WEBVTT - 013026_Lots_More_Skanda_Amarnath_Edit_v1 0:00:00.240 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.039 --> 0:00:11.560 Oh, Joe, this is cutting. This is from Neil Dudda, 0:00:11.800 --> 0:00:12.799 a friend of the pod. 0:00:13.000 --> 0:00:14.640 Oh yeah, all right, read it out, Read it out. 0:00:14.880 --> 0:00:19.120 President Trump has picked everyone's least favorite candidate, Kevin Walsh 0:00:19.280 --> 0:00:23.000 for the next Fed Reserve chief. I my hat to Warsh, 0:00:23.040 --> 0:00:25.560 who has managed to get selected after being passed over 0:00:25.720 --> 0:00:32.320 time and again. That's a remarkable achievement for him. Joe, 0:00:32.400 --> 0:00:35.680 I want a T shirt that says ruthless utility maximizer, 0:00:36.000 --> 0:00:38.080 black goal. Let's talk about losers. 0:00:38.200 --> 0:00:38.680 Hoo care. 0:00:38.880 --> 0:00:41.480 I've decided I'm going to base my entire personality going 0:00:41.479 --> 0:00:44.720 forward on campaigning for a strategic pork reserve in the US. 0:00:44.880 --> 0:00:45.839 Skull's unlimited. 0:00:45.960 --> 0:00:47.120 Oh what's the ticker for that? 0:00:47.320 --> 0:00:47.479 No. 0:00:47.560 --> 0:00:50.440 I think that like in a couple of years, the 0:00:50.520 --> 0:00:52.720 AI will do a really good job of making the 0:00:52.720 --> 0:00:53.760 out launch podcast. 0:00:53.840 --> 0:00:56.040 How do I get more popular and successful? 0:00:56.360 --> 0:00:59.040 One day that person will have the mandate of heaven. 0:00:59.280 --> 0:01:00.400 We do have of. 0:01:02.520 --> 0:01:04.880 You're listening to lots More, where we catch up with 0:01:04.880 --> 0:01:07.680 friends about what's going on right now, because. 0:01:07.400 --> 0:01:10.399 Even when the odd lots is over, there's always lots more. 0:01:10.680 --> 0:01:12.839 And we really do have the perfect guest. 0:01:18.560 --> 0:01:21.760 I'm just gonna say what I find interesting right now 0:01:21.920 --> 0:01:25.680 is that, you know, like Trump announces someone and you 0:01:25.760 --> 0:01:28.560 expect a bunch of like liberal ninnies in the media 0:01:28.720 --> 0:01:31.440 to like shake their fists. This isn't good, you know, 0:01:31.560 --> 0:01:34.399 It's like there's a lot of predictable response. But it 0:01:34.520 --> 0:01:38.240 is interesting to my mind. Here's someone like Neil who 0:01:38.319 --> 0:01:41.960 is a I do not associate him with liberal media 0:01:42.040 --> 0:01:44.640 groupthink or anything like that, as well as many others 0:01:45.080 --> 0:01:47.360 who are like, huh interesting pick here. 0:01:47.480 --> 0:01:53.040 Well, I will say, opinions kind of divided. So mohappadel 0:01:53.120 --> 0:01:57.120 Arian tweeted earlier that he thinks Kevin's going to be 0:01:57.160 --> 0:02:01.120 a great FED share and he's observed and this is 0:02:01.160 --> 0:02:04.240 a quote. Having observed and interacted with Kevin during his 0:02:04.360 --> 0:02:07.560 prior tenor as FED governor, in academia and as a 0:02:07.560 --> 0:02:09.760 fellow member of the Group of thirty, I believe he 0:02:09.800 --> 0:02:13.120 brings a strong mix of deep expertise, broad experience, and 0:02:13.160 --> 0:02:14.720 sharp communication skills. 0:02:15.320 --> 0:02:19.720 So, by the way, Jason Furman too, Yeah, yeah, Kevin 0:02:19.720 --> 0:02:22.840 worsh is well above the bar on both substance and independence. 0:02:22.840 --> 0:02:24.600 To be sure of the Federal Reserve, the Senate should 0:02:24.639 --> 0:02:27.760 ask tough questions about his independent and President Trump should 0:02:27.760 --> 0:02:29.880 reduce the thread to it. Hopefully that will make it 0:02:29.919 --> 0:02:32.720 clear Worsh should be confirmed. So it is a mix 0:02:32.760 --> 0:02:38.000 on both sides. It is not dividing in obvious easy ways. Anyway, Sconda, 0:02:38.080 --> 0:02:38.600 what's up. 0:02:38.600 --> 0:02:41.079 Glad to be part of this momentous day it is 0:02:41.480 --> 0:02:44.480 I guess we see that. Yeah, Kevin Worsh is right 0:02:44.520 --> 0:02:47.680 now the successor in waiting if