 And without further ado, I would so thrilled to have this webinar, which is something I am so looking forward to. I can't think of a better person to moderate it than our very own Brian Keough, deputy managing editor and senior editor of economy and business. Brian has been with the conversation in since 2014, right when we launch or right after he spent a decade prior writing and editing on business finance and economic topics from a business magazine based in very root to covering corporate finance from Bloomberg News in London in New York. Brian I'm going to let you take it away from here and look forward to the conversation. Thank you, Beth, for that very kind introduction and I would, I'm very pleased to also introduce our two guests, Brian blank and Ronnie Ramchron. They're both scholars who have published numerous papers and top economic and finance journals, and moreover they've helped me, many, many times and explaining and identifying the often mysterious workings of the Fed, the economy and inflation managers. Brian is a finance professor at Mississippi State University, where he focuses on corporate finance and governance and Rodney is an economist at the University of Southern California with previous stints at both the Federal Reserve and the International Monetary Fund. I'll get started first by asking each of them to briefly offer their own introductions of themselves and opening thoughts on their outlook for the use economy in 2023. Brian, would you like to go first. Absolutely. Thanks for having me. As Brian mentioned, I study firms, and particularly how executives navigate financial decisions and that's economic downturns. So right now, I'm watching to see how firms are allocating their capital investments for long term planning. These seem to be slowing down at the beginning of the year. But as consumer spending has continued to be strong, firms now seem to be planning larger investments in the coming months. And so they'll be watching that closely as the economy continues to progress. Thank you, Brian. It's a pleasure to be here. As Brian mentioned, I worked at the Fed for a number of years and the things I study is I try to focus to try to understand how Fed policy and interest rates affect things like consumer spending and so forth. And the things I'm looking at are the effects of the rate hikes in the last six to nine months on things like consumer spending and wage pressures, and trying to use that to sort of back out to figure out where the economic conditions might go to in the next year. Thank you, Rodney. So I think I'll just get right to the big question the elephant in the room I guess, as it were, to start this thing off. It's probably the biggest question on people's minds right now and certainly it's on my mind and my, my family's minds. Are we heading for a recession in 2023. And if so, when might that happen and how bad could it get Rodney how would I start with you. I'm going to actually try to dodge the question a little bit and just give you a brief background as to how we probably got got here and what the risks are so I think the natural answer that you might have heard is indeed yes. There's a likelihood that the economy is going to contract in the next nine months. I think that's sort of the, the expectation that the president of the New York Fed pointed out that he expects the unemployment rate to go up from 3.5% Currently the summer between four to 5% in the next year. And I think that will be consistent with with a recession. So I think that's the mainline expectation. In terms of how much worse it can be beyond that it's going to depend on a number of things. And just to give you a brief outline of that it could depend on whether the Fed is going to accept a higher inflation rate over the medium term. Or whether it's really committed to getting the inflation rate down to the 2% rate it would like to get it at what the official target rate is so I think that's the trade off. So the short dish answer is I think that's the expectation we're going to see the we should see things slowing in the next six to nine months if not if not now. How bad it could be beyond that is going to depend on how much pressure the central bank can can can take on as it tries to see as it tries to push up the job losses and that's that's a debatable thing. Because we're coming into the election season in 2026 as well. And so 2024 excuse me and so it's not clear how the Fed will think about this but let me stop there I've said a lot and let me stop there and give some room for for Brian to jump in as well Brian. Thanks Rodney, Brian what do you think. Well, like Rodney mentioned I think the consensus view among most forecasters is that there is a recession coming at some point maybe the middle of next year, potentially. I think I'm a little bit more optimistic than that consensus. I've been watching forecasters and data come through the last several months, it's reminded me of times that I've sat in an airport, and my flight gets delayed by 30 minutes, and then another 30 minutes, and then another. And I think it's easy to envision this delay to continue into next year. People have been calling for a recession for months now and this seems to be the most anticipated recession on record. But I think that it could still be a ways off that consumer balance sheets are still relatively strong stronger than we've seen them for most periods. So it doesn't mean that a recession is not coming there's always a recession somewhere down the road but I think that the labor market is going to remain hotter than people have expected. And now over the last eight months the labor market has added more jobs than anticipated which is one of the strongest streaks on record. And I think that until consumer balance sheets we can considerably, we can expect consumer spending, which is the largest part of the economy