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00:00Now, we are just a few days away from the start of the Jackson Hole Economic Policy Symposium,
00:06which I'm told is without a doubt the most important monetary policy conference in the world.
00:12Yes, the official theme of this year's gathering is...
00:14What is the theme?
00:14Drumroll, please.
00:15Okay.
00:15Financial innovation, implications for payments and policy.
00:18Put that on a cake.
00:19But what everyone is waiting for is the speech Fed Chair Kevin Warsh is scheduled to deliver on Friday at
00:2310 o'clock Wall Street time.
00:24That is 8 o'clock Grand Teton's time.
00:26Tom Keene will be there, and he is back with us before he makes the pilgrimage to the Cowboy State.
00:31We're also joined this morning by Henrietta Trays, who's the Director of Economic Policy at VEDA Partners.
00:36Tom, let me start with you.
00:38You've been to this many years running now.
00:40Way too many.
00:41I don't want to say how many.
00:44How highly anticipated is this speech?
00:46I think it's a trope.
00:47We lean on it.
00:47Oh, the Fed Chair is going to speak.
00:48The world will be listening.
00:50In this circumstance, is it different?
00:52I would say in 25 years, it's been three or four times like this without question.
00:57I'll say the summer of 07, right after the fourth standard deviation move in LIBOR.
01:02That was because I have a clear memory of Stanley Fisher glued to the phone looking out at the Rocky
01:08Mountains.
01:08And there was some real tension, real angst.
01:11It's a different tension this time, but it's a big deal.
01:15Henrietta, what do investors, what do attendants want to hear?
01:18What makes this a success, especially given everything that's happened in the past week?
01:22You know, the piece that I'm really interested in is obviously the combination of Warsh and how he is thinking
01:28about all the stuff that the Treasury Department is simultaneously doing.
01:32We basically are also getting, at the same time, two secret plans from Treasury Secretary Besson to fight the war
01:40with Iran and also to fight the war that they have with the bond market.
01:43So it's a fascinating dynamic to see the interplay between Treasury and the Secretary there and Warsh at the Fed.
01:50So I think those two combined are amazing.
01:53Henrietta nails it in that we've got to get to Friday.
01:56This idea that we're going to saunter out there and have a wonderful time.
02:00I mean, Tracy Alloway and Joe Weisenthal, but the rest of us, it's this unknown, unknown of market data Monday,
02:06Tuesday, Wednesday, Thursday, and even opening Friday.
02:09Henrietta, let me pick up on what you were saying there.
02:11So at the last press conference, the Fed chair said when asked about this speech, he's looking at a blank
02:16piece of paper and picking up on what Tom said a moment ago.
02:18It sounds like it would be folly for him to start writing this now.
02:21Let's hope he hadn't drafted it before what happened last week.
02:26How does he approach what's happened here over the last week?
02:29We were talking in the last hour with Tom and Tony Crescensi just about the kind of historic roles, historical
02:34roles of the Fed and the Treasury.
02:36This upends all of that.
02:37And I wonder sort of how you think he's approaching the speech that he's going to give on Friday.
02:41I mean, I don't envy him.
02:43I feel a lot like when I try to prepare to go on Tom Keene's show on Monday mornings.
02:47You have to be ready 15 minutes before to see what has just happened.
02:51I think with regards to this specific week, the scale of what we're talking about is so expansive.
02:59So, for example, if the Treasury Secretary rolls out a plan that imposes massive sanctions on China, what is the
03:06reaction function?
03:07Are we now dealing with a situation where we're going to tariff China again?
03:10Are they going to retaliate by limiting critical minerals and rare earths coming back to the United States?
03:15That is a huge impact on our inflation numbers, which, of course, is the remit of the Fed.
03:20So there's, as you point out, no way his paper has any writing on it going into tomorrow, let alone
03:26Friday.
03:27Tom, in the pantheon of economic symposium boondoggles, why is this one so important?
03:34They're important.
03:35Francine Lacroix would tell you that Sintra in Portugal is just as well.
03:38Frankly, I think Sintra is more modern, more with it.
03:42The Kansas City Fed keeps a tight, tight rope on the procedure here.
03:46There are a set of papers.
03:48Mike McKee is in the inner room past the eight-foot grizzly bear, and McKee is in the room with
03:53the other elite.
03:55They're going through boring, sometimes brilliant academic papers.
04:00Sometimes there's a lot of yelling and screaming.
04:02And then there's a choreography where the global central bankers walk out, and they do the beauty walkout to the
04:07split-rail fence,
04:08and the American central banker goes, Wyoming.
04:12And, you know, they do that.
04:14There's a whole bad way to this.
04:15Is this like a photo op?
04:16Oh, yes.
04:17This is like the G20 photo op.
04:18You'll be right there for that.
04:19I think it was Powell.
04:20One time his speech was 9 minutes 46 seconds.
04:23John Farrell had a donut in his mouth.
04:26It was such a short speech.
04:28And, you know, you really never know all of this parade wrapped around the speech.
04:35I would suggest boring speech with maybe one single sentence, or he really steps up and writes what was perceived
04:43as a disastrous press conference.
04:45How have you thought since that first press conference about Chair Warsh's approach to this job, particularly on the communications
04:51front?
04:51We can talk about the task forces and all of that, but he was very adamant in the way in
04:55which he wants to conduct himself,
04:56how the Fed should be conducting itself when it comes to communication.
04:59I imagine before this intervention, maybe that's what he would have dwelled on a little bit.
