1 00:00:15,124 --> 00:00:16,724 [Rush Lindell] You know what nobody wants to say? 2 00:00:17,074 --> 00:00:18,824 [Rush Lindell] Trump started the Iran war, 3 00:00:19,074 --> 00:00:20,673 [Rush Lindell] broke the Fed's rate cut path, 4 00:00:20,774 --> 00:00:23,274 [Rush Lindell] and is still out there demanding cheaper money. 5 00:00:23,423 --> 00:00:24,724 [Rush Lindell] That is the full story. 6 00:00:25,074 --> 00:00:26,624 [Rush Lindell] Welcome to the Rush Lindell Show. 7 00:00:26,774 --> 00:00:27,524 [Rush Lindell] I'm Rush Lindell. 8 00:00:27,674 --> 00:00:28,574 [Reagan] And I'm Reagan. 9 00:00:28,724 --> 00:00:29,824 [Reagan] Glad you're with us today. 10 00:00:30,024 --> 00:00:31,374 [Reagan] This one's worth your hour. 11 00:00:31,774 --> 00:00:32,824 [Rush Lindell] So here's what happened. 12 00:00:33,074 --> 00:00:36,124 [Rush Lindell] Kevin Warsh gets sworn in May 22nd. Big ceremony. 13 00:00:36,324 --> 00:00:39,374 [Rush Lindell] Trump's right there promising rates are coming down very quickly. 14 00:00:39,574 --> 00:00:40,674 [Rush Lindell] Five weeks later, 15 00:00:40,874 --> 00:00:42,474 [Rush Lindell] Warsh's first FOMC meeting. 16 00:00:42,579 --> 00:00:48,280 [Rush Lindell] held; rates stay right at three and a half to three and three quarters; unanimous twelve to zero! 17 00:00:48,629 --> 00:00:50,629 [Reagan] And the dot plot flipped completely: 18 00:00:50,979 --> 00:00:58,579 [Reagan] Fox Business reported nine of eighteen officials are now projecting a rate hike, not a cut; in March not one of them penciled in a hike. 19 00:00:58,579 --> 00:00:59,629 [Rush Lindell] Wow! Not one, 20 00:00:59,780 --> 00:01:00,079 [Rush Lindell] zero, 21 00:01:00,329 --> 00:01:02,329 [Rush Lindell] and now half the room wants to go higher. 22 00:01:02,530 --> 00:01:04,429 [Rush Lindell] That's a full reversal in three months. 23 00:01:04,829 --> 00:01:05,629 [Reagan] What changed? 24 00:01:06,030 --> 00:01:08,530 [Reagan] CPI hit four point two percent in May. 25 00:01:08,563 --> 00:01:10,913 [Reagan] A three-year high per CNBC. 26 00:01:11,413 --> 00:01:12,113 [Reagan] Energy-driven, 27 00:01:12,313 --> 00:01:16,363 [Reagan] tied directly to the Strait of Hormuz disruption that started February twenty eighth. 28 00:01:16,763 --> 00:01:18,813 [Rush Lindell] The day the Iran war launched! 29 00:01:19,063 --> 00:01:19,213 [Rush Lindell] See, 30 00:01:19,363 --> 00:01:21,163 [Rush Lindell] that's the thesis of the whole show today: 31 00:01:21,513 --> 00:01:23,663 [Rush Lindell] the Administration created the oil shock, 32 00:01:23,813 --> 00:01:25,913 [Rush Lindell] the oil shock broke the inflation picture, 33 00:01:26,263 --> 00:01:29,763 [Rush Lindell] and now the man they put in charge of the Fed can't give them what they asked 34 00:01:29,763 --> 00:01:29,864 [Reagan] Right. 35 00:01:29,864 --> 00:01:30,114 [Rush Lindell] for! 36 00:01:30,513 --> 00:01:32,813 [Reagan] And Warsh didn't even submit his own dot, 37 00:01:33,013 --> 00:01:34,563 [Reagan] refused to put a forecast in. 38 00:01:34,644 --> 00:01:42,694 [Reagan] CNBC flagged that before the meeting; he's also announced five task forces to overhaul how the Fed communicates and manages its balance sheet. 39 00:01:43,044 --> 00:01:46,644 [Rush Lindell] We've also got a parody segment that practically writes itself, 40 00:01:47,044 --> 00:01:49,993 [Rush Lindell] and Reagan will tell you why the joke lands harder than it should. 41 00:01:50,394 --> 00:01:52,294 [Reagan] Because the economics are real. 42 00:01:52,644 --> 00:01:56,544 [Rush Lindell] And we close on what Warsh walks into in the July twenty ninth meeting: 43 00:01:56,743 --> 00:01:57,944 [Rush Lindell] a fragile cease fire, 44 00:01:58,194 --> 00:02:00,194 [Rush Lindell] an IRGC cargo ship attack, 45 00:02:00,493 --> 00:02:01,094 [Rush Lindell] and an October 46 00:02:01,094 --> 00:02:01,344 [Speaker 3] twenty ninth meeting. 47 00:02:00,884 --> 00:02:02,433 [Rush Lindell] And October high cods climbing. 48 00:02:02,884 --> 00:02:03,983 [Rush Lindell] First up, the setup. 49 00:02:09,584 --> 00:02:10,933 [Rush Lindell] Before we dive in, 50 00:02:11,033 --> 00:02:11,834 [Rush Lindell] a quick reminder. 51 00:02:12,033 --> 00:02:16,734 [Rush Lindell] We love hearing from you. If you have questions or topics you'd like us to cover, 52 00:02:17,084 --> 00:02:19,984 [Rush Lindell] head to the link in the description and submit your question. 