CLAY: Joined now by Charles Gasparino. He is fantastic at helping to make sense of what an absurd reality we are in the middle of right now when it comes to our economic situation. He is a Fox Business Network senior correspondent. Charles, appreciate you taking the time to join us.

What is going to happen with inflation, and do you believe we’re already in a recession, and what might 2023 look like as we continue to move forward? How bad is it? Could it get worse? Do you think it’s gonna get better? Take us into the economy as you see it.

GASPARINO: Well, I mean, this is kind of a tricky area right now. I mean, half of the market is saying we’re gonna have wicked inflation and, you know, a lot of smart investors are saying the Dow is gonna, you know, plummet another 10,000 points.

And then you see other people saying, “Ah, we’ll get through this.” I will say this. The Fed, if you take the Fed at its worse, which is we have to get inflation down to the target, 2%, that means they’re gonna raise interest rates for the probably — I mean, definitely this week, right?

Left out another drag on the NYC budget: Looming Wall Street job losses and the falling stock market — New York City Faces Potential Fiscal Crisis as $10 Billion Deficit Looms https://t.co/Jg9LsELYqL

— Charles Gasparino (@CGasparino) September 19, 2022

But probably the next meeting and the meeting after that. So, we’re gonna have three rate increases in a row, and if you take ’em at its word, Jerome Powell, the Fed chair, he’s not gonna stop until we get to 2%. We already had two quarters of negative GDP growth.

Obviously, we still have decent employment; so, it’s not one of these recessions where employment’s fallen off the cliff. But you got some issues. If he raises three times, you know, and I think, you know, you already see it in tech, you hear it on Wall Street that they’re talking about layoffs at the big banks ’cause yield flow is down.

You might say, okay, that’s the banks. Yield flow is down. What does some guy working in a factory care about that? Well, if yield throw is down that means big companies aren’t refinancing, they’re not expanding, they’re cutting back right? So, Wall Street processes those trades. That’s a sign the economy is slowing.

BUCK: What do you think about the housing market, by the way, Charlie?

GASPARINO: That too. Housing is kind of… it’s a regional thing, and you have to… if you talk to people, they’ll say housing stock nationally is very low. So, you know, even with the higher mortgage rates, right, they’ve, essentially, tripled, we won’t have an issue.

That said, you gotta look at it where the hot spots were during the pandemic. Look at Charleston, South Carolina. Look at Asheville, North Carolina. Look at Nashville. Look at these places. You know, there’s inventory there ’cause they built a lot. So, that could be an issue too.

And, as you know, a lot of people have their wealth both in the markets and in their housing. One good thing about housing is, if you don’t buy it on leverage and borrowing too much, it’s a physical asset, you know, you get to keep it.

You can’t really say that with a stock, if you bought it at 10 and it’s down three, you know what I’m saying? But all this is factoring in. And all this will play out the next…we’ll know in the next couple months.

CLAY: Charles, you said we’re gonna know in the next couple of months. Do you have any confidence at all in Biden’s team of economic advisers? Buck and I talk sometimes — and we’re not claiming to be savants when it comes to economic knowledge — but it feels as if the Democrat Party has completely sort of eviscerated any understanding or argument in favor of business, making it increasingly difficult to believe that the Biden administration has the ability to get this thing back on the right track. How would you assess his advisers?

ICYMI–Cruel winter ahead for Wall Street as pandemic debts come due https://t.co/YkpkXa79it via @nypost

— Charles Gasparino (@CGasparino) September 19, 2022

GASPARINO: Well, you know, there’s two — when you break it down, government has two responses to the economy, right? It has fiscal policy and monetary policy. Monitary policy is handled by the Fed. That’s the money supply.

It tends to increase the money supply when we’re in a recession, decrease it when we have massive inflation and even decrease it when we have massive inflation even as we could be in a recession ’cause having…

See, the problem is, inflation is such a wicked tax on the working class that, you know, countries fall apart when people have to work three jobs just to, you know, buy the same hamburger they’re used to buying with one even if there’s three jobs to be had.

That’s kind of…we’re not quite there a little bit but that’s a little bit what we’re dealing with right now. So, keep that in mind, that fiscal policy is different. Fiscal is what comes out of the White House.

And the problem is that the fiscal policy that we have is so bizarre and so cockamamie, I mean, on one hand it feeds inflation through massive amounts of spending, and on the other hand it restricts. It attacks businesses through massive amounts of regulation.

So, if you were to say, you know, is the Biden administration doing what needs to be done to get us out of recession, I would say no.

BUCK: We’re speaking to Charlie Gasparino, Fox News Business. And Charlie, I just want to know, what do you think? What are you looking for, if we see a headline in the Journal or over at Fox Business or anyone who’s covering the markets and the economy more generally, for people listening to this?

What’s your, “Uh-oh. It’s time to batten down the hatches” indicator? Is it just a month of really bad job losses? Is it the market just getting crushed? I mean, it already feels like lately that’s come pretty close to happening a couple of times, though not as bad as it’s been in the past. What are the worry indicators that you might see here?

GASPARINO: I think there’s a combination of things. If the Fed comes out this week and says, we’re gonna hike interest rates, you know, a hundred basis points as opposed to 75, you know, that would be something.

I don’t think they’re gonna do that, but that would be something ’cause they see something in the numbers that says this inflation is just not going away and they gotta… there’s something much worse than what we know even though what we know is not great, right?

So, that’s one thing. The other thing is obviously employment falling off, you know, dramatically. You know, that would be a problem, you know, job openings, you know, decreasing and things like that. Then, you know, people are preparing for a recession, you know.

