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Do you think they arrived at the right conclusion for the action that they did, which was the quarter point cut? I absolutely do. In fact, I think a quarter point cut was warranted in July. So, I'm glad that they're starting the cutting cycle. I'm also glad that they are putting the emphasis on the employment side of the mandate.
They are facing this very difficult situation as we heard Gary say where the economy is going away from them both on the inflation side and the employment side. So they are deep in the world of second best and they have to decide which of the risk is larger and I think the employment risk is larger.
So I like what they've produced. I just hate the fact that we don't get clarity and we don't get an anchor from the central bank. We need some anchor in this economy because otherwise it's going to get really complicated going forward. What what does that anchor need to look like? What is when when you say anchor what do you mean exactly and what should they be changing?
So in the past the central bank has always given us a vision of the future what where it thinks we're going. This central bank after its big policy mistake in 2021 where it called inflation transitory and as I said we're going to end up at at a minimum was seven years above target has become highly data dependent.
So it's looking backwards and as it look backward it doesn't give guidance to the marketplace to businesses and the problem with not having guidance from a central policy maker is that uncertainty goes up and uncertainty discourages business from investing and could also discourage households from spending.
In their defense, isn't it a really difficult time to give that guidance? I mean, you know, you're in the economics profession. I've talked to so many economists over the past couple of years who have a new sort of source of humility because it's been very very challenging to forecast what the economy is going to do.
That said, of course, the Fed's supposed to be the best at this, right? They're supposed to know. So, but how do you how how can they possibly be forecasting in this kind kind of environment? So we need them and others to have a transparent discussion on two things that really matter of all of us. One is what should we expect for productivity?
Will AI life sciences robotics where we seeing incredible innovation will we get the diffusion through the economy that allows a significant increase in productivity? I believe so. Okay. But we need to hear and then the second thing you heard that the first thing wasn't even mentioned. Mhm. Yes. The second thing and we heard that in the press conference is what's really happening in the labor market.
Is it supply issue or is it a demand issue or both? Or both and how much of it is both and how much it would last. That's really important. Um Chair Pal started saying it's this and then said well no it's a bit of this. They need clarity on this and I think that clarity is possible on this but again they're shying away.
Now I understand that on the enormous political attack I understand that Chad Powell is coming to the end of his term but if you don't have a policy anchor to this economy the risk of volatility goes up economic volatility not market volatility the market is happy to bet on the corporate side the market is is this very strange world where it says I know the sovereign is messy we have tariffs we have central bank independence we have high fiscal deficits high I know that's messy
but I'm happy to bet on the corporate But is the Fed the real source of volatility on the corporate side or is fiscal really you know are tariffs are policies that you know sort of are very volatile themselves is that the real source of of volatility for corporations. So that's why we need the Fed even more
because on the administration side they are attempting a major rewiring of the domestic economy and a major rewiring of the global economy. You need some anchor. I remember I'm old enough to remember the early 80s when President Reagan came in and he undertook a major rewiring of the domestic economy.
The Fed was there providing a very clear anchor as to where it was going. And you cannot have a situation where you have major uncertainty on the two greatest influences on the economy.
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