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Speaker 1: T dot com put Knowledge to Work. Hello and welcome

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Speaker 1: to another edition of the Odd Lots Podcast. I'm Joe Wisenthal,

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Speaker 1: Managing editor at Bloomberg Markets, and I'm Tracy Halloway, Executive

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Speaker 1: editor at Bloomberg Markets. Uh. Well, Tracy, it's been quite

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Speaker 1: a week. You could you could put it that way.

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Speaker 1: There was something something about an election somewhere, right, Yeah,

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Speaker 1: I remember that election. Uh quite. And not only was

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Speaker 1: the election extraordinary for all kinds of sort of political

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Speaker 1: and historical reasons. Uh, it's also been an extraordinary aftermath

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Speaker 1: We've seen in financial markets, and it's uh, it's completely confounded.

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Speaker 1: Basically everything anyone would have predicted going into the into

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Speaker 1: the vote, that's right. So we were told that if

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Speaker 1: Donald Trump got elected, that was the ultimate, uh sort

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Speaker 1: of political tail risk, and it happened, and we got

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Speaker 1: an initial market sell off, like right when the results

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Speaker 1: started coming in. But at the time of us recording this,

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Speaker 1: we've seen markets rebound quite strongly, right right, I guess

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Speaker 1: we should say, you know, just in the full transparency,

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Speaker 1: we're recording this on a Thursday after the election. The

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Speaker 1: podcast people won't be listening to it till a few

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Speaker 1: days from now. So if the entire market changes again

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Speaker 1: and there's some huge crash or something before you hear this,

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Speaker 1: just disregard. Disregard, you can stop listening. You can just

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Speaker 1: disregard everything. Such is the world of podcast where we

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Speaker 1: have to um where we have to do this in advantage,

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Speaker 1: but one other thing. So we didn't get the crash

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Speaker 1: that people expected. In fact, markets have been surging. Perhaps

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Speaker 1: more interestingly and far more importantly from a financial markets perspective,

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Speaker 1: we've also seen a pretty big increase in a long

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Speaker 1: term interest rates. Yield on the ten year US Treasury

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Speaker 1: is above two percent for the first time since January.

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Speaker 1: Other market based measures of future possible inflation have been

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Speaker 1: going up. Uh. This is also the people have been

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Speaker 1: waiting for a rise in some of these measures for

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Speaker 1: quite some time, and in the immediate aftermath of Trump's victory,

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Speaker 1: we actually appear to be uh seeing some seeing some

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Speaker 1: of these moves. Right, So all it took for inflation

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Speaker 1: expectations to come back was the complete political upheaval of

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Speaker 1: the United States of America. Right, Yeah, that's all. That's all.

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Speaker 1: It took, just a completely stunning political outcome. And where's

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Speaker 1: Jenny Yellen and Ben Bernanke and Coroda have been trying

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Speaker 1: so hard to get inflation expectations up. Donald Trump seems

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Speaker 1: to have accomplished that in about a and he's not

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Speaker 1: even in office yet. Amazing, And he's not even in

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Speaker 1: office yet. So on that note, I think we have

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Speaker 1: the perfect guest for h the Week. His name is

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Speaker 1: David Beckworth. He's a research fellow at the Mercadis Center.

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Speaker 1: He writes a fantastic blog called Macro and Other Market

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Speaker 1: Musings where he talks about monetary policy, uh, inflation, the

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Speaker 1: macro economy and all that stuff. And I think he's

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Speaker 1: a perfect guest to help us break down some of

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Speaker 1: these moves in financial markets that we've seen and what

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Speaker 1: traders might be anticipating under a Donald Trump presidency. Let's

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Speaker 1: bring in David. David, thank you for joining us, Well,

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Speaker 1: thank you for having me on the show. Uh so,

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Speaker 1: quite an extraordinary few days in financial margarets, wouldn't you say?

