WEBVTT - Inflation Makes Duke Bootee Wonder How I Keep From Going Under

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<v Speaker 1>Two. That is the unmistakable opening of the message, the

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<v Speaker 1>seminal hip hop song from Grand Master Flash and the

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<v Speaker 1>Furious Five. Now you might wonder why are we playing

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<v Speaker 1>that song on our podcast about the global economy. I'm

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<v Speaker 1>Scott Landman, an economics editor with Bloomberg News in Washington,

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<v Speaker 1>and I'm Daniel Moss, executive editor for Global Economics in

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<v Speaker 1>New York. You know, Scott, the beauty of this is

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<v Speaker 1>economics is too often mistaken for the study of statistics.

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<v Speaker 1>That's boring. Economies are living, breathing things, composed of people

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<v Speaker 1>making decisions each day. Well, one of the things that

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<v Speaker 1>affects people in their day to day lives is inflation,

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<v Speaker 1>and it affected people a lot more in the seventies

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<v Speaker 1>and eighties than it does today. But anyway, the Federal

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<v Speaker 1>Reserve has just raised interest rates by a quarter point

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<v Speaker 1>and one of the major reasons they cited is inflation

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<v Speaker 1>is picking up and getting close to the central banks target.

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<v Speaker 1>But there's actually a line in the message that brings

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<v Speaker 1>us full circle. Got a education, double digit inflation, You

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<v Speaker 1>can take the train to the job back at the station. Now.

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<v Speaker 1>That was in two just as the country was recovering

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<v Speaker 1>from inflation being truly in the double digits or over ten.

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<v Speaker 1>We were fortunate to speak with Ed Fletcher, the man

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<v Speaker 1>who wrote those lyrics. He's also known as Juke Booty.

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<v Speaker 1>We talked with him about what was going through his

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<v Speaker 1>mind at the time and happening in the world around him,

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<v Speaker 1>and we got even more than rebargained for. You'll hear

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<v Speaker 1>that interview in just a moment. It's hard to talk that, Scott,

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<v Speaker 1>but we thought we'd check in with Alice Rivlin. Alice

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<v Speaker 1>is a form of vice chair of the FED now

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<v Speaker 1>at Brookings Institution, and find out what historical perspective she

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<v Speaker 1>has on those days and what she eases today's principal

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<v Speaker 1>economic challenge. All right, well, without further ado, here is

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<v Speaker 1>our interview with Ed Duke Booty Fletcher. He joins us

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<v Speaker 1>on the phone from the beautiful southern city of Savannah, Georgia,

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<v Speaker 1>where he is a lecturer of critical thinking at Savannah

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<v Speaker 1>State University. Let's let's go back to that era. This

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<v Speaker 1>was two when that song came out. Uh at different time,

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<v Speaker 1>different economy, different political situation in our country. What inspired

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<v Speaker 1>you to write the lyrics for that song? Actually, I

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<v Speaker 1>don't think the times are all that different. And I

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<v Speaker 1>tell people that I think coming up the teens are

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<v Speaker 1>going to make the sixties, seventies and eighties look like

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<v Speaker 1>So I think this kind of situation, you know, economic deprivation,

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<v Speaker 1>lack of opportunity, not seeing certain images projected in a

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<v Speaker 1>positive way, and living with it. I don't think that

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<v Speaker 1>for a certain class of people things have changed all

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<v Speaker 1>that much. Where were you living at the time, and

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<v Speaker 1>how old were you? I was living in Elizabeth, New Jersey.

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<v Speaker 1>I'm Elizabeth boy. And the things that you wrote about

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<v Speaker 1>in the song, Where is that coming from? Well? I

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<v Speaker 1>never say, but a lot of my friends say that

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<v Speaker 1>I could have looked right out my living room window

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<v Speaker 1>to the park across the street from my house and

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<v Speaker 1>seeing any of those visions. So I guess it came

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<v Speaker 1>from what I was living. I'm struck ed that you

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<v Speaker 1>think the economic times are not all that different. I mean,

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<v Speaker 1>one of the lines and the song that appeals to

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<v Speaker 1>us as an economics podcast is the line about double

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<v Speaker 1>digit inflation. When you look at today's inflation numbers, that

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<v Speaker 1>seems like it's a long way away. Yeah, truly. And

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<v Speaker 1>I and I thought about the interest rate Joe going

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<v Speaker 1>up and what the house mortgage rate is. But to

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<v Speaker 1>a certain class of people that really doesn't hit their consciousness.

