[0:00] rates. How does the disagreement on the
[0:02] FOMC make your job harder as you
[0:06] describe?
[0:07] >> All right, first policy question here.
[0:09] So, let's see how it goes.
[0:10] >> I don't think of it as making my job
[0:12] harder. Uh I I think it's and I've found
[0:14] throughout my career that um when you
[0:18] have a really difficult problem, it
[0:19] helps to hear from all sides. And in a
[0:22] way I, for example, when I was a private
[0:24] equity investor and I was looking at at
[0:27] at at supporting a transaction that I
[0:30] wanted to do, I really wanted to hear
[0:32] from the smartest people, tell me why
[0:35] it's a bad deal. Tell me now before we
[0:37] do it. And I I just think you you you
[0:40] don't really know how much you believe
[0:42] in something until you've had somebody
[0:43] literally try to take it apart. So I I
[0:46] welcome that at the FOMC and at the Fed
[0:48] generally. Um, and I think it helps us
[0:51] make better decisions. The Fed has had a
[0:54] tradition of of of governors not
[0:57] dissenting, but that's really not
[0:59] typical of other major central banks
[1:01] where there's more dissenting or they're
[1:03] different. Depends on the central bank.
[1:04] And I to me what matters is is it ascent
[1:08] thoughtful? Is it helpful? Does it help?
[1:10] Does it express a point of view? Can can
[1:12] you stand behind it and say, "Yeah,
[1:14] that's that's very thoughtful." And that
[1:16] that kind of a thing is not is not bad
[1:18] and it doesn't hurt with communications.
[1:20] You know I I think a situation like the
[1:22] present situation where you know there's
[1:25] there's sort of downside risk to the
[1:26] labor market which suggests keep rates
[1:28] low but there's upside risk to inflation
[1:30] which suggests maybe don't keep rates
[1:31] low. You've got tension between the two
[1:33] objectives. And I think to try to expect
[1:36] unonymity at a time like that where it's
[1:38] really quite historically challenging,
[1:40] it would almost be misleading to be
[1:43] really confident in in which way that
[1:45] should go. In fact, it's been said that
[1:47] uh uh confidence is what you feel before
[1:50] you really understand the problem.
[1:53] >> Okay, let's turn to the Fed's balance
[1:55] sheet. In 2008, 2009, that great
[2:00] financial crisis, there was a massive
[2:03] expansion in the Fed's balance sheet.
[2:06] And then again in 2020, under your
[2:08] leadership, there was a second vast
[2:11] expansion in the Fed's balance sheet to
[2:13] address these two economic and financial
[2:16] crises. The balance sheet has since come
[2:18] down a bit, but it still sits at over $6
[2:21] trillion. So I'd like to hear your views
[2:24] on how efficacious this vast bond buying
[2:29] program has been both in the 2008 and
[2:32] then again in the 2020 episode and also
[2:35] hear your reaction to the critics who
[2:37] say that the Fed has become too big a
[2:39] player in the bond market. The Fed has
[2:41] become too influential. There's been a
[2:43] muddying of as according to the critics
[2:46] of monetary policy and fiscal policy. Do
[2:49] they have a point or are they wrong?
[2:52] So I think the place to start with that
[2:54] is to the the the problem that people
[2:57] were struggling with from about 2008 to
[3:00] 2022 let's say in central banking
[3:03] everywhere in the world with is once
[3:05] you've cut interest rates to zero. Do
[3:07] you have anything else you can do? Let's
[3:08] say you cut interest rates to zero and
[3:10] the economy is still clearly not not
[3:13] flourishing and it wants more it wants
[3:16] more support. So do you just say well
[3:18] we're done. We're we're out we're out of
[3:20] uh of ideas here. And there were two
[3:22] ideas that that that were followed in
[3:24] the global financial crisis. One of
[3:26] which was to buy assets, longerterm
[3:28] assets. And what you're doing there is
[3:30] you're buying longer term government
[3:32] guaranteed securities which would hold
[3:33] down longer term rates and that should
[3:36] stimulate the economy or also forward
[3:37] guidance which would tend to hold down
[3:40] forward rates as well or just rates
[3:41] generally. So we did those two things
[3:43] rather than do nothing. And I think in
[3:46] the first instance they were both both e
[3:48] efforts were successful at restoring
[3:50] market function and at restoring
[3:52] financial stability. At the beginning of
[3:54] the of the global financial crisis and
[3:56] the pandemic we had massive problems of
[3:58] market function. They were solved. I
[4:00] think the question getting to your
[4:02] question David of the macroeconomic
[4:05] effects is a much more uh much less
[4:08] certain question. And I don't think
[4:10] there is an accepted answer, but but I
[4:12] would just say there's a oceanic
[4:14] quantity of of research on this. And
[4:17] overall, it tends to find that that
[4:20] buying long-term assets does does lower
[4:23] interest rates and does provide some
[4:25] support for economic activity. Um, and I
[4:28] I guess I'd be in the camp of thinking
[4:29] that there's some something in that. Uh,
[4:32] but it's hard to quantify it. And I
[4:34] think you know in different different
[4:35] people have different views on how much
[4:37] those those effects could be. The other
[4:40] side of it is you know QE is thought by
[4:43] the critics to to risk all kinds of
[4:45] other things. So for example you could
[4:47] buy too much uh of the treasury market
[4:50] and it would stop functioning well. We
[4:52] have not seen that here. At the very
[4:54] beginning uh there was the thought that
[4:56] it would be inflationary. We have not
[4:58] seen that or that it would that it would
[5:00] threaten financial stability or even
[5:01] create inequality. So we haven't really
[5:04] seen the the downside risks
[5:06] >> to money printing.
[5:07] >> At the same time, I'll the last thing
[5:08] I'll say is I remember u before I took
[5:12] over as chair thinking I I'll I'll
[5:15] almost certainly never have to do
[5:17] quantitative easing. So what's what's
[5:19] that expression? Man plans and God
[5:22] laughs. Something like that. So it just
[5:25] you know the the the pandemic came
[5:27] around and and we needed to do a lot of
[5:29] asset purchases in a big hurry and we
[5:31] did. So far, no no no Treasury
[5:36] Department has ever said, "Stop doing
[5:38] that. You're supporting the economy too
[5:39] much." Maybe that'll happen someday, but
[5:41] hasn't happened yet.
[5:43] >> Great. So, let's talk about the dynamics
[5:46] of inflation since the spike in 2022.
[5:49] Inflation has been coming down since
[5:51] then, but it still hasn't reached its 2%
[5:54] target. Some have argued that that last
[5:57] mile is extremely difficult and to
[6:00] obtain that we will need a recession.
[6:03] Others have argued that you've gotten us
[6:05] very close and you'll get us the rest of
[6:07] the way. Um are you concerned about the
[6:11] time duration of the path from the high
[6:13] inflation of 2022 back to target? It's
[6:17] taken time. We're not there yet.
[6:20] Is that a destination we'll reach or are
[6:24] you concerned that the last mile will
[6:26] prove very difficult?
[6:27] >> So we will reach uh the FOMC is and will
[6:31] continue to be committed to getting
[6:32] inflation back to 2% on a sustained
[6:34] basis. That's that's the place to start.
[6:36] Um so I feel like we had we had pretty
[6:39] much gotten there at the end of 2024
[6:43] um against the uh predictions of almost
[6:47] the entire economics profession. um when
[6:50] we raised rates a lot and very quickly
[6:52] in 2022
[6:55] um 100% essentially of economists were
[6:58] forecasting a recession. We didn't have
[7:00] one actually. We had 23 and 24 were both
[7:03] very strong years as the supply side
[7:05] healed and as our our higher rates had
[7:09] some effect on inflation. So it by by
[7:13] 2024 you had the economy growing at 2
[7:16] and a.5% you had inflation in in the two
[7:19] plus a few tenths on a 12-month basis by
[7:22] the end of the year and um you had the
[7:25] employment market you still had the
[7:26] labor market at at essentially full
[7:28] employment. So I would call that a soft
[7:29] landing. We had it there. Then since
[7:32] then we've we've had to face a much
[7:34] smaller source of inflation which is
[7:36] that the tariff inflation is vi is
[7:38] visible and we think it's really just a
[7:40] one-time price increase. That's been our
[7:42] thinking since the beginning. Right now
[7:44] we think it's adding somewhere between a
[7:46] half and a full percentage point to
[7:47] inflation. But that's that's a much
[7:49] smaller thing than than we saw during
[7:51] the the pandemic inflation. and um you
[7:54] know now and of course now we're facing
[7:56] events in the Middle East which will
[7:58] certainly affect uh gas prices and and
[8:01] uh we're we feel like our policyy's in
[8:03] in a good place for us to wait and see
[8:04] how that turns out.
[8:06] >> Great. So let me turn to the current
[8:08] crisis in the Middle East and the effect
[8:10] on energy prices. Indeed, this classroom
[8:12] is familiar with that question from the
[8:14] last problem set where we asked, how
[8:17] would you advise the Fed to respond to
[8:20] the rising price of oil? And we teach
[8:23] that when there's a demand shock, it's a
[8:25] pretty natural set of recommendations
[8:27] that emerge for the Fed. But when
[8:28] there's a supply shock like this energy
[8:31] price shock, there's trade-offs that the
[8:33] Fed has to juggle. How do you make those
[8:35] trade-offs in general? And how do you
[8:37] make those trade-offs in this particular
[8:38] instance? And can you help everyone with
[8:40] their piece?
[8:40] >> Well, maybe they should tell me.
