July 17, 2025 • 35 mins
On the morning of July 16, a White House official told Bloomberg News that President Donald Trump was preparing to fire Federal Reserve Chairman Jerome Powell. Such a firing would potentially be illegal (as the Supreme Court recently noted) and undermine decades of goodwill that Fed policymakers have built up with investors. Trump quickly took the threat back, while making it clear he might still try to dismiss Powell, ostensibly based on alleged overspending on a renovation of the central bank’s headquarters. On this week’s episode of Everybody’s Business, hosts Stacey Vanek Smith and Max Chafkin are joined by Martha Gimbel, director of the Budget Lab at Yale, to explore what’s at stake.
Though Gimbel says there’s a case to be made that the Fed has been too slow to lower interest rates, she explains that the idea of either firing or bullying Powell into an extreme rate cut would backfire by destabilizing the economy. She says banks would probably raise mortgage rates in the short run rather than lower them if Powell were ousted, due to the uncertainty caused by such an unprecedented move. The other problem is that interest rates aren’t set by Powell, but by a committee—and the committee might react to Powell’s firing by resisting Trump’s directives.
Also on the episode, Bloomberg Businessweek columnist Amanda Mull discusses why travel still hasn’t rebounded from the Covid-19 pandemic. Part of what’s happening has to do with politics: Canadian tourists in particular seem to be staying home in protest of Trump’s provocations. Plus, the pandemic may have permanently changed travel habits, discouraging vacationers from flying and pushing some business travelers to opt for Zoom when they might have previously hopped on a plane.
An underappreciated factor however is that airline travel has simply gotten less comfortable. This also comes back to the pandemic, which pushed carriers to adopt pricing schemes that allowed leisure travelers to pay for perks while adding new charges for services once provided for free. That’s made the experience for those of us at the back of the plane all the more miserable. On the bright side, the New Yorkers we spoke to—which included New York Mayor Eric Adams, who is having a very bad week—are nevertheless feeling optimistic.
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:12):
This is Everybody's Business from Bloomberg BusinessWeek. I'm Stacey Mannix Smith.
Speaker 3 (00:16):
I'm Max Chafkin.
Speaker 2 (00:17):
And this week, Max, I would argue that the theme
of the week is should I stay or should I go?
Speaker 3 (00:24):
Yeah, you got President Trump pondering whether Jerome Palell should
stay or go. We also have people potentially going just
because it's travel season, yes.
Speaker 2 (00:34):
Exactly, and maybe not going because the economy is feeling
a little iffy right now. And also our underrated story
Should I see or Should I Go? Astral Travel edition
That will make sense later. So, Max, we got inflation
numbers out this week. These are the numbers everyone's been watching,
(00:55):
especially since tariffs have been in place for some months now.
Our price is going up? Are they not going up?
And the inflation report wasn't super extreme, but we are
starting to see prices tick up for some of the
more kind of tariff sensitive items, things like furniture and toys,
which are very very much you know, from overseas.
Speaker 3 (01:15):
Yeah. I don't want to delight in the struggles or
potential struggles of the US economy, but I do feel
like Stacy, we got to say like, this is vindication
for you, Stacy vanack Smith, and for anyone else who's
been saying, which is pretty much every economist, that the
tariffs were gonna lead to this. And we've talked before
on this show about how, you know, why isn't it happening.
(01:38):
Is it because inventories were pulled forward? Is it because
of taco and you know, lo and behold, it does
appear like it's starting.
Speaker 2 (01:46):
Although like a lot of the stuff that had the
biggest price increases are not affected by tariffs, like beef,
Like most of the beef that we eat is domestic.
Speaker 3 (01:54):
Like, those prices are up, that's the time for beef
to go. I know.
Speaker 2 (01:59):
This is exactly. Also, car rental prices ticked up in Max.
You were talking about this like yesterday.
Speaker 3 (02:05):
Yeah, I'm planning a trip in the Midwest with a
heavy road trip component, gonna see some family on my
wife's side, my mom and running a car, and oh man,
it's like twice as expensive for this, like basically week
long rental as I've ever paid, and kind of staggering.
One of many things I'd say in the economy that's
(02:26):
kind of working against people taking trips and spending as
much money on travel as they used to.
Speaker 2 (02:32):
Yeah, I mean, because there are a lot of versions
of this, right, I mean, even if you do have
to take the vacation, or you know you're going to
see family or something, you might scale back, or you know,
you might splurge at this moment, thinking things are going
to get more expensive. So I thought I would go
and see what other people were doing, how if they're splurging,
if they're cutting back, how they're kind feeling about the
economy right now. So I went down to Union Square
(02:54):
here in New York. It's a crossroads of source that
We've got a lot of tourists but a lot of locals.
A lot of trains come and go from there. And
I ask people what their travel plans are. Do you
have any plans this summer?
Speaker 4 (03:04):
Yes, I will be heading to North Carolina for my
mom's birthday.
Speaker 2 (03:08):
The economy's kind of been a weird place right now.
Is that factoring into your plans at all?
Speaker 4 (03:12):
Money does factor in? All the travel I've done recently
has been a little bit more local, like a beach
day with friends that's like a two hour drive away
and not like a plane ride away.
Speaker 3 (03:22):
I travel a little bit for work. I work on
film sets, but now in general I have no plans
to get on a plane for quite some time, and
it is because of money.
Speaker 2 (03:32):
Do you guys have travel plans this summer.
Speaker 1 (03:36):
I don't like to travel during the summer because it's
too expensive, too.
Speaker 2 (03:39):
Hot, and there are children everywhere.
Speaker 3 (03:41):
October is the best.
Speaker 2 (03:43):
Time to travel. Do you have any plans to travel
this October? I think I'm gonna either go to Croatia
or Costa Rica.
Speaker 3 (03:49):
A lot of it is if I can get days off.
Part of it is do I find a good deal? Also,
where's the dollar strong?
Speaker 2 (03:56):
Where's the dollar strong? Right now?
Speaker 3 (03:58):
Japans still seems like a pretty good deal.
Speaker 2 (04:00):
Do you like track this?
Speaker 3 (04:02):
Oh? I yeah? New York is full of some really
interesting people. That guy is like up to date on
the yen to dollar conversion that's.
Speaker 2 (04:11):
Made for a while. It was not just the yen.
Apparently the UK is quite a good deal. The Yuan,
Taiwan is a good place to go right now, he said, so, yeah,
he has a spreadsheet.
Speaker 3 (04:22):
I just want to say, also, all these winners who
are staying in New York in the summer, great move.
That's the best thing you can do. This is the
greatest city in the world. Why would you travel someplace?
Speaker 2 (04:31):
I mean, possibly because it's like a little bit gross
in New York right now, it's kind of like walking
around inside of a gym bag.
Speaker 3 (04:38):
Well, Stacey point taken. Yeah, it may be a little humid,
it may feel a little gym bag esque. But there
was somebody in the Bloomberg building this week who happens
to agree with me on the issue of summers in
New York. How's this summer shiping? Summer from tourism.
Speaker 5 (04:58):
Perspectives, not the levels we have. I think some of
the conversation around tariff, some of the conversations impacted our tourism,
particularly some of our domestic tourists. But we're gonna We're
gonna bounce back.
Speaker 3 (05:10):
We had it.
Speaker 5 (05:10):
We had a hit during COVID, and we were able
to recover after COVID, and this is still a good product.
You know, people want to.
Speaker 2 (05:18):
Yes the product New York.
Speaker 3 (05:20):
I look a little bit of bias there, That's that's
Mayor Eric Adams obviously has a vested interest in the
product of New York.
Speaker 2 (05:28):
That's true. And he's speaking with our colleague Joe Weisenthal
for the upcoming episode of Odd Lots.
Speaker 3 (05:33):
Which is great. Out to odd line is a great
if you don't already.
Speaker 2 (05:38):
So yeah, the Mayor apparently thinks that all is well
in New York, although he.
Speaker 3 (05:42):
Did say tourisms acknowledging some challenges. Yeah, I will say,
you know, Mayor Adams locked in a very difficult election fight.
So it's it. I'm glad that whatever happens, we can
call him a friend of the show. So Max.
Speaker 2 (06:02):
There has been a lot of Federal Reserve drama this week,
namely fed cheer Jerome Powell. We've had Trump kind of
questioning if Powell should go.
Speaker 3 (06:13):
Yeah, it's like an episode of The Apprentice. It's like
he's going to fire him one minute, then he's going
to keep him the next minute, and and on and on.
Speaker 2 (06:20):
I mean, just to paint a small picture on Wednesday.
We're recording this on Thursday. So yesterday here at Bloomberg,
at about eleven in the morning, there was this headline
that read Trump likely to fire Powell soon, White House
official says, and an hour leader in Our Leader there
was a headline that said Trump now says firing Powell unlikely.
Whip sawing markets he's.
Speaker 3 (06:41):
A terrible he's a terrible fed cheer. I was surprised
he was appointed.
