Welcome everyone my name is Rebecca Blumenstein and I'm a deputy managing editor at the New York Times and I'm very pleased to introduce today's panel to delve deeply into the question what the heck is going on with the U.S. economy. Inflation is soaring at its fastest pace in 40 years. Markets haven't been as volatile since the financial crisis with the S. and P. 500 breaking through to bear market levels last Friday before sharply rebounding today. The Fed has started to raise interest rates to combat inflation with the highest increase of more than 20 years as it tries to engineer a soft landing. Unemployment remains at historic lows. Employers can't find enough workers coming out of the pandemic and supply chain problems threatened to get worse with the lockdowns in China. Here to make sense of it all are four people with a unique and important perspective. Senator Pat Toomey who has represented Pennsylvania Senate since 2011. Jason Furman a professor of economic policy at the Harvard Kennedy School of Government and former chair of President Obama's economic advisors. Adina Friedman president and CEO of NASDAQ and Dan Shulman who is president and CEO of PayPal. We're going to have a discussion and then open it up for questions old fashioned style with microphones for you since we are gratefully here in person. But Adina I'd like to start off with you. The markets are back a bit today. But but but tech stocks are down to really their their lowest level since 2001 when the tech bubble burst. And NASDAQ last I looked was down more than 30 percent. What's going on with the markets and tech in particular. Well you just described what's going on with the markets. So all of the ingredients that you started discussing at the very beginning are really making it very difficult for investors. To predict the future. And when you think about markets markets especially stock markets they're really all about the future value of companies and how do you look at the the opportunity for future earnings. It is very difficult right now to take all of those externalities and all those those intermixing signals and try to determine how do you put a discounted cash flow value in any company right now in that context. And I think that that is a that is when that happens investors tend to take a risk off approach of selling decisions much easier than a buying decision. And the result is the markets react. So I think that in the end though there are you know I think a lot of differences between the current situation and what happened back in the late 90s and early 2000s. So you know the certainly the the multiples of companies that were listed in the US back then were significantly higher than they were even at the peak now which was at the end of last year. And you're seeing a significant trough developing today. So I think at the end of the day any of those unknowns that you just mentioned inflation the geopolitical unrest the Fed actions as well as just employment you know having more room in the economy to allow us to continue to grow it in terms of labor. I think all of this any of one of those that starts to resolve itself or show some positive signals will give positive signals to the markets to give more certainty to investors. And I'm hopeful that we can manage our way through this situation and still continue to see growth in the economy. So more optimistic than pessimistic. I tend to be an optimist though. Yes. So Dan what is it like from your perspective PayPal has down like a lot of tech companies quite significantly in the last six months. Does this feel to you. I mean there's been so many predictions of the tech bubble bursting. I mean almost for 20 years. Does it feel like we're in something profoundly different now as a CEO. I think a dean I put it reasonably well. I think you've got a number of externalities that have increased the magnitude of uncertainty. And so all of us you know are taking a conservative view. We're also on the tech side growing over tremendous growth during the pandemic. I mean people were locked in their homes. They had nowhere to go. They had to do everything online. Whether it be exercise classes or shopping. And so we're growing over that growth at the same time. So I think there's a big difference. Many of the companies today including PayPal have very strong free cash flow. We'll do five billion dollars of free cash flow this year. Very strong balance sheets. I think it's just a matter of these externalities playing out kind of figuring out as we hopefully are coming out of the pandemic. Not into another one but out of the pandemic into a more normalized world. And then you go straight into inflation at 40 years 40 year highs. You know supply chain shocks to the system. I think we're trying to figure out what normalized growth looks like. And I think we're just all taking a conservative view of that right now. So so so the underlying demand is still strong. We're not seeing a burst in your I mean look you say the tech industry. I would say I look out in the room here. What industry is not a tech industry right now. I mean we are all moving more and more towards digital means digital technologies. Every company is a tech company today. So I think you've got what you classically think of Silicon Valley companies. But you know most companies out here would argue they're tech companies. Senator how is this playing out on the ground in your district in Pennsylvania. It feels like it's almost a whipsaw. Obviously a huge concern about inflation but it's never been easier to get a job. Yeah I think the problem on the ground for you know working family in Pennsylvania is that wages are rising. They can they can have a job. But inflation is rising faster. And this is very frequently the problem inflation doesn't doesn't have any sort of built in constraints but wages tend to move in cycles. And it's only periodic that you get a pay raise and so on. So yes by some measures the economy is quite strong. People who own their own homes have more equity in their own than they ever have. Balance sheets are generally pretty good. Job opportunities are out there. But I think the highest inflation in 40 years puts more than a damper on things. It is it is very disturbing for most people. And Jason you're the economist on the stage. What what concerns you the most of that. List that I went through is it inflation. Is it is it the Fed and just the historic move. What do you think we should be most concerned about. Yeah look I think it's a glass partly full. The incredibly strong job gains we've seen the incredibly strong consumer spending consumers tell pollsters they're really pessimistic. They're depressed. Everything's awful. And then they go out and spend a lot of money. We don't know how long that'll last but it keeps lasting month after month. And just overall pace of the economic recovery. That's all on the positive side. Inflation is at a 40 year high is on the negative side. Real wage growth inflation adjusted wages are falling at the fastest pace they've fallen in 40 years. So this is a real real problem for people. For most people they had a job last year. They have a job this year. What matters to them is that they're getting a once in a generation pay cut real pay cut going forward. How does the Fed navigate this. There is a happy story where this inflation was all transitory and team transitory was right. They just sort of were 12 months off. I think that's possible. I think it's 25 percent chance. I think it's worth hoping for that. But there's a lot of inertia in this inflation expectations are higher wages lead to prices prices lead to wages. And it's you know even if we had a recession that might take half a point or a point off of our inflation might not get it to where the Fed wants it to be. And so that's what worries me. I think there's also one other thing playing out right now. Consumer balance sheets went up tremendously with all the government stimulus. You have the average savings account go up from about four hundred dollars to about two thousand dollars. You know as I look out as others think about this if inflation stays where it is those savings and the spend continues. Those savings go back down by the end of this year the beginning of next year to that four or five hundred dollar level. And I think at that point you're going to really see. We are already seeing reduction in spend lower income levels for sure. That's