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<v Speaker 1>I mean they're still faced with the same problems. I

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<v Speaker 1>mean during the you know, the housing mortgage where everyone

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<v Speaker 1>could get a mortgage, the people I was talking to

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<v Speaker 1>still couldn't get them. More So, if the song were

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<v Speaker 1>written today, maybe double digit inflation, something else would go

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<v Speaker 1>in place of that. Yeah, as far as something that

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<v Speaker 1>rhyme with poverty kiss out on them? Well, when you

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<v Speaker 1>when you actually wrote the song, I mean that there

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<v Speaker 1>pictures that you created of so many different things happening.

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<v Speaker 1>You're talking about the bill collectors, talking about can't take

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<v Speaker 1>the train to the job, there's a strike at the station,

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<v Speaker 1>you know, things that are happening in the streets. Why

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<v Speaker 1>of all these things did you choose to mention double

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<v Speaker 1>digit inflation in the middle of all that. You know,

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<v Speaker 1>as a songwriter, you're looking for things that rod It's funny.

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<v Speaker 1>I just did interest with the guy through Vanity Fair

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<v Speaker 1>and he asked me about the Blind sacro Iliac, And

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<v Speaker 1>I said, well, do you We're a songwriter and you

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<v Speaker 1>were looking with something that rhymes was the previous wine

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<v Speaker 1>you may have? You know, I didn't even think that

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<v Speaker 1>was one of my best rhymes. But you know, you

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<v Speaker 1>never know what's gonna happen. But double digit inflation, I mean,

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<v Speaker 1>everybody can here with the fact their money ain't what

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<v Speaker 1>he used to be. Well, how did that affect you

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<v Speaker 1>or people you knew at the time. What was it

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<v Speaker 1>something that you just heard about on the news all

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<v Speaker 1>the time, or was it really burrowing into people's lives. Well,

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<v Speaker 1>you know, you gotta understand that even at that time,

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<v Speaker 1>I had a college degree, I had a master's degree,

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<v Speaker 1>I had taught and for me And I just told

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<v Speaker 1>someone today, the fact that President Trump is the president,

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<v Speaker 1>and the fact that there's all these arguments about health care.

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<v Speaker 1>I'm sixty I'm sixty five. My health care has been

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<v Speaker 1>straight for thirty years. My wife worked for the government

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<v Speaker 1>for thirty years. My kids have good health care, my

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<v Speaker 1>grandkids have good health care. It's not so much de

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<v Speaker 1>fact what I'm facing. What you think about a certain

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<v Speaker 1>population and you know the sort of desilation they face,

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<v Speaker 1>and you're trying to get to a certain audience. I

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<v Speaker 1>can't write, you know, songs about my situation as much

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<v Speaker 1>as I can about I did just write one about

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<v Speaker 1>my situation, but it really doesn't have those economic references

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<v Speaker 1>and has more of an age reference because you're going

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<v Speaker 1>to be sixty six. And just to get back to

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<v Speaker 1>that word you mentioned tesselation. Now you also mentioned President Trump.

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<v Speaker 1>You know, his victory is often portrayed as a primal

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<v Speaker 1>screen from at least some sections of the working class.

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<v Speaker 1>Why do you think then so many people feeling desolation

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<v Speaker 1>effectively voted to lose their healthcare. Well, you have to

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<v Speaker 1>understand that in America, if race isn't the context, it

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<v Speaker 1>certainly is going to be the subtext. And what people

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<v Speaker 1>fail to talk about when they talk about President Trump.

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<v Speaker 1>And you know, I did you look at my website.

