WEBVTT - Tim Duy on the Huge Challenge the Fed Now Has in 2022 0:00:10.800 --> 0:00:15.240 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:15.320 --> 0:00:20.160 I'm Joe Wisnthal and I'm Tracy Alloway. Tracy, I was 0:00:20.200 --> 0:00:25.680 thinking outside of like crisis, like outside of like you know, 0:00:25.880 --> 0:00:30.560 spring of and obviously the sort of like year year 0:00:30.600 --> 0:00:33.720 and a half like surrounding the Great Financial Crisis. I 0:00:33.800 --> 0:00:37.760 think right now is probably maybe the most interesting time 0:00:37.800 --> 0:00:40.640 we've seen in a long time for the Fed and 0:00:40.800 --> 0:00:44.640 central banking. Yeah. Absolutely, I would agree with that. I mean, 0:00:44.720 --> 0:00:49.280 we spent um, you know, immediately after two thousand eight, 0:00:49.400 --> 0:00:51.600 there was obviously a lot to digest, but then it 0:00:51.680 --> 0:00:54.280 was just years and years of basically the same thing, 0:00:54.440 --> 0:00:58.400 really low inflation, uh, and the central banks kind of 0:00:58.480 --> 0:01:02.720 arguing whether or not to why down various stimulus programs, 0:01:02.800 --> 0:01:05.800 um what exits we're going to look like. But now 0:01:06.240 --> 0:01:09.440 it feels like that conversation has just been ramped up, 0:01:09.560 --> 0:01:13.600 you know, times a hundred, because you actually do have inflation. 0:01:14.080 --> 0:01:16.679 You still have a lot of emergency liquidity lingering in 0:01:16.680 --> 0:01:19.400 the system, and the question is what are central banks 0:01:19.520 --> 0:01:22.800 going to do about it? And can they actually navigate 0:01:23.440 --> 0:01:30.040 clamping down on price pressures without destabilizing the entire economic recovery. 0:01:31.480 --> 0:01:34.080 You know, we paid a lot of attention to the 0:01:34.160 --> 0:01:36.959 FED and other big central banks like you know, for 0:01:37.000 --> 0:01:40.400 the last ten years. But in retrospect, like it's kind 0:01:40.400 --> 0:01:42.600 of always the same story. It's like, inflation is mild, 0:01:42.920 --> 0:01:45.959 so not quite a target. Maybe it will be how 0:01:46.040 --> 0:01:48.680 local employment go. Oh it turns out it can go lower. 0:01:48.880 --> 0:01:51.160 Maybe they'll try to hike a bit, maybe they use 0:01:51.160 --> 0:01:53.560 a little premature way to It's like it was like 0:01:53.680 --> 0:01:57.080 pretty repetitive and right now. And I think is interesting 0:01:57.160 --> 0:02:00.280 is beyond just the price pressure, like an extreme only 0:02:00.320 --> 0:02:03.920 wide disagreement, and some people think, oh, it's gonna fade 0:02:03.960 --> 0:02:06.880 because things are going to normalize. People worry about some 0:02:06.960 --> 0:02:11.000 sort of wage price inflationary spiral, like lots of legitimate 0:02:11.680 --> 0:02:14.880 economists and people sort of like coming out the problem 0:02:14.960 --> 0:02:17.840 or the question and good faith can arrive at extremely 0:02:17.880 --> 0:02:20.600 different views for the next couple of years. I would 0:02:20.600 --> 0:02:25.160 say from this starting point, absolutely, And I think we've 0:02:25.200 --> 0:02:28.280 spoken about this before. But the thing that complicates everything 0:02:28.360 --> 0:02:31.720 is that we don't really have a historical framework or 0:02:31.840 --> 0:02:36.320 parallel to look at because we didn't experience anything like 0:02:36.480 --> 0:02:41.359 the pandemic. Um well, I guess we had Spanish flu, 0:02:41.560 --> 0:02:44.320 but the crisis response wasn't quite the same, and so 0:02:44.440 --> 0:02:47.040 everyone is sort of trying to figure out what exactly 0:02:47.120 --> 0:02:49.280 is going on. And to be honest, I don't think 0:02:49.360 --> 0:02:55.000 anyone has a fool proof or bulletproof playbook just yet. 0:02:55.720 --> 0:02:58.600 Right And also, and of course, in addition to the 0:02:58.639 --> 0:03:02.960 pandemic itself, we had an extortiny amount of fiscal stimulus 0:03:03.000 --> 0:03:06.040 this time around. We had the FED at the summer 0:03:06.080 --> 0:03:09.600 of sort of adopting a new framework where they would 0:03:09.639 --> 0:03:12.680 intentionally allow of things to overshoot. So there is a 0:03:12.720 --> 0:03:16.560 lot to unpack. It's very new. Everything is different, and uh, 0:03:16.760 --> 0:03:19.519 we're going to uh, we're going to talk about how 0:03:19.520 --> 0:03:21.280 to make headser tails of this and what's going on. 0:03:21.680 --> 0:03:24.560 Excellent looking forward to So our guest has actually been 0:03:24.760 --> 0:03:30.040 on the podcast before, but very long time ago, way 0:03:30.080 --> 0:03:33.079 back in and we just talked to him back then 0:03:33.160 --> 0:03:35.760 about the sort of the art of FED watching. Well, 0:03:35.760 --> 0:03:39.560 now fed watching is actually was really putting it into 0:03:39.560 --> 0:03:43.040 practice these days. We're gonna be speaking to Tim Dewey. 0:03:43.120 --> 0:03:46.080 He is the chief US economist at s G H. Macro. 0:03:46.600 --> 0:03:49.840 He is also a professor of economics at the University 0:03:49.840 --> 0:03:52.680 of Oregon, and I think he's had a very good 0:03:52.720 --> 0:03:57.560 feel for both inflationary pressures and how the FED would 0:03:57.600 --> 0:04:01.720 likely respond to them over the last year in his 0:04:01.840 --> 0:04:04.800 writings on Twitter and so forth. So, uh, Tim, thank 0:04:04.840 --> 0:04:07.920 you so much for coming back on odd lots. Well, 0:04:07.920 --> 0:04:10.680 thank you for having me. I appreciate the opportunity. Yeah, 0:04:10.760 --> 0:04:14.960 absotlutely so in retrospect or we right there, like six 0:04:16.680 --> 0:04:19.279 pretty boring from a FED perspective, at least compared to 0:04:19.320 --> 0:04:22.880 what we're doing with now. Yeah, the never ending expansion 0:04:23.040 --> 0:04:25.520 was going to get old there pretty soon from a 0:04:25.520 --> 0:04:29.400 FED watching perspective, that's for sure. Of course, you didn't 0:04:29.400 --> 0:04:33.039 want it to end the way it ended, unfortunately. So 0:04:33.200 --> 0:04:36.440 what is it about the current period that makes it 0:04:36.960 --> 0:04:40.760 so unusual or so interesting for central bank watchers such 0:04:40.800 --> 0:04:46.480 as yourself, Well, it's it's the uncertainty. We had gone 0:04:46.560 --> 0:04:49.480 into the pandemic with a with a sense that we 0:04:49.600 --> 0:04:52.719 knew a right, we knew the basic economic framework that 0:04:52.760 --> 0:04:55.640 we're going to be working with you for the foreseeable future. 0:04:56.279 --> 0:05:00.480 And that basic framework assumed that to me and was 0:05:00.839 --> 0:05:03.719 really always an everywhere problem in the sense of being 0:05:03.839 --> 0:05:07.520 too low. And we also thought that inflation was very, 0:05:07.640 --> 0:05:11.479 very sticky around two percent and these were reasonable things 0:05:11.520 --> 0:05:14.719 to believe, you know, in the pre pandemic period, because 0:05:14.800 --> 0:05:17.320 that's that's the story that actually worked out well and 0:05:17.320 --> 0:05:20.200 seemed to be proved by the evidence, and especially the 0:05:20.240 --> 0:05:23.839 sticky inflation part. We've seen sticky inflation for twenty five 0:05:23.920 --> 0:05:27.760 years around two percent. You know, we went into the 0:05:27.760 --> 0:05:33.440 pandemic with really established consensus framework on how the economy worked, 0:05:33.839 --> 0:05:37.239 and the pandemic has really blown that apart, at least 0:05:37.240 --> 0:05:39.920 in the near term, because a lot of those predictions 0:05:40.000 --> 0:05:45.240 of persistently weak demand, persistently slow job growth, persistently low 0:05:45.279 --> 0:05:49.800 inflation near two percent, all of those uh predictions just 0:05:49.880 --> 0:05:52.640 did not work out as expected in the in the 0:05:52.680 --> 0:05:56.680 post pandemic era. This gets to sort of bigger picture 0:05:56.720 --> 0:05:58.960 question that I've been asking myself a lot over the 0:05:59.040 --> 0:06:01.560 last six months or a year, which is like, we 0:06:01.680 --> 0:06:05.760 can list all the ways this current moment is extraordinary, right, 0:06:05.880 --> 0:06:11.360 So we're still in a public health emergency by many measures. 