Speaker 6 (06:46):
I was surprised, frankly that Biden put him in and
extended him.
Speaker 2 (06:51):
So that was a clip of Trump from earlier this week.
And you know, we should say clearly, Max, you know,
Trump appointed Powell to his first term in twenty seventeen.
Powell was nominated to a second term during the Biden presidency,
so Biden it was in the mix too. But also,
Trump does not technically have the power to fire.
Speaker 3 (07:08):
Power, right, Yeah, a lot going on here, and I
think the way that this would happen if power were
to get fired, would be around There's this investigation going
on into a renovation and alleged overspending by the FED
in renovating its headquarters. Feels really like a pretextural thing,
like they're trying to gin something up. But that is
(07:30):
how it would happen. And Trump is indicated, you know,
later in the day, said I wouldn't fire him unless
there were some kind of fraud. That seems like a
reference to this investigation.
Speaker 2 (07:39):
Right, But the sort of the immediate issue, I think
that Trump is really upset about his interest rates. He
wants Jerome Powell to lower interest rates.
Speaker 3 (07:48):
Yeah, and you know when this original headline happened, where
a White House official told us told Bloomberg that they
were going to fire Pow quickly, like I heard like
a gas in the newsroom. I mean, people reacted to
that just because it's it's so it is such a
break from precedent. And also I think everyone knows because
(08:10):
all of us kind of are living with the financial
markets that would affect the markets, that that that the
markets were going to take a dive when that happened.
Speaker 2 (08:19):
Oh yeah, I mean I think, you know, the independence
of the Federal Reserve, the Central Bank, and the ability
for that entity to make decisions that are kind of
independent of politics or popularity. At least traditionally, that has
been looked at as quite sacricanct and quite crucially important.
And now I do feel like that is kind of
(08:39):
being thrown into question. But we wanted to bring an
expert on to talk about this issue, why it's important,
why it's being questioned right now, and so we've got
economist Martha Gimble here. She is the executive director of
the Budget Lab at Yale. Hey, Martha, thank you for
having me so there's all this back and forth, all
this drama about you know, Trump wanting to potentially fire
(09:00):
our own POWE. We talked to us a little bit
just about why, like what's going on here on the surface.
Speaker 7 (09:06):
So I think one thing to keep in mind is
that President Trump likes lower interest rates. In fairness to him,
lower interest rates are really fun. You get to borrow
money more cheaply. That flows through to mortgages and consumer credit.
Speaker 2 (09:21):
And businesses, business business band they hire. That's good. Yeah,
everybody wants that.
Speaker 7 (09:26):
The fact that it's fun when interest rates are low
is exactly why we have an independent central bank, because
if it were just up to politicians, generally, what you
see is they try to keep interest rates low because
people like that, and then inflation can get out of control.
And so historically policymakers have kind of tied to their
own hands and pre committed to say, hey, we won't
(09:52):
be touching the interest rate regime because we basically know
that we are not trustworthy. We know that we will
do something that in the short run makes voters happy,
but in the long run can create economic instability and
more inflation.
Speaker 3 (10:06):
There seem like two questions here. One is about the
independence of the FED, which is like a big structural question.
But then there's also like should jump power lower interest
rates right now? And it seems like there's room for
disagreement there. Stacy and I, Martha, you were not here,
but last week Stacey and I did an episode about
consumer sentiment, talking about how there are these warning signs?
(10:27):
Is the story that Trump's telling about the economy and
like the desire for lower interest rates apart from the
kind of like badness of like the president publicly feuding
with the chair of the Federal Reserve, Like, is there
anything to the argument that like he is being too
slow to react, maybe like too concerned about inflation, not
concerned enough about the economy.
Speaker 7 (10:47):
So I do want to distinguish between the question of
like should the Fed be cutting more versus what President
Trump has been talking about, which is like interest rates
at one percent, that would be a really really substantial cut,
And no economists is talking about cutting interest rates that
much at this particular point in time. What are interest
rates right now about four percent? There's all of these
things that the FED is kind of trying to keep
(11:10):
an eye on. It's trying to see if the labor
market is starting to deteriorate. It's trying to see, you know,
what is happening with the impact of tariffs on prices,
And it's a really uncertain time and I think it
is legitimately unclear. You know, should the Fed cut rates
by twenty five basis points this year?
Speaker 3 (11:31):
Should it hold?
Speaker 7 (11:32):
Should it do fifty? I mean you could get an
economist on here to defend each of those options. You
could not get someone on here. I don't think to
defend cutting interest rates by three percentage points?
Speaker 3 (11:43):
Can I ask? Like, people have argued that the Fed
should be more responsive to the concerns of normal people,
And I do wonder, Martha.
Speaker 2 (11:52):
Like, is there accountable too.
Speaker 3 (11:54):
Yeah, We've just lived through this period where there's been
like a massive growth in wealth inequality, where like there
are aspects of the economy that are not working for
a lot of people. It's why Trump keeps getting elected president.
And even if you leave aside like the mechanism by
which this is happening, is there anything to the argument that,
like it would be better if the FED had less
(12:15):
independence than it does today. Uh?
Speaker 7 (12:18):
No, So I think there's a couple of things to
address there. One is you know, the Federal Reserve has
really blunt instruments, and they've talked about this before, Right,
the FED is not there to address inequality. That's for
a couple of reasons, right. One is they work best
when they have really clear mandates. They're there to address unemployment,
(12:38):
they are there to address inflation. You start inserting more
things into that, it really complicates the picture for them,
and it means that people will trust less right that
they're going to address inflation or unemployment. The second thing
is they it's a really blunt instrument, interest rates, right,
And so you know you saw people talking about this
with the housing market, where you know, oh, of the
(12:59):
FED reason, it's interest rates, it'll impact the housing market.
It's like, yeah, but they need to address inflation, and
that's the tool they have. You need Congress, you need
fiscal policy to address a lot of these other issues.
And I think part of the reason why you've seen
this focus on the FED is because Congress is so dysfunctional,
and so people have gone like, oh, we can have
the FED do things, But then that undermines the very
(13:23):
existence and point of the FED, which is to be
isolated and insulated from a lot of these conversations so
that they can do their job.
Speaker 2 (13:31):
One argument that I read that I did find kind
of compelling was this idea that like, you know, inflation
got really i mean not quite out of control, but
it was almost in the double digits at one point,
and I heard, you know, somebody say like, well, President
Biden lost his job, Jome Pal didn't. And I do
think there is an interesting idea. I mean, the trade
(13:55):
off of independence is that you're not necessarily held accountable
for your actions, and maybe there's just not enough of
a consequence if a body is independent. I mean, there
were definitely advantages, but it does seem like they're real disadvantages,
Like you could make an argument for maybe a less
independent bed.
Speaker 7 (14:11):
Yeah, I mean, I think one thing that is hard
is that consumers don't understand the way the FED works,
and so the thing that people often want in these
situations is they want the means that will not achieve
the end that they want. So, as an example, if
you pulled voters, one of the number one things that
(14:33):
they thought should be done to address inflation was to
lower interest rates. Totally understand why people think that, right,
Like things are too expensive.
Speaker 2 (14:41):
Yeah, if you're trying to get a home loan, and
that's super expensive, right.
Speaker 7 (14:46):
And like inflation makes things more expensive. If I pay
lower interest, that's less expensive, So that will fight inflation, right.
Speaker 1 (14:53):
Like it you can cut you see how people get there.
But of course if you lower interest rates you get
exactly the opposite effect. And so I think this is
one of the things that is really hard about the FED.
And I understand why it is frustrating is it does
feel like this kind of you know, group of technocratic
bureaucrats just kind of looking at their charts and doing
their thing. The problem is that we now have decades
(15:14):
of experience that tells us that a group of unelected
bureaucrats looking at charts and doing their thing is actually
the thing that gets you the best economic outcome.
Speaker 3 (15:23):
And that is very.
Speaker 7 (15:24):
Frustrating, and I'm very happy that I'm the person that
doesn't have to sell that concept to voters. But you know,
it's pretty clear from the economic literature that that is
in fact what you want.
Speaker 3 (15:33):
You know, there's a chance, right like we wake up
tomorrow or even before this podcast comes out, and Trump
has tried to fire Jerome Powell. What would happen? Like
what would be what would our world look like?
Speaker 7 (15:47):
So, first of all, you know when it would take
time to get a new person confirmed, and that's even
assuming there isn't legal action. First it would almost certainly
be counterproductive, right, because it's not the case that the
FED Reserve just you know, is a hand that sets
the interest rates in every part of the market. It
lends money to banks, for instance, but you know, the
(16:08):
mortgage companies figure out what makes sense for them to
set interest rates at. And in a situation where you
fire the FED chair, it is almost only the case
that people are going to raise interest rates because they
are going to feel more uncertain about the US economy
and the direction of interest rate policy in the United States.
(16:29):
And so in fact, what you would probably end up
with is higher interest rates. Really, yeah, it would actually
almost certainly be counterproductive.
