July 18, 2025
Inside the Federal Reserve: A Conversation with Nate Kaufman
Nate Kaufman, Omaha Branch Executive of the Federal Reserve Bank of Kansas City, joins hosts Todd Kuethe and Chad Fiechter in this episode of the Purdue Commercial AgCast. Kaufman explains the structure and function of the Federal Reserve System, including the roles of the Board of Governors, the 12 regional reserve banks, and their respective branch offices, and shares how monetary policy is set and the importance of regional input in policy decisions. Kaufman highlights his role in representing Nebraska and the agricultural sector, ensuring their unique economic conditions are considered in national policy discussions. The episode also touches on the use of data and industry interaction in formulating economic insights. Additionally, Kaufman shares anecdotes and practical experiences, emphasizing the Fed’s commitment to transparency and public engagement.
Audio Transcript
Chad Fiechter: Hi everybody. I am Chad Fiechter. I’m a professor in the Department of Agricultural Economics. And I’m gonna kind of tee up my cohost here because I want him to introduce our guest for this podcast
Todd Kuethe: Yeah. Thank you Chad.
I’m also a professor here in the department. We both work in CCA and so we, we have all these interesting conversations where we try to learn about the economy.
This is a conversation with Nate Kaufman, at the Kansas City Fed
We wanted to learn kind of more about what he does, what the role of the Federal Reserve is, particularly as it relates to the agricultural sector. So Nate is a really interesting guest to have on, ’cause he’s the branch executive for the Omaha branch. And he’s got a bunch of titles, like all the people the Fed do. So he is like a some sort of vice president. They always have adjectives on it. I’m gonna mess it up. I’d have to look it up. I should have looked this up ahead of time, but that, you know, that’s how the show
Chad Fiechter: is vice President of podcast at Purdue.
Todd Kuethe: Yes. That’s how, that’s how we work. And so but he basically runs their ag and rural area programs. So focused on Nebraska, ’cause he’s in the Omaha office. But also just that Kansas City Fed District in general. Right. Which is the western half of Missouri. ‘Cause it’s split between the Kansas City district and the St. Louis district. The only state with two, Missouri, my home state. And then I believe all of Kansas. All of Colorado, all of Oklahoma, a little bit of New Mexico, the northern portion there. All of Nebraska. And all of Wyoming, that’s the other one. Right. So that’s kind of his district, but they also interact with the other Feds related to anything kind of touches ag in the area.
So Nate was coming through town, uh, just happened to be coming through for something else and wanted to come by and visit us. I’ve known Nate for a long time. So they, the Kansas City Fed hosts an annual conference , it’s called the National Ag Credit Committee, so that’s bankers, Farm Credit, they’ve got some of the mortgage lenders, people that lend to agriculture get together and they have kind of a professional meeting. They get lender reports and updates, and they’ll bring in people from around the area that work in the ag sector to give presentations. Um, and so that’s always nice. Um, but then there’s also the academic half of it. So, a group of us that are professors that kind of work in ag finance, we have our own meetings. We meet jointly with them for one day, so Nate has run that for a long time.
Actually I first met Nate when he was a grad student at that conference presenting before he worked at the Fed.
Then also when I first got to Purdue, they had one of their employees was gonna do a part-time appointment at, at the Board of Governors, another part of the Federal Reserve. So they had a need for somebody to help fill in a little bit. I applied and Nate was kind enough to hire me to do that, and Purdue was kind enough to let me use a day, a week or so to do research and interact with the Fed.
Now I have a PhD students is doing an internship this summer with Nate. So , Nate and I worked together in a lot of different ways. So that’s how I know Nate. Um, but he’s absolutely fascinating , interesting experience. I think it’s one of those things that’s like not really understood or appreciated by a lot of people in the ag sector. They’re not aware that there’s kind of a group at the Federal Reserve. That are interested in the ag economy.
Nate, why don’t you introduce yourself.
Nate Kaufman: Yeah, it’s great to be here, Todd. So, Nate Kaufman, I serve as the Omaha Branch Executive with the Federal Reserve Bank of Kansas City.
Todd Kuethe: So we’re gonna unpack a little bit there. We’re gonna pretend our listeners don’t understand anything.
Nate Kaufman: Yep.
Todd Kuethe: Right. Uh, often as teachers, we start with the basics, right. I use analogy a lot of times, like I played football in high school and every year the first practice, we just wore helmets. Right? You gotta work your way up. So, the Federal Reserve, there’s a number of Federal Reserve Banks around the United States. There’s a network of them. How many?
Nate Kaufman: There are 12 regional reserve banks is what we call them, of which Kansas City would be one.
Todd Kuethe: Oh, perfect. So then the other ones are like New York, Boston, Chicago.
Nate Kaufman: That’s right.
Todd Kuethe: That we sort of hear about in the news. And then, do all of those have regional branches as well?
Nate Kaufman: Not all of ’em. So, backing up just a step, the Federal Reserve is what we would say is the central bank of the United States, but where it’s maybe not all that well understood is that it’s not just one entity, it’s not just one bank. There are the 12 regional reserve banks, together with the Board of Governors, that is what call the Fed, or the Federal Reserve System, which is the central bank for the United States.
Depending on the regions that regional reserve might be located in, would determine, and historically where there may have been cash operations, whether or not would have branch offices. happen to three. The Federal Reserve Bank of Atlanta happens to have five. The Boston Fed does not have any. So it just depends on which region they represent and historically what those regions would’ve been responsible for.
