what the federal reserve could learn from paul volcker. is a mythical personality, he had a few faults of his own. sheila bair is to break it down and all the challenges facing jay powell after this. ♪. moving forward with node- positive breast cancer is overwhelming. but i never just found my way; i made it. and did all i could to prevent recurrence. verzenio reduces the risk of recurrence of hr-positive, her2-negative, node-positive, early breast cancer with a high chance of returning,... as determined by your doctor when added to hormone therapy. hormone therapy works outside the cell... ...while verzenio works inside to help stop the growth of cancer cells. diarrhea is common, may be severe, or cause dehydration or infection. at the first sign, call your doctor, start an antidiarrheal, and drink fluids. before taking verzenio, tell your doctor about any fever, chills, or other signs of infection. verzenio may cause low white blood cell counts, which may cause serious infection that can lead to death. life-threatening lung inflammation

kathleen cullinan let's remember, when he talked about paul volcker and that period when paul volcker had to work so hard to get inflation down, he also had to realize that he stopped hiking rates to quickly. jay powell particularly mentioned not moving prematurely, so don't be looking for a pivot any time soon, investors. also important to look at the totality of data. charlie evans from the chicago fed, who is known as more of a dove, said that he can see his way clear to a 75-basis-point rate hike. he has not made up his mind yet, but one thing for certain, he said, i know rates have to go a lot higher from here. the question is -- what is a lot for europe? what is a lot for the u.s.? definitely the economies are in a much different situation, but the path policymakers is the same and they are making it clear that this is what they intend to do and probably will not stop any time soon. haslinda: don't look for a pivot any time soon. kathleen hays in new york, thank you. let's bring in the cio of maybank wealth group management. the big question is if the fed will keep hiking. >> i

paul volcker and the fed increased interest rate discount rate 200 basis points over one weekend andegraph it and explain it. now the world is different. they telegraph exactly what they are going to do and explain it afterwards. the fed has been telegraphing 75 basis points. if they were to go to 100 basis points, i think it be shocking to the market. i know some percentage of people of the market, 14% or so, think it might be 100 basis points, but i think they wouldn't want to shock the market that way so if they were going to do 100 basis points i think they would have telegraphed it by now. neil: they have expressed alarm about what's going on and that is what bummed so many out after jerome powell's remarks in wyoming a few weeks ago, but the market reaction, did paul volcker worry about how the markets would digest what he was doing? what is this obsession we have? >> well there weren't as many tv shows and as many people who knew what was going on in the market those days because we didn't have instant access to the markets for everybody. today everybody follows it all over th

we think we can avoid the kind of very high social costs that paul volcker and the fed had to bring into play in order to get inflation back down and set us up for a long period of price stability. kathleen: interesting that jay powell alludes to the instance, trying to get people we cannot stop, we cannot stop prematurely, and we might have to raise rates more like paul volcker had to do around 1980 to finally get inflation down. he said he will be watching the totality of the data. cpi is the next big part of that total. presumably -- i think it almost does not matter how high it is or is not. it will be so high it will still justify being aggressive and hard to believe it will not be enough for them to do another jumbo. yvonne: and they both spoke at the same time, lagarde and powell, which was interesting. kathleen there from new york. let's get to chief investment officer, managing over $300 billion in assets. thank you for joining us. great to get people based in europe to talk us through the ecb. after we heard from lagarde, how long do you think the cycle can last? do rates go ab

everybody is talking about jerome powell being paul volcker. paul volcker but he is also part arthur burns because he monetized the debt during the pandemic. the m2 measure of money grew 42% during the pandemic. that's why we have inflation today. and the reason all of this happened is because they accommodated the congress. congress was trying to give people money. some people call it buying votes. then the fed bought the bonds that the congress was forcing the treasury to sell and then what happened is the money supply exploded and inflation went up. paul volcker never monetized the debt. he reversed all of that. we'll see if jerome powell has the intestinal fortitude to do this and i think you're right, i think he tightens, unemployment goes up, recession happens, market goes down and then he eases. that is exactly what arthur burns did. charles: what's interesting today, we had a whole bunch of economic data out. >> right. charles: it was good enough for the atlanta gdp number to go higher but one thing interesting to me is prices paid in t

