1
00:00:00,320 --> 00:00:02,120
Speaker 1: GDP three percent.

2
00:00:03,080 --> 00:00:08,399
Speaker 2: Oh dang, that's a that's a nicely moving economy right there.

3
00:00:08,560 --> 00:00:12,800
Speaker 2: That's things happening, that's money getting spent. That should mean

4
00:00:12,960 --> 00:00:16,439
Speaker 2: creation three percent for a nation like ours with the

5
00:00:16,560 --> 00:00:19,880
Speaker 2: level of output that we have. Three percent is a nice,

6
00:00:20,200 --> 00:00:20,920
Speaker 2: nice number.

7
00:00:21,600 --> 00:00:22,320
Speaker 1: But we got to.

8
00:00:22,320 --> 00:00:27,440
Speaker 2: Three percent with tariffs when the expectation from the economists

9
00:00:27,960 --> 00:00:33,240
Speaker 2: was two point three percent. We're beating the expectations. Yet

10
00:00:33,280 --> 00:00:35,640
Speaker 2: I could show you other spots of this economy that

11
00:00:35,720 --> 00:00:38,080
Speaker 2: don't seem to drive up to that. When I tell

12
00:00:38,159 --> 00:00:41,760
Speaker 2: you that I spend the time trying to understand, I

13
00:00:41,840 --> 00:00:45,000
Speaker 2: spend the time digging in nothing makes sense.

14
00:00:45,760 --> 00:00:46,760
Speaker 1: Trump is a genius.

15
00:00:46,800 --> 00:00:49,800
Speaker 2: Well, that could very well be it, or maybe some

16
00:00:49,880 --> 00:00:52,720
Speaker 2: things haven't yet happened. That will then give us a

17
00:00:52,760 --> 00:00:56,000
Speaker 2: more honest estimate of what's happening. But how do you

18
00:00:56,120 --> 00:00:58,880
Speaker 2: argue with a three percent GDP? I mean, how do

19
00:00:58,920 --> 00:01:02,160
Speaker 2: you do this? Tony? Tony Katz today, good to be

20
00:01:02,240 --> 00:01:04,720
Speaker 2: with you, Doctor Matt Will joins, the economist at the

21
00:01:04,800 --> 00:01:07,959
Speaker 2: University of Indianapolis. I know we just spoke the other

22
00:01:08,080 --> 00:01:11,240
Speaker 2: day about some of the things that are going on,

23
00:01:11,280 --> 00:01:17,679
Speaker 2: specifically the trade deal with the European Union, which has

24
00:01:17,720 --> 00:01:20,360
Speaker 2: in it some things that make you say fantastic. But

25
00:01:20,440 --> 00:01:22,320
Speaker 2: if we're talking about the buying of energy from the

26
00:01:22,400 --> 00:01:24,759
Speaker 2: United States, where else they can buy energy from when

27
00:01:24,800 --> 00:01:28,480
Speaker 2: they clearly can't buy energy from the Russians. Even India

28
00:01:28,560 --> 00:01:30,399
Speaker 2: is now getting a hit from the United States. I'm

29
00:01:30,400 --> 00:01:33,560
Speaker 2: buying oil from the Russians. We'll get into it. But

30
00:01:33,760 --> 00:01:37,720
Speaker 2: GDP at three percent, the estimate from the Economist was

31
00:01:37,720 --> 00:01:40,960
Speaker 2: two point three percent. Break down the numbers. What is

32
00:01:41,000 --> 00:01:41,640
Speaker 2: it that you see?

33
00:01:42,480 --> 00:01:44,840
Speaker 3: Well, let me serve. First of all, start by saying,

34
00:01:45,040 --> 00:01:48,800
Speaker 3: not all GDPs are created equal. So a GDP of

35
00:01:48,840 --> 00:01:53,640
Speaker 3: animal farm, I'll talk a GDP of Trump versus GDP

36
00:01:53,760 --> 00:01:56,960
Speaker 3: of Biden. And let me explain what I mean by that.

37
00:01:57,280 --> 00:01:59,720
Speaker 3: You know, yes, it's a three percent increase, which is

38
00:01:59,720 --> 00:02:02,600
Speaker 3: better than expected. So that's good news. But someone in

39
00:02:02,640 --> 00:02:05,000
Speaker 3: the Biden administration will say, well, we had two quarters

40
00:02:05,040 --> 00:02:08,720
Speaker 3: of positive three percent, which is true, but their three

41
00:02:08,760 --> 00:02:12,000
Speaker 3: percent was driven by government spending. That is not the

42
00:02:12,080 --> 00:02:16,680
Speaker 3: same as GDP driven by consumer spending and private companies

43
00:02:17,000 --> 00:02:21,400
Speaker 3: and shrinking government. We got a three percent GDP growth

44
00:02:21,760 --> 00:02:27,880
Speaker 3: and the government shrink. Biden's GDP was driven entirely by government.

45
00:02:28,160 --> 00:02:30,760
Speaker 2: Talk to me about the shrink Let's let's get into

46
00:02:30,800 --> 00:02:32,239
Speaker 2: I mean, I can't believe I'm going to talk to

47
00:02:32,280 --> 00:02:35,600
Speaker 2: you about shrinkage. We're going full George here, but talk

48
00:02:35,639 --> 00:02:38,040
Speaker 2: to me about the shrink right, So this is really

49
00:02:38,080 --> 00:02:40,480
Speaker 2: about Oh my gosh, doge worked. I mean, that is

50
00:02:40,680 --> 00:02:43,200
Speaker 2: I think one way to look at this. But give

51
00:02:43,200 --> 00:02:46,440
Speaker 2: me some specifics. Dig in if you can. What is

52
00:02:46,480 --> 00:02:51,680
Speaker 2: it that shrink that is truly attributable to the Trump

53
00:02:51,720 --> 00:02:52,280
Speaker 2: White House?

54
00:02:52,639 --> 00:02:55,280
Speaker 3: Okay, the GDP is a formula. We all learned it

55
00:02:55,320 --> 00:02:58,800
Speaker 3: back in high school. You know, consumer spending plus government

56
00:02:58,840 --> 00:03:02,720
Speaker 3: spending plus investment, and plus net imports exports. So government

57
00:03:02,800 --> 00:03:05,760
Speaker 3: is a major part of the GDP formula. Under the

58
00:03:05,800 --> 00:03:10,240
Speaker 3: Biden administration, there was massive amounts of government spending. So

59
00:03:10,520 --> 00:03:13,040
Speaker 3: we all know about the deficits that were created under

60
00:03:13,080 --> 00:03:16,359
Speaker 3: Biden that resulted in the inflation we're still dealing with.

61
00:03:16,800 --> 00:03:19,880
Speaker 3: So they increased the GDP and they bragged about it,

62
00:03:19,919 --> 00:03:23,760
Speaker 3: but Wall Street, Main Street hated it because it wasn't

63
00:03:23,840 --> 00:03:27,400
Speaker 3: driven by a growing private economy. We've spoken before on

64
00:03:27,440 --> 00:03:31,000
Speaker 3: the show about the shrinking manufacturing base in the United States,

65
00:03:31,160 --> 00:03:35,360
Speaker 3: that it was happening for three years under Biden. That's

66
00:03:35,360 --> 00:03:38,840
Speaker 3: not what's happening now under Trump, the government has shrunk.

67
00:03:39,200 --> 00:03:43,320
Speaker 3: The portion of the GDP attributable to government is actually negative.

68
00:03:43,680 --> 00:03:45,760
Speaker 3: So how do you get three percent if the g

69
00:03:46,040 --> 00:03:50,720
Speaker 3: part is negative because the consumer spart, because the investment part,

70
00:03:50,920 --> 00:03:54,040
Speaker 3: because of the net import exports. All the parts that

71
00:03:54,080 --> 00:03:57,200
Speaker 3: you want to grow are growing and the part you

72
00:03:57,240 --> 00:03:59,400
Speaker 3: want to shrink is shrinking. So this is a good

73
00:03:59,400 --> 00:04:02,240
Speaker 3: three percent. Were under Biden it was a bad three percent.

74
00:04:02,680 --> 00:04:06,360
Speaker 2: Talking to doctor Matt Will, economist at the University of Indianapolis,

75
00:04:06,920 --> 00:04:10,280
Speaker 2: Now let's talk about manufacturing. As we have noted on

76
00:04:10,320 --> 00:04:15,040
Speaker 2: this show, manufacturing has been down for the past four months.

