The Problem With Jon Stewart - Jon Talks to Thomas Hoenig: Our Economy Is a Delusion

Episode Date: January 20, 2022

You've probably heard that inflation is getting worse—and not just from your grandpa who remembers when soda cost a nickel and movies were movies. Jon talks with Thomas Hoenig, former president and CEO of the Federal Reserve Bank of Kansas City, about how the Fed has destroyed everything we hold dear. Jon is joined by staff writers Alexa Loftus and Kasaun Wilson to discuss the news of the week, including Rand Paul’s TV subscriptions and the gymnastic abilities of skunks.CREDITSHosted by: Jon StewartFeaturing, in order of appearance: Alexa Loftus, Kasaun Wilson, Thomas Hoenig, Tocarra MallardExecutive Produced by Jon Stewart, Brinda Adhikari, James Dixon, Chris McShane, and Richard Plepler.Lead Producer: Sophie EricksonProducers: Caity Gray, Robby SlowikAssoc. Producer: Andrea BetanzosSound Designer & Audio Engineer: Miguel CarrascalSenior Digital Producer: Kwame OpamDigital Coordinator: Norma HernandezSupervising Producer: Lorrie BaranekHead Writer: Chelsea DevantezElements: Kenneth Hull, Daniella PhilipsonTalent: Brittany Mehmedovic, Haley DenzakResearch: Susan Helvenston, Andy Crystal, Deniz Çam, Harjyot Ron SinghTheme Music by: Gary Clark Jr.The Problem With Jon Stewart podcast is an Apple TV+ podcast, produced by Busboy Productions.https://apple.co/-JonStewart 

I've been following the science. I like to follow the science. From what I understand, the pandemic is almost over or just entering the phase where it kills all of us. I'm going to go with we're almost done. OK. Alexa, is that based in anything? Just my personal wants.

Yeah. I'm ready to wrap it up. OK. It's almost like American Idol or The Bachelor. Well, you're like, another season? I didn't know they were still doing these. Yeah, no, I didn't either. It's not like I watch both of those shows religiously.

Really? Hey, everybody, welcome back. Today on the podcast, we have our wonderful writers, Alex Loftus and Kason Wilson. We're very excited and we're just going to dive right in. The mandate is topicality and we're hitting it hard and fresh. Hard and fresh, people.

Today's guest, by the way, is going to be talking to us about the Fed and the economy, which, as you know, we did a whole television program episode about the economy and how skewed it is. And if you haven't seen that episode, it is on Apple TV Plus. You can check it out. So let's start.

What do you guys got? Well, I have probably the most topical news story that I could find this morning, hot up the press. More skunks can do handstands than we thought. OK, see, that is not what I expected. It's, you know, there's a lot going on in the world. Alexa, I peruse an awful lot of publications. I have a pretty broad reach as far

as my informational matrix is concerned. I have to tell you, the skunk handstand story has not crossed my vision field. And I would very much like to know where a person comes across that. It's from popular science. Really? Yeah.

Uh-huh. Imagine being so tired of talking about coronavirus that you're like, skunks can pop, lock, and drop it. That's, I'm so tired of this disease. Skunks can do handstands, people. We need to discuss it. Do you think to yourself, well, skunk doing handstands, that's the dumbest fucking thing I've ever heard.

But if your sole means of protection is shooting things out of your ass or tail or wherever it's, I don't know where the gland is, if you can't do a handstand, you get no range. So it absolutely ruins your weaponry. So I actually find this a very relevant story. Because if you can't do a handstand, I would imagine it takes away your only defense.

Yeah, and I would also think it brings you shame. Oh. If you can't handstand and everyone else is in your sort of crew. A, is that the official term for a group of skunks? A crew. And second of all, are they a judgmental rodent? Like, if you couldn't do a handstand,

do you think other skunks would be like, lame? I would say any group of people who can do handstands will call themselves a crew. Oh, by the way, Scott, I've just been handed in the chat, skunks are not rodents. Are they marsupials? What are they? I would have assumed they're a rodent.

But apparently they are not a rodent. A group of skunks is a surfeit. Surfeit. And they're related to weasels. All right, well, this current events part of our program is off to a roaring start. I'll never look at skunks the same way again. OK, do you have something in your pocket topicality-wise?

