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There seems to be an excess of communication right now. Everyone is talking at the FED, within the administration. How do you interpret how everybody has to get out there and speak, speak, speak well.
One of the criticisms that's been leveled at the FED for a long time is we engage in groupthink. Every policy decision is a twelve nothing vote. There's no dessens, and that if you're all going to do exactly the same thing and think the same way, we don't need nineteen of you. We need one. But what I always try to point out is it's through speeches, in public speaking that everybody presents their views and you can go
out listening and they're not the same. So all the public speaking, the speeches are the way for us to show a diversity of opinions, have thought about the direction of policy. This is a good thing. It's not a bad thing. Despite people saying it's a cornucopy of noise. It's actually signaling where people stand when you come to the meeting. And I always try to stress this to people.
We have to make a decision every six weeks. We do not get to kick the can down the road, and what that implies is that to get a reasonable consistent opinion, we have to kind of compromise. You have to come to decision. And that's why our votes are often twelve to nothing, eleven to one. It's because we all understand we have to compromise someone on our positions to have a clear, consistent policy setting for markets and American people.
Larry Meyer, Washington University Saint Louis had a small book out of his time with green Span, a term at the FED, and he was heated about the consensus vote, the need for consensus. Should we be more like the Bank of England, which seems like a fist fight every six weeks.
You'd like to avoid the fist fight every six weeks. But I mean, I personally think there's nothing wrong with dissents. It's a way to communicate differences in policy stances. You know, the whole complete consensus largely comes out of a Greenspan era where it was like, if you have a twelve to nothing both, there's no doubt about what policy should be. Everybody agreed with the chair at that time and with
that kind of tradition continued. But as the Bank of England has showed there's no point of having nineteen of us if we always do the same thing. So at that point, what's wrong with having a few decent I don't actually personally, I just sent it at the July meeting. I don't personally think that shows anything about loss of faith in the chair or not the right policy.
But that's the.
Whole point is to say, look, I'm on this committee to have my own independent view and make these points, and that's what people are doing.
We welcome all of you again, particularly worldwide, with Christopher Waller into this audience. Ed, can I call on you first for the first question? In a bit, I'll let you come up with it, but I think we need to hear from.
You've giving you a little time to think of it.
He's got a little time to think about it. You know, maybe I don't want to get in the way of his good first question. I'm going to ask some questions about the speech. I got to keep the assembled press happier or they won't show up again. It counts on foreign relations. But I want to come out of this with a little bit more knowledge about who is Christopher Waller. We'll get to that in a minute. Number one question.
I get the unemployment rate's four point x percent. Is a four point x percent unemployment rate now the same as a four point x unemployment rate when you were at Washington State.
No, I think this is where we're in this unusual situation where we have this kind of zero net immigration instead of roughly say four hundred thousand a year, actually people leaving the country, and this is kind of I've said to this point, and it's masking this decline in labor demand. So just think about if it's all immigration and you have a decline in labor supply, then the following thing should happen. Employment will go down, wages should be bid up. If you have a labor shortage, vacancy
should go up, should go up. That's what you should see with a very tight labor market and declining labor supply. When did we see that twenty twenty two, twenty twenty one, That's what we saw, and that was a very tight labor market. If things are driven by a decline in labor demand, I'm just kind of thinking about labor supply is constant. You'll see jobs fall, there'll be downward pressure on wages, there'll be downward pressure on vacancies, quits rates
will fall. That sounds to me more like what we're seeing in the data. So all that's happening with all the labor supply stuff is it's kind of masking the weakness of labor demand. And I've seen some estimates that if you had just kept the labor force participation rate where it was, or unemployment would be four point nine to five percent.
Okay, well, that's an important touch point. I would suggest five percent is a much bigger number than four point nine percent. Do you see an immediacy at the Central Bank and among the staff that the real unemployment rate is five ish and not four point x percent?
Well, where you got to take a position on what do you think the labor supply is doing. Is it fine that it's four point three because the fact that people leave or drop by the labor force, that's just a natural part of the economy and therefore four point three is exactly reflecting things? Or do you think like I do, which is like we're seeing falling labor demand and if it wasn't for this decline and labor supply, we would be hurting and there'd be no doubt about
cutting rates, absolutely no discussion about it. So that's where they were in this weird thing. We've never seen falling labor demand with a big fall and labor supply at the same time, at least not in my career that I can remember.
