the congressman, if i did not stop telling lies without the election -- about the election, something that was going to happen. announcer: this week you will hear from two texas representatives. democrat colin allred and republican ronny jackson. january 6, views from the house, sunday at 10:00 p.m. eastern, on c-span, c-span.org come or listen on the c-span radio app. host: former president of the federal reserve bank, currently senior fellow with the mercator center. guest: good morning to you. host: want to start with those jobs numbers just out 15 minutes ago. nonfarm payroll rose by 943,000 in july. unemployment fell to 5.4%. guest: they are very pleasing

numbers. they are a little higher than most economists thought they would be come around 840. that is good news. the unemployment rate is now 5.4%. that is good news. the participation rate did not change much. that may continue until we get through the rest of august and son of --some of the unemployment benefits fall away and more people will be willing to join the labor force. i think that will be good in the sense that while we are losing some support from the relief packages, we will be gaining some added jobs into the market. on the whole i think those numbers are pretty good. i was trying to see where the real earnings were. i think those are down a little.

that reflects that we are still seeing some inflation across the country. host: you mentioned the labor force participation rate little changed, within a narrow range of 61.4 to 61.7. there is the supplemental data about impacts of the covid crisis. in july, 13.2% of unemployed persons teleworked because of the pandemic. also in july, 5.2 million persons reported they were unable to work because their employer closed or lost business due to the pandemic. that is down from 6.2 million in june. guest: these are good numbers. they suggest we are mending if you will.

i would also understand that this new delta variant is of concern to everyone. i think as more people get vaccinated, we will be able to address that issue and continue to improve the employment picture for the u.s. host: the phone numbers if you want to join the conversation. republicans (202) 748-8001. democrats (202) 748-8000. independents (202) 748-8002. you mentioned inflation. this is a recent headline from npr. inflation is a big political test for president biden's economic agenda. last month, consumer prices increased by 5.4% in june, the biggest monthly gain since august 2008. why is that? guest: you have a number of factors, supply and demand. on the supply side, you have the

effects of covid, which affected supply chains in the country and across the globe. that will affect the amount available and prices. that also interrupts those supply chains. on the supply side, you have had some interruptions. i think we need to get through those. on the demand side, you have had these significant and important relief programs that have put funds in the hands of the middle class and others that are out of work. while supplies have been interrupted to some degree, the demand is strong. you have monetary policy, which has been extremely accommodative. that has helped create demand.

the demand factors have been strong in this environment. it is not surprising you see the inflation numbers going up. host: on inflation on where it is now and where it could be in the future, a topic of conversation on capitol hill. jerome powell discussed the rise of inflation and his expectations about the future. this is what he had to say. [video clip] >> inflation has increased notably. as the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices because supply bottlenecks have limited how quickly production can respond in the near term. these bottleneck effects have been larger than anticipated. as these transitory supply affects abate, inflation is expected to drop back to our longer run goal. low readings from early in the pandemic and the pass-through of past increases in oil prices and consumer energy contribute to

the increase, all those base effects are receding. the process of reopening the economy is unprecedented. as the reopening continues, bottlenecks and other constraints could continue, raising the possibility inflation could turn out to be higher and more persistent than we expect. our new framework for monetary policy emphasizes the importance of having well anchored inflation expectations to foster price stability and enhance our ability to promote our maximum employment goal. broadly consistent with our longer run inflation goal of 2%. if we saw signs of longer-term inflation expectations, we are moving beyond levels beyond our

goal, we would adjust policy. host: jerome powell speaking about this issue of inflation. we are talking with thomas hoenig about the u.s. economy. jerome powell, we have heard him say before that inflation is expected to moderate in the coming months, perhaps by the end of the year. do you agree? guest: i think over time it will moderate. i think the transition will be longer than what i have heard him say and others among the fomc. monetary policy continues to be highly accommodative. i think that will have an effect on demand going forward that will keep some upward pressure on prices. i think the supply issues will moderate more slowly. as inflation embeds in the

economy, it carries its own way forward. real wages have been falling, and they have. i think we will see more pressures from labor to bring wages up. that will be somewhat inflationary. you can see why they would want those up. i think the fact that we are now in the process of passing an infrastructure bill, which people say we badly need, and i would agree, but there will be additional deficits with that the federal reserve will have to accommodate to keep interest rates low and fund the fiscal deficit. these are inflationary actions. the thing i would remind people of is that inflation has been with us for some time in asset values.

