Moody's Talks - Inside Economics - Financial Fragility & the Fed

Episode Date: March 24, 2023

Diane Swonk, chief economist of KPMG returns to discuss fragilities in the financial system and the impact on credit availability and the economy. She shares her view that a meaningful recession is dead ahead. We also discuss the Fed’s meeting earlier this week and their decision to not pause rates given the banking system turmoil.For more on Diane Swonk, click hereFollow Mark Zandi @MarkZandi, Cris deRitis @MiddleWayEcon, and Marisa DiNatale on LinkedIn for additional insight. Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandy, the chief economist of Moody's Analytics, and I'm joined by my two co-host, my two trusty co-host, Chris Reedies and Marissa D. Natali. Hi, guys. Hey, Mark. Hi, Mark. Another busy week, you know, just when you thought the banking crisis was over, well, I don't know. Did you think it was over? Maybe fingers crossed.

You were hoping. I was hoping it was over. And still am, still am. But yeah, we'll see how that goes. But we've got a Fed meeting in there as well to spice it on it. Definitely got to talk about. And we've got a great guest to talk about all of this with. And that's Diane Swank.

Hi, Diane. Hey, great to be your Mark. Good to have you back. I can't remember. Do you remember the last time you were on? It was probably about a year ago. A little over a year ago, yeah. Yeah.

And at that time, you were chief economist of Grant Thornton. And now you're over at KPMG. I am, yeah, with my old team over at KPMG. Yes. Yes. Oh, did you bring your whole team over? Oh, of course. Yeah. Excellent. Yeah. Yeah. Fantastic. And are you, are you guys remote or is there? So, you know, I mean, yeah, a lot of the team was hired apparently during the pandemic. And so my team, you know, was in Chicago. And so there's a lot of teams scrambled all over the country. But we're all going in from the NAVE Conference, you know, National Association for Business Economics. And so we get to meet in person there. And we've not been together enough. but we do get together because it's just so much, there's so much more productive when you can all see each other in person. Yeah, we,

I guess we haven't seen each other either, have we? I haven't seen Marit. Are you guys? They don't want to see each other. You might not want to see it. Oh, in Phoenix, we saw each other. Of course. Right.

Yeah. It's all a blur to me. I can't distinguish between Zoom and person, but. Oh, I can. I can distinguish. You can. Okay. And the move, when did you make that move from Grant?

July 18th. July 18th. Okay. Very good. And KPMG, their headquarters, physical headquarters, where is that? Is that in New York or where is that? Yeah. Yeah.

Yeah. Okay. But we have a big office in Chicago, A.M. building, beautiful. It's lovely. You can see, you know, the lake and all that kind of stuff. Really nice. Yeah, that's nice. And you're in Chicago now.

That's, yeah, yeah, yeah. Yeah, you know, I just, I just keep staying in Chicago. It's just the firms that I work for, Jay. Well, it's a good spot. You know, nice, centrally located, easy to get to places. So, yeah. I'm Midwestern Earth through and through, Mark. You know, always happen.

You're not moving to Florida like the other half of Chicago. No, and not like you. No, no, I don't, I don't dip out, you know, no. No, no, I'm not moving here anytime soon. I can, I can assure you of that. Yeah, Citadel, right? It's the, what's that guy's name, Ken Griffin? He made the high profile move and bought like what a $580 million mansion.

I don't know. I'm making that up, but it's a pretty big place. Yeah, down in Florida. Well, very good. There's a lot of ground to cover the banking situation. And of course, the Fed did meet and raised interest rates again and recession. And we're going to do the statistics game as well. So maybe we can start with the banking situation.

And let me ask you, Diane, how big a deal do you think this is for the economy? Actually, I think it's a really big deal because of where I think the credit tightening is going to hit the economy the most. And that's because we've done a awful lot of work that we had been doing about the resilience of the U.S. labor market and how resilient it was. And the main reason for the resilience was in firms with 250 employees or less. And that's where you're going to feel the credit tightening the most. We also did a lot of work on the new business formations, those high propensity business formations.

And we found about half of the excessive increase in new job gains, new job openings that we've seen since February 2020, which is around $7 million. They were running at $10.8 million in January 31st, 2023, so a 50% increase in new job openings. That was nearly four or five of those, and actually a little more now in January. were due to these smaller businesses. And they were more than absorbing some of these, you know, high profile layoffs that we've seen. And we even saw we did some work looking by sector in November, the quit rate in places like tech. Before they had some, as you're starting to get rumblings in tech that all of a sudden they had maybe

overshot a bit on some of their hiring, one major firm alone hired between 2019, fourth quarter and 22, fourth quarter, almost 900,000 people. Wow. And I don't use names of firms, you know, like I can't do that. But you know, you think about that large, you know, hiring in that one firm. And then they had their largest layoffs in history. The first one was 18,000. And the second one was 8,000.

You put it in the context of that. And you're like, well, that's not very much. This feels like the statistics game. Can anyone guess? Exactly. Exactly. But, you know, but it is really interesting to know how we saw the quit rate in tech picked up dramatically in November and December it stayed at elevated levels. And that was because people were

jumping and hopping ships, sort of adverse selection here, because they could because those skills were still very highly, you know, demanded. Now, job openings on the more high frequency data and places like Indeed and stuff like that, they're starting to slow down and things like, you know, computer software engineers and things like that. But it's still from a very high level. But, you know, we are very worried about where the heart of the credit tightening will hit in, you know, commercial industrial loans, what's going to happen in commercial real estate, and, you know, more broadly, the backbone of what we see, the resilience in the U.S. economy, these smaller businesses that have been able to absorb and new businesses and startups, and this has been

an highly unusual period for not only startups, but the speed with which firms that made the petition to say, hey, I'm applying for a new company that I'm starting here, and I intend to hire. And, you know, those are running still 40% above the 2010 levels in January. That's the IRS data, the I-I-N employee identification number data. And, you know, the compression from two years before, from an application pre-pandemic to actually hiring people went from three to nine months instead of two years. So, you know, one to three quarters. And you really saw by the middle of 2021, it was adding about a million new jobs per quarter, just from that alone.