53 00:02:20,183 --> 00:02:22,234 [Rush Lindell] We read every single one. 54 00:02:27,699 --> 00:02:29,099 [Rush Lindell] May twenty second, 55 00:02:29,500 --> 00:02:30,949 [Rush Lindell] East Room of the White House, 56 00:02:31,299 --> 00:02:36,500 [Rush Lindell] Supreme Court Justice Clarence Thomas swears in Kevin Warsh as the new Fed chair. 57 00:02:36,949 --> 00:02:38,449 [Rush Lindell] Trump steps to the mic and says, 58 00:02:38,699 --> 00:02:41,449 [Rush Lindell] I want Kevin to be totally independent. 59 00:02:41,799 --> 00:02:42,599 [Rush Lindell] Don't look at me. 60 00:02:42,799 --> 00:02:43,699 [Rush Lindell] Don't look at anybody. 61 00:02:44,349 --> 00:02:44,799 [Reagan] And then? 62 00:02:45,249 --> 00:02:47,699 [Rush Lindell] Same day, campaign rally in New York, 63 00:02:48,049 --> 00:02:51,249 [Rush Lindell] Trump tells the crowd rates are coming down very quickly. 64 00:02:51,649 --> 00:02:52,899 [Rush Lindell] You watch what's going to happen. 65 00:02:53,149 --> 00:02:54,849 [Reagan] Both things in the same day. 66 00:02:55,283 --> 00:02:56,233 [Rush Lindell] Both things! 67 00:02:56,483 --> 00:03:00,483 [Rush Lindell] One sentence says don't look at me; the next sentence says look at what I did. 68 00:03:00,783 --> 00:03:01,933 [Rush Lindell] That's the whole set-up, 69 00:03:01,983 --> 00:03:03,584 [Rush Lindell] Reagan—that's the con! 70 00:03:03,834 --> 00:03:05,983 [Reagan] CNBC covered the ceremony, 71 00:03:06,283 --> 00:03:08,383 [Reagan] Warsh's exact words after the oath: 72 00:03:08,584 --> 00:03:10,983 [Reagan] he vowed to act with independence and resolve. 73 00:03:11,483 --> 00:03:14,483 [Reagan] He also said he did not promise rate cuts to get the nomination. 74 00:03:15,183 --> 00:03:17,633 [Rush Lindell] Which give him credit for saying it out loud. 75 00:03:18,084 --> 00:03:20,834 [Rush Lindell] Senate confirmed him fifty four to forty five. 76 00:03:21,108 --> 00:03:23,557 [Rush Lindell] The thinnest margin for a Fed chair ever, 77 00:03:24,008 --> 00:03:27,557 [Rush Lindell] and he walks in already having to prove he isn't Trump's guy. 78 00:03:28,108 --> 00:03:28,508 [Reagan] Right, 79 00:03:28,807 --> 00:03:33,207 [Reagan] the confirmation fight was essentially a proxy war over whether the Fed stays independent. 80 00:03:33,758 --> 00:03:35,957 [Reagan] That shadow follows everything he does now. 81 00:03:36,508 --> 00:03:36,807 [Rush Lindell] So, 82 00:03:37,108 --> 00:03:38,207 [Rush Lindell] Trump fires Powell, 83 00:03:38,408 --> 00:03:38,807 [Rush Lindell] effectively, 84 00:03:39,207 --> 00:03:40,307 [Rush Lindell] installs his pick, 85 00:03:40,608 --> 00:03:42,158 [Rush Lindell] throws a White House ceremony, 86 00:03:42,557 --> 00:03:44,258 [Rush Lindell] tells a rally the cuts are coming, 87 00:03:44,608 --> 00:03:46,758 [Rush Lindell] and then June seventeenth rolls around. 88 00:03:47,259 --> 00:03:48,960 [Reagan] Warsh's first meeting as chair. 89 00:03:49,610 --> 00:03:54,060 [Rush Lindell] Rates stay put three and a half to three point seven five per cent. 90 00:03:54,409 --> 00:03:55,409 [Rush Lindell] Unanimous vote, 91 00:03:55,659 --> 00:04:01,759 [Rush Lindell] and the dot plot nine of eighteen Fed officials now project a rate hike by year end. 92 00:04:01,759 --> 00:04:02,060 [Reagan] Wow. 93 00:04:02,060 --> 00:04:02,460 [Rush Lindell] Nine! 94 00:04:03,159 --> 00:04:04,960 [Reagan] That's a full reversal from March, 95 00:04:05,110 --> 00:04:07,659 [Reagan] when the median projection was still pointing toward a cut. 96 00:04:08,159 --> 00:04:13,060 [Rush Lindell] So Trump's guy held rates and the committee's leaning toward raising them. 97 00:04:12,948 --> 00:04:15,147 [Rush Lindell] You know what nobody wants to say: 98 00:04:15,498 --> 00:04:18,648 [Rush Lindell] Trump didn't get rate cuts; he might get the opposite. 99 00:04:19,197 --> 00:04:20,497 [Reagan] The question I'd push on: 100 00:04:20,747 --> 00:04:22,898 [Reagan] was that outcome ever actually avoidable, 101 00:04:22,997 --> 00:04:24,947 [Reagan] given the inflation picture Warsh inherited? 102 00:04:25,697 --> 00:04:27,348 [Rush Lindell] That is exactly the question, 103 00:04:27,648 --> 00:04:29,398 [Rush Lindell] and the dot plot is just the headline. 104 00:04:29,798 --> 00:04:33,048 [Rush Lindell] What's inside those numbers tells a much darker story. 105 00:04:38,451 --> 00:04:42,252 [Rush Lindell] So the dot plot is where this gets really concrete. 