Inflation Report Drops: Why Everything Still Feels So Expensive w/ Robert Wolf

This is a music for you guys. Welcome to the Terapoll Mary Show, the Red Letter.

We've got Robert Wolff, our finance tier Titan, who has advised presidents, advised is advising president Obama during the financial crisis in 2008, 2009, so we've got -- we're really lucky to have someone who's been in the room and knows what kind of panic administration feels when they see the kind of numbers that they saw this morning in the consumer inflation report. The consumer price index, excuse me, and I mean, Robert, pretty bad today. What were you thinking when you saw these numbers this morning?

That consumer prices rose 3.3% in March.

Yeah, so Tara, this was a week of numbers, numbers numbers numbers. And if, you know, if you're a hard-working American, you didn't like what you saw. And the three key numbers this week was GDP came out, fourth quarter, 20, 25, and we all remember when commerce secretary Howard Lutnik says, "We own the fourth quarter. That's our quarter." Well, great. They own the fourth quarter, and it came in at a half of percent of growth, one half of a percent. Just to be blunt, that number sucks. Okay, that was

“worth a 4% in the third quarter. So, one, that's how it started. And then from there, we had what's”

called the personal consumption expenditure, which is PCE, that's what the Fed really looks at.

And for your viewers, that's the number of what American really spends on goods and services, excluding food and energy. And that rent rose 4% of a percent. And then we had today's number. And the month came in for CPI consumer inflation report came in at 9% and 3.3% for the year. So, again, three horrible numbers, no one can be happy with this, because, you know, and this didn't even include a lot of the impact of the Iran war. Today CPI included just the March aspect,

but PCE didn't, and GDP didn't. So, I think this is going to continue to get worse, and you

“and I have been having these weekly fireside chats now for the last three weeks in tower. The truth is,”

you know, the idea of stock inflation is going to become more and more front and center if this war continues. Just so you could explain it to everyone for anyone who doesn't know what the word PCE, it's the price index. Yes, personal consumption expenditures. So, it's really what you and I pay for goods and services, but not food in energy.

Which is actually the administration and they were bottled noted that the price of food has gone down slightly. What do you make of that? Well, I think it depends what people buy, right? I mean, you know, some areas of food have gone down, some areas of food have gone up.

“I mean, but the truth is, what's front and center for us?”

Things like electricity prices, gas prices, energy prices, they've all rose. I mean, listen, this administration ran on really two things. Immigration and we're not going to talk about that today and getting affordability down. That did not has not happened because, you know, you and I've chatted about it, but if you could argue that the two bookends of this administration economically is the past year. Tower of the year ago and the Iran war six weeks ago when it started.

All those things have just moved everything up. This has been an energy shock really what we're seeing from the war. You know, just for the sake of giving the administration their chance to explain. He's pushed aside who works for the president without a tweet saying.

The destruction of the administration has been diligently working to mitigate although gas and energy prices are seeing volatility price of eggs beef.

Prescription drugs, dairy and other household essentials are falling or remains stable. Thanks to President Trump's policies. As the administration ensures the free flow of energy through the straight of our moves. The American economy remains on a solid trajectory. Thanks the administration's robust supply, side agenda of tax cuts, deregulation and energy abundance.

I don't know how long those statements are really going to last for.

“I think ultimately people don't really care about statements as we know from a good old bydenomics that,”

you know, being told that the economy is doing well. I was on the other side of that, so I have to admit, you know, I think what we've learned and, you know, we've spoken about it. What we've learned during the Biden administration is that it's how people feel. I can give you all the facts. I gave you facts today, even if the facts were the other side. People don't feel good.

And I would tell you that whether it's that statement today or Kevin has it on TV yesterday, gaslighting the American people. When they talked about GDP and he called it just a small dip.

That number was horrible a half a percent. It's not a small dip. It went from 4.4 percent to a half a percent.

And so I think that it's time just to tell the facts. And this has been an incredible energy shock. Now, with that being said, I'm not here to, you know, I want the economy to do great. I want incredible growth. So I just want to be clear. Everything we do, we want wages go up, we want inflation come down, we want the job market do well. But we're not in that environment. You know, you spoke, you know, about your parents the other night.

“And I think, you know, repeating some of the stuff you said, how they were, you know, they're real maga and they're kind of really disappointed.”

