-- janet yellen did that during her time at the fed, and then the fed reversed course and lowered them back, all the four covid, with no substantial damage to the economy -- all before covid with no substantial damage to the economy. not getting behind the curve. another way to say it is, when you are steering a very big ship that turns only sluggishly, when you see an obstacle, you have to start turning long before you get to that obstacle. that is what monetary policy is, it's a very long killer, because of the lags on the economy. you have to start making adjustments promptly. i think the fed needs to recognize that. i am guardedly optimistic looking at the trends in their rhetoric that they may get on

the program and be responsive. the data point do keep coming in in ways that are concerning. i think now, with all of this overhang of political certainty passed us, -- past us, if congress moves quickly, i hope they will, to confirm the powell-brainard team, i think it will put us in a position to carry on as best as possible monetary policies. david: to what extent with the fed be assisted by what is happening on the fiscal side? a lot of the way that we have gotten into this, you told me at the beginning, the proposals for president biden, that the stimulus was too big.

it is coming off now. will that help to correct the problem, even without fed intervention? larry: it will help, but i think, david, that we still have a lot of bank stimulus from the support that was provided to the government. provided by the government to households last year. there is still a big overhang of savings. as that gets spent, people respond to the fact that they have run down their credit and are now a position to run a backup, i think you'll see strong stimulus generated spending for some time to come. i would not exaggerate that. that is why we need to be careful with any new fiscal legislation, to pay for it, hopefully in a relatively

contemporaneous way. that is one of the reasons i am not enthusiastic about the state and local tax provisions obtained in the tax bill. i don't see why people like me need a net tax cut. very much the opposite. it seems appropriate for broad reasons in the country. but i also think that the retroactive state and local deduction is something that will insert a lot of money into the economy at a moment when there is no particular reason to do that. david: you are a macro economist. when you and i talk about the fed, it is mainly about one half of the response of the fed, and there is the other half, the regulatory side. we did not hear the nominee for the other vice chair position in charge of regulation of the banks, which i know that you take seriously.

elizabeth warren has been pushing this hard, is disturbed by this nomination. what do you think about not nominating that person now, what is going on? larry: i suspect the administration is taking its time to pull its full slate together, the processes of vetting people these days are extremely elaborate. i have confidence that president biden, janet yellen, brian deese, cathy russell, who heads white house personnel, will make a good choice. what i hope for is somebody who is deeply committed to rigorous financial regulation in the way that i think is necessary, the way that derulo was at his time. we should not be appointing

someone who believes banks should be replaced with a public utility, or who believes banks should be removed entirely from the business of risk-taking, as some of the statements from the administration's comptroller nominee has suggested. i think there is room forfeited -- for substantial change from policies pursued by the outgoing chair randy quarles. frankly, i think jay powell could use pressure from the program get a tour aside from within the board of governors, but it has to be balanced. sometimes senator warren can overstep in her enthusiasm for attacking financial

institution's excess. if i could just say one more thing. in a way, the most significant of the statements that your correspondent referred to was the statement that senator sherrod brown had endorsed this pick. senator brown from ohio is an extremely strong supporter of labor interests, very strong progressive in favor of working people. he has been very concerned about financial is asian. -- financialization. but he has come to the right conclusion that these nominees should be supported, complemented by a tough regulator. that is what i expect we will get. david: one more on oil. bloomberg is reporting that the president is about to have a release from the strategic petroleum reserve, perhaps in

conjunction with other countries. opec-plus saying if you do that, we will make up the difference -- rather, we will cut back on production. is this a fools airman to try to affect the price at the pump by using the strategic trillium reserve? larry: i think it is probably a good thing. i don't think anybody should suppose it will have a huge impact. here is what i would look at. the oil curve is backward dating. the price of oil today is considerably higher than the futures market from a year from now. what that means is you can sell the oil and buy it one year from now and make a profit. at the same time, help the oil market right now.

