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Stock market DIPS after Fed raises interest rates to try and grapple inflation · INSIGHT TODAY

• 0:00
  Speaker 1: Take a look at the markets down more than a
• 0:03
  Speaker 1: percentage point right now after the announcement from the Fed
• 0:06
  Speaker 1: to raise rates a quarter point. Joining us is Ed Elson, professor.
• 0:13
  Speaker 2: He's not a professor.
• 0:14
  Speaker 1: Co-host of the Prop G Markets podcast, Ed Elson, also
• 0:17
  Speaker 1: professor of public policy and economics at the University of Michigan,
• 0:20
  Speaker 1: Betsy Stevenson.
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  Speaker 2: Ed, I almost gave you a promotion, my friend. Thanks
• 0:24
  Speaker 2: for joining us. What's up with the markets?
• 0:29
  Speaker 3: Well, interest rates were raised as a lot of people expected.
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  Speaker 3: The reason they were raised is because we're trying to
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  Speaker 3: get inflation under control. And what we're starting to see
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  Speaker 3: is something of a runaway train in terms of inflation.
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  Speaker 3: And it all really goes back to the war. We
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  Speaker 3: can look at the price increases since the start of
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  Speaker 3: the war. Corn prices are up 16 percent. Wheat is
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  Speaker 3: up almost 25%. Cotton, more than 30%. Rice, almost 50%.
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  Speaker 3: And this all comes back to oil. Oil prices are rising,
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  Speaker 3: which of course affects gas prices and diesel prices. Diesel
• 1:01
  Speaker 3: is used for transportation. It's used for fertilizer. It's one
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  Speaker 3: of the most important inputs into our economy. So the
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  Speaker 3: Federal Reserve has decided it's time to do something about it.
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  Speaker 3: It's time to raise rates.
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  Speaker 1: So I would ask now, Betsy, Does the president see
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  Speaker 1: this and does he try to do something about it?
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  Speaker 1: I mean, he could, I guess, roll back tariffs, but
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  Speaker 1: really this, does he have much control over it after
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  Speaker 1: the war in Iran? Does he have control of the
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  Speaker 1: war any longer, control of oil prices?
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  Speaker 4: I mean, that's sort of like, you know, asking after
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  Speaker 4: you've let, you know, all the horses out of the barn,
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  Speaker 4: do you have control over them anymore? Probably not that
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  Speaker 4: much control. But I don't think that's kind of the
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  Speaker 4: right question. What we have is a series of policy
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  Speaker 4: choices that have deliberately made the U.S. economy less affordable
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  Speaker 4: for large swaths of the public. And I think it's
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  Speaker 4: now time for the public to decide who they want
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  Speaker 4: to hold accountable for that.
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  Speaker 2: That's a good point.
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  Speaker 1: So, Ed, what are you hearing about who the public
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  Speaker 1: is going to be holding accountable for this?
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  Speaker 3: Well, based on His approval ratings, they hold Trump accountable.
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  Speaker 3: And this is good news because he is the one
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  Speaker 3: who is accountable. I mean, this is the thing that
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  Speaker 3: is so fascinating about our economic problems today. Usually you
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  Speaker 3: have situations where exogenous external events happen and then cause
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  Speaker 3: problems later down the line. For example, COVID. which caused
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  Speaker 3: a supply chain shock, which resulted in the inflation, and
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  Speaker 3: then we can have debates as to how we handled that.
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  Speaker 3: But this is a very unique situation because it was
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  Speaker 3: invented by one individual, not just the war, which we're
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  Speaker 3: now going on for more than 200 days, the war
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  Speaker 3: they said was gonna last a couple of weeks, but
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  Speaker 3: also the tariffs. Both of those two events added close
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  Speaker 3: to a full percentage point to inflation. And it's having
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  Speaker 3: a real effect on the lives of Americans. If we
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  Speaker 3: look at inflation from last month, it rose 3.4%. Average
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  Speaker 3: earnings were up less than that. They were up 3.1%,
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  Speaker 3: which means that every American took a 0.3% pay cut.
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  Speaker 3: And that was in addition to the previous month where
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  Speaker 3: the same thing happened, where inflation and prices grew faster
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  Speaker 3: than wages. So Americans are getting poorer. They are seeing that.
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  Speaker 3: They are experiencing that. They're seeing it every time. they
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  Speaker 3: go to the grocery store. And unlike other situations where
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  Speaker 3: it's a little bit hard to understand why that's happening
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  Speaker 3: or who to pin it on or who's responsible, it
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  Speaker 3: is clear to literally everyone that there is one person
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  Speaker 3: responsible for what is happening, and it is the president.
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  Speaker 1: Low-income households, by the way, the bottom 10% of this
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  Speaker 1: country reported a slight decline in income adjusted for inflation.
