Is Inflation Going to Ruin the Summer? | Off the Clock

Well, the work week may be over, thank goodness, but
the economy it never really takes time off. I'm Justin
Wolfers and welcome to Off the Clock, the show where
we want to unwind the week's economic news, and today
I'm joined by my very good mate, economics journalist Stacy Vannocksmith.
Hey, Justin, very glad to be here. I am Stacy Banksmith.
Like you said, I'm a columnist for Bloomberg Business Week
and co host of the podcast Everybody's Business, and excited.
To be talking with you today.
I can tell you all of Platypus loves you, Stacy.
We're happy to have you. Say. The goal for today's episode,
this is what we're trying to build together here, is
to help folks pick through the week's headlines and figure
out what you actually need to be thinking about, what
you can safely ignore. And if we look hard enough,
I reckon we might just find some silver linings.
We may have to look kind of hard at this
moment to find silver linings, but I think we can
get there.
We will, we will do it. We will find.
Them, Stacey Uno, if anyone can do it at you
hid Today we're going to discuss the lightest news out
of the Fed, Handsome Kevin, Congratulations, we're gonna talk about
what the heck.
Is going on with the bond market, and we're going
to ask the question, is inflation going to ruin your summer?
Let's get into.
It, Okay, Justin, I am very excited to.
Be talking with you right now, because Kevin, we we
have a new FED chair, Kevin worsh was just sworn
in as the new head of the Federal Reserve, head
of the Central Bank, replacing Jerome Powell, who has served
his eight years, who is still going to stay on
at the FED as a FED governor. He could stay
for another two years if he wants to. But of course,
kind of in the background of all this stuff, a
big question looming is FED independence. We've talked about this
in the asked uh And obviously the President has just
put kind of put the screws to Jerome Powell about
lowering interest rates. Has put a ton of pressure on
the FED in a way that I think is concerned
a lot of people. He did speak up today. I
can play you what he said. I'd love your your
thoughts on this, Justin. So here here's what the President
said as warsh was being sworn in.
Don't want Kevin to be outally independent. I want him
to be independent and just do a great job. Don't
look at me, don't look at anybody. Just do your
own thing and do a great job. Ben Thankfully, unlike
some of his predecessors, Kevin understands that when the economy
is booming it is, that's a good thing. We'd have
to go crazy, just let it boom. We wanted to boom.
We want it to be like nobody has ever had before,
because we do have some debt we'd like to take
care of. And the way you do that is through growth.
We're going to grow our way out of it.
So far, well, okay, I have a lot of questions,
but I would love your thoughts and your take on
this because you've watched the Fed for a long time,
and you've watched the economy for a long time.
What is your take on this moment?
All like, so, he's finally singing from the hymn book,
I want you to be independent? Now doing that today,
having fired the last bloke and tried to put him
in jail for being independent. It could be that since
we last heard from the President, he's read an economics textbook.
He's understood what fed independence is. He's huddled with his
advisors and he's figured this all out. Or it could
be this is a bloke who says a lot of
words but doesn't mean very many of them. Look, it's encouraging,
he said it. It's better than the alternative. The other
thing that was interesting there was he started with saying,
I want you to be independent by doing this.
Yes, that's true.
I mean, do you think that he's under enough pressure
about fed independence that he will change his tune or
do you think this is just do you think he
really just wants to kind of call the shots.
Mate where a f he is into the Trump presidency.
I think we have something of a sense of this,
don't we. The President's a mercurial fellow. See how polota
can be.
That's true, that's true, That's undeniably true.
Yeah, And so he says something today doesn't necessarily change
what he's going to say to mine. The President said,
I want Kevin to hear this. He said, we have
a debt and we need to get rid of it. Yes,
we need to grow our way out of it. And
this is actually, believe it or not, while he was
calming everyone down with his talk of independence, this was
actually my greatest fear all along. Yeah yeah. Let me
give you a couple of a few different reasons why
you might want a non independent feed. One, you might
suffer certain personality disorders where you always want to be
in charge of everything. That's a possibility. That's not economics.
That's so kind. I'm not going to say anything about that.
The second thing is what you want to do is
goose the economy just before an election to help your
side out. And that's the standard view that one has
heard a lot about. But actually a third, and this
is the one that's gotten so many developing countries into trouble,
is word for the day is fiscal dominance. Now, right now,
that's just two words, and it feels like sesame street.
So Ernie and Bird are going to help you unpack
it right now, fiscal dominance. Fiscal dominance is when you
set monetary policy with an eye to trying to worry
about fiscal issues rather than the state of the economy.
