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joining us right now is mohamed elairian advisor uh at allianz and uh gramercy also president of queens uh college cambridge i don't know we'll ask muhammad how nervous are you we just had a a chiron on the screen saying you know uh is the market stretched is the market stretched so is the market stressed valuation wise it is but it is for good reasons i want to stress last week andrew was a build of the goldilocks and the question is can it last you have strong fundamental news the economy is picking up significantly that's great news you had continued inflows and while you had a bad ppi number a bad inflation number the market treated it as transitory so when you have good fundamentals very loose financial conditions and the market is look is is willing to look through the inflation numbers you get the record levels the big question for me is not the first two it's the third one will inflation be truly transitory and will interest rates remain well behaved i think that's the major question facing this market mom can i flip this around you know i'm sure you watched 60 minutes last night and you saw what jay powell had to say and everybody keeps talking about inflation inflation inflation inflation but what i'm questioning actually is if if you think that he considers his mandate in this regard to be about jobs how quickly do you think we actually hit that jobs number and then does he put the brakes on so i don't think we're gonna hit that jobs number quickly because he's talking about the eight to nine million and he even said even more the eight to nine million people who haven't regained their jobs yet and there's a real question mark as to how they're going to re-enter the labor force and how they're going to be absorbed you know companies are having record openings but complaining that they can't wait if they can't find enough people and yet we have eight to nine million people who are still unemployed so there's a fundamental question as to how quickly we're going to be able to achieve his target of employment and whether that happens before inflation gets too hot for him well so that was that was going to be my next question which is how hot does the economy effectively have to run and potentially inflation i want to say run away but run on us to get at the same time that he's trying to get the jobs numbers to his targets so you heard him very clearly yesterday he said in the past we've run it hard and we haven't gotten inflation so we've gone from a forecast base to an outcome-based approach and we're willing to run it hot so this fed is willing to run the economy hot it's willing to take that risk because it in the it looks at history and says we haven't had inflation so we're not going to have inflation that's the big bet the transitory bed that it's making um which clarita the vice chair had an even better explanation basically saying the models that we were based our focus on aren't as reliable so it makes sense to go to an outcome based and do you think that is a a fair way to think about it i'm now thinking back to the the letter that jamie dimon put out last week his annual letter uh where he talked about this goldenly lock scenario but also said i mean if joe was nervous it sounded like jamie was also nervous about the prospect of inflation and even talked about the the paul the possibility of a paul volcker moment i don't think he was putting it necessarily at a high probability but but the idea that he was even talking about it so i do not believe that the fed would have changed its monetary framework and ended up where it is now had it known back then what we know today of course it couldn't no one knew we would have a complete change in demand management with trillions coming out of the fiscal and monetary at the same time no one knew that so i don't think they would have changed the monetary framework had they known but they're stuck in this new monetary framework now am i anxious about the way the fed is running yes i would much rather them see i would much rather see them do two things one is press harder on precautionary policies on macro prudential remember we've had near accidents already so so keep a a much closer eye on what's happening both the banks and non-banks and secondly start very slowly moderating these incredibly loose financial conditions start signaling that the economy is really picking up fiscal policy has kicked in and it's time for monetary policy to somewhat moderate that's what i would do but i don't think that's what they're gonna do they're gonna stay loose as long as they can
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