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¶ Trump's Iran Stance and "Transaction"
Hello everyone. This is JVL, future webby award winner, with uh my My dear friend, Catherine Rampel, author of the Receipts newsletter, and we're going to talk about economics and the things that are happening in the world of money because As we as we've discovered every Friday, there's always good stuff happening, Catherine, and today.
Okay. An embarrassment of riches, yes.
Strait of Iran is open. It is the Strait of Iran, which is what What he said right there, you see it right there. He's he calls it the Strait of Iran. It's like the Gulf of America. Uh maybe that's part of what they get out of the deal. We're gonna rename it for them.
I hadn't considered that. That's a good theory.
Uh, it is fully open, ready for business. We then had confirmation in a follow-up tweet from the president about 20 minutes after that. Uh there. See, this is art of the deal. He calls it the Strait of Ran first and then he calls it the Strait of the Hormuz to keep them off balance, Catherine. That's It's called negotiation. Uh-huh. Uh
Part of the deal right there.
The naval blockade is still in full force, though, until such time as our transaction with Iran is one hundred percent complete. Is it strange to talk about? The negotiation for the end of a war that you start as a transaction?
You don't think this is part of the just war doctrine?
I don't believe that's how typically Catholic theologians have have talked about just war theory.
I I mean Trump knows more than the Pope, so Uh I would defer to his judgment here. Yeah, it does seem quite odd, particularly since. Once again, we don't really know what the objective of this war has been, is, or will be, but we just know it is a transaction of some kind. And uh transaction, of course, implies if not something monetary, although there is some monetary um transaction that is being discussed here. Uh certainly something a little bit crasser than
national security or the freedom of the Iranian people or anything else. Uh, but look, this is Trump's a deal maker, you know, it's a deal, it's a transaction, it's a negotiation, it's not about World peace or Civil liberties or anything else?
Do you remember all that talk about the freedom for the Iranian people that was in the first like twenty four hours of this thing and
I do.
As far as I can tell it's gone.
¶ Financial Markets' Euphoria and Risk
Yeah, I yeah. I mean it's been interesting. I don't know if you've been following any of the um chatter from like the Iranian diaspora.
I am not.
Yeah, but it I mean i I'm far from an expert on this, but I uh I have read some I've talked with some, you know, friends who are who are part of that, uh, who may or may not be representative, but there's also been news coverage about it.
uh about how there were a lot of members of the Iranian diaspora who were very hawkish of you know advocating for war, thought that Donald Trump would uh would help their people and are now disillusioned, understandably, because that that felt that objective, if it what ever was one, fell by the wayside long
Perhaps like the people who have been struggling for freedom in Venezuela.
Yes, or the people who wanted prices to go down here. I mean, there are a lot of people who thought they had um They thought that they had something nice coming to them because Donald Trump said as much. And now we've moved on.
All right, so let's talk about the money. It's all about the money. Uh what will this mean? Yeah and pa in partly I ask because It seems to me like financial markets had already priced in the strait being reopened and the war being over because for the last week. We've had a series of like all-time highs in the SP 500, and we even had oil futures go backwards a little bit while the strait was closed and So I i is that the market's just pricing in already the the idea of this or?
I honestly I am genuinely comp uh perplexed by what is happening in markets in that it seems much more euphoric, certainly, than i reality thus far. Pardon?
Then more euphoric than rational.
Well I mean markets are there's this idea of like animal spirits in the s in the stock market and irrational behavior and things like that. So this is not entirely new, but it it does seem particularly untethered to real developments on the ground. It And I've seen other people who are, you know, like full time market reporters kind of try to puzzle through this as well. And the general pattern seems to be that when there's bad news, there's a relatively muted reaction.
to the downside and then when there is maybe good news or the prospect of good news at the very least. There's a huge uh upside overreaction. And it's a little bit I I think somebody I forget who it was, somebody at Bloomberg wrote something to the effect of, you know, it's it's FOMO. It's like
market participants have been conditioned to buy the dip, um, and that they don't want to be the ones missing out on the rally. And so that seems to be feeding some not super uh I rational is the wrong w you know uh I I I I feel weird calling it ration you know, rational or irrational, but it seems to be feeding some more um
overoptimistic behavior at the very least. And and it's not just me that is saying that because, you know, I have TDS or whatever. If you look at long-term um uh patterns, if you look at Bob Schiller, who was a a Nobel uh economic prize winner. He has this long-running measure called uh CAPE. It's the cyclically adjusted price to earnings ratio. And it's basically uh a way of looking at do stocks seem overvalued or undervalued relative to how much the underlying companies are making.
