Fmr. Currency Comptroller on US' Argentina Bailou

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00:00Gene, it's good to get you here with us and how fortuitous that we have you here on the day that

00:05this swap line is announced. Can you give us your instant analysis on why this is significant for

00:10the U.S. and how this helps kind of restore financial stability across North America?

00:17This is one of the toughest calls that a treasury has to make, which is currency support. And

00:23happily, the United States is blessed with a very fine treasury department with a lot of experts.

00:29Keeping international stability in these currencies is important. They don't take these

00:34things lightly. I'm sure they've thought about this from every conceivable angle. And net net,

00:40I think it's a good thing to do, but it's a very tricky thing to get right. And

00:44they're smart to try to get ahead of it. Let me ask a dumb question,

00:49because you have Scott Besson, the Treasury Secretary, saying that the U.S. Treasury is

00:53prepared immediately to take whatever exceptional measures are warranted to provide stability to

00:58markets. Some people might wonder, what is it about Argentina that the U.S. has such an

01:03investment invested stake in? Why is the U.S. so particularly focused on this country when it

01:11doesn't seem to have much impact on people's day to day lives or the U.S. economy on a day to day

01:16basis? Well, you know, it's an important country. It's it's much larger and richer than most people

01:24understand. So making sure that this stays stable as well as a currency market generally is a is a

01:31sensible move. But as I say, this is a very hard area in my day and age. We were worried about Mexico

01:38and we took some extraordinary measures at that time that worked out. But we've got competent

01:44people doing this and getting ahead of it and showing strength is a good thing. Well, that's the

01:49thing, Jean. This is a tricky area to intervene. And you think about the currency markets. There's no

01:53guarantee that intervention will have the intended effect, that it will actually be able to stabilize

01:59the exchange rate. When you look past at your tenure, I mean, what what does it typically result in? Can

02:07you be confident that the U.S. will get the intended effect when it comes to Argentina? Katie, these are

02:13enormous markets. And as powerful as the U.S. is and as well-meaning as the U.S. is, it's one of the

02:20reasons this call is so hard. Getting ahead of it, showing strength is a good thing. But but it's a

02:28roll of the dice. There's no doubt about it. Yeah, it'll be fascinating to see how this evolves with

02:33those fickle foreign exchange markets. But I do want to move on. I want to talk more about the U.S.

02:38because as Scarlett mentioned, of course, you have a new book out, The Mishmeasurement of America,

02:43How Outdated Government Statistics Mask the Economic Struggle of Everyday Americans. And I

02:48think that's really interesting because prior to the government shutdown, now we aren't getting

02:52any U.S. official data from the government. But there was a big question about the quality

02:57of U.S. data, especially when you think about the big revisions that we were seeing to the NFP

03:03results and the like. And I wonder how you think about that, the quality of U.S. data and whether

03:09or not it has eroded over the past several years. Well, Katie, this is an enormously important subject

03:16and I'm glad you've raised it. Data for the general public, for our policy leaders and how that's

03:25explained is really enormously important because if you're going to shoot at a target, you're going to

03:29make things better. And everybody tries to do that. You better know where the target is and try to hit

03:33the bullseye. The problem I've found with the government data is not the data collection

03:39itself. They're good-hearted people collecting things accurately. It changes from time to time

03:45as new data comes in. But it's actually the definitions they're using that are really long

03:52data. The definitions were put in the 1930s. And accordingly, what we've seen is a mischaracterization

03:57of the data that's profound in the headline statistics.

04:01Yeah, I mean, I just think back to the first time when I began reporting on financial markets, this idea of

04:06non-farm payrolls, it struck me as something kind of antiquated because people don't talk like that, in that

04:12farm payrolls are not a huge part of the U.S. economy. Gene, when you look at the data that does come out, which

04:17data points are perhaps overweighted, overrated versus those that are underappreciated?

04:22Well, sadly, almost every headline statistic is flawed, flawed deeply. You take unemployment.

04:31They report 4.2 percent, 4.3 percent. That is based on whether you worked even one hour in the last two

04:40weeks. So if you worked one hour in the last two weeks, you're counted as employed. Now, that's not

04:44what we, in a common sense way, think of as employed. If you're living in a tent or in Washington, D.C.,

04:50sometimes under bridges, but you get one hour's worth of work, that's not how we think of employed. So

04:56the data understates the problem. In fact, it's more like 24 to 25 percent of the American people

05:04are unemployed in a functional sense. That is, to be able to put good food on the table, have a roof over

05:11their head. So we have a much more profound problem for middle and low-income Americans than

05:15is typically reflected in the headline statistics. Right. Same is true with inflation. Right. I'm

05:20sorry. No, go ahead. No, the same is true with inflation. We use the CPI, which is a basket of

05:2780,000 goods and services, which over the last 25 years has inflated more slowly than the basket of

05:33goods and services ordinary Americans use, which is inflated more quickly. Accordingly, middle and low

05:39income Americans are hurting and they've been hurting a great deal. And we've seen that more

05:43recently in the spike in inflation. So, of course, this matters for everyday Americans,

05:48as you mentioned. But bring this conversation forward to what this also means for policymakers,

05:53not just for the Federal Reserve, but also for officials, of course, in the government trying

05:58to make policy if some of these struggles are being masked, in a sense, by the data that's being

06:04collected. Well, that is the big that is a big takeaway here, I think. Left and right, people come

06:11to government. They try to do the right thing and they try to do the right thing for their constituents.

06:16The problem is, if you basically are misled by these statistics, you don't realize how serious a

06:22problem we have in America. If we continue to decline and we have been declining in this country

06:27for the last 25 years in terms of middle and low income Americans, if we continue that trajectory,

06:32we're looking for social dislocation. It's a very, very serious problem indeed.

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