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Speaker 1: So the Fed they cut the rate by a quarter point,

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Speaker 1: and everyone said hooray. Most everybody said hooray, because when

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Speaker 1: you take a look at the vote count there of

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Speaker 1: these Federal Reserve officers, one person said it should be

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Speaker 1: a half point. Another person said, don't cut it in

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Speaker 1: the slightest. But it seems clear to me that Jerome

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Speaker 1: Powell is well, here you go, market, here's exactly what

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Speaker 1: you wanted. Here are the lower rates you dreamed of.

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Speaker 1: But is this good for us? Tony Katz, Tony Katz today,

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Speaker 1: good to be with you. We've got doctor Mattwell joining

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Speaker 1: us economist at the University of Indianapolis. Now there's a

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Speaker 1: host of things to cover on this rate cut, and

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Speaker 1: this happening as President Trump is taking this tour in Asia,

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Speaker 1: which I would argue has been a successful tour, not

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Speaker 1: only on a diplomacy side, but on a deal side,

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Speaker 1: at least framework side. Right until we have a deal

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Speaker 1: that actually brings dollars in, there's nothing but South Korea

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Speaker 1: is saying they're going to put in three hundred and

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Speaker 1: fifty billion dollars further the relationship with Japan to try

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Speaker 1: and thwart the hegemonic desires of China, and then the

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Speaker 1: meeting was Jijinping, which took place in South Korea. So

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Speaker 1: before we get to the rate cut, talk to me

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Speaker 1: about how this trip and these conversations coming out of

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Speaker 1: this Asia trip are seen by financial economists like yourself.

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Speaker 2: We see it as fantastic because the uncertainty is being removed.

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Speaker 2: The biggest problem that we've had with the tariffs is

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Speaker 2: well the second biggest. The biggest is they're tariffs. They stink,

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Speaker 2: But the second biggest problem has been the uncertainty. And

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Speaker 2: the Wall Street hates uncertainty. Business hates uncertainty. They want

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Speaker 2: to know what to do. You can't plan for the

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Speaker 2: future until you know what's going to happen. And so

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Speaker 2: the fact that these frameworks are in place and deals

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Speaker 2: are getting cut, even though they may not be good

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Speaker 2: deals for the consumer or for businesses, the deals are

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Speaker 2: cut and everybody likes it. And what I got to

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Speaker 2: tell you Trump actually he pulled one off on this

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Speaker 2: because I was hearing this morning read some information about

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Speaker 2: the fact that China now wants to participate in the

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Speaker 2: new LNG process pipeline from Alaska. They want to invest

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Speaker 2: in a pipeline that's going to feed LNG to Japan

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Speaker 2: and South Korea. This is a win no matter how

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Speaker 2: you slice it. For Trump going out to the East.

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Speaker 1: Now, I have to tell you I don't favor at all,

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Speaker 1: in any way, shape or form, allowing China to have

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Speaker 1: any energy from the United States. I think that is

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Speaker 1: an opportunity for massive failure. I've also disagreed with President

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Speaker 1: Trump when it's a conversation of allowing Chinese nationals to

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Speaker 1: come into the country to be students, the student visa conversation.

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Speaker 1: But we'll get to those things later. You see this

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Speaker 1: trip as a success. In the middle of this trip

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Speaker 1: comes Jerome Powell and comes the rate cut of a

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Speaker 1: quarter point.

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Speaker 3: Was this the right move? No, it was the wrong move.

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Speaker 2: Well, unless it was combined with a reducing of the

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Speaker 2: balance sheet. The headline, tony is rate cut quarter point.

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Speaker 2: That's the rate That's the headline. But there's three things

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Speaker 2: that happened here, and I think all three of them

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Speaker 2: are bad. One was the rate cut by itself. That's

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Speaker 2: not a good thing. The second thing they did is

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Speaker 2: they decided to stop reducing the balance sheet as of December. First,

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Speaker 2: they will officially reverse quantitative tightening and go back to

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Speaker 2: what they call neutral, but I believe is more quantitative easy.

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Speaker 2: If you're not reducing the balance sheet, that's a bad thing.

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Speaker 2: That will pump cash into the economy. And the third

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Speaker 2: thing they announced is they're going to replace long term

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Speaker 2: investments on the FED balance sheet with short term investments

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Speaker 2: on the FED balance sheet.

