THEIR HEADPHONES IN. IT’S ALL TODAY ON FLASHPOINT. HMM. ALRIGHT START TODAY. I HAVE
LONG BELIEVED THE JOB OF
JOURNALISM WAS TO SEPARATE THE
IMPORTANT FROM THE MERELY
INTERESTING AND ISN’T THAT A
TASK RIGHT NOW, GIVEN THE WILD
ECONOMIC SWINGS ON TOP OF OUR
HYPER POLITICIZED ATMOSPHERE,
AND THAT’S WHY I’M THRILLED TO
HAVE JUSTIN WOLFERS WITH ME TO
START TODAY. HE’S A PROFESSOR OF
PUBLIC POLICY AND ECONOMICS AT
THE UNIVERSITY OF MICHIGAN, AND
WHEN I SEE HIS NAME POP UP ON A
NEWS OR BUSINESS CHANNEL OR ON A
PODCAST, EILEEN IN SO JUSTIN.
GREAT TO HAVE YOU HERE AND I
WANT TO START WITH KIND OF WHAT
I FEEL IS YOUR SPECIALTY, WHICH
IS SEPARATING THE DIFFERENCE
BETWEEN THE HEADLINES WITH WHAT
IS ACTUALLY HAPPENING. IT WAS A
BLEAK WEEK IN THE MINDS OF MANY
. SO IS THE SKY FALLING OR JUST
SORT OF DROOPING A BIT. WELL I
ALSO LIKE TO SOMETIMES IMAGINE
THE GLASS IS HALF FULL, SO LET’S
START WITH THE HALF FULL SIDE.
OKAY WHICH IS THAT UNEMPLOYMENT
IS AT 3.6% WHICH IS IT’S NEARLY
THE 50 YEAR LOW PEOPLE ARE
QUITTING JOBS. FINDING NEW JOBS
, FINDING BETTER JOBS AND
FINDING OPPORTUNITIES. PEOPLE
ARE STARTING BUSINESSES PRETTY
MUCH AT RECORD RATES. SO THE
STATE OF THE ECONOMY IF YOU
THINK ABOUT IT IN TERMS OF YOUR
ABILITY TO GET A JOB, AND FOR
SOME PEOPLE, EVEN TO GET A RAISE
IS PRETTY GOOD. THE GLASS. HALF
EMPTY IS WHEN AN ECONOMY
OVERHEATS AND WHEN THE WORLD
GETS COMPLICATED RIGHT NOW,
HORNY, VERY COMPLICATED WORLD
WITH PUTIN INVADING UKRAINE AND
THE REST OF THE HANGOVER FROM
THE COVID PANDEMIC WHERE THAT’S
SHOWN UP MOST THANKFULLY, IT
HASN’T SHOWN UP IN JOBS, BUT
WHERE IT HAS SHOWN UP IS IN
PRICES. AND OF COURSE, WE’RE ALL
AWARE OF PRICES AT THE PUMP OF
GROWING UP A HECK OF A LOT SINCE
PUTIN IN UKRAINE, A RANGE OF
OTHER PRICES HAVE GONE UP AS
WELL. AND SO SOME PEOPLE ARE
FINDING IT A LITTLE HARDER TO
MAKE ENDS MEET RIGHT NOW. YOU
JUST POINTED OUT, THOUGH? YES.
YOU WOULD FEEL LIKE THE REAL
CALLING CARD HERE IS THAT LOW
UNEMPLOYMENT RATE, BUT I READ
THAT GOING BACK TO THE 19
FIFTIES. IF YOU HAVE INFLATION
AT OVER 4% AND UNEMPLOYMENT AT
UNDER 5% EVERY TIME THAT ENDS UP
ADDING UP TO A RECESSION
SOMETIME IN THE NEXT TWO YEARS
AFTER THAT OCCURRENCE IS THAT
THE CASE COMING OR ARE WE IN A
LABORATORY THAT WE REALLY DON’T
UNDERSTAND? I HEARD YOU REMARK.
