 Right well my name is Adam Tooze and it's my great pleasure to welcome you this morning to this session on inflation. The topic could hardly be more urgent. Inflations are historically speaking and I think more than that almost sort of metaphysically speaking the great shadow that hangs over all monetary systems. They are the fear that lurks in the under the bed or in the cupboard. They're the fear that drive so many people into the arms of cryptocurrency as one of the ways of avoiding that. They are also huge challenges to political authority when they become very large they they can shake a state to its foundations even in more modest terms they can affect very large redistributions of income and wealth through their effects on real incomes and through their effects on monetary assets and the offsetting yield chasing that we see into other categories. It's not too much to say I think that the history of economic policy is punctuated by a series of debates about what inflation means and what we should do about it. In fact it's not entirely unfair I think to say that the entire economic paradigm of the last 50 years was shaped by reactions to the traumatic experience of the 1970s and until yes last year I was going to say yesterday I don't mean quite yesterday but the day before yesterday until last summer we thought the central banking community I think and the wider policy thought the community thought we had this problem lit and you could tell because major central banks around the world on both sides of the Atlantic the Fed and the ECB engaged in historical changes to the way in which they pursued the arbitrary but nevertheless historically established target of two percent inflation moving to average inflation targeting in the US and a symmetrical redefinition of Europe's inflation target which implied that downside risk in other words deflation was as large as upside risk and now we find ourselves here today in a very very different world and in fact the Weff has been conducting its own research with a poll of chief economists around the world surveying them on their assessment of the world the panelists are in a slightly unfortunate position but you're in the audience can see this very well we can see and I can cheat oh we can see it ahead of us there and you can see the huge majorities of chief economists in a leading business firms and central banks around the world at least in Europe Latin America and Africa see inflation as a major problem in many of those parts of the world it's not just inflation but it's food insecurity that is a pressing issue as we were hearing earlier this morning the one part of the world where inflation is not currently seen as the major threat is in fact Asia for interesting reasons that we may get into on the panel but we are very much not in the world that we were in six months ago or perhaps nine months ago at least where that long-running process is adjusting the entire policy model was underway and I think many of us felt very convinced that that was the right thing to do it now feels like a rather obsolete self-confidence in any case we have a wonderful panel to discuss these issues with us this morning I'm going to just introduce our speakers from this end to that end before asking them to make a few opening statements to my immediate left is class naught who is the president of the central bank of the Netherlands and also of the financial stability board so he's wearing two hats both the inflation and the financial stability control hat next to class is Ricardo houseman who is the founder and director of the growth lab at Harvard University but before that backed on a very illustrious career in Latin American economic policy starting in Venezuela by way of the inter-American development back next to Ricardo you have Renee not a partner and president of bright star capital partners who brings to us this morning the private sector view the view especially from the middle market so not the grand titans of global business but the middle market of American capitalism and then on the left my friend Jason Furman currently the professor of the practice of economic policy but for before that chair of the Council of Economic Advisers in the Obama administration and they so we have a really great lineup here and I think perhaps I'll ask Jason to start by giving us his take on the inflation picture to Pax particularly in the United States where the pressure is largest but also some comparative observations that you might have for us Jason great well thanks so much for thanks for having me in this discussion and a sense of just how quickly this shifted is last year I was doing lots of cheap talk about inflation being high inflation being persistent when I say cheap talk I was paid less than a dollar a word by the Wall Street Journal for writing about it and if my predictions were wrong I didn't lose any money a friend of mine said this is all cheap talk so let's actually have a bet on this my friend worked in finance so he's a much better bargainer than I was at the time the consensus forecast was inflation this year would be 2.2% that was in December that was five months ago he was such a good bargainer he got to made the bet over under on 3% on even odds I took the bet two months after making the bet he conceded it and bought me dinner in five months we've gone from a world where 2% inflation in the United States was conceivable this year to a world where if we only had four or five percent inflation we would count ourselves lucky the inflation is worldwide it's up almost everywhere some of that is for the same reasons especially on the supply side with shortages in things like microchips things like oil and food but there's a lot of differences across countries in terms of the causes in the United States a much higher ratio of the inflation is demand yes there have been supply problems but people are buying 10 to 15 percent more goods than usual so the supply problem is more that supply can't keep up with the unbelievably voracious demand of American consumers demand that has by