WEBVTT - Surveillance: The Future of the Fed 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferroll and Lisa Brownwitz Jayleie. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance and Apple podcast, Suncloud, Bloomberg dot Com 0:00:23.920 --> 0:00:30.560 and of course, on the Bloomberg Terminal from New York 0:00:30.560 --> 0:00:34.440 City for our audience worldwide. Good morning, Good morning, breaking news. 0:00:34.560 --> 0:00:37.200 The President of the United States to nominate Chairman Powe 0:00:37.560 --> 0:00:40.560 to a second term as FED Chair, to nominate Governor 0:00:40.600 --> 0:00:43.280 Brainerd as FED Vice chair. That news coming from the 0:00:43.280 --> 0:00:46.400 White House in the last few seconds. That news this morning, 0:00:46.600 --> 0:00:48.920 the President of the United States to nominate Chairman Power 0:00:48.960 --> 0:00:51.599 to a second term as the FED Chair. From New 0:00:51.640 --> 0:00:55.080 York City alongside Tom Keene, Lisa Brown It's son Jonathan Faroll. 0:00:55.120 --> 0:00:57.600 Your reconly market at four tents of one percent. Tom 0:00:57.680 --> 0:01:00.560 Keane the chairman getting a second term, least he's been 0:01:00.560 --> 0:01:03.520 nominated for one. This one goes to the hearings. The 0:01:03.560 --> 0:01:06.759 market looks like it likes it, up fifteen and futures 0:01:06.800 --> 0:01:09.800 now up twenty. John still moving higher in the yield 0:01:09.880 --> 0:01:12.560 was from a one fifty six and change after one 0:01:13.640 --> 0:01:16.440 zero five at Lisa, it's a split, the president nominating 0:01:16.520 --> 0:01:20.479 chairman power to a second term Brainard governor Brainard nominated 0:01:20.560 --> 0:01:23.280 as FED Vice chair. Yeah. The idea here going with 0:01:23.319 --> 0:01:26.600 the status quo in the sense of trying to have continuity. 0:01:26.760 --> 0:01:29.000 One of the most perilous times, some people would say 0:01:29.000 --> 0:01:32.160 for FED policy possibly in history, based on how low 0:01:32.280 --> 0:01:34.760 rates are and how high inflation is. This is about 0:01:34.760 --> 0:01:38.280 two things, Tom Kane, continuity one and confirm ability too. 0:01:38.400 --> 0:01:41.679 We can talk about continuity at an important inflection point 0:01:41.680 --> 0:01:44.400 for monetery policy, we need to talk about confirm ability 0:01:44.440 --> 0:01:47.160 as well, perhaps that shaping the decision down in Washington. 0:01:47.480 --> 0:01:49.720 Sco point John here, and we're gonna have a wonderful 0:01:49.760 --> 0:01:51.600 set of guests. S are we welcome all of you 0:01:51.680 --> 0:01:55.040 on Bloomberg Radio and Bloomberg Television the special Hour of 0:01:55.040 --> 0:01:58.480 Bloomberg Surveillance. What Michael McKee and I know there's been 0:01:58.520 --> 0:02:01.920 other times where we've had to reappoint ointments, maybe without 0:02:01.960 --> 0:02:04.640 that focus. I went back and looked at Bush Greenspan 0:02:04.760 --> 0:02:07.600 the fourth or fifth time, and it wasn't really that 0:02:07.720 --> 0:02:10.480 big a deal. Why is this a big deal, Michael 0:02:10.520 --> 0:02:14.639 McKee at this time. Well, we've gone into a different 0:02:14.720 --> 0:02:18.400 kind of world tom in terms of monetary policy, things 0:02:18.440 --> 0:02:21.320 that Alan Greenspan never had to contend with, never had 0:02:21.360 --> 0:02:28.640 to consider, with the quantitative easing, with quantitative UH tightening, 0:02:29.120 --> 0:02:31.040 with all the things that the FED has done to 0:02:31.080 --> 0:02:34.080 expand its balance sheet, the zero bound UH. There's a 0:02:34.120 --> 0:02:36.280 lot going on for the FED, and it has become 0:02:36.320 --> 0:02:38.160 front and center in the United States, and as people 0:02:38.200 --> 0:02:41.400 have decided, the Federal Reserve is the economic savior for 0:02:41.600 --> 0:02:45.040 the country also the economic whipping boy. J Paal gets 0:02:45.080 --> 0:02:47.360 to play both roles in this case. Let's talk about 0:02:47.360 --> 0:02:49.680 this bond market move as will guys up five basis 0:02:49.680 --> 0:02:52.120 points on a two year up