I just want to say we're recording this the day after Martin Luther King's birthday. And I did not get to enjoy any of it because early in the morning, I saw the FBI tweet out a quote of MLK, and I just went to sleep. That's not true. What did they tweet out a quote that they had secretly recorded?

All right, so 6 o'clock in the morning, the FBI tweeted, Dr. Martin Luther King, Jr., once said, ow, no, I'm joking. He once said, life's most persistent and urgent question is, what are you doing for others? This MLK day, 2022, and every day, the FBI remains dedicated to service and committed to protecting our communities.

Wow. No irony. When they put protecting in communities, did they put those two words in quotes by any chance? Not it. Was it? Did they go, we're determined to protect our communities, especially of color.

And then a winky emoji. Yes. That's kind of mind-boggling. You'd think the FBI would sit this one out. Do you think the people running the FBI social media sort of know the history? Or you think it's some intern who's like, let's just. I'm going to make a guess that the people running the FBI

social media are not FBI. They're 20-somethings. And they wouldn't have any idea that the FBI notoriously listened in on Martin Luther King's conversations to destroy him. I think that's a good guess. There's a tough meeting going on as we speak, where they're bringing in these 19-year-old kids.

And they're like, hey, listen, us and Martin Luther King have a complicated relationship. Do you think they're bringing in to go, Emily Rose and Maxwell, could you guys come in here, please? I don't know what they taught you at Oberlin. But we really need to not necessarily bring up Martin Luther King. Or really, if I can, anybody from the civil rights era,

I think we want to lay low on as far as this concerned. Oh, really? Because we've got a great Fred Hampton thing we want to put out. No, I don't think that's the way to go here. I love that Oberlin is like a path to the FBI. It has to be. It's got to be.

Did you know what a group of young people who work at the FBI is known as? It's a surfeit. A surfeit of young people. And, and this is something most people didn't realize, they're related to weasels. Young people who tweet for the FBI, related. You see how I tied everything together?

I did. Yeah, and it was, again, beautiful. It's a callback. Are there more? What's our? Oh, yeah, we do have some. We have some. We have some more current.

Rand Paul cancels direct TV subscription after it drops own. My first thought was, why does Rand Paul care about the Oprah Winfrey network so much? Oh, right, own. The other one is O-A-N, right? Yes, yes, yes. Oh, so actually, that's pronounced O-N. O-N.

O-N. O and voting rights, O and the economy, O. O-N. That makes sense. Yeah, I could see that. I think they should report on everybody's streaming services. I don't think it should just be Rand Paul. Yes, I agree.

I'd like to know who's popping on Hulu. I'd like to know if HBO Max is included. Who's on Fubo? That's right. That's such a ridiculous piece of news to be like. Senator Chris Coons has decided to bundle Disney Plus. He hasn't seen Moana yet. Incanto has delighted the likes of Senator Lieberman.

John, you really have to wield your power better. I mean, we're making Newsweek for the wrong thing. You really have to come out and be like, I'm on Spectrum now. That's my cable service. That's right. That's right. Now we're getting somewhere.

All right, so I think this new program of topicality at the beginning of our podcast, I for one, love it and soon would imagine it dominates the entire podcast and we will no longer have guests or a podcast. And it'll just be us zooming and talking about current events. But here's something interesting about current events. So our guest today on the podcast,

it may not be somebody who's familiar to really anybody, but Fed Heads, that's what they call the stands of the Federal Reserve and Fed Chairs and Fed Heads. I was reading an article in Politico about this former Fed Chair and the President and CEO of the Fed Bank of Kansas City for a really long time. And what I didn't realize is all the Fed Chairs vote on Fed policy, the monetary policy.

But it's almost always unanimous. And he was the one guy who kept voting no. And the reason was he was very uneasy about this thing called quantitative easing, which is the Fed pumps a ton of money. They print money and pump a ton of money into our economy to keep interest rates low. And you would think, oh, that sounds great.

But his concern was it'll inflate the assets market, like stocks, real estate, that it will be a driver of inequality. Now, let that rattle around in your brain for a little bit. He said this 10, 12 years ago, he was really concerned it was going to lead to inflation and inequality. So we called him and said, will you come on the podcast? He's currently a distinguished senior fellow

at George Mason University. And so we spent a good amount of time him explaining to me why he felt that this was a difficult position to be in and all about the Fed. And you guys know the Fed, that happens to be my punching bag for a lot of our economic woes because they'll bail out the big corpse, but they won't help the people.

