Richmond Fed’s Tom Barkin on the Surprisingly Resilient Real Economy

The implications of Fed Chair Kevin Warsh's Jackson Hole speech are pretty clear: Traders expect a rate hike given the hawkish hints littered in his address, largely focused on inflation. There are still a number of open questions and Warsh's lack of forward guidance does not exactly lend clarity to how the Fed will act in the coming months. Today, we recap the speech — in a conversation recorded from the Lodge at Jackson Hole — with Richmond Federal Reserve Bank President Tom Barkin and he explains why his thinking around the Fed's communication policy is changing, and he gets into what is still useful about things like the dot plot. He also tells us what he's hearing at Chamber of Commerce meetings about the impact of AI on local communities, how businesses are using their tariff refund checks, and whether the Fed will have to start paying attention to the economic effects of data center politicization. Read more: Bond Investors Wary After Warsh Fuels Wagers That Fed Is Poised to Hike https://www.bloomberg.com/news/articles/2026-08-30/bond-investors-wary-after-warsh-fans-wagers-fed-poised-to-hike?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article Where to Invest Now as Data Centers Turn Copper Into a Hot Commodity https://www.bloomberg.com/news/articles/2026-08-28/ai-data-center-boom-power-grids-strengthen-investment-case-for-copper?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots https://www.bloomberg.com/subscriptions/oddlots?in_source=oddlotspodcast Subscribe to the Odd Lots Newsletter http://bloomberg.com/subscriptions/oddlots Join the conversation: discord.gg/oddlots https://discord.gg/oddlots See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee, so search Barclays Brief wherever you get your podcasts.

• 0:24Speaker 01

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• 1:06Speaker 02

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• 1:46Speaker 03

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• 2:02Tracy Alloway?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

• 2:05Joe Weisenthal?

  And I'm Joe Weisenthal.

• 2:07Tracy Alloway?

  Joe, we're still in Jackson Hole.

• 2:08Joe Weisenthal?

  That's right.

• 2:09Tracy Alloway?

  Plenty to talk about.

• 2:10Joe Weisenthal?

  Plenty.

• 2:10Tracy Alloway?

  We just got the speech from Fed Chair Kevin Warsh.

• 2:14Joe Weisenthal?

  That's right.

• 2:14Tracy Alloway?

  Which I think most people would describe as hawk-ish, although maybe there's kind of a gap in between the hawk and the ish part.

• 2:21Joe Weisenthal?

  Sure.

• 2:22Tracy Alloway?

  And there's still plenty of questions about the direction of the US economy and monetary policy in general. So we should talk a little bit more about it.

• 2:29Joe Weisenthal?

  We should, and beyond that, you know, there's many theoretical questions out there. What is the neutral rate of interest? What is the role of AI on productivity? And all of that is very interesting, or where's the term premium at? But also, it'd be interesting to know what the central bankers are hearing about actual businesses right now. And like, what's going on on the ground?

• 2:47Tracy Alloway?

  On the ground color. Okay, and there is one man that we go to for on the ground color. We have the perfect guest, of course, who are going to be speaking with Richmond Fed President Tom Barkin. So Tom, thank you so much for coming back on Odd Lots.

• 2:58Speaker 05

  Great to be back with you. I think it's my third year in a row. We'll be here in Jackson Hole.

• 3:02Tracy Alloway?

  Oh, we appreciate it.

• 3:03Speaker 05

  Yeah, no, and they let you outside of the hotel room. We get the tithes in the back, so this is great.

• 3:08Tracy Alloway?

  The production values have gone up, I will say. Okay, so let's just start very simply, Warsh's speech. What'd you think?

• 3:14Speaker 05

  I mean, he does a great job. He's a great speaker, and I thought it was a very authentic speech. I mean, Kevin laid out, I think, how he sees the world. He laid out how he sees the economy. The folks I've talked to, you know, appreciated the clarity in the thing. And I personally thought he had a very accurate sense of the economy. So I was very much aligned with what he said, and I thought he said it well.

• 3:33Joe Weisenthal?

  You know, so he said, okay, inflation seems to be going in the wrong direction right now. He described policy as not restrictive. So then you fill in the blanks, and it's like, okay, that means rate hikes. But he didn't quite say that. Just for you, as you see things, A, do you agree about inflation and the stance of policy? But then, more importantly, then what do we do about it?

