A lot of us spent a lot of the week actually trying to figure out where the
Fed is headed, chicken with a terminal rate.
And we had conflicting, I think at least somewhat conflicting answers out of the
Fed, including with Mr. Bullard, the Fed president saying, well,
five, five and a quarter and then put up a chart using the Taylor rule that
suggested seven. Where are we?
Look, no one knows. I think it's a mistake to be slavish
about Taylor rules. The market thinks the numbers are going
to be about five. I look at things and my sense is there's
more room for that to be too low than there is for that to be too high.
But it's pretty clear that we've had the big moves on this cycle and now we're
going to be finishing that process are off.
My view is that there's more risk from stopping prematurely and not really
curing inflation and setting the stage up for a wreaked celebration of
inflation. After it comes down, I see that as a
bigger risk than going too far, because going too far would mean bringing
inflation down below 2 percent. And that still seems to me like an
awfully remote risk starting from where we are.
But I think that the Fed has this in the right place when it says that they're
going to move up somewhat more and they're going to take stock of the
situation and see what the inflation data is saying and seeing what the
inflation forecasts are saying when we get to next get to the spring of next
fall. Spring, winter or rather spring of next
year. I have to say that if they hadn't made
as many mistakes as they did of excessive optimism about inflation,
they'd probably have a little more room than they do to rely on forecasts that
hadn't yet proved out that inflation was going to come down.
Larry, you and I talk a lot about monetary policy and fiscal stimulus and
things, but geopolitics also fit the increasingly in some of the issues
having to do with the economy. This week we had what is potentially we
don't know if it is an important development in the meeting of President
G of China and President Biden. What do you make of those discussions
and even ongoing discussions? Because now we have the USTR amount of
time actually meeting with their counterpart.
What do you make of the situation with China right now in the United States?
Look, as Churchill famously said, jaw, jaw is a lot better than bang, bang.
And so the fact that they had a meaningful conversation that lasted more
than three hours. The fact that they both came out of the
conversation with the sense that there had been satisfying dialogue, the sense
that there are some follow on steps. I think that's all to the good.
What it's really going to mean, what really is going to happen is they're
going to be constructive movement out of those dialogues.
I think that's something we're going to have to wait and see.
But I'm encouraged by. I won't by what I saw.
And I think it means that President Biden's whole trip has to be regarded as
a success. The United States back in the game with
respect to climate in Sharm el Sheikh, the meeting with Jay.
I don't think this G. 20 will be long remembered, but at a
very vexing moment, there could have been some kind of breakdown and there
certainly was not. That was as a minimal thing.
I've read some places people say at least there is a G 20.
And they came out with a joint communique and it was fairly tough on
Russia. I think it's fair to say and the
reporting behind the scenes are, is that some of the developing countries like
Indonesia and India helped drive that process, which might might want to
overread. It suggests that maybe we're taking a
half step back toward multilateralism. I think things.
I think. I think we are.
I think that what Russia has done has really shocked the conscience of the
world and has affected very, very many countries.
We'll have to see how this plays out. I think we need to remain aware that in
the original vote in the U.N. General Assembly, there were countries
with more than half the world's population who abstained on to Russia's
side, who declined to join in condemning Russia.
So I think we've got a lot of work to do.
And we in the United States tend to be a bit overoptimistic about the extent to
which all others see us as in a benign way that we see ourselves.
It's such an important point and it takes me back at least to China, because
it seems to me that sometimes we've been overly optimistic.
I mean, for example, going back to the time we admitted to the WTO, we thought
China was going to become more like us. And then we go to the other extreme of
being perhaps overly pessimistic about China.
I guess my question for you is former treasury secretary, among other things.
How do we play both sides of that? We don't know how we'll end up.
How do we keep open the realest? Possibly we can really work closely with
China, but also protect ourselves against the possibility of
confrontation. We in the United States probably need to
be careful about our evangelizing influence.
I don't think it's really for us to tell China how they should organize their
entire society. It's for us to stand up for some of our
fundamental interests in security and fair economic competition.
But to leave it at that point, I think we're going to need to be very careful
with respect to our diplomacy on the issue of Taiwan.
I think we need to be very careful about Trump, about giving China the sense that
we are trying to change the traditional One China policy, because I think that
could risk disastrous conflict. So I think the operative words for us
need to be respect for them, respect for the positions and the fundamental
interests that they have and at same time, absolute insistence on our own.
And I would say one other thing, David. I think ultimately we will prevail in
this broad contest with China. But I think if and when we prevail, it
is going to be more than anything else. On the strength of our example.
And that's why domestic renewal at home, whether the issue is scientific
innovation or infrastructure, whether the issue is doing something about
opiate opiate deaths or whether the issue is strengthening our education
system, whether the issue is building on the greatness of our universities or the
greatness of our national parks. Ultimately, it's going to be our ability
to remain the country that's the envy of the world, the country to which people
want to come. That is going to determine our success.
And if we change our focus from building ourselves up to tearing China down, I
think we will be making a very risky and very unfortunate choice.
Laura, I want to make a very large turn here.
I've had the benefit of talking to you about the Masters, about basketball's
was that I want to talk about Taylor Swift.
She's a rather popular pop music star and Ticketmaster, because we now know
the departure of justice is investigating possible antitrust
problems there because of Ticketmaster, which does, after all, have a like a 70
percent market share that's been under investigation for some time.
I don't know if you know much about Taylor Swift, although I am concerned
about you getting tickets, which apparently seems to be difficult.
But but more broadly, what does it say perhaps about some of the problems with
over concentration in the economy? You know, I want to say two things about
that, David. The first is that if the government made
a Web site. That functioned as badly as ticket
masters has here. Everybody would be laughing and scorning
the government. And so the next time the private sector
says that, you know, the public sector can't do anything right.
This was a private sector building a Web site sort of like that to build a Web
site for Obamacare, sort of like to have to build Web sites at the IRS or like
they have to build a build Web sites.
First, student loan debt relief and the private sector utterly failed.
And that's something that we just have to remember.
The next time somebody wants to say everything about government is hopeless.