77
00:04:15,320 --> 00:04:17,600
Speaker 1: It has been one of your alarms.

78
00:04:17,640 --> 00:04:19,440
Speaker 2: It has been something that you have been focused on,

79
00:04:19,520 --> 00:04:23,440
Speaker 2: concentrating on, and concerned with. Did this GDP report just

80
00:04:23,480 --> 00:04:24,440
Speaker 2: make all that disappear.

81
00:04:25,240 --> 00:04:28,520
Speaker 3: No, not at all. That concern is very real, and

82
00:04:28,880 --> 00:04:31,520
Speaker 3: I think that the biggest information for the week is

83
00:04:31,560 --> 00:04:33,320
Speaker 3: not going to be this report, although this was a

84
00:04:33,400 --> 00:04:38,320
Speaker 3: huge surprise. Friday Friday, when the ISM, the Institute for

85
00:04:38,360 --> 00:04:42,280
Speaker 3: Supply Management comes out with their Purchasing Managers Index, that's

86
00:04:42,320 --> 00:04:46,719
Speaker 3: the thing that says is manufacturing shrinking or growing? It

87
00:04:46,880 --> 00:04:50,840
Speaker 3: shrunk last month for the last two months. What will

88
00:04:50,839 --> 00:04:53,200
Speaker 3: that look like? Now, I guess probably this next one

89
00:04:53,240 --> 00:04:55,960
Speaker 3: may not be the best one to look at because

90
00:04:56,360 --> 00:04:59,000
Speaker 3: we still have the tariff impact. But I'm telling you

91
00:04:59,320 --> 00:05:01,680
Speaker 3: I predict, and I don't make the many predictions, that

92
00:05:01,760 --> 00:05:05,400
Speaker 3: when the tariff doest settles, and it is settling, I

93
00:05:05,520 --> 00:05:08,920
Speaker 3: believe that the manufacturing will grow because what we saw

94
00:05:09,040 --> 00:05:12,240
Speaker 3: also in this GDP report, here's a a little nerdy tidbit.

95
00:05:12,880 --> 00:05:17,080
Speaker 3: The United States consumers significantly increase their purchase of domestic

96
00:05:17,200 --> 00:05:21,400
Speaker 3: goods versus imported goods. Now, I'm not saying that's good

97
00:05:21,480 --> 00:05:23,640
Speaker 3: or bad. I like buying imported goods. I want to

98
00:05:23,640 --> 00:05:26,440
Speaker 3: buy the highest quality, cheapest good I can get. That's

99
00:05:26,520 --> 00:05:29,960
Speaker 3: me and I strongly believe that. But the data says

100
00:05:30,480 --> 00:05:33,880
Speaker 3: that US citizens bought more domestic made products.

101
00:05:33,960 --> 00:05:37,000
Speaker 1: So right there, write down a note so you don't

102
00:05:37,000 --> 00:05:37,640
Speaker 1: lose your spot.

103
00:05:38,480 --> 00:05:43,120
Speaker 2: You're saying that the American consumer recognize the price shifts

104
00:05:43,160 --> 00:05:46,920
Speaker 2: because of tariffs and made spending habit shifts. That that

105
00:05:47,360 --> 00:05:50,480
Speaker 2: wasn't a debate that actually happened.

106
00:05:50,920 --> 00:05:53,719
Speaker 3: Yes, that's what we see in this report. We see

107
00:05:53,839 --> 00:05:59,880
Speaker 3: more consumer spending from domestic sources versus imported sources that

108
00:06:00,200 --> 00:06:03,440
Speaker 3: in this report, and that was a goal of Trump.

109
00:06:03,520 --> 00:06:06,560
Speaker 3: Trump wanted us to buy domestic. Now I've said it,

110
00:06:06,600 --> 00:06:09,279
Speaker 3: and I'll continue to say. We can't buy everything domestic.

111
00:06:09,320 --> 00:06:11,880
Speaker 3: About eighty to ninety percent of everything in the world

112
00:06:12,000 --> 00:06:15,080
Speaker 3: is on a container ship. So we would go back

113
00:06:15,080 --> 00:06:17,520
Speaker 3: to the Stone Age if we didn't buy imports. But

114
00:06:17,640 --> 00:06:22,239
Speaker 3: the shift, the shift grew the domestic economy GDP grew

115
00:06:22,279 --> 00:06:25,080
Speaker 3: because we're buying more domestic. By the way, is that

116
00:06:25,120 --> 00:06:29,640
Speaker 3: a surprise Imports cost war. If imports cost war, you're

117
00:06:29,680 --> 00:06:32,240
Speaker 3: gonna buy less of them. That's exactly what happened here.

118
00:06:32,360 --> 00:06:34,919
Speaker 2: What this does tie into it, and I don't mean

119
00:06:35,000 --> 00:06:36,640
Speaker 2: to kind of meander to get back to me in

120
00:06:36,680 --> 00:06:39,560
Speaker 2: subjects talking to doctor Matt Will, economist at the University

121
00:06:39,600 --> 00:06:46,200
Speaker 2: of Indianapolis. This gets into the idea that tariff costs

122
00:06:46,760 --> 00:06:51,360
Speaker 2: are being absorbed and not being passed along to the consumer. Right,

123
00:06:51,400 --> 00:06:53,479
Speaker 2: We've been hearing at this with Toyota and with others.

124
00:06:53,520 --> 00:06:57,799
Speaker 2: They're absorbing the tariff costs. This report says the tariff

125
00:06:57,800 --> 00:07:01,560
Speaker 2: cost has not necessarily been absorb or by the company,

126
00:07:01,560 --> 00:07:05,240
Speaker 2: by the manufacturer. It is being passed along. People are

127
00:07:05,320 --> 00:07:08,280
Speaker 2: seeing it and they're making a shift in their choices,

128
00:07:08,760 --> 00:07:11,440
Speaker 2: which would make one think that, you know, to how

129
00:07:11,480 --> 00:07:16,040
Speaker 2: you brought this subject up. The tariff dust settling means

130
00:07:16,080 --> 00:07:20,480
Speaker 2: people have made their decisions and everybody can go now

131
00:07:20,560 --> 00:07:22,880
Speaker 2: from this new level of certitude that seems to be

132
00:07:22,920 --> 00:07:25,160
Speaker 2: where this data tells us things are going.

133
00:07:25,960 --> 00:07:28,800
Speaker 3: No, no, let me say it's not all or nothing.

134
00:07:29,640 --> 00:07:34,200
Speaker 3: There's a mixture. So they have absorbed most of the costs.

135
00:07:34,240 --> 00:07:36,080
Speaker 3: I mean we've saw it in Toyota. We saw it

136
00:07:36,120 --> 00:07:40,160
Speaker 3: in Nissan's announcement today, a significant drop. We saw you know,

137
00:07:40,280 --> 00:07:44,360
Speaker 3: General Motors announce this significant drop. So no, we've seen

138
00:07:44,440 --> 00:07:50,040
Speaker 3: a huge absorbing. I mean Whirlpool, Whirlpool a massive lost

139
00:07:50,160 --> 00:07:53,520
Speaker 3: reported yesterday. I mean, it's it's unfathomable. They cut their dividend.

140
00:07:54,040 --> 00:07:57,840
Speaker 3: Never happens. So it is true that companies have absorbed

141
00:07:57,840 --> 00:08:00,400
Speaker 3: the losses, but some of them have been passed long,

142
00:08:00,760 --> 00:08:02,440
Speaker 3: some of the terrafs have been passed along. I mean,

143
00:08:02,480 --> 00:08:05,120
Speaker 3: just look at the Amazon report that came out a

144
00:08:05,160 --> 00:08:07,560
Speaker 3: couple weeks ago from the Wall Street Journal. I mean

145
00:08:07,600 --> 00:08:10,320
Speaker 3: they had prices increasing across the board one hundred and

146
00:08:10,320 --> 00:08:13,000
Speaker 3: thirty six percent, one hundred and fifteen percent, thirty four percent.

147
00:08:13,000 --> 00:08:16,080
Speaker 3: I'm looking at the list right now. So no, there

148
00:08:16,120 --> 00:08:19,600
Speaker 3: have been some costs that we have absorbed as consumers.