about four basis points 0:02:52.120 --> 0:02:54.560 on tens, one fifty nine on tents. Right now, what's 0:02:54.639 --> 0:02:58.040 about fifty six basis points on twos? Mike, we can 0:02:58.080 --> 0:03:00.359 talk about confirmability in a moment. I want to talk 0:03:00.400 --> 0:03:03.960 about continuity and for this Federal Reserve chair staring down 0:03:04.000 --> 0:03:06.399 some data that is incompatible with an argument he's made 0:03:06.400 --> 0:03:08.799 through much of this year, and his vice chair, Rich 0:03:08.800 --> 0:03:12.320 Clarada now said to be replaced Governor Waller, both of 0:03:12.360 --> 0:03:14.520 them making a move in the last week to talk 0:03:14.560 --> 0:03:17.560 about accelerating the taper. When we think about the first 0:03:17.639 --> 0:03:19.640 job of this chairman before we even see if he 0:03:19.639 --> 0:03:22.080 gets confirmed for a second term, walk me through the 0:03:22.080 --> 0:03:25.119 complexities of that for the next couple of months. Well, 0:03:25.120 --> 0:03:27.480 when the FED announced that it was going to start tapering, 0:03:27.800 --> 0:03:31.480 it said it would have fifteen billion dollar a month 0:03:31.560 --> 0:03:35.320 taper for November and December, but did not put any 0:03:35.400 --> 0:03:38.680 numbers on January going forward, leaving themselves some room to 0:03:38.760 --> 0:03:41.880 try to uh, to have the ability to change. And 0:03:41.920 --> 0:03:44.440 it does look like they're getting set for a change 0:03:44.520 --> 0:03:46.320 now as we're hearing from more and more members of 0:03:46.320 --> 0:03:48.760 the FED. Rich Clarida will be on the board for 0:03:48.800 --> 0:03:53.440 the December fifteen meeting, and so we could expect the 0:03:53.440 --> 0:03:57.600 Fed maybe to start raising, maybe raise the amount that 0:03:57.800 --> 0:04:03.480 it cuts the buying by on and that then would 0:04:03.480 --> 0:04:06.240 be a reason you would see maybe the markets moving 0:04:06.240 --> 0:04:08.520 a little bit because they figured that j. Powell is 0:04:08.520 --> 0:04:10.280 going to be much more on board than that than 0:04:10.560 --> 0:04:13.240 necessarily Lele Brainard would have been. One of the conundrums 0:04:13.280 --> 0:04:15.840 heading into next year is the dual mandate, the idea 0:04:16.000 --> 0:04:19.200 of trying to combat runaway inflation or even higher inflation 0:04:19.200 --> 0:04:22.520 than they'd like. While allowing employment to get to a 0:04:22.600 --> 0:04:26.120 fuller picture. What happens if you have one, say hi 0:04:26.240 --> 0:04:29.760 inflation without the other, and how does the distinction of 0:04:29.880 --> 0:04:33.240 a power versus a brainerd FED weigh in on this. Well, 0:04:33.240 --> 0:04:34.920 what the Fed has said is they will look at 0:04:35.040 --> 0:04:38.800 both of the mandates and they will basically do risk 0:04:38.839 --> 0:04:42.440 management on whichever one seems to be the worst. Their 0:04:42.480 --> 0:04:45.159 focus is on trying to get unemployment down. But if 0:04:45.240 --> 0:04:48.880 inflation starts to become more of a hazard and unemployment 0:04:48.880 --> 0:04:51.400 doesn't look like it's going to immediately drop, then they 0:04:51.440 --> 0:04:55.719 would attack unemployment. They're hoping in this case that unemployment 0:04:55.960 --> 0:04:58.960 is to use the t word transitory, it will take 0:04:59.000 --> 0:05:02.839 longer to disappear uh inflation, but it will start to 0:05:02.920 --> 0:05:05.559 fall back. And that's the general consensus on Wall Street 0:05:05.600 --> 0:05:07.840 as well. In that case, they don't have to make 0:05:07.880 --> 0:05:11.680 a decision between the two, but tapering faster gets them 0:05:11.720 --> 0:05:14.440 to the point where they can raise rates if they 0:05:14.520 --> 0:05:17.000 need to more quickly. If you are just tuning in 0:05:17.160 --> 0:05:19.760 from audience worldwide on TV and radio, the President of 0:05:19.760 --> 0:05:22.440 the United States nominating Chairman Power to a second term 0:05:22.720 --> 0:05:26.000 as the FED Chair, nominating Governor Brain It's FED Vice 0:05:26.080 --> 