1 00:00:09,160 --> 00:00:12,639 Speaker 1: So just how is the US economy doing? The Trump 2 00:00:12,640 --> 00:00:15,520 Speaker 1: administration says, look at that stock market, and then Main 3 00:00:15,560 --> 00:00:18,480 Speaker 1: Street says, maybe not so great. Let's find out where 4 00:00:18,480 --> 00:00:19,960 Speaker 1: it's really at. I had to do that. We bring 5 00:00:20,000 --> 00:00:21,759 Speaker 1: in one of the best of the business. He is 6 00:00:21,880 --> 00:00:25,440 Speaker 1: a renowned economist from Duke University. His name is doctor 7 00:00:25,440 --> 00:00:28,280 Speaker 1: Michael Munger. Doctor Munger, Hello, good morning. 8 00:00:28,720 --> 00:00:29,080 Speaker 2: All right. 9 00:00:29,120 --> 00:00:31,240 Speaker 1: So before we get into the condition of the economy, 10 00:00:31,400 --> 00:00:34,040 Speaker 1: we talked about this earlier in the program. Jerome pal 11 00:00:34,120 --> 00:00:35,800 Speaker 1: the head of the Federal Reserve, has come out and 12 00:00:35,800 --> 00:00:38,960 Speaker 1: said I am under some sort of criminal investigation over 13 00:00:39,040 --> 00:00:43,159 Speaker 1: testimony to the Senate. This sounds very dangerous to me. 14 00:00:43,240 --> 00:00:45,400 Speaker 1: But you are the economics expert. 15 00:00:45,440 --> 00:00:51,480 Speaker 2: What say you, Well, this is a legal question. Announcing 16 00:00:51,760 --> 00:00:57,040 Speaker 2: an investigation is a big threat to a public official. 17 00:00:57,720 --> 00:01:01,720 Speaker 2: And even if you then dropped the investigation, that means 18 00:01:01,800 --> 00:01:05,720 Speaker 2: that you have shown the club behind the door that 19 00:01:05,880 --> 00:01:11,080 Speaker 2: the administration possesses. This is almost unprecedented to have a 20 00:01:11,120 --> 00:01:14,039 Speaker 2: member because I think he Trump would have preferred that 21 00:01:14,040 --> 00:01:18,520 Speaker 2: Powell will resign. He replaced someone else more compliant, and 22 00:01:18,880 --> 00:01:21,480 Speaker 2: presidents always want that, but no one else has dared 23 00:01:21,520 --> 00:01:25,920 Speaker 2: to do this. So I think I don't see any 24 00:01:26,680 --> 00:01:31,240 Speaker 2: content to what he's being investigated for. It's the announcement 25 00:01:31,280 --> 00:01:35,600 Speaker 2: of the investigation that is designed to send him a message. 26 00:01:35,480 --> 00:01:38,120 Speaker 1: Doctor Bunger, how damaging could this be to the US 27 00:01:38,160 --> 00:01:41,679 Speaker 1: economy even if nothing comes of this. The Federal Reserve Chair, 28 00:01:41,800 --> 00:01:44,600 Speaker 1: the head guy over there, he's a pretty important dude. 29 00:01:46,160 --> 00:01:50,640 Speaker 2: Well, there's two systems. One is you have an independent 30 00:01:50,680 --> 00:01:53,120 Speaker 2: Federal Reserve and you've got some bureaucrat in charge of 31 00:01:53,160 --> 00:01:56,320 Speaker 2: the money supply, and that's bad. The other system is 32 00:01:56,320 --> 00:01:58,760 Speaker 2: you have politicians in charge of the money supply, and 33 00:01:58,800 --> 00:02:03,400 Speaker 2: that's way worse. That's far worse, because that means that 34 00:02:03,480 --> 00:02:06,160 Speaker 2: then the money supply is going to be determined by 35 00:02:06,200 --> 00:02:09,400 Speaker 2: your desire to be able to run a gigantic deficit 36 00:02:10,080 --> 00:02:14,640 