I mean, affordability is not a hoax. There's a job session right now. And we can say that, yeah, there's a good chance that this energy crisis is transitory and I hope it is. But there's a chance it's not.

It's prices are sticky. Once they get set at a certain rate, it's really hard for them to come down, right?

And, you know, I don't know, when I hear these statements from the administration, I feel like they're being really condescending. Here's the fact, the price of gasoline has spike 21.2% since last from March to February. That is the largest monthly increase on record since 1967, okay? Like, that's a fact. And people in terror, I was born. I was five.

You were born, but I was five years old at that time. So I don't remember. I didn't even look for it to be honest because it sounds horrible. And, you know, I'm with my dad this weekend. We're in a, we're in a car. We're in a car that's probably like, I don't know, 20 something years old. It's Chris had this car forever. And he's, you know, he hasn't bought a new one. He doesn't really have the extra, you know, and come to be able to buy another car.

And it's chugging along and half a tank was $70. You know, it doesn't have any fuel offenses. It doesn't have the fuel efficiencies of new cars. And people can't afford new cars anymore. But cars are really expensive. Everything is really expensive right now. It doesn't have a lot without spending like $70.

I mean, even he said that to me, he's like, I don't think you can step outside without spending $70. It's just a part of it. In terror, listen, it doesn't impact me. You know, this K shape economy doesn't impact the upper 10%. Right, when when when gas prices go up.

Okay, wealthy people, you know, this is a regressive tax. Well, think people don't think twice. You know, beef prices go up. They're still going out to eat. So with this K shape economy that we've talked about since COVID,

where, you know, the haves and have knots and they have keep doing better and they have knots art. It's proliferating.

“You know, and I think, listen, President Trump ran on a real populist agenda.”

Right. And I think he has to get back on that and, and if I was advising him and I'm not. I would probably say that, you know, if this, if Iranians decided that this war ends and then there's some toll. But that ends the war. That may be the best outcome. Okay, and yeah, maybe an extra bucket get a barrel for energy, but energy prices will come down.

You know, probably by 30% at the end of the war.

It won't impact us that much. Okay, it's certainly will impact pan Europe and it will impact, you know, the Asia where, you know, most of the oil comes through the straight arm moves. But we need to figure out what this exit is. So we can get back to focusing on the economy.

Well, here's the deal. I just heard yesterday that Goldman Sachs predicted that if Iran can charge a dollar per barrel. Just a dollar to get, you know, to get this oil to a toll through this straight of our moves.

They'll make, they said at least $57 billion a year, making it one of the richest, like, four powers.

One of the richest countries really in the Middle East. Yeah, there's no question that. There's no question, Tara, I think you're spot on. In this war, you could end up where Iran has lost dramatically militarily. But has gained incredibly economically.

So that could be the outcome. You can buy a nuclear program on your rich, right? You don't need to get your own uranium. You can just buy it from Russia or China or North wherever. I mean, you could just buy the program.

Well, this is where I agree with the president. We have to make sure there is no nuclear proliferation in Iran.

“And I think we're going to have to work with our allies on that and our frenemies, right?”

We're going to, you know, we're not going to debate today the Iran nuclear deal under Obama. But one of the reasons I was a more of a proponent of that than others was because China and Russia were at the table. And anytime you can get China and Russia at the table agreeing with you, in some ways when it comes to the evil access with Iran and North Korea,

we may be better off. Now, how much we can trust, right?

It's trust and verify you never know.

And I know that you and I are going to be talking a lot about this over the year. But I think today, what's front and center is this war, is only causing prices to go up and it's causing literally companies to freeze what their growth strategy is for hiring. And that is a horrible sign.

And that goes to Stagflation, which is something that you've been really warning about for a while. Can you just explain it for our listeners? Yeah. So, although I'm now 64, I never really lived through Stagflation. The last time we had Stagflation, I was 16 years old and I don't even think I knew what it was.

But it was in the late 70s, early 80s. And I know a lot about it, mainly because I was really close with Paul Volker. And Paul Volker was the Fed-Jerry. Just tweeted out a great picture of me and the big fellow, let him rest in peace.

But Paul was really great. Thank you. I was the younger then, and Paul was alive. Paul was really the Superman as I called him during kind of the worst times of our economic cycle. And Stagflation is when inflation goes up and this was caused by energy shocks.

And at the same time, growth goes down. So you're in a recessionary environment. So you have slow growth and high inflation. And like I said, I have not lived that really in my lifetime since I've been, you know, buying my own way. And neither has anyone else I've really been around.