And right now they seem way overvalued. Like the the level of the stock market relative to how much the companies in the stock market are actually earning looks way out of whack. Like it hasn't been this high. since uh the two thousand dot combo. Yeah.
I have that chart in my newsletter today, actually.
Oh did you I'm sorry.
No, it's okay it was published.
I haven't seen it yet. I haven't seen it yet.
¶ JVL's "Madman Theory" & Ceasefire's Future
Okay,'cause I I actually I mean, I didn't mean for us to talk about this, but I actually have my own theory as to what's
What's your theory? Tell me, tell me.
Uh it is madman theory. And it is the in in the way that Trump supporters said, actually it's good that he's such a crazy person in foreign relations because this makes it keeps everybody else off balance. That turned out not to be true, um, as we've discovered with Iran. Um, but what if that was true for financial markets? And what if Having a guy who creates chaos constantly, right? What is chaos? Chaos is risk. And if there's risk everywhere all the time, then there isn't actually any risk.
And and so, you know, if if everything is risk, then when he does something crazy and things look bad, you would get a muted reaction, right? I mean, the the markets would be like, Uh, it's not great, but also there's always stuff like that. And then when you had your moments of of non-chaos and your moments of normalcy, you'd expect the markets to r to go gangbusters. So this is anyway, I've explicated at some greater length in the triad. Anybody who is was watching this might want to go.
Who who's a better uh colleague to JB? Well read it. Yes. I will read it immediately after this. I'm sorry. That's okay.
So no, no, literally it came out as we were hopping on.
Okay.
Talk to me about where Do you think this Optimism holds. And do we think the this version of the ceasefire holds? I kind of do. I have assumed that we were at the end game and that Trump just had to Basically drag out the negotiations because the initial reactions were so like holy shit, Trump Trump caved. Uh, and he had to make it look like no, I didn't actually cave, don't worry.
Yeah. I don't know. I've kind of given up making predictions about this. I feel like we've been hearing for a couple of weeks that certainly the administration and Trump himself will say this thing is almost over. generally uh these statements are made when markets are having at least their muted reaction to the downside or or oil markets are are spiking or whatever.
Uh so I feel like we've kind of heard this before. I don't really have a good enough sense of the players involved to know if it's credible this time. I think the real question going forward is that even if this ceasefire uh does not expire uh I forget the exact date, but sometime next week, and that it it persists and that there is some kind of indefinite détente What does that mean for global supply chains going forward? Because now that we have seen that the strait can be closed.
It is a known risk that it can be closed again, if that makes sense.
See it in here.
Yeah, you can't un exactly you can't unsee it. And so what does that mean for insurers who may be worried about their shift? you know, about about uh backing ships that are going through. What does it mean for other parts of the supply chain? Th I think there'll be some adaptations like more pipelines. coming out of of the Gulf as opposed to relying on a strait that can again be closed. Maybe the pipelines are are harder to uh to
blow up or whatever, you know, harder to disrupt. I so I think there'll be some adaptation that maybe is fine. It'll be costly in the near term, but maybe it'll be fine. But I think that I I do wonder like Even if this is the end, it's not really the end. uh and and how much damage have we done in the meantime. So it's like it's it's almost a not that it's a moot question about whether this is it, but it's I think there is no way for this to ever be it because we have now permanently disrupted.
um supply chains in that region. We have once again tarnished our relationships with allies around the world, not just those in Gulf states that have sustained attacks. from mostly from Iran through all of this. uh and and from Israel of course, but also um like our allies in Europe. There was a story in what was it, C N B C yesterday about how the IEA warned that, yeah, exactly. Europe may have just six weeks left of jet fuel. Yeah. Like that's that's insane.
that they might run out of jet fuel, which is obviously a critical component for jets, for for any kind of commercial um air travel. And again, maybe the street reopens and maybe that that uh disruption goes away at least temporarily, but like how much damage have we done in the meantime? So I
I hope the war I hope the bombing stops. I hope people stop dying. All of those things um that would be obviously the the first order priority, but like Uh I don't I don't I I have a pretty Yeah, okay, sorry.