And so that's a lot to all of a sudden start going in reverse on. And, you know, that's where I'm concerned that a combination of factors, I'm sure PPP loans played a role in all this as well. But at the end of the day, a combination of all these factors is going to hit the backbone of the resilience we've seen in the, labor market that, you know, it's not a cliff event like, you know, 2008 or layman, but a slow-moving, you know, sort of squeeze that really will have a pretty, could have a more of a credit tightening effect than I think the Fed had hoped. So the key channel you're identifying between what's going on in the banking system and the, I call it a crisis. I don't know. That's the word you're using, but it's it certainly is not um it's not not a crisis so um yeah yeah it's not yeah it doesn't feel like

a event doesn't i mean it's hard because our crisis you know our thresholds have gotten really high on crises so there was you know the bar is higher because we yeah the pandemic in 2008 yeah I mean those are really bad crises the s&L crisis was a crisis that created a lot of headwinds for the economy which i think are useful in thinking about now um that was in it we remember that mark That was in our early part of our career. That was like the first crisis I really went through as a professional economist was the S&L, the savings and loan crisis. Yeah, absolutely.

And so, well, and then in a bloody Monday. Yeah. Oh, yeah. Yeah. And you were in 19. You were in a big bank. You were in first Chicago. I was at a money center bank.

Oh, yeah. You were a money center bank at the time. At the time, I worked for Bill McDonough, who was the vice chair of the bank, who later became the president in New York Fed. And our analysis said, this isn't the great depression. because of what the Fed did at that point in time in terms of infusing liquidity into the system and stabilizing the system that this would not be the Great Depression. And actually, Bill McDonough went down and took over, it was my early years on, you know,

starting as an economist. And Bill McDonough, who was the vice chairman of the bank and was our boss and head of strategy, took over the training floor to stop the panic on the training floor because you didn't want them to lose all the positions, that if they just waited it out, we would be in better shape, which was, He was, we were right and he was right. So this is, this is a crisis. It's a crisis. It's not as bad as 2008.

And it's not as bad as March of 2020. Okay. So you're, you're, you, the, the key link in your mind between what's going on here in the banking system and the economy is the availability of credit, particularly to small business. And you've identified small businesses. And medium sized businesses and commercial real estate. I mean, there's a lot of. You know, I mean, the banking sector, you know, Mark, you know this. I mean, the banking sector isn't as big as it is in Europe, but I think, you know,

in terms of providing credit to the US economy. But, you know, we've already got stresses in large firms that are starting to pull back a bit. And then you add some stresses in firms that had been the engine of growth and been able to absorb that. And it happens to be where they get the most of their credit. And I think you start to get a much more tenuous situation that's more of a slow-moving crunch that is probably not as contained as the Fed would like. Hey, Chris, you've done a lot of work in this area, too. We had a webinar this past week to discuss with our clients the impact of banking,

the banking crisis on the economy and the key channel you identified. It was the same one, Diane, is focused on. Anything you wanted to add to what she just said about that? I share her concern. I certainly share her concern. Small businesses right front and center. They were already struggling to find credit even before. this crisis, right? So banks had already been tightening.

Small businesses were already complaining about troubles finding credit. So this is only going to exacerbate that. And then the CRA, I'm particularly concerned about commercial real estate. Yeah, the commercial real estate component. That's a, that's one that is, that's where I sort of get the parallels to a little bit of going back to 1990-91. You know, that was when Chairman Greenspan first said, and I was actually when I first met him, the 50 mile par headwind. And what he did was he was cutting interest rates into the recovery after, you know, it wasn't a bad recession, but it was our first quote unquote jobless recovery, which didn't mean that didn't generate jobs.

I think people always get confused about that. But it's like stainless steel. It's not that doesn't stain. It just stains less. It's just fewer jobs, right? And, and you know, so I think, you know, it's an interesting, dilemma when we think about, you know, what is the post world look like? Because I actually think we're moving into more inflation prone world in general. It's more prone to inflation shocks and

rate hikes yet. We could have this tail on commercial real estate that might not respond to interest rates coming down as rapidly as well. Mercer, anything to add on this particular point on credit availability and the bank? No, just that, you know, we've been looking at things like the senior loan officer survey for a while and seeing that tightening is happening pretty much across the board. But in particular, commercial real estate, I think in the last, in the first quarter, 70% of banks were saying they were tightening standards on CRE loans and about 55, 60% were tightening, lending to small and medium businesses. So certainly now we're in a different world than we were back then and it was already looking very tight. So I think

Diane and Chris, you know, that that makes sense that this is the main channel to be concerned about to the broader economy. And just to make that clear to the listener, the senior loan officer survey is a quarterly survey done by the Federal Reserve of senior loan officers at major, small and mid and large bank size. All across the board. Yeah. Yeah. And they create these, I guess these diffusion agencies, the kind of the net percent of respondents that say that they're tightening, underwriting for different types of lending. And that's the data you're using, pretty timely data. Well, and Mark, that's important too because it's something that, you know, Chair Powell brought up in his press conference that. Oh, did he? I miss that.

Well, you didn't bring up the senior loan lending survey, but what he did say was there's other measures of financial market conditions that suggest they're tighter than just the interest rates alone. And I think that was, you know, a reference to this. There's also the University of Michigan has in their sentiment index, has a measure of, you know, consumers view on tightening of credit conditions. And that's gone up to, you know, the highest level since 2008, although, again, high threshold. But, you know, I think it's important that we sort of think in terms of holistically and some of these more qualitative measures as well, rather than just the, you know, what people sort of spend time on with inversion of the yield curve and stuff like that.

Yeah. Go ahead, Chris. I was wondering if you had a view on the equivalence of the tightening or on credit availability to rate hike. How many basis points? All right. This is something we've been debating. Oh, yeah, yeah.

And we've been debating it too. So we've been running scenarios anywhere from an additional half percent to an additional percent in a Fed rate tightening. And so just to make that clear, the credit tightening because of the banking crisis has the same kind of economic consequence or effect as you're saying a half to a full percentage point on the funds rate? Oh, that's very significant. It gives you some interesting scenarios. And then we shocking the models with more volatility and an higher equity premium. So you get more VIX out of that, more volatility in the markets from that. And that gives more credit tightening across the board.

And so you start getting, you know, cascading events. And it's not a disaster scenario, but it's certainly a much more, we were looking for a mild contraction. And, you know, now it's much harder to get to that sort of mild contraction, not very high unemployment, relative to our demographics. Oh, goodness. So you, before this mess, you were saying, I had a mild contraction, but that, let's just make it clear. You're saying recession, mild recession. Mild. And now you're saying, yeah, I mean, in my own, we had unemployment rate rising about a percent, you know, and slowly grinding down inflation and, you know, it's sort of the feds recession, which they don't thought.

