00:02:26.120I mean, you're talking about 5% inflation.
00:02:28.180But when you look at the numbers on just basic consumer goods, I mean, there's inflation on things with beef and coffee and, you know, normal things that people are using that is much higher than just a 5% increase.
00:02:38.020So I see this getting a lot worse before it gets better.
00:02:41.200But to me, the real question is, you know, I'm an anti-Fed guy.
00:02:44.580I think the Federal Reserve has been bad for America since its inception.
00:02:48.620You had the second central bank of the United States, which was shut down, and they made the Federal Reserve.
00:02:52.660And for me, I just don't understand why we have 12 people who are deciding, essentially, the economic future, economic reality of a $30 trillion economy.
00:03:13.020I mean, you heard Japan also raised the rates to highest in 31 years.
00:03:17.240Well, that raises another question, okay?
00:03:18.740This is not just a U.S. problem, right?
00:03:20.860If we're having this energy shock and the effect on consumer prices in Europe, in Japan, in Asia, not China.
00:03:27.140China is a different story entirely, but most of the rest of the world.
00:03:30.280So most of the rest of the world is having a consumer price problem.
00:03:33.120What the hell is the Federal Reserve going to do?
00:03:34.780If it's a global factor, it's a set of global factors, why is the Fed responding to global factors that are beyond its capabilities to begin with?
00:05:24.680But I agree with Jeff on this, and I'll go into the specifics.
00:05:30.200This is absolutely a supply shock, and it is a supply shock to be exact.
00:05:35.640That is 65 percent the barrel of oil, which has moved since February 28th when the fund started, and it is 35 percent the 3-2-1 crack spread, which has been driven by refinery closures in the United States.
00:05:52.560And we have a shortage of refinery capability, which also has raised the price of a gallon of gas and worse, a gallon of diesel because the economy runs on diesel.
00:06:02.620And that's my point. The economy runs on diesel. And you can take a look at the inflation you're seeing everywhere from a strawberry to the gallon of gas. And you find it's in the supply shock that is related to energy.
00:06:16.380And so they are taking a pay if they if they. Here's what the Fed did. I'm going to prove my independence from the president. I'm going to raise rates a quarter point, not a half, not a whole point.
00:06:29.300So not like a not like a 2009, 2008 crash and I'm moving things big. I'm just going to raise by a quarter point and I'm giving lip service to inflation because I don't want to be wrong.
00:06:41.620I agree with Jeff on that point. They basically did this to give them a get out of jail free card if inflation keeps going up.
00:06:49.880Well, I tried. I raised it a little bit. That's the textbook thing to do, except the inflation is not related to that.
00:06:55.820And when they're talking about next year go down, basically what you need is you're only going to get part of it back.
00:07:01.700You stop the war and you get oil running and you get the Venezuelan stuff, the heavy crude coming across the Gulf of America coming into Houston.
00:07:09.420OK, you're going to get some relief, but you're not going to get relief on on refining costs in the U.S.
00:07:14.020You're only going to get some of it back. And so just and raising rates by a quarter point doesn't build another refinery.
00:07:21.480Raising rates by a quarter point doesn't open the Strait of Hormuz and raising rates by a quarter point.
00:07:26.580So why do it? Why do it? Because they wanted to get out.
00:07:29.520He wanted to prove his independence from the president.
00:07:32.240He wanted to say it's inflation because everybody's saying inflation, inflation, inflation.
00:07:36.680And he's getting beat pretty hard. Let me ask you a question.
00:07:38.680Does this right now make Hassett look good?
00:07:41.500Because he was another one that they were looking at.
00:07:43.460So you think he would have done anything different?
00:07:47.900No, there's technical reasons for this, too.
00:07:50.540I mean, you don't want to get into the econometrics here.
00:07:52.500They have something called R-Star, which is how they evaluate where interest rates should be.
00:07:55.960And there's a whole big argument there.
00:08:43.060Well, wait a minute. It's like having it's like having the flu.
00:08:45.260What flu do you have? Do you have a common seasonal flu or do you have covid?
00:08:48.380They're saying there is inflation, Pat, and everybody around him is saying inflation.
00:08:52.480So guess what? You reach into Batman's utility belt and you pull out a quarter point increase.
00:08:57.060But they're failing to look at what's causing the inflation.
00:08:59.620It is not overheated driving economy with a K-shaped economy.
00:09:04.560By definition, the middle class isn't getting jobs and raises and wage inflation, which drives broad inflation because you have to pay your people more than you have to raise price on your products.
00:09:26.540If you told us six months ago, a year ago, that the new chairman of the Fed would basically go against Trump and raise interest rates, I'd say you've got to be kidding me.
00:09:37.760Because sort of the illusion was that Trump was handpicking exactly who he wanted in the Fed.
00:09:42.980He's basically condemning Jerome Powell, and he's going to handpick his guy.
00:09:46.760What we've just realized is Trump is not a king.
00:09:49.880The guy he picked to be chairman of the Fed in his first major move was like, yeah, sorry, Trump.
00:10:14.180And by the way, what do you think is a likelihood that Kevin talked to the president telling him that I'm going to be raising the rates before actually doing it?
00:10:21.280Do you think that conversation happened?