D (2:24)

Mortgage rates are down despite the Fed. I mean, Scott, you got to work in this guy. He's got some real mental problems. No, he has something wrong with him. It's just sweet. I'll be honest, I'd love to fire his ass. He should be fine. Guy's grossly incompetent and he should be sued for spending $4 billion to build a little building. I'm building a ballroom. That's going to cost a tiny fraction of that and it's bigger than the whole thing put together. You got to work on him, Scott. The only thing Scott's blowing it on is the Fed. Because the Fed, the rates are too high, Scott. And if you don't get it fixed fast, I'm going to fire your ass. Okay? I can't tell you, Scott. Sir, don't fire him. Sir, please don't fire him. He's got three months to go. Don't fire him. I want to get him out. Scott, please. He's a voice of reason. You're very lucky you have him, I'll tell you that. Done a good job. I think Howard's a little bit more for firing. Right. Howard. I think Howard would say get him to hell out of there.

B (3:42)

Part of that is just standard stuff, right? But the interesting thing in there, I mean, standard stuff for Trump. Standard stuff for Trump. Standard stuff for this crazy time that we're living in now. But. But the interesting stuff in there is when he starts talking about the Treasury Secretary, right. Scott Besant, who. Who is sort of like the Wall street whisperer of this administration. Right. So, Catherine, can you just tell me a little bit about, like, just. Just kind of bring us back up to speed on. On the role that Besant has played in this crazy story over the last ten months or so.

C (4:11)

Well, to be clear, Trump doesn't really need to fire Jay Powell because Powell's term as chair is ending pretty soon and there's been a lot of jockeying behind the scenes for who is going seed Powell. Besant is one of the names that had been raised as, like, he was really gunning for this job. Apparently he's no longer. Well, Trump says he's no longer interested in the job. There are a bunch of other people in the mix. Kevin Hassett, who is also in the administration and has been doing his best to suck up to the President in public and presumably in private as well. So there's like a lot of people vying for Trump's attention, and not just for this job, but also for influence in general over policy, including influence over economic policy. Besant is not only has not only been vying for that particular position, chair of the Federal Reserve, which is one of the most important powerful jobs in the world, but also fighting with Lutnick, for example, Howard Lutnick, the Commerce Secretary, over influence over trade policy. Lutnick, for those at home who may not remember, had wanted Benson's job to be Treasury Secretary. So, like, everybody is sort of vying for influence with. With Trump. They're vying for particular jobs that they think will be upgrades. Of course, in the process of, like, trying to get those jobs, they are, in many cases, I think, kind of destroying the things that make those jobs powerful. Like in the case of the Federal Reserve. The reason why that is one of the most important jobs in the world is, is that the Federal Reserve has been credibly politically independent. And so people like, trust and listen to what the Fed signals it's going to do on interest rates and what it's going to do with the money supply. But if in vying for that job and trying to get Trump's favor, they destroy the political independence of the Federal Reserve, which it seems like Besant and others have sort of been willing to do, then, like, what's the point of the job anymore? I mean, I guess it still has plenty of prestige, but it's still a.

B (6:19)

Nice thing to be able to put on your business card.

C (6:21)

Yeah, it's like it's a feather in your cap to be chair of the Federal Reserve. Certainly you'll get a lot of big speaking fees afterward, but in this case, what's. I think the other thing that's interesting here is that Besant and Hassett and other members of this administration have been publicly suggesting that the Federal Reserve shouldn't be politically independent, that they. That, or at least that the Federal Reserve should cut interest rates because Trump wants them to cut interest rates. And here Trump is saying, like, Besant is standing up too much for the Fed. Right. He's saying, like, I shouldn't. He doesn't, you know, Bessant doesn't think I should fire Jay Powell, but Lutnick is on board. Again, this issue is sort of moot because Powell's leaving pretty soon anyway. My guess is that Bessant knew that firing Powell, as Trump had wanted to do, like, very early on after he got back into the White House, would disrupt markets and convince the President, don't bother. Like, he's going to be gone soon anyway. So just wait him out and appoint someone else and that'll be much less disruptive. It'll be much less likely to make the market crash. And there were times when they were like rumors or Trump had indicated that he might try to fire Powell and markets did like show it.

