What Went Wrong in Great Financial Crisis Stimulus with Reporter Jon Hilsenrath

Barry speaks with Jon Hilsenrath, founder of Serpa Pinto Advisory. They discuss Jon's career at the Wall Street Journal as a reporter, earning him the title of "Fed Whisperer," and the response to the Great Financial Crisis. They also discussed his belief the US is undergoing the post-industrial economic revolution. 

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio News. This is Masters in
Business with Barry Ritholtz on Bloomberg Radio.

Speaker 2 (00:16):
This week on the podcast, another extra special guest. John
Hilsenrath was a reporter for the Wall Street Journal, covering
everything from September eleventh to the Federal Reserve for twenty
six years. His coverage at the Journal of the Fed
got him nicknamed the Fed Whisperer for his many, many
page one scoops. He's now running Serpa Pinto Advisory, multiple

(00:43):
Pulitzer Prize nomination, author of a book about Janet Yellen,
just a whirlwind of information about the economy, markets, and
the Fed. I thought the conversation was absolutely fascinating, and
I think you will also with no further ado, my
conversation with the Wall Street Journals. John Hilson Rath.

Speaker 3 (01:05):
It is my extra special honor to be here.

Speaker 2 (01:08):
Does it does it feel like you're in the enemy's territory? Competitive?

Speaker 3 (01:12):
Uh, I've crossed over. I've crossed over.

Speaker 2 (01:14):
Here now on the private side.

Speaker 3 (01:16):
Yeah yeah, yeah, yeah. So I want to tell you,
and I should say on the Wall Street Journal page
one story as it was his, I'm a former editor too,
I had that many. I don't have that many anymore
because I've I left the journal.

Speaker 2 (01:29):
Well, but those those headlines, like that number isn't growing anymore, right,
but it's but it's not going down either. That number
is a permanent record.

Speaker 3 (01:36):
Yeah, I appreciate.

Speaker 2 (01:37):
So you you have that many, you know, that many
pole positions and you're you're good to go.

Speaker 3 (01:43):
And there were that many battles with editors at the
Wall Street Journal over you know, structure that story and
what headline to put on it.

Speaker 2 (01:51):
That's a whole nother conversation we're going to get to.
I am constantly reminding people, Hey, you know, the writer,
they don't get to pick the headline. That's the editor.
And people seem shocked by that.

Speaker 3 (02:02):
Yeah, it's a process. Let's just let's say the least,
it's definitely a process.

Speaker 2 (02:07):
Before we get to your writing and editing, let's talk
a little bit about your background. Duke University, undergrad eventually
an NBA from Columbia. What was the career plan?

Speaker 3 (02:19):
The career plan for me was always journalism. I actually
like you. I'm a Long Island boy. Are you from
Long Island?

Speaker 4 (02:26):
Or?

Speaker 2 (02:27):
From sixth grade on?

Speaker 3 (02:27):
From sixth grade? On Okay I grew I grew up
there to Manhasset, Long Island.

Speaker 2 (02:32):
And Welcus Valley. That's we could play Jewish geography. That's
twenty fifteen, twenty minutes from.

Speaker 3 (02:37):
Me, although Manhasset was a Catholic town. But like, the
career plan for me was always journalism. I started writing
for the Manhasset Press when I was sixteen years old.
I was I started out as a sports writer. The
original plan was sports writer, ah, and then the next
plan was war correspondent, and then somehow I ended up

(02:58):
becoming an economics writer. But I stuck to the plan
of journalism.

Speaker 2 (03:01):
So if journalism was always the plan, why an MBA,
why not journalism are well?

Speaker 3 (03:05):
So I about excuse me. About five years into my
journalism career, I went back and did a fell When
I decided I want to do economics and finance, I
went back and did a fellowship at Columbia. It's called
a night Badget fellowship. Ye great program. And what they
did is they took a few working journalists and then
they put them through the business school for a year.

(03:26):
And then after a year that I decided to do
a few extra courses and get the NBA, But I
was really there for the fellowship to kind of to
Basically what I wanted to do was learn how a
balance sheet worked, learn how corporate finance worked. I had
spent a bunch of years covering like Macro, but I
didn't understand anything about what made Wall Street go. So

(03:46):
that was why I went back there.

Speaker 2 (03:48):
So what was it that drew you to journalism? Oh?

Speaker 3 (03:51):
Wow, I just you know, so I hated English class
in high school. I don't know how you felt, but
you know these four and they're still teaching it the
same way. By the way, these four paragraph essays of
you know, introduction, supporting paragraph one, supporting paragraph.

Speaker 2 (04:08):
That was never a problem is always subject, predicate, what's
an adverb?

Speaker 3 (04:12):
Why do I need to? And then it's like why
am I? You know, why am I learning to do
literary reviews? To kill a mocking bodker? Anyway, I never
thought I would have anything to do with writing, but
then I got involved in covering the local sports teams
and I was like, this is really interesting, this is fun.
I'm like right in the middle of the action and
like right on the sideline, and people are paying attention

(04:35):
and they care about it, and it just felt it
was just I had I had, I had fun, and
I've come to see over my career that like the
great thing about journalism and like here we are in
the Bloomberg newsroom is like you're always surfing right on
the edge of history, right, And so that's really what
ended up drawing it to me. I mean, there's the

(04:55):
reporting aspect and the writing aspect, but just the idea
of being like right in the middle of things as
they're happening and trying to make sense of them and
explain them was an addiction that I didn't get over
for a long time.

Speaker 2 (05:07):
And right out of Columbia straight to the Wall Street
Journal was that your first gig?

Speaker 3 (05:11):
Well, so I started out at a newswires service in
the early nineteen nineties. Here we are back in Bloomberg.
It was called right Night rit or Financial No sure, yeah,
And like.

Speaker 2 (05:23):
Any relationship to the Night big a hot, No, there
was no.

Speaker 3 (05:27):
There was no relationship except for the fact that the
Knight family was really rich and could fund something. Right, Okay,
But Bloomberg was like up and coming at the time,
and people weren't taking it as seriously as they should have.
But I did that a few years, moved to Hong
Kong with a newly wed on an extrege with my
newly wed on on an exchange program with Columbia, and

(05:48):
then I signed up with the journal over there.

Speaker 2 (05:51):
How long were you in Hong Kong for five years?

Speaker 3 (05:53):
About five years? Yeah, And that was a place.

Speaker 2 (05:55):
This was when the UK was running the city and
before I was.

Speaker 3 (05:58):
There right for the handover, so you know, so it's
I mean, there's another great thing about journalism is wherever
I went, it seemed like stuff started blowing up. So
I started with the Wall Street Journal in Hong Kong
in July of nineteen ninety seven. That was the week
that the UK handed the city over to China, and

(06:19):
it was also the week that the Taibati valued and
started the Asian financial crisis. So I got in there
and I was like flying from day one on these stories.
It turned out that the Asian financial crisis, particularly in
given what I was doing, was a much bigger event
than the handover. The handover was had much had long
term implications obviously, but yeah, so I was there for

(06:41):
all of it.

Speaker 2 (06:42):
So how long after the handover did you start seeing
the heavier hands of China in day to day life
in Hong Kong.

Speaker 3 (06:49):
You know, I think it's been a very slow and
corrosive process. And frankly, when I was there from ninety
six through two thousand, it was really the economic events
that were driving the city at the time. So the
first one was the Asian financial crisis and a property
crisis that swept through Asia. One of my formative experiences

(07:10):
as journalists was covering an investment bank called Paragrine Investments
that blew up, and I learned some really important lessons
that came back to help me in two thousand and
eight about how banks explode and you know, were implode.

Speaker 2 (07:23):
So when you came back to tell you it was Paragrine.

Speaker 3 (07:27):
Yeah. So one of the formative experiences of my career
in Hong Kong was covering the collapse of an investment
bank called Paragrine Investments, and you know, I saw, you know,
why banks collapse and what causes these kinds of runs.
It came in really handy ten years later when Bear
Stearns and Lehman Brothers were blowing up, and I had

(07:48):
insights that kind of got me ahead of those stories
in ways that surprised some people at the journal. I
would you know when I don't know if you remember
when those bear Stearns hedge funds blew up.

Speaker 2 (07:57):
Oh? I remember.

Speaker 3 (07:58):
I told my Colly Kate Kelly, who was all over
that story. I said, they're going to blow up this weekend.
We need to have a two thousand world story ready
to go Saturday. She's like, you're overreacting. I was like,
watch because I saw what happens when creditors of banks
get nervous. And I learned all that in Asia. The
other big event in Asia in the late nineteen nineties

(08:20):
was of course the handover. But for people in Hong Kong,
it's a very entrepreneurial city. They were thinking, well, how
do we get money? How do we make money off
of this? You know, how do we tire? You know,
the Chinese economy had been booming, it was a growth story,
and so people were looking for ways to advance themselves economically.
I think what we've seen happen to Hong Kong since,

(08:41):
and this is perhaps a lesson, is that, you know,
these attacks on democracy have been and free speech and
all that have been slow and corrosive, and it's a
different city today than it was twenty five years ago,
but after the handover, it was just people trying to
make better lives for themselves.

Speaker 2 (09:02):
Right, really really fascinating. How do you get from Hong Kong.

Speaker 3 (09:06):
To d C to DC? Well there was a stop
in the middle in New York. So I was in
Hong Kong for five years. Moved back to the US
in early two thousand and one, right in time for
the tech bubble to burse and of course nine to eleven. Again,
wherever I went it seemed like terrible things were going on.

Speaker 4 (09:26):
You seem to be an unlucky charm and you know,
and I used to joke that like Wall Street should
just pass its hat around to retire me, because you know,
then I just get out of everybody's bad news.

Speaker 3 (09:37):
But yeah, came back. I was in the New York
office for seven years writing about economics. I was our
markets editor during the credit bubble and the credit bust
and learned a lot in that experience about the interactions
of economics and final.

Speaker 2 (09:55):
Where was your office in two thousand and one?

Speaker 3 (09:57):
Our office was across the street front.

