Isn't It Ironic?
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Welcome inside economics. I'm mark Sandy, the cheap economist of mood analytics, and i'm joined by my two trust cohoes mercy in italian. Christies, hi guys.

Hi my coffee. Then I ve .

been traveling saturday, a rare saturday podcast. You know, we generally podcast on a friday, but i've been in europe and IT was on a plane most of yesterday from a room to london um so talking today on the saturday but the is going to be talking when you guys going to see .

you to see you some picture .

you in in a seller in rome.

You know why now he say that, uh, rome was really nice. I said, I mean, I hadn't been in rome for a number years. I can remember one, but IT is a beautiful setting in the weather was, uh, picture perfect, you know, seventy seven, five grees sunshine really, really nice uh mother and got to meet the local government officials and bankable yeah was very interesting in couple days I really enjoyed um but now but found my way to london.

We have a conference in london next week um give me a lot of clients uh, in next few days. So been a good couple of weeks but you know a tough time to be away from the U. S. Even all the activity over there. Yeah but you have an .

international perspective on the election.

I do what is like um of course you talking about the election, right?

The U. S. Election that were .

talking about, uh, I think there's a fair matter. I had to say trapeze ation over here. Um you know they are nervous about trade, were terrible, worried about more a lot of geopolitical issues. I am, of course, what's going happen with ukraine.

Will that yeah and I think there's a general consensus that the the trip administration is going to uh 呃 put pressure on ukraine to come to terms with russia quickly。 And what does that mean? You know yes, one positive perspective was, well that might be near term positive because the wars over but then what does that mean for the longer run?

You know particularly if putin's is um empowered by that that move they were out nato in a person trump s talk to skeptically of nato um in what the future there is there you know like us to their security quite nervous about that um uh uh in of course a lot some nervous ness uh uh the fact they're probably not any more for their own defense interestingly they all feel like, well, you know we we probably should do that, you know, which we we great to two percent of G D P. on. So, you know, but none the less, you know, having to do that gonna very difficult financially, given their fiscal situation and given all the other demands that they have in terms of trying to improve their productivity and underline growth rates.

You know they the mario drug, the former head of the E C B and a former prime minister vitally and what else uh um this he's been a kind of a fixture in your uh european matter since the financial crisis, even before he came out with a study uh, 包括 on why europe is lagging in united states from a productive tivy growth， something we were talking about last week. And what to do about IT and what to do about IT requires resources, requires cash. And so more bits going to defense that means less for, you know, whatever else that can be done to improper tivy. So I see about a hand ringing over here, uh, you know about that.

Were they surprised by the result, do you think?

Yeah ah not not so much the truth son trump wine because that that seem like a real possibility um right yeah even in our scenario, we test the equal probability to the morning present with her so that and only that was particular surprise but the way he won, he won with a very significant majority of an you won the popular vote by five, five, six million votes, I think so. You know that's not, not, not in consequence control.

So I think that that was surprising. Were you surprised by that? Merson buys the by the size of .

his Victory sort of I mean I I was sort of bracing myself for the polls to be wrong um because they have been in the past but yeah ultimately I think ultimately I I was surprised that you know he didn't win a single swing state right like every every single swing state I think, uh, went to him. And so IT was just track.

I stop kind of paying attention that arizona, I .

guess yeah, that arizona, I never went to him .

OK so kind of stop paying .

attention to but yeah, the fact that he won every single swing state was surprising to me. right? Pennsylvania, mark, you know, the north CarOlina, like the whole blue wall, was down, right? So that that was surprising to me. Not surprised that he want, but surprised .

that IT was bad. Yeah.

big, widespread.

Yeah, course. What about you? Were you surprised by that?

Not so not so surprised by, again not guess with my not so surprisingly one but the margin of Victory was so wide, right the polls can throw us off there right again.

right right. Well is one reason that is being put forward for the uh for what happened for the sides of his Victory is but so called if you want to put IT into a phrase the vibe session that people just aren't feeling that I mean, even all this happy talk from economies like us, like me, me, obviously the economies performing very well. But that isn't resonating with many americans given the fact they are paying a lot higher prize for for many things compared to a couple three years ago, rent and food. And to the to greek isoline think that's what's going on on here that you think a big part of big cross.

I think so certainly h that's it's at least what again, well, if you trust the polls, people say that that's uh, right. It's only one of the criticisms um yeah I think that that has a lot to do with IT and that I I I think a lot has to do with the the messaging, right, been talking about that a lot as well.

You know if if the situation was reversed and trump had been given the card of economic indicators that we have today, how would the messaging have been different? right? Uh, we would have downplayed the the inflation certainly and up up play all all the other good things that are going right in the economy. So I think that certainly as part of the is part of the reason why um he was Victorious, he was able to place cards very well.

No, you a vive session that's big part of what happened.

Yeah I think um I think it's more than just um we get we get us this we've talked about this so much, right. Why do we think the economy is so good? I mean, we've we've said it's the best ever maybe yeah um but the end the average person does not and it's it's really it's every everybody I mean every single demographic group, even the ones that went majority for a cma herr's leaned more right in this election than they had in twenty twenty two, right?

