Speaker 1: One of the things I'd mind most about the president
Speaker 1: is there are traditional nineteen sixties forms of masculinity, but
Speaker 1: this is a bloke who's really willing to look at
Speaker 1: another man and say, I think you're handsome.
Speaker 2: You're beautiful, Yeah, you're beautiful of that.
Speaker 1: Yeah. The work week may be over, but the economy
Speaker 1: it never takes time off. I'm justin Wolpher's and this
Speaker 1: is off the clock unwinding the week's economic years. There's
Speaker 1: no one I would rather do it with than my
Speaker 1: good friend, superstar economic journalist Stacy Vanix Smith.
Speaker 2: Thank you, Justin. I'm very excited to be here with
Speaker 2: you once again. I am a calmnist of Bloomberg Business Week,
Speaker 2: co host of the podcast Everybody's Business, and as always,
Speaker 2: extremely thrilled to be here with you talking economics on
Speaker 2: a Friday.
Speaker 1: What else we could do at the end of the week,
Speaker 1: he so, what are we gonna do? We're going to
Speaker 1: pick through the recent economic years and we're here to
Speaker 1: tell the folks at home what you should actually be
Speaker 1: concerned about, what you can safely ignore, and maybe along
Speaker 1: the way we can find some silver linings. Stacey, We've
Speaker 1: got to packed episode, so strap in. We're gonna start
Speaker 1: off with the latest round of tariffs. And forgive me
Speaker 1: if you think you've heard this episode before, it's actually
Speaker 1: a new episode. It's a different round of tariffs. We
Speaker 1: can talk about what makes them different, what makes them
Speaker 1: more of the same, why maybe these are going to
Speaker 1: stick around, And we're going to dig into the FED.
Speaker 1: We're going to go and talk to Handsome Kevin and
Speaker 1: see how he's doing over there, and then we'll get
Speaker 1: back to the most recent GDP numbers. GDP stands for
Speaker 1: gross domestic product, not gus d platypus. These numbers came
Speaker 1: out on Thursday, so huge week for economics. What do
Speaker 1: you reckon?
Speaker 2: Stacy, Absolutely, and don't forget Justin. At the very end
Speaker 2: of the show, we're going to have a little bit
Speaker 2: of a competition. It's chart versus chart. I don't know
Speaker 2: what possessed me to say yes to this, since you're
Speaker 2: an economist, you spent all day looking at charts. But
Speaker 2: I said yesterday and I think I'm gonna win. I
Speaker 2: think I have the chart to end all charts.
Speaker 1: I mean, the thing is chat versus chat. White for
Speaker 1: this that wrongs with art versus art because a good
Speaker 1: chat is art. You have the comparative literature genius. You
Speaker 1: have that entire rights out of the brin so I
Speaker 1: reckon you have you thought about your colors?
Speaker 2: My color is like the color of the chart, Yeah,
Speaker 2: the art of the chart. Yes, and I stand by
Speaker 2: the color that I chose.
Speaker 1: Well, so minoring a platypos economics theme.
Speaker 2: Oh, mine are in the theme of the that the
Speaker 2: government put them in. But I still stand by the
Speaker 2: right and beige.
Speaker 1: Fantastic. Let's get into it. Tell me Number one.
Speaker 2: Tariffs all right, justin So, Okay, a lot has happened
Speaker 2: with tariffs since we last talked. I know you've done
Speaker 2: a bunch of videos about this already, and I'm very
Speaker 2: excited to kind of break things down with you a
Speaker 2: little bit. I was wondering if kind before we dive
Speaker 2: into this, you can kind of lay out what is
Speaker 2: going on with this leadst round of tariffs, as well
Speaker 2: as also the kind of the Canada specific tariffs that
Speaker 2: also happened. Can you kind of just get us up
Speaker 2: to speed economically speaking?
Speaker 1: Yeah, So to folks at home, strap in, because there's
Speaker 1: a lot going on, all of it highly informed after
Speaker 1: decades of careful research by one of the most thoughtful
Speaker 1: administrations in our nation's history. Stacy, do you guys have
Speaker 1: sarcasm in Idaho?
Speaker 2: You know, Idaho is a more of an earnest place, Okay,
Speaker 2: and I have often been accused of being too earnest,
Speaker 2: But I live in New York, where sarcasm is just
Speaker 2: the you know.
Speaker 1: I'm going to give it the Idaho treatment. We have
Speaker 1: had two sets of tariffs by an administration that has
Speaker 1: an approach that it believes in, and if at first
Speaker 1: you don't succeed, try try again. And so I feel
Speaker 1: like President Trump has been talking with your father, and
Speaker 1: so after his first round of tariffs has ruled unconstitutionally,
Speaker 1: came back with a second round of tariffs that actually
Speaker 1: just hit its xpery date. And now we're up to
Speaker 1: the third round. And I'm sure your father, being a
Speaker 1: true American, hates Canadians, and so he's got an extra
Speaker 1: round of tariffs to just really have a go with
Speaker 1: those terrible people north of our border.
Speaker 2: Definitely does not heed Canadians. I forgot Comedians.
Speaker 1: I just went back to sarcasm again. I'm not very
Speaker 1: good at earn all right, Okay, let me try and
Speaker 1: explain what's going on. The starting point is two starting points.
Speaker 1: The president loves tariffs, he has a theory about why,
Speaker 1: and the Constitution says that the Congress owns tariffs. So
Speaker 1: the problem with that is if the Constitution says you've
Speaker 1: got to go to Congress, there's actually, by the way,
Speaker 1: it's not a problem, a very nice opportunity. And this
Speaker 1: is Idaho earnest where he could just go to the
Speaker 1: Congress and he could say, I've got a really good idea,
Speaker 1: why don't we have tariffs, and they'd pass a law
Speaker 1: and then we'd have the tariffs that have gone through
Speaker 1: this system of government, and there'd be checks and balances,
Speaker 1: and our related politicians would all weigh in. I'm just
Speaker 1: a bill from Capitol Hill. Can you sing that for me, Stacy?
Speaker 2: I mean no, but I know the song said you
Speaker 2: can't do that to people.
Speaker 1: I'm just a bill, bill from on Capitol Hill, and
Speaker 1: I didn't grow up at America, so I don't know the rest. Okay,
Speaker 1: that's what he could do, but he doesn't like that
Speaker 1: because he doesn't like bills, doesn't like Capitol Hill, or
Speaker 1: they don't like him. So what he needs to do
Speaker 1: is he needs to find a time in the past
Speaker 1: where Congress has said said, you know what, we want
Speaker 1: to give the White House this power of a Tariff's
Speaker 1: first attempt was to say it's an emergency. But the
Speaker 1: emergency powers that didn't use the word tariff, and there's
Speaker 1: not an emergency. The Supreme Court said all of those
Speaker 1: first deliberation day tarifts for illegal were paying them back.
Speaker 3: Then.
