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DealBook Summit
Jerome Powell on the Fed’s Role in America’s Financial Future
00:36:29
The chair of the Board of Governors of the Federal Reserve System sat down to discuss the state of the U.S. economy, the importance of Fed independence, and what he expects from a second Trump administration. “Growth is definitely stronger than we thought, and inflation is coming a little higher.”
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- [00:03]
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- [00:33]
Jerome Powell
What is the case for the Fed being independent? What does independent mean? It basically means that we can make our decisions without them being reversed, other than by Congress. That's what independent means. And that gives us the ability to make these decisions for the benefit of all Americans at all times, not for any particular political party or political outcome.
- [00:55]
Andrew Ross Sorkin
This is Andrew Ross Sorkin with the New York Times, and you're listening to interviews from our annual DealBook Summit live event recorded on December 4th in New York City. Good afternoon, everybody. It is thrilling to have Jay Powell here, of course, the chair of the Federal Reserve. We talk about a lot of consequential people who come on this stage, but in truth, when it comes to the global economy, this, this one man may be maybe it. He has been in charge of the nation's monetary policy now for six years under both Trump, President Trump and President Biden. And through the most unusual and challenging times, we should say, the COVID pandemic and all the economic shifts that of course, came with that. Fair to say that the fears of a recession never happened so far at least. And he has managed to pilot the economy through what a lot of people thought was an impossible idea, which is this idea of a soft landing. He has been praised and criticized often in the same day. And now the very idea of the Fed's independence is in question politically in Washington, which we'll talk about. We could not be more pleased to have you here, here with us. So thank you.
- [02:13]
Jerome Powell
Thanks. It's great to be here, Andrew.
- [02:17]
Andrew Ross Sorkin
Thank you. Most of the interviews that you do, people talk directly, specifically and start about the economy. People actually rarely, I have found, try to find out about you and who you are and how this all happened and how you feel about all of this. Before we get into anything economic, I just want to get personal with you because as I said, there's a lot of powerful people in the world. A lot of them come on the stage. There are Presidents, there are CEOs, there are billionaires who are powerful, but in many ways, uniquely, you have a power that others do not. And I'm so very Curious, as a human, how that power sits with you.
- [03:03]
Jerome Powell
Well, first of all, it's great to be here. Thanks for having me. I guess I would say that I really love the work that I do. And that's the main thing. I like my job. I love my job. It's a great honor to do it. The work is incredibly interesting all the time. And I work at an institution full of highly talented people who are committed to public service. We know that the things that we do really matter for everybody, people and companies. And so I get enormous satisfaction about that. And there's a fair amount of responsibility. But you think about people who run large organizations, it probably feels very much.
- [03:41]
Andrew Ross Sorkin
The same, even when you can just change the dial and it changes everything.
- [03:48]
Jerome Powell
So I've been at the fed for almost 13 years, and I've been chair for six and a half years. And I'm kind of used to the work that we do and the way we do it and all that. And so. So, again, I don't experience it as difficult and unpleasant, although it can certainly be that. But I just feel. I feel lucky to do it, and I basically enjoy the work a great deal.
- [04:10]
Andrew Ross Sorkin
Okay, so explain. Let's just go back in time, though, just to explain a little bit to everybody about how this happened. It didn't just happen to you. It's something that you wanted. You graduated from Princeton. After Princeton, by the way, you went to Europe. From what I've read, now you have a guitar.
- [04:25]
Jerome Powell
Yeah.
- [04:27]
Andrew Ross Sorkin
You were playing music in Paris, including the song I'm so Lonesome I Could Cry. Could you still play that song?
- [04:35]
Jerome Powell
That's not a hard song to play. I could. I could play that song. I can't sing it very well.
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Andrew Ross Sorkin
Did you make money doing this?
- [04:40]
Jerome Powell
No. No, never. People pay me to stop, actually.
