Kudlow: I’m glad Trump punched back

Joining us now we have a big crowd very distinguished Fox Business correspondent Lauren Simonetti Rich Lowry editor-in-chief the National Review and if that weren't enough Charles Payne host of making money right here on fabulous Fox business. Thanks to all of us Charles I'll just say I mean we looked at the gold dollar all this all week long and China China has jumped about half of their holdings of US Treasuries in the last, I don't know,

15 years or so. And they're buying gold like crazy. And I think, I can't prove this one, but I think they're encouraging their little brick friends who don't like us at all and are trying to stir trouble to do likewise. It's not so much, I mean, all these currencies are falling against gold. Gold is rising.

But that's what I think. Buying gold is a way of rebelling against the dollar and the US. That's my take on this story. I don't see the inflation stuff. I don't see the booming yields and commodity prices.

What are you thinking about this? I think, though, that China only recently became an aggressive buyer of gold. They started selling off treasuries a long time ago, to your point. Now, the good news is that other buyers stepped up. And so the notion that we have for a long time, remember years ago, well, we can't ever push back.

You said the World Trade Organization didn't push back. America couldn't push back, apparently, because they had too much of our treasuries. That was just one of the excuses. So they sold a lot of treasuries over the last several years,

certainly over the last five, six, seven years. But their gold purchase really became aggressive last year. But it was other central banks, though. There's no doubt about it. Many people point to the Russia's invasion of Ukraine and when we took them off the financial system instantaneously, that what if that ever happened to us. For whatever reason, other nations are wondering,

hey, if they can take us off the SWIFT system, just with a flip of a switch, it lost a lot of confidence. I think the Biden administration might've moved too quickly there. Also, if they can take our assets from us and sell them to someone else. Again, other nations are saying,

we may not invade another country like Russia did, but we may do something to offend the United States. And that was, I think, a major inflection point.

Rich Lowry, a lot of good things happening here, including this whole Israel, HamHamas Middle East thing. I by the way think your column, I agree. I think the use of force, which is exactly the opposite of what Joe Biden, Joe Biden whined what force would escalate the war. Turns out the use of military force by the US and Israel deescalated, probably ended

the war. Okay, so, so much for that theory. But I also want us to fight back against China. China is going to be bad guys. If they're going to sell dollars and buy gold to embarrass us, if they're going to have export controls on rare earths, I don't know why they would pick now to do that on the

eve of- but I don't care. I know we now to do that on the eve of, but I don't care. I know we lost 800 points today in the Dow. Nobody likes to see the market ever go down ever at any single hour or day in our lifetime. But the reality is I'm glad Trump punched back. Don't let him get away with that crap. Of course.

I'm sorry, you go ahead. I'm asking the question.

I want to hear your answer. So obviously China is trying to establish leverage prior to this meeting, which probably still happened. But Larry, it is just an outrage and a disgrace that the entire West basically has allowed itself to become dependent on China for this crucial ingredient for all sort of advanced products, including weapons. And we basically, we don't want to mine or process rare earths because it's too environmentally

icky. That makes zero sense. So we need a long-term plan to ease ourself off this dependence because they shouldn't be able to just use this lever. But my expectation is both sides ultimately are gonna want a deal here and you're gonna get it.

Yeah, Trump's going there in two weeks or so. He'll sit down with them. Walny, I know you talk to both of them on a regular basis Yeah, Trump will sit down with Xi Jinping. You know, I don't know

This is this is the two biggest countries in the world decoupling right now. China is not a competitor They're absolutely an adversary and President Xi showed us that today This is a redo of what happened in April when the market tanked We had all the tariffs and the markets basically gone up since then because cooler heads were prevailing but now we're getting a reminder that China is an enemy and you are seeing, I mean, she is trying to have leverage right now in terms of holding on to those rare earths that we need for our fighter jets and our military, that we need for our data centers.

We're the AI leader of the world. What are we doing? Can't get some of those rare earths?

Is there anybody have supply? This is a serious question. Does anybody have an inventory of rare earths that we could and should?

I'm going to show you this. You study that for a little bit. That's a chart of rare earths, right? Yeah. Going back to the 90s, not long ago, mid 90s, we were developing, we had as much rare earth just a little bit less than China. So what happened? Well rich hit on one of the points, right?

It was their environment those dangerous stuff let them do but also businesses said you have no problem China wants to dig it up and sell it to his keeper, right? I mean, this is where tariff thinking particularly with traditional thinking we have to be smart about this This could be a project not unlike Eisenhower's project, you know, with the highway system. By the way, I don't think a lot of people realize our national highway system was a defense project.

