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What Rising Bond Yields Are Telling Us — Transcript

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0:00The work week may be over, but the
0:02economy, it never takes time off. I'm
0:05Justin Wolfers, and this is Off the
0:07Clock, the podcast in which we get to
0:09the end of the week. We slow down, we
0:11rewind, we look back, and we try to sort
0:14out what really matters. And I am
0:16thrilled to have been joined today by
0:19America's favorite economics journalist,
0:24Stacy Vanex Smith. Stacy, welcome. Uh,
0:28thank you, Justin. Uh, I really
0:30appreciate that. I am a columnist of
0:32Bloomberg Business Week and co-host of
0:34the podcast Everybody's Business and
0:35thrilled to be off the clock this week
0:38with you. [music]
0:43There's a lot to talk about.
0:44>> What a week it was.
0:46>> We just got the inflation report out for
0:50the month of August, which everybody was
0:52waiting for with baited breath.
0:54>> Then we're going to talk about the bond
0:55market. And I've heard this saying
0:56before, might have heard it from Stacy
0:58Vanic Smith. If you're talking about the
1:00bond market, it may not be a good news
1:03week.
1:04>> We are going to make talking about the
1:05bond market so clear and so fun, no one
1:09is going to believe it. This is this is
1:10the challenge this week that I have
1:12taken on. So,
1:14>> so fun.
1:15>> Yeah. This is going to be great.
1:16[clears throat]
1:17>> Goodness gracious. I don't know if you
1:18know this, Stacy. I have a PhD in
1:20economics. You just say the word bond
1:22market and I'm starting to think fun.
1:23>> It lights up. [laughter] Yeah. In fact,
1:26last week Betsy, my better half, she's
1:28also an economist. We went on a date and
1:30all we did was talked about bonds. It
1:31was fant
1:33away from the kids. The problem with my
1:36kids is they really are focused on the
1:37short end of the yield curve.
1:39>> And so, we needed time together
1:41>> to be able to talk about long-term
1:43bonds. And
1:44>> yeah, I think the 30-year is like a ser
1:47more a much more serious conversation.
1:49You don't want to get there too early in
1:50a relationship either. My mom warned me
1:53about that actually.
1:54>> The 30-year bind. Yeah.
1:55>> Well, when I went to America, she said,
1:57"They've got very, very loose morals
1:59over there. Stick to the short end of
2:01the curve until you feel comfortable."
2:03And that brings us to I mean, curves.
2:05We're going to have curves. We're going
2:06to have charts. Chart versus chart. We
2:08have the next round. And Stacy, I'm just
2:11going to tease the following apart from
2:13the fact that I'm going to win with we
2:16all know the secret sources dad jokes.
2:19And what if I managed to encapsulate the
2:22human condition and all of this week's
2:24news with a dad joke?
2:26>> I would be impressed by that. And you
2:28know who else would be impressed by
2:29that?
2:30>> Who?
2:32>> Gus.
2:33>> My victory platypus pillow arrived.
2:38It is beautiful and I love it.
2:41>> And I have big plans for Gus. I'm gonna
2:44take Gus around New York.
2:46>> Yeah. No, look, you earned that Gus fair
2:48and square. us in the Big Apple. It'll
2:50be cool.
2:51>> Yes. And just not for nothing, I think
2:53that you should think about making
2:57platypus pillows for people.
3:01>> I think I think it's good merch. This is
3:03a beautiful I I don't know. I'm I'm into
3:05like I I just think this is a beautiful
3:07pillow. Who else has a Platypus pillow?
3:09It's a conversation starter.
3:11>> Well, we are meant to be talking about
3:15the news, of course, Stacy. Let's get
3:16into it, mate.
3:17That's true to inflation. So the the
3:20inflation report came out, we should say
3:22prices were up by 3.4%
3:25um overall and that's from basically
3:29August of 2025 to August of 2026. Prices
3:32across the board were 3.4% which does
3:34not I'd love to ask you about this
3:35Justin because that does not sound like
3:37that much. Price going up 3%. It doesn't
3:39sound like that much. Um, gas was up
3:423.9%.
3:44I guess overall energy without food and
3:46energy. If you took those things out,
3:48those are often the biggest price
3:50movers. Uh, the prices were up only.3%.
3:55>> In a month.
3:56>> Yeah. 2.4% over the year. So, I love
3:59your take on this. I have so many
4:01questions.
4:02>> Great. Um, okay. So, 3.4%. Let me start
4:07with your conjecture. It doesn't seem
4:08like that much.
4:09>> Yeah. Um, Stacy, I double dog dare you
4:13to go to one of your Brooklyn dinner
4:15parties and say prices aren't really
4:17rising that much.
4:19>> Yeah, first of all, I wouldn't believe
4:21it myself. And second of all, it would
4:24not go over well. I'd be thrown out.
4:27I they Yeah, I would get no kale salad.
4:30>> Okay, so then clearly the cost of living
4:32is rising. It's rising 3.4%.
4:36Here's where I think we want to be
4:37thoughtful about our language. I
4:38wouldn't call that dramatically.
4:42I would call it more than we want. I
4:46think the word I used earlier today was
4:47uncomfortable.
4:49And I think another reason you would get
4:51thrown out of the Brooklyn dinner party
4:53without the kale salad is it comes after
4:56a run of inflation. So when you're
4:59already looking at a high price level
5:01and it rises again, somehow it feels
5:03like psychologically that hurts just a
5:05little bit more. Um, but Stacy, I think
5:08you're really on to something. If you
5:10wanted to make the case that inflation
5:12weren't that bad, what you would do is
5:13look at core inflation.
5:15Core inflation is when we strip out food
5:17and energy. And it's not that food and
5:19energy don't matter, but we think that
5:20they're sort of, you know, dancing to a
5:23different tune. So that came in at 2.4%.
5:26And so that's the optimist. That's close
5:28to 2%. You might, by the way, say, why
5:30is it the Fed wants inflation at 2%. Let
5:33me go back to what uh Alan Greenspan, a
5:35former Fed chair once said. He said he
5:37wanted inflation to be so low you could
5:39ignore it. That it could be boring,
5:42uninteresting, you wouldn't talk about
5:43it, you wouldn't think about it.
5:45>> I like that actually bright line from uh
5:49Sher Greenspan that because it is true.
5:52If something got 2% more expensive over
5:54a year, I probably wouldn't notice,
5:56right? If something cost $100 and I knew
5:59that if I didn't buy it now and waited
6:01for a year it would cost $102,
6:04I wouldn't be like, "Well, I've got to
6:05buy it now." Whereas, if I knew next
6:07year it was going to cost $200, I would
6:09run out and buy it, which is what
6:11happens when inflation gets really high.
