Transcript of Charles Payne on What’s Next for the U.S. Economy

And Nancy Pelosi actually went out later when Obama was in office and she explained it, what she called the multiplier effect. And what she said is, “If we give people one dollar of food stamps, they go out and spend $1.79.”

So keep this in mind because the government understands how to manipulate the public. She said this out loud though. So the goal wasn’t to shore people’s finances up as much as it was to goose the economy. So fast forward again. 2008, thirty or forty billion dollars. Then, of course, Obama comes in with a much higher number.

The Pandemic Spending

And then the opportunity of all opportunities. Rahm Emanuel famously said, you want to take advantage of a crisis. Well, how about a pandemic that comes around every one hundred years or something to that effect? The ultimate emergency.

The $1.9 trillion Biden COVID package was the ultimate gift we did not need. Household balance sheets were as strong as they’d ever been. Corporate balance sheets were as strong as they’d ever been. The vaccine had been created, and America simply did not need this money. Our household debt service payments as a percentage of disposable income had never been that low, and that’s where they decided Americans needed a financial bailout. It’s pretty clear Americans did not need a financial bailout.

By the way, this is on top of six hundred billion dollars that Trump had just pushed through. Unfortunately for him, Mitch McConnell held it up because he didn’t want him to be reelected. So he had six hundred billion dollars coming in, then they layered on another $1.9 trillion. We did not need this money. Right, but we got it. Corporations didn’t need the money either. You can see where corporations’ net worth was at the time, and of course, since then, it’s only gone significantly higher.

Trickle-Up Economics

So no one needed the money. Households didn’t really need the money. Corporations didn’t need the money, but the money was pushed through anyway. This is what they understand, and this is what a lot of people don’t get. Believe it or not, this is a beautiful report that came out from Stanford February of 2023. I love it. I advise everyone to read it. I was shocked it came out from that university.

I’d always talk to people about our economy. I’ve always considered our economy a trickle up economy. Not trickle down, which is a disparaging comment, a way of describing typically Republican economic theory. It’s trickle up. Now it was always easy to see it was trickle up before the Internet, the day after Thanksgiving, those Black Friday sales, and a gazillion people would give the mall the bums rush. They run over security guards, kill people, fight each other. Right? All to give the richest people in the world their money. Trickle up. We’ve always had a trickle up economy.

The Propensity to Consume

But this was amazing in this piece because it specifically focused on that $1.9 trillion that was pushed through. And essentially, what you have is what they call a propensity to consume. Now the bottom forty percent of households do it immediately. So when the stimulus checks went out and those malls were packed, those are your bottom forty percent of people. They couldn’t wait to go out and spend it, $1,400.

I’m not sure if you saw it here, but I saw it in New York and New Jersey. It was crazy. And of course, they’re in these stores they shouldn’t have been, Louis Vuitton and Gucci. Why are you buying a nine hundred dollar belt buckle when you live in a project? And of course, you know how people think. Remember, Nancy Pelosi already told us, they know how to manipulate us.

The Illusion of Savings

So if you go into the mall with a check from the government for $1,400, of course, you’re going to spend an extra five hundred. Because normally, this $1,400 would come out of your pocket. So in your mind, you’re saving nine hundred dollars. So, yeah, it’s wonderful when you start counting the GDP. “Oh man, our GDP number was this, and the economy is that.” And it shocked me how many Wall Street economists to this day go with this nonsense.

And you don’t know how many times I would have to correct my colleagues at Fox or Fox Business. I send emails, “I heard you today. No, it was not a strong report.” And everyone’s saying it was strong, but you have to look at the details of these reports.

So the money makes its way up. Higher income levels, store owners, whatever, they get the money. They hold on to it a little bit longer, but eventually it all trickles up to the top one percent. They said it would take five years for the $1.9 trillion to find its way into the pockets of the top one percent, also known as political donors.

Excess Savings and Inflation

And so immediately, this was our savings. By the way, they had this term “excess savings.” I had never heard of it before. I thought it was just for white people. I had never heard of it before. Was so confused the first time an economist said, “Charles, we’ve got $2.1 trillion in excess savings.” I was like, what? Like, we used to have like a coffee can with a few bucks in it. I didn’t know. I never heard the term excess savings before. Well, we had $2.1 trillion in excess savings. I thought you had a savings account. I didn’t know you could have excess savings. That’s a wonderful thing.

So we had $2.1 trillion in excess savings. Well, of course, we’re Americans. We shop till we drop. And they know we shop till we drop. And all of a sudden, these red lines, this is a drawdown of savings. We’re spending the heck out of it as fast as we can. At this period right around here, the richest person in the world became Bernard Arnault. You know Bernard Arnault, CEO of Louis Vuitton? Yeah. I mean, he was making a lot of money off those kids buying those belt buckles.