- [04:44]
Andrew Ross Sorkin
And then you come back to the States and you become a lawyer. Then you go to Dylan Reed, and when you're at Dylan Reid, which was an investment bank just to date, the world here, no longer with us. It's been merged into a whole bunch of other places since then. You had a boss named Nick Brady, Nicholas Brady, who later on, by the way, becomes the Treasury Secretary. But I'm curious. You're sitting there at this bank, and it was at this bank that you knew that you wanted to do something in public service.
- [05:18]
Jerome Powell
Actually, when I was in college, I'm not one of those very mature kids who came out with a plan. I really had one thought. I'd grown up in Washington, D.C. my family was not part of the government, and those elite circles. But I had this thought that I wanted to have a life which was mostly in the private sector, but then to do public service from time to time. And I had people like Cyrus Vance and George Schultz, who some of you may remember in mind, people like that, who had great private sector careers. That was the only idea that I had. And so one day at Dylan Reed, I forced myself to get up and walk up the stairs and knock on Nick Brady's giant office, which seemed to me like the palace of Versailles at the time, given my. I was working in a broom closet at the time, and say, nick, if you do anything in Washington, he would. You know, He's a former U.S. senator. He was close to former President George H.W. bush. If you do anything in Washington, I'd love to staff you. And he said, that's great, thanks. He asked his assistant to write my name down. And I went back to my broom closet thinking nothing would happen. But a couple months later, I get a call from Denise Emmett, who says, please come up. And I worked on a project with Nick Brady in Washington. We became friends and colleagues. He becomes Secretary of the treasury, eventually invites me to go to Washington as an Assistant Secretary. And honest to God, with that. The point of the story is that little bit of initiative to force. Force myself to get up and very fearfully knock on his door, thinking he might take it the wrong way. Maybe I wanted to leave the firm or something. And that little bit of initiative, without that, I would not be sitting here. There's no way I'd be sitting here. That is what opened the door to me to do public service at a high level that I hadn't really earned or deserved.
- [07:02]
Andrew Ross Sorkin
Did you ever think you don't have a PhD? Did you ever think that you wanted to go to the Fed?
- [07:07]
Jerome Powell
So when I worked at Treasury, I worked at treasury for three years, and I really liked the people at the Fed, people like Don Cohn and Alan Greenspan and many others. I liked it, but I never thought that's where I would wind up. I thought I'd love to come back and serve again in some kind of economic capacity, but I never thought I would be at the Fed. So then what happened was I did a study of the debt ceiling during the 2010 debt ceiling crisis. And I briefed, really, the Republican House and Senate caucuses and convinced them that they had to raise the debt ceiling, that it wasn't a fake thing, that there really would be a default. And the Obama administration was extremely grateful to me for doing that. And and nominated me to the Fed. And I've loved it, really, since. Since I started there.
- [07:56]
Andrew Ross Sorkin
So you never had the sense. There's a guy you probably know who has a sense that your job, he says it's the greatest job in government. You show up to the office once a month, you. And you say, let's flip a coin. And everybody talks about you like you're a God. That is President Elect Trump.
- [08:14]
Jerome Powell
I know. Yeah. So he's right. The part about it being the greatest job. It might well be right. I have to say, I do, as I mentioned, I do love the work. And it's a special place to be surrounded by people who are so dedicated and to know that your work really matters for people. It's a very special honor to do that work.
- [08:35]
Andrew Ross Sorkin
Did you laugh when you heard that?
- [08:37]
Jerome Powell
I thought he's partly right there because. But he's not right about to come to work, you know, once every month.
- [08:43]
Andrew Ross Sorkin
Just the flipping of the coin part.
- [08:44]
Jerome Powell
That part is. It's not quite. It's not like that. Not like that.
- [08:48]
Andrew Ross Sorkin
Let me ask you this, because it is the sort of political question that's. That I think is in the mix right now, which is you have talked a lot about the importance of the independence of the Federal Reserve. This is a group of people that I know that you are highly committed to. And there are now genuine questions, because the President elect has been quite outspoken about it, just publicly about the idea that maybe the Federal Reserve should come under more control and have. The White House should have more influence over it. What do you think when you hear that?