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Speaker 3: That's also a bad.

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Speaker 2: Thing because that's going to drive up bond prices and

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Speaker 2: it's going to pump cash into the economy by reducing

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Speaker 2: short term rates.

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Speaker 1: Again, hold on, I want to make sure I understood,

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Speaker 1: because when I first heard this story, I thought you

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Speaker 1: were going to be excited that look, they're removing things

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Speaker 1: from the balance sheet. That's how I heard the story.

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Speaker 1: They're removing things from the balance sheet. And this is

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Speaker 1: incredibly important. You're saying no, no, no, they're not removing,

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Speaker 1: they're replacing.

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Speaker 2: They're doing two things. They're stopping the reduction of the

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Speaker 2: balance sheet. They actually took a vote and as of

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Speaker 2: December first, they will discontinue reducing their balance sheet. And

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Speaker 2: we've talked about the quantitative easing that was a disaster,

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Speaker 2: that cause the inflation. Quantitative tightening, which is reducing their

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Speaker 2: balance sheet holdings is supposed to reverse that. They voted

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Speaker 2: to discontinue that. That was an official announcement made yesterday.

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Speaker 2: And then they decided to go from long term investments

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Speaker 2: on their balance sheet to short term that's high risk.

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Speaker 2: That's going to increase cash into the economy. All three

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Speaker 2: things will fuel inflation. They have given up up on

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Speaker 2: fighting inflation, that's clear, and they're shifting out to this

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Speaker 2: dual mandate of creating jobs. And I don't think that's

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Speaker 2: their job. I don't think they're even capable of doing it.

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Speaker 2: But that's what they're focusing on, and they're going to

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Speaker 2: kill us with inflation.

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Speaker 1: Talking to doctor Matt Well, economists at the University of Indianapolis, Yeah,

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Speaker 1: the the inflation thing has not gone away. You know,

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Speaker 1: we could talk about taris all all we want, and

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Speaker 1: you know, I've got a whole thought on this, you know,

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Speaker 1: increasing the tariffs on Canada because they put out a

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Speaker 1: stupid video. You can't tires are not a retribution for

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Speaker 1: not liking my outfit, right, It's just it's not the

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Speaker 1: way I think we should be going about things. But

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Speaker 1: the inflation conversation is whether or not this has gone away,

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Speaker 1: you know, And I'm not angry at President Trump for

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Speaker 1: not having inflation taken care of. There was a lot

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Speaker 1: of cash in the system, but inflation is still here.

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Speaker 1: You often argue that the business community already has it

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Speaker 1: factored in.

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Speaker 3: Are they still factoring it in?

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Speaker 2: I'm not sure you mean by factoring in, But let

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Speaker 2: me give you an example from just yesterday.

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Speaker 3: It is reprising.

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Speaker 1: Bake it into methodologies, bake it into future expansion, growth,

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Speaker 1: reduction of workforce, etc.

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Speaker 2: Then the answer is they have included it, but not completely,

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Speaker 2: not completely. Just yesterday, I gave a speech to a group,

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Speaker 2: and this group there was a business owner and she's

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Speaker 2: told me that she has paid more than twenty percent

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Speaker 2: increase since April for stuff she imports. She imports a

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Speaker 2: lot of stuff from Canada and the European Union, and

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Speaker 2: she said twenty percent more. But she has not passed

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Speaker 2: that cost along. She's taken the financial hit. So the

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Speaker 2: inflation has not disappeared. We saw it in the PMI

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Speaker 2: report last month. We saw that again. That number was

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Speaker 2: twenty one percent inflation to wholesalers and manufacturers that have

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Speaker 2: not been passed along to you and I. There is

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Speaker 2: inflation in the system and it's hitting businesses very hard. Now,

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Speaker 2: how are they reacting. They're laying people off, they're getting

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Speaker 2: rid of employees. Ups a que forty eight thousand employees

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Speaker 2: laid off. Thirty four thousand were in operations, fourteen thousand

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Speaker 2: were in management. We've seen this at Amazon, Microsoft. It's ridiculous.

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Speaker 2: Yet the market's going up because of AI. Let's not

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Speaker 2: forget it.

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Speaker 1: And the only reason the market's going up is because

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Speaker 1: of AI. The Amazon conversation, so I saw written two ways.

