Employ America’s Webcast Panel on the Federal Reserve’s Updated Framework and Its Implications for Monetary Policy

Macro Musings is back with another bonus episode, as Sam Bell and Skanda Amarnath (Employ America) are joined by Julia Coronado (Macro Policy Perspectives) and David Beckworth (Macro Musings) to talk through the announcement of the Fed’s framework transition towards average inflation targeting. Specifically, this panel of guests discuss the implications of moving to an average inflation targeting regime, whether the shift may cause credibility problems for the central bank, how to continue to improve the Fed’s toolkit, and more.

Read the full episode transcript:

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

Sam Bell:  Thank you so much for joining us on this morning of a new Fed framework. Let's see. Let me start by saying a lot's happening in our country, in our world. And we have many of our countrymen falling ill and dying of COVID. We have many millions unemployed. We have our black brothers and sisters living in fear. And so I just want to acknowledge those things at the top. And we're trying to bring to this and all conversations around monetary policy, a lightness, a festive atmosphere. Our goal there is just to make it inclusive and make it accessible and make it a bit of fun. But I also realize these are heavy times.

Bell:  So, all right, with that, I don't want to do too much in terms of introductions because I think folks who are watching this probably know everyone, but we will post in the links the full bios. Julia's bio is so long, it would take like six minutes to get through it all. But let me dive in. We had Jay Powell give a speech this morning at the Digital Jackson Hole. And in addition to that, we had the Fed release a revised statement basically of their framework. And I think the ... Well, actually, Julia would you want to give a summary of what the major pieces are just for our listeners who might not have scrolled through Twitter?

Julia Coronado: Of the changes to the framework?

Bell:  Yeah.

Changes to the Federal Reserve Framework

Coronado: So, I mean, I think that there was ... To me, the big picture here is this is the flipping of the order of operations here. The goal is now maximum employment. That takes precedence. That showed up in the statement in a few ways. They actually flipped the words inflation and employment when they were talking about their objectives. They moved the employment paragraph up in the statement. They included more words around what maximum employment means. So I think it really is an overarching emphasis on using an average inflation targeting framework, which we widely expected. That was the most socialized thing that we were expecting.

The big picture here is this is the flipping of the order of operations here. The goal is now maximum employment. That takes precedence...They included more words around what maximum employment means. So I think it really is an overarching emphasis on using an average inflation targeting framework, which we widely expected.

Coronado: We got it. We got it largely as expected. They're going to try to have inflation centered and averaging 2%, but that's a means to an end. And the end is a broad based and inclusive realization of full employment. And to me, that's the significance that was maybe less appreciated was ... And I mean, Sam, we've been talking about this for a long time. Jay Powell is about as dovish a labor market dove there is. I think he took Janet Yellen's lessons deep in his soul. He went out to the people and heard them. And I think his fingerprints are all over this.

Bell:  Yeah. All right. So let me push you on that, on the employment side. And Skanda and I have been going back and forth about how satisfied should we be about this? And you never want to be in the position where you pushed for something significant and then don't recognize it. So we don't want to move the goalposts. At the same time, the speech itself and most of Powell's speeches now are really love songs to full employment, right? It's just like tight labor markets are the greatest thing ever, they do so much. I think, to give him credit, I think that his main innovation, I'd be curious David and Julia, if you think this is right, his main innovation in 2019 was to say, "We just don't know enough about our estimates of maximum employment to say we're beyond full employment."

Bell:  And as a result, I'm not going to be the Fed chairman that tries to bring unemployment back up to some estimated level. Right. So props to him. That was big. I guess the question for us is if you're not actually targeting a labor market outcome, is that enough? Is our framework high powered enough to generate a more robust jobs recovery? I guess I'm curious for reactions to that. Julia, David, Skanda, should Employ America be happy about this, I guess is ... We're starting at a place where we have very high unemployment right now and we're about to hopefully start a recovery. So should Employ America be happy about this framework?

Evaluating the Change in Fed Framework

Coronado: David, do you want to take that first?

David Beckworth: Sure. I'll jump in. I'll say a big maybe. I think this is great and it's a step in the right direction. I've been calling for a long time for some kind of makeup policy, which would be level targeting. And this is a step in that direction. And why would that matter for labor markets? The way I look at it is make up policy is huge because it allows for some reflation in the economy, including labor income, or particularly labor income. If you don't encourage, you don't allow for reflation, which in plain English means dollar incomes growing rapidly to get back to where they would have been in the absence of a recession and spending, if you don't have that, you're not going to have these healthy labor markets. So this opens the door for that. It gives the Fed license.

I think this is great and it's a step in the right direction. I've been calling for a long time for some kind of makeup policy, which would be level targeting. And this is a step in that direction.

Beckworth: It also means if you get to a level target that provides powerful forward guidance, but I think makeup policy is the silver lining I see in this. I say a big maybe because I'm not convinced this is a terribly credible policy yet, and maybe things will come out. I think there's a lot to be done. I'll stop there. I can discuss some of those later, but I do worry whether this will be a credible policy, but it has the potential, Sam, to make you happy.

Bell:  Okay. Skanda, what do you think? If we were doing this in 2008 or 2011, you just wrote a big piece about the dangers of inflation target, and you looked at 2008 and 2011. 2008 I think is ... Yeah. Anyway, how would average inflation targeting plus maybe more of an emphasis on, or a de-emphasis on sort of a natural rate of unemployment, have fared in those periods?

Skanda Amarnath: I think that the latter is probably more important for our purposes as far as de-emphasizing the whole idea of… I think one of the critical changes in the document that was released today was it changed from talking about avoiding deviations in unemployment to talking about addressing shortfalls. So it's effectively saying there's no such thing as too much employment. Now maybe there's some other problems that are associated with that that need to be addressed. But the notion that we're symmetrically optimizing the amount of employment in the economy is not actually true. Right? And that runs counter to a lot of the Fed forecasts that were effectively projecting that optimal policy would raise the unemployment rate. Right? So that, I think, was not something was widely talked about or expected coming into today. I think that's probably what Julia was saying, a very positive development.

One of the critical changes in the document that was released today was it changed from talking about avoiding deviations in unemployment to talking about addressing shortfalls. So it's effectively saying there's no such thing as too much employment.

Amarnath: I think the average inflation targeting point is one where I'm conflicted in the sense that I do understand that they're trying to be more accommodative to welcome or increase the probability of tight labor markets. As to what David was saying, there is a chance for reflation. You don't do preemptive tightening the way they did in 2015, '16 to '18. So you don't actually try to tighten the ... If the economy is running, don't try to choke it off in terms of trying to preemptively avoid future inflation. At least try to see some of it.

Amarnath: I do think it sort of misses the point that, to all the things that David was talking about, in my mind it's why not calibrate policy with that specifically in mind, specifically trying to raise dollar incomes? That seems like we're kind of doing this very indirectly through inflation to talk about labor markets. I get that there is a dovish overtone to some of this, but inflation can do very weird things in the moment. It can distract both FOMC members and financial markets. And I think 2008 and 2011 are the two examples, I think, of where there was divergence. This is also the 2011 particular was when David and Scott Sumner's ideas around market monetarism and nominal GDP targeting, I think kind of got into the popular discourse more so because inflation was doing something very different from the economy itself.

Amarnath: And I do worry while Jay Powell and people like Janet Yellen have a certain set of instincts that say, "We need to deliver accommodation when unemployment is high," I don't think that's necessarily what average inflation targeting implies all the time. Not everyone's going to have the same worldview or the same set of values. So it does lead to a more fragility in those types of environments. Again, it may not play out. So if we're talking about the sort of late 2010s, when we had both low inflation and low wage growth and low nominal GDP growth, and all those things are moving in the same direction, this is a helpful policy. But I think it is something where it does feel like a very oblique way of actually trying to attack the issue of labor market tightness.

If we're talking about the sort of late 2010s, when we had both low inflation and low wage growth and low nominal GDP growth, and all those things are moving in the same direction, this is a helpful policy. But I think it is something where it does feel like a very oblique way of actually trying to attack the issue of labor market tightness.

Bell:  That's a little bit ... Just if I can add one more thing. Yeah. That's a little bit my concern is the framework is supposed to be a structure that persists across different FOMCs. And I kind of worry a little bit that we're calling it dovish because we're marrying it with the whole Powell emphasis on full employment, and when Don Jr appoints Judy Shelton to be Fed chair, will the framework be as robust? Well, we might have other problems in that scenario, but even in a lesser scenario, I guess are we over-weighting the dovishness of it because of the messenger and because we've just come off this period in 2019 where he did exactly this thing where the committee wasn't willing to push unemployment up. I don't know. Julia, you want to weigh in?

Coronado: Yeah. I mean, I agree with the points made. It's sort of a do no harm statement. It's not a guarantee. It's not a stated objective, but I will say, one of the reasons that might be the case is that it's not clear they have the tools. Their tool kit is increasingly not well suited to the job. They work through asset prices. The credit channel in an aging society characterized by extreme inequality, the credit channel is muted at best. It's there. Housing is doing well. It's there. But there's tons of people left out of that. And the asset price channel, even more people are left out of that.

It's sort of a do no harm statement. It's not a guarantee. It's not a stated objective, but I will say, one of the reasons that might be the case is that it's not clear they have the tools.

Coronado: So full employment is a truly macroeconomic outcome that, as Powell stresses, really means we're getting to the people that are the most vulnerable. They're the ones that suffer the most in a recession. They're the last to realize the benefits of an expansion. The Fed doesn't really have the best tools to get at that. David made the point earlier about they're going to kind of have to prove their credibility over time, right? And that's the danger of making a bolder statement about full employment objectives, which I'm extremely sympathetic to, is that they even lack of credibility even more than what they've done today.