The Consequences of Modern Monetary Theory

So what did it get us? Well, inflation erupted. This is a part of modern monetary theory that they still can’t figure out. The government according to folks who believe in this modern monetary theory, which was really pushed hard by AOC when she first got in office. And Biden had the chance to put it into play. Biden-Harris had a chance to actually say, “forget about it. Let’s do it. We’ve got the ultimate emergency.”

Inflation rate erupts to 9.1 percent, a level it hadn’t been in four decades. And I love now because as it starts to drift, economists come on, “well, inflation is down.” No, no. The rate of growth has slowed. But inflation is not down. There’s your inflation right there. It’s not down, not even by a little bit.

This chart right here with the red arrow explains the election outcome on Tuesday. That one single chart. I get so frustrated even on Fox when we use this chart when we talk about inflation because this is the real chart. No other chart. This is the only chart we should use to talk about inflation. The cumulative impact on the American household, on the average American has been devastating, absolutely devastating.

It has screwed up the housing market so that you have so many folks with four percent, three percent mortgages. They’re not going to sell their house and buy one with a seven percent mortgage. So it skewed that up. This has wrecked our nation. The American people told you it wrecked our nation on Tuesday, but before then, you could hardly get a professional economist who would acknowledge this. Obviously, politicians wouldn’t acknowledge it, but this is what happened with the grand experiment with modern monetary theory.

The Velocity of Money

Also, what’s happened as government has gotten larger and larger and the financialization of our economy has gotten larger and larger, we have less velocity of money. This right here to me has been one of the most amazing things in history. Before, money used to circulate in our economy, everyone got a piece of the action and then it sort of stopped right at the beginning of the great financial crisis. And I think there’s a lot of reasons for it, including what I call the financialization of our economy.

The Financialization of America

I think online has a lot to do with it, but also just to sort of focus on big businesses taking over local businesses or my neighborhood. When I grew up in Harlem, I used to work. I worked since I was thirteen years old. I used to clean car windows at red lights with Windex and paper towels. I did, man.

I did that before the crackheads did it, man. It’s hard competing against the crackhead, though. You’re like, okay, you got it. I worked in bodegas. I did everything, shoveled snow.

Had every kind of job. I’ve been working straight though since I’m thirteen years old. And when I lived in Harlem, it was so weird because they used this reverse psychology on us, right? And they still use it in a lot of black communities. Well, there’s no big businesses there.

They don’t like us. Where’s our McDonald’s? Where’s our but when I was growing up there and there weren’t any big businesses, I used to go to one hundred and twenty-fifth Street, where the famous Apollo Theater is. By the way, just saw Smokey Robinson there recently, eighty-four years old. Amazing, amazing.

If Biden had his vigor, he might still be President. Good thing he didn’t. They used complain in our neighborhood. Well, how come we don’t have these big stores? But what we had, you go to one hundred and twenty-fifth Street, every on all the different avenues, you had row after row after row after row of vendors, right?

People selling things, jeans, whatever, albums, instants, all kinds of stuff. And I used to get my money and go down there and you’d haggle with them. Two for thirty dollars how about I give you twenty-five dollars? But it was great. And so the person you buy the jeans from will go across the street and buy some record albums. The person from the record albums will go across to the restaurant and have lunch.

The person on the diner will go across the street and do this. And the money circulated in the community. We had velocity of money. Now you go, I couldn’t H and M opens up. Woah, look at this.

A great big store opens up. Yeah. So every time we buy something there from H and M, it immediately goes to wherever they I think they’re headquartered in Scandinavia somewhere or Spain. It immediately leaves the neighborhood. There’s no velocity of money.

Money Making Money

So that’s a big issue that’s haunting us in this country right now. The financialization of our country, our economy and our stock markets and our financial markets. It is taking over. It is swamping us. We have become so good at one thing, money making money.

But money doesn’t invest in factories anymore. It doesn’t invest in education anymore. It has one purpose, money making more money. So here’s an example of this financialization and how it’s worked over the last few years. 1973, GDP $1.3 trillion dollars. You go down now to 2005, $12 trillion.

But you start looking at the other parts of this, right, the credit markets. In ’73, the credit markets were less than about 170 percent of GDP. Look at 2005, a $4 trillion dollars economy with a $41 trillion dollars credit, right? 328 percent. Same thing in the financial sector, financial debt.

Look at the financial sector debt. In ’73, it was less than ten percent. By 2005, it was thirty-two percent. This just keeps going on and on. They’re monetizing debt.

They’re making money from debt. They’re creating ways of making more money. A lot of us just borrow time more than making money, right? This is the sort of Sordidomachus that’s over our head as a nation. Give you a more recent example of that debt driven prosperity.

So since 2009, our debt level has gone up 200 percent. And isn’t it ironic? Our GDP is up 200 percent. The stock market, if you put one dollar in the stock market in January of 2009, into this year, reinvested the dividends, you’d be up 750 percent. I think employment is up twenty-eight percent in that same time frame.

There’s a massive disconnect, a massive disconnect. Household wealth is up 170 percent, not even keeping up with debt or GDP. This is the financialization of our economy, a debt driven prosperity. So that $35 trillion dollars that was referenced earlier, sooner or later will come tumbling down. I don’t know when because they’ve gotten better and better at this stuff.

