Speak Up’s Anthony Scaramucci welcomes former Federal Reserve Bank of Atlanta President and CEO Dennis Lockhart to explore the echoes of the 2008 financial crisis and how they still resonate in today’s economy. Lockhart shares insider insights into the Fed’s bold response with quantitative easing, critical lessons learned, and how those actions continue to impact today’s Fed policies, including the recent rate cut. He also discusses the rising risks of deficits, the challenge of balancing growth with inflation, and what may lie ahead for the U.S. economy.
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Dennis Lockhart 0:00
Bear Stearns failed in March of 2008 then several months passed, and then we had Lehman and city and AIG and all of those, those shocks to the global economy that occurred in 2008 what happened was monetization by another name. We called it quantitative easing. We’ve been talking about the imminent recession for the last three years. It has not developed.
Anthony Scaramucci 0:38
So welcome to speak up. I’m your host, Anthony Scaramucci, and our guest today is a incredible guy and Dennis, I really appreciate you joining me. It’s Dennis Lockhart, former president and CEO of the Federal Reserve Bank of Atlanta, and former FOMC member, Dennis, welcome. Thank you for being with us today. I just want to read this, I think it’s important. You served as the 14th president and CEO of the Federal Reserve Bank of Atlanta, starting in March of 2007 which had to be a wonderful time for you to start, sir, because I’m old enough to remember the Bear Stearns collapse and then the ensuing global financial crisis. And so we’ll talk a little bit about that. You oversaw the bank’s activities, including monetary policy, bank supervision and payment services. And of course, you are on the very famous FOMC board, the Federal Open Markets Committee, which is basically the Federal Reserve’s main body for monetary policy. Before your tenure at the Fed, Mr. Lockhart held leadership roles in private equity and international finance. He was a managing partner at Zephyr. Spent 13 years at Heller financial. He chaired the advisory committee of the US export import bank. Earlier in his career, he worked for Citibank. Quite a resume, I actually believe it or not, sir, I was the chief strategy officer at the XM bank for three weeks. It’s a it’s a story that you will enjoy. Trump sent me over there, and Trump said to me, Rand Paul wants to shut down the XM bank. And I said, Okay. He says, I don’t understand anything about the XM bank. Go over there and and I want you to interview everybody, and then I want you to report back to me. I said, Do you want me to write you a report? No, I don’t want you to write me a report. You know, I’m not going to read the report. I just want you to report back to me. And so I was at the ExIm Bank for three weeks. I interviewed everyone. I went back to the White House. I sat with Trump in the Oval Office. He said, Should we shut down the ExIm Bank? I said, No, we should make the ExIm Bank bigger. He says, Okay, that’s all I need to know. And he dropped it. I thought you would enjoy that. Yeah. Anyway. Well,
Dennis Lockhart 2:52
people have been trying to shut down the ex im bank for years and years and years, and then they always run up against the K Street crowd, because there are three or four major US corporations that rely on the ExIm Bank to get deals done that the commercial markets can’t get done. So it’s, it’s, it serves a purpose.
Anthony Scaramucci 3:17
And a lot of time with the Boeing executives on that very topic, but, but, you know, I had a short stay in Washington, but I can assure you, Mr. Lockhart, I learned a lot. Okay, I learned about the good, bad and the ugly. So, so, if you don’t mind, I would like to get into it’s March of 2007 I don’t want to put you in post traumatic stress, sir, but let’s just set the scene for our viewers and listeners. Bear Stearns is on the brink of economic collapse. It has a liquidity mismatch on its book. The positions and its mortgage book are being marked down, and it’s on the verge of insolvency. The Fed works with JP Morgan and sells Bear Stearns for, I guess a few dollars to JP, Morgan takes over their very famous building here in Midtown, set the scene for us. You’re at the Fed. What happened, sir? What did you have to go through?