And that speaks to the technology. I'll get to that minute, and the AI AI AI. The thing you mentioned one hundred basis points, four rate cuts, five rate cuts maybe is modeled in. You have to see what happens out there. Quote despite more than three years of restrictive monetari policy, how many rate cuts do we need to get? Krystal Waller away from the dreaded our word restrictive.
Well, that's what I said. You have to kind of pick a what you think is the neutral rate, which means you're neither stimulating or contracting the economy. That's the simplest way I describe what the neutral rate is I have. I just typically look at the SEP, the Survey of Economic Projections, and the median is around three percent. So for the committee as a whole, if it's three percent, you know, and you've still got one hundred and twenty
five basis points to go to get to neutral. If everything starts coming back closer to target, and that's where I think things are going to be.
But the challenge is you allude to in your speech, and I'm going to be aggressive here. I think of John Edwards and two America is basically there's two hours starts out there right now. There's an UR start for the haves including everyone on Park Avenue assembled, and there's an OUR start for the have nots who are flat on their back, including farmers in your Dakotas. Yeah, there's two our starts. How do you manage that forward in a divided America?
Yeah, So that's actually an interesting way of thinking about I never have but typically when people talk about our star, I mean, how many interest rates are there? It's not like there's one that this is the unique our star. So I gave a speech at last May twenty twenty four on our star in Iceland, and I always have to look at it this way. For me, our star is a policy rate. I control reserves in the banking system.
What's the closest substitute short term liquid government debt? So for me, that's the real our star that I should be attention not to return on capital, not the return on AI, not the return on corporate debt, the return on safe liquid government debt. That's the R star I look at, and that's driven by global demand for treasuries versus the global supply of treasuries. That's how I view our star. I mean, your point is actually a very
good one, that what's restricted. If you think about our star as being restrictive, it's more restrictive for some groups than it is for others. That's probably always true, it's not just now, but it seems to be very stark this time that upper income groups everything's fine. Wealth is booming, the stock market's booming. They've got no problem financing stuff. I hear this from retailers. We pass tariffs through to high income customers. They don't bat an eye about it
because they can afford it. Low income households they can't pass them through. The don't walk out the door. So that's the tension again, one of these tensions that we have, kind of this dichotomy and the economy between the upper income groups the lower income.
Off the script, off the speech. Three esteemed market economists that I spoke to also the same thing away from a typical monetary policy speech. They're looking at qt QE, the state of our monetary policy forward, and the Fed's unique balance sheet. Give us an update on where you stand with the Fed's balance sheet and quantitative to the end of quantitative tightening.
Yeah, I mean I think we're at the point where we run an ample reserves. I gave a speech in July on our balance sheet. We run an ample reserves to ensure that there's sufficient liquidity in the banking system, in the financial markets that people don't have to at the end of the day go scrambling around looking for nickels and dimes in the couch to cover their reserve positions. That to me is idiocy. So you have ample reserves, the reserves are there, nobody has to spend the whole
evening looking for money under the cushions. We're about at that point. We had an excessively large balance sheet due to the quantitative easing. We ended that. We've been on a quantitative tightening policy since May of twenty two, and we're basically back to where we think we should be. Just for ample all the QES stuff is taken out in terms of how much liquidity it still has affected the composition of our balance sheet. Which was part of
my speech I gave in July. QUEA really distorted the maturity structure of our balance sheet and our next choice. Even though we get the level right, our next job is trying to get the composition right, and that'll take some time.
I sure the stage of Jason Furman up at Harvard boring because an act ten in basic economics, and you had a brilliant tweet the other day here he said, we need to fold in the wealth effect into our consumption. You have brilliant consumption numbers in here of the haves the Upperdessa. They're trading one block over on Madison Avenue. Explain the wealth effect and how it boosts monthly consumption. You mentioned luxury travel and others. How wealth effect is America right now?
