Joe LaVorgna, SMBC's chief economist and a Treasury official in the first Trump administration, joined Squawk Box from the G20 finance ministers' meeting in Asheville, North Carolina. He argued that the September rate cuts of last year should be reversed, that the Treasury's bond buybacks are a market-plumbing tool rather than a favor to anyone, and that a rate rise is something a president could be talked into.
👤 Guest: Joe LaVorgna, SMBC chief economist and a former Treasury official under President Trump, speaking from the G20 meeting in Asheville, North Carolina
🎙️ Hosts: Joe Kernen, Becky Quick and Andrew Ross Sorkin, who anchor CNBC's Squawk Box
👥 Also on: Katie Kramer, the CNBC producer who assembles Squawk Pod
📰 Published: 31 August 2026 on YouTube (CNBC Television)
🔴 YouTube | 🟢 Spotify | 🟣 Apple Podcasts | ⏱️ 32 min
Key Takeaways
Secondary sanctions on Iran are an untried instrument, and he will not bet against the Treasury Secretary
"These secondary sanctions have really never been tried before, and they have the potential, I think, to be quite successful."
"He's a man of principle, and I'm not going to bet against him, Joe."
Hyperinflation, not diplomacy, is what he expects to move Tehran
Leadership generally does not hold its position through hyperinflation, he said, and Iran is in it
He would not be drawn on China, and reframed the question as what a G20 is for
"You got to have discussion and conversation that's largely what G20 is about."
His headline claim on the US economy, offered with an apology for it
"The US economy is booming."
"I know I sound too American on this, but I think we're the envy of the world at the moment"
Warsh's speech was hawkish and right, and the Fed should raise in September
"I thought it was incredibly hawkish and I thought spot-on, I believe Joe, the Fed will raise rates, the Fed needs to raise rates."
Rates have risen for the right reasons — real rates, on better growth expectations
Current-quarter growth could be near 5%, which is why last year's 75 basis points of cuts should come back
"It looks like third quarter growth, current quarter growth could be up near 5%."
The buybacks are a liquidity tool, and a Treasury Secretary's job is not a hedge fund manager's
Stan Druckenmiller is a money manager; "So therefore, his role is different than a hedge fund manager, which he clearly understands, having been one."
The program starts 9 September, but he said markets react in anticipation rather than on the day
The pitch he would make in the Oval Office is that raising the short rate lowers the long rate
"It's going to lower the risk premium on the long end, and we're going to get those long rates are actually going to fall."
Savers earn more on T-bills and bank deposits while it happens
On the November elections he counsels patience, and points at manufacturing
"There's clear acceleration in manufacturing activity."
He declined to comment on reporters being kept out of the G20
From the Sanctions Desk to the G20 Floor
Katie Kramer set the segment up as two US officials getting top billing to sell an American growth agenda and an inflation-fighting plan to the rest of the world — Treasury Secretary Scott Bessent and Fed Chair Kevin Warsh. Joe Kernen brought LaVorgna in from the meeting itself, noting Bessent had told the AP that the administration plans to impose sanctions on another bank this week as it intensifies its efforts to isolate Iran economically.
Kernen's question was blunt: does any of this reach the people who actually decide anything in Tehran, given that some of them appear not to care what their economy does?
The instrument is new, which is the whole of his case for it. "The Secretary just announced that about a week ago, secondary sanctions really have never been used before."
His confidence is in the person rather than the mechanism. "You know the Secretary a bit. He's a man of principle, and I'm not going to bet against him, Joe."
Kernen pushed back that Iran does not hold elections and that its leadership does not appear to mind its population suffering — so is there a breaking point for a society like that?
LaVorgna's answer was that inflation ends governments even where votes do not. "I mean, the thing is, if you look at it, I mean, society's, or leadership, I should say, generally doesn't maintain its position when you have inflation, hyperinflation, and that's what we're seeing in the Iranian economy from all the data that's available is that there's real struggle."
He asked for time. It has been a week, he said, the Secretary is working diligently, and "These secondary sanctions have really never been tried before, and they have the potential, I think, to be quite successful."
Asked Whether China Cooperates, He Answered With What a G20 Is For
Kernen's follow-up was whether the president can get anything out of President Xi on sanctioning Chinese banks. LaVorgna did not take the question on its terms.
He described the room instead. The Secretary has brought in finance ministers and senior policy officials from across the world alongside a lot of business leaders — "both large banks, small banks, community banks" — and, he said, it is all about discussion and trying to maximize good policies
He hoped the conversation with Beijing would be cooperative to the extent that two important countries can work together, and said he does not know where those conversations lead
"You got to have discussion and conversation that's largely what G20 is about." The point, he said, is policies that work for everybody and get growth moving
Then the line the podcast used to open the episode: "The US economy is booming."
"I know I sound too American on this, but I think we're the envy of the world at the moment, at least in terms of our numbers and what our trajectory is."
Kernen's reply: no such thing as too American
Warsh's Speech Was "Incredibly Hawkish," and the Fed Should Take Back Last Year's Cuts
Kernen asked whether Kevin Warsh is ready to follow through in September with actual rate rises, or whether he is hoping the data lets him do what Kernen called the Greenspan method — run a hot economy on the strength of AI productivity.
LaVorgna praised the speech at length and said he hoped to tell the Fed Chair so in person that day.
What was in it: money, credit and lending; wages downplayed as a long-term predictor of inflation; the inflation metrics; and a diffusion index looking at the breadth of inflation and which components are moving
His verdict, and his call: "I thought it was incredibly hawkish and I thought spot-on, I believe Joe, the Fed will raise rates, the Fed needs to raise rates. The economy is healthy."