So I thought it was really interesting. And I got a B minus in his class. All right, so here it is. On my interview with Thomas Honig, former president, CEO of the Federal Reserve Bank of Kansas City. Take it away, Thomas. Thank you so much for being here, sir. Thank you.

It's my pleasure to join you. And I look forward to the conversation. I read an article about your time at the Federal Reserve Bank. Yes, I was concerned about a very accommodative monetary policy called quantitative easing where you buy government securities in mass over a long period of time and keep interest rates at zero.

And the idea is to spur on demand and have a strong economy. But it also has consequences that in some ways we're facing today, but we have faced for the last decade. And that is inflation. How did they deal with you at the Fed? When you would raise these things, would they say, look, there's political pressure on us

or we have to keep this asset bubble going? What would their argument be to you that you were in the wrong about quantitative easing over this long period of time, not just emergency quantitative easing? That quantitative easing provides the necessary liquidity into the system, keeps interest rates low so that people can be employed

and companies can grow. And therefore that's a better solution in the long run than just stopping this quantitative easing, allowing the intermediation process to work you just don't understand. And that's- They would tell you you don't understand? Yeah, of course.

I mean- You, I could see them telling me, but not you. Well, we had a disagreement. I mean, there was a disagreement. Now, let me ask you this. So the reservations that you were raising were not necessarily novel to the group, but you were the only one who still felt like

I need to vote no, even though that is an unusual vote to take at the Fed. Well, that's correct, but I have a vote. And so I felt obligated to use my vote, not someone else's vote and I become a proxy, but my vote. Here's why it's fascinating to me. I'm always stunned how the Fed is there to kind of bail out the economy at the top end.

You know, like in the 2008 crisis, the federal window where big institutions, Chase and all these other groups could come in and get money. And basically it was almost like a printing press for money. They could take it at zero interest and turn it around and buy treasuries at 1%. And I'm always curious why the Fed

doesn't intervene on behalf of people who had lost their houses or, you know, in that mortgage crisis, what is it about their policy that doesn't allow them to intervene on behalf of individual consumers as opposed to inflating the assets at these larger financial institutions? Well, that's a very good and fair question.

The way the Federal Reserve was originally designed was that when you come into a crisis, people lose confidence, whatever the reason is, the Federal Reserve would be able to print money and provide the necessary money to provide liquidity for institutions. So the Federal Reserve was to come in and provide temporary liquidity.

And then once the economy settled down, you don't need to have that liquidity continuing from the Federal Reserve and you go back to square one. And what happened in that last crisis is you really do have institutions today that are so important, so large, so interconnected, so much a part of the government's ability to finance that you can't let them fail.

You cannot let them fail because if you do, then the economy will fall completely apart. Not only will they be failures, but people will lose their job even in more mass and therefore you bail them out. And they become too big to fail. And as too big to fail, they have an advantage over others. And that was the complaint that you were raising at the Fed?

Yes, the recovery was started in 2009. We were on a way to recovery. And in 2010, the Federal Reserve system still wanted to print large sums of money, buy large amounts of securities, put that money into the banking economy. Can you give us a figure, like a general sense of when you say large sums, what do you mean?

A trillion dollars. Okay. So the Federal Reserve has been, if you will, providing the necessary dollars to the government that it has used to spend on a whole host of things through the period of the decade of the 2010 to 2020. And then also to help fund what's needed for this pandemic. So the effect is to really increase

the amount of money in the economy at a faster rate than we're increasing the amount of goods and so inflation is the outcome. And I think it's very important that during that period when they were doing this, they were also funding increases in debt that was being spent in the economy. So it's not new.

It's not something that is new. How are they funding when you say they're funding increases in debt? What is that in practical terms? They buy government debt. So they're buying bonds at that time? Absolutely. How much currency that has been sort of created

out of thin air has been added into this economy through the Fed? What would you put as a figure? It would be six trillion in terms of deposits with the banks and currency. Okay. That they're just injecting into it sort of out of nothing.

Out of nothing. The central bank of the United States is the only institution on earth that can create dollars and pay for assets out of nothing. It's alchemy. They're Rumpelstiltskin. Yes, in that sense, yes. And they've been given that authority

by the Congress of the United States for purposes of dealing with crises, for example. So we've been in a crisis since 2008 and we've never come out of it. According to some people, yes. All right. And the effects have not all been good, right? Yes, that would be correct.

