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Speaker 1: Live from val Hartbiner and the Crossroads of America. It's

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Speaker 1: Tony Katz today. I found it very strange that Disney

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Speaker 1: stock was up. Of course, this says to everybody who

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Speaker 1: said I'm gonna boycott Disney and I'm not going to

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Speaker 1: stream Disney. Well, people didn't do that. The streaming is up,

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Speaker 1: their numbers are up. But also up is the amount

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Speaker 1: of people going to the theme parks. They attribute the

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Speaker 1: stock price rising to people attending the theme parks. Have

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Speaker 1: you tried to attend a Disney theme park? I would,

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Speaker 1: but I work in radio and we just don't have

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Speaker 1: the money for it. Tony Katz, Tony Katz today. Good

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Speaker 1: to be with you, EJ. And TONI joins me right

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Speaker 1: now chief economists at Heritage. And there's a series of

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Speaker 1: subjects to get to, including the President selecting Kevin worsh

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Speaker 1: to lead the FED, and that's going to require Senate confirmation.

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Speaker 1: I want to hear your thoughts on that. But let's

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Speaker 1: talk about this economy for a moment. We have talked

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Speaker 1: often about the economic issues all across the country. I'm

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Speaker 1: one of the people who says this economy isn't great.

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Speaker 1: I can see that tariffs didn't necessarily blow up inflation,

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Speaker 1: and I'm still not a fan of tariffs, and the

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Speaker 1: President can yell at me all he wants. But this

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Speaker 1: is weird because we all know that the prices to

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Speaker 1: go to Disney World or Disneyland have gone up. It's

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Speaker 1: outrageously expensive to do never mind hotels, never mind the

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Speaker 1: food once you're in a park, never mind just the

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Speaker 1: actual park itself, and that attendance is up, and this

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Speaker 1: economy is questionable. Those two things don't make sense to me.

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Speaker 1: I was hoping you could square the circle. What does

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Speaker 1: this move this statement about Disney, as CNBC reported, tell

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Speaker 1: you about the economy in general.

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Speaker 2: Oh, Tony, thanks for having me back.

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Speaker 3: Look, this is, I think another example of the kind

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Speaker 3: of bifurcated economy that we've been dealing with ever since COVID.

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Speaker 3: If we roll back the clock to twenty nineteen, you

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Speaker 3: had an economy where both lower income as well as

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Speaker 3: middle income and upper income folks were all doing better.

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Speaker 3: In other words, we saw income gains across the board, right,

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Speaker 3: and everybody's income was rising faster than prices in terms

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Speaker 3: of looking at people as a class. Right, Again, that

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Speaker 3: threefold distinction between lower, middle and upper income folks. But

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Speaker 3: after COVID what happened was only the folks really in

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Speaker 3: the upper income bracket. We're seeing their incomes actually outpace

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Speaker 3: their income gains, i should say, outpace price increases. In

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Speaker 3: other words, middle class families fell behind, lower income folks

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Speaker 3: fell behind. And that really has continued almost until today.

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Speaker 3: It has only been very very recently, just a matter

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Speaker 3: of the last several months, that we have seen income

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Speaker 3: gains across the board that are outpacing inflation. And so

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Speaker 3: this idea that somehow, just because Trump came into office

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Speaker 3: in January of twenty twenty five a year ago, that

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Speaker 3: all of a sudden everything magically became better.

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Speaker 2: No, there's absolutely no evidence for that.

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Speaker 3: It took a while for Biden to really wreck the economy.

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Speaker 3: He started spending with his multi trillion dollar spending packages

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Speaker 3: literally in his first month in office, but inflation doesn't

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Speaker 3: peak until a year and a half later. It's not

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Speaker 3: as if making changes right away is immediately going to

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Speaker 3: produce all of the effects that you want or sometimes

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Speaker 3: don't want. These things take time. Well, it's the exact

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Speaker 3: same thing now with President Trump. It is taking time

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Speaker 3: for all of the different policy changes to actually have

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Speaker 3: their effects, to slow inflation, to bring certain prices down.

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Speaker 3: These things do not happen overnight. Now again we are

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Speaker 3: finally seeing I think things move in the right direction.

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Speaker 3: But you haven't yet regained all the lost ground. I'll

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Speaker 3: give you just one real quick stat that I think

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Speaker 3: sums it up to me. If if you look at

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Speaker 3: what the average Americans' weekly paycheck can actually buy, and

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Speaker 3: you look at what happened to that weekly paycheck again,

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Speaker 3: what it could buy, in other words, adjusted for inflation,

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Speaker 3: over the four years of Joe Biden, it fell about

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Speaker 3: accumulative four percent or so. And that's just according to

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Speaker 3: the official metrics. Right if you look at what has

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Speaker 3: it done under the first year under President Trump, it's

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Speaker 3: gone up about one and a half percent. So again

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Speaker 3: that tells you, I think two things. Number One, we

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Speaker 3: were moving in the wrong direction. Now we're moving in

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Speaker 3: the right direction. So positive change there. But the second

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Speaker 3: thing it tells you is that you have not yet

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Speaker 3: regained all the lost ground from the previous four years, which.

