Wurm on Warsh

[MUSIC] >> Welcome to Inside Economics. I'm Mark Zandy, the Chief Economist of Moody's Analytics. And I'm joined by my two trusted co-hosts, Mercedina Talley, Chris Gerides. Hi, guys. Geese, guys. Sorry about that. >> Geese. >> Geese. >> Hi. >> Hey, Mercedunday and Inside Economics recording. >> Yeah, I've gotten a few emails from folks saying, "Where's the podcast?" And I said, "Oh, yeah." Well, we tried, but travel got in the way. And so we've postponed to Sunday. But so I'm here down in Florida. It's brutal down here. I'm telling you, it's cold. Got down to 25 degrees, I think. >> Oh. >> For an hour or two last month. >> Yeah, yeah, I know, I know. It's not 10 for you. >> Really feel free. >> What's it in Philly right now, or in Westchester? >> It's a 10-blow zero Celsius. >> Oh, it's bull-- >> Oh, yeah, it's so hoity-toity. You're thinking in Celsius? >> Yeah. >> Come on, I got a stick with one. I got a stick with one, all right? >> But true blood in American thinks in Celsius. >> I'm trying to change the culture. >> Okay, so do you also use meters, too, and kilometers? >> Try to. >> Try to. >> Really? >> It's hard, that's so funny. >> But now we have a guest, one of our colleagues, Martin Worm, Martin, how are you? >> I'm good. >> Do you think in Celsius is well, Martin? >> The interesting things I am born in Germany, I should preface it by saying that. I go back between Celsius and Fahrenheit, depending on what I talk to, but I definitely think in meters. And I definitely cannot handle ounces in whatever format liquid or otherwise. >> All right, all right, all right. Well, you were born in Germany. How old were you when you came to the States? >> I had just turned 24. >> Oh, wow. >> Okay, I didn't realize that was pretty late in the game. >> Yeah. >> Yeah, I mean, I'm approaching rapidly, approaching 50. And so, it's. >> Oh, wow, we're lucky to have you. You're a world-class financial economist and obviously cover the Fed for us. >> And we're going to talk a lot about the nomination by the president of Kevin Warsh as the new Fed chairwoman, Jay Powell, the current chair rolls off in May. So we'll come back to that. And then we'll play the game. Everyone have a statistic. Mercy, everybody, okay. Mercy has a statistic, that's key. And you were saying we have a lot of listener questions. We haven't had an opportunity to take any recently, so we have a lot. >> Yeah, we've got like 70 or so. >> Wow, okay, so we'll take a few. And keep them coming, they're very useful. They're actually we're having a email conversation about some of the questions because they're good topics for future podcasts. So keep those coming. Okay, does that sound like a good game plan going forward? So the game, the questions and the Fed, okay. >> Yeah, all right, good. Let's talk about the Fed. So as I said, President Trump finally nominated, or I don't know if he's officially nominated, announced that he's going to nominate Kevin Warsh for the Fed chair. Jay Powell does roll off this May. And he needed to do that here really soon so that the Senate could go through the confirmation process. And it looks like one of the reasons why the President chose Warsh of the ability to get him through the process and actually confirmed. He's well known to all of us. He was a former Fed official back in the global financial crisis. It was on the FMC. In fact, he was key to designing policy to address that crisis. That was the Bernanke Fed. He was kind of Bernanke's right hand guy. And he knows everyone in global banking circles. He's a former investment banker. I didn't realize this, but he's a lawyer by training as a Harvard Law graduate. So he's got some real credentials. So I'm going to turn you into second Martin ask, what do you think of all this? But before I do, Chris, what was the, I think I'm sure you were watching. What was the market reaction to this announcement? So stock market and bond market. Well, bond market, say it's the most important. It was pretty muted, not much of a reaction at all. Which I guess is a positive sign, kind of accepting that this will be a perfectly flying acceptable candidate. Where we saw a lot of movement was in the gold and silver and crypto markets. Gold was down 10% on Friday. Silver was down 25%. One day, and crypto was down quite a bit as well. So there's a lot of debate or some debate whether or not the Washington nomination actually drove those movements. Some of this certainly just profit taking after a long period of increase, presumably. But Washington does have the reputation of more of a hard money type of view. So you could make the argument that investors were backing off of those precious metal trades as a result of that. Yeah, when you say hard money, what do you mean? At least the reputation is that he's hawkish in once the Fed to be more focused on the inflation mandate versus the employment mandate. So the idea is he may be advocating more for a harder hard money, a US dollar versus being more dovish in the future. Yeah, I mean, from my mind, as you said, it's the bond market that gives you the cleanest read on patents. And you're saying the 10-year treasury yield did not move much at all in response, barely. And the stock market that was down on the day, but it seems like maybe an AI story there. Not clear that that was a wash related. Right. And gold silver, I mean, why would gold silver respond, but not the 10-year yield? I guess because it was kind of a tale bet on the tale that he might not pick someone like Warsha, pick someone who would be more willing to take chances with lower interest rates, and that would be inflationary. And because you took that tale risk off the table now with Warsha, then those prices will come in. I guess that makes sense. I guess that's the idea. That's the idea. And gold silver, right, they really-- it's been parabolic, right? It's really been a bet. Yeah, one way of that. So any little movement is going to reverberate pretty dramatically in those markets. And with gold prices, they came in, but they're still-- way on. Yeah, yeah. And silver, same deal, not quite as much, because I think it got cut in value by the third on Friday, but still very high compared to where it had been over the past, well, forever. Yeah, yeah, OK. Even copper came in. Even copper. OK, yeah, that's interesting to be speculation all around, but yeah. Martin, what do you think of that market reaction? Do you think what happened in the gold silver market is reaction to worse's nomination or something else or-- It's possible. I agree with Chris from that. It's very hard to say. So it's price that's been up for a while. If the read-- it is definitely consistent with that read. So if worse really turns out to be a fairly, say hawkish, and you'll get more into that chair, then there's certainly less of a reason to shift into gold. And I think it is consistent, if that's your show. Yeah, OK. Which is-- Marissa, maybe I'll ask you first before I go take the next step forward. Any sense of the market reaction? Anything you want to add there? No. No, not really. I don't really see a strong link between those commodity and metal prices and the worst announcement. I can't really wrap my head around the direct link there. As you said, treasuries didn't move much, so. Right. Right, OK. OK. So if he's a hard money guy-- well, let me ask you-- let me before I say that, go there. Let me ask you, Martin. What do you think will work? What's your sense of him? How do you think he's going to perform as the next Fed chair? So I think ultimately he's going to end up-- basically what I'm going to say is I don't know. But I'll say more to that. I think he's going to be judged by his actions. And not necessarily. We never really know, Martin. Yeah, yeah. I know. I know. I know. I got that. But the reason I'm setting it up that we know is that Warsh portrays himself as a very particular kind of central banker. And if he's actually going to be that banker, I think time will tell. He's-- I think what everyone was concerned about in the markets was that we would pick a yes man who basically just does whatever the president was. And that Kevin Warsh is not. So that is the good news. He did apply for this job with a particular boss in mind. He did pitch to that a little bit. We can get into that as well. So the line is, in the short term, rates will have to be a little bit lower. But it doesn't necessarily mean he's just going to roll over. And inflation's going to run away, which is the sort of concern that I think some market participants had. Warsh is, though, in comparison to the last few