So what is the difference between those two things?
Right? So, the fiscal issues are our budget deficit and
in this case, most importantly, our government debt, and I think,
possibly most importantly, we have a big debt. So therefore
we have a big interest bill. Now, fiscal dominance is
when you say to this the Fed, don't do what
you're meant to do looking after inflation, unemployment. Help me
get these interest payments down, would you now? The president
at this point, the President did speak to fiscal dominance.
He said, Hey, Kevin, here's the thing I want you
to realize. We have a debt, and that's really important
for you to think about. The Central Banker's handbook says,
ignore the debt, not your job.
Why that does not seem like good That seems like
a bad idea. It seems like you should pay attention
to the debt. We're in a ton of debt most
of our like, it's one of our biggest expenses as
a country.
Right, So this is the question of what's the right
tool for the job. It's not saying don't worry about
the debt. It's saying some other bloke's better at it.
So the Central Bank Handbook says the central Bank prints
how much prince money determines the money supply, and so
its best job is to target low inflation and sometimes
it will also say to target low unemployment. Now let
me answer your question. You so why wouldn't you want
to target debt? Well you can. Here's how you do it.
The President didn't say this part out loud, but in fact,
what you do is you create more inflation.
See, you inflate the debt away. Is that what they That's.
The term of art. And then I want to explain
what that is. So it's inflate the debt away. So
let's say I'm America and I borrowed one thousand dollars
from Stacy, and I have to pay her back eleven
hundred dollars next year. Well, if what I do is
I create so much inflation that in a year's time,
eleven hundred dollars is worth almost nothing, I will pay
her back eleven hundred pieces of paper. But those pieces
of paper are worthless. So at a legal level, I've
repaid the debt. I ad Stacy eleven hundred dollars. I
gave her eleven hundred pieces of paper that say one
dollar each on them. But what I've done in between
is I've created so much inflation those pieces of paper
have gone from being worth a dollar worth of spending
power or a pennyworth of spending power. And so what
I'm effectively doing is I'm paying Stacy back eleven bucks
rather than eleven hundred. That's a way of reducing the
debt in real terms, which is what matters our ability
to repay it. But you'll notice, look at what wasn't
in the contract. But it wasn't not in a contract.
I said to Stacy, Hey, Stacy, can I borrow a
thousand bucks? Stacy says back to me, I'll give you, yes,
but if you give me eleven hundred a year's time. And
Stacy looked at me. I'm America, I'm freedom, I'm liberty,
I'm truth, I'm so much. But she also looked at me,
and she thought she saw stability, and so implicitly she thought,
you're not like those Argentinians who try and inflate away
their debt. You're actually going to pay me back eleven
hundred real dollars in a year's time. Now, what we
can do is if we create inflation that I end
up paying the equivalent of eleven dollars and Stacy gets screwed. Hey,
that's not so bad. This is the world of Trump.
It's absolutely true that if you screw someone once you
come out on top. My fear is that's where the
President's mind ends. You know, you can stiff your contractors,
but they're not going to come back and do maintenance work. Well,
in this case, if I try to borrow money from
you and I screw you by inflating the debt away,
you're going to want to lend money to me again
next time.
I will require a very high interest rate on that loan.
Yeah, and you might even refuse altogether, like I'm a jerk.
Yeah either. And so fiscal dominance, this is the great
fear is if the thing everyone's worried about is the
interest repayments on our debt, then that's implicitly going to
lead to inflation, which will which will succeed at that thing,
but it will then get us cut off from financial markets.
It'll create enormous inflation. It'll create tremendous dislocation out there. Now,
the President didn't say to Handsome Kevin, what I want you.
To do is be very scared by this.
Oh yeah, no, he loves it. I'll tell you later
what he calls me, so like.
He knows what you call him, Handsome Kevin, I don't know.
You could ask him. I mean Smith Warren asked him,
what do you disagree with the president on? Yes, and
this really happened, and Handsome Kevin said, well, the President
thinks I'm handsome and I'm not, which I'm in modest
and handsome Kevin. That's the best kind of Kevin, isn't it.
I hope my daughter grows up and meets a beautiful, honest,
modest Kevin worth a billion dollars. I want the best
for our country. So what the President didn't say is
please inflate the dead away. He said please grow it away.
So maybe he didn't break all the rules, But what
did he really mean in his heart? But more to
the point, the thing he said that he's not in
the Central Banking handbook is I want you to pay
attention to the debt. Handsome Kevin, if he went to
Central Banking school, should have said, mister President, you don't
mean that.