Speaker 2 (16:37):
Because people would just be so worried about lending money
because like that's happening in this country. This doesn't seem
like a great time. So I will lend the money,
but yikes, you're going to have to pay a lot
to borrow.
Speaker 7 (16:49):
Yeah, we want some extra money because your risk just
went up.
Speaker 6 (16:52):
Basically interesting, and so you know, people who've been listening
to this conversation who are thinking like, Okay, I get
that inflation might go up, but I really want to
take out a mortgage, So like Ech, I'm willing to
risk it.
Speaker 7 (17:05):
Like, let's fire Pal and see what happens. It would
be highly unlikely that mortgage rates would go down in
this instance.
Speaker 3 (17:13):
The other thing to keep.
Speaker 7 (17:14):
In mind is that we talk about the Federal Reserve
Chair a lot. The Federal Reserve Chair does not have
unilateral authority to raise or lower interest rates. They are
the face of the Fed. The interest rates are set
by a committee, and there's a wide range of views
on that committee. It is not the case that if
even someone was appointed tomorrow who was much more dubvish
(17:39):
on interest rates than Chair Pal is that you would
see a huge change in interest rate policy. And in fact,
you might see the committee going in the other direction
because they might feel that in order to maintain their
credibility on interest rates and to keep inflation expectations down,
that they have to be even slower to cut. So
there's a bunch of ways in which this could very
(18:00):
very well be counterproductive.
Speaker 2 (18:03):
As an economist looking at this, like the prospect or
basically the independence of the FED being challenged and talked
about in this way. How do you feel about this
conversation and this issue coming up in this way. Is
it scary, is it interesting? Is it how do you feel?
Speaker 7 (18:18):
I mean, this is the thing that stresses me out
the most about the direction of the US economy. I
think people should keep in mind when we talk about
the stagflation of the nineteen seventies and how hard that was.
One of the things that people think played a really
big difference there was that Arthur Burns, who was the
head of the FED, was not really independent. It was
(18:40):
susceptible to a lot of pressure from President Nixon, and
that that made the situation worse.
Speaker 2 (18:45):
He kept getting interest rates and inflation got pretty out
of control into the double digits.
Speaker 7 (18:50):
Yeah, he was taking calls from Nixent, who was saying,
you know, don't do this. You need to keep money
cheap basically, And so I really do worry that we
could end up in a situation like that. Again, I
think you could end up with a real slowdown in
economic growth. And again, at the end of this, I
don't think that your mortgage or your credit card.
Speaker 3 (19:12):
Bill would be cheaper.
Speaker 2 (19:15):
Martha Gimble is an economist and the executive director of
the Budget Lab at Yale.
Speaker 3 (19:26):
All Right, Stacey, as we heard at the top of
the show, it's the middle of the summer, it is
travel season, and there's some amazing news in addition to
all those plans we heard about earlier.
Speaker 2 (19:38):
Amazing news.
Speaker 3 (19:39):
Yeah, you don't have to take your shoes off when
you go through the TSA line anymore. Donald Trump, that
count is amazing. Achieved something that.
Speaker 2 (19:46):
Low bar for amazing. You don't have to take your
shoes off. I am a TSA pre check member. I
never have to take off my shoes, all right.
Speaker 3 (19:55):
Well, for those of us who are not DSA pre
check members, the hoy POLOI you would think that this
would be great. And you know, I've often heard people
from other countries kind of complaining about our security measures,
kind of like sort of snorting at them. And you'd think,
as we move away from COVID that, you know, the
tourist industry might be booming, but it is not, unfortunately
(20:16):
in the US. Yeah, in the US. So we got
the latest data from the US National Tourism and Travel Office,
which tracks this, reported that in June, the overseas international
travel was actually down three percent from a year ago,
and which, okay, doesn't sound that bad, but when you
look at the big picture, we are still a long
way from where we were during COVID. And given this,
(20:41):
also given the way that the sort of political landscape
is affecting travel, you know, of course people in other
countries are maybe not as inclined to go to the
US as they were before. I thought it'd be great
if we brought in our friend Amandamal Bloomberg Business Week columnist.
She is here. She's written a lot about travel and
the decisions consumers make. Amanda, how you doing.
Speaker 2 (21:01):
I'm doing great, so, Amanda. The data, the MAX just
laid out. I feel like you could look at it
in a couple ways. One way is like, you know, wow,
there have been a lot of rule changes for traveling
from other countries. A lot of people might be kind
of mad at US right now, and only three percent
maybe seems not as big of a change as I
might have expected. Or this could mean something else. What
(21:23):
do you actually see in these visitor numbers?
Speaker 8 (21:25):
This is one of those things where it's a lies,
damn lies and statistics type of thing, because like, what
matters is like the context you put those numbers in,
so like a three percent decline from last year, it
doesn't feel apocalyptic for sure, But when you compare that
to the pre pandemic benchmark, and when you look at travel,
you sort of have to look at how things were
(21:46):
going in twenty nineteen because the pandemic reordered travel plants
for so many people in such a durable way. We're
still only about at eighty percent of the international tourist
arrivals that we were at in twenty nineteen. So overall, like,
this is a market that has already shrunk, and for
it to continue to decline is bad. It means a
(22:06):
lot of bad things for US tourism jobs. It means
bad things for New York City, where we all are.
And when you start breaking those numbers down further, you
see some like worrying indicators. The current projections are that
tourist arrivals for the US are going to be down
overall in twenty twenty five.
Speaker 2 (22:25):
Up to nine percent.
Speaker 8 (22:26):
So when you stack that on top of the existing
decline post pandemic, it's an industry that's taken a huge hit.
Speaker 3 (22:32):
You know, it's interesting because you think about people coming
to the US. In a lot of ways, it says
more about the economies of other countries than about our economy,
although I guess, you know, the cost of the dollar
whatever does affect it. On the other hand, when you'd
start digging into these numbers, you see some signs that,
like the Trump factor may be playing a role. Canada.
(22:53):
So in the June numbers that I just gave you,
we don't have the information for land crossings or for
Canadian and Mexican travel. But when you go back and
look at the data we do have, which is as
recently as April, it's down like twenty percent, so way
way more down. Yeah, And Amanda's talking about these kind
of like small communities. So you have the hotels, you
(23:13):
have airlines, you have these big industries that are kind
of heard across the board. But then there are a
lot of towns in Maine and also upstate New York
where you get a lot of Canadian tourism. Also Florida.
For some reason, I guess Canadians will love to go Florida.
The other thing is it's probably worth mentioning. And you
see this in some of the analysis of this data,
is that it's kind of too early to know for
(23:35):
sure where the international tourism's going, because people plan vacations
like way in advance, Like I have a trip to
Italy planned for next year that I don't know honestly
if I would have booked if I were booking it now,
partly because the dollar's gotten weaker and some other stuff,
And so this may be a case where just like
the tariff data that we talked about at the top
(23:56):
of the show, where like we didn't see it at first,
you could see it down the road as people are
planning vacations of the future.
Speaker 8 (24:03):
Yes, especially with tourist arrivals, you get this sort of
lagging indicator thing that makes the numbers really frustrating for
people to look at and understand. Even smart people who
understand how this works and understand that sometimes effects take
a while to show up in data have a really
hard time looking at numbers three months or six months
after an event that was supposed to change everything and
(24:23):
thinking it still looks normal.
Speaker 3 (24:25):
Was this wrong?
Speaker 8 (24:26):
And because of the lag between when you plan and
book a vacation for pleasure travel and when you actually go,
I think that we will be seeing fallout from this
for quite a while.
Speaker 3 (24:37):
Okay, I have a question for the both of you.
So we're talking about the sort of post COVID recovery.
I want to get into that, but I was curious
to ask you, how long do you think it took
for travel to recover after nine to eleven?
Speaker 8 (24:50):
Amanda, what do you think I used to know this number?
This number came up in some reporting I did for
a story a couple of years ago, and I think
it was pretty short from my memory, I think it
was like a couple of years, maybe less.
Speaker 2 (25:03):
Stacy, I know our economy took like ten years to recover,
so I'm gonna guess, even though Amanda knows all these
things off top of head, I'm gonna guess a little
bit longer, like maybe seven years.
Speaker 3 (25:16):
Okay, So it was kind of in the middle. July
two thousand and five is when we hit the numbers
we'd hit in August two thousand and one, so basically
four years, which is kind of interesting because that's less
time than it's taken us to recover from COVID. And
it sort of made me wonder because on one hand,
you'd think like nine to eleven, and especially for people
(25:38):
who were adults at that point, right, just such a
defining moment in history and culture and everything, and it
was one where like air travel in particular was implicated
international travel. There were all these stories written about, Oh,
the world will never be the same, And yet, you know,
we kind of return to sort of the pre nine
to eleven travel norms pretty quickly, and it's taken us
(26:00):
longer now, like we are further out from COVID than
we were from nine to eleven, which seems interesting and different,
and I'm not sure I would have necessarily intuited that.
