S2 Ep1031: Joe Weisenthal: Everything Screams Recession

Hey guys, a couple of things before we get to our guest. One more reminder.
We have the events coming up in Chicago and Nashville. Go to thebulwark.com slash events.
Chicago is already, I got a note this morning, we think going to sell it 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 have pretty weather in May in Tennessee. On this pod, we've got Joe Weisenthal.
We're going to go real deep on economy stuff. He is just the hardest working man in finance journalism.
I've 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's Fox has said that they are only doing it on their Amazon haul program, which is for truckers and 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.

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 Bullard 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 Weisenthal.
What's going on, man? Thanks for having me. Psyched to finally be here.
I've been, you know, monitoring your tweets since, I don't know, fucking I was in short pants. Been a long time.
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. I've had a couple people tell me that over the years.
And I'm like, please turn that off. I know.
Just turn it off. It's not that important.
It's not that important. 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 and the S&P 500. So just kind of talk about the biggest picture.

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 a 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 plans.
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.
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? 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 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. And I'm getting increasingly shaky on the efficient markets hypothesis.
But Scott Besson, our Treasury Secretary, had an explanation this morning. He did a press conference and he said that individual investors are holding tight, and it's just the institutional investors that are panicking.
Yeah. And that's their spin.
What do you make of that? 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 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 market. It still doesn't completely satisfy me because, again, my efficient market sprain, I still think there must be, quote, smart money that would sell more if stocks are 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 Besson'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 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 the famous Jim Cramer, they know nothing rant about 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.. Here's my sociological theory listening to that because it appeals to me, it appeals to my priors, I'll admit, the idea that Trump is kind of a human pandemic or a human subprime mortgage, that the Wall Street guys and the big institutional investors might see all the data that you're talking about, 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 Besson sit there and do nothing as like the economy tanks? They will obviously pull back, right? And like, it's like they're imputing rationality that's maybe not there.
I think that's totally possible. People just say like, I just like, no, 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 US. 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 and 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 the 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 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.
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 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 a clear objective, right? We're going to rebuild Scranton, Springfield, but not with any Haitian workers.
We're just going to rebuild it just with the whites that live there. That feels doable.
I think there is this aesthetic aspect of it, and coal in particular. because look, one of the real booming industries for the U.S.
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 is 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.
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He was out this morning, as I mentioned, he said, you know, he's more involved in the Asian negotiations. He didn't have a lot of insight into the China or European negotiations, but he was on the Sunday show two days ago.
And I just, I wanted to pull a couple of select clips from him and ask you why you think he is out there and why you think he is seemingly a calming influence on some of the Wall Street guys. Cause I don't really get it.
So let's listen to a highlight reel of Scott this weekend. 200 deals? Who has he made deals with? Is there actually any deal at this point? I believe that he is referring to sub-deals within the negotiations we're doing.
And Marla, if there are 180... But those aren't actual deals.
And game theory is called strategic uncertainty. So you're not going to tell the 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. 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? 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. I know they have a very good relationship and a lot of respect for each other.
But again, I think that the Chinese will see that this high tariff level is unsustainable for their business model. You comfortable yet comfortable yet? Calm yet, Joe that worked for you? Look, I'm not, I'm not a, a trader, but I have to say like so far, having listened to now several Bessent 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, Lutnik 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 Lutnik, all of the people like criticizing him specifically, when in fact, he's been a pretty reliable measure. But, 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.
Yeah. I mean, that's not calming to me, right? I just to just 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 she seems like we're not we're kind of lying about that is what's happening with 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 think that that theory of the case is in touch with reality at all, is it? 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 their 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 perhaps the United States and elsewhere. So I think, you know, at least the stated view of what China wants the world to think is that their main focus is on these really difficult tech like batteries, other areas of energy, semiconductors, et cetera.
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.
I think the story is China itself wanting to leave those low-margin businesses in the past. I agree with that assessment.
I guess I'd just add on to 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 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. But that's not what's happening.
He's alienating those other countries at the same time. Yeah, this is the other part that's really hard to understand.
Because if you remember on April 9th, that was the first of the Trump blinks on the original reciprocal tariffs. And they announced that for all the non-China countries, it 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 theater is like, okay, we're going to form this sort of global ex-China trading block.
And 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, et cetera. 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, 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. I want to talk a little more about some of the domestic impacts you wrote

last week about the war on Christmas. Yeah.
The real war on Christmas and how there are, you know, even let's say they, you know, come to some sort of agreement and Bessent 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. This is really important.
We did a episode of our podcast last week with Anna Wong. She's the chief U.S.
economist here at Bloomberg. And she made the point that this is happening right now.
Holiday orders for all kinds of things, decorations, toys, et cetera. This is the period when they would be getting ordered 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, et cetera. But if you're a small business person and 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, 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.
It was Kwanzaa. We were recognizing Kwanzaa.
You don't want to do that. Yeah, exactly.
That's an assault on Santa Claus. 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.
What did your colleague 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? 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, you know, what some 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.
Amazon was 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. Timu had already done that on 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? Obviously, it's just complete nonsense, right? That was the price of goods. Biden didn't 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 in 40 years, was sort of the central economic story.
And then we're right back to this effort to raise prices. You know, 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're 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 and the people around the Biden administration over the last several years. Isn't that also usually just a bit of a lagging indicator in a situation like this? Yeah.
I mean, look, in defense, it turned out not to be a lagging indicator. The funny thing about 2022 and 2023 is that for all the negativity about the economy, at least on the consumer side, you never really saw consumers actually retrench for better or worse.
That's 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.
They're all predicting that they're going to have less employment in six-month 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, 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, 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, etc. 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.
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 the 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 is being spent.
But I really haven't heard a lot of talk about this. I just thought that was such a potent summary.
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 we want to rebuild domestic industry and we're 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 someone 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. 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 U.S.
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? Yeah, 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 punchable item this morning that I thought was interesting. It's 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 where this feels like 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. 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 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.
There was some discussion, I guess, of a sovereign wealth fund. Yeah.
But that has kind of dissipated. Are you hearing continued conversation around that? 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's 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 U.S.
Congress. Like, we already have this entity in D.C.
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, et cetera, 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 at a minimum, it sort of seems like an institutional gimmick to me. 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 got to look at what's happening with the terrorists in context of the reconciliation that's going to come this year, we're going to extend the Trump tax cuts or do all this other stuff. But I was just sort of looking at, you know, the Hill, you know, watchers this morning, and kind of just kind of grabbing a summary of where they're at.
And, you know, they're supposed to have something by July 4th. 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 trim 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, a 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 tariff stuff, but I don't know what kind of the Wall Street view is of all of it.