Speaker 1: He says, we're in the middle of a balance of
Speaker 1: payments crisis. Hey, fun fact, the United States the balance
Speaker 1: of payments right now is zero dollars. It's been zero
Speaker 1: dollars for many decades in a row. The balance of
Speaker 1: payments always balances when your currency floats. That's one for
Speaker 1: the one for the textbooks right there. Anyway, that was
Speaker 1: a power that says he's allowed to impose tariffs for
Speaker 1: six months. The sixth, the last day came up, and
Speaker 1: all of a sudden, he discovered and I'm now going
Speaker 1: to be sort of Brooklyn sarcastic if I may, he
Speaker 1: discovered a deep or maybe I'm being Odaho Earnest, a
Speaker 1: deep and abiding passion for the worlds oppressed people around
Speaker 1: the world who are enslaved in forced labor, situations, and
Speaker 1: there's nothing the President cares more about than that. What
Speaker 1: he is discovered is that there's a power where if
Speaker 1: the United States faces some form of unfair competition, he
Speaker 1: can levy tariffs. So here's the theory of the case.
Speaker 1: We're now putting tariffs on Australia, on Canada, on the
Speaker 1: United Kingdom, on every country, on eighty countries around the
Speaker 1: world based on this forced labor. Now, no one is
Speaker 1: saying Australia has forced labor, which is good because we don't.
Speaker 1: What they're saying is Australia is a bit sloppy and
Speaker 1: might sometimes import some goods that involve forced labor, and
Speaker 1: then they might export those to America, and it's unfair
Speaker 1: that American workers have to compete with Australia, which might
Speaker 1: accidentally occasionally use forced labor. By the way, it doesn't
Speaker 1: look here's the real problem. When a grape comes across
Speaker 1: a border, it doesn't actually say produced with forced labor
Speaker 1: on it, and so it's very hard to figure out
Speaker 1: what's going on. Okay, So then the President has put
Speaker 1: tariff's on eighty countries based on the theory that they're
Speaker 1: a bit sloppy and policing forced labor. It's great that
Speaker 1: he does that. What this It's transparently obvious that this
Speaker 1: is not actually about forced labor. Almost every country faces
Speaker 1: the same tariff of ten percent, some get ten percent
Speaker 1: or towven half percent. The difference is if you're less
Speaker 1: sloppy on forced labor, it's a very small incentive to
Speaker 1: actually care about the issue at all. So that's now
Speaker 1: in place. Surprising by the way it a place to
Speaker 1: eighty countries, you might say eighty what's going on there?
Speaker 1: Or slightly over eight sixty economies when you include all
Speaker 1: of the euear that's going to be eighty something. You
Speaker 1: might say, way, only eighty something one of all the
Speaker 1: world's countries. Will They discovered with Liberation Day that if
Speaker 1: they try and list all the countries, sometimes they make mistakes,
Speaker 1: like the Herd and McDonald Islands home to penguins, which
Speaker 1: they put very severe tariffs on home literally only to penguins.
Speaker 1: And so by.
Speaker 2: Focus, I feel like the penguins had it come.
Speaker 1: In they did. Son's a bitches always trying to outdress
Speaker 1: the president, miss business casual and what is a penguin
Speaker 1: where they think.
Speaker 2: They are in tuxedos. Of Yeah, that's very funny, Ustards.
Speaker 1: That's where we're at. Now here's the weird thing. It
Speaker 1: might actually be legal because not a lawyer. Basically, the
Speaker 1: law says you have to find evidence of unfair competition.
Speaker 1: So then what you do is you open an investigation
Speaker 1: and you investigate. And you'll be very surprised that when
Speaker 1: President trumpass Howard Lutnik in the Department of Commerce and
Speaker 1: the US Trade Representative to investigate whether something he hopes
Speaker 1: is true is true, they come back and say it's true.
Speaker 1: But the courts tend to give that a great deal
Speaker 1: of difference. They think, well, presidents wouldn't just make things up.
Speaker 1: They do very serious investigations. So it's very likely that
Speaker 1: these will turn out to be legal. So all of
Speaker 1: this very long story, they say, we used to have
Speaker 1: tariffs around about ten percent. We now have tariffs around
Speaker 1: about ten percent. How excited are you about that, Stacey?
Speaker 2: It's really interesting. I mean, it's interesting that there's been
Speaker 2: so much movement to stay the same. It's like a duck,
Speaker 2: you know, it's like sort of sitting on the surface.
Speaker 2: It's like the one constant is that we have tariffs
Speaker 2: and that the sort of feet underneath the surface or
Speaker 2: the reason for the tariffs. It's really interesting that it's
Speaker 2: sort of the result its results oriented and not process oriented.
Speaker 2: It's also interesting to sort of hear it from this
Speaker 2: perspective because I hadn't actually really thought about it from
Speaker 2: this way. But it's just like, I want to put
Speaker 2: tariffs in please by any means that I need.
Speaker 1: To, you know, And I think that's a critical part
Speaker 1: of the economics of this. So the President actually had
Speaker 1: a theory of the case. The theory of the case
Speaker 1: was going to be I'm going to use tariffs as leverage,
Speaker 1: and that's what he did with Liberation Day. He would
Speaker 1: point at the Brits and you say, here's the tariff
Speaker 1: coming for you. There's any one way to get out
Speaker 1: of this, and that's to come and kiss the ring
Speaker 1: and offer me some concessions. They pretended they came to
Speaker 1: a deal. They didn't.
Speaker 3: Really.
Speaker 1: That's a different story for a different day. But that
Speaker 1: was the idea. Now here's the thing. These tariffs come
Speaker 1: out of an investigation. The investigation have found every country
Speaker 1: except America is a bit sloppy when it comes to
Speaker 1: forced labor. Now, when President Trump called the British Prime Minister.
Speaker 1: First of all, it's a different blowke answering the phone now.
Speaker 1: But secondly, he can't point at him and say, unless
Speaker 1: you do a bunch of favors for me, this is
Speaker 1: your tariff. These are basically uniform tariffs and they're based
Speaker 1: on this false idea, which means the President now has
Speaker 1: no when to be clear about that, no leverage against
Speaker 1: any individual country. So what's happened is the President says
Speaker 1: I want tariff stumps his feet, tells his lawyers to
Speaker 1: get them for him, and they got them for him,
Speaker 1: but they're not the ones that actually do the job
Speaker 1: he wants to do, which is a rather way of saying,
Speaker 1: I know this is going to be studying. This is
Speaker 1: the dumbest set of tariff yet.
Speaker 2: Wait, he can't individualize them.
Speaker 1: Nope, why not because it's based on a legal foundation.
Speaker 1: The legal foundation is unfair competition from this particular country,
Speaker 1: and that legal foundation comes from the Commerce Department. Having
Speaker 1: done an investigation and having found that every country is
Speaker 1: bad on forced life.
