Barry Habib warns rural hospitals face congressional threats while dissecting the U.S.-China tariff deal’s ripple effects, noting 30% markups on goods like $10 shirts and stock market gains from trade optimism. He slams Fed Chair Powell for ignoring inflation’s drop to 2.4%—from 9.1%—and outdated shelter cost lags, arguing restrictive rates risk labor market collapse despite revised job data showing weakness. Advocating January tax cut renewals to prevent market backlash but cautioning against $2T deficits, Habib pushes for GDP-driven debt reform over austerity, targeting Medicare/Obamacare waste via Elon Musk’s fraud-detection model. His "three legs"—tariffs, taxes, and spending cuts—aim to stabilize the economy before political gridlock derails progress. [Automatically generated summary]
Rural Americans deserve access to the best of what our country has to offer, especially health care.
Across every state, every community, America's rural hospitals are the first line of defense protecting our families, neighbors, and loved ones.
No matter where you live, hospital care doesn't clock out.
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Each year, America's over 5,000 hospitals care for millions of patients, providing 24-7 emergency care, delivering babies, cancer treatments, and other life-saving care that patients rely on.
Behind every one of those patients are doctors, nurses, and caregivers working tirelessly to keep people healthy and safe.
Hospitals are our community's lifelines.
They employ our neighbors and keep our families healthy.
But now, some in Congress are threatening access to care.
Tell Congress, protect patient care to keep America strong.
Don't cut rural health care.
This is the Stone Zone with Roger Stone.
They went after a guy named Roger Stone, who's sitting in the office.
And I'll say this in front of Roger.
He's no baby.
And right now, he's cleaner than anybody in this place.
Now, as they treated him very unfairly.
Now, get in the zone.
It's the stone zone.
Here's Roger Stone.
And you're back in the Stone Zone.
Inflation's Impact on Markets00:15:43
Joining me now is Barry Habib.
He is the chief executive officer of MBS Highway.
More importantly, he is one of the country's leading authorities on both housing and the mortgage industry.
He is the go-to guy on mortgages and housing, but also a keen economic analyst.
He is widely credited with saving the mortgage industry back in 2020 from margin calls due to Federal Reserve actions.
It was Barry Habib's presentation to the Fed that created stability at a crucial time.
He is now the four-time winner of the Crystal Ball Award given by Fannie Mae, Pulsonomics, and Zillow for the most accurate real estate forecasts among the 150 top economists in the country.
We're always honored to have him because it's economic matters, simple and understandable.
Barry Habib, welcome in to the Stone Zone.
Always great to be with you, Roger.
Thanks for having me.
So, Barry, we had some momentous announcement yesterday.
The United States and China have agreed to slash tariffs for 90 days.
Do you believe this will lead to a longer and more permanent agreement?
I do.
And I think the incentives on both parts.
The U.S. is about to feel the pinch of it.
You've got to remember, Roger, that as of Friday, no ships left Chinese ports for the U.S.
And I think that was a big incentive to making sure there was a deal put together from the U.S. side.
Because from the consumer standpoint, if you hear, you know, you've been hearing about tariffs, you haven't really felt it too bad so far.
But where it really could hurt is that there's an item that you want that you can't have access to.
And I think that that is going to actually manifest itself as we approach the next 30 to 45 days, because it takes from ships leaving China about 30 days to reach the west coast of the United States, 45 days in the middle of the country, about 60 days to reach the East Coast.
So in the next 45 days-ish or so, we may see a void on some of the items that people are accustomed to having readily available.
And that's when people start to get antsy.
So this could be very, very good as a preemptive move.
Now, I'd like to just discuss the level of tariff whenever you'd like, Roger, because the percentages do make a difference.
You anticipated my next question.
Professor, proceed.
So, you know, that 145%, and we've talked about this in tests, that's window dressing.
Once you get above 50%, you essentially shut down viable trade because it's just too costly.
So dropping to 30% starts to make it viable again, and maybe there's room to negotiate.
So this 90-day period is going to be really good.
Hopefully that it can extend beyond that.
I think it will.
As I said, the incentives are there.
But Roger, let's take a look and understand how the tariff works because what I've discovered is there's so much confusion out there.
And let's use an example of a shirt that you buy from China.