moving up to middle income right now. So I think we've gotten numerous interweaving things that are happening right now that just it's not just consumers spend a lot of that was government stimulus. And that's not here anymore. And I think it's important to make the point. This might be a moment for a little government humility. Think about what happened you know in April I guess it was of twenty twenty with the lockdown economy looks like it's crashing. We're worried about markets freezing up. And there was a massive response. Right. And it was bipartisan. It was almost unanimous in Congress. I was part of it. And we stood up these facilities by the Fed. But we ended up having about a two trillion dollar hole and we filled it with six trillion dollars of spending. And at the same time we had a massive expansion of the monetary money supply. And we had the Fed buying one point four trillion dollars worth of bonds mortgages and treasuries at an annual rate. And they kept doing it a year and a half easily after we were clearly out of the woods. We have 30 percent GDP growth in the third quarter of twenty twenty. And there we are still buying these bonds. My point is I think we did way too much. And now one of the ways we pay the price for that is this inflation that we're living with. Adina and Jason I'd love to get you in on this. Jason you were in the Obama administration during the financial crisis and it was said for so many years that that the stimulus wasn't big enough. And I think that that's a lesson that President Biden and his advisors took. Did they did they go too far on the other side. Yeah I think we did too little.  Others may debate you know whose fault it was and the like. But it was too little and the recovery was too slow and too painful. Inflation was incredibly low for a long period of time. Interest rates was incredibly low for a period of time. A couple of years ago Ben Bernanke Tim Geithner and Hank Paulson convened a conference to learn the lessons of the last guy for us and make sure you didn't repeat them. And a lot of these conferences at places like Brookings are sort of a waste of time. This one worked really well. All the lessons were learned. We didn't make any of the same mistakes. We made brand new mistakes. And I think part of it was something the senator said in April. It looked like a second Great Depression by even July. The unemployment rate was I think down to something like eight or nine percent which was terrible. But it wasn't the 15 or 20 that the CBO and others were forecasting. And so it was less bad than people realize. And it took a while to adjust to that. And by 2021 the main problem were people not taking jobs. They're not being enough jobs. And that's not a problem the Fed has can solve. But you know from your perspective did the government over overreach and and you have an interesting. I want to get into the Fed. But did the Fed act too slowly here. Well I think first of all I think that the Fed and the government in general had to look at a cliff that they were facing at the beginning of COVID. And they also had to learn their lessons from the last crisis to say let's act fast. Let's act decisively unless act big. And they did all of those things which I think at the time we also we all said that was the right thing to do. And I think in hindsight you can say OK that was the right move to make at the time. The question is when do you take your foot off the gas. And I think that's the challenge is that on the back of what was happening in the economy when you really looked at the recovery. The recovery was quite uneven. So there were sectors in the economy that were booming on the back of the monetary stimulus and the fiscal stimulus. Those are two things that were just pouring money into certain parts of the economy. But there were sort of parts of the economy especially small businesses on the ground businesses that were not doing well at all and that were still really suffering. And I think the Fed was looking at both ends of the spectrum and trying to figure out how they kind of bring that other end of the spectrum along before they changed policy. And that was a that was a hard that's a hard calculus when on top of that you had a supply chain shocks that were much more lasting than I think anyone predicted particularly since we're still dealing with COVID lockdowns in the world today. Right. And at the same time you then had the geopolitical unrest which really threw the energy markets into a totally different space that the Fed could have predicted either. So if you kind of look at all the facts that they had to deal with and contend with it's always 2020. But you could argue that they were looking at things through a different lens and they see it today. Today they're seem quite committed to tamping down inflation. And they're you know they seem to be saying they're on a road to do that. And we should you know that seems like a road that is they are marching down that road pretty clearly. And I think that you know my hope is that they're able to do it successfully without just choking off the growth of the country. That's that's the big risk now. Dan you're a CEO running a company and and trying to navigate all of this. You're also navigating rising interest in Bitcoin and and and all sorts of different ways of digital payment that the blockchain all these all these things. Do you. Did the the Fed make it harder for you. In a sense to to run your company and to to navigate all of this by waiting as long as there's a lot of disconnected questions. But let me try and answer the best I can. First of all I think I think inflation is going to be with us for some time right now. I am even though people are spending I think it's because their bank accounts are inflated and that will come down. I do think consumer confidence is at low points in Europe. It's at a 50 year low right now. Based on my conversations with leading retailers around the world. You know none of us think that things are going to come back by the end of this year. I mean we are all planning for inflation to remain high for supply chain stocks. It's going to take some time to work out. China basically went into shutdown. A lot of companies right now are reorienting their supply chains to different parts of the world. That's going to cause slow down as well until that's complete. And so I think we just need to know that if there's going to be at least at the low end in the medium part of the market I think a slowdown in spending. I think one of the interesting second order effects that happened out of the war in Ukraine is that we weaponized SWIFT and we created what were very neutral financial rails and we turned that into somewhat of a weapon. And therefore you have a lot of parts of the world right now that have been somewhat silent on what's happening in the Ukraine. Looking at like is the dollar really the currency that they can count on. Is SWIFT the rails that they can count on. Are they looking at some form of digital currencies going forward and they all are at this point. Digital currencies are fundamentally different than crypto currencies. Cryptocurrencies are really an asset class right now and they're a volatile asset class. And when things are a volatile asset class they're a terrible currency. And you know. And so I think we should separate out you know what is the price of you know Bitcoin what's happening with Luna and Tara and algorithmic stable coins and that kind of thing versus what's going on with digital currencies right now. And is that in the strategic interest of various countries to promote that and why. And you're talking about central bank digital currency. I'm talking about central bank issued digital currencies and obviously China with a digital R&B is thinking hard and heavy about that. But 80 percent of the central banks around the world are thinking about that. So I think one of the things and I'd love to get your perspective on this Dan but the potential of stable coins. Yeah. Obviously the stable coin takes out the volatility and we so full disclosure I've got legislation that would create a regulatory framework that I think makes sense for stable coins that are in fact asset backed. Not the algorithmic stable coins. The main reason by the way is that the algorithmic stable coins don't have the same kind of mechanical connection to the traditional financial system. And so the failure might be tragic for