We've got CPI numbers this week. On Wednesday they came in significant better than a lot of people thought they would. So
you find some relief from this. Are we over the worst of it when it comes to inflation.
I think these were encouraging numbers. We we knew that the headline number was going to be coming substantially down
because we could see what had happened with gasoline prices. The core number was better than most people expected. That's
certainly better than the alternative to that. On the other hand it was heavily driven by volatile sectors like used cars like
hotels like airfares. We serious seen this movie before. We had a terrific core number in March but it was from those volatile
sectors and then it bounced back up in April May and June. So we'll have to see what happens going forward. But this is
certainly a better number than most people expected and it will come as a bit of relief to the Fed. But I certainly think it's
nothing like we are out of the woods. It's nothing like a fundamental change in the orientation. It's nothing. That means
that we can pivot away from the overwhelming paradigm being a need for restrictive policy to contain inflation. Well that's
what I want to ask you. Some relief for the Fed you said. Is there a risk in that you've warned before about backing off too
quickly in the cooling of the economy. Is there a risk the Fed pays too much attention to numbers like these. We'll have to.
We'll have to see what they do. If the Fed regards this as a major game changer they will be making another major mistake. I
would be surprised if they regarded it that way because I think when you look within it you'll see that seasonally adjusted
airfares coming out of 2 July ISE when airfares were highly distorted by Covid. How could you take that seriously as a huge
harbinger of new trends. So I don't think they will make that kind of mistake. They certainly shouldn't make that kind of
mistake. But you know you get out of woods and even deep woods you get out of them one step at a time. So I don't want to deny
that this that there's some encouragement in this number. But overreacting to that would be a grave mistake. I think that on
your show before David I've talked about how prudent people finish their regimen of antibiotics even as they're gratified
for days in that they feel better. Len I still think that's the right metaphor for thinking about this situation. You know I've
talked a lot about rates. What about the balance sheet. Because I might say just about every week after we get done on this
program somebody e-mails me says what about the balance sheet. How effective is the balance sheet in helping to slow down the
economy get our arms around inflation. And are they doing it the right way. Should they be coming off the balance sheet even
faster than they are. I wonder if they should come off faster than they are. I think the clearest statement about the balance
sheet is that they should have stopped buying six or nine months earlier than they did. I think it's clear that we had something
that history will look back on as a bit of a housing bubble. And I think they contributed to that by buying mortgage backed
securities. Now I certainly think they're going in the right direction. We've Kutty rather than QE. Could they do it faster.
Perhaps they could. Would it make a major difference. I'm not sure that it would. Would it add to financial risk. It might. In
terms of some kind of accident in markets in general David I think
yields are driven more by the fundamentals of what's happening in the economy and less by central bank policies like Kutty and
QE that I think many in the markets think you know I could be right about that or I could be for I could be wrong. But I think
people often ascribe to the direct impact of these policies what is in fact a signaling with respect to future monetary policies.
And I don't think that now. This is an area of stability. The Fed has set an expectation that expectation is under way. I
wouldn't be recommending a. Change in balance sheet policies add at this point. Laura we spoke last week. Inflation reduction was
getting toward being statute. Now we actually have pen put to paper. One of the issues that has been of concern to you is
carried interest. You were concerned actually that should go further and cutting back and carried interest. In the end they
went even less far. What do you make of what happened there particularly with some of the lobbying we saw on Capitol Hill. I
think it's very sad how much special interest lobbyists were able to stop things that are
clearly in the public interest. The idea that carried interest which after
all is income paid to people who work at providing a service. Some people provide the service of legal work. Some people
provide the service of serving meals. Some people provide the service of asset management. And the idea that the people who
provide the service of asset management who are often some of the best paid people in our country should be able to have their
compensation be taxed at half the rate of everybody else I think is outrageous. And I think it's very very sad that people on the
progressive side allowed themselves to be persuaded by very substantial donors to their campaigns that the legislation as it
was originally drafted should be gutted in that area. I also think it's very unfortunate even more unfortunate because it's
in some ways a larger issue that the hugely historically important legislation or an
agreement that Secretary Yellen reached with President Biden very much involved to foster international tax cooperation.
That's probably going to collapse now or may well collapse because Congress wouldn't pass the enabling legislation by going
after tax havens. And I sure wish that that had happened. I hope that some way will be found to go back to that set of issues and
frankly gave it it all has me thinking about the role of money and business interests in our system. As you know I am hardly
one who takes the perspective of the most progressive wing of the Democratic Party most left wing of the Democratic Party that
wants to see things socialized or wants to see punitive taxes levied. I tend to be on the more moderate side but I am pretty
offended by what's happened here. And I think business leaders who lobby these provisions who want to be explaining about
public private cooperation in the national and global interest and all of that I think they should always be asked shouldn't
they start by not lobbying to subvert the tax system we have.