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<v Speaker 1>I call myself a colored conservative. And what people fail

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<v Speaker 1>to look at as is the subject of race and

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<v Speaker 1>the social context of how people vote. The only thing

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<v Speaker 1>they can get a person to vote against their own

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<v Speaker 1>economic interest is a certain social subtext or context. And

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<v Speaker 1>I think that beyond the racial context, beyond the racial subtext,

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<v Speaker 1>there were also other things going on with overreached by

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<v Speaker 1>other communities. And when people feel that overreach is happening,

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<v Speaker 1>they feel like and and and also anyone who knows

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<v Speaker 1>history knows that the first time black people got any

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<v Speaker 1>power in this country was during reconstruction, and reconstruction brought

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<v Speaker 1>us Jim Kru there's always a natural, natural swing to

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<v Speaker 1>the other side before you come back to the home

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<v Speaker 1>meal stasis that we're used to. I mean the idea

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<v Speaker 1>that people are persuaded to vote against their economic self

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<v Speaker 1>interest by cultural symbols. I think that's what you're saying

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<v Speaker 1>right exactly exactly what most people don't understand is anyone

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<v Speaker 1>who would ever vote against their own economic interest. But

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<v Speaker 1>that's very clear throughout history people have done that, but

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<v Speaker 1>other ideas, and I think that those social contexts become

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<v Speaker 1>those ideas in this case. So people might not be

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<v Speaker 1>facing double digit inflation today, but they certainly face a

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<v Speaker 1>host of not just economic but uh, you know, racialist

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<v Speaker 1>issues that could be holding them back. For well, that's

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<v Speaker 1>that's actually, if you want to know the truth, that's

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<v Speaker 1>actually never changed. If you look during the Clinton era,

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<v Speaker 1>when home buying in America was at its highest, there

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<v Speaker 1>was a certain element people who still couldn't get a mortgage,

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<v Speaker 1>who still didn't have enough money for a down payment,

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<v Speaker 1>and who never got a home. So now those same people,

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<v Speaker 1>you know, even though the mortgage rate was low and

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<v Speaker 1>you could get a mortgage, I didn't have the money

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<v Speaker 1>for more. So you know, that same destination still there.

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<v Speaker 1>You know ed I grew up in suburban Australia, as

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<v Speaker 1>you can probably gather, and I remember, well, I figured

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<v Speaker 1>that he had it somewhere in England I lived in.

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<v Speaker 1>So I was like trying to figure where is that English?

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<v Speaker 1>The southeast of England, ten thousand miles to the southeast.

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<v Speaker 1>But but you know there I was, you know, in

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<v Speaker 1>my teens, and I believe it or not, that was

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<v Speaker 1>a hit in Australia. Actually you probably do believe it,

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<v Speaker 1>because I'm sure you've seen the night to be in

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<v Speaker 1>my record Where to make your money? But I know

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<v Speaker 1>where money? Okay? But the scene described in the lyrics

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<v Speaker 1>and the video as well was something radical to me

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<v Speaker 1>in a teenage upbringing in suburban Australia. Where was that

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<v Speaker 1>video shot? Was that shot? It in Manhattan? It was

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<v Speaker 1>shot in Manhattan and little known in fact, you were

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<v Speaker 1>not actually in the video and someone else was. Lips

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<v Speaker 1>was supposed to produce it wound up not producing it

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<v Speaker 1>because the budget I wanted for it wasn't going to

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<v Speaker 1>be allotted, So I said, well, you know, y'all, they

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<v Speaker 1>can do what you want. Now would any of the

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<v Speaker 1>people who featured in that video, and there are a

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<v Speaker 1>lot of straight scenes recognize both the city economy in

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<v Speaker 1>that area, the regional economy in the national economy. I mean,

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<v Speaker 1>back then the United States and other Western countries was

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<v Speaker 1>much more of a manufacturer. The digital economy didn't exist yet,

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<v Speaker 1>and urban gentrification, I guess had not yet happened. What's

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<v Speaker 1>that neighborhood look like now? Probably it was work unless

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<v Speaker 1>some of the scenes took place in downtown Manhattan round

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<v Speaker 1>that's like Disney Man, that's nothing like it was if

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<v Speaker 1>you're from Jersey and you're my age, what it grew

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<v Speaker 1>up like. But the kind of gentrification that that Harlem

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<v Speaker 1>faced and Brookelyn is facing is facing Savannah right now.

