Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan. I'm a senior editor at Bloomberg and I'm Moldana across asset reporter with Bloomberg. Add this week on the show. Well, we hate to sound like a broken record around here, but when it comes to financial markets, it's all about inflation again. Both the stock and bond markets got off to a roaring starts of the year following a disastrous twenty twenty two. I've made hopes that last year's surge and consumer prices had finally been tamed, but that strong start has mostly been reversed following some higher than expected inflation readings both in the US and Europe. So where do we stand now? Are these recent reports just potholes on the road to the normalization of inflation or is something else going went on? And what does it all mean for the path of interest rates. We'll get into it with a very influential economist who's best known for being Vice Chair of the Federal Reserve and a member of President Bill Clinton's Council of Economic Advisors in the nineteen nineties. He's got a new book out and it's all about the history of monetary and fiscal policy in the US. But first, vil Donna, I have to say I'm excited about this guest for two reasons. One, I think he's the perfect guest to sort of talk about all the issues affecting markets these days. But also, do you remember how excited I got a few weeks ago? Unreasonable, I will admit, unreasonably excited when I got to ride the Dinky. Yes, I remember? You remember what the dire happy it's Is it a train or a bus? It's a train. It's it's the shortest I believe, maybe our guests can correct me. It's the shortest train line commuter train line in the US. It's like two and a half miles. It goes from Princeton Junction to Princeton to Princeton University or Princeton Town the town Okay, well, yes, yes to both. Yeah, it lands right on campus. You were not as excited when I got to ride that as No, because how long of a ride? Is that? A minute? Like it's like I think it's like five minutes. Okay, So you can't even sit down, you can't even have a snack. You can you have to snack quickly. You have to snack quickly. That's what makes it exciting, is the superlative of the shortest ever train line. I've never I've never been on it. Maybe you and I can make a trip out there. We should, We should. I think our guests has been on it, including our guests. I bet he's written it. I have many times. Okay, well, before you tell us more, it's the person speaking is Alan Blinder. He's a professor of economics at Princeton and he's a former FED vice chair. Thanks so much for joining us on the podcast. Oh, sure, you're welcome. How has the dinky been riding it? Well? Have it it lately? I mean that's the way to get to New York. I used to go to New York quite a lot. Two things happened. The obvious one is the pandemic, and I don't go there very much anymore. The non obvious one is we had some grandchildren, little ones in Washington, so my wife and I now go south more often than we own North. Oh, let's get into sort of the current state of the markets. And by the way, congratulations on your book. I'm about halfway through it. It It really fascinating and I think just a really important read for anyone who wants to get an overview of sort of how we got where we are and sort of the the dynamic between monetary and fiscal policy and sometimes frictions. I guess you could say, but I'm curious how you're thinking right now about inflation. Yoyo'd op ed in the Wallstreet Journal earlier this year in which you were very optimistic that perhaps we've seen the worst of inflation. You look at sort of the first half of the year twenty twenty two versus the second half. It was super hot, double digit inflation in the first half, and then back closer to the Fed's target in the second half. You know, if you look at it month over month on an annualized basis, I think it was three months annualized basis. Correct me if I'm wrong. But we have seen sort of renewed concern about inflation. The January numbers were a little hotter, both pc and CPI. This week, the market's reacting pretty strongly to France, Spain, and Germany reputing hotter than expected inflation. How are you thinking about it now? Is it still is there still reason to be optimistic that we're trending in the right direction. You know, is this just sort of a pothole on that road to normalization or is there any reason to be more concerned. I think it's more of a pothole with one big exception. And this is my beef with the Bureau of Labor Statistics that I usually love, it's one of the great statistical agencies in the world. But what they did after I wrote that Wall Street Journal piece that you correctly referred to, this is going to send very wonkish change the seasonal adjustment factors. So it's no longer true. If you look at the year when I wrote that piece, it was true that roughly speaking, inflation in twenty twenty two was about eleven percent annual rate in the first half and about a two percent annual rate in the second half. Of Wow, that's quite a difference. It's nothing like that now because of changing the seasonals, which you know, struck me as dirty pool for a prognosticator. I was looking at what turned out to be wrong data. That said, the qualitative story that old lower inflation in the second half than in the first half remains true. That did not disappear from the data. It's also mostly universal. I won't say every country, but it's certainly true in Europe and in most other countries. But in terms of magnitude, nothing like what it was before they change the data. And that's the sense in which I view it as a kind of a pothole, but a pothole now on a road that's not as deeply declining as we used to think, but declining. That's important. So can you tell us more about this because this piece it did come out a couple of weeks ago before we got the minutes from the last FED meeting. But you said the FED now has a good chance at a soft economic landing. Yeah, because of this data revision, I'm revising that we whole revise things where we get new data. I'm revising that to be a little less optimistic. I think they still have a chance, but it's a tougher chance than it was, you know, just to repeat with the old data. By late in twenty twenty two, we are pretty close to the target where the FED wanted to be, but with the new data, we're not quite as close. And among other things, that means we have to fed as likely to raise interest rates more. Okay, I have a bunch of follow up questions about this, because there's a bunch of debates going on, you know, especially when I'm hearing people on bloom or TV or people I talked to on a daily basis, A lot of them are saying that a six percent Fed funds rate is a real possibility. To what extent you would agree with that, No, I'd bet against that. It's not beyond the realm of the possible. You're reminding me a bit when I was on the FED in ancient times in the nineteen nineties. You're too young to remember this. When we were tightening in ninety four ninety five, market sentiments at one point, not just for a day, for a while was that we were going to go up to eight percent on the federal funds rate. I remember sitting there in my office in Washington saying, are those people crazy? We're not going to go anywhere near eight percent. But in those days you weren't allowed to say anything. Those are the days when the FED was mum and if the markets flew off in some wild direction, Alan Greenspan, who was the chairman, wouldn't do anything to bring them back. Eventually, events brought them back, and in fact, we topped out coincidentally at six percent, not eight percent, so I'd be surprised if we get to six. I want to get into that idea of the Fed staying mom and sort of compare and contrast that with today. But first, before we do that, I think two things have shifted in the sort of the market's view of where the Fed's rate is going to go. One is exactly how high it's going to go, and we can debate five and a quarter, five and a half or six. But I think what's we're alarming to investors these days is the notion that it's going to stay there for a while. Um. You know, we we came into this year. If you look at the dot plot, uh you know, which is the feds uh individual members projections of where they see the FED funds rate or even market pricing in the SOFA or Fed funds futures markets that you know, it seemed to be at an unanimous consensus almost that that rate would peak maybe this spring early summer, and then immediately come down, that the Fed would pivot and start cutting rates. That seems to be you know, that dot plot hasn't been updated yet, but I'm assuming what it is that that that pivot's not no longer going to be there, and in the pricing of the you know, SOFA and FED funds futures market, it's no longer there either. Is that the correct interpretation and view of the rest of the year, do you think? I think so? I think the markets were getting were, frankly a little bit wacky when they had, as you correctly characterize, view that the FED was going to go up to a peak and then write down that's not what usually happens with monetary policy. The much more