Two. That is the unmistakable opening of the message, the seminal hip hop song from Grand Master Flash and the Furious Five. Now you might wonder why are we playing that song on our podcast about the global economy. I'm Scott Landman, an economics editor with Bloomberg News in Washington, and I'm Daniel Moss, executive editor for Global Economics in New York. You know, Scott, the beauty of this is economics is too often mistaken for the study of statistics. That's boring. Economies are living, breathing things, composed of people making decisions each day. Well, one of the things that affects people in their day to day lives is inflation, and it affected people a lot more in the seventies and eighties than it does today. But anyway, the Federal Reserve has just raised interest rates by a quarter point and one of the major reasons they cited is inflation is picking up and getting close to the central banks target. But there's actually a line in the message that brings us full circle. Got a education, double digit inflation, You can take the train to the job back at the station. Now. That was in two just as the country was recovering from inflation being truly in the double digits or over ten. We were fortunate to speak with Ed Fletcher, the man who wrote those lyrics. He's also known as Juke Booty. We talked with him about what was going through his mind at the time and happening in the world around him, and we got even more than rebargained for. You'll hear that interview in just a moment. It's hard to talk that, Scott, but we thought we'd check in with Alice Rivlin. Alice is a form of vice chair of the FED now at Brookings Institution, and find out what historical perspective she has on those days and what she eases today's principal economic challenge. All right, well, without further ado, here is our interview with Ed Duke Booty Fletcher. He joins us on the phone from the beautiful southern city of Savannah, Georgia, where he is a lecturer of critical thinking at Savannah State University. Let's let's go back to that era. This was two when that song came out. Uh at different time, different economy, different political situation in our country. What inspired you to write the lyrics for that song? Actually, I don't think the times are all that different. And I tell people that I think coming up the teens are going to make the sixties, seventies and eighties look like So I think this kind of situation, you know, economic deprivation, lack of opportunity, not seeing certain images projected in a positive way, and living with it. I don't think that for a certain class of people things have changed all that much. Where were you living at the time, and how old were you? I was living in Elizabeth, New Jersey. I'm Elizabeth boy. And the things that you wrote about in the song, Where is that coming from? Well? I never say, but a lot of my friends say that I could have looked right out my living room window to the park across the street from my house and seeing any of those visions. So I guess it came from what I was living. I'm struck ed that you think the economic times are not all that different. I mean, one of the lines and the song that appeals to us as an economics podcast is the line about double digit inflation. When you look at today's inflation numbers, that seems like it's a long way away. Yeah, truly. And I and I thought about the interest rate Joe going up and what the house mortgage rate is. But to a certain class of people that really doesn't hit their consciousness. I mean they're still faced with the same problems. I mean during the you know, the housing mortgage where everyone could get a mortgage, the people I was talking to still couldn't get them. More So, if the song were written today, maybe double digit inflation, something else would go in place of that. Yeah, as far as something that rhyme with poverty kiss out on them? Well, when you when you actually wrote the song, I mean that there pictures that you created of so many different things happening. You're talking about the bill collectors, talking about can't take the train to the job, there's a strike at the station, you know, things that are happening in the streets. Why of all these things did you choose to mention double digit inflation in the middle of all that. You know, as a songwriter, you're looking for things that rod It's funny. I just did interest with the guy through Vanity Fair and he asked me about the Blind sacro Iliac, And I said, well, do you We're a songwriter and you were looking with something that rhymes was the previous wine you may have? You know, I didn't even think that was one of my best rhymes. But you know, you never know what's gonna happen. But double digit inflation, I mean, everybody can here with the fact their money ain't what he used to be. Well, how did that affect you or people you knew at the time. What was it something that you just heard about on the news all the time, or was it really burrowing into people's lives. Well, you know, you gotta understand that even at that time, I had a college degree, I had a master's degree, I had taught and for me And I just told someone today, the fact that President Trump is the president, and