The Fed, Unreserved with Chicago Fed President Austan Goolsbee

Summary

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The Weekly Show with Jon Stewart

Episode: "The Fed, Unreserved with Chicago Fed President Austan Goolsbee"

Original Airdate: July 15, 2026

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Overview

In this episode, Jon Stewart dives into the mysteries and mechanics of the Federal Reserve with Austan Goolsbee, President of the Chicago Fed. Through candid and often comedic conversation, Stewart seeks to demystify how the Fed operates, illuminate its dual mandate, and probe its crisis-era decision making. They revisit financial crises, discuss the limits of economic forecasting, and debate whether monetary policy truly works for regular people. Stewart's trademark skepticism and curiosity propel this accessible, insightful, and entertaining economics deep-dive.

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Key Discussion Points & Insights

1. How the Federal Reserve Works

• Fed Structure Explained

  • 12 regional Federal Reserve Banks (e.g., Chicago, St. Louis, Kansas City).
  • Each led by a president, appointed by local boards (not direct government appointees).
  • 7-member Board of Governors in D.C., appointed by the President and confirmed by the Senate. Terms last 14 years to insulate from politics.
  • The Federal Open Market Committee (FOMC): Composed of 7 governors and 5 voting regional bank presidents at any given time (rotating among the 12), for a total of 12 votes.
  • Goolsbee: “It’s not about partisan politics. It’s absolutely not.” (46:35)

• Mission: Central bank independence is crucial to prevent governments from manipulating monetary policy for political gain and causing runaway inflation (06:16).

• FOMC Meetings

  • Held every 6 weeks in a secure, no-phones-allowed room in D.C.
  • Members discuss regional and national data, then set the federal funds rate.
  • Goolsbee: "It's the coolest room in the world for econ nerds." (10:33)

2. Independence and Political Pressures

• The Fed was designed for independence after historic crises and manipulations (Nixon, Weimar Germany, Argentina).
• Congress created the Fed’s “dual mandate”: maximize employment and control inflation (09:17).
• While presidents and Congress exert political pressure, Goolsbee insists Fed deliberations are insulated and serious:
  • "Everyone around the table... is taking extremely seriously the dual mandate. It’s all about the economy." (44:21)

3. Tools and Limits of Monetary Policy

• The Fed’s main lever is the short-term interest rate, which indirectly affects mortgages and other long-term rates.
• Market expectations and inflation projections heavily influence broader economic outcomes.
• The Fed's influence, while significant, is limited—other factors (like long-term inflation expectations) matter greatly (22:03).
• Stewart quips: "The title of an economic textbook should be ‘Better Than Random.’" (26:15)
• Goolsbee: “Most academic economists don’t think forecasting is doable...it’s art science.”

4. The Dual Mandate and Stagflation

• Under normal circumstances, controlling inflation and maximizing employment align—a "divine coincidence."
• When both employment and inflation worsen ("stagflation," as in the 1970s), the Fed faces a nightmare scenario (37:10).

5. Current Economic Conditions & Regional Perspectives

• Goolsbee’s Chicago Fed covers key manufacturing states (IL, IN, WI, MI, IA) but still takes a macro view.
• Regional insights, like exposure to tariffs, inform FOMC debate, but the main tools remain broad and blunt.
• Current labor market: both hiring and firing rates are oddly low, pointing to uncertainty as businesses “don’t know what the rules will be so they won’t hire or fire” (40:47).
• On AI & the future: Uncertainty about automation influences career choices and investment.

6. Fed Crisis Response: 2008 vs. COVID

• 2008 (Great Financial Crisis):

  • The Fed’s support focused on the banking sector, expanding its balance sheet to stabilize the system by buying assets.
  • Stewart challenges that this disproportionately helped banks, not homeowners.
  • Goolsbee: "We gave them life insurance at a crucial moment... But the banks did end up paying the money back—unlike in most countries, the taxpayer cost was near zero" (56:49).

• COVID Pandemic:

  • Relief was more direct and bottom-up (unemployment insurance, PPP loans), with the Fed administering some aspects.
  • The economy recovered more quickly.
  • Goolsbee: “It didn’t turn into a financial crisis, which it easily could have.” (63:06)
  • Stewart: “You can go bottom up with less money than top down—it always works that way.” (62:59)
  • Moral hazard debate revisited: Stewart lambasts “bailing out the banks due to moral hazard, but not the people.” (63:34)

7. Philosophy and Culture of the Fed

• Goolsbee reflects on the seriousness and deliberative nature of FOMC meetings (“world’s greatest deliberative body”), dismissing partisan lines (44:03).
• Anecdotes on first-day slip-ups (accidentally bringing a phone into the secured meeting!) (46:39).
• The Fed’s role isn’t just interest rates—it’s critical banking infrastructure and payments. Goolsbee offers to give Stewart a tour of “tens of billions” in the Chicago Fed vault (65:02).

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Notable Quotes & Memorable Moments

• On the limits of economics:

  • Goolsbee: “I’m more sympathetic to the view that economics is an art science... Most academic economists basically don’t think forecasting is doable. A bit of a fool’s errand. And yet we have to make decisions every six weeks.” (23:19–23:43)

• On the Fed as not "the bad guy":

  • Goolsbee: "We’re not magicians. We each come from different perspectives… The more uniformity and the more that outside voices got to dictate...that would be a mess. If you want inflation to come back, that’s how you would do it." (48:08–49:03)

• On the market’s expectations:

  • “I try to carry that… Our job is to act. The market’s job is to react. And let’s not get the order mixed up.” (Paul Volcker quote via Goolsbee) (28:52)

• Fun anecdote about economic reporting:

  • Goolsbee: “A reporter once asked a trader the reason gold was down; he gave a confident answer. Then it turned out gold was up, so she called back, and he gave the same reason. That’s when she decided to become a doctor.” (33:18)

• On pandemic response vs 2008:

  • Stewart: “Isn’t that what the government is for...to respond to the needs of the people in crisis? The government is not there to run a zero balance sheet.” (58:24)

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Timestamps for Key Segments

• Fed structure and appointment process – 03:53–05:26
• Why central bank independence matters – 06:09–07:53
• Origins and evolution of the Fed – 12:11–15:32
• What happens at FOMC meetings – 10:10–11:40
• Limits of Fed’s power on interest rates – 20:45–22:47
• Economic forecasting: art vs. science – 23:09–26:23
• Expectations and market psychology – 27:03–28:54
• Dual mandate and stagflation explained – 36:05–38:42
• Current job market puzzle: low hiring & firing – 39:43–40:47
• On the Fed’s limited toolkit and seriousness of deliberation – 43:43–45:04
• Crisis response 2008 vs. COVID (deep dive) – 51:53–64:04

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Tone and Style

• Accessible and Candid: Stewart’s everyman skepticism and jokes cue Goolsbee to offer clear, jargon-free explanations.
• Animated & Fun: The duo bring humor to arcane subjects; Goolsbee is called “the king of the world of economics” and described as a virtuous nerd.
• Critical and Reflective: Stewart continually questions whether the system works for regular people, not just banks.

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For Listeners Who Missed It

This episode is a masterclass on the Federal Reserve, making the complex inner workings of the economy engaging, understandable, and relevant. Jon Stewart's probing questions, sharp critiques, and joke-laden banter ensure the subject never drags. Goolsbee balances clarity with candor, admitting the system’s flaws while defending the necessity of independence and methodical debate. It’s a must-listen for anyone wanting to understand how monetary levers are actually pulled—and who they really help when crises hit.

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Summary prepared by PodcastSummarizer AI

Transcript

[Jon Stewart]

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[Austan Goolsbee]

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[Jon Stewart]

Hey everybody. Welcome to the weekly show podcast. My name is Jon Stewart. I'll be hosting this week's episode. It is Tuesday, July 14th. We are heading into the semifinals of the World Cup. Coming tomorrow is going to be two, I think incredible matches. We are back at war with Iran. So the world is, the world is, is stabilizing, becoming more normal. Now the Iran war will just be a, a low level fire that is just burning for years and years underneath the surface of the earth's mantle. It is Tuesday. Obviously Lindsey Graham passed over the weekend. This won't air till Wednesday. Who knows how many more of the assisted living facility we call our United States government, How many more will fall till then? But we're not going to talk about that. This, you know, the new CPI report, the new inflation report came out and it's creating ripples about what the Fed might possibly do. And it occurred to me that I have no idea how they do that, what they do and how they do it. And so I am very excited. We are going to get inside scoop. Ladies and gentlemen, not from a Fed observer, not from a Bloomberg analyst. No my friends, from someone inside the belly of the beast, inside the room where it happens. A President of a regional Fed, Chicago no less. The great city of Chicago. They, my friends, have sent us one of their best representatives. Did he get to go see Mulaney at Wrigley Field? He might not have, but a hell of a show. That was if you were there. But ladies and gentlemen, let's get to our president of the Chicago Fed right now. Ladies and gentlemen, what an exciting day. On the weekly show podcast we welcome back an old friend, a long lost pal, a king of the world of economics, Austan Goolsbee, who is now beyond all expectation, the President of the Federal Reserve bank of Chicago, Austin Goolsbee. How are you, sir?