to continue to grow quickly. And thanks for the optimism. I would love to believe that's true that the Fed could navigate that soft landing that I would put so much about. But even with whether there's a recession or not I mean the economy is expected to slow down at least. What would you say the impact will be on on businesses and consumers and the economy more broadly. And when what might we see the unemployment rate to start picking up, and will it will it be a rapid pickup. Yeah, well we've already seen a little bit of movement with unemployment, it hasn't risen much but it looks like we may have hit a bottom for this cycle already and maybe it'll pick up to somewhere close to 4%. For example, like Rodney mentioned the base case that the Federal Reserve and many are expecting something like 4.5%. And I think that's certainly possible. My base case is something more closer to four maybe just over 4%. And I think that we can see small upticks in the coming months, but I don't think it's going to rise as quickly as some people are expecting in part because what we've seen so far is a lack of labor force participation and until more people in the labor market I think there are going to be plenty of jobs to go around. Thanks Brian. Rodney, what do you think the impact is going to be going to feel like actually a question viewers asking how will it how will a recession or a slow down feel to to consumers but also the businesses and and others. On the consumer side I think the perception of risk is going to go up so as people find it more and more difficult to find jobs or to get jobs as they begin to lose jobs. On the consumer side I think that's going to dampen spending. So what's going to happen as well and we're seeing that now is the cost to borrow has gone up sharply and the Fed is expecting that in addition, I think the federal funds rate currently is around 4% the expectation is it will go up to five by next year. If you tack on on top of that baseline 5% if you tack on another couple of points, because of the risk involved then the cost to buy to borrow to buy a car to buy a home could potentially as in the case of homes. It could potentially get up to 8% for some kinds of people. And that could be very expensive so just to answer the question I think on the consumer side is going to be a lot of concern about risk and uncertainty. Not only not finding a job or not only losing a job but the risk about not being able to find one quickly. I think together that's going to dampen a lot of spending and the flip side of this on businesses is this potentially going to be a slowdown in cash flow if consumers are not spending. Then the revenues that businesses depend on to make the investments that Brian talked about mightn't be there. I think the final piece or the additional piece in this puzzle is what the banks will then do. There's also all likelihood that banks are going to begin to curtail the extension of credit so not only will interest rates go up for the typical consumer the typical business. It's also likely that they are more likely to experience a denial of credit not gain access at all. And so that should together begin to slow spending quite a bit. But I just want to be careful here and let your viewers know that, you know, we're making these statements based on theory because the inflation that we're experiencing now comes about from a pandemic and there really is no evidence. There's no data available that people can look to to say what happens to to to an economy after a pandemic that that data does not exist. So we're trying to piece together the data we do have with the theories we do have, but there's a huge band of uncertainty about what's going to happen. Thanks Rodney. Yes, I mean the markets seem to really know which way things are going. I mean every time get a new data point, you know, things shift, and people have to make their batch of predictions. Just to stop you on that point as you said that on Friday the markets the stock market rose sharply when the the inflation rate came in at 6.3 down from 6.6 in the previous month. I think I might have it wrong by a day it was on Thursday. Then on Friday the jobs report came out and it was stronger than what people had thought and other markets have gone down again in the last two or three days. I mean, it's not just us the economists who struggle I think the population and people in in in in the markets themselves are trying to think through here what the, what the path is. Yeah, I was just actually going to mention that. I mean, the Friday jobs report. I mean it was really strong. Normally it'd be great. I mean any economist would love to see a pretty solid jobs report with 253,000 jobs or something like that unemployment rate still near a record low. But the, you know, like you said the market reacted poorly to that because that seems to make the feds job a lot harder to find this soft landing where we were the Fed managed to attain inflation without trigger a session. So how much how much harder did the jobs report make the job for the Fed, Rodney. I think it's, I think it's, it's something they would not have liked to have seen. And just to give you just to give your audience some background on on the theory in the context. So the inflation that we're seeing again comes about because of the logistics problems that came up with the pandemic. The problems are now sorting themselves out so the cost to ship from Asia to to the West Coast fell by about 90% in the last couple of days. So that's, that's, so things are a lot better on that front. The concern is that as wages rose, that's going to lead to a second order effect that will push inflation that will keep inflation going, even after the initial cause the the initial cause being the pandemic wanes. And so what the Fed is trying to do is it's trying to slow the labor market to curtail