Speaker 2 (09:59):
Right, not the the Fox Wall Street Journal office.

Speaker 3 (10:02):
On that you moved up there after Murdoch took over.

Speaker 2 (10:05):
That's right, this was you guys were right in the
middle of it.

Speaker 3 (10:08):
We were, yeah, so what So we were across the
street in the World Financial Center, the southernmost tower, I
guess that was World Financial Center three. So I would
walk across the West Side Highway on this land bridge
every day, right.

Speaker 2 (10:20):
Next to the Palm Court, if I recall correctly, that
big glass.

Speaker 3 (10:24):
Yeah, yeah, yeah, yeah, we were across the street from
that too. Anyway, I happened to be in early that
morning trying to finish a story, and I was heading
over to the World Trade Center for NABE conference. And
you know, journal reporters tended to get in a little

(10:44):
bit after nine because we tended to have late deadlines.
I was in early, was there for the first plane
to hit, and then I ran out into the street
with a notebook. Second plane flew right over my head.

Speaker 2 (10:55):
Wow. Yeah, And were you interviewing? People were like, what
did you do that day?

Speaker 3 (11:00):
So well, so I'll tell you exactly what I did.
The first thing I did when I saw the inferno
from the first plane is I ran downstairs to I
was where the reporters were stationed. I knew the top
editors were down a floor. So I ran down there
to see who was here and who was organized organizing things.
I ran to Paul Steiger Oh, I was the managing

(11:22):
editor of the paper. I said, hey, I'm here, I'm
here early. You know, I'm on it. What do you
want me to do? And his advice was go figure
out what happened and don't get yourself killed. So like
he immediately understood that something serious was at hand. So
I grabbed a notebook and ran over that pedestrian bridge,

(11:43):
saw a lot of carnage in the street, and started
kind of writing. Well. The next thing I did was
call my wife to let her know that there was
a fire. And I was okay because I figured it
was going to be on the news within a matter
of minutes and she knew where I was, so I
called her to let her know I was okay. And
then a few minutes later, as I'm in the street,
the cops are trying to clear me out. They're saying,

(12:05):
you can't be here. This is a dangerous place, so
they're trying to move me out of the street. I walk,
and then as I'm walking kind of to follow the
police's orders, the second plane flies right over my head.
And you know, I stuck around and interviewed witnesses and bystanders,
and it was a pretty harrowing day.

Speaker 2 (12:26):
Yeah, to say, to say the very least, let's bring
it back to something a little less arrowing or more traditional.
You have a really unusual career trajectory at the Wall
Street Journal. You start, you know, fairly green, and eventually
you're running what's probably the hottest desk in economics, which

(12:48):
is covering the FED, showing up at meetings, interviewing FED governor's,
FED presidents and the chair of the f O and c.
What was that process like to get there?

Speaker 3 (12:58):
Yeah, well, you know, like my goal at the journal
was always well, I just wanted to write good stories, right,
And the journal back when I started at the place
was ironically you think of it as a finance, economics
markets kind of paper. And that's how I you know,
I grew up reading the New York Times and watching

(13:20):
my dad read the Wall Street Journal, and like that
stuff just didn't interest me. But what I discovered over
time was that the you had to be able to
write long feature stories to succeed page one stories. We
called them leaders. So like that's what I was focused
on doing what happened was by two thousand and eight,
I had I had learned a lot, basically in part

(13:44):
from my experiences in Asia, you know, where I covered
these banks collapsing and I saw financial crisis, and I
kind of felt like I had a roadmap for how
it worked. And then obviously in two thousand and eight,
I mean, the US markets were employed and it was
very complicated. It was kredit, it was credit driven. Our

(14:04):
star fed reporter left the paper that summer to go
to the economist magazine, greg Ip. It was a legend YEP.
And the guy that my future boss really wanted for
the paper had just moved to London, a guy named
Mark Whitehouse, who's a Bloomberg Opinion, brilliant, brilliant guy, and

(14:26):
he was I think seen as the heir apparent. But
he had just moved to London, so they had no
one else. And like I had learned a lot about markets,
I had been writing about economics. I was just well placed.
So they asked me to go to move down to
Washington in the summer of two thousand and eight to
cover the FED, and my first week on the job,
Lehman Brothers blew up, so I'm on the phone that

(14:49):
weekend with the top leadership of the FED, trying to
understand you know, when Tim Geitner is talking to me
about foam on the runway after like these day of
intense meetings collapsed, you know, some of these officials wanted
to talk to reporters to kind of keep us informed
because the next day was going to be a big deal,

(15:12):
and they just kind of wanted to have their story
out there. So I was talking to top people six
days into the job.

Speaker 2 (15:18):
You're the perfect person to ask this question that I
have never gotten a good answer to, which was why
was it that AIG was saved and Lehman was not.
I have my own theory, yeah, but I haven't spoken
to very many FED officials in real time.

Speaker 3 (15:36):
I think it was sequential, I mean remarkably right. So,
I mean what they were telling me Sunday night was
that they hoped that they had enough of these facilities
rescue facilities in place. You know, boy, I can't even
remember all the acronyms anymore, but you know, the liquidity

(15:57):
that they were pumping into the other investment banks, and
they hoped that they had enough of these facilities in
place in order to keep the system stable. The next day,
you know, people forget the FED had a policy meeting
on Tuesday. They didn't cut interest rates two days later,
Like Bernaki had a view that he thought that he
had the situation under control, and they realized, you know,

(16:18):
before AIG on Tuesday. On Monday, there was the money
market mutual funds that broke the boss, that's right, and
then all hell broke loose, and they realized that if
they didn't do something, that things were going to get
much worse. So it was the markets weren't a panic,
and I think the policy makers panicked and at that
point they just were doing whatever they could to put

(16:39):
out fires, whatever they go.

Speaker 2 (16:40):
I have two pet theories on Lehman, and I want
to run them by you, Okay. One is they looked
at the balance sheets, the whole repo one oh five
and moving money off. Someone looked at the balance sheets
and said, hey, you could rescue these guys, but they're insolvent.
And not just a little insolvent. Yeah, they're tens of
billions of dollars insolvent.

Speaker 3 (16:59):
Yeah.

Speaker 2 (17:00):
That was the Lehman brother issue. Bear Stearns. It's like
they weren't insolvent. They just had too much money tied
up in a liquid assets. Was a liquidity issue, not
a solvency issue.

Speaker 3 (17:11):
Yeah. And the rules that the FED was trying to
abide by at the very edge of its authority was
that they had to lend against good collateral, right and
if it was bad collateral, they couldn't do it. And
then the other problem that weekend was that they were
starting to worry about who was going to be the
next one.

Speaker 2 (17:28):
To fail AIG because a.

Speaker 3 (17:30):
Lot of I mean, you know, if if they bailed
out Laman, then the market's target was going to point
to Meryl Lynch, right like, So they were just happy
to get Meryl Lynch bought that week right, right.

Speaker 2 (17:40):
Right, So that John saying that was a great last
minute deal he pulled off and it worked out well
for everybody.

Speaker 3 (17:45):
Yeah, and they and and and they survived. So uh,
you know, it was coming at them fast and furious,
and I mean, what's kind of remarkable is that they
had all summer to prepare for it and it still
blew up in everybody.

Speaker 2 (17:57):
The other the other thing that I would have to
be a fly on the wall for was, at one
point in time, one Buffet reached out to Dick Fold
at Lehman Brothers, and we don't really know the details,
but it kind of looks like Buffett made an offer
to Leman and he kind of to Fold and he
kind of turned up his nose at a low ball offer. Eventually,

(18:20):
Buffett makes the similar offer to Goldman Sachson. Goldman was
smart enough to take it. So you can imagine how
BERNANKI was thinking, Wait, they turned down Buffett.

Speaker 3 (18:29):
Why do we have to get well, I mean, I
think a lot matters and kind of went at what price? Right?
So I know that they were working very hard all
summer to raise capital, and a number of deals, including
with Korean investors, failed to develop.

Speaker 2 (18:42):
So we mentioned three hundred and nineteen page one bylines.
What stands out as some of your favorite pieces?

Speaker 3 (18:52):
Well, I am most attached to those longer magazine feature stories.
One of my favorite ver It's was a piece I
wrote in two thousand and five. The spring of two
thousand and five, I actually had just been beaten badly
by the New York Times on another story and was
a little frustrated and disappointed with myself that I had

(19:14):
gotten beaten.

Speaker 2 (19:14):
What was the topic that you were beaten on.

Speaker 3 (19:16):
Oh that's I mean, that's that's a long story. It
was about an academic economist with an unusual background that
it's it's too complicated to get into. I mean, if
you want to, we can get into it. But it's
a all right, I'll it's a long story. But anyway,
I worked on a story with a colleague in Thailand
about how there was a global housing boom going on

(19:40):
that was being funded by a global credit boom and
increasingly complex credit not just through banks but through more
sophisticated vehicles and sophisticated investor groups. And I quoted Robert
Schiller in it. This is in June maybe of two
thousand and five, saying this was going to end in

(20:01):
a global recession. So and it connected the dots on
something that was building, and it took a couple more
years for it to really develop. I did another story,
and the stories I love were the ones that were
kind of looking around corners. But I did a piece
I think it was maybe two thousand and three, two
thousand and four looking at US China trade. I had

(20:24):
figured out an economists had told me, you know, everyone's
talking about all these imports coming from China and how
damaging it is for the US. You should look at
what the US is exporting to China. Our exports to
China are booming, and you should do a story about.

Speaker 2 (20:39):
That agriculture, right.

Speaker 3 (20:41):
So I looked at what was booming, and it turned
out that our number three export in value and our
number one export in volume was trash. We were the
Saudi Arabia. Well, we were sending them recycled paper, we
were sending them recycled plastic. We were sending them recycled
and they were turning that into the boxes and containers

(21:05):
and packaging that all the toys and books in microwoven
microwave ovens came back in And I kind of pieced
this together and actually used a little boy's piece of
trash to tell the story I found. I went to
a recycling facility in New Jersey where I still remember

(21:26):
their name, the Zizarro Brothers in New Jersey. Right near
the chipping containers. They had a container of recycled paper
that was going off to China. That let me pick
through it find a little boy's homework assignment that I
made a photocopy of. I put the homework assignment back
in the container where it belonged, and I tracked the
kid down, and then I was able to track this

(21:47):
one boy's homework assignment from the Zizarro Brothers backwards and
then all the way to a paper newsprint facility in
China and of us this boy's homework assignment to tell
how global trade was changing the face of the economy.