[Austan Goolsbee]

John. You thought they built the walls of the vault to keep people like me out of here, but listen, it didn't work.

[Jon Stewart]

I thought for sure they did. And to see you elevated, to have to see you in the hallowed halls of the Federal Reserve of Chicago. How many presidents, what is there 12 of you guys? How many presidents of regional feds are there?

[Austan Goolsbee]

Oh, I thought you meant ever at Chicago. Yeah, there's 12 Reserve Banks spread around the 12 Reserve Banks spread around the country.

[Jon Stewart]

How did, now did you run for president? Were you appointed? How did this, how did this work?

[Austan Goolsbee]

I was chosen. Each of those Reserve banks is not a government agency. They're a. Not for profit. And they have a board of directors that's made up of kind of local CEOs and civic leaders and bankers and the, the non banker board members choose the presidents at, at each of the, each of the banks.

[Jon Stewart]

So this is, we're what? Let me tell you something, this is. I can't even believe we've jumped in so hot and so fresh. We're. You know what, we're not even dipping our toes in Austin Goolsby.

[Austan Goolsbee]

We haven't even gotten to the Federal Reserve act of 1913, but we're going to.

[Jon Stewart]

Oh, but when, when we get to Eccles, the whole place is going to explode. We are, we are diving right in. So you've got this 12 regional feds and they're chosen by local leaders, civic leaders. And then that mixes with the board of governors and that is a more probably not political, but politically appointed.

[Austan Goolsbee]

Yeah, politically appointed, confirmed by the Senate and, and each of those governors. The thing that's confusing is.

[Jon Stewart]

Oh, it's Austin, it's all confusing.

[Austan Goolsbee]

D.C. political appointees, their title is Governor, but They're kind of more like senators and the presidents are more like governors because we, we're, we're out and have a region. The, those, those governors that are political appointees are appointed to 14 year terms and they're staggered because from the beginning they were trying to be, as much as possible in a democracy, they were trying to keep it independent from political interference.

[Jon Stewart]

And the Fed's independence is, is a necessary. Because why, Austin? Why?

[Austan Goolsbee]

Because people hate. That's the main reason that if you just look around economists before I, you, you knew me before I was ever at the Fed, economists are basically unanimous that the central bank of the country needs to be independent from political interference because the incentives of the sitting government for the setting of interest rates, you know what it is, they're like, cut the rates, let the inflation come in the future.

[Jon Stewart]

That's right. So they don't care.

[Austan Goolsbee]

If you just look at countries or times in this country when the central bank is not independent, inflation comes raging back, the job market is worth growth is worse. And that's why Fed independence is important. It's not, it's, as I say, it's not like we're, the Fed is not getting a pirate flag or like putting a snake on there and, and don't tread on me.

[Jon Stewart]

Right.

[Austan Goolsbee]

We want to have our own stamps or something. It's only because if you don't have central bank independence from, from interference in setting the interest rate, you get a lot of inflation and people hate inflation.

[Jon Stewart]

And the case study of that, as always, as is the case study in any political discussion here, Richard Nixon. Richard Milhouse Nixon. You know, the tapes that keep on giving. Yes, Richard Milhouse Nixon. He said to the veg, hey man, I have an election coming up. One that he was going to win, by the way, like 49 states to one. I don't want to, I don't even think McGovern got his own.

[Austan Goolsbee]

Yeah, no, exactly. But, but the thing is that's the US test case. I guess I would say there are a lot worse test cases.

[Jon Stewart]

Oh, sure.

[Austan Goolsbee]

You know, as you look around the world, Argentina, yeah, look, Argentina, Weimar, Germany, where there, there's not. If the, if the central government basically insists that the, that the central bank monetize the debt to, to pay for what the government's doing, that, that ends in tears and that, that's why Fed independence matters.

[Jon Stewart]

And it does matter. And, but you bring up an interesting point. Monetize the debt and we'll get into that in a little bit because that got a Little Tricky in 2008. We're running through it all, Austin. We're, we're, we're hitting all the. I haven't talked to. And it's, it's so exciting. We're gonna, we're gonna grab all the hits there. So they established this now, now the Fed independence. I don't even know if you're allowed to talk about this because you're as one of the presidents, but obviously right now every president is going to try and influence at some level monetary policy. And also Congress is going to try and influence it through legislation. Let's, let's face facts. Congress could change the dual mandate if they wanted to, could they not? Isn't. Wasn't it a congressional act that made it so that the Fed had those two mandates, one to control inflation and one for maximum employment?

[Austan Goolsbee]

Yes. Look, everything you said is true now. Now you, now you're out front. You're dragging me as a caboose. The dual mandate, the whole thing.

[Jon Stewart]

Let's dual mandate this bitch.

[Austan Goolsbee]

All right, look, the Constitution says in there. I'm not a constitutional expert, but it says Congress is the one who coins money. So I kind of think that at the root of the Federal Reserve act, which is started in 1913, is the idea that Congress coins the money and is in charge of that. They created the system. The law says that what the Fed does when it's setting the interest rate, and that's all. When we go for monetary policy, what the Fed does at the Federal Open Market Committee is we go in a big, huge tabled room, giant table. They. The shades come down.

[Jon Stewart]

Really?

[Austan Goolsbee]

Yeah.

[Jon Stewart]

Fomc.

[Austan Goolsbee]

FOMC literally sits around a big table. Literally around the biggest table.

[Jon Stewart]

How often?

[Austan Goolsbee]

Every six weeks.

[Jon Stewart]

What?

[Austan Goolsbee]

Yeah, every six weeks we go to Washington D.C. the shades come down so nobody can spy. It's like the Situation Room. You got to leave your phone outside. There's no devices in there.

[Jon Stewart]

Oh, this is.

[Austan Goolsbee]

And then it's the. If you're econ. Nerd, John, it's the coolest room in, in the world. They're going to just literally go around the table and they're going to be like, okay, Jay Powell, what do you think about the economy? Day one? It goes two days now.

[Jon Stewart]

He's not FOMC though, Isn't he? Oh, he is Board of Governors. Or is Board of governors part of FOMC?

[Austan Goolsbee]

They're on it. The FOMC is a collection. The 12 of us and the seven of them.

[Jon Stewart]

FOMC is the board of governors. Seven appointed members and then the 12 presidents of the regional feds that have been sel by regional civic and business leaders. 19 people.

[Austan Goolsbee]

Yes, but now I'm going to add one in the weeds and I already feel like punching myself for doing it. But not all of the 12 are voting at any one time.

[Jon Stewart]

How many are five?

[Austan Goolsbee]

Five of the 12 are voting so that it adds up to an even number which I still don't understand.

[Jon Stewart]

There are you voters?

[Austan Goolsbee]

There are 12 voters at any given moment. Five from the banks and seven from the governor.

[Jon Stewart]

Now do they do that to lessen the influence of the non political actors?

[Austan Goolsbee]

I think so. I think so.

[Jon Stewart]

And who decided that it was that, was that a congressional act?

[Austan Goolsbee]

Yes. Yeah, that's, that's the Banking Reform act of 1934 or something like that. But the, the, what's important is the idea so not to go back in the financial history, but Andrew Jackson kills the second bank of the United States. We have a national bank.

[Jon Stewart]

He kills it along with thousands and thousands of other people. But that's beyond, that's beyond. We're not going to talk about that with Andrew Jackson.

[Austan Goolsbee]

Yeah, go ahead. Look, I'm not disputing that. And, and I thought you were saying by killing the national bank it killed a lot of people. And that might be true because The Panic of 1837 follows the shutdown of the national bank. We then go for 70 years.

[Jon Stewart]

Yes.

[Austan Goolsbee]

Without a national bank. Panic of 1907.

[Jon Stewart]

Now that's where we went to Morgan.

[Austan Goolsbee]

That's where we went to Morgan. Exactly. J.P. morgan himself.

[Jon Stewart]

Yes.

[Austan Goolsbee]

In the panic of 1907 basically steps in as the lender of last resort to prevent the, the what would be a Great Depression.

[Jon Stewart]

He backstops the United States government who, who has what you would consider there a liquidity crisis. They have no money, they have nothing to lend the government.

[Austan Goolsbee]

But it's more the I, I think the story is kind has an interesting wrinkle because he doesn't do that out of just gratitude for the nation. Sure.

[Jon Stewart]

They never do.

[Austan Goolsbee]

He backstops a series of financial institutions and he chooses his friends when he does it. Okay, so when the crisis comes you have to decide, no, no, you guys are doomed. It's, we're not going to throw good money chasing after bad. So he chooses the people that he likes and he's like, okay, I'm going to give you the loans and the ones he doesn't like, they die. So Congress creates the Federal Reserve Act. A because they want to have a lender of last resort and B, they don't want to be beholden to one private individual choosing winners based on whatever

[Jon Stewart]

criteria they want to choose the win. JP Morgan shouldn't get to choose.

