The Fed, Inflation and Our Uncertain Economy | The Weekly Show with Jon Stewart

JON STEWART: But what is the track record over 30 years? In other words, generally speaking, the people that were setting monetary policy. in the '90s, in the '80s, the projections. that they're using to base these on, are. they generally accurate? What's the margin here? AUSTAN GOOLSBEE: They're the cleanest dirty shirt we have. [LAUGHTER]. OK? So I would say there actually is evidence. that the Fed's forecasts were better than the private. sector forecasts.

But that doesn't make them good. You know, that doesn't make them good. JON STEWART: Then why are they all such dicks about it? Why? [LAUGHTER]. [MUSIC PLAYING]. Hey, everybody. Welcome to The Weekly Show podcast. My name is Jon Stewart. I'll be hosting this week's episode. It is Tuesday, July 14. We are heading into the semifinals of the World Cup. coming tomorrow. It's going to be two, I think, incredible matches. We are back at war with Iran.

So the world is stabilizing, becoming more normal now. The Iran war will just be a low level fire that is just burning. for years and years underneath the surface. of the Earth's mantle. It is Tuesday. Obviously, Lindsey Graham passed over the weekend. This won't air till Wednesday. Who knows how many more of the assisted living facility. we call our United States government, how. many more will fall till then.

But we're not going to talk about that. The new CPI report, the new inflation report, came out. And it's creating ripples about what the Fed might possibly do. And it occurred to me that I have. no fucking idea how they do that-- what they do. and how they do it. And so I am very excited--. we are going to get inside scoop, ladies and gentlemen, not from a Fed observer, not from a Bloomberg analyst-- no, my friends, from someone inside the belly of the beast,

inside the room where it happens, a president. of a regional Fed--. Chicago, no less-- the great city of Chicago. They, my friends, have sent us one. of their best representatives. Did he get to go see Mulaney at Wrigley Field? He might not have, but a hell of a show. that was if you were there. But, ladies and gentlemen, let's get to our President. of the Chicago Fed right now. [MUSIC PLAYING].

Ladies and gentlemen, what an exciting day on the Weekly Show. podcast. We welcome back an old friend, a long lost pal, a king of the world of economics, Austan Goolsbee, who is now, beyond all expectation, the President of the Federal Reserve Bank of Chicago. Austan Goolsbee, how are you, sir? AUSTAN GOOLSBEE: Jon, you thought. they built the walls of the vault. to keep people like me out of here, but it didn't work. JON STEWART: Listen, I thought for sure they did.

And to see you elevated, to see you in the hallowed halls. of the Federal Reserve of Chicago--. how many presidents-- what is there, 12 of you guys? How many presidents of regional feds are there? AUSTAN GOOLSBEE: Oh, I thought you meant ever at Chicago. Yeah there's 12 reserve banks spread around the country. JON STEWART: Did you run for president? Were you appointed? How did this work? AUSTAN GOOLSBEE: I was chosen. Each of those reserve banks is not a government agency. They're a not-for-profit.

And they have a board of directors. that's made up of local CEOs, and civic leaders, and bankers. And the non-banker board members choose the presidents. at each of the regional banks. JON STEWART: So this is--. boy, let me tell you something. I can't even believe we've jumped in so hot and so fresh. You know what? We're not even dipping our toes in--. AUSTAN GOOLSBEE: We haven't even gotten to the Federal. Reserve Act of 1913. But we're going to.

JON STEWART: Oh, when we get to Eccles, the whole place is going to explode. We are diving right in. So you've got this 12 regional feds, and they're chosen by local leaders, civic leaders. And then that mixes with the Board of Governors. And that is a more probably--. not political, but appointed by political--. AUSTAN GOOLSBEE: Politically appointed. JON STEWART: Those are politically appointed. AUSTAN GOOLSBEE: Confirmed by the Senate. And each of those governors-- the thing. that's confusing is those--.

JON STEWART: Oh, Austan, it's all confusing. AUSTAN GOOLSBEE: DC political appointees, their title is governor, but they're more like senators. And the presidents are more like governors, because we're out and have a region. Those governors that are political appointees are. appointed to 14-year terms. And they're staggered. Because, from the beginning, they were trying. to be, as much as possible in a democracy,

they were trying to keep it independent. from political interference. JON STEWART: And the Fed's independence is a. necessary because why, Austan? Why? AUSTAN GOOLSBEE: Well, because people hate inflation. That's the main reason. That if you just look around, economists before-- you. knew me before I was ever at the Fed. Economists are basically unanimous that the central bank. of the country needs to be independent. from political interference, because the incentives.

of the sitting government for the setting of interest rates, you know what it is-- they're like, cut the rates, let the inflation come in the future. JON STEWART: Yes. That's right. They don't care. AUSTAN GOOLSBEE: If you just look at countries or times. in this country when the central bank. is not independent, inflation comes raging back. The job market is worse. Growth is worse. And that's why Fed independence is important.

As I say, the Fed is not getting a pirate flag. or putting a snake on there and--. JON STEWART: Don't tread on me. Right. AUSTAN GOOLSBEE: --we want to have. our own stamps or something. It's only because if you don't have central bank independence. from interference in setting the interest rate, you get a lot of inflation. And people hate inflation. JON STEWART: And the case study of that, as always, as is the case study in any political. discussion here--. Richard Nixon.

Richard Milhous Nixon-- the tapes that keep on giving. Richard Milhous Nixon. He said to the Fed chair, hey, man, I have an election coming. up, one that he was going to win, by the way, like, 49 states to 1. I don't even think McGovern got his own state--. something crazy. AUSTAN GOOLSBEE: Yeah. No, exactly. But the thing is, that's the US test case. I guess I would say there are a lot worse test cases--.

JON STEWART: Oh, sure. AUSTAN GOOLSBEE: --as you look around the world. JON STEWART: Argentina. AUSTAN GOOLSBEE: That informs-- yeah, look, Argentina, Weimar Germany. JON STEWART: Sure. AUSTAN GOOLSBEE: If the central government basically. insists that the central bank monetize. the debt to pay for what the government's doing, that ends in tears. And that's why Fed independence matters.

JON STEWART: And it does matter. And you bring up an interesting point-- monetize the debt. And we'll get into that in a little bit, because that got a little tricky in 2008. We're running through it all, Austan. We're hitting all the--. I haven't talked to you in so long, and it's so exciting. We're going to grab all the hits there. So they established this now. Now, the Fed independence--. I don't even know if you're allowed to talk about this. as one of the presidents. But obviously, right now, every president. is going to try and influence, at some level, monetary policy. And also, Congress is going to try and influence.

it through legislation. Let's face facts. Congress could change the dual mandate if they. wanted to, could they not? Wasn't it a congressional act that made. it so that the Fed had those two. mandates, one to control inflation. and one for maximum employment? Is that--. AUSTAN GOOLSBEE: Yes. Look, everything you said is true. Now you're out front. You're dragging me as the caboose-- the dual mandate, the whole thing. JON STEWART: Come on, baby. Let's dual mandate this bitch.

All right. AUSTAN GOOLSBEE: Look, the Constitution says in there--. I'm not a constitutional expert, but it says Congress is the one who coins money. So I think that, at the root of the Federal Reserve Act, which. started in 1913, is the idea that Congress coins the money. and is in charge of that. They created the system. The law says that what the Fed does when it's setting. the interest rate-- and when we go for monetary policy,

what the Fed does at the Federal Open Market Committee. is we go in a big, huge, tabled room, giant table, the shades come down--. JON STEWART: FOMC? AUSTAN GOOLSBEE: FOMC. JON STEWART: Literally sits around a big table? AUSTAN GOOLSBEE: Literally around the biggest table. JON STEWART: How often? AUSTAN GOOLSBEE: Every six weeks. JON STEWART: What? AUSTAN GOOLSBEE: Yeah. Every six weeks, we go to Washington DC. The shades come down so nobody can spy.

It's like the situation room. You got to leave your phone outside. There's no devices in there. JON STEWART: Oh, this is--. AUSTAN GOOLSBEE: And then it's the-- if you're econ nerd, Jon, it's the coolest room in the world. They're going to just literally go around the table. and they're going to be like, OK, Jay Powell, what do. you think about the economy? It goes two days. JON STEWART: Now, he's not FOMC, though? Isn't he Board of Governors? Or is Board of Governors part of FOMC? AUSTAN GOOLSBEE: They're on it. They're on it. The FOMC is a collection-- the 12 of us and the seven of them.

