So let's start with those Fed minutes that everyone was waiting for eagerly and they came out. The markets didn't know quite
what to do with them. What did you make out of those minutes. They confirmed what I suspected which was that the Fed doesn't
know where it is that the world is very ambiguous at this point and minutes of a meeting or a very poor way to convey a
collective message. Look the Fed has a fundamental problem about which it is not yet willing to be realistic and that is that it
is exceedingly unlikely that inflation can be brought down to target levels without a substantial increase in unemployment.
They want to be very concerned about unemployment and about inflation. And the reality is that it's probably not so
realistic to think that they're going to get inflation all the way down without getting unemployment up. And they don't want to
acknowledge that. And that forces a certain confusion into all of their statements. I can sympathize and understand
why they don't want to acknowledge that. Part of the problem is they've taken on an excessive obligation
to communicate. So I think they're in a very very difficult situation. I don't know to what extent they're going to choose
to take the pain that is ahead on the stag side and to what extent they're going to choose to take it on the flagrant
side. That remains to be seen. I suspect in some ultimate sense they don't really know either which way it's going to go. It's
got to worry them that financial conditions are now materially looser than they were
when the Fed last met and went in the middle of a tightening cycle. Financial conditions are substantially loosening. That
has to make a central bank nervous. David there's one other aspect to this situation that I think is very important and
under recognised. And that is because everybody focuses and focus is rightly on the geopolitics what's happening with Russia
and Ukraine what's happening with droughts all of it. They don't really fully internalize that oil prices and wheat prices have
both come down substantially and are predicted to come down substantially in the future. That's what's driving the
relatively limited inflation expectations. And those who were quick to focus on concepts of core inflation when headline
inflation was higher than core inflation can't stop doing that when headline inflation is lower than core inflation. And I
don't see that we're really making any great progress with respect to core inflation. I don't see it. With respect to the
wage numbers I don't see it. With respect to the median or trimmed mean
measures. And so I think we've still got a substantial inflation challenge ahead of us. One of the things the Fed emphasized in
the minutes besides really being concerned about inflation expectations on the other side of that was a softening housing
market something you referred to last week on this program. Give us your take on the housing market. Some people say we're in a
housing recession right now. So I think you have to distinguish movers from stay or sort of put it differently. You have to.
Look at you have to think about what the right way to look at rents is.
Here's what's true. What's true is that last year people who were signing new leases or buying new homes were paying 15 or 20
percent more than they had a year ago. Nothing like that. Fed into the consumer price index or the
Fed's preferred measure the P.C. index. All that fed through was the small fraction of people who
saw their rents change and a constant rent for everybody else. What that means is that down the road like now you're seeing
inflation not because new leases are going up so fast although they still are going up at a reasonable rate. But just because
the people whose leases are coming up are seeing substantial increases. And so we're going to see significant housing price
inflation in the measures of inflation that are used probably for another six to nine months. That's a different thing than
what builders are responding to. Builders aren't responding to that. Builders are responding to what they think the price of
houses will be a year from now and that come down. And so we're seeing a slowing in
building. And that's what happens when interest rates go up. When interest rates go up in some ways it makes sense if we're
going to have a decline in economic activity. It's better to have a decline in something where we've already got a huge stock
of it and it's only the new flow that's being affected. Then in the in something that we need to consume on a continuous basis.
And that doesn't have any duration to it. But I do think we're looking towards softness in the future with respect to housing.
And I'm sure there'll be differential impacts in different parts of the country. As I say my best guess is that we will have a
meaningful recession sometime in the next two years. And if so I think there's considerably more pain. With respect to housing
ahead Larry we'll talk about softness in slowing. We certainly saw that in numbers coming out of China at the beginning of this
week. And I wonder what you make of the Chinese problems. As we know there are three or four of them. They're interlocked there.
But on the other hand is it possible that we'll give a little at least a little relief to the Fed here slowing inflation.
Probably will. It goes back to the issue we discussed a few minutes ago David
about oil prices and grain prices. The main impact of Chinese slowing is likely to be on commodity prices. And there's a
question as to how much weight those should be given as we think about our inflation rate in this country. But it probably is a
positive on inflation. I think the larger questions involve how we see China in the future and how China will be responding to
these economic difficulties. These as I've been saying now for some time are looking like increasingly profound events in
China. It was taken as almost axiomatic six months or a year ago that at some point the Chinese economy would surpass the
American economy in terms of total GDP at market exchange rates. That's now much less clear than it previously was. And I think
you're seeing all kinds of challenges for China. There's the huge financial overhang. There's the where the growth is going
to come from. There's the growing Communist Party involvement in a wider range of enterprises. There's the demographic challenge.
I have been saying for some time that I think people are going to look back at some of the economic forecasts about China in
2020 in the same way they looked back at economic forecasts for Russia that were made in 1960 or for Japan that were made in
1990. Laura one last one here. Toward the end of the week Turkey's central bank made a move to try to combat inflation by
you believe this cutting the interest rate from 14 to 13 percent. This of course is part of President Irwin's theory of
interest rates and inflation. What did you make of that. President IRDA One is the world's first practical modern
monetary theorist. He is. Putting modern monetary theory into effect so far it hasn't worked very well for him or for the
Turkish people. I don't think that's going to turn around. And I hope that the misguided acolytes of modern monetary theory in
the United States are watching.