We have a lot to talk about when it comes to the economy with respect to markets.
But I want to start with something very different and that is what we saw in that tragic shooting down in South Texas
elementary school. I'd like to say it's unimaginable except it's happened too many times.
Do you have any thoughts about what we're seeing in this country.
Horror rage frustration. We can do better. We can do better.
We need to think through what the right solution is. Some some limits on access to guns that don't threaten any real
Second Amendment right. Some red flags set of procedures they catch catch signs of trouble in people and take actions.
We just can't accept this as the regular order of business in America. And I think David it reflects something that maybe
broader a kind of new callousness in our country. We're probably only in the fifth inning with respect to Covid. There are gonna
be hundreds of people dying each day. As far as the eye can see. And we are not as a country making
the investments whether it's vaccines you can take through your nose whether it's new therapeutics whether it's a war on long
Covid and clinical trials that we need. We've let the Covid controversy become a green eyeshade thing about pay for us and a
culture thing about masks when they're the highest return investments available in our society for here and for leadership
around the world. And we just can't seem to get there. And I just don't understand why we can't all come together on the
proposition that innocent Americans shouldn't be dying and that it's government's first obligation in the name of security to
prevent that from happening. Yeah it's hard to imagine what's going on. Let's come back now to the economy if we could. And in
particular we had FOMC minutes coming out this week that the markets took as good news because they talked about having
raising rates at 50 basis points for two or three times. And then that gives them flexibility as the Fed already accomplished
much of what it has to accomplish with respect to inflation. I doubt it.
But I'm not sure. I think the Fed's flexibility is a much better place for it to
be than all this emphasis on forward guidance that we were having for a long time. I think humility is the right posture in
with respect to monetary policy. David as you know my view has been that inflation's not going to come down without some
meaningful downturn in our economy. That means an increase in unemployment. But I've been uncertain as to where interest rates
will have to go to achieve that particularly all that's happening that's been adverse for financial conditions in the
stock market and in credit markets. But I thought the Fed's posture at last was broadly appropriate and now the question's
going to involve carrying Karin through. But I do continue to believe that a soft landing is an unlikely
outcome and that those who are confident that it will happen. I don't think I have a basis for their confidence. OK well let's
talk about the Congressional Budget Office because I don't know how confident they are but they came out with projections this
week that would sure look like a soft landing. They have inflation coming at a two point three percent by 2024. They've
got GDP growth at one point five percent. Unemployment still under 4 percent three point eight percent. And the 10 year only
goes up to three point one percent. That sounds a lot like a soft landing to me Larry.
I've always thought of the CBO as a bastion of credibility. I've watched the CBO projections for 40 years.
This is their least plausible one in the 40 years that I've been watching. To be fair they have to lock that forecast up months
ago and a lot's happened that's been adverse in the last several months.
But they are the last holdout on team transitory on the conviction that somehow we can have the economy overstimulated
and still have inflation come way down because the supply side is just going to wonderfully materialize. That's a conceivable
outcome to possible outcome. How they could regard that as the most likely outcome is not
something that I can understand. You know David a good discipline for would have been a good discipline for them. Good
discipline that I try to use. I would commend your listeners is whenever you have a forecast imagine that it's way off on the
upside and imagine that it's way off on the downside and see if those two things are equally plausible. And I for one don't
think that 4 percent inflation is I think it's much much more plausible than 0 percent inflation.
Two years from now. And that tells me that 2 percent inflation isn't really a best guess.
One of the valleys this week was how the United Kingdom is addressing some of the energy cost problems. They're imposing a
25 percent windfall profits tax on excess profits from oil and gas. We had Mohamed El-Erian say you know what. He's not sure
it's a great idea but it's better the alternatives if they give that money that people were having to pay more. They don't tend
not to be the people can afford it. What do you think about windfall profits taxes on oil and gas.
I don't know about the British context but I think in the American context they'd be a grave grave error.
Today's windfall profits tax is tomorrow is a return is a tax on the return people made on investments that prepared for this
contingency. A society that imposes windfall profits taxes is a society that
discourages preparatory investments. It's a mistake.
If we need revenue which we do in this country we should get it by repealing the windfall profits giveaway that was represented
in the Trump tax cuts to a substantial degree. And that would enable us also to join the world in the global tax cooperation
that was such a great success for ISE Secretary Ya'alon. I've sometimes been critical of the by the administration but I
applaud them for having resisted the easy political temptation to windfall profits taxes. That was the courageous thing and
that was the right thing Larry. Let's talk about how we're trying to get our ISE inflation back here. We all have to talk
about macroeconomics. You're a renowned macro economists. Well I on the micro economics. Things like antitrust policy something
we talked about last week on Wall Street. You tweeted about it to good effect this week. Also for that matter tariffs. We
continue to talk about tariffs with even secretary say Blinken coming out giving a speech this week. Doesn't sound like those
China tariffs are calling off anytime soon. I would say this. Those who say that vigorous competition is central to capitalism
are absolutely right. We should be pushing for vigorous competition.
Probably the single most important instrument the government has for promoting competition in key industries is maintaining open
markets in which foreign companies have access to U.S. markets and can compete with U.S. producers and which in return for that
U.S. producers get more access to foreign markets. Trade liberalisation is central to having competition in the
economy and it should be at the front of any kind of competition policy.
If we had not had 17 and a half percent tariffs on infant formula we would be in a much better position with respect to
that issue today. If governments had more sensible procurement policies with
respect to infant formula at the state level we would be in a better position with respect to infant formula today. So yes I
applaud. The administration's emphasis on competition policy. But that means we've got to respect all competitors who can help
American households.