0:05:27.560 chair this all according to the White House. In the 0:05:27.640 --> 0:05:30.200 last couple of moments, let's get some market reaction for 0:05:30.279 --> 0:05:32.400 you from Kathy Jimes of Schwabs. She joins, does Kathy 0:05:32.440 --> 0:05:35.839 grant to catch up with you? Your first reaction please? Um? 0:05:35.920 --> 0:05:39.720 I think this is a don't rock the boat move. Um. 0:05:39.760 --> 0:05:42.840 It's it's consistent with you know, the long history at 0:05:42.839 --> 0:05:46.880 the FED. Usually FED chairs are renominated, and it looks 0:05:46.920 --> 0:05:49.679 like probably there was a thought at the White House 0:05:49.760 --> 0:05:53.960 that this fighting, a battle perhaps over brainard, was not 0:05:54.120 --> 0:05:56.960 worth not worth the fight worth having at this stage 0:05:56.960 --> 0:05:58.680 of the game. Kathy, let's talk about the move in 0:05:58.680 --> 0:06:01.600 this bond market and you'll four basis points pushing one 0:06:01.680 --> 0:06:04.320 sixty again. The more interesting move for me is pushing 0:06:04.360 --> 0:06:06.480 sixty basis points at the front end on two's up 0:06:06.480 --> 0:06:09.679 by five basis points to fifty six early days kneez 0:06:09.720 --> 0:06:12.560 joke reaction maybe, But Kathy, what's your initial response to 0:06:12.640 --> 0:06:15.560 seeing that kind of move off the back of this decision. Yeah, 0:06:15.640 --> 0:06:19.000 clearly the market is looking at the likelihood that the 0:06:19.040 --> 0:06:21.760 Fed will increase the rate of tapering and move up 0:06:21.800 --> 0:06:25.200 the timing of the first rate hike. Now that Powell 0:06:25.360 --> 0:06:28.239 has been renominated and you've kind of cleared the decks 0:06:28.279 --> 0:06:32.760 in terms of of policy, you know, decision making going forward. 0:06:33.040 --> 0:06:36.000 And I think that that's a reasonable expectation given some 0:06:36.040 --> 0:06:38.320 of the comments that we've heard from various officials and 0:06:38.320 --> 0:06:41.400 the fact that inflation has been higher and more persistent 0:06:41.440 --> 0:06:45.120 than expected. You know, the fab really shouldn't have any 0:06:45.160 --> 0:06:47.680 reason to be buying bonds at this stage of the game. 0:06:47.720 --> 0:06:50.880 It's not really contributing much and it could be doing 0:06:50.920 --> 0:06:54.159 some harm. So the faster they taper, the better news 0:06:54.200 --> 0:06:57.200 it is in terms of getting the inflation picture under control. 0:06:57.480 --> 0:07:00.960 Kathy Jones was u here right now and own blinder 0:07:01.000 --> 0:07:04.080 scheduled to be with us here in moments. Cathy, I 0:07:04.080 --> 0:07:05.719 look at the bond market, I look at all the 0:07:05.800 --> 0:07:10.000 uncertainties forward in what we see, without question is a 0:07:10.080 --> 0:07:14.160 wall of savings, of liquidity, A buoyant holiday season for 0:07:14.200 --> 0:07:18.320 the consumer. Is well, what does the Schwab call on 0:07:18.440 --> 0:07:22.600 the American consumer next year? The chairman Powell and vice 0:07:22.640 --> 0:07:27.920 chairman Brainer will confront. Now, we're pretty optimistic about the consumer. 0:07:28.000 --> 0:07:31.520 You know, there's high levels of savings, job market is 0:07:31.520 --> 0:07:36.200 is very strong, wages are rising, particularly for lower income workers. 0:07:36.560 --> 0:07:40.040 All those are really positive for the consumer. Obviously, it's 0:07:40.080 --> 0:07:42.400 going to be a something of a constraint of energy 0:07:42.440 --> 0:07:46.440 prices stay high, because that's a particular pain point for consumers. 0:07:46.480 --> 0:07:49.160 But by and large, consumers are in good shape, so 0:07:49.200 --> 0:07:52.040 we're looking for that to continue to drive the economy 0:07:52.080 --> 0:07:54.800 going forward. Cathy, stay close for the market action. You're 0:07:54.800 --> 0:07:57.520 two year yield this morning up by five basis points. 0:07:57.520 --> 0:07:58.960 When I head down to d C and catch up 0:07:59.000 --> 0:08:02.680 with Blimpox Emory A Donna Washington correspondent, Amory, this is 0:08:02.720 --> 0:08:06.920 also about confirm ability. Can these decisions actually be realized? 