Larry there's a lot of focus out there right now about the pace of rate hikes the number of rate hikes. There's a little bit
Larry there's a lot of focus out there right now about the pace of rate hikes the number of rate hikes. There's a little bit

less discussion though out there right now about the balance sheet the potential balance sheet run off the Jay Powell has
less discussion though out there right now about the balance sheet the potential balance sheet run off the Jay Powell has

said he would provide a roadmap for at this meeting. What does a reduction of that 9 trillion dollar balance sheet mean if at all
said he would provide a roadmap for at this meeting. What does a reduction of that 9 trillion dollar balance sheet mean if at all

for the inflation mandate. Look I think it's the right thing to do. I think frankly it's well over too. It was very hard to
for the inflation mandate. Look I think it's the right thing to do. I think frankly it's well over too. It was very hard to

understand why when we were in the midst of the biggest house price run up ever that the Fed was buying mortgage backed
understand why when we were in the midst of the biggest house price run up ever that the Fed was buying mortgage backed

securities on a substantial scale. So I think the move towards rundown of the balance sheet is overdue and appropriate. I don't
securities on a substantial scale. So I think the move towards rundown of the balance sheet is overdue and appropriate. I don't

think it's going to have a large independent effect. I think much of the effect that balance sheet moves have had in the past
think it's going to have a large independent effect. I think much of the effect that balance sheet moves have had in the past

has been because of their signaling impact on monetary policy rather than their direct impact. But it will certainly add to
has been because of their signaling impact on monetary policy rather than their direct impact. But it will certainly add to

the monetary tightening that we're going to see. People have estimated that it may be the equivalent of one or possibly two.
the monetary tightening that we're going to see. People have estimated that it may be the equivalent of one or possibly two.

I think one's a bit more likely much 25 basis point rate hikes. And when you pair that with the rate hikes that at least the Fed
I think one's a bit more likely much 25 basis point rate hikes. And when you pair that with the rate hikes that at least the Fed

says are on the table a potential 50 basis point hike at this meeting and maybe another one at the meeting in June here. Do
says are on the table a potential 50 basis point hike at this meeting and maybe another one at the meeting in June here. Do

you think that that would give the Fed I guess enough ammunition to tamp down inflation or would they have to continue going
you think that that would give the Fed I guess enough ammunition to tamp down inflation or would they have to continue going

forward with additional rate hikes. Look I think it's hard to say. I think ultimately inflation depends on financial
forward with additional rate hikes. Look I think it's hard to say. I think ultimately inflation depends on financial

conditions. And what happens to rates is one important part of it but it's certainly not the only important part of it. My
conditions. And what happens to rates is one important part of it but it's certainly not the only important part of it. My

guess would be that the Fed's going to need to go further. I think that in order to reduce inflation you need to raise
guess would be that the Fed's going to need to go further. I think that in order to reduce inflation you need to raise

neutral raise real interest rates above their neutral level. If we've got 3 or 4 percent inflation and the neutral real interest
neutral raise real interest rates above their neutral level. If we've got 3 or 4 percent inflation and the neutral real interest

rate is as the Fed believes half a percent then you're going to have to be up in the four and a half five range to get inflation
rate is as the Fed believes half a percent then you're going to have to be up in the four and a half five range to get inflation

meaningfully down. And that's my best guess. Well I think the Fed's making a mistake when it speaks of raising rates above the
meaningfully down. And that's my best guess. Well I think the Fed's making a mistake when it speaks of raising rates above the

neutral rate and treats that as meaning rates above 2.5 percent because that 2.5 is only the neutral rate if inflation is down
neutral rate and treats that as meaning rates above 2.5 percent because that 2.5 is only the neutral rate if inflation is down

at the 2 level which is what the debate is about. So my best guess is that rates are going to have to go up more. If they
at the 2 level which is what the debate is about. So my best guess is that rates are going to have to go up more. If they

don't it will be not so much because we suddenly get good news on inflation but it will be because we get worse news on the
don't it will be not so much because we suddenly get good news on inflation but it will be because we get worse news on the

economy than many people expect. So I think we're looking at a pretty difficult situation. So when it comes to the news on
economy than many people expect. So I think we're looking at a pretty difficult situation. So when it comes to the news on

inflation though I mean we have the latest employment cost index which was released this week showing that the employment cost
inflation though I mean we have the latest employment cost index which was released this week showing that the employment cost

index rising the most that we've seen on record in the first quarter here. We know that wages compensation benefits tends to
index rising the most that we've seen on record in the first quarter here. We know that wages compensation benefits tends to

be much more sticky less transitory than some of the other elements of inflation out there. How would you suggest that the
be much more sticky less transitory than some of the other elements of inflation out there. How would you suggest that the

Fed address that. Look I think that we should be thinking in terms of wage or labor cost inflation as a kind of super core
Fed address that. Look I think that we should be thinking in terms of wage or labor cost inflation as a kind of super core

measure of inflation. Seems to me it's hard to escape the conclusion that it's running at five and a half percent or more.
measure of inflation. Seems to me it's hard to escape the conclusion that it's running at five and a half percent or more.

