WEBVTT - Adam Posen Thinks Things Could Get Very 'Messy' for the Fed

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<v Speaker 1>Bloomberg Audio Studios.

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<v Speaker 2>Podcasts. Radio. News.

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<v Speaker 3>Hello and welcome to another episode of the Odd Lots podcast.

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<v Speaker 2>I'm Joe Weisenthal.

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<v Speaker 4>And I'm Tracy Allaway.

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<v Speaker 3>Tracy, another Jackson Hole, another Jackson Hole, another Jackson Hole episode.

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<v Speaker 3>You know, I think like with central banking and some

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<v Speaker 3>of these topics... People are pretty polite. You know, it's

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<v Speaker 3>like sometimes you talk to people, it's a little bit

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<v Speaker 3>hard to know like what they're really thinking about all

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<v Speaker 3>these topics.

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<v Speaker 2>What they feel.

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<v Speaker 3>It's hard to, sometimes I do perceive a certain lack of,

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<v Speaker 3>I don't want to be.

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<v Speaker 4>Let's say people are very diplomatic.

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<v Speaker 3>People are very diplomatic. Thank you for finding the word.

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<v Speaker 4>That's a diplomatic answer to the point that you're making

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<v Speaker 4>about diplomacy at an official Fed function.

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<v Speaker 3>People are very diplomatic, and I'm pro-diplomacy, but sometimes it's

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<v Speaker 3>nice to just check in with someone just like, all right, let's.

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<v Speaker 1>Give it to a straight.

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<v Speaker 4>I'm waiting for you to describe our next guest.

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<v Speaker 1>No, I'm saying, all right, I'm just going to jump

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<v Speaker 1>right into it.

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<v Speaker 3>No, a guest who I believe when we talk to him,

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<v Speaker 3>I feel like here's someone who's giving it to us straight.

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<v Speaker 3>who's not as concerned perhaps with like, you know, being

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<v Speaker 3>overly diplomatic.

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<v Speaker 4>Someone who's not afraid to utter the words fiscal dominance.

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<v Speaker 1>Yeah, someone who's just afraid, someone who just tells it

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<v Speaker 1>like it is.

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<v Speaker 3>Anyway, very excited to say here in Jackson Hole, back

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<v Speaker 3>with the perfect guest, someone we've had on the podcast

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<v Speaker 3>multiple times before, Peterson Institute President Adam Posen, also formerly

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<v Speaker 3>a member of the Bank of England's Monetary Policy Committee.

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<v Speaker 3>So Adam, thank you so much for coming back on

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<v Speaker 3>Odd Lots.

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<v Speaker 2>After that intro, thank you so much.

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<v Speaker 1>You have to really throw some fastballs.

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<v Speaker 2>I don't know whether it's hype or warning.

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<v Speaker 1>You have to throw some fastballs first. But what did

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<v Speaker 1>you think of... This is the first interview we've done

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<v Speaker 1>since the speech.

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<v Speaker 2>Yeah.

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<v Speaker 1>So what did you think of Chairman Warsh's speech?

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<v Speaker 2>I mean, even though.

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<v Speaker 1>Okay, there we go.

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<v Speaker 2>No, no, no, no. Even though I knew that was

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<v Speaker 2>the question that was coming. You know, if you were

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<v Speaker 2>grading it, it's a B-minus speech. Okay. It's a B-

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<v Speaker 2>speech by normal standards. It's much more positive because of

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<v Speaker 2>the situation we were in. He, the chair, well, you know,

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<v Speaker 2>let's be blunt, as you said. The chair had created

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<v Speaker 2>a huge amount of not just confusion, but in central

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<v Speaker 2>banking circles, in the sophisticated observers like you, about what

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<v Speaker 2>he really thinks. And this was both short-term confusion Does

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<v Speaker 2>he want to raise rates? Does he not want to

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<v Speaker 2>raise rates? But also, medium, long term, what is behind

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<v Speaker 2>all this task forces and the rhetoric? And then he, obviously,

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<v Speaker 2>at the July press conference, totally messed things up. Now,

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<v Speaker 2>to be fair, three of his four predecessors as chair

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<v Speaker 2>had major stumbles in one of their early press conferences. Greenspan, Yellen, Powell.

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<v Speaker 2>So in a sense, if we are able six months

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<v Speaker 2>from now to look back And say this was a

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<v Speaker 2>pivot point. And so the stuff that Kevin, excuse me,

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<v Speaker 2>the chair was saying for the first few months was

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<v Speaker 2>just growing pains. And then he got smacked by reality. Yeah.

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<v Speaker 2>All good. Then this speech gets upgraded to a B

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<v Speaker 2>plus and we're all happy. And I think there are

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<v Speaker 2>a number of people now who hope that's true with

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<v Speaker 2>some confidence more than before. Because the big thing, and

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<v Speaker 2>Teresa and I talked briefly about this before coming on,

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<v Speaker 2>is how different this was than last year. because last

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<v Speaker 2>year was all about the attacks on the Fed and

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<v Speaker 2>the fears for the independents, and the standing ovation for

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<v Speaker 2>Jay Powell was his last thing, well, last Jackson Hole

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<v Speaker 2>as chair. And this year, I think deliberately, the chair

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<v Speaker 2>and the team wanted to make it much more normal,

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<v Speaker 2>and it passed much more normal. The second thing is,

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<v Speaker 2>as a European central banker said to me at breakfast

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<v Speaker 2>this morning, but I think it's widely shared sentiment, for

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<v Speaker 2>all the anti-Ford guidance, he basically set up they have

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<v Speaker 2>to hide. Now, as you know, and we talked about

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<v Speaker 2>a few months ago, I've been urging them to hike

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<v Speaker 2>for a while. I think inflation's real. So again, I'm

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<v Speaker 2>glad if they're making that call. But yeah, at this point,

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<v Speaker 2>they really guided. Because if you read, there were four

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<v Speaker 2>sections to the speech. In the fourth section, you basically

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<v Speaker 2>does the litany of the reasons you would think inflation

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<v Speaker 2>is not going to stay stable or it's going to

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<v Speaker 2>persist and maybe go up from here, even if it

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<v Speaker 2>goes down for a month or two for a while.

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<v Speaker 2>And basically, the next sentence is, therefore, we have a

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<v Speaker 2>tight new guise. Didn't say the next sentence. So things

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<v Speaker 2>could get really messy because if they don't hike, then

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<v Speaker 2>people start saying, was that because of Trump? Was the

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<v Speaker 2>chair out over his skis, meaning ahead of the committee?

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<v Speaker 2>If the chair's ahead of the committee, it's better than

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<v Speaker 2>being behind the committee, but it's still worrisome. Then the

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<v Speaker 2>third thing is, He did clean up some small but

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<v Speaker 2>important things. So he had talked for a while about

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<v Speaker 2>what's the right target. We don't really know what inflation is.

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<v Speaker 2>And yesterday, he stated very clearly, core PCE 2%. That's

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<v Speaker 2>the target. Similarly, he said something I think quite useful

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<v Speaker 2>about he doesn't think wage inflation is a very good

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<v Speaker 2>predictor of overall inflation. which is a perfectly reasonable position

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<v Speaker 2>to take. And then later he said, I think financial

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<v Speaker 2>conditions are important. I know you guys have talked a

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<v Speaker 2>lot about this at the industry level. All of these

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<v Speaker 2>were normal, sound, either mainstream or very defensible central bank things.

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<v Speaker 2>And so that would have been sort of eh, except

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<v Speaker 2>for the fact that we had these two months, three

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<v Speaker 2>months of weird stuff. And so it takes on more credibility.

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<v Speaker 2>I don't want to go on too long, but two

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<v Speaker 2>other points, if I may. So the other two takeaways

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<v Speaker 2>for me from the speech were, first, he does this

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<v Speaker 2>whole second section, which is about his principles. And if

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<v Speaker 2>I were him, I would have made this, and I

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<v Speaker 2>was surprised, I would have made this a much narrower,

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<v Speaker 2>much more practical speech. I basically would have cut that section.

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<v Speaker 4>It was a long speech for someone who says they

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<v Speaker 4>don't like forward guidance.

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<v Speaker 2>Exactly. No, you're absolutely right, Tracy. I was like, people

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<v Speaker 2>asked me ahead of time what I thought was going

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<v Speaker 2>to happen. I thought he was going to compete with

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<v Speaker 2>Jay Powell from like four years ago for the shortest

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<v Speaker 2>possible speech. I thought he was just going to, you know,

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<v Speaker 2>he didn't. So I think that muddles his message because

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<v Speaker 2>some of the principal stuff, it raises more questions than answers.

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<v Speaker 2>It's either a bromide or what does he really mean

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<v Speaker 2>by that? And I don't think that was useful. But,

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<v Speaker 2>you know, that's not a big deal. The big deal

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<v Speaker 2>that I'm worried about is, and a lot of ex-Fed,

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<v Speaker 2>ex-Central Bank people, academics are worried about, is he seems

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<v Speaker 2>to be still, even through yesterday's speech for all its improvements,

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<v Speaker 2>trying to maximize his last-minute discretion. Yeah.

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<v Speaker 4>So this is the thing I noticed, because at the

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<v Speaker 4>very end of the speech, he talks about, well, inflation

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<v Speaker 4>has to be heading in the right direction and at

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<v Speaker 4>the right speed. And... I don't know what the right

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<v Speaker 4>speed is. The right speed sounds very subjective to me.

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<v Speaker 2>Absolutely. And right direction doesn't mean anything unless you're saying

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<v Speaker 2>the target. I mean, without the speed, just to emphasize

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<v Speaker 2>your point, without the speed, then we're back with what

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<v Speaker 2>we had the last four years, which is inflation's above target. Well,

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<v Speaker 2>we know what the direction should be, but if we

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<v Speaker 2>don't declare a speed, we're going to bring it back

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<v Speaker 2>to target. It doesn't mean anything. Right. So yeah, I

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<v Speaker 2>think it's really striking because that, to me, is the

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<v Speaker 2>most consistent thing through the stuff he said from his hearings,

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<v Speaker 2>his confirmation hearings, his first two press conferences, his remarks

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<v Speaker 2>at ECB Cintra and then yesterday. He's sort of reserving

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<v Speaker 2>the right to make up his mind at the last minute,

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<v Speaker 2>before every meeting, without pre-committing. what things he's looking at.

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<v Speaker 2>He gave us a little bit of that, I mean,

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<v Speaker 2>to his credit. He did say some things about which

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<v Speaker 2>indicators he likes better than others, and that's good. And

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<v Speaker 2>you don't want him to be inflexible. But it's really

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<v Speaker 2>odd for somebody coming from the Hoover Institution, who's been

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<v Speaker 2>seen as a conservative, who was mentored by the late

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<v Speaker 2>John Taylor, but also just in a broader central banking context,

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<v Speaker 2>everybody tries to situate themselves between what's called rules versus discretion.

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<v Speaker 2>Is it like, I'm going to raise rates every time

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<v Speaker 2>monetary growth goes up or something like that, which generally

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<v Speaker 2>is a bad idea if you're too strict. Or pure discretion.

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<v Speaker 2>I'm going to, you know, I don't have to justify.

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<v Speaker 2>I'm just going to make the right call every time.

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<v Speaker 2>And that's basically Greenspan circa 1999. And Greenspan could get

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<v Speaker 2>away with it, partly because he was very good and

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<v Speaker 2>partly because by that point he had such dominance over

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<v Speaker 2>the committee. And partly it caused trouble for later. because

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<v Speaker 2>then you had the weekend at Bernie's problem, which is

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<v Speaker 2>if Greenspan, God forbid, drops dead, and we obviously just

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<v Speaker 2>lost him recently, but in 1999... I have.

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<v Speaker 4>The image in my head now.

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<v Speaker 2>No, no. In 1999, you were worried if then already

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<v Speaker 2>somewhat old Alan Greenspan had a heart attack on the

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<v Speaker 2>Fed's tennis court, all the credibility went away because it

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<v Speaker 2>was all about him. Oh, interesting. And this is why

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<v Speaker 2>Ben Bernanke, Rick Mishkin, Thomas Laubach, and I pushed the

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<v Speaker 2>inflation targeting idea. And Ben very consciously, when he was chair,

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<v Speaker 2>pushed accountability because he wanted it to be not just

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<v Speaker 2>all about one person. And I think this, to me,

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<v Speaker 2>is not talked about enough and is the most worrying

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<v Speaker 2>thing about where Chair Warsh has gone.

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<v Speaker 4>So this is exactly what my next question was going

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<v Speaker 4>to be. You have been a central banker. at the

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<v Speaker 4>boe not necessarily the fed but you have insight into

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<v Speaker 4>how these monetary policy making committees actually work what is

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<v Speaker 4>the role of the fed chair in its current form

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<v Speaker 4>as you envision it is warsh supposed to be trying

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<v Speaker 4>to get everyone on his side and get them voting

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<v Speaker 4>in his direction or is he supposed to be a

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<v Speaker 4>I don't know, synthesizing a common position from the committee?