¶ Iran Uranium Deal, Enforcement & Hypocrisy
Well, I have to correct myself because I said something that wasn't true. I said that you can't unsee this. And it turns out that that actually is not the case. Matt, if you could show us. Um so Donald Trump says that Iran has agreed to never close it again. And so We don't have to worry. Problem solved. They've agreed not to do it.
Yeah, I'm sure all of the insurers are totally gonna take Trump's word for that, right?
Or the Iranians word for that. Right? Like this is the the funny, you know. So uh one of the the sticking points on the deal seems to be about uh Iran's stock of enriched uranium. They have like four hundred or so kilograms of sixty percent or more enriched uranium. Uh it seems from reporting that America might be willing to purchase that from them to the tune of twenty billion dollars, which would be something that Donald Trump criticized. The Obama administration for doing
It's okay. Um, but at a much greater scale.
You're so persnickety with
Um
But uh but it seems to be the the the fight is over or the fight, I'm sorry, the negotiation, the transaction is over uh how long then Iran would agree to not enrich uranium.
And so it seems as though the United States from reporting wants them to agree to not do it for five years and the Iranians um I'm sorry for twenty years and the Iranians want to agree to not do it for five years. Um As I have said from the beginning Any part of this that is about, any part of this settlement, which is about agreements that one side or the other makes, is meaningless.
because agreements are meaningless. Like, you know, Iran could say ten years we won't do it. That doesn't mean they actually won't do it, right? I mean they're they're You have to decide are we gonna have a verifications regime, are we gonna agree to abandon Snapback sanctions in case there are violations? Could the Russians uh enrich uranium for them and then ship it to them, right? Which is a thing which has been talked about. Um But the the point of this is that we're not going to be able to
The rationale that this was all about forever removing the possibility of nuclear weapons sort of collapses too. Because even Even if what we're talking about, even if you take everybody at their word and Trump gets exactly what it's what he wants, well, we're only kicking the can down the road for 20 years.
Uh-huh.
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Yeah, I mean Trump can barely think past the next thirty seconds he's kind of like a goldfish, so twenty years may seem indefinite to him. I think the bigger issue is exactly what you pointed out, which is how do you enforce something like this, particularly when we have been proven under this administration to not be able to stick to our word.
and uh a gentleman's agreement, a handshake agreement, a piece of paper, whatever this looks like, it won't be worth anything if there is not some sort of enforcement mechanism. I'm curious, do you think that what is there an enforcement mechanism that you would trust or that you think
What's funny here is that the Iranians must understand that Trump doesn't want to enforce any agreement. Right. Trump wants to make the agreement and walk away and never think about this again. And he does not want to wind up in a position where he finds violations and then has to do something about Like for Trump, the the binary if Iran wound up getting a nuclear weapon, like if they test, you know, a nuclear device and prove that they have one.
He could live with that politically. Like just like, you know, that wouldn't hurt what he can't live with politically is having to go in and do this again after the pain he just in uh, you know, absorbed and after having seen what Iran can do.
So from
I could very easily see a situation in which we get a deal, the Iranians promise we will not do anything for X years, and the there will be some sort of superficial enforcement mechanism. But again, Trump is incentivized. It's like COVID. If you don't test, there are no cases. Right. If you don't enforce, then they're not doing any enrichment.
Yeah.
So uh Yeah, that's...
thought about it that way. That that yeah. But then the question becomes again, how does everybody else perceive the risk in all of this? I guess y I think you were probably right on Trump's motivation. But then what about market participants, what about people like Lindsey Graham, you know, the the people who are agitating for this? Uh what does Netanyahu think about all of this for to the extent that he continues to have influence over Trump? And I imagine that Uh there's
that may be somewhat less effective these days, uh post invasion. I don't know. Um
What is like s what do the Saudis think?
Yeah.
Would the Saudis be okay with that? Because they have to live with this ship. Right.
Right.
Like this is this is across the street for them.
