The Best One Yet - 🦅 “Fed Prez” — REPLAY: Interview with Federal Reserve President Austan Goolsbee on Money, Inflation, & When You Can Buy a House

Episode Date: August 27, 2026

Whip open your wallets, because no one affects your paycheck like this man. We just sat down with Austan Goolsbee — President of the Federal Reserve Bank of Chicago. He’s a Macarthur Genius, former Chair of Obama’s Economic Advisors, and the coolest economist we know: Picture Ted Lasso meets Paul Volcker… He’s the Maestro of our Money Supply, and he guided the economy through the ‘08 financial crisis and today’s Inflation Situation.So Auston spilled the money beans for us: The 2009 phone call with the President that was the worst financial briefing since the Great Depression… What it’s like in the room when he votes to change interest rates (spoiler: The table is huuuuge)... How he’d grade outgoing Fed Chair J-Poww… and why he’s not a “Dove” or a “Hawk” — He’s a “Data Dog.”If you want to know when you can finally afford buy a house, then Austan Goolsbee has the insights on the forces affecting that — And he makes dropping data sound as smooth as a beer commercial.CHAPTERS:Intro: Austan Goolsbee Joins TBOYObama's "Worst Briefing Since 1932" — Goolsbee On The 2009 Financial CrisisPaul Volcker's One Rule For Every Crisis: Don't Blow Your CredibilityThe 31% Housing Rule: Why Most Americans Are At Foreclosure RiskWhy Housing Has Compounded 5% A Year For 25 YearsDid Tariffs Cause Inflation? Goolsbee On The 1% BumpIs Stagflation A Real Threat In 2026? Goolsbee Says "We're Not 1978"Will AI Take Your Job? The Lump Of Labor Fallacy ExplainedWhy The Federal Reserve Has 12 Regional BanksInside The FOMC: How The Fed Actually Sets Interest RatesGoolsbee On Kevin Warsh: The New Fed Chair & Why The Job MattersThe "Data Dog" Approach: What Goolsbee Watches Instead Of CPIFed Independence: Why Inflation Roars Back Without ItGoolsbee's Jerome Powell Grade: First Ballot Hall Of FamerRapid Fire: Sunk Cost Fallacy, Ditka, And Best Chicago RestaurantNEWSLETTER:https://tboypod.com/newsletter OUR 2ND SHOW:Want more business storytelling from us? Check our weekly deepdive show, The Best Idea Yet: The untold origin story of the products you're obsessed with. Listen for free to The Best Idea Yet: https://wondery.com/links/the-best-idea-yet/NEW LISTENERSFill out our 2 minute survey: https://qualtricsxm88y5r986q.qualtrics.com/jfe/form/SV_dp1FDYiJgt6lHy6GET ON THE POD: Submit a shoutout or fact: https://tboypod.com/shoutouts SOCIALS:Instagram: https://www.instagram.com/tboypod TikTok: https://www.tiktok.com/@tboypodYouTube: https://www.youtube.com/@tboypod Linkedin (Nick): https://www.linkedin.com/in/nicolas-martell/Linkedin (Jack): https://www.linkedin.com/in/jack-crivici-kramer/Anything else: https://tboypod.com/ About Us: The daily pop-biz news show making today’s top stories your business. Formerly known as Robinhood Snacks, The Best One Yet is hosted by Jack Crivici-Kramer & Nick Martell. Hosted on Acast. See acast.com/privacy for more information.

We are going to glaze you. Like, donut prices are going to pop, right to glaze you so much. We wrote a little poem for you, basically. That's how we wanted to bring you on to the show. That's not my way, but it is... Yiddies, check your checkbook at the door and whip open your wallet.

Because today's guest sits on the Jedi Council of the American economy. Austin Gouldsby is the president of the Federal Reserve Bank of Chicago. One of 12 Fed presidents, he looks over our markets like Batman does. And when the Fed raises or cuts interest rates like it's done a dozen times

since the pandemic, Jack, Austin is actually one of the votes that made that happen. Boom, he's got a Yale PhD, a MacArthur genius, worked at the White Financial Crisis. And according to student surveys, he's the most popular professor at the Booth School of Business. And just like Dick Butkus, he is leading Chicago's defense, Jack. But instead of blitzes, Austin does beige books. Basties, it's been said that this man has the mind of an economist, but the voice of a beer commercial. Personally, he reminds us of a financially trained Ted Lassum. So on today's show, we're going to hear where our economy is headed and what's up with all those interest rates.

And whether Stagflation is a real boogeyman you should worry about or not. We'll also learn what the Fed actually is. From the president himself. Yeah, it is we have with us, the prince of policy, the maestro of the money supply. And the king of quantitative easing. Austin Gouldsby as president and CEO of the Federal Reserve Bank Up. Should I do it in an accent again, Jack? Go for it.

Chicago. And today's interview with Austin is the president. best one yet. Austin, great to have you with us. Man, half of that was BS, but I really enjoyed it. I really enjoyed it. And I do, from my first day, you can ask anybody here, my first day, I said, look, I'm a fan of da-pairs, and this is daubank, and that's the way we do it. That's the takeaway right there. Austin, so, so great to have you with us. You know, Jack and I were a guy of any deep T-boy style to your background. Your dad ran a trailer manufacturing company. not a typical finance pedigree,

even though you ended up in the most financier financial jobs you could possibly have. I know you got this Midwestern humility, but your resume is jacked, Austin. We see MIT, we see the University of Chicago, we see Yale, plus a secret bullet point underneath your Yale part. Skull and Bone Society?