Todd Kuethe: So you have team of folks for the Kansas City Fed that are based in Omaha and you kind of run the Omaha operations?
Nate Kaufman: Yeah. And the Omaha branch we often would say, would have responsibility for representing the state of Nebraska, we can in more into means, but ultimately, we would then have responsibility for the of Nebraska from Omaha branch.
Todd Kuethe: Perfect.
Chad Fiechter: So the Board of Governors, though, you don’t necessarily consider that part of one of the branches? That’s a standalone?
Todd Kuethe: The, the Board of Governors would be one of the entities that comprises the Federal Reserve System.
Chad Fiechter: Okay.
Nate Kaufman: And the regional reserve banks would be the other entity, even though there 12 regional reserve banks. It’s the combination of the board of governors that is a government agency, together with the regional reserve banks that are not government agencies, that forms this complicated, part public, part private institution, known as the Fed.
Todd Kuethe: I didn’t, I didn’t realize
Chad Fiechter: I didn’t either.
Todd Kuethe: was actually part of the federal government. Okay. Interesting.
Nate Kaufman: The Board of governors, and one of the reasons for that, just to get into the structure a bit. There are seven individuals in Washington DC that we call governors that are part of this institution that we’re referring to as the Board of Governors. And those seven individuals would be presidential appointments, confirmed by the Senate. They would be part of the group that is known as the FOMC, or the Federal Open Market Committee, that decides on interest rates. That’s one of the primary areas of the Fed.
And then the presidents of the regional reserve banks would also part of that Those presidents are not appointed by the President of the United States. They don’t go through a confirmation process. So that’s part of what determines this part, public part, private structure.
Todd Kuethe: So the, the president of the Kansas City Fed then is, is, uh, chosen or appointed by some apparatus within that region. Right?
Nate Kaufman: They would be appointed by a board directors. So our Kansas City Fed has a board of directors that responsible for, um, providing governance and oversight to the Kansas City Fed. And also have boards of directors in each of our branch offices. So I would be responsible working with our board in Omaha. That Kansas City Board of Directors would select and ultimately, um, present someone who would take on that position as president. It gets a little complicated. It’s only six of the nine because bankers don’t participate in that. Um, but it would be the responsibility of the boards to appoint those presidents, unlike what would happen in DC where they would be presidential appointments.
Todd Kuethe: And, and those appointments, if, if, uh, lemme know if I’m mischaracterizing this, the, it also sort of the, each of the regional banks’ presidents often sort of represent kind of the industry or interests of that area, right?
So if you think about like Dallas, that they would represent sort of the economic entities around Dallas, where Kansas City would represent sort of the economic entities around Kansas.
Nate Kaufman: Yeah, and that’s actually one of the most important features of the structure of the Fed when it comes to monetary policy. Which that sounds like a technical term, it really means discussion about interest rates. When the Fed was created, so you have to go back to 1913 to get to the structure of the Fed, the idea was that you would have input coming from different areas of the country. There was skepticism at the time about concentration of power in New York or DC or other places, and the idea was that you would have views that be represented from regions across the country.
So in the case of the Kansas City Fed, we would be looking to represent our region that’s informed by context and analysis and other things that comes from that region that would then collectively be part of that monetary policy process.
Todd Kuethe: It, it’s weird to think that we used to be skeptical of decisions being made elsewhere and as a country, like we’ve really moved past that, which is, uh, it’s why it’s, that’s why we like to study history.
Chad Fiechter: Yeah. right?
Todd Kuethe: Um, no. So the setting of monetary policy then is set by this federal open market committee, which is the board of governors. So those are the ones that are appointed. And then, uh, the presidents of their regions that are selected by their own board of directors that are influenced by what’s happening, right. And they do that multiple times a year. Right? Uh, so what, what kind of role does an economist like you play in that process?
Nate Kaufman: So, my primary role would be to ensure that the areas where I have some expertise would be included in those discussions and ultimately views being represented from either that industry or that segment region, uh, of the economy. Knowing that you would ultimately want a national discussion to be incorporating views from any industry or any region. So it would be making sure that I’m including views from Nebraska as part of it outta the Omaha branch. But then because of my background and the other area of responsibility, and we’ll talk with as we go, is, is representing agriculture. So making sure that we understand developments in agriculture and rural parts of the country because those may not always be represented if you’re thinking about ultimately what drives employment and economic activity at a national level. Of course you’re gonna think about large urban centers and industries that have an outsized, um, role. But of course, ag would be part of what needs to be included in that. So my role would be to ensure that through ongoing research and industry connections and other things that we are maintaining a pulse on agriculture rural America?
Todd Kuethe: Well, so the other one, maybe we just take a little step back. The, so we always ask, uh, as our regular listeners know, so we’re, we’re sort of thinking about kind of like how an economist builds a model of the economy for, right. So we think about things of like constrained optimization, things that you are trying to do and then activities that you do, right? So the Fed in general is trying to keep prices stable, uh, and then keep the, uh, economy chugging along and doing well so that we’re close to full employment, right? And kind of loosely defined, right?
Um, and then where they do that is through where they can interact there most directly is setting monetary policy, right? Uh, and so you’re looking at things like, um, you know, if the Fed is going to make a policy change, they’re gonna raise or lower rates, than how is that gonna affect prices and employment, but also things like investing or whatever it within your space of jurisdiction, right? So you’re, you’re talking about here’s what it’s gonna do in Nebraska, here’s what we think the Nebraska companies do or, or net.