chairman, he is a distinctly more partisan pitch. He is someone who comes out of a fairy. I want to say a conservative libertarian leaning field. He talks a lot about Ronald Reagan. He talks a lot about Newton Friedman. And that is a bit unusual for an incoming share. We haven't had that in a while. That some of us will have this particular direction I'm leaning into. If you look, for instance, it's like Ben Bernanke. He came in under Trush W. Bush. Basically, you know, when you, that he was a Republican until the day he got nominated. So he comes in with a little bit of a lean. And I think that is a little different than what we've seen in other previous partisans. But it's not, again, he's not a yes man. I think that is an important point. So I mean, the kind of characterization of his views on monetary policy is that, in Chris Setett, hard money, meaning he's more on the hawkest side of things. So that, you know, if you look at the read-fed reaction function, you know, the things that the Fed looks at when setting interest rates, he puts a higher weight, typically, on inflation, low and stable inflation. That part of the mandate compared to full employment. Is that a fair characterization given your read of his thinking over the years? Yes. And again, I think this states back to this very strong-- he talks about Milton Friedman a lot. It is a sort of idea that if we use the money press to create more money, if we intervene more, if the Fed takes some more and more function, inevitably the outcome is-- or maybe not inevitably, but frequently the outcome is going to be higher inflation. And he's trying to-- he's running on a platform of reigning that in a little bit. Now, the thing I will say about worship-- worship is not an academic writer. So it's not like Ben Bernanke had a body of literature that he can look at and say, well, here's what the man actually thinks. He comments on this in the context of public presentations. And the last few years, he's given a couple of them. I think a good starting point for this is an op-ed piece that he wrote. But the end of last year in the Wall Street Journal, which I've got to look at the title because I keep forgetting it. It's called the Federal Reserve's Broken Leadership. And I don't know if you read that, but that very much is an application letter for this job. It is generally very upbeat, very sanguine about the economy, right? So in this booming economy, AI is starting productivity. And the only obstacle is the current Fed. And what the obstacle is are essentially four points. He's an engine. And we should go through this one by one, because it really tees up what I think he wants to do at the Fed. The first point is he says, well, if Fed is wrong about his current forecast, the Fed is concerned about his declaration, inflation, and really, whereabouts entering a period of boom interest rates should be lower. That is his first criticism of the Fed. And in a sense, that is the application letter, right? So if you want this job in current environment, President Trump is looking for someone to cut rates. If you go in and say, well, I'm not going to cut rates, I'm not getting a job. So I'm probably should have that statement is that important, but he leads with that, for sure. Before we move on, just to make that point clear, or restate it, to reinforce it, what you're saying is, look, historically he's been characterized as a hawk, I mean, more focused on inflation than on a full employment. But in the current context, he's been able to kind of finesse that by saying, look, we've got this productivity boom that's dead ahead due to artificial intelligence. Because of that, that's disinflationary, or it's going to bring down prices, because it juices up productivity growth, lower costs, labor costs. And therefore, I can, and we should, therefore, lower rates to accommodate that. And I think it has a hawk and back to like the late 1990s internet boom when we saw a lot of productivity gains in Greenspan, the chair at the time, decided to follow a more dovish kind of policy because of the disinflationary effects of that technological productivity boom. Is that a good character? Is that a good way of paraphrasing what you're saying here? Yes, I think that's his point. I mean, he does not provide a lot of detail, but that is the statement of the show, right? We're reading into it, right? Okay. So I don't, that's my read of what he said. Okay, so he kind of can square the story. You can ask yourself, he's a hawk, so that doesn't feel like that's the kind of person in present Trump with a point, because present Trump has said, I want lower rates, give me lower rates. But you're saying he's able to square that circle because he's got this productivity boom there and therefore I can lower rates and we should lower rates. Yes, and the reality is I am willing to discount this because it's a prerequisite for getting the job. What you do when you're on the job is going to be a separate thing. If you run on a platform and it's like, well, I really worry about inflation rate should be higher. He would not be considered. I think based on that alarm, he should maybe discount a little bit. He doesn't show up and/or it doesn't mean restrained lower inflation back to target. Doesn't mean he's going to be on board with lower rates. That's exactly right. And I mean, all of these are big hits. He's a share in that, what's the present going to do then at that point? That's right. Okay, all right, so that's point number one. What was point number two? Point number two, and this is, I think, his big platform is he wants a narrow central bank. So he essentially says the Fed needs to come back to focusing on price stability. There's been scope creep. There's been what he calls economic imprinting. The Fed basically does so much that it later on has to correct its own on previous falls. And in a target, the IMF, a year ago, he actually elaborated a little bit on that. He goes as far as to say what is basically we live in a period of monetary dominance. The Fed is so pervasive, it's in everything. It has lost of its sight in what really matters. And the thing that really matters is price stability. And we can talk a little bit about the details of that. The point he comes back over and over and over again in this context is specifically this practice of quantitative easing after the global financial crisis where the Fed started buying long-term trajectories to really bring interest rates down a little bit. And his position on that is that in the short term, if there really is an emergency, like the global financial crisis, that's fine. But in the longer term, if the Fed doesn't shift out of it, it really causes, basically, Congress to take on too much debt that is going to balloon. And that eventually translates into inflation. Which in some sense is almost a milk and treatment kind of view. We can go back into theory. But that is sort of his core point. He wants the Fed to get out of all of that. He wants the Fed to get out of regulation as well as the third point he mentioned. He doesn't like the climate work. He doesn't like the AI and so forth. So narrow central bank focused on price stability, using interest rates as a tool, getting out of non-conventional mechanisms like quantitative. OK, let me take another crack at paraphrasing what you said. Just again, to reinforce the point, you're saying that he doesn't like QE, Quantity TV's going, the Fed going out and buying bonds to bring down long-term interest rates, except in times of crises like the GFC, and when things are going-- or during the teeth of the pandemic, perhaps. But outside of that, the Fed should not have a big balance sheet, should not be playing a big role in markets. Because by so doing, it makes it easier for fiscal policymakers to do the wrong thing. Because of the lower rates, more likely, they're going to be more profligate with tax and spending policy, bigger budget deficits and debt. And one of the reasons why we have these big deficits and debt now is because the Fed is, in a sense, accommodated this behavior. And that's a bad thing. The Fed should not be in that business. Is that roughly right? That is exactly right. He's very sharp about this point. It almost goes to the point where he accuses a strong word, but he's hinting that the Fed is more responsible for this than Congress and to itself. Which is a bit like saying, if I increase your credit card limit too much, that's the reason why you're $40,000 in debt. So it's not that you made the actual bet, it's because I gave you credit. And maybe there's some truth to that, but