Speaker 2 (22:06):
Coming up, we continue our conversation with John Hilson Wrath,
former chief economics correspondent for the Wall Street Journal. Today
he runs Surpa Pinto Advisory, discussing his Wall Street Journal
experience and Surpa Pinto. I'm Barry Ridults. You're listening to
Masters in Business on Bloomberg Radio. I'm Barry Ridults. You're

(22:44):
listening to Masters in Business on Bloomberg Radio. My extra
special guest today is John Hilson Wrath. He is the
former chief economics correspondent for the Wall Street Journal, where
he was dubbed the Fed Whisperer for all his many
scoops on the Fed. So let's talk about that. You
were thought of as the Fed Whisperer. What does that mean?

(23:05):
How do you get that nickname?

Speaker 3 (23:08):
Well, it's funny you ask. It actually used to really
bother me when people said that, because I thought, you know,
my feeling when I was covering the FED is it
kind of trivializes what we're trying to do here and
the hard reporting that went into getting stories out of
the institution and you know, following the journalistic mission. So

(23:30):
maybe I was a little righteous about being called the
FED whisperer back then. You know, Wall Street loves to
attach these kind of two word names and everything. So
when I was covering the FED, it was like the
Taper tantrum and Qui infinity, the terrifying, and the FED
pivot and you know, so for me, it was the
FED Whisperer. But you know, since I left journalism and

(23:53):
started my own business, now I'll use whatever I can
to my advantage. So now I'm like, yeah, you can
call me the FED whisperer. I'll take that. Back in
the day when people.

Speaker 2 (24:01):
Said it, I was like, I don't think Fed whisper
is as trivial as something like do you remember the
green span briefcase indicator how thick or thin hit? It
was just a dumb thing. Yeah, I don't remember seeing
MEC started it. Somebody started it, and it was just
one of those dumb like really are we really doing this?
But you were the one that was getting all the

(24:21):
FED scoops that when they wanted to publicize something, they
had a variety of outlets that they would reach out to,
So ten outlets would all get the same story, but
one outlet would have a much more in depth personal detail.

Speaker 3 (24:38):
Here's where we got to mystify.

Speaker 2 (24:40):
So okay, so let's see.

Speaker 3 (24:42):
Yeah, I mean, we could talk for a long time
about that, but I wouldn't say that that was exactly
the way it worked. So, you know, and this is
kind of why I had, you know, was a little
upity about the FED whisperer thing is it wasn't like
there was some bat phone sitting at my desk and
like the phone rang and it was like, oh yes,
Chairman Bernanky, what would you like me to say today?

(25:03):
There was you know, and my successor, Nick Timros is
great at this. There was a lot of reporting that
went into this work. It wasn't it wasn't like a
spoon feeding kind of process. It was a very kind
of It was a process is a keyword, and it
was dynamic and complex. So I mean, we could we

(25:25):
could talk in some more detail about that, But it
wasn't that it wasn't the kind of thing that well,
first of all, that they only started doing press conferences
sometime after I guess it was around it was twenty twelve,
who was posed four years? Four years into the beat,
Maybe it was twenty ten. I can't even remember anymore.

(25:45):
But what went into the process of writing a FED
story was like you had to do a lot of reporting,
a lot of triangulation. You had to figure out where
the debate was going inside the room and put enough
pieces of the puzzle together in order to say this
is what they're likely to do. And it was also
very important. You know, people used to say, oh, how cold,

(26:07):
How could his stories always be right? He's clearly being
spoon fed stuff. Well, there's like there's a reason for that,
because I didn't report stuff I didn't know. So, you know,
you had to do a lot of reporting to get
to a point where you could say, all right, this
is where they are and what they're going, and where
you could say, you know, this is what we know
about the kind of state of the debate, or how

(26:27):
certain you know, there were some meetings where they weren't
sure what they were doing going into it, and I
wasn't going to get over my skis on that stuff.
So it was, uh, you know, so there was reporting
that went into that, there was understanding the institution. I
became very good friends with the New York Giants Beat.
I'm a big football fan New York Giants Beat reporter
in those years, and we used to compare notes, like

(26:49):
I saw my job in some way similar to what
she was doing it, Like I needed to know what
was going on in the locker room right right, and
I needed to know kind of who the players were,
what the game plan were, who the trainers were, like
every angle of the locker room in order to get
a whole picture and in order to say with authority
what I thought was happening and what was going to

(27:11):
go on next to that. You know, by game day
was an FOMC meeting. By then I had already done
the hard reporting. It was just a matter of saying,
all right, here's what happened on the field.

Speaker 2 (27:20):
FED reporting as a sports analogy.

Speaker 3 (27:23):
Well, I started out as a sports writer, so yeah.

Speaker 2 (27:25):
It makes perfect sense. So let's talk a little bit
about the FED today versus when you were covering them.
Now you're covering them as a researcher and an analyst,
then you're covering them as a reporter. You wrote the
era of consensus and comedy at the US Central Bank
is ending.

Speaker 3 (27:46):
Explain well, So, I mean the FED is a very
consensus driven institution. When I was covering the FED back
in the financial cris period two thousand and eight two
thousand and nine, there was actually a lot of disagreement
at the time. The disagreement was internal and mostly in

(28:08):
the regional Fed banks. So I actually spent a lot
of time talking to these regional Fed bank hawks to
understand what their case was against programs like QWE and
interest rate cuts and things like that repression, and there
were a lot of unknowns, for sure, there were a
lot of unknowns. So and bernanky and yelling, and then

(28:31):
Powell spent a lot of time trying to building processes
to build consensus around their decisions. What's happening now is
is it's the disagreement and division is politically driven, right,
we all know that. But what the President has a
clear view of where he wants interest rates going. He
wants all interest rates going down. It's I'm afraid a

(28:55):
little more complicated than what he perhaps thinks he's going
to get out of that because he might cut short
term interest rates and get higher long term interest rates, which.

Speaker 2 (29:03):
Which happened very recently.

Speaker 3 (29:06):
It happened with the FEDS cuts last year. And so
you know, he's putting on people in the institution who
were you know he expects to be loyal to him.
Stephen Miron is the latest. So we're and there's a
lot at stake, and there's turnover happening at the FED
right now. We all know there's going to be a
new chairman appointed by the President next year. There are

(29:28):
tests of loyalty. The really big issue is if the
president gets four people who are loyal or even closely
loyal to his views, he has an opportunity to remake
the entire system because with a majority on the FED
Board there are seven Board governors. With a majority of
four on the FED Board, then the Board can start

(29:49):
firing and restructuring the regional banks that might oppose some
of the policies that the President wants to pursue. So
there's a lot of stake right now. Two levels, one
with the succession of j. Powell and two with the
construction of who the other governors are going to be
on the FED board and how loyal they'll be to

(30:09):
the President's vision of how monetary policy should be running
the end.

Speaker 2 (30:12):
So let's talk about that. You wrote a piece early
in the summer of twenty twenty five, the fourth seat,
meaning once the President gets a hold of that fourth seat,
he is essentially running the supposedly independent FED. Tell us
a little bit about that, and we'll eventually talk about
Lisa Cook. Yeah, and what this pretense firing really looks

(30:36):
like an attempts to get an early grib at that
fourth seat.

Speaker 3 (30:39):
Yeah, and I'm actually going to go straight into Lisa
Cook in a moment. But so there's the President appointed
Chris Waller, he's a FED governor, he might get the
chairman's job. He appointed Michelle Bowman. These were in his
first terms, and she was given a promotion to Vice
sheriff supervision. He's now appointed Stephen Miron, who's made the

(31:02):
President's case for much lower interest rates just last week.
And so he's in theory one set away from having
four governors and a majority on the board and an
opportunity to move the FED in a whole new direction
and what's happened. It looked like that fourth governor job
might be j Powell's job next year when his chairmanship ends.

(31:22):
But what happened is now, and this gets a little complicated,
But the chair of the FHFA is accusing the Federal
Home Finance Administration or agency is accusing Lisa Cook, another
FED governor, of fraud and mortgage applications that she submitted

(31:45):
to her banks in twenty twenty one. It's an unproven allegation,
but if they're trying to remove her for costs, the
President has effectively announced that he's firing her for cause,
and she's challenging that it could be in the Supreme Court.

Speaker 2 (31:59):
Now there's a whole concept of FED independence, and the
FED board can fire someone from cause. There doesn't seem
to be any precedent for the president fire. Let's hold
aside of fact. Wink wik nudge, nudge. We all know
that this mortgage thing is nonsense and it's just a pretense.

(32:19):
Let's just hold that aside. We're talking about governmental power.
Who has the power to hire and fire FED government?

Speaker 3 (32:29):
The President has power the power to fire a FED
governor for cause. Then we get to it hasn't happened.
No president has tried. But then you get to our
question was of well, how A, how do you define cause?
And b what is the what is the process for
defining cause? And then going through the process of firing

(32:50):
a FED governor. This is all on chartered ground, and
it's moving to the Supreme Court to make some decisions. Now,
there are a whole other set of decisions the Supreme
Court has made where it has found that the president
can fire heads of other agencies at his discretion. And
one of the questions is whether firing a FED official
for cause is held to a higher standard than you know,

(33:12):
firing a participant in the National Labor Relations Board, and
the Supreme Court for reasons I can't say I fully understand,
seems to be ready to draw a circle around the FED.
But there are big questions of how do you define
cause and what's the process, And we don't know where
they're going to go with it. They need to kick
it back.

Speaker 2 (33:32):
It's not just putting out something on social on any
social media order. You actually have to have a process.