Speaker 2: and using money to supply a deficit. That's what Argentina did, 37 00:02:15,000 --> 00:02:18,120 Speaker 2: That's what Zimbabwe did. So the reason we have a 38 00:02:18,160 --> 00:02:20,640 Speaker 2: bad system with a bureaucrat in charge of the money 39 00:02:20,639 --> 00:02:23,840 Speaker 2: supply is it's better than an even worse system, and 40 00:02:23,919 --> 00:02:26,800 Speaker 2: that is having a FED chair who is appointed just 41 00:02:26,840 --> 00:02:28,680 Speaker 2: to be a yes man to the president. 42 00:02:29,320 --> 00:02:32,760 Speaker 1: Dukee economist, doctor Michael Munger is our guest. Okay, So 43 00:02:34,680 --> 00:02:38,560 Speaker 1: what do you like, you're right, this is unprecedented territory. 44 00:02:38,600 --> 00:02:41,080 Speaker 1: Here is there an exit ramp with this? I mean 45 00:02:41,120 --> 00:02:43,160 Speaker 1: they've kind of opened the door now where I don't 46 00:02:43,240 --> 00:02:45,560 Speaker 1: understand how they're going to get out of this without 47 00:02:45,600 --> 00:02:46,240 Speaker 1: going forward. 48 00:02:47,400 --> 00:02:50,560 Speaker 2: Well, they will continue the investigation. This is pretty standard 49 00:02:50,680 --> 00:02:54,360 Speaker 2: Trump a negotiating technique. He describes it in his book, 50 00:02:54,400 --> 00:02:57,640 Speaker 2: and he always did it. He puts pressure on the 51 00:02:57,639 --> 00:03:00,480 Speaker 2: person he's negotiating with until they give him what he wants. 52 00:03:00,520 --> 00:03:02,040 Speaker 2: And if they don't give him what he wants, he 53 00:03:02,120 --> 00:03:05,240 Speaker 2: does something else. He'll change up the game. And so 54 00:03:06,000 --> 00:03:08,280 Speaker 2: in a week they might drop this and never mention 55 00:03:08,360 --> 00:03:10,920 Speaker 2: it again. He's trying to see if it works. He's 56 00:03:10,960 --> 00:03:13,799 Speaker 2: always probing to try to find weakness. And one of 57 00:03:13,840 --> 00:03:15,959 Speaker 2: the reasons that so for us, that works fine in 58 00:03:16,560 --> 00:03:20,320 Speaker 2: one off real estate deal or in politics, it doesn't 59 00:03:20,320 --> 00:03:22,480 Speaker 2: work well in the economy because none of the business 60 00:03:22,560 --> 00:03:24,720 Speaker 2: community knows what the heck he's trying to do. 61 00:03:25,680 --> 00:03:27,640 Speaker 1: Yeah, I heard years ago somebody told me this. With 62 00:03:27,720 --> 00:03:29,560 Speaker 1: the stock market, you can say this is the most 63 00:03:29,560 --> 00:03:31,519 Speaker 1: accurate thing I've ever heard, or that you can say 64 00:03:31,520 --> 00:03:34,760 Speaker 1: that's the dumbest thing I've ever heard. With the business world, 65 00:03:34,800 --> 00:03:36,640 Speaker 1: there's good news and there's bad news, and they know 66 00:03:36,680 --> 00:03:39,040 Speaker 1: how to deal with. What they don't deal well with 67 00:03:39,320 --> 00:03:40,360 Speaker 1: is uncertainty. 