“And so I think that we don't really know in America what that's going to mean for us,”

which is why maybe I've gone from a 10% chance to a 20% chance. I don't want to be, you know, the predictor of horrible news. But I know there are other economists who are at 50% possibility. But this would be the awful scenario for our country in the globe. So Emperlo is saying, if there's no equitable agreement in two weeks,

will we see a new round of bad economic news? I think so. I mean, longer the war last isn't that have impact on our, I mean, there's barely a ceasefire going on right now. If you can even call it that, right? I mean, we're going to see bad economic news because, you know, like GDP,

that was just horrible for the fourth quarter. Next time it comes out, it's going to include March, which is part of the Iran war. The next, you know, CPI numbers going to include another lift on gas prices. And the next PCE number, which was the last one was February, will be March, which will include the Iran war.

So the answer is yes, all of these numbers is somewhat backwards looking is what I would tell you,

yes, so yeah, it's going to feel a little ugly, which is why the feds on a pause. And and everyone, you know, the fed being on a pause is not a good thing,

“because I think the fed should be lowering rates.”

So as long as they're on a pause, mortgage rates are going to stay high credit card rates are going to stay high.

Otherwise, I think they would be lowering rates. Has the news been getting you down? I'm Megan McCartell, and I'm here to help. I'm the host of a news show from Washington Post opinion, called reasonably optimistic. And it's an antidote to the pessimism that's riddling America right now. I'm a colonist of the post, and I've been writing about economics, technology, and public policy for decades now.

So everyone's day, I'm going to talk to people who see a path forward. I'm going to talk to inventors, entrepreneurs, politicians, and probably some wonky types like me if I'm being totally honest. Congress to me was a very entrepreneurial place. It's like Shark Tank, but a lot less glamorous.

When nerds get rich and powerful, they can't help but get involved in politics.

I want to talk about how we can get unstuck and live up to the country's many promises. But it does seem to me that there's some awakening of a desire to act together to solve problems where they are if we believe in this country. It's worth fighting for. Join me Wednesdays on YouTube, or wherever you get your podcasts. On the flip side, let's say the war ended today.

“How long would it take for things to go back to normal?”

Like, I think the market is telling you, they think it's going to end shortly because, you know, the market's been strong. They have not traded hand in hand with the energy markets. So they're making a prediction that it is transitory. I mean, listen, it's hard to predict, but I think you could see some sort of normalcy within, you know, six weeks. If we had a real ceasefire and some real agreements, but it doesn't feel like, to me, that's around the corner.

Yeah, it's crazy.

I just, it just doesn't feel like there's an end in sight because like, how do you negotiate with Iran? We've never been able to really negotiate with Iran, right?

And Trump was long complaining that money was frozen under Obama. And with the, with the JCPOA, and now it looks like the Iranians are going to make even more money. Yeah, so, I mean, Tara, you know, it's interesting that for a president that said, you know, no more wars.

“You know, it feels to me that's all we've been in for the last year, whether it's the Tara for or, you know, this war, you know, I mean, fortunately Venezuela seems like the way he's handled it, you have to give him credit.”

But this, but I do think the biggest miss app is, you know, I think we totally underestimated Iran. It's nothing like Venezuela, you know, Iran is this is three times the size of Texas. It has 90 million people. So when he makes a comment, we're going to, and civilization in Iran, it's just, you know, just say it's a stupid, horrible comments and understatement. But I think we underestimated, okay, their capability. Do you think the markets really thought he was going to end civilization? Like, what were you looking at that day? I mean, I think Americans kind of didn't really believe him. He's a bit of a boy cried wolf.

But there was a little bit of panic that everyone felt right. I mean, what were you thinking on that day? Yeah, I did not have panic. I thought it was a horrible gesture. I was on TV that day. And as you know, I advise the Pentagon for two years. I don't advise any more. But, you know, my guess is the president Trump and the Department of War, they were working with their jag officers, their judge general. So their legal group of understanding what infrastructure they could and couldn't hit under the Geneva Convention.

So my view was, you know, that's, you know, how, how President Trump is, he owns the air waves with this type of, of rhetoric. But I, I certainly didn't like what I read. But I didn't think it was real. There was zero chance it was going to be a nuclear option and we're going to end civilization, at least that's my perspective. And then you read in New York Times that President Trump was told by Netanyahu that this was the time to strike around. They've never been weaker. It'll be easy. We just like Venezuela just go in there and crush.