What does that look like if you're the FED chair?
Because the Fed doesn't purposefully raise inflation. In fact, it's
kind of there to make sure and please doesn't get
out of control. But is he saying, like you need
to lower interest rates? Which and lowering interest rates does
tend to have the effect of inflation. Is that kind
of what the direction you heard?
Absolutely and so well. The President said it explicitly leading
out to all of this. He said that he wants
the interest rate to go down to one percent, effectively zero,
even at a time when inflation is three point eight percent.
This is the President explicitly calling for a low interest
rate policy. You and I can play detective and psychologists
and try and figure out the why of that. It
could be that he's a form of developer. A very
simple reason you keep hearing hints of it in the
president's rhetoric is he's he really doesn't like paying interest
on the federal debt.
Well, I mean, I think that's reasonable. It's a hard
way to spend money. It doesn't seem to get much.
I don't know.
I mean, it's not like you're not making anything, you're
not growing the economy. You're just paying down your debt.
Like a That's not a thing people feel good about,
right paying interest on a debt right now.
Also, destroying a financial system should also be a thing
you feel bad about.
Yeah, Just my view, is Kevin worsh going to do
what the president wants though, because I feel like that's
a big question. And historically speaking, Kevin worsh who was
in the FED and served under Bernanki during in the
teeth of the financial crisis, was I've heard him called
even Bernanki's right hand man, was like very closely working
with him and was known to be this major hawk
right and hawk just means like very concerned about inflation,
likes to keep interest rates high, and didn't necessarily want
Bernanki to do a lot of the things that he
did in terms of basically pumping a lot of money
into the economy, lowering interest rates a lot to try
to sort of help keep the wheels turning. I've heard
you refer to this as the two Kevin's. Which Kevin
do you think we're going to see?
Yeah, so, look, the one thing we know is the
President is appointed Kevin Wash chairman of the FED. The
problem is when I go and look up the Internet
or the textbooks and I say, who is Kevin Walsh?
I keep seeing these two completely different characters, and I
find it hard to believe they're the same person. So
one of them, as you said, from two thousand and
six to twenty eleven was part of the FED to
call him Bnenk's right hand man. He was deeply involved
in a lot of financial stuff. But actually it was
also a thorn in the side for folks who don't remember.
The two thousand and eight financial crisis is one that
was painful at the time, but worse than that, it
continued to be painful for years and years and years
and years. Our recovery from that crisis was too slow.
So anyone who looked back at that period and says,
you know, did we make any mistakes, would say, well,
the Fed should have done more. It should have cut
interest rates more. Inflation never got out of control, Unemployment
was too high. If it made a mistake, it was
being too cautious. Now the thing is, through that whole period,
Handsome Kevin was saying, look around the corner their icee inflation.
He'd look under the bed for inflation.
People were worried about it at the time because there
was you.
Are so generous. It was a number of people it was.
It was a worry with all the things happening.
Sure, but we're also worried about deflation. I mean, there
wasn't much inflation going on. We're in a massive recession,
and Handsome Kevin's looking everywhere to see prices rising, and
they weren't until at a period where most of the
FED was worried about deflation. He's like, oh, we cannot
cut interest rates because I'm really worried inflation's about to
take off. So by this view of the world, you're
so much kinder than me. Handsome Kevin was on the
wrong side of history every year during that recovery. That's
a question of judgment, and that's okay. Actually, it's okay
to be wrong. The real world's hard crises are complicated
all of that. Although he was asked during the Senate
confirmation if he regretted anything from that period, and he
said no, And I think that's actually a little troubling.
But anyway, what do we know. We know that Kevin
Walsh was very handsome, a competent governor, but an absolute
hawk who wanted to keep interest rights hime was always
terrified about inflation. Then fast forward and there's this bloke
who wanted to be appointed under Trump. I think his
name was Kevin Walsh, and he appeared before the Senate
and he said he was asked by Elizabeth Warren, do
you have any economy what is your largest economic policy
disagreement with President Trump? And that was where he quite
literally said, President Trump thinks I'm handsome. I'm not that handsome,
which is to say the President already said I should
have a voice in monetary policy. Interest rates should be
one percent. Jerome Powers too late, interest rates are too high. Now,
there's no way hawkish Kevin would have said that. But
this bloke just said, I've got no disagreements with the president.
He wasn't quite sure who had won the two thousand
and twenty election. You know, he was appointed by a
guy who has said he wants a lackey or a
sock puppet in the job. And so there are two stories.
