Welcome back to Portfolio Rescue, where we always appreciate your comments, questions, feedback. Email us, askthecompoundshow@gmail.com. Duncan, today's Portfolio Rescue is sponsored by Liftoff, powered by Betiman. It's our automated platform. Let's do it. There it is. There's the rocket. Listen, you can go to Liftoff, put in your goals, put in your risk tolerance.

They will build you a portfolio. It's automated. There's tax-loss harvesting, if you use a taxable account. You can do retirement accounts. It's great. We have advisors on call. Anytime you have a question about financial planning, anything that's going on in your life, check it out, liftoffinvest.com. So, Duncan, back in 2010-ish, I was at a wedding of a friend, and a college buddy cornered me to talk about markets.

And he had just discovered zero hedge, unfortunately for him. As one does. And was concerned about how the Fed's money printing is going to cause hyperinflation. And then he walked me through like a five-point plan of why this is happening, and why he's putting his entire portfolio into gold.

And he talked his dad into doing the same. And honestly, some of the points at the time, it kind of felt like it made sense, right? That that same year, a group of well-known economists penned a letter to Ben Bernanke. It was an open letter, so you know it meant business.

Open letter to Ben Bernanke. And I'm not going to name any names here, but it was well-known economists, portfolio managers, hedge fund managers, a lot of people you'd know. Really, really smart people. And they were begging him to stop QE, because it was going to cause really high inflation, maybe hyperinflation.

And for someone who didn't know a lot about the inner workings of the Fed, because pre-2008, you didn't really have to. You know? Like, a lot of the stuff that they did in quantitative easing, and all this stuff they were doing, it was changed in 2008 in its aftermath.

So, you know, before converting all my money into gold bars and buying cans of beans and creating a shelter in the backyard, like, I figured I might as well learn about this stuff. And one of the most informed sources I found in the Fed at the time was this blog called Pragmatic Capitalism from Cullen Roche.

And so, Cullen had actually done the work, and he looked at what the Fed was actually doing, and not just saying, like, they're printing money. Because obviously at the time, the Fed was not handing money out. I didn't get any money from the Fed. My portfolio was not going up, because the Fed was giving me money.

And it's like, people say the Fed is printing money, but where is it actually going? So, you had to kind of understand it. And Cullen kind of schooled me what was really happening, explained why hyperinflation was kind of a ridiculous concept to think about at the time, and why even high inflation after that was probably not going to happen, which turned out to be right.

And so, after the latest crisis, like, we have elevated inflation now, so what's next? So, I wanted to get Cullen's perspective. So, today's show is going to be a little different. I put a bunch of questions together, because I'm kind of confused as to what the Fed is doing, and how this is going to all transpire, and what's going on.

So, I wanted to hear Cullen. So, let's bring him out, John, just to talk about this current crisis. Cullen, how's it going, man? When did you start your blog? 2008-ish? Yeah, well, it was late 2008. Yeah, and it, God, it got really big really fast, because I was kind of, it was funny.

I was actually writing in 2008-2009, I was actually writing content that was a lot like zero, I'd say zero hedge now, because everyone's been calling me that this year. But no, it was a lot like zero hedge, where it was kind of talking about all the sort of perma bear stuff that was, you know, unavoidable back then.

But it was in that period that I really started to, especially in 2009-ish, really when things were starting to get really hairy with, especially with a lot of the central bank operations, and I was trying to navigate, you know, is this going to cause hyperinflation? That was the point where I was really delving deep into the operational side of everything, and really looking at it more from like the perspective of like an accountant, where I was trying to, you know, understand the flows of the balance sheets and the income statements, so that you can try to actually navigate.

And that was the first thing that you said that made sense to me, like, you're talking about like, it's assets and liabilities, and they kind of cancel each other out, and that was the first thing that you said that made sense to me, like, oh, that's right, it's not like the Fed is flooding the system with money, this is more of like a banking transaction kind of thing.

Yeah, well, you start to, when you actually go through the flow of funds, you realize that almost everything that's done with quantitative easing is after the fact of fiscal policy. So there has to be treasury bonds that were issued in the first place in order for the Fed to even buy the treasury bonds.

