BONUS EPISODE: Bloomberg Surveillance in Jackson Hole

This is a special edition of Bloomberg Surveillance. In your od loots podcast feed. We're in Jackson Hawayyoming, along with Joe and Tracy covering the fed's annual Symposium. Keep listening for conversations with Peterson Institute President Adam Posen and Philadelphia Fed President Patrick Harker. That's coming up on the special edition of Bloomberg Surveillance. This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz.

Perfect guest for reaction to this speech as Mohammad al Aaron of Bloomberg Opinion and Queen's College, cambridgemammed. Thanks for being with us and being through with us through that speech as well. What were your thoughts when you heard some of those words from Chairman Power just moments ago.

I had three takeaways. John, First, it's a speech that said very little that is new.

He repeated what he.

Has said in the past, and he has retained maximum policy optionality. Second, he reminded us that with the exception of the inflation target, which he said is two percent and will remain two percent, everything else is uncertain. And his reference to our star in particular was very interesting. And third, what I thought was also curious is how he ended the speech. He ended the speech talking about

Mohammed. One conversation you and I have had over the last several weeks, the last several months for that matter, people having this discussion here as well, are we, from your standpoint, in your opinion, sufficiently restrictive?

John. This goes immediately to what is the right inflation target? If the right inflation target is two percent and they want to get there in a credible period of time,

Mohammed, Does it concern you that we've heard a lot of people who sound pretty happy, actually, other than Jay Powell, who is taking sort of the adult tone of we're not there yet, Stop declaring victory. There's a lot more down the pike, everybody else sounds like things are going really well and the FED policy is achieving exactly what.

It saw to.

So I don't think it's everybody else, but most people are, especially in the marketplace, not so the economists. You have Larry Summers, for example, reminding us this morning that if you look at the seventies inflation cycle, this one looks very similar. He has to do graphs up and he's sort of warning implicitly that we may see a pickup in inflation. So I think the marketplace is much more

Do you think, Muhammad, that it's important for the Fed to get ahead of a potential resurgence in inflation, or do you think that Jay Powell's approach of watching the stars and seeing what they are will be sufficient to curtail some sort of more embedded inflation.

It's hard, Lisa, because as you know, they have not, like past Feds, opted for a strategic view of inflation, nor do they have a functional monetary policy framework. So they've become highly data dependent, which means that they are using instruments with lags on backward looking data. So they are in a bit of a tough situation. They're going to remain data dependent. So I don't think he knows what they will do in September. He's going to wait

Plenty of feedback, Tom, This coming from No Data of renmactis church and please send the following. I thought Pow delivered a neutral speech. The Fed seas its monetary policy stance is restrictive, and we'll make a more tempered approach to future meetings. Proceed carefully, risk management. These are all catchphrases for do nothing right now. The view from No Data just Manasa guy.

A lot more response coming in here. Mixed market, red and green on the screen, Doctor Orion. I want to touch upon your iconic work and game theory, and that with the word that I'm hearing this morning is complexity. I heard it from you, I heard it from John Lipsky and others. The simplicity we're all begging for is teed decisions.

You are known for.

This This is a Jackson Hall devoid of teed decisions. How do our viewers and listeners handle the complexity? Now?

And to come, Tom, I think the most important thing to understand is that we have left the world of insufficient demand and we are now in a world of insufficient supply, and there's many reasons for that. It's a world that's not going to go away anytime soon. It's not pandemic issues that are fully reversible quickly. There are longer term issues going on change, globalization, supply change management, the functioning of the labor market, and the list goes on.

We're thrilled, Mohaman to have doctor Gerghavin with us, and then you and Christian Laguard with us later. And the heart of the matter is, are we beyond the supply shocks of this pandemic? Where are we on that Continueum Muhammad? Have we escaped COVID?

