Fed Policy: The FOMC cut the federal funds rate by 25 bps to 3.75% and signaled renewed Treasury purchases, effectively ending quantitative tightening.
Market Messaging: Powell portrayed the economy as stable with improving productivity and AI tailwinds, which the hosts criticized as PR masking stagflation risks.
Data Dependence: With limited fresh government data, Powell leaned on anecdotal sources and September PCE, while admitting potential employment overstatements.
Tariffs & Inflation: Powell repeatedly blamed tariffs for elevated inflation but offered inconsistent clarity on growth implications without tariffs, drawing skepticism.
Political Dynamics: Discussion focused on Trump’s influence over a more dovish Fed and the upcoming chair change, with expectations of heightened politicization under potential appointees.
Treasury Market & Deficits: Fed buying of short-term Treasuries was seen as suppressing yields and easing the federal government’s $1.2T interest burden, adding liquidity.
Obamacare Debate: The hosts argued ACA subsidies entrench cronyism and rising costs, with Democrats seeking extensions and Republicans floating HSA-based alternatives.
Macro Outlook: The panel cautioned that Powell’s framing underplays cooling labor conditions and persistent inflation, implying greater recession and policy risk ahead.
Transcript
[music] Welcome back to the Power and Market podcast. I'm Ryan McMakin, editor-inchief at the Mises Institute. [music] And with me today are two of our contributing editors. I've got Tho Bishop and I've got Connor O'Keefe. And if you're a longtime listener, you know, this is the current events podcast at the Mises Institute where we really just look at what happened that week and provide some, you know, additional commentary. Sometimes snarky, sometimes arudite. We'll see which side we come down on this time. Although there was a Federal Reserve meeting, an FOMC meeting this week. So, that's going to offer plenty of opportunities for snark, I think, because I think, and we'll discuss in detail, uh, Powell's comments, some of which I think were really some outlandish claims in, uh, in several different cases, really just making claims about the state of the economy and inflation that were based on basically nothing. Uh, so we'll look at that in some more detail. And we may have time to also talk about just the current debate over Obamacare. and you'll be shocked to know that it's not making health care any more affordable. But what are the next steps after that politically and in terms of the economy? We'll see. Uh but uh before we do that though, uh we're we're almost at the end of the year. We're wrapping things up and but here at the Mises Institute, we got our year-end fundraiser going, right? >> It is. 2025 is going out fast and so we are doing our annual year end fundraising drive and if you participate you get some classic Ryan McMon uh we're offering many books the the fight for liberty uh by Ryan that looks at kind of the historical context of the fight for liberty uh different strategies for this battle what it might look like in the future things like that drawing from some of my favorite parts of the Rothbardian tradition right then and there. 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Uh but there's a lot of bad things going on too. And uh the Federal Reserve, I think, has uh has become masterful at really uh casting a a positive light on economic uh developments that don't look so great and also I would say presenting policies that should show an extreme lack of confidence in the economy while packaging them as progress and as evidence. evidence of just how great things are. And so let's look at those in a few details. So on Wednesday, there was an FOMC meeting and afterward uh as has been the case since 2011. Uh we have uh public press conferences that come after the end of the FOMC meeting. Now this didn't used to be the case, but I just like to throw this in. Uh these FOMC meetings used to happen. There was no sort of like debriefing after word, no sort of announcement, anything like that except other than this is what I did or this is what the this is what the the committee did and we have nothing else to say. Uh and that was it and everybody was uh left to just speculate and they weren't allowed to ask any questions. It was Ron Paul really who forced the debate over the Fed to the point where where the Fed felt that oh I guess we need to do some outward-f facing engagement with the public because they're losing our confidence in us. So for the last uh 15 years or so, they've started having these press conferences which serve a PR function as we'll look at today. They're they're not there to educate. They're not there to uh of course give people an inside scoop on how the Fed functions. The Fed is as opaque as ever, but they do craft these statements and they answer questions in a way that they think will then improve confidence in the Federal Reserve. It's it's a propaganda session is what the FOMC uh press conferences are. So let's look at a little bit of what's going on there and how did Fed policy change. So to the surprise of very few people uh the Fed went in and they lowered the target uh policy rate which is the federal funds rate and they they lowered it down to 3.75 which was another 25 basis point cut which is pretty much what everybody was expecting. Uh and just to give you a sense of how much that's come down in recent days, uh in December of 2024, so a year ago it was 4.5%. So it's come down uh 75 basis points since then and it had even been up at 5 a.5 in December of 2023. uh so since December of 2023 it's come down almost uh it was come down 1.75 uh% since then. So a significant number of cuts uh just in the last 18 months in the last two years and through it all the Fed has been talking about how great the economy is now. Normally in a normal world if you're running around making repeated cuts to the federal funds rate that means you do not have confidence in the economy. It means that you are you have no confidence that the economy can continue to grow without extra artificial stimulus and liquidity being added into the economy because the way the theory is supposed to work is if the economy were actually strong there would be sufficient liquidity. There would be plenty. You wouldn't have to take any action. Uh but they do take action consistently and have been doing it a lot in the last year especi and the last two years in terms of easing up on central bank policy not just in bringing down the target interest rate but also uh in being extremely timid about letting uh assets roll off the balance sheet. And you'll remember that in the wake of the financial crisis, the Fed bought up trillions of dollars in mortgage back securities and in treasuries. And just when it looked like they were going to start to really shrink that balance sheet and maybe get some of those assets off the books, COVID happened and they bought trillions more so that they were getting up near $9 trillion total in terms of the amount of assets, both mortgage back securities and treasuries. And again, they've started to let a lot of that roll off the balance sheet, but it's certainly not a majority. It's managed to come down two or three uh trillion. But at this meeting, in addition to cutting the 25 basis points, they also announced that they're going to start purchasing assets again. In this case, just treasuries and specifically short-term treasuries. And so, they're going to start adding to the balance sheet again. Now, uh there's going to be some debate over this among how this is to be interpreted. The Fed's position is that this has nothing to do with monetary policy. This has no stimulus role at all. We have great confidence in the economy. Yes, we're buying assets, but it's really just to ensure that we have reserves in place and that we can deal um with the repo situation and and any other short-term loans that need to be made. This is just like this is our day-to-day work. But these aren't even small numbers. They're talking about making $40 billion in asset purchases just in the first month. And then that eventually some at some point in 2026, they'll start to scale that back in terms of monthly purchases. So already quantitative tightening, as they were calling it, it's over. They're back to purchasing more assets again uh for the Fed. And of course, what does that do? It lowers interest rates on treasuries, which anybody can see has got to be a priority for the federal government because uh they were they paid out $1.2 trillion in interest on the federal debt just this last fiscal year. So allowing interest rates to go up more on that sort of debt is probably politically unacceptable to people in Washington. So the Fed of course is never going to admit that, but that's surely one reason that they're resorting back to big asset purchases. And really, of course, it has to do with monetary policy. Of course, it has to do with ensuring that there's tons of liquidity in the economy because the economy appears weak. And we can get into some of those details uh later as well. But I want to throw it to you guys and just kind of talk about the Fed's general messaging here. Not only were they really kind of creating a message of, yeah, we're just taking some baby steps and yeah, we're going to lower just 25 basis points. That's no big deal, right? And sure, we're going to start building up assets again. Uh but that's that's just something else entirely. Has nothing to do with with what we're talking about here. And the reason you don't have to worry about anything, dear ladies and gentlemen, in the public, is because the economy is still pretty good. They they can't pull off talking about how robust the economy is anymore, as they used to uh several months ago. But now they're still holding to this line about how the economy is pretty good. Now, he starts to back off a little bit on that later in the press conference, but the overall message was, "Oh, worker productivity is going up. We're going to have even more economic growth in 2026 than we had this year, over 2% next year, which is really nothing to crow about, but nowadays that that counts as near robust economic growth." And um oh, and thanks to AI, everything's just just going great. And uh we're we're steering the ship everybody. Everything's fine and we'll just continue on this into next year. No admission that there might be any sort of significant change to the economy in terms of recession or anything like that. They're still claiming that they have no signs of that which basically means nothing because the Fed was still claiming that there was no no recession on the horizon in in 20 in 2008. So Bernanki gots up there in like March of 2008 says no no recession on the horizon. later the uh the official recession for that period started in December. So he was four months behind the curve on that one. So you can't believe anything the Fed says. But what did what was your guy's takeaway? Did you find his general picture of the economy? Let's just go with you, Connor. Did you find his general picture of the economy to be convincing? Uh do you and also importantly do you think it will convince other people that the economy is just generally fine and the Fed is just it's still data driven is holding the line and that everything's under control or do you think there's maybe some deeper problems there? I think it's enough to sort of it feels like we're kind of in a holding pattern right now. And the way he was talking about it was that like yeah, there's some pressure, but things are generally like stable. And I think his only really his only real job at these press conferences is to not say anything crazy enough for the market to absolutely freak out one way or the other. And I think he he gave the market that like there it's not like there was some huge uh at least that I'm aware of some huge selloff one way or the other. Um I sort of and maybe