[8:44] >> Um, sure. So, it's it's you start with
[8:46] what you said. Um, you know, our tools
[8:48] work on demand. higher rates will tend
[8:51] to moderate demand. Lower rates will
[8:52] tend to stimulate demand. And when you
[8:54] have a supply shock, we our our tool
[8:57] doesn't have meaningful shorter term
[8:59] effects on supply. So, uh so when you
[9:03] have a supply shock, the the first
[9:04] question is do you respond to it? And
[9:06] the the classic question has been around
[9:08] energy uh just in general. Not really
[9:10] speaking about the current situation,
[9:12] although I'll get to that, I guess. But
[9:14] uh you know energy shocks have tended to
[9:16] come and go pretty quickly. Monetary
[9:19] policy works with long and variable lags
[9:21] famously. And so by the time the effects
[9:24] of of a tightening in monetary policy
[9:27] take effect uh you know the the oil
[9:30] price shock is probably long gone and
[9:32] you're you you'reighing on the economy
[9:34] at a time when it's not appropriate. So
[9:36] the tendency is to look through any kind
[9:39] of a supply shock. But a critical
[9:41] essential aspect of that is you have to
[9:44] have to carefully monitor inflation
[9:46] expectations because you can have a
[9:48] series of these supply shocks and that
[9:50] can lead you know the public generally
[9:53] businesses price setters households lead
[9:56] them to start expecting higher inflation
[9:58] over time. Why wouldn't they? At the end
[10:00] of a certain number of years that
[10:01] inflation is now just a it's just higher
[10:03] and that can happen. So you monitor that
[10:05] very very carefully. Also in the current
[10:08] situation, you have to be mindful of the
[10:10] whole broader context. And the broader
[10:12] context is we're still, you know, we've
[10:15] been coming down close to 2% post
[10:17] pandemic, but we've never actually, you
[10:20] know, gotten right and stayed at 2%. So,
[10:23] it's been a while. Um, uh, and we're
[10:26] we're very mindful of that fact.
[10:27] inflation expectations do appear to be
[10:29] well anchored beyond the short term, but
[10:32] nonetheless, it's something as we we
[10:33] will eventually maybe face the question
[10:36] of what to do here. We're not really
[10:38] facing it yet because we don't know what
[10:39] the what the economic effects will be,
[10:41] but we'll certainly be mindful of that
[10:43] broader context when we make that
[10:44] decision.
[10:45] >> Great.
[10:47] You've been a powerful and vigorous
[10:49] defender of the independence of the Fed
[10:52] with respect to monetary policy.
[10:56] You've also been collaborative with
[10:58] administrations with respect to
[11:00] financial regulation. So under President
[11:03] Biden, you worked for or you
[11:06] collaborated in a program of increasing
[11:08] regulation. Under President Trump,
[11:10] you've worked together to reduce
[11:12] regulation. So on the one hand, we've
[11:14] got an independent Fed with respect to
[11:17] monetary policy and on the other hand,
[11:19] we have a collaborative Fed with respect
[11:21] to financial regulation. I don't think
[11:24] there's a tension there, but can you
[11:25] explain to us the two different
[11:26] approaches and how you understand them?
[11:29] >> Yes. So, um, start with monetary policy.
[11:32] You know, I think there's pretty broad
[11:34] consensus in both political parties on
[11:36] both sides of Capitol Hill. And our
[11:38] oversight, by the way, is is Congress,
[11:40] not the administration, but pretty broad
[11:43] agreement that on monetary policy, the
[11:45] Fed needs to be fully politically
[11:48] independent, not reactive to political
[11:50] uh things at all. We just need to do our
[11:53] job and stick to our knitting.
[11:54] Regulation is a little bit different
[11:56] especially since DoddFrank where the
[11:58] DoddFrank act created something called
[12:00] the vice chair for supervision who has a
[12:02] specific statutory assignment which is
[12:05] to oversee all of supervision and also
[12:08] set the agenda for regulation. So the
[12:10] vice chair for supervision if if she
[12:13] wants to propose a change in for example
[12:16] the the Basel 3 Accords as implemented
[12:19] in the United States she has to bring
[12:20] that to the board of governors which is
[12:22] the seven governors uh and vote for it
[12:24] but she has full control over over
[12:27] supervision. So as chair, you know, the
[12:30] the whole the whole idea is is to be
[12:33] non-political and not, you know, never
[12:36] working for or against any political
[12:38] party or individual or never even
[12:41] considering things like that. So I I
[12:43] think the way the law works is the chair
[12:47] should allow the vice chair for
[12:49] supervision to carry out the the the
[12:51] role that Congress has assigned to that
[12:53] person by statute. And that's what that
[12:55] is. So you'll see and you know that the
[12:57] two parties really have a big difference
[12:59] on regulation now. So I like to think
[13:02] that the chair should always be someone
[13:04] who is working to without regard to
[13:07] political and should be therefore a
[13:10] person who can be reappointed by either
[13:11] side. That's always been the case has
[13:13] been you know Ben Bernani was
[13:15] reappointed. I was reappointed. And I
[13:18] think it's it's it's a good test of the
[13:19] Fed's nonpartisanship that that your
[13:21] appeal is really bipartisan. I think
[13:23] that's that's a critical thing. So if
[13:26] you're going to if I were to try to
[13:27] impose my personal views on regulation
[13:30] that that really wouldn't work. So I
[13:31] think there's there's um I don't want to
[13:33] say difference but there's we any chair
[13:36] needs to let the vice chair for
[13:37] supervision take the lead on those
[13:39] issues and then I'm another voter is
[13:41] what I am.
[13:42] >> Great. So let's talk about DoddFrank and
[13:46] the reforms to the financial system.
[13:49] 2008 was a terrible crisis and there
[13:52] were many efforts made in the years
[13:54] afterwards to tighten the bolts and
[13:57] create a safer financial system less
[13:59] prone to these kinds of cataclysmic
[14:01] events. But today we look out at the
[14:04] world and we see lots of threats both
[14:06] inside the formal banking system that
[14:08] you regulate and in the non-bank
[14:10] financial system which is lightly or not
[14:13] at all regulated. So I I wanted to have
[14:16] your thoughts on whether we're in a
[14:19] position of relative safety after all
[14:22] the DoddFrank and other reforms
[14:25] following the 2008 financial crisis or
[14:28] whether the new threats actually have
[14:30] brought us to another period of concern.
[14:33] And just to illustrate with a couple
[14:35] examples inside the banking system,
[14:38] there's commercial real estate that has
[14:40] fallen in value that affects both the
[14:42] banking system and non-financial instit
[14:45] uh non-banking financial institutions.
[14:47] We have the private credit market and a
[14:50] very active debate about its health. We
[14:53] have concerns about cyber security in
[14:55] the AJ of AI. Do you worry that another
[14:59] financial crisis looms out there? Of
[15:01] course there's always a possibility but
[15:03] is it something that's a issue of high
[15:06] alert or do you feel that we're putting
[15:08] all the pieces in the right places? You
[15:11] know after the global financial crisis
[15:14] um we actually started a new division
[15:16] called the division of financial
[15:17] stability and their job is to be you
[15:20] know sort of the the watchers of all
[15:22] financial stability issues all the time.
[15:24] So we don't we're not the old system was
[15:26] a crisis arrives we get the team
[15:27] together and we battle the crisis. This
[15:29] is much more of an ongoing monitoring
[15:31] thing with a framework that can be
[15:33] checked. So I would say uh after the
[15:36] global financial crisis which happened
[15:39] when you all were extremely young um we
[15:42] uh with between DoddFrank and and the
[15:44] Basel agreements we pretty dramatically
[15:47] raised the amount of capital and
[15:49] liquidity uh that that the largest firms
[15:52] and and other banks banks h have and I
[15:55] think that's been a good thing. I think
[15:56] they're also much um sort of more
[15:59] transparent and more aware of their
[16:00] risks and that kind of thing. So I think
[16:03] we've significantly hardened the system
[16:05] against the kinds of things that happen
[16:07] in the global financial crisis where you
[16:09] had a lot of credit losses really around
[16:12] mortgages and that's so that kind of a
[16:15] situation we've got well capitalized uh
[16:18] large banks. Um but that's just one part
[16:21] of the financial system. the the capital
[16:23] markets. The US has by far the largest
[16:26] capital market sector relative to the
[16:28] banking sector. The other countries
[16:30] still have a much bigger banking sector
[16:32] relative to their capital markets. And
[16:34] you know that's going to be less
[16:35] wellregulated and that's that's a good
[16:37] thing. You want it to be the place where
[16:39] you know where you know where biotech
[16:41] companies can do IPOs and they may or
[16:44] may not succeed but they can get capital
[16:46] out of that market and you know you're
[16:47] taking a lot of risk but great things
[16:49] happen because people put money into
[16:51] biotech. So um we've done some hardening
[16:54] of that but we shouldn't be trying to
[16:56] regulate risk out of existence. Um but
[16:58] so I think and we did fix some of the
[17:00] things that broke in the global
[17:02] financial crisis and the pandemic we did
[17:03] address. Um the real thing though is the
[17:07] the econom I mean sorry the financial
[17:09] sector is just always evolving rapidly
[17:12] and I think you the vigilance is what
[17:16] you need. You just need to always know
[17:17] that there's another thing coming. Uh
[17:20] and so and I think in particular we've
[17:22] had all kinds of financial crises but
[17:25] we've never really had a successful
[17:27] cyber attack on a large financial
[17:31] utility let's say or financial
[17:32] institution and that would be quite a
[17:35] different thing. You know if people are
[17:37] going to lose money in in in a certain
[17:39] part of the economy we have a hugely
[17:41] resilient uh econ financial system. Now
[17:44] it's more let me say this. more about
[17:46] resilience than it is about avoiding
[17:48] crisis. One of our uh former people used
[17:52] to say that we're in the levy building
[17:54] business, not the hurricane prevention
[17:56] business, right? So, um they're going to
[17:59] be hurricanes and they're going to come
[18:00] and you just have to assume you won't
[18:01] know what direction or what the nature
[18:03] of it will be. So, you want a highly
[18:04] resilient uh financial system and and we
[18:07] we do have that, but again, nobody
[18:10] nobody nobody who's in that business
[18:11] will ever will ever give you a green
[18:13] light. They'll always say here these are
[18:15] the risks and we got to monitor. You
[18:16] mentioned private credit. So private
[18:19] credit is something you're as you guys
[18:21] are probably following. Um it's a
[18:23] relatively small part of of a very large
[18:26] asset pool. We're watching it super
[18:28] carefully as everyone is. We're talking
[18:31] to the people in the industry and
[18:33] investors and everything. I think we
[18:35] understand it. or monitoring it for
[18:37] looking for things that might lead to
[18:39] greater contagion or greater losses or
[18:41] connections to the banking system. And
[18:43] you know, we're going to do that. You're
[18:45] again, you're not going to hear people
[18:46] say, "Oh, there's no problem here
[18:47] because that's a jinx." Um, but
[18:50] nonetheless, it's something that we're
[18:51] following very carefully.
