 Welcome everyone my name is Rebecca Blumenstein and I'm a deputy managing editor at the New York Times and I'm very pleased to introduce today's panel to delve deeply into the question what the heck is going on with the U.S. economy. Inflation is soaring at its fastest pace in 40 years. Markets haven't been as volatile since the financial crisis with the S. and P. 500 breaking through to bear market levels last Friday before sharply rebounding today. The Fed has started to raise interest rates to combat inflation with the highest increase of more than 20 years as it tries to engineer a soft landing. Unemployment remains at historic lows. Employers can't find enough workers coming out of the pandemic and supply chain problems threatened to get worse with the lockdowns in China. Here to make sense of it all are four people with a unique and important perspective. Senator Pat Toomey who has represented Pennsylvania Senate since 2011. Jason Furman a professor of economic policy at the Harvard Kennedy School of Government and former chair of President Obama's economic advisors. Adina Friedman president and CEO of NASDAQ and Dan Shulman who is president and CEO of PayPal. We're going to have a discussion and then open it up for questions old fashioned style with microphones for you since we are gratefully here in person. But Adina I'd like to start off with you. The markets are back a bit today. But but but tech stocks are down to really their their lowest level since 2001 when the tech bubble burst. And NASDAQ last I looked was down more than 30 percent. What's going on with the markets and tech in particular. Well you just described what's going on with the markets. So all of the ingredients that you started discussing at the very beginning are really making it very difficult for investors. To predict the future. And when you think about markets markets especially stock markets they're really all about the future value of companies and how do you look at the the opportunity for future earnings. It is very difficult right now to take all of those externalities and all those those intermixing signals and try to determine how do you put a discounted cash flow value in any company right now in that context. And I think that that is a that is when that happens investors tend to take a risk off approach of selling decisions much easier than a buying decision. And the result is the markets react. So I think that in the end though there are you know I think a lot of differences between the current situation and what happened back in the late 90s and early 2000s. So you know the certainly the the multiples of companies that were listed in the US back then were significantly higher than they were even at the peak now which was at the end of last year. And you're seeing a significant trough developing today. So I think at the end of the day any of those unknowns that you just mentioned inflation the geopolitical unrest the Fed actions as well as just employment you know having more room in the economy to allow us to continue to grow it in terms of labor. I think all of this any of one of those that starts to resolve itself or show some positive signals will give positive signals to the markets to give more certainty to investors. And I'm hopeful that we can manage our way through this situation and still continue to see growth in the economy. So more optimistic than pessimistic. I tend to be an optimist though. Yes. So Dan what is it like from your perspective PayPal has down like a lot of tech companies quite significantly in the last six months. Does this feel to you. I mean there's been so many predictions of the tech bubble bursting. I mean almost for 20 years. Does it feel like we're in something profoundly different now as a CEO. I think a dean I put it reasonably well. I think you've got a number of externalities that have increased the magnitude of uncertainty. And so all of us you know are taking a conservative view. We're also on the tech side growing over tremendous growth during the pandemic. I mean people were locked in their homes. They had nowhere to go. They had to do everything online. Whether it be exercise classes or shopping. And so we're growing over that growth at the same time. So I think there's a big difference. Many of the companies today including PayPal have very strong free cash flow. We'll do five billion dollars of free cash flow this year. Very strong balance sheets. I think it's just a matter of these externalities playing out kind of figuring out as we hopefully are coming out of the pandemic. Not into another one but out of the pandemic into a more normalized world. And then you go straight into inflation at 40 years 40 year highs. You know supply chain shocks to the system. I think we're trying to figure out what normalized growth looks like. And I think we're just all taking a conservative view of that right now. So so so the underlying demand is still strong. We're not seeing a burst in your I mean look you say the tech industry. I would say I look out in the room here. What industry is not a tech industry right now. I mean we are all moving more and more towards digital means digital technologies. Every company is a tech company today. So I think you've got what you classically think of Silicon Valley companies. But