it was a very expensive thing to do, i probably would not be in favor of doing it, but when there is significant profit in the deal, seems like a good thing to do. david: cannot thank you for coming on. that is larry summers of harvard. you can hear wall street week every friday at 6:00 eastern time. president biden is set to appear with his choices for fed chair jay powell and lael brainard. we will bring that to you when it happens. for a look at what this could mean for investors and the economy, we bring in diane swonk , chief economist at grant thornton. what is your reaction, as someone who is cognizant of the markets, but is an economist? diane: i think it is great, a dynamic duo of having powell and brainard. both of them have brought something very different to the fed. they work closely together

anyways, so elevating the voice of brainard to vice chair is very important at this stage, while keeping the continuity of powell. powell has a lot of humility when it comes to forecasting, where we have seen other economists have more hubris about the fed's ability to forecast. powell has also shown an ability to pivot. they left the door wide open. i am glad the nomination came before we got the minutes from the last fomc meeting. it is clear from the rhetoric that a lot of the fed have already moved to wanting to accelerate the tapering that larry was referring to. they have left the door open to do that. and then get that separated from the process of liftoff, which i do think we will be seeing by mid 2022. it is important that the messaging is right. one of the things that brainard and powell are very cognizant of

and have -- i'm think of other fed chair men's on this -- they bring the international perspective. the fed is the central bank to the rest of the world. you don't want to have a taper tantrum, accelerate things so much, hike rates so much that you overshoot. the fear of how you get a soft landing. you don't want this to get out of control and you. you want the fed to be prudent but not panicked and rate hikes. powell has said that they will be patient. now i want them to not panic. having that international lands. understanding what happens in the u.s. does not stay here, there is no las vegas in the global economy, and there could be repercussions in many developing economies, something larry had to deal with as treasury secretary. we don't want that washing up on our shores right now. we want to have as much smooth and this as possible.

very hard to do because now the fed will be chasing down inflation, which it has not done in a long time. it has preempted nonexistent inflation for the past 30 years. david: you say we need to make a pivot, we don't need to panic. it is really difficult to get it just right. in your view, what is right? larry says he thinks they should get rid of the mbs by next year and then start picking about raising rates. how fast should they make the pivot toward tightening? diane: first about, you have to lift your foot off the accelerator, and that means accelerating the tapering process. i would like to see them wrapped up with the process by the end of the first quarter, beginning of the second quarter, so that we can get into the process of thinking about liftoff in rates. i have three rate hikes next

year because i think the economy will be strong enough to withstand that. i also think there will not be the conflict between getting to that full employment mandate. i have to put this one caveat in there. central bankers are hardwired to be more worried about inflation then employment. powell and brainard bring some of that balance to the board, to keep us on that balance. that is important because that gets to the point of panic. you don't want the fed to looking like it is panicking and then get ahead of itself on rate hikes, preemptively derail the recovery. i think some of the inflation brc and will uncoil in supply chains, but it is not as transitory as the fed had hoped. i wish they had tapered sooner, but it was a tough call. what they need to do now is be very careful in their messaging, how they deal with this.

they will be prudent in rate hikes to accommodate and respond to an economy that is more robust and is warmer. it is not stagflation. that gets politicized. it is tough to stay above the political fray in yet another election year and that is what the fed needs to do. david: one aspect of this economy seems to be a lot of sitting in personal accounts. pushing up against the restrictions on the supply chain that you referred to. are you seeing that ease up on the supply chain, how fast is that easing up? diane: it is not as fast as any of us would like, but there is some uncoiling in the supply chain. we don't expect those issues to be resolved until well into the second half of 2022, at least into the first half. that is still a ways away, so still some upward pressure on prices we have to work out.

even though production in the auto industry is finally picking up, which is great, getting chips out there to keep production up, it is still a shortfall compared to the demand out there. we have to get through all of that as well. that is where it gets tough. we are at the same time that is happening, that the supply chain problems are happening, we have 2.5 trillion dollars in excess savings. most of that is in wealthy households. i am not as convinced that that is in the low income households that have lost unemployment insurance and supplement. that is in high income households that will not spend a lot of it. as we get into 2022, although demand will still be strong, it will start to normalize into the year. that is what the fed will be careful watching. how much do we normalize, what is the wildcard?

how much of that excess savings shows up in terms of spending? my guess is a lot of it doesn't show up. what is really different, on the fraud in the housing market, i am concerned about that. as investors coming into the housing market, larry alluded to that, the fraud in the housing market. we also have, unlike 2007, people have equity in their homes. they can tap that leverage. david: we are waiting for president biden to appear to introduce his nominees for the fed chair. jay powell and lael brainard. her new position as vice chair. we will bring you that as it happens. let me ask you one more question. participation rates in the labor market. one of the concerns is wage increases, which may be structural.