106 00:04:42,701 --> 00:04:46,901 [Rush Lindell] CNBC reported the statement came in at just 130 words, 107 00:04:47,201 --> 00:04:49,552 [Rush Lindell] down from 341 in April. 108 00:04:49,701 --> 00:04:51,252 [Rush Lindell] No forward guidance. 109 00:04:51,552 --> 00:04:53,651 [Rush Lindell] Warsh described it as a bit shorter, 110 00:04:53,851 --> 00:04:54,601 [Rush Lindell] a bit simpler. 111 00:04:55,201 --> 00:04:57,851 [Rush Lindell] Markets read that one signal and sold. 112 00:04:58,351 --> 00:04:59,151 [Rush Lindell] Stocks down, 113 00:04:59,401 --> 00:05:00,552 [Rush Lindell] short-term rates jumped, 114 00:05:00,951 --> 00:05:03,701 [Rush Lindell] all from a statement shorter than most text messages. 115 00:05:03,901 --> 00:05:04,851 [Rush Lindell] That's the whole story. 116 00:05:04,564 --> 00:05:05,364 [Rush Lindell] The whole tell. 117 00:05:05,514 --> 00:05:07,114 [Reagan] And the dot plot itself, 118 00:05:07,314 --> 00:05:10,963 [Reagan] 9 of 18 officials projecting a rate hike before year end. 119 00:05:11,264 --> 00:05:14,114 [Reagan] In March, the median was still calling for a cut. 120 00:05:14,514 --> 00:05:16,614 [Reagan] That's a complete reversal in one quarter. 121 00:05:16,914 --> 00:05:18,314 [Rush Lindell] A complete reversal, 122 00:05:18,314 --> 00:05:18,514 [Reagan] Yeah. 123 00:05:18,514 --> 00:05:18,914 [Rush Lindell] Right. 124 00:05:19,164 --> 00:05:22,463 [Rush Lindell] So what changed between March and June? 125 00:05:22,764 --> 00:05:25,463 [Reagan] CPI hit 4.2% in May, 126 00:05:25,514 --> 00:05:26,314 [Reagan] year over year. 127 00:05:26,614 --> 00:05:32,614 [Reagan] PCE came in at 4.1%. The Fed's own projections show total PCE running at 5%. 128 00:05:32,403 --> 00:05:34,653 [Reagan] running at 3.6% for the full year, 129 00:05:34,954 --> 00:05:36,954 [Reagan] those numbers leave no much wiggle room. 130 00:05:37,403 --> 00:05:41,103 [Rush Lindell] None. And the Iran war started the last day of February. 131 00:05:41,353 --> 00:05:45,853 [Rush Lindell] The Strait of Hormuz disruption roughly 20% of global oil supply. 132 00:05:46,204 --> 00:05:47,754 [Rush Lindell] That's what drove energy prices. 133 00:05:48,103 --> 00:05:50,053 [Rush Lindell] That's why CPI went from around 134 00:05:50,053 --> 00:05:50,153 [Reagan] Right. 135 00:05:50,153 --> 00:05:54,553 [Rush Lindell] 2.4% in January to 4.2% by May. 136 00:05:54,853 --> 00:05:58,903 [Reagan] The Chase investment research team put it plainly: inflation in May was, 137 00:05:58,954 --> 00:05:59,204 [Reagan] quote, 138 00:05:59,124 --> 00:05:59,324 [Reagan] quote, 139 00:05:59,474 --> 00:06:01,624 [Reagan] primarily driven by rising energy, 140 00:06:01,824 --> 00:06:02,074 [Reagan] oil, 141 00:06:02,224 --> 00:06:05,574 [Reagan] and gas prices that began in March with the onset of the conflict. 142 00:06:05,824 --> 00:06:08,174 [Reagan] So this isn't a Fed ideology story. 143 00:06:08,574 --> 00:06:09,774 [Rush Lindell] No, it is not. 144 00:06:09,974 --> 00:06:13,574 [Rush Lindell] But here's what I want people sitting in their car right now to understand. 145 00:06:14,024 --> 00:06:15,574 [Rush Lindell] You're paying more at the pump, 146 00:06:15,824 --> 00:06:17,474 [Rush Lindell] your mortgage rate isn't moving, 147 00:06:17,724 --> 00:06:23,124 [Rush Lindell] and the guy demanding rate cuts is the same guy who started the war that caused the price spike. 148 00:06:23,524 --> 00:06:23,874 [Reagan] Now, 149 00:06:23,924 --> 00:06:26,374 [Reagan] Warsh also did something unusual at his press conference. 150 00:06:26,228 --> 00:06:35,828 [Reagan] He refused to submit his own Dot; sat out the forecast entirely; said it's consistent with his "long held views on the SEP Framework. 151 00:06:36,127 --> 00:06:40,927 [Rush Lindell] The chair of the Federal Reserve won't tell you where he thinks rates are going. 152 00:06:41,278 --> 00:06:42,328 [Rush Lindell] That's either principled, 153 00:06:42,378 --> 00:06:42,927 [Rush Lindell] or it's... 154 00:06:43,177 --> 00:06:45,177 [Reagan] Strategic ambiguity—both, 155 00:06:45,328 --> 00:06:50,328 [Reagan] probably—and with seventeen of eighteen officials saying inflation risks are tilted upward, 156 00:06:50,728 --> 00:06:52,377 [Reagan] the direction of pressure is obvious. 157 00:06:52,627 --> 00:06:55,927 [Reagan] Which brings us to the question nobody in the White House wants to answer. 