Yeah? So, I mean, if you go back to some kind of some basic economic theory, one kind of rule of thumb is for every one dollar of wealth you get the real interest rate a three percent, two percent, your consumptions should go up by two to three percent for every dollar in wealth you get so like two or three cents for every dollar of wealth. That's what mean by the wealth tech. Now, those numbers also mean
that wealth increases permanent, it's not a one time. If it's just a one off, you're not going to change your entire consumption path. So this is always kind of the challenge with the wealth effect because it's not that big of a number in terms of a dollar increase. It's only like three cents of consumption. But that also has to be permanent. It's not like a one off and then comes back down. So wealth ficks often sometimes
are smaller than that. But the run we've had for the last few years, that's looking pretty permanent and pretty big. It's not just a one dollar increase.
I'ming a couple more questions, you know. This one's from the first. David Gurrah gave me this question over at Bloomberg News because he's vicious in his questions. Should we get rid of the dots?
That's a good question. I mean, I personally have doubts about whether we should have the SEP at all, But I've been told that what are you trying to hide? Then? Why would you take him away? Why would you not be as transparent?
What would happen if the dots went away?
Well, you'd kind of be back to twenty eleven and then you know, we would say that, now you could change the dots. I personal believe you should get rid of the calendar dating, get rid of the long run numbers, and just say, look, what's the next optimal policy over the next six, twelve, eighteen months. That's as good as we can do. So then it's a rolling number and you get away from this crazy thing. It's like, wow, there's three meetings left in the year. How many more
rcuts this year? Who cares the media?
We wouldn't have a job.
So if I said, okay at the September he said, here's how many over the next six months, that's what the focus would be, not the end of the calendar year. So I would do that and then get away from
the long run stuff. Just the best we can do is six twelve, maybe eighteen months out any kind of forecast, We're no, we don't have any genius insights over everybody else on Wall Street who does this, So that would be one of the critical things I would do is change the calendar dating and shorten the horizon that we actually do it.
One of my hallmarks is who are these guys literally like Butch Cassidy, And so we're going to find out who Christopher Waller is. I mentioned you were accounting major and you got bored because a professor was putting, so you switch to economics. The Waller of nineteen ninety one is a spectacular thirteen page paper. I think it is on prodigious game theory. And what he didn't know in nineteen ninety one is he would be describing the game
theory of twenty twenty five. I'm not going to get you in trouble with the Secretary of Treasury right now, but I'm going to review this you set up in nineteen ninety one off of James Baker's word Bashing of where administrations bash the Central Bank and there's corrosion involved. The title of the paper, Bashing and Corrosion, you sub out strong administrations and weak administrations. No, I'm going to not ask you what this administration is, but I want
to take it forward to the present day. If we have bashing and corrosion, and we have to be ex antew're trying to get out front of the debate, the fence, trying to glean what's going on, or we go true ex post literally in a Georgia school, where we wait for the data to come in. How does the bashing and coercion affect the monetary challenge of ex ante versus ex post? Do we become more do we become more x post with an administration going after a central bank?
Well, like I said, I wrote this paper back because at the time there was a lot of discussion about central bank independence and institutional design, and the kind of presumption was once you picked a central banker, that's the policy, and every other external influence just kind of went away. And I was kind of looking around, going that's not
what I'm hearing. That's not what I'm seeing. Back in the eighties, right, there was a lot of criticism, and so this idea of Baker's was, look, the administration can push the FED one way or the other by publicly criticizing the feed. Now, when I wrote this paper in nineteen eighty nine, nineteen nine, I didn't think I'd be the one receiving it twenty five years, thirty years later. So it was when I reread the intro the other day,
I was like, wow, what was I thinking? So, but I mean, that is kind of this situation and it's not just the curt administration. This has been done forever. I mean George Bush, bash Greenspan in him costing in
the election. Criticism had come out, and this was a norm until basically Bob Rubin came along and then it was like, don't talk about the FED and that kind of became the rule through serious sequence of administrations until President Trump came in in twenty eighteen started criticizing the FED more publicly than had been done in along.