he gets confirmed by 0:02:47.680 --> 0:02:50.120 the Senate. It is funny how he's part of this 0:02:50.160 --> 0:02:53.160 group of thirty, which is a form of former central bankers, 0:02:53.360 --> 0:02:56.680 former finance ministers, and movers and shakers. So you see 0:02:56.880 --> 0:03:01.840 Mohammadel Arian, Jason Furman, George Os. I believe Mark Karney 0:03:02.440 --> 0:03:06.440 certainly not exactly the most America first kind of grouping, 0:03:06.480 --> 0:03:10.040 maybe more globalist in flavor, has definitely kind of rallied 0:03:10.080 --> 0:03:13.960 around Kevin Worsh because I think they've probably converse with 0:03:14.000 --> 0:03:15.760 him a bunch of times and take him to be 0:03:15.800 --> 0:03:18.600 a very serious person. I myself am much more sympathetic 0:03:18.639 --> 0:03:21.720 to what our friend Neil has pointed out. 0:03:22.080 --> 0:03:24.880 By the way we are talking, of course, to longtime 0:03:24.880 --> 0:03:28.320 friend of the Podskanda Eminas co founder and executive of 0:03:28.400 --> 0:03:30.960 Employee America. So what do you see, Like, Okay, so 0:03:31.040 --> 0:03:33.920 someone like Neil and and someone like yourself, and you 0:03:33.919 --> 0:03:36.480 have these reservations, like what is the origin of some 0:03:36.560 --> 0:03:37.960 of these anxieties. 0:03:38.640 --> 0:03:41.720 I think there are a few different anxieties, and I 0:03:41.720 --> 0:03:44.240 think let's start with this is obviously someone who's served 0:03:44.240 --> 0:03:46.080 on the FED before, right, he was a FED governor, 0:03:46.560 --> 0:03:48.040 So we have like a track record. We don't have 0:03:48.040 --> 0:03:51.920 to rely on secondhand validation. We don't have to if 0:03:51.960 --> 0:03:53.760 we didn't have anything about Kevin Worshton. I think probably 0:03:53.760 --> 0:03:55.920 it's probably we're putting a little more emphasis on what 0:03:56.680 --> 0:04:00.400 Jason Furman and Mohammed Alarian and those people are saying. 0:04:00.520 --> 0:04:04.120 And they seem like respectable people. Except he was FED governor, 0:04:04.160 --> 0:04:06.440 and he does have a pretty long body of work 0:04:07.160 --> 0:04:11.160 in terms of a public intellectual, giving remarks, being in 0:04:11.160 --> 0:04:14.560 the Wall Street Journal opinion pages. And the trouble is 0:04:14.600 --> 0:04:16.919 it kind of comes back to like who do you 0:04:16.960 --> 0:04:20.560 want in a crisis? Right, So the FED really tends 0:04:20.640 --> 0:04:24.480 to matter the most in periods of crisis. He was 0:04:24.520 --> 0:04:27.000 a FED governor in the crisis, and he often touts 0:04:27.040 --> 0:04:31.560 it as some financial purpose. Yes, the two thousand and 0:04:31.560 --> 0:04:35.320 eight financial crisis. If you go through what his views 0:04:35.360 --> 0:04:38.600 were through that whole period, what you will find is 0:04:39.160 --> 0:04:42.279 this is someone who is very eager to tout how 0:04:42.480 --> 0:04:45.120 well the financial system was performing, even as it was 0:04:45.120 --> 0:04:47.360 descending into crisis in two thousand and seven and eight. 0:04:48.200 --> 0:04:51.159 He was very eager to really upright the importance of 0:04:51.200 --> 0:04:53.960 inflation in the summer and fall of two thousand and 0:04:53.960 --> 0:04:57.960 eight until Lehman failed. So this is on clearly who 0:04:58.279 --> 0:05:01.000 had his eye on I'd say the wrong ball that time. Okay, 0:05:01.120 --> 0:05:03.560 mistakes happen, Like people had different views. I don't think 0:05:03.560 --> 0:05:06.719 we should be like too precious about that specifically. And 0:05:06.800 --> 0:05:10.000 yet also the moment that sort of came into two 0:05:10.040 --> 0:05:12.960 thousand and nine, and let's say the absolute worst of 0:05:13.440 --> 0:05:16.719 the financial distress may have been behind us, but we 0:05:16.800 --> 0:05:20.760 had historically high and rising unemployment, he basically said this 0:05:20.880 --> 0:05:22.680 was not really a big problem, not something that the 0:05:22.720 --> 0:05:24.960 