0:06:11.360 --> 0:06:14.200 We had a very intense O macron wave, we had 0:06:14.480 --> 0:06:17.880 Dealta wave before that. That's not over. There are still 0:06:17.880 --> 0:06:20.680 many disruptions. They seem to be winding down, but they're 0:06:20.680 --> 0:06:23.960 going away, but they but there's still many, um, sort 0:06:24.000 --> 0:06:27.480 of interventions and masks and school issues. Then of course 0:06:27.520 --> 0:06:31.840 we had the massively expansion, the aggressive fiscal stimulus, and 0:06:31.880 --> 0:06:35.440 of course the FED which made a decision in that 0:06:35.440 --> 0:06:37.880 they did not want to make the same mistakes they 0:06:37.880 --> 0:06:39.560 did in the past, and they said, Okay, we're going 0:06:39.640 --> 0:06:43.520 to let it overshoot this time. Well, my question is, 0:06:43.720 --> 0:06:47.840 why wouldn't things return to normal, Why after the sort 0:06:47.880 --> 0:06:51.920 of pandemic ends. Why wouldn't it necessarily be safe to say, Okay, 0:06:51.920 --> 0:06:54.120 we're just gonna go back to the sort of like 0:06:54.520 --> 0:06:58.719 the medium economy that we had pre crisis. I think 0:06:58.760 --> 0:07:02.200 that's uh an excellent question. Um, you know, I think, 0:07:02.240 --> 0:07:05.240 you know, particularly with respect to the inflation story, that 0:07:05.279 --> 0:07:09.080 inflation trend, the pre pandemic, you know, trend of two 0:07:09.160 --> 0:07:11.800 percent inflation that we've seen for twenty five years, that 0:07:11.920 --> 0:07:15.360 was presumably a very sticky trend, and there's a good 0:07:15.400 --> 0:07:17.840 reason to think that that you don't want to just 0:07:17.880 --> 0:07:21.440 sort of turn your back on a deeply established trend 0:07:21.560 --> 0:07:25.240 like that. Now. On the other hand, one idea that 0:07:25.280 --> 0:07:28.640 I play around with quite a bit is that the 0:07:28.680 --> 0:07:33.800 pre pandemic economy was more finely balanced than we appreciated. 0:07:34.080 --> 0:07:39.400 That we essentially had just enough labor market pressure to 0:07:39.480 --> 0:07:43.000 keep downward pressure on unemployment, keep pulling people into the 0:07:43.080 --> 0:07:48.200 labor market, keep wages rising in nominal and real terms. Uh. 0:07:48.240 --> 0:07:51.680 And also you're not not having an overheat in the 0:07:51.720 --> 0:07:53.960 sense that there were any real threats to that two 0:07:54.760 --> 0:07:59.440 inflation trend that though might have been a more unique 0:07:59.440 --> 0:08:04.560 economy then we realized by how we got nine. How 0:08:04.680 --> 0:08:08.400 much of the inflation pressures do you see as down 0:08:08.440 --> 0:08:13.320 to supply issues, um, such as the various logistics problems 0:08:13.360 --> 0:08:15.040 that we've been talking about on the show over the 0:08:15.040 --> 0:08:20.360 past year or so, versus demand coming from consumers, many 0:08:20.440 --> 0:08:23.560 of whom you know, in terms of household balance sheets, 0:08:23.680 --> 0:08:26.320 seem to be in better positions than they were going 0:08:26.440 --> 0:08:30.440 into the crisis. You know, I get concerned when we 0:08:30.520 --> 0:08:33.120 try to say that that, you know, things are either 0:08:33.200 --> 0:08:35.800 demand or supply related, because I'm not sure that we 0:08:35.840 --> 0:08:40.040 can really tease out those factors as easily as as 0:08:40.040 --> 0:08:42.400 we think we can. You know, demand and supply are 0:08:42.440 --> 0:08:45.560 like two sides of let's like compair of scissors, right, 0:08:46.080 --> 0:08:48.640 and so both both are cutting the papers. So which 0:08:48.679 --> 0:08:52.680 which which which blade is doing the job is hard 0:08:52.720 --> 0:08:56.600 to In many cases determined. I've thought that demand was 0:08:56.640 --> 0:08:59.880 a large factor here, that if we look at factors 0:09:00.080 --> 0:09:03.640 like nominal spending power on the part of consumers, that 0:09:03.679 --> 0:09:09.160 they really were spending more nominal terms and basically stretching 0:09:09.480 --> 0:09:12.640 the ability to the economy to produce those goods and services. 0:09:13.080 --> 0:09:15.760 So I thought that that the supply angle has been 0:09:15.800 --> 0:09:21.280 overplayed and the demand angle underplayed. So that's that's where 0:09:21.320 --> 0:09:25.679 I sit on the subject we look forward into the future. 0:09:25.960 --> 0:09:29.280 I do think it still relies depends a lot about 0:09:29.679 --> 0:09:34.200 how much consumers are able to and um willing to accept. 0:09:34.920 --> 0:09:38.640 And it looks right now that they have the capacity 0:09:38.679 --> 0:09:43.200 to continue to absorb price increases, and I suspect will 0:09:43.440 --> 0:09:46.360 continue to do so, although maybe not at a you know, 0:09:46.520 --> 0:09:49.000 six or seven or eight percent analyzed rate as we've 0:09:49.000 --> 0:09:53.240 been as we've kind of been seeing. So we're like 0:09:53.320 --> 0:09:56.120 ten minutes into this conversation already, and I think it's 0:09:56.160 --> 0:09:59.719 really interesting that inflation dominates the story right now, but 0:09:59.840 --> 0:10:02.199 the labor market and the sort of the other half 0:10:02.200 --> 0:10:05.280 of the fedual mandate, it's just been incredibly strong, and 0:10:05.320 --> 0:10:09.319 no one I think would have predicted some four percent unemployment. 0:10:09.880 --> 0:10:13.760 Uh So, you know, early or I guess we're at 0:10:13.760 --> 0:10:17.800 four percent right now. My question is, in your view, 0:10:18.480 --> 0:10:21.080 was there a way to have this fast of a 0:10:21.160 --> 0:10:26.319 labor market recovery without the inflationary pressures that we've seen, 0:10:27.000 --> 0:10:31.600 or are these inflationary pressures the inevitable byproduct of an 0:10:31.600 --> 0:10:36.320 economy that moved so fast back to normal. The rapid 0:10:36.320 --> 0:10:39.920 recovery of the labor market was certainly unexpected, and you know, 0:10:40.080 --> 0:10:43.480 the Federal Reserve and the the U. S. Government dumped 0:10:43.600 --> 0:10:46.800 enormous amounts of resources uh in the economy on the 0:10:46.800 --> 0:10:50.280 assumption that that it would not recover very quickly, and 0:10:51.000 --> 0:10:57.040 it did. Had we known really that COVID, you know, 0:10:57.080 --> 0:11:03.160 the COVID shock in twenty funny was going to be 0:11:03.240 --> 0:11:06.240 more like a snowstorm than a persistent source of demand 0:11:06.679 --> 0:11:10.040 lost demand, I'm not sure that we would have dumped 0:11:10.280 --> 0:11:14.000 that much policy stimulus into it. We'd be at a 0:11:14.080 --> 0:11:17.800 situation where where the labor market did recover quickly. It's 0:11:17.920 --> 0:11:21.880 very much true that going into the pandemic, we would 0:11:21.880 --> 0:11:25.199 not have expected labor demand to rebound quite as quickly 0:11:25.200 --> 0:11:29.040 as it did, and that was really our experience in 0:11:29.080 --> 0:11:32.040 the last last couple of processions. The fact that that 0:11:32.200 --> 0:11:36.920 recovery did happen very quickly, probably helped contribute to inflationary 0:11:36.960 --> 0:11:40.520 pressures when you take into account the additional stimulus that 0:11:40.559 --> 0:11:44.880 we added onto the um UH system. In some ways, 0:11:44.880 --> 0:11:47.120 it comes down to me, for there's a question of, 0:11:47.440 --> 0:11:50.400 you know, what was the original COVID shock, like a 0:11:50.480 --> 0:11:53.880 big demand shock like the financial crisis in two thousand 0:11:53.960 --> 0:11:57.440 and seven two nine era, or was it more like 0:11:57.679 --> 0:12:02.680 a snowstorm? And you would expect fairly rapid recovery after 0:12:02.679 --> 0:12:06.000 a snowstorm, and and that's that's kind of what what 0:12:06.040 --> 0:12:08.840 we've seen. UH. And I do think you know that 0:12:08.840 --> 0:12:11.480 that the additional stimulas we put on top of that 0:12:11.559 --> 0:12:15.720 then helped contribute to to the the inflationary pressures we 0:12:15.760 --> 0:12:19.280 see now, how do you disaggregate the speed of that 0:12:19.480 --> 0:12:24.160 recovery from the policy response? Though, right, I think that's 0:12:24.200 --> 0:12:26.320 a that's a great question that would be the subject 0:12:26.320 --> 0:12:30.520 of a thousand PhD dissertations in the future. I don't 0:12:31.000 --> 0:12:33.600 I don't. I don't know that that I'm able to 0:12:33.640 --> 0:12:38.640 take a stand on that at this point. I really 0:12:38.880 --> 0:12:41.880 this comes down to some sense, really what kind of 0:12:41.920 --> 0:12:46.280 framework you had going into the crisis, or we're adjusting 0:12:46.280 --> 0:12:49.160 that framework. I think where we started seeing the economy 0:12:49.200 --> 0:12:53.840 bounced back in the middle of it really started to 0:12:53.880 --> 0:12:58.320 strike me that there's a lot of underlying structural there's 0:12:58.360 --> 0:13:02.080 a lot of underlying structural very going on here, and 0:13:02.800 --> 0:13:05.240 we probably don't need quite the amount of stimulus as 0:13:05.240 --> 0:13:08.559 well as we're putting into the system. But but in 0:13:08.720 --> 0:13:12.480 some sense that was that was a hunch feel for 0:13:12.480 --> 0:13:32.320 the data more than anything else. So, Tim, you mentioned 0:13:32.679 --> 0:13:37.160 um frameworks going into this, and one of the criticisms 0:13:37.400 --> 0:13:41.400 now that we've seen the return of inflation or this 0:13:41.440 --> 0:13:48.160 new