Speaker 1: Two. That is the unmistakable opening of the message, the
Speaker 1: seminal hip hop song from Grand Master Flash and the
Speaker 1: Furious Five. Now you might wonder why are we playing
Speaker 1: that song on our podcast about the global economy. I'm
Speaker 1: Scott Landman, an economics editor with Bloomberg News in Washington,
Speaker 1: and I'm Daniel Moss, executive editor for Global Economics in
Speaker 1: New York. You know, Scott, the beauty of this is
Speaker 1: economics is too often mistaken for the study of statistics.
Speaker 1: That's boring. Economies are living, breathing things, composed of people
Speaker 1: making decisions each day. Well, one of the things that
Speaker 1: affects people in their day to day lives is inflation,
Speaker 1: and it affected people a lot more in the seventies
Speaker 1: and eighties than it does today. But anyway, the Federal
Speaker 1: Reserve has just raised interest rates by a quarter point
Speaker 1: and one of the major reasons they cited is inflation
Speaker 1: is picking up and getting close to the central banks target.
Speaker 1: But there's actually a line in the message that brings
Speaker 1: us full circle. Got a education, double digit inflation, You
Speaker 1: can take the train to the job back at the station. Now.
Speaker 1: That was in two just as the country was recovering
Speaker 1: from inflation being truly in the double digits or over ten.
Speaker 1: We were fortunate to speak with Ed Fletcher, the man
Speaker 1: who wrote those lyrics. He's also known as Juke Booty.
Speaker 1: We talked with him about what was going through his
Speaker 1: mind at the time and happening in the world around him,
Speaker 1: and we got even more than rebargained for. You'll hear
Speaker 1: that interview in just a moment. It's hard to talk that, Scott,
Speaker 1: but we thought we'd check in with Alice Rivlin. Alice
Speaker 1: is a form of vice chair of the FED now
Speaker 1: at Brookings Institution, and find out what historical perspective she
Speaker 1: has on those days and what she eases today's principal
Speaker 1: economic challenge. All right, well, without further ado, here is
Speaker 1: our interview with Ed Duke Booty Fletcher. He joins us
Speaker 1: on the phone from the beautiful southern city of Savannah, Georgia,
Speaker 1: where he is a lecturer of critical thinking at Savannah
Speaker 1: State University. Let's let's go back to that era. This
Speaker 1: was two when that song came out. Uh at different time,
Speaker 1: different economy, different political situation in our country. What inspired
Speaker 1: you to write the lyrics for that song? Actually, I
Speaker 1: don't think the times are all that different. And I
Speaker 1: tell people that I think coming up the teens are
Speaker 1: going to make the sixties, seventies and eighties look like
Speaker 1: So I think this kind of situation, you know, economic deprivation,
Speaker 1: lack of opportunity, not seeing certain images projected in a
Speaker 1: positive way, and living with it. I don't think that
Speaker 1: for a certain class of people things have changed all
Speaker 1: that much. Where were you living at the time, and
Speaker 1: how old were you? I was living in Elizabeth, New Jersey.
Speaker 1: I'm Elizabeth boy. And the things that you wrote about
Speaker 1: in the song, Where is that coming from? Well? I
Speaker 1: never say, but a lot of my friends say that
Speaker 1: I could have looked right out my living room window
Speaker 1: to the park across the street from my house and
Speaker 1: seeing any of those visions. So I guess it came
Speaker 1: from what I was living. I'm struck ed that you
Speaker 1: think the economic times are not all that different. I mean,
Speaker 1: one of the lines and the song that appeals to
Speaker 1: us as an economics podcast is the line about double
Speaker 1: digit inflation. When you look at today's inflation numbers, that
Speaker 1: seems like it's a long way away. Yeah, truly. And
Speaker 1: I and I thought about the interest rate Joe going
Speaker 1: up and what the house mortgage rate is. But to
Speaker 1: a certain class of people that really doesn't hit their consciousness.
Speaker 1: I mean they're still faced with the same problems. I
Speaker 1: mean during the you know, the housing mortgage where everyone
Speaker 1: could get a mortgage, the people I was talking to
Speaker 1: still couldn't get them. More So, if the song were
Speaker 1: written today, maybe double digit inflation, something else would go
Speaker 1: in place of that. Yeah, as far as something that
Speaker 1: rhyme with poverty kiss out on them? Well, when you
Speaker 1: when you actually wrote the song, I mean that there
Speaker 1: pictures that you created of so many different things happening.