Yeah, yeah. They're like the enthusiasts like Lindsey Graham and then there are the people who might actually bear the consequences of not enforcing this agreement. And I I don't know. Um I don't yeah. I'm that's inter an interesting analysis.
They may they may discover it's possible. They may discover that Donald Trump doesn't really care what they think and that he only wants to take care of his own problems.
Weird.
Uh weird. Uh I'm I'm just looking at the uh for the CNN report on this is that the administration is considering unfreezing twenty billion dollars of Iranian assets. And uh This is after Trump went crazy because the uh J J Pac, how do you how do you The J A POA was uh I think we unfroze one point two billion. So you know only twenty X.
Yeah. Whatever. I mean there's been some inflation since then. So
Yeah.
Living increase. For the payoff to Iran.
Do it in real dollars.
I mean you were right. You were obviously right. On some level the uh hypocrisy, lack of consistency, it's all caring about it almost feels quaint. Um I I wish that were not the case, but I just take it for granted that
Yeah.
There's a double standard. Yes.
¶ "Greedflation" Rhetoric & Trump's Policies
It is where we are. So I uh I would like to talk with you about your Truly wonderful newsletter yesterday. Again, if you are not receiving Katherine Rempel's receipts newsletter, go sign up. Go to, I'm sure we have a link down in the YouTube description. Um, or go to the bulwork.com and sign up. Uh It it was about the very funny sort of socialist stuff that is coming out of this super duper free market administration where you have
The president and the secretary of treasury saying that they are really keeping an eye on people selling gas and people selling fertilizers to make sure that they only sell those goods at prices that the government approves of.
Yeah. Yes. Not from Camra.
If Zolan Mamdani opens up five community run grocery stores, that's socialism.
Hello. Again, it's like I realize I realize it's like almost a little bit quaint to fixate on the hypocrisy here. But I am old enough to remember that when Kamala Harris proposed as part of her Uh economic policy launch, a version of what se certainly seemed like price controls, and when Joe Biden jawboned oil companies or or r really retail gas stations, uh, to try to get them to lower their gas prices.
A anything that's that's smacked of not understanding supply and demand, of intervening in markets in Uh, suggesting that the government should exert pressure or even control over how markets price things was. um was mocked. I mean, I I mocked some of it, uh, because I thought it was, you know, e economically illiterate and uh And basically, you know, early slopulism. The and and certainly that was the case with a lot of the greedflation stuff that we saw.
even prior to that, uh, not just from Biden and Kamala Harris, but kind of led by people like Elizabeth Warren, that it was much easier to scapegoat corporate greed than to give, well, certainly the more technical analysis of like why prices are rising because supply and demand are out of whack, but also that might implicate some of the policies that Democrats had adopted that on the margin I think
worsened that mismatch between supply and demand and therefore worsened inflation, which was already going to happen anyway.
In any event.
Um there was a you know a lot of criticism of um of that line of rhetoric for from economic commentators like me, but also from Republicans because they I know, surprise. Uh because this was supposed to be a sign of socialism, of the uh you know, economic illiteracy of Democrats, et cetera, et cetera.
And lo and behold, Donald Trump is suggesting pretty much the exact same policies. I mean, in in some cases it's it's I almost have deja vu because it's like almost the exact same complaints and rants and jaw boning from Trump. from Scott Bessent, from other people in this administration, that I heard from Biden, that I remember arguing with people in the Biden administration about. Rockets and feathers, which is this concept about gas prices shoot up.
uh quickly on the way up and then they sl they fall down slowly on the way down. And this is a a known phenomenon and we can get into why it happens. But it's a known phenomenon that always drives presidents crazy and they just yell at the gas stations and that's not gonna do anything. And lo and behold, Scott Bessant said basically the same thing that Donald Trump is gonna yell at the the
bad actors who don't cut their prices quickly enough. So it's exactly the same stuff. Um and Republicans, of course, are nowhere to be found in their critiques of this, alongside, you know, any critiques of other whatever you want to call it, Trumpian socialism or uh command and control style instincts for the economy that Donald Trump has adopted. This is certainly not the first of those that that he has done or that they have remained silent on, but they are nowhere to be found.