Does it change the behavior of a given central bank? If we have bashing, you're trying to get out front the public. The media want you to be out front, omniscient, have a crystal ball, or do you have to slam back to a massively expost data dependency because you're getting crushed. Whatever the executive branch is, whatever the nation is.
I mean, at the end of the day, this is what I tell everybody. I just go to work and I try to do my job the best I can. That's all I can do. A lot of this is just out of my control, you know, whether the administration's views drive people to push one way or the other. And you know, I can't speak for anybody else, but I just try to do the best job I can. Using the theory that I know, the models of the economy that I use and the data that I use.
So you know the call I made in June, which was I was saying the labor market is not as good as it looks, and I was accused of being political August first, that suddenly didn't look so political. The data came in exactly the way i'd said it was going to. So what sometimes looks like people say, ah, they were interpreting this as purely a political position. Suddenly the data said, maybe it's not political. Maybe it was actually the right call. And so that's how I kind
of think of this. You can always look at something and interpret it as political when it's not. That's kind of the problem and what we decided what we do.
One more question. I'm going to go to the floor and also out on Zoom worldwide with the Council on Foreign Relations. I want to get this one question, and I have to ask, with your heritage of the Dakotas in the old Northwest, how bad is it for the farmers right now? Soybeans is a news, but French Hill down in Arkansas is telling me guess what. They're flat on their back reporting that police well. Back in the first Trump administration, there was a you know, tariffs on
China and tariffs. China immediately responded by not buying US soybeans. And I was at the Saint Louis fad some of the biggest soybean producers were in our district. I heard this.
We had barges of soybeans lined up on the Mississippi River that were never going anywhere, and they only have a certain shelf life before they rot and they're gone. So we saw this. China was I think, don't quote me exactly, but this is in the ballpark, but China has sort of bought like seventy five percent of US soybeans. Even later when some of this came off, soyvings never recovered, China was only buying like thirty five Again don't quote me on the exact but like thirty five percent, and
now it's back down to basically zero. So they've just shifted their entire supply chain to Brazil and South America and they never came back. And so that's the one thing you want to be a little careful of, is just because the supply scene gets disrupted and then you reverse something, it doesn't necessarily mean it comes back. Once it's changed, it's changed. So yeah, solving farmers are typically getting hammered and China buying.
I've seen the new Foreign Affairs magazine. It is brilliant. Shannon O'Neill with a great article on supply lines, which to me is the discussion of Q one next year. Edward Cox, please, sir with our first question.
Ed Cox can be for economic development of the conference board. Governor Waller, your excellent presentation. I appreciate it very much about the data, but there's several mega things out there for which the FED is not responsible that I'm sure are in the background or part of your consideration, and that's the extraordinary deficits, fiscal deficits going forward, and the
value of the dollar. Would you explain how those might enter into your considerations as to the what monetary policy should be.
Yeah. When you know, we have a kind of a long standing view that we don't, you know, praise or criticize fiscal policy. We take it as a given for doing our own job. But when you're running six percent deficits three percent primary deficits, we know that that's just not sustainable in the long run. How long is the long run. I don't know the old joke, I'll be dead before we find out, but we just know what economicy you can do it persistently just not going to happen.
So that has general concerns. The our Star speech I gave back in Iceland was if you think about our Star and government debt, which is the closest thing to should matter for me, and reserves, it's a race between the growing demand for US Treasury debt and the growing supply. For the last forty years, demand has outstripped supply. And what does that mean. Prices go up, yields go down.
At some point. If that reverses and the supply starts succeeding demand, the only way you're going to get the markets in the world to hold this stuff is you lower the price, which means the yield's going to go up. So for me, having good stable fiscal policy is the best way to ensure that you don't have that happen. But again this is not under my control. That's up to the Congress, White House to think about fiscal policy. That's it. That's just my view on it.
Chris Sir Mock raising adventure in Great capital.
Alna Walla, you talked about AI, and you said that you thought short term it could have some risks for the labor market. Long term is good for productivity, but a lot of forecasters are predicting that it will be negative or the labor market longer term, that it will reduce jobs. How does that impact monetary policy, how does it impact your dual mandate? And how do you think about it generally?