Speaker 1: You're talking about the bill collectors, talking about can't take
Speaker 1: the train to the job, there's a strike at the station,
Speaker 1: you know, things that are happening in the streets. Why
Speaker 1: of all these things did you choose to mention double
Speaker 1: digit inflation in the middle of all that. You know,
Speaker 1: as a songwriter, you're looking for things that rod It's funny.
Speaker 1: I just did interest with the guy through Vanity Fair
Speaker 1: and he asked me about the Blind sacro Iliac, And
Speaker 1: I said, well, do you We're a songwriter and you
Speaker 1: were looking with something that rhymes was the previous wine
Speaker 1: you may have? You know, I didn't even think that
Speaker 1: was one of my best rhymes. But you know, you
Speaker 1: never know what's gonna happen. But double digit inflation, I mean,
Speaker 1: everybody can here with the fact their money ain't what
Speaker 1: he used to be. Well, how did that affect you
Speaker 1: or people you knew at the time. What was it
Speaker 1: something that you just heard about on the news all
Speaker 1: the time, or was it really burrowing into people's lives. Well,
Speaker 1: you know, you gotta understand that even at that time,
Speaker 1: I had a college degree, I had a master's degree,
Speaker 1: I had taught and for me And I just told
Speaker 1: someone today, the fact that President Trump is the president,
Speaker 1: and the fact that there's all these arguments about health care.
Speaker 1: I'm sixty I'm sixty five. My health care has been
Speaker 1: straight for thirty years. My wife worked for the government
Speaker 1: for thirty years. My kids have good health care, my
Speaker 1: grandkids have good health care. It's not so much de
Speaker 1: fact what I'm facing. What you think about a certain
Speaker 1: population and you know the sort of desilation they face,
Speaker 1: and you're trying to get to a certain audience. I
Speaker 1: can't write, you know, songs about my situation as much
Speaker 1: as I can about I did just write one about
Speaker 1: my situation, but it really doesn't have those economic references
Speaker 1: and has more of an age reference because you're going
Speaker 1: to be sixty six. And just to get back to
Speaker 1: that word you mentioned tesselation. Now you also mentioned President Trump.
Speaker 1: You know, his victory is often portrayed as a primal
Speaker 1: screen from at least some sections of the working class.
Speaker 1: Why do you think then so many people feeling desolation
Speaker 1: effectively voted to lose their healthcare. Well, you have to
Speaker 1: understand that in America, if race isn't the context, it
Speaker 1: certainly is going to be the subtext. And what people
Speaker 1: fail to talk about when they talk about President Trump.
Speaker 1: And you know, I did you look at my website.
Speaker 1: I call myself a colored conservative. And what people fail
Speaker 1: to look at as is the subject of race and
Speaker 1: the social context of how people vote. The only thing
Speaker 1: they can get a person to vote against their own
Speaker 1: economic interest is a certain social subtext or context. And
Speaker 1: I think that beyond the racial context, beyond the racial subtext,
Speaker 1: there were also other things going on with overreached by
Speaker 1: other communities. And when people feel that overreach is happening,
Speaker 1: they feel like and and and also anyone who knows
Speaker 1: history knows that the first time black people got any
Speaker 1: power in this country was during reconstruction, and reconstruction brought
Speaker 1: us Jim Kru there's always a natural, natural swing to
Speaker 1: the other side before you come back to the home
Speaker 1: meal stasis that we're used to. I mean the idea
Speaker 1: that people are persuaded to vote against their economic self
Speaker 1: interest by cultural symbols. I think that's what you're saying
Speaker 1: right exactly exactly what most people don't understand is anyone
Speaker 1: who would ever vote against their own economic interest. But
Speaker 1: that's very clear throughout history people have done that, but
Speaker 1: other ideas, and I think that those social contexts become
Speaker 1: those ideas in this case. So people might not be
Speaker 1: facing double digit inflation today, but they certainly face a
Speaker 1: host of not just economic but uh, you know, racialist
Speaker 1: issues that could be holding them back. For well, that's
Speaker 1: that's actually, if you want to know the truth, that's
Speaker 1: actually never changed. If you look during the Clinton era,
Speaker 1: when home buying in America was at its highest, there
Speaker 1: was a certain element people who still couldn't get a mortgage,
Speaker 1: who still didn't have enough money for a down payment,
Speaker 1: and who never got a home. So now those same people,
Speaker 1: you know, even though the mortgage rate was low and
Speaker 1: you could get a mortgage, I didn't have the money
Speaker 1: for more. So you know, that same destination still there.
Speaker 1: You know ed I grew up in suburban Australia, as
Speaker 1: you can probably gather, and I remember, well, I figured
Speaker 1: that he had it somewhere in England I lived in.
Speaker 1: So I was like trying to figure where is that English?