The Pain of the Average American

But I tell you who’s hurting from it, the average American. So University of Michigan comes out with their sentiment report. They just had one on Friday. I didn’t get a chance to really go through it, comb through it. So this is the one before that.

And so the American public says, well, this black line here, they can see that the growth of inflation is expected to slow dramatically. But then when they were asked about what hurts them the most, Consumers started high prices for their worst personal finances. That’s still at a record level, near fifty percent. And again, that gets back to the other chart. Even as the growth of inflation slows, it’s too late.

And it’s been extraordinarily painful, and people expressed that on Tuesday. Meanwhile, what’s happening with the economy? The jobs market is slowing dramatically. This is a three month moving average. Of course, this last jobs report, we lost twenty-eight thousand private sector jobs.

And there’ll be some adjustments for the hurricane, but it’s still going to be a shockingly depressing number. And you can see where it’s been coming down ever since the peak in 2021. So it’s not new. We’ve had a labor issue, a labor problem for a long time. One of the reasons is that there’s six ways the government, the Bureau of Labor Statistics can count unemployment.

U1, two, three, four, five and six. I’m not sure why this is, but for some reason, they settle on the U3 number being the number that we always talk about to represent unemployment. So again, you’ll hear someone say, well, an economist or a politician, our unemployment rate is only four point one percent. With the U3 number, if you drop out, you’re not counted. If you just simply drop out, you’re not counted at all.

But you exist. Eight million American men have dropped out. Eight million. They don’t count them at this four point one percent number. They live.

They exist. They have to eat. Many of them live in desperation. They expressed that on Tuesday. So this unemployment number, again, is just so phony baloney.

It’s ridiculous. It really is. Thanks. Wages are also slipping. The growth of wages are slipping.

The AI Challenge

So this is the employment cost index. This is a quarterly report. We got one last week. And they have what they call unit labor cost. And that number is really starting to slip faster and faster.

And I really worry because we’re just now starting to use AI. This is even before AI. We’re starting to slip faster and faster. Last week when Google reported their earnings, one of the most fascinating parts about the whole earnings, they said twenty-five percent of all their new code was written by AI. We just spent the last ten years saying, teach girls how to code. Teach factory workers how to code. Well, maybe not.

So again, you hear a lot of Wall Streeters, a lot of economists say the economy is great. Look at productivity. Well, productivity is a euphemism for we need fewer people.

It’s fantastic for corporate bottom lines, but it’s not necessarily a good thing for the American public. So here’s the thinking, and this is what’s been happening lately, the wealth effect. Stock market goes higher, rich people buy stuff. Right now, the top twenty percent of Americans do forty percent of the consumption. They’re buying things.

The Fix Is In

You got to hire people. You hire people, the economy looks great, stock market goes higher. I tell people the fix is in. The fix is really, really in. Passive investing, people get paid every week, money goes into their 401k.

That money automatically is invested in the stock market. Typically, it goes proportionality. So the strongest, biggest, strongest stocks, that’s where the lion’s share of it will go. Guess what? If all that money is going into these stocks, they remain the strongest stocks.

They lift the market. The market goes up, more people want to be in it. It’s heck of a positive feedback loop. And if that starts to get a little shaky, something happens and the Federal Reserve comes in and they become friendlier and more accommodative, and they start to put money back into the economy. And if that’s not enough, the federal government will come in and swoop in.

The fix is in. If you own stocks, the fix has been in. But a lot of people either don’t own stocks or they don’t own a lot of stocks. Here’s the dilemma for President Trump. And by the way, did you guys know that every speech I gave this year up to June was based on Germany?

The German Cautionary Tale

Because Germany is the ultimate cautionary tale for Americans, the ultimate cautionary tale for Americans. What Germany did to themselves is mind boggling. You’ve never seen economic suicide on this scale before. If you think about Germany, and I talk about this place in Germany called Swabia. When the industrial revolution began, you had these railroads, the UK, Great Britain dominated.

Germany was way behind. But there was a small area in Bavaria called Swabia where they had this tremendous work ethic. We call it right now as the Protestant work ethic. They were very religious. They became very frugal because they were poor.

It was a poor region. They saved their money. They didn’t squander it. They believed in hard work and they started to invest in themselves. Then they had people who eventually came out of there named Benz.

You may have heard of that, Zeppelin, these kind of people, Daimler. Anyway, Germany finally caught up and surpassed Great Britain. And they had a system. After both world wars, you had these treaties. They had one treaty and one agreement.

And ostensibly, they were to stop the German war machine, the Treaty of Versailles and the Potsdam Agreement. But if you ever look at these things, they were really designed to stop them industrially so that the rest of Europe could catch up. And still, Germany came out ahead. So this mighty German economy where people around the world pay premium for these products, right, if it’s a German car, you would pay more money, if it’s a German razor, you would pay more money. If it’s a German coffee machine because you knew what you were getting.