You think you're doing a good thing and you are. And when you continue it on beyond that, people begin to expect it. The banks begin to expect it. Other people begin to expect it. So you get through the crisis and you don't stop doing it. That's when you begin to invite inflation. And inflation is a reduction in the purchasing power

of those very dollars you're giving people. And of course, it affects lower income and moderate income more than high income. It creates and accelerates the division of haves and have nots. So you have to stop. It's an inequality machine. If it isn't stopped, if it isn't stopped.

If it's used for the crisis, for example, giving this, giving, longing this money to the banks, I don't have a problem during a crisis because it does free up liquidity and it helps maintain corporate accounts and so forth in people's jobs. But when you continue to provide it after the fact, then you begin to favor one group over another.

You keep interest rates at zero and then you start getting distorted effects in the economy. Some winners, some losers. Right, asset bubbles. Asset bubbles, but also people who will have, who hold assets, they become wealthier just from the fact that they hold assets

versus those who are making income. So you have to be an asset holder to benefit from it. Correct. So if I'm looking at this from a layman's perspective, if I'm a homeowner who in the crisis suddenly has a mortgage that's underwater and I'm not even saying to them, forgive my mortgage but bring it back to balance.

And they say no. What would be the justification for not providing that, if you're providing that backstop for large financial institutions, why not provide it for Americans in need? The answer is that I think the central bank has begun to provide it for Americans in need. That's what-

They did during the pandemic. Correct, and that's a crisis moment. But let me go back to 2008. The Fed comes in, they say we're in a crisis. Where's Rumpelstiltskin? We're gonna take the straw, we're gonna spin it into gold and we're gonna give it to the big boys

to cover their losses on these bundles. My question is that immediately favors these banks so homeowners lose their homes. Yes. Why didn't they print money and bring those mortgages to sea level? Because doesn't that immediately then solve your problem? And you've done it for a fraction of the price

and you've saved people from losing their homes. Right, right, a very good point. I would first of all tell you that what you described is not what was intended for the Federal Reserve. That is to bail out companies that were bust. Okay. Okay, we're supposed to be solvent

and we have a temporary liquidity problem and you provide capital. That's why the issue of too big to fail is a very real issue. Right. Because if they're too big to fail, they can borrow more money at discounted rates. People know they're gonna get their money back.

They take these risks, they engage in this activity and then the crisis comes and the Fed does in fact bail them out. That's wrong. That's not how it's supposed to work. Right. It's supposed to take away from their investors, what they put in, they're supposed to absorb the loss

and then go from there and management suffer the consequences. But if you have the central bank or the government, okay, come in and provide them the money necessary to survive, then you have violated that principle of providing liquidity. You're now providing capital and saving them.

That's right. So that makes your argument, well, why not bring everyone else back to level that is in the houses? Why not do it first? Because then you actually diffuse the subprime crisis. Well, because we didn't. But in this pandemic, I think they did that.

We did more of that. Right. And the banks cannot do that and do it for another decade and borrow this money because money- But you could see how people would get frustrated because- Of course. We didn't hear anything about inflation

during any of that period. So I could see them as reasonably saying, let me get this straight. You can inflate the stock market by maybe 50% to 60%. Nobody says a word, inflation's not a problem. The rich get richer. But the minute you give $600 to people who've lost their jobs,

watch out, because milk's now $20 a gallon. How does that work? Well, you did have inflation. And what you did is through that period, that decade, you did see housing prices go up, right? But you didn't get it because people are seeing the stock market. That must be good.

And zero interest rates, not only that, but it changed the whole dynamics in the corporate sector because now you could, instead of using your investor as funding, you borrowed more money. You did stock buybacks. And so as you fool around with this, now you call it alchemy,

some people are benefiting while others are not, you are creating and increasing the divide. People felt that. They may not have been, they may not have got the headlines, but they saw that some people were getting, doubling the stock market, that they were getting ahead.

The wage earners, real wages did not increase during that decade, so they were falling behind. That was a big part of the dissatisfaction that was going on in 2016, 2017. Correct. And so that is why we have to think about inflation as asset inflation, as well as price inflation. Because asset inflation increases that inequality.