0:08:07.200 --> 0:08:10.320 Take a listen to that famous quote from Senator Warren 0:08:10.320 --> 0:08:12.200 in the last couple of months on what she thinks 0:08:12.440 --> 0:08:17.600 of this chairman. I can't support J. Powell for renomination. 0:08:18.120 --> 0:08:21.400 So my view is he ends his term, we put 0:08:21.440 --> 0:08:24.240 somebody else in place, and I think the fit is 0:08:24.240 --> 0:08:26.120 going to be better off, and I think our economy 0:08:26.200 --> 0:08:29.200 is going to be safer. Senator Warren. Emory called him 0:08:29.240 --> 0:08:32.640 a dangerous man, this president going against the wishes of 0:08:32.679 --> 0:08:34.520 some of these Democrats. Can you walk me through, just 0:08:34.559 --> 0:08:36.920 set the stage frame it for us what the next 0:08:36.960 --> 0:08:41.160 couple of months could look like trying to make this happen. Well, 0:08:41.200 --> 0:08:45.240 the progressives are certainly waking up, probably unhappy with this decision, 0:08:45.320 --> 0:08:48.320 like Senator Warren who did call J. Powell dangerous man. 0:08:48.520 --> 0:08:51.880 But also on Friday, Senator white House coming up with 0:08:51.920 --> 0:08:54.480 a statement as well they wanted a new pick at 0:08:54.520 --> 0:08:57.560 the top. But Jonathan, as you say, this is about 0:08:57.880 --> 0:08:59.880 being able to get through that Senate. Come for me. 0:09:00.720 --> 0:09:05.839 J Powell was confirmed eighty four to thirteen, and many 0:09:05.880 --> 0:09:08.200 of those people are still in the Senate that are 0:09:08.200 --> 0:09:10.920 going to be able to push forward. He has bipartisan support. 0:09:11.200 --> 0:09:13.880 Many credit him to being able to bring the U. 0:09:13.960 --> 0:09:16.840 S economy um out of the pandemic. And then you 0:09:16.840 --> 0:09:20.680 look at Brainarden. She received sixty one to thirty one. 0:09:21.040 --> 0:09:24.720 So you'd already see from their previous nominations and Senate 0:09:24.760 --> 0:09:29.400 confirmations that Governor Chair Powell had a much easier time 0:09:29.480 --> 0:09:33.240 in the Senate. So that's potentially part of the decision making. Also, 0:09:33.760 --> 0:09:37.679 he was able to remain with going with Chair Powell. 0:09:38.000 --> 0:09:39.920 He was able to have this continuity at the top 0:09:39.960 --> 0:09:43.280 of the Fed where his predecessor Trump decided to get 0:09:43.440 --> 0:09:47.000 rid of Janet Yellen and elevate Powell. Now, this is 0:09:47.040 --> 0:09:49.040 something that he likely is going to toot that he 0:09:49.080 --> 0:09:52.199 wanted to make sure that the FED remains independent. At 0:09:52.200 --> 0:09:54.320 the same time, he's giving a nod to the progressives 0:09:54.320 --> 0:09:56.880 by making sure Governor Brainard gets a top spot, and 0:09:56.960 --> 0:09:58.839 she is yeah. But in Marie d we have a 0:09:58.920 --> 0:10:01.640 sense of what the main hang up President Biden had 0:10:01.679 --> 0:10:04.360 with just renominating J. Powell, say a month or two ago. 0:10:05.800 --> 0:10:08.240 It's unclear, but potentially part of it is the fact 0:10:08.320 --> 0:10:10.839 that there's not just these positions. They have a number 0:10:10.840 --> 0:10:13.720 of other positions as well at the FED. So they're 0:10:13.720 --> 0:10:16.240 probably likely looking at how they would we work the 0:10:16.320 --> 0:10:19.440 FED to make it more diverse, to look a little 0:10:19.440 --> 0:10:21.680 bit more like America. That is something you've heard time 0:10:21.720 --> 0:10:25.200 and time again Democrats campaigned for, so potentially that was 0:10:25.240 --> 0:10:27.360 part of it. And then when you had these two 0:10:27.679 --> 0:10:32.280 top selections Brainard and Powell, then you started to hear 0:10:32.360 --> 0:10:35.720 and are reporting that you had senators wanting to sit 0:10:35.760 --> 0:10:37.600 down with each of them. And this is where the 0:10:37.679 --> 0:10:40.080 counting game probably came in for the White House to 0:10:40.160 --> 0:10:43.000 make sure that these two individuals can be