S2 Ep1031: Joe Weisenthal: Everything Screams Recession

Summary

The Bulwark Podcast: Season 2, Episode 1031 - "Joe Weisenthal: Everything Screams Recession"

Release Date: April 29, 2025

Hosts: Tim Miller and Joe Weisenthal
Guest: Joe Weisenthal, Executive Editor of Digital News at Bloomberg and Co-Host of the Odd Lots Podcast

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Introduction

In this episode, Tim Miller welcomes Joe Weisenthal to delve into the current economic landscape, focusing on the ominous signs pointing toward a potential recession. The discussion covers a range of topics, including market behavior, tariffs, supply chain disruptions, domestic economic impacts, and the role of cryptocurrency in uncertain times.

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Economic Outlook and Market Resilience

Key Discussion: Goldman Sachs' projection of the U.S. experiencing the lowest economic growth and highest inflation among developed economies in 2025 sets a grim backdrop. Despite this, the S&P 500 remains surprisingly resilient.

Notable Insights: Joe expresses confusion over the market's lack of reaction to traditionally recession-indicative metrics. He states, "Everything screams recession right now by almost any traditional metric," reflecting his skepticism about the market’s current stability despite negative indicators (02:46).

Quote:

"A lot of people are scratching their heads about why isn't the market down more given what we can plainly see in much of the evidence." — Joe Weisenthal (04:37)

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Treasury Secretary's Statements and Market Dynamics

Key Discussion: Tim references Treasury Secretary Scott Bessant's assertion that individual investors are holding steady while institutional investors are panicking. Joe elaborates on this dynamic, noting the significant involvement of retail investors who continue to invest aggressively despite broader economic concerns.

Notable Insights: Joe highlights the dichotomy between optimistic retail behaviors and the pessimistic outlook of institutional investors, questioning, "Is the market missing something?" (04:37).

Quote:

"There is still this belief of a blink or it can't really be as bad." — Joe Weisenthal (08:34)

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Tariffs and Supply Chain Disruptions

Key Discussion: The conversation shifts to the impact of tariffs, particularly those imposed on Chinese goods. Joe discusses how tariffs are increasing costs for manufacturers who struggle to pass these costs onto consumers, leading to potential cutbacks in hiring and capital investments.

Notable Insights: Joe emphasizes the strain tariffs place on small businesses, making it difficult for them to survive under increased costs without the ability to adjust prices accordingly.

Quote:

"They're talking about how they're going to have higher costs but not going to be able to pass it on." — Joe Weisenthal (03:15)

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Domestic Impacts: Small Businesses and Retailers

Key Discussion: The episode examines how tariffs and economic uncertainty are affecting domestic businesses, particularly during critical retail periods like the holiday season. Joe highlights the vulnerability of small businesses compared to large retailers like Walmart, which can absorb the financial shocks better.

Notable Insights: Joe warns of potential disruptions in supply chains leading to empty shelves and reduced product variety, which could disproportionately harm small businesses unable to sustain high tariffs.

Quote:

"Small businesses, which historically have been one of the most reliable Republican constituencies, really lose out to the giant retailers that can afford to take a gamble and can afford to take a hit." — Joe Weisenthal (23:23)

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Reconciliation Bill and Budget Concerns

Key Discussion: Tim and Joe discuss the complexities surrounding the reconciliation bill, highlighting disagreements over budget cuts, Medicaid, SNAP, and tax deductions. Joe expresses skepticism about the administration's ability to effectively manage fiscal policy amidst these disagreements.

Notable Insights: Joe points out that Wall Street may not fully grasp the intricacies of D.C.'s budgetary conflicts, leading to an underestimation of the potential economic fallout.

Quote:

"I sort of think the only thing that Wall street has really thought about is, oh, yeah, they're going to like extend the tax cuts." — Joe Weisenthal (35:43)

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Energy Sector and Domestic Production

Key Discussion: The discussion moves to the energy sector, focusing on coal jobs and the administration's inconsistent policies toward energy production. Joe notes the industry's dissatisfaction despite Republican rhetoric favoring domestic energy expansion.

Notable Insights: Joe criticizes the lack of substantial support for high-risk, high-capital investments necessary for revitalizing sectors like shipbuilding and energy, especially in a shrinking economy.

Quote:

"In a shrinking economy, if that's what we're going to get, if there's going to be this recession that a lot of people are anticipating, investors aren't going to do that." — Joe Weisenthal (29:29)

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Worst-Case Economic Scenarios

Key Discussion: Joe outlines potential doomsday scenarios, including severe supply shortages and a sustained recession that traditional macroeconomic policies might fail to mitigate. He emphasizes the societal disruptions that could arise from prolonged economic downturns.

Notable Insights: The conversation underscores the limitations of monetary stimulus in addressing supply-side shocks, aligning with Megan McArdle's assertion that such measures can exacerbate inflation without resolving underlying issues.

Quote:

"If there aren't things to buy, if there aren't industries to serve them, then it becomes a lot harder to see how you get that countercyclical macro policy that stabilizes things." — Joe Weisenthal (46:50)

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Cryptocurrency Discussions

Key Discussion: In the final segment, Tim and Joe explore the rise of Trump's crypto firm amid economic uncertainty. They discuss the potential for cryptocurrencies like Bitcoin to serve as safe-haven assets, as well as the speculative risks associated with digital currencies in a volatile market.

Notable Insights: Joe remains cautious about the speculative nature of many cryptocurrencies but acknowledges the growing interest in Bitcoin as a non-sovereign asset holding value similar to gold.

Quote:

"I think that we should at least be looking out for it. People actually treating bitcoin as a safe haven asset the way many of its proponents have been advertised for a long time." — Joe Weisenthal (49:13)

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Conclusion

The episode concludes with a reflection on the intertwined challenges of tariffs, economic policy, and market behavior, leaving listeners with a comprehensive understanding of the precarious economic situation and the factors contributing to the looming recession.

