Austan Goolsbee

Because people are like, whoa, wait a minute.

I'm not going to take flat wages.

The prices are going up 10% a year.

I need 10%.

And that fuels higher inflation.

It becomes a self-fulfilling prophecy or a very difficult spiral.

Yeah.

And all I will observe to people is that this time, CPI inflation got almost to double digits.

PCE inflation, which is the one we look at, well over 5%, 6% plus, vastly above the 2% target.

Even when that happened, if you looked at the actual market, like the tips market where you can get a market expectation of what do they think the inflation rate will be, even when it's raging out of control and everybody's angry, if they asked

what do you think the inflation rate will be in five years?

They continued to say basically exactly 2% as the Fed promised.

That is only possible if the Fed has credibility.

And if the Fed loses its credibility and you start to see that thing drifting up, then hold on to your something, gentlemen, because that ends in tears or that ends in pain.

Look, that was, and I was described, when the housing bubble popped,

We designed a program which was trying to prevent foreclosures, which was based on this.

If your housing payment exceeds 31% of your income, then there's a decent chance you won't be able to sustain that.

In normal times, if you get into a tough environment like that, you would sell your house.

But...

When the housing bubbles just pop, you can't even sell your house because a bunch of people are underwater.