Spoken out against the Fed's parlas.
I mean he has more than even not speaking up
in that moment. I mean, he's been pretty clear that
he thinks that he thinks Joe and Power should have
cut interest rates, that he thinks that the FED and
the decisions they made are partly responsible for the slow
growth of the economy and for infleetion. Like he's been
very openly.
Critical, absolutely, And I think one story is that was
part of the audition for the job that you criticize
an institution the president doesn't like. The one thing he
never did was came up with an alternative. There's this
story in economics, we say it takes a model to
be in a model. If you've got a view about
the economy, it's fine to call the Fed wrong, but
it's not at all constructive unless you tell me what
to do. That's right, which he didn't neglect to do.
But you know, look, the big question is who's going
to show up on the first day work. Is it
hawkish Kevin or is it sock puppet Kevin. If it's
hawkish Kevin, then the next change in rates is up.
If it's sock puppet Kevin, the next change is down.
And he's got to fight in these and with the
rest of the board. Now, I'm going to say a
couple of positive things. First. At Jerome Powell's parting press conference,
Jay seemed really comfortable about whichever Kevin Walsh was coming in.
He said he was he thought he was going to
do a great job. Yeah, he was very He said
some really nice things.
Yeah, and he's a bloke who says what he means.
We've learned Secondly, the President pretended to be interested in
FED independence today. That's actually wonderful news. On the flip side,
you know what would have been even better if he
hadn't been the one to swear him in. That's not
typically what happens, that you look up to the boss
to see you get your marching orders. It sometimes happens,
but it's more often that you know the vice president
or the Chief Justice sweeze you in. So the other
thing is, if you look at Wall Street right now,
there's federal funds futures, basically a betting market on the
future of interest rates. Oh, they're betting interest rates are
going up. So either they're betting that it's not sock
puppet Kevin, that it's hawkish Kevin, or they're betting the
sock puppet turns up and everyone ignores him.
Yeah, because I was gonna say, I mean, Kevin Walsh
has one vote, and Jerome Powell has just as many
votes now as he did when he was FED chair.
So Kevin Worsh would have to build a consensus.
There are twelve voting members and the majority rules, and
even if Kevin Worsh does exactly what the President's hoping
he'll do that's not gonna lower interest rates, like he
would have to convince people. And these are all colleagues
who he's been a little bit critical of. I feel
like that's gonna be potentially sort of an uncomfortable first
week of work.
I think it is going to be an uncomfortable first
week of work. He's got his job ahead of him,
but I'm excited to see how he goes.
What is your prediction, like, what do you think is
gonna What do you think he's gonna do.
I find it very hard because it is the story
of two Kevin's. People I know who are somewhat close
to him think it's hawkish Kevin who's coming. And this
whole thing has been a russ There's a sense of
dishonesty there, but dishonesty in the service of higher goals.
And look, I've been quite critical, but at this point
he's my fed chair and I'm just going to cheer
for him. And if he picks up the phone and
asks me for advice, I'm going to give it to
him straight. And I hope these folks get the next
set of decisions right.
Is it possible could he knowing that he has the
groundcover of the other eleven FED governors potentially vote in
a dubbish way with like hawkishness in his heart or
is that like not a thing?
Is there too much pride in like your voting record.
I think at this point he's got the job for
four years. It's time to stop auditioning and start governing.
And so I think that, actually, Stacey, I had a
feeling you want us to talk about the bond market.
Gosh, the bond market. Yeah, the markets.
The stock market has just been on this happy tear
despite everything. It's kind of extraordinary. The thing that finally
rattles it is the bond market. Everyone is suddenly so
worried about the bond market. The you know, government bonds
especially is the one everybody looks at. There's the ten
year treasury note, there's the thirty year. The thirty year
is at a the interest rate essentially the yield.
Is at a hot twenty plus year high.
And the ten year, which is the big one, the
very very global market is up. I think it's four
point seven percent, which is extremely high. Can you talk about, like,
what is the government because this is like the ten
year tea note. I think it's the largest market in
the world.
Yeah, which is huge.
So like, what are the people's what does the government
get out of selling all these bonds? And what do
people get out of buying them? Like, why are people
all over the world buying so many of these bonds?
Welcome to bunmarket one I want. Yeah, Okay, this is
kreat We can wind back a whole long way. So
this year, the government is going to spend a lot
more than it took into the treasury. So it's gonna
it needs to pay a bunch of people and needs
to pay you know, my mother in law her social Security.