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Notable Quotes:

1. "Everything screams recession right now by almost any traditional metric." — Joe Weisenthal (02:46)
2. "There's this belief of a blink or it can't really be as bad." — Joe Weisenthal (08:34)
3. "They're talking about how they're going to have higher costs but not going to be able to pass it on." — Joe Weisenthal (03:15)
4. "Small businesses, which historically have been one of the most reliable Republican constituencies, really lose out to the giant retailers..." — Joe Weisenthal (23:23)
5. "I sort of think the only thing that Wall street has really thought about is, oh, yeah, they're going to like extend the tax cuts." — Joe Weisenthal (35:43)
6. "In a shrinking economy... investors aren't going to do that." — Joe Weisenthal (29:29)
7. "If there aren't things to buy... it becomes a lot harder to see how you get that countercyclical macro policy that stabilizes things." — Joe Weisenthal (46:50)
8. "People actually treating bitcoin as a safe haven asset the way many of its proponents have been advertised for a long time." — Joe Weisenthal (49:13)

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Produced by Katie Cooper with audio engineering and editing by Jason Brown.

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Timestamp Reference

• 02:46: Joe discusses traditional recession indicators.
• 03:15: Tariffs increasing costs for manufacturers.
• 04:37: Market resilience vs economic indicators.
• 08:34: Institutional disbelief in economic downturn severity.
• 23:23: Impact of tariffs on small businesses vs large retailers.
• 29:29: Challenges in domestic energy and shipbuilding investments.
• 35:43: Wall Street's perception of budgetary policies.
• 46:50: Limitations of monetary stimulus in addressing supply shocks.
• 49:13: Cryptocurrency as a safe-haven asset.

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For more in-depth analysis and discussions, listen to the full episode of The Bulwark Podcast.

Transcript

[Tim Miller]

Hey guys, a couple things before we get to our guest. One more reminder. We have the events coming up in Chicago and Nashville. Go to the bulwark.com events. Chicago is already. I got a note this morning we think gonna sell out in the next 48 hours. So if you want to come see us, check it out. More tickets available for Nashville. So come on down. I don't know, we can go see a little music after. I got no plans. We'll figure it out. Come visit us in Nashville. Good excuse for a little spring trip. We had pretty weather in May in Tennessee. On this pod we've got Joe Eisenthal. We're going to go real deep on economy stuff. He is just the hardest working man in finance journalism. Been following him for a long time. So I'm looking forward to getting to everything about our likely impending recession. One note on the conversation, we talked a little bit about how Amazon said that they're going to start listing the cost of tariffs on their site. The White House responded to that very negatively attacking Amazon since then and Amazon Fox has said that they are only doing it on their Amazon haul program, which is for, you know, truckers and kind of long distance material. So that's not going to be on the main Amazon website. Unclear if that was a goof or a step down on behalf of Bezos, but that is surely something that we are going to be monitoring in the coming days. Just wanted to get you the facts on that. This is a great chat. Stick around. Up next, Joe Weisenthal. Hello and welcome to the Bulwark Podcast. I'm your host, Tim Miller. Delighted to have with us today executive editor of Digital News at Bloomberg. He's co host of the Odd Lots podcast. At long last, it's the stalwart Joe Wiesenthal. What's going on, man?

[Joe Wiesenthal]

Thanks for having me psyched to finally be here.

[Tim Miller]

I've been, you know, monitoring your tweets since, I don't know, fucking. I was in short pants. Been a long time.

[Joe Wiesenthal]

I feel bad. Some people over the last several weeks, they're like, oh, I turned on alerts for your tweets. And I'm like, oh shoot. Now I just can't like tweet random stuff because, you know, I feel like every one of my tweets have to have some important data or a chart or something like that. But thank you for following.

[Tim Miller]

I've had a couple people tell me that over the years and I'm like, please turn that off.

[Joe Wiesenthal]

I know, just turn it off. It's not that important. It's not that important.

[Tim Miller]

All right, we got so much to talk about. I guess let's just start with the top line economic outlook. Goldman Sachs projecting the US will have the lowest economic growth and highest inflation of any developed economy in 2025. That doesn't seem good. But you wrote this week about the strange calm in the s and P500. So just kind of talk about the biggest picture.

[Joe Wiesenthal]

It is really weird actually because the amount of gloom from both investors and businesses and actually consumers. Any survey that you look at right now of anyone, so what they call soft data, subjective data, is really dismal. Like we are talking survey measures at the lows either of the pits of COVID or in some cases the financial crisis in 2008. It's all dismal. Tuesday. Yesterday we got, you know, regional Fed survey from the Dallas Fed manufacturers in the region. Terrible. All complaining about tariffs. They're talking about how they're going to have higher costs but not going to be able to pass it on. They're talking about how they're going to cut back on hiring, cut back on capital plants. Everything screams recession right now by almost any traditional metric. And yet the market is hanging in there. And it's really difficult for me to wrap my head around this because I do have this sort of like, I don't know, I'm sort of cursed with this efficient markets brain where it's like I think everything is priced in all the time and we can all see the drop off in shipments from China and we can all see all these surveys and yet I'm like, am I missing something? Is the market missing something? And so we are in this weird moment. You know, most of the quote, hard data hasn't reflected much weakness yet. We haven't seen the big layoff wave that everyone is anticipating. So I think a lot of people are sort of scratching their heads, including me, saying like, what am I missing here? And I don't know what we're missing. I mean if we did, that would be really helpful. You know, the market is down, stocks are down on the year and they're down substantially from their highs in mid February. A lot of people are scratching their heads about why isn't the market down more given, you know, what we can plainly see in much of the evidence.

[Tim Miller]

Yeah, given that my father was a mutual fund manager and you know, I originally came from the school of Paul Ryan Republicanism, the efficient markets hypothesis, you know, was, was right there next to the pocket constitution for me as a college Republican. And I'm pretty shaky on how my Republican colleagues felt about the Constitution. I'm getting increasingly shaky on the efficient markets hypothesis. But Scott Besson, our Treasury Secretary, had a. Had an explanation this morning, and he did a press conference and he said that individual investors are holding tight, and it's just the institutional investors that are panicking, and that's their spin. What do you make of that?