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<v Speaker 2>That's a really good question, Tracy. And in the Fed system,

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<v Speaker 2>that's not specified. And it varies over time, partly because

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<v Speaker 2>of the chair, partly because of the political surroundings, partly

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<v Speaker 2>because of the economy. But for example, at the European

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<v Speaker 2>Central Bank, it is, for all the attention deservedly President

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<v Speaker 2>Lagarde gets, It is very much meant to be a

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<v Speaker 2>consensus-driven organization and really try to get as many people

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<v Speaker 2>on board as possible. And that's partly because they're representing nations,

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<v Speaker 2>not districts within one nation. At the Bank of England,

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<v Speaker 2>when I served, and still, and this is something Chair

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<v Speaker 2>Warsh invokes now, invokes, I should say, is it's all

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<v Speaker 2>about discussion, what Kevin calls friendly debate or whatever.

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<v Speaker 4>The family fight.

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<v Speaker 2>Yeah, that's what he says. You're right. And the Bank

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<v Speaker 2>of England really prioritizes that. The Fed has generally, on average,

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<v Speaker 2>given more power and deference to the chair, certainly basically

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<v Speaker 2>since Volcker, so the last 45 years. It varies over time,

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<v Speaker 2>but essentially there's always something. So a financial crisis, Ben

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<v Speaker 2>Bernanke wanted, started running the committee trying to open it

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<v Speaker 2>up more, more debate, but financial crisis came and you

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<v Speaker 2>really wanted been making the decisions and there wasn't time.

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<v Speaker 2>And then there were these crazy US rules about you

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<v Speaker 2>can't have more than four people in the room from

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<v Speaker 2>the committee at one time without it becoming a public.

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<v Speaker 1>Then you have to take notes, right?

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<v Speaker 2>Then you have to take notes and whatever. And so

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<v Speaker 2>like ended up, it would be the New York Fed president,

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<v Speaker 2>Chair Bernanke, Kevin Warsh, and Don Cohn were the four

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<v Speaker 2>people in the room. And that was the right call

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<v Speaker 2>given the situation. So anyway, this is part of the

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<v Speaker 2>reason I worry about the discretion because The ethic of

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<v Speaker 2>the committee and the norm of the committee in the

0:12:20.559 --> 0:12:24.300
<v Speaker 2>Fed system is you don't contradict the chair. You might dissent.

0:12:25.250 --> 0:12:27.750
<v Speaker 2>But even there, as was pointed out by the former

0:12:27.809 --> 0:12:31.350
<v Speaker 2>Fed governor, Larry Meyer, a while back, there's sort of

0:12:31.410 --> 0:12:35.220
<v Speaker 2>an informal rule. Only so many people dissent on the

0:12:35.250 --> 0:12:38.600
<v Speaker 2>committee at any one meeting. And the chair never loses

0:12:38.660 --> 0:12:42.000
<v Speaker 2>a vote. Even Volcker, once it was clear he was

0:12:42.020 --> 0:12:45.610
<v Speaker 2>going to lose a vote, He basically said, next meeting

0:12:45.670 --> 0:12:46.370
<v Speaker 2>is my last meeting.

0:12:48.150 --> 0:12:48.990
<v Speaker 1>That's super interesting.

0:12:49.670 --> 0:12:53.339
<v Speaker 3>Well, let's actually– so one of the comments Chairman Walsh said,

0:12:53.360 --> 0:12:57.140
<v Speaker 3>he basically said, I don't know, 64, 65 months of

0:12:57.220 --> 0:12:58.880
<v Speaker 3>above target inflation.

0:12:59.520 --> 0:12:59.940
<v Speaker 1>That's true.

0:13:00.420 --> 0:13:00.599
<v Speaker 2>Yep.

0:13:00.880 --> 0:13:03.040
<v Speaker 1>But he also said, and this is the Fed's fault.

0:13:03.660 --> 0:13:03.800
<v Speaker 2>Yep.

0:13:03.940 --> 0:13:08.460
<v Speaker 3>And so, you know, obviously– That means it's in large

0:13:08.520 --> 0:13:11.560
<v Speaker 3>part he claims his predecessor's fault. But it also occurs

0:13:11.620 --> 0:13:14.460
<v Speaker 3>to me, you know, inflation has been above target around

0:13:14.760 --> 0:13:17.420
<v Speaker 3>the world in many respects, and it's not just a U.S.

0:13:17.500 --> 0:13:22.300
<v Speaker 1>Problem. I'm curious, like that comment, like, is it seems

0:13:22.340 --> 0:13:24.160
<v Speaker 1>kind of true? Like, is that is that fair?

0:13:24.280 --> 0:13:27.179
<v Speaker 2>Is that correct? I think it's fair. I mean, I

0:13:27.240 --> 0:13:29.520
<v Speaker 2>think what was unfair in the run up to his

0:13:29.580 --> 0:13:32.980
<v Speaker 2>appointment by President Trump and in some of the initial statements,

0:13:33.580 --> 0:13:38.110
<v Speaker 2>there was. A lot of talk about diplomatic, not diplomatic.

0:13:38.390 --> 0:13:43.050
<v Speaker 2>There was a lot of pretty nasty sounding tone about

0:13:43.110 --> 0:13:46.209
<v Speaker 2>the previous regime. And, you know, I'm going to reform,

0:13:46.290 --> 0:13:48.000
<v Speaker 2>I'm going to clean house on my watch. It's okay.

0:13:48.290 --> 0:13:51.599
<v Speaker 2>That was unnecessary, but I do think it is entirely

0:13:51.660 --> 0:13:57.500
<v Speaker 2>justified to say, um, care pal with the deference and

0:13:57.540 --> 0:14:02.300
<v Speaker 2>buy-in of the committee. Basically start was late to the

0:14:02.340 --> 0:14:07.220
<v Speaker 2>game and hiking and 2022. was early, if not, in

0:14:07.260 --> 0:14:11.260
<v Speaker 2>my view, profoundly mistaken to cut multiple times last year

0:14:12.020 --> 0:14:16.500
<v Speaker 2>and is behind the curve again. And the international comparison

0:14:16.580 --> 0:14:19.900
<v Speaker 2>actually doesn't flatter the US. You have to do a

0:14:19.940 --> 0:14:23.140
<v Speaker 2>little bit of careful things on the data. But basically,

0:14:23.200 --> 0:14:28.890
<v Speaker 2>if you control for three things, which is how dependent

0:14:28.970 --> 0:14:36.950
<v Speaker 2>on imported energy are you, how What was the inflation

0:14:37.010 --> 0:14:39.590
<v Speaker 2>going into the last few years? So what do you

0:14:39.630 --> 0:14:43.700
<v Speaker 2>have to clean up from the predecessor? And then out

0:14:43.740 --> 0:14:46.220
<v Speaker 2>of the Fed or any centralized control, how loose is

0:14:46.240 --> 0:14:50.980
<v Speaker 2>your fiscal policy? When you look at that, the Fed

0:14:51.040 --> 0:14:54.720
<v Speaker 2>is more of an outlier. So the ECBs kept inflation down.

0:14:55.560 --> 0:14:59.990
<v Speaker 2>The Swiss National Bank's kept inflation relatively down. Bank of

0:15:00.040 --> 0:15:04.560
<v Speaker 2>England's almost the same as the Fed. But additionally, This

0:15:04.600 --> 0:15:09.359
<v Speaker 2>gets into the independent stuff because part of the reason

0:15:09.380 --> 0:15:11.460
<v Speaker 2>the US has more inflation in my view and many

0:15:11.500 --> 0:15:15.700
<v Speaker 2>people's view is because Biden did do a fiscal blowout

0:15:16.520 --> 0:15:20.040
<v Speaker 2>on coming into office that probably wasn't necessary. And then

0:15:20.180 --> 0:15:23.760
<v Speaker 2>there's been no consolidation. And obviously Trump in his first

0:15:23.820 --> 0:15:27.860
<v Speaker 2>year did this long-term set of tax cuts. And so,

0:15:27.960 --> 0:15:31.280
<v Speaker 2>but again, it's still, if you take Kevin's, what you

0:15:31.300 --> 0:15:36.190
<v Speaker 2>quoted him, you know, it's ultimately up to the Fed.

0:15:37.130 --> 0:15:40.290
<v Speaker 2>If you take that seriously, then all this fiscal laxity

0:15:41.130 --> 0:15:44.010
<v Speaker 2>in discipline should be another reason to hike. Yeah, yeah.

0:15:44.450 --> 0:15:49.010
<v Speaker 2>So anyway, much too long, but I think even a sober,

0:15:49.080 --> 0:15:53.420
<v Speaker 2>temperate thing suggests, no, Powell did get it wrong. Now,

0:15:53.860 --> 0:15:57.300
<v Speaker 2>it's not he got it horrendously wrong. It's not he

0:15:57.320 --> 0:16:00.400
<v Speaker 2>got it wrong for the wrong reasons. But, you know,

0:16:00.440 --> 0:16:02.510
<v Speaker 2>when you and I talked The three of us talked

0:16:02.570 --> 0:16:05.310
<v Speaker 2>about this last year, which is, and the year before,

0:16:05.330 --> 0:16:07.790
<v Speaker 2>that at Jackson Hole there was this drumbeat from the

0:16:07.850 --> 0:16:12.880
<v Speaker 2>Fed staff and members. The labor markets could be really weak.

0:16:12.930 --> 0:16:15.980
<v Speaker 2>The inflation is going down. And there were people like

0:16:16.040 --> 0:16:20.480
<v Speaker 2>me or Michael Strain, AEI, and Diane Swank in KPMG

0:16:20.520 --> 0:16:22.780
<v Speaker 2>who were out there saying, we don't see this. Now,

0:16:22.800 --> 0:16:25.420
<v Speaker 2>I'm not saying necessarily they had to listen to us

0:16:25.460 --> 0:16:28.320
<v Speaker 2>and it didn't. but just to say they actually did

0:16:28.360 --> 0:16:30.600
<v Speaker 2>get something wrong. There were people who were saying, no,

0:16:30.700 --> 0:16:32.400
<v Speaker 2>the labor market is not going to collapse in the

0:16:32.450 --> 0:16:34.370
<v Speaker 2>next two years. And they kept saying, yes, it will.

0:16:34.570 --> 0:16:36.010
<v Speaker 2>So yeah, they did get some things wrong.

0:16:36.750 --> 0:16:41.690
<v Speaker 4>What's the sort of bar for political interference with the Fed?

0:16:41.790 --> 0:16:45.040
<v Speaker 4>Because it could be anything from just the president talking

0:16:45.080 --> 0:16:48.380
<v Speaker 4>about how he thinks rates are artificially high. It could

0:16:48.400 --> 0:16:52.140
<v Speaker 4>be maybe something a little bit different, like The fiscal

0:16:52.180 --> 0:16:54.940
<v Speaker 4>dominance idea to the extent that the Fed now feels

0:16:55.000 --> 0:16:57.240
<v Speaker 4>hamstrung in some way in terms of what it can

0:16:57.260 --> 0:16:57.859
<v Speaker 4>do with rates.

0:16:58.580 --> 0:17:03.180
<v Speaker 2>Again, you're right to raise that, Tracy. I mean, so

0:17:03.330 --> 0:17:05.810
<v Speaker 2>the first thing to say is a certain amount of

0:17:05.869 --> 0:17:08.830
<v Speaker 2>yelling at or scapegoating the Fed is part of the game.

0:17:08.850 --> 0:17:13.290
<v Speaker 2>And in fact, in previous presidencies, it kind of sometimes

0:17:13.369 --> 0:17:17.400
<v Speaker 2>was healthy, right? So it's like, oh, God, Fed has

0:17:17.420 --> 0:17:19.859
<v Speaker 2>to raise rates to deal with inflation. I don't want

0:17:19.880 --> 0:17:22.320
<v Speaker 2>to be blamed for it. So I'm going to go

0:17:22.380 --> 0:17:25.560
<v Speaker 2>out there and yell. But meanwhile, in the background, wink, wink, Fed,

0:17:25.600 --> 0:17:29.070
<v Speaker 2>do your job. And that was under Volcker, under Greenspan,

0:17:29.109 --> 0:17:31.990
<v Speaker 2>under Bernanke, under Yellen. I mean, that was always understood.

0:17:32.790 --> 0:17:36.430
<v Speaker 2>So a certain amount of, not like President Trump tweeting

0:17:36.970 --> 0:17:39.150
<v Speaker 2>the Fed chair is an enemy of the state, not

0:17:39.290 --> 0:17:43.610
<v Speaker 2>using lawfare to go after Lisa, Governor Cook, or now

0:17:43.670 --> 0:17:49.570
<v Speaker 2>Governor Powell. I mean, that's outrageous and arguably criminal. But

0:17:50.160 --> 0:17:52.460
<v Speaker 2>certain amount of carping about the central bank, that's fine.

0:17:54.160 --> 0:17:57.560
<v Speaker 2>Where the rubber hits the road is partly what you said,

0:17:57.820 --> 0:18:02.609
<v Speaker 2>which is when does the government treasury secretary or president

0:18:03.070 --> 0:18:06.850
<v Speaker 2>who's trying to sell U.S. bonds say, you have to

0:18:06.910 --> 0:18:11.290
<v Speaker 2>help me sell U.S. bonds, whether or not inflation's high.