the fact that there's all these arguments about health care. I'm sixty I'm sixty five. My health care has been straight for thirty years. My wife worked for the government for thirty years. My kids have good health care, my grandkids have good health care. It's not so much de fact what I'm facing. What you think about a certain population and you know the sort of desilation they face, and you're trying to get to a certain audience. I can't write, you know, songs about my situation as much as I can about I did just write one about my situation, but it really doesn't have those economic references and has more of an age reference because you're going to be sixty six. And just to get back to that word you mentioned tesselation. Now you also mentioned President Trump. You know, his victory is often portrayed as a primal screen from at least some sections of the working class. Why do you think then so many people feeling desolation effectively voted to lose their healthcare. Well, you have to understand that in America, if race isn't the context, it certainly is going to be the subtext. And what people fail to talk about when they talk about President Trump. And you know, I did you look at my website. I call myself a colored conservative. And what people fail to look at as is the subject of race and the social context of how people vote. The only thing they can get a person to vote against their own economic interest is a certain social subtext or context. And I think that beyond the racial context, beyond the racial subtext, there were also other things going on with overreached by other communities. And when people feel that overreach is happening, they feel like and and and also anyone who knows history knows that the first time black people got any power in this country was during reconstruction, and reconstruction brought us Jim Kru there's always a natural, natural swing to the other side before you come back to the home meal stasis that we're used to. I mean the idea that people are persuaded to vote against their economic self interest by cultural symbols. I think that's what you're saying right exactly exactly what most people don't understand is anyone who would ever vote against their own economic interest. But that's very clear throughout history people have done that, but other ideas, and I think that those social contexts become those ideas in this case. So people might not be facing double digit inflation today, but they certainly face a host of not just economic but uh, you know, racialist issues that could be holding them back. For well, that's that's actually, if you want to know the truth, that's actually never changed. If you look during the Clinton era, when home buying in America was at its highest, there was a certain element people who still couldn't get a mortgage, who still didn't have enough money for a down payment, and who never got a home. So now those same people, you know, even though the mortgage rate was low and you could get a mortgage, I didn't have the money for more. So you know, that same destination still there. You know ed I grew up in suburban Australia, as you can probably gather, and I remember, well, I figured that he had it somewhere in England I lived in. So I was like trying to figure where is that English? The southeast of England, ten thousand miles to the southeast. But but you know there I was, you know, in my teens, and I believe it or not, that was a hit in Australia. Actually you probably do believe it, because I'm sure you've seen the night to be in my record Where to make your money? But I know where money? Okay? But the scene described in the lyrics and the video as well was something radical to me in a teenage upbringing in suburban Australia. Where was that video shot? Was that shot? It in Manhattan? It was shot in Manhattan and little known in fact, you were not actually in the video and someone else was. Lips was supposed to produce it wound up not producing it because the budget I wanted for it wasn't going to be allotted, So I said, well, you know, y'all, they can do what you want. Now would any of the people who featured in that video, and there are a lot of straight scenes recognize both the city economy in that area, the regional economy in the national economy. I mean, back then the United States and other Western countries was much more of a manufacturer. The digital economy didn't exist yet, and urban gentrification, I guess had not yet happened. What's that neighborhood look like now? Probably it was work unless some of the scenes took place in downtown Manhattan round that's like Disney Man, that's nothing like it was if you're from Jersey and you're my age, what it grew up like. But the kind of gentrification that that Harlem faced and Brookelyn is facing is facing Savannah right now. So urban scenes continually change and rechanged themselves depending on the need for housing. Who wants to live close to the urban center? Well ed, it's rare for us at Bloomberg to get such a trench and economic insights from people who, you know, we don't normally talk to on a regular basis outside of the economic and financial world. So this has been a real treat and a pleasure and an