Larry thanks so much for being back one Of the big events of the week was fed Chair jay powell speaking at a wall Street journal event He talked about a lot of things Including the bond yields and things Like that but one of the things he Addressed was inflation And he admitted as how they're keeping a Close eye on it maybe because of some of The things you've said frankly And that they are not going to repeat The mistakes of the 60s and 70s as you Refer to it What does he need to do to avoid that i Sure hope they don't repeat the mistakes Of the 60s and 70s because they were Hugely important not just for inflation Not just for macroeconomic stability But for the whole politics and attitude Of The country they're going to need to Look in hard-headed ways and to be Prepared to not make excuses Each month pointing to a different Factor When inflation picks up and they're Going to need to remember That their priority is The macro economy when i see them say They won't raise rates Until diversity groups Unemployment rates are appropriate i get Nervous
Because the fed can't really control Those issues those are issues for Anti-discrimination law those are issues For fiscal policy Uh those are issues for labor market uh Programs and so if the fed sets out to Target the unemployment rate of Particular groups Without regard to inflation that'll be a Good way to make really serious Uh inflation if they take inflation Seriously They monitor closely and they're Prepared to cause Pain they will be able to control Inflation But if instead they say oh we've got Credibility inflation expectations are Anchored And inflation's not something we have to Worry about Ironically the more optimistic they are About Inflation uh being under control the Less likely it is to actually be under Control So fed chair powell gave us a little bit Of a hint about how he's going to Approach this because he addressed a Couple of things he said Some of the uptick in prices that we're Expecting is going to be base effects as There's a reopening effect as people Come back
And also there may be some particular Choke points in the supply chain We're not going to pay much attention to Those because that's transient How do you tell the difference between Transient inflation something more Troubling That's why they've got a staff of a few Hundred economists And precisely to make those distinctions And they got to look at all the data They can what i'm worried about When i hear that kind of talk is not That it isn't right he's right about the Base year effects he's right about Specific sectors But every great inflation is made By a central bank that dismisses it As due to transient factors and so at a Certain point when you start having a Transfu factor every month Then you maybe got a permanent factor Going over Going uh overall so It takes a lot of worry About inflation to make there not be Inflation this is a classic example of Self-denying prophecy The more the fed is fearful of inflation The more likely they are to avoid it The more the fed is complacent about Inflation The more likely they are to have so Larry one of the things that's a big
Item on the agenda now as we are working Our way through the stimulus package Is infrastructure president biden has Said that he wants to go on to that he Had meetings at the white house this Week to talk about it So we've talked in the past about the Stimulus package maybe what should have Been done what could have been done Before we get started on infrastructure Give us some advice How do you do it the right way and how Do you do it the wrong way Here are two broad principles david One is democrats are right that we need Much more money On infrastructure and republicans are Right That we need much more efficient Regulation much more rapid Environmental approvals and much more Efficient Uh procurement and we need to do A politics of both and rather than Either or When it comes to infrastructure the Other thing is This is an area where the public sector And the private sector Have to uh collaborate some Infrastructure is Public repairing the potholes and the Roads in new york city Some is private building out
A 5g wireless system Some is joint Toll roads bridges electric utilities uh And the like we've got to find creative Ways of bringing the public and private Sectors together Around the infrastructure uh issues and We need to Understand that infrastructure is much More than bricks and mortar So infrastructure is good for all of us Because it makes our lives better Presumably but there's another purpose As well which is Increase productivity as we go forward It's future growth essentially We're investing in a lot of us haven't Had the experience you've had Being a macroeconomist in the u.s Government we've run companies or parts Of companies When we make a decision about capital Investment we take a look at the payback When do we get to pay back what's the Long what's the prospects of payback do You look at it that way i mean how do You decide which projects are the most Likely to really increase productivity And increase growth in the out years If you've got a look at the overall Social return Some of that is the extra money that's Going to get Produced some of that is the carbon
That's going to get Mitigated that otherwise would have a Substantial Social cost some of that is the Incremental business activity that's Going To be enabled some of that is and it's Not always easy Putting the valuation on Uh amenities that people are going to Enjoy There's a spac frenzy some people think In the country right now and so We treat you as an expert which you Certainly are but let's treat you as a Fact witness the way i used to when i Put Witnesses on in the courtroom you Actually have gotten involved in a spac Here as i understand it you're an Investor in a company That now is being acquired by us back Tell us about it's called The state's title right i'm on the i'm On the board And have been uh an investor for a Number of years Our company has the potential to Transform Title insurance the type of insurance Where most of the time there's the Highest ratio of premiums paid To benefits paid out and this company is Going to transform its efficiency
By using uh artificial intelligence It's a huge business opportunity Ultimately to transform the process of Buying a house And make it pleasant and fast rather Than Excruciating and slow so let's wrap this Up with a rapid fire summer Says number one we talked about jay Powell the federal reserve chair earlier Uh do you expect him to be reappointed He should be He certainly should be he's done a great Job and continuity in that role Is a very important thing on the other Side we learned this week that neera Tandon's nomination to be the director Of office of management A budget has been withdrawn you know her Who do you expect to succeed her Nobody who will be able to do that job As well As uh she could have and finally Larry what's the future the minimum wage Looks like it's not gonna be part of This stimulus package what's the future My guess is we'll have a minimum wage That'll be way above 725 but won't reach 15 And i think that's probably the right Kind of prudent compromise