0:18:12.390 --> 0:18:14.590
<v Speaker 2>And in that case, what a central banker should do,

0:18:14.609 --> 0:18:18.760
<v Speaker 2>a Fed president or a Fed governor should do is say,

0:18:19.460 --> 0:18:22.180
<v Speaker 2>I'm here to help you sell U.S. bonds and your

0:18:22.220 --> 0:18:25.210
<v Speaker 2>successor sell U.S. bonds and your successor sell U.S. bonds.

0:18:25.510 --> 0:18:30.270
<v Speaker 2>And that means I don't do cheating and manipulation now.

0:18:30.670 --> 0:18:32.189
<v Speaker 2>I'm here to help you sell the bonds.

0:18:32.650 --> 0:18:35.310
<v Speaker 4>You're preserving the long-term credibility of U.S.

0:18:35.350 --> 0:18:38.750
<v Speaker 2>Debt. And so you have to be willing to stand

0:18:38.910 --> 0:18:41.600
<v Speaker 2>up to that. And that gets us into the potential

0:18:41.720 --> 0:18:44.780
<v Speaker 2>really big situation now. But the second thing, and this

0:18:44.840 --> 0:18:47.820
<v Speaker 2>is the part that was really unprecedented under Trump besides

0:18:47.880 --> 0:18:54.389
<v Speaker 2>the individual illegal attacks on individual members, is they were,

0:18:54.410 --> 0:18:59.399
<v Speaker 2>and this was very loud last year, they were threatening

0:18:59.900 --> 0:19:02.419
<v Speaker 2>to take away the votes of some of the Reserve

0:19:02.460 --> 0:19:06.919
<v Speaker 2>Bank presidents or quickly turn over the Reserve Bank presidents,

0:19:07.000 --> 0:19:09.260
<v Speaker 2>not get rid of them and put in their own

0:19:09.300 --> 0:19:13.220
<v Speaker 2>political appointees rather than having the staggered terms as intended.

0:19:13.920 --> 0:19:17.060
<v Speaker 2>And there was talk about changing the Fed's mandate and

0:19:17.080 --> 0:19:20.800
<v Speaker 2>there was And then the things about the Fed's budget.

0:19:20.960 --> 0:19:26.100
<v Speaker 2>And so the big one, economically speaking, is the caving

0:19:26.240 --> 0:19:31.500
<v Speaker 2>in in the face of fiscal pressure. But the almost

0:19:31.600 --> 0:19:34.359
<v Speaker 2>as big and as a means to that one is

0:19:34.460 --> 0:19:41.100
<v Speaker 2>the threats to politicize, turn over, fire, remove the functional

0:19:41.180 --> 0:19:44.940
<v Speaker 2>independence of the Fed by messing with who's appointed when.

0:20:01.119 --> 0:20:04.080
<v Speaker 3>It occurs to me, you're talking about this phrase, family fight.

0:20:04.400 --> 0:20:08.340
<v Speaker 3>And I hadn't thought much about it, because it's a

0:20:08.380 --> 0:20:11.679
<v Speaker 3>good sounding phrase. It's like, great, we want our- You

0:20:11.720 --> 0:20:12.420
<v Speaker 3>want healthy debate.

0:20:12.440 --> 0:20:13.520
<v Speaker 2>It feels good, right? You want healthy debate.

0:20:13.540 --> 0:20:15.380
<v Speaker 3>It feels good, but he's used the phrase a bunch

0:20:15.420 --> 0:20:19.570
<v Speaker 3>of times now in both of his press conferences, I believe.

0:20:20.270 --> 0:20:23.389
<v Speaker 3>And I'm curious now, just sort of thinking about a

0:20:23.410 --> 0:20:29.020
<v Speaker 3>few things that have been said, Last year at this conference,

0:20:29.060 --> 0:20:32.360
<v Speaker 3>I asked Chicago Fed President Austin Goolsbee, why are dissents

0:20:32.720 --> 0:20:34.480
<v Speaker 3>rare at the Fed? And one of his answers is

0:20:34.560 --> 0:20:38.740
<v Speaker 3>that Chairman Powell was good at building consensus.

0:20:39.119 --> 0:20:40.149
<v Speaker 1>But now I'm sort.

0:20:40.030 --> 0:20:45.210
<v Speaker 3>Of curious, was there a perception under the Powell years

0:20:45.310 --> 0:20:49.470
<v Speaker 3>that he was too good at building consensus? Did members

0:20:49.510 --> 0:20:53.320
<v Speaker 3>of the FOMC feel that actually that meeting room was

0:20:53.420 --> 0:20:56.830
<v Speaker 3>not a real site for debate? And when Kevin Warsh

0:20:56.850 --> 0:21:00.150
<v Speaker 3>says we want the family fight. Is he saying, no,

0:21:00.270 --> 0:21:04.850
<v Speaker 3>I'm okay with, unlike my predecessor, I'm actually okay if

0:21:04.869 --> 0:21:05.949
<v Speaker 3>you don't agree with me?

0:21:07.170 --> 0:21:09.470
<v Speaker 2>I think he's saying, I think Kevin Warsh is saying

0:21:09.540 --> 0:21:12.020
<v Speaker 2>what you just said, Joe, that I am okay with

0:21:12.080 --> 0:21:16.580
<v Speaker 2>more dissent and more debate. I don't believe him. Okay.

0:21:17.440 --> 0:21:20.480
<v Speaker 2>But if you take it at face value, he's right.

0:21:21.780 --> 0:21:22.919
<v Speaker 2>and that's what I meant in part.

0:21:22.980 --> 0:21:23.780
<v Speaker 1>You think he's right?

0:21:24.180 --> 0:21:27.460
<v Speaker 2>He's right that debate had gotten too little, and it's

0:21:27.520 --> 0:21:30.699
<v Speaker 2>healthy to have debate. I think, Paul, it's partly he

0:21:30.740 --> 0:21:32.320
<v Speaker 2>was very good inside the building, but I think it

0:21:32.380 --> 0:21:36.870
<v Speaker 2>was two other things. I think he smartly and justifiably,

0:21:36.960 --> 0:21:41.190
<v Speaker 2>first under COVID, and then when the Fed was under

0:21:41.330 --> 0:21:46.230
<v Speaker 2>such overt attack by Trump, saying, let's not dissent and

0:21:46.290 --> 0:21:51.270
<v Speaker 2>create divisions in the committee casually. Let's make the bar

0:21:51.330 --> 0:21:56.610
<v Speaker 2>very high. If you dissent, I understand, but let's not

0:21:56.670 --> 0:21:59.690
<v Speaker 2>show division because that just gives the attackers on the Fed,

0:21:59.790 --> 0:22:02.149
<v Speaker 2>or in the case of COVID, that just gives the

0:22:02.190 --> 0:22:06.020
<v Speaker 2>sense of panic. And there is always this temptation. So

0:22:06.060 --> 0:22:08.000
<v Speaker 2>when I was on the Bank of England MPC, which

0:22:08.060 --> 0:22:10.679
<v Speaker 2>was 2009 to 12, so I was there during the

0:22:10.720 --> 0:22:13.980
<v Speaker 2>financial crisis. And there was a point at which the

0:22:14.020 --> 0:22:16.980
<v Speaker 2>governor and Bank of England had a much more lively debate.

0:22:18.070 --> 0:22:23.260
<v Speaker 2>publicly at least, than the Fed. Then Governor Mervyn King

0:22:23.300 --> 0:22:26.300
<v Speaker 2>came at one point and said, look, quantitative easing is

0:22:26.380 --> 0:22:29.580
<v Speaker 2>really controversial. We're going to take the vote. You'll vote

0:22:29.619 --> 0:22:32.580
<v Speaker 2>however you want. But once we've done it, can we

0:22:32.619 --> 0:22:36.439
<v Speaker 2>have a moratorium on people asking whether or not quantitative

0:22:36.520 --> 0:22:41.230
<v Speaker 2>easing works or not for a while? And I totally

0:22:41.270 --> 0:22:44.650
<v Speaker 2>supported that. I mean, again, it's an emergency. You don't

0:22:44.690 --> 0:22:48.010
<v Speaker 2>want to just Oh, well, you know, according to VIXELL,

0:22:48.050 --> 0:22:51.130
<v Speaker 2>I'm not sure, you know, the usual central bank thing.

0:22:51.190 --> 0:22:53.310
<v Speaker 2>I'm giving a talk in Glasgow and I just sort

0:22:53.350 --> 0:22:57.650
<v Speaker 2>of wander off into monetary theory. So I think not

0:22:57.690 --> 0:23:01.430
<v Speaker 2>through bad motivations, but I think Powell ended up between

0:23:01.470 --> 0:23:06.310
<v Speaker 2>the COVID panic and then the rallying solidarity and people

0:23:06.369 --> 0:23:08.780
<v Speaker 2>not wanting to look like they were undermining the chairman

0:23:08.800 --> 0:23:11.580
<v Speaker 2>while the Fed was under attack. You did end up

0:23:11.640 --> 0:23:14.760
<v Speaker 2>getting much lower than usual dissents. And then what happens

0:23:14.780 --> 0:23:18.530
<v Speaker 2>is which shouldn't but does happen, is it builds momentum.

0:23:18.869 --> 0:23:23.649
<v Speaker 2>So if you've gone 12 meetings, 15 meetings without anybody dissenting,

0:23:24.730 --> 0:23:28.810
<v Speaker 2>the bar psychologically becomes higher for someone to dissent. So again,

0:23:29.170 --> 0:23:32.430
<v Speaker 2>I hope I'm wrong. I don't think Chair Warsh really

0:23:32.470 --> 0:23:37.359
<v Speaker 2>means it. I hope he does. But taking it literally, yeah,

0:23:37.390 --> 0:23:39.379
<v Speaker 2>we went through a period where there was too little dissent.

0:23:41.020 --> 0:23:43.939
<v Speaker 4>So you mentioned Mervyn King just then, and King is

0:23:44.000 --> 0:23:47.199
<v Speaker 4>heading the new task force on Fed communications. So I'm

0:23:47.240 --> 0:23:51.679
<v Speaker 4>curious whether you have any insights or perhaps informed guesses

0:23:51.859 --> 0:23:55.720
<v Speaker 4>about what the problem is that Warsh slash King are

0:23:55.770 --> 0:23:56.570
<v Speaker 4>now trying to solve.

0:23:56.960 --> 0:24:00.369
<v Speaker 2>Well, I know well two of the three members of

0:24:00.410 --> 0:24:02.710
<v Speaker 2>that committee. So I worked with Governor King. He was

0:24:02.770 --> 0:24:05.410
<v Speaker 2>governor before that when I was at the Bank of England.

0:24:06.030 --> 0:24:08.670
<v Speaker 2>And Peter Fisher, the former New York Fed and U.S.

0:24:08.710 --> 0:24:11.419
<v Speaker 2>Treasury senior official, is on the board of directors of

0:24:11.440 --> 0:24:14.770
<v Speaker 2>the Peterson Institute. So just full disclosure. So I've not

0:24:14.850 --> 0:24:18.650
<v Speaker 2>talked to them directly about confidential things, but just disclosure.

0:24:20.369 --> 0:24:24.590
<v Speaker 2>I think this is the committee that has the biggest

0:24:25.410 --> 0:24:30.240
<v Speaker 2>chance of a surprise to being radical. I think people

0:24:30.280 --> 0:24:34.600
<v Speaker 2>are very concentrated on the balance sheet committee, and I

0:24:34.640 --> 0:24:38.600
<v Speaker 2>think actually they are likely to come out with much

0:24:38.720 --> 0:24:44.820
<v Speaker 2>more sober, practical, smaller scale recommendations than people think they are.

0:24:44.859 --> 0:24:48.000
<v Speaker 2>That's just my guess. But knowing who's on that committee,

0:24:48.780 --> 0:24:52.180
<v Speaker 2>Raghu Rajan, Jennifer Einstein, Karen Dinan, who's also a colleague

0:24:52.220 --> 0:24:56.109
<v Speaker 2>of mine. But I think the communications fund is going

0:24:56.130 --> 0:25:01.310
<v Speaker 2>to surprise people. Because both Mervyn and Peter, and I'm

0:25:01.350 --> 0:25:06.660
<v Speaker 2>only referring to their public statements, have gotten pretty radically

0:25:06.760 --> 0:25:10.500
<v Speaker 2>skeptical about central bank communications in recent years. So Mervyn

0:25:10.540 --> 0:25:13.740
<v Speaker 2>King was actually the leader of the inflation targeting movement

0:25:13.820 --> 0:25:17.010
<v Speaker 2>long before we wrote our book. He's the one who

0:25:17.090 --> 0:25:20.010
<v Speaker 2>in 1992, when the British pound fell out of the

0:25:20.070 --> 0:25:22.770
<v Speaker 2>exchange rate mechanism and there was basically a crisis, we

0:25:22.810 --> 0:25:25.810
<v Speaker 2>need to have something to anchor in the UK. He's

0:25:25.830 --> 0:25:27.409
<v Speaker 2>the one who leapt into action with a couple of

0:25:27.430 --> 0:25:29.820
<v Speaker 2>key staffers. He was chief economist of the bank at

0:25:29.859 --> 0:25:32.690
<v Speaker 2>the time. and said, look, these little countries are trying

0:25:32.710 --> 0:25:34.570
<v Speaker 2>inflation targeting, but we think it can work for us,

0:25:34.630 --> 0:25:37.790
<v Speaker 2>and he did. And so he was the father, the parent,

0:25:38.190 --> 0:25:41.430
<v Speaker 2>of what used to be known as the fan charts.