Bingo. But let me ask you a question then. So if I'm watching this at home, I'm thinking, let me get this straight. For 10 years, the wealthiest part of this country has been not just too big to fail, they've become grotesque, right? But the minute that that transfers to real wages,

everyone decides they've got to pull the plug on this hot economy. And isn't that even more perverse? It's not that simple in the sense that wages are increasing, prices are increasing more. Partially supply, but a big part of it is demand created by easy money. So we had a pandemic that immediately

disrupted production, trade. So supply became constrained. Then we had the government, I think rightfully, provided funds to those people who lost their jobs, were sick, gave them continued purchasing power, and actually gave more than that. They gave more than unemployment benefits and they gave it to some people who were still employed.

And the government borrowed it all. So that created demand and kept the economy going. And so normally if the rest of the economy was still going okay, you would see interest rates rise. But the Fed said, and the government said, we don't want you to have increasing interest rates. We want them to say zero. Is that because politically they can't allow

the stock market to go down? Because the minute you raise interest rates, the stock market's gonna go down. It's going to correct. It should correct. Yes, right. But it's due to the fact that you somehow think that you have to keep everyone going strongly.

So, and you think zero interest rates are gonna do that. So you buy these government bonds and they can provide it. Are they still doing that? Yes, they're still doing it. They're gonna do it through March, through March. Oh boy. So yeah. March is gonna be bad.

Well, then you have to go forward with the raising of interest rates. But I wanna make the point that when you borrow that for this particular purpose, I think you can justify that. But the problem is that you continue it on, just like you did last time. So we borrowed $5 trillion to manage it.

But that's a continuation of, as I said, $10 trillion of debt in 2008 and $30 trillion today. You're gonna get inflation. And how does something like this end without it ending in a tailspin and a crater? Because when it crashes, the effects of it are gonna be devastating to those who've been hanging on, the wage earning class.

Yes, it is gonna be. It could be. Okay. How do you soft landing that? I don't dim the challenge because they're so far behind the curve. They've been doing this for so long that it'll be very difficult.

Inflation at 7%, when your wages are only going up 4.5%, the wage earner is losing. Brutal. So now you have to correct it. And the way you correct it is, you have to pull that excess money back, interest rates go up,

and you have a very difficult adjustment. But if you don't make the adjustment, this is the hard part. Then inflation gets worse. And believe me, inflation is the most aggressive tax you can impose on the public. Yeah, absolutely. If it's goods and services people use,

if it's gas and milk and food, well, that's gonna hit the people that are scraping by the most. And that's where inflation is right now. So you have to bring that inflation back down. And that means hopefully supplies will come back, but we have really increased demand through this very strong printing press

over the last decade and a half. What the Fed can do is get inflation in check. Have we gotten these larger corporations too addicted to record profit? And is that something that Fed policy can also help address? Are the corporation too addicted to record profit? Are they addicted to zero interest rates? That's what I mean because the zero interest rates

allow them to have these record profits. We are, I mean, everyone is. I mean, even labor thinks that zero interest rates may help them get jobs. When in fact, what you're doing is you're distorting how credit is given, who benefits, what you choose to invest in. Because at zero interest rates,

companies will restructure their balance sheet, increase their debt, which will handicap their ability to invest in innovation and new products and increase productivity. And that hurts the laborer. So let me maybe formulate it this way. There's a certain orthodoxy to how we have to get out of it, right?

A slow raising of interest rates, a tightening of monetary policy, maybe they burn off some of the money. Should there be a rethinking of that orthodoxy and the reason why I ask it is you talked about debt, right? To me, and clearly I'm a layman and don't understand the intricacies of it, it feels made up that this monetary policy

feels like a delusion of some sort. And why couldn't they just cancel that debt and have the country carry less and then tighten the policy? If you raise interest rates on big debt, right? Then we've got all this pressure on making those payments. And why not have the Fed cancel the debt and then raise interest rates to reset the playing field? Well, the difficulty with that is, of course,

this is debt owed by the government. But they made the money. Well, they would in fact be declaring bankruptcy, wouldn't they? Because you have this debt and you're just going to say, I don't owe it anymore. Who do we owe it to? Like when they say the United States

has $20 trillion of debt, where would that be distributed to? Be in commercial banks, it would be in China, it would be in Europe, it would be in different countries around the world. And so do you owe this money throughout the world? You can't just stop paying on the debt. Couldn't you just quantitative ease our debt?

What's the difference of making that money available to Goldman Sachs, as it is to making that money available to China, only one would lessen our debt. So you confiscated it from Goldman Sachs? Sure, they're fine. Well, but that means you're defaulting on your debt, just like anyone else.