They gave it all up for the Green Party for climate change. They’ve crushed their economy to a point I can’t even describe to you right now. Volkswagen just announced they’re laying off ten thousand, twenty thousand people. I mean they crushed their own economy. Here’s the irony.

They shut down all the nuclear power plants. They use more coal right now than every country in Europe combined, right? All in the name of climate I mean they’ve destroyed themselves. And we’re in that we’re getting in that direction in the sense that fiscal policy, people get addicted to free checks. Believe it or not, people like what they think is free money.

The Allure of “Free” Money

It’s hard to describe. But in a lot of times, lot of folks who are well off say, oh, man, that’s really ridiculous. Well, I can tell you right now, I’ve been in some great hotels around the world. And when I walk in and sometimes they have that piece of chocolate on their pillow, I’m like, oh, wow, a piece of chocolate. Well, free chocolate.

I’m so giddy. So we like free stuff. Let’s just put it that way. We kind of dig free stuff. At least we think it’s free.

Was built into the $500 a day rate though, right? So I’m always an advocate for everyone to invest in the stock market. And Wall Street has a mixed reaction to Main Street being in the market. They love it when you’re in the market as long as you’re handing them the check. They don’t like it so much when you think you could do it on your own.

The Stock Market Reality

Right now, the average stock market portfolio, according to the University of Michigan, when they ask people what is it now, it’s up to $250,000. Not long ago, was $100,000. Wall Street might actually just try to put a few bumps in the road shake these folks up a little bit and make sure they take that money and give it to a professional because how could you take it from $100,000 to $250,000 anyway, right? And here’s the thing we’ve got to keep in mind. Despite the fact that we have greater percentage of people who own stocks than ever before, we still need more I still would like to see more people in the market. But also remember this, the top ten percent of Americans still own ninety-three percent of the stock market. Again, that’s the wealth effect.

And they’ve gotten better at manipulating the stock market. So these spikes are your bull markets, right? These are years that go before the last twenty percent drawdown. And you can see in recent years, it’s just gotten better and better and better. They perfected it.

So the crashes happen. Everyone licks their wounds. They bail out Wall Street. They go back to the drawing board. How can we perfect this thing like Constantinople or something?

We just it becomes impenetrable. These are your returns from the last the first two years after a new bull market. So again, you can see back in the day, seven percent, sixty-two percent, forty-three percent, fifty-two percent, starts getting a little bit better. But then the last two bull markets after the first two years were up ninety-three percent. And this bull market is on its way.

They perfected the financialization of our stock market. It’s really remarkable. It’s really amazing. But it’s coming at the expense of something else. It’s coming at the expense of building America, rebuilding America.

The American Economy: Looking Ahead (continued)

It’s coming at the expense of really educating our kids. It’s enriching a handful of people, and there will be a massive revolt. Tuesday was an example of that. There will be a massive revolt of somehow not taking this from folks, but finding out a way to reinvest in America in a smart way. I’ve got great, great hopes that Trump, Elon Musk and the rest will do that.

I really do. Because whenever they brag about how quickly our economy has come back versus all these other countries, it’s first of all, they’re comparing us against Europe. They’ve already gone down this path. We should not brag about having a quicker recovery than European nations or Japan. These places have shot themselves in the foot.

They’re not coming back. They’ll never see the glory they had before. They’ve had open borders for too long. They’ve had welfare states for too long. They’ve gone to war with their most creative people.

That’s why their most creative people come to America to start businesses. And then on top of all of that, they have the fertility crisis. You can’t buy a pizza in Italy from an Italian. You’re going to buy it from someone from Morocco or somewhere else. They just don’t have the people.

Hungary doesn’t have the people. Those nations are dying. Japan will go from one hundred and twenty million people to eighty million people. Already, they sell more adult diapers than baby diapers. Part of that is the cultural problem that we have to figure out here in this country.

The Cultural Crisis

Twenty years ago in Japan, a professor came up with a term called grass eaters. And what he noticed is that these young men refused to be like their parents. Japan famous for their work ethic. Two hour commutes both way to work, worked for the same company for fifty years. They don’t want to do that.

Instead, they want to play video games all night and sleep all day. And now they’re at the point where they identify they’re the person. They’re the person on that screen or the creation on that screen, not themselves. Thirty percent of the men there, thirty and under, express no interest in sex at all. Not with anyone.

Men, boys, girls, don’t care. They want no they’re not interested in it. President Xi of China last year, who knows, who understands this stuff, because for him and for China, they feel like they were robbed by Westerners. And anytime they bring up the Opium Wars, you know what they’re saying. So he brought up the Opium Wars last year talking about this same battle.

So I think he cut the hours on Friday, two hours on Friday, one hour on Saturday. And then last year during college graduation season, he says, our college graduates won’t lie flat. In other words, they’re not just going to graduate and chill out. Now there was some pushback. A lot of those kids graduated. They had the cabin ground on and they’re laying on the ground flat. But the point is, he knows that it’s an issue. It’s an issue here too.