And Democrats are in this uh kind of odd situation where there should be a layup for them, right? They should be able to say, God, Donald Trump is responsible for raising prices in a way that is much truer today than was ever true of Democrats.
b a few years ago, even if even if as I said, Democrats were not completely blameless, much easier to pin the blame on Donald Trump today for raising prices across the board. And yet Um he's trying to scapegoat corporate greed um as this, you know, sort of Um, it's an it's an easy out for him, right? Because he doesn't he wants to deflect from what he's actually done.
But democrats can't say that because they do the same thing and they're in this tricky situation. And I I just hope that there is like some enlightenment about all of this.
That on enlightenment.
I know.
If the if the bet is enlightenment or not enlightenment, I will always take the under.
¶ Policy Responses, Price Gouging & Antitrust
Yeah, that's fair. Uh a and and my I guess the the more serious point I should make is that this is not just about silly rhetoric. I think the real problem is when you have
Uh
policymakers who get kind of high on their own supply and then they actually do try to impose price controls. or similar measures. It's it's one thing if they say a bunch of silly stuff and they launch a bunch of performative antitrust investigations, which by the way, both Trump and Biden did.
have done, prior presidents have as well, every time there's like a increase in gas prices, prior administrations or other politicians have have sicked the FTC to do a like a meaningless um antitrust investigation. That's wasteful and it won't do anything, but it's much less harmful than actually imposing some form of price controls in these kinds of, you know, these commodity markets.
So that's what I'm more concerned about. And again, maybe l enlightenment is too much to hope for, but at the very least, greater caution against um taking their own Their own bullshit so serious.
A better response might be government investment in renewables or something like that. Right. That is like if you want a policy response to, ooh, energy now it doesn't help in the near term because these are this is a long tail. Svix. Yeah. But the problem with that is you can do that the way the Biden administration does, and then the next administration comes in as Trump has done and just takes it all away. Right.
And so uh I I do think just as a matter of politics, there's a pretty obvious answer for Democrats, which is we are in favor of uh using the power of the government to make life easier for consumers when there are exogenous shocks.
Yeah.
Not when there are shocks that the the president causes. Right. This is, you know, like this shock is because he decided you you want to fix prices, stop the war. Right. Uh don't don't go. So I yeah, I mean that's a a resource.
I mean there are other things that we're going to do.
We're going to be able to do that.
I was gonna say there are other things. Uh d Trump and the Republicans allowing the enhanced premium tax credits uh for people who are on marketplaces. uh insurance plans to lapse. And that's not a market that I think it resembles anything like a free market. I don't wanna suggest that like all of these markets, if left to their own devices, would be, you know w would be perfectly competitive or anything. Healthcare is totally screwed up.
But this is a case where you could do a lot of good. Um, this is a core competency and strength of the Democratic Party. You could hone in on things like that and not actually, in my view, do much damage, do any damage, really.
I just wanna last last thing from your you had a Trump bleat from uh earlier this week. I am watching fertilizer prices closely during our fight for freedom in Iran. The United States will not accept price gouging from the fertilizer monopoly. American farmers, we have your back. I do is it freedom we're fighting for in Iran again? Is that And it's all so confusing.
It is very hard to keep track. I don't know what we're fighting for. Um but price gouging is bad. We have decided that. And I know I'm gonna get a bunch of angry comments because people are like price gouging is bad. And yeah, it sucks when prices go up, but nobody can ever define what price gouging is. Price gouging is just like prices that are higher than feels right right now.
Um and uh I again this is like an easy scapegoat. And the other thing I will point out about some of this is that Trump is actually not wrong. that the fertilizer market in the US is pretty concentrated. This this has been like a known issue for a while. So it's not like I think uh more antitrust enforcement is bad. Antitrust enforcement is is I'm generally in favor of it certainly much more than this administration.
has been to date. Uh it's just that antitrust is sort of like diet and exercise. It's like, you know, it's generally helpful to you in the long run, but it will not solve an acute problem like acute crisis like the one we are dealing with right now, where we have supply chains completely severed in the fertilizer industry. So it's, you know,
C better competition policy, better competition enforcement, pro competition enforcement, a good thing. It's not gonna solve it's it's I mean, not only will it not solve this problem, it also has like very little to do with some of the other things we're talking about, like Retail gas stations are incredibly diffuse. This is not a concentrated industry. There are like 150,000 or some odd retail gasoline stations in the country. Most of them are owned by.
single owner operators, you know, independent owner operators. Um, they're a lot of them are like losing money on the gas that they sell, or at least it's very, very low margin. It's really just about getting people in the door to buy the beef jerky and the, you know, slushies and stuff like that.