• 3:54Speaker 05

  Yeah, so the economy's solid. I think he said that. And you can definitely see that in the GDP numbers and the consumer spending numbers. I mean, it's been crazy this year that gas prices went up and consumer spending accelerated. It's been crazy that you have all this uncertainty and artificial intelligence spending has led business investment to, you know, almost double versus this historic thing. So there's a lot of momentum in the economy. Jobs market seems to have stabilized, unemployment rates low, so all that's good. And I'm not saying inflation is definitely headed in the wrong direction. It's just not in the right place.

• 4:24Joe Weisenthal?

  Okay.

• 4:25Speaker 05

  And that's how I think it's not in the right place. I also would say the job market's good, but it's not frothy.

• 4:31Joe Weisenthal?

  Yeah.

• 4:31Speaker 05

  I mean, this low fire thing continues. And so that's where the policy thing will figure out. I've had the number one thing people have asked me after his speeches. Well, I guess that makes, you know, September, that tells you something for September. And I said, well, I listened to his speech, and I'm pretty sure he doesn't like forward guidance. So I don't think you should take any forward guidance from a speech from a guy who doesn't give forward guidance. And I think it's probably a good way to think about it.

• 4:53Joe Weisenthal?

  The problem.

• 4:54Speaker 05

  No, I know, but it's, I mean, I think you can talk about the economy in a very good way, and then you can talk about forward guidance. If you choose not to do forward guidance, you don't do forward guidance.

• 5:03Tracy Alloway?

  I want to talk more about forward guidance, but since you mentioned the resilience of the economy, do you have a working theory for what's going on here? Because I think, to your point earlier, it's surprised a lot of people that even with prices still pretty high, gas going up, all the economic uncertainty, consumers keep spending.

• 5:21Speaker 05

  They do keep spending, and I would compare it to coming out of the Great Recession, where at the Great Recession, you had people who lost their jobs, lost their house, lost their car, savings destroyed, needed to rebuild for retirement. We had five, six, seven years, the secular stagnation, where people weren't spending the way you thought they would. I compare it to COVID. We thought for two months it was going to be terrible, but then coming out of it, people had money in their pockets, you had stimulus, you had spending, money you hadn't spent. You had equity values up, you had home values up. And I think you had a mindset that just says, I'm bound and determined to spend. And so we all know the wealthy people are spending because they have more wealth. But even those with less wealth, what I hear is a very creative consumer

• 6:03Speaker 05

  figuring out ways to find money, to spend money, to borrow from the future. You can see the finding money and the growth of private label, the move to Walmart and dollar stores, you know, if you look at their results. But people aren't carrying insurance. There's a story in the Journal a couple of weeks ago about more people living from home. You know, you and I think more people living from home, oh, my God, my kids are coming back. I think, wait a second, those are people not paying rent, and they're using that money to spend on something else. And I've talked to auto lenders who talk about people being 60 days delinquent, not 120 days delinquent, because they don't want to, they need to find the money, but they don't want to lose their car. I've talked to gas providers who say people aren't paying the gas bill during the summer because no one's going to have a problem with gas in the summer. It's the winter that matters.

• 6:49Speaker 05

  So people are finding ways to effectively borrow from the future, savings rates down. And I think that's what's keeping the spending going. And underneath it all is this just positive energy to keep spending. And I really do think as long as the markets are healthy and people have jobs, they're going to keep finding a way to spend.

• 7:06Joe Weisenthal?

  That was a very good sort of summary of one of the engines of the economy that's clearly continuing to fire. We traveled with you. Was that 2023 or 2024 that we were in Mount Airy?

• 7:17Speaker 05

  24, I think.

• 7:18Joe Weisenthal?

  2024. And at that point, one of the things, you know, we were talking about sort of rural housing issues, rural childcare issues, but also in one of the themes that came up was the scarcity of skilled trades.

• 7:29Speaker 05

  Yeah.

• 7:30Joe Weisenthal?

  And now I have to imagine it's much worse because every, you know, if you're skilled electrician, you probably are working, at least in theory, the AI boom, et cetera. We talked to Austin Goolsbee yesterday, or I lost time. We talked to Austin Goolsbee maybe two days ago, and he's like, yes, we hear a lot of people complaining about the scarcity of skilled trades and the AI build out. People are always complaining. I'm not, he wasn't sure how much is actually related to data center and AI construction. What's your read on the scarcity of parts, materials and labor for general things? And the degree to which AI investment is crowding out and making life more difficult for other types of industry?