I mean, we've escaped the worst of COVID, but we're dealing with the legacy of COVID, but we're also dealing with the legacy of the war. We're also dealing with many other legacies. You know, Tom is fascinating that you will have President Lagard on because if you think the US is complicated, then in terms of degrees of complexity, Europe is even higher. The UK is even higher than that.

So Mohammed, she is so much more exposed. Europe is much more exposed to what's developing in China at the moment, Muhammed, if you took the US out of the equation right now, and we've been talking just about Europe and China, wouldn't we be talking about things like rate cuts and easing and stimulating the economy.

If you take the US out of the equation, you would be talking about stagflation, and that's what everybody is afraid of. The US is exceptional, and it's exceptional in its economic performance, and if you take the US away, then you're taking away the only engine of growth for this global economy. But you're not taking away to supply

Muhammed, is that the risk or the reality in Europe right now?

John, is still the risk?

You know?

Yes, Germany is struggling the most, and that is if you like the engine for Europe, but there's also good things happening in Europe. Away from Germany. It's a high risk. It's flashing WED, not even yellow, it's flashing WED. But it's not yet a done deal. The US is much better off. China, ironically, is the one that's suffering the most. If you've been discussing all morning, there is no obvious policy response. And now these piecemeala responses are being rejected

And that's perhaps the cause of the manufacturing recession that we see in Germany and parts of Europe, but the service aside, we've been talking about how that's maybe more directly affected by the ECB's policies and where rates are and the more direct transmission mechanism than in the US. J. Powell just said that there is evidence that the long and variable lags are coming to the fore and will

I hope not, Lisa.

Our service sector has been stronger, and even though the PMI numbers this week were disappointing, at least there were over fifty for the service sector. We don't want pmis south of sixty or fifty. And also, ironically, the service sector is where Europe just to staflation as well. It's not the goods sector, it's a service sector that's the

We're silso talking about the potential for some sort of weakness down the pike.

One thing that J.

Powell speech did we seem to remove rate cuts in the near future, at least for the foreseeable future, and you can see that shifting upward in the rate expectations. Do you think that this economy can hand a five percent fed funds rate for the remainder of next year, even with all the strength that you're hearing about.

Lisa, We don't know. And he did use the word agile, and that's absolutely correct. He's got to be agile. Look, there are all sorts of sectors that adjust.

With a lag.

We haven't seen the full impact yet of the higher rates. You're starting to see it play out in various segments, but in a very small way. Remember, not everything that's refinanced immediately. This is very unlike the UK economy, where the effective duration is much shorter, so you get refinancing quickly and the weights happen, the great effects happen much quicker. So we don't know how well we can navigate the

Stuart Kaiser, a city publishing just moments ago, give you a flavor of what's happening on the south side. Not a game changer for markets from Chair Power, but remind us on upside risk to inflation, that demand downside risks to growth. Mohammedel Airan still with us, Mohammed, I just want to finish on that with you. The downside risk to growth to counter the upside risk to inflation. Is that something we all need to be cautious of, gone into year round and beyond.

Yes, and that's why Chair Pal had a speech full of optionality. You know, I go back to what Mike McKee correctly said. It's not that the content was new. It wasn't. There was nothing in that speech that we didn't know before. Whether it was explaining what has been behind inflation, or whether it was explaining the range of policy possibilities and the risks and the need for risk management.

All that has been said before.

What was notable this time is that it was packaged slightly more hawkish than than dubvish, and that's what people are picking up on. But ultimately, John, if we step back, the only thing he said is that what we know for sure is his belief is that two percent is the right inflation target and will remain the right inflation target. That issue is going to be hotly discussed in the next quarters as we get more and more data.

Yeah, Muhammed, and I think that device is gon and go away anytime soon, even if you havevin power tries to put it to bad. Mhammed, thanks for being with us today. I appreciate it as always Mohammed al Arion.

It will be analysis and interpretation owning the high ground on that is Joseph Wisenthal and Tracy Alloway. They host a podcast odd Lot's. Alloway had to redo her fireplace mantle because.

The awards have come in outright so large.