the way raised goods prices worldwide so part of your inflation is our fault the degree of embeddedness of inflation varies quite a lot wage growth is much higher in the United States than it is in Europe that tends to be more inertial and labor markets in the United States are extremely extremely tight with two job openings for every unemployed workers and a record quits rate which says even more inflationary pressures the consequences vary across countries here it's worse for Europe for the exact opposite of the reason I just said our inflation is more homegrown more demand driven that means we have higher nominal wages higher higher nominal wage growth higher price growth real wages have fallen behind real wages are falling at the fastest pace in 40 years but it is not as big a cost of living crisis as Europe where you haven't really had the wage increases which means you don't have as much inertial inflation but you're suffering that much more than from the price increases caused by some combinations of presidents Biden and Putin and then finally Biden would be the goods prices Putin would be the oil and food finally on the consequences of all of this there are pros and cons to inflation it's helped us deleverage our debt there are some good things associated with it but it is so high that we're way past the point we're debating the relative magnitudes of those is important at some point in the future though that debate will be important but for now I'm bringing it down is quite important for sustainability for real wages and really ultimately for the political reasons that you started with Adam thank you Jason I would love to come back at some point in the conversation to this issue as you called it deleveraging another way of talking about it will be the inflation tax on nominal assets including the obligations of the state class after having had the view from the American side of the Atlantic can you give us your take as a European Central Bank a long time also member of the ECB decision-making process how do things look on your side yeah well thank you and thank you for having me it's great that I have to talk after Jason because a lot of I think the dynamics that Jason already alluded to are also relevant for Europe albeit I will argue to a slightly lesser extent at this moment I mean we are being hit by a combination of negative supply shocks positive demand shocks both of them have a tendency to increase inflation but of course the impact on growth is more ambivalent and and I would argue that this sort of the mix between demand and supply elements differs also a little bit across region and one difference with the US is that I think in the US it's much clearer that the dominance is on the demand shock side whereas in Europe I think we suffer a bit more from the negative supply shocks but I also would not want to completely ignore the demand side in in Europe we Central Bankers we make projections when you make projections there are unfortunately projection errors when you analyze our projection errors coming out of the pandemic we consistently not only underestimated inflation like in the US we also consistently underestimated growth and the growth dynamics coming out of the pandemic so there must also have been a demand element in the high inflation in in Europe now the inflation explosion was clearly related to energy prices and energy price inflation is something that really Central Bankers cannot do much about I mean also raising interest rates is not going to do much about energy price inflation but what you should hold us accountable to is that we prevent this sort of temporary first bout of high inflation to become entrenched and to become more permanent into other forms of inflation as well and if that is the case then that usually also shows up in inflation expectation becoming the anchor the anchored means no longer concentrated at our 2% target we measure inflation expectations by market pricing we look at surveys etc and the message from these inflation expectations in the Euro area is that they have consistently drifted upward let me take one number the consensus forecast which is a well respected professional survey in November last year expected inflation for the next 10 years in the Euro area was 1.9 last week the number came out for May it was 2.4 that is sort of a number which is still close to 2 but it is a number where it gives it provides you with a little little pause so what should we as Central Bankers then watch of course the underlying dynamics in inflation we're not so much from a sent from a monetary policy perspective focusing on energy price inflation with all due respect that is yesterday's news that's water under the bridge what we are looking as underlying inflation so we have a couple of indicators which is not exactly the same as core inflation that core inflation is an important indicator it's inflation where you strip out the more volatile food and energy component and the problem is that these measures of underlying inflation over the last few months have all gone northeast and the question is where do they stop do they stop at a level sufficiently close to 2% or will they continue to increase and will that then also be reflected in inflation expectations a second thing to watch is wages also here I think we don't have the same amount of wage increase yet in the Euro area than we have in in the US I'm also not saying that there is absolutely no room for wage increases let me not be misunderstood here but what is worrisome from the perspective of the central bank is that if you had a sort of wage price spiral emerging and for instance where we see things like automatic price compensation being brought back on into wage settlements that's a very worrisome signal we're seeing that happening in a couple of euro area countries we're seeing wages take off in the Eastern European members of the euro area in Germany in Netherlands in Belgium a little bit in Spain etc so these are signals that we have to closely monitor now our president has issued a block on how policy would