[Joe Wiesenthal]

There's something to that. I mean, if you look at sort of speculative flows in the market that we would associate with institutional or sort of individual, quote, retail, unquote investors, there are a lot of signs of that. Not just that they're holding tight, but that they're buying aggressively. You know, one of the things I wonder about is that over the last several years, traders, individuals have been trained to buy the dip every time stocks go down a little bit, buy more. And what you see in a lot of this sort of speculative names, whether it's cryptocurrencies, shares of Tesla, shares of Robinhood, shares of IPOs and SPACs, not only are they doing well, they're actually well above their April 2nd highs. So I think one theory is, you know, that there is just a lot of flow from households still that are largely still employed, still have money, still perhaps have savings, and so that is going to the market. It still doesn't completely satisfy me because, again, my efficient markets brain, like, I still think there must be, quote, smart money that would sell more. If stocks are, like, obviously disconnected from valuations. If it's so obvious that things are going to get really terrible, you think, okay, well, like large institutional holders, hedge fund managers, et cetera, could sell more. So I think there is evidence of Bessant's theory out there in the market. It still doesn't totally sit right with me. The one thing I'll say, though, is that markets don't always get it right. And, you know, my colleague Tracy, you know, she pointed out Yesterday how in February 2020, basically everyone should have, in retrospect, been able to see that this was truly going to be a global pandemic. And it wasn't really until it hit New York that stocks started tanking in March. Another example that springs to my mind, I might write about it today is that, you know, the famous Jim Cramer, they know nothing rant about, you know, some of the problems at the banks. That was August 2007, and markets continued to rise for several months after that. And then we didn't get the real crash until September or sort of late 2008. So sometimes you can have this big sort of wall of doom coming and everyone sort of savvy enough can see it and it doesn't necessarily reflect in the market until it's right there. So, you know, maybe markets aren't as forward looking as I like to think they are.

[Tim Miller]

Here's my sociological theory listening to that because, you know, it appeals to me, appeals to my priors. I'll admit the idea that Trump is kind of a human pandemic or a human subprime mortgage that, you know, the Wall street guys and the big institutional investors might see all the data that you're talking about, but like just fundamentally refuse to believe that it can be as insane as it, as it seems like it's going to be, right? Like, refuse is like, is this really going to be a, you know, a Spanish flu level pandemic? Right. Like, could the subprime mortgage really take down Bear Stearns? Right. Like, could Donald Trump really just sit there and Scott Besant sit there and do nothing as like the economy tanks, they will obviously pull back, right? And like, it's like they're, they're imputing rationality that's maybe not there.

[Joe Wiesenthal]

I think that's totally possible. People just say like, and I just, like, no, they, they're not really going to sort of completely try to box out China from the entire global trading system. We're not really going to raise the input costs for all these manufacturers at a time when we ostensibly want manufacturing to come back to the U.S. we're not really going to raise prices on all these things. Right after an election in which inflation was arguably the number one or number two issue for the electorate. So I do think there is still this belief of a blink or it can't really be as bad. You see these drop off in shipments from China to the US And I do think there's still this sort of element of disbelief that actually they want to do what they say they're going to do. And again, my colleague Tracy wrote about this. You know, in prior crises or prior big market events, you know, there was some clear sense of what the goals were, right? So 2008 was this massive bank run and we didn't know whether authorities were going to step up to stop it in time. We didn't know if the stimulus would be large to sort of rebuild back employment in demand. But we sort of knew that that was the goal. And in 2020, you know, we knew that the goal was to sort of stop the spread of the virus, develop a vaccine, try to backstop households through checks and other measures to sort of stabilize economy during this period of pandemic disruption. I think what now is different is, you know, you don't even really know what a victory looks like policy wise. And I think that's like a very different thing. We don't even know like what that state is, what that looks like. When we say, oh, we are happy with what's been achieved in part because the ostensible claims of the tariffs are, you know, different. Some days it's about reshoring manufacturing, some days it's about isolating China. Some days it's about replacing revenue for the government so that we can cut income taxes on anyone making, I don't know, $150,000 a year. So it's hard to know what victory or policy success looks like when there's so many different reasons stated for the policies being put into place.

[Tim Miller]

I think we're going to bring back all the coal jobs. That's one thing that's going to happen. We're going to have a golden age of America. And I think that's, that's a clear objective. Right. We're going to, yeah, you know, rebuild Scranton, Springfield, but not with any Haitian workers. You know, we're just going to rebuild it. Just with the whites that live there. That feels doable.

[Joe Wiesenthal]

I think there is this like aesthetic aspect of it and coal in particular because look, one of the real booming industries for the US really like starting under the Obama administration has been liquid natural gas. It's one of our big or natural gas in general, and then liquid natural gas emerging as this major source of exports. But it's very interesting to see the emphasis on coal specifically because I think that sort of, it certainly gives off a sort of like cultural thing. Men in a certain, you know, in West Virginia, like a Zoolander. Yeah, yeah, there's a, there's an aesthetic element to that.

[Tim Miller]

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[Joe Wiesenthal]

200 deals. Who has he made deals with? Is there actually any deal at this point?

[Tim Miller]

I believe that he is referring to sub deals within the negotiations we're doing.

[Joe Wiesenthal]

And Martha, if there are 180, but those aren't actual deals.

[Tim Miller]

And game theory is called strategic uncertainty.

[Joe Wiesenthal]

So you're not going to tell the.

[Tim Miller]

Person on the other side of the negotiation where you're going to end up. And nobody's better at creating this leverage than President Trump.

[Joe Wiesenthal]

You heard that small businessman saying his inventory in China might as well be lit on fire because already what has happened and the concern about what's happening next, how do they plan for things if they don't know what's going to happen?

[Tim Miller]

Well, what they know is that the China tariffs are unsustainable because the Chinese cannot sustain this. That if the business people, like the gentleman you interviewed stop ordering, China has no business model. I don't know if President Trump has spoken with President Xi.