this is like a failing of mine. I tend to look at this through more of a political lens and we were talking earlier in the year kind of about the dynamic of Trump coming in and really starting to get a lot more aggressive in in terms of pushing the Fed towards his preferred policy. And that's kind of the lens that I'm seeing all of this through right now. And what it feels like to me is that Pal and I'm sure his allies at [clears throat] allies at the Fed and kind of in the media, they're trying to basically um put together the or like build this narrative in real time that the economy is maybe it's not great, but it's stable and it's okay. So that when I think it's May, uh Fed's or Trump's new Fed chair is going to come in. Um, I think once that happens, then they can kind of h they they can sort of step back and if things change dramatically, uh, they can say, well, look, things were fine while we were in there, but then Trump put, you know, one of his attack dogs in there, um, and it all fell apart. I think like that's kind of the line that I see, the line in time they're trying to get there before they can kind of start admitting that maybe the economy is not great because I think that's kind of a dynamic going forward. This is something we've been talking about how Trump is trying to act like the economy is amazing. It's the golden age. He gave himself an A with five pluses in an interview with Politico the other day. And yeah, so his opponents definitely um they're they're happy about that. They want him to commit to the, you know, the the status quo is um what he's rallying around for, you know, future elections. So it definitely makes sense from like the establishment kind of regime machine for them to sort of be like, "Yeah, the economy is really not that great under Trump, but they need to kind of be strategic about how they're going to do it." So I think that uh Pal leaving and Trump's chair, whoever that might be coming in to sort of they're trying to basically uh hold things together and make monetary policy nice and boring until then so that they can kind of, you know, maneuver it to their to their advantage. >> From my perspective, looks like Trump is winning, right? like he's getting more or less the policy he wants from Pal's Fed right now, >> right? Because I was last time there was like, "Oh, don't give you don't assume that we're going to cut next meeting." Like, don't don't assume that. Of course, they did. Everyone knew it, right? This has been kind of the oh, there I find particularly interesting in terms of its communication devices going up to next year. It's like, oh, we we've only got one rate cut priced in for 2026. Anyone believe that? I I don't, you know, you. So, so that's that's the whole thing. like this this is a you know we we have gone back to a dovish Fedum despite all of Pal's concerns he stated it multiple times about the the you know how difficult it is to get the inflation genie back in the bottle we have gone back to a dovish Fed that's what Trump wanted and we're getting these moves as they are even without Trump's you know next big move which will be the Fed chair you know come next year um you Moran right now Steve Moran is is his number one leader on the Fed um if it was up to um rate interest rates would be a full half point more than they are right now if you you just kind of deduct from from what his uh more aggressive positions are. I do think will be interesting is you know I know some of the headlines are focusing on the kind of the growing tension right because historically right you know for good and ill both you know typically there's not a lot of public dissension around these votes and now you're getting you a handful of you know voting members say you know we shouldn't do anything we got more in kind of pushing for a more aggressive approach. I I I I I expect that to be a dynamic that will continue going out there that for all the propaganda, for all of the, you know, the the Fed speak that you get from Pal trying to create a nice little narrative bow on everything that, you know, some of those voting members are going to, you know, make their great stands in history by, you know, saying that, you know, we don't like where these things are going here, here, and here. Um, but, you know, Trump, to me, the big my big takeaway is that Trump has succeeded at getting the Fed to do exactly what he wants, which, you know, isn't a big surprise. Um, but it goes back to just, you know, that that wonderful independence that the central bank has. >> If that's all it takes to bully the Fed to get what you want, just some tweets and stuff, that's pretty remarkable. Um, >> we never saw the end of that investigation over the Fed the the the Fred renov Fed renovations either, right? The bill never got whatever Bill Py was cooking at either. So, who knows what some of that >> maybe that was the bargaining point, right? We won't mention the Fed renovation again, just force down policy more, which of course the Fed doesn't care less about, right? They don't have any actual principles on monetary policy. They'll do what makes the Fed looks good. So, I guess they've decided that they can do that and get away with it and still have the Fed looking good. But, Connor, that's a that's a good theory, right? The idea here is let's just get to the point until we get Fed's uh Trump's chairman in at the Fed and then the wheels come off the propaganda train, right? Where we can then talk about the real state of the economy and that sort of thing because hey, look how look how Trump's guy screwed it up. I don't I don't believe that a new chairman, even if he's Trump's guy, is going to be fundamentally different. There's a lot of institutional inertia at the Fed, right? you just don't come in and do whatever you want. Um, but yeah, I could see helping get even more dovish policy uh in that case. Now, let's look at a little bit at how they were framing the the issue of the economy. Uh, one thing that we've made fun of this a lot in the last few weeks is the fact that the Fed has stopped calling itself data dependent. I don't think he used that phrase during this press conference. Um because essentially what data uh because I mean this government shutdown is maybe the best ever because it just made it made kind of a mockery of the Fed and their policies and their claims to be data dependent. Uh but they did say oh well we have September's data I mean which was months ago. We have September's data on PCE right their favorite measure of inflation that was 2.8%. Core PCE was also 2.8%. That's essentially what they're going off of, a inflation rate near 3%. And then they come around and keep saying, well, inflation's heading back to 2%. Based on what they they they never actually say, this is just kind of an assumption they make. They do say that uh that the economy continues to grow at a quote unquote moderate pace and consu based largely on consumer spending remaining quote unquote solid. Now, later in the meeting, he admits that most of that's being driven by rich people that uh oh gee, well, normal people maybe aren't spending as much. And then if you look at the New York Fed's own data on spending, delinquencies on auto loans and credit cards all shooting up to like 15 20 year highs. So, uh yeah, I don't I don't think uh consumer spending is necessarily the the best measure of how the uh average consumer is doing. But they did make some admissions saying that well here's another thing. Now that they're no longer data dependent because they don't have this data. Uh Powell on two different occasions referred to his quote unquote vast network of sources um where they [laughter] where they were talking about oh well we've got all of these organizations out there that tell us about the economy. So suddenly anecdotal evidence is amazing again. Now I'm not against anecdotal evidence. I think it can tell us a lot. But the Fed has usually historically said, "Well, we've got all this great statistical data with the estimates and the seasonality and everything." Now they're what they're saying is, "Well, we call people on the phone and we've got some surveys and they tell us what the state of the economy is." Now that they can't say, "Oh, well, we we use the the federal data on employment and this is the number we came up with." They're waiting on still the latest uh employment date, which doesn't come out till next week. So they don't have November data or October data yet that they're using and they certainly don't have inflation data which comes out later in the month as well. So they're all just kind of guessing on that and going off private data but way later in the conference. So he started to admit that okay we're going off September data. The the employment situation maybe isn't as great as I sort of said it was uh earlier in the meeting. And then he starts talking about how, oh well, we think there's systematic biases there in the day. There's a ton of weird admissions during this meeting. May maybe Powell's trying to sabotage the whole show on his way out. Uh, [laughter] but he started talking about how we think there's a a a bias in the data that's really inflating overall employment numbers in the establishment survey. And then he says, we think it's like 60,000. He says, "So if a number comes out soon saying 40,000 job gains, we actually think that's negative 20,000 job gains." So, so Powell's going off on how he thinks actually there's negative job growth in recent months and just seems to take as a given that the economy is losing jobs. And here was my favorite quote, like right in the beginning. This is like 30 seconds in. Quote, "Conditions in the labor market appear to be gradually cooling and inflation remains somewhat elevated." unquote. That's a definition of stagflation. But so he comes up to the podium and says, uh, 10 seconds in. So basically, we have stagflation and but we'll fix it. We'll fix it everybody. And that seemed to be just the overall tone of the whole meeting. I Connor, I mean, did you have some favorite little bits in there that you found to be particularly interesting? >> Yeah, I agree with your your takeaway there. To me, it kind of felt like not this extreme, but kind of like a like if you were [clears throat] ever in school and you had to do a presentation, but you like didn't do the reading or something like that and you have to kind of go up there and make it up as you go. And it felt like that like they they're so used to having, you know, this set schedule of data that they then use whatever that is and it's just like in out in out. Um, and they didn't have that. Like the the uh press release open with like available data says this. it's just they they don't have what they can normally rely on. So he it was a lot more um he was kind of bouncing all over the place a lot more than normally, you know, in his very like he Pal is very good at FedSpeak. He does it in a a skilled way like it's not like he caused a firestorm with it. Um but yeah, there there were a number of those moments. There was one where he was talking about how without tariffs inflation would be in the low twos and he just said that matter of fact and it's like site your work there. Like how do we how do we know that? Um, but yeah, I don't know. And I guess to me, like, and to kind of The's point, like I do see this as generally being a positive thing. It feels like a little bit a little crack in kind of the the facade of this, you know, almost godly um organization in DC that's just, you know, all these geniuses looking at the economy and steering this this huge uh central bank. It's like, no. And actually some of the data that they're not used to or that they're used to having is unavailable. They're a lot more wily and all over the place as we kind of saw. >> Yeah. The whole thing seemed a bit curious and just um it seemed as you say right a lot less buttoned up in terms of its political messaging. Uh so what did you