149
00:08:20,280 --> 00:08:24,000
Speaker 3: Most of them have been absorbed by businesses. So when you,

150
00:08:24,400 --> 00:08:28,240
Speaker 3: when you as a consumer, have an increase in your costs,

151
00:08:28,400 --> 00:08:31,600
Speaker 3: you will switch your behavior. And they did. They switched

152
00:08:31,640 --> 00:08:35,559
Speaker 3: their behavior to find more domestic products. And Procter and

153
00:08:35,600 --> 00:08:38,160
Speaker 3: Gamble has even said that, but they also issued a

154
00:08:38,200 --> 00:08:41,920
Speaker 3: warning just this week on what looks not too good

155
00:08:41,960 --> 00:08:43,800
Speaker 3: for the future of consumer spending.

156
00:08:43,880 --> 00:08:47,200
Speaker 2: Talking to doctor Matt Will, economists at the University of Indianapolis.

157
00:08:47,240 --> 00:08:49,600
Speaker 2: And this is where it gets all like you're saying

158
00:08:49,600 --> 00:08:52,120
Speaker 2: two things at once. You're you're saying it's good, but

159
00:08:52,200 --> 00:08:55,840
Speaker 2: it's not. It's bad, but it's not. Stick with the

160
00:08:55,840 --> 00:08:57,640
Speaker 2: first part here before we get into the Proctor and

161
00:08:57,679 --> 00:09:01,800
Speaker 2: Gamble warning. You have people who have made these shifts.

162
00:09:02,360 --> 00:09:07,320
Speaker 2: You have these companies that understand that the tariffs are here,

163
00:09:07,800 --> 00:09:11,520
Speaker 2: and they understand that it's going to create new prices, consumers,

164
00:09:11,760 --> 00:09:14,960
Speaker 2: as we said, making their decisions based on it.

165
00:09:15,679 --> 00:09:23,079
Speaker 1: But you also say that we're the manufacturing numbers which

166
00:09:23,160 --> 00:09:28,080
Speaker 1: have been down aren't necessarily a serious problem. If I

167
00:09:28,200 --> 00:09:29,640
Speaker 1: understood you, right, that's what.

168
00:09:29,520 --> 00:09:33,120
Speaker 2: You were discussing there on the manufacturing numbers, because when

169
00:09:33,120 --> 00:09:37,920
Speaker 2: we take a look at inventories and investment in quarter one,

170
00:09:38,000 --> 00:09:40,800
Speaker 2: inventories were up. In quarter two, inventories were down, and

171
00:09:40,880 --> 00:09:45,160
Speaker 2: as you note, not only inventories, but investment is down

172
00:09:45,840 --> 00:09:48,360
Speaker 2: in the US. That would tell me the tariffs are

173
00:09:48,440 --> 00:09:52,000
Speaker 2: having a negative effect on American business.

174
00:09:52,960 --> 00:09:56,160
Speaker 3: Yes, that is correct, and that's what I observed. But

175
00:09:56,160 --> 00:09:59,040
Speaker 3: then when I looked at the numbers, this shocked me.

176
00:09:59,160 --> 00:10:02,479
Speaker 3: This was very fast to me. The decrease in investment

177
00:10:02,840 --> 00:10:08,360
Speaker 3: was one hundred percent, a decrease in inventory investment. Because

178
00:10:08,559 --> 00:10:11,600
Speaker 3: you can invest in inventory or you can invest in

179
00:10:11,640 --> 00:10:14,800
Speaker 3: building a machine, they're in the same number. So the

180
00:10:14,880 --> 00:10:18,160
Speaker 3: decrease that we saw in investments was one hundred and

181
00:10:18,200 --> 00:10:21,839
Speaker 3: eighty nine billion. The decrease in inventories was one hundred

182
00:10:21,840 --> 00:10:25,520
Speaker 3: and ninety billion, So one hundred percent of the drop

183
00:10:25,520 --> 00:10:28,720
Speaker 3: in investments was due to inventory, which we talked about

184
00:10:28,760 --> 00:10:32,920
Speaker 3: on your show. It was front running companies bought inventory

185
00:10:32,960 --> 00:10:36,640
Speaker 3: in anticipation of the tariffs in Q one, So investments

186
00:10:36,640 --> 00:10:38,840
Speaker 3: were through the roof one hundred and fifty five billion,

187
00:10:38,960 --> 00:10:43,480
Speaker 3: up this quarter, they're down one hundred and eighty nine billion.

188
00:10:43,880 --> 00:10:46,760
Speaker 3: Why because they've already bought their inventory from overseas in

189
00:10:46,800 --> 00:10:47,439
Speaker 3: the first quarter.

190
00:10:47,520 --> 00:10:49,400
Speaker 2: So how does that play in the crystal ball world?

191
00:10:49,480 --> 00:10:52,480
Speaker 2: What does that mean for quarter three? That means fantastic,

192
00:10:53,040 --> 00:10:55,960
Speaker 2: This means really good. Think of the remember the bounce

193
00:10:56,000 --> 00:10:58,480
Speaker 2: back during COVID. You know, we forced everyone into a

194
00:10:58,520 --> 00:11:00,760
Speaker 2: recession and to stay home, and then we let them

195
00:11:00,760 --> 00:11:02,000
Speaker 2: loose and things came back.

196
00:11:02,400 --> 00:11:05,840
Speaker 3: Same thing. We front loaded our purchasing of inventory in

197
00:11:05,920 --> 00:11:09,000
Speaker 3: Q one. In Q two we didn't buy any inventory.

198
00:11:09,720 --> 00:11:13,120
Speaker 3: So Q three should be back to normal. And here's

199
00:11:13,160 --> 00:11:16,160
Speaker 3: what's good about the normal. When I look into the data,

200
00:11:16,400 --> 00:11:22,160
Speaker 3: other than this anomaly of inventory switching, it's good. Investments

201
00:11:22,200 --> 00:11:25,880
Speaker 3: were up. Investments are positive, and it's not government investing,

202
00:11:25,920 --> 00:11:30,200
Speaker 3: it's private investing. I really see positive news in the

203
00:11:30,240 --> 00:11:32,440
Speaker 3: third quarter. Now, I gotta tell you, I saw Kevin

204
00:11:32,480 --> 00:11:36,400
Speaker 3: Hassett in an interview just a few moments ago. He

205
00:11:36,520 --> 00:11:40,800
Speaker 3: actually made a prediction which I'm shocked. He said, GDP

206
00:11:41,040 --> 00:11:44,320
Speaker 3: at least four percent growth next quarter. That's a pretty

207
00:11:44,360 --> 00:11:46,960
Speaker 3: bold statement, but of course, I think we're used to

208
00:11:46,960 --> 00:11:48,480
Speaker 3: bold statements from this administration.

209
00:11:49,000 --> 00:11:52,679
Speaker 2: Talking to doctor Matt Well, economists at the University of Indianapolis.

210
00:11:52,840 --> 00:11:56,280
Speaker 2: Kevin Howsett leads the White House Council of Economic Advisors,

211
00:11:56,640 --> 00:12:01,000
Speaker 2: and four percent GDP in a nation like ours is

212
00:12:01,040 --> 00:12:04,520
Speaker 2: beyond growth. Four percent might be too dang big. And

213
00:12:04,559 --> 00:12:06,599
Speaker 2: if you get which, don't get me wrong, I'm not

214
00:12:06,600 --> 00:12:09,280
Speaker 2: opposed to the growth. I'm just playing in economic reality here.

215
00:12:09,640 --> 00:12:12,520
Speaker 2: This all is going to play into a Drone Powell conversation,

216
00:12:12,840 --> 00:12:15,200
Speaker 2: which as we're talking, he hasn't made the decision yet

217
00:12:15,240 --> 00:12:17,880
Speaker 2: on rates. I'm betting on he's holding firm. I'm betting

218
00:12:17,920 --> 00:12:20,680
Speaker 2: on no cuts whatsoever. I'll listen to what your bet is.

219
00:12:21,120 --> 00:12:22,760
Speaker 2: But if you get four percent.

220
00:12:22,480 --> 00:12:24,040
Speaker 1: There's going to be a worry that the economy is

221
00:12:24,080 --> 00:12:27,280
Speaker 1: going too fast, Inflation might return, and this is going.

