Raw Transcript: Will Fed Cut Rates To 0%? Former Fed President Reveals Next Move | Thomas Hoenig

We're in the early stages of a bubble. There's more uncertainty coming into the economy. A little more leverage, in some cases, a lot more leverage. So long as the price is going up and people think, I got to get on this wave, you're going to see this continue. The the famous phrase, it will continue until it stops and then it'll be a really nasty exit. The the stable coin industry will ask for permission to have other types of assets back the stable coin. That's when you begin to see the creeping into a higher risk uh instrument called uh stable coin and then you have a moment uh where people lose confidence and then you have a run and they'll turn to the Fed for bailouts. I'm very pleased to welcome back to the show Thomas Hanik. He is the distinguished senior fellow at the Mercada Center. He was previously president of the Kansas City Fed and vice chair of the FDIC. And it's always an honor to have Dr. Hanik back on the show. We'll be discussing the state of the economy, what's next for the Fed and the emergence of digitization of the dollar known as stable coins. We'll talk about that. Welcome back to the show, Thomas. Good to see you again. Good to be back. Thanks for having me. I want to start by giving a timely update on the economy. Let's start with the Fed. We're speaking one day ahead of the FOMC decision and by the time this airs, the FOMTC decision will probably be uh just taking place. So what is your expectation for not just this particular meeting but for the next few meetings uh Thomas uh what is your uh what is the guidance from the Fed that investors should be paying attention to this Wednesday? Well I think number one the Fed will ease tomorrow. That's a pretty clear out already been signaled and I think uh it's probably um more than necessary given the way things are right now. They're very strong in the economy and yet the Fed's going to ease. Inflation's actually went up a little bit with this last report. It's 3% been at 3% well above their target. Uh so so I think the chairman uh will the pal will be very cautious in his press conference. He will acknowledge the importance of the cut. it will emphasize the employment numbers as being that where they're focused um and they're in a sense allowing inflation to run a little bit high or a lot high actually um because of the employment concern and then then he'll be he'll kind of back off after that. he won't want to signal too strongly for another cut at the next meeting. Uh although the markets fully want him to and fully are going to put a lot of pressure on him as well as the administration and and politicians to to cut. So he'll have that to deal with kind of work his way through on the on the conference. He'll get questions about it over and over again. Uh and we'll we'll see. you know, beyond that, it's impossible to know what the future holds given that we still don't have all the data. Um, we're we're lacking data. The Fed's lacking data and so forth. So, I think cut now on on uncertainty going forward. Uh, but a lot of pressure on the Fed to cut rates again come December. What is the likelihood that uh we'll have a new Fed share by December? The betting market is actually factoring in a higher pop probability that we will not have a new Fed share. But Scott Bassan, as you know, earlier this week, Treasury Secretary has announced his top picks for a new Fed share. Uh so when can we how does this process work? When can we expect one? December seems perhaps a little bit early to me, but if they, you know, they're that through that they'll go they can go ahead and make the announcement. it will start it will start changing the dynamics in the marketplace. I think the I think the president knows that and so does Bessant. So um that I I would agree that with the markets maybe a little soon December but I would say January February almost for certain because it takes time to get the hearing set up and the confirmation going. So I'm I'm thinking January February will be the the time for it. How significant would a new Fed chair be for Fed policy? Uh some speculate, for example, Jerome Powell could still stay on as a governor. That's a possibility. Not confirmed yet, of course. Um and I I wonder how much weight a new governor, sorry, a new Fed share does have on the direction of the Fed funds rate. Well, I think this the new chairman will have a lot of impact as they all do. uh he leaves that group uh and he will uh apply the bully pulpit of the chair to to get the policy in the direction he thinks it should go. I don't know how well he'll listen because I don't know who the candidate is. I mean I don't know who the chairman is, but of the ones that were named, uh I know four of the five that probably listen, but they still will um pick the policy and people will tend to follow that policy. That's what I expect to have happen there. Will will Pal stay