WEBVTT - SURVpodcast_06-12-24 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.160 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:46.800 the Bloomberg Terminal, and the Bloomberg Business App. We got 0:00:46.840 --> 0:00:49.360 so much to talk about with James Bullard. Of course, 0:00:49.800 --> 0:00:53.320 original is Saint Louis Fed with all the research heritage 0:00:53.680 --> 0:00:58.000 of the Saint Louis Fed his PhD from Indiana University, 0:00:58.440 --> 0:01:02.520 and he's wearing a boiler of Purdue pin today with 0:01:02.600 --> 0:01:06.319 this wonderful challenge taken on what's the difference between I 0:01:06.440 --> 0:01:07.679 you in Purdue. 0:01:09.160 --> 0:01:14.120 Purdue is number four engineering school in the country. So 0:01:14.160 --> 0:01:16.200 it's MIT Stanford. 0:01:15.640 --> 0:01:17.039 Berkeley out in the Midwest. 0:01:17.319 --> 0:01:22.200 Yeah, and so the medical school is down at IU, 0:01:21.800 --> 0:01:25.400 but engineering is at Produce. So it's a great Technical 0:01:25.520 --> 0:01:30.000 University and the business school is aiming to combine even 0:01:30.040 --> 0:01:33.440 better than we have with the engineering school and get 0:01:33.440 --> 0:01:34.400 great graduate school. 0:01:34.440 --> 0:01:36.440 You're enjoying the private life. 0:01:36.440 --> 0:01:40.039 Oh I am, and it's going very well. It's great 0:01:40.080 --> 0:01:42.640 to be back on campus and around the students and 0:01:43.600 --> 0:01:44.080 hanging out. 0:01:44.360 --> 0:01:46.000 I want to go back to I believe it was 0:01:46.040 --> 0:01:50.960 twenty sixteen and doctor Bullard, you had a profoundly important 0:01:51.000 --> 0:01:55.000 paper saying, as Leguard is saying at the ECB, we 0:01:55.120 --> 0:02:00.280 got to get off this idiot media micro analysis of 0:02:00.400 --> 0:02:03.600 data and look at the regimes that we live in. 0:02:04.080 --> 0:02:06.720 Is we go to this FED meeting today within disinflation, 0:02:06.840 --> 0:02:08.880 with the FED, with the ECB leading and of the 0:02:08.919 --> 0:02:11.960 rate cut for Jim Bullard, Is there a new regime 0:02:12.160 --> 0:02:14.320 out there right now post pandemic. 0:02:14.960 --> 0:02:18.320 I do think we've switched regimes. We're in a higher 0:02:18.360 --> 0:02:22.240 nominal interest rate, higher inflation environment, and I think that 0:02:22.440 --> 0:02:26.520 means that comparison should be made more to the second 0:02:26.520 --> 0:02:29.160 half of the nineteen nineties in the first part of 0:02:29.200 --> 0:02:33.240 the two thousands than to the twenty nine to twenty 0:02:33.320 --> 0:02:36.880 nineteen period, which was a low noight, low inflation regime. 0:02:36.919 --> 0:02:38.840 Paul wants to get here We're going to tie the 0:02:38.880 --> 0:02:42.800 bow here if I can. It's critical. Is this the 0:02:42.880 --> 0:02:47.440 press conference where we get some form of hint or 0:02:47.520 --> 0:02:51.720 statement to where Bullard and Clarida are, which is away 0:02:51.760 --> 0:02:56.959 from the slavery of two point zero percent? Do we 0:02:57.000 --> 0:03:01.520 get a higher an understanding of higher run rate for 0:03:01.639 --> 0:03:03.680 our start or for inflation. 0:03:04.720 --> 0:03:07.480 Inflation. No, the inflation target will stay at two percent. 0:03:07.639 --> 0:03:11.600 But inflation itself, I think that ideal policy would guide 0:03:12.000 --> 0:03:16.680 inflation to two percent. But assom tote a word that 0:03:16.720 --> 0:03:19.680 you love, Tom assum tote to two percent. So you 0:03:19.760 --> 0:03:23.919 want this gentle reduction inflation right down to two percent. 0:03:23.960 --> 0:03:27.000 You don't want to be bouncing above them below two percent. 0:03:27.080 --> 0:03:29.720 I think you want this nice glide path into two percent. 