1 00:00:04,880 --> 00:00:08,200 Speaker 1: On this episode of News World, we're experiencing a record 2 00:00:08,280 --> 00:00:11,240 Speaker 1: high stock market. In fact, on Friday, the S and 3 00:00:11,280 --> 00:00:14,160 Speaker 1: P five hundred ended last week with a record high, 4 00:00:14,480 --> 00:00:18,680 Speaker 1: beating its previous record from January twenty twenty two. The 5 00:00:18,760 --> 00:00:22,640 Speaker 1: Dow Jones Industrial Average, which surpassed as twenty twenty two 6 00:00:22,640 --> 00:00:26,280 Speaker 1: peak last month, also closed at a new record Friday, 7 00:00:26,760 --> 00:00:30,440 Speaker 1: and according to Reuters on January eighteenth, the number of 8 00:00:30,480 --> 00:00:34,680 Speaker 1: Americans filing new claims for employment benefits fell last week 9 00:00:35,040 --> 00:00:38,560 Speaker 1: to the lowest level in nearly one and a half years, 10 00:00:38,600 --> 00:00:43,800 Speaker 1: suggesting job growth likely willmain solid in January, and very 11 00:00:43,840 --> 00:00:47,560 Speaker 1: strong retail sales growth in December during the holiday season 12 00:00:48,000 --> 00:00:52,520 Speaker 1: shows an upbeat picture of the economy. Yet, in poll 13 00:00:52,640 --> 00:00:56,640 Speaker 1: after poll, when you ask the average American what issue 14 00:00:56,680 --> 00:01:01,800 Speaker 1: concerns the most, they say inflation and the economy. The 15 00:01:01,920 --> 00:01:04,400 Speaker 1: reaction seems to be out of line with some of 16 00:01:04,440 --> 00:01:08,160 Speaker 1: the key economic indicators. However, I think it's important to 17 00:01:08,200 --> 00:01:11,880 Speaker 1: understand why people are feeling this way. Here to discuss 18 00:01:11,880 --> 00:01:14,360 Speaker 1: the state of our economy as we head into the 19 00:01:14,360 --> 00:01:17,919 Speaker 1: election season. I'm really pleased to welcome back my guest, 20 00:01:18,280 --> 00:01:22,000 Speaker 1: Thomas Hunnik. He's the former vice chairman of the Federal 21 00:01:22,000 --> 00:01:26,520 Speaker 1: Deposit Insurance Corporation, former President and CEO of the Federal 22 00:01:26,520 --> 00:01:29,279 Speaker 1: Reserve Bank of Kansas City. He is with the Federal 23 00:01:29,280 --> 00:01:33,400 Speaker 1: Reserve for thirty eight years. He is currently a Distinguished 24 00:01:33,680 --> 00:01:52,040 Speaker 1: Senior Fellow at the Mercada Center at George Mason University. Tom, welcome, 25 00:01:52,320 --> 00:01:54,600 Speaker 1: and thank you for joining me again on News World. 26 00:01:54,880 --> 00:01:57,440 Speaker 2: Well, thank you, Neil for having me and appreciate the 27 00:01:57,480 --> 00:02:01,200 Speaker 2: opportunity for this conversation. So I hope it's interesting and useful. 28 00:02:01,600 --> 00:02:03,800 Speaker 1: You know, I thought we'd just dive right in and 29 00:02:03,840 --> 00:02:06,280 Speaker 1: I wanted to get your reaction to why you think 30 00:02:06,600 --> 00:02:10,280 Speaker 1: we're hearing from American voters that inflation in the economy 31 00:02:10,680 --> 00:02:13,440 Speaker 1: is their top concern. What do you think is motivating 32 00:02:13,480 --> 00:02:14,200 Speaker 1: these feelings. 33 00:02:15,000 --> 00:02:17,760 Speaker 2: Well, I think there's several things, perhaps, but number one 34 00:02:17,880 --> 00:02:21,120 Speaker 2: is the American people know that the government is continuing 35 00:02:21,120 --> 00:02:24,480 Speaker 2: to spend enormous amounts of money. Even though we talk 36 00:02:24,560 --> 00:02:27,320 Speaker 2: about the concerns about the deficits and so forth, we're 37 00:02:27,360 --> 00:02:30,400 Speaker 2: still spending over six trillion dollars a year. They also 38 00:02:30,480 --> 00:02:33,560 Speaker 2: know that the interest on that debt is accelerating rapidly. 39 00:02:33,760 --> 00:02:36,240 Speaker 2: It was almost half of the increase in the debt 40 00:02:36,320 --> 00:02:39,720 Speaker 2: this last year, so that's number one. Number two. They 41 00:02:39,760 --> 00:02:43,080 Speaker 2: know that the debt itself has grown from a decade 42 00:02:43,120 --> 00:02:46,080 Speaker 2: ago about ten trillion to thirty four trillion dollars today. 