[Austan Goolsbee]

They should get to choose in a way. But they, but they outline that invested in a Federal Reserve System. And importantly, they're deeply uneasy in 1913, just as people are today that Washington D.C. plus the banks on Wall street are going to control the entire financial system of the United States with no input from the rest of the country. And that is why they create 12 reserve banks spread around the country to represent. And we have boards of directors made up of these regions. And we aren't political appointees and we come to these FOMC meetings with a totally different perspective than political appointees. And that actually, even though it's kludgy, even though yes, we got five votes and they rotate in and out, that actually was a stroke of genius. And it's, and it's a reason why the central bank, the Fed has existed for a hundred and whatever for 13 years and it wasn't shut down like the first and second banks of the United States were.

[Jon Stewart]

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[Austan Goolsbee]

Yes.

[Jon Stewart]

Austin Goolsbee is the president of the Chicago Fed. So I'm assuming your purview is kind of the manufacturing center of the United States. So to that point, so you've got a San Francisco Fed and they're in charge of, I guess, growing weed. I don't know what they do out there, but something San Francisco, St. Louis.

[Austan Goolsbee]

Yes.

[Jon Stewart]

Boston, New York.

[Austan Goolsbee]

There's kind of some crazy, I guess that the speaker of the House and the Majority leader were both from Missouri. And the Federal Reserve Act, I think, kind of came down to one vote. St. Louis and Kansas City. Two of the 12 are in Missouri.

[Jon Stewart]

Right. St. Louis, Kansas City, Atlanta. So they've got it. It's, it's all spread around. So Austan Goolsbee's purview is now, I would say all those probably what Michigan is that. Do you represent the interests of manufacturing?

[Austan Goolsbee]

We got Most of the 90% of the economies of Iowa, Michigan, Illinois, Indiana, Wisconsin, heart of the Midwest. Now importantly, if you go look at the economy, most of the economy in any place is kind of macro, is the same everywhere. It's the, the, the thing that is distinctive of Chicago's district. It is the most manufacturing intensive of all the districts. You're quite right. But manufacturing is still not the majority of the economy. So we don't just represent.

[Jon Stewart]

You're taking a macro view.

[Austan Goolsbee]

We're taking a macro view, but it does inform when we got into all the tariff discussions and Liberation Day. Of the seven most affected states by tariffs, four of them are in my district in Chicago. So when I'm out talking to business people, talking to civic leaders, their hair is on fire and they want to talk about supply chain. They want to talk about if tariffs apply to their, to their components and supplies, how it's going to end up turning into inflation because their costs are going to go up. And so I'll try to bring that, when I go to the meetings, I'll try to bring that.

[Jon Stewart]

Right. That perspective, the different research that you've done. So now everybody, I'm assuming is doing that maybe not at the level that Austan Goolsbee is doing it because your Your diligence and your tenacity is second.

[Austan Goolsbee]

I am in the greatest of all

[Jon Stewart]

the Fed district, the Fed districts and Missouri is doubling up on everything.

[Austan Goolsbee]

Everybody's around, everybody's trying to do that.

[Jon Stewart]

So, so they all get together and it's every six weeks. So I imagine the, the nuance of it, because economic conditions over every six week period are probably not that, not that different. Certain storms can come in, certain others, but you're getting together. The thing I want to ask is. So everybody's got all this incredibly nuanced information about the economic conditions that are affecting their general regions, but the Fed really only has kind of the, the more broad based sledgehammer tool of interest rates.

[Austan Goolsbee]

No, totally, yes. And only one, one small part of interest rates. So we set an overnight rate which affects short run interest rates. But okay, a mortgage is like a 30 year mortgage and the determination of those long rates, as they call it, the market has a lot to say about that. So what we do is important. But as I describe was kind of like we're this big of the universe, but oh boy, in this part of the universe, what the Fed does makes a huge difference. But there are a lot of things that are outside the Fed's purview.

[Jon Stewart]

So what is downstream of the Feds? Because that's all anybody talks about. Nobody talks about the variety of other interest rates that may be raised at other levels. And I guess we can get into who raises those or who closes those, or if those are just downstream of the overnight interest rate that the Fed

[Austan Goolsbee]

would open up, they are downstream of the overnight interest rate. So when the Fed does things, it does affect those. But one of the most important things that affects mortgage rates or 30 year treasury rates or all of this, if we get down in the weeds, are what do people think the inflation rate is going to be over the next 30 years?

[Jon Stewart]

Wait, are people really trying to figure that out over 30 years? They're trying to figure out the inflation rate.

[Austan Goolsbee]

Yeah, the Whoever owns the 30 year mortgage that you got, that person cares a lot about what inflation is going to be over the next 30 years. Because if they lend to you at 6% and then inflation is going to be 9% for 30 years, they're going to lose money every year for the entire time. So the Fed does a thing on these shorter rates that influences longer rates. But other influences include what do people think are going to be inflation, how do people think growth is going to be, what do they think is going to be productivity?

[Jon Stewart]

All of this stuff, these Are all projections?

[Austan Goolsbee]

All of those involve a projection.

[Jon Stewart]

Let me ask you a question. How accurate? Because this is, this is the thing about economics that I'm never quite sure about. My sense, My sense when I talk to economists is that they think they're arithmetic, but they're really probability calculators.

[Austan Goolsbee]

They Nostradamus kind of thing.

[Jon Stewart]

They think that, that they are doing a strict science as opposed to an art science.

[Austan Goolsbee]

Yeah, I'm more on the art science. I think, I think you're right that it, that it's art science. And most, most researcher, academic kind of economists basically don't think forecasting is, is doable. They think it's, it's extremely. And a fool's errand, you know, a bit of a fool's errand. And yet we have to, we have to make decisions every six weeks.

[Jon Stewart]

But what is the track record over 30 years? And in other words, generally speaking, were the economists in 2000, or I would say now what, 1995? Were they in the arena of where we are now? In other words, the people that were setting monetary policy in the 90s, in the 80s, in 2000. I won't go with Volcker because that obviously was a crisis situation. And, and you know, and we'll take 2008 out of it. But the projections that they're using to base these on, are they generally accurate? What's the, what's the margin here?

[Austan Goolsbee]

They're the cleanest dirty shirt we have. Okay, so. So I would say there actually is evidence that the Fed's forecast.

[Jon Stewart]

Right.

[Austan Goolsbee]

Were better than the private sector forecast. But that doesn't make them good. You know, that doesn't make them.

[Jon Stewart]

Why are they all such dicks about it? Why, why is that awesome?

[Austan Goolsbee]

Anybody who's overconfident, I can say this because I wasn't a forecaster, so I came in. So I'm inherently different rule skeptical of black boxes to begin with. And I have this theory about, about human beings that like dates back to caveman times. That's. They're kind of like, you either believe in magic or you don't believe in magic. And there, and this plays out in many venues in, in academics. If somebody came and presented a paper that was so complicated that no one could understand it. There are. Some academics are like, that person is so impressive, I couldn't even understand it. And others, like the Nobel laureate Gene Fama, who was at the University of Chicago, his thing inherently doesn't believe in magic. So he'd be like, this whole thing is bullshit. I can't understand one word that guy said. And I'm, I'm more sympathetic to that.

[Jon Stewart]

Yeah, I think that's, I think that's the correct interpretation.

[Austan Goolsbee]

But that makes you skeptical of forecasting in general.

[Jon Stewart]

Right.

[Austan Goolsbee]

Yet.

[Jon Stewart]

And yet it has to be done.

[Austan Goolsbee]

It's better than. It has to be done. It's been better than random. And for all the, for all the criticisms, for all the criticisms of the people who say, look, you missed this one. You screwed that one up. It's not like their forecasts were better.

[Jon Stewart]

Right.

[Austan Goolsbee]

And like I say, so the, I

[Jon Stewart]

kind of love the idea, though, that economic textbook. There should be a title of an economic textbook, and the title is Better than Random.

[Austan Goolsbee]

Say, hey, I'm the author of the textbook. I'm gonna make that the subtitle. I'm gonna make that the subtitle. Better than Random.

[Jon Stewart]

Better than Random. I think that's, that's the highest bar that we can try and aspire to. So you've done this. Everybody sits down, and it's only that and, and what it seems like when you're in the meeting and you've got your 12 members of the regional boards, only five of which vote, you've got your seven board members, and they're going to decide 25 basis points up, 25 basis points down. We're going to hold, we're going to put, we're going to do a push, we're going to all these different things.

[Austan Goolsbee]

Right.

[Jon Stewart]

But what almost matters more than that.

[Austan Goolsbee]

Yeah.

[Jon Stewart]

Is what everybody thought they were going to do.

[Austan Goolsbee]

Yeah, that's fair. That's fair. The expectation and the expectations and the communication and like, how are we talking about it, all of that stuff. I get impatient with the funhouse mirror nature of this. Well, we're. We think that they think that we think that this is going to happen. I don't like that. Paul, as you know, Paul Volcker was an old friend of mine.

[Jon Stewart]

Do you guys talk about that in the meeting?

[Austan Goolsbee]

Sometimes.

[Jon Stewart]

Sometimes in the meeting you'll say that they think we're going to do this.

[Austan Goolsbee]

Yeah, there are some.

[Jon Stewart]

Okay.

[Austan Goolsbee]

People come from different backgrounds, and some people are markets people. Came from a finance background. I was an economist. They're business people. It feels like we're, we're only ever supposed to talk about what we ourselves think, not what the committee thinks or what anybody else's opinion is. And.