158 00:06:56,177 --> 00:06:59,127 [Rush Lindell] Which is, who actually created this problem? 159 00:07:04,851 --> 00:07:06,451 [Rush Lindell] You know what nobody wants to say? 160 00:07:06,873 --> 00:07:10,923 [Rush Lindell] Trump launched a war on February 28th. The Strait of Hormuz, 161 00:07:11,073 --> 00:07:13,223 [Rush Lindell] one-fifth of global oil supply, 162 00:07:13,373 --> 00:07:14,373 [Rush Lindell] gets choked off, 163 00:07:14,823 --> 00:07:18,373 [Rush Lindell] Brent crude goes from $73 a barrel to over $100, 164 00:07:18,623 --> 00:07:20,523 [Rush Lindell] and suddenly the Fed can't cut. 165 00:07:20,873 --> 00:07:22,873 [Rush Lindell] That's not a monetary policy story. 166 00:07:23,123 --> 00:07:27,323 [Rush Lindell] That's a foreign policy story that crashed a monetary policy meeting. 167 00:07:27,723 --> 00:07:29,423 [Reagan] And the data backs that up. 168 00:07:29,823 --> 00:07:32,323 [Reagan] CNN fact-checked Trump's own inflation claims. 169 00:07:32,473 --> 00:07:35,823 [Reagan] CPI was 2.4% in January and February. 170 00:07:35,577 --> 00:07:36,027 [Reagan] In February, 171 00:07:36,227 --> 00:07:36,877 [Reagan] before the war, 172 00:07:37,277 --> 00:07:42,977 [Reagan] the Fed was penciling in a cut for twenty twenty six; that path was gone the moment the first strike happened. 173 00:07:43,627 --> 00:07:43,977 [Rush Lindell] Gone. 174 00:07:44,227 --> 00:07:47,177 [Rush Lindell] Completely." And the Dallas Fed put out a paper on this. 175 00:07:47,477 --> 00:07:49,077 [Rush Lindell] They called the Strait disruption, 176 00:07:49,077 --> 00:07:49,377 [Reagan] How? 177 00:07:49,377 --> 00:07:53,277 [Rush Lindell] the largest geopolitical oil supply shock in history, 178 00:07:53,777 --> 00:07:56,777 [Rush Lindell] two to three times bigger than nineteen seventy three. 179 00:07:57,227 --> 00:07:58,277 [Rush Lindell] That's not a footnote, 180 00:07:58,477 --> 00:07:59,627 [Rush Lindell] that's the whole cause. 181 00:08:00,077 --> 00:08:01,877 [Reagan] Now I'd push back slightly. 182 00:08:02,169 --> 00:08:06,269 [Reagan] The war had national security justifications we can argue about, 183 00:08:06,469 --> 00:08:09,669 [Reagan] but the economic consequences don't care about the justification. 184 00:08:10,419 --> 00:08:10,819 [Rush Lindell] Right. 185 00:08:11,169 --> 00:08:16,919 [Rush Lindell] The oil market is not moved by your foreign policy rationale; the oil market moves on supply, 186 00:08:17,119 --> 00:08:18,719 [Rush Lindell] and supply got cut. 187 00:08:19,169 --> 00:08:23,169 [Reagan] So you've got a president who created the shock and then on Wednesday, 188 00:08:23,469 --> 00:08:24,769 [Reagan] CNBC reported this, 189 00:08:24,919 --> 00:08:25,719 [Reagan] he said quote, 190 00:08:25,869 --> 00:08:27,519 [Reagan] we need low interest rates. 191 00:08:27,869 --> 00:08:31,069 [Reagan] His own advisors have quietly stopped calling for near term cuts. 192 00:08:30,873 --> 00:08:31,223 [Reagan] Cuts, 193 00:08:31,373 --> 00:08:32,373 [Reagan] but Trump hasn't. 194 00:08:32,823 --> 00:08:36,223 [Rush Lindell] He hasn't gotten the memo-or he's gotten it and doesn't care. 195 00:08:36,723 --> 00:08:38,623 [Rush Lindell] Because here's the thing about this Administration: 196 00:08:39,123 --> 00:08:44,023 [Rush Lindell] the political pressure doesn't follow the economic reality; it runs ahead of it. 197 00:08:44,423 --> 00:08:47,873 [Reagan] And that puts Warsh in a genuinely impossible spot: 198 00:08:48,223 --> 00:08:52,323 [Reagan] he can't cut-inflation won't let him; he can't hike-without ... 199 00:08:52,423 --> 00:08:54,673 [Rush Lindell] infuriating the man who installed him. 200 00:08:55,023 --> 00:08:55,723 [Reagan] Exactly. 201 00:08:55,973 --> 00:08:59,373 [Reagan] And Trump has a very specific history with Fed chairs who ... 202 00:08:59,129 --> 00:09:00,879 [Reagan] To "don't deliver," ask Powell. 203 00:09:01,279 --> 00:09:04,579 [Rush Lindell] So the question now isn't whether Warsh is independent, 204 00:09:05,079 --> 00:09:06,979 [Rush Lindell] it's how long Trump lets him be. 205 00:09:07,479 --> 00:09:09,479 [Rush Lindell] That's the conversation we need to have. 206 00:09:14,873 --> 00:09:15,323 [Rush Lindell] So, 207 00:09:15,373 --> 00:09:17,173 [Rush Lindell] while we're on the Powell parallel, 208 00:09:17,623 --> 00:09:19,073 [Rush Lindell] I want to make that case directly. 