you know most companies out here would argue they're tech companies. Senator how is this playing out on the ground in your district in Pennsylvania. It feels like it's almost a whipsaw. Obviously a huge concern about inflation but it's never been easier to get a job. Yeah I think the problem on the ground for you know working family in Pennsylvania is that wages are rising. They can they can have a job. But inflation is rising faster. And this is very frequently the problem inflation doesn't doesn't have any sort of built in constraints but wages tend to move in cycles. And it's only periodic that you get a pay raise and so on. So yes by some measures the economy is quite strong. People who own their own homes have more equity in their own than they ever have. Balance sheets are generally pretty good. Job opportunities are out there. But I think the highest inflation in 40 years puts more than a damper on things. It is it is very disturbing for most people. And Jason you're the economist on the stage. What what concerns you the most of that. List that I went through is it inflation. Is it is it the Fed and just the historic move. What do you think we should be most concerned about. Yeah look I think it's a glass partly full. The incredibly strong job gains we've seen the incredibly strong consumer spending consumers tell pollsters they're really pessimistic. They're depressed. Everything's awful. And then they go out and spend a lot of money. We don't know how long that'll last but it keeps lasting month after month. And just overall pace of the economic recovery. That's all on the positive side. Inflation is at a 40 year high is on the negative side. Real wage growth inflation adjusted wages are falling at the fastest pace they've fallen in 40 years. So this is a real real problem for people. For most people they had a job last year. They have a job this year. What matters to them is that they're getting a once in a generation pay cut real pay cut going forward. How does the Fed navigate this. There is a happy story where this inflation was all transitory and team transitory was right. They just sort of were 12 months off. I think that's possible. I think it's 25 percent chance. I think it's worth hoping for that. But there's a lot of inertia in this inflation expectations are higher wages lead to prices prices lead to wages. And it's you know even if we had a recession that might take half a point or a point off of our inflation might not get it to where the Fed wants it to be. And so that's what worries me. I think there's also one other thing playing out right now. Consumer balance sheets went up tremendously with all the government stimulus. You have the average savings account go up from about four hundred dollars to about two thousand dollars. You know as I look out as others think about this if inflation stays where it is those savings and the spend continues. Those savings go back down by the end of this year the beginning of next year to that four or five hundred dollar level. And I think at that point you're going to really see. We are already seeing reduction in spend lower income levels for sure. That's moving up to middle income right now. So I think we've gotten numerous interweaving things that are happening right now that just it's not just consumers spend a lot of that was government stimulus. And that's not here anymore. And I think it's important to make the point. This might be a moment for a little government humility. Think about what happened you know in April I guess it was of twenty twenty with the lockdown economy looks like it's crashing. We're worried about markets freezing up. And there was a massive response. Right. And it was bipartisan. It was almost unanimous in Congress. I was part of it. And we stood up these facilities by the Fed. But we ended up having about a two trillion dollar hole and we filled it with six trillion dollars of spending. And at the same time we had a massive expansion of the monetary money supply. And we had the Fed buying one point four trillion dollars worth of bonds mortgages and treasuries at an annual rate. And they kept doing it a year and a half easily after we were clearly out of the woods. We have 30 percent GDP growth in the third quarter of twenty twenty. And there we are still buying these bonds. My point is I think we did way too much. And now one of the ways we pay the price for that is this inflation that we're living with. Adina and Jason I'd love to get you in on this. Jason you were in the Obama administration during the financial crisis and it was said for so many years that that the stimulus wasn't big enough. And I think that that's a lesson that President Biden and his advisors took. Did they did they go too far on the other side. Yeah I think we did too little. I think we had political constraints and did the most we possibly could given the politics we had at the time. Others may debate you know whose fault it was and the like. But it was too little and the recovery was too slow and too painful. Inflation was incredibly low for a long period of time. Interest rates was incredibly low for a period of time. A couple of years ago Ben Bernanke Tim Geithner and Hank Paulson convened a conference to learn the lessons of the last guy for us and make sure you didn't