Speaker 2: Couldn't you say, like, oh, as it turns out the
Speaker 2: UK isn't as bad as we thought, but Australia is
Speaker 2: still super terrible, So we can keep Australia's tarif simply
Speaker 2: and und So.
Speaker 1: At some point you might hope that the lawyers. This
Speaker 1: is where I'm glad I don't have a law degree,
Speaker 1: because then i'd be a lawyer, but one might be
Speaker 1: required at this point that you're absolutely right. There must
Speaker 1: be some way that you could pretend your whole way there.
Speaker 1: But as far as I can tell, he doesn't really.
Speaker 1: At some point the courts are going to say this
Speaker 1: is utterly preposterous. You just met with the British Prime
Speaker 1: minister and he slipped you a bottle of whiskey in
Speaker 1: a gold bar. While of a sudden, do you think
Speaker 1: that they're good on forced labor and so? And you
Speaker 1: could even if you weren't confident of my theory there,
Speaker 1: And to be honest, I'm not because I'm not a lawyer.
Speaker 1: You can actually see it in another way, which is
Speaker 1: the President is not making phone calls. He has not
Speaker 1: called the British Prime Minister, of the Korean or the
Speaker 1: Australian Prime minister over and said lets negotiate over this.
Speaker 1: So the White House is already acting as if these
Speaker 1: are tariffs that just are going to exist no matter
Speaker 1: what you know.
Speaker 2: One of the things I find really interesting about the
Speaker 2: fixation on tariffs is to me, it's it's sort of
Speaker 2: a testament to the power of the American consumer, because
Speaker 2: like US consumers, like essentially US buying stuff is not
Speaker 2: only like one of the most powerful forces in the country,
Speaker 2: I mean, it's most of the US economy. It's a
Speaker 2: hugely powerful force in the world. It's like sixteen percent
Speaker 2: of the global economy. And I think he figured this out,
Speaker 2: that this is this powerful weapon that people are so
Speaker 2: like the whole world's economy seemingly has become so dependent
Speaker 2: on the American consumer that to threaten to cut people
Speaker 2: off from that or to compromise that is just it's
Speaker 2: a huge threat. I mean, it's tantamount to like a weapon,
Speaker 2: and it's a weapon everybody's scared of, and you can
Speaker 2: just kind of wield it at will. But it hurts
Speaker 2: us too, I think absolutely.
Speaker 1: When you cut off the access of American consumers to
Speaker 1: foreign markets, that hurts folks in foreign markets and American consumers.
Speaker 1: But what's great, Stacey, we found something we disagree on.
Speaker 1: You have actually, I think very well described the view
Speaker 1: of the administration. We hold the American consumers perse strings,
Speaker 1: we can hold the world to ransom around that. You've
Speaker 1: actually heard that very explicitly from Stephen Miller. In fact,
Speaker 1: he gives numbers. Here's the thing that Miller misses. So
Speaker 1: if you look at consumpt the share of global consumption
Speaker 1: that comes to American consumers, you just gave a number.
Speaker 1: I'm sure it's right. The American economy is definitely a
Speaker 1: large one, but it's also one of the most closed economies.
Speaker 1: Closed means we trade less than other countries do, and
Speaker 1: so our share of global consumption is good, but our
Speaker 1: share of how much are we consumers on the gloves
Speaker 1: global market is substantially smaller. And you know, so I
Speaker 1: think our trade share of GDP is about thirty percent.
Speaker 1: It can be you know, twice that in other countries,
Speaker 1: which means that the weight of American consumers is large,
Speaker 1: but their weight in global markets is half as much.
Speaker 1: Because the truth is, folks from Michigan buy stuff from Idaho.
Speaker 1: They don't need to buy it from Ireland. I'm thinking
Speaker 1: about potatoes. And because we're so big, we're doing a
Speaker 1: lot of trade within US across states rather to cross countries.
Speaker 1: That's one of the reasons you think about US as
Speaker 1: being a somewhat closed economy.
Speaker 2: I mean another thing to consider is not only maybe
Speaker 2: are we not hurting other countries as much as we
Speaker 2: think we are, but I feel like we're hurting ourselves.
Speaker 2: I've talked to a lot of businesses and about this.
Speaker 2: I mean, there's consumer prices. I think that's one place
Speaker 2: where it crops up. But another place where it crops
Speaker 2: up is especially small businesses just oftentimes are not operating
Speaker 2: with the time the profit. And in fact I spoke
Speaker 2: with there's a small business, Burlap and Barrel. They are
Speaker 2: a spice importing business. They're one of two small businesses
Speaker 2: suing the Trump administration. They sued over the first set
Speaker 2: of tariffs, and one a few hundred thousand dollars, and
Speaker 2: now they are suing again. So it's owned, it's co
Speaker 2: owned by Ori Zoharan Ethan Frish. And so here is
Speaker 2: what Ethan said about kind of where the cost of
Speaker 2: the tariff's lands for his company, Burlap and Barrel. They
Speaker 2: they're a spice company, so they import from dozens of countries.
Speaker 4: I think this year already we've paid like what like
Speaker 4: three hundred and fifty thousand dollars in tariffs even more.
Speaker 4: And so this was this was it was really meaningful.
Speaker 4: What we ended up doing is cutting costs wherever we could.
Speaker 4: And so that ended up being in like how do
Speaker 4: we cut costs on packaging, how do we cut costs
Speaker 4: on shipping? What ends up happening, I think a little
Speaker 4: bit ironically or counterintuitively, we realized is that the place
Speaker 4: where we could cut cost was not unsourcing the spices
Speaker 4: because they don't grow in America.
Speaker 1: It was in our cost in America.
Speaker 2: Yeah, so it's like not hiring when they would have
Speaker 2: hired someone and other things like that. So it's hurting
Speaker 2: the US economy and of course hurting their business and
Speaker 2: the profits that they can make.
Speaker 1: It makes a really important point there. And you know,
Speaker 1: I haven't been polite about the Trump tariffs. I'm not
Speaker 1: going to start now. I might have called them dumb.
Speaker 1: Another way in which they're dumb is they're across the
Speaker 1: board on every product. So if you had a rationale
Speaker 1: for tariffs that you wanted to bring manufacturing back to America,
Speaker 1: then maybe what you would want to do is tariffs
Speaker 1: specific the sorts of manufacturing that we're more likely to do.
Speaker 1: The joke I used to tell, I'm going to tell
Speaker 1: it again. So now the joke I do tell is,
Speaker 1: you know, tariffs on bananas are not going to bring
Speaker 1: banana factories back to the United States. And that's his
Speaker 1: point about spices. These are spices that literally aren't grown abroad.
Speaker 1: They literally cannot do what the President wants them to do.
Speaker 1: And so I think this comes to somewhat broadery issue,
Speaker 1: and I want to be thoughtful and careful about this.
