We all remember well spring of 2020, when the world economy almost melted down it didn’t in in substantial part, because of the actions that you and your colleagues took. You kept this thing in the middle of the road. Now, some days you had to do it with spit and happy thoughts, but you kept it in the middle of the road um. I remember particularly your uh. Your currency swap lines. Uh didn’t, you didn’t read a lot about it, but uh. I can understand when the world’s melting down, if, if other countries seek out treasuries, but when they don’t like treasuries, they want hard coal, american dollars, that’s scary. So i want to thank you. This is my question. We have spent not just during the biden administration but but during president trump’s administration we have spent an enormous amount of money. I mean it’s breathtaking and now some agree with it. Some disagree with it, but some say you shouldn’t have done it. Some said we had to do it, it’s, probably a little bit of both a lot of it. Wasn’T paid for um, and i look around and president biden is asking us in the next. I don’t know six months to spend what another five and a half trillion dollars and there’s a lot of talk about pay fors, but it won’t all be paid for. We know that at what point do these deficits matter? Are we living in a different world? I mean it, i know you you’ll probably say well deficits always matter, but it.
But at what point does the the marginal benefit of the extra deficit spending become less than the marginal cost? And i don’t think there’s a precise point that i can identify. I will say that we’re not on a sustainable path. We actually haven’t been for a long time that just meaning that the debt is growing substantially faster than the economy and in the long run, that is not sustainable, we’re going to need to that. The laws of gravity have not been repealed. We will need to get back on a sustainable path. At some point, i think the time to do that is when the economy is strong. Unemployment is low. Taxes are rolling in that’s the time to do it and to do it. You know, with a longer term plan that that matches up our spending needs and and and our revenues that’s what we’re going to do. We will eventually have to do that. When do you think that will be? I wish i knew i mean i would say you know the dollar is the world’s reserve currency people are buying our paper around the world. I i don’t think there’s. You know any issue of being able to fund our deficits in the near term and the medium term there’s, no evidence that there is, but you know we shouldn’t wait until the urgent need arises. Yeah it’s too late, then um. Well, i mean everybody seems to be a keynesian now and that’s fair, dr caines was was brilliant, but some people forget about that chapter in one of his books where he said: okay, you deficits spin and you borrow to stimulate your economy, but when it’s better, you Pay it back.
He said that very clearly, you pay it back. The other thing that none of us wants inflation um, but it’s, not just inflation, as you know much better than i do. It’S inflation expectations and i i’m worry that if we spend this extra six trillion dollars or five and a half trillion dollars that president biden wants to spend uh that the private sector is gon na, say you know, we’re gon na have more inflation. I don’t care. What they say at the fed we’re going to have more inflation and we’re going to start raising prices. I mean you don’t. You don’t have to be einstein’s cousin to figure that out don’t, you think that’s something we have to consider. Well, i i would agree with you that inflation expectations are really central to what we think are central to what creates actual inflation. We see them now being they’ve moved up. They moved down at the beginning of the pandemic, they’ve moved back up roughly to where they’ve been in recent years, so they’re not at a troubling level. Okay, but it’s. Something we’ll be carefully watching all right. Last point: um: i’m: not expecting a response, resist the pressure you’re going to be asked by a lot of people to get involved in social policy, in uh, cultural matters and and in what some will call economic policy. That really has nothing to do with the fed’s mission and it’s not just happening here, it’s happening all over the world don’t.
Let us become turkey, where the whole central banking system is politicized. Please resist it. Thank you, mr chairman. Thank you.