>> i mean powell is trying to be paul volcker although he is not really doing what paul volcker did.es the money supply and that is when interest rates, why interest rates went up. today the fed just sets interest rates where they want and they think that is going to lower inflation and the wheel idea here is that rate hikes will destroy demand, kind of what i was just talking about. here's the problem. rate hikes also destroy supply. so for example, people are having a tough time buying houses today with more rates at 6% but homebuilders are also backing off because they face higher construction costs as interest rates go up. so this idea that you can just raise rates and it is like a laser scalpel and it gets rid of demand, that is not true. it affects the entire economy, demand and supply. so they're going to keep it up and eventually throw the economy into recession. charles: am i overthinking though, or maybe wishful thinking when the fed put out their model last week, their economic projections they're modeling for a rebound in growth next year. >> right. charles: in order for

and used the same language that paul volcker may have used and paul volcker was revere in the financialmunity and he killed inflation in the early back-to-back in 1980s. so the proof of the pudding is in the eating and the debate, of course, gdp and the economy's plat on its back and the first two quarters were dominated by omicron and china lockdowns complicating the further global supply chain that was the first installment we haven't seen what the fed has done that will show up at the end of this year into next year the first two quarters of this year and if you average gdi and gdp and we'll just say the economy is flat on its back. even if you don't think there's a recession it's stagnant, but the fed's actions haven't kicked in yet and that's going to be the story for the next 12 months and that's why the recession, if you don't believe it it's already started and staring us in the face. >> the fed has not kicked in yet. the quantitative easing of it is sort of this underreported part of it when they're pulling cash out of the system. i wonder why, though, if the economy is flat on

to avoid that, we think we can avoid the high social costs that paul volcker and the fed had to bringplay in order to get inflation back down. janet yellen wants to see tax hikes on the rich. she used a speech to highlight what she sees as the biden administration's success story. the u.s. government is loosening restrictions that were put in place because of technology sharing. look commerce department says the rules will help the u.s. maintain its lead in setting standards. to australia it was passed its first major climate legislation and more than a decade. it set targets. the prime minister's climate change bill legislates a 43% cut in carbon dioxide emissions from 2005 level by 2030. the target brings us closer in line with allies including canada, south korea, and japan. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. paul: the big story around of the world, the passing of queen elizabeth ii. she was head of state in australia and had the distinction of meeting more than h

guest: i will remind your listeners, when paul volcker had to go after inflation, short term interest rates went up 20%. i don't think we are there yet because the underlying problem is the federal reserve has to print more money because we keep spending more money. things will continue to be worse. host: the congress shows reluctance to spend money as we continue to keep the government open? guest: i think everybody should be watching if there are new programs in there. we are talking about new programs, sending money to local police departments for training. it is something for the public to monitor, is the government showing restraint? the idea that we spend more money on anything right now is ridiculous. nevertheless, that is where congress is. i sure hope if the republicans take charge, the spending stops immediately. host: there is a public safety bill on the floor today. could you go more into that? guest: we just found out about it. i am very supportive the police. i am one of the most outspoken opponents of the anti-police bill floating around there. we do not want the police

before paul volcker was in that position, he ran the new york federal reserve so he didn't care about markets given what his background was, he just got the job done. neil: is that a mistake to ignore the market? >> you cannot be insensitive to what hard-working americans made and squirreled away in their 401(k)s and iras because they waited. neil: your actions artificially propped up the markets, doesn't do any good. >> you understand that. i understand that. the retirees understand that? their financial advisors told him to be in it for the long term, to buy and hold, stay there. what if you are 70 years old and don't have the option to reenter the workforce at that age. neil: that is a different definition. >> shorter for me every day. >> they held rates too loafer too long which is where we are. neil: it is mind-boggling. and we could end at 4% or more. >> we started this in march. neil: is transitory, and people questioning them. neil: it started, any effect it is working, still remains high. only thing i see signs where it is working is some other economic sign slowing. >> housi

paul volcker confronted the last inflation, two months after his confirmation, been burning key -- led the federal reserve during the financial crisis, chairman powell served through the covid 19 pandemic in which we have seen inflation reach its highest level in 30 years. as we sit in front of zoom screens the last 2 and a half years i will speak for myself, when you watched as her hair turns gray her, and in chairman powell, with key policy issues, chairman powell, good to see you today. >> it is not failure of my imagination on my part nor would anybody be surprised. as jim mentioned, including at the fed, a head fake on inflation, in the pandemic and related to disruptions, this contributed, seems a stronger consensus in larger part policy debate. can you give us some insight into how you are thinking on this topic over the last year and 1/2 and how those conclusions are involved as well? >> congratulations to both of you and cato on 40 years of monetary policy conferences. a good entry point for that question is to start by recalling before the pandemic unemployment was at a 50 ye

a lot of people say, professor, that powell found his inner paul volcker, and he made this his mission to wipe out inflation no matter the cost. paul volcker didn't aggressively full the markets raising interest rates often times a full percent at a time, let alone at meetings but between meetings. your own views notwithstanding and concerns, how far do you think this goes? >> don't forget volcker was in a much worse inflationary situation than we're in now. neil: absolutely. >> we were having eight to 10% inflation for almost a decade and interest rates were sky-high. inflationary expectations by both surveys and market based were much higher today. in fact market-based inflation and expectations going forward have come way down from where they were six, 12 months ago. so he doesn't have to -- pull a volcker, the interest rates, what is happening in the sensitive commodity markets and housing markets are showing how strong the effects already is. neil: you know the backdrop for this is still pretty steady job gains professor. that is one thing the administration points to, a number ev