0:03:29.800 --> 0:03:32.519 So hopefully that's what we'll get here. And this report 0:03:32.560 --> 0:03:34.120 today is very encouraging. 0:03:33.800 --> 0:03:36.200 And so Jim, there are folks out there in academia, 0:03:36.520 --> 0:03:38.560 in practice, in the marketplace. I think this fit of 0:03:38.600 --> 0:03:41.360 reserve is already behind the curve that they should have 0:03:41.440 --> 0:03:43.920 already been cutting. Now, how do you think about that? 0:03:44.280 --> 0:03:47.760 So I've argued that earlier this year we did get 0:03:48.000 --> 0:03:52.520 tremendous reduction and core pc inflation in the second half 0:03:52.600 --> 0:03:56.360 of twenty twenty three, it was four point eight percent. 0:03:56.480 --> 0:03:58.920 Last summer, on a twelve month basis, it came all 0:03:58.920 --> 0:04:01.720 the way down to two point eight percent. So in 0:04:01.760 --> 0:04:04.400 this world, in this game, two hundred basis points of 0:04:04.400 --> 0:04:09.440 inflation reduction over six months or so, this is fantastically large. 0:04:09.640 --> 0:04:12.280 So you should be taking that into account. You should 0:04:12.320 --> 0:04:14.960 be reducing the policy rate. But the committee just couldn't 0:04:14.960 --> 0:04:18.400 find the right moment to do that because all the 0:04:18.400 --> 0:04:22.440 inflation reports up to now we were mixed or even 0:04:22.600 --> 0:04:27.080 even negative. So unfortunately didn't find the right moment to 0:04:27.160 --> 0:04:29.800 do that. But this idea that the policy rate is 0:04:29.839 --> 0:04:32.760 a little too high for where the economy is today, 0:04:32.800 --> 0:04:35.640 I think makes a lot of sense. So I've advocated 0:04:35.640 --> 0:04:38.160 for like a technical adjustment. You know, you want to 0:04:38.200 --> 0:04:42.280 get this idea across that because inflation isn't near five 0:04:42.320 --> 0:04:45.680 percent anymore. Core inflation it's now under three percent, we 0:04:46.040 --> 0:04:49.320 can afford to reduce the policy rate, still be restrictive 0:04:49.640 --> 0:04:52.640 and get this glide path into two percent, the two 0:04:52.680 --> 0:04:53.360 percent target. 0:04:53.400 --> 0:04:55.800 Look to get your opinion on another topic that investors 0:04:55.800 --> 0:04:57.800 are thinking about, which is this is an election year 0:04:58.440 --> 0:05:00.960 and what does that mean for the FIT Reserve to timing. 0:05:01.240 --> 0:05:02.440 I mean, a lot of folks are saying, you don't 0:05:02.440 --> 0:05:05.000 want to be too close to the election, so maybe 0:05:05.040 --> 0:05:06.560 a September might not be the right time. 0:05:07.000 --> 0:05:10.000 I think the first of all, I don't think anybody 0:05:10.000 --> 0:05:12.320 ever won an election based on whether the FED did 0:05:12.360 --> 0:05:16.599 something at the September meeting, so I don't think it 0:05:16.640 --> 0:05:19.560 matters for actual election outcomes. I don't think the median 0:05:19.640 --> 0:05:22.320 voter is voting on that. They're voting on much broader issues. 0:05:22.360 --> 0:05:26.040 So I think that the Committee feels in boldened to 0:05:26.360 --> 0:05:29.279 do whatever it thinks is right at that meeting or 0:05:29.320 --> 0:05:32.200 any of the other meetings and lead up to the election. 0:05:33.080 --> 0:05:36.560 And they have moved in the past during the election cycle, 0:05:36.600 --> 0:05:39.280 and I think they can do that if they wish 0:05:39.320 --> 0:05:39.839 this time. 0:05:40.200 --> 0:05:43.120 When the FED does begin to cut rates, how should 0:05:43.200 --> 0:05:48.800 we think about the next three, six nine meetings after that? 0:05:48.839 --> 0:05:53.560 How will they proceed in what may be a prolonged 0:05:53.640 --> 0:05:56.280 rate reduction move. How will that procede? 0:05:56.360 --> 0:05:56.719 You think? 