to curtail that to get to your question, the jobs report says that the Fed has not done enough. Right. The initial, you know, shock is waning, but the second order shock is still there. And so they're going to have to raise rates. They may not raise it faster because I think the chair has said they're going to slow to 50 basis point hikes now, but they might have to keep it high for longer. And that's going to be a problem. Yeah. Okay, and Brian, what do you think and also I mean with the feds actually meeting next week to decide what to do where it's going to go with this going to slow the pace of rate hikes from, from a very high 75 basis points per meeting to 50 points or something else. So you agree that the, how do you, how do you feel about the way the jobs report how does it affect the feds job, or its ability to affect the soft landing, and how much higher do you think the Fed will have to go to raise rates in order to take inflation. Yeah, well, it looks like you're right that the Fed is going to continue raising rates in December though, albeit a slightly slower pace than what we've experienced for the last several months I am expecting a half a percentage point rate increase next week, when they meet. And I think that we can expect more similar police size rate increases in the coming months afterwards, markets are currently expecting that rate to rise to about 5%. And while I think it's, it's possible that that ends up being a sufficiently high rate to cool off the economy I think it's, it's more likely that they're going to have to go higher than that I think 6% is much more likely than four and a half, for example. And I think that some of that is related to what we're seeing in the labor market as you alluded to earlier on Friday, it was a strong labor report, which is great for people that want jobs. And that that was good news. Unfortunately, to your point, that might make the Fed's job considerably more challenging I think the most important data point that we got on Friday wasn't the number of jobs that were created. It was the rate that the wages for those jobs has been increasing. Over the past month, people have been able to see wage growth of about 7%, which is great that they're able to keep up with inflation a little bit better. But unfortunately that means that inflation might persist a little bit longer and become a little bit stickier than we're concerned. And in fact, while it was 7% this past period if you look over the past three months it was about 6% and over the past year is about 5%. So not only is it high but it seems like it's rising. And that's really not what the Fed is hoping to see we're hoping to see that people are able to get jobs and to keep income that keeps pace with inflation and and those are, you know, great things for workers but when the prices of labor wages continues to rise that rapidly. It makes for a very hot economy. And I think that that's really the challenge that the feds facing right now. Thanks Brian. And Ronnie use a moment ago you were you noted the CPI the latest consumer price index suggested signs that inflation was cooling. Are you seeing other signs that inflate that the feds. The feds job is working that the Fed is managing to tap down inflation, especially by its, its preferred measures of inflation. And also can you address why isn't inflation such a problem. Is it worth potentially triggering a recession just to lower inflation is inflation worse than a recession. Yeah, so I think these are great questions. The CPI did slow from 6.6 to 6.3 part of that slowing comes about because of the housing market. So the housing market has been a major driver after the pandemic or when the pandemic occurred. The Fed lowered interest rates, there was a mass shift amongst the population for various reasons, they decided that housing was the right investment or the right thing. And so when, you know, 50 million people all collectively decided to buy homes, the supply of homes is reasonably constrained in the short run and so that led to this massive increase in house prices and in rents. In the last six months, so I think in the last three months, the housing market is cooled sharply. We're now seeing house prices beginning to fall at least in the last three months it's fallen consecutively. So together that's feeding into the CPI slowing down and that's all a good thing. And I would imagine going forward the housing market cooling is going to be a major driver behind the slowdown in the inflation rate and in rents. So that's positive. Why we are concerned or why cultures or societies are generally concerned about inflation rate is it has the potential to get explosive. Let me give you a simple example. If, if, if there's a logistics shock supply side shock that for whatever reason because it's more expensive to ship a company has to increase prices by 6% and the workers were expecting a 2% wage increase then the company has a huge profit right because prices have gone up. The wage increases of lag behind workers looking backwards might then say we'd like to get a 9% wage increase to catch up. And so when they do that, that could lead to the company having to continue to push our prices to pay to pay the workers and as prices go up the workers are going to look backwards see the high price increases and attempt to negotiate a higher wage increase. And so this kind of spiral shows no end. And eventually as, as prices go up, banks are going to be reluctant to lend because they're going to be paid back in cheaper dollars than they're lending, and the economy can begin to slow very sharply. So this is just a rough example of why inflation can can become a big problem. I'll pause there because I know I said a lot and it's might be as as obvious. Thanks Rodney you know it's great explanation. I know it can be very, very tricky and understand I mean, even for