Right? So that's what I'm saying, is this a structural or a cyclical phenomenon with AI? So if you think about labor demand and employment just over time just grows with the economy, what I worry about is AI being a structural is there's this one time, permanent drop in the level of demand. The question is does it continue to grow at the same rate as before, in which case it's just a level effect employment growth and everything will continue on in the future. Or does it drop
and then it just tastes flat. It not only drops in the level, but it has a lot or growth rate of employment. I as a policymaker cannot do anything about that latter case. If it's just the fact that there's this kind of cyclical movement in labor Evan, that's what I'm designed to have some influence over. But if it's a sharp structural drop, you know, lowering the FED funds right fifty base points isn't going to overcome that. And that's what we're trying to figure out is going
to happen now. In the past, whenever we've seen technological change, I gave a speech yesterday down to Amazon. You know, you see jobs going away, you know which ones are going to go away, but you never know which jobs are coming. And usually there's a kind of enough of a gap where there's the jobs are slowly going away, new ones are coming on. This time when I worry about it's so fast. It's happening so fast that the jobs go a way faster than we can figure out
what the new jobs are. The new jobs will show up. I have no doubt about that. It's just the timing may be a little more disruptive than technology we've seen in the past.
Thank you for that question. I forgot to ask that you saved me there with that question. Here's a footnote from this speech this morning. Technology that improves labor productivity leads firm to demand more labor, not less a huge
body of America doesn't agree with that. And to your point on innovation with a Nobel prize, the celebration of the last forty eight hours of Schumpad and across profit of innovation, this new innovation, the gains are going to go to a narrow group or do you think they will This is a truche word.
They will diffuse out across America. Well, the history of technology is that they do diffuse. I mean, one of the things I pointed out the speech yesday. If you look back to Karl Marxist year of capitalism.
Machines robots would replace labor to produce all the output. Everybody would lose their jobs, be unemployed. There'd be this mass army of the unemployed, there'd be a social revolution, Capitalism would die, and we'd have a socialist utopia. That doesn't happen, right, I mean, when capital goes out, machines and technology go up, it makes labor more productive, and firms like productive workers and that's why they want to hire them, because they don't want to keep their output constant.
They want to produce more and they need both of these things to breach more output. This is what we've seen in the history, certainly of the US. In the last two hundred years, the capital stock in the US is seven times larger than it was in nineteen fifty in terms of machines, equipment, everything. The unemployment rate is exactly the same. So employment grows with technology, it doesn't go negative with it.
But to the President's point, and arguably his election, a huge body of America feels let down. We had productivity, we had capital deepening of an extraordinary amount, and the jobs went to China. That's his theme with AI. Are we going to replicate that in some unknown way and the jobs are going to go to you name the place.
Well, even with the China shock, totally, employment in the US has grown ever since the China Shock. It hasn't gone negative or falling. It's just go look at say the employment right, go to fred my favorite data series, pull up employment. Look what it does. It just goes up. So, yes, there are reallocations. Jobs get lost and they go somewhere else or they get eliminated. But that's my point. New jobs, new things came up, people reskilled going to new areas.
So when the China shock was hitting manufacturing, we had a whole it software, phone technology, information technology that created thousands and millions of jobs.
Is FRED an unfair advantage for the Saint Louis fed Do they wake up every day different than any other bank?
FRED is one of the greatest gifts from the Federal Reserve to the planet.
There we go, ma'n.
Please hi, Ginger Color.
I'm to remember cfr Overwall or just what you just said about how unemployment is the same as it was in nineteen fifty and the China Shock didn't really necessarily affect employment. I guess I want to harken back to what you said about where wealth is concentrated in the hands of Americans, right, and how you said that what the bottom sixty percent of households owned fifteen percent of
wealth and forty five percent of spending. I'm curious how that figures into what you just said about unemployment being the same as it was in nineteen fifty and the China Shock ultimately not really having an effect on the labor market. I'm curious how inequality factors into that.
