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Speaker 1: Bloomberg Audio Studios, podcasts, radio News. This is Masters in

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Speaker 1: Business with Barry Ritholtz on Bloomberg Radio.

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Speaker 2: This week on the podcast, another extra special guest. John

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Speaker 2: Hilsenrath was a reporter for the Wall Street Journal, covering

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Speaker 2: everything from September eleventh to the Federal Reserve for twenty

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Speaker 2: six years. His coverage at the Journal of the Fed

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Speaker 2: got him nicknamed the Fed Whisperer for his many, many

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Speaker 2: page one scoops. He's now running Serpa Pinto Advisory, multiple

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Speaker 2: Pulitzer Prize nomination, author of a book about Janet Yellen,

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Speaker 2: just a whirlwind of information about the economy, markets, and

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Speaker 2: the Fed. I thought the conversation was absolutely fascinating, and

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Speaker 2: I think you will also with no further ado, my

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Speaker 2: conversation with the Wall Street Journals. John Hilson Rath.

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Speaker 3: It is my extra special honor to be here.

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Speaker 2: Does it does it feel like you're in the enemy's territory? Competitive?

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Speaker 3: Uh, I've crossed over. I've crossed over.

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Speaker 2: Here now on the private side.

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Speaker 3: Yeah yeah, yeah, yeah. So I want to tell you,

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Speaker 3: and I should say on the Wall Street Journal page

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Speaker 3: one story as it was his, I'm a former editor too,

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Speaker 3: I had that many. I don't have that many anymore

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Speaker 3: because I've I left the journal.

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Speaker 2: Well, but those those headlines, like that number isn't growing anymore, right,

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Speaker 2: but it's but it's not going down either. That number

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Speaker 2: is a permanent record.

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Speaker 3: Yeah, I appreciate.

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Speaker 2: So you you have that many, you know, that many

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Speaker 2: pole positions and you're you're good to go.

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Speaker 3: And there were that many battles with editors at the

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Speaker 3: Wall Street Journal over you know, structure that story and

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Speaker 3: what headline to put on it.

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Speaker 2: That's a whole nother conversation we're going to get to.

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Speaker 2: I am constantly reminding people, Hey, you know, the writer,

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Speaker 2: they don't get to pick the headline. That's the editor.

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Speaker 2: And people seem shocked by that.

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Speaker 3: Yeah, it's a process. Let's just let's say the least,

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Speaker 3: it's definitely a process.

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Speaker 2: Before we get to your writing and editing, let's talk

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Speaker 2: a little bit about your background. Duke University, undergrad eventually

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Speaker 2: an NBA from Columbia. What was the career plan?

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Speaker 3: The career plan for me was always journalism. I actually

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Speaker 3: like you. I'm a Long Island boy. Are you from

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Speaker 3: Long Island?

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Speaker 4: Or?

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Speaker 2: From sixth grade on?

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Speaker 3: From sixth grade? On Okay I grew I grew up

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Speaker 3: there to Manhasset, Long Island.

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Speaker 2: And Welcus Valley. That's we could play Jewish geography. That's

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Speaker 2: twenty fifteen, twenty minutes from.

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Speaker 3: Me, although Manhasset was a Catholic town. But like, the

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Speaker 3: career plan for me was always journalism. I started writing

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Speaker 3: for the Manhasset Press when I was sixteen years old.

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Speaker 3: I was I started out as a sports writer. The

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Speaker 3: original plan was sports writer, ah, and then the next

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Speaker 3: plan was war correspondent, and then somehow I ended up

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Speaker 3: becoming an economics writer. But I stuck to the plan

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Speaker 3: of journalism.

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Speaker 2: So if journalism was always the plan, why an MBA,

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Speaker 2: why not journalism are well?

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Speaker 3: So I about excuse me. About five years into my

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Speaker 3: journalism career, I went back and did a fell When

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Speaker 3: I decided I want to do economics and finance, I

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Speaker 3: went back and did a fellowship at Columbia. It's called

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Speaker 3: a night Badget fellowship. Ye great program. And what they

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Speaker 3: did is they took a few working journalists and then

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Speaker 3: they put them through the business school for a year.

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Speaker 3: And then after a year that I decided to do

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Speaker 3: a few extra courses and get the NBA, But I

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Speaker 3: was really there for the fellowship to kind of to

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Speaker 3: Basically what I wanted to do was learn how a

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Speaker 3: balance sheet worked, learn how corporate finance worked. I had

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Speaker 3: spent a bunch of years covering like Macro, but I

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Speaker 3: didn't understand anything about what made Wall Street go. So

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Speaker 3: that was why I went back there.

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Speaker 2: So what was it that drew you to journalism? Oh?

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Speaker 3: Wow, I just you know, so I hated English class

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Speaker 3: in high school. I don't know how you felt, but

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Speaker 3: you know these four and they're still teaching it the

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Speaker 3: same way. By the way, these four paragraph essays of

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Speaker 3: you know, introduction, supporting paragraph one, supporting paragraph.

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Speaker 2: That was never a problem is always subject, predicate, what's

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Speaker 2: an adverb?

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Speaker 3: Why do I need to? And then it's like why

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Speaker 3: am I? You know, why am I learning to do

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Speaker 3: literary reviews? To kill a mocking bodker? Anyway, I never

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Speaker 3: thought I would have anything to do with writing, but

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Speaker 3: then I got involved in covering the local sports teams

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Speaker 3: and I was like, this is really interesting, this is fun.

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Speaker 3: I'm like right in the middle of the action and

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Speaker 3: like right on the sideline, and people are paying attention

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Speaker 3: and they care about it, and it just felt it

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Speaker 3: was just I had I had, I had fun, and

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Speaker 3: I've come to see over my career that like the

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Speaker 3: great thing about journalism and like here we are in

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Speaker 3: the Bloomberg newsroom is like you're always surfing right on

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Speaker 3: the edge of history, right, And so that's really what

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Speaker 3: ended up drawing it to me. I mean, there's the

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Speaker 3: reporting aspect and the writing aspect, but just the idea

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Speaker 3: of being like right in the middle of things as

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Speaker 3: they're happening and trying to make sense of them and

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Speaker 3: explain them was an addiction that I didn't get over

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Speaker 3: for a long time.

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Speaker 2: And right out of Columbia straight to the Wall Street

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Speaker 2: Journal was that your first gig?

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Speaker 3: Well, so I started out at a newswires service in

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Speaker 3: the early nineteen nineties. Here we are back in Bloomberg.

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Speaker 3: It was called right Night rit or Financial No sure, yeah,

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Speaker 3: And like.

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Speaker 2: Any relationship to the Night big a hot, No, there

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Speaker 2: was no.

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Speaker 3: There was no relationship except for the fact that the

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Speaker 3: Knight family was really rich and could fund something. Right, Okay,

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Speaker 3: But Bloomberg was like up and coming at the time,

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Speaker 3: and people weren't taking it as seriously as they should have.

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Speaker 3: But I did that a few years, moved to Hong

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Speaker 3: Kong with a newly wed on an extrege with my

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Speaker 3: newly wed on on an exchange program with Columbia, and

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Speaker 3: then I signed up with the journal over there.

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Speaker 2: How long were you in Hong Kong for five years?

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Speaker 3: About five years? Yeah, And that was a place.

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Speaker 2: This was when the UK was running the city and

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Speaker 2: before I was.

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Speaker 3: There right for the handover, so you know, so it's

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Speaker 3: I mean, there's another great thing about journalism is wherever

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Speaker 3: I went, it seemed like stuff started blowing up. So

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Speaker 3: I started with the Wall Street Journal in Hong Kong

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Speaker 3: in July of nineteen ninety seven. That was the week

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Speaker 3: that the UK handed the city over to China, and

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Speaker 3: it was also the week that the Taibati valued and

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Speaker 3: started the Asian financial crisis. So I got in there

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Speaker 3: and I was like flying from day one on these stories.

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Speaker 3: It turned out that the Asian financial crisis, particularly in

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Speaker 3: given what I was doing, was a much bigger event

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Speaker 3: than the handover. The handover was had much had long

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Speaker 3: term implications obviously, but yeah, so I was there for

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Speaker 3: all of it.

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Speaker 2: So how long after the handover did you start seeing

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Speaker 2: the heavier hands of China in day to day life

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Speaker 2: in Hong Kong.

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Speaker 3: You know, I think it's been a very slow and

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Speaker 3: corrosive process. And frankly, when I was there from ninety

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Speaker 3: six through two thousand, it was really the economic events

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Speaker 3: that were driving the city at the time. So the

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Speaker 3: first one was the Asian financial crisis and a property

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Speaker 3: crisis that swept through Asia. One of my formative experiences

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Speaker 3: as journalists was covering an investment bank called Paragrine Investments

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Speaker 3: that blew up, and I learned some really important lessons

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Speaker 3: that came back to help me in two thousand and

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Speaker 3: eight about how banks explode and you know, were implode.

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Speaker 2: So when you came back to tell you it was Paragrine.

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Speaker 3: Yeah. So one of the formative experiences of my career

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Speaker 3: in Hong Kong was covering the collapse of an investment

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Speaker 3: bank called Paragrine Investments, and you know, I saw, you know,

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Speaker 3: why banks collapse and what causes these kinds of runs.

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Speaker 3: It came in really handy ten years later when Bear

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Speaker 3: Stearns and Lehman Brothers were blowing up, and I had

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Speaker 3: insights that kind of got me ahead of those stories

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Speaker 3: in ways that surprised some people at the journal. I

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Speaker 3: would you know when I don't know if you remember

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Speaker 3: when those bear Stearns hedge funds blew up.

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Speaker 2: Oh? I remember.

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Speaker 3: I told my Colly Kate Kelly, who was all over

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Speaker 3: that story. I said, they're going to blow up this weekend.

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Speaker 3: We need to have a two thousand world story ready

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Speaker 3: to go Saturday. She's like, you're overreacting. I was like,

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Speaker 3: watch because I saw what happens when creditors of banks

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Speaker 3: get nervous. And I learned all that in Asia. The

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Speaker 3: other big event in Asia in the late nineteen nineties

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Speaker 3: was of course the handover. But for people in Hong Kong,

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Speaker 3: it's a very entrepreneurial city. They were thinking, well, how

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Speaker 3: do we get money? How do we make money off

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Speaker 3: of this? You know, how do we tire? You know,

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Speaker 3: the Chinese economy had been booming, it was a growth story,

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Speaker 3: and so people were looking for ways to advance themselves economically.

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Speaker 3: I think what we've seen happen to Hong Kong since,

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Speaker 3: and this is perhaps a lesson, is that, you know,

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Speaker 3: these attacks on democracy have been and free speech and

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Speaker 3: all that have been slow and corrosive, and it's a

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Speaker 3: different city today than it was twenty five years ago,

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Speaker 3: but after the handover, it was just people trying to

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Speaker 3: make better lives for themselves.

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Speaker 2: Right, really really fascinating. How do you get from Hong Kong.

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Speaker 3: To d C to DC? Well there was a stop

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Speaker 3: in the middle in New York. So I was in

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Speaker 3: Hong Kong for five years. Moved back to the US

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Speaker 3: in early two thousand and one, right in time for

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Speaker 3: the tech bubble to burse and of course nine to eleven. Again,

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Speaker 3: wherever I went it seemed like terrible things were going on.

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Speaker 4: You seem to be an unlucky charm and you know,

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Speaker 4: and I used to joke that like Wall Street should

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Speaker 4: just pass its hat around to retire me, because you know,

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Speaker 4: then I just get out of everybody's bad news.

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Speaker 3: But yeah, came back. I was in the New York

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Speaker 3: office for seven years writing about economics. I was our

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Speaker 3: markets editor during the credit bubble and the credit bust

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Speaker 3: and learned a lot in that experience about the interactions

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Speaker 3: of economics and final.

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Speaker 2: Where was your office in two thousand and one?

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Speaker 3: Our office was across the street front.

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Speaker 2: Right, not the the Fox Wall Street Journal office.

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Speaker 3: On that you moved up there after Murdoch took over.

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Speaker 2: That's right, this was you guys were right in the

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Speaker 2: middle of it.

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Speaker 3: We were, yeah, so what So we were across the

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Speaker 3: street in the World Financial Center, the southernmost tower, I

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Speaker 3: guess that was World Financial Center three. So I would

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Speaker 3: walk across the West Side Highway on this land bridge

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Speaker 3: every day, right.

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Speaker 2: Next to the Palm Court, if I recall correctly, that

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Speaker 2: big glass.

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Speaker 3: Yeah, yeah, yeah, yeah, we were across the street from

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Speaker 3: that too. Anyway, I happened to be in early that

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Speaker 3: morning trying to finish a story, and I was heading

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Speaker 3: over to the World Trade Center for NABE conference. And

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Speaker 3: you know, journal reporters tended to get in a little

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Speaker 3: bit after nine because we tended to have late deadlines.

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Speaker 3: I was in early, was there for the first plane

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Speaker 3: to hit, and then I ran out into the street

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Speaker 3: with a notebook. Second plane flew right over my head.

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Speaker 2: Wow. Yeah, And were you interviewing? People were like, what

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Speaker 2: did you do that day?

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Speaker 3: So well, so I'll tell you exactly what I did.

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Speaker 3: The first thing I did when I saw the inferno

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Speaker 3: from the first plane is I ran downstairs to I

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Speaker 3: was where the reporters were stationed. I knew the top

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Speaker 3: editors were down a floor. So I ran down there

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Speaker 3: to see who was here and who was organized organizing things.

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Speaker 3: I ran to Paul Steiger Oh, I was the managing

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Speaker 3: editor of the paper. I said, hey, I'm here, I'm

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Speaker 3: here early. You know, I'm on it. What do you

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Speaker 3: want me to do? And his advice was go figure

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Speaker 3: out what happened and don't get yourself killed. So like

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Speaker 3: he immediately understood that something serious was at hand. So

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Speaker 3: I grabbed a notebook and ran over that pedestrian bridge,

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Speaker 3: saw a lot of carnage in the street, and started

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Speaker 3: kind of writing. Well. The next thing I did was

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Speaker 3: call my wife to let her know that there was

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Speaker 3: a fire. And I was okay because I figured it

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Speaker 3: was going to be on the news within a matter

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Speaker 3: of minutes and she knew where I was, so I

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Speaker 3: called her to let her know I was okay. And

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Speaker 3: then a few minutes later, as I'm in the street,

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Speaker 3: the cops are trying to clear me out. They're saying,

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Speaker 3: you can't be here. This is a dangerous place, so

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Speaker 3: they're trying to move me out of the street. I walk,

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Speaker 3: and then as I'm walking kind of to follow the

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Speaker 3: police's orders, the second plane flies right over my head.

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Speaker 3: And you know, I stuck around and interviewed witnesses and bystanders,

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Speaker 3: and it was a pretty harrowing day.

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Speaker 2: Yeah, to say, to say the very least, let's bring

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Speaker 2: it back to something a little less arrowing or more traditional.

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Speaker 2: You have a really unusual career trajectory at the Wall

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Speaker 2: Street Journal. You start, you know, fairly green, and eventually

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Speaker 2: you're running what's probably the hottest desk in economics, which

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Speaker 2: is covering the FED, showing up at meetings, interviewing FED governor's,

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Speaker 2: FED presidents and the chair of the f O and c.

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Speaker 2: What was that process like to get there?

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Speaker 3: Yeah, well, you know, like my goal at the journal

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Speaker 3: was always well, I just wanted to write good stories, right,

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Speaker 3: And the journal back when I started at the place

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Speaker 3: was ironically you think of it as a finance, economics

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Speaker 3: markets kind of paper. And that's how I you know,

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Speaker 3: I grew up reading the New York Times and watching

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Speaker 3: my dad read the Wall Street Journal, and like that

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Speaker 3: stuff just didn't interest me. But what I discovered over

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Speaker 3: time was that the you had to be able to

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Speaker 3: write long feature stories to succeed page one stories. We

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Speaker 3: called them leaders. So like that's what I was focused

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Speaker 3: on doing what happened was by two thousand and eight,

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Speaker 3: I had I had learned a lot, basically in part

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Speaker 3: from my experiences in Asia, you know, where I covered

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Speaker 3: these banks collapsing and I saw financial crisis, and I

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Speaker 3: kind of felt like I had a roadmap for how

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Speaker 3: it worked. And then obviously in two thousand and eight,

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Speaker 3: I mean, the US markets were employed and it was

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Speaker 3: very complicated. It was kredit, it was credit driven. Our

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Speaker 3: star fed reporter left the paper that summer to go

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Speaker 3: to the economist magazine, greg Ip. It was a legend YEP.

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Speaker 3: And the guy that my future boss really wanted for

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Speaker 3: the paper had just moved to London, a guy named

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Speaker 3: Mark Whitehouse, who's a Bloomberg Opinion, brilliant, brilliant guy, and

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Speaker 3: he was I think seen as the heir apparent. But

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Speaker 3: he had just moved to London, so they had no

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Speaker 3: one else. And like I had learned a lot about markets,

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Speaker 3: I had been writing about economics. I was just well placed.

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Speaker 3: So they asked me to go to move down to

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Speaker 3: Washington in the summer of two thousand and eight to

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Speaker 3: cover the FED, and my first week on the job,

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Speaker 3: Lehman Brothers blew up, so I'm on the phone that

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Speaker 3: weekend with the top leadership of the FED, trying to

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Speaker 3: understand you know, when Tim Geitner is talking to me

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Speaker 3: about foam on the runway after like these day of

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Speaker 3: intense meetings collapsed, you know, some of these officials wanted

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Speaker 3: to talk to reporters to kind of keep us informed

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Speaker 3: because the next day was going to be a big deal,

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Speaker 3: and they just kind of wanted to have their story

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Speaker 3: out there. So I was talking to top people six

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Speaker 3: days into the job.

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Speaker 2: You're the perfect person to ask this question that I

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Speaker 2: have never gotten a good answer to, which was why

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Speaker 2: was it that AIG was saved and Lehman was not.

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Speaker 2: I have my own theory, yeah, but I haven't spoken

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Speaker 2: to very many FED officials in real time.

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Speaker 3: I think it was sequential, I mean remarkably right. So,

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Speaker 3: I mean what they were telling me Sunday night was

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Speaker 3: that they hoped that they had enough of these facilities

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Speaker 3: rescue facilities in place. You know, boy, I can't even

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Speaker 3: remember all the acronyms anymore, but you know, the liquidity

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Speaker 3: that they were pumping into the other investment banks, and

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Speaker 3: they hoped that they had enough of these facilities in

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Speaker 3: place in order to keep the system stable. The next day,

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Speaker 3: you know, people forget the FED had a policy meeting

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Speaker 3: on Tuesday. They didn't cut interest rates two days later,

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Speaker 3: Like Bernaki had a view that he thought that he

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Speaker 3: had the situation under control, and they realized, you know,

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Speaker 3: before AIG on Tuesday. On Monday, there was the money

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Speaker 3: market mutual funds that broke the boss, that's right, and

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Speaker 3: then all hell broke loose, and they realized that if

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Speaker 3: they didn't do something, that things were going to get

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Speaker 3: much worse. So it was the markets weren't a panic,

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Speaker 3: and I think the policy makers panicked and at that

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Speaker 3: point they just were doing whatever they could to put

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Speaker 3: out fires, whatever they go.

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Speaker 2: I have two pet theories on Lehman, and I want

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Speaker 2: to run them by you, Okay. One is they looked

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Speaker 2: at the balance sheets, the whole repo one oh five

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Speaker 2: and moving money off. Someone looked at the balance sheets

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Speaker 2: and said, hey, you could rescue these guys, but they're insolvent.

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Speaker 2: And not just a little insolvent. Yeah, they're tens of

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Speaker 2: billions of dollars insolvent.

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Speaker 3: Yeah.

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Speaker 2: That was the Lehman brother issue. Bear Stearns. It's like

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Speaker 2: they weren't insolvent. They just had too much money tied

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Speaker 2: up in a liquid assets. Was a liquidity issue, not

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Speaker 2: a solvency issue.

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Speaker 3: Yeah. And the rules that the FED was trying to

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Speaker 3: abide by at the very edge of its authority was

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Speaker 3: that they had to lend against good collateral, right and

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Speaker 3: if it was bad collateral, they couldn't do it. And

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Speaker 3: then the other problem that weekend was that they were

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Speaker 3: starting to worry about who was going to be the

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Speaker 3: next one.

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Speaker 2: To fail AIG because a.

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Speaker 3: Lot of I mean, you know, if if they bailed

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Speaker 3: out Laman, then the market's target was going to point

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Speaker 3: to Meryl Lynch, right like, So they were just happy

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Speaker 3: to get Meryl Lynch bought that week right, right.

