. >>> HIS LATEST OP-ED WRITING ABOUT RELATIONSHIP BETWEEN ECONOMIC AND GEOPOLITICAL INSTABILITY SAYING, MASSIVE GOVERNMENT SPENDING SURGING DEBT BURDENS AND BANK RESCUES OVER THE PAST YEARS ALARMED AMERICA'S ALLIES, EMBOLDENED ITS ADVERSARIES AND CALLING FOR WHAT HE TERM AS NEW ECONOMIC AND SECURITY COMMONS KEVIN WARSH JOINS US CURRENTLY DISTINGUISHED VISITING FELLER AT THE HOOVER INSTITUTION. WHAT DO YOU MEAN >> GAVE ME CREDIT. GEORGE SHULTZ IS THE GREAT MAN CAME UP WITH THAT FRAMING AFTER WORLD WAR II AND DESCRIBED HOW THE WORLD WAS SAFER AND THE U.S. MORE SAFER AND PROSPEROUS BECAUSE THE UNITED STATES LED A NEW WAY TO THINK OF A GLOBAL ECONOMY. 2024, CAN'T GO BACK. HAVE TO LOOK FORWARD, BUT WHAT I READ ABOUT A COUPLE DAYS AGO IS WE NEED A NEW WAY TO THINK ABOUT THE U.S. LEADING THE WORLD TO MAKE OURSELVES SAFER AND STRONGER. >> WHAT DOES THAT LOOK LIKE? >> WELL IT LOOKS LIKE A STRONGER ECONOMY. IT LOOKS LIKE MORE CAPABLE ECONOMIC POLICY SO THAT OUR ADVERSARIES AROUND THE WORLD ENVY THE U.S. ECONOMY INSTEAD OF THINK THEY CAN INTIMIDATE IT IT LOOKS LIKE A WORLD THAT'S SAFER, BECAUSE OUR ALLIES CAN TRUST US AND ADVERSARIES AREN'T SO SURE WHAT WE'RE GOING TO DO EVEN OVERNIGHT, BECKY, FISHING BOATS BETWEEN THE PHILIPPINES AND THE CHINESE, THE RUSSIANS INVADING POLISH AIRSPACE AS PART OF THE WAR IN WESTERN UKRAINE. THIS IS A WORLD WHERE U.S. DETERRENCE ISN'T WORKING AND WHAT I TRIED TO WRITE ABOUT IS THAT WHEN THE U.S. IS NO LONGER A FORCE STEADY IN THE WORLD, THE WORLD LOOKS MORE DANGEROUS AND COMES DOWN TO NEGATIVE BENEFITS HERE IN THE U.S. >> THE ECONOMY LOOKS REALLY GOOD HERE RIGHT NOW SURPRISINGLY SO PEOPLE THINKING THE FED SHOULD CUT RATES OR THOSE WORRYING A RECESSION IS JUST AROUND THE CORNER, BUT WE CAN'T EVEN GET A BUDGET PASSED OVER THE COURSE OF TEN MONTHS. FINALLY A DEAL ONLY UNTIL OCTOBER. GET US FUNDED THROUGH OCTOBER. IS THAT WHAT YOU'RE TALKING ABOUT? WHEN YOU TALK HOW WE WORK TOGETHER AND PRESENT A STRONGER UNITED FRONT, IT'S HARD TO SEE HOW WE GET TO THAT POINT SOUNDS GOOD BUT HARD TO SEE HOW WE GET THERE LOOKING AT WASHINGTON THESE DAYS. >> PROCESS MATTERS INSTITUTIONS MATTER A LOT. I'M A LITTLE LESS IMPRESSED ABOUT THE STRENGTH OF THE U.S. ECONOMY TODAY. THE TREASURY DEPARTMENT, THE FEDERAL RESERVE FOR THE BEST OF INTENTIONS I'M SURE ARE GOOSING THIS ECONOMY THE ECONOMY'S LOOKED GREAT LAST SEVERAL QUARTERS AND PROBABLY THE NEXT COUPLE QUARTERS YOU REFERENCED AT THE BEGINNING, MASSIVE GOVERNMENT DEFICITS AT TIMES OF PROSPERITY. A FED PROMISING TO CUT RATES EVEN AS ASSET PRICES ARE MELTING UP LOOSER POLICY. THE REST OF THE WORLD, ESPECIALLY ALLIES AND ADVERSARIES LOOK AT US AND MAYBE IMPRESSED BY GDP GROWTH, IMPRESSED BY THE STOCK MARKET BUT NOT THE U.S. ECONOMIC ENGINE SEEMS STIMULATED EVEN AT A TIME OF FULL EMPLOYMENT. >> TO YOUR POINT, LEADS IN THE "WALL STREET JOURNAL" TODAY ABOUT SURGING TREASURY SALES AND MONEY THEY'RE GOING TO NEED TO CONTINUE TO FUND FUNDING THE DEFICITS WE'RE BUILDING UP. >> RIGHT TREASURY IN THE LAST SIX MONTHS ISSUED MORE BILLS, SHORT-TERM BILLS, THAN THEY HAVE LONGER-TERM NOTES AND BONDS. WHAT APPENED LONG-TERM YIELDS CAME DOWN SO LONG-TERM YIELDS ARE ABOUT 100 BASIS POINTS LOWER THAN EARLY LAST FALL. THAT WORKS FOR A WHILE, BUT ULTIMATELY THIS DEBT HAS TO BE PAID DURING A TIME OF ZERO INTEREST RATES FOR THE LAST TEN YEARS MOST PEOPLE TERMED OUT