honor, you know, anytime. Man, I'd like to think of myself as somewhat of a thinker, and I do follow many of the Boomberg outlets because I follow business because business is an indicator of the future. Ed, thank you, thank you so much, Thank you so much. It's been a real pleasure, all right, man, I appreciate the time. Well, Dan, that was a little different from what we usually do here on Benchmark, wasn't it. Look who said economics is about statistics. It's about living, breathing people, companies, organizations making decisions each day. And that really was a great economic history lesson. Yeah, it sure was. Now we're about to go to a more traditional guest that we have on Benchmark. It's Alice Rivlin, former Vice chair of the FED, and we're going to see what she has to say about all this. Alice, thanks so much for joining us today. Delighted to be here. So in light of the Fed's latest decision where they cited rising inflation as one of the reasons for this latest interestry hike, we're taking a longer view of inflation today. You were the founding director of the Congressional Budget Office in the nineties, seventies and early eighties, when inflation was running at much higher rates than it is today. How did inflation affect Americans lives back then? What kinds of things do you remember from that time? Well, back then, especially in the seventies. Uh, inflation was serious and at the end of the seventies actually got into double digits, which seemed very important at the time. What it meant for individuals was that their prices of everything, we're going up. Consumer products and uh, all kinds of things, cars and houses and uh, consumer durables particularly, and other food and other things that people had to buy. And gasoline because one of the main apparent precipitating factors of such eye inflation was the oil embargo to oil embargoes actually uh, and very rapidly rising prices of oil and gasoline. Was it the kind of situation where you would go to the grocery store from one month to the next or the gas station from one month to the next, and you'd be like, oh, my goodness, the prices have gone up so much. Yes, it wasn't actually a runaway inflation such as many developing countries had experienced. And Germany after World War One, where you had to take wheelbarrows full of marks to buy anything. It wasn't like that, but it was really serious inflation, prices rising from one month to the next in almost everything, and you know Alice. Today it seems like the situation has been turned on its head. You could almost hear the cheers from central bankers, not just in the United States but around the world. In the last few months, there's some inflation, yippie two percent. It feels like the problem of the last few years has been deflation or disinflation in the world's major economy. Is probably something you never thought you'd confront. Absolutely, the Japanese were the first to confront real deflation. Prices going down, and prices going down is a bad thing because people then expect them to go down further, so they don't buy things. They post poland purchases in hopes of better prices. Uh, and then the situation gets worse. One can say, inflation on the upside also has self perpetuating capacity, but on the downside it's really dangerous. And the Japanese deflation was very worrisome, and they haven't really gotten back to normal levels of inflation even yet, and it worried all the advanced countries. The United States never actually had uh negative inflation, But uh, that's central bankers were worried about a few years ago. You actually, you know, we're at the FED at a time when the memories of the nineties, seventies and early eighties still seemed to be very fresh. It seemed to persist for a long time, and many of the more hawkish policymakers who lived through that era have warned in recent years that any excessive stimulus from the FED would cause inflation to skyrocket. And yet that hasn't happened. Why is that? That's right? I was at the FED uh in the second part of the nineties to ninety nine. Then we had very good growth in the economy. We had tight labor markets, we got the unemployment rate down below four percent briefly at one time, and yet there was no inflation. And the economists who were looking at their models and models tell you what used to happen in the past. We're all saying we're going to get inflation. We're going to get inflation, and we have to guard against that. But it wasn't happening. And at the FED, we were trying to figure out why it wasn't happening. Alan Greenspan had a theory that proved to be right. Actually that productivity growth had accelerated as people learned how to use the internet, and UH that the productivity growth was giving businesses a way to accommodate rising wages without raising their prices. UH. That turned out to be at least part of the explanation. But we weren't seeing inflation. And at the time I began saying two people at the FED and other places, I don't think we're going to see inflation for quite a while because we've gotten away from the inflation prone situation in the economy that we had in the seventies and eighties. In the seventies and eighties, we had very strong