Bell:  Let me ask you, so on tools ... And David, we're going to come back to your ... In the chat, people are asking about credibility and we're going to come back to it. On tools, two questions. One is, I know you've thought a lot about tools. Three questions would be one, are there tools that they already have legal authority to do that they should be talking up more? Two, are there tools they should get legal authority to do that they don't currently have legal authority to do? And then three, my thing is should they be talking up more fiscal policy so everyone is socialized to the notion that we need fiscal policy to do more of the work? They could even call for more rule like fiscal policy, like automatic stabilizers or something like that. Anyway, do you want to take one or all of those?

Beckworth: Well, Sam, can I jump in? I want to go back to Julia's comment about do no harm. I think that’s key. I think that even if we acknowledged maybe that it doesn't have the tools that need, it still has the ability to do great harm. And the challenge is being able to let inflation rip, if it needs to temporarily, on the upside of a recovery. We want the economy to run hot. We want to get back to full employment. They want to have nominal incomes back to where they would be. And the danger, in my view, of this policy is it's going to be hard for policymakers, when we get 2% inflation, two and a half percent inflation, and pundits start crying out, the market starts worrying.

Beckworth: Congress starts worrying, and it may be hard for the Fed to do no harm. They might be tempted to raise rates. So I think even before we get to the question of additional tools, can they constrain themselves from raising rates, like they did in the past. And our hope is, this policy does that. But I'm still not sure this goes back to credibility, I'm not sure though. We'll have to wait and see when they go through a true test of inflation going up.

Even before we get to the question of additional tools, can they constrain themselves from raising rates, like they did in the past. And our hope is, this policy does that.

Bell:  Yeah.

Coronado: That's fair.

Bell:  We have another question from folks about credibility. David said a few times, one of the main problems of Fed right now is credibility. What is the main change in that direction with average inflation targeting, instead of inflation targeting? Do you think there's a significant change here in terms of credibility?

The Fed’s Credibility with Average Inflation Targeting

Beckworth: Well, let me speak to this since I brought it up, but I'm sure the other two would like to respond as well. The two big credibility questions I see is one, this policy, as we've alluded to earlier, under it, you have to sell higher inflation as a good thing. You're going to tell people, "Hey, I know you just went through a recession and come through a pandemic, let me generate a little extra higher inflation it'll only be six months a year, but this is what you need for a fix."

Beckworth: And they're constrained to do that, because this is under the framework of an inflation target. I think Skanda was alluding to, it'd be a whole lot easier if we just said, "Look, but what we're really aiming to do is to restore normal incomes, or your dollar incomes. And as a byproduct, maybe there'll be some higher inflation temporarily." And I think that's where credibility comes in. I don't again think, and I worry that the Fed, when it comes to this point, may back down and not do no harm.

Beckworth: The other thing, another concern I have about credibility with this is, average inflation targeting, the parameters around it aren't defined very well. And they even said in the statement, and I think Powell mentioned it that we still reserve all the discretion. And I think in this case it's actually detrimental. If you don't define well what average inflation targeting is, it leaves a big open hole to make it up as you go along and therefore you get back to what we already have today. One of the benefits of a pure price level target is it really does tie the hands of the Fed and says, "You have to get it back up." But the fact that it's so vague and uncertain, I think that undermines its credibility as well.

Bell:  Yeah. I thought they were going to anchor around the Bernanke proposal, which is however many quarters we are at the lower bounds, we're going to make it up with quarters above 2% inflation. I'm probably butchering it a little bit, but he had some metric around that. But yeah they kept discretion. I wonder if that was like an escape clause for financial stability.

Coronado: Yeah, they did strengthen the financial stability escape clause. They had one in there before. They added some language that strengthened it a little bit. So, I think credibility comes on a number of fronts. So I agree with David, if you're going to be truly credible, it would be a lot more effective to tie your hands. On the other hand, you might not still be fully credible, because there are these other dimensions that they do care about. And there have been times when, all else equal, they still prefer to use non-monetary tools to address financial stability. But they get nervous when markets get super frothy and debt starts piling up. And I don't think that that's necessarily something they should take off the table.

Coronado: Those are how imbalances that can be very detrimental to full employment over the cycle can develop. So I think it's just inherent to the institution and how they make decisions, that there's going to be some squishiness. And I agree that the proof will be in the pudding. And I think Powell has acknowledged this too, that this anchoring of inflation expectations, is something… if they want to re-anchor them a bit higher, it's going to take some time. They are going to have to prove themselves.

Coronado: I do think that in effect, what they've done with how they look at inflation is, look unless inflation is coming from wages, it's not going to be persistent. Supply chain driven pops, energy price pops, they look through those, they've done it before. They'll do it again. But, I think Sam, you mentioned that that requires that the personnel is that technocratic, credible people that want the right thing for the medium term interest of the economy. And if we follow that tradition of appointing types of people, then you'll get that outcome, but there's no guarantee. So, at the end of the day, the Fed is a political institution tied to the whims of Congress and subject to some of that malleability over time.

Amarnath: To that point into what David was saying about the political language. I think obviously with the political alignment right now of you have Congress, that's not really criticizing the Fed for being overly dovish. I don't think you're really seeing that side from maybe a couple of senators, but generally speaking, under Trump's presidency, we've seen actually a more dovish Republican party and the Democrats have not gotten particularly critical of the Fed for being overly dovish either.

Amarnath: But I think you can see the scenario where this language sounds very tone deaf. Where you say, "We are shooting for higher inflation." I think this is where like part of the political credibility, central banks do not operate, they may be independent, but they don't operate in a political vacuum. So there still is political pressures. If we think back to 2010, '11, '12, where there was a lot of scrutiny of the Fed in terms of, what are you actually trying to achieve here? Are you trying to debase the dollar? Are you trying to just create inflation and raise my cost of living? Or are you trying to achieve something?

Amarnath: The actual thing, I think to your point about... The inflation pressures, and I think a lot of FOMC members who are dovish are thinking about, are the ones that are wage driven. The ones that are income driven, not supply chain issues that should fall out of the system in 12 months time. But I think it's worth being explicit about that, because otherwise I feel like we're also going to get back to square one, where we're going to be talking, it's not that hard to see a scenario where you see the faster inflation, temporarily. And the question is what should the Fed do about it?

Amarnath: I think the problem with the level targeting stuff… And I think this is why some doves even, I read a Brainard speech from earlier this year, Governor Brainard talked about how, "I prefer a more flexible approach." It's not because she wants to withdraw accommodation necessarily in those sorts of environments. But let's say we did get some excess of the price level target itself. Does that necessarily warrant tightening? I think it really depends on what we're talking about. What kind of price level overshoot are we really seeing? Is this the kind of thing that is idiosyncratic, transitory, or is it actually driven by some persistent pressure?

Amarnath: And to me, all of these linguistic and credibility problems really would be better hammered out by moving away from the inflation-centric paradigm that the Fed has fenced itself into. And then it really depends on who is the personnel? And I think that gets away from the whole notion of a framework, which shouldn't really be highly depend... Personnel always matters, but to the extent it really turns on, who's the Fed chair? Or, who are the FOMC members. Maybe that's a better way to put it. What's the composition of the FOMC? I think to make that count, and moving away from this framework would actually be helpful to our Senate.

All of these linguistic and credibility problems really would be better hammered out by moving away from the inflation-centric paradigm that the Fed has fenced itself into.

Coronado: Well, I think there's scope for moving in that direction. Skanda, I think, again, if our understanding of inflation dynamics and persistent inflation dynamics is ultimately rooted in wage dynamics, there is some scope for, maybe in the next five year review, you'll get your wish.

Amarnath: Yeah. One thing that I wanted to bring up, given some of the things both of you talked about, was the framework review was supposed to also discuss tools, whether the Fed had the right tools. And it really did not get a lot of attention. Powell didn't really talk about it in his speech. And yet I can go both ways on this in the sense that we just see now, unpredictably a little bit that the Fed now has all these new authorities under the CARES Act to really lend to more of the economy. They have fenced themselves in, by certain rules that say we have to lend at a penalty rate. We can't be too generous with our lending. Some of this is just really a function of their choice, so they could actually do more if they were creative enough.

Amarnath: But some of it also does reflect like, "Look, credit channel is not the same as it used to be." And so it's the question of, are there other ways to explore new tools? It strikes me this would be a much better emphasis of their time than trying to toggle with, I don't know, a handful of basis points on inflation expectations. If we're talking about moving it back up to 2%, or targeting 2.2 or 2.3% on core and headline PCE, I'm not sure where these inflation expectations, calibration exercises, is that really worth their time for the past 18 months relative to the toolkit discussion? I think it's important to at least discuss the strategy, but it has to be rooted in, "Do we have the right tools to do the job too?"

Coronado: Amen. Woo. They spent so much time fine-tuning this little average inflation targeting thing. And when push came to shove in the recovery, it was all about the balance sheet. 150% about the balance sheet. And the statement still says their primary tool is interest rates. No, it's not. It's the balance sheet guys. Hello? The balance sheet is primary and interest rates are a companion to it. That's how I see it, in terms of sitting in financial markets, what has had the most impact in catching the falling knife when the COVID recession hit and market seized up? It certainly wasn't interest rates. That was part of it. But the balance sheet and then the credit facilities. And they're still, Powell, they're struggling. That's a lot that they were asked to take on in a very short period of time. I'm very sympathetic to the personnel and logistical issues.