Sorry, guys, I've got to go. What about the secret handshake? We're supposed to learn that one on here. Now, Austin, before you worked at the Fed, You worked at the White House under President Barack Obama. Okay, let's paint the picture, Jack. First day on the job, January 2009, Lehman Brothers, and AIG declared bankruptcy just a few months earlier. Unemployment was double what it is today, and the stock market was down.

Get this. Nearly 50%. Okay, so no big deal. Chief economist, you're right there. No pressure. What did you tell the president on day number one of that catastrophe? It was awful. Thank you for bringing up such a painful memory.

I remember before the Washington, D.C., Obama wins. The financial crisis began in the campaign, and we had a briefing. Obama, I had known for a long time. We were both the U.S. Chicago guys. Michelle was way more famous than he was. Yeah, big job at the university. When he first started running for the U.S. Senate, his people called me. His daughter, he has two daughters, and our oldest was in the same school as them,

run by the University of Chicago. And so I kind of, I vaguely knew him as the dad from the birthday parties. And his people called, it was like 2003 and 2004. Could you help here? I was like, are you talking about Michelle Obama's husband? They were like, his name is Brock. I was like, who cares what his name is? That's Michelle Obama's husband.

So he had named Tim Geithner, Secretary of Treasury, Larry Summers, Hed the NEC, Christie Romer, Z, and CA. All-starcast. They had a meeting. in the transition, it was in December. Paul Volker flies in. He's about 80 years old, his giant guy. Famous former head of the Fed.

A snowstorm hits so you can't get a cab. So there's Paul Volker. Come taking the subway. He's marching through the snow. We go to this meeting. Lehman has happened. We're in the heart of the financial crisis. The tarp has passed.

Each person is to talk about one thing. I'm talking about housing. I'm like, housing's a disaster. sir, we're down. We got $700 billion of negative equity, and everybody may walk away. And if they do, we don't even know what's going to happen. Tim Geithner's like half the financial institutions in America may be insolvent. They blew through all the tarp money. We may need another trillion dollars of tarp. Christy Romer's like, we're going to need the biggest stimulus of all times, bigger than the new deal. Partway through the thing, Obama's like, is it too late to ask for a recount? You know,

he says it was last. So it finishes. The meaning finishes. And I go up to him and I say, that's the worst briefing that the incoming president has had since 1932. Franklin Roosevelt, 1932, maybe since Abraham Lincoln, 1860, you know, where they tell them, oh, the, you know, the country is going to break apart. Obama says, he's not even joking. And he says, Gouldsby, that's not my worst briefing this week. And I was like, oh, God. Oh, God. So that's mostly what I remember from that, from that time.

In January, it was like one mess after another. Now I feel bad, Jack, because I think January that year, you and I were trying to win a beer pong tournament in college. And in a way, so was I. So was I. But here's the reason we wanted to start on that note. You're one of the very few people who's been at the policy table for both the 2009 Great Recession and the financial crisis and the current inflation situation that we've been

dealing with for a few years now. So we wanted to know, what is the one lesson from 2009 that is actually useful right now? But hold on. I started to fit in 2023. So if you got complaints about inflation, that was before I got there. We've been trying to fix that since I was there. What's one lesson that applied in both times? This is a good question. 2008 and the inflation crisis, they're pretty different. They're pretty different because one, of course, this is. the financial collapse and the slow comeback. And this inflation was partly overheating from stimulus and low rates and partly a bunch of big supply shocks, whether that's the supply chain breakdowns from COVID or the Russian

oil. I think for policymakers, Paul Volcker, I work with very closely in the financial crisis. and he was a great friend and a personal hero of mine. And as it was going through the crisis, I was the most annoying young guy ever because I was like, tell me about 1978, what happened with this? You know, I'm asking him.

I'm asking them all the time. And he always said, when the crisis comes, the only thing that you have, the only true asset that you have, is your credibility. And don't do anything. to blow your credibility.

As you blow your credibility, it just makes your job that much harder. And that was true in the financial crisis, and that has been true with the inflation crisis, if you want to call it that. The same thing. I'm always like, don't say something now

that in six months they're going to look back and be like, no, no, that's totally wrong. I thought you promised this wasn't going to happen. So don't speculate that everything's fine. try to stick with the facts and here's what's happened and here's what we're doing and here's what you can do. So I think at a high level they're similar, but on a content level, they're pretty different. The Fed chair announces at his press conference, you know, a statement before. And the words are so carefully written and they're dissected by the financial press.

Everyone's like, what preposition did he use there, you know? And I think this speaks to your point about credibility. Why is credibility so important and to whom? Is it to investors, bankers, CEOs, the American spending public? And ordinary people. It's all of those. It's all of those. And it's important that we highlight. It's important that you highlight.

There are different audiences that the statements are made to. For sure, the seriousness with which the market takes not just the words of the statement, but like the words of the minutes that come out when it says many people at the committee thought this or most people thought this. Huge difference. Work through the specific words. There, it's about traditional market credibility. And I'll give you just an example of why it does matter.

In the 1970s, when we had the inflation crisis before, the so-called inflation expectations, that is, asking either individuals or professional forecasters, what do you think the inflation rate will be five years from now, that soared with actual inflation. And the problem is if everybody assumes inflation's going to keep going this high, then it's that much more painful to try to get the inflation to come down. Because people are like, whoa, wait a minute, I'm not going to take flat wages. The prices are going up 10% a year. I need 10%. And that fuels higher inflation. It becomes a self-fulfilling prophecy or a very difficult spiral. Yeah. And all I will observe to people is that this time, inflation, CPI inflation got almost a double digits,

PCE inflation, which is the one we look at, well over 5%, 6% plus, vastly above the 2% target. Even when that happened, if you looked at the actual market, like the tips market where you can get an market expectation. What do they think the inflation rate will be? Even when it's raging out of control and everybody's angry, if they asked, what do you think the inflation rate will be in five years? They continued to say basically exactly 2% as the Fed promised.