68 00:03:41,400 --> 00:03:44,520 Speaker 2: I wish I'd said it. Milton Friedman famously said he 69 00:03:44,600 --> 00:03:48,680 Speaker 2: was asked once, Milton Friedman, the Chicago Economists, Professor Friedman, 70 00:03:48,720 --> 00:03:51,080 Speaker 2: what would be the best tax system, and he says, 71 00:03:51,160 --> 00:03:54,600 Speaker 2: whatever tax system we have now, the worst thing would 72 00:03:54,600 --> 00:03:57,160 Speaker 2: be to know what taxes I'm going to owe a 73 00:03:57,240 --> 00:03:59,640 Speaker 2: year from now. If I'm a business, I can't invest 74 00:04:00,240 --> 00:04:02,200 Speaker 2: if I don't know what the taxes are going to 75 00:04:02,240 --> 00:04:04,320 Speaker 2: be a year from now. Or say it with me, 76 00:04:04,600 --> 00:04:07,040 Speaker 2: the tariffs, if I don't know what the tariffs are 77 00:04:07,080 --> 00:04:09,200 Speaker 2: going to be a year from now. So if Trump 78 00:04:09,200 --> 00:04:12,800 Speaker 2: would pick a trade policy and stick with it, we'd 79 00:04:12,800 --> 00:04:15,839 Speaker 2: be okay, even if it's one that has really high tariffs. 80 00:04:16,040 --> 00:04:18,640 Speaker 2: But they're up there down did some girl smile at 81 00:04:18,680 --> 00:04:23,000 Speaker 2: me today? There's no telling what he is trying to do, 82 00:04:23,080 --> 00:04:26,000 Speaker 2: and that means the business community is confused. And you 83 00:04:26,160 --> 00:04:29,320 Speaker 2: said it, well, what I can't deal with is not knowing. 84 00:04:29,920 --> 00:04:32,640 Speaker 1: Yeah, Doctor Michae Mungerdoke economist is our guest. Okay, So 85 00:04:33,120 --> 00:04:36,120 Speaker 1: basically half of this radio show is stuff fifteen years 86 00:04:36,120 --> 00:04:39,480 Speaker 1: ago I stole from you. And one of the phrases 87 00:04:39,480 --> 00:04:41,280 Speaker 1: that you have used over the years that I think 88 00:04:41,360 --> 00:04:44,680 Speaker 1: is great as daff deficits are future taxes. And we 89 00:04:44,720 --> 00:04:46,359 Speaker 1: talk about this a lot as it relates to the 90 00:04:46,400 --> 00:04:49,480 Speaker 1: out of control spending. Can you talk about I mean, 91 00:04:49,520 --> 00:04:51,799 Speaker 1: we're thirty eight going on thirty nine trillion in debt, 92 00:04:52,200 --> 00:04:55,719 Speaker 1: the long term ramifications that will have to not only 93 00:04:55,960 --> 00:04:58,719 Speaker 1: future generations but people now potentially. 94 00:05:00,200 --> 00:05:03,839 Speaker 2: The big difficulty that we have is that the United 95 00:05:03,839 --> 00:05:08,080 Speaker 2: States is pretty sound financially, and that is people will 96 00:05:08,080 --> 00:05:10,320 Speaker 2: still loan US money. So suppose you were a business 97 00:05:10,440 --> 00:05:13,400 Speaker 2: and you were worried about going bankrupt, as long as 98 00:05:13,400 --> 00:05:16,719 Speaker 2: you have lines of credit where their banks will say sure, yeah, 99 00:05:17,040 --> 00:05:18,960 Speaker 2: we will open up a new line of credit, you 100 00:05:19,000 --> 00:05:21,680 Speaker 2: could borrow another million dollars next year. That's the position 101 00:05:21,760 --> 00:05:24,920 Speaker 2: the US is in. Everyone will loan US money, and 102 00:05:25,040 --> 00:05:28,159 Speaker 2: it's like a little kid who has a key to 103 00:05:28,520 --> 00:05:31,520 Speaker 2: the cookie cabinet. We keep going back and say, well, 104 00:05:32,040 --> 00:05:34,400 Speaker 2: we don't need to actually do anything, we can just 105 00:05:34,520 --> 00:05:38,480 Speaker 2: borrow more. And so the difficulty that the US has 106 00:05:38,560 --> 00:05:41,800 Speaker 2: is precisely that it is so powerful financially that other 107 00:05:41,880 --> 00:05:45,080 Speaker 2: people will still loan us money. The result is, and 108 00:05:45,120 --> 00:05:48,840 Speaker 2: I've been saying this, as you said, for fifteen years. 