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Speaker 1: Absolutely yes? As you mentioned in the intro, Donald Trump

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Speaker 1: has done more to make treasury yelds great again that

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Speaker 1: Yalen has has tried and be Bernankey tried and tears

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Speaker 1: that couldn't accomplish. UM. It is quite shocking, but it

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Speaker 1: also speaks to I think one of the things that

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Speaker 1: plagued this this past seven eight year period has been

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Speaker 1: kind of a swing and risk premiums to one extreme

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Speaker 1: of during the boom. I think we were maybe over

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Speaker 1: optimistic and we've been stuck in a funk, and maybe

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Speaker 1: Trump was the shock uh that we needed it maybe

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Speaker 1: to change things around. So let's talk about this stuff,

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Speaker 1: because you know, people like to talk about the FED

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Speaker 1: having an inflation target, and the FED in the US,

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Speaker 1: the central bank is supposed to target stable prices UH

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Speaker 1: and full employment. They've aimed for this two percent inflation

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Speaker 1: target UH for years and haven't really been able to

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Speaker 1: hit it, except very briefly. They've done all kinds of

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Speaker 1: UH stuff. They've tried QUEI, they've tried forward guidance, they've uh,

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Speaker 1: you know, hinted at other sort of extraordinary policies going forward.

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Speaker 1: They have all these dots and press conferences, all these

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Speaker 1: UH all these new innovations designed to uh keep prices

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Speaker 1: stable and boost inflation. It's never worked. And we joke

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Speaker 1: about Donald Trump having done more to accomplish this in

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Speaker 1: uh forty eight hours after being elected than the central

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Speaker 1: bankers have done. But it's not really a joke. So

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Speaker 1: what is it about, um, his win that seems to

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Speaker 1: have jolted financial markets? And what does it say? Well,

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Speaker 1: I think it speaks to understand that I've actually developed

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Speaker 1: over these past years, and that is FED policies really

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Speaker 1: constrained by what the body politic wants. So um, you know,

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Speaker 1: if if it's the FED, think of the FED trying

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Speaker 1: to to hit two percent inflation. I think there's some

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Speaker 1: reasons inside the FED, maybe there's inertia, um that there's

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Speaker 1: a conservative nature to the institution. But I think a

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Speaker 1: bigger issue is what if the set could have hit

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Speaker 1: say two percent inflation with a button And maybe they couldn't,

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Speaker 1: But what if they had tried the webpaid overshot their

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Speaker 1: target as some people have advocated, I think it would

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Speaker 1: have been very politically controversial. Um Bernankee. If you recall

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Speaker 1: in two thousand and ten, he had congressional hearings right

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Speaker 1: around the time of the que two, he got railed

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Speaker 1: for debasing the currency, and if you look at core

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Speaker 1: inflation was one percent, then just the threat of it.

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Speaker 1: So one thing I think that really we tend to

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Speaker 1: overlook is the set is limited or is empowered, as

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Speaker 1: much as the public wants it to be. And if

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Speaker 1: the public once a low inflation, you know, and they

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Speaker 1: revers they expressed that through their uh Congress people, then

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Speaker 1: I think that that's going to be um limited. And

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Speaker 1: one way to look at what Trump is Trump is

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Speaker 1: is a referendum by the public saying, Okay, we can

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Speaker 1: try a little bit higher inflation, we can try a

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Speaker 1: little bit more rapid accurate demand growth. Now they're not

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Speaker 1: saying that explicitly, but by bring him into office, some

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Speaker 1: of his proposals for investment spending, um maybe he has

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Speaker 1: more reckless nature. Speaks to maybe a change in attitude,

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Speaker 1: And I think what that says is it says fiscal

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Speaker 1: policy will be easier, it will be a tolerance for

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Speaker 1: higher inflation. And that's something the FED couldn't do on

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Speaker 1: its own. And that's again kind of one of the

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Speaker 1: points I've come to appreciated in theory. The FED can

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Speaker 1: do whatever it wants, but in practice that can't because

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Speaker 1: there's political constraints. But David, if that's the case, then

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Speaker 1: what do you think has driven the change in the

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Speaker 1: general attitude towards inflation, Like what's happened over the past

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Speaker 1: four years or so to make people ready all of

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Speaker 1: a sudden for prices to go up. It's a tough

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Speaker 1: story to tell, no doubt, but I think what has happened,

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Speaker 1: um agatting, going back to the crisis up until Trump's election,

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Speaker 1: is that, UM, there was this this desire for stability.

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Speaker 1: The starts are for low inflation. It's partly um the

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Speaker 1: result of fed down past success. If you look at

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Speaker 1: the history of inflation targeting, it hits the world around. UM,

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Speaker 1: we really did need something to rain inflation, and simple

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Speaker 1: banks have tried money supply targeting, they tried um in

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Speaker 1: different attempts, and inflation targeting seemed to be the best solution.

