Joel Griffith - Research Fellow, The Heritage Foundation Joins Houston's Morning News

Episode Transcript

Speaker 1 (00:01):
Five fifty two a time. You're in Houston's point of news. Yep,
stock market down yesterday. The interest rates didn't go up though.
Interest rates came down to quarterbass points. Joel Griffith joins
US research fellow with the Heritage Foundation. Yeah, I've heard
a lot of reaction that the Fed is not handling
inflation very well. Do you think they quarter point dropped
yesterday was justified.

Speaker 2 (00:22):
And well, good morning. No, I believe the set should
actually be pausing the rate cuts were even increasing the rates,
and we're well aware the market yesterday had one of
the worst days in recent memories. But it's not because
the market did not drop because of the rate cut
or because the cut wasn't deep enough. The market dropped

(00:44):
because if you look at the documents that came out
of the Federal Reserve yesterday, it showed a few important things.
The Fed has downgraded the economic growth forecast for the
next few years and has also has all so predicted
that inflation will be higher than previously predicted. So get

(01:04):
that it's a recipe of slower growth and higher inflation,
and it appears that these rate cuts might be put
on pause for a while. So this was a trifecta
of bad news for the market.

Speaker 1 (01:17):
I have to wonder, Joel yesterday the other thing that
came out yesterday, and I think they put a halt
to it for now, but they're trying to pass this
continuing resolution to get the budget taken care of until March.
It's fifteen hundred pages long, it's hundreds of billions of dollars.
There's a lot of park bell spending. In fact, a
lot of people are describing it as a Christmas ornament.

(01:38):
It's just full of presents for a whole variety of
different people, and it's that government spending, I think is
one of the biggest inflationary things that we have. Do
you think that this CR, or the threat of this
CR had something to do with what Wall Street felt yesterday?

Speaker 2 (01:56):
Well, you're right that this CR is a no good document.
To think that Congress is trying to push this through
with no time to read it, days before the Christmas holiday,
and just weeks before we get a Republican president and
a Republican House and Republican Senate, it's absolutely absurd. I

(02:19):
am glad that it appears that this has been put
on ice for now. We'll see what happens. But now
there's calls too for Congress to either suspend the debt
ceiling or increase the debt ceiling in the next few weeks.
This should all be put on hold until we have
a Republican Congress and a Republican president. But regarding whether

(02:39):
or not this impacted the market yesterday, no, I think
the market decline was really a digestion of the fact
that this war on inflation has not been won. Inflation
continues to be at nearly twice what the target of
the feed is, and we have prospects now going forward
of slower growth, higher inflation rates that will not be

(03:01):
as low as expected.

Speaker 1 (03:03):
Donald Trump indicated before the election that, given his brothers,
he would probably like to replace the current head of
the FED, Jerome Powell, although he is backed off on that.
Does Jerome Powell J? Powl? Does he need to be replaced?
And if so, can you think of somebody who would
be a better FED chairman than him?

Speaker 2 (03:22):
Well, here's the thing, I'm not thrilled with FED share pal,
But let's remember what guy's into this problem. This inflation
has been caused by a lot of money printing at
the Federal Reserve and that printing has gone to purchase
government debt. Well, why has the FED purchased all of
this government debt or a lot of government debt? Well,

(03:44):
that's because both Republicans and Democrats, particularly over the past
five years, have been passing floated federal budgets and we
don't have the tax revenue to cover it, and there's
not enough appetite in the bond market. So that means
the FED, the FED was incentivized to purchase that debt.
This has been a problem of a past Republican Congress,

(04:06):
the past Democrat Congress. There was a problem with when
President Trump signed into law a bloated budget in his
final year, and of course Biden made it even worse.
So Republicans and Democrats in Congress and the White House
are also to blame for this. And so I've got
a lot of criticism for how Jerome Powa has handled this.
But until we get our federal spending under control, simply

(04:31):
changing the FED chair is not going to solve the problem.

Speaker 1 (04:34):
I got you, Joel Griffith, thank you, appreciated research fellow
the Heritage Foundation. Joel Griffith, It's five point fifty seven