repeat them. And a lot of these conferences at places like Brookings are sort of a waste of time. This one worked really well. All the lessons were learned. We didn't make any of the same mistakes. We made brand new mistakes. And I think part of it was something the senator said in April. It looked like a second Great Depression by even July. The unemployment rate was I think down to something like eight or nine percent which was terrible. But it wasn't the 15 or 20 that the CBO and others were forecasting. And so it was less bad than people realize. And it took a while to adjust to that. And by 2021 the main problem were people not taking jobs. They're not being enough jobs. And that's not a problem the Fed has can solve. But you know from your perspective did the government over overreach and and you have an interesting. I want to get into the Fed. But did the Fed act too slowly here. Well I think first of all I think that the Fed and the government in general had to look at a cliff that they were facing at the beginning of COVID. And they also had to learn their lessons from the last crisis to say let's act fast. Let's act decisively unless act big. And they did all of those things which I think at the time we also we all said that was the right thing to do. And I think in hindsight you can say OK that was the right move to make at the time. The question is when do you take your foot off the gas. And I think that's the challenge is that on the back of what was happening in the economy when you really looked at the recovery. The recovery was quite uneven. So there were sectors in the economy that were booming on the back of the monetary stimulus and the fiscal stimulus. Those are two things that were just pouring money into certain parts of the economy. But there were sort of parts of the economy especially small businesses on the ground businesses that were not doing well at all and that were still really suffering. And I think the Fed was looking at both ends of the spectrum and trying to figure out how they kind of bring that other end of the spectrum along before they changed policy. And that was a that was a hard that's a hard calculus when on top of that you had a supply chain shocks that were much more lasting than I think anyone predicted particularly since we're still dealing with COVID lockdowns in the world today. Right. And at the same time you then had the geopolitical unrest which really threw the energy markets into a totally different space that the Fed could have predicted either. So if you kind of look at all the facts that they had to deal with and contend with it's always 2020. But you could argue that they were looking at things through a different lens and they see it today. Today they're seem quite committed to tamping down inflation. And they're you know they seem to be saying they're on a road to do that. And we should you know that seems like a road that is they are marching down that road pretty clearly. And I think that you know my hope is that they're able to do it successfully without just choking off the growth of the country. That's that's the big risk now. Dan you're a CEO running a company and and trying to navigate all of this. You're also navigating rising interest in Bitcoin and and and all sorts of different ways of digital payment that the blockchain all these all these things. Do you. Did the the Fed make it harder for you. In a sense to to run your company and to to navigate all of this by waiting as long as there's a lot of disconnected questions. But let me try and answer the best I can. First of all I think I think inflation is going to be with us for some time right now. I am even though people are spending I think it's because their bank accounts are inflated and that will come down. I do think consumer confidence is at low points in Europe. It's at a 50 year low right now. Based on my conversations with leading retailers around the world. You know none of us think that things are going to come back by the end of this year. I mean we are all planning for inflation to remain high for supply chain stocks. It's going to take some time to work out. China basically went into shutdown. A lot of companies right now are reorienting their supply chains to different parts of the world. That's going to cause slow down as well until that's complete. And so I think we just need to know that if there's going to be at least at the low end in the medium part of the market I think a slowdown in spending. I think one of the interesting second order effects that happened out of the war in Ukraine is that we weaponized SWIFT and we created what were very neutral financial rails and we turned that into somewhat of a weapon. And therefore you have a lot of parts of the world right now that have been somewhat silent on what's happening in the Ukraine. Looking at like is the dollar really the currency that they can count on. Is SWIFT the rails that they can count on. Are they looking at some form of digital currencies going forward and they all are at this point. Digital currencies are fundamentally different than crypto currencies. Cryptocurrencies are really an asset class right now and they're a volatile asset class. And when things are a volatile asset class they're a terrible currency. And you know. And so I