209 00:09:19,723 --> 00:09:21,023 [Rush Lindell] Trump picked Powell, 210 00:09:21,273 --> 00:09:22,173 [Rush Lindell] praised Powell, 211 00:09:22,473 --> 00:09:25,873 [Rush Lindell] then spent three years calling him a fool and threatening to fire him. 212 00:09:26,073 --> 00:09:27,473 [Rush Lindell] Now he's got Warsh, 213 00:09:27,673 --> 00:09:28,623 [Rush Lindell] and last Wednesday, 214 00:09:28,973 --> 00:09:29,523 [Rush Lindell] Oval Office, 215 00:09:29,873 --> 00:09:32,473 [Rush Lindell] same guy says low rates will solve everything, 216 00:09:32,673 --> 00:09:33,323 [Rush Lindell] everything, 217 00:09:33,673 --> 00:09:34,373 [Rush Lindell] the border, 218 00:09:34,473 --> 00:09:35,123 [Rush Lindell] the deficit, 219 00:09:35,273 --> 00:09:36,223 [Rush Lindell] your electric bill, 220 00:09:36,573 --> 00:09:37,123 [Rush Lindell] low rates! 221 00:09:37,473 --> 00:09:38,023 [Reagan] Okay, 222 00:09:38,123 --> 00:09:40,523 [Reagan] but Rush slow down for a second because 223 00:09:41,061 --> 00:09:42,661 [Reagan] Warsh is not Powell, 224 00:09:43,161 --> 00:09:45,811 [Reagan] and I think that distinction matters more than the parallel. 225 00:09:46,261 --> 00:09:46,961 [Rush Lindell] Make the case. 226 00:09:47,417 --> 00:09:50,117 [Reagan] Powell never had Trump's actual trust. 227 00:09:50,417 --> 00:09:51,117 [Reagan] From day one, 228 00:09:51,267 --> 00:09:53,567 [Reagan] he was managing a president who resented him. 229 00:09:54,017 --> 00:09:56,317 [Reagan] Warsh starts with real political capital. 230 00:09:56,817 --> 00:10:04,067 [Reagan] CNBC reported that a White House official said Trump has confidence and faith in Warsh and that's changing the whole posture. 231 00:10:04,567 --> 00:10:06,767 [Reagan] Even Navarro walked back his cut calls. 232 00:10:07,367 --> 00:10:07,967 [Rush Lindell] Okay, 233 00:10:08,117 --> 00:10:10,667 [Rush Lindell] I'll give you that; the relationship is different. 234 00:10:11,067 --> 00:10:12,317 [Rush Lindell] But here's what gets me: 235 00:10:12,617 --> 00:10:14,767 [Rush Lindell] it doesn't change the structural trap. 236 00:10:14,617 --> 00:10:14,817 [Rush Lindell] Cut (you validate inflation), hike (you infuriate a President who just said rates solve everything). The trust buys him time: 237 00:10:15,267 --> 00:10:23,167 [Rush Lindell] it does not buy him a way out. 238 00:10:23,417 --> 00:10:25,217 [Rush Lindell] That's fair. 239 00:10:25,717 --> 00:10:26,317 [Reagan] And look, 240 00:10:26,567 --> 00:10:27,017 [Reagan] And look, 241 00:10:27,217 --> 00:10:27,967 [Reagan] markets agree: 242 00:10:28,467 --> 00:10:32,667 [Reagan] CME FedWatch is pricing a seventy nine percent chance of a hike by December. 243 00:10:33,117 --> 00:10:33,967 [Reagan] Zero cuts. 244 00:10:34,417 --> 00:10:36,367 [Reagan] The patience from the White House is real, 245 00:10:36,617 --> 00:10:38,017 [Reagan] but it's not infinite. 246 00:10:38,617 --> 00:10:40,367 [Rush Lindell] Trump's patience infinite, 247 00:10:40,717 --> 00:10:40,817 [Rush Lindell] right? 248 00:10:41,209 --> 00:10:43,209 [Reagan] The man does have a track record. 249 00:10:43,409 --> 00:10:47,359 [Rush Lindell] Which brings us to what Warsh is actually doing inside the institution, 250 00:10:47,659 --> 00:10:51,759 [Rush Lindell] because he's not just holding rates and waiting – he's shaping the whole operation. 251 00:10:52,259 --> 00:10:53,209 [Rush Lindell] Five task forces, 252 00:10:53,459 --> 00:10:56,909 [Rush Lindell] a new statement format – that's a different kind of move entirely. 253 00:11:02,681 --> 00:11:03,131 [Rush Lindell] So, 254 00:11:03,231 --> 00:11:03,681 [Rush Lindell] look, 255 00:11:03,781 --> 00:11:10,781 [Rush Lindell] setting aside the rate drama for a second, what Warsh actually did at that first meeting is worth taking seriously on its own terms. 256 00:11:11,131 --> 00:11:13,831 [Rush Lindell] Five task forces-communications, 257 00:11:14,231 --> 00:11:14,931 [Rush Lindell] balance sheet, 258 00:11:15,231 --> 00:11:16,381 [Rush Lindell] inflation framework, 259 00:11:16,781 --> 00:11:17,581 [Rush Lindell] data sourcing, 260 00:11:17,981 --> 00:11:18,631 [Rush Lindell] productivity, 261 00:11:18,881 --> 00:11:19,531 [Rush Lindell] and jobs. 262 00:11:20,031 --> 00:11:23,731 [Rush Lindell] According to CNBC's recap of the June 17th press conference, 263 00:11:24,181 --> 00:11:28,231 [Rush Lindell] no Fed chair in recent history has launched anything this ambitious. 