Speaker 8 (26:11):
Yeah, I think behaviorally, the sort of durable nature of
COVID habit changes. People really took a break from flying
for like a year or more. I think that that
is like a big enough interruption to people's habits that
like you're going to end up with more durable changes.
Even at the margins some people who just like don't
(26:32):
want to fly anymore because they got out of the habit.
And then you also have changes in business travel, and
business travel has never gotten quite back up to the
rates it was before.
Speaker 2 (26:41):
That was very lucrative too, because they didn't really look
at prices as much as the rest of us.
Speaker 8 (26:45):
Yes, they don't look at prices and they fly all
the time.
Speaker 3 (26:47):
Yeah. And not all of this is about fear or
about hey, we don't live in a globalized world. It's
about people getting on zoom calls for some percentage of
meetings that they would have flown for. There is an
underappreciated factor which is related to this that Amanda has
written a lot about, which is that flying sucks now
and it's so bad?
Speaker 2 (27:06):
Is it worse than it was?
Speaker 3 (27:07):
Like?
Speaker 2 (27:08):
Is it worse than it was before the pandemic.
Speaker 8 (27:10):
It depends who you are and how much you're paying
to fly. If you are a person who post pandemic,
has decided to treat yourself and get a fancy credit
card that gives you rewards miles and puts you in
line for upgrades and maybe incentivizes you just buy more
expensive plane tickets to accrue those rewards faster, then flying
for you might be better now. You might spend more
(27:32):
time in the airport lounges. A bunch of them have
opened up since the pandemic. You might be sitting in
nicer seats. For most people, I think it is worse.
I think that travel has gotten a little bit more
like riding the bus for a lot of people, for
most people, for everybody in the back of the plane.
I think that temperatures run a little bit hotter as
far as people's behavior. I think that we there was
(27:54):
like this real spate of like post pandemic like sort
of antisociality that I think has maintained its momentum in
some cases in airplanes.
Speaker 2 (28:03):
One thing that I keep thinking of, just like sort
of more holistically about international travel going down is I
was on an earnings call once for the Empire State Building,
like people that own the Empire State Building, and they
were saying that travel was way down since the pandemic,
and their solution. They're like, oh, but we've made up
for the revenue by raising ticket prices, so it's like
eighty hundred bucks now to So I'm wondering if if
(28:25):
we see less travel, is that going to push prices up?
Is that going to be contributing to inflation?
Speaker 8 (28:30):
I think so, But it depends on what kind of
travel destination or what kind of travel expense you're looking at.
If nobody is buying airline tickets for pleasure travel, if
nobody is renting cars to go on a fun road trip,
then those will probably get less expensive to incentivize more
people to start taking those up. That's what we saw
during parts of the pandemic, which is, you know, come,
(28:51):
come take the flight, go on the vacation. We'll get
you there cheap. What it costs when you get there
is none of our business. But these sort of attraction
tickets that are sort of limited that like, you're there,
you don't want to skip it because it costs twenty
more dollars than you thought it might. Those types of
things I think are sort of ripe for inflation, right,
for price increases to make up for volume decreases.
Speaker 3 (29:11):
This is why the shoe thing is such a big deal,
because a man is talking about how, you know, airline
travel has become bad and everything, but maybe.
Speaker 2 (29:18):
You do get kind of haraplic maybe the shoe thing
will save it. You think it kind of like is
a move in the right direction. Yeah, I mean, I'm
happy to keep my shoes on.
Speaker 3 (29:27):
Same.
Speaker 2 (29:34):
So, Max, we are now to the part of our
show where we talk about a story that is underrated
in the news, something that is very significant but isn't
being talked about enough. And you brought today's story.
Speaker 3 (29:44):
Yeah, I'm glad Amanda is here to stick around because
we definitely need, yes, an expert in consumer behavior to
explain this one. So all right, Wall Street Journal reported
on July fifteenth about a new trend in online commerce.
I'm going to read you the headline, witches charge for jobs,
Sunshine and nix wins business is booming. So this is
(30:05):
a story about how witchcraft and other sort of magical
spells are super hot on Etsy. And I can tell
you I went on Etsy and there are just like
it seems like thousands of magical spells for sale.
Speaker 2 (30:18):
What does this mean? Like, what do you do? How
do you buy a spell?
Speaker 3 (30:20):
You pay a witch, an online witch or warlock. I
suppose are other spiritual figure like twenty bucks, ten bucks,
as little as like a couple of bucks, depending on
the spell. I guess it depends on what you want exactly.
And I think that from there they collect the money.
But of course they cast a spell on your behalf.
They cast a spell on your behalf. Yes, Now what's
(30:42):
funny here is this is like technically banned by Etsy.
They ban metaphysical services.
Speaker 8 (30:48):
What an incredible category name first of all, metaphysical services?
Speaker 2 (30:53):
Why do they ban metaphysical services.
Speaker 3 (30:56):
I have no idea, but I did notice that like
all of these witches disclaimers essentially saying.
Speaker 2 (31:01):
So do you want to mess with the witches and
say that they can't sell their spells? Because that does
not seem like a good I mean.
Speaker 8 (31:06):
If the witches have cursed Etsy, that would explain some
thoughts about.
Speaker 2 (31:10):
Their Maybe we should they mess with the witches.
Speaker 3 (31:15):
Do you know why people are doing this? It can't
be totally fake, Like you look at the reviews. These
sellers have thousands of reviews. Obviously there are ways to
juice your numbers and everything. Yeah, but it looks like
there are people who are going for it. And there
are some hilarious anecdotes in this Wall Street Journal story.
The guy who paid to have the Knicks win. They
won one game, but then they lost the next game,
(31:36):
and he said that it was probably some Pacers fans
doing some counter spells. Right.
Speaker 8 (31:41):
You know you can't you can't account for counter spells
when you're paying the Etsy Witch is the thing they
may have contracted with the better Etsy Witch.
Speaker 3 (31:48):
Well, initially I was thinking, like Stacey, you and I,
because there are some spells that are relevant to everybody's business. Yes, what,
there are lots of spells. Well, there's some wealth spells.
They're also revenge spells, which are fun and seems dangerous. Yeah,
you can.
Speaker 8 (32:02):
You can have like an Etsy witch like hex your
your friend's ex boyfriend who cheated owner or something like that.
Speaker 2 (32:08):
That's fun.
Speaker 3 (32:09):
I feel like if Edsy's gonna crack down anything, that's
where they should start. But then they're also that these
kind of general ones like here's a good one two
hundred and seventy bucks, kind of pricey butt call to
all seventy two demons of the Gotia for a custom spell.
So seventy two demons all, and according to the description,
they're all gonna work at once together demons.
Speaker 2 (32:29):
That feels dangerous.
Speaker 8 (32:30):
No, seeing too many horror movies, don't mess with the demons.
Speaker 2 (32:32):
Didn't you talk tout Buffy the Vampire Slayer.
Speaker 3 (32:35):
Yeah, well I had the same feeling because like you know,
my kids are you know, there are a lot of
fairy tales and myths Harry Potters, and there is a
recurring theme which is that don't mess with magical spells.
You mess with a magical spell like it's gonna it's
gonna blow back in a way you cannot appreciate. We
cannot predict the nature of witchcraft, and as a result,
(32:55):
I'm staying away.
Speaker 8 (32:56):
I'm about to reveal myself as too online. But this
is this is a very long standing digital market. This
goes back, at least in the sort of current iteration
to Tumblr. So many weird things online do Tumblr Witches
that you could ask for a spell, or you could
like PayPal them or Vemo them for a spell have
been going for a while, and I suspect a lot
of these which entrepreneurs have just moved their services over
(33:20):
to Etsy to you know, it gives you a checkout
layer some seller productions.
Speaker 2 (33:27):
I feel like there's this moment happening, like kind of
like a mystical moment. I just feel like astrology witchcraft,
like this stuff is kind of coming to the four.
Speaker 8 (33:37):
Yes, it has definitely grown over time. I mean, which
if it's been around for a minute. Yes, witchcraft is
one of one of our oldest.
Speaker 2 (33:44):
Sciences, women owned, of the oldest women owned businesses.
Speaker 8 (33:49):
You know, the girl bosses of Etsy are are are simply.
Speaker 3 (33:55):
Leaning all right, Amanda, Thank you for being here.
Speaker 8 (34:00):
Thank you so much for having all.
Speaker 3 (34:06):
Right, if you are a witch on Etsy, which is
an Etsy, and you have a suggestion for us or
any thoughts on this story, please email us at Everybody's
at Bloomberg dot net. That's Everybody's with an asset Bloomberg
dot net. Also, regular people can email us too.
Speaker 2 (34:23):
Muggles also welcome to email us.
Speaker 3 (34:25):
You're genuinely curious to hear from listeners about travel and
like how this story is playing out in their lives.
I also want to say, Stacey, we still need reviews.