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Speaker 2: Right, So that John saying that was a great last

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Speaker 2: minute deal he pulled off and it worked out well

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Speaker 2: for everybody.

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Speaker 3: Yeah, and they and and and they survived. So uh,

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Speaker 3: you know, it was coming at them fast and furious,

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Speaker 3: and I mean, what's kind of remarkable is that they

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Speaker 3: had all summer to prepare for it and it still

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Speaker 3: blew up in everybody.

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Speaker 2: The other the other thing that I would have to

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Speaker 2: be a fly on the wall for was, at one

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Speaker 2: point in time, one Buffet reached out to Dick Fold

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Speaker 2: at Lehman Brothers, and we don't really know the details,

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Speaker 2: but it kind of looks like Buffett made an offer

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Speaker 2: to Leman and he kind of to Fold and he

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Speaker 2: kind of turned up his nose at a low ball offer. Eventually,

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Speaker 2: Buffett makes the similar offer to Goldman Sachson. Goldman was

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Speaker 2: smart enough to take it. So you can imagine how

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Speaker 2: BERNANKI was thinking, Wait, they turned down Buffett.

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Speaker 3: Why do we have to get well, I mean, I

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Speaker 3: think a lot matters and kind of went at what price? Right?

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Speaker 3: So I know that they were working very hard all

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Speaker 3: summer to raise capital, and a number of deals, including

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Speaker 3: with Korean investors, failed to develop.

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Speaker 2: So we mentioned three hundred and nineteen page one bylines.

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Speaker 2: What stands out as some of your favorite pieces?

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Speaker 3: Well, I am most attached to those longer magazine feature stories.

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Speaker 3: One of my favorite ver It's was a piece I

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Speaker 3: wrote in two thousand and five. The spring of two

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Speaker 3: thousand and five, I actually had just been beaten badly

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Speaker 3: by the New York Times on another story and was

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Speaker 3: a little frustrated and disappointed with myself that I had

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Speaker 3: gotten beaten.

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Speaker 2: What was the topic that you were beaten on.

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Speaker 3: Oh that's I mean, that's that's a long story. It

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Speaker 3: was about an academic economist with an unusual background that

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Speaker 3: it's it's too complicated to get into. I mean, if

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Speaker 3: you want to, we can get into it. But it's

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Speaker 3: a all right, I'll it's a long story. But anyway,

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Speaker 3: I worked on a story with a colleague in Thailand

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Speaker 3: about how there was a global housing boom going on

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Speaker 3: that was being funded by a global credit boom and

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Speaker 3: increasingly complex credit not just through banks but through more

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Speaker 3: sophisticated vehicles and sophisticated investor groups. And I quoted Robert

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Speaker 3: Schiller in it. This is in June maybe of two

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Speaker 3: thousand and five, saying this was going to end in

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Speaker 3: a global recession. So and it connected the dots on

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Speaker 3: something that was building, and it took a couple more

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Speaker 3: years for it to really develop. I did another story,

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Speaker 3: and the stories I love were the ones that were

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Speaker 3: kind of looking around corners. But I did a piece

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Speaker 3: I think it was maybe two thousand and three, two

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Speaker 3: thousand and four looking at US China trade. I had

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Speaker 3: figured out an economists had told me, you know, everyone's

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Speaker 3: talking about all these imports coming from China and how

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Speaker 3: damaging it is for the US. You should look at

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Speaker 3: what the US is exporting to China. Our exports to

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Speaker 3: China are booming, and you should do a story about.

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Speaker 2: That agriculture, right.

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Speaker 3: So I looked at what was booming, and it turned

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Speaker 3: out that our number three export in value and our

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Speaker 3: number one export in volume was trash. We were the

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Speaker 3: Saudi Arabia. Well, we were sending them recycled paper, we

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Speaker 3: were sending them recycled plastic. We were sending them recycled

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Speaker 3: and they were turning that into the boxes and containers

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Speaker 3: and packaging that all the toys and books in microwoven

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Speaker 3: microwave ovens came back in And I kind of pieced

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Speaker 3: this together and actually used a little boy's piece of

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Speaker 3: trash to tell the story I found. I went to

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Speaker 3: a recycling facility in New Jersey where I still remember

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Speaker 3: their name, the Zizarro Brothers in New Jersey. Right near

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Speaker 3: the chipping containers. They had a container of recycled paper

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Speaker 3: that was going off to China. That let me pick

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Speaker 3: through it find a little boy's homework assignment that I

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Speaker 3: made a photocopy of. I put the homework assignment back

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Speaker 3: in the container where it belonged, and I tracked the

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Speaker 3: kid down, and then I was able to track this

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Speaker 3: one boy's homework assignment from the Zizarro Brothers backwards and

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Speaker 3: then all the way to a paper newsprint facility in

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Speaker 3: China and of us this boy's homework assignment to tell

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Speaker 3: how global trade was changing the face of the economy.

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Speaker 2: Coming up, we continue our conversation with John Hilson Wrath,

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Speaker 2: former chief economics correspondent for the Wall Street Journal. Today

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Speaker 2: he runs Surpa Pinto Advisory, discussing his Wall Street Journal

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Speaker 2: experience and Surpa Pinto. I'm Barry Ridults. You're listening to

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Speaker 2: Masters in Business on Bloomberg Radio. I'm Barry Ridults. You're

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Speaker 2: listening to Masters in Business on Bloomberg Radio. My extra

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Speaker 2: special guest today is John Hilson Wrath. He is the

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Speaker 2: former chief economics correspondent for the Wall Street Journal, where

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Speaker 2: he was dubbed the Fed Whisperer for all his many

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Speaker 2: scoops on the Fed. So let's talk about that. You

438
00:23:02,640 --> 00:23:05,320
Speaker 2: were thought of as the Fed Whisperer. What does that mean?

439
00:23:05,400 --> 00:23:07,480
Speaker 2: How do you get that nickname?

440
00:23:08,000 --> 00:23:11,320
Speaker 3: Well, it's funny you ask. It actually used to really

441
00:23:11,359 --> 00:23:15,639
Speaker 3: bother me when people said that, because I thought, you know,

442
00:23:15,680 --> 00:23:17,600
Speaker 3: my feeling when I was covering the FED is it

443
00:23:17,680 --> 00:23:20,679
Speaker 3: kind of trivializes what we're trying to do here and

444
00:23:20,800 --> 00:23:24,840
Speaker 3: the hard reporting that went into getting stories out of

445
00:23:24,880 --> 00:23:30,320
Speaker 3: the institution and you know, following the journalistic mission. So

446
00:23:30,640 --> 00:23:32,960
Speaker 3: maybe I was a little righteous about being called the

447
00:23:32,960 --> 00:23:36,879
Speaker 3: FED whisperer back then. You know, Wall Street loves to

448
00:23:36,920 --> 00:23:40,399
Speaker 3: attach these kind of two word names and everything. So

449
00:23:40,440 --> 00:23:42,280
Speaker 3: when I was covering the FED, it was like the

450
00:23:42,359 --> 00:23:47,600
Speaker 3: Taper tantrum and Qui infinity, the terrifying, and the FED

451
00:23:47,720 --> 00:23:49,760
Speaker 3: pivot and you know, so for me, it was the

452
00:23:49,760 --> 00:23:53,200
Speaker 3: FED Whisperer. But you know, since I left journalism and

453
00:23:53,240 --> 00:23:55,560
Speaker 3: started my own business, now I'll use whatever I can

454
00:23:55,640 --> 00:23:57,880
Speaker 3: to my advantage. So now I'm like, yeah, you can

455
00:23:57,880 --> 00:24:00,639
Speaker 3: call me the FED whisperer. I'll take that. Back in

456
00:24:00,680 --> 00:24:01,679
Speaker 3: the day when people.

457
00:24:01,400 --> 00:24:05,159
Speaker 2: Said it, I was like, I don't think Fed whisper

458
00:24:05,320 --> 00:24:07,960
Speaker 2: is as trivial as something like do you remember the

459
00:24:08,000 --> 00:24:11,639
Speaker 2: green span briefcase indicator how thick or thin hit? It

460
00:24:11,680 --> 00:24:13,840
Speaker 2: was just a dumb thing. Yeah, I don't remember seeing

461
00:24:13,840 --> 00:24:16,240
Speaker 2: MEC started it. Somebody started it, and it was just

462
00:24:16,280 --> 00:24:19,040
Speaker 2: one of those dumb like really are we really doing this?

463
00:24:19,560 --> 00:24:21,679
Speaker 2: But you were the one that was getting all the

464
00:24:21,680 --> 00:24:26,760
Speaker 2: FED scoops that when they wanted to publicize something, they

465
00:24:26,760 --> 00:24:29,600
Speaker 2: had a variety of outlets that they would reach out to,

466
00:24:30,240 --> 00:24:33,720
Speaker 2: So ten outlets would all get the same story, but

467
00:24:33,840 --> 00:24:38,080
Speaker 2: one outlet would have a much more in depth personal detail.

468
00:24:38,840 --> 00:24:40,440
Speaker 3: Here's where we got to mystify.

469
00:24:40,520 --> 00:24:41,720
Speaker 2: So okay, so let's see.

470
00:24:42,160 --> 00:24:44,560
Speaker 3: Yeah, I mean, we could talk for a long time

471
00:24:44,600 --> 00:24:46,640
Speaker 3: about that, but I wouldn't say that that was exactly

472
00:24:46,680 --> 00:24:49,879
Speaker 3: the way it worked. So, you know, and this is

473
00:24:50,000 --> 00:24:52,000
Speaker 3: kind of why I had, you know, was a little

474
00:24:52,240 --> 00:24:55,320
Speaker 3: upity about the FED whisperer thing is it wasn't like

475
00:24:55,359 --> 00:24:58,520
Speaker 3: there was some bat phone sitting at my desk and

476
00:24:58,640 --> 00:25:00,880
Speaker 3: like the phone rang and it was like, oh yes,

477
00:25:00,960 --> 00:25:03,720
Speaker 3: Chairman Bernanky, what would you like me to say today?

478
00:25:03,800 --> 00:25:08,320
Speaker 3: There was you know, and my successor, Nick Timros is

479
00:25:08,400 --> 00:25:10,320
Speaker 3: great at this. There was a lot of reporting that

480
00:25:10,400 --> 00:25:13,399
Speaker 3: went into this work. It wasn't it wasn't like a

481
00:25:13,480 --> 00:25:16,880
Speaker 3: spoon feeding kind of process. It was a very kind

482
00:25:16,880 --> 00:25:19,080
Speaker 3: of It was a process is a keyword, and it

483
00:25:19,119 --> 00:25:25,040
Speaker 3: was dynamic and complex. So I mean, we could we

484
00:25:25,080 --> 00:25:28,400
Speaker 3: could talk in some more detail about that, But it

485
00:25:28,440 --> 00:25:30,879
Speaker 3: wasn't that it wasn't the kind of thing that well,

486
00:25:31,280 --> 00:25:34,320
Speaker 3: first of all, that they only started doing press conferences

487
00:25:34,760 --> 00:25:39,520
Speaker 3: sometime after I guess it was around it was twenty twelve,

488
00:25:39,600 --> 00:25:43,120
Speaker 3: who was posed four years? Four years into the beat,

489
00:25:43,160 --> 00:25:45,400
Speaker 3: Maybe it was twenty ten. I can't even remember anymore.

490
00:25:45,840 --> 00:25:48,240
Speaker 3: But what went into the process of writing a FED

491
00:25:48,320 --> 00:25:52,080
Speaker 3: story was like you had to do a lot of reporting,

492
00:25:52,160 --> 00:25:54,640
Speaker 3: a lot of triangulation. You had to figure out where

493
00:25:54,680 --> 00:25:57,920
Speaker 3: the debate was going inside the room and put enough

494
00:25:57,960 --> 00:26:01,080
Speaker 3: pieces of the puzzle together in order to say this

495
00:26:01,200 --> 00:26:03,280
Speaker 3: is what they're likely to do. And it was also

496
00:26:03,800 --> 00:26:06,720
Speaker 3: very important. You know, people used to say, oh, how cold,

497
00:26:07,040 --> 00:26:09,320
Speaker 3: How could his stories always be right? He's clearly being

498
00:26:09,400 --> 00:26:12,880
Speaker 3: spoon fed stuff. Well, there's like there's a reason for that,

499
00:26:12,920 --> 00:26:16,000
Speaker 3: because I didn't report stuff I didn't know. So, you know,

500
00:26:16,040 --> 00:26:17,720
Speaker 3: you had to do a lot of reporting to get

501
00:26:17,760 --> 00:26:19,199
Speaker 3: to a point where you could say, all right, this

502
00:26:19,359 --> 00:26:22,080
Speaker 3: is where they are and what they're going, and where

503
00:26:22,119 --> 00:26:24,359
Speaker 3: you could say, you know, this is what we know

504
00:26:24,520 --> 00:26:27,040
Speaker 3: about the kind of state of the debate, or how

505
00:26:27,080 --> 00:26:28,920
Speaker 3: certain you know, there were some meetings where they weren't

506
00:26:28,960 --> 00:26:31,600
Speaker 3: sure what they were doing going into it, and I

507
00:26:31,640 --> 00:26:33,760
Speaker 3: wasn't going to get over my skis on that stuff.

508
00:26:33,880 --> 00:26:37,639
Speaker 3: So it was, uh, you know, so there was reporting

509
00:26:37,680 --> 00:26:41,359
Speaker 3: that went into that, there was understanding the institution. I

510
00:26:41,440 --> 00:26:43,760
Speaker 3: became very good friends with the New York Giants Beat.

511
00:26:44,000 --> 00:26:46,439
Speaker 3: I'm a big football fan New York Giants Beat reporter

512
00:26:46,520 --> 00:26:49,399
Speaker 3: in those years, and we used to compare notes, like

513
00:26:49,480 --> 00:26:52,000
Speaker 3: I saw my job in some way similar to what

514
00:26:52,080 --> 00:26:54,439
Speaker 3: she was doing it, Like I needed to know what

515
00:26:54,640 --> 00:26:56,879
Speaker 3: was going on in the locker room right right, and

516
00:26:56,960 --> 00:26:59,040
Speaker 3: I needed to know kind of who the players were,

517
00:26:59,119 --> 00:27:02,280
Speaker 3: what the game plan were, who the trainers were, like

518
00:27:02,359 --> 00:27:05,920
Speaker 3: every angle of the locker room in order to get

519
00:27:05,920 --> 00:27:08,440
Speaker 3: a whole picture and in order to say with authority

520
00:27:08,480 --> 00:27:11,159
Speaker 3: what I thought was happening and what was going to

521
00:27:11,640 --> 00:27:14,240
Speaker 3: go on next to that. You know, by game day

522
00:27:14,440 --> 00:27:16,840
Speaker 3: was an FOMC meeting. By then I had already done

523
00:27:16,880 --> 00:27:18,800
Speaker 3: the hard reporting. It was just a matter of saying,

524
00:27:18,800 --> 00:27:20,520
Speaker 3: all right, here's what happened on the field.

525
00:27:20,720 --> 00:27:23,280
Speaker 2: FED reporting as a sports analogy.

526
00:27:23,119 --> 00:27:25,600
Speaker 3: Well, I started out as a sports writer, so yeah.

527
00:27:25,840 --> 00:27:28,720
Speaker 2: It makes perfect sense. So let's talk a little bit

528
00:27:28,760 --> 00:27:33,400
Speaker 2: about the FED today versus when you were covering them.

529
00:27:33,720 --> 00:27:36,240
Speaker 2: Now you're covering them as a researcher and an analyst,

530
00:27:36,280 --> 00:27:40,760
Speaker 2: then you're covering them as a reporter. You wrote the

531
00:27:40,800 --> 00:27:45,200
Speaker 2: era of consensus and comedy at the US Central Bank

532
00:27:45,359 --> 00:27:45,879
Speaker 2: is ending.

533
00:27:46,600 --> 00:27:51,200
Speaker 3: Explain well, So, I mean the FED is a very

534
00:27:51,240 --> 00:27:57,640
Speaker 3: consensus driven institution. When I was covering the FED back

535
00:27:57,680 --> 00:28:01,639
Speaker 3: in the financial cris period two thousand and eight two

536
00:28:01,680 --> 00:28:04,560
Speaker 3: thousand and nine, there was actually a lot of disagreement

537
00:28:04,640 --> 00:28:08,240
Speaker 3: at the time. The disagreement was internal and mostly in

538
00:28:08,280 --> 00:28:11,000
Speaker 3: the regional Fed banks. So I actually spent a lot

539
00:28:11,040 --> 00:28:14,399
Speaker 3: of time talking to these regional Fed bank hawks to

540
00:28:14,520 --> 00:28:19,000
Speaker 3: understand what their case was against programs like QWE and

541
00:28:19,080 --> 00:28:23,920
Speaker 3: interest rate cuts and things like that repression, and there

542
00:28:24,119 --> 00:28:27,159
Speaker 3: were a lot of unknowns, for sure, there were a

543
00:28:27,200 --> 00:28:31,239
Speaker 3: lot of unknowns. So and bernanky and yelling, and then

544
00:28:31,320 --> 00:28:34,120
Speaker 3: Powell spent a lot of time trying to building processes

545
00:28:34,160 --> 00:28:38,800
Speaker 3: to build consensus around their decisions. What's happening now is

546
00:28:39,320 --> 00:28:43,360
Speaker 3: is it's the disagreement and division is politically driven, right,

547
00:28:43,480 --> 00:28:48,120
Speaker 3: we all know that. But what the President has a

548
00:28:48,120 --> 00:28:50,800
Speaker 3: clear view of where he wants interest rates going. He

549
00:28:50,840 --> 00:28:55,800
Speaker 3: wants all interest rates going down. It's I'm afraid a

550
00:28:55,800 --> 00:28:58,880
Speaker 3: little more complicated than what he perhaps thinks he's going

551
00:28:58,920 --> 00:29:01,240
Speaker 3: to get out of that because he might cut short

552
00:29:01,280 --> 00:29:03,920
Speaker 3: term interest rates and get higher long term interest rates, which.

553
00:29:03,800 --> 00:29:05,160
Speaker 2: Which happened very recently.

554
00:29:06,000 --> 00:29:09,160
Speaker 3: It happened with the FEDS cuts last year. And so

555
00:29:09,400 --> 00:29:12,160
Speaker 3: you know, he's putting on people in the institution who

556
00:29:12,200 --> 00:29:14,200
Speaker 3: were you know he expects to be loyal to him.

557
00:29:14,240 --> 00:29:18,600
Speaker 3: Stephen Miron is the latest. So we're and there's a

558
00:29:18,640 --> 00:29:21,760
Speaker 3: lot at stake, and there's turnover happening at the FED

559
00:29:21,840 --> 00:29:24,200
Speaker 3: right now. We all know there's going to be a

560
00:29:24,240 --> 00:29:28,120
Speaker 3: new chairman appointed by the President next year. There are

561
00:29:28,200 --> 00:29:31,240
Speaker 3: tests of loyalty. The really big issue is if the

562
00:29:31,280 --> 00:29:34,880
Speaker 3: president gets four people who are loyal or even closely

563
00:29:34,960 --> 00:29:38,000
Speaker 3: loyal to his views, he has an opportunity to remake

564
00:29:38,040 --> 00:29:41,560
Speaker 3: the entire system because with a majority on the FED

565
00:29:41,640 --> 00:29:45,080
Speaker 3: Board there are seven Board governors. With a majority of

566
00:29:45,120 --> 00:29:49,000
Speaker 3: four on the FED Board, then the Board can start

567
00:29:49,080 --> 00:29:52,680
Speaker 3: firing and restructuring the regional banks that might oppose some

568
00:29:52,720 --> 00:29:57,320
Speaker 3: of the policies that the President wants to pursue. So

569
00:29:57,360 --> 00:30:00,720
Speaker 3: there's a lot of stake right now. Two levels, one

570
00:30:00,760 --> 00:30:03,800
Speaker 3: with the succession of j. Powell and two with the

571
00:30:03,840 --> 00:30:06,560
Speaker 3: construction of who the other governors are going to be

572
00:30:06,640 --> 00:30:09,080
Speaker 3: on the FED board and how loyal they'll be to

573
00:30:09,160 --> 00:30:12,040
Speaker 3: the President's vision of how monetary policy should be running

574
00:30:12,040 --> 00:30:12,240
Speaker 3: the end.