109 00:05:48,960 --> 00:05:52,039 Speaker 2: Let's admit I've been consistently wrong. I thought we would 110 00:05:52,240 --> 00:05:55,520 Speaker 2: be able to borrow this amount of money. Wrong. Wrong. 111 00:05:56,440 --> 00:05:59,719 Speaker 2: Nobody heard that I was wrong. I did not think 112 00:05:59,760 --> 00:06:01,919 Speaker 2: we be able to borrow this much. I don't know 113 00:06:01,960 --> 00:06:05,240 Speaker 2: why people are still loaning us money, but I do 114 00:06:05,400 --> 00:06:09,599 Speaker 2: know that twenty five percent of the federal budget is 115 00:06:09,760 --> 00:06:14,120 Speaker 2: interest on the deficit. Another forty five percent is Social 116 00:06:14,160 --> 00:06:18,760 Speaker 2: Security and Medicare, which we also borrowed, and we spent 117 00:06:18,839 --> 00:06:21,039 Speaker 2: all the money that we took rob I don't know 118 00:06:21,040 --> 00:06:25,200 Speaker 2: if you know. I'm old. I get four thousand dollars 119 00:06:25,200 --> 00:06:28,000 Speaker 2: a month from you and the listeners. I want to 120 00:06:28,000 --> 00:06:30,479 Speaker 2: thank all of you young people because it is really great. 121 00:06:30,560 --> 00:06:33,479 Speaker 2: I'm rich as hell, but I get four thousand dollars 122 00:06:33,560 --> 00:06:36,920 Speaker 2: a month from you young people. And you know it's 123 00:06:37,000 --> 00:06:39,560 Speaker 2: true that over my whole life, I looked it up. 124 00:06:39,640 --> 00:06:42,800 Speaker 2: I put five hundred thousand dollars into the Social Security system. 125 00:06:43,000 --> 00:06:46,880 Speaker 2: It's gone, it's all spent. So it's not just the deficit, 126 00:06:47,360 --> 00:06:50,880 Speaker 2: it's the overhang of Social Security and Medicare. If you 127 00:06:50,920 --> 00:06:53,679 Speaker 2: add up interest on the debt, social Security and medicare. 128 00:06:53,760 --> 00:06:57,080 Speaker 2: That's sixty percent of the federal budget. What are we doing? 129 00:06:57,680 --> 00:06:59,160 Speaker 2: What is it where you would say, you know, what 130 00:06:59,160 --> 00:07:01,839 Speaker 2: we'd really like is to have a government pay interest 131 00:07:01,839 --> 00:07:04,760 Speaker 2: to other people and to give money to rich old people. 132 00:07:05,480 --> 00:07:07,440 Speaker 1: Here's the thing, though, you look great for eighty seven 133 00:07:07,560 --> 00:07:08,640 Speaker 1: years old. 134 00:07:08,920 --> 00:07:11,080 Speaker 2: I was hoping you'd say that. I was fishing for 135 00:07:11,120 --> 00:07:11,680 Speaker 2: a compliment. 136 00:07:12,640 --> 00:07:15,480 Speaker 1: Doctor Michael Mugger, Duke economist is our guests. So where 137 00:07:15,480 --> 00:07:17,640 Speaker 1: are we at with the economy? Because the stock market 138 00:07:17,720 --> 00:07:20,080 Speaker 1: seems to keep going up? Trump's telling us how hot 139 00:07:20,120 --> 00:07:22,840 Speaker 1: it is. But Biden said the same thing, and Main 140 00:07:22,840 --> 00:07:25,560 Speaker 1: Street was like, yes's not going so great, and it 141 00:07:25,600 --> 00:07:27,720 Speaker 1: seems like people aren't buying the way they used to, 142 00:07:28,080 --> 00:07:31,000 Speaker 1: you know, out in the communities, Like how do we 143 00:07:31,000 --> 00:07:32,640 Speaker 1: make sense of this? Where are we at? 144 00:07:33,240 --> 00:07:35,960 Speaker 2: If you want to make sense of it? You shouldn't 145 00:07:35,960 --> 00:07:38,720 Speaker 2: talk to me. We've already established I've been consistently wrong. 