[Jon Stewart]

But you live in the world.

[Austan Goolsbee]

But you live in the world. And my observation is that some people put a higher weight on what does the market expect. And for Myself, I was old protege of Paul Volcker, went through the financial crisis, working very closely with him.

[Jon Stewart]

For those who don't remember, Volcker was. He came in after the Nixon debacle where they lowered rates artificially. Inflation got really sticky in the late 70s. There was the oil shock and Volcker came in and raised rates, what, to maybe record levels for the United states,

[Austan Goolsbee]

literally to 20, 20, you know, years. And it was a brutal. And it was a brutal period. Terrible recession and it was the only way that we got rid of inflation. And so in central bank circles and

[Jon Stewart]

got Reagan elected, basically. Yeah.

[Austan Goolsbee]

They look back at Paul Volcker as the, as the, the superhero of central banking. And he was like 6 foot 8. He was a giant in every way. He used to say, our job is to act. The market's job is to react. And let's not get the order mixed up. And, and I try to carry that. That's interesting to the. So I, I do think it matters. The psychology of the market matters. But there's nothing in the Federal Reserve Act. The law says that we are to maximize employment and stabilize prices and that those are the two jobs. There's nothing in there that says make sure the stock market is happy, make sure nobody's disappointed. And I don't know, we've had this conversation. We, we had it 15 years ago and let's have it again today. The stock market is not the economy. And the, the ultimate evidence that that's true is. You remember that day at peak Covid that they announced the job numbers for April? They announced it on my mom's birthday in. At the beginning of.

[Jon Stewart]

Do they always do it on your mom's birthday or it just happened to be this year.

[Austan Goolsbee]

It just happened to be my mom's birthday. That's how I remember whether what the date was. It was. They announced that the United states had lost 20 million jobs in a single month.

[Jon Stewart]

That's right.

[Austan Goolsbee]

It was the worst. That was the worst day in the history of any of the job market. The stock market went up that day, of course, because they thought it would be worse. Who knows why?

[Jon Stewart]

No, you know why.

[Austan Goolsbee]

But like, the stock market is not the economy. Everybody need to remember that because what

[Jon Stewart]

they thought it's, it's always. I mean, this happens. Just recently, there was a. In the midst of this difficult economy, I think it was maybe last month or two months ago, there was a really good jobs report. And in the really good jobs report, the market went down, or no, I'm sorry, reverse that. It was a terrible Jobs report and

[Austan Goolsbee]

it shot up and the market goes up.

[Jon Stewart]

The thinking of it, I think, is, yeah, oh, shit. They've got a dual mandate. So if they're not worried about hiring. Right. They'll be more likely to do what we want on interest rates, and therefore we won't have the competition of treasuries and other things. People will think the stock market is our best avenue.

[Austan Goolsbee]

Maybe. But look, just be careful getting. Trying to get into people's heads.

[Jon Stewart]

Yeah, okay.

[Austan Goolsbee]

In the market, why would it go up?

[Jon Stewart]

What would be the reason?

[Austan Goolsbee]

Well, that would be why? Well, I mean, it could be two reasons. It could be, hey, they think it means the Fed is going to do something, or it could be they had already priced in what they thought it was going to be, and actually this was better or worse than what they thought it was going to be.

[Jon Stewart]

Another expectation game. Yeah. Okay.

[Austan Goolsbee]

So that's why you just got to be careful about that. I have a friend who's a pretty famous doctor down at the University of Chicago, and she started her first job before medical school. She was working at the Wall Street Journal who had some kind of a TV program. And her job was, was to call the people in the market and say, you know, copper's up 5% this, this, this week. Why is that? And she would get the explanation, and then she had to run over and they would record it on the tape and then they'd send out the tapes to all of the branch affiliates or something. And she said she decided to go into medicine. When she, she came in and they said, gold is down 5%. Why is that? And the guy said, well, it's because the traders think that this and the Fed is going to move. So she runs in and just as they're about to hand it, somebody says, wait a minute, gold is not down, it's up. Go back and call the guy. So she, she runs back down and she calls him up and she says, we said, you told me why gold was down, but actually gold is up. Why is gold up? And the guy said, same reason. At that point. She said, I'm out of here. I'm going to become a doctor.

[Jon Stewart]

I'm going back into where not as many people will die at my hand.

[Austan Goolsbee]

Yes.

[Jon Stewart]

Than would if the economy tanks down. Yes, that is. That, that, that. That's phenomenal, Folks. You know, I am nothing if not a generator of ideas that may never work. Obviously. We've talked a little bit on the show about the crumple, which is the portable dog bed that you throw on the ground that makes a different topographical shape each time you do it. Or maybe I'll make an app. Maybe I'm always thinking of different apps. Or maybe I'll make an app that helps people create and run their great business ideas. Oh, wait, I don't need to do that because it's already existing. Shopify. Somebody price sat around having a Shopify idea about an app that would help people bring their ideas to fruition, like the crumple. And then they made that. And the damn thing's brilliant. It makes the whole process easy. Everything you need. It's easy to design your shop, it's easy to get paid. They handle the checkout process. You might think to yourself, like, oh, how, how are they going to complete their purchase that Shopify handles? It gets them to come back as repeat customers. Set up and checkout are all handled. That you get to live your life, grow your business, which they help you do too. I'm perfectly honest, I'm not that happy with them that they stole my idea, even though obviously they had it first and did the work you needed to do to make it come to fruition. So get Shopify, for God's sakes. With Shopify, nothing stands between your idea and a real business. So go make it one. Start your free trial at shopify.com TWS Start your free trial at shopify dot com TWS. So now let's get into. So the Fed is, is charged with this idea. You know, if employment, if we're in a deep recession, they might say we're going to cut rates because that will stimulate the economy. And then hopefully, as the money pours into the economy, people will start hiring again. If employment is steady and looking good, but inflation is sticky and above that 2% mark which it is now like, although the, the, the new, I guess CPI came out, it was lower a little bit than they thought. It had cooled a little bit. But if that's the case, they might raise interest rates because employment looks robust, but they need to bring down. The problem is when they get into where employment doesn't look great but inflation is still up, and then you're in that weird, I guess they call stagflation.

[Austan Goolsbee]

Stagflation. Right. Look, look at you, John.

[Jon Stewart]

I read the synopsis.

[Austan Goolsbee]

You got the whole thing wired. The basic idea is that the, the most cyclical parts of the economy, whether they're durable goods, manufacturing, autos, stuff like that, business investment, construction of data centers or what have you, these parts of the economy also tend to be the most Interest rate sensitive. So that's why the Fed kind of becomes the tip of the spear. Why use the interest rate to counteract the business cycle? Because these really cyclical. If the economy's overheating, then you raise the interest rate to try to cool it down and ease inflation. If it looks like you're teetering on recession, then you reduce the interest rate and try to get people buying more cars, building more houses, doing more business investment when it goes wrong. The economists call that the divine coincidence

[Jon Stewart]

that it's not, it's only a coincidence, nothing to do with what you did.

[Austan Goolsbee]

The, the convince. The coincidence part is usually those two, the dual mandate, they aren't in conflict.

[Jon Stewart]

Okay.

[Austan Goolsbee]

When the divine coincidence starts going wrong is when both things start getting worse at the same time.

[Jon Stewart]

And we're somewhat in that cycle.

[Austan Goolsbee]

We're kind of in that cycle, but somewhere kind of in that cycle.

[Jon Stewart]

Okay.

[Austan Goolsbee]

Because things like oil prices going up, they drive down employment and up prices at the same time. Supply chains getting interfered with and wrecked. Anything that on in our language is happening on the supply side.

[Jon Stewart]

Right.

[Austan Goolsbee]

That's a stagflation area direction shock. And that's the nightmare of the central bank.

[Jon Stewart]

That was the 70s, that was the oil shock.

[Austan Goolsbee]

Now it's the 70s. Now it's the 70s, though as I say, it's not the 70s. This is stagflationary direction. But if you could pull out your Magic Crystal 8 Ball and call the 1970s and say, hey, you guys dealt with stagflation, what do we do? They would say, oh man, it's a nightmare. What's your unemployment rate? And you're going to say, well, it's a little over 4%. What they're going to be like, what's your inflation rate? Well, you know, it's, it's, it's up to 4%.

[Jon Stewart]

Yeah.

[Austan Goolsbee]

They're going to hang up on you and say, like, why are you bothering us?

[Jon Stewart]

You're doing great.

[Austan Goolsbee]

Yeah, exactly. They're going to be. We have unemployment that's almost 10% and inflation is 14%. And so let us never go back to the 70s. But this, this dilemma of what do you do when both things go wrong? That's a tough spot.

[Jon Stewart]

And this is where in your. So in those meetings. So, so you're in that place now where it's managing. Like you say, it's creeping up because of a variety of things. Whether it's the Russian war or the Iran war, the straight Hormuz or anything else. People are suffering at these higher grocery Prices, Inflation is weirdly steady but not seemingly moving in any real direction.

[Austan Goolsbee]

Yeah, it's not coming down right.

[Jon Stewart]

Employment, same. It's kind of steady, but not really. You're not seeing robust other than data centers and AI. You're not really seeing the rest of the economy having much being very robust in the way that it's creating things.