Speaker 1: I think the current moment is telling us that the
Speaker 1: administration's policy isn't working. You might be drawn from that
Speaker 1: to conclude tariffs don't work. And even though I am
Speaker 1: not in favor of tariffs, I want to be more
Speaker 1: careful than that, because what we've had is a particularly
Speaker 1: poorly designed set of tariffs. This set you can't negotiate
Speaker 1: country by country. They're across the board, not product by product,
Speaker 1: and then they're particularly chaotic. They're on on Monday, off
Speaker 1: on Tuesday, on on Wednesday, off on Thursday. And the
Speaker 1: chaos then means that no one's going to adjust their
Speaker 1: behavior around a new law that just passed that's going
Speaker 1: to get unpassed. The very next day. All of those
Speaker 1: things are actually end up maximizing the harm that the
Speaker 1: tariffs do and minimizing the benefit. So, look, I can
Speaker 1: believe there's a world in which smart tariffs are smart.
Speaker 1: I'm not sure it's true, but I could believe it exists.
Speaker 1: But there's no world in which dumb tariffs are good
Speaker 1: for us. And so if you're a pro tariff person,
Speaker 1: I think the form of the argument you would want
Speaker 1: to take going forward is the real problem is and
Speaker 1: we have we haven't tried smart tariff share, and I
Speaker 1: think there's something to say that.
Speaker 3: Well.
Speaker 2: Another thing that kind of came up in the very
Speaker 2: beginning of our discussion is just all of the instability
Speaker 2: around it, because if you're a bit trying to operate
Speaker 2: a business, it is really hard. I mean, the tariffs
Speaker 2: are changing all the time. They're legal, they're illegal, then
Speaker 2: there are new ones that are that expire, now there
Speaker 2: are other ones. So one of my very favorite conversations
Speaker 2: about this happened with the seafood company. They import seafood
Speaker 2: from all over the world. I think they import like
Speaker 2: hundreds of thousands of dollars worth of seafood every year.
Speaker 2: But margins are really thin on seafood, and obviously timing
Speaker 2: is really of the essence. So I talked to this guy,
Speaker 2: Nate Torch. She's the co president of Sense, which is
Speaker 2: a sixty year old seafood importer. I think you will
Speaker 2: enjoy what he said about tariffs, although there's a lot
Speaker 2: of like not very funny truth in this.
Speaker 3: We're dealing in eighty million pounds of seafood a year.
Speaker 2: That's a lot of strength.
Speaker 3: And so I'm just a little microcosm of the real
Speaker 3: world global economy and imports into the United States. But
Speaker 3: it is not making stense and I don't know what
Speaker 3: my cost is going to be on containers coming in,
Speaker 3: and it's unreal. It's unfair. The fact of the matter is,
Speaker 3: I can tell you I don't know if I should
Speaker 3: scratch my watch or whine my ass right now.
Speaker 1: You know I'm going to scratch.
Speaker 3: Operate a business and not know what your costed.
Speaker 2: Anyway, which I really I feel like that is stuck
Speaker 2: with me all this time, because you know, for small businesses,
Speaker 2: it's just what do they do? Are the tariff's legal
Speaker 2: or the illegal? I think the instability maybe as damaging
Speaker 2: as the tariffs themselves.
Speaker 1: Yeah, no, what a colorful turn of phrase. Doesn't know
Speaker 1: whether to scratch his watch.
Speaker 2: I'd never read that one before.
Speaker 1: This is how I can till you've moved on from
Speaker 1: National Public Radio, Stacey.
Speaker 2: Oh yeah, I never would have. Yeah, I think ours
Speaker 2: would have been right out.
Speaker 1: Do you want to just get a few hosses out there?
Speaker 1: Just because I bet you've had several decades.
Speaker 2: I'm all sat but I appreciate that. I might take
Speaker 2: you up on that later in the show.
Speaker 1: Ah, you're worried about your dad and night Idaho, aren't you?
Speaker 1: He raised your right. That's what I love about you. Hey, look,
Speaker 1: I think it's actually a real Let me add one
Speaker 1: more piece of the fire. Because what you were talking
Speaker 1: about there was uncertainty. I don't know what's coming down
Speaker 1: the track. It makes it hard for me to figure
Speaker 1: out how to do a business. But I want to
Speaker 1: mate another word. It's actually conceptually distinct. It takes a
Speaker 1: moment to understand why it's distinct. Is tariff confusion? So
Speaker 1: tariff certainly is. I know what it is today, but
Speaker 1: I don't know what it is tomorrow. So I don't know.
Speaker 1: You know what crops to sew? What raw materials to
Speaker 1: get how many people to hire. Tariff confusion is a
Speaker 1: different beasts. Tariff confusion is well, I need to make
Speaker 1: a decision, but cracky, I don't know what the tariff
Speaker 1: rate is. And I bet your bloke has a bit
Speaker 1: of that. And I tell you why, I know that's
Speaker 1: true because I do. So here's the wee thing. Let
Speaker 1: me just confess this to folks at home. I've been
Speaker 1: following this issue like right on edge, I bet you
Speaker 1: have two Stacy. And then occasionally I find myself on
Speaker 1: twov and someone will say, well, tell me about the
Speaker 1: latest set of Canadian tariffs, and iody be like, yes.
Speaker 2: It's like which tariffs?
Speaker 1: Yeah, And I think there was a new set of
Speaker 1: Brazilian tariffs the other day. And then there's the tariffs
Speaker 1: that are announced that the president forgets as well. And
Speaker 1: the interesting thing is if you think about tariff confusion,
Speaker 1: if a tariff rate of ten percent is one thing,
Speaker 1: but instead you think if you think, well, the tariff
Speaker 1: rate is somewhere between zero and twenty percent, and I'm
Speaker 1: not really sure, that's a different form of paralysis. And
Speaker 1: if what you do is have a rule of thumb,
Speaker 1: like I reckon. Whatever feels bad is what it is
Speaker 1: that might lead you to overrespond. There's a very interesting
Speaker 1: piece of research about this, We might try and do
Speaker 1: some more on this soon, which suggests that confusion believing
Speaker 1: tariffs are high when they aren't is actually the worst
Speaker 1: of all possible worlds. You believe they're high, so it
Speaker 1: distorts your behavior, but they're not, so therefore it acts
Speaker 1: like a tariff, but they're not high, which means the
Speaker 1: government gets no revenue. So you know how I talked
Speaker 1: earlier about the dumbest form of all tariffs. This is
Speaker 1: literally the dumbest to believe there's a tariff that's not there.
Speaker 1: There's no revenue, there's no bargaining power, and there's no nothing.
Speaker 1: But the good news is we can move from talking
Speaker 1: about dumb things to talking about handsome things. Stacy was
Speaker 1: not particularly handsome in the years.
Speaker 2: Today this week, I feel like you might have like
Speaker 2: a small man crush on Worrise. Is this wrong?