on? I doubt it. Uh I wouldn't if I were him. He's served his term. Um and and to think that he could somehow block this new chairman by staying on the board or block another nominee, which would um which would be a dynamic change. I don't think he he would pay the price to do that because his his life would be pretty difficult uh in doing that. the five um finalists named uh this week, Christopher Waller, Michelle Bman, Kevin Hasset, Kevin Walsh, Rick Reer. What was your reaction to seeing this list? Any any surprises for you? No, I don't know Reer. The other four, no surprise at all. They've been in the They've been in the mix since the start of it almost. Um they're all qualified. Uh and it'll be I think frankly a big part of the choice will be who will who will do the president's bidding most likely and I don't know who that is. Um if any of them you know they may as chairman want to establish their own independence. Uh but I I don't know but I would suspect he will be looking for someone who pretty much does as he would like them to do. Well, of the four that you do know, uh, independent of the president and his administration's policies, uh, and views, are they all dovish? And, uh, how are they what is their approach? Do they have differing approaches to fighting inflation? They have different attitudes towards it, I would say. Worst is more hawkish. Um, at the moment, has it? I think he's playing it very neutral right now. Waller has been dovish uh, as you can tell. And Mickey Bowman has been um kind of mixed doubbish to hawkish. Um she wants to shrink the balance sheet more which is a more of a hawkish move. Uh at the same time she did vote for cuts uh and did descent when they didn't give the quarter point cut in July. So she's in the middle and I don't know I don't know reader I don't know how he would uh well given that uh these picks are from the administration. Is it fair to make the assumption that it doesn't really matter at this point where inflation goes where we can expect rate cuts either way? Well, I don't know that for sure. I think uh if if the economy slows and if unemployment rises, I think we can expect cuts. But if inflation were to start to increase uh too rapidly, I think people like Hasset and Walsh uh and maybe Waller would would and certainly Bowman might say let's we need to we need to stop cutting. We need to think about raising rates at some point. So I think it depends on how the economy goes even for these individuals because even the president knows if inflation gets out of hand uh he will be held he will be blamed for it. the 3% inflation headline CPI that you mentioned earlier that was a dramatic rise from what we had earlier. The last time we had 3% was at the beginning of the year. Uh Thomas, is this is this progression um in line with your expectations? Is it moving too fast or is it, you know, just just about normal here? Well, it's in line with my expectations because number one, we did expect some inflationary pressure from the tariffs and we've gotten that. um it doesn't dominate but it's it's added to the inflation number. That's number one. Two, we have an enormous uh I think spending spree going on in the investment side with AI. Uh the consumer is now very busy in the sense of uh spending. Uh they've been a big part of this strong economy that we've had and and the third quarter numbers should be close to 4% I'm told. So, um I think you know I think that's really um going to going to drive things going forward in terms of of the FOMC and different policy makers outlook for the economy growth of the economy itself. We've just had reports that uh several big tech companies uh and uh and other companies in other sectors are are cutting uh their workforce today. So um recent layoff announcements Amazon announced um a cut by uh well 14,000 I think today but uh over the last month or so up to 30,000 employees UPS 48,000 Intel 24 Nestle so on and so forth. A lot of these companies like Amazon are citing automation as one factor making their company a little more leaner. Um, I don't know if this is just an issue of uh companies uh trying to shrink their costs, which could be a good thing for corporate margins, uh, or it could be a signal for a deteriorating labor market overall. What is your read on the current situation, Thomas? I I think it is somewhat unique right now, uh, to the uh, to the tech industry. They're they're trying to come back so they can employ and uh, spend more on AI. uh and I think that's a big part of their goal here. Uh and that's why these cuts are taking place to kind of force that issue. On the other hand, you know, healthc care uh it's it's growing employment uh very strongly. Um manufacturing is weak and that's partly because of the tariffs. So you have this mixed bag as you always do with the economy, but I think overall it's uh slowing but modestly. I don't expect that unemployment right now and we won't get the numbers on it, but I'm I'm guesstimating