inflation, is that either traditional economics failed to predict 0:13:48.200 --> 0:13:54.440 this or heterodox economics like modern monetary theory failed to 0:13:54.559 --> 0:13:58.240 predict this. And it kind of feels like everyone everyone 0:13:58.320 --> 0:14:01.360 is criticizing everything at at the moment. But do you 0:14:01.360 --> 0:14:05.320 think that's fair. Did economists, you know, fail to see 0:14:05.440 --> 0:14:11.760 this coming? So forecasting is hard, and the underlying structure 0:14:11.800 --> 0:14:15.800 the economy could shift, and so you know, this is 0:14:15.840 --> 0:14:20.920 something that could hammer an economist no matter what they're worth, 0:14:20.920 --> 0:14:24.320 their initial framework is. And so I try to be 0:14:25.440 --> 0:14:30.880 fairly humble in thinking about these kinds of economic developments, 0:14:30.960 --> 0:14:34.520 because I really do believe you have to be flexible 0:14:35.000 --> 0:14:39.840 to you know, basically react in real time to you know, 0:14:39.880 --> 0:14:42.880 what the what the data is telling you. And I 0:14:42.920 --> 0:14:45.680 don't know if there's really a failure of anyone given 0:14:46.040 --> 0:14:50.600 sort of strand of economic thought or macroeconomic framework. It's 0:14:50.600 --> 0:14:53.640 more of um, what I see just a willingness to 0:14:54.480 --> 0:14:58.120 evolve from whatever your fixed position is as that incoming 0:14:58.200 --> 0:15:02.560 data arrives. Well, let's talk a little bit more about 0:15:02.600 --> 0:15:05.960 that data, because I do think that you know, even 0:15:06.160 --> 0:15:12.680 I think winter late, the COVID numbers were picking up again, 0:15:12.800 --> 0:15:15.240 we didn't have a vaccine. There was a lot of 0:15:15.280 --> 0:15:17.800 reason to think that if we didn't get like another 0:15:17.920 --> 0:15:22.760 round of substantial physical expansion, we could like have another downturn. 0:15:23.160 --> 0:15:26.800 You were like pretty I think, pretty optimistic then, and 0:15:26.920 --> 0:15:29.840 I think, you know, starting in the summer or maybe 0:15:29.880 --> 0:15:35.320 the spring of I think you're pretty concerned that maybe 0:15:35.800 --> 0:15:39.280 the the accelerating inflation wasn't just a temporary thing, it 0:15:39.400 --> 0:15:41.960 wasn't just going to be base effects, that there was 0:15:42.040 --> 0:15:45.000 something more sustained here, and that the FED at some 0:15:45.080 --> 0:15:47.920 point would attempt to play catch up and ramp up 0:15:47.960 --> 0:15:50.480 the number of hikes sooner and faster. So what was 0:15:50.560 --> 0:15:53.680 it that you were seeing in the data, and how 0:15:53.680 --> 0:15:56.000 did you then sort of like synthesize that through some 0:15:56.120 --> 0:15:59.080 sort of macro framework that I think, at least so 0:15:59.120 --> 0:16:01.520 far has proven to be a good read on the 0:16:01.560 --> 0:16:05.280 inflationary pressure. I think the first thing said even with that, 0:16:05.440 --> 0:16:09.960 that that wave and the late twenty one early you 0:16:10.000 --> 0:16:14.160 know that that wave excu I think even at that 0:16:14.200 --> 0:16:18.360 point we started to recognize that the subsequent waves of 0:16:18.400 --> 0:16:20.160 the virus we're going to have less and less of 0:16:20.160 --> 0:16:24.520 an economic impact. And so that that became a critical 0:16:24.800 --> 0:16:28.320 sort of element to my thinking going forward, is that 0:16:28.360 --> 0:16:31.000 we're going to continue to have COVID, that it was 0:16:31.040 --> 0:16:34.280 going to be more endemic than than certainly zero COVID 0:16:34.480 --> 0:16:37.360 at that point was was not really a possibility, and 0:16:37.400 --> 0:16:41.200 that we would learn to to live around the pandemic. 0:16:41.320 --> 0:16:44.240 So that was what was one element. The other element 0:16:44.320 --> 0:16:47.640 that I just couldn't shake was how type job markets 0:16:47.640 --> 0:16:51.360 were getting. Uh and this really speaks to the perhaps 0:16:51.400 --> 0:16:55.440 finally balanced economy prior to the pandemic. When I saw 0:16:55.960 --> 0:17:00.480 how quickly job opening surged, you know, the fairly slow 0:17:00.560 --> 0:17:03.720 response of labor supply, and I'd say the fairly sol 0:17:03.840 --> 0:17:07.679 responsive labor supply is pretty typical that we see in 0:17:08.160 --> 0:17:11.879 post recession a periods. It really started to say to 0:17:11.920 --> 0:17:14.520 me that there's there's a lot more pressure in this 0:17:14.600 --> 0:17:17.920 economy than than I think of the FED at the 0:17:17.960 --> 0:17:21.720 point was thinking about and was probably, um, you know, 0:17:21.760 --> 0:17:24.000 the FED at that point, I think, had had estimates 0:17:24.000 --> 0:17:27.800 of wear full employment was going to to be that. 0:17:28.119 --> 0:17:31.439 We're optimistic relative to what I was seeing in the 0:17:31.520 --> 0:17:34.800 labor market. So that sort of said to me, Look, 0:17:35.080 --> 0:17:36.960 there's gonna be a lot of pressure in this labor market. 0:17:37.000 --> 0:17:38.600 It's going to be cult a lot of pressure and 0:17:38.800 --> 0:17:42.000 upward uppropression wages. That's going to be that the kind 0:17:42.040 --> 0:17:46.480 of thing that can really sustain inflationary pressures over time. 0:17:47.160 --> 0:17:49.239 And I felt eventually that was something that was going 0:17:49.280 --> 0:17:52.080 to catch up to the FED. It does feel like 0:17:52.160 --> 0:17:55.840 the FED was very focused on this idea of yes, 0:17:56.320 --> 0:18:01.040 jobs have rebounded, Um, you know, the employment recovery has 0:18:01.080 --> 0:18:05.320 been stronger than expected, but we're still digging ourselves out 0:18:05.359 --> 0:18:09.000 of a COVID related whole. I guess, um, and we 0:18:09.040 --> 0:18:12.560 still have further to go. Were they wrong to do that? 0:18:12.720 --> 0:18:16.880 In retrospect? I think the FED did not basically adjust 0:18:16.960 --> 0:18:21.280 their their you know models as as quickly as the 0:18:21.359 --> 0:18:24.040 data would suggest that they should. I think that they 0:18:24.080 --> 0:18:27.000 became although the although the FED says that they think, 0:18:27.040 --> 0:18:30.640 you know, full employments a moving target, they became very 0:18:30.720 --> 0:18:34.879 much attached to the pre pandemic economy. We all liked 0:18:34.920 --> 0:18:38.040 the pre pandemic economy. I think would have been you know, 0:18:38.200 --> 0:18:40.680 we would have thought was a great year if we'd 0:18:40.720 --> 0:18:43.840 been able to enjoy it, because came down on it's 0:18:43.880 --> 0:18:46.960 so hard. So there was really good reason to look 0:18:46.960 --> 0:18:50.760 at that period and think that's where we need to 0:18:50.760 --> 0:18:53.200 get back to. And I think the FED just did 0:18:53.240 --> 0:18:59.520 not just held onto that vision for too long and 0:18:59.520 --> 0:19:03.520 and as a consequence sort of missed the development of 0:19:04.200 --> 0:19:08.320 what I think are still substantial inflation impressures. Even even 0:19:08.359 --> 0:19:10.479 if you know, even if they ease off, do they 0:19:10.520 --> 0:19:12.439 ease off enough to get us back to two percent 0:19:12.560 --> 0:19:16.119 is still an open question. I want to press you 0:19:16.160 --> 0:19:18.479 on this a little bit further because I remember, like 0:19:18.600 --> 0:19:25.200 post Great Financial Crisis, one of the criticisms then is like, oh, 0:19:25.240 --> 0:19:28.200 we can't get back to two thousand six, two seven, 0:19:28.600 --> 0:19:31.520 and that maybe there's something structural, And it turned out 0:19:32.160 --> 0:19:34.000 it was kind of just a matter of time, and 0:19:34.720 --> 0:19:39.080 the FED back then I would say, and grossly sort 0:19:39.119 --> 0:19:42.000 of like underestimated for a long time, like how low 0:19:42.040 --> 0:19:47.040 the unemployment rate could get without spurring labor market pressure, 0:19:47.440 --> 0:19:49.480 which I guess again bring me to the question is 0:19:49.520 --> 0:19:51.880 the error of like, oh, we want to get back 0:19:51.880 --> 0:19:55.280 to some four percent unemployment or is the err in 0:19:55.400 --> 0:19:58.920 thinking that it can happen that fast because we are 0:19:58.920 --> 0:20:01.680 still I mean, we just had a uh jobs number 0:20:01.720 --> 0:20:03.560 in January. We are still bring a lot of people 0:20:03.560 --> 0:20:06.159 back into the labor market. You know, I think we 0:20:06.200 --> 0:20:10.960 could argue that in the post financial crisis era, the 0:20:11.240 --> 0:20:15.159 FED did make an error, and I think again for 0:20:15.160 --> 0:20:18.280 for the same reason. We became enamored with a pre 0:20:18.359 --> 0:20:21.920 you know, a pre financial market sort of framework, financial 0:20:21.960 --> 0:20:25.000 crisis sort of framework. And you know, we saw right 0:20:25.080 --> 0:20:28.520 in the in the post era, post um crisis era, 0:20:29.280 --> 0:20:33.280 estimates of the short run natural rate of unemployment rights right, 0:20:33.560 --> 0:20:35.679 and we all now think we all look back at 0:20:35.720 --> 0:20:37.560 that and say, no, that was that was crazy, right, 0:20:37.600 --> 0:20:41.280 that that never happened. And so we sort of took 0:20:41.320 --> 0:20:44.760 that same framework and applied it to this crisis, and 0:20:44.800 --> 0:20:47.760 we didn't raise our estimates of the short term rate 0:20:47.760 --> 0:20:51.160 of of of a natural unemployment and maybe we should 0:20:51.240 --> 0:20:53.879 have right, And so you know, it's sort of a 0:20:53.960 --> 0:20:56.400 question do you always get caught fighting the last war? 0:20:57.000 --> 0:21:00.720 And I think, again, I have no problem. It was 0:21:00.760 --> 0:21:02.720 the right thing to think of in in the spring 0:21:02.760 --> 0:21:06.840 of That was our framework, and that was a reasonable framework. 