So it's I don't even understand the logic behind like, oh, if only we had more competition in the retail gasoline industry, which is notoriously cutthroat, we would have lower prices. No, it's It's a supply shock and you gotta accept that.
I feel like a crazy person just baying at the moon. But it drops Insane that the president who is gutting antitrust. Then when he has a problem says, I mean the these monopolists over here.
I know.
It just drives me crazy. Do antitrust.
Yeah, or for that matter, a political enemy that he wants to exact revenge on. He's also weaponized. antitrust authorities against uh for example, when Time Warner uh was merging way back in the day with ATT and CNN was involved, he was mad about that. you know there's some question about if Netflix had successfully bought Warner Brothers this time around there were you know at least the suggestion of threats that the administration would try to block it.
even though they don't seem so interested in blocking the other merger that does seem to be going through with uh with Warner Brothers. So uh yeah, no, there's there's no principle here.
¶ Consumer Sentiment vs. Revealed Preferences
It's all corruption all the way down. Uh all right. A little little something, a little uh palate cleanser. Um your friend and mine, Scott Bessant, who I think is in the running for The most Just sort of superficially detestable person in the administration. It's between him and JD Vance, I would say. If like the question being. The person you would least like to have to sit next to for an hour. like uh at a dinner or like or be seated next to on an airplane, right?
Well he's certainly the person most likely to threaten to punch you in the face. There have been a bunch of stories about that.
Yes, I've heard that about it
Yeah.
And boy. But uh but he had Matt, we could throw that up now. Um something sort of thought.
Why aren't we seeing the sentiment? Why are people feeling better?
I you know, I I when I was in the investment business, uh their consumer uh
Sure.
But I used to look at what are the people really doing. So at Treasury we have loads of CEOs come through, whether they're in retail, credit card, the banks, and the consumer, uh, while they may be uh Sounding uh grim is actually quite buoyant. So we we are seeing spending has been very solid across most categories.
They
Well th look in their heart of hearts they feel good. I'm I'm not sure what they're telling the survey.
God help me, Catherine.
I think
Kind of with him.
Yeah, I was that's what I was gonna say. I was like, I know we're we're in a dunking on Scott Bessant, uh
That's that's why I set that all up. This is the that onion meme with like the worst person you know just made a good point.
Yeah.
So I I went crazy during the Biden years when the consumer sentiment was the lowest it had been since the Great Recession. And yet boat sales. We're at an all-time high. Never had more Americans bought boats than during like the period from twenty twenty-one through early twenty twenty three. Another marker that was was the appearance of the$400 Home Depot Halloween skeleton, the lawn skeleton. I don't know if you remember this, but there
Everybody was buying Jack Skellington, maybe, or I forget the name of this. The Home Depot people had a cutesy name for it. And you know, you just drive around and every fucking house, every third house had one of these things on their lawns.$400. For a a stupid thing that you put on your lawn for one week a year. And I was just like, I am sorry, but this country does not act like they believe things are terrible.
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And it so I listened to Scott Bessentier and I'm like, Yes, people's what they're actually doing with their lives. Does seem different than what they're saying in sur in the surveys. And you and I have talked about this before like the consumer sentiment surveys, things are not great in the economy. But the consumer and sentiment responses are like it's the middle of the nineteen thirties or something.
Yeah, economists refer to this as revealed preferences. The idea that stated preferences and revealed preferences are different and generally we would maybe place more weight on revealed preferences. And the consumer sentiment numbers in particular, lots of polling actually really, has gotten
uh less reliable in the sense that it is more likely to be mediated through a partisan filter. And so when when uh People are answering us a questions about how good they think the economy is, uh, in various aspects of the economy. If they are Democrats and there's a Republican in office, they are more likely to say that the economy sucks.
uh than a Republican is if there's a Republican in office. And so you do kind of have to take things with a grain of salt and maybe pay more attention at least to what the independent voters are saying. But yeah, there's there's been this disconnect. Um it's partly about partisanship. And I think it's also partly about uh just kind of like this hangover effect almost from the great inflation that we saw a few years ago. So like
The things so I I think there it's not like it's completely made up or that it's completely about partisanship. I do think it is true that the uh many of the economic indicators that we look at, things like inflation, don't necessarily capture the ways that people think about their financial status.