[18:55] What is one of your biggest regrets in
[18:58] your time as Fed chair? And on the other
[19:01] hand, what is something that you're very
[19:03] proud of?
[19:05] you know, on on regrets, I I don't allow
[19:08] myself the luxury of that. I I think
[19:10] it's really important that that uh in my
[19:13] job, I'm focused on the windshield and
[19:16] not not the rear view mirror, and so I
[19:19] don't I'm tempted to say regrets. I've
[19:21] had a few,
[19:23] but uh then again, not so many or
[19:27] whatever the line is from that Frank
[19:28] Sinatra song. So, uh, I just think you I
[19:32] I'll have plenty of time to for that
[19:34] after I after I'm out of this role, but,
[19:36] uh, honestly, you just have to keep
[19:38] looking at the next thing. You can't be
[19:40] berating yourself for the mistakes that
[19:42] you've made. You You're going to make
[19:43] mistakes,
[19:44] >> but then again, too few to mention.
[19:46] >> Take it from an expert. Uh, I've made
[19:49] plenty. But, um, I don't I don't focus
[19:52] on regrets and things like that. You
[19:54] know, my overall in terms of what I'm
[19:55] proud of, I'm more than happy to talk
[19:57] about that. Um,
[19:58] >> let's go for it.
[19:59] >> Yeah. Let's let's go deep there. Uh so
[20:02] um I basically I'll just say it's an
[20:06] incredible honor to do public service as
[20:09] many of you will find out at some point
[20:11] in your life. I always wanted to to do
[20:14] some of it. I saw these people around
[20:15] Washington who were well-known public
[20:17] servants like George Schultz and I would
[20:19] think that that looks like a really
[20:21] interesting thing to do. It's it's
[20:22] different, you know, in the private
[20:23] sector. It's I love my private se my
[20:26] years in the private sector, but there
[20:27] really is a feeling of what you're doing
[20:29] is help hope help ideally help helping
[20:31] all Americans and that kind of thing.
[20:33] It's a great honor to serve the public
[20:35] and particularly in a job like this. So
[20:37] that is my the main thing I'm proud of
[20:39] is you know 14 years at the Fed and
[20:42] eight and a half of them as chair. I'm
[20:44] I'll be I'll always be proud of that
[20:45] >> and I'm very grateful to you for your
[20:47] service to our country.
[20:48] >> Thank you. So if you are willing to
[20:51] share publicly some advice that you
[20:53] would give to the next Fed chair, we'd
[20:55] love to hear it.
[20:56] >> So
[20:59] one thing you will learn uh when you
[21:01] when your children are grown up and uh
[21:03] and they have their own children is uh
[21:05] is uh never volunteer advice. Only give
[21:09] advice when asked. So and I I would not
[21:11] I will not uh I would only give advice
[21:14] if asked and I would do it privately.
[21:15] But I'll just say in general a couple
[21:17] things about about the Fed. It is very
[21:20] very important to stick to your knitting
[21:23] and to stick to the things uh that were
[21:26] actually assigned. And there's there's
[21:28] always a temptation to want to move into
[21:31] other areas. And I I think we you know
[21:33] we have very powerful tools. They're
[21:35] supposed to be for maximum employment
[21:37] and price stability and financial
[21:39] stability. There there's always a time
[21:41] when an administration looks and says it
[21:43] would be it would be good to use that
[21:45] tool for something else. What if we were
[21:47] just to like and call that like that's
[21:49] part of the mandate? Happens all the
[21:51] time and we just have to be in a
[21:52] situation where we're we're not trying
[21:55] to be again we're not trying to work
[21:56] against any any politician or any any
[21:59] administration but we have to be careful
[22:00] to stick to what we're doing. The other
[22:03] thing is I'll just note that you know
[22:05] the Fed's not a perfect institution.
[22:07] Don't don't look for perfection. uh what
[22:09] we do is very challenging and highly
[22:11] uncertain, but it's it's a great
[22:13] American institution and I'm very proud
[22:16] to work with the people I work with.
[22:18] They're extraordinary right across the
[22:20] board, an incredible group of people.
[22:21] And I'll just close by saying it's very
[22:24] hard to build great democratic
[22:27] institutions and and much easier to to
[22:30] bring them down.
[22:33] So though you were uncomfortable giving
[22:36] unsolicited advice to your successor, um
[22:40] I know that the students in this room
[22:41] would love to hear your advice. They've
[22:43] asked me for my advice and asked me what
[22:46] you what you would advise them. So
[22:48] they're entering into an uncertain time,
[22:52] an economy where new job formation um is
[22:56] lower for many reasons. Um, in
[22:59] particular, jobs that were plentiful a
[23:02] couple of years ago for students coming
[23:04] out of college are no longer so. And AI
[23:08] sits as this remarkable technological
[23:12] transformation that is both promising
[23:15] and existentially threatening. So if
[23:18] you're advising the 600 students that
[23:21] sit here today, what would you suggest
[23:24] they think about as they embark on both
[23:27] academic and then ultimately
[23:28] professional careers?
[23:30] >> Let let me start by saying that I'm well
[23:32] aware and my colleagues too are well
[23:34] aware of the current situation um for
[23:37] students coming out. It's a time of very
[23:39] low job creation
[23:42] um and also you have AI going on. You've
[23:44] got the effects uh on job creation of
[23:47] significant changes in immigration
[23:49] policy which have brought down both
[23:50] demand and supply of workers. The
[23:52] unemployment rate is really low, but
[23:54] that doesn't help you uh if you're
[23:56] coming into that kind of market. So,
[23:58] it's it's a time when um you're you're
[24:03] the business I mean the there's a
[24:05] business cycle, right? And you're coming
[24:06] out in the business cycle at a time when
[24:08] getting hired is a little bit
[24:09] challenging. There's also probably
[24:10] something more longer term, more secular
[24:13] that's happening. and around technology
[24:15] and AI. So you're it's yes it is a
[24:18] challenging time but I'll say a couple
[24:20] things. One just is that the US economy
[24:23] compared to other major e open economies
[24:26] in big market-based economies around the
[24:29] world is just incredibly dynamic and
[24:33] productive since World War II. US um
[24:38] compared to other again large mature
[24:39] economies our productivity has grown at
[24:41] like twice the speed for example in
[24:44] Europe and higher productivity is the
[24:46] way you know uh compensation and
[24:49] earnings can grow over time so it's an
[24:52] incredibly flexible and dynamic economy
[24:54] it reinvents itself technology it always
[24:57] comes from the United States so just be
[25:00] optimistic about the medium and longer
[25:02] term I'm very optimistic about the
[25:03] medium and longer term um And the other
[25:07] thing is my observation is that you know
[25:10] these these large language models make
[25:13] people much more productive. I feel like
[25:16] it's making me more productive because I
[25:17] can I can learn things really quickly.
[25:20] Um you know and I talked to you know my
[25:23] son and others who were out there in the
[25:25] world and I think if you use it well
[25:28] it's making you more productive. So, I
[25:30] think you're you're in a situation where
[25:32] you need to invest the time to really
[25:34] master the use of these new technologies
[25:36] and and uh that should stand you in
[25:39] goodstead. I I but there's there's no
[25:41] denying it's a it's a challenging time
[25:43] to enter the labor market, but it may
[25:45] take some patience and all that, but in
[25:47] the longer term, this economy is going
[25:49] to give you great opportunities and just
[25:51] be be a little optimistic about that. So
[25:53] when you talk about the longer term, are
[25:56] you talking about 10 years, 20 years, 40
[25:59] years? Are you worried that there'll be
[26:02] wind at our back as we use these tools
[26:04] over the next decade? But at some
[26:07] horizon, let's say 40 years, there'll be
[26:10] substitution rather than
[26:12] complimentarity.
[26:13] >> You know, it's it's so hard to say.
[26:16] I mean a lot of people you talk to
[26:18] business people are are talking about
[26:21] you know the sort of the next few years
[26:23] being big years for um AI to come in but
[26:26] they're mostly talking about existing
[26:29] you know middle market sorry middle
[26:31] management back office jobs and things
[26:34] like that I don't think they're they're
[26:36] it shouldn't have those kinds of effects
[26:38] on people who can use AI well and that
[26:41] kind I don't know but so certainly the
[26:43] next few years look like whatever the
[26:44] effects are they'll will start to feel
[26:46] them because major US companies and we
[26:49] talked to a lot of of those people who
[26:51] who run those companies and you know
[26:53] they're all looking at what they can do
[26:55] and the truth is they can take out a lot
[26:58] of jobs that can be automated by a very
[27:00] smart large language model. They just
[27:02] can and they will because if because
[27:04] their competitors are doing it and they
[27:05] they can afford to have higher costs
[27:07] than their competitors. What's that
[27:09] going to mean for you? It may not mean
[27:10] that much. It depends on what you're
[27:12] going to wind up doing. you know, you
[27:13] may stay in school a little bit and you
[27:15] may do something that that is it's going
[27:17] to create new jobs too over time and
[27:19] again it makes people more productive. I
[27:21] did talk to a CEO in tech world who said
[27:24] the marginal benefit of a new employee
[27:26] in this world is actually very high. Now
[27:29] that's not that's not what you hear all
[27:30] the time. So um I don't know I mean when
[27:34] you know if you if you look back through
[27:36] history uh to generalize tech this has
[27:40] been going on for a couple hundred years
[27:41] this you know since the loom was
[27:43] invented right and to put all the people
[27:44] who were doing weaving out of business
[27:47] but so in all cases it has wound up
[27:50] raising productivity and raising living
[27:52] standards as long as as long as the
[27:54] society keeps producing people who can
[27:57] who can who have the skills and
[27:58] aptitudes to benefit from that
[27:59] technology.
[28:00] Um, so that will be the case here, but
[28:04] you're right. There there can be a
[28:06] period during which it's challenging and
[28:08] and this may be one of those, but
[28:09] nonetheless, I would just say it's out
[28:11] there and it it's it's out there to be
[28:14] done and I I would be medium and longer
[28:16] term very optimistic about about this
[28:19] economy compared to any other economy.