people who cover it, you know on a regular basis. Brian I'll let you chime in on that same question, but also, I mean, now that we we just had an election, and that changed the composition of Congress. And that affects the economy I mean if we'll have a Republican House make it less likely that the, that the Congress provides fiscal support. So if there is a problem recession, it's all in the Fed and there's no, you know, maybe backup from from the from the government to stabilize the economy. Go ahead, Brian. Absolutely. Certainly when we have a divided Congress were less likely to see decisions made that involve passing legislation that might support the economy. And I think it's likely that Republican House is going to become a little bit more conservative with spending. And so if we do start to see a downturn, I think you're less likely to see legislation that might help support an economy that could be in need of it. And so that is going to make the Fed's job more important, which is one of the reasons that it is nice to see at least a little bit of slowing and inflation. Right. It seems like inflation is still really high but maybe it's peaked, at least in some aspects we talk about inflation like it's one thing, but the reality is there's a lot of different components there's a lot of different types of things that are all priced a little bit differently. And so we're starting to see some prices fall. We've talked a lot about the housing market would definitely seen some cooling begin there with house prices and not just with the prices of houses but also all of the components that are related to housing. So for example, a lot of the goods that we purchase when we buy new houses. So appliances, for example, have seen prices fall and so there are a lot of aspects where we are starting to see inflation slow. Unfortunately, it doesn't look like it's slowing when we think about services. There are a lot of items that people are continuing to pay more for than they were six months ago. And, unfortunately, that service inflation is related to some of the wage increases that we were talking about earlier, and a lot of times that stickier, in part because of the dynamic that Rodney was describing, where we start to see individuals negotiating based on inflation. And so that is a concern and certainly a divided Congress is not something that's going to help the Fed out much. Thanks, Brian. Let me turn to some reader questions. We've got quite a few questions and already on, you know, inflation and the drivers of inflation is the current inflation, primarily a supply side issue or has it been driven by by is there anything on the demand side driving inflation right now? Either one of you want to take that? Sure. So I think it depends on when I think the initial inflationary shock came through the supply side with the pandemic and the lockdowns in China. And now I think the propagation is I alluded to because all of the logistics are being smoothed out now, not completely, but they're being cleaned up now. I think a lot of it is coming still on now on the demand side. So that's a rough way to answer it. I don't know if that helps, but if you want to jump in, please do Brian. I would echo a lot of that. I think early on, a lot of the inflation that we saw was this goods inflation that I would talk about. So the prices of items that we purchase and a lot of that was because of logistics challenges and shipping that we were all familiar with at this point. I think that there were a lot of boats sitting in the ocean waiting to come into port and there were just too much of all of these items trying to come through small bottlenecks and not raise the prices for goods that were just too scarce at the time. But since then a lot of those have resolved. And it does seem to be more related to demand at this point. I just to stop you there. I don't want to let the Fed off the hook here. I think there's a tricky question of quantitative easing and the effects on the housing market. So when the pandemic occurred, not only did they drop the short term interest rate right down to zero in a couple of days, I think by March 20th they had cut it to zero. The Fed chair also announced that he's going to begin to go and do quantitative easing again in the housing market, which meant that they're going to be buying up all of the securities from which the underlying assets are the mortgages that you and I might have, which sharply lower the interest rates on on home loans. So I think it fell from five to 3%, which is a big number. And I think that that led to a massive increase in house prices right that added a lot of fuel and the debate I think people should be having in Washington is whether there is another way to help the economy without fueling asset price booms. Is this the right tool we have? Can we calibrate these tools better to avoid the kinds of conversations that we're having now? Thanks Rodney. I'm sure those discussions will be happening. Hopefully it'll be, I'll get one of both of you to write articles about in the coming months. And that's a very important question to answer, how to do that thing better. But it does suggest, I mean, if it's moving to a demand focused reasons, suggests the Fed will have more success or can have more success. If it's a supply side, Fed can't really do much about those problems, but it can address the demand side and really cooling things down. So that's just some nuance on this as well, because it's not obvious. So the nuance is there's a geopolitical move in the last three or four years to bring production back from China. And so that's going to push up the inflation rate in a trendway, not a pandemic shock, but this is going to be a trend move, right? As chips, as Intel and the other companies bring their plans back into the US with higher cost. You saw yesterday with Apple saying it's going