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<v Speaker 1>So urban scenes continually change and rechanged themselves depending on

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<v Speaker 1>the need for housing. Who wants to live close to

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<v Speaker 1>the urban center? Well ed, it's rare for us at

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<v Speaker 1>Bloomberg to get such a trench and economic insights from

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<v Speaker 1>people who, you know, we don't normally talk to on

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<v Speaker 1>a regular basis outside of the economic and financial world.

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<v Speaker 1>So this has been a real treat and a pleasure

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<v Speaker 1>and an honor, you know, anytime. Man, I'd like to

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<v Speaker 1>think of myself as somewhat of a thinker, and I

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<v Speaker 1>do follow many of the Boomberg outlets because I follow

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<v Speaker 1>business because business is an indicator of the future. Ed,

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<v Speaker 1>thank you, thank you so much, Thank you so much.

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<v Speaker 1>It's been a real pleasure, all right, man, I appreciate

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<v Speaker 1>the time. Well, Dan, that was a little different from

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<v Speaker 1>what we usually do here on Benchmark, wasn't it. Look

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<v Speaker 1>who said economics is about statistics. It's about living, breathing people, companies,

0:11:55.200 --> 0:11:59.600
<v Speaker 1>organizations making decisions each day. And that really was a

0:11:59.679 --> 0:12:03.600
<v Speaker 1>great economic history lesson. Yeah, it sure was. Now we're

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<v Speaker 1>about to go to a more traditional guest that we

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<v Speaker 1>have on Benchmark. It's Alice Rivlin, former Vice chair of

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<v Speaker 1>the FED, and we're going to see what she has

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<v Speaker 1>to say about all this. Alice, thanks so much for

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<v Speaker 1>joining us today. Delighted to be here. So in light

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<v Speaker 1>of the Fed's latest decision where they cited rising inflation

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<v Speaker 1>as one of the reasons for this latest interestry hike,

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<v Speaker 1>we're taking a longer view of inflation today. You were

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<v Speaker 1>the founding director of the Congressional Budget Office in the nineties,

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<v Speaker 1>seventies and early eighties, when inflation was running at much

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<v Speaker 1>higher rates than it is today. How did inflation affect

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<v Speaker 1>Americans lives back then? What kinds of things do you

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<v Speaker 1>remember from that time? Well, back then, especially in the seventies. Uh,

0:12:54.000 --> 0:13:00.000
<v Speaker 1>inflation was serious and at the end of the seventies

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<v Speaker 1>actually got into double digits, which seemed very important at

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<v Speaker 1>the time. What it meant for individuals was that their

0:13:10.520 --> 0:13:17.720
<v Speaker 1>prices of everything, we're going up. Consumer products and uh,

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<v Speaker 1>all kinds of things, cars and houses and uh, consumer

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<v Speaker 1>durables particularly, and other food and other things that people

0:13:28.120 --> 0:13:32.000
<v Speaker 1>had to buy. And gasoline because one of the main

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<v Speaker 1>apparent precipitating factors of such eye inflation was the oil

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<v Speaker 1>embargo to oil embargoes actually uh, and very rapidly rising

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<v Speaker 1>prices of oil and gasoline. Was it the kind of

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<v Speaker 1>situation where you would go to the grocery store from

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<v Speaker 1>one month to the next or the gas station from

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<v Speaker 1>one month to the next, and you'd be like, oh,

0:13:57.559 --> 0:14:01.080
<v Speaker 1>my goodness, the prices have gone up so much. Yes,

0:14:01.320 --> 0:14:10.040
<v Speaker 1>it wasn't actually a runaway inflation such as many developing

0:14:10.080 --> 0:14:15.880
<v Speaker 1>countries had experienced. And Germany after World War One, where

0:14:16.240 --> 0:14:20.600
<v Speaker 1>you had to take wheelbarrows full of marks to buy anything.

