speaker 1: be funny.

707
00:39:10,719 --> 00:39:13,040
Speaker 4: But you know, but but but but there is a

708
00:39:13,120 --> 00:39:16,399
Speaker 4: kernel of truth to it, which is as we said

709
00:39:16,440 --> 00:39:18,960
Speaker 4: earlier in the in the podcast, the power of the

710
00:39:19,040 --> 00:39:23,160
Speaker 4: chair is the power persuasion. Wars will only have one vote.

711
00:39:23,480 --> 00:39:27,520
Speaker 4: You've got some very very high profile and confident people.

712
00:39:27,640 --> 00:39:30,200
Speaker 4: There's a voting rotation, as your listeners know. So right

713
00:39:30,239 --> 00:39:32,399
Speaker 4: now you've got folks like Beth Hammick, and you've got

714
00:39:32,480 --> 00:39:37,760
Speaker 4: Louri Logan, Neil cashcar and Minnesota are voting now, and

715
00:39:37,760 --> 00:39:41,719
Speaker 4: an Anna Paulson in Philadelphia, I believe, and you know,

716
00:39:41,800 --> 00:39:45,480
Speaker 4: and Laurie Logan and and and Hammock and Cash Cary

717
00:39:45,520 --> 00:39:48,719
Speaker 4: will not will not be shy publicly or I'm sure

718
00:39:48,719 --> 00:39:53,480
Speaker 4: in the meetings if they disagree with what they would perceive.

719
00:39:53,520 --> 00:39:56,200
Speaker 4: And I'm not saying Warrish would do this, As you know,

720
00:39:56,280 --> 00:39:59,120
Speaker 4: we're going to keep cutting rates below a level where

721
00:39:59,160 --> 00:40:02,160
Speaker 4: the Committee seems to have a broad sense that the

722
00:40:02,239 --> 00:40:04,000
Speaker 4: neutral rate, the destination rate.

723
00:40:03,920 --> 00:40:05,759
Speaker 3: Is going to be somewhere in the low threes, you know,

724
00:40:05,800 --> 00:40:07,480
Speaker 3: three and a quarter, three whatever.

725
00:40:08,239 --> 00:40:12,040
Speaker 4: And so I do think that we'll, under the sort

726
00:40:12,040 --> 00:40:15,920
Speaker 4: of baseline scenario for the economy, we may get to

727
00:40:16,000 --> 00:40:19,120
Speaker 4: that level of rates sometime this year. And then at

728
00:40:19,120 --> 00:40:22,480
Speaker 4: that point the issue would be depending on if there's

729
00:40:22,520 --> 00:40:26,920
Speaker 4: political pressure on how the worst FED would navigate that.

730
00:40:27,000 --> 00:40:30,400
Speaker 4: And my sense is, notwithstanding all the discussion of the

731
00:40:30,400 --> 00:40:35,640
Speaker 4: supply side benefits of AI and deregulation, you know, if

732
00:40:35,920 --> 00:40:39,200
Speaker 4: if the hint or the discussion of a future rate

733
00:40:39,239 --> 00:40:43,360
Speaker 4: cut would would trigger nervousness in the financial markets break

734
00:40:43,360 --> 00:40:47,160
Speaker 4: even inflations go up, expected inflation measures go up, you know,

735
00:40:47,200 --> 00:40:48,840
Speaker 4: I think Wars would, and I think Wars in the

736
00:40:48,880 --> 00:40:53,000
Speaker 4: FED would take that seriously. Some My read is that

737
00:40:53,400 --> 00:40:56,120
Speaker 4: he will, he will navigate the data as it comes.

738
00:40:56,719 --> 00:40:58,799
Speaker 3: He'll he'll want to focus on the supply side.

739
00:40:58,800 --> 00:41:02,160
Speaker 4: But at the end of the day, look, no FED

740
00:41:02,280 --> 00:41:04,200
Speaker 4: chair wants to go down in the history books as

741
00:41:04,239 --> 00:41:08,160
Speaker 4: the FED chair that squandered forty years a price of stability.