Nate Kaufman: And it could go in either direction, right? You would want to know how those potential changes would pass through in terms of Nebraska’s economy or agriculture. But likewise, you could imagine that there’s some scenarios of some anecdotes or things that bubble up from a particular region of the country or an industry that actually inform some things that you would want to understand about bigger pictures, that that might be a discussion in the context of monetary policy. So it could potentially work in either direction, but ultimately you would want, I think, a central bank that is responsible for making a decision that affects everybody in this country and all industries. You would want to know that those decisions are inclusive of the totality of ultimately what this economy represents.
Todd Kuethe: Yeah. So like you, you specialize in, in Nebraska and, and in the agriculture sector, uh, jointly. Right. But then you would have, within the sort of federal reserve system, there’ll be people that look at energy or healthcare or light manufacturing or whatever. Right. All this sort of different
Nate Kaufman: Yeah, yeah, that’s right.
Todd Kuethe: Different segments of the economy.
You
Nate Kaufman: would have somebody looking at healthcare or places where you could imagine that there are some large corporations concentrated in a particular industry. Then you would have contacts in those industries to make sure that those views are being represented. So the idea of having the, going back to the structure and the 12 banks branch offices is that you would have people out in the country in, in all parts of the country to ensure that they are capturing those views.
Todd Kuethe: So that, that kind of brings to the next natural question, which we always sort of ask about, like tasks, right? So when you’re trying to assemble information that you need to be able to give advice to the decision makers, like what are the things that you’re doing? Like who are you talking to? Are you having conversations? Are you looking at data or what are you reading? Kind of tell us about, tell us about like, sort of a typical day or week.
Chad Fiechter: Todd has told me stories before of you stopping people on your lunch break to ask questions about how they’re feeling about the economy? Are they construction workers? Like, can you like even share some stories about that too?
Nate Kaufman: I’ll, I’ll give an anecdote on that one because it was, it was actually pretty interesting and I learned a lot during but to answer the question at a high level, I would say it’s a combination of two things in terms of trying to provide information. One is we rely on data. And of course we have economists and analysts that are collecting that data and trying to learn lessons from what that data says. So are there trends that are emerging in the data? Is there a new data point that seems to suggest something different is happening? Of course, we rely extensively on data and those that collect them.
Todd Kuethe: And, and, and that’s data that you’re collecting either from the market or in surveys, but addition, like the federal government data, state governments, and universities.
Nate Kaufman: Yeah, we would, would look at all sources.
Todd Kuethe: Wherever it can come.
Nate Kaufman: Government data, universities, state level data, of our own data that’s primary survey data. Any of that would be included in, in how we think about data.
So that would of course be important. The challenge, or one challenge with data is that it might often be too old to really provide useful insights into policy discussions that need to be forward looking. So. Perfect example is right now, we, uh, had some announcements of tariffs a week ago, but if we looking data that represents January and February of this year and trying to learn lessons about what that might mean for trade, it’d be really hard to make that connection. So data can often be backward looking.
The, the compliment to that is we interact a lot with, we would say, industry participants. In an effort to learn how they’re making decisions and what they’re doing. So we would ask regular questions in meetings, round tables, board meetings, and other things. Along the lines of, are you hiring? Why or why not? What sorts of factors are affecting those decisions? How are you thinking about changing wages? Um, what sorts of investments are you making and why? How are the market fluctuations affecting the decisions you’re making? Because ultimately the decisions that they’re making, if you think about that in a collective sense, eventually we’ll show up in data. It might not be a perfect match, but we’re at least going to learn some lessons based on what those conversations look like to them.
Todd Kuethe: Well, and and sometimes you can contrast that with what is showing up in the data, right? So if, um, you know, if someone’s gonna hire a fair amount of like seasonal or part-time workers, those may not show up in like a quarterly data or whatever, but you would know like, well there is this little tick up here or whatever, right?
Nate Kaufman: And a lot of times what will happen is we will hear from contacts, certain things that will be somewhat qualitative but it will inform us as to where we might need to look a a little bit more to try to get some better quantitative data to support that. So a lot of times it’ll give us some signs of directionality and then ultimately we want to, to better support that in other places to be able to provide. Argument, so to speak, that suggests we this is where the economy seems to be moving, either at a high level or ag or whatever it is. Um, and then that hopefully that, that informs good policy discussions.
Todd Kuethe: You promised a fun story and we want to,
Chad Fiechter: I know, I know.
Todd Kuethe: Because we need some fun. We always fun Yeah.
Nate Kaufman: so, um, I happen to live in Omaha, that’s where I work, live and work. And a couple of years ago there, well there has been for quite some time, uh, Kellogg’s, um. A plant that’s not too far from where I live. It’s one of a handful of Kellogg’s plants, and they’ve gone through some changes. They’ve made some announcements, but they’d been in the midst of some labor negotiations for a long time. And a couple of years ago, uh, there was a pretty well-known strike that was happening, uh, not too far from my house at this Kellogg’s plant.
And I thought, you know, I, I can read a lot about what’s happening with respect to this strike, but I’m just gonna walk down there and talk to some people that are, are actually there there leading the charge and you know, you’re gonna get a, a certain picture that emerges from that. But it’s interesting to hear those perspectives because there could be a variety of perspectives.