he's very sharp in this argument. He thinks the Fed should not be doing it. Right. And I'm going to come back, Chris and Marissa, and ask, what's your view on these different points? So how do you think about this? OK, that's point number two. Is there a point number three? Yeah, point number three. And I think we probably can't be a little bit short about that because it goes into details. Have to do with the Fed. In fact, the Fed has also become a very significant regulator, especially in the banking space. So this takes back to some of the experience after the global financial crisis. Obviously, it was a banking crisis. And as to do with things like capital rules for banks, what are the sort of much money do banks have to keep on hand? What are the kind of things they have to do? And he thinks that's gotten to honor us in a way that's specifically disadvantages, smaller banks that's at least his argument. That is a pretty general claim that has a lot of detail to it. It's not necessarily a conservative talking point. And you have folks like Aaron Klein at Brookings, so I would say a little bit more liberal. They will agree with this in broad strokes. Some regulation is useful. Other regulation is not useful. We'd have to see what the details there really are. But do you think generally the Fed should not be in this business? The Fed should worry about money. There should be a separate regulator that deals with the financial space. OK, fair enough. But that's legislation that Dodd-Frank gave the Fed. The Fed was a regulator. Before Dodd-Frank, Dodd-Frank, of course, the banking legislation that was passed after the GFC, the reform, they handed more power to the Fed. I can remember the debates around that. And the reason that happened was because the lawmakers didn't trust any other regulator to take on the added regulation. Therefore, they felt the Fed was only grown up in the room. And therefore, we have to give it to the Fed. Not that they wanted to, but they couldn't think of an alternative. Yeah, I think-- I mean, I think all of what you're saying is correct. I do think, in general, that combining financial oversight and monetary policy can create conflicts of interests. And again, this is not a common point that no one's ever made. And think about, for instance, the inflation round that we just went through. To deal with inflation, what the Fed has to do is it has to type monetary conditions. But at the same time, also needs to make sure that banks remain liquid. These can be competing targets. And I think that's sort of, in general, an argument to say, well, maybe the Fed should not be doing as much regulation. Is the Fed responsible for that? No, I mean, obviously, Congress established the rules, post GSC, I agree with that. OK. I find that a speechless argument. I find just the opposite. I mean, because I remember at times back before the financial crisis, the Fed was easing. And the Fed was tightening, the regulators were easing. It was across purposes. It didn't make any sense whatsoever. So I don't know. It feels like the Fed can use both those levers to achieve its mandate. Yeah. So as I said, I don't really want to dwell on this point too much, but I'll say some more thing just to expand where he's coming from here. So the specific example that he cites when you're talking to the group of 38, the IMF banking group, is the Silicon Valley bank collapse in 2023. So we go into a point where after global financial crisis, we build all these allegedly kind of group that are not on our banking regulations. And then you get a bank that doesn't even register the systemic for the Fed. That sort of collapses in the middle of a banking cycle. The Fed has to create an emergency institution that pushes out reserve sense of forward. And in his view, that should not be something the Fed is in at all. And we can't disagree or agree on that. But basically he's saying what the Fed should focus on is getting inflation out of control. It should not also be dealing with this and then reinserting reserves or doing anything along the lines. OK. I don't think this was in that op-ed or that opinion piece. But he's also-- The other thing he's brought to the table or other critics that he's brought forward of the Fed is around data dependency. Can you explain that? So again, he has a long list of grievances. I was going to use the op-ed piece because it boils down to four. If you listen to the longer talk, it's more like a dozen plus. Right. What he, I think, is criticizing there is sense among regulators of understanding the economy better than they do. And so what he means by that is, well, I don't like data dependency because data is not correct. I don't like the dependency on complicated economic theory models, not going to go into what he means by that, but very academic stuff. I don't really like the forecasting because forecasts are wrong. Really, all this sort of stuff is detracting from what the Fed should focus on, which is price stability. Now, he doesn't quite say what he thinks the Fed should do instead, right? Because that's sort of the opening question. If I'm not data dependent, then what am I going to respond to? But what is resonating in the background is again-- Oh, I'm going to forecast. What am I going to-- I mean, because the Fed policy change doesn't affect inflation with long and variable lags. Yeah, I agree. I mean, I have some-- I have some question marks there. But perhaps he's not saying what he really would do. That's why I'm saying time will tell. Based on the statements, I cannot actually read it. But if I'm reading between the lines, a lot of this is again starting to sound like Milton Friedman. It's going back to this idea, really what the Fed should do. It should broadly make sure that there's enough money in the system to keep the economy smooth, that it's not intervening too much. We're basically focusing on money. He talks a lot about money, which most central bankers actually don't do. Most central bankers talk about interest rates instead. Let us pivot to his own academic background, I think. What that would look like in practice, at this point, I really can't say, because he doesn't comment. OK. I want to come back to, do you think he's going to preserve or at least maintain some semblance of Fed independence? Because in my mind, all this other stuff is very secondary to whether that happens or not, whether that Fed independence is significantly impaired. But we'll come back to that. Let's talk about what you think of these different points. Do you think this is a good idea or a bad idea? So if we go back to the first point, which was around inflation, good, bad, what's your view? So far, you've just described his view with a little bit of commentary. But what do you think of that perspective on inflation? So this is point one, which is currently what should the Fed do in the next year? That's basically the first point. I mean, this becomes a question of ultimately, what do you think is going to happen over the next year? Do we think there's going to be more tariff from inflation, going to be more inflation from tariffs? Do we think the labor market is weaker than it appears? Do we think there's going to be a huge productivity problem? This is broadly where this is coming down on. There's active discussion that talks like you related the F&C leads. And broadly speaking, my sense is, if I compared this to where we were a year ago, is inflation isn't quite as high as we thought it would be. So that seems to be playing itself out a little bit. The labor market certainly has weakened. There is a bit of discussion around it by how much we learn more about this when we get the benchmark revisions from the Bureau of Labor Statistics next week. And in that scenario, where I think most people seem to come down on, including the current F&C, is that rates can gradually come down a little bit. I think that would have happened irrespective of whether Worsh is going to be chairman or not. We can argue about when, if that's going to be in March or in September. But broadly, within the range of what most people say, yes, in between two to three cuts are likely expectation for the next year if we continue on the path that we're on. So I think that's fair. Do I think that there is no concerns about inflation? Do I think there's no concerns about employment? Do I think that we're going to get this massive productivity boom for my eye? I have some concerns about that. So short answer on my eye specifically. I am not convinced that we're going to get dramatic productivity growth immediately. If that's