Speaker 1: I think everyone does. I mean the president does. He
Speaker 1: said he was from Central Casting, when it's true. And
Speaker 1: you know, the President's got two Kevin's and he needs
Speaker 1: to keep track of them. And I one of the
Speaker 1: things i'd mind mudged about the president is there are
Speaker 1: traditional nineteen sixties forms of masculinity, but this is a bloke.
Speaker 1: He's really willing to look at another man and say,
Speaker 1: I think you're handsome, You're beautiful.
Speaker 2: Yeah, you're beautiful.
Speaker 3: Love that.
Speaker 1: Yeah.
Speaker 2: I think that we need more of that in our
Speaker 2: central banking. So obviously, justin one of the big pieces
Speaker 2: of news this week was interest rates, better Reserve met
Speaker 2: and handsome. Kevin came and addressed the nation talking about
Speaker 2: what was going to happen with interest rates. What happened
Speaker 2: was exactly what was expected, which is interest rates didn't move.
Speaker 2: They weren't raised, they weren't lowered, nothing. But it caused
Speaker 2: all all kinds of drama and roiled the markets because
Speaker 2: of like the kind of nothing that it was, which was, like,
Speaker 2: there are twelve members of the FED that vote on
Speaker 2: interest rates, and you get to see how many FED members,
Speaker 2: you know, vote one way or the other, and there
Speaker 2: were three people who dissented, and all three thought interest
Speaker 2: rates should go up. Talk to me a little bit
Speaker 2: about this, because I was I found this so strange
Speaker 2: because exactly what everyone expected to happen happened. Nothing happened
Speaker 2: with interest rates, but the fact that three people disagreed
Speaker 2: was just seen as really concerning.
Speaker 1: Yeah, so let me add one more facts. So you're
Speaker 1: right that what people thought would happen happened. But actually,
Speaker 1: if you look at markets, there's a betting market on
Speaker 1: what the Fed's going to do. It's called Fed funds futures.
Speaker 1: But you can think about it as culchhi for the
Speaker 1: Fed if you want. They said there was a seventy
Speaker 1: percent chance that the Fed would do nothing, a thirty
Speaker 1: percent chance that it would And you might say, oh,
Speaker 1: that seems like they really had a view, But actually,
Speaker 1: normally before the meeting, it's like ninety nine to one.
Speaker 1: Normally over the past few years, Jay Powell had done
Speaker 1: such a good job of letting people know what's going
Speaker 1: on that the actual meeting was often really boring, which
Speaker 1: is really bad news for you. Stacey's an economics journalists,
Speaker 1: because you have to breathlessly report we knew this would happen,
Speaker 1: and it happened. But great thing about business journalism is
Speaker 1: that's a great headline. So this was quite uncertain. Now
Speaker 1: a bunch of reasons for it to be uncertain. I
Speaker 1: think the two big ones are Actually it's kind of
Speaker 1: hard to know what to do. I genuinely have sympathy
Speaker 1: for my friends on the FED. The second is handsome Kevin.
Speaker 1: He's the strong, silent type. He believes that the FED
Speaker 1: should stop talking, and so normally Jay Power would let
Speaker 1: out a bunch of what was that, mate?
Speaker 2: Oh, I said, The man crush deepens.
Speaker 1: Certain Yes, absolutely, I mean.
Speaker 2: We're talking about the handsome.
Speaker 1: Kevin and me. No, No, it's good because the thing
Speaker 1: between handsome Kevin and me, it's not intellectual. It is
Speaker 1: purely about the aesthetics, because I don't actually agree with
Speaker 1: him on that much. So you know, man crushes can
Speaker 1: be purely of that form. Holy smoke. You know, sometimes
Speaker 1: I get invited to like Jackson Hole. I'm going to
Speaker 1: be like in a room with handsome Kevin and he's
Speaker 1: kind of like raise his eyebrows at me, and then
Speaker 1: his staffers are going to run over. You're making my
Speaker 1: life going.
Speaker 2: To be handled. You're going to be handled, I think, Yeah,
Speaker 2: I don't think.
Speaker 1: The President and I both think he's got unbelievable boyish
Speaker 1: good looks. Okay, so he doesn't talk, and as a result,
Speaker 1: none of us will know what's going on. Okay, let
Speaker 1: me come back to what you said, which is the
Speaker 1: bond market had a meltdown. You have to be a
Speaker 1: real nerd here, and so the timeline really matters. At
Speaker 1: two pm they released the decision. The decision was we're
Speaker 1: not going to raise rates. We thought it was a
Speaker 1: seventy percent chance before the fact, and the truth is
Speaker 1: markets who are just like, yeah, who cares. That's also
Speaker 1: when they announced that it was seven to three, nine
Speaker 1: to three the vote two point thirty is when Handsome
Speaker 1: Kevin begins his press conference and what followed, and this
Speaker 1: I don't want to make generalizations about handsome men, but
Speaker 1: it was utterly vacuous. Handsome Kevin had said, we will
Speaker 1: defeat inflation and I'm going to do absolutely nothing about it.
Speaker 1: And it was incoherent.
Speaker 2: I had a hard to hand following it, and fed
Speaker 2: speeches are difficult to follow often, but this one I
Speaker 2: really I did. I watched it, but I couldn't. Yeah,
Speaker 2: it felt a little inscrutable, inscrutiny.
Speaker 1: If I knew what that was, I would agree it's
Speaker 1: I couldn't follow it. And he was like, what we're
Speaker 1: going to do is we're going to listen to markets,
Speaker 1: and the only way we listen to markets is by
Speaker 1: not talking. And if I stop talking, then people in
Speaker 1: the bond market will stop caring about the FED. That's wrong,
Speaker 1: Handsome Kevin. People in bond markets still care what the
Speaker 1: FED does because the FED sets the overnight interest rates
Speaker 1: and that's really important for the pricing of longer term bonds.
Speaker 1: But it used to be that they would care about
Speaker 1: the FED, and the FED would tell them what the
Speaker 1: FED thought. Now folks in bond markets care about the FED,
Speaker 1: but the FED won't tell and that's created a lot
Speaker 1: of volatility. But it hasn't solved this problem that now
Speaker 1: the market can speak to the Fed more clearly, not
Speaker 1: in any way that I can at all understand. And
Speaker 1: then there were my favorite parts of the press conference
Speaker 1: when he would be asked a direct question, You know,
Speaker 1: inflation is high, will raise it interest rates help solve
Speaker 1: the problem? I can tell you. You can just pick
Speaker 1: up your favorite economics textbook, and I bet I know
Speaker 1: that it's Stevenson Wolfers and the answer, by the way,
Speaker 1: it's on the final you better know the answer. The
Speaker 1: answer is higher interest rates help reduce inflation, and he
Speaker 1: sort of says, now I've got a committee looking into it.
Speaker 1: This didn't feel like a confident leader. This felt like
Speaker 1: someone who campaigned for the job with a bunch of
Speaker 1: talking points that could please both country club Republicans and
Speaker 1: mega Republicans. But he's just repeating them now and it
Speaker 1: all felt very empty.