43 00:02:46,120 --> 00:02:48,880 Speaker 2: They know that's got to have an impact at some point, 44 00:02:49,360 --> 00:02:51,480 Speaker 2: and I think those are a couple of things. I 45 00:02:51,480 --> 00:02:53,800 Speaker 2: think the reason though, that the market continues to do 46 00:02:53,880 --> 00:02:56,520 Speaker 2: well is there remains a lot of liquidity from that 47 00:02:56,560 --> 00:03:00,440 Speaker 2: government spending and from the FED. Its balance sheet, which 48 00:03:00,480 --> 00:03:03,200 Speaker 2: people thought was great at nine trillion dollars, is still 49 00:03:03,240 --> 00:03:07,160 Speaker 2: seven point seven trillion dollars. There's enormous numbers of reserves, 50 00:03:07,240 --> 00:03:09,680 Speaker 2: well over three and a half tree in reserves still 51 00:03:09,720 --> 00:03:12,359 Speaker 2: in the banking industry. That's down from four and a 52 00:03:12,360 --> 00:03:15,400 Speaker 2: half tree in, but still well above its historic norm. 53 00:03:15,880 --> 00:03:19,239 Speaker 2: There's a lot of concern about inflation because of those events. 54 00:03:19,680 --> 00:03:23,160 Speaker 2: And at the same time, even though the unemployment rate 55 00:03:23,280 --> 00:03:26,200 Speaker 2: is low and the job's claims were low, there's still 56 00:03:26,240 --> 00:03:29,440 Speaker 2: a lot of uncertainty about jobs in the future. The 57 00:03:29,520 --> 00:03:34,160 Speaker 2: retail sales were strong, but they are concerned that was 58 00:03:34,160 --> 00:03:37,400 Speaker 2: carried a lot by increase in leverage, either by reducing 59 00:03:37,480 --> 00:03:40,600 Speaker 2: savings that were there, but mostly by using your credit cards. 60 00:03:40,600 --> 00:03:43,360 Speaker 2: That weren't there. And so with all this turmoil and 61 00:03:43,400 --> 00:03:48,240 Speaker 2: all these conflicting events and the consumer's ability to spend, 62 00:03:48,320 --> 00:03:51,360 Speaker 2: I think people are more uncertain about the future and 63 00:03:51,400 --> 00:03:55,080 Speaker 2: therefore concerned about inflation and concerned about the economy. 64 00:03:55,160 --> 00:03:59,360 Speaker 1: Given your extraordinary experience, when you look at what's going on, 65 00:03:59,440 --> 00:04:02,960 Speaker 1: do you find yourself thinking that this may be a 66 00:04:03,040 --> 00:04:08,520 Speaker 1: period of instability where we actually don't quite know what's coming. 67 00:04:09,360 --> 00:04:11,560 Speaker 2: I think it's very much that. I think there is 68 00:04:11,600 --> 00:04:15,760 Speaker 2: more uncertainty than normal because of all these conflicting all 69 00:04:15,760 --> 00:04:18,520 Speaker 2: this conflicting information for the consumer to try and deal with. 70 00:04:18,640 --> 00:04:22,560 Speaker 2: And remember when you look at other factors, like industrial 71 00:04:22,600 --> 00:04:26,200 Speaker 2: production has moderated its one percent increase year over year 72 00:04:26,480 --> 00:04:30,120 Speaker 2: this last year. That's not a precursor of a strong economy. 73 00:04:30,160 --> 00:04:33,320 Speaker 2: That's a precursor of a slowing economy. And people see that, 74 00:04:33,400 --> 00:04:35,520 Speaker 2: so are they going to have those jobs next year? 75 00:04:35,920 --> 00:04:38,440 Speaker 2: And there's more and more discussion. I'm afraid about the 76 00:04:38,480 --> 00:04:41,680 Speaker 2: fact that people are being laid off, it's taking longer 77 00:04:41,680 --> 00:04:44,680 Speaker 2: to find a new job. The number of job openings 78 00:04:44,720 --> 00:04:49,480 Speaker 2: to job seekers is slowly coming down. That difference, so 79 00:04:49,760 --> 00:04:52,240 Speaker 2: if you're out there and you're entering the workforce, or 80 00:04:52,279 --> 00:04:54,960 Speaker 2: you've been recently laid off. You're not as optimistic as 81 00:04:54,960 --> 00:04:59,320 Speaker 2: you were before, and you're anticipating a less shall we say, 82 00:04:59,560 --> 00:05:02,960 Speaker 2: exciting in future as far as the economy goes from. 83 00:05:02,760 --> 00:05:06,440 