♪
CHARLES: JANET YELLEN AND JAY
POWELL TESTIFYING LIVE ON
CAPITOL HILL.
EDWARD LAWRENCE IS LIVE WITH
MORE.
REPORTER: THIS WAS ALL ABOUT THE
YIELD CURVE ON THE 10-YEAR
TREASURY EVEN THOUGH IT WAS NOT
MENTIONED ONCE DURING THE
HEARING.
BOTH THE FEDERAL RESERVE
CHAIRMAN AND TREASURY SECRETARY
TRYING NOT TO SPOOK THE YIELD
CURVE.
TO DO THAT THE SECRETARY YELLEN
SAYS THAT SHE WAS-LIGHTING THE
FACT THAT THE ECONOMY WILL REACH
FULL EMPLOYMENT NEXT YEAR.
FOR REPUBLICANS IT DEPENDS ON
WHAT YOUR DEFINITION OF FULL
EMPLOYMENT IS.
UNDER FORMER PRESIDENT
DONALD TRUMP THE EMPLOYMENT
REACHED 3.5% IN FEBRUARY OF
2020.
THE FEDERAL RESERVE HAS ADDED
OVER 4% FOR SOME TIME.
THE FED CHAIRMAN SAYS THE
ECONOMY LOOKS TO BE
STRENGTHENING IN HIS WORDS BUT,
IT WILL TAKE A LITTLE BIT LONGER
FOR EVERYONE WHO LOST A JOB TO
GET A JOB.
NOW ON INFLATION, HE SAYS, THERE
WILL BE A SURGE BECAUSE OF ALL
THE FISCAL MONEY THAT IS BEING
PUSHED INTO THE ECONOMY.
>> WE’LL SEE SITUATION IN WHICH
IF THE ECONOMY REOPENS, THE
VACCINATION CONTINUES, THERE
COULD BE A SURGE IN SPENDING AND
THERE COULD BE SOME BOTTLENECKS
IN THE ECONOMY.
WE SEE SOME OF THAT NOW.
WE MIGHT SEE SOME UPWARD
PRESSURE ON PRICES.
OUR BEST VIEW IS THATHATHAT THES
FECT ONLATIONLALA WLL B B
NENE PCULA PY LARGE N RSIS.
RTER: BUT H: BUT HENT HN T T S
FEEDER RESERVE RESERVE HAS THE
TOOLS TTOOLS TOLSL WIT WITHLATIO KEEP IT T THE TARGE OVEGE
2%.
SA
D THEYHEY W WILL THOSE TOOLS.
AKERS ASKED KED FFF
QU
QUESTIONOUT THE AME AMF
MONEATATGRESS ISESS IS PUS PUSHI
INTOHE ECONONO HERE.E. N $3 THARILLHARILLIO
WE LOOKING AOOKIOOKI TTEX POTENTIALTENTIALNTIAGE BEING F F
FRASTRUCFRASTRUCTURETU.RERE
HERE IS WH SRERERY OF O O
TRSURYSU YELLEN SAY S S ABOUT TH >> IHI I I A PACACACHAT
CONSCOISTS OF INVESTMENTMTSEN IN
PEOPLE,LE,, INVESTMENTSENTSTS IN
INFRASTRUCTURE, WILL HELP TO
CREATE GOOD JOBS IN THE AMERICAN
ECONOMY AND CHANGES TO THIS TAX
STRUCTURE WILL HELP TO PAY FOR
THOSE PROGRAMS.
REPORTER: SPECIFICALLY, SHE
TALKED ABOUT RAISING THE
CORPORATE TAX RATE.
THEN REPUBLICANS ON THE
COMMITTEE TALKED ABOUT TARGETING
A TAX AT THE MOST WEALTHY IN THE
UNITED STATES.
BACK TO YOU.
CHARLES: EDWARD, THANK YOU VERY
MUCH.
NOW THE FEDERAL RESERVE AND
TREASURY WORKING HAND IN HAND.
FEELS LIKE THERE IS NOBODY
WATCHING OUR FLANK, RIGHT?
IF THEY’RE JUST PRINTING,
PRINTING, PRINTING.