Dennis Lockhart 4:09
Well, let me start with March of 2007 i i started March 1 2007 and the reason I start on that date is because if you, if you had started as a president three weeks before an FOMC meeting, you could attend the next FOMC meeting. So I saw no reason not to get into it. So the March meeting was 23rd 22nd 23rd something like that. 2007 I went to that meeting, and i i Now, in retrospect, and am surprised no one brought up any trouble at all. Look like the economy was just motoring along beautifully. And fact, I would say for the first. Three meetings that I attended through the June meeting, everyone was pretty sanguine about the glide path of the economy in the summer of 2007 we begin to hear about problems in the subprime mortgage backed securities market, but I would say no one felt that on the committee, no one felt that that was a big enough market to do much damage to the overall economy, much less the global economy. And for the remainder of 2007 there was growing concern that something big was happening, but not really recognition of the seriousness of it. So the real year to focus on is 2008 Bear Stearns failed in March of 2008 then several months passed, and then we had Lehman and city and AIG and all of those, those shocks to the global economy that occurred in 2008 2008 Believe me, was a lot different than 2007 in my experience. Yeah,
Anthony Scaramucci 6:19
I, want to ask you about this. There’s a very famous Milton Friedman birthday party. Dr Bernanke is giving a speech at that party, and they’re talking about getting monetary policy right to avoid the next calamity. Do you remember this? Or No,
Dennis Lockhart 6:40
I don’t remember the party. No, I can sort of imagine what Ben Bernanke might have said.
Anthony Scaramucci 6:44
Yeah. So Dr Bernanke, and he writes about it in his book courage to act that they miss size the problem. They thought it was a $90 billion problem in 2007 they could sort of ring fence it, and they could make the problem go away, but once the fire started it, it became a confidence, you know, issue, it became a crisis of confidence. And so, if you don’t mind, before we go into the Fed and all the other stuff, tell us a little about the psychology of all this stuff, because there’s science behind being on the FOMC and trying to figure out what the right interest rates are to hit the dual mandate, but there’s also some psychology that goes into the overall markets. And so what do you think the Fed gets right? And what do you think the Fed sometimes gets wrong?
Dennis Lockhart 7:29
Well, I have often said, Anthony that the FOMC is in a minuet with the markets sometimes leading, sometimes following. The Fed takes action, focused on the real economy, and the markets react, and interest rates or market activity changes the real economy that the Fed was trying to influence in the first place. And it is a very intricate communications challenge for central bankers, and also a process of of communication reaction, reaction to the communication and so forth. Having said that, and I think the Fed gets this right. The financial markets are not the primary focus. It is the main street economy of the country and and I would say that the the members of the FOMC really do not want to be seen as reacting to every little thing in the markets. So there is a great tendency to ignore or the more elegant term is look through market reactions or market activity. And if you go back to 2007 and even into 2008 that sort of passiveness was was part of the MO of the of the committee, because they just didn’t feel that the real economy was going to be endangered by some even failures In the financial markets turned out to be wrong. So the Fed gets that wrong from time to time. I would also say, you know, the most recent experience, of course, has been the misreading of the effect of the supply chain disruption, and therefore the view that the trans the inflation surge would be transitory. I suppose you could argue it has been transitory. It just took about three years longer than than originally thought. So you can misread the seriousness of developments, particularly. In the early stages, this
Anthony Scaramucci 10:01
show is sponsored by better help. A rate cut has arrived. It finally happened that it was only four years in the making, the Fed has cut rates by 50 basis points. It surprised some, but many cheered it for sure, there will be some bumps in the economy going forward. There always are, and maybe there are bumps in your personal life, financially that are weighing on you, or maybe there are other things on your mind keeping you awake at night. It happens to all of us. We walk around with the weight of the world on our shoulders, and we look at others thinking their lives are perfect with no worries or cares in the world. Of course, that isn’t true. Everyone has worries and things they can’t get off their mind. You can’t let those things