We love reviews. We got another five star review, and
I am not going to read a haiku for this
listener only because they offered a bit of constructive feedback
(34:46):
in the review, really taking slight issue with the haiku.
Speaker 2 (34:50):
So in honor of the review, we will not read
a haiku. I feel like that's a reasonable way to
honor this listener.
Speaker 3 (34:56):
Thank you for the review, Ga Seattle. We are not
probably us to not do haiku in the future, but
today for you we will.
Speaker 2 (35:04):
So we'll hold off. I think that's I think that's classic.
Speaker 3 (35:06):
See how it goes from there.
Speaker 2 (35:13):
This show is produced by Stacy Wong. Magnus Hendrickson is
our supervising producer. Amy Kean is our editor and Brendan
Francis Neonham is our executive producer. We get engineering support
from Blake Maples and Dave Purcell, factchecks Sage Bauman heads
Bloomberg Podcast, and a very special thanks to Jeff Muscus,
Julia Rubin and Maria Ling. Thank you very much for
(35:33):
listening and we will see you next week
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:12):
This is Everybody's Business from Bloomberg BusinessWeek. I'm Stacey Mannix Smith.
Speaker 3 (00:16):
I'm Max Chafkin.
Speaker 2 (00:17):
And this week, Max, I would argue that the theme
of the week is should I stay or should I go?
Speaker 3 (00:24):
Yeah, you got President Trump pondering whether Jerome Palell should
stay or go. We also have people potentially going just
because it's travel season, yes.
Speaker 2 (00:34):
Exactly, and maybe not going because the economy is feeling
a little iffy right now. And also our underrated story
Should I see or Should I Go? Astral Travel edition
That will make sense later. So, Max, we got inflation
numbers out this week. These are the numbers everyone's been watching,
(00:55):
especially since tariffs have been in place for some months now.
Our price is going up? Are they not going up?
And the inflation report wasn't super extreme, but we are
starting to see prices tick up for some of the
more kind of tariff sensitive items, things like furniture and toys,
which are very very much you know, from overseas.
Speaker 3 (01:15):
Yeah. I don't want to delight in the struggles or
potential struggles of the US economy, but I do feel
like Stacy, we got to say like, this is vindication
for you, Stacy vanack Smith, and for anyone else who's
been saying, which is pretty much every economist, that the
tariffs were gonna lead to this. And we've talked before
on this show about how, you know, why isn't it happening.
(01:38):
Is it because inventories were pulled forward? Is it because
of taco and you know, lo and behold, it does
appear like it's starting.
Speaker 2 (01:46):
Although like a lot of the stuff that had the
biggest price increases are not affected by tariffs, like beef,
Like most of the beef that we eat is domestic.
Speaker 3 (01:54):
Like, those prices are up, that's the time for beef
to go. I know.
Speaker 2 (01:59):
This is exactly. Also, car rental prices ticked up in Max.
You were talking about this like yesterday.
Speaker 3 (02:05):
Yeah, I'm planning a trip in the Midwest with a
heavy road trip component, gonna see some family on my
wife's side, my mom and running a car, and oh man,
it's like twice as expensive for this, like basically week
long rental as I've ever paid, and kind of staggering.
One of many things I'd say in the economy that's
(02:26):
kind of working against people taking trips and spending as
much money on travel as they used to.
Speaker 2 (02:32):
Yeah, I mean, because there are a lot of versions
of this, right, I mean, even if you do have
to take the vacation, or you know you're going to
see family or something, you might scale back, or you know,
you might splurge at this moment, thinking things are going
to get more expensive. So I thought I would go
and see what other people were doing, how if they're splurging,
if they're cutting back, how they're kind feeling about the
economy right now. So I went down to Union Square
(02:54):
here in New York. It's a crossroads of source that
We've got a lot of tourists but a lot of locals.
A lot of trains come and go from there. And
I ask people what their travel plans are. Do you
have any plans this summer?
Speaker 4 (03:04):
Yes, I will be heading to North Carolina for my
mom's birthday.
Speaker 2 (03:08):
The economy's kind of been a weird place right now.
Is that factoring into your plans at all?
Speaker 4 (03:12):
Money does factor in? All the travel I've done recently
has been a little bit more local, like a beach
day with friends that's like a two hour drive away
and not like a plane ride away.
Speaker 3 (03:22):
I travel a little bit for work. I work on
film sets, but now in general I have no plans
to get on a plane for quite some time, and
it is because of money.
Speaker 2 (03:32):
Do you guys have travel plans this summer.
Speaker 1 (03:36):
I don't like to travel during the summer because it's
too expensive, too.
Speaker 2 (03:39):
Hot, and there are children everywhere.
Speaker 3 (03:41):
October is the best.
Speaker 2 (03:43):
Time to travel. Do you have any plans to travel
this October? I think I'm gonna either go to Croatia
or Costa Rica.
Speaker 3 (03:49):
A lot of it is if I can get days off.
Part of it is do I find a good deal? Also,
where's the dollar strong?
Speaker 2 (03:56):
Where's the dollar strong? Right now?
Speaker 3 (03:58):
Japans still seems like a pretty good deal.
Speaker 2 (04:00):
Do you like track this?
Speaker 3 (04:02):
Oh? I yeah? New York is full of some really
interesting people. That guy is like up to date on
the yen to dollar conversion that's.
Speaker 2 (04:11):
Made for a while. It was not just the yen.
Apparently the UK is quite a good deal. The Yuan,
Taiwan is a good place to go right now, he said, so, yeah,
he has a spreadsheet.
Speaker 3 (04:22):
I just want to say, also, all these winners who
are staying in New York in the summer, great move.
That's the best thing you can do. This is the
greatest city in the world. Why would you travel someplace?
Speaker 2 (04:31):
I mean, possibly because it's like a little bit gross
in New York right now, it's kind of like walking
around inside of a gym bag.
Speaker 3 (04:38):
Well, Stacey point taken. Yeah, it may be a little humid,
it may feel a little gym bag esque. But there
was somebody in the Bloomberg building this week who happens
to agree with me on the issue of summers in
New York. How's this summer shiping? Summer from tourism.
Speaker 5 (04:58):
Perspectives, not the levels we have. I think some of
the conversation around tariff, some of the conversations impacted our tourism,
particularly some of our domestic tourists. But we're gonna We're
gonna bounce back.
Speaker 3 (05:10):
We had it.
Speaker 5 (05:10):
We had a hit during COVID, and we were able
to recover after COVID, and this is still a good product.
You know, people want to.
Speaker 2 (05:18):
Yes the product New York.
Speaker 3 (05:20):
I look a little bit of bias there, That's that's
Mayor Eric Adams obviously has a vested interest in the
product of New York.
Speaker 2 (05:28):
That's true. And he's speaking with our colleague Joe Weisenthal
for the upcoming episode of Odd Lots.
Speaker 3 (05:33):
Which is great. Out to odd line is a great
if you don't already.
Speaker 2 (05:38):
So yeah, the Mayor apparently thinks that all is well
in New York, although he.
Speaker 3 (05:42):
Did say tourisms acknowledging some challenges. Yeah, I will say,
you know, Mayor Adams locked in a very difficult election fight.
So it's it. I'm glad that whatever happens, we can
call him a friend of the show. So Max.
Speaker 2 (06:02):
There has been a lot of Federal Reserve drama this week,
namely fed cheer Jerome Powell. We've had Trump kind of
questioning if Powell should go.
Speaker 3 (06:13):
Yeah, it's like an episode of The Apprentice. It's like
he's going to fire him one minute, then he's going
to keep him the next minute, and and on and on.
Speaker 2 (06:20):
I mean, just to paint a small picture on Wednesday.
We're recording this on Thursday. So yesterday here at Bloomberg,
at about eleven in the morning, there was this headline
that read Trump likely to fire Powell soon, White House
official says, and an hour leader in Our Leader there
was a headline that said Trump now says firing Powell unlikely.
Whip sawing markets he's.
Speaker 3 (06:41):
A terrible he's a terrible fed cheer. I was surprised
he was appointed.
Speaker 6 (06:46):
I was surprised, frankly that Biden put him in and
extended him.
Speaker 2 (06:51):
So that was a clip of Trump from earlier this week.
And you know, we should say clearly, Max, you know,
Trump appointed Powell to his first term in twenty seventeen.
Powell was nominated to a second term during the Biden presidency,
so Biden it was in the mix too. But also,
Trump does not technically have the power to fire.
Speaker 3 (07:08):
Power, right, Yeah, a lot going on here, and I
think the way that this would happen if power were
to get fired, would be around There's this investigation going
on into a renovation and alleged overspending by the FED
in renovating its headquarters. Feels really like a pretextural thing,
like they're trying to gin something up. But that is
(07:30):
how it would happen. And Trump is indicated, you know,
later in the day, said I wouldn't fire him unless
there were some kind of fraud. That seems like a
reference to this investigation.
Speaker 2 (07:39):
Right, But the sort of the immediate issue, I think
that Trump is really upset about his interest rates. He
wants Jerome Powell to lower interest rates.
