Let's start at the end of the week, if we could, on Friday with the jobs report
came in a little bit softer than one anticipated.
150,000 and 180,000. Are we starting to see that slowdown
that we need in order to get inflation under control?
It is hard to know. You know, there was an automobile
strike. There's a lot of fluctuation of from
month to month. The labor market is not quite red hot in
the way that it was a few months ago. But whether it's in a place that's
consistent with sustainable inflation at 2%, I think that's still very much in in
doubt, though. This was a this was a favorable number,
but I don't think anybody should overinterpret it.
We're talking about overinterpreting. What about what Chairman Jay Powell had
to say actually earlier in the week, because the markets certainly ran with
it. They basically took it as saying we're
pausing, we're not going up anymore. We're happy days are here again.
Are the markets overreacting to think about where we are and what actually he
said? I think it's unfortunate when there's
excessive volatility in either direction.
In response to Fed meetings, I think smoother communications that induces
less sharp volatility would probably be would probably be better, though it's
obviously a very difficult role that the chairman has.
I am not confident of a central element in the Fed's thinking, which is they can
regard higher long term rates as some kind of contractionary impulse to which
the right response is for their policy to be easy.
If, for example, the higher rates are coming from a sense that we're going to
have larger and more expansionary fiscal policy or a sense that we're going to
have more robust investment demand down the road, that is not a basis for
lowering rates or having easier financial conditions, even if it comes
from an increase in the term premium. It's not really clear how big the impact
of changes in the term premium is on stock prices or business investment
decisions. So I think the argument that was being
made is a bit less ironclad than the chairman suggested.
And I think that in general, the kind of very dramatic response we've seen in
interest rates this week, the longer term and in stock prices make me not as
certain as many people that the job of containing inflation is over and that
the war is done. They're right to be watchful and
waiting, but I think people are a little bit too much of a hurry to declare that
we've done all the monetary policy that we need to do.
What do you think about the job the Treasury is doing in managing this?
We have something a dispute right now between Stanley Druckenmiller on the one
hand and Janet Yellen the other, about exactly how they're terming the debt.
So I don't want to get I don't want to get in the middle of that dispute.
But I'll say this. If you take the combined job that the
Treasury and Fed did. At the moment of maximum opportunity to
issue long term debt in 2021. When rates were on the floor, they were
busy stretching out, turning in the debt mostly due to quantitative easing that
wasn't being offset. The Fed's lost probably hundreds of
billions of dollars in market value of its portfolio.
The Fed's remission back to the Treasury is much smaller than it could have been
because of those losses and is actually turning negative, and that negative
isn't showing up in the fiscal accounts. So I don't think our debts have been
well managed over the last few years. I think a corporate treasurer who had
been moving all through 2021 to a floating rate debt or more floating rate
debt would kind of have surprised his CEO and maybe wouldn't be looking so
strong today. Obviously, the reason we have the debt
is because we're spending more money than we're taking in.
Let's talk about the taking, in part because we had to balance this week
where the House of Representatives and the Republicans and has represented had
a new bill for support for Israel. And they said they were going to pay for
it by cutting back on something you had been advocating, actually, which is more
resources for the IRS, even though CBO, Congressional Budget Office said
actually it's going to increase the deficit.
I know you feel strongly about this. So look.
We have to be a serious country in a very dangerous world.
And that means promptly voting financial support for Israel and for Ukraine.
And if we don't, it's going to have a very important effect on American
leadership in terms of how that is financed.
The single most foolish way to finance that would be with further cuts in the
IRS budget. They would raise the deficit and debt
over time as we collected less revenue. They would exacerbate inequality because
the principal beneficiaries would be affluent people who had cheated on their
taxes. And they would demoralize the overall
tax system where the vast majority of people are honest.
But, Larry, it's a dangerous world. It's also a divisive world.
And we're seeing some of that division right back here in the United States,
something we've talked about on this program before with you, Larry, But it
doesn't seem to be subsiding. Some of the turmoil, the roiling on
college campuses right across the country as people pick up sides and a
lot of anti-Semitism, frankly, is being expressed.
What do you think we are right now and what can be done, particularly by the
leadership of universities? It's a it remains a difficult, very
difficult issue. Look, everybody should be allowed to
have their say without being explicitly punished, even if that say
offends people. No one should be doxxed.
But every university president in America has a playbook for these kinds
of situations. It's the way they've responded to racial
incidents or homophobic incidents on their campus.
And the issue this month of anti-Semitic incidents is just as serious, maybe in
many ways more serious, given what we saw, for example, at Cornell.
And universities need to go to that playbook, which they've used often in
the past, and too many universities have.
I'm very sorry to say, a double standard where anti-Semitism doesn't get the same
regard. Yeah, let's let's absolutely debate the
rules about free speech and hate speech and universities involvement in
politics. Those are important debates to have.
But let's have a single standard for all kinds of prejudice.
David, I've seen a lot and I was somebody who was worrying about
anti-Semitism and BDS and boycott Israel and all of that 20 years ago.
But I have to say that I have been profoundly surprised and disappointed by
what I have seen since these Hamas attacks on many college campuses, but on
many other places as well. And that is something that I think all
of us have to take seriously. I have been very glad to see the
powerful way in which President Biden has addressed these issues in general
and the way in which he and his colleagues in the Education Department
have addressed them in the call in the context of college campuses.
And I hope that that's going to be an inspiration to others around these
issues going forward.