So you layer on top of that income inequality and inflation, all of these things, we have them in a much more in abundance than they do in Europe. So while we can brag about how quickly we recovered, it hasn’t been that great.

The New Gilded Age

So this is what I’m excited about. I’m excited about the new Gilded Age. Now in my last book, my recent book that I just published in October, I have a chapter there on the Roaring Twenties. And as I was thinking about the book, the parallels seemed perfect. Coming out of the Spanish flu, coming out of COVID, coming out of the world war, coming out of the war on terror.

There was a big depression in the early 20s. We had a big depression when COVID first hit. But now I’m really starting to think that parallel might be the Gilded Age. And if so, it could be amazing. Now many have heard President Trump talk about William McKinley a lot.

William McKinley is getting a second look. He’s getting a second look in part because of the industrialization that he used. Obviously, he used tariffs. That was a big part of his fight. But he had the gold standard. He held back on antitrust enforcement. In other words, he left free markets rule. William McKinley is getting a nice second look.

And I’m doing more research on this, but I think this is going to be the parallel that we want. By the way, after McKinley, Republicans won the White House, in the next thirty years, he only lost twice. He created an era coming out of that period.

In 1893, even before he was President, we had the Chicago World’s Fair, which for me was the introduction of consumerism. Ferris wheel, skyscrapers, the White City. If you ever get a chance to study any of the world’s fairs, that’s the one you want to look at. So I’m thinking about Trump and the new Gilded Age.

The Gilded Age is known for rapid industrialization, economic growth, political corruption. Sounds familiar. Issues, race, ethnicity, immigration, labor, women’s rights. Sounds familiar. Notable figures, John D. Rockefeller, Andrew Carnegie, Cornelius Vanderbilt, JP Morgan. We’ve got Elon Musk, Mark Zuckerberg, Jeff Bezos. The similarities are really, really eerie, really eerie.

And one of the things that kind of got me thinking about this even more, I have this habit. I write every single day for my subscribers. I have my own research firm, and I also write obviously for my show. And I’m always thinking like these phrases we use, like autopilot. If you ever get a chance to study the origins of the term autopilot, it’s phenomenal. Some guy takes these gyroscopes that his dad created for the Navy and puts him on planes. And he’s at the Paris Air Show, America Goes Last, he’s flying by, and he takes his hands off the steering wheel.

That was the first autopilot, and everyone loses their mind. So recently, was thinking, wow, the market and the economy feels like it’s on easy street. So I started digging in. Where is Easy Street? So this is the first time it was ever recorded use, the use of it.

But what’s so ironic about this, if you inquire where he is going, he will say, up on Easy Street to see Miss Comfort. This was in a Union magazine in 1887. And you think of the Gilded Age and these robber barons, and you think, well, unions must have had it hard. They were on Easy Street. They were doing great. Everyone was doing great. It was an amazing time in this country.

Again, we had thirty years of amazing prosperity. So it’s just one of the things that, again, I’m going to dig into it a little bit more, but I’m really thinking the parallel and maybe for folks out to look into a study, might be the Gilded Age more so than the Roaring Twenties.

Global Conflicts

One other thing I just wanted to mention, no one talks about the world being on fire. So you’ve got political risk in the red through the roof, and then you have mentions by corporations, whether it’s on conference calls or earnings calls, no one’s talking about it. I think obviously part of the reason is that it’s a sort of a proxy thing. We just keep writing checks.

But you can imagine if and maybe soon we’re drawn into one of these conflicts, particularly Russia, and people start to see the slaughter. Remember what turned Vietnam was people saw it on TV for the first time. In the ’70s, they’d never seen anything like that. That turned the general public against it. Could you imagine the stuff that people will see daily on their cell phones? I’m not sure the American public would be able to stomach it for long. Yet we’re being pulled deeper and deeper into these conflicts instead of trying to solve them.

So with that, I’m going to say I’m a rose colored glasses kind of guy. I’m always generally optimistic, but I’m also a student of history. And I feel I can’t begin to tell you how thrilled I am about Tuesday and how much more hopeful I am. And I even get more hopeful when I’m able to come out to places like this and meet people like you. So I want to say thank you very much.

Q&A Session

MODERATOR: We’re going do some Q and A.

Yes. Thank you, Mr. Payne. We do now have some time for Q and A. If you have a question, please make your way to a microphone. Student questions will be given preference and good questions will be considered for extra credit.

AUDIENCE QUESTION: Thank you for the excellent speech presentation. So I guess now that we have a changeover at the top of the ticket, what would you recommend that President-elect Trump does like in the first thirty days? Any executive actions, maybe two or three things he should do?

CHARLES V. PAYNE: I think there’s a list there’s a couple of lists floating out there. I’m not one hundred percent sure what he can do through an executive action or not. So I’m not sure what the list would be, except let’s go ahead and anything that was designed specifically, I think he’s going to do something in the oil, obviously, right? I mean, that’s the no brainer.