0:25:42.190 --> 0:25:44.130
<v Speaker 2>I love the fan charts.

0:25:44.410 --> 0:25:45.790
<v Speaker 4>I think I was the only one, but I really

0:25:45.810 --> 0:25:45.990
<v Speaker 4>liked it.

0:25:46.010 --> 0:25:48.129
<v Speaker 2>No, no, no, there were a few of us scattered around,

0:25:48.190 --> 0:25:52.190
<v Speaker 2>but it was definitely a niche product. And there are problems,

0:25:52.600 --> 0:25:54.119
<v Speaker 2>better or worse, with fan charts, and the Bank of

0:25:54.160 --> 0:25:59.389
<v Speaker 2>England has changed it. But basically, Mervyn... was leading the effort,

0:25:59.430 --> 0:26:02.430
<v Speaker 2>and we cited this hugely, Bernanke et al. cited this

0:26:02.510 --> 0:26:06.750
<v Speaker 2>hugely in our book, that they were, again, back to

0:26:06.770 --> 0:26:10.670
<v Speaker 2>the combination of accountability and transparency, that you were sending

0:26:10.690 --> 0:26:13.060
<v Speaker 2>out a forecast. You were being much more explicit than

0:26:13.340 --> 0:26:16.160
<v Speaker 2>central banks usually were about the forecast. You were with

0:26:16.180 --> 0:26:19.740
<v Speaker 2>the fan charts, which are essentially colored spreads about how

0:26:19.800 --> 0:26:22.619
<v Speaker 2>likely a given outcome would be. Here's what we centrally

0:26:22.680 --> 0:26:25.480
<v Speaker 2>think is going to happen. Here's what may happen. You

0:26:25.520 --> 0:26:29.649
<v Speaker 2>were trying to give the message this was probabilistic, that

0:26:30.210 --> 0:26:34.090
<v Speaker 2>we're making our best guess, but it's probably going to

0:26:34.150 --> 0:26:35.510
<v Speaker 2>err on the high side, and it's going to be

0:26:35.530 --> 0:26:41.670
<v Speaker 2>somewhere around here. So anyway, it was very, very much

0:26:41.760 --> 0:26:47.100
<v Speaker 2>about transparency, accountability, and more information is better. Regular information

0:26:47.180 --> 0:26:52.859
<v Speaker 2>is better. Commitment to specific releases at specific times is better.

0:26:52.900 --> 0:26:55.000
<v Speaker 2>So you have a track record, and the committee has

0:26:55.040 --> 0:27:00.280
<v Speaker 2>to admit when it changes its mind or learns something. Anyway,

0:27:00.580 --> 0:27:05.680
<v Speaker 2>in more recent years, since Governor King left the bank, retired,

0:27:07.180 --> 0:27:11.200
<v Speaker 2>he's become quite loud in the spirit of some of

0:27:11.220 --> 0:27:13.810
<v Speaker 2>the things Chair Warsh has been saying, that it's too

0:27:13.830 --> 0:27:18.770
<v Speaker 2>much noise, central banks can't forecast, we're lousy at forecasting,

0:27:19.130 --> 0:27:22.590
<v Speaker 2>given that we shouldn't be putting out all this information

0:27:22.630 --> 0:27:27.590
<v Speaker 2>that's not really misleading, and Mervyn also, from even before that,

0:27:27.670 --> 0:27:32.600
<v Speaker 2>was very concerned about this idea of the markets getting

0:27:32.800 --> 0:27:36.700
<v Speaker 2>too dependent on the information and the future plans of

0:27:36.720 --> 0:27:39.330
<v Speaker 2>the central bank and then not giving as much information

0:27:39.450 --> 0:27:43.460
<v Speaker 2>back and also having more moral hazard that they're not

0:27:43.480 --> 0:27:45.060
<v Speaker 2>going to take the price and risk.

0:27:45.380 --> 0:27:48.210
<v Speaker 4>This is the idea that yields are an important policy

0:27:48.250 --> 0:27:50.450
<v Speaker 4>signal for central bankers, or they should be.

0:27:50.570 --> 0:27:53.010
<v Speaker 2>They should be. And it should be a two-way street.

0:27:53.190 --> 0:27:56.270
<v Speaker 2>It should be yields and volatility around yields should be

0:27:56.390 --> 0:27:59.100
<v Speaker 2>higher than it had been. This is their point of view,

0:27:59.640 --> 0:28:01.960
<v Speaker 2>not mine. It should be higher than it had been

0:28:02.000 --> 0:28:06.040
<v Speaker 2>because that forces markets to take risk more seriously and

0:28:06.080 --> 0:28:09.790
<v Speaker 2>price things better. And so you have less, not zero,

0:28:09.830 --> 0:28:12.730
<v Speaker 2>but you have less chance of a bubble and less

0:28:12.890 --> 0:28:15.679
<v Speaker 2>inequality of things running out of them. And then at

0:28:15.720 --> 0:28:18.500
<v Speaker 2>the same time, that should mean the pricing that the

0:28:18.520 --> 0:28:23.820
<v Speaker 2>markets give you is more informative. And Peter Fisher, who,

0:28:24.100 --> 0:28:28.109
<v Speaker 2>after he was at Fed New York and Treasury, was

0:28:28.190 --> 0:28:31.510
<v Speaker 2>head of Asia and other senior roles at BlackRock, he

0:28:31.550 --> 0:28:33.790
<v Speaker 2>feels very strongly these two points as well, at least

0:28:34.070 --> 0:28:37.360
<v Speaker 2>what I know from his public statements. He's very skeptical

0:28:37.400 --> 0:28:40.640
<v Speaker 2>about central banks' ability to forecast and very worried about

0:28:41.200 --> 0:28:46.450
<v Speaker 2>central banks' certainty about central banks causing bubbles and indiscipline

0:28:46.490 --> 0:28:50.970
<v Speaker 2>and then clouding market signals. So even though Chair Warsh

0:28:50.990 --> 0:28:55.410
<v Speaker 2>in the speech here at Jackson Hole backed off a

0:28:55.470 --> 0:28:57.460
<v Speaker 2>little bit of some of the more extreme statements of that,

0:28:58.000 --> 0:29:01.260
<v Speaker 2>he admitted that he had this thing about a hall

0:29:01.280 --> 0:29:03.600
<v Speaker 2>of mirrors image in the speech, which is a way

0:29:03.640 --> 0:29:07.200
<v Speaker 2>of admitting that the market isn't always right. And if

0:29:07.300 --> 0:29:12.020
<v Speaker 2>the Fed chases the market noise, you may get a

0:29:12.080 --> 0:29:15.580
<v Speaker 2>weird dynamic. And I was glad he said that. Much

0:29:15.640 --> 0:29:18.200
<v Speaker 2>better than play the ball, not the referee, which was garbage.

0:29:18.220 --> 0:29:20.280
<v Speaker 4>That was the previous message was like, oh, market, you're

0:29:20.300 --> 0:29:21.420
<v Speaker 4>the ball, like off you go.

0:29:21.480 --> 0:29:25.020
<v Speaker 2>Yeah, that was really bad. But anyway, no, I mean,

0:29:25.060 --> 0:29:27.780
<v Speaker 2>of all the things that annoyed the central banking community,

0:29:27.800 --> 0:29:32.780
<v Speaker 2>that may have been the most annoying. But anyway, so

0:29:33.100 --> 0:29:39.940
<v Speaker 2>just to say, I think Chair Warsh's true beliefs and instincts, though,

0:29:39.980 --> 0:29:43.680
<v Speaker 2>are much more in the we can't get any forecasts right.

0:29:44.080 --> 0:29:47.740
<v Speaker 2>Market has much more information on a lot of things

0:29:47.770 --> 0:29:51.770
<v Speaker 2>than we do. We have a moral hazard issue of

0:29:51.850 --> 0:29:56.090
<v Speaker 2>not spoon-feeding the markets. So I think the communications committee

0:29:56.250 --> 0:29:58.590
<v Speaker 2>is probably where we're going to get the biggest surprises.

0:29:59.350 --> 0:30:02.030
<v Speaker 3>Yeah, I find myself like thinking like maybe all these things,

0:30:02.070 --> 0:30:04.690
<v Speaker 3>various charts, dots, et cetera, like served a real purpose

0:30:05.010 --> 0:30:08.530
<v Speaker 3>maybe post-GFC and maybe it's just a lot of noise

0:30:08.570 --> 0:30:12.730
<v Speaker 3>right now. Since we're talking about this sort of monetary

0:30:12.770 --> 0:30:15.650
<v Speaker 3>policy at the theoretical level and a lot of– which

0:30:15.690 --> 0:30:15.990
<v Speaker 3>is great.

0:30:16.330 --> 0:30:17.750
<v Speaker 2>Oh, yeah. And all this.

0:30:18.170 --> 0:30:20.690
<v Speaker 3>I'm just sort of– maybe sort of said a little

0:30:20.730 --> 0:30:25.400
<v Speaker 3>bit here and I'm curious from think tank world. What

0:30:25.420 --> 0:30:29.780
<v Speaker 3>do you think about so many social scientists, including a

0:30:29.810 --> 0:30:34.390
<v Speaker 3>lot of economists, suddenly either leaving universities or leaving think

0:30:34.430 --> 0:30:39.110
<v Speaker 3>tanks and joining one of two very big AI companies?

0:30:39.170 --> 0:30:41.070
<v Speaker 1>And when you think about.

0:30:40.850 --> 0:30:43.990
<v Speaker 3>The sort of future of social scientists, not so much like, well,

0:30:44.030 --> 0:30:46.860
<v Speaker 3>we use models, which I'm sure there's going to be

0:30:46.880 --> 0:30:49.800
<v Speaker 3>tons of that, but just the sort of Depending on

0:30:49.840 --> 0:30:52.980
<v Speaker 3>which side you're on, either vortex or brain drain of

0:30:53.500 --> 0:30:56.440
<v Speaker 3>people of stature moving into these companies.

0:30:56.500 --> 0:30:57.760
<v Speaker 1>What do you think? How does that make you feel?

0:30:58.660 --> 0:31:02.000
<v Speaker 2>I mean, as someone whose main job is to hire, develop,

0:31:02.020 --> 0:31:06.200
<v Speaker 2>and retain talent, I think about this a lot. And

0:31:06.780 --> 0:31:09.330
<v Speaker 2>it is, as I think you applied, Joe, I mean,

0:31:09.350 --> 0:31:12.830
<v Speaker 2>I think it's not unprecedented. So during the internet boom,

0:31:13.730 --> 0:31:15.950
<v Speaker 2>when Amazon was first coming up and Google was first

0:31:15.990 --> 0:31:20.740
<v Speaker 2>coming up, they hired economists. They were hiring them more

0:31:21.500 --> 0:31:25.820
<v Speaker 2>to be useful, like Amazon's pricing model, useful in terms

0:31:25.880 --> 0:31:28.660
<v Speaker 2>of internal production. Design and auction system or something like that. Right.

0:31:28.680 --> 0:31:32.400
<v Speaker 2>So like the very famous MIT microeconomist, Hal Varian, became

0:31:32.460 --> 0:31:35.880
<v Speaker 2>Google's first chief economist and brought with him and hired

0:31:35.920 --> 0:31:38.620
<v Speaker 2>a bunch of really smart people. But they also were

0:31:38.640 --> 0:31:42.160
<v Speaker 2>there to talk about policy and help explain why the

0:31:42.200 --> 0:31:44.840
<v Speaker 2>technology was good and what kinds of regulations they wanted

0:31:44.880 --> 0:31:48.240
<v Speaker 2>and didn't want. And that's normal. I mean, that's okay.

0:31:48.710 --> 0:31:51.590
<v Speaker 2>But there was also a little bit of this sense,

0:31:51.750 --> 0:31:55.020
<v Speaker 2>which we're seeing now, an order of magnitude higher. Oh

0:31:55.060 --> 0:31:57.640
<v Speaker 2>my God, I can make real money. Oh my God,

0:31:57.680 --> 0:32:00.080
<v Speaker 2>that's where the cool people are. Oh my God, I

0:32:00.080 --> 0:32:04.660
<v Speaker 2>can be part of changing the world. So it's very seductive.

