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the fed in my opinion hasn't done a thing right since paul volcker who was brilliant all of the others have encouraged a chain series of really dangerous uh asset bubbles they they rattle the economy they're incredibly disruptive the decline in 2000 82 in the nasdaq was the decline from 2000 the decline of the housing market all the way back to trend and below dragging the world with it um and all of the problems from bad mortgages and and a percent decline in the s p these have a terrible wealth effect they make people feel poor and they make people spend less it's the last thing you want and yet they have not learned they overstimulated to get to 2000 they overstimulated in the housing market they got three or four percent more people to own houses in 2007 than had ever owned houses before and the consequence consequences were dire and have they learned absolutely not so in this time they step into covid and of course you needed to stimulate but did you need to throw this much money all over the world so that it flows into the stock market and creates creates these meme stocks so this is a complicated question you know the question is why did they delay that i think that why did they delay their response i think in retrospect yes it was a mistake and i think they agree it was a mistake uh there were a number of reasons for it one of the reasons was that they wanted not to shock the market they wanted to avoid jay powell was on my board during the tape retail trim in 2013 which was a very unpleasant experience he wanted to avoid that kind of thing by giving people as much warning as possible and so that gradualism uh was one of several reasons um why the fed didn't respond more quickly to the inflationary pressure in the middle of 2021.
there were other reasons as well what do you think well one of them was that in in early 2021 after the american rescue plan was passed and this was something like 2.8 trillion dollars in new federal spending between the american rescue plan and the december program um you know the fed could have responded to that point but they looked around and said well look there's still a lot of slack because the unemployment rate was still close to six percent the number of people working was still well below where it was before the pandemic and so they they said that um well there's still a lot of slack in the economy we should let this fiscal program do its job and bring the economy back to full employment what we've learned since then is that because of the pandemic with a lot of people staying home that the unemployment rate for example the number of jobs may not be a really good indicator whether the labor market is hot or not and so they're looking now at things like the number of job vacancies which show that employers are having a terrible time finding enough workers and that the labor market is is distorted um the other issue that they were looking at was the supply chain issue you know the pandemic has snarled supply chains around the world that has helped drive up prices the fed believed in middle of 2021 that these factors would likely solve themselves over time that in other words that the supply shocks were quote transitory uh and so that they didn't need to respond to the early stages of inflation because it was going to go away by itself that proved wrong um so there were there were a couple of of issues i think that are related primarily to the pandemic itself and and the way that it scrambled the usual indicators it made it harder for the fed to read the economy the fed is going to have to raise rates and reverse qa and they're gonna you know if they can they're gonna try to slow down the economy enough so eight percent starts to come down over time and i wish them the best you know we're a little late but you know remember two years ago we had 15 percent unemployment and no vaccine so i think people should take a deep breath give them a chance and i think they're going to move i think the sooner they move the better uh so yeah they're going to be raising right yes they can engineer soft landing a 30 chance probably a 30 chance they can engineer a mild recession think of we've had mild fed induced recessions before you know where inflation goes up one and a half for two percent everything slows down flash is coming down and it's six or nine months and then there's a chance this could be much harder than that and then in the face of all of that you have ukraine which is a huge global issue and i'm not afraid of the fact you know i i'll change this subject a little bit i think america needs very good domestic policy to improve the growth of the economy which makes the fed job easier and that is about regulations and rules and policies and and improving projects and things like that so you have you know increase the supply side as opposed to you know do some of the demand side so the fed's job would be easier if we had very rational thoughtful economic policy well um look i i think i was wrong then about the path that inflation would take as i mentioned there have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that i didn't at the time didn't fully understand but we recognize that now the federal reserve is taking the steps that it needs to take it's up to them to decide what to do and for our part president biden is focused on supplementing what the fed does with actions we can take to lower the cost that americans face for important expenditures they have in their budgets prescription drugs is one example health care costs another example utility bills if congress is willing to pass some of the proposals to boost the use of non-renewables i think that can serve to bring down an important costs that households face he realizes we all realize what an important and huge burden inflation is placing chair powell has made clear that he has every intention and believes um as i would that the fed has the tools to bring inflation down and that's his focus you know the fed has a dual mandate the economy is i think it's fair to say operating at full employment with the strongest job market in generations inflation's too high and it's got to be brought down well you know core inflation has come down it's still too high but in recent reports we've seen it move down and that's an encouraging sign but oil prices are high russia continues to wage war against ukraine we're trying and the europeans are trying to um address that and limit his ability to wage this war um there can be impacts on energy and food prices that you know we can do everything we can domestically to control the president his um authorized historic releases of oil from the strategic petroleum reserve but we can't rule out further shocks
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