- [09:22]
Jerome Powell
Well, I think that the case for. What is the case for the Fed being independent? What does independent mean? It basically means that we can make our decisions without them being reversed, other than by Congress, which created it. We're a creature of Congress. We're not in the Constitution. We're a creature of statutes. So that's what independent means. And that gives us the ability to make these decisions for the benefit of all Americans at all times, not for any particular political party or political outcome. We're supposed to achieve maximum employment and price stability for the benefit of all Americans and keep out of politics completely. I think there is very, very broad support for that set of ideas in Congress in both political parties, on both side of the Hill. Sides of the Hill. And that's what really matters. It's in the. It's the law of the land. And I'm not concerned that. That. That there. That there's some risk that. That we would lose our statutory Independence, because I do think that, that those set of ideas are strongly believed by people.
- [10:21]
Andrew Ross Sorkin
But you fear, I mean, he has talked openly about firing you, which is something technically he's not supposed to be able to do.
- [10:28]
Jerome Powell
So I never discuss anything that elected officials say. So I'm going to disappoint you here. I just know, you know, this is our focus. The US Economy is in very good shape right now. It's in remarkably good shape. We are the sort of envy of other large economies around the world. And I want to do everything I can to keep it there during the rest of my term. And I feel very good about the economy is, and where monetary policy is.
- [10:52]
Andrew Ross Sorkin
We're going to go there in a moment and I'm going to try a slightly different approach with you, which is this because this guy's not elected yet or even confirmed. So the new Treasury Secretary likely to be, if he gets confirmed, Scott Besant, who I think you know, has made this, this is what he told Barron's. He said it publicly. He said, quote, and this is an effort to undermine your power. He said you could do the earliest Fed nomination and create a shadow Fed chair. And based on the concept of forward guidance, effectively the idea of what people expect in the future, no one is really going to care what Jerome Powell has to say anymore. What do you think the impact of something like that would be? Do you believe that that's even a possibility in the world?
- [11:42]
Jerome Powell
So let me say I don't think that's on the table at all. There's a set of institutional relationships between the Fed and every administration. I fully expect that we'll have the same general kinds of relationships that we have. Institutional relationships, for example, with the Council of Economic Advisors, but most importantly with the Treasury Department. The Treasury Secretary and the Fed chair have had breakfast or lunch together every week for 75 years. And more than that, the institutions have to, you know, there's got to be trust and mutual respect and acknowledgement of the different authorities and boundaries that we have. But, but a very constructive relationship because, you know, in times of crisis, we, we work much more together under the law. Nonetheless, it's, it's a very important relationship. And I fully, I'm confident that we'll have the same kinds of relationships with the incoming.
- [12:35]
Andrew Ross Sorkin
That first lunch, though, is going to be interesting.
- [12:38]
Jerome Powell
It's going to be fine.
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Andrew Ross Sorkin
Have you guys talked?
- [12:40]
Jerome Powell
I don't, you know, I don't know him. I don't know him well. But, but I'm, I am confident that I will have the same kind of relationship with him once he's confirmed, as I've had with other treasury secretaries.
- [12:54]
Andrew Ross Sorkin
Okay, let me ask you a slightly different question that's in the same category, but actually very different about just influence from the White House, because I think the public, it would help people to understand it. So before Paul Volcker passed away, I went to go visit him in his apartment on the Upper east side. This is back in 2018. I was writing a story about him, and he had just written a book and he had talked about, and told me a story about how President Ronald Reagan and his Chief of staff back then, James Baker, had asked him to come to the Oval office. This is 1984. And he says, quote, reagan didn't say a word. Instead, Baker delivered a message. The President is ordering you not to raise interest rates before the election. Now, Volcker wasn't planning to raise interest rates, and he said that he was stunned by all this. And then he went on to say that he later surmised that the library location had been chosen, quote, because unlike the Oval Office, it probably lacked a taping system. Has anything like that ever happened to you.