likely scenario always was it was going to go up to some peak, and one could debate, and people did debate where that peak would be, and then hang around there for a while see what happens. The same thing is true when the FED is going down. It goes down for a while, it flattens out, usually to wait and watch, wait and watch what, among other things, the effects of the policy it's already promulgated, and then keep moving if necessary, or reverse if that seems appropriate. So I never thought that was a likely scenario, and I'm glad to see the markets don't believe it anymore. And what about the debate that the FED will have to rethink it's two percent target. And we've had guests on this podcast as well arguing that maybe they should be rethinking that two percent just isn't very realistic. So let me assure you of one thing, and then I elaborate slightly. There is no debate inside the FIT. None. Zero. It is not going to happen. Bet your whole portfolio on it, all right, if the FIT is not changing its target. Now, a broader question, which is interesting to economists and historians we're talking about a book on economic history here, is whether it should have set a higher number when it did latch onto a target not two. I think that's quite debatable, and I think I'd be on the side of yes, it should have gone higher. So why do I say both? Because and the reason it's the same answer to the reason. Why is there no debate at the FIT? Because it would look like caving, giving in, surrendering. We can't do it, So we're going to make our target easier. And immediately people would start saying, oh, you went up to three, how do I know you don't go up to four? And those are the kinds of reasons why the FED will never ever. Ever, well, ever is much too long. Let's say for the next thirty five years that it is not going to think about changing the target. What would have been, in your view, a better target than two. I thought three would be better than two. And the main reason is what we were experiencing before the pandemic with zero quote zero interest rates, that if it was three rather than two, the FED would have had more room as the economy crater to push the economy out of the crater with lower interest rates, as if it had started with interest rates one hundred basis points higher than it did, or would add one hundred basis points more easy before it had to resort to the so called unconventional policies. Well, and I think maybe an important distinction to draw is the idea of while the FED may not change that two percent target, I assume that that doesn't necessarily mean that they won't pause or pivot before it gets to two. Right, Absolutely, I think they'll pause, not pivot, That's what we're talking about. Before. They'll pause once inflation gets low enough and is falling, so the two percent, so to speak, is in sight, then they'll pause to see, all right, is it going to two? Is it not going to two? How's the economy look? And so what about other areas within the economy? Actually hear this question a lot, and I asked this question a lot when I'm talking to people. Look where actually are we seeing any weakness? Or I'm thinking about the housing market. I get a ton of notes in my inbox on a daily basis that says, the housing market now is also showing some signs of pricking up and of a turnaround, and the consumer remains strong, etcetera. Where might you point to even show any weakness right now? I point to the housing market, and I'm getting the same email says you're getting or some of them. And if you look at the graphs that accompany with them, it looks like it's gone down, down, down a usual way and then a tiny little uptick. Let me see that uptick grow over a month, and then I'll start getting worried. And the reason I say that is that classically for decades, if you ask people on the fed away from microphones, so it's stop being recorded by Bloomberg, where do you think you can do your damage or help for that matter, If it's the other direction on the economy, they'll say, housing, Housing is by far the most sensitive to interest rates, and to me, despite these little blips of optimism, very lately housing as well down, and that's what you'd expect. The second place, by the way, is more puzzling, and I can't figure it out, which is automobile purchases. They generally respond to interest rates a lot. And the reason I can't figure it out of the reasons maybe there are people that are more expert in the auto market than I is. As you remember, we had all these shortages the manufacturers couldn't make enough cars because they couldn't get enough chips and so on and so forth, and there have been some unusual fluctuations, so you wouldn't want to attribute those down drafts to interest rates, and that sort of confused the whole picture. So I don't know what to make of automobiles if and I just haven't studied it enough. Maybe if I had, i'd have a clearer pictures. But those are the two places, and the third, which is also down, is business investment. The worst of this past recession caused by the pandemic was in concert sumer services. Anybody who was expecting the FEDS tightening to affect spending on consumer services was not paying attention to history. It doesn't have any effect zero. Now that's a big hunk of the economy. But even in the good old days when nobody questioned whether the FED could push the economy around, like the Volker days or the Greenspan days, nobody on nobody at the FED. I don't want to speak about the whole earth. No nobody at the FED ever thought they were able to either push up or push down consumer spending on services. You know, Professor, It's it's interesting how one hundred percent of the discussion around fighting inflation these days relates to monetary policy and what the FED can or can't do. A part of your book that I found really fascinating is you get into the sixties during the present and see of JFK and LBJ and how the the Keynesian economists had really come into power and you know, and influence under both of those administrations, and you know, the notion of you know, using fiscal spending to boost demand, don't let worries about the deficit really handcuff you in that sense, And you talk about how Keynesians sort of got a bad rap back then because inflation accelerated pretty pretty fast during the Vietnam War because of all the defense outleads and Keynesians were actually advising on fiscal restraint to to to to bring down inflation. And as you point out, I think you know, and this to me is kind of relates to today's world two with modern monetary theory, in that it's very easy for a politician to go out there and promise lower taxes, more spending, that sort of thing. It's pretty much political suicide to to suggest some kind of fiscal constraint and higher taxes, less spending in order to help reduce inflation. Is it just a lost cause to ever think that fiscal policy could or will ever be used in the fight against inflation? Is it just too politically impossible to even consider anymore. Yes, in a word, I wish it weren't true, but I think it is true. One of the things I discovered in reminded myself, i should say, in researching and writing this book is and this is to your point, the last time fiscal policy was used deliberately by the government to take some steam out of the economy to fight inflation was nineteen sixty eight nineteen sixty eight. That's a long time. There had been other episode since sixty eight in which fiscal policy turned contractionary, but that was always motivated by concerns about the deficit, not about concerns about the economy. I was in the Clinton administration and that was an example. Right, we promulgated and barely got through Congress by the skin of our teeth, or more accurately, by Al Gore breaking a tie vote in the Senate, a contractionary fiscal policy to reduce the deficit. It was not to bring down inflation. The inflation was three percent. Most of us thought, oh, three percent, We were just talking about three percent inflation. Believe me, Bill Clinton was not concerned that the inflationary was three percent and that was terrible. He was concerned about the budget deficit. So there have been some episodes like that, but none since These Keynesian economists who were referring to finally convinced Johnson that we needed to raise taxes because of the Vietnam inflation, and then john after a year and a half of cajoling, finally convinced Congress to do it. It was a really hard fight. Since then, there's been no fiscal contraction for demand management reasons. I love taking all the different scenarios and historical time periods that you talk about in the book and then comparing them to maybe developments that we've seen over the last ten years or so. And you said recessions at the end of the fifties and the two recessions at the end of the fifties and at the start of the sixties, they didn't see Congress or the White House coming in to help mitigate things. And obviously that is very different from what we saw during the COVID pandemics. So maybe you could talk a bit about that and how things have changed. Yeah, those episodes that you talked about were in the United