• 8:09Speaker 05

  Yeah, so it's been a monumental construction investment cycle. 700 billion announced in one week, I think, at the beginning of February alone. And for sure, if you're trying to find switch gears or transformers or electricians, they are very hot and in very short supply. So there's no doubt in my mind that there are constraints being put on it. I think the overall construction cycle, though, it's fascinating because office buildings aren't being built. Multifamily starts are way down. You do have, you know, industrial is starting to come back. Home building's okay, not great. And so I do think there's been a big movement in terms of construction from one sector of the construction market into another sector of the construction market. Now, how much of that is crowding out, I think, is a good question.

• 8:53Speaker 05

  Because when I talk to people in, let's say, multifamily construction, they'll tell me you can't pencil it out, and they want to talk about interest rates. And of course, I say, well, is it really interest rates? Because we had the same interest rates in '04 and '05, and you're building lots of buildings. And then they'll acknowledge that construction costs are up and labor costs are up, and they have to put more equity into projects and all that kind of stuff. And so it's more than that. But you could argue that all this data center construction is making it more expensive to do this other construction, which means they're not doing this other construction because it's more expensive. So there's a chicken and egg question in there.

• 9:26Tracy Alloway?

  Just within your district, I know you travel around, and as we said, you like to talk to people on the ground and actual businesses. But what are the most notable impacts of AI that you're seeing so far? Whether it's on something like the labor market in the low hire, low fire environment, or prices?

• 9:42Speaker 05

  Well, so it's interesting. I mean, the number one impact is a political impact. And what I mean by that is every Chamber of Commerce meeting I do, every town hall I do, I'm getting questions about jobs and water and data centers and all the rest of it. It's really quite striking, and you can see when you travel, the issues on people's minds by the questions they ask. In terms of the economy itself, I don't think it's having this massive productivity impact quite yet. Outside of just a couple of areas where there really is a structure where you can substitute an agent for like call centers, programming. I mean, you see it there. There's some, you know, heavy documentation, compliance documents. But by and large, the productivity boom we're seeing, which is significant,

• 10:24Speaker 05

  I think has really been driven by '22, when you had people, short workers, and so they invested in automation. They invested in new staffing models and different operating processes. And they're reaping the benefits of those today. And people are enthusiastic, owners, executives are enthusiastic about AI, workers somewhat less so. But it's still being very much used as a extra added, get my job done better, get my job done, you know, faster kind of thing. The one place you see it, though, is on the hiring side. Because, you know, this may not be true for Bloomberg, but in everywhere else in the economy, people are saying. You know, I don't know what the future looks like. Maybe I don't need to hire as much. I wonder whether AI can do that job. And so why don't you leverage and see if you

• 11:06Speaker 05

  can't fill the job using AI first and then we'll hire later. That's happening, you know, at some scale. And so I do think that's the place, you know, where it's most relevant.

• 11:14Joe Weisenthal?

  You know, one thing that's clearly working in, I guess, the Fed's favor when it comes to the dual mandate is the housing market is pretty, you know, it's not very hot. That's sort of, most of the numbers there are going in the right direction, so to speak, from a getting inflation back to target perspective. But how confident are you that that will persist, especially if we've had softness in construction? Then eventually, do you have any anxiety that eventually then that turns into housing tightness again?

• 11:42Speaker 05

  Oh, I think that's highly likely. You know, at some point, you won't have, you've got a whole generation of people who really want houses and the price isn't quite right for them. At some point, you know, they'll have their second kid and they need a bigger house or they'll, and so the demand will come. And then if you don't have the housing inventory, you know, whether it's rental or a single family, then the prices will go back up. I will say, we sort of got in the mode a few years ago that I think we should back off of, of trying to take the inflation data and parse it, you know, and take this part out of it and this part out of it.

• 12:12Joe Weisenthal?

  It's very tempting to do that and to find, to torture it and get the answer you want.

• 12:17Speaker 05

  And I was getting, for a while, you know, when rents were coming, where market rent numbers were coming down faster than the CPI rent numbers, I was getting emails from real estate developers saying, you've got your numbers wrong and the rents are coming down faster. Well, I'm not getting those emails anymore. You know, they're not saying, hey, let's take the, that Apple, you know, your Apple phone just got more expensive. Let's, no, I mean, so you don't want to overparse it. You want to say overall, there's a, there's about a money in the system. There's an amount of goods people are trying to buy, you know, with that money. Maybe prices of housing came down, but maybe prices of something go up. And you're looking at inflation as a total basket. That's how I like to think about it.