Speaker 3 (33:40):
Well, I don't know. I mean, the Supreme Court might
decide that the president can do it at his discretion
on X.

Speaker 5 (33:47):
So if it's that discretion as but but then what
is Lisa Cook's argument is that, well, so there's a
definition of for a cause, and I don't have the
specific language in front of me, but it has to
be for discreet malfeasance or neglect.

Speaker 3 (34:03):
On the job. And one of her one of her
defenses is that he isn't accusing me of doing anything
wrong on the job. These were applications I submitted years ago,
or and but then there's some fuzzy language that you know,
or or the like or something to that effect. And
so there's a question of whether there's enough gray area

(34:25):
for the president to define what fore cause means on
the first two things of you know, you know, malfeasance
on the job or neglect on the job, they don't
seem to hold up. But there's some gray area on
the third piece of that, you know, And that's that's
kind of legal precedent that's been said over many years.

Speaker 2 (34:42):
It's fascinating because the government, when they were defending the
tariffs kinda said, well, AIPA says emergency, they don't say
anything about tariffs. What's an emergency? In the government's position
was whatever the President says it is. Yeah, all these
words that uretically have actual meaning. Once you start saying

(35:03):
it's subjective at the president's discretion four cause emergency, things
like that go out the window. It's going to be
interesting to see if the Supreme Court contorts themselves to
acquiesce to the president or follows what we think of
as traditional legal theory.

Speaker 3 (35:22):
It's another big year court for sure. And I mean,
if you want to get really philosophical and pull the
lens way back, I mean, I personally think we're living
through revolutionary times kin to the French Revolution in the
American Revolution. And one of the things we know is
that in revolutionary times, standards and norms get thrown into

(35:44):
the air and redefined.

Speaker 2 (35:46):
Which can first, Did did the throwing of the norms
away lead to the revolution? Or was the revolutionary set
up in place and norm are just collateral.

Speaker 3 (36:01):
The revolution has been building for years. And I'll take
this back to my FED beat. It's a little off
the subject, but when I was covering the FED by
twenty thirteen twenty fourteen, I was regularly getting emails from
really angry readers who saw the FED as being at
the center of America's problems an example of an elite

(36:23):
Wall Street institution hurting the little guy in favor of
rich guys, an insiders game. And they saw me as
a reporter at the Wall Street covering the institution theater
as yeah as carrying their water. And I routinely got
emails from people saying there's a revolution coming, and like

(36:44):
they told me and like as a warning, they said,
there's a revolution coming, and when we come, you're going
to be one of the people we string up on
on you know, on pitchforks, on pitchforks they were, they
used injury of the French Revolution. I was seeing this
back in twenty fourteen. It actually led me to write

(37:05):
a series of collection of stories with actually the most
prolific Wall Street Journal Page one reporter of all time,
a guy named Bob Davis, about the economic roots of
what we call the economic roots of political discontent by
twenty sixteen. By twenty fifteen, like I was getting death threats,
and we saw that there was like something going on
in the country that was kind of deeper than your

(37:27):
normally agitated reporter, And so we went out and wrote
a bunch of stories called The Great unraveling in twenty
six I recall that I recalled that it was all
about how kind of trade had gone the wrong way
for many Americans, how finance had gone the wrong way
for many Americans, and technology, and that people were angry
and they were angry at the elites. And so to

(37:50):
answer your question, the revolution started a long time ago,
and I think we're pretty well into it. And you know,
I think a lot of this revolution has been and
you know, we have digital guillotines now right where like
where we'll cut off your head by your reputation. But

(38:11):
sadly and disturbingly, it's now getting somewhat bloody.

Speaker 2 (38:17):
Yeah, no, to say the very least. You know, it's
kind of fascinating. When I was writing Bailout Nation, one
of the things that kept coming up when you look
at the history of who is Treasury secretary, they seem
to be pulled, pulled from two different groups. They were
either pulled from Wall Street and banking, or they were

(38:39):
pulled from manufacturing and industry. And throughout history, if you
had an industrialist as Treasury secretary when things hit the fan,
well a whole bunch of banks are going to have
to go under sorry, flip that when you have someone
from Wall Street, well, then we're going to rescue the banks.
And ironically, I don't disagree with anything you said about

(39:05):
the history. I think some of the anger is misplaced
because it wasn't the FED basically stepped in when Congress
threw their hands up and said, we can't do anything.

Speaker 3 (39:16):
Oh and it was a financial crisis, right. It is
the lender of last resort, right, it's their role.

Speaker 2 (39:22):
They were supposed to do that.

Speaker 3 (39:24):
That's where they were creating in nineteen thirteen.

Speaker 2 (39:26):
That's right. What didn't happen during a normal financial crisis
is fiscal stimulus along with monetary stimulus. Monetary stimulus benefits
the holders of capital. You on stocks, bonds, real estate
rates go down, you do great. When the government does
a big fiscal stimulus that tends to land on the
middle class. Hey, we're going to build an interstate commerce system,

(39:50):
an interstate highway system. We're gonna you know, create weaponized
kingsingism and build up defense. That tended in pass to
find its way to the middle class. What happened in
the twenty tens were you had all that monetary stimulus,
very little fiscal stimulus at least until the pandemic, and

(40:12):
for a brief period of time it looked like the
middle class was bought off.

Speaker 3 (40:16):
Yeah, well, there's I mean, there's a lot of economics
in history here. What I'll say is, I agree with you.
We got fiscal policy exactly one hundred and eighty degrees
wrong after the financial crisis, in the sense that what
we needed was and there was some fiscal stimulus right
after the fact, but it wasn't sustained. We went, you know,
we went to fiscal austerity within a year or two.

(40:40):
What we needed was short term stimulus, right and long
term fiscal austerity in order to get the budget under control.
And what they did was short term austerity and nothing
about the long term. And I'm still waiting, by the way,
for the bond market to recognize this, and it doesn't
seem to do that.

Speaker 2 (41:00):
It's kind of fascinating that the bond vigilantes. I keep
hearing those names come up, and they don't really seem
to exist anymore.

Speaker 3 (41:09):
They seem to flutter their eyes and wake up and
then go back to sleep again.

Speaker 2 (41:13):
I have a pet theory that there's just a shortage
of quality sovereign paper and so even a damaged, high
debt United States is still going to make good on
its debts.

Speaker 3 (41:24):
So they're still appetite, right, And I think that helps
you explain why spreads are so tight right now, because
people will buy whatever paper they can.

Speaker 2 (41:31):
Get, right, right, absolutely true.

Speaker 3 (41:33):
Hey, I know that you have a bunch more things
you want to ask about the FED. Can I you
were asking a few minutes ago about the about covering
the fat and being the Fed whisper right and being
spoon fed so to speak.

Speaker 2 (41:46):
Right, You didn't know no shoe leather, no heavy research,
no investigative jenneralism. They just handed you your stories.

Speaker 3 (41:53):
And I pushed back, and see, there's a lot there's
a lot of there's a lot of reporting that went
into those stories. I just wanted to I don't know
if this was among the things he wanted to ask,
but I just wanted to describe, for a second, like
what my mentality was about, like what my job was, right. So,
and I used to preach this to colleagues all the time.
As a beat reporter, I felt like this is really

(42:15):
important to me. I had three responsibilities. One responsibility was
to break stories, right, that was those Fed scoops, and
it mattered. You know, if people were going to pay
to subscribe to the Walls regional all, they want something
different in there. The other responsibility I had was to
explain a complicated world. There were a lot of complicated
things going on when I was covering the FED with

(42:38):
QI and zero interest rates, and I had to understand
it and try to explain it to people. But then
the third piece was holding powerful people and institutions accountable.
And you know, I think that from the outside, maybe
people would look at this and say, oh, he's getting
spoon fed these scoops and he's pulling his punches. He's
not holding them accountable. But that third part was important

(43:00):
to me, and I mean, I'd be happy to talk
about stuff that we did on that front. And you
know what we did to try to hold the FED account.

Speaker 2 (43:09):
Well, let's zoom in.

Speaker 3 (43:10):
And there's also the sense that those that those two
things are in conflict right that well, you know, if
you're holding their feet to the fire, they're not going
to you know, they're not going to give you the
next scoop. And my response is, first of all, they
weren't spoon feeding these scoops. I had to work to
get the information and put them in positions where they
would tell me things that didn't happen by accident. I
had to leverage information how I could. But also, you know,

(43:35):
I had a responsibility to do the accountability stuff, and
I couldn't, let you know, fear get in my way
of doing that that it was going to undermine. And
you know, there were times when I made them uncomfortable
and I just had to do that.

Speaker 2 (43:46):
So let's let's zoom out and take like a ten
thousand foot view. A FED chair has a story he
wants to inform the market of. And that's always been
my thought process. When the FED is communicating, it's not
about image or pr They want the market to do
some of their work for them, or at least not

(44:08):
shock or surprise the market. They want the market to
understand what's coming and be prepared for it. So how
would a BERNANKI or yelling go about communicating, Hey, you
guys don't understand there are after you left in twenty
twenty two, there was a bunch of increases coming. But

(44:30):
let's stick with the twenty tens. Hey rates are going
to are low and they're going to stay low for
the next for the foreseeable future. How does that get
disseminated out to the public and then to the bond
traders so that the street knows what's coming up next?

Speaker 4 (44:48):
Right?

Speaker 3 (44:49):
Yeah, Okay, So there are a lot of pieces to this.
The first one is you're right, there are two really
important imperatives from their perspective, especially in the twenty tens,
because the interest rate had gotten to zero. What they
realized was the only way they're going to like affect
financial conditions in a way that helps the economy is
if they convince the markets that they're going to keep

(45:11):
interest rates really low for a long time, then you
get long term rates down in addition, and so projecting
a stance of dubbishness for a long time became part
of the mission, right, And that was part of what
they wanted to do to influence the economy and financial conditions.
But then the other thing, as you said, is they
don't want to freak the markets out because that causes

(45:33):
in their mind, unnecessary turbulence that can be really damaging,
and they're still haunted to this day. By nineteen ninety four,
when Greenspan raised rates i think by three quarters of
a point and the market started pricing in a succession
of three quarter point increases, and then the next thing,
you know, Orange County, California blew up, in Mexico blew up, right,

(45:54):
So like they want their view of the world to
be under stood, and they do a lot of different
things along those lines. They give speeches. They've become more
you know, back in the early nineties when I started
on this beat, the FED didn't tell anybody anything.