States, though not in Europe in the pre Kansian era. Came Zianism was considered back then a strange foreign doctrine. Probably some people were calling it communist. I was once called a Malice Keynesian. I haven't figured out what that is yet, But in those days in the Eisenhower administration, the Keynesian ideas had just not caught on in the American political world. They had in the academic world absolutely. I mean I was a young student back in the sixties and we were taught that kind of stuff, but an academia, no, and that was one of the things that was revolutionary, though it took a long time. In Kennedy's call for a tax cut, which he first made in nineteen sixty two, let's note the dates. It finally passed in nineteen sixty four and only after he was tragically assassinated. We can't run history again, but my best guess is it never would have passed where Kennedy not assassinated, if he was still alive and trying to push it through Congress. There was tremendous resistance to Kenzie and ideas, largely because they were going to raise the deficit in that if it's Kenzie and in that direction. A few minutes ago we were talking about Kenzie and in the other direction, trying to throttle back demand. But if it's Keynesianism in the expansionary direction, it's going to raise the deficit, something Ronald Reagan should have known in nineteen eighty one. Maybe he did, but that's another story. But the point is that these ideas were foreign and considered kind of revolutionary back then. Not anymore, but back then, yeah, Well, I wonder. You know, I still feel like the debate hasn't been settled on exactly how we got where we are today with inflation, and maybe it can't be settled. But you know, your book really points out the various drivers of inflation throughout history. You know, it was UH in the sixties, first JFK's tax cuts and then the big spending on the Vietnam War. Then later in the seventies it was the you know, the oil price shock obviously played played a big role. I feel like these days we've gotten hit with it all at once. You know, we had the Trump tax cuts, the covid UH spending, the were in Ukraine, and the oil price shock, not to mention all the supply chain disruptions during the pandemic. So how in your head, how do you sort of assign the blame for the inflation inflation problem between you know, fiscal policy, monetary policy that arguably stayed too loose for too long, the oil shock, on and on. How do you sort of assign the influence of each on on where we are now? Your list is exactly right. Assigning a portioning the blame is harder and controversial, But my list would put the supply disruptions in the recovery from COVID on the top of the list. They were pervasive all over the place. It wasn't like just one thing. And then would put the supply shocks which were not one hundred percent but very much exacerbated by the war in Ukraine. And then the excessive stimulus of the economy. Now that's the one that's most controversial. People that want to blame Joe Biden or Donald Trump before him latch onto the tremendous fiscal stimulus. And it was of tremendous fiscal stimulus, and that's the kind of thing that you expect to be at least somewhat inflationary. But my view is that the forces clobbering the economy over the head, we're so powerful that giving some upward impetus to the economy, a substantial upward impetus, was necessary if we aren't going to go into a deep hole. And then finally we come to the FED. Part of the blame that is related is the FED started tightening too late. There's unanimity on that. Jerome Powell himself has said that numerous times we goofed that wasn't that's not the way to talk. After of the Chairman of the FED, but he said, we goofed and we should have raised interest rates earlier than we should and that's right. But if you try to put magnitudes to that through models that we used to estimate the effects of monetary policy, remembering also that the mistake was maybe a delay being three to six months too late, not two years too late, it's hard to come for me to come up with big numbers on that. So, yes, the mistake of the FED did contribute to inflation, but I don't I put it closer to the bottom of the list than to the top of the list. One other very interesting anecdote you talk about is the downturn in the first quarter of nineteen eighty and you said consumers voluntarily stepped stopped spending, They sort of stepped into do their part to help out, which is I don't know. I just find that so so fascinating because the Prince, the data princes that we've gotten in recent weeks have shown really strong retail spending numbers, etc. Etc. So maybe you can tell us more about that. It was the second quarter of nineteen eighty at Jimmy Carter was president, and inflation, of course, was the problem of the day, the economic problem of the day. In a speech, he urged people to put away their credit cards and not use them and spend less. He also pushed Paul Volker, who wasn't too happy about it, to invoke credit controls on banks, something we don't normally do, and Volca was very unhappy about doing it, but felt that Carter was giving him him in the fence such a free reign to do nasty things that were against Carter's political interest, that he ought at least go along and do that. But coming to what you asked, an astonishing number of people tore up their credit cards and wrote to the White House, here's my torn up credit card. I'm not using it anymore to try to help the fight against inflation. I don't remember what I thought at the time, but I'm sure I was astonished. To take you back a little bit further, it was only about six years earlier that Jerry Ford as president, tried something similar. They were issuing wind buttons with inflation. Now, wi n I still have mine as an historical souvenir. It was a joke. Nobody did anything, so I certainly didn't think Carter's urging people to tear up their credit cards wasn't going to do anything. But boy was I wrong, and consumer spending just fell off a cliffs. It almost it sort of looked like what happened at the beginning of the pandemic that was a bigger cliff, but a smaller version of that happened in the second quarter of nineteen eighty. It was so severe the contraction that both Vulcar and Carter got scared, like this economy sliding down hill really rapidly, and Volca eased up on monetary policy and Carter reversed field and took away the controls. But while it lasted, it was a whopper. I just can't imagine people ripping up their credit cards today. Well neither could I. Then. Yeah, if you asked me if Joe Biden did the same today, would people listen? My guess is no. But I I remember having the same guests in the Jimmy Carter case. Well, it gets to the notion of communication, at least you know from the White House, can be influential. I remember reading that, Yeah, Carter, people would actually mail their ripped up cards to the to the White House. I mentioned at some point maybe you wanted to tape them back together and send them back turn asunder. But um, but uh, professor, I wanted to get to that notion of FED communications. You know you said earlier how in the Greenspan era, Alan Greenspan wouldn't necessarily come out and push back against the market's interpretation of FED policy. Obviously, in this era, Chair Pal has been very vocal about more communication is better. But I feel like it's a it's a difficult needle to thread because say, you know, you're the FED chair and you do believe that inflation is under control and that it'll continue to normalize and maybe by the end of the year we'll be back at two percent. That's a dangerous opinion to communicate to the market because investors hear it, the markets go wild, stocks go up, yields come down, and you run the risk of loosening the financial conditions enough to to sort of defeat your own purposes. So, you know, I hate to use the word subter future misleading, but it's it possible that fedeficials kind of come across a little more hawkish than maybe they are in their hearts. In order to avoid that type of thing. Yeah, I think so. I think so. And what I was going to say, what they definitely do is stay away from interesting or colorful adjectives and adverbs. Be boring. It boring, Lee, you know, just the opposite of what you want to do in the media show. That's why everything's modest and moderate. And yeah, I mean they use boring pros and in the statements, in the formal statements, as you know, you say, tend to see the same words over and over and over again. You know, if you think that's designed to put you to sleep, it is. They don't want you getting hyper excited because they know. And this is the other point, it's inherent in the financial world they live in that markets will over act. This is not a surprise to the Fed. This is not somebody it wasn't expecting. It's always expecting markets to overreact, and they just about always do the nice thing. So that's the bad thing about markets. The nice thing about markets is they tend to self correct when they see, oh, the Fed's not going to cut interest rates next month, they reprice securities so they do correct. And to come back to