742
00:41:08,600 --> 00:41:10,400
Speaker 4: And so at the end of the day, and this

743
00:41:10,520 --> 00:41:12,839
Speaker 4: is I think perhaps what the President was referring to

744
00:41:13,280 --> 00:41:16,280
Speaker 4: on more than one occasion when he was thinking about

745
00:41:16,520 --> 00:41:18,799
Speaker 4: who he was going to choose. I'm paraphrasing, but he

746
00:41:18,800 --> 00:41:21,160
Speaker 4: said something like, you know, people will say one thing

747
00:41:21,200 --> 00:41:24,080
Speaker 4: and then they get in the job and they disappoint you.

748
00:41:24,160 --> 00:41:28,040
Speaker 4: And so I think that's an element of the institution

749
00:41:28,200 --> 00:41:31,440
Speaker 4: and of the committee structure that will continue to be relevant.

750
00:41:31,960 --> 00:41:34,960
Speaker 1: It's so interesting. I mean, something that's interesting is when

751
00:41:35,200 --> 00:41:38,479
Speaker 1: you mentioned the forty years of general price stability. It's

752
00:41:38,480 --> 00:41:41,920
Speaker 1: interesting that, like Arthur Burns, that is a name that

753
00:41:42,000 --> 00:41:44,719
Speaker 1: has a lot of it's been tarnished right because of

754
00:41:44,719 --> 00:41:48,680
Speaker 1: the inflation, and yet Bernanki, who you know, went through

755
00:41:48,680 --> 00:41:52,360
Speaker 1: the Great Financial Crisis, the worst downturn ever by and large,

756
00:41:52,400 --> 00:41:54,759
Speaker 1: is remembered as having been a very good central bank

757
00:41:54,800 --> 00:41:57,600
Speaker 1: a chief. And so it's striking that, yeah, you have

758
00:41:57,640 --> 00:41:59,960
Speaker 1: a few years of inflation, everything's all, You're a disaster.

759
00:42:00,520 --> 00:42:03,520
Speaker 1: But if you have a great recession underneath your term,

760
00:42:03,640 --> 00:42:06,960
Speaker 1: by and large, you could still have a pretty good reputation.

761
00:42:07,360 --> 00:42:09,160
Speaker 1: I want to ask, though, you know, the thing is,

762
00:42:09,239 --> 00:42:11,920
Speaker 1: right now, we still have above target inflation, and maybe

763
00:42:11,960 --> 00:42:15,480
Speaker 1: AI will drive a productivity boom and allow the economy

764
00:42:15,680 --> 00:42:18,840
Speaker 1: to grow very fast with low rates, et cetera. In

765
00:42:18,920 --> 00:42:21,000
Speaker 1: the here and know that we haven't even gotten back

766
00:42:21,040 --> 00:42:22,920
Speaker 1: to two percent yet, and so and a lot of

767
00:42:22,920 --> 00:42:26,279
Speaker 1: these benefits of AI still very theoretical.

768
00:42:26,960 --> 00:42:30,520
Speaker 4: Yeah, well, I'll be even more blunt.

769
00:42:30,719 --> 00:42:33,239
Speaker 3: I think you can make a case.

770
00:42:33,440 --> 00:42:39,319
Speaker 4: That although longer term AI will be disinflationary, as the

771
00:42:39,320 --> 00:42:40,920
Speaker 4: productivity benefits arrive.

772
00:42:41,360 --> 00:42:44,680
Speaker 3: I think it make a very plausible case that between between.

