Global Data Pod Weekender: Save poor Bob if you please

(upbeat music) - Welcome to the JP Morgan Weekender. I'm Bruce Cazman and with me is Joe Lapton, surprise, surprise. - Hey, Bruce, you had to pause 'cause we were doing this a day early on Thursday, huh? - I'm off my normal routine, so it's gonna be a little bit different. But yes, we are doing this on Thursday because Joe is traveling to his daughter's college graduation tomorrow. Congratulations, Joe. - Congratulations to her. - Congratulations to her, congratulations to the family, great achievement, and enjoy. So with that, we're gonna do this on Thursday. We'll miss the ISM, which I think is the only important data release we don't have here. I don't think that's gonna change the conversation very much. And let me frame the conversation if I'm saying, I think the motion of the global economy, at least on growth, we can talk about inflation and policy separately, but on growth has basically two things. And one of them is how much momentum has the global economy taken into the new year, and the other is how much momentum is gonna get taken out what the risks are around the geopolitical events, driving the energy sector. And it feels like if anything, we're kind of becoming more powerfully at odds in terms of these signals. I think one of the, you know, interesting and important signals from this week's data and really accumulating in the last few weeks data is how well the global economy is doing with obviously a clear concentration in what has been tech. If you look at the GDP prints that have come out of Asia so far for the first quarter, China and Korea close to 7% growth, Taiwan this morning close to 12% growth, all of those are sequential. The US holding up reasonably well in terms of private demand, a lot of noisy components, which I don't wanna bore people here with, but, and then I think the business surveys, the industry, data overall, you know, kind of complementing that story on tech, but there's so seem to be some fairly big gains going on there with the April PMI surveys, which we talked about a lot when the DM came out and we were questioning whether that would be followed through in Asia, what we've gotten to China one, and if anything, China was even stronger than the DM one. So there's a lot of, I think, pretty healthy growth momentum here. There's a question about whether Europe is a laggard and we can maybe talk about that, but the other side of the story, without dwelling on the details very much, as we do not have an opening of the straight-of-form moves, we do not have any signs that we're about to have an agreement, and we do have this concern that the pressures from reduced supply, the lack of progress on anything politically here, leaves us very vulnerable to non-linearities. We wrote a piece this week kind of going through the idea that we're at a crossroads that there's potentially two scenarios here. We have talked a decent amount about this, but I'll just say in our baseline scenario, we get through this in a reasonably constructive way that requires the straight to open. There is some growth drag, but growth holds trend possibly even higher, given the momentum we have. Inflation, which has been elevated, the core stays elevated. I think part of this is that there's a gradual tilt in the direction of higher interest rates, central bank tightening that kind of comes with it. There are other ways it can play out, but that's probably the most likely scenario. And then all hell breaks loose. If we really have an adverse scenario, we start to push oil prices up in non-linear way. We start to have physical supply constraints, and obviously that's a genuine threat to the expansion. So with that framing, Joe, we should really figure out where we want to probe in terms of the issues here. We've talked about the general tension. What is it that you're most focused on at this point? Well, I mean, you laid everything out. And of course, we could dig into any piece of that and rehash it, but I think we've been doing that a lot. I think if I were just to pick one area that-- well, maybe two things that I think are worth highlighting. One is just worth highlighting. The second is, I guess, I might push on you a little bit. So the first-- the highlighting bit is just to recognize this idea that we go through this in the piece, right, that if we do get through this and we don't have a recession, and let me say, actually, the path to that, the path to our baseline. Our baseline may start to see more and more untenable every week that we go through this. But remember, there's a narrative, which is that things get really bad for a brief period of time before the US and the Trump administration really just gives into a lot of the Iranian demands, and then we kind of prices come back down quickly. So-- That's not our narrative. That's your narrative, if you're-- No, no, I know. I'm just saying that I said there is a narrative that-- OK. --get that, right? I said, we have a baseline, which is-- right now our baseline is $100 average. And we considered something where the price spikes up to $150 or higher. That's in this piece. You can imagine a world where we spike up to $150, and once they even 175 or 180 for a few days before things come back down very quickly. We should recognize that things can get very bleak before they get better. And we could still be on this path of resilience, in which case, the one point I wanted to highlight-- and you can see very clearly in the piece in our figure