Speaker 2 (46:10):
Right there, It's so funny, I've told people this. You
get an announcement, we've raised rates. The only way you
knew the Fed did something was from the open market
activity in the bond market. Oh, the Fed must have
done something. What's going on?

Speaker 1 (46:23):
Yeah?

Speaker 3 (46:23):
Right, yeah, that was that was going to say, like
they weren't putting out announcements in nineteen eighty nine. When
they did something, you had fed watchers, that's what the
original term fed watcher, and you had people in the
markets who looked at what were going on with money
market rates and the FED injected X billion dollars and
they're like, oh, they just pushed up interest rates. And
then it took you three days to figure out if

(46:45):
that was their intention or an accident and then so
over a course of thirty plus years, they've become more
and more transparent, right, so they started green Span started
putting out statements. Oh and by the way, you know,
Alan Greenspan just delighted in how obscure he could be
and what he said, because he wanted to confuse people.
And they came to see over time that there was

(47:05):
a benefit to just being clear. So they put out statements.
They you know, they put up minutes. Obviously, they started
doing press conferences. Is there interaction between FED officials and
reporters that doesn't show up, you know, like onto, Yes,
FED officials talk to reporters on background in certain circumstances,

(47:29):
and so like yeah, we did talk to FED officials,
you know, not for attribution, but it was part of
a very dynamic process. When I like when I was
writing stories about for instance, Q two, stands out to
me like that was that was a situation where like
they were moving towards making a decision about Q two
over several months. It took them like six to nine

(47:51):
months to get there. And that was a case where
I was putting pieces very kind of I was putting
pieces of a puzzle together to be able to figure
out how they didn't even know where they were going
at the time, and so there was a lot of
reporting that had to go into understanding what was going
on behind the scenes, and which words that they used

(48:13):
matter mattered, and how they and how they used them.

Speaker 2 (48:16):
My recollection of q E two, and this is ten
plus years ago, was I think it was before where
I even launched my own firm. We had maybe it
was a double line bond fund that was primarily mortgage back,
and it used to be ninety percent mortgage backed, and
then it was eighty percent, then it was seventy percent.

(48:38):
And what was going on is the FED was just
sucking up all of the mortgage back bonds out there,
yeah that the private sector had very little of it.
And eventually this went from a substantially mortgage back fund
to just another treasury fund.

Speaker 3 (48:55):
And that was quey exactly what they wanted to tappen.
It's kind of crazy because it brought it took down
risk free rates they wanted. And so I don't know
if you or others and other investors in your funds decided,
all right, well, if we want to get a return,
we got to move further out on the risk card.
That was exactly what they were trying. You just you

(49:16):
just explained QUI to an action like the way they
wanted to do it.

Speaker 2 (49:21):
And the ironic thing is the first person who said
that to me about risk capital was Jim Bianco summer
of nine in a canoe, maybe it was ten in Maine.

Speaker 3 (49:37):
You're you're at the David Kotok.

Speaker 2 (49:39):
That's right, And he had said the purpose of quantitative
easing is to get people out of the safe all
of the risk aversion that people developed during the financial crisis,
flooding into money market and bonds. Hey, in order for
the economy to work, we need this money to.

Speaker 3 (49:56):
Move and the right of way. The purpose, this is
another thing is like I was always amused by how
like people on Wall Street reacted to stories because they
very often thought the stories were foreign about them. But
the purpose wasn't to get like the end goal wasn't
to get you guys to move out the risk curve.
It was to ease financial conditions in a way that

(50:18):
economic activity that was being put off for five years
from now would take place now instead. Right, it was
to get people to it was to generate economic activity
today that was being deferred because people were so underwater
or uncertain.

Speaker 2 (50:33):
So it's funny to use the word underwater. I always
assumed that the way to recover from a crisis is
the mistake wasn't letting Lehman Brothers collapse. The mistake was
many more banks should have been allowed to collapse. Right,
tear the band aid off, have the government provide veteran

(50:54):
possession financing, so all these companies, you know, the joke was,
there's no such thing is toxic paper, only toxic prices
at the right price. These pools have bid, mortgages, had balance.

Speaker 3 (51:06):
That's the age old debate in finance, right is you know,
if you bail them out, you're putting off all these
hard decisions. Basically, I remember talking to Bill Dudley about this.
But you know, basically, what you're doing is trying to
smooth smooth out the curve so that there isn't as
much damage today. You're bringing forward some activity, but by

(51:27):
by design, you're actually putting off some of the damage
for the future. The alternative is you tear the band
aid off, you get to the right price. But the
worry at the FED at the moment was that they
were replaying the Great Depression. And in the Great Depression,
what happened was the price didn't correct and readjust the
whole process of destruction fed on itself and it became

(51:52):
its own self feeding equilibrium that took a decade to
get out. And so that's the choice they made, was
that they didn't they didn't want to go down on
this path where banks start collapsing, there's no credit, Businesses
start collapsing, people get laid off, people have no money
to spend. More, banks collapse more, you know, So like
they were trying to short circuit that kind of process.

Speaker 2 (52:13):
Although obviously we have the FDIC, we have all these
other structures in place to prevent.

Speaker 3 (52:19):
That, but that wasn't enough. Lehman Brothers wasn't FDIC insurance, right,
And that was so here's my analogy.

Speaker 2 (52:24):
But City, Chase, Wells Fargo go through all the lists.
There were plenty of banks. Chase was fine, but Wells
Fargo ran it's trouble and yeah, well but they're insured
not a bank, right.

Speaker 3 (52:36):
But that's what I'm That's what I'm saying. The thing,
what they what they recognized was that they were replaying
the potentially the Great Depression, but the old story of
a bank run had been had been altered, and now
we're dealing with very exotic instruments and institutions that didn't
fall under the institutions that were that didn't fall under

(52:59):
the calls that were created during the Great Depression. And
you know, they were potentially going back.

Speaker 2 (53:06):
So as we were speaking earlier, and it's a little
ironic they avoided the Great Depression, but sort of an
unintended consequence was they helped lead us to the French Revolution.

Speaker 3 (53:18):
But yeah, yeah, in fact, you know, I remember a
conversation I had with with Bernanky way back then, where
you know, he said like he expected a populous blowback.
Really yeah, he expected it, just not as far as
it went well. I mean, I think he was surprised
by where it came from, right. I don't think he
would have expected it to have come from the right.

Speaker 2 (53:36):
Well, that whole Rick Santelli, you know, tea party nonsense.

Speaker 3 (53:41):
I had run in with Rick during that hotey.

Speaker 2 (53:43):
I mean, wait, we're bailing out banks to the tunes
of tens of billions of dollars, but the people who
applied for mortgages, you're just gonna cut them loose. That
seemed to be what yeah.

Speaker 3 (53:55):
And yeah, and there were a lot of consequences that
It's funny you mentioned Rick because Rick I went on
with Rick on CNBC and he lectured me that I
needed to be more opinionated in my questions at press
conferences and reporting, like.

Speaker 2 (54:10):
You don't understand what that's not right? It's like that
you miss you seem to think.

Speaker 3 (54:15):
I'll give you one little analogy since we're talking about
My analogy for Ben Bernanke is imagine that you are
a Civil War historian at at wake Forest University, and
you're an expert on the battlefields of the Civil War.
Actually let's call University of Virginia, because Virginia was more

(54:36):
center places. And you're an expert on the artillery and
the battlefields and the personnel, and you know everything about
the Civil War. And then you got a job as
a consultant at the at the Pentagon, and you did
such a good job as a consultant at the Pentagon
that they made you the Defense Secretary. And then a
new Civil War broke out, but it was being fought
with drones and laser guided miss That's what happened to

(54:59):
Ben Bernanke. He was a great depression historian who knew
about all the battles and wrote decisive histories of it.
And then he got the job at the FED, and he,
you know, he was fighting. He was refighting what he
thought was a great depression moment. But he was doing
it with these really high tech financial instruments like credit
default swaps and credit you know, clatteralized dead obligations and

(55:24):
the like.

Speaker 2 (55:25):
Coming up, we continue our conversation with John Hilsenrath, former
Wall Street General reporter and current research advisor at Serpa
Pinta Advisory, discussing rates, politics, and the FED. Today, I'm
Barry Ridults. You're listening to Masters in Business on Bloomberg Radio.

(55:58):
I'm Barry Ridult's. You're listening to Masters and Business on
Bloomberg Radio, and some of you are watching us on YouTube.
My extra special guest today John Hilson Wrath, former chief
economics correspondent and FED whisperer for The Wall Street Journal,
now an analyst and researcher at his own shop, Surpa
Pinto Advisory. So let's talk about where we are today

(56:22):
in the world. Starting with a quote of yours, The
old normal is dead, the new normal is here? What
does that mean?

Speaker 3 (56:30):
Wow, I'll be honest with you, I don't even remember
writing that, all right, so let me remove that, but
I mean we could, but let me redefine that. Okay,
you go back to our French Revolution story. Sure, which
is I think there's a new old normal setting in
which is that? You know? I mean I think we're
living through historically changing times on several levels. So one

(56:57):
of those is just is information right? And this brings
me again. But I've become I've been obsessed with the
French Revolution ever since people started telling me they're going
to stick my head into the eighteen But you know,
there was an information revolution happening during the French Revolution too.
There were printing presses everywhere knew, there were pamphleteers. I mean,
the printing press had been around for a couple of centuries,

(57:19):
but it wasn't being mass produced. And in every village
and every you know, neighborhood in Paris.

Speaker 2 (57:26):
But sent you read.

Speaker 6 (57:29):
Histories, If you read histories of the French Revolution, there
were pamphleteers everywhere giving their version of events on every
street corner, and they were basically tearing down the old
institutions of the church and the aristocracy who defined the
story for the public as they saw fit.