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Speaker 1: Over time. As they've done that, they've gotten better at it.

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Speaker 1: I think they've built up the expectation among the body

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Speaker 1: politic that this is what we want. We go into

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Speaker 1: the crisis, there's all this uncertainty, there's this disaster, and

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Speaker 1: the last thing the public wants is to have a

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Speaker 1: simple banks tinkering with three or four percent inflation overshooting

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Speaker 1: their target. So I think the FED created an environment

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Speaker 1: where a low inflation was expected. Warm then you have

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Speaker 1: a crisis that people are concerned. They're fearful of big

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Speaker 1: institutions like the FED. But then after you know, seven

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Speaker 1: eight years of slow, sluggish growth, that longer period of

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Speaker 1: people becoming the falling behind economic angst, they want something different.

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Speaker 1: So maybe people aren't aren't you know, explicitly articulate in

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Speaker 1: their minds, we want higher inflation. But by voting for Trump,

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Speaker 1: they want something new. They want something different, and that's

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Speaker 1: going to include higher inflation. Um it's it's kind of

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Speaker 1: maybe an unconscious quote for higher inflation, higher aggres demand growth. Alright,

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Speaker 1: So so I get that, and I you know, I

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Speaker 1: get that politics changes, and you know, suddenly we have

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Speaker 1: something new. But couldn't it also be as simple as

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Speaker 1: fiscal policy really matters to inflation expectations? And and on

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Speaker 1: Donald Trump, when he had his victory speech, he made

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Speaker 1: a very point. He first of all, he said it

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Speaker 1: a lot during the campaign. He said tax cuts, he said,

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Speaker 1: double infrastructure spending than Hillary Clinton, um, he said, repatriation

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Speaker 1: of foreign cash. There's all this sort of raw money.

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Speaker 1: And then in his victory speech he talked about rebuilding

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Speaker 1: bridges and hospitals and America's cities and all this is

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Speaker 1: a fiscal stimulus, and couldn't it suggest that maybe inflation

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Speaker 1: is a h the fiscal side is a big determinant

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Speaker 1: of inflation and inflation expectations. And then it's just not

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Speaker 1: really about the Fed as much as people thought. So. Absolutely,

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Speaker 1: and I think it was neat about this is this

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Speaker 1: is kind of a natural experiment to test that idea, right, um.

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Speaker 1: If you recall, uh Trump actually said something that sounded

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Speaker 1: very much like the m M T school spot um

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Speaker 1: a while back during the campaign. He said, look, the

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Speaker 1: government can never go broke. You know, he can preparent

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Speaker 1: its own money. If the government runs up depths that

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Speaker 1: they can just eventually pay off the depth of pretty

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Speaker 1: more money, very much of very you know, post Canesi

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Speaker 1: and mm T type thinking. And and we're going to

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Speaker 1: have a great now will experiment on that. And I

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Speaker 1: guess what you can say is the early results, the

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Speaker 1: early evidence seems to support that, at least the ford

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Speaker 1: looking evidence. But absolutely, and again I'm going back to

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Speaker 1: play mentioned earlier. I think it speaks to them then

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Speaker 1: the codependency of fiscal policy and monetary policy. Here's another

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Speaker 1: way of thinking about this. Imagine the Federal Reserve had

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Speaker 1: got a hole in it balance you so imagine, for example,

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Speaker 1: some of its assets had lost value, some of those

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Speaker 1: more effect securities for whatever reason, um, they suddenly lost value.

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Speaker 1: So there was a big hole in the balance sheet.

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Speaker 1: There were more liabilities, more monetary base outstanding than there

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Speaker 1: were assets. That would create a fear of inflation because

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Speaker 1: now the FED couldn't pull all the monetary base in

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Speaker 1: in the future. What would happen in that case, what

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Speaker 1: would happen is the U. S. Treasury would bail out

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Speaker 1: the FED. So should the Fed ever become insolvent in

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Speaker 1: the sense that couldn't control inflation of the monetary base,

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Speaker 1: the FED would be there. And the way we do

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Speaker 1: it the FED would, you know, give bonds to the FED.