They spent so much time fine-tuning this little average inflation targeting thing. And when push came to shove in the recovery, it was all about the balance sheet. 150% about the balance sheet. And the statement still says their primary tool is interest rates. No, it's not. It's the balance sheet guys. Hello? The balance sheet is primary and interest rates are a companion to it.

Beckworth: For Julia, maybe for Skanda too, and Sam you as well, why don't we have more healthy discussions about the tools? Is that itself a product of the political environment? Is the Fed hesitant to go there? Julia, you have some great ideas.

Coronado: Yeah, so do you.

Beckworth: Yeah, but you've been thinking about this longer than I have, but why haven't we seen this more openly discussed? Is it a function of the environment, or what?

Rethinking and Expanding the Fed’s Toolkit

Coronado: I think that there's also a function of personnel and it being new and it's a new front. And the Fed tends to have been a more academically based institution, where they want a theory and some evidence to make decisions based on, which is admirable. I'm not discounting that. But naturally speaking, when things change very quickly, it's hard for them to adapt quickly. And Bernanke, boy to get to QE2, that was such a heavy lift on the committee. And the staff is still... Love the staff, a little behind the curve on balance sheets.

Coronado: Really thinking about it, thinking about how it interacts with financial markets, the different dimensions. They're now moving, some of the more recent staff papers are using [inaudible] framework, they're more flexible. They're more open-ended about the channels through which this all works, and how it coordinates with interest rate policy and forward guidance. But it was really, really amazing to me, during the review that that wasn't right there in the middle. And there was a little presumption, and this was on the part of investors too, that, "Oh, the next recession will be more like a garden variety of risk."

Bell:  Yes, yes, yes, yes.

Coronado: It was complacency. And it's amazing how quickly complacency returns.

Bell:  Yes. I remember a significant former Fed official saying, "We shouldn't just assume that the next recession will be as big as the Great Recession." I was like, "We should assume that. It might not be, but we should." But Julia, can you say a few sentences on your two ideas for new tools, recession insurance and your, I forget what you call it, the direct deposits to households.

Coronado: Yeah, yeah. So I have a proposal with Simon Potter, the former markets group head at the New York Fed, and you all know who Simon Potter is. So to create a system of digital currency, digital payment providers, that's one thing that we... One, I think that the Fed, and they are moving in this direction and Brainard's recent speech definitely I felt was a pretty big move forward on the thinking of the Fed should absolutely be on the frontier of digital technology and delivering the benefits of digital technology to the public. It can provide a more inclusive, lower cost, more efficient, faster payment system. It can create better financial stability as a result and a more inclusive financial system. So that's one prong of it, is they should embrace it, they should work diligently to put that into place.

The Fed should absolutely be on the frontier of digital technology and delivering the benefits of digital technology to the public. It can provide a more inclusive, lower cost, more efficient, faster payment system. It can create better financial stability as a result and a more inclusive financial system.

Coronado: And then that would facilitate, with the blessing of Congress, it would have to be authorized by Congress. And we have a construct of recession insurance bonds where Congress authorizes a certain percentage of GDP that the Fed can deliver into these digital accounts in a recession. So it's money rains. It's just helicopter money direct to consumers. This is not a new idea. It's just operationalizing it. Simon is excellent on operational and plumbing issues, which matters so much to getting policy right. And again, I don't think enough policymakers weight that as heavily as they should. So that's what our proposal is about.

Coronado: And to me, one, it does belong… this isn't fiscal policy. Look, if we got automatic stabilizers, a la Claudia Sahm's proposal, I'm all for that, 100% supportive of that. But at the same time, this is a different way to operationalize that and it is arguably the domain of monetary policy because why did we develop an independent central bank over time to take decisions with a medium term view, but based on near term circumstances? Because fiscal policy gets stuck in the mud, only in the most extreme circumstances, it's too little too late.

Coronado: And if the Fed could have jumped in and deposited $500 into everyone's account in mid-March, then they may not have had to go as far in buying corporate bonds and because the people would be insured, and that's ultimately what businesses care about anyway, is the risk to consumer spending and the real economy. So if you can insure the consumer better, and again have lots of guard rails and to limit the Fed's reach into this area, that's imminently doable. And then you can deliver… And it's monetary. Ultimately something like this is a contraction in the money supply and the credit channel working in reverse, it's very disinflationary, deflationary. The Fed's goal is to reflate to consumers. So that's the idea.

Bell:  And Julia, it strikes me that one thing coming out of this crisis, I can imagine Fed staff or Fed officials being like, "We'd rather give that Coronado idea some legs," versus having to set up a permanent municipal facility or...

Coronado: Yeah, right.

Bell:  It would be interesting if this experience makes them more wanting to do this based on... Yeah. Based on where they have ended up. I don't think they are happy about where they've ended up in terms of all the things they are-

Coronado: I can imagine they are not.

Bell:  -engaged in. David, do you have reaction to this? Or...

Beckworth: Well, I have a similar proposal as Julia's. I mean, very similar in spirit. I will invoke my few chances you've given me just bring up nominal GDP targeting again, only a few times, but I'll bring it up now. So I like Julia's idea and I agree, only in emergencies with guardrails, with sign off from Treasury secretary, all the proper checklist, I think helicopter drops tied to something like a nominal GDP level target. So again, we're doing this, but in a systematic fashion to the point, and we keep doing it until we reflate and restore incomes to where they should be, not just a one-time shot. That's the problem with what we solve, these checks that were sent out. It's a one-time shot, depends on the mood of Congress, the president. We want a systematic and whole process in place. So yeah, I'm very sympathetic to what Julia has outlined.

Bell:  What about your colleagues, Scott? I think he would say, "Forget all that. Just keep buying stuff. Buy everything that Treasury puts out there, you can buy it all up. And when you get done with that, you buy every single corporate issuance. And when you're done with that, buy whatever else paper is around." Is there a distinction there?

Beckworth: I can't speak for him, but what I would probably say is, and I would agree at this point, just having a level target in place could go a long way. So it may not be enough, but having a level target so you're putting the proper guardrails in place. But you could do a thought experiment, which this is not very practical. Again, I would refer to the more operationally sound stuff with Julia suggested. But you can do a thought experiment where if the Fed could do this, why not buy up the whole planet?

Beckworth: At some point we would see inflation and demand kick in, but there are political constraints that kick in. There are assets supply constraints that kick in. And so I think there's probably a practical limit, but you can see the logic of the argument. But like Julia, I propose what I think is a middle ground, a practical middle ground, where... And I like the way Julia frames. The Monetarist in me likes to think in terms of quantities and what she's proposing is increasing the monetary base to the point that the economy's reflating.

Coronado: And Sam, I will say to add to that, again, given what we know and what we're seeing in terms of the distribution of wealth, reflating asset prices just doesn't get the job done anymore. And we'd already seen that before this crisis hit. The wealth effect on consumer spending, which in the nineties was a big thing. And I was at the Fed in the late '90s, early 2000s, we ran our consumer forecasting models based on the wealth effect. It was three to five cents of every dollar would go into the economy over the following six quarters, or come out of the economy in terms of wealth losses. And it died. It actually absolutely died.

Given what we know and what we're seeing in terms of the distribution of wealth, reflating asset prices just doesn't get the job done anymore. And we'd already seen that before this crisis hit.

Coronado: If you run these models now, the wealth effect is zero because wealth is so concentrated and wealthy people save less and are less responsive. They buy what they want to buy regardless of sort of the fluctuations in their wealth. So that wealth effect on consumer spending is diminimous. And it doesn't matter if you break it out into housing wealth or financial asset wealth, it's basically zero.

Coronado: And so, it's already broken down. I think right now what the Fed's doing, it works very asymmetrically. It prevents a negative feedback loop. We all know that if asset markets were collapsing and the treasury market was seizing up, that would be unambiguously bad for the outlook. But now that we've got the S&P 500 at new highs and Tesla up, whatever, 6000% in a month, does that actually predict growth? No, it doesn't actually. So it's the impact of their policies through these asset price channels is very asymmetric and that's just not desirable over the longer run. I think we need to have a bigger, bluer sky discussion about tools.

Bell:  What do you think, Skanda?

Amarnath: Yeah, I think that Julia's ideas for sort of being able to do sort of functional helicopter drops, I think this is where institutional frictions really do matter just by increasing the amount of bank reserves in the system alone. That doesn't necessarily translate into more spending in the economy, right? There's more to the causal chain that goes missing. So I think when you heard the Fed two years ago, the sort of party line was, "Well, okay, we'll be at the zero lower bound. That seems kind of scary, but we also have forward guidance, we also have the ability to buy treasuries and agency mortgage backed securities, and we're going to kind of hope it's fine and maybe we need to do this sort of framework review. Sort of like a way to kind of buffer inflation expectations, and then we'll have lower real rates when we're at zero lower bound. That's going to be the solution."

Amarnath: This is wholly inadequate for this kind of crisis, right? And that's why we also have CARES act authority that's in place to allow the Fed to lend broadly, get more directly to businesses, to state and local governments to some extent, right? So now they actually do have some authority. It's probably not and optimal form of authority. I think direct payments to households will probably be both the more neutral and more broad based. So it seems like that's probably more optimal tool.