So even the margins by which he won every single demographic group, age, sex, race, income um were less for her than they were for biden in twenty twenty so I don't even think it's like this tiktok thing we've talked about right among Young people. I think it's really everybody from all walks of life is feeling like they are being freezed and they're upset about what they perceived to be still high inflation and high Prices. And I A hundred percent agree with Chris that I think the democrats just they keep doing that. They just keep falling down on the messaging in the every election and the republicans are kicking their but when IT comes to how to message things.

you know it's interesting the survive session, it's definitely here in europe. I mean, even extracting from the election results, which option may be wonder bs in in my visits, especially what I find i'm learning from my visits with you know the here name but and I mention also in brusson meeting with lot of european commission uh officials and presentation. And uh what I find most interesting, disconcerting, worrisome is that Young people, people in their thirties, uh, are really very nervous about things. I mean supply to me surprisingly nervous already across this never tell you who uh uh time in uh uh woman uh in her thirty SHE was thirty nine.

I ask I was a little once I once I ask I was I felt little reticent about asking her but he was very good because IT is very curious how old he was because of the conversation we were having and he was saying that um he wants to buy car SHE now I should say she's working a very professional job in a uh uh a government institution that is back stops a lot of a trade that a tying companies though I like the exam uh back you know in the united states and and SHE won't by the car SHE SHE wants to buy the car. She's GTA pick that he told me to make the model of the car but SHE is not gonna do IT because he is she's as in her word's nervous that in he he mentioned me the flooding in valencia as a reason because to her home, P. S.

Home is close to a river. She's afraid that same thing could happen to her. That happens the books in in spain and that really fascinating and the dove tailed with is a conversation ahead at the back business because the the folks there uh and I think anyone isn't doesn't know that the saving rate uh, in your in italy and in europe, I think more broadly is on the rise.

A that is started rise in to the point where their models aren't working. So they have A A model that economic growth and consumer spending in the amount of consumer spending they're getting as well below what they expect. And saving water, rising ing in the questions to we know why, you know what's going on.

And their theory was so called precautionary saving, that this vive session, you know, these people books are very nervous. And that if you got a lot of people like that, three, nine year old isn't gona buy that car, is a problem. It's a problem.

Actually, the interactive point in the context of the election and what may follow. H, this is becomes even more important, the context of a trade war. Because if you have trade terms and trade war and you can get growth from, uh, external trade, which the the and rest of european and do they, it's a big driver, the economy.

If they then they can that get that growth, then they got have domestic demand, you kind of drive the train, but that's not happen in the saving rate is rising. So uh, this really very faster. So other things he was worried about because I kind of questioner, and you know what's going on course, the middle st, what's going on? The middle st.

A obviously ukraine and in russia what's going on there and in of course, the election, united states. So found that very, very fascinating. So yeah this this this so called vibe session is it's really um it's real.

It's having real rural life implications. I think you know it's a big deal, Chris. The other thing I ve found perplexing, we talk a little bit and maybe a little bit bit.

Last week, I was going on in financial markets. You know in the post election a period in the last few days, we've seen a rally and stock Prices. And what we talked about last week can increase in bonier.

S i've come back a little bit in last day or two, but they're still up a lot for more. They were a few months, a couple months ago. Uh, the dollar is up, a crypto Prices are up, uh, credit spreads are or uh down narrow.

That's a different between yields on a corporation ones and treasury yields, which measures the kind of the risk in those bonds and credit risk in those bonds that become dinner. So markets have have a really moved here in recent weeks and certainly since election. Uh, what do things is going on? How how you interpret all these moves in the financial markets？ What are they saying about what investors are thinking is going to happen here?

What's the ly, all policy driven are assumptions of policy. So tax rates, corporate tax rates, like we we got to fifteen percent that certainly positive fraction ties right now, university. So that kind of explains that rally, the a assumption of increased deficits, additional spending, tax even if we just if we did nothing else but just extend the tax cut jobs act, right? We're talking deficit.

So going to be additional deficit that's going to, you know, require additional abandoned in that explains the A A higher yields on on bonds, right? I think in the short term, certainly a all all heroes s point to the growth, right? We're gna get this uh, a little bit of sugar rush perhaps with these with these tax cuts.

So it's all all positive at least for this uh, presumed future here. Even with if t terrorists come along, it's going to take some time for those to go into effect by the deportations. Also unlikely that that you know a day maybe a day one decision. But in terms of actually seeing the effects of that on the economy, it's gna take some time. So I think I think that explains the rally mode ah that we're in the crypto L I think is a combination of uh, more favorable treatment of crypto m right, that's been promised that the governments gna open up or allow more activities, provide a bit more um just enough regulatory guidance to give investors more confidence in that market, but not so much that that IT cripples IT. That is that's the that's the vibe uh, i'm hearing and maybe you do have inflation um uh investors looking that cypher as as an inflation hedge are potentially so both of those factories might be driving .

that upward right right where the same interpretation of the market action we've seen.

Yeah I think I think businesses are I like your sugar rush um analogy cries. I think you know businesses are happy that tax rates likely coming down, regulations listening or going away, that would explain the rally in the stock market. And yeah, I think everybody who's analyzed the plans of uh, trump and and Harris have seen that under trump s proposed policies that deficits and that wide and out. So it's probably likely a reaction to what what his policy proposals look to be over the course of the next four years.

Yeah, I think when he when he says we think about corporate tax cuts, you going from a twenty one percent rate to fifteen, although it's not quite clear that means for all corporations or domestic companies or domestic manufactures are not sure, but I think the interpretation is kind of broader based corporate tax rates. That one for one is to lift to stock Prices, right? Because that means after tax, corporate profits, earnings are higher.

I mean, the tax rates lower amount of a money that's going to the the corporation and share order rises. And if you just assume a constant Price earnings multiple, you know Price of stock vide by the earnings after tax earnings, you you get a higher stock Price by definition, just simple rotech. So that I think is a big part of the run up in stock Prices.