6:13And you wanted a little This is also
6:15something that's so interesting. I
6:16remember when I first started reporting
6:17on inflation, um, I was, you know, it's
6:20like you don't, as economists, you do
6:22not want to see prices falling. Like,
6:24you don't want to [clears throat] see
6:25that. And this always confused me. So,
6:27will you just like quickly explain? I
6:29don't want to derail us too much before
6:30we get to the report, but why we don't
6:33want to see prices falling because that
6:35sounds awesome to me.
6:37>> So, what you're suggesting is we need a
6:39Goldilocks theory of inflation. We don't
6:41want it too high when you're always off
6:43worrying about it.
6:44>> We don't want it too low, which would be
6:46prices falling. So, if I want to buy a
6:47washing machine, it's like $500 this
6:50week, but I know it's going to be $490
6:55next week and $480 if I can wait another
6:57week. And so then I just don't buy. I
6:59just sit around being like, "Well,
7:01they're going to keep cutting the price,
7:02so I don't have to buy anything." People
7:04stop buying things. They're just waiting
7:06around for the price to drop, which
7:08means companies stop selling things,
7:09which means they stop making so much
7:10money, which means they stop hiring, and
7:13they can start laying people off. And
7:15anyway, that's the deflationary spiral
7:17from kind of just the consumerry part.
7:20>> Absolutely. So, we now have our
7:22Goldilocks theory. You don't want
7:23inflation too high, 10%. You don't want
7:26it too low below zero. You want it where
7:29it's ignorable. And that's why it comes
7:31out at 2%.
7:33>> Okay. So, here's the interesting thing.
7:36When I said that core inflation was 2.4%
7:38over the past year,
7:41>> that's we actually have multiple
7:42measures of inflation. Wow. While we're
7:44going into these, people are going to
7:45love this. Different measures of
7:47inflation.
7:48No, the Fed actually targets a different
7:50measure of inflation called the personal
7:52consumption expenditures deflator.
7:54>> That I've even never heard that.
7:56>> Oh, come on. The PCE deflator.
7:58>> No, this is new territory for me.
8:00>> Okay,
8:01>> I don't know about deflators.
8:03>> Okay, a deflator is just a measure of
8:04inflation.
8:06>> Okay,
8:07>> but right now the PCE deflator is
8:10running hotter than the CPI. We don't
8:12know what the PC deflator is for for
8:14August yet. That's we're going to find
8:16out in a few weeks time, [clears throat]
8:18but a reasonable guess is if the core
8:21CPI is running at 2.4 and PC is running
8:24a little hotter, it's probably running
8:25at a number that's like 2.8 2.9%
8:28something like that. I would
8:29characterize you got to get into all
8:31these layers and levels, but
8:32characterize as basically inflation
8:34remains uncomfortably high.
8:36>> Yes. And that is
8:40a hard on all of us because it means
8:43prices are rising. Prices are also
8:44rising faster than wages right now which
8:47is very bad.
8:48>> And the third thing is it kind of
8:50increases the possibility that we're
8:52going to see interest rates go up.
8:54>> Absolutely. Because now it's the it's
8:57looking like maybe inflation's getting
8:59entrenched and it's rising and that
9:01means that maybe the Fed's gonna have
9:02the Federal Reserve Kevin War central
9:04bank handsome silent Kevin is going to
9:07have to come in and and deal with the
9:10situation.
9:11>> Right. So since we last spoke, we got a
9:14jobs report that was actually really
9:16pretty good.
9:17>> Yes.
9:17>> And the Fed's meant to care about
9:19unemployment and inflation. Well, the
9:21news on unemployment is things seem to
9:23actually be going okay in the labor
9:24market. The news on inflation is it was
9:28already pretty bad. And there's a little
9:30tiny reason to be a little bit more
9:32worried right now. If Kevin Walsh, who
9:35is devastatingly handsome,
9:37was able to talk, he would tell us that.
9:41But unfortunately, Kevin has decided to
9:43play the role as silent Kevin. This is a
9:45Fed that uh that's my adoring nickname
9:48for the fact that he has decided he's
9:50not going to tell us what he's thinking
9:51about anything which means we all get to
9:53be on tent hooks right on edge thinking
9:56I wonder what Kevin's thinking right
9:57now. So very clever strategy for getting
10:00people to think about you and Kevin I am
10:01thinking about you. I'm wishing you the
10:03best.
10:04>> Always leave them wanting more. Although
10:06you did make the argument last week that
10:07him his not saying anything actually did
10:11did he did say quite a bit. So yes,
10:14>> who knows if the silence is is real or
10:17just
10:18>> fake silence.
10:20>> Just fake silence. Yeah.
10:21>> Yeah. Uh so in fact what today's
10:25inflation report did is there's a way to
10:27figure out the likelihood of the Fed
10:29raising rates which is there's a futures
10:31market basically a betting market where
10:33people can bet on the possibility of the
10:34Fed raising rates. And as of this
10:37morning, there was a 72% chance that
10:40Handsome Kevin was going to raise rates
10:42and that rose today to uh rose to 86%.
10:47That he's going to raise rates at the
10:48next meeting. Um so
10:52Kevin might think he's keeping his views
10:54a secret, but the markets seem to
10:55believe fairly strongly that he's
10:57raising rates. Um there's another thing
10:59you might care about a lot if you're on
11:00a political calendar. Is the Fed going
11:03to raise rates before the next election?
11:05because there's actually two Fed
11:07meetings before the next election. And
11:08according to these markets, there's a
11:1090% chance that Handsome Kevin and his
11:13friends are going to raise rates before
11:16the election. I think that's going to
11:18make it it's going to be pretty
11:20interesting and a good day to get glued
11:22to your social media.
11:23>> Oh, yeah. Well, we have we have a bet
11:26about gas prices um right before the
11:30November elections and um you were very
11:32optimistic that gas prices were going to
11:34fall and I bet they were going to rise.
11:38>> Yeah. And like I love there's nothing
11:40people like more than gloating Stacy.
11:42She's my favorite Stacy. That's why I
11:44often on this podcast choose to be wrong
11:47because I want to give you opportunities
11:49to gloat
11:50>> because you're you because I gloat. So
11:53I'm sorry. I don't mean to gloat. It's
11:55not great for the country. I don't want
11:57gas prices to be higher. It's all I've
11:59got. That's the only shred of joy in
12:01this moment is that I was right about
12:03the bad news.
12:05>> Um, so the president during a week, this
12:09was the most mind-blowing thing I think
12:10I've ever seen. The president during a
12:12week said in a social media post,
12:15"Handsome Kevin, you better not raise
12:18rates."
