Income is back and Van Eck has you covered with VETF to bring income to your portfolio.
With Van Eck's Income Investing Yield Monitor at ThinkYield.com, you can easily track Van Eck's ETF yields,
monthly flows and performance of each income ETF category.
Explore Van Eck Income ETFs at ThinkYield.com.
Investing risk includes principal loss, past performance is no guarantee of future results.
Visit Van Eck.com to view a prospectus that includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully.
Van Eck ETFs are distributed by Van Eck Security Corporation, a wholly owned subsidiary of Van Eck Associates Corporation.
♪♪♪
Hello and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Regan. I'm a senior editor at Bloomberg.
And I'm Moldana Heierk, a cross-asset reporter with Bloomberg.
And this week on the show, well, we hate to sound like a broken record around here,
but when it comes to financial markets, it's all about inflation again.
Both the stock and bond markets got off to a roaring start to the year following a disastrous 2022,
amid hopes that last year's surge in consumer prices had finally been tamed.
But that strong start has mostly been reversed following some higher than expected inflation readings both in the US and Europe.
So whether we stand now, are these recent reports just potholes on the road to the normalization of inflation, or is something else going on?
And what does it all mean for the path of interest rates?
We'll get into it with a very influential economist who's best known for being vice chair of the Federal Reserve
and a member of President Bill Clinton's Council of Economic Advisers in the 1990s.
He's got a new book out, and it's all about the history of monetary and fiscal policy in the US.
But first, Moldana, I have to say I'm excited about this guest for two reasons.
One, I think he's the perfect guest to sort of talk about all the issues affecting markets these days.
But also, do you remember how excited I got a few weeks ago?
Unreasonable, I will admit, unreasonably excited when I got to ride the Dinky?
Yes, I remember.
You remember what the Dinky is?
You were super happy.
Is it a train or a bus?
It's a train.
It's the shortest, I believe, and maybe our guests can correct me.
It's the shortest train line, commuter train line in the US.
It's like two and a half miles, it goes from Princeton Junction to Princeton.
To Princeton University or Princeton Town, the town?
OK.
Well, yes, yes, to both.
Yeah, yeah.
It lands right on campus.
You were not as excited when I got to ride that as I was talking about.
No, because how long a ride is that?
A minute?
I think it's like five minutes.
OK, so you can't even sit down, you can't even have a snack.
Yeah, I can.
You have to snack quickly.
You have to snack quickly.
That's what makes it exciting is the superlative of the shortest ever train line.
I've never been on it.
Maybe you and I can make a trip out there.
We should.
We should.
I think our guest has been on it.
Including our guest.
I bet he's written it.
I have many times.
OK, well, before you tell us more, the person speaking is Alan Blinder.
He's a professor of economics at Princeton and he's a former Fed Vice Chair.
Thanks so much for joining us on the podcast.
Oh, sure.
You're welcome.
How has the dinky been riding it?
Well, I haven't written it lately.
I mean, that's the way to get to New York.
I used to go to New York quite a lot.
Two things happened.
The obvious one is the pandemic and I don't go there.
Very much anymore.
The non-obvious one is we had some grandchildren, little ones in Washington.
So my wife and I now go south more often than we own north.
Oh, let's get into sort of the current state of the markets.
And by the way, congratulations on your book.
I'm about halfway through it.
It's really fascinating.
And I think just a really important read for anyone who wants to get an overview of
sort of how we got where we are and sort of the dynamic between monetary and fiscal
policy and sometimes friction.
So I guess you could say, but I'm curious how you're thinking right now about inflation.
You had an op-ed in the Wall Street Journal earlier this year in which you were very optimistic
that perhaps we'd seen the worst of inflation.
You look at sort of the first half of the year, 2022 versus the second half.
It was super hot double digit inflation in the first half.
And then back closer to the Fed's target in the second half.
If you look at it month over month on an annualized basis, I think it was three month annualized
basis.
Correct me if I'm wrong.
But we have seen sort of renewed concern about inflation.