B (7:39)

Yeah, that's what's so fascinating to me here because I mean those are some of the moments that stand out to me from this storyline before is Trump would like trial balloon this thing about firing Powell and markets would swoon and pretty quickly he would kind of back off of it or walk it back in some way or another and markets would quickly be like, oh, that was a close one and then they would recover. Right. And like, I guess the thing that I can't quite wrap my brain around and maybe you can walk me through it a little bit is, is why it is that markets seem so much more content with a situation in which Powell walks off the job normally and then Trump sticks in a crony who will be more responsive to his political whims and risk letting inflation get out of control to run the economy hotter. You know what I mean? Like, like if, if that pain is the same whether it comes sort of like according to the natural cycle of Federal Reserve chairs careers or abruptly. Right. I mean like isn't it, doesn't it all kind of come to the same thing as far as the economic dangers are concerned?

C (8:44)

Yeah, absolutely. Look, I want to be clear. If inflation and affordability are your number one concern in this economy, all of this should be a five alarm fire. If Trump in fact co ops the Federal Reserve basically tells the Federal Reserve how to set interest rates, which it's pretty clear he is interested, no pun intended, he wants to do right. He, he, he is leaning on the Fed quite publicly now. He has made clear his criteria for replacing not only Powell, but there's another opening on the Fed board and there will soon be soon be another. He had his chair of economic advisers, Steve Myron is filling a post that that term ends pretty soon too. So Trump will get to slot in a few of his picks and he has made clear his criteria for those people is they should cut interest rates. It doesn't matter what the rationale is, but they should cut interest rates. If he does all of that, if he basically juices the economy at a time when it's not clear that the economy needs it again, inflation is still relatively elevated. That's very bad for long term price outcomes in the United States and you don't have to take my word for it, like there are lots of examples around the world where the central bank has basically been under the power of politicians who are thinking not about long term price stability and other monetary policy goals. They're just thinking about what, what like boosts the economy in the near term to get them through the next election. In those other countries they have had much worse inflation. So I'm thinking about places like Turkey, Venezuela, pre euro Italy, pre euro Greece. There are a lot of places that have had really difficult periods in their country's history keeping inflation stable and you know, having price stability. Because when you put politicians in front of, in charge of the money supply, their incentives are not, not long term price stability, their incentives are to pump a little bit more stimulus into the economy today to help their approval ratings, to help their reelection chances, to keep them popular, all of those things which has problems in the long run. So if you look at like countries that have, that have had more independent central banks or have switched from more independent to less or vice versa, you can see patterns in the data. There's been a lot of research on this. This is why it's important that the central bank such as the Federal Reserve is independent and not just is independent, but appears independent. Because it's like people don't believe that, that a central bank will be willing to, to take the punchbowl away is the term will be willing to do the painful things necessary to get inflation under control. Inflation becomes kind of a self fulfilling prophecy, right? If you don't believe that the central bank is willing to raise interest rates when inflation is getting high, then maybe you're going to preemptively raise your prices and because you're worried your suppliers will also raise their prices. And if you're a consumer, you, you're more likely to like go out and buy stuff sooner rather than later because you're worried about prices getting higher. All of that collectively again is self fulfilling and creates more inflation. So it's not again, it's not just about like, are the people at the central bank such as the Federal Reserve actually operating independently? Are they technocrats who are making decisions on their own? It's do people believe that they are acting independently? And it's not just the leader, the political leader who's leaning on them to cut interest rates whenever possible.

B (12:36)

The wildest thing about all of this stuff to me is that all this stuff that you're talking about and all of these sort of like warnings that you're giving, these are not based on like you Know, our speculation or our fears about what Trump might do, they're all based on the things that he is openly pledging to do.

C (12:51)

Yes.

B (12:51)

These are the things he's champing at the bit to do. Right. And I felt a little bad for, for, for Scott Besant as, as Trump was, was, you know, joking around about firing him and all of that, because I feel like, like Besant has been really invaluable to Trump so far this year as the guy who is kind of like keeping, you know, investors, keeping traders from, keeping Wall street from basically panicking about all of this stuff where he's like, backing Trump to the hilt in public, and then he goes to them in a more private capacity and is like, don't worry, guys, like, nothing too crazy is going to happen. We all know what needs to, you know, what needs to take place and things like that. Meanwhile, Donald Trump is out here just sort of throwing tariffs around and, you know, just like counting down the days until he gets to, to install his new, much more pliable Fed board. And I just, it's, it seems to me that, that, that Bessant has at least in some capacity, kept the effects of gravity from hitting Trump maybe as hard as they would have otherwise. I don't know. Maybe I'm wrong about that.