four, if anyone wants to dig into this-- which is that if we don't have a recession, the odds of hikes here are quite high. And when we talk about broad-based hikes, we're talking something close to 50%. And it's really just a resurrection of that theme that we've been saying for a while, which is you can't have your cake and eat it to. So it doesn't mean it's a guarantee. But the central bank views, obviously, really varied between these two paths. In some sense, that's not surprising. But the numbers, the way they fall out, I think, were kind of interesting. That's just a highlighting point. The point that I want to probe with you a bit is that this adverse scenario that we have, which is a world where prices stay quite elevated, which means the straight stays closed. Let's say-- I don't know how it-- we see it opening, but let's say it stays closed into August. And prices stay elevated, 150 or higher for the next several months here. That, to me, is more of a world where recession seems almost like a foregone conclusion. And you admit that the probabilities are more likely than not in that strand. You put a bit of a higher weight on the idea that we could weather that. And is that just a-- is you chided me before? Is that you just being humble, which I'm open-minded to, that hey, maybe there's just a lot more inventories. Here, that we don't see. We don't realize. And inventories are a big cushion. They have been a cushion. Maybe there's more than we don't realize, not just in crude space, but in product space. Or is there something else? Is it also the cushions that, hey, we keep going on? Well, I think we're getting into an area which I don't really want to spend too much time delving. Because I think behind your question is the idea that accompanying a move to prices at 150 or more is a COVID-like breakdown in supply chains. You're basically saying in that scenario that we run out of inventories. People can't find oil in other products. And as a result of that, we have mass problems in terms of-- I wasn't seeing. I mean, I was just considering the baseline. I mean, want to-- No, you're asking me about, in the adverse scenario, how we avoid recession. Yeah. So I'm saying that I want to distinguish between what is the ability of the global economy to continue growing with oil prices close to $150 a barrel. And what's the ability of the global economy to continue to grow if you don't have oil and people are not able to actually find the products in their production processes? I would agree with you, Joe. I would agree with you, Joe, that if you have a serious breakdown in the capacity to have physical supply that's broad-based across the world, the global economy is going to have a recession. I'm not convinced that that is the only scenario that you have if you have $150 oil prices. And I'd like to actually address the issue, can the global economy without major and broad-based supply chain breakdowns handle $150 oil? $150 oil would basically be a roughly 100. percent rise in the price of oil. Yeah, it would be like 1979, right? It would also be like 1999. No, that was more like 60 percent. Okay, either case, in 1999, in a world in which in a world in which prices moved up fairly dramatically, the US economy grew 4 percent. Now you're going to say to me incorrectly so that that was a period in which the Y2K was happening and we had a fed easing in the background and other things. But my point to you is here is that if you look at the global economy through periods of significant oil price shocks and we separate out the recession dynamics that were in place otherwise and we separate out the physical supply constraints, there are a number of cases where you've had big increases in oil prices and economies have continued to grow through it. That doesn't mean they've been unaffected by it, but they avoided recessions. Yeah, I look, I don't know, this is good, right? Because I guess we're finding areas to disagree on. But like, first of all, 99, that's a weird one because that has a big demand component in it as well. You know, what I think we should try to do is isolate clear supply shocks. No, there was a clear supply shock there. OPEC cut back oil production. That's the one case where you had a production cut back which was pretty immediate in the face of an event playing that. Now it's fair to say that they were cutting back because they had oversupplied the market before that. But the point is I think that you're trying to say that there was a demand element there and you're also going to say to me that in 1990 when Europe continued to move well through the oil price shock, which you know, we had at that point was because of German unification. That's what I'm going to correctly say and we have strength right now and so these are the types of things. But what I wanted to get to was to say that magnitude matters and the only time we've seen a 100% price move was in 74 and 79. Well, if we're going to distinguish between an 80 and 100 percent price, that's dramatically different. 99 is actually 50. 