It was funny during the debate when Harris talked about the Biden administration opening up all this land. The fine print, though, was really interesting. Like the lease went up four hundred percent. The cost of carry the oil went up one thousand percent. Like, yes, open it, wink, wink.

So I think the first thing he’s going to do, obviously, baby, drill. So any executive order aimed at fossil fuel industry. And then I think some of the just more nuanced dumb things designed to keep us at odds with each other will probably be out of the way. I think he’ll put some people in position because, again, the clock is ticking. He doesn’t really have four years.

He’s got to do a lot in two years. Those midterms will last. Remember, this is the first time an incumbent the incumbent has lost in America three elections in a row since the eighteen hundreds. So the clock is ticking, and Trump knows it’s ticking. So they’ve got to hit the ground running. But I think the very first thing that he’ll address is in the petroleum area, fossil fuels.

AUDIENCE QUESTION: Thank you, Mr. Payne. I’m interested in human ingenuity. I’m wondering if you’d be willing to share more with us about how you worked yourself up through pretty adverse starting with American freedom. Did you have mentors or luck or hard work? Or what was it?

CHARLES V. PAYNE: D, all of the above. I had a beautiful life growing up as a kid living on Army bases. My father was in the Army. I was born in New York. We moved to Pittsburgh. After that, we moved to Germany. After that, we went back to Pittsburgh. No, I’m sorry, we went to New York, Pittsburgh, Texas, then Germany, back to Pittsburgh, then Japan, back to Texas, Alabama, North Carolina and Virginia.

My high school was the first school I went to two years in a row. The bad news is I don’t have any childhood friends. The good news is I know how to make friends quickly.

A lot of things in my life in terms of mentors, it’s really interesting because they weren’t necessarily mentors at that specific time, like my grandfather and my grandmother. In my book, I honor them in the first chapter, and I talk about how they bought their land. They gave up everything. I mean, you just got to read. I just wish I had it here, but they everything they worked for, the mules they had, the farming equipment they had, for that dirt, for that Alabama dirt.

And it was hard for a black family to own a farm in 1952 without taking a lot of heat. And I read later where the guy they bought it from actually was tricking a lot of black farmers and they took the land back. And I didn’t appreciate it as a kid. I was like this little bratty ass kid. I didn’t like to outhouse. I didn’t like the fact they didn’t have running water. And I didn’t know until I used to even look at my grandfather’s shoes.

He had one pair of shoes, they were turned up at the toe. And I didn’t appreciate that until I became a man, until I had to pay bills, until I had kids. You know what I mean? So it’s weird when you talk about mentors. They were mentoring me. I didn’t even know it at that time.

And so my mom we moved to Harlem. We got picked on a lot. We sounded like white kids. We wore the wrong clothes. They beat us up every day. And one day, I was standing on the stoop by myself, and one of the ringleaders was going by on his bike. I’d never seen him by himself, Andre. I just said, okay, I’m going to go for it. So I ran across the street, I punched Andre. He fell off his bike, and he ran away.

And I always tell people, if this was a Disney movie, the credits would have went up, and we’d have lived happily ever after. But it wasn’t a Disney movie. They got me in a schoolyard that night, about nine, ten people circling me, beat me up. And then one guy was really choking the hell out of me. I couldn’t I was like blacking out. And I see someone coming out of my building with a nightgown, and I looked, there’s my mother in her nightgown with a kitchen knife. I mean, it was pure hell. You guys have no idea it was pure hell.

So my parents, my grandparents, my father in a different way. My father was a military man. I looked up to how sharp he was. At night, he would polish his buckle with Brasso and those kind of things. And then I had three critical teachers, three important teachers. Mrs. Flood, I had a serious speech impediment. I still have a speech impediment. I’ll switch words and skip over words all the time. And so one day I remember Mrs. Flood, when my mom was in school, a parent teacher meeting, and I was so nervous, because we used have to read out loud in her class.

The Power of Mentorship

And I get just close enough to eavesdrop, and she says, “Charles, when we’re reading out loud, he’ll get to a word, and then he’ll change it because he can’t pronounce the word.” She says, “You know how brilliant he is to be able to do that?” I was like, I am. Mr. Austin and Mrs. Giladi. So I think you’ve got to have at least one or two teachers in your life, these kids, that touch their lives. And then again, with the mentorship, it was weird. I didn’t have a mentor per se at the time, but my parents and my grandparents were my mentors, and I started to appreciate them and build off their strength as a man.

Religion and the American Economy

AUDIENCE QUESTION: Thank you very much for your talk. My question is when we’re looking at the economic state of America today and also comparing that to the economic state of America historically, do you think religion and specifically Christianity has a place in the conversation? And if so, how?

CHARLES V. PAYNE: Well, the answer is yes, absolutely. And I think it’s the Protestant work ethic that got us where we are now. There’s no doubt in my mind. And it’s still lingering out there, but there’s been a war against it. Right? And it’s fashioned in so many ways, the work-life balance, those kind of things, where people are encouraged not to work and encouraged not to sweat.