That is only possible if the Fed has credibility. And if the Fed loses its credibility and you start to see that thing drifting up, then hold on to your something, gentlemen, because that ends in tears or that ends in pain. Now a quick word from our sponsor. The Fed credibility question. It's one that leads to the number one question our listeners had, the eddies and the besties.

The biggest curiosity they had is, you know, our millennial listeners grew up in a world without inflation. Our Gen Z listeners have grown up in a world... With only inflation. Yeah. And they're both facing the same housing challenges. You once said that if housing costs more than 31% of your income, you're at risk of foreclosure. And Jack, where are we kind of right now in this situation?

Right now, the average American is at risk of foreclosure based on your definition. Look, that was, and I was described, when the housing bubble popped, we designed a program which was trying to prevent foreclosures, which was based on this. If your housing payment exceeds 31% of your income, then there's a decent chance you won't be able to sustain that. in the normal times, if you get into a tough environment like that, you would sell your house. But when the housing bubbles just pop, you can't even sell your house because a bunch of people are underwater. Now, side note, that was an extremely personally stressful time for me, because we had a house on the north side, and we had bought a house on the south side, and then we were going to sell our house on the north side.

So you were temporarily owning two homes? It was the 08 financial crisis had not yet started, but the housing bubble was popping. So I was like, okay, okay, we can do it. We just need to do a little bit of renovations on this south side house, and then we can move into it. But then the renovations took longer, the price is going up. And I said, you know what, we got to sell this. We got to sell our other house. But then nobody can buy the house because the housing bubble is popping.

And then Obama wins, and I'm going to D.C. So we're like trying to rent out a place and rent a different place. And my wife sees this thing about 31%. She's like, our housing costs 100 to 5% of our income. Somebody said, you're a one-man walking housing crisis. Yeah, yeah. That was a very difficult time. The president had to take your recommendations with a grain of salt because you're

in the game. Please don't let this happen. Okay. But the extreme inflation of house prices relative to going to the Costco and how much a TV costs, I just want to highlight goods. There's productivity growth. So the price of that stuff is coming down over time. If you go to whatever, Target, Walmart, Costco, you look at the TVs compared with TVs when you were a kid. It's insane. You can get a 80-inch television for like 600 bucks. Yeah, weighs two pounds instead of 200 pounds.

And it weighs two pounds. It is flat. I mean, it's incredible. And then if you look at housing, it's for the same thing. When people look and they're like, hey, my grandpa, he with one income at a factory, no college degree, he bought this house and like, I can't afford a condo. That's not wrong. The relative price of housing has been going up relative to goods, something like 5% per year for 25 years or more. Okay, so you look, you don't have to be one of, you don't have to have a fancy MBAs from Ward or Ross or anywhere to know that if you compound something 5% a year for 25, 30 years in a row, you're going to have a very big relative price difference and we're living it.

If you want to buy physical goods, they are historically cheap. And if you want to buy housing, it is historically very expensive. I feel seen right now, Austin, especially coming at you from San Francisco right now where, yeah, but curious, so what do you think, like, looking forward? Like, what's the solution here? How do you make housing less expensive? Part of the solution is to boost productivity of building houses, but that's not an easy solution, right? Yeah, no, no, I got a whole separate thing about productivity and construction, and it's actually, for the last 40 years, productivity in the construction industry has been negative, not even flat, literally negative. So I do think part of it is we're getting worse at building.

We don't have scale. The builders of housing tend to be small-scale operations. And we're going to channel all of our inner economists. You want the price to go down for something. You either got to reduce the demand or increase the supply. And we got a lot of states, a lot of cities where they're restricting the supply. And you want housing to go down. You've got to build.

You got to make more units available. It's more complicated than that, of course, but it's not that much more complicated than that. That is going to be a component of any housing affordability challenge. And of course, that's totally outside the purview of the Fed. And that is outside the purview of the Fed. Absolutely right. But channeling our inner economist, after Liberation Day in April of 2025,

all of the economists thought inflation would go out of control. It merely stayed flatish compared to what it had been. So we were curious, looking back on it, how do you feel about your colleagues judging the impact of tariffs on the economy? Was that the wrong call by the central bank? I disagree with the, I disagree with the premise a little bit. And let me start. The rules of the FOMC are I am only allowed to speak for myself. I'm not allowed to speak for anybody else.

As much as I want to evaluate their opinions, I'm going to resist. I, you go back and look at what I said about tariffs. I said imported goods are only 11% of GDP in the United States. Even substantial tariffs, as long as they stay in their lane, they might not have that material of an impact on the U.S. economy. Like in 2018, we had tariffs, but overall inflation didn't go up that much. If you jump out of the lane and how it would jump out of the lane would be, if you start applying the tariffs to intermediate goods, So it becomes a tax on domestic production, not just on imported goods, but on the components and supplies that go into U.S. cars, for example. Now it's going to be bigger.

If there's retaliation, now you're going to have to deal with some of those issues. If there are spillovers like we saw in COVID where they disrupt the supply chain for computer chips, that affects cars, cars affects FedEx, FedEx affects FedEx effects. retailers who are shipping stuff, you know, you can get that trickle-down kind of effect. But I think the overall forecasts have proved pretty accurate for what the size of the tariffs ended up being. Okay, remember, when the backlash began, they began exempting a bunch of stuff. So anything that was USMCA compliant, oh, no tariffs on that. The rates came down a bit.