- [14:01]
Jerome Powell
Basically? No, No. I mean, you remember in the prior administration, there was a lot of public things that happened, and the things that happened in private were exactly the same. The President said the same things to me privately as he said publicly. I said the same things privately to the President as I said publicly. So all of that is, was in the prior administration, but nothing like. I know, I'm very familiar with that story and with that book, by the way, but nothing exactly like that happened.
- [14:28]
Andrew Ross Sorkin
The other question that I had just, is this a government question, which is, we've been talking about DOGE and things like that. Today. The Fed is self funded, my understanding, but it does have congressional oversight as Congress thinks about trying to figure out how to deal with the debt and the deficits and trying to make things more efficient. Do you think that the Fed could come into or come under some kind of DOGE like program?
- [14:58]
Jerome Powell
You know, part of our independence is that we are self funded and we have, you know, the ability to make our own decisions about hiring people and that kind of thing. So we've got, we've got strong legal independence. We do try to run the, the Fed respectfully. And, you know, we know these are taxpayer dollars, even though we do essentially, we have a large balance sheet and our assets earn more than our liabilities. So we're earning a spread. And we give, we give those profits every year to the Treasury Department. But we also use some of it to pay for the Fed. But we try to be good stewards of the public's money as well.
- [15:35]
Andrew Ross Sorkin
You know, one of the things that I think is fascinating about you and differs from many of the other predecessors of yours, is you speak very plainly and very openly and transparently. Alan Greenspan spoke somewhat obtusely. There was always this sort of communication divide in some ways, and I'm so curious how you think about that, which is this idea of communicating. And some people, by the way, would argue over communicating in terms of the way the Fed approaches its job today. Sort of post financial crisis, there really was a move to try to tell the public what was going to happen, to try to tell everybody where everybody thought the Fed was about to go. And whether you think long term that that has helped you or long term whether you think that that has to be rethought.
- [16:19]
Jerome Powell
You know, so go back 50 years and Central banks were mysterious. And, you know, that was. There was a lot of lure that that was the right thing to be. Then there was a bunch of academic research by people like Alan Blinder and others which came to the view, which is, I think, clearly correct, that if the market and the public understand how you will react to incoming data, then they'll do your work for you. So today, when some economic event happens, markets adjust immediately long before we take any policy action. So the whole modern theory is to be as transparent as possible. And we've greatly increased transparency. People do make the argument that enough transparency, maybe it's too much, but I think generally the overall trend over 40 years of history has been very constructive. And also, we're a public entity. We shouldn't be mysterious. We should be telling people what we're doing and why. In terms of speaking plainly, I think it's important that the interested public be able to understand what we're doing. And so it's important that we explain it in a way that doesn't include a lot of jargon. Jargon is really important when you're talking to other central bankers or other economists, but when you talk to the public and use jargon, you just make people angry because it excludes people.
- [17:37]
Andrew Ross Sorkin
Do you think it makes it harder for you to make a snap decision if a snap decision is necessary, because the markets have already moved on this expectation of where they think you're supposed to be or think you're going?
- [17:52]
Jerome Powell
I haven't. That hasn't happened. I mean, we've, we've moved very, very quickly both up and down with rates when it became appropriate to do so. I mean we, we cut rates. We were the first central bank in the world to cut rates to zero during the pandemic. And we, we rose, we raised rates during the inflation faster than any than the Fed ever has.
- [18:17]
Andrew Ross Sorkin
We'll be right back.
- [18:21]
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- [19:55]
Andrew Ross Sorkin
So here's a question about where we are now in this economy and I want to get into maybe where the economy may go, but the expectation is that you're going to cut rates. But I'm curious about why, why that is the expectation insofar as we're still in a moment where it appears that inflation looks a little stickier than we thought it did and the economy is stronger in many ways than had been expected. And so the question is what is the cost, if you will, of waiting?