575
00:30:12,640 --> 00:30:15,120
Speaker 2: So let's talk about that. You wrote a piece early

576
00:30:15,200 --> 00:30:18,880
Speaker 2: in the summer of twenty twenty five, the fourth seat,

577
00:30:19,560 --> 00:30:23,360
Speaker 2: meaning once the President gets a hold of that fourth seat,

578
00:30:23,760 --> 00:30:29,000
Speaker 2: he is essentially running the supposedly independent FED. Tell us

579
00:30:29,040 --> 00:30:31,720
Speaker 2: a little bit about that, and we'll eventually talk about

580
00:30:31,760 --> 00:30:36,280
Speaker 2: Lisa Cook. Yeah, and what this pretense firing really looks

581
00:30:36,320 --> 00:30:38,520
Speaker 2: like an attempts to get an early grib at that

582
00:30:38,600 --> 00:30:39,120
Speaker 2: fourth seat.

583
00:30:39,200 --> 00:30:41,120
Speaker 3: Yeah, and I'm actually going to go straight into Lisa

584
00:30:41,160 --> 00:30:45,560
Speaker 3: Cook in a moment. But so there's the President appointed

585
00:30:45,640 --> 00:30:48,240
Speaker 3: Chris Waller, he's a FED governor, he might get the

586
00:30:48,360 --> 00:30:51,800
Speaker 3: chairman's job. He appointed Michelle Bowman. These were in his

587
00:30:51,840 --> 00:30:56,120
Speaker 3: first terms, and she was given a promotion to Vice

588
00:30:56,160 --> 00:31:02,440
Speaker 3: sheriff supervision. He's now appointed Stephen Miron, who's made the

589
00:31:02,440 --> 00:31:05,360
Speaker 3: President's case for much lower interest rates just last week.

590
00:31:05,840 --> 00:31:09,560
Speaker 3: And so he's in theory one set away from having

591
00:31:09,640 --> 00:31:12,160
Speaker 3: four governors and a majority on the board and an

592
00:31:12,240 --> 00:31:14,680
Speaker 3: opportunity to move the FED in a whole new direction

593
00:31:15,440 --> 00:31:18,720
Speaker 3: and what's happened. It looked like that fourth governor job

594
00:31:18,840 --> 00:31:22,560
Speaker 3: might be j Powell's job next year when his chairmanship ends.

595
00:31:22,960 --> 00:31:27,160
Speaker 3: But what happened is now, and this gets a little complicated,

596
00:31:27,400 --> 00:31:35,120
Speaker 3: But the chair of the FHFA is accusing the Federal

597
00:31:35,160 --> 00:31:40,760
Speaker 3: Home Finance Administration or agency is accusing Lisa Cook, another

598
00:31:40,840 --> 00:31:45,880
Speaker 3: FED governor, of fraud and mortgage applications that she submitted

599
00:31:45,920 --> 00:31:48,760
Speaker 3: to her banks in twenty twenty one. It's an unproven allegation,

600
00:31:49,160 --> 00:31:53,000
Speaker 3: but if they're trying to remove her for costs, the

601
00:31:53,040 --> 00:31:56,920
Speaker 3: President has effectively announced that he's firing her for cause,

602
00:31:56,960 --> 00:31:59,240
Speaker 3: and she's challenging that it could be in the Supreme Court.

603
00:31:59,520 --> 00:32:04,160
Speaker 2: Now there's a whole concept of FED independence, and the

604
00:32:04,200 --> 00:32:08,160
Speaker 2: FED board can fire someone from cause. There doesn't seem

605
00:32:08,200 --> 00:32:12,400
Speaker 2: to be any precedent for the president fire. Let's hold

606
00:32:12,440 --> 00:32:15,440
Speaker 2: aside of fact. Wink wik nudge, nudge. We all know

607
00:32:15,600 --> 00:32:19,200
Speaker 2: that this mortgage thing is nonsense and it's just a pretense.

608
00:32:19,640 --> 00:32:24,520
Speaker 2: Let's just hold that aside. We're talking about governmental power.

609
00:32:25,200 --> 00:32:28,640
Speaker 2: Who has the power to hire and fire FED government?

610
00:32:29,000 --> 00:32:31,960
Speaker 3: The President has power the power to fire a FED

611
00:32:32,000 --> 00:32:36,120
Speaker 3: governor for cause. Then we get to it hasn't happened.

612
00:32:36,240 --> 00:32:38,960
Speaker 3: No president has tried. But then you get to our

613
00:32:39,040 --> 00:32:42,680
Speaker 3: question was of well, how A, how do you define cause?

614
00:32:43,280 --> 00:32:46,480
Speaker 3: And b what is the what is the process for

615
00:32:47,120 --> 00:32:50,520
Speaker 3: defining cause? And then going through the process of firing

616
00:32:50,560 --> 00:32:52,960
Speaker 3: a FED governor. This is all on chartered ground, and

617
00:32:53,000 --> 00:32:56,520
Speaker 3: it's moving to the Supreme Court to make some decisions. Now,

618
00:32:56,640 --> 00:32:59,080
Speaker 3: there are a whole other set of decisions the Supreme

619
00:32:59,120 --> 00:33:01,920
Speaker 3: Court has made where it has found that the president

620
00:33:02,000 --> 00:33:05,520
Speaker 3: can fire heads of other agencies at his discretion. And

621
00:33:05,600 --> 00:33:09,000
Speaker 3: one of the questions is whether firing a FED official

622
00:33:09,080 --> 00:33:12,360
Speaker 3: for cause is held to a higher standard than you know,

623
00:33:12,560 --> 00:33:17,200
Speaker 3: firing a participant in the National Labor Relations Board, and

624
00:33:17,400 --> 00:33:21,000
Speaker 3: the Supreme Court for reasons I can't say I fully understand,

625
00:33:21,400 --> 00:33:23,960
Speaker 3: seems to be ready to draw a circle around the FED.

626
00:33:24,000 --> 00:33:26,280
Speaker 3: But there are big questions of how do you define

627
00:33:26,320 --> 00:33:30,280
Speaker 3: cause and what's the process, And we don't know where

628
00:33:30,280 --> 00:33:31,520
Speaker 3: they're going to go with it. They need to kick

629
00:33:31,560 --> 00:33:31,840
Speaker 3: it back.

630
00:33:32,560 --> 00:33:36,400
Speaker 2: It's not just putting out something on social on any

631
00:33:36,440 --> 00:33:39,200
Speaker 2: social media order. You actually have to have a process.

632
00:33:40,080 --> 00:33:42,920
Speaker 3: Well, I don't know. I mean, the Supreme Court might

633
00:33:43,000 --> 00:33:46,320
Speaker 3: decide that the president can do it at his discretion

634
00:33:46,600 --> 00:33:47,360
Speaker 3: on X.

635
00:33:47,480 --> 00:33:50,440
Speaker 5: So if it's that discretion as but but then what

636
00:33:50,600 --> 00:33:54,440
Speaker 5: is Lisa Cook's argument is that, well, so there's a

637
00:33:54,440 --> 00:33:57,280
Speaker 5: definition of for a cause, and I don't have the

638
00:33:57,320 --> 00:33:59,600
Speaker 5: specific language in front of me, but it has to

639
00:33:59,640 --> 00:34:04,280
Speaker 5: be for discreet malfeasance or neglect.

640
00:34:03,920 --> 00:34:06,600
Speaker 3: On the job. And one of her one of her

641
00:34:08,320 --> 00:34:11,000
Speaker 3: defenses is that he isn't accusing me of doing anything

642
00:34:11,000 --> 00:34:15,040
Speaker 3: wrong on the job. These were applications I submitted years ago,

643
00:34:15,600 --> 00:34:17,839
Speaker 3: or and but then there's some fuzzy language that you know,

644
00:34:18,280 --> 00:34:21,879
Speaker 3: or or the like or something to that effect. And

645
00:34:21,960 --> 00:34:24,880
Speaker 3: so there's a question of whether there's enough gray area

646
00:34:25,040 --> 00:34:28,960
Speaker 3: for the president to define what fore cause means on

647
00:34:29,040 --> 00:34:32,239
Speaker 3: the first two things of you know, you know, malfeasance

648
00:34:32,280 --> 00:34:33,960
Speaker 3: on the job or neglect on the job, they don't

649
00:34:33,960 --> 00:34:36,640
Speaker 3: seem to hold up. But there's some gray area on

650
00:34:36,680 --> 00:34:39,280
Speaker 3: the third piece of that, you know, And that's that's

651
00:34:39,400 --> 00:34:41,919
Speaker 3: kind of legal precedent that's been said over many years.

652
00:34:42,040 --> 00:34:46,080
Speaker 2: It's fascinating because the government, when they were defending the

653
00:34:46,120 --> 00:34:51,719
Speaker 2: tariffs kinda said, well, AIPA says emergency, they don't say

654
00:34:51,760 --> 00:34:55,320
Speaker 2: anything about tariffs. What's an emergency? In the government's position

655
00:34:55,600 --> 00:34:58,839
Speaker 2: was whatever the President says it is. Yeah, all these

656
00:34:58,920 --> 00:35:03,600
Speaker 2: words that uretically have actual meaning. Once you start saying

657
00:35:03,719 --> 00:35:08,600
Speaker 2: it's subjective at the president's discretion four cause emergency, things

658
00:35:08,640 --> 00:35:10,840
Speaker 2: like that go out the window. It's going to be

659
00:35:10,880 --> 00:35:15,440
Speaker 2: interesting to see if the Supreme Court contorts themselves to

660
00:35:15,520 --> 00:35:19,520
Speaker 2: acquiesce to the president or follows what we think of

661
00:35:19,560 --> 00:35:21,880
Speaker 2: as traditional legal theory.

662
00:35:22,320 --> 00:35:27,200
Speaker 3: It's another big year court for sure. And I mean,

663
00:35:27,200 --> 00:35:29,960
Speaker 3: if you want to get really philosophical and pull the

664
00:35:30,040 --> 00:35:32,359
Speaker 3: lens way back, I mean, I personally think we're living

665
00:35:32,400 --> 00:35:36,640
Speaker 3: through revolutionary times kin to the French Revolution in the

666
00:35:36,640 --> 00:35:40,200
Speaker 3: American Revolution. And one of the things we know is

667
00:35:40,200 --> 00:35:44,600
Speaker 3: that in revolutionary times, standards and norms get thrown into

668
00:35:44,640 --> 00:35:46,800
Speaker 3: the air and redefined.

669
00:35:46,920 --> 00:35:51,520
Speaker 2: Which can first, Did did the throwing of the norms

670
00:35:51,640 --> 00:35:57,240
Speaker 2: away lead to the revolution? Or was the revolutionary set

671
00:35:57,320 --> 00:36:01,000
Speaker 2: up in place and norm are just collateral.

672
00:36:01,120 --> 00:36:04,239
Speaker 3: The revolution has been building for years. And I'll take

673
00:36:04,280 --> 00:36:06,080
Speaker 3: this back to my FED beat. It's a little off

674
00:36:06,080 --> 00:36:10,000
Speaker 3: the subject, but when I was covering the FED by

675
00:36:10,040 --> 00:36:14,640
Speaker 3: twenty thirteen twenty fourteen, I was regularly getting emails from

676
00:36:14,800 --> 00:36:18,359
Speaker 3: really angry readers who saw the FED as being at

677
00:36:18,360 --> 00:36:23,320
Speaker 3: the center of America's problems an example of an elite

678
00:36:23,719 --> 00:36:28,799
Speaker 3: Wall Street institution hurting the little guy in favor of

679
00:36:28,920 --> 00:36:33,719
Speaker 3: rich guys, an insiders game. And they saw me as

680
00:36:33,760 --> 00:36:37,000
Speaker 3: a reporter at the Wall Street covering the institution theater

681
00:36:37,120 --> 00:36:40,879
Speaker 3: as yeah as carrying their water. And I routinely got

682
00:36:40,920 --> 00:36:44,360
Speaker 3: emails from people saying there's a revolution coming, and like

683
00:36:44,400 --> 00:36:47,080
Speaker 3: they told me and like as a warning, they said,

684
00:36:47,080 --> 00:36:51,239
Speaker 3: there's a revolution coming, and when we come, you're going

685
00:36:51,280 --> 00:36:54,240
Speaker 3: to be one of the people we string up on

686
00:36:54,239 --> 00:36:59,000
Speaker 3: on you know, on pitchforks, on pitchforks they were, they

687
00:36:59,160 --> 00:37:02,120
Speaker 3: used injury of the French Revolution. I was seeing this

688
00:37:02,200 --> 00:37:05,160
Speaker 3: back in twenty fourteen. It actually led me to write

689
00:37:05,160 --> 00:37:07,720
Speaker 3: a series of collection of stories with actually the most

690
00:37:07,760 --> 00:37:11,799
Speaker 3: prolific Wall Street Journal Page one reporter of all time,

691
00:37:11,840 --> 00:37:15,160
Speaker 3: a guy named Bob Davis, about the economic roots of

692
00:37:15,160 --> 00:37:18,359
Speaker 3: what we call the economic roots of political discontent by

693
00:37:18,440 --> 00:37:21,880
Speaker 3: twenty sixteen. By twenty fifteen, like I was getting death threats,

694
00:37:21,880 --> 00:37:24,799
Speaker 3: and we saw that there was like something going on

695
00:37:24,960 --> 00:37:27,520
Speaker 3: in the country that was kind of deeper than your

696
00:37:27,640 --> 00:37:31,239
Speaker 3: normally agitated reporter, And so we went out and wrote

697
00:37:31,239 --> 00:37:34,879
Speaker 3: a bunch of stories called The Great unraveling in twenty

698
00:37:34,920 --> 00:37:37,719
Speaker 3: six I recall that I recalled that it was all

699
00:37:37,800 --> 00:37:39,959
Speaker 3: about how kind of trade had gone the wrong way

700
00:37:40,000 --> 00:37:43,759
Speaker 3: for many Americans, how finance had gone the wrong way

701
00:37:43,840 --> 00:37:47,400
Speaker 3: for many Americans, and technology, and that people were angry

702
00:37:47,480 --> 00:37:50,319
Speaker 3: and they were angry at the elites. And so to

703
00:37:50,360 --> 00:37:54,120
Speaker 3: answer your question, the revolution started a long time ago,

704
00:37:54,400 --> 00:37:57,880
Speaker 3: and I think we're pretty well into it. And you know,

705
00:37:58,000 --> 00:38:00,680
Speaker 3: I think a lot of this revolution has been and

706
00:38:01,000 --> 00:38:05,480
Speaker 3: you know, we have digital guillotines now right where like

707
00:38:06,160 --> 00:38:11,520
Speaker 3: where we'll cut off your head by your reputation. But

708
00:38:11,719 --> 00:38:17,000
Speaker 3: sadly and disturbingly, it's now getting somewhat bloody.

709
00:38:17,440 --> 00:38:19,319
Speaker 2: Yeah, no, to say the very least. You know, it's

710
00:38:19,400 --> 00:38:24,480
Speaker 2: kind of fascinating. When I was writing Bailout Nation, one

711
00:38:24,480 --> 00:38:26,319
Speaker 2: of the things that kept coming up when you look

712
00:38:26,320 --> 00:38:32,319
Speaker 2: at the history of who is Treasury secretary, they seem

713
00:38:32,400 --> 00:38:35,839
Speaker 2: to be pulled, pulled from two different groups. They were

714
00:38:35,840 --> 00:38:39,000
Speaker 2: either pulled from Wall Street and banking, or they were

715
00:38:39,160 --> 00:38:44,279
Speaker 2: pulled from manufacturing and industry. And throughout history, if you

716
00:38:44,400 --> 00:38:48,919
Speaker 2: had an industrialist as Treasury secretary when things hit the fan,

717
00:38:49,160 --> 00:38:50,759
Speaker 2: well a whole bunch of banks are going to have

718
00:38:50,800 --> 00:38:55,640
Speaker 2: to go under sorry, flip that when you have someone

719
00:38:55,680 --> 00:38:58,920
Speaker 2: from Wall Street, well, then we're going to rescue the banks.

720
00:38:59,080 --> 00:39:04,240
Speaker 2: And ironically, I don't disagree with anything you said about

721
00:39:05,280 --> 00:39:08,759
Speaker 2: the history. I think some of the anger is misplaced

722
00:39:09,520 --> 00:39:13,439
Speaker 2: because it wasn't the FED basically stepped in when Congress

723
00:39:13,800 --> 00:39:16,160
Speaker 2: threw their hands up and said, we can't do anything.

724
00:39:16,239 --> 00:39:19,520
Speaker 3: Oh and it was a financial crisis, right. It is

725
00:39:19,560 --> 00:39:22,799
Speaker 3: the lender of last resort, right, it's their role.

726
00:39:22,840 --> 00:39:24,239
Speaker 2: They were supposed to do that.

727
00:39:24,239 --> 00:39:26,080
Speaker 3: That's where they were creating in nineteen thirteen.

728
00:39:26,320 --> 00:39:30,759
Speaker 2: That's right. What didn't happen during a normal financial crisis

729
00:39:31,320 --> 00:39:36,600
Speaker 2: is fiscal stimulus along with monetary stimulus. Monetary stimulus benefits

730
00:39:36,640 --> 00:39:39,720
Speaker 2: the holders of capital. You on stocks, bonds, real estate

731
00:39:40,320 --> 00:39:43,600
Speaker 2: rates go down, you do great. When the government does

732
00:39:43,600 --> 00:39:45,920
Speaker 2: a big fiscal stimulus that tends to land on the

733
00:39:45,960 --> 00:39:50,240
Speaker 2: middle class. Hey, we're going to build an interstate commerce system,

734
00:39:50,280 --> 00:39:55,160
Speaker 2: an interstate highway system. We're gonna you know, create weaponized

735
00:39:55,239 --> 00:40:00,600
Speaker 2: kingsingism and build up defense. That tended in pass to

736
00:40:00,640 --> 00:40:03,880
Speaker 2: find its way to the middle class. What happened in

737
00:40:03,880 --> 00:40:07,560
Speaker 2: the twenty tens were you had all that monetary stimulus,

738
00:40:07,719 --> 00:40:12,040
Speaker 2: very little fiscal stimulus at least until the pandemic, and

739
00:40:12,080 --> 00:40:15,319
Speaker 2: for a brief period of time it looked like the

740
00:40:15,320 --> 00:40:16,719
Speaker 2: middle class was bought off.

741
00:40:16,920 --> 00:40:19,120
Speaker 3: Yeah, well, there's I mean, there's a lot of economics

742
00:40:19,120 --> 00:40:21,719
Speaker 3: in history here. What I'll say is, I agree with you.

743
00:40:22,480 --> 00:40:26,480
Speaker 3: We got fiscal policy exactly one hundred and eighty degrees

744
00:40:26,520 --> 00:40:30,319
Speaker 3: wrong after the financial crisis, in the sense that what

745
00:40:30,360 --> 00:40:33,359
Speaker 3: we needed was and there was some fiscal stimulus right

746
00:40:33,400 --> 00:40:36,400
Speaker 3: after the fact, but it wasn't sustained. We went, you know,

747
00:40:36,440 --> 00:40:39,839
Speaker 3: we went to fiscal austerity within a year or two.

748
00:40:40,200 --> 00:40:43,520
Speaker 3: What we needed was short term stimulus, right and long

749
00:40:43,680 --> 00:40:49,120
Speaker 3: term fiscal austerity in order to get the budget under control.

750
00:40:49,360 --> 00:40:52,920
Speaker 3: And what they did was short term austerity and nothing

751
00:40:52,960 --> 00:40:56,799
Speaker 3: about the long term. And I'm still waiting, by the way,

752
00:40:56,840 --> 00:40:59,240
Speaker 3: for the bond market to recognize this, and it doesn't

753
00:40:59,239 --> 00:40:59,920
Speaker 3: seem to do that.

754
00:41:00,719 --> 00:41:05,719
Speaker 2: It's kind of fascinating that the bond vigilantes. I keep

755
00:41:05,719 --> 00:41:08,040
Speaker 2: hearing those names come up, and they don't really seem

756
00:41:08,080 --> 00:41:09,080
Speaker 2: to exist anymore.

757
00:41:09,120 --> 00:41:11,400
Speaker 3: They seem to flutter their eyes and wake up and

758
00:41:11,400 --> 00:41:12,520
Speaker 3: then go back to sleep again.

759
00:41:13,480 --> 00:41:15,800
Speaker 2: I have a pet theory that there's just a shortage

760
00:41:15,840 --> 00:41:21,680
Speaker 2: of quality sovereign paper and so even a damaged, high

761
00:41:21,719 --> 00:41:23,840
Speaker 2: debt United States is still going to make good on

762
00:41:23,920 --> 00:41:24,440
Speaker 2: its debts.