individuals but it's not clear that it leads to a systemic failure. Whereas the more if I can say conventional stable coins they could right. They would certainly connect. I think we ought to have a framework that allows privately issued stable coins to thrive in a sort of rational framework. And if that happens I'm not sure how much we need a central bank digital dollar because I could see stable coins playing that role. But I wonder what. But now can I just ask you to do you see them then you're acting. A lot of people like equate them to a money market fund. So do you kind of see them in that kind of same same genre. Or do you see them as I see you saying they're going to play a different role but having the regulation kind of govern it that way. So I see the analogy and I think that is a very analogous instrument. If you look at the president's working group they suggested that all stable coins must be issued by insured depository institutions. But I think it's way too narrow. I don't think that makes sense. And you know we don't have the FDIC ensuring money market accounts. I don't think we have the FDIC. That's how I was asking whether you said money market. I don't. So so I'm hoping we don't go down there. I think I mean for a lot of countries around the world I think central bank digital currencies might make sense. I don't think the United States needs to do them. I think you can do one in US dollars just as easily as the Fed could. Stable coins to me seem like a solution in search of a problem just like everything else in this space. I haven't studied your legislation. I guess I'd worry two things. Not having seen it at all but that's not going to stop me. One I worry that money market funds are already under regulated and we're already in a position where we could have we could have a run in the future as long as you're pricing it at a dollar and everyone thinks it's a dollar. Two once you have regulation I know you would never ever want this but you're putting a government imprimatur on something and is the government going to have to rescue it if all this money goes into it. Are people going to start thinking of it like money with an implicit government guarantee. I'd almost rather people understand it's sort of the Wild West. You know caveat and tour. Well I think that the debate on stable coins versus central bank digital currencies is who are the issuers right. So if it's a central bank digital currency in a way they're stepping in front of the private banking system to determine to establish account direct accounts of consumers. So you have to set in a minute and some sort of intermediary there to act as that. And so there's a little bit of a scope creep concern on central bank digital currencies where as a stable coin could be issued by a private institution backed by government fiat in a way that allows an intermediation to happen more naturally. But at the same time these are all theoretical because neither of them exist. I mean they exist but they're not using this way yet. For you have to think about is when it becomes general commerce and creating twenty four seven payment capabilities globally. That that's actually a great common good if we can do it. And these are technologies that could enable that. But you have it comes with a lot of different consequence. I want to get back to the CBDC. Sorry. No one does it has interest. Then you've just nationalized the retail banking system. And if it doesn't have interest you've just gotten people to put their money in something that's a lot worse deal than you know what else they could be putting. I don't know why you're using it. So I think it's sort of a means of exchange means of exchange. Right. But I don't know. Dan let's go to you and then I want to go to the broader impact of the Ukraine. I think people can play four different things when they talk about crypto or digital currencies. There's kind of crypto currencies that are an asset class that people trade in. Then there is kind of programmable money which is something very interesting where you can add utility payments by creating software around that payment that allows you to do something you couldn't have done in just a traditional payment sphere. I think that's very interesting. There's stable coins. And I think stable coins actually have some very interesting use cases to them. They have to be backed one by one by fiat currency. It can't be. And you have to disclose it. And I think the legislation that you're looking at I think is very helpful in doing that. But to do this point on a stable coin if you have a stable coin it's 24 by seven. You can fundamentally reorient B to B. For instance 24 by seven no intermediaries could take costs out of the system. I think there are real use cases for a stable coin that are tremendously interesting but it's got to have trust and it's got to be backed completely. And then you have central bank issue digital currencies which you know many of us have you know different things like how could that work. What is it necessary. Why. But there you have the you have the full faith and backing of the government behind that central bank issue. It's just it's that technological advancement of money. Exactly. The programmable feature I think is huge. Yeah. I think we can't probably can't even imagine the applications that will come about from the ability to build into into money itself. An automatic transaction that occurs based on some extraneous event that's verifiable. Yeah. That's I think going to be a big deal. I do too. Senator many of your colleagues a number of your colleagues are here today. Obviously talking about the bipartisan consensus behind the 40 billion dollar package that was approved late last week. What are what do you think. I mean it's clear that this this this war is not going to end anytime soon. What. How do you think it's going to play out. And a question for all of you in the U. S. economy that the the you know the things that there will be negatives and the things that are that are positives. Well I do think it's important to note that there's been overwhelming bipartisan support for this. Right. I mean there is a there's a wing of the Republican Party that has been very skeptical about multinational commitments. NATO the value of our involvement turns out. I think that was a test on the Senate floor. Whatever a couple of weeks ago last week and 80 percent of Republicans who think we've spent way too much money and our apoplectic about the size of our debt. Nevertheless voted for 40 billion dollars more because there is still evidently a consensus on the importance of standing with allies under circumstances like this. I think one of the one of the big effects that I'm worried about unfolding is in in food prices. Right. We know obviously Ukraine is a huge exporter of grain. So is Russia for that matter. If that Ukrainian grain can't get out from their southern ports and if it can't get through the Black Sea then I think we've got serious problems. I'm told anecdotally. And I don't know what the data suggests yet. But that America's crop may not be a great crop just because of some some weather events. So some of our agricultural commodities may be just less prolific than we'd like them to be. So those are a couple of the wars that I have. And and and do you Adina do you think that this is going to in terms of retail investors and it was such a big you know it was such a big part of the pandemic people getting into the market in a bigger way than they've been. Is that going to are some of these dynamics going to change this psychology of the market in a sense. I mean I would just start saying just the Ukraine conflict and in the war there. I think is creating a lot of just sense of uncertainty. And I think we're starting to understand some of the economic impacts of that. So we have some of the knowns be known. But the fact is conflict is always very unpredictable. And so the question really is how far does it go. How much further does it go. And obviously the tragedy of the human loss definitely weighs on everyone's minds. So I think all of that can have a significant impact on investor psyche in general. But it's not not just for the retail. Right. So this is institutional investors and others who have to look at the calculus. They look at the direct first order impact of a business's business and their exposure to that region as number one. The secondary impacts on