do we have a potential problem, if we have fewer workers available? diane: we do, if we have fewer workers available. some of it is good news. we have a million fewer workers today working multiple jobs. i hope that is because wages have come up enough. it is more a testimony to how low wages were in the best of times in the last expansion. it also means that a million fewer jobs counted out there because they are not working double jobs. going forward, we need to bring some of these people back from the sidelines. the pandemic has played a huge role. i had one of my colleagues who her child go into quarantine, and even though they got the vaccine, had to be home from school. if she was working hourly and not able to work from home, that would have meant she lost 10

days of pay. we have to be cognizant that we are still in a pandemic. until we get out of this pandemic, we cannot count on labor force participation coming back. i'm a little more concerned about how much labor force we can bring him back from the sidelines given the sheer volume of people -- 3 million excess retirees as well. they are sitting on a lot of wealth. if you bring them back in, employers would have to start casting a much broader net and get rid of some of the ageism and many of the biases we saw out there. that is where we still have a long way to go. david: that is grant thorton chief economist diane swonk. as we wait for the president to appear with jay powell and lael brainard, let's get a quick remark from french hill, representative in the house of representatives from arkansas. are you there?

gave us your reaction to this nomination that is coming of jay powell for chair and then lael brainard as vice chair. rep. hill: i think president biden has made a good decision in reappointing jay powell as the chairman of the federal reserve. markets need that continuity. jay powell did an outstanding job leading the fed through the worst of the pandemic. it is good to have that continuity as we push back now against what concerns me most, the inflationary pressures in our economy that you just discussed. that is both a monetary policy issue and a fiscal policy issue. we need a steady hand at the fed. david: on the one hand, this is a steady hand staying the course, but on the other hand, there needs to be a pivot to deal with inflation. are you confident that powell and brainard can make that pivot quickly enough and deftly enough

to keep inflation from getting out of control? rep. hill: this has been building since the financial crisis. we never disengage from quantitative easing after the crisis. we slowly began that effort in 2019, stopped it, and then fell into the pandemic. it is that experience that jay powell has, serving as governor and chairman both, that give him that practical experience on how to navigate withdrawing that accommodation in order to not see inflation take hold in the economy. david: thank you so much. the president is approaching. president biden: i want to comment on the tragedy that occurred last night during the holiday parade in wisconsin. while we don't have all the facts and details yet, we know this morning that five families in waukesha are facing fresh

grief, a life without loved ones. at least 40 americans are suffering from injuries, some of them in critical condition, and an entire community is struggling to cope with the horrific act of violence. last night, people in waukesha were gathered to celebrate the start of a season of hope and togetherness, thanksgiving. this morning, jill and i and the entire biden family pray that that same spirit will lift up the victims of this tragedy. we bring comfort to those recovering from their injuries and wrapping the families of those who died the support from their communities. we are all grateful of the extraordinary work of first responders, from law enforcement to emergency room doctors, who are working around-the-clock to deal with the terrible consequences of what happened last night.

my administration is monitoring the situation closely. now, let me turn to today's announcement. 20 months ago, when the covid-19 pandemic exploded in america, creating the worst economic crisis we have faced since the great depression, wreaking havoc not only on our economy but economies across the world. in just two months, over 20 million americans lost their jobs. the unemployment rate shot up to 14.8%, the highest ever recorded in america. all of us remember the scenes, major cities and small towns, main streets that looked like ghost towns, boarded-up businesses, empty roads, empty airports, empty train stations. offices were closed, schools were closed. hospitals were taken to the breaking point. when you remember the depth of the crisis we face, it is all

the more amazing the progress we have made since then. we had gone from an economy that was shut down to an economy that is leading the world in economic growth. we have gone from small businesses being shuttered to record number of new small businesses starting up. and we have gone from a devastating job destruction to record new job creation. don't get me wrong, there is still a long way to go to fully recover from the pain and destruction caused by the pandemic. and we are still dealing with the difficult challenges and complications caused by covid-19 that are driving up costs for american families. i know for a lot of americans things are still very hard, very hard. but if you look at all the facts, you can only come to one conclusion. we have made enormous progress in this country. first and foremost, our economy is creating jobs, lots of jobs. in fact, we have seen a record new job growth in america this