Speaker 2: Is that what got everyone's so upset that his speech
Speaker 2: didn't clarify anything? Is that more so than the three
Speaker 2: dissenting boots?
Speaker 1: Yes? And the way I know that is because market's
Speaker 1: got upset at two thirty when they've heard the vacuus,
Speaker 1: not at two when they heard that a sense. So
Speaker 1: you have to be watching minute by minute bond yields
Speaker 1: as people love to do during their summer vacations. It's
Speaker 1: not so One view is that sound evacuous? Another view
Speaker 1: is handsome. Kevin has said I'm against inflation. And if
Speaker 1: you remember, the concern before the fact was was this
Speaker 1: sock puppet Kevin, the guy who's going to do what
Speaker 1: the president wants? Or was this hawkish Kevin the guy
Speaker 1: who hates inflation? So what's happened? He gave a really
Speaker 1: good press conference after the first meeting. After the second one,
Speaker 1: he said, I am hawkish Kevin. The way he said
Speaker 1: that was we will defeat inflation.
Speaker 2: Yes, I remember, and everyone was very reassured.
Speaker 1: Right, he didn't say how. He didn't take a single action.
Speaker 1: He's appointed committees. This supplow could be great at a university.
Speaker 1: That's what we do when there are hard problems we
Speaker 1: don't want to solve a former committee, absolutely committee of
Speaker 1: profoundly learned people. And so what this raised, though was okay,
Speaker 1: so we didn't actually do anything. He didn't raise rates
Speaker 1: where the situation might call for it, and he sounded
Speaker 1: lightly incoherent in defending that. And there's a little faint echo.
Speaker 1: I don't want to ever stated that. There's a faint
Speaker 1: echo of wait, is this sock puppet Kevin? And if
Speaker 1: it is, then we've lost fed independence and that's what
Speaker 1: really matters. So saying I'm against inflation, look mate, everyone
Speaker 1: can say that. Doing something to show that you're against inflation,
Speaker 1: that's what the markets were looking to hear, and they
Speaker 1: didn't hear anything like that at all.
Speaker 2: So was the fact that he didn't say something that
Speaker 2: made sense that the markets got worried that maybe he
Speaker 2: doesn't have a plan. Is it that he doesn't have
Speaker 2: a plan or he doesn't know what he's wit. We
Speaker 2: just don't know which Kevin, we're going to get okay.
Speaker 1: So one problem is that markets, when I say markets,
Speaker 1: believe markets said the only thing I actually see is
Speaker 1: a graph of prices. So where personifying something that's not
Speaker 1: quite that way. But I do think part of its incoherence.
Speaker 1: But I also think part of it's like if you
Speaker 1: say one thing, I won't do anything, then I'm not
Speaker 1: sure I believe at all. He didn't reassure them that
Speaker 1: he was committed to reducing inflation. Now there was an
Speaker 1: easy way out if what he wanted to do is
Speaker 1: keep interest rates low and make it clear that he
Speaker 1: was going to keep inflation low. What he would have says,
Speaker 1: I don't think I'm ready to raise rates now, but
Speaker 1: if the following happens, I will raise rates a lot.
Speaker 1: I guess what that's called forward guidance, And that's something
Speaker 1: that Handsome Kevin has said he's deeply against. So he's
Speaker 1: boxed into a corner now and there's not much and
Speaker 1: he hasn't found his way out. There's going to be
Speaker 1: a lot of meetings at the FARED over the next
Speaker 1: few weeks, as they try to figure out how to
Speaker 1: come across somewhat more coherently.
Speaker 2: Interesting though. Yeah, I was wondering why the markets were
Speaker 2: so upset. I mean, some people did say that it
Speaker 2: was because the signal is that rates are going to
Speaker 2: go up soon, because there were three dissenters and things
Speaker 2: seemed to be kind of moving in that direction. But
Speaker 2: when I watched the speech, I didn't get much of
Speaker 2: an impression from it, and I guess that the real
Speaker 2: problem was the lack of impression.
Speaker 1: Yeah, and so the fact that long term bond yields rose,
Speaker 1: so the interest rate over long periods, that's reflecting expectations
Speaker 1: of higher inflation in the future, which is markets are
Speaker 1: less convinced that it's hawkish Kevin, Okay, I know your
Speaker 1: favorite thing in the world is data or data, depending
Speaker 1: which country you're from.
Speaker 2: Data, data, your data.
Speaker 1: I have had to move from data to data and okay,
Speaker 1: very hard for me.
Speaker 2: But in your heart of hearts, it's data.
Speaker 1: Now you're going to make me think about my data,
Speaker 1: and that's a sad and difficult topic as well. How
Speaker 1: about we just talk about gross domestic product.
Speaker 2: Okay, that's true. Your therapist was invoked many times in
Speaker 2: the last in the last show. So I think we can.
Speaker 2: We can stay away from parents.
Speaker 1: I had to pay them a licensing fee at the end.
Speaker 2: We should bring them on.
Speaker 1: We should. He's really good and you know, actually, Stacey,
Speaker 1: I can. I can do an impression for you. Say,
Speaker 1: Stacy's the latest growth domestic product numbers for the second
Speaker 1: quarter just came out. And Stacy, how did that make
Speaker 1: you feel?
Speaker 2: It made me feel worried, really really worried.
Speaker 1: Tell me more, say more.
Speaker 2: It made me feel worried for a few reasons. One
Speaker 2: GDP is like a very it's a very ham fisted number.
Speaker 2: It's very imperfect. A lot of people criticize it, but
Speaker 2: it's kind of.
Speaker 1: A sort of like my parents flash.
Speaker 2: Yeah. Yeah, it's like a flash judgment, you know what
Speaker 2: I mean. It's like this quick snapshot of the economy.
Speaker 2: How's it doing? Growth at one point five percent is
Speaker 2: quite low. And what especially worried me, and I'm especially
Speaker 2: excited to ask you about.
Speaker 1: Is.
Speaker 2: You know, there's been all this promise about AI that
Speaker 2: that is going to start growing the economy, and there
Speaker 2: was some talk that that's already happening. It's already improving productivity,
Speaker 2: and things like that, well, that should be showing up
Speaker 2: in GDP numbers if that's true, And the fact it
Speaker 2: wasn't really worried me. It really seemed like a signal
Speaker 2: that things are slowing down. So many mixed signals in
Speaker 2: the economy right now that it just seemed like the
Speaker 2: overall snapshot was just like not good. That's why I
Speaker 2: worried me.