think we should separate out you know what is the price of you know Bitcoin what's happening with Luna and Tara and algorithmic stable coins and that kind of thing versus what's going on with digital currencies right now. And is that in the strategic interest of various countries to promote that and why. And you're talking about central bank digital currency. I'm talking about central bank issued digital currencies and obviously China with a digital R&B is thinking hard and heavy about that. But 80 percent of the central banks around the world are thinking about that. So I think one of the things and I'd love to get your perspective on this Dan but the potential of stable coins. Yeah. Obviously the stable coin takes out the volatility and we so full disclosure I've got legislation that would create a regulatory framework that I think makes sense for stable coins that are in fact asset backed. Not the algorithmic stable coins. The main reason by the way is that the algorithmic stable coins don't have the same kind of mechanical connection to the traditional financial system. And so the failure might be tragic for individuals but it's not clear that it leads to a systemic failure. Whereas the more if I can say conventional stable coins they could right. They would certainly connect. I think we ought to have a framework that allows privately issued stable coins to thrive in a sort of rational framework. And if that happens I'm not sure how much we need a central bank digital dollar because I could see stable coins playing that role. But I wonder what. But now can I just ask you to do you see them then you're acting. A lot of people like equate them to a money market fund. So do you kind of see them in that kind of same same genre. Or do you see them as I see you saying they're going to play a different role but having the regulation kind of govern it that way. So I see the analogy and I think that is a very analogous instrument. If you look at the president's working group they suggested that all stable coins must be issued by insured depository institutions. But I think it's way too narrow. I don't think that makes sense. And you know we don't have the FDIC ensuring money market accounts. I don't think we have the FDIC. That's how I was asking whether you said money market. I don't. So so I'm hoping we don't go down there. I think I mean for a lot of countries around the world I think central bank digital currencies might make sense. I don't think the United States needs to do them. I think you can do one in US dollars just as easily as the Fed could. Stable coins to me seem like a solution in search of a problem just like everything else in this space. I haven't studied your legislation. I guess I'd worry two things. Not having seen it at all but that's not going to stop me. One I worry that money market funds are already under regulated and we're already in a position where we could have we could have a run in the future as long as you're pricing it at a dollar and everyone thinks it's a dollar. Two once you have regulation I know you would never ever want this but you're putting a government imprimatur on something and is the government going to have to rescue it if all this money goes into it. Are people going to start thinking of it like money with an implicit government guarantee. I'd almost rather people understand it's sort of the Wild West. You know caveat and tour. Well I think that the debate on stable coins versus central bank digital currencies is who are the issuers right. So if it's a central bank digital currency in a way they're stepping in front of the private banking system to determine to establish account direct accounts of consumers. So you have to set in a minute and some sort of intermediary there to act as that. And so there's a little bit of a scope creep concern on central bank digital currencies where as a stable coin could be issued by a private institution backed by government fiat in a way that allows an intermediation to happen more naturally. But at the same time these are all theoretical because neither of them exist. I mean they exist but they're not using this way yet. For you have to think about is when it becomes general commerce and creating twenty four seven payment capabilities globally. That that's actually a great common good if we can do it. And these are technologies that could enable that. But you have it comes with a lot of different consequence. I want to get back to the CBDC. Sorry. No one does it has interest. Then you've just nationalized the retail banking system. And if it doesn't have interest you've just gotten people to put their money in something that's a lot worse deal than you know what else they could be putting. I don't know why you're using it. So I think it's sort of a means of exchange means of exchange. Right. But I don't know. Dan let's go to you and then I want to go to the broader impact of the Ukraine. I think people can play four different things when they talk about crypto or digital currencies. There's kind of crypto currencies that are an asset class that people trade in. Then there is kind of programmable money which is something very interesting where you can add utility payments by creating software around that payment that allows you to do something you couldn't