00:00Michael you and I had a scintillating conversation five or six days ago about the nominal nature of the American economy. This kind of inflation if we see it over one month two months three months what does it say about the combination of real GDP and inflation. Hi Tom. Yeah I think you know these numbers obviously are too hot. So you know this is a bit of a shock to the upside but I'd actually go to the point that you know that Jonathan just made where the you know the peak which looks like it it is in now on a year over year basis is potentially a lot less important than where these numbers settle or where the plateau is. And if we have really rapid nominal GDP aggregate demand even if these year over year numbers were to come down by half. Right. And we settle around 4 percent or just above that by the end of the year. And it looks like that's the plateau. That's still a major problem for this bond market. A major problem for this Federal Reserve. And as we're seeing a major problem for the valuations that support the S & P 500 they are going down and they are going down because long term interest rates have been going up. My just that landing strip for a soft landing just get that little bit narrower with this number. Yes I think it does. You know the Fed has its work cut out for it. It does need to slow aggregate demand. And typically you know starting from behind the curve the success rate is very high. So usually what happens is central banks start off too slow when they're behind the curve. That's the definition of being behind the curve. And then eventually they apply too much braking force later on. And that's typically when you're in a bust part of the cycle. So I don't think that that part plays out this year. But they they've missed the boat a bit here. I think it's pretty obvious now. They really should have gotten a tightening process going last year. And then even with that press conference last week Powell seemingly you know explicitly ruling out greater than 50 basis points point moves. Why rule anything out in the early innings. You know step away from the for forward guidance and you know take it meeting by meeting. So I think the message was a bit bungled and confused as well. And that is not helpful in this environment.