get in the way of the fun things in life, the things you are curious about and want to tackle. Talking to someone helps to ease some of the negative thoughts and gain a new perspective on some of the things that are floating around our heads. And believe me, there’s plenty. If you need to talk to a professional, or you are thinking about giving therapy a try, give better help a try. It’s easy, online, convenient and flexible. To fit your schedule, just fill out the questionnaire and get matched to a licensed therapist anytime. Rediscover your curiosity with BetterHelp, visit betterhelp.com/wealthy. On today to get 10% off your first month. That’s BetterHelp. Hlp.com/wealthion, so I had the opportunity to interview Dr Bernanke a few times after he left the Fed, and one of those times was actually in Tokyo. I brought him with me to one of our conferences. He was my keynote speaker, and then we had dinner together with a few people, and he talked about quantitative easing, and he talked about the concept, actually was a derivation, if you will, from the Bank of Japan. And he was actually meeting with Central Bank leadership in Japan after our conference. Was quantitative easing a good idea, I think it was. But I’m interested in what you think. And if you look at the Fed balance sheet today, the size and scale of the balance sheet, we seem to still be in quantitative tightening despite the rate cut. And so what are your thoughts there in terms of where the economy is? So I’m asking you to do something that you used to do at the FOMC, sir. I want you to intersect these vectors that are affecting the economy. Were quantitatively tightening, did quantitatively easing? Was it a good strategy, but now we’re quantitatively tightening. We’re cutting rates simultaneously. Is that okay to do the quantitative tightening concomitant with the rate cut? That’s a long winded question, but I know you. I know you know because you’ve had to make these decisions and choices before? Well,
Dennis Lockhart 13:00
I have an opinion to say that I know would suggest that there’s more precision to this than there really is, right?
Anthony Scaramucci 13:07
Okay, let me rephrase that. You have an opinion based on well grounded experience and very humbling to be an FOMC committee person. I’m
Dennis Lockhart 13:14
sure you know, we had many, several presentations in which the economic staff at the Federal Reserve tried to estimate in basis points terms the effect of quantitative easing. And as you recall, we went through three cycles of quantitative easing, and my recollection is that it always came out of being worth about a quarter of a point, maybe a little less, maybe a little more, but it was on the margin, a little bit more accommodation to use the central bank term than simply the zero bound interest rates were providing. I remember pretty vividly the meeting in which which occurred toward the end of 2008 in which Ben Bernanke brought up the idea of quantitative reasoning. And the situation was, we could not take the policy rate any lower than it was. It was set in a range of zero to 25 basis points, so effectively at zero. And so the question, it’s an academic question about much. Much has been written about it, and it’s also a practical question for people who are making monetary policy, what do you do when you can’t cut the policy rate any further? And the answer is, you try to add more accommodation, more stimulus to the economy by printing money, if you will. I don’t like that term, but creating new money and buying bonds and trying to force longer term interest rates lower it. Is the longer term interest rates that are probably most important to the real economy, because that’s where mortgages and cars and other, let’s say consumer durable purchases are made, and that’s where term loans of banks to companies and bonds and so forth where their rates are set. So the idea was put more pressure on the long term rates, to add more stimulus through the interest rate channel. I think it worked. Quite frankly, it’s very hard to determine to isolate the effectiveness of quantitative easing versus the ultra low interest rates, but I think it worked, and I think the first round of quantitative tightening was able to retrace a lot of the ground in terms of the balance sheets growth and then decline. And so I think it was successful, or certainly didn’t do any harm. When we were when we were discussing it in the committee, everyone recognized that this was terra incognita. No one had been there before, and therefore lots of discussion around the subject of, what are the long term consequences of doing this first time around? I don’t think the consequences were all that severe, as I said just a moment ago, but the second time around, we we doubled the scale of the balance sheet to to almost $9 trillion so that story hasn’t played out yet. We don’t know. Now to your question, Can you both tighten in effect and ease at the same time? Well, they they sort of offset each other. The Fed wanted to put the FOMC wanted to put quantitative tightening on a on a very methodical back burner that which wasn’t foremost in the minds of of people who are watching policy and just let it play out, and it perhaps reduces a little bit what is now beginning, and that is a rate cutting cycle that eases the restrictiveness of policy. But but again, it’s, I don’t think it’s a big deal, and I think they will continue with quantitative tightening through a rate cutting cycle that could last into 2026