So, you know, the way to think of it is like, if you were to consolidate the Fed into the treasury, well, in that case, you know, what QE really does is QE is basically issuance of a deficit in cash form. It just takes you to that ultimate form of the government actually does print the money.

But what QE is, QE is weird, because if the treasury bonds were already printed, and you could say that a deficit is basically government spending that results in a deficit is technically treasury bond printing. Like I think that's a fine term to use as far as deficit spending goes.

But all QE does is then take that bond and swap it with a reserve in the private sector. And so it's the exact same thing as if the government, the treasury had in the first instance just printed the reserves into existence. And so to me, when you look at what QE does, you're like, well, wait a minute, this is just it's really just an asset swap.

And maybe this has all sorts of like tangential impacts. You can debate whether that makes people go out and need to replace their cash with high yield bonds. And there's a risk component there, for sure. It's not technically money printing in the sense that like, you know, taking wheelbarrows of cash out of the treasury would be in dumping them on the street, you know.

And now we're looking at the other thing where it's QT, which is quantitative tightening. So I put together some questions here. These questions may be a little leading because I've shared some thoughts on the Fed, but I wanted to hear your perspective on this. So Duncan, let's do the first one.

These are all questions for me, because I have a lot of questions about the Fed, too. Let's do it. I like they're all short and sweet, you know, and not a single not to brag in here. No, I'm kidding. We love those. All right. Up first, is the Fed making a huge mistake by potentially throwing us into a recession?

This is a question everyone has now. Yeah. So listen, Cullen, obviously the Fed had to do something. Like, you can't just let inflation be at 8% or 9%, and it seems like the government is not really doing anything, even though they are the ones who spend a bunch of money.

So I guess my biggest surprise is not that the Fed is raising rates, but it's the speed at which they're doing it and the fact that they seem to be willing to throw us into a recession to get there. So do you think that there is a mistake here in terms of the magnitude of this move and the fact that maybe they're trying to make up for mistakes they made in the past by not finding that, you know, it's not seeing that inflationary spike in the first place?

Yeah. And I, you know, I think being in the financial markets, that's the thing. That's the difference in the way we perceive things versus the way the Fed does. I mean, we're inherently focused on risk management to a large degree. And so to me, you know, the pace of these rate hikes, it's the fastest rate hikes basically ever.

The market is already pricing in four, four and a half percent overnight rates. So we've come basically off of zero to four and a half, which, you know, from the basis of zero, that's a huge, huge historical move, much bigger than anything that's ever happened before. And so the portfolio shock and the economic shock is really only just filtering through the system.

Because, I mean, it was just a year ago, literally a year ago, that Powell was talking about the markets and saying, we don't need to raise rates yet because the unemployment rate is still too high. That was only a year ago. So they hadn't even really started to move as of 12 months ago.

And so they're really, they're playing, you know, catch up here in a big way. The worry now, this feels a lot like sort of the opposite environment where, you know, the big thing that I look at is not only the foreign exchange markets where you see the dollar going crazy, which is almost always a sign of bad stuff going on in foreign markets.

But if you look domestically, the mortgage rates in the United States, you know, have surged so much that at some point you have to look at this and say, OK, housing is the biggest sector of the U.S. economy. If you if you bring housing to a complete freeze, what happens to the U.S.

economy? And we know from 2008, 2009, if you cause a big problem in housing, you could cause a big problem in the aggregate economy. So that is the risk that I'm growing increasingly concerned about. And you look at all this housing data, all the housing data is starting to look like a disaster.

And I don't see how with mortgage rates at 7 percent for, you know, the next 12 months, how does that not just continue for all the 24 months? I got I got a question come up on housing. I just want to ask. So I've looked at this before. Every time inflation has spiked above 5 percent in the past, the only way it's come down is is through a recession, basically.

Do you think that the Fed has just resigned to this? Like, it seems like they almost don't even want to look for another path. Like, is there a way that we could get inflation come down and be a little more patient and bring it down without a recession? Is that pretty much the only tool they have?

