I could call this the week of inflation as it were with the CPI numbers the PPA numbers something you've been warning about for
some time now some people are saying that shows sort of we've hit the peak it's starting to come down. What did you read into
those numbers. You know once again the numbers were worse than people expected
them to be. We may have hit a peak last month at eight point five but we're not heading anywhere near to anytime soon. And
that says that we've got very big challenges ahead of us in terms of managing this economy. And I think there's a lot of
real risks out there. I see an overheated labor market as the core of the inflation process driving service prices up. And I
see lots of risks geopolitically in terms of supply chains geopolitically in terms of commodity prices. And so I think this
is going to be a very difficult environment for quite some time to come. Well let's talk about that quite some time to come.
Because we're now starting to see some people including Jason Furman on Bloomberg this week say he thinks that we could have
years of inflation even get a recession. We would because there are some structural factors that could give us long long
inflations that a long Covid. I think the two sets of issues that mean that is a plausible
view. One is most inflations don't get stopped with a single slowdown. There are multiple attempts to break inflation before
there's ultimate success. That was certainly the case in the previous big inflation that we've had in the modern era. In the
1960s and 1970s. And then there's the argument. I never sure how much weight to give it that we're probably in a more labor short
economy that we used to be that the pressures of globalization that we used to feel are no longer there that there's more
capacity of firms to niche market than there used to be. And that all of that means there's going to be a bit less ruthless
deflationary pressure than we've seen in most of this century so far and that that could operate in the direction of higher
inflation. I think I'd be very surprised if the average inflation rate during the 20 20s wasn't materially higher than
the average inflation rate during the decade of the teens. And it's reinforced by a growing number of voices. I'm not yet
prepared to join the chorus saying that we should set a target for inflation that is higher than 2 percent. Could conceivably
be ultimately right. But I think moving in that direction immediately would very much undermine what limited anti
inflation credibility the Fed has. So Larry the question that obviously is what do we do about this inflation. Is there
anything that can be done. Obviously the Federal Reserve has the frontline responsibility but we also have the executive branch
and now the legislature saying well we can do some things. We have President Biden saying the FTSE take a look at price
gouging. And then we have the speaker of the House Nancy Pelosi saying she's going to bring legislation forward next week about
price gouging at the pump. It's not going to help us. The price gouging at the pump. Stuff. The more general price
gouging stuff is to economics science. What President Trump's remarks about disinfectant in your veins was to medical science.
It is dangerous nonsense. There is no material prospect that in any enduring way gouging
legislation can have any substantial effect on inflationary pressure. But it can cause and contrive all kinds of shortages.
It can distort a complex network of flows between crude and refined product. It can inhibit the supply responses that are
what's ultimately the best way to overcome inflation. This gouging talk is a diversionary confusion. It's
something that tends to happen when we have inflations but we only make progress once we move through that. And we understand
that the real determinants of inflation have to do with the total level of demand that's being stimulated by policies. If
politicians outside the Fed want to make a difference on inflation to the limited extent they can they should be reducing
tariffs. They should be letting more immigrants into the country. They should be reducing regulatory burdens like the
Jones Act that mandates that only U.S. ships can take crude oil from Texas to the northeast. They should be limiting them
limiting demand by asking borrowers at a moment when they have better financial condition than any time in a very long time to
pay back their student debts rather than maintaining the moratorium. Those are the things that you can usefully do to
influence the inflation rate and all is gouging. Talk is a pandering diversion from all of that.
Let's wrap up this week with a couple of quick rifts from the headlines. One of them is crypto currencies and stable coins.
The prices of those certainly didn't go up this week. In fact I saw there like something like turning 70 billion dollars where
the market value taking away. Do we know anything at the end of the week about cryptocurrency stable coin that we didn't know at
the beginning of the week. We've been reminded of something we should have known which is
that fear and greed drive financial markets all financial markets and cryptos not immune from that and bank run phenomena
whether it's banks whether it's money market funds whether it's repo or whether it's crypto. When you don't have backing and you
lose confidence you get a big mess. And finally Larry at the very end the week on Friday Elon Musk tweeted on the one hand
that he was having some second thoughts about Twitter. And then he came back and said no no he's still committed to it's not
clear. The stock certainly went down came back a little bit but it certainly went down substantially. Does it say something
larger about what's going on with tech right now. We saw that the value of so many big tech companies has come down. It's
possible this is actually having some buyer's remorse. Iran is I think Iran Musk is I think in some ways the Andrew
Carnegie of our time a titanic innovative driving extraordinarily wealthy
figure who when he has leverage uses it. And with the changes at Twitter that have already taken place in the absence of other
bidders he has enormous leverage in this situation. And I suspect he's using it. That's fascinating. And Andrew Carnegie
of our time that will go down. But the larger issue is tech not going to have as large a role in the markets going forward as it
has in the past. I suspect that that the share of total wealth total stock market that's in tech may be somewhat lower over the
next few years than it has been over the last few years. But I think it's going to continue to be the case that the most
valuable companies are tech companies. I think it's going to continue to be the case that as it always is that
technology and the transformations that it brings are driving history. My guess is that we're going to see very profound
changes coming out of artificial intelligence over the next decade. And I'm not sure where that's going to go.