going to happen, we don't see it in the data yet. But you know, it's time we'll tell. Morsh, what do you think of this argument he's giving? That, you know, we can lower rates because we're going to get this productivity boom, or probably, say, we're already in the middle of this productivity boom. And that's going to result in disinflation, lower inflation, head it back to the target and therefore we can lower rates. Does that resonate with you? It does in a longer term perspective, for sure. I think if we think about AI's impact on productivity over a five or a 10 year horizon, that absolutely makes sense with economic theory, right? Faster productivity should result in lower inflation. But I think in a transition period, which it seems like we're going through not only in terms of the job market, but also in terms of all these policy headwinds that we have, right? We've got tariffs changing and immigration policy changing. And then on the other side, we're getting fiscal stimulus. I believe that the Fed needs to be more reactive to current conditions and current data. I'm sympathetic to the argument that the data may be not completely accurate. It gets revised. I'm sympathetic to the argument of maybe some thinking outside the box beyond the economic data. But the Fed doesn't have much else to go on other than signals from financial markets, right? To know if inflation expectations are anchored. So in theory, I agree with that argument. But I don't agree that that's an argument to start rapidly cutting rates right now when we're still in the middle of having policy that we know is inflationary. And I don't think has fully played out yet. I mean, I think there's still a good chance that we're going to see higher inflation this year from tariffs, because I believe that a lot of companies that were able to absorb the cost of the tariffs last year may not be able to do that this year. And we are going to get some fiscal stimulus in the first half of this year. So I still, if I was on the Fed, I'd be a bit cautious about that stance. So yeah, in the long run, I agree with that theoretically. But I think when they have to make decisions about what's happening right now, I'm not so convinced that they should be rapidly slashing rates because of that argument. I don't think we're seeing the AI productivity boost yet. I think we're seeing the impact of AI on financial markets and on company bottom lines and the stock market and the wealth effect all the things that we talked about last week, right? But I don't think that that right now is translating into very strong worker productivity yet. Yeah, that makes sense to me. I mean, in my sense is the Fed will be cutting rates in 2026, not because of the productivity boom related AI and disinflation, but just because the job market's going to be weak enough that they're going to want to cut rates in the context of where inflation is all currently. Martin, one quick question. Something that we've talked about in the past, I find very perplexing. And I think you do too. So there may not be an answer. But when you have higher productivity growth, all else equal, that argues for a higher equilibrium interest rate. Our store is higher. Therefore, it argues for higher interest rates. Now, it's not all else equal. You get lower inflation. That offsets that. But it's not necessarily the case that with stronger productivity growth, that would argue for a lower fund rate. Am I right in that regard? Yeah, right. Strictly speaking, in theory, it's an argument for a higher policy rate. And there is some on the FMC that I think the policy rate should be higher. And the general idea here being that we have higher productivity. So what it really means in terms, it makes us potentially a lot richer at the current interest rate. So if that happens and we don't change interest rate, it's going to boost demand that's eventually translate into inflation. So when you get this sort of productivity shock, what the Fed really should do is raise interest rates. But I think that conflicts with policy realities, especially in context of AI, we're worried about things like employment, a cost of living as obviously high. If you raise interest rates today and anticipation, or what's going to happen next 10 years, I think that would be very difficult to sell. But all I'm saying, all I'm arguing is that what Warsha is saying about productivity, inflation, what it means for rates is not internally-- may not even be internally consistent, right? Because it is not in a pure-- if I can draw you a beautiful model with lines and charts, the kind of stuff you see in your macroeconomics courses. And if I shift the productivity line up, what that really should do is it should raise interest rates or else in the long term that will be in place. Let's go on to the second point. That's QE. Chris, let me turn to you. What do you think of his argument on QE that it should be more circumscribed? I think that's the right word. That may be in a crisis when things are going to hell. You're at the zero lower bound on the federal funds rate. But the Fed has taken as much too far in terms of keeping-- in terms of QE. Yeah, it seems like a fine line argument, right? It does show flexibility in his thinking. It's not saying never QE is acknowledging that in a crisis, it's necessary, it's useful. But then what-- he's also not-- I don't think he's advocating for a very sharp unwinding either. So I'm a little confused in terms of what's his actual recommendation here, right? He's saying don't abuse it. OK, that's fine, but I don't have a clear sense of what he means by what's the equilibrium, what's the-- where should we go from here, right? Clearly, we shouldn't be expanding QE. And there is this risk of fiscal dominance that's out there. But what's the practical guidance? Again, I don't have a clear idea from what he said or written. Yeah, I think that this might come back to bite him in that they're likely-- they're very likely might be too strong a word, but there is a real potential for a bond market sell off, at some point, when bond investors are spooked by something that goes to the fiscal sustainability of our tax and spending policies. Feels like the markets are already on edge. And kind of who owns treasuries has shifted away from the Fed as they've pulled out. They've gone from QE to QT, quantitative tightening, and hedge funds have come in. And they're obviously very repatient and will move quickly. But things don't stick exactly to the script. So if that's the case, then I guess based on his perspective, he should not intervene. He should let the bond market do its thing, because that would impose discipline on fiscal policymakers. But I don't think that line's established, right? You can say that in theory, but I think-- Oh, right. Yeah, exactly. I'm saying that I just don't buy it. I don't believe it. I don't believe it. Can I add a bit of shit on that quickly? Yeah, sure. Because I did spend quite a bit of time listening to his sort of statements about this and reading what he has written. And I really don't want to be unfair about this. Paul Krugman phrased it the following way. When he comes to these kind of arguments, it's a bit like-- You're going to quote Paul Krugman in "safe fair." No, no, no, no. He has a lean, and I'm saying, I'm trying not to project a lean. I love Paul, but in this context, but it goes-- Yes, no, obviously, he has a lean. We know where Paul Krugman stands on this. But I agree with him on this one thing. It's when it comes to these kind of arguments. When I'm hearing Warsh talk about this, it's a bit like putting your head into a bowl of oatmeal. In the sense that there is this idea out there, he said, well, OK, I'm worried about fiscal deficit. I don't want the Fed to hold it all this debt, which is a plausibly not argument, right? I can't agree with that or not, but it's an argument that makes sense. But how are we going to get there when it comes to that? It becomes very opaque, it becomes very murky. And so what I can take away from what Warsh is advocating for, it's a return to the old monetary system pre-GFC, which really means what the Fed is going to do. It's going to roll off over time, not from one day to the next. It's going to roll off basically all of its treasury exposure, with the exception of just a minimum amount, it needs to hold to establish the policy rate, right? This is how it worked before the global financial crisis. Banks needed a degree of cash to get the flow of credit working. And what the Fed would do it would, by short-term treasuries, to provide that basically