Yeah, so, any like it was just trying to get with employment. You get sectoral shifts. Some sector goes down, some other sector goes up. In my speech yesterday said look, when automobiles came up, if you were making saddles or wagons, your jobs were going away. But those same skills got transferred over to precy chassis for cars, making car seats, the same skills they just had to transfer. So those jobs went away, but other jobs came up that took
their place. That's why you can't just look at one sector and say, oh, that's going to kill the entire I don't believe that's going to happen with AI either. In terms of wealth and income and equality, this has been an issue in the US for the last forty to fifty years. There's been a tremendous increase or a reasonable increase in wealth inequality, income inequality. For me, as a policymaker, I have one instrument. I can't deal with inequality.
It's really not in my toolkit. I can't say, here's an interest rate for this group, as Tom was saying, I can't say here's an interest rate without our star, and here's an industrate without our star. That's not in my set. I have to look at the aggregate. It's really my only choice. Can I look at these discrepancies and think how I might want to lean one way or the other. Sure, I can. You know, we kind of got criticized for that before with our last framework,
that we were kind of leaning a particular way. There's nothing wrong with it, it's just we only have we there's very little we can do about it, and that was my issue with our last framework. I could care about this, but there's very little I can do with it for particular.
Groups I think we have here in the digital world. We'll take the next question from Chris Thomas.
Good morning, Governor Wallert, Thank you for the time today. Ex Intel X McKenzie. Now, I help global companies think about their global footprint and where they put advanced manufacturing facilities, and the constant refrain is that no matter how high the tariff, the US is just completely uncompetitive and now it's the most expensive place in the world to do business,
especially if you're building something. To what extent does this matter for the growth and success of the US economy and is there anything that could be done about it. I've heard that even if it's one hundred percent tariff, it's still cheaper to manufacture in Taiwan or Vietnam, or Japan or Korea or China than.
In the US.
Yeah, I mean, this is this is way outside my wheelhouse, I have to say on trade policy, you know, particularly worrying about one sector over another, manufacturing versus others. This is just something I can't make those decisions. That's what the president got elected to do, and he's following through on his promises. Whether you get stuff on shoring or not,
I don't know. We'll see. We did learn something with the pandemic that supply chains stretched across the globe are pretty fragile, and there was a lot of emphasis on getting near shoring. Maybe not on shoring, but near shoring as a result over time, you know, if tariff's were big enough, I'm pretty sure you bring your factory back. There is a price at which you will bring it back.
It's not infinite, So that's what I don't know. We'll see how this all works out, whether there's a lot of incentives to bring stuff back or not, or whether the people that you know, you bring these jobs back, whether people want to do them or not. I mean, in the US we've moved into much more of a service sector mentality and the idea of screwing lugnuts on the tire for eight hours a day is not something most Americans typically want to do.
Well. I'm not going to ask you about bananas and terrorifts because I don't think we're growing bananas. Sir over here, please.
Andrew Watchers is Morgan Stanley, Governor Waller. Thank you for your comments. I want to ask you to say a little bit more about what you are intending to convey with the phrase to a more neutral stance of policy. In a sense, if you're restrictive just cutting once, is moving to a more neutral sense of policy? Or is this describing sort of a process where over several meetings you have an idea of a range in mind that is more neutral, and you're describing a process of moving towards that range.
Yeah, I'd say it's the latter. It's really the process. So if you're at neutral and you think you're restrictive and your policy ready to set up here, what's going to cause you to bring it down? You think inflation is coming back to target, you think the labor market is either stable or weakening, you want to kind of bring it back towards neutral. It doesn't mean you go below and you want to stimulate the economy. Things would
have to really get bad. We're not seeing that in the labor market that we want to go below netrol or I'm not seeing it. I can't speak for anybody else. But and the debate right now is about inflation. Inflation is running three percent, it's way over our target. It's been above target for five years, four years. Why are you lowering rates? So you have to say what is the outlook for inflation? And that's what I've argued, that any teriff effects are going to be temporary. You look,
this is a classical line in central banking. You look through those things. You think about what is it going to be inflation twelve months from now? When the next twelve months. So that's what I'm doing. And in that world, I see inflation coming back down to target. I see a softening labor market. So I want to bring things back to target. I don't want to go below target right now because inflation is above target.
