The Coolest Thing in the World for an Econ Nerd

Summary

Slate Money — "The Coolest Thing in the World for an Econ Nerd"

Date: November 28, 2025
Host: Felix Salmon
Guests: Elizabeth Spiers, Emily Peck, Austan Goolsbee (President of the Chicago Fed)

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Overview

This special Thanksgiving episode dives into the inner workings of the Federal Reserve with Austan Goolsbee, President of the Chicago Fed. Rather than focusing solely on short-term rate decisions, Felix Salmon, co-hosts Elizabeth Spiers and Emily Peck, and Goolsbee himself explore what actually happens inside the Fed’s Federal Open Market Committee (FOMC) meetings, demystify Fed transparency, debate the evolution from “mystique” to modern communications, address public trust issues, and discuss how the Fed responds to both public perception and political changes. The episode offers a rich, insider’s look at how U.S. monetary policy is crafted and the foundational philosophies guiding it.

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Key Discussion Points

Inside the FOMC: What Actually Happens?

• The FOMC experience ([03:13]):

  • Goolsbee describes attending his first FOMC meeting as “the coolest thing in the world” for an econ nerd.
  • Meetings occur in a massive room around a giant table; security is tight (no phones, no outside communication, shades drawn).
  • Day one focuses on staff briefings about the economy, markets, international business, and financial stability.
  • Day two is voting day for interest rates, led by deliberative speeches from each committee member.
  • Goolsbee: “You go in, it's a huge room with a giant table, biggest table I've ever seen. … the shades come down so that nobody can spy and you're not allowed to bring your phone in.” [03:13]

• Preparation & deliberation ([05:21]):

  • Prep occurs in the week before the meeting — each Fed bank analyzes the circulated “teal book” and prepares.
  • During the meeting, members present their independent analyses; debate is rehearsed and respectful, not combative.
  • Goolsbee: “People take pretty seriously I think the idea that everybody's coming there with an independent view.” [06:02]

• How decisions really get made ([08:24], [08:56]):

  • Outcome is rarely a surprise; votes are almost always unanimous.
  • Fed chair’s diplomatic skills are key to achieving consensus, often by crafting language everyone can accept.
  • “If you just predicted everyone's going to vote yes on Alternative B, you would almost always be right. Almost all the votes are unanimous.” — Goolsbee [08:56]

The Role and Limitations of Market Expectations

• Market vs. Fed influence ([10:46], [12:39]):

  • Sometimes “market expectations” seem to predetermine the Fed’s decision, but the Fed’s role is to act, not simply follow market predictions.
  • Goolsbee reflects: “The Fed's job is to act and the market's job is to react. And let's not get the order mixed up.” [11:45]
  • Warns against letting market expectations dictate Fed actions, as it creates a “reflection problem” ([12:46]).

• Transparency and Communication Evolution ([18:10], [21:15]):

  • Under Jay Powell, the Fed is far more open than during the days of Volcker or Greenspan, who thrived on “mystique.”
  • Goolsbee argues for more transparency due to declining institutional trust in America:
    “It's really important to convey as much as possible to both the market and to the semi interested public. What is the Fed? What do we do? As I always say, we're not the bad guys. We are the guardians of the galaxy.” [19:21]

The Value of Transparency Versus Mystique

• The mystique argument ([22:40]):

  • Felix pushes back, championing the old era of Fed mystique: “I am gonna be the one dissenting voice here. I'm gonna be team tall Paul and I'm gonna be like, there was real value to the Mystique and Dora era.” [22:40]

• Forward guidance and new communication tools ([23:51]):

  • Forward guidance — explicit public commitments to future monetary policy — emerged during the financial crisis.
  • Goolsbee is skeptical: “You know that I've never been that big of a fan of forward guidance and I was kind of critical of forward guidance. … The era of heroes is done. … The miracles aren't there. We are never. None of us is going to fill Paul Volcker's shoes.” [23:54]

• Rebuilding public trust ([24:50], [28:31]):

  • Both Goolsbee and the hosts note public distrust in the wake of the 2008 financial crisis and other recent upheavals.
  • Transparency is positioned as essential for restoring trust: “I think the only answer to eroding public trust is forthrightness and treating people like adults and saying, we aren't magicians, we're trying to figure it out.” — Goolsbee [24:50]

The Public’s Misunderstanding of Monetary Policy

• Public perceptions of the Fed ([28:56]):

  • The public links interest rates to mortgage rates, and inflation to gas and milk prices — oversimplifications compared to how markets and economists think.
  • Goolsbee: “We don't even set the mortgage rates exactly.” [29:15]

• Who do FOMC members represent? ([31:00], [31:18]):

  • When voting, Goolsbee says he acts on behalf of the nation as a whole, though informed by his district.
  • “We're explicitly supposed to be taking a national view.” [31:18]

Critiques and Defenses of Central Banking

• Responding to ‘Abolish the Fed’ and gold standard arguments ([33:59]):

  • Goolsbee breaks down different forms of anti-Fed sentiment, particularly gold-standard advocates.
  • Explains why the gold standard fails, especially in crises:
    “When stuff starts going wrong, the gold standard forces you to do the opposite of what you want to do.” [35:00]

• On monetary rules vs. discretion, like the Taylor Rule or NGDP targeting ([36:06]):

  • Skeptical of strict rules: “The test of the rule is does it give you insight when stuff is going wrong or when there are very complex dynamics that are unlike things that have happened before. … It would be a big mistake to commit ahead of time to not have discretion.” [36:54]

Political Risks and the Future of Fed Independence

• Future FOMC fractiousness and politicization ([37:04], [38:00]):

  • Felix asks about potential future “fractious” FOMC meetings, with political appointees voting in blocs, risking transparency making divisions public.
  • Goolsbee’s hope: “The people around this table take the job extremely seriously. And you'll see when the transcript comes out, it's not about politics. … I hope to God that we will always maintain that this last bastion of deliberation, conscious deliberation based on fact, and that it won't become politicized in some way like that. I think that would be really. That would be troubling.” [40:16]