. >> andrew, is it fair to say that jay powell was trying to reprise a bit of what paul volcker did ints and yet without the impact that paul volcker had, maybe having a really negative impact on the economy? >> i think that's exactly right. what he's trying to do to some degree is sort of jawbone his way out of this, rather than actually raise interest rates to 10-plus percent. if he can say i'm on this path, can he slow things down literally almost verbally by using the bully pulpit and businesses start to say i'm not going to hire more people right now, i'm going to slow things down a little bit, and does that aleve year to date some of these pressures? the truth is that the federal reserve has a very blunt instrument, raising interest rates, lowering interest rates. that's the instrument. and we know that so many of these problems that are facing our economy are so nuanced, so much of them are supply-side issues. you still can't get enough chips manufactured, you know, we've seen the price of food go up. wages have gone up, which is great in so many ways, but when costs are up even

we think we can avoid the very high social cost that paul volcker and the fed had to bring into playder to get inflation down. -- long period of price stability. >> he's alluding to what people consider the misstep paul volcker made. they thought they were getting inflation under control, so they started slowing down rate hikes. guess what? they had to go back in the fray and raise even more, causing a deeper recession. jay powell also said they are going to put their decision on the back of the totality of the data. that puts a lot more emphasis on the cpi's, if there was not enough already. the august cpi is out next tuesday. charlie elephant -- charlie evans also on board with this aggressive hike, the doors open to 75 basis points. paul: the ecb moving 75 basis points as well. there was a sense maybe they wouldn't go that far. was this a surprise? >> it is hard to say it was a surprise because a number of people were saying it was expected. if you looked deeper, a lot of people thought it definitely could happen, but it might not. partly because the energy crisis is now full-blow

probably showing my age, steve here, i remember paul volcker never fussed with such concerns. the market didn't like what he was doing who cares? i know we live in a different age now, from alan greenspan the markets have been pivotal coaxing them, preparing them, but why do we obsess about that? >> i think the markets are too obsessed with fed interest rates and not obsessed enough about what impact inflation has not just on peoples incomes but on peoples investments. so the dow, the dow ask down 222 as i look at the screen right now today. it is actually down now for the year, you know. it's down since biden took office. so when you consider that over that period we've had, oh, somewhere near 13% inflation, that means investors have lost 13% on an index fund because you know, it is not just income. it is also investments that are affected by inflation. so my point i'm making, neil, is inflation is a killer of bull markets, kills them. look what happened in the '70s. i said this many times on your show. we were at dow 1000 in 1967. they were the dow hit 800 by 1982. inflation

if that's his hero, didn't paul volcker cut spending at the same time? >> he did. spending cuts, domestic spending cuts, tax cuts, energy deregulation, and of course he then pulled the money supply out and raised nominal and real interest rates a lot. so yeah, it would be nice if we had -- you know, this is a strange story because the federal government, congress and the white house, increasing spending. recent bills are going to increase spending by, i don't know, $2 trillion or some such. so they are putting money in and the fed is trying to take money out. that's a very bizarre situation which is probably going to make things even harder to accomplish. >> ainsley: larry, on fox nation you have the unauthorized history of socialism, a live summit that will stream at 11:00 a.m. today. i understand brian will take part in this. tell us more about it. >> one of the big questions is which side brian will be on, socialism or freedom and democracy. [laughter] we will have to work that out later to attract the viewers. look, this is going to be a discussion essentially

i'm not 100% convinced they will up to the talking hawkish or impactful as a paul volcker. >> it's ait troubling to me they do seem to be moving in a panicky way. your discussion before the fed really needing to get going sooner than they did, to be more aggressive early on rather than to start slow and then get pan mickey and aggressive at a time when they might be overdoing it. they are chasing lagging indicators here. we talked about the yield curve, housing, money supply. those are leading indicators. rental inflation is a deeply lagging indicator. wages yes they're critical and important but they're a lagging indicator. very sick at sticky tied to contracts. so they don't move right away. if the fed is running the vehicle looking through a rear view mirror don't be surprised if you end up in a ditch. charles: i have to be agree with you. very wise words. >> thank you. charles: former chair of white house coins skill of economic advisors tomas phillipson. just your thoughts on this number. why do you think so many people got it wrong? listen, anecdotally there were many signs thi

this morning during this q&a session with the cato institute jay powell was asked about paul volckerefore volcker got the job. this is what he had to say. >> it is very of our view, my view that we need to act now forthrightly, strongly as we have been doing and we need to keep at it until the job is done to avoid that. we think we can avoid the kind of very high social costs that paul volcker and the fed had to bring into play in order to get inflation back down. charles: very high social costs. that to me was the key phrase. i really, i know he wants to be hawkish but i believe when it comes to the very high social cost i think he is going to blink. what are your thoughts on that? >> i think he was talking about inflation being a very high social cost. inflation impacts 100% of the population. i don't want to be callous about this but a recession and unemployment does not impact 100% of the population. really what he is trying to get at is that, and he said this in previous meetings too, if you don't get inflation under control, pretty much can't do anything else with the economy.