So let's just say there's a tariff of 10%.
Now, the confusion starts with who pays the tariff.
Some people think China is paying the tariff.
They're not paying the tariff.
If you have a shirt that you're importing from China, and let's just say that shirt is $10 and there's a 30% tariff on it, that means the importer is going to pay a $3 charge for that tariff.
Now, what happens after that's important because then nothing else is tariffed.
There's markups.
That importer is going to send it to a wholesaler.
They're going to mark it up a couple of bucks.
That wholesaler is going to send it to a retailer and they're going to mark it up a couple of bucks.
And then the realtor, when they sell it to the consumer, will probably mark it up at least 100%, if not more.
So you could have an item that does have a 30% tariff, which sounds onerous, but the cost of the item might only change from $45 to $48.
Instead of like being $44.99, being $47.99.
So while that's certainly something that's meaningful and something that makes a difference, when we look at a number of 30%, we start to think, oh my gosh, that's 30%.
That seems like an awful lot.
And in some cases, like if it's a vehicle that were imported and everything's imported, it could be.
But on much of the items that we get, people often forget that the other markups to the wholesaler, to the retailer, to the consumer are not subject to the tariff.
So the tariff is only on the raw imported item at that percentage.
It gets diminished on a percentage basis before it hits the customer.
Obviously, Secretary of the Treasury Beshant made this announcement of a trade deal with China at a time that the stock markets were closed.
How did the markets react this morning to this news?
We had a huge rally in the stock market.
Obviously, trade is very important.
We know that it also means a lot to the job market because the Dow today responding by up over 1,100 points.
This is a sign that the stock market really loves this news because, look, it means a lot for jobs.
Those people that unload the ships, that transport the goods, the retailers that have to have those goods on their shelves.
It's very important for the economy to keep the economy in good shape.
In addition to that, there are things that could come out of it bilaterally.
If there is a more fair platform for trade, if it does help American workers, if it does help American exports, that, in addition to it, will also help the U.S. economy.
So, you know, President Trump's negotiating tactics are not conventional.
But maybe they shouldn't be because in the past, some of the more conventional ones have not been effective.
But if we do get something good out of this, this could be a very effective way to have a more level trading partnership with China.
And something else that seems to have come out of it that President Trump was also discussing was that China will be more cooperative in restricting fentanyl from coming into the U.S., too, which obviously is something really critical.
So you have been a pretty articulate critic of the Federal Reserve Chairman Jerome Powell.
I saw recently where he announced that he was essentially not going to hike rates.
He was going to do nothing.
With inflation down to 2.4% from a 9.1% rate in June of 2022 under Biden.
Seems to me the president is already stabilizing the economy.
What should the Fed be doing at this point, if anything?
They should be cutting rates.
Clearly, Jerome Powell is like a deer in the headlights who is more concerned with his legacy than doing what's right, because he has zero in the way of backbone or gumption.
And I was very critical of Jerome Powell because he was complicit after Biden went with that $1.9 trillion budget buster, which was going to be inflationary.
Jerome Powell was complicit and potentially politically motivated by keeping interest rates at zero and to add gasoline to the fire, keeping quantitative easing going, which then caused inflation to explode, as you perfectly articulated, to 9.1%.
Inflation like we had not seen in 40 years.
Jerome Powell has a lot of dirt on his hands for that.
But one of the reasons why he has so much dirt on his hands is because he looked at data that has a very long lag.
Unfortunately, the data in the United States not only has a long two-month lag on the PCE inflation reports before it's reported.
So you'll get May's report at the end of this month.
I'm sorry, you'll get to get a report within the month of May for the end of this month.
But that's going to be for the beginning of April.
So it takes two months for it to come out.
You don't get it till almost the beginning of June to see what happened in April.
And that in of itself is a delay.
But the components within it that we've discussed in the past, like shelter, which is the largest component, 44% of core CPI, these reports have a lag of 9 to 12 months.
So he's looking at that.
It's like trying to drive your car down the highway, but only looking in the rearview mirror.
He's not looking ahead.
Now, I have a lot of issues with Jerome Powell, but I also feel that he has been inconsistent.
So let's just take apart a few things from Jerome Powell.
Number one, is policy.