It might, one of them might be a corporate perspective that comes from, um, you know, some of the things that happen at a very high level, and some of them might be a worker’s perspective and they’re trying to deal with. Very practical questions about when am I gonna pick my kid up from school, or what do, what does the next month look like for me when it comes to employment?
So it was an interesting conversation that I had just, um, randomly introduced myself to people that were the midst of the strike and asked a bunch questions. They never knew who I was with the Fed, and we never, you know, of course I never shared it elsewhere, but it helped me better understand what things look like on the ground.
Todd Kuethe: Well, so I ideally, I mean, I think that’s, I mean, we’re applied economists, right? All three of us. Right. And I think that’s ideally what we always want to have happen. If I, if I’m trying to understand like, um, you know, something going on in a market. It’d be really nice to be able to call up somebody from the management side and say, what do what’s going on from your perspective? And then talk to some workers what’s going on in your perspective. And then even talk to customers like, do you even care about this? Right. Or, or what do you know about it?
Chad Fiechter: But it it’s hard though. It’s interesting because y your job is to communicate as neutrally as possible. This is how this sector of the economy instead of sort of like the, I think we interact sometimes with like lobby where it’s like they’re advocating for this is not advocation, this is No, no. We’re trying to describe the current and future challenges.
Nate Kaufman: Yeah, so that’s an important distinction. And going back to the structure of Fed, we are an apolitical organization. We, we would say that we are independent, but within the government we are accountable Congress.
The Federal Reserve would be, but when it comes to economic analysis, and to your point, you know, trying to understand what things look like, our goal would be to try as objectively as we can to describe what conditions look like and based on, I.
What the current structure of things might be in the economy or circumstances, how we might see things unfolding that would be absent any kind of recommendation or advocating for any particular policy. So the way that I often describe this is our goal is to describe how things currently exist in the economy, but we would fall short of saying, therefore, policymakers should. X, we don’t make those recommendations. We ultimately describe how we see things evolving in the economy, and then let others make the policy decisions around them.
Todd Kuethe: So when you’re, you’re briefing, uh, your own president, right before the president would go to FOMC, uh, but do you interact with any of the governors or other presidents from other districts as well? Because I, I would imagine there was also questions that would come up with agriculture across the country.
Right. And so.
Nate Kaufman: yeah, we are, we are one system. So it’s a federal reserve system and I would have colleagues that work in other offices and it is useful often to compare notes. Occasionally we’ll do joint meetings of various sorts because the lessons that you might learn from agriculture in the Southeast could be very different from the lessons that you learn in the Midwest or wherever you might be located. Some of ’em there, there could be some parallels.
So yes, we do, we interact. Pretty often with, with those other districts, um, we tend to know what sorts of things are informing their views, but the reality is anyone who is part of that that we talked about earlier. Is bringing with them not just the support that they would have from their teams and the information that they get from their region, but their own lived experiences of how they see the economy evolving.
So I think that there’s ultimately, part of the, the beauty of the, of, of the way that it works, having the different voices is knowing that you do have diverse thought that’s contributing to things. And then ultimately, hopefully what emerges from that is a policy that is representative collectively of all parts of the country.
Todd Kuethe: Yeah. And as economists, I think economics sort of gets, um, beat up a little bit in that, but we do also recognize those trade offs, right? So the, even this is gonna be good for the bulk of people or the bulk of sectors or something, there will be people that are also harmed by it. Right. And so you’re trying to just get that balance right and understand, we always say like sort of textbook economics, like, you know, the, the winners should be able to compensate the losers in these sort of trades, right? With always,
Nate Kaufman: And the Fed is, of course the, when we talk monetary and interest rates, we that it’s a very blunt tool. It’s not something can be used with a great deal precision to one industry but not another, or to one region or not another. It’s a blunt instrument. And so for that reason, I think that you would want to know and ensure that all voices are being included when that. Relatively blunt tool is being used so that there is a feeling that they’re all part collectively of, of, of an economy that’s inclusive.
Todd Kuethe: So, uh, I if I have another
Chad Fiechter: question, you’re doing great. Uh. I took my first economics class 25 years ago from right now, and I remember the professor telling us some kind of model of the economy and where recessions come from, and then the professor said, but now. With Alan Greenspan, we figured it out and this isn’t gonna happen again. Right. Which is funny.
Todd Kuethe: This is 2000, right? So like we quickly after he was, he was wrong. Right? Uh, but there was, but I came in with this idea of being taught like, oh, the Fed just knows it all. Right. Uh, and then like the sort of Feds skepticism sort of increased through recessions and stuff. So what has it as somebody who works there in, in the years you’ve been there, what.
Uh, what have you noticed sort of change about kind of the people’s understanding or view of kind of the Federal Reserve in the, in the, and the people that when you’re interacting with folks having these conversations, do you think they generally understand what you’re doing or what you’re trying to do?
Nate Kaufman: I think most people don’t understand the Federal Reserve at a very basic level. I think they understand role of interest rates, and most people actually have a very intuitive understanding of that. If you’re gonna money and you’re gonna take out a loan, you’re gonna pay some interest for that loan. They understand that there’s a cost to money.
Todd Kuethe: I, I always love when I have like non-traditional students in my classroom ’cause it’s way easier to understand interest rates once you’ve bought a car, or it’s way easier to understand contracts once you’ve, uh, signed your own rental agreement. Right. Uh, whereas like, you know, think about me when I was taking that economics class as like a more on 18-year-old
Chad Fiechter: What do interest rates have to do with it?