We in Q and A, we go to tens of a percentage point. You were talking whole numbers up there. You say two percent is where the FED is right now? What is the latest thinking you see around the raging debate to take a tailor roll, look at the output gap, look at Nahru and all the rest of the mumbo jumbo, and plug in a more normal two point two or two point four or two point six percent run rate versus the decades long hope for a two percent.
Change the inflation target.
Yeah.
Yeah, I mean there's always a good argument or debate about what should you pick a point or pick a range. A lot of central banks in the world they run with a range. They don't seem to have big problems with that, you know, like the bank a Canna is a range of one to three percent, So you know, there's often a question you're just as happy with three percent inflation as one percent?
Should we be? Ah? Should we we want two?
But they're not going to do crazy stuff to get it to two. That's the key point. You'll get there. You'll take your time, but you're not going to do drastic policies to drive it to exactly two. I think two is a good thing. I'll give you my spiel on what's the real value of having a two percent target with a particular price index. It holds you accountable. If I just said inflation in general somewhere between one
and three percent. There's a lot of loose things that go on in there that I could always slippery slide, say, I did my job. What are you talking about? That happened with the money growth targeting back in the early eighties. Yeah, and one was pretty good, but M two was lousy.
But next month two, Remember how the world stopped. I think it was Thursday and whenever it was three thirty for M one M two.
And it is money growth. So I like two percent because it holds me accountable. Okay, now you want to hold me accountable because it's two point two instead of two. Come on, that's where a range kind of helps. I always like to tease my friends and things. Is in the year two thousand, if I had told you the FED would keep inflation between one and two percent for a decade, everybody in the year two thousand, that is
a phenomenal monetary policy success. But because it ran one point seven, we didn't hit two, it was a failure. Think about that. One point seven, not two was a failure. But if I'd asked you before any specific two percent target you said one to two, that's amazing. That is phenomenal monitoring. So that's the danger with the two percent. It's so precise that if you don't hit it, you start saying you're failing and hitting your target. That's why I actually kind of like arrange myself.
I want to talk one final questionnaire for me about the culture and the fabric of America and are economics there is such a conceit and bias in a distrust back to nineteen oh seven or even before of three zip codes in Manhattan or maybe the corridor from Washington up to Boston. You represent a part of America, some would say the backbone of America from Bimidgi, the Dakota's Bimigi all the way out to Washington State and then
to Saint Louis. How would the Federal Reserves system change under a Chairman Waller given that cultural geography versus every day the East Coast certitude. It's the heritage of the modern economic FED.
Well, I mean, this is one of the brilliant aspects of the design of the FED. I've studied the structure of the FED for forty years now. The whole idea was to say, look, you need some political accountability in DC, but you want to have a lot of this outside of DC. That was the typical grassroots get people away from DC talk to the American public. I always say, we're the one government agency that has contact with all parts of the US. Who are are twelve districts and
all the branches in those districts. Everybody can come talk to a president of the Bank, they go out, they go out regularly speak to the public. You can come talk from me. You can have a conversation with somebody. I mean, the only other institution is they have that kind of contact, or the IRS and the Post Office, and we typically don't want to have them knocking on our door. So that's when the big advantage of the FED in our structure of having people on the outside.
There has been debates forever of moving more political accountability to the FED or moving in a way. Sometimes people's viewship back and forth depending on what the situation is. But I believe the basic structure that we have has served the country well by representing all the country in the decision making process, just not a few handful of elites in Washington, Washington, DC, So that I think is important. I would say, like I said, for me, one of
the critical things i'd changed the SVP. I would encourage the sense. I'm not somebody who's afraid of like, oh, if you're dissenting against what I'm pushing, that lowers my confidence or min It'll.
Be so much better for us, you know, it'll be I highly recommend lots of dessense. It'll make the FED show better.
Well, I just think that's the whole point of it. That was the idea of the structure was you put nineteen members so you get this diversity of views from around the country coming in different points of views. If everybody comes in, no matter what part of the country, no matter what the situation is, and you always say the same thing, we don't need it, you know, just have four or three governors and that's it. It's the board and you're done with everything.
Governor Waller, thank you for joining the hustle and