But there’s no doubt it’s played a massive role in how we were able to get to this place in such a short period of time. And I talk about how there was Swampia in Germany. There’s also a little region in Sweden called Smalen. And in the late 1800s, the king went there, he marveled. He gave this speech about, “Wow, you folks, this is the most barren, hardest place to live in Sweden. And yet you have figured out a way to become prosperous.” And it all, first and foremost, very religious, believe in God. Hard work, save your money. And businesses came out of there. One that you probably heard of is called IKEA.

So I think it’s played a role. I think it’s playing less of a role, although there’s a resurgence. I’m going to do a show soon based on a Christian investing show real soon. So I am seeing it with more CEOs and again, not necessarily afraid to talk. I mean, some of these CEOs weren’t afraid to talk about some other things, so it’s about time, come out the closet if you’re a Christian.

It’s played a role. I don’t think we would be the greatest country in the world if it wasn’t for the Protestant work ethic and our strong belief in God. But it has diminished, but I think it’s got to be essential that we’re going to remain number one in the world.

Tariffs and International Trade

AUDIENCE QUESTION: Thank you, Mr. Payne. President Trump has repeatedly said that he would impose a 20% tariff on countries with an additional 60% tariff on China. How do you think this would affect the American economy? And would you think that this would create more jobs in America?

CHARLES V. PAYNE: Well, I’m glad you asked because one of the reasons I think McKinley is going to become more well known is because he effectively used tariffs. By the way, we also used tariffs in 1922, that recession that I talked about, was a great recession. It was short lived. It was the McCumber Fort Norris and McCumber tariffs.

And here’s the thing, and the folks at The Wall Street Journal hate this. But listen, that’s this old school conservative orthodoxy about everything we do to benefit the bottom line of corporate America, that’s out, right? That’s out. And both parties have been able for the last few decades to fool their voters. The Republicans getting folks in their heartland to go along with policies that sent their jobs to China, and in return, we got fentanyl. And liberal politicians able to fool black voters into this, “Hey, you know what? Let government take care of you” kind of stuff.

And so I think it can work for many reasons. And a lot of people go back and say, didn’t work in the Great Depression. Our economy was roughly equal to Europe. Right now, our economy is here. Europe is here. Even China is here. We don’t use our strength. We don’t use our weight. We’re so weak. We’re talking about a heavyweight going against a welterweight. Yes, maybe the welterweight will get a couple of punches in, but the heavyweight will knock this person out, the welterweight knows it.

I’ve already predicted before the election that China is going to come up with some—I’m calling it Trump’s Iranian hostage deal. Anyone remember the Iranian hostages? Four hundred forty-four days. They let them go January 20, 1981, the day that Ronald Reagan was being inaugurated. I think by inauguration day, China was going to make some major concessions, major concessions before then.

China’s economy is reeling. They are in desperate trouble. They mismanaged the one child policy. They mismanaged the COVID policy. Ripping off other countries doesn’t work. Companies have already started to leave. The first Trump presidency crushed China, crushed them. It sparked the onshoring phenomenon in this country. It helped Vietnam. It’s helped Mexico. It’s helped India. It’s helped India tremendously.

So I do think it will work as a diplomatic, as a negotiating tool, but also to bring jobs back to America. I think it will work.

Public Money and Economic Solutions

AUDIENCE QUESTION: I have a lot of peers who see public money as kind of the answer to a lot of issues. So my question is how do I, in a short interaction, maybe open up a peer’s eyes to the fact that public money is not always or often not the solution to economic issues?

CHARLES V. PAYNE: Well, we have to start with the fact that there’s no such thing as free money, right? I think that’s the first thing that we have to start with. And your peers, what are the things they complain about? The cost of college. Well, government interference were there with President Obama kicking out the middleman, saying we’ll take care of all these loans. We’ll essentially just rubber stamp them. What happened in the meantime? Tuition has went through the roof. Campuses got beautiful. But college is now extraordinarily expensive.

What are we dealing with right now? Government puts trillions of dollars into the economy. Yes, you went to the mall a few times. Maybe you went down to Mexico for spring break. But now you’re dealing with you can’t even find a place to rent. You need three roommates.

So they’re living. They’re paying for it right now. They just they just can’t connect the dots. You have to help them connect the dots. And not a lot of dots. There’s one dot, okay. They put trillions in and you can’t afford a ham sandwich. That’s it, just one dot.

It’s—I understand indoctrination, and it’s been going on for years and years. And it’s not always easy to get people to change their minds, even when they’re suffering from the very policies that they champion. I’ve had friends—I would have this debate with friends of mine, like Obama when Trump was in office. They’d say, “You know what? He’s doing a lot better than Obama.” And the answer would be, “Yes, but I just kind of felt better when Obama was in office.” Felt. I mean, next time you get a bill, don’t send a check in, send a note. “I’m feeling good” passing it on to you. It ain’t going to work. It ain’t going to work.