So just as an example, inflation is usually calculated like month over month or year over year, but it's not as if people have um have completely forgotten what prices used to look like two years ago or three years ago. That's not what economists pay attention to, but consumers have longer memories. And so they're still mad about the fact that things were so much cheaper a few years ago than they are today, even if they have stopped getting even more.
So I think it's it's partly about, you know, there just is a difference in perspective and how consumers think about
Collective memories though.
I'm not sure.
Longer or shorter, right?'Cause'cause consumer memories become incredibly long on some things and like stupidly short on others.
Yeah.
¶ Political Disconnect & Economic Reality
it becomes harder. And here's the what I was trying to get at. The the disconnect I worry about is the political disconnect. Between politics and economics. Right. So in in economics, we can still say, well, you have stated preferences, but we can see your revealed preferences and your behaviors based on that. In voting.
People have basically just gone to voting their stated preferences, right? Like they vote their feelings and their vibes. Yeah. And it doesn't matter what their actual real life is experience is like, you know, like they they can have their brand new boat. and their giant Home Depot skeleton and still they're gonna vote because like, oh, it's terrible here. And yeah, there's uh I'm forever linking to this. Um the the Ellie Reeves did a piece on CNN, I don't know, two years ago.
Maybe three years ago, which she went to a Trump boat parade and she was talking to all these Trump people. And so she's talking about.
Like really so into the boats.
It's a very important indicator. No, very important economic indicator. The boat index. And uh and so she's talking to this this big dude in a toga and he is just going on and on about how the country is going to hell. And nobody can afford anything, and it's awful, and nobody can make a living. And Ellie and they were like very
non threatening way says, No, I hear that. I really I hear that. A lot of people are really worried about that. Um It does seem like you have a really big boat here though. And so he pivots to, well, I'm doing great. Yeah. Like, you know, I'm doing great. And the reason I'm doing great is because I worked hard and I did everything the right way and I deserve it and blah, blah, blah, blah, blah. And so Ellie says to him,
Totally understand. So it's really more worried about the future and for your children. And he goes, Oh no, my children are doing awesome. My children are actually better off than I am. They uh they're they're making even more money than I make. And uh, you know, but but that's because I raised them the right way and and showed them.
So she's like desperately trying to figure out, wait, wait, you know, some way she earnestly she's looking for, but where's the hardship in your life after he's going on and on about how he's living in Mad Max world, you know? And uh That's the disconnect. Whose lived experience is one thing, but whose just preferences and vibes are another.
Yeah, and to be fair, this c this phenomenon, I forget what it's called. Somebody who's watching will remember, but there's like a specific name for this phenomenon in political science when people like love their own congressmen but hate Congress. They love their local school, but they hate school. You know, they think schools in general are bad. They think and and there is a version of this for finance.
that people are much at le I don't know if this is still the case, but at least a couple of years ago when I had last looked at this. People rated their own financial circumstances much more positively. Yeah, than that of the overall country. But I do actually think.
Well, I'd have to look at the data. I don't wanna, you know, uh make this up. But I I do think it is possible that people well, yeah, actually if you if you look at the numbers from like the University of Michigan Consumer Sentiment Index, there are much more people who are saying today
that uh their m their finances are worse off. Uh their own finances. So not just like general impression of their overall economy. And I think that's partly I think that's actually not intention with the example that you gave Because one reason why people really hate inflation is that even when their wages rise, which is often happening. Like you may have this what's called a wage price spiral that like wages rise in response to high prices and then prices rise further, et cetera.
People think that their wage increases, their raises are because of their own hard work and they deserved them and inflation is something that happened to them. They are actually in a broad sense
Everybody's above average, Catherine.
In a broad Exactly. These things are linked, wage growth and price uh price increases. And maybe people are more likely to get able to move to a a better paying job or get a promotion or whatever when the economy is so hot that you ha do have uh rapid price increases. But that's not how people interpret what's happening to them. So like boat guy, um, I'd be interested in reinterviewing him.