unions, often with multi year contracts that tied wages to the consumer price index UH, and that meant that you had a self perpetuating situation there. If prices went up, wages would go up, and that would put further pressure on Also, the economy was not nearly as flexible as it is now. Back in those days. If you were short of something, especially skilled labor, UH, you had to raise wages and therefore costs uh to get more labor. Now you don't, Uh. You go on the internet and find skilled people somewhere else in another part of our country or another part of the world. So our economy is just much more flexible and UH spawns more quickly to shortages than it did. Then. There are a lot of other reasons, but I think we don't have the same situation that we had in the seventies and eighties. The other big thing is nobody, no one adults UH have experienced inflation for a very long time, and the expectation of inflation is one of the things that fuels this self perpetuating cycle cycle. Back then, if prices went up, people said, oh dear, they're going up more. We're going to have to buy quickly. But now nobody expects inflation. We haven't had any for a long time, and as you said, the Fed's been worrying about it's being too low. Uh. So UH, we just don't have those inflationary expectations, you know, Alice, We just heard from Duke Pooty who wrote the message. He was saying, well, just because there's no longer double digit inflation does not mean we're out of the economic woods. It does not mean there aren't serious economic challenges facing Americans and the world today. What's number one of your worry list? I have a long worry list, and inflation is very far down it. Uh one is the inequality of growth in the United States, where the fruits of growth have gone more and more heavily to the top one or two percent of the income distribution, and wages of average people have lagged far behind. That's very serious. I think climate change is a very serious threat over time to all of our economies, and we're not addressing it. I think financial instability is another threat. We just saw in two thousand and eight that we can have a crisis in our financial system and that precipitates a terrible recession that we're only now recovering fully from. Uh. So, that's that's why uh uh Top three. I could give you some more before I got to inflation. Well, let's let's go back to inflation again. The FED is actually mandated by Congress to focus on stable prices and maximum employment, the so called dual mandate. Most other central banks in the developed world, Bank of England, European Central Bank, so on, and so forth, also have mandates to focus on price stability, and they many of them, have interpreted it to mean trying to achieve inflation of two Should lawmakers in these countries think about changing these kinds of mandates to focus on some of the other kinds of things you were talking about more prominently? And is two percent inflation the right target to be focused on if they have to decide on a on a stable price target. I think two percent is a pretty good goal. Back when I was at the FED, actually the inflation hawks used to aim for zero. But I think we have learned that zero puts you in a dangerous place. You might get deflation because you can't be very exact about it. Uh. Two percent is an okay number. I wouldn't be terribly worried if inflation crept up to two and a half or three, because I think inflation is what central banks know how to deal with very easily. Uh. If inflation does seem to be getting too high, then they can raise interest rates and that that work. We know that. Uh. The things that are much harder to deal with, our slow growth and other things that the Federal Reserve doesn't have very good instruments to to deal with. If you UH lower the rate, the short term interest rate UH down near zero, you can't get it below zero. And if your economy is still in recession, then you have to figure out what else to do now. In the Great Recession, everybody figured it out, and the central banks had good success with increasing monetary ease by UH simply buying security but keeping downward pressure on the range of interest rates. But it's not guaranteed to be successful very quickly. Fiscal policy is much more effective in raising growth and employment. UM So, I don't mind a two percent target on inflation. I just think it shouldn't be taken too seriously if we rise above it a little bit, all right, Well, Alice, we're going to have to leave it there. Thank you so much for joining us today. This has been a very enlightening conversation. Good enjoyed it. Benchmark will be back next week and until then, you can find us in so many places the Bloomberg terminal, Bloomberg dot com, or Bloomberg App, as well as on iTunes, pocketcasts, and Stitcher. While you're there, please rate and review the show so more listeners can find us. And you can find us on Twitter I'm at at scott Landman and Dan you are at at Moss. Underscore Echo Benchmark is produced by Sarah Patterson and the head of Bloomberg Podcast is Alec McCabe. Thanks for listening, See you next time. But the time party back to Torment and turned back and the sundered by pass my fnger