Speaker 1: Your perspective, Can we continue to add the scale of 84 00:05:06,480 --> 00:05:08,880 Speaker 1: debt that we're adding right now? I mean, just to 85 00:05:08,920 --> 00:05:12,279 Speaker 1: share interest on the debt is beginning to itself be 86 00:05:12,360 --> 00:05:15,960 Speaker 1: a factor in increasing the debt. We're not anywhere close 87 00:05:16,000 --> 00:05:20,240 Speaker 1: to getting control both on spending. If interest go back 88 00:05:20,320 --> 00:05:23,080 Speaker 1: up as the largest borrower in the world, the US 89 00:05:23,160 --> 00:05:25,440 Speaker 1: government will have a horrendous debt. 90 00:05:26,080 --> 00:05:28,000 Speaker 2: Let me say, the way we are right now, the 91 00:05:28,040 --> 00:05:30,360 Speaker 2: government will not be able to pay this debt back, 92 00:05:30,760 --> 00:05:34,080 Speaker 2: and I think that's becoming more and more apparent. Number One, 93 00:05:34,279 --> 00:05:35,919 Speaker 2: the way you get out of something like that is 94 00:05:35,920 --> 00:05:38,840 Speaker 2: through inflation. You devalue the value of the dollar that 95 00:05:38,880 --> 00:05:41,120 Speaker 2: you have to pay back, so that eases it for 96 00:05:41,160 --> 00:05:44,480 Speaker 2: the government. Number one. Number Two, the government is not 97 00:05:44,520 --> 00:05:46,720 Speaker 2: slowly as spending. I mean, this is an election year 98 00:05:46,800 --> 00:05:49,920 Speaker 2: and both parties one talking about increasing spending, the other 99 00:05:50,120 --> 00:05:53,839 Speaker 2: reducing taxes, and their compromises will do both, and I 100 00:05:53,880 --> 00:05:57,520 Speaker 2: think that worries the consumer, the public about what the 101 00:05:57,560 --> 00:06:01,400 Speaker 2: future holds then for the national debt and the burden 102 00:06:01,440 --> 00:06:03,960 Speaker 2: that that brings forward into the future, that is a 103 00:06:03,960 --> 00:06:06,920 Speaker 2: big factor for them. And if you are looking at 104 00:06:07,080 --> 00:06:11,400 Speaker 2: even what the Congressional Budget Office shows with an increase 105 00:06:11,400 --> 00:06:13,920 Speaker 2: in debt over the next decade of over twenty trillion 106 00:06:14,000 --> 00:06:17,640 Speaker 2: dollars and because of that, the interest on the debt 107 00:06:17,680 --> 00:06:20,920 Speaker 2: becoming almost three and a half percent of our national income, 108 00:06:21,440 --> 00:06:25,120 Speaker 2: are total deficit seven percent of national income. Those are 109 00:06:25,560 --> 00:06:29,080 Speaker 2: scary numbers. And when people think about that, they say, well, 110 00:06:29,120 --> 00:06:31,520 Speaker 2: how is this going to end? And they worry about 111 00:06:31,600 --> 00:06:34,320 Speaker 2: inflation coming down the right now. The other important point 112 00:06:34,320 --> 00:06:37,560 Speaker 2: of that is even the Congressional Budget Office is projecting 113 00:06:37,600 --> 00:06:41,120 Speaker 2: that our long term growth rate, which has been around 114 00:06:41,120 --> 00:06:44,560 Speaker 2: two point three percent, is projected to faull to one 115 00:06:44,560 --> 00:06:48,479 Speaker 2: point eight percent. Well in real terms in terms of 116 00:06:48,520 --> 00:06:52,080 Speaker 2: real wealth, that means a reduction in what we could 117 00:06:52,120 --> 00:06:55,000 Speaker 2: have had in terms of real GDP growth of over 118 00:06:55,040 --> 00:06:58,200 Speaker 2: a trillion dollars less in ten years than what we 119 00:06:58,200 --> 00:06:59,480 Speaker 2: would have had if it could have stayed of the 120 00:06:59,520 --> 00:07:02,479 Speaker 2: two point tis three percent growth rate. And the reason 121 00:07:02,520 --> 00:07:04,920 Speaker 2: that growth rate is being projected down from two point 122 00:07:04,960 --> 00:07:07,800 Speaker 2: three to one point eight is because of the heavy 123 00:07:07,960 --> 00:07:11,280 Speaker 2: carrying costs of the national debt and the effects that 124 00:07:11,400 --> 00:07:15,440 Speaker 2: have on crowding out investment as it moves from the 125 00:07:15,520 --> 00:07:18,480 Speaker 2: private sector into the public sector to pay for that 126 00:07:18,760 --> 00:07:21,640 Speaker 2: new increase in spending or continued to increases in spending. 