In other words, you just print that money and pay debt. If this is money that we've created at a thin air anyway, what's to stop us from creating 10 trillion, I used to make fun of Paul Krugman for his idea of a trillion dollar coin. And now I feel myself saying, hey man, let's just get 10 trillion dollar coins, give one to China, one to Europe, are we square?

Good. And then we start again, because this whole thing seems manufactured. Okay, who received the money? All the people that own the debt of the United States. So that money would be received by China, by Europe, and all the debt holders. Okay, all you're doing there is changing one debt for another,

because the printing of the money is a liability, is a debt of the Federal Reserve System. That dollar, that liability that the Fed created, it's now owed to China. No, we give it to, what I'm saying is, we're giving it to them now and saying, we don't owe you that anymore. Here it is.

Yeah, but they have, what do they have? What did they get? They have a trillion dollars. A trillion dollars of Fed liabilities. Of money. Money that we printed, yeah. Right, and that's a liability of the Federal Reserve. That's debt.

And then they forgive themselves, and they just bargain. Then they just say, you're okay, we like you? Good luck. I don't think China's in the business of doing us any favors right now, and I don't think Europe is either, because why would they take the loss?

I guess I'm confused as, if we can print money, you just said we're the only, we can buy an asset. Okay. Any asset by printing money. But you can't pay debt by printing money. You can buy debt by printing money. So what if you just buy back our debt?

Well, because all you're doing is, I feel like you're having trouble, it's like talking to a monkey. You're like talking to a monkey and trying to figure out, how do I communicate with this monkey? No, no, no. I don't know what to do.

No, no, I totally get, it's confusing. But remember, creating money, means that the Federal Reserve creates a liability to buy debt or buy other assets. Right. Okay, so if they go out and say, well, to China, we want the government debt, and they say, okay, and we say,

we'll give you our deposit, our money. That we've printed. Right, China says, fine, what kind of interest are you gonna pay me? It's just another form of government debt. So we haven't really solved the problem. We just changed one kind of debt for another. Right.

So when the Fed thinks they have too much money in the supply and they decide to burn it, let's say they decide to burn a trillion dollars, where does it go? Okay, they sell their assets. So they have all these government securities. They sell those assets back into the bank and the bank pays them back in dollars.

And then those dollars are, shall we say, put aside or burned. So they actually say, all right, we have all these government debt, all these mortgage back securities on our balance sheet. Okay. We are going to sell those to back into the banking industry or wherever.

And they're gonna give us cash back. They're going to say, would you debit my account at the Fed that we have with you at the Fed? And that shrinks by the trillion dollars. So assets declined by a trillion and the Fed's liabilities declined by a trillion. That's quantitative tightening, if you will, or reversal quantitative easing.

Right. And when you do that, of course, you're taking money out of the system and that's why interest rates go up. I see. So am I making sense? You know, it makes sense in the make-believe world of conjuring.

Like there is a certain part of this that all feels like a mirage to some extent. So it's, you know, when you think about fundamentals, right? So when I think about the fundamentals of the banking system, it makes sense to me. You have a central clearinghouse that their business model is, I'm gonna trust you with my savings.

You're gonna give me interest on that. And you're gonna make a little money on that by loaning that money out to somebody else for a little bit more money. It's a business model that makes sense. When we start to get into, I'm printing money to buy bonds, to artificially keep those interest rates low. It makes less sense.

So it's hard for me not to think of, well, why can't we just buy back our own debt so that we owe it to ourselves? And if you owe it to yourself, then it's no longer can be weaponized by a foreign power or even by us because you can create a different paradigm of what that debt looks like.

So it's hard for me when sometimes the rules of the Fed or the rules of monetary are explained, it's a little like saying, yes, you can levitate, but you cannot spin around. Do you know what I mean? It all seems sort of fake. Well, it's a fiduciary system. It's all faith-based.

No. You got it. Oh my Lord. Yes, you gotta have confidence in that currency, in that dollar, because there's nothing back in there. There's no gold back in there. In some ways, it's a mass delusion. Well, that's a harsh word,

but so long as you have faith, yeah, you might see it today in terms of, with all this printing, you see these cryptocurrencies, these bitcoins, which are basically virtual currencies. And faith-based to some extent. And faith-based. Right. Let me ask you this.