Yeah. I mean, a lot of this is in my view, it's sort of the way a boom bust cycle works, like you could look back at 2021 and say, well, the market just it went up too much. Like people were were at home, bored, doing stupid stuff, buying more stuff than they should have, you know, buying GameStop and AMC and all these silly things that, you know, were kind of going on last year.

And so you had this big sort of irrational boom. And I think it's it's perfectly rational to argue now that there needed to be some give back. So there needed to be a bust to some degree. And, you know, whether that results in like a technical recession or not, you know, it's just that's just the way.

And my thinking is in the economy sometimes evolves. The worry with me now is that I basically think that you were going to get this bust no matter what. Right. Because that's just the way that the cycle was going to occur. You know, you had so many unusual variables from covid that these variables were eventually going to work themselves out.

It was just it's really just a matter of time. I mean, the you know, the Fed was was wrong to call this transitory. But in the long run, the likelihood that this ends up being transitory is probably very, very close to right. So the worry now is that the car is slowing and you start to see this already in a lot of the data and the Fed is coming in and they're basically slamming the brakes on.

And so now you worry, well, are they causing the car to slow to a speed that's unnecessarily slow or are they potentially going to cause the car to crash at this point? Because they're they're now being trying to be proactive about something that was already well in motion. Right.

To your point, like, I think everything spikes so much. It's like a retail sales charts. All these things are off the charts. Even a normalization probably would have felt or looked like a slowdown. Yeah. So, yeah. With or without them. So let's I wanted to kind of talk about like the unintended consequences.

Duncan, throw up the next question. All right. Yeah. You're already kind of segwaying nicely into this. But yeah. What are some of the unintended consequences of the Fed raising rates so aggressively? So you mentioned the dollar here. I think that's the biggest one right now where sometimes the Fed can't help like what their actions have in the rest of the world.

But should they care if the dollar strengthening is going to mess up a bunch of emerging markets and even some developed markets like the UK, where the strength of the dollar is potentially creating crises elsewhere in the world and eventually that comes to our shore and then they're forced to fix.

So like, should they care about that stuff? They end up being forced to care at some point, because if things get bad enough abroad, the especially with the European banking system, it's so intertwined into the U.S. banking system that, you know, let's say that let's play sort of like worst case scenario here and say that Europe gets really messy in the next two years.

And let's say that Credit Suisse and Deutsche Bank and a lot of the big European banks are legitimately in big, big trouble. Well, one of the central banks that has to get involved in all of that is the Fed, because the Fed is so intertwined in the European banking system through like the, you know, the euro dollar market, basically euro or dollar denominated borrowing markets that are based in Europe.

The Fed ends up being forced to get involved through, you know, Fed swap lines or lending facilities to these entities. So to me, it's kind of unavoidable. And that's the, you know, it's technically like a Triffin dilemma, basically, where the Fed is they're the reserve currency issuer in the world.

And the U.S. economy is so big and so intertwined into everything else that there's a lot of there's a lot of markets that rely on the dollar to function, a lot of foreign economies that rely on the dollar to function well. And so when the dollar goes up like it is, you know, because mainly because credit markets are becoming so much more expensive, it's becoming more expensive to get dollars.

So the demand for dollars is now, you know, rising and rising. You get this knock on effect where it comes back to our shores in a way where you slow down everything else and the Fed ends up having to get involved because eventually it causes a slowdown in the United States.

So you've got kind of a double whammy here where the Fed is at risk of not only, I think, potentially causing a much or contributing to a much bigger slowdown in foreign markets, but you've got the domestic impact where are they actually managing the risks of the of the credit markets in the United States and, you know, really looking at this in a proactive manner where they're they're really managing the potential for something that starts to look a little bit like 2008 here in the next 12 to 24 months.

I don't want to just keep dunking on perm bears today, but remember when the dollar was going to collapse to that was another hyperinflation thing and the dollar is just stronger than ever. I think today maybe people will say it's like the cleanest shirt in the laundry hamper. But the next you mentioned housing, I want to get into that.