[Austan Goolsbee]

Yeah, look, that's what I describe that as. The job market is stable without being good. And there's a weird combination that people throw around this phrase low hiring, low firing. It's worth taking a second to realize that's extremely unusual. Usually if there's low hiring, there's a lot of layoffs, or if there's low layoffs and low firings, there's a lot of hiring. That both of those are low at the same time is really weird. The hiring rate is so low, it's characterized. If I told you we're in the depths of a recession, that's what you would think by how low the hiring rate is. But if I told you the layoff rate, you'd think we're in a huge boom. That's how low the. The layoff rate is. So it's stable without being good.

[Jon Stewart]

Do you have a sense of why is that? Because the economy is being boosted by one particular sector to the. In other words, it's got a high ceiling, but it's really shallow.

[Austan Goolsbee]

Interesting. That's. I was going to say something totally different. I attribute that combination to a lot of uncertainty that businesses say, yikes, I don't know what the rules are going to be. I don't know what the tariffs are going to be. I'm not going to get rid of anybody because I might need them. Yeah, right away. But I'm not going to hire anybody. So that's where my head is.

[Jon Stewart]

Your idea is smarter than mine, by the way.

[Austan Goolsbee]

I like your idea. No, no, no. You're actually. Your idea is a. I do think we should think through if the. Let's call that a sector, sector specific. If it's all data centers, this could be a. This could characterize it. If it's kind of like we've got a bunch of workers that are trained for one thing, and now it's going to take a while for them to get retrained and shift to somewhere else. We better think that through.

[Jon Stewart]

But the uncertainty plays into that as well, because people, I think, are also not sure. Is the promise of this AI going to be a boon for us?

[Austan Goolsbee]

Yes.

[Jon Stewart]

Or is it going to be a disaster?

[Austan Goolsbee]

And if you talk to young people, it's kind of like, hey, should I even invest in this skill set? To what, what was a great job? You know, I'm trained to be an accountant. In eight years, are there not going to be any accountants? Like, it's all going to be done in the computer. So. So that, that might also be a part of it.

[Jon Stewart]

Honestly, I think the economy, the future, is just all of us kind of trading health care with each other.

[Austan Goolsbee]

You're 100.

[Jon Stewart]

It's all just going to be us changing each other's bedpans for money. That's it.

[Austan Goolsbee]

So the thing is that health part of the economy just gets bigger and bigger as a share of the, of the GDP over time. So they used to have this joke, but it wasn't even really a joke. In the job market, there were more and more economists coming and presenting their papers about, about health economics. And somebody said, God, in 20 years, everybody is going to be a health economist. But that's because the entire economy will be health.

[Jon Stewart]

That's right.

[Austan Goolsbee]

So it makes sense. I think there's something to that.

[Jon Stewart]

Now when you guys. So when you're in the meeting and you're talking about the various nuances of things that are going on and you say to yourselves, or our only option is that 25 basis points up, 25 basis point down, holding it steady. And you're feeling the political pressure because you're humans and you live in the world and a president is using his bully pulpit to do whatever he's doing and the guy sitting at the front of the table is somehow being investigated for mortgage fraud and the other woman is being investigated for more like. So you're feeling all those pressures. You have to be. Do you ever think, I wish we had different tools. I wish we had other options?

[Austan Goolsbee]

Yes, but also no. In the following sense. In the following sense, I'm gonna explain that sounds like a cop out. But it's not. But it's not.

[Jon Stewart]

The answer is yes and no.

[Austan Goolsbee]

The answer. The answer is more like no. Okay, but. But it's for a weird reason. That's why it's yes and no.

[Jon Stewart]

Okay.

[Austan Goolsbee]

It is frustrating. A. Let. Let me start by saying my experience at the FOMC is that I consider this now the world's greatest deliberative body. It's definitely not the US Senate anymore. Tommy, turn on C Span. Turn on C Span.

[Jon Stewart]

That's for sure.

[Austan Goolsbee]

The people. My experience is that everybody sitting around the table takes the job extremely seriously. That we're out of the business. Look you know, I was, I was in the political elections business. You're out of that business. You join the night's watch. You're, you're out of that. Everybody around the table, my experience is they're taking extremely seriously the dual mandate. It's all about the economy. And whether it's the president or the markets or others, there are these pressures, but people are really around on the data.

[Jon Stewart]

Is there a predictability of how people will tend to vote given the who appointed them? In other words, if a Democrat appointed somebody or a Republican appointed somebody.

[Austan Goolsbee]

That's a good question.

[Jon Stewart]

You worked for Obama. I imagine the experience that other people have has touched upon the political world at some point.

[Austan Goolsbee]

Kind of not.

[Jillian Spear]

Okay.

[Austan Goolsbee]

I, I would say you're gonna get. It comes out with a lag. But they released the word for word transcripts of the meeting.

[Jon Stewart]

Right. But nobody understands any of that. None of it makes sense.

[Austan Goolsbee]

But, but you're gonna see, it's not about, it's not about partisan politics. It's absolutely not. And so, so I, I'm pleased by that. Now, the other thing I'm thinking, my very first meeting, I told you, you gotta leave all the phones, everything. Sure. It's very secretive. I come in, I've been in the room for five minutes, and I'm like, this is the coolest thing. This is the coolest room I've ever been in. And then I hear, and I'm like, what idiot has brought their phone? And I realize it's in my pocket. It's in my pocket because I've just started at the Fed and I now have two phones. So I had left my phone, but I didn't forget my other phone. So, so I'm like, oh my God, I'm going to be arrested. I've been there five minutes. I pull it out, it says spam likely. I'm like, oh, God. So I've never made that mistake again.

[Jon Stewart]

Now did anybody, like, did Janet Yellen turn and go, what the fuck?

[Austan Goolsbee]

Goolsbee Jim was j Foul. Everybody gave me this stink eye beyond belief, but I deserved it. I deserved it.

[Jon Stewart]

Understood.

[Austan Goolsbee]

I've never made that mistake again.

[Jon Stewart]

So this is a deliberative body. They do the good work.

[Austan Goolsbee]

It's a deliberative body and people are not responding.

[Jon Stewart]

My experience, even the new guy, even Warsh, who you knew, but Trump clearly appointed him to do a job.

[Austan Goolsbee]

If Kevin Wash. Look, I went through the financial crisis, he was at the Fed when I was at the Council of Economic Advisors. I felt like we were kind of wartime foxhole buddies.

[Jon Stewart]

2008.

[Austan Goolsbee]

Yeah. 2009. 10.

[Jon Stewart]

Right.

[Austan Goolsbee]

I think he left in 2011. Maybe it was 2012. I saw him at a moment of very high economic stress and he was level headed. And if he comes to the job, which he has seemed to with the seriousness of purpose that kind of the room demands, it's going to be fine. As I always say, we're. The Fed is technical and its founding was rooted in conspiracy. So I understand why.

[Jon Stewart]

Sure. And collusion and monopoly and oligarchy and

[Austan Goolsbee]

collusion and the tenant. I understand that. But now the Fed is not the bad guy. We are the Guardians of the Galaxy and we're all coming down there.

[Jon Stewart]

Slow down. Slow your roll, Magneto.

[Austan Goolsbee]

Listen, listen to this. In this part. And we're not even the raccoon one. You know, we're the good ones. We're the good ones. We're all coming down there trying to do the job as best we can. And we're not magicians. We each come from different perspectives and different parts of the country. And that we hash it out and those independent views is really critical. And we're back to this thing about Fed independence that the more uniformity and the more that outside voices got to dictate, here's what the decision should be. That would be a mess if you want inflation to come back, right? That's, that's how you would do it. Inflation come roaring back if you, if you don't have independence.

[Jon Stewart]

Oh, you know, I Like to Sleep because I'm old. That's a new song I've been working on. You know, I'm in a band, we do original songs. I have not presented this song yet to the band to see what they think of it, but I might. It's called I Like to Sleep Because I'm Old. When you get older, you got to have yourself a little bit of the comfort. And that's where the avocado green mattress comes in, man. And unlike most mattress brands, they'll only sell you online. They do have stores, too. You can go into a store, you can try them out. Unbelievably comfortable avocado mattress is designed for comfort support, helping your body stay aligned. You know, the last time my body was aligned, it's been. I think it might have been the last time the Mets won the World Series. That's how long it's been since it's been aligned. But these mattresses, Avocado green mattress. Responsibly sourced, organic materials that are built to last. So get an Avocado Green Mattress Avocado products are made, not manufactured and thoughtfully crafted with real materials to deliver lasting comfort and support. You can experience them in person at an Avocado showroom or premier retailer near you or shop online at avocadogreenmattress.com TWS to check out their mattress and furniture sale. It's avocadogreenmattraz.com TWS avocadogreenmattrush.com TWS period foreign. So let's talk about the two different a broader kind of macro conversation on the economy. We'll talk about the two moments that I thought were very instructive of how the government handles these types of crises. We're not going to go all the way back to 1907 or 1913 or any of those things. We're going to go 2008. Yeah, you were, you were there. So you understood how the government reacted to that. And then we'll go to Covid and the Pandemic because I thought those, those were two really different responses from the government and I certainly know which one I prefer. And I'm curious what you think of both. 2008 the response comes in that the world liquidity is an issue throughout the, the whole system it's about to seize up. These banks are, the mortgage backed securities are failing and, and everything's about to collapse and the Fed actually takes on a much more robust role than they had in the past. They not only were they just about the interest rates, they started taking on loans. Right. They, they sold Treasuries I guess to take on. They started loaning.