12:18>> Yep. If you raise rates,
12:22I will put tariffs on a bunch of
12:23countries.
12:25Stacy, what did you make of this?
12:29>> Th that was not even the splashiest
12:32remark to me that the president made,
12:33but to me it it made me actually it made
12:38me smile a little bit because I
12:40remembered this moment. So, President
12:42Trump nominated Chair Jerome Powell. Um,
12:47and at the time I remember being quite
12:51upset because I loved Janet Yellen and I
12:54and and also uh Chair Pal was not an
12:57economist and I thought like who does
12:59who's who's how is he going to run the
13:01central bank if he's not an economist?
13:03One of the things that that made me
13:04laugh was immediately Trump had had like
13:08buted heads with Jerome Powell. And it
13:12was pretty quick and there was like
13:15almost no honeymoon period. And I
13:17remember him moaning bemoning this fact
13:20before he nominated War saying, "Well,
13:23the problem is they tell you whatever
13:25you want to hear and then you nominate
13:27them and then they have this security in
13:30the job and then they just do whatever
13:32they want." So this tweet just kind of
13:35made me smile because it feels like
13:37Trump sees what's coming down the pike.
13:39He nominated a hawk. The Hawk may have
13:41said some things that indicated like,
13:44"Oh, I'll totally do your," but it seems
13:47like the the handwriting's on the wall.
13:49Worsh is gonna It seems like do what
13:52needs to be done. There have been a lot
13:53of hints about that. We don't know. We
13:55don't know.
13:56>> I think what's so interesting about this
13:58is if Walsh doesn't raise rates,
14:01remember we're at a point right now
14:02where markets think there's a 90% chance
14:05he raises rates before the election.
14:08If he doesn't raise rates, I think
14:10markets are going to take that as a
14:12signal not about the state of the
14:13economy, but a signal about who Walsh
14:15is.
14:15>> Yep. 100% agree.
14:17>> So, whatever hap this next Fed meeting,
14:19it's going to be terrific. Bring your
14:20popcorn folks because if he raises
14:22rates, remember the president has
14:23already said if he raise rates, I'm
14:25going to put tariffs on other countries.
14:27So, expect a presidential tantrum.
14:31If he doesn't [clears throat] raise
14:32rates, expect a Wall Street meltdown.
14:36>> Oh, yeah. No. And I I can't imagine him
14:40doing that. But the thing is, here's the
14:42other thing too to remember is that Wars
14:44has one vote. So even if he does vote to
14:47lower rates, it doesn't, you know, if
14:50the there are 11 vote or 11 other voting
14:53members who will who are very likely to
14:57vote to raise rates. So it seems like
15:00interest rates are probably going up,
15:01which is going to be hard on all of us,
15:02but probably probably the right thing
15:05for the economy. I mean, I don't know. I
15:07tend to be hawkish for some reason in my
15:09heart. Maybe it's my Idaho upbringing or
15:11something, but um I do worry about
15:14inflation and it seems like Worsh is
15:16worried about it. But I think you're
15:17right. It's not even the inflation
15:20philosophies that are I think worrying
15:22markets so much or that the reason that
15:23we should bring our popcorn, it's how is
15:26Wars going to handle Trump?
15:28Well, he's threatening I I I just So,
15:31one of the things
15:32>> he's threatening tariffs, but like that
15:34that's not going to hurt Worsh, is it?
15:36Is that is there like a threat there
15:37that I'm not I mean, this isn't like a
15:39horse head or something like I don't
15:41understand.
15:42>> Can you explain the horsehead reference
15:43to everyone?
15:44>> Yes. The horsehead reference is from the
15:46Godfather, which is an excellent movie.
15:48And in The Godfather, The Godfather,
15:51Marlon Brando, is trying to get a movie
15:54producer to put basically Frank Sinatra,
15:57but it's a fictionalized version of
15:58Frank Sinatra in a movie. And the guy
16:01won't do it. The producer doesn't want
16:03to do it. Um, and so, but the producer
16:06is this very wealthy movie producer. He
16:08has a bunch of horses, like
16:10thoroughbreds, and he, the mafia guys
16:13come to ask him to to put Frank Sinatra
16:16in the movie, and he's like, "No, I
16:17don't want to do that. But he shows them
16:18his prize, Thoroughbreds. The next thing
16:20he knows, he goes into his bedroom and
16:22one of his beautiful Thoroughbreds heads
16:25is in the bed and it is a very iconic
16:27and bone chilling scene.
16:30>> I thought that the point of the
16:32president's tweet was effectively a
16:34horse head. It was if you don't do what
16:37I want, I'm going to do something so
16:39dumb that it hurts you.
16:41>> Would tariffs hurt the Fed or worse? No,
16:45but it hurts anyone who has a soul.
16:48Look, Kevin Walsh doesn't want dumb
16:49things to happen to the American
16:51economy. That's
16:52>> maybe international pressure, too. It
16:54might create other countries being like,
16:55"Listen, you can't
16:56>> you can't do this.
16:57>> This happen."
16:58>> Yeah. Look, the whole
17:00>> I think they're more interested in the
17:01bond market than interest rates here,
17:03though.
17:04>> We were going to have a whole segment on
17:05the bond market. Do you want to get into
17:07it? Well, I did want to run over one
17:09thing that is like a little exercise
17:11that I like to do when the inflation
17:13report comes out
17:15is like a little game, an inflation game
17:17to try to end on a somewhat silver
17:19lining. So, so the report comes out, the
17:22inflation report, it comes out from the
17:23Bureau of Labor Statistics and they when
17:26you look at the report, it's amazing.
17:28You can read it like anybody can read it
17:30and they list off all these products.
17:32men's shirts, steak, turkey, frozen
17:36peas, jam, motor engines, like
17:39everything you can imagine is listed out
17:41and it shows you how much the price rose
17:44or fell between like compared to last
17:47year. And so I always like to look and
17:48see like what the big movers were. So
17:51I'm wondering, Justin, if you have any
17:53idea what the top five biggest jumps
17:55were, price jumps from August 2025 to
17:58August 2026.
17:59>> Wow, that's so unfair. Um, but I'm going
18:01to go with You can I actually bet you
18:03can guess.
18:04>> Okay. Diesel.
18:06>> That's not broken out, but Yeah. Yeah.
18:08Yeah.
18:08>> Uh gasoline.
18:10>> Mhm.
18:11>> Um electricity.
18:14>> Uh no.
18:16>> Now I'm struggling.
18:17>> Well, okay. So, the biggest one was
18:19heating oil. Just not great going into
18:22winter. 52%.