think? I mean you obviously you better than anybody know that this is all a political exercise. Do you think this succeeded uh in its political goals this meeting uh or is is there are there cracks on the surface that you're noticing? >> I I don't think that um you know Powell has made himself the punchline of trying to think of the equivalent of like late night talk shows since they're relevant now. But like you know I I don't think we quite yet got to like complete infamy which you know is itself kind of a a mark of success um for something like that. But I I do think though that the the response from like say like financial Twitter things like that um kind of recognizing that this is of you know a far more dovish release than what was expecting. Um again whether that's a good or bad thing kind of depends on on how much you agree with Donald Donald Trump on these sort of things. But like you know I I I think that the people that follow this stuff were not buying what the you know the the calm and steady sort of facade that Pal was presenting here. And one of the other things um I thought was interesting is that Pal's putting kind of all of his eggs in the basket that the inflationary pressures that we see right now are one-off events from from tariffs. Um and even though we you know he's got his own little separate measure, right? We can separate that from this and everything looks fine. I mean he he at near the end of the the the meeting I mean he he's he's asked specifically about inflationary threats. He says like oh it's it's it's you these are onetime things. We're expecting to go down. It's on inflation. It's tariffs driving this inflation. Well, the question is what is if what if it's not and then this entire thing like that's that that to me that is the entire bet from Powell's Well, I mean that that's that's the the policydriven bet here. The the secondary political bet, right? Is is that he can kind of prevent, you know, some wild man taking over with the Fed or whatever. I would bet something like that. But I think right now though that that's that is if if you're trying to give PAL every benefit of the doubt then which again no reason you should but like if you were um then then you you would truly believe that all the the the number one issue pushing the Fed right now to to take this you basically embrace a stagnation environment as as you you you mentioned uh Ryan is the tariff question and that does make one little kind of interesting dynamic that is not Fed driven is you know what what does happen if the tariffs go Okay. Right. Like what what happens if Trump does lose the Supreme Court sort of stuff like what what that ends up having on the other side of it like you know the long-term ramifications there and whatever. But but I I do think it's funny though is that like if you take to to the extent that you take the data from whatever sector you're dealing with from whatever aspect the economy deal you're dealing with right now that the one common core that you can you can identify as the biggest issue right now is the the the the tariff policy that's been the spearheading the number one policy tool economically of the Trump administration for the first year and and and that's what they're trying to double down on now. and that the monetary environment around it is is going to be very interesting particularly if that pressure is not uh uh you know magically waved away by a Supreme Court victory that would lend to its own uh bountiful uh tren of you know angry uh Trump Trump tweets. one uh they they tried to get him on a couple of questions regarding the uh the Supreme Court case on this over overseeing the one one reporter I can't believe he thought this was a good question to ask maybe his boss has told him you have to ask this question to us he said uh can you comment on the pending Supreme Court case and what are your views on how the court should rule I'm like there's no way in hell he's answering this question which of course he did not uh and however uh going back to you mentioning Connor his newly invented stat that he used both at this one and at the last FOMC meeting. This is the the new invent the new inflation measure known as uh CPI minus tariffs. Right? So he's got he he's never explained how exactly this is measured. just throws out this this new number that's what would inflation be without tariffs and then he he throws out some lower number and he said you weren't like paraphrasing he literally said without tariffs inflation would be in the low twos you know who can argue with that level of precision and he later then though was asked since he apparently has this great insight into how the economy would perform s tariffs a later reporter asked Um what would we all you know we can all agree that tariffs are weighing on the economy. So what would your estimation be of what economic growth will would be or will be if tariffs go away you know after the Supreme Court decision knocks them down or whatever. And Powell's answer was I don't know I can't help you there. That's that's just data we don't have. So he he can magically figure out the inflation rate sands uh tariffs but has no clue how the larger economy uh might be affected by tariffs. So I I find that suspect. I am skeptical that he actually has a solid number of what inflation would be without tariffs. But though man you are so right. the the one if there was any one string running through this press conference, it was that tariffs are the cause of all of our problems. And don't blame us at the Fed. If there's high inflation, it's the tariff's fault. If unemployment is or if employment is cooling, it's the tariff's fault. So maybe there's just kind of this secret war that we're witnessing between Powell and Trump where the Fed blames everything on tariffs and then Trump comes back and badmouths Powell and talks about how I can't wait to get that guy out of there and we'll get my dude in there soon. I I don't know. Maybe it's like a cat fight and it's all just very uh Washingtonian in its tone and style. Uh but that I maybe that's just the number one takeaway from this is blame everything on tariffs. Uh otherwise everything would be fine and the Fed's doing a great job. I think maybe that sums it up. >> This is what uh we talked about back when the tariffs are first coming out. Well, I we started the show a little bit after that, but this was a point we were all making early on is that you're just handing them this way this thing to use to blame any economic trouble that we may have going forward. And it was just it's just not worth it. But it will be and kind of kind of getting back to what I opened with. I'm very interested to watch how this changes once we get a new Fed chair. I think it's an interesting dynamic where uh I don't remember all three of the uh there's like three big contenders right now, but I think Hasset the the head of the director of the National Economic Council is like the the front runner what most people are expecting. And this guy, he just goes on the news like every day whenever there's any kind of new economic data. he goes does these cable news hits just finding any way to spin this is like this is the greatest economy ever and that I think is the metric that Trump's looking for a new Fed chair but that's like the opposite of what you're supposed to do as a Fed chair so whenever he gets in there like he's either going to have to pivot completely kind of like uh Mirren did and just act like oh no just pretend that he never said anything that he said before and that you know it's just all data driven and just kind of take on um the role which I think Trump is not going to like or he has to kind of keep keep up the act that uh is you know responsible for getting him that job which is just going to freak everybody out because it's going to really start shattering all of these illusions about the Fed. So that's uh that'll be early somewhat early next year and I'm just I'm very interested to watch that. >> No, no, the the Fed definitely deserves Kevin Hasset as a chair. I mean like this this guy is like your you cannot create a dopier um uh figure head for a financial body. I mean this the same dude like he wrote a DO 3600 uh right before the the the.com bust, right? Like I mean you you put in a you you bring up just like what are the ultimate sins of like you know talking head financial topic talking heads. I mean like it's it's it's this guy right here. He's exactly who the Fed Fed needs as a chair. big big fan. All in. >> So, will these FOMC meetings be even more absurd and fun after Trump gets his guy in? Okay. [laughter] >> All right. It's gonna be great. I think you're going to get even even not even attempt at like, you know, if if you if you like post data Fed, you're going to love Kevin Hassen. [laughter] And that so that was like this is what was in my mind when I was watching Pal because I think he's trying to sort of maneuver his way into being the foil of that that everything is calm and Fed speaky so that when Hass comes in and it gets crazy they could be like oh this is just like the politicization of the Fed is just an isolated thing that Trump's been bringing around and if we just get rid of all the Trumpers we can kind of go back to how it works. I think that's what they're attempting to do but the whole thing is not trending in a great direction for the Fed which is good. >> Yes. And we should be very clear that we don't fall for it, right? It's always been BS. It's always been totally politicized. It's always been this way. It's just they hid it much more successfully before Trump. And so I right neither though nor I think that the Fed is literally more of a circus after you get Trump's guy in. It's just more apparent. It's just more out in the open. And I mean I don't have really a problem with that happening. I I think it really uh it shows a breakdown in the propaganda and I think the public becomes more aware of how things are really run. The problem is they might still think that things were run properly in the olden days. I think that that was a time of more honesty and civility which it certainly was not. Um but okay, so I look forward and I just say that's why I loved MAGA's um the their when they went to war against Lisa Cook. Like I thought that was great and unfortunately that seems to have kind of petered out at least for now. But like that that's what you want is like for these to these right-wingers to be like, "Oh, all the Biden appointees are these like extreme political uh political appointees basically, which is true." And so I was like really hoping that would keep going and maybe as uh the Fed gets kind of more centered in our discourse with the new chair coming that'll that'll come back. But like I I really want it to be like the Supreme Court where you have these appointees versus these appointees and it's very politicized. I I think that would be productive. >> Well, I one of the great things about the Trump administration, I don't know if I've mentioned this before. I have like a half-written column on the topic. I don't think I ever finished it, but just the the whole idea of you may criticize the man, but you cannot criticize the office. You know, this whole like thing that people say, which clearly was something invented by people in positions of power to limit criticism of people in positions of power, right? We must respect the office even if we don't respect the man. And that there's been a huge breakdown in in that convention I think where now you don't have to hold back like you had to in the past in terms of in order to maintain decorum and all that stuff. You could just come straight out and call people scum and god forbid you disrespect the office or something. I mean who who even cares about that sort of thing anymore? And I know that some people, you know, some romantics from the olden days thinks that's bad, but we're talking political positions here. We're talking the state. These