222
00:12:27,280 --> 00:12:31,080
Speaker 2: To keep the rates higher, which Trump doesn't want. What

223
00:12:31,240 --> 00:12:33,360
Speaker 2: is your take on a four percent GDP and where

224
00:12:33,400 --> 00:12:34,080
Speaker 2: inflation is.

225
00:12:34,720 --> 00:12:37,280
Speaker 3: If we have a four percent GDP growth that's not

226
00:12:37,520 --> 00:12:42,160
Speaker 3: government based, it's private company based, then we need more

227
00:12:42,160 --> 00:12:44,880
Speaker 3: cash in the economy. We need more cash because we

228
00:12:44,960 --> 00:12:47,920
Speaker 3: have more stuff. So that means he needs to cut rates.

229
00:12:48,600 --> 00:12:51,000
Speaker 3: He has to cut rates. I know, you know, I've

230
00:12:51,040 --> 00:12:54,280
Speaker 3: been an anti rate cutting guy, but now the data

231
00:12:54,320 --> 00:12:56,520
Speaker 3: says and I said, this is a last few times

232
00:12:56,559 --> 00:12:57,000
Speaker 3: we spoke.

233
00:12:57,840 --> 00:13:02,000
Speaker 2: Data is indicating rate cuts. I'm on the opposite side. Well,

234
00:13:02,040 --> 00:13:03,480
Speaker 2: I'm not on the opposite side of it, but I

235
00:13:03,520 --> 00:13:06,960
Speaker 2: see it incorrectly. Is what you're saying that if indeed

236
00:13:07,240 --> 00:13:09,960
Speaker 2: we get to a level of four percent, if indeed

237
00:13:10,000 --> 00:13:12,560
Speaker 2: we have the speed in this economy, we have to

238
00:13:12,800 --> 00:13:14,920
Speaker 2: cut rates to ensure more cash can get into the

239
00:13:14,920 --> 00:13:18,440
Speaker 2: system so the products can be purchased or the investments

240
00:13:18,480 --> 00:13:21,280
Speaker 2: can be utilized. Because if not not cutting the rates

241
00:13:21,360 --> 00:13:22,680
Speaker 2: is going to keep inflation high.

242
00:13:23,320 --> 00:13:27,600
Speaker 3: Yes, no, well, actually you know what. Okay, ready, are

243
00:13:27,640 --> 00:13:30,080
Speaker 3: you sitting down? I'm always am I sitting down. I

244
00:13:30,120 --> 00:13:32,160
Speaker 3: have a very comfy chair. Look at this setup. This

245
00:13:32,240 --> 00:13:35,439
Speaker 3: is gold deflation.

246
00:13:36,559 --> 00:13:37,920
Speaker 1: Well, now you have a drink.

247
00:13:38,640 --> 00:13:41,280
Speaker 3: If you have so much growth in the economy, not

248
00:13:41,400 --> 00:13:45,720
Speaker 3: government growth, because government growth is different than private industry growth.

249
00:13:45,920 --> 00:13:49,320
Speaker 3: Government growth is another juice to the economy. It just

250
00:13:49,400 --> 00:13:53,840
Speaker 3: causes the inflation. Private industry growth is legitimate stuff, and

251
00:13:53,840 --> 00:13:57,400
Speaker 3: if you have more stuff, you need more cash. And

252
00:13:57,440 --> 00:14:01,040
Speaker 3: so this report says stuff is growing, so we now

253
00:14:01,160 --> 00:14:04,200
Speaker 3: need more cash. And I think that they need to

254
00:14:04,200 --> 00:14:06,440
Speaker 3: cut their rates. And I said this before. I'm gonna

255
00:14:06,440 --> 00:14:08,560
Speaker 3: say it again. They need to cut their balance sheet

256
00:14:08,559 --> 00:14:11,040
Speaker 3: at the same time. They've got to cut their balance

257
00:14:11,040 --> 00:14:14,920
Speaker 3: sheet while they're cutting rates. And the perfect indication is

258
00:14:14,920 --> 00:14:17,960
Speaker 3: the yield curve. The yield curve is telling us to

259
00:14:18,040 --> 00:14:20,840
Speaker 3: do this. The yield curve. Long term rates have been

260
00:14:20,880 --> 00:14:23,960
Speaker 3: slightly increasing and short term rates are still high. That's

261
00:14:23,960 --> 00:14:28,720
Speaker 3: an artificial increase. Jerome Palell is artificially keeping short term

262
00:14:28,800 --> 00:14:32,400
Speaker 3: rates low when all the data now says cut. And

263
00:14:32,560 --> 00:14:35,440
Speaker 3: I think, this is my opinion, I think it's personal.

264
00:14:35,880 --> 00:14:37,880
Speaker 3: I think he's no longer looking at the data. I

265
00:14:37,880 --> 00:14:40,080
Speaker 3: gave him a lot of credit in the last two years,

266
00:14:40,120 --> 00:14:43,000
Speaker 3: but now I think it's become personal. And I think

267
00:14:43,000 --> 00:14:47,680
Speaker 3: we're going to see FED governors diverge and defect and

268
00:14:47,720 --> 00:14:49,000
Speaker 3: not agree with his decisions.

269
00:14:49,000 --> 00:14:52,200
Speaker 1: This is already happen. Oh my god, this is already happening.

270
00:14:52,520 --> 00:14:55,600
Speaker 2: You already have the rumor mill going that federal Reserve

271
00:14:55,680 --> 00:14:58,120
Speaker 2: governors are going to come out and say this isn't right,

272
00:14:58,240 --> 00:14:59,520
Speaker 2: this is wrong, and this is going to be the

273
00:14:59,520 --> 00:15:03,800
Speaker 2: pressure that might very well lead Jerome Powell to resigning.

274
00:15:03,840 --> 00:15:06,600
Speaker 1: I think you're one thousand percent right on that part.

275
00:15:06,360 --> 00:15:08,800
Speaker 2: Of it, but just to get back to this really quick,

276
00:15:09,320 --> 00:15:14,400
Speaker 2: because maybe it's important that everybody understands how the economics plays.

277
00:15:14,960 --> 00:15:18,040
Speaker 2: You're saying that without a rate cut in an advancing,

278
00:15:18,160 --> 00:15:22,160
Speaker 2: growing economy, I should say we would see deflation. Now,

279
00:15:22,200 --> 00:15:24,240
Speaker 2: deflation is going to be the lowering of the prices,

280
00:15:24,320 --> 00:15:26,680
Speaker 2: the increasing of purchase power. So I don't know if

281
00:15:26,680 --> 00:15:30,320
Speaker 2: everybody is going to be upset by deflation. Is the

282
00:15:30,520 --> 00:15:33,920
Speaker 2: argument that this should be measured and not be allowed

283
00:15:34,160 --> 00:15:39,360
Speaker 2: to be a part of a wild gesticulation of market forces,

284
00:15:39,560 --> 00:15:43,120
Speaker 2: that we should have government intervention to lessen that blow,

285
00:15:43,160 --> 00:15:43,640
Speaker 2: if you will.

286
00:15:44,280 --> 00:15:46,800
Speaker 3: Okay, well, I don't know what gesticulation means. I'm just

287
00:15:46,840 --> 00:15:47,920
Speaker 3: a university professor.

288
00:15:48,000 --> 00:15:48,200
Speaker 1: Yeah.

289
00:15:48,200 --> 00:15:54,360
Speaker 3: Well, but no, deflation is actually bad, and we've seen

290
00:15:54,360 --> 00:15:59,080
Speaker 3: this in Japan. Japan had a forever depression because of deflation,

291
00:15:59,280 --> 00:16:03,000
Speaker 3: not inflation, because what happens in deflation. If you have

292
00:16:03,120 --> 00:16:05,880
Speaker 3: some money, it's better to put it in your mattress

293
00:16:05,960 --> 00:16:08,640
Speaker 3: under your bed than to invest it in building a factory,

294
00:16:08,680 --> 00:16:13,560
Speaker 3: because in deflation, your dollar gains value over time by

295
00:16:13,600 --> 00:16:18,120
Speaker 3: just sitting there doing nothing. So you're competing against putting

296
00:16:18,160 --> 00:16:22,280
Speaker 3: money under your pillow versus building a factory and growing

297
00:16:22,280 --> 00:16:26,440
Speaker 3: the economy. Deflation is worse than inflation because it's harder

298
00:16:26,480 --> 00:16:29,400
Speaker 3: to get out of deflation. Japan has not succeeded in

299
00:16:29,440 --> 00:16:29,720
Speaker 3: doing so.