respond to that I'm fully on board I fully support everything that is in the block I think it nicely charts sort of the policy course and I'm happy to elaborate on that in let's say the remainder of this conversation thank you guys the distinction that you make between first and second round moves is really fascinating because in there is packed the entire distributional politics of inflation because if you see is as the role of the central banker to ensure there is no second round what you're in a sense saying is the first round winners take their winnings and the second round which you're going to prevent as it will absorb the loss and this I think is the delicate line that central bankers have to tread because one of the second round moves you might expect would be labor organized labor and as I can see the entire ECB policymaking team trying to formulate a line which doesn't as you avoided saying mean that the ECB is going to stand against any wage adjustment in Europe because this would essentially be to underwrite inequality just just a quick comment we are energy importers in Europe yes so it means energy price inflation essentially is a terms of trade loss yes so any efforts to try to shift around the price of these energy costs by workers onto employers on to the government on to workers on to that's futile we have to accept the loss we have collectively grown poorer so I think that wage settlements in Europe should focus on core inflation and productivity growth that is traditionally the space that there is for wages but all energy being spent on trying on trying to pass on the the cost of high energy prices it's a purely political the government can decide to do so for distributional reasons we know that particularly the lower incomes suffer a lot from higher energy prices so there is a legitimate public policy case to be made for compensation for lower incomes absolutely but there is we cannot compensate everyone this is a check that we somehow have to accept I mean this is about Schnaubel pointed out in a recent memo and we'll leave off in a second but there is one group who have made able to pass on which is the profit margins of European business have done quite healthily so they are passing on but we must we must move on another sign that there is a strong demand element in Europe exactly because the demand is there for businesses to sustain that push Ricardo as we saw from the from the overview that the weft team provided us with this may not be an entirely global phenomenon but it's certainly very wide reaching how does this scene look in your view from the em perspective perhaps particularly from Latin America well I think I would say that the environment it has many sources of risk and danger but inflation is sort of like not in my mind the most dangerous one the first thing that's happening is a terms of trade shock and and the terms of trade shock means that the country as a whole is either getting richer or poorer because we're paying more or less for adults yeah so energy prices are up food prices are up that's good for energy and food exporters it's bad for importers and in the MEMs there is some combination of both right but in general it's it's been a positive shock for South America it's been a positive shock for South Africa for example now that's at the aggregate level means that national income has gone up right internally it means that the government has become richer and households have become poorer so there's a domestic income redistribution issue that government some are trying to address it by pegging the price of food and and energy or by doing social transfers and the government's become richer because it's real value of its debts gone down and the households have become poorer because they were the people who had the claims on the government and and the government has become richer because all the commodity exporting firms are paying more taxes so so the fear is so the dangers are a what's going to happen to interest rate policy in the US everybody remembers in Latin America vividly the Volcker shock that led to the Latin American debt crisis and a decade of zero growth so I I'm on on the optimist side of that discussion in the sense that even if the US it does more like a mini Volcker thing and we will ask Jason what his views are in we are better placed to absorb that shock now in most countries that have independent monetary policies with inflation targeting and floating exchange rates and long-term debts that are more in domestic currency than we were then when it was all short-term debt and pegged exchange rates and the whole macroeconomic setup was upset so in I would say Latin American and South African central banks central bankers and never fell into this idea that inflation was dead and they were so they have to close a history of inflation they've been reacting very quickly they didn't fall behind the curve they have moved much much more than than the ECB and and the Fed they're I would say on the curve they're not behind the curve and so I think that those inflationary concerns are more or less contained it's the other risks to the macro picture and the income redistribution of these relative price shifts that are so like dominant in policy thank you so much René it would be great to get your view both as it were as somebody who's in private business rather than the policy team that we've got up here and also from the distinctive market segment that you operate in which is as I understand it medium-sized American firms many of which are private you were saying to me earlier there as it were the bread and butter the actual dynamo of the economy but they never get any attention and so give us you the perspective from there thank you Adam and thanks everyone for being here it's great to be back in person at the Weff and hopefully we can continue this obviously inflation is a thread that has run across through the whole last three days every session I've been in there's someone has brought up inflation we buy and operate middle market companies in the US the middle market