Does he feel like may maybe he's doing, you know, he thinks like he's bringing he's raking in money um so much so that he was able to get this boat, but the boat cost more than it should. or other daily things that he purchases cost a lot more than they should have. And it is robbing him of his well deserved higher living standards that he thinks he has earned. And you know, they're they're
that it's not wrong that people who are making more money or who got into a promotion like may have done a lot of things to to earn that. Um but when you have rising prices across the board, that's also a factor. And it's just not how people think of things. It's a there's a term for this called the money illusion, which is about, you know, how people think about inflation, nominal prices versus real prices and things like that. Uh and so
I I know you always want to crap on the voter for uh for all of these things and their imagining problems. Uh Thank you. I am. I'm sorry. I'm sorry. Okay. I'm overstating the case. Uh, I do think. Um I I think you have a point in this disconnect and about partisanship and everything else, but I don't think people are like m totally making up the fact that they feel strapped or that they feel like
life is m is becoming unaffordable. I don't think they're making it up. And I also don't think it's particularly productive to argue with them about how they're feeling. Um, so the question is like how do you if if you're a policymaker, whether an elected official or otherwise, how do you respond to it in in a way that does help people's lives materially and helps them feel better about it too?
¶ Systemic Economic Problems & Media Bias
So my response to that would be um Absolutely. I understand people feeling stressed. And the reason they feel stressed is because the entire American economic system. is set up to have very little slack in it. We have been chasing efficiency in America, like at a fantastic rate since at least like the early nineteen seventies. This is what like the entire
idea of just in time delivery is, right? We're gonna wring all the slack possible out of the system. This was the move from the one income household to the two income household. And an another word for slack is safety. And as societies and economies become more efficient. you get greater returns, right? And so like standard living, but also it means that people are working without a net.
And uh this is true for most people in America, like even very high up on the wage scale. You can be in the 85th percentile and still be one medical disaster, one one job loss away from like real trouble. So that is not made up. It's real. Yeah. But the thing is that that has been real every week of every month of every year for decades. And it drives me a little crazy when people are like,
I mean, just think about this. When when when's the last election where the the people running were like, Things are really good and we gotta we gotta make sure that we
protect our gains and we don't have too much uncertainty in the markets. We want to make sure that we're staying an even keel because things are good right now. No, it's everybody's always like things are terrible. This is, you know, it we're going backwards. It's the everything is always bad. And the same way that nobody ever says, You know what? Gas prices are really cheap right now.
Nobody ever says this. I mean, it's like even when it's 250, like you know, you might stop caring about gas, but nobody ever says looks around and says, Yeah, you know what actually housing prices are actually quite reasonable right now relative to the cost of rent, you know.
कर दो कर दो
What was that?
Yeah.
Uh these are bigger systemic problems with the American economy and the way that we've chosen to order ourselves or the way our oligarchs have decided to order it for us, depending on how pink you are.
Yeah. I think uh we this could be a a much longer conversation. I think the media media coverage is not blameless in any of this either. Uh Politicians.
It leads it leads, right.
Yes, exactly. Politicians certainly uh benefit if they're out of office in particular from the change election type model. Everything is crappy now. I can deliver something better. But there is also a bias in the news media to cover things that way too, even when they're great. So but but anyway, that's that's a a rabbit hole we can fall down another time.
Some other time. Uh hey friends, tickets for the Bulwark live shows in Los Angeles and San Diego next month are on sale right now. They just went on sale right before we came on here. Go to the bulwark.com slash events. Don't sleep on these things. They sell out faster than they should for any reasonable.
I don't understand. I don't know why people are so determined to go see Sarah and Tim, but they are. And everywhere Sarah and Tim go, they get mobbed and uh so you should you should go too. These shows are fun. They're a lot of fun. Catherine, thank you for sitting down. I look forward to doing this again next Friday when I'm sure we'll have more good news. Uh maybe we'll be in a partnership with Iran to collect tolls. paid in World Liberty Financial Stablecoin on the the Strait of Iran.
It just seems like there's so many possibilities here.
There there are. Um the future has infinite possibilities. That is always the case. Thanks, JV.