I think it added about one full percentage point to the inflation rate. And that was sort of the estimate at the beginning. And I think that basically played out. If you looked at the, let's call it, the 10 to 12 months before Liberation Day, I believe core inflation was only a tiny bit above 2% in that period. You have one blip in January for reasons we can argue about because it seems to happen every January. So we got to think how to do that. But I think we were making progress.

I got to do it this way for you. We were making progress on inflation for a substantial period. And we were almost down to 2%. And this thing raised it by 1%. And I think it kind of tariffs kind of shoved us back to 3 instead of 2. And three is too high, but the advertisement was it's going to go away. A tariff is a one-time thing. So, yeah, it's going up to three for this year, but that's about to go away.

And the thing that worries me about sticking the oil price shock from the war on top is that thing hadn't gone away yet. So now we're adding a second one before that one went away. and I think people are freaking out a little bit. You know, you see in the surveys that absolutely number one thing that people say about the economy, their biggest concern, is prices, and number two is affordability.

And I'm like, wait, that's the same thing. Those are one and two are the same thing. Yeah, yeah. It's like those cereals where it's like the first ingredient is sugar and the second ingredient is corn syrup. It's like, wait a minute. Those are both the same.

Well, you know, the inflation situation, as we called it. Jack and I described it says Godzilla. We didn't see it for so long and it kind of came out of nowhere and freaked everyone out. That is kind of what it was. But there is one more kind of scary monster here. Stagflation. You know, the stagflation potential situation, which Jack, what's the analogy we like to use for that? When the fire is both burning and being flooded at the same time. When it was Cleveland where the river caught on fire, you know, that is what is stagflation is the river catches on fire. You've got high inflation and high unemployment. It's a rare situation. So, you know, is that something we should. be concerned about. Yes. Look, it's rare and it's horrible, and especially if you're the central bank, let's just give a 30 seconds. You know it, but permit me 30 seconds to say, why does central banking

work in economics? They call it the divine coincidence. The most cyclical industries in the economy, construction, big, durable goods, manufacturing, business investment, also tend to be the most interest rate sensitive parts of the economy. So if you have a normal business cycle and things are overheating the Fed, by tightening the interest rate, we kind of have like a volume knob, and we can make it quiet and we can make it soft. But it works because of the divine coincidence that the cyclical industries are also interest rate sensitive. So if we control the interest rate, if it looks like they're getting too hot, we raise the interest rate a little, we kind of pull them back down and that's stabilize the business cycle. That's basically the idea. So then what do you do

if they both start going, both sides of the dual mandate, which the law says we're supposed to stabilize prices and maximize employment. And that's it. That's what our monetary policy is supposed to be. That's the Fed focus. Well, what do you do if they both start going wrong? Because now the divine coincidence doesn't work. Yeah. If you loosen the rates when inflation is high, inflation might go up, but you're losing the rates because unemployment is high. It's a catch-22. So now you've got a trade-off. So it's the worst.

For the central bank, it's the worst situation you can be in, or among the worst. I mean, a financial crisis is even worse than that. But this is among the toughest challenges because there's no obvious playbook. And we knew, we didn't know it was going to come within a few months, but last year, we put out a monetary policy framework review that's kind of said, here's the way we do things, here's our goal is 2% inflation.

And we said, if we're ever faced with shocks to both sides at the same time, we're going to basically ask which side is getting worse, more, and how long do we think it's going to last? And I don't think that's a terrible approach to take, but realistically,

like you say, when you get supply shocks, it's not obvious that the Fed can do anything or the central bank can do anything. Raising the rates doesn't fix it. Cutting the rates doesn't fix it and leaving them where they are doesn't fix it. So now you're hitting and hoping at the same time. So, Nick, here's this scary story I'm going to tell by the economic campfire. Here's the scenario. The Strait of Hormuz and high oil prices continue to drive up inflation. And then on the other side, artificial intelligence drives up unemployment. I'm not listening. I mean, that's the stagflationary concern,

which we'll deal with it when it comes, right? But it sounds like we have an idea of what we would do. First, let's think about straight-of-hormos. High oil prices can be a stagflationary shock in itself, and we've seen that multiple times. That's qualified a little bit now because the U.S. became a big energy producer, not just a user,

but if the straight-of-hormoos is shut, has a toll taker on it, if we're going to have oil prices be $100 a barrel, and it's not going to go away quickly, we're going to be dealing with the implications of that, and they very well could both drive up prices and down employment at the same time. It's important to remember that a stagflationary direction shock is not the same thing as stagflation, and I like to run the mental experiment. Say you back to the future style, you could call people from 1978 and say, hey, we're having stagflation. What do we do? You know, you're dealing with stagflation. And the first thing they'd say is, what's your unemployment rate? And you'd be like,

well, it's 4.3%. Four what? Four point three percent. What? What's your inflation rate? Well, you know, we're disturbed. It's a little over 3%. I mean, they had periods where the unemployment rate was pushing 10% and inflation is over 10%. We have the tiniest violin. We're not there. We're not even close to there. Let us never get there. But that still doesn't make it any easier to deal with stuff that's pushing that way.

And if you add the AI thing on top of it, if AI leads to fewer jobs overall, which I still want to caution you, my inner economist says that has not been the path of even major technological breakthroughs. It's so common that there's even a name for it, the lump of labor fallacy, that there's a fixed number of jobs. And once the technology can do these jobs better than the people do them now, the unemployment rate will go to 100%. I fundamentally don't think that's what will happen. But if it did in the short run lead to fewer jobs, there is a sense in which that is a structural change that redefines maximum employment in the short run. And for sure, the Fed cutting the overnight interest rate is not going to change that.