[28:22] >> Terrific. Thank you so much. We're now
[28:23] going to open it up to your questions.
[28:26] So, um I think I've got Jason and David
[28:30] in the in the well and I've got two
[28:34] microphones in the balcony. Why don't we
[28:36] start with um Oh, Jason, do you have a
[28:39] question?
[28:39] >> I think I have a question.
[28:40] >> Fantastic. We're going to let Jason ask
[28:41] the first question.
[28:42] >> Um so, Chair Powell, when you're making
[28:46] decisions at the Fed, I'm curious, how
[28:49] much are you relying on very specific
[28:52] economic models? The Fed has its own big
[28:54] fancy model, Furbus. How much are you
[28:57] relying on information you get from
[28:59] talking to people out in the real world
[29:01] to businesses, your own intuition and
[29:04] experience? What what do you bring
[29:06] together as a way of thinking about
[29:08] these decisions with a role of
[29:10] economics, but everything else that
[29:12] feeds into it?
[29:13] >> So, it's really all it's really all of
[29:16] the above. We have to start with the
[29:19] perimeter. You know, we have the reserve
[29:21] banks are in touch. They're in all 50
[29:24] states, right? 12 12 reserve banks. And
[29:27] they bring summaries of these extensive
[29:30] conversations they have with the public
[29:32] sector, the private sector,
[29:34] universities, healthcare, everything in
[29:36] their district. And we see all of that
[29:38] in the Beige book and in the meetings.
[29:39] We we get all of that. We also look at
[29:43] several models. It's never just the
[29:44] Furbus model. It's many, many different
[29:46] models. And we look at different
[29:47] alternative simulations. You look at all
[29:49] of that and then we look at where our
[29:51] policy stance is and we we look out the
[29:53] window and we say, does it look like our
[29:56] policy stance is affecting the economy
[29:58] in a way that moves us closer to our
[30:00] goal variables or keeps us at our goal
[30:02] variables. You do all of that. We also
[30:04] talk to each other. You know, I talk to
[30:06] the other 18 participants on the FOMC a
[30:09] couple of times each cycle and people
[30:11] have different thoughts and ways of
[30:13] thinking about things. Talk to the
[30:14] senior staff. You know, they've been
[30:16] doing this longer than any of us. Um, so
[30:19] all of those things go into it. I
[30:21] wouldn't say, you know, I mean, so a
[30:24] good analogy is, uh, when I was in the
[30:26] private equity business, we had really
[30:28] good models of companies and my my big
[30:31] boss said, "We we we want to have the
[30:33] best model in the industry, but if you
[30:35] think that model is going to make the
[30:36] decision for you, you're in the wrong
[30:38] business." So the models are just
[30:41] illustrative. We we cannot model the US
[30:43] economy with the kind of precision that
[30:45] that we will never be able to probably.
[30:47] It's like modeling the weather. You
[30:48] can't predict it two months away. So,
[30:50] but that's So, it's all of those things,
[30:52] Jason.
[30:53] >> Thank you.
[30:54] >> Okay. So, David, why don't you pick the
[30:57] first hand and then Jason, you'll get
[30:58] the second hand
[31:01] and then we'll go to the balcony. So,
[31:03] looking for someone upstairs. Hi, my
[31:05] name is Fabio. I'm a first year studying
[31:07] economics and government. Um, I'm really
[31:09] interested in kind of the decision-
[31:11] making in the in the Fed. How do you
[31:15] work with situations where like the the
[31:17] decision might be very tight and like
[31:19] sometimes there's like expectations of
[31:21] like the um interest rates increasing or
[31:24] and it might be very tight in those very
[31:26] tight decisions like how do you make end
[31:28] up making the decision?
[31:30] >> So remember I'm one of 12 voters uh so I
[31:34] I there's a an FOMC cycle is about seven
[31:37] weeks between meetings. We have eight of
[31:40] them a year. So uh and I would say sort
[31:42] of 3 weeks before the meeting by then I
[31:47] have to have a pretty good sense of what
[31:49] I think we need to do and staff will
[31:51] already have been working on if we're
[31:53] doing anything in particular. We always
[31:55] have like a special topic. So a lot of
[31:57] work is going on. So I I I almost need
[31:59] to make a decision about the probable
[32:02] thing we're going to do. And then I have
[32:03] to talk to everybody a couple of times
[32:05] because I got to get people to vote for
[32:07] this. And I've got to a lot of it is
[32:09] finding out where the sentiment of the
[32:10] committee is. I've been working with
[32:12] these people for many years. So most of
[32:14] the time I I kind of know how they'll
[32:15] approach a problem. Um and uh that's
[32:19] that's how it works. So it's a lot of
[32:21] talking and listening and understanding.
[32:24] Um I I think an underrated skill is in
[32:29] um listening to people. listening is,
[32:32] you know, if you if you listen to people
[32:34] and you hear them and you can make their
[32:36] argument and they they understand that
[32:38] you're actually listening to them and
[32:39] not just, you know, communicating at
[32:41] them for most of the people most of the
[32:44] time, that's going to be enough. And by
[32:45] the way, that's true on Capitol Hill.
[32:47] That's true. It was true when I was a
[32:49] governor. If I felt I mean, I always
[32:51] felt like Ben or Ben Bernanki or Janet
[32:54] were listening to me. And if that if
[32:56] they could engage with the pro the
[32:58] points I was making then I felt like I
[33:00] could support what they wanted me to
[33:02] support. So it's a lot of that though. I
[33:04] mean it's it's a lot of committee
[33:05] management. That's the big part of it is
[33:08] to is to have active dialogues going
[33:11] with all of the FOMC participants. And
[33:14] by the way also with all the senior
[33:15] staff who've been doing this a very long
[33:17] time and they you know they bring in
[33:20] many cases they bring you know history
[33:22] going back many years. For example, in
[33:24] in the public communications that we
[33:25] make, you know, somebody who's been
[33:27] doing that for 30 years will tell you,
[33:30] don't use that word, even though that
[33:31] word might make sense in another
[33:33] context.
[33:34] >> Okay.
[33:36] >> Over here.
[33:37] >> Uh, good morning, Mr. Pal. Um, I wanted
[33:40] to ask you a bit more about um private
[33:43] credit markets and particularly rising
[33:45] defaults among non-bank lenders like
[33:48] Blue Al Capital. Um so I wanted to ask
[33:51] to what extent could stress in these
[33:53] private credit markets spill over into
[33:56] the traditional banking system.
[33:58] >> So that's the question we ask ourselves
[34:00] quite a bit and you know as I as I
[34:02] mentioned we're we're watching very
[34:05] carefully. Of course you read you what
[34:06] you can read in public. We're also
[34:08] getting the backstory from the people
[34:10] who run these uh organizations and from
[34:12] all the banks supervisors well aware of
[34:16] what the bank's exposure is and what is
[34:18] not. And um you know I'm reluctant to
[34:20] say anything that suggests that we're
[34:22] dismissive of the risk, but we're
[34:24] looking for connections to the banking
[34:26] system and things that might you know
[34:28] result in contagion. We don't see those
[34:31] right now. We what we see is uh uh you
[34:34] know a correction going on and um and uh
[34:38] certainly there'll be people losing
[34:39] money and things like that, but it
[34:41] doesn't it doesn't seem to have the the
[34:43] makings of a of a broader systemic
[34:45] event. But again, we never, you know, we
[34:48] never give a a clean bill of health. We
[34:50] just keep watching for that. We don't we
[34:52] don't see those characteristics though
[34:54] right now.
[34:55] >> Okay, let's go to the balcony and
[34:57] remember to share your name when you
[34:58] begin your question. Great.
[35:03] >> What's over here?
[35:04] >> Um, hi, my name is Cody. Thank you so
[35:05] much for being here, Mr. Powell. My
[35:07] question is about whether international
[35:09] relations has um impact on your
[35:11] decision-m. I know you mentioned that,
[35:13] you know, the Fed's job to do exactly
[35:15] what's best objectively for the American
[35:18] economy, but I'm wondering, you know, if
[35:20] you're competing with, you know, let's
[35:21] say, China or other powerful countries,
[35:23] whether or not you would kind of, you
[35:24] know, cut interest rates or do something
[35:26] like that to stimulate the economy to
[35:27] kind of get ahead of other countries.
[35:30] >> No, it doesn't. You know, we're we're
[35:32] always asking the question, as you'd
[35:34] suggest, you know, what we serve the
[35:37] American public always in all of our
[35:39] decisions and what is best for them. How
[35:41] do we achieve maximum employment and
[35:43] price stability on a sustainable basis?
[35:45] That's that's what we're always asking.
[35:48] We do, you know, meet with, you know, in
[35:51] Basil, the central banks all meet
[35:53] without the finance ministries and we
[35:55] can talk privately about what's going on
[35:57] in global financial markets. It is a
[35:59] global economy. We all know each other
[36:01] and and frankly and many of us have
[36:04] regular communications going on just
[36:06] privately, you know, or you know, by
[36:08] telephone, email and text and things
[36:10] like that. But we're never we're never
[36:12] looking to um to get on the on the turf
[36:15] of you know the national security people
[36:18] or the or the you know the state
[36:20] department or you know things like that.
[36:22] We're not looking looking at things that
[36:24] way. We're looking at our goals. That
[36:26] would be I think a classic case of
[36:28] mission creep. If we were to say hey
[36:30] let's let's let's deviate from just
[36:33] chasing these two goals and let's do
[36:34] something for a third purpose. that
[36:36] would almost by definition make us less
[36:38] effective at the things we're supposed
[36:40] to be doing. So, we try to stick to
[36:41] that.
[36:42] >> Okay, great. David, you're next.
[36:46] >> Good morning. My name is Jenny and thank
[36:49] you so much for coming. We're all very
[36:50] honored that you took the time to come.