in the US but also globally as Adam mentioned is a vital part of all economies and what they've proven in the past is that they're quite resilient in tough times just to give you an example on the great financial crisis middle market firms added 2 million jobs in the United States while their larger counterparts the corporates the big caps lost 4 million jobs so we expect that this part of the economy will remain very resilient we're seeing that and what we do our firm is very hands-on operational with our portfolio companies so we're talking to our management teams on a daily basis in the current environment they're actually thriving but they are seeing challenges across many facets of inflation and I think we've touched on them but wage inflation especially in the US with such a tight market for labor input cost materials as well as energy just to name a few what we're doing about that as operators and as a team we have a lot of experience across multiple economic cycles what we're doing is helping our management teams deal with these challenges and basically it's basically good business practice right we're making sure we have diverse and diversified supply chains and not only they diversified they need to be diversified geographically now so that's that's a new important factor to labor we're seeing pricing you know labor is costing us 5% on average across all our portfolio companies what we need to do there is not only make sure we can hire people but also retain them so our companies are sharing best practices on how to hire people but more importantly we are working on our portfolio companies culture because as we've seen in this great resignation people are leaving the workforce not just because they're not getting paid enough they have to feel like they're valued and that they have a purpose and so critically right now we're working with our portfolio companies to help them push down culture and make sure that their employees feel valued and I think that's going to become a more and more important part of what we do we're also spend a lot of time driving efficiencies in our business that helps mitigate inflation and input cost going up and then finally I'm sure you've heard it across multiple sessions as well but applying technology but we absolutely think and are prepared for the challenge ahead we do expect inflation to to persist and that's what we're focused on that's great we have an amazing audience here today and I want to move to questions from you in a minute so you've got an idea percolating get it queued up and I'll go to you just in a minute but I wanted to come back to something that we were talking about Renee one you know while we were prepping oh no no no it's really it was a great observation you made and I asked you the policy makers question right so from your point of view what kind of policy do you want to see and and you said something to me that really struck me which was forgive me if I misquote you but it was along the lines of you know what I could deal with a couple of years of above-target inflation just so long as we avoid a another financial crisis that I did say that you did so so what that I for me what that triggered is okay in the back of the minds here we've got debt we've got financial stability concerns and inflation as far as debt is concerned is double-edged right on the one hand it eats it up and on the other hand if central banks react by sticking interest rates up it can create squeezes for people who are overextending we've got class here's like boss of global financial stability or the overseer of so how do you judge those risks there's been a lot of talk in the markets about we're in a situation my central banks can't really drive interest rates up because the pile of debts too big that's I guess Renee's concern does that seem realistic to you because if it were it would be a strong argument against a rapid central bank response yeah well the short answer is no I think that this is overplayed but I will sort of substantiate at the point but first of all of course as the chair of the FSB I would be the last person that would want to downplay the risks and the vulnerabilities emanating from the levels of indebtedness in our economy as a matter of fact the FSB has consistently been warning already before the pandemic for high corporate indebtedness in some countries high household indebtedness in others and high public indebtedness in yet other other other other countries but I think that should always be seen in conjunction with repayment capacity we're talking here about nominal GDP growth and yes because of the pretty high inflation rest assured the coming years you will see pretty high nominal GDP growth right so the denominator effect will be there and two years ago we would have bitten your hand off yeah could have had those numbers right secondly many governments if you're worried about sovereign debt of course rightfully used the window in which interest rates were extremely low and central banks were doing asset purchases etc to significantly lengthen the maturity of their debt we know that in fighting inflation you have two choices you either do it forcefully and determined then you have a short-lived spike in rates but then it's a short-lived spike and rates can come down relatively quickly again or if you're too hesitant and you do it step by step by step you run the risk that rates will have to remain high for much longer and possibly also have to be taken even higher now given the relatively long maturity of the debt I would argue that the first scenario is by far preferable over the second one that's the vote that's why I challenge the fact that this imposes a restriction on on monetary policy and the last point I want to make is always we should think about this in terms of real interest rates not nominal interest rates and given the high inflation and the elevated inflation expectations that we're seeing real interest rates are still at record low record record record low I should say and even if there will be some tightening of financing conditions