Let's sprinkle on more context to the Fed. Because one thing Jack and I should share with you as fans of the Fed, as we call ourselves. Uh-oh. Here it comes. What is it? No, we want to hear more of your descriptions of what you'd love about the institution. Like for us, for us, you know, the fact that there are 12 regions, it's always like reminded us of like, you know, the NFL, right, Jack? No, it is right. The future.

Only we're the winners. Chicago is the Super Bowl champion. So most federal institutions have Washington, D.C., that's it. Yeah. But there are 12 Federal Reserve banks, the best ones in Chicago. Yeah? Like the NFL, apparently. I'm quoting you.

You're going on our book cover. Why do we have 12 Federal Reserve Banks? Okay, look, super important question, often phrased to me, one of two ways. why does Chicago have a Fed or what do you do all day? Like what is that? In 1913, they passed the Federal Reserve Act. And in 1913, as today, people were deeply uncomfortable with the idea that the federal government, plus maybe the Wall Street banks, would control the entire U.S. financial system

with no input from the rest of the country. And that was the thing that the first and second national banks of the United States kind of foundered on way back in the early days of the country. They don't want a central bank that was controlled by the federal government.

They thought it gives too much power to the central government, it could be turned to corruption, et cetera. So there was a stroke of genius in 1913 which set up a little bit of tension, but kind of a new governance model that said, let's have a regional component automatically in there. Yeah, look, it's a little goofy. It was laid out circa the economy in 1913. I think they needed the champ Clark was the speaker of the house and whoever's the head

of the banking committee. They were both from Missouri. So the two of the banks were in Missouri. Really strange Missouri got two fed banks. St. Louis and Kansas City. say, no, no, that's totally bogus. We were critical. But the idea that there would be these regional representations, and like the Chicago Fed is

90% of the population of Iowa, Illinois, Indiana, Michigan, and Wisconsin. So it's kind of the heart of the Midwest, where the, by far the most manufacturing intensive of all the districts, way, way

by far the most auto production. That gives us a regional character that is a form of monetary independence that's critically important for the central bank to have when you're setting interest rates that having these different perspectives automatically on there is really quite important. And the second thing, what do we do all day? Just remember, the most prominent part of the jobs of the feds is voting on monetary policy. go every six weeks and it's really cool. Someday you guys are going to get in and see this.

I heard it's a huge table. It's a gigantic table. It's awesome. If you're an econ nerd, it's just as cool as you would want it to be. Neat. Now, that said, there are 1,700, 1,800 employees at Chicago Fed. Most of them are working on payments and we're kind of a bank to the banks. where the Fed systems are running $6 trillion of payments per day on Fed Wire and ACH and Fed Now.

All the cash in the economy is printed by the Bureau of Engraving and Printing, but is distributed by our banks. So your ATMs are filled with cash that they're saying, hey, take it out of my master account. I'm going to send a Brinkstruck over there. And we've got billions of dollars in our faults, and we're running it through the machines and pulling the counterfeit. And it's a whole operation.

We're running bank supervision. So we have thousands of people who are in the banks, checking to make sure that they have the capital they say they have. They're not doing something nefarious with the money. And we have major regional community development, community engagement components where we're out talking to business people, civic leaders, all through the region, because they can tell us things quicker than you can see them in the data.

Because as you know, the data come in with a lag. So it's a mission-driven organization. It's one where before I got here three years ago, they told me that success was viewed if nobody mentioned the Fed in any way or acknowledge it of any kind. That was a victory. The only bad can come of people hearing about that. the Fed. Like referees. If people are talking about the referees, that means the referees did bad job.

If they're talking about the referees, that the game is a crappy game. Or the Batman analogy, you know, the silent guardian. That's the 20th century version. And look, you know, we are in an environment where there is a massive crisis of public trust in institutions in general, not just the government. Anything that's big, that's elite, that's whatever, banks, Congress, everything. And a demystification project of here is what the Fed does. And it's made worse by, in 1913, the Fed was hatched in a conspiracy. Every conspiracy theorist is like, I think that they went to Jekyll Island. This is literally with a story. They snuck to Jekyll Island under fake names and came up with a plan to design a central bank of the United States. That's all true. That's all true.

So of course people are like, wait a minute, the Fed are the bad guys. But we aren't the bad guys. We're the Guardians of the Galaxy. And that's the Batman analogy, yeah. It is the Batman. I told the way I phrased it to our people, I said, look, you're working at the Fed and this is 80% working at NASA. And it's 20% working at the DMV. And we've got to like hold the DMV part down.

and emphasize the NASA part. Because it is, it's super, it's only this much of the universe, but in this part of the universe, it makes a huge difference what the Fed does. Oh, Austin, take us as, you know, the Batman of the big money into the room where it happens.

You know, like the Fed Open Markets Committee, you know, you were describing the huge table you guys have. It's awesome. Is that an actual lever for the interest rates because they're shipping. That's what I wish. Oh, God, that would be so great

if it was like a crank You're like a Princess Bride where they're like, how many years do we take out of the person's life? Exactly. There's a huge wood table. The shades come down. Washington, D.C. It's in Washington, D.C. In the Fed Martin building, the Fed has reversed dog years.

So, like, you could be here seven years and they're like, you're the rookie. You know, this is your first year. So I started telling everybody, when I started going to the meetings, I was like, this is the coolest room. This is the coolest thing in the world. And all the old diversed say, oh, you should have seen the other room. It was even better. Oh, of course, of course. Are they hazing you, or is that really true?

I don't know. I haven't been over there. It was older, and there was a map on the wall or whatever. So a huge table. We got one guy from Kansas City, one gal from St. Louis. Who else is there? Okay, so kind of four sides. It's not exactly a square, but it's kind of four sides.

everybody's assigned seats. So I'm always sitting. I got Mary Daly from San Francisco on my left. I got Neil Kashkari from Minneapolis on my right. Great guy. Then they go up up this side, president, presidents, presidents. We got St. Louis there. It comes to the governors, come around the front.

