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Speaker 1: So I saw a lot of people upset with President Trump,

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Speaker 1: but they were on the political left, and they're always

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Speaker 1: upset with President Trump. And oh, look he's bailing out Argentina,

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Speaker 1: and Wade I thought Argentina was the great miracle. And

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Speaker 1: look what Malay was doing in Argentina. I guess it

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Speaker 1: was just a big failure. I guess all those austerity

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Speaker 1: measures didn't get you anything. Argentina was better before. There's

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Speaker 1: no way on the good Lord's green earth that Argentina

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Speaker 1: was better before. But there is something really interesting going

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Speaker 1: on with what the president is doing in what the

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Speaker 1: United States is going to do with Argentina. That's usually

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Speaker 1: saved for much larger, much more stable nations. Tony Katz,

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Speaker 1: Tony Katz today, good to be with you. Doctor mattwill

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Speaker 1: joined us right now, economist at the University of Indianapolis.

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Speaker 1: Before we get to the Argentina story, let's start with

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Speaker 1: GDP three point eight percent revised growth now in the

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Speaker 1: second quarter, according to the US pre zero of Economic Analysis,

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Speaker 1: three point eight listen, three percent was good. Three point

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Speaker 1: three was amazing for a country like ours with an

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Speaker 1: output like hours. Three point eight is insane. Is immeasurable.

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Speaker 1: It's almost too fast. What is this number and what

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Speaker 1: does it say to you?

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Speaker 2: Well, it's a great number. I mean you can't deny

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Speaker 2: it's a great number. But like you and I always do,

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Speaker 2: let's dig below the surface. There's two good parts and

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Speaker 2: one that yeah, that explains it. The two good parts

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Speaker 2: is consumer spending was up more than the first two estimates,

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Speaker 2: So the final number says, hey, consumers, they're confident, they're

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Speaker 2: buying stuff. And the second is massive investment in intellectual

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Speaker 2: property for AI. AI is driving this thing, equipment, intellectual property,

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Speaker 2: non residential AI investment. It's through the roof, and that's

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Speaker 2: the big number here. And the third one is imports

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Speaker 2: were down. It's an anomaly of the entire GDP formula.

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Speaker 2: Imports were up the first quarter front loading, heading in

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Speaker 2: front of the TA error, and the second quarter they

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Speaker 2: snap back.

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Speaker 1: So if imports are down, that helps the GDP because

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Speaker 1: it means.

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Speaker 2: What it's just the form the formula is net imports exports.

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Speaker 2: It's part of the GDP formula. It's a part of it.

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Speaker 2: I don't agree with, I don't like it, but it's

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Speaker 2: just part of the Kinsy and formula developed in the forties.

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Speaker 1: And we should we should really spend a little bit

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Speaker 1: of time on that one day, sir. That my conversation

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Speaker 1: regarding the Buerau of labor statistics and how we take

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Speaker 1: a look at inflation numbers, et cetera. Is it because

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Speaker 1: we are trying to politically maneuver numbers to fit a

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Speaker 1: political party or a political moment, or is our utilization

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Speaker 1: of formulas just out data and off base. Certainly, anything

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Speaker 1: Keynesian to me is out data and off base. But

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Speaker 1: is the formula no longer applicable to this modern world?

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Speaker 1: And what is it that is that needs to be

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Speaker 1: configured or con in the configuration for a new model.

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Speaker 2: Yes, yes, yes, yes to your second point, it is old.

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Speaker 2: It's outdated. That's why eg Antoni is going to be

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Speaker 2: in charge of the Bureau of Labor Statistics. His job

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Speaker 2: is to fix the problem because their formulas are outdated.

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Speaker 2: The BEA formulas are dated. You asked, what should the

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Speaker 2: fix be. It needs to be revised to include what

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Speaker 2: we call FDI foreign direct investment that is totally excluded

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Speaker 2: from the formula, which is absurd when all this money

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Speaker 2: is flooding into the United States from overseas, as Trump

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Speaker 2: points out, but it's not in the GDP formula. So yes, Tony,

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Speaker 2: the GDP formula is old. It needs to be revived.

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Speaker 3: So if we're going to include foreign investment.

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Speaker 1: Talking to doctor Mattwell, economists at the University of Indianapolis,

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Speaker 1: you're saying that the GDP should be seen as higher

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Speaker 1: than it is.

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Speaker 3: Yes, well, okay, Tony, it's not so simple.

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Speaker 2: Okay, there's a lot of moving parts here, So I'm

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Speaker 2: not gonna say it should be higher. I'm going to

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Speaker 2: say there's a lot of moving parts.

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Speaker 1: But give me one thing that you would if you're

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Speaker 1: adding this foreign direct investment, How does that show up?

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Speaker 1: How would you put that into the number and would

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Speaker 1: the number move up or down?

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Speaker 2: Okay, it would move up, but then it might cause

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Speaker 2: some things to go down. It goes up because if

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Speaker 2: you build a factory in Indiana and it's built with

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Speaker 2: foreign money, that's going to cause the GDP to go up.