year. 5.6 million jobs since i was sworn in in january. more jobs created at this point in a new presidency than ever before in american history. we have seen a dramatic drop in the unemployment rate, from the high of 14.8% in april of 2020, to 4.6% today. earlier this year, independent experts were predicting it would take until the end of 2023 to see unemployment that low. our economy is creating new businesses, lots of new businesses. in fact, americans are starting small businesses at a record rate. up to 30%. two before the pandemic. economist will tell you that an increase in new business is one of the best signs of an economy, and economy becoming more innovative and dynamic. that is because small businesses

are not just the heart and soul of america, not just the bedrock of so many communities across the country. america's small businesses are the primary job creators, innovators and drivers that power our economic progress. that is why it is a powerful statement about the faith that we have in our country, where our country and economy is heading. small business creation is surging in america. which is why i am proud to say, if you look at my presidency so far, it is a jobs presidency, it is a small business presidency. if you look at the facts, here is what the record shows. record job creation. record economic growth. record small business creation. that is the story that should give us confidence about the economy that we are building. confidence in ourselves. confidence in the future. now, after years of wages being flat or falling behind, we are

also seeing something else. things are getting better for american workers. higher wages, better benefits, more flexible schedules. balance sheets for american families are better as well. savings are up, home equity is up, credit card balances are down. if we are and combine the wage increases we have seen with the direct relief my administration provided to middle-class families, the typical middle-class family's disposable income has actually gone up 2% this year, even after accounting for higher prices. that is the kind of recovery just one year after a crippling economic crisis, is unprecedented. it makes us stand out from the rest of the world. america is the only major economy, the only one in the world, where the economy is bigger today and families have

more money in their pockets today and before the pandemic hit, even after accounting for inflation. none of our competitors can say that. it is a testament to the hard work and perseverance of the american people. it is a testament to the effectiveness of the vaccination effort. it is a testament to the economic policies we fought so hard to pass, to put in place especially the american rescue plan. it's a testament to the federal reserve. for all the progress we have made, we know we still face challenges, serious challenges. we know there is a lot of fear and uncertainty in the country. we know it is tough for families to keep up with the rising cost of gasoline, food, housing, and other essentials. it is not just an american problem, it is a worldwide problem. it doesn't make it any easier for american but it is a worldwide problem. every country is dealing with

the same problems emerging from the pandemic. supply chain bottlenecks. disruptions caused by spikes in covid-19. elevated prices. they are all taking a bite out of our family budgets. perhaps no entity plays a more important role in navigating these challenges than the federal reserve. because it is the fed's job to balance two key goals. the first is to achieve maximum employment. to get as many americans working as possible. the second is to keep inflation low and stable. to meet these goals will require patience, skill, and independence. that is why, today, i am nominating jerome powell for a second term as chair of the federal reserve. i am nominating they'll brainard to take the position as braced -- lael brainard to take the position as vice chair of the federal reserve.

last year when there was panic in the financial markets, jay's study and decisive leadership help to stabilize markets, put our economy on track to a robust recovery. jay is a believer in the benefits of what economists call maximum employment. that is an economy where companies have to compete to attract workers set of workers competing with each other for jobs. where american workers get steady wage increases after decades of stagnation. and where the benefits of economic growth are broadly shared by everyone in the country, not just concentrated for those at the top. jay said it well last month, and i will quote him. he said, "an economy is healthier and stronger when as many people as possible are able to work. if entrenched in equities prevent americans participating in the labor markets, not only will they be held back from opportunities, but the economy overall will not realize its

potential. those that have been left behind stand the best chance of prospering in a strong economy with plentiful job opportunities." as chair, he took a landmark review to reinforce the federal reserve's mission toward delivering full employment, making strong progress toward that goal now. i believe jay is the right person to see us through and finish that effort while also addressing the threat of inflation. jay and i have had a chest -- chance to discuss his views. he has made clear to me, a top priority will be to accelerate the fed's effort to address and mitigate the risks that climate change poses to our financial system and economy. extreme weather has cost our economy over $600 billion over the last 10 years.