Yeah, they're piling up. I mean Wisenthal already had a mantle that it holds three Interpax City joining us. Tracy Alloway from Weisenthal would not get out of bed this early this morning. What I love about your work back at the f ten years ago is you own a perspective of London and New York and synthesizing the Western world China and an exceptional Japan with you waita in attendance here in this YCC disaster. Just had to listen

Well, I'm kind of confused at some of the bond market action that we've seen, so two year yields going above five percent hawkish interpretation.

But I'm on the Neil.

Dudda side here, which is this was a very dubvish speech. Actually, Powell sort of gave a nod to the r star debate, the idea about whether or not the neutral rate of interest is structurally higher in current world. But then in the next sentence he basically goes, but we have no idea what our star is anyway, so it's completely irrelevant.

And they're talking about being at restricted.

It's not a small matter, John, Yeah, that's not a small matter. This has come up a couple times today. The guy from New York City, you know, the private equity guy, whatever Paul is, he's not too big on the plugins of our stir.

The tracy something you've discussed. This probably shouldn't come as a surprise, should it.

I don't think so.

To me, it very much resembles what we saw last month from Powell. It's very much a data dependent speech, which makes sense because you have two major data points coming up before the next FED decision. Why would Powell stick his neck out at this particular moment in time? And of course there is a lot of uncertainty about those long and variable lags, as.

You were talking about, Lisa, Well, this is a problem right now for j.

Powell because he wants to bring things down, but he doesn't want to curtail tynamism too much. Do you think that it seems fair to view his speech as saying that rate cuts are not in the cards for a longer period of time time next year, because that's maybe what he wanted to say in the implicit sort of tone, but not what he actually said.

I think he'd have to see a real deterioration in the underlying data to justify a rate cut, and that's just not happening. We have a lot of sort of anecdotal data points about maybe consumer spending is starting to weaken, but we haven't seen any of that in the unemployment rate right now. That said, I know the tone of this particular Jackson hole is very different to last year where Palell was talking about how we'd have to assume

Right.

The Phillips curve says that if inflation's coming down, the unemployment rate should be going up, but that hasn't been what's happening.

So there's still a ton of uncertainty here.

This is essentially, while it is a global central banker is coming together, it's also essentially an academic conference and you're here with Odds to speak to some of the academic research. What are you hoping to illuminate in this whole shifting global structure?

That was sort of the theme. Yeah, that's exactly right.

So I know that the focus is always going to be on the sort of short term outlook for interest rates, but really Jackson Hole is about the long term framework of monetary policy.

And one of the big themes that is starting to.

Emerge is this idea of higher public debt and we've seen that born out in the Fitch rating cut. Recently, bond yields higher because of some concerns over the outlook for US fiscal health. And again, the unusual thing about this moment in time is that we are seeing massive fiscal spending.

At a time of low unemployment. That hasn't really happened before.

And so I think there are a lot of people at this conference who are wrestling with that idea.

In that dynamic, you and.

Joe wis loove Rockstar hours. You're just sort of windering, and you do your podcast, and you do it by piecing together conversations where Bloomberg surveillance is complete and total chaos twenty four. What's the conversation here you're most looking for into your next podcast?

Thank you for assuming that all thoughts isn't constant chaos as well. Tom, Well, we're having you on later today.

Count please all.

Right, it's a conversation you want right now at Jackson Hole.

Okay, the big picture goes back to that bond outlook. What does a world of structurally higher debt look like? Does it necessitate higher interest rates? And what new financial risks does it introduce into the system. So we basically moved from a system that was very much reliant on bank lending to one that is far more bond based. And how do you square a world where bonds really really matter with central bank mandates to bring down inflation.

There's a tension there.

You can't build the financial system on bonds and assume that they're going to be very low volatility and then try to bring down inflation and have higher rates.