Todd Kuethe: I had, not interacted with the economy. Right? Like I only understood the economy of like buying CDs, like compact discs. Should say.
Nate Kaufman: The other part I think people, people understand intuitively is we, you alluded to this earlier, the, the Fed has what we often call a dual mandate. So that mandate, it’s been given by Congress. It’s to structure policy in a way to promote maximum employment. That’s one side of the mandate. Uh, and price stability. Inflation is the other side of that.
So I think people obviously have a pretty intuitive understanding of that. If you’re looking for a job, you fit into that employment category. If you’re, or even if you’re employed, if you interact in any sort of way with the economy and buying things, then of course inflation is something that you’re thinking about.
So I think people understand those. Very intuitively, they just don’t always understand the calculus that the Fed applies about interest rates when it’s taking into account that dual mandate. And so that’s where, just even the visit here describing how we go about doing it or how I would go about doing it, representing, you know, Omaha, Nebraska, Kansas City Fed. That’s what that ultimately is, is intended to do.
Todd Kuethe: Well, and I think too, the, the, maybe it’s just the corners of the internet that I get shoved onto my feet from, but I think there’s also a sort of a view often of like sort of conspiratorial, like there’s like this cab ball of people that set the economic agenda for the world, right?
But like. That’s cl the, that clearly can’t be the case because you can’t get all of these people to agree
Nate Kaufman: Yeah, and I think my, we, we get a lot, I get a lot of those questions, a lot of those comments and, and my observation is that those typically emerge when people just don’t understand something. And it’s natural to try to make connections with things that you maybe do understand or have heard from other places, but. That is part of our mission is to be a bit more transparent. So you asked what’s, what are some things that are different about the I would, I would say relative to 25 years ago. I think the fed tries a lot harder to be more transparent about how it’s thinking and how it’s structuring policy and the kinds of things that go that.
Um, the chair of the Fed now does more press than would’ve been in the past. There’s more information and forecasts that are derived from how the fed thinks about things to to suggest markets. This is how we think about conditions right now. So I think that there’s been a lot to try ultimately communicate to the public.
Todd Kuethe: Well, I think there has been a much more, as a consumer of fed information, uh. Much sort of clearer and plain speak description of here’s what we’re doing, here’s what we’re seeing, here’s what we’re thinking. Whereas like when I was first learning about economics, it was much more of like a policy that has been set will someday be reversed. And you’re like, what does that mean? You know what I mean? Like, uh, so yeah.
If, if I can jump back a step. So the other, the other hat that we wear, uh, here at, uh, at Purdue is at teachers. And so I get, uh, smart young folks all the time. Tell us a little bit about your background, how you came to work at the Fed. Uh, or like, if, if I had a really smart student that I’m like, that person should work at the Fed someday. Like what should they do with their time
Nate Kaufman: Yeah.
Todd Kuethe: To get there.
Nate Kaufman: Yeah. So my, my and my path fed was not a linear one. It wasn’t straight. I actually graduated from college in 2000, 25 years ago, actually similar to 2000 with a degree in chemistry. Which sound like economics Federal Reserve. And what was after that I got outta college. Um, uh, prior to going to grad school, which something I thought might be in my future, my wife and I made the decision to to live overseas. And so we spent three years living in, in Southeast Europe, in Bosnia. And it was doing some service work with an organization that was to help people who would’ve fled the country come back to the country after the war
Todd Kuethe: Yeah. This would’ve been po po right after the war. Like, like.
Nate Kaufman: And it was really that experience that working with communities that were struggling with, things that were really obvious in economic ways. This was, I lived in a town at the time that was dramatically affected by the war, and the unofficial unemployment rate was 80%.
Chad Fiechter: Woah
Nate Kaufman: When you saw, saw on a regular basis, people with, know, life necessities. Had gotten interested in economics and, and at that time made the decision that I was going to, pursue eventually a graduate degree in economics. So, started taking some classes and, and actually, I don’t know if you knew this,
I, I a couple classes here at Purdue before going
Todd Kuethe: I did not know
Nate Kaufman: I did not know Iowa State for my, my graduate
Todd Kuethe: This, keeps our tradition of
Chad Fiechter: I know
Todd Kuethe: people have been educated by Purdue
Chad Fiechter: Exactly.
Todd Kuethe: To come in and talk.
Nate Kaufman: So I, I was, um, not ready to go full on into an economics program, was very interested in the field, I needed to take some background classes and then ultimately pursued a graduate degree at Iowa State finished the PhD program there.
Todd Kuethe: We, we won’t hold that against you.
Nate Kaufman: That’s fair.
Todd Kuethe: They, they do a good job there too.
Chad Fiechter: In, in economic is, was that, is the, was the department already joint ag, econ and econ?
Nate Kaufman: There was an option of both, the I took was economics with a concentration in agriculture finance.
So having, having made that decision of the path that I to take, the Federal Reserve was an option for someone who was interested in both applied portion of research, but also the industry connections. So I will say that there’s a parallel from the work that I was involved in in, in Bosnia. Together now with the work that I do, which is when I lived overseas, um, I would spend a couple days each week just. Just visiting with people in very rural places in Bosnia, asking quite simple questions about how they perceive their needs and their challenges. And then a few days of the week in office doing some other work to try to connect things at a more systemic level. actually do a lot of the same thing now. I do some analysis in the office a few days a week, and I. Not talking always to, to very people in very rural places, although we do that some,
Todd Kuethe: probably not as many Bosnians,
Nate Kaufman: not as many Bosnians. And I, I actually don’t know that I’ve had any work related conversations in, in Serbian, uh, in the time that been there. But.
