THROUGH THAT.
WILL YOU SHUT UP FOR GOD’S
SAKES!
KEVIN HAS IT HERE, FORMER
COUNCIL OF ECONOMIC ADVISORS,
"THE DRIFT."
I DON’T WANT TO DISCUSS WITH
MACHINES AND LEAVE BLOWERS BUT
THIS IDEA --
>> I HAVE SEEN IT SEVERAL TIMES.
NEIL: I REMEMBER TALKING TO YOU
SEVERAL TIMES BUT YOU KEEPING
YOUR COMPOSURE.
PEOPLE HAVE SEEN, HEARD THESE
REMARKS AGAIN, WE DON’T HAVE TO
REPLAY THEM NECESSARILY, BUT
JAMIE DIMON TALKING ABOUT THE
LIKELIHOOD OF A RECESSION AND
FURTHERMORE ANOTHER 20% HIT TO
STOCKS.
DO YOU AGREE WITH WHAT HE SEES?
>> YEAH, I THINK THAT, YOU KNOW,
STOCKS HAVE NOT HIT BOTTOM
SADLY.
I THINK THAT THIRD QUARTER GDP
IS ACTUALLY A LITTLE HIGHER THAN
I EXPECTED BUT I THINK PEOPLE
WILL LOOK BACK AND CALL THIS A
RECESSION YEAR AND I THINK THERE
IS MORE BAD NEWS TO COME.
THAT THE EFFECT OF THE FED’S
INTEREST RATE HIKES HASN’T
REALLY TAKEN OFF TO THE EXTENT
THAT THE FED RUNS DOWN ITS
BALANCE SHEET.
I DID SOME ECONOMETRICS ON THAT
A COUPLE DAYS AGO AND THAT IS
WORTH ABOUT 10% OFF THE S&P.
AND THEN IF THERE IS THIS
RAILWAY STRIKE, YOU KNOW, I
THINK THE RAILWAY STRIKE IS A
MUCH BIGGER NEWS STORY.
GOD BLESS YOU FOR COVERING IT
RIGHT AT THE TOP OF THE HOUR
THAN MARKETS EXPECT RIGHT NOW
AND THE POINT IS IF YOU LOOK AT
THE DEAL, IF I WERE A UNION
MEMBER I WOULD VOTE AGAINST IT
BECAUSE YOU’RE BASICALLY NOT
REALLY KEEPING UP, MOST OF THEM
ARE NOT KEEPING UP WITH
INFLATION IF YOU MAKE A
REASONABLE INFLATION FORECAST.
THAT IS THE PROBLEM WITH THE
ECONOMY RIGHT NOW IS THAT WAGES
AREN’T KEEPING UP WITH
INFLATION.
IT COSTS $460 MORE PER MONTH TO
BUY WHAT YOU BOUGHT LAST YEAR.
YOU CAN’T AFFORD TO DO THAT.
STANDARD OF LIVING IS GOING
DOWN.
GDP IS GOING DOWN.
I DON’T THINK MARKETS INVESTED
IN THAT IN HIGHER INTEREST RATES
JAMIE IS RIGHT.
NEIL: THEN YOU HAVE TO WORRY
ABOUT DISRUPTIONS IN THE
HOLIDAYS, HOW THAT LIFTS PRICES
ANYWAY.
IF SITTING ON THE FEDERAL
RESERVE, YOU’RE LOOKING AT
HEADWINDS THIS IS ONE YOU REALLY
DOESN’T PLAN ON.
HOW DO YOU THINK IT ALL GOES?
>> RIGHT.
I WANT TO GO BACK AND, YOU KNOW,
BASICALLY MAGNIFY THE POINT THAT
YOU JUST MADE.
SO IF I WERE IN THE UNION I
WOULD VOTE AGAINST THE DEAL.
BASICALLY JOE BIDEN IS TELLING
HIS UNION SUPPORTERS THEY SHOULD
TAKE A REAL WAGE REDUCTION.
THE POINT IS WHEREVER THERE IS
COLLECTIVE BARGAINING ANYWHERE
IN THE U.S., WORKERS ARE GOING
TO LOOK AT THE INFLATION
NUMBERS, THEY’RE LOOKING AT THE
WAGE INCREASE THEY HAVE BEEN
OFFERED, JEEZ, MY REAL WAGES ARE
GOING DOWN, MY STANDARD OF LIVE
BEING IS GOING DOWNTOWN WHAT
YOU’RE HEARING FROM THE WORKERS
THAT ARE VOTING ON THIS.
I DON’T THINK IT NECESSARILY
STOPS WITH THE RAILWAY UNIONS.
I THINK OVER THE NEXT YEAR THERE
COULD BE A UNION REVOLT AGAINST
THE HIGH PRICES AND SLOW WAGE
INCREASES.
THAT IS THE THING THAT I THINK
IS THE REAL DOWNSIDE FOR THE
OUTLOOK RIGHT NOW.
NEIL: YOU KNOW, KEVIN, WHILE I
HAVE YOU, WE’RE GETTING FLASHES
ON THE WIRES CONCERNING
CLEVELAND FED PRACTICAL RESERVE
PRESIDENT LORETTA MESSTER, I
BELIEVE A VOTING MEMBER OF THE
FEDERAL OPEN MARKET COMMITTEE
SAYING AMONG OTHER THINGS THE
FED HAS YET TO MAKE PROGRESS
ULTIMATELY LOWERING INFLATION.