JON STEWART: FOMC is the Board of Governors, seven appointed members and then the 12 presidents. of the regional Feds that have been. selected by regional civic and business leaders. AUSTAN GOOLSBEE: Yes. JON STEWART: OK. AUSTAN GOOLSBEE: But now, I'm going to add one in the weeds. JON STEWART: Don't do this to me. AUSTAN GOOLSBEE: I already feel like punching. myself all right for doing it. But not all of the 12 are voting at any one time. JON STEWART: How many are? AUSTAN GOOLSBEE: Only 5 of the 12.

are voting so it adds up to an even number, which. I still don't understand. JON STEWART: Austan, are you kidding me? AUSTAN GOOLSBEE: There are 12 voters at any given moment--. 5 from the banks and 7 from the governor. JON STEWART: Now, do they do that to lessen the influence. of the non-political actors? AUSTAN GOOLSBEE: I think so. I think so. JON STEWART: And who decided that it was that? Was that a congressional act? AUSTAN GOOLSBEE: Yes. Yeah. That's the Banking Reform Act of 1934 or something like that.

But what's important is the idea. So not to go back in the financial history, but Andrew Jackson kills the Second. Bank of the United States. We have a national bank. He kills it. JON STEWART: Along with thousands. and thousands of other people. But that's beyond-- we're not going to talk about that. with Andrew Jackson. AUSTAN GOOLSBEE: Yeah. JON STEWART: Go ahead. AUSTAN GOOLSBEE: Look, I'm not disputing that. And I thought you were saying by killing the national bank,

it killed a lot of people. And that might be true, because the panic of 1837. follows the shutdown of the national bank. We, then, go for 70 years without a national bank, panic of 1907. JON STEWART: That's where we went to Morgan. AUSTAN GOOLSBEE: That's where we went to Morgan. Exactly. JP Morgan himself--. JON STEWART: Yes. AUSTAN GOOLSBEE: --in the Panic of 1907 basically. steps in as the lender of last resort.

to prevent what would be a Great Depression. JON STEWART: He backstops the United States. government who has what you would. consider a liquidity crisis. They have no money. They have nothing to lend. AUSTAN GOOLSBEE: The government, but it's more--. I think the story has an interesting wrinkle, because he doesn't do that out of just. gratitude for the nation. JON STEWART: Sure. They never do. AUSTAN GOOLSBEE: He backstops a series.

of financial institutions, and he chooses his friends. when he does it, OK? So when the crisis comes, you have to decide, no, no, you guys are doomed. We're not going to throw good money chasing after bad. So he chooses the people that he likes. And he's like, OK, I'm going to give you the loans. And the ones he doesn't like, they die. JON STEWART: Wow. AUSTAN GOOLSBEE: So Congress creates a Federal. Reserve Act, A, because they want to have.

a lender of last resort. And, B, they don't want to be beholden to one. private individual choosing winners. based on whatever criteria. JON STEWART: They want to choose the winner. JP Morgan shouldn't get to choose. They should get to choose. AUSTAN GOOLSBEE: In a way. But they outlined that vested in a Federal Reserve system. And, importantly, they're deeply uneasy in 1913,

just as people are today, that Washington, DC, plus the banks. on Wall Street, are going to control. the entire financial system of the United States with no input. from the rest of the country. And that is why they create 12 reserve. banks spread around the country to represent--. and we have boards of directors made up of these regions. And we aren't political appointees. And we come to these FOMC meetings.

with a totally different perspective. than political appointees. And that, actually, even though it's klugey--. even though, yes, we got five votes, and they rotate in and out--. that actually was a stroke of genius. And it's a reason why the central bank, the Fed, has existed for 100 and whatever--. 13-- years. And it wasn't shut down like the First and Second Banks. of the United States were.

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It's every six weeks. AUSTAN GOOLSBEE: Yes. JON STEWART: Austan Goolsbee is the president. of the Chicago Fed. So I'm assuming your purview is the manufacturing. center of the United States. AUSTAN GOOLSBEE: Yes. JON STEWART: So, to that point, you've got a San Francisco Fed. and they're in charge of, I guess, growing weed. I don't know what they do out there, but something San Francisco-y. St. Louis. AUSTAN GOOLSBEE: Yeah. JON STEWART: All the--. Boston, New York. AUSTAN GOOLSBEE: There's some crazy--.

I guess the Speaker of the House. and the Majority Leader were both from Missouri. And the Federal Reserve Act, I think, kind of. came down to one vote--. St. Louis and Kansas City, 2 of the 12, are in Missouri. JON STEWART: Right. St. Louis, Kansas City, Atlanta. So it's all spread around. So Austan Goolsbee's purview is now, I would say, all those--. probably, what, Michigan? Do you represent the interest of manufacturing?

AUSTAN GOOLSBEE: We got 90% of the economies of Iowa, Michigan, Illinois, Indiana, Wisconsin--. heart of the Midwest. Now, importantly, if you go look at the economy, most. of the economy in any place is kind of macro, is the same everywhere. The thing that is distinctive of Chicago's district, it is the most manufacturing intensive of all the districts.

You're quite right. But manufacturing is still not the majority of the economy. JON STEWART: You're taking a macro view. AUSTAN GOOLSBEE: We're taking a macro view. But it does inform-- when we got into all the tariff. discussions and liberation day-- of the seven most. affected states by tariffs, four of them. are in my district in Chicago. So when I'm out talking to business people, talking to civic leaders, their hair is on fire.

I'm impervious to that, but their hair is on fire. And they want to talk about supply chain. They want to talk about if tariffs apply. to their components and supplies, how it's going to end up turning. into inflation because their costs are going to go up. And so I'll try to bring that when I go to the meetings. I'll try to bring that perspective. JON STEWART: The different research that you've done. So now everybody, I'm assuming, is doing that-- maybe not. at the level that Austan Goolsbee is doing.

it, because your diligence and your tenacity. is second to none. AUSTAN GOOLSBEE: And I am in the greatest. of all the Fed districts. JON STEWART: Of all the Fed districts. And Missouri is doubling up on everything. Everybody's--. AUSTAN GOOLSBEE: But everybody is trying to do that. Everybody's trying to do that. JON STEWART: So they all get together--. and it's every six weeks. So I imagine the nuance of it, because economic conditions. over every six-week period are probably not that different.

Certain storms can come in, certain others, but you're getting together. The thing I want to ask is, so everybody's. got all this incredibly nuanced information. about the economic conditions that are affecting. their general regions, but the Fed really only. has the more broad based sledgehammer. tool of interest rates, no? AUSTAN GOOLSBEE: Totally yes. Totally yes. And only one small part of interest rates. So we set an overnight rate, which affects.

short run interest rates. JON STEWART: OK. OK. AUSTAN GOOLSBEE: A mortgage is like a 30-year mortgage. And the determination of those long rates, as they call it, the market has a lot to say about that. So what we do is important. But, as I described, it was kind of like we're. this big of the universe. But, boy, in this part of the universe, what the Fed does. makes a huge difference. But there are a lot of things that. are outside the Fed's purview.

JON STEWART: So what is downstream. of the Fed's-- because that's all anybody talks about. Nobody talks about the variety of other interest rates. that may be raised at other levels. AUSTAN GOOLSBEE: Exactly. JON STEWART: And I guess we can get into who raises those, or who closes those, or if those are. just downstream of the overnight interest rate. that the Fed would open up. AUSTAN GOOLSBEE: They are downstream of. the overnight interest rate. So when the Fed does things, it does affect those. JON STEWART: OK.

AUSTAN GOOLSBEE: But one of the most important things that. affects mortgage rates, or 30-year Treasury rates, or all of this, if we get down in the weeds, are what do people think the inflation rate is going. to be over the next 30 years. JON STEWART: Wait, are people really. trying to figure that out? Over 30 years, they're trying to figure. out the inflation rate? AUSTAN GOOLSBEE: Whoever owns the 30-year mortgage that you. got, that person cares a lot about what inflation is going. to be over the next 30 years. Because if they lend to you at 6% and then.

inflation is going to be 9%-- for 30 years, they're going to lose money every year for the entire time. So the Fed does a thing on these shorter rates. That influences longer rates, but other influences. include what do people think are going to be inflation? How do people think growth is going to be? What do they think is going to be productivity? All of this stuff. JON STEWART: These are all projections.