18:23>> Yeah. And a big one. I mean, right now
18:25I'm not using any, but I come from a
18:26place that is very cold and
18:29[clears throat] a very big determinant
18:30of our cost of living here.
18:32>> Yes. No, it's I mean, yeah. Gasoline up
18:3628% from last year.
18:38>> Yeah.
18:38>> Um airfare, which I think has got to be
18:41jet fuel, right?
18:42>> Up 23% over last year. I mean, those
18:45jumps are speaking of the Greenspan
18:47bright line of like prices jumps. You
18:49would notice something rises by 50% 23%
18:53you notice. And then the other ones are
18:54all food. It's poultry, instant coffee,
18:58uh, and beef. But there is a small
19:00silver lining of price. The biggest
19:03price drops year-over-year. It is the
19:06reliable drama queen of the consumer
19:09price index.
19:10>> The reliable drama queen.
19:12>> Well, it's like a reality show for me.
19:14And eggs are like
19:16>> eggs. Eggs.
19:17>> Oh my gosh, I totally gave it away. This
19:18I'm terrible at secrets. Um, yeah, eggs
19:22down 23%. I feel like eggs are always
19:24the drama.
19:25>> Have you noticed how often the president
19:27talks about eggs?
19:28>> My favorite
19:29>> I would also talk about eggs if I were
19:31the president right now.
19:32>> Because I don't believe in intellectual
19:34dishonesty. And so the favorite game
19:37that I see coming out of Washington. No,
19:39I mean, no, this is serious. [laughter]
19:41And I mean this for the folks at home.
19:43If you care about the cost of living,
19:45look at the CPI. If you care about dumb
19:48partisan talking points, then look
19:50through the long list. You'll realize
19:51the list is so bloody long. Of course,
19:53there are a few things that are going up
19:54a lot and of course there are a few
19:55things that are going down. Anytime a
19:57politician when asked about the cost of
19:59living pulls out a particular good, eggs
20:02or beef or gasoline,
20:04>> what they mean to do is mislead you. And
20:07that makes me mad. So I just keep that
20:10as your rule of thumb. Anytime they're
20:11talking about a specific category
20:13without a real reason, it's because they
20:15have disdain for you and they want to
20:17mislead you.
20:20>> That is kind of true. Um,
20:24that said,
20:26I will tell you something that is going
20:27to cost less this year than it did last
20:29year, significantly less, which is a
20:32bacon, egg, and cheese, which is a very
20:34classic sandwich here in New York, a
20:36breakfast sandwich. You get a bacon,
20:37egg, and cheese on a roll. Eggs down
20:3923%, cheese down 3.8%, bacon down 3.4%,
20:43and butter down 8.3%. So,
20:46>> wow.
20:46>> Sounds like cholesterol up how much
20:48percent?
20:49>> Driving to get the bacon, egg, and
20:51cheese. Not going to be good.
20:53>> No.
20:54>> Um, but but but the actual bacon, egg,
20:57and cheese um or you can get an egg
21:00mcmuffin with bacon. Also a possibility.
21:03Anyway, a little cheaper. So, that is my
21:04that's my silver lining from the
21:06inflation report. Yeah, all the biggest
21:07gains, the gas gains are pretty pretty
21:11dramatic.
21:13>> All right, I think there was an
21:15expression someone said, if we're
21:17talking about the bond market, it
21:18probably hasn't been a good week. My
21:22favorite expression, um, James Carville
21:24in 1993, apparently he said it. He said,
21:27"Uh, I used to think that if there was
21:30reincarnation, I wanted to come back as
21:32the president or the pope or as a 400
21:35baseball hitter, but now I would like to
21:38come back as the bond market. You can
21:40intimidate everybody." The point is,
21:44this is the 800 lb gorilla. This is
21:46actually where much of the world's money
21:48flows. This is more important for you
21:50and for me than the stock market that
21:52usually gets the headlines. It's meant
21:54to be boring, but when it's not, look
21:57out.
21:58>> Yes. Here's the thing about the bond
22:00market. I think you're right. It is far
22:02more important than the stock market. It
22:04is also a lot harder to talk about
22:07because it is so confusing. I feel like
22:09it's like through the looking glass. Up
22:11is down, left, like it's very
22:14complicated, which is why I think we can
22:17actually provide a real service here.
22:20>> Yeah. I'm going to take that as a
22:22challenge. Can we make the bond market
22:25clear? I reckon I can. So, let's get
22:27into it.
22:28>> You are an excellent explainer. You are
22:29a teacher. You are in the media all the
22:31time. So, you're very good at at
22:35explaining things, but the bond market,
22:37it it does us all in in the end. So, I
22:39have a challenge for you. You ready for
22:40the bond market challenge?
22:42>> I got this.
22:43>> Okay. I have to give a shout out to your
22:45social media guru, Sam Westby, for this
22:47idea because I think it is so genius. It
22:50is the jargon jar.
22:52I challenge you. So, I'm going to ask
22:54you a bunch of questions about the bond
22:55market. What's going on in the bond
22:56market? And try not to use any jargon.
23:00And by jargon, I mean like a word that
23:03let's say a very like a bright
23:06comparative literature major who is
23:08listening would not know. And we will
23:12see how many um how many jarens if and
23:15if if how many words of jargon you use
23:17and if you do at the end we'll kind of
23:19go over the jargon. Basy peasy
23:23lemon squeezy.
23:25>> Oh wow. Okay. I'm gonna give us a little
23:28primer into bonds and then I'm going to
23:30go in on what's happening. The best way
23:32that I have learned to describe bonds, I
23:34have like a little things that I go
23:36through because as a journalist having
23:37to describe the bond market, it is it is
23:39daunting. I'm glad that you are so
23:41unintimidated.
23:43Um but so a bond is essentially a loan
23:47and it's a loan that you give the
23:48government. So a treasury bond, a T bill
23:51or whatever you call it is a loan that
23:53you give the government and they they're
23:55for different amounts of time. Two
23:56years, 10 years is the one you hear all
23:58the time, 30 years. Um those in
24:02>> Yes.
24:03>> You know, there's corporate bonds as
24:05well.
24:05>> Yes, there are corporate bonds as well,
24:08but you're just lending them money. It
24:10is just a loan. And the yield that they
24:12always talk about is just the interest
24:13on the loan. So you lend the US
24:16government money for 10 years. At the
24:17end, you get your money back plus a
24:19little bit of money. That's called the
24:20yield. And the US government for years
24:23and years has basically had to pay
24:25almost no interest on a loan. And in
24:27spite of that, in spite of the fact it
24:28pays almost no interest, people are
24:30lining up, falling all over each other
24:32to lend the US money because it is so
24:35safe. It is often called the riskless
24:37asset because countries and big
24:39investors, they want a safe place to put
24:41money. This brings us up to the current
24:44moment and the bond challenge. I have
24:46the jargon jar right here. Okay, Justin,
24:50there's been so much drama happening in
24:52the bond market. Before we dive into
24:54specifics overall, what is happening?
