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going it may influence the fed that tells you the state of things doesn't i i think it's just kind of funny but it would be a big mistake if if this crisis uh reduced the amount of tightening we need to control inflation i i think the fed rate hikes is ten times as important than what's going on in russia right now you're doing it too you're you're doing it too i mean obviously ukraine is far away but the the kind of uh of toll that that we're talking about if if it if it were to be the worst case scenario and the human suffering and everything else it's just don't you think it's kind of ironic that we reduce it to to what jay powell's gonna do here in this country well he you know jay powell has to look at everything but you know think back joe you remember the 1970s when oil prices were going up and the fed was not titan enough and inflation raged for a decade and it wasn't until volcker finally said enough of it and you know had to raise the fed funds rate to 20 we don't want that to happen uh you you you you've got to act against the inflationary pressures from wherever they come now fortunately it you know looks at least at this point oil is two or three dollars on what is going on in in the ukraine but let's face it oil was heading up way before the ukraine crisis and many experts call for 100 oil uh before the ukraine crisis so that just adds fuel to the fire he has to look at everything it would be a mistake for him to say oh yeah there may be trouble there as a result we'll delay in tightening there has just been way too much money growth and uh stimulation and fed is way behind the curve way behind the curve at acting against it you do see some similarities to that period of hyperinflation then because most people do not because it's a supply chain and it's sort of a coincidence that oil happens to be uh spiking as well but there were many other things back in the 70s and early 80s with wage well we're seeing some wage pressure too so you see enough similarities to think that this elixir or this combination of things could result in something really troublesome if so it's pretty bizarre where rates are right now because it it's yeah we're we're i mean even back then they started at seven or eight didn't they before they went to 20 i mean we're starting from you know we're basically starting from almost zero globally yeah yeah you know i i've mentioned before that that you know that the the long-term treasury has been a wonderful hedge asset uh against uh short-term stock market risk it has an enormous what's called hedge demand which it never had in the 60s and 70s 1670s treasury bonds were terrible hedge assets because oil spiked up and inflation and the dow went down they were not good today you know if if anything crisis happens the dow goes down 2 000 points people rush to treasuries and as a result that keeps that long-term treasury low it is deceptive to say that there's no inflation just because of treasury rates 190.
uh and again i'm not saying we're in the 70s but we had in the 1970s we had 10 inflation we had you know for almost a decade uh uh we're not there yet but i don't want to get there and i don't see the fed slowing down credit growth in particular you've mentioned the m2 growth which by the way comes out this afternoon people don't watch that indicator it's the fourth tuesday of every month and uh it's been out of control it's been 40 increase since covid won and even after the original crisis has been going up at uh double-digit rates which is is way too much to be consistent with any notion of price stability that has to be un put under control and the only reason is both reducing the balance sheet and and raising rates jeremy i don't think anyone at this point really ascribes the the really hot inflation numbers that we're seeing to what you're describing it and that is what hawks monetary hawks always talk about and bond vigilantes and every but it's been so long but you really think that the fed has printed so much money in the past five years you think we're seeing that in some of these inflation uh numbers now you think that things are coming home to roost there's already it's not supply chain it's not covid people not wanting more money to come back resignation and all this other stuff you think there's a direct correlation between m2 growth and inflation because that's going to be much harder much harder to put back in the bottle yeah exactly but the m2 growth was stable until the pandemic it was growing actually at five to five and a half percent a year for 34 years until the pandemic remember even the quantitative easing that bernanke engaged in never pushed into money it just pushed into reserves but this this covet pandemic totally different all the money creation pushed right into that m2 which is so much more potent than the reserves that's where if you take a look at m2 graphs you just absolutely astounded in the year 2021 we had the the greatest m2 growth in 150 50 years uh and that is what uh is the reason why for as you know from the very beginning from 2020 i was saying we're going to have an inflation problem uh goldman sachs talking about seven increase i think it's got to be at least two percent by the end of the year and perhaps even higher here than two percent at the end of the year to begin to control monetary growth doesn't mean that the long rate's going to go up up all that much i think we will end up with a inverted curve very honestly short and long i'm not it doesn't necessarily mean a recession yet but if we don't start right away the tightening will have to be strong enough that it will produce a strong slowdown would would you be uh would you tell policy makers to hold off on big fiscal spending as well or or is your 90 of what you're talking about as with monetary uh it's 90 is money and i i think you know given you know where we're matching another stand and that inflation there is i don't think there's going to be a lot of expansion over the next 12 months i'm looking at the fed to finally say hey we've been wrong we've been you know behind the curve but but we are now going to get serious and there's going to be a little bit of pain um but the longer term looks good and don't forget stocks are real assets that will survive inflation they just have to survive the the interest rate bumps that are needed to get that inflation under control all right jeremy thanks we started with did you even i don't even think you said ukraine you might have you might have just but just like if it was in the uh just looking at what happens in monetary policy based on what happens to you politically which is what i was kind of kidding about everybody else but you you fell right into that and and i think you're probably right because these things in the past have not been uh been long lasting but uh someday maybe it will be uh the world can only end once thank god uh all right see you later thank you
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