0:14:21.040 --> 0:14:25.359
<v Speaker 1>It wasn't like that, but it was really serious inflation,

0:14:25.760 --> 0:14:31.640
<v Speaker 1>prices rising from one month to the next in almost everything,

0:14:33.080 --> 0:14:36.560
<v Speaker 1>and you know Alice. Today it seems like the situation

0:14:36.600 --> 0:14:40.440
<v Speaker 1>has been turned on its head. You could almost hear

0:14:40.560 --> 0:14:43.960
<v Speaker 1>the cheers from central bankers, not just in the United

0:14:44.000 --> 0:14:46.560
<v Speaker 1>States but around the world. In the last few months,

0:14:47.120 --> 0:14:52.640
<v Speaker 1>there's some inflation, yippie two percent. It feels like the

0:14:52.720 --> 0:14:56.600
<v Speaker 1>problem of the last few years has been deflation or

0:14:56.640 --> 0:15:00.360
<v Speaker 1>disinflation in the world's major economy. Is probably something you

0:15:00.440 --> 0:15:06.120
<v Speaker 1>never thought you'd confront. Absolutely, the Japanese were the first

0:15:06.160 --> 0:15:12.440
<v Speaker 1>to confront real deflation. Prices going down, and prices going

0:15:12.520 --> 0:15:15.600
<v Speaker 1>down is a bad thing because people then expect them

0:15:15.640 --> 0:15:19.680
<v Speaker 1>to go down further, so they don't buy things. They

0:15:19.760 --> 0:15:24.160
<v Speaker 1>post poland purchases in hopes of better prices. Uh, and

0:15:24.200 --> 0:15:28.960
<v Speaker 1>then the situation gets worse. One can say, inflation on

0:15:29.000 --> 0:15:35.280
<v Speaker 1>the upside also has self perpetuating capacity, but on the

0:15:35.320 --> 0:15:42.000
<v Speaker 1>downside it's really dangerous. And the Japanese deflation was very worrisome,

0:15:42.040 --> 0:15:45.920
<v Speaker 1>and they haven't really gotten back to normal levels of

0:15:46.480 --> 0:15:51.600
<v Speaker 1>inflation even yet, and it worried all the advanced countries.

0:15:52.080 --> 0:15:59.360
<v Speaker 1>The United States never actually had uh negative inflation, But uh,

0:15:59.560 --> 0:16:03.080
<v Speaker 1>that's central bankers were worried about a few years ago.

0:16:04.080 --> 0:16:07.080
<v Speaker 1>You actually, you know, we're at the FED at a

0:16:07.160 --> 0:16:11.200
<v Speaker 1>time when the memories of the nineties, seventies and early

0:16:11.280 --> 0:16:14.520
<v Speaker 1>eighties still seemed to be very fresh. It seemed to

0:16:14.600 --> 0:16:17.320
<v Speaker 1>persist for a long time, and many of the more

0:16:17.400 --> 0:16:21.200
<v Speaker 1>hawkish policymakers who lived through that era have warned in

0:16:21.280 --> 0:16:25.560
<v Speaker 1>recent years that any excessive stimulus from the FED would

0:16:25.600 --> 0:16:30.520
<v Speaker 1>cause inflation to skyrocket. And yet that hasn't happened. Why

0:16:30.640 --> 0:16:33.840
<v Speaker 1>is that? That's right? I was at the FED uh

0:16:33.960 --> 0:16:38.800
<v Speaker 1>in the second part of the nineties to ninety nine.

0:16:39.560 --> 0:16:45.720
<v Speaker 1>Then we had very good growth in the economy. We

0:16:45.800 --> 0:16:50.680
<v Speaker 1>had tight labor markets, we got the unemployment rate down

0:16:51.040 --> 0:16:55.360
<v Speaker 1>below four percent briefly at one time, and yet there

0:16:55.440 --> 0:16:59.000
<v Speaker 1>was no inflation. And the economists who were looking at

0:16:59.040 --> 0:17:02.640
<v Speaker 1>their models and models tell you what used to happen

0:17:02.680 --> 0:17:06.880
<v Speaker 1>in the past. We're all saying we're going to get inflation.

0:17:06.920 --> 0:17:10.520
<v Speaker 1>We're going to get inflation, and we have to guard

0:17:10.720 --> 0:17:14.240
<v Speaker 1>against that. But it wasn't happening. And at the FED,

0:17:14.400 --> 0:17:17.520
<v Speaker 1>we were trying to figure out why it wasn't happening.