[36:53] Um, so last lecture we learned about
[36:56] soft landings and about how it's
[36:58] definitely much more ideal than hard
[37:00] landings, but in the US history, we've
[37:02] had far more hard landings than soft
[37:03] landings. And we were just talking about
[37:06] how it's really important that you are
[37:08] monitoring expected inflation. Um, and I
[37:11] think a lot of that just buil comes down
[37:13] to the trust between the public and the
[37:16] central bank. And the central bank is
[37:18] known to be much more technocratic. But
[37:20] I think especially with like the rise of
[37:21] populism and previous events, there
[37:24] seems to be a lot of uh impact of like
[37:26] political tensions between or or
[37:29] cooperation between the Fed chair
[37:31] position and the administration. And I
[37:34] wanted to ask you, how do you still keep
[37:36] the public's trust this way?
[37:39] >> Um, by sticking to our jobs and doing
[37:42] them well. Ultimately, we if we deliver
[37:46] the maximum employment and price
[37:47] stability or at at least are seen to be
[37:50] doing everything we possibly can as we
[37:52] meet various shocks and, you know,
[37:54] multiple supply shocks in recent years,
[37:57] the public keeps its faith in us. And if
[37:59] you look, you know, we look at things
[38:00] like longerterm inflation expectations
[38:03] and you'll you'll see that they they've
[38:05] remained pretty well anchored right
[38:06] through all of this, you know. So if you
[38:08] if you really think inflation is going
[38:10] to be higher, you can make some money
[38:11] betting against that. But people don't
[38:13] do that. You know, the people who are
[38:14] putting their money to work in the
[38:16] financial markets, not to give too much
[38:18] credit to that, but that's but that's
[38:20] it. If we stick to our knitting and we
[38:22] do our jobs, we stay out of politics,
[38:24] stay out of stay out of the hot
[38:25] political issues of the day and just do
[38:27] your job and keep your head down. I
[38:29] think, you know, I see this through the
[38:31] my dealings with elected people. You
[38:33] know, if they get the sense that you're
[38:35] you're you're not there to deliver
[38:37] talking points, you're there to listen
[38:38] to them and and you're really somebody
[38:40] who is committed to doing your job and
[38:42] sticking just to that job and that's all
[38:44] you want and you're not going to get
[38:45] into politics. That's that's what we
[38:48] need to do. And I think generally um I
[38:51] think we are accepted in that spirit in
[38:53] Washington and I think I think generally
[38:55] around the country as well.
[38:58] >> Jason
[39:04] remember to tell us your name.
[39:09] Thank you chairp for being here. My name
[39:12] is Jake. Uh, as you know, your term ends
[39:15] in May and a potential successor, Kevin
[39:17] Worsh, has indicated a desire to cut
[39:19] rates if he fills the role of chair.
[39:22] What is your effect? What is your take
[39:23] on the effect that a cut would have on
[39:25] the flexibility of the Fed to maintain
[39:27] well to remain well positioned to
[39:29] maintain both sides of its dual mandate,
[39:32] particularly given the fact that
[39:33] inflation has remained elevated above
[39:35] the Fed's 2% target for several years
[39:37] now and progress is further halted by
[39:40] the oil shock and tariffs especially.
[39:43] >> Jake, um that's that's not something I'm
[39:47] going to going to uh going to swing at
[39:49] that pitch. Is that a Red Sox jersey, by
[39:51] the way?
[39:53] I called on him.
[39:54] >> Yeah. Okay.
[39:55] >> I know this must be Red Sox country.
[39:57] >> So, we're going to go to the balcony
[39:58] next.
[40:08] >> Hi, my name is Aean Candle. So, earlier
[40:12] you said that you don't know how much
[40:14] you believe in something until someone
[40:16] tries to take it apart. So my question
[40:18] was, what's the thing you currently
[40:20] believe about the economy that you're
[40:22] least confident of?
[40:24] >> Interesting question. Um
[40:32] I can't I'm not going to give you a
[40:34] particular individual thing uh at the
[40:37] moment but I I will say that um I I I
[40:41] would say this and I of course this is
[40:43] self- serving to an extent but having
[40:44] worked in the private economy for most
[40:46] of my career I I don't have any
[40:49] predisposition
[40:51] to believe that models can really
[40:54] capture it um because so much of it is
[40:57] animal spirits as Kane's called it uh
[41:00] and also it's just it's again I go back
[41:02] to the weather will we ever be able to
[41:05] predict the weather with any precision
[41:08] three three months ahead other than the
[41:11] seasons so the economy no one has been
[41:14] able to really successfully predict the
[41:17] economy so I I think the temptation is
[41:19] always to um to place too much uh sort
[41:25] of stock in uh you know in models or in
[41:29] one particular outlook. The other thing
[41:32] is another thing which is a big takeaway
[41:34] is you know about fat tails right? So
[41:38] famously the financial it's there's a
[41:39] normal distribution and the tales are
[41:41] what they are. It's not a normal
[41:43] distribution. The tails are fat and
[41:45] however fat you think they are they're
[41:47] fatter than that. that the the
[41:49] possibility for the economies at any
[41:51] given time is so much so so much
[41:54] broader. For example, the pandemic
[41:55] inflation. We'd spent 15 years with the
[41:58] inflation below target and that was at a
[42:01] time of QE and lots of finan fiscal
[42:04] stimulus and that kind of thing. We had
[42:05] inflation below target and people pretty
[42:07] much the profession had the big problem
[42:10] the whole profession was trying to solve
[42:11] was how do we get inflation up to 2%.
[42:14] That was really the problem. And then
[42:15] then along comes the pandemic inflation
[42:17] and bang, you suddenly you have a
[42:19] 40-year high inflation. So it's hard to
[42:21] keep your mind open to just how broad
[42:24] the possibilities are.
[42:26] >> Okay,
[42:27] take down here. Yes.
[42:29] >> Hi, my name is Robert. Thank you so much
[42:31] for being here. I'm a first year
[42:33] studying econ, math, and philosophy. Um
[42:37] so many economists that I've listened to
[42:39] uh at least retroactively say that what
[42:41] we really needed uh during the co
[42:43] pandemic was around $3 trillion and the
[42:46] government printed you know something
[42:48] along $6 trillion more than that uh and
[42:50] so inflation uh rose but that money is
[42:53] still out there. So if rates come down
[42:56] you know obviously you took initiative
[42:58] and you raised them very significantly.
[43:00] if rates get lowered again to let's say
[43:02] two or so percent uh do you think that
[43:04] the price spikes have already played out
[43:06] or do you think that all that extra
[43:08] money being out there will you know on
[43:10] top of you know instability uh
[43:13] geopolitically uh do you think that's
[43:15] going to uh push us back into an
[43:17] inflationary spiral uh and then also I
[43:20] was wondering uh for your next press
[43:21] conference are you going to start it
[43:22] with good afternoon or hello everyone
[43:30] Let's talk about that later.
[43:33] >> So um sorry the first question was um
[43:36] the was the expansion the money supply.
[43:39] >> Yeah. No. So I I think monetary
[43:41] quantities are a very challenging way to
[43:43] try to think about inflation and the
[43:46] economy. There was a time when the
[43:48] profession thought that you know
[43:50] monetary quantities and inflation were
[43:51] tightly linked. And of course it in an
[43:53] abstract way or a simple model it makes
[43:56] sense if you if you don't increase the
[43:58] amount of goods and you double the
[43:59] amount of money then the price has to go
[44:01] up but that there has been relatively
[44:03] little correlation and you know my story
[44:06] of the pandemic inflation would not be
[44:08] about monetary quantities mainly not I'm
[44:10] not saying it might not have played a
[44:11] role um it was more you did have a lot
[44:15] of stimulus particularly in the United
[44:17] States uh at the same time we were
[44:20] looking at at at the possibility of
[44:22] another great depression. We didn't know
[44:24] whether there would ever be a a vaccine.
[44:27] We didn't know what this was going to
[44:28] be. How many millions of people was the
[44:30] is the disease going to kill. So
[44:32] literally for the first time probably
[44:34] ever, we're looking at a you know little
[44:38] alternative simulations that are a great
[44:40] depression lasting many years. So we did
[44:41] a lot of stimulus and then when the
[44:44] global economy reopened after shutting
[44:46] down, you had this burst of demand,
[44:49] red-hot demand and constrained supply
[44:52] still. So automobiles is a great
[44:54] example. Everybody wanted a car because
[44:57] they didn't want to take public
[44:58] transportation and they'd all moved to
[44:59] the suburbs and out of the city. So I
[45:01] need a car and yet you couldn't make
[45:03] cars because you couldn't get the
[45:04] semiconductors. So you're you're looking
[45:06] at a vertical supply curve. So a little
[45:08] bit of demand drove prices up a lot. Um
[45:12] then of course we took the view, my
[45:15] colleagues and I did that vertical
[45:17] supply curve works both ways. If if a
[45:19] little bit a little bit of demand could
[45:20] bring that price right down and also it
[45:23] won't be vertical forever. It'll it'll
[45:25] start you you'll get supply side
[45:27] healing. You got those two things. It's
[45:28] it was always both supply and demand for
[45:30] me. And you got inflation coming down
[45:32] very sharply in 23 and 24. We got close
[45:36] to to to the end of your question. we
[45:37] got pretty close to 2% in um by the end
[45:40] of 24. Now we're dealing we were just
[45:43] dealing with the you know the the effect
[45:46] of tariffs which have largely fallen
[45:49] here in the US and not abroad. Um
[45:52] they've been less than expected because
[45:54] the the other side the um others didn't
[45:57] retaliate and also because what was
[45:59] implemented was less than what had been
[46:00] announced. Nonetheless, that's that was
[46:02] the piece. We were we were at about 3%
[46:05] inflation and somewhere between 0.5 and8
[46:08] of that is from is from tariffs. So
[46:10] we're getting we've been pretty close to
[46:12] 2% all this time. Now we have another
[46:14] supply shock coming. You know, it's it's
[46:16] one of those uh times where you get a
[46:18] series of supply shocks. First the
[46:20] pandemic, then the much smaller one from
[46:23] tariffs, and then we're getting now an
[46:25] energy shock. No one knows how big it
[46:27] will be. We It's way too early to know.
[46:29] As I mentioned, we do think our
[46:31] policyy's in a good place for us to wait
[46:32] and see.
[46:34] >> Okay. So, one last question.
[46:39] >> Go.
[46:42] >> Hi, Mr. Pal. I'm Lola and I was
[46:44] wondering at what point does the size of
[46:47] the US's debt break the point of natural
[46:51] systems repayment and if that's
[46:52] something you're worried about now or
[46:54] something you think our generation
[46:56] should look out for.