and nominal interest rates I would say that real interest rates will go from very very deeply negative to nothing or next to nothing one last question before we go out and it's the targets question like two percent two percent is the fetish two percent is the target we adjusted to symmetrical average but we're still focused on two percent two percent now looks a long way out of reach how what is the price that we should pay and what are the stakes in pursuing that target because again a couple of years ago there was quite a lot of freewheeling debate about whether or not we should adjust upwards whether that might not be a better target to move to Jason I know that you and I were talking about this before as well is this something you know that we should really be heavily invested in what are the what are the stakes here yeah so Adam I think there's two distinct questions one is if you could just pick from a blank slate what inflation target you'd want the number you would pick today would be higher than the number you would have picked 20 years ago when the two percent was roughly set the reason for that is that the equilibrium interest rate is much lower than it used to be the amount of room you have to cut interest rates is less in recessions than it used to be and there while I support things like quantitative easing I think they do have a set of side effects that can be worthwhile in a bad situation but I'd rather avoid so having a higher inflation target gives you a higher nominal interest rate it gives you more room to cut it in a recession and a couple years ago I would have said four percent I've been chased in by the reminder that people really don't like inflation so the people have bargained me down to three percent as the optimum the second question though is how do you get from here to there I think for Jay Powell to go out and say we're desperately trying to bring inflation down and oh by the way we want inflation to be higher would be a little bit head turning and isn't the message we should have what I think is nice is that the Fed committed to reviewing its framework every five years they did a framework in August 2020 it was this flexible average inflation targeting and they said five years from now we're gonna have a discussion about having a new one in the dream scenario here our inflation rate by then won't have gotten all the way down to two it'll be at three it'll be stable at three and that next framework review will say hey let's lock that in two to three three something like that so I think at an intellectual level on panels like this we should be having this conversation and debate now central bankers should probably start having this debate two years from now and three years from now might be an appropriate time at least in the United States to really actually change that target excellent do we have a first question yes Stephanie Flanders from Bloomberg Economics I guess it's a question for Jason but also others the latest Fed forecasts roughly speaking still have an expectation that it can slow the economy not that much by next year bringing but still bringing inflation down to the sort of two and a half 2.6 percent by next year while still having an unemployment rate around three and a half percent and a barely positive in real terms federal funds rate do you think that's plausible and if not how dangerous is it for the world that's living with the consequences of Fed mistakes now for the Fed to carry on with that view so I most of what I do is tweeting where I don't get paid anything per word and so the second that forecast came out in March I I wrote about it and you know possible might be the word I would use not plausible I've been you know overconfident on this panel just because you get on panels and you start being overconfident there is a lot of uncertainty here long-run inflation expectations are anchored there's a chance that nominal wage growth is slowing down so I think there is a possibility that 25 years of credibility is going to manifest itself in inflation coming back down next year so I don't think that's impossible it's not what I bet on I don't think the Fed believes their own inflation forecast I don't think the Fed believes inflation models at all anymore they've been so badly burned by them I think they've switched to the right thing which is we want to actually see the inflation change before we change we're not going to rely on a forecast so in that sense their inflation forecast doesn't bother me what bothered me most in their forecast was they had I think it was about 2.6 I might be off by a 10th Fed funds right next year the maximum member of the FOMC was at 3.5 for the Fed funds right next year my median expectation for the Fed funds rate is it going to end next year above 4 I don't mind the pace of liftoff I mind that they haven't done enough to prepare people for a higher Fed funds rate in the future as a result we haven't seen long rates rise as a result we still have those negative long rates and they're not tightening as much as they need to so that's where they need to do work is that sort of preparing people for higher rates I'm not going to ask class to comment on another central banks forecasting but Jason maybe you could spell out for us another real puzzle which is if we're this confused about inflation forecasting why are inflation expectations such a key variable and that what does it mean to make inflation expectations such a key variable in decision-making because inflation expectations are what central banks want to anchor they mustn't run away we all agree on that but we're saying that the best economists in the business run the best models presumably and even the people who employ them don't really believe the models so what kind of a world is this right look I think part of the problem last year is this thing called the New Keynesian Phillips curve and it says inflation equals expected inflation plus a term for labor market tightness plus a random term for shocks you use that model last year and it predicted that inflation was going to