The January numbers were a little hotter, both PCE and CPI.
This week the markets reacting pretty strongly to France, Spain and Germany reporting hotter
than expected inflation.
How are you thinking about it now?
Is there still reason to be optimistic that we're trending in the right direction?
Is this just sort of a pothole on that road to normalization or is there any reason to
be more concerned?
I think it's more of a pothole with one big exception.
And this is my beef with the Bureau of Labor Statistics that I usually love.
It's one of the great statistical agencies in the world.
But what they did after I wrote that Wall Street Journal piece that you correctly referred
to, this is going to sound very wonkish, changed the season adjustment factors.
So it's no longer true if you look at the year, when I wrote that piece, it was true
that roughly speaking, inflation in 2022 was about 11% annual rate in the first half and
about a 2% annual rate in the second half.
Wow, that's quite a difference.
It's nothing like that now because of changing the seasonals, which struck me as dirty pool
for a prognosticator.
I was looking at what turned out to be wrong data.
That said, the qualitative story that of lower inflation in the second half than in the first
half remains true.
That did not disappear from the data.
It's also mostly universal.
I won't say every country, but it's certainly true in Europe and in most other countries.
But in terms of magnitude, nothing like what it was before they changed the data.
And that's the sense in which I view it as a kind of a pothole, but a pothole now on
a road that's not as steeply declining as we used to think, but declining.
That's important.
So can you tell us more about this?
Because this piece, it did come out a couple of weeks ago before we got the minutes from
the last Fed meeting.
But you said the Fed now has a good chance at a soft economic landing.
Yeah, because of this data revision, I'm revising that.
Behold, revise things when we get new data.
I'm revising that to be a little less optimistic.
I think they still have a chance, but it's a tougher chance than it was, just to repeat.
With the old data, by late in 2022, we were pretty close to the target where the Fed wanted
to be.
But with the new data, we're not quite as close.
And among other things, that means the Fed is likely to raise interest rates more.
Okay, I have a bunch of follow-up questions about this, because there's a bunch of debates
going on, especially when I'm hearing people on Bloomberg TV, or people I talk to on a daily
basis, a lot of them are saying that a 6% Fed funds rate is a real possibility.
To what extent you would agree with that?
No, I bet against that.
It's not beyond the realm of the possible.
You're reminding me a bit when I was on the Fed in ancient times in the 1990s.
You're too young to remember this.
When we were tightening in 1994, 95, market sentiments at one point, not just for a day,
for a while, was that we were going to go up to 8% on the federal funds rate.
I remember sitting there in my office in Washington saying, are those people crazy?
We're not going to go anywhere near 8%.
But in those days, you weren't allowed to say anything.
Those are the days when the Fed was mum.
And if the markets flew off in some wild direction, Alan Greenspan, who was the chairman, wouldn't
do anything to bring them back.
Eventually, events brought them back.
And in fact, we topped out coincidentally at 6%, not 8%.
So I'd be surprised if we get to 6%.
I want to get into that idea of the Fed staying mum and sort of compare and contrast that
with today.
But first, before we do that, I think two things have shifted in the markets view of
where the Fed's rate is going to go.
One is exactly how high it's going to go.
And we can debate 5.25, 5.5 or 6.
But I think what's more alarming to investors these days is the notion that it's going to
stay there for a while.
We came into this year, if you look at the dot plot, which is the Fed's individual members'
projections of where they see the Fed funds rate, or even market pricing in the so-for
or Fed funds futures markets, it seemed to be the unanimous consensus almost that that
rate would peak maybe this spring or early summer and then immediately come down that
the Fed would pivot and start cutting rates.
That seems to be, the dot plot hasn't been updated yet.
But I'm assuming what it is that that pivot's not no longer going to be there.
And in the pricing of the so-for and Fed funds futures market, it's no longer there either.
Is that the correct interpretation and view of the rest of the year, do you think?
I think so.
The markets were frankly a little bit wacky when they had this as you correctly characterize
view that the Fed was going to go up to a peak and then write down.