0:32:04.740 --> 0:32:08.020
<v Speaker 2>And we've seen this in other fields. When genetic engineering

0:32:08.120 --> 0:32:12.340
<v Speaker 2>had a boomlet many decades ago, all these Nobel Prize

0:32:12.380 --> 0:32:16.620
<v Speaker 2>winners and grad students would leave academic jobs and set

0:32:16.680 --> 0:32:22.440
<v Speaker 2>up startups to Genentech, things like that. Right now, I

0:32:23.160 --> 0:32:31.520
<v Speaker 2>think it's challenging. It's challenging because the case that can

0:32:31.580 --> 0:32:34.400
<v Speaker 2>be made, and I know I have colleagues I know

0:32:34.720 --> 0:32:38.340
<v Speaker 2>who have gone in-house at some of these companies. The

0:32:38.360 --> 0:32:40.980
<v Speaker 2>case that can be made that this is the most

0:32:41.020 --> 0:32:46.650
<v Speaker 2>transformative technology of a century. and it has the potential

0:32:46.670 --> 0:32:50.740
<v Speaker 2>to do enormous good for the world, is legit. It

0:32:50.760 --> 0:32:53.020
<v Speaker 2>may be overhyped, it may take longer to get there,

0:32:53.640 --> 0:32:56.360
<v Speaker 2>we may have to care more about how many people

0:32:56.420 --> 0:32:59.800
<v Speaker 2>we displace and what happens on the way, but the

0:32:59.900 --> 0:33:03.620
<v Speaker 2>idea that that is a valid view and you want

0:33:03.660 --> 0:33:06.340
<v Speaker 2>to be part of that, I think is real. And

0:33:06.400 --> 0:33:08.520
<v Speaker 2>so beyond the money and the sense of I want

0:33:08.540 --> 0:33:12.320
<v Speaker 2>to be doing the cool stuff, which matter, because think tanks,

0:33:12.360 --> 0:33:15.600
<v Speaker 2>you pay well compared to average American salaries, which don't

0:33:15.620 --> 0:33:22.190
<v Speaker 2>pay like those people. I understand it. You can also

0:33:22.210 --> 0:33:26.670
<v Speaker 2>go one step further, which is unlike, say, Google or

0:33:26.750 --> 0:33:31.370
<v Speaker 2>Amazon when they were coming up, where there were policy issues. Actually,

0:33:31.390 --> 0:33:33.950
<v Speaker 2>a lot of us didn't realize what all the policy

0:33:34.010 --> 0:33:38.690
<v Speaker 2>issues were. And the economists who were hired Some of

0:33:38.710 --> 0:33:41.130
<v Speaker 2>them worked on policy, but most of them were, like

0:33:41.150 --> 0:33:45.120
<v Speaker 2>we said, working on sort of internal tools. Now, a

0:33:45.280 --> 0:33:47.860
<v Speaker 2>lot of what the hiring, say, for example, Anthropic is

0:33:47.900 --> 0:33:53.100
<v Speaker 2>doing is by their own account about trying to envision

0:33:53.360 --> 0:33:57.810
<v Speaker 2>what the right policies are to make the transition for

0:33:57.880 --> 0:34:01.990
<v Speaker 2>AI work. And at least among the economists I know

0:34:02.050 --> 0:34:05.930
<v Speaker 2>who've gone there, that's a sincere belief. But it does

0:34:06.010 --> 0:34:10.219
<v Speaker 2>make it more awkward sometimes Because it's one thing to say, oh,

0:34:10.300 --> 0:34:12.360
<v Speaker 2>I work for Amazon. I came up with the pricing

0:34:12.420 --> 0:34:15.410
<v Speaker 2>auction model, and that's why you get that. And people say,

0:34:15.430 --> 0:34:18.890
<v Speaker 2>you're ripping me off. And you say, no, I'm not. Ah, fine.

0:34:19.890 --> 0:34:24.489
<v Speaker 2>But when it's like someone who's a world-class expert on

0:34:24.530 --> 0:34:28.149
<v Speaker 2>the economics of innovation or of growth or whatever goes

0:34:28.290 --> 0:34:31.270
<v Speaker 2>in and then starts saying, well, you know, they're going

0:34:31.290 --> 0:34:34.200
<v Speaker 2>to create three times as many jobs as they destroy,

0:34:34.239 --> 0:34:38.129
<v Speaker 2>and it's... The singularity is near, and so you can't

0:34:38.170 --> 0:34:39.890
<v Speaker 2>regulate it right now because we're on the cusp of something.

0:34:40.550 --> 0:34:46.080
<v Speaker 2>They may sincerely believe it, but it gets... People understandably

0:34:46.140 --> 0:34:51.580
<v Speaker 2>discount their views once they're in-house and getting money. And also,

0:34:51.660 --> 0:34:53.980
<v Speaker 2>and I was talking about this, a very noted academic

0:34:54.080 --> 0:34:57.939
<v Speaker 2>who has been pursued by all these places who turned

0:34:57.980 --> 0:35:02.190
<v Speaker 2>it down not to go. I mean... Hero. Well... And

0:35:02.210 --> 0:35:05.089
<v Speaker 2>this is a person who's very techno-optimist. I mean, so

0:35:05.130 --> 0:35:11.770
<v Speaker 2>it's not about that. But there's also just, you do inherently,

0:35:11.930 --> 0:35:15.230
<v Speaker 2>these are still companies. I mean, you're becoming part of

0:35:15.270 --> 0:35:19.840
<v Speaker 2>a hierarchy. You're losing your independent voice. What you choose

0:35:19.880 --> 0:35:23.280
<v Speaker 2>to work on, you may choose not to work on that,

0:35:23.640 --> 0:35:25.319
<v Speaker 2>which you might have worked on because now you work

0:35:25.360 --> 0:35:29.759
<v Speaker 2>for this company. So again, is it outright corruption of

0:35:29.800 --> 0:35:32.830
<v Speaker 2>the sort we're seeing in the Trump administration? No. But

0:35:32.910 --> 0:35:35.370
<v Speaker 2>it is unsettling. And I think there's a role for

0:35:35.650 --> 0:35:38.250
<v Speaker 2>this academic colleague of mine, the people at the Peterson

0:35:38.290 --> 0:35:42.350
<v Speaker 2>Institute and like institutes to, I hope, be willing to

0:35:42.390 --> 0:35:45.140
<v Speaker 2>settle for the low six-figure salaries, which are still pretty

0:35:45.180 --> 0:35:50.800
<v Speaker 2>darn good, and influence policy without going on staff.

0:35:51.980 --> 0:35:54.359
<v Speaker 4>Just on the AI side of things. So at the moment,

0:35:54.400 --> 0:35:56.640
<v Speaker 4>if you look at the economic impact, it's very much

0:35:57.210 --> 0:36:02.469
<v Speaker 4>sort of short-term effects on prices and inflation and capital investment.

0:36:03.030 --> 0:36:06.930
<v Speaker 4>And everything else, you know, the impact on productivity, even jobs,

0:36:07.010 --> 0:36:09.590
<v Speaker 4>is much further off into the future and very theoretical.

0:36:10.090 --> 0:36:13.489
<v Speaker 4>Do you see any evidence of an impact on the

0:36:13.530 --> 0:36:15.820
<v Speaker 4>labor market side or productivity here and now?

0:36:16.820 --> 0:36:21.140
<v Speaker 2>Much more indicative evidence of improvement in productivity, Tracy, than

0:36:21.300 --> 0:36:26.140
<v Speaker 2>on effects on the labor market. So speaking of colleagues

0:36:26.200 --> 0:36:31.530
<v Speaker 2>of mine, Martin Terzempa and Jed Kolko are both top

0:36:31.570 --> 0:36:34.230
<v Speaker 2>economists who work at Peterson and work on these issues.

0:36:34.770 --> 0:36:38.879
<v Speaker 2>Anton Koronek is affiliated with Peterson, is on leave this year.

0:36:38.940 --> 0:36:41.780
<v Speaker 2>He went to work at Anthropic this year. But anyway,

0:36:43.060 --> 0:36:44.759
<v Speaker 2>if you look at their work, and in particular, I

0:36:44.760 --> 0:36:47.860
<v Speaker 2>would cite the work of Jed Kolko. And he was

0:36:47.910 --> 0:36:51.130
<v Speaker 2>chief economist at the U.S. Department of Commerce under Biden.

0:36:51.170 --> 0:36:54.090
<v Speaker 2>He was at Indeed, was it Indeed or ADP? Yeah, Indeed,

0:36:54.150 --> 0:36:56.850
<v Speaker 2>I believe. Yeah, and yeah, so he's a real practical

0:36:56.890 --> 0:36:59.189
<v Speaker 2>labor market economist. And he and there are a number

0:36:59.210 --> 0:37:02.560
<v Speaker 2>of others, there's another think tank called economic innovation group.

0:37:02.600 --> 0:37:05.219
<v Speaker 2>There are a bunch of them. And you're just not

0:37:05.260 --> 0:37:09.120
<v Speaker 2>seeing it in the data. So the number of hires,

0:37:09.200 --> 0:37:10.980
<v Speaker 2>even of coders, you know, if you had to pick

0:37:11.020 --> 0:37:16.319
<v Speaker 2>the two jobs where you most thought they're toast, would

0:37:16.340 --> 0:37:20.759
<v Speaker 2>be long haul truckers and coders, lower level coders. And

0:37:20.940 --> 0:37:26.520
<v Speaker 2>we're just not seeing it. Job growth continues in those industries.

0:37:27.560 --> 0:37:30.359
<v Speaker 2>I think there's been a lot of yes, theory, but

0:37:30.580 --> 0:37:34.140
<v Speaker 2>really important theory work done, not by my team, but

0:37:34.200 --> 0:37:40.980
<v Speaker 2>by people like Eric Bjornolfsson at Stanford or Luis Garicano

0:37:41.020 --> 0:37:45.380
<v Speaker 2>at London School of Economics about why, those are just

0:37:45.420 --> 0:37:49.580
<v Speaker 2>two examples, but they've done great work, about why we

0:37:49.600 --> 0:37:53.279
<v Speaker 2>haven't seen the job displacement yet. And partly it's a

0:37:53.300 --> 0:37:55.900
<v Speaker 2>matter of time, as you indicated. Time keeps coming up.

0:37:56.180 --> 0:38:00.020
<v Speaker 2>It's how fast things happen. that there is arguably a

0:38:00.080 --> 0:38:03.020
<v Speaker 2>period in which it is efficient to have the human

0:38:03.260 --> 0:38:06.759
<v Speaker 2>and the AI working together, especially as the AI is

0:38:06.820 --> 0:38:09.660
<v Speaker 2>in sort of learning mode, and especially as the businesses,

0:38:10.140 --> 0:38:12.250
<v Speaker 2>just like with the internet, you have the technology and

0:38:12.290 --> 0:38:13.930
<v Speaker 2>then you have to figure out how to reform your

0:38:13.969 --> 0:38:17.630
<v Speaker 2>business to make use of it. So there's a period there,

0:38:18.250 --> 0:38:20.430
<v Speaker 2>we don't know if it's one year, five years, it's

0:38:20.450 --> 0:38:23.350
<v Speaker 2>probably less than 10 years, it's probably closer to five.

0:38:23.830 --> 0:38:27.110
<v Speaker 2>But there's a period there where the businesses are changing,

0:38:27.920 --> 0:38:32.480
<v Speaker 2>and the specialized applications are being created, and things like

0:38:32.540 --> 0:38:36.370
<v Speaker 2>robotics are being integrated. And during that period, we probably

0:38:36.450 --> 0:38:40.270
<v Speaker 2>don't lose many jobs. Again, long-haul truckers, I'm not trying

0:38:40.290 --> 0:38:41.770
<v Speaker 2>to make fun of them. I mean, they may be

0:38:41.810 --> 0:38:48.680
<v Speaker 2>the ones. And so Brynjolfsson has spoken about a J-curve,

0:38:49.120 --> 0:38:51.520
<v Speaker 2>that it takes time for this to happen. And it's

0:38:51.580 --> 0:38:53.640
<v Speaker 2>similar to the argument I made with you all about

0:38:53.680 --> 0:38:57.200
<v Speaker 2>the effect of tariffs and migration last time I was on. Businesses,

0:38:57.420 --> 0:38:59.960
<v Speaker 2>people have to make decisions and implement things. It takes time.