Amarnath: You have seen that the Fed… there's just this comfort level with thinking about things purely in interest rate terms, that they think about it as the models are all designed around what is the optimal interest rate that kind of gets you to full employment or gets you to whatever u* is, whatever sort of is, it gets you to the inflation target or whatever goal you have in mind, that the interest rate is kind of the key metric to toggle with. And the Fed just seemed very comfortable that sort of thing.

Amarnath: The discussion moves to tools, it feels political. It feels greasy, and they don't really want to get their hands dirty, but this is actually the thing that mattered the most. So I think there is room for robust discussion of the income target versus having an average inflation target versus an income target versus a different sort of framework. I think that's a really big part of this, but also the tools that make this all possible. It’s just sort of striking to me that the Fed spent so much effort on this when we really should be talking about what kind of tools helped to achieve those goals too. And I think the Fed just got very comfortable with that.

So I think there is room for robust discussion of the income target versus having an average inflation target versus an income target versus a different sort of framework. I think that's a really big part of this, but also the tools that make this all possible. It’s just sort of striking to me that the Fed spent so much effort on this when we really should be talking about what kind of tools helped to achieve those goals too.

Amarnath: And it seems just a little bit dissonant when like Jay Powell is talking, this is right in the middle of a recession. We're in the middle of a pretty big crisis and Jay Powell asked to kind of explain sort of New Keynesian macroeconomic modeling about how we're going to get the real rate low enough to get the inflation expectations are going to sort of change if we commit to higher inflation, but we're not going to really commit. This is all very arcane stuff. It's not really clear that they [understand] how arcane the discussion is. It's actually as powerful as sort of it's being hyped up to be.

Bell:  We make sure we're somewhat responsive to the comments in our YouTube chat. So Ernie Tedeschi, some guy on the internet. For those who don't know, Ernie is a friend of everyone on the program and the shadow Fed whisperer.

Coronado: And we cannot live without his labor market analysis.

Bell:  And we can't live without him or his labor market analysis. And he asked, "Do you all think U-3 based NAIRU is now dead as a policy metric, or will it live on? Or will it be replaced by a broader measure or a basket of measures?" And this is, I'll take the-

The Future of NAIRU as a Policy Metric

Coronado: Like Yellen’s dashboard.

Bell:  Yeah. Yeah, so Yellen had a dashboard, it's clear that from day one Powell sort of hated NAIRU. I think it was clear from day one. His first speech was about take taking aim at the stars. And I think he's been really dismissive, both in congressional testimony and his press conferences, about past estimates. But it's a very interesting question, what replaces it, if anything? So I'm curious. Yeah, I'm curious for everyone else to weigh in.

Coronado: Skanda has an idea, right Skanda?

Amarnath: I hope that u* is dead in terms of at least how it's functionally used in… I think you can make an argument that there's always an u* that's always that always exists if we have inflation too low, that means u*… We're not there yet. If you have inflation high, that means you passed u*. I have a post hoc analysis of what the natural rate of unemployment is.

Amarnath: But just functionally being the Fed, Jay Powell talks about this in his speech and I really enjoyed this part, which was these estimates kind of move grossly quickly, so we just kind of move them up and move them down really slowly so that the natural rate of unemployment, it's supposed to be the amount of structural unemployment and the economy or everything, it's not super bullish. And yet, this thing just moves around and we kind of just know what after the fact.

Amarnath: So then how much usefulness is there in saying, "Well, we know that the natural rate of unemployment is within... It's 5%." And then, oops, we actually find out later it's not. I find this to be a very backward way of thinking about maximum employment, right? And I think the changes suggest that the Fed's going to really think about employment from a standpoint of, there's obviously a problem when we have depressed employment when we do see these sort of asymmetric shocks and we need to address that. That requires addressing and I think that's all very good.

Amarnath: I think what's really weird about the last five years of 2010's expansion was that the Fed was talking about how unemployment is at risk of going too low, that we're actually going to have ... We need to get unemployment rate back up. And these are people who are historically considered more dove-ish, people like Eric Rosengren, Charles Evans, even ...

Coronado: John Williams.

Amarnath: … even into this direction that we've got to be worried about low unemployment because there is this sort of story that's been told.

Coronado: Bad things happen when unemployment gets too low.

Amarnath: Don't you see that we got unemployment really low in 1968 and '69? And then you started to see core inflation creep up and that's actually why you got the 1970s Great Inflation. Obviously, there are plenty people who disagree with that narrative, but it's a pretty powerful one within the Fed and within the institution about sort of the risks of keeping employment too high. And I think that they're getting rid of that, both in terms of politically, if the Fed wants to sort of maintain some political independence, I think that's important to kind of stamp that out, but also it's a very grim and incorrect view, I think, of how this is supposed to work. So I do think it's a positive. Whether it actually means the end of U-star, I think J. Powell is more dove-ish on this question than, say, the staff is. I think the Fed staff is more into the idea that we still have to find some sort of U-star to make these models work. And so ...

Coronado: It all comes back to the models.

Amarnath: Yeah. So I do think that it'll still exist in Fed models. It's not going away, but I think there's going to be more willingness to think dynamically about, okay, U-star is ...

Coronado: Oh, yeah. Inherently, the makeup strategy that comes in is a dynamic thing. Right? And so we've stepped decisively away from a Taylor rule, which even a forward-looking Taylor rule is kind of a spot estimate. Right? It's not as dynamic as thinking about things over the cycle. So we've stepped in that direction. I think, if you think about practically how the policy conversations are going to change with a de-emphasis of U-star I think we do start moving in the direction of talking about income and wages because what do we care about? How do we know where we are? And Powell was the one ... I mean, again, all kudos to Janet for starting this movement in this direction. And then Powell took it and that was the metric he said, like, "Look, we don't know what it is, but we'll know based on wage growth."

Bell:  You have to see the heat to call it hot.

Coronado: Huh?

Bell:  You have to see the heat to call it hot.

Coronado: You have to see the heat to call it hot. And so we're moving in the direction of our income target de facto, if you think about how this manifests itself in terms of policy decision making. When you're at the table and you're talking about, "What do we need to do to the setting of policy?" Well, where are we on the U3, the U6 participation, all the metrics on the dashboard and, at the end of the day, wage growth? And is it keeping up? Is it going beyond productivity? I mean, we never really got there in the last cycle. We were just starting to get there, not even really getting there. And so I think that the practical implication of stepping away is going to be powerful over time.

Beckworth: I hope you're right. And I think, again, going back to what's been said, it's difficult to know what these stars are in real time. I mean, you're playing God here. No one really knows these measures and that's another argument for nominal income or nominal GDP targeting. You kind of take a hands-off approach in the near term, but over the long run, you're still aiming for some kind of price stability, some kind of nominal anchor over the long-term, but in the short term, you say, "Look, we simply don't know. And we're just going to focus on stabilizing nominal income growth."

It's difficult to know what these stars are in real time... You're playing God here. No one really knows these measures and that's another argument for nominal income or nominal GDP targeting. You kind of take a hands-off approach in the near term, but over the long run, you're still aiming for some kind of price stability, some kind of nominal anchor over the long-term.

Amarnath: Yeah. I think this is sort of the market side of Powell showing up, as well, and that he is more mistrustful of latent variables ... That's what the whole 2018 Jackson Hole speech is about, "How am I supposed to know where any of these stars are?" And the kind of person who wants some price confirmation or some kind of evidentiary confirmation to say, "Okay, this is where the stuff is. So okay, if you want to keep your U-star and R-star-oriented models, it's fine, but there has to be some kind of check in real time for how we decide this stuff."

Amarnath: I hope the narrative that – the concern from Julia -- comes to fruition, I think, it'll be interesting to see how the Fed, as the personnel is involved in the Fed, what staff, FOMC members, whether they really take that to heart, whether they take it to heart that there is more to maximum employment than a low U3. There is more to maximum employment than a low U6. There is wage growth. There's all sorts of other measurements to sort of fold in. I think that, if we're really thinking about business cycle analysis and actually what totrack in real time, it hopefully will move towards something that's more like income targeting. Right?

Amarnath: That's a lot more reliable guide for where things are going in a way that ... I'm just afraid a little bit of, when we have this discussion, are we discussing wage growth or are we discussing income growth or are we going to end up discussing, well, cell phone prices, the methodology changed and all of a sudden go down that road. It can be a real false flag for what we should be focused on here. But it's very possible that all these sort of moves end up taking us to a much more constructive place. Hopefully, as I said, if we can get to de facto income targeting, that would be a big plus because the proof is in the pudding there.

If we can get to de facto income targeting, that would be a big plus because the proof is in the pudding there.

Bell:  All right. We're coming to the end. I want to ask one question that's a little bit more specific. So if you look in the strategy doc that the Fed put out, they have basically ... Well, let me back up. There's this thing called the divine coincidence, which basically says we'll get price stability when we close the output gap. There's no conflict between our goals around labor market growth and price stability. And the Fed says, "Well, that's not always true." So I'll just read here. "The committee's employment and inflation objectives are generally complementary. However, under circumstances in which the committee judges that the objectives are not complementary, it takes into account the employment shortfalls and inflation deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate."

Bell:  So here's my question and I'm particularly interested in David and Julia's answer. So we're going to take into account deviations and we're going to balance these kind of equally. We only have a target for one, not the other. How does that work? I guess, I'm curious, how should a layperson understand, when those two things conflict, how the Federal Reserve, which is this hugely powerful institution, sort of balances them against each other? Any thoughts on that question.