300
00:16:30,120 --> 00:16:34,640
Speaker 1: Inso a deflation is a killer of investments.

301
00:16:35,120 --> 00:16:38,360
Speaker 3: Yes, yes, deflation is a killer of investment.

302
00:16:38,560 --> 00:16:39,920
Speaker 1: Stay right there, doctor.

303
00:16:39,680 --> 00:16:43,840
Speaker 2: Matt Whell, economist at the University of indianapomis keep it here.

304
00:16:44,080 --> 00:16:48,640
Speaker 1: This is Tony Kats today. So let's pick up.

305
00:16:50,360 --> 00:16:54,320
Speaker 2: Where we left off as we were discussing deflation. Tony Katz,

306
00:16:54,400 --> 00:16:56,760
Speaker 2: Tony Kats today, Good to be with you talking to

307
00:16:56,800 --> 00:17:01,280
Speaker 2: doctor Matt Whell, economist at the University of Indianapolis, and

308
00:17:01,800 --> 00:17:04,760
Speaker 2: how the moment may very well be here.

309
00:17:04,560 --> 00:17:07,600
Speaker 1: To cut rates, because the cutting of rates.

310
00:17:07,640 --> 00:17:09,960
Speaker 2: If we're seeing the economy now with a GDP of

311
00:17:09,960 --> 00:17:13,280
Speaker 2: three percent, which I agree is an unbelievable number for

312
00:17:13,320 --> 00:17:15,280
Speaker 2: the last quarter, doctor Will.

313
00:17:15,400 --> 00:17:18,399
Speaker 1: It is an absolutely amazing number.

314
00:17:18,680 --> 00:17:22,320
Speaker 2: And that number, when properly digested, might very well be

315
00:17:22,960 --> 00:17:25,600
Speaker 2: what President Trump needs to share with the rest of

316
00:17:25,640 --> 00:17:30,120
Speaker 2: the country economists, others, others on his economic team to say,

317
00:17:30,280 --> 00:17:33,320
Speaker 2: now we've got the data, now we can cut the rates.

318
00:17:33,480 --> 00:17:35,919
Speaker 2: And maybe Jerome Powell, Chairman of the Federal Reserve, is

319
00:17:36,000 --> 00:17:38,560
Speaker 2: taking all the attacks on him personally. Of course, that

320
00:17:38,680 --> 00:17:40,800
Speaker 2: walk through of the building where they're wearing the hard hats,

321
00:17:40,920 --> 00:17:43,600
Speaker 2: and he's Trump's like, you see he spent three billion here,

322
00:17:43,600 --> 00:17:47,000
Speaker 2: and Powell's looking at it like it's hieroglyphics. He doesn't

323
00:17:47,000 --> 00:17:49,240
Speaker 2: know which end is up. He might be taking it

324
00:17:49,280 --> 00:17:52,439
Speaker 2: personally not want to cut rates. We do have federal

325
00:17:52,480 --> 00:17:55,679
Speaker 2: Reserve governors who are going to apply pressure, but for

326
00:17:55,760 --> 00:17:57,879
Speaker 2: a lot of people like myself who have said, I

327
00:17:57,920 --> 00:17:59,600
Speaker 2: don't know if we're in a place to cut rates.

328
00:17:59,680 --> 00:18:05,040
Speaker 2: Yet you're selling us that this data set says, okay,

329
00:18:05,440 --> 00:18:09,359
Speaker 2: cut Trump wants one percent, two percent to take whatever

330
00:18:09,400 --> 00:18:13,040
Speaker 2: he can get. What is the number here that you

331
00:18:13,040 --> 00:18:16,159
Speaker 2: would advise Jerome Powell? Because we're speaking now before the

332
00:18:16,240 --> 00:18:19,440
Speaker 2: rate cuts, what's the number you would suggest, Jerome Powell?

333
00:18:19,480 --> 00:18:19,920
Speaker 1: Cut time.

334
00:18:20,600 --> 00:18:23,359
Speaker 3: Okay, I'm sorry, but I refuse to answer your question

335
00:18:23,480 --> 00:18:25,680
Speaker 3: the way that you asked it. I have to answer

336
00:18:25,680 --> 00:18:26,480
Speaker 3: it a different way.

337
00:18:27,000 --> 00:18:29,159
Speaker 1: Okay, Wait, what's wrong with how I asked it?

338
00:18:30,320 --> 00:18:32,479
Speaker 3: There's nothing wrong with the way you ask asked it,

339
00:18:32,520 --> 00:18:34,520
Speaker 3: but I'm going to answer it a different way. Sure,

340
00:18:35,920 --> 00:18:39,000
Speaker 3: I believe that it's a he must announce a combination

341
00:18:39,280 --> 00:18:43,760
Speaker 3: of rate cut and shedding the balance sheet, getting rid

342
00:18:43,760 --> 00:18:47,479
Speaker 3: of in the assets that the Federal Reserve owns, because

343
00:18:47,840 --> 00:18:51,280
Speaker 3: that's how you need to control inflation. He's controlling it improperly,

344
00:18:51,720 --> 00:18:55,000
Speaker 3: he's controlling it. He's got to reverse all this quantitative

345
00:18:55,000 --> 00:18:58,520
Speaker 3: easing that occurred. It's massive. It's still over seven trillion

346
00:18:58,600 --> 00:19:01,800
Speaker 3: dollars on the Fed's back balance sheet. So they need

347
00:19:01,800 --> 00:19:04,760
Speaker 3: to We talked about this in a previous show, dislocation.

348
00:19:05,200 --> 00:19:09,080
Speaker 3: The Fed has to get their butt out of the markets.

349
00:19:09,119 --> 00:19:11,720
Speaker 3: They need to step on the sidelines, which means and okay,

350
00:19:11,960 --> 00:19:14,840
Speaker 3: I'll tell you to answer your question. Now, combination, I

351
00:19:14,880 --> 00:19:18,879
Speaker 3: would cut rates one percent plus and I would begin

352
00:19:19,080 --> 00:19:22,760
Speaker 3: selling at least at least ninety billion dollars a month

353
00:19:22,840 --> 00:19:24,760
Speaker 3: off the FED balance sheet. Now we stop brought there.

354
00:19:25,320 --> 00:19:27,200
Speaker 2: When you talk about selling off the balance sheet, you're

355
00:19:27,200 --> 00:19:28,120
Speaker 2: talking about selling debt.

356
00:19:28,160 --> 00:19:28,560
Speaker 1: Correct.

357
00:19:29,200 --> 00:19:33,320
Speaker 3: No, No, the the Federal Reserve bonds. Okay, yeah, you

358
00:19:33,359 --> 00:19:37,080
Speaker 3: could say that, but not government bonds. It's not selling

359
00:19:37,080 --> 00:19:40,080
Speaker 3: for the federal government. The Federal Reserve Board actually is

360
00:19:40,080 --> 00:19:43,720
Speaker 3: an investor. They own mortgages, is the big thing that

361
00:19:43,720 --> 00:19:47,280
Speaker 3: they bought, So they are an investor. They buy these mortgages.

362
00:19:47,359 --> 00:19:49,919
Speaker 3: That was the quantitative easing that we remember occurred in

363
00:19:49,920 --> 00:19:53,359
Speaker 3: two thousand and eight and nine. They bought mortgages which

364
00:19:53,640 --> 00:19:56,960
Speaker 3: printed money and put cash into the economy. They need

365
00:19:56,960 --> 00:20:01,200
Speaker 3: to now sell those mortgages and take the cash out

366
00:20:01,200 --> 00:20:04,280
Speaker 3: of the economy to control inflation. That's how they need

367
00:20:04,320 --> 00:20:06,960
Speaker 3: to control inflation. They need to not be the investor.