know, one thing in another i was able to publish a number of major major books by people like paul volcker the great fed chair earning jordan the great civil rights leader george soros who obviously doesn't do it for the money. i was able to find the wesley clarke when he came back after having won the war in kosovo was able to agree with me on a contract without having to pay ridiculous amounts of money. so there was a way to do it, but you had to have an approach that i was able to take because of my experience and most people choose or can't do that. and so what happens is they go into an auction. they meet with the public figure. sometimes that public figure doesn't even show up for the meeting. and there's an auction and then they write i have somebody write the book for me. it's just you know, it's not a good process in my view, but that's the process. so peter austenos, let's go back to your work with presidents. did you make money on the art of the deal? and what were you what were you dealing? what were you dealing with president trump? oh god the art of the deal. is a remote is t

they were totally at sea then paul volcker came in, hed chief, hit us, boom, with a series of ruthlessess than they'd needed to be if they acted aggressively a few years earlier. sound familiar today unlike back then the fed knows exactly how to beat inflation and jay powell has shown he's willing to bring the pain that means it should peak sooner next let's look at the same sticky price cpi number from today versus the early to mid a&e. '70s in red. williams points out it's very similar to what we had back then again, i'm talking about perfect correlation. it's almost eerie, isn't it? he says the current inflation action looks very similar to where we were in 1974. and 1974 was the peak. two peaks. after that we had a few years where inflation moderated substantially before again exploding in '79, which was on the large chart i showed once again williams notes that inflation only tends to persist for so long before it burns out. despite what you hear about in the media. although how we get there varies by time period finally, how about the last major bout of inflation we had in the u.

look, all their rhetoric has been paul volcker-ish, amazingly. they went in one year from the biggest doves in history to paul volcker-ish. i'm looking at three-quarters unless in the next three weeks interest rates come down in a big way, and i'm not seeing that happening. neil: that would be a fifth meeting at which time the fed has raised rates almost three full percentage points. that is amazing. that is volcker-ish-like momentum. gary, thank you very much. have a safe weekend, my friend. >> you too, sir. thank you. neil: this shouldn't come as a surprise, it was bound to happen sooner or later, but in an android-dominated world, most devices are kind of an destroyed operating system, at least in this country that has now flipped. if it is now an apple-dominated world. we're just playing in it. ♪ finding my way forward with node-positive breast cancer felt overwhelming at times. but i never just found my way, i made it. so when i finished active therapy, i kept moving forward and did everything i could to protect myself from recurrence. verze

in other words i'm paul volcker. i'm paul volcker. are you worried that he's going to push that too far? is that one of the great risks in this market? >> i think that's one of the risks. i'm also concerned about the amount of spending that we're coming out of the government making their job even harder. charles: oh, god it's ridiculous >> so you are, you know, obviously doing the best they can with the fomc but the government is just piling on extra cash into the system to exacerbate this inflation situation, and so i think between those two, it makes their job almost impossible. charles: you have a nibble a little bit. >> i have, i have. i think we are very close to a lot of bot ops. i actually bought united healthcare today, this morning, added it into the portfolio. healthcare is one of those areas holding up a lot better. i know we've juggled some other healthcare names, so i think that is one of the safer points, while we're in this risk-off period. charles: yeah, united health and sigma, i'm looking at those real close. i like

inflation, we can keep rates low and now they are saying they have coast to coast, tighter than paul volcker with their words and part of what you are seeing, they don't keep quiet, all they are talking about is higher rates and inflation, this inflation apps they caused a lot of and you are seeing it in droves right now. stuart: will inflation kick down if the fed raises interest rates? >> they are playing catch up. the 10 year yield at 3.8%. they are passengers on the bus right now, the market is doing the trick. commodity inflation, scenarios are taking over now, i am more worried, i will use a different word, i am worried about deflation. we see asset prices, a big drop in housing, we have seen that right now. that worsened. i hope that does not get out of time. people around the globe, the easiest money in the history of time, now the tightest money people in the history of time and markets reflecting it. neil: how did you do in orlando overnight with the storm? >> we dodged a big bullet. southwest of orlando where i have a lot of friends they said it has been bombed out. right now we h

he is committed to doing this the 1980's way like paul volcker and not the 70's.re also not listening if you think they're going to start stop start stop. i feel jay powell is committed to staying higher for longer and causing some pain to get the core inflation down and healthy. >> when the two-year is at 4%, are we looking at different alternatives and the fading that there is no alternative other than equities trade? >> that's the short end that has come up in the 0-6 month range, when you look at the curve we have steepness between zero and one year but the two-year is at 4% then you have 54 basis point inversion between the two year and 10 year. the 30 year is below the 10 year. you look at where the curve is showing you, it's flashing recession. if you're getting paid it four to sit around, that becomes very attractive to investors to sit out some of this carnage. i would rather be a little late then to be early right now. >> energy is a big theme. what is the strategy for finding opportunities we have these expectations that the broader economy and the hous