All projections. AUSTAN GOOLSBEE: And all of those involve a projection. JON STEWART: Let me ask you a question--. how accurate-- because this is the thing about economics. that I'm never quite sure about. My sense, when I talk to economists, is that they think they're arithmetic, but they're really probability calculators. AUSTAN GOOLSBEE: Nostradamus kind of thing. JON STEWART: They think that they are doing a strict science. as opposed to an art science.

AUSTAN GOOLSBEE: Yeah. I'm more on the art science. I think you're right that it's art science. And most researcher academic kind of economists. basically don't think forecasting is doable. They think it's extremely--. JON STEWART: A fool's errand. AUSTAN GOOLSBEE: And a fool's errand--. a bit of a fool's errand. And yet, we have to make decisions every six weeks. JON STEWART: But what is the track record over 30 years?

In other words, generally speaking, were the economists in 2000--. or, I would say, now, what, 1995--. were they in the arena of where we are now? In other words, the people that were. setting monetary policy in the '90s, in the '80s, in 2000--. I won't go with Volcker, because that obviously. was a crisis situation. And we'll take 2008 out of it. But the projections that they're using to base these on,

are they generally accurate? What's the margin here? AUSTAN GOOLSBEE: They're the cleanest dirty shirt we have. [LAUGHTER]. OK? So I would say there actually is evidence. that the Fed's forecasts were better than the private. sector forecasts. But that doesn't make them good. JON STEWART: So funny. AUSTAN GOOLSBEE: That doesn't make them good. JON STEWART: Why are they all such dicks about it? Why? Why is that, Austan?

AUSTAN GOOLSBEE: Look, anybody who's overconfident--. I can say this because I wasn't a forecaster. So I came in, I'm inherently skeptical of black boxes. to begin with. And I have this theory about human beings. that, like, dates back to caveman times, that they're kind of like, you either believe in magic. or you don't believe in magic. And this plays out in many venues.

In academics, if somebody came and presented. a paper that was so complicated that no. one could understand it--. there are some academics who are like, that person. is so impressive. I couldn't even understand it. And others, like the Nobel laureate Gene Fama, who was. at the University of Chicago--. his thing inherently doesn't believe. in magic-- so he'd be like, this whole thing is bullshit. I can't understand one word that guy said. And I'm more sympathetic to that.

JON STEWART: Yeah, I think that's. the correct interpretation. AUSTAN GOOLSBEE: But that makes you skeptical of forecasting. in general. And yet--. JON STEWART: It has to be done. AUSTAN GOOLSBEE: --it's better than-- it has to be done. It's been better than random. And for all the criticisms-- for all the criticisms. of the people who say, look, you missed this one, you screwed that one up-- it's not like their forecasts. were better. JON STEWART: I kind of love the idea, though,

that economic textbooks-- there should. be a title of an economic textbook, and the title is Better Than Random. AUSTAN GOOLSBEE: Hey, I'm the author of a textbook. I'm going to make that the subtitle. I'm going to make that the subtitle--. Better Than Random. JON STEWART: Four years of school. to be better than random. I think that's the highest bar that we can try and aspire to. AUSTAN GOOLSBEE: Yeah. JON STEWART: So you've done this. Everybody sits down, and it's only that-- and what it seems. like when you're in the meeting and you've got your 12.

members of the regional boards, only 5 of which. vote-- you've got your 7 board members--. and they're going to decide 25 basis points up, 25 basis points down. We're going to hold, we're going to put--. we're going to do a push. We're going to all these different things, right? But what almost matters more than that is what everybody. thought they were going to do. AUSTAN GOOLSBEE: Yeah. That's fair. That's fair. JON STEWART: The expectation. AUSTAN GOOLSBEE: And the expectations, and the communication, and, like,

how are we talking about it. All of that stuff--. I get impatient with the funhouse mirror nature of this. Well, we think that they think that we think. that this is going to happen. I don't like that. As you know, Paul Volcker was an old friend of mine. JON STEWART: Do you guys talk about that in the meeting? AUSTAN GOOLSBEE: Sometimes. JON STEWART: In the meeting, you'll say that-- they. think we're going to do this. AUSTAN GOOLSBEE: Yeah. There are some-- people come from different backgrounds.

And some people are markets people, came. from a finance background. I was an economist. There are business people. It feels like we're only ever supposed to talk about what we. ourselves think, not what the committee thinks. or what anybody else's opinion is. JON STEWART: But you live in the world. AUSTAN GOOLSBEE: But you live in the world. And my observation is that some people. put a higher weight on what does the market expect. And for myself, I was old protégé of Paul Volcker,

went through the financial crisis. working very closely with him. JON STEWART: For those who don't remember, Volcker came in after the Nixon debacle. where they lowered rates artificially. Inflation got really sticky in the late '70s. There was the oil shock. And Volcker came in and raised rates to maybe record levels. AUSTAN GOOLSBEE: Literally to 20%. JON STEWART: 20%. AUSTAN GOOLSBEE: And it was--. JON STEWART: For years. AUSTAN GOOLSBEE: And it was a brutal--. JON STEWART: Terrible recession. Yeah. AUSTAN GOOLSBEE: --period. And it was the only way that we got rid of inflation.

JON STEWART: And got Reagan elected, basically. AUSTAN GOOLSBEE: In central bank circles, they look back at Paul Volcker as the superhero. of central banking. And he was, like, 6 foot 8. He was a giant in every way. He used to say, our job is to act. The market's job is to react. And let's not get the order mixed up. And I try to carry that--.

JON STEWART: That's interesting. AUSTAN GOOLSBEE: So I do think it matters. The psychology of the market matters. But there's nothing in the Federal Reserve Act--. the law says that we are to maximize employment. and stabilize prices. And those are the two jobs. There's nothing in there that says "make. sure the stock market is happy, make. sure nobody's disappointed.". And we've had this conversation. We had it 15 years ago. And let's have it again today.

The stock market is not the economy. And the ultimate evidence that that's true. is you remember that day at peak. COVID that they announced the job numbers for April. They announced it on my mom's birthday, at the beginning of--. JON STEWART: Do they always do it on your mom's birthday? Or it just happened to be this year? AUSTAN GOOLSBEE: It just happened. to be my mom's birthday. That's how I remember what the date was.

They announced that the United States had lost 20 million jobs. in a single month. JON STEWART: That's right. AUSTAN GOOLSBEE: That was the worst day in the history. of the job market. The stock market went up that day. JON STEWART: Of course. AUSTAN GOOLSBEE: Because they thought it would be worse. Who knows why? But, like, the stock market is not the economy. Everybody needs to remember that. JON STEWART: You know why-- because what they thought--. it's always--.

I mean, this happens just recently. In the midst of this difficult economy, I think it was maybe last month or two months ago, there. was a really good jobs report. And in the really good jobs report, the market went down--. or, no, I'm sorry, reverse that. It was a terrible jobs report, and it shot up--. AUSTAN GOOLSBEE: And the market goes up. JON STEWART: The thinking of it, I think, is, oh, shit, they've got a dual mandate. So if they're not worried about hiring, right, they'll be more likely to do what.

we want on interest rates. And, therefore, we won't have the competition of treasuries. and other things. People will think the stock market is our best avenue. AUSTAN GOOLSBEE: Maybe. But, look, just be careful trying. to get into people's heads-- JON STEWART: Yeah. OK. AUSTAN GOOLSBEE: --in the market. JON STEWART: Why would it go up? What would be--. AUSTAN GOOLSBEE: Well, I mean, it could be two reasons. It could be, hey, they think it means the Fed. is going to do something. Or it could be they had already priced in what they.

thought it was going to be. And, actually, this was better or worse than what they. thought it was going to be. JON STEWART: Another expectation game. AUSTAN GOOLSBEE: Yeah. JON STEWART: Ah, OK. AUSTAN GOOLSBEE: And so that's why you just. got to be careful about that. JON STEWART: Yeah. AUSTAN GOOLSBEE: I have a friend who's a pretty. famous a doctor down at the University of Chicago, and she started--. her first job before medical school, she was working at the Wall Street Journal, who. had some kind of a TV program. And her job was to call the people in the market.

and say copper's up 5% this week. Why is that? And she would get the explanation. And then she had to run over. And they would record it on the tape. And then they'd send out the tapes to all of the branch. affiliates or something. And she said she decided to go into medicine when she came in, and they said, gold is down 5%.