[Joe Wiesenthal]

I know they have a very good.

[Tim Miller]

Relationship and a lot of respect for each other. But again, I think that the Chinese.

[Joe Wiesenthal]

Will see that this high tariff level.

[Tim Miller]

Is unsustainable for their business.

[Joe Wiesenthal]

Why would they?

[Tim Miller]

You comfortable yet calm, yet, Joe. That worked for you.

[Joe Wiesenthal]

Look, I'm not, I'm not a, a traitor. It. But I have to say, like, so far, having listened to now several Besant interviews, it is hard for me to wrap my head around what it is about him specifically that is perceived to be the calming influence. You know, there's this funny thing where it's like people are saying like, oh, we really, you know, we want to buy on Besant days and sell on Lutnik days. But if anything, you know, Lutnick has so far proven to be, in my opinion, the more reliable guide to what's going on in Trump's mind or what's going on in Trump's thinking. You know, I kind of feel sorry for Lutnick. All of the people like criticizing him specifically, when in fact, he's been a pretty reliable measure. But, you know, you know, it's interesting, that comment. He said a couple of times in different interviews that he regards the tariff level against the Chinese as unsustainable. But then he quickly says unsustainable from the Chinese perspective. And obviously, look, you know, that clip, it seemed unsustainable from the American perspective as well. And I think a lot of people feel that. But it's also interesting to think about what he, you know, he says China's business model, which to my mind represents a fairly outdated view of what China's business model actually is. Yes, they do a lot of sort of low margin, cheap manufacturing, but part of their goal over time has been to actually outsource that to other Asian countries while China pursues the more high end advanced technological manufacturing that is the source of a lot of angst in the West. So I don't know when he says that these tariffs strike to the heart of China's business model. Absolutely, in part there's still a lot of that type of manufacturing in China. But my perception is that's not where they see the future of the Chinese economy in any instance.

[Tim Miller]

Yeah, I mean that's not calming to me. Right. I just, just let's expand on that just a little bit because the small business owner that he's talking about there is, it was a dog collar manufacturer or something. Right. And so it's like we don't even know if we're talking to Xi. Seems like we're not, we're kind of lying about that is what's happening for the administration. So there's no negotiations happening. We have this tariff that's going to cripple some percentage of American businesses. And the theory of the case, according to Besant, is that if Americans stop buying cheap dog collars from China then their whole system is going to collapse and they're going to have to come to the table. And I don't, I don't think that that theory of the case is like in touch with reality at all. Is it?

[Joe Wiesenthal]

This is a really tough one because so much of the sort of information that we've gotten out of China over the last couple of years has really been, or several years has really been focused on China's efforts to move up the value chain. So obviously EVs are a big example and they're big. Electric car companies are selling all over the world, excluding the United States. Huawei, the biggest chip company, which is now perceived to be getting closer and closer to the cutting edge, closer to Nvidia, again, very big player all around the world excluding you know, perhaps the United States and, and elsewhere. So I think, you know, at least the stated view of what the, what China wants the world to think is that their main focus is, is on these like really like difficult tech like batteries, other areas of energy, semiconductors, etc. I'm sure there is still a lot of employment tied up in the sort of low end manufacturing like dog collars or strollers or umbrellas or whatever else. So I'm sure that is real pressure and growth in the Chinese economy has not been stellar over the last several years. You know, I think the story is China itself wanting to leave those low margin businesses in the past.

[Tim Miller]

I agree with that assessment, I guess I would just add on to it one other element though, which is that there are other. And obviously we're the biggest market. But the Chinese could start selling dog collars to other Asian countries. And by the way, it's possible that we could put the squeeze on China. You could sell me on the fact that this is a, at least a plausible theory of the case. If it was, we're linking arms with Europe, we're linking arms with Japan and Australia and we're all going to pressure China and none of those countries are going to buy dog collars from China. That's not what's happening. Like he's alienating those other countries at the same time.

[Joe Wiesenthal]

Yeah, this is the other part that's really hard to understand because if you remember on April 9, that was the first of the Trump blinks on the original reciprocal tariffs and they announced that for all the non China countries there would just be the 10% tariff. They were going to temporarily, for 90 days pause the reciprocal tariffs that were announced in that infamous OR famous chart April 2nd in the Rose Garden. And so then the, the like, okay, we are going to form sort of global X China trading block. The dream is you're going to get Japan in there and you're going to get Vietnam in there and you're going to get Cambodia, etc, But then it raises the question why the sort of other forms of hostility towards the non China countries. And this goes back to J.D. vance's speech in Munich in February where he went to Europe and sort of insulted many of the European leaders there like. But it's hard to square this idea of this global alliance that stands on the other side of the table from China with the sort of active efforts we've made to alienate our friends and neighbors. Canada being a good example there.

[Tim Miller]

I want to talk a little more about some of the domestic impacts. You wrote maybe last week about the war on Christmas, real war on Christmas, and how there are, you know, even, let's say they, you know, come to some sort of agreement and Besant is right and this is unsustainable and they, you know, change course in the next month. Like orders are happening now for things that come for Halloween holidays. Talk about that a little bit.

[Joe Wiesenthal]

This is really important. We did a episode of our podcast last week with Anna Wong. She's the chief US Economist here at Bloomberg and she made the point that this is happening right now. Holiday orders for all kinds of things, decorations, toys, etc. This is the period when they would be getting orders and shipped and so forth. And so you can sort of like, you know, even if somehow there were a complete reversal, and I don't think anyone's really expecting a complete reversal, even the optimist. But even if there were a complete reversal, there would be a disruption in the short term. You know, you could imagine some of the really big retailers, okay, they're going to cut back and they're going to have, you know, she's predicting, you know, noticeably empty shelves with reduced variety coming up. But you could imagine, you know, some of the really, you know, the companies with a ton of money, like Walmart, continuing to place orders, taking the risk that maybe the trade environment or the tariff environment will be different later in the summer, etc. But if you're a small business person and you're, you know, you're in the dog collar business or the toy business specifically, that just might be too much of a risk. You probably have modest margins, and you can't risk that when the good gets to the port and you have to pay that big tariff bill just to receive your goods. That could bankrupt you, depending on who you are. So another element. Yes, you're, you know, there's this sort of war on Christmas, which used to be this sort of obviously conservative trope, because people were saying, you know, happy Holidays and stuff like that.

