00:00well the future takes up a long potential time so i'm sure we'll see someone similar to greenspan
00:04in the future but you're right he was a different uh type of fed chairman because not only was he
00:11very knowledgeable about economics but he wasn't academic and so he was basically going from the
00:16data to the decision making rather than from the model to the decision making and so sometimes when
00:23the world changed he got it right before anybody else did the best example of course was the late
00:271990s when there was this productivity boom and greenspan held off on tightening monetary policy
00:33so i think he was you know an exceptional exceptional chairman um both in terms of his
00:39understanding of economics his openness to data his willingness to you know change his mind and
00:45update his his forecast um i think the only really you know blind spot was really his views about
00:51financial stability and regulation his view was always uh you know we can't identify bubbles in
00:57real time so all we can do is clean up after the fact and obviously the great financial crisis
01:01showed that cleaning up after the fact is always it's not always the right approach well to get into
01:07your excellence at berkeley and to say okay it is about the regulation decision are we making the same
01:14mistakes today that the critics say were made in 05 and 06 i don't see the same kind of uh
01:23problems
01:24number one uh in terms of you know the market having a lot of assumptions that will ultimately
01:29turn out to be wrong i mean if you look at 2006 2007 there was all these assumptions triple eight
01:33studios are safe housing markets can never decline on a national basis um you know uh you know there
01:40were just a lot of assumptions that turned out subprime lending is not risky uh all those assumptions
01:45turned out to be dramatically wrong so i think you know i like i think there's risk to financial stability
01:49today obviously in the non-bank financial sector but the other thing is we have a much more robust
01:54regulatory regime i know i know we're in the process of dismantling that to a degree i think
01:59it's important that we don't throw the baby out with the bathwater but you know we did learn a lot
02:03of
02:03good lessons from the financial crisis that i think means that the financial system fundamentally
02:08is stronger than it was back then putting all that together bill uh what do you think the legacy is
02:15is for mr greenspan with a little bit of a hindsight here i think he is obviously going to go
02:21down in
02:22history as a great central banker uh also go down as someone who was really politically adept i mean
02:28he navigated through democratic and republican administrations uh really well and didn't have
02:33the kind of conflicts that a lot of other central bankers have run into like jay paul for example
02:39um so i think that combination of you know good economic uh intuition reliance on data ability to
02:46navigate through washington really well uh it's pretty special i just wish he'd done a little bit
02:51better on the financial stability regulatory side if he did that he'd sort of get straight a's
02:56let's fast forward it to today uh mr warsh we did hear from kevin warsh last week for the first
03:01time as chairman of the fed uh what were your takeaways well i think the you know big takeaway
03:07is number one that uh it's it's going to be a different regime under kevin warsh uh you know
03:12so the regime change that he promised is is in the process of happening you can just tell it uh
03:17you
03:17know right off the bat with a very much shortened statement i think the the and getting rid of ford
03:23guidance i think is completely appropriate but i'm i'm pretty nervous about his views about not
03:27communicating at all about how the fed is likely to react if the economic circumstances has changed
03:32this reliant on the market views to sort of guide policy i think is a mistake uh the federal reserve
03:39needs to set monetary policy not financial markets and if you're relying on the on the markets how do
03:44you make the decision markets basically don't price to what they think the fed should do they price
03:49to what the fed what they think the fed will do so right if you're relying on the market you're
03:54sort of you have this indeterminacy about what you should do so i think so i think that's a mistake
03:59i
03:59think uh you know i think transparency i think is very helpful in terms of the conduct of monetary
04:04policy because you do want markets to think along with the fed when you know strong economic report
04:09comes out you want the markets to reprice in terms of their expectation about the monetary policy path
04:14but to do that well you need good community good communication you need the markets to understand
04:19the fed's monetary policy reaction function so i think the risk here is kevin is throwing out the
04:24baby with the bathwater i have no problem getting rid of ford guidance but don't throw out
04:28you know information about the fed's monetary policy reaction function at the same time and i
04:33think he did that at the press conference because he was asked very explicitly what would cause you
04:37to want to tighten monetary policy and he really wouldn't answer the question i mean obviously the
04:42obvious answer would be if inflation stays longer for for higher than i expect then we'll obviously have
04:47to tighten monetary policy or if the economy is stronger than we expect then obviously i'll revise up
04:52my estimate of a neutral monetary policy but he refused to answer those questions and i think that's
04:56maybe okay for the first press conference but i don't think that can be sustained over time
05:01dudley fired up that's what we're saying right now william dudley with us and we continue the former
05:06president of the new york fed you yeah you're sitting there bill all fired up and everybody knows i agree
05:12with you on this i mean to be polite about it the heritage of your shop called goldman sachs and
05:19how
05:19celsius has carried this forward is a disinflation narrative is the big shock after this war with
05:27west texas intermediate a 71 49 so i could get with constructive news a 69 handle here are are we
05:35prepared bill dudley for the disinflation narrative that could come well there's going to be a disinflation
05:42narrative really next month right when we get the pc and cpi data for june because obviously oil
05:49prices and gasoline prices have come down this month but i think that you have to look in the
05:53broader context what's the pressure on resources more broadly we still have a lot of price pressures
05:57like for example chip prices are going going up really rapidly um and i think the i think the
06:03fundamental question really for the monetary policy outlook is is the question is monetary policy
06:07actually restrictive today and my own personal view is that there's not much evidence of that i mean
06:12we've had the monetary policy at this setting or tighter for three years and yet we're still at an
06:17unemployment rate consistent with full employment so if monetary policies isn't restrictive then why
06:24do you need to cut rates what's the next data point bill that you think the market should really be
06:30focusing on i think the labor market is really important here i mean i think if the economy is strong
06:36enough to keep the payrolls growing like the pace they've done over the last few months the unemployment
06:41rates flat to declining um you know that's gonna that's gonna continue to push the fed in the
06:46direction of thinking that they need to tighten monetary policy i don't you know i'm i'm a little
06:50uncertain about you know how fast monetary policies tightens likely to occur and or or what that
06:55probability is because it's not clear how much commitment kevin warsch has to actually doing it i mean
07:01the talk is cheap of course everybody's in favor of price stability but the question is what
07:05are you actually prepared to do to achieve that outcome and i don't think we really know that
07:10at this point i mean he couldn't he could have obviously said the opposite i'm not in favor of
07:14price stability uh so it's not really clear that there's a lot of content in that statement