Why is that? And the guy said, well, it's because the traders. think that this and the Fed is going to move. So she runs in and, just as they're about to hand it, somebody says, wait a minute. Gold is not down. It's up. Go back and call the guy. So she runs back down, and she calls him up, and she says, well, you told me why gold was down, but, actually, gold is up. Why is gold up? And the guy said, same reason. [LAUGHTER]. And then at that point, she said, I'm out of here.

I'm going to become a doctor. JON STEWART: I'm going back into where not as. many people will die at my hand than would if the economy. tanks down. AUSTAN GOOLSBEE: Yes. JON STEWART: That's phenomenal. [MUSIC PLAYING]. Folks, I am nothing if not a generator. of ideas that may never work. Obviously, we've talked a little bit. on this show about the crumple, which is the portable dog. bed that you throw on the ground. that makes a different topographical. shape each time you do it.

Or maybe I'll make an app. I'm always thinking of different apps. Or maybe I'll make an app that helps people create and run. their great business ideas. Oh, wait, I don't need to do that because it's. already existing. Shopify. Somebody probably sat around having a Shopify idea. about an app that would help people bring. their ideas to fruition, like the crumple, and then they made that. And the damn thing is brilliant.

It makes the whole process easy. Everything you need-- it's easy to design your shop, it's easy to get paid. They handle the checkout process. You might think to yourself, like, oh, how are they going. to complete their purchase? Shopify handles it, gets them to come. back as repeat customers. Set up and checkout are all handled. So you get to live your life, grow your business, which they help you do too. Be perfectly honest with you, I'm not that happy with them. that they stole my idea, even though, obviously, they had it.

first and did the work you needed to do. to make it come to fruition. So get Shopify, for God's sakes. With Shopify, nothing stands between your idea. and a real business. So go make it one. [CASH REGISTER DINGS]. Start your free trial at Shopify.com/TWS. Start your free trial at Shopify.com/TWS. [MUSIC PLAYING]. So now, let's get into it. So the Fed is charged with this idea of if we're.

in a deep recession, they might say. we're going to cut rates because that. will stimulate the economy. And then hopefully, as the money pours into the economy, people will start hiring again. If employment is steady and looking good, but inflation is sticky and above that 2% mark, which it is now-- like, although the new, I guess, CPI came out. It was lower a little bit than they thought--.

it had cooled a little bit. But if that's the case, they might raise interest rates. because employment looks robust, but they need to bring down-- the problem is when they get. into where employment doesn't look great, but inflation is still up, and then you're in that weird, I guess they call stagflation. AUSTAN GOOLSBEE: Stagflation. Right. Look at you, Jon. Like, you got the whole thing wired. JON STEWART: I read the synopsis. AUSTAN GOOLSBEE: The basic idea is that the most cyclical parts.

of the economy, whether they're durable goods manufacturing, autos, stuff like that, business investment, construction of data centers, or what have you-- these parts. of the economy also tend to be the most. interest rate sensitive. So that's why the Fed kind of becomes the tip of the spear. Why use the interest rate to counteract the business cycle?

Because these really cyclical-- if the economy is overheating, then you raise the interest rate to try to cool. it down and ease inflation. If it looks like you're teetering on recession, then you reduce the interest rate. and try to get people buying more cars, building more houses, doing more business investment. When it goes wrong, the economists call. that the divine coincidence. JON STEWART: Of course. It's only a coincidence.

Nothing to do with what you did. AUSTAN GOOLSBEE: The coincidence part. is usually those two, the dual mandate, they aren't in conflict. JON STEWART: OK. AUSTAN GOOLSBEE: But when the divine coincidence starts. going wrong is when both things start getting. worse at the same time. JON STEWART: And we're somewhat in that cycle now. Not like we were in the '70s, but somewhere--. AUSTAN GOOLSBEE: We're kind of in that cycle because things. like oil prices going up, they drive down employment. and up prices at the same time, supply chains getting.

interfered with and wrecked-- anything that, in our language, is happening on the supply side, that's. a stagflationary direction shock. And that's the nightmare of the central bank. JON STEWART: That was the '70s. That was the oil shock. AUSTAN GOOLSBEE: Now, it's the '70s. Now, it's the '70s. Though, as I say, it's not the '70s. This is stagflationary direction. But if you could pull out your magic crystal eight ball, and call the 1970s, and say, hey, you.

guys dealt with stagflation. What do we do? They would say, oh, man, it's a nightmare. What's your unemployment rate? And you're going to say, well, it's a little over 4%. JON STEWART: Oh, they'd be like--. AUSTAN GOOLSBEE: What? They're going to be like, what's your inflation rate? Well, it's up to 4%. JON STEWART: Yeah. AUSTAN GOOLSBEE: They're going to hang up on you. and say, like, why are you bothering us? We have unemployment that's almost--. JON STEWART: You're doing great. AUSTAN GOOLSBEE: Yeah, exactly.

They're going to say, we have unemployment that's almost 10%. And inflation is 14%. And so let us never go back to the '70s. But this dilemma of what do you do when both things go wrong. That's a tough spot. JON STEWART: So in those meetings--. so you're in that place now where. it's managing-- like you say, it's creeping up because. of a variety of things, whether it's. the Russian war, or the Iran war, the Strait of Hormuz, or anything else.

People are suffering at these higher grocery prices. Inflation is weirdly steady, but not seemingly moving. in any real direction. AUSTAN GOOLSBEE: Yeah. It's not coming down. Right. JON STEWART: Employment, same. It's kind of steady, but not really. You're not seeing robust-- other than data centers and AI, you're not really seeing the rest. of the economy having much--. being very robust in the way that it's creating things.

AUSTAN GOOLSBEE: Yeah. Look, that's what-- I describe that as the job market. is stable without being good. JON STEWART: Right. AUSTAN GOOLSBEE: There's a weird combination. that people throw around this phrase "low hiring, low firing.". It's worth taking a second to realize. that's extremely unusual. Usually, if there's low hiring, there's a lot of layoffs. Or, if there's low layoffs and low firings, there's a lot of hiring. That both of those are low at the same time is really weird.

The hiring rate is so low it's characterized-- if I told you. we're in the depths of a recession, that's what you would think by how low the hiring rate is. But if I told you the layoff rate, you'd think we're in a huge boom. That's how low the layoff rate is. So it's stable without being good. JON STEWART: Do you have a sense of why that--. is that because the economy is being boosted by one. particular sector to the-- in other words,

it's got a high ceiling, but it's really shallow. AUSTAN GOOLSBEE: Interesting. I was going to say something totally different. I attribute that combination to a lot of uncertainty. that businesses say, yikes, I don't know what. the rules are going to be. I don't know what the tariffs are going to be. JON STEWART: OK. AUSTAN GOOLSBEE: I'm not going to get rid of anybody, because I might need them right away, but I'm not going to hire anybody. So that's where my head is. Now--. JON STEWART: Your idea is smarter than mine, by the way. AUSTAN GOOLSBEE: No, no, no.

Actually, your idea is--. I do think we should think through--. let's call that a sector specific--. if it's all data centers, this could characterize it, if it's kind of like, we've got a bunch of workers that. are trained for one thing, and now it's. going to take a while for them to get retrained. and shift to somewhere else. JON STEWART: That's right. AUSTAN GOOLSBEE: We better think that through. JON STEWART: But the uncertainty.

plays into that as well, because people, I think, are also not sure, is the promise of this AI. going to be a boon for us? Or is it going to be a disaster? AUSTAN GOOLSBEE: And if you talk to young people, it's kind of like, hey, should I even invest in this skill. set to what was a great job--. I'm trained to be an accountant. In eight years, are there not going to be any accountants. Like, it's all going to be done in the computer? So that might also be a part of it. JON STEWART: Honestly, I think is just all of us of trading.

health care with each other. AUSTAN GOOLSBEE: You're 100% right. JON STEWART: It's all just to be us. changing each other's bedpans. AUSTAN GOOLSBEE: Yeah. JON STEWART: For money. That's it. AUSTAN GOOLSBEE: Exactly. So the thing is that health part of the economy. just gets bigger and bigger as a share of the GDP over time. So they used to have this joke, but it wasn't even really. a joke-- in the job market, there were more and more.

economists coming and presenting their papers. about health economics. And somebody said, god, in 20 years, everybody is going to be a health economist. But that's because the entire economy will be health. JON STEWART: That's right. AUSTAN GOOLSBEE: So it would make sense. I think there's something to that. JON STEWART: Now, when you guys--. so when you're in the meeting and you're talking about. the various nuances of things that are going on, and you say.

to yourselves, well, our only option is. that 25 basis points up, 25 basis points down, holding it steady--. and you're feeling the political pressure, because you're humans, and you live in the world, and a president is using his bully pulpit. to do whatever he's doing. And the guy sitting at the front of the table. is somehow being investigated for mortgage fraud. And the other woman is being investigated. for mortgage-- so you're feeling all those pressures. You have to be. Do you ever think, I wish we had different tools? I wish we had other options?