24:56Why is everyone so concerned?
24:58>> Okay, so first of all, Stacy, you're
25:00exactly right. A bond is a loan.
25:03Now, when you and I want to get a loan,
25:04we go to the bank and we ask for a loan.
25:07And the good thing is the amount of
25:08money you and I borrow is not very much.
25:10They've got enough bank just sitting
25:11back there in the safe.
25:14The US government when it asks for a
25:16loan, it's asking for a trillion dollars
25:19more. This year, it'll borrow $2
25:21trillion.
25:23If you were to walk up to Wells Fargo
25:25and just say, "Hey, I want to see the
25:27manager. I'd like to borrow $2
25:28trillion."
25:30The manager is going to say, "We don't
25:32have it." So, the next thing you do is
25:33you say, "Well, how about you take a
25:35billion and I'll go to the next bank
25:36around the corner and I'll keep visiting
25:38different banks until I get it." Well,
25:41effectively that's sort of what the bond
25:42market is, which is the government
25:43stands on the street corner and yells,
25:45"I want to borrow money. Who wants to
25:47lend it to me?" And then everyone from
25:50all around the world can come and say,
25:51"I'll do it. I'll do it. I'll do it."
25:53And then what do you do if you've got
25:55all these people saying they'll lend you
25:56money? You run an auction and you keep
25:59changing the price
26:01until you get just enough people who are
26:03willing to lend you money. Now, what's
26:04the price? Okay, so here we're talking
26:07about Stacy's right on me here, folks.
26:10>> [laughter]
26:10>> Oh, it's only going to get harder. Keep
26:12going. This is great. Not one word of
26:14jargon.
26:15>> I want you to think about the market for
26:16apples.
26:18>> How's that? In the market for apples, if
26:22more people want to buy apples, the
26:24price of apples goes up. In the market
26:27for loans, that's what the bond market
26:29is. It's a market for loans. In the
26:31market for loans, if more people want to
26:33want to buy loans, take loans,
26:36then the price of loans goes up. The
26:39price of a loan is the interest rate.
26:40So, I've even skipped over I would have
26:42punished you, Stacy, and said yield goes
26:45in the jargon jar.
26:46>> I say the yield was interest, but I also
26:49should I should be held to account in
26:51the jargon jar, too, 100%.
26:53>> But the point is, anytime someone says
26:55the word bond yield, all they're doing
26:56is trying to impress you that they went
26:58to NBA school. What they're talking
27:00about is just interest rate. It
27:02literally is just the interest rate.
27:04>> So, basically, you're saying the market
27:05for loans is more competitive right now.
27:07more people are trying to borrow money.
27:09Who is trying to borrow money that was
27:11that was not trying to borrow money
27:12before? Why has this gotten more
27:14competitive?
27:15>> I'm not going to say more competitive.
27:17That has a specific meaning in
27:18economics. I'm going to say there's more
27:20demand. More people want loans at any
27:23given interest rate. Uh who wants loans
27:25right now? Why is there more demand for
27:27loans?
27:28>> Demand. No, I'm I'm going to ask for a
27:32judgment whether that's jargon.
27:34demand I don't consider jargon.
27:37>> Okay. Right. So more people want lines
27:40right now. So who is that? Number one,
27:42the big AI companies. They're in the
27:44midst of this very expensive build out
27:46of billions of dollars of data centers
27:49all around the world. It's an investment
27:51boom right now and they don't have the
27:53cash on hand. So they have to borrow it.
27:55So they're effectively they want to
27:57borrow so much they can't go to the
27:58bank. So what they do is they go to the
28:00bond market. Remember we talked about
28:02corporate bonds? This is an example of
28:04corporate bonds. And they're yelling,
28:05"Hey, I'm going to loan." And people all
28:07around the world line up to lend them
28:10money.
28:10>> Now, Justin, there have always been
28:13corporate bonds. Companies have always
28:15been issuing bonds, trying to borrow
28:17money, asking for loans.
28:21Why is this different? I mean, is like
28:23what is different about these loans or
28:26these bonds, if anything? We're moving
28:28from not having AI to having
28:32extraordinary AI capabilities. And that
28:34means we've got to do the AI equivalent
28:36of build a lot of factories. The AI
28:38equivalent of building a lot of
28:39factories is buy a lot of RAM, buy uh a
28:42lot of computer chips, and build a lot
28:44of data centers. But these companies,
28:46which companies by the way are very
28:48small number of workers, uh they're
28:50actually quite small companies, but
28:52they're investing billions and billions
28:54of dollars. They don't have the cash, so
28:56they have to come and borrow it. Think
28:57about all the normal borrowers already
28:59in the market. Then these AI BS walk in.
29:01You're like, "Hey, we want loans, too."
29:03It's sort of like more people want
29:05apples.
29:06>> So competition, this is one reason that
29:10bond yields, aka interest rates on loans
29:13are going up. There are other reasons
29:15though too. What are some of the other
29:18reasons? Why else are we seeing bonds go
29:20up?
29:21>> Right. Next big one is the US federal
29:25government is probably the biggest
29:27borrower in the world. And the US
29:30federal government right now is
29:32borrowing tons of money,
29:34>> billions a week. It's crazy.
29:36>> Uh trillions a year.
29:38>> Trillions a year.
29:40>> It's absolutely bonkers. Now, why is
29:43that? The US federal government is
29:45spending more than it's taking in.
29:49At the moment, our borrowing is about
29:516%. Our extra borrowing every year is
29:55about 6% of GDP every year. And we
29:58already owe 100% of GDP. So the the
30:02amount that we're borrowed is basically
30:03a full year's output and that's going up
30:06by 6% every year. That extra 6% that's a
30:09ton of extra borrowing. Plus, there's
30:12more.
30:14So, if I was thinking about loaning
30:16someone money and I thought, well, I
30:18could loan them money this year at a low
30:20rate or next year at a really high rate,
30:24well, I'd wait till next year, right?
30:26And so, what that means is that
30:27expectations about future interest rates
30:30play a really big role in the bond
30:32market. And it turns out that we know
30:35not only that the US is running these
30:37big budget deficits which is has to
30:39borrow a lot this year. We also know
30:42that nobody in Washington has been
30:43paying attention at all to these issues
30:46and they're going to run really big ones
30:48next year.