And of course, to be more earnings and crack cash flow, I mean, makes IT much less likely you going to faul on a on a bomb, therefore, are IT spreads come in the corporate yo bond yo comes in road to the treasure. I think on the on the stock, uh in terms of the stock market, less regulation, right? I mean in the financial services industry banking and uh, telemedicine and technology in health care, fossil fuels, you know the light more likely regulated.

That means again more earnings and high a star Prices. And then probably I heard this, but I think might be also important more mergers and acquisitions, right? I think I think the by administration was but looked at M N.

A with the john this style. They were focused on mark concentration and pricing. And I I I suspect that that the trump administration will be uh less suspicious of them.

An activity which then again also positive for for for stocks and and and uh if you have terabits and you have importation, which means IT disrupt labour markets that are already pretty tight in the construction trades and agriculture, manufacturing, transportation, contribution, retAiling, litter, hospitality, those in course deficit in the tax cuts, in a full employment economy, all that is inflationary. Uh and I I think we have seen inflation expectations pick up. You go look at five year um you know break events, which is a measure of you know inflation expectations.

They're up quite that in recently uh and um and also more, as you point out, deficits and that so that explains higher by us so that you get to the higher by new. So uh, there might be an element of more growth there, but I suspect that kind of by the list in all the factories driving or serving in market that close point at this point. But yes, okay, I understand. And we have a lot of listening questions like within uh, collecting hero with past few weeks a you want turn to those emerson, you any good ones? And I think he said there's a few more relevant to this conversation.

Yeah, there is there is quite a lot. I mean, there there are two questions just sort of about this vibe session that you were talking about, right? Like we have talked week after week about how good we think the economy is, where we are.

Economists were looking at broad metrics of the micro o economy. We're looking at G, D, P growth and wage growth and the labor market, right? We're looking at everything.

I mean, fundamentally, why do you think that that is, excuse me, not not driving with the way seemingly most of the country is looking at the economy? And is there is something that we need to do Better IT as economists to make people understand how the economy is doing? Or is that just you know, this is the way people feel about their own financial situation.

and this is what IT is. My sense is that when economists talk about the state of the current economy, uh, you're talking about growth, G D P, jobs, the time, unemployment at the time of stock Prices, housing values and inflation, the rate of growth in the Prices for goods and services as of this point in time. So you know, here we are this point in time, all those things look good at the economy, looks like it's on very solid ground.

IT doesn't account for the fact that we had very high inflation back not long ago, two, three years ago. And uh, that caused the Price for many things that we buy staples, no groceries or rent, gasoline or higher, much higher than they were three years ago. I mean, I think groceries are twenty, twenty five percent higher even though the inflation of for grocery inflation moderated is back close as president, not really rising all that.

There are some items that are for very idea of sync rac reasons like you know egg Prices are up a ck as a baby in photo. But you know, you look across all groceries, the Prices for those things hadn't reason all that much of the past year, but they are still up twenty, twenty five percent for more. They were three years ago.

So IT rent, the same thing. Rents are flat. There are going they gone nowhere in on rents, probably not for a couple years, but there are also twenty twenty five percent for more.

They were three years ago, three, four years ago, gasoline that's less, you know, but still that's up as well. So you know, when people think about the, uh, financial situation in my extensions, the economy there there, you know they're still paying a hot for those items that they need. And their incomes, in many cases, uh, on average, present consistent with that, but just barely consistent with that.

There are certainly not we're not seeing wage gains are higher than that on. So that means have the population is experiencing a wage games that are less over the three appeared, there are less than and picking three years in a roughly speaking, three three have four years something like that uh, during the period, the wage gains have not cut pace with in the Prices for these things. And so the kind of so called real income, real purchasing power has been depressed.

The other thing is, for many of the folks, are really upset you. When inflation was high, they turn to credit cards and consumer finance loans uh in other dead vehicles to cut supplemental income to maintain their purchasing power in the face of uh, the high inflation. Uh and you know it's one thing when rates were very, very low and they were borrowing back in twenty twenty one and twenty twenty two, but now rates are very high.

The average credit card rate, I think it's twenty three, twenty four percent, which is just crazy high. I mean, can imagine that that's that's that's usual and feels usual. It's a record high.

And so you're paying a lot of interest on the what you borrow to help supplement your income just not too long ago, no two, three, four years ago. And um you know that just make life even more more difficult for you. And a lot of the a lot of the folks that are again really, really upset, you know they don't they don't know stocks.

You know they they have enjoyed they are up and stock about that. In many cases, they don't know their own home. Mean, two thirds of americans do, but one third don't. And the one thing that down, you know the they haven't enjoy the run up and house Prices.

And by the way, that means it's much like i'll ever be able to afford to buy a home if they want to, you know the first time potential first home buyers sideline here. So that be my sense of IT that you know that's what's going on on uh you know the there's no game changing event here that you know will change that the the reality of that um it's something that only change over time. You know assuming that the economy remains good, unemployment low, wage grow strong, inflation know h slows IT is people will steadily feel Better, uh, you know, as we go forward.

so. You know, I don't I don't know that there is anything that they can change people's perceptions of that. I will say also, I think politics are player all. I mean, you know if not for the election and everyone you know you know hitting each other over the head and making an issue uh and and spending you know the data in the reality of things, I think um that that is also played because you can look at consumer cent. We've talked about this in the past. You look at consumer sentiment surveys that like you resume ichigan, if you're republican, you're feeling a lot worse about things and if you are democrats, so that just goes to the fact that you know people's perceptions are colored by their political of the it's it's much deeper and railer than that truck one and he want buy a good amount. So it's much deeper than APP that I I feel confidence part of the story that you know uh the politics that we've been, environment that we've been in, as you know, exasperated that the vibe session, you know, the this feeling that are being left behind because what you think .