these are positions that are not to be respected. So, I I like that Trump, the age of Trump has produced that sort of situation where we don't have to pretend that these people are respectable uh in any significant way anymore. But speaking of government screwing things up, let's move on to our next topic, which is Obamacare. But maybe they didn't screw it up. Maybe they got exactly what they wanted. And that was kind of the point of uh your article which uh says that okay, we we've been talking recently about how Obamacare was a failure in the sense that healthcare is much more expensive now, but maybe it's not a failure when we look at it through a political lens. And tell us tell us a little bit more, Connor, what what you mean by that. Yeah, this is what I like to do with my articles is sort of take something that's in the news and then use it as an opportunity to talk about a broader concept. And this is a theme we've touched on a number of times in this show that um for all these different kinds of policies, the government will come in and say, "We're going to fix this problem." And they spend a bunch of our money on it. They, you know, hire a bunch of new bureaucrats. They trample on our rights even more. And then the problem just gets worse. And there's a tendency uh amongst a lot of like libertarians and more like free market oriented people to look at that and be like, "Oh man, like they're just the government's just terrible at fixing all these problems." And I I like that is a reasonable conclusion if you take them at their word that they're actually trying to fix these problems. But if you actually look like one step below the surface, they're messing up and, you know, making mistakes and writing policies in ways that don't actually fix these problems consistently in ways that just lead to them and their cronies getting a tremendous amount of money. And it's just like I think Tom Woods had some uh quip about how like if it was just mistakes they would occasionally you know uh or if it was just errors then occasionally they would be you know have errors that pivot in a productive direction and like you know towards freedom and towards free markets but it's always in the same direction. And so the uh story that I wanted to kind of focus in on was Obamacare because that's in the news right now. we had these ACA um these subsidies that were rolled out as an emergency these temporary relief efforts during the pandemic. Um but now you know years later um people are completely dependent on them to afford healthcare and so that there was just a two votes in the Senate earlier today and they both failed and it's basically that was what the whole government shutdown was uh basically centered around. Um and that debate has continued after the government opened up again. these subsidies are going to expire at the end of the year and a bunch of people are going to be left out in the cold. Um, and the Democrats want to re-up them and maybe, you know, beef them up a little bit. And the Republicans, um, you know, they don't want to cut them. It's it's never cutting spending. It's about, oh, we want to kind of maybe maneuver, uh, some bring about some changes that us conservatives would like. Um, the most like appealing uh, proposal is some there was a bill to transfer it to basically a health savings account. um which I think is that's the best of kind of the available options, but that just doesn't seem very politically realistic. Um I think that these are going to probably lapse and then, you know, there will be some pain and it'll get a lot more media attention and then the Republicans will uh roll over and there will be once again uh more spending. So writing this I was motivated to write this article because once again a theme I harp on a lot. The right has just completely seated this argument to the left that like we that because there the reason that there are problems with people affording healthcare right now is because we have not spent enough money. And if you actually look back at it and you look back at the history um of healthc care policy in this country, going back a hundred years or so since it really started during the progressive era, all of it has been it all makes the most sense if looked at as a way to move as much money as possible into the healthcare industry and the pharmaceutical industry and the health insurance industry too. And like so I I wanted to sort of tell that story once again. It's not just that they came in back in, you know, the 1890s when healthcare was super cheap compared to where it is now and tried to make it more affordable for everybody and then they messed up so badly that it's like we're now in our current mess. It's like no, it was all cronyism the entire way. And then specifically, if you look at uh the census data, it was in the early 2000s that it seemed like this whole scam started to falter because for the first time, healthcare prices just got so high and insurance uh premiums just got so high that fewer and fewer people were buying insurance. The number of people with insurance started dropping. And that's like that was a huge emergency from the standpoint of these cronies like running this whole racket because the thing only works if money keeps moving in to moving into the system. And I think it makes a lot more sense that Obamacare was brought out as a ploy to help that. It you know it it required every American to to buy insurance. And basically once again it's it's the same thing we were talking about with the affordability crisis the other week. It's the same pattern. government constrains the supply of something and then just pours all this tax money into it which ratchets up demand and then the cost explodes. That's why like all these most important industries are so unaffordable for people and healthcare is the chief example of that. So, of course, healthcare costs just skyrocketed after um Obamacare. And I guess it's it's tempting for a lot of free market people to be like, "Oh, so it was a complete failure." But I believe that if you don't take them at their word and you actually look at the the broader context of all of this healthcare policy that all of it makes the most sense if motivated by you know not actually making things better for everyday Americans but enriching their cronies and you know empowering health bureaucrats in the federal government. If you look at it through that lens, then Obamacare was a huge success. And that's that's essentially what my column is about. >> Well, I mean, I'm looking out at the the political state of the healthcare debate right now, right? And if if prices continue to go up, there's just going to be more calls for uh well, we need a new solution then. And this was always kind of my theory going back to 2010 was when they were doing Obamacare because even then some people on the left of the Bernie bro types were saying well this is a nice stepping stone to more affordable healthcare but in the end it's got to be Medicare for all. It's got to be single-payer socialized medicine, which by the way, just as a side issue, is just the worst type of government medicine. Americans have been pounded with this idea that singlepayer healthcare is the only type of government controlled healthcare. It's not, of course. It's actually very rare. You get that in Canada and the UK and in the Anglosphere is really kind of the only place you get it. In most of the world, yeah, they have government provided health care in lots of ways as a backup, but you can purchase private health care. I mean, this is this is on the continent of Europe. This is the common way of doing it. But these people want to give want to force feed you the absolute worst kind of socialized medicine which is there is one provider one government controlled provider and if you try it and you have to leave the country in order to get any other choices which is just like a nightmare scenario. What are we going to do? We're going to be flying to like France to get health care if uh that sort of thing is pushed through because they have a freer health care system than either the UK or Canada. So that's the last thing we need in America. But that seems to be the next step. Oh, look, we tried. It's still unaffordable. Time to move on to the next thing. And though, I mean, I'm sure you noticed that these people are out there all along, right? The left is always pushing for a new step, a new socialization of policy. I I mean, I assume they're out there and they're ready with a new plan for even more socialized medicine. Um, but maybe they're just smart enough to not mention it. right now in terms of actual sort of plans, it's it's more just kind of status quo, keep this thing together with, you know, duct tape and bubble gum because you don't want to dare suggest Obamacare is not working. Um, and so everything right now is just focused on just continuing the subsidies, no reforms, yada yada yada. And as Connor mentioned, kind of the big radical alternative from Republicans is um basically keeping the same sort of spending but doing it through a health savings account, which I I I do think would probably be like if if you're going to get over the sort of psychological, you know, power, political power of like the gimme sort of system, then, you know, having something that's an account that you control versus a a government program probably does create like that's probably the best way of challenging um that sort of dynamic towards, you know, for the masses there. So, you know, it' be interested to see how that ends up playing out. And actually push comes to shove here. Uh but I I do think it's it's it's it's I think Obamacare really is like one of the like best illustrations of the modern political environment like you know the fact that the Supreme Court was completely inept in terms of any sort of reforms you know with with the just the the absolute you know you know you know how how how horrible the entire process was from the get-go. The way that it has been an absolute money bomb for special interest groups. the way that people lied shamelessly, bragged about it, got caught bragging about it and had nothing go like it's just it is the perfect single, you know, issue. Funny just how modern politics operates. It's a gift that could keeps on giving. And I think, uh, you know, the points that Conor was making in terms of how, you know, this is exactly what they wanted from the get-go. I think you're absolutely right in the situation. >> I would add to that that the Republicans, the opposition party rail against it and then once it's implemented becomes untouchable. Yeah. >> Absolutely toothless. Yep. >> Yeah. Yeah, we've seen that in so many things, right, with Washington, another way that Washington is so much worse than state politics and that I mean, I don't know about California, but in most states, you pass a law, it's a disaster, people get poorer, people hate it, they will actually repeal legislation. Uh they will actually respond to public demands for changes in legislation in Washington. Once something's in place, man, it is there forever. And as you say, Connor, it's always though in the direction of more government power, more regulation, more taxation. You never seem to get policies in place that are unmovable when they embrace free markets. Those things are always up for debate, always up for repeal. It's only once, oh, sorry, we got this more regulated version of healthcare in place, Obamacare. It's there forever. can't do anything about it unless it's replaced with something even worse from a market perspective. and just just another way that Washington DC is just absolutely awful. Even com I mean other we've the states prove that it is possible to have like functioning sort of democratic governments which right I'm not like a big fan of that sort of thing but the the sheer scale of Washington and the way that interests work there where it's always in their favor. I mean it's just a larger macrocosm of what your article is about. It's always the big interest. They get what they want and then it's unchangeable and it's there forever unless you make some trims around the edges that ultimately end up benefiting them. And Obamacare just seems to be a perfect example of that. All right, guys. Well, I think that's going to be all for today. Uh we do thank everyone out there for listening. Uh go ahead and head on over to mises.org. That's mises.org and click on subscribe or click on donate here before the end of the year if you like what you hear here. But uh we will be back next week with more. So we'll see you then. [music]