on a day-by-day basis. Martin, are you saying he's advocating going back to the previous way of managing the public funds right here? He's going away from the excess reserve system that we have now to go back to the scarce reserve system. At least that's the aspiration. Oh, I didn't know that. Is that right? That's what I read in here. That's very out there, isn't it, in central banking circles? It is not really. So I don't really know how deep you want to go into this. The reason why we don't do this anymore, the short version is that it's operationally, incredibly inefficient for a central bank to constantly trying to guess how much money does bank X need, right? How much money do I need to move around on a day-to-day basis? It's just easier to say, we give you the money you need. We have ample reserves, and we establish the industry. Differently, we pay interest on these reserves, and you're not going to land below that interest rate. That's how the monetary system works today. Operationally, that is much easier. It creates less volatility in the funding markets. All of this is established. The big counter-argument is to say, well, what it costs the Fed, it will, in fact, have to hold more treasury there. And perhaps that acts as less of a disciplinary tool on the treasury. And I think that is the argument far as I can make sense of it. - You know, I'll have to say, I don't buy that argument at all. I mean, just look at the current context. I mean, the 10-year treasury yield is four and a quarter percent. And you go, hey, Mark, what do you think the 10-year treasury yield should be through the cycle abstracting from the ups and downs and all arounds and the business cycle? What should the 10-year treasury yield be? I'd say, and you and I Martin have written a paper on this. - Oh, yeah. - What's the answer? - It doesn't feel like to me, the fact that Fed's balance sheet is larger has really had any meaningful impact on where the 10-year treasury yield is today. No? - So my sense on this, I think the idea that a central bank is ultimately a real foolproof backstaff against fiscal access is aspirational. I don't think it's actually true in history. So sure, the idea is out there. If I have a government, if I have a sovereign that racks up debt and uses the printing press that creates all sorts of bad outcomes, it creates inflation, the long term, it ruins the credit of the government, all this stuff. All of this is true, right? And this is a big reason why historically we've established independent central banks. But there are effective limits to how independent the central bank really is. Because if a sovereign is going to push this no matter what, the central bank will always take the back seat. I mean, Congress could just change the status of the Fed and that will be the end of independence if it wanted to make more debt. So the idea that it starts with the central bank and that's guiding the sovereign seems backwards to me. So I also don't think this is correct. - You know, maybe, and this is highly Machiavellian of me, my thought, I usually am not this Machiavellian. But if I were Kevin Warsh, this kind of view, if it's, you know, and he's expressed it clearly and openly, and the president still nominated him, it is a way not to get captured by the Fed in a sense that he can say, look, I'm not going to accommodate your profligate ways and interest rate spiking. That's not my, I'm not going to, I'm not going to QE. I'm not going to engage in financial repression. I'm not going to do that and he can harken back to, I said, I wasn't going to do this, though. - Yeah, you think that's credible? - I don't know. - I mean, I think it's a possibility. - I'm going to give him credit there. I do think he's healthy as he is on the record for a longer period of time. - I mean, he goes, yeah. - Okay, and that's my point, this is not, this is not something new, he holds, this is kind of a North Star, you know, for his views. And president still nominated him, presumably, maybe didn't understand what that means, but. - Well, he also put it into the Wall Street Journal piece. It's not really in there. It's like, you have to listen to the long talk if you really want to. - Yeah, yeah, right, right, right. Okay, let's go to the last point around regulation. Let me turn back to you, Marissa. What do you think about his argument around the Fed and having too much regulatory authority, dude? What do you think of that? - I think it's a fair opinion to hold. I think it's probably an opinion that Trump likes. So in the vetting process, I think that was probably a plus in his column, right? I think just generally, the administration would like, fewer regulations around the financial system and perhaps the Fed's mandate has become too big and too broad over the years since the financial crisis. I mean, he said that, Donald Trump has said that or members of administration have said that. So I can see that being a plus in this Kevin's column for that. My thoughts on it, I mean, I think it's fair in the wake of a financial system crisis to start looking at how banks are regulated. Is that the Fed's mandate or is that the mandate of another agency? I think you could argue that maybe that's not up to the Fed. I think in terms of quantitative easing, maybe we didn't see so much movement in the treasury market because when the Fed started this, they were more focused on the mortgage market, right? And I think you could argue that that did have an impact on mortgage rates. And is that their job to get involved in housing policy? I think it's fair to argue that it's not. So I don't have a problem with his stance on that. I don't have a problem with his stance on that. You know, and I think that that probably is appealing to this administration. - Right, right, what do you think, Chris? - Oh, gosh, I guess the question is, where would you put the regulatory authority? Or you just get rid of it altogether, I guess. It's just, I mean-- - Well, there's one that got you a CD or what does it go? - FDIs. - I mean, a very direct answer. - I agree. - It's Congress, right, who has authorized, right? - Yeah. - Dot Frank, and that's under their purview, that's their mission, right? So on the one hand, it's Congress who has decided and if you want to change regulations, you should talk to Congress, right? Where I struggle a bit is in terms of this, in terms of the Fed specifically, there's this tradeoff between the regulation, regulatory pressure, and the balance sheet, right? If you're really concerned about having a balance sheet that expands in a crisis, perhaps you want regulations that avoid the crisis in the first place, right? So what's the, there's a natural tension there. It seems like you can't have both. You can't have a Fed that's hands off on all regulation. - And also, then, doesn't intervene in a crisis, or you're setting yourself up for a very tough, economic environment, right? So that's where I see some inconsistency here in terms of what's going on. - Yeah, I can't see the alternative. I mean, I guess the alternative is no less regulation. I just don't see, there's certainly not gonna establish another regulatory body. I mean, there's been some talk about combining the various banking regulators into one, but that's pretty tough, I don't think that's gonna happen. And they're not gonna create a new one. So I guess what this is kind of a potentially a smoke screen for less regulation, you know? We just don't hand more hands off kind of perspective that the Fed should be, it should be just much easier on the banks, which they are now under the Trump administration. - Okay, let's come back, 'cause I want to play the game in questions, and we've already taken a paramount of time, but let's talk about, finally about Warsh in the context of Fed independence. What do you think, Martin, at the end of the day, is the Fed's independence gonna be maintained here? Is Warsh on board with maintaining Fed independence? So what do you think? - Yeah, see, there's a two separate questions. Let's start with the easier one, which is actually six or seven questions. - Yes, let's keep it top level. So the first is the question, where does he stand on this? And he obviously gets asked this question whenever he talks to anyone. And the answer he delivers on that is, I do think the Fed needs to be operationally independent and the biggest sort of, I guess, indicator of Fed independence is that the Fed does such a good job that there's no inflation, right? So if there's no inflation, then we wouldn't be having this conversation. That is what he will say. And in