confirmed. Emory 0:10:43.120 --> 0:10:45.640 down and Dasy a Wahington correspondent sticking with us through 0:10:45.679 --> 0:10:47.439 this morning on the back of this news, Tom Kane, 0:10:47.480 --> 0:10:49.320 let's build on the price section up at the front end, 0:10:49.360 --> 0:10:51.920 yield to Hime by five basis points. Clear read for 0:10:51.920 --> 0:10:54.680 the FX market, t K that dollar stronger, Well, the 0:10:54.720 --> 0:10:57.240 dollar stronger, and I think that's an immovable force here 0:10:57.280 --> 0:10:59.640 into the new year. John. I think you know everybody's 0:10:59.640 --> 0:11:01.839 doing the looks in that and know I'll readapt and 0:11:01.880 --> 0:11:05.440 adjust off of this. And there's this the confirmation process, 0:11:05.480 --> 0:11:08.880 and that John, the dollars, the global system. And it 0:11:09.040 --> 0:11:11.400 is a vote today for what President Biden did a 0:11:11.520 --> 0:11:13.560 nanty six handle on the d x Y the Bloomberg 0:11:13.600 --> 0:11:15.880 Dollar Index, Lisa, a broader read of that U S dollar. 0:11:16.040 --> 0:11:18.840 More broadly, it's stronger. The idea that if they raised 0:11:19.120 --> 0:11:21.680 reads that will end up leading to a money flight 0:11:21.760 --> 0:11:25.360 into the United States. I do wonder, though, is a 0:11:25.440 --> 0:11:28.920 chair by chair Powell excuse me, so much more hawkish 0:11:29.120 --> 0:11:31.240 than Leo Brainerd or is he going to have a 0:11:31.360 --> 0:11:33.520 rather dovish tilt as he tries to wait for the 0:11:33.559 --> 0:11:36.079 employment market to really pick up. Tom, As you think 0:11:36.080 --> 0:11:38.600 about the history of the Federal Reserve, I'm with Lisa. 0:11:38.679 --> 0:11:41.320 I just think on these two nominees, whether it would 0:11:41.320 --> 0:11:45.080 have been chairman Brainard or chairman Power for a second term. 0:11:45.160 --> 0:11:47.160 How much daylight was there between the two. What I 0:11:47.160 --> 0:11:49.480 think this opens the door too, is a much cleaner 0:11:49.480 --> 0:11:52.160 conversation about what took place on Friday off the back 0:11:52.200 --> 0:11:54.680 of those discussions about accelerating the tape, and now we 0:11:54.679 --> 0:11:56.800 can have a real conversation, not about a lane up 0:11:56.880 --> 0:12:00.000 chairman in December, but a conversation Tom about pushing things 0:12:00.080 --> 0:12:02.560 is forward and maybe pushing things forward a little bit 0:12:02.600 --> 0:12:05.600 more quickly. I think they will be data dependent, John, 0:12:05.760 --> 0:12:09.079 I I understand the parlor game of taper in rate 0:12:09.200 --> 0:12:11.640 rise and Matt Lozettie on with Deutsche Bank, and they're 0:12:11.720 --> 0:12:15.120 July ish. Now I should say on on some form 0:12:15.160 --> 0:12:17.960 of rate move. But John, to me, it's a boom 0:12:18.000 --> 0:12:21.240 American economy. Frankly, the comments of Dana Telsea on the 0:12:21.320 --> 0:12:24.360 American consumer are just as important as Matt l Zati 0:12:24.400 --> 0:12:26.720 of Deutsche Bank. So what extent though, Lisa, right now? 0:12:26.920 --> 0:12:29.240 Are they date to dependent? Are they going back to 0:12:29.280 --> 0:12:31.679 being forecast dependent? Because everything I hear from them is 0:12:31.720 --> 0:12:34.080 about the future. In the future, this will happen if 0:12:34.080 --> 0:12:35.960 we were truly data dependent and we were looking at 0:12:35.960 --> 0:12:38.560 the data right now we'd be saying things are stickier, 0:12:38.760 --> 0:12:41.439 they're broader, and maybe we were really quite wrong about 0:12:41.440 --> 0:12:43.959 our forecast of what would happen with inflation through the year, 0:12:44.040 --> 0:12:46.080 and the employment market perhaps is a bit hotter than 0:12:46.160 --> 0:12:49.320 we previously previously expected. You raise a really good point, John, 0:12:49.520 --> 0:12:52.960 the idea that FED Vice chair Rich Clarida basically talked 0:12:53.040 --> 0:12:56.240 Friday about accelerating the taper and we did not see 0:12:56.440 --> 0:12:59.400 any real material reaction in markets, and I was surprised 