This week we also got, uh, indication that inflation continues to run pretty hot, meaning it's rising faster than expected, Stacy, and I know you've been looking at different angles of this.

Yeah, so, uh, obviously we got inflation numbers.

Uh, inflation up 3.7% across the economy, but in a lot of places, uh, much higher.

Gas prices up 34% over last year.

Um, now Social Security payments did get a bump, so starting on December 31st, uh, payments will be up by about 3.6%, so almost keeping up with inflation-

We like stories.

It's, it's a great...

It's a...

And I know you've been looking at different angles of this.

Yeah, so, uh, obviously we got inflation numbers.

Uh, inflation up 3.7% across the economy, but in a lot of places, uh, much higher.

Gas prices up 34% over last year.

Um, now Social Security payments did get a bump, so starting on December 31st, uh, payments will be up by about 3.6%, so almost keeping up with inflation-

We like stories.

It's, it's a great, it's a...

I love the Beige Book.

This week we also got, uh, indication that inflation continues to run pretty hot, meaning it's rising faster than expected, Stacy, and I know you've been looking at different angles of this.

Yeah, so- Uh, obviously we got inflation numbers.

Uh, inflation up 3.7% across the economy, but in a lot of places, uh, much higher.

Gas prices up 34% over last year.

Um, now Social Security payments did get a bump, so starting on December 31st, uh, payments will be up by about 3.6%.

So almost keeping up with inflation-

We like stories.

It's, it's a great, it's a...

Mm-hmm

... are retired and you have saved your pennies and worked really hard and you're not making a wage right now, um, then all of a sudden it's like, "Hey, wait a minute." Like, this is the...

You know, this is one of the big problems when inflation really takes off.

Even if wages keep up, and in cer- you know, in some countries, like when there's a big inflation spiral, wages will rise a lot, too.

The job market's hot.

Everybody's jumping jobs, getting raises.

Uh, there's the wage price spiral.

Sure.

I keep joking that my hockey sticks and maple syrup are going to get a lot more expensive as a result.

They will actually probably get a lot more expensive.

Yeah, the trade war really escalated, I think, in a way that nobody expected.

And it will affect both sides of the border, of course.

Obviously, it's going to affect Canada's economy a lot more.

But for American consumers, they can expect auto parts.

This is really going to hit the auto industry.

And it's kind of across

Yeah.

It was forward guidance of a sort.

I think maybe ...

I, I mean, the market certainly reacted that way.

Interest rates rose on his speech.

It certainly reacted as if it were forward guidance.

It may be that he's just signaling that his style of forward guidance is gonna be different, that the market's not gonna get as much transparency, as much information, as much disclosure as it did under Ben Bernanke, Janet Yellen, and Jerome Powell.

Is there a difference, difference here and, and does history matter?

Yeah.

It was forward guidance of a sort.

I think maybe, I mean, the market certainly reacted that way.

Interest rates rose on his speech.

It certainly reacted as if it were forward guidance.

It may be that he's just signaling that his style of forward guidance is gonna be different, that the market's not gonna get as much transparency, as much information, as much disclosure as it did under Ben Bernanke, Janet Yellen, and Jerome Powell.

Uh, so it may be that he's easing us off of forward guidance, but this definitely seemed forward guidance adjacent, if not full on forward guidance.

Is there a difference, difference here, and, and does history matter?

I keep joking that my hockey sticks and maple syrup are going to get a lot more expensive as a result.

They will actually probably get a lot more expensive.

Yeah, the trade war really escalated, I think, in a way that nobody expected.

And it will affect both sides of the border, of course.

Obviously, it's going to affect Canada's economy a lot more.

But for American consumers, they can expect auto parts.

This is really going to hit the auto industry.

And it's kind of across

Stacey, I speak here on behalf of the labor market, which would like some love from the central bank, which it does not seem to be getting.

Well, I think that's right.

I mean, I do feel for Mr. Warsh because he is a little bit between a rock and a hard place.

I mean, the last jobs report we got, not great.

You talked about it, Kai.

The economy lost 23,000 jobs.

That's not good.

What Walsh decides to do and what the bond markets decide that they want Walsh to do matters across the economic spectrum.

Right

... and then you're down to things like expectations, which can be really sticky.

You know, the classic example is if you own a restaurant and you're printing menus, you're anticipating inflation, so you print prices a little higher.