0:21:07.560 --> 0:21:10.600 It was kind of just a slow adjustment to to 0:21:10.680 --> 0:21:12.960 maybe that framework is not quite the right right way 0:21:13.000 --> 0:21:15.120 we should be thinking about the economy and the post 0:21:15.200 --> 0:21:20.080 pandemic era. Is there something about the FEDS structure or 0:21:20.200 --> 0:21:23.679 culture that makes it hard for them to be flexible 0:21:24.080 --> 0:21:27.360 or to pivot as the data changes. I think that 0:21:27.840 --> 0:21:32.239 institutions in general can be slow to pivot. And you 0:21:32.280 --> 0:21:36.760 see this, I think in in any kind of bureaucratic structures. 0:21:37.320 --> 0:21:40.960 Uh so, once you've spent ten years developing your models 0:21:40.960 --> 0:21:44.240 in your framework, you're gonna have a hard time breaking 0:21:44.600 --> 0:21:49.160 from that framework. So I think that's just a national 0:21:49.200 --> 0:21:53.800 consequence of of of what happens. You know within institutions 0:21:53.840 --> 0:21:57.119 that you know the FED could not adjust as quickly 0:21:57.119 --> 0:22:00.199 as as maybe they should have. Would you say, just 0:22:00.400 --> 0:22:04.480 as they should have? Was there a could we currently 0:22:04.720 --> 0:22:09.480 in February two have less inflation than we have right now? 0:22:09.960 --> 0:22:13.480 Had they done something different like what what was the 0:22:13.560 --> 0:22:16.720 moment in your view in which if they had taken 0:22:16.720 --> 0:22:20.679 a different tag, maybe started hiking earlier, etcetera, may have 0:22:21.400 --> 0:22:23.440 allowed us to be in a better situation than we 0:22:23.480 --> 0:22:25.919 are right now. Like, what does that alternate scenario look 0:22:26.000 --> 0:22:30.680 like to you? Right? And given the lags in these processes, 0:22:32.240 --> 0:22:35.120 how you know was was by the time we did, 0:22:35.640 --> 0:22:40.000 you know, the fiscal stimulus and the monetary stimulus, and 0:22:40.080 --> 0:22:44.240 by the time we got to the end one or 0:22:44.280 --> 0:22:47.679 excuse me, at the end of the beginning one, was 0:22:47.720 --> 0:22:50.320 this pretty much already baked in the cake. Really, what 0:22:50.680 --> 0:22:54.680 we're thinking about is how persistent these inflationary pressures will 0:22:54.720 --> 0:22:58.080 be going forward. So for me, a couple of things 0:22:58.119 --> 0:23:00.879 that I think that that the Vetch probably should have 0:23:00.880 --> 0:23:05.920 thought of differently. UM One is basically the asset purchases QUEI. 0:23:06.520 --> 0:23:10.320 Those were really initially UM put in place to deal 0:23:10.359 --> 0:23:13.119 with financial market functioning. Right, if you remember the spring 0:23:13.160 --> 0:23:17.679 of it's not clear that that such emergency measures were 0:23:17.760 --> 0:23:22.200 necessary really even even past the middle of twenty twenty 0:23:22.760 --> 0:23:26.080 that the financial markets had rebounded and we're functioning quite 0:23:26.080 --> 0:23:29.199 well by that point, So you know, we did, we 0:23:29.240 --> 0:23:33.639 did years of que that I don't wasn't probably necessary 0:23:34.160 --> 0:23:36.240 to support the economy, and now we have to sort 0:23:36.240 --> 0:23:38.000 of think, how is the FED going on? Wine that 0:23:38.520 --> 0:23:41.080 The other thing that that I think that a critical 0:23:41.119 --> 0:23:44.400 space here was the FED, you know, from my perception, 0:23:44.480 --> 0:23:49.280 was cheerleading fiscal policy, and I think that they really 0:23:49.359 --> 0:23:51.520 pushed back or couldn't do any sort of fiscal or 0:23:51.560 --> 0:23:56.879 monetary offset even after that last last of fiscal stimulus 0:23:56.880 --> 0:23:59.639 we had that really gave the economy a good push 0:23:59.680 --> 0:24:03.320 and and I think that might have been a real 0:24:03.480 --> 0:24:07.120 real air on on the Fed's power. Is by not 0:24:07.320 --> 0:24:10.320 sort of writing off any any hope of of any 0:24:10.359 --> 0:24:13.479 fiscal push or any monetary offset pretty early in the 0:24:13.520 --> 0:24:18.120 process also kind of set the stage in motion for 0:24:18.680 --> 0:24:22.720 you know, the possible persistence of these inflationary pressures. I 0:24:22.720 --> 0:24:26.000 want to jump to. I guess what the FED should 0:24:26.040 --> 0:24:28.840 be doing now, because you know, on the one hand, 0:24:28.880 --> 0:24:31.760 as we've been discussing, we have inflation that's been higher 0:24:31.800 --> 0:24:34.800 than expected. We've had a pretty strong recovery in the 0:24:34.880 --> 0:24:38.320 jobs market, although you know, there are some people who 0:24:38.320 --> 0:24:42.840 say it can get even better. The recovery overall has 0:24:42.880 --> 0:24:46.879 been quite strong. But again there are those who argue 0:24:47.040 --> 0:24:51.200 that in some ways, the economy is still quite fragile. 0:24:51.240 --> 0:24:53.960 There's still a lot going on in the global economy 0:24:54.040 --> 0:24:57.800 with covid um and various economic pressures that could come 0:24:57.840 --> 0:25:03.040 back and impact the US. So taking all of that together, 0:25:03.280 --> 0:25:05.960 you know, if you were in the Fed's place right now, 0:25:06.400 --> 0:25:09.960 what would you be doing. That's a that that's a 0:25:09.960 --> 0:25:14.760 great question, um, because we'ren't very I think this is 0:25:14.800 --> 0:25:20.080 potentially really challenging time for monetary policy because if these 0:25:20.119 --> 0:25:24.040 inflationary pressures have become embedded deeper than the Fed FED 0:25:24.080 --> 0:25:27.879 really believes, then you're you're really coming to the party 0:25:27.920 --> 0:25:31.600 too late, and you're going to have a hard time 0:25:32.240 --> 0:25:37.720 really really containing these inflationary pressures without creating a recession. So, 0:25:38.160 --> 0:25:40.760 you know, I think the FEDS should should do a 0:25:40.800 --> 0:25:43.160 little bit more clearly what I think they're they're kind 0:25:43.160 --> 0:25:45.760 of positioned to do, and that's to try to get 0:25:46.400 --> 0:25:50.320 rates up to something closer to neutral as as quickly 0:25:50.320 --> 0:25:54.360 as they can. Uh So I would probably define that 0:25:54.480 --> 0:25:58.240 objective at least right now, so that you'd be better 0:25:58.320 --> 0:26:02.720 prepared in the to find objective more clearly, so you'd 0:26:02.760 --> 0:26:06.040 be pre prepared to prepared to adjust policy in the 0:26:06.080 --> 0:26:09.480 second half of this year as necessary, and that would mean, 0:26:09.720 --> 0:26:12.159 you know, I think you're starting out with there's always 0:26:12.160 --> 0:26:14.800 a question should you start out with fifty basis points? Um, 0:26:15.200 --> 0:26:17.679 you know, I think uximately you'd like to be you know, 0:26:17.840 --> 0:26:21.120 at HUD and fifty basis points by the second half 0:26:21.160 --> 0:26:23.560 of this year. And the Fed's not not positioned to 0:26:23.600 --> 0:26:28.080 do that and hasn't hasn't really primed markets to expect 0:26:28.080 --> 0:26:31.040 that kind of grate hike. That's what I would be 0:26:31.640 --> 0:26:37.360 thinking about pretty pretty aggressively if if I was the FED. Yeah, 0:26:37.440 --> 0:26:40.320 I wanna talk about this more and maybe the idea Okay, 0:26:40.320 --> 0:26:42.800 they got there too late. You wrote something in one 0:26:42.800 --> 0:26:44.800 of your notes a couple of weeks ago that I 0:26:44.800 --> 0:26:47.800 thought was pretty provocative, and you said, you know, look, historically, 0:26:48.359 --> 0:26:51.720 when inflation is like this, the answer ends up being 0:26:52.400 --> 0:26:54.879 it took a recession to bring it down. And so 0:26:54.960 --> 0:26:56.840 of course everyone hopes that you can have sort of 0:26:56.880 --> 0:26:59.600 like you know, the so called smooth landing where just 