127 00:07:22,120 --> 00:07:26,160 Speaker 2: So people are watching that, they're reading about that, and 128 00:07:26,320 --> 00:07:29,280 Speaker 2: I give them credit. They're thinking about what the implications 129 00:07:29,280 --> 00:07:32,600 Speaker 2: of that are, and they are uncertain and worry. So 130 00:07:32,800 --> 00:07:35,720 Speaker 2: the spinning has to come down, and the FEDS willingness 131 00:07:36,120 --> 00:07:39,840 Speaker 2: to monetize that debt has to stop, and we bring 132 00:07:39,880 --> 00:07:43,080 Speaker 2: discipline to our fiscal side, so that allows the private 133 00:07:43,120 --> 00:07:46,760 Speaker 2: sector to retain more of that, more of our investment 134 00:07:46,760 --> 00:07:51,600 Speaker 2: fund more of our savings for new products, new investments, 135 00:07:51,600 --> 00:07:55,520 Speaker 2: and new ideas and new technology. I tell people that 136 00:07:55,840 --> 00:07:59,400 Speaker 2: to be a great athlete requires, first of all, discipline. 137 00:08:00,080 --> 00:08:03,240 Speaker 2: You could use your talents best same thing for a country. 138 00:08:03,360 --> 00:08:08,720 Speaker 2: We cannot just wildly spend on everything. We have to prioritize, 139 00:08:08,960 --> 00:08:12,800 Speaker 2: bring our spending and our revenues into balance, and allow 140 00:08:12,800 --> 00:08:17,240 Speaker 2: our private sector to produce and bring greater productivity, bringing 141 00:08:17,240 --> 00:08:20,080 Speaker 2: those numbers back up from one point eight percent back 142 00:08:20,080 --> 00:08:23,640 Speaker 2: above two point three percent. So the future generations live 143 00:08:23,680 --> 00:08:26,320 Speaker 2: as well as our current and past generations. 144 00:08:26,520 --> 00:08:30,280 Speaker 1: Larry Kudlow keeps pointing out there's actually a long stretch 145 00:08:30,360 --> 00:08:33,160 Speaker 1: after World War Two where we were averaging around three 146 00:08:33,280 --> 00:08:36,040 Speaker 1: or three and a half percent real growth. And it 147 00:08:36,080 --> 00:08:38,120 Speaker 1: seems to me that if you set that as your goal, 148 00:08:38,160 --> 00:08:40,120 Speaker 1: and you said, Okay, what do I have to do 149 00:08:40,160 --> 00:08:42,640 Speaker 1: with deregulation, what I have to do with tax policy, 150 00:08:43,000 --> 00:08:45,240 Speaker 1: what do I have to do with controlling spending? And 151 00:08:45,360 --> 00:08:48,000 Speaker 1: with certain kind of social reforms. I mean, when we 152 00:08:48,400 --> 00:08:53,280 Speaker 1: passed a workfare replacement for traditional welfare, we had a 153 00:08:53,480 --> 00:08:57,800 Speaker 1: huge impact both on the quality of life. When Clinton 154 00:08:57,880 --> 00:09:02,560 Speaker 1: signed that, it was bipartisan, a really tough negotiation. By 155 00:09:02,640 --> 00:09:06,440 Speaker 1: insisting on work, parents' incomes went up. It was the 156 00:09:06,480 --> 00:09:09,960 Speaker 1: biggest increase in children leaving poverty of any act in 157 00:09:10,000 --> 00:09:13,559 Speaker 1: American history. It dramatically helped the states, which we had 158 00:09:13,600 --> 00:09:16,560 Speaker 1: frankly not calculated on because it took all these people 159 00:09:16,559 --> 00:09:20,640 Speaker 1: off Medicaid, off welfare, put them out paying taxes, earning 160 00:09:20,679 --> 00:09:23,320 Speaker 1: a living. You know, those kind of changes. If we 161 00:09:23,360 --> 00:09:26,160 Speaker 1: could get a Congress and a president to work together 162 00:09:26,800 --> 00:09:31,560 Speaker 1: and have that kind of a growth focus, opportunity focused future, 163 00:09:32,160 --> 00:09:35,120 Speaker 1: it could have I think could turn around the system 164 00:09:35,840 --> 00:09:39,760 Speaker 1: remarkably fast. When we campaigned, we thought we could balance 165 00:09:39,760 --> 00:09:42,440 Speaker 1: the budget in seven years. And when we made the 166 00:09:42,440 --> 00:09:45,520 Speaker 1: decision that we