[Austan Goolsbee]

Yeah. They start buying up. Yeah. Well not they, they, they start buying a bunch of bonds the equivalent of making loans. But they, they, they're buying up these assets.

[Jon Stewart]

Right. And I guess they offset that with Treasuries. Would that be the way that they would hold on to that or.

[Austan Goolsbee]

No, not exactly. Yeah. They're allowed to, to expand the balance sheet in the same way they would be allowed to print money.

[Jon Stewart]

But they're doing it beyond where they had ever previously.

[Austan Goolsbee]

Oh, for sure.

[Jon Stewart]

Yeah. Okay.

[Austan Goolsbee]

Well beyond.

[Jon Stewart]

And by expanding their balance sheet now they've got an issue with somebody's got to pay the interest on their own balance sheet, would they not?

[Austan Goolsbee]

Yes, yes, yes and no. I mean in a way it feels like you're getting. No, but I should have completed the thought of when you said do you wish you had other tools? The reason why overall, yes, it's frustrating but no, I kind of don't is the Fed is not the policy Process. The Fed is not politics. We're not doing fiscal policy. That should in my mind be decided by the Congress, the President, the American people, all the really important things should be decided in that. And the more they try to put that onto the Fed. And it was my fear, I wasn't in the Fed when, when Covid struck, but my fear on the Fed's behalf in Covid where if you remember the, the Congress said we're going to spend trillions.

[Jon Stewart]

That's right. And all kinds of loans.

[Austan Goolsbee]

Who's going to run this? Who's going to run this? They were like, well, the only people competent enough to run it are the Fed. Let's have the Fed do it. I was really nervous on behalf of the Fed because having been through 2008, if anything goes wrong with the program, you know they're going to blame whoever ran the program. So I thought it was an effort to cut for Congress to kind of be like, oh, let's have the Fed do these loans. And then if people can't pay them back or if, if it costs more, if there's fraud, if whatever, then we'll say ah, the stupid Fed. We asked them to do it and they screwed it up. So that makes me nervous. In the FOMC context, if we had more, if we had more tools that were literally fiscal policy tools like taxes or stuff like that, then we would be Congress, you know, like the Fed shouldn't have that. We, we. There is no bad weather, there is only bad clothing. That's our motto. And our thing is the fiscal. Those are just the conditions. You tell us the conditions, we get the right jacket.

[Jon Stewart]

So. But the difference is in 2008 the Fed gave the jackets to the big boys. They, they basically existed. Their, their money hose that they were doling out at went to the financial

[Austan Goolsbee]

institutions, not the individuals. And you Correct use highlighted this at the time.

[Jon Stewart]

Every.

[Austan Goolsbee]

You highlighted that at the time.

[Jon Stewart]

So mad.

[Austan Goolsbee]

But you remember what you asked me why not bail out the homeowners? And then wouldn't they by, by domino effect, wouldn't that save the mortgage backed securities? Why?

[Jon Stewart]

Right.

[Austan Goolsbee]

Save the mortgage backed securities. And I said that that would be viable.

[Jon Stewart]

Yes.

[Austan Goolsbee]

If you remember the thing I said

[Jon Stewart]

was you weren't in charge though.

[Austan Goolsbee]

I wasn't in charge. But you remember, you remember what I said if we had done that we would never get back the money. And you said what do you mean get back the money? I said we, if we had used the 800 billion and put it into mortgages, it would be Very hard to get people to pay back the money. But the banks were putting it in and were taking warrants. And you incredulously said, do you honestly believe that the banks are going to pay back this money? And I said yes, I think we, it's designed so that they will pay back the money. And, and they did. It's not to say it's free. Let's not do that again. We gave them life, we gave them extraordinarily valuable life insurance at a crucial moment like when the mafia said we're coming to kill you, we then we're like, we'll give you life insurance. But it's still worth thinking about that context of if financial crises. If you look around the world, financial crises usually cost the taxpayer in the country.

[Jon Stewart]

Correct.

[Austan Goolsbee]

5 to 10% of GDP lost money to, to save it. That the TARP ends up costing the US government close to zero.

[Jon Stewart]

Let me, let me push back a little bit on this.

[Austan Goolsbee]

Yeah, so do.

[Jon Stewart]

When you, you, you're looking at it through the lens of what it costs the government. But the government is not an entity that is disassociated from the needs of its people.

[Austan Goolsbee]

I agree with that.

[Jon Stewart]

So in 2008 that was horrible, horrible recession. They push all this money out to the big banks. Now you're right, a lot of that came back to them after they paid back those loans. But what didn't come back were the people's homes that they lost and the jobs.

[Austan Goolsbee]

I agree. In the foreclosures. Right. I'm, I'm totally sympathetic to, to that field.

[Jon Stewart]

But let's go to pandemic. Yes, you're right. The government may not have recouped some of that, but the economic activity of doing demand side stimulus rather than supply side, rather than the Fed pumping money into the big boys, but the Fed helping to pump money into the individuals helping to run that program. That economy did not have the unemployment that you would think of. It bounced back much more quickly. People didn't lose their homes. So isn't that what the government, the government is not there to run a zero balance sheet. It's there to respond to the needs of the people in crisis.

[Austan Goolsbee]

I made that. Now you're fully in the fiscal policy space.

[Jillian Spear]

Come on.

[Austan Goolsbee]

As a Fed person, I have no opinion on that. Before I was at the Fed, I agree with you. As somebody described, you wouldn't want to lose World War II because you had

[Jon Stewart]

to run a zero.

[Austan Goolsbee]

Oh, we needed to. We. Yeah, no, exactly. Like, ah, let's, let's have a zero Deficit.

[Jon Stewart]

The debt has exploded since the TARP anyway.

[Austan Goolsbee]

Yes, that's, there's, there's no question that's true.

[Jon Stewart]

Come on, Goolsbee, come to team. Come to team.

[Austan Goolsbee]

At the same time, that's not the Fed, that's not the Fed.

[Jon Stewart]

To team Keynes, just do it.

[Austan Goolsbee]

The Fed doesn't, doesn't decide that we just set the short term interest rate. You know what I mean? So as you come to the, say, should that be in the Fed's toolkit, for example?

[Jon Stewart]

So who decided for the Fed to start that program of zero interest rate windows? Like was that not, was that Congress?

[Austan Goolsbee]

Zero interest rate windows. Tell it, tell me more, tell me.

[Jon Stewart]

Didn't they allow the big banks to come in and take out.

[Austan Goolsbee]

Oh, oh, the discount window.

[Jon Stewart]

Correct.

[Austan Goolsbee]

So that, that's, that's the lender of last resort and that's created by Congress. Congress creates that.

[Jon Stewart]

But they have discretion over who they are lending to. And I'm assuming they have discretion over the kinds of, kind of.

[Austan Goolsbee]

Not really. They have to outline a criteria. Okay, back to the old J. Pierpont Morgan days. We're not supposed to be expressing like, hey, here's a bank I like and let's give you money.

[Jon Stewart]

Right. But that is what they did and they, they did choose to give it to the big boys instead of the people. So my question to you is, in hindsight, no.

[Austan Goolsbee]

But the Fed couldn't do that. It would have to be Congress to do that.

[Jon Stewart]

Right. The Congress decided, okay, we're going to get the Fed to run that program. And they do that. Which do you think was a better use of the powers of the Fed and the government? Because I have a very clear.

[Austan Goolsbee]

You keep wanting this to be the fit.

[Jon Stewart]

Yeah, you're right.

[Austan Goolsbee]

Now the, the word better is doing the work.

[Jon Stewart]

No, no, no, that's, that's very fair.

[Austan Goolsbee]

The better is doing the work because that's very fair. Here's a big difference between the COVID times and the great financial crisis times. That was bank driven crisis. Part of the thing that infuriated me, infuriated everybody about the bailouts is. Wait a minute, we're bailing out exactly. The people who are at fault for creating this.

[Jon Stewart]

Right.

[Austan Goolsbee]

And that made a, that made for a dynamic that was a. Wait a minute. Even if you told me this thing would be better for the economy, I don't want you to give these people money. And then the Tea Parties rise was, well, I don't want you to bail out the homeowners because I think they're at fault. They were over their heads. They were buying houses they never had any business buying. So that conflict was a little different when it came to Covid, because it wasn't anybody's fault. Who. So, So I feared with the PPP loans and the unemployment insurance and a whole bunch of stuff, I was like, whoa, geez. When we, when we were going through the financial crisis and this, the stimulus following the financial crisis, we had massive monitoring to make sure there's no fraud, because everyone perceived, if there is a lot of fraud, the legitimacy of all of these programs are going to be undermined somehow because it was biology or, you know, spreading. People just kind of wanted to say, let's not speak of this again. Let's just like, let's get on with our lives. I think there's no question that your read of the evidence that the unemployment rate went higher under Covid, but came down, like, pretty quickly.