0:26:59.680 --> 0:27:03.240 the relation side goes down but employment keeps chugging along. Fine, 0:27:03.280 --> 0:27:05.520 that'd be great, but talk to us about, you know, 0:27:05.800 --> 0:27:08.639 the historical analogies of like, yeah, this is what it 0:27:08.720 --> 0:27:12.760 actually took to get inflation done. Yeah, this is something 0:27:12.840 --> 0:27:16.359 that struck me just looking at the charts of wage 0:27:16.400 --> 0:27:20.560 growth and particularly inflation in the sort of the the 0:27:20.680 --> 0:27:25.359 era not associated with with two percent inflation, that really 0:27:25.400 --> 0:27:28.480 once you sort of shifted your equilibrium, it was it 0:27:28.560 --> 0:27:31.760 was pretty sticky. Wage growth really stayed at you know 0:27:31.800 --> 0:27:35.399 whatever it's it's it's prerecession level was until until you 0:27:35.440 --> 0:27:38.200 came to a recession. And the same was was really 0:27:38.240 --> 0:27:42.000 true of inflation. So it really started to look in 0:27:42.080 --> 0:27:47.240 the data like to me that changing these dynamics was 0:27:47.240 --> 0:27:51.480 was actually very hard once once they had become established, 0:27:52.000 --> 0:27:55.520 and it was probably going to be harder than we anticipated, 0:27:55.680 --> 0:27:58.640 especially since all of the models I think right now 0:27:58.680 --> 0:28:01.960 are are calibrated on the pre pandemic period. So you know, 0:28:02.000 --> 0:28:05.000 when inflation never really deviates more than say, your core 0:28:05.080 --> 0:28:09.919 inflation never deviates more than basis points away from the 0:28:09.960 --> 0:28:13.320 two percent target, in that case, you're fairly fairly easy 0:28:13.359 --> 0:28:15.480 to see how you could guide the economy back to 0:28:15.560 --> 0:28:20.680 target without a recession. If you're to two d four 0:28:20.760 --> 0:28:24.520 hundred basis points away from target, the historical data suggests 0:28:24.640 --> 0:28:28.280 you you you guide it back towards a lower number 0:28:28.520 --> 0:28:33.640 by by inducing a recession. So that's that's something that's 0:28:33.640 --> 0:28:36.200 been just sticking in the back of my mind as 0:28:36.240 --> 0:28:42.200 a as a real risk. Going into particular just tells 0:28:42.240 --> 0:28:46.760 me how much we're all leveraged on the idea that 0:28:46.880 --> 0:28:49.040 inflation is going to ease by the end of this 0:28:49.120 --> 0:28:51.960 year sort of on its on its own accord. This 0:28:52.080 --> 0:28:55.800 might just be a question about semantics, but I'd still 0:28:55.960 --> 0:28:59.240 be curious to get your your response. But if if 0:28:59.400 --> 0:29:04.400 the only way historically UM to end inflation or avert 0:29:04.480 --> 0:29:07.520 price pressures is to have a recession and the FED 0:29:07.640 --> 0:29:10.640 raises rates and induces a recession, can we still call 0:29:10.680 --> 0:29:16.400 that a policy error? That's a um, you know, that's 0:29:16.440 --> 0:29:19.760 a that's a good question. Um, the policy here would 0:29:19.760 --> 0:29:23.080 have been made prior to you, prior to that point, right. 0:29:23.480 --> 0:29:26.880 You know, one thing I think about is in retrospect, 0:29:27.720 --> 0:29:30.880 the FED actually did a pretty good job in the 0:29:31.240 --> 0:29:34.960 post Greed financial crisis era. And uh, you know, at 0:29:34.960 --> 0:29:38.680 the time, you know, myself included criticize the FED for 0:29:38.720 --> 0:29:42.720 maybe moving to aggressively, but but we still ended up 0:29:42.760 --> 0:29:48.320 in the economy, which I think we can all agree 0:29:48.400 --> 0:29:50.920 was really an excellent economy. We'd like to be back there, 0:29:51.440 --> 0:29:55.240 and that was managed by essentially, you know, guidance, loose 0:29:55.320 --> 0:29:58.040 guidance on a Philips curve. And then I would argue, 0:29:58.200 --> 0:30:00.480 you know, later in the crisis and later later in 0:30:00.480 --> 0:30:03.880 the expansion, some loose guidance on the basis of not 0:30:03.960 --> 0:30:06.920 letting the yield curve invert, and that sort of slow 0:30:06.960 --> 0:30:10.440 and steady return brought us to a good outcome. And 0:30:10.480 --> 0:30:13.480 we all ended up complaining because inflation was twenty basis 0:30:13.520 --> 0:30:17.520 points below two percent, And maybe you know that that 0:30:17.080 --> 0:30:20.000 you know that we should have appreciated that that response 0:30:20.080 --> 0:30:24.200 more than we did at the time. So I have 0:30:24.240 --> 0:30:26.960 a really basic question, but you know, uh, two percent 0:30:27.000 --> 0:30:31.280 inflation target in retrospect, maybe it wasn't that bad having 0:30:31.720 --> 0:30:37.760 years of subpar below target inflation. Like should we should 0:30:37.800 --> 0:30:40.120 we be trying to I mean, I know they change 0:30:40.160 --> 0:30:44.840 the inflation framework um to something more flexible, the flexible 0:30:44.840 --> 0:30:49.120 average targeting stuff, But should we be aiming for something 0:30:49.160 --> 0:30:51.960 other than two percent inflation at this point in time? 0:30:52.600 --> 0:30:55.760 You know, there's a a big view that we shouldn't 0:30:55.760 --> 0:30:59.000 be aiming for inflation greater than two percent. We should 0:30:59.000 --> 0:31:01.800 have picked a three percent four percent target given our 0:31:01.880 --> 0:31:05.560 proximity to the lower bound. That maybe that would raise 0:31:05.680 --> 0:31:08.800 what we consider the neutral rate of nominal interest rates. 0:31:09.600 --> 0:31:13.360 And I do think there's some truth to that story. Certainly, 0:31:13.360 --> 0:31:17.400 given the current circumstances, I don't know that it's really 0:31:17.560 --> 0:31:20.880 politically possible for the FED to target something other than 0:31:20.960 --> 0:31:24.120 two percent. I think they'd have a hard time basically 0:31:24.200 --> 0:31:28.200 creating support within Congress for for a higher inflation target, 0:31:28.600 --> 0:31:31.160 even though you know, there's the reason to think the 0:31:31.200 --> 0:31:34.640 economy could operate at at three percent now. At the 0:31:34.680 --> 0:31:38.680 same time, I think if right now monetary policy almost 0:31:38.680 --> 0:31:42.680 has to have an inflationary bias because of the proximity 0:31:42.680 --> 0:31:45.960 to the lower bound, you can't really target something less 0:31:46.000 --> 0:31:50.040 than two percent because you can't. You can't take the 0:31:50.160 --> 0:31:54.080 chance of of tipping yourself into recession when you're this 0:31:54.200 --> 0:31:57.640 close to the zero bound. So, you know, this is 0:31:57.840 --> 0:32:00.160 kind of one interesting thing I don't know if has 0:32:00.200 --> 0:32:07.000 been properly or completely recognized, is the FED really can't 0:32:07.000 --> 0:32:10.920 sort of do average inflation targeting at two percent right now. 0:32:11.160 --> 0:32:12.880 Right they can't sort of go into the future and 0:32:12.880 --> 0:32:15.440 say we want, we want, we want average two percent 0:32:15.480 --> 0:32:17.920 over the next five years, average inflation of two percent 0:32:17.960 --> 0:32:20.160 over the next five years, because that's going to imply 0:32:20.360 --> 0:32:23.840 some period of less than two percent inflation and they 0:32:23.880 --> 0:32:29.840 can't do that. You know, you mentioned that the nineteen 0:32:30.040 --> 0:32:34.560 economy was pretty good, and I agree, but two was 0:32:34.640 --> 0:32:37.240 eight years no, like, you know, yeah, eight years after 0:32:37.920 --> 0:32:40.880 the crisis. And so when I think back to those years, 0:32:40.960 --> 0:32:42.480 I don't think like, oh, it's so bad that we 0:32:42.520 --> 0:32:45.560 only had one point eight percent unappointment or sorry inflation. 0:32:45.640 --> 0:32:47.520 I think like, oh, we had like a pretty big 0:32:48.040 --> 0:32:52.280 um employment shortfall for a very long time post GFC. 0:32:52.440 --> 0:32:54.680 So what we're talking about, how good of a job 0:32:54.920 --> 0:32:58.760 the Fed in retrospect did? Do you think, like, does 0:32:58.800 --> 0:33:01.480 that apply applied to the labor side of the mandate 0:33:01.560 --> 0:33:05.200 as well? I think again that's a that's a good question. 