By his own words, we are in a restrictive policy stance.
That means that interest rates are currently designed to slow the economy, by his own admission.
And John Williams, the New York Fed president, articulated it very well.
He said, if you take the Fed funds rate, 4.375, you subtract the rate of inflation, let's use round numbers, it's about 2%, the difference between the two.
And then he thinks there's a number there that they call this fancy name called R-Star.
You add that above the inflation rate, which means the difference between the two will tell you where the neutral rate should be.
We are currently 1.25% restrictive.
That's pretty restrictive.
Roger, we are pretty restricted.
So we are designing it.
The Fed is causing the economy to forcefully and purposefully slow, which I think the labor market's a lot weaker than we think.
And I think inflation is heading in the right direction.
Yes, there are uncertainty of tariffs, but we are forcing the economy to slow down.
And that's why President Trump has been, I mean, maybe a little overboard in his comments, but he has a lot of merit in the things he's saying about Sean Powell.
And the Fed, Roger, they're like a bunch of frickin' lemmings.
Okay, these guys, they follow each other.
They're afraid of their own shadow.
Look at the UK.
The UK just had a vote.
Five, four, four dissenting votes.
That's a meaningful discussion where people are not afraid.
People's voices are heard.
They represent different thought processes.
The Fed is like a bunch of leather, like a bunch of freaking penguins jumping in the water.
One jumps in, the rest of them jump in.
Nobody has their own mind.
Nobody has their own backbone.
And Jerome Powell is just worried because in February of next year, he goes off into the sunset, right?
And when he does, he's so fearful that it's going to have, oh, he let inflation get out of control that he's willing to risk to the health of the U.S. economy because of his reputation.
But there is no evidence that inflation is getting out of control.
If anything, inflation's come down.
You're 100% correct.
The only uncertainty is these tariffs, which is what they're running for cover under, because tariffs potentially, it's different than inflation because it is a one-time price adjustment, whereas inflation is persistent year over year.
However, inflation is something that has been improving, but there is a period of uncertainty.
But you are 100% correct.
It has been coming down.
Although I will tell you that the run rate for the last three and six months is above the year-over-year rate.
So there is reason to believe that potentially it could nudge up, but not in a meaningful way, and not to risk the health of the economy and the labor market.
There is one other thing that I'd like to talk about: one more inconsistency of Jerome Powell.
So we recently had first quarter GDP.
First quarter GDP came out with a negative number.
It's the first time in three years we've seen that.
Clearly, a red flag.
But Jerome Powell, in this particular instance, Roger, was able to say, hey, you know what?
Let's use a little critical thinking here.
So he rationalized it by saying, and he was correct, that a lot of it was front-running imports.
The calculation for GDP takes imports minus exports.
So you then are reducing GDP artificially by this front-running.
So therefore, you could say, okay, well, he's probably right.
But yet it's amazing to me that he doesn't use the same strategy when contemplating the lags.
He just looks at data.
In other words, GDP, no, I don't like the numbers, so I'll rationalize it.
I won't look at just the data.
But the job report last month, 177 jobs, I'm calling BS on that one.
Because first of all, there were 60,000 revisions that will be revised lower.
So it was a much weaker number.
And the numbers came from imputed data we've talked about in the past, this birth death ratio, which accounted for about 80,000 of the jobs.
This number was really closer to a 50,000 job report.
It was a lousy job number, but yet Jerome Powell looks us in the eye and says, economy's in great shape, labor market's in great shape.
He knows all too well that's BS.
And he's able to be critically used critical thinking on the GDP number when he doesn't like it, but the jobs number?
No, he's just going to take any face value.
That's a double standard.
I'm calling BS on it.
Barry, how do you think the president's announcement regarding lower pharmaceutical prices for all Americans will affect the economy?
Well, I think that could be a great thing so long as it does not discourage research and development.
I think it could be one of the greatest things for us because it is an unfair playing field.
We pay so much, so much more, but we are also the breadbasket of all these new breakthroughs.
So so long as there are still incentives in place and there's a way to thread the needle by keeping the incentives in place, but reducing the cost, it could be one of the greatest things that happens to us.
We have about doing an amazing job.
We have about two minutes before we have to go to a break, and we'll be back with more of Barry Abe.