It needs to pay some military salaries and so on,
but not that much money came in. Well, what do
you do when you have to write more checks than
accept than you're taken in. This is true for government,
it's true for anyone else. You have to get a loan.
That's the only way to make that math work. When
you and I go get a loan, We go to
the bank and we say, hey, I'm down on MYLK.
Can you lend me some money. Now, if the government
went to Wells Fargo and said I'm down on my luck,
could I have a trillion dollars. Wells Fargo is going
to have it check the check the vault, and I'll
discover the vault it's not that big. And they'll say, now,
actually I don't have a trillion dollars, but across all
the banks there is enough money. So what you need
is a way of taking effectively a whole bunch of
bank loans. But that doesn't even have to be from
a bank. Could be from a company you work for, Bloomberg.
Maybe Bloomberg's got extra cash that he could lend the government.
So all right, now we need to find a way
of doing that without having to knock on a thousand doors.
And the way you do that is the government literally says,
I have a piece of paper here, this piece of paper.
I'm going to sell you this piece of paper if
you'll buy it for a hundred bucks. This piece of
paper says, I'll give you one hundred and five bucks
in a year's time.
It's going to owe you yeap.
Now, the thing I want you to realize is, let's
do that transaction, which is I'm the government stays I'm
going to sell you this piece of paper. I'm handing
you a piece of paper. Great could I have the cash.
I just told you I'd sell you that piece of
paper for one hundred bucks. So what are you got
to give me?
I need to give you my money on hundred bucks.
I'm waiting. Oh sorry, sorry, fantastic. Okay, did you take
all the pape? Yes? Now, in a year's time, what's
going to happen. You're going to come. You're going to
show me this IOU. Do you want to show it
to me?
I want my one hundred and five bucks.
Great, hand me the IOU and here I'm going to
hand you one hundred and five dollars.
I appreciate this commitment, Yes.
Very committed. The thing I want you to understand at
this point is I want you only to look at
my side of that transaction. What happened was I got
one hundred dollars today and I paid one hundred and
five next year. Guess what we call that alone?
Yeah, yeah, yeah, But we did it with all.
That funny stuff with pieces of paper. But at the
end of the day, I borrowed a hundred bucks at
a five percent interest rate. Let's now focus on your
side of it. You handed someone one hundred bucks and
a year, lady, you got one hundred and five bucks.
It's just like what happens when you hand your bank
one hundred bucks, you get one hundred and five later.
That's what the bond market is, and so that's why
it exists. And then when we talk about the yield,
that's a fancy way of saying the interest rate. What
will you thinking about with when you're thinking do I
want to buy that piece of paper, you're thinking about
what will the inflation rate be? How much will my
purchasing power rise over the next year? And can I
trust Justin? And of course you thought he's an economics major.
He's good for the money, he can repay it. And
what's going on right now is three things. Expected. Inflation
is rising partly because of what's going on in the.
Round, real prices iran, Yes.
And so therefore you're not going to lend me money
unless I compensate you for that.
So people think inflation is not just a temporary thing,
that the strait of horm Moves is going to open
tomorrow and prices are going to go back to normal.
People think this is locked in so much so that
no one wants to lend the US money for thirty years.
Yes, that's right.
So the US is having to pay a lot of interest,
a lot.
Of interest, and part of that is a lot of
inflation and over feeling. That was something else you wanted
to talk about.
Today, justin I feel like the people of Michigan, of
the University of Michigan need to explain themselves.
Because I don't want to say that you're.
Bringing summer down, but there's just a lot of summertime
sadness that you guys are are dishing out to the
world at this moment via feelings the consumer Sentiment survey.
I see. I thought you were going to talk about
winning a national championship in basketball.
Okay, you also bring a lot of joy into the
world in fairness too, But the consumer sentiment came out,
just came out, and it's like, looking pretty bad.
Can you talk about what is happening here?
It was, oh my god, terrible. It was literally the
worst rating on this thing since my colleagues started collecting
these data in the mid nineteen fifties, and my colleagues,
to be clear that, I'll they had some other colleagues
taike Iva literally the lowest tibabin.
I want to ask a couple questions about this. But
first of all, how serious is this?
You are an economist, as we have established, you disdain
the world of symbolism, literature and feelings.
Is this serious? Do you take this just getting?
I know?
Do you take this seriously?
Like?
How big of a deal are these? Bad feelings?
Yeah? So is this how people answered the question? Yes?
Is this a serious attempt at nationally representative survey? Yes?