to move iPhone production from China to elsewhere. That's very costly to do. And so the question then becomes, even if the Fed is able to tamp down on pandemic inflation, will the 2% target be sustainable as a US economy move away from its dependence on China. And that's again, that's a question that folks will have to think about. I agree. I think we've been sitting in a place over the last few decades where inflation has been historically low for a very long period of time. And we've become accustomed to that. And I think that some may have had the impression that that was related to experts making really good monetary policy. And obviously that plays a role, right? But there were a lot of structural factors at play as well. And some of those are going to pose challenges as, as we reallocate our supply chains and think about building out new infrastructure that that's a difficult situation for our economy to be faced with and then it's all going to be happening as the the largest generation in the United States is retiring and that's going to create different capital dynamics that are going to also pose challenges at the same time. And so it's certainly possible that those factors hold inflation higher than anticipated as a result and that that will make the 2% target challenging. And while we ran below it for years, we've now been quite high, well above it, and we're not just thinking about, do we want to get back to 2%. We also need to be thinking about, do we want to be averaging 2% the way that we had talked about five years ago or what really is that target and so these are big questions that are monetary policy makers are going to have to be thinking about in the coming years. Thanks, Brian. Here's another viewer question that someone had everyone keeps saying we won't have a housing crisis or a session like 2008 or 2001, because the circumstances are different. But what and how will new circumstances or complexities contribute to a new kind of recession. And what might that look like, you know, examples are climate change Ukraine long COVID etc. Either of you want to take a crack at that. A lot of people have definitely said that the housing market this time is different than it was a decade and a half ago and I think there are some structural differences. Some of them are related to the quality of borrowers that we're seeing who are purchasing houses and refinancing some of the credit that was extended prior to the great financial crisis was a little bit lower quality. And probably heard the term subprime a lot which is just to indicate that some people might have been extended more credit than they were able to repay. And I don't think we've had that same dynamic happen now, while prices of houses have risen substantially over the pandemic. I think that most people are forecasting prices to fall slightly, but still remain above pre pandemic levels in a way that's quite different than a decade and a half ago. I think that the bigger concern that I have when we think about the next downturn is still financial crisis related but I'm more concerned about liquidity crisis. We had Rodney talk a little bit earlier about quantitative easing, and this is something that the Federal Reserve is still learning a lot about. And now we're quantitatively tightening the balance sheet which means that instead of supporting financial markets, the Federal Reserve is taking liquidity out of the markets. And I worry that that liquidity could end up sparking a financial crisis that could spiral into a deep economic downturn, which would be troubling and that's the soft global economic outlook. Well, I think that's a wonderful answer. And I agree with Brian that the quality of lending is fundamentally different because of all of the regulatory changes that took place after the crisis with the standardized way to lend. And the amount of leverage that the households have is fundamentally different as well. So I think these are the factors that would weigh on my mind to say that I don't think we're going to have a 2008 and nine the way it happened. And it's really the case that a crisis plays itself out in exactly the same way because we tend to learn. I think something to watch and worry about is the commercial real estate market. I think that that's pretty scary. And I think that's the right word here because it's getting hit with the pandemic. As people work from home, you were like, I'm guessing that Brian is at home. I'm at home, you know, we're not in the office. Most of the audience mightn't be in the office. There's a lot of office space available now. And the question is how do you repurpose that? What do you do with that extra space? The answer right now is we don't know. Rates are going up. So the present value or the value of that space is going down in addition because of the discount factors because the interest rate has gone up. Now that can spill over and then affect banks and that could lead to a crisis in a totally separate way. So while the residential market looks to be safe because a lot of the regulations were put in place to keep that safe, the commercial space is a problem. And as Brian pointed out on the liquidity front, the Treasury market in the United States and outside the United States, the bond market outside the US could be a problem as well. And so these are things that we need to worry about. And just to bring this all back to a question that you had asked with the House Republicans taking over the capacity for the government to sort of act in a way that gives to act quickly outside of the Federal Reserve is now a little bit more constrained. Thanks for having another viewer question ties into what you're saying about, you know, there's just a lot of unknowns in looking in looking into 2023 and whether there's the Fed or inflation or the pandemic. And we can have another wave from the pandemic, we