And, you know, I don't know what the ceasefire ending. You can't help but think that it's like, it's not just Israel that doesn't want this war to end.

It's UAE, you know, it's Saudi Arabia, none of these other countries want this war to end with Iran coming out more powerful than ever before.

“And I think that's why you're just going to see a lot of instability.”

Yeah, I think it's not. I think you spot on, Tara. I think what is an exit that our allies are comfortable with is a real unknown because one energy prices up will hit, you know, UK, Germany and France and Japan and Korea that, you know, get oil from the Middle East a lot.

And they become maybe stronger over time. We can't allow that to happen. So, you know, there's no real exit strategy that's easy to, you know, say that would be good for, you know, our allies.

You know, if it ended tomorrow, you know, and we didn't have boots on the ground, and we got rid of the eye atoller, I mean, an energy prices came down, but we're not really paying the toll, you know, you could say the president, you know, succeeded where he wanted, but there'd be incredible challenges to that.

“I think about our lead negotiators, too, Steve Wittkov, barred a ton of money from cutter to sell his hotel, the park hotel for over in New York for over a hundred million dollars.”

They clearly have not been able to negotiate with Iran for for months as much as they've tried. I feel like this is all just like a feudal attempt and nothing is going to happen. Nothing is going to change at all. But I hope you're wrong. I hope I'm wrong, too. But it's hard to think that anything will be different this time, but we're going to throw to our director of national economic council, Kevin has it because, you know, we got a lot of the administration way in. So take a listen here. Well, I think that what we have is a terrorist regime that was threatening, you know, basically the creative nuclear bomb, and then hold everybody in the world hostage with missiles that could already reach Europe.

And if you remove that global threat, then the world has to be better off with a log rod. It has to be that there are lower risk premium. There's more investment.

Think about all the investment that doesn't happen in the Persian Gulf area, because people are worried the Iranians might launch missiles at the things. If we can get to a point where there are a common stable country that, of course, the global economy down the horizon is going to be much much stronger.

“Yeah, well, I think that what we have is a terrorist regime that was threatening.”

Okay, sorry about that. The door knocks. This is that live TV and I or alive YouTube. Luckily, got that figured out. But yeah, I don't know. I don't think I don't feel reassured by that. Also, the fact that even Trump's own DNA tells the Gabbard said that they were 10 years away from having a nuclear missile. And John Bolton said the same thing. But yeah, this is the entire, what I heard in that and I didn't see that. So I'm glad you played it. Just a lot of ifs. If that if that. Yeah, if everything happened perfectly, we'd be better off if they had no missiles, no money.

And they had a new regime and, you know, we could all sing come by out. Then yeah, we could hold hands and be great. That does not seem to be the outcome.

“I hope it is, but I think this goes to my point about, you know, this White House gas lighting. Like, yeah.”

And then just said, that's not happening. Okay. And so we should just say, I mean, the follow-up should have been Stuart Varney saying, okay. And if that doesn't happen, then what? We should have a show and like every statement they say, and then go then what? Yeah, would you ever go out there if you were in the position? I mean, I know you have, you know, advice and administration. Do you ever go out there like that and just say it and and give a bunch of what if speculation on behalf of the administration.

Isn't that just ruining your credibility? Here's what I would say. One of the reasons I stayed is an outside advisor to the president for eight years economic advisor.

And and stayed as an informal advisor, you know, to Mandoni, even though he and I disagree a lot of his views on the economy. When you work for the president and you're a surrogate for the president, you really have to stay on point and be in that sandbox. It's an incredibly difficult position. But what I would say is, you still have to give the facts and the facts don't lie. So you can say, hey, listen, this was a horrible GDP number, but let me tell you because of the big beautiful bill or what we're doing. We think this.

If we're right, great, if we're wrong, then we have to do this. What I think is they don't, they don't take the next step and saying, if they're wrong. And and the truth is these numbers are showing they've been wrong. And so I listen, I'm not in the situation where I work for the president and so it's it's not an easy position to be a surrogate, but I do think they should start talking about the facts.

Yeah, well, we definitely live in an interesting environment where the fact is fiction and the fiction is the fact.