763
00:41:24,760 --> 00:41:26,719
Speaker 3: So they're still appetite, right, And I think that helps

764
00:41:26,760 --> 00:41:29,400
Speaker 3: you explain why spreads are so tight right now, because

765
00:41:29,520 --> 00:41:31,319
Speaker 3: people will buy whatever paper they can.

766
00:41:31,239 --> 00:41:33,200
Speaker 2: Get, right, right, absolutely true.

767
00:41:33,239 --> 00:41:35,800
Speaker 3: Hey, I know that you have a bunch more things

768
00:41:35,840 --> 00:41:37,920
Speaker 3: you want to ask about the FED. Can I you

769
00:41:37,920 --> 00:41:41,480
Speaker 3: were asking a few minutes ago about the about covering

770
00:41:41,480 --> 00:41:43,719
Speaker 3: the fat and being the Fed whisper right and being

771
00:41:44,600 --> 00:41:45,879
Speaker 3: spoon fed so to speak.

772
00:41:46,120 --> 00:41:49,640
Speaker 2: Right, You didn't know no shoe leather, no heavy research,

773
00:41:49,760 --> 00:41:53,520
Speaker 2: no investigative jenneralism. They just handed you your stories.

774
00:41:53,840 --> 00:41:55,520
Speaker 3: And I pushed back, and see, there's a lot there's

775
00:41:55,560 --> 00:41:58,359
Speaker 3: a lot of there's a lot of reporting that went

776
00:41:58,360 --> 00:42:00,640
Speaker 3: into those stories. I just wanted to I don't know

777
00:42:00,640 --> 00:42:02,520
Speaker 3: if this was among the things he wanted to ask,

778
00:42:02,560 --> 00:42:05,000
Speaker 3: but I just wanted to describe, for a second, like

779
00:42:05,080 --> 00:42:09,960
Speaker 3: what my mentality was about, like what my job was, right. So,

780
00:42:10,120 --> 00:42:13,200
Speaker 3: and I used to preach this to colleagues all the time.

781
00:42:13,280 --> 00:42:15,680
Speaker 3: As a beat reporter, I felt like this is really

782
00:42:15,680 --> 00:42:19,759
Speaker 3: important to me. I had three responsibilities. One responsibility was

783
00:42:19,760 --> 00:42:23,040
Speaker 3: to break stories, right, that was those Fed scoops, and

784
00:42:23,120 --> 00:42:25,640
Speaker 3: it mattered. You know, if people were going to pay

785
00:42:26,560 --> 00:42:29,200
Speaker 3: to subscribe to the Walls regional all, they want something

786
00:42:29,239 --> 00:42:32,239
Speaker 3: different in there. The other responsibility I had was to

787
00:42:32,320 --> 00:42:35,080
Speaker 3: explain a complicated world. There were a lot of complicated

788
00:42:35,120 --> 00:42:38,000
Speaker 3: things going on when I was covering the FED with

789
00:42:38,520 --> 00:42:41,320
Speaker 3: QI and zero interest rates, and I had to understand

790
00:42:41,360 --> 00:42:43,680
Speaker 3: it and try to explain it to people. But then

791
00:42:43,760 --> 00:42:48,520
Speaker 3: the third piece was holding powerful people and institutions accountable.

792
00:42:49,160 --> 00:42:52,440
Speaker 3: And you know, I think that from the outside, maybe

793
00:42:52,480 --> 00:42:54,600
Speaker 3: people would look at this and say, oh, he's getting

794
00:42:54,640 --> 00:42:58,080
Speaker 3: spoon fed these scoops and he's pulling his punches. He's

795
00:42:58,120 --> 00:43:00,480
Speaker 3: not holding them accountable. But that third part was important

796
00:43:00,480 --> 00:43:02,520
Speaker 3: to me, and I mean, I'd be happy to talk

797
00:43:02,520 --> 00:43:06,480
Speaker 3: about stuff that we did on that front. And you

798
00:43:06,480 --> 00:43:09,440
Speaker 3: know what we did to try to hold the FED account.

799
00:43:09,160 --> 00:43:10,160
Speaker 2: Well, let's zoom in.

800
00:43:10,360 --> 00:43:12,560
Speaker 3: And there's also the sense that those that those two

801
00:43:12,600 --> 00:43:15,120
Speaker 3: things are in conflict right that well, you know, if

802
00:43:15,160 --> 00:43:16,920
Speaker 3: you're holding their feet to the fire, they're not going

803
00:43:17,000 --> 00:43:18,560
Speaker 3: to you know, they're not going to give you the

804
00:43:18,600 --> 00:43:20,960
Speaker 3: next scoop. And my response is, first of all, they

805
00:43:20,960 --> 00:43:23,640
Speaker 3: weren't spoon feeding these scoops. I had to work to

806
00:43:23,680 --> 00:43:26,840
Speaker 3: get the information and put them in positions where they

807
00:43:26,880 --> 00:43:30,239
Speaker 3: would tell me things that didn't happen by accident. I

808
00:43:30,239 --> 00:43:35,400
Speaker 3: had to leverage information how I could. But also, you know,

809
00:43:35,520 --> 00:43:38,279
Speaker 3: I had a responsibility to do the accountability stuff, and

810
00:43:38,320 --> 00:43:40,919
Speaker 3: I couldn't, let you know, fear get in my way

811
00:43:40,960 --> 00:43:42,880
Speaker 3: of doing that that it was going to undermine. And

812
00:43:43,200 --> 00:43:45,239
Speaker 3: you know, there were times when I made them uncomfortable

813
00:43:45,239 --> 00:43:46,239
Speaker 3: and I just had to do that.

814
00:43:46,320 --> 00:43:49,600
Speaker 2: So let's let's zoom out and take like a ten

815
00:43:49,640 --> 00:43:54,640
Speaker 2: thousand foot view. A FED chair has a story he

816
00:43:54,719 --> 00:43:58,520
Speaker 2: wants to inform the market of. And that's always been

817
00:43:58,600 --> 00:44:01,360
Speaker 2: my thought process. When the FED is communicating, it's not

818
00:44:01,440 --> 00:44:04,799
Speaker 2: about image or pr They want the market to do

819
00:44:04,880 --> 00:44:08,160
Speaker 2: some of their work for them, or at least not

820
00:44:08,320 --> 00:44:11,719
Speaker 2: shock or surprise the market. They want the market to

821
00:44:12,400 --> 00:44:17,160
Speaker 2: understand what's coming and be prepared for it. So how

822
00:44:17,200 --> 00:44:22,920
Speaker 2: would a BERNANKI or yelling go about communicating, Hey, you

823
00:44:22,960 --> 00:44:27,560
Speaker 2: guys don't understand there are after you left in twenty

824
00:44:27,640 --> 00:44:30,560
Speaker 2: twenty two, there was a bunch of increases coming. But

825
00:44:30,719 --> 00:44:34,239
Speaker 2: let's stick with the twenty tens. Hey rates are going

826
00:44:34,320 --> 00:44:36,319
Speaker 2: to are low and they're going to stay low for

827
00:44:36,440 --> 00:44:40,000
Speaker 2: the next for the foreseeable future. How does that get

828
00:44:40,440 --> 00:44:43,840
Speaker 2: disseminated out to the public and then to the bond

829
00:44:43,880 --> 00:44:48,680
Speaker 2: traders so that the street knows what's coming up next?

830
00:44:48,840 --> 00:44:49,000
Speaker 4: Right?

831
00:44:49,200 --> 00:44:51,120
Speaker 3: Yeah, Okay, So there are a lot of pieces to this.

832
00:44:51,239 --> 00:44:54,760
Speaker 3: The first one is you're right, there are two really

833
00:44:54,760 --> 00:44:58,680
Speaker 3: important imperatives from their perspective, especially in the twenty tens,

834
00:44:59,160 --> 00:45:02,040
Speaker 3: because the interest rate had gotten to zero. What they

835
00:45:02,080 --> 00:45:05,000
Speaker 3: realized was the only way they're going to like affect

836
00:45:05,040 --> 00:45:08,520
Speaker 3: financial conditions in a way that helps the economy is

837
00:45:08,760 --> 00:45:11,080
Speaker 3: if they convince the markets that they're going to keep

838
00:45:11,120 --> 00:45:13,680
Speaker 3: interest rates really low for a long time, then you

839
00:45:13,760 --> 00:45:18,279
Speaker 3: get long term rates down in addition, and so projecting

840
00:45:18,360 --> 00:45:21,799
Speaker 3: a stance of dubbishness for a long time became part

841
00:45:21,840 --> 00:45:24,359
Speaker 3: of the mission, right, And that was part of what

842
00:45:24,400 --> 00:45:27,759
Speaker 3: they wanted to do to influence the economy and financial conditions.

843
00:45:27,840 --> 00:45:30,640
Speaker 3: But then the other thing, as you said, is they

844
00:45:30,680 --> 00:45:33,080
Speaker 3: don't want to freak the markets out because that causes

845
00:45:33,120 --> 00:45:36,480
Speaker 3: in their mind, unnecessary turbulence that can be really damaging,

846
00:45:36,960 --> 00:45:41,040
Speaker 3: and they're still haunted to this day. By nineteen ninety four,

847
00:45:41,680 --> 00:45:44,960
Speaker 3: when Greenspan raised rates i think by three quarters of

848
00:45:45,000 --> 00:45:47,719
Speaker 3: a point and the market started pricing in a succession

849
00:45:47,719 --> 00:45:50,640
Speaker 3: of three quarter point increases, and then the next thing,

850
00:45:50,680 --> 00:45:54,279
Speaker 3: you know, Orange County, California blew up, in Mexico blew up, right,

851
00:45:54,719 --> 00:45:59,600
Speaker 3: So like they want their view of the world to

852
00:45:59,600 --> 00:46:01,520
Speaker 3: be under stood, and they do a lot of different

853
00:46:01,520 --> 00:46:05,319
Speaker 3: things along those lines. They give speeches. They've become more

854
00:46:05,360 --> 00:46:07,640
Speaker 3: you know, back in the early nineties when I started

855
00:46:07,680 --> 00:46:10,440
Speaker 3: on this beat, the FED didn't tell anybody anything.

856
00:46:10,520 --> 00:46:13,960
Speaker 2: Right there, It's so funny, I've told people this. You

857
00:46:14,000 --> 00:46:16,680
Speaker 2: get an announcement, we've raised rates. The only way you

858
00:46:16,719 --> 00:46:19,280
Speaker 2: knew the Fed did something was from the open market

859
00:46:19,280 --> 00:46:21,880
Speaker 2: activity in the bond market. Oh, the Fed must have

860
00:46:21,960 --> 00:46:23,200
Speaker 2: done something. What's going on?

861
00:46:23,320 --> 00:46:23,560
Speaker 1: Yeah?

862
00:46:23,680 --> 00:46:25,799
Speaker 3: Right, yeah, that was that was going to say, like

863
00:46:25,840 --> 00:46:29,080
Speaker 3: they weren't putting out announcements in nineteen eighty nine. When

864
00:46:29,120 --> 00:46:32,040
Speaker 3: they did something, you had fed watchers, that's what the

865
00:46:32,120 --> 00:46:34,920
Speaker 3: original term fed watcher, and you had people in the

866
00:46:34,960 --> 00:46:37,120
Speaker 3: markets who looked at what were going on with money

867
00:46:37,160 --> 00:46:40,480
Speaker 3: market rates and the FED injected X billion dollars and

868
00:46:40,520 --> 00:46:42,759
Speaker 3: they're like, oh, they just pushed up interest rates. And

869
00:46:42,760 --> 00:46:45,000
Speaker 3: then it took you three days to figure out if

870
00:46:45,000 --> 00:46:47,480
Speaker 3: that was their intention or an accident and then so

871
00:46:47,680 --> 00:46:50,920
Speaker 3: over a course of thirty plus years, they've become more

872
00:46:50,960 --> 00:46:53,840
Speaker 3: and more transparent, right, so they started green Span started

873
00:46:53,840 --> 00:46:56,160
Speaker 3: putting out statements. Oh and by the way, you know,

874
00:46:56,239 --> 00:46:59,960
Speaker 3: Alan Greenspan just delighted in how obscure he could be

875
00:47:00,360 --> 00:47:02,960
Speaker 3: and what he said, because he wanted to confuse people.

876
00:47:03,440 --> 00:47:05,480
Speaker 3: And they came to see over time that there was

877
00:47:05,520 --> 00:47:09,560
Speaker 3: a benefit to just being clear. So they put out statements.

878
00:47:10,440 --> 00:47:13,960
Speaker 3: They you know, they put up minutes. Obviously, they started

879
00:47:13,960 --> 00:47:19,279
Speaker 3: doing press conferences. Is there interaction between FED officials and

880
00:47:19,400 --> 00:47:23,319
Speaker 3: reporters that doesn't show up, you know, like onto, Yes,

881
00:47:23,960 --> 00:47:28,720
Speaker 3: FED officials talk to reporters on background in certain circumstances,

882
00:47:29,160 --> 00:47:31,759
Speaker 3: and so like yeah, we did talk to FED officials,

883
00:47:31,800 --> 00:47:35,360
Speaker 3: you know, not for attribution, but it was part of

884
00:47:35,400 --> 00:47:37,759
Speaker 3: a very dynamic process. When I like when I was

885
00:47:37,800 --> 00:47:41,680
Speaker 3: writing stories about for instance, Q two, stands out to

886
00:47:41,719 --> 00:47:45,000
Speaker 3: me like that was that was a situation where like

887
00:47:45,520 --> 00:47:48,919
Speaker 3: they were moving towards making a decision about Q two

888
00:47:48,960 --> 00:47:51,319
Speaker 3: over several months. It took them like six to nine

889
00:47:51,320 --> 00:47:53,560
Speaker 3: months to get there. And that was a case where

890
00:47:53,600 --> 00:47:59,000
Speaker 3: I was putting pieces very kind of I was putting

891
00:47:59,040 --> 00:48:02,360
Speaker 3: pieces of a puzzle together to be able to figure

892
00:48:02,360 --> 00:48:04,600
Speaker 3: out how they didn't even know where they were going

893
00:48:04,719 --> 00:48:06,880
Speaker 3: at the time, and so there was a lot of

894
00:48:06,880 --> 00:48:10,160
Speaker 3: reporting that had to go into understanding what was going

895
00:48:10,200 --> 00:48:13,200
Speaker 3: on behind the scenes, and which words that they used

896
00:48:13,280 --> 00:48:16,279
Speaker 3: matter mattered, and how they and how they used them.

897
00:48:16,360 --> 00:48:20,279
Speaker 2: My recollection of q E two, and this is ten

898
00:48:20,480 --> 00:48:23,960
Speaker 2: plus years ago, was I think it was before where

899
00:48:24,040 --> 00:48:28,880
Speaker 2: I even launched my own firm. We had maybe it

900
00:48:28,960 --> 00:48:33,239
Speaker 2: was a double line bond fund that was primarily mortgage back,

901
00:48:33,960 --> 00:48:36,160
Speaker 2: and it used to be ninety percent mortgage backed, and

902
00:48:36,160 --> 00:48:38,040
Speaker 2: then it was eighty percent, then it was seventy percent.

903
00:48:38,400 --> 00:48:40,719
Speaker 2: And what was going on is the FED was just

904
00:48:40,880 --> 00:48:43,719
Speaker 2: sucking up all of the mortgage back bonds out there,

905
00:48:43,840 --> 00:48:47,239
Speaker 2: yeah that the private sector had very little of it.

906
00:48:48,000 --> 00:48:52,160
Speaker 2: And eventually this went from a substantially mortgage back fund

907
00:48:52,680 --> 00:48:55,680
Speaker 2: to just another treasury fund.

908
00:48:55,840 --> 00:48:59,759
Speaker 3: And that was quey exactly what they wanted to tappen.

909
00:49:00,200 --> 00:49:02,799
Speaker 3: It's kind of crazy because it brought it took down

910
00:49:02,920 --> 00:49:07,080
Speaker 3: risk free rates they wanted. And so I don't know

911
00:49:07,120 --> 00:49:11,200
Speaker 3: if you or others and other investors in your funds decided,

912
00:49:11,200 --> 00:49:12,640
Speaker 3: all right, well, if we want to get a return,

913
00:49:12,920 --> 00:49:14,560
Speaker 3: we got to move further out on the risk card.

914
00:49:14,680 --> 00:49:16,719
Speaker 3: That was exactly what they were trying. You just you

915
00:49:16,960 --> 00:49:20,920
Speaker 3: just explained QUI to an action like the way they

916
00:49:20,920 --> 00:49:21,600
Speaker 3: wanted to do it.

917
00:49:21,880 --> 00:49:25,200
Speaker 2: And the ironic thing is the first person who said

918
00:49:25,280 --> 00:49:31,720
Speaker 2: that to me about risk capital was Jim Bianco summer

919
00:49:31,920 --> 00:49:37,120
Speaker 2: of nine in a canoe, maybe it was ten in Maine.

920
00:49:37,640 --> 00:49:39,600
Speaker 3: You're you're at the David Kotok.

921
00:49:39,200 --> 00:49:43,399
Speaker 2: That's right, And he had said the purpose of quantitative

922
00:49:43,560 --> 00:49:47,399
Speaker 2: easing is to get people out of the safe all

923
00:49:47,480 --> 00:49:51,120
Speaker 2: of the risk aversion that people developed during the financial crisis,

924
00:49:51,520 --> 00:49:54,640
Speaker 2: flooding into money market and bonds. Hey, in order for

925
00:49:54,640 --> 00:49:56,719
Speaker 2: the economy to work, we need this money to.

926
00:49:56,680 --> 00:49:59,200
Speaker 3: Move and the right of way. The purpose, this is

927
00:49:59,239 --> 00:50:01,879
Speaker 3: another thing is like I was always amused by how

928
00:50:02,080 --> 00:50:05,000
Speaker 3: like people on Wall Street reacted to stories because they

929
00:50:05,120 --> 00:50:08,200
Speaker 3: very often thought the stories were foreign about them. But

930
00:50:08,239 --> 00:50:11,799
Speaker 3: the purpose wasn't to get like the end goal wasn't

931
00:50:11,840 --> 00:50:14,200
Speaker 3: to get you guys to move out the risk curve.

932
00:50:14,440 --> 00:50:18,560
Speaker 3: It was to ease financial conditions in a way that

933
00:50:18,680 --> 00:50:21,680
Speaker 3: economic activity that was being put off for five years

934
00:50:21,680 --> 00:50:25,520
Speaker 3: from now would take place now instead. Right, it was

935
00:50:25,560 --> 00:50:29,080
Speaker 3: to get people to it was to generate economic activity

936
00:50:29,120 --> 00:50:32,440
Speaker 3: today that was being deferred because people were so underwater

937
00:50:32,600 --> 00:50:33,840
Speaker 3: or uncertain.

938
00:50:33,560 --> 00:50:37,360
Speaker 2: So it's funny to use the word underwater. I always

939
00:50:37,400 --> 00:50:42,000
Speaker 2: assumed that the way to recover from a crisis is

940
00:50:42,680 --> 00:50:46,799
Speaker 2: the mistake wasn't letting Lehman Brothers collapse. The mistake was

941
00:50:46,920 --> 00:50:50,000
Speaker 2: many more banks should have been allowed to collapse. Right,

942
00:50:50,520 --> 00:50:54,560
Speaker 2: tear the band aid off, have the government provide veteran

943
00:50:54,600 --> 00:50:58,840
Speaker 2: possession financing, so all these companies, you know, the joke was,

944
00:50:58,880 --> 00:51:02,960
Speaker 2: there's no such thing is toxic paper, only toxic prices

945
00:51:03,000 --> 00:51:06,520
Speaker 2: at the right price. These pools have bid, mortgages, had balance.

946
00:51:06,920 --> 00:51:10,640
Speaker 3: That's the age old debate in finance, right is you know,

947
00:51:10,880 --> 00:51:13,120
Speaker 3: if you bail them out, you're putting off all these

948
00:51:13,160 --> 00:51:18,000
Speaker 3: hard decisions. Basically, I remember talking to Bill Dudley about this.

