The Julia La Roche Show, Released on 5/3/25

In Episode 254 of The Julia La Roche Show, legendary economist Dr. Lacy Hunt, Chief Economist at Hoisington Investment Management, analyzes what he calls an economic “interregnum” where five convergent forces are aligning to depress growth. Dr. Hunt methodically explains how tariffs will ultimately prove deflationary rather than inflationary, why the Fed’s restrictive monetary policy is misplaced, how federal spending cuts are creating headwinds, why massive debt overhang limits policy effectiveness, and how changing demographics will impact long-term prospects. With over 56 years of experience and historical perspective dating back to the 1920s, Dr. Hunt delivers a sobering but authoritative prediction that recession lies ahead in 2025, describing it as “a long, difficult slog” rather than a brief downturn.

0:00 – Introduction and welcome
1:16 – “Interregnum” explanation
1:28 – Tariffs discussion begins
2:08 – Economic boost from tariff announcements
2:49 – Consumer buying ahead of tariffs
3:42 – Employment impact of demand surge
4:26 – Inventory accumulation
5:03 – Federal spending decline (FY 2025)
6:18 – Economy in frail condition
7:05 – Beverage ratio analysis
7:45 – Average hourly earnings indicator
8:11 – April’s wage growth weakness
9:30 – Late Easter timing challenges
10:31 – Recession prediction
10:58 – Five convergent economic factors
11:32 – Microeconomics of tariffs
12:55 – Price elasticity in international trade
14:31 – Historical context (1920s-1930s)
15:44 – French devaluation of 1925
17:43 – Smoot-Hawley tariff impact
19:45 – Chart explanation of M2 trend
21:03 – Tariffs’ impact on money supply
22:15 – Monetary policy restrictiveness
22:51 – Fed’s “data dependency” critique
25:31 – Other deposit liabilities explained
28:38 – Fed policy recommendations
29:37 – Tax cut potency limitations
31:16 – Fed’s need for longer-term view
32:08 – Forward guidance discussion
33:22 – Asset reallocation issues
35:48 – Net national savings analysis
37:39 – Birth rate economic connections
39:46 – Immigration discussion
42:52 – Recession confirmation
43:49 – Historical economists on debt
44:37 – Interest expense approaching defense spending
46:18 – US debt impacts (125% of GDP)
48:30 – Gross vs. net debt explanation
49:48 – Fisher equation for bond yields
53:00 – Tariffs’ deflationary nature
55:32 – High-tech sector growth analysis
56:38 – Aircraft sector growth unsustainability
57:11 – Federal spending outlook
1:00:03 – Need for tariff dispute resolution
1:01:18 – Closing remarks

Lacy Harris Hunt is an economist and Executive Vice President of Hoisington Investment Management Company (HIMCO). He is Vice-Chairman of HIMCO’s strategic investment policy committee and also Chief Economist for the Wasatch Hoisington Treasury Bond Fund. He has authored two books, A Time to Be Rich and Dynamics of Forecasting: Financial Cycles, Theory and Techniques, and has had articles published in Barron’s, The Wall Street Journal, The New York Times, The Journal of Finance, the Financial Analysts Journal, the Journal of Portfolio Management and other locations. He received the Abramson Award from the National Association for Business Economics for “outstanding contributions in the field of business economics.”

  economy, Lacy Hunt, tariffs