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00:00:33.660Hello, everybody, and welcome to The Great America Show.
00:06:40.960Be very cautious and realize that you're taking quite a gamble because if this consumer does not begin to spend more or to at least maintain the current rate of consumer spending growth,
00:08:33.340They don't like being told what to think.
00:08:35.560They don't like the restraints being placed on speech and whatnot.
00:08:39.320These are reasons that extend beyond the economy, and these are the reasons why it will take a miracle or an unexpected move to the center for the Democrats to hold on to both the White House and the Senate come this November.
00:08:59.460We're talking with John Lonsky, one of the country's great economists.
00:09:04.280And we're going to come right back, and when we do, we're going to talk about some interesting Trump policy initiatives that he has been talking about.
00:09:14.800And obviously, Janet Yellen, the Treasury Secretary, doesn't like any of them.
00:09:20.080We'll find out why that is with John Lonsky.
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00:13:22.280You know, Trump did put tariffs into effect on Chinese exports during his administration.
00:13:29.960Yet what I recall is that the annual rate of inflation never got higher than 2 percent.
00:13:35.740So perhaps it's somewhat of an exaggeration on the part of Janet Yellen to claim that moving towards increased tariffs will necessarily spark another bulk of persistently rapid price inflation.
00:13:51.600Yeah, they've got such a good track record in calling inflation now at every turn, don't they?
00:13:58.280I wouldn't listen to them for a minute.
00:14:00.600But they're absolutely egregiously wrong time after time after time.
00:14:07.180And when we look at what the Chamber of Commerce is promoting, it is free trade at any cost.
00:14:16.300They are still the same outfit they were 20 years ago, despite all of the changes in leadership over time.
00:14:24.860They are the corporatist Chamber of Commerce, and that's not likely to change.
00:14:32.720As we look at 2024, the end of 2024 and 2025, it looks to me like President Trump is going to have some very serious challenges going into that year.
00:14:47.080The business roundtable, all of the major companies seem to be coming toward him.
00:14:54.700You recall they bailed on him in the first six months of his administration in 2017.
00:15:01.660But I think we're seeing something different here.
00:15:25.560He has a lot of interest in manufacturing plants in various areas and based in the United States and in Europe for the most part, some in South America.
00:15:35.680He was, you know, a big supporter of Donald Trump at one time.
00:15:39.880However, he changed his tune when he found found out all the money he could make with the help of government subsidies for manufacturing windmills.
00:15:50.060OK, so what happens here is that we have the federal government that's pouring billions of dollars into non-fossil fuel sources of energy, electric vehicles, the batteries that go into these vehicles.
00:16:06.720And once these companies start to get these government subsidies, I don't care where where the CEO is coming from ideologically.
00:16:40.380You know, even Nikki Haley in one of the debates said if she was if she were president, she would go ahead and get rid of these various alternative energy subsidies.
00:16:52.480That's, you know, a small part of what lies ahead for Donald Trump.
00:16:57.980And he'll talk about some changes in the tax code.
00:17:02.620Maybe you want to move more towards a consumption tax, relying less on an income tax.
00:17:09.280And, of course, another matter of contention will be whether or not the income tax cuts that took place during the administration during the Trump administration will be renewed fairly soon.
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00:18:25.680Meanwhile, we have the monetary policy.
00:18:28.980Jerome Powell is being stubborn about rate cuts.
00:18:32.780It seems to me that it would make some sense here for the Fed to simply come up with new targets right now because what we're seeing is also a lot of damage being done in the real estate sector, construction, and it's painful.
00:18:50.820And yet there's no attitude adjustment, no adjustment in policy on the part of the Biden administration or, frankly, the Fed.
00:19:01.280Yeah, you're talking about the housing sector, and I'm very much surprised by how home prices have continued to climb higher, despite the fact that we have the highest mortgage yields since, I believe, roughly 1999-2000.
00:19:21.060A 7%-plus mortgage yield, and yet home prices still manage to increase.
00:19:26.320As a result, of course, we're looking at sharply lower homes being sold, number of homes being sold, compared to where we were prior to COVID.
00:19:41.160And one of the reasons why, of course, two of the reasons why people are not buying homes is quite easy.
00:19:47.000Prices are too high, and so are mortgage yields.
00:19:51.340The only risk with cutting rates and cutting mortgage yields right now is that that might put even additional upward pressure on home prices, which is something we don't want.
00:20:04.920I think we have to, unfortunately, go through a process that will include some easing of home prices that recent buyers of housing are not going to like.
00:20:18.520There's no way in the world that we get affordability back down to levels where it belongs without some combination of lower mortgage yields and lower home prices and also higher incomes.
00:20:33.560This is especially true for middle-income Americans.
00:20:37.620You were talking earlier about the divergence with consumer confidence, consumer sentiment, as it's called these days.
00:20:46.940Give us an idea of what you think will happen with rates and yields and prices going forward.
00:21:00.320Well, I think what's going to happen is eventually elevated prices, high interest rates bring about a slowdown by consumer spending that pushes the U.S. economy into a recession.
00:21:15.100And with that, we're going to get higher unemployment, slowdown on wage growth.
00:21:19.920We're going to go through a painful correction.
00:21:24.280And this correction or recession is going to bring attention to these big problems that face the underlying U.S. economy.
00:21:34.980And that is perhaps, you know, we mentioned this earlier, too much competition from cheaply priced goods from abroad.
00:22:09.320And we also, you know, on the business side, the corporate side, we need less regulations and we need more corporate executives who focus on making a profit instead of worrying about trying to change the world through woke policies.
00:22:27.200It's absolutely amazing to see what corporate America has become.
00:22:33.880Do you think, on the basis of what you just said, do you think it's likely that we'll actually see any decoupling at all from China?
00:22:45.340And the reason I ask the question is I can't imagine how we extricate ourselves from the dependency we've created.
00:22:52.680And that dependency is, of course, on China.
00:22:57.600Well, it's going to be difficult to achieve.
00:23:01.620And I think what would worry me is that it would take a military type crisis in order to expedite this decoupling from China for the U.S. economy.
00:23:15.400It's going to be painful as we go through the process.
00:23:18.340It's not going to be pain free under those circumstances.
00:23:22.680And so I hope that our corporate leadership has some idea as to what their strategies will be when we come to realize that we simply cannot have this much dependency on Chinese manufacturing, that it has to come to an end.
00:24:13.980Sometimes you have to swallow the increase in cost or the increase in prices that accompany a tariff in order to assure the long-term viability of the U.S., the long-term viability of a continued increase in living standards.
00:24:32.420John Lusky is always great talking with you, always learned so much.
00:24:38.560And I think the audience is thrilled to hear your voice and to see what reality looks like.