30:50And we also know that no one in
30:52Washington ever does anything to fix the
30:54budget deficit unless voters force them
30:56to. And voters are so distracted right
30:58now that there is no no one out there
31:02calling their politicians offices and
31:04saying, "Hey, could you do something
31:05about this?" And so folks in the bond
31:07market have basically gotten to realize
31:09that the US government is going to keep
31:11borrowing tons of money for a long long
31:13long time. So it's not just there's a
31:16lot of borrowing this year. They expect
31:17a lot of borrowing over the next many
31:19years. And that is another thing that's
31:23going to lead to a great So the fact
31:25that I could lend at a high rate in the
31:27future actually somehow comes back and
31:30changes interest rates today.
31:33>> The amount of money that we spend every
31:35year paying down our interest rate
31:37payment, servicing our debt um is now
31:40bigger than the amount of money we spend
31:41on defense. So a lot of the money we
31:43borrow is now going to pay off the
31:45interest on money we already borrowed,
31:47which is a whole thing. But why is that
31:51a problem? So, okay, we're running a ton
31:53of debt or we have a big deficit. Why
31:55does that make us have to pay a higher
31:58interest rate on the money that we
32:00borrow our country?
32:02>> I think I understand the question, which
32:04is why is this a big deal?
32:06>> I might be losing the jargon jar
32:08competition, but go ahead. [laughter]
32:13>> So, think about it in very human terms.
32:16If you don't owe any money and the
32:18interest rate goes up, you don't care.
32:21If you owe a little bit of money and the
32:24interest rate goes up, you care a little
32:25bit. And your friend who's maxed out 23
32:28credit cards and the interest rate goes
32:29up, you realize that friend, they're in
32:31trouble.
32:33But we're the biggest economy in the
32:35world by a lot. So, but like what's the
32:38endgame here? What's the what's the
32:40worry? It's like, so we owe a lot of
32:42money and so what?
32:45>> Because we owe a lot of money, our
32:48interest bill each year
32:51is very sensitive to the interest rate.
32:54So because the interest rate went up,
32:55the interest bill's going up. And that
32:58then means that if the government wants
33:00to not go crazy,
33:04it's going to have to spend less on
33:05roads and schools and helping people out
33:08on food stamps and the military.
33:11>> Yeah. I think 25% of the money the
33:13federal government spends comes from
33:14bonds. Keeps the lights on. Bond money.
33:17>> Yeah. Right. So if that if the credit
33:20card bill goes up, we have to cut back
33:21on something else in order just to keep
33:23our spending exactly where it is. That's
33:25the way it directly affects yours and my
33:27life, which is that government. It's us.
33:29If our government's spending more of its
33:30cash on credit card bills, it's got less
33:32to spend on the stuff we care about.
33:34That's the first problem. The second
33:36problem Stacy's getting at is what I'm
33:39going to I'm going to descri I'm going
33:41to say what the jargon word is and then
33:43I'm going to say what it is is what
33:44economists call the risk premium.
33:46>> Yes.
33:47>> Okay. So, if Sta if I if Stacy comes to
33:50me for a loan, now I know Stacy, she is
33:55a very serious person who gets all the
33:56finances in order and never misses a
33:58bill. I'd be happy to lend her money.
34:01It turns out the younger Stacy, well,
34:04she was forgetful. She sometimes didn't
34:06send in her credit card bills. She had a
34:09lot to, you know, going to all those
34:10Brooklyn kale parties that she blew so
34:13much money on kale as a youngster.
34:16Um, and I was worried with that younger
34:20Stacy that she would never be able to
34:22repay her bills.
34:25The only way she could actually ever get
34:27me to want to lend her money is she say,
34:29"Well, how about I'll pay you a bit
34:30extra, Justin.
34:32That bit extra, we call it the risk
34:34premium. It's the extra reward that you
34:37demand as a lender
34:39for the possibility you might get
34:41stiffed by the other guy." But the US
34:44government can print its own money. So
34:46it's not like an individual. It's I
34:48might run out of kale lending money.
34:51Like I might not be able to pay a loan
34:52back, but the government like Uncle Sam
34:54could just print money and pay it back.
34:56>> Wow. You are just upping the jargon. I
34:58know that Stacy knows the answer to all
35:00of this, but she's just trying to make
35:01it hard for me.
35:02>> This is not an easy pipeline to follow.
35:04Although I have to say, can we just take
35:06a pause and say that you've not used any
35:08jargon, and I cannot believe it. I am
35:12very impressed. Keep going.
35:14>> All right. Um, you're right, Stacy.
35:18There's no reason to think the US
35:19government would ever stiff you because
35:21it borrows in US dollars and it has a
35:23big machine that prints US dollars. If
35:27it does that,
35:29there's now lots of dollars chasing the
35:32same amount of goods.
35:34What's going to happen is if lots of
35:37people walk into the store wanting to
35:38buy cans of tomato soup and I've only
35:40got so much tomato soup, I'm going to
35:42jack up the price.
35:45And so if the US government decides to
35:47repay its debts just by running the
35:49money printer, it's going to cause
35:51inflation.
35:53So at a literal level, the US doesn't
35:56stiff its lenders. What it does instead,
36:01and I'm going to describe the jargon
36:02here. I I want permission to say
36:04>> permission to jargon. [laughter]
36:06>> Yes. Permission because I'm going to
36:08explain what they economists say they're
36:10going to inflate away the debt. Let me
36:11explain what that means.
36:13>> Hear that all the time.
36:14>> When you lend the US government money,
36:16what you do is you give them $90 and in
36:18return they plan to give you $100 in a
36:20year's time, right? And that would be a
36:2210% interest rate. Well, you give them
36:24$100 and they give you 110 in a year's
36:26time. That's a 10% interest rate. But if
36:28I run the money printer and it creates
36:30inflation of 50 bajillion%.
36:34I only owe you $110 in a year's time.
36:37But right now, the 110 I repay you with
36:39is worth very little.
36:43And so, yeah, I repaid you in terms of
36:45pieces of paper. I lived up to the
36:47letter of the law, but I repaid you with
36:50pieces of paper that were worth
36:52basically nothing. So, I still found a
36:54way to stiff you. And in fact, countries
36:58do this. They quote, "Inflate away the
36:59debt." What it means is you just run
37:02inflation so hot that you repay the
37:06number of dollar bills you were meant to
37:08repay, but these dollar bills now aren't
37:10worth very much. So, at a deep level,
37:11you've stiff someone,
37:12>> right? I mean to to put it in consumer
37:15terms, the way I always think of it is
37:16that like if you if you buy a 30-year
37:19bond, so you're lending the US
37:21government money for 30 years and you
37:23know it's going to print a bunch of
37:24money by the if you lend it $1,000 for
37:2630 years. By the time the 30 years is
37:28up, your $1,000 buys like a cup of
37:30coffee, then you are not going to want
37:33your money tied up in that way for 30
37:36years,
37:37>> right? Whereas you hoping you'd lend
37:38them the thousand and have enough to buy
37:40a sofa. It repays you that number of
37:42dollars, but all you can do is buy a
37:43coffee. Once you get into that game,
37:47first of all, you change your name to
37:48Argentina.