SHE GOES ON TO SAY SHE DOES NOT
EXPECT THE FED TO LOWER RATES
NEXT YEAR.
THIS ECHOES NOISE WE HEARD OUT
OF OTHER FED GOVERNORS, THIS
TRAJECTORY IN RATES, FORGET
WHETHER THEY KEEP GOING UP
THROUGH THE NEW YEAR, THEY’RE
CERTAINLY NOT GOING TO COME
DOWN.
SHE EXPECTS RIGHT NOW THAT
UNEMPLOYMENT WILL BE FOUR 1/2,
4 1/2% BY THE END OF NEXT YEAR.
I THINK WE’RE AT 3 1/2% RIGHT
NOW THAT WOULD BE A BIG BACKUP
IN UNEMPLOYMENT AND THAT MIGHT
BE GENEROUS.
WHAT DO YOU THINK?
>> RIGHT, YOU KNOW I THINK THAT
AT THE JACKSON HOLE CONFERENCE,
I WAS OUT THERE, I REMEMBER
TALKING TO YOU WHILE I WAS OUT
THERE, THE FACT IS AT THE
JACKSON HOLE CONFERENCE THE
MESSAGE AMONGST CENTRAL BANKERS
FROM ALL AROUND THE WORLD WAS
ARTHUR BURNS AND THE ’70s IN
THE U.S. MADE A CATASTROPHIC
ERROR WHEN HE STARTED TO FIGHT
INFLATION.
SOON AS THE UNEMPLOYMENT RATE
WENT UP HE EASED OFF ON RATES.
I THINK THE CONSENSUS IS THAT
THE UNEMPLOYMENT RATE NEEDS TO
GO UP BETWEEN ONE AND TWO FULL
PERCENTAGE POINTS FOR THE FED TO
FEEL LIKE IT REACHED THE POINT
WHERE WAGE INFLATION AND PRICE
INFLATION GO DOWN TOWARDS THEIR
TARGET.
SO IF THE INFLATION RATE WERE TO
STAY STEADY, OF COURSE THEY WILL
KEEP RAISING RATES BUT EVEN WITH
INFLATION GOING DOWN FIVE TO 6%
FROM THE 8% WE SEE NOW, I THINK
1% HIGHER UNEMPLOYMENT RATE
WOULD NOT INDUCE THE KIND OF
RATE REDUCTION YOU WOULD SEE IN
NORMAL TIMES.
I WOULD THINK YOU HAVE TO GO UP
MORE THAN TWO BEFORE THE FED
WOULD CONSIDER A RATE REDUCTION
NEXT YEAR.
NEIL: THIS MIGHT BE OUTSIDE OF
WHAT WE’RE NORMALLY TALK ABOUT,
BRITAIN CONSIDERING FREEZING
UTILITY RATES AND BILLS.
NORM MATLEY THAT WOULD MAKE A
CONSERVATIVE WINCE, A FREE
MARKETEER WINCE.
IT IS GETTING FAVORABLE PRESS,
FINANCIAL TIMES,
"WALL STREET JOURNAL," THIS
NOTION IT COULD DO SOME GOOD.
I ALWAYS GO BACK TO WAGE AND
PRICE CONTROLS UNDER
RICHARD NIXON, THAT THAT COMES
OFTEN TIMES BACK TO BITE YOU.
WHERE ARE YOU ON THIS?
>> YEAH.
I AGREE WITH YOU, NEIL.
AND IT GOES BACK TO NOT TO DO --
YOU LET ME DO ECON 101 ON YOUR
SHOW SOMETIMES.
NEIL: BECAUSE YOU’RE VERY GOOD
AT IT.
>> THE PRICE.
BUT IF YOU TRY TO IMPOSE A PRICE
THAT IS LOWER THAN THE MARKET
CLEARING PRICE, THEN YOU END UP
WITH SHORTAGES, LONG LINES AND
SO ON.
SO MY EXPECTATION IS THAT IF
THEY TRY TO IMPOSE A PRICE THAT
IS DIFFERENT THAN THE MARKET
CLEARING PRICE THEN THEY’RE
GOING TO BE BROWNOUTS FOR
ELECTRICITY AND LONG LINES AT
THE GAS STATION AND MAYBE EVEN
GAS STATIONS SHUT.
I CAN REMEMBER BACK WHEN I WAS
GOING TO COLLEGE I WAS DRIVING
TO COLLEGE FROM MASSACHUSETTS
DOWN TO PHILADELPHIA.
REMEMBER YOU USED TO BE ONLY
TANK UP YOUR CAR EVERY OTHER
DAY.
NEIL: ODD, EVEN DAYS.
>> THE NUMBER ON YOUR LICENSE
PLATE.
THAT’S RIGHT.
AND SO THE POINT IS, THAT IS
WHAT PRICE CONTROLS WILL GIVE
YOU AND YOU KNOW, I’M SURPRISED
THAT NORMALLY PEOPLE LIKE
"THE FINANCIAL TIMES" ARE
SUPPORTING SUCH A MOVE.
NEIL: I WAS SURPRISED AS WELL.
WE’LL WATCH IT VERY CLOSELY,
KEVIN.
WE’RE BOTH AROUND THE SAME AGE,