One of the big developments of this week was the European Central Bank which made an historic move 50 basis points also
implemented a new emergency policy. What did you make of what they did. Look I think they had to do it. Europe's got a serious
inflation problem. Yes a lot of it's coming from the supply side. But if you don't respond it becomes entrenched and not
much more expensive to eradicate. They've got an aspect to their problem that we don't have in the United States coming out of
the fact that they're a monetary union rather than just a monetary system. And so if you're going to have to administer
substantial shocks to contain inflation you're going to have to insulate the European economy and the weaker credits in the
European economy from that. And that's what they had to do. I think all things considered they took the right kind of steps.
And this is pushing Europe in the right direction in a dangerous situation. I was very sorry to see the political developments in
Italy which are yet another example of one of the great challenges of our times which is populist leadership and
populist politics unsettling the prospects for rational policymaking and creating
greater challenges in the long run. I strongly suspect that Italy will regret that Mario Draghi did not have a longer run as
prime minister and head of government. Well I'd take those two and put them together Larry. Actually the politics of Italy on
the one hand and the monetary policy of the ECB the ECB try to address some of that with their new policy was unclear exactly
how it gets implemented. Try to keep the spreads on the bonds for example between Italy and Germany in check. I mean here's
the ECB problem David. It's you know to use a phrase from the security area it's double deterrence. They want on the one hand
to deter the speculators from speculating against Italy and other periphery countries. That requires a confidence sense that
that the ECB is going to stand behind them. On the other hand they don't want to finance unlimited spending and so they want
to put pressure on countries to manage their affairs responsibly so that points towards an element of conditionality. But the
more the conditionality is credible to the countries the more it's unsettling to the markets the more confidence you give the
markets the more of the countries feel that they don't need to do their part in terms of making painful policy adjustments. So
it's a very difficult balance to strike. And I think this was a reasonable move forward in striking that balance. But it's not
going to be easy. Going forward one of the other things that we heard from Madam Legarde is something you and I have talked
about in connection with the Fed which is forward guidance. It sounds to me like essentially the ECB saying we're out of the
business of foreign for guides. We'll take it meeting by meeting David except for some quite particular quite unusual
circumstances. I think forward guidance is generally a mistake for central banks. Forward guidance tends to run into the
problem that the market doesn't believe it very much. So it's not very impactful. And the central bank takes its own
credibility seriously and it's constrained down the road by the forward guidance that it gave in the past. So except for very
extreme deflationary situations I think forward guidance is a tool that is better off kept in the closet back in the United
States. We've got a number of important events coming up next week. We've got a meeting of the FOMC. We also have really
important potentially data coming out particularly P.C. Corpus C and otherwise and also the ECI numbers. What are you going to be
looking at. Look I think the most interesting and informative number is going to be the ECI number David. The wage picture is
mixed. The average hourly earnings data that come out in each employment report have been relatively favorable and benign for
the last several months. On the other hand the last Atlanta Fed report which looks at the wage changes for particular
individuals and therefore controls for composition issues was really quite alarming. And so there is a divergence between
those two reports that is not well understood. And I think we'll get greater clarity on that when we see what happens with the
employment cost index. If wage inflation is continuing to accelerate which is what you would tend to think given how high
vacancies are relative to unemployment. That's going to be a very concerning sign if somehow despite everything. Wage growth
is slowing. That's got to be reassuring to the Fed in terms of the risks of entrenched inflation. So I think that's going to be
very revealing and informative. No when it comes I think at this point most people kind of have a 75 basis point increase locked
in for the Fed. And I don't think they expect the Fed to make a dramatic news with any policy
announcements. I think the P.C. number can be previewed pretty well on the basis of what happened in the CPI. It's likely to
look a bit better but we've still got us very serious slog of inflation ahead of us for the medium term. A huge amount is
going to depend on what happens with commodity prices. The agreement reached this morning that suggests that Ukrainian
wheat may at long last flow to the rest of the world. That was certainly an encouraging sign but there are huge overhangs of
uncertainty surrounding the oil market. And while it's not what's currently priced into the forward market I
think we have to recognize that there are real risks of substantial oil spikes. We're all focused on the Fed is the
front line of defense as it were against inflation. At the same time is it only the Fed. Are there things we can do in fiscal
policy at this point that can address the inflation issue. Look fiscal policy makes a big difference. This is. The time for
stimulative fiscal policies like continuing moratoriums on student debt relief. This is not the time for anything that's
going to be a big new spending program. In fact it's the time for short term deficit reduction. That's why I'm so disappointed
that the IDF seems to be gaining currency that you shouldn't raise taxes when there's inflation. I actually think that just
the right thing to do is to raise taxes right now to take some of the demand out of the economy. We can raise substantial
revenue by cutting corporate tax loopholes. In fact if we don't do it we're likely to lose what I think was a huge
accomplishment for the Biden administration. The global tax cooperation agreement that Secretary Yellen concluded we can
generate significant revenues simply by enforcing the tax law and taking some of the spend taking some of the money out of
high income tax evaders who then go and spend the money and that will contribute to reduced inflation as well. So I sure wish we
could get past this basically ludicrous economic idea that tax increases are
inflationary. It's just not right. One quick one here at the end Larry we had a lot of earnings out of tech particularly SNAP and
also Twitter. They didn't do so well this week. Is that tell us they were telling us anything broader. Look I think what you're
seeing in tech is what you kind of always see which is just when governments getting aroused that something is a source of
monopoly power and earning excess profits. That tends to be when it peaks in the marketplace. That's how it was with IBM many
years ago. That's how it was with Microsoft. I think we're seeing some elements of that with this advertising supported
tech businesses right now.