AUSTAN GOOLSBEE: Yes, but also no, in the following sense--. in the following sense. I'm going to explain. That sounds like a cop out, but it's not. But it's not. JON STEWART: The answer is yes and no. AUSTAN GOOLSBEE: The answer--. the answer is more like no. JON STEWART: OK. AUSTAN GOOLSBEE: But it's for a weird reason. That's why it's yes and no. JON STEWART: OK. AUSTAN GOOLSBEE: It is frustrating. A, let me start by saying my experience at the FOMC.

is that I consider this, now, the world's. greatest deliberative body. It's definitely not the US Senate anymore. Turn on C-SPAN. JON STEWART: That's for sure. AUSTAN GOOLSBEE: My experience is that everybody sitting. around the table takes the job extremely. seriously-- that we're out of the business. Look, you know I was in the political elections business. You're out of that business.

You've joined the Night's Watch. You're out of that. Everybody around the table, my experience. is, they're taking extremely seriously the dual mandate. It's all about the economy. And whether it's the president, or the markets, or others, there are these pressures, but people. are really around the data. JON STEWART: Is there a predictability. of how people will tend to vote given who appointed them?

In other words, if a Democrat appointed. somebody or Republican appointed somebody--. AUSTAN GOOLSBEE: That's a good question. Only 7 of the 19 people were chosen. JON STEWART: Right. But you worked for Obama. I imagine the experience that other people. have has touched upon the political world at some point. AUSTAN GOOLSBEE: Kind of not. JON STEWART: OK. AUSTAN GOOLSBEE: I would say you're going to get-- it comes. out with a lag, but they release a word for word. transcripts of the meetings. JON STEWART: Right.

But nobody understands any of that. None of it makes sense. AUSTAN GOOLSBEE: But you're going to see, it's not about partisan politics. It's absolutely not. And so I'm pleased by that. JON STEWART: Right. AUSTAN GOOLSBEE: Now, the other thing I'm. thinking-- my very first meeting, I told you, you got to leave all the phones, everything-- it's very secretive. I come in. I've been in the room for five minutes. And I'm like, this is the coolest thing. This is the coolest room I've ever been in.

And then I hear [IMITATING PHONE RINGING]. And I'm like, what idiot has brought their phone? And I realize it's in my pocket. JON STEWART: No. AUSTAN GOOLSBEE: It's in my pocket. Because I've just started at the Fed, and I now have two phones. So I had left my phone, but I didn't forget my other phone. JON STEWART: Not your Fed phone. AUSTAN GOOLSBEE: So I'm like, oh, my god, I'm going to be arrested. I've been there five minutes. I pull it out, it says "spam likely.".

I'm like, oh, god. So I've never made that mistake again. JON STEWART: Did anybody--. like, did Janet Yellen turn and go, what the fuck Goolsbee? AUSTAN GOOLSBEE: It was Jay Powell. They all looked at me. JON STEWART: What the fuck? AUSTAN GOOLSBEE: Everybody gave me the stink eye beyond belief. But I deserved it. I deserved it. JON STEWART: Understood. AUSTAN GOOLSBEE: I've never made that mistake again. JON STEWART: So this is a deliberative body. AUSTAN GOOLSBEE: It's a deliberative body. And people are not responding, my experience--. JON STEWART: Even the new guy, even Warsh, who you knew.

AUSTAN GOOLSBEE: I did know. JON STEWART: But Trump clearly appointed him to do a job. AUSTAN GOOLSBEE: If Kevin Warsh--. look, I went through the financial crisis. He was at the Fed when I was at the Council. of Economic Advisors. JON STEWART: Right. AUSTAN GOOLSBEE: I felt like we were kind. of wartime foxhole buddies. 2008. AUSTAN GOOLSBEE: Yeah. 2009, '10. I think he left in 2011, maybe it was 2012. JON STEWART: Right. AUSTAN GOOLSBEE: I saw him at a moment.

of very high economic stress. And he was level headed. And if he comes to the job, which he has seemed to, with the seriousness of purpose that the room demands, it's going to be fine. As I always say, the Fed is technical. and is rooted-- its founding was rooted in conspiracy. So I understand why--. JON STEWART: Sure. AUSTAN GOOLSBEE: --why--. JON STEWART: And collusion, and monopoly, and oligarchy.

AUSTAN GOOLSBEE: I understand that. But now, the Fed is not the bad guy. We are the Guardians of the Galaxy. JON STEWART: Whoa. Slow your roll, Magneto. Listen-- listen. AUSTAN GOOLSBEE: In this part-- and we're. not even the raccoon one. We're the good ones. We're the good ones. We're all coming down there trying. to do the job as best we can. JON STEWART: Right. AUSTAN GOOLSBEE: And we're not magicians. We each come from different perspectives.

and different parts of the country. And we hash it out. And those independent views is really critical. And we're back to this thing about Fed independence. The more uniformity and the more. that outside voices got to dictate, here's what the decision should be, that would be a mess. If you want inflation to come back, that's how you would do it. Inflation come roaring back if you don't have independence.

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AvocadoGreenMattress.com/TWS. Period. [MUSIC PLAYING]. So let's talk about the two-- a broader kind of macro. conversation on the economy. We'll talk about the two moments. that I thought were very instructive of how. the government handles these types of crises. We're not going to go all the way back to 1907, or 1913, or any of those things. We're going to go 2008. You were there. So you understood how the government reacted to that.

And then we'll go to COVID and the pandemic, because I thought those were two really different. responses from the government. And I certainly know which one I prefer. And I'm curious what you think of both. 2008, the response comes in that the world. liquidity is an issue throughout the whole system. It's about to seize up. The mortgage backed securities are failing, and everything's about to collapse.

And the Fed actually takes on a much more robust role. than they had in the past. Not only were they just about the interest rates, they started taking on loans, right? They sold treasuries, I guess, to take on--. they started loaning. AUSTAN GOOLSBEE: They started buying a bunch of bonds--. the equivalent of making loans. But they're buying up these assets.

JON STEWART: Right. And I guess they offset that with treasuries. Would that be the way that they would hold on to that or no? AUSTAN GOOLSBEE: No. Not exactly. JON STEWART: Not so much. AUSTAN GOOLSBEE: Yeah. They're allowed to expand the balance. sheet in the same way they would. be allowed to print money. JON STEWART: But they're doing it beyond where. they had ever previously--. AUSTAN GOOLSBEE: Oh, for sure. Yeah, for sure. Well beyond. Well beyond. JON STEWART: And by expanding their balance sheet, now. they've got an issue with somebody's. got to pay the interest on their own balance sheet,

would they not? If they expand it--. AUSTAN GOOLSBEE: Yes and no. I mean, in a way, it feels like you're getting--. JON STEWART: Better than random. AUSTAN GOOLSBEE: No, but I should have completed. the thought of when you said, do. you wish you had other tools? The reason why overall, yes, it's frustrating, but, no, I kind of don't is the Fed is not the policy process. The Fed is not politics. We're not doing fiscal policy.

That should, in my mind, be decided. by the Congress, the president, the American people. All the really important things should be decided in that. And the more they try to put that onto the Fed--. and it was my fear. I wasn't in the Fed when COVID struck, but my fear. on the Fed's behalf in COVID, where, if you remember, the Congress said, we're going to spend trillions--.

JON STEWART: That's right. All kinds of loans. AUSTAN GOOLSBEE: --and who's going to run this? Who's going to run this? They were like, well, the only people competent enough. to run it are the Fed. Let's have the Fed do it. I was really nervous on behalf of the Fed. because, having been through 2008, if anything goes wrong with the program, you know they're going to blame whoever ran the program. So I thought it was an effort for Congress.

to be like, oh, let's have the Fed do these loans. And then, if people can't pay them back or if it costs--. if there's fraud or whatever, then. we'll say, ah, the stupid Fed. We asked them to do it. And they screwed it up. So that makes me nervous. In the FOMC context. If we had more tools that were literally fiscal policy tools, like taxes or stuff like that, then we would be Congress.