773
00:42:44,320 --> 00:42:50,280
Speaker 4: Now and then, the cap ax build out to train

774
00:42:50,440 --> 00:42:54,279
Speaker 4: the models is going to be increasing demand and a

775
00:42:54,320 --> 00:42:58,480
Speaker 4: fully employed economy before the productivity benefits arise. And so

776
00:42:58,640 --> 00:43:00,799
Speaker 4: if I were still teaching enter me at Macro, this

777
00:43:00,840 --> 00:43:04,000
Speaker 4: had actually be a pretty interesting case starting to go

778
00:43:04,080 --> 00:43:07,080
Speaker 4: on on the chalkboard that in five years you've got

779
00:43:07,120 --> 00:43:10,960
Speaker 4: more GDP per worker. That's great, that's disinflationary. But between

780
00:43:10,960 --> 00:43:13,399
Speaker 4: now in year five, you're going to be doubling your

781
00:43:13,440 --> 00:43:17,520
Speaker 4: tech capital spending investment, which is adding demand before the

782
00:43:17,600 --> 00:43:21,000
Speaker 4: productivity benefits show up. So it's not a slam dunk

783
00:43:21,040 --> 00:43:24,040
Speaker 4: to me at all about about what AI means for

784
00:43:24,760 --> 00:43:28,000
Speaker 4: monetary policy near term, even though maybe in five years

785
00:43:28,600 --> 00:43:32,240
Speaker 4: the productivity benefits are so large it will it will

786
00:43:32,280 --> 00:43:35,600
Speaker 4: have a different you know, tendon to be disinflationary. So

787
00:43:35,680 --> 00:43:38,880
Speaker 4: I think it's AI is complicated along every dimension you

788
00:43:38,880 --> 00:43:39,200
Speaker 4: can think.

789
00:43:39,239 --> 00:43:40,839
Speaker 3: It's a complicated technology.

790
00:43:40,840 --> 00:43:45,040
Speaker 4: It has complicated economics and social potential ramifications. And I

791
00:43:45,080 --> 00:43:49,239
Speaker 4: think it's it's not a slam dunk easy situation for

792
00:43:49,480 --> 00:43:51,200
Speaker 4: the Central Bank either.

793
00:43:51,400 --> 00:43:54,320
Speaker 1: I have one last question about central bank independence setting.

794
00:43:54,400 --> 00:43:57,920
Speaker 1: Aside Worshi's comments, something we haven't talked about at all

795
00:43:58,280 --> 00:44:02,440
Speaker 1: is the subpoena to Jerome Powell the over the offices

796
00:44:02,640 --> 00:44:06,800
Speaker 1: over the renovation. Powell was very specific that he thought

797
00:44:07,040 --> 00:44:11,000
Speaker 1: the subpoena was motivated by punishing him or trying to

798
00:44:11,000 --> 00:44:13,600
Speaker 1: get back at him for doing great policy that the

799
00:44:13,640 --> 00:44:17,719
Speaker 1: President didn't like. Two things related to that. A does

800
00:44:17,760 --> 00:44:21,279
Speaker 1: the subpoena, in your view, sort of add to your

801
00:44:21,360 --> 00:44:24,560
Speaker 1: worry either medium or long term about how long the

802
00:44:24,560 --> 00:44:27,120
Speaker 1: Central Bank truly will be an independent institution in the

803
00:44:27,200 --> 00:44:30,560
Speaker 1: United States? And a corollary to that, you mentioned Powell

804
00:44:30,600 --> 00:44:33,680
Speaker 1: control the ors by doing all the rate cuts now,

805
00:44:33,960 --> 00:44:35,840
Speaker 1: what do you see as the odds that he stays

806
00:44:35,960 --> 00:44:39,359
Speaker 1: on the board until his term as governor ends, even

807
00:44:39,400 --> 00:44:40,399
Speaker 1: if he's no longer chair.

808
00:44:40,920 --> 00:44:43,759
Speaker 4: First of all, there is precedent in the Fed's a

809
00:44:43,920 --> 00:44:48,200
Speaker 4: very very precedent focused institution, legendary FED chair. Indeed, you

810
00:44:48,239 --> 00:44:51,359
Speaker 4: have a building name after a Mayriorner Eccles was an

811
00:44:51,400 --> 00:44:54,879
Speaker 4: FDR appointee, and then when Harry Truman became president, Harry

812
00:44:54,880 --> 00:44:57,520
Speaker 4: Truman named another FED chair, and Eccles stayed on and

813
00:44:58,000 --> 00:45:01,000
Speaker 4: actually became a real thorn in Truman's side.