Speaker 1: The southeast of England, ten thousand miles to the southeast.
Speaker 1: But but you know there I was, you know, in
Speaker 1: my teens, and I believe it or not, that was
Speaker 1: a hit in Australia. Actually you probably do believe it,
Speaker 1: because I'm sure you've seen the night to be in
Speaker 1: my record Where to make your money? But I know
Speaker 1: where money? Okay? But the scene described in the lyrics
Speaker 1: and the video as well was something radical to me
Speaker 1: in a teenage upbringing in suburban Australia. Where was that
Speaker 1: video shot? Was that shot? It in Manhattan? It was
Speaker 1: shot in Manhattan and little known in fact, you were
Speaker 1: not actually in the video and someone else was. Lips
Speaker 1: was supposed to produce it wound up not producing it
Speaker 1: because the budget I wanted for it wasn't going to
Speaker 1: be allotted, So I said, well, you know, y'all, they
Speaker 1: can do what you want. Now would any of the
Speaker 1: people who featured in that video, and there are a
Speaker 1: lot of straight scenes recognize both the city economy in
Speaker 1: that area, the regional economy in the national economy. I mean,
Speaker 1: back then the United States and other Western countries was
Speaker 1: much more of a manufacturer. The digital economy didn't exist yet,
Speaker 1: and urban gentrification, I guess had not yet happened. What's
Speaker 1: that neighborhood look like now? Probably it was work unless
Speaker 1: some of the scenes took place in downtown Manhattan round
Speaker 1: that's like Disney Man, that's nothing like it was if
Speaker 1: you're from Jersey and you're my age, what it grew
Speaker 1: up like. But the kind of gentrification that that Harlem
Speaker 1: faced and Brookelyn is facing is facing Savannah right now.
Speaker 1: So urban scenes continually change and rechanged themselves depending on
Speaker 1: the need for housing. Who wants to live close to
Speaker 1: the urban center? Well ed, it's rare for us at
Speaker 1: Bloomberg to get such a trench and economic insights from
Speaker 1: people who, you know, we don't normally talk to on
Speaker 1: a regular basis outside of the economic and financial world.
Speaker 1: So this has been a real treat and a pleasure
Speaker 1: and an honor, you know, anytime. Man, I'd like to
Speaker 1: think of myself as somewhat of a thinker, and I
Speaker 1: do follow many of the Boomberg outlets because I follow
Speaker 1: business because business is an indicator of the future. Ed,
Speaker 1: thank you, thank you so much, Thank you so much.
Speaker 1: It's been a real pleasure, all right, man, I appreciate
Speaker 1: the time. Well, Dan, that was a little different from
Speaker 1: what we usually do here on Benchmark, wasn't it. Look
Speaker 1: who said economics is about statistics. It's about living, breathing people, companies,
Speaker 1: organizations making decisions each day. And that really was a
Speaker 1: great economic history lesson. Yeah, it sure was. Now we're
Speaker 1: about to go to a more traditional guest that we
Speaker 1: have on Benchmark. It's Alice Rivlin, former Vice chair of
Speaker 1: the FED, and we're going to see what she has
Speaker 1: to say about all this. Alice, thanks so much for
Speaker 1: joining us today. Delighted to be here. So in light
Speaker 1: of the Fed's latest decision where they cited rising inflation
Speaker 1: as one of the reasons for this latest interestry hike,
Speaker 1: we're taking a longer view of inflation today. You were
Speaker 1: the founding director of the Congressional Budget Office in the nineties,
Speaker 1: seventies and early eighties, when inflation was running at much
Speaker 1: higher rates than it is today. How did inflation affect
Speaker 1: Americans lives back then? What kinds of things do you
Speaker 1: remember from that time? Well, back then, especially in the seventies. Uh,
Speaker 1: inflation was serious and at the end of the seventies
Speaker 1: actually got into double digits, which seemed very important at
Speaker 1: the time. What it meant for individuals was that their
Speaker 1: prices of everything, we're going up. Consumer products and uh,
Speaker 1: all kinds of things, cars and houses and uh, consumer
Speaker 1: durables particularly, and other food and other things that people
Speaker 1: had to buy. And gasoline because one of the main
Speaker 1: apparent precipitating factors of such eye inflation was the oil
Speaker 1: embargo to oil embargoes actually uh, and very rapidly rising
Speaker 1: prices of oil and gasoline. Was it the kind of
Speaker 1: situation where you would go to the grocery store from
Speaker 1: one month to the next or the gas station from
Speaker 1: one month to the next, and you'd be like, oh,
Speaker 1: my goodness, the prices have gone up so much. Yes,
Speaker 1: it wasn't actually a runaway inflation such as many developing
Speaker 1: countries had experienced. And Germany after World War One, where
Speaker 1: you had to take wheelbarrows full of marks to buy anything.