[46:57] Um I don't think we know uh what that
[47:01] number is sort of ratio of debt to GDP
[47:04] where it'll be a problem. There are of
[47:05] course Japan being a great example there
[47:07] are countries that have much higher um
[47:09] levels of sovereign debt to their GDP
[47:12] than we do. What's clear is that our uh
[47:16] debt is growing much faster. The federal
[47:18] government debt is growing substantially
[47:20] faster than our economy and that ratio
[47:23] is going up. And you know, in the long
[47:24] run, that's kind of the definition of
[47:26] unsustainable.
[47:28] The level of the debt is not
[47:29] unsustainable, but the path is not
[47:31] sustainable. And so, it's it's really
[47:34] important that we get back to we don't
[47:37] have to pay the debt down. We just need
[47:39] to to to have, you know, primary balance
[47:41] and and begin to have the economy
[47:44] actually growing better, growing uh more
[47:46] quickly than the economy. It will it
[47:49] will not end well if we don't do
[47:51] something fairly soon. This is not the
[47:53] Fed's job of course and I pretty much
[47:56] limit myself to those high level points
[47:59] which which essentially everyone
[48:01] ignores.
[48:04] So we're going to thank Chair Powell but
[48:07] let me just describe the sequence of
[48:09] events that now follows. So first we'll
[48:12] thank Chair Powell. Then anyone who
[48:14] wants to is welcome to join us on the
[48:16] stage and we'll take a group photo with
[48:20] Chair Powell. Um because of a tight
[48:23] schedule, there can't be any selfies
[48:27] because if there's one selfie, there's
[48:28] 600 selfies. So, you'll need to um make
[48:31] do with one photograph of the entire
[48:34] class with our esteemed guest.
[48:37] >> All right, let's go ahead and uh
[48:38] summarize uh what just uh what was just
[48:42] said and then we'll do a little bit of
[48:44] an update there on uh Iran as well. So,
[48:47] we'll uh we'll get into all of this.
[48:50] Jerome Powell just spoke at Harvard and
[48:52] gave us a little bit of insight into his
[48:54] thoughts on Iran, private credit,
[48:56] interest rates, policies, and otherwise.
[48:58] Uh before we talk about Powell though,
[49:00] uh and after we talk about Powell, we'll
[49:02] talk about Iran. But before we talk
[49:03] about Powell, I'd like to add in what
[49:05] Fed Myron said right before Powell
[49:08] spoke. So right before Powell spoke, we
[49:11] actually ended up hearing that Myron is
[49:14] still of the mindset that we should be
[49:17] lowering interest rates. And one of the
[49:19] reasons for that uh is he says the labor
[49:23] market as we've heard many times before
[49:26] uh is almost certainly experiencing a
[49:29] negative demand shock. We've had 3 years
[49:32] of a cooling labor market and he says
[49:34] there's nothing to indicate that that
[49:36] cooling labor market has changed
[49:38] directions. Now, that's been a hope,
[49:41] right? In uh November, December, and
[49:44] January, we were really hoping that some
[49:46] of the jobs numbers we were getting
[49:48] would imply that we're starting to see a
[49:50] little bit of an inflection point up in
[49:52] the labor market, actually getting back
[49:54] to growth again. And then, of course,
[49:56] unfortunately, we got those horrible
[49:57] numbers in February, you know, 92,000
[50:00] jobs, which were quite disappointing and
[50:03] killed that narrative somewhat. Now,
[50:05] drum pow threw cold water on the sort of
[50:08] negative February report and suggested
[50:10] it sort of balanced out with January.
[50:13] Now, we have new jobs data coming out
[50:15] later this week. So, I encourage you to
[50:17] mark your calendar for some of the
[50:19] things coming up this week. We're going
[50:20] to have uh the uh challenger layoffs
[50:23] report. We'll have the Jolts report and
[50:26] we'll also have the BLS labor report.
[50:29] Now, I'll give you just quickly the
[50:30] catalyst uh dates and expectations for
[50:33] those. Uh starting with uh let's see
[50:36] here. We'll start with tomorrow. Let's
[50:39] see. Today is the 30th. Wow, tomorrow is
[50:41] already the end of the month, which is
[50:42] incredible. Uh tomorrow, we'll get
[50:44] Jolts. Last uh Jolts report from last
[50:47] month. We had a pretty big miss. This is
[50:48] the job openings and labor market
[50:50] turnover survey for February. We're
[50:52] expecting 6.895,000.
[50:54] So, uh well, million. So, uh, 6.9ish
[50:58] million is really what we're expecting.
[51:00] Uh, then we're expecting on Wednesday,
[51:03] that's April 1st already, April Fool's
[51:04] Day, the ADP employment report that's
[51:07] been holding pretty steady. Uh, prior
[51:09] report was 63. This is expected to be
[51:11] 40, which aligns with last week's 10,000
[51:14] report, which is pretty much a sign of
[51:17] sort of a stabilizing in the labor
[51:18] market. Certainly not any kind of boom.
[51:20] Uh, then we'll get challenger job cuts
[51:22] on Thursday and along with continuing
[51:25] claims. And then on Friday, we're
[51:26] looking for 60,000 in non-farm payrolls
[51:29] and 75k in private payrolls for the BLS
[51:32] jobs data on Friday. But this myin
[51:35] comment was very interesting because he
[51:37] really makes this strong argument to say
[51:39] the Fed's interest rate policy is still
[51:42] too high. It's not just uh you know the
[51:46] labor market shrinking is not solely
[51:48] because we've had an immigration
[51:51] collapse. Uh if it were true that the
[51:53] labor market were collapsing because of
[51:55] an immigration collapse, then we should
[51:57] be seeing a lot of job demand uh amongst
[52:01] lower uh age or sort younger individuals
[52:05] and uh lower education individuals which
[52:09] typically compete with immigrants. But
[52:11] Myron says we're not seeing that which
[52:13] suggests this is still a negative labor
[52:15] growth economy and we should really be
[52:18] supporting rate cuts. Now, that's
[52:21] Myron's take. He obviously thinks, you
[52:24] know, we're going to get through some of
[52:25] these, you know, inflationary impeties
[52:28] that we're seeing now, not just tariffs,
[52:30] but also, uh, Iran, but broadly, we
[52:33] should be looking at lower rates to
[52:35] support the labor market. Now, we'll see
[52:36] when Wsh comes in, when and if he comes
[52:39] in, you'll sort of have these uh uh
[52:40] you'll have Myron go back to his his
[52:43] prior job. But, uh it seems like Walsh
[52:46] still wants to bring in that momentum
[52:49] of, oh, we're going to lower rates. Now,
[52:51] the bond market hasn't exactly been
[52:54] sending us signals that the bond market
[52:55] is ready for lower rates. I mean, we've
[52:57] got now over a 40% chance of uh a rate
[53:01] hike by the end of the year and some
[53:03] pricing coming in for potentially
[53:05] multiple rate hikes by the end of the
[53:07] year, two to three rate hikes. If we
[53:09] look at the bond market, we can see
[53:11] today is a good day for the 10-year, but
[53:13] you're still at 4.33, down 10 basis
[53:15] points. But a lot of people are paying
[53:17] attention to this. It's that spread
[53:19] between the 2-year and the 10-year
[53:21] Treasury, which on Friday actually
[53:25] spiked up substantially. Now, we've
[53:27] cooled off about a basis point today,
[53:30] but we shot up from about42 to about
[53:33] 0.51 on Friday, and a lot of bond market
[53:36] experts think this is because markets
[53:38] are finally starting to price in weaker
[53:40] growth over the long term. as now Iran's
[53:44] uh the war in Iran enters a second
[53:46] month. This isn't great. Uh one thing
[53:50] that Dr. Powell certainly broke uh uh
[53:52] broke down, we'll talk more about what
[53:54] Powell just said, uh is he talked about
[53:55] inflation break evens, which he
[53:57] regularly does. And there are two forms
[53:59] of inflation break evens that you should
[54:01] really be paying attention to. There is
[54:03] the 5-year break even inflation, which
[54:06] is essentially, hey, what do we think
[54:07] inflation is going to be 5 years from
[54:09] over the next 5 years on average? That's
[54:11] currently sitting at about 2.6%. And you
[54:14] can see it's really it hasn't broken out
[54:16] to levels like what we saw in early 2022
[54:19] when we started really raising interest
[54:21] rates because we had 9% inflation. So
[54:24] we're kind of more in line with the
[54:26] inflation that we saw around liberation
[54:27] day uh or you know what we saw in mid24
[54:31] or even during the banking crisis of
[54:32] 2023 when people thought the Federal
[54:34] Reserve was going to print money. So
[54:36] this level really hasn't unanchored.
[54:39] Powell is right and he reiterates this
[54:42] as a way to say, hey, you know, there's
[54:44] there's really no urgency here uh to to
[54:48] raise rates because that 5-year break
[54:49] even isn't moving up. The problem is
[54:52] there is another chart and it's called
[54:54] the 5-year forward break even, which
[54:57] does express uncertainty and urgency,
[55:02] but maybe not in the direction that you
[55:04] expect. I'm going to explain the 5-year
[55:06] forward and how that's different from
[55:07] the 5-year break even in just a moment
[55:09] because there's a really important
[55:10] difference there. But I do want to
[55:11] express a point where there is urgency
[55:13] and that is we're doing this super
[55:15] quiet. Haven't mentioned it much at all.
[55:17] Uh coupon expiration tomorrow, March
[55:20] 31st, just for the end of the month. Uh
[55:22] we've got uh a lot of cool things coming
[55:25] and so we're we're trying to get our
[55:26] prices uh to a higher level. So, we'll
[55:29] have another price increase before some
[55:31] of these uh new features come out uh
[55:34] probably in April or May, which we're
[55:35] very excited about. But in the meantime,
[55:37] you can get every trade alert, all nine
[55:38] courses, every private live stream and
[55:40] alpha report over at me.com. Go check
[55:41] that out. Uh we got that coupon expiring
[55:43] March 31st tomorrow night. Okay. So, now
[55:46] let's understand the difference between
[55:47] that 5-year forward and the 5-year break
[55:50] even. So, the 5-year forward at 2.69.