many ways, it's a bit of a cop-out because operational independence strictly speaking is the how, it's not the what, right? When we think about Fed independence, what we really mean is the Fed makes the decision where interest rates should be. I was like, are we worried about inflation? Are we worried about unemployment? Let us do what we do. I do think he wants that, but I do not think he outright says it, again, due to the nature of the job he's applying for. I do not think, as I said this before, I mean, we've been critical of some of Warsaw's years. I do not think he's a yes-man. I do think he actually takes this seriously. Is the Fed going to remain independent? No, that's a much more complicated question. I think one of the things we talked about, Worsh, in a great detail now, who is going to set the rate this June or this September, is the Federal Open Market Committee, right? And Worsh is one vote on the Federal Open Market Committee. So there's the six other governors that would have to come along with him. And then there is basically, 12 District Bank District Presidents, not all of them vote every year, but you have to convince, basically, half these people to do what you want. So Worsh comes in and presses for something that is completely outrageous. It's at the Federal Funds Rate to have a percentage point. The FMC will not go along with it, because it is set up in a way to be immunized from these kinds of pressures. And I think based on that in the near term, I'm really not that concerned that things aren't going to go dramatically off the rail. It comes down to maybe a basis point cut more here or there. I think it's probably fine. If you really want to change the independence of the Fed, if you're really after that, either Congress has to change the Federal Reserve Act, which I think the odds of that are pretty slow, or you would have to find some other way to really change the FMC. And I mean, there is an attempt to remove governor Coke from the Board of Governors. That's currently sitting in front of the Supreme Court. The Supreme Court does not seem to be willing to do that. And as long as that doesn't change, I don't think the Fed's independence is really in danger, at least not as my baseline. - Okay, I guess the real tell for me will be, and that all makes sense. A real tell obviously what the Supreme Court decides, but I think everyone believes the Supreme Court's is going to rule against the president and not allow him to fire at least a cook. I think that, let's take that as given. The real tell is gonna be what Powell does. He rolls off in May as chair. This term doesn't end. When does it end? Is it late 27 or early 28? - I believe 28. So it would be February 28 would be the replacement. - So historically when Fed chairs leave the chairmanship, they leave the Fed. But that would open up a seat for the president to point whomever he deemed appropriate. If Powell stays, that would be a real tell, that he's really worried about Fed independence, even in the context of Kevin Worsher's chair of the Fed. Does that sound about right? Kevin and Martin? - Yes. - We don't need a third Kevin, Martin. - Yes, that's definitely part of it. But I mean, even if Powell leaves, and this goes a little less chaotic, which obviously there will be some benefits to that as well, less of a messy policy setting, there are still folks on the Eiffel seat that are not gonna go along with everything. - Yeah. - So even if Powell leaves and let's say, I don't know, John Williams leaves too, and you put on all these Trump appointees, there's still the regional bank presidents that may or may not go along with what you're doing. And that's intentional, right? That is the reason why the Fed is set up this way, they said, well, we can have an argument, we can maybe lean more this direction, that direction. But in the end, it needs to be a process of consensus. And I don't really see that going away. I do think that if Powell stays, that's a very combative sign, I agree with that. - Yeah, I guess the market reaction is very consistent with that perspective, that we need to be on guard about Fed independence, but at the end of the day, it's gonna be hard for the president to significantly impair it. Hey guys, we don't have all, we have less time than I thought. I wanna get to the questions. The game, instead of playing, the game is, we each pick a stat, the rest of the group tries to figure that out through clues to Dr. Reasoning questions, and we go round the group. Does anyone have a great, really, what they consider to be a great stat? Well, do one stat. Mercy, do you have a great stat? You have a high bar, so how's your stat? Is it good? - Like it because it highlights some data that came out that's broadly interesting, but is the stat itself great? I don't know. - Chris, Martin, do you guys have a, what would you say? Anyone got a great stat? - I have an interesting one, but it's not current, and you're not gonna guess it. - Oh. - So what's your stat? - Okay, I have, it's actually two numbers. - Okay. - Okay, one and a half percent and minus three percent. - Is it related to the federal fund rate? - No. - PPI. - Nope. - Is it a statistic that came out last week? Oh, it is. What came out last week? It's such a blur. I've trowling so much, industrial production, factory orders, I'm just gonna go down the list. Was it a government stat? Oh. Housing related? Nope. Huh. What else came out last week? It wasn't the PPI, that was a big stat. It's related to economic activity. - Yeah, it was really big. I'll say it's not, no, I won't say that again. - You're not going back to the GDP 'cause that was a week before a lot. - No, I'm not. - No, you're not. - No, it came out last week. - Oh, it did. Oh, it wasn't productivity. Oh, okay. 'Cause that would be the other one. Not in that report, not in labor cost or in, geez Louise, UI claims. - No, it could be UI claims, right? - Yeah. - Vascular. - It was one and a half and minus-- - One and a half percent and minus three percent. These are-- - Is that bellwing something? Is it just, it's the highest something and the lowest something in this report? - No. Martin, any, any, any, any ideas? - No, I actually ran off the wrong, because when you said lowest, I was thinking of gold prices, but it was much stronger. - No, she's saying it's a government stat. - ISM, now in government stat. - No, it's not. - All right, we give up. What is it? - Okay, so the 2025 population data came out in the census bureau last week. - Oh, that's right. - That's right. - I've been looking at that. - Yes. - Yes, yes, yes. - Chris even made a joke about it before we started this podcast. - Yes. - Yeah. - That's a worry. - One and a half percent is the US state with the highest population growth between 24, 2024 and 2025 and minus three percent was the biggest percentage decline in population. Last year, you know what states those are? - DC was the minus three. - Sorry? - DC? - No. - Oh, it wasn't DC. - Is the fastest one still either? - No. - But I know it's like number two, I think. - It's summer in the mountain. - It's Wyoming, I think, it's not Wyoming. Oh, huh. - Minus three, that's a surprising. That's a big move. - Very little state. - No last one. - Rhode Island. Hawaii. - No, you're close, Martin's the closest. - I'm etiquette. - No, keep going north. - Main? - No, it goes south. - New Hampshire? - Hampshire. - Vermont? - No next door. - Geez, Matt. - Tuesday's not Vermont. - Yes, Vermont. - Vermont, okay. Oh, wow. Boy, that is a big, big move. - Yeah. - And do you know what the fastest growing state is now? One point, what did I say, 1.5 percent? - Yeah, 1.5. I wanna say South Carolina. - You are correct. - Oh, South Carolina. - Okay, nice. - Yeah. - Boy, I'll take it. I didn't get anything else right. Geez. (laughing) - Yeah, it was a big release, right? Because this is the first glimpse we have of how immigration policy has changed. - Right. - Population in the country. So immigration fell to 1.7 million, which is not terrible, actually, like, I think much of policy hasn't shown up, right? 