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Speaker 1: Maybe you actually have the better analysis here. The Wall

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Speaker 1: Street Journal said it was thirty thousand corporate jobs. In

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Speaker 1: other places, I saw fourteen thousand, So I didn't know.

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Speaker 1: Fourteen thousand was like a step by step kind of thing.

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Speaker 1: It was like how they were going to step up

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Speaker 1: to thirty thousand, whether the thirty thousand number was right

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Speaker 1: or wrong?

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Speaker 2: What say you, thirty thousand is a combination of operations. Well,

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Speaker 2: they're mostly an operations entity, but they do both operations

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Speaker 2: and management.

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Speaker 3: It's both.

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Speaker 2: Just like we saw with UPS, about two thirds of

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Speaker 2: it was operations, one third of it was management. Amazon's

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Speaker 2: about the same, probably about two thirds operations one third management.

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Speaker 2: But they're not cuttings necessarily because their business is getting worse.

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Speaker 2: The economy's growing at three point eight percent. They're cutting

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Speaker 2: because they don't need the workers, because they're automating, they're

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Speaker 2: using AI to improve their operations. I got to talk

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Speaker 2: about it, you know. If you want me to not

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Speaker 2: get into it, I won't. But Meta yesterday announced a

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Speaker 2: twenty six percent increase in revenue. At the same time

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Speaker 2: they announced seventy billion dollars of CAPEX expenditures. Microsoft did

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Speaker 2: the same thing. Microsoft. Let me focus on Microsoft here.

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Speaker 2: Their quarterly revenue was up seventeen percent. That's a pretty

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Speaker 2: big increase. At the same time, they announced eighty billion

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Speaker 2: dollars of capital expenditures on AI, and they laid off

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Speaker 2: and announced ninth thousand people being laid off. They laid

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Speaker 2: off six thousand earlier this year. So Microsoft revenue up,

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Speaker 2: AI spending up, firing employees. I think that's the great transition.

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Speaker 2: That is my buzzphrase. I want to coin the great transition,

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Speaker 2: like we saw way back when Henry Ford developed the

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Speaker 2: mass production line for cars. We're in a great transition.

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Speaker 2: Hold on, it's going to be a roller coaster, but

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Speaker 2: the transition.

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Speaker 1: Talking to doctor Matt Will economists at the University of Indianapolis.

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Speaker 3: The transition is to not even so much the proof

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Speaker 3: of the.

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Speaker 1: Utilization of AI, but rather the investment in the hope

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Speaker 1: that AI will be able to be something that we use.

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Speaker 3: So what transition are you referring to when you.

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Speaker 2: Say the words, I don't agree with the statement that

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Speaker 2: the hope Because Meta reported a twenty six percent year

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Speaker 2: over year increase in revenue. Microsoft reported seventeen percent quarterly

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Speaker 2: revenue increase. This is not the future. This is revenue

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Speaker 2: generation now, and that's why the market's going up. We

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Speaker 2: are actually seeing the actual revenue benefit from these AI investments,

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Speaker 2: but it comes at a big cost, which is we

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Speaker 2: are losing employees. This so for the to the first

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Speaker 2: two quarters of this year, the USA lost seven hundred

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Speaker 2: and forty four thousand jobs, but the tech sector grew

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Speaker 2: seventy six thousand jobs. That's a twenty seven percent increase

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Speaker 2: for the tech sector. It's a transition from labor even

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Speaker 2: in management.

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Speaker 3: To AI.

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Speaker 2: So you need to learn AI, you need to learn

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Speaker 2: tech because that's going to be the next job. Guess

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Speaker 2: what horse and buggies aren't here? People putting shoes on

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Speaker 2: horses are gone. We replaced it with cars. It's happening again.

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Speaker 1: And there's going to now be because if people are

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Speaker 1: now just seeing it for the first time. Of course,

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Speaker 1: people who engage in the in the futurist game have

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Speaker 1: been having this discussion.

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Speaker 3: How do you protect American jobs? Then? Should you be

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Speaker 3: protecting American jobs? Then? Is it the job of government

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Speaker 3: to protec American jobs?

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Speaker 1: And if someone asked Donald Trump a ten percent tariff

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Speaker 1: because you don't like how Canada put out a video

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Speaker 1: for job protection?