90 is 60. Okay, whatever it is and whatever, you know, we're starting to get into. I mean, whatever Bruce, when I'm sitting here saying scale matters. Right. And 1979, you know, what kind of monetary policy tightening you got in the world? Sure. So it's, you know, I think the impact of price increases are significant, but I don't think they have to cause a recession if they're not being accompanied by the big kind of constraints or they're being accompanied by significant monetary tightening. I mean, if the issue is here, if you're asking me the question, does $150 oil prices have to create a recession for the global economy? My answer is no. Yeah, my answer is no two, but you just said yes when you said that. When you said you started this by saying, you got 150 oil. And I literally said I wouldn't say it's 100 percent. I would say it's, would I say it's 35 percent that we avoid recession? That seems a little high to me, but you know, I mean, maybe that's, I'm, look, I raised it. I don't know what the, what we're talking about. If we agree that the probability of recession is probably high in that environment, but it's not by any means a done deal. Why no, I was pulled. Where are we? Where are we disagreeing here? I would have put the odds at maybe 80, 20. Okay. And if I put the odds at 60, 40, what do we actually disagreeing on? Well, that's not what we wrote in the piece and that's not what we argued about. We put it, we wrote in the pieces in the scenario adverse scenario. Like 70, 30. Excuse me? It's more like 70, 30. And that's where I was kind of saying like, that's a little low for me. Right. I would have said, I want to say 80. You say the 70 to 80 is worth arguing about. I'm just saying, this is an issue I wanted to understand the nature of my point, my point, getting getting away from these numbers, which I think you're not very useful. I want to know the mechanism, which I think that's what I want to talk about. I want to talk about the idea that I think there is more flexibility. There's more ability in the current environment to be able to substitute away from oil periods of time. As I've mentioned to you in the past, we've seen episodes where US gasoline consumption is going down 4, 5% in a year and it hasn't led to a pullback in consumer spending. That's not that these things don't matter. It's not that these things aren't causing growth slowdowns, but do they have to cause the kind of breakdown that you have when you have recessions? I don't think that's the only path. I think it's a threat to the expansion, but I don't think it's anything close to a certainty that you're going to fall into recession in that environment. I do worry, and I think the point here is important, is I do worry that if we keep down this path of keeping the straight close, we are going to have, in some parts of the world, supply problems. That is going to magnify. That's probably going to be more of a regionally concentrated story. One of the interesting features of the current environment is that that story is playing out in the region which has the strongest growth momentum type to tech, which is Asia, and also probably is having the biggest policy response in terms of the fiscal supports to cushion the blow. Asia's really interesting in this world in the sense of how potentially vulnerable it is to a Middle East oil shock here being extended, but at the same time, the biggest benefit is coming from both tech and from what fiscal is doing at the moment. The fiscal is important. The tech, I haven't fully thought through this. I mean, just take Taiwan, for example. This is one company that's driving this. X, TSMC and some of the support companies for TSMC, Taiwan is not doing that great. It's kind of just moving alongside, which is why you get this fiscal to kind of step in to try to provide that. I mean, if you look at the Asian region and you look at its exports and you look at, and this is a big part of the world, we're talking about China as well as the ASEAN countries as well as Korea. If you look at these guys, they're selling a lot of stuff and I think tech is an important part of it, but it's not the only part of it. GDP in the region in the first quarter was Boomi. GDP in the fourth quarter was Boomi. I totally agree, Bruce. There's nothing you've told me there that says how much of what the non-tech part of that is doing. Well, Joe, there's two points there. First of all, I don't have a clean read on the tech versus the non-tech, but if it is the tech, and that means the tech stuff is just so Boomi that it can de-strate this much growth for the regions. Why are we losing sight of that fact in terms of having continued support for growth given that the tech story doesn't seem to be going away? I'm not sure what the point you're trying to make here is. I totally agree. Not only that, I will say I did not see how strong tech was going to be over the last year and a half. In terms of thinking about the Asian outlook going forward from here, are we supposed to feel more worried about the Asian outlook because it's so concentrated in tech spending? I think on the margin, yeah, if I were to give you two economies, one where every sector is Boomi and one where one is going to the stratosphere and everything else is weak, which economy would you want? Well, I think that's not the right way to frame it. I think if you're looking at an economy right now, which is being boosted in a very significant way by a set of forces which are somewhat less sensitive to the energy price shock, then I feel somewhat better about it relative to one where the sectors that we're driving the growth are more sensitive. I think the tech is going to be sensitive. That may be your point. If that's the point you want to make is that tech is highly sensitive here to the energy sector, but I'm not sure I'd agree with that. Yes, but when you keep hearing stories about well, they've got enough inventories to kind of get them through and that just