don't really know. They, somebody in the audience brought up Ukraine, like as an example like Ukraine war, we don't know where to go, could escalate. We just saw recent days, some signs of escalation in terms of the Ukrainians firing and attacking inside Russia. They probably forecast make a forecast. And so many people have forecast I mean Goldman Sachs and all the banks. They forecast 2% growth 1% growth whatever for the entire year. Well, the future. How do you do that. When there are so many unknowns like Ukraine war the pandemic other things. You don't, you should not forecast. I strongly. You should never do that because the world is not stable, right and an airplane is stable you could forecast with precision when you what's the correct speed is for the aircraft to take off. We depend on on that so the natural world is stable the human world is fundamentally unstable. What we can do is tell stories about what might occur if certain events take place, but we have no fundamental skill to forecast what the likelihood of these events are. It's impossible. Right so when you see Goldman Sachs making a forecast as an educated consumer you should read that and take it for what it's worth. I'm not going to say what it's worth I'll let you be the judge, but I think that's a great point certainly forecasting amidst the amount of uncertainty that we see right now is very challenging and and I think to Rodney's point. A lot of people are trying to make their best assessments of what they expect could happen, and some of them will be right if there are enough out there. It's certainly challenging to identify which ones are the most accurate we're probably seeing the broadest range on forecast that we've seen over the last couple of years we've started to notice that a lot of people try to estimate you know how many jobs the economy might add next month and miss on the that forecast but we're starting to see those the estimates that forecasters put out are broader so we're seeing higher highs and lower lows which I think just indicates how challenging it is. A lot of these data points we've been talking about. We're based on survey responses, and we've seen response rates for a lot of those surveys fall, particularly last month it was unusually low for more looking at this labor market reading that we just saw on Friday and so I think that there definitely is more uncertainty. And it's not just geopolitical there's all kinds of different factors that are impacting that type of uncertainty. That said, I think there are some things that we can take into consideration, there are facts that we do know. For example, when we talk about the labor market that's been really tight, we know that the baby boomers are going to continue retiring. We know that because of that there's going to be people leaving the workforce over the coming years for probably about the next decade, because we know about how many people are going to be in the economy at 50 years old. We're not creating any more next year so there are some things that we are able to forecast and so I think that we just have to take the facts that we do know, and try to assess the uncertainty and it's those facts. I just want to pick up on that point that Brian pointed out that with the baby boomers going back to the 2% rate and the target with the baby boomers leaving the workforce and the migration into the United States slowing. That has slowed sharply since Trump and I think just prior to Trump as well it began to slow. There's a beginning to be a little bit of a skills gap one and just a labor gap as well as because we normally depended on migrants coming in to either fill the high skill jobs or fill the low skill jobs. And as that slows now, I think that's also a potentially interesting factor for policymakers to think about whether the 2% target is achievable. Right and what the rate of wage inflation is going to have to be given that the migration rates have slowed down. I think that kind of connects to the labor force participation rate, which you mentioned earlier, which has been really low, much lower than before the pandemic, the percentage of people looking for work or who have a job in the economy. Do you expect it to remain low, or do you predict that the perhaps go higher what are the main drivers kind of keeping it so low, besides maybe people retiring. And if the unemployment rate rises just because the participation rate rises as well what does that mean like does it, I mean is a good is a good thing I mean people are coming back into the workforce, you know, looking for jobs and things like that. Yeah, as you mentioned the labor force participation rate has remained lower than prior to the pandemic. And that is concerning, I think a lot of economists are trying to understand that a little bit better. I think that we have some data points that help us understand that so one of the things that I think we have been able to document is that a lot of it is driven by prime age men, leaving the workforce and not re entering the workforce. And that's exactly why they're making that decision I think is a more difficult one day answer I think there are a lot of factors, and some of them were able to pin down I think the pandemic sparked a lot of things, a lot of people relocated. There was a lot of household formation that happened which means that people might have gone and either gotten married or moved out of an apartment that they were sharing with a roommate. And some people are starting families and potentially as these things have happened, childcare needs have been challenging during this period and so I think there are a lot of factors related to those that may be holding down labor force participation. I think that there's a lot that we're still learning about why these people that are in their 30s that we generally expect to be employed have