Anthony Scaramucci 17:53
is it fair to say the I want to make a statement. You tell me if I’m being fair or if I’ve got the right analysis. We are normalizing interest rates. It took us about 15 years to normalize them, but we are normalized. We’re off of zero. We will be off of zero when the Fed has done cutting rates, unless you tell me differently, and the process of quantitative tightening will bring down the Fed’s balance sheet to something that looks more manageable and less crisis oriented. Is,
Dennis Lockhart 18:28
I think that’s, I think both statements are correct, yes, okay, okay,
Anthony Scaramucci 18:31
yeah, so that, so that’s good for the economy. Then, right, sir, is that? Don’t you think? Yeah,
Dennis Lockhart 18:35
I think so, you know, what is a normal level of interest rates? I suppose we could debate, depends a little bit on how old you are. You know, my first mortgage was seven and a half percent, and that was, I believe, in 1978 so what was abnormal was zero. That clearly was abnormal, and
Anthony Scaramucci 19:00
so was so was 16 back in 1980 That’s right, that’s right.
Dennis Lockhart 19:04
But you could probably argue that five and a quarter for the or five and a quarter to five and a half, the most recent setting for last week, was not abnormal. I mean, it could be called normal, but each the economy evolves, and the economy changes in its character, and we’re in a process of defining what is normal to the state of the economy going forward with all of the different influences on that economy that exist in 2024 and 2025 not what it was in the past. But,
Anthony Scaramucci 19:46
and again, I’m interested in getting your reaction to this. This seems like healthy it’s an equipoise between where a reasonable cost of cash. Capital is, but also where a reasonable interest rate is for the nation’s savers. You know, it’s hard for savers when the rates are at zero, it may force them to take more risks than they want to, but the rates where they are now, it seems like we’re back at a good equipoise. Is that a fair thing?
Dennis Lockhart 20:16
That’s a good way to put it. I’m going to have to to include equipoise in my vocabulary going forward, but it’s a good term for your finding finding a healthy middle ground, a healthy balance in the setting of the policy rate. And of course, the policy rate then kind of dictates the floor from which the yield curve should rise. And that should create a an interest rate environment that balances the needs of the economy and is the best for the overall Main Street, real economy where most people live.
Anthony Scaramucci 20:58
Okay, so I, I have a big mouth, and I talked a lot of people on Wall Street. And so let me give you two schools ready? There’s one school, Oh, that’s fantastic. A 50 basis point cut. They’re getting ahead of the curve. It’s going to stave off of recession, and this is a great thing for the economy, and the Fed’s going to look great in the next six to 12 months. There’s another, more histrionic view that is terrible. What a bad sign the Fed is actually way behind the curve, and they think we’re going into a recession. Otherwise, there’s no way they would cut 50 basis points. Which one of those views is more accurate?
Dennis Lockhart 21:40
The former, the first one, first one I I don’t know, I don’t see the signs of going into a recession. We always worry about a recession, and particularly the street always worries about a recession. We’ve been talking about the imminent recession for the last three years, it has not developed. So I just, I’m not sure in the current data and the current evidence about the economy, how you could draw a conclusion that it’s coming soon, not to say you won’t have a recession sooner or later, almost inevitably, you will, but not, I don’t see it now, so I don’t interpret this 50 basis point move as having any hint of panic or any hint of, let’s just say, really intense makeup or catch up. I view it as I think Austin Goolsby of the Chicago fed called a demarcation from a phase of monetary policy in which they were fighting inflation to one in which they’re now more in a mode of trying to preserve a good thing and trying to, you know, not lose ground, particularly in the employment markets, or at least Not significant ground. So I view it as a an optimistic 50 basis points, not a panicky 50 basis points.