They see the the tightened credit conditions and businesses are paring back. So, those are the two things I would look at. I don’t think the Fed’s going to a hundred basis points. They’re going to 75 probably. But still, that’s not great. Again, look at the employment numbers. They’re gonna be interesting.

CLAY: Charles, the FedEx numbers seem to have really shook the stock market because FedEx sort of has its pulse on the overall national economic picture. I don’t know if you saw Fred Smith, the founder of FedEx, basically came out and said we’re in a recession now, right?

Whatever it’s called. Certainly, we know two declining quarters. Technically that is a rough estimation of a recession. What do the FedEx numbers tell us about where the market is, where it’s going, and how nervous, based on what the CEO, Fred Smith, said about the economy do you think people should be predicated on that sort of knowledge?

GASPARINO: Listen. I think we are heading for a steeper recession than we have now. That’s me. Okay. Just this is the somewhat calm before the storm. Again, if you think the Fed is gonna raise rates twice, we have a 2% inflation target, we’re at 8.3 and not really going down, well, then, you know, we’re talking three rate increases, and they’re gonna slam the brakes on the economy. I mean, think about where mortgage rates —

BUCK: I was gonna ask you, Charlie, where do you think mortgage rates could go?

GASPARINO: They’re at 6 now.

BUCK: Could we see double digits?

GASPARINO: You could see 10. They do three, 3.75 basis point increases.

BUCK: That makes homes a whole lot more expensive for people to finance.

GASPARINO: — expensive now, if you have cash —

CLAY: By the way, for Buck’s question there, Charles, there’s then also a lot of people that might be interested in moving that say, “I’ve got a two and a half, two and three quarter percent interest rate locked in, there’s no way even if I think I need a bigger house ’cause I had a new baby or cause we need to move to a better school district.”

It’s gonna be a whole lot of people sitting down literally doing the math on this and saying, it’s hard to give up a two and a half, two and three quarter percent mortgage rate even if you feel like you need to move to a bigger home because that bite even at 6 you’re getting if you’re talking about potential double digits. I mean, that is monstrous to so many people.

GASPARINO: I know. It really is so I think that’s where we are with that. To be honest.

BUCK: From what I’m seeing basically if you were in the market based on the rate increase you’ve already seen, if you could afford a half a million-dollar house before, now it’s more like a house that’s 250K, if it was a 250K house, now it’s more like 125.

GASPARINO: Yeah. You’re — and that’s how recessions start, you know, just like that.

CLAY: And then you got so many people who bought in at the peak, right? If you bought in a year ago at the price even though you might have a good mortgage rate the numbers might start coming back on your house which is what happened in ’08.

BUCK: I got one thing Charlie also, which is that, you know, Biden, he talks this big game about, oh, you know, Wall Street and the Republicans. Biden got more money than anybody from Wall Street in history except for Barack Obama.

You talk to these guys. You got sources all over the Street and it’s really the financial sector for everybody because no one really works. Very few people actually work down on Wall Street anymore. Do they have any buyer’s remorse for their love of Biden in the last election?

GASPARINO: You might have seen my interview with Larry Fink who, you know, runs BlackRock, which has, I mean, there are BlackRock executives all over the White House. He’s got deep ties to the Democratic Party, and he came out and criticized Biden and the spending.

What he was saying is that he’s spending as Jerome Powell needs to raise rates; so, what he’s doing is stoking inflation and probably the worst type of inflation, not exactly, you know, increasing supply-side but just handing out money for people to spend at a time when Jerome Powell needs to decrease the money supply, essentially. So, you know, that’s Larry Fink saying that.

CLAY: So, yeah. What happens if that just keeps going, right? If we keep spending money which we’re doing, unfortunately, while also trying to restrict, like, what happens?

GASPARINO: It just makes the Fed’s job so much more…and that’s why people are talking about three rate increases. That’s actually why people are talking about a hundred basis points. Because the Biden administration is working at odds.

You know, engineering a soft landing — and, by the way, Jerome Powell’s not, you know — is complicit in this too. He kept printing money, money, money for like — for way longer than we needed to. We were coming out of the pandemic slowly, surely, the vaccines kind of worked, they didn’t work, but, you know, we were getting our sea legs back and people were going back to work.

We didn’t need to…you know, we didn’t need monetary policy to match what the idiots in Washington were doing on fiscal policy, you know, the spending. Yet he kept doing it. So, now he recognizes that probably too much, he probably did it to get reappointed by Biden, right?

And now he has a job to engineer soft landing. That means make sure the economy doesn’t slow so much we go into a steep recession. Joe Biden’s making that job a lot worse —

BUCK: You gotta tell us, Charlie, if the soft landing they’re going for turns into the plane heading into the side of, you know, the mountain and it’s time to start buying up land off the grid in Belize, you gotta let us know, right?

GASPARINO: Belize. You know, I still don’t like buying in other countries. One thing about —

BUCK: Important tip. I didn’t know that.

GASPARINO: One thing that we have here is the rule of law. You go to another country, you have currency risk, you have legal risk. You know, that’s the one thing about this, you know, we sit around and, you know, I’m not a big fan of Joe Biden’s economic policies, but, you know, I’m not looking to leave. You know, when I heard all those Democrats saying, oh, they want to leave the country when Trump becomes president, I was like, “Are you kidding? Where you gonna go?”

BUCK: We are the best of the rest no matter what happens here financially, it seems. But, anyway, Charlie Gasparino over at Fox News. Charlie, thanks so much for being with us. Appreciate it.

GASPARINO: I’ll see you, guys.