Speaker 3 (57:47):
And you know the United States too, The Declaration of
Independence was a pamphlet. They signed the thing in Philadelphia,
they fled because the British were coming, found their way
to a printing facility in Baltimore and started mass producing
the Declaration of Independence. So, you know, I think we're
going through something like that now, where the old institutions

(58:09):
of power in the media or are being redefined. I mean,
for goodness sake, podcasters had a bigger influence on the
last election than see and ended. It's amazing to me, Yeah,
no doubt about it. So I think that, you know,
that's an old normal, but the new normal is you know,
this technological revolution, in my mind is mind boggling. I mean,

(58:30):
I'm happy to sit at the table with a contemporary.
When you and I were young men, if you wanted
to take a picture.

Speaker 2 (58:38):
You know, you had to get a camera. You had
a black.

Speaker 3 (58:40):
Box called a camera with something called film, a canister
called film in it, and then you know, you would
take thirty six snaps and then you had to take
it to a store.

Speaker 2 (58:50):
Or a photo Matt a little yellow booth.

Speaker 3 (58:52):
Yeah, yeah, and it had to get you know, it
took a week in the store to get developed, and
you had to pay some amount of money. If you
wanted to do a search, you went to a library.
If you wanted to write a letter, you wrote it
with a piece of pen on a paper. You stuck
it in an envelope, put a stamp on it, put
in a blue box, and waited a month for All
of that stuff is now instantaneous, infinite, and practically costless.

(59:17):
And so you know, and like I've ride the subway
in New York, you look like every every you know,
three out of every four people sitting next to you
was staring at their phone. I think the information we're
living through right now is quantums of magnitude of what
they were going through, I think during the French revolutions.

(59:39):
So it's an interesting time to be alive, doing well.

Speaker 2 (59:42):
To say nothing about bad information, misinformation, propaganda.

Speaker 3 (59:49):
Bad information. The word libel has its root in part
in the French wordly bell, which were these scandalous pamphlets
that were being put out about Marie Antoinette. And I
think it was called rub Street in London. Huh, So Yeah,
an abundance of information includes an abundance of really bad
information and misinformation. So we're living through all of that

(01:00:10):
right now. So let's talk about quite the central bank stuff.

Speaker 2 (01:00:14):
You're not quite, but let's talk about what all this
means for the economy, which, as you have noted, has
proven to be much more resilient than most forecasters have predicted.
Where are we, uh in the economy today? What sort
of job does the FED have to do balancing their

(01:00:34):
dual mandate in the in the post pandemic economy we
are living through.

Speaker 3 (01:00:39):
Yeah, I mean I think I think the FED is
in a tough spot and it's prone to making some
costly mistakes right now.

Speaker 2 (01:00:47):
Do you think they make mistakes or are they just
always late to the party.

Speaker 3 (01:00:52):
No, I think they missed. I think they make mistakes.
They clearly made a mistake after COVID, and I understand
and understand what happened. So this is the thing, like
people attacked the KIWI programs that BERNANKI did. I think
you know, in the moment that he implemented them, they
were the net benefits were greater than the net costs
in those moments. What happened I think was we went

(01:01:14):
into another shock after COVID, and I think, you know, J.
Powell made a mistake. He's frankly, he's not an economist,
and he misread a supply shock to the economy as
a potential demand shock. So we took all these tools
off the shelves that Bernanki and yelling it created and
threw them at the COVID shock, which was a supply shock,

(01:01:35):
overstimulated demand and we got inflation. So, yes, that was
a mistake.

Speaker 2 (01:01:39):
You're putting more of that on the FED than the
massive fiscal stimulus from Karzact one and two under Trump,
Karzac three, and all the various spending bills under Biden.
You think that was more monetary than fiscal.

Speaker 3 (01:01:52):
I think it was all of these things combined.

Speaker 2 (01:01:54):
Okay, that's fair.

Speaker 3 (01:01:55):
It was. And by the way, the other thing that
the FED and the Trump administration did intentionally was decided
we're not just going to bail out the banks this time,
We're going to bow out the little guys. That's why
everybody got those checks. Everyone was reliving the trauma of
the two thousand and eight financial crisis when they made
these decisions that created a whole new trauma. My mom

(01:02:16):
was a historian and she talked about the kaleidoscope of history.
So the configuration is constantly turning and growing out of
whatever last configuration we were in. The FEDS made a mistake,
a discreete mistake, and the mistake in two thousand and
I'm sorry twenty twenty twenty twenty one was over stimulating
in the face of a suppleas shock, but to get

(01:02:39):
to come more to you know. And I think one
of the problems that economists have is they call certain
things like a law or a rule, and they think
when they once it's called a law or rule, then
it must always be true, right the psalm rule. Claudia
Sam brilliant economists, wonderful person, you know, she noticed a
correlation between that's, you know, a certain moments when the

(01:03:00):
unemployment rate rises a certain amount of i think a
half percentage point over a six month period, it tends
to keep going up. That's like in a historical observation.
It's not a law written into rules about never.

Speaker 2 (01:03:13):
From a zero percent interest rate and a sub four
percent unemployment rate, like when yeah, where some rule didn't
work was coming from levels that historically had never existed.

Speaker 3 (01:03:25):
Yeah, so yeah, you have to look at the situation
you're in right now, and these rules of thumb and
people do you know, they're like, oh, GDP contracted, you know,
we're close to it. I think you have to look
at the situation you're in and make the most sense
of it that you can. So where are we right now?
So growth has proven to be more resilient than a

(01:03:47):
lot of people expected. But employment is slowing down, inflation
is above the FEDS two percent target. What sense do
I make of this? I think that the economy has
slowed down a little bit. But coinciding with all this
uncertainty from the tariff shock is we're going through an
investment boom. We're going through, you know, a technology driven

(01:04:10):
investment boom right now, which by the way, could hurt
labors and workers in the long run, and maybe we're
seeing some of that as we speak. By the way,
I also think that if the demand for capital is
rising for investment in AI and data centers, higher demand
for capital should mean a higher equilibrium interest rate, a
higher cost of capital. Right, If the demand for capital

(01:04:33):
is higher, then the price for capital should be higher.
And you know, but the FED is being asked to
respond to a labor market that's softening. You know. My
own concern is that the FED, is that the FED
is going to ease into the slowdown in the job
market when the financial markets are on fire, when it

(01:04:55):
thinks the risk free rate is lower than it actually is,
and when they're still an inflation problem, and they're gonna
light even more of a fire into these markets, which
might feel good for a few months for you know,
as we saw, and they're only two thousands, late nineties,
go on for years, but those situations often don't end well.

Speaker 2 (01:05:15):
So you I want to combine two of the things
you said. You mentioned we're above the feds two percent
inflation target, But why is that a rule? If you
look at the two thousands, two thousand and ten tens era,
two percent was an upside monetary target. Yeah, from below.

(01:05:35):
Now we've kind of pivoted into a fiscal stimulus era. Yeah,
two percent is a downside target.

Speaker 3 (01:05:42):
Yeah.

Speaker 2 (01:05:42):
Should you have the same inflation target in the twenty
twenties that you had in the two thousands and twenty tens.

Speaker 3 (01:05:49):
Yes, one hundred percent. It should be immutable, so it
should always be percent, because it is now and it's
in everybody's interest to keep it there. And here's why.
So we have a fiat currency, right and so you know,
if you go back two hundred years, three hundred years,
the anchor for that currency was was gold. You know,

(01:06:12):
people would say your money is as good as gold
if you if you had a dour today, you could
buy x number of ounces with that door today. That
was the anchor for the currency. Gold doesn't work as
an anchor for the currency. In my humble opinion, do
you know that Americans spend about the last time I
looked at this, about as much money every year on
dry cleaning as they spend on gold. And do you

(01:06:34):
know that the that the that the largest producers of
gold in the world include countries like Russia and South
Africa and Venuzu not the most stable producers. So like,
so why would we anchor our currency to to an
idea like like gold? What you want to have an anchor? Now,
so the inflation target, what inflation is is an anchor

(01:06:59):
that you know you're dollar is going to be worth
a known and set amount every single year. It is.
The two percent inflation target is the gold standard of
the past. And in my mind, it's a more sensible
gold standard because it touches a wider array of what
it costs us to live. So then the question becomes, well,
hy two percent? Well, so the answer is because that's

(01:07:23):
what they chose because and you know, and this actually
I go through this in my book about Yellen. But
you know, well, why shouldn't it be zero? Well, the
fear is. The fear was that if your anchor is zero,
then interest rates are always very low. And when you
get to a point where the economy is slow is
slowing down like a depression or recession, unemployment is rising,

(01:07:43):
the central bank can't do anything exactly what we live
through in the eight period. You need to have the
inflation number a little bit above zero. We want you
want it low, but you wanted something above zero so
that the Fed has a little wiggle room to support
the economy in a crisis. That's the idea. So you
could say, well, it should have been three percent, it
should have been four percent, okay, but we chose two percent.

(01:08:05):
And once you've chosen it, then it's very hard to say, like,
we choose something else. Now.

Speaker 2 (01:08:11):
I read a paper by former FED Vice chair Roger
Ferguson about the two percent target, and Ferguson said, it's
a random number that came out of New Zealand's where
someone just happened to be talking about inflation in the
nineteen eighties and they tossed out two percent. And that's

(01:08:32):
the history of it. It traces to a New Zealand
banker discussion first fifty.

Speaker 3 (01:08:36):
Years, first mover advantage. There was, there was, there was
certainly an element to it. But I want to say
something else about it because people sometimes make this argument that,
you know, why should you accept any inflation where we're
debasing our currency. The currency today is worth five percent
of what it was worth ten percent of what it
was worth, you know in nineteen thirteen when the Fed

(01:08:57):
was creative. But like you had, like in my mind,
what matters is the purchasing power of an hour of
your labor. Right, So exactly, if inflation is going up
two percent a year, okay, that's one thing. If you're
earning three percent of year for your labor, if you're
earning five percent a year for your capital, then you're
getting ahead. And it would be impossible for anyone to

(01:09:19):
argue to me that the human condition is I mean
on many levels, maybe psychological. I can't make this case,
but the human condition is worse today than it was
in nineteen thirteen. Of course, well like America became a
world superpower in nineteen So it's just it doesn't make
sense to me when people say you're debasing the currency,

(01:09:39):
Like what I want to say is against what measure.
Here's another Like when I was covering the.