RECENTLY THAT THERE IS NO LIVING
ECONOMIST RIGHT NOW WHO HAS
LIVED THROUGH A WORLDWIDE
PANDEMIC. I THINK THAT’S REALLY
IMPORTANT TO BEAR IN MIND. LOOK,
EACH OF US PSYCHOLOGICALLY WANTS
TO LEAVE THE PANDEMIC BEHIND US
AND FOR A MENTAL HEALTH. THAT
MIGHT BE THE RIGHT THING. BUT
FOR OUR ECONOMIC MANAGERS, IT’S
NOT AND THE POINT IS THAT THE
RULES OF A PANDEMIC ECONOMY OF
FUNDAMENTALLY DIFFERENT THAN
THAT OF ANY OTHER ECONOMY, SO
THE PATENTS THAT HAVE PREVAILED
IN THE PAST MAY NOT PREVAIL
AGAIN RIGHT NOW AND AS MUCH AS
MANY OF US ARE TRYING TO GET
BACK TO OUR REGULAR LIVES
REALIZED FIRST OF ALL THAT LIFE
IS STILL VERY COMPLICATED AND
MUCH OF THE REST OF THE WORLD.
CHINA IS OPENING AND CLOSING.
EVERY SECOND DAY. IT’S STILL
AIMING FOR COVID ZERO. AND
REALIZED THAT BUSINESSES THAT
SHUT DOWN LESS THAN A YEAR AGO
MANY OF THEM ARE STRUGGLING TO
REOPEN THE NEW RHYTHM OF WORK
AND THE NEW RHYTHM OF LIFE
WHERE, FIRST OF ALL, WE BOUGHT A
LOT OF GOODS WHEN WE COULDN’T
CONSUME SERVICES DURING THE
PANDEMIC. NOW, LIFE’S GETTING
NORMAL. WE’RE TRYING TO CONSUME
A LOT OF SERVICES, BUT NOT MANY
GOODS. THIS IS A WRENCHING
CHANGE IN THE ECONOMY OF NATURE,
WHICH I’VE NEVER SEEN BEFORE IN
MY LIFE, AND SO NATURALLY THERE
ARE GOING TO BE BUMPS ALONG THE
ROAD. I THINK ANY OF US COULD
HAVE PREDICTED THERE’D BE SOME
BUMPS. VERY FEW WAS PREDICTED
WHAT THOSE BUMPS WOULD BE, AND
IT TURNS OUT THE BIG BUMP RIGHT
NOW IS INFLATION. ARE YOU
COMFORTABLE WITH ALL OF THE TALK
? IN FACT, IT ALMOST FEELS LIKE
SOME PEOPLE BELIEVE IF RECESSION
IS A FOREGONE CONCLUSION. WHAT I
HATE IS THAT FOR SOME THAT IS
POLITICALLY ADVANTAGEOUS TO HAVE
THAT HAPPEN, WHICH I THINK IS A
HORRIBLE CALCULUS THAT WE LIVE
IN RIGHT NOW. BUT DO YOU FEEL
LIKE A RECESSION IS NECESSARILY
ON THE HORIZON? NO. THE WORD
RECESSION IS DRAMATICALLY
OVERUSED OUT THERE IN ECONOMICS
. IT HAS A VERY PRECISE MEANING
. IT MEANS THAT THE ECONOMY IS
SLOWING. IT’S GOING BACKWARDS,
PRODUCING LESS THAT PEOPLE GET
FEWER JOBS THAT PEOPLE ARE
SPENDING LESS. NONE OF THOSE
THINGS ARE TRUE. WHAT IS TRUE IS
INFLATION IS UNCOMFORTABLY HIGH
. THAT MAKES PEOPLE CRANKY. AND
SO THEN THEY USED THE FIRST
ECONOMIC SWEAR WORD IF YOU LIKE
RECESSION THAT THEY CAN THINK OF
LOOK, THE REALITY IS IF THE
ECONOMY WE’RE GOING INTO A
RECESSION, WHICH WHOLE LOT OF
EARLY WARNING INDICATORS GOING
OFF, AND NONE OF THEM ARE GOING
OFF RIGHT NOW WE’RE PRODUCING
JOBS THAT ARE RIGHT THAT IN
NORMAL TIMES, WE WOULD CALL A
BOOM RATHER THAN THE BUST. SO
I’M NOT PROMISING ANY OF YOUR
VIEWERS THAT WE WON’T HAVE A
RECESSION. BUT I AM WILLING TO
TELL YOU THAT, UH, THE STATE OF
THE ECONOMY RIGHT NOW, IN TERMS
OF GETTING PEOPLE INTO JOBS,
GETTING PEOPLE SPENDING GETTING
FACTORIES BACK TO WORK. ALL OF
THAT’S LOOKING PRETTY GOOD RIGHT
NOW. WELL, WE DEFINITELY NEED TO
HAVE PEOPLE WHO DO HAVE THEIR
HANDS ON THE FEW LEVELS THAT ARE
AVAILABLE. WE NEED TO HAVE
CONFIDENCE IN THEM AND LET ME
START WITH THE FEDERAL RESERVE.