814
00:45:01,520 --> 00:45:03,400
Speaker 3: I would be surprised if J.

815
00:45:03,640 --> 00:45:06,640
Speaker 4: Powell stays on for the remainder of his term as governor,

816
00:45:06,719 --> 00:45:12,000
Speaker 4: which runs through January of twenty twenty eight. Would I

817
00:45:12,080 --> 00:45:15,800
Speaker 4: be shocked if he stayed for a meeting or to know?

818
00:45:16,520 --> 00:45:17,520
Speaker 3: Only Powell knows.

819
00:45:17,600 --> 00:45:20,480
Speaker 4: He's been asked that question two dozen times and he

820
00:45:20,480 --> 00:45:24,520
Speaker 4: always gives the same answer. But I sense he's probably

821
00:45:24,520 --> 00:45:27,560
Speaker 4: not going to be staying on. You know, in terms

822
00:45:27,640 --> 00:45:32,680
Speaker 4: of this case, you know Powell's comments, can you stand

823
00:45:32,719 --> 00:45:33,640
Speaker 4: for themselves?

824
00:45:33,680 --> 00:45:34,640
Speaker 3: I won't weigh in.

825
00:45:34,880 --> 00:45:37,839
Speaker 4: What I will say though, is we have not only

826
00:45:37,920 --> 00:45:41,279
Speaker 4: this the current thing that you just mentioned about investigation

827
00:45:41,480 --> 00:45:44,560
Speaker 4: on the building. You know, we also have the Lisa

828
00:45:44,640 --> 00:45:45,880
Speaker 4: Cook case.

829
00:45:45,960 --> 00:45:47,879
Speaker 3: He's going to weigh in on that.

830
00:45:48,360 --> 00:45:50,200
Speaker 4: And this is all sort of tied up into this

831
00:45:50,360 --> 00:45:55,440
Speaker 4: idea of can Congress establish a central bank with a

832
00:45:55,480 --> 00:45:58,840
Speaker 4: degree of independence to raise or lower rates? And an

833
00:45:58,880 --> 00:46:03,239
Speaker 4: important element of this is this idea of four cause removal.

834
00:46:03,640 --> 00:46:05,719
Speaker 3: You know, beyond that, it's just going to play out.

835
00:46:05,760 --> 00:46:08,520
Speaker 4: And I don't have any particular expertise about where we'll lend,

836
00:46:08,560 --> 00:46:10,319
Speaker 4: but I will say is at the end of the day,

837
00:46:11,040 --> 00:46:14,120
Speaker 4: I do expect that the FED is an institution and

838
00:46:14,160 --> 00:46:17,480
Speaker 4: it will have sufficient independence to raise a lower rates

839
00:46:17,840 --> 00:46:20,239
Speaker 4: because of its institutional structure, and I think ultimately the

840
00:46:20,320 --> 00:46:22,080
Speaker 4: courts are going to back that up.

841
00:46:22,800 --> 00:46:26,000
Speaker 2: All right, Richard Clarita truly the perfect guest. Thank you

842
00:46:26,040 --> 00:46:27,160
Speaker 2: so much for coming back on.

843
00:46:27,120 --> 00:46:30,520
Speaker 1: A those Thank you, thanks, rich That was great.

844
00:46:43,080 --> 00:46:46,400
Speaker 2: So that was a really fun conversation. I like the idea,

845
00:46:46,920 --> 00:46:49,160
Speaker 2: I'm not sure I like. I am intrigued by the

846
00:46:49,200 --> 00:46:52,080
Speaker 2: idea of monetary policy by trolling.