Tricy, this was great. Good to have you here. Thank you, thank you having Thank you very much, Tricy Anaway the host the co host of the Odlots podcast. Joining us is Patrick Kaker, the Philadelphia FED President, Patrick good Mornick, Let's start right here, not what Chairman Pal said, but what your colleague over at the Boston Fed said in the last twenty four hours, that this resilience of this economy suggests maybe we might have to do more. You take a different view.

Why so, Look, we have to get inflation down to two percent. We all agree on that, I mean everybody is. We're all committed to that. The question is how to get there. We are at a restrictive stance in my view, and we're putting pressure on the economy to slow inflation. The question is whether we need to increase the pressure, just keep pushing pushing, pushing, and I'm in the camp right now. Just keep the pressure going, let this work

Paul didn't really say anything new, but he did sort of cast it in a hawkish light, and he talked about how the economy is perhaps growing faster than anticipated and that could increase inflationary pressures. So what would it take to get you to change your view and think we need to raise rates more.

If we saw that the decreases in inflation, we're stalling right, that we weren't making that progress that we need to make.

But what would that How would that manifest itself? Because people who calculate CPI the analysts suggest we're going to see it go back up, just essentially for mechanical.

Reasons on the headline side, Yeah, for sure, But we also were going to see shelter inflation come down, right that it's coming down now. You see this with real time rents. So if service inflation in particular, or core service inflation, whatever you want to call it, supercore, if that continues to stall, then I'd say we have to do more. But again, I really want to emphasize we are doing something right now. It's not as though keeping

You said, and Jay Powell just said that it was important to get inflation back down to two percent.

That was unequivocal.

Does it matter when I mean right now you can see in the dots that it's not until after twenty twenty five. If it takes till twenty thirty, does it matter?

Oh yeah, twenty thirty is a long way off twenty six. They set under four this year, under three next year, and then get to two in twenty twenty five. So yeah, it's going to take some time. But what really matters what I hear all the time. Is not just the headline, not just supercore, but think about the essentials of life, the things that people really need, shelter, food, transportation, energy.

You clearly think we're sufficiently restrictive. Other people think we don't. So let's go through that point. Unemployment is still three point five percent. Growth this quarter could come in at about three percent. What is the evidence that we're sufficiently restrictive? What can you actually point to beyond the soft day? So let's talk about the real hard data.

Starting to stoppen. We are hearing story after story I'm hearing.

And you think that's connected to where interest rates are right now?

Yeah, markets, labor markets are definitely easing up. We're hearing this over and over again. It's easier to get employees. And the retail numbers I'm a little suspicious of because what we're hearing, for example, from a major supplier to the back of the school market is sales are not what they expected. So we are starting to see these early signs, but they're early, right, and so I don't think we need to react either way right now, just

Well, if you keep the pressure on, but even don't raise rates, how long do you need to keep the pressure on. When would you see moving away from the peak?

Clearly not until next year at the earliest. And when next year again, the data will have to dictate that.

Well. There is a question about if inflation keeps coming down, real rates continue to rise and put additional pressure on the economy, would you see the FED recalibrate its peak rate to keep the pressure steady as opposed to letting it grow. I realized this is a fine point for the market area. And if you get the wrong if you say this the wrong way, they're all going to start pricing your rate cuts.

It's possible, right but at this point, we really need to see inflation moving down, and they're saying the early signs of that again, and I'm getting story after story from all our contacts that it is starting to happen. But I want to keep rates where they are right now, and then we'll decide later what we do.

What do you think is happening with labor market wages at this point, because that was the concern, especially with Jpal's non housing services. These guys were talking about the United Autoworkers negotiations going on. Have we broken the back of rising wages rising at a too fast a pace?

Too early to tell right now, but it does seem like what I'm hearing from all our contacts is that it is starting to ease, right I mean, we're not where we were where midyear increases, they're there. Nobody's considering that. So we are starting to see some easy particularly in the service area, hotels, restaurants, and so forth. We are starting to see it getting a little easier to get

Well, but this goes to this question.