0:33:05.440 --> 0:33:07.800 Is you know, in that post in that post Greek 0:33:07.800 --> 0:33:11.400 financial crisis period, that was certainly a slow period of 0:33:11.400 --> 0:33:14.080 of of recovery relative to you know, what we would 0:33:14.120 --> 0:33:17.840 have optially expected. And I do think that sometimes gets 0:33:17.840 --> 0:33:19.520 you the question of what can you expect out of 0:33:19.560 --> 0:33:22.400 monetary policy? Uh? And I think again, if we go 0:33:22.440 --> 0:33:25.080 back to that period of time, we all, I think 0:33:25.520 --> 0:33:28.680 basically universally agree that we should have had more fiscal 0:33:28.760 --> 0:33:31.760 policy and maybe that would have been the thing that 0:33:31.840 --> 0:33:35.080 would have boosted job growth. Now, it may be that 0:33:35.200 --> 0:33:38.040 neither of those things would have been as important as 0:33:38.120 --> 0:33:40.680 we we we'd like to think it was that, you know, 0:33:40.720 --> 0:33:43.640 for whatever structural reasons, the economy was just in a 0:33:43.680 --> 0:33:47.440 low real growth mode as we had to you know, recover, 0:33:47.800 --> 0:33:51.760 rebuild the financial system from the from the Great Financial Crisis, 0:33:51.760 --> 0:33:54.120 and sort of rebuild the economy from the housing bubble. 0:33:54.480 --> 0:33:57.240 And also, I think demographics were probably in play there. 0:33:57.640 --> 0:34:00.160 You know, the boomers were aging out of the the 0:34:00.640 --> 0:34:05.160 workforce and being replaced by the Gen xers, which is 0:34:05.200 --> 0:34:09.000 a demographic whole. And so we actually have the opposite 0:34:09.080 --> 0:34:11.719 right now, where now the millennials are going to be 0:34:11.760 --> 0:34:14.720 aging into their prime working years in their home buying years. 0:34:15.360 --> 0:34:17.440 There might have been a bit of a demographic weight 0:34:17.480 --> 0:34:21.360 on the economy and that that post grade financial crisis period. Again, 0:34:21.400 --> 0:34:24.239 it's it's easy to criticize after the fact, but I'm 0:34:24.280 --> 0:34:26.960 not sure the Fed could have done, you know, this 0:34:27.120 --> 0:34:30.120 magic job that we all sort of thought at the 0:34:30.160 --> 0:34:33.239 time that they should be doing. So you said, so 0:34:33.280 --> 0:34:36.000 the interesting and that is like what can we expect 0:34:36.120 --> 0:34:38.080 out of monetary policy? And I think that's like a 0:34:38.160 --> 0:34:42.360 very fair question in both directions. You mentioned, you know, 0:34:42.400 --> 0:34:44.920 a few minutes ago, Okay, if we really want to 0:34:44.920 --> 0:34:48.680 crush inflation, we could probably do it by engineering a recession, 0:34:48.719 --> 0:34:51.080 but we all don't. We don't want that to happen. 0:34:51.760 --> 0:34:54.520 When when you know, thinking from the Fed's perspective, and 0:34:54.600 --> 0:34:56.960 they hope, okay, maybe four hikes this year, maybe five, 0:34:57.040 --> 0:35:00.680 maybe three, something like that, what is the channel via 0:35:00.760 --> 0:35:05.360 which theoretically these rate hikes do bring down inflation? Like, 0:35:05.440 --> 0:35:07.359 how does it how does a rate hike or any 0:35:07.440 --> 0:35:10.960 number of rate hikes feed through to real activity and prices. 0:35:12.000 --> 0:35:15.760 There's this typical idea, right of a Philips curve, where 0:35:15.840 --> 0:35:19.600 the idea of the rate hike is to to raise unemployment. 0:35:19.719 --> 0:35:23.239 Essentially there should trade off between unemployment and inflation. And 0:35:23.280 --> 0:35:26.120 we didn't really see that, uh, you know, in the 0:35:26.200 --> 0:35:28.959 in the pre pandemic era, we thought that Philips curve 0:35:29.040 --> 0:35:33.200 was was fairly flat. So so that's you know, was 0:35:33.239 --> 0:35:37.000 a mechanism we weren't necessarily relying on as heavily u 0:35:37.200 --> 0:35:39.840 instead of we're relying on I think what would be 0:35:39.920 --> 0:35:43.640 more more vague idea that it's financial conditions you know, 0:35:43.800 --> 0:35:48.520 tightened that we'd see possibly monetary policy evolved through through 0:35:48.960 --> 0:35:51.640 a number of different channels, wor be you know, the 0:35:51.880 --> 0:35:54.560 the exchange way would would possibly be higher, and that 0:35:54.600 --> 0:35:58.400 would create you know, a slowing of of of demand 0:35:58.560 --> 0:36:03.480 where firms would find themselves facing higher interest costs and 0:36:03.520 --> 0:36:06.680 that would flow slow their their cash flow and you know, 0:36:06.840 --> 0:36:10.279 consequently that would cause them to you know, slow back, 0:36:10.600 --> 0:36:15.080 pull back on activity. You can also think about, you know, 0:36:15.160 --> 0:36:17.840 whether this is how this is operating through home mortgages. 0:36:18.320 --> 0:36:22.279 So there's a number of channels. But clearly, you know, 0:36:22.400 --> 0:36:24.399 one way that we've always thought of this is that 0:36:24.680 --> 0:36:27.920 you you're you're trying to find a mechanism by which 0:36:27.960 --> 0:36:33.640 to soften aggurate demand. And historically, you know, areas that 0:36:33.640 --> 0:36:38.120 that has really been prominent is in consumer durables and housing. 0:36:38.400 --> 0:36:42.319 This is the challenge is that can you sort of 0:36:42.360 --> 0:36:45.560 make fine tuning adjustments at the economy at this point 0:36:45.560 --> 0:36:49.120 like we became more accustomed to in the pre pandemic era, 0:36:49.719 --> 0:36:53.040 or are you you know, at the verge of of 0:36:53.040 --> 0:36:57.000 of more major changes in policy that then do have 0:36:57.160 --> 0:37:17.399 these these um pretty dramatic impact on economic activity. Thinking 0:37:17.400 --> 0:37:21.279 about financial markets and one of the things are one 0:37:21.280 --> 0:37:25.440 of the ideas that set in after the two crisis UM, 0:37:25.480 --> 0:37:28.480 and the FEDS policy response was this idea of a 0:37:28.760 --> 0:37:31.960 central bank put and that the FED would always come 0:37:32.000 --> 0:37:36.319 in UM when markets showed signs of wobbling and stabilize 0:37:36.400 --> 0:37:39.640 things because they didn't want to risk um a tightening 0:37:39.640 --> 0:37:44.080 of financial conditions and you know, potentially hitting the real economy. 0:37:45.040 --> 0:37:49.120 How are we thinking about that aspect of the FEDS 0:37:49.719 --> 0:37:53.240 policy workings, like its relationship with markets at the moment, 0:37:53.280 --> 0:37:57.640 because we have seen stocks fall quite a bit. But 0:37:57.840 --> 0:38:00.759 part of me feels like the FED doesn't necessarily care, 0:38:00.960 --> 0:38:06.080 you know, if big tech valuations come down UM to 0:38:06.520 --> 0:38:10.879 arguably more reasonable multiples. But where I think they might 0:38:10.920 --> 0:38:13.720 start to get concerned is when something like the credit 0:38:13.760 --> 0:38:18.399 market starts to show signs of strains. So I guess 0:38:18.400 --> 0:38:20.400 the question is like, how is the FED thinking of 0:38:20.440 --> 0:38:24.319 financial stability and is there still a possibility here that 0:38:24.440 --> 0:38:28.600 if markets really start to get pressured, that they might 0:38:29.080 --> 0:38:34.520 um sacrifice rate hikes, you know, in order to preserve them. 0:38:34.600 --> 0:38:37.680 I agree with you that it's it's not necessarily stock prices, 0:38:37.680 --> 0:38:41.520 are big tech prices, are bitcoin prices that that's going 0:38:41.560 --> 0:38:46.080 to be influencing monetary policy decisions you know, obviously if 0:38:46.120 --> 0:38:49.120 we had twenty drop in overnight, that would that would 0:38:49.160 --> 0:38:52.400 probably be something interesting. But no, it's it's not asset prices. 0:38:52.440 --> 0:38:54.960 I think you're right. It's it's it's a credit or 0:38:55.840 --> 0:38:58.759 market functioning. So you know, obviously the FED doesn't like 0:38:58.800 --> 0:39:02.600 the situations we've had um where where trenching markets don't 0:39:02.600 --> 0:39:05.080 seem to be functioning properly. So that would be certainly 0:39:05.080 --> 0:39:10.000 one issue and might apply to quantitative tightening um going forward, 0:39:10.040 --> 0:39:12.600 which which we really haven't talked about. The other thing 0:39:12.840 --> 0:39:15.680 is if you saw corporate debts but it's really wide, 0:39:15.719 --> 0:39:18.200 and that would be I think a red flag for 0:39:18.239 --> 0:39:20.440 the fact that something was was going wrong. They'd like, 0:39:20.719 --> 0:39:23.560 you know, they would like credit to be a bit tighter, right, 0:39:23.640 --> 0:39:26.440 that's you know, they want a slow activity, but they 0:39:26.440 --> 0:39:28.640 don't want those credits feds to blow out as you 0:39:28.760 --> 0:39:32.040 often see, you know, before or around a recession. And 0:39:32.080 --> 0:39:34.440 so that's where you know, that's where I think the 0:39:34.480 --> 0:39:37.880 FED would be much more worried that they needed to 0:39:38.480 --> 0:39:43.080 reassess what their what their expectations were. So you mentioned 0:39:43.600 --> 0:39:46.960 quantitative tightening, and of course the FED expanded its balance 0:39:46.960 --> 0:39:52.319 sheet quite a bit since March and you hear some members, 0:39:52.320 --> 0:39:54.919 some regional FED presidents sometimes talk about it's like, well, 0:39:54.960 --> 0:39:58.240 maybe we could do one or two less rate hikes 0:39:58.360 --> 0:40:01.839 in the short term, but sort of counteract that by 0:40:01.960 --> 0:40:05.359 a more rapid wind down of the balance sheet. It's 0:40:05.360 --> 0:40:09.120 a little unclear what effect that had. Highly sort of controversial. 