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Speaker 1: Now you have to stop. You how in the world

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Speaker 1: do people afford Disney at that moment? So, I mean

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Speaker 1: I might be asking a question about personal responsibility and

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Speaker 1: a question about where people's motives are. Their answer was

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Speaker 1: I now finally have a couple more bucks in my pocket,

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Speaker 1: or feel that I will have a couple more bucks

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Speaker 1: in my pocket. Let's go spend the unbelievable increase in

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Speaker 1: prices at Disney. Let's go put our money there.

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Speaker 3: So, Tony, this is where we just have to come

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Speaker 3: to the well, we got to face facts. Basically, Disney

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Speaker 3: is increasingly like I'm trying to think of another good

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Speaker 3: example here, maybe taking a family to the ballpark to

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Speaker 3: watch a game. When I was a kid, When you

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Speaker 3: were a kid, you could go to the ballpark, you

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Speaker 3: could bring your entire family, and you could afford to

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Speaker 3: eat there and everything right, and it was relatively inexpensive.

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Speaker 3: You could do an outing out at a baseball game.

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Speaker 3: A family can't really do that the day unless you're

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Speaker 3: willing to shell out a whole heck of a lot.

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Speaker 3: More So, for a lot of families, that's just simply

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Speaker 3: out of reach. My point is that things like going

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Speaker 3: to Disney, going to a ball game that used to

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Speaker 3: be relatively inexpensive are today luxuries. And so when we

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Speaker 3: look at why is it certain luxury purchases like going

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Speaker 3: to Disney are actually increasing today. Again, that speaks to

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Speaker 3: the fact that you still have a kind of bifurcated

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Speaker 3: economy where the rich, the wealthy, the high income earners

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Speaker 3: over the last five or six years have done extraordinarily well,

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Speaker 3: and you are still waiting for the lower income folks

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Speaker 3: and middle class families to catch.

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Speaker 2: Up to that.

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Speaker 3: If you look at who is actually going to Disney today,

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Speaker 3: it is not the blue collar guy making seventy thousand

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Speaker 3: dollars bringing his family a four. It's not it's people

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Speaker 3: making six figures. Oftentimes couples who both the mom and

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Speaker 3: the dad are each making six figures, who are taking

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Speaker 3: their kids to Disney.

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Speaker 1: So let me now bring this to a kind of corollary.

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Speaker 1: Maybe that's the right word. Talking to ej antony hif

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Speaker 1: economists the idea of income gap versus wage gap, because

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Speaker 1: we'll often hear about pay inequities, right, it's one of

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Speaker 1: the things that the left loves to talk about, and

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Speaker 1: the wage gap between men and women. But there, you know,

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Speaker 1: we can go back to the conversations of Thomas Sole

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Speaker 1: and the decisions that are made in families, decisions made

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Speaker 1: by women, all sorts of things that lead to this

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Speaker 1: disparity in numbers. But it's interesting that there is certainly

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Speaker 1: a difference between wage gap and income gap, and this

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Speaker 1: idea of not the Bell curve, but what's known as

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Speaker 1: the K curve, and the idea that you can have

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Speaker 1: rich growing, poor growing, the middle class shrinking, and that

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Speaker 1: usually leads to unrest and things not being very good. First,

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Speaker 1: do you believe that this K graph conversation is one

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Speaker 1: that's representative as you're discussing it, of where the American

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Speaker 1: economy is right now, the difference between a wage gap

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Speaker 1: and an income gap, and is Trump's economy on its

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Speaker 1: way to settling both of these things down.

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Speaker 3: I would say, Tony that the problem that you're describing

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Speaker 3: is not as bad today as it was a year ago,

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Speaker 3: and is much less so than it was two or

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Speaker 3: three years ago.

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Speaker 2: But it still exists.

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Speaker 3: It's not as if just because prices have basically stopped

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Speaker 3: rising at this point, the inflation rates are incredibly low today,

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Speaker 3: much lower than the official metrics if you look at

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Speaker 3: something like the true Inflation Price Index. But at the

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Speaker 3: end of the day, again, just because things are not

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Speaker 3: getting worse for everybody, does not mean that everything is

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Speaker 3: getting better for everybody. So that's basically where we are

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Speaker 3: at today. There is a lot of lost ground that

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Speaker 3: we're going to need to make up before people are

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Speaker 3: made whole as it were. And so yes, the the

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Speaker 3: kind of case shape there still exists. That bifurcated economy,

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Speaker 3: as I like to call it, still exists. Those differentials

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Speaker 3: between wages and incomes still exist. Are they get better? Yes,

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Speaker 3: but it.