0:17:17.880 --> 0:17:21.440
<v Speaker 1>Alan Greenspan had a theory that proved to be right.

0:17:21.520 --> 0:17:27.400
<v Speaker 1>Actually that productivity growth had accelerated as people learned how

0:17:27.440 --> 0:17:31.720
<v Speaker 1>to use the internet, and UH that the productivity growth

0:17:32.280 --> 0:17:37.159
<v Speaker 1>was giving businesses a way to accommodate rising wages without

0:17:37.240 --> 0:17:40.719
<v Speaker 1>raising their prices. UH. That turned out to be at

0:17:40.760 --> 0:17:44.600
<v Speaker 1>least part of the explanation. But we weren't seeing inflation.

0:17:44.880 --> 0:17:50.240
<v Speaker 1>And at the time I began saying two people at

0:17:50.240 --> 0:17:53.600
<v Speaker 1>the FED and other places, I don't think we're going

0:17:53.720 --> 0:17:58.120
<v Speaker 1>to see inflation for quite a while because we've gotten

0:17:58.160 --> 0:18:03.560
<v Speaker 1>away from the inflation prone situation in the economy that

0:18:03.640 --> 0:18:06.879
<v Speaker 1>we had in the seventies and eighties. In the seventies

0:18:06.920 --> 0:18:11.840
<v Speaker 1>and eighties, we had very strong unions, often with multi

0:18:11.960 --> 0:18:18.800
<v Speaker 1>year contracts that tied wages to the consumer price index UH,

0:18:18.840 --> 0:18:23.400
<v Speaker 1>and that meant that you had a self perpetuating situation there.

0:18:24.080 --> 0:18:26.920
<v Speaker 1>If prices went up, wages would go up, and that

0:18:26.960 --> 0:18:31.600
<v Speaker 1>would put further pressure on Also, the economy was not

0:18:31.880 --> 0:18:36.320
<v Speaker 1>nearly as flexible as it is now. Back in those days.

0:18:36.320 --> 0:18:39.520
<v Speaker 1>If you were short of something, especially skilled labor, UH,

0:18:39.600 --> 0:18:43.159
<v Speaker 1>you had to raise wages and therefore costs uh to

0:18:43.359 --> 0:18:46.320
<v Speaker 1>get more labor. Now you don't, Uh. You go on

0:18:46.359 --> 0:18:50.359
<v Speaker 1>the internet and find skilled people somewhere else in another

0:18:50.400 --> 0:18:53.960
<v Speaker 1>part of our country or another part of the world.

0:18:54.359 --> 0:18:59.400
<v Speaker 1>So our economy is just much more flexible and UH

0:19:00.080 --> 0:19:05.919
<v Speaker 1>spawns more quickly to shortages than it did. Then. There

0:19:05.960 --> 0:19:07.959
<v Speaker 1>are a lot of other reasons, but I think we

0:19:08.040 --> 0:19:11.280
<v Speaker 1>don't have the same situation that we had in the

0:19:11.359 --> 0:19:16.600
<v Speaker 1>seventies and eighties. The other big thing is nobody, no

0:19:16.640 --> 0:19:23.359
<v Speaker 1>one adults UH have experienced inflation for a very long time,

0:19:24.040 --> 0:19:29.080
<v Speaker 1>and the expectation of inflation is one of the things

0:19:29.160 --> 0:19:33.880
<v Speaker 1>that fuels this self perpetuating cycle cycle. Back then, if

0:19:33.920 --> 0:19:37.040
<v Speaker 1>prices went up, people said, oh dear, they're going up more.