• 12:54Tracy Alloway?

  Yeah. So Worsch was talking about this yesterday. You know, he was talking about looking at the breadth of inflation and things like that. And I'm curious, do you still see, he was also talking about a lot of the one-off shocks that we've seen. So the Iran war and the impact on gas prices and things like that. Is the overall environment just more inflationary in general when we see these one-off shocks that just seem to keep coming, right? It's like this month, it's this one thing and okay, maybe it'll fade away into the background after a while, but then the next month, there's, there's another thing on the way.

• 13:27Speaker 05

  It seems like it. And I think the question is, is normal today or was normal 10 years ago? And I think normal may be a lot more like today than it was 10 years ago. If you think about the environment of 10 years ago, fracking and what that did to help bring, you know, energy prices down and demographics, which meant you have more workers and kept wage costs under control. And e-commerce and, you know, which was bringing prices down for stuff, you know, you bought online. And there were just a bunch of globalization, access, all these factors which were, I think, bringing inflation down. I don't think it's ridiculous to imagine that 10 years later, you might have a bunch of factors that would be bring inflation up. Now, the inflation we realize in time depends on what we do about it. So just because, you know, I like to use the analogy of sailing, you know, you

• 14:12Speaker 05

  just sail differently. If you've got the wind behind you than if you're sailing into the wind, you can still get there. You just have to, you know, tighten your sheet. And I think that's the kind of risk we've got. If you're in a world with an ever continuing sets of inflationary shocks, you just have to lean against that wind.

• 14:43Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets, fast. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

• 15:08Speaker 01

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• 16:20Joe Weisenthal?

  So obviously, one of the things that came up in the speech, and again, we know that Chairman Worsch is not a fan of forward guidance. There's going to be these task forces, et cetera, that may revisit some of the Fed's approaches to communications, et cetera. Would you be on board with say, you know what, we don't need dots anymore? We don't need to have press conferences. Like, for most of Fed's history, the Chair didn't have a press conference. Would you, in your mind, should all of these things be on the table?

• 16:49Tracy Alloway?

  Should you be talking to us right now?

• 16:50Joe Weisenthal?

  Yeah, yeah, seriously.

• 16:51Speaker 05

  So there, there's sort of, there was someone who said the theory of a great mind is being able to hold two opposable thoughts at the same time. So I hold the following two thoughts to be very clear. One is, if we're relatively transparent about how we think about things, that helps build credibility with the public. It helps build trust in the institution. And it helps markets do some of the work for you. That's the famous Bernanke theory. I also 100% agree with Chairman Worsch when he says, sometimes if you give too much forward guidance, you get stuck in it and you end up having to make a suboptimal decision because you've misguided. And I think it's fair to say that's part of the 2021, 2022, you know, story, which is we had very strong forward guidance in place. And it was very hard to, to get your way out of it. So I can hold both those thoughts,

• 17:34Speaker 05

  you know, at the same time. And I hope to keep coming and talking to you as long as you'll have me.

• 17:38Joe Weisenthal?

  What about like dots and like these specific techniques?

• 17:41Speaker 05

  So we'll have to debate the techniques and I'm sure we will. My, my view on the, on the SEP is I really like doing the SEP. I mean, I like negotiating, arguing, debating with my team. My policy bias next to my economy bias. And, you know, it often happens that I've gotten, got a little out of whack. I mean, I've, I still think the policy ought to be that, but I'm not really thinking about it in the right way. And, and we have those debates and I feel it really sharpens my thinking. So regardless of whether we release it or not, I plan to keep doing an SEP because I think it, you know, having your own forecast and working against the forecast is a pretty healthy thing. Now, should we release it? The one thing I don't like about the SEP is I think the dot plot itself is a picture

• 18:22Speaker 05

  that overwhelms the story. And I've said this in other forums, but you know, the, if what comes out is I go do a Chamber of Commerce in Greensboro and somebody says to me, well, I see the Fed promised two more rate, rate cuts this year, then that's not good communication. Because that's not what we've done.

• 18:39Joe Weisenthal?

  Right.

