So, Larry, at the very end of the week on Good Friday, we would say this was of
that persuasion. We've got the jobs numbers, two hundred
thirty six thousand. Pretty much right on expectations.
Although the bond market was a little disappointing.
They were hoping something softer. What do you make of them?
I think this was not a very newsworthy bit of news.
Things came in pretty much as people expected.
The numbers reflected the strength that we certainly saw in the early part of
the first quarter. I don't think this bears on very much on
interpreting the economy because the numbers are a few weeks old when we get
them. And more importantly, because those
numbers, employment and unemployment are lagging indicators of what's happening
in the real economy. So the real question is still how much
of a credit crunch is coming in the wake of all the banking problems, in the wake
of all the disturbances in the banking sector?
And that's a very hard thing to know. Well, that's a Shery Ahn credit crunch.
I mean, some people refer to that as saying the credit just not available as
opposed that it's more expensive. Is that what you mean by it?
And again, when do you think we might have a sense of whether that comes to
pass? I think it's a combination of, you know,
something's available at any price, but if the price is too high, it doesn't
really matter that it is available. I hope we're getting a sense that there
is some substantial amount of constriction
in credit. If you looked at the forward looking
numbers this week from the PMI surveys, those numbers were really quite weak.
If you look at the UI claims with the new seasonal adjustment, they're
suggesting much less strength than they had been earlier when you looked at
vacancies. They seem to be coming, coming down.
So I think you have to say that recession probabilities are going up at
this point. And I think the Fed's got very, very
difficult decisions ahead of it with very much a
two sided risk. That's a consequence of where we sort of
found ourselves with an overheated economy.
Well, the Fed's going to have to do something coming up in early May.
What would your advice be then, given where we are right now with the day
you're seeing? It's too early to come to a view.
I think what's pretty clear is that we're in the very late innings of any
tightening site of the current tightening cycle and
whether there's going to be another move necessary or not.
I think that's a judgment day should be holding off on until the very last the
very last kind of kind of moment, because it's not
easy to make that judgment. Given that we are getting more and more
indication that a variety of things starting from commercial real estate are
are softening. David?
Said Larry, those of us in the financial news media, as you know, tend to focus
on individual data points and individual decisions.
The Fed take a step back, though. The Fed, I'm assuming, has a longer term
view of where the economy is, where it's headed.
Take a longer term view or the next year or so.
How should the Fed be looking at this economy?
I'm going to even take a slightly longer term view than than that, David.
I think the Fed needs to engage in some serious soul searching.
They rely on models. They rely on a set of established
institutional ISE procedures. Those procedures got inflation very,
very wrong for a very long time. And those procedures missed what was
happening at Silicon Valley Bank and in a number of banks because of the
discontinuity associated with highly mobile deposits and associated with loss
of market value on long duration securities.
And so I think the Fed needs to think about the ways it does business, the
ways in which it does, and more importantly, does not consider
discontinuities in the economic environment.
The other thing to which the Fed needs to turn its focus is its concept of the
future financial system in this world that is high interest, straight, high
digital. How is it that we're going to have a
financial system that's structured? Because more than I think most people
have appreciated. We've had a financial system that has
been based on the willingness of large numbers of households to earn almost
nothing on their money. Larry, let's turn this specific.
Certainly something that you've been quite involved in.
You've done a lot of work of written papers on the question of IRS and tax
enforcement, not raising taxes very much, just collecting the ones we're do
already. You've talked about it on this program.
We've talked about for some time there was something put in the Inflation
Reduction Act. I think maybe you're the godfather.
It actually puts more money into it.
And this week we had an announcement that both the first step, they're going
to do a digital first. What do you think about the approach as
you understand it? I was very pleased to see what IRS
Commissioner Werfel had come up with. Working closely under the direction of
Secretary Yellen and Deputy Secretary Ida, IMO,
this is a huge opportunity. Without raising taxes that are
legislated on anybody. We all agree that people should pay the
taxes they owe. Our country's got a tax gap over the
next 10 years, that's going to be seven trillion dollars.
God knows we can figure out how to collect 5 percent of that.
I actually think there's some research that's going to come out in the next few
weeks that very strongly confirms this view that we'll probably get 10 or more
percent of that and we forget it from affluent
people in the top 1 percent of the income distribution just by making sure
that people don't cheat. And that's at the center of this
program. What's also at the center of this
program is starting to provide better, more decent service for people.
So they get their refunds quickly. So they get the phone answers when they
have a question. God knows the era of chat.
GP to me should not be the era of vacuum tubes at the IRS and full credit to the
Biden administration people and the people in Congress who supported this
legislation here in 2022 to bring the IRS into the 21st century at last.
And I think Commissioner Werfel is strong new leadership in that regard.
Of course, it's the planning part is easy.
The objective setting part is easy now is when the hard work of execution
begins. But this is something that all Americans
have a stake in. And again, this is not arguing about
what is a tax shelter or what isn't a tax shelter.
This is money that everybody agrees is owed that we are not collecting.
That comes disproportionately from our wealthiest taxpayers.
And finally, Larry, you said the magic words to borrow from Groucho Marx there,
if I may, chat GP. You brought those words originally to
Wall Street week. I know you've been following it closely
now as you talk to people about Chad Draper and its potential.
Where do you think we're headed? Here's the thing I'm seeing more and
more. I think it's coming for the cognitive
class. Chelsea Piti is going to replace what
doctors do, hearing symptoms and making diagnoses before it changes what nurses
do. Helping patients get up and handle
themselves in the hospital, it's going to change what traders
do going in and out of financial markets before it changes.
What salespeople do, making relation, making relationships with potential
clients. It's going to change.
White authors and editors
do before it changes what people in bookstores
do. And so I think this is going to be an
enormous change over time in our society.
And I think it's got a great opportunity to level a lot of playing fields.
And I have to say, David, that I think some of
the people who've been quickest to say structural change is just something you
have to live with and accept as the part of modernity when it was happening to
other people. People who maybe wore uniforms to work
are now going to be seeing it happen to them.
And it'll be interesting to see how they respond.