So Larry this was quite a week in the market you saw equity markets really selling off rather substantially. It's got a lot
of people nervous. Is that going to help or hurt the Fed's effort to address inflation.
I think it's part of the Fed's efforts to address inflation the way monetary policy works is by raising the costs of capital and
discouraging investment. The way it works is by reducing wealth which reduces spending. This is part of the process. This is a
feature not a bug associated with the tightening of monetary policy that we've had. And the reason I've been reasonably
confident that the economy will slow down but not so confident about just where interest rates will go is because of the
uncertainty about what economists call the transmission mechanism how large a decline in markets how much of a
discouragement of housing you get as rates go up. What's at that very point. What is the risk from where you see it right now of
the Fed essentially getting cold feet as we see the markets really go off substantially. S&P now it really in bear market
territory. What's the risk that they'll let up too soon on the interest rate hikes.
Look there's two risks in a situation like this that we overshoot the runway and that we land the plane too hard and
those are both very real risks in this situation. It's a very very difficult landing that the Feds attempt at. As I've said on
your show before David. There's never been a moment when we had unemployment below 4 and inflation above 4 when we avoided
having a recession within the next two years. And that just goes to show the huge difficulty of the task that is before the Fed.
My own judgment is that it's distinctly more likely than not. Probably two in three or three and four that we will have a
recession that will start sometime within the next two years. When we look at the markets right now a lot of this reaction we
think is a reaction to the possibly of higher interest rates. Is it possible it's actually bleeding over into the underlying
economy itself. Because we also saw some retail sales numbers that concern people from Wal-Mart and from Target this week.
Maybe people aren't spending as much money. We also have seen some softening housing numbers. There are various indications
that by the way a lot of the things that people are buying they're buying with increased credit card loans. So I think that
the prospect of recession is looking much more real to markets right now than it was a few months ago. You see that in the way
in which certain retail stocks have been hammered. You see that in the way some credit spreads have
widened. And it's just you see it in the behavior of the overall market.
So I think you still have more room to go in. As I say I do think we're unlikely to get
out of this with sustained expansion. There are some costs. There are other ways as well to address the inflation problem.
One of the suggestions is increasing corporate taxes. That's something suggested by President Biden for Mr. Business. Amazon
came out against that. You had a little bit of a disagreement on Twitter this week.
Yeah look I I've been hardly consistently supportive of everything the White House has said on fiscal policy and now I
haven't been consistent with everything they've said on policy towards business either. And I've got great respect for Jeff
Bezos as a business leader and as an observer of the economy. But I didn't really see his point. It seemed to me that it was
pretty natural to raise corporate taxes so as to reduce spending when you had an economy that was overheating. And it seemed to
me pretty reasonable strategy to try to raise taxes to reduce spending in ways that would affect the most fortunate people in
the society. And it seems to me that that's what President Biden was is trying to do and that's what he pointed up in his
remarks. So I didn't understand why Jeff Bezos was suggesting that they were somehow an obfuscation
or somehow an inappropriate kind of commentary. Agree or disagree with the president's policy. But I found Jesus's
comments to be somewhat off base. Another way that President Biden is suggesting we might address some of the inflation
problem is by more vigorous enforcement and trust lies. We had the assistant attorney general for antitrust this week come out
and say he thinks he's got some problems with private equity. What do you make of the efforts at the FTC and the private
justice on antitrust front. I'm very worried about whether they are in the right direction.
I don't think there's any question that we need to step up and say I trust enforcements in America only there's any question
that there are areas where we have too much monopoly power that should be price that should be prosecuted principally where
individual firms are merging to get excessive market shares in particular industries. The budgets of those agencies have been
allowed to erode in ways that are quite damaging. What I think is badly misguided and potentially dangerous to our economic
future is the set of doctrines that people jokingly refer to as hipster
anti-trust or the new Brandeis aeons after Justice Brandeis. That's a theory that says antitrust shouldn't be about
maximizing benefits to consumers but should be about some other different set of abstract objectives. And I think that tilts
very easily into a kind of dangerous populism. If the head of the antitrust division thinks that there are mergers that are
headed towards Monopoly he should try to block those mergers. If the head of the antitrust division believes that there are
companies that are engaged in inappropriate exclusionary business practices he should prosecute those companies. But I
don't understand what his argument is that whether a firm is owned by public shareholders or private equity shareholders
should be dispositive. If he's saying that all the private equity firms are colluding on particular deals I understand that
argument. And if he can prove that argument it would obviously be a serious problem. But it frankly sounded rather like some of
the populist rhetoric that the FTC commissioner Lena Kohn has engaged in. And I think it's very important that we have
antitrust policy based on facts based on economic science based on consumers not on a kind of generalized feeling of hostility
and outrage towards business. And I'm frankly worried about that. Okay. One quick one here at the end. There was a big
objection for the shareholders to Jamie Dimon as compensation as a 50 million dollar bonus that they were going to pay him that
they really objected to. What did you think of that. Look I think taxes ought to be more progressive. And so Jamie
Diamond what Jamie Diamond and everyone else who makes a lot of money ought to be paying more in taxes. There ought to be much
harder for them to pass large fortunes to their kids. But God if you look at
what Jamie Diamond has contributed to the market value of the share owners of JP Morgan I don't think there's anything
unreasonable about his being paid making as much money in a year as a really great pro golfer. And so I was surprised at those
objections. I think the way to get at issues of inequity is to have more progressive taxation more burdensome taxation on
estates. Get rid of a whole set of loopholes. But driving people out of leading public companies into the private sphere away
from public companies I don't think that's smart strategy for our country.