I GET JEROME POWELL AND JANET
YELLEN WANT TO SAVE THE ECONOMY
BUT SOMETHING HAS CHANGED
DRAMATICALLY, IN A SENSE BOTH
SEEM TO LOOK MORE TOWARDS
SOCIETAL ILLS RATHER THAN OLD
SCHOOL THINGS THEY USED TO DO.
OUR WHOLE FINANCIALISM IS IN
UNCHARTED WATERS, AND MANY WOULD
SAY ON A DANGEROUS PATH.
JOINING ME QUILL INTELLIGENCE
CEO, FORMER DALLAS FED ADVISOR
DANIELLE DIMARTINO BOOTH.
YOUR THOUGHTS ON THE TESTIMONY
THAT WE SAW TODAY?
BY THE WAY, ALSO WHILE WE’RE AT
IT, CAN WE REALLY SPEND OUR WAY
TO PROSPERITY?
>> WELL YOU KNOW, CHARLES IT IS
THAT SECOND QUESTION THAT IS THE
MOST UNDETERMINED.
YOU’VE SEEN A LOT OF CEO’S,
YOU’VE SEEN A LOT OF SMALL
BUSINESSES LOOKING TO HIRE
AMERICANS BUT YOU HAVEN’T SEEN A
LOT IN THE WAY OF COMMITMENT, IN
THE SENSE OF PERMANENT JOB
CREATION.
YOU HAVE SEEN A LOT OF TEMPORARY
JOBS BE CREATED.
WE ALWAYS WANT TO KNOW IF WE’RE
LOOKING FOR DEMAND TO BE SHELVE
SUSTAINING, WHAT THE ECONOMY IS
GOING TO LOOK LIKE WHEN YOU’RE
NOT INJECTING RECORD LEVELS OF
PERSONAL INCOME INTO THE WALLETS
OF AMERICANS.
I’M SURE, LOOK, YOU WATCH THE
MARKET MUCH MORE CLOSELY THAN I
DO.
WE’VE SEEN RECORD INFLOWS INTO
THE LARGEST TECH FUNDS, LARGEST
TECH ETF AND EQUITY EXCHANGE
TRADED FUNDS.
WE SAW THE LARGEST INFLOW ON
RECORD IN THE EQUITY MARKETS
LAST WEEK.
WE’VE SEEN TRAVEL AND AIRLINES
AND HOTEL PRICES GO THROUGH THE
ROOF.
YOU KNOW YOU WILL GET A SURGE OF
SPENDING.
YOU KNOW THERE IS A INFLUX OF
MONEY INTO THE EQUITY MARKETS.
I’M NOT SO SURE THAT IS EXACTLY
WHAT THEY WERE TRYING TO SELL TO
CONGRESS TODAY AT ALL.
THEY WERE TALKING ABOUT JOB
CREATION, NOT CONSUMPTION AND
SPENDING.
THERE ARE TWO DIFFERENT THINGS,
CHARLES, AND I THINK WE HAVE TO
DISTINGUISH BETWEEN THEM.
CHARLES: AND JEROME POWELL
HIMSELF BELIEVES IT WILL BE
SHORT-LIVED, RIGHT?
ALL THE SPENDING YOU’RE TALKING
ABOUT WILL HAPPEN WHEN WE GET
REOPEN.
HE BELIEVES THERE IS SHORT-TERM
PHENOMENA.
ANYBODY WORRIED ABOUT INFLATION
SHOULD NOT BE WORE IRID ABOUT
IT.
THEN WE GET TO YOUR POINT, THEY
KEEP PRINTING PRINTING UNTIL
THEY GET THE TO THE NEW
DEFINITION OF FULL EMPLOYMENT IS
BUT DOES THAT CREATE DANGERS WE
HAVEN’T THOUGHT ABOUT?