energy prices food prices and other things that could become major externalities for them in some or two. And then the third is just the unpredictable out you know next moves and where could this go. And in terms of lead over into other parts of the economy or other parts of the world. So I think that's where you end up getting as I said before kind of a risk off approach that comes with this level of uncertainty that's happening. I think oh sorry. You know for Ukraine the loss can even be measured in terms of GDP. It's just so enormous outside of Ukraine Russia far and away vastly the biggest loser economically Europe faces a much greater risk than the United States because the increase in the price of natural gas and the reliance on natural gas has been enormous. And I don't think Europe has made the set of adjustments it needs to for example keeping nuclear reactors going in Germany to respond to that. The United States. I think it is much less scary for me for the economy than it was two months ago. Now if Russia tracks Poland if they use tactical nuclear weapons is a lot of things out there but a hundred and five dollar oil the U.S. economy which produces you know as much as it consumes things like that. You know we can really handle so I don't think it's existential for us at all. There's actually don't take this the wrong way but there's a huge economic opportunity. So my state of Pennsylvania if we were an independent country we'd be the fourth or the fifth biggest producer of natural gas in the world. We're not drilling much and there's a whole lot more under the ground than the reason we don't drill it because we refuse to build the infrastructure to bring it to markets. So Pennsylvania natural gas traded in Pennsylvania is almost always at a significant discount to gas throughout the rest of the country because all the pipelines are full. It's not hard to imagine if we expanded that capacity we could dramatically increase LNG exports to Europe. You know Europe's not going to be completely independent of natural gas. Why not burn American gas instead of Russian gas. It's it's a huge opportunity. Dan I want to ask you all predictions about the likelihood of a recession. But before I do supply chain rethinking we talked briefly about China and more lockdowns there. What are you hearing in the tech world is this really a moment where there's going to be reshoring that that will be net. All this uncertainty might might yield a net benefit to the U.S. to Mexico to North America. Well remember the private sector has played a role obviously in the sanctions that have happened. You know we in general I think everybody is pulled out of Russia. We have enabled services into the Ukraine. For instance over the PayPal platform now we've been able to direct humanitarian aid or direct to individuals in Ukraine over $700 million by over 8 million people around the world that have donated to that. And I think you know businesses are now engaged in that in that and that's in the world stage right now. I think as we think about I think Adina was saying this the possible spillover effects that becomes worrisome. Russia is one thing. China is a very different thing on that. And I think trying to figure out how we maintain that sense of globalization that this isn't against but somehow we are we can be competing but work together at the same time. I think that's very important at the same time though. There's no question companies are trying to figure out how to be more resilient in their supply chain anticipating what could happen and then diversifying. So it's incremental cost to go and do that that can add pricing pressure. It will take time for that to happen. And in the meantime you know will affect supply chains but I think all businesses are imagining kind of scenarios like what could go wrong as opposed to like what could go right in preparing for that. Before I open it up for questions I'd like to ask our panelists. President Biden said today that a recession is not inevitable. And and to all of you what what is the probability would you say of a recession and Jason I want to start with you first. Certainly somewhere between one and ninety nine. Inevitable mean my baseline for the next year is always 15 percent. That's sort of roughly is how the economy functions.  You get one you get a recession two through six. You don't. I'm a little bit higher than 15 right now because of all this existential uncertainty and problem we've been talking about but not much higher than it. We heard about all the extra money people had people got two point three trillion dollars of extra money above and beyond what they spent. They spent off about a hundred billion of it in the first four months of this year. That money could last a while. There's about one point five million workers who are out of the labor force since covid. I think a lot of them will come back. A lot of them will need to come back because of some of the economic problems we're talking about. There's more room for businesses to add to their inventories. So I think on the one year horizon there's a number of positive things. I get more worried about sort of one to two years from now. I think the Fed goes above three percent maybe to four maybe to five and what that means but that's more like a year and a half two and a half years from now where I get more worried. Senator. Yeah I might be a little bit more worried than Jason in the short term I'm a little more optimistic longer term. I think the market is going to help a lot. The backup in yields the strength of the dollar. We're already actually seeing some demand destruction. And Dan referred to the sales growth but that's nominal growth. It's not real terms. And we're starting to see a little bit of margin compression at least among the big retailers. We'll see what other earnings numbers start to look like. So I wouldn't be surprised if we see a little bit more of a slowdown sometime this year. But I'm I'm quite bullish about the medium term. Adina the markets. Well I mean first of all I think that the markets are definitely saying it's a non zero risk of having a recession. I also would say though that some of that slowdown that where you just refer to is actually what the Fed is trying to achieve. Right. So you know by taking a very hopefully consistent approach to increasing rates for some period of time to kind of normalize back to something that we actually even didn't achieve pre pandemic by the way. Right. To try to get rates up back up to a more normalized level. I think that that will it is meant to slow down the economy. Now the question is just does it get to a tipping point. And I think all of the things you just mentioned are kind of like these really strong functions that will make it so that there's just a lot of money. There's a ton of money in the system. There's a ton of investable money in the markets. There's a lot of money that the government has created to be put into the system that still hasn't yet been spent. And so I have to say I'd like to think that those positive forces even if you say we ever did it. Those positive forces will countervail what the Fed is trying to do to slow down inflation. I think the big issue is consumer confidence. Right. So if consumer confidence really continues to go south the markets continue to show a lot of wobbliness and a lack of foundation to give savers an understanding of where their portfolio sits. And that confidence continues to drop. That's that to me can become self-fulfilling into recession. So that's where I see the nonzero risk but I'm not willing to put a percentage on it. If we had one point seven growth this year. There'd be people in the Fed doing backflips and celebrating right. It's just they're they're trying to find a way to get to that that that stable stable point that then we can lift off of from there. And the question is does it just go too far. Dan optimistic pessimistic. You don't have to in general. I'm an optimist who worries a lot. I think I stole that from Madeleine Albright. But I think it accurately describes me. I think in Europe the chances of recession are much higher than than here in the in the U. S. and I wouldn't I wouldn't put a number on either because the truth of the matter is we don't know. We don't know. I think it depends on how long does the war go on. Confidence supply chain. You know can the Fed navigate this kind of softer landing. It's it's unclear. And