Of Okay, well, the savings are going to get borne down and then we're going to start to see the real economy expose itself.

Right, A lot of people have questioned that.

But I am wondering, what kind of neutral rate, what kind of you know, sort of longer term expectation for the FED do you expect in the new normal?

What does it look like?

Yeah, so we don't know for sure, right, let's start there. We don't know exactly what that new normal looks like. But one of the things I think about is what's fundamentally shifted in the economy between before the pandemic and now, remember before the pandemic hard to remember for all of this, right, given what we've been through, but we had low interest rates, low unemployment, and low inflation. What's fundamentally shifted? There have been a lot of things. Supply We're going to talk

Yes, it sounds like a base case when I listened to you, is that case?

I don't know.

I mean, at this point, I'm not quite sure. But clearly we're going to get we think, and we'll get back to trend growth in a couple of years. We'll get inflation under control in a couple of years, and inflation and unemployment will tick up. But really in the fouri ish range, back to the neutral rate.

You've offered example after example in the last eight minutes. It's highly anecdotal. Is the basebook now more important to us than us retailselves?

When I step back and I think about myself, and I can only speak for myself. Right when we were going through the early part of the pandemic and we were saying that inflation was transitory, it was just used vehicles and so forth, what we're hearing, what I was hearing from my contacts was now it's more persistent. And I didn't factor that in. The mistake I made. If I made a mistake, was I didn't factor that. It's really soft data, that anecdotal data. But it's more than

NERD question for our friends on the trading guests out there, especially the bond guys. The balance sheet has been coming down, but very slowly because of.

The caps and the way that works.

You haven't hit maximum reduction yet on a month by month basis, and at the same time we have seen financial conditions remain easier than you would expect. So the question is do you do more with the balance sheet because it has an effect on how tight the policy is.

At this point, I don't see us changing course on how we're reducing the balance sheet. Again, circumstances could dictate something else, but for right now, I think we just stay the course, keep that on, as I've said or many times before, on autopilot, just let it run, and if we need to adjust policy, we adjust that. With the bed country.

Well, there has been a question on the other side of how close you are to stopping balance sheet reduction when you reach the level of demand.

Yeah, I don't think we're there yet, but we do clearly have to monitor that. If you go back to the last time we did this, we knew we were at that point where we needed to stop, and we saw the market indicators, the volatility in the markets. We've not seen that yet, but we could.

We have seen real yields climb significantly. Today five year real yields, inflation for adjusted yields rose the highest levels going back to two thousand and eight. Are you watching that closely as an indication of the transmission mechanism at the balance sheet run off?

Sure?

Yeah, I mean that's one of many, and it's also just a simple trading and things like the phatas market and so forth. Not at this point. I mean, but it is clearly something we need to keep watching.

Can I finish on this itty provocative? Have you destroyed the mortgage market in America for generation?

I don't think so. I mean, well, it is clearly tough when you talk to bankers.

Beyond tough people, Yeah, it's first.

First time home buyer really really hard because there's no inventory. Even if they could they could afford mortgage, they can't find a home because people are locked into that low mortgage rate, you know, in their existing home. That's why I think we don't keep going with rigs right, so that we can stay steady and at some point as we reduce rates, we can bring those mortgage rates back down. There's no question that's an initiation.

But we're not going back to two percent mortgages over thirty years, are we. So that inventory is offline maybe for a generation.

Less.

You're not there yet, yeah, because what we're hearing from some of the home builders is they keep selling, how they're having a.

Great sign, having a great high. I've done that a huge favor. Yeah, we're talking about whether this housing market can really recover in the next several years given that this feels quite generational. This feels like a but there's a.

Lot of inventory coming online I can tell you in Philadelphia and across many cities I know, but Philadelphia, for example, a lot of multifamilies coming online in the next few years. So we are increasing inventory.

Patrick, it's good to see you as always. Thank you, sir Patrick Harker, the Philadelphia Fed President. Reaction there from inside the Federals following that space from Chairman Powell.