949
00:51:18,160 --> 00:51:20,040
Speaker 3: But you know, basically, what you're doing is trying to

950
00:51:20,080 --> 00:51:23,120
Speaker 3: smooth smooth out the curve so that there isn't as

951
00:51:23,160 --> 00:51:27,560
Speaker 3: much damage today. You're bringing forward some activity, but by

952
00:51:27,760 --> 00:51:31,640
Speaker 3: by design, you're actually putting off some of the damage

953
00:51:31,800 --> 00:51:34,439
Speaker 3: for the future. The alternative is you tear the band

954
00:51:34,440 --> 00:51:36,160
Speaker 3: aid off, you get to the right price. But the

955
00:51:36,200 --> 00:51:38,480
Speaker 3: worry at the FED at the moment was that they

956
00:51:38,480 --> 00:51:41,960
Speaker 3: were replaying the Great Depression. And in the Great Depression,

957
00:51:42,000 --> 00:51:46,239
Speaker 3: what happened was the price didn't correct and readjust the

958
00:51:46,280 --> 00:51:52,800
Speaker 3: whole process of destruction fed on itself and it became

959
00:51:52,840 --> 00:51:55,759
Speaker 3: its own self feeding equilibrium that took a decade to

960
00:51:55,760 --> 00:51:58,239
Speaker 3: get out. And so that's the choice they made, was

961
00:51:58,280 --> 00:52:00,160
Speaker 3: that they didn't they didn't want to go down on

962
00:52:00,200 --> 00:52:04,759
Speaker 3: this path where banks start collapsing, there's no credit, Businesses

963
00:52:04,800 --> 00:52:07,560
Speaker 3: start collapsing, people get laid off, people have no money

964
00:52:07,640 --> 00:52:10,600
Speaker 3: to spend. More, banks collapse more, you know, So like

965
00:52:10,640 --> 00:52:13,360
Speaker 3: they were trying to short circuit that kind of process.

966
00:52:13,560 --> 00:52:16,279
Speaker 2: Although obviously we have the FDIC, we have all these

967
00:52:16,320 --> 00:52:19,239
Speaker 2: other structures in place to prevent.

968
00:52:19,200 --> 00:52:22,879
Speaker 3: That, but that wasn't enough. Lehman Brothers wasn't FDIC insurance, right,

969
00:52:22,920 --> 00:52:24,560
Speaker 3: And that was so here's my analogy.

970
00:52:24,680 --> 00:52:27,920
Speaker 2: But City, Chase, Wells Fargo go through all the lists.

971
00:52:28,840 --> 00:52:31,960
Speaker 2: There were plenty of banks. Chase was fine, but Wells

972
00:52:32,000 --> 00:52:35,920
Speaker 2: Fargo ran it's trouble and yeah, well but they're insured

973
00:52:36,000 --> 00:52:36,920
Speaker 2: not a bank, right.

974
00:52:36,960 --> 00:52:39,600
Speaker 3: But that's what I'm That's what I'm saying. The thing,

975
00:52:39,760 --> 00:52:43,400
Speaker 3: what they what they recognized was that they were replaying

976
00:52:43,760 --> 00:52:47,600
Speaker 3: the potentially the Great Depression, but the old story of

977
00:52:47,640 --> 00:52:51,759
Speaker 3: a bank run had been had been altered, and now

978
00:52:51,800 --> 00:52:55,960
Speaker 3: we're dealing with very exotic instruments and institutions that didn't

979
00:52:56,280 --> 00:52:59,560
Speaker 3: fall under the institutions that were that didn't fall under

980
00:52:59,640 --> 00:53:04,439
Speaker 3: the calls that were created during the Great Depression. And

981
00:53:05,000 --> 00:53:06,520
Speaker 3: you know, they were potentially going back.

982
00:53:06,520 --> 00:53:08,680
Speaker 2: So as we were speaking earlier, and it's a little

983
00:53:08,680 --> 00:53:12,960
Speaker 2: ironic they avoided the Great Depression, but sort of an

984
00:53:13,040 --> 00:53:17,280
Speaker 2: unintended consequence was they helped lead us to the French Revolution.

985
00:53:18,160 --> 00:53:20,880
Speaker 3: But yeah, yeah, in fact, you know, I remember a

986
00:53:20,920 --> 00:53:24,040
Speaker 3: conversation I had with with Bernanky way back then, where

987
00:53:24,120 --> 00:53:27,600
Speaker 3: you know, he said like he expected a populous blowback.

988
00:53:27,880 --> 00:53:30,319
Speaker 3: Really yeah, he expected it, just not as far as

989
00:53:30,320 --> 00:53:32,600
Speaker 3: it went well. I mean, I think he was surprised

990
00:53:32,600 --> 00:53:34,680
Speaker 3: by where it came from, right. I don't think he

991
00:53:34,719 --> 00:53:36,560
Speaker 3: would have expected it to have come from the right.

992
00:53:36,560 --> 00:53:40,759
Speaker 2: Well, that whole Rick Santelli, you know, tea party nonsense.

993
00:53:41,120 --> 00:53:43,520
Speaker 3: I had run in with Rick during that hotey.

994
00:53:43,640 --> 00:53:46,480
Speaker 2: I mean, wait, we're bailing out banks to the tunes

995
00:53:46,480 --> 00:53:50,200
Speaker 2: of tens of billions of dollars, but the people who

996
00:53:50,239 --> 00:53:53,480
Speaker 2: applied for mortgages, you're just gonna cut them loose. That

997
00:53:53,680 --> 00:53:56,000
Speaker 2: seemed to be what yeah.

998
00:53:55,880 --> 00:54:00,239
Speaker 3: And yeah, and there were a lot of consequences that

999
00:54:00,280 --> 00:54:03,040
Speaker 3: It's funny you mentioned Rick because Rick I went on

1000
00:54:03,120 --> 00:54:05,640
Speaker 3: with Rick on CNBC and he lectured me that I

1001
00:54:05,680 --> 00:54:09,120
Speaker 3: needed to be more opinionated in my questions at press

1002
00:54:09,160 --> 00:54:10,759
Speaker 3: conferences and reporting, like.

1003
00:54:10,800 --> 00:54:14,080
Speaker 2: You don't understand what that's not right? It's like that

1004
00:54:14,200 --> 00:54:15,279
Speaker 2: you miss you seem to think.

1005
00:54:15,680 --> 00:54:17,759
Speaker 3: I'll give you one little analogy since we're talking about

1006
00:54:18,239 --> 00:54:21,640
Speaker 3: My analogy for Ben Bernanke is imagine that you are

1007
00:54:22,719 --> 00:54:29,040
Speaker 3: a Civil War historian at at wake Forest University, and

1008
00:54:29,080 --> 00:54:32,399
Speaker 3: you're an expert on the battlefields of the Civil War.

1009
00:54:33,120 --> 00:54:36,239
Speaker 3: Actually let's call University of Virginia, because Virginia was more

1010
00:54:36,440 --> 00:54:39,840
Speaker 3: center places. And you're an expert on the artillery and

1011
00:54:39,880 --> 00:54:42,160
Speaker 3: the battlefields and the personnel, and you know everything about

1012
00:54:42,200 --> 00:54:44,040
Speaker 3: the Civil War. And then you got a job as

1013
00:54:44,040 --> 00:54:47,879
Speaker 3: a consultant at the at the Pentagon, and you did

1014
00:54:47,920 --> 00:54:50,280
Speaker 3: such a good job as a consultant at the Pentagon

1015
00:54:50,320 --> 00:54:53,520
Speaker 3: that they made you the Defense Secretary. And then a

1016
00:54:53,560 --> 00:54:56,120
Speaker 3: new Civil War broke out, but it was being fought

1017
00:54:56,200 --> 00:54:59,400
Speaker 3: with drones and laser guided miss That's what happened to

1018
00:54:59,440 --> 00:55:03,920
Speaker 3: Ben Bernanke. He was a great depression historian who knew

1019
00:55:04,000 --> 00:55:07,160
Speaker 3: about all the battles and wrote decisive histories of it.

1020
00:55:07,520 --> 00:55:09,840
Speaker 3: And then he got the job at the FED, and he,

1021
00:55:10,600 --> 00:55:12,960
Speaker 3: you know, he was fighting. He was refighting what he

1022
00:55:13,000 --> 00:55:15,919
Speaker 3: thought was a great depression moment. But he was doing

1023
00:55:16,000 --> 00:55:18,680
Speaker 3: it with these really high tech financial instruments like credit

1024
00:55:18,719 --> 00:55:24,279
Speaker 3: default swaps and credit you know, clatteralized dead obligations and

1025
00:55:24,719 --> 00:55:25,080
Speaker 3: the like.

1026
00:55:25,320 --> 00:55:30,040
Speaker 2: Coming up, we continue our conversation with John Hilsenrath, former

1027
00:55:30,080 --> 00:55:34,360
Speaker 2: Wall Street General reporter and current research advisor at Serpa

1028
00:55:34,680 --> 00:55:39,759
Speaker 2: Pinta Advisory, discussing rates, politics, and the FED. Today, I'm

1029
00:55:39,800 --> 00:55:47,359
Speaker 2: Barry Ridults. You're listening to Masters in Business on Bloomberg Radio.

1030
00:55:58,320 --> 00:56:01,799
Speaker 2: I'm Barry Ridult's. You're listening to Masters and Business on

1031
00:56:01,880 --> 00:56:06,080
Speaker 2: Bloomberg Radio, and some of you are watching us on YouTube.

1032
00:56:06,239 --> 00:56:09,799
Speaker 2: My extra special guest today John Hilson Wrath, former chief

1033
00:56:09,840 --> 00:56:13,840
Speaker 2: economics correspondent and FED whisperer for The Wall Street Journal,

1034
00:56:14,360 --> 00:56:17,800
Speaker 2: now an analyst and researcher at his own shop, Surpa

1035
00:56:18,080 --> 00:56:22,000
Speaker 2: Pinto Advisory. So let's talk about where we are today

1036
00:56:22,160 --> 00:56:25,759
Speaker 2: in the world. Starting with a quote of yours, The

1037
00:56:25,800 --> 00:56:28,799
Speaker 2: old normal is dead, the new normal is here? What

1038
00:56:28,880 --> 00:56:29,480
Speaker 2: does that mean?

1039
00:56:30,080 --> 00:56:33,160
Speaker 3: Wow, I'll be honest with you, I don't even remember

1040
00:56:33,160 --> 00:56:36,080
Speaker 3: writing that, all right, so let me remove that, but

1041
00:56:36,520 --> 00:56:39,560
Speaker 3: I mean we could, but let me redefine that. Okay,

1042
00:56:39,640 --> 00:56:42,279
Speaker 3: you go back to our French Revolution story. Sure, which

1043
00:56:42,320 --> 00:56:45,120
Speaker 3: is I think there's a new old normal setting in

1044
00:56:45,239 --> 00:56:48,360
Speaker 3: which is that? You know? I mean I think we're

1045
00:56:48,800 --> 00:56:57,000
Speaker 3: living through historically changing times on several levels. So one

1046
00:56:57,000 --> 00:57:00,319
Speaker 3: of those is just is information right? And this brings

1047
00:57:00,360 --> 00:57:02,640
Speaker 3: me again. But I've become I've been obsessed with the

1048
00:57:02,640 --> 00:57:05,640
Speaker 3: French Revolution ever since people started telling me they're going

1049
00:57:05,680 --> 00:57:08,560
Speaker 3: to stick my head into the eighteen But you know,

1050
00:57:08,600 --> 00:57:12,120
Speaker 3: there was an information revolution happening during the French Revolution too.

1051
00:57:12,120 --> 00:57:16,280
Speaker 3: There were printing presses everywhere knew, there were pamphleteers. I mean,

1052
00:57:16,520 --> 00:57:19,000
Speaker 3: the printing press had been around for a couple of centuries,

1053
00:57:19,000 --> 00:57:22,520
Speaker 3: but it wasn't being mass produced. And in every village

1054
00:57:22,760 --> 00:57:25,560
Speaker 3: and every you know, neighborhood in Paris.

1055
00:57:26,280 --> 00:57:29,600
Speaker 2: But sent you read.

1056
00:57:29,280 --> 00:57:32,280
Speaker 6: Histories, If you read histories of the French Revolution, there

1057
00:57:32,280 --> 00:57:36,200
Speaker 6: were pamphleteers everywhere giving their version of events on every

1058
00:57:36,240 --> 00:57:40,120
Speaker 6: street corner, and they were basically tearing down the old

1059
00:57:40,160 --> 00:57:43,880
Speaker 6: institutions of the church and the aristocracy who defined the

1060
00:57:43,960 --> 00:57:46,640
Speaker 6: story for the public as they saw fit.

1061
00:57:47,160 --> 00:57:50,720
Speaker 3: And you know the United States too, The Declaration of

1062
00:57:50,760 --> 00:57:54,920
Speaker 3: Independence was a pamphlet. They signed the thing in Philadelphia,

1063
00:57:55,320 --> 00:57:58,040
Speaker 3: they fled because the British were coming, found their way

1064
00:57:58,400 --> 00:58:02,720
Speaker 3: to a printing facility in Baltimore and started mass producing

1065
00:58:02,800 --> 00:58:05,840
Speaker 3: the Declaration of Independence. So, you know, I think we're

1066
00:58:05,840 --> 00:58:08,880
Speaker 3: going through something like that now, where the old institutions

1067
00:58:09,040 --> 00:58:13,880
Speaker 3: of power in the media or are being redefined. I mean,

1068
00:58:13,960 --> 00:58:17,760
Speaker 3: for goodness sake, podcasters had a bigger influence on the

1069
00:58:17,840 --> 00:58:21,360
Speaker 3: last election than see and ended. It's amazing to me, Yeah,

1070
00:58:21,400 --> 00:58:23,160
Speaker 3: no doubt about it. So I think that, you know,

1071
00:58:23,200 --> 00:58:25,840
Speaker 3: that's an old normal, but the new normal is you know,

1072
00:58:26,920 --> 00:58:30,440
Speaker 3: this technological revolution, in my mind is mind boggling. I mean,

1073
00:58:30,680 --> 00:58:34,040
Speaker 3: I'm happy to sit at the table with a contemporary.

1074
00:58:34,240 --> 00:58:36,520
Speaker 3: When you and I were young men, if you wanted

1075
00:58:36,560 --> 00:58:37,800
Speaker 3: to take a picture.

1076
00:58:38,400 --> 00:58:39,960
Speaker 2: You know, you had to get a camera. You had

1077
00:58:40,000 --> 00:58:40,760
Speaker 2: a black.

1078
00:58:40,560 --> 00:58:43,640
Speaker 3: Box called a camera with something called film, a canister

1079
00:58:43,800 --> 00:58:46,160
Speaker 3: called film in it, and then you know, you would

1080
00:58:46,160 --> 00:58:49,080
Speaker 3: take thirty six snaps and then you had to take

1081
00:58:49,120 --> 00:58:50,280
Speaker 3: it to a store.

1082
00:58:50,320 --> 00:58:52,120
Speaker 2: Or a photo Matt a little yellow booth.

1083
00:58:52,200 --> 00:58:54,920
Speaker 3: Yeah, yeah, and it had to get you know, it

1084
00:58:54,960 --> 00:58:57,520
Speaker 3: took a week in the store to get developed, and

1085
00:58:57,520 --> 00:58:59,320
Speaker 3: you had to pay some amount of money. If you

1086
00:58:59,360 --> 00:59:01,320
Speaker 3: wanted to do a search, you went to a library.

1087
00:59:01,400 --> 00:59:03,520
Speaker 3: If you wanted to write a letter, you wrote it

1088
00:59:03,520 --> 00:59:05,320
Speaker 3: with a piece of pen on a paper. You stuck

1089
00:59:05,360 --> 00:59:07,640
Speaker 3: it in an envelope, put a stamp on it, put

1090
00:59:07,680 --> 00:59:10,440
Speaker 3: in a blue box, and waited a month for All

1091
00:59:10,520 --> 00:59:16,360
Speaker 3: of that stuff is now instantaneous, infinite, and practically costless.

1092
00:59:17,000 --> 00:59:19,680
Speaker 3: And so you know, and like I've ride the subway

1093
00:59:19,720 --> 00:59:23,160
Speaker 3: in New York, you look like every every you know,

1094
00:59:23,280 --> 00:59:25,280
Speaker 3: three out of every four people sitting next to you

1095
00:59:25,320 --> 00:59:29,120
Speaker 3: was staring at their phone. I think the information we're

1096
00:59:29,160 --> 00:59:36,560
Speaker 3: living through right now is quantums of magnitude of what

1097
00:59:36,600 --> 00:59:38,880
Speaker 3: they were going through, I think during the French revolutions.

1098
00:59:39,000 --> 00:59:42,320
Speaker 3: So it's an interesting time to be alive, doing well.

1099
00:59:42,280 --> 00:59:50,280
Speaker 2: To say nothing about bad information, misinformation, propaganda.

1100
00:59:49,320 --> 00:59:52,640
Speaker 3: Bad information. The word libel has its root in part

1101
00:59:52,720 --> 00:59:56,560
Speaker 3: in the French wordly bell, which were these scandalous pamphlets

1102
00:59:56,560 --> 00:59:59,240
Speaker 3: that were being put out about Marie Antoinette. And I

1103
00:59:59,280 --> 01:00:02,800
Speaker 3: think it was called rub Street in London. Huh, So Yeah,

1104
01:00:02,840 --> 01:00:06,400
Speaker 3: an abundance of information includes an abundance of really bad

1105
01:00:06,480 --> 01:00:10,520
Speaker 3: information and misinformation. So we're living through all of that

1106
01:00:10,640 --> 01:00:14,400
Speaker 3: right now. So let's talk about quite the central bank stuff.

1107
01:00:14,400 --> 01:00:17,000
Speaker 2: You're not quite, but let's talk about what all this

1108
01:00:17,160 --> 01:00:22,200
Speaker 2: means for the economy, which, as you have noted, has

1109
01:00:22,280 --> 01:00:27,000
Speaker 2: proven to be much more resilient than most forecasters have predicted.

1110
01:00:27,360 --> 01:00:30,880
Speaker 2: Where are we, uh in the economy today? What sort

1111
01:00:30,880 --> 01:00:34,720
Speaker 2: of job does the FED have to do balancing their

1112
01:00:34,800 --> 01:00:38,760
Speaker 2: dual mandate in the in the post pandemic economy we

1113
01:00:38,800 --> 01:00:39,360
Speaker 2: are living through.

1114
01:00:39,480 --> 01:00:42,600
Speaker 3: Yeah, I mean I think I think the FED is

1115
01:00:42,640 --> 01:00:46,040
Speaker 3: in a tough spot and it's prone to making some

1116
01:00:46,120 --> 01:00:47,640
Speaker 3: costly mistakes right now.

1117
01:00:47,840 --> 01:00:49,800
Speaker 2: Do you think they make mistakes or are they just

1118
01:00:50,000 --> 01:00:51,760
Speaker 2: always late to the party.

1119
01:00:52,080 --> 01:00:53,960
Speaker 3: No, I think they missed. I think they make mistakes.

1120
01:00:54,000 --> 01:00:57,520
Speaker 3: They clearly made a mistake after COVID, and I understand

1121
01:00:57,560 --> 01:01:00,760
Speaker 3: and understand what happened. So this is the thing, like

1122
01:01:00,760 --> 01:01:03,600
Speaker 3: people attacked the KIWI programs that BERNANKI did. I think

1123
01:01:03,640 --> 01:01:07,320
Speaker 3: you know, in the moment that he implemented them, they

1124
01:01:07,360 --> 01:01:11,080
Speaker 3: were the net benefits were greater than the net costs

1125
01:01:11,840 --> 01:01:14,680
Speaker 3: in those moments. What happened I think was we went

1126
01:01:14,680 --> 01:01:18,040
Speaker 3: into another shock after COVID, and I think, you know, J.

1127
01:01:18,320 --> 01:01:22,280
Speaker 3: Powell made a mistake. He's frankly, he's not an economist,

1128
01:01:22,880 --> 01:01:25,800
Speaker 3: and he misread a supply shock to the economy as

1129
01:01:25,800 --> 01:01:29,120
Speaker 3: a potential demand shock. So we took all these tools

1130
01:01:29,200 --> 01:01:32,360
Speaker 3: off the shelves that Bernanki and yelling it created and

1131
01:01:32,480 --> 01:01:35,200
Speaker 3: threw them at the COVID shock, which was a supply shock,

1132
01:01:35,680 --> 01:01:39,200
Speaker 3: overstimulated demand and we got inflation. So, yes, that was

1133
01:01:39,240 --> 01:01:39,800
Speaker 3: a mistake.

1134
01:01:39,920 --> 01:01:42,400
Speaker 2: You're putting more of that on the FED than the

1135
01:01:42,400 --> 01:01:46,280
Speaker 2: massive fiscal stimulus from Karzact one and two under Trump,

1136
01:01:46,360 --> 01:01:50,200
Speaker 2: Karzac three, and all the various spending bills under Biden.

1137
01:01:50,760 --> 01:01:52,680
Speaker 2: You think that was more monetary than fiscal.