that it'd be about five and a half, four and a half percent rather. And I I think that's no surprise. It's in my expectations and should not should not be a reason for the Fed to cut rates unless they think it's so embedded in the economy that we'll see larger uh job cuts later. And I don't I don't think that's I don't think that's in the forecast at the moment. What is the um the the unemployment level that would worry the Fed? Is it is it the level of unemployment that would prompt a rate cut decision or is it the delta meaning the rate of change of unemployment that would be more of a factor here? Well, at this point either one because to get to get the unemployment rate up high enough for them to to in a sense, you know, make a strong action in cutting rates, it would have to be a big delta. But it also means it would have to be above well it would have to be above 4.6% or even 4.7%. And so that's really you know what they'll what they'll watch. Uh and I don't I don't expect I don't think they expect that and at the moment I wouldn't expect that we have you know what's going on in the labor force is as as pal has indicated yes we're having a slowdown in demand but we're also having a slowdown in immigration and the supply of labor. So these two are kind of balancing out and overall I think these these job cuts from these tech companies these people will be re-employed fairly rapidly. Um I think it's new entrance who will find the most difficult to uh to find employment if they're they're inexperienced they don't have enough they're these these institutions like Amazon that are not hiring more. So they'll be slow to slower to be hired than the more experienced layoff players. Uh Powell called this economy a slow hiring, slow firing economy. Uh this just sounds like equilibrium, doesn't it not, Thomas? Well, yeah, it is. And under the circumstances, it it is. I mean, you have you have a you still you're not you're not seeing a sharp drop off in labor demand. You're not seeing, you know, in every industry layoffs or fear coming into the economy. So that's the that's the demand side. the supply side. Yeah, you have you've had a slowing down in immigration, a slowing down in terms of of job seekers. So, I I think it's a it's an equilibrium, an unusual equilibrium at a low pace. I want to switch gears now, talk about the um regional banks. Uh you were former um vice chair of the FDI. So, uh you you know you know um about banks uh better than anybody else I can think of. Uh Thomas, the regional banks that plummeted on Thursday, this was a couple weeks ago, were Phoenix based, Western Alliance Bank Corps, uh Zans Bank Corps, uh Zions fell 13%, Western Alliance stock fell nearly 10%. Some BAT loans were exposed um on the news and that's what prompted the pullbacks. Uh the earnings while their performance was so disappointed. Uh Jamie Diamond of uh of JP Morgan Chase uh warned that um you know, once you spot one cockroach, there's probably more lurking around in the corner. uh he's referring to um you know banks with bad bad loans. Uh we've had a regional banking crisis two years ago. This is nothing of that sort of is happening now. But just interpreting the news that's coming out recently. Uh what is happening here? Can you explain? Well, I mean the the economy has been on a what I call a blitz in terms of the level of lending. Uh it was up pretty significantly at the first half of this year. uh you have a lot of loans being made and then you're you're seeing some uh fraud. I mean some of these were deliberate fraud. They were uh you know providing duplicating their use of collateral to different lenders. These these things happen especially when the economy is in a more speculative mode which it has been and so you've had these kinds of events take place. But you know the the banks who were involved they have absorbed these losses. But the real issue that you don't know and this is the Jamie Diamond comment is is this uh an indication of other firms that have gone into speculative borrowing speculative activities that are now coming home to roost and will we see more uh announcements in the months and weeks ahead. So that's a risk because I think part of what's going on here is we're in the early stages of a bubble. Uh we have very strong investment in AI, a lot of activities around that. We've had subprime lending that's coming back. We have the consumer kind of leveraging up their position so they can maintain their their their levels of consumption. Um so there's more there's more uncertainty coming into the economy. A little more leverage in some cases a lot more leverage for some of these companies. uh and therefore that means these banks are more vulnerable. So as a result of what you've witnessed, these regional banks are going these regional banks are going to be scrubbing their loans much more carefully. This is very much different than Silicon Valley which was a market risk problem. This is a credit risk