the way you introduced this question, the FED nowadays, not in the old days, but nowadays helps them with that by basically saying, politely, you guys got it wrong, and here's the way you should be thinking about what we're thinking. That was what I was alluding to. Alan Greensman just refused to do that in the nineties. He wouldn't, but Ben Bernanke started doing it, Janet Yellen did it, and Jay Powell does it. You also said in the book that you once asked Volker how monetary policy crushes inflation and he said by causing bankruptcies. Yeah, you're a close reader. I gasped when I read that. She's in three different book clubs. Professor, She's you're a close reader. And yes, I was shocked by that. I mean, yeah, very surprised by that too. This was a conversation we had pulled vocal between FED jobs. Spent the year or two years as a visiting professor at Princeton, and I had a number of discussions with him, and I was engaged, as a lot of macroeconomists were engaged in different theories of how monetary policy works. So one day at lunch, I figured, well, I have the former chairman of the FED right here. Let me ask him how he thought it worked that. That's what he gave me as an answer, not that he relished it, but he thought that's how it actually worked. So, professor, let's kind of get you were state of mind right now for how the rest of the year turns out. Is it basically a plateau in rates and still that chance of a soft landing amid that? Is that a fair characterization? I don't. I don't think we're at the plateau yet. Yeah, I think the FED is going to go up a bit more and then probably plateau and watch what happens. Soft landings are tough, and the heart the higher the FED goes, the tougher it is to land softly. And so the odds are moving in the wrong direction right now. But I you know, if I was betting on this, depending of course, on the definition of the bed of what's a soft landing, I guess I would handicap it as just a hair below fifty percent chance. And an important part of that, Mike, by the way, is that unlike some previous feds in history, including the one I served on in the nineties, this FOMC wants to achieve a soft landing if it can. Many of them have said that, either directly or indirectly, and that includes Chairman Powell. If you had asked Paul Volker in nineteen eighty one, are you shooting it for a soft landing, he'd a laugh, He said, with this kind of a problem, there's no way we land softly. This is going to be a crash landing. But and what's interesting in your book you point out, you know, I think many people believe that it's a pipe dream to engineer a soft landing. But as you put on the book, it's it's happened. It has happened several times in history. Yes, yeah, it depends on your definition, but but yes, it has happened several times in history. Yeah, well, fingers crossed, it happens again. With that said, professor, we can't let you go just yet, because we have a tradition on this podcast where we all like to observe the craziest things we've seen in markets and economics and whatever's in your wheelhouse in the last week or so. Then why don't you start, what's the craziest thing you've seen in the past week. I think this technically was from at the It came out at the end of the prior week, but I'm gonna go with it because it's striking. Okay, Blackstones CEO Steve Schwartzman, did you see this. I'd have to hear the rest. Okay, No, he's been in the news quite a bit. This is big. He took home a record one point two seven billion dollars in twenty twenty two. One point two seven Be like, boy, not bad work if you can get it, Professor, what do you think that's more than Princeton pays me? You know, I don't want to talk down to your audience, but some of the rewards in the financial sector seemed way out of line with their contributions to society. That's a good thing. It's a good thing. C Schwartzman isn't listening to this podcast. Even if he is, I don't think there's much debate on that. That's that's pretty good, all right. I'll give you mine. Uh Maiden's courtesy of the Twitter user Zoran law Vanny. It's on the Hustle dot Co website. Dona, what was your favorite toy as a child. I had this Barbie that I really wanted and my mom got it for me for my birthday, and if you press this button on like her abdomen, she sang a song and I and I wanted it for forever. And the day I got it, my sister took the doll. She was so mad jealous, I guess, and ran it over with her tricycle like fifty times. Like she basically flattened the Barbie pancake. Oh my goodness, that is that's a traumatic memory to be brigg it up for you. My sister listens to the podcast, so I have to call her for being evil. Well, Biden's related because my favorite toy was hot wheels, you know, the little toy cars, And apparently Mattel had such a hit with Barbie that they came out. They're like, well now we got to sell something to the boys, so they came out with hot wheels. So the story on the Hustle dot com website talks about this guy, Bruce Pascal, who's got a one point five million dollar collection of hot wheels. Pretty extensive collection. But in order to turn this into our game show, the prices precise. I want you to guess the most expensive, most highly valued hot wheels. It hasn't sold in a while. But what the collector's estimate is the most highly valued hot whale in his collection, And I'll give you a little details on here. It was a prototype for the nineteen sixty nine rearloading beach Bomb, which was basically kind of looks like one of those old Volkswagen vans has a surfboard coming out the back. There are only forty some of them made, but this was the actual prototype. Um So, so what's your bid? What's your bid on that for this one car? One nineteen sixty nine rear loading beach Bomb surfer Van hot wheels? Okay, then I'll go with two hundred thousand dollars. Two hundred thousand dollars, very quick, quick and uh confident answer on your part, professor, What do you think if you're if you're on the prices right, what are you been for the world's most expensive hot wheel? Definitely less than hundred thousand dollars. I'll tell you what you just both taught me. My six year old grandson as a burgeoning collection of hot wheels, I'm gonna make sure he doesn't do with it what I did with my collection of baseball cards when I was six. What'd you do with that, I just let it go to rotten. We put him in a bicycles spokes, took them outside in the rain, and you know, yeah, I probably had a Mickey mantle from nineteen fifty something, but I don't have it anymore. It was putting up though, I'm gonna go lower. One hundred thousand, hundred thousand. Well, you guys split the difference perfectly. It was one hundred and fifty thousand dollars. Is the value? So I think prices precise roles. We have to give it to a professor bondary here you think another item for your resume. There, professor, you win. The prices precise. I'm not buying, not really betting on that hot wheel. How about you Alt? Have you seen anything crazy recently? Sure? To me, almost everything about cryptocurrency is crazy. So you can start with Sam and it doesn't stop with that company was once valued in the market at twenty five billion dollars. I'll put that up as crazy. Yeah, what do you think it? Is? It the loose monetary policy that a lot of people blame. As an economics professor in historin with your credentials things like that, how do you explain the booming crypto. There have been fads and crazes like that throughout history. I when I talk about the stock market in economics one on one, I tell my students that the first bubble in the stock market happened with the very first company. It was the south Sea Bubble in England, the first listing company basically, and already they having a bubble, so people have gone crazy. And then there was the tulip of craze, and yeah, the tech stock craze, and you know, you go on and on and on. It just happens in speculative markets. Oh, just inevitable sort of human nature to people who get hyper excited about the new new thing, and and they wind up paying outrageous prices. Yeah. Yeah, you only know they're outrageous later, right right, right, Well, great perspective, Professor Alan Binder, Princeton University. We really appreciate your time and your your insights. I think you really helped a lot of us think about the current state of affairs, especially from that that really important historical perspective that you bring with your new book. It's called A Monetary and Fiscal History of the United States nineteen sixty one to twenty twenty one. Thank you so much for your time. Nice to be with you. Thank you, Professor What Goes Up. We'll be back next week. Until then, you can find us on the Bloomberg Terminal website and app, or wherever you get your podcast. We'd love it if you took the time to rate and review the show so more listeners can find us. And you can find us on Twitter, follow me at Veldona Hirich. Mike Reagan is at Reaganonymous. You can also follow Bloomer Podcasts at podcasts. What Goes Up is produced by Stacy Wong and our head of Podcasts is Sage Baldman. Thanks for listening and we'll see you next week.