Like, the Fed shouldn't have that. JON STEWART: Understood. AUSTAN GOOLSBEE: There is no bad weather. There is only bad clothing. That's our motto. And our thing is the fiscal-- those are just the conditions. You tell us the conditions, we get the right jacket. JON STEWART: But the difference is in 2008, the Fed gave the jackets to the big boys. They basically existed-- their money hose. that they were doling out--.

AUSTAN GOOLSBEE: Went to the financial institutions, not. the individuals. JON STEWART: Correct. Correct. AUSTAN GOOLSBEE: You highlighted this at the time. Highlighted it at the time. JON STEWART: Made me so mad. AUSTAN GOOLSBEE: But you remember--. you asked me, why not bail out the homeowners? And then wouldn't they, by domino effect, wouldn't that save the mortgage backed securities? Why save the mortgage backed securities? JON STEWART: Right. AUSTAN GOOLSBEE: And I said that that would be viable. JON STEWART: Yes. AUSTAN GOOLSBEE: If you remember,

the thing I said was--. JON STEWART: You weren't in charge, though. AUSTAN GOOLSBEE: I wasn't in charge. But you remember what I said? If we had done that, we would never get back the money. And you said, what do you mean, "get back the money?". I said. If we had used the $800 billion and put it into mortgages, it would be very hard to get people to pay back the money. But the banks were putting it in and were taking warrants. And you, incredulously, said, do you. honestly believe that the banks are.

going to pay back this money? And I said, yes. It's designed so that they will pay back the money. And they did. It's not to say it's free. Let's not do that again. We gave them extraordinarily valuable life insurance. at a crucial moment, like when the mafia said, we're coming to kill you. We were like, we'll give you life insurance. JON STEWART: Right. AUSTAN GOOLSBEE: But it's still worth. thinking about that context of if financial crises-- if you.

look around the world, financial crises usually cost. the taxpayer in the country 5% to 10% of GDP, lost money, to save it. The TARP ends up costing the US government close to zero. JON STEWART: The US government. AUSTAN GOOLSBEE: Yeah. JON STEWART: Let me push back a little bit on this. AUSTAN GOOLSBEE: Yeah. Do.

JON STEWART: So you're looking at it through the lens of what. it cost the government. But the government is not an entity that is disassociated. from the needs of its people. AUSTAN GOOLSBEE: I agree with that. JON STEWART: In 2008--. AUSTAN GOOLSBEE: I agree with that. It was horrible. Horrible recession. JON STEWART: They push all this money out to the big banks. Now, you're right-- a lot of that. came back to them after they paid back those loans. But what didn't come back were the people's homes. that they lost and the jobs--. AUSTAN GOOLSBEE: I agree.

And the foreclosures. JON STEWART: Right. AUSTAN GOOLSBEE: Look, I'm totally. sympathetic to that view. JON STEWART: Let's go to pandemic. AUSTAN GOOLSBEE: Yes. JON STEWART: You're right. The government may not have recouped some of that. But the economic activity of doing demand side. stimulus rather than supply side, rather than. the Fed pumping money into the big boys, but the Fed helping to pump money into the individuals. helping to run that program, that economy. did not have the unemployment that you would think of.

It bounced back much more quickly. People didn't lose their homes. So isn't that what the government--. the government is not there to run a zero balance sheet. It's there to respond to the needs of the people in crisis. AUSTAN GOOLSBEE: I made--. now you're fully in the fiscal policy space. JON STEWART: Come on, Goolsbee. Just admit it. AUSTAN GOOLSBEE: As a Fed person, I have no opinion on that. Before I was at the Fed, I agree with you.

The government-- as somebody described, you wouldn't want to lose World War II because, oh, we needed--. JON STEWART: Had to run a zero--. AUSTAN GOOLSBEE: Yeah, no. Exactly. Like, let's have a zero deficit. JON STEWART: The debt has exploded since the TARP anyway. AUSTAN GOOLSBEE: Yes. There's no question that's true. JON STEWART: Come on, Goolsbee. Come to Team Keynes. Goolsbee, come to Team Keynes.

Just do it. AUSTAN GOOLSBEE: That's not the Fed. The Fed doesn't decide that. We just set the short term interest rate. You know what I mean? So as you come to say, should that be in the Fed's toolkit, for example--. JON STEWART: So who decided for the Fed. to start that program of zero interest rate windows? Like, was that Congress? AUSTAN GOOLSBEE: Zero interest rate windows? Tell me more. JON STEWART: Didn't they allow the big banks.

to come in and take out--. AUSTAN GOOLSBEE: Oh, the discount window loan. JON STEWART: Correct. AUSTAN GOOLSBEE: So that's the lender of last resort. JON STEWART: Right. AUSTAN GOOLSBEE: And that's created by Congress. Congress creates that. JON STEWART: But they have discretion. over who they are lending to. And I'm assuming they have discretion over the kinds of--. AUSTAN GOOLSBEE: Kind of. Not really. They have to outline a criteria. JON STEWART: OK. AUSTAN GOOLSBEE: We're back to the old J. Pierpont Morgan days. We're not supposed to be expressing,

like, hey, here's a bank I like. And let's give you money. JON STEWART: Right. But that is what they did. And they did choose to give it to the big boys. instead of the people. So my question to you is, in hindsight--. AUSTAN GOOLSBEE: No, the Fed couldn't do that. It would have to be Congress to do that. JON STEWART: Right. The Congress decided, OK, we're going to get. the Fed to run that program. And they do that. Which do you think was a better use of the powers. of the Fed and the government? Because I have a very clear--.

AUSTAN GOOLSBEE: You keep wanting this to be the Fed. Now, the word "better"--. JON STEWART: You're right. No, that's very fair. That's very fair. AUSTAN GOOLSBEE: The "better" is doing the work. Because here's the only difference--. here's a big difference between the COVID times and the. great financial crisis times. That was bank-driven crisis. Part of the thing that infuriated. me, infuriated everybody, about the bailouts is, wait a minute,

we're bailing out exactly the people who are. at fault for creating this. JON STEWART: Right. AUSTAN GOOLSBEE: And that made for a dynamic. that was a, wait a minute. Even if you told me this thing would be better. for the economy, I don't want you to give these people money. And then, the Tea Party's rise was, well, I don't want you to bail out the homeowners because I. think they're at fault. They were over their heads. They were buying houses they never had any business buying.

So that conflict was a little different when it came to COVID. because it wasn't anybody's fault. So I feared, with the PPP loans, and the unemployment. insurance, and a whole bunch of stuff, I was like, whoa, geez. When we were going through the financial crisis. and the stimulus following the financial crisis, we had massive monitoring to make sure there's no fraud.

because everyone perceived, if there is a lot of fraud, the legitimacy of all of these programs. are going to be undermined. Somehow, because it was biology spreading, people just kind of wanted to say, let's not speak of this again. Let's get on with our lives. I think there's no question that your read of the evidence,

that the unemployment rate went higher under COVID. but came down, like, pretty quickly. JON STEWART: And we recovered very quickly. AUSTAN GOOLSBEE: And we recovered quickly. To the extent that that's a lesson for dealing. with other massive, monumental shocks, it came a different way. It went from the bottom up, not from the top down. JON STEWART: That's the point. And you can go bottom up with less money than top down.

It always works that way. AUSTAN GOOLSBEE: And it didn't turn into a financial crisis, which it easily could have. JON STEWART: That's right. And, by the way, the caveat to all of that, the COTA is what they told me-- because you. were not the only person I complained to about that--. about why aren't we bailing out the homeowners. Why are we bailing out AIG and all these idiots that did it? And what they said to me, the toughest pill to swallow in all. of this, was we couldn't bail out the homeowners. because of moral hazard.

AUSTAN GOOLSBEE: Yeah. And then you'd be like, hey, what about the moral hazard. of the banks? JON STEWART: Well, that's what I said. And the answer to that was we had to land the plane. AUSTAN GOOLSBEE: Yeah. Look, my thing wasn't rooted in moral hazard. And I still, to this day, despise that we got to--. I understand why we had to do the bailouts. once everything's on fire. But we shouldn't be happy about it. I mean, it's still awful. JON STEWART: I still think it could have.

worked the other way around. I still think it could have worked the other way around. AUSTAN GOOLSBEE: And I do think it could. I do think it could. But we would have had to have had. a kind of a national commitment to, we want to spend. the money to do this in a way that we did have. when it came to COVID. Everybody could see, let's not lose World War II for the sake. of balancing the budget. JON STEWART: Well, Austan Goolsbee, let me tell you something-- you know. there's nobody I like talking about this shit more than you.