have done in just a traditional payment sphere. I think that's very interesting. There's stable coins. And I think stable coins actually have some very interesting use cases to them. They have to be backed one by one by fiat currency. It can't be. And you have to disclose it. And I think the legislation that you're looking at I think is very helpful in doing that. But to do this point on a stable coin if you have a stable coin it's 24 by seven. You can fundamentally reorient B to B. For instance 24 by seven no intermediaries could take costs out of the system. I think there are real use cases for a stable coin that are tremendously interesting but it's got to have trust and it's got to be backed completely. And then you have central bank issue digital currencies which you know many of us have you know different things like how could that work. What is it necessary. Why. But there you have the you have the full faith and backing of the government behind that central bank issue. It's just it's that technological advancement of money. Exactly. The programmable feature I think is huge. Yeah. I think we can't probably can't even imagine the applications that will come about from the ability to build into into money itself. An automatic transaction that occurs based on some extraneous event that's verifiable. Yeah. That's I think going to be a big deal. I do too. Senator many of your colleagues a number of your colleagues are here today. Obviously talking about the bipartisan consensus behind the 40 billion dollar package that was approved late last week. What are what do you think. I mean it's clear that this this this war is not going to end anytime soon. What. How do you think it's going to play out. And a question for all of you in the U. S. economy that the the you know the things that there will be negatives and the things that are that are positives. Well I do think it's important to note that there's been overwhelming bipartisan support for this. Right. I mean there is a there's a wing of the Republican Party that has been very skeptical about multinational commitments. NATO the value of our involvement turns out. I think that was a test on the Senate floor. Whatever a couple of weeks ago last week and 80 percent of Republicans who think we've spent way too much money and our apoplectic about the size of our debt. Nevertheless voted for 40 billion dollars more because there is still evidently a consensus on the importance of standing with allies under circumstances like this. I think one of the one of the big effects that I'm worried about unfolding is in in food prices. Right. We know obviously Ukraine is a huge exporter of grain. So is Russia for that matter. If that Ukrainian grain can't get out from their southern ports and if it can't get through the Black Sea then I think we've got serious problems. I'm told anecdotally. And I don't know what the data suggests yet. But that America's crop may not be a great crop just because of some some weather events. So some of our agricultural commodities may be just less prolific than we'd like them to be. So those are a couple of the wars that I have. And and and do you Adina do you think that this is going to in terms of retail investors and it was such a big you know it was such a big part of the pandemic people getting into the market in a bigger way than they've been. Is that going to are some of these dynamics going to change this psychology of the market in a sense. I mean I would just start saying just the Ukraine conflict and in the war there. I think is creating a lot of just sense of uncertainty. And I think we're starting to understand some of the economic impacts of that. So we have some of the knowns be known. But the fact is conflict is always very unpredictable. And so the question really is how far does it go. How much further does it go. And obviously the tragedy of the human loss definitely weighs on everyone's minds. So I think all of that can have a significant impact on investor psyche in general. But it's not not just for the retail. Right. So this is institutional investors and others who have to look at the calculus. They look at the direct first order impact of a business's business and their exposure to that region as number one. The secondary impacts on energy prices food prices and other things that could become major externalities for them in some or two. And then the third is just the unpredictable out you know next moves and where could this go. And in terms of lead over into other parts of the economy or other parts of the world. So I think that's where you end up getting as I said before kind of a risk off approach that comes with this level of uncertainty that's happening. I think oh sorry. You know for Ukraine the loss can even be measured in terms of GDP. It's just so enormous outside of Ukraine Russia far and away vastly the biggest loser economically Europe faces a much greater risk than the United States because the increase in the price of natural gas and the reliance on natural gas has been enormous. And I don't think Europe has made the set of adjustments it needs to for example keeping nuclear reactors going in Germany to respond to that. The United States. I think it is much less scary for me for the economy than it was two months ago. Now if Russia