Todd Kuethe: You should go to the St. Louis Fed. So St. Louis had a bunch, so when I, I was in college in St. Louis right after the war, and there was a bunch of Bosnians that relocated. So there’s like phenomenal. Uh, Bosnian food in
Chad Fiechter: Same in Fort Wayne.
Todd Kuethe: Oh, really?
Chad Fiechter: Okay.
Must have been somewhere we could,
Todd Kuethe: if you want to dust it off. We know, we know.
Nate Kaufman: good. We
Todd Kuethe: We could at least go, at least go get some food and you can talk to the servers. Yeah.
Nate Kaufman: So now i’m doing some similar things, but it would be interacting with, you know, sometimes it might be large businesses and sometimes it might be individual producers. It’s a variety of things there ultimately inform the way you understand how conditions are, are evolving. Yeah. Yeah.
Todd Kuethe: Perfect. Yeah, so if a student wants to work, I’ll say, go get a chemistry degree.
Chad Fiechter: Yeah. Go to Bosnia and
Todd Kuethe: go to, well, I think just, I don’t think it should necessarily be Bosnia, just a place that’s going under severe economic hardship.
Nate Kaufman: like a pretty natural You know what would, what I would say is, um, someone who has some natural curiosity about how the world works, because if you’re gonna be at the Fed, understanding how those, how evolve is really important. But you, you need the technical background and you know. All are involved in teaching classes and helping mentor graduate students that are going through that stuff, and they need to be able to do research in a rigorous way, but to be at the Fed where, where we’re going to interact with industry groups that. Maybe don’t about the Greek letters that you’re using in an equation, on a model or something. You also need to be able to speak in very plain terms to, to understand and interact, and then capture information there too. So you have to wear both hats. You have to be able to, I think, to interact at a pretty technical, a technical but then also in a, in a very plain spoken way.
Todd Kuethe: Well, I think, I think that flow, I mean, this is my bias as a grad advisor, right? Is that flow goes both ways too, right? You wanna make sure that those Greek letters are actually representing the things that the people are actually right.
Like, if we’re gonna build a model, build a model to explain people’s decisions, you better make sure you’re accounting for and measuring those things that they actually care about, right? So, uh, it’s a, it is a challenge,
Nate Kaufman: Yeah, yeah. That’s right. I think you would ultimately, I mean, ultimately you want research that is being informed by what relevant questions might be and doing whatever the analysis requires to get to the answer, and, and then being able to describe that in a variety of settings at a, at a di, at a number of different levels of complexity.
Chad Fiechter: Do you consider yourself, this is gonna be in the weeds, a micro economist or a macro economist?
Nate Kaufman: I don’t know I would label way or not. think my. My graduate training would’ve suggested that it was probably more micro, because ag tends to be an industry that is fairly applied
Todd Kuethe: And know, and we come from like from the management
Nate Kaufman: That’s right. And there’s decisions that would happen within the industry that are probably more micro in nature. But the Fed as an institution, of course, involved a very macro level. Level. Um, which is to say that there’s things that happen at a national level or an aggregate level or, or things that tie together.
So think before joining the Fed, I probably said more clearly that I’d be a economist. But now part of my job is to connect the two things there. It’s, um, providing views from something that might be a micro level to something that’s at a, at a higher scale.
Chad Fiechter: That that’s where I feel like the ag economy piece, I feel like it’s harder to distinguish, right? For, for those of us who have interest in the ag economy, it’s like you can’t really pick out, well, we’re just this, or we’re just this.
Nate Kaufman: Yeah, And I think depending on what your role is or where you intersect with the ag economy, you may different views of constitutes macro or not. When I think of macroeconomics, just by way of being at the fed, I tend to think things like interest rates or. Trade other things at a very level, but somebody that’s that’s involved at a production level in agriculture might think of macro conditions as being something very different.
Chad Fiechter: Mm-hmm.
Todd Kuethe: Yeah. I think the other one, yeah, is like how much is macro, just something that’s out there coming down on us. Right. Like sunshine or something versus us adding us adding up to it. Yeah. I was, I was trying to avoid using the word exogenous. Sorry. No, no. But no, we got smart listeners. We can use, we can use words like endogenous and exogenous.
Chad Fiechter: and exogenous. Exogenous meaning outside.
Todd Kuethe: Yes. There we go.
Uh, so the other question that we asked again, sort of thing about building models of if, if we wanted to build a model for what you are doing with the Fed, or what the Fed is doing, uh, so we talked about your objectives, talked about your activities, what are your constraints? Like, what sort of limits the Fed. Being able to do exactly what you’d like it to do.
Nate Kaufman: I, think one of the limitations is always data. I. Um, if you’re trying to develop thoughts ultimately an argument that is supported by something that is databased, then your main constraint is almost always the data or the information, let’s call it information that you’re relying on, to inform those views. And you know, in a perfect world, we would know all things all times as to how conditions are evolving. So you could tell a very consistent and. Perfect story about what’s happening with respect to the economy, but the reality is that you don’t have that. So you have to rely on either imperfect data or impartial data, or in some cases, data that you don’t have, and try to make connections from one place to another help fill the gaps of what you might be missing that’s needed for that narrative.
Todd Kuethe: Perfect.