Is it? Are the numbers doc? Yes? Let me tell
you another few, just to get you give you a
real taste for it. Only I think it was seven
percent of people think that business conditions this year are
better than they were a year ago, seven seven percent.
By the time you've included the president's children, you're probably
down to five and a half percent. Only thirteen Only
thirteen percent believe next year will be better than last
year was. So these are dramatic numbers, but a different
level of truth. Is is it really the case that
the economy is as bad as it's been since the
mid nineteen fifties. The answer has to be no. I
mean that can't be true. I was there for COVID,
COVID sucked, I was there for the financial crisis. We
have double digit unemployment.
I mean the gas crisis in the seventies, inflation in
the double digits, unemployment in the double digits, sucked. We've
seen this inflation since the fifties, stagflation.
Yeah, so look, it's not as bad as these numbers say.
So these numbers must be telling us something else. And
I think that's the question. What is it they're telling us?
And so my hypothesis, there's a question tucked away in
the back that no one looks at except me. That
question asks, effectively, how good of a job do you
think the government is doing it managing its economic policies? Oh?
Right now, they're like the five main questions, but I
know there are like fifty some there's.
Pages of questions. My colleagues have a lot of ingenuity.
Right now, seventy seven percent of Americans believe that economic
policy is poor. And that is not just the highest
it's ever been. It's you know, fifty years of just
bumping along and then all of a sudden, we just
shoot to the moon. When I look at what's happening
right now, the three largest shocks affecting the American economy
are all self inflicted. There's a trade war, there's a
mass deportation under way, so we actually have a shrinking
population and there's a war war, and you can add
on to that a sense of fiscal instability and an
undermining of the rule of law, and it does I
don't want to say feel, because I think it's more
than feel. For the first time in my professional life,
and Stacey and I've been talking for a long time,
it's not a question of, oh, which side should win
this debate. It's like, if you're doing it, you don't
have to do it this badly. Look, the thing is,
we've had Democrats and Republicans imposed tariffs before, but they
did so in predictable ways. They did so by involving Congress.
They have a lot of uncertaintly timeline part of businesses.
And absolutely we've gone to war before, but presidents have
explained what it is we're trying to do, why we're there,
and what our exit strategy is. We haven't always lived
up to it, you know. So I think it's that
sense that maybe we are living in genuinely incompetent times.
And I really don't mean that as a partisan statement.
I mean as a judgment as an economist. And it
turns out, seventy seven percent of Americans agree with me,
and only a handful disagree.
Can I just go through the court like the five
main questions on the survey really fast with you?
Because I loved loved for perhaps.
Obvious reasons, the idea of how to measure feelings, and
I think it's kind of genius what they do, and
like what constitutes these feelings, like what it means when
the numbers are bad? One of them is the first
question is are you and your family better or worse
off financially than a year ago?
A year from now?
Do you expect to be better off financially worse off
for the same Do you think the next twelve months
will be good or bad for the country's economy as
a whole. Do you think the next twelve months will
be good or bad for the country's economy as a whole.
Do you think the next five years will be good
or bad for the economy? And is now a good
time to buy major household items like furniture or appliances?
So like, it's just a huge story.
What are we getting at with these with these questions?
Well, I actually met with my therapist, yes, said I,
and those were the first questions he asked me, and
how are.
You feeling, Justin how how is the Justin Woolford sentiment
index doing.
I'm ready to buy a refrigerator, but yeah, but I
leased my car instead of buying it. So look. So actually,
that one about major appliances is really interesting because there
is a suspicion among economists when you ask people they
just say words. But when you see what they do,
it's more important. You know, you say one thing, you
do another. We care about what you do. And the
thing about is it a good time to buy appliance
is it's trying to get at that underlying idea of
economic security. I feel like there's enough in the bank now.
In fletion too, I feel like if you feel like
prices are going up or tariffs are going to come in,
you're like, I've got to get that refrigerator now.
Absolutely. And so I also want to point out my
colleagues first wrote versions of this question in nineteen forty six.
It was a Hungarian, a Hungarian psychologist by named George
Katona at the University of Michigan. Bring that out at
your next trivia night, And he was really and there's
this very rich tradition on my campus actually of social
scientists to ask in the public about what they think.
And if you're a Michigan political scientist, to actually come
from a rich traditional polling, it's actually just part of
the blood stream of my workplace. You're at Bloomberg, part
of the bloodstream is money.
Sure, it's yeah, I live in Diane Dieter.
