Speaker 1: Bloomberg Audio Studios, podcasts, radio news joining.
Speaker 2: Us now, and without exaggeration, the only exception would be
Speaker 2: Edward Jardenny is the number one person I want to
Speaker 2: talk to now about the legacy of Alan greenspand William
Speaker 2: Dudley is a different FED president, yes, of the New
Speaker 2: York Fed and all, but far more. He built Goldman
Speaker 2: Sachs Economics with Ed McKelvey and the rest of young
Speaker 2: Jana Hasias. At the time Bill Dudley joins us this
Speaker 2: morning to me Bill Dudley, and the phrase I've always
Speaker 2: used is chart paragraph chart. And it was a people
Speaker 2: like Hymen and Yard Denny at C. J. Lawrence. It
Speaker 2: was the Bear Stearns combine with mel Pass and writing.
Speaker 2: But more than anyone, it was Goldman Sachs chart paragraph chart.
Speaker 2: Alan Greenspan loved that. At the end of the day,
Speaker 2: he was a market economist awen to data. Do we
Speaker 2: have anyone that can be like Alan Greenspan in our
Speaker 2: future or was he a one off in the history
Speaker 2: of our economics?
Speaker 3: Well, the future it takes up a long potential times.
Speaker 1: I'm sure we'll see someone similar to Greenspan in the future,
Speaker 1: But you're right, he was a different type of FED
Speaker 1: chairman because not only was he very knowledgable about economics,
Speaker 1: but he wasn't academic, and so he was basically going
Speaker 1: from the data to the decision making rather than from
Speaker 1: the model to the decision making. And so sometimes when
Speaker 1: the world changed, he got it right before anybody else did.
Speaker 1: The best example, of course, was the late nineteen nineties
Speaker 1: when there was the product three boom and Greenspan held
Speaker 1: off on tightening manentrey policy. So I think he was,
Speaker 1: you know, an exceptional exceptional chairman in both in terms
Speaker 1: of his understanding of economics, his openness to data, his
Speaker 1: willingness to you know, change.
Speaker 3: His mind and update.
Speaker 1: Is his fourth asked, I think the only really you know,
Speaker 1: blind spot was fully his views about financial stability and regulation.
Speaker 1: His view is always, you know, we can't identify bubbles
Speaker 1: in real time, so all we can clean up after
Speaker 1: the fact, And obviously the Great Financial Crisis showed that
Speaker 1: cleaning up after the fact is always it's not always
Speaker 1: the right approach.
Speaker 2: Well did you get into your excellence at Berkeley and
Speaker 2: to say, okay, it is about the regulation decision? Are
Speaker 2: we making the same mistakes today that the critics they
Speaker 2: were made in five and six.
Speaker 3: I don't see the same kind of problems.
Speaker 1: Number one, in terms of, you know, the market having
Speaker 1: a lot of assumptions that will ultimately turn out to
Speaker 1: be wrong. I mean, if you look at two thousand
Speaker 1: and six, two thousand and seven, there was all these
Speaker 1: assumptions triple A CDOs are safe housing. Markets can never
Speaker 1: decline on a national basis. You know, uh, you know,
Speaker 1: there were just a lot of assumptions that turned out
Speaker 1: some prime lending it is not risky. All those assumptions
Speaker 1: turned out to be dramatically wrong. So I think, you know,
Speaker 1: I like, I think there's risk of financial stability today,
Speaker 1: obviously in the non bank financial sector. But the other
Speaker 1: thing is we have a much more robust regulatory regime.
Speaker 1: I know we're in the process of dismantling that too
Speaker 1: much degree. I think it's important that we don't throw
Speaker 1: the baby out with the bathwater. But you know, we
Speaker 1: did learn a lot of good lessons from the financial
Speaker 1: crisis that I think means that the financial system fundamentally
Speaker 1: is stronger than it was back then.
Speaker 4: Putting all that together, Bill, what do you think the
Speaker 4: legacy is for mister Greenspan With a little bit of
Speaker 4: a hindsight here.
Speaker 1: I think he's obviously going to go down in history
Speaker 1: as a great central banker, also go down as someone
Speaker 1: who was really politically adept. I mean, he navigated through
Speaker 1: democratic and Republican administrations really well and didn't have the
Speaker 1: kind of conflicts that a lot of other central bankers
Speaker 1: have run into, like J.
Speaker 3: Paul for example.
Speaker 1: So I think that combination of good economic intuition, reliance
Speaker 1: on data, ability to navigate through Washington really well is
Speaker 1: pretty special.
Speaker 3: Wich.
Speaker 1: He'd done a little bit better on the financial stabil
Speaker 1: reglatory side. If he did that, he sort of gets straight.
Speaker 4: A's let's fast forward to today, mister Walsh. We did hear
Speaker 4: from Kevin Walsh last week for the first time as
Speaker 4: Chairman of the FED.
Speaker 3: What were your takeaways?
Speaker 1: Well, I think the big takeaway is number one that
Speaker 1: it's going to be a different regime under Kevin Walsh.