Two. That is the unmistakable opening of the message, the seminal hip hop song from Grand Master Flash and the Furious Five. Now you might wonder why are we playing that song on our podcast about the global economy. I'm Scott Landman, an economics editor with Bloomberg News in Washington, and I'm Daniel Moss, executive editor for Global Economics in New York. You know, Scott, the beauty of this is economics is too often mistaken for the study of statistics. That's boring. Economies are living, breathing things, composed of people making decisions each day. Well, one of the things that affects people in their day to day lives is inflation, and it affected people a lot more in the seventies and eighties than it does today. But anyway, the Federal Reserve has just raised interest rates by a quarter point and one of the major reasons they cited is inflation is picking up and getting close to the central banks target. But there's actually a line in the message that brings us full circle. Got a education, double digit inflation, You can take the train to the job back at the station. Now. That was in two just as the country was recovering from inflation being truly in the double digits or over ten. We were fortunate to speak with Ed Fletcher, the man who wrote those lyrics. He's also known as Juke Booty. We talked with him about what was going through his mind at the time and happening in the world around him, and we got even more than rebargained for. You'll hear that interview in just a moment. It's hard to talk that, Scott, but we thought we'd check in with Alice Rivlin. Alice is a form of vice chair of the FED now at Brookings Institution, and find out what historical perspective she has on those days and what she eases today's principal economic challenge. All right, well, without further ado, here is our interview with Ed Duke Booty Fletcher. He joins us on the phone from the beautiful southern city of Savannah, Georgia, where he is a lecturer of critical thinking at Savannah State University. Let's let's go back to that era. This was two when that song came out. Uh at different time, different economy, different political situation in our country. What inspired you to write the lyrics for that song? Actually, I don't think the times are all that different. And I tell people that I think coming up the teens are going to make the sixties, seventies and eighties look like So I think this kind of situation, you know, economic deprivation, lack of opportunity, not seeing certain images projected in a positive way, and living with it. I don't think that for a certain class of people things have changed all that much. Where were you living at the time, and how old were you? I was living in Elizabeth, New Jersey. I'm Elizabeth boy. And the things that you wrote about in the song, Where is that coming from? Well? I never say, but a lot of my friends say that I could have looked right out my living room window to the park across the street from my house and seeing any of those visions. So I guess it came from what I was living. I'm struck ed that you think the economic times are not all that different. I mean, one of the lines and the song that appeals to us as an economics podcast is the line about double digit inflation. When you look at today's inflation numbers, that seems like it's a long way away. Yeah, truly. And I and I thought about the interest rate Joe going up and what the house mortgage rate is. But to a certain class of people that really doesn't hit their consciousness. I mean they're still faced with the same problems. I mean during the you know, the housing mortgage where everyone could get a mortgage, the people I was talking to still couldn't get them. More So, if the song were written today, maybe double digit inflation, something else would go in place of that. Yeah, as far as something that rhyme with poverty kiss out on them? Well, when you when you actually wrote the song, I mean that there pictures that you created of so many different things happening. You're talking about the bill collectors, talking about can't take the train to the job, there's a strike at the station, you know, things that are happening in the streets. Why of all these things did you choose to mention double digit inflation in the middle of all that. You know, as a songwriter, you're looking for things that rod It's funny. I just did interest with the guy through Vanity Fair and he asked me about the Blind sacro Iliac, And I said, well, do you We're a songwriter and you were looking with something that rhymes was the previous wine you may have? You know, I didn't even think that was one of my best rhymes. But you know, you never know what's gonna happen. But double digit inflation, I mean, everybody can here with the fact their money ain't what he used to be. Well, how did that affect you or people you knew at the time. What was it something that you just heard about on the news all the time, or was it really burrowing into people's lives. Well, you know, you gotta understand that even at that time, I had a college degree, I had a master's degree, I had taught and for me And I just told someone today, the fact that President Trump is the president, and