>> WE’VE SEEN EVIDENCE OF
FINANCIAL INSTABILITY
PERCOLATING ITS WAY THROUGH THE
SYSTEM BUT MORE TO YOUR FIRST
POINT, CHARLES, IS THE FACT, I
HATE TO BRING THE DOT-PLOT BACK
UP, I FEEL LIKE WE’VE GOTTEN
OVER TALKING ABOUT THE DOT PLOT
BUT IF YOU LOOK AT THE DOT
PLOTS, YOU’RE RIGHT, JEROME
POWELL AND HIS PEERS AT THE FED
THEY DO SEE GDP GROWTH FALLING
OFF SHARPLY AFTER THE
THIRD QUARTER OF THIS YEAR AND
FALLING BACK TO THIS 2% TREND
LINE.
I DON’T ASSOCIATE THAT WITH A
SELF-SUSTAINING, GROWING, ESCAPE
VELOCITY TYPE OF ECONOMIC GROWTH
AND I DON’T THINK HE DOES EITHER
AND THAT GETS US TO THE
CONUNDRUM, WILL WE BE LOOKING AT
SITUATION WHERE ONE OF THE
CONGRESSPEOPLE HAVE THE INSIGHTS
TO ASK THIS TODAY, ARE WE GOING
TO LOOK AT A SITUATION WHERE
WE’RE CONSTANTLY HAVING TO PRINT
MORE?
THAT IS NOT WHAT YOU GET IF YOU
CRAFT INFRASTRUCTURE LEGISLATION
IN AN FDRESQUE MODEL WHERE IT’S
A PUBLIC/PRIVATE PARTNERSHIP AND
MAKE SURE NOT BRINGING HOPE THE
BACON PORK TYPE OF SPENDING.
CHARLES: YEAH.
I FEEL LIKE MORE OF THE LATTER
RIGHT NOW, DANIELLE.
THANK YOU VERY MUCH.
ALWAYS APPRECIATE YOUR INSIGHT.
IT IS REALLY FANTASTIC.
I WANT TO KIND OF STICK TO THIS
TOPIC OF TAXES, TAKE A LITTLE
BIT DIFFERENT ANGLE.
THINK ABOUT BIDEN’S RESCUE PLAN,
THE LANGUAGE IN THERE, MANY
INTERPRET IT A THREAT AGAINST
STATE HAS WANT TO CUT TAXES.
WE KNOW THERE IS MAJOR, MAJOR
PUSH IN THE PACKAGE TO BRING
BACK THE WELFARE STATE.
DEMOCRATS ARE WORKING ON
LEGISLATION THAT WOULD REMOVE
RIGHT-TO-WORK STATES.
TAKE ALL THE VOTES MOVE THEM TO
THE SIDE.
ALL OF THIS WHILE THERE IS
ANOTHER BILL OUT THERE THAT
WOULD REALLY EXPAND VOTE BY
MAIL, SUPERSEDING STATE’S LAW.
JOINING ME FROM THE BAHNSEN
GROUP, MANAGING PARTNER DAVID
BAHNSEN.
WE’RE TALKING ABOUT TAXING AND
SPENDING BUT THE OTHER PART OF
THIS WHERE THE FEDERAL
GOVERNMENT IS ELBOWING OUT
STATES AND STATES RIGHTS.
I’M REALLY CONCERNED ABOUT THAT.
I DON’T THINK IT IS GETTING
ENOUGH PRESS.
>> IT IS GETTING VIRTUALLY NO
PRESS EXCEPT FOR OF COURSE
OUTLETS LIKE YOURS HERE, CHARLES
AND IT IS REALLY IMPORTANT.
NOT ONLY A GROTESQUE VIOLATION
OF THE TENTH AMENDMENT BUT VERY
REVELATORY ABOUT HOW THEY VIEW
WHAT IS HAPPENING ECONOMICALLY.
I BELIEVE THEY KNOW STATES THAT
ARE ABLE TO INCENTIVIZE ECONOMIC
GROWTH AND PRODUCTIVITY WITH
REDUCING MARGINAL TAX BURDENS,
THEY KNOW THAT WILL VALIDATE THE
WHOLE KIND OF SUPPLY SIDE
THINKING, PRO-ECONOMIC GROWTH,
LESS STATE INTERVENTION.
SO TO END UP HAVING COMPARATIVE
DATA, WHERE YOU SEE STATES THAT
CUT TAXES AND HAVE ECONOMIC
RECOVERY THEY HAVE, VERSUS ONES
THAT DON’T, I DON’T THINK THEY
WANT THAT DATA SAMPLE OUT THERE.