we have to make sure our financial system can withstand climate change and is prepared to transition to clean energy. the fed must be a leader among central banks globally and addressing climate related financial risk. he has also underscore the importance of the fed taking a more proactive role in the years ahead, making sure financial regulations stay ahead of emerging risk. be they from innovations and cryptocurrency to the practice of nonregulated bank institutions. having served during the 2009 financial crisis, working with president obama to put together stronger rules of the road, i understand the stakes of regulations falling asleep -- regulators falling asleep at the switch. jay and others at the board must ensure that we never expose our

economy and american families do that kind of risk. i respectjay's independence and trust that he will follow through on his commitment to these issues. now, some will know. question why i am re-nominating jay, when he was the choice of a republican president susser. why am i not picking a democrat, fresh blood, taking the fed in a different direction? put directly, at this moment, both enormous potential and uncertainty for our economy, we need stability and independence at the federal reserve. jay has proven the independence i value in a fed chair. in the last administration, he stood up to unprecedented political interference and maintain the integrity and credibility of this institution. it is just one of the many reasons why jay has support across the political spectrum.

in 2018, he was confirmed with 84 votes in the u.s. senate. his approach as fed chair has earned the respect and support of those from the afl-cio to the business roundtable, which brings me to one more reason i have chosen to renominate jay. i believe having fed leadership with broad bipartisan support is important, especially now in such a politically divided nation. i believe we need to do everything we can to take the bitter partisanship of today's politics out of something as important as the independence and credibility of the federal reserve. this is vital to maintain public trust in an independent institution like the federal reserve. that is why i am so proud as well to nominate dr. lael brainard to serve as vice chair of the federal reserve. by promoting lael today to vice

chair, i am elevating one of the country's most qualified and dedicated public servants. she is one of the nations leading macroeconomists. she spent years at the treasury department representing american capitals around the world on international economic issues. she spent nearly the last decade as a member of the fed, recently working side-by-side with jay as the fed navigated financial crises, and reaffirmed his commitment to a full employment economy. throughout her time at the fed, lael has also been a steadfast voice for tough rules to protect the pensions and savings of the american people. she has led the effort to make sure banking systems serve everyone in the communities they serve. regardless of where you live or your background, every american can have access to credit they need to start a business, buy a home, and just have a fair chance in life.

she has done pioneering work and how the fed should account for the emerging of risk and climate change to our financial system. like jay, her expertise and leadership have earned her the respect and support of republicans and democrats alike. i am proud to nominate her to the vital role of vice chair of the federal reserve. beyond jay and lael, i look forward to nominating additional members to the federal reserve board of governors, including a new vice chair of supervision. these individuals will safeguard the financial system, and alongside jay and lael leadership, help to support this historic economic recovery. while jay and lael bring continuity to the fed, my additions will bring new voices. i also pledge that my additions will bring new diversity. which is much-needed and long overdue in light.

last year, the pandemic shut down much of the global economy. now there is a worldwide reawakening that is creating both an incredible opportunity and tough challenges. as economies across the world come back from this pandemic, america is leading the way. like every country in the world, we have to deal with these issues arising costs. but we should remember, we have the skills and tools to get it under control. while other countries are stumbling out of this pandemic, we are racing ahead, because so much of the rest of our economy is doing well. we have created so many new jobs as fast as we have. we are in a position to attack inflation, from a position of strength, not weakness. in times like this, we need study, tested principal leadership at the fed. we need people with sound judgment and proven courage to preserve the independence of the

fed. and many people of character and integrity who can be trusted to keep their focus on the right, long-term goals for our country. i'm confident jay and lael are those people. now i want to give both jay and lael an opportunity to say a few words. we will start with jay. the floor is yours. chair powell: mr. president, thank you for this extraordinary opportunity to continue to serve the american people. it confirmed by the senate, i pledge do everything within my power to meet the responsibilities that congress has entrusted to the federal reserve. i am joined today by my wife and i three adult children. their love and support underpin and make possible all that i do.