1138
01:01:52,760 --> 01:01:54,240
Speaker 3: I think it was all of these things combined.

1139
01:01:54,280 --> 01:01:55,040
Speaker 2: Okay, that's fair.

1140
01:01:55,080 --> 01:01:57,280
Speaker 3: It was. And by the way, the other thing that

1141
01:01:57,920 --> 01:02:02,720
Speaker 3: the FED and the Trump administration did intentionally was decided

1142
01:02:02,920 --> 01:02:04,720
Speaker 3: we're not just going to bail out the banks this time,

1143
01:02:04,760 --> 01:02:06,600
Speaker 3: We're going to bow out the little guys. That's why

1144
01:02:06,640 --> 01:02:10,320
Speaker 3: everybody got those checks. Everyone was reliving the trauma of

1145
01:02:10,360 --> 01:02:12,959
Speaker 3: the two thousand and eight financial crisis when they made

1146
01:02:12,960 --> 01:02:16,560
Speaker 3: these decisions that created a whole new trauma. My mom

1147
01:02:16,680 --> 01:02:19,880
Speaker 3: was a historian and she talked about the kaleidoscope of history.

1148
01:02:20,160 --> 01:02:24,040
Speaker 3: So the configuration is constantly turning and growing out of

1149
01:02:24,080 --> 01:02:28,280
Speaker 3: whatever last configuration we were in. The FEDS made a mistake,

1150
01:02:28,480 --> 01:02:31,360
Speaker 3: a discreete mistake, and the mistake in two thousand and

1151
01:02:32,440 --> 01:02:35,920
Speaker 3: I'm sorry twenty twenty twenty twenty one was over stimulating

1152
01:02:35,920 --> 01:02:38,960
Speaker 3: in the face of a suppleas shock, but to get

1153
01:02:39,160 --> 01:02:41,280
Speaker 3: to come more to you know. And I think one

1154
01:02:41,280 --> 01:02:44,920
Speaker 3: of the problems that economists have is they call certain

1155
01:02:44,960 --> 01:02:48,120
Speaker 3: things like a law or a rule, and they think

1156
01:02:48,120 --> 01:02:50,160
Speaker 3: when they once it's called a law or rule, then

1157
01:02:50,160 --> 01:02:53,800
Speaker 3: it must always be true, right the psalm rule. Claudia

1158
01:02:53,880 --> 01:02:58,360
Speaker 3: Sam brilliant economists, wonderful person, you know, she noticed a

1159
01:02:58,440 --> 01:03:00,840
Speaker 3: correlation between that's, you know, a certain moments when the

1160
01:03:00,920 --> 01:03:03,920
Speaker 3: unemployment rate rises a certain amount of i think a

1161
01:03:03,920 --> 01:03:06,400
Speaker 3: half percentage point over a six month period, it tends

1162
01:03:06,480 --> 01:03:09,920
Speaker 3: to keep going up. That's like in a historical observation.

1163
01:03:10,040 --> 01:03:13,360
Speaker 3: It's not a law written into rules about never.

1164
01:03:13,320 --> 01:03:16,640
Speaker 2: From a zero percent interest rate and a sub four

1165
01:03:16,680 --> 01:03:21,440
Speaker 2: percent unemployment rate, like when yeah, where some rule didn't

1166
01:03:21,480 --> 01:03:25,400
Speaker 2: work was coming from levels that historically had never existed.

1167
01:03:25,800 --> 01:03:30,520
Speaker 3: Yeah, so yeah, you have to look at the situation

1168
01:03:30,640 --> 01:03:33,160
Speaker 3: you're in right now, and these rules of thumb and

1169
01:03:33,240 --> 01:03:36,320
Speaker 3: people do you know, they're like, oh, GDP contracted, you know,

1170
01:03:36,400 --> 01:03:38,600
Speaker 3: we're close to it. I think you have to look

1171
01:03:38,640 --> 01:03:42,000
Speaker 3: at the situation you're in and make the most sense

1172
01:03:42,040 --> 01:03:44,760
Speaker 3: of it that you can. So where are we right now?

1173
01:03:44,880 --> 01:03:47,760
Speaker 3: So growth has proven to be more resilient than a

1174
01:03:47,760 --> 01:03:52,680
Speaker 3: lot of people expected. But employment is slowing down, inflation

1175
01:03:52,840 --> 01:03:57,400
Speaker 3: is above the FEDS two percent target. What sense do

1176
01:03:57,480 --> 01:04:00,880
Speaker 3: I make of this? I think that the economy has

1177
01:04:00,920 --> 01:04:03,680
Speaker 3: slowed down a little bit. But coinciding with all this

1178
01:04:03,800 --> 01:04:06,640
Speaker 3: uncertainty from the tariff shock is we're going through an

1179
01:04:06,680 --> 01:04:10,800
Speaker 3: investment boom. We're going through, you know, a technology driven

1180
01:04:10,880 --> 01:04:13,840
Speaker 3: investment boom right now, which by the way, could hurt

1181
01:04:13,920 --> 01:04:16,560
Speaker 3: labors and workers in the long run, and maybe we're

1182
01:04:16,560 --> 01:04:19,520
Speaker 3: seeing some of that as we speak. By the way,

1183
01:04:19,560 --> 01:04:22,800
Speaker 3: I also think that if the demand for capital is

1184
01:04:22,920 --> 01:04:26,960
Speaker 3: rising for investment in AI and data centers, higher demand

1185
01:04:27,000 --> 01:04:30,640
Speaker 3: for capital should mean a higher equilibrium interest rate, a

1186
01:04:30,720 --> 01:04:33,800
Speaker 3: higher cost of capital. Right, If the demand for capital

1187
01:04:33,840 --> 01:04:36,280
Speaker 3: is higher, then the price for capital should be higher.

1188
01:04:36,920 --> 01:04:38,920
Speaker 3: And you know, but the FED is being asked to

1189
01:04:38,960 --> 01:04:42,400
Speaker 3: respond to a labor market that's softening. You know. My

1190
01:04:43,040 --> 01:04:48,680
Speaker 3: own concern is that the FED, is that the FED

1191
01:04:48,760 --> 01:04:50,919
Speaker 3: is going to ease into the slowdown in the job

1192
01:04:50,960 --> 01:04:55,480
Speaker 3: market when the financial markets are on fire, when it

1193
01:04:55,600 --> 01:04:59,680
Speaker 3: thinks the risk free rate is lower than it actually is,

1194
01:05:00,640 --> 01:05:03,040
Speaker 3: and when they're still an inflation problem, and they're gonna

1195
01:05:03,360 --> 01:05:05,960
Speaker 3: light even more of a fire into these markets, which

1196
01:05:06,040 --> 01:05:09,040
Speaker 3: might feel good for a few months for you know,

1197
01:05:09,080 --> 01:05:11,360
Speaker 3: as we saw, and they're only two thousands, late nineties,

1198
01:05:11,480 --> 01:05:15,320
Speaker 3: go on for years, but those situations often don't end well.

1199
01:05:15,440 --> 01:05:18,280
Speaker 2: So you I want to combine two of the things

1200
01:05:18,360 --> 01:05:21,600
Speaker 2: you said. You mentioned we're above the feds two percent

1201
01:05:21,640 --> 01:05:25,640
Speaker 2: inflation target, But why is that a rule? If you

1202
01:05:25,960 --> 01:05:30,120
Speaker 2: look at the two thousands, two thousand and ten tens era,

1203
01:05:30,640 --> 01:05:34,960
Speaker 2: two percent was an upside monetary target. Yeah, from below.

1204
01:05:35,600 --> 01:05:40,120
Speaker 2: Now we've kind of pivoted into a fiscal stimulus era. Yeah,

1205
01:05:40,200 --> 01:05:42,320
Speaker 2: two percent is a downside target.

1206
01:05:42,400 --> 01:05:42,800
Speaker 3: Yeah.

1207
01:05:42,800 --> 01:05:46,240
Speaker 2: Should you have the same inflation target in the twenty

1208
01:05:46,280 --> 01:05:49,880
Speaker 2: twenties that you had in the two thousands and twenty tens.

1209
01:05:49,760 --> 01:05:52,960
Speaker 3: Yes, one hundred percent. It should be immutable, so it

1210
01:05:53,000 --> 01:05:57,080
Speaker 3: should always be percent, because it is now and it's

1211
01:05:57,080 --> 01:05:59,520
Speaker 3: in everybody's interest to keep it there. And here's why.

1212
01:05:59,720 --> 01:06:04,000
Speaker 3: So we have a fiat currency, right and so you know,

1213
01:06:04,040 --> 01:06:06,800
Speaker 3: if you go back two hundred years, three hundred years,

1214
01:06:06,800 --> 01:06:11,960
Speaker 3: the anchor for that currency was was gold. You know,

1215
01:06:12,040 --> 01:06:14,400
Speaker 3: people would say your money is as good as gold

1216
01:06:14,400 --> 01:06:16,480
Speaker 3: if you if you had a dour today, you could

1217
01:06:16,520 --> 01:06:19,320
Speaker 3: buy x number of ounces with that door today. That

1218
01:06:19,480 --> 01:06:22,480
Speaker 3: was the anchor for the currency. Gold doesn't work as

1219
01:06:22,520 --> 01:06:24,760
Speaker 3: an anchor for the currency. In my humble opinion, do

1220
01:06:24,840 --> 01:06:28,440
Speaker 3: you know that Americans spend about the last time I

1221
01:06:28,480 --> 01:06:30,600
Speaker 3: looked at this, about as much money every year on

1222
01:06:30,760 --> 01:06:34,600
Speaker 3: dry cleaning as they spend on gold. And do you

1223
01:06:34,600 --> 01:06:37,640
Speaker 3: know that the that the that the largest producers of

1224
01:06:37,680 --> 01:06:41,960
Speaker 3: gold in the world include countries like Russia and South

1225
01:06:42,000 --> 01:06:46,080
Speaker 3: Africa and Venuzu not the most stable producers. So like,

1226
01:06:46,120 --> 01:06:50,000
Speaker 3: so why would we anchor our currency to to an

1227
01:06:50,040 --> 01:06:53,960
Speaker 3: idea like like gold? What you want to have an anchor? Now,

1228
01:06:54,040 --> 01:06:59,360
Speaker 3: so the inflation target, what inflation is is an anchor

1229
01:06:59,440 --> 01:07:02,120
Speaker 3: that you know you're dollar is going to be worth

1230
01:07:03,040 --> 01:07:06,720
Speaker 3: a known and set amount every single year. It is.

1231
01:07:07,040 --> 01:07:10,520
Speaker 3: The two percent inflation target is the gold standard of

1232
01:07:10,560 --> 01:07:13,280
Speaker 3: the past. And in my mind, it's a more sensible

1233
01:07:13,280 --> 01:07:16,200
Speaker 3: gold standard because it touches a wider array of what

1234
01:07:16,240 --> 01:07:19,200
Speaker 3: it costs us to live. So then the question becomes, well,

1235
01:07:19,240 --> 01:07:22,960
Speaker 3: hy two percent? Well, so the answer is because that's

1236
01:07:23,000 --> 01:07:26,040
Speaker 3: what they chose because and you know, and this actually

1237
01:07:26,360 --> 01:07:28,360
Speaker 3: I go through this in my book about Yellen. But

1238
01:07:28,760 --> 01:07:30,720
Speaker 3: you know, well, why shouldn't it be zero? Well, the

1239
01:07:30,800 --> 01:07:34,120
Speaker 3: fear is. The fear was that if your anchor is zero,

1240
01:07:34,160 --> 01:07:37,840
Speaker 3: then interest rates are always very low. And when you

1241
01:07:37,880 --> 01:07:39,920
Speaker 3: get to a point where the economy is slow is

1242
01:07:39,960 --> 01:07:42,960
Speaker 3: slowing down like a depression or recession, unemployment is rising,

1243
01:07:43,160 --> 01:07:45,840
Speaker 3: the central bank can't do anything exactly what we live

1244
01:07:45,920 --> 01:07:48,360
Speaker 3: through in the eight period. You need to have the

1245
01:07:48,360 --> 01:07:53,560
Speaker 3: inflation number a little bit above zero. We want you

1246
01:07:53,600 --> 01:07:55,840
Speaker 3: want it low, but you wanted something above zero so

1247
01:07:55,840 --> 01:07:57,640
Speaker 3: that the Fed has a little wiggle room to support

1248
01:07:57,680 --> 01:08:00,600
Speaker 3: the economy in a crisis. That's the idea. So you

1249
01:08:00,600 --> 01:08:02,280
Speaker 3: could say, well, it should have been three percent, it

1250
01:08:02,280 --> 01:08:05,080
Speaker 3: should have been four percent, okay, but we chose two percent.

1251
01:08:05,640 --> 01:08:09,680
Speaker 3: And once you've chosen it, then it's very hard to say, like,

1252
01:08:09,760 --> 01:08:11,080
Speaker 3: we choose something else. Now.

1253
01:08:11,360 --> 01:08:15,120
Speaker 2: I read a paper by former FED Vice chair Roger

1254
01:08:15,200 --> 01:08:21,360
Speaker 2: Ferguson about the two percent target, and Ferguson said, it's

1255
01:08:21,400 --> 01:08:24,920
Speaker 2: a random number that came out of New Zealand's where

1256
01:08:24,960 --> 01:08:28,640
Speaker 2: someone just happened to be talking about inflation in the

1257
01:08:28,720 --> 01:08:31,960
Speaker 2: nineteen eighties and they tossed out two percent. And that's

1258
01:08:32,000 --> 01:08:34,719
Speaker 2: the history of it. It traces to a New Zealand

1259
01:08:34,800 --> 01:08:36,760
Speaker 2: banker discussion first fifty.

1260
01:08:36,560 --> 01:08:39,160
Speaker 3: Years, first mover advantage. There was, there was, there was

1261
01:08:39,200 --> 01:08:41,040
Speaker 3: certainly an element to it. But I want to say

1262
01:08:41,040 --> 01:08:44,080
Speaker 3: something else about it because people sometimes make this argument that,

1263
01:08:44,520 --> 01:08:47,439
Speaker 3: you know, why should you accept any inflation where we're

1264
01:08:47,479 --> 01:08:51,080
Speaker 3: debasing our currency. The currency today is worth five percent

1265
01:08:51,439 --> 01:08:53,920
Speaker 3: of what it was worth ten percent of what it

1266
01:08:53,960 --> 01:08:56,960
Speaker 3: was worth, you know in nineteen thirteen when the Fed

1267
01:08:57,040 --> 01:09:00,000
Speaker 3: was creative. But like you had, like in my mind,

1268
01:09:00,120 --> 01:09:03,599
Speaker 3: what matters is the purchasing power of an hour of

1269
01:09:03,640 --> 01:09:06,880
Speaker 3: your labor. Right, So exactly, if inflation is going up

1270
01:09:06,920 --> 01:09:09,400
Speaker 3: two percent a year, okay, that's one thing. If you're

1271
01:09:09,479 --> 01:09:12,439
Speaker 3: earning three percent of year for your labor, if you're

1272
01:09:12,439 --> 01:09:16,439
Speaker 3: earning five percent a year for your capital, then you're

1273
01:09:16,479 --> 01:09:19,479
Speaker 3: getting ahead. And it would be impossible for anyone to

1274
01:09:19,640 --> 01:09:23,479
Speaker 3: argue to me that the human condition is I mean

1275
01:09:23,600 --> 01:09:26,360
Speaker 3: on many levels, maybe psychological. I can't make this case,

1276
01:09:26,400 --> 01:09:30,320
Speaker 3: but the human condition is worse today than it was

1277
01:09:30,360 --> 01:09:33,519
Speaker 3: in nineteen thirteen. Of course, well like America became a

1278
01:09:33,640 --> 01:09:36,800
Speaker 3: world superpower in nineteen So it's just it doesn't make

1279
01:09:36,840 --> 01:09:39,200
Speaker 3: sense to me when people say you're debasing the currency,

1280
01:09:39,680 --> 01:09:42,960
Speaker 3: Like what I want to say is against what measure.

1281
01:09:43,760 --> 01:09:45,519
Speaker 3: Here's another Like when I was covering the.

1282
01:09:45,800 --> 01:09:49,040
Speaker 2: Dollar is not supposed to be a permanent store of value.

1283
01:09:49,080 --> 01:09:51,760
Speaker 2: It's a medium of exchange. If you're holding on to

1284
01:09:51,840 --> 01:09:55,760
Speaker 2: a dollar for a century, you've made some financial errors.

1285
01:09:55,960 --> 01:09:57,200
Speaker 2: That's not what you're supposed to do.

1286
01:09:57,520 --> 01:09:59,680
Speaker 3: People used to always say to me, and I used

1287
01:09:59,680 --> 01:10:01,439
Speaker 3: to hear them say when I was covering the FED,

1288
01:10:01,560 --> 01:10:03,960
Speaker 3: that the FED is destroying the value of the dollar,

1289
01:10:04,120 --> 01:10:06,240
Speaker 3: And like, I spent a lot of time. This gets

1290
01:10:06,240 --> 01:10:08,400
Speaker 3: to something I think we're going to think about, like, well,

1291
01:10:08,439 --> 01:10:11,280
Speaker 3: so what does that mean when the Fed? Like one

1292
01:10:11,320 --> 01:10:14,000
Speaker 3: of my principles for writing was like I need to

1293
01:10:14,000 --> 01:10:16,840
Speaker 3: be able to break things down to their to their

1294
01:10:17,000 --> 01:10:20,200
Speaker 3: like their their core, meaning, like, what does it mean

1295
01:10:20,240 --> 01:10:23,240
Speaker 3: when you say that the FED is destroying the value

1296
01:10:23,280 --> 01:10:24,320
Speaker 3: of the currency.

1297
01:10:24,560 --> 01:10:25,559
Speaker 2: They're dimasing it?

1298
01:10:25,800 --> 01:10:25,960
Speaker 3: Yeah?

1299
01:10:26,000 --> 01:10:28,080
Speaker 2: Yeah, but like a metal, precious metal.

1300
01:10:28,160 --> 01:10:30,240
Speaker 3: But you know, so you couldn't say that like kind

1301
01:10:30,280 --> 01:10:33,000
Speaker 3: of relative to other currencies, because the dollar was going up.

1302
01:10:33,439 --> 01:10:36,120
Speaker 3: And while it's you know, the purchasing power of a

1303
01:10:36,200 --> 01:10:38,720
Speaker 3: dollar today was going down. The purchasing power of your

1304
01:10:38,800 --> 01:10:42,840
Speaker 3: income exactly is long. And this again brings me back

1305
01:10:42,880 --> 01:10:46,680
Speaker 3: to the revolution, because this is also technological revolution. A

1306
01:10:46,680 --> 01:10:49,920
Speaker 3: lot of working class Americans got left behind during this

1307
01:10:50,000 --> 01:10:54,559
Speaker 3: era of technology and globalization. And what happened was the

1308
01:10:54,600 --> 01:10:59,120
Speaker 3: purchasing power of their labor declined. It wasn't the FED

1309
01:10:59,400 --> 01:11:02,519
Speaker 3: that did that from inflation. Inflation was very stable. The

1310
01:11:02,560 --> 01:11:05,040
Speaker 3: purchasing power of the labor declined because they were competing

1311
01:11:05,080 --> 01:11:08,679
Speaker 3: against you know, low wage workers in Mexico and China,

1312
01:11:09,000 --> 01:11:11,960
Speaker 3: and because they were competing against machines that were replacing

1313
01:11:11,960 --> 01:11:14,599
Speaker 3: them in the workplace. And so it is true. It

1314
01:11:14,680 --> 01:11:16,800
Speaker 3: is a fact, and this is another part of the

1315
01:11:16,840 --> 01:11:22,040
Speaker 3: revolution which is related and potentially intensifying. We've lived for

1316
01:11:22,240 --> 01:11:26,400
Speaker 3: twenty five years into this kind of post industrial information

1317
01:11:27,520 --> 01:11:31,639
Speaker 3: driven economy, and what we know about this is that

1318
01:11:32,200 --> 01:11:37,519
Speaker 3: it exaggerates inequality, It concentrates wealth among very few people,

1319
01:11:37,520 --> 01:11:40,600
Speaker 3: and a lot of people are being left behind. And

1320
01:11:40,640 --> 01:11:42,680
Speaker 3: the question is and how do you like preserve the

1321
01:11:42,760 --> 01:11:45,080
Speaker 3: value of the dollar. It's how do you preserve the

1322
01:11:45,200 --> 01:11:48,040
Speaker 3: value of an hour of your work? You know, how

1323
01:11:48,040 --> 01:11:51,040
Speaker 3: do you find work that's going to keep you keep

1324
01:11:51,040 --> 01:11:53,240
Speaker 3: your family fed and get your kids through school and

1325
01:11:53,439 --> 01:11:55,880
Speaker 3: you know, get you your trip to Disneyland.