So Duncan, do the next question, because I think this is I think to me this is the biggest unintended consequence for the United States right now. OK, what is going to happen in the housing market now that mortgage rates are 7% and prices are up about 50% since the start of the pandemic?

John, throw the chart up here of housing as a percentage of GDP. So this is from John Burns Real Estate Consulting, and they show that over time, historically, the housing market as a percentage of GDP. So this is everything. Housing costs, utilities, furniture repairs, maintenance, construction, all this stuff.

I think it's kind of hard to remember that there's so much that goes on with the transaction. Not only the transactions where we have realtors, inspectors, loan officers, appraisers, movers. I got an email this morning actually from a loan officer saying it's like tumbleweeds right now because, you know, they were living off of refinancing for years.

He's like, we're 100% based on commission. He's like, our office is basically screwed. There's no transactions going on right now. And so you also have the construction industry and the housing supply in the future. And so obviously, like inflation, housing was not healthy in 2020 and 2021. But this is not healthy either, where you've seen prices go up so much, incomes haven't kept up, and now rates double.

Prices would have to fall 40% or 50% to make these rates make sense, right, from a payment perspective. I just don't see how this shakes out and how just, again, slamming the brakes on an industry like this that's this big and this important, I don't see how that ends well at some point.

I think this is the thing that the average listener is most panicked about too, based on like the questions we get, it's the housing element. Yeah. And it's like Ben was alluding to, it's a really, really big, important, I mean, there's entire economic research on the idea, the theory that housing is the economy essentially.

And so when you bring that sector, it's such a big component of fixed private investment, which is a huge component of GDP, arguably the most important component of GDP. When you bring that sector to a freeze, I mean, the knock-on effect is huge. And it's not just the knock-on effect is specifically in the real estate industry, because obviously, you potentially put a lot of mortgage bankers out of business, you put a lot of real estate brokers out of business, you halt new construction.

But this filters through all of the credit markets as well. And that was the lesson from 2008 that I think really scared everybody was that it was, hey, when this asset price falls by 20 or 30%, that has a huge knock-on effect on everyone else's balance sheet. And that caused the entire credit quality of really the entire balance sheet of the private sector, and especially the household sector to basically collapse on itself.

And that's the thing, I'm not, I think Ben's written about this too, I'm not in the 2008 camp where there's a lot of differences between this and 2008, especially from the credit quality side of the borrowers who have been buying homes lately. Yeah, the loans people took out, they had much better credit quality.

The people have already locked in low rates. It's not like they have these teaser arms that are going to reset at higher rates. So from that perspective, the people that own homes are in a much better position. But I just think- But it's still, here's the thing that scares me about this is that when you look at the price increase from the pre-COVID period, you're starting to see this with a lot of the sort of pre-COVID irrationality in some of the other markets where they're just reverting right back to where they were basically.

Like everyone's basically just repricing all this stuff saying, "Oh, that was a fun game. That was kind of a dream, and we're now reverting right back to where we were pre-COVID." You could look at housing and make a really strong argument that that is a pretty rational position. I mean, disposable income is only up like 15% since the pre-COVID period.

Well, here, John, throw Cullen's chart up here from disposable income. So you have this chart of disposable income to housing prices. And again, the thing that worries me is not that this didn't have to get fixed eventually, it's the speed of it happening. And I feel like people haven't taken the time to realize how this is going to filter through because it happened so- I mean, rates were 3% at the beginning of the year.

Now they're 7% and change, and it happened seemingly in the blink of an eye. And that's the thing that I think from the Fed's perspective is somewhat reckless here is that this takes a really long time to filter through the economy. Housing is a really big slow-moving beast. And I mean, I remember 2006 when housing technically peaked, the yield curve was inverting, and it took 18 to 24 months.

I mean, you could have sat around and made bullish arguments about the U.S. economy for two years before that really started to materialize into something that was a noticeably really frightening event. And that's the thing. I mean, Fed policy works notoriously with a lag. I mean, Milton Friedman wrote a famous paper about this 50 years ago, and yet we're still willing to ignore not only the signs of inflation that were there last year, but now the signs of potential deflation across so many different sectors.