i am also grateful to the exceptionally talented and dedicated team at the federal reserve with him it's been my great privilege to serve over the last decade. my predecessor, secretary janet yellen, left the bed in a strong position to meet every challenge and i'm thankful for her leadership, example, and her friendship. when covid hit our shores, american families and businesses were 10 years into an historic economic expansion. with a robust jobs market that was reaching even those who had traditionally been left out. the pandemic, however, brought an immediate and painful recession. fortunately, american resilience along with strong policy actions and vaccines that enable the economies reopening cushion the blows and set the stage for a strong recovery. today, the economy is expanding at its fastest pace in many years, carrying the promise of a return to maximum employment. challenges and opportunities

remain as always. the unprecedented reopening of the economy along with the continuing effects of the pandemic led to supply and demand imbalances, bottlenecks, and a burst of inflation. we know that high inflation takes a toll on families, especially those less able to meet the higher costs of essentials, like food, housing, transportation. we will use our tools to support the economy and labor market and to prevent higher inflation from becoming entrenched. other key priorities in include stability of the financial system, addressing risks from climate change and cyberattacks, and facilitating the modernization of the payment system while protecting consumers. i look forward very much to continuing to work closely with my colleague of the past seven years, lael brainard, as the fed confronts these and other issues. lael brings formidable talent, a wealth of experience, and good judgment to her work.

inside the federal reserve, we understand our decisions matter for american families and communities. i strongly share that sense of mission and am committed to making those decisions with objectivity and integrity, based on the best available evidence in the long-standing tradition of monetary policy independence. mr. president, thank you again. president biden: now, i would like to give the floor over to dr. brainard. vice chair brainard: mr. president, thank you. i am deeply honored that you are entrusting me with this possibility at a critical time. i am committed to putting working americans at the center of my work at the federal reserve. this means getting inflation down at a time when people are focused on their jobs and how far their paychecks will go.

it means supporting a growing economy that includes everyone. it means ensuring financial markets are thriving and resilient, and the economy sustainable for future generations. it means serving all-americans in every community across the country and ensuring the federal reserve reflects the diversity of the communities we serve. i was privileged to work with chair powell as we made every effort to protect workers, businesses, and families from the covid financial shock with the support of congress, and i look forward to working with him in the months and years ahead to build a durable recovery. i also want to thank secretary yellen with whom i've also been privileged to work. i am grateful to the many people that supported my efforts. as a working mom, i'm especially grateful for the love and support of my three dynamic daughters, who took the afternoon to be off from school, my deeply devoted husband, and

vivian, my sisters, and my amazing mother joanne, who is here with me today. i'm confident that by working together we will see a strong recovery for all-americans. thank you. president biden: well, folks, that is it. hope you have a happy thanksgiving. i think the families of the two nominees to be willing to support their work, what they have to do. it will be long hours, as you know. i think the families. -- thank the families. thank you all. david: we have been listening to president biden, along with his two nominees to the fed, jay powell, current chairman nominated to a second term, as well as his nomination for vice chair, lael brainard, who have been on the for some time now, but now she will be moved up to vice chair.

the president emphasized repeatedly a steady and decisive and independent that is what he wants. he also talked about for employment, the importance of everyone being employed. with respect to jay powell, he said it's important that he is bipartisan. we heard from jay powell and lael brainard, both of whom thanked secretary yellen, whom they had served with. i want to make a small correction. earlier in the program, we mistakenly referred to sheldon whitehouse -- we talked about sherrod brown, the democratic senator from ohio as being lukewarm about jay powell. that is not right. sherrod brown came out with a strong supporting statement for the nomination of jay powell. it was a confusion with sheldon whitehouse, who oppose the nomination, saying we need

somebody who will guard the financial system better. no question, sherrod brown strongly supports jay powell's nomination. now we will go to our roundtable of economists. the relatively new bureau chief from washington, as well as our senior market editor, john authers. what do you make of this? >> your combo today was something that a lot of us were waiting for, markets were waiting for, wondering why it was taking so long. it has been taken as a strong sign that there will be consistency at the fed. the duo is important in the sense that the two of them are seen as somewhat similar on monetary policy. brainard is seen as stricter on financial regulation. while she has the vice chair role, as opposed to the vice chair role for supervision, she can still take leadership in that role. he talked a lot about climate change.