Speaker 3 (07:48):
Yeah, and you know when this original headline happened, where
a White House official told us told Bloomberg that they
were going to fire Pow quickly, like I heard like
a gas in the newsroom. I mean, people reacted to
that just because it's it's so it is such a
break from precedent. And also I think everyone knows because
(08:10):
all of us kind of are living with the financial
markets that would affect the markets, that that that the
markets were going to take a dive when that happened.
Speaker 2 (08:19):
Oh yeah, I mean I think, you know, the independence
of the Federal Reserve, the Central Bank, and the ability
for that entity to make decisions that are kind of
independent of politics or popularity. At least traditionally, that has
been looked at as quite sacricanct and quite crucially important.
And now I do feel like that is kind of
(08:39):
being thrown into question. But we wanted to bring an
expert on to talk about this issue, why it's important,
why it's being questioned right now, and so we've got
economist Martha Gimble here. She is the executive director of
the Budget Lab at Yale. Hey, Martha, thank you for
having me so there's all this back and forth, all
this drama about you know, Trump wanting to potentially fire
(09:00):
our own POWE. We talked to us a little bit
just about why, like what's going on here on the surface.
Speaker 7 (09:06):
So I think one thing to keep in mind is
that President Trump likes lower interest rates. In fairness to him,
lower interest rates are really fun. You get to borrow
money more cheaply. That flows through to mortgages and consumer credit.
Speaker 2 (09:21):
And businesses, business business band they hire. That's good. Yeah,
everybody wants that.
Speaker 7 (09:26):
The fact that it's fun when interest rates are low
is exactly why we have an independent central bank, because
if it were just up to politicians, generally, what you
see is they try to keep interest rates low because
people like that, and then inflation can get out of control.
And so historically policymakers have kind of tied to their
own hands and pre committed to say, hey, we won't
(09:52):
be touching the interest rate regime because we basically know
that we are not trustworthy. We know that we will
do something that in the short run makes voters happy,
but in the long run can create economic instability and
more inflation.
Speaker 3 (10:06):
There seem like two questions here. One is about the
independence of the FED, which is like a big structural question.
But then there's also like should jump power lower interest
rates right now? And it seems like there's room for
disagreement there. Stacy and I, Martha, you were not here,
but last week Stacey and I did an episode about
consumer sentiment, talking about how there are these warning signs?
(10:27):
Is the story that Trump's telling about the economy and
like the desire for lower interest rates apart from the
kind of like badness of like the president publicly feuding
with the chair of the Federal Reserve, Like, is there
anything to the argument that like he is being too
slow to react, maybe like too concerned about inflation, not
concerned enough about the economy.
Speaker 7 (10:47):
So I do want to distinguish between the question of
like should the Fed be cutting more versus what President
Trump has been talking about, which is like interest rates
at one percent, that would be a really really substantial cut,
And no economists is talking about cutting interest rates that
much at this particular point in time. What are interest
rates right now about four percent? There's all of these
things that the FED is kind of trying to keep
(11:10):
an eye on. It's trying to see if the labor
market is starting to deteriorate. It's trying to see, you know,
what is happening with the impact of tariffs on prices,
And it's a really uncertain time and I think it
is legitimately unclear. You know, should the Fed cut rates
by twenty five basis points this year?
Speaker 3 (11:31):
Should it hold?
Speaker 7 (11:32):
Should it do fifty? I mean you could get an
economist on here to defend each of those options. You
could not get someone on here. I don't think to
defend cutting interest rates by three percentage points?
Speaker 3 (11:43):
Can I ask? Like, people have argued that the Fed
should be more responsive to the concerns of normal people,
And I do wonder, Martha.
Speaker 2 (11:52):
Like, is there accountable too.
Speaker 3 (11:54):
Yeah, We've just lived through this period where there's been
like a massive growth in wealth inequality, where like there
are aspects of the economy that are not working for
a lot of people. It's why Trump keeps getting elected president.
And even if you leave aside like the mechanism by
which this is happening, is there anything to the argument that,
like it would be better if the FED had less
(12:15):
independence than it does today. Uh?
Speaker 7 (12:18):
No, So I think there's a couple of things to
address there. One is you know, the Federal Reserve has
really blunt instruments, and they've talked about this before, Right,
the FED is not there to address inequality. That's for
a couple of reasons, right. One is they work best
when they have really clear mandates. They're there to address unemployment,
(12:38):
they are there to address inflation. You start inserting more
things into that, it really complicates the picture for them,
and it means that people will trust less right that
they're going to address inflation or unemployment. The second thing
is they it's a really blunt instrument, interest rates, right,
And so you know you saw people talking about this
with the housing market, where you know, oh, of the
(12:59):
FED reason, it's interest rates, it'll impact the housing market.
It's like, yeah, but they need to address inflation, and
that's the tool they have. You need Congress, you need
fiscal policy to address a lot of these other issues.
And I think part of the reason why you've seen
this focus on the FED is because Congress is so dysfunctional,
and so people have gone like, oh, we can have
the FED do things, But then that undermines the very
(13:23):
existence and point of the FED, which is to be
isolated and insulated from a lot of these conversations so
that they can do their job.
Speaker 2 (13:31):
One argument that I read that I did find kind
of compelling was this idea that like, you know, inflation
got really i mean not quite out of control, but
it was almost in the double digits at one point,
and I heard, you know, somebody say like, well, President
Biden lost his job, Jome Pal didn't. And I do
think there is an interesting idea. I mean, the trade
(13:55):
off of independence is that you're not necessarily held accountable
for your actions, and maybe there's just not enough of
a consequence if a body is independent. I mean, there
were definitely advantages, but it does seem like they're real disadvantages,
Like you could make an argument for maybe a less
independent bed.
Speaker 7 (14:11):
Yeah, I mean, I think one thing that is hard
is that consumers don't understand the way the FED works,
and so the thing that people often want in these
situations is they want the means that will not achieve
the end that they want. So, as an example, if
you pulled voters, one of the number one things that
(14:33):
they thought should be done to address inflation was to
lower interest rates. Totally understand why people think that, right,
Like things are too expensive.
Speaker 2 (14:41):
Yeah, if you're trying to get a home loan, and
that's super expensive, right.
Speaker 7 (14:46):
And like inflation makes things more expensive. If I pay
lower interest, that's less expensive, So that will fight inflation, right.
Speaker 1 (14:53):
Like it you can cut you see how people get there.
But of course if you lower interest rates you get
exactly the opposite effect. And so I think this is
one of the things that is really hard about the FED.
And I understand why it is frustrating is it does
feel like this kind of you know, group of technocratic
bureaucrats just kind of looking at their charts and doing
their thing. The problem is that we now have decades
(15:14):
of experience that tells us that a group of unelected
bureaucrats looking at charts and doing their thing is actually
the thing that gets you the best economic outcome.
Speaker 3 (15:23):
And that is very.
Speaker 7 (15:24):
Frustrating, and I'm very happy that I'm the person that
doesn't have to sell that concept to voters. But you know,
it's pretty clear from the economic literature that that is
in fact what you want.
Speaker 3 (15:33):
You know, there's a chance, right like we wake up
tomorrow or even before this podcast comes out, and Trump
has tried to fire Jerome Powell. What would happen? Like
what would be what would our world look like?
Speaker 7 (15:47):
So, first of all, you know when it would take
time to get a new person confirmed, and that's even
assuming there isn't legal action. First it would almost certainly
be counterproductive, right, because it's not the case that the
FED Reserve just you know, is a hand that sets
the interest rates in every part of the market. It
lends money to banks, for instance, but you know, the
(16:08):
mortgage companies figure out what makes sense for them to
set interest rates at. And in a situation where you
fire the FED chair, it is almost only the case
that people are going to raise interest rates because they
are going to feel more uncertain about the US economy
and the direction of interest rate policy in the United States.
(16:29):
And so in fact, what you would probably end up
with is higher interest rates. Really, yeah, it would actually
almost certainly be counterproductive.
Speaker 2 (16:37):
Because people would just be so worried about lending money
because like that's happening in this country. This doesn't seem
like a great time. So I will lend the money,
but yikes, you're going to have to pay a lot
to borrow.
Speaker 7 (16:49):
Yeah, we want some extra money because your risk just
went up.
Speaker 6 (16:52):
Basically interesting, and so you know, people who've been listening
to this conversation who are thinking like, Okay, I get
that inflation might go up, but I really want to
take out a mortgage, So like Ech, I'm willing to
risk it.
Speaker 7 (17:05):
Like, let's fire Pal and see what happens. It would
be highly unlikely that mortgage rates would go down in
this instance.
Speaker 3 (17:13):
The other thing to keep.