So it's three and a half to four and a half kind of recession. Yeah. And now you're saying three and a half to, to what? Could be as high as five and a half. Oh, okay. Oh, so that'd be almost a typical recession, kind of a typical World War II. More typical. More typical. Exactly. And, and so, you know, and when does that start? Can I ask? Well, you know, so. we actually can get it started depending because of this more rapid tightening now and the non-linearity of it,

we can get it started in the second quarter, which is, you know, and then- You too. So now, like next month. Oh my gosh. You are pretty pessimistic. Yeah. Okay. So I want to come back to the film.

But it doesn't really gain momentum until the summer. The summer's the worst of it. And then it tails off. But, you know, that it's hard. It's hard. It's hard. I mean, there's a lot of things that are.

Can I ask, Diane, that's based on what has happened so far. Are you making some forecast about future problems? I mean, do you think the banking crisis is over or is there more coming? I don't think the financial situation we're in is done yet. I would like to be hopeful that we've contained and put a ring around all of the additional

tightening that's going to come besides what the Federal Reserve wanted to do. I'm not confident that that's the case. And I think that's really important because, you know, we tend to think of, you know, we tend to think of these things in terms of they usually don't play out entirely within the course of weeks or days. They usually take months. Even, you know, I'm thinking back on things like LTCM and, you know, the situation with the Russian debt debacle and then the Taibok crisis. I guess we can sort of benchmark our careers marked by the number of financial crises we've been to. Well, I'm getting sold now.

I can't even remember all of them. Like, LTCN. I feel like, I feel like that's, you know, with my dislike deal, that's my,

that's my only way. I used to be that, it used to be the, correct crises, but. It used to be the, the 1984 collapse of continental Illinois was like a huge deal. Now,

like, no one was even remember. Yeah. Yeah, that was a huge deal. And, You know, interestingly, it was my, my, so I worked for the bank for Chicago that absorbed many of those employees, almost like a, at the time, I hate to say this, it was like a gentleman's agreement. Once I joined the bank, that had already happened. And it was after I joined that that had happened. But it was a pretty recent thing that it happened. And the bank that I joined at the time was for Chicago, later became J.P. Morgan. And I worked for Jamie Diamond for four years. But it was. was what was interesting about it was they had a gentleman's agreement to hire a lot of people

that got hit by the Continental Bank failure. And that was really more tied to the oil price situation and an oil bet they made than the interest rate situation. That was, but my former, one of my, my children's grandfather, he passed recently, lovely man. He worked his whole career at Continental Bank. And that was a very hard thing for him. I bet. But he did make it all the way through. But I want to circle back, kind of Chris,

push the conversation a little further than I wanted to go at that moment in time. But that's okay. That was very interesting. But I want to come back. I want to come back. And, you know, we're talking about credit tightening and trying to understand that. And the one thing we've identified that is helpful there is a senior loan officer survey. I'm struggling to find anything.

You mentioned Michigan, but that's kind of on the margin. Yeah, it's on the margin. Anything else we should be, are you looking at any other indicators? I mean, well, you're looking at, you must be looking at the treasury market as well, which, you know, we had a lot of short covering that spiked that liquidity back to, you know, the lowest level since March 2020. Back to the credit standards, you know, to direct, you know, that's kind of that treasury market reflects a lot of stuff.

Yeah, yeah, no. Well, I mean, the other thing we're watching is, you know, we've been watching to deposit flows too. Deposit flows. Okay. And that data is lagged, but it does show that, and it does coincide, I think, with deposit flows that we've seen. Part of the stress that was in the system that many people didn't see is that, you know,

depositors were fleeing for money market funds, but also just looking for treasury bonds. I mean, all of a sudden you get a return, working your money elsewhere than a bank and a higher return. And I think that that's another issue that hasn't really been, that was happening way before, you know, for a while building up. And so you wonder, you know, I mean, there is a bit of, there's obviously some outliers out there in what's going on. But there's also some consistencies that I think we have to look at more broadly in terms of, you know, where our depositors is looking to park their money and how fast, you know, I mean, it's a comment that J. Paul made as well as, I mean, how fast people can move money now and how fast that is. is occurring is really something very different than what we had in the past. And, you know, I'm even thinking, you know, Mark, we were there for flash crashes and there's things that have happened quickly. But this was a very rapid event. However, there were signs of it earlier. And, you know, I kicked myself and I know you've kicked yourself too for, you know, how much, you know, did we miss? Yeah. Yeah. At least some of it. I mean, yeah. I mean, can I mean, movement and deposit

flows, I should have been looking at that sooner. Now I'm paying attention to it. Well, I saw the deposit flows, but I didn't connect the dots to how much stress that was, you know, here kind of, we were talking about this the other day or at the webinar yesterday. The thing I, you know, I look at these things from a 30,000 foot level down. Maybe I go to 20, maybe I go to 10. And I look and I'm, if I look at the aggregate statistics across the banking system, you know, I expected some dot-pods outflows because you saw a surreys, deposit during the pandemic because of savings or the fact I can't go out and spend. Right. So I'm not surprised by that. But I think it's, you need to look at the distribution across

all of the banks in the system because there's those banks kind of like out on the tail. That's where the problems, you know, are. And if you, if you're looking from a 10,000 foot level and don't look at the distribution, which I, I failed to do here, you miss it. And I think that's, that's the issue. Yeah. And when it gets to the issue where, oh, there's my dog bear,

sorry. Oh, no. We're dog friendly. We're dog friendly. Child friendly, you know, crazed economist friendly,

you know, or, you know, ecumenical. Hey, can I ask those? So the other indicator you're looking at is deposits.

And I think that's a good one because you're saying, look, particularly for smaller, mid-sized banks, that's the, they need those deposits to be able to go out and make loans.

If the deposits are flown out. If people are pulling their money out, then they don't have the ability to, it's much more difficult for them to find the funding necessary to go out and make a loan. So that's a pretty good indicator that, you know, there's going to be some credit conditions in general for the macro economy. And, you know, I mean, other things that I think are important as well is, um, in addition to that, you know, it really is a more economy-wide thing flows into money market funds versus other places. Did you see that data, by the way? Did you see the ICA, I-CI data, the most recent data? Did you see that another week of pretty significant outflow?

Yeah. I mean, inflow into the new money forms. Yeah. Into money market. And and and and and then the other issue of course is now, you know, watching. I mean, the stigma has come off the discount window but the special funding facilities, you know, we know who's using those. But I mean, I watching the swap lines, you know, that the Fed set up. I haven't. I've been looking at that at all. central banks. So that gives you a sense of stresses in the overall global banking system. And, and, you know, I said, you know, this is not just banking. This is financial fragilities. And I think, you know, I brought up a little earlier, Mark, you know, that, you know, the IMF all of a sudden moved after not moving for a long time, for obvious reasons, with Sri Lanka with a package.