368
00:20:07,400 --> 00:20:10,520
Speaker 3: They're missing up the markets by being an investor. So

369
00:20:10,800 --> 00:20:15,800
Speaker 3: again my statement, if they sell their investments, which brings

370
00:20:15,840 --> 00:20:18,880
Speaker 3: cash out of the economy, then they can cut rates,

371
00:20:19,520 --> 00:20:23,080
Speaker 3: which puts cash back in the economy, and that will

372
00:20:23,119 --> 00:20:26,960
Speaker 3: fix the yield curve. The yield curve is dislocated, it's

373
00:20:27,080 --> 00:20:30,480
Speaker 3: messed up, it's dysfunctional, and Jerome pal can fix it.

374
00:20:30,480 --> 00:20:32,800
Speaker 3: It's an easy fix if he just has the guts

375
00:20:32,840 --> 00:20:33,280
Speaker 3: to do it.

376
00:20:33,600 --> 00:20:36,560
Speaker 2: So I think that is a bit confusing, and I

377
00:20:36,600 --> 00:20:39,119
Speaker 2: want to go back to it, no, in terms of

378
00:20:39,520 --> 00:20:41,560
Speaker 2: what it is that the FED owns, and how does

379
00:20:41,640 --> 00:20:44,360
Speaker 2: selling these things get cash.

380
00:20:44,440 --> 00:20:47,800
Speaker 1: Out of the system or is it out of the system?

381
00:20:47,840 --> 00:20:48,639
Speaker 1: Is it in the system?

382
00:20:48,800 --> 00:20:51,399
Speaker 2: Go back, start from the beginning of what it is

383
00:20:51,440 --> 00:20:53,639
Speaker 2: they own, why you think they have to sell it,

384
00:20:53,680 --> 00:20:55,119
Speaker 2: and what it's actually.

385
00:20:54,920 --> 00:20:57,560
Speaker 3: Going to do to the economy. Let me explain what

386
00:20:57,600 --> 00:21:00,879
Speaker 3: the FED does they print money? I mean, I'm not joking.

387
00:21:00,960 --> 00:21:04,760
Speaker 3: They literally they have printing presses. The Treasury owns the

388
00:21:04,760 --> 00:21:07,120
Speaker 3: printing presses, but the FED says turn them on. It's

389
00:21:07,119 --> 00:21:10,880
Speaker 3: a big red building south of the Washington Monument in Washington, DC.

390
00:21:11,040 --> 00:21:14,480
Speaker 3: They physically have printing presses. And the way they get

391
00:21:14,520 --> 00:21:18,120
Speaker 3: cash into the economy is many ways, but the one

392
00:21:18,119 --> 00:21:21,440
Speaker 3: that we're focusing on is they would buy bonds. So

393
00:21:21,760 --> 00:21:25,080
Speaker 3: say Tony, you own a bond, a mortgage, an investment,

394
00:21:25,280 --> 00:21:28,280
Speaker 3: they would buy it from you. They would then print

395
00:21:28,320 --> 00:21:28,880
Speaker 3: the money to.

396
00:21:28,840 --> 00:21:29,320
Speaker 1: Give to you.

397
00:21:29,600 --> 00:21:31,320
Speaker 3: So that's how they would get cash in the economy.

398
00:21:31,320 --> 00:21:34,480
Speaker 3: They would print cash and give it to you in exchange.

399
00:21:34,520 --> 00:21:37,560
Speaker 3: So they now own all these investments. They're the largest

400
00:21:37,560 --> 00:21:40,520
Speaker 3: investor in the country. Well, they need to not be

401
00:21:40,600 --> 00:21:43,760
Speaker 3: the largest investor. They need to start selling that mortgage

402
00:21:43,760 --> 00:21:46,960
Speaker 3: back to you, selling a bond, selling any investments they have.

403
00:21:47,080 --> 00:21:49,240
Speaker 3: They need to sell them and then take the cash

404
00:21:49,240 --> 00:21:51,560
Speaker 3: back and just throw it in the trash can. That

405
00:21:51,600 --> 00:21:54,520
Speaker 3: gets cash out of the economy. That reduces inflation.

406
00:21:54,640 --> 00:21:57,159
Speaker 1: Cash doesn't go in a trash can. What does that

407
00:21:57,200 --> 00:21:59,800
Speaker 1: actually mean? No, it does? It does it?

408
00:22:00,280 --> 00:22:02,680
Speaker 3: Does it doesn't. They don't. It doesn't go circulating around

409
00:22:02,720 --> 00:22:07,879
Speaker 3: the economy. They print money literally, print money electronically or physically,

410
00:22:08,280 --> 00:22:11,280
Speaker 3: and they also destroy money. They do both. They're the

411
00:22:11,320 --> 00:22:13,320
Speaker 3: only entity in the country that can. That's the problem

412
00:22:13,400 --> 00:22:15,480
Speaker 3: with digital currency, which we won't get into, is they

413
00:22:15,520 --> 00:22:18,479
Speaker 3: can print money that we don't want them printing. So

414
00:22:19,040 --> 00:22:21,800
Speaker 3: this is exactly what they do. They physically are the

415
00:22:21,840 --> 00:22:25,280
Speaker 3: ones the FED interest rate. That's just another way to

416
00:22:25,280 --> 00:22:27,960
Speaker 3: get cash in the economy. If you're a bank and

417
00:22:28,040 --> 00:22:30,800
Speaker 3: I charge you zero percent, and I'm the Federal Reserve Board,

418
00:22:30,840 --> 00:22:32,400
Speaker 3: you're gonna say, hey, I like to borrow a lot

419
00:22:32,440 --> 00:22:34,639
Speaker 3: of money from you. Well they charge four and a

420
00:22:34,680 --> 00:22:36,760
Speaker 3: half percent. Now you're not gonna borrow as much. So

421
00:22:37,359 --> 00:22:39,920
Speaker 3: guess what, there's not as much cash. So there's many

422
00:22:39,960 --> 00:22:43,200
Speaker 3: ways they control the cash in the economy, and they

423
00:22:43,240 --> 00:22:47,560
Speaker 3: need to sell their investments to pull that cash out

424
00:22:47,600 --> 00:22:51,160
Speaker 3: of the economy and cut rates that will get them

425
00:22:51,240 --> 00:22:53,960
Speaker 3: on the sidelines. We don't want them competing with you

426
00:22:54,119 --> 00:22:56,840
Speaker 3: and me and Chase and Bank of America.

427
00:22:57,040 --> 00:23:00,320
Speaker 1: But how are they competing with me if they own mortgage.

428
00:23:01,840 --> 00:23:04,720
Speaker 3: Because as an investor, again not homeowner, don't think of

429
00:23:04,760 --> 00:23:06,840
Speaker 3: yourself as a homeowner, think of yourself as an investor.

430
00:23:06,840 --> 00:23:09,320
Speaker 3: You could buy a mortgage. You can buy a mortgage

431
00:23:09,320 --> 00:23:11,960
Speaker 3: backed security. You can, you can. You know banks do.

432
00:23:12,000 --> 00:23:14,399
Speaker 3: This is what the big the biggest asset that banks

433
00:23:14,440 --> 00:23:17,159
Speaker 3: have is loans. They make loans. A big loan they

434
00:23:17,160 --> 00:23:18,040
Speaker 3: make is mortgages.

435
00:23:20,240 --> 00:23:23,040
Speaker 2: Yeah you are, I'm gonna do this one more time

436
00:23:23,480 --> 00:23:26,399
Speaker 2: because I'm gonna get you to the place that that

437
00:23:26,480 --> 00:23:29,720
Speaker 2: I need to be. You're making the argument that what

438
00:23:29,960 --> 00:23:32,480
Speaker 2: has to happen is the FED has to get out

439
00:23:32,480 --> 00:23:35,040
Speaker 2: of being in competition with me. But I don't understand

440
00:23:35,080 --> 00:23:37,880
Speaker 2: how them owning mortgages is in competition with me. It's

441
00:23:37,920 --> 00:23:40,879
Speaker 2: never mind the whole idea of they pull cash out

442
00:23:41,000 --> 00:23:43,920
Speaker 2: when they go about selling the mortgage. Somebody put cash

443
00:23:44,000 --> 00:23:47,639
Speaker 2: in to buy the mortgage, so the the it's not

444
00:23:47,800 --> 00:23:50,000
Speaker 2: yet clear how that this part of it works.

445
00:23:51,240 --> 00:23:55,680
Speaker 3: You have investments, you probably have stocks, and you have bonds, right, Okay,

446
00:23:55,880 --> 00:23:59,679
Speaker 3: the federal government, the Federal Reserve Board, they also have bonds.