Do they call you now and say, Tom, long time no talk, would you mind coming back and helping us fix this cluster of a, hmm, to help us get out of our addiction? Or even in the middle of their quantitative easing, when they're watching companies burn through cash and then not have it for the next emergency, or use it on stock buybacks,

would they then come to you and say, ooh, we probably should have put some qualifications on that. They haven't, and I don't know that they would. Now there's a view. I listened to the testimony of the nomination for chair and vice chair, and they say, well, we've got this inflation, we have to deal with it. So they're beginning to think about dealing with it,

but I don't know that they are thinking in terms of asset values, I have not talked to them. If they did, I would try and be helpful. I mean, my purpose then was to be helpful. I mean, I saw- Oh, absolutely. You strike me as the least disruptive, like you don't strike me as a contrarian bomb thrower.

You strike me as very reasoned. Well, and part of it was, I was involved in banking in the 70s and 80s, and where we saw the asset bubbles in land and commercial real estate, and I saw that the hardship that comes when that can no longer be done, when inflation does become 13%, and you have to take care of it,

the agony within communities, the agony within businesses. And I know today, we don't see that. I know today, we're trying to spur the economy on, but when you do it like this, and you put this amount of money into the economy, and you create these bubbles, you are, shall we say, feeding the dragon,

and therefore the dragon will only want more until in fact, you can no longer stand it, and then you have these crises come again. And that's what I worried about then, and that's what I worry about now. We don't want to see the unemployment rate rise. And so when they begin to tighten, they will understandably worry about this increase

in unemployment, but there is no easy solution to that until you get through it and bring things back into balance. We are addicted to zero interest rates. We have to break the addiction. That's the hard part. And so the question really now becomes, the solution then becomes how soft a landing do we get? What is going to be our methadone

that allows us to come off of an addiction like this in a way that is not devastating to the people who've already suffered through these 12 years of increasing inequality? Absolutely. And inflation will only make the inequality worse. So how do we do it without destroying ourselves by going too quickly?

I wish I had a methadone that would save everyone from the agony of this correction. But what I'm hoping is that they are able to inform the people what it's going to be, because we are going to have to see interest rates rise. We are going to have to see the demand side of the economy slow, hopefully as the supply side picks up. But I don't know that I have an easy solution.

It has to be done. Would your main thing then be maybe more transparency? Because quite frankly, that's some of the larger issues of this is it's not discussed publicly. I've not seen this other than in very obtuse congressional hearings where the words are so measured as to become meaningless.

I very rarely see this discussed openly. And it's because no one wants to disappoint anyone. And the fact is we are going to have a difficult time ahead. And we need to tell people that and we need to tell them here's how we're going to get through it. It's going to require something. And we have to figure out ways to at least moderate the unequal impact that this will have.

I think that's the key is you have to find some way to reset that. The takeaway seems to be is we have fed dragons and this thing's going to end like Game of Thrones. It's all going to go. It's going to be a challenge for everyone. It's going to be a challenge. Well, sir, I thank you so much for taking the time.

I found the article about your reticence about quantitative easing. Really, really interesting and principled. And I'm so glad that we had a chance to talk to you. And hopefully we'll check in again down the road. I'm happy to do it. It's been a pleasure to talk with you. Thank you.

Thank you, sir. All right, we're back. Alexa, K, what did you think? I just want to say one word, trillions, trillions, trillions? Yes. We're playing with trillions of dollars. That's not even. It's crazy hearing us continuously say on our show,

like we are willing, America is willing to reward companies negligence before people's needs. And every expert is like, yeah, what are you going to do? We got it. We're at the rules, rules are rules. Every time you do an interview like this, I spend most of my time waiting for your hopeless laugh. At some point in the interview, where

there's like a problem that you're really passionate about, and then you bring on an expert, and then they tell you a stat that makes you realize it's much worse than what you thought it was. And then it's just listening to your hope for humanity leave in your laugh. I like that. You know what?

We should do a podcast called Hopeless Laughter. And it just invites people to talk about the things that they believe are structurally hopeless. And then we all just laugh at them. It's the research team giving us all of the stats that we hate about life. And it's us on microphones trying to riff on it, but just can't because we're hopeless.