Trump is Winning Over the Fed
Summary
Transcript
[music] Welcome back to the Power and Market podcast. I'm Ryan McMakin, editor-inchief at the Mises Institute. [music] And with me today are two of our contributing editors. I've got Tho Bishop and I've got Connor O'Keefe. And if you're a longtime listener, you know, this is the current events podcast at the Mises Institute where we really just look at what happened that week and provide some, you know, additional commentary. Sometimes snarky, sometimes arudite. We'll see which side we come down on this time. Although there was a Federal Reserve meeting, an FOMC meeting this week. So, that's going to offer plenty of opportunities for snark, I think, because I think, and we'll discuss in detail, uh, Powell's comments, some of which I think were really some outlandish claims in, uh, in several different cases, really just making claims about the state of the economy and inflation that were based on basically nothing. Uh, so we'll look at that in some more detail. And we may have time to also talk about just the current debate over Obamacare. and you'll be shocked to know that it's not making health care any more affordable. But what are the next steps after that politically and in terms of the economy? We'll see. Uh but uh before we do that though, uh we're we're almost at the end of the year. We're wrapping things up and but here at the Mises Institute, we got our year-end fundraiser going, right? >> It is. 2025 is going out fast and so we are doing our annual year end fundraising drive and if you participate you get some classic Ryan McMon uh we're offering many books the the fight for liberty uh by Ryan that looks at kind of the historical context of the fight for liberty uh different strategies for this battle what it might look like in the future things like that drawing from some of my favorite parts of the Rothbardian tradition right then and there. 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Uh but there's a lot of bad things going on too. And uh the Federal Reserve, I think, has uh has become masterful at really uh casting a a positive light on economic uh developments that don't look so great and also I would say presenting policies that should show an extreme lack of confidence in the economy while packaging them as progress and as evidence. evidence of just how great things are. And so let's look at those in a few details. So on Wednesday, there was an FOMC meeting and afterward uh as has been the case since 2011. Uh we have uh public press conferences that come after the end of the FOMC meeting. Now this didn't used to be the case, but I just like to throw this in. Uh these FOMC meetings used to happen. There was no sort of like debriefing after word, no sort of announcement, anything like that except other than this is what I did or this is what the this is what the the committee did and we have nothing else to say. Uh and that was it and everybody was uh left to just speculate and they weren't allowed to ask any questions. It was Ron Paul really who forced the debate over the Fed to the point where where the Fed felt that oh I guess we need to do some outward-f facing engagement with the public because they're losing our confidence in us. So for the last uh 15 years or so, they've started having these press conferences which serve a PR function as we'll look at today. They're they're not there to educate. They're not there to uh of course give people an inside scoop on how the Fed functions. The Fed is as opaque as ever, but they do craft these statements and they answer questions in a way that they think will then improve confidence in the Federal Reserve. It's it's a propaganda session is what the FOMC uh press conferences are. So let's look at a little bit of what's going on there and how did Fed policy change. So to the surprise of very few people uh the Fed went in and they lowered the target uh policy rate which is the federal funds rate and they they lowered it down to 3.75 which was another 25 basis point cut which is pretty much what everybody was expecting. Uh and just to give you a sense of how much that's come down in recent days, uh in December of 2024, so a year ago it was 4.5%. So it's come down uh 75 basis points since then and it had even been up at 5 a.5 in December of 2023. uh so since December of 2023 it's come down almost uh it was come down 1.75 uh% since then. So a significant number of cuts uh just in the last 18 months in the last two years and through it all the Fed has been talking about how great the economy is now. Normally in a normal world if you're running around making repeated cuts to the federal funds rate that means you do not have confidence in the economy. It means that you are you have no confidence that the economy can continue to grow without extra artificial stimulus and liquidity being added into the economy because the way the theory is supposed to work is if the economy were actually strong there would be sufficient liquidity. There would be plenty. You wouldn't have to take any action. Uh but they do take action consistently and have been doing it a lot in the last year especi and the last two years in terms of easing up on central bank policy not just in bringing down the target interest rate but also uh in being extremely timid about letting uh assets roll off the balance sheet. And you'll remember that in the wake of the financial crisis, the Fed bought up trillions of dollars in mortgage back securities and in treasuries. And just when it looked like they were going to start to really shrink that balance sheet and maybe get some of those assets off the books, COVID happened and they bought trillions more so that they were getting up near $9 trillion total in terms of the amount of assets, both mortgage back securities and treasuries. And again, they've started to let a lot of that roll off the balance sheet, but it's certainly not a majority. It's managed to come down two or three uh trillion. But at this meeting, in addition to cutting the 25 basis points, they also announced that they're going to start purchasing assets again. In this case, just treasuries and specifically short-term treasuries. And so, they're going to start adding to the balance sheet again. Now, uh there's going to be some debate over this among how this is to be interpreted. The Fed's position is that this has nothing to do with monetary policy. This has no stimulus role at all. We have great confidence in the economy. Yes, we're buying assets, but it's really just to ensure that we have reserves in place and that we can deal um with the repo situation and and any other short-term loans that need to be made. This is just like this is our day-to-day work. But these aren't even small numbers. They're talking about making $40 billion in asset purchases just in the first month. And then that eventually some at some point in 2026, they'll start to scale that back in terms of monthly purchases. So already quantitative tightening, as they were calling it, it's over. They're back to purchasing more assets again uh for the Fed. And of course, what does that do? It lowers interest rates on treasuries, which anybody can see has got to be a priority for the federal government because uh they were they paid out $1.2 trillion in interest on the federal debt just this last fiscal year. So allowing interest rates to go up more on that sort of debt is probably politically unacceptable to people in Washington. So the Fed of course is never going to admit that, but that's surely one reason that they're resorting back to big asset purchases. And really, of course, it has to do with monetary policy. Of course, it has to do with ensuring that there's tons of liquidity in the economy because the economy appears weak. And we can get into some of those details uh later as well. But I want to throw it to you guys and just kind of talk about the Fed's general messaging here. Not only were they really kind of creating a message of, yeah, we're just taking some baby steps and yeah, we're going to lower just 25 basis points. That's no big deal, right? And sure, we're going to start building up assets again. Uh but that's that's just something else entirely. Has nothing to do with with what we're talking about here. And the reason you don't have to worry about anything, dear ladies and gentlemen, in the public, is because the economy is still pretty good. They they can't pull off talking about how robust the economy is anymore, as they used to uh several months ago. But now they're still holding to this line about how the economy is pretty good. Now, he starts to back off a little bit on that later in the press conference, but the overall message was, "Oh, worker productivity is going up. We're going to have even more economic growth in 2026 than we had this year, over 2% next year, which is really nothing to crow about, but nowadays that that counts as near robust economic growth." And um oh, and thanks to AI, everything's just just going great. And uh we're we're steering the ship everybody. Everything's fine and we'll just continue on this into next year. No admission that there might be any sort of significant change to the economy in terms of recession or anything like that. They're still claiming that they have no signs of that which basically means nothing because the Fed was still claiming that there was no no recession on the horizon in in 20 in 2008. So Bernanki gots up there in like March of 2008 says no no recession on the horizon. later the uh the official recession for that period started in December. So he was four months behind the curve on that one. So you can't believe anything the Fed says. But what did what was your guy's takeaway? Did you find his general picture of the economy? Let's just go with you, Connor. Did you find his general picture of the economy to be convincing? Uh do you and also importantly do you think it will convince other people that the economy is just generally fine and the Fed is just it's still data driven is holding the line and that everything's under control or do you think there's maybe some deeper problems there? I think it's enough to sort of it feels like we're kind of in a holding pattern right now. And the way he was talking about it was that like yeah, there's some pressure, but things are generally like stable. And I think his only really his only real job at these press conferences is to not say anything crazy enough for the market to absolutely freak out one way or the other. And I think he he gave the market that like there it's not like there was some huge uh at least that I'm aware of some huge selloff one way or the other. Um I sort of and maybe this is like a failing of mine. I tend to look at this through more of a political lens and we were talking earlier in the year kind of about the dynamic of Trump coming in and really starting to get a lot more aggressive in in terms of pushing the Fed towards his preferred policy. And that's kind of the lens that I'm seeing all of this through right now. And what it feels like to me is that Pal and I'm sure his allies at [clears throat] allies at the Fed and kind of in the media, they're trying to basically um put together the or like build this narrative in real time that the economy is maybe it's not great, but it's stable and it's okay. So