• Stagflation and communicating difficult mandates ([40:33], [41:33]):

  • Goolsbee discusses the challenge for the Fed if both mandates (maximum employment, stable prices) worsen at once, e.g., stagflation.
  • “We're going to try to figure out which side of the mandate is getting worse, quicker and by more. And how long do we think each error is going to last? And we're going to be in a business of we're trying to strike a balance.” [41:33]

Monetary Policy versus Fiscal Policy

• Who is more powerful? ([43:16]):
  • Goolsbee argues fiscal policy is much more powerful long-term than monetary, but monetary policy can act quickly and independently.
  • “Setting of interest rates is a very primitive tool. It's basically just a screwdriver. … Everything else in the universe is fiscal policy.” [43:16]
  • Strongly defends Fed independence amid occasional political pressure to monetize public debt:
    “The central bank must be independent from political interference when setting the interest rates or else inflation is coming back.” [44:12]

Living Through Data Droughts and Embracing the “Data Dogs”

• How the Fed copes with missing data ([47:29], [49:00]):
  • Goolsbee calls himself a “data dog,” always sniffing out information; jokes about the lack of “data cats.”
    “The thing is, cats are predators and they involve killing… that's why there are no data cats. The data cats are out killing birds.” [49:00]
  • When government statistics go dark, the Fed pulls in private sector data and constructed indicators, but warns: “Everybody's numbers are getting worse the longer the official statistics are down because everybody benchmarks onto the official data.” [50:02]

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Memorable Quotes

• “If you're an econ nerd, it's about the coolest thing in the world.” — Austan Goolsbee [03:13]
• “The Fed's job is to act and the market's job is to react. And let's not get the order mixed up.” — Goolsbee [11:45]
• “Almost all the votes are unanimous. … But that's misleading, because Jay Powell... has a remarkable talent for talking. He knows, in a way, I think he does the poll you're describing ahead of time, but he's the only one who truly knows.” — Goolsbee [08:56]
• “As I always say, we're not the bad guys. We are the guardians of the galaxy.” — Goolsbee [19:21]
• “You want the Hollywood star system and you're like, you know, there used to be stars like Marilyn Monroe, there were giants of the Fed like Paul Volcker. And the era of heroes is done. The miracles aren't there.” — Goolsbee [23:54]
• “The only answer to eroding public trust is forthrightness and treating people like adults and saying, we aren't magicians, we're trying to figure it out.” — Goolsbee [24:50]
• “We don't even set the mortgage rates exactly.” — Goolsbee [29:15]
• “When stuff starts going wrong, the gold standard forces you to do the opposite of what you want to do.” — Goolsbee [35:00]
• “If you tried to do what Greenspan did now or Volcker did now, in terms of you'll get nothing and like it, you know, that's a message. … I just think the environment has changed.” — Goolsbee [25:44]
• “The central bank must be independent from political interference when setting the interest rates or else inflation is coming back.” — Goolsbee [44:12]
• (On cat people in economics): “The thing is, cats are predators and they involve killing and it doesn't… that's why there are no data cats. The data cats are out killing birds.” — Goolsbee [49:00]

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Timestamps for Important Segments

• FOMC Meeting Atmosphere & Routine — [03:13]–[07:00]
• Debate, Decision-Making & the Role of the Chair — [08:24]–[13:00]
• Transparency, Mystique, and Forward Guidance — [18:10]–[24:50]
• Public Trust and Post-Crisis Distrust — [24:50]–[31:00]
• Abolishing the Fed, the Gold Standard & Rule-Based Policy — [33:59]–[36:54]
• Future Political Fractiousness — [37:04]–[40:16]
• Stagflation and Dual Mandate Dilemmas — [40:33]–[42:52]
• Fiscal vs. Monetary Power & Independence — [43:16]–[45:08]
• Data Drought and “Data Dogs” — [47:29]–[51:46]

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Tone & Takeaways

The episode, playful but substantive, offers listeners a rare, candid seat at the monetary policy table, showing both the ceremony and genuine debate within the Fed. Goolsbee is both explanatory (“We are the guardians of the galaxy”) and disarmingly honest about challenges, risks, and the limits of what central bankers can do. The show underscores the importance of public trust, the perils of nostalgia for Fed “mystique,” and the seriousness with which FOMC members take their charge—even if, in Goolsbee’s words, “the era of heroes is done.”

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For anyone wanting to understand the real Federal Reserve—not just the headlines or rate announcements—this episode provides clear, nuanced answers, plenty of inside anecdotes, and valuable context for both econ nerds and the broader public.

Transcript

[A]

Hello, and welcome to a very special Thanksgiving episode of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Bloomberg. I'm here with Elizabeth Spires of the New York Times.

[B]

Hello.

[A]

I'm here with Emily Peck of Axios.

[B]

Hello.

[C]

Hello.

[A]

And we are going to be talking this week with the president of the Chicago Fed. We are going to be talking to Austan Goolsbee, who probably needs no introduction. He's been in the headlines, well, ever since the Obama campaign. In 2008, when he was advising the candidate Obama on economic policy, he went into the White House. He has now switched over to monetary policy. We're going to talk about that switch. We're going to basically talk about what is the Fed. He is a voting member some of the time on the open market committee that sets interest rates. We're gonna ask how do they set interest rates? What do they think about what happens in the room? How have things changed since the days of Volcker and Greenspan? And then do stick around for the Slate plus segment where Emily and Elizabeth and I try and work out what we just heard from Austin. We unpack the whole thing and manage somehow, inevitably, to talk about avocado toast.

[C]

It all comes back to avocado toast.

[A]

It's a really good, really, really good conversation. So stay tuned. It's all coming up on Slate Money. This message is a paid partnership with Apple Card. Fun fact, I never leave home without my Apple card. I mean, would you want to miss out on daily cash back on everyday purchases subject to credit approval? Apple Card issued by Goldman Sachs Bank USA Salt Lake City branch terms and more at Applec extra value meals are back.