It was not an economic project. It was a defense project. We saw what Germany had done, right, with the autobahn and how useful it was for moving tanks around. And that's how he sold it. That's how he got it through Congress. You know, a lot of people are upset because the government's investing in MP materials

and in other names. This might be the time where you have to take off your traditionalist hat and say, we're at war to Lawrence Point, and now we maybe should be investing in these things, and we should be pushing it.

This was the days when the argument was China was our friend, and we were all going to have free market love together and free trade love together. And it really didn't work out that well.

Yeah, so it didn't work. So it's one thing to have a foreign country that's undercutting US industry, say, with textiles or something, right? It's bad for textiles.

Who cares about textiles?

But China wants to dominate at the very top end of the technological spectrum for this reason to dominate the world and to topple our hegemony and that's a huge issue

And there's no reason we can't be doing this stuff and it has to be real national focus going forward

Yeah, well, I agree with all that. I mean I agree with all that. I just didn't know if there was some reserved rare-earth

reserve

Range by the way, in Minnesota. It's by Lake Superior.

Yeah, I remember.

Minnesota, Alaska. They're trying to build the road.

Wyoming. Yes. I think so.

Do you know where Wyoming is?

Out west.

Beautiful place. That's Texas. Well, no, Texas saying, okay, well, the K-Web, by the way, we should point out.

You're blushing.

I've never been to Wyoming or Montana.

Really?

Oh, you have to go though.

I know, or any of those beautiful- Jackson Hole. I know, yeah. But K-Web, China's market, where their biggest tech stocks are down 7% today. Our market was down two percent Yeah, let's keep all of this in focus because everyone's gonna be saying China's winning winning winning now They're using PPP to measure it purchasing power Not not you know anything they can do in this country to hate

I mean just enough TDS out there that they're still

Openly rooting for China to win this but they are trying are trying to screw us. And they are trying to damage the dollar's currency. They are trying. Now, I know all these currencies have devalued against gold. But I don't think the Chinese care about that. I think they are buying gold so they don't have to buy dollars. And they're getting all their little brick friends in cahoots to do the same thing. This is what the Chinese do. And by the way, their gold positions have gone up enormously. You're right.

The biggest in the last year, but not only the last year. Anyway, let us move on. Lauren, what about here? The finals for the Fed, the finals for the Fed. OK. Mickey Bowman, Chris Waller, Kevin Hassett, Kevin Walsarsh, and Rick Reeder.

I don't think Rick Reeder's going to—he's a good guy. He's a Bond guy. He's a terrific guy. I don't want to say anything bad about him. I still think it's a two-person race between the two, Kevin's, Hassett, and Warsh. But it's kind of an odd thing to announce that here's the—maybe it's the semifinals.

It's gone from 11 to five. I've never seen a thing like this happen before, but that's up to Scott Pesson.

You have the two Kevins in your bracket.

That's what you're telling us?

To me, that's where we started and we're gonna end and Trump's gonna make a decision about that. But do you have a thought, I mean, we were with Mickey Bowman last night or two nights ago for the Laffer Curve party. Waller's a smart guy. The two Kevins are very, very, very, very smart.

You can't go wrong.

Does it, I mean, does it matter here? Do people, does this have anything to do with anything in terms of the markets?

I think if you're signaling it's clearly someone in the same camp and nothing like Jay Powell and you're communicating that to the market, you make Powell ineffective, right?

You think you should – would you like to see him announce the candidate early, later? I have people talking at me about this all the time. If you put in – make a choice. The president has to make a choice, and that totally devalues Jay Powell,

even though he's got five – I feel like that's already happened, though, even though the president has to make a choice, and that totally devalues Jay Powell.

Even though he's got five...

I feel like that's already happened, though, even though the president has made a choice. He has. I'm sorry, even though the president has made a choice. Yes, I feel like Jay Powell's...

He's been devalued. Yes.

Do you agree with that?

Well, to an extent.

I mean, we've got some critical meetings coming up. jobs report on Friday, I think we would have had an urgency for 50 basis points because I think we would have had a negative number. But having said that, at that dinner, Walsh impressed the hell out of me. Wasn't he something? I mean really there is a difference between these candidates. The laugh for dinner we had. Yeah, I mean I was leaning Waller before this and I think I may have changed my mind. I mean I was blown away and the ideas, the conceptual nests that what he wants to do what he talked about I think is in line with best sense some of the things that Myron wrote in 2024

There's so many things that can be done with the Fed other than in addition to stripping away Unnecessary power that they don't need and shouldn't have rich

Is there politics behind any of this stuff or not? There's an implicit bargain when I come on your show, Larry, that you don't ask me about the currency, which you honor the first, and you don't ask me about the Fed and Fed policy. I know more about Wyoming than I do the Federal Reserve. But of course there is. Of course there is.