264 00:11:28,601 --> 00:11:29,051 [Rush Lindell] And, 265 00:11:29,151 --> 00:11:29,351 [Rush Lindell] Reagan, 266 00:11:29,501 --> 00:11:30,451 [Rush Lindell] I'll give him that. 267 00:11:30,701 --> 00:11:35,701 [Rush Lindell] Conservatives have wanted someone to attack that $6.7 trillion balance sheet for years. 268 00:11:36,151 --> 00:11:41,651 [Rush Lindell] That thing ballooned from $800 billion to nearly $9 trillion, and nobody in Washington blinked. 269 00:11:41,651 --> 00:11:42,151 [Reagan] Right. 270 00:11:42,251 --> 00:11:43,651 [Reagan] And dumping forward guidance? 271 00:11:44,201 --> 00:11:48,801 [Reagan] Serious monetary economists have argued for a decade that it boxes the Fed in. 272 00:11:49,051 --> 00:11:50,801 [Reagan] Warsh didn't just talk about it, 273 00:11:50,851 --> 00:11:53,151 [Reagan] he stripped it from the statement on day one. 274 00:11:53,501 --> 00:11:54,251 [Rush Lindell] Day one. 275 00:11:54,521 --> 00:11:55,571 [Rush Lindell] very bold, 276 00:11:55,871 --> 00:12:03,271 [Rush Lindell] very principled, and also none of it matters if Trump blows the relationship up in six months because rates are still at three and a half percent. 277 00:12:03,897 --> 00:12:05,047 [Reagan] I mean, that's the tension. 278 00:12:05,247 --> 00:12:06,997 [Rush Lindell] That's exactly the tension. 279 00:12:07,497 --> 00:12:09,197 [Rush Lindell] The reform agenda is real. 280 00:12:09,547 --> 00:12:21,597 [Rush Lindell] Warsh clearly believes it. But you're threading a needle between institutional overhaul and a president who went to a rally the same day he said totally independent and promised rates coming down very quickly. 281 00:12:21,997 --> 00:12:24,297 [Reagan] The question I keep coming back to is, 282 00:12:24,347 --> 00:12:31,547 [Reagan] is a central banker doing the job or a man building credibility so fast that he's hoping the political pressure doesn't catch up? 283 00:12:31,321 --> 00:12:33,271 [Reagan] CHAPTER FOUR THE REFORMS TAKE HOLD 284 00:12:33,621 --> 00:12:34,621 [Rush Lindell] Both! 285 00:12:34,721 --> 00:12:35,821 [Rush Lindell] the answer is both! 286 00:12:36,171 --> 00:12:41,571 [Rush Lindell] He's buying himself cover with the reform optics while holding firm on rates-smart play, 287 00:12:41,771 --> 00:12:42,471 [Rush Lindell] if it works. 288 00:12:42,871 --> 00:12:45,121 [Reagan] And Warsh himself put it pretty plainly. 289 00:12:45,621 --> 00:12:49,471 [Reagan] CNBC quoted him saying the commitment to two per cent is strong, 290 00:12:49,721 --> 00:12:51,421 [Reagan] unanimous and unambiguous. 291 00:12:52,021 --> 00:12:55,421 [Reagan] That's not a man threatening anything-that's a man planting a flag. 292 00:12:55,821 --> 00:12:56,371 [Rush Lindell] Sure, 293 00:12:56,671 --> 00:12:58,371 [Rush Lindell] but here's what I want you to imagine. 294 00:12:58,585 --> 00:13:07,685 [Rush Lindell] What does the political conversation actually sound like right now from the guy demanding cheap money while also running a war that's making everything expensive? 295 00:13:08,085 --> 00:13:09,535 [Rush Lindell] Stay right there. 296 00:13:14,905 --> 00:13:18,605 [Rush Lindell] All right, we're doing it-mock press conference time. 297 00:13:18,905 --> 00:13:19,855 [Reagan] Oh no. 298 00:13:20,555 --> 00:13:22,205 [Rush Lindell] My fellow Americans, 299 00:13:22,755 --> 00:13:24,905 [Rush Lindell] inflation is out of control. 300 00:13:25,255 --> 00:13:28,055 [Rush Lindell] The Fed must cut rates immediately. 301 00:13:28,605 --> 00:13:32,605 [Rush Lindell] Also, we're sending another carrier group to the Gulf. 302 00:13:33,055 --> 00:13:35,555 [Reagan] Those two statements cannot coexist. 303 00:13:36,305 --> 00:13:38,805 [Rush Lindell] Wrong-they coexist beautifully. 304 00:13:39,205 --> 00:13:42,605 [Rush Lindell] Cheap money and bombs-that's leadership. 305 00:13:43,233 --> 00:13:44,083 [Reagan] Right. 306 00:13:44,233 --> 00:13:44,433 [Reagan] See, 307 00:13:44,533 --> 00:13:45,983 [Reagan] here's what he's actually asking: 308 00:13:46,533 --> 00:13:51,983 [Reagan] Can you run wartime energy inflation at the same time as peacetime interest rates? 