[D]

That means 10 tender juicy McNuggets and medium fries and a drink are just $8 only at McDonald's for a limited time only. Prices and participation may vary. Prices may be higher in Hawaii, Alaska and California and for delivery.

[A]

So I feel, Austin, that like everyone, whenever you do media interviews, everyone wants to know about monetary policy and what's going to happen to interest rates and whether you think they should go up or down. Yeah, and I have a certain amount of appetite for that, but not much. What I really want to know is just like I want to zoom way back out. I want to just know what is it that you do, not so much in your Lake Chicago Fed, but specifically at the FOMC in the room when interest rates are being set. There's like this committee and we see the minutes occasionally. But I'm just going to come out and say that 99% of slate money listeners have never read a copy of the Fed minutes.

[D]

Yeah. And didn't know that the minutes came out or that with a lag it's going to come out word for word. Transcript. You want to see what happens? You got to wait a few years, but they'll tell you word for word.

[A]

So. Exactly. It's years down the line. So what happened?

[D]

Okay, so I didn't know this. I had never been there. Three years ago, almost three years ago, I come to the Fed and within a couple of weeks is the first meeting. And I'm a voter at the very first meeting that I'm going to. I gotta say, if you're an econ nerd, like, I am, like you guys are, it's about the coolest thing in the world. You go in, it's a huge room with a giant table, biggest table I've ever seen. And they sit all around the table and assign seats. So I'm right next to Mary Daly, the president in San Francisco, and Neel Kashkari, the president in Minneapolis are on the two sides of me all the time. And the shades come down so that nobody can spy and you're not allowed to bring your phone in. And there's no communication with the outside world.

[A]

So no one can be like, I need to Google that. You need to like, send a person.

[D]

Don't Google. You gotta have it sorted out before you get in there. If somebody says something and you're like, I don't think that's true, you can wait till the break and then you run back in the other room and check your phone. But in the, there's no real time fact checking in there. One side of the table is the staff, and the Fed staff will have a series of briefings. Here's what the official forecast is. You'll get a briefing from the market's desk about the balance sheet and what's happening with rates. They'll have an international briefing. Once a quarter, they'll do the financial stability briefing and then they're going to go around the table. Day one, day, it's a two day thing. Day one is about the economy and day two is about the rates. And day two is when you vote on the rates.

[A]

And then. So I just need to ask, like, when you're listening to all of these briefings and then you're doing day one talking about the economy, is there a voice in the back of your head going like, can we just like get all of this passed so that we can get to the meat of it and start talking about rates or is it actually super important to have all of that first?

[B]

Well, relatedly, how much of that conversation has already happened outside of the room before you show up?

[D]

Those are both good questions. The difference in having the briefing in person rather than they do send you in all of the banks. I think I certainly know in Chicago we take this super seriously. And so the whole week before the meeting we're intensively going through, they send the teal book which has lots of the material already and we will have analyzed that and have our views of it. You can ask questions of the staff in a way that you can't ask questions of the teal book itself.

[A]

Famously mute. You try and ask a question of a book and it just like so.

[D]

What do you think? Deal book, speak up for yourself. So that can be instructive. But it does have a certain formality to it for sure. Both the meeting and the. And the kind of the Fed itself. Now then we switch to the other people and kind of Elizabeth's question is more to the well, are you debating it in the room or are you debating it? Have you debated it before? People take pretty seriously I think the idea that everybody's coming there with an independent view. So there's not really debate ahead of time or at least nobody's calling to invite me into the debate. Maybe it is, but I'm although it.

[A]

Kind of happens in the media, right? Everyone's giving advice but it kind of.

[D]

Happens in the media.

[B]

Assume you know what your colleagues opinions are, where they're probably going to land.

[D]

Sort of, yeah, maybe. But you know, I'm mostly getting that, monitoring it through their speeches in the media and they're going to go around the table. I mean the main thing is that we go all day and we go around the table and each of the 19 people is going to say their piece, you know, seven to 10 minutes about where we are in the economy. And that's really instructive and it's fascinating to me seeing how they're coming from very not everybody's a. I came with a research economics background, academic, there are a few economists, there are business people, there are people with a banking background, a markets background. I found it really interesting, really fun to to kind of hear what they have to say. People are scripted, there's not like a lot of interrupting and like no, no, that's not true, that doesn't happen. But it is a deliberative body and a debate does take place but it kind of takes place across meetings, as I describe it, that everybody will say their piece. You bring a plus one, usually your research director or your monetary policy advisor, and that person is furiously writing down everything that the other people are saying. And then we come back and we'll analyze what just happened. What did they say? Do we agree with that? You know, and then you're getting ready at the next one. In a way you're kind of refuting or reacting to what they said. It's pretty amazing, actually. I think as a body, it sounds.

[A]

To me that like people have their 7 to 10 minute speech pretty much worked out before they even enter the room. And the ability of the Fed chair or anyone else to move them off, that sort of predetermined position is relatively.

[D]

Limited in that moment, I think in that moment.

[A]

So the outcome of the vote is like if you did a poll, you know, before everyone walked into the room of how everyone was going to vote, like nine times out of 10 or 19 times out of 20, that would be exactly how they voted at the end of day two.

[D]

Yes, but there's probably even a stronger form of that. If you just go look at the votes, if you just predicted everyone's going to vote yes on Alternative B, you would almost always be right. Almost all the votes are unanimous. So part of you looks at that and says, hey, well, if they're all unanimous votes, then they must not have much diversity of thought. But that's misleading because Jay Powell, he's the only chair that I've worked with, but he's got a remarkable talent for talking. He knows, in a way, I think he does the poll you're describing ahead of time, but he's the only one who truly knows. If my colleagues don't get up and literally say I intend to vote X, there is still a question mark of what's going to happen. Now, we're meeting every six weeks, so there is a sense in which at most moments the meeting is not on the margin. So if you went and looked at the loose prediction in the markets while.

[A]

You'Re in Chicago, the Fed futures traded in your district in Chicago.