[55:52] This is relatively stable, right? The
[55:55] five-year forward. So, this is the
[55:57] 5-year break even. The five-year forward
[55:59] says, "Hey, what do we think inflation
[56:00] is going to be over the next five years,
[56:04] five years from now?" So, you're
[56:06] basically talking about if this chart
[56:08] you're looking at right here is year 0
[56:11] to year five, basically the end of year
[56:14] four, right? That would be five years.
[56:15] That's your 5year break even. And then
[56:17] the next chart is essentially 5 to 10.
[56:20] That's what you're looking at. If the 5
[56:22] to 10 chart is skyrocketing, it's an
[56:25] inflation concern. But if the 5-year
[56:28] forward is plummeting, it's a growth
[56:30] concern. And take a look at what it's
[56:33] doing. It's plummeting. This is the
[56:36] lowest level on the 5-year forward break
[56:39] even inflation rate that we have seen
[56:41] since the recession scare of liberation
[56:44] day. And uh Jerome Powell is astutely
[56:48] pointing these inflation expectations
[56:50] out. He doesn't specifically talk about
[56:52] these two charts, but we we know based
[56:54] on his prior conversations that these
[56:56] are two that he definitely considers. Uh
[56:58] and to me, these actually align more
[57:02] with what Mr. Myin is saying, which is
[57:04] hey, we are now not worried so much
[57:08] about inflation uh you know getting
[57:10] unleashed. We are much more worried
[57:13] about a growth shock to the economy
[57:16] because of the compression that we end
[57:19] up getting from higher fuel prices which
[57:21] could lead people not to want to fly.
[57:24] When people fly, what do they do? They
[57:26] spend money. They spend money on $6
[57:28] water bottles at the airport. They spend
[57:30] money going out at all the restaurants
[57:32] or stores or whatever where where they
[57:34] travel because they're not at home where
[57:35] things are cheaper, right? This is
[57:37] called demand destruction. Uh you have
[57:41] people not wanting to pay fuel search
[57:43] charges for cruises. People don't want
[57:45] to go on road trips. People just decide
[57:46] to stay home and they cancel trips.
[57:48] That's just one form of demand
[57:50] destruction.
[57:51] That is when growth concerns get priced
[57:54] in. And we've just on Friday started to
[57:57] see those growth concerns finally start
[58:00] getting priced into the market a little
[58:01] bit by seeing that spike in the 210. So,
[58:04] I highly encourage if you're watching
[58:06] for bond market signals, watch the
[58:08] spread between the 210. We've certainly
[58:11] come down from some of those shock
[58:12] levels we had before the war around 72.
[58:16] But once this level rises to about 1.25,
[58:20] you're pretty much in the thick of a
[58:22] recession. So, you really want to stay
[58:24] away from this rising. And it's a great,
[58:28] I think, leading indicator of sort of
[58:30] what's coming based on the direction
[58:31] that we're heading in. Now uh drum
[58:33] Powell also mentioned that uh over the
[58:36] long term we you know don't really or
[58:39] haven't seen inflation or financial
[58:41] stability risks from money printing from
[58:43] QE. You know, I think people would argue
[58:46] that is not true that you could
[58:48] definitely print your way to inflation
[58:49] and we saw that during co and then of
[58:52] course one of the reasons he argues that
[58:54] we really haven't seen much much
[58:56] inflation uh from printing money is
[58:59] because he's referring to the Bernanki
[59:00] era where between 28 uh 2008 after the
[59:04] great financial crisis all the way to
[59:05] COVID we were able to print money and
[59:07] inflation was running below trend. But
[59:09] the reality is it's probably because our
[59:12] economy is actually deflating thanks to
[59:14] technological innovation. And because of
[59:17] the money printing, we are creating just
[59:18] enough inflation to get relatively close
[59:21] to 2%. So if it weren't for money
[59:23] printing, we'd actually be in a
[59:24] deflationary regime, which makes sense.
[59:26] We used to spend $2,000 for a 42-in Sony
[59:29] Bravia TV, and now you can get, you
[59:32] know, a Roku 65 in TV for like $379 at
[59:37] Target or Walmart. It's it's crazy that
[59:39] that is deflation which is great for the
[59:42] consumer. That's mostly driven by
[59:45] technology but also in part because of
[59:47] the changed uh monetization dynamics in
[59:50] in uh television thanks to the connected
[59:52] TV and otherwise but totally different
[59:54] topic. So uh you know Drum Powell really
[59:58] applauds the soft landing that he
[60:00] achieved by 2024. He says the economy
[60:03] grew at 2 and a.5% and inflation was
[60:06] slightly above 2% but pretty dang close
[60:08] to 2%. He says the labor market was at
[60:10] full employment then and we had it. We
[60:13] had our soft landing. We did it. So he
[60:16] really today sort of declared victory
[60:18] on, hey guys, I got the soft landing.
[60:22] This was a little bit sort of like
[60:23] almost like an exit interview about
[60:25] wanting to sort of brag about the soft
[60:27] landing that he got. Then he says, you
[60:29] know, then then we've been dealing with
[60:30] supply or shocks after shocks,
[60:33] inflationary shocks after shocks. Uh,
[60:36] you know, now not only the tariff
[60:38] inflation, which we think of as one time
[60:40] but sort of coming in many different
[60:41] pieces, so it looks really blurry and
[60:43] messy, but then of course the Middle
[60:45] East, which on Iran and what's going on
[60:49] in the Middle East, Jerome Powell is
[60:51] really blunt here. He says, "We don't
[60:53] know what to do because we don't know
[60:56] the effects yet of this war." Now,
[60:58] remember, we've just moved on to the
[61:01] second month of this war. Donald Trump
[61:04] says he's going to destroy and
[61:05] completely obliterate Iran's uh electric
[61:07] generating plants, oil wells, and
[61:09] frankly, Car Island if the strait isn't
[61:12] immediately reopened, which of course is
[61:14] the opposite of what Treasury Secretary
[61:16] Besson says, who says the strait is not
[61:17] economically important to us. I kind of
[61:20] can't wait for this war to end and then
[61:23] maybe we could all go on a uh straight
[61:26] of Hormuz booze cruise.
[61:29] Sorry, we made that up this morning.
[61:31] Thought it was a good one. But anyway,
[61:33] um you know, Donald Trump says we're in
[61:35] serious discussions with a new and more
[61:38] reasonable regime and great progress has
[61:40] been made. Of course, he's unwilling to
[61:42] declare which of his 15 points have
[61:45] actually had any progress. At the same
[61:48] time, the Wall Street Journal is also
[61:49] reporting that insiders in the White
[61:51] House are essentially preparing Donald
[61:54] Trump for to be able to order a ground
[61:57] invasion into Iran with special
[61:59] operations linked uh likely for weeks to
[62:02] extracting quote nearly 1,000 pounds of
[62:06] uranium from Iran. Now this is uh the
[62:09] sort of freedom unit measure of the same
[62:12] 460 kg of roughly 60% highlyenriched
[62:18] uranium which is expected to be enough
[62:20] for about 11 to 12 nuclear weapons.
[62:23] This of course could leave US forces in
[62:26] Iran for days, weeks or potentially much
[62:30] longer. At the same time, things are
[62:33] certainly not deescalating with Israel
[62:35] as Israel is expanding its buffer zone
[62:37] into Lebanon uh even more so than
[62:40] previously due to attacks by Hezbollah.
[62:42] Israel seems to be escalating uh in in
[62:46] their push uh against uh extremism which
[62:49] unfortunately
[62:52] essentially leads to a broadening of
[62:53] this conflict and more death. Lebanon is
[62:56] the second uh largest recipient of
[63:00] deaths that compared to Iran. Obviously,
[63:03] Iran takes the cake for being the number
[63:05] one recipient of dying, which is very
[63:07] sad. Uh and then of course that's
[63:09] followed by Lebanon, mostly because of
[63:11] Israel's incursion into Lebanon, which
[63:13] of course is in reaction to uh Hezbollah
[63:16] terrorists who live amongst the Lebanese
[63:18] uh launch resuming their missile strikes
[63:21] against Israel. Now, it doesn't help
[63:23] that the Houthies down uh south in Yemen
[63:26] are now announcing that they are joining
[63:29] the war. There are now, of course,
[63:31] concerns that this supply shock and
[63:34] inflationary shock that Jerome Powell is
[63:36] worried about himself uh is going to
[63:38] expand even more because now potentially
[63:41] not only do we have to worry about uh
[63:43] the straight of Hormuz, but we
[63:45] potentially have to worry about the Red
[63:46] Sea again. Here is uh the Persian Gulf
[63:49] and the Gulf of Oman. This is the
[63:51] straight of Hormuz. Saudi Arabia has
[63:54] been pumping through their East West
[63:56] pipeline a lot of oil uh over to the Red
[63:59] Sea. Approximately 5 million barrels a
[64:02] day now being brought over to the Red
[64:04] Sea, suggesting Saudi Arabia might
[64:06] actually be capable of expanding their
[64:09] output of oil to about 45% of what it
[64:12] was before the Straight of Hormuz was
[64:14] sealed.
[64:16] Now, if Saudi Arabia loses access uh to
[64:21] shipping through the Red Sea because we
[64:23] end up getting uh this choke point over
[64:26] here, Bob Alman, I always screw it up,
[64:29] but anyway, the the little passageway
[64:32] over here, if this ends up getting uh
[64:35] attacked or ships get attacked over here
[64:37] as ships leave the Red Sea, go through
[64:40] uh you know, this little passage here
[64:42] and then get into the Gulf again uh and
[64:44] then out to sea. If the Houthies here
[64:48] strike shipping lanes, then we could see
[64:50] some of the same damage that we saw in
[64:52] uh 2023
[64:54] and 4 to Red Sea uh shipping, which not
[64:59] only chokes oil again, but also now
[65:01] substantially more supplies uh which are
[65:04] important components of industrials
[65:06] throughout the entire world. So both of
[65:08] these are unidal and the Houthis in
[65:11] Yemen have declared that they are
[65:13] joining the war. We think it's just a
[65:15] matter of time for them to start
[65:16] launching attacks. Mind you that the
[65:19] most of what keeps these straits and
[65:22] passageways sealed is really the fear of
[65:27] uh your ship getting sunk. Uh just
[65:30] because these ships are very difficult
[65:31] to insure. Some of them operate without
[65:33] insurance. Uh the cargo is just not
[65:36] valuable enough for the shipper to to
[65:37] justify losing uh their entire ship or
[65:41] worse lawsuits from uh the crew. uh Cruz
[65:44] family potentially it all turns into a
[65:46] giant mess. So you know on one hand
[65:51] while there's optimism including from
[65:53] Jerome Powell about the medium to longer
[65:56] term there are real reasons to be
[65:58] concerned about the short term and this
[66:00] is where Powell talks about tail risks.