gets us back into the other side of the probability tree, which we all agree. Let's talk about the other piece of this story, which is if you ask the question, where in the world has growth been somewhat disappointing or at least where the momentum feels to be somewhat worrisome? I'd say it's Western Europe right now. Absolutely. Certainly, the GDP numbers, I think, and you cut it are not necessarily too bad. Take out Ireland, the first quarter is still growing not far from 1%, but you've had a week start to the air consumer. You've had a half percent. What? This was a region we've been saying this should be a rebounding reason for about exactly. I've had pretty big drops in the survey in March and to April in a way that you don't see it elsewhere. The other side of this is, should we be more particularly worried about Europe? Europe doesn't. and have quite the same vulnerability as Asia, but it is vulnerable. It's closer geopolitically to the area than the Americas. Sentiment seems to be getting hit here. And the ECB looks like it's about to hike right into that. I hike policy, right? So I mean, I was kind of laying it out and I was showing you this earlier today, just to kind of go through our conversation on this was to say, look, the US is probably getting, you know, not probably, is getting a drag from Iran. It's getting a little bit of a tech boost. Not much. It's easy to overstate the tech boost in the US when you look at just catbacks, but the net trade takes a lot of that out. It's getting some boost. So it's getting some drag from Iran, some boost from tech. It's getting, I think, a pretty good boost from financial conditions in the stock market still the after-glow of the last year's gains. It's getting a pretty good boost from fiscal and it's getting a little boost from monetary. If I look to Europe, I think it's getting hit harder by Iran. I think the tech story is not really doing all that much for Europe. I think financial conditions are not doing all that much like they are for the US. I think fiscal's adding a little bit from Germany, but not doing that as much as the US. And I think monetary's mixed because I think they do have rates all the way back to neutral, which is maybe more better than the US. But as you just got through saying, it's a central bank that's sitting here ready to hike into all this weakness. So when I add up the US pluses and minuses, I get like a kind of like a five plus. If I add up, I think Europe might be like maybe a one plus at best. - So I think one of the issues here, we didn't address in the piece we wrote this week. And I think it is partly because we kept this on a more of a top down global basis is to what degree should our concerns be more regionally focused than globally focused? What concerns we have as much as we should talk about global recession, but what should our concerns be in terms of thinking, well, this could play out with the US getting dinged and Asia getting dinged, perhaps. And someone like Europe, maybe having a recession or something like that is that an important way to frame the outlook. - If I do this for the whole world, I would say the US is at the top, which is like surprise, surprise as always. Then I think Asia is next because I think while they are getting the tech in spades, I don't think they have nearly as much on the monetary or fiscal. - You say that even given their vulnerabilities to the shock? - Well, I was just going to say, that's what pulls them back is that the shock is they're more vulnerable to that. So that's what puts them number two to the US. So if US is number one, Asia's number two, and then Western Europe, I mean, Latam is kind of like, they're kind of seem somewhat quiet to all of this. So they're kind of number three. And Western Europe just kind of to me adds up to the least performance, which is why you jump to that as the one that probably has you turn. But let me throw another part of this to the story. Let's stay in the baseline. And then the baseline are, our modal view now is, okay, growth is dinged and it goes back. Baseline means we get some resolution in the next number of weeks, just let's sort of keep that in mind. But in the baseline, the modal view is, global growth is dinged. It runs close to trend over the next two, three quarters, core inflation stays sticky. And we get sort of a roughly, mixed view in terms of what central banks do. We have an ECB and we have a few other central banks hiking and we have a lot of other central banks that stay un-hold. I guess where I would push right now and this has come back to what we set up front is that the tails get somewhat wider here. The tensions get larger is clearly, as we said, up front, the longer the straight stays closed, the more of the risk that something bad, non-intlinear happens here. But at the same time, if things do actually resolve, I think the argument to be made that growth turns out to be stronger, that pressures on inflation turn out to be greater and that we have a broader tightening, maybe not immediately. I think it's hard to get the Fed to do anything immediately, it starts to build and obviously a key to the story on global central banking and the Fed specifically is whether we're gonna be right that we're gonna get a normalization pick up in the US labor market here. But if we start to get that stuff coalesce around the world in which the straights open in the next few weeks, I think we're gonna feel much more kind of in that mode of the-- - Yeah, well that's how I started