Speaker 2 (01:09:45):
Dollar is not supposed to be a permanent store of value.
It's a medium of exchange. If you're holding on to
a dollar for a century, you've made some financial errors.
That's not what you're supposed to do.

Speaker 3 (01:09:57):
People used to always say to me, and I used
to hear them say when I was covering the FED,
that the FED is destroying the value of the dollar,
And like, I spent a lot of time. This gets
to something I think we're going to think about, like, well,
so what does that mean when the Fed? Like one
of my principles for writing was like I need to
be able to break things down to their to their
like their their core, meaning, like, what does it mean

(01:10:20):
when you say that the FED is destroying the value
of the currency.

Speaker 2 (01:10:24):
They're dimasing it?

Speaker 3 (01:10:25):
Yeah?

Speaker 2 (01:10:26):
Yeah, but like a metal, precious metal.

Speaker 3 (01:10:28):
But you know, so you couldn't say that like kind
of relative to other currencies, because the dollar was going up.
And while it's you know, the purchasing power of a
dollar today was going down. The purchasing power of your
income exactly is long. And this again brings me back
to the revolution, because this is also technological revolution. A
lot of working class Americans got left behind during this

(01:10:50):
era of technology and globalization. And what happened was the
purchasing power of their labor declined. It wasn't the FED
that did that from inflation. Inflation was very stable. The
purchasing power of the labor declined because they were competing
against you know, low wage workers in Mexico and China,
and because they were competing against machines that were replacing

(01:11:11):
them in the workplace. And so it is true. It
is a fact, and this is another part of the
revolution which is related and potentially intensifying. We've lived for
twenty five years into this kind of post industrial information
driven economy, and what we know about this is that

(01:11:32):
it exaggerates inequality, It concentrates wealth among very few people,
and a lot of people are being left behind. And
the question is and how do you like preserve the
value of the dollar. It's how do you preserve the
value of an hour of your work? You know, how
do you find work that's going to keep you keep
your family fed and get your kids through school and

(01:11:53):
you know, get you your trip to Disneyland.

Speaker 2 (01:11:56):
You know, the federal government dropped the ball. And we
see it in some specific industries like if you're shutting
coal mines in West Virginia, well you have to retrain
those people to do something else. And if you work
in a furniture factory, a garment factory, any of the
low end manufacturing businesses that all left, those people have

(01:12:19):
to be retrained.

Speaker 4 (01:12:20):
Well.

Speaker 3 (01:12:20):
But so yes, so, I mean I kind of I wrote,
I wrote a lot about this, and we did, but
it's not It wasn't as if we didn't recognize we
I mean, all right, I'll just say it. The elites
who were driving the bus, uh didn't recognize that there
was a challenge there. You know, there was a Trade

(01:12:41):
Adjustment Act, right, there were facilities that were meant to
get people retrained.

Speaker 2 (01:12:47):
Uh.

Speaker 3 (01:12:48):
And then and there was a vast American community college
system which was meant to be a vehicle to get
people retrained. But I talked to people from manufacturing, you know,
from furniture plants and Hickory, which is one of my
favorite and nowlogies for America because Hickory, North Carolina is
right next to Charlotte. One's a banking center, one was
a furniture center. One went one way, one went red,

(01:13:08):
one went blue, one did better, one did worse. Anyway. Yeah,
I talked to people in these plants and Hickory, and
they're like, you know, I didn't finish high school. Now
you're telling me to go out. I'm fifty years old.
I got I gotta go and re educate myself. And
then like for the people who actually went through it
and did it, You're like, I was making twenty five

(01:13:28):
dollars an hour with bent, with a pension and health benefits.
Now I'm a phlebotomist. You know, I'm pulling blood out
of people's veins, making twelve dollars an hour at a hospital.
It didn't work for them, and the you know, this
was one of the great errors of the economics and
economic policy profession of the last twenty five years is

(01:13:50):
they didn't think that stuff through and the politics didn't
really weren't conducive to addressing that problem, but it and
this is my this is one of my kind warnings,
warnings for politicians, say, I don't see how anyone is
fixing that underlying problem that we live in a post
industrial economy that bifurcates wealth and income. And frankly, I

(01:14:12):
don't think it's realistic to expect we're going to reindustrialize
this country.

Speaker 2 (01:14:17):
Even if we do, it'll be automated.

Speaker 3 (01:14:19):
It's going to be exactly it's it's it's going to
be machines, and we're moving out of an industrial ear,
you know. So the so my question is like, how
do you I talk to an economist David Otter, who's
thought a lot about this stuff. He wrote the papers
about the China shock. You know, our work is not
only a source of kind of fulfillment and income, but

(01:14:41):
but the way we work is also the way we
distribute wealth and income. And so if the whole nature
of work is changing because of technology, then like, are
we thinking about how we're going to manage the distributional
effects of that? And I'm not like saying this as
some kind of you know, screaming, bleeding hord liberal. I
mean Donald Trump actually got elected because of the disaffected

(01:15:05):
American working class. And I don't think either party has
has actually gotten their hands around it. I wrote a
book about Jenny All, and I talked a lot of time,
spent a lot of time talking to Democrats about this.
I don't think any of these people have gotten their
hands around how do we navigate this, like this revolution
that we're going through the economic post industrial revolution.

Speaker 2 (01:15:25):
So so I have one last question I'm going to
ask you before we get to our favorite questions we
ask old guests. Okay, but you've been alluding at it,
so feel free to go back to a previous conversation.
What do you think investors are not talking about but
should be. It could be a policy issue, an asset class,

(01:15:46):
a data point.

Speaker 3 (01:15:47):
That that's it.

Speaker 2 (01:15:48):
But I think it's yeah, that's why it's the it's.

Speaker 3 (01:15:50):
The inequality issue because and when I said, I don't
want to use I don't want to use the word
inequality in like the kind of conventional politically divisive way.
What what I mean is that you know, an economy
creates income and wealth, and how that income and wealth
is distributed distributed across the population is a result of

(01:16:12):
the way. And and by the way.

Speaker 2 (01:16:14):
There is for a chart on this exact.

Speaker 3 (01:16:16):
There is there is no law. There is no rule
in economics that says that wealth and income will be
distributed in a fixed or predictable way. You know, the
agricultural era, uh what did not create an economic system

(01:16:36):
or that that distributed wealth and income equally. It was
very unequal. You had kings and queens and peasants, right.
It just so happened that the industrial economy distributed created
a vast middle class because you needed people attached to
machines to make the stuff that made our lives more comfortable.
But there's no rule that I see that says, moving

(01:16:57):
into a post industrial, high tech world, that this whole
new world is going to distribute income and wealth in
the same way. And so my question is what are
we doing about that? And by the way, I think
the institutions we talked about norms before, the institutions that
we've created over the last two hundred years, we're built
for an industrial economy. Our tax base, our voting systems,

(01:17:21):
everything is built for an industrial you know. So to me,
the big existential question is, you know, how are we
going to manage the distributional effects of income and wealth
creation and a high tech, high information economy.

Speaker 2 (01:17:36):
I saw a table this morning. I can't I can't
find it now, but it basically shows a number of
industrialized countries and what percentage of their workforce is below
the median income and the US and UK are substantially

(01:17:59):
I think something like twenty three twenty four percent substantially below.
You look at other countries like Japan, the difference between
the mean and the median isn't that big. And when
you have a very skewed distribution like you're describing, that
gap gets bigger and bigger. So I'll dig up that table.

Speaker 3 (01:18:17):
Well, you said it to me, I'd love to see.

Speaker 2 (01:18:18):
I'll say, I'll share it with you and I'll post
it when we when we this goes live. But it's
kind of fascinating because you don't think of the country
that way. And when you look at what was it
the Z one flow of funds that the Fed puts
out good one, you can see that gap getting bigger
and bigger, especially since the nineties. I mentioned unintended consequences.

(01:18:43):
Some legislation passed by the Clinton administration to cap executive
compensation at I want to say it was a million
dollars or two million dollars that just led to massive
equity compensation.

Speaker 3 (01:18:54):
Right, help drive and by the way, accounting fraud, that's right,
that's right.

Speaker 2 (01:18:59):
So not only did you are you driving people to
hyper focus on the quarterly calls leading to some quarterly
yearnings leading to some monkey business, but people getting paid
in equity we're making and so that.

Speaker 3 (01:19:11):
From political perspective, for Republicans, how are you going to
take care of the working class? Are these promises about reindustrialization?
Can you realize them? And for the Democrats, how are
you going to win people back? Because they lost them
Donald Trump took them from him. Well, the question is,
and by the way, is terms of the FED. All
the FED can ever do is make a mistake. It's

(01:19:32):
like his job is to prevent financial crises and keep
inflation stable. Like people love to attack the FED because
you know, you only notice it when it's screwing something up.

Speaker 2 (01:19:44):
So and and by the way, for getting things right.

Speaker 3 (01:19:46):
One other thing about the FED is, you know, I
live in Washington, d C. It's this place where like
people like ninety percent of people, what they're doing you know,
time is spinning you and trying to get you to
believe his story that's in their personal or institutional economic interests.

(01:20:09):
The Fed is out there trying to tell people what
it thinks it's going to do. Like you could give
them a hard time for making mistakes. I've just said
I think J. Powell made mistakes, but like, at least
they're trying to be honest about what they're up to.
I got to answer, and so many other people in
Washington are trying to mislead you. You know, I admire
them for trying to be straight.

Speaker 2 (01:20:28):
I got to ask you a question. You've lived in
New York, you've lived in Washington, d C. Which town
is more transactional.