• 18:39Speaker 05

  We've done a set of forecasts independently. And so good communication to me has to communicate well. And if what's happening is that picture is swamping the narrative, then we're going to have to think differently about the picture.

• 18:52Tracy Alloway?

  So I take the point that there's a risk with forward guidance that the Fed could get boxed into a certain decision in a suboptimal way. But that said, and I also take the point that there's a distinction between forward guidance and the reaction function in general. But all of that said, at some point, if inflation is above target, you would think the Fed needs to act. And Worsch kind of, you know, insinuated this in his speech. He talked about, well, inflation's been above target for what was it, 65 months?

• 19:19Speaker 05

  Yeah.

• 19:19Tracy Alloway?

  Or something. And he said, that is squarely on the Fed. When you hear something like that, I mean, you were in the room, you were at the Fed for part or all of the past 65 months. What, what do you think? What's your reaction?

• 19:31Speaker 05

  Well, I'm definitely 100% insistent on getting inflation under control. And I think it's fair to, to hold that mirror against what we're doing and ask ourselves the question of whether we're doing it the right way. You know, I think there are two ways you can look at where we are today. You can take a 65-month view, or you can take a, I'll get the months right, a 47-month view followed by an 18-month view. Okay. And if you do the second, which I'm not arguing for, I'm just saying it's a perfectly defensible way to do it. As you say, inflation happened, maybe we were a little slow, we raised rates, inflation came down. If you go to March of 2025, you've got 2.3, 2.4% inflation and everything seems to be headed in the right direction. The economy's moving, the labor market was a little weak, you're gonna, you know, the plane is gonna land. And then, of

• 20:15Speaker 05

  course, you've had this series of external shocks, whether it be AI or tariffs or oil price increases. And that's taken inflation right back up. But you could argue in that and then we'll bring it down. That's, that is an argument. It's a colorable argument. And it's not a 65-month argument. It's a 47 and 18-month argument. On the other hand, you say, don't give me your excuses. It's been 65 months and it's been over and, you know, maybe rates aren't that restrictive and maybe you have to think about it. Those are, and that's the argument I'm sure we're gonna have.

• 20:46Joe Weisenthal?

  What are manufacturers in your district saying about tariffs these days? It feels like it's, there's become behind AI and the oil shock, we don't even talk about trade.

• 20:54Speaker 05

  Oh, it's a lot quieter than it is now. But I mean, it depends what sector you're in. I mean, if you're a steel or aluminum manufacturer, that's created a price umbrella that's helped your industry. If you're somebody moving operations into the country, you know, there's a real argument there. The people who are the most unhappy about it are the people who it affects the most. And the ones who are most poignant, if I could put it that way, are the foreign manufacturers who have assembly operations. Many of them are in South and North Carolina.

• 21:19Joe Weisenthal?

  Yeah.

• 21:20Speaker 05

  And they said, no, we've, we've actually moved manufacturing to the US. But you know, what that actually means is they create their components in Europe and they ship them to the US. And then they assemble them. They're still getting tariffed. And so you have those sorts of, you know, stories out there. You know, quietly, what's happened on the tariff side is the numbers went up. The collections were never as big as the numbers were, and then the Supreme Court ruled and they've put through all these refunds. So one of the reasons you're not hearing a lot about it is for the last three or four months, people have been collecting refunds as opposed to paying more tariffs. And when you're collecting, you're not talking about it quite as much.

• 21:52Joe Weisenthal?

  Right.

• 21:53Speaker 05

  You know, when it's working to your advantage.

• 21:55Tracy Alloway?

  Are the refunds stimulative in your mind? I mean, it's a decent chunk of money. It has to go somewhere.

• 22:00Speaker 05

  They're very positive for earnings. If you read through the earnings reports of the people who've gotten the refunds, you hear they're going to reinvest it in the customer. You hear a lot of that reinvestment in the customer occasionally is price, but I think it's a lot more marketing, store refits, you know, the staffing levels.

• 22:17Tracy Alloway?

  Yeah.

• 22:17Speaker 05

  So positive earnings are stimulative. I mean, companies do less likely to do layoffs, more likely to hire, more likely to invest. So it is stimulative, but is it coming through to price? I think in very targeted ways, but not in a massive system wide way.

• 22:31Tracy Alloway?

