Your words what ultimately matters is not the timing of liftoff on policy rates but the cumulative response. Can you build on
that for us. Yeah I mean we all focus on when exactly the left was going to
happen. And as you mentioned they are being brought pretty aggressively into 2020. Now I would push back on the tracks and
22 seems like extremely aggressive to us but we might see the beginning of the hiking cycle in 2022. But ultimately what's
going to matter when it is very unusual this cycle is that the cumulative response to this kind of inflation that we haven't
seen in 30 years will be much more muted. And historically and that's going to be meaning that real rates in our view are
remain very low for a sustained amount of time. And that's a that's a different read to address. Yes. And I think that's a
much more constructive backdrop that's sustained. And that's where there is a risk of confusion. We think so. hastag
confusion for us as a starting point of any conversation what does the fiscal impulse of this natural
disaster of this pandemic what does it do to the geometry that any given central bank faces. It's not in the textbooks is it.
It's not in the textbooks and we call this all kind of complex world. We talk about a policy evolution over the last few years
this complex of both mastery policy and fiscal policy moving very aggressively. But that leaves us at the place now where you
know we cannot forget about this but the debt levels are very high. Not long ago you know the narrative in the US was you know
the debt servicing costs are so low. Like record levels are low that we can afford to increase the debt very significantly which
we've done. The flipside of this which we'll see soon is that it won't take
much in terms of rate increase to change the story completely on its head. You know we cannot 10 year back at 2.5 percent. And at
that point that servicing costs in the U.S. will be back to their to their historical level trying completely out the
window. You know the argument that Summers and Marshall were making in just a couple of years ago. So point being to your
point at a time it's it's not textbook and it's going to be a constraint on equity rates can go up. Jihye Lee. I find this
fascinating. The idea here that central bankers and frankly policymakers in general don't want to see rates go up too high
because the economy is no longer able to withstand it because of what you're just talking about. Does that mean that the more
volatile asset class is perhaps short term yields that have very little room to maneuver but could potentially be offset
dramatically by what might people might speculate about policy changes whereas stocks continue to be supported no matter what
by the negative real yields that you see persisting. Yeah. So it's certainly consistent with what we've seen over the
last month or two. Right. I mean there are lots of swings around the repricing option or the near term policy. And yet the
backdrop has been you know continues to be constructive. More broadly for risk assets I think that would be consistent with
you know rates might be lifting up a different point in time. But there's a conviction that overall this is going to be a
muted the hiking cycle. And if it were not Jason Kelly I think we've seen some example of that then markets are quick to price
some kind of policy mistakes of quick reversal of policy which speaks to this environment we're talking about is going to be
difficult to raise rates or to put it is like any rate rise. We'll have a bigger impact. John I'm honored to do this
with your work at Princeton. As you know the great Olivier Blanchard of France of M.I.T. and of the International Monetary
Fund. Professor Blanchard is out with a blistering note this morning in the Peterson Institute saying forget about team
temporary forget about team gloom. Jon mentions Dr. El-Erian.
He says we need to get used to the consequences of higher inflation.
What are the consequences of a sustained higher inflation. Is Olivier Blanchard mentions.
Well I mean it feeds to the entire economy. So you know there will be adjustment. True. You know obviously prices. But that
means also we'll see some wage dynamics that none of those wage rent. I mean that will be different than that. Eventually you
know workers will want to keep up with this. Inflation is going to
change the bargaining kind of situation. And I think we'll see wages catching up. We haven't seen. I think I don't know. I
haven't read yet Olivier's piece. But I I would suspect like one of the key point is for the last 20 years where inflation was
missing in action and even if we are you know 2.5 percent well going back you know after some some spikes it's going to feel
different. For that reason. And the other big point is how will people react in terms of the expectation of inflation. I don't
think people we have collectively a good handle. There's no good models of inflation expectations. And so that's a big unknown I
guess that we'll need to track and live with. Now.