problem which in some ways is is more serious. So, they're going to be very careful and looking very carefully at their portfolios over the next quarter or beyond. The the the credit risk issue, uh, how does that start? Can you just walk us through, uh, how banks even get themselves into credit risk issues? Uh, presumably we've had regulations that should prevent this, do we not? Well, regulations only go so far. And what you really have to be careful of is in a in a growth economy, an economy that's been stimulated with the uh beat inflation act and so forth where a lot of money is poured in, these these lenders are are, you know, they're looking for margin and they have these borrowers who are willing to pay it. Now they put, you know, they can put covenants in, but the competition usually puts pressure on these banks to ease off on their on their covenants, on their reporting covenants, on their collateral check covenants. And it becomes more risky just by the nature of easing off on the covenants, making loans to companies that have a little less of a a strong balance sheet, a little more leverage than they've had, more borrowing. And those are the things that happen in the boom side of things, the boom side of the economy. And if we are, you know, slowing and that's what people don't know for sure. But if we are slowing, then those, you know, as the as the tide recedes, then you see who's who's in the water naked. And that's really what they're fearing now. And I think many of these regionals are tightening up their lending standards very quickly right now and double-checking their collateral very carefully. So there's a lot of double-checking going on right now. And if they find more problems and they start announcing more problems, then then the uncertainty and the fear, what I call the the psychology of panic begins to take over. We want to avoid that, but that is a risk. Can we expect an easing of lending standards alongside an easing of monetary policy from the Federal Reserve? Is there a relationship there? There usually is as the as the Fed stimulates and creates a environment that's conducive to to a growing economy, conducive to lending, um lowers the interest rate, allows them then the banks to search for yield. Uh yes, there can be there can be that effect. Uh that's the intent of lowering uh interest rates and stimulating the economy on the part of the Fed. Now, let's talk about some new developments in the banking industry. I'm referring to the tokenization of money here. Uh this is just one story but it's a broader trend. So earlier in the summer uh following the enactment of the Genius Act uh the Goldman uh the following banks Goldman Sachs and BNY are transforming a lot of their money micro funds into tokenized tok uh assets here. So uh here we go. The um clients of BNY the world's largest custody bank will be able to invest in money market funds whose ownership will be recorded on Goldman's blockchain platform. uh project has already signed up fund titans including Black Rockck, Fidelity, uh Federated Hermes as well as the manage asset management arms of Goldman and BNY. Uh Thomas, going back to the credit risk that we talked about, this doesn't affect credit at all. It's just it's another form of listing your assets, right? Exactly. Well, there's a couple things here. One of them is Yeah, you you you tokenize your assets. It's encrypted. It's safe. that that is that's merely uh converting your asset into a tokenized crypt crypted encrypted uh uh electronic transaction. Stable coins are you actually are issuing a liability a token and you're you're receiving dollars for it and then you invest those dollars in the under the Genius Act under in under acceptable reserves 100% reserves. So every token has to be backed 100% by these reserves. And these reserves are uh basically um government securities, bank deposits, uh um there's other high so-called highquality assets and that are highly liquid so that there's zero there's zero credit risk supposedly zero credit risk with these with these stable coins. there's still market risk because if you're if you're holding government securities as 100% security for the token and interest rates go up, the value of the of the reserves declines and you're exposed and you have to buy more. So, it it's not riskless, but it is far safer and there's no no credit risk associated with it so long as it is in these highquality uh liquid assets like government securities, short-term securities, deposits. Over time, I will promise you that the industry, the stable coin industry will ask for permission to have other types of assets back the stable coin less liquid uh maybe AAA but credit rather than government securities. And that's when you begin to see the creeping into a higher risk uh instrument called uh stable coin. the anticipated demand for treasuries. One of the reasons why the 10-year has been falling all year. I don't know if that's related, but I'm just