Chad Fiechter: Do you think, so I’m thinking about this when you’re trying to contextualize or or brief the president before they go to FOMC, in a business sense, people would use those gut feelings to try to like preempt the market and do something sort of like to take advantage of something.
Do you feel like when you are trying to characterize how the economy’s gonna evolve? Is it these gut feelings to try to preempt or is it No, we think these, these signs are suggestive of where it’s going. We don’t need to preempt, like conservative versus sort of aggressive.
Nate Kaufman: I think it’s a little of both. Often what you’ll hear us talk about is at the Fed is, is what we would say the balance of risks. So we would give, try to give our best assessment of how we see the economy unfolding, and that might be a current picture and also how we see things maybe in the next couple of months. Understanding that there will be uncertainty in that, and often talk about to the upside or risks to the downside of whatever that metric might, might be. It’s not enough to just say, here’s what we think is going to happen, because the next answer might be, well, why? And what’s informing that view? And what else did you think about when you were making that argument? And then you have to be ready to be able to explain, well, here’s the things that we included, but here’s what we don’t know yet and here’s what we’re watching for. So I think it’s, it’s a little bit of both of those things.
Ultimately, want a policy maker to try to, to, as best as they can, understand how the, how the economy’s going to evolve going forward so that when they’re making their decisions or engaging in a policy discussion, it’s as forward looking as it can be.
Todd Kuethe: So the other one, um, sort of related. So we’re the center of commercial agriculture, so we interact a lot with farmers. If, if a, if, if one of our listeners is a farmer or someone else involved in the ag sector and they want to get the best information they can to understand the fed, uh, in a relatively neutral and informative way, where do you suggest they go?
Nate Kaufman: I, I, think every. Regional Reserve bank have resources that describe in pretty plain terms what Fed to do. The Board of Governors would have it. We would have it on available on our website.
Honestly, though, part of it. Is just engaging with us at the Fed. We actually welcome a lot of those conversations and we would have programs that we host at various times. So if there would be people that are interested in interacting, um, you know, coming to one of those programs or having an opportunity to interact with someone where I think you’d have maybe the ability to learn some of those things firsthand, that’s hard to absorb just by reading about or even talking here the structure of the institution.
Todd Kuethe: Well, because they’re not a profit driven firm. Nate didn’t also mention that. They have a, so the ag finance updates is what you call, where you have a bunch of data and information that you assemble on behalf of not just Kansas City Fed, but the, the system as a whole as it relates to agriculture. You guys give really great regular reports on Yeah, and that’s on, on what lenders are saying and what loans look like.
Nate Kaufman: And so we, we want people understand what is being included when we talk about economic conditions or agriculture or ag, finance, whatever that topic might be. And the hope would be that by being involved in the conversation, sharing information, that we will come into contact also with people that will provide us information back. And by being engaged in the industry. That’s, I best way to develop the narrative of how you understand it. I don’t think that you would be able to be removed from that and still. Be able to give a compelling picture of how it’s evolving.
Chad Fiechter: I don’t really understand how you use the balance sheet at the Fed. And why, like conceptually, I think I have some idea. Can you give any more indication of like, how do you use the balance sheet of the Fed? How, and maybe use the example of what we just did kind of through COVID and where we’re coming out.
Esther talked about that. Uh,
Todd Kuethe: wait, so yeah, the former. Uh, president of campus
Chad Fiechter: Yes.
Todd Kuethe: Was just here on campus to give a, a lecture to, to the department. And so we, we had a conversation to fill in our listener who might be
Chad Fiechter: Yeah. good
Todd Kuethe: Listening to this in the future and not, not know whose name you’re dropping here.
Nate Kaufman: So the, the probably the easiest way, or, or maybe the shortest way to explain it, is for people going back to the years that followed the financial crisis and recession, because that’s really when the balance sheet would’ve first been used as a tool. And it wasn’t really used as in, in that way, prior.
Todd Kuethe: So we’re 2008, 2010.
Nate Kaufman: 10. Yeah. So following a financial crisis oh 8, 0 9 and what would have been referred to at that people. Would recognize the term of quantitative easing and ultimately that that means, um, using the sheet and I’ll, I’ll try explain that quickly in a in an effort to try to stimulus to the economy, I. After the traditional tool of short-term interest rates would have already been used, and interest rate would’ve to zero, but the economy was still struggling. the balance sheet would be simply a way saying Fed is going to acquire assets, it’s going to buy things ultimately by crediting banks and financial institutions with account that allows them to make loans that. Filter into the rest of the economy and ultimately provide stimulus that way. So it’s a, it’s a function of a central bank that has the ability of creating money, but not necessarily hard currency by of credit. So basically crediting the account of financial institutions that engage with the economy in, in every way with the economy. That allows there to be more flow of credit and money available. So a, it’s additional way of stimulating the economy, ultimately driving down longer term interest rates. Um, so that would be probably the shortest way to explain it, is that the traditional tool of Fed is to affect short term interest rate. And the balance sheet, and the approach that would’ve been taken both during, um, quantitative easing of 2010 and onward, as well as the, as the COVID environment would’ve been to try affect longer term interest rates and stimulate additional activity through those actions.
Todd Kuethe: I, uh, Nate can tell me if my analogy works, what I’ve, what I’ve used before with like thinking about this when, uh, before was a Purdue, I lived. Uh, in another Midwestern college town, and there was a local realtor that was always trying to stimulate his ability to sell houses. So his, his tagline was, your house will sell in 90 days, or I’ll buy it. And that was his way of sort of like, oh, well, you know, if you guarantee that you want to get the house on the market, like he would be sort of that reserve purchaser. Right. So it’s like the idea of like, to stimulate the economy sometimes just. Dumping a bunch of short run money isn’t gonna do anything. Freeing up sort of the way that business thing about the long run, right?