And now they're moving with Pakistan. And there was, you know, as the swap lines were announced, there was dollar appreciation, which then put stress on some of these emerging markets that were already feeling stress. And, you know, one of the things from day one, I remember the Jackson Holt meetings and, you know, the 2020, 2021, especially in 2021, talking about normalizing rates and how that could have, you know, where we thought the natural suspects were of fragilities in the financial system were things like sovereign debt and how much sovereign debt we had taken on globally and which countries were at risk as the Fed in particular started to raise rates and would that have any, you know, sort of cascading effects through the global

economy? And there was an enormous amount of time spent in terms of thinking about emerging market risk and, you know, what was the exposure? Was there some kind of, you know, major hedge fund blow up out there that had made a major bet or a pension fund that had, you know, reached for yield as yields were so low for so long? All of those things, I think, are things that we need to take into account now. And so those are things that I'm watching as well. So just taking it back to the banking crisis. So senior loan officer survey, deposit flows, and you can, they have weekly data from the Fed, the H8 release. You can see what's going on with deposits. And they're blowing out of the system right now. Money market funds, you can see

from the, it's called the Investment Company Institute, I believe. They publish data on flows in the money funds. If there's a lot of flow in, too, that's coming out of deposits. Chris, have you looked at the recent data around discount window borrowing in the bank term funding facility? Did you see that recent data coming out of there or not? Not the most recent one. It came out yesterday. Yeah. And that showed another sizeable, this time a sizeable increase in the bank term funding facility.

I think it was up to $55 billion, $54 billion. Yeah. Discount window borrowing is still very high. So these are ways banks that are having trouble with deposits and in liabilities, funding can fill that hole. So they're calling upon the Fed to provide that liquidity that they need to meet their deposit out for those. So those are all good, good timely things, weekly things to watch, I guess. Yeah. Well, and you know, what's interesting to me is the stigma that's come off the deposit window. Yeah. And to me, that is how the system should work actually, because, you know,

we, I mean. Stigma, meaning a bank who, you previously historically, but bank went to the discount window. Everyone said, oh my gosh, this bank is in trouble. And then it became self-fulfilling. Everyone stopped doing business with them and they were out of business. Right. And so you couldn't go to the discount window and you couldn't do what it was meant to do, right? And be a backstop. And now, you know, I do think it is serving more of the function. And, you know, maybe that's a legacy of 2008, you know, one, nobody wants to be, I knew a lot of bankers who were not happy about having to be, everyone had to sign up and say, we're all using the discount window now so that it wasn't a stigma and they weren't happy about what that meant for them to have to do that.

But at the end of the day, that may be one of the positive things from the 2008 crisis that we now have a more functional system that doesn't penalize banks in this kind of situation. You know, the other indicator, I just throw it out there where there was never a stigma, was federal home loan bank advances. So the federal home loan banks provide loans to banks. who put up Treasury and mortgage securities as collateral, kind of served like the bank term funding facility. And that also, those advances have also surged to record highs.

Yes. Also indicative. And I think that's weekly data too. I'm pretty sure we can get weekly data, certainly monthly data. And that's another good indicator of, you know, potential stresses in the system. And that would translate through in terms of credit availability. Well, and, you know, all this we're looking at is part of what you would expect, right,

from the Fed tightening. Yeah, absolutely. And so this is, this is part of normal. This is, you know, part of the truth.

This is how works. And it's, you know, the hard part is, you know, you never know, the word. And actually it was,

you know, I was thrilled that Jay used the word in the press conference. He looked really, it was rough, rough couple of weeks, 12 days from me. He actually said 12 days.

I was expecting to say 12 days and how many minutes and how many hours. Yeah. But, you know, there was, he used the word non-linearity. And, you know, when I'm talking to my audiences, I'm like, you know, I found out only one and four people knows what exponential actually means.

So one in four, is that a, yeah, apparently one in four. Official survey. Apparently, that's one of us in this group does not know what exponential. Well, it's funny because my son has said, you know, well, you know, it's clearly not the people around this table. So who is it? But, you know, non-linearity, you know, that is hard for people to get their hands around, too. I'm like, well, you don't want to get to moments where, you know, you've got the straws sort of piling up on the camel's back.

You don't want to break the camel's back. But it doesn't necessarily mean the back breaks per se, but it does, the weight goes up more. Yeah. And the non-linearity of this tightening that we're seeing now, I think it's much less predictable. And we're all trying to assess how much. And like, to Chris's point, how much is this even Paul said, you know, Chairman Powell said, you know, it's a guess on how much tightening this is equivalent to. And I think that's a really hard, I mean, I'm having a really hard time getting my arms

around, you know, the numerical estimates. Yeah. Well, we came up with two to three quarter point rate hikes. It's equivalent the economic consequence, which is not senior ballpark, you know. Yeah, so it's not far from where we are. Yeah. Yeah. So 50 to 100 is, yeah.

But there is an offset here, and I'm just curious how big an offset you think it is. And Chris, you've also done work here too, is lower interest rates. So as you pointed out, treasury rates are down a lot. Yeah. Now, mortgage rates and corporate bond rates haven't come down nearly as much. In fact, I don't know, Chris, if high yield corporate bond yields even come down, maybe they've just. Probably wide note. I haven't seen it.

I don't think they actually go up. The yields go up or the spread. The spreads went over treasuries went up, but did the yield go up? I'm not sure that the yield one up. Do you know? Yeah, I think they're pretty flat. Then the issue too is, you know, and the mortgage one is an interesting one because, you know, the housing market, we know it's so grossly under supplied. I mean, this is just, you know, I mean, there are people who've got their houses.

I mean, I'm in a house that's paid off because I've been in a long time and, you know, it's paid off in full. But, you know, then you've got, that's what, 42% of the market, then you got over 90% in some kind of a fixed rate mortgage and they just don't want to move. and they've got people sort of tearing down their existing house and rebuilding it to trade up instead of that's, you know, a new thing that's going on. But on the mortgage side of things, you would expect to see, and this is the part that we're trying to grapple with as well, even as rates come down, because we've seen every time rates come down, you've got those buyers, you know, especially at the any supply that's out there. There's still bidding wars on the cheaper entry level stuff because people want to buy it. That's where the millennials are aging into, and they want to get those homes. And there's just not much supply. However, you know, I would, you know, counter that I would expect to see even tighter

mortgage market conditions in terms of lending standards. But in, in terms of, in terms of, in terms of, in terms of, you mean? Because Fannie Freddie and FHA aren't. Right. So they, they can do that. But in a jumbo market in particular, but also, you know, I mean, you get to the jungle market pretty quickly in terms of, they. do have different jumbo markets for different markets, obviously, because what's considered

energy level in New York is not considered entry level in a suburb of Chicago. But there is, I do think there's going to be some tightening of lending standards as well that are just, you know, going to be a little harder for people on the margin to get in. Yeah. And that, and that, you know, that may not have much of effect because there's just not that many people that can get in. Right. Right. The number of the volume of activities. is limited. Right. I think the, at least from memory, the jumbo market is probably a quarter of the origination market. So not, it's meaningful, but yeah, that gives you context. But Chris, mortgage rates have come down, right? Oh, yeah, they've come off their highs. Yeah, how far have they come down? Do you know?