what I said in the beginning I'll reiterate now. I think the magnitude of uncertainty is greater than we've seen in a long time. And so for any of us to accurately predict I think it would be very difficult to do. Well said and I'm struck I must say by the by the consensus on this panel bipartisan as well about what got us into the situation and what may get us out. I'd love to open it up for those old fashioned in person questions if anybody has one. I have plenty but anyone. I see a hand here. Laura Esposito Murray Committee for Economic Development. Senator and Jason I really like to ask you there's been a lot of emphasis on the monetary side on the fiscal side with the increase in interest rates. We're going to see our debt payment go up. How do you think this is going to affect where we go in terms of deficits and debt. Will we be spending more even though we can't afford it. So I'll go first. You don't mind. So you know let's be honest about half the Senate wants to do yet another big spending bill something on the order of a trillion dollars if they can get that done. I think that's a bad idea. But that's very much still alive and well. I've been frustrated by Congress and administrations unwillingness to deal with the fundamental driver of our long term structural imbalance which are entitlement programs growing faster than our economy year in and year out decade in and decade out. And I started to get to the view that it's going to take some kind of exogenous shock to get people to really focus on this. When when debt hits 100 percent of GDP which is almost that now. If we have a normalization of interest rates that sort of if normal means something like what most of my adult life it's looked like the cost of serving servicing that is huge. So ultimately that has to put pressure on spending. I'm hoping it puts pressure on us to make some structural changes to the programs that drive that. I'm also an optimist who worries a lot. The debt is about ninth on my worry list. It's not absent from it. But the market expects the 10 year to be I think three and a half percent by a decade from now. It's below three percent right now with two percent inflation. The debt service on that even at 100 percent debt to GDP to me isn't that scary. At some point we need to stabilize our debt. I think we could stabilize it at above 100 percent of GDP and that would be fine. That will take additional effort to do in particular Social Security goes in solvent a decade from now and bringing solvency to that system. I think it's both important in its own right and would get you about two thirds of the way to where you need to go to stabilize the debt in a way that I'd be comfortable with. Love people to do that tomorrow. If they do that four years from now I'm going to be losing sleep over worries one through eight not over that one. Question. Hi. I'd be interested in getting your perspectives on how much we should trust the markets when they're making predictions about the future. You talked about the interest rates. So I was just checking that the the really old interest rates still negative up to five years and less than one percent going out along distance. The five year forward inflation expectations are by two point two or two point three percent. Are those numbers that we should be worried about. And if not how much should we discount what the collective markets are saying compared to what others are saying. I certainly have a view but if somebody go for it go ahead. You know the case for being sanguine on inflation is that the least bad predictor of inflation in the past was long term inflation expectations and long term inflation expectations whether measured by markets or by economic forecastors or by consumers are all in a perfectly fine place. As I said those were the least bad predictors in the past. They were never that good a predictor. I worry we're in a slightly different paradigm now. Also worry that some of those market prices especially in thin markets like tips are distorted by the huge holdings that the Fed has. And I think the market is sort of overly sanguine about they're not being four percent Fed funds rate a year and a half from now. So I take some comfort from it but it's not enough to keep inflation from being probably number one on my worry list. I just worry about how reliable the price signal is given the size of the Fed balance sheet when you think about the magnitude. What are the eight trillion dollars nine trillion dollars. It's pretty staggering. And so I worry about whether we're getting the price signals we should be getting. You think the Fed waited too long. In my mind yes the Fed. So I hope the Fed reconsider the whole paradigm they adopted whenever it was a couple of years ago when they when they said you know inflation expectations are so important when we run inflation below two percent for an extended period we've got to run above so that the world is convinced we'll stay at about two percent. You overlay that with the idea that if it does kick up its transitory and it's like a guaranteed recipe for being behind the curve if inflation in fact does accelerate. And that's exactly what happened in my view. They they waited way too long. I mean why were we still buying mortgage backed securities in March of this year when they finally ended. It should have been over a year before that. Other questions is one in the back there one and maybe we'll get to two. Hi. Jack Denton from Barron's. I have a question for the senator and Dan Schulman as well. So you you you reach some consensus on payment stable coins like Tether or U. S. D. C. But I'm curious why you might not think that algorithmic stable coins shouldn't be regulated the same way. After all it was Tara an algorithmic stable coin that wiped out forty five billion dollars in two tokens in a couple days. You know fueled losses in the wider crypto market ten times that and by some analysts measures that that's selling leaked into equity markets. You know algorithmic stable coins are supposed to always be redeemable for one dollar just like Tether and U. S. D. C. should they not be regulated the same way. Go ahead. So I'll go first. So first of all you know you can have a truly decentralized algorithmic stable coin and who would you regulate. What would you require. You could say disclosure. You've got an open source code on the protocol. What more disclosure is there than that. And then the third point I would make is I I don't believe you necessarily have to protect people from themselves. It strikes me as a highly speculative device. The mechanism to ensure the value is very dubious. But people wanted to speculate on that. They were being promised huge returns. Maybe you've got an argument for fraud. Maybe people are misrepresenting the nature of this animal. But you know people lose money on commodities and on speculation all the time. I don't think it's the job of the government to protect them from themselves. I think when you have asset backed stable coins now you have a very realistic mechanism to retain the value. And my regulation is mostly about disclosure. Like make sure this is fully disclosed. Everyone in the world knows what they're buying if they buy a stable coin that's back and you'd have auditing requirements. You'd have to be very clearly defined redemption policies. In my view I'd like to see a new charter and sort of a narrow bank charter offered by the OCC for for issuers that want to do just that. But but the other and my last point is that the the stable coin that is backed by securities. Clearly there is a potential for a mechanism to to affect the broader financial markets where I just don't see that in the algorithmic coins. Dan quickly you want to jump in. I think Senator did a thorough job on on that. One last very quick question here and then we're going to wrap up. Great. Thank you. My name is Atoka. I'm a global shaper from Japan. Just out of curiosity. What are your personal predictions of interest rates increase in June's FOMC. So whether it's 50 basis points 75 basis points or do you think it would decrease to 25. That's 50 with certainty. They've said that the open question is whether they deviate from that after June. Probably not. But maybe I would agree with Jason. Sorry. No. I mean that's what they've been very clear and publicly communicating that strategy. Yeah. Exactly. I'd like you all to join me in thanking our panelists for.