0:40:09.320 --> 0:40:12.480 What is your view on this sort of like the 0:40:12.560 --> 0:40:14.400 I guess I don't know if it's a sequencing question 0:40:14.680 --> 0:40:18.319 or the the impact of quantitative tightening and how they 0:40:18.360 --> 0:40:20.520 sort of like translate to rate hikes, Like, how do 0:40:20.520 --> 0:40:23.000 you think about that question? Yeah, I think the FED 0:40:23.080 --> 0:40:25.680 has to be really careful about how they approached that 0:40:25.800 --> 0:40:29.480 that particular question, because you know, Paul said, you know 0:40:29.640 --> 0:40:32.200 in the Prosperous bull streets and press conference that there's 0:40:32.239 --> 0:40:35.600 you know, some some capacity to estimate some trade offs 0:40:35.600 --> 0:40:39.439 between QT and rate hikes, But but were they something 0:40:39.440 --> 0:40:42.759 you really wanted to count on? And that's that's you know, 0:40:42.920 --> 0:40:45.719 that's my opinion too. I'm not sure you want to 0:40:45.760 --> 0:40:50.960 start setting expectations about the path of rate hikes on 0:40:51.000 --> 0:40:53.200 the basis of what you're doing with the balance sheet. 0:40:53.719 --> 0:40:56.120 What the FED really should think about doing is Okay, 0:40:56.160 --> 0:40:58.960 here's here's what our objectives for the balance sheet are 0:40:59.200 --> 0:41:01.160 and I don't really know if that if we're clear 0:41:01.239 --> 0:41:03.239 on what those are yet, right? Is it about getting 0:41:03.280 --> 0:41:06.400 the size down? Is about getting NBS down? How quickly 0:41:06.440 --> 0:41:08.640 do you want to get this down? They need to 0:41:08.640 --> 0:41:11.320 set the objectives to the balance sheet and they should 0:41:11.320 --> 0:41:13.840 probably just let that run in the autopilot on the 0:41:13.920 --> 0:41:17.200 back until there's some kind of concern from financial market 0:41:17.239 --> 0:41:21.000 functioning that they need to adjust on that front, and 0:41:21.000 --> 0:41:24.680 then just say that's going on. Here's what we're doing 0:41:24.719 --> 0:41:28.319 with interest rates. That's really a separate thing, rather than 0:41:28.360 --> 0:41:31.800 trying to, you know, say at the front of this, well, 0:41:32.000 --> 0:41:34.840 if we do this much q QT, we're going to 0:41:35.000 --> 0:41:38.400 get you know, fifty basis points less of tightening going forward. 0:41:38.520 --> 0:41:41.880 I think that's you know, something that's just too unknown 0:41:41.960 --> 0:41:44.799 for the FED to really commit to. I want to 0:41:44.840 --> 0:41:48.480 just go back to inflation for a little bit, because 0:41:48.480 --> 0:41:51.719 I realized we didn't talk about this, and we are 0:41:51.760 --> 0:41:55.840 recording this on visit February nine, and I guess CPI 0:41:56.000 --> 0:42:01.480 is coming up relatively soon. Do inflation next? But stations matter? 0:42:02.320 --> 0:42:07.239 And further to that, should we be differentiating between consumer 0:42:07.640 --> 0:42:12.080 versus corporate inflation? Expectations, and I realized that might be 0:42:13.040 --> 0:42:15.320 maybe that's an odd question or a new question. But 0:42:15.360 --> 0:42:17.560 I've been thinking about it because I've been watching your 0:42:17.600 --> 0:42:20.520 tweets and you've been focused a lot on what companies 0:42:20.560 --> 0:42:23.600 are actually saying about price increases, and you made the 0:42:23.640 --> 0:42:28.200 point that shareholders seem to be rewarding companies who say 0:42:28.200 --> 0:42:31.080 that they're going to raise their prices in response to 0:42:31.840 --> 0:42:35.080 cost pressures, and so I guess the question is, most 0:42:35.120 --> 0:42:39.000 consumers seem to think that a lot of the inflation 0:42:39.120 --> 0:42:42.040 pressures are still transitory and that things like used car 0:42:42.080 --> 0:42:44.920 prices are going to get better. But on the other hand, 0:42:45.440 --> 0:42:49.120 companies seem to have entirely different motivations and therefore different 0:42:49.120 --> 0:42:52.920 ways of thinking about this. So how how are you 0:42:52.960 --> 0:42:58.319 thinking about expectations broadly? So, I'm not convinced that consumers 0:42:58.440 --> 0:43:00.600 right now have a good sense of really what what 0:43:00.719 --> 0:43:02.960 inflation is going to be out five years in the future, 0:43:03.080 --> 0:43:05.359 ten years in the future. It would be amazing if 0:43:05.360 --> 0:43:07.600 they did, wouldn't it. I Yeah, I think that would 0:43:07.600 --> 0:43:11.080 be really, really amazing. More likely to me is that 0:43:11.239 --> 0:43:16.080 does long term inflation expectations adjust as the short term 0:43:16.200 --> 0:43:21.160 inflation remains sticky? Above those those current long form inflation 0:43:21.239 --> 0:43:23.640 numbers you know. Right now, we know that short term 0:43:23.640 --> 0:43:29.000 inflation expectations are elevated um and consequently, if the continues 0:43:29.040 --> 0:43:31.759 to be matt right, if those expectations continue to matt 0:43:32.160 --> 0:43:35.960 then that will probably put expect upward pressure on inflation 0:43:36.000 --> 0:43:38.600 expectations over those long term So I think when the 0:43:38.680 --> 0:43:41.560 FED you know, looks at these long term inflation expectation 0:43:41.640 --> 0:43:45.440 numbers as if they're they're really signaling some some intense 0:43:45.719 --> 0:43:48.520 um attitudes about long term inflation on the part of 0:43:48.520 --> 0:43:52.439 consumers um, I think that's that's probably misleading, that those 0:43:52.440 --> 0:43:56.680 are almost certainly lagging indicators, so especially after a twenty 0:43:56.719 --> 0:43:59.680 five year period of very low inflation. Now, I do 0:43:59.800 --> 0:44:05.239 think that what firms are telling us right now, so 0:44:05.280 --> 0:44:07.840 they're telling us essentially they can raise prices and then 0:44:07.920 --> 0:44:11.160 not get any consumer push back. That tells me two 0:44:11.200 --> 0:44:15.239 things is that there's lots of nominal spending power. Also 0:44:15.360 --> 0:44:19.040 that that consumers are expecting higher prices and willing to 0:44:19.080 --> 0:44:22.560 pay it because they have that nominal spending power. That 0:44:22.760 --> 0:44:26.160 suggests to me again sort of more of an embedded 0:44:26.600 --> 0:44:31.279 inflation dynamic than then we would like to see you know, 0:44:31.719 --> 0:44:33.759 earlier in the conversation, we talked about this idea of 0:44:33.800 --> 0:44:37.279 like inevitably policymakers fight the last war, and we you know, 0:44:37.480 --> 0:44:40.920 it's obvious why that happens. But there are some elements 0:44:40.920 --> 0:44:44.800 of the current economy, even with elevated inflation, that strike 0:44:44.920 --> 0:44:47.919 me and potentially like are much better than they were 0:44:48.040 --> 0:44:50.400 pre crisis. And so we see the fastest wage of 0:44:50.440 --> 0:44:54.560 growth at least currently happening at lower income scales. It 0:44:54.680 --> 0:44:57.560 seems like there is a potential you know, for years 0:44:57.800 --> 0:45:03.600 Larry Summers great stagnation, like very mediocre productivity numbers for 0:45:03.640 --> 0:45:06.840 the ten years after the Great Financial Crisis, it seems 0:45:06.880 --> 0:45:09.960 like there's a potential here for capital expenditure to maybe 0:45:10.280 --> 0:45:14.239 kick into a higher gear. On the matter of you know, 0:45:14.400 --> 0:45:17.560 people bemoan for years inequality, well, you know, it's like 0:45:17.600 --> 0:45:21.560 in a in a tight labor market, obviously the powers 0:45:21.600 --> 0:45:24.800 shifts somewhat to workers. I mean that by definition almost 0:45:25.120 --> 0:45:28.560 is there a potential here for the jolt that we've 0:45:28.680 --> 0:45:33.319 seen to kick us into a superior equilibrium when all 0:45:33.360 --> 0:45:37.400 of Sadden done right, and I think about this um 0:45:37.440 --> 0:45:40.200 a lot, is you know, obviously you want to get 0:45:40.200 --> 0:45:44.000 back to at least as a good place, but maybe 0:45:44.040 --> 0:45:46.680 even a better place, right, because we'd like to see, 0:45:46.760 --> 0:45:49.120 you know, a productivity be higher, right, And maybe is 0:45:49.160 --> 0:45:52.600 that requires some investment? And is that investment something wrong? 0:45:52.640 --> 0:45:54.799 You're going to see if we if we run the 0:45:54.840 --> 0:45:58.600 economy high right? Right? And so is there a potential 0:45:58.640 --> 0:46:00.759 here to get to a better player? And I think 0:46:00.840 --> 0:46:04.000 you're the answers, Yes, there is that potential. And I 0:46:04.080 --> 0:46:07.600 just think it's how do you moderate the economy during 0:46:07.640 --> 0:46:10.320 that adjustment? Because I think you know, what what Sherman 0:46:10.360 --> 0:46:13.560 Paul has said has been I think generally correct in 0:46:13.680 --> 0:46:19.520 that if you want to you know, maintain and extend 0:46:19.600 --> 0:46:24.320 these benefits, you need to know basically have inflation under control. 