That stuff is hard to get rid of.

What Warsh decides to do and what the bond markets decide that they want Warsh to do matters a- across the economic spectrum.

Oh, yeah.

For anyone who wants to buy a house or charge something on a credit card, the interest rates, they really affect us all.

And it does sometimes feel like it gets kind of wonky and esoteric, but it really affects our lives.

There's something called funflation taking place.

Yes, there's a little bit of fun inflation taking place because things have gotten so expensive.

Obviously, since the pandemic, we've spent a lot more money on experiences rather than just goods.

We've we've tended to spend on services.

Demand for services is up.

Prices for services are up.

Even going to see the Odyssey this weekend could cost a lot of money.

we congratulate you?

Discuss.

I think that's a good point.

It does seem like the tariffs are dead long with the tariff situation, for sure.

I think the difference is, though, for consumers right now.

I think consumers are in a very different place.

We got numbers from the Tax Foundation that in 2025, tariffs cost households about $1,000.

I think with high gas prices, inflation continuing to climb, wages not keeping up with inflation, I think consumers are just in an increasingly... difficult situation trying to pay for things.

Stacey, the next bullet item on my list of things to talk to you about says, just back to what Courtney said, the bullet point literally is oil, question mark, war, question mark.

There's something called funflation taking place.

Yes, there's a little bit of funflation taking place because things have gotten so expensive.

Uh, obviously, since the pandemic, we've spent a lot more money on experiences rather than just goods.

We've s- we've tended to spend on services.

Demand for services is up.

Prices for services are up.

Even going to see The Odyssey, uh, this weekend could cost a lot of money.

Right

Right.

He's delivering a message that things are just gonna be a little more secretive, a little more kinda behind closed doors.

But he did give us one really big hint, which was he said, you know, quote, "This committee will deliver on price stability," which is essentially Fed speak for we're not gonna lower interest rates.

But I do actually think even if he came in planning on lowering interest rates, that does seem like an appropriate response to this moment because jobs have looked stronger in the last couple months, and inflation has looked higher.

So both of those things would be conducive to raising interest rates.

Uh, so I don't know what his initial plans were, but it seems like he's definitely moving in a hawkish direction.

Um, but, you know, uh, uh- Compared to before the war and where we are now, how would you characterize the economic impact?

I mean, it was huge.

You know, is that the right read, do you think?

I do think that's the right read, yes.

And I think the dot plot famously or since Bernanke through Yellen and Jerome Powell, I feel like the Federal Reserve has been moving towards more and more transparency and openness.

And I think Warsh was delivering a message.

He did not participate in the dot plot, we think.

He's delivering a message that things are just going to be a little more secretive, a little more kind of behind closed doors.

But he did give us one really big hint, which was he said, quote, this committee will deliver on price stability.

But, you know, compared to before the war and where we are now, how would you characterize the economic impact?

Yes.

And if you're asking a certain question, I feel like it doesn't get at everything.

And I think the value of the stories, in addition to their seductiveness, is that they can bring out nuance that sometimes- ... gets missed in the data.

Like, if all, if you just look at job creation numbers and you don't necessarily go down into which sectors are creating jobs, you think one story about the economy.

But then if you look at it and it's like, "Wow, all the jobs are coming from this sector," it, it gives it nuance.

So I think the Beige Book can also, it's also a leading indicator, and a lot of data's lagging, so it, it gives you hints about things that are happening.

And let me just read you one of these hints, because I did wanna bring this back to jobs.

Um, so you have a big idea that I really love, and I hope we can make part of this show.

And we're going to ask the question, is inflation going to ruin your summer? Let's get into it.

Okay, Justin, I am very excited to be talking with you right now because Kevin, we have a new Fed chair.

Kevin Walsh was just sworn in as the new head of the Federal Reserve, head of the Central Bank, replacing Jerome Powell, who has served his eight years, who is still going to stay on at the Fed as a Fed governor.

He could stay for another two years if he wants to.

But of course, Kevin, Kind of in the background of all this stuff, a big question looming is Fed independence.

We've talked about this in the past.

And obviously, the president has just put kind of put the screws to Jerome Powell about lowering interest rates, has put a ton of pressure on the Fed in a way that I think is concerned a lot of people.

Yes.

Mm-hmm.