that when I think it's May, uh Fed's or Trump's new Fed chair is going to come in. Um, I think once that happens, then they can kind of h they they can sort of step back and if things change dramatically, uh, they can say, well, look, things were fine while we were in there, but then Trump put, you know, one of his attack dogs in there, um, and it all fell apart. I think like that's kind of the line that I see, the line in time they're trying to get there before they can kind of start admitting that maybe the economy is not great because I think that's kind of a dynamic going forward. This is something we've been talking about how Trump is trying to act like the economy is amazing. It's the golden age. He gave himself an A with five pluses in an interview with Politico the other day. And yeah, so his opponents definitely um they're they're happy about that. They want him to commit to the, you know, the the status quo is um what he's rallying around for, you know, future elections. So it definitely makes sense from like the establishment kind of regime machine for them to sort of be like, "Yeah, the economy is really not that great under Trump, but they need to kind of be strategic about how they're going to do it." So I think that uh Pal leaving and Trump's chair, whoever that might be coming in to sort of they're trying to basically uh hold things together and make monetary policy nice and boring until then so that they can kind of, you know, maneuver it to their to their advantage. >> From my perspective, looks like Trump is winning, right? like he's getting more or less the policy he wants from Pal's Fed right now, >> right? Because I was last time there was like, "Oh, don't give you don't assume that we're going to cut next meeting." Like, don't don't assume that. Of course, they did. Everyone knew it, right? This has been kind of the oh, there I find particularly interesting in terms of its communication devices going up to next year. It's like, oh, we we've only got one rate cut priced in for 2026. Anyone believe that? I I don't, you know, you. So, so that's that's the whole thing. like this this is a you know we we have gone back to a dovish Fedum despite all of Pal's concerns he stated it multiple times about the the you know how difficult it is to get the inflation genie back in the bottle we have gone back to a dovish Fed that's what Trump wanted and we're getting these moves as they are even without Trump's you know next big move which will be the Fed chair you know come next year um you Moran right now Steve Moran is is his number one leader on the Fed um if it was up to um rate interest rates would be a full half point more than they are right now if you you just kind of deduct from from what his uh more aggressive positions are. I do think will be interesting is you know I know some of the headlines are focusing on the kind of the growing tension right because historically right you know for good and ill both you know typically there's not a lot of public dissension around these votes and now you're getting you a handful of you know voting members say you know we shouldn't do anything we got more in kind of pushing for a more aggressive approach. I I I I I expect that to be a dynamic that will continue going out there that for all the propaganda, for all of the, you know, the the Fed speak that you get from Pal trying to create a nice little narrative bow on everything that, you know, some of those voting members are going to, you know, make their great stands in history by, you know, saying that, you know, we don't like where these things are going here, here, and here. Um, but, you know, Trump, to me, the big my big takeaway is that Trump has succeeded at getting the Fed to do exactly what he wants, which, you know, isn't a big surprise. Um, but it goes back to just, you know, that that wonderful independence that the central bank has. >> If that's all it takes to bully the Fed to get what you want, just some tweets and stuff, that's pretty remarkable. Um, >> we never saw the end of that investigation over the Fed the the the Fred renov Fed renovations either, right? The bill never got whatever Bill Py was cooking at either. So, who knows what some of that >> maybe that was the bargaining point, right? We won't mention the Fed renovation again, just force down policy more, which of course the Fed doesn't care less about, right? They don't have any actual principles on monetary policy. They'll do what makes the Fed looks good. So, I guess they've decided that they can do that and get away with it and still have the Fed looking good. But, Connor, that's a that's a good theory, right? The idea here is let's just get to the point until we get Fed's uh Trump's chairman in at the Fed and then the wheels come off the propaganda train, right? Where we can then talk about the real state of the economy and that sort of thing because hey, look how look how Trump's guy screwed it up. I don't I don't believe that a new chairman, even if he's Trump's guy, is going to be fundamentally different. There's a lot of institutional inertia at the Fed, right? you just don't come in and do whatever you want. Um, but yeah, I could see helping get even more dovish policy uh in that case. Now, let's look at a little bit at how they were framing the the issue of the economy. Uh, one thing that we've made fun of this a lot in the last few weeks is the fact that the Fed has stopped calling itself data dependent. I don't think he used that phrase during this press conference. Um because essentially what data uh because I mean this government shutdown is maybe the best ever because it just made it made kind of a mockery of the Fed and their policies and their claims to be data dependent. Uh but they did say oh well we have September's data I mean which was months ago. We have September's data on PCE right their favorite measure of inflation that was 2.8%. Core PCE was also 2.8%. That's essentially what they're going off of, a inflation rate near 3%. And then they come around and keep saying, well, inflation's heading back to 2%. Based on what they they they never actually say, this is just kind of an assumption they make. They do say that uh that the economy continues to grow at a quote unquote moderate pace and consu based largely on consumer spending remaining quote unquote solid. Now, later in the meeting, he admits that most of that's being driven by rich people that uh oh gee, well, normal people maybe aren't spending as much. And then if you look at the New York Fed's own data on spending, delinquencies on auto loans and credit cards all shooting up to like 15 20 year highs. So, uh yeah, I don't I don't think uh consumer spending is necessarily the the best measure of how the uh average consumer is doing. But they did make some admissions saying that well here's another thing. Now that they're no longer data dependent because they don't have this data. Uh Powell on two different occasions referred to his quote unquote vast network of sources um where they [laughter] where they were talking about oh well we've got all of these organizations out there that tell us about the economy. So suddenly anecdotal evidence is amazing again. Now I'm not against anecdotal evidence. I think it can tell us a lot. But the Fed has usually historically said, "Well, we've got all this great statistical data with the estimates and the seasonality and everything." Now they're what they're saying is, "Well, we call people on the phone and we've got some surveys and they tell us what the state of the economy is." Now that they can't say, "Oh, well, we we use the the federal data on employment and this is the number we came up with." They're waiting on still the latest uh employment date, which doesn't come out till next week. So they don't have November data or October data yet that they're using and they certainly don't have inflation data which comes out later in the month as well. So they're all just kind of guessing on that and going off private data but way later in the conference. So he started to admit that okay we're going off September data. The the employment situation maybe isn't as great as I sort of said it was uh earlier in the meeting. And then he starts talking about how, oh well, we think there's systematic biases there in the day. There's a ton of weird admissions during this meeting. May maybe Powell's trying to sabotage the whole show on his way out. Uh, [laughter] but he started talking about how we think there's a a a bias in the data that's really inflating overall employment numbers in the establishment survey. And then he says, we think it's like 60,000. He says, "So if a number comes out soon saying 40,000 job gains, we actually think that's negative 20,000 job gains." So, so Powell's going off on how he thinks actually there's negative job growth in recent months and just seems to take as a given that the economy is losing jobs. And here was my favorite quote, like right in the beginning. This is like 30 seconds in. Quote, "Conditions in the labor market appear to be gradually cooling and inflation remains somewhat elevated." unquote. That's a definition of stagflation. But so he comes up to the podium and says, uh, 10 seconds in. So basically, we have stagflation and but we'll fix it. We'll fix it everybody. And that seemed to be just the overall tone of the whole meeting. I Connor, I mean, did you have some favorite little bits in there that you found to be particularly interesting? >> Yeah, I agree with your your takeaway there. To me, it kind of felt like not this extreme, but kind of like a like if you were [clears throat] ever in school and you had to do a presentation, but you like didn't do the reading or something like that and you have to kind of go up there and make it up as you go. And it felt like that like they they're so used to having, you know, this set schedule of data that they then use whatever that is and it's just like in out in out. Um, and they didn't have that. Like the the uh press release open with like available data says this. it's just they they don't have what they can normally rely on. So he it was a lot more um he was kind of bouncing all over the place a lot more than normally, you know, in his very like he Pal is very good at FedSpeak. He does it in a a skilled way like it's not like he caused a firestorm with it. Um but yeah, there there were a number of those moments. There was one where he was talking about how without tariffs inflation would be in the low twos and he just said that matter of fact and it's like site your work there. Like how do we how do we know that? Um, but yeah, I don't know. And I guess to me, like, and to kind of The's point, like I do see this as generally being a positive thing. It feels like a little bit a little crack in kind of the the facade of this, you know, almost godly um organization in DC that's just, you know, all these geniuses looking at the economy and steering this this huge uh central bank. It's like, no. And actually some of the data that they're not used to or that they're used to having is unavailable. They're a lot more wily and all over the place as we kind of saw. >> Yeah. The whole thing seemed a bit curious and just um it seemed as you say right a lot less buttoned up in terms of its political messaging. Uh so what did you think? I mean you obviously you better than anybody know that this is all a political exercise. Do you think this succeeded uh in its political goals this meeting uh or is is there are there cracks on the surface that you're noticing? >> I I don't think that um you know Powell has made himself the punchline of trying to think of the equivalent of like late night talk shows since they're relevant now. But like you know I I don't think we quite yet got to like complete infamy which you know is itself kind of a a mark of success um for something like that. But I I do think though that the the response from like say like financial Twitter things like