Fed should be focused on, and that we actually should 0:05:24.960 --> 0:05:29.400 start to shift back towards focusing on keeping UH interest 0:05:29.440 --> 0:05:32.719 rates more normal, not so low. I'm worried about inflation, 0:05:33.360 --> 0:05:35.000 and so he came with a lot of reasons why 0:05:35.040 --> 0:05:37.479 I thought inflation was gonna explode why QWET was really bad, 0:05:37.880 --> 0:05:40.640 and that would ultimately lead to first inflation, then maybe 0:05:40.640 --> 0:05:43.880 some version of acid price inflation, maybe bubbles, maybe it's 0:05:43.920 --> 0:05:45.799 backdoor fiscal policy. He gave with a lot of different 0:05:45.800 --> 0:05:48.279 reasons at different times for why he really hated the 0:05:48.279 --> 0:05:50.720 fact that the Fed's balance sheet was so big, But 0:05:50.960 --> 0:05:53.400 one those predictions weren't really true. I think they reflective 0:05:53.400 --> 0:05:55.719 misunderstanding of what the Fed's balance sheet really does and is. 0:05:56.360 --> 0:05:59.359 And it's still like a big is a favorite hobby 0:05:59.400 --> 0:06:02.839 horse of his, But that's itself like he kind of 0:06:02.839 --> 0:06:04.880 missed the whole financial crisis in a way, right like 0:06:04.880 --> 0:06:07.160 aside from like the absolute worst of it, everyone got 0:06:07.200 --> 0:06:09.839 on the same page in October two thousand and eight. 0:06:10.279 --> 0:06:12.359 But that's like kind of like not like that's not 0:06:12.400 --> 0:06:15.679 a great badge of like of honor that you actually 0:06:15.720 --> 0:06:17.560 figured out that you had to serve to support the 0:06:17.560 --> 0:06:20.400 financial system at that time. I think that's the first 0:06:20.400 --> 0:06:24.719 dimension that probably is of concern. But let's say, like, Okay, 0:06:24.960 --> 0:06:27.480 people have gone through various episodes and missed a lot 0:06:27.520 --> 0:06:30.400 of things, and you'd hope coming out of that people 0:06:30.440 --> 0:06:33.719 kind of have learned something, expressed some humility Okay, I 0:06:33.720 --> 0:06:35.880 missed this part of this problem, the scale of it, 0:06:35.920 --> 0:06:38.400 the duration of it, and I'll do better next time. 0:06:38.839 --> 0:06:41.000 We haven't really heard that, but okay, let's see those 0:06:41.080 --> 0:06:44.160 like missing mea culpus aside. The two things that are 0:06:44.200 --> 0:06:48.640 more concerning that come out of that, though, is we 0:06:48.720 --> 0:06:52.600 see now a growing pattern of both obsequiousness and partisanship 0:06:52.680 --> 0:06:56.560 in how he orientsd his macro and monetary policy beams. 0:06:57.120 --> 0:07:00.920 So let's fast forward to twenty twenty four, right where 0:07:00.960 --> 0:07:03.680 we had for a while. Obviously there was a sense 0:07:03.720 --> 0:07:05.160 of like the fence going to cut rates, but are 0:07:05.160 --> 0:07:07.320 they going to cut rates soon enough? Or are they 0:07:07.360 --> 0:07:09.040 going to wait longer because they want to see more 0:07:09.080 --> 0:07:12.520 progress on inflation? Kevin worsh For most of that year, 0:07:13.320 --> 0:07:16.680 he was pretty clearly in the camp of the Fed 0:07:16.840 --> 0:07:19.600 is risking not keeping interest rates high enough for long 0:07:19.720 --> 0:07:22.680 enough to kill inflation. But when do you think that 0:07:22.760 --> 0:07:26.160 his policy views changed. They've had the change in November 0:07:26.200 --> 0:07:28.760 twenty twenty four, basically, and he basically did a big 0:07:29.040 --> 0:07:32.400 one to eighty on what were probably considered pretty hawkish views. 