Hello, and welcome to What Goes Up, a weekly markets podcast. My name is Mike Reagan. I'm a senior editor at Bloomberg and I'm Moldana across asset reporter with Bloomberg. Add this week on the show. Well, we hate to sound like a broken record around here, but when it comes to financial markets, it's all about inflation again. Both the stock and bond markets got off to a roaring starts of the year following a disastrous twenty twenty two. I've made hopes that last year's surge and consumer prices had finally been tamed, but that strong start has mostly been reversed following some higher than expected inflation readings both in the US and Europe. So where do we stand now? Are these recent reports just potholes on the road to the normalization of inflation or is something else going went on? And what does it all mean for the path of interest rates. We'll get into it with a very influential economist who's best known for being Vice Chair of the Federal Reserve and a member of President Bill Clinton's Council of Economic Advisors in the nineteen nineties. He's got a new book out and it's all about the history of monetary and fiscal policy in the US. But first, vil Donna, I have to say I'm excited about this guest for two reasons. One, I think he's the perfect guest to sort of talk about all the issues affecting markets these days. But also, do you remember how excited I got a few weeks ago? Unreasonable, I will admit, unreasonably excited when I got to ride the Dinky. Yes, I remember? You remember what the dire happy it's Is it a train or a bus? It's a train. It's it's the shortest I believe, maybe our guests can correct me. It's the shortest train line commuter train line in the US. It's like two and a half miles. It goes from Princeton Junction to Princeton to Princeton University or Princeton Town the town Okay, well, yes, yes to both. Yeah, it lands right on campus. You were not as excited when I got to ride that as No, because how long of a ride? Is that? A minute? Like it's like I think it's like five minutes. Okay, So you can't even sit down, you can't even have a snack. You can you have to snack quickly. You have to snack quickly. That's what makes it exciting, is the superlative of the shortest ever train line. I've never I've never been on it. Maybe you and I can make a trip out there. We should, We should. I think our guests has been on it, including our guests. I bet he's written it. I have many times. Okay, well, before you tell us more, it's the person speaking is Alan Blinder. He's a professor of economics at Princeton and he's a former FED vice chair. Thanks so much for joining us on the podcast. Oh, sure, you're welcome. How has the dinky been riding it? Well? Have it it lately? I mean that's the way to get to New York. I used to go to New York quite a lot. Two things happened. The obvious one is the pandemic, and I don't go there very much anymore. The non obvious one is we had some grandchildren, little ones in Washington, so my wife and I now go south more often than we own North. Oh, let's get into sort of the current state of the markets. And by the way, congratulations on your book. I'm about halfway through it. It It really fascinating and I think just a really important read for anyone who wants to get an overview of sort of how we got where we are and sort of the the dynamic between monetary and fiscal policy and sometimes frictions. I guess you could say, but I'm curious how you're thinking right now about inflation. Yoyo'd op ed in the Wallstreet Journal earlier this year in which you were very optimistic that perhaps we've seen the worst of inflation. You look at sort of the first half of the year twenty twenty two versus the second half. It was super hot, double digit inflation in the first half, and then back closer to the Fed's target in the second half. You know, if you look at it month over month on an annualized basis, I think it was three months annualized basis. Correct me if I'm wrong. But we have seen sort of renewed concern about inflation. The January numbers were a little hotter, both pc and CPI. This week, the market's reacting pretty strongly to France, Spain, and Germany reputing hotter than expected inflation. How are you thinking about it now? Is it still is there still reason to be optimistic that we're trending in the right direction. You know, is this just sort of a pothole on that road to normalization or is there any reason to be more concerned. I think it's more of a pothole with one big exception. And this is my beef with the Bureau of Labor Statistics that I usually love, it's one of the great statistical agencies in the world. But what they did after I wrote that Wall Street Journal piece that you correctly referred to, this is going to send very wonkish change the seasonal adjustment factors. So it's no longer true. If you look at the year when I wrote that piece, it was true that roughly speaking, inflation in twenty twenty two was about eleven percent annual rate in the first half and about a two percent annual rate in the second half. Of Wow, that's quite a difference. It's nothing like that now because of changing the seasonals, which you know, struck me as dirty pool for a prognosticator. I was looking at what turned out to be wrong data. That said, the qualitative story that old lower inflation in the second half than in the first half remains true. That did not disappear from the data. It's also mostly universal. I won't say every country, but it's certainly true in Europe and in most other countries. But in terms of magnitude, nothing like what it was before they change the data. And that's the sense in which I view it as a kind of a pothole, but a pothole now on a road that's not as deeply declining as we used to think, but declining. That's important. So can you tell us more about this because this piece it did come out a couple of weeks ago before we got the minutes from the last FED meeting. But you said the FED now has a good chance at a soft economic landing. Yeah, because of this data revision, I'm revising that we whole revise things where we get new data. I'm revising that to be a little less optimistic. I think they still have a chance, but it's a tougher chance than it was, you know, just to repeat with the old data. By late in twenty twenty two, we are pretty close to the target where the FED wanted to be, but with the new data, we're not quite as close. And among other things, that means we have to fed as likely to raise interest rates more. Okay, I have a bunch of follow up questions about this, because there's a bunch of debates going on, you know, especially when I'm hearing people on bloom or TV or people I talked to on a daily basis, A lot of them are saying that a six percent Fed funds rate is a real possibility. To what extent you would agree with that, No, I'd bet against that. It's not beyond the realm of the possible. You're reminding me a bit when I was on the FED in ancient times in the nineteen nineties. You're too young to remember this. When we were tightening in ninety four ninety five, market sentiments at one point, not just for a day, for a while was that we were going to go up to eight percent on the federal funds rate. I remember sitting there in my office in Washington saying, are those people crazy? We're not going to go anywhere near eight percent. But in those days you weren't allowed to say anything. Those are the days when the FED was mum and if the markets flew off in some wild direction, Alan Greenspan, who was the chairman, wouldn't do anything to bring them back. Eventually, events brought them back, and in fact, we topped out coincidentally at six percent, not eight percent, so I'd be surprised if we get to six. I want to get into that idea of the Fed staying mom and sort of compare and contrast that with today. But first, before we do that, I think two things have shifted in the sort of the market's view of where the Fed's rate is going to go. One is exactly how high it's going to go, and we can debate five and a quarter, five and a half or six. But I think what's we're alarming to investors these days is the notion that it's going to stay there for a while. Um. You know, we we came into this year. If you look at the dot plot, uh you know, which is the feds uh individual members projections of where they see the FED funds rate or even market pricing in the SOFA or Fed funds futures markets that you know, it seemed to be at an unanimous consensus almost that that rate would peak maybe this spring early summer, and then immediately come down, that the Fed would pivot and start cutting rates. That seems to be you know, that dot plot hasn't been updated yet, but I'm assuming what it is that that that pivot's not no longer going to be there, and in the pricing of the you know, SOFA and FED funds futures market, it's no longer there either. Is that the correct interpretation and view of the rest of the year, do you think? I think so? I think the markets were getting were, frankly a little bit wacky when they had, as you correctly characterize, view that the FED was going to go up to a peak and then write down that's not what usually happens with monetary policy. The