Balancing Inflation and Employment Objectives

Coronado: So it's trickier. I mean, obviously, that was one of the appeals of the sort of loss function framework that they basically had in words in the statement before was, "When they conflict, we will weight them equally and we'll calculate the loss and we'll weight it equally and a number will be set out as to which one." And that's the appeal of having a framework like that and that's the appeal of the modeling and all of that. It's much, much harder to not have those goalposts, but there's a reason we're stepping away from them. They led to mistakes. They led to significant policy mistakes and U-turns that hurt the Fed's credibility. And so there's no perfect solution to this. I think it's just...

It's much, much harder to not have those goalposts, but there's a reason we're stepping away from them. They led to mistakes. They led to significant policy mistakes and U-turns that hurt the Fed's credibility. And so there's no perfect solution to this.

Bell:  We're back to Chairman Deng sort of crossing the river by feeling the…

Beckworth: Yeah. I guess, following up on what Julia said, it depends on personalities, how they interpret this. And Sam, as you mentioned to me in an earlier exchange, 2021 is going to be a big part of this story. Right? The person who is going to end up at the Fed. Who's going to be chair? I mean, all of this discussion today could be for naught if they get some different personalities, but we hope there's continuation and progress on this front, but people do play a role. This is the real world. Politics are real. So we have to keep that in mind when we think about it.

Coronado: Yeah, absolutely.

Bell:  David, do you have parting thoughts for us on the framework, Powell's speech, anything else?

Beckworth: Yeah. I will quote the classic line from Dumb and Dumber. "So you're saying there's a chance." There's a chance for nominal GDP targeting. Again, this is a step, in my view, in the right direction. I think it would be hard for the Federal Reserve to do something really radical, like what I want, but I think we can make incremental moves in that direction. It's all about credibility in getting there.

Bell:  You have five years to get New Zealand to not only adopt an NGDP target, but actually see it work out successfully.

Beckworth: I don’t know about that, Sam.

Bell:  Julia, do you have any parting thoughts.

Coronado: I think that the next time that a congresswoman or man asks Chair Powell, "Do you have all the tools that you need to get the job done?" I think he should say, "Actually, I think a review of our toolkit would be a fabulous idea, not just an internal review, but a congressional review," and maybe some kind of commission or whatever and really, really think outside the box because I don't think that, in the world we live in of slower growth and lower inflation and all of this, that achieving their mandates is going to be easy with the toolkit that they have.

I think that the next time that a congresswoman or man asks Chair Powell, "Do you have all the tools that you need to get the job done?" I think he should say, "Actually, I think a review of our toolkit would be a fabulous idea, not just an internal review, but a congressional review," and maybe...think outside the box because I don't think that, in the world we live in of slower growth and lower inflation and all of this, that achieving their mandates is going to be easy with the toolkit that they have.

Bell:  You heard it here first. The February Humphrey Hawkins is going to have fireworks.

Coronado: It's going to be lit.

Bell:  Yeah. Skanda, closing thoughts?

Amarnath: Yeah. There was something David said earlier about the Fed playing God with some of these different major variables and we're going to talk about Congress' role in all of this. I mean, it does seem to me, while it seems like Congress isn't itching to get into any of these discussions, itself, it does seem like a part of what does a proper review look like of the Fed's goals and framework… should have some congressional and White House input.

Amarnath: It seems to me they have not really shown much interest in getting engaged in this discussion. I think there's a tendency to just defer to the Fed. Sometimes it's a good thing and sometimes it's not a good thing, but it seems like part of the process here, there is something a little bit ... If you look at other countries and how they go about reviews, this process isn't something that is done in a vacuum. The central bank just operates completely in a vacuum in deciding these goals.

Amarnath: And especially on things like the divine coincidence, is there just a point where, if we're at the inflation target, we're also at full employment? Is that actually how this stuff works? That's something that models have already predefined for you, but it seems like that's also inherently a political question, too. Right? So I do wonder what is the ... whether we see Congress try to say more, politics are going to change one way or another after this election. So that probably will color sort of what is the political feeling around what the Fed's done and whether the Fed needs to do more things in sort of any direction.

Bell:  Okay. Those are great thoughts. I've really enjoyed this. And I thank Julia and David in particular for coming on. We're always interested in new ways we can communicate and new forums we can host. So if you have ideas, I think the best thing it to tweet at us. @EmployAmerica is our handle. And I hope everyone has a good rest of the week.

Photo by Eric Baradat via Getty Images

People: 
David Beckworth
Calendar Date: 
Sep 2, 2020
Podcast Series: 
Publish to Announcements page?: 
Image: 
Publish to The Bridge?: 
Libsyn Podcast ID: 
15847163
Subtitle: 
The Fed recently announced its movement towards an average inflation target, but despite being a step in the right direction, it may cause problems for the central bank’s credibility.

Micro Foundations, Macro Questions

While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

David Beckworth:     Our guest today is Julia Coronado. Julia is the president and founder of Macro Policy Perspectives, a Wall Street research firm. Previously, she was a chief economist for Graham Capital Management and a senior economist at BNP Paribas. Julia also served at the Board of Governors for almost decade. Julia, welcome to the show.

Julia Coronado:        Thank you very much.

David Beckworth:     So we're happy to have you on the show. You're an actual Wall Street practitioner, and you're going to set us straight on how the market and economy really works.

Julia Coronado:        All right, I'll do my best, David.

David Beckworth:     Okie doke. So Julia, with all my guests, I ask them how did they get into macroeconomics, and I'm dying to hear your story because you've been both an insider at the Federal Reserve and you're a practitioner on Wall Street. So tell us how you did it.

Julia Coronado:        Well, I was part of a, I guess, movement you could call it, in graduate school, of putting micro foundations to macro. So I was always interested in macroeconomics. As a graduate student, I wanted to study it, but there was this desire to do more micro level analysis with macro ... to answer macro questions. So, that was my thesis was looking at actually Social Security privatization and how that ... I looked at the case of Chile, and how that impacted aggregate savings and investments.

Julia Coronado:        So, that thesis was of natural interest to the Federal Reserve, so I interviewed with them and was hired by them right out of graduate school. At the time, Alan Greenspan was the chair, and was deeply involved in thinking about Social Security, and so my thesis was a natural fit for their interest ... as well as my focus on looking at household behavior and aggregating it up and into the flow of funds section at the Federal Reserve Board. I was looking at household financing and balance sheets and how that interacted with savings decisions with retirement preparedness.

Julia Coronado:        So I had a lot of focus in my research on household finance, pension fund finances, but and also being in the flow of funds group, which is looking at capital flows, credit behavior, borrowing behavior, credit risk, credit spreads, and trying to line it up with the real economy, and what are the signals and what are the interactions between financial markets and the real economy. That made it naturally easy to transition into Wall Street and the financial markets. I mean, that's what it's all about, right, is translating market developments into the real economy.

David Beckworth:     Right.

Julia Coronado:        So, I was recruited by Barclays Capital originally by some of my former Fed colleagues, Jean Mackey, Larry Kantor were who I worked with at Barclays. So, it was actually a wonderful transition.

Julia Coronado:        It's hard, you know, the Federal Reserve Board is a fantastic place to work because it's like getting another graduate education. You learn a macroeconomics that no academic department I know of teaches. It's very ... the rigor comes in application. Why is this interesting, why is this policy relevant, or is it? Everything you do, every analysis you do, you have to apply that question. And you have to learn the policymakers need to make policy decisions you cannot just fuss over all the caveats to your findings, or you have to come down off the fence and make a recommendation. This is our best guess. You have to use data very, very carefully and understand its imperfections.

Julia Coronado:        So it's just an incredible training that you get at the Fed that you don't get anywhere else, and it's a wonderful place to work. You have incredible colleagues. So, it's hard to leave the Fed, but on the other hand, what you end up finding a lot of people end up leaving the Fed because you know, you ultimately, there's hundreds of people poring over the forecast, you may want more ... you don't really have a voice. And what's wonderful about being in the private sector is that I'm in control of my forecast. I am not a member of the FOMC or the research director at the Fed. I can say, you know what, this is where I think the risks are gonna come out, and this is what I think is gonna happen.

Julia Coronado:        So you have a voice, and it changes the way you approach questions and your thinking. It adds a burden and an incentive to get things right. So, that's the biggest benefit of stepping into a market role is that you're calling the shots on your forecast, and it matters to people that are making real decisions with money. So, it's exciting, it's challenging. Getting things wrong is extremely painful. Getting things right is really wonderful. So, I've definitely enjoyed ... I have no regrets in having made that transition, and nor do I feel like I've sacrificed sort of my intellectual development. Because I have more responsibility for my forecast, I put a lot of work into it. I try to always learn from my mistakes, and we had a huge one. We had a huge forecasting mistake in the financial crisis.

Julia Coronado:        Even though being on the financial market side of things we saw things a little bit more ahead of the average forecaster, it still was not ... we just didn't project the magnitude and the scope of what we saw. And so we had to ... I had to go back and say, okay, what parts of my tool kit still work, and what don't? And it was very humbling, and it was also very personally terrifying because I didn't have the safety net of a government job. I had real risk to job loss and income loss, so it was personally terrifying, it was professionally humbling, and I feel like I've learned a lot.

Julia Coronado:        So, it's an exciting time to be in markets and on the ground where that interplay is taking place. So, it's been a wild ride, but I am very pleased. I feel with any crisis it's scary at the time, but I feel like I've learned so much from having been on the front lines when that happened, and I find macroeconomic forecasting in the private sector to be a very exciting place to be.

David Beckworth:     It sounds like a fascinating journey and exhilarating at times. I mean, your part about the great recession, the financial crisis, where your job depends on how successful you are, that is something that academics don't worry about as much, although I know some academics did lose their jobs as well, but not like the private sector did during that time. So, that's an interesting story.