speculating here. Uh Scott Besson has said following the enactment of the Genius Act that he expects uh this to bolster demand for US treasuries and put the dollar back on the map as a global reserve currency. So, what's the relationship there? Well, I I doubt that it's going to have that kind of effect. I think um what first of all why why is the tenure coming down because the market expects and will not be disappointed that the Fed's easing rates. That's why the that's why that's coming and they expect another cut yet this year and they're going to lobby hard for it and into next year. So they're talking about another at least 125 150 basis points cut. That's why that's going down. Whether that's a correct uh interpretation on the part of the market, I question, but that's that's what the market's thinking. As as far as demand for uh government securities, the the idea that you you you would be able to solve the the debt problem by stable coins, I think, is a fallacy. The government always always puts its debt somewhere. It's it's and and there's a price. You may be talking basis points, but only small basis point differences. It will depend on how much the the the banks buy of this debt and how much the Fed monetizes it. And one of the discussion items that's getting played in the paper right now is whether at this meeting that the FOM's going to have going is going to have tomorrow starting in tomorrow is whether they will change their balance sheet um management whether they will stop quantitative tightening and perhaps re-engage in quantitative easing or at least the purchase of government securities. That's what also will cause the the 10-year to come down. Uh I want to go back to stable coins uh for one for a for a minute now, Thomas. Uh there there's there there's going to be uh more adoption for stable coins even on the consumer retail level. And one of the concerns is um uh how protected these consumers are going to be. Now uh there are some platforms out there that promise uh a yield on stable coins and this BIS paper addresses this concern dated the 23rd of October. So this week, some crypto asset service providers offer yieldbearing products based on payment stable coins, even though these stable coins are not inherently designed to generate onchain returns to holders. So just think of a stable coin as something tethered to a fiat currency. But now um instead of going through a bank, you can just own stable coins on your wallet. That doesn't inherently generate a yield. And so there are these providers that now do whatever it is that they need to do to provide a yield on, you know, to the user in their crypto wallets. Uh it says here, "These practices may blur the lines between payment instruments and investment products. They may compete with bank deposits, but are often provided without equivalent credential oversight." This is a brand new sector. Um Thomas, how should regulators, including organizations like the FDI, approach this issue? Well, if I understand the Genius Act right, this this the FDIC, the OC, and maybe the Fed have have some credential supervision over these over these stable coin issuers. U now, it's not the same as the banks. That's for sure. And I would tell you that these are these are legitimate concerns because uh when they were talking about the Genius Act, it was very clear, at least to some of us, that the that as soon as it was passed, they would start lobbying for the ability to pay interest. Well, they didn't get it directly, but they get it indirectly. It's it's like when you had in the old in many many years ago when you had these limits on interest rates for bank that banks could pay, they started giving other kinds of of gifts. You know, if you make a deposit, we'll give you XY. Well, that's what's going on here. It's a way to draw dollars in and they're going to try and deploy those dollars to maximize yield and they're going to try and allow themselves to hold uh to pay interest. And then soon after that, they're going to ask if they can have as their reserve amount their their reserve for these stable coins less liquid uh higher credit quality risk assets. And and that's when the trouble starts. That's when the risk increases, the leverage increases, and then you have a moment uh where people lose confidence uh either because interest rates have risen or because one of these stable coin buyers can't can't make a payment and then you have a run and they'll turn to the Fed for bailouts. And in fact, Governor Waller at last week was talking about having these stable coins have a an account with the Fed. So now the Fed's a counterparty. So you can see where this is leading. It's another form of currency uh but uh it and it basically uh will disintermediate some of the banks, change the nature of it, but still have risk uh and still be a source of problems. So, uh I know from talking to some of these crypto uh service providers firsthand that one of the ways that they have