From running in your underwear in San Francisco to tulip mania on pier 39. I'm Tori. I'm Talyn. Check out this week's Berkeley hotspot. Whoa! And you're probably thinking why would I run in my underwear? Well, why wouldn't you? It's benefiting children's cancer. So bring out your favorite pair of underwear, and you don't actually have to run, which is the best part. That sounds exciting because I do not like to run. No. No. But if I am gonna run, I am gonna run right over to our next event. Beer Week kicks off this Thursday in San Francisco with a nightlife event in Golden Gate Park. And it's free. That's right. It's absolutely free. Free things are always good. Just like tulip mania that's happening on Sunday up here at 39. It's the final day of tulip mania, and let me tell you, I'm a maniac for tulip. Tulip mania is gonna be so exciting. You have to be there. There's gonna be thousands of tulips. Thousands? Yeah. 40,000 tulips. There's 40,000 tulips. 40,000 tulips. Wow. 40,000 tulips. That is a lot of tulips. I mean, this next event isn't free, but it's still really fun to go to because you can drink in the theater. $6 movie nights at the Sundance Kabuki Theater in San Francisco every Tuesday. Well, that wraps up this week's Berkeley Hotspot. So tune in every Thursday at 8 p.m. And if we missed any hot tips or events for the next week, tweet us at CalTV.


the detective, he's telling Chuck what he wants to hear. You wanted to go to the car to get something out of the car, a weapon. Yes. In order to do what with it? If it came down to it. If it came down to it. To beat someone. To beat someone with it. To possibly beat him. To death. To death? That's not the way you do it. Then he scoots up real close and starts in with this TV show thing he's doing. I don't know what he's doing in there. There's no reason to be doing that. And the kid, look at his body language. He's wide open.  I'm not being deceptive. These things just butt up against each other so hard. Anybody that would have watched this, I think from a perspective that we have, would have seen that and gone, oh dude, this is not right. And he would have said, you're doing this wrong. And he would have gone upstairs. He would have gone above the guy. I said, you need to get this guy retrained.  This is out of hand.


Welcome back. It is Friday and that means FNA Friday and today I'm gonna talk about how to block out your animation. I know I don't know your blocking is wrong. It's absolute clickbait title, but hear me out I want to talk about blocking the process of blocking how to show blocking mostly in relationship to student work because I've been teaching for 11 years there's a certain pattern that I see in how students presents their first past their blocking past and how that can cause problems in the long term and that will kind of set them back and it will take so much more time to get the work done So today is going to be a part one about what not to do a bit more theory and a bit more of my opinions And then I'm gonna continue with more examples and it's gonna segue into workflow and then back into blocking So as I'm attacking my second block of animation tips for FNA This is going to be a bit more back-and-forth with hands-on demos and examples and theory And I think blocking is massively important because there's something about poses and all that good stuff But the thing is if you're blocking is structurally not where it's supposed to be in terms of showing information Showing the story points or the acting points or the emotions or whatever you have Then you're gonna have such a harder time to fix it later on your main structure your basis for your work has to be Absolutely clean even as a student It's super important as you work for your clients and everything But as a student already you got to get into the habit of making your blocking work correctly and by correctly I mean this blocking doesn't mean crappy animation. Oh, I know this is this is how dare you I know now Let me rephrase blocking doesn't mean super rough Animation that's probably one of the most common things that I see from student work Is that when I give the assignment and the next week blocking is due what I give back a lot of times not most of the times But a lot of times it's technically a layout pass where you have the basic camera Maybe a set the staging and some really rough animation of a character moving from left to right doing Maybe some acting choices and then that's kind of it and that is a really really difficult to critique because it's a rough There is not enough information in terms of the story the acting points the emotions your gear change or whatever You want to do in there or even if you do weight assignment to show the weight in the complexities and all that good stuff So that's already a problem even if they show something that's more advanced than layout It's still not quite there in terms of really showing every beat the story points and clear information So what do I mean by that to me subjectively? But still blocking means every story point every idea every emotional beats every choice that the character Makes and that you want to show to the audience has to be as clear as possible And here's the controversial thing blocking can also include polished animation. I know what I know that I hear me out My point is that if you have a specific move that needs more advanced animation to sell that point Then that's what you need to do if you can show Exactly what you want to portray in terms of again your acting choice Whatever it is with minimal keys and it's still clear that's even better because you're gonna be faster Provisions can be incorporated faster. That's obviously better But if you need to set more keys and be more detailed and have more advanced animation Because that's what you need to do to show that story point and that's what you have to do Obviously, you don't want to polish during blocking but then you're gonna put too much time into this and their potential changes coming in And then your workflow is gonna slow down for sure But I prefer to go full on the opposite way and say if you need to really polish something to sell an idea That's better than just keep it in layout and then have people be confused when they look at your work So as an example, for instance, if you have and my thing is always head turns, right? So if you have a character that looks at another character and it's kind of a suspicious type of look and you just do this and That turn away that moment of looking maybe some eye darts I'm a little bit of pause and then and then over that is totally different than if you do this But that's what I mean with layout style or really really rough blocking If you just have two keys and you have this What does that mean? Does the character not care or is the character sleepy or is it a robot? I think this can mean so many things, but if I do this That has a completely different meaning and if you need to set more keys to sell that then so be it Obviously with more experience and the more work that you do and you know You're adapting different workflows where you can sell that idea with minimal keys and some tweaks in your graph editor Obviously, that's the ideal thing because it'll be faster, but you still tell the story But again going back the main problem that I see with student work is that they're blocking is so rough It's almost layout style that the ideas are not there, but they consider that blocking So then when the next pass comes in which should be blocking plus where you put in all your notes and kind of refine your animation Towards you know the final stages then suddenly a gesture like this turns into something like that where the idea is completely different and that's my whole point all of your ideas all of your acting choices the timing especially the Timing has to be clear in your blocking pass if you need examples You can easily type in progression reel or there's an example of an artist on Instagram That constantly shows his work at Disney and if you look at blocking pass what they consider blocking It's all in step mode and sometimes it's not step mode, but a lot of times it's that mode You can see how much detail is already there in head turns head accents shoulder movements That's the general timing why because it shows the intention it shows the timing it shows the emotion It shows all the acting choices and they're clear Especially if you work for someone and if you want to show it to your lead your super client or whatever it is You have to make sure that every story point is clear if then someone asked I don't understand what this means Then you technically failed because you didn't put in enough information to make that story point clear now I totally understand as a student as you're still learning animation You got to worry about arcs and and pops and space and everything that it's a lot to ask to not only be good from a Technical point of view, but then on top of that also put all of your animation But at the same time, I don't think it's encouraged enough just looking at other people's work from other classes Maybe other you know semesters previous semesters where this is considered. Okay This is considered blocking or later or looking at the grades that they get I don't think it's hammered in enough that you need to go further in your blocking pass But in order to do that in order to have all the information ready in terms of the timing and everything I said you also need to have a good foundation You need to have a plan damn it Valentine. You never plan ahead plan. Okay.  