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Speaker 1: The FED would then use as a pull the monetary

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Speaker 1: based out. What that speaks to though, is ultimately the

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Speaker 1: FED being able to control inflation depends on the Treasury

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Speaker 1: being solving itself. If the Treasury we're having problems with

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Speaker 1: budget deficits, and there are concerns about the treasuries financial health,

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Speaker 1: it would impair its ability to build a FED out.

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Speaker 1: So no matter where we are in time, the Fed's

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Speaker 1: ability to control inflation is implicitly backstopped by the Treasury,

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Speaker 1: which is fiscal policies. And I so it's going to

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Speaker 1: your point if if treasury finances fall apart, if there's

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Speaker 1: a change in approach to fiscal policy, it's ultimately going

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Speaker 1: to shape expectations about inflation. So yes, Joe, Um, I

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Speaker 1: do think it speaks to the important to fiscal policy

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Speaker 1: port inflation A right. We have to take a quick

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Speaker 1: break for a commercial, but then when we come back,

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Speaker 1: I want to dive more into this question. But Knowledge

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Speaker 1: to Working grow your business with s I T from

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Speaker 1: transportation to health, air to manufacturing. C i T offers

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Speaker 1: middle market businesses. Learn more at c I T dot

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Speaker 1: com put Knowledge to Work. And we're back with David Beckworth.

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Speaker 1: He's a researcher at the Mercadis Center, and we've been

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Speaker 1: talking about UH the role of fiscal policy in driving

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Speaker 1: inflation and inflation expectations. UH and I want to keep

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Speaker 1: hitting this question. I want to drill down further into

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Speaker 1: this question because there has been a view out there

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Speaker 1: that fiscal policy is essentially impotent on anything having to

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Speaker 1: do with total demand and inflation. They talk about Riccardian

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Speaker 1: equivalence and that if the government drives up deficits, then

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Speaker 1: that'll make people think that there will be higher taxes

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Speaker 1: in the future, and so they'll spend less, and ultimately

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Speaker 1: that will counteract any stimulative effects of that UH spending.

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Speaker 1: And generally, I think it's sort of mainstream economic view

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Speaker 1: that the fiscal side of the ledger of you know,

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Speaker 1: economic management is not where UH inflation comes from, and

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Speaker 1: that it's the you know, inflation is essentially controlled by

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Speaker 1: the FED. But it at least seems like a possibility

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Speaker 1: that if we do get you know, one of the

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Speaker 1: things that's interesting about Trump spending plans is that they're

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Speaker 1: not countercyclical in the sense that we're at four point

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Speaker 1: nine percent unemployment. UH, there is not obvious that there's

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Speaker 1: a huge sort of output gap UH here. It does

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Speaker 1: seem like, you know, as we've been talking about, there

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Speaker 1: could be a real natural test here where maybe uh,

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Speaker 1: the UH fiscal side is really the main driver, and

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Speaker 1: the FED just isn't as important as we thought on

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Speaker 1: this front. Do you think that's possible that some of

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Speaker 1: these assumptions that we had about the significant of the

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Speaker 1: FED in control your targeting inflation was overstated? I do.

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Speaker 1: I want to be careful and how we'd say this

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Speaker 1: kind of what you're referring to. I think is is

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Speaker 1: what we've called the Monterrey policy offset right in the past.

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Speaker 1: So if fiscal policy, you know, had tried, and I

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Speaker 1: think you could, you could argue this is actually would

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Speaker 1: fit um Obama's fiscal stimulus, make this concrete large spending plan.

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Speaker 1: But you know, we didn't see a huge spike in

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Speaker 1: aggurate demand, a huge spike in inflation. You could have

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Speaker 1: argued to put a Florida the economy. But you know,

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Speaker 1: the conventional view would say, well, the reason that didn't

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Speaker 1: happen is because the FED wanted to maintain low inflation.

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Speaker 1: So yes, there's a large fiscal stimulus, um, but the

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Speaker 1: FED could only tolerate so much inflation. So in general,

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Speaker 1: people who called for helicopter drops over the past year,

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Speaker 1: um they would run up against the concern that the

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Speaker 1: FED might offset it. So the you know, the Treasury

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Speaker 1: sends out checks, the household people spend, inflation goes, the

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Speaker 1: FED gets nervous. But I think behind both of those,

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Speaker 1: really maybe another way of sense behind fiscal policy and

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Speaker 1: behind Monterrey policy is lurking. Maybe this again, this this

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Speaker 1: this public um acceptance. What does the what will the

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Speaker 1: public tolerate? And so maybe by electing Trump, the public

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Speaker 1: has has stated clearly we're tired with with the norm.