I think that that that makes us and I guess what I would add to that been thinking about is just how people's perceptions of their own economy are differ as well, right? So even even if we just focus on um households, individuals who actually have seen their incomes keep up with inflation even exceed right maybe slightly faster than the inflation, even those people are upset right there feeling the pitches as well.

I think there is a difference in how people view income growth, right? So there are seeing their incomes rise. I think people put that in the box as well.

I earn that, right? That's because of my performance. That's that's uh, that's a reward for what i've i've been doing and achieving. But that Price increase that there's in the inflationary increase that they're seeing, that's attacks that, you know that's external to me and that's not fair, right? That's being imposed on me, you know, whatever the source of that is.

And we then we can go into the kind of some of the politics in terms of blaming certain individuals or situations, whatever. But I think at its core, I think that's part of the vibe session is just in terms of how people view the different forces are going on. So even if again, real wages, real incomes might actually be improve even if wealth is up, right, I feel I am wealthier.

But still, that Price is really a bothers me because that that's an external force that that's not because that's not the result of a IT, uh, good investment decision I made. That's the result of some other external force that's been imposed on me so that I think part of the issue as well and now i'm the again and I kind of pose this to you in an email mark, this is this election, kind of a referendum on the fed do Mandate as well. Should the fed now, based on this, really be focus much more on I stability, lower inflation unless on a full employment, right? And not saying that IT goes zero, all about Price is but maybe the waiting, which historically you said he was fifty, fifty, both are important. Maybe it's not maybe they should be putting a little bit more emphasis on Prices and hog more hawkish policy versus you know, bearing in mind the full in layer, I don't know what do you think of that?

Ah IT is a very interesting thought um and definitely worth expLoring. My instinct is, uh we only feel that way now yeah imployments high. We're gona feel very different.

Yeah yeah. So i'm not so sure you know, I would change the weight. And once you change the weight, then IT feels like we're going into recession. Think about think about IT is the way word you know one, two, three, one third, in the last couple of years, we've in recession.

By now we we good to, but Price will low. Price will low.

Yeah, for no good reason. I don't I get a good place, but IT. But you know, if you go to other parts of the world, I think most of of the parts of the world in developed central banks, but a much higher wait on inflation tion.

In fact, in many case, like the european and central bank doesn't. It's all on inflation, right? They have one objective and that's low inflation.

Although that that is a good case in point, they made some pretty glacial errors because of that right over the years. Now I remember one episode I was in european. I think IT was twenty eleven in the was a twenty eleven uh IT was IT was very clear.

I think we are just coming out of the financial crisis, and they prematurity, raised in, retired. And that may have been one of the causes of the sovereign european and verey n debt crisis to completely crush their economy like the most crazy thing to do. Remember, being in germany, germans, really, they wanted this right, because are all, but they were at that time in particular, all about single monday noon civil inflation, and they they crossed the economy.

And I I think that's a good, good case studies. If you want to change the way to go, take a look what happened there. I'm not i'm not so sure that I would do that, but anyway, that was is an interesting any views on this uh, you know why? Uh, you people are feeling away. They .

are yeah, I think let's take the job market right? The job market is I think objectively great. The unemployment rate is low. It's been low for years where we're not seeing massive layoffs.

But for for your average american, they don't really care what the unemployment rates as long as they have a job, right? But with Prices that something everybody faces every single day. And so IT.

whether G D, P growth is .

two and a half or two percent or the unemployment rate is four point one or four point five, that doesn't who cares right to your data day life if you have a job and you're still getting a paycheck.

But when you're out living your life and going to the grocery store and booking flights and hotel rooms and paying for day care and going grocery shopping, that something every single day that you face and people are, I just get a sense people are really angry and they are. There is a sense that it's not fair, right? There is a sense of this unfairness.

I mean, even when I talk to sort of the people in my sphere and they're constantly asking me about this and these are well educated people with good jobs to make good money. And there is a sense of, like, I don't understand why, you know, I get I get what happened during the pandemic. I get the supply chain stuff, I get russia, ukraine, I get the Spike energy Prices that resulted.

I understand why goods Prices were high, but why is IT now? When I go to a hotel, there is a list of twenty fees I have to pay and to park my car overnight. It's now seventy five dollars a day, and IT used to be fifty.

Like what explains that, you know, is that IT just seems like corporate breed. IT just seems like companies trying to just freeze every little bit that they can. And is this real, palpable, able anger from people that I see all across the board when I talk to people? And that is something we all, I mean, IT gets me upset to some of this stuff that I see, right. Um so I just think .

it's .

it's this is like a universal part of the economy that everybody interacts with every second of the day. That's american consumerism that we all see. So all these other statistics about the economy don't matter to to anybody except us on this call, right, who are who are trying to make assessments of of the broader economy. Um your average person doesn't really .

care yeah I know it's great point I I going to throw one other thing and I might not articulate this well, but it's exacerbating this kind of on this conflict with regard to people's financial situation is just a general ask about everything is going on in the world that maybe lots of reasons because there's lot things going on in the world there. Not the very disturbing the look at, but it's amplified by our media, by our social media like that.

