Because of all of this, what will the Federal Reserve do in the next few weeks? According to many analysts that I've been speaking with this morning, it really takes the possibility of a rate cut off the table later this month, because the Federal Reserve wants to make sure [00:00:17] that inflation is not going to continue to accelerate before they cut rates. Remember, 2.7% is moving even farther away, Pamela, from the Federal Reserve's 2% target. Well, new data that's been released by the Labor Department indicates that inflation [00:00:35] did rise slightly in the month of June, which is sparking a bit of a debate among economists about whether President Donald Trump's trade wars and tariffs have already begun to increase consumer prices, or if there's something else at play. [00:00:52] Now, before I get to the granular details here, I just want to note one of the major areas or two areas of inflation in the month of June. We're in regard to housing, which continues to go up in price month after month for obvious reasons. [00:01:07] We have a housing crisis. No government official, whether we're talking about the federal government or local governments, are really taking this seriously enough. Maybe Austin, Texas is a good example of a city that's kind of bucking the trend. They started building more housing, and housing prices have actually [00:01:23] gone down in Austin as a result. But elsewhere in the country, we're not seeing that same Austin trend because we're not building enough housing. The other area where there was inflation that's not related to tariffs, has to do with gas. Gas rose in price last month. Why? [00:01:39] Oh, just because of that small 12 day war that, you know, Israel and Iran had engaged in, and also our part in it. So that had an impact on the oil market as well. Now, with that in mind, let's take a look at this graph using, Labor Department data [00:01:56] to kind of show you how much inflation went up in the month of June. So if you take a look at this. According to the Wall Street Journal, consumer prices rose 2.7% in June from a year earlier, which was faster than May's increase of 2.4%. [00:02:11] Core inflation, which excludes volatile food and energy prices, was 2.9%, also in line with forecasts. And according to the Wall Street Journal, month over month consumer prices rose 0.3% in June compared with May, as economists had expected. [00:02:30] Core prices rose by 0.2%, slightly less than the 0.3% increase economists had predicted. And, you know, lending some credibility to the argument that economists have been making in regard to Trump's trade wars and how that's going to lead to inflation. [00:02:47] You'll notice that the inflation was most prominent in areas like home furnishings and supplies, which rose by 1% in June compared with May. Obviously, we rely heavily on foreign imports for furniture and supplies, so we're talking about an industry that's very vulnerable to tariffs. [00:03:04] Video and audio products also rose by 1.1%. Toys rose by one point I'm sorry 1.8%. We get about 80% of our toys from China. And so. And clothing, by the way, a lot of clothing is, made in other countries [00:03:22] and imported in the United States. You'll notice an increase of 0.4% in the cost of clothes in June compared to May. So I don't think it's surprising that these are the areas in which we're seeing inflation. I do think it lends some credence to the argument that Trump's tariffs are starting [00:03:37] to have an impact on consumer prices. Yeah. So remember he famously said, you know, you don't need $30. You only need $2 because he knew that the price of toys was going to go up because 80% of them are produced abroad. So, now, the most important part is Trump is pressuring the Federal Reserve to lower [00:03:57] the rates, which stimulates the economy. But they're they were reluctant to do that because they said, well, what if inflation goes back up? Then if we lower the rates, that will actually compound the problem, and it'll actually greatly increase inflation at a time when it was already rising. [00:04:14] And so because of the tariffs, we're not sure. Now we're a little bit more certain. The inflation has begun has re begun. Right. And so now the Federal Reserve. That's why in the beginning and I alluded to the Federal Reserve going well okay. Now I guess we're definitely not going to lower rates [00:04:29] because if we lower rates when inflation is going up it's going to be way worse. Yeah, it's going to heat up the economy even more. Right. So that's why when Donald Trump he's I don't know if at the end [00:04:45] everyone will agree or not. But he's such a simple minded man and I know I slept to convince a lot of people of that. But like for him to understand the simple concepts of yes, if you cut interest rates, the economy gets stimulated. You understand that he does okay now, but if you overstimulate the economy, [00:05:05] the inflation goes up. So if inflation is already rising, prices are already rising. If you cut rates, you'll overstimulate the economy and then you'll have out-of-control inflation. Trump doesn't understand that. He's so simple minded. He doesn't understand the simplest economic concepts. [00:05:22] Because if he understood that right now, he'd be telling the Federal Reserve, don't, don't don't raise rates. I'm sorry. Don't lower rates. Don't lower rates. Right. - And so he's. - Like lower rates. I want better