Barry, how important is it that the president's tax cuts be renewed in January?
Well, as you know, I've been kind of involved in this on a couple of committees that I belong to, and I think it is very important.
If they're not, the stock market will not like it, Roger.
It will not like it one bit.
But by the same token, we do have to be careful that we don't take the budget so far out that I know that we're going to play the come here.
We're going to say, look, it will increase revenues.
And all that is true.
But if you do blow out the budget further than the bond market is willing to accept, it could potentially backfire.
So they have to, again, this is a matter of threading the needle and using just enough to get the tax cuts extended without loading it up with too much.
I know he wants the big, beautiful bill, but he can't get the bond market to the point where you get the bond vigilante saying, hey, you know what?
The deficit's going to be too big.
There's going to be too much supply coming to the market.
And we see interest rates increase dramatically.
That will also hurt the stock market.
So we've got to be careful.
When we come back on the other side, I'm going to ask Barry Habib, the chief executive officer of MBS Highway, one of the leading experts on the housing and mortgage industry, as well as the overall economy, about the national debt and the deficit.
So please don't go away.
We'll be right back in the Stone Zone with more of Barry Habib and a breakdown on the economic news of the day, Donald Trump keeping a number of his key promises and the impact of those announcements.
Whatever you do, don't touch that dial because we'll be right back.
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This is the Stone Zone.
Now, get in the zone.
It's the stone zone.
Here's Roger Stone.
And we're back in the stone zone.
My guest, Barry Habib, the chief executive officer of MBS Highway, more importantly, one of the most brilliant economic analysts in the country, specifically an expert on housing and mortgages, but also a shrewd economic analyst who has won numerous awards for his accurate real estate forecasts.
Joining me here in the zone.
Barry, how concerned should Americans be about the national debt that was allowed to grow so exponentially under Joe Biden?
And what is the very best way to address it?
You know, Roger, it's a great question.
And we're not left with many good choices right now because the time for making good choices is past.
The can's been kicked down the road and it's been exacerbated by the Biden administration.
Now, when we look at the size of the yearly deficit, it's about $2 trillion.
So we're not going to be able to get this down in one shot.
But if we can get the trajectory to be reduced, that's why the president is so concerned about gross domestic product.
It's not necessarily the size of the deficit, but its relationship to gross domestic product.
This is the key.
You can have a $2 trillion deficit be manageable if the economy is growing at a much faster pace.
That's why Jerome Powell has to wake up and has to understand that we should keep this economy accelerating and not contracting and not in a restrictive sense because that exacerbates the level of debt as to the gross domestic product.
So what we want to try and do is we want to try and see if we can, A, through Doge and other spending cuts, try and eliminate waste, fraud, abuse, but also try to make some reasonable cuts.
It's hard to do because nobody wants to see cuts.
And when you think about the compensatory spending that you have, you have very little discretionary that's left unless you start to touch something like Medicare or Obamacare, because that's where the big money is.
And that's where you can really make some cuts.
But they may, in turn, be unpopular.
And, you know, nobody knows better than you how that could influence midterms or presidential elections.
So these are things that, you know, I'm sure that they need to be very cautious and strategically minded with making these cuts.
But we do need to get this deficit down.
Last time we talked about this, you pointed out that there were three legs of the stool: that yes, the president needs to use the tariff stick to get better trade deals for the country.
We have to renew the tax cuts.
In fact, if you're opposed to renewing the tax cuts in January, well, then you're de facto supporting the largest tax increase in American history.
But we have to get serious about spending.
Elon Musk has shown us the way with his Doge project, uncovering not millions, not billions, but trillions of dollars of waste, fraud, and corruption.
All right, I want to thank our guest, Barry Habib, the chief executive officer of MBS Highway, and the voice I respect the most when it comes to the overall economy in America.
Barry, thank you so much for joining us today in the Stone Zone.
Thank you, Roger.
You're the best.
Thank you.
And to those out there in our Stone Zone audience, God bless you and Godspeed.
Until we meet again, please remember to tune in tomorrow for more of the Stone Zone.
We talk news, history, politics, culture, food, well, particularly food.
And we'll see you tomorrow.
God bless you.
Thanks for listening to The Stone Zone with Roger Stone.
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