David Beckworth:     What's also interesting though about your career path, what I find interesting at least, is that you were both an insider at the Fed, and I know most of your work now is with Wall Street clients, but you also act in an advisory role to the New York Fed. So, you have seen it from both the inside and then you come back as a consultant. I mean, I've had some friends, for example, who used to work for the Defense Department. They quit, and then they come back as a consultant. So they see it from two different perspectives, and you have that as well. And I'm wondering if there's anything you want to share about that, that change in perspective.

Julia Coronado:        Yeah, definitely. Particularly during the financial crisis, I felt like my role in part was to be a translator between the Federal Reserve and financial market participants, because they see the world very differently, they speak different languages, and yet with all of the crisis liquidity functions and the development of QE, there was a lot of new things that had to be understood between the two.

Julia Coronado:        And so, you know, I learned how to do that, to let investors know how the Fed was seeing the world, how these facilities were working, what they were intended to do, and to then go to Fed officials and say, this is how the market is hearing what you're saying, here's how they're interpreting these actions. So, I served as a bit of a translator, and that's still somewhat the role of a Wall Street economist is to play that translation role. You know, interpreting Fed-speak isn't straightforward, and so having been inside the system, we have a better sense of how the words are chosen and crafted, and how they should be interpreted.

Julia Coronado:        And then also, to be honest, during the crisis, sometimes my role was to say, you know, that model is broken, guys. We have to bring some finance into this. You have to look at what's happening in terms of risk appetite and credit flows and global capital flows. Models do not evolve quickly, and the Fed is always so careful about the models that it develops and selects and uses and relies on, that they weren't quite as flexible in terms of understanding the outlook. It took them a while to grasp the gravity and the depth of the structural hit that we took ... so, whereas it was easier to see when you're in the middle of it.

Julia Coronado:        So, that was partly why I've moved into some of the ... you know, on the New York Fed's economic advisory panel, for example, is that I think they, certainly Bill Dudley, when he created this advisory group, understood that there was valuable perspectives to be had from not just ... the advisory panel is made up of both academics and private sector economists, because we come at things from a very different perspective, and that adds value for them to have that diverse set of perspectives. You can get a bit isolated at the Fed, and not be able to see what's happening in real time always. So, I think that they understand that that's value added for them to have those external perspectives, and I do look at the world very differently than I did when I was inside the Fed and thinking more in a conventional, academic style.

Julia Coronado:        So, it's great that the Fed seeks out different views, because I think that makes their policy decisions more robust.

David Beckworth:     Okay, well very interesting. So, one of the big things that have happened over the past few days, and we're recording this on December 5th, we've had the market go down quite a bit yesterday, several percentage points. There has been talk again about the yield curve inverting, there's been talk about what is the Federal Reserve communicating and are we a long way from neutral rates, are we just below neutral rates.

David Beckworth:     So, I get the sense there's a lot of uncertainty, and the markets don't seem very happy right now. So what is your take on recent economic developments?

Julia Coronado:        Well, in some senses, the market correction we're seeing, it's really a correction in risk appetite to some extent-

David Beckworth:     Okay.

Julia Coronado:        ... is long overdue. We had the fiscal stimulus masking what was an evolving global slowdown that's been proceeding throughout 2018, and yet markets were tightening everywhere in Asia, in Europe, in emerging markets, and the U.S. sort of stood alone as the market where everything was great. The stock market was pricing in what seemed to be a combination of record earnings and sort of permanently low interest rates. Something was bound to give. Either you're not gonna have record earnings, or the Fed is gonna have to raise interest rates more than you've got priced in, and we're sort of meeting in the middle there.

Julia Coronado:        So, it was more of a mystery why markets weren't tightening despite a global slowdown, despite the Fed continuing to tighten policy. Now we're starting to see the U.S. markets catch up. So, why is it happening? It's happening because global growth, which has been ... we had to synchronize global boom in the last couple of years. That is no longer the case. We have trade wars that are complicating the outlook, and the boost from the tax cut to earnings is now moving into the rear view mirror, and companies are starting to have to guide about 2019. All the low hanging fruit is gone, so we're seeing more sensitivity to what is a more mixed bag of news.

David Beckworth:     So Julia, what about the role President Trump has played in this? You've mentioned we've picked all the low hanging fruit, maybe in some ways we were doing better than should have been expected given global conditions. But it seems like President Trump's trade rhetoric or the false hopes that there was a truce in the trade war has played some role in this. What are your thoughts on that?

Julia Coronado:        Absolutely. So, we are seeing the markets become more sensitive to this news. This isn't a new development. We've been grappling with trade wars for a number of months. We've had tariffs put in place, we've had some retaliation, so we've had it, but again, markets had been immune. Now we're seeing markets more reactive to the news on the trade front because it is more material to the outlook. It's more moving more closer to us in terms of the horizon at which it's going to impact things.

Julia Coronado:        So, we are seeing that greater sensitivity. There is also a sense that there isn't a great strategy or an obvious end game in sight, and that's more concerning. If you think sort of broader brush, we've seen the profit share of GDP at record highs on the back of globalization for the last couple of decades, so companies have been able to tap into global supply chains, realize incredibly efficiencies and profitability, and we may be starting to see that unwind a little bit. And it's not just Trump, it's Brexit, it's populism everywhere, it's the rise of China, which is not an open free trade player in the sort of western sense.

Julia Coronado:        So, there's a lot of complications to global supply chains. Some companies are starting to guide, and in their guidance talk about turning towards more or planning for more localized supply chains to protect against political risk. And if that is a broad based development, that would certainly be meaningful at a macro level, because again, we've been riding a wave of globalization and efficiencies. If we're now going to unwind that to some degree so that we're having more political disruptions, making more less efficient decisions based on political risk that wouldn't be great news for current valuations, which are still pretty high.

David Beckworth:     Okay, so one of the things which has been fun to watch as well has been the Federal Reserve, and recently chair Jay Powell had several speeches that seemed to contradict each other. I alluded to them earlier. In October he had a speech, I think maybe it was a conversation actually, where he said-

Julia Coronado:        Right, it was a conversation.

David Beckworth:     A conversation with the Dallas Fed president, where he said he thought that interest rates were a long way from neutral, the point where they would stop raising them. And then just recently, he said rates were just below neutral. And the market responded favorably. They thought, "Oh great, there's fewer rate hikes." But there's been several takes on that; maybe that isn't what he meant. What is your take on that little communication story?

Julia Coronado:        My take on this is first of all when he said "a long way from neutral," if you were watching the speech or the moderated conversation where he said that, it was in the context of a conversation. He was asked about the likely path of interest rates. He used that phraseology, but it wasn't an ... I feel like it was over-interpreted. He wasn't trying to deliver a hawkish message, a message of strict discipline. He was sort of generally describing the Fed's current outlook, and a long way: what is a long way? It's a time, it was before the September rate hike, and they think neutral is about three percent. So were we a long way? We a 100 basis points, that's a long way. But again, it wasn't part of a crafted message, and I feel like the market overreacted to that.

Julia Coronado:        The just below neutral came after the September rate hike, so we've got another 25 basis points, and it was part of his prepared remarks, so I think it was very intentional that they saw the market overreact to a conversational description of the outlook, and they decided to intentionally walk that back. I think the market got it right. Has it overreacted or not? That will depend entirely on the data. I think the market is still pricing in a December rate hike, and another rate hike next year, and that seems fair. Beyond that, it's going to be very data-dependent, and I think one of the reasons that the Fed is also carving out some optionality ... two reasons: one, they are getting closer to what they think neutral might be. It makes all the sense in the world if you don't know exactly what neutral is, and there are long lags in monetary policy, and that was to me another significant part of his recent speech, was he noted that the lags in monetary policy can be up to a year for interest rate hikes to actually take effect.

Julia Coronado:        If that's their assessment of lags, there's a lot of tightening that we haven't yet felt that is in the pipeline. So if you don't know where neutral is and you have these lags of monetary policy, it makes sense to slow down as you come in towards that neutral zone. That's one reason to carve out this functionality, to tell markets, "Look, we don't know beyond the next rate hike what's going to happen. It's going to be data-dependent. We may want to extend the pauses in between rate hikes." Now it's every other meeting. They might take an extra break in between, and so that makes sense, given the lags and where they are in the rate hiking cycle.

Julia Coronado:        The other reason is that they are responding to forward-looking indicators. The markets are telling them that the outlook has become less buoyant. Interest rate-sensitive sectors are telling them that their hikes are starting to have an effect, so the data are telling ... even though the employment data is still very strong, the labor market's doing great, consumers are doing great, but in this environment, late in the cycle, you're getting closer to neutral, you're looking at what are my forward-looking indicators? Interest rate sensitive sectors, financial markets that are forward-looking, the global conditions, and all of these say, "You may want that option. You may not. The U.S. may be resilient; fiscal stimulus may win the day. 2019 might look like 2018, but what if it doesn't?" And there are certainly plenty of indications it might not. Then you will want that option to pause.

Julia Coronado:        I think just structurally being closer to neutral, you want that option to pause, and then the data are telling you, you might want the option to pause. I think it was very intentional that he crafted that message to say, "We're just below neutral, we're not here to ... " There was a narrative in the market that the Fed was going to hike till something breaks.

David Beckworth:     Yeah.