37:50And second of all, no one wants to lend
37:51you money. And right now, if people are
37:54worried the US might get into that game,
37:58that makes them reluctant to lend us
38:00money. So why do why do folks at home
38:02care about the bond market? One, when
38:05the government's credit card bill is
38:08larger, the government can buy less of
38:09the stuff that we want, you know, roads
38:11and education and health.
38:14Two, when the government's borrowing
38:17more money, there's le money less money
38:19left for you. So therefore, you the
38:20loans that you take out on your car,
38:22your house, your student loan, they go
38:24up.
38:26And three, folks in the bond market are
38:29always looking to the future.
38:30>> Well, that's when they're supposed to
38:31get paid back. So I understand.
38:33>> Yeah, that's right. they really have to
38:35be focused on the future. And so
38:37sometimes we care a lot because interest
38:39rates rise. That's because folks in the
38:40bond market smell something changing in
38:43the future. And that's time to listen
38:45and try and figure out what is it that's
38:46worrying them because maybe we should do
38:48something about it.
38:49>> Um, okay. So Justin, what happens to a
38:52country and the people in the country
38:54when bond yields go up? When the
38:56interest on these loans go up? Like what
38:57is that what does that does it change
38:59our lives?
39:00>> Yeah. Uh so if you're looking to buy a
39:03house right now, you'll go to the bank
39:05and you'll ask what is the interest rate
39:07on a home loan. What you'll discover is
39:10what happened last night in the bond
39:12market is happening today at your local
39:14bank that quickly. And actually what
39:16we're seeing right now is that home loan
39:18rates are going up pretty quickly. Uh
39:21the best time to buy a house was 3 years
39:23ago. Um I'm sure you're glad you listen
39:27to hear that. Um but and that applies
39:31not just to your so in the United States
39:34in the United States by the way is quite
39:35unusual. Lots of people have fixed rate
39:36mortgages which means the interest rate
39:38is locked in for a period of years. So
39:41for many folks who own their homes not a
39:43big deal. Um but for folks who need to
39:46borrow for a car or to start a new
39:47business, those rates have already gone
39:49up.
39:50>> All right, Justin, are you ready for the
39:52the super advanced final bonus round?
39:55>> This is where I'm going to lose $20.
39:57Yeah. The Treasury Secretary Scott
39:59Bessant made a very kind of shocking
40:03aggressive action in the bond market.
40:07What did he do and why?
40:10And how did it come out?
40:16>> I know this is
40:18>> okay. We're going to go back. Remember,
40:20when the government borrows money, the
40:22way it does that is it walks into the
40:23bond market and yells, "I want to borrow
40:25money."
40:26>> Yeah. It doesn't just do it on one day.
40:29It borrows some money today. It borrows
40:32some money tomorrow. It borrows some
40:33money the next day and so on. Yeah. One
40:36of the reasons people are willing to
40:37lend money in the bond market is well,
40:40when I put money in my bank, I can
40:42easily get it back out. If I want the
40:44same thing to be true in the bond
40:46market, this is called liquidity,
40:49then it has to be that if I have bought
40:51a bond, taken on a loan, that was
40:53explaining the jargon. That wasn't
40:55jargon.
40:57Okay, fine.
40:58>> Keep going. Questionable, but go.
41:00>> If we want bonds to be just as good,
41:02well, a bond is not a bank. It's a piece
41:04of paper. It's an IOU. How would I get
41:07my money out? I'd get my money out by
41:08selling that I owe you to someone else.
41:11Now, remember I said the government
41:13borrows over different periods of time
41:16on many different days, which means it
41:18doesn't have one mortgage. It has
41:19thousands of different pieces of paper
41:21that all look different from each other.
41:24and it wants to promise people if you
41:26buy bonds, if you lend us money that
41:28you'll really be able to get your cash
41:30out, you'll be able to sell those bonds
41:32really easily. But it's really hard
41:33because there's thousands of pieces of
41:35paper running around.
41:37So what the Treasury has and has always
41:39had is a system where it basically says,
41:41look, if it gets hard to sell some of
41:43these pieces of paper, we'll just buy
41:45them. We'll buy them at a fair price.
41:48That's the scheme that Scott Bent has
41:50been using. It's like the government
41:52lending itself money.
41:54>> Yeah, it is. If there were only a few
41:56pieces of paper, this wouldn't be a
41:57problem, but there's thousands and
41:58thousands of them. And so, the Treasury
42:00has a scheme where basically it says if
42:02the prices get a little bit out of
42:03whack, we'll buy them. Don't worry, not
42:05a big deal. This is a scheme so boring
42:08that you should never have heard of it.
42:10We call this plumbing.
42:12>> It was an $18 billion scheme and from
42:15what I understand, it did not work.
42:17>> Okay, so that was the scheme. It was
42:20just meant to be plumbing. Let's make
42:21sure the financial pipes are running
42:24well. Right? That Scotty Bravado decided
42:28that he wanted interest rates to be
42:30lower.
42:32He thinks that he knows more than the
42:35bond market about what the interest rate
42:37should be. And so he said he took this
42:40system where he was meant to just be,
42:42you know, sanding stuff down at the
42:43edges, worried about financial plumbing.
42:45And he said, "You know what I'm going to
42:46do with this? I'm going to buy a lot of
42:48bonds." Another way of saying that is
42:50I'm going to lend a lot of money for
42:53long-term loans. Now, you might say,
42:55where did he get the money? Well, he
42:56borrowed it with a bunch of short-term
42:58loans.
43:00If he says he is willing to sell loans,
43:06now what happens if there are more apple
43:08farmers who sell more apples? The price
43:10of apples goes down. So, he said he was
43:12willing to sell these loans, take on
43:15short-term loans in order to lend money.
43:19Gee, that took me a while. Um,
43:23and so he's now lending more money. So,
43:25what happens if another apple farmer
43:27comes and provides more apples? The
43:28price of apples falls. And his hope was
43:31that if he, the US federal government,
43:33you and me, was providing more loans,
43:36the price of long-term loans would fall.
43:38He tried it the first time. He said,
43:40"I'm going to double the size of this
43:41program." And it worked [clears throat]
43:42for 12 hours.
43:44>> Couple days. Yeah. Or Yeah.