be like two to two and a half percent because that model is incapable of predicting any inflation because the Phillips curve was so flat I think to some degree the Fed got into this weird asymmetry where they had said we're not going to react until we actually see inflation we're not going to react preemptively based on a forecast and then they said oh wait we've seen a lot of inflation now we actually are going to use a forecast to say it's going to go away and they had that asymmetry now this New Keynesian Phillips curve had for those of you that remember your statistics class in our square of about 2% it explained 2% of the variation in inflation and 98% was explained by other thing that weren't in this model so this was the now all the other models by the way had our square of 1% so if you had to choose a model this was the right model to choose but it was the least bad model and so the idea that we're going to wait to actually see things at this point I think is right and I think that the really big question in it is what expectations matter long run expectations were in this model those are still fine in the United States short run expectations are not in the model those are terrible right now in the United States I don't quite know if I'm going to look even at expectations which of those I'd look at the question here from the front yeah maybe question first for class but maybe also the others I want to react Ronald Reister APG you offer to talk a little bit about ECB ideas and my question would be what is in the toolkit of course we were surprised of all the measures that were available to central bankers to well avoid the economy to go into crisis is this toolkit as full to fight inflation if that would be needed if eventually what could be done if you think creatively are there things that we are not thinking about today well yes I mean that is not in essence all these measures that were in our toolkit to to fight a long period of below target inflation can of course be reversed but I think that is some logic in now focusing first on interest rates we will end the net asset purchases likely very very early in Q3 well use your imagination what is the earliest moment in Q3 and then we will focus on rates because that's the measure we know best also that will imply that we will have a large balance sheet for still some some time to come we've been saying that we won't touch the balance sheet for the foreseeable future or at least well beyond liftoff so I don't expect any discussion on that at least during the remainder of this year and sort of into next year so we will focus on rates and there we will be guided as I was referring to the block that our president put out data dependency full optionality because a central bank that is constrained will have to pay a higher cost of this inflation than a central bank that is unconstrained and gradualism of course it is welcome if we can be gradual if we can be predictable in normalizing policy I'm deliberately not using the word tightening policy because with medium term inflation essentially at target the appropriate stance should be a neutral stance the stance today is still highly stimulative so we're only talking about the movement from a highly stimulative stance to a more neutral stance and that we will do in in interest rate steps to be decided by these three criteria that are in the block. Thank you. Excellent we have another question for our panel so can we go to the interaction between monetary and fiscal policy and how they fit together here because the line that we're trading is quite a dangerous one it's a difficult one that's been indicated we could not we could perhaps not do enough we could do too much and then there is the distributional issue of who pays who pays the price what is the role for fiscal policy to bring I mean you are asking about the instruments that are available to the ECB perhaps the question should be what are the instruments available to other actors and perhaps a colleague is a economist of great expert range and expertise you could give us some ideas here and some some perspective on what kind of options might be available. Well I mean I think our joint colleague Larry Summers was right in saying don't think about these models think about how much demand you're pumping in and how much supply you think can respond as an economist that sees the US in some sense from from outside even though I'm inside I fear that there is just too much stimulus in the pipeline given supply and that something more forceful needs to be done on interest rates and that this idea that if you raise interest rates then you take away the Fed put on the stock market and then you get a financial stability and so on that that fear increase should increase inflation expectations it's a little bit it reminds me of Argentina where you needed to raise interest rates to bring inflation down but since the government pays a short-term interest rate on its debt it fears that a higher rate will increase the fiscal deficit and increase the need to print more money and and so on so you're kind of a bad monetary arithmetic problem so I I I lose sleep in thinking that the US is way behind the curve and that these models are going to prove wrong then inflation is going to remain high and that eventually they will have to react much more forcefully and that if they if they for once did more than the market expected that would be better at building credibility than the expectation that the problem will go away on its own so yes there are two sort of big American central banking figures that haunt this conversation right one is Paul Volcker who demonstrated the interest rates do work against inflation if you stick them high enough and that they are willing to pay the price of a major recession and mass unemployment to get you to dampen demand and the other great American central banker who hangs over the conversation that you invoked there is Alan Greenspan and the feds promise to essentially allow the money market the financial markets to bubble along at a healthy pace and