[Tim Miller]

Kwanzaa. We were recognizing Kwanzaa. You don't want to.

[Joe Wiesenthal]

Yeah, exactly.

[Tim Miller]

Assault on Santa Claus.

[Joe Wiesenthal]

Right. And so you could imagine that not only is there just sort of less to go around, but also that you get this big distribution from small to big. So small businesses, which historically have been one of the most sort of reliable Republican constituencies, really lose out to the giant retailers that can afford to take a gamble and can afford to take a hit.

[Tim Miller]

What'd your colleagues say about the empty shelves? As far as timing? I think I saw Larry Summers on All in podcast, maybe talking about this month coming in May. What's your sense?

[Joe Wiesenthal]

Yeah, I think the drop in shipments coming into Los Angeles is starting now. So it's hard to believe that they wouldn't show up soon. Like, you know, as you were saying in the very beginning, you sort of scratch your head and it's like, is there something I'm missing here? Is there some way you can have a big drop in container shipments into the US without it fairly quickly showing up on shelves? It's hard to see. Not. Maybe some of what's coming in now would be going into inventory. And so it takes a while. But intuitively you would think like over the next couple months.

[Tim Miller]

Amazon is the other element of this. This was something that happened this morning. So Amazon announced that they're going to start showing how much of the cost of each good is coming from tariffs. Temu had already done that. Some of the Chinese Amazon spinoffs. The press secretary just about an hour ago called this a hostile political act by Amazon and then asked, why didn't Amazon do this when Biden hiked inflation to the highest point in 40 years?

[Joe Wiesenthal]

Obviously, it's just complete nonsense, right? That was the price of goods. Biden didn't, you know, tack on a distinct inflation tax on goods. I'm kind of surprised by the Amazon move. I mean, it is notable. It is going to get a lot of attention. It might make a lot of sense. It'll really be interesting to see how people respond to the visual of that. And again, it's sort of crazy to my mind that we did have these several years in which inflation, the worst of 40 years, was sort of the central economic story. And then we're right back to this effort to raise prices. It's interesting going back to some of the Besant comments, one of the things he said, he's been saying it over the last two days. So I think something he said this morning was that, you know, I look at, I don't really care about the survey data. I look at the hard data, the actual numbers, they're holding up well. And then he said in another, maybe it was one of the weekend ones, something about how like consumers are still shopping, activity is still fine. These were the exact arguments, the exact arguments that people made about why the Biden economy was actually good in 2022 and 2023. They're like, oh, sure, everyone is complaining about inflation, but look what they're doing. They're still shopping, they' still going out, they're still taking cruises and traveling in record numbers. So the soft data doesn't actually indicate what's happening in the real economy. So it's very interesting to hear Besson, almost like word for word, using the same defenses of the economic environment as we got from the Biden administration, the people around the Biden administration over the last several years.

[Tim Miller]

Isn't that also usually just a bit of a lagging indicator in a, in a situation like this?

[Joe Wiesenthal]

Yeah, I mean, look in defense, like it turned out not to be a lagging indicator in, you know, I mean, the funny thing about 2022 and 2023 is that for all the negativity about the economy, at least on the consumer Side, you know, you never really saw consumers actually retrench, for better or worse. And, you know, that's what partly why inflation remained as firm as it did for as long. When I think about sentiment measures, it's hard to see how the dismal sentiment measures among CEOs among small businesses wouldn't soon translate into real activity. You know, they're all predicting that they're going to have less employment in six months time than they have right now. So just intuitively you would think, okay, they're going to start pulling down job listings right now. This is going to have an almost immediate effect on the employment landscape. People graduating from college next month, you would think, okay, like, this is going to be a materially more difficult labor market than what it otherwise might have been. So I agree with you. It's really hard not to see why this sentiment among large and small businesses would not fairly quickly translate into weakening actual economic activity. If nothing else, you know, even setting aside tariffs, just the uncertainty over tariffs, you would presume that this would at least have a temporary pausing effect on new capital outlays, plants, equipments, new store openings, et cetera.

[Tim Miller]

This is one other thing just about like that, like the tangible impact on the economy and how these guys have a mixed, you know, kind of mixed message on what their goals are. This clip jumped out to me. My friend Michael Moynihan was interviewing somebody who does hiring for shipbuilders. And I just want to play this for you because I think it's pretty like her insight is pretty notable.

[Joe Wiesenthal]

I sort of sit at the intersection of two of the Trump policies that are sort of intersecting in my world. I place people, mostly military veterans, into manufacturing and shipbuilding jobs. And so we have an immigration policy that is supposed to be bringing jobs back to American workers and a tariff policy that's supposed to be doing the same in some way. But in shipbuilding alone, we have to hire 14,000 people a year for the next 10 years just to replenish our fleet now and become competitive with China. And that doesn't even come close to what we have to build to fulfill our contracts with the UK and Australia that we just signed a couple of years ago. There's just no way to do this with Americans. We're doing all we can to train people up. It's very difficult. It was a pretty good effort, actually, underway right now, millions of dollars being spent. But I really haven't heard a lot of talk about this.

[Tim Miller]

I just thought that was such a potent summary.