Absolutely, and so look, they may not be the perfect questions,
but there's no other question that we have all the
way back to the nineteen fifties. And you know, you
can make up a question, but always, you know, often
on the TV news, I'll say, and tonight seventeen percent
of people agreed that blah blah blah. And what you
don't know is what's a sensible baseline for that, like
what does that normally look like? Whereas a nice thing
about the Michigan survey is we've been running it since
forty six actually, but we normally say fifty two, and
so we know what it normally looks like in a boom,
We know what it normally looks like in a baston,
and we compare these things over time.
Well, the thing that I really love about this is
you're basically asking people like do you think like do
you feel like do you feel like you are better off?
Do you think you will be better off?
And that that has to do I think with like
how people are going to spend ye and feelings squishy.
As they might be, do determine.
I think a lot of how people spend what they
spend on, if they're willing to go into debt, if
they're going to grow their business, if they're going to
hold back. And I have talked to a lot of
small business owners who have been making the decision to
not grow, who are kind of holding back a little bit,
not hiring, canceling leases, just to make sure they've got
some resources. And I think a lot of individuals are
probably doing something similar and that does have huge economic implications.
Yeah. Absolutely, And so right now, actually, Sticy, you've made
the case clearly enough that we at the University of
Michigan want'll offer you as a job working in a
survey research center collecting those data because you understand where
it comes from.
They know about the complict degree, because I feel like
that could come back to Hobbie. Okay, I'll say nothing,
you and I'll say nothing. Yeah, Well, and I would
would also just like to point out, justin like we had,
we got some inflation numbers out a couple of weeks ago.
They're a little rough, and it does seem like everything
associated with summer is getting giantly more expensive. Fuel prices
gases up twenty percent, airfare of twenty percent. AC you
cannot run your AC prices are like six percent more
expensive than last year, and barbecuing is a nightmare. Beef
fourteen percent more expensive, Tomatoes are up thirty nine percent.
Iced coffee, which I drink a lot of in the summer,
is eighteen percent more expensive than last year. Beer's up,
soft drinks are up. Joy everything we can't afford anything.
I need a silver lining here.
Wolfers that sticy man expense says it's a miserable inflationery summer. Well,
I'm much easier to place block than you, sticy, So
I think you're doing your summer is wrong. Okay, First
of all, I am pescatarian. I donate BAF so I
think I think this White House one of the most
important things that's done is it's made my lifestyle so
affordable compared to my meat eating friends. And I'm also
going to live forever. So that's a big one. The
other thing is what's the most important thing about summer.
It's the sun, same old price, exactly zero. Just get outside,
enjoy the sun. And then my favorite thing to do
all summer is swim. Swimming still absolutely free, as long
as you can find a place that you can splash about.
Hopefully there's a local pool. Maybe not, you know the
local government for all the complict majors in Brooklyn, does
it have pools? Yes, we have pools. Yeah, so I
have pools too. I cannot wait. I'm going to spend
the whole summer having a swim, all.
Right, And don't you I feel like the Stevenson Wolf's household.
Also, haven't you. You've talked extensively about your zip line.
Yeah, and I'm going to zip line.
Hey.
So this is when I want to explain this to O.
But I have decided I'm totally serious about this. So
I was on Katie Tur's show on MS NOW week
and they brought me on and they said our economic
segment today. They told me it was going to be
on the ballroom and I'm like, there's no economics there.
It's a ballroom, yes, yes.
And then they said no. At the last moment, they
changed to the arch, and they asked me what I
thought of the arch? And at this point, I'm just
going to tell you. I'm sitting there. I'm a Harvard
PhD in economics. I take myself incredibly seriously. And they say,
what do you think about the arch? And I went blank?
And then the only arch I can think. I'm going
to tell you the truth. In my family's backyard, we
have a zip line that starts from a tree. Now
you've got to tie the end of a zip line
to something, and so what we have is a couple
of bits of wood that come out of the ground
that is cemented into the ground, and they're in the
shape of an arch. And that's where my zip line
goes to. So the only thing I could think about
at that moment was my zip line.
So when they asked you about the arch, you thought
they might mean the one in your backyard.
No, But I'm like, how do I think about the
economics of the arch? And I just said, arches are dumb.
You know what's good? Zip lines? And everyone laughed. It
was very funny, but I wasn't really being funny because
I thought about it, I was like, oh, maybe it
was a bit funny. But in the week since I
have gotten totally radicalized and I believe in the zip
line and I think the president should give up on
the arch and install a zip line. And I'm one
hundred percent serious.