'Cause we're talking about between July of '24 and July of '25. So it's not capturing the second half of 2025. - Right. - It's bound to be a much bigger slowdown in international immigration when we see the numbers next year. But nevertheless, this was the slowest rate of population growth and immigration since 2021, right after COVID, when nothing was happening, nobody was moving, nobody was coming into the country. Borders were basically shut down. So it was a big, huge slowdown generally in the US population and then just some interesting things going on in the States, I just wanna mention one thing that for the first time in, I think, over a decade, every state in the Midwest grew, which is very different. People moved to the Midwest. There were five states that lost population and many of them were in the West, which has always been one of the fastest growing, right? It's always been, we've always talked about how the South and the West are the fastest growing in the Northeast and the Midwest are the slowest growing. I mean, generally that's still true overall, but really interesting things like, you know, California is now losing population and is lost population on a five-year basis. Is that immigration? Is that immigration for the West? No, actually, like, immigration, international immigration slowed in every single state, but California still gets a lot of immigrants. Why the West, what caused the decline in those five Western states? Well, I think it's affordability. I think it's people moving out of very high cost, housing states to lower cost. You saw a lot of people move to like Michigan and Ohio. No, I thought about that. Well, the California Texas is still a California Texas, right? Yeah, it's been a big one. I mean, it's just personally, I live in Washington. I thought about moving to Illinois, something. What? Because of what? No, it's not because of the weather or because of the beautiful Illinois mountains. No, it's housing costs. Housing costs is a big, big factor. That's fascinating. I did know that. I'm not doing it. I like the mountains too much, but I thought about it. Really? Of course, we've established that you're kind of on the weird side. Yeah. Can I interest you in the Vermont? Not that weird. I'm not talking to joking. You're very rational. So, OK, it would be nice to do a kind of a scatter plot with, on one axis, the population growth by state and on the other axis, some measure of housing for the ability or something. Can we do that? I'd love to see that. I mean, that would be really surprising to me, but that's interesting. That's very interesting. Yeah, I think it would be interesting. They put statistics together in this release that shows you since 2020. So, like, a five-year snapshot. You can see, like, 9 million people left California over these five years, right? So, you could look at, like, a longer time horizon to get a snapshot of, I think, these trends of affordability and how people are moving. You want to fly away with a question or two or three? See what we can do here? Here's kind of a-- I mean, sort of interesting question I never thought about. But maybe there's a simple answer to this? Maybe there's not. This is for you, Martin. Is there something sacred about the Fed only being able to move the Fed funds rate in 25 basis point increments? Why not 20 or 10? Wouldn't that allow for more precise adjustments? Interesting. It's a good question. I don't actually thought about that. But he is my educated guess. So, for one, it's obviously not sacred. And every now and then, you get a larger cut. You might get something like 50. But I think the question is more about the specific increments. Yes, yes. I mean, the reality is that none of this is actually all that precise. So we're talking about the funding markets earlier. So the rates at which banks lend to each other is not exactly typically what the Fed says it is. There's a little bit of variation around this anyway. So there's a little bit of basis point volatility. And I think what they just want is large enough increments to make a difference. And 25 feels about right. That is outside of the range of what the plausible intraday variation can be, even if you take in sort of stress periods. And if you did something like five basis points, it's not really clear that that would consistently enough move the needle. Because it's a signaling thing, right? So it matters in the short-term markets. More than it does actually affect the 10-year yield, right? So to move the 10-year yield, you have to do much more than that. You'd have to raise for rounds of times. And so I think it's just large enough to register without it being noise. And that's sort of the smallest number, I guess, that would be my guess. But I have to look at the history because I don't actually know the answer. That's a good question and a good answer. I wonder if it's also operational. Because when the Fed changes rates, banks have to change. They will, they change rates, primary home equity lines of credit are tied to the-- so if you start doing smaller increments, just to get some more operationally, probably. I mean, at least it's back in the day. Maybe a lot of snow now, because everything is so digital. It is certainly convenient for the entire banking system that feeds off of it. It's a minor convenience, because they could then just-- use some other spread to adjust for it. But it's just easy, right? We like round things. We don't like 0.3 for 8. Right. Do you think it has anything to do with the committee structure in a way? Yeah, so if you had to-- if it was any number, can you get everybody to agree on a five basis money? Oh, what an interesting one. Right, so it's sufficiently large enough that you're kind of making a statement. You're making-- Yeah, it's a bit influential. Otherwise, why are we even thinking about it? Yeah, no, I think it should be 7.5. Yeah, right. Yeah, that makes sense. I mean, there's many different ways you could do it. You could have everyone submit a number. And then you'd, I don't know, develop a complicated auction system whatever you want to do or take an average. You could do all of that. But I think part of this-- and there's actually something right at the way to Kevin Worsh credit. Kevin Worsh's credit, he points it out a lot. There is a false sense of precision if we go down to the third decimal, right? So economic data is measured with a lot of noise. Prices aren't perfect. So we don't really know that exactly. Keep it a nice and round seems more-- it seems a bit more honest, I feel. We really like going down to the third decimal and inside economics, though. Yeah, I'd be-- I'd root for more refined kind of changes, but that's a good question. How about-- let's do a couple more. Go ahead. Ruta. How about this one? Kind of getting back to price increases inflation. Why do you think companies are more reluctant to increase prices now compared to three years ago as a due to supply chain issues during COVID, political factors, skepticism about future tariff policy, and how has this reflected in company earnings? Well, the premise is that companies are raising prices more aggressively now than three years ago? No, no, no, the opposite. Why are they more reluctant to raise prices now than they were three years ago? Oh, when inflation was raging. Yeah, yeah. Oh, I see. Well, first of all, do we all agree with that premise that that's true? I think that's true. I believe that. Well, three years ago, that would probably four or five years ago, right? Because it was 21 or 22. This question is probably seven months old. Oh, OK, OK. So the real inflation was kind of 2021 and 2022. Yeah, like the height of inflation was 22, right, 2020, summer of 2022. And that's coming out of the pandemic and the supply chain stuff. Well, I'll give two reasons, and I'm sure that the others. I mean, one is, if you go back to the period when inflation was raging, there were clear supply chain disruptions. I mean, big time, the chip industry would have affected the vehicle industry and on and on and on. Labor markets were disrupted. People had gotten thrown out of jobs and works. There was labor shortages in many industries. Wages jumped. So there was a very severe supply side disruption to the economy. That's not the case today. You don't have that same kind of supply side dynamic. And then I think the current period, it goes to the tariffs largely. And there, I think businesses are reluctant because they just don't know what the tariffs are going to be. They're up, they're down, they're all around. There's carve outs, there's exemptions. So they don't want to raise price, get wrong-footed tariffs go away or get changed or they get a carve out and they have lost market share because they jacked up price. So they're just kind of more reluctant to end with good, you can see if you wait long enough, the tariff changes. And it goes down and goes gray. So I think there's just more reluctance to do that in the current context. And also, of course, politically, at least if you're a big company, start raising prices aggressively, I think you'll call attention