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I want to talk about the Fed rates and so much more with Mohamed El-Erian. He's of course a professor , chief economic economic advisor at Allianz and so much more, friend of Squawk. We haven't had a chance to talk Mohamed since we heard from Jay Powell last week. I think as openly as we've ever heard him really talk about dissension on the board of the Fed in terms of what comes next.
And I'm curious what, you know, what your perspective was coming out of that press conference and how clear he was about that. So, he was very clear that there are major divisions within the FOMC and we've heard since the extent of those divisions. They relate to whether you worry more about inflation or you worry more about unemployment.
The second issue that's clear is that there's different views as to what you do on the uncertainty. And the uncertainty comes from the lack of federal data. Some people feel that you slow down and therefore you should stay on hold. Other people say, "No, the destination is the same. We should continue going towards lower rates." That is not going to be resolved unless the Fed takes a strategic view of the economy.
And in particular, does it believe we're on the verge of a productivity surge, which I think we are? And secondly, does it believe that what's happening to the labor market has to do with demand as much as supply, which I think it has. But unless the Fed is willing to take a strategic view, Andrew, they're going to be paralyzed by divisions.
Go back and just hit the employment piece cuz you just you just made a sort of interesting observation about what you think is driving this. You don't think it's a demand issue, you think it's a supply issue or you're saying it's the opposite? It's both. So, definitely we're going to see a decoupling of growth from employment.
Part of that has to do with AI, part of that has to do with the change behavior among companies, but there's also a demand element that we are seeing in place. So, it's both. If it were only supply, then the Fed would not cut. But because there's a demand element and because we are on the verge of a productivity increase, there is an argument why the Fed should continue cutting.
So, it sounds like you would cut. Oh, absolutely. I would cut in December. I would have started cutting in July. We should not get in the way of this continued strong growth because it offers a solution to a lot of other things in the economy. And we just have to get used to something you've heard me say, which is that inflation is going to stick around to 2 and 1/2 to 3% for a while and that's okay because it's stable.
The most important thing is stable inflation and we've seen inflation expectations haven't been de-anchored. What is the crypto market telling you right now? Oh, it's telling you lots of things. It's telling you that the longer-term investor base, while it's growing, is not big enough to deal with the ups and downs of speculation.
Very different than what we're seeing in the gold market, which is stabilizing. So, you know, what you're seeing is the structural setup of different markets. Crypto, looking forward, will continue to increase the institutional base, the most stable base, what I call resident investors. But you have a lot of tourist investors in the market right now and that's what you're picking up.
All right, do you have any thoughts? We've been talking about it this morning, but most people have have not thought it means anything, but there's been a a whole lot of action in the repo market that the Fed's been engaged in. I know that happens often times at the end of the month, but it's it's an awful lot.
Oh, it is and it's it's lasted longer than normal. Look, it just tells you that we have tight financial conditions in certain part. I don't worry about it in the terms of it getting systemic. I don't think it causes a sudden stop. I don't think it causes any breakdown, but you're getting clear indication as to why the Fed decided that it should stop QT as of December 1 and that's the right thing to do.
And then I want you to weigh in on this one. We've been having debates all morning about, you know, the mayor election in New York and all of these different things, but the prediction markets. You you care about markets. You look at markets. You know, Bill Ackman was out there last week saying the prediction markets for the mayoral campaign in New York, he believes they're being being manipulated.
We've heard this kind of thing before, typically from folks who are supporting a candidate on the losing end and they say, "Don't look at the prediction market. The prediction market isn't right. There are folks that are that are are doing funny things with it." Do you believe that's true? I mean, you'd have to tell me how they're being manipulated.
I I often hear exactly what you said. When you don't like what they're saying, you then tend to say they are manipulated. How are they being manipulated? I'd be very curious as to what Bill thinks about how they're being manipulated before I can tell you whether I believe that they're being manipulated.
But in in general, they tend not to be manipulated. So, you have to prove the point rather than just assume the point.
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