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 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 types. 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 of this. People like to imagine that, oh, 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.
Yeah, the energy industry is so interesting to me because at some level, 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 these guys are donors they're all old school republicans like you'd think they'd have access to them and to hear their you know comments in the dallas fed and others and it's pretty striking that they're all unhappy and it doesn't feel like like anybody gives a fuck about that in the white house i don't know one of the quotes that's been um said is that uh chris wright the new energy secretary and i forget who first reported the someone out of Houston.
It's 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'd 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 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. Yeah, it's true on the union side.
I mean, the working, the forgotten man, the longshoreman I was talking 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 funny.

It's like on labor and capital. On both sides of it, they're opposed.
I mean, it's really hard to see who is the very niche domestic constituencies for this. They're not wide.
The shrimpers down by me. The shrimpers are excited.
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's like okay yeah but they're major hedge fund ceos to the long shoremen to small businesses etc the number of people who are like really in support of this approach to trade policy mostly seems like MAGA influencers to me.
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 a hundred percent, actually, I think that it's possible the chaos assumes 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. And know you had another interview I was listening to with one of your colleagues who specializes in that.
Anyway, I just kind of want to let you kind of go on like the relationship between the increasing, you know, rates and our debt issues. 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. Yeah, there are 10 of us left, Joe.
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 DC 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 of 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. What is your sense about kind of like the worst case scenario, the fears that we're seeing around the bond market after Liberation Day and the potential, are there potential actions they could take, you know, that could get us into a debt spiral that kind of gets that out of control? You know, 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's 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 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 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, that by and large around the world, there's been a declining interest in holding U.S. related assets.

And that's showing up largely in the form of a weak U.S. 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 in terms of making our cost of imports significantly more expensive.
This is a doomer pot. So give us your doomsday scenario as you look at what is out there.
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? I mean, I'm worried about the societal effects of actual material shortages and that 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 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's a limit to what that can 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, etc. But if actually whole sort of lines of businesses are shutting

down and there's nothing new to, you know, 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. Yeah.
You're in line with a 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. That's right.
There's a problem. And I do think it also ties to our debt issue, like the ability to do big stimulus also is like somewhat limited if you're worried about interest on debt.
You know, or just the fact that, look, 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 apply 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 counter-cyclical macro policy that stabilizes things.
All right, final thing we got to do is just a little crypto before I lose you. Okay, sure.
There's an insane, the crypto has been doing well. Crypto market's 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 things, it says that World Liberty sold its crypto to investors abroad, which is a new avenue for foreign businesses to carry favor with Trump.
Several investors in the coin managed 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 wickhoff steve wickhoff'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 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.
What do you make of, so like, 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 investors, and that there could be a run on it.
Do you have a crystal ball on crypto? 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. I agree with you on that.
The biggest truth about Bitcoin, it reminds me of the COVID stuff. People had the money, they're throwing money around.
And that's still a huge part of it. I purchased a couple of those basketball NFTs.
Nice. I had the Jamal Murray three-pointer from the 2021 playoffs.
I think that's worth $0 now. Oh, I forgot about those.
The apes have gone down to zero. So I do think that that might be the case in some of this fact.

Joe Isethall, the stalwart.

Follow him on social media.

Do not set alerts for his tweets.

No, please don't.

That is not a healthy way to live in this economy.

Appreciate it.

Please come back soon.

Anytime.

Thanks for having me.

All right, everybody else.

We'll be back here tomorrow for another edition of the Bullwark Podcast.

See you all then.

Peace. I ain't got a dime left Just know I'm a grind that till I ain't got a dime left Speaking of dime left Now I ain't got a dime left Had to pay up my bills Now I ain't got a dime left It's a recession Everybody's broke So I just came back to give everybody hoes I was working out for my foe And giving all the nine Now you ain't got a, till you keepin' all night It's a recession, everybody dies, so I just came back, give everybody hold Just looking out for me, giffin' all night, now you're on this shit, and you keepin' all night God bless America, never been to Columbia, so I'ma need one and you get the word to Columbia Say if need be, I get the word to Columbia That's South Carolina, just pay my driver They say young, won't you make it rain? Bitches, you insane Look up, I want some money, num num, but be insane In the membrane, got me rank in my damn brain More than this damn game, I goin' through a damn thing It's a recession, everybody's going by So I just came back and give everybody I'm fuckin' up for a fuck, I'm givin' all night No, you ain't got nothing, so you givin' all night It's a recession, everybody's going by So I just came engineering and editing by Jason Brown.
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