[D]

Exactly. It's traded like right down the street. And in most meetings that Aziz are close to 0% or close to 100%. And it's only in meetings where something's going to happen and it's uncertain. I don't know if I totally. You might be right in a technical sense that literally when we come there on that day, it's determined. But that's not to say that if you backed up a few days. It was determined. I will often go into meetings without having my mind totally made up and I want to hear what the other members had to say before I totally decide.

[A]

This is exactly where I was going with this because you're absolutely right that in the overwhelming majority of meetings, the outcome according to the Fed funds futures is predetermined. Basically everyone knows what it's going to be and it's going to happen. But that is partly because you can have dissent and then you still have majority voting for the thing that everyone wants the majority to vote for. The thing I'm interested in is when you come in without a very strong prior of I really need to vote for 25 or I really need to vote for zero, whatever you want. And then you realize that this Fed chair who you admire is kind of like moving in this direction, everyone else is kind of moving in that direction. And it kind of just makes sense for you to be like, well, all of these, like really smart people have all kind of coalesced around this particular course of action, alternative B, and I'll throw in my vote and there is value to being able to come out with a Fed statement saying like, this was unanimous. We all thought this. Right? Like that's part of the job of a Fed chair. Right.

[D]

And that is part of the job of a Fed chair. Yeah. I was going to say I'm only allowed to speak for myself, not for what anybody else thinks. I'm enough of a make me ornery of something. I don't feel like anybody's going to tell me, hey, we really expect you to vote this way or the markets expect this, so we have to give it to them. Paul Volcker was my mentor and really almost a personal hero to me. And one of the things that when we work together, he would always say is the Fed's job is to act and the market's job is to react. And let's not get the order mixed up. And I do kind of think that the Fed's Fed futures estimation, there is a reflection problem in that if you start going down the path of like, well, we should just do what we are expected to do, that's not a necessarily equilibrium.

[C]

But isn't the, the chair setting those expectations in advance? I mean, that's a change since Volcker in a way.

[D]

That's the point.

[A]

That's why you'll have the chair phoning up John Hilsenrath and saying like, oi.

[D]

Yeah, that's the insight that it can't be I think that we take what the market's expectations as a well, we can't do X because the market doesn't expect it. That's a dangerous thing to do. That's what I say when I say it's not an equilibrium is if the market only thinks what it is because of what we already did. You can get yourself into a little bit of a mistaken pickle mixed metaphors but you you can tie yourself up in a bit of a problem.

[A]

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[C]

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[D]

The expectations will be and then oh, there'll be a 75 point increase.

[A]

Right.

[C]

So he the expectation was set or reset by someone. We don't know where Nick gets his information from. And then there was a vote.

[A]

Although we do know when Nick gets his information.

[C]

So do you know what I mean? Like the order of operations.

[D]

I don't know.

[C]

The order of operations would say like the vote was preordained. Right.

[D]

It sounds like you are wanting. You're hunting for bear. You're wanting to say but what about this? But you're just stating my I agree with you.

[C]

Okay.

[B]

Yeah.

[D]

That was exactly what you said.

[C]

Smart enough to understand I need to repeat it.

[D]

There are people, if you go watch out in public, there are people who say the Fed cannot do blank because the market does not expect it. And I reject that reasoning because most of what the market expects is just reflecting what they think we're already going to do. So I don't want to base what we choose to do based on what they think we were going to do.

[A]

Yeah, no, totally. You can change, you can change those expectations quite easily.

[C]

Just to finish my thought, because I didn't quite hear Austin saying it is just that there is a vote, but coming into the vote, it's sort of already been decided. Like in the case I'm talking about, there was a message 0.75 percentage points. The vote happened after that. The message came from the Fed. So it's like, you know what I mean? Like, what does the vote really even mean at that point?

[D]

Let me separate those into two parts. There are two important ideas and they're kind of a joint hypothesis in that just take out the somebody talk to the media and that's why the expectations change. Okay, so the, the question that Felix is kind of sniffing around too of isn't this a sham of a vote? And I'm arguing it is a deliberative body and there is movement, but there is an alternative B that comes with a statement and that is the thing that we vote on. Now, the chair doesn't just get to sit down and write, here's what the alternative B statement is with no input from everyone else. There is a process that before the meeting it will say, here's the proposed alt A, which is always, there's always one that's kind of dovish. There's alternative B that we vote on and there's an alternative C which is more hawkish. And they each have language and they'll send around the proposed language. They're arguably, you can give comments and they do get revised based on what the comments are.

[A]

Is this during the meeting or before the meeting?

[D]

No, no, this before the meeting. This, you know, for a week before the meeting. And therein lies a bit of the diplomatic skill of the chair. That one way you get to unanimous votes is you have to find language that everybody could agree on. And if you didn't, if you just charge ahead, if you were the chair and you were like, I don't care what anybody says in the committee, you, here's what you're voting on, the chances of a lot more dissents would go Way up. If you didn't have that diplomatic skill.

[B]

This kind of speaks a little bit to different philosophical positions about how you should run the Fed and the extent to which you are obligated to communicate both to the market and to regular people. And you know, Jay Powell has been very, I would say forward facing, you know, more aggressive about communication. Certainly at the opposite end of the spectrum. Kind of Alan Greenspan type who blinks twice and you're supposed to determine something from it. How do you view this, especially in the context of what we're talking about and in a political environment where the Fed is probably more politicized than usual? Which is not to say that it isn't always politicized and people don't, voters don't fully understand what the Fed does.