You know I love this. I could do this forever. AUSTAN GOOLSBEE: We're going to get way into weeds. Just remember-- JON STEWART: Yeah. Go ahead. AUSTAN GOOLSBEE: --the Fed doesn't just. set interest rates. We're also $6 trillion a day of the payment. plumbing when anybody's doing wire transfers. and making payments--. all the cash in the economy is printed by the Bureau. of Engraving and Printing. It's getting distributed by the reserve banks. And if you ever come out to Chicago, I'll take you down.

We'll go see the vault. We had tens of billions. of dollars in there. We're pulling out the counterfeit. It's awesome. JON STEWART: Oh, you know I'm doing that. And the QE days are over. We're not--. AUSTAN GOOLSBEE: And the QE days are over. We're not printing it. We're just handing it out. JON STEWART: Well, this is fabulous. And, by the way, thank you for giving, I think, the most cogent and clear explanation. of what goes into the decisions and the meetings of how. these interest rates are decided, and what their particulars are, and when it that was very,

very illustrative for me. And thank you for that. AUSTAN GOOLSBEE: Hey, Jon, I know this is technical, but the Fed matters. The economy matters. We're going to maximize employment. and stabilize the prices. And if we do that, everything will be OK. JON STEWART: Or-- AUSTAN GOOLSBEE: No. JON STEWART: --we're just going to go. back to the JP Morgan days and just let Musk take care of. it all. Austan Goolsbee, you're the man. AUSTAN GOOLSBEE: Great to see you again, Jon. JON STEWART: Always a pleasure. President of the Federal Reserve Bank. of Chicago, Austan Goolsbee. Thanks for joining us.

AUSTAN GOOLSBEE: Take care. [MUSIC PLAYING]. JON STEWART: I love a nice cereal. Morning, lunch, dinner, if I'm having a particularly. spectacular night of insomnia, I'll pop a nice bowl of cereal, 3:00 in the morning. What's better than a bowl? What's better than cereal? What's better than Magic Spoon? Nothing. My point is that Magic Spoon makes healthy cereal. You could still eat it out of a bowl, but you won't get that crazy up and down crap.

13 grams of protein, no sugar. Zero. 5 grams of net carbs per serving. That's perfect for breakfast, late night. snack, post-workout fuel. It keeps you from those crazy ups and downs, comes in great flavors-- fruity, frosted cocoa, cinnamon crunch. Look for Magic Spoon on Amazon or at your nearest. grocery store. And there are plant based versions of the cereal, too.

Even vegans get to feel like they had a childhood. You'll find vegan options at Whole Foods. Or get $5 off your next order at MagicSpoon.TWS. That's MagicSpoon.TWS for $5 off. [MUSIC PLAYING]. I love talking to that dude. BRITTANY MEHMEDOVIC: I could tell. GILLIAN SPEAR: I didn't know economists. were allowed to be that fun. JON STEWART: Right? GILLIAN SPEAR: Or that caffeinated. JON STEWART: He's like talking to a normal human being.

about the economy, and he's an economist. And when I don't understand something, he's not a huge dick about it. He's just like, look, technically, your terms are not quite correct, but this is what it--. and then you can, like, actually have the conversation. GILLIAN SPEAR: Yeah. And he actually seems like a really curious. person too and, like, a really animated person. by what he does. And I think that that's kind of, like, what you would want. for somebody in that role. JON STEWART: He loves it. BRITTANY MEHMEDOVIC: It was the most excitement-filled episode. that I think we've ever done. [LAUGHTER].

And it was on economics. GILLIAN SPEAR: About the Fed. JON STEWART: Well, part of that is, so I've known him for years. And we did used to have-- in 2008, 2009, like, I had so many arguments with the economists. that were in that administration. about what we were doing. And so every time, they would just be like, shut up! No! And so reliving that and relitigating that. is one of the true pleasures of that era, because I was so mad.

GILLIAN SPEAR: Yeah. JON STEWART: I can't remember-- there were, like, certain even. terminology that I was trying to make. happen during that time, like wealth incumbency. Like, I kept trying to make wealth incumbency. a tagline for what the economic crisis of 2008 was doing, and that those banks had a wealth. incumbency that gave them an advantage over the. individual homeowners. And what was the other?

Oh, I used to say to him all the time, I go, you're bailing them out at a geometric level when you could. bail out the homeowners at an arithmetic level. and save us fucking trillions of dollars. And they'd be like, you don't understand. GILLIAN SPEAR: I feel like the term "top down" existed then. JON STEWART: We were top down and we were trickle down. GILLIAN SPEAR: Yeah. JON STEWART: But what was so odd about it. was they were all Democrats. BRITTANY MEHMEDOVIC: Yes. JON STEWART: And so my frustration was always--.

because all this was all when my dislike of Larry Summers. began to bubble, because he was the central, I think, Yoda-like figure of it all. He was the one that they spoke about as, like, this is the unassailable guru and Nostradamus--. kind of like what we were talking about earlier, about how the economists would project, but with an air of mathematical certainty.

that doesn't exist in the world of probability, or even--. GILLIAN SPEAR: Larry only recently. stopped making those types of predictions, and nobody knows why. JON STEWART: Yeah, I don't know. I think he just decided to take up a different hobby. GILLIAN SPEAR: Oh, that's so weird. He just sort of dropped out of the public discourse. And nobody knows why. JON STEWART: Well, I think some people, when they retire, they like to go down to a Caribbean island. GILLIAN SPEAR: Yeah. JON STEWART: Just hang out. Or now-- I wonder if he's going the opposite way. Now he's just like, I will only ski.

I will no longer go to warm climates. GILLIAN SPEAR: He's in Scandinavia as we speak. JON STEWART: And what's so funny about that. is if you remember, like, whenever there's, like, an economic crisis, they'll always. go to him as the expert. And he's always in an island in--. BRITTANY MEHMEDOVIC: Yes. Oh, my god. Palm trees in the background. JON STEWART: How are regular people going. to get through this crisis? And he's just down there with, like, a fucking piña colada. and his culottes on sitting in a big chair. from Margaritaville.

I don't think we should bail them out at the demand level. [LAUGHTER]. Massage me. GILLIAN SPEAR: It would be so reckless to bail them out. Yeah. JON STEWART: So reckless. GILLIAN SPEAR: Meanwhile, they're, like, handing him piña coladas. JON STEWART: Unbelievable. But fabulous. Goolsbee is one of my favorites. And whenever the arguments were, they were never ill spirited. They were always like--. I really liked him. GILLIAN SPEAR: Yeah. I mean, I think part of that is him. being such a curious person.

Like, you could tell he was really interested by the points. that you were making, because it's. not the typical, like, economic framing, necessarily. JON STEWART: And I think he wasn't bound by "we have. to have certainty"-- that he was always willing to grant. there might be a different way, and a better way, and all that, which is always helpful. Speaking of which, Brittany, what do the kids. want from us this week? BRITTANY MEHMEDOVIC: OK. Jon, do you think news networks should carry the President's. remarks live on Thursday night or wait. until they can fact check?

JON STEWART: Oh, they're not going to fact check anyway. What difference does that make? I think there should be a C-SPAN camera. on the president at all times. Every remark he makes should be carried live, including whatever ketchup splattering tantrums he might. be throwing behind the room when his gold plated. new phones came out late. Like, whatever it is. I don't think we should have to live with the shit. that he spews out there whenever. he feels like doing it.

I think you want to be ubiquitous, be ubiquitous. GILLIAN SPEAR: Yeah. He's still deciding the terms. Yeah. We have, like this, like, 24-hour news cycle. JON STEWART: That's right. GILLIAN SPEAR: He can't get enough attention. And yet, we're still just like, hanging. on whatever words he selects that we pay attention. to at any given moment. JON STEWART: Do you feel like-- and this. maybe gets us into the relationship. portion of our podcast--. I feel like the country is in an abusive relationship. with a narcissistic partner.

GILLIAN SPEAR: Yeah. BRITTANY MEHMEDOVIC: Yeah. JON STEWART: And I'm not fluent enough. on the issues of the psychology of relationships. to know, how do people heal from that? First of all, how do we get rid of him? How do you break up with a narcissist? And how do you not let the specter of the narcissist cloud. and begin to rule your life? That's the problem here is the narcissist. isn't thinking about us. He's only thinking about himself.