He credited last year's tax bill with the underlying strength. The bill was passed with the Treasury Secretary's help, and LaVorgna said he looks at it as economically positive
The reason to reverse the cuts is that the reason for them has gone. Late last year the Fed cut 75 basis points because it was worried about the labor market
"It seems to me that given the outlook and rates have risen for the right reasons, it's real rates as expectations of growth have picked up."
"It looks like third quarter growth, current quarter growth could be up near 5%."
"If that's the case, we don't need those extra rate cuts last year."
The Bond Buybacks: a Plumbing Tool, Not a Trade
Sorkin asked him to weigh in on the argument over the Treasury Secretary's bond buybacks, and on what Stan Druckenmiller — the Secretary's mentor — has said about them.
LaVorgna's answer separated the two jobs. Druckenmiller is a money manager with strong views on how markets and government should work, and LaVorgna said he understands that
The Secretary's mandate is different. He runs the most important economy with the biggest, deepest, broadest capital markets and has to make sure the market functions properly
The buybacks are for liquidity, and the timing is the point. "And the buybacks are certainly a tool that is used to add liquidity in the market at a time of year when typically, Andrew, you've had a lot of volatility in markets."
"People are on vacation. They're away in August."
Sorkin pressed on the start date: the program does not begin until 9 September. LaVorgna agreed on the date and said it does not matter
"But markets are forward-looking. So in anticipation of the increased buyback, that's going to react now. It's not going to wait a few weeks."
To the extent buybacks slow the speed at which rates rise, he called that effective
The closing distinction was personal. The Secretary has to keep the markets liquid, lubricated and supplied with foreign demand, so "So therefore, his role is different than a hedge fund manager, which he clearly understands, having been one."
Reporters Kept Out of the G20: No Comment
Sorkin raised reports that specific reporters at Bloomberg, The Wall Street Journal and The New York Times had been prevented from covering the G20 by the Treasury Department, and asked whether LaVorgna supports that decision.
He declined, on the grounds that he had seen no evidence of it. "I mean, I read Bloomberg, I read The New York Times, they've been talking about G20"
"I don't have really any comment on that because I don't know."
The Pitch He Would Make in the Oval Office
Kernen asked whether LaVorgna would want to be Warsh — to walk into the Oval Office and tell the president that rates are going up in September — and whether the president could be talked into it. LaVorgna made the speech on air.
"I'm going to do it right now, Joe. I'm going to say, Mr. President, I'm going to raise interest rates, and I'm going to raise interest rates because I'm going to do a couple of things."
The first is the one that answers the political objection. "It's going to lower the risk premium on the long end, and we're going to get those long rates are actually going to fall."
The second is a transfer to savers. "At the same time, I'm going to be raising that short rate, which is going to put more money in people's bank accounts, their savings accounts, T-bills. They're going to earn more on a safe asset, and it's actually going to help the economy longer term."
He thought the message would land well with the president
Mortgage Rates, November, and Where He Would Counsel Patience
Becky Quick put the household cost question to him. Mortgage rates are higher, the Fed works at the short end rather than the long end, and the November elections are the backdrop to all of it — so is there anything that can or should be done around the elections, or does the president take the longer timeline?
LaVorgna took the longer timeline, and built the case on last year's tax bill.
The speed of the bill was itself unusual. It passed on 4 July, and outside a crisis, he said, the US Congress has never passed a bill that quickly
What it did: made tax changes permanent, reduced taxes on capital, and for a temporary period allowed full expensing for factories
He says it is already visible in the data. Across the various ISM and regional Fed surveys, "There's clear acceleration in manufacturing activity."
"We are seeing industrial production pick up, even outside of tech."
"Those are all wonderfully positive things that will lift productivity, lift wages, raise living standards, very much what we saw during the first Trump administration."
The lending channel is where he expects the next leg. Policy on the small and community bank side is where he expects it to show up: "That's going to get lending into small businesses, where sentiment has been improving."
His prescription for the campaign is messaging rather than policy. He would have people highlight that the US outlook is healthy and the growth outlook is good
He relayed Jamie Dimon on why that is available to both parties. "I listened to Jamie Dimon speak last night. He said growth is a bipartisan initiative. People left and right both agree on that."
That, he said, is what Bessent is trying to foster at the conference: where the global economies can work together in sync in ways that maximize efficiency and positive outcomes
A Golf Course, and No Clubs
Kernen closed on the scenery, telling LaVorgna he is not technically in the Great Smokies but that North Carolina looks like it.
"So fortunately, it's cloudy, Joe, and there's a golf course right over here. I should have brought my golf clubs, but it's beautiful."
Kernen's answer was the old line about golf: "That's a good walk spoiled."
LaVorgna's bottom line is that the September 2025 cuts were insurance against a labor-market scare that did not materialize, and that with growth running where he thinks it is running, the Fed should take them back — and that doing so would lower long rates rather than raise them, which is the argument he thinks wins the president over.
Products, Companies & Tools Mentioned
SMBC (LaVorgna's firm; he appears as its chief economist)
The US Treasury and the Federal Reserve (Scott Bessent's sanctions program and bond buybacks, and Kevin Warsh's rate decision, are the two halves of the segment)
The G20 (The Asheville finance ministers' meeting he is speaking from, which he describes as finance ministers, policy officials and business leaders trying to "maximize good policies")
JPMorgan Chase (Jamie Dimon, whom he heard speak the night before, on growth as "a bipartisan initiative")
Bloomberg, The Wall Street Journal and The New York Times (The three newsrooms whose reporters were said to have been kept from covering the G20 — a report he would not comment on)
The Associated Press (Where Bessent said the administration would sanction another bank this week)
Books & Resources Mentioned
Bessent, the Treasury General Account and the bond buybacks – CNBC (The buyback plan Sorkin asks him about, from the episode's own notes)
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