Episode Transcript
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Speaker 1 (00:00):
As we continue today, the Federal Reserve is having their
annual Jackson Hole Meeting Jackson Hole, Wyoming and Federal Reserve
Chair Jerome Powell, I'm reading from CBS News spoke today
and in his speech this morning, he highlighted twin economic
risks of a slowing labor market and rising inflation, but
(00:25):
opened the door to rate cuts in a widely anticipated
speech at the annual Jackson Hole, Wyoming Economic Forum. Risks
to inflation are tilted to the upside and risks to
employment are to the downside, a challenging situation, Powell said
in his speech. The Fed will proceed carefully, but the
(00:48):
shifting balance of risks quote may warrant adjusting our policy stance.
Powell said his remarks signaling that the Federal Reserve is
likely to cut raids at its September seventeenth meeting, which
would mark the first reduction since December twenty twenty four.
This according to several economists that they had said in
(01:10):
research notes following the speech. Again, that's from CBS News.
What's going on here? What can we take away from
the speech and more, Let's dive in with somebody who's
absolutely perfect to talk with about this very topic. Danielle
de Martino Booth is CEO and Chief Strategist for QI Research,
(01:33):
a research and analytics firm. She is all over various
programs on National TV. She is the author of Fed
Up and Insider's Take on Why the Federal Reserve Is
Bad for America, and spent nine years at the Federal
Reserve Bank of Dallas as advisor to then President Richard W. Fisher.
(01:57):
And that was right through the financial crisis. Danielle Deemer,
you know Booths returning here on Koway. Welcome back.
Speaker 2 (02:04):
Thank you for having me on this clearly, clearly historical.
Jackson Powell said, day.
Speaker 3 (02:12):
Yeah, that's remarkable.
Speaker 2 (02:15):
Oh yeah, I've got my words all backwards.
Speaker 1 (02:17):
I now I thought it was like Jackson slash Powell.
It all worked for me. Let's just break this down
a little bit, because he did give some indications of
concern not just about inflation, but also of the labor market.
Speaker 2 (02:32):
Well, and you know what it's about, darn time. We've
got the highest unemployment rate for new entrance to the
job market about thirteen point four percent. This is according
to the Richmond Federal Reserve Research. So this is internal
said analysis. That's we have the highest level of unemployment
(02:54):
for new entrance to the job market since nineteen eighty
eight when the baby Boomers were flooding the market. And
there are many other signposts record numbers of individuals working
two or more jobs. Four hundred and forty thousand full
time jobs lost just in the month of July. So
(03:15):
it is not just strong arming by President Trump. At
this point, it is time for Chair Powel to serve
as he as beholden to do so, not just the
inflation mandate, but to the employment mandate.
Speaker 1 (03:30):
That's remind folks for just a moment, Danielle D. Martino
Booth as to both of those mandates of the Federal
Reserve employment and inflation.
Speaker 2 (03:39):
So initially, when the Federal Reserve Act was conceived in
nineteen thirteen, it was it was only supposed to be
controlling inflation and preserving the value of the dollar. And
you know what, I actually have two very badly behave
steth it right now, Bassett Houn, who wanted to going
(04:00):
into the.
Speaker 3 (04:00):
Show, welcome to KOA.
Speaker 2 (04:04):
Absolutely, but initially, weh, I'm so sorry that's just actually
ever happened. I'm insiding you'll be hey, soop it.
Speaker 3 (04:14):
That is, okay, well, I totally understand, believe.
Speaker 2 (04:17):
Me anyway, Okay, maximize, maximize the value of the dollar,
minimize inflation. In times of financial crisis, be the lender
of last resort. And during the brutal recession of the
nineteen seventies, when manufacturing really started to collapse in the
United States, the FED was given its second mandate in
(04:40):
nineteen seventy eight of also maximizing employment. There's a lot
of controversy surrounding this because most people believe that that's
the job of the private sector, and it should be
left in the hands of the private sector except during
times of recession. Be that as it may. The FED
is beholden to not just minimize inflation, but also maximize employment.