were going to balance the budget, John Kasek, 167 00:09:45,559 --> 00:09:48,440 Speaker 1: who was our budget committee chairman, came in and said, guys, 168 00:09:48,920 --> 00:09:52,040 Speaker 1: you know this is really going to be very very hard. Well, 169 00:09:52,080 --> 00:09:54,920 Speaker 1: how about if we have ten years, and as a 170 00:09:55,000 --> 00:09:58,079 Speaker 1: leadership group, we all voted. Everybody who was not responsible 171 00:09:58,160 --> 00:10:02,120 Speaker 1: voted for seven. John was himself. The next week we 172 00:10:02,200 --> 00:10:04,920 Speaker 1: gave him a marble plaque for his desk that said 173 00:10:04,960 --> 00:10:08,800 Speaker 1: balance budgets seven years. But the amazing thing was, once 174 00:10:08,840 --> 00:10:12,520 Speaker 1: we turned the corner, we balance the budget in four years, 175 00:10:13,040 --> 00:10:16,000 Speaker 1: because the momentum gets to be so enormous. 176 00:10:16,200 --> 00:10:18,120 Speaker 2: I totally agree with that. If we make up our 177 00:10:18,120 --> 00:10:21,600 Speaker 2: minds to do that, we have the wherewithal. But part 178 00:10:21,600 --> 00:10:25,400 Speaker 2: of the two is over the pandemic. We transferred from 179 00:10:25,400 --> 00:10:29,080 Speaker 2: the government and transfer payments enormous sums of money that 180 00:10:29,280 --> 00:10:34,720 Speaker 2: deemphasized work and de emphasized productivity to take care of things. 181 00:10:34,760 --> 00:10:37,080 Speaker 2: I understand the immediate effects of the pandemic, and I 182 00:10:37,160 --> 00:10:40,080 Speaker 2: think I understand the important but to continue that for 183 00:10:40,120 --> 00:10:44,640 Speaker 2: such a long period actually worsened our debt problem reduced 184 00:10:44,760 --> 00:10:47,400 Speaker 2: our willingness to work and therefore our productivity, and we 185 00:10:47,480 --> 00:10:50,240 Speaker 2: pay the price for that. So if we now decide, 186 00:10:50,280 --> 00:10:53,520 Speaker 2: as we did with your bipartisan effort, to say, wait 187 00:10:53,520 --> 00:10:55,760 Speaker 2: a minute, we can't do that anymore. We have to 188 00:10:55,800 --> 00:10:58,880 Speaker 2: reduce our spending, We have to watch our tax burden. 189 00:10:59,240 --> 00:11:02,120 Speaker 2: We have to allow people the freedom to innovate. And 190 00:11:02,160 --> 00:11:05,360 Speaker 2: that's the regulatory burden issue here, which is big, I 191 00:11:05,400 --> 00:11:08,600 Speaker 2: can tell you, and then you can become productive and 192 00:11:08,640 --> 00:11:11,440 Speaker 2: we will take care of this problem over I don't 193 00:11:11,440 --> 00:11:13,920 Speaker 2: know how many years, but I think again, faster than 194 00:11:13,920 --> 00:11:16,960 Speaker 2: what people otherwise would think. But if we continue down 195 00:11:17,000 --> 00:11:19,400 Speaker 2: the road we have been on, then this will only 196 00:11:19,480 --> 00:11:22,240 Speaker 2: multiply and become worse until we have a crisis. And 197 00:11:22,280 --> 00:11:24,960 Speaker 2: when I say crisis, I don't mean necessarily an immediate 198 00:11:25,360 --> 00:11:28,600 Speaker 2: everything collapses, but what I call a death by a 199 00:11:28,640 --> 00:11:32,679 Speaker 2: thousand cuts of slower and slower productivity. That reduces your 200 00:11:32,720 --> 00:11:36,600 Speaker 2: ability to invest and innovate and increase productivity. And that's 201 00:11:36,640 --> 00:11:39,480 Speaker 2: what we have to avoid. But it takes determination to 202 00:11:39,520 --> 00:11:42,120 Speaker 2: do that. One other thing I've got to point out 203 00:11:42,160 --> 00:11:45,000 Speaker 2: is because we put this enormous regulatory burdens on the 204 00:11:45,000 --> 00:11:47,599 Speaker 2: banking astry, which I was a part of as a supervisor. 