I mean, you would take Powell down. I don't know if there's a last peg, but that would take him down the last peg if you name somebody as his guy. Because then-

He's a lame duck, right?

Right. Totally lame. And now he's like, he's an injured duck. Lame duck. I want him to be a really badly wounded duck. I guess that's what I'm trying to get at.

So nobody would listen to him anymore. That's what I'm saying. So everybody would want to know, well, Kevin, and I don't have to name a last name here.

Yeah, I'm like, which one?

Kevin says this, which is much more important than what Jay says. That's the kind of situation that Trump could put the whole financial world in. Think about that. Just a thought.

I don't know, you guys may agree or disagree with that. Suddenly, everyone's hanging on the words of someone else. Yeah. I mean, I think that's a big thing. Charles, the rifts have begun. What do we think here? The rifts have begun. Nonessentials may become permanently nonessential.

Doge 2.0, restructuring the federal government in ways we haven't seen in I don't know how many years.

What do you make of that? I love it. I mean, we just found out the last 12 months, we did pay a trillion dollars in interest on our debt. I mean, the government is far too large. And listen, I didn't come up with the term non-essential. I don't know who did, but, and it kind of speaks for itself.

And you never root for anyone to lose their job, but this is, these that in these agencies and non-government organizations, there's been outright theft of hundreds of billions of dollars from the American taxpayer and hidden inside this bloated massive machine called the U.S. government. We've got to pare it down. It's got to become more transparent. And the pressure has got to come off of the average American taxpayer so that they can have prosperity as well.

All you need to know about government is that actually employs non-essential employees, right? Right. Any other entity in the United States, if they're non-essential, they're not working

for that entity.

Well, that, I, you know, I've been saying this for a couple weeks, and most people would agree, I think. Look, I don't, nobody likes to shut down. I would help them, OK, if you're going to take out another three, four, five hundred thousand, OK, fine. I'll give them severance pays and so forth, because the first three hundred thousand or two hundred fifty thousand got pretty good bonus packages.

I'm not out there hurt them, but I'm saying non-essential is non-essential. The federal government is too big. We don't need two million, two million civilian domestic big. We don't need 2 million, 2 million civilian domestic employees. We don't. This is the age of information revolution.

This is the AI age. If the private sector is downsizing for AI, why isn't the federal government downsizing for AI?

They're still human beings. And I wonder how it plays out in Virginia with the gubernatorial race there. How it works out for people who live near the nation's capital if all of a sudden there's Doge 2.2, the shutdown is in effect, and you see more government jobs being cut. I hear your point.

I just don't know how that goes down in terms of being more of the American people.

I would show heart. I'm a humanitarian. Okay. I have a heart. I would help them.

But when we're talking about who gets the blame for the shutdown, right now the blame is on the Democrats. That's easy. Does it shift when people start getting laid off, which is happening, and the paychecks

don't go out, which we'll see next week. You've got a guy, hang on a second, on Virginia, you've got a guy running on a Democratic ticket who's talking about killing people.

Jay Jones might be so upset about the shutdown, he'll threaten to put bullets in the heads

of other Republicans.

I was just going to say, this guy, right, killing his opponents, their kids.

And Spanberger, the Virginia Democratic gubernatorial candidate, was horrible on this. I heard she didn't say anything, she just froze up. Yeah she said oh it's the individual voters choice but she's still endorsing this guy she's running on a ticket with him. Is Chitorelli gonna win in

New Jersey if that's the Russian annunciation? Has a real shot. I'm bad in New York.

I live in New Jersey and the county I live in if you look up the voter records it's literally 50% Democrat 50% registered Republican and it feels like Chitarelli is gonna win where I live

Well, you need to vote more than once And Charles would you buy the stock market back after today's trade I'm looking my chops my man. Oh my god

I'm looking my chop some names. I either sold to earlier never owned. I'm like just a chops, my man. Oh my God, I'm licking my chops. Some names I either sold to earlier or never owned, I'm like, just a little bit more Monday morning.

The S&P is at 35% since the April lows.

I don't care, I love Charles.

It only went up, basically, so now the money can come in.

I love Charles' optimism. I love his insight. What was it, the memo that came around? press person said if you'd listen to Charles Payne how many years ago you'd have been up nine hundred percent in the S&P 500.

Oh wow, yeah, yes. Someone on the show. I forget who it was. I forget it.

I'm not going to say anything. You're paying attention though. Yes sir, you bet I am. Lawrence Simonetti, thank you very much. We appreciate it. We appreciate it.

Rich Lowry, Charles Payne.