Anthony Scaramucci 23:28
So I’m in your camp on this. I actually agree with all of that. I want to ask you two questions, and then I’m going to take questions from the audience. And so the question number one is, we have enormous fiscal spending. If you look at the US spending, you know, we’re creating one to $2 trillion of deficit spending a year. Monumental in dangerous, in my opinion. But maybe, I don’t know. Maybe it’s okay. Maybe Dick Cheney’s right, deficits don’t matter, sir, I I don’t know. I’m going to ask you that question. We’re sitting here looking at a federal budget that could be 7 trillion. It’s going to take in four and a half to 6 trillion, but it’s going to be another at least one to possibly $2 trillion of deficit spending. We have an election coming, neither presidential candidate will even discuss or touch this. Are we super cycling into a debt crisis? And if we’re not, tell us why we’re not, and, you know, tell me maybe I’m wrong. Maybe deficits don’t matter. They I feel like they do, and I feel like they hurt middle and lower income people, because there is some level of monetization that takes place when you have this high level of inflation that we’ve printed recently that just hurts the disposable income of poor and middle income people. So, so what do I have wrong? Not
Dennis Lockhart 24:51
much, if anything. Of course, deficits matter. I’ll start with. Just with what Powell has been saying repeatedly and and interestingly, Powell’s background very strong in fiscal matters. That’s how he got the attention of of the Republican Party in the first place. I was after he left Carlisle, he joined the Bipartisan Policy Center and the made a couple of presentations on the Hill about what was then viewed as the unsustainability of the deficit spending. Now it has grown dramatically, but Jay Powell says it’s unsustainable. That doesn’t mean that the reckoning is tomorrow, but it’s unsustainable. I have said publicly, although when I was at the Fed, we don’t talk about it much, that I viewed it as a serious problem and that I expected there would be a reckoning. But I cannot describe for you exactly how that reckoning would take place. I don’t think it’s going to be or look like an Argentine debt crisis. It might more look like Japan, with its very high debt to GDP ratio, getting into a stagnant period that lasts for a decade. You know, you can make an argument that Japan’s reckoning was on and off again, deflation, no growth. That doesn’t seem to be the problem. In the United States, we have some somewhat similar demographic issues, although we can address them by immigration, Japan can’t so easily do so. So I can’t tell you if the reckoning will be next year or 20 years from now, the fact that the dollar is the world’s reserve currency, and there really isn’t any alternative to the dollar gives us some flexibility that what I would call a normal country doesn’t face, and that
Anthony Scaramucci 27:20
may our debts denominated in our home currency, so
Dennis Lockhart 27:23
that may forestall, that could forestall a serious correction or a serious adjustment requirement because of the deficit spending and the level of the debt, what I think is very Concerning, which has gotten attention in the last year or so is the growth of the interest component of the federal budget, and therefore the federal deficit, which is now higher, I believe, than the defense budget. That’s correct, and the defense budget is the largest so called discretionary component of the budget. So you know that’s very worrisome, at least the first order effects of paying interest. If you’re paying interest to yourself, it’s a little more circular. United States is paying interest partly to itself and partly to foreign investors. No,
Anthony Scaramucci 28:25
no, no question. But I, but I mean, it’s going to last longer than we had expected. I think, you know, I always thought we had a little bit of a problem. And then we keep printing or keep making money or monetizing our debt, it seems like we can keep going. Before I turn it over to the audience, what?
Dennis Lockhart 28:41
Let me just say, Anthony, one thing, yeah, please. Quantitative tightening is demonetizing. Yeah.