447
00:24:00,280 --> 00:24:02,639
Speaker 3: So if you're a bond investor and they're a bond investor,

448
00:24:02,680 --> 00:24:08,919
Speaker 3: they're competing with you for bonds. And if Tony, you

449
00:24:08,960 --> 00:24:12,280
Speaker 3: want to buy a bond, a mortgage is a bond,

450
00:24:12,280 --> 00:24:15,119
Speaker 3: by the way, it's an investment. So you, as an investor,

451
00:24:15,560 --> 00:24:18,960
Speaker 3: you can go into that market. Well what if again,

452
00:24:19,000 --> 00:24:21,919
Speaker 3: this is crazy, but suppose there's only one bond in

453
00:24:21,960 --> 00:24:24,960
Speaker 3: the entire market to buy and you don't buy it,

454
00:24:25,000 --> 00:24:28,040
Speaker 3: the Federal Reserve Board buys it. Well, then what do

455
00:24:28,080 --> 00:24:29,280
Speaker 3: you have in your portfolio?

456
00:24:29,560 --> 00:24:30,159
Speaker 1: Cash?

457
00:24:30,520 --> 00:24:33,040
Speaker 3: They buy the bond from you. You're an investor, you're

458
00:24:33,080 --> 00:24:35,960
Speaker 3: a big shot Wall Street investor. They give you cash.

459
00:24:36,359 --> 00:24:38,080
Speaker 3: They take the bond out of the market and put

460
00:24:38,119 --> 00:24:41,520
Speaker 3: it in their pocket. So now there's extra cash floating around.

461
00:24:41,680 --> 00:24:43,400
Speaker 3: What they need to do is they need to sell

462
00:24:43,440 --> 00:24:47,000
Speaker 3: that bond back to you and take the cash out

463
00:24:47,000 --> 00:24:49,240
Speaker 3: of your pocket, put it in their pocket, take it

464
00:24:49,280 --> 00:24:51,160
Speaker 3: out of the market, so it's not causing inflation.

465
00:24:51,240 --> 00:24:53,000
Speaker 2: So the cash that I use to buy the bond

466
00:24:53,200 --> 00:24:56,639
Speaker 2: from the Federal Reserve is going to lower the amount

467
00:24:56,640 --> 00:24:58,399
Speaker 2: of cash that's out there circulating.

468
00:24:58,760 --> 00:25:01,760
Speaker 1: Yes, yes, I just need a clarity on that one.

469
00:25:01,800 --> 00:25:05,600
Speaker 2: I ain't shy that we're playing in you know, four

470
00:25:05,680 --> 00:25:08,959
Speaker 2: hundred level classes here with doctor Matt Will economists at

471
00:25:08,960 --> 00:25:10,359
Speaker 2: the University of Indianapolis.

472
00:25:10,440 --> 00:25:12,560
Speaker 1: Did that bother you? Was that like one of your

473
00:25:12,600 --> 00:25:14,879
Speaker 1: students saying, you're not making any sense. Why did I

474
00:25:14,920 --> 00:25:15,639
Speaker 1: go to this school?

475
00:25:16,240 --> 00:25:19,200
Speaker 3: I actually love this because I know that I've got

476
00:25:19,200 --> 00:25:21,000
Speaker 3: to learn to be able to explain something in three

477
00:25:21,080 --> 00:25:23,800
Speaker 3: or four or five different ways because each person absorbs

478
00:25:23,840 --> 00:25:25,400
Speaker 3: it differently. That's my job.

479
00:25:25,640 --> 00:25:28,240
Speaker 2: Now let's go back to the rate cut, the one

480
00:25:28,320 --> 00:25:32,840
Speaker 2: percent concept of the rate cut. Is there such a

481
00:25:32,880 --> 00:25:37,480
Speaker 2: thing as cutting too much too fast? Because every conversation,

482
00:25:37,600 --> 00:25:40,600
Speaker 2: until now I know what Trump wants, every conversation has

483
00:25:40,600 --> 00:25:41,880
Speaker 2: been slowly go.

484
00:25:41,960 --> 00:25:43,600
Speaker 1: And slowly go and slowly go.

485
00:25:43,840 --> 00:25:46,280
Speaker 2: And I had made the argument that if you saw

486
00:25:46,320 --> 00:25:48,560
Speaker 2: that Joon Bowell was going to cut a quarter point,

487
00:25:49,160 --> 00:25:51,680
Speaker 2: that would be worse for him than if he didn't

488
00:25:51,680 --> 00:25:53,480
Speaker 2: cut at all, because people be like, what do you

489
00:25:53,520 --> 00:25:56,320
Speaker 2: do with you playing around the edges? But one percent

490
00:25:56,400 --> 00:25:58,840
Speaker 2: is a very very big number when we're talking about

491
00:25:58,880 --> 00:25:59,439
Speaker 2: these things.

492
00:25:59,760 --> 00:26:01,920
Speaker 1: Why why do you say one percent and not let's

493
00:26:01,960 --> 00:26:02,760
Speaker 1: say two percent?

494
00:26:04,400 --> 00:26:07,479
Speaker 3: Maybe I exaggerated, Maybe I should say half a percent

495
00:26:07,600 --> 00:26:10,840
Speaker 3: this month and half a percent next month. Because when

496
00:26:10,880 --> 00:26:12,840
Speaker 3: you combine it with this what we just talked about,

497
00:26:12,840 --> 00:26:16,320
Speaker 3: the buying and selling of bonds, you could cause disruption.

498
00:26:16,960 --> 00:26:19,280
Speaker 3: I mean, this is what China did just a couple

499
00:26:19,400 --> 00:26:22,399
Speaker 3: months ago they threatened to dump eight hundred billion dollars

500
00:26:22,400 --> 00:26:25,600
Speaker 3: of US treasuries into the market, which has destroyed the

501
00:26:25,600 --> 00:26:29,040
Speaker 3: bond market and caused rates to go through the roof.

502
00:26:29,400 --> 00:26:31,840
Speaker 3: So you have to do it gingerly. You don't want

503
00:26:31,880 --> 00:26:34,760
Speaker 3: to come in and be, you know, fifty percent of

504
00:26:34,760 --> 00:26:36,600
Speaker 3: the bond market today. Hey, I would like to sell

505
00:26:36,600 --> 00:26:38,920
Speaker 3: some bonds, and I'm fifty percent of all bonds sold

506
00:26:38,960 --> 00:26:42,240
Speaker 3: in one day. That's a little disruptive. So you want

507
00:26:42,240 --> 00:26:44,560
Speaker 3: to do it, you know, so you don't disrupt the markets.

508
00:26:44,600 --> 00:26:46,720
Speaker 3: And so maybe half of a percent would be better

509
00:26:46,760 --> 00:26:49,080
Speaker 3: this month, and half a percent next month, and start

510
00:26:49,119 --> 00:26:51,399
Speaker 3: selling your bonds at a nice gingerly pace.

511
00:26:51,800 --> 00:26:55,080
Speaker 2: So let's say it's a one percent cut that gets

512
00:26:55,119 --> 00:27:00,520
Speaker 2: more people investing, more people borrowing money to make capital investments, machine, this,

513
00:27:00,600 --> 00:27:03,120
Speaker 2: that and the other, and that is going to help

514
00:27:03,200 --> 00:27:05,919
Speaker 2: speed along economic growth.

515
00:27:07,600 --> 00:27:13,320
Speaker 3: Okay, yes, if yes, If the growth that's occurring is

516
00:27:13,400 --> 00:27:16,240
Speaker 3: private companies nice as.

517
00:27:16,080 --> 00:27:19,000
Speaker 2: You discussed earlier, this can't be government growth that defeats

518
00:27:19,080 --> 00:27:19,560
Speaker 2: the purpose.

519
00:27:20,000 --> 00:27:22,560
Speaker 3: Yeah, but that's an important thing to distinguish, because let

520
00:27:22,560 --> 00:27:26,080
Speaker 3: me give you some more and more nerdy data. Under Biden,

521
00:27:26,359 --> 00:27:28,960
Speaker 3: the federal government grew in the last four quarters zero

522
00:27:29,000 --> 00:27:33,440
Speaker 3: percent plus four plus nine plus four. Under Trump, it's

523
00:27:33,800 --> 00:27:37,199
Speaker 3: shrunk by four point seven and shrunk by three point seven.