were they ever to get into trouble the implicit promise that the Fed would lower interest rates and stimulate the market I mean there is a really dark vision dark from the point of view of most of the people at a conference like this that the Fed has turned Frankenstein on the markets right because if the key to inflation problem is excess demand where does this demand come from it comes overwhelmingly from households within the American household sector which households does it come from it comes from the top 20 to 40% of the household distribution what do we know about them we know they're the people who own the equities they're the people who actually own the financial assets they have been benefiting from the Fed put to end all Fed puts since the advent of QE so is the key to actually dampening demand and slowing the American economy down actually to put the fear of God into the financial markets and to induce more or less deliberately a contraction of overvalued balance sheets well I mean this is the salt on posh our view of what how the Fed has turned nasty in the last month I want to say two quick things and I want to hear Jason on this the first one is that we thought that markets were about pricing assets right and not central banks about pricing assets so if the moment you got central banks targeting price asset prices I think it's very dangerous the other thing I want to say is that in Latin America we had this this joke about lousy central bankers in lousy central bankers always have a statement they have to explain why inflation was above where they thought it was going to be and the statement was always if it weren't for the prices that went up inflation would have gone down and I hear that too much I was rediscovered by a lot of Americans last year and their analysis of inflation yeah I think oh the Fed puts over they you know don't mind what's happening to the market the you know this one may also be a good example of you'd rather a smaller decline in the market now than letting a bubble build up and have a larger decline later I did want to briefly say something on fiscal policy in the quandary for fiscal policymakers as people are suffering from the cost of living in the United States if you mailed everyone a check for a thousand dollars to help them with the cost of living prices would go up by approximately a thousand dollars and everyone be left with nothing no not any better off you can actually protect some of the most vulnerable you can take families with low-income children and give them more in our country that would be the refundable child tax credit so you can choose pockets of the country to protect you'll get some extra inflation from that but you won't offset the inflation for the people you want to protect and you won't get that much extra inflation because the most vulnerable aren't the most but in European countries where you see energy tax cuts being proposed to try to protect people those countries are poorer because of the energy price went up so they're going to get lower gas bills higher inflation and on net people aren't going to come out that much ahead even if they think they do and optically it works for the politicians but beyond the Fed put Jason I heard you say something rather striking earlier today which is that we were talking in a session about growth outlook for the world and growth outlook for the United States in particular and you sort of were fairly optimistic rather bullish in fact about the US and then added this rider on the end which is that you weren't in fact entirely certain that more growth was better at this particular moment could you spell out the logic of that because that seems to me to take the Fed put argument you just made and to extend it to a macroeconomic scale that's quite that's quite striking and put it the way you did I mean the optimist from the US economy is a long version of it I think the most important point second quarter I think we're going to have consumer spending increasing at about a four to five percent annual rate be among the best quarters we've had in the last 25 years but I no longer know how to root for economic data when I see the unemployment rate go down I don't know whether to be happy or sad when I see job growth being high I don't know whether to be happy or sad wage growth I don't know whether to be happy or sad labor force participation that one's easy when it goes up I'm happy and down I'm sad but yeah I think if I could choose a growth rate for the US economy this year I'd choose 1.7 that feels better to me than 2.7 which would be scarily hot and you know minus 0.7 is something I would certainly never turn a switch to cause a recession even if maybe it needs to happen one day I'm not prepared to say it needs to happen yet but we sort of need that happy medium class yeah I just want to very briefly say on this relationship it's of course clear that in every financial market valuation there's an assumption on future interest rates right because they are the discount rate of these future cash flows and to my liking we have seen sort of corrections on stock markets and like but to my liking a few weeks ago I was also making a lot of comments saying that there seems to be a lot of optimism being priced into the markets in the capacity of central banks to truly engineer this into a soft landing where we would absolutely find the lowest cost interest rate path for disinflation and of course I'm spending 24 hours a day trying to find that path but there have been episodes in the past where my predecessors who also worked 24 hours a day trying to find that path unfortunately didn't find it and ended up in a path that was a little bit more costly than seemed to go into valuations so this is part of the logic that comes with the uncertainty that is there if there is a significant change in the direction of the interest rate outlook thank you so much class you've landed us perfectly at least in one target which is our times today and in the interest of the smooth flow of the conference can I ask you all to give our great panel