  Well, this was also going to be my next question because there was a debate about the tariff pass through into price. And I think some people would have said when the tariffs were first announced, well, consumers are stretched, companies aren't going to be able to pass them on. But now we've seen consumer spending just, you know, stay resilient as we discussed earlier. How are you thinking about that pass through ability now?

• 22:52Speaker 05

  So the B two B companies I talked to, to a person, they're convinced they're passing it through. Tariff costs have come in. I've had to pass it through. I know they don't like it on the other side, but what am I going to do? We have to do it. And they tell me they've been pretty successful at passing it through. If you're a B two C company, back in April of 25, you would have said, oh yeah, I've got to pass it through. A lot of them had trouble passing it through. Easier if you serve wealthy customers, harder if you serve less wealthy customers. But those people who sell into the major big box retailers, they tell me they're having a devil of a time trying to pass it through. And the mindset of those retailers is I need to find some price to give to my customers. So, you know, I think the consumer pushback is very real. It's most real B two C.

• 23:36Speaker 05

  It's most real low to moderate income, you know, B two C. And then you might say, you just told me earnings were good. How is that happening? And that's where the productivity stuff comes in. There's been very little wage pressure and people are really driving productivity. Again, through the set of things I think that they launched three or four years ago.

• 23:53Joe Weisenthal?

  Those big box retailers, they're truly our strongest soldiers of the fight against inflation, holding the line on prices on behalf of the customer.

• 24:01Speaker 05

  Well, that's another, you know, I was talking about all the disinflationary stuff in the 2010s, the rise of the big box retails, the rise of private label brands, all those things, you know, help keep prices under control and help keep spending okay.

• 24:13Joe Weisenthal?

  You're saying we didn't know how good we had it. I want to actually go back to just because it's so in the news these days. You mentioned you go around and people talk about data centers and stuff like that. And the picture that like I always have in my mind, I haven't done any like on the ground reporting on this topic, but the picture I have in my mind is a lot of people very anxious about it. And then a town manager or a mayor like trying to explain to them, oh, it's going to bring your property bill down or actually we have plenty, you know, and then the people are upset. Is that more or less the shape of it that you have some people either at the business community or the town management community that says, no, this could be a good thing. And they're trying to persuade the citizens that actually it could be like, is that more or less right?

• 24:54Speaker 05

  Here's the thing, if I have a manufacturing plant in my hometown.

• 24:57Joe Weisenthal?

  Yeah.

• 24:57Speaker 05

  Then the kids of the people who work in the manufacturing plant are on the baseball team and on the football team and on the hockey team. And if you have a data center, they don't have very many employees.

• 25:07Joe Weisenthal?

  Yeah.

• 25:08Speaker 05

  So people don't really know. So the data center thing is exactly what you described. You've got the economic developers talking about how great this is for the tax base and the citizens saying whatever version of, I don't like what it's doing to water. I don't like how it looks. I don't trust AI. You know, it's been politicized in that way, but I think at its core, it doesn't, it brings tax dollars, but it doesn't bring enough workers.

• 25:31Joe Weisenthal?

  Yeah.

• 25:32Speaker 05

  After the construction for the citizens to have friends who work in the data centers.

• 25:36Joe Weisenthal?

  Yeah.

• 25:37Speaker 05

  And so there's no political base. I tease sometimes that they ought to name an elementary school after, you know, Microsoft or Google or whoever, and say, you know, here's Google. They just brought you this, you know, if you're going to market.

• 25:47Tracy Alloway?

  It would be more tangible.

• 25:48Speaker 05

  They just brought you this elementary school, but that's just not how people think about it.

• 25:51Tracy Alloway?

  Is there a point at which the political pushback against data centers becomes a big enough economic issue that the Fed has to pay attention to it? Because if you think about price pressures in the economy, a lot of them are coming through on the construction side because of the data center build out. If you think about growth components, a lot of people will say that the AI build out is a big driver of that.

• 26:12Speaker 05

  Well, I like to say, we're going to grow the AI footprint of this country massively, but we have no idea how massively. We're going to grow the data center footprint massively. We have no idea how massively we're going to grow the energy. And the one thing we know is we're going to get those numbers wrong. And so we don't know whether we're going to get the number too many or too few. And so, you know, there could be a backlash on data centers and maybe that'll be the perfect thing to do economically because we won't overbuild the way we would have otherwise overbuild, or maybe there won't. And now we're going to underbuild. So yes, it could have a big impact, but I do not have, I need AI forecasting skills to help me figure out how big this thing is going to be because you're trying to meet a very significant moving target.

