We've lost it strikes me two world leaders in a sense this week in very different circumstances. Boris Johnson of course forced
to step down as prime minister of the United Kingdom. But then at the end of the week we lost to an assassin's bullet Shinzo
Abby the longest serving Japanese prime minister in history. I wonder is this telling us anything larger about the state of the
world when we had these sorts of events in a single week. You know what the assassination of Shinzo Harvey in Japan is a
tragedy. It's a tragedy for his family. It is a tragedy for Japan. It is a tragedy for the Japanese American relationship
which is the linchpin of our whole approach to Asia. Ultimately I think it is a
global tragedy. And I have to think about what it represents. And it represents a manifestation of a kind of swirling anger
that seems far too pervasive in our politics almost everywhere in the world. In a very different way. Brexit. Boris Johnson's
ascendancy represents that kind of swirling anger and his ultimate Lee falling from power is a product of these kinds of
divisions. And we certainly see this in our own country with the question of worldly succession of power on the table with the
bitter controversies that surround the Supreme Court. And so I think ultimately all of us have to reckon with this rage
that seems to be a feature that cuts across very very many societies. And that is going to be a
framing aspect as we discuss the more narrow particulars of economic policy going forward. Larry it strikes me that former
Prime Minister Obey had a fairly profound I believe macro economic effect unlike a lot of prime ministers and have met
presidents. You had a named after him. I'm an addict. What was. I'm an addict. And in the end did it work.
Ivan nomics was an attempt to jolt
the Japanese economy out of two decades of secular stagnation and disinflation with radically expansionary
policy both on the fiscal side and on the monetary side and with structural policies like major efforts to get women working and
enfranchised in the labor force. And I think one would have to say that it was a success by the standards of what had come
before. But it was not fully mission accomplished in terms of what was happening in Japan. But I think it will be remembered
as one of the more aggressive and successful reprogramming of macro economic strategy that we've seen in a long time. And if
as I fear after this current inflationary episode the issues of absorbing
savings secular stagnation that we've talked about on and off on this show recur in Europe and in the United States then I think
that of a nominee legacy will be studied very very carefully because in some sense Japan was the first to experience the
challenge of demographic contraction and of excess saving. But it may not ultimately be the last bringing back the United
States. And some of those questions you just mentioned about inflation. We got jobs numbers at the end of this week higher in
the terms of the overall addition to jobs. At the same time a little lower than was expected by some at least in the wage
increases. What did you make of the jobs numbers. Look I think we have a very ambiguous
economy right now. We've got indicators of strength in many in many sectors particularly travel and services. This was a strong
employment report once again in an economy where the labor force only grows by 50 or 75000 people a month. You can't forever be
creating three hundred and seventy five thousand jobs. There's nothing here to suggest that the economy is currently collapsing
into recession. And we certainly could have seen a wage inflation number that was much more alarming. And so from that
point of view I think there was a little bit of reassurance on inflation here but we still have a very ambiguous
picture. I don't think that this changes fundamentally the picture we had
coming in that. Interest rates are still considerably below where they're going to need to be that the economy has very
considerable inflation risks and that the Fed has the challenge of trying to achieve as soft a landing as possible in an
airplane that's on a very complicated kind of trajectory. So I think that most people are saying there's little in these jobs
numbers that would indicate that the Federal Reserve that they should back off at least yet the rate hikes. Do you agree with
that. And what factors should they be looking at as they determine whether in fact and when they should back off.
I think that there's nothing here that should change somebodies mind in a major way about what monetary policy is going to need
to need to do at the next meeting or at probably the meeting after the next meeting. I think what would start to change
things would be very strong evidence that the economy was slowing substantially in and across the board way.
With respect to consumption and investment demand I think if you saw a precipitous decline in the level of vacancies and level of
labor turnover that would be an indicator that I would be watching.
But as long as we're in almost unimpressive we're actually unprecedented territory in terms of the ratio of job openings to
unemployed people. I don't think we can stop being concerned about inflation. ISE
Larry something I'm curious about from you as an economist is it possible to have a recession when we have full employment or
very close to full employment. Or another way to put it is do we have to have a precipitous fall in employment or rise in
unemployment before we really should be very concerned about recession.
I think it would be hard to imagine a recession in which you didn't have some meaningful increase in unemployment. It's not
something we have ever seen before. And in some ways the very definition of recession is a broad gauged sustained decline in
economic activity and the act of hiring and working is the central part of that economic activity. So could we see two
quarters in a row with GDP decline. Yeah I do think it's possible that we'll see that
between the first and two quarter second quarters of this year. But would that be something that we would think about as a
recession in the classical sense. If it wasn't coupled with employment statistics different from the ones we've seen I don't
think the National Bureau of Economic Research would or should label that a recession.
So how concerned at this point are you about a recession. Larry. I still think the dominant prospect is that we will have a
recession in within the next year or two. I think the chances that it has already be gone look a little bit diminished to me
relative to what I would have guessed several weeks ago. Not impossible but I think more unlikely than I would have judged
several weeks ago from the recent numbers.