[Joe Wiesenthal]

That's such an interesting comment because it sort of dovetails with another thing I've been thinking about a lot, which is that a lot of these sort of domestic industrial ambitions, you know, we saw a lot under the Biden administration that was the sort of core of the CHIPS act, the Inflation Reduction act, which was in large part about energy subsidies, et cetera. People will be debating for a long time how successful or the efficacy of the design of these programs were. But there was this clear idea that like we want to rebuild domestic industry and we were going to de risk the production, we're going to subsidize it, we're going to try to get alignments right so that private capital worked in concert with public goals. You know, there is this belief, or maybe it's a fantasy, that if you just erect walls around the country, literally and figuratively, that you'll get this influx of investment, right? That you'll get these new factories, these new high tech robotic factories that people would like to see that sort of look like the gigafactories that we see in videos out of China, et cetera, but has to spend the money on that. And that's really difficult. And in a shrinking economy, if that's what we're going to get, if there's going to be this recession that a lot of people are anticipating, investors aren't going to do that. Shrinking economies with shrinking profit margins aren't conducive to high risk, high upfront capital costs for building ships, for building new auto plants, et cetera. So part of the big question is like, you know, you could imagine some tariffs in concert with some sort of public investment program, some sort of public investment bank of sorts to re industrialize certain sectors of the US Economy. But I think by and large the Republican Party is pretty allergic to a lot of those ideas, like these big policy bank ideas like using public money to de risk certain investments. So it feels like there's sort of a missing piece, if you will, towards some of the even like the clear areas that the administration wants to see growth in, such as shipbuilding or such as cars or such as steel, like some of these areas, like where is the money come from to fund these investments.

[Tim Miller]

This dovetails nicely with another thing I wanted to talk to you about, which is kind of what was happening in the doge side of this and on the Hill with the reconciliation, because there's a punchbowl item this morning that I thought was interesting. It's a Democrats, the House and Senate Appropriations Committee say Trump and top administration officials are improperly holding up more than 430 billion in federal funding already approved by Congress and signed into law. And so again, this is another situation where this feels at crossways, right. Where like you would think they would want to be putting that money out into the economy when we're seeing these recession signs.

[Joe Wiesenthal]

Yeah, there's a lot of confusing aspects of this because the administration talks about semiconductors as an important area. And if you're going to think about like, what is like one really critical area where we have strategic vulnerability, the ability to produce chips efficiently domestically, and yet we have this program that was designed to do that. Could the program be modified? Could it be changed? I'm sure. But instead, so far it seems like it's mostly getting gutted. You know, one of the other areas, there's a lot of talk about AI and the need for more electricity. From what I can tell and from what I've seen in reporting, there's a lot of gutting of the programs that de risked new nuclear power plants. And this is an area where there are a lot of people within the right that are think nuclear power should be one of the important power sources in the future. But the upfront costs of nuclear are extraordinarily high and these projects are extraordinarily risky. And so it's very hard to imagine breaking ground on much new nuclear without that public backing. And yet it looks like that's being pulled away.

[Tim Miller]

There was some discussion, I guess, of a sovereign wealth fund.

[Joe Wiesenthal]

Yeah.

[Tim Miller]

But that has kind of dissipated. Are you hearing continued conversation around that?

[Joe Wiesenthal]

Yeah, who knows? You do hear about that. But to my mind, it sounds like a gimmick to me. And let me say specifically what I mean by that, which is that you sort of like to imagine that there is going to be this entity in D.C. that can make big investments and sort of have it be nationally owned by the citizens and pursue industrial objectives. We already have that. It's called the US Congress. Like we already have this entity in DC that can make big public investments and have it be owned by the citizens. We have Congress, we have its power of the purse. And so like at the end of the day, like listening to ideas about a sovereign wealth fund, etc, it sounds like what the goal is, to have it be one step removed. Again, because I think there is this perceived allergy among a lot of people, particularly on the right, towards public funding of investment. And so therefore maybe you sort of sidestep that issue by creating this vehicle that sort of looks distinct, that maybe can move autonomously, that maybe kind of has A profit motive unlike typical fiscal expenditure, maybe some corruption opportunities, perhaps that. But you know, at a minimum, it sort of seems like an institutional gimmick to me.

[Tim Miller]

Yeah, back to the allergy on Congress, because this is the other element that is all this. And you hear this from Besant and others, which is, well, you know, you've got to look at what's happening with the tariffs in context of the reconciliation that's going to come this year. We're going to extend the Trump tax cuts. We're going to do all this other stuff. But I was just sort of looking at the Hill watchers this morning and kind of just kind of grabbing a summary of where they're at. And they're supposed to have something by July 4th growth. We'll see. There's a lot of concern. They're not going to, they have disagreement over how much to cut Medicaid and SNAP or whether to cut it. They have disagreement over totally how much they're going to turn the budget. There are still a handful of budget hawk conservatives on the Hill who at least claim to be that, who say they want to trim to a certain level. There's disagreement over the SALT tax deduction, disagreement over clawing back some of these energy tax credits that we've been talking about. There's potentially another debt limit issue before they get this passed if it gets delayed. I mean, to me that seems about as uncertain as the, as the tariff stuff. But I don't know what the, what kind of the Wall street view is of all of it.

[Joe Wiesenthal]

I've never thought that Wall street understanding of D.C. is particularly sophisticated. I sort of think the only thing that Wall street has really thought about is, oh, yeah, they're going to like extend the tax cuts. And everyone sort of assumes that that's going to happen, that the political chaos in D.C. won't somehow subsume the tax cut extension. And then beyond that, I doubt that there are many people on Wall street accepted very specific niches or people are very affected by one specific area of the budget who are thinking beyond that. But it does seem to me that there is this, again, hope that, yes, okay, tariffs, they're going to have this sort of, you know, tariffs are tax hikes and so that's fiscal tightening. And so that's a headwind for the economy. It just is. There is this hope that we're going to get tax cuts and deregulation and suddenly it's going to create this big environment for business to invest. I'm sort of skeptical. You know, energy is A good example of this. People like to imagine that we could just unshackle US Energy and suddenly we're just going to drill and pump fossil fuels at a much higher rate. But if you actually just sort of listen to energy executives, the big issue, well, there's two now, one big issue is that as prices come down, that's not a very good incentive to invest. And we've already seen because of there's concerns about the economy, energy prices weakening, and then you add in the element of tariffs and higher costs on things like steel tubing and so forth, and you get a lot of oil companies, they're already saying, like, our economics look terrible because of higher costs and lower prices. And the regulatory component of that seems pretty minor. I'm sure they really did not like many aspects of the Biden era energy policy, but we did have booming domestic production because there were solid, predictable profits for the energy companies. I don't think any amount of deregulation really helps the case when just the basic math between cost of goods sold and what you're selling compresses the way it seems to be.