What I'm going to do at Jackson Hall right now as we begin in the sunrise at this important Friday is taken a more international perspective. She is not here at Jackson Hall, but in heart and soul her institution, the International Monetary Fund, decisively is Kristallina Gorgiheva joins us, the Managing director of the IMF, offer a recent essay on what everyone's talking about, the fragmentation, the fracture of the global economy. Doctor Gorgihaeva, congratulations on the essay that

What needs to be done now to.

Begin to a more stable global economy.

It is urgent, and that sense of urgency is lacking.

Tom. Why is it urgent?

Because we have moved in a more shock front world, in a world of more uncertainty, and in this world we need each other even more than before, and yet cooperation is in a retreat.

What does that mean?

It means that unless we wake up and we act pragmatically in the areas where we can find common ground, and in the areas where we must find common ground, like the fight against climate change, we will drift into a world that is poorer and less secure. We have random numbers. Unless we wake up and we pursue this pragmatic collaboration, we are going to be losing about seven percent of global GDP in the long run. I mean that is like White transend and Germany from the economic map of the world.

Because of time, doctor gargave. It's so important I get this in this morning. I want you to speak right now to the four major central bankers assembled here and Jackson Hall. The singular call this year is the five year caution of economic growth of your institution. You call it slobalization. How do those four central bankers assemble here get us out of slobalization.

It is not going to be only the job of central bankers, but yes they play a role, and their role is to be very careful in assessing how data informs their actions. We're going to see tom after a period of convergence in monetary part see action tightening creates fighting inflation, some divergence because where the US economy is very resilient I was listening to the discussion just before me, the European economy is not. There is less strength in

Spillover for global growth.

And this is why my main point is there would be some divergence in policy approaches across central banks.

Crystallina is fragmentation inflationary, of course.

It is why because so much, how much did you take you if you take the main impact of fragmentation through trade, what it translates into is pushing cost of production up on a global scale. How inflationary it could be depends, of course on how that specifically reflects into cost structures across national economies in the world economy. But the pressure on costs and then through that on standard of living ordinary people serve only comes when we fragment the world economy.

Christin and I just want to squeeze this in. I've got about sixty seconds ninety seconds left on the clock. You've said the IMF needs more resources. Can you be a lot more specific about what that means, what do you need and where do you expect those resources to come from.

Well, let's face reality, more shot from world means countries need to have more capacity to face these shocks. Today, global reserves are concentrated in a small number of strong, advanced and emerging market economists. Ten countries hold two thirds of global reserves and all the small medium sized countries hope less than one percent of global reserves. This is where the IMF comes in. We are the insurer for

The IMF managing. All right, Christina, thank you. It's going to hear from you. Thank you.

This is a wonderful moment now as we go to that speech because of central bankers gathered here and yes, US economics, but of course international economics, and they will listen more to Barry eichen Green of Berkeley than anyone here. He owns the high ground from Golden Fetters, his classic book on gold until what we see with globalizing capital, and now his intense focus on debt and the debt mess we're in. Doctor kan Green, Thank you so much for joining us. How bad is the debt mess we're in?

Well, I think it's a big change from the pre COVID days. Governments are going to be constrained if and when we have a global recession, if and when a bad thing happens, they have a lot less room to run fiscally because of the increase in public debts worldwide.

As usual, You've been out front on this, and the phrase that I hear from you is and you say it with respect to the institutional pressures and our political leaders. The modern medicine that we have, what is the more stronger medicine we need to take to get control of our debt in our ratios.

I think we're going to have to learn to live with these high levels of public debt that the advice policy makers are getting from the Bank for International Settlements in the IMF about bringing down debt ratios. That's unrealistic. We're not going to be able to grow out of these higher debt ratios. We're not going to have a more favorable real interest rate going forward than we've had in the past. We're not going to be able to

Debts tipso your words, manage. Other people might say this ends in disaster, Barry, what's the argument against that?