847
00:46:53,560 --> 00:46:55,320
Speaker 1: It's so funny if there's like no room lift to

848
00:46:55,400 --> 00:46:57,759
Speaker 1: cut by the time Kevin got there, and then you

849
00:46:57,800 --> 00:47:00,839
Speaker 1: couldn't fulfill any inclination to cut.

850
00:47:01,040 --> 00:47:03,920
Speaker 2: But I think it actually raises an important point, and

851
00:47:03,960 --> 00:47:06,439
Speaker 2: I'm thinking back to the conversation we did with Emmy

852
00:47:06,520 --> 00:47:09,680
Speaker 2: Nakamura where she talks about central banks building up a

853
00:47:09,719 --> 00:47:13,680
Speaker 2: sort of store of credibility and then having to spend

854
00:47:13,719 --> 00:47:17,799
Speaker 2: it at various points. If you have a president who

855
00:47:17,840 --> 00:47:21,040
Speaker 2: is so opinionated when it comes to interest rates and

856
00:47:21,239 --> 00:47:25,520
Speaker 2: certainly not shy about tweeting or talking about them, I

857
00:47:25,600 --> 00:47:29,840
Speaker 2: feel like it inherently starts to spend down some of

858
00:47:29,880 --> 00:47:33,920
Speaker 2: that credibility because it just becomes very, very difficult, I think,

859
00:47:34,200 --> 00:47:36,840
Speaker 2: to demonstrate your own independence.

860
00:47:37,200 --> 00:47:38,760
Speaker 1: Yeah, I think it's going to be really tricky.

861
00:47:38,800 --> 00:47:38,880
Speaker 2: You know.

862
00:47:38,960 --> 00:47:41,879
Speaker 1: It's obviously something we talked about with Uskanda last week,

863
00:47:41,920 --> 00:47:45,200
Speaker 1: which is that there's multiple potential nominees who would have

864
00:47:45,239 --> 00:47:48,000
Speaker 1: come in with the willingness to cut rates further at

865
00:47:48,000 --> 00:47:50,759
Speaker 1: this point. Christopher Waller being an obvious one. He's been

866
00:47:50,840 --> 00:47:52,640
Speaker 1: voting for rate cuts, but he also has a lot

867
00:47:52,680 --> 00:47:54,759
Speaker 1: of credibility because he was voting for rate hikes and

868
00:47:54,800 --> 00:47:58,280
Speaker 1: you know twenty twenty two, twenty twenty three and so forth.

869
00:47:58,400 --> 00:48:00,320
Speaker 1: I think it's going to be you know, it'll be

870
00:48:00,360 --> 00:48:03,120
Speaker 1: tricky for worsh and but on the other hand, look,

871
00:48:03,360 --> 00:48:05,720
Speaker 1: I would say Also, you know, it's easy to say, oh,

872
00:48:05,800 --> 00:48:07,680
Speaker 1: he's got to come in, he's got to build credibility.

873
00:48:07,800 --> 00:48:09,360
Speaker 1: A lot of people really like him. A lot of

874
00:48:09,440 --> 00:48:11,480
Speaker 1: people who have worked with him at various times, who

875
00:48:11,480 --> 00:48:14,360
Speaker 1: have known him, think he's a serious thinker, that he

876
00:48:14,400 --> 00:48:16,200
Speaker 1: knows what he's talking about, that even if he doesn't

877
00:48:16,239 --> 00:48:19,000
Speaker 1: always agree with them, particularly on things relate to the

878
00:48:19,040 --> 00:48:23,280
Speaker 1: balance sheet communication, that he's an honest broker. So maybe,

879
00:48:23,360 --> 00:48:26,719
Speaker 1: you know, maybe we are overstating the risks or maybe

880
00:48:26,719 --> 00:48:29,520
Speaker 1: it's easy to overstate the risk that he comes in

881
00:48:29,560 --> 00:48:32,359
Speaker 1: and has a real fight on his hands to get

882
00:48:32,360 --> 00:48:34,320
Speaker 1: the policy agenda that he wants.