524
00:27:37,880 --> 00:27:41,080
Speaker 3: That is such good news to me a capitalist. I

525
00:27:41,200 --> 00:27:45,920
Speaker 3: love seeing that the GDP is not government based. So now,

526
00:27:46,200 --> 00:27:48,639
Speaker 3: remember back to this nerdy discussion we had. You can

527
00:27:48,680 --> 00:27:52,119
Speaker 3: start cutting those short term rates and that will start investing.

528
00:27:52,400 --> 00:27:55,280
Speaker 3: It will encourage people to invest because, let me, you're

529
00:27:55,320 --> 00:27:57,760
Speaker 3: an investor. Let's say you're a big shot entrepreneur, which

530
00:27:57,800 --> 00:28:00,919
Speaker 3: you are with your radio empire here, thank you very much,

531
00:28:01,200 --> 00:28:03,920
Speaker 3: and you make you know, eight percent on your investment,

532
00:28:03,960 --> 00:28:06,480
Speaker 3: but you're barring money at nine. You're not going to

533
00:28:06,560 --> 00:28:09,080
Speaker 3: make an eight percent investment when you're borrowing money at nine.

534
00:28:09,080 --> 00:28:11,480
Speaker 3: But if you're barring money at four or three, oh,

535
00:28:11,520 --> 00:28:15,080
Speaker 3: you'll definitely make that investment. So we need to start

536
00:28:15,119 --> 00:28:18,240
Speaker 3: cutting short term rates to make it cheaper for someone

537
00:28:18,320 --> 00:28:22,720
Speaker 3: to borrow. Residential residential construction the big okay, the piece

538
00:28:22,720 --> 00:28:26,600
Speaker 3: of bad news in this GDP report was construction down

539
00:28:26,640 --> 00:28:29,679
Speaker 3: ten point three percent, residential down four point six percent.

540
00:28:29,920 --> 00:28:32,560
Speaker 3: You know what, they live on short term rates. This

541
00:28:32,680 --> 00:28:35,200
Speaker 3: is Trump's world. When you're a construction guy and you're

542
00:28:35,200 --> 00:28:37,280
Speaker 3: putting up a building. You're getting a construction loan for

543
00:28:37,320 --> 00:28:40,520
Speaker 3: twelve to eighteen months. Well, short term rates are high,

544
00:28:40,600 --> 00:28:43,520
Speaker 3: right now, cut short term rates. You're going to juce construction.

545
00:28:43,840 --> 00:28:47,040
Speaker 2: Before I let you go, doctor Matt Will, economist, University

546
00:28:47,080 --> 00:28:51,720
Speaker 2: of Indianapolis. Let me get into indian The tariffs. Certainly,

547
00:28:52,760 --> 00:28:57,160
Speaker 2: the effect of tariffs. It leads one to question whether

548
00:28:57,200 --> 00:29:03,120
Speaker 2: economists ever understood tariffs, whether or not the absorption of businesses, etc.

549
00:29:03,600 --> 00:29:08,320
Speaker 2: Have allowed for enough cushion to make the effect negligible

550
00:29:08,520 --> 00:29:13,840
Speaker 2: to allow other things to occur. But what we're seeing

551
00:29:13,880 --> 00:29:17,160
Speaker 2: now is that President Trump is saying to India, you

552
00:29:17,240 --> 00:29:20,360
Speaker 2: get a twenty five percent tariff and a penalty because

553
00:29:20,400 --> 00:29:23,680
Speaker 2: you have traded with Russia specifically buying oil, buying energy,

554
00:29:24,040 --> 00:29:27,760
Speaker 2: and we're here to strangle Russia on the energy side.

555
00:29:27,800 --> 00:29:31,040
Speaker 2: A lah Ronald Reagan and Garbachev back to ending the

556
00:29:31,080 --> 00:29:35,160
Speaker 2: colds war twenty five percent tariff on India when you

557
00:29:35,240 --> 00:29:38,040
Speaker 2: said on this show just a day ago that India

558
00:29:38,120 --> 00:29:42,320
Speaker 2: is eating China's lunch in specific iPhones and other technology

559
00:29:42,360 --> 00:29:45,720
Speaker 2: that Americans are buying. This doesn't have an effect on

560
00:29:45,760 --> 00:29:46,720
Speaker 2: the American consumer.

561
00:29:48,240 --> 00:29:49,880
Speaker 3: It does. But let me go, I take a little

562
00:29:49,880 --> 00:29:53,080
Speaker 3: exception to the premise when you started saying the impact

563
00:29:53,080 --> 00:29:55,440
Speaker 3: has been negligible for the tariffs. No.

564
00:29:55,600 --> 00:29:56,280
Speaker 1: I can show you.

565
00:29:56,240 --> 00:29:58,320
Speaker 3: A list of companies that have lost money, that have

566
00:29:58,360 --> 00:30:01,720
Speaker 3: cut dividends, that are laying p people off. There's a

567
00:30:01,840 --> 00:30:04,160
Speaker 3: huge impact that we've seen in the wholesale that we

568
00:30:04,200 --> 00:30:06,360
Speaker 3: will see in the retail. So I think there is

569
00:30:06,440 --> 00:30:11,640
Speaker 3: an impact in the in from the teriffs. Concerning India,

570
00:30:12,000 --> 00:30:16,680
Speaker 3: you know, that's that's that's Trump's next nemesis, which I

571
00:30:16,680 --> 00:30:19,840
Speaker 3: don't understand. Okay, I understand the political angle, and I

572
00:30:19,880 --> 00:30:23,360
Speaker 3: will defer to you on that that's not my area whatsoever.

573
00:30:24,000 --> 00:30:27,480
Speaker 3: But from the economic side, it makes me nervous because

574
00:30:28,000 --> 00:30:31,960
Speaker 3: they've done what we've asked. They've shifted production away from China.

575
00:30:32,320 --> 00:30:35,680
Speaker 3: India is becoming the new China for US. So why

576
00:30:35,680 --> 00:30:37,280
Speaker 3: do I want to start a war with them when

577
00:30:37,280 --> 00:30:40,800
Speaker 3: they've done exactly what we asked. Apple has done exactly

578
00:30:40,840 --> 00:30:42,840
Speaker 3: what we asked as far as manufacturing.

579
00:30:43,000 --> 00:30:44,880
Speaker 2: I can answer the question by saying, it's not the

580
00:30:44,920 --> 00:30:47,760
Speaker 2: objectives to start the war, it's to to put it

581
00:30:47,800 --> 00:30:50,120
Speaker 2: out there to allow for the deal to be hastened.

582
00:30:50,120 --> 00:30:52,640
Speaker 2: Happened a little bit faster which is all about putting

583
00:30:52,680 --> 00:30:55,800
Speaker 2: the pressure on China. I stick with my original thesis.

584
00:30:56,000 --> 00:30:59,200
Speaker 2: It's Japan, it's Vietnam, it's South Korea, it's India. Never

585
00:30:59,240 --> 00:31:02,600
Speaker 2: mind the Eudi, which is certainly interesting. But once those

586
00:31:02,640 --> 00:31:05,760
Speaker 2: four deals are made, the pressure point on China is

587
00:31:05,840 --> 00:31:10,000
Speaker 2: now full on and full strength against these major competitors.

588
00:31:10,040 --> 00:31:12,480
Speaker 2: And I think that's all this is. This is standard

589
00:31:12,480 --> 00:31:14,960
Speaker 2: Trump tactic to a thing. These tires may.

590
00:31:14,800 --> 00:31:18,840
Speaker 1: Never actually get fully implemented. Knowing the way Trump does things.

591
00:31:18,960 --> 00:31:21,720
Speaker 2: A wall shape may call it taco, he calls its strategy,

592
00:31:21,960 --> 00:31:26,000
Speaker 2: and right now he's winning that debate. Doctor Matt Will,

593
00:31:26,040 --> 00:31:28,800
Speaker 2: economist at the University of Indianapolis. I appreciate you taking

594
00:31:28,800 --> 00:31:30,640
Speaker 2: the time to be with us more to get to

595
00:31:30,680 --> 00:31:32,600
Speaker 2: I'm Tony Katz. This is Tony Katz today,