There's the chair and the vice chairs. And then on the other side are a bunch of more presidents. And on this left side of the table are the staff. And they're going to make presentations. So you come in, shades come down, can't be spied on. It's like being back in the situation room. Nobody can bring their phone in. Nobody can bring in any communication devices.

So we're in there. And day one is about the economy, and day two is about the rates. And they're literally just going to go. We got the briefings from the staff. Here's what the models show. Here's what the forecasts are, et cetera. Here's what the market's desk says. And then it's going to go.

around the table and everybody's going to give their opinion, here's what I think about the economy. And it's like, Jay Powell's going to give his view. Governor Chris Waller is going to give his view. And they're very different views. And it's really fun. And then day two, it tends to be shorter, but it's going to be like, okay, given what everybody thought where we are in the economy, what do you think should happen for rates? And we're going to debate the statement, is circulated the statement. And here's the, there's an old. Alternative A, B, and C. And what we vote on is alternative B,

what the rate change or non-change is and the statement as it exists. And you can vote yes or no. And they tend to be not Pollock Bureau-like, but they tend to be unanimous or a small number of dissents unless you get into weird environments. And we might be in that kind of weird environment.

At the last meeting, we had the most dissents in 30-something years. and interestingly, some of those dissents weren't even about the rates. They were just about the words in the statement, wanting the words to be tougher. Is it heated? Is it frustrated? Is it amicable? What's the vibe like?

It's pretty amicable. We get along pretty well. I would say we get along pretty well, but it's a little, I mean, it's the Fed, so it's got a formal aspect to it. The debate oftentimes happens across meetings, so you get to bring your research, director or somebody from your reason.

And they're writing down what everybody says, and then we'll come back and be like, what did Anna Paulson say, you know, from Philadelphia, when she was talking about XYZ, and we'll try to analyze that and we'll come back the next time and sort of have a debate. There are a few economists, you know, I was a research economist. There are also business people and markets, finance people, and they're coming at this from different ways. I worked with Kevin Warsh, the new chair, in 2009, 10, 11 through the financial crisis. And as I said, I kind of felt like we were old foxhole buddies or something. We had come from very different backgrounds, but he was level-headed in what was a pretty awful

crisis. So I'm optimistic he's going to be similarly as good as Jay Powell, but kind of bringing everybody together and providing leadership. Now a quick word from our sponsor. So, Austin, there's 12 votes on monetary policy. What's the big deal? What's the big fuss about the Fed chair? It's just one of 12 votes. Yes, he's one of 12 votes.

But, for example, the chair is the one who gets to decide what we're voting on. I thought he'd say he decides on lunch. Like, Jay Pows, like, we're doing pizza again, guys. So he gets the right, alternative B. And, yes, look, there's some negotiated, whatever. But it's kind of like, at the end of the day, the chair says, here's what we're voting on. And you can vote for it or you're going to vote against it. But this is the thing we're voting on.

And that's extremely powerful. And then there are other things that only the chair is allowed to do. There are some regulatory policy decisions, et cetera, that only the seven governors vote on. and the presidents, we just execute on the policies that they decide. So the chair is extremely powerful. He's not just one vote. Yeah, Jack, if Kevin Warsh wants a sweet green salad, everyone at the Fed is eating sweet green that day.

The thing is, Jay Powell, I don't know, the guy wakes up at 4 o'clock in the morning or something they tell me. So when the thing is done on the first day, they'll usually be like a reception, will decompress and they have dinner. Only that happens at 5 o'clock. We have dinner at 5 o'clock Easter. So the people came from the business.

I'm like, it's 4 o'clock. San Francisco, it's 2 o'clock. It's like, we get dinner at 4 o'clock? Like, what are we doing? Kevin Warsh might change that part. Austin, curious, you're talking about all this data you're looking at with the team and everyone presenting. Jack and I were curious.

You know, we always like to find that one stat. We just did a story on Burberry and we noticed they mentioned scarves and, you know, scarves are driving burglars. Yeah, I heard you guys tell us. So we're curious, like when it comes to studying the economy, is there one data point that you look at that others aren't

working at? And you can't say unemployment rate and CPI. You can't say unemployment or CPI. Okay, okay. Now I'm going to loophole you on that. Okay, okay, we'll take it. Okay, we, before I was

at the Fed, I was the main advisor for Adobe, me and a guy Pete Clean out at Stanford, for the Adobe Digital Price Index, which got all of this data online and it was said, let's compute an alternative to CPI. And it showed that online inflation looks super different from in-the-store inflation. Interesting. So price is rising more. More deflation online than than in brick-and-mortar stores. Is CPI, which is our mainstream measure of inflation? Is that only physical stuff? No, no, it's not.

To your point, online skews toward physical stuff. So in CPI, there's housing, there are a bunch of services, medical services, a bunch of things that aren't in the basket, if you want to call it that online. But I bring up that example, not to say that's what I look at, but to say there are many private sector sources that aren't as good. No one of them is near as good as the official BLS statistics. But we at the Chicago Fed have put together our labor market indicators, where we go look at, I think, 14 different some private sector, some public sector,

measures of the job market, and make a real-time prediction what will be the next unemployment rate when it comes out. and it's proved pretty prescient, and it gives us a early read on what the labor market conditions are, and it was particularly useful when the government shut down, and there were no unemployment statistics. So then it was like, hey, we're the only ones with an unemployment. Here's what the unemployment rate would have been. And we also have a hiring rate and a layoff and separations rate. So I like the Chicago Fed labor market indicators on that side. And it's important to add what I don't like at this moment is what in normal times is the single greatest labor market statistic, which is how many jobs were created last month.