chosen not to seek employment, even though jobs are plentiful, even though wages wages are rising right now. There are a lot of people that don't seem to be interested in looking for jobs. And I think that those are important questions not just for economists to try to answer I think that psychologists and sociologists are also going to be the people that we need to help us to understand what's happening to our labor force right now. Thanks Brian. Well, given all this uncertainty I mean, and we don't know is there can be recession what's going to look like next year with the bill soft landing. What advice what advice could you offer to, you know, consumers out there, or business people who are worried about the outlook. How can they prepare one viewer asked, should they just put away a whole bunch of cash. What should they be saving and what should they be doing. And the other aspect of that is, I noticed that the personal savings rate is the lowest since 2005, and about the lowest on record is the 1960s, the few tenths of a point away from that are people ready for a recession. I mean our Americans in a good position at all. And they still have trillions in cash. You know that. How are people people were ready for recession what they should, what should they do to prepare. You're Brian. I'm happy to jump in. So, I think a general way to think about this is the world is often a lot riskier than you think. And it's always to sort of take that in into your planning and so the general advice in finance is you want to have a diversified portfolio so to the extent that you have surplus savings or savings. I think you want to try to maximize that as much as possible and I would recommend or not recommend it might be sensible to hold cash. And rates are very high now and going up so if you have extra cash buying treasury bonds could be a very profitable strategy, especially, especially if you intend to keep the money in bonds and not sell it. Then you could invest in short term treasuries and roll over the three month treasuries. And I think today, three month treasuries are yielding 4.2% or something, and that's risk free. So, I think that would be a sensible way to plan your portfolio as you look into the next six to nine months is to hold some extra cash, put some of those funds in short term treasuries and earn the interest. And if you have a longer time span stocks could get cheap in a couple of weeks. And so that it might also be a useful time to invest in some stocks as well. That's good advice. I definitely think that people learn a lot about their risk tolerance when markets are having difficult years like they have this year and I think for most people focusing on stock markets and whether they're up or down in a given day is not particularly beneficial. However, I do think that there are some portfolio considerations that people can make. A lot of times, people have bonds and stocks in their portfolio, and something that not everyone includes in their portfolio but I think has performed really well this year is commodities. And so I think that's an exposure that some people might consider as a small part of their portfolio certainly not the majority. I think having a little bit of exposure to things like oil prices, if, you know, the war heart leads to an increase in energy prices in the coming years may not be a bad thing for some people. But for most people, like Rodney said, I think bonds are probably one of the most sensible investments that you can make right now, particularly with inflation high that I have to Treasury bonds in mind. This is a Treasury and inflation protected security. These are securities that are particularly designed to help people earn returns when inflation is high and I think those are great investments for people that are looking for low risk. And if you're looking to make investments within tax advantage plans like IRAs. I think these tips Treasury inflation protected securities are a great way to earn risk free returns in excess of inflation. Another tool that I think is particularly useful right now is something called I series I bonds, and these are also good for consumers to use, particularly outside of tax advantaged accounts. They're designed to be longer term investments, but these are going to be available to people that may want to withdraw them at some point in the future and so I think these are both tools that can earn really high returns right now when inflation is really high, and it can help people protect their spending power, even amidst high inflation. So those tips. See more questions from the audience. One on. When you look at inflation being high one one audience member noted that in the 70s inflation was a lot higher. I mean it was double digits. How do you think about high inflation is, you know, six, seven, 8% the kind we're experiencing now. Is it really high, or is it, as the Fed avoided the kind of be the worst possible outcome of inflation just by out of control. Yeah, I think we've avoided that so I think, you know, you're right in the 1970s we had inflation going up to 18 to 20% in the VMA Republic and just before just after World War one inflation was a million and change where people would steal the baskets and not the money that contain the baskets. So we've avoided those bad things I think 6% isn't comfortably high because it affects the credibility of the Fed. And so there's also the secondary effect that if your target is 2% but inflation is 6% people no longer trust what you say so that's sort of the damage that we're thinking of. I don't think we're in the ballpark of a hyperinflation or extremely high inflation world. And just one last thing on this, if it's 6%, but it's predictably 6%, we could manage that right. The concern is if it's 6% one month, 9% the next month for 4% the next month and 12% the next month. That uncertainty is a big