[D]

All of those are important contexts. Look, I was an academic for 30 years studying the economy. I wasn't there when the inflation was going crazy. Whatever critiques of the Fed, I probably agree with them. I wasn't there. Don't blame me. You know, we've been cutting inflation since I got there. Now, as we kind of think through the. What's the commitment to transparency? How much transparency is the right amount? That's an important topic. I'm more in the camp that there's massive declines in public trust of all major institutions of the government, of banks, of anything that's perceived to be faceless and elite. And it's kind of like the Fed is right in the nugget of the whole Venn diagram on that thing. So I think that it's really important to convey as much as possible to both the market and to the semi interested public. What is the Fed? What do we do? As I always say, we're not the bad guys. We are the guardians of the galaxy. We're running $5 trillion a day of payments in the United States. Wire transfer, ach, direct deposit. All the cash that exists in the economy gets distributed through the Feds. We got a vault with billions of dollars down in the basement and we're running it in and out and we're out in our districts talking to business leaders, talking to civic leaders and bringing that knowledge back to these FOMC meetings every six weeks. And that's how it's supposed to be. That's how they built the Federal Reserve in 1913. They were just as suspicious about the idea that Washington D.C. alone or in concert with Wall street would control the whole financial system of the United States with no input from the rest of the country. Okay, but Austin, that's why they built a system that we have.

[A]

Austin, let me ask Elizabeth's question in a slightly different way, which is that.

[D]

That was a polite way to say I'm taking too long, I'm just answering it.

[A]

No, but you were saying that this is built into the Fed structure and it's important to be transparent and communicative and this kind of thing. I just wanna say if you had gone back to Alan Greenspan and said you should give a press conference after every FOMC meeting, he would have like bitten you.

[D]

And they asked Volcker, if you asked Volker, if you asked Volcker, he hated the press conference. I would talk to him. When the press conference started, his attitude was, this is the Fed. The Fed does not justify its actions. And like the thought that Nick Timirose would be asking a follow up and kind of hounding the Fed chair. Wait a minute. But you said whatever he Absolutely his view was the most important thing for the Fed is mystique. But that's in the modern economic understanding of central banks. It's not just the Fed. The mystique Fed is magician. That's kind of, that's old school. You asked me, I think transparency is an important goal. And we have a committee. There are some people who don't like hearing from a bunch of different members of the committee. They say essentially it would be a lot easier if there was just one voice and everybody would just get on the script and tell us what the script is.

[C]

What is everyone with the one voice lately?

[A]

Everyone.

[C]

Unitary voice, democracy.

[D]

That's not how the committee is structured. So we shouldn't have one voice. You should want to hear just like there's no one voice in the Senate. You go at a Senator A thinks this, Senator B thinks that. You gonna figure out what, where.

[A]

I feel like, I feel like all three.

[C]

No one voice here.

[A]

E, you guys have one voice. I am gonna be the one dissenting voice here. I'm gonna be team tall Paul and I'm gonna be like, there was real value to the Mystique and Dora era. Like back in the Volcker era, not only were there no press conferences, there weren't even any press releases. And in fact.

[D]

And you didn't even know what the decision was.

[A]

You didn't even know what decision was. You needed to kind of like look.

[D]

At the New York desk and try.

[A]

And work out what the new rate was because no one was gonna tell you. I think there was real utility to that. And what Austin, is that something changed after the Greenspan era and the thing that changed was that during the financial crisis under Bernanke, the Fed decided that it needed more than just interest rates as a tool. It needed this thing called forward guidance. And so the only way that it could do forward guidance was to come out very loudly and say in very explicit words, not only are we going to have interest rates at zero now, but we're going to keep interest rates at zero for a substantially long time into the future. And they really wanted to communicate that. And that was when the Fed switched over to oh shit, we need to communicate, because it had no choice.

[B]

Also, it's a wildly different media environment.

[D]

You're Trev. You're Trev. Are you doing this on purpose? You know that I've never been that big of a fan of forward guidance and I was kind of critical of forward guidance. So now you're trapping me into the. What I'm saying the press conference is good, the transparency is good, and you're like, ah, so you do like voting guys. No, I don't. I know I don't. Look, I think Elizabeth's point about the media environment, partly you are bemoaning an old world that doesn't exist anymore. You want the Hollywood star system and you're like, you know, there used to be stars like Marilyn Monroe, there were giants of the Fed like Paul Volcker. And the era of heroes is done. The miracles aren't there. We are never. None of us is going to fill Paul Volcker's shoes. He was a giant man. He was huge, literally, physically and, you know, spiritually. And so this is where we are. I still think if you tried to go back to the days of mystique with the people who we are now, that'd be a terrible mistake because people be. There would be a lot of confusion and this erosion of public trust. That's why I want to start with the erosion of public trust. I think the only answer to eroding public trust is forthrightness and treating people like adults and saying, we aren't magicians, we're trying to figure it out. The hardest thing the central bank has to do is figure out the through line and moments of transition and try to get the timing right.

[A]

I would disagree that at the time when Paul Volcker was setting interest rates of 15% that the public trusted him and was like, oh, Paul Volcker, you're a giant. We trust you to do the right thing. I think he was deeply unpopular, not only in the country, but when the.

[D]

Interest rates were that high. Yeah, I'm sure You're right, yeah, they were. His widow, when he died, gave me the original two by four that they sent him. And it says, it's scribbled on it, it says, please lower these insane interest rates. And I keep that on the shelf right next to my desk, A, to remind me of him, but B, to remind me what we do impacts the real economy. And sometimes the Fed's got to do stuff that the administration doesn't like, the public doesn't like. So I'm not talking about winning a popularity contest. I'm talking about if you tried to do what Greenspan did now or Volcker did now, in terms of you'll get nothing and like it, you know, that's a message. We're not going to tell you nothing. We're not going to tell you what we did. We're not going to tell you this. Do you think that would improve the public trust in the Fed? It's a theory. I kind of think not. Maybe it would. I just think the environment has changed.

[C]

I would also say the environment changed and public trust was eroded. Not because the public just woke up one day and was like, everything's a conspiracy. I trust no one.

[D]

But, yeah, what do you think it was?

[C]

There was a financial crisis in 2008. People lost their jobs, people lost their houses. People, you know, they had to leave their houses, they were sold, a lot of them. These mortgages they couldn't afford.

[D]

For sure, that's true.

[C]

The whole system was revealed to be like, in a very, very bad place. The public couldn't just say, oh, we can trust the Fed, the Fed knows what they're doing. The public was reckoning with record high foreclosures, a massive loss of wealth, Stock market was in the dumps.