she is seen as being forward running on that. david: why didn't they name the vice chair for supervision at the same time? that is an important position, particularly if you listen to someone like senator warren. peggy: it was a bit of a surprise. lael brainard is seen as the most qualified for that position of vice chair of banking supervision. but i think the vice chair role is certainly a public facing role, consider the fed's number two spot. together, they present, as biden said multiple times, a steady presentation of where the fed is going when it faces key issues for the economy and the american people, with inflation soaring, and we are not back to where we were with the jobs before the pandemic broke. david: let's turn to inflation and john authers. that is something you been monitoring closely. you are concerned about inflation.

give us your sense about what this fed will keep on the same course but at the same time turn course. john: basically nothing has changed since yesterday. we have the same cast of players in place. monetary policy, even though that is the most important element of this choice by president biden, was never up for grabs. brainard and powell have agreed with each other on monetary policy in every vote they have taken over the seven years that they have been on the fed. there was no public discussion by them as to how they might differ on monetary policy. in terms of how to was presented, i agree with peggy. i'm surprised lael brainard was also not given the supervision of the regulation role. that would have been much

discussed as a way of splitting the difference between these two candidates, keeping all people happy. the other point that did occur to me strongly as we were listening to biden, he was talking more to democratic senators than to anybody else. trying to cast jay powell as a figure who really cares about employment and who will make the priority in combating climate change. i don't think those were things that president trump had in mind when he first appointed him. it is also very intriguing how much he has put on the notion of stability and independence. at this point, there is arguably nothing in the domestic arena that is more dangerous to joe biden politically than inflation, and yet, he has said it is really not his job to fight inflation, but who he appoints to the fed.

i think he is probably correct, but an alarming juncture. ok, i have to leave it to these guys who are doing it now, even though -- which nobody mentions -- they don't seem to have done a good job of it over the last year. david: full employment sound like a good thing. fighting inflation sounds like a good thing. what if those two things are in contradiction with each other? in order to get full employment, you have to run it hot. john: conventional economics suggest that they are often in conflict with each other, and that is arguably where the whole weakness of the current system of an independent fed lies. they have to try and get full employment and inflation under control, but it is not clear how they should prioritize those things, given that often prioritizing one will mean

taking a risk on the other. if it were possible to have more of a sense of direction for the president and congress to set much more precise goals, you might be able to thread the needle of having an independent central bank with the freedom of action that we saw last, that a central banker needs to have, but also a sense of democratic accountability. we do not have that. that personally bothers me quite a lot that there is no more economic issue facing this country over the world, frankly, then how to deal with inflation, prioritize inflation and unemployment. this was the opportunity to address that issue. frankly, given the importance of the fed and the economy, given the importance of stability and continuity to keeping the markets happy and avoiding financial crisis, there has been

no progress in establishing some degree of democratic accountability over this. david: peggy collins, you will oversee the confirmation hearings. we heard from john that the president was to some extent addressing democratic senators. at the same time, does he need many of them? there are a fair number of republican senators who say they like the idea of jay powell hanging around. peggy: we expect a pretty easy confirmation process. he has spent a lot of time walking the halls of congress on both sides, so he has support on both sides. we do think that lael brainard will also have an easy side getting -- process of getting confirmation. a lot of democrats think the fed needs to be more aggressive in terms of financial regulation over banks and things of that nature. david: great to have you both.

peggy collins, our washington bureau chief, and john authers, senior editor for markets. we are now joined by betsey stevenson, of the ford school of public policy and economics. professor, thank you so much for being with us. you know labor. what about this issue about whether you have to pay for increased inflation in order to get full employment? betsey: there is no longer run trade-off between full employment and inflation. what we are trying to do now is to the economy back to a place where all of our resources are used in the most effective way possible, getting our workers back, factories back online, and everything is a little mixed up right now because people are changing their priorities, both about what they buy and how they work. we are far from full employment still but we are seeing some inflationary pressure.

