Chicago FED President breaks down the Economy | Austan Goolsbee talks with Chuck Todd...

Former, exactly. I'm out of that business.

Mine. President of the Chicago Fed. So, a lot of people like why does Chicago even have a Fed? Like why isn't the Fed in DC? There are 12 Reserve Banks spread around the country as well as the Board of Governors in DC because in 1913, just like today, people were deeply uneasy that the federal government alone or the federal government plus banks on Wall Street would control the whole US financial system and not have input from the rest of the country. So, they created these 12 banks purposely to generate a form of independence, independent thought, and you see it when we come and we sit around the table, and it's a gigantic table, and for econ nerds, it's the coolest table in the world. They come from very different perspectives. I was an economist from the Midwest. There are markets people, business people, financial people all come there with a different perspective trying to figure out interest rates and follow the law. And our law says stabilize prices, maximize employment. This whole enterprise is only one part of the job. However, it may be the most public, but the other things that we do at Chicago Fed, we are kind of a bank to banks, and they have accounts only in the region. And so all the cash, yeah, heart of the Midwest. It's mostly Iowa, Wisconsin, Illinois, not Ohio, Indiana, Michigan. Those five states. And then that's going the other way, and so all the cash in the economy is printed by Bureau of Engraving and Printing, but distributed through us, and we do $6 trillion a day of wire transfer payments on a rail. We run the plumbing of the financial system, essentially. And we supervise banks to make sure they have the capital they say they have, they're following the consumer protection laws. And we're members of the community. We're out gathering intelligence as well as engaging community development.

Is the banks that and the ones that we supervise. If you get down in the weeds, banks can be state chartered or nationally chartered and etc., but our member banks or the bank holding company, the Fed oversees them, and we have hundreds of people working in supervision who are going down there to make sure we don't set the policy. That's set in Washington, but we enact and oversee that they're doing what they're supposed to.

And that but we haven't felt it yet. Okay. He is...

I haven't heard concerns like that. Now, we're not that big of an energy producing region. The Dallas Fed is kind of the most famous for that. We're a lot of users of petroleum products, especially agriculture, manufacturing. There's been a lot of worry, angst, concerns expressed about the uncertainty of the war, how long is this going to last? But the markets, at least if you look at like oil futures, where do they think prices are going to be 6 months from now? They're still expecting them to be down. It sounds like Yergin is not there. He thinks the supply disruption's going to be more persistent.

It is hard to imagine that it'll be fixed by then.

That's what, before the war began, we were still waiting for the tariff inflation to go away, and there was a little bit of argument. It was lingering. I felt it was lingering. But I remained one of the more optimistic folks on the committee that it would go away, we could get back to 2% inflation, and that we could have multiple rate cuts in 2026. That this thing is past 7%, and that this thing happened before that thing faded away, that raises a little bit of indigestion. I'm not necessarily throwing up in my mouth, but I'm getting a little... this could start looking like a persistent shock not unlike you remember when the first team transitory and they said, 'Yeah, the inflation in 2021 is about to go away. Don't worry.' And then we had the first shocks. Russia invades Ukraine, the price of oil goes up, we get another set of shocks, and there was a receding, but it hadn't finished, and then people started saying, 'Wait a minute, this isn't transitory at all.' If we get back into that dynamic, it's a very difficult dynamic. Let me though go on the optimistic side here because there's been a resiliency in our economy and the global economy, and it has been dealing with shock after shock.

And there's a point where like is this, it frankly performs better than any of us. You're totally right. If we got out your own whiteboard and just like went through the numbers, this is going to be how we're... Look, what we're missing is the main, strongest, most resilient driver of the US economy for the last 3 years has been the US consumer. It's not data centers, it's not AI, it's not any of those. If the consumer kept chugging along based on they had jobs, the high end has been more, but you cannot get 2.5, 3% solid growth in consumption without it being broad-based. If you sit down with the numbers, it's not just the 1%. They might have done the best. And AI data centers have been especially strong, but that's not the main engine. The main engine's been the consumer. As long as that stays true, that the consumer chugs along, we're basically going to be fine, but if that's in danger, which it could look when oil prices go up, the University of Michigan survey, the most recent one, sentiment lowest ever. They didn't exist in the 70s, so you don't... They switched over to... We got a lot of... their chief economist is on Chicago Fed advisory committee, and they're in our district, so we follow them a lot.

At one point they switched over to being internet-based, and when they went full internet, people are crankier on the internet, so everything kind of went down a few points. There's a little bit of, you know, you sort of... It's not skepticism, but it's like let's not overreact. I was predicting the second the price of oil went up, I said, and you could check it. I'm not just Monday morning quarterbacking there. I said I would not be surprised if we see a plunge in consumer confidence. That has often happened when this very public price goes up. But if that turns into a drop in spending, we got problems. But there hasn't been the last 5, 8 years, as you're hinting, those two things have broken apart. So, we just have to watch to see is that getting worse?

Fertilizer in the... and it couldn't have come at a worse time for agriculture. Before this ever was, when we were in the tariff space, people's hair's on fire in the 7th District as we're going around. We went to Cedar Rapids, Iowa, where heavy agriculture economy focused. The sales price of their product was kind of suppressed. The cost of their inputs rising dramatically, so their farm income getting squeezed, and then the tariff retaliations, their main markets were drying up. The Chinese start buying soybeans from Brazil. So, they were dealing with that, trying to get out the back end of it. Now, for the price of oil, I'm telling you, this thing is an extended basis at these kind of prices.

You know, more than a month or two months. Something that diverges, if we had a graph and could plot out, here's what Wall Street's oil futures say they think the path of oil is going to be. Anything that's above that over the next 6 months, there's really going to be a squeeze because there wasn't much margin of error in agriculture to begin with. If the fertilizer prices go like this and then it starts spilling over into manufacturing prices of their machinery, which we can talk about in a second how the manufacturers reacted.