They were at six and a half last time I'm at. Six and a half. Yeah, they went over seven. They were over seven. So we're down about half a point on fixed mortgage rates. So that should help a little bit offset things, no? It should. Well, and the issue is how much activity do we get out of it because of the constraints in the housing market, right, as well? So I would expect a lot of demand and you see people going in with adjustable rate mortgages, which, you know, I understand why they want to do that because I think, well, in a year, maybe rates will be lower and why lock into a higher rate, get in the door and buying up whatever comes up and supply on the new market is a little more that little more supply, although it tends to be skewed very high.

end. Yep. So this match between supply and demand. Demand is that, you know, sort of 350,000, 400,000 and demand and supply in the high end and the new market is much more expensive. They're trying to come down, but, you know, they had built a lot of more expensive homes. But the supply, anything that comes online, I expect to be snapped up pretty quickly, but most people don't want to sell. Yeah. Yeah. Okay. So just to do get some of, offset. But I just don't think it's a big enough one that, you know, the housing first in, first out. And, you know, all of a sudden, our housing price scenarios look a lot more, look stronger than they would have even, even in the beginning of the month, because, you know,

rates now look like they're going to be a little lower. And it doesn't see, I mean, it's been amazing how little a movement in mortgage rates has brought people back in given affordability. Yeah, it's interesting. So we've got this credit tightening, big negative. We've got a little bit of this decline in interest rates, not a whole lot, maybe on the mortgage side, not so much on the corporate side. So maybe a little bit of offset, so a pretty significant offset. Hey, Marissa, are there any other channels that you can identify between this banking crisis and the real economy? You know, there's credit, there's the availability of credit, there's the cost of credit. Is there anything else you can identify? Any other channels?

No, I think Jobs is the other one that Diane brought up, which goes to credit. credit could go directly to the financial services industry too. So, yeah, I think those are, I think those are the main ones. You know, Chris? Any other channel? I'd say the elephant in the room is confidence. Yeah. Yeah.

Yeah. If it's into when you start hitting the volatility and the risk premium. Yeah. Yeah. So if consumer is a non-linearity. Yeah. If they lose faith, even with a cheaper mortgage rate out there, they're going to be cautious and pull back. And if that happens, right, we're going into recessions.

Right. So if consumers are spooked by all this, and certainly judging by my anecdotes in my family and the questions I got around, is my money safe, you know? Yeah. People are pretty nervous, I would say. So the question is, are they going to run for the hills or not? that's the key question. And so far we don't have any evidence one way or the other on that one, do we? Not nothing out there so far. I was with a group of CEOs of credit unions yesterday. And they were saying just how many calls they're just getting from, you know, depositors.

Just is everything okay? Is the bank okay? Am I going to be able to get my money out? So it seems like just talking to people in the banking industry. You know, everyone is a little bit skittish by this, right? So, yeah, I think the confidence channel, you're right, is huge. Yeah. So, Diane, here's the key question. Given everything we just said and given, obviously, your view that the economy is headed to a recession here quickly, why in the world would the Fed raise interest rates as they did this week?

What's going on? So clearly they wanted to signal their confidence in the banking system, although they rolled it back from, you know, just two weeks ago. It seems like an eternity in the economy. Just two weeks ago, we had bid tier, you know, J. Paul say, you know, 50 basis points, the next meeting and a higher terminal rate. And so going to a quarter point, they decided that would be a signal in their confidence in the system and where we're at. and that they were basically from where they were, assuming somewhere implicitly about a half percentage point tightening in the overall economy due to the credit tightening we have. That said, you know, my own view would have been to do a pregnant pause and say, you know, we'll deliver later if we need to. But let's assess where we're at given we know there's tightening in the system.

And, you know, what's interesting to me is still, I think the concern at the Fed is, one, I think they want to delineate interest rate policy from financial stability, which I'm not sure you can actually fully do that. And two, how do you really derail what looks like it might be a more sticky inflation in their worst nightmare is, you know, if something were to happen and they buoy the economy enough? that they don't derail that inflation. And you get something that is a more persistent bout of inflation. And, you know, the errors, the Fed is trying to avoid, of course, are the 1970s and, you know, sort of this more baked in inflation. But, you know, as a risk hedging institution that the Fed is, I was a little surprised. I don't get it at all. I mean, one week, you're setting up a credit facility to provide liquidity to bank so that they can pay depositors.

And then the next, literally the next week. raise interest rates that puts pressure on the same banks. And it's a whole argument that you're trying to restore confidence. That makes no sense to me. I mean, because everyone knows that the banking system's under a lot of pressure

and credits a problem. So what, who's fool in who? Well, you know, and I, you know, I have a lot of empathy for your views. And it's not just sympathy because I was at the same place. And, you know, if I was, you know, I'm not sitting at the table. So, you know, doesn't really matter what I would have done.

But, you know, looking at it from, where we were. You know, the fact that the European Central Bank went, I think that was a different issue. And I wouldn't have used that as the, you know, the indicator. I do think one of the things they were worried about is they had 85, 82 to 85% priced in, a 25 basis point hike. And so the market was expecting it that said about over 50%. That's because of what they guided. I mean, they, if they had said one small thing.

But they couldn't. It was a blackout period. Oh, okay. Good point. I hadn't thought of it. So part of what happened was we went from 50 basis points. And right after that, we went into the blackout period where the Fed could not speak. They couldn't, they couldn't guide.