• 26:54Tracy Alloway?

  Have you tried asking ChatGPT what it thinks? Just type it in, just ask.

• 26:58Speaker 05

  I've also asked ChatGPT to try to write a speech for me and I didn't think it did a very good job.

• 27:02Joe Weisenthal?

  It could never, it could never, it could never capture your voice. Have you been back to Mount Airy since we've been there?

• 27:08Speaker 05

  I've been through, not I haven't stopped, but I've definitely driven through.

• 27:11Joe Weisenthal?

  I think we should like, can we?

• 27:12Speaker 05

  And I was in Greensboro just this week.

• 27:13Tracy Alloway?

  I was thinking how, how striking the questions we would be asking now are versus 2024.

• 27:19Joe Weisenthal?

  Maybe like in 2027, like, I don't know what your schedule is like.

• 27:22Speaker 05

  Absolutely.

• 27:23Joe Weisenthal?

  But there's like, because I'm curious about, you know, the state of housing, obviously. I'm curious how that big textile manufacturer that was doing the synthetic textiles is doing. I'm, I'm, I'm curious about.

• 27:35Tracy Alloway?

  The carport companies.

• 27:36Joe Weisenthal?

  The carports and like, there's just a bunch of things. It would be fun to go revisit that.

• 27:39Speaker 05

  No, we'd love to have you back and I'm in West Virginia next week. If you guys have any time, we'll take you there.

• 27:43Joe Weisenthal?

  I'm on vacation next week.

• 27:45Tracy Alloway?

  Well, okay, speaking of AI, we've mentioned productivity quite a lot already, but there is this assumption that at some point you, you might get this big productivity boom. And so maybe that gives the Fed a little bit of room when it comes to things like R star and the neutral rate of interest. How far ahead should the Fed be looking when it comes to expecting that productivity boom? Because in the here and now, it's not that evident. And in the here and now, it's, it's most tangible impact on the economy is higher prices.

• 28:18Speaker 05

  I think it's really hard to make a forecast of what it's going to do a year, two, three years from now. Like I said, the range of possible outcomes is very wide. In addition, how that outcome plays out in terms of prices or borrowing rates, because you know, you could be crowding out capital or, or labor employment is a big deal. And so, you know, and I think Kevin said this yesterday, you could have models of this thing that end up looking very inflationary and you have to move one way or things that look, you know, very distressing for the economy, you'd have to go another way. And there's 18 different versions in between. And so, you know, we can argue about the direction, but I think you've got to get, you know, some more confidence before you could make too much policy based on an assumption.

• 28:58Joe Weisenthal?

  I just have one last question and I know you're going to play it coy, but so I will not ask you, you know.

• 29:04Speaker 05

  What are we doing at the next meeting?

• 29:06Joe Weisenthal?

  No, no, not even.

• 29:06Speaker 05

  Good.

• 29:07Joe Weisenthal?

  Have the two worst meetings felt substantively different than Powell meetings?

• 29:12Speaker 05

  We have, it's, we've been in these meetings for a long time.

• 29:14Joe Weisenthal?

  Yeah.

• 29:14Speaker 05

  They're relatively structured in how they go.

• 29:17Joe Weisenthal?

  Yeah.

• 29:17Speaker 05

  I believe, you know, as part of these task forces, we're going to take a fresh look at everything we do, including these meetings. But by and large, they've looked like the meetings we've had and.

• 29:25Joe Weisenthal?

  Okay.

• 29:25Speaker 05

  The chair has shown up and, you know, led very well. And I think, you know, he does like this idea of a family fight is a phrase he likes to use. And, you know, he encourages that kind of debate. We certainly have that.

• 29:36Joe Weisenthal?

  Is the nature of the debate feel any more open or different? Or would you say that Powell meetings were also a family fight?

• 29:42Speaker 05

  There are a lot of different families.

• 29:43Joe Weisenthal?

  Okay. All right. Good to know.

• 29:46Tracy Alloway?

  I'm thinking of that. What's that Russian quote?

• 29:48Joe Weisenthal?

  Yeah, all unhappy, something like, yeah.

• 29:50Tracy Alloway?

  Well, I had, my last question was going to be something related, but we know that one of the distinctive things about you and the way you fill the role as regional Fed president is that you like to gather anecdotes and on the ground color. Are there particular anecdotes or data series that WASH is interested in versus Powell? Like, are there particular things when you come to him and you say, oh, you know, I was talking to the carport company yesterday and they mentioned this that he's really interested in?