this, right? I said that thing I wanted to highlight was that in the non-resession mode, I think things shift a lot more to the not having your cake and eat it too. And frankly, as you know, at the beginning of the year, one of my key calls as we were looking at the year ahead was that the Fed's gonna start talking about hiking earlier than people think. I mean, January minutes and then this week, with three people dissenting on that, at least going to neutral, I think-- - That's not talking about hiking, J. - I know, I think that hiking, but it's-- - Well, no, that is talking about like our-- - And that they're just as likely to hike as there is, that's exactly talking about hiking, right? That's going from bias to a neutral bias is a talk about the other part of the tale. So yeah, I think it is. And yeah, like, you know, I mean, do you think in the world where we get, you were saying last week that you saw payrolls running 100,000 here in the next couple months? - Yeah, I think that when we sit here and after the June report, we're gonna feel that the economy's made a move to 100,000 or so payroll growth. For sure, I've been feeling that way. - Right. - And it's the start of the year and I still feel-- - I feel more comfortable with that now. - And yeah, and so, well, more comfortable, conditional on not going on the downside path or also more comfortable just unconditionally given that we're another-- - I feel more comfortable unconditionally in the following sense that I think if something's gonna go wrong in the US, it's gonna come after the second quarter. - Right. - If we're not resolving the straight thing here in the next six or eight weeks, yeah, we're gonna have problems, but I don't think it's gonna have an effect on the April and May payroll reports. - Oh, so you're saying anything can happen as short of like, you know, boots on the ground, but like we can stay completely closed, no progress, and you think we're getting 100,000 on payrolls in May. - I think the three-month average for the second quarter is gonna be 100,000. Yeah, now that might be followed by a recession in the second half of the year. - I know, I hear you. I hear you. - Yeah, I think the dynamics of transmission year, especially given what we are in terms of financial conditions in terms of what the energy prices are right now. - I think the point is is just that there's a cycle that's happening here. - Yeah. - Exactly. - The cycle is kicking in. And frankly, this was our call, right? Particularly on the good side. We said kind of two to three percent on global manufacturing in the first half of the year. And I think that call is back on track now. And that cyclical uplift in the good sector. - The question is whether it's, I think the question, and this is where we're talking about Asia before matters, 'cause Asia is a big producer here. It's whether that is entirely tech, just tech doing a lot stronger, or whether or not there's actually some of the broadening in the base that we've been-- - Well, I was gonna say two things. I was gonna say one, this imbalanced point that I talked about, which doesn't help the US that much. So I'm wondering, and even if it did, you don't get 100,000 jobs from the building a data center. So the other point I wanted to raise is what's striking to me is that even with this, I always thought the ace in the whole for strong growth was that you were, you were getting all this fiscal stimulus, right? The refunds were gonna drive consumer spending, you're gonna get a huge increase in income. And what I'm seeing now is, at least if our forecast is right, that we've got kind of real compensation overall is actually in the first half, is contracting one and a half percent. And then if I throw in the refunds, their real DPI forecast is minus 0.5. So that's a very different world I thought we-- If you would have said, oh, by the way, you're gonna see real DPI contract by half a percent in the first half. I don't know if I would have been as upbeat on the fiscal stimulus boost in the first half of the year. - Well, I mean, to me, the fiscal stimulus boost was not the primary driver of the growth forecast. And I think you have to realize that at the same time that you're getting the tax cut, which does matter, and is front loaded in the first part of the year, state and local spending is slowing. The fiscal boost in the US, I think, over the course of this year is front loaded. And-- That's all I'm sorry about. Oh, all the way to fiscal. I just want to stick on the consumer. And $120 billion is not something-- I'm not saying you're shaking a stick app, but I don't think you're giving it enough weight. Particularly for a cyclical guy like you, that should have been something that was saying, oh, wow. Yeah, the consumer's going to do really well here. And-- But I wasn't thinking that the consumer doing well was never part of the forecast. The consumer was anticipated to consolidate. And the idea was that the US would continue to grow. What does consolidate mean? Well, after having lowered its saving rate, materially over the course of 2025, that the consumer would take the tax cuts, would take the improvement in the labor market, which would give it a decent boost in income, and would take that and raise its savings rate, and keep spending in the 1.5 to 2% range. Wow. So I agree. And I think that is an importance. All of that, it was important. I think what's happening now, Bruce, is that you've lost all of those income supports, because income is contracting