But, I mean, let me ask you this question. If they had done, if they paused, would we have seen red on the screen or green on the screen? You know, it's not clear to me. Not clear. And I think that you could have messaged. I mean, the messaging is really difficult. And what's interesting is a recent study on messaging. I mean, one, Chair Powell has more press conferences and has had them through a more volatile

period in time than any Fed chairman. And so on the volatility during the press conference is more than any other thing, the statement, the action, it's the press conference received the most volatility. And so the press conference really does matter. That said, you know, even taking out the recent. studied looked at even taking out sort of pre-pendemic press conference of Jay Powell versus other press conferences because they're longer. And he's more willing to talk about these things in a different way. There's more volatility in financial markets as a result of that. And we can say

that it's good, bad, or indifferent. But I think it's really important because it tells you how much power they have in messaging at the press conference. And I actually think you could have walked in and said, you know, we're going to pause right now. We're keeping all options on the table to go further. And I would have suspended their summary of economic forecast because given the uncertainty, we have a precedence for it, March of 2020. But, you know, why give a forecast when you just don't know where the economy is going and how much credit tightening is already in the pipeline? So, you know, my preference would have been that. And I think you could have message through that saying we believe in the stability of the system and we're, you know, we've got to, we think there's a

ring around this. But the bottom line is the Fed's goal was to tighten credit conditions and slow inflation and slow the economy. So, you know, my view is probably aligned with yours on that. And I'm not sure that you can delineate financial stability and interest rates as much as the Fed would like to argue that you can. Not in this environment. You can't. Not when my mother-in-law is asking, hey, is my deposit safe, you know, is my save, is my CD safe in, you know, the local bank? I mean, it just can't, can't divorce the two. But anyway, here we are. But it's, it is. And, you know, I mean, you and I would have done it differently, but we know, we're not in that decision. And, you know, I turned down the ability to be in that decision a couple times.

So, you know, that's, you know, it is what it is. But it is, it was a calculus they made. And you could tell that, you know, they did, I mean, the fact that he admitted that they, they, they thought about a pause. I think that was important. And, you know, but the end of the day, I mean, it was, it was pretty clear that this has been a rough couple of weeks. And, you know, just seeing, you know, Jay Powell's tenure, I think a lot of people forget. And I think this is important, Mark, for you and I, too, because, you know, we think of, this is just not data. This is people's lives, right? We're worried about people's lives. The economy is about people's lives. And these, you know, everyone hates the Fed.

I see him as a political panata all the time. And I don't know, I agree with them. But that these people internalize this. And you can see it in their body language. You can see it in when you deal with them, how concerned they are about getting things right. And it's hard to get things right when you've gotten a visibility. And so in my view, when you got no visibility, you probably shouldn't be doing anything. Yep.

Which is where we're at. Yep. Well, it's like it's like a policy 101. If you're unsure, you know, then you, I think that would argue strongly. You err on the side of accommodation. You don't, you know, press, you know, press on the brakes. You just don't press on the accelerator, but, you know, take your foot off the break for a little bit just to see what's going on. Just to take a breath.

I mean, to me, I've always argued that fighting inflation is a marathon, not a sprint. Yeah, exactly. That's a good way to put it. And, you know, you and I are runners, you know, and at some points of times, sometimes, you know, I mean, the hardest mile is, you know, where a lot of central banks drop off, but it's, you know, and they fall short of the finish line. But part of, you know, getting through the hardest mile is focusing on getting, overcoming, you know, mind and body that wants to stop, but it's also taking a moment and focusing

and taking a breath. And I think that's a good way to be thinking about this. And I thought it was, you know, I kept, you know, my colleagues and I, we debated this at length. You know, what do we think is going to happen? And we just kept saying, you know, given the risks. And they did. The Fed said there's downside risks. We're raising rates with downside risks.

Again. Okay. Right. Yeah. I agree. Right. No. I mean, that was.

I'd say we're pausing and there's downside risk. Well, anyway. you're right though. No, I think we're sort of in a similar place, you and I, in terms of what we think, you know, I mean, I understand the inflation concerns, but I don't see these as, I didn't see this as, you know, and, you know, Muhammad O'Learyans are very good friend of mine. I think the world of them, and he's been, you know, the Fed's late. I mean, I argued the Fed was late.

However, if the Fed had moved, you know, say three to six months sooner, quarter point moves, and they had realized it wasn't transitory a little sooner, we still would have had a very disruptive rate hiking cycle. The counterfactual on this is not that we'd be where we wanted to be and it would have been a nice smooth transition. And I think that's a little disingenuous too. And just to raise rates because you'd want to look strong on inflation, I don't think the tradeoff is between any instability and inflation.

I'm not at all critical of what the Fed did a year ago. I mean, there was the problem. pandemic, there was Russian invasion. I, you know, I, I, you know, it was a mistake, obviously, but I, I don't think it's appropriate to be critical of them, but if they, you know, this move is on them, you know, and it's yeah, yeah, this is on them, you know, this is harder. This is harder. Yeah.

Anyway. And I was, you know, I added out there, pregnant pause, you know, be ready to deliver if you need to. Otherwise, you know, but, you know, that, that, it, it was. they came to a consensus. I think they had to come to a consensus. But the fact that you also look at the dots and that someone was close to 6%,

you know, where there was pushback too. Yeah, yeah, for sure. Hey, let's play the game, the statistics game. Yeah, yeah, let's do that. Yeah, before we run out of time. Yeah, and just to remind the folks, the game is, we put forward a statistic. The rest of the group tries to figure that out

with the questions and clues and deductive reasoning. The best question, or we should say the best statistic is one that's not so easy. we all get it immediately not and one that's not so hard we never get it if it's apropos to the topic at hand plus and it's tradition to begin with marissa marissa what's your statistic uh it is 14.4 percent i know what it is i i want everyone you do i know everybody knows what that is god i think it was going to be this easy it was a light statistics creek i think that's true it kind of was, yeah. Oh, Chris, I'll buy, Diane, do you have?

It's in the housing market. On the count of three, we both say it, all right? It's not in the housing market, but it's not a housing market. Okay. No, Chris, I will bow to you. Go ahead. You deserve the cowbell. That is the financial obligations ratio.