Speaker 1: It wasn't like that, but it was really serious inflation,
Speaker 1: prices rising from one month to the next in almost everything,
Speaker 1: and you know Alice. Today it seems like the situation
Speaker 1: has been turned on its head. You could almost hear
Speaker 1: the cheers from central bankers, not just in the United
Speaker 1: States but around the world. In the last few months,
Speaker 1: there's some inflation, yippie two percent. It feels like the
Speaker 1: problem of the last few years has been deflation or
Speaker 1: disinflation in the world's major economy. Is probably something you
Speaker 1: never thought you'd confront. Absolutely, the Japanese were the first
Speaker 1: to confront real deflation. Prices going down, and prices going
Speaker 1: down is a bad thing because people then expect them
Speaker 1: to go down further, so they don't buy things. They
Speaker 1: post poland purchases in hopes of better prices. Uh, and
Speaker 1: then the situation gets worse. One can say, inflation on
Speaker 1: the upside also has self perpetuating capacity, but on the
Speaker 1: downside it's really dangerous. And the Japanese deflation was very worrisome,
Speaker 1: and they haven't really gotten back to normal levels of
Speaker 1: inflation even yet, and it worried all the advanced countries.
Speaker 1: The United States never actually had uh negative inflation, But uh,
Speaker 1: that's central bankers were worried about a few years ago.
Speaker 1: You actually, you know, we're at the FED at a
Speaker 1: time when the memories of the nineties, seventies and early
Speaker 1: eighties still seemed to be very fresh. It seemed to
Speaker 1: persist for a long time, and many of the more
Speaker 1: hawkish policymakers who lived through that era have warned in
Speaker 1: recent years that any excessive stimulus from the FED would
Speaker 1: cause inflation to skyrocket. And yet that hasn't happened. Why
Speaker 1: is that? That's right? I was at the FED uh
Speaker 1: in the second part of the nineties to ninety nine.
Speaker 1: Then we had very good growth in the economy. We
Speaker 1: had tight labor markets, we got the unemployment rate down
Speaker 1: below four percent briefly at one time, and yet there
Speaker 1: was no inflation. And the economists who were looking at
Speaker 1: their models and models tell you what used to happen
Speaker 1: in the past. We're all saying we're going to get inflation.
Speaker 1: We're going to get inflation, and we have to guard
Speaker 1: against that. But it wasn't happening. And at the FED,
Speaker 1: we were trying to figure out why it wasn't happening.
Speaker 1: Alan Greenspan had a theory that proved to be right.
Speaker 1: Actually that productivity growth had accelerated as people learned how
Speaker 1: to use the internet, and UH that the productivity growth
Speaker 1: was giving businesses a way to accommodate rising wages without
Speaker 1: raising their prices. UH. That turned out to be at
Speaker 1: least part of the explanation. But we weren't seeing inflation.
Speaker 1: And at the time I began saying two people at
Speaker 1: the FED and other places, I don't think we're going
Speaker 1: to see inflation for quite a while because we've gotten
Speaker 1: away from the inflation prone situation in the economy that
Speaker 1: we had in the seventies and eighties. In the seventies
Speaker 1: and eighties, we had very strong unions, often with multi
Speaker 1: year contracts that tied wages to the consumer price index UH,
Speaker 1: and that meant that you had a self perpetuating situation there.
Speaker 1: If prices went up, wages would go up, and that
Speaker 1: would put further pressure on Also, the economy was not
Speaker 1: nearly as flexible as it is now. Back in those days.
Speaker 1: If you were short of something, especially skilled labor, UH,
Speaker 1: you had to raise wages and therefore costs uh to
Speaker 1: get more labor. Now you don't, Uh. You go on
Speaker 1: the internet and find skilled people somewhere else in another
Speaker 1: part of our country or another part of the world.
Speaker 1: So our economy is just much more flexible and UH
Speaker 1: spawns more quickly to shortages than it did. Then. There
Speaker 1: are a lot of other reasons, but I think we
Speaker 1: don't have the same situation that we had in the
Speaker 1: seventies and eighties. The other big thing is nobody, no
Speaker 1: one adults UH have experienced inflation for a very long time,
Speaker 1: and the expectation of inflation is one of the things
Speaker 1: that fuels this self perpetuating cycle cycle. Back then, if
Speaker 1: prices went up, people said, oh dear, they're going up more.