That's not what usually happens with monetary policy.
The much more likely scenario always was it was going to go up to some peak and one could
debate and people did debate where that peak would be.
And then hang around there for a while, see what happens.
The same thing is true when the Fed is going down.
It goes down for a while, it flattens out usually to wait and watch.
Wait and watch what?
Among other things, the effects of the policy, it's already promulgated.
And then keep moving if necessary or reverse if that seems appropriate.
So I never thought that was a likely scenario and I'm glad to see the markets don't believe
it anymore.
And what about the debate that the Fed will have to rethink its 2% target?
And we've had guests on this podcast as well arguing that maybe they should be rethinking
that the 2% just isn't very realistic.
So let me assure you of one thing and then I'll elaborate slightly.
There is no debate inside the Fed.
None, zero.
It is not going to happen.
Bet your whole portfolio on it.
All right, the Fed is not changing its target.
Now a broader question which is interesting to economists and historians, we're talking
about a book on economic history here, is whether it should have set a higher number
when it did latch onto a target, not 2%.
I think that's quite debatable and I think I'd be on the side of yes, it should have gone
higher.
So why do I say both?
And the reason it's the same answer to the reason why is there no debate at the Fed?
Because it would look like caving, giving in, surrendering.
We can't do it so we're going to make our target easier.
And immediately people would start saying, oh, you went up to three.
How do I know you don't go up to four?
And those are the kinds of reasons why the Fed will never, ever, ever.
Well, ever is much too long.
Let's say for the next 35 years that is not going to think about changing the target.
What would have been in your view a better target than 2%?
I thought three would be better than two.
And the main reason is what we were experiencing before the pandemic with zero quote zero interest
rates, that if it was three rather than two, the Fed would have had more room as the economy
cratered to push the economy out of the crater with lower interest rates.
If it had started with interest rates, 100 basis points higher than it did, it would
have 100 basis points more easing before it had to resort to the so-called unconventional
policies.
Income is back and Van Eck has you covered with V ETFs to bring income to your portfolio.
Find the yield duration and credit exposure you're looking for from Van Eck's range of
income focused ETFs, which includes municipal bonds, corporate bonds, international bonds,
equity income, floating rate instruments and multi asset income.
With Van Eck's income investing yield monitor at ThinkYield.com, you can easily track Van
Eck's ETF yields as well as the monthly flows and performance of each income ETF category.
Take advantage of the back to income play, explore Van Eck's income ETFs at ThinkYield.com
and find the right ETF for you.
Investing risk includes principal loss, past performance is no guarantee of future results.
Visit Van Eck.com to view a prospectus that includes investment objectives, risks, fees,
expenses and other information that you should read and consider carefully.
Van Eck ETFs are distributed by Van Eck Securities Corporation.
The wholly owned subsidiary of Van Eck Associates Corporation.
I think maybe an important distinction to draw is the idea of, well, the Fed may not
change that 2% target.
I assume that doesn't necessarily mean that they won't pause or pivot before it gets to
two, right?
Absolutely.
I think they'll pause, not pivot, that's what we were talking about before.
They'll pause.
Once inflation gets low enough and is falling so that 2% so to speak is in sight, then they'll
pause to see, all right, is it going to two?
Is it not going to two?
How's the economy look?
And so on.
What about other areas within the economy?
You actually hear this question a lot.
I asked this question a lot when I'm talking to people, like, where actually are we seeing
any weakness or I'm thinking about the housing market, I get a ton of notes in my inbox on
a daily basis that says the housing market now is also showing signs of perking up and
of a turnaround and the consumer remains strong, et cetera, et cetera.
So where might you point to even show any weakness right now?
I point to the housing market and I'm getting the same email that you're getting or some
of them.
And if you look at the graphs that accompany with them, it looks like it's gone down, down,
down a huge way and then a tiny little uptick.
Let me see that uptick grow over months and then I'll start getting worried.
And the reason I say that is that classically for decades, if you ask people on the Fed away
from microphones, so it's not being recorded by Bloomberg, where do you think you could
do your damage or help, so that matter if it's the other direction on the economy, they'll
say housing.