THEY SEEM TO HAVE COMPLETELY
MISCALCULATED JUST HOW DEEP
INFLATION WAS GOING TO BE.
LAWRENCE SUMMERS WAS URGING THEM
A LONG, LONG TIME AGO TO BE
MOVING INTEREST RATES UP MUCH
MORE QUICKLY THAN THEY HAVE
ALREADY PROMISING. BASICALLY
ANOTHER BIG JUMP COMING UP LATER
THIS SUMMER. DO YOU HAVE FAITH
IN THE FED? I DO. LOOK WE ALL
HAVE TO ADJUST OUR EXPECTATIONS
. WE HAD A DRAMATIC FINANCIAL
CRISIS ALL THE WAY BACK IN 2000
AND EIGHT THAT RESHAPED THE
ECONOMY OF THE 20 TEN’S,
FOLLOWED BY THE LARGEST DOWNTURN
OF OUR LIFETIME, AND THE FED AS
A RESULT, HAD TO TAKE
EXTRAORDINARY MEASURES THROUGH
THE LAST 10, OR EVEN 15 YEARS.
WE’VE HAD INTEREST RATES CLOSE
TO ZERO THROUGH THAT ENTIRE TIME
. AND THE THING WE’VE ALL GOT TO
REMEMBER IS THAT AIN’T NORMAL.
THAT WAS THE FED TRYING TO BAIL
US OUT OF AN INCREDIBLY
DIFFICULT AND AWKWARD SITUATION
. WHAT THEY’RE TRYING TO DO NOW
IS BRING US BACK TO NORMAL.
NORMAL IS THAT THE INTEREST RATE
ON YOUR MORTGAGE IS ACTUALLY
POSITIVE, AND YOU HAVE TO PAY A
BIT EACH MONTH. IT’S GONNA BE
PAINFUL FOR PEOPLE WHO JUST
BOUGHT HOUSES OR WANT TO BUY
HOUSES. BUT REALIZE THIS IS
SOMETHING WE SHOULD ALL HAVE
SEEN COMING THAT AT SOME POINT
INTEREST RATES HAVE TO GET BACK
TO NORMAL AND NORMAL IS MAYBE
34% MENTIONED ARE POLITICALLY
CHARGED WORLD. A LOT OF PEOPLE
WANT TO BELIEVE THAT THE
EXECUTIVE BRANCH AND IN
PARTICULAR, THE WHITE HOUSE HAS
ACCESS TO LEVERS. IS THERE
ANYTHING THAT PRESIDENT BIDEN
SHOULD BE DOING OR IS THERE VERY
LITTLE THAT HE CAN DO? BUT WATCH
WELL, THE IMPORTANT LEVELS THAT
THE WHITE HOUSE HASN’T HAD WERE
IN MANAGING THE PANDEMIC AND
BOTH MINIMIZING THE IMPACT OF
THE DISEASE. AND I THINK AT BEST
, WE’D SAY, PARTLY SUCCESSFUL
AND THEN IT MINIMIZING THE
ECONOMIC IMPACT. GIVEN THAT WE
HAD THE DISEASE, AND THERE THEY
WERE DRAMATICALLY SUCCESSFUL.
THAT’S WHY WE HAVE AN
UNEMPLOYMENT RATE OF 3.6% RIGHT
NOW. WHICH TWO YEARS AGO YOU
REMEMBER THE DARK DAYS MANY OF
US THOUGHT UNIMAGINABLE NOW THAT
HAS COME WITH A BIT OF A
HANGOVER. THE HANGOVER IS
INFLATION. INFLATION IS
SOMETHING THAT’S BEST DEALT WITH
BY THE FED TRYING TO CREATE A
MORE SUSTAINABLE RATE OF
ECONOMIC GROWTH THAT WILL
TRANSLATE TO LESS PRICE GROWTH.