Speaker 1: What about you, I'm going to agree, I'm going to
Speaker 1: blame my mother and tell you about a bad dream
Speaker 1: that I had. Uh okay, so one point five per
Speaker 1: cents of bad number not bad, it's it's not great,
Speaker 1: genuinely mediaca. And if I'd brought that home on a
Speaker 1: school report I got enough with the therapist took, it
Speaker 1: wouldn't have been good now, but I would have said
Speaker 1: to my mom, the underlying fundamentals are a lot better
Speaker 1: than that. And actually that always worked in my house
Speaker 1: holiday I did well in English and math and poorly
Speaker 1: in music and pe. Mom was always like, that's all right,
Speaker 1: justin where we knew what we cared about. And actually
Speaker 1: GDP is much the same way, which is there are
Speaker 1: some parts where if they're doing well today, that tells
Speaker 1: you a lot about how well we're doing in the future.
Speaker 1: That really particularly true for consumption and investment, So spending
Speaker 1: by businesses and spending by you and me, those actually
Speaker 1: looked pretty good. What we had was rundown was disinvestment
Speaker 1: in inventories. What does that mean? When a company can't
Speaker 1: sell stuff and it leaves it in the warehouse, that's
Speaker 1: actually called a form of investment, which for odd reasons
Speaker 1: counts as positive economic growth. And when we get less
Speaker 1: stuff in the warehouse, that's less investment than that, So
Speaker 1: that tends to move up and down like crazy. That's
Speaker 1: a big part of what's going on here. So the
Speaker 1: headline was one point five percent, but it's a little
Speaker 1: bit like the GPA was a little bit stronger than that.
Speaker 1: So look, there are two ways we have to tell
Speaker 1: stories in the modern world. One is how is this
Speaker 1: as a serious matter, and I think this is the
Speaker 1: economy bumped along genuinely moderate, fair enough. Then the other
Speaker 1: is how do we And that's the truth and that's
Speaker 1: what we should care about, But then there's our political narratives.
Speaker 1: Commerce Secretary howdnik Wod promised US five percent growth this year.
Speaker 1: One point five is profoundly less than five Now you
Speaker 1: might think maybe Howard Latinik's just not very good at numbers,
Speaker 1: and that's probably true, but relative to the sorts of
Speaker 1: numbers we've did in promise now, other thing we saw
Speaker 1: was through twenty twenty five, the numbers weren't great, and
Speaker 1: we kept being told don't worry, the good stuff's coming
Speaker 1: soon or now you know, a year and a half in,
Speaker 1: I'm less patient than I might once have been, and
Speaker 1: so things aren't that great. What do you think is
Speaker 1: driving us law down there? Mate?
Speaker 2: Well, I'm more excited to hear what you think about
Speaker 2: that than me speculating. But I'll tell you some of.
Speaker 1: The things, which, by the way, is what my therapist says.
Speaker 2: Your therapist is a smart man. Yeah, I mean, I
Speaker 2: think one of the things driving the slow down is
Speaker 2: the uncertainty that we talked about around tariffs. I think
Speaker 2: because it's not just tariffs, there's a lot of uncertainty
Speaker 2: around policy right now. The Trump administration likes kind of
Speaker 2: surprises much. I guess, like Kevin Walsh, kind of there's
Speaker 2: lots of unexpected things happening, and I know that the
Speaker 2: markets hate uncertainty, but also businesses do not like it.
Speaker 2: They don't feel comfortable. I mean, if and you think
Speaker 2: about it as a person too, if you don't know
Speaker 2: what's gonna happen, there might be bad things on the horizon.
Speaker 2: You save a little money, you kind of you're like, Okay,
Speaker 2: I'm gonna keep a little powder dry. You know, I'm
Speaker 2: going to keep a little savings just in case you're
Speaker 2: not gonna say, I think we need to open this
Speaker 2: new factory. I think we need to hire all these
Speaker 2: new people. Let's tick a chance, let's expand. And I
Speaker 2: feel like in order for that sort of expansive growth
Speaker 2: to come into an economy, and I think it could
Speaker 2: be in the economy because of AI and all the
Speaker 2: promise of it, I think all the sort of fear
Speaker 2: and uncertainty around policy things like tariffs and gas prices
Speaker 2: and all that stuff, I think that is kind of
Speaker 2: draining that some of the energy that would otherwise be
Speaker 2: going into growing the economy. That's what I saw when
Speaker 2: I saw those numbers that were in me.
Speaker 1: Yeah, well, so then let me give the optimist version
Speaker 1: of the story. And I do think both sides are true.
Speaker 1: I suspect you're going to agree with me on this,
Speaker 1: which is there's lots of policy related reasons to worry.
Speaker 1: There's war, there's a trade war, there's a new scandal
Speaker 1: every other day, Boom boom. Despite all that, the economy
Speaker 1: sort of bumping around with economic growth round about two percent.
Speaker 1: The unemployment rate is remarkably stable. So I think we're
Speaker 1: seeing actually a remarkably resilient American economy in the face
Speaker 1: of those shocks. That's the optimist view. The pessimist view
Speaker 1: is is building data centers really broad based economic growth
Speaker 1: and how much of what's going on is about that?
Speaker 1: And that, Stacy, is how we're going to segue to.
Speaker 1: You wanted to do art of the chart. You wanted
Speaker 1: some sort of a competition charts chart.
Speaker 2: What are we competing for? I think those pillows behind you,
Speaker 2: I am for really coveting your platypus pillows.
Speaker 1: March bet you well, no, it just you know, I
Speaker 1: just I just love the platypus. I just love seeing
Speaker 1: Gussie makes me happy. So, Stacy, that one, right, which
Speaker 1: one do you want? The white one or the green one?
Speaker 2: Like the partier one. Yeah, yeah, it's because it's like
Speaker 2: a logo. It's like the Apple logo or something, you
Speaker 2: know what, It's like if you know, you know.
Speaker 1: Just like that. In fact, that was produced by the
Speaker 1: exact same designer who did the Apple logo.
Speaker 2: Maybe I thought so I was looking at it.
Speaker 1: Yes, I'm willing to bet you that pillow on chart
Speaker 1: versus chart, we're going to see your couch totally totally different.
Speaker 2: So has these people going to like vote on this?
Speaker 2: How are we going to know who wins the pillow?
Speaker 1: I mean I could just judge it myself. I could say,
Speaker 1: whose child risky?
Speaker 2: And wait, what do you get if you win? You
Speaker 2: just get to keep your pillow. That doesn't feel quite right.
Speaker 2: I can send you peanut butter cups, but I think
Speaker 2: you might be set up there.
Speaker 1: No, actually I really like them. They're really good.
Speaker 3: I know.
Speaker 1: If you can find me some king size races, that's
Speaker 1: your side of it done. But six of them, not
Speaker 1: just like two or three.
Speaker 2: I'll set you up for this for the rest of
Speaker 2: the summer.
Speaker 1: Oh that might need more than six months. That's going
Speaker 1: to get me through two days. But those things are spectacular.
Speaker 1: We had people in the comments so like, justin, You've
Speaker 1: got to stop going on about this. It's so obvious
Speaker 1: your advertising and I'm not it's just Stacey changing my life.