Housing is by far the most sensitive to interest rates.
And to me, despite these little blips of optimism very lately, housing is well down
and that's what you'd expect.
The second place, by the way, is more puzzling and I can't figure it out, which is automobile
purchases.
They generally respond to interest rates a lot.
And the reason I can't figure it out, or the reason, maybe there are people that are
more expert in the auto market than I, is as you remember, we had all these shortages,
the manufacturers couldn't make it off-cars because they couldn't get enough chips and
so on and so forth.
And there have been some unusual fluctuations.
So you wouldn't want to attribute those down drafts to interest rates and that sort of
confused the whole picture.
So I don't know what to make of automobiles.
And I haven't studied enough.
Maybe if I had, I'd have clearer pictures.
But those are the two places and the third, which is also down, is business investment.
The worst of this past recession caused by the pandemic was in consumer services.
Anybody who is expecting the Fed's tightening to affect spending on consumer services was
not paying attention to history.
It doesn't have any effect, zero.
Now that's a big hunk of the economy, but even in the good old days when nobody questioned
whether the Fed could push the economy around, like the Volcker days or the Greenspan days,
nobody at the Fed, I don't want to speak about the whole earth, nobody at the Fed ever
thought they were able to either push up or push down consumer spending on services.
You know, Professor, it's interesting how 100% of the discussion around fighting inflation
these days relates to monetary policy and what the Fed can or can't do.
A part of your book that I found really fascinating is you get into the 60s during the presidency
of JFK and LBJ and how the Keynesian economists had really come into power and, you know,
and influence under both of those administrations and, you know, the notion of, you know, using
fiscal spending to boost demand, don't let worries about the deficit really handcuff
you in that sense.
And you talk about how Keynesians sort of got a bad wrap back then because inflation accelerated
pretty fast during the Vietnam War because of all the defense outlays.
And Keynesians were actually advising on fiscal restraint to bring down inflation.
And as you point out, I think, you know, and this to me is kind of relates to today's world,
too, with modern monetary theory in that it's very easy for a politician to go out there
and promise lower taxes, more spending, that sort of thing.
It's pretty much political suicide to suggest some kind of fiscal constraint and higher taxes
less spending in order to help reduce inflation.
Is it just a lost cause to ever think that fiscal policy could or will ever be used in
the fight against inflation?
Is it just too politically impossible to even consider anywhere?
Yes, in a word.
I wish it weren't true, but I think it is true.
One of the things I discovered in reminded myself, I should say, in researching and writing
this book is, and this is to your point, the last time fiscal policy was used to be
used deliberately by the government to take some steam out of the economy, to fight inflation
was 1968.
1968, that's a long time.
There had been other episodes since 1968 in which fiscal policy turned contractionary.
But that was always motivated by concerns about the deficit, not about concerns about
the economy.
I was in the Clinton administration, and that was an example, right?
We promulgated and barely got through Congress by the skin of our teeth, or more accurately,
by allegor of breaking a Thai vote in the Senate, a contractionary fiscal policy to reduce
the deficit.
It was not to bring down inflation.
Inflation was 3%.
Most of us thought, oh, 3%.
We would just talk about 3% inflation.
Believe me, Bill Clinton was not concerned that the inflationary was 3%, and that was
terrible.
He was concerned about the budget deficit.
There have been some episodes like that, but none since the Keynesian economists you
were referring to finally convinced Johnson that we needed to raise taxes because of the
Vietnam inflation.
Then Johnson, after a year and a half of cajoling, finally convinced Congress to do it.
It was a really hard fight.
This then has been no fiscal contraction for demand management reasons.
I love taking all the different scenarios and historical time periods that you talk about
in the book and then comparing them to maybe development that we've seen over the last
10 years or so.
You said recessions at the end of the 50s and the two recessions at the end of the 50s
and at the start of the 60s.
It didn't see Congress or the White House coming in to help mitigate things.
Obviously that is very different from what we saw during the COVID pandemic.