It's just really really dirty and then polish is the same car, but just clean It's the same idea is the same make same model the same design everything It's just you took the dirt away right but for a lot of people this might be exaggeration But for a lot of students that I see polish for them is like you have a Volkswagen that's dirty And then you have Mercedes that's dirty. It's a totally different cars It's a totally different idea, but it's still kind of dirty where they don't look at well technically you got to get to Blocking plus where you're pretty much done and polish is basically Asymmetry so we know like fine tuning of timing stuff in the fingers in the face But it's not that much different than your blocking plus pass But I think the common misconception there too of them Like I said is that blocking means very rough animation and that from whatever stage you would say Let's say blocking plus for just picking up a term from blocking plus to polish is a huge difference Not really it really should just be the final polish which takes a lot of time because it's you know The detail you want to put in but it really shouldn't be a dramatic difference So again if you need to polish your shop for blocking then so be it is it ideal of course not should you do this? No, you need to be as fast as you can and as clean and as simple While still showing all of the information but this comes with experience and practice But still when you present a shop for blocking make sure that every idea is clear Now one of the pitfalls and one of the reasons why it looks so rough It's because a lot of students do stepped mode for animation now I love steps step this fine right in terms of posing because it really forces you to think about this is the pose This is the pose and this is the pose and you're gonna look at is that pose Clear it's the silhouette. Okay, does it tell the story? That's fine But the danger is that you just set a couple keys in steps and because it's stepped It kind of looks better because you kind of pop from pose to pose and it kind of looks cool And that's it and the moment you spline this so many students freak out because then it turns into the spline You mess why because you didn't set enough breakdowns and in between you didn't take enough control over the timing and that's my biggest complaint and Hesitation when I say to zoom you should do stepped mode only because it just takes so much work in discipline to do Steps spline go back at more breakdowns spline it again need more breakdowns and not a lot of maybe that's the harsh That doesn't mean that not a lot of students that but it's something that is very common Common enough for me to make this clip and say this so for instance And that this came up yesterday in class when you have someone that sits and this is your pose in your Stepped key process right and then the next pose is the is the character standing That's not gonna work How you get up if it's a quick one if it's I'm I say this You know in previous if you watch this if it's like a slow beginning up if it's an alert thing Whatever it is There's so much information that you can show between the sitting and the standing pose same with the head like this and The head here How do you get there and in order to show that through your steps? Hey, you have to have more breakdowns and in-betweens and you correct easins and outs But it also goes back to you got to have a plan And you need to know why you're doing this and you need to know what your character is supposed to do and what you Want to show to the audience it's really a multi-step thing But before you start anything you got to have a clear idea Then you got to have a clear representation of that idea Be it just in your head because I can't draw it's mostly my head or reference or thumbnails And once you have that plan here's the plan Then you attack that plan with clear blocking and again if you need to set more keys to make that blocking clear Then so be it and just practice to set less keys to be faster and then you can make more changes But again the biggest thing is that blocking doesn't mean rough animation blocking means every idea is Presented in the clearest fashion for whoever watches this now that being said your blocking can Be rough if you're showing it to someone who has seen your final animation who knows how you polish and this is sometimes easier at Work when you show something really rough and you show it to your lead or your co-worker and you say listen This is kind of my idea. They don't have to go. Well, this is really rough I don't know if you can actually polish this that's one of the concerns as a teacher is that when you see work from students And it's rough and the ideas are kind of there like I don't know if it's a new students It's not a repeat students. I don't know how fast they work I don't know how I mean, I can look at the previous reel, but you never quite know how long it took them So it's kind of a thing of it looks cool, but this might take you two months to finish I don't know if it's gonna take you two months or three weeks. I'm not sure So that's why you want to encourage your students to keep things simple So they have enough time to go through the whole process and polish and so on and so on My point is work, you know people's work. You've seen your co-workers final shots You know what they can do with something so I would say at work It's a bit easier to show internally rough work because they know well I know that this person can take this so much further and I can I can see the ideas there and I can say okay Well, that's a good idea I'm not sure about that follow this and pursue that and you know flesh that out But you can't show something super rough and not clear to a client and again I can't talk too much about work because you know permission and blah blah blah But it's not uncommon to show blocking plus to clients because aid has to work with a life action plate Which is you know full motion and real time and everything and your animation has to kind of fit that So if you do super rough step blocking something that pops in front of a live action play I'm a big problem But mainly again you want to show things as clearly as you can and sometimes you also just want to sell it You just want to make a good impression like this is cool This I want to sell the shop which also means that sometimes you got to go further than blocking and maybe it's blocking plus And maybe that's not what the client wanted They got to delete the whole thing and start from scratch and that's okay Because that's the job your job is to just present something in a clearest fashion and Have it be kickass so that the client likes it and then you move on it's not about I mean Hopefully it can be economical because of money shoes and budget in Thailand So I know but that's a whole different FNA job at work It's okay to be rougher because people know how you work and they've seen your final work at school It's different so if a student shows me very very rough blocking It's usually an indication that's gonna take a long time to get there and the revisions are gonna be tricky And then also depends how the student takes in the notes