0:46:24.719 --> 0:46:26.920 And if you don't get inflation under control, you know 0:46:27.040 --> 0:46:30.880 we're going to end up with these instabilities that eventually 0:46:31.520 --> 0:46:35.719 prompt us to create a recession. So even if you're 0:46:35.719 --> 0:46:37.880 getting a jolt, can you have too much of a 0:46:37.920 --> 0:46:40.680 good thing in a short run that you actually lose 0:46:40.719 --> 0:46:42.960 some of those long run benefits? And I think that's 0:46:43.040 --> 0:46:49.480 the concern that the FED should have at at this juncture. Well, Tim, 0:46:49.520 --> 0:46:51.800 I mean, I think that's like a that's a great 0:46:51.920 --> 0:46:54.560 spot to leave it. It does seem like, yeah, there 0:46:54.640 --> 0:46:56.960 is some reasons to be excited, but can they get 0:46:56.960 --> 0:47:00.279 it just right? It seems like an incredible chill for 0:47:00.320 --> 0:47:03.160 the FED in two So maybe maybe we'll have you 0:47:03.239 --> 0:47:05.960 on in December again of this year and we're like, 0:47:06.200 --> 0:47:08.880 we'll see how they did with the hikes. Assuming the 0:47:09.040 --> 0:47:11.840 h that's great, and we'll see, you know, it's inflation 0:47:11.920 --> 0:47:15.160 moderates back towards two percent, as many people expect, then 0:47:15.640 --> 0:47:18.480 the fan is gonna look brilliant because we'll be it 0:47:18.480 --> 0:47:21.960 will be near neutral with a you know, a pretty 0:47:21.960 --> 0:47:25.319 tight job market and inflation back to two percent, and 0:47:25.400 --> 0:47:28.319 that's that's, you know, the optimal outcome. All right, Well, 0:47:28.440 --> 0:47:31.000 knock on wood. I don't have any wood, but knock 0:47:31.000 --> 0:47:34.440 gonna lead that. That is the set of conditions at 0:47:34.480 --> 0:47:36.759 the end of this year. Tim Dooey, thank you so 0:47:36.840 --> 0:47:39.200 much for coming up. Thanks for having me appreciate it. 0:47:39.480 --> 0:47:55.960 Thanks Tim, I really enjoyed that tracing. I mean, I 0:47:56.000 --> 0:47:59.359 think it's clear regardless like this is going to be 0:47:59.600 --> 0:48:03.120 a tricky year for the FED because obviously it wants 0:48:03.160 --> 0:48:07.120 to consolidate its gains. It wants to is to mention 0:48:07.239 --> 0:48:09.640 the end, It wants to sort of preserve the potential 0:48:09.719 --> 0:48:12.560 for the benefits that you get from a hot economy 0:48:12.719 --> 0:48:16.560 while making the economy less hot, but also not so hot, 0:48:16.640 --> 0:48:19.560 so less hot that we're in a recession so hot 0:48:20.880 --> 0:48:24.080 something like that, less hot but not too less hot. Yeah, 0:48:24.120 --> 0:48:26.560 I think that's right. The other thing that stood out 0:48:26.560 --> 0:48:30.719 to me was, you know, Tim's point about how difficult 0:48:30.719 --> 0:48:34.120 it is to separate supply from demand issues at the moment, 0:48:34.160 --> 0:48:36.680 But I kind of I sort of follow that to 0:48:36.880 --> 0:48:39.839 a different conclusion, which is, I still think a lot 0:48:40.000 --> 0:48:42.640 of the demand that we're seeing is actually a result 0:48:42.880 --> 0:48:45.920 of the supply shortages, and people are you know, just 0:48:45.960 --> 0:48:48.600 getting things when they can and sort of stalking up 0:48:48.640 --> 0:48:51.800 and seeing a bunch of other people improve their houses 0:48:52.000 --> 0:48:54.920 and do this and that and jumping in so that 0:48:54.960 --> 0:48:59.120 they're not left behind. But I mean it does. It 0:48:59.200 --> 0:49:02.560 does just high how difficult it is at the moment 0:49:02.640 --> 0:49:05.960 for for policymakers. And I know it's their job and 0:49:06.200 --> 0:49:08.680 everyone likes to criticize them, but it does seem like 0:49:08.719 --> 0:49:12.120 a particularly challenging time. Yeah. No, I mean I do 0:49:12.200 --> 0:49:15.080 think like the the sort of like, oh, did the 0:49:15.239 --> 0:49:19.680 massive like boom in demand that we saw one turned 0:49:19.719 --> 0:49:24.920 into Glutch and three uh as you've written a lot 0:49:24.920 --> 0:49:27.520 about this sort of bull whip effect, is like is 0:49:27.640 --> 0:49:31.839 a underdiscussed scenario still like we don't really know, like 0:49:32.080 --> 0:49:34.040 you know how long it's going to go. But to 0:49:34.120 --> 0:49:36.640 your question, and you asked the important question, like and 0:49:36.680 --> 0:49:39.839 Tim has been pointing it out, It's like if companies 0:49:40.239 --> 0:49:44.120 are saying, like, well, shareholders, we a we can raise prices, 0:49:44.160 --> 0:49:46.319 like Chipotle is like, yeah, we can raise the price 0:49:46.360 --> 0:49:49.520 of a burrito without hitting demands, and be investors are 0:49:49.560 --> 0:49:52.480 rewarding us for raising the prices of a burrito without 0:49:52.520 --> 0:49:55.200 hitting demand, then that is like a sort of like 0:49:55.320 --> 0:50:00.040 level of corporate motivation that could sustain sustain priced in 0:50:00.040 --> 0:50:02.840 creases for some time totally. And this to me is, 0:50:02.960 --> 0:50:06.000 you know when people are saying, oh, inflation and expectations 0:50:06.040 --> 0:50:09.359 don't matter anymore, they're looking at consumers, and I kind 0:50:09.360 --> 0:50:11.480 of I agree with that, but I really do think 0:50:11.560 --> 0:50:15.840 company inflation expectations matter quite a lot because they have 0:50:16.160 --> 0:50:18.759 the pricing power, um, and those are eventually going to 0:50:18.800 --> 0:50:22.200 feed into consumer expectations. UM. So I think that's a 0:50:22.239 --> 0:50:25.279 really important point. Um. And possibly you know, one of 0:50:25.360 --> 0:50:27.920 the things that the FED might have gotten right in 0:50:28.000 --> 0:50:31.880 recent years. Is its point about MONOPSYNY and big companies 0:50:31.920 --> 0:50:34.920 and pricing power, and we might start to see that 0:50:35.120 --> 0:50:37.680 um or we might really start to see the impact 0:50:37.719 --> 0:50:41.160 of that over the next year or so. Yeah. I 0:50:41.200 --> 0:50:45.319 mean everyone is like criticizing Elizabeth Warren and the White 0:50:45.320 --> 0:50:48.280 House for pointing out the sort of like the corporate 0:50:48.280 --> 0:50:52.400 profitability driven inflation, But you know, you look, look, you 0:50:52.400 --> 0:50:56.440 know yesterday, um February a Chipotle earnings came out, and 0:50:56.440 --> 0:50:58.719 it's like they're doing very well, and they see more 0:50:58.760 --> 0:51:02.120 pricing power, and they're mares are holding up well and 0:51:02.320 --> 0:51:05.359 they're raising prices in part because they can make more 0:51:05.400 --> 0:51:07.640 money when they raise prices, and so the companies that 0:51:07.680 --> 0:51:10.720 can do that are in a position to dictate prices 0:51:10.960 --> 0:51:14.120 are obviously doing really well. There's just like so many, uh, 0:51:14.320 --> 0:51:18.280 there's so many moving parts to this, and I thought 0:51:18.280 --> 0:51:21.399 that was a very helpful conversation. Can I just say, 0:51:21.440 --> 0:51:23.120 I've been in New York about a week and I've 0:51:23.120 --> 0:51:26.200 had Chipotle like two times now. It is so good. 0:51:26.239 --> 0:51:28.560 I missed it so much. They didn't have to put 0:51:28.600 --> 0:51:32.080 there's Chippotle in Hong Kong. No, there's also just a 0:51:32.160 --> 0:51:35.960 broader shortage of good Mexican food. But yeah, I missed it. 0:51:36.480 --> 0:51:39.200 It's it's worth the price increase for me at least 0:51:39.400 --> 0:51:43.319 for now. You're one of the consumers, Yeah, fresh back 0:51:43.320 --> 0:51:46.200 out of American soil. Who's like really to absorb any 0:51:46.239 --> 0:51:51.040 price price price insensitive for for American Mexican food? All right, um, 0:51:51.080 --> 0:51:53.560 shall we leave it there. Let's leave it there. This 0:51:53.640 --> 0:51:56.799 has been another episode of the Odd Thoughts podcast. I'm 0:51:56.840 --> 0:51:59.640 Tracy Alloway. You can follow me on Twitter at Tracy 0:51:59.640 --> 0:52:02.240 Alloway and I'm Joe wi. Isn't thought you could follow 0:52:02.280 --> 0:52:05.200 me on Twitter at the Stalwart. Follow our guest Tim 0:52:05.280 --> 0:52:09.000 Dewey on Twitter He's at Tim Dewey. Follow our producer 0:52:09.200 --> 0:52:12.960 Laura Carlson at Laura M. Carlson. Follow the Bloomberg head 0:52:12.960 --> 0:52:16.839 of podcast, Francesco Leady at Francesca Today, and check out 0:52:16.880 --> 0:52:20.839 all of our podcasts at Bloomberg under the handle at podcasts. 0:52:21.000 --> 0:52:21.800 Thanks for listening.