Anthony Scaramucci 28:51
Okay, so let’s explain that to people, because you have a lot of young listeners. So first,
Dennis Lockhart 28:56
Monet monetization. Monetization of the debt is a sin in central banking circles, right? So what happened was monetization by another name. We called it quantitative easing. It was meant to provide stimulus, but it did that by buying treasuries in a period of deficit finance, right? So, you know, to be frank, it looked, looks like a duck and quacks like a duck. It’s monetization, even if it was not intentionally monetization, right? So, when you start to shrink the balance sheet and and run down the number of treasury treasuries you’re buying, the amount of treasures you’re buying, the central bank is gradually getting out of the monetization business and therefore turning it over to private markets to finance the deficit. And I think it’s important to make that point.
Anthony Scaramucci 29:57
Yeah, no, I listen. I. Give high marks to the Fed. I give high marks to your tenure at the Fed. I give high marks to Jerome Powell, is it perfect? What could be perfect? They got the inflation right. In my mind, the downward trend is there because of the introduction of all this new technology, biotechnology, AI, robotics, all of that stuff is disinflationary. They just supply chain took longer to connect. You know, somebody said to me that the Fed Miss size the number of hospital beds in China. So what do you mean by that? Is it? Well, they didn’t realize that China was going to lock down their factories as long as they did, because they didn’t have the resources of the West, and they were worried about a death crisis as a result of covid 19. And so the lockdowns lasted longer. The supply chain was disconnected for a longer period of time. And it’s sort of that butterfly effect that we always talk about in terms of life, and it just took a little longer, but the Fed ultimately got things generally right in this cycle, and we’ve done a good job in the economy is recently robust. I know people feel that they’re hurting from the inflation numbers, and totally understandable, but that wasn’t that was done also to protect people during the covid 19 situation. So it’s coming down now, and I think that they will be well reviewed from a historical perspective, I think. But all right, before we go to the audience, just one quick question, we always ask people for actionable things. And so when you think about a portfolio, because you’re a macro person, are you bullish on stocks? Are you bullish on bonds. Are you bullish on neither? Or what do you recommend to people? How should they think about their investing?
Dennis Lockhart 31:45
Depends on time frame and depends on the need for for income. It depends a lot on you know how you’re thinking about your portfolio, whether you’re trading in a lottery. I’ll tell you what I’m doing. This is very open kimono. I have a nice portfolio all in equities. I don’t think I’m going to have to invade the corpus of that money. So it’s basically there for my grandchildren and my my daughter and my grandchildren. I am in a process of transitioning from individual stocks to ETFs, and the ETFs are low cost, in other words, six basis points or less. And I’m hoping that as I make or conclude this transition, I’ll be almost 100% invested in equities for the long term, and I won’t touch it, and then someday I’ll die, and my my inheritors will have a nice portfolio. I believe in the argument over the longer term, it’s better to be invested in equities in the US economy than debt, and I don’t need the income from this portfolio, so I’m prepared to be heavily in equities, but I am, I am moving toward the ETF products.
Anthony Scaramucci 33:28
Okay, let’s, let’s turn it over to the thank you for that. Let’s turn it over. And so how do you view the balance between controlling inflation and maintaining economic growth? Can the Fed actually achieve both? This is Daniel from Florida.
Dennis Lockhart 33:43
Well, I think there’s pretty obviously some correlation between the pace of growth and inflation and it is, has been the view in the economics profession that the so called trend rate of growth in the US economy is about 1.8% that’s a way of saying the longer term potential growth is should be about 1.8 to 2% in order to achieve that, you have to have some degree of inflation, and that means the nominal growth would be, let’s just say, around 2% and the inflation target is 2% and that should preserve a an economy that’s growing slowly. So it’s to answer Daniel’s question. So. So to preserve some robustness of growth is important to keep inflation under control. But it can’t be too much a 6% growth rate, a 5% growth rate is an overheated economy and is likely to produce an inflation rate that is undesirable.