0:05:57.680 --> 0:06:01.240 I think it'd be slow. I think that you know, 0:06:01.279 --> 0:06:04.640 at least as up today, you would think that the 0:06:04.640 --> 0:06:07.880 inflation rate would come down slowly towards two percent, But 0:06:07.960 --> 0:06:11.080 it would depend on the data and what else is 0:06:11.120 --> 0:06:12.320 going on, as it always does. 0:06:13.279 --> 0:06:16.120 I look at the FED and I'm going to be honest, 0:06:16.160 --> 0:06:19.039 Jim Buller, do you have prodigious economic chops. There's a 0:06:19.040 --> 0:06:22.120 few other people out there as well, but the fact 0:06:22.400 --> 0:06:24.719 is on this program we've had more than a few 0:06:24.800 --> 0:06:28.839 guests take a shot at a central bank that seems 0:06:28.880 --> 0:06:32.560 to be in love with non economists. Do we need 0:06:33.480 --> 0:06:37.360 a representation at the governor's level and at the senior 0:06:37.440 --> 0:06:42.320 levels of the FED that includes prodigious PhD macroeconomics or 0:06:42.360 --> 0:06:44.440 can we go with a more generalist approach. 0:06:45.120 --> 0:06:47.440 I think it's great to have a mix of voices 0:06:47.560 --> 0:06:49.960 and a mix of backgrounds on the committee. I think 0:06:49.960 --> 0:06:52.640 it really helps. You get too many people like me 0:06:52.760 --> 0:06:56.200 and you get in too much in the weeds about analysis. 0:06:57.080 --> 0:06:59.800 But if you don't have enough of that, then you 0:06:59.800 --> 0:07:01.960 know you can't do a good job either, and so 0:07:02.080 --> 0:07:04.760 a good mix is the right way to go. I've 0:07:04.920 --> 0:07:09.200 learned a lot from my colleagues that have markets experience, 0:07:09.240 --> 0:07:10.920 and now there's a couple of new people coming on 0:07:11.040 --> 0:07:12.160 that have a lot of markets. 0:07:12.200 --> 0:07:14.800 Jim Bullard was this week continue he's a purdue of 0:07:14.880 --> 0:07:18.800 course at Crannerton White The Mitch Daniels combine out there 0:07:18.800 --> 0:07:24.239 of their great graduate and undergraduate programs. Here's the history, 0:07:24.360 --> 0:07:26.360 and you're never going to admit it, but there was 0:07:26.400 --> 0:07:32.240 a rogue dot there and you don't know which dot is. 0:07:32.320 --> 0:07:36.120 You don't know which dot Janet Yellen was, but you 0:07:36.200 --> 0:07:39.520 knew which dot Bullard was because there was a roague dot. 0:07:40.000 --> 0:07:43.240 If the dots lost their meaning, as you protested with 0:07:43.400 --> 0:07:47.520 your rogue dot, you could barely fit on the Bloomberg screen. 0:07:47.760 --> 0:07:51.400 Tom Secunda is over in Bloomberg LP aging because you 0:07:51.520 --> 0:07:52.760 ruined the dot screen. 0:07:54.880 --> 0:07:57.920 That's yeah, Well, it was a different era. You know, 0:07:57.960 --> 0:08:02.040 we were talking about regimes earlier. It was definitely a situation 0:08:02.320 --> 0:08:05.720 where uh interest rates were low around the world. You 0:08:05.800 --> 0:08:11.559 had negative nominal rates around the world, and I just thought, 0:08:11.720 --> 0:08:13.960 why don't we just admit that we're in this low 0:08:14.080 --> 0:08:17.960 nominal intright low inflation regime and project based on that 0:08:18.120 --> 0:08:20.560 and not project not try to project that we're going 0:08:20.640 --> 0:08:21.200 to swing if. 0:08:21.120 --> 0:08:23.440 The dots loss are sell by date, I mean, is 0:08:23.480 --> 0:08:25.240 there any efficacy to the dots now? 0:08:26.160 --> 0:08:29.280 I think there could be great reforms on the on 0:08:29.320 --> 0:08:32.560 the dot plot, but the committee has just not wanted 0:08:32.600 --> 0:08:35.959 to make those reforms. One thing that's very strange about 0:08:35.960 --> 0:08:39.120 the dots is that the horizon shortens up as you 0:08:39.160 --> 0:08:41.800 go through the year. So now you've got a dot 0:08:41.840 --> 0:08:44.960 plot that really isn't comparable to the previous dot plots 0:08:45.040 --> 0:08:47.520 because now you've only got six months left in the year. 0:08:47.960 --> 0:08:49.800 Was when you started, you had a whole year out 0:08:49.800 --> 0:08:50.360 in the future. 