Speaker 1 (05:04):
And so when we look Daniel de Martino Booth at
what the Federal Reserve Chair Jerome Powell indicated today in
regards to those concerns, do you take this to be
that there will be a rate cut next month September seventeenth,
And if so, do you think that's the right path?
Speaker 2 (05:25):
I do. It's for no other reason because look, between you,
me and the wall, a quarter of a percentage point
of interest rate decreases is not going to reignite the
housing market. It's not going to make it that much
easier for people to pay down their credit card debt
when they're starting at twenty nine percent APR. But it's
going to be a signal. It's going to be a
(05:47):
signal the Federal Reserve is with the people of the
United States who are jobless or who are under employed.
And I think that it is appropriate for the Fed
to make the signal because that's it's what they're committed
to do. They're committed to trying to make the strongest
(06:07):
economy possible for every single working man and woman in America,
and it's time to signal that they're with them, not
against them.
Speaker 1 (06:15):
Well, it have to what extent Would it have a
meaningful economic impact versus just being a signal. I mean,
it's the one thing, certainly to send that message, hey,
we're trying to help you, the average worker.
Speaker 3 (06:28):
But will that have a real world.
Speaker 1 (06:31):
Impact that is significant or is it sort of Okay,
this is the signal will hopefully help boost things a little.
Speaker 2 (06:38):
Bit, well, it will certainly boost confidence, But more importantly,
what we saw that ended in December twenty twenty four
as you said, what we saw was highly unusual. Insteed
of reserve history. We don't normally have the said begin
to lower interest rates and then stop and pause for
(06:59):
nine months, which is how long it's been until this September,
the seventeenth meeting. So normally that first interest rate cut
is going to be in response to economic weakness, and
then we will see subsequent interest rate cuts. And indeed,
this morning, we have now priced out through twenty twenty six,
(07:21):
three four more interst rate cuts that will make a
difference because the markets tend to price forward. This is
where mortgage rates are going to be. In fact, mortgage
rates are already down the quarter percentage point that is
anticipated that the Fed's going to be lowering rates in
three some odd weeks time from now, because that's what
(07:43):
markets do. They look forward, they anticipate again.
Speaker 3 (07:47):
Danielle D.
Speaker 1 (07:47):
Martino Booth our guest author fed up an insiders take
on why the Federal Reserve is bad for American and
I want to talk about the notion of the independence
of the Federal Reserve because there are some who could say,
with the more cynical eye, oh, this is more of
the Federal Reserve trying to curry favor with President Trump,
(08:08):
who has been pushing for rate cuts, and not only that,
but it has been at least signaling that he'd like
to bring the federal reserves independence a little more to
heal under the presidency. So two part question One, do
you think that there's any sense that this could come
to people or people's mind in the perspective of well, no,
(08:28):
this is more about curring favor to Trump. And number
two about the independence of the FED. Is that important
to you?
Speaker 2 (08:37):
I think the independence of the FED is absolutely critical,
and that is what the Supreme Court indeed rules this
last may that that is something that cannot be impinged upon.
And most people in my world, most economists would say
(08:58):
that the FED in fact wait it too long to
begin lowering interest rates in order to not be seen
as cow telling to the administration to the detriment of
the real economy. So it is I don't think the
set is going to be seen as being politically driven
to help Trump, but rather pulling up the rear and
(09:22):
finally doing something that they've needed to do as far
as independence goes. Moving forward, this is when the makeup
of the Federal Reserve becomes critical. We're talking about seventeen
individuals on the Federal Open Market Committee. Every single meeting,
there are twelve voters. So while in modern history we
(09:43):
have become accustomed to a very strong leader of the
Fed leading policy and being able to be one voice
behind a committee, is that independence because the President would
presumably try to in all individuals who would bend to
his will. If the other policymakers on the Federal Reserve
(10:07):
see that independence as being threatened, then you will not
end up having a one individual led central bank. You
will end up having what Paul Volker have Paul Wolker
have Newtony in nineteen eighty seven with all members of
the Federal Market Committee voting against him when the economy
was in a terrible recession. So I think you will
(10:30):
see much more disparity and dissent if the President does
indeed try to quote unquote stack the FED.