we have seen the effects of that. we have seen housing prices go up to historically high levels in the last couple months. we have seen other areas in asset values. when you have inflation in those asset values, it begins to seep out more broadly. we will see those pressures build over time. i think it will be important from the federal reserve to continue its discussions on tapering in a way in which we can carefully remove some of this excess accommodation so that we slow down this inflationary pressure going forward that hurts the middle-class more than it does others. this is very important. the fed knows this. it is important that they keep

this in front of them as we move forward from here and not get caught in this zero interest rate firemen indefinitely, waiting for the economy to regain its full strength. that will happen over time. it can hopefully moderate inflationary impulses. host: if you want to talk about the u.s. economy, economic policy, thomas hoenig is a good guy to do that with, former vice chair with the fdic. republicans can call in at (202) 748-8001. democrats (202) 748-8000. independents (202) 748-8002. this is stan out of indiana. an independent, go ahead. are you with us? you have got to stick by your phone. we will go with keith in

alabama, republican. go ahead. caller: if i remember correctly, the great recession started with $4 gas prices. aren't we headed in the same direction? guest: the great recession started with many things, mostly though they were financial related as we saw housing boom explode in very high leverage in those products. one of the consequences at the time was higher gas prices, but it was only one consequence of many. it followed a long period of very accommodative monetary policy that stimulated demand

beyond what the supply of those goods could provide on the market relative to the amount of money that was being put into the market at the time. i would say so in the sense that it reflected a very accommodative monetary policy to a good part of the early decade until the crisis occurred in 2008. host: back to the hoosier state, sandy, and independent. go ahead. caller: 74 in indiana, white. i have lived through recessions. i have lived through a lot. i have never lived through millions of illegal immigrants being flooded into our country when we are being told to take shots, which i have not, nor will i, being told that we are to be

-- this is going to affect us financially, physically auxiliary -- physiologically, emotionally. how do you justify that? these millions of people that we are taking care of now, i just want to know how you justify that. guest: the issue with immigration, and i think you are speaking of illegal immigration, is a difficult matter. we have immigration laws -- i think that we expect people to abide by those laws. to the extent that they do not, we have to address that issue. that is really part of what the government trying -- government is trying to do today, i hope. i don't know that it is a major cause of our problems by any means.

but it is something that we have to address in time and through the rule of line -- through the rule of law. host: pensacola, florida. democrat. good morning. caller: good morning. i am 72 years old. i'm going to say something in general. it seems like when republicans are in control, we don't hear anything about inflation. they do not say how are you going to pay for all of these tax cuts. as soon as a democrat gets in, that is all we talk about. can you address that? guest: i do not know that that is necessarily the case. i think the issues around the deficit has been in place with both parties. they have both contributed to the deficit over time. there is a bipartisan effort for infrastructure spending that will involve additional debt and

deficits and both parties are involved. it is really a matter of what the american people want and right now they want improved infrastructure. that has to be paid for and i think there will be a likely borrowing associated with that and a greater deficit. everyone has to take responsibility for these issues. it is not just one person or one party's issue. host: steve on twitter with this question saying, "we see lower interest rates hurt pension funds. i thought most pensions invest in the stock market, which saw an excellent rise in the past 18 months. how do low interest rates hurt pension funds?" guest: pension funds are not overly invested in the stock market. it is like anything else.

you have a broad base of assets, which you rely on. if a good portion of those assets, bonds, securities, have interest rates that yield 1% and 2%, your ability to stay funded is compromised. if you were to put everything into the stock market because you think it is only going to go up and we have another stock market crash as we had in the last crisis, i think people would be even worse off. it is the ability of having a market in which interest rates reflect market conditions and not just the ability of the federal reserve to push interest rates down near zero. that means there are other winners and losers. over time, you see the effects. i mentioned pension funds.

we know asset values and housing is out of the reach of some people because the prices are so high. not because of interest rates, but because the prices are so high. those people are being adversely affected. pension funds are very much in many cases underfunded, requiring that more of a person's income be allocated for that for retirement. if you are an individual saving for retirement and unless you are willing to take the risk and plunge into stocks on the assumption that they will only go up because the federal reserve will continue to fund the market, then you will be taking a high-risk risk position for your future. those are the issues that people have to work through. when you have an environment with an abnormally low interest rate. most people agree that zero interest rates are not a normal