0:08:50.440 --> 0:08:53.319 So I just saw this stuff. I think it's all 0:08:53.400 --> 0:08:57.800 just I don't vote, I don't focus on the dots. 0:08:58.200 --> 0:09:01.040 It's a great fun say well save me. 0:09:01.280 --> 0:09:04.240 I'm trying to explain to my offspring Jim, that about 0:09:04.960 --> 0:09:07.640 this is a more normalized interest rate environment. This is 0:09:07.679 --> 0:09:11.360 where most of the time, this society, this economy lives, 0:09:11.400 --> 0:09:13.040 and they're trying to figure out how to borrow for 0:09:13.800 --> 0:09:16.800 cars and houses and things like that. Is this, in 0:09:16.840 --> 0:09:19.480 fact where we're going to be for some time? Do 0:09:19.559 --> 0:09:21.520 you think this kind of No? 0:09:21.559 --> 0:09:23.840 I do think we're in this higher interest rate regime, 0:09:23.880 --> 0:09:26.960 and I do think that it's better on the whole. 0:09:27.040 --> 0:09:29.199 If you think about the second half of the nineties, 0:09:30.040 --> 0:09:32.480 which was really the best period for the US economy 0:09:32.480 --> 0:09:35.880 in the post war era that had interest rates like 0:09:35.920 --> 0:09:41.439 we have today broadly speaking, and the economy can grow 0:09:41.559 --> 0:09:45.319 very rapidly. You know, we had a great run at 0:09:45.360 --> 0:09:48.160 that time, and I do think you probably get a 0:09:48.200 --> 0:09:52.559 little bit better allocation of capital because it's more of 0:09:52.640 --> 0:09:56.080 a decision about it's my project really worth it or not, 0:09:56.880 --> 0:09:59.640 And you don't get this kind of experimenting around with 0:10:00.040 --> 0:10:02.840 kind of projects that probably have low payoff. 0:10:03.280 --> 0:10:07.079 You're West Lafayette, Indiana, Yes, has a three point zero 0:10:07.160 --> 0:10:11.880 percent unemployment rate. They're fully employed at Harry's Chocolate Shop. 0:10:11.960 --> 0:10:16.400 I mean, there's no question about it. What does urban America? 0:10:16.559 --> 0:10:18.480 I mean, you and I have talked about this in 0:10:18.960 --> 0:10:23.120 your offices in Saint Louis years ago. What is urban 0:10:23.160 --> 0:10:27.160 America missing about the vibrancy of the Midwest of this nation? 0:10:27.840 --> 0:10:31.800 I think the Midwest is extremely powerful, very populous. It 0:10:31.880 --> 0:10:33.880 might not all be in one place like it is 0:10:33.920 --> 0:10:37.920 here in New York City, but really a lot of people, 0:10:37.960 --> 0:10:41.480 a lot of great manufacturing, a lot of great businesses 0:10:41.920 --> 0:10:44.680 spread out across the Midwest, and it's a great place 0:10:45.480 --> 0:10:47.720 to live. And that because you're more spread out, you 0:10:47.760 --> 0:10:49.520 have better housing markets, a better option. 0:10:49.640 --> 0:10:52.040 Is there a labor arbitrage still going on right now 0:10:52.040 --> 0:10:54.520 where I'm sorry, we're gonna We're gonna take the Biden 0:10:54.600 --> 0:10:56.800 Investment Program, and that's where we're going to find the 0:10:56.880 --> 0:10:59.400 jobs because the labor total cost all in it. 0:10:59.679 --> 0:11:02.240 There's a lot happening in Indiana. And one thing that's 0:11:02.240 --> 0:11:05.720 happening is this I sixty five cord or between Lafayette 0:11:05.800 --> 0:11:08.680 and Indianapolis. If you drive up and down that you'll 0:11:08.720 --> 0:11:12.560 see lot to launch of businesses locating there. And we 0:11:12.720 --> 0:11:16.160 just had a deal with South Korean chip maker that's 0:11:16.200 --> 0:11:19.760 going to move to West Lafayette to Purdue. 