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Speaker 2: So that's a good thing. And so what Trump is

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Speaker 2: doing with these foreign investments is a good thing. But

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Speaker 2: at the same time, in order to get more FDI,

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Speaker 2: you have to have a larger or smaller trade deficit,

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Speaker 2: and I can tell you trade deficits are good for

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Speaker 2: the United States because that gets more trade back and

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Speaker 2: forth and it lowers the cost of overall goods. So

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Speaker 2: there's two parts to this equation. It's not one simple formula.

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Speaker 1: And we're going back now to the conversation that we

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Speaker 1: should not be engaging trade policy based on, for example,

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Speaker 1: tariffs based on trade deficits, because trade deficits are not

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Speaker 1: necessarily bad things. Talking to doctor Matt Will, economists at

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Speaker 1: the University of Indianapolis, the argument against that is, well,

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Speaker 1: the problem is they're not buying our goods, not opening

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Speaker 1: up to our markets, not giving us markets, and then

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Speaker 1: trying to flood us with their things. That this has

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Speaker 1: been the back and forth really about American jobs more

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Speaker 1: than it is about the economy. But this is only

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Speaker 1: part one of our conversation. Part two is what's going

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Speaker 1: on with Argentina, where Trump has said he will provide

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Speaker 1: help to Argentina when it comes to their economy. They

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Speaker 1: had massive spending, massive issues. They bring in Javier Malay.

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Speaker 1: He starts engaging in austerity measures left and right. The

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Speaker 1: inflation rate in the matter of a year falls precipitously

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Speaker 1: and it is an Oh my gosh, look at what's

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Speaker 1: happening in Argentina.

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Speaker 3: Great opportunity there.

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Speaker 1: But when you're asking the United States, hey, we need dollars,

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Speaker 1: and we'll give you our Argentinian peso, which isn't necessarily

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Speaker 1: worth much and hopefully it'll be worth more in the future,

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Speaker 1: that's not a great sign that all is well in

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Speaker 1: the Argentinian economy.

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Speaker 2: No, but let me give it a little bit of

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Speaker 2: economic nerdy training here. They're asking for what's called a

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Speaker 2: swap line. A swap line is when Argentinians sell US

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Speaker 2: paysos and we give them dollars. It's just an exchange.

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Speaker 2: Why do they need to do this Because the dollar

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Speaker 2: is the world's reserve currency and all transactions to current dollars.

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Speaker 2: So Argentinians cannot buy stuff unless they have dollars, and

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Speaker 2: they don't have enough net exports. They need more dollars.

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Speaker 2: We're not buying enough stuff for them. So ironically, the deficits,

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Speaker 2: the trade deficits that Trump is trying to eliminate, is

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Speaker 2: actually hurting Argentina because they don't have enough dollars. So,

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Speaker 2: but Trump can't do this on his own, Tony. He

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Speaker 2: can't just swap pasos for dollars. Only the Federal Reserve

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Speaker 2: Board can do that. Only the Federal Reserve Board can

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Speaker 2: exchange US dollars for another currency. He has to coordinate

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Speaker 2: with them through the Treasury Department to make this happen.

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Speaker 2: It's a huge risk because what if they don't end

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Speaker 2: up getting dollars through trade, Well, then they will not

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Speaker 2: give us our dollars back. So it's it's as if

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Speaker 2: we loan money to our college roommate and they never

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Speaker 2: paid us back. That's what we're getting into, and it's

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Speaker 2: a high risk scenario that the US never does. We

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Speaker 2: only do swap lines with euro Japan, Switzerland, the UK

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Speaker 2: they need temporary dollars. We never do it with developing countries.

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Speaker 2: This is a very unusual circumstance.

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Speaker 3: So let's get into the the risk reward here.

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Speaker 1: This seems to be more of a geopolitical play in

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Speaker 1: trying to create better alliances in South America. I would

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Speaker 1: almost argue that this is a hedge against China and

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Speaker 1: their continued assertion of dominance in South America, in our

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Speaker 1: in our hemispheres. But the going back to just how

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Speaker 1: the how the mathematics works, and this swap line we

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Speaker 1: take their pesos, they get our dollars, and as you

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Speaker 1: brought up, the fear is they may not be able

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Speaker 1: to give those dollars back. How does that manifest? Meaning

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Speaker 1: what mistake gets made? What issue does Argentina run into

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Speaker 1: that they are not able to overcome that they can't

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Speaker 1: basically get us our money back.

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Speaker 2: Well, they're going to get the two things could happen.

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Speaker 2: They have to sell their products around the world and

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Speaker 2: collect dollars. It's that simple. They simply have to sell

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Speaker 2: Argentinian beef to somebody to collect dollars. They need to

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Speaker 2: have more tourists come to their country so that they

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Speaker 2: leave dollars behind. They simply need dollars so that they

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Speaker 2: can then trade them back for the pesos. So that's

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Speaker 2: one part of it. The other part is when that

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Speaker 2: exchange occurs, what if the peso is weaker, so we

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Speaker 2: get fewer dollars when we exchange the pesos in our pocket,

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Speaker 2: in our reserve. So that's the risk because the peso

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Speaker 2: gets weaker by the way, it's been getting weaker over

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Speaker 2: the years, and it's still getting weaker, and that they

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Speaker 2: don't collect enough dollars to pay us back. It's unlikely, Tony,

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Speaker 2: It's very unlikely that they will swap back the same

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Speaker 2: number of dollars that we give them.