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Speaker 1: We were tired with this tinkering on the margins by

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Speaker 1: fiscal policy monetary policy. We want to open up the

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Speaker 1: start the engine. Let's get going things going a little

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Speaker 1: bit faster. Keep in mind, fiscal policy will affect spending

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Speaker 1: and inflation by affecting the velocity. So it's you know,

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Speaker 1: you think of you know, money times velocity that's total

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Speaker 1: spending in the economy. Fiscal policy generally is gonna work

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Speaker 1: through velocity and and pss people to spend faster. Um.

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Speaker 1: So it's still a monetary story ultimately, But fiscal policy

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Speaker 1: and Montrey policy are interacting, and I think it's reflecting

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Speaker 1: the public tolerance level for it. So on that interaction point,

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Speaker 1: you suggested early on in the conversation that the FED

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Speaker 1: may have been hamstrung a little bit by a general

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Speaker 1: reluctance or political reluctance UM to do more in terms

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Speaker 1: of boosting inflation UM, and Trump potentially changes that. Um.

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Speaker 1: How do you see that relationship between the Fed and

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Speaker 1: Trump actually developing? Because there's also been the opposite suggestion,

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Speaker 1: which is that if inflation runs too hot, then the

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Speaker 1: FED might step in or even um, we saw city groups.

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Speaker 1: Matt King suggests that maybe Janet Yellen just kind of

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Speaker 1: wants to seek revenge on Trump in some way, and

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Speaker 1: so maybe she'll be a reluctant partner in his um

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Speaker 1: or an obstacle in his quest to boost inflation. So

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Speaker 1: how will that actually play out? Well, that'll be interesting

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Speaker 1: to watch if she pulls a pole vulcer on Trump.

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Speaker 1: But again I think it would play out um more

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Speaker 1: through fiscal policy. It would be One way to look

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Speaker 1: at this is, you know, he made tone down, he

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Speaker 1: made you know, tighten what the Fed can do. He

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Speaker 1: may appoint people there that will be because view that

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Speaker 1: he's expressed. You all know, he was very critical to

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Speaker 1: said he said that cap rates too low. Um. Again,

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Speaker 1: I think we can argue I thought that I definitely

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Speaker 1: don't think it was the FEDS results rates were low.

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Speaker 1: I think it was more following where the economy is going.

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Speaker 1: But he yeah, he's very critical to said, he seems

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Speaker 1: to be very supportive implicitly what he's saying about fiscal policy.

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Speaker 1: So one way to look at it is he may

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Speaker 1: rein in the stads aggressive unconventional policies, but he's gonna

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Speaker 1: be you know, hitting the gas pedal on the fiscal

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Speaker 1: policy side. And and you know, so they they'll work

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Speaker 1: in hand to to lead to this outcome. Um. You

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Speaker 1: know someone who's probably be interesting to watch this follow

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Speaker 1: over the next year is Judy Shelton. She has written

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Speaker 1: some columns for the Watch for the Wall Street Journal

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Speaker 1: of the Financial Times, and she's one of his advisors

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Speaker 1: on monetary policy. And initially enough, she takes a very

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Speaker 1: hard money view, um sympathetic to the gold standards. So

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Speaker 1: it is a little bit puzzling how that would reconcile.

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Speaker 1: It's almost it's almost as if we don't totally know

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Speaker 1: what Trump has got the planned. You could almost say

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Speaker 1: it's a he's a bit of a mystery on some

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Speaker 1: of these things. I'm being naively optimistic. I mean, we all,

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Speaker 1: we all have very little, very few clues to go

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Speaker 1: on with this stuff. And that's why I think the

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Speaker 1: financial mark, the decisive financial market reaction is so interesting

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Speaker 1: because whereas you know, anyone could sort of pull together

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Speaker 1: some Donald Trump quotes and try to come up with

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Speaker 1: some theory about what he's gonna do economically, Uh, No

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Speaker 1: one is totally sure, but there really is quite a

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Speaker 1: startling reaction financial markets. I want to ask another question

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Speaker 1: about inflation and tell me if I'm just completely off

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Speaker 1: base here and if this is nonsense or if there

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Speaker 1: might be something to this. It seems to me that

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Speaker 1: inflation is lower in really stable economies. So some of

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Speaker 1: the some of the most stable countries, and I mean politically, uh,

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Speaker 1: Singapore is in his negative cp I growth, Switzerland is

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Speaker 1: in has virtually no inflation. Japan, one of the most

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Speaker 1: stable countries politically in a sense, hasn't had inflation in forever.