people's demand has outstripped supply. we have had particular challenges with prices coming from goods overseas because of the supply chain challenges, increased cost of shipping. i do think it is rocky waters right now, but i would have to say, if i would say the number one problem fixing the globe right now, it is how to get everybody back to work into a place where they will be stable in a post-pandemic world, being able to be employed, and we don't see people trapped outside of labor force for a long amount of time. david: that sounds like a worthy goal, not many would disagree with you, but is that within the fed's power to do? does it have the tools to get that done? betsey: let's think about what the fed is doing when it raises interest rates. it is trying to figure out whether it should change the price of money today versus in the future. it could raise rates to discourage people from consuming

today. that would bring down demand. to curb inflation. it also risks ringing demand down too much, so that businesses stop hiring, and people end up in a world where they don't get back to work and end up with what economist fear, labor market sorry, so that even if the economy is strong again, they don't go back to work. it could be worth it coming out of a recession to run the economy a little bit hot for a little bit of time, so that we can build labor force participation backup. we do that not only by bringing people back into the labor force but by making sure others don't exit. we stabilize the labor force at a higher participation rate. that may run a little bit of inflation but i have confidence that the fed can bring inflation back down. i think the president has done exactly the right thing by reappointing powell and saying we have somebody at the head

here who knows how to steer us through these rocky waters. i have a lot of faith in him. he has shown he is able to learn from past mistakes, one of the reasons why he is running the economy a little hot right now. he has also shown he doesn't bow to presidential threats, which he was faced with under president trump. i think he deserves a chance to get us through this difficult time. david: give us your sense of why people are sitting on the sidelines. last time i checked, it is not evenly distributed. we have a number of prime working age women not coming back to the workforce, and quite a few people of color not coming back in. if i understand the factors, maybe i understand the means of addressing them. betsey: it is a little bit of a misnomer, women not coming back as much. they are coming back at roughly the same amount as men, but they lost more jobs than men. it is the same thing with people of color. the service sector has not recovered.

all of this inflation pressure is coming from the goods sector. people are demanding goods at a rate that is way beyond not only pre-pandemic levels but any pre-pandemic trend. they want stuff. they want to go back to buying services. going to the dentist. going out to eat. there is a whole range of services. women and people of color just proportionately work and services, and that is where the jobs have not come back. it is not all a labor supply story, there is some labor demand going on. on the labor supply side, families are still struggling with childcare issues. schools are back, but any day your kid could come home and say, bobby next to me has covid, so they told me i cannot come back for two weeks. that is a tough way to manage employment. a lot of employers are not being exactly sympathetic to calling out, saying, we need notice. david: one of the things that was talked about by president

biden as well as the nominees, climate change, and the proper role for the federal reserve in dealing with climate change. we understand the epa and with the administration can do about it. how far should the fed be going in addressing climate change through monetary policy or bank regulation? betsey: climate change is the biggest threat we face over the longer period. what we saw in the pandemic was a big threat like the pandemic, we absolutely needed the fed. same with climate change. we absolutely need the fed. the president spoke to chairman powell, lael brainard. he believes they are willing to do more. i hope he is right because we will need to see all hands on deck when it comes to fighting climate change, and that includes the federal reserve. david: one thing the president went out of his way to say was you'll see more nominations and more diversity, something people have been clamoring for. what do you expect? betsey: i will not begin to

guess who he will nominate, but he does have pressure to dominate people who have not served before, who may bring a different perspective. i think there is a really good slate of candidates he could choose from that could bring that diversity in. david: thank you so much. great to have you with us. that is professor betsey stevenson of the university of michigan. this is the end of our coverage of the domination of jay powell. coming up later, there will be an interview on bloomberg technology with democratic virginia senator mark warner, who is a member of the banking committee. he will talk about what he think's about these nominations of jay powell and lael brainard. this is "balance of power" on bloomberg television and radio. ♪ television and radio. ♪

mark: christmas. your milwaukee, wisconsin turned

into a scene of warner -- a christmas parade near milwaukee, wisconsin last night turned into a scene of horror, killing five -- when an suv went to a crowd, killing five and injuring 40 others. one officer fired his gun trying to stop the vehicle. closing arguments underway in the ahmaud arbery case. the 25-year-old unarmed black man was killed last year while jogging in a georgia neighborhood. the prosecutors said arbery posed no threat to anyone and the three white defendants decided to pursue him quote because he was a black man running down their street. closing arguments can day after 18-year-old kyle rittenhouse was acquitted on all charges in the shooting death of two men at a black lives in her protest in kenosha, wisconsin. new york's assembly to sherry committee released its report -- judiciary committee released its report on andrew cuomo, founding he was accountable