Maybe you could talk a bit about that and how things have changed.
Those episodes that you just talked about were in the United States, though not in Europe
in the pre-Cansian era.
Cansianism was considered back then a strange foreign doctrine.
Probably some people were calling it communist.
I was once called a Maoist.
Cansian, I haven't figured out what that is yet.
In those days, in the Eisenhower administration, Cansian ideas had just not caught on in the
American political world.
They had in the academic world.
Absolutely.
I was a young student back in the 60s and we were taught that kind of stuff.
But an academia no.
That was one of the things that was revolutionary, though it took a long time, in Kennedy's
call for a tax cut, which he first made in 1962.
Let's note the dates.
It finally passed in 1964 and only after he was tragically assassinated.
We can't run history again, but my best guess is it never would have passed or Kennedy
not assassinated if he was still alive and trying to push it through Congress.
There was tremendous resistance to Cansian ideas largely because they were going to raise
the deficit.
If it's Cansian in that direction, a few minutes ago, we were talking about Cansian in the other
direction trying to throttle back them in.
But if it's Cansianism in the expansionary direction, it's going to raise the deficit.
Something Ronald Reagan should have known in 1981, maybe he did, but that's another
story.
But the point is that these ideas were foreign and considered kind of revolutionary back then.
Not anymore, but back then.
Well I still feel like the debate hasn't been settled on exactly how we got where we are
today with inflation.
And maybe it can't be settled.
But your book really points out the various drivers of inflation throughout history.
In the 61st JFK's tax cuts and then the big spending on the Vietnam War, then later in
the 70s it was the oil price shock, obviously played a big role.
I feel like these days we've gotten hit with it all at once.
We had the Trump tax cuts, the COVID spending, the war in Ukraine and the oil price shock.
Not to mention all the supply chain disruptions during the pandemic.
So how in your head, how do you sort of assign the blame for the inflation problem between
fiscal policy, monetary policy that arguably stayed to lose for too long, the oil shock
on and on?
How do you sort of assign the influence of each on where we are now?
Your list is exactly right.
Assigning, apportioning the blame is harder and controversial.
But my list would put the supply disruptions in the recovery from COVID on the top of the
list.
They were pervasive all over the place.
It wasn't like just one thing.
And then would put the supply shocks, which were not 100%, but very much exacerbated by
the war in Ukraine.
And then the excessive stimulus of the economy.
Now, that's the one that's most controversial.
People that want to blame Joe Biden or Donald Trump before him latch on to the tremendous
fiscal stimulus and it was of tremendous fiscal stimulus.
And that's the kind of thing that you expect to be at least somewhat inflationary.
But my view is that the forces clobbering the economy over the head were so powerful
that giving some upward impetus to the economy, a substantial upward impetus, was necessary
if we aren't going to go into a deep hole.
And then finally, we come to the Fed.
Part of the blame that's related is the Fed started tightening too late.
Because unanimity on that, Jerome Powell himself has said that numerous times.
We goofed.
That's the way you talk a few of the Chairman of the Fed.
But he said we goofed and we should have raised interest rates earlier than we should.
And that's right.
But if you try to put magnitudes to that through models that we use to estimate the effects
of monetary policy, remembering also that the mistake was maybe a delay being three
to six months too late, not two years too late.
It's hard for me to come up with big numbers on that.
So yes, the mistake of the Fed did contribute to inflation.
But I put it closer to the bottom of the list than to the top of the list.
Income is back and Van Eck has you covered with VETFs to bring income to your portfolio.
In the yield duration and credit exposure you're looking for from Van Eck's range of
income-focused ETFs, which includes municipal bonds, corporate bonds, international bonds,
equity income, floating rate instruments, and multi-asset income.
With Van Eck's income investing yield monitor at ThinkYield.com, you can easily track Van
Eck's ETF yields as well as the monthly flows and performance of each income ETF category.
Take advantage of the back-to-income play, explore Van Eck's income ETFs at ThinkYield.com,
and find the right ETF for you.