That's right. That's right. It's the financial obligations ratio in the fourth quarter of 2022. This just came out this week. This is data from the Fed. They put out data on the share of, uh, household disposable income that is going to debt payments. So there's also a debt service ratio that they put out that's accompanied by this. The financial obligations ratio is a bit broader

because it includes things like rent for people that are renting as opposed to homeowners. It includes auto lease payments. It includes, I think it includes homeowners insurance payments. It's a bit broader. So 14.4 percent, very, very low and pretty, much unchanged over the last three quarters. And this is actually still lower than it was prior to the pandemic. So if you go back in the months leading up to the pandemic, the financial obligations ratio was 14.6%. So we're almost there. But it's extraordinarily low. And it goes to both, we know that debt is growing, household debt is growing. And the cost of debt obviously has gone up with interest rate hikes, but income has gone up too. And so as a share of income, it's still very, very low. So I just,

I picked this to show still the sort of resiliency and bulwark of, you know, household balance sheet strength in this economy, which probably goes a long way to explaining why we are not in a recession and haven't been yet. Absolutely. You know, why, you know, why the financial obligations ratio, the debt service burden, very low, stable. why are we seeing these, it's not, this seems, doesn't square with a big increase in delinquency that we're seeing in cards and, uh, and secured personal loans. Is it just that we're, it's, again, it goes back to the distribution. We can't look at the aggregates. We've got to look at the distribution and it's low income households. Dead service is a lot higher. Is that what's

going on? Yeah. And I think also, yes, so delinquency rates for, for auto loans and consumer installment loans are now higher than they were prior to the pandemic. And rising fast, right? And rising. But for the biggest part of debt, which is mortgages, they're still very low and they're still lower than where they were. So yes, you have segments that are rising and you're right. That probably goes to, I'm sure if you were to cut this by income, it would look very

different for lower income households than it would for middle or high income households. But it's still a relatively small piece of overall consumer. debt when you take it in totality. You wanted to say something? Yeah, you know, in the auto lending business as a result of increases in interest rates. And that is something that I think you're seeing the subprime echo and the affordability in vehicles is really low. All cash purchases on vehicles.

And I think the sticker price as a, I mean, the actual transaction price as of December was around $47,500 on average. that's a big check to write out for an all-cast purchase for most people, right? And the demand for use vehicles has gone up yet again. And so the subprime aspect of this really hard, particularly for lower-income households that also got squeezed by higher gas prices, higher insurance costs, higher maintenance costs on their vehicles, all of those things. I think that's where you're seeing some stress. but it is an area that got that waiver. And so they kept lending in subprime.

And so I'm not surprised to see it there. Yeah. Yeah. Okay. Let's move on. Chris, what's your statistic? All right. This one is difficult.

Oh, but you would have been, here's my hint. You would have, during the pandemic and the teeth of the pandemic, you would have known what this number was. You would have been tracking this. Number of people sick with COVID? Nope. Let me give you a number first. Okay.

I'm just, I'm just got it. Two million, 189,372. Oh, my goodness. Is this a statistic that came out last week? The 22nd of March, yes. Say it again, 2,000. 2,189,372. And it's a statistic we would have known in the middle of the pandemic.

I'm thinking about it's not the number of people who are out sick and unable to work in the household survey was $1.3 million. That also didn't come out last week. Is it job market related? No. Is it related to the banking situation? Oh, is it something that's unemployment claims? Nope. Is it related to supply chains?

No. Oh. Is it a demographic statistic? No. No. It is the number of people. Chris, is it related? No, it's not related. Is it related to the housing market? No. It's a statistic that you said they came out on Wednesday. Yes, it comes out daily. Oh, comes out daily.

Yeah, goodness gracious, sakes a lot. Can you give us one more hint without giving it away? It relates to consumer activity. Oh, is it is the number. PSA throughput? No. Oh, what's that? PSA throughput. TSA checkpoint number of people traveling to TSA checkpoint.

Diane, way to go. That's a great one. Yeah. Why did you pick that? I'm like, wait a way, wait a way. That's okay. I would have never gotten that. That's great.

Why did I pick this? Well, it's, you know, we're looking for measures of how consumers are responding. Yeah. I'm talking about the confidence. Yeah. But you got me when you got it's like, oh, it's the throughput number. So you gave it away. Yeah.

So spring break's not canceled yet. People are traveling. So this is right on par with where we were prior to the pandemic and higher. 2019, yeah. Yeah, 2019 and higher than. 2019 level. Yeah. So consumer so far at least are reacting positively.

So no sign yet of any. Of course, those were flights that were booked three weeks. Yeah, yeah. You know, I'm trying to give you a positive spin. Well, I'll take it. I'll definitely take it. Yeah, for sure. But that's a good thing to watch.

You're absolutely right. Let's watch that carefully. Yeah. It's a very good one. In the labor market, and to add on to that, we hit an interesting inflection point. We're finally seen in the monthly labor market data, even though the number of people who are out sick and unable to work is still elevated relative to pre-pandemic levels. We're hitting month after month.

February was the second highest record for the month of February. But December was a record. January is a record. The number of people out and unable to work because you're on vacation. Oh. In the household survey. I didn't know. That's a data point.

Is it a data point? And the household survey. Yeah. I did not know that. Yeah. That's so cool. And what's really cool now and the inflection point now is that the number of people out on vacation has exceeded the number of people out sick and unable to work as well.

Ah. Oh, that now we, I'm definitely going to start watching that every month. That's a good, that's a good one. It's a good number. Yeah, very good number. Okay, Dan, you're up. What's your statistic? So sadly, you know, I didn't know it had to be this week.

So, um, no, it doesn't. No, no, no. Okay. Mine's 1.8 million. 1.8 million. Is it related to UI claims? No. Okay.

Is it really good to the job market? Yes. Is it from the household survey? Yes. Okay. It's not what we just talked about. It's not people out sick. Nope.

That's $1.3 million in February. Okay. All right. Knew it was something like that. 1.8 million. So, okay. There's so many data points in that household. I also have some really great data on the number of people with two full-time jobs, 12-month moving average.

But I'll get to that in a minute. Oh, my gosh. She's like a master player of this game. Is this people not at work, employed not at work for a particular reason? Nope. Is it a demographic cut? No, it's not a cut. Okay.

But it is, it is, it is, it is from the household survey. Okay. Is it the number of people out of the labor forces say they want to work? I think that's lower than that. No. Okay. No. Am I, are we in the right ballpark in terms of, sort of kind of sort of.

Yeah. It's not an obscure number. It's not an obscure number. Okay. No. Okay. Well, it's not the number of unemployed. No, no.

Is it people out of the labor force for, is it a cut of people out of the labor force? No. All right. I think we got to, we're tortured here. I think we're going to call it. Okay. Okay. So the reason I think of December, it is $1.8 million from February 2020 to February

2023 that the labor force grew by. That's only 1%, which is one third the pace of the 2010s. The number of foreign workers grew by 2.1 million, which means absent the number of foreign workers in the labor force, which caught up with the benchmark revisions in January and February, the January benchmark revisions to, we've got more foreign workers, which have a higher participation rate, helped to elevate participation in the labor market as well, within that immigration. We would have had a contraction in the labor force between February of 2020 and February of 2023 without immigration. Yeah, it's pretty amazing. That is an amazing. And it's one-third of pace of the 2010. Yeah.