Julia Coronado:        I don't understand where that narrative came from. Jay Powell was never describing things that way. He was always talking about data dependence, extending the recovery, exploring the potential for the labor market to heal further ... I never quite got why the market was telling that story of the Fed being sort of hell bent on hiking till something breaks. Why would they? Why would any central banker sitting in the seat make that decision?

David Beckworth:     This raises another interesting question, and that is this communication problem. The struggle with how to interpret the Fed, and Jay Powell has to be so careful in what he says. As you mentioned, the just below was his intent, and the long way was just the conversation, and so maybe we need to be more careful as observers. Is this the kind of the nature of the beast, or is there any way to improve the communication, the message from the Fed, so we don't have these miscommunications?

Julia Coronado:        I don't know that we can ever avoid the nature of the beast. We've been dealing with that with every Fed chair. It's not bad for me; it's why I have a job. It's up to me to tell investors, "You're not getting that right, or you are getting that right, or this was a conversation, that was a prepared remark." I've been inside the halls of the Fed, I know how obsessive they are about language. Language is like a mathematical equation. Every word is chosen very carefully, so they do their best to be transparent and clear, but they're human beings, number one, so sometimes they say things like, "Oh, we're a long way from neutral," sitting on the couch, having a conversation, not necessarily taking into account that thousands of investors around the world are going to freak out over that phraseology.

Julia Coronado:        Plus, with the Fed, and other central banks too, but you have the cacophony problem. You've got different people with different views. One of the other parts of that September/October shift, was that Governor Brainard gave a very hawkish speech, and so okay, where do we put her, and how much is she speaking for the chair? Is she speaking for the committee, or she speaking just about her personal view?

Julia Coronado:        It's always a bit of a challenge to know how to weight different views on the committee: the chair and the vice chair and usually the New York Fed president are what we call the troika. They're the most important to watch. But other voices can matter, and do matter, and so it's always ... that's a bit of a challenge to interpreting the Fed, is just there's so many voices. And we're in the transition. We've got new committee members; we've got a new Fed chair. That's also ... It takes a while to get to know him and his style of communication as it differs from the prior leadership. There's a lot going on; it's always challenging, and I think that they do the best they can, and truth be told, I don't think we can really ask for a better, clearer communicator, than Chair Powell. He is very clear, very plain spoken, so I think he's doing a pretty good job on that front.

David Beckworth:     Yeah, and to be fair to him, I think all the chairs have some hiccups at some point. Bernanke I remember had a moment where he talked to Maria Bartiromo.

Julia Coronado:        Bartiromo, yeah.

David Beckworth:     He disclosed something to her.

Julia Coronado:        Over a glass of wine.

David Beckworth:     Right, right. So it's not the first time someone has had to learn on the job to keep their mouth shut.

Julia Coronado:        Right.

David Beckworth:     I remember-

Julia Coronado:        I guess-

David Beckworth:     Go ahead.

Julia Coronado:        Yellen's first press conference, right?

David Beckworth:     Yeah, right.

Julia Coronado:        When she was asked ... What was the phrase?

David Beckworth:     We can come back to that.

Julia Coronado:        What "some time" meant, I think it was? And some reporter just really pinned her to the wall, and she said, "It's six months." And that was ... Yeah. They learn on the job for sure. There's a steep learning curve in being in the public eye like that.

David Beckworth:     It is, and I guess for me, I still wrestle with this question though. And I know the Fed is a particularly important central bank. Reserve currency ... I know its actions affect many other countries. I've heard that the Bank of Canada, for example, they don't give as many talks, as many speeches. And they don't have ... My impression is, you don't hear the same cacophony. You don't have as much discussion over what do they exactly mean. Maybe this has to do in part with the nature of the beast. We're designed differently than the Bank of Canada here in the United States. We're also more consequential to world markets.

Julia Coronado:        Yeah.

David Beckworth:     We never get away from this issue, but it just seems to me sometimes, I wonder if all the speeches, the press conferences ... This next year, Jay Powell's going to have a press conference after every FOMC meeting. Is this going to create more signal or noise, and I'm not sure.

Julia Coronado:        Yeah, no, I don't know either. I've always felt like, given where we are in the cycle, and where we are in terms of the Fed's communication, that adding those press conferences wasn't going to change things in the near term, but it might become useful if and when the economy is softening or showing some recessionary signs.

David Beckworth:     Yeah, I know. Yeah.

Julia Coronado:        Because that will allow them to fine tune or shift their message more nimbly. Right now, we've been on kind of a steady as she goes message. There hasn't been a lot to say. In this environment, it's hard to imagine why we need a press conference at every meeting. But, let's say the markets are sensing some risks that are going to materialize in 2019, then having those press conferences can be helpful in signaling a shift, and saying, "You know what? We're seeing some things that worry us, and we're going to just be extra careful so that we take care of the recovery, and signal a pause." That's when the press conferences ... And in terms of where it sits with the cacophony, the more that the chair can control the message, the less inclined you are to respond to maybe regional Fed presidents or other Fed speakers that are saying something different, that are expressing a different view. If we hear more from the chair, the chair has more control over the message. That might make things smoother and clearer to hear more frequently and officially from the chair.

David Beckworth:     So Julia, speaking of improving communication, the Federal Reserve just released its financial stability report. And I'd like to hear your take on it. Is it useful? Could it be improved? Does it tell us anything about the Fed and what it wants to do with financial stability?

Julia Coronado:        The report is an effort at their desire to be more transparent and communicate better. It reveals to the public a framework that they've been putting into place, they've had in place for a number of years already. They put it into place in the aftermath of the financial crisis, and that is to have this very rigorous, systematic monitoring of financial stability issues and as a way of staying ahead of emerging risks that they may need to take into account in making policy. So they track two main tracks, well three main tracks. One is, is there excessive maturity transformation in the system: borrowing short and lending long, which is one of the things that led to the collapse of the banking sector. So they monitor that very carefully.

Julia Coronado:        The second prong is asset valuations: are they excessive relative to historical norms, are they fair? Do we see signs of irrational exuberance, if you will, in asset valuations?

Julia Coronado:        And then the third prong is debt: do we see excessive borrowing or leverage building in the system in a way that can cause more vicious dynamic if it unwinds? Like we saw with the housing bubble, it was particularly pernicious because those valuations, those excessive valuations, were being fueled and funded by excessive leverage. So when the unwind happens, there's that debt deleveraging dynamic, which can create a systemic risk.

Julia Coronado:        Those three prongs are what they've developed as their monitoring framework. They've been monitoring this for years. They've been getting briefed every quarter on the state of financial stability, and now they're just letting us know exactly what they're looking at and what their assessment is. They've always revealed it in the minutes, in the discussion, so it's an evolution in their transparency.

Julia Coronado:        Is it useful? I think it is useful. I think we saw when markets earlier this year were excessively optimistic, that all else equal, that was a reason to lean ... The data were strong, and also it was coming with this excessive layer of optimism. Did it affect things at the margin? It was all else equal, a reason to keep going with rate hikes, and lean towards normalization, and now we might be seeing the reverse. You've got some rather pronounced dynamics and corrections in markets. It's still nothing worrisome yet, but it's something to keep an eye on, and maybe at the margin, lead you to err on the side of some patience in 2019.

Julia Coronado:        We'll see. I think it is useful. Did I learn anything new? Perhaps the most interesting or unexpected part of the report, because again, we've been familiar with the debt monitoring and the asset valuation monitoring, the maturity transformation ... They had an international section that was pretty developed, and that's another dimension that they have to be ... that they've learned to become much more rigorous and systematic about, factoring into their reaction function. They discuss the risks from Chinese leverage, the Chinese credit boom, the global slowdown, the emerging market issues ... There's a pretty good discussion of all of these global risks, and the fact that they do get that kind of a comprehensive global briefing, including global financial stability issues, I find reassuring.

David Beckworth:     Okay.

Julia Coronado:        I think it means they're well informed.

David Beckworth:     Okay, so they're taking it more seriously now. And I think that's pretty clear with also the regulations and all the changes that have been made. Well, let's move on to another topic I'm dying to ask you about, and that's inflation. One of the questions I have wondered about over this past decade is why has inflation been persistently below two percent? Now, it's gone above a few times, but on average, it's been hitting below two percent.

David Beckworth:     If we look at, for example, the core PCE deflator, and if I take the average since June 2009 once the recovery has begun it's just about 1.5 percent. And there's this two percent target and even before the target was officially announced in 2012, it was still an understanding of two percent. So what is your take on this? Why hasn't inflation been persistently low and is it just different now or is it something the Fed has done?

Julia Coronado:        So I think there's a number of things going on here. One, I think from a sort of broader perspective, we know that globalization has come with downward pressures on inflation. The Phillips curve dynamic that we sort of have always had as a cornerstone of inflation forecasting is muted by the fact that labor markets are now global. So domestic labor markets slack isn't necessarily the primary driver of inflation because workers have to compete on a global level. And so it's really we had this opening up of the global economy. Basically an opening up of labor supply that came with some downward pressures on wages and also came with some downward pressures on inflation.

Julia Coronado:        So that's been one sort of meta factor that's feeding into lower inflation in addition to obviously central bank's credibility. And that was sort of a hard fought development over recent decades not just in the US but globally with inflation targets and commitment to those targets. But as you note, the problem is no longer how to keep inflation down at your target but how to get inflation back up to the target. So there's a couple of new dynamics that I think are playing a role in the current performance of inflation. One is technology. We ... sort of the Amazon effect, which is that technology has brought a sort of brutal price transparency and that has made it harder for firms to raise prices because consumers can just shop around and get the best price.