- [20:25]
Jerome Powell
Right, so let me take a step back on that and just say the, the background is that as I mentioned, the US Economy is doing very well. We're in a very good place with the economy. We're growing at around 2 and a half percent and inflation has come down. Headline inflation was as high as 7.2 or so now it's at 2.3% and unemployment's at 4.1%, which is a little higher than it was a couple of years ago. But it's still near very, it's a very, very low level. And you know, we're not quite there on inflation, but we're still making progress. So the backstory is that the US Economy is in very good shape and there's no reason for that not to continue. So we raised rates to between five and a quarter and five and a half and we held them there for 14 months. And other central banks around the world had already started cutting. We were the last major central bank to cut and we're now on a path to bring rates back down to a more neutral level over time. But you're right, the economy is strong and it's stronger than we thought it was going to be in September. So the labor market is, is better and the downside risks appear to be less. In the labor market, growth is definitely stronger than we thought and inflation is coming a little higher. So the good news is that we, we can afford to be a little more cautious in as we, as we try to find neutral.
- [21:49]
Andrew Ross Sorkin
Tell me, I'm actually very curious about this, just how you think about it occasionally when you either either get it wrong or it's not where you think it was going to go. As you just said, you had a different view in September than you do now. Obviously things change. But what was it in September that surprised you? And if you could go back in time, do you think that you would have known the difference?
- [22:09]
Jerome Powell
Well, in September, what we saw was the unemployment rate had moved up close to a full percentage point. And again, we'd held on long after other, other major central banks had cut. And I mean, more broadly, there are two risks, right? There's the risk that we move too quickly and, and undermine the progress we've made on inflation. And there's the risk that we move too slowly and unnecessarily undermine the labor market. And so we're trying to, to, to be in that middle place and, and get it just right so that we continue to get inflation coming down. We keep policy at a restrictive level, but at less restrictive level over time. That's what we're trying to do. In, I would say in September it was time for us to cut because it was time, but, but also because I wanted to send, and we wanted to send a strong signal that we, that we were going to support the labor market if it continued to weaken. What happened instead Was in the couple of months after that, we got some data revisions which strongly suggested that the economy is even stronger than we thought. Even stronger than we thought. So the picture is actually stronger than it was then.
- [23:14]
Andrew Ross Sorkin
How do you think we as the public should think about when we get these labor numbers which by the way seem to get revised all the time? Do we have a counting problem? What is the what? No, and I ask it really because oftentimes we'll see a number and then you'll find out, you know, a month later that not only was their new number, but actually the old number was off by more than you could expect. Do you think there's a better way?
- [23:35]
Jerome Powell
So the way it works is that the numbers that people see from the household survey, the household survey is the unemployment rate and then the, the payroll jobs. That's, that's an establishment, economic establishment survey. They're surveys. So it's not, you're not counting people nationwide. You're, you're, you're doing a as sophisticated as you can survey and you're projecting that out to the nation. What's happened lately is that survey response levels have come down and that has probably meant, it's meant for smaller, you know, smaller groups of people. And that means there's more volatility. There's been more volatility in the revision. So you've seen a lot of months in which, which the job number comes in and then it gets revised down the next month. And that's typical when unemployment in the unemployment rate is going up. The labor market data is among the best data that we get. We do eventually not we, the Fed doesn't do this kind of data, but it eventually gets down to counting people and tax records and things like that. But the first numbers that you see are survey based and they're going to be a little volatile.
- [24:38]
Andrew Ross Sorkin
How do you take into account and do you some of the things that may be forward looking in terms of political or new policy changes? So we heard a couple things this morning when we were talking to Ken Griffin. One is he thinks that the economy is about to rip in a great way because the regulatory shackles are going to come off the system that were under the Biden administration and President Elect Trump is going to take that off. At the same time we also talked about tariffs and the uncertainty that that would create, which he does not think is going to actually create, and much uncertainty, at least for a while. How do you, sitting in your seat, think about those things?