Because during the pandemic we were all home, a lot of socializing, education, all of that happened necessarily, in a lot of cases, entirely through screens.

Add to that sort of the growing world of social media, the growing world of games like Roblox, and you've got a generation that sort of moves between worlds in a way that other generations don't.

So think there are a lot of worries about that.

Also, attention spans with the screens.

There are a lot of worries about alphas' brains, essentially.

Their reading comprehension, their ability to interact with people outside of screens, like in real life.

They'll be our customers for, for life." Is that the sense that you're getting from both Generation Alpha and these companies? How, how susceptible is all this to economic shocks?

How worried ought we be?

I think we should be pretty worried.

I mean, obviously the big kind of headline for this inflation report was oil, fuel, the Strait of Hormuz, fuel's up 28%, but there was a lot of other stuff in there.

It wasn't just oil pushing everything up.

I mean, food prices are up, shelter prices are up, and for the first time inflation is rising faster than wages, the first time this has happened in years.

"I'm glad there are 12 of us"

... 12 members of the Federal Reserve who vote.

It's not just him.

How worried ought we be?

I think we should be pretty worried.

I mean, obviously, the big kind of headline for this inflation report was oil, fuel, the Strait of Hormuz, fuel's up 28%, but there was a lot of other stuff in there.

It wasn't just oil pushing everything up.

I mean, food prices are up, shelter prices are up, and for the first time, inflation is rising faster than wages, the first time this has happened in years.

I'm glad there are 12 of us, sure

... 12 members of the Federal Reserve who vote.

It's not just him.

But what else do these numbers say about the economy?

I mean, you're absolutely right.

Obviously, the first thing everybody thought of when they saw these numbers were gas prices.

You know, gas prices are up more than 20%.

It's a lot.

I mean, in California, I think you guys have the highest gas prices in the country right now.

So everybody's feeling that, and businesses feel it, and consumers feel it.

So what can consumers expect from the economy in the near coming months?

Mm-hmm.

Because during the pandemic we were all home, a lot of socializing, education, all of that happened necessarily, in a lot of cases, entirely through screens.

Add to that sort of the growing world of social media, the growing world of games like Roblox, and you've got a generation that sort of moves between worlds in a way that other generations don't.

So I think there are a lot of worries about that.

Also, attention spans with the screens.

There are a lot of worries about alphas' brains, essentially, their reading comprehension, their ability to interact with people outside of screens, like in real life.

Also, their ability to respect authority, interact in social situations that are offline.

They'll be our customers for, for life." Is that the sense that you're getting from both Generation Alpha and these companies? How, how susceptible is all this to economic shocks?

And the real debate then is how short is the short run and how do we make it less painful?

I did notice something along those lines in the jobs numbers that came out this week, which is that all told, it was a positive jobs report, which is great.

115,000 jobs were added.

But when you look deeper in the report, the jobs that were added were in health care, which has been growing a lot, but also retail and warehousing.

And a lot of the jobs that were lost were were in IT tech and financial services and things like that.

So those jobs are like, I feel like tech and financial services were jobs that paid a lot better and required a lot more education than necessarily jobs in warehousing and retail.

I mean, it depends on the job, but it does seem like there's a little bit of like that sort of freeing up the economy for better jobs.

tell me what the bet was.

Mm-hmm.

...

there has been kind of alliances, like you said, between China and Venezuela and Russia and Iran and Cuba, and this kind of gets in the middle of all of that, and because Venezuela has been such an important oil provider for a lot of countries that aren't necessarily friendly with the U.S., I think that is right at the center of this.

Why don't the markets seem to care?

It, that is a really interesting question.

It is very puzzling what the markets care about sometimes.

I think a lot of this maybe has been priced in, and there's so much uncertainty around how much of these words will translate into actions.

I think it is really difficult to say, and the markets may be hanging back a little bit and focused on other things.

Mm-hmm.

Just meaning that one part of the economy, the upper leg of the K, is, like, kind of getting wealthier and wealthier and wealthier.

These are people who have money in the markets.

Then there's a part of the economy that isn't necessarily super invested in the markets, that is not invested in AI, just like the regular working person.

That is the leg of the K that's going down.

And for those workers, things are pretty rough.

I mean, yes, inflation isn't so bad, but if you look across, like, to when the pandemic started, food is more than 30% more expensive than it was.

Wow.