0:07:33.000 --> 0:07:37.280 But actually they turn dubbish the moment the election changes. Now, Obviously, 0:07:37.360 --> 0:07:40.880 like everyone does a version of inflecting their policy views 0:07:40.880 --> 0:07:43.480 with some level of politics and partisanship, whether they can 0:07:43.520 --> 0:07:45.320 help it or not. I'm not here to say it's 0:07:45.360 --> 0:07:48.040 like anyone's immune, but there's a tendency if you look 0:07:48.040 --> 0:07:51.680 through his track record of basically worrying about inflation and 0:07:51.720 --> 0:07:55.440 worrying about sort of fiscal excesses during periods when it's 0:07:55.480 --> 0:07:58.360 a Democrat that's in the White House, and then it 0:07:58.400 --> 0:08:02.280 tends to flip towards deregularly and productivity growth are going 0:08:02.320 --> 0:08:06.640 to be disinflationary, and that's that's why we can afford 0:08:06.640 --> 0:08:09.200 to keep rates lower. When it's the Republican that's in 0:08:09.240 --> 0:08:12.760 the White House, I think that's been dialed up even further. 0:08:12.840 --> 0:08:15.280 And this is this last call it eighteen to twenty 0:08:15.320 --> 0:08:17.960 four months where you've seen that sort of one to 0:08:18.000 --> 0:08:20.760 eighty take place, and I think that kind of speaks 0:08:20.760 --> 0:08:23.520 to exactly what did you have to promise to President 0:08:23.520 --> 0:08:24.560 Trump to get the job. 0:08:25.200 --> 0:08:28.280 It's funny you mentioned writing op eds in the Wall 0:08:28.280 --> 0:08:33.120 Street Journal, and this is also a Dutta line, he says, 0:08:33.320 --> 0:08:35.640 And all he's done in the years since his time 0:08:35.679 --> 0:08:38.120 at the FED is critique QE and the FED itself 0:08:38.240 --> 0:08:40.480 making a bunch of bad economic calls along the way, 0:08:40.520 --> 0:08:42.680 and writing the same op ed in the Wall Street 0:08:42.760 --> 0:08:46.080 Journal every year. So one thing I was reading, you know, 0:08:46.120 --> 0:08:47.920 I read some of those op eds, but I also 0:08:48.000 --> 0:08:52.080 read a speech that Walsh made last year, and he 0:08:52.240 --> 0:08:56.600 was criticizing the FED for being too dependent on data 0:08:56.800 --> 0:09:02.359 or focusing on data dependency too much near term forecasting, 0:09:02.960 --> 0:09:05.640 and it kind of, you know, it made me think, like, well, 0:09:05.679 --> 0:09:08.680 if you're not looking at the data, what are you 0:09:08.760 --> 0:09:10.640 going to be looking at? Do we have any sense 0:09:10.679 --> 0:09:14.200 of what he actually prioritizes when it comes to making policy? 0:09:14.559 --> 0:09:17.600 Yeah, I mean maybe it's vibes, maybe it's presidential preferences, 0:09:17.720 --> 0:09:20.240 but obviously, like sort of half kidding there, But I 0:09:20.240 --> 0:09:21.840 think it's like, what do we have if we don't 0:09:21.840 --> 0:09:24.120 have data? Right, what do we have if we don't 0:09:24.160 --> 0:09:27.199 have a language that you can talk about facts? Like, 0:09:27.240 --> 0:09:29.720 obviously data has flaws. We all know that there's like 0:09:30.040 --> 0:09:33.880 limitations to what macroeconomic data releases can tell us, what 0:09:33.960 --> 0:09:35.880 various points of information tell us. We're all trying to 0:09:35.880 --> 0:09:41.400 triangulate around this like fuzzy reality of macroegonomics. But it's 0:09:41.440 --> 0:09:43.520 a useful language for being able to like get people 0:09:43.559 --> 0:09:48.079 from different policy preferences, different political orientations to get on 0:09:48.120 --> 0:09:50.880 something of the same page. Right. It's a way of saying, Okay, 0:09:51.040 --> 0:09:53.000 this is a fact about the data. We can tell it, 0:09:53.120 --> 0:09:54.839 say this is the reason why it's too high, it's 0:09:54.880 --> 0:09:57.599 too low, it's biased. This way you can have a 0:09:57.600 --> 0:09:59.480 discussion about it. But at least it's a way to 0:09:59.480 --> 0:10:01.720 make sure we're talk with something other than politics, something 0:10:01.760 --> 0:10:05.080 other than policy that's like outside of the ambit of 0:10:05.120 --> 0:10:08.000 the FED. I think what you actually hear from Kevin 0:10:08.040 --> 0:10:10.640 Worese from the data dependence side, it's pretty worrisome because 0:10:10.640 --> 0:10:14.640 it kind of speaks to a disinterest in being perceived 0:10:14.640 --> 0:10:18.000 as objective and lack of interest in actually doing something 0:10:18.040 --> 0:10:21.480 that