- [25:19]
Jerome Powell
So like all forecasters, you know, we, we have to kind of make a guess at this point about what, what's going to mean for the economy. But let me say, let me, let's take tariffs. Here's what we don't know about tariffs. We don't know how big they'll be. We don't know their, their timing and their duration. We don't know what goods will be tariff. We don't know what country's goods will be tariffed. We don't know how that will play into prices, what will be the transmission into prices. We don't know how people in the markets and in the economy will react to that. And we don't know whether other countries will retaliate. So that's the list of things that we don't know, a partial list of the things we don't know. So we can't really start making policy on that at this time. That is something that lies well into the future. We have to be, we have to let this play out. We literally don't know all those things. We also, the main thing we don't know is all the other things that will be happening in the economy in six months or a year when this starts to matter. So, so, so what are we doing? We're modeling this, we're looking at it, we're evaluating it, we're observing. But it's right. The decisions we're making right now are not about that. They're about what's happening in the economy now.
- [26:28]
Andrew Ross Sorkin
Similar answer in terms of immigration. And the reason I ask about immigration is, you know, the CBO has calculated that if there's one force in the economy today that is, could be a major boost or not to the gdp, jobs, tax revenue, lowering the deficit, all of it seems to be about higher net immigration.
- [26:46]
Jerome Powell
You know, so let me say for both trade and immigration, the Fed has no role in that policy. We don't have an institutional view on the right level of tariffs or the right level of, of immigration. It's just not our job. That's the job of elected people. We don't comment on the decisions they make for whatever reasons they deem appropriate. We don't comment on that. But, so, but I can tell you, you know, there was a great deal of significant wave of immigration. It's now come, the level of immigration has come way down in the second half of this year as the existing, the Biden administration changed its policies. It's true that a lot of people came in and they went to work and that was part of why the GDP growth was, was so high in 20, a wave of people coming in and doing more work and spending money.
- [27:33]
Andrew Ross Sorkin
I know, I know the dollar is the Treasury's department, so I'm not going to ask you about the dollar per se, but I am curious just because it relates to tariffs. There has been this sort of speculation around tariffing countries, bric countries that may be trying to build their own currency. And long term, if you're just to think out a long time, the idea of the US as a reserve currency relative to somebody else creating their own, is it something that concerns you?
- [27:58]
Jerome Powell
You know, so I mean, you started with this. The, the administration and more particularly the Treasury Department has responsibility for, for, for the, for the value of the dollar and for exchange. It's not something that we opine on. We stay very, we stay away from that and they stay away from, you know, what we do.
- [28:18]
Andrew Ross Sorkin
You hope. Let me ask you a slightly different question about crypto. We were talking earlier also about bitcoin and it's going, you know, it's rising. There's talk in Washington also about creating a bitcoin reserve. Actually you do deal with currencies to some degree and you have to think about some of these issues. How does crypto sit with you right now at a time when it appears that this administration, this next administration may legalize it in a much more broader way? I mean, it's legal now, but, but that there might be a much bigger groundswell for it.
- [29:00]
Jerome Powell
So from, from the, the jobs that we have, what's relevant is really two things. One is just, you know, if what, what role should crypto be, crypto assets be allowed to play in the banking system? We try to keep the banking system safe and sound. We regulate and supervise banks and we would want the interaction between the crypto business and the banks to not just threaten the health and well being of the banks. That's thing one. The other one just is, to the extent anybody's doing that through a bank, we would want the public to, if people are buying crypto products and things like that, it's sort of a consumer protection aspect of it. But they would need, should need to understand exactly what it is and that sort of thing. But we're not, you know, we don't regulate it directly and we don't have that bigger role.