0:19:38.000 --> 0:19:43.000
<v Speaker 1>We're going to have to buy quickly. But now nobody

0:19:43.080 --> 0:19:46.000
<v Speaker 1>expects inflation. We haven't had any for a long time,

0:19:46.040 --> 0:19:48.480
<v Speaker 1>and as you said, the Fed's been worrying about it's

0:19:48.480 --> 0:19:52.159
<v Speaker 1>being too low. Uh. So UH, we just don't have

0:19:52.280 --> 0:19:56.640
<v Speaker 1>those inflationary expectations, you know, Alice, We just heard from

0:19:56.800 --> 0:20:01.440
<v Speaker 1>Duke Pooty who wrote the message. He was saying, well,

0:20:01.520 --> 0:20:05.520
<v Speaker 1>just because there's no longer double digit inflation does not

0:20:05.800 --> 0:20:09.359
<v Speaker 1>mean we're out of the economic woods. It does not

0:20:09.600 --> 0:20:14.240
<v Speaker 1>mean there aren't serious economic challenges facing Americans and the

0:20:14.280 --> 0:20:18.240
<v Speaker 1>world today. What's number one of your worry list? I

0:20:18.280 --> 0:20:21.040
<v Speaker 1>have a long worry list, and inflation is very far

0:20:21.119 --> 0:20:28.000
<v Speaker 1>down it. Uh one is the inequality of growth in

0:20:28.080 --> 0:20:32.439
<v Speaker 1>the United States, where the fruits of growth have gone

0:20:32.920 --> 0:20:37.440
<v Speaker 1>more and more heavily to the top one or two

0:20:37.440 --> 0:20:43.200
<v Speaker 1>percent of the income distribution, and wages of average people

0:20:43.280 --> 0:20:47.560
<v Speaker 1>have lagged far behind. That's very serious. I think climate

0:20:47.640 --> 0:20:51.720
<v Speaker 1>change is a very serious threat over time to all

0:20:51.800 --> 0:20:55.600
<v Speaker 1>of our economies, and we're not addressing it. I think

0:20:55.840 --> 0:21:01.120
<v Speaker 1>financial instability is another threat. We just saw in two

0:21:01.119 --> 0:21:06.240
<v Speaker 1>thousand and eight that we can have a crisis in

0:21:06.320 --> 0:21:12.520
<v Speaker 1>our financial system and that precipitates a terrible recession that

0:21:12.680 --> 0:21:18.600
<v Speaker 1>we're only now recovering fully from. Uh. So, that's that's

0:21:18.720 --> 0:21:21.879
<v Speaker 1>why uh uh Top three. I could give you some

0:21:21.960 --> 0:21:24.320
<v Speaker 1>more before I got to inflation. Well, let's let's go

0:21:24.359 --> 0:21:28.680
<v Speaker 1>back to inflation again. The FED is actually mandated by

0:21:28.800 --> 0:21:33.199
<v Speaker 1>Congress to focus on stable prices and maximum employment, the

0:21:33.240 --> 0:21:37.320
<v Speaker 1>so called dual mandate. Most other central banks in the

0:21:37.359 --> 0:21:40.680
<v Speaker 1>developed world, Bank of England, European Central Bank, so on,

0:21:40.920 --> 0:21:45.679
<v Speaker 1>and so forth, also have mandates to focus on price stability,

0:21:46.160 --> 0:21:49.440
<v Speaker 1>and they many of them, have interpreted it to mean

0:21:50.359 --> 0:21:55.840
<v Speaker 1>trying to achieve inflation of two Should lawmakers in these

0:21:55.880 --> 0:21:59.440
<v Speaker 1>countries think about changing these kinds of mandates to focus

0:21:59.480 --> 0:22:01.800
<v Speaker 1>on some of the other kinds of things you were

0:22:01.840 --> 0:22:07.639
<v Speaker 1>talking about more prominently? And is two percent inflation the

0:22:07.720 --> 0:22:10.200
<v Speaker 1>right target to be focused on if they have to

0:22:10.240 --> 0:22:14.840
<v Speaker 1>decide on a on a stable price target. I think

0:22:14.880 --> 0:22:18.239
<v Speaker 1>two percent is a pretty good goal. Back when I

0:22:18.320 --> 0:22:21.159
<v Speaker 1>was at the FED, actually the inflation hawks used to

0:22:21.200 --> 0:22:25.320
<v Speaker 1>aim for zero. But I think we have learned that

0:22:26.600 --> 0:22:29.960
<v Speaker 1>zero puts you in a dangerous place. You might get

0:22:30.080 --> 0:22:34.080
<v Speaker 1>deflation because you can't be very exact about it. Uh.