Julia Coronado:        There's been some academic work that sort of looks at a granular level and confirms and identifies that, "Yes, there is an Amazon effect." And that Amazon effect has been sort of spreading out. It was first mainly in online shopping but now it's the disruption from ride sharing apps to taxi rides or Airbnb to hotel and motel pricing. And potentially moving forward going into things like health care where transparency could bring better pricing or more competitive pricing. So I think that is one new dynamic that these ... the tremendous transformation we've seen on the technology front is playing a role.

Julia Coronado:        And then I think also just the way our inflation is constructed. We measure housing inflation in the rental market. So we basically look at what rents are and if you own a home, it's like what you would pay to rent your home is what's measured in our inflation indexes. And what we saw in the housing crisis was, and if you look traditionally first of all, when you identify a Phillips curve, you can run a Phillips curve regression. That is how much slack is in the labor market to inflation on different components of inflation. And the Phillips curve has always been most pronounced in the transitive sector of housing. Not surprising, right?

Julia Coronado:        So when the labor market is very strong, you tend to see rents go up. We've had a disruption to that this time around. In the housing crisis, we saw this incredible decline, shock to home ownership, shift to rentals. So we saw, actually one of the reasons inflation didn't fall as much as forecasters were expecting in the immediate aftermath of the Great Recession was that rents were going up because everybody was like ... a huge wave of people shifted from home ownership to renting. We didn't have enough rental properties to rent them and so there was this upward pressure on rents even though we had 10 percent unemployment.

Julia Coronado:        And so that was a disruption to the normal cyclical inflation dynamic. And now we've had a multi-year, multi-family housing construction boom. We're actually starting to see millennials maybe dip their toes into home ownership so there's less demand for rentals. There's more supply of rentals and we're actually seeing rental inflation moderate at the peak of the cycle when purchasing power is doing well and the unemployment rate is below the natural rate. And you would expect upward pressures on inflation. We're not getting that acceleration in rents because the whole rental cycle has been disrupted. So that's another reason-

David Beckworth:     Okay.

Julia Coronado:        Peculiar to this cycle that we're not seeing more upward pressure on inflation from a cyclical standpoint.

David Beckworth:     So there's a number of developments that have occurred in other words that have led to this result. One question I have though is given that these things do create measurement problems, uncertainty in the near term. Is it Amazon? Is it globalization? Is it measurement issues? I can accept that that's something the Fed has a hard time wrestling with. I mean I would have a hard time too, no doubt.

Julia Coronado:        Yeah.

David Beckworth:     But I guess my question is on a persistent basis over a decade, it to me, the monetarist in me says maybe the Fed is doing something systematically wrong. Either it's incredibly unlucky or it's just really not doing its job. Am I being too harsh?

Julia Coronado:        Right. No, I mean I think ... look. I feel a fair assessment to say that because of the debt deleveraging dynamic of the aftermath of the Great Recession of this recovery, monetary policy has been less effective than usual, right? We didn't see ... you have the credit channel effectively shut down for households throughout the entire recovery. They're not responding to interest rates because they're cleaning up after a huge mess. So it's not an unfair criticism to say that monetary policy has been less effective.

David Beckworth:     Okay.

Julia Coronado:        And so I agree with that and I do believe at the end of the day that the Fed has the tools to generate inflation if it really wants to, right?

David Beckworth:     Right.

Julia Coronado:        But then the other complication is that quantitative easing is also generally thought to be less effective, definitely declining marginal benefit, right?

David Beckworth:     Absolutely.

Julia Coronado:        The first wave undeniably useful. The third wave less of an impact. And on top of that you have a political backlash to that sort of totally unprecedented decision that the Fed made and so they don't have the flexibility to maybe engage in as aggressive a policy as would be required to generate the inflation outcomes that they seek. And it may just be again that this cycle, because of that attenuated policy transmission, maybe it would be irresponsible to push policy to the extent you would need to generate inflation pressures. Maybe you just let the cycle play out with some patience. And I think that's kind of where we are right now.

Julia Coronado:        Where we are with policy is, "Okay, we were running so strong and inflation was picking back up and it seemed like the right thing to do and markets were a little crazy and it was the right thing to do to move to a more neutral stand." But now as you say, we're just not getting those kinds of cyclical inflation signals. We are closer to neutral. We're unwinding the balance sheet. Maybe it is right for the Fed to sort of be a little more cautious and patient here and not make a policy mistake of tightening too much so that those inflation pressures can continue to heal and normalize. That inflation dynamic can ... and I think that's what we're hearing from them. They've introduced symmetry.

David Beckworth:     Right.

Julia Coronado:        That's not exactly the same as a nominal GDP target. And it's not the same as a price level target. But it's sort of a baby step in that direction, right?

David Beckworth:     That's right. That's right, yeah.

Julia Coronado:        We're gonna allow ... we want some overshooting. We're not only gonna allow it, we welcome it. We're forecasting it. It's now in our baseline forecast. And that's another development lately. Inflation's been weak. Core inflation has sort of softened unexpectedly in recent months. It's come back down off two percent. And oil prices are now down quite a bit so that offsets perhaps some upward pressure from tariffs. So the inflation backdrop also says to the Fed, "Maybe you ought to be a little more caution here. Maybe you're closer to neutral than you think. Maybe you're just below neutral."

David Beckworth:     Right. Well, that's a nice segue into the next topic in the time we have remaining. I want to touch on this review of strategies that the Feds gonna be doing over this next year. And they're gonna have a conference in June. That thing's gonna be kind of the highlight at this development.

Julia Coronado:        Right.

David Beckworth:     But all over this next year they're gonna be reviewing what they do, how they do it, how they communicate it. And one of the topics, one of the parts of this conversation is gonna be the monetary regime itself. So you alluded to this. What should the Fed be targeting? Should it be targeting a truly flexible inflation target? Some metric? Some would argue you have a higher inflation target. Others would say a price level target. Others like myself would love to see a nominal GDP level target.

Julia Coronado:        Right.

David Beckworth:     But what I would like to hear from you is your perspective and what you're hearing from Wall Street? When they hear this chatter about changing the regime, does it get them nervous? Are they excited about it? Indifferent? What is your take?

Julia Coronado:        That's interesting. So we do, my firm does a survey a market participants every quarter and we've been asking about inflation expectations and about investor's views of the Fed's view of inflation. Whether there's a ceiling and so on. What we have found through this survey is that a year ago investors were deeply skeptical that the Fed would achieve a symmetric two percent target. Deeply skeptical. The majority view was that they would never achieve it the way they say they want to. And that maybe they don't even ... maybe they do have implicitly a ceiling. So I think since then we've had the symmetry emphasis, the Fed actually forecasting above two percent inflation in its baseline outlook. And we've had improved inflation dynamics so there's some adaptive learning going on.

Julia Coronado:        And investor's expectations have changed a lot. They now are more ... they now believe the Fed that they can and will achieve a symmetric two percent inflation target. I think that that's-

David Beckworth:     Interesting.

Julia Coronado:        Great news for this discussion because before if you'd ask me a year ago about this conference and this whole reevaluation, I would have said I think the Fed is playing a dangerous game here because they might think, "Oh, we can do this nominal GDP targeting or price level targeting, whatever symmetric target, whatever the evolution is" but nobody believes them. You know?

David Beckworth:     Yes.

Julia Coronado:        And that's a dangerous place to go. And now I think they're actually starting from a position of strength that both the data and their own communication has set them up to have this discussion in a productive way. So I think investors are going to be listening to this and I think it may be overwhelmed by events. I mean we've seen inflation compensation in the market be extremely volatile lately. And with the energy prices and the global developments so I hope that that is not the case. I hope that they can have a productive discussion because I know you're sympathetic towards nominal GDP targeting. I'm sympathetic towards some version of that. Whatever is easiest to communicate, I think if they do it in a methodical, well-communicated way, there is scope to achieve ... well, ultimately the goal is to get inflation expectations up a bit so that they have more policy room over the long run. So I'm optimistic about the effort.

David Beckworth:     Okay.

Julia Coronado:        I think that they're ... I hope that the circumstances remain favorable for them to conduct this and I think that there are evolutions we can see that will give them that desired policy space.

David Beckworth:     No, that's a great perspective and you're right, let's hope nothing crazy happens between now and then. That will disrupt and take their focus off of this issue. Can you imagine, for example, a recession came along. That would definitely change their mind. I mean in 2011, the Federal Reserve had a conversation and I know they talked about nominal GDP level targeting in particular. I know they also talked about other issues and one of the concerns was we don't want to change horses mid-stream here.

Julia Coronado:        Right.

David Beckworth:     This would be a hard ... It'd be tough to do something when we're already facing low inflation and other problems. So I like your point. Now is a good time to do it assuming no other crisis emerges. They're in a good spot. Now's the time to do it. Now's the time to act. And from what you're saying, your surveys indicate Wall Street's also more receptive to these changes now.

Julia Coronado:        Definitely, yes.

David Beckworth:     Okay. Well, our time is up. Our guest today has been Julia Coronado. Julia, thank you for coming on the show.

Julia Coronado:        David, really seriously, thanks a lot.

David Beckworth:     Macro Musings is produced by the Mercatus Center at George Mason University. If you haven't already, please subscribe via iTunes or your favorite podcast app, and while you're there please consider rating us and leaving a review. This helps other thoughtful people like you find the podcast. Thanks for listening.

Photo credit: Brookings Institution/Flickr

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David Beckworth
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Jan 7, 2019
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A Macro Musings Transcript