- [29:49]
Andrew Ross Sorkin
Would you ever own it yourself?
- [29:51]
Jerome Powell
I'm not allowed to.
- [29:52]
Andrew Ross Sorkin
You're not allowed to?
- [29:52]
Jerome Powell
No.
- [29:55]
Andrew Ross Sorkin
One of the big issues coming up is going to be taxes in the budget. We talked about doge and all of this. One thing that you have spoken out quite emphatically about is debt and deficits. You've been doing that now for a very, very long time. What is in your mind the tipping point for the debt and the deficit in that, for a very long time. I go back to thinking of 2010 or 11. I read some of the speeches you were giving back then and think about Simpson Bowles. And at that time, people talked about the debt deficit. We're at a tipping point. If we don't deal with it immediately, we're at a knife's edge, we're going to tip over. And here we are in 2024 and we haven't tipped over yet. In between that, there was this whole MMT idea that somehow we could just spend money wildly and that would be fine too. And I'm not sure that's gained too much traction either. Maybe it's been undone. But what do you worry about as the tipping point for all of this?
- [30:49]
Jerome Powell
So you're right. I did work on fiscal policy issues before I came to the Fed. But at the Fed, we don't have oversight over fiscal policy. Quite to the contrary, Congress has oversight over us. So I would limit myself to saying this, that the US Federal budget is on an unsustainable path. The debt is not as an unsustainable level, but the path is unsustainable. And we know that we have to change that. We've got to get back so that revenues and spending are in better alignment. We don't need to pay the debt down, we don't need to balance the budget. We just need the economy to grow faster than the debt. And that's not happening. We're running very large budget deficits at a time of full employment and strong growth. So we need to address that. And we got to do it sooner or later. And sooner is better than later.
- [31:35]
Andrew Ross Sorkin
Now, do you think the Fed should or could take into account the debt and deficits and that cost in terms of where you think rates can or should be ever?
- [31:47]
Jerome Powell
No, never. You see this in some emerging market countries. For example, if the central bank can't raise rates to deal with inflation because the fiscal situation is so bad that they can't raise rates, that's called fiscal dominance. And that we're so far from that. I mean, we will always use our, put it this way, we'll always use our tools to achieve price stability and maximum employment. 2% inflation. We're not thinking about, oh, we better not raise rates because of the budget. If we ever get to that point that we're far from that point.
- [32:23]
Andrew Ross Sorkin
Before I forget, one of the reasons I wanted to actually ask you about Bitcoin is to some degree, people think that that is a symbol of people's faith or lack of faith in either the US Dollar or in the Federal Reserve itself. In terms of the system, what do you think of that idea?
- [32:39]
Jerome Powell
I don't think that's how people think about it. I mean, it's. So people use Bitcoin as a speculative asset, right? It's like gold. It's just like gold, only it's virtual, it's digital. People are not using it as a form of payment or as a store of value. It's highly volatile. It's not a competitor for the dollar. It's really a competitor for gold. That's really how I think of it.
- [33:02]
Andrew Ross Sorkin
When you think about other countries, and I know it's not your job necessarily to think about other countries, but you spend a lot of time, I think, talking to your peers at other central banks. What are you most concerned about? You most concerned about the economy in China right now? Are you most concerned about Europe? What's the take on the world?
- [33:21]
Jerome Powell
As good as things are in the United States, of course there are always risks and certainly geopolitical risk is very elevated around the world with Ukraine and the Middle east and kind of very weak growth in places like China. That's all out there. I think domestically we do see low and moderate income people under some economic pressure. If you read, for example, or listen to the earnings reports from some of the retailers who deal a lot with low and moderate income people, they will uniformly say that people are under pressure, they're very much price shopping and that kind of thing. So that's. The aggregate numbers for the US Are really good, but we see pressures there in the lower income spectrum that we didn't see two years ago after the pandemic when people came out with, you know, really significant amounts of savings.