309 00:13:52,433 --> 00:13:55,033 [Reagan] The answer from any economist on earth is no. 310 00:13:55,433 --> 00:13:56,383 [Rush Lindell] DETAILS 311 00:13:56,883 --> 00:14:00,133 [Reagan] The Pentagon's own controller told the Senate Armed Services Committee that he could not close the books on the department's spending for the past year, because the books are in such a mess. 312 00:14:00,133 --> 00:14:00,733 [Speaker 3] Services Committee in May that the Iran war had already run up $29 billion in operational costs, 313 00:14:00,202 --> 00:14:06,902 [Rush Lindell] Wow. 314 00:14:06,902 --> 00:14:07,402 [Reagan] and that number wasn't counting base repair in Kuwait and Bahrain. 315 00:14:07,402 --> 00:14:10,702 [Rush Lindell] You cannot pump that kind of wartime spending into an oil-shocked economy and then demand the Fed hand you cheap credit on top. 316 00:14:10,902 --> 00:14:18,852 [Rush Lindell] Okay, 317 00:14:19,252 --> 00:14:19,652 [Reagan] but I'm right though, 318 00:14:19,752 --> 00:14:20,752 [Reagan] right? 319 00:14:20,852 --> 00:14:21,052 [Reagan] That's exactly what's happening. 320 00:14:21,202 --> 00:14:22,952 [Reagan] That's exactly what's happening. 321 00:14:23,452 --> 00:14:24,302 [Rush Lindell] That's the bit. 322 00:14:24,702 --> 00:14:28,502 [Rush Lindell] The IEA called this the largest oil supply disruption in the history 323 00:14:28,502 --> 00:14:28,652 [Speaker 3] of the United States. 324 00:14:28,318 --> 00:14:30,468 [Rush Lindell] In the history of the global oil market, 325 00:14:30,968 --> 00:14:32,618 [Rush Lindell] you've got wartime fiscal pressure, 326 00:14:33,018 --> 00:14:34,068 [Rush Lindell] a closed Strait of Hormuz, 327 00:14:34,368 --> 00:14:36,368 [Rush Lindell] inflation at four point two percent, 328 00:14:36,368 --> 00:14:36,668 [Reagan] And 329 00:14:36,668 --> 00:14:39,018 [Rush Lindell] and the demand is still cut rates. 330 00:14:39,518 --> 00:14:42,018 [Reagan] the Fed can't say that out loud. 331 00:14:42,418 --> 00:14:44,318 [Reagan] Warsh, without naming Trump, 332 00:14:44,668 --> 00:14:48,068 [Reagan] pointed to the Iran war as a key cause of high inflation. 333 00:14:48,368 --> 00:14:50,018 [Reagan] The Globe and Mail flagged that, 334 00:14:50,268 --> 00:14:52,618 [Reagan] without directly naming the president. 335 00:14:53,118 --> 00:14:55,018 [Rush Lindell] With diplomatic dissemination. 336 00:14:55,294 --> 00:14:56,844 [Reagan] Maximum polite. 337 00:14:57,194 --> 00:14:57,744 [Reagan] Anyway, 338 00:14:57,994 --> 00:14:59,044 [Reagan] the joke writes itself: 339 00:14:59,344 --> 00:15:00,644 [Reagan] You want peacetime rates, 340 00:15:00,944 --> 00:15:01,894 [Reagan] end the war. 341 00:15:02,144 --> 00:15:04,994 [Rush Lindell] And that's the part that's actually not funny. 342 00:15:05,244 --> 00:15:06,444 [Rush Lindell] The contradiction is real: 343 00:15:06,894 --> 00:15:10,794 [Rush Lindell] War can't cut because the conditions Trump created won't allow it, 344 00:15:11,094 --> 00:15:13,344 [Rush Lindell] which is exactly where we're heading into July. 345 00:15:13,694 --> 00:15:15,744 [Reagan] The next FOMC meeting, 346 00:15:16,094 --> 00:15:19,444 [Reagan] and that one's going to matter a lot more than this one did. 347 00:15:24,980 --> 00:15:27,880 [Reagan] So here's what's waiting for Warsh on July twenty ninth, 348 00:15:28,030 --> 00:15:29,880 [Reagan] the next FOMC meeting, 349 00:15:30,230 --> 00:15:32,580 [Reagan] and the Strait situation just got messier: 350 00:15:32,980 --> 00:15:40,830 [Reagan] Iran's Revolutionary Guard struck a cargo ship last Thursday; the IMO paused its evacuation convoy; Trump said, 351 00:15:41,030 --> 00:15:41,630 [Reagan] and I'm quoting, 352 00:15:41,880 --> 00:15:48,230 [Reagan] "You're gonna find out," when asked about consequences; that's the geopolitical backdrop Warsh walks into. 353 00:15:48,580 --> 00:15:50,730 [Rush Lindell] And the market is already pricing that in. 354 00:15:51,080 --> 00:15:53,730 [Rush Lindell] CME FedWatch as of today has roughly seven. 355 00:15:53,534 --> 00:15:55,534 [Rush Lindell] Seventy per cent holding in July, 356 00:15:55,884 --> 00:15:57,734 [Rush Lindell] but the hike probability by October, 357 00:15:58,184 --> 00:16:00,734 [Rush Lindell] that number keeps moving in the wrong direction. 