205 00:11:48,160 --> 00:11:51,959 Speaker 2: We bring those costs way up. And a major cause 206 00:11:52,240 --> 00:11:56,319 Speaker 2: of one banking crisis after another is not necessarily the 207 00:11:56,360 --> 00:11:59,559 Speaker 2: behavior of banks as an industry, but by the very 208 00:12:00,040 --> 00:12:04,360 Speaker 2: dancial accommodative monetary policies that lead to inflation of assets, 209 00:12:04,760 --> 00:12:07,120 Speaker 2: both in the seventies and eighties and then in the 210 00:12:07,240 --> 00:12:10,920 Speaker 2: two thousands, and then following the pandemic that then has 211 00:12:10,960 --> 00:12:15,240 Speaker 2: to be corrected, and that puts deflationary pressures on asset values, 212 00:12:15,360 --> 00:12:17,840 Speaker 2: brings the economy even down further, and you have to 213 00:12:17,840 --> 00:12:21,679 Speaker 2: get through that transition. So the sooner we address the problems, 214 00:12:22,000 --> 00:12:25,120 Speaker 2: bring the balance back, the budget back into balance, and 215 00:12:25,520 --> 00:12:28,480 Speaker 2: reduce these burdens, the more productive our economy will be 216 00:12:28,800 --> 00:12:31,640 Speaker 2: and the faster we will turn this thing around. And 217 00:12:31,679 --> 00:12:34,959 Speaker 2: I really implore the Congress and the executive branch to 218 00:12:34,960 --> 00:12:38,040 Speaker 2: get together on this, or else I think we will 219 00:12:38,280 --> 00:12:41,360 Speaker 2: slowly reduce our productivity and our wealth as a nation. 220 00:12:58,880 --> 00:13:03,719 Speaker 1: We did a podcast back with somebody who had studied 221 00:13:04,600 --> 00:13:09,600 Speaker 1: the very sharp depression of nineteen twenty twenty one, and 222 00:13:10,800 --> 00:13:15,439 Speaker 1: there were no efforts to ameliorate the problem. People just said, 223 00:13:15,840 --> 00:13:19,160 Speaker 1: coming out of World War One, we've had gross over spending, 224 00:13:19,600 --> 00:13:22,760 Speaker 1: prices are way too high, and they bit the bullet 225 00:13:22,800 --> 00:13:27,600 Speaker 1: within eighteen months, but an enormous pain they had, nonetheless 226 00:13:28,040 --> 00:13:31,320 Speaker 1: righted the economy and it grew for the next eight years. 227 00:13:31,720 --> 00:13:35,000 Speaker 2: Right, I'm familiar with that history. I think it's absolutely correct. 228 00:13:35,400 --> 00:13:39,120 Speaker 2: And remember this even with Voker when he shut down 229 00:13:39,120 --> 00:13:42,280 Speaker 2: the economy because he said, enough of this fourteen percent inflation, 230 00:13:42,320 --> 00:13:44,200 Speaker 2: We've got to take care of it. We went through 231 00:13:44,240 --> 00:13:48,400 Speaker 2: some really painful times, but after that growth picked up immediately, 232 00:13:48,720 --> 00:13:51,040 Speaker 2: and I think we're on the way then to find 233 00:13:51,280 --> 00:13:55,240 Speaker 2: the solutions that then your Congress and Clinton did at 234 00:13:55,280 --> 00:13:58,439 Speaker 2: that time to again address the budget and bring our 235 00:13:58,480 --> 00:14:02,360 Speaker 2: debt back into balance, and our economy grew very significantly. 236 00:14:02,679 --> 00:14:05,120 Speaker 2: So I mean, the history is there to show that 237 00:14:05,240 --> 00:14:08,079 Speaker 2: this is the better way to go. But right now 238 00:14:08,120 --> 00:14:11,440 Speaker 2: we're not taking that path. We're still spending enormous amounts 239 00:14:11,480 --> 00:14:14,520 Speaker 2: of money. The Federal Reserve, who has said they're put 240 00:14:14,520 --> 00:14:18,080 Speaker 2: a hold on increasing their balance sat. They are under 241 00:14:18,120 --> 00:14:19,800 Speaker 2: a lot of pressure now and they'll be under more 242 00:14:19,840 --> 00:14:22,480 Speaker 2: pressure this year to ease. All you hear about now 243 00:14:22,600 --> 00:14:25,440 Speaker 2: is it's time to bring the interest rates back down. 244 00:14:25,600 --> 00:14:28,880 Speaker 2: And yet we're still what appears to be a booming 245 00:14:28,920 --> 00:14:32,160 Speaker 2: stock market. I'm not sure the timing is right for that, 246 00:14:32,240 --> 00:14:34,840 Speaker 2: given all that we have yet to address in terms 247 00:14:34,880 --> 00:14:38,880 Speaker 2: of our debt, our deficit, and our economy going forward, I. 248 00:14:38,840 --> 00:14:42,200 Speaker 1: Have to plead guilty a little bit. Time was living 249 00:14:42,280 --> 00:14:44,840 