and i don't think what chairman powell is doing is similar to what paul volcker did.est rates go wherever they want to the go in 1980 the fomc directive said that the federal funds target would be between 8% and 14%. the fed was selling off securities to move the interest rate this fed is doing something very different. they are paying a record high interest rate on a pile of cash kept at the fed and effectively bribing commercial banks and mono market funds to keep that money from doing anything productive keep it in cash in a risk-free, government-guaranteed account receiving over 3% now, maybe 4.5 pie the end of the year. as little sense as it made to pay people not to work, now we are -- our central bank is paying banks not to lend and paying money market funds not to allow their cash to finance productive investment in the real economy >> if you wanted to cause demand to be last to bring down inflation which is the tool that the fed uses, that's a viable way of doing it. the question is is whether you kill the patient in the process and whether inflation at this

we think we can avoid the kind of very high social cost that paul volcker in the fed had to bring into order to get inflation back dead -- down. >> eu energy ministers hold emergency talks today to thrash out common measures in the hopes of countering a looming gas and electricity price crisis. european commission president ursula von der leyen has set out a 5.5 -- five point plan. it's likely to draw strong opposition from some member states. global news 24 hours a day on air and at bloomberg quicktake, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. manus: thank you very much. as the u.k. and the world mourns the passing of queen elizabeth, markets are still moving. no more important than the beginning of the dollar, yen. kuroda steps in. the biggest one-day move since the start of august. >> yes. two to three yen move against the dollar is very sudden. it's against everything the dollar is falling dramatically today. we have some strength in the euro and cables. euro had fallen yesterday after the ecb decision. perhaps the market is more concentrated on

when paul volcker conquered inflation in the 1980's, he got it down to about 4%. while people were happy to live in 4% inflation. whether it is two or three or four, it doesn't matter very much. guy: let's round this all up. professor, what are the chances of soft landing? laurence: the chances are low. it is possible if everything goes right. you can't really quantify. 10% or something like that. if everything is just right, it is possible. it is quite a bit more likely that there is a substantial increased in unemployment. alix: we appreciate you taking the time with us. wonderful analysis ahead of one --ahead of wednesday. putting more pressure on gold. we will speak to the role of goal counsel ceo, coming up next. this is bloomberg. ♪ ritika: this is "bloomberg markets." i'm ritika gupta. coming up, an executive director joining bloomberg tv. this is bloomberg. ♪ alix: -- ritika: keeping you up-to-date, here is "first word." it was the final moment for the woman who reigned over her country for 70 years. the funeral of queen elizabeth ii today. her cough and w

from the decision by the fed we get the first full point, i.e. 100 basis point hike, since the paul volcker era >>> plus two martz of the market most impacting, housing and tech we'll look at the fallout from each sect ore "the exchange, lots to do, we're back right after this new projects means new project managers. you need to hire. i need indeed. indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. visit indeed.com/hire and get started today. as a business owner, whose resumes on indeed ma your bottom line isa. always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts. saving you up to $500 a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities. ™ >>> welcome back to "the exch

the most aggressive three steps consecutive of monetary tightening since the early 1980s under paul volcker federal funds rate at 3.1% is still five percentage points below the year over year cpi inflation rate you can't control inflation with a sharply negative real inflated rate you've got to be disciplined, focused and tedetermined to get the nominal fund rate above the cpi inflation rate everybody is hoping and jay powell has been notable for being the most hopeful that the cpi would fade spontaneously that has been a disappointing forecast you know, i would say the fed is, at best, halfway down. he will end up taking the federal funds rate well above 5% which is above its latest projection and possibly up to 6% to contain inflation >> stephen, this is interesting. we are showing a sequence of charts here that have been matching the data points you talked about one was looking at the core consumer price index fuel and food prices what it shows is this leveling out and rolling over the conventional wisdom is a lag in terms of affect when it columcome to monetary policy some say 6 to 12 m

paul volcker had to take them to 20% and it took five years to tamp inflation back down, 2% from 81 to of being political enterprise errors, i have been here over four years, $18 trillion in debt when i got here, 30 now. look at all the spending we did, on top of what probably wasn't needed, the $4 trillion through the cares act. we should have been cautious, they know fiscal policy and the fed accommodated the boot and contrast it to the way it was paris covid. the best economy i've been a part of, no inflation, interest rates low, wages going up, less regulation. we need to get back to that. how you get back down, took five years. ashley: neil: the debt was going up under donald trump as well, you are right to point out, accelerated with covid. i wonder how you get out of this because your point the higher interest rates are adding to the cost of the debt. one hundred $50 billion as a result of rates going up, without anything being added to the debt. i am wondering, if the fed is the only game in town how high rates go? >> one% on $30 trillion is $30 billion and you get a few down,