much more likely scenario always was it was going to go up to some peak, and one could debate, and people did debate where that peak would be, and then hang around there for a while see what happens. The same thing is true when the FED is going down. It goes down for a while, it flattens out, usually to wait and watch, wait and watch what, among other things, the effects of the policy it's already promulgated, and then keep moving if necessary, or reverse if that seems appropriate. So I never thought that was a likely scenario, and I'm glad to see the markets don't believe it anymore. And what about the debate that the FED will have to rethink it's two percent target. And we've had guests on this podcast as well arguing that maybe they should be rethinking that two percent just isn't very realistic. So let me assure you of one thing, and then I elaborate slightly. There is no debate inside the FIT. None. Zero. It is not going to happen. Bet your whole portfolio on it, all right, if the FIT is not changing its target. Now, a broader question, which is interesting to economists and historians we're talking about a book on economic history here, is whether it should have set a higher number when it did latch onto a target not two. I think that's quite debatable, and I think I'd be on the side of yes, it should have gone higher. So why do I say both? Because and the reason it's the same answer to the reason. Why is there no debate at the FIT? Because it would look like caving, giving in, surrendering. We can't do it, So we're going to make our target easier. And immediately people would start saying, oh, you went up to three, how do I know you don't go up to four? And those are the kinds of reasons why the FED will never ever. Ever, well, ever is much too long. Let's say for the next thirty five years that it is not going to think about changing the target. What would have been, in your view, a better target than two. I thought three would be better than two. And the main reason is what we were experiencing before the pandemic with zero quote zero interest rates, that if it was three rather than two, the FED would have had more room as the economy crater to push the economy out of the crater with lower interest rates, as if it had started with interest rates one hundred basis points higher than it did, or would add one hundred basis points more easy before it had to resort to the so called unconventional policies. Well, and I think maybe an important distinction to draw is the idea of while the FED may not change that two percent target, I assume that that doesn't necessarily mean that they won't pause or pivot before it gets to two. Right, Absolutely, I think they'll pause, not pivot, That's what we're talking about. Before. They'll pause once inflation gets low enough and is falling, so the two percent, so to speak, is in sight, then they'll pause to see, all right, is it going to two? Is it not going to two? How's the economy look? And so what about other areas within the economy? Actually hear this question a lot, and I asked this question a lot when I'm talking to people. Look where actually are we seeing any weakness? Or I'm thinking about the housing market. I get a ton of notes in my inbox on a daily basis that says, the housing market now is also showing some signs of pricking up and of a turnaround, and the consumer remains strong, etcetera. Where might you point to even show any weakness right now? I point to the housing market, and I'm getting the same email says you're getting or some of them. And if you look at the graphs that accompany with them, it looks like it's gone down, down, down a usual way and then a tiny little uptick. Let me see that uptick grow over a month, and then I'll start getting worried. And the reason I say that is that classically for decades, if you ask people on the fed away from microphones, so it's stop being recorded by Bloomberg, where do you think you can do your damage or help for that matter, If it's the other direction on the economy, they'll say, housing, Housing is by far the most sensitive to interest rates, and to me, despite these little blips of optimism, very lately housing as well down, and that's what you'd expect. The second place, by the way, is more puzzling, and I can't figure it out, which is automobile purchases. They generally respond to interest rates a lot. And the reason I can't figure it out of the reasons maybe there are people that are more expert in the auto market than I is. As you remember, we had all these shortages the manufacturers couldn't make enough cars because they couldn't get enough chips and so on and so forth, and there have been some unusual fluctuations, so you wouldn't want to attribute those down drafts to interest rates, and that sort of confused the whole picture. So I don't know what to make of automobiles if and I just haven't studied it enough. Maybe if I had, i'd have a clearer pictures. But those are the two places, and the third, which is also down, is business investment. The worst of this past recession caused by the pandemic was in concert sumer services. Anybody who was expecting the FEDS tightening to affect spending on consumer services was not paying attention to history. It doesn't have any effect zero. Now that's a big hunk of the economy. But even in the good old days when nobody questioned whether the FED could push the economy around, like the Volker days or the Greenspan days, nobody on nobody at the FED. I don't want to speak about the whole earth. No nobody at the FED ever thought they were able to either push up or push down consumer spending on services. You know, Professor, It's it's interesting how one hundred percent of the discussion around fighting inflation these days relates to monetary policy and what the FED can or can't do. A part of your book that I found really fascinating is you get into the sixties during the present and see of JFK and LBJ and how the the Keynesian economists had really come into power and you know, and influence under both of those administrations, and you know, the notion of you know, using fiscal spending to boost demand, don't let worries about the deficit really handcuff you in that sense, And you talk about how Keynesians sort of got a bad rap back then because inflation accelerated pretty pretty fast during the Vietnam War because of all the defense outleads and Keynesians were actually advising on fiscal restraint to to to to bring down inflation. And as you point out, I think you know, and this to me is kind of relates to today's world two with modern monetary theory, in that it's very easy for a politician to go out there and promise lower taxes, more spending, that sort of thing. It's pretty much political suicide to to suggest some kind of fiscal constraint and higher taxes, less spending in order to help reduce inflation. Is it just a lost cause to ever think that fiscal policy could or will ever be used in the fight against inflation? Is it just too politically impossible to even consider anymore. Yes, in a word, I wish it weren't true, but I think it is true. One of the things I discovered in reminded myself, i should say, in researching and writing this book is and this is to your point, the last time fiscal policy was used deliberately by the government to take some steam out of the economy to fight inflation was nineteen sixty eight nineteen sixty eight. That's a long time. There had been other episode since sixty eight in which fiscal policy turned contractionary, but that was always motivated by concerns about the deficit, not about concerns about the economy. I was in the Clinton administration and that was an example. Right, we promulgated and barely got through Congress by the skin of our teeth, or more accurately, by Al Gore breaking a tie vote in the Senate, a contractionary fiscal policy to reduce the deficit. It was not to bring down inflation. The inflation was three percent. Most of us thought, oh, three percent, We were just talking about three percent inflation. Believe me, Bill Clinton was not concerned that the inflationary was three percent and that was terrible. He was concerned about the budget deficit. So there have been some episodes like that, but none since These Keynesian economists who were referring to finally convinced Johnson that we needed to raise taxes because of the Vietnam inflation, and then john after a year and a half of cajoling, finally convinced Congress to do it. It was a really hard fight. Since then, there's been no fiscal contraction for demand management reasons. I love taking all the different scenarios and historical time periods that you talk about in the book and then comparing them to maybe developments that we've seen over the last ten years or so. And you said recessions at the end of the fifties and the two recessions at the end of the fifties and at the start of the sixties, they didn't see Congress or the White House coming in to help mitigate things. And obviously that is very different from what we saw during the COVID pandemics. So maybe you could talk a bit about that and how things have changed. Yeah, those episodes that you talked about