different instruments and different ways they could generate yield, but one of the things that they do is simply lend out the reserves and then pay uh deposits through through the spread similar to how a bank actually operates. So, essentially they're operating like a traditional bank except they're not a bank like you said. So, uh, what what are some of the risks that consumers need to be aware of and what should consumers uh do to find out more about the risk that they're taking with these instruments? Well, number one, I the Gen, if I understand correctly, the Genius Act says it cannot rehypothecate the the uh the uh reserves. They can't lend them out. So, there should be some some restrictions there. Number one. Number two though, the the only value of a stable coin, not the only the purpose of a stable coin is to facilitate payments, instant payments, especially across borders. So if I'm a consumer for now, we're talking about stable coins backed by high quality dollar assets. If I'm a consumer, unless I unless I have some kind of a payment need that's different than what I normally use, I don't see why you would invest in it. We, you know, only time will tell. If I have, if I have a, let's say I have a a son or daughter overseas and I want to move money from to them, okay, I can do it using stable coin. Okay, that's a special purpose need. All right, fine. But if I need to make a payment to my someone in the United States, I can use zel. I can use instant payments, the Fed's Fed Now, the bank's instant payment programs to get that money there. So there's no real unique need for a stable coin outside of international transactions and even then it's a matter of timing and cost. Uh the crypto community is pushing a lot of its users to use wallets. So that's personal self-custody versus going to a bank whether you're buying Bitcoin or a stable coin for whatever purpose that you that you as a consumer need. Let's assume this trend continues and we have a lot of users instead of putting their fiat money in a bank, they put their fiat money in a cold wallet via a stable coin. Now, I know through conversations with yourself previously, you told me that you're against the FDIC backstopping crypto asset companies. Are you still of that view even if there's a wider adoption of people directly self-custodying on wallets? Well, it's a matter of choice, isn't it? those those same individuals put their money in a bank that's insured or they can put it in a the wallet pay, you know, at the moment pays no interest uh uh is there just for payments purposes. You can do that elsewhere. If for some reason you want it in that wallet and you want it for for uh because you you think stable coin's cool, well, fine. But that's not I don't think that the government should be guaranteeing that. So you can have an instant payment uh domestically when you have one already in the banking system. So and the problem is you're you're broadening the safety net. Therefore you're broadening the moral hazard issues that you have to deal with later. And when these companies, think about it, with a money market that a stable coin is a money market with a payment uh franchise in the last in the great financial crisis, money markets uh supposedly backed by highquality liquid assets got into trouble and the and broke the buck. And guess what? The taxpayer and the and the central bank bailed out the money markets. Uh you know, it's not free. It's not free. And so I want to make sure that what they're doing uh serves a purpose that the banks can't serve uh at at at this stage at least. Okay. Now let me let me just draw on a practical example from uh earlier this year. I don't believe you and I have talked about it. So by bit as you know uh got hacked earlier in February. This was uh the largest crypto hack in history. A group of North American uh North Korean rather North Korean hackers uh stole $1.5 billion in Ethereum tokens. Now most of those funds uh were returned to investors and uh by bit was able to replenish its reserves. Uh if this were to happen now this isn't this isn't you know the the the exchange uh being uh being malicious or irresponsible with their funds. This was a hack. Uh what what what if anything should the government do um about this kind of incident? Well, what they did do, they uh basically tried to find the source and to get the money returned. Uh should they insure it to where the uh there's no there's no accountability on the part of the of the depositor? Heck no. I mean, you you you have to know where it is you're putting your money and trust it or not. I don't see I don't see why the taxpayer, the government behind it, uh the taxpayer behind the government should say, "Yeah, put your money wherever you want. will take care of it if anything goes wrong. That's not the purpose of of the of the government's role with these uh stable coins and these bitcoins. Uh so just to sum up our discussion so far, you don't do you believe