Chapter 1: What is the main topic discussed in this episode?
Hello and welcome. This is The Michelle Hussein Show. I'm Michelle Hussein. I speak with people like Elon Musk. I think I've done enough. And Shonda Rhimes. That's so cute. This will be a place where every weekend you can count on one essential conversation to help make sense of the world.
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You certainly ask interesting questions.
Heading into the opening bout, let's turn to the Federal Reserve. The newest Federal Reserve Governor Stephen Myron making the case for aggressively lowering interest rates to avoid damaging the economy, diverging from some other FOMC members. I'm pleased to say that joining us this morning, live from the Federal Reserve, is Governor Myron himself. Governor, welcome to the program, sir.
We've got tons of time to talk about what's going to happen next. your thoughts on the labor market, the balance of risk, the broader economy. I actually wanted to lead the conversation with this one. Governor, what was your experience like? I'm sure this was unexpected 12 months ago. What was it like walking into the room and was it different to what you expected?
Good morning, and thanks for having me. It's great to see you again. Look, you know, walking into the room, you know, I had had a good briefing ahead of time about what the meeting would be like, and so that was very helpful. But I will say that everyone was extremely friendly and welcoming and kind and collegial. And I really appreciated that.
And, you know, it's important to understand that the FOMC is a body, the Federal Open Market Committee is a body that makes decisions by arguing on the merits of the economics and the economics and the merits of policy. And that's how it was. And everyone was very collegial in airing their views. And I, the same. And that's how it will continue to be.
You know, we make policy, as the chairman said last week, by persuasion. And so I will continue to try to lay out my views and make the case as best as I can.
Governor, I sense you got the opportunity to articulate your argument. Just how much daylight did you sense there was between you and everyone else on the committee?
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Chapter 2: What was Governor Miran's first experience in a Federal Open Market Committee meeting like?
And the longer that policy stays excessively restrictive, the greater the risks to the downside for the economy. If policy stays excessively restrictive for too long, then you do get to a situation in which you have a meaningful increase in unemployment rate and a failure of the employment mandate.
So, Governor, that's the tension, I think, in your view that's worth exploring just a little bit more. On the one hand, you don't think the economy's at risk of breaking down, but you also think we are excessively tight at the moment and getting tighter.
There are some people who would say, and we've had this conversation around the table this morning, if we were as tight as you're suggesting, why is the market within 1% of record highs? Why are credit spreads super tight? And why is this economy still doing okay?
Yeah, so that's a perfectly natural thing to ask. Sorry, and let me say two things. One, I don't think that all financial conditions are universally loose like that. In particular, if you look at the housing market, I think it's in quite a different state than some financial markets and security markets.
So I don't think that that's necessarily a holistic look at the world of financial conditions and the economy. But even that aside, I think that... You know, people in financial markets tend to focus a lot on monetary policy because interest rates are sort of huge tradable instruments, right?
But there's so much more that goes into determining economic growth and the state of the economy and inflation and employment than monetary policy. And I think that attributing all changes in financial assets to monetary policy can be a mistake.
And in particular, that's what I tried to do in my speech, you know, was to draw out some of these effects from non-monetary policies that are affecting the economy and, of course, therefore also financial markets.
And so if you have changes in tax policy, right, like significant incentives for investing that lower the effective tax rate on capital, of course that's going to get reflected into capital assets. If you have significant changes to the regulatory environment—
where you're removing barriers to operations that companies can make more, more cheaply, which, by the way, is disinflationary and pushes out the Apple cap, then, of course, that's also going to be reflected in asset markets. So I think it's a mistake to conflate
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