05:01He's getting what he wants, frankly.
05:03He's getting much more of a, like, here's the markets, this is a stew, and then we'll act after the
05:08fact.
05:08So I think he's, like, halfway there.
05:10He, like everyone else, including us, has been overcome by events.
05:14I mean, Henrietta knows it.
05:15I pulled an all-nighter, Christina, just trying to keep up with Carney and Trump on Canada.
05:20I mean, it's all moving in real time.
05:23It's the same for the chairman.
05:25Henrietta, can we pull back from this a little bit?
05:27Because if you're not one of these cool people, you guys, who knows the ins and outs of these things
05:32and why they matter,
05:33if you're an average American going to the polls in November,
05:37you may not be able to track the precise ins and outs of what's happening with the bond buybacks,
05:42with what Warsh is doing at the Fed, but you know what's happening at the pump.
05:46You know what's happening to your paycheck.
05:48And you see that there's this rattling around.
05:51You know something is going on.
05:52How does this filter down to average Americans?
05:54Do they care?
05:55Should they care?
05:56It's a fascinating question, Christina.
05:58You know, there is actually historical polling trends that show us it's not necessarily the price of gasoline
06:06that is a huge problem for the American voter.
06:08I mean, we're at, what, like $4.10 right now.
06:11That's obviously a steep curve that's very expensive.
06:13So we're going to pick up on that.
06:15And the number one issue for voters right now is inflation by a country mile.
06:18But it's really actually the chaos that voters respond to.
06:23And you can see that backlash building right now.
06:26The president's approval rating is as low as 33 percent in the latest Reuters poll.
06:30The Republican conference is losing special elections nationwide from Tennessee to Virginia by double digits.
06:37And it's really this fluctuation in, oh, my gosh, why are we intervening in the bond market?
06:44Why are we intervening in the yen?
06:45Why are we intervening in Iran?
06:48Why is the straits so closed?
06:49It's the chaos of it all that is driving voters away from the Republican conference and specifically the independent voter.
06:57The independent voter is defaulting towards Democrats.
07:00And not to bring too much into the table in this conversation, but you're seeing them at a pivotal time
07:05decide that Republicans are not presenting an opportunity for legislation or a policy that they support.
07:12And so that's having a ripple down effect to even how they feel about AI.
07:16How do you feel about data centers?
07:17And Democrats are winning that conversation because of, I would argue, a lot of the last 18 months of the
07:24Trump administration and what they've seen from the Republican conference.
07:27It's a really interesting moment in time to be asking voters to weigh in.
07:31Tom, pick up on this because so much of the agita in the bond market centers on the fact that
07:35we did surpass this $40 trillion threshold in U.S. debt.
07:39Right.
07:39Debt to GDP ratio not looking great.
07:42And to Henrietta's point, in a moment like that, customarily, you're not looking at the Treasury Department.
07:46You're looking up to Capitol Hill.
07:47You're looking for some sort of action here.
07:48And you know well how long this conversation has gone on over.
07:51There's hand-wringing about the U.S. fiscal house and very little gets done.
07:55In the very New Testament, the gospel according to Henrietta, nobody votes on fiscal policy.
08:00We know that going back and back and back.
08:03Is this time different?
08:04And I'm hearing some conversations saying, you know what, $40 trillion is a round number.
08:09And this time may be different.
08:11I would focus much more on the gift of the stimulus-driven, AI-driven boom economy, which has said, okay,
08:18the deficit is where it is.
08:20The interest expense is where it is.
08:21But, boy, it's a boom economy.
08:22Great.
08:23And to me, the absolute hallmark here into the election is, does nominal GDP pullback?
08:29To me, that's the number one thing I'm watching.
08:31And, Henrietta, speaking of the Hill, we've got some breaking news from the New York Times reporting that the president's
08:37son-in-law, Jared Kushner,
08:38has met with Democratic leader Representative Hakeem Jeffries to talk about ways they could possibly find common ground.
08:45That sounds like Republicans are planning to lose in November.
08:49But I'm wondering how you take that reporting, if it is indeed factual.
08:54Yeah, I bet they are meeting, and there is a lot of risk, specifically for the Trump administration.
08:59When I meet with Democratic leadership, one of the core, obvious approaches that they're going to have—and, you know, my
09:07forecast is 90 percent odds that the Democrats take the House.
09:10But I still feel like Republicans have a better hand in the United States Senate.
09:13So you're not going to be in a position to pass legislation.
09:15They will have to address the debt ceiling, avoid a government shutdown, those really sort of basic things that can
09:20nonetheless be economically catastrophic.
09:22But really, it's the investigation and oversight.
09:25And right now, the Democratic strategy is to go after not just Trump officials—you know, you can do Pete Hegseth
09:31or RFK Jr., Christine Elm, or whomever.
09:34But there's also a tremendous amount of focus on the idea that there is a relationship between the Trump administration
09:41and private enterprise, whether that's Apple, Google, Microsoft, NVIDIA.
09:46Why are you getting a special license to sell your chips to China?
09:49What's that about?
09:50Are you returning the tariff revenue to consumers, Walmart or Apple?
09:57Have you gotten a refund?
09:59And what are you doing with prices?
10:00So there's going to be this affordability lens.
10:03There's going to be a corruption lens.
10:06Why are these companies donating millions of dollars to a ballroom?
10:10What's going on there?
10:11There's a lot for the administration to be concerned about.
10:14And Kushner should be with Hakeem Jeffries right now.
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