0:11:19.520 --> 0:11:21.880 In studio where there's a former president of Saint Louis 0:11:21.960 --> 0:11:26.320 Feller Reserve System, James Bullard, he of Indiana University. He 0:11:26.440 --> 0:11:30.680 have a profoundly important paper I'm guessing twenty sixteen on 0:11:30.800 --> 0:11:34.760 the regimes that we face within our monetary policy. Paul 0:11:34.800 --> 0:11:38.040 I can report to you at his Purdue at Harry's 0:11:38.320 --> 0:11:42.040 chocolate shop right at the top of the menu domestic cans. 0:11:42.160 --> 0:11:44.559 They have Budweiser. I know, very important. 0:11:44.559 --> 0:11:46.199 Well, Tom, I found another place we're gonna have to 0:11:46.240 --> 0:11:47.640 go through. This could be a busy time for us 0:11:47.679 --> 0:11:49.559 there Lynnwood Tavern. 0:11:49.320 --> 0:11:51.719 Yeah, and grille. I've heard Rachel's mentioned this. 0:11:51.800 --> 0:11:54.680 Z I mean exactly three days Walmash rivers right there. 0:11:54.760 --> 0:11:58.280 You study when you do all nighters in mathematics. 0:11:59.200 --> 0:11:59.920 That's my kind of place. 0:12:00.080 --> 0:12:01.760 Having Jim Billard with us. Jim, I got to go 0:12:01.800 --> 0:12:05.000 to monetary policy or in the measurement of the inflation 0:12:05.240 --> 0:12:08.559 adjusted yield. As you mentioned, we had negative rates nominally 0:12:08.640 --> 0:12:12.320 as completely wacko when you were you know, doing the 0:12:12.360 --> 0:12:15.920 same Los FED. We're now back to a two percent 0:12:16.080 --> 0:12:20.480 is ten year real yield. Does that impinge an investment 0:12:20.559 --> 0:12:22.000 in America? 0:12:22.240 --> 0:12:25.080 I think it does, And like we were saying earlier, 0:12:25.160 --> 0:12:29.760 I think it makes people think more carefully about their projects. 0:12:29.800 --> 0:12:32.160 You know what is really going to pay off, and 0:12:32.240 --> 0:12:35.640 you get probably rid of some of the malinvestment or 0:12:35.679 --> 0:12:39.400 the misinvestment that might otherwise occur with very cheap money available. 0:12:40.000 --> 0:12:42.560 Hey, Jim does to what extent is a FED think 0:12:42.600 --> 0:12:45.079 about the consumer here, because you think about the American consumer, 0:12:45.120 --> 0:12:47.640 we probably have two at least two sets of consumers 0:12:47.679 --> 0:12:50.240 out there. The folks that are maybe you know, do 0:12:50.400 --> 0:12:55.160 have some assets, whether it's stocks, bonds, real estate doing well, 0:12:56.200 --> 0:13:00.320 maybe even benefiting from a higher instrate environment. Everybody else 0:13:00.720 --> 0:13:04.240 who may not have those types of assets or economic support, 0:13:04.880 --> 0:13:07.040 they're really filling the impact of inflation how does it 0:13:07.120 --> 0:13:08.160 fed think about that? 0:13:09.240 --> 0:13:13.200 Yeah, I think inflation is very pernicious and punishes the 0:13:13.280 --> 0:13:16.839 lower end of the income distribution very heavily. And you're 0:13:16.880 --> 0:13:20.920 certainly seeing that and hearing that when you talk to 0:13:21.040 --> 0:13:24.679 people in surveys, they do not like the inflation at all. 0:13:24.840 --> 0:13:26.959 They do not like the fact that the price level 0:13:27.040 --> 0:13:31.839 is up some nineteen percent since twenty twenty one, and 0:13:31.000 --> 0:13:33.360 they're very upset about that. 0:13:33.480 --> 0:13:37.679 One final question, blistering question s k heinins they're going 0:13:37.720 --> 0:13:41.280 to invest in Purdue Research Park. Yes. The number one 0:13:41.559 --> 0:13:45.040 thing in the zeitgeist is America doesn't have the employees 0:13:45.640 --> 0:13:49.000 to be labor in those factories. Are you confident we 0:13:49.040 --> 0:13:54.080 can develop highly motivated, skilled labor as we perceive in Asia. No. 0:13:54.080 --> 0:13:56.840 No, I think we'll have no trouble pulling in the 0:13:56.960 --> 0:14:01.760 right workforce for the South Korean company, and that'll be 0:14:01.760 --> 0:14:06.360 a major chip manufacturing facility who tried to reshore a 0:14:06.400 --> 0:14:09.720 lot of our chip making as you know, across the country. 