that um kind of recognizing that this is of you know a far more dovish release than what was expecting. Um again whether that's a good or bad thing kind of depends on on how much you agree with Donald Donald Trump on these sort of things. But like you know I I I think that the people that follow this stuff were not buying what the you know the the calm and steady sort of facade that Pal was presenting here. And one of the other things um I thought was interesting is that Pal's putting kind of all of his eggs in the basket that the inflationary pressures that we see right now are one-off events from from tariffs. Um and even though we you know he's got his own little separate measure, right? We can separate that from this and everything looks fine. I mean he he at near the end of the the the meeting I mean he he's he's asked specifically about inflationary threats. He says like oh it's it's it's you these are onetime things. We're expecting to go down. It's on inflation. It's tariffs driving this inflation. Well, the question is what is if what if it's not and then this entire thing like that's that that to me that is the entire bet from Powell's Well, I mean that that's that's the the policydriven bet here. The the secondary political bet, right? Is is that he can kind of prevent, you know, some wild man taking over with the Fed or whatever. I would bet something like that. But I think right now though that that's that is if if you're trying to give PAL every benefit of the doubt then which again no reason you should but like if you were um then then you you would truly believe that all the the the number one issue pushing the Fed right now to to take this you basically embrace a stagnation environment as as you you you mentioned uh Ryan is the tariff question and that does make one little kind of interesting dynamic that is not Fed driven is you know what what does happen if the tariffs go Okay. Right. Like what what happens if Trump does lose the Supreme Court sort of stuff like what what that ends up having on the other side of it like you know the long-term ramifications there and whatever. But but I I do think it's funny though is that like if you take to to the extent that you take the data from whatever sector you're dealing with from whatever aspect the economy deal you're dealing with right now that the one common core that you can you can identify as the biggest issue right now is the the the the tariff policy that's been the spearheading the number one policy tool economically of the Trump administration for the first year and and and that's what they're trying to double down on now. and that the monetary environment around it is is going to be very interesting particularly if that pressure is not uh uh you know magically waved away by a Supreme Court victory that would lend to its own uh bountiful uh tren of you know angry uh Trump Trump tweets. one uh they they tried to get him on a couple of questions regarding the uh the Supreme Court case on this over overseeing the one one reporter I can't believe he thought this was a good question to ask maybe his boss has told him you have to ask this question to us he said uh can you comment on the pending Supreme Court case and what are your views on how the court should rule I'm like there's no way in hell he's answering this question which of course he did not uh and however uh going back to you mentioning Connor his newly invented stat that he used both at this one and at the last FOMC meeting. This is the the new invent the new inflation measure known as uh CPI minus tariffs. Right? So he's got he he's never explained how exactly this is measured. just throws out this this new number that's what would inflation be without tariffs and then he he throws out some lower number and he said you weren't like paraphrasing he literally said without tariffs inflation would be in the low twos you know who can argue with that level of precision and he later then though was asked since he apparently has this great insight into how the economy would perform s tariffs a later reporter asked Um what would we all you know we can all agree that tariffs are weighing on the economy. So what would your estimation be of what economic growth will would be or will be if tariffs go away you know after the Supreme Court decision knocks them down or whatever. And Powell's answer was I don't know I can't help you there. That's that's just data we don't have. So he he can magically figure out the inflation rate sands uh tariffs but has no clue how the larger economy uh might be affected by tariffs. So I I find that suspect. I am skeptical that he actually has a solid number of what inflation would be without tariffs. But though man you are so right. the the one if there was any one string running through this press conference, it was that tariffs are the cause of all of our problems. And don't blame us at the Fed. If there's high inflation, it's the tariff's fault. If unemployment is or if employment is cooling, it's the tariff's fault. So maybe there's just kind of this secret war that we're witnessing between Powell and Trump where the Fed blames everything on tariffs and then Trump comes back and badmouths Powell and talks about how I can't wait to get that guy out of there and we'll get my dude in there soon. I I don't know. Maybe it's like a cat fight and it's all just very uh Washingtonian in its tone and style. Uh but that I maybe that's just the number one takeaway from this is blame everything on tariffs. Uh otherwise everything would be fine and the Fed's doing a great job. I think maybe that sums it up. >> This is what uh we talked about back when the tariffs are first coming out. Well, I we started the show a little bit after that, but this was a point we were all making early on is that you're just handing them this way this thing to use to blame any economic trouble that we may have going forward. And it was just it's just not worth it. But it will be and kind of kind of getting back to what I opened with. I'm very interested to watch how this changes once we get a new Fed chair. I think it's an interesting dynamic where uh I don't remember all three of the uh there's like three big contenders right now, but I think Hasset the the head of the director of the National Economic Council is like the the front runner what most people are expecting. And this guy, he just goes on the news like every day whenever there's any kind of new economic data. he goes does these cable news hits just finding any way to spin this is like this is the greatest economy ever and that I think is the metric that Trump's looking for a new Fed chair but that's like the opposite of what you're supposed to do as a Fed chair so whenever he gets in there like he's either going to have to pivot completely kind of like uh Mirren did and just act like oh no just pretend that he never said anything that he said before and that you know it's just all data driven and just kind of take on um the role which I think Trump is not going to like or he has to kind of keep keep up the act that uh is you know responsible for getting him that job which is just going to freak everybody out because it's going to really start shattering all of these illusions about the Fed. So that's uh that'll be early somewhat early next year and I'm just I'm very interested to watch that. >> No, no, the the Fed definitely deserves Kevin Hasset as a chair. I mean like this this guy is like your you cannot create a dopier um uh figure head for a financial body. I mean this the same dude like he wrote a DO 3600 uh right before the the the.com bust, right? Like I mean you you put in a you you bring up just like what are the ultimate sins of like you know talking head financial topic talking heads. I mean like it's it's it's this guy right here. He's exactly who the Fed Fed needs as a chair. big big fan. All in. >> So, will these FOMC meetings be even more absurd and fun after Trump gets his guy in? Okay. [laughter] >> All right. It's gonna be great. I think you're going to get even even not even attempt at like, you know, if if you if you like post data Fed, you're going to love Kevin Hassen. [laughter] And that so that was like this is what was in my mind when I was watching Pal because I think he's trying to sort of maneuver his way into being the foil of that that everything is calm and Fed speaky so that when Hass comes in and it gets crazy they could be like oh this is just like the politicization of the Fed is just an isolated thing that Trump's been bringing around and if we just get rid of all the Trumpers we can kind of go back to how it works. I think that's what they're attempting to do but the whole thing is not trending in a great direction for the Fed which is good. >> Yes. And we should be very clear that we don't fall for it, right? It's always been BS. It's always been totally politicized. It's always been this way. It's just they hid it much more successfully before Trump. And so I right neither though nor I think that the Fed is literally more of a circus after you get Trump's guy in. It's just more apparent. It's just more out in the open. And I mean I don't have really a problem with that happening. I I think it really uh it shows a breakdown in the propaganda and I think the public becomes more aware of how things are really run. The problem is they might still think that things were run properly in the olden days. I think that that was a time of more honesty and civility which it certainly was not. Um but okay, so I look forward and I just say that's why I loved MAGA's um the their when they went to war against Lisa Cook. Like I thought that was great and unfortunately that seems to have kind of petered out at least for now. But like that that's what you want is like for these to these right-wingers to be like, "Oh, all the Biden appointees are these like extreme political uh political appointees basically, which is true." And so I was like really hoping that would keep going and maybe as uh the Fed gets kind of more centered in our discourse with the new chair coming that'll that'll come back. But like I I really want it to be like the Supreme Court where you have these appointees versus these appointees and it's very politicized. I I think that would be productive. >> Well, I one of the great things about the Trump administration, I don't know if I've mentioned this before. I have like a half-written column on the topic. I don't think I ever finished it, but just the the whole idea of you may criticize the man, but you cannot criticize the office. You know, this whole like thing that people say, which clearly was something invented by people in positions of power to limit criticism of people in positions of power, right? We must respect the office even if we don't respect the man. And that there's been a huge breakdown in in that convention I think where now you don't have to hold back like you had to in the past in terms of in order to maintain decorum and all that stuff. You could just come straight out and call people scum and god forbid you disrespect the office or something. I mean who who even cares about that sort of thing anymore? And I know that some people, you know, some romantics from the olden days thinks that's bad, but we're talking political positions here. We're talking the state. These these are positions that are not to be respected. So, I I like that Trump, the age of Trump has produced that sort of situation where we don't have to pretend that these people are respectable uh in any significant way anymore. But speaking of government screwing things up, let's move on to our next topic, which is Obamacare. But maybe they didn't screw it up. Maybe they got exactly what they wanted. And that was kind of the point of uh your article which uh says that okay, we we've been talking recently about how Obamacare was a failure in the sense that healthcare is much more expensive now, but maybe it's not a failure when we look at it