But when immigration's got question marks, labor supply has got question marks, the number of jobs created in the month is no longer a very good measure of the business cycle. On the price side, I think it's harder to track. We got a better private sector measures of the job market than we do of inflation. I only ever aspired to be a data dog. I didn't want to be, they asked me, are you a dove? Are you a hawk? I don't need to be a bird of any kind. I just want to be a dog and sniff over here.

And one of the main rules of the data dogs is sniff every piece of data that hits the floor, because it might be dinner. Well, data dog, we can relate. You know, we have profit puppies on our show, Austin. You guys are dated dogs, that's right. But what we're curious, this actually leads perfectly to a question. We really like to ask every guest because it matters whether you are working in marketing at a company in Brooklyn or you're working as a president of the Fed. And it's how you make decisions.

Metrics versus magic, information versus intuition, graphs, versus guts, imagining versus engineering. Where do you fall on the spectrum of using data versus using vibes, like science versus art? for how you make a decision. I love me some data, for sure. But I hesitate to say, oh, I'm heavily on the data site because that feels like it says I only look backward. And that's totally not. I do not totally focus on the rearview mirror.

So I'd say vibes probably up to bit since I've been to the Fed, partly because now I have really amazing access to the executives at the highest level. So whether they're on my board of directors or business roundtables we're doing, they'll say the last three weeks, X has happened, and that's not going to show up in the data yet. But remember, we talked about the Fed's dual mandate. It says, by law, what we have to do is stabilize prices, maximize employment, and that's about the hard data. Okay, so if the vibes tell us something about what's about to happen in the hard data,

then we should and do pay attention to it. But you're never going to hear me say, you know what the Fed should do? The Fed should target vibes. Who cares what the inflation rate is? Let's target how people feel. I'm not that guy. No, I'm always curious about it, though, because Jack and always talk about how, you know, you can get interesting intel when you're talking to, we just mentioned a DoorDash delivery.

Yeah, heck yeah. The DoorDash Delivery driver, it tells you a lot. He's working a lot right now or not. Or, you know, Jack and I have found even with the show, the data shows our audience average listener is a certain age. But what the data doesn't show is that a lot of them are families listening. So their kids are also enjoying the show. And we learned that through like reviews and surveys,

not through our Spotify data on who has the account. Yes. Look, I was just in Rockford, Illinois. We went out and toured, if you're an Adam Smith fan, the wealth of nations that creates economics. There's all this stuff about the pin factory. Actually, we toured a modern-day pin factory. And they make fasteners and pins.

And it was fascinating. The fasteners were fascinating. And the CEO who took me around is showing me the machines. And basically you take a long tube of steel and it kind of grinds it down to be a screw. or if it looked like a bunch of the stuff that's like in the IKEA furniture where I can't figure out how to like you put it in and twist it and do things, they're making those. They're making those. It turns out lubrication, which is a petroleum-based product, is super important in their world.

And so he's kind of describing, oh, yikes, when the price of oil goes up, this lubricant that we need, the price has gone way up. and now we're trying to recycle our own sludge to get the oil out of it. And if this continues for six more weeks, we're going to have to shut down this thing and that thing. That color commentary of what does it mean if the Strait of Homoos remain shut at this macro level, down to the pin factory in Rockford. And he's like, if the cost of lubricant stays like this for four more weeks,

like we're going to have a problem. There you go. That's vibes, but it is data too. You know what I mean? Yeah, that's true. Yeah. Yeah. Yeah.

Somebody who's not at that humongous table in Washington, D.C. is the president. So let's talk independence from politics. You've said it doesn't say anything in the Federal Reserve Act about making the White House happy, and it doesn't say anything about making the stock market happy. Who is the Fed supposed to make happy? That's not a political statement. That's just a fact. Just read it.

Who, what is supposed to make happy? It's supposed to be that. I mean, we're established by Congress. the Constitution says Congress coins the money, but it's supposed to be for the American people, for the American economy. Stabilize the prices, maximize employment. That's it.

That's the criteria. It's not polling. It's not what the president says. It's not whether the stock market went up. If it maximizes employment, stabilizes prices, that's what the law says. That's what we've got to pay attention to.

Why does it matter that there be central bank independence. And I want to kind of separate it from just the Fed. It's not just the Fed. Independence has an extremely narrow meaning. It doesn't like, the Fed is not like getting a pirate flag and right now the we hold these truths and be self-evident. It's not that kind of independence. It's literally just, can the sitting government order the central bank to change the interest rates according to their, according to what they want in the moment? That's the sense in which The central bank needs to be independent from the government when determining monetary policy. If they aren't, before I was ever at the Fed, I believe strongly in Fed independence,

and that's virtually unanimous among economists. Not based on theory for some of them. Some people it is on theory. But for most people, it's just look out the window at countries where they don't have that kind of independence. inflation comes roaring back. Inflation comes roaring back. Of course it does. You knew that's what would happen.

And that's why it's important. If you want inflation to go up, this is the perfect way to do it, is make it so the sitting government can say, hey, we want the rate to be lower, lower, lower. That ends in tears. I mean, yeah, that backfires. So Jerome Powell just ended his tenure as chair,

although he's still going to be at the table for a couple years. Nick and I just did an episode on Friday covering his eight-year tenure, and we gave him a grade, based on our assessment of his performance, for both how he handled the economy and monetary policy and how he handled the Fed as an institution. Are you able to share yours before we share ours? Well, I saw yours. So you gave him a B on the economy and A-plus on independence, right? Correct. I considered J. Powell a first ballot hall of fame Fed chair. and every Fed chair's got stuff that went wrong and stuff they did well.

