Greg Ip

speaker

528 appearances 8 recordings 1 series first heard Jan 2018 last heard Sep 2024

Greg Ip’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Should Incoming Fed Chair Powell Prepare for a Bust? · 12 Jan 2018 podcast

Whalen in New York.

Jerome Powell assumes the top post at the Federal Reserve when chairwoman Janet Yellen's term ends at the end of the month.

And while it seems like a strong economy could mean a smooth transition for Powell, could a robust stock market set up a colossal bust?

Wall Street Journal chief economics commentator Greg Ip has some thoughts on the matter, and he joins us from our Washington bureau.

So, Greg, in your column in the Wall Street Journal, you say that Powell could feel a bit queasy when stacking the current economic landscape against housing and the tech stock booms of the past.

If you think about the way recessions happened over the last 50 or 60 years, it used to be that the economy would get really strong, unemployment would drop, inflation would pick up, the Fed would raise interest rates, that would hurt spending, and you'd go into recession. voice-verified

That really hasn't been the way they've happened in the last 20 years. voice-verified

Instead, both of the last two recessions, you didn't have inflation getting out of control. voice-verified

Instead, you had this massive inflation of asset prices, which then went bust. voice-verified

So we had the tech stock bubble in 1999 that went bust in 2000, and we had the housing bubble that went bust in 2006, 2007. voice-verified

So here we sit today. voice-verified

We've got stocks and property prices together, back to more or less the same records they had in the past when you compare them to household income. voice-verified

And so if you're a central banker looking at that and knowing what has happened afterwards historically, you've got to be a little bit worried that the same sort of dangerous dynamics are currently underway. voice-verified

And that could put him in a tough position as to when to raise interest rates and how frequently.

Well, exactly. voice-verified

So the Fed basically runs interest rates according to what it considers necessary to achieve low stable inflation of around 2% and the lowest unemployment rate it can. voice-verified

But there's nothing in that formula that says that getting inflation and unemployment right will also automatically get the financial system nice and stable and prevent bubbles. voice-verified

And in fact, you could say that both times in the last 15 years, those bubbles happened not because of an inflation problem, but in spite of the fact that inflation was under control. voice-verified

The Fed didn't have to raise interest rates very much because the usual measures of inflation were very well controlled. voice-verified

Today, we have inflation that's not just low, it is by some measures too low. voice-verified

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