THERE WERE A FEW THINGS AT THE
MARGIN THAT THE ADMINISTRATION
COULD BE DOING, BUT THEY’RE
REALLY RELATIVELY SMALL, LIKE
THEM TO PAY A LITTLE BIT MORE
ATTENTION TO TARIFFS. I JUST
INSTALLED SOLAR PANELS. WHY
WE’RE PAYING TARIFFS ON SOLAR
PANELS, FOR INSTANCE, IS CRAZY.
UM MANY OF THE ELEMENTS OF
TRUMP’S AH TRADE WAR WITH CHINA
WOULD NEVER DISMANTLED AND IF WE
DISMANTLE SOME OF THOSE THAT
WILL HELP REDUCE PRICES, BUT
OVERALL, THIS IS A JOB FOR THE
FIT. LASTLY JUST I WANT TO ASK
YOU ABOUT THIS THE POLITICAL
ENVIRONMENT THAT I MENTIONED
EARLIER WHERE YOU’VE GOT SOME
PEOPLE THAT MIGHT ACTUALLY WORK
OUT IN THEIR FAVOR. IF WE WERE
TO FALL FURTHER BEHIND OR INTO A
RECESSION, AND WE HAVE WHAT SOME
PEOPLE HAVE POINTED OUT AS A
REAL DISCONNECT. THERE WAS A
POLL. JUST AS EVERYONE ARRIVED
FOR THE MACKINAW POLICY
CONFERENCE THIS YEAR, EVERYBODY
THEIR NUMBER. ONE ISSUE WAS THE
ECONOMY AND INFLATION, BUT WHEN
YOU DRILL DOWN, YOU FOUND OUT
THAT MORE THAN 70% OF THE
RESPONDENTS SAID THAT THEIR
LIVES FINANCIALLY WERE EITHER
THE SAME OR BETTER. WE REALLY
ARE FALLING PREY TO WHAT WE’RE
READING AND HEARING ON
TELEVISION AND RADIO, RIGHT?
THIS IS WHAT ONE OF MY FRIENDS
CALLS THE OKAY ECONOMY, WHICH IS
YOU ASK PEOPLE ABOUT THE STATE
OF THE ECONOMY, AND THEY TELL
YOU IT’S DREADFUL AND YOU HEAR
THEM USE WORDS LIKE RECESSION A
LOT. YOU ASK THEM ABOUT THEIR
FAMILY AND SAY, WELL, MY FAMILY
IS DOING OKAY. AND ACTUALLY YOU
LOOK AT WHAT PEOPLE ARE DOING IF
WE WERE REALLY PEOPLE REALLY
THOUGHT WERE ON THE CUSTOMER
RECESSION, THEY’D BE CUTTING
BACK SPENDING DRAMATICALLY.
WELL, THAT’S NOT TRUE. THEY’RE
SPENDING LIKE CRAZY. IF THEY
THOUGHT WERE ON THE CUSP OF
RECESSION, THEY WOULDN’T BE
STARTING NEW BUSINESSES. THAT’S
NOT TRUE. THE REALITY IS,
AMERICANS ARE ACTING AS IF
THEY’RE INCREDIBLY OPTIMISTIC
ABOUT THE ECONOMY EVEN AS THEY
MOAN TO THE REST OF US THAT
THEY’RE PESSIMISTIC. GONNA
CHOOSE TO BELIEVE THE OPTIMISM
FOR NOW, LET’S DO THAT. JUSTIN.
GOOD TO SIT IN ON YOUR CLASSROOM
TODAY. I REALLY APPRECIATE YOU
BEING ON FLASHPOINT. THANKS SO
MUCH. YOU’RE WELCOME IN CLASS
ANY DAY, MATE. THANKS VERY MUCH.
JUSTIN WOLFERS, THE ECONOMIST
FROM THE UNIVERSITY. ADMISSION
WILL BRING IN THE ROUNDTABLE.
RIGHT AFTER THIS. THIS IS
FLASHPOINT ON LOCAL 4. SAVE ON