146 00:07:39,240 --> 00:07:42,320 Speaker 2: I can't say this. A bunch of idiots in Glenn 147 00:07:42,360 --> 00:07:44,880 Speaker 2: I'm looking at you, Paul Krugman, a bunch of New 148 00:07:44,960 --> 00:07:49,080 Speaker 2: York Times self appointed god's economies. So all the tariffs 149 00:07:49,120 --> 00:07:52,960 Speaker 2: are going to cause inflation. Tariffs cannot cause inflation. Tariffs 150 00:07:52,960 --> 00:07:56,480 Speaker 2: are a change in relative prices, and so unsurprisingly inflation 151 00:07:56,560 --> 00:07:59,520 Speaker 2: has not gone up very much. What has happened is 152 00:07:59,560 --> 00:08:03,040 Speaker 2: that the of some products have increased, but the price 153 00:08:03,040 --> 00:08:07,120 Speaker 2: of gas has fallen. Our economy is doing okay. And 154 00:08:07,240 --> 00:08:12,120 Speaker 2: the Trump people look at that and they say, well, 155 00:08:12,160 --> 00:08:14,840 Speaker 2: I guess everybody was wrong. Our policy is good. No, 156 00:08:15,480 --> 00:08:19,080 Speaker 2: the US economy would be on fire if Trump had 157 00:08:19,160 --> 00:08:22,840 Speaker 2: chosen sensible economic policies. Many a lot of what he 158 00:08:22,880 --> 00:08:27,720 Speaker 2: did was sensible, but the teariffs, the uncertainty, the threats 159 00:08:27,760 --> 00:08:30,120 Speaker 2: to the Fed chair. If he would just stay in 160 00:08:30,160 --> 00:08:33,839 Speaker 2: his damn lane, we could very easily the economy could 161 00:08:33,880 --> 00:08:36,160 Speaker 2: have twice the growth rate that it has now, the 162 00:08:36,280 --> 00:08:39,120 Speaker 2: stock market with two thousand points higher than it is now. 163 00:08:39,240 --> 00:08:42,920 Speaker 2: So we're doing okay, and Trump is right. You look 164 00:08:42,920 --> 00:08:45,440 Speaker 2: at the numbers. We're doing all right. I must be 165 00:08:45,520 --> 00:08:48,160 Speaker 2: doing the right thing. He's not. It would be much 166 00:08:48,320 --> 00:08:50,920 Speaker 2: better if he would just behave sensibly. 167 00:08:51,320 --> 00:08:53,920 Speaker 1: Why doesn't he do that? I mean he's a brilliant guy, right, 168 00:08:53,960 --> 00:08:55,760 Speaker 1: I mean he's made all sorts of money. Like he 169 00:08:55,840 --> 00:08:58,040 Speaker 1: has to know that, doesn't he? Like, is there some 170 00:08:58,440 --> 00:09:00,960 Speaker 1: super secret strategy here or is he just a guy 171 00:09:01,000 --> 00:09:02,720 Speaker 1: without any self constrain. 172 00:09:03,400 --> 00:09:07,240 Speaker 2: Like most of us, and I would include myself. If 173 00:09:07,280 --> 00:09:10,760 Speaker 2: you're an expert in something, you credit yourself with being 174 00:09:10,800 --> 00:09:13,880 Speaker 2: an expert in everything. Yeah, and you so often that 175 00:09:13,920 --> 00:09:16,079 Speaker 2: gets thrown back in my face. I've sort of cured 176 00:09:16,080 --> 00:09:19,839 Speaker 2: myself of it. He really has a genius for negotiating 177 00:09:20,200 --> 00:09:23,760 Speaker 2: business deals, and he has an idea in his head 178 00:09:24,240 --> 00:09:26,680 Speaker 2: that if I give you money and you give me 179 00:09:26,720 --> 00:09:30,600 Speaker 2: a thing, I've lost, that hurts me. If I give 180 00:09:30,640 --> 