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  Speaker 1: Top 10% not having that problem, but the bottom 10%
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  Speaker 1: Certainly are. At the same time, Betsy, the president or
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  Speaker 1: his business, which his business is quick to point out,
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  Speaker 1: the president does not control, traded more securities than every
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  Speaker 1: member of Congress combined since he returned to office, even
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  Speaker 1: as he seeks to pass a stock purchasing ban for lawmakers.
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  Speaker 1: That would exclude, drumroll please, him.
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  Speaker 2: How do you, how do you... How do you square that?
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  Speaker 4: I mean, look, if you look at the data, if
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  Speaker 4: you look at the polling data, Americans think our government
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  Speaker 4: is corrupt. And they think it's more corrupt today than
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  Speaker 4: really in any other time I've looked at the polling data.
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  Speaker 4: They think it's more corrupt than business. People are trusting
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  Speaker 4: CEOs to do the ethical thing over the government. And
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  Speaker 4: if you look at other countries, the U.S. is more
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  Speaker 4: likely to think that we have a corrupt government. And
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  Speaker 4: I mean, that's a really... disappointing, sad state of affairs
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  Speaker 4: because trusting government is actually a key ingredient to government
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  Speaker 4: being able to pass and enforce the effective policies that
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  Speaker 4: are needed for us to have maximum economic growth, for
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  Speaker 4: us to have maximum employment. And so all the things
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  Speaker 4: like the Fed's doing to try to get inflation down,
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  Speaker 4: to try to preserve employment, they're all doing this with
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  Speaker 4: a constraint of a government that is corrupt, not trusted,
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  Speaker 4: and really disliked by a large part of the public.
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  Speaker 4: All right.
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  Speaker 2: What about Doge? Remember, Doge was supposed to save us money.
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  Speaker 2: Look at this.
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  Speaker 1: Nine point five billion in paid administrative leave. The congressional
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  Speaker 1: watchdog said about six point seven billion was associated with
• 5:54
  Speaker 1: the deferred resignation program, which agencies continue to offer at
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  Speaker 1: other points during 2025. According to federal data, one hundred
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  Speaker 1: and thirty nine thousand nine hundred and sixty three, nearly
• 6:06
  Speaker 1: one hundred and forty thousand. federal employees took the deferred
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  Speaker 1: resignation offer. Remember when they said, just quit now, we'll
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  Speaker 1: pay you through September.
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  Speaker 2: That's a whole lot of money, Ed.
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  Speaker 3: It's a lot of money. And it's just another example
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  Speaker 3: of what a complete joke this administration has become. And
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  Speaker 3: I really don't think that's hyperbole. We should also remember
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  Speaker 3: the fact, remember he said that we were all going
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  Speaker 3: to get $ 5, 000 dividend checks from the Doge savings? That
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  Speaker 3: never arrived. He also said that we were going to
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  Speaker 3: get dividend checks from the tariff savings as well, which
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  Speaker 3: of course he then returned to corporations. So it ended
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  Speaker 3: up being a tax on consumers and then it ended
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  Speaker 3: up being a benefit to the corporations. And of course,
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  Speaker 3: now he says that we're going to get another dividend
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  Speaker 3: of $ 5, 000 if the Republicans win the House and the Senate,
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  Speaker 3: which of course would add up to more than $ 1. 3 trillion.
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  Speaker 3: It would increase our fiscal deficit from $ 2 trillion, which
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  Speaker 3: is what we're on track for today, to more than
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  Speaker 3: $ 3 trillion, which is also why we're seeing what we're
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  Speaker 3: seeing in the bond markets where yields are are rising
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  Speaker 3: to historic levels. The 10-year yield touched 5.04%, its highest
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  Speaker 3: level since 2007. Now we have interest rates rising as
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  Speaker 3: a result of the inflation, which means higher borrowing costs
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  Speaker 3: for all of us. It means higher mortgage rates, which
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  Speaker 3: we're already seeing the 30-year mortgage rate just surpassed 7%
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  Speaker 3: for the first time in 15 months. All of the
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  Speaker 3: signals are flashing red. It's very, very difficult to find
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  Speaker 3: any positives other than maybe your stock portfolio if you've
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  Speaker 3: been juiced by some gains in ai those people are
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  Speaker 3: happy right now the rest of america is very unhappy.
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  Speaker 1: Yeah the stock market hasn't been doing badly i know
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  Speaker 1: it's down today but generally it's been on the way
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  Speaker 1: up but there is this feeling that americans who are
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  Speaker 1: in the market even if their retirement is just in
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  Speaker 1: the market have that they're not quite sure it's going
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  Speaker 1: to last and even if it does last and ai
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  Speaker 1: comes in and wipes out all our jobs how much
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  Speaker 1: is that really going to help all right ed elson
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  Speaker 1: A bummer of a show today.
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  Speaker 2: Betsy Stevenson. I appreciate it. Being informed is important. It matters.
• 8:11
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