It's like, it's like they don't want to ask you something, you know, what are your friends thinking about in here when it comes to affordability and you know, I think a lot of your friends live in the city, so they may not not be driving cars and things like that, but where do they feel the most pain. You know, it's hard to say because like, we're not in like the upper middle upper upper class or anything like that, so it's not like we don't feel it at all, you know, maybe you don't go out to dinner as much or maybe you don't get the

more spacious apartment that costs a little bit more, maybe you take the subway more like you kind of cut back in little ways, but it's not in a substantial way where, you know, you're deciding that your kids can't go to the school you want to send them to or you can't take a vacation at all.

“I think the or, you know, you can't afford to even go to the doctor, I mean, I don't, I don't think, you know, middle income people are a little, it depends, I mean.”

I'm just posting red. I think, yeah, a lot of my friends are, you know, college educated and they can, they have some flexibility and they're in a good place in their careers, you know, once you're kind of in your late 30s or early 40s.

But not everybody, and I think we all have that anxiety about what the future is going to bring, we're certainly not in retirement level or not there.

So we're going to have to work. We lose our job.

“I'll tell you where the numbers are showing and that's why I asked so.”

The recent numbers have shown, you know, one of the reasons GDP wasn't negative was consumer spending was still big, but what it's showing is people are dipping into savings. They are selling their pensions and 401(k)s more than they are. They are dipping back into credit cards and the buy now pay later financing has just, you know, become a monster financing vehicle for younger people. They, they're using it like an ATM, but they don't realize they're being, you know, charged, you know, double digit interest rates.

So I would just say that what we are seeing is the way they maybe it's either stay afloat is, you know, some of the bad habits that could come back and really, you know, hurt everyone. It's like it's kind of what we talked about before. If you're invested in the market, you're probably feeling all right, right, it took some dips, but it kind of bounced back and you're, you're probably feeling better if that's if you're very invested in the markets. If you're not, then you're not feeling great at all, and you're probably worried about your job, and you realize that everything just costs about 20%.

It feels like at least 20% more or 30% more.

I mean, certainly it's interesting because my father said something to me, I mean, he's always been really conservative and he said, well, why don't we just have a flat sales tax?

And I was like, Dad, don't you understand that that actually impacts lower and middle income people more than anyone more than the wealthy? Yeah, no questions. Those types of taxes are aggressive. I mean, you have Democrats now touting, you know, to change the income tax threshold to 75,000 and 90,000 and we'll talk more about that over time. But, you know, they still put there's still a lot of federal tax everyone pays payroll tax, so security tax, Medicare tax, gas tax, the federal gas, local sales tax. So, you know, we live in an environment where, you know, you may win on one side and lose on the other side.

Totally. Well, we are kind of having to wrap things up. Abby, who works for me, and is a Gen Z or said, "Uper's are expensive." And I agree, and, you know, she's about to graduate from college. She's going to work for me, but, you know, I don't know what her maybe Abby sent me a message. I mean, what are your friends? Are they having a hard time finding jobs with the market like for young people right now coming out of college?

“She said, "No one has jobs." Well, if you want to be an intern for me, we are hiring, send your friends. He said, "You said all coming from top schools, no one has jobs." That is a really, really sad scary place to be.”

I know what that's like. I graduated from college early because I graduated in 2008, and I wanted to, I got a job offer and I had enough credits, and I was like, I'm getting at it school and we start working because, yeah, it was a horrible, horrible time to graduate. And I think a lot of these sadly, about 20 years later, these people, these students are going to the same thing, it's odd.

So it's, you know, definitely the highest end we've seen since COVID. And now she said, "People, this is crazy actually. People's parents are hiring job interview coaches." So, yeah.

I do remember to my friends that graduated on time, that did not graduate early. They had to wait years before they got their first jobs, and that really set you back.

“And I think that's why a lot of millennials are saddled with that now, a lot of it being student loans and stuff like that.”

Alas, those decisions, so people at the top make, they really trickle down and affect us, don't they?

On that note, let's pray that this war ends, and people can get back to their lives and not have to worry about bigger geopolitical issues and can just, you know, live in peace with their families.

“Thank you Tara. We'll speak shortly again. I can't wait. I know, actually I'm going to go hit some golf balls for the first time in six months, you know.”

Okay, all right.

Because, all right, she really speaks soon. Thanks everyone.

Bye.

“Hi, I'm Tampson Fidel, journalist and author of How to Manipause and host of the Tampson Show, a weekly podcast with your road map to midlife and beyond.”

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