0:12:59.440 --> 0:13:01.959 by that. Today you raise the point people dismiss that 0:13:02.280 --> 0:13:05.320 is not necessarily being as relevant with leadership. Well, now 0:13:05.400 --> 0:13:07.439 all of a sudden that has becomes a much more 0:13:07.480 --> 0:13:09.760 real conversation, doesn't it If you just chune again front 0:13:09.760 --> 0:13:12.520 audience worldwide on TV and radio, tell m Kane, we 0:13:12.559 --> 0:13:14.440 have a decision from the President of the United States 0:13:14.480 --> 0:13:17.040 to nominate Chairman pal to a second term as FED. 0:13:17.160 --> 0:13:18.880 Yet we all knew this was coming. They came to 0:13:18.920 --> 0:13:20.400 me a couple of weeks ago and they said, who 0:13:20.440 --> 0:13:22.040 do you want to speak to? And I said, there's 0:13:22.040 --> 0:13:25.400 only one voice that matters, and that is Alan Blinder, 0:13:25.520 --> 0:13:29.760 Princeton University. In the former vice chair, Alan Blinder. It 0:13:29.880 --> 0:13:33.200 was a different time, a different place. You know more 0:13:33.240 --> 0:13:35.760 than anyone on the planet what it's like when a 0:13:35.880 --> 0:13:39.080 chairman and a vice chairman don't get along. You and 0:13:39.160 --> 0:13:44.160 Chairman Greenspan collegiately battled at your time at the FED. 0:13:44.640 --> 0:13:48.199 That's not the case. Now, How will this vice chair 0:13:48.400 --> 0:13:53.520 assist this chairman? Well, I think perfectly as she has 0:13:53.559 --> 0:13:56.120 been as from her seat as governor. You know, it's 0:13:56.160 --> 0:13:58.880 the same table. She'll have a new title, a better, 0:13:59.440 --> 0:14:04.320 uh higher title. But on monetary policies, I think Johnathan 0:14:04.440 --> 0:14:08.240 said a few moments ago, there's been no distance between 0:14:08.240 --> 0:14:11.600 the two of them. This is pure either way. If 0:14:11.679 --> 0:14:16.040 Layle Brainer has become a chair, there'll be no discontinuity 0:14:16.040 --> 0:14:18.319 and monetary policy. And there certainly is not going to 0:14:18.400 --> 0:14:22.800 be any conflict on monetary policy between share Power and 0:14:22.920 --> 0:14:28.240 Vice Chair Brainer. If there's any disagreement uh, and there 0:14:28.280 --> 0:14:32.560 probably will be, it'll be on regulatory uh policy. By 0:14:32.600 --> 0:14:35.200 the way, That's the way it was mostly between Greenspan 0:14:35.240 --> 0:14:39.120 and myself way back in each history. Explain now that 0:14:39.200 --> 0:14:41.760 the rules have changed on the linkage of a monetary 0:14:41.800 --> 0:14:44.920 and fiscal policy, what the voice will be for this 0:14:45.040 --> 0:14:49.440 new team is this nation tackles trillions of dollars of 0:14:49.520 --> 0:14:55.280 new debt. Well, you know, the Federal Reserve. This comes 0:14:55.280 --> 0:14:57.520 back to your taper a question that the three of 0:14:57.560 --> 0:15:00.280 you were just talking about. The Federal Reserve have been 0:15:00.320 --> 0:15:04.160 buying quite a bit of the newly issued debt, which 0:15:04.160 --> 0:15:09.560 smooths the way obviously for issuance of large amounts of 0:15:10.240 --> 0:15:14.160 federal debt. That's going to continue, but at a diministrate 0:15:14.720 --> 0:15:18.040 and I actually joined, I'm part of the school of 0:15:18.080 --> 0:15:20.640 thought that says they ought to be tapering faster. But 0:15:20.760 --> 0:15:24.560 let's remember, tapering does not mean withdrawing. It just means 0:15:24.640 --> 0:15:27.880 easing off the gas pedal. Uh. And that's why I 0:15:27.920 --> 0:15:30.280 think it's an appropriate thing for the FED to be 0:15:30.400 --> 0:15:34.880 doing uh right now. You know, there are these vaguest 0:15:34.960 --> 0:15:40.520 hints the Clarida discussion was just mentioned that the FED 0:15:40.640 --> 0:15:44.840 is thinking in that way also, we'll see, but I 0:15:44.880 --> 0:15:48.640 think they should and I don't see that coming back 0:15:48.680 --> 0:15:51.560 to your previous question as a point of contention between 0:15:51.560 --> 0:15:53.960 Powell and Brainer at all. I just want to bring 0:15:54.000 --> 0:15:57.200 you some newsly, so