All Episodes
Previous Next
June 19, 2025 - Epoch Times
08:44
Economist EJ Antoni Says Americans Can Now Buy More with Their Pocketbooks
| Copy link to current segment

Time Text
Well, we spoke about nine months ago about the state of the economy, about inflation, about discrepancies between statistics and indicators and reality in the economy.
So how have things changed nine months in with the new administration?
It's interesting to see we still have some of those problems that we discussed previously, whether those are problems just with the statistics or problems in the real economy, but it's remarkable how in just a few months we've already seen a tremendous amount of progress, a tremendous amount of change, so much so that it's actually showing up in the macro-level data, and we're seeing how it affects people just in terms of their daily life.
One really good example is how if you look at Not just the size of the average American's weekly paycheck, but what that paycheck could actually buy.
That fell about 4% from when Biden took office until when he left office.
Conversely, under Trump, in literally just the last few months, I mean, he's only been president, right, since the end of January, basically.
So just from the end of January to today.
That paycheck, that average American's weekly paycheck, not only is it bigger, but it can buy more, too, because those wage increases are exceeding inflation.
So that's actually increased about 1% now, a little over 1%.
So that's a stark contrast, a decline of 4%, an increase of 1%.
I mean, it really is amazing what a difference an administration can make.
And so what accounts for that?
I mean, what accounts for both those changes?
The biggest change has been the slowdown in inflation.
Prices are not rising anywhere near as fast as they did under Biden.
In fact, prices right now under Trump are growing at an annualized rate of less than 2%.
Which is phenomenal.
It's about 1.4%, which is less than the 1.8% that they averaged from about mid-2009 until the end of 2020.
That was essentially the end of the Great Recession all the way until Biden took office.
So that averaged, it was an annualized 1.8%.
Conversely, Biden takes office.
His first 18 months, inflation is an annualized 8.6%.
That's terrible.
And then for the last 30 months of his term, which was the bulk of it, inflation was well over 3%.
It was over 3.5% at an annualized rate.
So you contrast that with what is happening under Trump.
Inflation has been not only cut in half.
From that latter portion of the Biden administration, but it's running even slower than it did in the economic expansion before Biden took office.
So really tremendous news on that front.
We've seen a lot of consumer staples.
Not only has inflation slowed down, where the price is rising, but not as fast as before.
Some of these things, the price is actually going down.
Eggs is a good example.
Gasoline is a good example.
There are other staples as well.
But what we see when we look at the entire landscape, we say, Some things have risen a little bit.
Some things have fallen a little bit in terms of price.
But on average, there's been almost no change.
There's been only a very slight increase, which is great news considering Biden handed Trump an economy with inflation running at an annualized rate of over 5% from December to January.
And Trump has managed to cut that by about 80%.
It's terrific.
Much of it has to do with energy.
The fact that energy production is helping drive down prices so much.
And it's not just domestically, but it's also foreign suppliers as well, in part because nations like Saudi Arabia realize if they don't become the marginal producer, in other words, if they don't step up and produce more today, then we'll do it.
So they'd rather have the production than us.
But whatever the case, it's forcing down energy prices around the world, which has been tremendous for the American consumer.
Because energy affects the price of everything we do and everything we buy.
So if you bring down that input, if you will, into other goods and services throughout the economy, then you see prices everywhere start to go down as well.
And sure enough, that's what we're seeing today.
So a couple of quick things come to mind.
First of all, that huge increase in inflation had to do with the massive spending around COVID.
So some of that actually came still from the Trump administration, didn't it?
So this is a really, really interesting kind of phenomenon that happens there.
What we saw in 2020 was the government printing trillions and trillions of dollars, but most of it didn't get spent.
In fact, interestingly, a lot of the money that got handed out to folks, they didn't go out and spend it.
First of all, it was hard to find anything to spend money on, right?
You couldn't get cars.
There were all kinds of things.
There were shortages everywhere.
There were all kinds of things that you couldn't get.
People, for the first time since the global financial crisis, started paying down their credit card balances en masse.
So much so that the interest people were paying on those credit cards just plummeted.
And between the decline in the balances and then also the decrease in interest rates, the financing charges went to almost nothing.
So what that did was it put actually downward pressure on the money supply.
Because as you borrow money, that actually creates money.
Lending actually creates money.
And when you pay back those loans, it extinguishes the money.
Can you just explain that a little bit more to me, like how that works?
Sure, sure.
We use what's called fractional reserve banking.
This is the whole reason that you can get bank runs.
It's because when you put a dollar on deposit in the bank, the banker turns around and loans out that money as quick as he can into more than one person.
And so what ends up happening is you get multiple claims on the same dollar.
You're walking around thinking, I own the dollar that's in my bank account.
And you do.
But it's already been handed out to a bunch of other people in the form of loans.
And so if you go and you put a dollar into the banking system, it ends up creating about $10.
It's the original dollar plus about nine additional dollars because the money gets lent out.
Not all of it.
Some of it has to get kept on reserve just in case you do go and ask for your money back.
But let's say 90 cents on the dollar gets lent out to somebody else.
Well, he spends that money, and then he put whoever...
And 90% of that, or 81 cents, gets lent out.
Well, this cycle continues, and you end up with a situation where, again, the $1 that you put on deposit in the bank ended up creating $10 in the banking system.
And when the Fed creates money, it works the exact same way.
This is why it's so problematic when the Federal Reserve creates a dollar for the government to spend.
The government spends it, it goes through the banking system and ends up creating $10.
So to give the government a little bit of money to spend, you end up creating a lot of inflation.
Conversely, in 2020, because of this very weird confluence of events, people were paying down debt, not taking on debt.
And that resulted in a reduction in the money supply, not an increase.
And a lot of the money that the Fed created for the government to spend, they basically kept in what you might call kind of a rainy day fund.
They kept it in their cash account at the New York Federal Reserve.
This is part of why, when we look at the amount of the debt increase under Trump, it's a little misleading.
A trillion dollars of that increase was literally just cash that the Treasury left sitting in the bank.
Because they weren't sure in April of 2021 what were tax receipts going to look like.
They thought that tax receipts might be terrible because nobody's working in 2020.
Now, it turns out tax receipts were fine and they didn't need that money.
So the correct move by the Biden administration would have been to simply take all the cash sitting in the bank and retire that extra trillion dollars in debt.
Instead, they turned around and spent it.
So a big reason why you don't see literally any inflation in 2020 Is the fact that the Fed creates all of this money, and then whether you're a consumer or the government, you just keep a lot of that cash on the sidelines.
You're not actually using it.
It's not really flowing through the economy.
Fast forward to 2021.
The economy's opening back up.
People are feeling more confident.
They go out and they start spending all that money that the government's been handing them in 2020.
And then in 2021, whether it's ARPA or a couple of the other bills they passed, they gave people even more money.
That the Fed printed out of nothing.
And so at the precise time we should have taken our foot off the gas and put it on the brake, we just stomped all the way on the gas.
▲
Export Selection