Chad Fiechter: Yeah. Gotcha.
Todd Kuethe: those, buying those longer term things, right? Like Yeah. If you, if you can’t sell your house, we’ll buy it. Right?
Nate Kaufman: It it is, it is sometimes confusing for people because it would be a function of a bank most other, any other bank, any commercial bank would not be able to engage with. It’s, it’s the, the Federal Reserve, just by, by of its. Its, um, priorities and mandate, being able to ultimately provide stimulus by way of credit
Todd Kuethe: the creation
Nate Kaufman: of new money and allowing that to flow
Todd Kuethe: the economy,
Nate Kaufman: um, in ways that, that other banks wouldn’t be able do.
Chad Fiechter: Sure. That makes sense
Todd Kuethe: So, uh, then we’ll maybe we’ll pivot towards our, and so I like to try to end things with a lightning round to give us a little bit of fun, uh, and also. If our listeners are starting to flag a little bit on their, uh, running on the treadmill or, or, or driving the car around.
Uh, so the, the lightning round you have to answer quickly ’cause it’s lightning. Okay. So, uh, first lightning round question. If you had a magic wand, you could only use it for work to gather some piece of information that you don’t have, what would you use your magic wand to learn?
Nate Kaufman: I’d say it would be to always know who I need to reach out to and ask a question.
Todd Kuethe: Oh, that’s really good like that That’s really good. that. And you got the lightning round. Yeah. That was good. for
I know he’s a Federal Reserve economist. He’s gotta respond.
Chad Fiechter: I know.
Quickly. Well, and I take your of, it’s
Todd Kuethe: difficult
Chad Fiechter: question
Nate Kaufman: if, if people are listening to this on a treadmill, it’s gotta be quick. Here.
Yeah.
Todd Kuethe: Well, and then, and then the next part, uh. If you, if the Federal Reserve was able to issue you, a company issued time machine, so you can only use it for work. You can’t use this for recreation. When are you going with your time machine?
Nate Kaufman: that’s hard one. I. I’m failing the lightning round on this one, todd.
Todd Kuethe: It’s okay. It’s okay.
okay.
Nate Kaufman: I think because of the, the interest that I have in agriculture, I would want understand what led to the 1980s. I think we get that question all the time about agriculture in the 1980s, and I’m guessing that you have a lot of listeners that would’ve lived during that time.
Um, would’ve predated the experience that I have, so I think learning some of that firsthand and, and how people were making decisions in advance of that I think would be useful for,
Todd Kuethe: not to mention, you get to drive like cool cars, like late seventies, early eighties cars
Nate Kaufman: And the music of course, we know was
Chad Fiechter: Yeah,
Todd Kuethe: that would be great. I love that one. Uh, okay, so, uh, I’ll ask the sort of the, this, this one, this one is, uh, we get.
Sometimes sad answers. I’ll have to come with another one in case. Nate. Nate has a sad answer. Uh, the last time you had difficulty sleeping. Oh yeah. ’cause you were thinking about something for work. What were you thinking about?
Nate Kaufman: We host a a couple of events through the year, and I know that you’re familiar with some of these, and whenever you host an event that involves coming from other places, you spend a lot of time trying to think about, are you designing this event in a way that’s ultimately going to be of interest to the people that are coming?
So when we’re doing that, you have to take into account a lot of different things, a lot of personalities, challenges coming from different parts of the perhaps. So probably the last time. been laying awake, thinking about are, are covering all of our bases on this? Is it something that, um,
Todd Kuethe: know,
Nate Kaufman: people are going to want to come because to my earlier lightning round question, we want to be able to interact with them and
Chad Fiechter: Yeah. Right. questions. Yeah,
Nate Kaufman: So it’s there. There’s a lot that goes into, I just making sure that we’re presenting ourselves in a way that people understand what we’re doing and,
Todd Kuethe: and then want to engage with them. Well, it is similar to like planning a wedding twice a year. Right? Where it’s like, how are we gonna get all these people here at the right time, make sure they’re around the people they want to be around?
Right. Uh. Perfect. Well, that then it wasn’t a sad one.
Chad Fiechter: That, was great. that was a great answer.
Todd Kuethe: so asked that to somebody one time. I always ask that question, uh, when I, and then somebody told me about how like, they’re worried they’re gonna lose their business and stuff. And I was like, oh,
Chad Fiechter: is rough. Oh, yeah. Yeah. It’s good
Todd Kuethe: know. It’s good to know about that, but like, uh, but you didn’t, you didn’t answer bummers. I think we can, we can wrap it up there. Uh, so thank you for joining us. Uh, thank you, Nate. Yeah, it was good to discuss. We, we learned a ton. Yeah. Uh, and for anyone listening to this podcast, uh, tune in, uh, next time and we will have another interesting conversation.
Thanks again to Nate for coming in. Um, similarly, if, if, uh, if you think we could learn from you and you happen to be coming through Purdue, let us know. Uh, ’cause we would love to learn more. Thanks for listening. Make sure to subscribe, tell your friends, tell your enemies, uh, tell your loved ones, um, and, uh, and come back next month and we’ll have another conversation for you to enjoy.
Chad Fiechter: Do people still have enemies?
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