43:45>> The interest rate went down. And then
43:48everyone woke up the next morning and
43:49realized the amount of money that Scotty
43:51Bravado had brought was 2 to4 billion,
43:54which sounds like a lot to everyone
43:56who's never been in a bond market. In a
43:59bond market, trillions is table stakes.
44:01>> Mhm.
44:02>> And so they basically woke up and
44:03they're like, "Hey, he forgot a few
44:04zeros. Why are we even thinking about
44:07this bloke?" And so they just jacked the
44:09they just realized that means nothing
44:11and the interest rate went right back up
44:12the next day. Fast forward to this week
44:15and Scotty Batana said, "Ah, yeah, but
44:17I've got stacks of money. I'm the US
44:19government.
44:19>> I have asymmetric information." Like I
44:22am the house now. So right,
44:26>> I am the house.
44:27>> I am the house. Now if you want to be
44:30the house, you got to talk in trillions.
44:32Instead, he went from 2 billion to 4
44:34billion up to six billion.
44:37And everyone's like, "Scott, if you
44:39think you're the house, that's
44:41ridiculous."
44:42So, he tried to be a farmer bringing new
44:44apples to the market, but he just
44:46brought a couple of apples. He talked as
44:48if he was bringing a whole trailer load
44:49of apples, but he just brought a couple
44:51of apples. And not surprisingly, that
44:53didn't do much at all.
44:57>> Um, Justin, the only piece of jargon
45:00that I can fault you on is liquidity.
45:03Uh, which is pretty good. I thought that
45:06was a pretty excellent, but also I think
45:08feel like if listeners are confused
45:10about any part of this um or want us to
45:12do explain something else with the
45:14jargon challenge, I think we should do
45:15it. But I have to say kudos. My hats
45:19off.
45:19>> Okay, it's time for my favorite part of
45:22the week. Chart versus chart.
45:23>> Woo.
45:24>> I mean, it had been my favorite until
45:26you kept beating me with the
45:28razledazzle.
45:30>> Yes. Well, I did I do concede that I
45:34did. It was razle. It was it was flash,
45:36possibly slightly over substance, but um
45:40but I am I'm excited about this week.
45:42So, what have what have you brought to
45:44church versus
45:45>> I thought to myself, what would Stacy
45:46do?
45:47>> Okay,
45:47>> Stacy would go outside the rules, maybe
45:50bring a little bit of identity in. And
45:52so,
45:54my chart
45:56>> is a dad joke
45:57>> that also tells us everything about
46:00what's going on. This chart shows you
46:02the price of romaine lettuce which has
46:05plummeted in the last week.
46:08>> This will happen when you're kind of
46:10making people sick.
46:12>> That's true. Now on the right I'm
46:15showing well beyond that one category.
46:18Remember earlier you said leafy green
46:20charts for the win. You said that not
46:21me. Beyond that I've got the change in
46:25the cost of living. You might say what
46:26do these have to do with each other? And
46:28this is it. Ready for it, Stacy? Even
46:31though the price of lettuce is falling,
46:34>> the cost of living Roma.
46:37>> No.
46:38>> A problem.
46:41>> Okay. I appreciate your chard.
46:45>> Oh, wow. Wow. I do love chard, Roma.
46:48Thank you. [laughter]
46:50You saved me. Thank you, Stacy.
46:52>> No, that is really good. Okay. Now,
46:56before I reveal my chart, I wanted to
47:00also hearken back to the discussion we
47:02just had about bonds and the size of the
47:05bond market and our debt, our mounting
47:07debt.
47:09>> And you you said something really
47:11interesting. You were like, "Trillions
47:13doesn't mean anything." And that is
47:15true. It's too big. We cannot conceive
47:17of it. So, I had this idea
47:21like none of us knows how big a trillion
47:23is. It's too big. But we all know how
47:25big a dollar bill is, right?
47:28>> It's like 6.14 in or something like
47:30that. Now, if you had a dollar, if you
47:33had Now, our debt is $40 trillion. That
47:36is how much our debt is. It's 40
47:38trillion. If you had 40 trillion actual
47:41dollar bills and you like put them end
47:44to end, like you made a ribbon of dollar
47:46bills, how far do you think that ribbon
47:50would reach? Like if you like I guess
47:52started on the surface of the earth,
47:53like do you think you could get to the
47:54moon with $40 trillion bills
47:56>> end to end?
47:57>> Long end to long end. Yeah.
47:59>> Wow.
48:01>> Don't do math in your head.
48:03>> Yeah.
48:06>> 2.4 times.
48:08Um, okay. I would like to reveal my
48:12chart.
48:15>> Wow.
48:16>> This is my chart to give us an idea of
48:19how big the debt is and to boldly go
48:22where no chart has gone before. That is
48:25my dad joke.
48:26>> Wow.
48:27>> It only takes two
48:29>> and point basically two and a half
48:31billion dollar bills to get to the moon.
48:35We our $40 trillion bills end to end
48:39gets us Justin to Pluto. It gets us
48:43>> just incredible.
48:45>> I have
48:47I just want folks at home to know this
48:49is what happens when a comparative lit
48:50major meets an economist [laughter]
48:52and there's the opportunity for
48:54creativity and Stacy has destroyed me.
48:57Destroyed me.
48:58>> I don't
49:01>> is a Pluto. it Pluto. But but one of the
49:04things that you also mentioned about our
49:07debt is it doesn't necessarily matter
49:09how much debt you have. It's really how
49:11much you make in comparison to that
49:13debt. We make about $32 trillion a year.
49:16That's our GDP.
49:18>> So
49:20you can see like we can get to Neptune.
49:22Our economy is gets us to Neptune and a
49:25little beyond, but it doesn't outpace
49:29our debt which gets us to Pluto. I still
49:31can't like quite wrap my head around
49:34this, but yeah, this is the size of our
49:36economy and our debt. [gasps]
49:39>> All right, folks. This has been off the
49:41clock, the podcast in which Stacy
49:43Manning Smith try and I try and look
49:45back at the week that mattered. She
49:48brought out the not the swear jar, but
49:50the jargon jar this week to try to force
49:52me to explain the bond market in plain
49:54English. You'll have to let me know how
49:56it went because right now I am
49:58exhausted.
49:59>> [laughter]
50:00>> Uh, if you
50:01>> you earned you earned your weekend,
50:03Justin Wolfers,
50:04>> if you found anything interesting in
50:06this podcast, please [music] like and
50:08subscribe. We're trying to build a real
50:10community here. So, let your mates know.
50:12Uh, mash the subscribe button on
50:15YouTube, wherever you get your podcast,
50:16so you can catch us on Substack [music]
50:18as well. Until next time, folks, stay
50:21curious.

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