Speaker 1: We're going to have to buy quickly. But now nobody
Speaker 1: expects inflation. We haven't had any for a long time,
Speaker 1: and as you said, the Fed's been worrying about it's
Speaker 1: being too low. Uh. So UH, we just don't have
Speaker 1: those inflationary expectations, you know, Alice, We just heard from
Speaker 1: Duke Pooty who wrote the message. He was saying, well,
Speaker 1: just because there's no longer double digit inflation does not
Speaker 1: mean we're out of the economic woods. It does not
Speaker 1: mean there aren't serious economic challenges facing Americans and the
Speaker 1: world today. What's number one of your worry list? I
Speaker 1: have a long worry list, and inflation is very far
Speaker 1: down it. Uh one is the inequality of growth in
Speaker 1: the United States, where the fruits of growth have gone
Speaker 1: more and more heavily to the top one or two
Speaker 1: percent of the income distribution, and wages of average people
Speaker 1: have lagged far behind. That's very serious. I think climate
Speaker 1: change is a very serious threat over time to all
Speaker 1: of our economies, and we're not addressing it. I think
Speaker 1: financial instability is another threat. We just saw in two
Speaker 1: thousand and eight that we can have a crisis in
Speaker 1: our financial system and that precipitates a terrible recession that
Speaker 1: we're only now recovering fully from. Uh. So, that's that's
Speaker 1: why uh uh Top three. I could give you some
Speaker 1: more before I got to inflation. Well, let's let's go
Speaker 1: back to inflation again. The FED is actually mandated by
Speaker 1: Congress to focus on stable prices and maximum employment, the
Speaker 1: so called dual mandate. Most other central banks in the
Speaker 1: developed world, Bank of England, European Central Bank, so on,
Speaker 1: and so forth, also have mandates to focus on price stability,
Speaker 1: and they many of them, have interpreted it to mean
Speaker 1: trying to achieve inflation of two Should lawmakers in these
Speaker 1: countries think about changing these kinds of mandates to focus
Speaker 1: on some of the other kinds of things you were
Speaker 1: talking about more prominently? And is two percent inflation the
Speaker 1: right target to be focused on if they have to
Speaker 1: decide on a on a stable price target. I think
Speaker 1: two percent is a pretty good goal. Back when I
Speaker 1: was at the FED, actually the inflation hawks used to
Speaker 1: aim for zero. But I think we have learned that
Speaker 1: zero puts you in a dangerous place. You might get
Speaker 1: deflation because you can't be very exact about it. Uh.
Speaker 1: Two percent is an okay number. I wouldn't be terribly
Speaker 1: worried if inflation crept up to two and a half
Speaker 1: or three, because I think inflation is what central banks
Speaker 1: know how to deal with very easily. Uh. If inflation
Speaker 1: does seem to be getting too high, then they can
Speaker 1: raise interest rates and that that work. We know that. Uh.
Speaker 1: The things that are much harder to deal with, our
Speaker 1: slow growth and other things that the Federal Reserve doesn't
Speaker 1: have very good instruments to to deal with. If you
Speaker 1: UH lower the rate, the short term interest rate UH
Speaker 1: down near zero, you can't get it below zero. And
Speaker 1: if your economy is still in recession, then you have
Speaker 1: to figure out what else to do now. In the
Speaker 1: Great Recession, everybody figured it out, and the central banks
Speaker 1: had good success with increasing monetary ease by UH simply
Speaker 1: buying security but keeping downward pressure on the range of
Speaker 1: interest rates. But it's not guaranteed to be successful very quickly.
Speaker 1: Fiscal policy is much more effective in raising growth and employment.
Speaker 1: UM So, I don't mind a two percent target on inflation.
Speaker 1: I just think it shouldn't be taken too seriously if
Speaker 1: we rise above it a little bit, all right, Well, Alice,
Speaker 1: we're going to have to leave it there. Thank you
Speaker 1: so much for joining us today. This has been a
Speaker 1: very enlightening conversation. Good enjoyed it. Benchmark will be back
Speaker 1: next week and until then, you can find us in
Speaker 1: so many places the Bloomberg terminal, Bloomberg dot com, or
Speaker 1: Bloomberg App, as well as on iTunes, pocketcasts, and Stitcher.
Speaker 1: While you're there, please rate and review the show so
Speaker 1: more listeners can find us. And you can find us
Speaker 1: on Twitter I'm at at scott Landman and Dan you
Speaker 1: are at at Moss. Underscore Echo Benchmark is produced by
Speaker 1: Sarah Patterson and the head of Bloomberg Podcast is Alec McCabe.
Speaker 1: Thanks for listening, See you next time. But the time
Speaker 1: party back to Torment and turned back and the sundered
Speaker 1: by pass my fnger