out politically and that will be a problem for companies. So I think they've been more reluctant. I don't know, Chris, other reasons? No, I agree with those, that's what I had in mind. Yeah, Merced, do you have any other explanation? I think those are the general-- Yeah, no, I think it's all of the above, right? And I think we came off a period of extremely high inflation where consumers voted on that, on an affordability and prices and really were up in arms by the way that prices rose after the pandemic. So I think there is this caution of raising prices to aggressively, and you're right, when policy is changing weekly, why pull the trigger and make a huge change in your price structure when that issue may go away next week. So-- Yeah, I guess the other thing is inflation expectations became a bit untethered back in '21. That's one reason why the Fed jacked up rates so aggressively in 2022 to re-anchor those expectations and they did, inflation expectations are back down. So if you expect inflation to be higher and businesses, investors, consumers, did, then you're going to get more inflation. Business is going to be more aggressive in raising price than when inflation expectations are anchored. So I think that might have also-- But that's a-- there's a lot of things going on there, but I think those are the key reasons. All right, one more-- Well, there's the other part of that question about profitability, right? And companies have been generally pretty profitable with pretty good margins. So they do have the room, a lot of them, have the room to absorb some of the increased cost that they're facing. The question is-- From a perspective of the CEO looking at their stock price, probably not, because there's no giving back. There's no giving back, because the stock price reflects the high margin and expectation you're going to be able to maintain or even grow that margin, right? But isn't the risk that's put it in theory, at least, you don't have to-- if I have no margin in my input cost increases, I have to raise prices. OK. And the reason why I'm saying this is because we have a local brewery here that imports hops from Germany that's now been tariffed. And I'm very upset about that. I can imagine. That sounds like something that you take to the streets. Oh, yeah. It's deep. Back in the barrier, they used to do that. Then they raised the beer prices. People would go, right? Yeah. Yeah. Well, wasn't beer back in the day, particularly in Europe, you had to drink beer because you'd die if you drank beer. It was a food, because obviously water wasn't purified. And so it's liquid in its food. So it's a little different. Right. But we still feel strong about the beer price. Where I'm from. Yeah. All right, one more question. Marissa, one more question, more Q. OK, this is a good one. Given the policies that are shrinking the labor force, I'm sure they're referring to immigration, disrupting trade, stifling capital formation-- not quite sure what that one is-- and housing, and removing people from health care. Do you see any pro-growth policies right now emerging other than AI? Anything good? Or has it been all bad? I mean, I'd say less regulation is pro-growth, at least in the near term. If you're not worried about the unintended consequences and what might happen down the road. And I think it's-- I would, from my own perch, argue the regulatory environment perhaps got a little one cited. And now it's gone in the other direction. And that may, in part, be not a bad thing. Some of the deregulation, less regulation. I do worry about the context of financial stability in the future. In the lack of oversight now, we'll have some implications down the road. Like, for example, no oversight on private credit markets as an example of that. But now, in the near term, that predisposition to deregulate and less regulation would be supportive of growth. It's not a game-changing boost to growth. But on the margin, it would help. In terms of credit availability, cost to capital, that kind of thing. I think that would be-- you could consider that to be progress. Chris, any views on that? Any other progress? I'd say the treatment of investments in the one big, beautiful bill act, aren't you? In terms of immediate, if magnets built into our forecast for 26, we're going to get a tailwind due to that tax policy change. Yeah. Martin, anything there? No, I agree with that. I mean, it's a live in the banking realm and the reality is there is useful regulations and deregulations that are not. And if something like the global financial crisis occurs, what legislators will do is they pass sweeping builds because you have a need to do that. And then over time, you realize that some things you need and some things you don't need. And getting away with some of the things that you don't need is usually a good thing. The risk is that you also get rid of some of the things that bring their further reason. All right. Marissa, can you think of any policies that are supporting growth? I mean, I think generally the policies that have been implemented are stunting growth. And we got bailed out by AI. I don't think on AI, there's been any kind of policy, except no policy, right? There's been no growth, maybe that you can consider that to be progress, maybe. Yeah, or he said, or yeah, he said any pro-growth policies or forces emerging beside AI. So yeah. I mean, I agree with everything you said, those things are pro-growth, but it's at what cost? Did we pass them? And that's the worry. It's like in the longer run, we're just ballooning the debt and the deficit to an unsustainable level. And there will be some reckoning someday. We may get a pop in growth over the next few years, but again, at what cost are we doing this all? And I do think to some kind of bring it all together, if we had not gotten what I would consider to be unexpected boosts to growth from AI over the past year, I expected some boost, but not what we got. And we've talked about that in the past on the podcast. Without that, we'd have a very different perspective on the economy right now. I mean, GDP growth would be a lot lower. And I suspect we'd be seeing job loss in recession risks. We'd be talking about recession in recession risks, not for the AI boost. - Okay, good. One hour, 10 minutes, guys. How about that? It seems like the golden rule. The golden rule for inside economic podcasts. - Yeah. - For a perfect podcast. But we're not data-dependent, all right then. - But we're not data-dependent. - Exactly. - I thought those are really very informative. Martin, I like the way you frame the whole conversation around Kevin Warsh, I think that was very useful. And thanks for the cues. Keep them coming. And anything else guys before we call it a podcast? Going, going. - Happy Groundhog today. Happy Groundhog day. - Oh yeah, what happened with the Punks of Tony? - No, it's tomorrow. - It's tomorrow, it's tomorrow. - Oh yeah, this is the first. Okay, tomorrow's the second, right? Okay, I know it's a big holiday for you, Martin. - I'm sure he's gonna come out of his bro. - I mean I, I think he's gonna be snowing. - Well they always have to yank that poor animal out. - Yeah, I don't know. It's pretty cruel. - I don't think it ever willingly comes out. - Yeah, I can't, it doesn't seem like spring is six weeks away. I'm just saying, my Groundhog in 10 or more, yeah. - I hope it makes a difference in Pennsylvania because I live in Washington state. And a warm spring is 50 degrees in rain. And the cold spring is 48 degrees in rain. - Okay. (laughing) - Well, you know, when you're, at that point in time, I would take that, Martin. That's not too bad. - I like it, but I do understand why some people don't. It's easy, at least it's very predictable. - Right, all right. All I have to say, if you want, this is really thinking about moving to Illinois, take a look at the weather. - I went to school in Wisconsin, I remember. - Oh, that's true, that's true. Anyway, okay, guys, thanks so much. We're gonna call us a podcast, dear listener. I hope you enjoyed it and we will talk to you. Oh, jobs Friday coming up. Next, that's gonna be a big one, the benchmark revision. - I'm gonna, I'm not gonna be here sadly, but Dante's got you covered. I know, I know. - How can we do this without you? Where are you gonna be? - You'll get by. - Okay. - You have a number of them? - What's that? - Oh. - Never a prediction. - No, I have to think about that. - Oh, you put it on the spot. - Yeah, yeah. - All right, okay. All right, we'll miss you, but dear listener, we will talk to you next week. Take care now. (upbeat music)