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Speaker 2: Is still not great.

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Speaker 1: Let's now move over to the future of this economy.

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Speaker 1: It's very clear that President Trump has no love lost

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Speaker 1: for Jerome Powell, Chairman of the Federal Reserve. He has

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Speaker 1: nominated Kevin Walsh to that position. He would need Senate confirmation.

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Speaker 1: This is a process that is certainly not an easy

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Speaker 1: one in today's world. Walsh is interesting because not only

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Speaker 1: as he addressed the idea of bringing down rates, he

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Speaker 1: has also addressed the idea that the Federal Reserve has

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Speaker 1: too much on the balance sheet and that has to

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Speaker 1: go away in order for things to really be economically superior.

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Speaker 1: Talk to me about what you know about Kevin Walsh,

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Speaker 1: his theories that would lead the Fed, and what kind

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Speaker 1: of changes one could expect under his leadership.

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Speaker 3: Well, Tony, I've actually had the pleasure to sit down

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Speaker 3: with Kevin Walsh several times now over dinner and have

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Speaker 3: some really in depth discussions on monetary policy, and I

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Speaker 3: have been very, very impressed with the man. You know,

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Speaker 3: this is a guy we forget because it happened seemingly

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Speaker 3: so long ago. But this is a guy who during

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Speaker 3: the global financial crisis and the mortgage meltdown. So we're

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Speaker 3: going back to, you know, two thousand and seventy eight nine.

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Speaker 3: Here he was the one saying to the rest of

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Speaker 3: the people on the FED. He was there at the time.

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Speaker 3: He was the one saying, guys, you're making a mistake here.

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Speaker 3: This is not the policy course you should be taking.

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Speaker 3: Instead of doing X, you should be doing why, et cetera.

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Speaker 3: And of course history has proved him to have been correct.

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Speaker 2: So it's not as if he's just.

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Speaker 3: Monday morning quarterbacking where he's looking back and saying, hey,

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Speaker 3: back then, we should have done something differently. No, he

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Speaker 3: was the man in the arena at the time saying

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Speaker 3: we need to do something differently. So he has you know,

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Speaker 3: it's not just a matter of okay, look at his education,

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Speaker 3: look at the places he's worked.

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Speaker 2: Wow, he's got a great resume.

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Speaker 3: No, I don't care so much about that as I

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Speaker 3: care about his ideas and the fact that he is

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Speaker 3: consistently correct. That to me is the most impressive thing

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Speaker 3: on his resume. So fast forward to today and he

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Speaker 3: has pointed out that the FED under Jerome Pale as

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Speaker 3: the policy.

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Speaker 2: Mixed exactly backwards.

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Speaker 3: They have interest rates too high and the balance sheet

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Speaker 3: too big. You can reduce rates without causing inflation by

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Speaker 3: selling off the balance sheet. But Jerome Pale, a Wall

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Speaker 3: Street creature and a lawyer not an economist, has been

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Speaker 3: for a very long time funneling profits to Wall Street

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Speaker 3: at the expense of Main Street by exploding the balance sheet,

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Speaker 3: which is when the Fed engages in all of these

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Speaker 3: asset purchases, flooding the system with liquidity at the same

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Speaker 3: time then having to jack up interest rates to deal

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Speaker 3: with the inflation that is inflicting.

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Speaker 2: Main Street has to deal with.

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Speaker 3: Higher prices and a higher cost of borrowing via these

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Speaker 3: high interest rates, whereas Wall Street just gets to rake

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Speaker 3: in all of the higher asset prices and higher profits

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Speaker 3: that has been the Fed under Jerome pal and Kevin

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Speaker 3: Walsh wants to completely reverse all of those mistakes. That

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Speaker 3: would be such a huge win for the American economy

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Speaker 3: and more importantly, Tony, for the American people.

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Speaker 1: So we take things off the balance sheet? Describes me

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Speaker 1: what those things are, what does it mean to remove

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Speaker 1: it from the balance sheet, and what is the result

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Speaker 1: that Midwest main Street feels on day one?