A nice ambient sound, Hopeless Laughter, to add to like the ocean sounds and rainforests. Yeah, it would be. It's like kind of a nice white noise machine. Yes, it's the sort of thing though. A lot of times research will give us this stuff. And we'll take it in. But man, you don't really, it takes

that that vaunted, tenured expert to come on and go, you have no idea. Yeah. But even with that expert, I feel like you were kind of trying to get him to answer the question, can't we just print more money? Can't we just make more? And he didn't really quite have a satisfying answer.

No. I love the whole thing. You're like, so our economy is kind of a mass delusion. And he's like, yeah, most economies, that's kind of how they work. You're like, well, if it's a mass delusion, why don't we just create some sort of hallucinogenic vision that works for working people?

And he's like, yeah, I can't do that. Even in a mass delusion, you cannot help working people to the same extent that you help corporations. The whole thing is completely invented. It's a mirage. Oh, so we can just, why don't we just give it to them? Yeah, you can't do that in this mirage. Because in our made up fantasy, we made up these rules.

And so technically, there are very strict rules to the made up delusion that we are all abiding. Thomas Honing probably is the loneliest person in that entire room. He got no lunch dates. I mean, being the only person to not vote takes a lot of courage. It has to, right?

That's true. Because they'll ice them out, you know? And that's a lot of other old white guys. You know, if you're an old white guy and you got no other old white guys to eat breakfast with, that's some lonely shit right there. Yeah. Because you can't go younger and there's no one older.

No. And also at that age, like you're starting to make those dietary changes and you need other people to be like, yeah, no, the wife says no eggs. Yeah. But he's got nobody to do that with. When did that start for you, John?

I'm just curious. When you're more crypt keeper than man. Wait, what was the first thing you cut out of your diet where you're like, this is slowly killing me? Meat. Yes, okay. But it wasn't because it was slowly killing me. It was because my wife went vegan

and she just kept staring at me disapprovingly. The health benefits didn't come until later. And it's true. Like we have farm animals and they're so nice and you know their names and they have personalities and you're like, oh, I can eat bacon, but I can't eat Veronique. Oh my gosh.

You have a pig named Veronique. Yeah. Wow. Can it do a handstand though? Okay. Can I tell you something? She can. And man, is it a weapon.

600 pounds. All right, we got our friend, Takara. I don't know if you guys knew this. Do you know Takara has a new segment? It's a thought about rising inflation, but it's her new segment. Now that's what I call petty. Here we go.

It's time for another edition of Now that's what I call petty. Mm-hmm. Hi, it's Takara. I would ask how you were doing, but since no one asked me, I'm just gonna get straight to the point. Apparently the US is on track

to have the highest inflation rate in decades. And in response to that, I have just three words. How dare you? No one bothered to run any of this by me. Not the Biden administration, not the Federal Reserve, not Wall Street, not even Disney World. And I'm not gonna sugarcoat it.

That really shits on my cake. I'm an important person, a valued global citizen. People look to me for feedback, advice, guidance, and to be left out of this impactful conversation seems like a flaw in the system. Inflation, people, do you know what that means? Prices will rise and my tolerance for bullshit will go way down.

I can't hate watch euphoria if I'm worried about if I can afford HBO Max. And with inflation so bad, how are these kids affording these drugs? When I was in high school, you were lucky if you found a smoldering cigarette in the teacher's parking lot, okay? Here's some bullshit.

Scream is back in theaters and a ticket is $20. Back in 1996, it was $5, so there better be four times as much stabbing. I was just about to buy a state-of-the-art voice-activated home safe to protect my beanie babies, and lo and behold, the price had risen by nearly 3%. My beanie babies are priceless, but I'm not made of money.

You know, I don't mean to brag, but I minored in economics and college. I have a lot to say about this issue, especially if I can use my notes, but I wouldn't help now. Not even if Walt Disney himself woke up from a cryogenic sleep and begged me. Petty, I know.

All right, everybody, fan-tastic. Thank you so much for joining today. Alexa, K-Son, you guys were hilarious, lovely. Thank you guys all for listening. For more content from The Problem, check out the newsletter, subscribe to the website. Did you guys know we have a website now? Yes, and it's very snazzy.

Yeah, I made it. I did a HTML, and what I did is I cut and paste a lot of images. It looks great. Thank you so much. I really appreciate that. Well done, Joe. Yeah.

Labor love. It's a lot harder than people think, and I worked on it all weekend. It's theproblem.com, check out the Apple TV Plus show, and I believe there's a link in the episode description. Guys, we'll be back next week. Until then, goodbye. Have a good one.