1326
01:11:56,280 --> 01:11:58,600
Speaker 2: You know, the federal government dropped the ball. And we

1327
01:11:59,000 --> 01:12:03,000
Speaker 2: see it in some specific industries like if you're shutting

1328
01:12:03,080 --> 01:12:06,360
Speaker 2: coal mines in West Virginia, well you have to retrain

1329
01:12:06,439 --> 01:12:10,200
Speaker 2: those people to do something else. And if you work

1330
01:12:10,240 --> 01:12:14,400
Speaker 2: in a furniture factory, a garment factory, any of the

1331
01:12:14,720 --> 01:12:19,479
Speaker 2: low end manufacturing businesses that all left, those people have

1332
01:12:19,520 --> 01:12:20,160
Speaker 2: to be retrained.

1333
01:12:20,200 --> 01:12:20,360
Speaker 4: Well.

1334
01:12:20,400 --> 01:12:22,519
Speaker 3: But so yes, so, I mean I kind of I wrote,

1335
01:12:22,520 --> 01:12:24,760
Speaker 3: I wrote a lot about this, and we did, but

1336
01:12:24,840 --> 01:12:29,080
Speaker 3: it's not It wasn't as if we didn't recognize we

1337
01:12:30,439 --> 01:12:33,000
Speaker 3: I mean, all right, I'll just say it. The elites

1338
01:12:33,520 --> 01:12:37,439
Speaker 3: who were driving the bus, uh didn't recognize that there

1339
01:12:37,520 --> 01:12:41,240
Speaker 3: was a challenge there. You know, there was a Trade

1340
01:12:41,240 --> 01:12:44,920
Speaker 3: Adjustment Act, right, there were facilities that were meant to

1341
01:12:44,960 --> 01:12:47,000
Speaker 3: get people retrained.

1342
01:12:47,800 --> 01:12:47,960
Speaker 2: Uh.

1343
01:12:48,040 --> 01:12:50,920
Speaker 3: And then and there was a vast American community college

1344
01:12:50,960 --> 01:12:53,280
Speaker 3: system which was meant to be a vehicle to get

1345
01:12:53,360 --> 01:12:56,680
Speaker 3: people retrained. But I talked to people from manufacturing, you know,

1346
01:12:56,720 --> 01:12:59,320
Speaker 3: from furniture plants and Hickory, which is one of my

1347
01:12:59,320 --> 01:13:03,080
Speaker 3: favorite and nowlogies for America because Hickory, North Carolina is

1348
01:13:03,160 --> 01:13:05,479
Speaker 3: right next to Charlotte. One's a banking center, one was

1349
01:13:05,520 --> 01:13:08,559
Speaker 3: a furniture center. One went one way, one went red,

1350
01:13:08,600 --> 01:13:12,000
Speaker 3: one went blue, one did better, one did worse. Anyway. Yeah,

1351
01:13:12,040 --> 01:13:14,360
Speaker 3: I talked to people in these plants and Hickory, and

1352
01:13:14,400 --> 01:13:17,679
Speaker 3: they're like, you know, I didn't finish high school. Now

1353
01:13:17,680 --> 01:13:20,000
Speaker 3: you're telling me to go out. I'm fifty years old.

1354
01:13:20,080 --> 01:13:23,599
Speaker 3: I got I gotta go and re educate myself. And

1355
01:13:23,640 --> 01:13:25,640
Speaker 3: then like for the people who actually went through it

1356
01:13:25,680 --> 01:13:28,559
Speaker 3: and did it, You're like, I was making twenty five

1357
01:13:28,640 --> 01:13:31,879
Speaker 3: dollars an hour with bent, with a pension and health benefits.

1358
01:13:32,040 --> 01:13:35,519
Speaker 3: Now I'm a phlebotomist. You know, I'm pulling blood out

1359
01:13:35,520 --> 01:13:39,440
Speaker 3: of people's veins, making twelve dollars an hour at a hospital.

1360
01:13:40,320 --> 01:13:43,840
Speaker 3: It didn't work for them, and the you know, this

1361
01:13:44,000 --> 01:13:46,920
Speaker 3: was one of the great errors of the economics and

1362
01:13:47,000 --> 01:13:50,280
Speaker 3: economic policy profession of the last twenty five years is

1363
01:13:50,520 --> 01:13:54,160
Speaker 3: they didn't think that stuff through and the politics didn't

1364
01:13:54,200 --> 01:13:58,400
Speaker 3: really weren't conducive to addressing that problem, but it and

1365
01:13:58,439 --> 01:14:00,720
Speaker 3: this is my this is one of my kind warnings,

1366
01:14:01,360 --> 01:14:04,280
Speaker 3: warnings for politicians, say, I don't see how anyone is

1367
01:14:04,320 --> 01:14:07,160
Speaker 3: fixing that underlying problem that we live in a post

1368
01:14:07,200 --> 01:14:12,479
Speaker 3: industrial economy that bifurcates wealth and income. And frankly, I

1369
01:14:12,560 --> 01:14:16,200
Speaker 3: don't think it's realistic to expect we're going to reindustrialize

1370
01:14:16,880 --> 01:14:17,559
Speaker 3: this country.

1371
01:14:17,680 --> 01:14:19,360
Speaker 2: Even if we do, it'll be automated.

1372
01:14:19,360 --> 01:14:21,800
Speaker 3: It's going to be exactly it's it's it's going to

1373
01:14:21,880 --> 01:14:24,920
Speaker 3: be machines, and we're moving out of an industrial ear,

1374
01:14:25,160 --> 01:14:28,160
Speaker 3: you know. So the so my question is like, how

1375
01:14:28,200 --> 01:14:31,360
Speaker 3: do you I talk to an economist David Otter, who's

1376
01:14:31,400 --> 01:14:34,200
Speaker 3: thought a lot about this stuff. He wrote the papers

1377
01:14:34,240 --> 01:14:38,200
Speaker 3: about the China shock. You know, our work is not

1378
01:14:38,280 --> 01:14:41,320
Speaker 3: only a source of kind of fulfillment and income, but

1379
01:14:41,320 --> 01:14:43,200
Speaker 3: but the way we work is also the way we

1380
01:14:43,520 --> 01:14:47,320
Speaker 3: distribute wealth and income. And so if the whole nature

1381
01:14:47,360 --> 01:14:51,400
Speaker 3: of work is changing because of technology, then like, are

1382
01:14:51,400 --> 01:14:54,720
Speaker 3: we thinking about how we're going to manage the distributional

1383
01:14:54,720 --> 01:14:56,920
Speaker 3: effects of that? And I'm not like saying this as

1384
01:14:56,960 --> 01:15:01,000
Speaker 3: some kind of you know, screaming, bleeding hord liberal. I

1385
01:15:01,000 --> 01:15:04,640
Speaker 3: mean Donald Trump actually got elected because of the disaffected

1386
01:15:05,000 --> 01:15:08,840
Speaker 3: American working class. And I don't think either party has

1387
01:15:08,920 --> 01:15:11,200
Speaker 3: has actually gotten their hands around it. I wrote a

1388
01:15:11,200 --> 01:15:13,320
Speaker 3: book about Jenny All, and I talked a lot of time,

1389
01:15:13,560 --> 01:15:16,160
Speaker 3: spent a lot of time talking to Democrats about this.

1390
01:15:16,200 --> 01:15:18,000
Speaker 3: I don't think any of these people have gotten their

1391
01:15:18,000 --> 01:15:21,439
Speaker 3: hands around how do we navigate this, like this revolution

1392
01:15:21,560 --> 01:15:25,000
Speaker 3: that we're going through the economic post industrial revolution.

1393
01:15:25,320 --> 01:15:28,320
Speaker 2: So so I have one last question I'm going to

1394
01:15:28,320 --> 01:15:31,040
Speaker 2: ask you before we get to our favorite questions we

1395
01:15:31,080 --> 01:15:33,880
Speaker 2: ask old guests. Okay, but you've been alluding at it,

1396
01:15:33,920 --> 01:15:38,240
Speaker 2: so feel free to go back to a previous conversation.

1397
01:15:38,880 --> 01:15:42,360
Speaker 2: What do you think investors are not talking about but

1398
01:15:42,520 --> 01:15:46,479
Speaker 2: should be. It could be a policy issue, an asset class,

1399
01:15:46,520 --> 01:15:47,480
Speaker 2: a data point.

1400
01:15:47,320 --> 01:15:48,240
Speaker 3: That that's it.

1401
01:15:48,320 --> 01:15:50,759
Speaker 2: But I think it's yeah, that's why it's the it's.

1402
01:15:50,640 --> 01:15:53,519
Speaker 3: The inequality issue because and when I said, I don't

1403
01:15:53,520 --> 01:15:55,280
Speaker 3: want to use I don't want to use the word

1404
01:15:55,520 --> 01:16:00,120
Speaker 3: inequality in like the kind of conventional politically divisive way.

1405
01:16:00,160 --> 01:16:04,080
Speaker 3: What what I mean is that you know, an economy

1406
01:16:04,200 --> 01:16:08,080
Speaker 3: creates income and wealth, and how that income and wealth

1407
01:16:08,160 --> 01:16:12,519
Speaker 3: is distributed distributed across the population is a result of

1408
01:16:12,560 --> 01:16:14,360
Speaker 3: the way. And and by the way.

1409
01:16:14,320 --> 01:16:16,600
Speaker 2: There is for a chart on this exact.

1410
01:16:16,400 --> 01:16:19,800
Speaker 3: There is there is no law. There is no rule

1411
01:16:19,880 --> 01:16:24,880
Speaker 3: in economics that says that wealth and income will be

1412
01:16:26,000 --> 01:16:30,479
Speaker 3: distributed in a fixed or predictable way. You know, the

1413
01:16:30,520 --> 01:16:36,719
Speaker 3: agricultural era, uh what did not create an economic system

1414
01:16:36,920 --> 01:16:41,800
Speaker 3: or that that distributed wealth and income equally. It was

1415
01:16:41,920 --> 01:16:44,840
Speaker 3: very unequal. You had kings and queens and peasants, right.

1416
01:16:45,320 --> 01:16:48,920
Speaker 3: It just so happened that the industrial economy distributed created

1417
01:16:48,960 --> 01:16:51,760
Speaker 3: a vast middle class because you needed people attached to

1418
01:16:51,840 --> 01:16:54,520
Speaker 3: machines to make the stuff that made our lives more comfortable.

1419
01:16:55,040 --> 01:16:57,720
Speaker 3: But there's no rule that I see that says, moving

1420
01:16:57,800 --> 01:17:01,160
Speaker 3: into a post industrial, high tech world, that this whole

1421
01:17:01,200 --> 01:17:04,240
Speaker 3: new world is going to distribute income and wealth in

1422
01:17:04,320 --> 01:17:06,720
Speaker 3: the same way. And so my question is what are

1423
01:17:06,720 --> 01:17:08,920
Speaker 3: we doing about that? And by the way, I think

1424
01:17:08,960 --> 01:17:13,479
Speaker 3: the institutions we talked about norms before, the institutions that

1425
01:17:13,479 --> 01:17:16,840
Speaker 3: we've created over the last two hundred years, we're built

1426
01:17:16,840 --> 01:17:21,040
Speaker 3: for an industrial economy. Our tax base, our voting systems,

1427
01:17:21,080 --> 01:17:23,400
Speaker 3: everything is built for an industrial you know. So to me,

1428
01:17:23,560 --> 01:17:27,400
Speaker 3: the big existential question is, you know, how are we

1429
01:17:27,479 --> 01:17:32,960
Speaker 3: going to manage the distributional effects of income and wealth

1430
01:17:33,000 --> 01:17:36,280
Speaker 3: creation and a high tech, high information economy.

1431
01:17:36,320 --> 01:17:39,080
Speaker 2: I saw a table this morning. I can't I can't

1432
01:17:39,080 --> 01:17:43,680
Speaker 2: find it now, but it basically shows a number of

1433
01:17:43,960 --> 01:17:52,200
Speaker 2: industrialized countries and what percentage of their workforce is below

1434
01:17:52,840 --> 01:17:58,600
Speaker 2: the median income and the US and UK are substantially

1435
01:17:59,120 --> 01:18:03,240
Speaker 2: I think something like twenty three twenty four percent substantially below.

1436
01:18:03,240 --> 01:18:06,120
Speaker 2: You look at other countries like Japan, the difference between

1437
01:18:06,120 --> 01:18:10,120
Speaker 2: the mean and the median isn't that big. And when

1438
01:18:10,160 --> 01:18:13,920
Speaker 2: you have a very skewed distribution like you're describing, that

1439
01:18:14,000 --> 01:18:17,240
Speaker 2: gap gets bigger and bigger. So I'll dig up that table.

1440
01:18:17,360 --> 01:18:18,719
Speaker 3: Well, you said it to me, I'd love to see.

1441
01:18:18,920 --> 01:18:21,120
Speaker 2: I'll say, I'll share it with you and I'll post

1442
01:18:21,160 --> 01:18:24,280
Speaker 2: it when we when we this goes live. But it's

1443
01:18:24,360 --> 01:18:27,960
Speaker 2: kind of fascinating because you don't think of the country

1444
01:18:27,960 --> 01:18:30,280
Speaker 2: that way. And when you look at what was it

1445
01:18:30,360 --> 01:18:32,559
Speaker 2: the Z one flow of funds that the Fed puts

1446
01:18:32,560 --> 01:18:37,120
Speaker 2: out good one, you can see that gap getting bigger

1447
01:18:37,160 --> 01:18:42,440
Speaker 2: and bigger, especially since the nineties. I mentioned unintended consequences.

1448
01:18:43,000 --> 01:18:47,480
Speaker 2: Some legislation passed by the Clinton administration to cap executive

1449
01:18:47,520 --> 01:18:49,880
Speaker 2: compensation at I want to say it was a million

1450
01:18:49,960 --> 01:18:53,040
Speaker 2: dollars or two million dollars that just led to massive

1451
01:18:53,200 --> 01:18:54,880
Speaker 2: equity compensation.

1452
01:18:54,479 --> 01:18:58,160
Speaker 3: Right, help drive and by the way, accounting fraud, that's right,

1453
01:18:58,600 --> 01:18:59,000
Speaker 3: that's right.

1454
01:18:59,040 --> 01:19:00,960
Speaker 2: So not only did you are you driving people to

1455
01:19:01,040 --> 01:19:04,800
Speaker 2: hyper focus on the quarterly calls leading to some quarterly

1456
01:19:04,920 --> 01:19:09,280
Speaker 2: yearnings leading to some monkey business, but people getting paid

1457
01:19:09,280 --> 01:19:11,960
Speaker 2: in equity we're making and so that.

1458
01:19:11,960 --> 01:19:14,479
Speaker 3: From political perspective, for Republicans, how are you going to

1459
01:19:14,560 --> 01:19:18,280
Speaker 3: take care of the working class? Are these promises about reindustrialization?

1460
01:19:21,640 --> 01:19:23,479
Speaker 3: Can you realize them? And for the Democrats, how are

1461
01:19:23,479 --> 01:19:25,720
Speaker 3: you going to win people back? Because they lost them

1462
01:19:25,720 --> 01:19:28,040
Speaker 3: Donald Trump took them from him. Well, the question is,

1463
01:19:28,160 --> 01:19:29,920
Speaker 3: and by the way, is terms of the FED. All

1464
01:19:29,920 --> 01:19:32,280
Speaker 3: the FED can ever do is make a mistake. It's

1465
01:19:32,320 --> 01:19:35,679
Speaker 3: like his job is to prevent financial crises and keep

1466
01:19:35,720 --> 01:19:39,320
Speaker 3: inflation stable. Like people love to attack the FED because

1467
01:19:40,360 --> 01:19:43,519
Speaker 3: you know, you only notice it when it's screwing something up.

1468
01:19:44,160 --> 01:19:46,599
Speaker 2: So and and by the way, for getting things right.

1469
01:19:46,720 --> 01:19:50,200
Speaker 3: One other thing about the FED is, you know, I

1470
01:19:50,240 --> 01:19:53,280
Speaker 3: live in Washington, d C. It's this place where like

1471
01:19:55,040 --> 01:19:59,160
Speaker 3: people like ninety percent of people, what they're doing you know,

1472
01:20:00,200 --> 01:20:03,080
Speaker 3: time is spinning you and trying to get you to

1473
01:20:03,160 --> 01:20:08,639
Speaker 3: believe his story that's in their personal or institutional economic interests.

1474
01:20:09,160 --> 01:20:11,320
Speaker 3: The Fed is out there trying to tell people what

1475
01:20:11,400 --> 01:20:13,680
Speaker 3: it thinks it's going to do. Like you could give

1476
01:20:13,720 --> 01:20:16,400
Speaker 3: them a hard time for making mistakes. I've just said

1477
01:20:16,439 --> 01:20:20,080
Speaker 3: I think J. Powell made mistakes, but like, at least

1478
01:20:20,080 --> 01:20:22,120
Speaker 3: they're trying to be honest about what they're up to.

1479
01:20:22,439 --> 01:20:24,040
Speaker 3: I got to answer, and so many other people in

1480
01:20:24,120 --> 01:20:26,879
Speaker 3: Washington are trying to mislead you. You know, I admire

1481
01:20:26,920 --> 01:20:28,080
Speaker 3: them for trying to be straight.

1482
01:20:28,320 --> 01:20:29,920
Speaker 2: I got to ask you a question. You've lived in

1483
01:20:29,960 --> 01:20:33,200
Speaker 2: New York, you've lived in Washington, d C. Which town

1484
01:20:33,320 --> 01:20:34,560
Speaker 2: is more transactional.

1485
01:20:35,600 --> 01:20:37,840
Speaker 3: Oh oh, that's a good question. I didn't think you

1486
01:20:37,840 --> 01:20:40,599
Speaker 3: were going in that. They're both transactional. But the difference

1487
01:20:40,680 --> 01:20:44,200
Speaker 3: is in New York is a transactional town, and everyone's

1488
01:20:44,240 --> 01:20:48,960
Speaker 3: looking out for their own interests, and everybody knows that, right,

1489
01:20:49,000 --> 01:20:51,439
Speaker 3: and everybody knows that and accepts that is like the

1490
01:20:51,560 --> 01:20:56,080
Speaker 3: rules of the game. Right in Washington, it's all transactional

1491
01:20:56,200 --> 01:20:58,559
Speaker 3: and everyone's out for their own interests. But they're trying

1492
01:20:58,600 --> 01:21:01,040
Speaker 3: to make you believe that they're doing it for you,

1493
01:21:01,520 --> 01:21:04,960
Speaker 3: and and and that's why it all looks so hypocritical,

1494
01:21:05,240 --> 01:21:08,360
Speaker 3: because like they're yes, they're totally transactional, and they're totally

1495
01:21:08,360 --> 01:21:11,720
Speaker 3: trying to advance their party or their power or their

1496
01:21:12,000 --> 01:21:15,040
Speaker 3: their you know, fundraising, but they're trying to make you

1497
01:21:15,080 --> 01:21:17,680
Speaker 3: believe that they're doing it for you, to help you

1498
01:21:17,880 --> 01:21:19,720
Speaker 3: so that your children will be better off.

1499
01:21:19,920 --> 01:21:20,000
Speaker 2: Right.

1500
01:21:20,120 --> 01:21:22,200
Speaker 3: And I'm sorry, I've got I've grown a little cynical

1501
01:21:22,240 --> 01:21:25,040
Speaker 3: about No, I m I much prefer being in New York.

1502
01:21:25,320 --> 01:21:27,800
Speaker 2: I asked that question because I had a feeling you're

1503
01:21:27,840 --> 01:21:31,320
Speaker 2: going to go that way. New York. There's no pretending Yeah,

1504
01:21:31,439 --> 01:21:36,800
Speaker 2: it's transactional because it's the center of US capitalism. DC

1505
01:21:37,000 --> 01:21:37,519
Speaker 2: is something else.

1506
01:21:37,800 --> 01:21:40,040
Speaker 3: Yeah, And like New York is traders, and it always

1507
01:21:40,080 --> 01:21:43,240
Speaker 3: has been, Washington is lawyers. Here's my other New York

1508
01:21:43,320 --> 01:21:47,160
Speaker 3: Washington analogy. If you're driving down the street in New York,

1509
01:21:47,160 --> 01:21:50,000
Speaker 3: although you can anymore because there's so much traffic, if

1510
01:21:50,000 --> 01:21:52,040
Speaker 3: you kind of move in and out of one lane,

1511
01:21:52,080 --> 01:21:55,519
Speaker 3: if you kind of overstep your bounds, someone will honk

1512
01:21:55,560 --> 01:21:57,720
Speaker 3: the horn, give you the finger, and keep driving. Right.