I mean, I think the number of foreign-born and labor forces kind of has been, now has kind of been growing at its pace pre-pendemic. It's $2.1 million above February 2020 to February 23. So it's $300,000 down without the foreign-borns. Yeah. But we're back to normal kind of sort of with the foreign-born. Right. But the domestic, the folks that are born here, that's just so weird.

It's just so far. Yeah. Now, obviously, there's things like retirement. There's things like parents with young children. Yep. Maybe some COVID in there effects. There's also the male situation. I mean, especially white men, prime age white men.

And great book, Richard Reeves. I don't know if you've read his book. That's a terrific. book on male participation, but that we had a she session and that still prime age men didn't come back, even though we had a lot of male-dominated professions go up in demand. And women are much more likely to cross into male-dominated professions and men are to cross into women-dominated professions. But really interesting.

But, I mean, the fact that, you know, the labor force is still, you know, we're really supply constrained. without immigration. Absolutely. You know, that gets so long. And also I think there's some major issues that we need to think about in terms of everything. We've had a record every month of people out on parental leave, which I think is a sign of expansion of parental leave, but also a record number of people out last month of people

with child care problems. And that is, you know, these are things that have persisted and got worse during the pandemic. and are not uncoiling very rapidly. Yeah, that's a good one. That was a very good one. I wasn't thinking in terms of changes. I was thinking in terms of levels. Yeah, I know.

But I would never have gotten that anyway. So, hey, you want to hear my statistic? Yeah, last one. Okay. I don't know if this is hard or easy. 17.6 trillion. And I'll give you a hint, a big hint, to move things along. It's related to the banking situation.

Crisis. 17.6. trillion. Is this the amount of borrowing at the discount window over the past? No, no, no. 17.6 trillion. Are you kidding me? 158 billion and came down a hundred million, no, no, no, no.

No, no. No, no. That against, okay. That would be, that would be more than a crisis. Yeah, I'll get dollars, $17.6 trillion dollars. and it's top of mind. Just say that. Related to the banking situation.

The total amount of some asset class. Or how about on the liability side? Deposits, $17.6 trillion in deposits. It's down from a year ago, $18.1 trillion. So it's down, you know, $500 billion. As of when? Oh, last week. It's weekly data, the H8, H8 data, the Fed's H8 data.

And did you know this? There's only one other time in history, at least in the history we have back into the 70s, that deposits actually fell on a year-over-year basis, and very, very briefly, and that was in the mid-90s. It's never declined, never declined. And it's declining, you know, year-over-year-over-year-old basis. are now 3%, which is quite significant. Here's the other interesting thing. You can look at the data, large banks, small banks. I think large banks are defined as the top 25 banks in terms of assets. That's how it's defined, I think, in the data. That's where the declines are occurring.

For small, mid-sized banks, it's flat. It hasn't declined at all. So all of the deposit runoff, at least, you know, so far, I'm guessing that might be changing in the current environment. but up to this point in time has been large institutions losing deposits, which I found fascinating. But that's really important. It also gets to me the larger issue. And this is one I'd love to get your review on as well, Mark, is, you know, you say, you know, we look at these benchmarks. And the reality is coming out of the pandemic, reopening, shutting down an economy, happened overnight. Reopening happened in phases.

which created frictions. And, you know, the idea that we can seasonally adjust the data that we're measuring it, you know, can measure the shifts in the economy that's happening so rapidly. And then the speed with which things can change in this economy, we talked about the overhang of savings. And the reason people had a lot more deposits because, you know, they weren't spending on things. And they got some stimulus funds as well, you know, all of that. And that's dissipated. but that this, you know, trying to put this economy into these, you know, the historical format

is a really hard thing to do. I mean, it's always difficult in a crisis, but I think, you know, we have to really be mindful not to, you know, do too many rules of thumbs just because of how hard it is to even capture. I mean, I have a lot of questions about, you know, retailers are saying, you know, we're ready for a recession mode. And you look at the retail sales for the first two months of the year. and you say, well, these retail sales look like they're really great. What am I missing here?

You know, and obviously the comps, you know, the credit card data, the comps from a year ago, remember Omicron Wave, the first one? Yeah. I mean, you know, so, you know, you have that as well, but that feels like 20 years ago, but it was just. I know, I know, I know. I used to say, you know, this was like aging in dog years. Now it's like aging and insect years, you know, the way that, I mean, you know, the last two weeks

alone. But I think there's a really difficult time. in trusting, you know, how the seasonal adjustment is of the data. And they're trying so hard. I give the, you know, statistical agencies a lot of credit for trying to do the best they can. But how do you seasonally adjust against the surge in extreme weather events against reopening and closing an economy? And, you know, how does, how do we think about these, you know, measures, you know, like,

well, you know, Chris was saying, well, TSA throughput, you know, well, it's bad. you know, to 2019 or a little above. That's our benchmark. But is that really the right benchmark either? You know? And then you add high frequency data into the equation where a lot of the high frequency data has no history to it. And we all, you know, flooded to it to look at it for the pandemic, but then does it

have the same meaning going forward? Yeah. No, you're absolutely right. I think very difficult to understand what's going on, even if we had perfect data. now throw in the data that we have. It's really obviously very difficult and humbling, obviously. Yeah, yeah, by using the data point that you're pointing to. I mean, it says, you know, yeah, something, it doesn't usually happen,

but it doesn't necessarily mean, it could have been what was sustaining spending and helping to boy spending through an inflation bout. Yeah. You know, I mean, it's part of the resilience of the economy as well, right? Yeah, absolutely. Well, we've taken a fair share of your time. And I thought an hour, we're definitely well over an hour. So I think we probably should call it a podcast.

Well, you know, I feel a little bit bad about that because I'd love to explore your pessimism in greater detail. Because, you know, that would fit right in with Chris's thinking. But I don't think we have time for that at this time because I know you have to get going. But we'll definitely, if you're up for it, have you back. and hopefully you're just dead wrong. On every level, I hope you're dead wrong. Yeah, you know, I mean, some things you actually hope you're dead wrong. Yeah, I hope you're dead wrong.

You want to have people, you don't want to have these disruptions in the country, you know? Absolutely. So I'm right there with you. Okay. Hope springs eternal. Indeed. And, well, with that, we're going to, uh, anything, Chris, Marissa, anything else you'd like to say? Are we good?

We're good? Okay. We're going to call this a podcast and look forward. Thanks, thanks everyone for listening in and look forward to next week. Take care now.