[66:03] He says anytime there's a tail risk so
[66:05] normal distribution right bell curve
[66:07] anytime you have a which let me just
[66:09] pull up a normal distribution here
[66:11] normal distribution so you can see it a
[66:13] little better. I always feel like when
[66:14] people hear tail risk and they're not
[66:16] into like stats, they're just not really
[66:18] going to understand it. Uh what a tail
[66:20] is, you know, millennials have a
[66:22] different definition for tail than than
[66:24] staticians or other generations. But
[66:26] anyway, uh this is a normal distribution
[66:28] here, right? And then you would have a
[66:30] one standard deviation in each
[66:31] direction, two standard deviations each
[66:32] direction. Okay, you get the idea. Your
[66:34] tail risk is really what's on the left
[66:36] side or the right side. So this would be
[66:38] your uh in the case of uh growth for the
[66:41] stock market uh a right risk right tail
[66:43] risk would be an upside risk upside
[66:46] hedging you know an explosion to the
[66:48] upside and bullishness and then of
[66:50] course the left uh tail would be your
[66:52] downside risk. Drum Powell says uh
[66:56] however fat or or risky right the the
[66:59] greater the risk the fatter the tail
[67:01] right so let's assume that this right
[67:03] here is about a 5% risk right here if
[67:06] you fatten the tail uh then maybe it's a
[67:08] 20% risk right whatever drone Powell
[67:12] made this interesting quote he says
[67:13] however fat you think the tails are they
[67:16] are in reality fatter which actually
[67:19] implies that the market doesn't really
[67:21] have this much of a normal distribution
[67:23] it probably means it has more of a flat
[67:26] distribution, right? Uh to indicate that
[67:28] hey, the upside could be greater and the
[67:30] downside could be greater. Obviously, um
[67:34] the Christine Lagod of the ECB is uh
[67:38] quite bearish. She uh she thinks that
[67:40] the the energy shock that is coming is
[67:43] devastating and recessionary and and
[67:45] she's quite worried about the impacts of
[67:48] this economy. So, she certainly has a
[67:51] very very high uh left tail risk over
[67:53] here. One thing that Powell though says
[67:55] that isn't too risky, which is
[67:58] interesting, is uh he actually says
[68:00] private credit uh is uh is is really not
[68:04] showing any kind of sign of uh
[68:07] contagion. He does say that we're in a
[68:09] correction right now, but it's it's not
[68:10] systemic. One thing that I actually
[68:12] mentioned to course members, which
[68:13] remember you can always be a part of
[68:14] that over at me.com, but one thing that
[68:16] I mentioned to course members in our
[68:18] latest alpha report was that private
[68:20] credit does appear to be stabilizing.
[68:22] And one of the charts that evidences
[68:24] this is actually right here. Uh so this
[68:27] is a a chart that was normalized uh at
[68:30] the point of the war basically February
[68:32] 27th. So assume that you know these bond
[68:35] prices are really you know 70 60 cents
[68:38] on the dollar or whatever. But then what
[68:39] they did is they took that number and
[68:41] they normalized it at 100. So even
[68:43] though it says 100 that probably still
[68:45] represents minus 30 or 40% because of
[68:47] the fall that's happened right now. Now,
[68:49] anyway, since then, uh since February
[68:52] 27th, over the last month, uh private
[68:54] credit has actually indicated uh less
[68:57] stress uh than than the stress that we
[68:59] were seeing previously, which is a
[69:02] bullish sign that maybe there are
[69:05] actually banks buying the dip on private
[69:07] credit and private credit is
[69:09] stabilizing, which economically is
[69:11] great. You know, if jobs can stabilize
[69:13] and private credit can stabilize,
[69:16] fantastic. Then Jerome Powell is 100%
[69:18] right to be optimistic on the medium to
[69:20] longer term. You know, he thinks that
[69:22] artificial intelligence and the
[69:24] productivity generated by AI will create
[69:26] plenty of opportunities. I mean, gosh, I
[69:28] mean, I think we've, you know, we've
[69:30] we've hired so many people because of
[69:33] artificial intelligence because we're
[69:34] we're developing so much software at my
[69:36] startup, both for stocks and real
[69:38] estate, which is so exciting. when we've
[69:40] got our valuation AI coming uh after the
[69:42] real estate AI beta that we've already
[69:44] released. The next iteration is still on
[69:46] schedule for Q2 here. And what's really
[69:48] remarkable about it is, you know, we've
[69:50] hired more because of AI. Uh you know,
[69:53] even though we let some people go and
[69:55] sort of the GNA rules, we've hired more
[69:57] software developers like substantially.
[69:59] It's incredible what we're able to do.
[70:00] So I actually agree with Jerome Powell
[70:02] that you could be optimistic on an
[70:04] economy creating new opportunities and
[70:06] and plenty of opportunities, which is uh
[70:08] really exciting. Uh as far as job
[70:11] creation though, he admits, you know,
[70:13] we're in an environment of low job
[70:14] creation and uh this obviously comes at
[70:17] the same time as what we're seeing in
[70:19] Iran being a big poopy dupy. Goldman
[70:21] Sachs thinks that uh this is still going
[70:23] to be a uh 1 to two month issue and in
[70:26] that case they they don't actually think
[70:28] now is the best time to be shorting
[70:30] anymore, which also seems somewhat
[70:32] bullish. They kind of sort of imply that
[70:34] maybe some of the worst might already be
[70:36] over. Uh but in part they hedge this by
[70:40] saying that the market is still pricing
[70:41] this as an oil price spike not a
[70:44] longerterm issue. Uh one way that we see
[70:47] this measured is people will stack up
[70:49] the 10-year Treasury yield skyrocketing
[70:51] but then oil skyrocketing even higher.
[70:54] And the argument is that the longer oil
[70:56] prices stay up the longer the 10ear
[70:58] should go up. So one of two things
[71:01] historically needs to happen. uh
[71:03] historically we either see gold price or
[71:06] oil prices plummet or the 10-year goes
[71:08] up even more. Obviously the 10-year
[71:10] going up even more would
[71:12] increase risk in private credit uh be a
[71:15] negative weight on the stock market and
[71:17] create other problems which aren't
[71:19] ideal. Uh then if um you know
[71:22] alternatively if if oil collapses which
[71:25] would be the best case scenario on some
[71:27] form of maybe some negotiated peace
[71:29] talks or whatever uh then uh then
[71:31] markets will be right. The stock market
[71:34] will likely rally rapidly and oil can
[71:36] hopefully settle back down at $80 a
[71:38] barrel higher than where it was because
[71:40] of some of the permanent damage that's
[71:41] occurred. But uh you know that's that's
[71:45] better than where we sit today as we
[71:46] were approaching $120 per barrel this
[71:48] morning. Not great. Now, in fairness,
[71:51] some of this has cooled again a little
[71:52] bit. We're back down to right now about
[71:54] 112 from about the 115 where we were
[71:57] this morning. Now RBC unfortunately
[72:00] indicates that there's really no easy
[72:02] way out of this conflict because if
[72:04] Donald Trump declares victory too soon
[72:05] without extracting that uranium uh
[72:07] Donald Trump may lose whatever
[72:09] credibility the United States has left
[72:11] and it basically gives this de facto
[72:14] control of the straight of Hermuz to
[72:16] Iran which would be a worse loss than
[72:19] had you just not invaded in the first
[72:21] place. Uh again, all eyes also though
[72:24] not just on Iran and negotiations, but
[72:26] also the Houthis when they became
[72:28] involved in a conflict in 2023 with the
[72:31] Red Sea. They ended up firing 150
[72:34] attacks against ships in the Red Sea,
[72:36] the Arabian Sea, and the Gulf of Aiden.
[72:39] All this is problematic because they're
[72:42] just now entering the war again. And if
[72:44] they have any capacity like they did
[72:46] then, we we expect Red Sea disruptions
[72:49] to lead to more inflationary impetities,
[72:53] not fewer. Now, we'll see where all this
[72:56] goes. Uh obviously, the stock market
[72:58] today is uh you know, somewhat neutral.
[73:00] You're getting a little bit of a deadcat
[73:02] bounce off of uh the collapse that we
[73:05] saw last week. Uh last week was pretty
[73:08] much a red day straight through and
[73:10] through or red, you know, every day was
[73:12] was essentially a red day. A lot of
[73:15] people looking for opportunities to buy
[73:16] the dip though. Uh as uh as Bloomberg is
[73:19] citing, a lot of people on Robin Hood at
[73:21] least are not buying the dip. They're
[73:23] actually uh waiting, which then makes
[73:25] you wonder, is it time to inverse the
[73:27] inverse? Who knows? But uh as as we've
[73:29] been calling since last week uh VCX uh
[73:33] this is uh an absolute crap show of a
[73:36] lowflat uh NAV uh play here. Uh and uh
[73:41] it has been collapsing as expected. I
[73:44] think it'll go all the way down to $20,
[73:46] but um honestly it might even slingshot
[73:49] past that. So anyway, this still has
[73:51] some work to do. Yet another 37% day
[73:54] down. Uh remember if you want to hear
[73:56] all of my takes and calls on the market,
[73:58] make sure you're part of the membership
[73:59] over at mekevin.com. Otherwise, there's
[74:01] uh your summary on what Powell said
[74:02] today and what's going on in Iran.
[74:05] Donald Trump at the same time escalating
[74:07] and trying to deescalate, which he likes
[74:10] to do Monday morning. So anyway, uh
[74:13] there you have it. Good luck out there
[74:15] and uh well, all right. Wish you the
[74:18] best.