• 30:18Speaker 05

  Well, so what I try to do is I try to come up with a synthesis that backs off from individual anecdotes. I think the anecdote doesn't, everyone likes a good story, but it doesn't really move policy. But if you can synthesize, you know, like what we're talking about consumer spending and where the B two C and the B two B, both Jay and Kevin, in my impression, have been very attentive to that. You know, they, they live more in a cloister. I get to go out a lot more than they get to go out because the press follows them everywhere. And, you know, and so, you know, I think they really do want to hear what's happening there. And then the, the challenge and the, the commitment I try to make is to tie it to whatever the issues are we have on the ground. And so, you know, productivity has expanded. What's driving it? How long is it going to last? We've talked about that. Inflation, you know, underlying inflation, what's happening in the consumer world?

• 31:02Speaker 05

  I think I try to tie it to those things and then bring a synthesis. And that's where I try to do it. And I think they're both very appreciative of it. At least they, they tell me that.

• 31:10Tracy Alloway?

  All right. Well, Tom, thank you so much for coming back on All Thoughts and hopefully we can all do another road trip in Mount Airy.

• 31:15Joe Weisenthal?

  See you next year here and maybe in Mount Airy.

• 31:18Speaker 05

  Really look forward to it. Thanks, you guys.

• 31:32Tracy Alloway?

  Joe, always good to catch up with Tom.

• 31:34Joe Weisenthal?

  I love chatting with Tom. You know what I thought was really interesting is his description of the creative ways consumers are continuing to spend, which actually I don't think has gotten the attention probably it's deserved, right? Because there's so much talk about the inflationary impulse from all the business investment happening right now. And then people talk about oil, et cetera. But the de-saving or the disaving and the going into debt and finding ways to continue to consume, we hear about it a little bit. We talk about it and we talk about BNPL and stuff like that. But maybe that's a thing we should be paying more attention to.

• 32:10Tracy Alloway?

  I always thought the strong consumption was like maybe sort of like a nihilistic response to the pandemic experience. But you actually, you don't see it that much in the savings rate, right? Like, I think the savings rate has gone down, but it's not like it's plummeted.

• 32:23Joe Weisenthal?

  No, it's not plummeted, right? No, it doesn't feel like the sort of spending that you would expect before like for the upcoming hyperinflation where everyone's going out and buying silver candles. Well, you probably buy silver candlesticks, but everyone else.

• 32:36Tracy Alloway?

  I do have silver candlesticks. I'm so sorry.

• 32:38Joe Weisenthal?

  We don't have saying, it doesn't feel like that. But it does sound like the appetite to keep buying stuff. He laid it out very well.

• 32:45Tracy Alloway?

  Yeah. And I do think going back to Mount Airy next year would be a really good idea. Because if you just think back to 2024, I mean, we didn't ask a single AI related question, right? I'm pretty sure we didn't.

• 32:56Joe Weisenthal?

  I agree. And like the process, something bad about us as a journalist.

• 33:01Tracy Alloway?

  Well, I don't think anyone was talking about it that much at that time. If we would have asked the textile company, are you using ChatGPT in your daily operations? I don't think they would have had a response.

• 33:11Joe Weisenthal?

  Yeah, I can't really remember. But they certainly, no one was talking about data centers the same degree. And that boom really has been basically over the last two years. So really, like, since we were past there. Yeah, we got to go back. There are some really interesting questions out there. And yeah, I got to get some answers.

• 33:26Tracy Alloway?

  Another Odd Lots road trip, but shall we leave it there for now?

• 33:30Joe Weisenthal?

  Let's leave it there.

• 33:31Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 33:36Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at Carmen Erman, Dashil Bennett at Dashbot, Cale Brooks at Cale Brooks, and Kevin Lozano at Kevin Lloyd Lozano.

• 33:47Tracy Alloway?

  And for more Odd Lots content, you should check out our daily newsletter. You can find that at Bloomberg.com/oddlots.

• 33:53Joe Weisenthal?

  And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 33:58Tracy Alloway?

  And if you enjoy Odd Lots, if you like this conversation, then please leave a comment or like the video or better yet, subscribe.

• 34:05Joe Weisenthal?

  Thanks for watching and listening.

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