I go back to that three, nine old, the time woman worried about the flooding and baLanced a, uh, you know, I point out her that that kind of flooding probably happened one hundred years ago, but you didn't even know about IT because there is no way to know about IT, right? So, uh, and even more, a hundred years ago, no government gna come to you a rescue. I mean, I know this spanish people are very upset that the spanish government didn't come to the rescue more quickly.

But you know they they eventually came under years ago. Pretty sure no one came here on your own um you know so I didn't have insurance many insurance that can help them you know kind of navigator on other side. But you you you know there's so is the same kinds of things are happening over the years, in the decades, in the millenia.

But you know about the first hand and you you know about IT visually. You can see the pictures. You can see you know kids that are uh uh dogs or animals that are struggling. You you know IT affects you much more deeply, much more quickly. So I wonder if you know where this divide session and our uh anx around the economies, this you know even more emphasized by the fact that we got all these things going on around this and they are in our face all the time.

It's feeding on each other.

It's feeding reinforcing interactions that are occurring that are just reinforcing these in our thinking about what's going on.

Let me let me ask you this, and this is sort of a to this question. Do you think there is anything that, lets say, vice president Harris campaign should have done differently in terms of messaging around the economy and inflation?

Well, yeah, I think there is probably a couple things that were just kind of areas like, you know, when B. P. Hers was asked with anything in the by administration and SHE could have done differently and SHE said, no, I can think of anything that was probably that was a mistake, you know, because our things they should have done Better and differently.

And I think you got to handle something like that uh, you know that good, that kind of a question, uh, turn that to her advantage is opposed to making that you know something that the your people saw all really you can you if you can. You don't think there is nothing you could have done differently than you know I so my problem go forward for sure, you know. So I think that the case what more substantive ly pretty tough, right? Think about IT means the first resources b to get inflation back down, not fiscal policy makers that.

Early night quickly, uh, and uh, you know, there are things you can do, but they play out of a long periods of time, like her housing plant crew supply to help moderate house Price and rain increases, which goes to the cost of in a cost of housing. Or you know, uh, focus on prescription drug pricing. Now he can focus on food Prices via gouging.

And you know that might not turn some people off. But IT now goes back to your point that people feel like you're ripped off. So that actually resonated with people, a lot of people because, you know, they felt they are getting ripped off.

But to your interest in question substantively, probably hard and pretty hard. And not something can solve very easily because you're talking about getting Prices back down. You're not talk to you know, you can lish getting the rate of growth down, inflation flow and stable but actually getting Prices back down.

I mean, yeah that's that's a tough one, certainly any or reasonable period of time. Um anyway, you will pose another question. That was a really good one.

good system. I just add one one thing to that one, which is sure that I agree there is not much that he .

could .

do in capacity, the capacity of the president to get races down. But I don't know why they didn't go after trumps policies being inflationary more. I mean, people are upset about inflation.

He is all about the national sales tax, the terrace house.

They shouted hammer that more. I mean, I I just think people are upset about inflation, but they just elected somebody whose policies are highly inflationary. And and I don't think it's gona happen.

We don't know, right? We don't know how the terrible thing is gna play out in over what time period. This isn't gonna like a day. One thing IT may not even be twenty twenty five. That might be twenty twenty six. But putting a ten percent tariff on every import, sixty percent tariff on china, even if it's not that um tax cuts for very wealthy people, all of these things are inflationary and SHE could have harped on that more I think.

Yeah, I don't know. That's a tough one, a much sure. Uh but ability, right?

I mean, it's it's fascinating and this is really I think the world is ironic. I always have yeah use that work. I'm not sure what he really means this meals, ironic to me.

So he see those are right. People built around because of inflation, the higher Prices and his policies are inflationary. But you to convince somebody of that thing I was ring that, uh, you know, made this typical, uh uh H I think was peer coin.

The wall street journal road about economists are also big losers here because no one is paying attention to us. We say this, but yeah, you guys know what really you don't know what you talk. So I don't know. I don't know.

yeah.

And we've gotten we've actually gotten questions about that like as economist, what are responsibility in terms of getting this message out to people and how do we more accurately explain things so people understand? And the difference between, you know, year on year C P I growth and month on month and what is inflation? And um you know do we have a responsibility in this year as well or do people are do people even listen? I don't other than the people are snicked to this bad gas.

this is that. So I think IT comes I .

think that also IT comes down back to uh, interpretation, right? I think a lot of voters, they don't expect that the terror are actually going goes through that this is a this is a negotiating tactic and uh, you know, a person he is going to call a person trump. We'll work IT out time to buy two trillion dollars worth of goods and we won't actually go down the Peter, if I I think that there's still that uncertainty.

I'm sure the more uncompensated we're going down the terror path and the deportation path.

I think we are I think .

are not twenty twenty six. This is twenty twenty five of like because he's he's rand ago, but the first president comms rand ago and this feels like this gonna en. So I I do .

think the terrifying is going to be in negotiation though, probably over the course of several years, and we'll make changes to IT and people. Other countries will relent and retaliate. And it's gonna this back.

And fourth thing, I think I mean, yeah I think that hill, he'll certainly start the process of all of this stuff on day one. And I don't know why people would think that he's not serious or is just saying things. I mean, we saw in his first term in the office, he try to execute or did execute.

I'm pretty much everything that he said in one form or another. So I don't know why people wouldn't believe that he's gone to do these things. I absolutely believe is gonna try. And now he has a congress behind them, right? So it's going to be much easier to do a lot of these things than IT was during his first term office.