Now, where would the zipline be?
And mate, well is painting the bottom of the reflecting
pool and so we see that maybe from the Lincoln
Memorial right across or what's the big phallic.
One in the middle of the Washington Monument.
Watching them, Wouldn't that be a great spot for a
zip line? Uh?
I mean, that would be a very intense zipline because
that it goes up a lot like that, it's.
Not messed around. Let me tell you why I'm serious,
And I'm two thirds serious.
I really am really Okay, yeah, why are you serious?
Way? I told you, I'm very serious. Economists. I have
been to any number of dinner parties where people say,
I freaking hate the President's later something or other and
they whine to each other. I have been on any
number of TV shows where people say, well, this is
out of control, this is bad, this is wrong, this
is corrupt, blah blah blah, blah. You know what. The
thing I think really is this one, there is actually
some value in ridicule of stupidity. But two, what's the
real case against the arch? The real case fundamentally is
it's dumb. You can't use an arch. No one likes
an arch. What do you do with an arch? Oh
there's an arch? Oh it looks very archy. The thing
about a zipline is you can use it. And I
think that people.
Of Venice would disagree. But and Paris and in Brooklyn
we have anyway.
Go on arches. I'm sure you do. But here's what
I really like. I hope that there's a polster who's
paying attention to us right now, because I want a
polster to go into the field and literally poll would
you prefer an arch or a zip line? And I
am willing to bet you any amount of money the
zip line outpolls the arch easily. And that's actually the point,
the opportunity cost of the arch. There's some economics. I
finally got some in. Yeah, the opportunity cost of the
arch is not spending that money on a zip line.
And zip lines are awesome.
Are they? Do you use your zip line in your backyard?
God, Yes, we'll get you on the zip line.
Okay, okay, come and visit.
They're like, I'm just Ston's house. It's so great, I'm
getting on the zipline.
So you're like more of a service economy person than
a good person, is how I'm translating this, Mate.
I have kept all my kids old toys so that
we're a full service economy whenever, whenever other people bring
their kids over. Absolutely, I mean, I am serious, Stacey.
I'm surprised that you're not on Team Zipline already. And
I bet I'm just gonna folks who are in our
audience if you can just drop something in the comments,
Team Zipline or team Arch. You want an arch, like
a crappy American knockoff of a pretty good French arch.
I never said that's.
Angels wings. They don't look very American. Otherwise, are Clydesdale's
on top of the thing? Could you well?
That could be uh in homage to the one in
Saint Marco's.
Plaza with the horses.
Yeah yeah, all right, I said, looks sticy, you're miserable
that the Sama process are going out. I'm gonna remind
you there's still good things in the world.
I did find a silver I did find a silver
lining in the inflation report, by the way, because I
wanted to find one.
Uh.
You know two things that are more affordable that are delicious.
Eggs way down, like more than thirty percent cheaper than
last year.
And potato they went way.
Up before that. I know, the least interesting thing in
the world. Oh bird fluids about triviy Uh listen.
You take your silver linings where you can get them
and are cheaper.
Yeah, yeah, But I think I want to go to
an actual bet that we have. Yes, this came up
in our a couple of weeks ago when we talked
about out gas prices and I was the pessimist, which
made me a little bit sad, but you were the optimist,
and we bet.
We put this bet on national average gas price.
You thought by the election by Tuesday, in first Tuesday November,
gas prices would be three dollars and sixty cents or below,
and I bet that they would be above that.
So I went onto this site called what is.
It manifold Markets. There's no real money involved, it's fake money,
but I thought that would not complicate things. And you
can find this bet and it says will national gas
prices in the US average above three sixty? And you
can weigh in with a comment and you can put
fake money on my guess or your guest.
And by the way, justin because I thought.
We would get distracted by the election results I did
the Friday before.
That makes sense. I appreciate it anyway. Yeah, hey, Stacey,
we get a polster who polls on the zip line
versus the arch, then we're going to come back and
we'll organize another bet next week on how that polls.
All right, look, Stacy, thanks for setting up our bet
on manifold markets. We'll go ahead. We'll put a link
in the episode description for anyone who wants to play
along and get on their side of that bet. Probably
a good enough place that we should leave things. Stacy,
thank you so much for joining me, and to our audience,
we really hope you enjoyed this episode. We're learning as
we go. We want this to be useful for you,
so be sure to let us know in the comments
what you thought. And in the meantime, our job is
to keep on top of all the economics so that
you don't have time for so turn in for more
and stay curious