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Speaker 1: And then if you look at the countries with a

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Speaker 1: lot of inflation, you tend to see much more volatile

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Speaker 1: emerging markets with weaker political stability South Africa, Brazil, Turkey,

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Speaker 1: the Zimbabwe being the most extraordinary one. Is there a

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Speaker 1: connection in your view between um sort of political stability

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Speaker 1: and inflation, and is there anything that we can derive

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Speaker 1: from that given the appearance apparent decline in the US.

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Speaker 1: I think there's two stories behind that. The first one,

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Speaker 1: I think it's less important, but it's a part of

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Speaker 1: the story, and I'll do that one first. That's demographics.

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Speaker 1: So often many of those countries you mentioned, their advanced economies,

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Speaker 1: aging populations, they tend to rely more on fixed income

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Speaker 1: as they get older. There's a paper of the i

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Speaker 1: AM Ethic that when a cross country study and you know,

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Speaker 1: the older the average age of the population UM, the

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Speaker 1: more constraint again politically a simple bank will be in

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Speaker 1: terms of inflation. So on it this speaks to actually,

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Speaker 1: I think it's going on in Japan tabonomics. I mean,

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Speaker 1: they have an incredible queie. They pushed the limit at

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Speaker 1: the what what's possible? Right over there? Their balance she's

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Speaker 1: just blowing up like nothing else, and yet inflation remains

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Speaker 1: really subdue. They've they've broken you know, the positive number,

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Speaker 1: but it's still it's really low, much lower than they wanted.

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Speaker 1: And in my view, I think one of the key

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Speaker 1: stories in Japan is the politically they can't do this.

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Speaker 1: Their population shrinking, it's getting older, um, and that's the

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Speaker 1: powerful voting block, and they won't tolerate high inflation that

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Speaker 1: each the way they're fixed income. I think that's part

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Speaker 1: of the story. There's a demographic issue, which also speaks

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Speaker 1: to another reason rates might be low around the world

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Speaker 1: in advanced economies. I think a second issue, though, is

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Speaker 1: is the difference between you know, these advanced economies and

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Speaker 1: the emerging markets. Is the advanced economies again, and I

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Speaker 1: mentioned earlier, have had inflation targeting for a longer time,

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Speaker 1: and and and it just gets built into expectations. If

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Speaker 1: you know, several decades of inflation targeting, everyone comes to

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Speaker 1: expect well inflation and anything outside of that is considered devian.

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Speaker 1: It's you know, how can you possibly go buck two

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Speaker 1: percent inflation even if it's needed, even as the temporary,

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Speaker 1: you know, departure. I think we've gotten to the point

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Speaker 1: where the body politic and a lot of advanced economies

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Speaker 1: will not tolerate a deviation. So I've my writings, I've

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Speaker 1: called this the inflation targeting straight jacket. Um. They've been

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Speaker 1: so good that they've worked themselves into a corner and

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Speaker 1: they can't get out. They don't have the flexibility they

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Speaker 1: need during deepercessions. So I think that's I think that's

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Speaker 1: the probably the biggest part of the story and advanced

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Speaker 1: economies is their own past successes have made them less able.

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Speaker 1: And again, Donald Trump, what Donald Trump has done? If

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Speaker 1: I continue my inflation straight jacket story, he he's unbuttoned

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Speaker 1: that straight jacket. Given the central banks, given macro policy,

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Speaker 1: fiscal policies, more degrees of freedom to work. Alright, Uh.