Speaker 1: You know, so the regime change that he promised is
Speaker 1: in the process of happening. You can just tell it
Speaker 1: right off the bat with a very much shortened statement
Speaker 1: I think and getting rid of Ford guides I think
Speaker 1: is completely appropriate. But I'm pretty nervous about his views
Speaker 1: about not communicating at all about how the FED is
Speaker 1: likely to react if the economics circumstances has changed. This
Speaker 1: reliant on the markets views to sort of guide policy,
Speaker 1: I think is a mistake. The FED Reserve needs to
Speaker 1: set monetary policy, not financial markets. And then if you're
Speaker 1: relying on the markets, how do you make the decision?
Speaker 1: Markets basically don't price to what they think the FED
Speaker 1: should do. They priced to what the Fed what they
Speaker 1: think think the FED will do. So if you're relying
Speaker 1: on the market, you're sort of you have this indeterminacy
Speaker 1: about what you should do. So I think so, I
Speaker 1: think that's a mistake. I think, you know. I think
Speaker 1: transparency I think is very helpful in terms of the
Speaker 1: conduct of mandre polic policy, because you do want markets
Speaker 1: to think along with the Fed when you know strong
Speaker 1: economic report comes out. You want the markets to reprice
Speaker 1: in terms of their expectation about the monetary policy path.
Speaker 3: But to do that well, you need.
Speaker 1: Good community, good communication, markets understand the Fed's monitary policy
Speaker 1: reaction from me. So, I think the risk here is
Speaker 1: Kevin is throwing out the baby with the bath water.
Speaker 1: I have no problem getting rid of afford guys, but
Speaker 1: don't throw out, you know, information about.
Speaker 3: The Fed's Nentrey policy reaction function at the same time.
Speaker 1: And I think he did that at the press conference
Speaker 1: because he was asked very explicitly, what would how did
Speaker 1: you want to tighten manitary policy?
Speaker 3: And he really wouldn't answer the question.
Speaker 1: I mean, obviously, obviously answer would be if inflation stays
Speaker 1: longer for higher than I expect, then we'll obviously have
Speaker 1: to tighten monetary policy. Or if the economy is stronger
Speaker 1: than we expect, then obviously I'll revise up my estimate
Speaker 1: of a neutral madry policy.
Speaker 3: But he refused to answer those questions.
Speaker 1: And I think that's maybe okay for the first press conference,
Speaker 1: but I don't think that can be sustained over time.
Speaker 2: Dudley fired up. That's what we're saying right now, William
Speaker 2: Dudley with us, and we continue the former president of
Speaker 2: the New York FED. You're sitting there, Bill, all fired up,
Speaker 2: and everybody knows I agree with you on this. I
Speaker 2: mean to be polite about it. The heritage of your
Speaker 2: shop called Goldman, Sachs and Hotsius has carried this forward.
Speaker 2: Is a disinflation narrative. Is the big shock after this
Speaker 2: war with West Texas intermediate to seventy one forty nine,
Speaker 2: so I could get with constructive news is sixty nine handle.
Speaker 2: Here are we prepared, Bill Dudley for the disinflation narrative
Speaker 2: that could come.
Speaker 1: Well, there's going to be a disinflation narrative really next month,
Speaker 1: rightway when we get the PC and CPI data for June,
Speaker 1: because obviously oil prices and gasoline prices of them down
Speaker 1: this month. But I think that you have to look
Speaker 1: in the broader context what's the pressure on resources? More broadly,
Speaker 1: we still have a lot of price pressures, like for example,
Speaker 1: chip prices going up really rapidly. And I think the
Speaker 1: I think the fundamental question really for the Madre policy
Speaker 1: outlook is the question is Mantrea policy actually restrictive today?
Speaker 3: And my own personal view is that there's not much
Speaker 3: evidence of that.
Speaker 1: I mean, we've had the Mantre policy at this setting
Speaker 1: or tighter for three years and yet we're still at
Speaker 1: an unploying rate consistent with full employment. So if Madre
Speaker 1: policy isn't restrictive, then why do you need to cut rates?
Speaker 4: What's the next data point, Bill that you think the
Speaker 4: market should really be focusing on.
Speaker 3: I think the layer market is really important here.
Speaker 1: I mean, I think if the economy is strong enough
Speaker 1: to keep the payrolls growing like the pace they've done
Speaker 1: over the last few months, the unemploying rates flat to declining,
Speaker 1: you know that that's going to continue to push the
Speaker 1: fit in the direction of thinking that they need to
Speaker 1: tighten monetary policy.
Speaker 3: I don't you know.
Speaker 1: I'm I'm a little uncertain about how fast madret policy
Speaker 1: is Titan's likely to occur, or what that probability is,
Speaker 1: because it's not clear how much commitment Kevin worsh has
Speaker 1: to actually doing it.
Speaker 3: I mean, the talk is cheap.
Speaker 1: Of course, everybody's in favor of price stability, but the
Speaker 1: question is what are you actually prepared to do to
Speaker 1: achieve that outcome? And I don't think we really know
Speaker 1: that at this point. I mean, you could have obviously
Speaker 1: said the opposite. I'm not in favorite price stability, So
Speaker 1: it's not really clear that there's a lot of content
Speaker 1: in that statement.
Speaker 2: Just valuable. Thank you so much. Bill Dudley with US,
Speaker 2: a former president of New York FED. In remembrance of
Speaker 2: a life of Alan Greenspan,