00:09:32,320 Speaker 2: you money and you give me a thing I need, 181 00:09:32,400 --> 00:09:35,199 Speaker 2: and that hurts me. So if we buy something from 182 00:09:35,240 --> 00:09:38,520 Speaker 2: another country and our money goes out and goods come in, 183 00:09:38,920 --> 00:09:42,840 Speaker 2: we've lost. He's mistaken about that if you look all 184 00:09:42,920 --> 00:09:47,559 Speaker 2: of his policies derived from that fundamentally flawed premise. Now, 185 00:09:48,000 --> 00:09:50,240 Speaker 2: there's a lot of problems with trade. There are things 186 00:09:50,320 --> 00:09:53,080 Speaker 2: that you might say other countries are behaving unfairly, but 187 00:09:53,120 --> 00:09:56,040 Speaker 2: the argument for free trade is buy and large unilateral. 188 00:09:56,320 --> 00:09:58,679 Speaker 2: We are better off being able to buy things more 189 00:09:58,760 --> 00:10:01,840 Speaker 2: cheaply than we could make them. Any business faces a 190 00:10:01,880 --> 00:10:04,160 Speaker 2: make or buy decision, and if you can buy it 191 00:10:04,240 --> 00:10:07,040 Speaker 2: cheaper than you could make it, you're not losing by 192 00:10:07,080 --> 00:10:10,160 Speaker 2: giving out money and getting the thing you're gaining because 193 00:10:10,160 --> 00:10:12,480 Speaker 2: then you have more money to spend on other stuff. 194 00:10:12,920 --> 00:10:17,000 Speaker 2: And so there's a fundamental mistake that motivates Donald Trump's 195 00:10:17,040 --> 00:10:20,080 Speaker 2: understanding of the world, and that is trade policy. He 196 00:10:20,160 --> 00:10:24,439 Speaker 2: often confuses the federal deficit and the trade deficit. Well, 197 00:10:24,520 --> 00:10:28,320 Speaker 2: the federal deficits bad. He's right, trade deficit could be bad, 198 00:10:28,360 --> 00:10:30,320 Speaker 2: but he puts way too much emphasis on it. 199 00:10:31,080 --> 00:10:33,160 Speaker 1: Before I let you go, we always do this disclaimer. 200 00:10:33,280 --> 00:10:35,520 Speaker 1: You are basically the reason I'm here today. You are 201 00:10:35,520 --> 00:10:37,880 Speaker 1: one of the people who inspired me to get involved 202 00:10:37,920 --> 00:10:40,600 Speaker 1: in politics. So everybody who hears this number one rated 203 00:10:40,679 --> 00:10:43,200 Speaker 1: radio program, they can thank you Monger. 204 00:10:44,080 --> 00:10:47,240 Speaker 2: It's a terrible responsibility. I wake up at night screaming 205 00:10:47,320 --> 00:10:48,319 Speaker 2: for thinking about that. 206 00:10:48,720 --> 00:10:52,160 Speaker 1: No where could people find you on the internet if 207 00:10:52,160 --> 00:10:54,400 Speaker 1: they'd like to read more or hear more about you. 208 00:10:55,360 --> 00:11:01,079 Speaker 2: My Twitter account is at mungowitz unng wi easy at 209 00:11:01,480 --> 00:11:06,280 Speaker 2: mungowitz and you can also read my you can listen 210 00:11:06,280 --> 00:11:09,680 Speaker 2: to my podcast, which is the answer is transaction cost 211 00:11:09,760 --> 00:11:11,880 Speaker 2: The answer is transaction costs. 212 00:11:12,200 --> 00:11:14,200 Speaker 1: Doctor Michael Bonger one of the best in the game. 213 00:11:14,280 --> 00:11:16,839 Speaker 2: Thank you, my friend, Thanks very much. It was a 214 00:11:16,840 --> 00:11:17,680 Speaker 2: pleasure as always. 215 00:11:17,760 --> 00:11:20,040 Speaker 1: Yeah, ninety three WIBC it's Kell and Casey Show.