Speaker 1 (10:38):
Just a few minutes left with our guest Danielle d
Martino Booth, and I want to ask you about the
tariffs and trade issue, because of course there's a lot
of talk about that. We're just now starting to see
in some of the price datas, such as producer prices
starting to see the impact of the tariffs hit. How
do you look at that, especially in the context of
what the FED does. I mean, it's really interesting to
(10:59):
me as you see President Trump who has said, well,
the tariffs aren't going to be harmful, They're going to
be great for Americans, and also actually don't believe the
Bureau of Labor Statistics that the data is rigged. Meanwhile,
he's calling for the reduction in interest rates, as we've
been talking about, which is an interesting perspective given those
(11:21):
two things I just said. But when it comes to
the tariffs in particular, how are you looking at their
economic impact both in the short term and the long term,
providing that they continue similar to how they are now.
Speaker 2 (11:34):
So you know, I listen to the nation's largest employer
one point nine people, Walmart, and they're in contact with
more Americans than any other entity. And so I listened
to what the CEO and the CFO had to stay
yesterday about the tariffs, and they know that their input
costs are rising, and they know that they're slowly going
(11:57):
to be pushing these input costs to the customer, but
only dot dot dot to the extent that they can.
And that's why CEO Doug McMillan said, we're looking for
other vendors. We're looking for other ways to get supplies
that are going to be more economical because middle and
lower income Americans simply cannot pay the higher prices. We've
(12:19):
seen them push back. Ross Stores announced yesterday that it
is growing its customer base because it's a deeper discounter
than other stores in its space. So we know that
Americans who are middle and lower income are trading down.
And Walmart also tells us that even higher income Americans
are having trouble shouldering the tariffs they cannot they cannot
(12:43):
avoid in food inflation, and that they're actually seeing upper
income Americans trade down to Walmart. So people have to
understand the tariffs are very damaging. Their attacks on US corporations.
There are potential tax on US consumers. But if there's
not purchasing power, if there's not sufficient job growth, full
time job growth, you simply cannot pass these higher costs
(13:06):
along to the consumer, not if they can't afford it.
As I always say, you cannot squeeze blood from a rock.
Speaker 3 (13:11):
And so what does that mean for the FED?
Speaker 1 (13:13):
If the tariff policies continue in this way? And have
a squeezing impact on retailers and consumers alike.
Speaker 3 (13:23):
Does that factor.
Speaker 1 (13:24):
In as much of a consideration, because of course their
goal is inflation, which isn't technically with teriffs, But there
is an interconnection. If you look at inflation from the
lens of higher prices.
Speaker 2 (13:35):
For people, there is, but it's not higher until it's
higher prices for people. Again, Walmart told you that in
the second quarter prices rose at their source by one percent.
That's half the fed's target. So until again there is
passed through, the FED has a much bigger problem on
its hand if we're talking about a widespread margin squeeze
(13:57):
with companies having to absorb these higher costs but not
be able to pass them along, and that means that
if companies are making less in the way of profits,
they're going to have to fire more employees and that
becomes its own adverse feedback loop that feeds off of
itself as a factor of time and ends up diminishing
(14:18):
purchasing power even more as the unemployment rate rises, which
is exactly what J. Powell warned is the risk this
morning at Jackson Hole.
Speaker 3 (14:27):
And finally, Danielle G.
Speaker 1 (14:28):
Martino Booth how do you think investors are looking at
the current situation, what is on top of mind or
what are they watching for as decisions are made in
the coming months.
Speaker 2 (14:41):
So I think investors are. They're almost manic at this point.
You see these massive swings in the market that especially
makes retirees nervous, so to the extent that retirees interest
income is going to start declining as the seed starts
reducing interest rates. I think investor should be very attuned
(15:01):
and attentive to how that might or might not affect
the people over the age of seventy the United States
who own forty percent of the stock market. So we're
going to have to be very very careful moving forward
because in two thousand and one, in two thousand and seven,
these same individuals were able to rejoin the workforce. Simply
not the case today.
Speaker 1 (15:23):
Danielle Di Martino, Booth, CEO and Chief strategist for QI Research.
Speaker 3 (15:28):
Always great to get your insights.
Speaker 1 (15:29):
Thanks so much for joining us again on KOA, and
thank you for having me