Anthony Scaramucci 35:22
Okay, let’s go to another question. All right, it’s Anthony question. I guess I’m afraid to deposit my cash in a bank other than under my mattress where it’s losing guy, where is a safe place to park it from the reach of the government. This is Dean from California. So I’m going to like you to chime in here too, Dennis, if you don’t mind, but I, I am a bank person. I’m a believer in the system. And I would also point out the FDIC, you’ve got insurance up to $250,000 the Fed has stepped in regularly, most recently with the Silicon Valley Bank crisis last March, March of 2023 so I would, I would stay the course in the banking system. So it’s probably not the answer that you want, but that’s the answer, I believe. What about you? Dennis, yeah, I’m
Dennis Lockhart 36:13
I’m similar. I i think it is very far fetched that as suggested by the question, the government will confiscate somebody’s money. I think the government may tax some of it away, but it’s not likely to confiscate it, if that’s what’s meant by the reach of the government. Yeah, yeah. And the banking system, which is in quite decent shape. Depositors are protected by the FDIC insurance, which is, by the way, I came to conclude, once I started to study this, that deposit insurance is one of the great inventions, financial inventions of the last century that that adds stability to the system, because people like our questioner really shouldn’t worry. I mean, the only thing you need to worry about is that you’ve got your money in a probably a smallish bank that fails, and it takes you a few weeks to get the FDIC to pay off. Yeah, but we’re
Anthony Scaramucci 37:27
in the same camp on that, and I think I’m an institutionalist guy, so I like staying with the institutions. It’s my been my path to financial independence. Okay, let’s go to the next one. Why haven’t we seen a wide uptake of public blockchain use cases, and what will it take to reach a tipping point of wide industry application of the technology? So do you have a view one way or another on the blockchain or Bitcoin? Yeah, I
Dennis Lockhart 37:50
do. I actually sit on the board of PayPal digital, which, is PayPal entry into the the cryptocurrency and blockchain world, and most of their activity right now is emphasizing a stable coin, which, of course, is backed by a portfolio of US Treasuries and my views have changed. Anthony, from before going on this board to the time I’ve been on the board, the use cases are still developing, but there it looks plausible that there will be payments use cases that are pretty interesting, particularly in bringing down the cost of transactions and for specialized use cases. I’m not very, let’s just say, very supportive of the idea of an investment use case or a store of value use case, but I think the technology is going to make a very positive difference over time. All
Anthony Scaramucci 39:09
right, so you like the blockchain, you like stable coins, but you don’t like Bitcoin, yeah,
Dennis Lockhart 39:13
that’s a good way to put it in summary. And and I’m no longer completely I’m no longer completely negative on the whole idea. I, I do, I do see some good things coming out of the technology, and particularly the ability to lower the cost of transactions. Also smart smart contracts is another interesting development, but it really hasn’t matured yet at all. But that too, I think could, could turn out to be a a real benefit to to the economy and society. You’re
Anthony Scaramucci 39:52
showing your age and you’re showing your central bankerness, okay? I just want you to know all right, and your grant. Children are upset with you right now. You don’t like Bitcoin, but that’s okay. I still love you here on speak up. Just wanted to make sure you know okay, there are some Bitcoiners talking to you right now. Let’s go to the next question. If you had to restructure America’s $35 trillion debt, and it’s $73 trillion unfunded liabilities, what would you do? And would you make Bitcoin a reserve asset? So Angelo, the good FOMC chair and former president of the Atlanta Fed, I’m going to say no on that one, but answer the other question, How do you tackle these entitlement issues and the and the and the deck situation?