0:39:00.719 --> 0:39:05.290
<v Speaker 2>Another argument which Luis Garcano and his co-authors have made

0:39:05.330 --> 0:39:08.330
<v Speaker 2>is what they call messy jobs, which is the idea

0:39:08.430 --> 0:39:12.690
<v Speaker 2>that actually, again, you can try to come up with

0:39:12.870 --> 0:39:17.050
<v Speaker 2>the sort of extreme case long-haul trucker job, but almost

0:39:17.110 --> 0:39:22.719
<v Speaker 2>every job, even arguably long-haul truckers, have... a lot more

0:39:22.760 --> 0:39:26.160
<v Speaker 2>specific knowledge and are embedded in a lot of relationships

0:39:27.030 --> 0:39:33.200
<v Speaker 2>that there's much more complicated and much more, I don't

0:39:33.239 --> 0:39:37.960
<v Speaker 2>want to say uniqueness, but specialization than people appreciate. And

0:39:38.020 --> 0:39:41.569
<v Speaker 2>so just sort of doing a lot of these things

0:39:41.590 --> 0:39:44.469
<v Speaker 2>that get published by consulting firms or international institutions, like

0:39:44.489 --> 0:39:46.450
<v Speaker 2>these are the most exposed sectors, these are the most

0:39:46.530 --> 0:39:49.660
<v Speaker 2>exposed sectors, probably are misleading. And we know this from

0:39:49.700 --> 0:39:53.480
<v Speaker 2>the past. Again, in the Industrial Revolution in 19th century England,

0:39:54.120 --> 0:39:58.170
<v Speaker 2>the analog to the long-haul truck driver was the skilled

0:39:58.230 --> 0:40:01.969
<v Speaker 2>artisan who did weaving. And so those people literally did

0:40:02.010 --> 0:40:08.410
<v Speaker 2>get replaced by the automated weaving stuff. But if you

0:40:08.450 --> 0:40:11.920
<v Speaker 2>had done this kind of study before the Industrial Revolution,

0:40:12.520 --> 0:40:15.120
<v Speaker 2>outside of that very narrow, they're real people, but that

0:40:15.160 --> 0:40:19.509
<v Speaker 2>very narrow job description, the displacement was very different than

0:40:19.550 --> 0:40:24.529
<v Speaker 2>you would have expected. Anyway, so the job stuff, it's

0:40:24.610 --> 0:40:28.830
<v Speaker 2>probably coming. If it is coming, it is showing up

0:40:29.170 --> 0:40:33.290
<v Speaker 2>in the lack of hiring of younger people. Yeah, and

0:40:33.310 --> 0:40:36.060
<v Speaker 2>Chair Warsh had a throwaway line in his speech yesterday,

0:40:36.080 --> 0:40:38.279
<v Speaker 2>but it happens to be one I agree with, and again,

0:40:38.300 --> 0:40:41.480
<v Speaker 2>we've talked about this previously, that a lot of the

0:40:41.560 --> 0:40:45.440
<v Speaker 2>lack of hiring, I think, is overhang from the huge

0:40:45.520 --> 0:40:50.430
<v Speaker 2>shifting around of people uh, and redefining jobs, um, after

0:40:50.469 --> 0:40:54.609
<v Speaker 2>COVID and the re-employment. And so you can't automatically say

0:40:54.630 --> 0:40:56.830
<v Speaker 2>the lack of hiring is AI. I mean, it may

0:40:56.850 --> 0:41:00.859
<v Speaker 2>be contributing, but there's other stuff. Productivity is different. Um,

0:41:00.989 --> 0:41:04.940
<v Speaker 2>so there, I think there's a legitimate active debate and

0:41:05.000 --> 0:41:07.580
<v Speaker 2>it's not a debate ideologically or anything. It's cause it's generally,

0:41:07.620 --> 0:41:09.080
<v Speaker 2>it's hard. You got a limited amount of data and

0:41:09.100 --> 0:41:10.900
<v Speaker 2>you're trying to figure out what's going on. I think

0:41:10.920 --> 0:41:14.680
<v Speaker 2>there's a legitimate debate about how much productivity growth we've got.

0:41:14.700 --> 0:41:19.120
<v Speaker 2>That's due to AI. Is it the real big money

0:41:19.180 --> 0:41:25.670
<v Speaker 2>stuff yet? How soon? I'm at probably just this side

0:41:25.690 --> 0:41:28.649
<v Speaker 2>of pessimistic on that in the sense that I think

0:41:29.250 --> 0:41:32.170
<v Speaker 2>going back to the jobs reshuffling after COVID, I don't

0:41:32.190 --> 0:41:40.680
<v Speaker 2>think the AI productivity boost to growth kicked in until

0:41:40.820 --> 0:41:45.799
<v Speaker 2>very recently, last year and a half. But that is

0:41:45.860 --> 0:41:50.280
<v Speaker 2>much more an open debate. Nobody except some really, really

0:41:50.380 --> 0:41:53.279
<v Speaker 2>crazy techno-optimists who talk about staying in your lane who

0:41:53.320 --> 0:41:58.070
<v Speaker 2>are not economists. I think... You mean Joe? No, no, no, no, no.

0:41:58.130 --> 0:42:01.190
<v Speaker 2>I would never say such a thing. He's a man

0:42:01.230 --> 0:42:08.910
<v Speaker 2>for all seasons. Finally someone says that. I'm very diplomatic.

0:42:08.930 --> 0:42:16.690
<v Speaker 2>I think the extreme calls... about huge amounts of productivity growth.

0:42:17.469 --> 0:42:19.820
<v Speaker 2>As my grandmother used to say, we should be so lucky.

0:42:20.739 --> 0:42:22.549
<v Speaker 2>But we ain't there yet.

0:42:23.590 --> 0:42:26.450
<v Speaker 3>I think, by the way, I find the messy jobs

0:42:26.570 --> 0:42:28.610
<v Speaker 3>theory to be quite compelling. And by the way, the

0:42:28.650 --> 0:42:31.030
<v Speaker 3>long haul truckers would absolutely say, look, there's a lot

0:42:31.090 --> 0:42:31.710
<v Speaker 3>more to this job.

0:42:31.730 --> 0:42:32.230
<v Speaker 2>Oh, I agree.

0:42:32.300 --> 0:42:34.540
<v Speaker 1>And include, you know, like all the things.

0:42:34.300 --> 0:42:36.259
<v Speaker 2>That they have to do at the warehouse. No, I

0:42:36.320 --> 0:42:37.200
<v Speaker 2>didn't mean to.

0:42:37.219 --> 0:42:40.900
<v Speaker 1>No, no, I know. But I think it illustrates that point.

0:42:40.920 --> 0:42:42.180
<v Speaker 1>Let me tell you what's actually involved.

0:42:42.219 --> 0:42:42.419
<v Speaker 2>Right.

0:42:42.660 --> 0:42:43.200
<v Speaker 1>Another one.

0:42:45.510 --> 0:42:49.070
<v Speaker 3>People point out, Adam Uzimek has pointed out that people

0:42:49.100 --> 0:42:50.960
<v Speaker 3>still get hired to play the piano at parties.

0:42:51.000 --> 0:42:52.180
<v Speaker 1>Yeah, yeah.

0:42:52.200 --> 0:42:54.739
<v Speaker 3>But as others would argue, well, the person responds to

0:42:54.780 --> 0:42:57.739
<v Speaker 3>the crowd, they see what the mood is. These things

0:42:57.780 --> 0:43:00.239
<v Speaker 3>that the player piano could not do, they could say like, oh,

0:43:00.280 --> 0:43:02.580
<v Speaker 3>maybe this crowd looks like it needs an uptempo thing.

0:43:02.840 --> 0:43:08.060
<v Speaker 3>So I do think these jobs are much more probably complex.

0:43:08.080 --> 0:43:09.920
<v Speaker 2>I'm glad to hear you say that. And again, I

0:43:10.120 --> 0:43:13.720
<v Speaker 2>was using the truckers just because that's the example everybody uses.

0:43:13.739 --> 0:43:17.569
<v Speaker 2>But I agree with you. And Adam Ozemek, who's at EIG,

0:43:17.610 --> 0:43:19.129
<v Speaker 2>is one of the other people. I think he's doing

0:43:19.170 --> 0:43:21.260
<v Speaker 2>great work on this and comes down in this sort of,

0:43:21.310 --> 0:43:23.770
<v Speaker 2>it may come yet, but it hasn't happened yet. But

0:43:23.810 --> 0:43:25.489
<v Speaker 2>I think the really important point you said about the

0:43:25.530 --> 0:43:28.629
<v Speaker 2>messy jobs is like with the piano. So I was

0:43:28.790 --> 0:43:30.630
<v Speaker 2>in a meeting, supposed to be off the record, I

0:43:30.650 --> 0:43:33.950
<v Speaker 2>won't go into details. but a very big, big, big, big,

0:43:34.030 --> 0:43:37.460
<v Speaker 2>big shot from the AI community, not an economist. There

0:43:37.480 --> 0:43:41.540
<v Speaker 2>are no economists big shots. From the AI community was talking,

0:43:41.760 --> 0:43:47.060
<v Speaker 2>and a pretty famous academic economist asked this person, well,

0:43:47.080 --> 0:43:49.830
<v Speaker 2>you kept telling everyone there's going to be a job apocalypse.

0:43:50.230 --> 0:43:53.790
<v Speaker 2>Hasn't happened. Why do you think that is? Just open question.

0:43:55.390 --> 0:43:58.609
<v Speaker 2>And among other things, this person said, the big, big, big,

0:43:58.670 --> 0:44:01.359
<v Speaker 2>big shot said, Well, you know, it turns out people

0:44:01.420 --> 0:44:03.380
<v Speaker 2>really like dealing with humans and don't always want to

0:44:03.400 --> 0:44:07.239
<v Speaker 2>deal with machines. And even among the not exactly emotional

0:44:08.020 --> 0:44:11.860
<v Speaker 2>IQ high economist community, we're all kind of like, duh.

0:44:12.739 --> 0:44:14.370
<v Speaker 2>You know, I mean, that's what you mean about the

0:44:14.410 --> 0:44:17.410
<v Speaker 2>live piano player. I mean, I didn't need AI to

0:44:17.430 --> 0:44:20.770
<v Speaker 2>have Spotify. I mean, current generation AI to have Spotify,

0:44:20.790 --> 0:44:23.790
<v Speaker 2>you know, like figure out if I like Paul Simon

0:44:23.810 --> 0:44:24.790
<v Speaker 2>and Billy Joel. Yeah.

0:44:43.200 --> 0:44:46.540
<v Speaker 3>Since we're talking about some of these questions and measurement

0:44:46.620 --> 0:44:48.940
<v Speaker 3>and limited data, I wanted to get your take on,

0:44:49.020 --> 0:44:50.660
<v Speaker 3>I think you may have, I don't know if you

0:44:50.719 --> 0:44:53.500
<v Speaker 3>saw it, there are these questions about, it came up

0:44:53.540 --> 0:44:56.620
<v Speaker 3>with Nvidia specifically, and whether.

0:44:56.440 --> 0:44:59.410
<v Speaker 1>Some of the chips that they design, but.

0:44:59.330 --> 0:45:05.709
<v Speaker 3>Which are manufactured elsewhere, largely Taiwan, et cetera, whether they're

0:45:05.790 --> 0:45:08.470
<v Speaker 3>being adequately captured in data. And there was this report

0:45:08.570 --> 0:45:11.370
<v Speaker 3>out that we should have added 0.3% to GDP. which

0:45:11.450 --> 0:45:13.390
<v Speaker 3>is not that much in the sense that like, oh,

0:45:13.410 --> 0:45:14.910
<v Speaker 3>the big techno-optimists were right.

0:45:14.969 --> 0:45:16.259
<v Speaker 2>No, but it's real money.

0:45:16.320 --> 0:45:18.279
<v Speaker 1>I'm curious what you think. It is real money.

0:45:18.620 --> 0:45:20.400
<v Speaker 3>On the other hand, when I look at it, I say, well,

0:45:20.420 --> 0:45:23.140
<v Speaker 3>the market certainly noticed that NVIDIA has been doing very well.

0:45:25.100 --> 0:45:27.910
<v Speaker 3>The Fed doesn't target GDP, so it doesn't really imply

0:45:27.969 --> 0:45:30.770
<v Speaker 3>anything about, oh, we would have done something different monetary policy-wise.

0:45:31.150 --> 0:45:33.029
<v Speaker 1>Tell us what your thoughts on this discussion are.

0:45:33.430 --> 0:45:38.660
<v Speaker 2>So, I mean, GDP, measuring how much income, we get

0:45:38.840 --> 0:45:41.390
<v Speaker 2>for how much production and how much labor. That's what

0:45:41.430 --> 0:45:45.770
<v Speaker 2>GDP is meant to do on a national basis. And

0:45:45.790 --> 0:45:50.270
<v Speaker 2>it is much more science than art. But there are

0:45:51.850 --> 0:45:56.589
<v Speaker 2>pieces of it where it's not very simple. And so

0:45:56.640 --> 0:46:00.460
<v Speaker 2>there are multiple definitions. There's something called GDI, and then there's,

0:46:00.480 --> 0:46:03.460
<v Speaker 2>of course, final demand, and there's these various things. And

0:46:03.480 --> 0:46:05.200
<v Speaker 2>they're all meant to be a check on each other.

0:46:05.500 --> 0:46:11.480
<v Speaker 2>And over time, they basically move together. So what you're saying, Joe,

0:46:11.680 --> 0:46:15.000
<v Speaker 2>about this discussion of mismeasurement of say NVIDIA or the

0:46:15.040 --> 0:46:21.340
<v Speaker 2>other top tech companies, again, doesn't really change the fundamental path.

0:46:22.110 --> 0:46:24.950
<v Speaker 2>But going back to what you both raised, if we're

0:46:25.010 --> 0:46:27.630
<v Speaker 2>trying to assess how much we've seen a big transformation

0:46:27.650 --> 0:46:32.270
<v Speaker 2>in productivity, this matters. If this 0.3% say a year

0:46:33.090 --> 0:46:36.970
<v Speaker 2>was overlooked and it is directly attributable to the AI sector,

0:46:37.590 --> 0:46:41.190
<v Speaker 2>then that tells a different story about productivity. So it

0:46:41.250 --> 0:46:45.680
<v Speaker 2>does matter. A colleague of mine I already mentioned, Martin

0:46:45.700 --> 0:46:49.140
<v Speaker 2>Chorzempa at Peterson, is doing some work on this. Former

0:46:49.200 --> 0:46:51.980
<v Speaker 2>Fed official at Peterson, Joe Gagnon, has also written about this.