And the biggest knock on his tenure as chair is the Fed was slow coming off the block as inflation started back up. That's the only knock. And I think the combination of one, we had the epic collapse of the economy in COVID, and it did not turn into a financial crisis. Fair. that number two, we had bank failure, Silicon Valley Bank, et cetera, after the Fed started raising rates quite significantly, and that didn't turn into a financial crisis or even a credit crunch.

And in 2023, going into 2024, inflation fell as much as it's ever fallen in a single year and there was no recession. Each of those three things, many smart people said was impossible. There was, in 2023, people were making fun of the idea that inflation could go down without there being a recession. Larry Summers, you saw as said, there must, there will be an intense recession for five consecutive years before inflation will come down. All three of those, any one of those would be a pretty strong accomplishment. and then you add navigating through political pressures that are unlike any in modern memory. That seems like a pretty compelling combination to me.

Jack, do we have to do a grade revision here? I mean, no, I think that I guess that one knock, too late to raise interest rates, it's a pretty big knock. Look, I don't dispute that. All I'll say is, the here. he wasn't the only one making the forecast that inflation was going to be transit. Right, right. And when they decided to pivot, because I want to say again, I wasn't there.

And when it was, I didn't do that. But look, I agreed with the professional forecasters and the markets were thinking that, as I was, I thought inflation would be temporary because I thought a lot of it was coming from a wrecked supply chain and that the supply chain would heal quicker than it did. But when it healed, we got the decrease in inflation without a recession. And to me, the fact that that happened on the other side kind of establishes that there was less of the stimulus driven than the supply driven part in the beginning. But look, I'm aware people are of different minds on that. You know, we've got to this point of the interview where it is just so fun speaking with you, Austin.

Yeah, this is, like, the best thing that's happened to me this month. No, we got a blast. And we know you've also won awards for public speaking. You're on TV all the time. We've seen you so many times up there. So we've got a question that we think a lot of our listeners who want to know. And as a couple of podcasters, we're always curious about this too, right, Jack? I'm a public speaking, Trump.

Oh, look at the time. Sorry, guys. You don't have to be concerned. You don't have to be concerned. Well, what is a question? We were going to ask you about public speaking. You're a fantastic public speaker. And what advice do you give to those who don't have the confidence or don't think that they have the confidence to speak publicly and in a compelling way in front of people?

I came to economics from when I was a kid, I liked math and science, but I like did the speech and debate team and I like current events. And I was like trying to figure out it. I was not informed, but I wasn't wrong. I was like, hey, maybe economics is combining speech and debate. with current events and math and science. And it kind of is. I find, look, it depends what your age is. I found in school, there are tons of teams, extracurriculars, stuff that you can do

where you just get up and talk a lot. And that's the most important thing. It's just kind of messing up a whole bunch of times and it's not the end of the world. partly I've been too loud my whole life. As I say, when I was a freshman in high school, I'm still the same size that I was, and I was the middle linebacker on the freshman football team. And I'm not a large person. How it went is they said, okay, the captain of the defense is going to have to call the plays.

And the coach said, who's the loudest? And everyone pointed and said, that kid, that's how I got the job. Be allowed for it. Well, Austin, fantastic. You have had you with us, but before we let you go back to the big policy work and yanking that full lever on the interest rates, preferably down. We wanted to whip up some rapid fire questions for you, Jack. Rapid fire.

Here it is. Okay, so what is the best brand in America? The size of the Chicago Fed? Okay, we'll take that. What is the best coin or dollar note the United States mint has ever produced? Ooh, ever? I mean, the original silver dollar that is made of silver, that's pretty amazing. But look, I'm in Illinois.

So the penny with Abraham Lincoln, I know that like now we're phasing it out, but a good shiny penny is pretty good. Oh, it's the best business book you've ever read. Best business book, leading with gratitude. Who's the best business leader that you admire? Does Paul Volker count? I mean, he wasn't exactly a business, but he's kind of a personal hero to me. Best economic policy. For us, it's guac is always extra, which is like no such thing as a free lunch, but your best economic principle. Probably never commit the sunk cost fallacy.

What's the best restaurant in Chicago? I might make most of the food at my house. Like, I'll cure and smoke my own bacon. I'll have you guys over. You'll be pretty into that. But there's a restaurant down in high park, all virtue. That's probably the best. Who's better? Dittka or God? Trick question. Dittka is God. Yeah. I was going to say those were those were in the same they're both on the defense at least that might be the same person if you Austin were a stock what would be your three or four letter stock ticker symbol what would be my stock ticker symbol

triple a oh and one more we were curious about if the Fed had a mascot and you can't say bald eagle what would be the animal representing you it'd be the data dog what are you talking about it's obvious Well, if you could just leave our audience with some parting words, we'd love if you could whip up the takeaway about the Fed, the American economy, or yourself. I got nothing. Look, come to Chicago. The takeaway of the Fed is we're the Guardians of the Galaxy. We're not the bad guys.

And if you want to learn more and you're in Chicago, remember TripAdvisor's number one free museum is the Money Museum here at the Chicago Fed. You can just walk right in there and hear all about it. We got a cube with a million dollars of cash in there, and it's bigger than you think. Austin, it's been a real pleasure and an honor speaking to you. Yeah, guys, what a treat. And what you do for this, for the economy, for this, a, you make it fun, and B, you just have so much content. It's really great.

That's so kind, and it helps Nick and me rest easier at night knowing people like you are overseeing us as the Guardian Batman style. All right. Thank you, Austin. We'll see you guys the next time around. We'll see you there. Thank you very much.