THEIR FUNDING. THE AVERAGE 30-YEAR FIXED RATE MORTGAGE IS ABOUT 3.5% BUT THE ONLY PEOPLE THAT DIDN'T TERM OUT THEIR DEBT OBLIGATIONS IS THE U.S. GOVERNMENT. SO AS YOU SAY. A BILL TO PAY. >> I GUESS THIS MORNING ONE OF THE ISSUES WE'VE BEEN TALKING ABOUT IS WHAT THE FED'S GOING TO DO NEXT. RAPHAEL BOSTIC NOW MAKING NOISE HE THINKS ONLY ONE FED RATE CUT THIS YEAR. THAT'S A LONG WAY FROM THE SIX THE STREET WAS ANTICIPATING AT ONE POINT. IF YOU'RE WORRIED ABOUT THE ECONOMY, WHAT DO YOU THINK THEY SHOULD BE DOING? THE FIRST THING I'M SUGGEST IS THAT THE 19 PEOPLE AROUND THE TABLE SPEND MORE TIME THINKING ABOUT AND DESCRIBING WHAT ARE THE FACTORS THAT CAN AFFECT INFLATION? I WILL SAY I'M A LITTLE PUZZLED BY WHAT THEIR FRAMEWORK REALLY IS WE WERE LED TO BELIEVE LAST YEAR THAT INFLATION WAS REALLY, SERVICES INFLATION AND WAGE INFLATION. NEW INDEX THEY TROTTED OUT SHOWED SERVICES X HOUSING GROWING ABOVE 4% HAVEN'T HEARD ABOUT THAT FOR A WHILE. LISTEN, I AM SYMPATHETIC TO THEIR CHALLENGE TRYING TO NAVIGATE THIS ECONOMY AS THE WORLD IS ON FIRE, BUT I THINK PRE-COMMITTING AS THEY DO IN THESE SERIES OF DOTS, EACH PERSON SAYING HOW MANY TIMES THEY CUT THREE, SIX, NINE MONTHS FROM NOW IS DEEPLY COUNTER PRODUCTIVE FINANCIAL MARKETS, PRODUCTIVE. ASSET PRICES MELTING UP BUT TAKING BIG RISKS WITH INFLATION. IF YOU'RE LIVING OFF YOUR W-2 INCOME, THEY'RE ASKING FOR INFLATION TO MOVE BACK HIGHER AND I THINK SOME OF THE DATA SUGGESTS IT IS, BUT, OF COURSE, IF YOU HAVE A LARGE BALANCE SHEET THIS IS A GREAT PARTY, BUT ULTIMATELY WHAT HAPPENS TO HARD-WORKING AMERICANS HERE MATTERS MORE. >> WE WAIT, WE WAIT, WE WAIT IF YOU WERE TO ASK YOURSELF HOW LONG YOU'VE BEEN WORRIED ABOUT UNSUSTAINABLE DEBT LEVELS, ALL OF US, IT PROBABLY ISN'T IN YEARS. IT'S PROBABLY MEASURED IN DECADES. AND IT SCARES ME WE SEEM TO BE -- TO ALMOST ASSUME IT'S NOT GOING TO COME HOME TO ROOST. WE'RE LEARNING -- WE'RE NOT LEARNS LESSONS WE SHOULD BE LEARNING BECAUSE MAYBE OF THE STIMULUS MAYBE IT'S BEING -- YOU KNOW, GLOSSED OVER BY, BY LARGE FROM THE FED AND FISCAL AUTHORITIES BUT NO FREE LUNCHES. WE THINK THERE ARE FREE LUNCHES NOW. I THINK MAYBE THERE ARE FREE LUNCHES NOW, KEVIN, AND MT WORKS. RESERVE CURRENCY OF THE WORLD. WE CAN KEEP SPENDING IT'S WORKING TELLING US EVERY DAY, IT'S -- [ WHISPERING ] -- IT'S WORKING. A BAD LESSON TO LEARN WHEN CLEARLY IT'S NOT GOING -- END WELL SO -- >> CENTRAL BANKERS ARE PAID TO THE NERVOUS. IF I COME ON THE SHOW AND SOUND UNCOMFORTABLE IN THE STATE OF AFFAIRS, THAT'S OUR JOB. OUR JOB ISN'T TO THROW A PARTY OUR JOB ISN'T TO FIGURE OUT WAYS TO BE THE FIRST CENTRAL BANK TO CUT RATES INTO A MELT-UP IN ASSET PRICES I'M CONCERNED. THAT'S THE OCCUPATION. >> I'M WITH YOU. JUST WONDERING THE PROPONENTS OF MMT HAVE NOT BEEN DISSUADED THAT IT WORKS -- YET. >> SO IN ORDER TO BE PERSUADED OUT OF A POSITION YOU HAVE TO BE PERSUADED IN TO THE POSITION OUR JOB AS CENTRAL BANKERS THINK ABOUT ECONOMICS NOT POLITICS LONG-TERM INTEREST RATES LOOK LIKE THEY'RE MOVING UP, MACHINA LONG TIME. MY HANDS IN THE FINANCIAL CRISIS AT A TIME OF FULL EMPLOYMENT THE WORLD IS MORE SKEPTICAL OF THE U.S. AS SOME SHINING CITY UPON A HILL. LOOKS TO ME AS THOUGH THEY'RE LESS COMFORTABLE PUTTING ALL OF THEIR EGGS IN THE AMERICAN BASKET THIS IS A WINDOW'S OPPORTUNITY FOR WASHINGTON TO PUT ITS BEST FOOT FORWARD AND TO TRY TO THINK ABOUT SOME IDEA OF