0:46:52.180 --> 0:46:55.500
<v Speaker 2>I mean, there are a lot of subtleties, which I

0:46:55.540 --> 0:46:58.770
<v Speaker 2>don't even understand. But there are basically two issues. One

0:46:59.110 --> 0:47:04.050
<v Speaker 2>is sometimes when companies that are based in the US,

0:47:04.489 --> 0:47:09.529
<v Speaker 2>using US technology, produce stuff abroad, the allocation of how

0:47:09.570 --> 0:47:12.950
<v Speaker 2>much stuff is actually produced in the U.S. versus not,

0:47:13.090 --> 0:47:19.150
<v Speaker 2>and therefore how, whether it's GDP versus GNP, what's imports,

0:47:19.190 --> 0:47:23.109
<v Speaker 2>what's exports, gets messed up. And so with these very

0:47:23.150 --> 0:47:28.690
<v Speaker 2>complicated supply chains, there is an issue of trying to

0:47:28.730 --> 0:47:33.410
<v Speaker 2>figure out what stuff gets allocated to the domestic pile

0:47:33.450 --> 0:47:34.410
<v Speaker 2>versus the import pile.

0:47:34.430 --> 0:47:36.030
<v Speaker 4>This is the old value-add argument.

0:47:36.370 --> 0:47:39.670
<v Speaker 2>Yeah, sort of. Again, I'm worried I'm going to screw

0:47:39.690 --> 0:47:42.680
<v Speaker 2>up on nuance. So look on our website for a

0:47:42.700 --> 0:47:45.140
<v Speaker 2>paper by Joe or a paper by Joe Gagnon or

0:47:45.360 --> 0:47:48.620
<v Speaker 2>Martin Shurzemba or Tweet. I'm afraid I don't want to.

0:47:48.640 --> 0:47:52.000
<v Speaker 2>But just essentially, there is a discussion over how much

0:47:52.080 --> 0:47:57.400
<v Speaker 2>is domestic versus national. But as you said, Joe, in

0:47:57.420 --> 0:48:00.200
<v Speaker 2>the end, the market's you're either selling stuff or you're not.

0:48:00.420 --> 0:48:04.259
<v Speaker 2>I mean, NVIDIA's bottom line actually doesn't change based on

0:48:04.300 --> 0:48:05.739
<v Speaker 2>any of this. And the bottom line.

0:48:05.760 --> 0:48:07.600
<v Speaker 3>We all know they're making a ton of money regardless

0:48:07.660 --> 0:48:08.660
<v Speaker 3>of what the government does.

0:48:08.739 --> 0:48:11.380
<v Speaker 4>Also, the people who are working at NVIDIA designing the

0:48:11.420 --> 0:48:13.500
<v Speaker 4>chips in the U.S. are still getting paid in debts.

0:48:13.900 --> 0:48:17.940
<v Speaker 2>Absolutely. And all the money that comes into NVIDIA, some

0:48:17.980 --> 0:48:19.680
<v Speaker 2>of it goes to the shareholders, some of it goes

0:48:19.719 --> 0:48:23.719
<v Speaker 2>to investments, some of it goes to the workers. So again,

0:48:24.239 --> 0:48:28.020
<v Speaker 2>this is worth worrying about, but this is not a

0:48:28.080 --> 0:48:31.010
<v Speaker 2>major distortion. The second thing, though, which is the more

0:48:31.070 --> 0:48:36.189
<v Speaker 2>contentious part, is there are always, in technological revolutions, there

0:48:36.450 --> 0:48:41.830
<v Speaker 2>are recurrent statements that GDP or whatever economists are using

0:48:41.950 --> 0:48:45.690
<v Speaker 2>are just not capturing the true value. And usually the

0:48:45.770 --> 0:48:50.469
<v Speaker 2>economist's response to that is some combination of, A, well,

0:48:50.690 --> 0:48:53.750
<v Speaker 2>we're capturing the true market value. So if people are

0:48:53.770 --> 0:48:56.669
<v Speaker 2>getting more out of it than what they're paying the markets, great.

0:48:57.410 --> 0:48:59.739
<v Speaker 2>but the market value is what we're supposed to think about.

0:49:00.260 --> 0:49:05.980
<v Speaker 2>That's one response. The second response is, oh, well, there

0:49:06.040 --> 0:49:08.799
<v Speaker 2>are these various things like hedonic indexing where we try

0:49:08.840 --> 0:49:11.310
<v Speaker 2>to adjust for quality. This shows up more on the

0:49:11.310 --> 0:49:14.150
<v Speaker 2>inflation side than the growth side, but that helps you

0:49:14.150 --> 0:49:16.739
<v Speaker 2>figure out what's real growth and what's not. So let's

0:49:16.780 --> 0:49:19.299
<v Speaker 2>look at this specific sector and try and fix that.

0:49:19.780 --> 0:49:22.700
<v Speaker 2>So there is still a controversy about that. I mean,

0:49:23.960 --> 0:49:25.520
<v Speaker 2>but this goes back, Tracy, to what you were saying

0:49:25.540 --> 0:49:28.890
<v Speaker 2>about the timing and the productivity or the J curve, right?

0:49:28.969 --> 0:49:32.930
<v Speaker 2>So we already have GPT, GLAW, whatever. I don't want

0:49:32.950 --> 0:49:34.950
<v Speaker 2>to cite any particular brand name. We have the AI.

0:49:35.010 --> 0:49:40.770
<v Speaker 2>And You or I can go in and type, get

0:49:40.790 --> 0:49:43.540
<v Speaker 2>me the cheapest possible ticket to Jackson Hole. I don't

0:49:43.560 --> 0:49:45.259
<v Speaker 2>want to have to think about it, but don't seat

0:49:45.300 --> 0:49:50.390
<v Speaker 2>me next to a baby. And that provides utils to me.

0:49:50.400 --> 0:49:52.080
<v Speaker 1>Tracy, when she does it, and she says, don't seat

0:49:52.100 --> 0:49:53.500
<v Speaker 1>me next to Joe. Don't seat me next to Joe.

0:49:53.540 --> 0:49:55.120
<v Speaker 2>I thought it was don't seat me next to economists.

0:49:55.140 --> 0:49:57.810
<v Speaker 4>But we spend enough time together. Do we really need

0:49:57.850 --> 0:49:59.210
<v Speaker 4>another four hours on a plane?

0:49:59.350 --> 0:49:59.569
<v Speaker 2>No.

0:49:59.590 --> 0:50:00.009
<v Speaker 1>Keep going.

0:50:00.250 --> 0:50:05.190
<v Speaker 2>No, no, no, no. And so that's giving me utils.

0:50:06.350 --> 0:50:10.089
<v Speaker 2>It's saving me some time. It gets me a better experience.

0:50:11.550 --> 0:50:14.750
<v Speaker 2>I don't get annoyed with the AA or United or

0:50:14.930 --> 0:50:17.670
<v Speaker 2>Delta website because somebody else is dealing with it for me.

0:50:18.310 --> 0:50:22.090
<v Speaker 2>Does that show up in GDP? No. So this is

0:50:22.170 --> 0:50:25.350
<v Speaker 2>why we usually think the big productivity gains and the

0:50:25.410 --> 0:50:29.989
<v Speaker 2>disinflation stuff comes further down the pipeline. It's when we're

0:50:30.090 --> 0:50:32.650
<v Speaker 2>on the track, I should say, not the pipeline. When

0:50:32.850 --> 0:50:36.060
<v Speaker 2>the businesses start transforming. So like It was really cool

0:50:36.100 --> 0:50:39.520
<v Speaker 2>that Intel and Texas Instruments and whoever else was building

0:50:39.560 --> 0:50:42.910
<v Speaker 2>chips in the 90s were following Moore's Law and all that,

0:50:42.930 --> 0:50:44.989
<v Speaker 2>and that showed up a bit in the GDP. But

0:50:45.030 --> 0:50:48.850
<v Speaker 2>the gains really happened when McDonald's and Walmart and UPS

0:50:49.790 --> 0:50:53.029
<v Speaker 2>and everybody transformed their businesses to take advantage of it.

0:50:53.950 --> 0:50:56.890
<v Speaker 4>Joe, do you remember when Goldman Economist, I think it

0:50:56.930 --> 0:50:59.090
<v Speaker 4>might even have been Hatsies. Yeah, they put out a

0:50:59.140 --> 0:51:03.080
<v Speaker 4>note saying that productivity was being mismeasured because the graphics

0:51:03.280 --> 0:51:05.640
<v Speaker 4>in the new Grand Theft Auto game, I can't remember

0:51:05.660 --> 0:51:07.779
<v Speaker 4>what edition it was at that time, were so much

0:51:07.840 --> 0:51:10.919
<v Speaker 4>better than the previous graphics. We should have them back

0:51:11.040 --> 0:51:12.190
<v Speaker 4>on now that the new one's coming out.

0:51:12.200 --> 0:51:13.420
<v Speaker 1>Because the new GTA 6 is coming out. Yeah, we

0:51:13.440 --> 0:51:13.840
<v Speaker 1>should do that.

0:51:13.860 --> 0:51:16.540
<v Speaker 4>All right. I have just one more question. We could

0:51:16.580 --> 0:51:19.620
<v Speaker 4>talk for hours, and unfortunately we don't have that much time,

0:51:19.660 --> 0:51:22.910
<v Speaker 4>but Just in terms of the pure inflation outlook, the

0:51:22.950 --> 0:51:24.950
<v Speaker 4>last time we had you on, it was right after

0:51:25.010 --> 0:51:27.410
<v Speaker 4>you published a paper saying that you thought inflation was

0:51:27.430 --> 0:51:29.109
<v Speaker 4>going to be 4% by the end of the year.

0:51:29.530 --> 0:51:32.379
<v Speaker 4>I can't remember if you were looking at PCE or CPI.

0:51:32.400 --> 0:51:36.500
<v Speaker 2>No, I was saying at that time, I was saying 4%

0:51:36.500 --> 0:51:41.839
<v Speaker 2>on PCE and a little higher on CPI. Yeah. Okay.

0:51:41.880 --> 0:51:44.069
<v Speaker 4>Well, I mean, at least on CPI, we got to

0:51:44.180 --> 0:51:47.009
<v Speaker 4>over 4% earlier in the year. And I think a

0:51:47.050 --> 0:51:49.770
<v Speaker 4>lot of people were surprised by that direction of travel.

0:51:51.030 --> 0:51:51.890
<v Speaker 4>What's your thinking now?

0:51:52.870 --> 0:51:57.310
<v Speaker 2>I guess, thank you for citing that, Tracy. I guess

0:51:57.370 --> 0:51:58.989
<v Speaker 2>what I was saying, and it was things I was

0:51:59.030 --> 0:52:01.610
<v Speaker 2>saying and then a joint piece with Peter Orszag of Lazard,

0:52:03.070 --> 0:52:06.130
<v Speaker 2>what we were saying was, going back to where we

0:52:06.170 --> 0:52:08.529
<v Speaker 2>were with the criticisms of the PALFED that I think

0:52:08.570 --> 0:52:11.870
<v Speaker 2>were legitimate, the U.S. labor market is much more resilient

0:52:11.890 --> 0:52:17.380
<v Speaker 2>than they thought. Credit was much more available in the terms,

0:52:17.500 --> 0:52:20.860
<v Speaker 2>the financial conditions were not as tight as they thought.

0:52:21.719 --> 0:52:25.399
<v Speaker 2>Fiscal policy was a little looser than we thought. And

0:52:26.219 --> 0:52:29.910
<v Speaker 2>the Fed, having not brought down inflation for 64 months

0:52:29.950 --> 0:52:35.290
<v Speaker 2>or whatever it was then, 55 months, did have some

0:52:35.750 --> 0:52:38.310
<v Speaker 2>momentum built up. And then additionally, one thing we talked

0:52:38.330 --> 0:52:40.090
<v Speaker 2>about was, as I said, I think there was a

0:52:40.130 --> 0:52:45.150
<v Speaker 2>J curve in the impact of tariffs and anti-migration policies,

0:52:45.370 --> 0:52:47.130
<v Speaker 2>over time, it took time for it to kick in.