were in the United States, though not in Europe in the pre Kansian era. Came Zianism was considered back then a strange foreign doctrine. Probably some people were calling it communist. I was once called a Malice Keynesian. I haven't figured out what that is yet, But in those days in the Eisenhower administration, the Keynesian ideas had just not caught on in the American political world. They had in the academic world absolutely. I mean I was a young student back in the sixties and we were taught that kind of stuff, but an academia, no, and that was one of the things that was revolutionary, though it took a long time. In Kennedy's call for a tax cut, which he first made in nineteen sixty two, let's note the dates. It finally passed in nineteen sixty four and only after he was tragically assassinated. We can't run history again, but my best guess is it never would have passed where Kennedy not assassinated, if he was still alive and trying to push it through Congress. There was tremendous resistance to Kenzie and ideas, largely because they were going to raise the deficit in that if it's Kenzie and in that direction. A few minutes ago we were talking about Kenzie and in the other direction, trying to throttle back demand. But if it's Keynesianism in the expansionary direction, it's going to raise the deficit, something Ronald Reagan should have known in nineteen eighty one. Maybe he did, but that's another story. But the point is that these ideas were foreign and considered kind of revolutionary back then. Not anymore, but back then, yeah, Well, I wonder. You know, I still feel like the debate hasn't been settled on exactly how we got where we are today with inflation, and maybe it can't be settled. But you know, your book really points out the various drivers of inflation throughout history. You know, it was UH in the sixties, first JFK's tax cuts and then the big spending on the Vietnam War. Then later in the seventies it was the you know, the oil price shock obviously played played a big role. I feel like these days we've gotten hit with it all at once. You know, we had the Trump tax cuts, the covid UH spending, the were in Ukraine, and the oil price shock, not to mention all the supply chain disruptions during the pandemic. So how in your head, how do you sort of assign the blame for the inflation inflation problem between you know, fiscal policy, monetary policy that arguably stayed too loose for too long, the oil shock, on and on. How do you sort of assign the influence of each on on where we are now? Your list is exactly right. Assigning a portioning the blame is harder and controversial, But my list would put the supply disruptions in the recovery from COVID on the top of the list. They were pervasive all over the place. It wasn't like just one thing. And then would put the supply shocks which were not one hundred percent but very much exacerbated by the war in Ukraine. And then the excessive stimulus of the economy. Now that's the one that's most controversial. People that want to blame Joe Biden or Donald Trump before him latch onto the tremendous fiscal stimulus. And it was of tremendous fiscal stimulus, and that's the kind of thing that you expect to be at least somewhat inflationary. But my view is that the forces clobbering the economy over the head, we're so powerful that giving some upward impetus to the economy, a substantial upward impetus, was necessary if we aren't going to go into a deep hole. And then finally we come to the FED. Part of the blame that is related is the FED started tightening too late. There's unanimity on that. Jerome Powell himself has said that numerous times we goofed that wasn't that's not the way to talk. After of the Chairman of the FED, but he said, we goofed and we should have raised interest rates earlier than we should and that's right. But if you try to put magnitudes to that through models that we used to estimate the effects of monetary policy, remembering also that the mistake was maybe a delay being three to six months too late, not two years too late, it's hard to come for me to come up with big numbers on that. So, yes, the mistake of the FED did contribute to inflation, but I don't I put it closer to the bottom of the list than to the top of the list. One other very interesting anecdote you talk about is the downturn in the first quarter of nineteen eighty and you said consumers voluntarily stepped stopped spending, They sort of stepped into do their part to help out, which is I don't know. I just find that so so fascinating because the Prince, the data princes that we've gotten in recent weeks have shown really strong retail spending numbers, etc. Etc. So maybe you can tell us more about that. It was the second quarter of nineteen eighty at Jimmy Carter was president, and inflation, of course, was the problem of the day, the economic problem of the day. In a speech, he urged people to put away their credit cards and not use them and spend less. He also pushed Paul Volker, who wasn't too happy about it, to invoke credit controls on banks, something we don't normally do, and Volca was very unhappy about doing it, but felt that Carter was giving him him in the fence such a free reign to do nasty things that were against Carter's political interest, that he ought at least go along and do that. But coming to what you asked, an astonishing number of people tore up their credit cards and wrote to the White House, here's my torn up credit card. I'm not using it anymore to try to help the fight against inflation. I don't remember what I thought at the time, but I'm sure I was astonished. To take you back a little bit further, it was only about six years earlier that Jerry Ford as president, tried something similar. They were issuing wind buttons with inflation. Now, wi n I still have mine as an historical souvenir. It was a joke. Nobody did anything, so I certainly didn't think Carter's urging people to tear up their credit cards wasn't going to do anything. But boy was I wrong, and consumer spending just fell off a cliffs. It almost it sort of looked like what happened at the beginning of the pandemic that was a bigger cliff, but a smaller version of that happened in the second quarter of nineteen eighty. It was so severe the contraction that both Vulcar and Carter got scared, like this economy sliding down hill really rapidly, and Volca eased up on monetary policy and Carter reversed field and took away the controls. But while it lasted, it was a whopper. I just can't imagine people ripping up their credit cards today. Well neither could I. Then. Yeah, if you asked me if Joe Biden did the same today, would people listen? My guess is no. But I I remember having the same guests in the Jimmy Carter case. Well, it gets to the notion of communication, at least you know from the White House, can be influential. I remember reading that, Yeah, Carter, people would actually mail their ripped up cards to the to the White House. I mentioned at some point maybe you wanted to tape them back together and send them back turn asunder. But um, but uh, professor, I wanted to get to that notion of FED communications. You know you said earlier how in the Greenspan era, Alan Greenspan wouldn't necessarily come out and push back against the market's interpretation of FED policy. Obviously, in this era, Chair Pal has been very vocal about more communication is better. But I feel like it's a it's a difficult needle to thread because say, you know, you're the FED chair and you do believe that inflation is under control and that it'll continue to normalize and maybe by the end of the year we'll be back at two percent. That's a dangerous opinion to communicate to the market because investors hear it, the markets go wild, stocks go up, yields come down, and you run the risk of loosening the financial conditions enough to to sort of defeat your own purposes. So, you know, I hate to use the word subter future misleading, but it's it possible that fedeficials kind of come across a little more hawkish than maybe they are in their hearts. In order to avoid that type of thing. Yeah, I think so. I think so. And what I was going to say, what they definitely do is stay away from interesting or colorful adjectives and adverbs. Be boring. It boring, Lee, you know, just the opposite of what you want to do in the media show. That's why everything's modest and moderate. And yeah, I mean they use boring pros and in the statements, in the formal statements, as you know, you say, tend to see the same words over and over and over again. You know, if you think that's designed to put you to sleep, it is. They don't want you getting hyper excited because they know. And this is the other point, it's inherent in the financial world they live in that markets will over act. This is not a surprise to the Fed. This is not somebody it wasn't expecting. It's always expecting markets to overreact, and they just about always do the nice thing. So that's the bad thing about markets. The nice thing about markets is they tend to self correct when they see, oh, the Fed's not going to cut interest rates next month, they reprice securities so they do correct. And to