And the Fed is just looking at this stuff and saying, well, we need to keep the pedal to the metal here until we crash this car, and just ignore any of the potential risks that are happening in sectors that can cause really, really big asymmetric downturns. Right. They seem to want it to happen very quickly.

So I think, I mean, if anything in the last 15 years has taught us is that inflation is hard to understand. So Duncan, do the next question, because I think this is important. Our understanding of inflation, to me, seems like ... The Fed obviously doesn't get it. I think a lot of people don't.

So Duncan, go ahead with this one. Yeah. Okay. Is it possible that we simply don't understand enough about inflation to use monetary policy as the only way to slow it down? Because, I mean, obviously it's easy to dunk on the Fed now and say they missed the inflationary spike because they were still putting the gas pedal on a year ago.

But I think a lot of us don't. So it's easy now to go through, and we have so many good macroeconomic thinkers that you can go to the BLS website and look at each single component and then how it's calculated. You can go through all this stuff, owner equivalent rent, and look at all these different things and understand what the pieces are doing to inflation.

But I still feel like we don't really understand the levers to pull and how it's going to impact inflation in terms of monetary policy versus fiscal policy versus what happened with the pandemic. All these things helped cause inflation, but we don't have ... You can't say fiscal policy caused 43% of it and monetary policy caused 13.

So I think that's the hard part for them is that, first of all, the Fed seems to be the only one that's trying to do something about inflation, and we don't know if their policies can do it or how long it is going to take besides throwing us into a recession.

Yeah. I mean, and that's my big ... I mean, I've spent most of my adult life studying inflation because I basically think inflation is the most ... I mean, if you're looking at portfolio management, in my opinion, understanding inflation is probably the most important component of the whole construction, portfolio construction process.

And I always tell people, I still don't understand inflation. Inflation is so confusing. It's so dependent on specific economies and the way that things are actually functioning in certain environments. Every environment's different. Every economy's different. Every policy response is different. So there are infinite numbers of variables that go into the contributing factors of inflation.

And I think, I mean, the last two years are a perfect example of even the smartest people who study this stuff, they don't really have anything remotely close to a precise metric for understanding what is the causality even. Right. There's no model for this, right? That you can say, like, if we take these three inputs, put them in here, that's going to tell us what inflation is probably going to be.

No one knows this stuff. Yeah. And that's the worrisome thing is that I'm ... if anything, studying inflation is just really humbling. It'll teach you that you really don't ... you don't know what you don't know. And so that's the component where I'm always sort of worried about the tail risk, the asymmetric risk in all of this, where, okay, well, what if we get this wrong?

You end up getting it wrong in a big, big way, in a way that causes a lot more collateral damage. And to me, that's sort of the most important debate that's going on right now, is it, is this 1978 or is this more like 2008? And to me, there's just, there's not a lot about what's going on today that looks like the 70s to me.

You could maybe make the argument that like the stuff going on with oil and Russia, you know, is a little bit kind of reminiscent of like the 70s. But aside from that, there's a lot of big underlying trends that this feels more, more closely aligned to a potential 2008 type of credit event rather than a sort of stagflation, permanent high inflationary event.

So I don't, maybe I'm wrong. I mean, I'm not, I'm, I'm not arrogant enough to say that. Well, I mean, the thing is, we love these, we love these analogies because ... Towards like an '08. Yeah. So these analogies are fun because it makes it, you feel more comfortable that you know how it's going to end.

So I've been using like the World War II analogy where we had this huge spending come in and then you get this huge inflationary spike and then it, I mean, back then it got to like 20%. Obviously that was a much different, it felt like wartime spending for the pandemic.

But that's the hard thing is, is you could take little bits and pieces from each analogy and it's this, this beast just feels completely different because of what happened and, and the government response. So you talk about like collateral damage. So Duncan, do the next one. Because I think this, this one to me is the one that's been hard to wrap my head around lately for how economists are viewing this.