can broaden legitimacy around the FED so that people 0:10:21.520 --> 0:10:25.280 really understand, Okay, the FED made this decision because indicators 0:10:25.320 --> 0:10:28.040 moved in this direction, or they think indicators are moving 0:10:28.080 --> 0:10:30.640 this direction. At the same time, we obviously have a 0:10:30.640 --> 0:10:34.960 situation where like there's a lot of risk of eroding 0:10:35.000 --> 0:10:39.640 trust in the FED. When Trump has been saying that 0:10:39.720 --> 0:10:42.319 he wants his guy in who's going to do what 0:10:42.400 --> 0:10:45.800 he wants, and that he really felt burned by picking 0:10:46.559 --> 0:10:49.640 Jerome Powell, so basically that Jerome Powell was not pliant 0:10:49.760 --> 0:10:53.240 enough to what Trump was looking for. I think that 0:10:53.240 --> 0:10:55.760 that just raises a lot of risks going forward. And 0:10:55.800 --> 0:10:58.400 I just to bring it back to the issue of prises. 0:10:59.000 --> 0:11:00.680 The FED has been such an I were an actor 0:11:00.760 --> 0:11:03.880 in periods of crisis and divided government. Right when we 0:11:03.920 --> 0:11:07.360 think about twenty eight and twenty twenty, when periods when 0:11:07.760 --> 0:11:10.720 the White House was controlled by a Republican and there 0:11:10.800 --> 0:11:13.960 was a pretty vociferous opposition from Congress in terms of 0:11:14.040 --> 0:11:16.400 obviously there was a democratic House in twenty twenty and 0:11:16.600 --> 0:11:18.680 both chambers were a democratic in two thousand and eight, 0:11:19.320 --> 0:11:23.200 how did you get to like policies that actually started 0:11:23.200 --> 0:11:25.680 to take like address the scale of the crises in 0:11:25.679 --> 0:11:29.560 front of them. You got there because there was some 0:11:29.600 --> 0:11:32.199 agreement and trust that the FED could be a reliable 0:11:32.400 --> 0:11:35.120 kind of crisis broker of sorts. I think that's gonna 0:11:35.120 --> 0:11:37.000 be a lot harder this time around because Kevin Morrish 0:11:37.080 --> 0:11:39.880 is like track record. Obviously, there's a certain obsequiousness that 0:11:40.000 --> 0:11:42.319 kind of has been very obvious from how he's do 0:11:42.480 --> 0:11:45.280 these policy one eighties. He goes from hawk at one 0:11:45.320 --> 0:11:47.640 point and then the moment Trump wins office, he starts 0:11:47.679 --> 0:11:50.199 to shift towards being more dubbish. He did a version 0:11:50.200 --> 0:11:53.320 of this in twenty seventeen, though less exaggerated, So that's 0:11:53.320 --> 0:11:57.520 something that is concerning. Layer it onto. His tenure as 0:11:57.600 --> 0:12:01.200 Fed governor has this like features a lot of speeches 0:12:01.240 --> 0:12:03.840 in which he's like really going off script in terms 0:12:03.840 --> 0:12:05.560 of what he's talking about. He doesn't just talk about 0:12:05.600 --> 0:12:08.520 monetary policy or just financial regulation. He started to give 0:12:08.960 --> 0:12:11.760 kind of these like bigger concerns about, Hey, I don't 0:12:11.760 --> 0:12:14.120 really like the way the trade policy is going under 0:12:14.160 --> 0:12:17.400 the Obama administration. I don't really like how like we 0:12:17.800 --> 0:12:22.160 risked going down the wrong path on broader regulatory policy, 0:12:22.559 --> 0:12:25.240 things that really shouldn't have been under his domain itself 0:12:25.280 --> 0:12:27.800 to focus on. And yet he kind of veered into 0:12:27.880 --> 0:12:30.520 the political and probably was speaking to a more partisan 0:12:30.600 --> 0:12:32.920 audience at that time. I think everything you've seen since 0:12:32.960 --> 0:12:34.679 two thousand and five six kind of speaks to someone 0:12:34.720 --> 0:12:36.559 who wants to talk to a one side of the 0:12:36.559 --> 0:12:38.640 partisan aisle. But it may be very different in a crisis. 0:12:38.679 --> 0:13:05.640 But you need relationships across this vectrum. 