tracks Poland if they use tactical nuclear weapons is a lot of things out there but a hundred and five dollar oil the U.S. economy which produces you know as much as it consumes things like that. You know we can really handle so I don't think it's existential for us at all. There's actually don't take this the wrong way but there's a huge economic opportunity. So my state of Pennsylvania if we were an independent country we'd be the fourth or the fifth biggest producer of natural gas in the world. We're not drilling much and there's a whole lot more under the ground than the reason we don't drill it because we refuse to build the infrastructure to bring it to markets. So Pennsylvania natural gas traded in Pennsylvania is almost always at a significant discount to gas throughout the rest of the country because all the pipelines are full. It's not hard to imagine if we expanded that capacity we could dramatically increase LNG exports to Europe. You know Europe's not going to be completely independent of natural gas. Why not burn American gas instead of Russian gas. It's it's a huge opportunity. Dan I want to ask you all predictions about the likelihood of a recession. But before I do supply chain rethinking we talked briefly about China and more lockdowns there. What are you hearing in the tech world is this really a moment where there's going to be reshoring that that will be net. All this uncertainty might might yield a net benefit to the U.S. to Mexico to North America. Well remember the private sector has played a role obviously in the sanctions that have happened. You know we in general I think everybody is pulled out of Russia. We have enabled services into the Ukraine. For instance over the PayPal platform now we've been able to direct humanitarian aid or direct to individuals in Ukraine over $700 million by over 8 million people around the world that have donated to that. And I think you know businesses are now engaged in that in that and that's in the world stage right now. I think as we think about I think Adina was saying this the possible spillover effects that becomes worrisome. Russia is one thing. China is a very different thing on that. And I think trying to figure out how we maintain that sense of globalization that this isn't against but somehow we are we can be competing but work together at the same time. I think that's very important at the same time though. There's no question companies are trying to figure out how to be more resilient in their supply chain anticipating what could happen and then diversifying. So it's incremental cost to go and do that that can add pricing pressure. It will take time for that to happen. And in the meantime you know will affect supply chains but I think all businesses are imagining kind of scenarios like what could go wrong as opposed to like what could go right in preparing for that. Before I open it up for questions I'd like to ask our panelists. President Biden said today that a recession is not inevitable. And and to all of you what what is the probability would you say of a recession and Jason I want to start with you first. Certainly somewhere between one and ninety nine. Inevitable mean my baseline for the next year is always 15 percent. That's sort of roughly is how the economy functions. You roll a die. You get one you get a recession two through six. You don't. I'm a little bit higher than 15 right now because of all this existential uncertainty and problem we've been talking about but not much higher than it. We heard about all the extra money people had people got two point three trillion dollars of extra money above and beyond what they spent. They spent off about a hundred billion of it in the first four months of this year. That money could last a while. There's about one point five million workers who are out of the labor force since covid. I think a lot of them will come back. A lot of them will need to come back because of some of the economic problems we're talking about. There's more room for businesses to add to their inventories. So I think on the one year horizon there's a number of positive things. I get more worried about sort of one to two years from now. I think the Fed goes above three percent maybe to four maybe to five and what that means but that's more like a year and a half two and a half years from now where I get more worried. Senator. Yeah I might be a little bit more worried than Jason in the short term I'm a little more optimistic longer term. I think the market is going to help a lot. The backup in yields the strength of the dollar. We're already actually seeing some demand destruction. And Dan referred to the sales growth but that's nominal growth. It's not real terms. And we're starting to see a little bit of margin compression at least among the big retailers. We'll see what other earnings numbers start to look like. So I wouldn't be surprised if we see a little bit more of a slowdown sometime this year. But I'm I'm quite bullish about the medium term. Adina the markets. Well I mean first of all I think that the markets are definitely saying it's a non zero risk of having a recession. I also would say though that some of that slowdown that where you just refer to is actually what the Fed is trying to achieve. Right. So you know by taking a very