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Speaker 1: David Beckworth, research fellow at the Mercadis Center, I think

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Speaker 1: this is a great conversation to uh sort of introduce

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Speaker 1: people to what I think is going to be a

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Speaker 1: really hot economic uh debate over the coming years and

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Speaker 1: sort of a real time economic laboratory experiment, particularly on

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Speaker 1: the economy. Well, I really appreciate you coming on, David Beckworth. Um,

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Speaker 1: you should check out his blog Macro and Other Market Musings,

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Speaker 1: And David also has his own podcast Do you want

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Speaker 1: to tell us about that real quickly where it's called

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Speaker 1: Macro Museums and we look at um macro economists and writers,

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Speaker 1: journalists and just look at the big macro issues of

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Speaker 1: the day. Well, I think everyone should check that out

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Speaker 1: if they're interested in these topics, and I suspect again

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Speaker 1: that as some of these debates unfold, that will continue

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Speaker 1: to be a mud must lesson. So really appreciate you

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Speaker 1: coming on day. Thank you for having me on. Well, Tracy,

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Speaker 1: I think that was like the perfectly time guest for

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Speaker 1: what we've seen uh in uh in the market so

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Speaker 1: far in the in the Trump era, and I am

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Speaker 1: very interested in seeing, like you know, if a sort

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Speaker 1: of economic regime change is sort of shocked to the

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Speaker 1: system fiscally will actually change the trajectory of interest rates

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Speaker 1: and inflation, which, as you know as well as anyone,

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Speaker 1: has been a falling NonStop for years. Yeah, it's going

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Speaker 1: to be really interesting to watch. My only, um my

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Speaker 1: only sort of one thought on this is I wonder

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Speaker 1: if we're ascribing too much meaning to what we've seen

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Speaker 1: in markets so far in terms of you know, these

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Speaker 1: inflation expectations. No one you mentioned this, but no one

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Speaker 1: really knows what Trump's exact policies are going to be

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Speaker 1: on this front. And I just wonder if investors at

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Speaker 1: this point are sort of projecting their hopes and their

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Speaker 1: dreams onto Trump, right, they want they want inflation to

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Speaker 1: come back. They want infrastructure spending, they want tax cuts,

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Speaker 1: they want business friendly environment, and who knows if that's

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Speaker 1: really going to happen. Now, I think that's obviously, Uh,

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Speaker 1: this there's a lot of hopeful trading it looks like

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Speaker 1: going on based on just sort of minimal evidence to

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Speaker 1: piece together and the fact that we still don't really

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Speaker 1: know how Republicans in Congress, who have been opposed to

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Speaker 1: any sort of extra deficit spending under the Obama years,

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Speaker 1: whether they're ready to turn on a dime the way

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Speaker 1: I mean you could they could because politicians, you know,

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Speaker 1: politicians and politicians, So it's certainly you know, and anyone.

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Speaker 1: We don't really know what anyone really believes on these

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Speaker 1: things because everything is situational with this stuff. Um, but

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Speaker 1: we don't really know how much they're willing to go

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Speaker 1: back on everything that they've been saying. But definitely, I

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Speaker 1: think we're gonna be talking about this for a while

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Speaker 1: to come, for sure. Yeah. And I think, you know,

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Speaker 1: one of it's interesting looking at the financial market reaction

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Speaker 1: because beyond stocks, beyond bonds, one of the things that

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Speaker 1: we've been seeing is, uh, a really big surge in

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Speaker 1: industrial metals prices uh copper iron ore again on this

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Speaker 1: belief that we're gonna be building thousands of bridges and

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Speaker 1: skyscrapers and new hospitals and schools, which is which is

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Speaker 1: going to need all this stuff? And if you know,

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Speaker 1: if we actually get something like that, and I don't

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Speaker 1: know if we will, but if we actually do, watching

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Speaker 1: the economic ramifications of this is really going to be

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Speaker 1: perhaps the one of the most important economic stories of

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Speaker 1: the next few years. All Right, well, this has been

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Speaker 1: another episode of the Odd Lots podcast. Thank you everyone

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Speaker 1: for listening. I'm Joe Wisenthal. You can follow me on

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00:26:57,440 --> 00:27:00,399
Speaker 1: Twitter at the Stalwart and I'm Tracy Alloway. I'm on

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00:27:00,440 --> 00:27:04,360
Speaker 1: Twitter at Tracy Alloway. And you can follow David Beckworth

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Speaker 1: on Twitter at David Beckworth. Thanks for listening. Put knowledge

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