- [34:11]
Andrew Ross Sorkin
One of the. I don't know if you got a chance to see the video. We were talking, one of the big things was vibe session. Vibe session, this idea of how people think the vibe about the economy. And I think the vibe had a lot to do with actually the result of the election. And I'm curious how you think about this question about inflation. You know, a lot of people were saying, well, it is this past administration's fault, the inflation problem. Some people said it was your fault. Some people said it was how much money Congress appropriated during that, during the period of COVID How do you actually think about it yourself.
- [34:47]
Jerome Powell
Look, we shut down the world economy partially and there was a global outburst of inflation. There was a time when there wasn't a single country in the world that had 2% inflation. It was everywhere. Okay, and what was it because? It was because of a lot of pent up demand. It was certainly because of very strong fiscal support and low rates. All of those things contributed to inflation everywhere. And now it's, you know, if you look at, I could show you a graph of 10 countries and they, they all look like that. And I'd say, which one is the United States? You wouldn't be able to, you'd have a one in ten chance of guessing. So I think that's what happened. And, you know, the good news is in the case of the United States, we're back to a much better place. But I will say people are unhappy because the price level is higher. You can tell people that inflation has gone down, which is the change in prices, but that doesn't matter to people who are paying 10, 20% more for the important things in their lives.
- [35:45]
Andrew Ross Sorkin
You are known to spend a lot of time talking to folks in Congress privately. Folks like Fetterman, by the way, love you, apparently. I'm curious what you think the state of financial literacy is in Congress today.
- [35:59]
Jerome Powell
So like anything else, it's mixed. You know, there are people who are very knowledgeable and they tend to be the ones in responsible positions on the important committees. And there are people who, you know, they, there's so many things to be an expert on when you're a congressman or a senator. Think of the breadth of the things they have to know about, you know, defense. It's, it's, it's endless. So it's not surprising that most of them are not, you know, a good number of them are focused on the economy and, you know, monetary policy and things like that, but many of them are focused on other things, as you would expect.
- [36:30]
Andrew Ross Sorkin
We are out of time. But before we go, I am told that you have a special talent. I don't know if the public knows about this special talent, but I thought since we're here, we should try it out, which is that apparently you can repeat sentences backwards. Famously.
- [36:46]
Jerome Powell
No. Ever since I was a little kid, I was able to see and just for standard vocabulary words, I can see it in my head spelled forwards and backwards. I started pretty much any word, as long as it's not 12 syllables, you know, but. And I, I started doing that for friends when I was about 10 years old, and they were like what is that? You know, So I would write it down. So I can. Yeah, I could. I can just see that I'm not as good as that I used to be. But I can literally see the word forward and backward in my head and I can spell it backwards. Like you're a word in a.
- [37:15]
Andrew Ross Sorkin
So if I give you a sentence, can you do the whole sentence backwards?
- [37:18]
Jerome Powell
I could do each word. I can't do the whole sentence.
- [37:20]
Andrew Ross Sorkin
So the sentence I had written down. This was Bernice Nank in 2008. If it may be too long for you, though, if we don't do this now, we won't have an economy on Monday.
- [37:30]
Jerome Powell
I'll do economy. Enamos. Imonos. That's economy backward. I'm not going to do the whole sentence.
- [37:42]
Andrew Ross Sorkin
Jay Powell, everybody. Thank you.
- [37:43]
Jerome Powell
Thank you. Thanks, Andrew.
- [37:52]
Andrew Ross Sorkin
Dealbook summit is a production of the new york times. This episode was produced by evan roberts and edited by sarah kessler. Mixing by kelly piclo. Original music by daniel powell. The rest of the dealbook events team includes julie zahn, hillary kuhn, angela austin, haley hess, dana perkowski, matt kaiser and yen wei liu. Special thanks to sam dolnick, nina lassom, ravi mattu, beth weinstein, kate carrington and melissa tripoli. Thanks for listening. Talk to you next.