Speaker 1: in Rome close to was the ambassador of the Vatican 250 00:14:45,520 --> 00:14:48,600 Speaker 1: when COVID broke out, and COVID originally broke out in 251 00:14:48,680 --> 00:14:52,040 Speaker 1: northern Italy because there were about one hundred thousand Chinese 252 00:14:52,120 --> 00:14:56,480 Speaker 1: workers in northern Italy and they came back from Chinese 253 00:14:56,760 --> 00:14:59,520 Speaker 1: New Year, and what I think was almost a deliberate 254 00:14:59,560 --> 00:15:03,080 Speaker 1: strategy by the Chinese government. They wouldn't let him fly 255 00:15:03,200 --> 00:15:05,800 Speaker 1: to other places in China, but they could fly to 256 00:15:05,880 --> 00:15:10,440 Speaker 1: foreign countries. So you had this enormous impact. Very early 257 00:15:10,480 --> 00:15:14,440 Speaker 1: Italy was sort of the forerunner of the pandemic. Watching 258 00:15:14,480 --> 00:15:16,920 Speaker 1: what was going on, I wrote a memo for the 259 00:15:16,960 --> 00:15:20,720 Speaker 1: administration and said, whatever you plan to spend, triple it 260 00:15:21,240 --> 00:15:25,520 Speaker 1: because you're going to have such a sharp pandemic response 261 00:15:26,080 --> 00:15:29,240 Speaker 1: that you're going to face a very very steep economic 262 00:15:29,280 --> 00:15:32,960 Speaker 1: problem unless you intervene. But I think your point which 263 00:15:33,040 --> 00:15:35,080 Speaker 1: was I still think that was the right memo. At 264 00:15:35,120 --> 00:15:38,040 Speaker 1: the time, but it assumed that when that was over, 265 00:15:38,120 --> 00:15:40,800 Speaker 1: we'd quit doing it, not that it was established a 266 00:15:40,800 --> 00:15:43,360 Speaker 1: new sort of plateau for additional spending. 267 00:15:44,040 --> 00:15:46,360 Speaker 2: And that's been my point all along, the same thing. 268 00:15:46,400 --> 00:15:49,240 Speaker 2: After the Great Financial Crisis in third quarter of two 269 00:15:49,280 --> 00:15:52,840 Speaker 2: thousand and nine and twenty ten, economy was recovering, and 270 00:15:52,920 --> 00:15:56,920 Speaker 2: yet we decided to print more money, and the debt 271 00:15:57,160 --> 00:16:01,320 Speaker 2: continued to grow in the pandemic means kind of moving 272 00:16:01,400 --> 00:16:04,840 Speaker 2: back by August of twenty twenty, and yet we kept 273 00:16:04,960 --> 00:16:09,040 Speaker 2: this enormous spinning, this normous support system in place until 274 00:16:09,160 --> 00:16:13,320 Speaker 2: March of twenty twenty two, way past when its usefulness 275 00:16:13,600 --> 00:16:16,240 Speaker 2: was kind of behind them and now was going to 276 00:16:16,280 --> 00:16:20,560 Speaker 2: cause us inflationary problems, and it did and misallocate resources 277 00:16:20,600 --> 00:16:23,440 Speaker 2: and it did. And so it's not that the government 278 00:16:23,440 --> 00:16:27,160 Speaker 2: shouldn't intervene in a crisis. It's when to step away 279 00:16:27,160 --> 00:16:29,960 Speaker 2: from that and let the market and the private sector 280 00:16:30,480 --> 00:16:33,600 Speaker 2: re emerge as the driving force for the economy. And 281 00:16:33,640 --> 00:16:36,080 Speaker 2: by waiting too long and moving all those resources into 282 00:16:36,120 --> 00:16:38,840 Speaker 2: the government, it's very difficult to get them back out. 283 00:16:39,040 --> 00:16:42,000 Speaker 2: And that's really the painful part that we have yet 284 00:16:42,000 --> 00:16:42,400 Speaker 2: to face. 285 00:16:42,680 --> 00:16:45,440 Speaker 1: One of the consequences of that amount of liquidity. And 286 00:16:45,520 --> 00:16:48,040 Speaker 1: I kept trying to tell people over the last year 287 00:16:48,080 --> 00:16:49,760 Speaker 1: and a half. The one of the challenges the FED 288 00:16:49,800 --> 00:16:53,640 Speaker 1: faces is the Fed's primary tool is interest rates, and 289 00:16:53,680 --> 00:16:56,480 Speaker 1: the primary impact of interest rates is on the private sector. 