C (13:45)

Yeah, I think he was chosen to be the guy markets trusted. Right. He was the one who was going to be the steadying force to keep Trump from doing some of the dumber things that Trump is want to do, including having global tariffs, for example. But he, Besson, can only maintain that role if, in fact, he credibly keeps the President from doing some of the dumb stuff that he's doing, which he's not. So I guess the, the question is like he's, he's, you know, using his political, his reputation. He's using his reputation to calm markets. That's why he was brought in. But that reputation is getting steadily degraded over time the longer he is associated with this administration and that the administration is doing things that are bad for economic policy, bad for business conditions, and ultimately bad for markets. The question is, as you say said earlier, like, why haven't markets flipped out more? And I think this is really a puzzle, particularly since tariffs are way higher than had been anticipated last year. Like, you may recall that markets seem to have brushed off Trump's tariff threats going into the 2024 election because people thought, oh, there's no way he'll actually put a global 10% tariff on anything. Like, that's crazy even for Trump. And then of course, we're in a world where we have higher than 10% tariffs and markets have just sort of shrugged it off. And the question is why? And I don't have a great answer for that. I think there are different hypotheses. Maybe it's beside keeping everyone calm. It's probably more like, well, people are counting on Trump rolling back these tariffs, the taco trade. Right. That he'll chicken out and ultimately take the tariffs away. Maybe the Supreme Court will strike down most of the tariffs, as is now widely believed. So all of this stuff, it's like noise temporarily. But eventually we'll go back to, you know, to, to, to normalcy and to the kinds of things that were keeping the economy doing relatively well. Quite well, in fact, before Trump took office. I mean, the other reason why markets are doing relatively well is that it's the AI stocks that are kind of propping everything up, the so called Magnificent Seven. They are responsible for most of the growth in the market. And if you look at how US Stock markets are doing relative to the rest of the world, yeah, they're doing really well here. Again, partly because of AI, maybe because people are not worried about tariffs. You know, not as worried about tariffs as they might otherwise be because they think they're going away. But actually elsewhere in the world, markets are doing even better. So it's like everybody's kind of in this boom period. It may be ephemeral, it may be transitory, to use a term of art, that got lots of people into trouble a few years ago, but it may be temporary or transitory because again, AI investment, not just here but around the world, is really propping up markets. So it's hard to disentangle all of these things. However, the fact that Trump is hell bent on destroying the Federal Reserve, an institution, again, that is responsible for price stability, that's half of its dual mandate. That should be what I would think would be weighing more heavily on markets as well as, again, the overall economy. But maybe people are just hoping that, like, somebody will prevail on Trump to not hire a crazy person or not nominate a crazy person to lead the Fed. And I think you might see more of a market reaction if in fact, like he nominates some obvious sycophant who he can control to the Fed. Like right now, we just don't know. I think we'll probably find out in the next couple of months, maybe even sooner, who Trump wants to put in those jobs.

B (17:45)

Yeah, yeah. Well, I for one am really excited to see Fed Chair Laura Loomer take the reins. I think that'll be a really good time.

C (17:51)

Don't give him any ideas.

B (17:53)

Yeah, I don't know. I can't be the first person to. All right, if you're listening, Mr. President, it was a joke. I was joking. 100% joking. The one other piece of the puzzle, obviously, of all of this, is that we are in this weird moment right now where, like, the stock market is one of the only economic indicators that we are actually seeing happen. And, like, we're in kind of a weird place because we're taping this on Wednesday afternoon. Tomorrow, from the point of view of our taping it Thursday morning, maybe it's already happened. By the time anybody out there is watching this video, we're going to finally get some of the actual, like, lagging economic numbers that were sort of on pause all through the government shutdown. We're going to get, like, September job data finally now in mid November, and, you know, inflation numbers and things like that in the days ahead as well. So that's something that we're going to keep a very close eye on, obviously. I think we can leave it there for now. Thanks, Catherine, for coming on and explaining all this stuff to us, to me, to everybody out there in TV land, and thanks to you all out there as well, for watching, for sharing our content, for subscribing to the Bulwark, for heading over to thebullwork.com to sign up for Catherine's excellent new newsletter, and all the other ones that the rest of us write, too. Thanks for watching, and we'll see you all next time.