we had a lot of data flow this week and id like your reaction to it and lets lead off with the lead which is those cpi numbers of 7 percent its been a good long time since weve seen that kind of number it has david richard nixon imposed wage price controls when inflation was about two thirds as high as its been last year this is above any place it got during the guns and butter vietnam inflation i think the data flow is saying what i thought for quite some time that yes there are transitory elements in inflation and very likely they will recede but we are basically moving towards higher entrenched inflation its there in expectations its there in wages its there in labor shortages its there in the pervasive pattern across many different prices and people try to excuse it by picking this figure and that figure from month to month but weve got an overheated economy and the feds going to have the very real challenge of cooling that economy off and doing it in a controlled way that has not been done very successfully in the past so its going to be a very challenging year for macro economic policy and i suspect that the approach depends on what the causes are of the underlying inflation and we have various candidates put forward for example we talk with brian deese you know him well from the white house this week he said well really this is a supply side problem once we get the supply chain fixed itll be all fixed is he right no hes wrong we have a massive overheated labor market we have the highest ratio of vacancies to unemployment in the countrys history by a large margin we have shortages of labor in everything from psychotherapy to mcdonalds in everything from investment analysts to gardeners that suggests a surfeit of purchasing power and demand relative to the capacity of the economy to produce and unless we bring those things into balance were going to have not just higher inflation but possibly even accelerating inflation and we need to recognize that we have an overheated economy that we are going to need to cool off in the time to come and until we do that it is going to be much more difficult to address the problem yes we need to do what we can to open up ports yes if there was anything we could do to cause there to be more semiconductors that would be good yes better child care arrangements to enable more women to work would be desirable but fundamentally this inflation is about an overheating economy and thats the thing that we have to address every time a washington policymaker suggests that this is caused by corporate greed or some such they are delaying the date at which we will achieve the credibility necessary to bring down inflation with stable employment they are raising the risk that we are going to need that kind of which i sure hope we can avoid i think we can avoid the kind of drastic contraction that was necessary when paul volcker became chairman of the fed but missed diagnosis of the problem around greed or around particular sectors raises the risk that ultimate recession will be necessary all of which takes us back to your statement that its pretty difficult for the fed to have a soft landing or the track record is not unblemished i think its fair to say with the three new nominees from president biden he will have basically put five people in place renominating jay powell as chair promoting his proposal is proposing lael brainard and then three new members what do we know about these people what does it say about the petition the fed going forward assuming they get confirmed let me say that i strongly support the reconfirmation of jay powell and i strongly support lael brainard s nomination to be vice chair of the fed i think that the three new nominees who dont have a track record on the fed will have an opportunity to present their views on inflation and on the challenges they will face in dealing with an overheating economy the president has made clear his commitment to the independence of the fed part of that commitment is allowing and encouraging the fed to be focused on its fundamental jobs of maintaining a noninflationary economy with a strong employment as is possible on a sustained basis if a sense develops that there is a desire to politicize the fed by focusing it tours other issues beyond the crucial issues of financial stability i think that could be problematic for the feds credibility and so it will be very important too for the nominees who have distinguished track records in different areas in the past to present their views to congress and for congress to very seriously consider those views finally larry we cant summer of work without talking about covid19 the akron variant as we have record numbers this week coming in at least of the disease being contracted im curious about where you think we are dealing with pandemic and more pointedly in the past on this program you question particularly during the trump administration the competence of the government then where they did demonstrate competence in the way they handled it at this point is the biden administration demonstrate incompetence in the way its handling the pandemic it is so much easier to be on the outside and criticize and carp and judge things in retrospect that im reluctant to pass judgment on what the biden administration has done certainly we now need to be focused on much more than vaccination on rapid dissemination of treatment particularly on the availability of tests i wish those things had happened faster i wish the cdc and the fda had broken more out of their conventional rhythms to reflect the extraordinary situation that were dealing with but i would underscore one thing david and that is that covid anywhere is a risk of mutation that could lead to catastrophe everywhere and that we are under investing as a global system on a massive scale in the global effort to contain covid and in addition to its moral significance around the world we are making it more likely that the next vaccine next covid strain will have omicron transmissibility and some other strains lethality and that is a grave risk to the global system and one that i think is not getting enough attention you know one of the things that i think is very very important in government is to hope for the best but to plan for the worst and i think in a whole set of areas that the administration even as it tries so hard to present an optimistic vision and that is so important to do needs to be insuring against the downside outcomes and global covid is one of those outcomes