0:14:09.720 --> 0:14:10.840 So this is part of that effort. 0:14:10.960 --> 0:14:13.960 Jim Buller to future governors of the Federal Reserve System, 0:14:14.080 --> 0:14:17.160 Constant Hunter and Julia cordn Otto are here on your 0:14:17.200 --> 0:14:21.040 way out, saying Hello, you're hugely go Jim Bullard, thank 0:14:21.080 --> 0:14:25.800 you so much, greatly appreciated. With the Saint Louis FED, 0:14:36.320 --> 0:14:40.000 we had a huge response. The last time he was on. 0:14:40.120 --> 0:14:43.600 Doctor Mark Zandi joins us from Moody's. He was definitive 0:14:43.640 --> 0:14:47.720 in the Great Financial Crisis for perspective and optimism on 0:14:47.800 --> 0:14:51.800 the American economy, Doctor Xandy. These results was there the 0:14:51.920 --> 0:14:56.160 undershoot A select few talked about. Did they finally show 0:14:56.240 --> 0:14:59.400 to a FED a disinflationary America. 0:15:00.200 --> 0:15:01.200 I hope so, Tom. 0:15:01.280 --> 0:15:03.360 I mean, it feels like all the trend lines are 0:15:03.440 --> 0:15:07.720 moving in the right direction. Inflation's coming in. You know, 0:15:07.800 --> 0:15:10.760 the only thing that's keeping overall inflation from the Fed's 0:15:11.200 --> 0:15:14.880 two percent target is the cost of housing, the implicit 0:15:15.720 --> 0:15:19.960 cost of home ownership. And you know, if I were 0:15:20.040 --> 0:15:22.520 king for the day, I wouldn't be looking at that. 0:15:22.600 --> 0:15:27.120 I'd be looking at inflation x oeer owner's equivalent rent. 0:15:27.160 --> 0:15:30.400 And we're there. So, you know, hopefully the FED takes 0:15:30.400 --> 0:15:32.880 solace in this, and they're not going to move today, 0:15:32.960 --> 0:15:36.040 but hopefully they move relatively move in the next few months. 0:15:36.040 --> 0:15:37.760 We need intertrates to come down. 0:15:38.600 --> 0:15:41.640 Mark, I'm just looking at Bloomberg Red headline across the 0:15:41.720 --> 0:15:46.400 terminal fed swaps fully pricing quarter point rate cut in November. 0:15:46.600 --> 0:15:47.520 Does that make sense to you? 0:15:49.280 --> 0:15:53.960 Yeah, it feels like a preponderance investors probably feel like 0:15:54.000 --> 0:15:55.760 Septembers when they'll start to move. 0:15:55.640 --> 0:15:56.560 And by November. 0:15:56.720 --> 0:16:00.800 Yeah, I think that very high profit that they'll have 0:16:00.840 --> 0:16:04.560 cut rates by that point in time. I mean, everything 0:16:04.600 --> 0:16:06.320 is where they want it to be, right, I mean, 0:16:06.400 --> 0:16:09.960 the economy is at full employment, four percent unemployment rate, 0:16:10.520 --> 0:16:13.120 the libor market is cooled off sufficiently, so wage growth 0:16:13.120 --> 0:16:15.720 has come in, which is consistent with getting inflation back 0:16:15.760 --> 0:16:19.200 in the bottle. You got inflation coming back in, you know, 0:16:19.280 --> 0:16:22.520 in a very graceful way. Financial conditions are you know, 0:16:22.600 --> 0:16:24.880 I think they're right where they wanted them. The stock 0:16:24.920 --> 0:16:28.480 market is up, credits presurren with the dollars strong, you know, 0:16:28.480 --> 0:16:30.360 you add it all up, it feels like they're there. 0:16:30.480 --> 0:16:32.240 They VI should declare victory and move on. 0:16:32.320 --> 0:16:35.280 So yeah, by November, I would be surprised if they 0:16:35.280 --> 0:16:36.400 haven't cut rates. 0:16:36.200 --> 0:16:40.120 Out on YouTube, the live chat a really smart observation. 