883
00:48:34,600 --> 00:48:36,319
Speaker 2: Oh to be a fly on the wall of the

884
00:48:36,320 --> 00:48:38,440
Speaker 2: first meeting with Warrish.

885
00:48:38,160 --> 00:48:41,200
Speaker 1: Ramp, Yeah, it'll be it'll be super interesting. I also

886
00:48:41,239 --> 00:48:43,239
Speaker 1: really like, I wonder if he's going to get rid

887
00:48:43,280 --> 00:48:45,720
Speaker 1: of the press conference. That's my prediction. Yeah, I wouldn't

888
00:48:45,840 --> 00:48:49,560
Speaker 1: be surprised. And you know what I'll say, like, these

889
00:48:49,560 --> 00:48:52,160
Speaker 1: are new things. It's not a it's it's not like

890
00:48:52,239 --> 00:48:54,799
Speaker 1: he'd be overturning eighty years of precedent here. This is

891
00:48:54,800 --> 00:48:58,080
Speaker 1: a very modern thing and a lot of the communications

892
00:48:58,080 --> 00:49:03,239
Speaker 1: innovations were, as Rich said, a very specific purpose when

893
00:49:03,320 --> 00:49:05,600
Speaker 1: the FED was ebserp to convince the market that it

894
00:49:05,640 --> 00:49:08,760
Speaker 1: would stay low because and they needed to make that case.

895
00:49:09,239 --> 00:49:11,480
Speaker 1: So if there's a sort of honest look at all

896
00:49:11,520 --> 00:49:17,480
Speaker 1: of these POSTGFC monetary policy changes, I certainly think that's

897
00:49:17,520 --> 00:49:18,280
Speaker 1: totally fine.

898
00:49:18,440 --> 00:49:20,880
Speaker 2: I think Jackson Hole might be in danger too, you

899
00:49:20,920 --> 00:49:24,680
Speaker 2: think so, Yeah, maybe just out of pure self interest.

900
00:49:25,000 --> 00:49:28,200
Speaker 2: I hope not joy going to one of the most

901
00:49:28,200 --> 00:49:29,799
Speaker 2: beautiful places on Earth every year.

902
00:49:29,880 --> 00:49:32,600
Speaker 1: But yeah, I hope it doesn't go away.

903
00:49:32,719 --> 00:49:33,640
Speaker 2: All right, shall we leave it there?

904
00:49:33,760 --> 00:49:34,399
Speaker 1: Let's save it there.

905
00:49:34,640 --> 00:49:37,080
Speaker 2: This has been another episode of the Odd Thoughts podcast.

906
00:49:37,160 --> 00:49:40,440
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

907
00:49:40,160 --> 00:49:42,880
Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart.

908
00:49:43,040 --> 00:49:46,239
Speaker 1: Follow our producers Carmen Rodriguez at Carmen Ermann, dash Oll

909
00:49:46,239 --> 00:49:49,319
Speaker 1: Bennett at Dashbot, and kil Brooks at Keil Brooks. And

910
00:49:49,320 --> 00:49:51,640
Speaker 1: for more odd Lad's content, go to Bloomberg dot com,

911
00:49:51,640 --> 00:49:54,000
Speaker 1: slash odd Lots or the daily newsletter and all of

912
00:49:54,080 --> 00:49:56,279
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913
00:49:56,280 --> 00:49:59,560
Speaker 1: topics twenty four to seven in our discord Discord dot

914
00:49:59,600 --> 00:50:01,080
Speaker 1: gg slash lots.

915
00:50:01,200 --> 00:50:03,400
Speaker 2: And if you enjoy Odd Lots. If you like it

916
00:50:03,440 --> 00:50:07,080
Speaker 2: when we talk about new fed chairs with former vice chairs,

917
00:50:07,080 --> 00:50:09,720
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918
00:50:09,760 --> 00:50:13,560
Speaker 2: podcast platform. And remember, if you are a Bloomberg subscriber,

919
00:50:13,680 --> 00:50:16,880
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920
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921
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