Speaker 7 (17:14):
In mind is that we talk about the Federal Reserve
Chair a lot. The Federal Reserve Chair does not have
unilateral authority to raise or lower interest rates. They are
the face of the Fed. The interest rates are set
by a committee, and there's a wide range of views
on that committee. It is not the case that if
even someone was appointed tomorrow who was much more dubvish
(17:39):
on interest rates than Chair Pal is that you would
see a huge change in interest rate policy. And in fact,
you might see the committee going in the other direction
because they might feel that in order to maintain their
credibility on interest rates and to keep inflation expectations down,
that they have to be even slower to cut. So
there's a bunch of ways in which this could very
(18:00):
very well be counterproductive.
Speaker 2 (18:03):
As an economist looking at this, like the prospect or
basically the independence of the FED being challenged and talked
about in this way. How do you feel about this
conversation and this issue coming up in this way. Is
it scary, is it interesting? Is it how do you feel?
Speaker 7 (18:18):
I mean, this is the thing that stresses me out
the most about the direction of the US economy. I
think people should keep in mind when we talk about
the stagflation of the nineteen seventies and how hard that was.
One of the things that people think played a really
big difference there was that Arthur Burns, who was the
head of the FED, was not really independent. It was
(18:40):
susceptible to a lot of pressure from President Nixon, and
that that made the situation worse.
Speaker 2 (18:45):
He kept getting interest rates and inflation got pretty out
of control into the double digits.
Speaker 7 (18:50):
Yeah, he was taking calls from Nixent, who was saying,
you know, don't do this. You need to keep money
cheap basically, And so I really do worry that we
could end up in a situation like that. Again, I
think you could end up with a real slowdown in
economic growth. And again, at the end of this, I
don't think that your mortgage or your credit card.
Speaker 3 (19:12):
Bill would be cheaper.
Speaker 2 (19:15):
Martha Gimble is an economist and the executive director of
the Budget Lab at Yale.
Speaker 3 (19:26):
All Right, Stacey, as we heard at the top of
the show, it's the middle of the summer, it is
travel season, and there's some amazing news in addition to
all those plans we heard about earlier.
Speaker 2 (19:38):
Amazing news.
Speaker 3 (19:39):
Yeah, you don't have to take your shoes off when
you go through the TSA line anymore. Donald Trump, that
count is amazing. Achieved something that.
Speaker 2 (19:46):
Low bar for amazing. You don't have to take your
shoes off. I am a TSA pre check member. I
never have to take off my shoes, all right.
Speaker 3 (19:55):
Well, for those of us who are not DSA pre
check members, the hoy POLOI you would think that this
would be great. And you know, I've often heard people
from other countries kind of complaining about our security measures,
kind of like sort of snorting at them. And you'd think,
as we move away from COVID that, you know, the
tourist industry might be booming, but it is not, unfortunately
(20:16):
in the US. Yeah, in the US. So we got
the latest data from the US National Tourism and Travel Office,
which tracks this, reported that in June, the overseas international
travel was actually down three percent from a year ago,
and which, okay, doesn't sound that bad, but when you
look at the big picture, we are still a long
way from where we were during COVID. And given this,
(20:41):
also given the way that the sort of political landscape
is affecting travel, you know, of course people in other
countries are maybe not as inclined to go to the
US as they were before. I thought it'd be great
if we brought in our friend Amandamal Bloomberg Business Week columnist.
She is here. She's written a lot about travel and
the decisions consumers make. Amanda, how you doing.
Speaker 2 (21:01):
I'm doing great, so, Amanda. The data, the MAX just
laid out. I feel like you could look at it
in a couple ways. One way is like, you know, wow,
there have been a lot of rule changes for traveling
from other countries. A lot of people might be kind
of mad at US right now, and only three percent
maybe seems not as big of a change as I
might have expected. Or this could mean something else. What
(21:23):
do you actually see in these visitor numbers?
Speaker 8 (21:25):
This is one of those things where it's a lies,
damn lies and statistics type of thing, because like, what
matters is like the context you put those numbers in,
so like a three percent decline from last year, it
doesn't feel apocalyptic for sure, But when you compare that
to the pre pandemic benchmark, and when you look at travel,
you sort of have to look at how things were
(21:46):
going in twenty nineteen because the pandemic reordered travel plants
for so many people in such a durable way. We're
still only about at eighty percent of the international tourist
arrivals that we were at in twenty nineteen. So overall, like,
this is a market that has already shrunk, and for
it to continue to decline is bad. It means a
(22:06):
lot of bad things for US tourism jobs. It means
bad things for New York City, where we all are.
And when you start breaking those numbers down further, you
see some like worrying indicators. The current projections are that
tourist arrivals for the US are going to be down
overall in twenty twenty five.
Speaker 2 (22:25):
Up to nine percent.
Speaker 8 (22:26):
So when you stack that on top of the existing
decline post pandemic, it's an industry that's taken a huge hit.
Speaker 3 (22:32):
You know, it's interesting because you think about people coming
to the US. In a lot of ways, it says
more about the economies of other countries than about our economy,
although I guess, you know, the cost of the dollar
whatever does affect it. On the other hand, when you'd
start digging into these numbers, you see some signs that,
like the Trump factor may be playing a role. Canada.
(22:53):
So in the June numbers that I just gave you,
we don't have the information for land crossings or for
Canadian and Mexican travel. But when you go back and
look at the data we do have, which is as
recently as April, it's down like twenty percent, so way
way more down. Yeah, And Amanda's talking about these kind
of like small communities. So you have the hotels, you
(23:13):
have airlines, you have these big industries that are kind
of heard across the board. But then there are a
lot of towns in Maine and also upstate New York
where you get a lot of Canadian tourism. Also Florida.
For some reason, I guess Canadians will love to go Florida.
The other thing is it's probably worth mentioning. And you
see this in some of the analysis of this data,
is that it's kind of too early to know for
(23:35):
sure where the international tourism's going, because people plan vacations
like way in advance, Like I have a trip to
Italy planned for next year that I don't know honestly
if I would have booked if I were booking it now,
partly because the dollar's gotten weaker and some other stuff,
And so this may be a case where just like
the tariff data that we talked about at the top
(23:56):
of the show, where like we didn't see it at first,
you could see it down the road as people are
planning vacations of the future.
Speaker 8 (24:03):
Yes, especially with tourist arrivals, you get this sort of
lagging indicator thing that makes the numbers really frustrating for
people to look at and understand. Even smart people who
understand how this works and understand that sometimes effects take
a while to show up in data have a really
hard time looking at numbers three months or six months
after an event that was supposed to change everything and
(24:23):
thinking it still looks normal.
Speaker 3 (24:25):
Was this wrong?
Speaker 8 (24:26):
And because of the lag between when you plan and
book a vacation for pleasure travel and when you actually go,
I think that we will be seeing fallout from this
for quite a while.
Speaker 3 (24:37):
Okay, I have a question for the both of you.
So we're talking about the sort of post COVID recovery.
I want to get into that, but I was curious
to ask you, how long do you think it took
for travel to recover after nine to eleven?
Speaker 8 (24:50):
Amanda, what do you think I used to know this number?
This number came up in some reporting I did for
a story a couple of years ago, and I think
it was pretty short from my memory, I think it
was like a couple of years, maybe less.
Speaker 2 (25:03):
Stacy, I know our economy took like ten years to recover,
so I'm gonna guess, even though Amanda knows all these
things off top of head, I'm gonna guess a little
bit longer, like maybe seven years.
Speaker 3 (25:16):
Okay, So it was kind of in the middle. July
two thousand and five is when we hit the numbers
we'd hit in August two thousand and one, so basically
four years, which is kind of interesting because that's less
time than it's taken us to recover from COVID. And
it sort of made me wonder because on one hand,
you'd think like nine to eleven, and especially for people
(25:38):
who were adults at that point, right, just such a
defining moment in history and culture and everything, and it
was one where like air travel in particular was implicated
international travel. There were all these stories written about, Oh,
the world will never be the same, And yet, you know,
we kind of return to sort of the pre nine
to eleven travel norms pretty quickly, and it's taken us
(26:00):
longer now, like we are further out from COVID than
we were from nine to eleven, which seems interesting and different,
and I'm not sure I would have necessarily intuited that.
Speaker 8 (26:11):
Yeah, I think behaviorally, the sort of durable nature of
COVID habit changes. People really took a break from flying
for like a year or more. I think that that
is like a big enough interruption to people's habits that
like you're going to end up with more durable changes.
Even at the margins some people who just like don't
(26:32):
want to fly anymore because they got out of the habit.
And then you also have changes in business travel, and
business travel has never gotten quite back up to the
rates it was before.
Speaker 2 (26:41):
That was very lucrative too, because they didn't really look
at prices as much as the rest of us.
Speaker 8 (26:45):
Yes, they don't look at prices and they fly all
the time.
Speaker 3 (26:47):
Yeah. And not all of this is about fear or
about hey, we don't live in a globalized world. It's
about people getting on zoom calls for some percentage of
meetings that they would have flown for. There is an
underappreciated factor which is related to this that Amanda has
written a lot about, which is that flying sucks now
and it's so bad?