Dennis Lockhart 40:39
Well, my answers are probably naive. Frankly, I think we missed an opportunity when the Obama administration, President Obama let the Simpson Bowles recommendations basically die a death of inaction. I I think politicians feel they need air cover in order to do the painful things that are necessary to get the fiscal situation under control. I would like to see another commission again. This is probably completely unrealistic, Anthony, but a commission of agreed, wise people that comes together and takes a year or six months to tackle the complexity of this problem presents a recommendation and it’s an up or down vote on the hill, so that there’s not doesn’t go into just an endless debate and endless politicking, but it we tackle it by having an outside party present to Congress. A Yes, no decision,
Anthony Scaramucci 42:11
okay? And I mean, I agree with you. And remember, we did this with the Social Security. Alan Greenspan, the prior to his fed chairmanship, he was a Social Security chairman of a commission that helped to right size and make social security more solvent, and it’s lasted over 40 years since that commission. So so we we can do this. We just have to figure out how to get the political will back in the system to do it. So we agree on that. Okay, let’s go to the next question. How do we get Democrats and Republicans to get their political news from different sources with opposing views, so they can at least be civil to each other? Gregory, now, that’s a great question. Okay, I don’t know. I mean, we have a lot of guns in the country. Maybe we can use the guns, Dennis, you know, put the guns
Dennis Lockhart 43:01
to each other’s heads. I
Anthony Scaramucci 43:03
don’t know, yeah, no, I’m saying that obviously, very facetiously, but it’s a good question. I don’t have an answer. I’ll start. I’ll let’s see if Dennis can come with anything. I just think we have to
Dennis Lockhart 43:18
form
Anthony Scaramucci 43:21
more. Organized groups of people that are centrists, that push these politicians into the middle. I don’t think we do a good job of that. I think they figured out a way to strain us out of the system and gerrymander us away from their districts and so forth. And a result of which we have to figure out, we have to come up with some methods of striking back. But you know, the politicians are one of the few places in our life where they have a 14% approval rating in the Congress. I think the North Korean dictator probably has a higher approval rating, but yet, 98% of these incumbents get reelected. So it tells you something about the system. You know that the system’s disconnected from the customer reviews. Dennis, but what would you do? Would you have an idea?
Dennis Lockhart 44:05
I a lot of ideas. I’m not very hopeful, frankly, and I think it will take time that there may be you sense from hearing the news and some of the polls that there’s a weariness with the polarization and more of a willingness to consider bland but reasonable, balanced centrists. So I think one of the answers is vote for centrists. Vote for people who live in a world of trade offs and are prepared to make compromises not push an issue to binary extremes. That’s one thing a second thing is, there are, I think, institutions now small, but they’re trying to bring people together for dialog, both citizens and politicians. I. Was on a call this morning with a university happens to have a major presence in Washington, and there, this particular university has a whole series of of what they call bridge discussions, where they’re taking an issue and they are inviting a Republican and Democrat publicly to discuss that issue in front of an audience. I think these kinds of institutionalization of dialog and of civility are very important to the solution. The third thing I would say, which, of course, is very far fetched reform the primary system. It’s the primary system that tends to reward extremists, and then the extremists if they win the primary or in the general election, and we don’t get the benefit of someone who is more centrist, because they just cannot survive the primary system in an election. All right,
Anthony Scaramucci 46:04
let’s go to another question. It’s the dumbest depreciating asset you’ve bought since you’ve had your success. These guys are making fun of my Lamborghini, okay? I mean, they know that I’m a nouveau riche Italian from Long Island, Dennis. You know, I don’t have that good southern stock like you do, and they are making fun of me because that’s what they are, and that means there’s no more questions. Okay, I just want them to know that my Lamborghini is actually an appreciating asset at this moment. Okay, so that’s all we got for today, but the legendary Dennis Lockhart, thank you so much for joining us on speak up. I hope we can get you back and talk a little bit more, maybe post election, about the direction of the fact. I
Dennis Lockhart 46:45
enjoy that very much. Thank you, Anthony,
Anthony Scaramucci 46:47
if you like this video, you’ll like this video as well. Check it out. You.