0:16:40.360 --> 0:16:43.000 Thank you so much for this. I am glad I 0:16:43.040 --> 0:16:46.120 was able to roll over a bunch of CDs. So, Paul, 0:16:46.200 --> 0:16:49.560 you've talked about this. If you get a Zamdi disinflation 0:16:49.720 --> 0:16:53.360 in place, when does it finally crack that five point 0:16:53.720 --> 0:16:54.760 percent money market? 0:16:54.760 --> 0:16:57.440 That's why this Sweeny offspring one bee. She was very 0:16:57.440 --> 0:17:00.640 smart getting in the her CD at five. I'm very 0:17:00.640 --> 0:17:03.440 proud of her for that mark. Are you in a 0:17:03.440 --> 0:17:06.159 camp that says, maybe even that this FED is behind 0:17:06.160 --> 0:17:09.280 the curve that they should be cutting already? 0:17:09.440 --> 0:17:12.240 Yeah, I would have argued that they should be cutting rates. 0:17:12.280 --> 0:17:16.600 I think they have achieved their objectives properly measured, and 0:17:17.720 --> 0:17:19.560 you know, five and a half percent federal fund rate 0:17:19.600 --> 0:17:22.760 target where we are today is just not necessary. I mean, 0:17:22.800 --> 0:17:26.080 there's a lot of reasonable debate. Is to excuse me, 0:17:26.080 --> 0:17:28.520 what the equilibrium rate is? You know, the rate that 0:17:29.359 --> 0:17:33.040 neither that's neither restraining or supporting growth. You know, it's 0:17:33.280 --> 0:17:36.320 higher than it has been historically, but it's not five 0:17:36.359 --> 0:17:39.920 and a half percent. So why such high interest rates 0:17:39.920 --> 0:17:41.880 when you've achieved what. 0:17:41.800 --> 0:17:43.400 You set out to do? 0:17:43.600 --> 0:17:47.959 So in the economy, I think the economy is going 0:17:48.000 --> 0:17:50.760 to soft land, that's most likely scenario, but the risks 0:17:50.800 --> 0:17:54.840 of it going off the rails are not inconsequential. The 0:17:54.880 --> 0:17:57.960 longer you keep rates, you know, unusually high. So yeah, 0:17:58.000 --> 0:17:59.680 I would have argued that they should be cutting rates. 0:17:59.680 --> 0:18:02.080 Alright, Marks, Andy with us with the Moodies. We will 0:18:02.080 --> 0:18:05.439 continue with them. We're commercial free this entire hour for you. 0:18:05.520 --> 0:18:08.840 Thank you so much to Commonwealth, to con Residant, to 0:18:08.920 --> 0:18:12.760 interactive brokers for their support of our discussion of economics. 0:18:12.760 --> 0:18:16.280 If you're just joining us worldwide on YouTube across this nation. 0:18:17.080 --> 0:18:20.800 A stunning report. It is what a few wrote about. 0:18:20.800 --> 0:18:24.359 Good Morning Goldbin Sachson on Hatzias, who really parsed this? 0:18:25.080 --> 0:18:28.000 I thought, well, what if it comes in with an 0:18:28.080 --> 0:18:32.160 undertone headline? CPI three point four percent came in three 0:18:32.200 --> 0:18:36.239 point three percent, futures of forty two, the Sweeney yield here, 0:18:36.320 --> 0:18:40.280 the two year yield in fourteen fourteen basis points four 0:18:40.320 --> 0:18:41.600 point seven zero percent. 0:18:41.680 --> 0:18:44.959 Paul, Hey, Mark, what do you think the Federal Reserve 0:18:45.040 --> 0:18:47.520 is really keying on here? And what kind of message 0:18:47.520 --> 0:18:49.280 do you think they want to get across today? 0:18:51.119 --> 0:18:55.040 Well, I think with this report they have a strong 0:18:55.119 --> 0:18:58.000 case to make that the interest rates are coming. I 0:18:58.040 --> 0:19:01.200 think they will still make the case make the argument 0:19:01.280 --> 0:19:04.800 that they want to see more inflation, good inflation numbers, 0:19:05.160 --> 0:19:08.600 things that are very consistent inflation numbers are very consistent 0:19:08.680 --> 0:19:12.880 with their two percent target. But with today's numbers like today, 0:19:13.400 --> 0:19:16.919 what joggers well for the consumer expenditure deflator, which we're 0:19:16.960 --> 0:19:19.000 going to get here in a couple of weeks, which 0:19:19.040 --> 0:19:21.240 is what their target is based on. 0:19:23.359 --> 0:19:24.720 I think they want to signal. 