Speaker 2 (27:06):
Is it worse than it was?
Speaker 3 (27:07):
Like?
Speaker 2 (27:08):
Is it worse than it was before the pandemic.
Speaker 8 (27:10):
It depends who you are and how much you're paying
to fly. If you are a person who post pandemic,
has decided to treat yourself and get a fancy credit
card that gives you rewards miles and puts you in
line for upgrades and maybe incentivizes you just buy more
expensive plane tickets to accrue those rewards faster, then flying
for you might be better now. You might spend more
(27:32):
time in the airport lounges. A bunch of them have
opened up since the pandemic. You might be sitting in
nicer seats. For most people, I think it is worse.
I think that travel has gotten a little bit more
like riding the bus for a lot of people, for
most people, for everybody in the back of the plane.
I think that temperatures run a little bit hotter as
far as people's behavior. I think that we there was
(27:54):
like this real spate of like post pandemic like sort
of antisociality that I think has maintained its momentum in
some cases in airplanes.
Speaker 2 (28:03):
One thing that I keep thinking of, just like sort
of more holistically about international travel going down is I
was on an earnings call once for the Empire State Building,
like people that own the Empire State Building, and they
were saying that travel was way down since the pandemic,
and their solution. They're like, oh, but we've made up
for the revenue by raising ticket prices, so it's like
eighty hundred bucks now to So I'm wondering if if
(28:25):
we see less travel, is that going to push prices up?
Is that going to be contributing to inflation?
Speaker 8 (28:30):
I think so, But it depends on what kind of
travel destination or what kind of travel expense you're looking at.
If nobody is buying airline tickets for pleasure travel, if
nobody is renting cars to go on a fun road trip,
then those will probably get less expensive to incentivize more
people to start taking those up. That's what we saw
during parts of the pandemic, which is, you know, come,
(28:51):
come take the flight, go on the vacation. We'll get
you there cheap. What it costs when you get there
is none of our business. But these sort of attraction
tickets that are sort of limited that like, you're there,
you don't want to skip it because it costs twenty
more dollars than you thought it might. Those types of
things I think are sort of ripe for inflation, right,
for price increases to make up for volume decreases.
Speaker 3 (29:11):
This is why the shoe thing is such a big deal,
because a man is talking about how, you know, airline
travel has become bad and everything, but maybe.
Speaker 2 (29:18):
You do get kind of haraplic maybe the shoe thing
will save it. You think it kind of like is
a move in the right direction. Yeah, I mean, I'm
happy to keep my shoes on.
Speaker 3 (29:27):
Same.
Speaker 2 (29:34):
So, Max, we are now to the part of our
show where we talk about a story that is underrated
in the news, something that is very significant but isn't
being talked about enough. And you brought today's story.
Speaker 3 (29:44):
Yeah, I'm glad Amanda is here to stick around because
we definitely need, yes, an expert in consumer behavior to
explain this one. So all right, Wall Street Journal reported
on July fifteenth about a new trend in online commerce.
I'm going to read you the headline, witches charge for jobs,
Sunshine and nix wins business is booming. So this is
(30:05):
a story about how witchcraft and other sort of magical
spells are super hot on Etsy. And I can tell
you I went on Etsy and there are just like
it seems like thousands of magical spells for sale.
Speaker 2 (30:18):
What does this mean? Like, what do you do? How
do you buy a spell?
Speaker 3 (30:20):
You pay a witch, an online witch or warlock. I
suppose are other spiritual figure like twenty bucks, ten bucks,
as little as like a couple of bucks, depending on
the spell. I guess it depends on what you want exactly.
And I think that from there they collect the money.
But of course they cast a spell on your behalf.
They cast a spell on your behalf. Yes, Now what's
(30:42):
funny here is this is like technically banned by Etsy.
They ban metaphysical services.
Speaker 8 (30:48):
What an incredible category name first of all, metaphysical services?
Speaker 2 (30:53):
Why do they ban metaphysical services.
Speaker 3 (30:56):
I have no idea, but I did notice that like
all of these witches disclaimers essentially saying.
Speaker 2 (31:01):
So do you want to mess with the witches and
say that they can't sell their spells? Because that does
not seem like a good I mean.
Speaker 8 (31:06):
If the witches have cursed Etsy, that would explain some
thoughts about.
Speaker 2 (31:10):
Their Maybe we should they mess with the witches.
Speaker 3 (31:15):
Do you know why people are doing this? It can't
be totally fake, Like you look at the reviews. These
sellers have thousands of reviews. Obviously there are ways to
juice your numbers and everything. Yeah, but it looks like
there are people who are going for it. And there
are some hilarious anecdotes in this Wall Street Journal story.
The guy who paid to have the Knicks win. They
won one game, but then they lost the next game,
(31:36):
and he said that it was probably some Pacers fans
doing some counter spells. Right.
Speaker 8 (31:41):
You know you can't you can't account for counter spells
when you're paying the Etsy Witch is the thing they
may have contracted with the better Etsy Witch.
Speaker 3 (31:48):
Well, initially I was thinking, like Stacey, you and I,
because there are some spells that are relevant to everybody's business. Yes, what,
there are lots of spells. Well, there's some wealth spells.
They're also revenge spells, which are fun and seems dangerous. Yeah,
you can.
Speaker 8 (32:02):
You can have like an Etsy witch like hex your
your friend's ex boyfriend who cheated owner or something like that.
Speaker 2 (32:08):
That's fun.
Speaker 3 (32:09):
I feel like if Edsy's gonna crack down anything, that's
where they should start. But then they're also that these
kind of general ones like here's a good one two
hundred and seventy bucks, kind of pricey butt call to
all seventy two demons of the Gotia for a custom spell.
So seventy two demons all, and according to the description,
they're all gonna work at once together demons.
Speaker 2 (32:29):
That feels dangerous.
Speaker 8 (32:30):
No, seeing too many horror movies, don't mess with the demons.
Speaker 2 (32:32):
Didn't you talk tout Buffy the Vampire Slayer.
Speaker 3 (32:35):
Yeah, well I had the same feeling because like you know,
my kids are you know, there are a lot of
fairy tales and myths Harry Potters, and there is a
recurring theme which is that don't mess with magical spells.
You mess with a magical spell like it's gonna it's
gonna blow back in a way you cannot appreciate. We
cannot predict the nature of witchcraft, and as a result,
(32:55):
I'm staying away.
Speaker 8 (32:56):
I'm about to reveal myself as too online. But this
is this is a very long standing digital market. This
goes back, at least in the sort of current iteration
to Tumblr. So many weird things online do Tumblr Witches
that you could ask for a spell, or you could
like PayPal them or Vemo them for a spell have
been going for a while, and I suspect a lot
of these which entrepreneurs have just moved their services over
(33:20):
to Etsy to you know, it gives you a checkout
layer some seller productions.
Speaker 2 (33:27):
I feel like there's this moment happening, like kind of
like a mystical moment. I just feel like astrology witchcraft,
like this stuff is kind of coming to the four.
Speaker 8 (33:37):
Yes, it has definitely grown over time. I mean, which
if it's been around for a minute. Yes, witchcraft is
one of one of our oldest.
Speaker 2 (33:44):
Sciences, women owned, of the oldest women owned businesses.
Speaker 8 (33:49):
You know, the girl bosses of Etsy are are are simply.
Speaker 3 (33:55):
Leaning all right, Amanda, Thank you for being here.
Speaker 8 (34:00):
Thank you so much for having all.
Speaker 3 (34:06):
Right, if you are a witch on Etsy, which is
an Etsy, and you have a suggestion for us or
any thoughts on this story, please email us at Everybody's
at Bloomberg dot net. That's Everybody's with an asset Bloomberg
dot net. Also, regular people can email us too.
Speaker 2 (34:23):
Muggles also welcome to email us.
Speaker 3 (34:25):
You're genuinely curious to hear from listeners about travel and
like how this story is playing out in their lives.
I also want to say, Stacey, we still need reviews.
We love reviews. We got another five star review, and
I am not going to read a haiku for this
listener only because they offered a bit of constructive feedback
(34:46):
in the review, really taking slight issue with the haiku.
Speaker 2 (34:50):
So in honor of the review, we will not read
a haiku. I feel like that's a reasonable way to
honor this listener.
Speaker 3 (34:56):
Thank you for the review, Ga Seattle. We are not
probably us to not do haiku in the future, but
today for you we will.
Speaker 2 (35:04):
So we'll hold off. I think that's I think that's classic.
Speaker 3 (35:06):
See how it goes from there.
Speaker 2 (35:13):
This show is produced by Stacy Wong. Magnus Hendrickson is
our supervising producer. Amy Kean is our editor and Brendan
Francis Neonham is our executive producer. We get engineering support
from Blake Maples and Dave Purcell, factchecks Sage Bauman heads
Bloomberg Podcast, and a very special thanks to Jeff Muscus,
Julia Rubin and Maria Ling. Thank you very much for
(35:33):
listening and we will see you next week
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