0:52:47.630 --> 0:52:51.070
<v Speaker 2>But anyway, the big point was, whenever the next inflation

0:52:51.110 --> 0:52:54.530
<v Speaker 2>shock comes, it's gonna go worse. I had no idea

0:52:54.610 --> 0:52:56.910
<v Speaker 2>that the President of the United States would bomb Iran

0:52:57.219 --> 0:53:00.180
<v Speaker 2>and ignore the fact that disrupting the Straits of Hormones

0:53:00.219 --> 0:53:02.920
<v Speaker 2>might have some inflationary effects beyond whatever else you think

0:53:02.960 --> 0:53:05.960
<v Speaker 2>of it. But I knew there was gonna be an

0:53:06.000 --> 0:53:09.120
<v Speaker 2>inflation shock and we were primed to have more. So,

0:53:09.680 --> 0:53:12.910
<v Speaker 2>the next couple months, inflation may trickle down a tenth

0:53:12.950 --> 0:53:17.670
<v Speaker 2>or two because of the energy market, whatever. But as

0:53:17.790 --> 0:53:23.290
<v Speaker 2>Chair Warsh said, as many FOMC members have said, this

0:53:23.370 --> 0:53:27.960
<v Speaker 2>is not good. You've got persistence. You've got persistent inflation

0:53:28.020 --> 0:53:31.100
<v Speaker 2>and essentially the core measures that are services and not

0:53:31.160 --> 0:53:36.300
<v Speaker 2>imported goods. You've got, as the chair cited in his speech,

0:53:36.940 --> 0:53:41.200
<v Speaker 2>you've got three, six, 12 months where The moving average

0:53:41.219 --> 0:53:43.440
<v Speaker 2>looks like it's going up. It's in the high threes

0:53:43.520 --> 0:53:47.660
<v Speaker 2>rather than four, but it's going up. So my view

0:53:47.920 --> 0:53:52.490
<v Speaker 2>is the Fed is going to hike. If they don't

0:53:52.510 --> 0:53:54.830
<v Speaker 2>hike in September, they're certainly going to hike in December.

0:53:55.010 --> 0:53:57.210
<v Speaker 2>I expect if they hike in September, they're still going

0:53:57.230 --> 0:54:00.890
<v Speaker 2>to hike in December. And so six months from now,

0:54:01.870 --> 0:54:05.870
<v Speaker 2>Fed funds will be 75 pips or 100 pips higher

0:54:05.910 --> 0:54:08.750
<v Speaker 2>than it is now. And inflation will start coming down

0:54:08.790 --> 0:54:13.350
<v Speaker 2>for reals, as the kids say. But until then, we're

0:54:13.370 --> 0:54:15.650
<v Speaker 2>going to be in this three and a half to

0:54:15.690 --> 0:54:18.950
<v Speaker 2>four and a half range with some upside risk. All right.

0:54:19.050 --> 0:54:22.230
<v Speaker 3>Adam Posen, always great catching up with you, especially this

0:54:22.270 --> 0:54:23.090
<v Speaker 3>beautiful location.

0:54:23.190 --> 0:54:24.910
<v Speaker 1>Thank you so much for coming back on Outbox.

0:54:25.010 --> 0:54:27.239
<v Speaker 2>Thank you for having me. I'm a big listener. Thank

0:54:27.260 --> 0:54:27.609
<v Speaker 2>you so much.

0:54:27.640 --> 0:54:28.160
<v Speaker 4>Thank you.

0:54:28.200 --> 0:54:29.680
<v Speaker 2>Love to hear it. Thank you.

0:54:41.430 --> 0:54:43.750
<v Speaker 1>Tracy, I love chatting with Adam. It's so good. It's

0:54:43.890 --> 0:54:46.750
<v Speaker 1>always really good. I'm really glad we made it happen.

0:54:47.050 --> 0:54:48.030
<v Speaker 1>You know what's interesting?

0:54:49.290 --> 0:54:53.160
<v Speaker 3>I'll be curious, like, to see how Powell's legacy ages. Like,

0:54:53.180 --> 0:54:55.399
<v Speaker 3>I think there's going to be, you know, as Kevin

0:54:55.420 --> 0:54:59.700
<v Speaker 3>Wurst said, 64, 65 months of above-target inflation. When you

0:54:59.780 --> 0:55:04.680
<v Speaker 3>think back at the last several Fed shares, a lot

0:55:04.739 --> 0:55:08.129
<v Speaker 3>of generally, like, the one who people, like, really think

0:55:08.170 --> 0:55:11.410
<v Speaker 3>that was a bad tenure was Arthur Burns, right? Despite,

0:55:11.610 --> 0:55:14.440
<v Speaker 3>and Bernanke is held up, like people think of him fondly,

0:55:14.500 --> 0:55:17.060
<v Speaker 3>despite the fact that he presided over a financial crisis

0:55:17.160 --> 0:55:18.160
<v Speaker 3>and several years.

0:55:18.280 --> 0:55:19.620
<v Speaker 1>Of high unemployment.

0:55:20.820 --> 0:55:25.069
<v Speaker 3>It doesn't seem like from a reputational perspective, High unemployment

0:55:25.219 --> 0:55:28.200
<v Speaker 3>under your watch gets sort of penalized the same degree

0:55:28.380 --> 0:55:29.340
<v Speaker 3>as high inflation.

0:55:29.360 --> 0:55:31.400
<v Speaker 4>People really seem to hate inflation.

0:55:31.420 --> 0:55:31.819
<v Speaker 2>You're right.

0:55:32.020 --> 0:55:33.340
<v Speaker 4>Like, it's kind of skewed.

0:55:33.420 --> 0:55:35.400
<v Speaker 1>Yeah, it clearly is.

0:55:35.460 --> 0:55:38.660
<v Speaker 3>So, you know, between, like, the questions like, well, did

0:55:38.940 --> 0:55:43.160
<v Speaker 3>the Fed gather this sense of momentum where people were

0:55:43.200 --> 0:55:46.420
<v Speaker 3>not dissenting for maybe reasons that were sort of inevitable

0:55:46.560 --> 0:55:49.969
<v Speaker 3>or structural, etc.? and you go over five years of

0:55:50.030 --> 0:55:52.690
<v Speaker 3>above-target inflation. I just think it'll be really interesting to

0:55:52.710 --> 0:55:55.330
<v Speaker 3>see how people are talking about Powell in the years ahead.

0:55:55.570 --> 0:55:57.380
<v Speaker 4>It was also interesting to hear that there seems to

0:55:57.410 --> 0:55:59.660
<v Speaker 4>be a sort of unspoken norm that you can only

0:55:59.719 --> 0:56:00.960
<v Speaker 4>have a handful.

0:56:00.520 --> 0:56:03.879
<v Speaker 1>Of dissents per meeting. Yeah, I think it's... Oh, yeah, yeah.

0:56:04.020 --> 0:56:05.799
<v Speaker 4>The other thing I was thinking about, just on the

0:56:05.860 --> 0:56:09.270
<v Speaker 4>messy jobs note, I was... You know, there is this

0:56:09.350 --> 0:56:12.350
<v Speaker 4>thinking out there that, oh, well, for instance, contractors can

0:56:12.370 --> 0:56:15.550
<v Speaker 4>get replaced because now you can just ask ChatGPT how

0:56:15.590 --> 0:56:17.930
<v Speaker 4>you're supposed to, I don't know, fix your toilet or

0:56:17.969 --> 0:56:21.410
<v Speaker 4>something like that. But I was thinking, so my husband

0:56:21.430 --> 0:56:23.180
<v Speaker 4>and I, we were doing a project where we were

0:56:23.219 --> 0:56:26.719
<v Speaker 4>roofing an outdoor shed and we asked ChatGPT how to

0:56:26.760 --> 0:56:29.060
<v Speaker 4>do it. And we watched a couple of YouTube videos

0:56:29.100 --> 0:56:31.120
<v Speaker 4>and it told us to use this one product, like

0:56:31.280 --> 0:56:34.180
<v Speaker 4>to stick on the shingles and things. And then after

0:56:34.239 --> 0:56:37.600
<v Speaker 4>we had started doing it, we realized that that product

0:56:37.840 --> 0:56:41.460
<v Speaker 4>only worked in environments that were above 60 degrees Fahrenheit

0:56:41.500 --> 0:56:44.930
<v Speaker 4>and we were in New England. And the bots and

0:56:44.969 --> 0:56:47.790
<v Speaker 4>the YouTube videos were incapable of spotting that we were

0:56:47.850 --> 0:56:51.070
<v Speaker 4>in fact in Connecticut versus Florida. So, you know, there's

0:56:51.310 --> 0:56:52.750
<v Speaker 4>some nuance left for humans.

0:56:52.989 --> 0:56:54.390
<v Speaker 1>Yeah, I think that's right.

0:56:54.730 --> 0:56:58.710
<v Speaker 3>I feel strongly like for all the extraordinary things that

0:56:58.750 --> 0:57:01.380
<v Speaker 3>the models can do that, There are just so many

0:57:01.420 --> 0:57:04.239
<v Speaker 3>of these minor things that we don't even articulate about

0:57:04.520 --> 0:57:07.279
<v Speaker 3>what human judgment looks like that they're not there yet.

0:57:07.340 --> 0:57:09.799
<v Speaker 3>They may yet get there. They may get there by

0:57:09.840 --> 0:57:12.969
<v Speaker 3>the end of the year. But they're not quite there yet.

0:57:13.890 --> 0:57:17.630
<v Speaker 3>But just like on the conversation, I do think it's interesting.

0:57:17.830 --> 0:57:20.770
<v Speaker 3>You know, the term that I've been thinking about with

0:57:21.590 --> 0:57:22.530
<v Speaker 3>the war speech.

0:57:22.730 --> 0:57:22.850
<v Speaker 2>Mm-hmm.

0:57:25.260 --> 0:57:29.000
<v Speaker 3>I found it to be hawk-ish, which is like with

0:57:29.040 --> 0:57:31.430
<v Speaker 3>a dash between the hawk and the ish, as in

0:57:32.030 --> 0:57:35.690
<v Speaker 3>it was clearly more like, yes, clear that there's a

0:57:35.750 --> 0:57:38.330
<v Speaker 3>plan to fight and that there is going to be

0:57:38.930 --> 0:57:41.170
<v Speaker 3>work to do to get inflation because he said the

0:57:41.210 --> 0:57:43.490
<v Speaker 3>two things that were key, which is inflation is going

0:57:43.510 --> 0:57:47.040
<v Speaker 3>in the wrong direction and policy has been insufficiently restricted,

0:57:47.060 --> 0:57:50.000
<v Speaker 3>which therefore the third thing that the silent part is,

0:57:50.240 --> 0:57:51.840
<v Speaker 3>therefore high grades, which he didn't say.

0:57:52.580 --> 0:57:54.820
<v Speaker 1>So like, That is hawkish.

0:57:55.050 --> 0:57:57.860
<v Speaker 3>On the other hand, it was not hawkish in the

0:57:57.900 --> 0:58:01.500
<v Speaker 3>sense that we are now about to embark on an aggressive...

0:58:01.540 --> 0:58:05.160
<v Speaker 3>It was not Palo 2022, where it's just, we're going

0:58:05.200 --> 0:58:07.740
<v Speaker 3>to get inflation down and I'll see you next year.

0:58:07.840 --> 0:58:09.640
<v Speaker 4>Well, it also begs the question of, okay, you could

0:58:09.660 --> 0:58:12.680
<v Speaker 4>have said the exact same things at the July meeting,

0:58:12.860 --> 0:58:15.680
<v Speaker 4>and yet he opted not to hike because he said

0:58:15.720 --> 0:58:18.840
<v Speaker 4>he wanted to see more information. But more information is

0:58:18.900 --> 0:58:21.660
<v Speaker 4>always coming out. And also in this environment, it feels

0:58:21.720 --> 0:58:26.120
<v Speaker 4>like more shocks are also constantly happening. And so I,

0:58:26.470 --> 0:58:29.490
<v Speaker 4>you know, you have to wonder what the threshold actually is. Yeah.

0:58:29.630 --> 0:58:32.530
<v Speaker 1>Well, anyway, I'm glad a big, big year, much to

0:58:32.550 --> 0:58:32.970
<v Speaker 1>think about.

0:58:33.410 --> 0:58:33.650
<v Speaker 2>All right.

0:58:33.690 --> 0:58:34.790
<v Speaker 1>Shall we leave it there? Let's leave it there.

0:58:35.210 --> 0:58:37.590
<v Speaker 4>This has been another episode of the odd thoughts podcast.

0:58:37.730 --> 0:58:40.280
<v Speaker 4>I'm Tracy Allaway. You can follow me at Tracy Allaway.

0:58:40.510 --> 0:58:43.200
<v Speaker 1>And I'm Jill Weisenthal. You can follow me at the stalwart.

0:58:43.500 --> 0:58:46.980
<v Speaker 3>Follow our producers, Carmen Rodriguez at Carmen Arman, Dashiell Bennett

0:58:47.060 --> 0:58:50.260
<v Speaker 3>at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano

0:58:50.380 --> 0:58:51.440
<v Speaker 3>at Kevin Lloyd Lozano.

0:58:51.920 --> 0:58:53.920
<v Speaker 4>And for more OddLots content, you should check out our

0:58:53.960 --> 0:58:57.460
<v Speaker 4>daily newsletter. You can find that at Bloomberg.com forward slash OddLots.

0:58:57.780 --> 0:58:59.860
<v Speaker 3>And you can chat about all of these topics 24-7

0:59:00.310 --> 0:59:03.610
<v Speaker 3>in our Discord, Discord.gg slash OddLots.

0:59:03.910 --> 0:59:06.490
<v Speaker 4>And if you enjoyed this conversation, then please leave a

0:59:06.530 --> 0:59:09.210
<v Speaker 4>comment or like the video or better yet, subscribe.

0:59:09.470 --> 0:59:09.910
<v Speaker 2>Thanks for watching.

0:59:10.050 --> 0:59:10.810
<v Speaker 1>Watching and listening.

0:59:27.640 --> 0:59:28.100
<v Speaker 2>Thank you.