0:12:53.040 --> 0:12:56.160 You know, regardless of what people thought about BERNANKI or Paul, etc. 0:12:56.800 --> 0:13:00.720 Both of them, you know, were reasonably well respect across 0:13:00.760 --> 0:13:03.320 both sides of the aisle, which probably was very helpful 0:13:03.440 --> 0:13:04.240 during the crisis. 0:13:04.320 --> 0:13:05.320 I have a question, and I've. 0:13:05.200 --> 0:13:08.120 Never actually quite known the answer to this, but even 0:13:08.559 --> 0:13:11.760 going back to two thousand and nine, twenty ten, et cetera, 0:13:11.920 --> 0:13:14.920 like a lot of people really liked Worsh, and you 0:13:15.000 --> 0:13:18.200 mentioned that he's in a select community of like some 0:13:18.280 --> 0:13:21.760 pretty like heavy hitters, et cetera. And I think Bernank 0:13:22.320 --> 0:13:24.680 liked Worsh quite a bit. If I recall, what is 0:13:24.760 --> 0:13:27.680 the sort of like worsh origin story of how he 0:13:27.800 --> 0:13:30.680 got to be in the circles of some of the 0:13:30.720 --> 0:13:32.960 most elite and a monetary policy minds. 0:13:33.400 --> 0:13:36.240 So he was one of the youngest people selected to 0:13:36.320 --> 0:13:38.720 be a Fed governor, and there was a lot of 0:13:38.720 --> 0:13:43.079 consternation even about whether he was qualified at that time. 0:13:43.640 --> 0:13:47.679 There's some good background about how there were a lot 0:13:47.679 --> 0:13:51.400 of critics for Price chairman, people who served under Ronald 0:13:51.440 --> 0:13:56.120 Reagan expressing reservation is about picking someone so young who 0:13:56.160 --> 0:13:59.280 had no real track record. He was like an investment 0:13:59.280 --> 0:14:03.680 banquet Morgan Stance and technology media Telcom for a brief period. 0:14:04.080 --> 0:14:06.720 He's kind of known in these circles primarily, and like, 0:14:07.120 --> 0:14:09.040 I don't know how much to ascribe to this, but 0:14:09.120 --> 0:14:11.360 I do think like it matters that probably his father 0:14:11.440 --> 0:14:13.560 in law is one of the big donors to the 0:14:13.600 --> 0:14:15.880 Republican Party and has been a big donor to Trump, 0:14:15.920 --> 0:14:19.320 so Ron laudaiir of es Day Lauter fame. So there's 0:14:19.360 --> 0:14:21.680 ex certain levels of connections that have mattered. I think 0:14:22.000 --> 0:14:25.200 there's a pretty well documented fight between Randy Quarrels, who 0:14:25.280 --> 0:14:27.800 is the head of supervision appointed by Trump in his 0:14:27.880 --> 0:14:31.800 first rum, and Kevin Warsh were fighting over a particular 0:14:31.880 --> 0:14:35.360 job in the Bush Treasury Secretary Office, the Treasure Department. 0:14:35.480 --> 0:14:38.640 So he's been around in those circles. I think he's 0:14:38.680 --> 0:14:41.680 mostly been conversed with, let's call people who are like 0:14:41.720 --> 0:14:44.280 he was on a visiting fellow the Hube Institution, which 0:14:44.320 --> 0:14:48.000 is like an intellectual hub for obviously conservative economic thought. 0:14:48.520 --> 0:14:51.480 But he's also mostly been speaking to a specific crowd 0:14:51.480 --> 0:14:54.600 like the Wall Street Journal op eded Page. Has mostly 0:14:54.640 --> 0:14:58.400 been with those who are of his persuasion. He has 0:14:58.440 --> 0:15:01.200 managed to do a remarkable job of shape shifting to words, 0:15:01.280 --> 0:15:05.000 making sure he's heard well by President Trump. And so 0:15:05.160 --> 0:15:08.040 he has managed to kind of make that transition in 0:15:08.040 --> 0:15:10.280 a way that maybe other people have not. But that 0:15:10.400 --> 0:15:13.440 shape shifting itself has always been with an orientation towards 0:15:13.480 --> 0:15:15.960 I'm really speaking to a Republican audience. And what I 0:15:16.000 --> 0:15:18.680 wonder about that is, if we run into any sort 0:15:18.720 --> 0:15:21.440 of situation where you're going to need the FED to 0:15:21.520 --> 0:15:23.360 kind of put out a fire, or you're gona need 0:15:23.400 --> 0:15:26.000 some institution to do that play that role as there 0:15:26.080 --> 0:15:27.840 was the case in the Cares Act, or was the 0:15:27.880 --> 0:15:31.520 case around Tarp or around any of