problem, but if it's a predictable number, it's doable. That is a really good point. So certainly 100% inflation or even 30% inflation are very different than what we're experiencing right now. And a lot of times when we think about whether inflation is higher or low, it's really just relative to our experience. So this is the highest inflation that a lot of people have ever experienced and it's higher than it's been in decades. So yes, inflation is very high relative to what we're used to, but it certainly could be higher. And it is nice that it doesn't seem like we're going to see double digit inflation next year it looks like inflation is close to its peak we're optimistic that it'll remain at these levels that it is and before eventually coming down. Certainly, it could be worse, and we are fortunate to have really good data and assess our inflation concerns very carefully and effectively in our economy and so I think for those reasons Rodney's points are very, very true that inflation is high, and it's concerning, but it could be a lot worse. Always true. It always could be worse is words I live by. Thank you very much. I think we'll we're nearly wrapping we're about to wrap up with time for a couple more questions so members of the audience want to get any of their questions answered throw them in the Q amp a right now. One that was just asked. Right here. The person was wondering if you have any comments on tax policy. They believe that there needs to be a lot of reform. I'm going to go back to the conversation the topic of today that with 2023 and the economy and, and, you know, ways to, you know, I guess ways fiscal policy can help support it is tax reform something that you would. We just had a big tax reform in 2017. Would you consider that something that that should be on the minds of legislators going to Washington in January. I think that the, the biggest thing that's on my mind with respect to tax policies you mentioned the 2017 tax cuts and I think, and over the next few years we're going to start to see some of those roll off unless there are tax policy changes made in Washington and so that's something that I think could lead to uncertainty among tax planning. I think that individuals may want to be aware that tax rates could be going back to levels that we saw five years ago. If there aren't changes that are made. So that means that you know when we're talking about withdrawing from tax advantage accounts the timing could be really important. We've also seen some corporate tax rates globally get discussed and minimum tax rates for example, are trying to alleviate uncertainty in that regard and I think that that's something that we definitely want to be thinking about and watching. Thanks Brian. One last question, and Ronnie you can respond to that question as well. If you'd like. One last, what are the chances that we have a deep recession, you know, perhaps worse than 2008 or I don't know what other, that's probably the worst of recent and recent understanding. What are the odds do you think it's going to, it's a decent possibility that things get out of control and things get really bad. I can't give you a number I can give you a narrative as to how it could happen so the liquidity in the Treasury market could dry up so just before in March 2021 the pandemic occurred. There was some chaos in the Treasury market and the audience should know that the Treasury market is critical to the functioning of the US economy. The interest rates at auction in the Treasury market is what we used to price all of the assets in the US economy. So if that interest rate of that market begins to malfunction that affects the entire world. And so it is possible that there's always a shock that can take place we don't quite know what the shock is. There could be a war in Ukraine getting out of hand you could have something happen with China and Taiwan, or something else could be some massive fraud that you discover or something we do ourselves like if the House Republicans. If they decide they're going to blow up the debt ceiling. Then that could take out the Treasury market and when you take out the Treasury market. Or at that point, you know, it to come back from that gets very difficult, because once you set the precedent, you no longer have a safe asset. And then how you deal with that becomes very, very long and drawn out and problematic, and that could spark a downturn that could go on for a very long time. And even get to the debt ceiling. I mean that's an issue that'll be coming up in the coming months, March or April or May is when they expect the debt ceiling to be hit and that'll be a big fight. Anyway, thank you so much. I think, would you like to leave one last more optimistic closing thought, either of you, Ronnie or Brian. I think they're good people in Washington, I think all the risks we've talked about they've talked about they're aware of these risks and they're doing their best. Thanks for any Brian. I agree I think that, fortunately, the economy has continued to grow and my base case is that 2023 looks more like 2022 than 2020, for example. That's something that we can all be excited about. Thanks to you both and I'll hand it off to Beth to close it off. Yeah, thank you both. I mean, I went through depression during the last hour to to optimism to kind of leveling out, but it was incredibly useful and incredibly informative and in a way that a non economists like me can I'm super grateful to all three of you. I'm particularly grateful for our donors who are on this call we made this possible and make the nonprofit conversation work every single day we're incredibly grateful to you and allowing these kind of conversations to take place for your benefit. So thank you all it was wonderful. And we'll see you all soon and we'll share the recording with people on this call. All right, bye folks. Bye bye.