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Speaker 3: So again I.

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Speaker 1: Go to, you know, the question of why do we

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Speaker 1: do this? I have to assume there's some geopolitics at

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Speaker 1: play here. But if we engage as politically, people will say, well,

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Speaker 1: I guess Malay was wrong, and I guess all this

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Speaker 1: austerity didn't work, and again all the spending cuts didn't work.

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Speaker 1: That Argentina was in a much better place before Malay

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Speaker 1: got elected.

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Speaker 3: That's not true.

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Speaker 2: No, No, that is that one hundred percent false. This

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Speaker 2: country has revolutionized themselves in the last few years since

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Speaker 2: he's been president. They had a budget surplus last year.

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Speaker 2: It may not maintain this year. It looks like they

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Speaker 2: may be stable in a flat to slight deficit, but

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Speaker 2: nothing like they were before. Their currency has stabilized. It's

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Speaker 2: still weak, it's still getting weaker, but it's nothing. They

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Speaker 2: used to have what's called the blue rate. You would

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Speaker 2: have a black market rate to exchange the Argentinian peso

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Speaker 2: because the government rate was so bad. No, Tony, this

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Speaker 2: has been an economic miracle. Let's not let's not confuse it.

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Speaker 2: But they aren't finished with the job yet. And that's

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Speaker 2: where we're at, and I think this You're right, it

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Speaker 2: may be geopolitical, but it may also be Trump just

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Speaker 2: saying okay, let's give them a nudge to get across

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Speaker 2: the finish line.

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

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Speaker 1: it's it is interesting, and it does strike to exactly

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Speaker 1: what can we afford or maybe more to the point,

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Speaker 1: what can't we afford? Never mind why this might be

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Speaker 1: smart on a geopolitical basis, I could, I could without

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Speaker 1: knowing any other information. I think I could sell that

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Speaker 1: story regarding China and hegemonic power. But it is the

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Speaker 1: United States in a position to make this kind of

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Speaker 1: move economically.

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Speaker 2: And yes we are, I mean, think of it. We

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Speaker 2: pulled back all this usaid, which was total bogus junk

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Speaker 2: that we were giving money away around the world. Why

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Speaker 2: not take some of those dollars and help a friendly

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Speaker 2: nation that is shifting from capitalism, I mean, from socialism

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Speaker 2: to capitalism. Do we want them to go back to

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Speaker 2: the socialist, corrupt government they had before? I again, Tony,

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Speaker 2: I'm not saying I'm in favor or against this from

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Speaker 2: a pure economic standpoint, I don't like it, But from

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Speaker 2: a geopolitical standpoint, I understand we have a good capitalist friend.

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Speaker 2: Do we want him to succeed or do you want

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Speaker 2: the corrupt people to come back in and take it

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Speaker 2: over and go back to the way it was, which

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Speaker 2: was a disaster.

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Speaker 1: Speaking of good capitalism, which is to say, just capitalism.

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Speaker 1: The story came out yesterday and here is where I

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Speaker 1: bring you something that we I didn't mention. I was

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Speaker 1: going to bring up the Chicago Bears. There's a two

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Speaker 1: point three to five percent minority steak that is sold

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Speaker 1: and because of the value of that steak, that means

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Speaker 1: that the Chicago Bears are valued at eight.

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Speaker 3: Point nine billion dollars.

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Speaker 1: And you had Robert Kraft of the Patriots engaging a

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Speaker 1: small sale of some shares, and that puts the New

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Speaker 1: England Patriots at a value of nine billion dollars as well.

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Speaker 1: First of all, the Bears are worth the same amount

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Speaker 1: as the Patriots not buying it. Secondly, NFL teams are

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Speaker 1: now worth nine billion dollars.

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Speaker 3: Sir.

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Speaker 2: I hate to say this, but yes, yes, when you

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Speaker 2: take the present value of the cash flows generated, this

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Speaker 2: is a money making machine. How do you think they

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Speaker 2: can afford to pay some of these players hundreds of

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Speaker 2: millions of dollars. I mean, it's it boggles the mind

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Speaker 2: the amount of cash generated by the NFL, and they

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Speaker 2: continue to make it. Some of these companies, the Colts,

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Speaker 2: for example, the Colts owners used to be in other businesses.

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Speaker 2: They've said, heck, what do we need another business for.

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Speaker 2: We've got NFL football. It's the most profitable business on

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Speaker 2: the planet. It's a money making machine.

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Speaker 1: And something is worth what somebody else is willing to

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Speaker 1: pay for it. I still think that that falls in

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Speaker 1: and this is the most exclusive club possibly in the world,

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Speaker 1: owning an NFL team. Doctor Mattwell, economist at the University

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Speaker 1: of Indianapolis, appreciate you more coming up on Tony Katz