just very quickly, one twenty Eastern time, 0:15:57.200 --> 0:15:59.000 we will hear from the President of Nada States Lay 0:15:59.040 --> 0:16:01.640 will also hear from the air and the Vice Chair, 0:16:02.080 --> 0:16:05.440 the nominations for both Chairman Powell and Governor Brain It 0:16:05.600 --> 0:16:08.840 also delivering remarks a little bit later. That's one twenty 0:16:08.960 --> 0:16:11.600 Eastern time, So we're here from all three perhaps a 0:16:11.600 --> 0:16:14.480 little bit later, and in the meantime, certain comments are 0:16:14.520 --> 0:16:17.240 already rolling in from the leadership of the Senate. We 0:16:17.360 --> 0:16:20.000 do get us. Senator Shared Brown, chair of the Sudding 0:16:20.000 --> 0:16:23.040 Committee on Banking, Housing, and Urban Affairs, coming out and 0:16:23.360 --> 0:16:26.520 seeming to endorse FED Chair j Powell, saying that he 0:16:26.600 --> 0:16:29.480 led our economy through a historic pandemic and under his 0:16:29.600 --> 0:16:33.080 and President Biden's leadership, unemployment has fallen and workers are 0:16:33.080 --> 0:16:37.320 seeing increased bargaining power. Alan, when we look forward, what 0:16:37.480 --> 0:16:40.040 is the biggest risk in your view for the Federal 0:16:40.120 --> 0:16:44.200 Reserve moving too quickly or waiting too long to raise rates. 0:16:45.400 --> 0:16:48.200 I think it's probably waiting too long, but I can 0:16:48.360 --> 0:16:51.480 understand the way I thought you were good leading up 0:16:51.520 --> 0:16:53.720 to a slighting through it question. I'm just gonna say, 0:16:53.760 --> 0:16:56.840 I think the biggest risk that the FED. It's weighing 0:16:56.840 --> 0:16:59.480 on the FED right now is whether we're going to 0:16:59.600 --> 0:17:04.200 get on another wave of COVID infections coming over from Europe, 0:17:04.440 --> 0:17:08.000 as has happened several times in the past. If that happens, 0:17:08.000 --> 0:17:11.760 we're gonna get kicked down the staircase again, and we're 0:17:11.760 --> 0:17:13.720 gonna be looking at the first to help us get up. 0:17:14.320 --> 0:17:18.000 And I think that's the main reason why, uh, they're 0:17:18.040 --> 0:17:23.639 not anxious to lift off interest rates. That's slightly separate 0:17:23.920 --> 0:17:27.439 question from the taper. The taper is pressing on the 0:17:27.480 --> 0:17:30.800 gas pedal out at a time when it's really not appropriate. 0:17:30.920 --> 0:17:35.080 The liftoff is when you start tapping the brakes uh 0:17:35.160 --> 0:17:37.359 a bit. They're not ready to do that, and I 0:17:37.400 --> 0:17:40.520 think this big risk of the disease is a major 0:17:40.560 --> 0:17:43.240 reason for that. Alan. Given what we've heard from Germany 0:17:43.280 --> 0:17:46.080 this morning and from Europe over the last couple of weeks, 0:17:46.080 --> 0:17:47.600 I think a lot of people might agree with you. 0:17:47.840 --> 0:17:50.240 Tom Let's just frame the president's next twenty four hours. 0:17:50.280 --> 0:17:52.240 Just think about this. We're expecting some comments from the 0:17:52.240 --> 0:17:56.080 president tomorrow about lowering prices, and today he's going to 0:17:56.160 --> 0:18:00.520 stand alongside Chapel a governor Brainer to talk about what 0:18:00.640 --> 0:18:04.280 exactly the future stable prices, lower prices. You put those 0:18:04.280 --> 0:18:07.919 two to two events, togetha and something. They're pretty interested gotten. 0:18:07.920 --> 0:18:10.679 They got into the Thanksgiving holiday, Oh it's a dynamics. 0:18:10.680 --> 0:18:14.280 It's just simply John the into the holidays. I'll take 0:18:14.320 --> 0:18:16.440 your point in this, John, but what I see here 0:18:16.440 --> 0:18:20.720 as all new inequality is is well, I mean, there's 0:18:20.760 --> 0:18:23.560 the halves and the have nots. There's a partition, John Farrell, 0:18:23.640 --> 0:18:26.600 within our society, and that's what they have to confront. 