[D]

I accept that the actual conditions. And fast forward 21 22, inflation is almost double digits. People hate inflation. So you see in the polls, some 80% of people say they're not familiar with the Fed or what they do, but 75% of the people are saying, but they know they're doing a bad job, whatever that job is.

[A]

Right.

[C]

I'm not saying the Fed caused the financial crisis. I'm just saying after the financial crisis, you couldn't let the Fed operate behind a curtain with mystique. The mystique was gone. The economy was in a shambles.

[D]

That's another good point. That does go a little bit though. It sounds like to Felix's thing of if the Fed is going to engage in unusual conduct or it's a very unusual moment, like you're hitting the zero lower bound and you literally can't cut rates anymore. That's in the spirit of your comment. Like basically the public will not stand for you just doing a bunch of things with no explanation in that kind of a moment.

[B]

To your point and to Emily's point, I think members of the public, not members of the market, not sophisticated economic actors, when they think about these economic indicators and the things that the Fed controls, inflation in particular, they think about and interest rates, they tie inflation to things, for example, very often that have to do with things that are outside of core cpi. Like gas prices.

[D]

Gas prices, exactly. Price of milk, stuff like that.

[B]

Yeah. And so I think of gas prices as being the ultimate vibes economy indicator. But with interest rates, they always think about it in the context of personal home mortgages.

[D]

Right. We don't even set the mortgage rates exactly.

[B]

But this is how the public understands both inflation and interest rates, which is very different from the way the market understands it.

[D]

My only concluding thought on the trust is I do think there have been performance problems in the economy that contributed to the lack of trust and undermined confidence. And also that you've seen big drops in trust in the military, educational institutions, the courts, a whole bunch of things that didn't have to do with the economy. So something's going.

[B]

Anyway, I don't think Emily and I are not saying that this is fair. I think it's.

[C]

That it's not.

[B]

It's not even the reality of the perception.

[A]

Yeah, I can see the argument that in this world of reduced trust in institutions, the one thing you can do is increase transparency. And like, obviously as a journalist I'm very open to this.

[D]

You're like, yes, give us more. And I think the investment in the local, like the regional character of the FOMC makes it pretty distinct from any other central bank in the world, even the ecb. Those are different countries that are represented. We're the, I think, the only place that has a wide regional representation from within the country. And I actually think that there was a certain element of genius in that from the beginning because now it ends up people are more rooted in their local. They like their congressmen even as they report, they hate congress, they like their bank even as they report, they hate banks. And that local aspect, I think there is potentially some more trust to be to be found in that.

[A]

This raises a big question that I've really wanted to ask you for some time, which is when you walk in and you cast your vote for what you think interest rates should be Are you casting your vote on behalf of the people of your district? On behalf of the people of the United States?

[B]

Whoa.

[D]

Mostly on behalf of the people of the United States. I am informed by the people in my district. But we're explicitly supposed to be taking a national view. And the Federal Reserve act doesn't specify. It says when we're setting monetary policy, we're supposed to be maximizing employment and stabilizing prices, which we've collectively interpreted to be an inflation rate of 2%. So that's a good question, but I think the answer to it is pretty clear. We're supposed to be taking a national view. This podcast is brought to you by Progressive Insurance. Do you ever think about switching insurance companies to see if you could save some cash? Progressive makes it easy. Just drop in some details about yourself and see if you're eligible to save money. When you bundle your home and auto policies, the process only takes minutes and it could mean hundreds more in your pocket. Visit progressive.com after this episode to see if you could save Progressive Casualty Insurance Company and affiliates. Potential savings will vary. Not available in all states. Introducing Meta Ray Ban Display, the world's most advanced AI glasses with a full color display built into the lens of the glasses. It's there when you need it and gone when you don't. Send and receive messages, translate or caption live conversations, collaborate with Meta, AI and more. Be one of the first to try Meta Ray ban display. Visit meta.com metaraybanddisplay to book a demo and find your pair.

[B]

Can I ask you a question that under any normal administration I would not have to ask or wouldn't be interesting?

[D]

I didn't know where you were going. Can I ask you a question that in any normal administration you would hang up on me?

[B]

Well, it just wouldn't even be an issue. You know, I think right now, you know, I talk to Trump voters and aside from just sometimes not understanding what the Fed does, there isn't an abolish the Fed palpable activist movement, right?

[D]

It's been around for a bit.

[B]

If you're faced with somebody like that who says, I don't trust central banking because it's kind of this weird government private sector hybrid that doesn't make sense to me. Or maybe it's just general distrust of any situation where you have experts in a room making decisions, what do you tell those people? How do you explain the need for the Fed to people who maybe don't understand how it works?

[D]

It probably depends on which is the nature of the conspiracy that they employ. Because there are a lot of Fed haters. They come from different perspectives. So there's one which is sort of rooted in the gold standard folks, their worldview. And that's kind of the traditional. The creation of fiat money is itself bogus and is intended to debase the currency of the country. And they tend to say we should go back to gold standard or we should have some discipline and be a hard money system. That if we start to go into it, there are clear reasons why every country of the world got off the gold standard and nobody went back to it. Which include things like when stuff starts going wrong, the gold standard forces you to do the opposite of what you want to do. So the depression begins and the gold standard forces you to start raising the interest rate and driving the economy farther into the ground. So it's fundamentally unstable in a crisis.

[A]

So wait, hang on a sec, Austin, we need to get your video back here.

[B]

The Goldbergs knocked you out frozen. It's happening.

[D]

I gotta watch what I say.

[A]

The minute he starts talking about gold that Bill Gates started, now you're going back.

[B]

There you are.

[A]

I'm telling you, the conspiracy theories are going to have a whale of a diamond.

[D]

Exactly right. And they might not be wr. So one style is the traditional abolish the Fed and replace it with a rule. And the problem with rules, I'm sympathetic to whether it's a Taylor rule. In the olden days that we're kind of Milton Friedman. We should just have a constant growth rate of money that foundered on the rocks of what counts as money has been changing over time. In the formula, the velocity of money is not, not a constant. So it's up and down and all around. And so targeting those monetary aggregates didn't work that well. I'm sympathetic that we think about Taylor rules or other formula formulae. I don't know how to use it.