Yeah agree, I think is a question degree.

right? yes. Yeah yeah be negotiation. yeah. So there be .

something that it'll be higher than what IT is today, certainly.

But yeah, isn't the considers even if it's in negotiation, that creates uh, a one consequence, right? Because that creates ton of uncertainty for businesses. Which products have a terrible uh, which countries you know what, over what period of time.

Uh, I know this looking uh a uh a list of uh products that uh have terms on them already. You look at this go, oh my gosh, this is like incredibly the complex, you know, very complex. So for all these businesses trying to figure that out out there is going throw up their hand, say, you know, I can't figure this out if you can figure out, you do just stop.

You stop investing. You stop improving supply chain resilience, uh, which adds to lowest productivity. And as the cost and inflation so there is a cost born by uncertainty, created by what certainly will be in negotiate.

You're right, just going negotiation. But if IT takes a couple of three years, is going to do that by itself, is going to do so in the image. Where are you .

expecting a surge in imports or couple quarters the consequence?

Yeah, you seen the a number of containers coming through and oh yeah, it's straight up. Its straight up actually. Here's the other things going to happen.

I I suspect just listen to people. We're going to start going buying things that they think might get a terf. You go, boy, washing you Better way by the washing machine. I hope that machines, you know I think there's going there might actually be a sport of spending. Ah you're pretty soon because people going to want to get under uh, in before the terrace actually take .

a fat yeah I think IT will be a good retail sales. Uh.

how how they could be really gangbusters you know, good ruling the gang busters. Uh, want another question. Um recently .

have another one.

I have lots, I I have lots, I me no OK. So we kind .

attached on this at the at the beginning of the conversation, but there's questions about OK. Now the fed the fed mat this week, they lowered decided to lower interest rates. Another twenty about that. yes. There there was that?

Yes.

right, right. So they met the day after the election. They lowered the target rate another twenty five basis points. Now we're down seventy five basis points from from where we started.

Why then can you explain the relationship between the fed short term moves and why we've actually seen ten year treasury yields rise and and we saw that before the election, right? So there wasn't there. There is not this relationship, this tight relationship between what the fed does and longer term interest rates and certainly not mortgage rates.

I mean, mortgage rates actually rose over the last few weeks. They're up around. I don't know what they are.

They were yesterday, they were like six point nine percent, right? So the fed lowering rates were not seeing that translate to mortgage rates or other long term bond yield. So what what's up with that? Can you explain the relationship there?

See you grab some kind of animal.

Yes, my dog is upset about the um .

monitor. Yeah a very, very, very cern. Um so the Chris, here's the question is around what the fed did launching race, but yet long term interest rates have risen.

The ten yield treasurer yield is up. I was just looking at this uh, earlier point seven point seven five percentage pots, seventy seven five basis points since he hitting A A low back in early september. Um what what's going on we know uh, how do you explain that?

Yeah I think, uh, A A difference between the short term and long term, uh short term or still on the right path, right in terms of inflation coming and we continue to see pretty good reports. Rent growth is moderating, right? We can see things kind of moving in the right direction.

But now there is concern about that longer run fiscal trajectory, uh, in particular. So keep coming back to the deficits in the death, but then also the terrorists. The other policies that could be inflationary would be a longer term, and that therefore requires a higher yield in the ten year. Long term rates mongers rates up substantially as well.

So so then you're saying this was kind of all being baked in even prior to the election.

I think the probabilities were certainly shifting in that direction. Um so a really interesting chart in terms of a what was IT the the increase in the ten year. And uh, so expectations, if you will, and be um the betting markets, right like if he was one for one, right? As the probability of uh trump winning went up, bond investors were taking that to hurt immediately pushing up the bond deal.

This yeah I think the the recent law in the ten year was like three point seven three point six five percent. That was early september. That's when Harris was leading the most uh, in the pole. So that was the apex of her uh uh a popularity uh and the the bedding market thought that he had chance to win since then. Since that point in time, uh, things changed dramatically.

And by the time of the election, bidding markets were saying trumps going to win and and course truck did when in in ten year up now the three six, use me four point three, four point three five percent. That's that seventy seventy five days point increase. And in my mind, that goes to inflation, inflation expectations, right? I'm going to have terrors deportation.

I'm going to have deficit tax cut and from eloy ment economy, that's inflation. So that adds to take your treasury s relative to what the fends are doing. And then i'm also gonna more that in that bigger deficits in that and add as to the circle turn premium, that again goes to the different in short, long.

So my mind, it's it's really about the election and in the election results. That's why we've seen this disconnect. Between you know what the fed is doing and and what ten year treasury s are doing and and of course, the thirty year fixed right mortgage is tied to the ten year treasury old cause of spread.

And that spread also is why I think a little bit here and uh because um uh you know the increased uh a volatility and interest rates that were serving in the environment, there's a lot of uncertain of things are moving around quite a bit in the market itself is got all kinds of structural issues. Broker dealers aren't explain their baLance to be consistent with the growth, understand. You see this, you know you two, three decades ago, two, three basic point moving in ten years, years was a big deal on a given day.

Now is moving twenty thirty basis points in an hour, you know. And that adds to volatility. That add that volatility adds to the social prepayment risk and not going to go down explain that it's just dargan for it's more good, really going to be higher. So because of the voltige ity in interest rates. So that that's that's also a goes right back to the election.

So fed governors, andy, what do you do next month?