Speaker 2: That's one peanut butter cup at a time. That's what
Speaker 2: I do. I bring. I bring joy and a lot
Speaker 2: of calories into people.
Speaker 1: Okay, here's what we're going to do. My producer Megan
Speaker 1: is going to post a poll on YouTube and substack
Speaker 1: who's got the best chart? And if you don't have
Speaker 1: access to YouTube or substack, that's at Platypus Economics, then
Speaker 1: just leave a comment and Megan will make sure that
Speaker 1: she adds your vote to the most important delection of
Speaker 1: our lifetimes. So who's going first?
Speaker 2: I see, I want to go first because I do
Speaker 2: think it's quite an elegant segue out of our last conversation.
Speaker 2: Here's my chart. Oh it's GDP, what we were just
Speaker 2: talking about. So I thought it was like very helpful
Speaker 2: to take a look at the GDP journey that our
Speaker 2: economy has been on. So if you see there was
Speaker 2: Q one of twenty twenty five and look at the
Speaker 2: growth in Q two and Q three, it seems like
Speaker 2: we were like really on an exciting trajectory and then
Speaker 2: Q four and of course these numbers get adjusted, that
Speaker 2: must be said, but it just seems like if you
Speaker 2: back up from the chart, it just seems like things
Speaker 2: are slowing down, and that feels very counter to where
Speaker 2: it feels like we should be with all of this
Speaker 2: new technology coming online and making people more productive and
Speaker 2: causing all kinds of disruption in our lives. It seems
Speaker 2: like the good part of that should be economic growth,
Speaker 2: but we're not seeing that. This is why I'm worried.
Speaker 2: This is why this chart feels like such a big
Speaker 2: seismic deal to.
Speaker 1: Me, Stacy, you have made the strongest possible case that
Speaker 1: I have chart of the week, and I am so
Speaker 1: grateful that was the intro I was hoping for. Suck it,
Speaker 1: here comes mine.
Speaker 2: Okay.
Speaker 1: My chart takes all of our economic growth over the
Speaker 1: period you were talking about, so basically what's driven the
Speaker 1: economy since the Trump administration. So I took all of
Speaker 1: your bars and I schmushed them together. Okay, And so
Speaker 1: everage economic growth has been about one point eight percent
Speaker 1: since President Trump came to office. That's merely moderate, but
Speaker 1: at least it's merely moderate. But the thing I did,
Speaker 1: and you were making such a pasture. Isn't it important
Speaker 1: we get into AI and the AI revolution and what
Speaker 1: it's doing to GDP, and that's what I did. Sorry
Speaker 1: for sounding glueful. I just realized I'm showing my personality
Speaker 1: and I've been told that's a bad idea to hard disagree.
Speaker 2: I'm just amused at the theatrics. I feel like, if
Speaker 2: you really had confidence in your chart is superior chart,
Speaker 2: you wouldn't be you know, but that's just me anyway. Continue,
Speaker 2: So this is since Trump took office.
Speaker 1: The totals of the growth growth has been one point
Speaker 1: eight percent. Now, what we can do is we can
Speaker 1: say of the economy, there's a little tiny section, five
Speaker 1: percent of it that is investment in IT related stuff.
Speaker 1: So there's no line that says this is AI. The
Speaker 1: closest proxy is this small sector that's just five percent
Speaker 1: of the economy. That tiny sector has contributed one point
Speaker 1: twenty four percent to our one point eight percent economic growth.
Speaker 1: The rest of the economy imagine that sector hadn't grown.
Speaker 1: I want to put an asterix next to this, and
Speaker 1: it says our economic growth would have been less than
Speaker 1: one percent if we hadn't had the AI boom. And
Speaker 1: so the other way of saying this is, roughly speaking,
Speaker 1: two thirds of our economic growth has come from AI.
Speaker 1: Now I want to put two asterisks next to that, the.
Speaker 2: Data center construction, right, So this testament, Okay, yeah, there's
Speaker 2: two AI stories.
Speaker 1: One AI story is in the future, we're going to
Speaker 1: become much more productive at everything blah blah blah. So
Speaker 1: that's his productivity will grow the other stories, yes, but
Speaker 1: to get there we need to build a lot of
Speaker 1: data centers, and data centers are spending, and GDP counts spending.
Speaker 1: This is basically that version of the story, and it's
Speaker 1: saying the spending side, which is driving so much about
Speaker 1: economic strength roat now, is what's keeping the economy afloat.
Speaker 1: I have to put a second asterix. A lot of
Speaker 1: the stuff we're buying for the AI rollout is actually
Speaker 1: imported stuff, and so my red bar here is all
Speaker 1: spending on AI related stuff, not spending on American made
Speaker 1: AI stuff, and so were I able to make an
Speaker 1: adjustment for that, the red bar would look smaller. So
Speaker 1: this one's got a little bit too much dramatic effect,
Speaker 1: But the underlying message is still fundamentally true, which is
Speaker 1: the AI rollout and the building of data centers has
Speaker 1: been a huge part of the story about what's keeping
Speaker 1: the American economy afloat station. Now I think you and
Speaker 1: I can both agree it's over to the voters.
Speaker 2: Well, I did want to ask one quick question, So,
Speaker 2: like you me, all the work that we do, it's
Speaker 2: all just in the little purple bar.
Speaker 1: Yeah, you and I just a little purple bar.
Speaker 2: I do have like one final thing I would like
Speaker 2: to say for the voters consideration, m M, and that
Speaker 2: is paper covers rock. This is so interesting and so
Speaker 2: fascinating and also completely encompassed in my chart. So I
Speaker 2: feel like my chart is really a vote for both
Speaker 2: of our charts.
Speaker 1: I want to say to people. My chart loves freedom,
Speaker 1: my chart loves America, my chart loves dogs, my chart
Speaker 1: rock family, and my chart puts a Racey's Peanut butty
Speaker 1: Cup in every part.
Speaker 2: I feel like it's it's dirty pool bringing in the
Speaker 2: cute dog for the votes.
Speaker 1: Oh den, Max, But I respect that. You know Max
Speaker 1: was actually named for economics. What do economists let to do?
Speaker 1: We like to maximize, We maximize utility, we maximize the
Speaker 1: quality of our ground.
Speaker 2: That's how you named your dog.
Speaker 1: I believe that's true. My critics would say it's just
Speaker 1: I meant to name him Max, But I don't know
Speaker 1: how to spell, and Betsy would say the dog from
Speaker 1: the Greenches style Christmas.
Speaker 2: Oh okay, and he works on a number of levels.
Speaker 1: Over to the vaders, folks, there's going to be a poll.
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Speaker 1: It's up to you. So this has been Off the
Speaker 1: Clock the Economics podcast in which we slow down, review
Speaker 1: the week that was, and try to sort out what
Speaker 1: really mattered. Stacey and I were going to be back
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