Investing risk includes principal loss, past performance is no guarantee of future results.
Visit Van Eck.com to view a prospectus that includes investment objectives, risks, fees,
expenses, and other information that you should read and consider carefully.
Van Eck ETFs are distributed by Van Eck Securities Corporation, a wholly-owned subsidiary of
Van Eck Associates Corporation.
One other very interesting anecdote you talk about is the downturn in the first quarter
of 1980.
You said consumers voluntarily stopped spending.
They stepped in to do their part to help out, which is, I don't know, I just find that
so fascinating because the data prints that we've gotten in recent weeks have shown really
strong retail spending numbers, et cetera, et cetera.
So maybe you can tell us more about that.
It was the second quarter of 1980.
At Jimmy Carter was president, and inflation, of course, was the problem of the day, the
economic problem of the day.
In a speech, he urged people to put away their credit cards and not use them and spend less.
He also pushed Paul Volcker, who wasn't too happy about it, to invoke up credit controls
on banks, something we don't normally do when Volcker was very unhappy about doing it, but
felt that Carter was giving him in the fence such a free reign to do nasty things that
were against Carter's political interests that he ought to at least go along and do that.
But coming to what you asked, an astonishing number of people tore up their credit cards
and wrote to the White House, here's my torn up credit card I'm not using it anymore to
try to help the fight against inflation.
I don't remember what I thought at the time, but I'm sure I was astonished to take you back
a little bit further.
It was only about six years earlier that Jerry Ford, as president, tried something similar
to issuing win buttons with inflation now, W-I-N.
I still have mine as a historical souvenir.
It was a joke.
Nobody did anything.
So I certainly didn't think Carter's urging people to tear up their credit cards was going
to do anything, but boy was I wrong.
And consumer spending just fell off a cliff.
It sort of looked like what happened at the beginning of the pandemic.
That was a bigger cliff.
But a smaller version of that happened in the second quarter of 1980.
It was so severe, the contraction, that both Volcker and Carter got scared.
Like this economy sliding downhill really rapidly.
And Volcker eased up on monetary policy and Carter reversed field and took away the controls.
But while it lasted, it was a whopper.
I just can't imagine people ripping up their credit cards today.
Well neither could I then.
Yeah, if you ask me, if Joe Biden did the same today, would people listen?
My guess is no.
But I remember having the same guess in the Jimmie Carter case.
Well, it gets to the notion of communication at least from the White House can be influential.
I remember reading that Carter, people would actually mail their ripped up cards to the
White House.
I imagine at some point maybe you wanted to tape them back together and send them back.
Return to Sundered.
But Professor, I wanted to get to that notion of Fed communications.
You said earlier how in the Greenspan era, Alan Greenspan wouldn't necessarily come out
and push back against the markets interpretation of Fed policy.
Obviously in this era, Chair Powell has been very vocal about more communication is better.
But I feel like it's a difficult needle to thread because say you're the Fed chair,
and you do believe that inflation is under control and that it'll continue to normalize
and maybe by the end of the year we'll be back at 2%.
That's a dangerous opinion to communicate to the market because investors hear it.
The markets go wild, stocks go up, yields come down, and you run the risk of loosening
the financial conditions enough to sort of defeat your own purposes.
So I hate to use the word subterfuge or misleading, but is it possible that Fed officials kind
of come across a little more hawkish than maybe they are in their hearts in order to
avoid that type of thing?
Yeah, I think so.
I think so.
And what I was going to say, what they definitely do is stay away from interesting or colorful
adjectives and adverbs.
Be boring.
Say it boringly.
Just the opposite of what you want to do in a media show.
That's why everything's modest and moderate.
Yeah, that's really good.
I mean, they use boring prose and in the statements, in the formal statements, as you
know, you tend to see the same words over and over and over again.
If you think that's designed to put you to sleep, it is.
They don't want you getting hyper excited because they know, and this is the other point.
It's inherent in the financial world they live in that markets will overreact.
This is not a surprise to the Fed.
This is not something it wasn't expecting.