price that you would see for debt issuance. host: we talked about the fed a couple of times already this morning. you ran the federal reserve bank in kansas city at one point. what should people know about the fed and how it works? what are some of the biggest misperceptions right now? guest: the perception is that the federal reserve can solve almost all problems. when we have a financial crisis, the fed can step in. the federal reserve can print money, that is for sure. but that does not mean we can solve the issues around labor. we cannot solve the pension from problems. those are the sorts of things that have become the

responsibility -- appear to become the responsibly of the federal reserve when it is the elected officials, the congress, the president who also have a more important role relative to the infrastructure of our country, how we regulate our country, and how we deal with issues around income distribution and so forth and those are things that need attention. relying on the federal reserve over the long period makes those situations worse. if you are an asset holder, you win big. if you are not and inflation makes your income come down, you lose. if you cannot afford a home, you lose. those are the things that need to be clear in people's minds in terms of what the real capabilities of the central bank are. host: thomas hoenig is a

distinguished fellow at george mason university joining us this morning and taking your phone calls. bill is next in alabama. republican. good morning. caller: it is obvious that the debts of the united states far exceed our ability to ever repay it. we have so much off budget, not identified debt with regard to future commitments. if we needed money badly, let's say we got in the war, where would we get the money to borrow? who would lend it to us? if the chinese and some other not so friendly people in the middle east decided they would not lend, what do we do? guest: at the moment, the u.s. is a global reserve currency and the federal reserve can and has

printed money. it creates money by buying government securities from the broad public or from the banks themselves. it can pay for those securities by creating the money to pay for those by creating the liability on the bank's balance sheets. they would be able to create money, print more money to fund the war. secondly, i would assume that the government would impose taxes on individuals in the united states to help pay for that war just like they did in world war ii. they would collect that money and that would help pay for the instruments of war that were needed to defend the country. there are those two at a minimum. as we have learned in the past, think about it this way.

the amount of debt since the beginning of the pandemic that the government has issued and taken, has gone from $23 trillion to $28.5 trillion. the balance sheet of the federal reserve, in terms of its assets, in terms of securities and mortgage-backed securities have increased from $4 trillion to $8 trillion. the federal reserve has purchased those securities, provided the necessary money to pay for those and that has allowed the government to spend without having to tax more. as long as they do that, the government can fund itself. the problem with that is we are creating this enormous amount of money out there and you are beginning to see some of the effects of that today by rising inflation and you have seen it

for over a decade in terms of increases in asset values that have made housing much more expensive than it was a decade ago. it has funded the stock market and helped it to increase over that period because those are assets. that is some of the effects of the federal reserve's ability to print this money. but it would be able to print more money to help fund the government's spending for conducting a war. host: connecticut, kristin. good morning. caller: thank you for taking my call. i love this conversation this morning. if i could get a few points in, i would appreciate it. i think what are fine guest is talking about is debt monetization. this is what the federal reserve is doing. it is monetizing our debt. that is what banana republics

do. since 1971, the dollar taken off of the wrightwood system and to the price of gold. since that time, we have seen a 95% decrease in the purchasing power of the u.s. dollar. if you gauge it with other currencies, that is not going to give you appropriate metrics because all other central banks are devaluing their currencies at the same time. inflation of the -- inflation is the worst kind of taxation, of confiscation, of people who are living paycheck-to-paycheck. it is absolutely detrimental to these people. if the fed is talking about it is supposed to be helping these people, it is complete and utter nonsense. 2% inflation, which is made up by ben bernanke and janet yellen is an arbitrary number. it never existed before in fed literature.

and the federal reserve was wrong about 2000. they were wrong about 2008. currently, they are pumping in $120 billion every month. $40 billion of that is buying mortgage-backed security in a housing bubble. stock prices are at the highest they have every been -- they have ever been since 1929, since 2000. host: you bring up a lot of points. let me let thomas hoenig respond. guest: what you are saying is accurate. in fact, when the u.s. decoupled itself from the gold standard, it allowed for the free printing of money, of fiat currency. we have seen in a norm is increased in the amount of money -- an enormous increase in the amount of money the fed has created over those decades.

in the last crisis, they did create money. here is where -- what i think is important. if you have a crisis as you had in 2007 and in the pandemic, it is reasonable for the central bank to provide liquidity because the markets freeze up. you cannot buy or sell -- to provide liquidity to get the market moving again. that is good. the problem is that folks in the -- both in the crisis following 2008 and in this crisis with the pandemic, the federal rese >> widgets live every day at 7:00 a.m. eastern. you can watch this segment at c-span and more. >> thank you for joining us for our headliners event with air force chief of staff chief -- chief of staff, general charles