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Speaker 3: Is job won me?

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Speaker 1: Remember I'm a conservative and in President Trump is not.

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Speaker 1: It's a difference between us. It's not an anger. He

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Speaker 1: wants to protect those jobs. Vice President jad Vance has

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Speaker 1: been very very clear on these subjects. So how does

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Speaker 1: the White House now engage a stock market that they

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Speaker 1: want to go up, but is therefore hurting them overall?

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Speaker 1: Because look at the Americans who don't have jobs anymore.

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Speaker 2: Okay, well you asked a lot there, but your first

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Speaker 2: question was how do you protect jobs? Let me tell

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Speaker 2: you the way. You don't do it. You don't do

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Speaker 2: it through tariffs. You don't protect bad companies like Intel.

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Speaker 2: You don't protect bad companies like Whirlpool. You let the

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Speaker 2: competition eat them alive, and then whoever replaces them will

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Speaker 2: be better. Remember, Intel is not the only semiconductor company

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Speaker 2: in the United States. Six of the seven top ones

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Speaker 2: are in the United States. Other than Taiwan's Semiconductor, they're

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Speaker 2: all right here.

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Speaker 3: So it's okay.

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Speaker 2: If Intel disappears and they're replaced by Nvidia or AMD

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Speaker 2: or Micron or Broadcom. Good for those companies. Now, the

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Speaker 2: second part of the answer is where do the new

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Speaker 2: jobs come from. I know this is hard for people

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Speaker 2: to accept, but you have to get rid of the

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Speaker 2: old jobs that are lower skill and replace them with

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Speaker 2: the tech job. The AI those jobs are existing, they're

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Speaker 2: growing again. I'll use the example I use all the time.

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Speaker 2: We have this discussion in the nineteen hundreds when the

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Speaker 2: car came around and people say, oh, we can't lose

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Speaker 2: all these jobs in the transportation and horse and buggy industry.

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Speaker 2: That's not a joke, that's actually what was said. And

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Speaker 2: then that new industry exploded and it has been the

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Speaker 2: biggest employer we've seen in the last hundred years. Tech

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Speaker 2: will be the same. Now it's difficult, Tony, this is difficult.

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Speaker 2: We're going to need to retrain people. Now that's a

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Speaker 2: different discussion. Does a government do it? Do to charities

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Speaker 2: do it? Is a local community function, But we need

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Speaker 2: to help transition workers from old skills to new skills.

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Speaker 2: It's vital.

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Speaker 1: Talking to doctor Matt Will, economist at the University of Indianapolis, Uh,

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Speaker 1: any slowing on this AI train. Anybody saying, maybe we've

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Speaker 1: invested enough. Now let's see further results. You share, you

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Speaker 1: share the results from Microsoft, and and and and Amazon.

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Speaker 1: Show me three quarters of that and then you'll see

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Speaker 1: me actually say, Okay, maybe there really is something here.

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Speaker 1: But is there anybody saying or any feeling in the

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Speaker 1: market that it's you know what, We've invested a lot

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Speaker 1: of money here. Let's see what this money created.

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Speaker 2: Yes, I've heard this, and you know, am I allowed

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Speaker 2: to mention a TV network that does business?

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Speaker 3: Yeah? Of course?

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Speaker 2: Okay, So CNBC, I can't believe you mentioned them. Oh

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Speaker 2: I saw that coming CNBC. I've seen this over the

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Speaker 2: last week, people who went on TV saying I was

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Speaker 2: against this, waiting see the results. I was wrong. I

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Speaker 2: can't tell you how many people I've seen say exactly

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Speaker 2: the words you just repeated, and then come out and

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Speaker 2: say guess what I was wrong. It's legit. The growth

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Speaker 2: in AI is more, the capex is more than we

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Speaker 2: ever anticipated, the results Meta, Microsoft, Amazon, We're seeing the results,

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Speaker 2: so it's legitimate. It's there. People are skeptical, but the

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Speaker 2: skeptics are coming around because the proof is in the

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Speaker 2: pudding and it's there. The skeptics are coming around.

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Speaker 1: Doctor Matt Will, economists at the University of Indianapolis. I

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Speaker 1: appreciate you taking the time to be with us more

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Speaker 1: to get to I'm Tony Katz, and this is Tony

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Speaker 1: Katz today