Did The Fed "Jump The Shark" By Cutting Too Early? | Chris Whalen

**Chris Whalen** (0:00)
I wrote a piece that said that Powell had jumped the shark, to use the old term.

**Adam Taggart** (0:05)
I do recall, from Happy Days.

**Chris Whalen** (0:07)
Yeah, and I think he went too early. And I think you're going to see the Fed growing the balance sheet again, as we go into 2025 I think mortgage rates could back up to 7

**Adam Taggart** (0:25)
Welcome to Thoughtful Money, I'm Thoughtful Money founder and your host, Adam Taggart. We've got the great privilege today of talking with the great Chris Whalen, Chairman of Whalen Global Advisors LLC, who's an expert on the banking mortgage finance and fintech sectors, as well as just a great overall macro analyst. Chris is doing us a huge solid by taking this interview from the road. He's actually in an airport lounge at the moment. Chris, thanks so much for taking the time to join us while you're traveling.

**Chris Whalen** (0:57)
My pleasure. My pleasure. Always good to talk to you.

**Adam Taggart** (1:00)
Thanks. Well, same here. And you're one of those guys, Chris, when it's been a little bit too long since you've been on the program, I start getting a lot of comments saying, hey, when's Chris Whalen back gone? So thanks for filling that need for the audience here. Well, look, lots of questions. And I understand that you've actually just been down in Washington, DC and maybe have a sense of the pulse from having been down there. So I'm very curious to hear your observations, obviously, with the election so close. Before I get to the specific questions, just to set the context for everybody, I'm going to ask you my normal general question here to kick things off. What's your current assessment of the global economy and financial markets?

**Chris Whalen** (1:38)
I think the global economy is suffering from the role of the dollar. When things are going well here and we're expanding and indeed we still have an inflation problem, the rest of the world slows down. And so you see stagnation in Asia as well as in Europe. No growth in Germany this year, probably none next year. And that's a problem. In fact, I think the Fed may have reacted to that more than domestic considerations, even though their mandate is entirely domestic. Wow.

**Adam Taggart** (2:12)
So it's just so I'm clear, you think that the Fed's policy shift and starting big with a 50 percent basis point cut, that may have been more to help out the rest of the world than the US domestic economy?

**Chris Whalen** (2:24)
It's happened in the past. If you look after World War I, for example, we were helping the British for a decade. So the Fed can't be indifferent to the global dollar system because we live in it. And I do think that when they see deflation in two-thirds of the world economy, it's going to be something that catches your attention. All right.

**Adam Taggart** (2:49)
Well, then, let me start there. I'd love to get your thoughts on just where you think the US dollar might go over the coming couple of quarters if you have a strong opinion on that. But on the day that we're talking here, we received a lot of inflation data recently. We just got the headline in core PCIs, which increased a little bit more expected month over month. The headline CPI is down to 2.4% year over year, but it did increase month over month. We just got the PPI numbers. Those came in higher than expected.
We just got the University of Michigan inflation expectations reading, and those are rebounding. And GDP is actually pretty robust right now. 3% for Q2, right now GDP now shows Q3 GDP expected to be about 3.2%. So to your thoughts there on inflation, have we slain the inflation dragon yet? Or are inflation concerns maybe starting to reawaken a little bit?

**Chris Whalen** (4:02)
No, I wrote a piece that said that Powell had jumped the shark, to use the old term.

**Adam Taggart** (4:08)
I do recall, from Happy Days.

**Chris Whalen** (4:10)
Yeah, and I think he went too early. There are a number of people, including Larry Summers and Kamal Sri Kumar, who's a great economist, who all said that. So I don't know what it was that triggered that big 50 basis point move, but there was something clearly bothering them. It's not the US economy. Although I would tell you that I worry a lot about the bottom third, as we've talked about before, because they are suffering much more than the top two thirds. And I think you see that in politics, too, the bifurcation of the economy and the difficulty that a lot of people in the lower income levels are having, just surviving, given the inflation rate. So it's pretty obvious.