But the good news, I really believe, if you look at these exit polls, people are waking up. They’re waking up. Now the other side is not going to lay down. They own all the megaphones still, right? And so this is it. But I think if you just say, “Hey, your life is so much more expensive.”

I mean, people complain about their parents could buy a house at 28 years old and their grandparents. You know who bought most of the houses at the average age of homebuyers last month? 56 years old. Your friends—tell them that. That’s what happens with free money. It messes up everything. And the only people who benefit are the rich people and old people. Tell them old people.

Comparing Economic Eras: 1970s vs. Today

AUDIENCE QUESTION: Thank you, Mr. Payne. I appreciate your enthusiasm. I’m interested in comparing the late ’70s and early ’80s with the situation now. And of course, in the late ’70s, you had the stagflation, high inflation and slow economic growth. And if I’m correct, Paul Volcker tightened the monetary policy in order to clobber inflation, but that took a while. In fact, the first couple of years of the Reagan administration, he was really hurting. I mean the country was hurting, and he was hurting politically. Just this week, the Fed reduced the interest rate, which seem to me to be the opposite of what had happened under Volcker. And isn’t that going to make it even harder for everyday people to deal with inflation?

CHARLES V. PAYNE: That’s a great question because it brings up a serious dilemma. There’s four buckets of the way Fed policy is transmitted into the economy. I originally had Bullard on. He used to be in charge of St. Louis Fed. And I couldn’t get him—I mean, golly, I couldn’t get him to at least acknowledge that we need to find that the Federal Reserve has to find a better way to implement policy because to a degree, they’re in a conundrum.

Again, it gets back when you have the federal government Inflation Reduction Act, this act, that act, we’re paying corporations with fifty billion dollars in the bank, billions of dollars to open factories here. It just doesn’t make sense. When you have this massive force, this inflationary force on one side that they can’t tame or control, it makes it even harder.

But here’s what’s so interesting about what’s happening right now. So I tell you the top 20% of households are doing 40% of the consumption. So retail sales numbers come in, and they’re higher than expected. So you say, well, golly, there’s a reason that the Fed should hike rates. CPI comes in, inflation reading is higher than expected. But when you look at the categories, what’s at the top? Home insurance, auto insurance, rent.

And the reason I bring this up is the Fed trying to crush the economy to bring down inflation, the folks who are driving it aren’t going to be as hurt as the ones who are suffering from it because the average credit card interest payment has gone from 15% to 23%. Now if the Fed puts it to 25%, the bottom 75% of American households are going to be just crushed even more. In other words, the Fed has won the war against the bottom 75%. They’ve won the war. We surrender. Look at delinquency rates. They’re through the roof. You won that war.

But the problem is there’s just been so much money. You ever think about this when we say we’re paying one trillion dollars a year in interest on our debt? Who’s getting it? And what are you doing with it? So you’ve got this money still gushing in between the federal government and ultra wealthy folks who are getting paid. Every time interest rates go up, they make more money. They’re going out. They’re keeping the retail sales higher, not even using principal.

So it’s a conundrum. I don’t know how to get around it. I do believe Powell—well, this last one was really a doozy. I think obviously he was really late in the beginning. I think he was too tepid. They waited too late. They started 25 basis point hike, then 50, then four 75 in a row. They should have just came out with 75 and crushed it.

That’s hindsight. I don’t know. I’m trying to learn. I don’t know exactly how he can fight inflation that’s being driven by 25% of the population and the federal government, but he’s already defeated everyone else. So we’re going to continue to punish people who are already getting crushed, are already missing home payments, who already saw the credit card rate go from 15% to 23%. They’re not spending. It’s not them. It’s not them.

I don’t know what the solution is, Don. Jay Powell says that Paul Volcker is his idol, that he loves him. He wants to be him. And part of his job is completely out of his control. But I also think that there’s so many egos there too, particularly these economists. He’s not a trained economist, but it’s one of those things I’m just not sure what the answer is.

Also, another wildcard is the jobs market, the labor front. Our jobs market is in trouble. It’s really an unmitigated disaster. And four Fed meetings ago, he more or less said, unfortunately, our Federal Reserve, our central bank has a dual mandate. No other central bank has a dual mandate, inflation and full employment. So he wants to focus on full employment because historically, when the unemployment rate, the U3 unemployment rate starts to go through the roof, it doesn’t stop. I mean, it breaks out, it breaks out big time.

He wants it to stay at 4.4%, which is going to be tough because more people are going to start looking for jobs. They’re not going to have a choice. And I think we’re going to break through there. So it’s a heck of a conundrum, but it’s not as simple as saying, because if we use this government data, it’s really bad. We need to find a way to even get off of it or fix it.

So I know I didn’t really answer the question because it’s hard to answer it honestly. I know people pick sides on this thing. But if you look at how really complicated it is, a lot of people—the Federal Reserve has done their job in crushing a big chunk of this economy. Now the question is, if you wanted to crush this part of it, these people are going to suffer more.

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