0:18:26.720 --> 0:18:29.399 Mike McKay once twenty Eastern time, we'll get some comments 0:18:29.400 --> 0:18:31.399 from the President of the United States on this, and 0:18:31.400 --> 0:18:33.280 we're here from Sham and Pound and Governor Bran. Mike, 0:18:33.320 --> 0:18:35.200 what are you looking for from those comments? A little 0:18:35.200 --> 0:18:37.640 bit late to this afternoon. It's kind of interesting because 0:18:37.680 --> 0:18:41.119 the President has already scheduled a talk on the economy 0:18:41.200 --> 0:18:44.280 and inflation for tomorrow, so I'm not sure how much 0:18:44.560 --> 0:18:47.040 he wants to step on that, but apparently he does 0:18:47.080 --> 0:18:50.160 want to introduce his two new leaders for the FED, 0:18:50.240 --> 0:18:54.120 and we'll probably talk about inflation. That is the key 0:18:54.200 --> 0:18:57.520 element in the statement the White House put out, the 0:18:57.560 --> 0:19:01.240 President is quoted as saying that he ciates the focus 0:19:01.240 --> 0:19:06.880 of Chair Powell and Leo Brainerd on inflation and on jobs, 0:19:06.920 --> 0:19:11.080 on full employment, putting inflation as his first priority. So 0:19:11.280 --> 0:19:13.199 one can assume he's going to try to deal with 0:19:13.240 --> 0:19:16.520 that both today and tomorrow. I wouldn't expect a whole 0:19:16.520 --> 0:19:20.320 lot from J. Powell and Leo Brainerd as nominees. You 0:19:20.359 --> 0:19:22.399 don't want to get out ahead of the Senate. You 0:19:22.440 --> 0:19:24.919 want to save anything that could end up being a 0:19:24.960 --> 0:19:28.520 controversial comment until then, Uh, they'll thank him and say 0:19:28.520 --> 0:19:32.440 there here to help the economy move forward. I see 0:19:32.480 --> 0:19:35.639 now Alan Blinder still where there's the former vice chairman 0:19:35.680 --> 0:19:38.399 of the Federal Reserve and at Princeton Allen. There was 0:19:38.440 --> 0:19:41.439 a point long agoing far away where a Federal Reserve 0:19:41.560 --> 0:19:45.080 chairman was contained. Not only Chairman Paul, but others have 0:19:45.200 --> 0:19:47.560 changed that rule book for the time of green Span. 0:19:48.200 --> 0:19:51.879 Blinder is, well, how will the second term of power 0:19:52.080 --> 0:19:55.280 be different? How does he cast the day to day, 0:19:55.400 --> 0:20:00.680 the press conference to press conference differently? Reappointed, I think 0:20:00.720 --> 0:20:04.000 that's completely dependent on the state of the economy right now. 0:20:04.240 --> 0:20:08.800 As several of you have just correctly said, inflation is 0:20:08.880 --> 0:20:12.840 popping up as the main problem facing the FED, which 0:20:12.840 --> 0:20:15.960 hasn't been true for years, like maybe maybe I should 0:20:15.960 --> 0:20:19.160 say decades. I mean, it's been a long time since 0:20:19.200 --> 0:20:21.800 the FED chair or the f m S more broadly, 0:20:22.200 --> 0:20:25.480 is really concerned about high inflation, but now they are, 0:20:26.160 --> 0:20:29.280 and so I think for that reason alone, you'll see 0:20:29.960 --> 0:20:34.480 a different tone of rhetoric coming out over the coming months, 0:20:34.520 --> 0:20:38.800 and eventually everybody's guessing when a lift off on interest 0:20:38.880 --> 0:20:42.560 rates to try to slow things down a bit and 0:20:42.960 --> 0:20:47.719 counter the inflationary search. That guessing getting continues this morning 0:20:47.760 --> 0:20:49.919 with your two year, your five year, the yields on 0:20:50.000 --> 0:20:53.960 both at the highs. From off the back of this decision, 0:20:53.960 --> 0:20:56.920 some comments from Secretary yelling the former Fed share of course, 0:20:56.960 --> 0:20:59.800 saying she's pleased with pal brain and nominations. It will 0:20:59.840 --> 0:21:02.639 can ten you to support a strong federal reserve. Kathy 0:21:02.720 --> 0:21:04.960 Jones a schwab stool with us. Kathy, thanks for staying 0:21:05.000 --> 0:21:06.639 patient at stand close. I want to bring him into 0:21:06.640 --> 0:21:09.560 the conversation again. We will hear it once went from 0:21:09.560 --> 0:21:12.560 all three, from the President, from the chair and from 0:21:12.600 --> 0:21:16.120 the would be vice chair. Let's see how the nominations 0:21:16.160 --> 0:21:17.879 goes and how that works out down in d C. 0:21:18.240 --> 0:21:20.000