the other sort 0:15:31.520 --> 0:15:33.960 of bailous of zos and eight, how do you like 0:15:34.040 --> 0:15:36.960 muster that together when like this person has kind of 0:15:37.320 --> 0:15:41.560 been pretty consistently partisan and ideological in some ways, ideological 0:15:41.600 --> 0:15:44.320 maybe more so when it's not Trump at the helm, 0:15:44.640 --> 0:15:46.240 but it's just something that's going to come very hard 0:15:46.280 --> 0:15:49.160 to trust. And we kind of take that for granted 0:15:49.280 --> 0:15:52.040 in terms of like macro and finance about how the 0:15:52.080 --> 0:15:54.040 FED is supposed to step in when there's a crisis, 0:15:54.160 --> 0:15:56.000 but like the FED steps into the crisis when they 0:15:56.000 --> 0:15:58.040 get the backing from both Congress and the White House, 0:15:58.760 --> 0:15:59.680 that may not exist. 0:16:00.480 --> 0:16:03.560 Just going back to things that Orsh has said previously, 0:16:03.600 --> 0:16:06.440 So we talked about he's been very critical of the 0:16:06.480 --> 0:16:10.280 fed's balance sheet, expanded balance sheet and QI and things 0:16:10.360 --> 0:16:13.840 like that. Assuming that he figures out a way to 0:16:14.560 --> 0:16:17.400 do what he wants at the FED and somehow it 0:16:17.400 --> 0:16:20.760 gets support of the FED board or does something else, 0:16:21.200 --> 0:16:24.560 how dramatic could his tenure at the FED actually be 0:16:24.800 --> 0:16:27.680 in terms of monetary policy, because I'm thinking, you know, 0:16:28.360 --> 0:16:32.000 there's been some chat or some suggestion that worsh would 0:16:32.040 --> 0:16:37.120 like to radically redesign the way monetary policy interest rates 0:16:37.200 --> 0:16:38.720 are actually implemented. 0:16:40.240 --> 0:16:42.080 Yeah, that's always been a bit fuzzy to me because 0:16:42.280 --> 0:16:44.400 he's been very eager to criticize, but the nature of 0:16:44.400 --> 0:16:47.520 the criticism has always had to like continuously adapt to 0:16:48.160 --> 0:16:51.400 what I'd call somewhat failed predictions. First it was that 0:16:51.440 --> 0:16:52.840 there are a lot of people said, QUI is going to 0:16:52.880 --> 0:16:56.000 increase some money's supply and mechanically increase inflation. And that 0:16:56.120 --> 0:16:57.720 was the case that people said this like two thousand 0:16:57.720 --> 0:17:00.480 and nine didn't quite pan out that way. Then people 0:17:00.560 --> 0:17:01.920 kind of said, like it's going to lead to acid 0:17:01.960 --> 0:17:05.240 price inflation, slash and bubbles, like maybe there's acid price inflation. 0:17:05.280 --> 0:17:07.240 But there wasn't really like an obvious bubble that Trent 0:17:07.240 --> 0:17:10.080 transpired from it, and then it's sort of that some 0:17:10.119 --> 0:17:12.320 of the criticians shifted towards while it's actually doing something 0:17:12.359 --> 0:17:14.359 on fiscal policy. So I think you have to have 0:17:14.400 --> 0:17:15.760 a career in view of what you actually think the 0:17:15.760 --> 0:17:19.200 Fed balagy does. Like if you ask me, ordinary vanilla 0:17:19.240 --> 0:17:21.639 treasury QI is not really doing much. It's mostly an 0:17:21.680 --> 0:17:23.760 acid swamp of two risk free acids, which is a 0:17:23.840 --> 0:17:26.240 view actually that another person who over institutions John Cochran 0:17:26.280 --> 0:17:29.480 would be abide by. So there's not really any disporting 0:17:29.560 --> 0:17:32.280 effects that people are really the way people are saying, 0:17:32.960 --> 0:17:34.400 and yet he sort of has made this a big 0:17:34.440 --> 0:17:36.159 bug bearer that this is like the big thing that 0:17:36.200 --> 0:17:39.200 needs to shift. He comes at a very awkward time 0:17:39.600 --> 0:17:42.400 because what's been happening is that money markets have been 0:17:42.440 --> 0:17:45.119 basically giving the signal that actually the balance sheet is 0:17:45.119 --> 0:17:46.760 getting to a place where if you try to run 0:17:46.800 --> 0:17:49.440 it down from here and run it down to abruptly, 0:17:50.359 --> 0:17:52.280 you might get more dysfunction, kind of similar to what 0:17:52.320 --> 0:17:55.400 we saw in like September twenty nineteen. So we might 0:17:55.400 --> 0:17:59.080 get into a situation where rebol rates spike because there's 0:17:59.080 --> 0:18:01.760 just not a lot of relative to the banking system 0:18:01.760 --> 0:18:04.360 and the financial system's needs. You do need to have 0:18:04.400 --> 0:18:07.880 some amount of liquidity available, and that amount of liquidity 0:18:07.920 --> 0:18:10.320 is meaningfully more than it was prior to the financial crisis. 