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Speaker 1: Line from the Heartbland and the Crossroads of America. It's

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Speaker 1: Tony Katz today, point seven percent. That's the increase in

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Speaker 1: wholesale prices in the month of February. Tony Katz, Tony

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Speaker 1: Kats today, Good to be with you. This is not

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Speaker 1: the number you want if you're running for reelection. Nothing

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Speaker 1: about this feels good. And I've got a theory, and

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Speaker 1: I believe the theory involves tariffs and the eventuality. Doctor

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Speaker 1: Matt will joined us right now, economist at the University

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Speaker 1: of Indianapolis. Point seven percent. The expectation was point three

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Speaker 1: percent up for the producer price index, that's wholesale prices

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Speaker 1: core right you exclude food and energy, was up point

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Speaker 1: five percent. And they want to say on the twelve

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Speaker 1: month inflation was three point four. If it's point seven,

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Speaker 1: it's way more than three point four based on you

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Speaker 1: the way you do the math. But what does this

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Speaker 1: What are you taking from this report? What should we

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Speaker 1: be looking at?

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Speaker 2: Well, I mean, obviouslyzer point seven times twelve is eight

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Speaker 2: point four. That gives us the Biden era inflation level.

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Speaker 2: But there's a few aspects of this that are very important,

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Speaker 2: one of which it's wholesale, so we may not see

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Speaker 2: it at the store because this is not what we pay.

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Speaker 2: This is what the manufacturers are paying. But we know

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Speaker 2: every one in the world knows they cannot absorb these

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Speaker 2: cost prices forever and eventually they're going to have to

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Speaker 2: pass them along. So we see that right now they're

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Speaker 2: paying more every single month. It's consistent with other data

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Speaker 2: that we've seen. The ISMPMI report said very high wholesale

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Speaker 2: prices as well. So what's the cause of this, Well,

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Speaker 2: there's a few things. Inflation is caused by more stuff

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Speaker 2: or not enough stuff, but too much cash. So the

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Speaker 2: government is still spending too much money. That's part of

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Speaker 2: what's driving this. Trump has not been a lower spender person,

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Speaker 2: he just hasn't spent as much as Biden. So one,

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Speaker 2: do we just have too much government spending going on?

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Speaker 2: Second is the tariffs. The terriffs are still out there.

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Speaker 2: The Supreme Court said no, Trump said, okay, I got

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Speaker 2: another tool, and he's using that tool. So tariffs are

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Speaker 2: still driving manufacturing and wholesale pricing. So we've got the

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Speaker 2: driving force being tariffs, We've got government spending, and all

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Speaker 2: of these things are not good. The economy is growing decently,

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Speaker 2: but not enough to compensate for all the cash and

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Speaker 2: all the tariffs.

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Speaker 1: So first things first, none of this has to do

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Speaker 1: with what's going.

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Speaker 2: On in Iran.

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Speaker 1: That has to be clear with people. Not a single

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Speaker 1: ounce of what we're seeing from this report has to

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Speaker 1: do with Iran.

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Speaker 2: True, true, because that was pre this report. All of

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Speaker 2: the I mean post this report, so all the Iran

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Speaker 2: stuff that has occurred has been after this data was

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Speaker 2: already baked in.

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Speaker 1: But with a tariff conversation, this could be taken as

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Speaker 1: can uh, the manufacturer is no longer absorbing the tariff costs.

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Speaker 1: This is officially being passed on now to the retailer,

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Speaker 1: and that would one would assume, means it's going to

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Speaker 1: be passed on to the consumer, you.

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Speaker 2: And me eventually, I mean, can they absorb it. They'll

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Speaker 2: you know, Trump has threatened the Amazon before not to

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Speaker 2: pass along the cost Well, you can only threaten for

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Speaker 2: so long, and you can only eat eat your costs

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Speaker 2: so much. Eventually got to give them to the consumer.

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Speaker 2: That's just the fact.

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Speaker 1: So this now leads us to where does where do

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Speaker 1: we go from here? To quote Buffy the Vampire Slayer,

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Speaker 1: If this is where we are at, and this is

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Speaker 1: a tariff conversation. The reduction of wholesale prices doesn't go

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Speaker 1: down until the tariff's disappear.