1513
01:21:58,080 --> 01:22:01,000
Speaker 3: If you do that in Washington instead of giving you

1514
01:22:01,040 --> 01:22:04,080
Speaker 3: their middle finger. They'll point their pointing finger. They'll wag

1515
01:22:04,160 --> 01:22:06,680
Speaker 3: their finger at you and tell you you broke a

1516
01:22:06,800 --> 01:22:09,680
Speaker 3: rule and then like threatened to turn you in. And then,

1517
01:22:09,800 --> 01:22:12,479
Speaker 3: by the way, there are speed cameras everywhere. It's a

1518
01:22:12,520 --> 01:22:14,000
Speaker 3: little bit more oppressive ever place.

1519
01:22:14,040 --> 01:22:17,040
Speaker 2: I think, really amusing. All right, so I only have

1520
01:22:17,080 --> 01:22:19,000
Speaker 2: you for a certain amount of time. Let's jump to

1521
01:22:19,080 --> 01:22:22,439
Speaker 2: our favorite questions we ask all of our guests, starting

1522
01:22:22,520 --> 01:22:26,519
Speaker 2: with who are your mentors who helped shape your career?

1523
01:22:27,600 --> 01:22:29,800
Speaker 3: Well, so, I'd have to say one of my most

1524
01:22:29,800 --> 01:22:32,880
Speaker 3: important important mentors at the Journal was a guy named

1525
01:22:32,960 --> 01:22:36,960
Speaker 3: David Wessel, who covered the David Wessel covered the fad

1526
01:22:37,040 --> 01:22:40,599
Speaker 3: in the nineteen nineties, was just like an institution in

1527
01:22:40,720 --> 01:22:44,479
Speaker 3: economics and economic policy coverage. He gave me chances and

1528
01:22:44,520 --> 01:22:48,120
Speaker 3: he was usually nice to me. So yeah, he's a

1529
01:22:48,120 --> 01:22:50,479
Speaker 3: tough boss too. Dave Wessell was a great guy and

1530
01:22:50,680 --> 01:22:54,000
Speaker 3: my best friend at the Journal all those years was

1531
01:22:54,520 --> 01:22:57,839
Speaker 3: a guy named Bob Davis. Gentleman, good guy, great reporter.

1532
01:22:58,479 --> 01:23:00,840
Speaker 2: Number one in terms of one bylines.

1533
01:23:01,160 --> 01:23:03,000
Speaker 3: Yeah, man, I And and by the way, Nick tim

1534
01:23:03,080 --> 01:23:05,360
Speaker 3: Rose is going to pass me pretty Oh really, I'm

1535
01:23:05,360 --> 01:23:08,200
Speaker 3: sure I have I don't know the numbers, but I'm Nick.

1536
01:23:08,960 --> 01:23:13,760
Speaker 3: Nick is my successor, uh covering the FED. He'll pass me,

1537
01:23:13,880 --> 01:23:15,639
Speaker 3: but I don't know he's gonna catch Bob Davis.

1538
01:23:15,800 --> 01:23:18,360
Speaker 2: That's amazing. Let's talk about books. What are some of

1539
01:23:18,360 --> 01:23:19,479
Speaker 2: your favorites. What are you reading?

1540
01:23:19,600 --> 01:23:21,360
Speaker 3: Well, I've been reading. I've alluded to this. I've been

1541
01:23:21,439 --> 01:23:24,719
Speaker 3: reading a bunch about the French Revolution. I'm also reading

1542
01:23:24,760 --> 01:23:29,559
Speaker 3: the book Sapiens, but I can't remember his full name. Harari. Yeah,

1543
01:23:29,640 --> 01:23:33,320
Speaker 3: you'v all Harari. It's a pretty bleak perspective on humanity,

1544
01:23:33,560 --> 01:23:36,280
Speaker 3: very I think I. I think I. I'm a little

1545
01:23:36,320 --> 01:23:41,960
Speaker 3: more optimistic about our species and its intentions, but there's

1546
01:23:42,200 --> 01:23:45,479
Speaker 3: interesting insights in there. Like I The reason I picked

1547
01:23:45,479 --> 01:23:49,840
Speaker 3: it up is I think that humans have these kind

1548
01:23:49,880 --> 01:23:55,080
Speaker 3: of primitive brains with primitive mcdowah and emotion centers. We

1549
01:23:55,160 --> 01:24:01,200
Speaker 3: have an industrial area era economic and political structures, and

1550
01:24:01,240 --> 01:24:06,320
Speaker 3: we're living with twenty third century technology, and I'm trying

1551
01:24:06,320 --> 01:24:09,200
Speaker 3: to understand the primitive parts and how that might interact

1552
01:24:09,280 --> 01:24:10,000
Speaker 3: with all this other thing.

1553
01:24:10,560 --> 01:24:12,960
Speaker 2: You keep bringing stuff up. I have chapters in a

1554
01:24:13,000 --> 01:24:15,640
Speaker 2: book for you that you're going to love. What do

1555
01:24:15,680 --> 01:24:19,120
Speaker 2: you remember the name of the French Revolution book. You

1556
01:24:19,160 --> 01:24:21,559
Speaker 2: know you're putting email to me, I'll dig it up

1557
01:24:21,840 --> 01:24:25,120
Speaker 2: and you crack me up. Comparing DC to a city

1558
01:24:25,160 --> 01:24:28,840
Speaker 2: of lawyers versus New York as a city of traders.

1559
01:24:29,280 --> 01:24:32,120
Speaker 2: I'm going to share a book title with you called

1560
01:24:32,240 --> 01:24:38,160
Speaker 2: Breakneck China's Rush to Build the Future by Dan Wang,

1561
01:24:38,680 --> 01:24:42,880
Speaker 2: and he compares China versus the US. The US as

1562
01:24:42,920 --> 01:24:46,680
Speaker 2: a country of lawyers, China as a country of engineers,

1563
01:24:47,200 --> 01:24:49,960
Speaker 2: which is why they could put up as much stuff

1564
01:24:50,000 --> 01:24:51,479
Speaker 2: as they do, as fast as they do.

1565
01:24:53,160 --> 01:24:55,960
Speaker 3: But we're also a country of entrepreneurs.

1566
01:24:55,200 --> 01:24:57,200
Speaker 2: For sure, for sure, and we're not just a lot

1567
01:24:57,240 --> 01:25:00,680
Speaker 2: of state dictated although I was going to say not

1568
01:25:00,720 --> 01:25:03,439
Speaker 2: a state dictated of industrial policy, but that's.

1569
01:25:03,439 --> 01:25:05,360
Speaker 3: Just so, you know, So this is another thing that

1570
01:25:05,439 --> 01:25:07,280
Speaker 3: I just have them having a hard time getting my

1571
01:25:07,360 --> 01:25:10,439
Speaker 3: head around. So, like, China's economy is really struggling right now.

1572
01:25:10,439 --> 01:25:13,800
Speaker 3: They definitely pushed us, they challenged us. You know, we

1573
01:25:14,040 --> 01:25:18,680
Speaker 3: were our workers were hurt by the incursion of china imports.

1574
01:25:19,160 --> 01:25:22,919
Speaker 3: But we're you know, on many measures. You know, we're

1575
01:25:23,000 --> 01:25:26,080
Speaker 3: still doing all right and winning, but we basically conceded

1576
01:25:26,520 --> 01:25:30,000
Speaker 3: to China's economic model. It's like we're loving we're moving

1577
01:25:30,040 --> 01:25:33,599
Speaker 3: towards the state run capital is state run capitalism, which

1578
01:25:33,640 --> 01:25:36,080
Speaker 3: is you know, it's it's hard for me to get

1579
01:25:36,080 --> 01:25:38,840
Speaker 3: my head around the idea that we've given up on

1580
01:25:39,800 --> 01:25:44,639
Speaker 3: a system and a project of democratic capitalism, and that

1581
01:25:44,640 --> 01:25:48,639
Speaker 3: that's especially is democratic change, I should say, democratic free

1582
01:25:48,640 --> 01:25:52,240
Speaker 3: market capitalism. You know, we seem to be having our

1583
01:25:52,280 --> 01:25:54,920
Speaker 3: doubts about it. I guess what I would hope is

1584
01:25:54,960 --> 01:25:56,920
Speaker 3: that we don't give up on it too fast.

1585
01:25:57,280 --> 01:26:01,880
Speaker 2: I'm curious, is this a permanent it or is this Hey,

1586
01:26:02,880 --> 01:26:06,760
Speaker 2: let the president have his ten percent of intel. But

1587
01:26:06,960 --> 01:26:09,599
Speaker 2: he's this is his second term and he's almost eighty

1588
01:26:09,880 --> 01:26:12,360
Speaker 2: and this is an aptive change, Like I've heard that

1589
01:26:12,520 --> 01:26:15,280
Speaker 2: sort of vibe from people, and I don't know how

1590
01:26:15,320 --> 01:26:16,160
Speaker 2: serious I think.

1591
01:26:16,200 --> 01:26:19,400
Speaker 3: I think he and his followers and his lead the

1592
01:26:19,560 --> 01:26:22,559
Speaker 3: leaders who were working with him are vulnerable on the

1593
01:26:22,600 --> 01:26:25,559
Speaker 3: issue of inflation in the cost of living. Got he

1594
01:26:25,600 --> 01:26:28,920
Speaker 3: got in there and in part because people were angry

1595
01:26:28,960 --> 01:26:31,640
Speaker 3: about the inflation of the post COVID period. Back then

1596
01:26:31,680 --> 01:26:33,720
Speaker 3: it was we're now doing a lot of We're doing

1597
01:26:33,760 --> 01:26:36,000
Speaker 3: a lot of things right now. It's not just tariffs,

1598
01:26:36,000 --> 01:26:39,960
Speaker 3: but with monetary policy pushing I guarantee you. If we

1599
01:26:40,000 --> 01:26:42,080
Speaker 3: get the interest rate down to where the President wants it,

1600
01:26:42,120 --> 01:26:44,759
Speaker 3: we're going to have inflation. And if we don't get inflation,

1601
01:26:44,840 --> 01:26:47,360
Speaker 3: there's going to be an asset price boom. Where again,

1602
01:26:47,439 --> 01:26:49,800
Speaker 3: this inequality thing, there's a few people who are going

1603
01:26:49,880 --> 01:26:52,360
Speaker 3: to make a lot of money off of that. So

1604
01:26:52,640 --> 01:26:56,080
Speaker 3: I mean, I think that they have a little bit

1605
01:26:56,120 --> 01:26:57,800
Speaker 3: of an achilles heel in that issue.

1606
01:26:58,600 --> 01:27:01,320
Speaker 2: Let's talk about street. What are you listening to in

1607
01:27:01,400 --> 01:27:05,040
Speaker 2: terms of podcasts or watching on Netflix or Amazon product.

1608
01:27:05,000 --> 01:27:08,680
Speaker 3: I watched a really cool show called Tehran, which was

1609
01:27:08,760 --> 01:27:13,280
Speaker 3: about Israeli Mosat agents infiltrating Tehran. It was put out

1610
01:27:13,280 --> 01:27:17,920
Speaker 3: a couple of two three years ago infiltrating Tehran to

1611
01:27:18,200 --> 01:27:22,560
Speaker 3: blow up their nuclear reactors. I watched it like a

1612
01:27:22,920 --> 01:27:25,600
Speaker 3: couple of months before they went and blew up their

1613
01:27:25,960 --> 01:27:28,439
Speaker 3: you know, so that was really interesting. I'm also just

1614
01:27:28,640 --> 01:27:33,320
Speaker 3: I'm a sports fanatic, so I don't really I don't

1615
01:27:33,320 --> 01:27:35,599
Speaker 3: have to. I'll tell you what. I've stopped watching cable

1616
01:27:35,640 --> 01:27:39,719
Speaker 3: television after been participating in it for a long time,

1617
01:27:40,760 --> 01:27:44,880
Speaker 3: but if there's a game on them, yeah, I'm a

1618
01:27:44,920 --> 01:27:45,960
Speaker 3: football fanatic.

1619
01:27:46,200 --> 01:27:49,200
Speaker 2: Final two questions, what advice would you give a recent

1620
01:27:49,240 --> 01:27:53,919
Speaker 2: college grad interested in a career in financial journalism.

1621
01:27:54,240 --> 01:27:57,080
Speaker 3: Financial journalism. All right, so I've had this talk. This

1622
01:27:57,120 --> 01:28:00,559
Speaker 3: is getting back to the whole printing press French revel thing.

1623
01:28:00,600 --> 01:28:06,280
Speaker 3: I mean, I think it's clear that the journalism is

1624
01:28:06,320 --> 01:28:10,439
Speaker 3: going through a period of exceptional disruption right now, right,

1625
01:28:10,880 --> 01:28:13,080
Speaker 3: And so the choices that I was looking at when

1626
01:28:13,120 --> 01:28:15,479
Speaker 3: I was coming into the field of like, you know,

1627
01:28:15,520 --> 01:28:17,080
Speaker 3: how do I get to the Wall Street Journal? How

1628
01:28:17,120 --> 01:28:18,920
Speaker 3: do I get to the New York Times? Like, it's

1629
01:28:18,960 --> 01:28:21,920
Speaker 3: a different set of choices, And if you use the

1630
01:28:22,000 --> 01:28:25,840
Speaker 3: kind of pamphleteers and analogy, you know, when you see what's

1631
01:28:25,920 --> 01:28:28,160
Speaker 3: going on, look at you. You know you started a

1632
01:28:28,160 --> 01:28:31,200
Speaker 3: podcast and you know this has become this great thing

1633
01:28:31,240 --> 01:28:34,479
Speaker 3: for you. I say this to young people all the time.

1634
01:28:34,640 --> 01:28:42,920
Speaker 3: Be think expansively and creatively about where these interests might

1635
01:28:42,960 --> 01:28:46,560
Speaker 3: take you. You know, the core skill set of getting information,

1636
01:28:48,280 --> 01:28:51,560
Speaker 3: distilling and making sense of the information and conveying information,

1637
01:28:52,200 --> 01:28:54,559
Speaker 3: like that's the core of journalism. That's like that's more

1638
01:28:54,640 --> 01:28:58,400
Speaker 3: essential than ever. But the way you're going to practice

1639
01:28:58,400 --> 01:29:01,320
Speaker 3: those skills is going to be different than what I did.

1640
01:29:01,439 --> 01:29:04,559
Speaker 3: And you know, like I had a young student that

1641
01:29:04,640 --> 01:29:07,080
Speaker 3: I was working with and talking to with Duke a

1642
01:29:07,080 --> 01:29:09,240
Speaker 3: few years ago. You know, she was going down the

1643
01:29:09,240 --> 01:29:12,320
Speaker 3: whole newspaper route. She's now doing a true crime prodcast

1644
01:29:12,360 --> 01:29:15,320
Speaker 3: in the Midwest, and so, you know, I think that

1645
01:29:15,520 --> 01:29:18,799
Speaker 3: there's a lot of opportunity out there for people who

1646
01:29:19,360 --> 01:29:21,719
Speaker 3: are willing to kind of take chances and be nimble.

1647
01:29:21,760 --> 01:29:24,600
Speaker 3: And it's scary, but there's a lot of opportunity for

1648
01:29:24,680 --> 01:29:27,800
Speaker 3: people who can be flexible and find the opportunities and

1649
01:29:27,840 --> 01:29:31,040
Speaker 3: go for it. And I love being a journalist. I

1650
01:29:31,080 --> 01:29:34,639
Speaker 3: would not take There's this ritual that journalists go through

1651
01:29:34,680 --> 01:29:38,160
Speaker 3: where like experienced journalists are constantly trying to tell young

1652
01:29:38,240 --> 01:29:41,160
Speaker 3: journalists don't do this, it's a terrible field, it's a

1653
01:29:41,240 --> 01:29:44,519
Speaker 3: dying profession, and go become a lawyer, you know, blah blah.

1654
01:29:44,560 --> 01:29:46,600
Speaker 3: I had a great experience, like I'm never going to

1655
01:29:46,640 --> 01:29:51,639
Speaker 3: tell someone not to pursue that that dreamer, that interest

1656
01:29:51,760 --> 01:29:54,080
Speaker 3: because it was so good to me. But you've got

1657
01:29:54,080 --> 01:29:56,759
Speaker 3: to be willing to, you know, kind of take chances

1658
01:29:56,800 --> 01:29:58,840
Speaker 3: and go down some roads you might not expect to go.

1659
01:29:58,800 --> 01:30:01,320
Speaker 2: Down, recognize how the as this model has changed. Yea,

1660
01:30:01,560 --> 01:30:04,080
Speaker 2: and our final question, what do you know about the

1661
01:30:04,080 --> 01:30:08,400
Speaker 2: world of economics finance? Central banks today might have been

1662
01:30:08,439 --> 01:30:10,920
Speaker 2: helpful twenty five or so years ago when you were

1663
01:30:10,960 --> 01:30:12,680
Speaker 2: starting out thirty years ago.

1664
01:30:12,720 --> 01:30:14,200
Speaker 3: Well, I mean, I guess the basic thing is just

1665
01:30:14,240 --> 01:30:16,519
Speaker 3: that it's so much more interesting than I expected. I

1666
01:30:16,520 --> 01:30:19,080
Speaker 3: didn't want to get into economics writing. I did. I

1667
01:30:19,080 --> 01:30:24,759
Speaker 3: did by accident, and I stayed in it. I wanted

1668
01:30:24,760 --> 01:30:28,920
Speaker 3: to be a war correspondent, and what I came to

1669
01:30:28,960 --> 01:30:31,720
Speaker 3: see was that, like or a sports writer, that the

1670
01:30:31,760 --> 01:30:35,600
Speaker 3: great battlefields and the great arenas that really affected the

1671
01:30:35,640 --> 01:30:41,200
Speaker 3: human condition were in markets and economics. So I guess

1672
01:30:41,280 --> 01:30:44,519
Speaker 3: what I would tell myself now was to go into

1673
01:30:44,520 --> 01:30:47,400
Speaker 3: it with even more conviction because it turned out to

1674
01:30:47,439 --> 01:30:49,040
Speaker 3: be so fascinating.

1675
01:30:49,000 --> 01:30:52,519
Speaker 2: Really really interesting. Thank you, John for being so generous

1676
01:30:52,520 --> 01:30:56,120
Speaker 2: with your time. We have been speaking with John Hilson Wrath,

1677
01:30:56,800 --> 01:31:00,439
Speaker 2: former chief economics correspondent for The Wall Street Journal. Today

1678
01:31:00,479 --> 01:31:05,800
Speaker 2: he runs Serpa Pinto Advisory. If you enjoy this conversation,

1679
01:31:06,040 --> 01:31:08,320
Speaker 2: check out any of the five hundred and sixty seven

1680
01:31:08,720 --> 01:31:11,920
Speaker 2: we've done over the past eleven years. You can find

1681
01:31:11,960 --> 01:31:16,720
Speaker 2: those at Bloomberg, iTunes, Spotify, YouTube, wherever you find your

1682
01:31:16,760 --> 01:31:20,000
Speaker 2: favorite podcast. Be sure to check out my new book,

1683
01:31:20,320 --> 01:31:24,519
Speaker 2: How Not to Invest The ideas, numbers and behaviors that

1684
01:31:24,560 --> 01:31:27,479
Speaker 2: destroy wealth and how to avoid them, how not to

1685
01:31:27,600 --> 01:31:31,320
Speaker 2: invest at your favorite bookseller. Now, I would be remiss

1686
01:31:31,320 --> 01:31:33,200
Speaker 2: if I didn't thank the Crack team that helps with

1687
01:31:33,240 --> 01:31:38,920
Speaker 2: these conversations together each week. Alexis Noriega is my video producer.

1688
01:31:39,240 --> 01:31:43,080
Speaker 2: An A. Luke is my audio producer. Sean Russo is

1689
01:31:43,080 --> 01:31:45,280
Speaker 2: my head of research. Sage Bauman is the head of

1690
01:31:45,320 --> 01:31:49,879
Speaker 2: podcasts here at Bloomberg. I'm Barry Retultz. You've been listening

1691
01:31:49,920 --> 01:31:58,600
Speaker 2: to Masters in Business on Bloomberg Radio.

1692
01:32:00,080 --> 01:32:03,479
Speaker 1: Bass back