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Speaker 3: Well, Tony, When we talk about the FED adding or

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Speaker 3: subtracting from its balance sheet, that basically means the FED

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Speaker 3: is going to be buying or selling assets. The assets

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Speaker 3: in these cases are things like United States treasuries. Those

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Speaker 3: could be bills, notes, or bonds, and also mortgage backed

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Speaker 3: securities or nbs. And as the FED buys these things,

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Speaker 3: it is creating money in the process because when the

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Speaker 3: FED gives you money in exchange for one of these assets, right,

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Speaker 3: you have the bond, I, as the FED, buy the

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Speaker 3: bond from you. So you give me the bond, and

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Speaker 3: what do I give you? Well, I'm going to give

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Speaker 3: you cash. Where did that cash come from? While I

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Speaker 3: created it? As the FED? That's my power. I was

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Speaker 3: given that power by Congress, the power to create and

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Speaker 3: extinguish money. That is what happens when the FED puts

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Speaker 3: these assets on its balance sheet, it is injecting liquidity

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Speaker 3: into financial markets. Conversely, when the FED sells these assets,

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Speaker 3: we're reversing the process.

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Speaker 2: Tony.

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Speaker 3: So I'm giving you the bond back and you're giving

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Speaker 3: me money. What happens to the money you just gave

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Speaker 3: me as the FED poof, it's gone? It extinguishes the

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Speaker 3: money as the FED gets it back. And so that

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Speaker 3: is what Kevin wants to do. That is anti inflationary,

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Speaker 3: that puts downward pressure on prices, not upward pressure on prices.

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Speaker 3: At the same time, having less pressure on inflation means

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Speaker 3: the FED can lower interest rates. So this is a

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Speaker 3: real win for main street because you not only get

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Speaker 3: the benefit of less inflationary pressure in the economy, but

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Speaker 3: you also get the added benefit of lower interest rates

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Speaker 3: on everything from your mortgages that you're trying to get,

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Speaker 3: your credit cards that you open, your student loans, your

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Speaker 3: auto loans, you name it. So you're talking about not

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Speaker 3: having to spend as much on products and services because

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Speaker 3: of less inflationary pressure in the economy, but then also

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Speaker 3: not having to spend as much on interest every month

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Speaker 3: because it doesn't cost you as much to borrow that

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Speaker 3: is such a huge win for as you said, Midwest main.

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Speaker 1: Street talking to EJ. Antoni, chief economist at Heritage dot Org.

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Speaker 1: Before I let you go, I've been tracking what's been

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Speaker 1: going on with silver and gold, and silver at one

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Speaker 1: twenty one and gold at fifty at fifty six hundred,

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Speaker 1: and it would have been climbing and climbing and then

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Speaker 1: all of a sudden boom getting punched in the neck

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Speaker 1: as it did at the end of last week and

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Speaker 1: over the weekend, and still at outrageous highs. And silver

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Speaker 1: between seventy five and eighty five dollars an ounce, and

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Speaker 1: gold and at forty six hundred dollars an ounce. These

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Speaker 1: things are the typical hedge against inflation. Why did gold

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Speaker 1: and silver go up so much? Why did it just

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Speaker 1: take a hit downward? And if you want a crystal ball,

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Speaker 1: and I'm not gonna hold you to it, where's it.

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Speaker 2: Going, Tony?

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Speaker 3: Great great questions, and this actually has a lot to

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Speaker 3: do with what we were just talking about, Kevin Walsh.

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Speaker 3: You know, people have been looking at what's happening in

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Speaker 3: Congress where they just cannot get control of the spending.

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Speaker 2: They refuse to make.

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Speaker 3: Substantive cuts to go to the federal budget, and they've

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Speaker 3: been watching what Jerome Palell is not just saying but

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Speaker 3: doing at the FED and realizing that there is so

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Speaker 3: much upward pressure on inflation in the future because of

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Speaker 3: that deadly combination of no fiscal restraint in the halls

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Speaker 3: of Congress and a federal Reserve that is more than

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Speaker 3: happy to print the money to cover the deficits, which

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Speaker 3: is what has been happening under Powell. However, with Kevin

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Speaker 3: Walsh's announcement with his nomination, all of a sudden, that

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Speaker 3: was water dousing the fire.

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Speaker 2: Now there is not.

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Speaker 3: Anywhere near as much concern that you need to heavily

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Speaker 3: hedge against inflation because the policies that we were just

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Speaker 3: talking about of Kevin Walsh would be much less inflationary

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Speaker 3: at the FED than what we have seen under Jerome Powell.

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Speaker 3: And that's even true with the Congress that refuses to

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Speaker 3: control the spending. Even with that bad component not having

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Speaker 3: Jerome Powell, there would still be a god send for markets.

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Speaker 3: So that kind of soothing or calming effect on those

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Speaker 3: inflationary fears meant that the monetary premium on gold and

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Speaker 3: silver went way way down and Tony, chief economist Heritage

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Speaker 3: dot org.

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Speaker 1: Appreciate you coming back to join us. Glad it's all

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Speaker 1: going well. EJ and TONI thank you. More ahead. I'm

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Speaker 1: Tony Katz, and this is Tony Katz today