the fact that there's all these arguments about health care. I'm sixty I'm sixty five. My health care has been straight for thirty years. My wife worked for the government for thirty years. My kids have good health care, my grandkids have good health care. It's not so much de fact what I'm facing. What you think about a certain population and you know the sort of desilation they face, and you're trying to get to a certain audience. I can't write, you know, songs about my situation as much as I can about I did just write one about my situation, but it really doesn't have those economic references and has more of an age reference because you're going to be sixty six. And just to get back to that word you mentioned tesselation. Now you also mentioned President Trump. You know, his victory is often portrayed as a primal screen from at least some sections of the working class. Why do you think then so many people feeling desolation effectively voted to lose their healthcare. Well, you have to understand that in America, if race isn't the context, it certainly is going to be the subtext. And what people fail to talk about when they talk about President Trump. And you know, I did you look at my website. I call myself a colored conservative. And what people fail to look at as is the subject of race and the social context of how people vote. The only thing they can get a person to vote against their own economic interest is a certain social subtext or context. And I think that beyond the racial context, beyond the racial subtext, there were also other things going on with overreached by other communities. And when people feel that overreach is happening, they feel like and and and also anyone who knows history knows that the first time black people got any power in this country was during reconstruction, and reconstruction brought us Jim Kru there's always a natural, natural swing to the other side before you come back to the home meal stasis that we're used to. I mean the idea that people are persuaded to vote against their economic self interest by cultural symbols. I think that's what you're saying right exactly exactly what most people don't understand is anyone who would ever vote against their own economic interest. But that's very clear throughout history people have done that, but other ideas, and I think that those social contexts become those ideas in this case. So people might not be facing double digit inflation today, but they certainly face a host of not just economic but uh, you know, racialist issues that could be holding them back. For well, that's that's actually, if you want to know the truth, that's actually never changed. If you look during the Clinton era, when home buying in America was at its highest, there was a certain element people who still couldn't get a mortgage, who still didn't have enough money for a down payment, and who never got a home. So now those same people, you know, even though the mortgage rate was low and you could get a mortgage, I didn't have the money for more. So you know, that same destination still there. You know ed I grew up in suburban Australia, as you can probably gather, and I remember, well, I figured that he had it somewhere in England I lived in. So I was like trying to figure where is that English? The southeast of England, ten thousand miles to the southeast. But but you know there I was, you know, in my teens, and I believe it or not, that was a hit in Australia. Actually you probably do believe it, because I'm sure you've seen the night to be in my record Where to make your money? But I know where money? Okay? But the scene described in the lyrics and the video as well was something radical to me in a teenage upbringing in suburban Australia. Where was that video shot? Was that shot? It in Manhattan? It was shot in Manhattan and little known in fact, you were not actually in the video and someone else was. Lips was supposed to produce it wound up not producing it because the budget I wanted for it wasn't going to be allotted, So I said, well, you know, y'all, they can do what you want. Now would any of the people who featured in that video, and there are a lot of straight scenes recognize both the city economy in that area, the regional economy in the national economy. I mean, back then the United States and other Western countries was much more of a manufacturer. The digital economy didn't exist yet, and urban gentrification, I guess had not yet happened. What's that neighborhood look like now? Probably it was work unless some of the scenes took place in downtown Manhattan round that's like Disney Man, that's nothing like it was if you're from Jersey and you're my age, what it grew up like. But the kind of gentrification that that Harlem faced and Brookelyn is facing is facing Savannah right now. So urban scenes continually change and rechanged themselves depending on the need for housing. Who wants to live close to the urban center? Well ed, it's rare for us at Bloomberg to get such a trench and economic insights from people who, you know, we don't normally talk to on a regular basis outside of the economic and financial world. So this has been a real treat and a pleasure and an