inflation we have to look at federal government we got to look at regulation taxation it wasn't paul volcker by himself brought inflation under control in early 1980s, ronald reagan and and then and his advisers and different direction they pushed the economy in, had much to do with that secular decline began under reagan administration if afrm american wants to get rid one of rapidly inflation have to get rid of politicians those people in washington followed policyholders that breed inflation fuel inflation, of course, energy policy, is a great example, that is one of the reasons why, you are heating bills are going is to be so much higher come winter. maria: no acknowledge of any leo from white house, obviously because they keep coming out with spending packages if you really wanted to get your handle on inflation, you would stop spending right. leo: as it no question the first step is admitting there is a problem we don't seem to be able to take first step we heard the president say a month ago zero inflation, this month, was negligible wasn't a big deal it is a bike deal markets tell yo

paul volcker confronted our last and worst bout of inflation. alan greenspan saw the stock market crash a mere two months after his confirmation and ben bernanke led the federal reserve amidst the financial crisis of 2007 and 2008. and chair powell, as we all know, has served throughout the covid-19 pandemic and its aftermath, a period in which we've seen inflation reach its highest level in 40 years. as we've sat in front of zoom screens in the past 2 1/2 years, i'll speak for myself, many have watched with our hair turning grayer, but few of us have as good an excuse for this as chair powell we're delighted to have a discussion about key policy issues, what he's learned, and the challenges facing the fed. chair powell, it's good to see you today. welcome. >> thank you very much, peter. and thank you -- go ahead. >> i don't think it's a failure of imagination on any part, nor do i believe anyone will be surprised that the first topic we turn to is inflation. you know, as jim mentioned, it seems policymakers were initially given a bit of a head

-- obviously we have an inflation and everyone talks about getting inflation under control and paul volckerat he did to the fed previously. when inflation was high 40 years ago, volcker raised fed funds and borrowing rates were upward of 20%, painful time back then. and this is just the start of the tightening cycle and rising rates and there's more pain to come here. maria: i was looking at note and bank of england action intervening yesterday and the boe's action take financial stability seriously. just wondering, i know that's not the case here but does the fed see that and say, well, if markets crash maybe it's time for a pivot? >> well, markets are hoping that the fed will pivot they can my pivot if they want to fight inflation. they have been behind the curve and why we are going through the temper tantrum right now. we have a listening way to go to get inflation under control. what do central banks want to do. they want to protect the currency and rates and protect the economy. inflation is way out of control. if they don't stop it now, then things are going to get worse. maria: i ag

that is one of the things i takeish timiraos has this column about jay powell inflation when is% paul volcker a straight reported piece from nick timiraos, i am not criticizing him but to say that jay powell is trying to follow this volcker attack on inflation, jay powell in have large part caused all of this. we never needed -- again, you don't have to take away punchbowl if you didn't serve up hooch to investors, and enrich leveraged rich two years for two years, by the way, the end of 2020, they still passed the trump administration and everybody still passed additional covid relief, before two trillion dollars from joe biden after he took office, they were still doling out money, right and left. we didn't need it we already had vaccine, all of the stimulus should have ended when we got a vaccine, period. >> did cancels, end of 2020 jay powell term coming unwanted to be reappointed, the progressives pushing lael brainard down his throat competing with her to get reappointed you can't convince me it was also not political what was going on with the stimulus as well watching that inflation t

took paul volcker in the early 80s to tamp it down five years.et them get by with making it sound like well, the things that they have done are actually helping. in the inflation reduction act, most of the deficit reduction on anything is phony. it occurs later on. not immediately. the spending is out of the gate. they're not going to get by with it. we as republicans have to articulate it, a little better, make it easier to understand so that they don't. >> trace: i remember, i used to go out in palm springs and sonny bono was the mayor out there. when things cost more and the dow is down, people are angry. they're always angry at the people in charge, the leaders. that's how you tell them. what i was looking at all of the numbers today, what struck me the most is the fact that cbs is reporting that 46% of americans that make between 80 and $100,000 a year are carrying a monthly credit card debt. that makes people stressed. >> and it's going to be more stressful. the fed in the 80s had to take interest rates up to 20%. and here the most indebted

reserve making a choice whether you want to be arthur burns who let inflation run in the 1970s or paul volcker who screwed it down and sounds like chairman powell is intent on doing that. the white house has to suffer the consequences. david: it is not just inflation. powell came out with a grim forecast for economic growth, 0.02%, as flat as you can get for 2022. we lowered that tremendously this week. we are in a desperate stage of stagflation. jillian: mary:he's trying to prepare the public for what is happening to the economy as conditions tighten. that is something he has to do if he brings inflation out of the economy but it is going to mean basically demand destruction which is raising interest rates to the point where it is harder for companies to borrow money at low interest rates which they have been doing for many years and that will hit earnings, probably the job picture will be higher. unemployment, jerome powell trying to prepare people for that because when it happens, everyone will say you are keeping rates too high, he has the backbone to hang in there. david: it has hit, amer