hopefully consistent approach to increasing rates for some period of time to kind of normalize back to something that we actually even didn't achieve pre pandemic by the way. Right. To try to get rates up back up to a more normalized level. I think that that will it is meant to slow down the economy. Now the question is just does it get to a tipping point. And I think all of the things you just mentioned are kind of like these really strong functions that will make it so that there's just a lot of money. There's a ton of money in the system. There's a ton of investable money in the markets. There's a lot of money that the government has created to be put into the system that still hasn't yet been spent. And so I have to say I'd like to think that those positive forces even if you say we ever did it. Those positive forces will countervail what the Fed is trying to do to slow down inflation. I think the big issue is consumer confidence. Right. So if consumer confidence really continues to go south the markets continue to show a lot of wobbliness and a lack of foundation to give savers an understanding of where their portfolio sits. And that confidence continues to drop. That's that to me can become self-fulfilling into recession. So that's where I see the nonzero risk but I'm not willing to put a percentage on it. If we had one point seven growth this year. There'd be people in the Fed doing backflips and celebrating right. It's just they're they're trying to find a way to get to that that that stable stable point that then we can lift off of from there. And the question is does it just go too far. Dan optimistic pessimistic. You don't have to in general. I'm an optimist who worries a lot. I think I stole that from Madeleine Albright. But I think it accurately describes me. I think in Europe the chances of recession are much higher than than here in the in the U. S. and I wouldn't I wouldn't put a number on either because the truth of the matter is we don't know. We don't know. I think it depends on how long does the war go on. Confidence supply chain. You know can the Fed navigate this kind of softer landing. It's it's unclear. And what I said in the beginning I'll reiterate now. I think the magnitude of uncertainty is greater than we've seen in a long time. And so for any of us to accurately predict I think it would be very difficult to do. Well said and I'm struck I must say by the by the consensus on this panel bipartisan as well about what got us into the situation and what may get us out. I'd love to open it up for those old fashioned in person questions if anybody has one. I have plenty but anyone. I see a hand here. Laura Esposito Murray Committee for Economic Development. Senator and Jason I really like to ask you there's been a lot of emphasis on the monetary side on the fiscal side with the increase in interest rates. We're going to see our debt payment go up. How do you think this is going to affect where we go in terms of deficits and debt. Will we be spending more even though we can't afford it. So I'll go first. You don't mind. So you know let's be honest about half the Senate wants to do yet another big spending bill something on the order of a trillion dollars if they can get that done. I think that's a bad idea. But that's very much still alive and well. I've been frustrated by Congress and administrations unwillingness to deal with the fundamental driver of our long term structural imbalance which are entitlement programs growing faster than our economy year in and year out decade in and decade out. And I started to get to the view that it's going to take some kind of exogenous shock to get people to really focus on this. When when debt hits 100 percent of GDP which is almost that now. If we have a normalization of interest rates that sort of if normal means something like what most of my adult life it's looked like the cost of serving servicing that is huge. So ultimately that has to put pressure on spending. I'm hoping it puts pressure on us to make some structural changes to the programs that drive that. I'm also an optimist who worries a lot. The debt is about ninth on my worry list. It's not absent from it. But the market expects the 10 year to be I think three and a half percent by a decade from now. It's below three percent right now with two percent inflation. The debt service on that even at 100 percent debt to GDP to me isn't that scary. At some point we need to stabilize our debt. I think we could stabilize it at above 100 percent of GDP and that would be fine. That will take additional effort to do in particular Social Security goes in solvent a decade from now and bringing solvency to that system. I think it's both important in its own right and would get you about two thirds of the way to where you need to go to stabilize the debt in a way that I'd be comfortable with. Love people to do that tomorrow. If they do that four years from now I'm going to be losing sleep over worries one through eight not over that one. Question. Hi. I'd be interested in getting your perspectives on how much we should trust the markets when they're making predictions about the future. You talked about the interest rates. So I was just checking that the the really old interest rates still negative up to five years and less than one