0:22:34.160 --> 0:22:39.840
<v Speaker 1>Two percent is an okay number. I wouldn't be terribly

0:22:39.880 --> 0:22:43.399
<v Speaker 1>worried if inflation crept up to two and a half

0:22:43.560 --> 0:22:48.520
<v Speaker 1>or three, because I think inflation is what central banks

0:22:48.600 --> 0:22:53.640
<v Speaker 1>know how to deal with very easily. Uh. If inflation

0:22:53.800 --> 0:22:57.480
<v Speaker 1>does seem to be getting too high, then they can

0:22:57.560 --> 0:23:01.760
<v Speaker 1>raise interest rates and that that work. We know that. Uh.

0:23:01.800 --> 0:23:04.000
<v Speaker 1>The things that are much harder to deal with, our

0:23:04.040 --> 0:23:09.919
<v Speaker 1>slow growth and other things that the Federal Reserve doesn't

0:23:09.960 --> 0:23:15.879
<v Speaker 1>have very good instruments to to deal with. If you

0:23:17.040 --> 0:23:22.800
<v Speaker 1>UH lower the rate, the short term interest rate UH

0:23:22.880 --> 0:23:27.760
<v Speaker 1>down near zero, you can't get it below zero. And

0:23:27.840 --> 0:23:31.159
<v Speaker 1>if your economy is still in recession, then you have

0:23:31.240 --> 0:23:33.520
<v Speaker 1>to figure out what else to do now. In the

0:23:33.560 --> 0:23:39.280
<v Speaker 1>Great Recession, everybody figured it out, and the central banks

0:23:39.320 --> 0:23:45.640
<v Speaker 1>had good success with increasing monetary ease by UH simply

0:23:45.880 --> 0:23:51.919
<v Speaker 1>buying security but keeping downward pressure on the range of

0:23:52.200 --> 0:23:57.760
<v Speaker 1>interest rates. But it's not guaranteed to be successful very quickly.

0:23:57.840 --> 0:24:04.639
<v Speaker 1>Fiscal policy is much more effective in raising growth and employment.

0:24:05.440 --> 0:24:09.160
<v Speaker 1>UM So, I don't mind a two percent target on inflation.

0:24:09.280 --> 0:24:12.360
<v Speaker 1>I just think it shouldn't be taken too seriously if

0:24:12.400 --> 0:24:15.400
<v Speaker 1>we rise above it a little bit, all right, Well, Alice,

0:24:15.520 --> 0:24:17.320
<v Speaker 1>we're going to have to leave it there. Thank you

0:24:17.400 --> 0:24:19.720
<v Speaker 1>so much for joining us today. This has been a

0:24:19.840 --> 0:24:25.040
<v Speaker 1>very enlightening conversation. Good enjoyed it. Benchmark will be back

0:24:25.080 --> 0:24:27.399
<v Speaker 1>next week and until then, you can find us in

0:24:27.480 --> 0:24:30.359
<v Speaker 1>so many places the Bloomberg terminal, Bloomberg dot com, or

0:24:30.359 --> 0:24:34.480
<v Speaker 1>Bloomberg App, as well as on iTunes, pocketcasts, and Stitcher.

0:24:34.920 --> 0:24:37.479
<v Speaker 1>While you're there, please rate and review the show so

0:24:37.600 --> 0:24:40.199
<v Speaker 1>more listeners can find us. And you can find us

0:24:40.200 --> 0:24:43.560
<v Speaker 1>on Twitter I'm at at scott Landman and Dan you

0:24:43.600 --> 0:24:47.760
<v Speaker 1>are at at Moss. Underscore Echo Benchmark is produced by

0:24:47.800 --> 0:24:51.920
<v Speaker 1>Sarah Patterson and the head of Bloomberg Podcast is Alec McCabe.

0:24:52.440 --> 0:25:01.200
<v Speaker 1>Thanks for listening, See you next time. But the time

0:25:01.440 --> 0:25:10.080
<v Speaker 1>party back to Torment and turned back and the sundered

0:25:10.320 --> 0:25:12.560
<v Speaker 1>by pass my fnger