through a political lens. And tell us tell us a little bit more, Connor, what what you mean by that. Yeah, this is what I like to do with my articles is sort of take something that's in the news and then use it as an opportunity to talk about a broader concept. And this is a theme we've touched on a number of times in this show that um for all these different kinds of policies, the government will come in and say, "We're going to fix this problem." And they spend a bunch of our money on it. They, you know, hire a bunch of new bureaucrats. They trample on our rights even more. And then the problem just gets worse. And there's a tendency uh amongst a lot of like libertarians and more like free market oriented people to look at that and be like, "Oh man, like they're just the government's just terrible at fixing all these problems." And I I like that is a reasonable conclusion if you take them at their word that they're actually trying to fix these problems. But if you actually look like one step below the surface, they're messing up and, you know, making mistakes and writing policies in ways that don't actually fix these problems consistently in ways that just lead to them and their cronies getting a tremendous amount of money. And it's just like I think Tom Woods had some uh quip about how like if it was just mistakes they would occasionally you know uh or if it was just errors then occasionally they would be you know have errors that pivot in a productive direction and like you know towards freedom and towards free markets but it's always in the same direction. And so the uh story that I wanted to kind of focus in on was Obamacare because that's in the news right now. we had these ACA um these subsidies that were rolled out as an emergency these temporary relief efforts during the pandemic. Um but now you know years later um people are completely dependent on them to afford healthcare and so that there was just a two votes in the Senate earlier today and they both failed and it's basically that was what the whole government shutdown was uh basically centered around. Um and that debate has continued after the government opened up again. these subsidies are going to expire at the end of the year and a bunch of people are going to be left out in the cold. Um, and the Democrats want to re-up them and maybe, you know, beef them up a little bit. And the Republicans, um, you know, they don't want to cut them. It's it's never cutting spending. It's about, oh, we want to kind of maybe maneuver, uh, some bring about some changes that us conservatives would like. Um, the most like appealing uh, proposal is some there was a bill to transfer it to basically a health savings account. um which I think is that's the best of kind of the available options, but that just doesn't seem very politically realistic. Um I think that these are going to probably lapse and then, you know, there will be some pain and it'll get a lot more media attention and then the Republicans will uh roll over and there will be once again uh more spending. So writing this I was motivated to write this article because once again a theme I harp on a lot. The right has just completely seated this argument to the left that like we that because there the reason that there are problems with people affording healthcare right now is because we have not spent enough money. And if you actually look back at it and you look back at the history um of healthc care policy in this country, going back a hundred years or so since it really started during the progressive era, all of it has been it all makes the most sense if looked at as a way to move as much money as possible into the healthcare industry and the pharmaceutical industry and the health insurance industry too. And like so I I wanted to sort of tell that story once again. It's not just that they came in back in, you know, the 1890s when healthcare was super cheap compared to where it is now and tried to make it more affordable for everybody and then they messed up so badly that it's like we're now in our current mess. It's like no, it was all cronyism the entire way. And then specifically, if you look at uh the census data, it was in the early 2000s that it seemed like this whole scam started to falter because for the first time, healthcare prices just got so high and insurance uh premiums just got so high that fewer and fewer people were buying insurance. The number of people with insurance started dropping. And that's like that was a huge emergency from the standpoint of these cronies like running this whole racket because the thing only works if money keeps moving in to moving into the system. And I think it makes a lot more sense that Obamacare was brought out as a ploy to help that. It you know it it required every American to to buy insurance. And basically once again it's it's the same thing we were talking about with the affordability crisis the other week. It's the same pattern. government constrains the supply of something and then just pours all this tax money into it which ratchets up demand and then the cost explodes. That's why like all these most important industries are so unaffordable for people and healthcare is the chief example of that. So, of course, healthcare costs just skyrocketed after um Obamacare. And I guess it's it's tempting for a lot of free market people to be like, "Oh, so it was a complete failure." But I believe that if you don't take them at their word and you actually look at the the broader context of all of this healthcare policy that all of it makes the most sense if motivated by you know not actually making things better for everyday Americans but enriching their cronies and you know empowering health bureaucrats in the federal government. If you look at it through that lens, then Obamacare was a huge success. And that's that's essentially what my column is about. >> Well, I mean, I'm looking out at the the political state of the healthcare debate right now, right? And if if prices continue to go up, there's just going to be more calls for uh well, we need a new solution then. And this was always kind of my theory going back to 2010 was when they were doing Obamacare because even then some people on the left of the Bernie bro types were saying well this is a nice stepping stone to more affordable healthcare but in the end it's got to be Medicare for all. It's got to be single-payer socialized medicine, which by the way, just as a side issue, is just the worst type of government medicine. Americans have been pounded with this idea that singlepayer healthcare is the only type of government controlled healthcare. It's not, of course. It's actually very rare. You get that in Canada and the UK and in the Anglosphere is really kind of the only place you get it. In most of the world, yeah, they have government provided health care in lots of ways as a backup, but you can purchase private health care. I mean, this is this is on the continent of Europe. This is the common way of doing it. But these people want to give want to force feed you the absolute worst kind of socialized medicine which is there is one provider one government controlled provider and if you try it and you have to leave the country in order to get any other choices which is just like a nightmare scenario. What are we going to do? We're going to be flying to like France to get health care if uh that sort of thing is pushed through because they have a freer health care system than either the UK or Canada. So that's the last thing we need in America. But that seems to be the next step. Oh, look, we tried. It's still unaffordable. Time to move on to the next thing. And though, I mean, I'm sure you noticed that these people are out there all along, right? The left is always pushing for a new step, a new socialization of policy. I I mean, I assume they're out there and they're ready with a new plan for even more socialized medicine. Um, but maybe they're just smart enough to not mention it. right now in terms of actual sort of plans, it's it's more just kind of status quo, keep this thing together with, you know, duct tape and bubble gum because you don't want to dare suggest Obamacare is not working. Um, and so everything right now is just focused on just continuing the subsidies, no reforms, yada yada yada. And as Connor mentioned, kind of the big radical alternative from Republicans is um basically keeping the same sort of spending but doing it through a health savings account, which I I I do think would probably be like if if you're going to get over the sort of psychological, you know, power, political power of like the gimme sort of system, then, you know, having something that's an account that you control versus a a government program probably does create like that's probably the best way of challenging um that sort of dynamic towards, you know, for the masses there. So, you know, it' be interested to see how that ends up playing out. And actually push comes to shove here. Uh but I I do think it's it's it's it's I think Obamacare really is like one of the like best illustrations of the modern political environment like you know the fact that the Supreme Court was completely inept in terms of any sort of reforms you know with with the just the the absolute you know you know you know how how how horrible the entire process was from the get-go. The way that it has been an absolute money bomb for special interest groups. the way that people lied shamelessly, bragged about it, got caught bragging about it and had nothing go like it's just it is the perfect single, you know, issue. Funny just how modern politics operates. It's a gift that could keeps on giving. And I think, uh, you know, the points that Conor was making in terms of how, you know, this is exactly what they wanted from the get-go. I think you're absolutely right in the situation. >> I would add to that that the Republicans, the opposition party rail against it and then once it's implemented becomes untouchable. Yeah. >> Absolutely toothless. Yep. >> Yeah. Yeah, we've seen that in so many things, right, with Washington, another way that Washington is so much worse than state politics and that I mean, I don't know about California, but in most states, you pass a law, it's a disaster, people get poorer, people hate it, they will actually repeal legislation. Uh they will actually respond to public demands for changes in legislation in Washington. Once something's in place, man, it is there forever. And as you say, Connor, it's always though in the direction of more government power, more regulation, more taxation. You never seem to get policies in place that are unmovable when they embrace free markets. Those things are always up for debate, always up for repeal. It's only once, oh, sorry, we got this more regulated version of healthcare in place, Obamacare. It's there forever. can't do anything about it unless it's replaced with something even worse from a market perspective. and just just another way that Washington DC is just absolutely awful. Even com I mean other we've the states prove that it is possible to have like functioning sort of democratic governments which right I'm not like a big fan of that sort of thing but the the sheer scale of Washington and the way that interests work there where it's always in their favor. I mean it's just a larger macrocosm of what your article is about. It's always the big interest. They get what they want and then it's unchangeable and it's there forever unless you make some trims around the edges that ultimately end up benefiting them. And Obamacare just seems to be a perfect example of that. All right, guys. Well, I think that's going to be all for today. Uh we do thank everyone out there for listening. Uh go ahead and head on over to mises.org. That's mises.org and click on subscribe or click on donate here before the end of the year if you like what you hear here. But uh we will be back next week with more. So we'll see you then. [music]