currently there is a slowdown in the economy to such an extent that the banking industry is at risk from either a housing bubble which was the case in 2007208 uh or a series of bad loans or all the above other things. No, I don't think so. I think the economy is um extended. I think it's uh releveraging. It's it's not well into the process yet, but it it is increasing its risk profile. And if that goes on indefinitely into next year and beyond, then then the risk will rise and the banking industry will become more exposed. And that's what the supervisors need to be aware of and what the Fed needs to think about as they lower interest rates and encourage this kind of activity, this speeding up of the economy when it's already uh at a fairly uh rapid pace. Uh despite some headwinds to the economy, there seems to be a pickup in M&A activity in the tech space. Just today, for example, Nvidia announced a $1 billion stake in Nokia. Uh this follows uh an announcement earlier uh that Microsoft is investing additional money into Open AI. Um and there seems to be the lot lot of cross um kind of financing amongst big tech companies. uh can you just overview provide an overview of the M&A landscape right now and why there seems to be so much activity? Well, I think it's because uh AI is a very hot topic. It's like the dotcom bubble was in the late 90s. Uh it's it's the it's the thing to put your money in. It's it's on a wave up. Uh so you have a lot of this going on and and you have these companies buying into one another that increases the the price of those their stock. It's all kind of um it's it's all part of a speculative trend that we're seeing that I think will build over time. Uh so long as the market so long as the price is going up and people think I got to get on this wave, you're going to see this continue. And I I would expect it to continue until and you know the famous phrase, it will continue until it stops and then it'll be a really kind of a nasty exit. uh uh what what usually prompts these kinds of things to stop? People begin to figure out that for all the money being put in, the yield on the investment isn't anything like you expected. Your yield so far is coming from the fact that the value of the the the price of the stock is rising rapidly rather than the earnings flow coming into the institution is is rising rapidly. And so that's what you have to watch. uh where is this going? you know, Microsoft puts X hundreds of millions or billions, whatever company it is, are they getting a return or are they not? And if it if the if if they are not and that goes on for a extended period, they're going to say, "Wait a minute, what am I doing in this stuff?" And Microsoft will back out. And so you'll see this thing kind of turn in turn in on itself. And that's what you have to watch for. Now if if if AI is is you know is the thing everyone thinks it is and it really does begin to return uh provide a return to the investor then it may write we may ride this for quite some time. That's the decision the investor is trying to figure out right now. Is this permanent or am I riding a wave? How should I look at it? And if if it's the if they're riding a wave and they get out too late they'll lose money. The uh final question uh Tom, should the Fed be concerned with capital markets? There's a theory out there that uh the wealthy uh their wealth is dependent on uh the valuations of of assets in the stock market and other and other assets. Um and so if we have a stock market correction, we could potentially see a lot less spending in the economy. Now, that's just one theory, but overall, should the Fed make it an unofficial policy to be following capital markets? Well, I I don't think they Well, they obviously are going to follow capital markets. I mean, that's part of their job. Whether they follow that to the exclusion of others, that would be a terrible mistake. But, you know, the capital markets are something that you should watch. For example, while um while incomes have gone up modestly, while real GD while real GDP has gone up one and a half times in the last 20 years, um the stock market has gone up five times as high. So that there's an enormous amount of wealth that has been accumulated in the stock market and in the capital markets. So that's what that's why they that's why they're looking at it. That's why it's so important. So if yeah, if you had a major correction in that, it it would probably almost certainly slow consumption, slow investment, and therefore turn the economy to a slow much slower rate of growth or even even a recession. Uh thank you very much, Tom. I appreciate your insights. Where can we go to follow you? Uh go to um go to mercadus.org. Okay, we'll follow you at the Mercedes Center. Thank you very much, Tom. And uh I appreciate your uh your insights. We'll speak again next time. Sure. Look forward to it. David, good to talk to you. Byebye. Thank you for watching. Don't forget to like and subscribe.