358 00:16:01,184 --> 00:16:01,684 [Reagan] Right, 359 00:16:01,784 --> 00:16:03,084 [Reagan] so think about the trap: 360 00:16:03,384 --> 00:16:04,084 [Reagan] Warsh hikes, 361 00:16:04,334 --> 00:16:07,784 [Reagan] Trump blames the Fed; Warsh holds and inflation stays hot, 362 00:16:08,084 --> 00:16:15,784 [Reagan] Trump blames the Fed; the only exit ramp is if Hormuz fully stabilizes fast enough for let energy prices to fall on their own. 363 00:16:15,984 --> 00:16:17,834 [Rush Lindell] And there's an honest case for that. 364 00:16:18,134 --> 00:16:20,984 [Rush Lindell] Core inflation was two point nine per cent in May. 365 00:16:20,926 --> 00:16:21,026 [Rush Lindell] Hey, 366 00:16:21,326 --> 00:16:23,476 [Rush Lindell] the underlying economy isn't running hot, 367 00:16:23,626 --> 00:16:25,576 [Rush Lindell] it's the oil shock that's doing the damage. 368 00:16:25,926 --> 00:16:28,026 [Rush Lindell] If the MOU holds and shipping resumes, 369 00:16:28,476 --> 00:16:30,826 [Rush Lindell] that dynamic could shift before September. 370 00:16:31,376 --> 00:16:34,476 [Reagan] Except Iran shot a cargo ship last Thursday. 371 00:16:34,826 --> 00:16:36,776 [Rush Lindell] I know, I know, I'm steel manning it. 372 00:16:37,226 --> 00:16:38,326 [Reagan] Steal away. 373 00:16:38,576 --> 00:16:39,276 [Reagan] But Reagan, 374 00:16:39,426 --> 00:16:42,726 [Reagan] every piece of the resolution is outside the Fed's control. 375 00:16:43,126 --> 00:16:44,276 [Reagan] The MOU language, 376 00:16:44,326 --> 00:16:45,476 [Reagan] per reporting from Time, 377 00:16:45,676 --> 00:16:48,176 [Reagan] is ambiguous enough that Iran can strike. 378 00:16:47,998 --> 00:16:49,648 [Reagan] strike and still claim compliance. 379 00:16:50,298 --> 00:16:51,598 [Rush Lindell] That's the real problem: 380 00:16:51,998 --> 00:16:56,298 [Rush Lindell] Warsh is making monetary policy decisions about an inflation shock he didn't cause, 381 00:16:56,648 --> 00:16:57,398 [Rush Lindell] can't control, 382 00:16:57,648 --> 00:16:58,598 [Rush Lindell] and can't fix. 383 00:16:58,998 --> 00:17:02,698 [Rush Lindell] The Fed's only lever is demand; it can't reopen the Strait. 384 00:17:03,148 --> 00:17:05,698 [Reagan] And that is the whole episode in one sentence. 385 00:17:06,098 --> 00:17:08,498 [Reagan] Trump started a war that broke oil markets, 386 00:17:08,698 --> 00:17:09,598 [Reagan] inflation followed, 387 00:17:09,898 --> 00:17:14,048 [Reagan] and now the guy Trump put in charge of the Fed gets to own the consequences. 388 00:17:14,078 --> 00:17:17,928 [Reagan] The July twenty-ninth meeting won't just test monetary policy. 389 00:17:18,278 --> 00:17:22,478 [Reagan] It tests whether the relationship survives contact with what actually happened. 390 00:17:22,928 --> 00:17:25,078 [Rush Lindell] The economics don't care who's in the chair. 391 00:17:25,528 --> 00:17:25,878 [Reagan] No, 392 00:17:26,078 --> 00:17:30,228 [Reagan] they don't. And that's the problem nobody in the White House wants to say out loud. 393 00:17:35,550 --> 00:17:37,350 [Reagan] And that is where we leave it. 394 00:17:37,650 --> 00:17:41,750 [Reagan] Warsh walked into his first FOMC meeting holding a trap he didn't build, 395 00:17:42,100 --> 00:17:45,750 [Reagan] and now he's got until July twenty-ninth to figure out how to get out of it. 396 00:17:46,350 --> 00:17:48,250 [Rush Lindell] The dot plot reversal said it all: 397 00:17:48,800 --> 00:17:51,100 [Rush Lindell] nine of eighteen officials projecting a hike. 398 00:17:51,250 --> 00:17:52,050 [Rush Lindell] That's not a hold, 399 00:17:52,300 --> 00:17:52,850 [Rush Lindell] that's a warning. 400 00:17:53,400 --> 00:17:58,000 [Reagan] And Trump called rates coming down very quickly same day—both things. 401 00:17:58,430 --> 00:18:02,730 [Rush Lindell] The cease fire is fragile; the IRGC cargo ship attack just happened, 402 00:18:02,980 --> 00:18:04,480 [Rush Lindell] there's no clean path here. 403 00:18:05,030 --> 00:18:05,480 [Reagan] None, 404 00:18:05,680 --> 00:18:11,280 [Reagan] and that's the story-a political trap built by the same administration that needed worse to succeed. 405 00:18:11,980 --> 00:18:13,380 [Rush Lindell] Thanks for spending the hour with us. 406 00:18:13,980 --> 00:18:15,580 [Reagan] If this episode got you thinking, 407 00:18:15,930 --> 00:18:17,580 [Reagan] share it with someone who needs to hear it. 408 00:18:17,880 --> 00:18:18,230 [Reagan] Subscribe, 409 00:18:18,530 --> 00:18:19,730 [Reagan] leave us a five star review. 410 00:18:20,030 --> 00:18:21,280 [Reagan] It matters more than you know. 411 00:18:21,880 --> 00:18:23,530 [Rush Lindell] New episodes every weekday. 412 00:18:23,730 --> 00:18:24,680 [Rush Lindell] We'll see you back here tomorrow. 413 00:18:25,130 --> 00:18:26,080 [Reagan] Stay sharp! 414 00:18:29,022 --> 00:18:29,222 [Speaker 4] S