I keep cotton. Um you know because I trieve my goals. I ve two goals for employment check. I have a four percent of a plant rate, a solid and uh the other objective is low and stable inflation.

Uh the definition is a two percent inflation rate on the consumer expended flatter i've achieve that check. So therefore the uh central foundry, the radi control should be consistent with its so called echo library. That rate at which is neither supporting a restrain growth anything.

There's appropriately widespread agreement that even with the the cutting rates so far still too high, you know four, three quarters is still well above that equal. So I keep cutting until get to four percent ish and then I might slow that point. So i'll be a december rate cut.

We ve got, we ve got one november, another one in december, maybe in january. There's another meeting in january uh and then in mark, know something like that. But once I get the four, then I then I slow up because there's a love and certainty that collision rate is and you know could be IT could be his four percent. So then I slow take a look around and make decisions after that. Do you take .

do you anticipate policies in your in the future? So we get to .

I know if we do .

see terrify are are doesn't arizon you?

Yeah, slow down, right? I can. I cut in december. I cut in january, right? That puts the front at four in a quarter.

You know, maybe in marketing on what's going on with the present sco policy, maybe not. You know, terrorists are coming, deportations. I say, oh, I don't know what that with that implies for inflation.

I'm going to slow up here. And by the way, they're also focused on inflation expectations, not just about inflation. That's right.

It's inflation expectations and there. So that would argue they should slow, they should slow up the right, the right cutting. So that that would argue for dentist, the slow to pause on the rating to sea.

You know exactly what truth administration has in mind and let the us. Subtle, they start killing great again. I think.

yes, very hi. Yes, I think we're onna see a .

slower path. Would you go or yeah .

yeah and and I don't know if you guys watched the press conference press conference uh and read the statement and you know they were in the statement, they address the election. They basically said we're not factor this into the are near term policy decisions because we don't know what fiscal policy is going to look like. We're not in the business of speculating.

It's gna happen, and we're just focused on our dual Mandate right now. And as far as we can see that risks, but you know between the labor market and and inflation or baLance. So we're gonna keep marching ahead until we have more information. And then in the press conference um which was kind of funny, if you haven't watched IT, you should go watch clips of IT. Jpl was ask several times about a whether if Donald trump or someone in the administration asked him to resign which has been bloated around right his term doesn't end until the midst of twenty twenty six um and he just gave a very turn no, I won't resign and then the reporter said, can you elaborate that on that and he said, no and then then there was a follow up question, do you think it's legal if they asked you to resign? He said, no, it's not it's not allowed under the law to basically mess with the the F O, M, C before IT people's terms are up.

Um tell you though, if if present from saying martial says I want to share the reserve to resign, I want to put my own person that I don't trust what he's doing. I know jpl probably as illegal stories to say no, but would he actually say no? Would he actually say no?

Well, the irony is that the power was .

donal trumps pick for world again.

It's everywhere. That is .

his person is his person. Um yeah yeah. I saw that clip in yeah by I what I bound even most amusing with the reporter was totally plum ics. You resign, which no. 我 我给你 给 no that that was great IT for him for him but I but I you know back to back to .

the ten year yelled and long term bony's ld thing。 I mean, basically like the the fed is cutting, they've cut seventy five basis points, but sort of almost gone nowhere because inflation expectations are up, bond fields are up because of this expectation that trumps policies will be inflationary and the the debt debt to GDP ratio will expand over time. So the fact you've cut seventy five basis points almost hasn't really done much.

Yeah the irony of the irony is that person trump would be Better off if japan doesn't like because of he left and the ten year old who d code work know you know the fix morgues right would be eight percent. So uh, it's actually saving them by not leaving. Yeah uh a great, great point. right. Let's take one more question.

How about some? Um this is a really this one is kind of near and dear to my heart. I don't really know the answer to IT, but I think it's a .

good question OK um kind .

of question I one .

that I don't know the answer to or just I don't know 有一点 um .

so this is around economic data integrity。 So this listener said thinking about the incoming administration was a bit of a biased question. I will say i'm wondering what kind of checks exists that our federal reporting agencies to publish accurate data is there are a way to confirm that numbers, for example, in the jobs reporter, accurate and have not been tampered with.

And i'll say that over the years, well, really since Donald trump came on the scene, there has been these repeated accusations um that the jobs s report has been tampered with in some way by whatever democratic administration is an office um I used to work at the beer of labor's statistics. I used to write the employment situation report on a rotating basis with my colleagues and have some insight into this. But do either of you and Chris, you worked in federal government too. I don't know if you are ever in an agency where you have to have parity clearance to well, sort of that, I guess.

And yeah, that was a pride institution when were right.

really with strong influence.

O, K, O K, for life. OK for life.

So I I, I mean, i'm happy to talk about this having been been in this. But do you guys have anything to.

well, that my first reaction is a cheese. But now questioning every single institution that we have, and we distrust every single institution we have, and that goes to the core of a well functioning democracy. If you don't trust your institutions, we don't trust the barely statistics or the fear resort or consumer financial protection.

But of whomever IT is, you don't trust your government. Your democracy becomes more difficult to its this more fragile. It's not gonna work uh so I I find that such a worry some question disturbing question um but i'll let you respond to do you think in the P L S or other government to the agencies have been compromised anyway politically?

I I don't think yeah I I certain I I through of colleagues in these institutions. I work with folks I know I these are professionals with the highest degree of integrity, right? People who are generally trying to do the best a job in terms of measurement. So I don't I don't see this as A A A risk at all that someone would be compromised, you know fudged than numbers.