[Jon Stewart]

And we recovered very quickly.

[Austan Goolsbee]

And we recovered quickly to the extent that that's a lesson for dealing with other massive, monumental shocks. It came a different way. It went. It went from the bottom up, not, not from the top down.

[Jon Stewart]

That's the point. And you can go bottom up with less money than. Than top down. It always, it always works that way.

[Austan Goolsbee]

And it didn't turn into a financial crisis, which it easily could have.

[Jon Stewart]

And by the way, the caveat to all of that, the coda, is what they told me because I. You were not the only person I complained to about that. About. About. Why aren't we bailing out the homeowners? Why are we bailing out AIG and all these idiots that did it? And what they said to me, the toughest pill to swallow in all of this was we couldn't bail out the homeowners because of moral hazard.

[Austan Goolsbee]

Yeah. And then you'd be like, hey, what about the moral hazard of the banks?

[Jon Stewart]

Well, that's what I, that's what I said. And the answer to that was we had to land the plane.

[Austan Goolsbee]

Yeah. Look, my, My thing wasn't rooted in moral hazard, and I still to this day despise that. We got to. I understand why we had to do the bailouts once everything's on fire, but we shouldn't be happy about it. I mean, it's still awful.

[Jon Stewart]

I still think it could have worked the other way around. I still think it could have worked the other way around.

[Austan Goolsbee]

I do think it could. But we would have had to have had a kind of a national commitment to we want to spend the money to do this in a way that we did have when it came to Covid, everybody was could see. Let's not lose World War II for the sake of balancing the budget.

[Jon Stewart]

Well, Austan Goolsbee, let me tell you something. You know, there's nobody. I like talking about this shit more than you. You know, I love this. This is, I can do this forever

[Austan Goolsbee]

way in the weeds. Just remember.

[Jon Stewart]

Yeah, go ahead.

[Austan Goolsbee]

The Fed doesn't just set interest rates. We're also $6 trillion a day of the payment plumbing. When anybody's doing wire transfers and making payments, all the cash in the economy is printed by the Bureau of Engraving and Printing. It's getting distributed by the reserve banks. And if you ever come out to Chicago, I'll take you down. We'll go see the vault and we got tens of billions of dollars in there.

[Jon Stewart]

You know, I'm doing that.

[Austan Goolsbee]

We're pulling out the counterfeit. It's aw.

[Jon Stewart]

QE days are over. We're not qian.

[Austan Goolsbee]

And the QE days are over. We're not printing it, we're just handing it out.

[Jon Stewart]

Well, this is fabulous. And by the way, thank you for giving, I think, the most cogent and clear explanation of what goes into the decisions and the meetings of how these interest rates are decided and what their particulars are and when it was. That was very, very illustrative for me and thank you for that.

[Austan Goolsbee]

Hey, John, I know this is technical, but this, the Fed matters, the economy matters. We're going to maximize employment and stabilize the prices. And if we do that, everything will be.

[Jon Stewart]

Or we're just going to go back or we're just going to go Back to the J.P. morgan days. Just let Musk take care of it all. Austan Goolsbee, you're the man.

[Austan Goolsbee]

Great to see you. Always a pleasure.

[Jon Stewart]

President of the Federal Reserve bank of Chicago, Austan Goolsbee. Thanks for joining us.

[Austan Goolsbee]

Take care of foreign.

[Jon Stewart]

I love a nice cereal. Morning, lunch, dinner. If I'm having a particularly spectacular night of insomnia, I'll pop a nice bowl of cereal three in the morning. Come on, what's better than a bowl? What's better than cereal? What's better than Magic Spoon? Nothing. My point is that Magic Spoon makes healthy cereal. You can still eat it out of a bowl, but you won't get that crazy up and down crack. 13 grams of protein, no sugar.05 grams of net carbs per serving. That's perfect for breakfast, late night snack, post workout fuel it keeps you from those crazy ups and downs. Comes in great flavors. Fruity, frosted Cocoa Cinnamon Crunch. Look for Magic Spoon on Amazon or at your nearest grocery store. And there are plant based versions of the cereal too. Even vegans get to feel like they had a childhood. You'll find vegan options at Whole foods. Or get $5 off your next order at magicspoon.com TWS that's magicspoon.com TWS for $5 off. I love talking to that dude.

[Brittany Mametovic]

I could tell.

[Jillian Spear]

I didn't know economists were allowed to be that fun.

[Austan Goolsbee]

Right?

[Jillian Spear]

Or that caffeinated.

[Jon Stewart]

He's like talking to a normal human being about the economy. And he's an economist and when I don't understand something he's not a huge dick about, he's just like, look, technically your terms are not quite correct, but this is what it. And then you can like actually have the conversation.

[Jillian Spear]

Yeah. And he actually seems like a really curious person too and like a really animated person by what he does. And I think that that's kind of like what you would want for somebody in that role.

[Jon Stewart]

He loves it.

[Brittany Mametovic]

It was the most excitement filled episode that I think we've ever done and it was on economics.

[Jillian Spear]

The Fed.

[Jon Stewart]

Well, you know, part of that is. So I've known him for years and we did used to have in 2008, 2009. Like I had so many arguments with the economists that were in that administration about what we were doing. And so they were, they were all just like. Every time they would just be like, shut up. No. And then we would. And so reliving that and relitigating that is is one of the true pleasures of that era. Because I was so mad and I, I can't remember, I. There were like certain even terminology that I was trying to make happen during that time. Like, like wealth incumbency. Like I kept, I kept trying to make wealth incumbency a tagline for what the economic crisis of 2008 was doing. And that those banks had a wealth incumbency that gave them an advantage over the individual homeowners. And if. What was the other. Oh, I used to say them all the time. I go, you're bailing them out at a geometric level when you could bail out the homeowners at an arithmetic level and save us fucking trillions of dollars. And they'd be like, you don't understand.

[Jillian Spear]

I feel like the term top down

[Jon Stewart]

existed then we were top down and we were trickle down in it.

[Jillian Spear]

Yeah.

[Jon Stewart]

But what was so odd about it was they were all Democrats. And so that my frustration was always because it was all. This was all when my dislike of Larry Summers began to bubble because he was kind of the, the central, I think, Yoda like, figure of it all. He was the one that they spoke about as, like, this is the unassailable guru and Nostradamus, kind of like what we were talking about earlier about how, you know, the economists would project but with an air of mathematical certainty that doesn't exist in the world of probability.

[Jillian Spear]

Larry only recently stopped making those types of predictions. And nobody knows why.

[Jon Stewart]

Yeah, I don't know. I think he just decided to take up a different hobby.

[Jillian Spear]

That's so weird. He just sort of dropped out of the public discourse and nobody knows why.

[Jon Stewart]

Well, I think some people when they retire, they like to go down to a Caribbean island.

[Jillian Spear]

Yeah.

[Jon Stewart]

Just hang out. Or now I wonder if he's going the opposite way now. He's just like, I will only ski. I will no longer go to warm climates.

[Jillian Spear]

He's in Scandinavia as we speak.

[Jon Stewart]

And what's so funny about that is if you remember, like whenever there's like an economic crisis, they'll always go to him as the expert. And he's always in an island.

[Jillian Spear]

Yes. Oh my God.

[Brittany Mametovic]

Palm trees in the back. Yeah.

[Jon Stewart]

How are regular people going to get through this crisis? And he's just down there with like a pina colada and his culottes on, sitting in a big chair from Margaritaville. I don't think we should bail them out at the demand level. Massage me.

[Jillian Spear]

It would be so reckless to bail them out. Meanwhile, they're like handing him pina coladas.

[Jon Stewart]

Unbelievable, but fabulous. Goolsbee is one of my favorites. And whenever the arguments were, they were never ill spirited. They were always like, you know, I really liked him. Yeah.

[Jillian Spear]

I mean, I think part of that is him being such a curious person. Like you could tell he was really interested by the points that you were making because it's not the typical, like economic framing necessarily.

[Jon Stewart]

And I think he wasn't bound by. We have to have certainty that he was always willing to grant there might be a different way in a better way and all that, which is always helpful. Speaking of which, Brittany, what, What are the. What do the kids want from us this week?

[Brittany Mametovic]

Okay, John, do you think News network should carry the President's remarks live on Thursday night or wait until they can fact check?

[Jon Stewart]

Oh, they're not going to fact check anyway. They're not going to. That's. What, what, what difference does that make? I think there should be a C SPAN camera on the President at all times. Every, every Remark he makes should be carried live, including whatever ketchup splattering tantrums he might be throwing behind the room when his gold plated new phones came out late. Like, whatever it is, listen, man, I don't think we should have to live with the shit that he spews out there whenever he feels like doing it. I think you want to be ubiquitous. Be ubiquitous.

[Jillian Spear]

Yeah. He's still deciding the terms even though. Yeah, we have like this like 24 hour news cycle.

[Jon Stewart]

That's right.

[Jillian Spear]

He can't get enough attention, like, and yet we're still just like hanging on whatever words he selects that we pay attention to at any given moment.