For countries like the United States? There is a big remains demand out there from foreign central banks and the international private sector for US treasury bonds. So I think the the US government is an exception to the general rule in that it has room to run. Other governments are going to have to reform fiscal institutions, worry about fiscal transparency, do all the things that the IMF and others have been recommending for years.

Does it basically suggest that longer term yields in the US are where they need to be, That basically the term premium is going to be significantly higher, That essentially what you.

See is what you get.

Well, I think the term premium can come down a bit, but not back down to pre COVID levels. I think where everybody understands that we're in a new world with higher interest rates, the question is how much higher? And I wouldn't be a pessimist about that.

How much has the debt that the US is a curd in particular driven a lot of the inflation that we see. How much you can really basically write the book and say helicopter money actually does cause inflation.

Well, I think the fiscal stimulus that we the United States did in twenty twenty one was a contributing factor to the inflation, and there will be debate about that today because there were other contributing factories as well, the supply shocks, a variety of other things.

Take your study of debt, your view on the inflation adjusted yield, which is maybe what the adults of pros look at, and bring it over to the Eichinggreen application of monetary policy. And there's a whole our starred debate in that. Are we going to move away from a two percent regime? And how do we search out an anchored level that is higher?

Well, I think the FED has to bring inflation down to two percent before it really opens that conversation we saw in this recent episode. The importance of credibility, and credibility and two percent are synonymous. For the time being. The only time you talk about changing the regime is when you have everything.

Let's go to alohol at Berkeley to Brad the LNG the office. You and I are going to walk in with a professor DeLong, and I'm going to say to both of you, with your academics and his politic more political view, what's the price of bringing inflation down to two percent? What's the cost of that to Americans?

Well, so far the cost has been minimal compared to the doom and gloom scenarios. We heard about unemployment going up to five or six percent.

So so far, Somark, you have been the arch optimist against doom and glue. And how do you respond to the doom and gloom that we hear daily from Lisa Bramwooz or that we hear out in all of economics. How do you respond to that American gloom that you fought against for fifty years?

Well, look at what the Atlanta Fed now Crackers is saying. The US economy is on track. There there's no sign of inflation on the horizon. Yet in this kind of assembly of economists there has to be one optimist.

At least your name is referenced.

I just want to wonder, you know, at one point, is it unsustainable this kind of enthusiasm, this kind of growth, right, I mean, at some point you're not going to get down to two percent. I'm already changing to three percent two percent for quite a while, even by the fed's own admission twenty twenty five, exactly after.

Twenty twenty five. Doesn't that reduce their credibility to some degree?

They have to have a credible strategy for getting to two percent? So this is the classic. Give them a target two percent or give them a date and never give them both two percent?

Can we think about where it came from? Is this really about some people in New Zealand in the nineteen eighties just coming up with a number. Is that what we're all doing here?

Percent?

About two percent?

That's exactly what we're all all doing here.

But history has consequences, should I see anyway I said geta I mean absolutely absolutely dead. On the first time I think I met you, or it was like within the year I met you, some guy almost took a swing at you on a stage in Singapore at at G seven meeting. He was so angry with you. How do you respond to, OMG, the dollar's dead? Ren mindy ascended? You throw chalk at people at Berkeley when it comes up how do you respond.

No, at Berkeley, I don't hear it, but that that kind of interchange, you get more invitations, do you.

Get okay, you get more speaking fees off that. Do you suggest a dollar is at risk given all these stresses?

I think the dollar is not at risk yet. So we in the United States can do things to damage its credibility, but nothing that happens at the Brick Summit this weekend will much as you reader, I would have chosen to come here anyway.

Yet word yet it's so loaded. Thank you. This is wonderful trading. Thank you very much, sir.

Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern Bloomberg dot Com, the iHeartRadio app tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always on the Bloomberg terminal. Thanks for listening. I'm Tom Keen, and this is Bloomberg