0:19:24.400 --> 0:19:28.280 That another month two or three of good inflation satistics, 0:19:28.359 --> 0:19:31.280 they'll they'll cut the numbers like this really makes the 0:19:31.320 --> 0:19:34.160 case very easily for a race cut. 0:19:34.240 --> 0:19:38.040 Okay, Mark, I'm looking at inflation back pre pandemic, and 0:19:38.080 --> 0:19:42.680 we had an immense stability core CPI. We were two 0:19:42.720 --> 0:19:46.960 percent two point two percent the two standard deviation band. 0:19:46.960 --> 0:19:50.400 I don't want to get too mathey here was extremely narrow, 0:19:50.520 --> 0:19:55.160 extremely predictable. We had an upset of disinflation, deflation down 0:19:55.160 --> 0:19:58.439 to one point x percent with the pandemic, and then 0:19:58.520 --> 0:20:02.440 boom the stimulus up over six percent. Of course CPI. 0:20:03.080 --> 0:20:09.080 I see almost doctor Zandy in inertial force of disinflation 0:20:09.359 --> 0:20:13.920 now almost with what I'm gonna call convexity or acceleration 0:20:14.760 --> 0:20:19.280 in the form of disinflation. Explain to our audience why 0:20:19.320 --> 0:20:21.960 this central bank that you should think should cut this afternoon. 0:20:22.240 --> 0:20:24.720 That's a joke. I'm putting words in doctor Sandy's book. 0:20:24.960 --> 0:20:28.639 But Mark Zandy, why are they such a slave to 0:20:28.760 --> 0:20:32.280 an ex post strategy? What are they afraid of. 0:20:34.080 --> 0:20:35.480 Losing credibility? Tom? 0:20:35.560 --> 0:20:40.800 I think they've got a target two percent on the 0:20:41.200 --> 0:20:45.040 consumer expenditure to flavor. They feel like if they don't 0:20:45.080 --> 0:20:49.840 hit that target, they'll lose credibility, and credibilities really is important. 0:20:50.119 --> 0:20:52.640 That's key to keeping inflation expectations down. 0:20:52.880 --> 0:20:53.840 People have to believe. 0:20:53.880 --> 0:20:56.840 Investors have to believe the BED is going to do 0:20:57.119 --> 0:20:58.480 you know what it says it's going to do. 0:20:58.640 --> 0:21:02.480 So I think that's that's the motivation here. 0:21:02.560 --> 0:21:02.720 Now. 0:21:02.720 --> 0:21:05.639 Having said that, I do think once they hit the 0:21:05.640 --> 0:21:08.200 two percent target and they do start cutting and you 0:21:08.320 --> 0:21:12.440 kind of rethink their framework for monetary policy going forward. 0:21:12.200 --> 0:21:15.200 That they should they should come up with a better 0:21:15.359 --> 0:21:16.000 mouse trap. 0:21:16.080 --> 0:21:19.159 That the two percent target on consumer expenditi flavor is 0:21:19.240 --> 0:21:21.600 probably not the target they want or the way they 0:21:21.600 --> 0:21:22.560 want people. 0:21:22.320 --> 0:21:22.960 To think about it. 0:21:23.040 --> 0:21:26.920 So once they've gotten there, they've established credibility, then they 0:21:27.080 --> 0:21:29.280 really need to think about their framework and how they 0:21:29.280 --> 0:21:31.080 want to do this going forward. Two percent is not 0:21:31.119 --> 0:21:33.920 the right number and the pcees not the right to flavor. 0:21:33.800 --> 0:21:37.200 Zandy Paul, this is so important. You're going to see 0:21:37.200 --> 0:21:43.359 a tweet someday Zamdi National Bureau of Economic Research nb ER. 0:21:44.040 --> 0:21:47.440 It's going to be a paper by Mark Zamdy, The 0:21:47.480 --> 0:21:49.399 FED and the Better mouse Trap. 0:21:50.960 --> 0:21:54.560 All right, Yeah, Like, hey, Mark, what do you think 0:21:54.560 --> 0:21:56.560 about I mean, when you see an inflation print like today, 0:21:56.600 --> 0:21:59.280 what do you think about the US consumer? Because the 0:21:59.320 --> 0:22:01.280 US consumer, you go out there and ask the consumer 0:22:01.280 --> 0:22:04.640 out on the street in South Philadelphia or you know, Peoria, 0:22:04.920 --> 0:22:06.760