[Jon Stewart]

Do you feel like. And this maybe gets us into the relationship portion of our podcast. I feel like the country is in an abusive relationship with a. With a narcissistic partner.

[Brittany Mametovic]

Yeah.

[Jillian Spear]

Yeah.

[Jon Stewart]

And I don't, you know, I'm not fluent enough on the issues of the psychology of a relationship thing like that to know, how do we heal? How do people heal from that? First of all, how do we get rid of them? How do you break up with a narcissist? And. And how do you not let the specter of the narcissist cloud and. And begin to rule your life? That's the problem here is the narcissist isn't thinking about us. He's only thinking about himself. So we're left with the churn and, and bad feeling.

[Brittany Mametovic]

Years of therapy, I think, is the only solve.

[Jillian Spear]

Yeah, we gotta go on couples therapy on Showtime, baby.

[Jon Stewart]

Would Orna. Would Orna do it?

[Jillian Spear]

Would orna help us?

[Jon Stewart]

Could orna sit down with the country and Trump so that we can expose what a narcissistic answer. Because those are the best Orna episodes is when, like, the person thinks they're being clever and tricky and like, Orna's just sitting back letting them expose the narcissistic that they are.

[Brittany Mametovic]

Crazy.

[Jon Stewart]

I kind of love. Do you watch that show? Do you ever. You ever watch?

[Jillian Spear]

Yeah. Yeah, she's fantastic.

[Brittany Mametovic]

I haven't. No.

[Austan Goolsbee]

Oh.

[Brittany Mametovic]

Oh, Brittany, I'm gonna love it.

[Jillian Spear]

You're in for a treat.

[Jon Stewart]

You are. There's. There's guys that are just like, you never listen to me. You don't do what I do. You don't treat me like the king that I am.

[Jillian Spear]

You know, literally.

[Jon Stewart]

It's like crazy, though.

[Jillian Spear]

And then they look at her like, right? And she's like, no, right then.

[Jon Stewart]

Then she'll always turn and she'll look at the woman and go like, I'd like to hear where you're at right now. You know, what, how are, how are you receiving his comments about how mistreated he is? You know, saying that, you know, you really began to mistreat him after he had all those other people.

[Jillian Spear]

Yeah, he's a. He's saying that he won the 2020 election. How are you receiving that?

[Brittany Mametovic]

He won't get over it. Yeah. Can't move on.

[Jon Stewart]

Wild shit. All right, what else they want, John?

[Brittany Mametovic]

What's the deal with Fetterman?

[Jon Stewart]

Can't a man wear board shorts to work without everybody wondering? I think it's the deal with a lot of things, which is, you know, you tend to embrace the side that flatters you. And I think there's very little of his. You know, his whole socialist panic is bananas for a guy who ran on working class bona fides. Like, yeah, like, what does he mean by socialism? Like, Social Security, health care? Like, what the are you even talking about? I think the Israel thing also has affected him grandly, but I also think there's a lot of people that can't help be flattered by the other side coming to you and saying, you're the only one. You're the only one that makes any sense on that side. You're the, you're the guy. Come join us. One of us. One of us.

[Jillian Spear]

And it's so weird from where he started, too. Like, you wouldn't. Maybe it was because he was getting the praise from the left or. I don't know. It's like, I guess we were talking

[Jon Stewart]

about the praise from the left, though. Made sense.

[Jillian Spear]

Yeah. That's. What I mean is it's like.

[Jon Stewart]

Right.

[Jillian Spear]

I just don't, I mean, I don't want to speculate about anybody's health or anything, but it's been a. It's been a real heel turn.

[Jon Stewart]

I, I think it's also there is a power, and cinema did this and Manchin did this to some extent. There is a power in being the controlling interest, you know, and, and I think that that tends to go to certain people's head of being, you know, I'm the contrarian that can change. The Republicans are pretty good about making a performance of that with the Freedom Caucus and those kinds of guys. But when push comes to shove, they still get their 215 to 214 vote or their 50 to 49. You know, they don't get that, but they keep saying, like, he's going to switch over to their side. And you're like, on what ground? Like, on what policy Ground would he be over there?

[Jillian Spear]

But also, like, how would it meaningfully be different?

[Jon Stewart]

Like, get a nicer office. Yeah, get a much nicer office.

[Jillian Spear]

And if the Democrats actually had a majority, it would matter. Somebody flipping if that you lost the majority for any reason. But, like, right now, he's voting for all their nominees. He's, you know, doing everything he can to make their lives easier. So I don't. I just don't see how it's meaningfully different at this point.

[Jon Stewart]

Right.

[Brittany Mametovic]

Except Blanche, apparently.

[Jon Stewart]

No, it seems to be that he seems to be embracing the caricature of Democrats as opposed to the reality of what, you know, a more populist economic platform would look like. But I have no idea, to be honest with you. I mean, I think he just. He. He might just, like, iconoclastic status.

[Jillian Spear]

Yeah.

[Brittany Mametovic]

I think he likes the attention, and he's getting a lot of it.

[Jon Stewart]

Yeah, they're flat. I mean, they're, you know, they're.

[Brittany Mametovic]

They're courting him from the media, too, though.

[Jon Stewart]

Oh, sure.

[Brittany Mametovic]

Everyone keeps going to him.

[Jon Stewart]

Well, if you remember cinema. What, like, that was her thing. Like, I'm the one. And. And it's all couched in pretend principle. I'm the one who stands on principle and integrity. And you're like, what principle exactly are we talking about? Yeah, more guns, more religion, more like, less social safety net. Like, what exactly are you embracing on their side in terms of issues?

[Brittany Mametovic]

Yeah.

[Jon Stewart]

Other than I think the left is a little too angry at Israel right now. Like, well, if you're not angry at Israel right now, I really don't think you're watching the news. I don't think you're seeing what's happening.

[Brittany Mametovic]

No. Yeah.

[Jillian Spear]

And there's also, like, there's this benefit to being a sort of swing vote because you can kind of get more for your state. Like, look what Murkowski did with Alaska. But what is Federman doing for Pennsylvania right now?

[Jon Stewart]

That's an excellent point, Jillian. I really. The Murkowski example is. Is a great one. She's leveraged it into. And she'll still support the bill generally on her side, but she leverages provisions. I don't know that he's. That he's done that, to be honest

[Jillian Spear]

with you, can make the case that Murkowski has done well for her state in some regards. Like, I would argue, not well for the woman of any state, but.

[Jon Stewart]

Right.

[Jillian Spear]

She, you know, has managed to get these carve outs.

[Jon Stewart]

Right. Right.

[Brittany Mametovic]

Yeah.

[Jon Stewart]

And it's funny, Collins in the same position, doesn't have the same efficacy. And maybe that's, by the way, that Alaska has a slightly, you know, less mainstream sort of need matrix. But I think you're. I think you're dead on right there. Fine. Analysis.

[Brittany Mametovic]

Last one.

[Jon Stewart]

Oh, one more. All right. Come on, Brittany. What do we got?

[Brittany Mametovic]

Okay. Did John find that going vegetarian led to an increase in farting? I fear for my marriage.

[Jillian Spear]

What a. What a pivot. This is the kind of pivot you only get on this show as, as

[Jon Stewart]

someone, as someone who's. I don't wear. I don't have wearable tech, so I'm not, I'm not tracking it to the extent that I don't have a fart or a ring that is giving me a statistical analysis. I can tell you that I, I. It's very difficult to separate aging from diet when it comes to your ability to digest anything. I mean, the idea that eating cheeseburgers would somehow calm the, the gaseous nature.

[Brittany Mametovic]

Yeah.

[Jon Stewart]

Of. Of your colon seems not quite. But I do understand if she's gone full cruciferous like, there is, you know, there is an argument to be made that beans and broccoli, like, do you have to spread it out a little bit with a variety of, you know, you got to throw a couple of slices of pizza in there to calm the waves.

[Jillian Spear]

Beautifully put.

[Brittany Mametovic]

Eloquent.

[Jon Stewart]

The only thing I will say about that is the idea that that would hurt her marriage. It's the key to a happy marriage is two people. Remember, it's in health, but also in sickness. Two people comfortable enough with their own standing with each other to let them know that their body is slowly dying from the inside and decomposing whatever has been put in it. And it's got to get out somehow.

[Jillian Spear]

I think Orta said that. I think.

[Jon Stewart]

Thank you for bringing that around. That's.

[Jillian Spear]

Thank you.

[Jon Stewart]

That's what we know as a callback, Brittany. How can they get a hold of us to ask us more of these truly insightful questions?

[Brittany Mametovic]

Twitter. We are weekly show pod. Instagram threads. TikTok, blue sky. We are Weekly show podcast. And you can, like, subscribe and comment on our YouTube channel. The weekly show with Jon Stewart.

[Jon Stewart]

Fine and dandy. Thank you very much as always. Couldn't do it without producer Brittany Mametovic, producer Jillian Spear, video editor and engineer Rob Vitola, audio editor and engineer Nicole Boyce, and our executive producers, Chris McShane and Katie Gray. We will see you all next week. The Weekly show with Jon Stewart is a Comedy Central podcast. It's produced by Paramount Audio and Busboy Productions, Paramount podcasts.