come back to the way you introduced this question, the FED nowadays, not in the old days, but nowadays helps them with that by basically saying, politely, you guys got it wrong, and here's the way you should be thinking about what we're thinking. That was what I was alluding to. Alan Greensman just refused to do that in the nineties. He wouldn't, but Ben Bernanke started doing it, Janet Yellen did it, and Jay Powell does it. You also said in the book that you once asked Volker how monetary policy crushes inflation and he said by causing bankruptcies. Yeah, you're a close reader. I gasped when I read that. She's in three different book clubs. Professor, She's you're a close reader. And yes, I was shocked by that. I mean, yeah, very surprised by that too. This was a conversation we had pulled vocal between FED jobs. Spent the year or two years as a visiting professor at Princeton, and I had a number of discussions with him, and I was engaged, as a lot of macroeconomists were engaged in different theories of how monetary policy works. So one day at lunch, I figured, well, I have the former chairman of the FED right here. Let me ask him how he thought it worked that. That's what he gave me as an answer, not that he relished it, but he thought that's how it actually worked. So, professor, let's kind of get you were state of mind right now for how the rest of the year turns out. Is it basically a plateau in rates and still that chance of a soft landing amid that? Is that a fair characterization? I don't. I don't think we're at the plateau yet. Yeah, I think the FED is going to go up a bit more and then probably plateau and watch what happens. Soft landings are tough, and the heart the higher the FED goes, the tougher it is to land softly. And so the odds are moving in the wrong direction right now. But I you know, if I was betting on this, depending of course, on the definition of the bed of what's a soft landing, I guess I would handicap it as just a hair below fifty percent chance. And an important part of that, Mike, by the way, is that unlike some previous feds in history, including the one I served on in the nineties, this FOMC wants to achieve a soft landing if it can. Many of them have said that, either directly or indirectly, and that includes Chairman Powell. If you had asked Paul Volker in nineteen eighty one, are you shooting it for a soft landing, he'd a laugh, He said, with this kind of a problem, there's no way we land softly. This is going to be a crash landing. But and what's interesting in your book you point out, you know, I think many people believe that it's a pipe dream to engineer a soft landing. But as you put on the book, it's it's happened. It has happened several times in history. Yes, yeah, it depends on your definition, but but yes, it has happened several times in history. Yeah, well, fingers crossed, it happens again. With that said, professor, we can't let you go just yet, because we have a tradition on this podcast where we all like to observe the craziest things we've seen in markets and economics and whatever's in your wheelhouse in the last week or so. Then why don't you start, what's the craziest thing you've seen in the past week. I think this technically was from at the It came out at the end of the prior week, but I'm gonna go with it because it's striking. Okay, Blackstones CEO Steve Schwartzman, did you see this. I'd have to hear the rest. Okay, No, he's been in the news quite a bit. This is big. He took home a record one point two seven billion dollars in twenty twenty two. One point two seven Be like, boy, not bad work if you can get it, Professor, what do you think that's more than Princeton pays me? You know, I don't want to talk down to your audience, but some of the rewards in the financial sector seemed way out of line with their contributions to society. That's a good thing. It's a good thing. C Schwartzman isn't listening to this podcast. Even if he is, I don't think there's much debate on that. That's that's pretty good, all right. I'll give you mine. Uh Maiden's courtesy of the Twitter user Zoran law Vanny. It's on the Hustle dot Co website. Dona, what was your favorite toy as a child. I had this Barbie that I really wanted and my mom got it for me for my birthday, and if you press this button on like her abdomen, she sang a song and I and I wanted it for forever. And the day I got it, my sister took the doll. She was so mad jealous, I guess, and ran it over with her tricycle like fifty times. Like she basically flattened the Barbie pancake. Oh my goodness, that is that's a traumatic memory to be brigg it up for you. My sister listens to the podcast, so I have to call her for being evil. Well, Biden's related because my favorite toy was hot wheels, you know, the little toy cars, And apparently Mattel had such a hit with Barbie that they came out. They're like, well now we got to sell something to the boys, so they came out with hot wheels. So the story on the Hustle dot com website talks about this guy, Bruce Pascal, who's got a one point five million dollar collection of hot wheels. Pretty extensive collection. But in order to turn this into our game show, the prices precise. I want you to guess the most expensive, most highly valued hot wheels. It hasn't sold in a while. But what the collector's estimate is the most highly valued hot whale in his collection, And I'll give you a little details on here. It was a prototype for the nineteen sixty nine rearloading beach Bomb, which was basically kind of looks like one of those old Volkswagen vans has a surfboard coming out the back. There are only forty some of them made, but this was the actual prototype. Um So, so what's your bid? What's your bid on that for this one car? One nineteen sixty nine rear loading beach Bomb surfer Van hot wheels? Okay, then I'll go with two hundred thousand dollars. Two hundred thousand dollars, very quick, quick and uh confident answer on your part, professor, What do you think if you're if you're on the prices right, what are you been for the world's most expensive hot wheel? Definitely less than hundred thousand dollars. I'll tell you what you just both taught me. My six year old grandson as a burgeoning collection of hot wheels, I'm gonna make sure he doesn't do with it what I did with my collection of baseball cards when I was six. What'd you do with that, I just let it go to rotten. We put him in a bicycles spokes, took them outside in the rain, and you know, yeah, I probably had a Mickey mantle from nineteen fifty something, but I don't have it anymore. It was putting up though, I'm gonna go lower. One hundred thousand, hundred thousand. Well, you guys split the difference perfectly. It was one hundred and fifty thousand dollars. Is the value? So I think prices precise roles. We have to give it to a professor bondary here you think another item for your resume. There, professor, you win. The prices precise. I'm not buying, not really betting on that hot wheel. How about you Alt? Have you seen anything crazy recently? Sure? To me, almost everything about cryptocurrency is crazy. So you can start with Sam and it doesn't stop with that company was once valued in the market at twenty five billion dollars. I'll put that up as crazy. Yeah, what do you think it? Is? It the loose monetary policy that a lot of people blame. As an economics professor in historin with your credentials things like that, how do you explain the booming crypto. There have been fads and crazes like that throughout history. I when I talk about the stock market in economics one on one, I tell my students that the first bubble in the stock market happened with the very first company. It was the south Sea Bubble in England, the first listing company basically, and already they having a bubble, so people have gone crazy. And then there was the tulip of craze, and yeah, the tech stock craze, and you know, you go on and on and on. It just happens in speculative markets. Oh, just inevitable sort of human nature to people who get hyper excited about the new new thing, and and they wind up paying outrageous prices. Yeah. Yeah, you only know they're outrageous later, right right, right, Well, great perspective, Professor Alan Binder, Princeton University. We really appreciate your time and your your insights. I think you really helped a lot of us think about the current state of affairs, especially from that that really important historical perspective that you bring with your new book. It's called A Monetary and Fiscal History of the United States nineteen sixty one to twenty twenty one. Thank you so much for your time. Nice to be with you. Thank you, Professor What Goes Up. We'll be back next week. Until then, you can find us on the Bloomberg Terminal website and app, or wherever you get your podcast. We'd love it if you took the time to rate and review the show so more listeners can find us. And you can find us on Twitter, follow me at Veldona Hirich. Mike Reagan is at Reaganonymous. You can also follow Bloomer Podcasts at podcasts. What Goes Up is produced by Stacy Wong and our head of Podcasts is Sage Baldman. Thanks for listening and we'll see you next week.