honor, you know, anytime. Man, I'd like to think of myself as somewhat of a thinker, and I do follow many of the Boomberg outlets because I follow business because business is an indicator of the future. Ed, thank you, thank you so much, Thank you so much. It's been a real pleasure, all right, man, I appreciate the time. Well, Dan, that was a little different from what we usually do here on Benchmark, wasn't it. Look who said economics is about statistics. It's about living, breathing people, companies, organizations making decisions each day. And that really was a great economic history lesson. Yeah, it sure was. Now we're about to go to a more traditional guest that we have on Benchmark. It's Alice Rivlin, former Vice chair of the FED, and we're going to see what she has to say about all this. Alice, thanks so much for joining us today. Delighted to be here. So in light of the Fed's latest decision where they cited rising inflation as one of the reasons for this latest interestry hike, we're taking a longer view of inflation today. You were the founding director of the Congressional Budget Office in the nineties, seventies and early eighties, when inflation was running at much higher rates than it is today. How did inflation affect Americans lives back then? What kinds of things do you remember from that time? Well, back then, especially in the seventies. Uh, inflation was serious and at the end of the seventies actually got into double digits, which seemed very important at the time. What it meant for individuals was that their prices of everything, we're going up. Consumer products and uh, all kinds of things, cars and houses and uh, consumer durables particularly, and other food and other things that people had to buy. And gasoline because one of the main apparent precipitating factors of such eye inflation was the oil embargo to oil embargoes actually uh, and very rapidly rising prices of oil and gasoline. Was it the kind of situation where you would go to the grocery store from one month to the next or the gas station from one month to the next, and you'd be like, oh, my goodness, the prices have gone up so much. Yes, it wasn't actually a runaway inflation such as many developing countries had experienced. And Germany after World War One, where you had to take wheelbarrows full of marks to buy anything. It wasn't like that, but it was really serious inflation, prices rising from one month to the next in almost everything, and you know Alice. Today it seems like the situation has been turned on its head. You could almost hear the cheers from central bankers, not just in the United States but around the world. In the last few months, there's some inflation, yippie two percent. It feels like the problem of the last few years has been deflation or disinflation in the world's major economy. Is probably something you never thought you'd confront. Absolutely, the Japanese were the first to confront real deflation. Prices going down, and prices going down is a bad thing because people then expect them to go down further, so they don't buy things. They post poland purchases in hopes of better prices. Uh, and then the situation gets worse. One can say, inflation on the upside also has self perpetuating capacity, but on the downside it's really dangerous. And the Japanese deflation was very worrisome, and they haven't really gotten back to normal levels of inflation even yet, and it worried all the advanced countries. The United States never actually had uh negative inflation, But uh, that's central bankers were worried about a few years ago. You actually, you know, we're at the FED at a time when the memories of the nineties, seventies and early eighties still seemed to be very fresh. It seemed to persist for a long time, and many of the more hawkish policymakers who lived through that era have warned in recent years that any excessive stimulus from the FED would cause inflation to skyrocket. And yet that hasn't happened. Why is that? That's right? I was at the FED uh in the second part of the nineties to ninety nine. Then we had very good growth in the economy. We had tight labor markets, we got the unemployment rate down below four percent briefly at one time, and yet there was no inflation. And the economists who were looking at their models and models tell you what used to happen in the past. We're all saying we're going to get inflation. We're going to get inflation, and we have to guard against that. But it wasn't happening. And at the FED, we were trying to figure out why it wasn't happening. Alan Greenspan had a theory that proved to be right. Actually that productivity growth had accelerated as people learned how to use the internet, and UH that the productivity growth was giving businesses a way to accommodate rising wages without raising their prices. UH. That turned out to be at least part of the explanation. But we weren't seeing inflation. And at the time I began saying two people at the FED and other places, I don't think we're going to see inflation for quite a while because we've gotten away from the inflation prone situation in the economy that we had in the seventies and eighties. In the seventies and eighties, we had very strong