0:18:10.359 --> 0:18:13.359 That's probably like one part regulation, one part supervision, and 0:18:13.480 --> 0:18:16.320 one part bank risk management practices. But this stuff is 0:18:16.400 --> 0:18:18.280 kind of like actually hard to pin down how much 0:18:18.280 --> 0:18:21.520 of each, And so he's bide this is like big concern. 0:18:22.080 --> 0:18:25.359 I suspect he's probably gonna have to swallow his pride 0:18:25.400 --> 0:18:30.200 a bit and be more supportive of like gradual battle 0:18:30.240 --> 0:18:33.560 sheet expansion during this period because money market conditions are 0:18:33.600 --> 0:18:35.879 basically signaling that things have tidied up quite a bit 0:18:35.880 --> 0:18:38.080 in terms of if you look at where the FED 0:18:38.119 --> 0:18:40.439 funds rate or money market interest rates are relative to 0:18:40.520 --> 0:18:42.920 the interest that the FED pays on reserves, or the 0:18:42.960 --> 0:18:46.520 interest rate that the FED pays for money market funds 0:18:46.520 --> 0:18:49.320 to the revers reypop facility, those have been converging, right, 0:18:49.359 --> 0:18:51.760 Those are basically been those money market indust rates have 0:18:51.760 --> 0:18:54.440 been kept going up relative to those but rates set 0:18:54.480 --> 0:18:56.399 by the Fed. And that kind of is also a 0:18:56.480 --> 0:18:59.199 sign that like, yeah, you're gonna to have more malleability. 0:18:59.240 --> 0:19:01.840 And it's not exactly be the case that like, oh 0:19:01.840 --> 0:19:04.120 my god, this FED balance sheet is like this big problem, 0:19:04.440 --> 0:19:06.720 or that it's something that if you if you lower 0:19:06.720 --> 0:19:08.600 the balance sheet, that's how you get lower interest rates. 0:19:09.440 --> 0:19:11.520 These views are all kind of incoherent. But I think 0:19:11.560 --> 0:19:13.480 that especially now that he might be in a position 0:19:13.520 --> 0:19:16.560 where has to deal with those hard realities, I suspect 0:19:16.640 --> 0:19:18.080 his views made worse to change. 0:19:18.160 --> 0:19:20.320 It'll be interesting to see what happens. Let's just talk, 0:19:20.400 --> 0:19:23.920 you know, so we know Trump wants lower rates. Kevin 0:19:23.960 --> 0:19:26.920 Warrish has talked about we need lower rates, so there's 0:19:26.920 --> 0:19:30.520 alignment there. Other candidates who were like the sort of 0:19:30.760 --> 0:19:34.879 finalists also talking about that. So Christopher Waller, who I think, 0:19:35.280 --> 0:19:37.399 you know, many people would say perhaps has the best 0:19:37.400 --> 0:19:40.359 track record of the last five years of anyone having 0:19:40.400 --> 0:19:44.959 correctly identified the inflationary turn and then also recognizing when 0:19:45.040 --> 0:19:48.400 the inflationary turn was coming to and he also wants 0:19:48.720 --> 0:19:51.360 lower rates. So like there were presumably no matter who 0:19:51.440 --> 0:19:53.760 was going to come in was going to have this 0:19:54.000 --> 0:19:57.240 lower rates. Now view that being said, you know, does 0:19:57.760 --> 0:20:01.120 the actual execution of lower rates in the short term 0:20:01.240 --> 0:20:05.480 setting aside crisis, does it change at all the dynamics 0:20:05.520 --> 0:20:08.959 when he's just one of multiple voting members. If that 0:20:09.040 --> 0:20:11.640 message is coming from Kevin Walsh versus if it were 0:20:11.680 --> 0:20:13.640 coming from a Christopher Waller. 0:20:13.920 --> 0:20:17.240