in the first part. Yeah, sure. So now the consumer needs to-- You know why the consumer holds up? Because the consumer is not only not consolidating in our forecast anymore. They're actually seeing the saving rate fall by another percentage. But that's exactly what has to happen here. Because-- I know. That's fine. That's what's happening. The consumer has to stretch more. And the question is whether they will do that. Right. I would say is what allowed them to stretch in the last two years has been perfectly in line with what the traditional wealth effect would have said. Well, the wealth effect is moving sideways now. And so it's not calling for another percentage point fall. Now, you can say-- and I'm not necessarily disagree-- that, oh, well, this is just truly going to be a behavioral. They think that the war is a shock. And they're going to dig deep and go off the wealth effect. Maybe. I think you're looking at this wrong, Joe. There is a story that says, wealth goes up, and there's a marginal propensity to consume off of that and consumers spend. That is there. And there is still wealth gains in the pipeline. And that is still boosting the underlying trend of consumption relative to what it's norm is. We would agree on that, right? The wealth effect still in the pipeline. The equity market is up this year in the US. Up like 4% or so. What? They're not enough to move the needle. Well, whatever it is-- How much is that-- That's not even putting in the list. I mean, in normal times of 5% and 1/2% rise in the S&P, which is what we have this year, would be viewed as a pretty good wealth effect for the first four months of a year. But OK, maybe it's nothing. Maybe it's rounding error. But it's coming off the back of a very strong second half of last year. These things work with luck. I'm actually not trying to push this point. I'm saying what you're doing is you're saying there's some wealth effect that has a impact on consumption through MPCs and you get a spending increase. Fair enough. And it's still positive. It may not be as positive if it was a couple of quarters ago, but it's still positive. Home prices are rising. Equity markets are going up. The consumers overall is getting wealth effects. Not evenly distributed, so on. But we're talking about something different here. We're talking about when you get an income shock in a short period of time, regardless of what the recent growth and wealth is, regardless of what the recent growth in income is, is the consumer willing to eat into its savings over a short period of time to smooth it? That was a long way to say what I already said. And I agree with that. You're going to say that this is just a temporary smoothing of the shock. And that's probably-- We know that the inflation part of the story that you're describing, that's turning real incomes negative, is a temporary part of the shock. The fact that inflation is going to be 5% this quarter is not something which UI or anybody is going to view as a permanent part of the macro scene. So your tendency historically is to smooth into it. And especially if you're getting a better labor market, if you're getting labor income and nominal terms continue to grow at a solid pace, if you have supportive financial conditions, then it makes it more likely. This is a call, and it's an important one. And there's reasons why we could be wrong and the consumer could be more cautious, but so far. And through the month of March, the consumer is held up reasonably well. And what does the saving rate do in the second half of the year? Does it rebuild? Yeah, it probably rebuild somewhat. If the energy price shock is fast and the labor market's doing better, then you delayed that consolidation that I described a minute ago. That's kind of the way. And it's a holds back growth. It takes off some of what would otherwise be a stronger rebound if the goal, if this straight is open. But it's still there, the behavioral story. Yeah, yeah. I just think you need something that's different on the saving rate behavior than what you've seen last year. Because last year's saving rate-- and the past two years saving rate store, I think you could actually link to something fundamental. It wasn't a behavioral smoothing. It definitely was a behavioral smoothing last year. Not in a way that differed from the 25% gain and wealth that we had. Well, if you had-- What? What? I'm saying, if you told me that you're going to see that move in the stock market, I would have told you, my best guess is the saving rate is going to fall by the amount that it fell by. That's not a behavioral saying, oh, I'm getting a shock. And I need to smooth this. That's what-- It's observationally equivalent. I don't really feel like it's useful. It's observationally equivalent to say that disposable income fell in the second half of last year. And the consumer continued to grow at a modest but solid pace. Is that a wealth effect? Or is that smoothing? You've got two different pieces. And you're fixing your wealth effect and then saying, if I fix my wealth effect, then that behavioral is not that strong-- that's not that far off. If I take my income effect and say, oh, consumers ate into their savings, we're getting to the same place. It's not clear which one is-- which behavioral call is right. That that's just a normal wealth effect, or it's a smoothing. I think with disposable income down in the second half of last year and consumer spending still growing one and a half to two, there is a smoothing that's