[A]

Formulas like NGDP targeting, what do you think of that?

[D]

Yeah, look, let's think through all of those. But exactly the thing that makes me hesitant to consider rules that are widely debunked. Like let's go back to a gold standard rule. Ask yourself, not in normal times. This is kind of like the worst version of a self driving car mechanism. Yeah, okay, fine. The self driving car can drive when there's no traffic, it's clear weather, you're driving down a highway. The test of the rule is does it give you insight when stuff is going wrong or when there are very complex dynamics that are unlike things that have happened? Before. And my read of the rules is it would be a big mistake to commit ahead of time to not have discretion.

[A]

Since you brought up the subject of car crashes.

[D]

Speaking of train wrecks. Speaking of train wrecks.

[A]

There was, I remember reading in a biography of Paul Volcker once, where things were going very badly just in terms of he had to keep on raising interest rates. And he was deeply unpopular and he actually found himself, himself coming very close to being outvoted at the FOMC meeting. And he felt that if that should ever happen, he was honor bound to resign as Fed Chair and all hell would have broken loose. And there is a world coming down the pike where an increasing number of FOMC members in one way or another. Maga like we have one already now, the voices on the FOMC are going to be much more fractious and much less aligned than they ever were in the past. And the votes are not gonna be even close to unanimous. And that this is the point at which all of your vaunted transparency is just going to make the car crash that much more visible. And like, is that really what we want?

[D]

Is it a car crash or is the transparency gonna allow us to avoid the car crash? I mean, that's kind of my question. So there has been a tradition, it feels like that governors especially, that is political appointees who are there in Washington, not the Reserve bank presidents who are, are kind of supposed to be independent voices already, that they don't dissent. And if the governor's dissent against the chair, that has a meaning. And that was the case of what happened back in the Volcker episode. You're describing that the Fed had been extremely muscular, Fed funds rate up to 20% holding it there until inflation was coming down. And there had been a number of new appointees who called a meeting for themself and evidently were going to vote against the chair, that the chair was going to be in the minority. And Volcker said, if this goes through, I'm resigning on the spot. And they came back and they revoted, but in a way they put him on notice. That era is done. The Volcker era is done. And actually he retired soon after that. Does it need to be the case that we always vest so much in unanimity? I don't know. As I said, none of us on the committee are supposed to be talking about what other people think or how they're going to vote. I would just say I found fascinating, as we talked about at the beginning, I found fascinating the worldviews espoused by to people around the table. And I will just say my experience is not at all political. So you said they're going to be MAGA governors. My experience is that the people around this table take the job extremely seriously. And you'll see when the transcript comes out, it's not about politics. It's about what do people think is the economic outlook and what do they think the data say. So I hope to God that we will always maintain that this last bastion of deliberation, conscious deliberation based on fact, and that it won't become politicized in some way like that. I think that would be really. That would be troubling.

[B]

I have one last tiny provocation, which is that it's apolitical, though. It's how would the Fed communicate a stagflation situation given that people don't necessarily even understand the dual mandate?

[D]

Now you threw me off. We have a dual mandate. So whether people understand it or not, the law requires us to fail to maximize employment, stabilize prices. I try to say what I was saying before the tariffs came in. You can go back and read my speeches from really almost a year ago. And I said, if we have big tariffs, this is going to be one of the more troubling things a central bank ever has to confront, which is a stagflationary direction shock, where both sides of the mandate get worse at the same time. Because there's not an obvious playbook of what you do. Usually you're not in a low, higher, low fire environment, for example, you're either in low, higher, high fire or high, higher, low fire. And so you either tighten or loosen to heat it up or cool it down. If both things are going wrong, the Fed has to come to. In a way, we talked about this a little bit in the framework review. We identified that we're going to try to figure out which side of the mandate is getting worse, quicker and by more. And how long do we think each error is going to last? And we're going to be in a business of we're trying to strike a balance. And to your point, I think stagflationary episodes, which are not caused by the Fed, and there's hardly anything the Fed can do about them because we can't pump oil and we can't build data centers and we can't. Well, if there are a bunch of things that the Fed cannot do, and yet they are exactly the episodes when people blame the central bank the most. They're like, look at what the central bank is doing. The unemployment Rate is up.

[B]

Well, they expect you to fix it on some level.

[D]

They're like, go fix it.

[B]

Yeah.

[D]

I'm a little nervous that we're in a juniorized version of that right now in that we said, hey, if you put in big tariffs, this threatens to make the job market worse and drive up prices at the same time. And now we're seeing some signs that the job market is getting worse and some signs that the inflation is going up and we've been above target for a long time and it's heading the wrong way. So it may be sooner than we wanted that we're going to have to come to some terms on that.

[A]

So let me just finish with the mother of all questions, which is exactly to your point. The government, the President and Congress has the power to do all manner of things with tariffs. You have worked in the White House. You understand the power of fiscal policy. You now are working at the Fed and you understand the power of monetary policy. Who's more powerful?

[D]

I think fiscal's way more powerful on a long term basis than is monetary. The advantage of the monetary, just the setting of interest rates is a very primitive tool. It's basically just a screwdriver. You can tighten it, you can loosen it, that's all there is. But we're meeting every six weeks. We can respond to the business cycle in real time in a way that fiscal policy has trouble doing. So it's in this lane, you know me get on the camera. This narrow of a lane is a monetary policy lane. But it makes a huge difference in that part part of the universe. Everything else in the universe is fiscal policy. And I got out of that business, I'm out of the elections business, you know, and people come back and they'll be like, well, when you 13 years ago when you were in the Obama administration, they were arguing about tax rates. What do you think the tax rate should be? I'm not going to do that anymore. They set whatever tax rates they want. They set whatever tariff rates they want. And when we go to set interest rates, I feel like think it's my job to take those as conditions and not respond to, look, you want a central bank to be independent. We've now gone into an environment where we've had high level government officials, including the Vice president, going on national television saying bureaucrats at the Fed should not be setting the interest rate that should be set by the President. I don't agree with that. I didn't agree with that before I ever got to the Fed. And I believe close to unanimous among economists, the central bank must be independent from political interference when setting the interest rates or else inflation is coming back. That's not rooted just in theory. That's just rooted in. Look around the world and look at times in the United States when the central bank wasn't independent. Inflation comes back.