And with labor markets tight and creating several hundred thousand jobs a month I think it's likely that rates are going
And with labor markets tight and creating several hundred thousand jobs a month I think it's likely that rates are going

to rise further. Of wage inflation. And that suggests to me that while used car prices semiconductor prices oil prices will
to rise further. Of wage inflation. And that suggests to me that while used car prices semiconductor prices oil prices will

fluctuate month to month that we have an underlying rate of inflation increasingly being baked in that is well above the
fluctuate month to month that we have an underlying rate of inflation increasingly being baked in that is well above the

Fed's target range. That's why I think they need to be raising rates
Fed's target range. That's why I think they need to be raising rates

above the neutral level. They could somehow get lucky on this. It could be that we're going to see wage inflation subside of
above the neutral level. They could somehow get lucky on this. It could be that we're going to see wage inflation subside of

its own accord. But gosh as I go around as I talk to people what I see and hear much more is labor. Talk that need to ratchet up
its own accord. But gosh as I go around as I talk to people what I see and hear much more is labor. Talk that need to ratchet up

wages to hold on to. Workers need to ratchet up wages and labour costs in order to attract people. The pioneering of new kinds of
wages to hold on to. Workers need to ratchet up wages and labour costs in order to attract people. The pioneering of new kinds of

employment benefits that are costly in order to maintain the morale of workers. All of that I think contributes to
employment benefits that are costly in order to maintain the morale of workers. All of that I think contributes to

inflationary momentum. All right. So as the market sort of focuses in on the Fed and I guess more importantly whether the
inflationary momentum. All right. So as the market sort of focuses in on the Fed and I guess more importantly whether the

Fed is willing to sort of stick stick by this sort of reduction in accommodative policy a lot of people are looking overseas
Fed is willing to sort of stick stick by this sort of reduction in accommodative policy a lot of people are looking overseas

Larry. And the decision this week by the Bank of a by a Bank of Japan to effectively maintain its accommodative policy for a
Larry. And the decision this week by the Bank of a by a Bank of Japan to effectively maintain its accommodative policy for a

much longer period of time and signal at least to the market that they're fairly comfortable with a weaker yen and some of
much longer period of time and signal at least to the market that they're fairly comfortable with a weaker yen and some of

the knock on effects to their economy here. When you see that move there by a major bank like the Bank of Japan how does how
the knock on effects to their economy here. When you see that move there by a major bank like the Bank of Japan how does how

do you think the reaction would be if the Fed itself were maybe just pause there accommodative a cycle. I got looking at very
do you think the reaction would be if the Fed itself were maybe just pause there accommodative a cycle. I got looking at very

different situations in Japan and the United States in terms of inflation in the United States. We've got inflation at a place
different situations in Japan and the United States in terms of inflation in the United States. We've got inflation at a place

where the American people regard it as a huge problem in a way they haven't. For 40 years we've got almost every leading
where the American people regard it as a huge problem in a way they haven't. For 40 years we've got almost every leading

indicator of inflation pointing upwards. We've got epically tight labor markets. I think the situation's very different in
indicator of inflation pointing upwards. We've got epically tight labor markets. I think the situation's very different in

Japan. I think their situation still has more in common with the pre Covid situation we had in the United States where you're
Japan. I think their situation still has more in common with the pre Covid situation we had in the United States where you're

trying to overcome a force of secular stagnation. In their case I think driven substantially by the fact that they now have a
trying to overcome a force of secular stagnation. In their case I think driven substantially by the fact that they now have a

quite rapidly shrinking labor force. So I think their decision in a very different context has been broadly appropriate. Our
quite rapidly shrinking labor force. So I think their decision in a very different context has been broadly appropriate. Our

Larry I have to ask you about the other big news that kind of overshadowing everything else. Was the news here that Elon Musk
Larry I have to ask you about the other big news that kind of overshadowing everything else. Was the news here that Elon Musk

of course the CEO at Tesla has made a basically a personal bid for Twitter a bid that Twitter itself has accepted. And now we
of course the CEO at Tesla has made a basically a personal bid for Twitter a bid that Twitter itself has accepted. And now we

sort of await for shareholders to weigh in on whether they're willing to accept this deal. What were your first thoughts when
sort of await for shareholders to weigh in on whether they're willing to accept this deal. What were your first thoughts when

you saw this. I think it's worrying when America's wealthiest people on a
you saw this. I think it's worrying when America's wealthiest people on a

private and individual basis own America's most important communications platform. I think that at least raises questions
private and individual basis own America's most important communications platform. I think that at least raises questions

about how well democracy is going to function. And my hope would be that we could have some. I don't think it will happen but I
about how well democracy is going to function. And my hope would be that we could have some. I don't think it will happen but I

would hope that we can have some serious bipartisan dialogue and soul searching around those issues. It may be that ultimately
would hope that we can have some serious bipartisan dialogue and soul searching around those issues. It may be that ultimately

they will be stewards of a very responsible kind. On the other hand I remember learning in my high school history courses and I
they will be stewards of a very responsible kind. On the other hand I remember learning in my high school history courses and I

don't know what exactly is true that the Hearst newspapers got us into the Spanish American War because that's what William
don't know what exactly is true that the Hearst newspapers got us into the Spanish American War because that's what William

Randolph Hearst wanted to do. And he was able to use his newspapers to stoke everybody up with incidents that might have
Randolph Hearst wanted to do. And he was able to use his newspapers to stoke everybody up with incidents that might have

been true and might have been false. And it seems to me that as I look at what's happening at
been true and might have been false. And it seems to me that as I look at what's happening at

Twitter as I look at it I think the stewardship has been entirely responsible to this point. The world's second
Twitter as I look at it I think the stewardship has been entirely responsible to this point. The world's second

wealthiest man owning The Washington Post I think the questions need to be given
wealthiest man owning The Washington Post I think the questions need to be given

very serious thought. I'm not prepared to make a public policy recommendation and I know of no basis for thinking that this
very serious thought. I'm not prepared to make a public policy recommendation and I know of no basis for thinking that this

transaction has anything illegal about it. But I must say I'm uncomfortable. I'm uncomfortable. And I think there really does
transaction has anything illegal about it. But I must say I'm uncomfortable. I'm uncomfortable. And I think there really does

need to be some serious reflection.
need to be some serious reflection.