Here I I am more concerned about the very real um problems we've seen in terms of response rates, right? In terms of survey response rates in some of the data, right, I worried about that, that response rate going down so that the numbers may be inaccurate because of know the data collection process, but not because someone is putting their film on on the scale. The I see a difference or a what gives me some hope is that, uh, we live in in this very open society.

We have a lot of other data sources now too, that we can look at when we think about the labor market. Don't rely just on the staff CS still the gold standard, but we have other confirming data or other data that we can use to uh to test no whether or not the the numbers coming out of the B, L, S are accurate or not or reasonable or not. And we have private sources, other private sources.

We have some other in a state or local government sources. So we have originals of data still are that we can look to to test whether not someone actually is attempting to the data. So I be much more, again, i'm worried about the the data collection and then I would be worried about the narratives get spin around the numbers, right? That that's another issue um but the number itself, I think with again, hi integrity individuals in these agencies who are you know they're just focused on doing the best job possible with the data that they have.

Now I say I do were a little bit, I mean member person trumping his first term front rain, the bail us employment report one one report be can say before IT the number uh, or gave people sense of what the number was gonna be before the number was actually released.

That's a problem, the process before but I don't think he gave a false number.

right? No.

I don't think so. I think no no follow the right protos though I don't I don't .

remember that yeah because .

of the process .

doesn't yeah yeah IT certainly certainly um so that that definitely .

I I won't concerned about some of those procedure things whether he knew what the right proceed is and didn't follow IT or or just was ignorant of I I don't know um so I be concerned about that but not again I think there's this uh this conspiracy theory has been put forward several times over the last decade in terms of folks actually within the B L S C L changing the numbers?

Or can I ask from from experiences, is that even possible because there's like so many moving parts there.

many people involved and um all of these people have a certain level of um security clearance. So if you come in contact with a market moving economics statistic, you have to undergo a background check, right? Like you have to you have to have a level of security clearance and then the number the data are actually collected at the U S. Census bureau by B L S, at least on the um the household survey side.

So if we're talking about the unemployment right that's collected by the census peria, the results of the current population survey s transmitted to be a less where the data are then aggregated by a data team and then IT sent to another group that then is responsible for creating the sort of employment report and writing up the description of what's going on the narrative. There's people on both the payroll survey and the household survey offices involved, only the people that need to know. no.

So not everybody is aware of what the number is. Only like the the handful of people that are actually working on the report in these offices knows then at that sort of end of the week that goes up to the B L. S.

Commissioner, they pour through every single word of the report in agg's ized detail, you know, looking at IT to make sure it's it's sort of just a descriptive narrative of of what the numbers are and then IT gets transmitted to some key people in the government like the council of economic advisers um some people in congress and the president. It's and delivered in a envelope. I mean it's it's very it's there are so many um so many people involved at that at each individual step, right that IT would be almost impossible for somebody to come in in change this or manipulated in any way. Just like every conspiracy theory, IT would be too hard and IT wouldn't involve too many people to actually have any chance of working.

Yeah okay, well, that makes me feel Better. Uh but that I found that that's a really actually this concerning question that were think along .

those lines so o to right yeah 是 IT .

was um you know last year um the B L S was talking about how congress was going to cut funding or the B L S and specifically for the current population survey， which is where the unemployment rate comes from, that actually that did not happen. So the funding was put in place. Um so and the result of that cuts of funding was that they were gona cut the sample size of the C P S.

So right now this C P S is sixty thousand households across the U S. They were gonna cut IT to something like fifty thousand households with reduced funding. It's it's as of now budget that was past this past year. They're not .

going to cut the C P S.

I. I. I think just given sort of the narrative from this administration about just sort of overall trying to shrink the size of government, drain the swarm, all of the staff rate, the cutting the number of bureaucrats and government yeah that's what I would be the most worried about is as Chris, just the integrity of the statistics declines because we're not funding these agencies that collect economic data and think about how important that is.

I mean, we wouldn't have jobs and we didn't have economics statistics coming out of the government. The federal reserve wouldn't be able to do its job. They they have to look at all these data, right in order to take a pulse of the economy and figure out what monetary policy is going to be. Um so it's it's very important and I know i'd come from a statistic background, so I I have a lot of strong thoughts on this, but I mean that that is my fear is that funding will be cut for these agency is the B E, A in the B L S in .

the context of Christ is the following rep. Anyway, me and I think some central banks are already having trouble. Now the person I think the british are being a real hard time with there are right, right, right.

They they difficulty measuring and they they, I think, fix the issues. But they their response or have been so low that they were for a while, they were getting, they were getting. They could not measured the on the point, right? I think I I I hope I don't mistook that, but something along those line.

So it's already happening. So this so what we're saying is there might not be direct intention to mess with the data, but indirectly through the funding. Combine with all these links are going on anyway around response to rates.

You know they could make up the data to you. Yeah, yeah. okay.

I think we'll be relying more and more .

on private .

sources anyway that's expLoring .

those today, today, right? And actually, we have some really kind of interesting data sets, the helpful what's not on the job site. I'd like to get more information there, but uh, okay um I think I think we there is a lot we cover a lot of ground.

Um I I you know take A A few listening questions. Didn't play the game, but I think will say that for for next week um anything else you want to bring up before we call the podcast mercy Chris guys, we're good. Yeah uh okay. I think you going to call this the podcast your listings and help you enjoy the conversation will talk you next week. Take care now.