So we're left with the churn and bad feeling. BRITTANY MEHMEDOVIC: Years of therapy, I think, is the only solve. GILLIAN SPEAR: Yeah. We got to go on Couples Therapy on Showtime, baby. JON STEWART: With Orna? Would Orna do it? GILLIAN SPEAR: Would Orna help us? JON STEWART: Could Orna sit down with the country and Trump. so that we can expose what a narcissistic ass--. because those are the best Orna episodes. is when, like, the person thinks they're. being clever and tricky. And, like, Orna is just sitting back.

letting them expose the narcissistic asshole. that they are. Do you watch that show? Do you ever watch that show? GILLIAN SPEAR: Yeah. She's fantastic. BRITTANY MEHMEDOVIC: I haven't. No. JON STEWART: Oh. Oh, Brittany. BRITTANY MEHMEDOVIC: I'm going to love it. GILLIAN SPEAR: You're in for a treat. JON STEWART: There's guys that are just. like, you never listen to me. You don't do what I do. You don't treat me like the king that I am. GILLIAN SPEAR: Literally. JON STEWART: It's, like, fucking crazy, those shows. GILLIAN SPEAR: And then they look at her, like, right? And she's like, no. JON STEWART: Right.

Then she'll always turn, and she'll look at the woman, and go, like, I'd like to hear where you're at right now. You know what? How are you receiving his comments. about how mistreated he is? Saying that you really began to mistreat him after he. had fucked all those other people. GILLIAN SPEAR: Yeah. He's saying that he won the 2020 election. How are you-- how are you receiving that? BRITTANY MEHMEDOVIC: He won't get over it.

Can't move on. JON STEWART: All right. What else do they want? BRITTANY MEHMEDOVIC: Jon, what's the deal with Fetterman? JON STEWART: Can't a man wear board shorts to work--. [LAUGHTER]. --without everybody wondering? I think it's the deal with a lot. of things, which is you tend to embrace. the side that flatters you. And I think there's very little of his--. his whole socialist panic is bananas for a guy who ran.

on working class bona fides. Like, what does he mean by socialism? Like, Social Security, health care? Like, what the fuck are you even talking about? I think the Israel thing also has affected him grandly. But I also think there's a lot of people that can't help be. flattered by the other side coming to you and saying, you're the only one. You're the only one that makes any sense on that side.

You're the guy. Come join us. One of us. One of us. GILLIAN SPEAR: And it's so weird from where. he started too. Like, you wouldn't-- maybe it was because he was getting. the praise from the left or--. I don't know. It's like, I guess we were talking about narcissism. JON STEWART: But the praise from the left, though, made sense. GILLIAN SPEAR: Yeah. That's what I mean is it's, like--. I don't want to speculate about anybody's health or anything, but it's been a real heel turn. JON STEWART: I think it's also there is a power--.

and Sinema did this. And Manchin did this, to some extent. There is a power in being the controlling interest. And I think that that tends to go. to certain people's head of being, I'm the contrarian that can change. The Republicans are pretty good about making. a performance of that with the Freedom Caucus. and those kinds of guys. But when push comes to shove, they still get their 215 to 214. vote or their 50 to 49.

They don't get that. But they keep saying, like, he's going. to switch over to their side. And you're like, on what ground? Like, on what policy ground would he be over there? I don't--. GILLIAN SPEAR: But also, like, how would. it meaningfully be different? It's like, if--. JON STEWART: Get a nicer office. You get a much nicer office. GILLIAN SPEAR: And if the Democrats actually. had a majority, it would matter somebody flipping, if you lost. the majority for any reason. But, like, right now, he's voting for all their nominees. He's doing everything he can to make their lives easier.

So I just don't see how it's meaningfully. different at this point. JON STEWART: Right. BRITTANY MEHMEDOVIC: Except Blanche, apparently. JON STEWART: No. It seems to be that he seems to be embracing the caricature. of Democrats, as opposed to the reality. of what a more populist economic platform would. look like. But I have no fucking idea, to be honest with you. I mean, I think he might just like iconoclastic status. GILLIAN SPEAR: Yeah. BRITTANY MEHMEDOVIC: I think he likes the attention. And he's getting a lot of it. JON STEWART: Yeah, they're--.

I mean, they're courting him. BRITTANY MEHMEDOVIC: From the media too, though. JON STEWART: Oh, sure. BRITTANY MEHMEDOVIC: Everyone keeps going to him. JON STEWART: If you remember, Sinema, like, that was her thing. Like, I'm the one-- and it's all. couched in pretend principle. I'm the one who stands on principle and integrity. And you're like, what principle, exactly, are we talking about? BRITTANY MEHMEDOVIC: Yeah. JON STEWART: More guns? More religion? Like, less social safety net? Like, what exactly are you embracing on their side.

in terms of issues other than, I think the left is a little. too angry at Israel right now. Like, well, if you're not fucking angry at Israel. right now, I really don't think you're watching the news. I don't think you're seeing what's happening. GILLIAN SPEAR: Yeah. And there's also-- like, there's. this benefit to being a sort of swing vote. because you can get more for your state. Like, look what Murkowski did with Alaska. JON STEWART: Oh. GILLIAN SPEAR: But what does Fetterman doing. for Pennsylvania right now? JON STEWART: That's an excellent point, Gillian. The Murkowski example is a great one. She's leveraged it into-- and she'll still.

support the bill, generally, on her side, but she leverages provisions. I don't know that he's done that, to be honest. GILLIAN SPEAR: Like, you can make. the case that Murkowski has done well. for her state in some regards. Like, I would argue not well for the women of any state, but she has managed to get these carve-outs. JON STEWART: Right. Right. BRITTANY MEHMEDOVIC: Yeah. JON STEWART: And it's funny--. Collins, in the same position, doesn't have the same efficacy. And maybe that's by the way that Alaska has a slightly.

less mainstream need matrix. But I think you're dead on right there. Fine analysis. BRITTANY MEHMEDOVIC: Last one. JON STEWART: Oh, one more. All right, come on. What do we got? BRITTANY MEHMEDOVIC: Did Jon find that going vegetarian. led to an increase in farting? I fear for my marriage. [LAUGHTER] JON STEWART: What? GILLIAN SPEAR: What a pivot. [LAUGHTER]. This is the kind of pivot you only get on this show.

JON STEWART: As someone who's--. I don't have wearable tech, so I'm not tracking it. to the extent that I don't have a fart Aura ring that is giving. me a statistical analysis, I can tell you. that it's very difficult to separate aging from diet. when it comes to your ability to digest anything. I mean, the idea that eating cheeseburgers would.

somehow calm the gaseous nature of your colon. seems-- not quite. But I do understand if she's gone full cruciferous. Like, there is-- there is an argument to be. made that beans and broccoli--. like, do you have to spread it out a little bit. with a variety-- you got to throw. a couple of slices of pizza in there to calm the waves. GILLIAN SPEAR: Beautifully put.

BRITTANY MEHMEDOVIC: Eloquent. JON STEWART: The only thing I will say about that is the idea. that that would hurt her marriage-- it's the key. to a happy marriage--. [LAUGHTER]. --is two people-- remember, it's in health, but also in sickness. BRITTANY MEHMEDOVIC: Yeah. JON STEWART: Two people comfortable enough. with their own standing with each other. to let them know that their body is slowly. dying from the inside and decomposing.

whatever has been put in it. And it's got to get out somehow. GILLIAN SPEAR: I think Orna said that. I think that was on--. JON STEWART: Thank you for bringing that around. That's what we know as a callback. Brittany, how can they get a hold of us. to ask us more of these truly insightful questions? BRITTANY MEHMEDOVIC: Twitter, we are WeeklyShowPod. Instagram, Threads, TikTok, Bluesky, we. are WeeklyShowPodcast. And you can like, subscribe, and comment. on our YouTube channel, The Weekly Show with Jon Stewart. JON STEWART: Fine and dandy. Thank you very much.

As always, couldn't do it without producer. Brittany Mehmedovic, producer Gillian Spear, video editor. and engineer Rob Vitola, audio editor and engineer Nicole. Boyce, and our executive producers. Chris McShane and Caity Gray. We will see you all next week. [MUSIC PLAYING]. The Weekly Show with Jon Stewart. is a Comedy Central podcast. It's produced by Paramount Audio and Busboy Productions.