[Tim Miller]

Yeah, the energy industry is so interesting to me because at some level, you know, the dark angel on my shoulder is tempted to laugh at the fafo element of it all. But it's like, if you would think if there was any industry that had influence over Trump, right, it would be this one. And Trump's like, his whole campaign is we're going to unleash all the liquid gold underneath our feet. And so like the one really kind of traditional Republican policy that he talked about consistently on the campaign trail, all of these guys are donors. They're all old school Republicans. Like you'd think they'd have access to them. And to hear their comments in the Dallas Fed and others. And it's pretty striking that they're all unhappy. And it doesn't feel like anybody gives a fuck about that in the White House. I don't know.

[Joe Wiesenthal]

One of the quotes that's been said is that Chris Wright, the new energy secretary, and I forget who first reported the quote of someone out of Houston is like, we thought he was going to be one of our guys. Turns out he's not. He's Trump's guy. He obviously comes from an energy background. He had a fracking company, I believe, I'm pretty sure. But look, all of them like small businesses too. Again, you think like, okay, this is a core Republican constituency, certainly they're not going to flatten small businesses freight. Here's another area where I Imagine, a huge Trump constituency among truck drivers is a pretty rough time for domestic freight already. And so, yeah, this idea. And for better or worse, this idea that, you know, business can just call up the White House and say, well, you can't do this. That line does not seem to be as robust as people might have expected.

[Tim Miller]

Yeah, it's true. On the union side, I mean, the working. The forgotten man, the longshoremen I talked about earlier, you know, they were one of the unions that supported Trump, and they put out a statement unequivocally condemning the recent tariffs the other day. So, you know, I mean, it's. It's funny. It's like on labor and capital, on both sides of it, they're opposed.

[Joe Wiesenthal]

I mean, it's really hard to see who is the. They're very niche domestic constituencies for this. They're not. Why?

[Tim Miller]

The shrimpers down by me. The shrimpers are excited.

[Joe Wiesenthal]

The shrimpers. And I can't really think of any other topic where there's just so much condemnation across different realms from major hedge fund CEOs criticizing it. It's like, okay, yeah, but they're major hedge fund CEOs to the longshoremen, to small businesses, et cetera. The number of people who are, like, really in support of this approach to trade policy mostly seems like MAGA influencers to me.

[Tim Miller]

I want to just go back to the reconciliation bill conversation because it relates to kind of two of the other things that I want to talk to you about, which is, you know, look, if they do extend the tax cuts, which I guess I wouldn't put it 100%, actually, I think that's possible. The chaos subsumes that, but it's most likely, if you just look at their own budget math, like, this thing is going to balloon the deficit even more, it's going to balloon the debt even more, just because the cost of the extenders are going to be more than whatever they can find to cut significantly more. And so that is intersecting with what's happening in the bond market. I know you had another interview I was listening to with one of your colleagues who specializes in that. Anyway, of want to let you kind of go on, like, the, the relationship between the increasing, you know, rates and, and our. And our debt issues.

[Joe Wiesenthal]

There's a lot of intersecting things. Obviously, there's always been a, you know, faction within DC that really cares about the deficit per se. Just that gap between outlays and intake.

[Tim Miller]

Yeah, there are 10 of us left, Joe.

[Joe Wiesenthal]

I, I've never really thought that that was, like, very Big even like during, like the sort of like Tea Party era, that mostly where there's the energy in D.C. strikes me as always being we want to kneecap and massively shrink this sort of capacity of the federal government. And sometimes that can rhetorically resemble a concern about deficits. But then when you actually look at the impulse to constantly vote for tax cuts, never really actually do anything on spending, you tell it's not really about the deficit. That's really sort of a thing for a handful of wonks. The more recent phenomenon that people started talking about in the last couple of years is how much the government is spending on interest payments and how this is becoming a major fiscal line item, particularly as interest rates go up. And that's concerning. If you want to, you know, rein in inflation and you want to rein in spending, you can't have interest payments starting to surge. You know, you heard about this from economists associated with the Trump campaign. This idea, the importance of getting down interest rates. And it's not really worked so far. And it's hard to see how it would work given the sort of constellation of policy measures that we're getting, whether it's huge tax cuts, very minimal spending restrictions, the tariffs and so forth. We haven't seen much sensitivity in the immediate week after Liberation Day. We saw rates sort of shoot up. They have settled down. So there's been some of that. But if you want to really move the dial on interest rates, there really has not been much done yet that would support that effort.

[Tim Miller]

What is your sense about kind of like the worst case scenario, the fears that we were seeing around the bond market after a Liberation Day and the potential. Are there potential actions they could take that could get us into a debt spiral that kind of gets that out.

[Joe Wiesenthal]

Of control more than even the situation with Treasuries? I mean, look, so the night of April 8th and then also April 11th, we did see this big spike in yields. I think there was just a lot of panic in the markets. And mostly that was the story. There was panic. And in times of panic, people want cold, hard cash. And so you just sell everything. You sell your stocks, you sell your Treasuries, et cetera, because you just want to have your dollar, because you need to make, you know, your rent at the end of the month. And I think that's what you were seeing. I think the bigger story, the market that I'm really interested in is the currency market. You know, you have had this rebound in the stock market, you have had this stabilization in the bond market. What you also have is the dollar index traded against a bunch of other currencies pretty close to the lows of the month. That is the one area that you can look at in the market in which we haven't seen much of a rebound over the last several weeks. And so what it looks to me, and there's other data supporting this, you know, that by and large around the world there's been a declining interest in holding US Related assets. And that's showing up largely in the form of a weak US Dollar. You know, one of the theories prior to the tariffs for a long time is people said, oh, there's not going to be an inflationary impact of the tariffs because what's going to happen is foreign currencies are going to weaken, the dollar is going to strengthen and that will offset some of the tariffs. It's actually been the opposite. The US Dollar has been very weak since the tariffs. So this is like a double whammy. It's in terms of making our cost of imports significantly more expensive.