unions, often with multi year contracts that tied wages to the consumer price index UH, and that meant that you had a self perpetuating situation there. If prices went up, wages would go up, and that would put further pressure on Also, the economy was not nearly as flexible as it is now. Back in those days. If you were short of something, especially skilled labor, UH, you had to raise wages and therefore costs uh to get more labor. Now you don't, Uh. You go on the internet and find skilled people somewhere else in another part of our country or another part of the world. So our economy is just much more flexible and UH spawns more quickly to shortages than it did. Then. There are a lot of other reasons, but I think we don't have the same situation that we had in the seventies and eighties. The other big thing is nobody, no one adults UH have experienced inflation for a very long time, and the expectation of inflation is one of the things that fuels this self perpetuating cycle cycle. Back then, if prices went up, people said, oh dear, they're going up more. We're going to have to buy quickly. But now nobody expects inflation. We haven't had any for a long time, and as you said, the Fed's been worrying about it's being too low. Uh. So UH, we just don't have those inflationary expectations, you know, Alice, We just heard from Duke Pooty who wrote the message. He was saying, well, just because there's no longer double digit inflation does not mean we're out of the economic woods. It does not mean there aren't serious economic challenges facing Americans and the world today. What's number one of your worry list? I have a long worry list, and inflation is very far down it. Uh one is the inequality of growth in the United States, where the fruits of growth have gone more and more heavily to the top one or two percent of the income distribution, and wages of average people have lagged far behind. That's very serious. I think climate change is a very serious threat over time to all of our economies, and we're not addressing it. I think financial instability is another threat. We just saw in two thousand and eight that we can have a crisis in our financial system and that precipitates a terrible recession that we're only now recovering fully from. Uh. So, that's that's why uh uh Top three. I could give you some more before I got to inflation. Well, let's let's go back to inflation again. The FED is actually mandated by Congress to focus on stable prices and maximum employment, the so called dual mandate. Most other central banks in the developed world, Bank of England, European Central Bank, so on, and so forth, also have mandates to focus on price stability, and they many of them, have interpreted it to mean trying to achieve inflation of two Should lawmakers in these countries think about changing these kinds of mandates to focus on some of the other kinds of things you were talking about more prominently? And is two percent inflation the right target to be focused on if they have to decide on a on a stable price target. I think two percent is a pretty good goal. Back when I was at the FED, actually the inflation hawks used to aim for zero. But I think we have learned that zero puts you in a dangerous place. You might get deflation because you can't be very exact about it. Uh. Two percent is an okay number. I wouldn't be terribly worried if inflation crept up to two and a half or three, because I think inflation is what central banks know how to deal with very easily. Uh. If inflation does seem to be getting too high, then they can raise interest rates and that that work. We know that. Uh. The things that are much harder to deal with, our slow growth and other things that the Federal Reserve doesn't have very good instruments to to deal with. If you UH lower the rate, the short term interest rate UH down near zero, you can't get it below zero. And if your economy is still in recession, then you have to figure out what else to do now. In the Great Recession, everybody figured it out, and the central banks had good success with increasing monetary ease by UH simply buying security but keeping downward pressure on the range of interest rates. But it's not guaranteed to be successful very quickly. Fiscal policy is much more effective in raising growth and employment. UM So, I don't mind a two percent target on inflation. I just think it shouldn't be taken too seriously if we rise above it a little bit, all right, Well, Alice, we're going to have to leave it there. Thank you so much for joining us today. This has been a very enlightening conversation. Good enjoyed it. Benchmark will be back next week and until then, you can find us in so many places the Bloomberg terminal, Bloomberg dot com, or Bloomberg App, as well as on iTunes, pocketcasts, and Stitcher. While you're there, please rate and review the show so more listeners can find us. And you can find us on Twitter I'm at at scott Landman and Dan you are at at Moss. Underscore Echo Benchmark is produced by Sarah Patterson and the head of Bloomberg Podcast is Alec McCabe. Thanks for listening, See you next time. But the time party back to Torment and turned back and the sundered by pass my fnger