Yeah. And you and Michael talked about this on Animal Spirits, so yeah, people check that out if you didn't see it. Why does it feel like economists are cheering for people to lose their jobs right now? Why are workers the ones being blamed for inflation? No, I know that economists try to sort of detach themselves and not be emotional, but you know, I would love it if we could figure out a way to, to not say we have to have the unemployment rate go from 3.5 to 4.5 and have a million people lose their jobs to just so we can get, bring price stability down because my thinking is, okay, the Fed has a dual mandate.

It's price stability and it's employment, right? And so it seems like for a while right after the pandemic, the only thing they cared about was unemployment, right? And now the only thing they care about is inflation. I guess that's my problem with what they're doing is, there doesn't seem to be a lot of balance and they're just, they're focusing on the extremes and that, that makes like things go back and forth and back and forth and the pendulum is swinging.

And so, I don't know, isn't, wouldn't it be nice if we could find a way to balance things out and maybe try to let inflation cool a little bit without a bunch of people having to lose their jobs? I know recessions are part of the, you know, that's the system we live in.

Like recessions are going to happen, but I guess my way of thinking is I would prefer not to have one if we don't have to. Yeah. Yeah. I mean, that's the, you're kind of going back to what we were talking about before the, you know, the ebb and flow of all this stuff where, you know, some variance is natural.

Obviously, you know, people do stupid stuff. You get, you know, booms and busts along the way. The question is, is do a lot of these policies exacerbate the booms and the busts, you know, across, you know, the spectrum of time. And that's the, that's the hardest variable to manage in all this because the Fed is, you know, the Feds now, they're super worried about having made the mistake that they did last year.

And I think now they're trying to play catch up, but now they're potentially operating such an impatient manner where the risk of them now creating the opposite, you know, mistake is increasing. And so, you know, I think inevitably there is, you know, to some degree there's a give and take in terms of, you know, can you, can you have permanent low inflation and permanent low unemployment?

No, there's going to be some ebb and flow in the way that the business cycle works. That's just, you know, a natural part of the way the economy works. The question is, is, you know, how much does that need to, do those variables need to actually gyrate over time?

And I think, I think we're going to come out of this period and I think people are going to look back at the way the Fed managed interest rates and say, you know, is this the right way to be doing this going forward? Because I think that the discretionary manner in which they're sort of just shifting the car into, you know, reverse in sixth gear, as if like, there is no like one, two, three, four or five gear in between all of that is a worrisome.

And obviously, you know, with the benefit of hindsight, we can look back and say, these people are not very good at this, you know, and I'm not bad mouthing Jerome Powell necessarily. I don't necessarily think anybody would be good at it. And that's kind of, I think, one of the big lessons coming out of this.

It's easy to play armchair Federal Reserve Chairman. So Duncan, do the last one because we'll put our own skin in the game here. Okay. Yeah. And I want to throw a disclaimer on this one. Keep in mind that we are policy influencers. And so we have people on the Hill watching who are making policy based on what we talk about here.

So, you know, it's a lot of responsibility. What would you do if you were running the Fed right now? So obviously, like, this is not a job that I would want because there's so much pressure. And I think one of the big mistakes they made is this just I think this is just natural because of the way the free flow of information.

I think that the Fed is talking way too much these days. I think they say too much. And I think part of them kind of likes the power they have that they hold. And remember, back in the day, people were looking at Alan Greenspan's briefcase to see if it's if it's thick, he's going to do something, if it's thin, he's not going to do something.

Now the Fed, there's a Fed statement every day, it seems like. And they talk and the market moves, and I feel like they kind of enjoy that power a little bit. And they're human, so who can blame them? But I just think, to your point about things working on a lag, I think especially with Treasury rates at four to five percent coming from zero, in mortgage rates at seven coming from three in such a short period of time, now's a great time to just take a breath and let's just see what happens.

It's not you could say if inflation stays high, we're going to we're going to use that data and five or six months down the line, we'll we'll raise again if inflation stays high. I think it's a great way to show a little patience here, that that'd be the thing that I would look.

Stocks and bonds have already crashed, housing prices are rolling over. My point is, like, what's the rush here? Why? It's because it's going to take some time, regardless of how it happens. Yeah, I mean, I've got I, I got up and left DC 15 years ago, moved to the beach in California.