Speaker 3 (01:20:35):
Oh oh, that's a good question. I didn't think you
were going in that. They're both transactional. But the difference
is in New York is a transactional town, and everyone's
looking out for their own interests, and everybody knows that, right,
and everybody knows that and accepts that is like the
rules of the game. Right in Washington, it's all transactional

(01:20:56):
and everyone's out for their own interests. But they're trying
to make you believe that they're doing it for you,
and and and that's why it all looks so hypocritical,
because like they're yes, they're totally transactional, and they're totally
trying to advance their party or their power or their
their you know, fundraising, but they're trying to make you
believe that they're doing it for you, to help you

(01:21:17):
so that your children will be better off.

Speaker 2 (01:21:19):
Right.

Speaker 3 (01:21:20):
And I'm sorry, I've got I've grown a little cynical
about No, I m I much prefer being in New York.

Speaker 2 (01:21:25):
I asked that question because I had a feeling you're
going to go that way. New York. There's no pretending Yeah,
it's transactional because it's the center of US capitalism. DC
is something else.

Speaker 3 (01:21:37):
Yeah, And like New York is traders, and it always
has been, Washington is lawyers. Here's my other New York
Washington analogy. If you're driving down the street in New York,
although you can anymore because there's so much traffic, if
you kind of move in and out of one lane,
if you kind of overstep your bounds, someone will honk
the horn, give you the finger, and keep driving. Right.

(01:21:58):
If you do that in Washington instead of giving you
their middle finger. They'll point their pointing finger. They'll wag
their finger at you and tell you you broke a
rule and then like threatened to turn you in. And then,
by the way, there are speed cameras everywhere. It's a
little bit more oppressive ever place.

Speaker 2 (01:22:14):
I think, really amusing. All right, so I only have
you for a certain amount of time. Let's jump to
our favorite questions we ask all of our guests, starting
with who are your mentors who helped shape your career?

Speaker 3 (01:22:27):
Well, so, I'd have to say one of my most
important important mentors at the Journal was a guy named
David Wessel, who covered the David Wessel covered the fad
in the nineteen nineties, was just like an institution in
economics and economic policy coverage. He gave me chances and
he was usually nice to me. So yeah, he's a

(01:22:48):
tough boss too. Dave Wessell was a great guy and
my best friend at the Journal all those years was
a guy named Bob Davis. Gentleman, good guy, great reporter.

Speaker 2 (01:22:58):
Number one in terms of one bylines.

Speaker 3 (01:23:01):
Yeah, man, I And and by the way, Nick tim
Rose is going to pass me pretty Oh really, I'm
sure I have I don't know the numbers, but I'm Nick.
Nick is my successor, uh covering the FED. He'll pass me,
but I don't know he's gonna catch Bob Davis.

Speaker 2 (01:23:15):
That's amazing. Let's talk about books. What are some of
your favorites. What are you reading?

Speaker 3 (01:23:19):
Well, I've been reading. I've alluded to this. I've been
reading a bunch about the French Revolution. I'm also reading
the book Sapiens, but I can't remember his full name. Harari. Yeah,
you'v all Harari. It's a pretty bleak perspective on humanity,
very I think I. I think I. I'm a little
more optimistic about our species and its intentions, but there's

(01:23:42):
interesting insights in there. Like I The reason I picked
it up is I think that humans have these kind
of primitive brains with primitive mcdowah and emotion centers. We
have an industrial area era economic and political structures, and
we're living with twenty third century technology, and I'm trying

(01:24:06):
to understand the primitive parts and how that might interact
with all this other thing.

Speaker 2 (01:24:10):
You keep bringing stuff up. I have chapters in a
book for you that you're going to love. What do
you remember the name of the French Revolution book. You
know you're putting email to me, I'll dig it up
and you crack me up. Comparing DC to a city
of lawyers versus New York as a city of traders.
I'm going to share a book title with you called

(01:24:32):
Breakneck China's Rush to Build the Future by Dan Wang,
and he compares China versus the US. The US as
a country of lawyers, China as a country of engineers,
which is why they could put up as much stuff
as they do, as fast as they do.

Speaker 3 (01:24:53):
But we're also a country of entrepreneurs.

Speaker 2 (01:24:55):
For sure, for sure, and we're not just a lot
of state dictated although I was going to say not
a state dictated of industrial policy, but that's.

Speaker 3 (01:25:03):
Just so, you know, So this is another thing that
I just have them having a hard time getting my
head around. So, like, China's economy is really struggling right now.
They definitely pushed us, they challenged us. You know, we
were our workers were hurt by the incursion of china imports.
But we're you know, on many measures. You know, we're
still doing all right and winning, but we basically conceded

(01:25:26):
to China's economic model. It's like we're loving we're moving
towards the state run capital is state run capitalism, which
is you know, it's it's hard for me to get
my head around the idea that we've given up on
a system and a project of democratic capitalism, and that
that's especially is democratic change, I should say, democratic free

(01:25:48):
market capitalism. You know, we seem to be having our
doubts about it. I guess what I would hope is
that we don't give up on it too fast.

Speaker 2 (01:25:57):
I'm curious, is this a permanent it or is this Hey,
let the president have his ten percent of intel. But
he's this is his second term and he's almost eighty
and this is an aptive change, Like I've heard that
sort of vibe from people, and I don't know how
serious I think.

Speaker 3 (01:26:16):
I think he and his followers and his lead the
leaders who were working with him are vulnerable on the
issue of inflation in the cost of living. Got he
got in there and in part because people were angry
about the inflation of the post COVID period. Back then
it was we're now doing a lot of We're doing
a lot of things right now. It's not just tariffs,
but with monetary policy pushing I guarantee you. If we

(01:26:40):
get the interest rate down to where the President wants it,
we're going to have inflation. And if we don't get inflation,
there's going to be an asset price boom. Where again,
this inequality thing, there's a few people who are going
to make a lot of money off of that. So
I mean, I think that they have a little bit
of an achilles heel in that issue.

Speaker 2 (01:26:58):
Let's talk about street. What are you listening to in
terms of podcasts or watching on Netflix or Amazon product.

Speaker 3 (01:27:05):
I watched a really cool show called Tehran, which was
about Israeli Mosat agents infiltrating Tehran. It was put out
a couple of two three years ago infiltrating Tehran to
blow up their nuclear reactors. I watched it like a
couple of months before they went and blew up their

(01:27:25):
you know, so that was really interesting. I'm also just
I'm a sports fanatic, so I don't really I don't
have to. I'll tell you what. I've stopped watching cable
television after been participating in it for a long time,
but if there's a game on them, yeah, I'm a
football fanatic.

Speaker 2 (01:27:46):
Final two questions, what advice would you give a recent
college grad interested in a career in financial journalism.

Speaker 3 (01:27:54):
Financial journalism. All right, so I've had this talk. This
is getting back to the whole printing press French revel thing.
I mean, I think it's clear that the journalism is
going through a period of exceptional disruption right now, right,
And so the choices that I was looking at when
I was coming into the field of like, you know,

(01:28:15):
how do I get to the Wall Street Journal? How
do I get to the New York Times? Like, it's
a different set of choices, And if you use the
kind of pamphleteers and analogy, you know, when you see what's
going on, look at you. You know you started a
podcast and you know this has become this great thing
for you. I say this to young people all the time.
Be think expansively and creatively about where these interests might

(01:28:42):
take you. You know, the core skill set of getting information,
distilling and making sense of the information and conveying information,
like that's the core of journalism. That's like that's more
essential than ever. But the way you're going to practice
those skills is going to be different than what I did.
And you know, like I had a young student that

(01:29:04):
I was working with and talking to with Duke a
few years ago. You know, she was going down the
whole newspaper route. She's now doing a true crime prodcast
in the Midwest, and so, you know, I think that
there's a lot of opportunity out there for people who
are willing to kind of take chances and be nimble.
And it's scary, but there's a lot of opportunity for

(01:29:24):
people who can be flexible and find the opportunities and
go for it. And I love being a journalist. I
would not take There's this ritual that journalists go through
where like experienced journalists are constantly trying to tell young
journalists don't do this, it's a terrible field, it's a
dying profession, and go become a lawyer, you know, blah blah.
I had a great experience, like I'm never going to

(01:29:46):
tell someone not to pursue that that dreamer, that interest
because it was so good to me. But you've got
to be willing to, you know, kind of take chances
and go down some roads you might not expect to go.

Speaker 2 (01:29:58):
Down, recognize how the as this model has changed. Yea,
and our final question, what do you know about the
world of economics finance? Central banks today might have been
helpful twenty five or so years ago when you were
starting out thirty years ago.

Speaker 3 (01:30:12):
Well, I mean, I guess the basic thing is just
that it's so much more interesting than I expected. I
didn't want to get into economics writing. I did. I
did by accident, and I stayed in it. I wanted
to be a war correspondent, and what I came to
see was that, like or a sports writer, that the
great battlefields and the great arenas that really affected the

(01:30:35):
human condition were in markets and economics. So I guess
what I would tell myself now was to go into
it with even more conviction because it turned out to
be so fascinating.

Speaker 2 (01:30:49):
Really really interesting. Thank you, John for being so generous
with your time. We have been speaking with John Hilson Wrath,
former chief economics correspondent for The Wall Street Journal. Today
he runs Serpa Pinto Advisory. If you enjoy this conversation,
check out any of the five hundred and sixty seven
we've done over the past eleven years. You can find

(01:31:11):
those at Bloomberg, iTunes, Spotify, YouTube, wherever you find your
favorite podcast. Be sure to check out my new book,
How Not to Invest The ideas, numbers and behaviors that
destroy wealth and how to avoid them, how not to
invest at your favorite bookseller. Now, I would be remiss
if I didn't thank the Crack team that helps with

(01:31:33):
these conversations together each week. Alexis Noriega is my video producer.
An A. Luke is my audio producer. Sean Russo is
my head of research. Sage Bauman is the head of
podcasts here at Bloomberg. I'm Barry Retultz. You've been listening
to Masters in Business on Bloomberg Radio.

Speaker 1 (01:32:00):
Bass back