do they understand the notes in terms of I gotta do this and then they Absorb the notes so that the next pass already has those notes in mind for the next week and so on and so on So you got to be very careful what you tell the students and the thing is for me The biggest thing as always is to skip things short and simple enough So you can go through the whole process and you can practice to go through blocking to polish and so on and so on And then just have the muscle memory of doing that So what could you do to practice that like one of the things you can do that I mentioned yesterday in class It's kind of a tricky thing and it's not it's not a long term It's not something that you can use for your reel But what you could do is again look for progression reels look out There's so many reels out there where people show their layouts. They're blocking maybe already polished Maybe just skipping blocking plus but they show their final animation then final animation rendered But a lot of times you see blocking a lot of times it's stepped and you can see the amount of detail That's in there if you can find something that is stepped maybe a bit more on the rougher side Not super detailed what you could do technically take that footage into Maya take any rig that you have that somewhat matches that rig Right and then rotoscope. I know it's horrible to say about rotoscope the step poses Not because that's what you want to present or keep but you can have that pose and then look at when does it pop into the next pose And then copy that copy that and then you look at the curves because to me It's also important that you look at this is the animation Well, what does that look like in the graph editor like my process has been again It's very subjective is as I go through my my work and as I practice and as I see other people's work When you take someone else's shot to fix it or change something or if I see mocap and I see the mocap curves I learn from seeing the curves. I know that well if this curve looks like this I know that this is going to do this to the animation So sometimes you can tweak the graph editor the curves in graph editor and you know what the result is going to be And sometimes you make this change. You know that how it's going to affect the curve and so on and so on It's back and forth. So to me, there's a lot of value at looking at curves to see what that means So if you have some rough blocking in terms of steps that still shows every idea It might be beneficial to bring that in do the poses and look at well How how does that affect the timing? What are the curves? But you don't want to get caught up into Cleaning your curves a lot of times people do again. I'm saying a lot of times I'm exaggerating But you might have an animation and it's okay And then you start cleaning the graph editor because for some reason someone told you that your curves have to be clean I don't know not to me not really I mean it's your animation looks good and your curves are super messy and it's not cheating It doesn't destroy things downstream like sim or hair or cloth and it's fine if it looks great It looks great But sometimes if you go back in there and you clean your curves You start to kind of file down and send down the accents the nice little moments where everything gets kind of too clean And then it loses that edge It just becomes all kind of swimmy and spliny and kind of and I think one of the benefits would be to see Something that's well animated and see what the curves are doing now It's hard to get someone's professional shot and then get that Maya scene and look at the curves But again, maybe one of the ways could be that you look at something that's Again, not super super detailed in step mode But just rough enough that it's clear enough and cool put that into my copy it so you can see what happens between each poses What the curves do this might be time consuming. I'm not saying do this all the time But this could be a way for you to understand some like my point is also you have to find different ways of learning You got to adopt different workflows and different methods because there's not one workflow that's going to work for everybody So maybe that might be a step for you to where something clicks and you understand a process better and so on and so on I mean, I don't know again try different things, but as a whole that's my rant now I'm going to show more example part two is going to be more of a it's still blocking related But it dips into workflow What can you do to make sure that your blocking is good that your timing is still there that your what you blocked out Kind of resembles your reference or what you hide in mind There are a couple steps kind of like a hit list that I tell my students that they should pay attention to In order to make their blocking work But still the main thing that I wanted to communicate in this first clip in this part one is that rough animation is not blocking That it's basically layout. You got to flesh this out more. I have more acting beats This is a bit too even like the body might just do a turn like this I don't know what that means is that because the character is really stressed out and stiff Or is it because he didn't set enough keys and then you ask specific acting questions And then they don't know I don't know what I wanted to do here, which then goes back to planning So the big thing is gotta have a plan looks to me like they're coming up with a plan I have to change that plan. We've got a plan and you got to have a clear plan in however way you get there Again thumbnails reference, whatever you need then with that clear plan You attack your blocking and your blocking has to present every idea that you have and every acting choice in the clearest fashion So whatever you can do to minimize the steps that your workflow gets faster This is super important. This is another thing about workflow and being fast at work That's a whole different fna But it's okay for blocking to have advanced animation in there as long as every idea is presented in the clearest fashion And sometimes I think is that really too exaggerated and then I look at those examples and I go no their blocking pass is pretty advanced I mean it's still in step mode, but there's so much information how shoulders can move or the head moves I think it's a good thing to strive towards. I know it again This is difficult to do as a student was you have so much to learn still But if this should be on your horizon, this should be your end goal that when I block something out I'm going to put in as much information as I can It doesn't mean again that you need to do like crazy offsets and you know and your fingers and everything Of course, there are things you will simplify But the current danger is that you simplify too much and one of the ways to to make that mistake Is to do step mode and just have your golden poses and that's it So for anybody any student that does step mode blocking Make sure that you put in enough breakdowns in between and you take control of those easins and outs And how your character goes from pose to pose what body part leads so that every intention is clear Okay, I think I've beaten that horse to death But I will explain that again and I will repeat that again in future FNAs Because it's a really really important thing that your basic structure You main thing that you start with animation is as solid as you can Otherwise it's going to take forever to fix it and again your workflow will suffer and so on and so on Next week part two. There are more examples. There again workflow tips It's going to be a bit of a back and forth between workflow and just blocking theory But that's it if you have concerns about anything I just said like wait a minute, but that makes any sense Please comment Let me know because I think this part the the step of blocking things out is so important So if you have tips or other examples or anything that you use that you want to share that other people Can see and learn from it It would be awesome to comment and share that if this was as always helpful like and subscribe All my whole thing, you know how it goes and it's obviously helpful to me And I will continue next week with more info about blocking with potentially less click baity titles Maybe or I'll keep the title to say part two. All right. So thank you for watching and I will see you next week