[Tim Miller]

This is a doomer pod. Okay, so give us your doomsday scenario. As you look at what is out there, you know, what are some, I don't know, red sirens that could go off in the next month or two that would really raise your eyebrows. What's something that you're particularly worried about?

[Joe Wiesenthal]

I mean, I'm worried about the societal effects of actual material shortages and that. But if they emerge to the degree that some people are anticipating that it's seriously disruptive in a way that would be significantly worse than how angry people got about inflation in 2022 and 2023 and then a real intense layoff wave that cannot easily be countered by sort of traditional macroeconomic policies. Right. Because typically in a recession you think, okay, well, the Fed can sort of of step in to stabilize things. You cut rates. And it's very plausible that we will get more rate cuts this year due to economic weakness. But there is a limit to what that could do when supply capacity is constricted. Right. If various entities are running at subpar capacity, the Fed can cut rates and then maybe they start hiring again, et cetera. But if actually whole sort of lines of businesses are shutting down and there's nothing new to, there's no reason to have them open because the goods simply aren't there, then I start to worry about sustained recession that does not rebound easily. And then, yeah, that becomes something that meaningfully disrupts day to day living.

[Tim Miller]

Yeah, you're in line with our girl Megan McArdle, who wrote this yesterday. I saw this. You cannot fix a supply shock with monetary stimulus. That's right. All you do is end up creating more inflation.

[Joe Wiesenthal]

That's right.

[Tim Miller]

It's a problem. And I do think it also ties to our debt issue. Like. Like the ability to do big stimulus also is, like, somewhat limited. If you're worried about interest on debt.

[Joe Wiesenthal]

You know, or just the fact that, look, when, when they, when they passed the CARES act in 2020, there was a lot of domestic capacity to supply people with goods even though they weren't working. So a lot of people stayed at home or they were on furlough or layoff of some sort, but they were able to spend money to meet their basic needs, and things sort of turned out okay there. If we're not getting the goods in, if there's another layoff wave on top of that, you could even ply people with cash to buy things. But if there aren't things to buy, if there aren't industries to serve them, then it becomes a lot harder to see how you get that countercyclical macro policy that stabilizes things.

[Tim Miller]

All right, final thing, we got to do just a little crypto before I lose you.

[Joe Wiesenthal]

Okay, sure.

[Tim Miller]

There's an insane. The crypto has been doing well. Crypto markets crushing Trump coin is on the way up. Eth has rebounded. But there's an insane New York Times story this morning. The headline is Secret Deals, Foreign Investments, Presidential Policy Changes, the rise of Trump's Crypto firm. You can start to see why the Trump coin is going up in this story. Among other. It says that World Liberty sold its crypto to investors abroad, which is a new avenue for foreign businesses to curry favor with Trump. Several investors in the coin manage firms that the federal government had accused of wrongdoing. That now the federal government is no longer investigating. And then in recent days, this was new to me. Zach Wyckoff, Steve Wyckoff's son and Trump's business partner on this, was in Pakistan meeting with the Prime Minister Sharif and other top government officials to discuss World Liberty. And that is crazy. The president's business partner is meeting with the head of Pakistan, asking for money into his shit coin.

[Joe Wiesenthal]

The opportunity for corruption is one of these things where it boggles the mind. It's on such a high, massive level. Again, you almost like, can't believe this real. The President of the United States launching his own cryptocurrency. These various firms around him collecting money from overseas. It almost breaks the brain when you actually read the facts of it.

[Tim Miller]

What do you make of. So there's theory of the case that people start putting more money into bitcoin and eth as we get through this economic uncertainty. There's a theory of the case where that's a lot of people's extra money, except for the big. The big investors and that, you know, there could be a run on it. Do you have a crystal ball on crypto?

[Joe Wiesenthal]

I have no crystal ball. The one thing I will say for bitcoin is I do get the impression and maybe other cryptocurrencies that there is real money around the world that is starting to take bitcoin and maybe some of the other ones seriously as assets to hold that are not tied to a sovereign nation, that maybe it has a gold like property. I don't know how large that trade is, but I think it's big enough that we should at least be looking out for it. People actually treating bitcoin as a safe haven asset the way many of its proponents have been advertised for a long time. I think for a lot of the other ones, it's a speculative trade and if you get another big downdraft in the market and people are panicking because they need the cash to pay the bills, they're going to mostly be sellers.

[Tim Miller]

I agree with you on that. The biggest true about bitcoin, it reminds me of the COVID stuff. People had the money they're throwing money on.

[Joe Wiesenthal]

It's still a huge part of it.

[Tim Miller]

I purchased a couple of those basketball NFTs. You know, I had. I had the Jamal Murray three pointer from the 2021 playoffs. I think that's worth zero dollars now.

[Joe Wiesenthal]

Oh, I forgot about those.

[Tim Miller]

The apes have gone down to zero. So I do think that, that, that might be the case in some of this speculative areas. Joe Wise, with all the stalwart follow him on social media, do not set alerts for his tweets. That is not a healthy way to live in this economy. Appreciate it. Please come back soon.

[Joe Wiesenthal]

Anytime. Thanks for having me.

[Tim Miller]

All right, everybody else, we'll be back here tomorrow for another edition of the Bulwark Podcast. See y'all then.

[Joe Wiesenthal]

Peace. Buy me some more time Ain't nobody got it now need to buy me a new grind grind hey, got a nine left Just know I'm a grind that till I ain't got a dime left Speaking the dime left I ain't got a 9 left had to pay up my bills now I ain't got a dime left Columbia that if need be, I get to walk to Columbia. That's South Carolina. Just pay my driver. They say, yo, won't you make a brain? You ain't saying what if I want the money? Them numbers being the same in the memory give everybody.

[Tim Miller]

The Bullord podcast is produced by Katie Cooper with audio engineering and editing by Jason Brown.