percent going out along distance. The five year forward inflation expectations are by two point two or two point three percent. Are those numbers that we should be worried about. And if not how much should we discount what the collective markets are saying compared to what others are saying. I certainly have a view but if somebody go for it go ahead. You know the case for being sanguine on inflation is that the least bad predictor of inflation in the past was long term inflation expectations and long term inflation expectations whether measured by markets or by economic forecastors or by consumers are all in a perfectly fine place. As I said those were the least bad predictors in the past. They were never that good a predictor. I worry we're in a slightly different paradigm now. Also worry that some of those market prices especially in thin markets like tips are distorted by the huge holdings that the Fed has. And I think the market is sort of overly sanguine about they're not being four percent Fed funds rate a year and a half from now. So I take some comfort from it but it's not enough to keep inflation from being probably number one on my worry list. I just worry about how reliable the price signal is given the size of the Fed balance sheet when you think about the magnitude. What are the eight trillion dollars nine trillion dollars. It's pretty staggering. And so I worry about whether we're getting the price signals we should be getting. You think the Fed waited too long. In my mind yes the Fed. So I hope the Fed reconsider the whole paradigm they adopted whenever it was a couple of years ago when they when they said you know inflation expectations are so important when we run inflation below two percent for an extended period we've got to run above so that the world is convinced we'll stay at about two percent. You overlay that with the idea that if it does kick up its transitory and it's like a guaranteed recipe for being behind the curve if inflation in fact does accelerate. And that's exactly what happened in my view. They they waited way too long. I mean why were we still buying mortgage backed securities in March of this year when they finally ended. It should have been over a year before that. Other questions is one in the back there one and maybe we'll get to two. Hi. Jack Denton from Barron's. I have a question for the senator and Dan Schulman as well. So you you you reach some consensus on payment stable coins like Tether or U. S. D. C. But I'm curious why you might not think that algorithmic stable coins shouldn't be regulated the same way. After all it was Tara an algorithmic stable coin that wiped out forty five billion dollars in two tokens in a couple days. You know fueled losses in the wider crypto market ten times that and by some analysts measures that that's selling leaked into equity markets. You know algorithmic stable coins are supposed to always be redeemable for one dollar just like Tether and U. S. D. C. should they not be regulated the same way. Go ahead. So I'll go first. So first of all you know you can have a truly decentralized algorithmic stable coin and who would you regulate. What would you require. You could say disclosure. You've got an open source code on the protocol. What more disclosure is there than that. And then the third point I would make is I I don't believe you necessarily have to protect people from themselves. It strikes me as a highly speculative device. The mechanism to ensure the value is very dubious. But people wanted to speculate on that. They were being promised huge returns. Maybe you've got an argument for fraud. Maybe people are misrepresenting the nature of this animal. But you know people lose money on commodities and on speculation all the time. I don't think it's the job of the government to protect them from themselves. I think when you have asset backed stable coins now you have a very realistic mechanism to retain the value. And my regulation is mostly about disclosure. Like make sure this is fully disclosed. Everyone in the world knows what they're buying if they buy a stable coin that's back and you'd have auditing requirements. You'd have to be very clearly defined redemption policies. In my view I'd like to see a new charter and sort of a narrow bank charter offered by the OCC for for issuers that want to do just that. But but the other and my last point is that the the stable coin that is backed by securities. Clearly there is a potential for a mechanism to to affect the broader financial markets where I just don't see that in the algorithmic coins. Dan quickly you want to jump in. I think Senator did a thorough job on on that. One last very quick question here and then we're going to wrap up. Great. Thank you. My name is Atoka. I'm a global shaper from Japan. Just out of curiosity. What are your personal predictions of interest rates increase in June's FOMC. So whether it's 50 basis points 75 basis points or do you think it would decrease to 25. That's 50 with certainty. They've said that the open question is whether they deviate from that after June. Probably not. But maybe I would agree with Jason. Sorry. No. I mean that's what they've been very clear and publicly communicating that strategy. Yeah. Exactly. I'd like you all to join me in thanking our panelists for.