going on there, especially in the context of how much. You're going to define any fall in the saving rate as a smoothing, then that's fine. Yeah, I can't disagree with you. That's all right. What I can define and what I can see very clearly is over the last 10, over the last 20 years, short periods where real disposable income go negative. Consumers don't go-- don't weaken. Now, if you want to argue that those things are wealth effects that are-- Oh, I'm making sense. I wasn't doing that. It happened in this second half of last year. I wasn't-- no. I think last year you could explain it with the wealth effect. You could explain it. But you could explain it the same way I am. I mean, though I'm saying is it doesn't matter. It doesn't matter. It does matter if this time you're not getting a wealth effect. Right? I agree, Bruce, that there are times-- But don't you think-- don't you think, Joe, Joe, if you tell me that the fundamentals supported the saving rate to go down last year. And therefore, the consumer didn't have to really do anything unusual by smoothing a shock. Doesn't that make the consumer better positioned to smooth a shock if we get one now? No, not if that support fades. If you tell me the consumer was solid last year, it basically aligned with the fundamentals. I'm saying the consumer was smooth last year. It had to eat into its savings in a way that it otherwise wouldn't have done. It was insecure, but it still ended up spending. That leaves them somewhat more fragile. But if you're telling me they weren't actually doing anything out of line with normal macro behavior. Oh, you had a K-shaped kind of-- we can look at these distribution things to say the people that actually really held up spending were the people who were very wealthy. Do I think they were struggling? Do I think that they-- I would disagree with that. I argue that both upper income individuals and middle income individuals did the work last year, not just the very wealthy people. I think a number of the middle income distribution, which have both sensitivity to labor income and labor market developments, as well as benefits from the wealth side, they also were carrying the weight of the consumption last year. It wasn't just the top 10 or 20%. It was the top 60% of the income distribution, top 80%. Number-- they may be right, but I have not seen those. It's just like you're throwing out numbers. I don't know. Look, it's a cart data. The cart data tells you that. Our cart data says that the middle and upper income individuals basically continue to spend it about the same pace in terms of rate of growth. Look at your cart data. How much I would put on that when you look at the SCF numbers, you kind of see this upper income that's doing quite well and the lower income. But look, I don't want to get off on that. I think the real thing is that the government is not going to be able to make a decision. The reason that you had that fall in the saving rate last year was consistent with what you would have expected, giving people who are feeling pretty flush in their portfolios. And that's going to be a little bit different this year. Do I think they will smooth? Sure, maybe, but I think there's more risk this year. It's going to be a harder, it's going to be a kind of a bigger kind of chasm to cross. But you're seeing real incomes contracting at a time where wealth effect is largely flattened out. Now, one thing I'll say, Bruce, that I guess- By the way, I don't think the consumer is going to completely be unaffected. I think consumption spending, slowing to something like a 1% pace here is the kind of cushioning we need in a world in which real incomes are going to be compressed. It's not the consumer continuing to spend an increase at a 2-1/2% pace. That's not the view I would take on. Then our forecast just so you know. But it's weaker than our forecast. Fair enough, but to me, what you need here is to be able to stay 1% or stronger. Say it again. I think you need to say that the consumer to stay about 1% or so not get weaker than that in a material way for a quarter or two. The one thing I'll say, I was saying that- well, I mean, I just in the last two weeks, the market has really ripped after these earnings reports. So I don't know. Maybe you will get something. I mean, I would say that the saving rate based on the kind of you just look at that wealthy income ratio relationship, which does pretty well since 2018, it's saving rate in our forecast is about a little less than a percentage point too low. I would say that the graveyard of bad forecasts is littered with people who look at the level of a saving rate. Okay. Then the change in the saving rate is too low. Too high. It's too negative. Okay. Is that better? Well, at least it has more, I think- same point. A argument. Just like of the saving rate is- All right. We're going to leave it there. I'm going to let you go. Yeah, okay. And go see your- I said a little weird though. We didn't say anything about central banks. Yeah, but we've already used up way too much time. So we're not going to get any- we did say something about the ECB. We gave them our dose of grief here, but we'll leave it there. Anyway, you have a good time this weekend. And we'll see what we are. We're going to take next week off, I believe. So- Yeah, sure. On vacation next week. From holiday, right? Yeah. Yeah, all right. Yeah, fine. All right. Take care, everybody, and hope to continue this conversation. At some point in the future on the weekend, there. Bye.