[A]

So let me ask you about, you know, it is definitely possible we have this situation right now where we have an absolutely enormous national debt where the debt is rising at a very high rate. It is very possible for fiscal policy and that's all fiscal. Nothing the Fed can do about that. It is possible for fiscal policy to then create this world where it becomes a lot more expensive for the government to borrow money and that becomes this kind of vicious cycle and long term interest rates start becoming incredibly important. And the White House and Congress have historically kind of dropped the ball on caring about the effects of fiscal policy on long term interest rates. And then the Fed comes in and I guess my question for you is how much does the Fed even have the ability? Because I know a lot of people on Capitol Hill think they do. How much do you have the ability to try and bring those rates down and help the country out that way?

[D]

Well, long term rates, we don't set the long term rates. But the argument that the Fed should cut the interest rate to make it cheaper for the government to run debt, that's the monetize the debt argument. That's literally the canonical reason why the Fed or the central bank is supposed to be independent is precisely to prevent that. So I can't speak for anybody else, but in my head these need to be separate.

[A]

Okay.

[D]

That argument, I don't find that persuasive at all. I find that scary that if people are expecting the Fed to set interest rates to try to make it easier and less costly to run up more debt, I would just ask you to go look at the. This is not the first time somebody's had that idea that often ends in tears.

[C]

So you're about to make a trade based on a friend's text, but which u do you listen to is it we could buy a house in Tulum, get optioning those options. We could lose everything. Or let's do a little research.

[D]

Get your head in the trade and.

[C]

Make the investment decision that's right for you. Learn [e-mail] TradeSmart Wayfair's big sale is returning. Get ready for way day. For four days only, score up to 80% off all things home with free shipping on everything from October 26th through 29th score Wayfair's best deals like up to 80% off off area rugs, up to 60% off mattresses, up to 60% off bedroom furniture, and more exclusive doorbuster deals. So mark your calendar and shop Wayday starting October 26th at Wayfair.com Wayfair Every style, every home. I just have this. It's kind of like a half joke question, but half very real question. Okay, you're a self described data dog. You sniff out the financial information. You say to assess the economy, you need to sniff out the data. So my two questions are one, why not give any props or attention to the cats out there? There are a lot of cats. I'm a cat person. Where are the data cats? And how hard has it been to be a data cat and or dog in the past, you know, 43 days? I mean, we're about to get. We're taping this before Thanksgiving.

[D]

Let's start with that second thing.

[B]

Awful.

[D]

The data dogs are howling. Where is the food? Where is the food? Look, why not catch cats? Because cats are terrible.

[C]

Wow.

[A]

Wow.

[D]

If a cat acts like a dog, then it's okay, but wow.

[C]

Okay.

[D]

The thing is, cats are predators and they involve killing and it doesn't.

[B]

We're gonna get the most hate mail just for this.

[C]

Are so cute.

[D]

They are literally predators. But that's why there are no data cats. The data cats are out killing birds. All right, but in all seriousness, it's been horrible. The US government statistics are the best. Look, you had a whole entire shows on that. But they're the best statistics in the entire world. It's not to say they're perfect. And it's not that they have gotten noisier over times. People don't like answering surveys and stuff like that, but they're still the best data that we have. Now, one of the first rules of data dogs is sniff everything that hits the floor because it might be food. And so if you don't have whatever dog chow that you normally gonna get, go sniff everything else. And that's what we're doing. We're looking at private sector sources. Not because of the shutdown. We were working on it for months.

[C]

Yeah.

[D]

But we came out with these labor market indicators just before the shutdown shut off the official data in which we take 11 different sources, some private sector, some public sector, and make a forecast. What will the next unemployment rate be? What will the hiring rate be of people who are currently unemployed? And what will be the layoff or separations rate for people with jobs, we rely on that when we have nothing else. If they don't give us the actual unemployment rate, well, then let's just use what we have to say where the labor market is. But, but the first thing I'll say is everybody's numbers are getting worse the longer the official statistics are down because everybody benchmarks onto the official data. So whether it's ADP or anything, if you go longer and longer without official statistics, what we observe is getting more and more inaccurate. And then the second thing I'll say is there's kind of a weird subtlety that I think for me makes me more paranoid about inflation, which is we have at least a few statistics on how the job market is doing when the official jobs numbers are shut down. We're still getting the UI claims data, we still have adp, we still have a series of private sectors, and on the price side, we have very, very little. So if the job market fell apart in the short run, we would know that. And if the inflation part began to fall apart, we really wouldn't know that. And so that makes me in a period of darkness that makes me a little asymmetric, you know, that kind of.

[A]

Surprises me, I have to say.

[B]

Oh.

[D]

Oh, that's.

[C]

He can't even give us a number.

[B]

Okay, we had six more questions.

[D]

The number was the unemployment rate stayed exactly the same. So it's like in the Simpsons. Did you ever see that Simpsons? It comes to the end of the year and they're in history class and the bell rings and they all get up to leave and the teacher goes, wait, you didn't hear what happened at the end of World War II. And everyone pauses and they said, we won. They run out of the way.

[A]

That, I am afraid, really is all we have time for. Austan Goolsby has been dragged off with a hook from the stage. He was staying on as long as he could, but he has a busy schedule there, man. And so with sadness in our hearts, we say goodbye to Austin and thank you, Austin, very much for coming on the show. Thank you all for listening. Thank you to Shayna Roth and to Justin Molly for producing and thank you for being a Slate plus member. If you're a Slate plus member, you'll enjoy it this week and we will be back next next week with more Slate money.

[D]

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