It's always expecting markets to overreact, and they just about always do.
The nice thing, so that's the bad thing about markets.
The nice thing about markets is they tend to self-correct.
When they see, oh, the Fed's not going to cut interest rates next month.
They reprice securities.
They do correct.
To come back to the way you introduced this question, the Fed nowadays, not in the old
days, but nowadays helps them with that.
By basically saying politely, you guys got it wrong.
It's just the way you should be thinking about what we're thinking.
That was what I was alluding to.
Alan Greenspan just refused to do that in the 90s.
He wouldn't.
But Ben Bernanke started doing it.
Janet Yellen did it, and Jay Powell does it.
You also said in the book that you once asked Volcker how monetary policy crushes inflation,
and he said, by causing bankruptcies.
Yeah.
You're a close reader.
I gasped when I read that.
He's in three different book clubs, Professor.
You're a close reader, and yes, I was shocked by that.
I mean, yeah.
Very surprised by that, too.
This was a conversation we had.
Volcker between Fed jobs spent the year or two years as a visiting professor at Princeton,
and I had a number of discussions with him.
I was engaged as a lot of macroeconomists were engaged in different theories of how
monetary policy works.
So one day at lunch, I figured, well, I have the former chairman of the Fed right here.
Let me ask him how he thought it worked, but that's what he gave me as an answer.
Not that he relished it, but he thought that's how it actually worked.
So Professor, let's kind of get your state of mind right now for how the rest of the
year turns out.
Is it basically a plateau in rates and still that chance of a soft landing amid that?
Is that a fair characterization?
I don't think we're at the plateau yet.
I think the Fed is going to go up a bit more and then probably plateau and watch what happens.
Soft landings are tough.
And the higher the Fed goes, the tougher it is to land softly.
And so the odds are moving in the wrong direction right now.
But if I was betting on this, depending, of course, on the definition and the bet of
what's a soft landing, I guess I would handicap it as just a hair below 50% chance.
And an important part of that, Mike, by the way, is that unlike some previous feds in
history, including the one I served on in the 90s, this FOMC wants to achieve a soft
landing if it can.
Many of them have said that either directly or indirectly.
And that includes Chairman Powell.
If you had asked Paul Volcker in 1981, are you shooting for a soft landing?
He'd have laughed.
He said, with this kind of a problem, there's no way we land softly.
There's going to be a crash landing.
And what's interesting in your book, you point out, I think many people believe that
it's a pipe dream to engineer a soft landing.
But as you put it on the book, it's happened several times in history.
Yes.
Yeah, it depends on your definition.
But yes, it has happened several times in history.
Yeah.
Well, fingers crossed.
It happens again.
With that said, Professor, we can't let you go just yet because we have a tradition
on this podcast where we all like to observe the craziest things we've seen in markets
and economics and whatever's in your wheelhouse in the last week or so.
Volana, why don't you start?
What's the craziest thing you've seen in the past week?
I think this technically came out at the end of the prior week, but I'm going to go
with it because it's striking.
Okay.
Blackstones CEO Steve Schwartzman.
Did you see this?
I'd have to hear the rest.
Okay, I know he's been in the news quite a bit.
This is big.
He took home a record $1.27 billion in 2022.
1.2 billion.
Be like boy.
Not bad work if you can get it, Professor.
What do you think?
That's more than Princeton pays me.
I don't want to talk down to your audience, but some of the rewards in the financial sector
seem way out of line with their contributions to society.
It's a good thing.
It's a good thing.
Steve Schwartzman isn't listening to this podcast.
Even if he is.
I don't think there's much debate on that.
That's pretty good.
All right, I'll give you mine.
Mine's courtesy of the Twitter user Zorren L'OuwVani.
It's on the hustle.co website.
Vildana, what was your favorite toy as a child?
I had this Barbie that I really wanted, and my mom got it for me for my birthday.
If you press this button on her abdomen, she sang a song.
I wanted it for forever.
The day I got it, my sister took the doll.
She was so mad, jealous, I guess.