So you know, I, I always joke around that. I think everyone at the FOMC, everyone in the Federal Reserve should do something similar. Like, you know, get up, leave, fire yourself. And I mean, you could set you could easily set interest rates on I mean, there's some theories that say, hey, the the overnight rate should just permanently be zero.

You know, I'm not an advocate of that. But you could set up a really simple algorithm that just even if even if the overnight rate was pegged at, you know, something close to like the rate of inflation, or you could set up a moderated like, you know, or modified Taylor rule where like, the, you know, the interest rate could change to some degree, but it stayed within like a band of like, like I theorize, I've theorized in the past that like, it can move from like two to like five within a band over time.

And it would just be completely out of algorithm based, completely automated, data dependent. The Taylor rule is somewhat forward looking. So someone calling someone asked us this a couple weeks ago, like, could the Fed be more rules based? And my thinking was 95% of the time they could and the other 5% during a crisis is when you need them.

But I think what we're learning now is that the Fed is way better at stepping in during a crisis than they are at pulling the punchbowl away like they they know what to do during a crisis. And I think that's actually easier, the easiest part of their job. And I think Powell did a great job in the pandemic.

I think obviously, the other way they're showing that that that's much harder to know what to do and when. Totally, you know, and that's the thing, a lot of that tangential stuff, like, you know, having to manage things like a credit facility that goes to, like, you know, Bear Stearns or, you know, a big investment bank that's in dire need of something unusual.

That's a very different scenario than the everyday management of something like interest rates, like interest rates for the most part, I think could be it could be very automated, systematic, something that people just were mostly hands off with. And of course, even that model will have its flaws, but at least it won't have the discretionary impact that we now kind of know almost always lags because people are just bad at predicting stuff.

I mean, everybody, literally everybody is bad at predicting stuff. And so but you still need even if you had this like self-driving car version of Fed policy, you still need somebody behind the wheel. You need someone to pay attention. The car kind of starts to get wobbly. And so I think that's I mean, that's what I would do, frankly.

I would you still need people manning the ship, but you don't need like you said, you don't need 20 people doing speeches every day, just yabbering about what's going on with the economy and talking things, you know, off of what looks like a cliff edge here. So this might be I was just going to say it might be a stupid question, but I've always wondered why do we have all these different locations of Feds?

Like what's the. They're like often they're offering different opinions on stuff. It just seems kind of part of the banking system, right? Yeah, different spots for the banks in those areas kind of really like back when the Fed was formed and the as it kind of developed, I mean, the banking system wasn't very integrated.

And so it wasn't very nationalized. And so you had all these Fed districts that were they were kind of managing specific locations across the country and which now looks kind of silly because it's like, well, it's just, you know, I send a wire transfer and it doesn't matter whether you're in San Francisco or New York, like it just goes through.

So it's kind of a I mean, a lot of the a lot of the structure of the Fed, a lot of the a lot of the existing management of it is somewhat archaic, you know, and that's, I think, becoming more and more of a problem as as the monetary system evolves.

So there was a story today that St. Louis Fed President Jim Bullard gave like a behind the scenes speech to Citigroup. People are kind of up in arms about that, that the Fed moves markets. I think after today, the Fed is not going to be coming on Portfolio Rescue.

We're a little harsh. It is what it is. Cullen, where can people find your work? Yeah, I feel like you might be fired from the Fed, Ben. Yeah. It's I turned my resignation a while ago. Cullen, where can we send people to find your work? Pragmatic Capitalism is my blog.

I run an investment management firm called Discipline Funds. But yeah, the blog, Twitter, Cullen Roach on Twitter. So if you want to hear more boring stuff about the Fed, you know, that's where you can find me. Thank you, Cullen. We appreciate it. Yeah. Thanks. Yep. Yep. You're listening to the podcast.

Remember, leave us a review. Send us a question. Ask the compound to a gmail.com if you're watching on YouTube. Leave us a comment. Let us know what you think you would do with the Fed. And we will see you next time. See everyone. Transcribed by https://otter.ai Transcribed by https://otter.ai (upbeat music)