economy, lower rates. You schmuck. It's going to make it worse for you. You still have three and a half years left. [00:05:37] Right. And I mean, he has. And it's not just the Trump administration. We've had terrible economic policies for several administrations in a row now. But with Trump, think about the whole picture here. Right. So he just cut a ton of a ton of revenue that would go into the federal government [00:05:55] in the form of these massive tax cuts in that giant omnibus bill that they just passed. He's trying to make up for that revenue by, of course, cutting Medicare, cutting food stamps, things like that. But on top of that, by upping the ante with tariffs, which, yes, tariffs do increase revenue for the federal government, [00:06:14] but they decrease your disposable income or your income in general, because you're paying a lot more for products that are being imported to the United States. And I guess Trump's solution to this is make borrowing cheaper, which, again, [00:06:30] will overstimulate the economy, which is why Jerome Powell has been standoffish about cutting rates further. He's kind of sitting and waiting to see just how much Trump's trade wars are going to impact consumer prices. But it's just more of this. [00:06:45] Borrow, borrow, borrow. It's okay. More debt for Americans. That's the way we're going to solve everything mentality. And I don't think that's the right mentality to have. Consumer debt is already at record levels. Yeah. No, no this is a look right now. It's not a disaster right now. [00:07:01] It's a modest increase in inflation. Right, right. But if he keeps going this direction. But luckily he won't, I don't think he'll be able to move the Federal Reserve. But if he moved the Federal Reserve to cut rates, then you're talking disaster. Because the worst of the tariffs still haven't hit. [00:07:16] He keeps delaying them and delaying them and delaying them. So like if you're thinking oh the tariffs and then inflation only went up a little bit. No brother they haven't even begun yet. August 1st is when he claims the tariffs will start. Look he could chicken out like he always does. Right. [00:07:31] And maybe we never get any of these tariffs. There's already some obviously. And that's partly what's causing this. But we don't get the mega ones the 30% 40% etc.. I don't know about that because, you know, this is such an underreported story. But the trade negotiations have ended with Vietnam. [00:07:49] And you want to know what the tariff is for anything produced in Vietnam and imported to the United States. It's 20%. Okay. Anything that was produced in a third country, shipped to Vietnam and then shipped to the United States will be tariffed at 40%. [00:08:05] Yeah. So look, these are if he either he's going to have to indefinitely delay them or at some point he's going to say, all right, there's no deals or there's half a deals. And those deals are already like monster numbers, right? Huge. So if he actually goes through with the majority of the tariffs, then those [00:08:23] numbers are going to be way higher. Right, right. And so economists who argue that the tariffs are going to be absorbed by the consumers are looking at this data and saying this is just the tip of the iceberg. We're going to wait and see what happens in July. One area that's really interesting here, though, is what happened [00:08:40] to the price of new vehicles. So new cars and what the data shows is that, new cars actually fell by 0.3% in June in terms of price. And there are multiple different reasons for why this might be. It could be due to companies essentially rushing to stock up on their [00:08:59] inventory prior to the tariffs hitting, or maybe Americans actually decided to purchase the new cars prior to Trump's original tariff negotiation deadline, the one that he announced on Liberation Day, which I believe [00:09:16] was supposed to be July 9th. Now it's August 1st, and there's also some argument that companies are eating the costs, which is why the inflation hasn't really hit consumers yet. I'm less likely to believe that, considering how unbelievably greedy [00:09:33] our companies are. I mean, the whole reason why they're manufacturing products abroad, or why that started in the first place, was to exploit cheap labor to keep their costs down. But one other thing I want to just note is going back to what Jake was saying about interest rates. You know, it is unlikely that this data will do anything [00:09:50] to persuade Jerome Powell to lower interest rates in the month of June. And while inflation in June wasn't earth shattering, Trump is ramping up his trade war. It's important to know that. So on Saturday, Trump said that the U.S. Would start charging 30% levies on goods from Mexico and the European Union [00:10:08] beginning on August 1st. That's the new deadline. On Monday, Trump threatened 100% tariffs on Russia if it didn't reach a peace deal with Ukraine. And also, I should note that Trump is threatening additional tariffs [00:10:24] on so-called BRICs nations. These are companies. These are countries like Russia, Brazil, who are attempting to dethrone the US dollar as the world's reserve currency. Trump is saying that he's going to slap those countries or any other country that does business with them, with 10% tariffs. [00:10:40] And Goldman Sachs economists estimate that the US consumers will end up paying 70% of tariffs direct costs. Walmart said in