She ran it over with her tricycle.
She basically flattened the Barbie into her pancake.
Oh my goodness.
That's a traumatic memory to be figured up for you.
My sister listens to the podcast, so I have to call her out for being evil.
Mine's related because my favorite toy was Hot Wheels, the little toy cars.
Apparently, Mattel had such a hit with Barbie that they came out.
They were like, now we got to sell something to the boys so they came out with Hot Wheels.
This story on the hustle.co website talks about this guy, Bruce Pascal, who's got a $1.5
million collection of Hot Wheels.
Pretty extensive collection, but in order to turn this into a game show, the price is
precise.
I want you to guess the most highly valued Hot Wheels.
It hasn't sold in a while, but what the collectors estimate is the most highly valued Hot Whale
in his collection.
I'll give you a little details on here.
It was a prototype for the 1969 rear loading beach bomb, which basically looks like one
of those old Volkswagen vans.
It has a surfboard coming out the back.
Oh, I like those.
Yeah, they're cute.
There are only 40 some of them made, but this was the actual prototype.
What's your bid?
What's your bid on that?
For this one car.
One 1969 rear loading beach bomb, surfervan Hot Wheels.
Okay, then I'll go with $200,000.
$200,000.
That was very quick and confident answer on your part.
Professor, what do you think?
If you're on the prices right, what are you bidding for the world's most expensive Hot
Wheel?
Definitely less than $100,000.
I'll tell you what you just both taught me.
My six year old grandson has a burgeoning collection of Hot Wheels.
I'm going to make sure he doesn't do with it what I did with my collection of baseball
cards when I was six.
What'd you do with that?
I just let it go to Rotten.
We put him in a bicycle spokes and we took him outside in the rain.
I probably have Mickey Mantle from 1950 something, but I don't have it anymore.
It was putting up, though.
I'm going to go lower, $100,000.
$100,000.
Well, you guys split the difference perfectly.
It was $150,000 is the value.
I think prices precise rules, we have to give it to Professor Bonder here.
I think so, yeah.
Another item for your resume there, Professor.
You win the prices precise on Muckus.
I'm not buying.
Not really betting on that Hot Wheel.
How about you, Al?
Have you seen anything crazy recently?
Sure.
To me, almost everything about cryptocurrency is crazy.
So you can start with Sam and it doesn't stop with...
That company was once valued in the market at $25 billion.
I'll put that up as crazy.
Yeah.
Is it the loose monetary policy that a lot of people blame as an economics professor in
history with your credentials?
For things like that.
How do you explain the boom in crypto?
There had been fads and crazes like that throughout history.
When I talk about the stock market in Economics 101, I tell my students that the first bubble
in the stock market happened with the very first company.
It was the South Sea bubble in England.
The first list of the company basically and already they having a bubble.
So people have gone crazy and then there was the tool above craze and the tech stock craze
and you go on and on and on.
It just happens in speculative markets.
Just inevitable sort of human nature to...
You'll get hyper excited about the new new thing and they wind up paying outrageous prices.
You only know they're outrageous later.
Well great perspective professor Alan Binder of Princeton University.
We really appreciate your time and your insights.
I think you really helped a lot of us think about the current state of affairs especially
from that really important historical perspective that you bring with your new book.
It's called A Monetary and Fiscal History of the United States 1961 to 2021.
Thank you so much for your time.
Nice to be with you.
Thank you professor.
What goes up will be back next week.
Until then you can find us on the Bloomberg terminal, website and app.
Or wherever you get your podcasts.
We'd love it if you took the time to rate and review the show so more listeners can find
us.
And you can find us on Twitter.
Follow me at Vildana Hirek.
My korean is at Reganonymous.
You can also follow Bloomberg podcasts at podcasts.
What goes up is produced by Stacey Wong and our head of podcasts is Sage Baumann.
Thanks for listening and we'll see you next week.
Bye.
Bye.
the next week.
the next week.
Bye.
Bye.
Bye.
Bye.
Bye.
Bye.
♪♪♪♪