00:00Kevin Hassett is in the lead to essentially become the next Fed chair, to replace Jerome Powell, because he doesn't lower the interest rate, because Trump wants him to lower interest rates more.
00:09Hassett is a regular on my employer's network, Fox News, and people are warning Trump not to go there with him, because he's going to have to sell rate cuts.
00:23He's going to have to sell the economy. If people feel that there's no Fed independence, there's a dual mandate for the Fed chair.
00:33He wants low inflation in the context of a strong economy, but if bond investors feel that the low inflation doesn't matter anymore, you're just going to inflate the economy,
00:45well, then you're going to be paying higher interest rates. It doesn't matter how much the Fed lowers the short-term rate.
00:49The real rates on the 10 and the 30, where mortgages are priced off of, consumer loans, all that stuff, those rates will go up because people won't buy bonds.
00:58And Steve Moore actually has a theory. Some people subscribe to this theory that the Fed, in some ways, sets rates, but that doesn't actually necessarily mean that that's where the market is.
01:08He thinks that those two can be different.
01:10Well, it's true. I mean, the market sets the rates, not the Fed. The Fed sets the short-term rates, which gives you an indication.
01:17Now, the Fed can set the rates if they want to print money dramatically. They could go out and use their balance sheet to buy the 10 and the 30.
01:25Quantitative easing.
01:26Quantitative easing.
01:27You don't have complete control over the economy.
01:30But if you do that...
01:31It's short-sighted.
01:32But here's the bottom line. Kevin Hassett, if you ask anybody that warned Trump about him, they'll tell you he's probably going to be the next Fed chair.
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