May that it would be forced to raise prices in response to tariffs, and clothing brand Ralph Lauren has also [00:10:56] said it was considering price increases. But what's really interesting about this is there was a lot of fear and a lot of concern about Trump's tariffs, in earlier months, but apparently recent polling shows they're not as concerned. People are not as small businesses especially are not as concerned [00:11:13] as they previously were. - Why do you think that is? - Oh, I know why. Because Taco Trump always chickens out. So they believe that Taco Tuesdays is every day. So, they the markets and I think they're wrong, [00:11:28] but the markets are absolutely convinced that Trump is bluffing completely. And he's not going to do any of the major tariffs. Right. So I have mixed feelings about that. I think that he's a giant bluffer. But he thought he could bluff the whole world, which is going to bring us back [00:11:46] to Brixton in a second. But it didn't work. And the world is now going, yeah, no, we're not going to do those deals now. What are you going to do? Right. And so either he's going to completely taco right and just get rid of most of them, especially now that the tax cuts have passed and he doesn't need that as an [00:12:04] excuse, etc., or he's going to dig in. If he digs in, that's when we hit a disaster. And I want to actually go to one of our members here, because they made a really good point that I want to address. I love all your handles. They're all hilarious. Mr. Scruffy oh four has written on Twitch. Because we do a serious news show. [00:12:23] Even if Trump reversed all the tariffs, the damage is done. We're an unreliable trading partner to the rest of the world. Now, see? But that smartest audience in the country. That's right. Because what's happening now is explain what the BRICs is. They're now trying to find a way around America. [00:12:40] Okay. There's also something known as, the Basel Reforms. I'm not 100% informed about this, so, bear with me as I try to explain it. But one of the reforms is they essentially want to go back to not necessarily the gold standard, but move away from printing money. [00:13:00] You know what I mean? So have currency tied to gold because you can print currency, but you can't print gold. Yeah. So I don't I don't know how that's going to work, but. That's that's a much longer and complicated conversation. But what if BRICs includes India and China? [00:13:20] BRICs is gigantic, right? And so all they need is basically Europe and Japan and South Korea. And they're like then America becomes an afterthought. By the way, it would be absolutely disastrous for America [00:13:35] if that if the US dollar is no longer considered the reserve currency. By the way, rather than investing in, you know, America, American currency. You have the global markets kind of moving away and instead investing in gold. [00:13:50] So that's like a current trend that's happening. And these Basel reforms are apparently going to play a big role in that. I'm going to do an in-depth segment on that for tomorrow's show. So you guys can understand and like what I'm talking about here. Yeah. So last thing, guys, for me on this is that, look, Russia is part of BRICs. [00:14:08] And if when they invaded Ukraine, we got to bully them in a lot of ways. We got to do sanctions, maybe freeze some bank accounts, grab some yachts and have the world unite against them. Right? But if the world unites against us because we have a maniacal president [00:14:24] that is trying to go back 120, 30 years in the tariff regime, right. Then and they stop using the dollar. Oh my God, then our interest rates are going to go up. Our debt payments are going to go way up. Our debt is going to go up. [00:14:39] Overall, we're going to be a super tough economic times. So we've got a toddler in the white House, like playing around, with things that that he could break and shouldn't be broken. I mean, super last thing is that this is exactly the debate that I had with right [00:14:56] wingers right before the election. And Dan Holloway from Drinking bro said, I know he's a bull in a China shop, but we hate the China shop so much we're going to send him in. And I thought that was a terrible idea. This is what a bull in a China shop does. He breaks things and a lot of things he shouldn't break. [00:15:13] Trump is notably worse in his second term compared to his first term. He played around with tariffs in his first term, as we've said a billion times on this show before. There was a lot of worry about that. But the tariffs were way more targeted. Some of them were so successful that Biden kept them in place and expanded upon them, [00:15:31] especially the tariffs in China. That's not what's happening here. His tariff policy right now is, oh, I'm the best. I'm the strongest, and I can just bully every country on the international stage to play by my rules. But there's no brakes in the car. But, you know, as we've seen with Japan so far as we've seen [00:15:49] with other trading partners, no, they're not willing to cower to Trump. They're not bending the knee. And they want favorable terms for their own consumers and their own country and their own companies. So we'll see how this all plays out. But right now, not really looking that great. Every time you ring the bell below, an angel gets his wings. [00:16:06] Totally not true. But it does keep you updated on our live shows.