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Speaker 2: Okay, there is there's three parts of that. The tariffs

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Speaker 2: are here, the terriffs aren't going anywhere. They're in the

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Speaker 2: system now. But we could grow ourselves out of it.

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Speaker 2: Trump did that in his first term. He grew himself

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Speaker 2: out of the inflation that would be created, not by

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Speaker 2: tariffs at that time, but by government spending. And that's

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Speaker 2: the problem now. Trump is not controlling government spending. Trump

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Speaker 2: is not controlling tariffs. So we could grow ourselves out

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Speaker 2: of this. But if we don't, and my gosh, tony,

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Speaker 2: the amount of growth that would be required to compensate

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Speaker 2: for the massive amount of government spending in the tariffs. Hey,

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Speaker 2: we've had high government growth, I mean high GDP growth,

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Speaker 2: but not enough. So I think we're stuck with this

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Speaker 2: unless Trump can get his hands around spending controls and

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Speaker 2: his hands are around reducing tariffs, which I don't see

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Speaker 2: that happening.

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

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Speaker 1: before I let you go what we're seeing in Iran

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Speaker 1: with the straight up Hormuz and oil prices per Bowo

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Speaker 1: price is over one hundred dollars on the Brent crued.

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Speaker 1: You know, this is not necessarily our oil. This is

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Speaker 1: oil that goes to the rest of the world. It's

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Speaker 1: twenty seven percent of the world's oil. But all this

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Speaker 1: affects barrel price and effects what we pay at the pump.

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Speaker 1: Is there a number a number of months, a number

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Speaker 1: of weeks, a certain number of barrel that if you

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Speaker 1: were to hit for a certain amount of time, economists say, okay,

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Speaker 1: that leads us down the road of the R word,

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Speaker 1: which is recession.

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Speaker 2: By the way, we're there, We're there. I mean these

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Speaker 2: numbers right now will not go away once the war

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Speaker 2: is over. If Trump is held to his what is

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Speaker 2: a ninety day limit by law or something sixty So

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Speaker 2: if this is how much sixty is it?

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Speaker 1: Yeah, and the warpowers act sixty days?

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Speaker 2: Okay, So if he if he had a sixty day war,

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Speaker 2: the price of oil is not going to drop at

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Speaker 2: the end of that because prices are downwardly sticky, meaning

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Speaker 2: that oil prices jump immediately when they're supplying demand constraints,

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Speaker 2: but they do not come down that fast they tend

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Speaker 2: to come down at about three to five times longer.

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Speaker 2: So we are going to be stuck with these higher prices.

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Speaker 2: And when you add the inflation, you could be adding

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Speaker 2: to the R word because of oil prices being sticky

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Speaker 2: and a government spending causing the inflation. So we might

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Speaker 2: be there. I don't want to say we aren't because

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Speaker 2: other things that Trump is doing are fantastic for the economy,

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Speaker 2: and I believe this is not economics. Okay, this is

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Speaker 2: not economics. This is Matt doctor, Matt, regular citizen guy.

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Speaker 2: But I have a lot of faith that what Trump

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Speaker 2: is doing from foreign policy standpoint is necessary and he's

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Speaker 2: taking an economic bullet to do the right thing. So

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Speaker 2: he deserves credit for that. But you and I have

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Speaker 2: to get back to economics and say, there is going

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Speaker 2: to be a negative economic impact.

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Speaker 1: What's the biggest turnaround he can make?

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Speaker 2: You mean economically, Yeah.

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Speaker 1: What's the biggest turnaround maneuver? What is the thing that

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Speaker 1: you would say to him, do this right now and

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Speaker 1: this all gets better in a month.

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Speaker 2: He won't. He needs to eliminate the tariffs and he

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Speaker 2: needs to cut government spending, neither which is going to

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Speaker 2: occur because he won't eliminate the tariffs, and his own

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Speaker 2: party won't let him cut spending.

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

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Speaker 1: appreciate you taking the quick moment with us. This is

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Speaker 1: Tony Katz today