The Fed had a hard job before the war came up. There are a lot of problems there. Now they get the war on top of it. In a
nutshell it's a favorite game. How they doing. You know what I mean listen I think you're Powell alluded to the
fact that they should have moved earlier. I mean we're in you know the fight is behind the curve significantly behind the
curve. You know now I think what's really tricky is how do you move. How do you move to the other side quickly and not disrupt
the system so aggressively. So I think they're in a tough spot. In fact I think this is the toughest spot I've seen a Fed in
maybe in my career. So so. So I think it I think it's going to be a challenge. I think you've got an economy that you know we
say this high prices are the cure for high prices. You actually see an economy that's starting to moderate in a number of
places. And I think that I think the Fed has to try and be careful about not letting the economy slip into a recession
while they're well they're trying to deal with inflation. Listen much of this inflation is supply shock driven. You know when you
go through some of these you know we talk about energy a lot. You know the global wheat production 34 percent comes from
Russia Ukraine pretty incredible numbers. You're going to see that flow through food prices. So it's a challenging dynamic
that's going to impact the economy for sure. And the Fed's got a got to run a straddle a very fine line. So as you say record
high prices are said to be the solution for high prices. I would put up a chart here for our television audience will describe it
for those of us joining us on radio that basically illustrates that point in terms of real consumption not now a consumption
but real consumption. The extent to which really inflation this way is outpacing the growth in consumption. It's pretty
incredible David. I mean we went through this period with this explosive set of real growth quantities real growth of goods
demand that as you as you emerge from the pandemic you were buying cars and furniture et cetera of an across the board
electronics computers et cetera. Then now you get this spike higher in prices. And what you're seeing is a pretty
extraordinary dynamic that now real real consumption is starting to come off i.e. the cure for high prices high prices people
start to pull back on demand. You're seeing this in the inventory builds. Retailers are growing interview. You're seeing
inventories start to build. That will bring that will bring prices down. But it's definitely something to pay attention to.
I think. One other chart that shows the dynamic that where we are today in consumer sentiment consumer sentiment is the lowest
it's been in 10 years. You know desire a good time to buy a car a house. Durables are really falling precipitously. So you know
this is part of that dynamic that the Fed has got to straddle this line and the consumers are going to are going to pull back.
I mean look at these numbers. It's pretty staggering. I think you're talking about these numbers falling off a cliff when the
consumer is arguably in the best shape I've ever seen them in history. Savings rate is up wages are up hiring is up and yet
they're going to pull back and they're going to wait because these prices are eye popping high. And Ed wait for a four for
better period of time particularly when we need when you look at the consumption basket for lower middle income fuel and food
shelter where you're seeing the biggest price hikes makes it really tough for consumption to stay up. I want to come back to
the lower middle income. But before that just interpret that conditions chart for me just a little bit. Rick is that death
and destruction worth RTS. That's exactly right. I mean it's literally the dynamic by the way you've seen us in corporate
earnings. Interesting. You see a lot of companies now and they're reporting the revenues are still decent. But then when
you actually dissect their revenues and you get a dynamic where wow they're not getting it from quantity anymore they're getting
it from price. There's a limit to how much you can get. And this is part of why earnings can can start to come off over the next
couple of years because you can't keep getting it through price. You got to get it through through quantity as well. By the way
when you look at what the Fed did in terms of their projections this week they dramatically brought down real GDP. They dropped
dramatically brought up inflation. Listen. That is something that will boost the economy. The U.S. economy particularly the
most flexible self calibrating economy in the world. And I think you're going to see that you're starting to see that
transmission through the economy today. And yet as you point out there may be some good news in here that some of the middle and
lower income people are gaining the most right now. So I mean this this is you know I think it's a very easy answer.
And quite frankly I don't think it's a complete answer when people say gosh the Fed just got to keep raising rates and do it
quickly. You've got to be really careful if you think about what's happened the last few years. Wages are moving up. You're
bringing more people into the labor force. By the way there's two million or so less people in the labor force today than pre
coded. You'd need to keep cultivating that. And this is where I think when you look at this chart I mean look at how well lower
and middle income is doing now. You're seeing exclusive wage growth and people coming into the workforce. That is something
the Fed wants to keep going. And particularly think about the income burden in this country or today I should say the debt
burden in this country. And we're going to have to fund an awful lot of debt over the coming year. It's going to be really
careful if you lift interest rates too much that debt burden is going to be too high. And B you want to keep lower and middle
income wages up and keep bringing people into the labor force. So I just don't think it's as easy as some. Well say like like
she's getting a great wage rates up we got to get them up quickly. We've got to reduce the balance sheet quickly. I think
listen we're far from neutral but needs to move away from easy policy which is I mean think about think about the irony. QE was
happening last week and now now we're going the other side. They've got to move quickly away from that. But I just think
projecting out where we're gonna be six months hence on the economy. I just don't think that that's as easy as people
suggest it is. It's a risk. You're responsible for investing an awful lot of money there at BlackRock. I have to ask you how are
you taking to account if at all the war in Ukraine. Because it looked to me this week like the markets almost said we're going
to react for a while but we're over it. We're back to saying words business as usual.
Virtual avatar is the most extraordinary weeks in markets I've ever seen. I mean so by the way the news now is the Ukrainian
news. You had a more hawkish fed and then the markets just in particular the equity market just went right through it. Now
some of it is rate stabilized. That was a big deal. Part of his people sitting on the sideline. The losses have been significant
this year both in bonds and stocks. So people were on the sidelines are sitting on a lot of cash.
And then you know you started OK maybe I can start to put some money to work. And I said that started to build on itself. And
listen there was one significant piece of news this week that should not be underestimated. China is watching how China is
going to align with Russia or not. And there were some significant statements both on the regulatory side on the growth
side but also somewhat with what clearly appears to be some detaching between China and Russia. And that was one of things
the markets were super concerned about because that creates a framework that's really hard to deal with. Bless your brother
for raising because the other question I had was China because some people think that maybe President Xi capitulated when it
comes to. So the regulation of big tech and some of the issues with really seeking investors from outside of China.
Yeah I mean listen it was a pretty strong set of statements. I mean I was actually blown away by how aggressive these
statements were. I think there's a couple things to talk about your point. Chinese economy has been slow right hand and you
have the lockdown in some of the citizens and et cetera. That is that has created some concern. And then you know a lot of
pressure and immense pressure on some of the markets there. So listen I thought it was a pretty strong statement. And I think
that's part of what the markets latched onto this week.