it should not outvolcker, paul volcker.street is unusually alarmed by rapid unusual moves in the bond market. what do you think. >> i'm with the congressman. go back to where this came from. inflation is the result of too much money chasing too few goods. what did this administration do? added nearly five trillion dollars of demand through additional spending starting with the american rescue plan and most recently ending with the student loan bailout and so we got five trillion dollars more in demand and today they had a white house meeting. some of the senior officials in the government to discuss this, he said we'll have plans to save families money and lower costs. what did they say? we'll have airlines required to disclose the extra fees in advance so when you book a ticket you know how much you're charged for your baggage. really, that will offset a lot i bet of the five trillion dollars in additional demand. strikes me we have both the fed and the administration off on the wrong track here. the one that we can do som

that could be the biggest central increase since 1984 when paul volcker was fed chair. before yesterday's report, that probability was at zero. elon musk weighing in. he thinks the federal reserve should cut interest rates because of the drop in lumber, cop per and oil. nobody is expecting a cut in rates until next year. stock market didn't recover much from yesterday's sell off. you have more job cuts by big technology companies. that's why some are calling this the start to a white collar jobs recession. snap, goldman sachs and netflix and warner brothers discovery in laying off workers. despite the reset that we saw in stock markets, there's not much panic just yet. average investors like me and you are actually buying. they both $2 billion in discounted stocks. >> neil: thanks, susan. and then this other development that could be building markets. the fear of a nationwide railway strike on friday. for amtrak, it's already taking place. we're just learning that it has cancelled all long distance train schedules for thursday ahead of a potential freight rail shut down

that is not what paul volcker did.nd targeted monetary aggregates, m1 and m2 and let interest rates go wherever they went. he used free market pricing and price of signaling to establish interest rates instead of just dictating what the rate is going to be so we're now all fixated on the next meeting in november and again saying will it be 75 versus 50. i think we put the fed entirely too much in control of the private sector. maria: yeah. i think you make so many important points. really great analysis. and we read a bit about that in your recent op-ed in the wall street journal called biden and powell are at odds on inflation. you write this. the fed could crush demand by raising interest rates to strait ospheric levels he only to have consumer prices being pumped up through fiscal measures that expand power. it feels like powell is the only one doing anything about inflation. you're not hea hearing an acknowledgement in the white house about more spending of look at the deal they want to do for the rail companies. d

and they have and they have even back in the days of paul volcker. >> i just wonder if they're reacting too aggressively or not aggressively enough? because they increase money supply by 40% in the last two years. they drop rates to basically zero in their defense, again, we didn't know what was going to happen with covid and the economies, but pretty much everybody by the middle of last year realized that a lot of parts of the economy were stronger, you know, consumer spending, everyone's buying a car or fixing up their house in your mind, if the fed made a mistake, what would be the mistake that they made >> well, the mistake is that they kept purchasing assets well into the middle of next year and they were a little bit late, i would say, on starting to hike rates. because they were very clear signs as early as august of last year that inflation was going to run a lot hotter than what they had penciled in. but it took them a while to shift away from their transitory narrative, and sort of switch to a much more hawkish tone and now that they are, they're really starting to catch up an

i think he has placed his lot, channeling paul volcker. it worked forepaul volcker even though you know, volcker was notoriously famous for not caring a hook about impact on stock market. good thing because the market was collapsing while he was doing it. it seems like jerome powell is ready to follow that do you agree with that? >> i don't agree with the fact he should do that. i think he is talking tough now because he was so say weak or meek for many, many years leading into this. i think he wants a stake in the ground saying i'm not doing that again, i'm not making that mistake again. as soon as the fed makes that mistake again i believe they will turn dovish. don't forget, neil, as we've seen in the past bear markets in very emotional trading scenarios, whether it was 16, whether 2009, certainly 2001 and 2002, the market will rally ahead of that slowing pace of the fed. the market will rally ahead of that next up swing in earnings or economic data. so to get out at this point if you have a long-term horizon as many of our investors do

were kids, neil, and we're dating ourselves here, of the late 70s early 80s but that's when the paul volckeruts on interest rates and squeezed. they essentially were twice, cost two recessions in a matter of three years just to get inflation under control. i don't know if we're going there but we're going to come pretty close. i do want to pivot to a story i have, because this is kind of breaking news in addition i know the markets are huge, but everybody talks about tik tok that short video at that is highly controversial. republicans think it's a way that the chinese government since it's owned by a chinese company spies on americans, particularly young americans, maybe steals identities. democrats are kind of on board but it looks like the biden administration is looking at some sort of a deal with tik tok that allows it to continue operating in the u.s. as , and putting some safeguards in place , including taking their servers out of china, or singapore where they are, putting them in the u.s. , under the control of oracle, the big u.s. tech company. this was tried under the trump admini