THIS IS REALLY, REALLY DANGEROUS
AND THERE IS NO REASON FOR
STATES TO PARTICIPATE IN THIS
KIND OF OPPRESSION.
CHARLES: NO, YOU’RE ABSOLUTELY
RIGHT.
THE EFFORT IN OF ITSELF IS
DEFACTO ADMISSION THERE IS
BETTER WAY TO DO ALL OF THIS.
>> YEAH.
CHARLES: WHAT ARE YOUR THOUGHTS
ON JEROME POWELL, PARTICULARLY,
NOT EXTENDING THE SLR EXEMPTION?
FEELS LIKE HE REINVENTED HIMSELF
IN A WAY THAT CERTAINLY THIS IS
NOT THE JEROME POWELL FROM THE
FOURTH QUARTER OF 2018?
>> WELL, CERTAINLY NOT, AND A
LOT IN OUR WORLD IS MUCH
DIFFERENT AS WELL IN FAIRNESS.
SO I WOULD MAKE TWO COMMENTS
BECAUSE THE SLR DEAL, REALLY
CAN’T HAVE ANYTHING GOOD
INCENTIVE ABOUT IT.
IT IS UTTERLY BIZARRE.
THE IDEA THAT BANKS WOULD NEED
TO HOLD 5% CAPITAL CUSHION
AGAINST UNITED STATES GOVERNMENT
DEBT, AGAINST TREASURY BONDS, IS
UTTERLY INSANE.
AND THE ONLY PEOPLE PUSHING FOR
IT FROM THE BANKS TO REGULATORS,
CENTRAL BANKERS THEMSELVES, ALL
OF THE REVIEW OF THIS THE ONLY
PEOPLE ASKING FOR IT ARE
ELIZABETH WARREN AND
SHERROD BROWN AND THAT ILK.
REALLY RADICAL, FAR LEFT,
PROGRESSIVES.
IT IS MEANT TO BE PUNITIVE TO
BANKS.
IT DISINCENTIVIZES LENDING AT A
TIME LOAN DEMAND IS HAVING A
HARD TIME COMING BACK UP.
A TIME WHEN THE GOVERNMENT IS
BEGGING PRIMARY DEALERS TO BUY
TRILLIONS OF DOLLARS OF THEIR
DEBT IT IS RIDICULOUS TO
DISINCENTIVIZE THEM FROM HOLDING
THE DEBT ON THEIR BALANCE
SHEETS.
SOMEONE DOESN’T UNDERSTAND HOW
CAPITAL RATIOS WORK BUT SEE
CHAIRMAN POWELL IS NOT THAT
PERSON.
HE DOES, FOR HIM TO CAPITULATE
HERE IS REALLY DISAPPOINTING.
I’M NOT AS CRITICAL OF JAY
POWELL FOR A LOT OF THE OTHER
THINGS GOING ON AS OTHERS MAY BE
AND OUR FRIEND DANIELLE OFTEN
MAKES GREAT POINTS WHAT IS GOING
ON AND THE ONLY REASON I SAY I’M
NOT, BECAUSE I THINK HE IS DEALT
BAD CARDS.
I THINK WE’RE DEALING WITH A
DECADES OF AFTERMATH OF THE
GREENSPAN PUT AND WITH
POST-FINANCIAL CRISIS, THE WHOLE
COUNTRY LOOKING TO THE CENTRAL
BANK TO DO THE DIRTY WORK AND NO
ONE ELSE WILL DO.
I THINK HE HAS A VERY TOUGH JOB
ON THIS SLR THING.
I HAVE NOTHING GOOD TO SAY.
CHARLES: YEAH.
I AGREE WITH YOU ON BOTH POINTS.
YOU WONDER, AT SOME POINT THE
BATON HAS TO BE HANDED BACK, THE
DIRTY JOB PART, LET THE FED
PRINT FOREVER.
WE’LL SEE.
DAVID, THANK YOU VERY MUCH.
ALWAYS ENJOY OUR CONVERSATIONS.