took five years for paul volcker to tamp down inflation to 2% from back in 1981 to 1986.ng to go through some version of that. >> martha: it looks like that. i want to pull up this "washington post" opinion piece by the president of this cfrv. the committee for the reresponsible for federal budget. he said the white house is wrong. joe biden is no fiscal of responsibility. with more new debt a lot of covid relief in there i'll add, biden has done more to add to our deficits than to address them. he can claim the mantel of fiscal responsibility all he wants. the math tells a different story. we've heard so much, senator, about how the deficit has come down. so is that math inaccurate? >> that's the irony of politics. when everything that caused inflation was done by you and then you brag that it's coming down, a lot of it due to the economic laws of gravity, when you look at the economy, just go back to precovid. you talked about it earlier. everything was running on full throttle. with no inflation. raising wages in the toughest spots. now when you have the audacity to ho

now, martha, one stat interesting, paul volcker when he was fed chair in the late 70s, early 80s, theytes seven times in this period to quell inflation. the federal reserve under chairman jay powell has raised rates five times so far under president joe biden with two more rate hikes likely the next two meetings. that would be seven rate hikes. >> martha: it's going to take a couple years, he could surpass volcker's rate hikes of seven. he may need to go further than that. edward, thank you. let's bring in mark tepper, president and ceo. you're shaking your head as you look at the numbers over the next two years. >> yeah, yeah. i don't think the fed can take their foot off of the brake any time soon. inflation is red hot. jay powell mentioned, the sticky parts of inflation. when the cpi report came out, i scoured through the data. the only items that decelerated from july to august with highly discretion nary items like air fare, sporting tickets. all the essentials. food, shelter, all of those kind of things, utilities, they all accelerated. that's the real concern. the fed has a long

under control and four-time say their poster did a a u-turn in the 1970s unless you arebu named paul volckerthere's a high probability that you would cause a u-turn. i think it's not impossible but on a sustained basis it is. >> larry's not here so i can't ask him so mervyn it will come to. >> it's a turbo mistake to forecast. i'll say one thing they shouldn't be possible to reduce a target.tion to as jay powell said earlier if consistent with the target. if that's maintained over the next couple d of years we know what the fed will do. there's no reason why core inflation couldn't come back. what will actually happen is hard to touch and much will depend on the offense of the energy crisis and you could make scenarios in which inflation goes down to zero depending on what happens with the shocks. just remember the forecast on the first of january 2020 we didn't know there was a pandemic in 2021 we didn't know how demand would he ended 2022 we didn't know russia was going to invade ukraine. making for guests is a game. >> fair enough. i want to thank our panelists c for spending time with us

but 1980 and '81, inflation was out of control paul volcker crushed it, and 1982 became a space shuttle-like lift off for equities. >> yeah, no, i think that when we look at what happened tuesday and we take a longer-term view of even a year out, it doesn't matter if the fed hiked 75 basis points or 1%, right, we're 18 months out we look back and say, oh, my god, that changed everything probably not i think the big question is, if march and april of next year, are we seeing inflation year over year with a four handle or are we seeing inflation with a six handle and that will dictate what the discount rate of the markets are and what valuation are so not to concern the short-term, just because of one print. i think the market kind of overreacted from that perspective. but, inflation clearly matters, and we'll just have to see what happens next >> it does matter, david and rate hikes matter. but i'll quote another historical period, when you were probably just getting started in the business in 1994 the federal reserve raised rates by 2.5%. what we would call 250 basis points super aggressive

the last time a federal reserve chairman made that kind of dire prediction for the future was paul volcker in october of 1979 before aggressive rate hikes. now today the market believes 80% of the market believes they will move 75 basis points. there is 20% of the market who believes they will go a full percent, 100 basis points. there has never been a time under modern monetary policy prime minister work where the fed hiked three meetings in a row up 3/4 of a percent or more. that is what we're looking at. >> the more they hike the odds after soft landing get really, really poor. so you know, he's, he is in a pandora's box right now. reporter: the other big happening on capitol hill is the house financial services committee grilling ceos of major banks. the chairwoman of that committee, maxine waters pressed the bankers including jamie dimon on bank mergers. representative waters saying banks have become too large. on the economy the citigroup ceo said that covid may be behind us but economic challenges that we're facing are no less daunting. neil? neil: thank you very much. we have two b

the data may suggest they should pause and they get a rebound because of course even paul volcker had to deal with that and he messed up a little bit there. you see the labor market as strong. most folks on the street see it as strong. the last jobs report we saw all six measures of unemployment go higher and the job market couldn't absorb 700,000 people in one month coming back to the labor force. what happens if we start to see a spike in unemployment rates? would that change anything? >> absolutely and i think that means that we are in a real recession, and by real recession , i mean, we're in the kind of recession that our clients, that retail investors, don't enjoy. the profits recession. the one where companies see earnings compress enough where they start to make decisions on the labor force, and then the necessity of every job in the lineup, and that's where people get uncomfortable. we also think the retail consumer, charles you were just talking about flows over the last couple weeks. a lot of consumers are likely over invested and now we're see ing some opportunity especial