290 00:16:56,880 --> 00:16:59,920 Speaker 1: But if the Congress and the President are insisting on 291 00:17:00,040 --> 00:17:02,760 Speaker 1: spending more money at the very time that the Fed's 292 00:17:02,760 --> 00:17:05,600 Speaker 1: trying to slow the economy, it sort of erases the 293 00:17:05,640 --> 00:17:09,640 Speaker 1: effect and makes it much harder to bring things under control. 294 00:17:10,160 --> 00:17:13,000 Speaker 1: And what I was struck with is does people ask 295 00:17:13,040 --> 00:17:16,480 Speaker 1: these questions about, well, if the inflation rate's coming down, 296 00:17:16,800 --> 00:17:19,080 Speaker 1: you know, why don't people feel better? But I think 297 00:17:19,119 --> 00:17:22,359 Speaker 1: people have a memory of what it was like around 298 00:17:22,400 --> 00:17:25,720 Speaker 1: twenty nineteen or twenty twenty. I know Clisso went to 299 00:17:25,760 --> 00:17:29,280 Speaker 1: the store last night to pick up Hamburger to make spaghetti, 300 00:17:29,760 --> 00:17:32,240 Speaker 1: and she came back and she said, you know, this 301 00:17:32,320 --> 00:17:35,240 Speaker 1: is at least double the price I used to pay. 302 00:17:36,119 --> 00:17:40,080 Speaker 1: And so even though technically this month's inflation rate may 303 00:17:40,080 --> 00:17:44,600 Speaker 1: be down, the cumulative effect and something which Dave Winston 304 00:17:44,640 --> 00:17:46,800 Speaker 1: at the Winston Group has come up with as a 305 00:17:46,880 --> 00:17:51,320 Speaker 1: presidential inflation rate, where you measure from the inaugural through 306 00:17:51,359 --> 00:17:55,080 Speaker 1: the entire term and Biden is now I think, surpassing 307 00:17:55,160 --> 00:17:59,560 Speaker 1: Carter in a presidential inflation rate. And what people feel 308 00:17:59,640 --> 00:18:03,960 Speaker 1: is not this month's inflation number, but the total cumulative 309 00:18:04,000 --> 00:18:07,160 Speaker 1: weight of what's happened to their pocket book. I mean, 310 00:18:07,160 --> 00:18:08,199 Speaker 1: does that make sense to you? 311 00:18:09,480 --> 00:18:13,600 Speaker 2: Absolutely makes sense. I've talked to people frequently who say, yes, 312 00:18:13,680 --> 00:18:17,159 Speaker 2: I understand inflation three percent, but since it started, my 313 00:18:17,320 --> 00:18:20,440 Speaker 2: cost of food, how much I've spent in prepares of 314 00:18:20,520 --> 00:18:23,760 Speaker 2: my home, how much I've spent on just entertainment, they 315 00:18:23,800 --> 00:18:26,960 Speaker 2: are so much higher. And yes, that's why I think 316 00:18:27,200 --> 00:18:30,400 Speaker 2: why you see some of these labor unrest and their 317 00:18:30,440 --> 00:18:34,080 Speaker 2: insistence on getting higher wages because they're falling so far behind, 318 00:18:34,320 --> 00:18:37,240 Speaker 2: and that leads to social unrest and challenges. So those 319 00:18:37,280 --> 00:18:39,800 Speaker 2: are real things. And here's the other fact that I 320 00:18:39,800 --> 00:18:44,360 Speaker 2: think is very important. When you increase the debt, one 321 00:18:44,359 --> 00:18:47,640 Speaker 2: thing you know is the government might complain about how 322 00:18:47,720 --> 00:18:51,679 Speaker 2: high interest rates are, but they always fund themselves no 323 00:18:51,680 --> 00:18:55,680 Speaker 2: matter what the interest rate is. The private sector not 324 00:18:55,720 --> 00:18:58,200 Speaker 2: only has to complain about it, but it rations them 325 00:18:58,240 --> 00:19:02,360 Speaker 2: out because they can't make investments pay at increasingly higher 326 00:19:02,720 --> 00:19:05,720 Speaker 2: interest rates. And the longer they stay that high, the 327 00:19:05,760 --> 00:19:08,680 Speaker 2: more difficult it is for them to invest and reinvest, 328 00:19:08,720 --> 00:19:11,320 Speaker 2: and that's why I think you're seeing industrial production at 329 00:19:11,600 --> 00:19:15,280 Speaker 2: moderate increase at best one percent, and productivity will over 330 00:19:15,320 --> 00:19:17,840 Speaker 2: time not pick up as much as we would like. 331 00:19:18,240 --> 00:19:20,840 Speaker 2: And that's what we have to be concerned about. We 332 00:19:21,040 --> 00:19:24,000 Speaker 2: ration out the private sector that it makes it harder 333 00:19:24,040 --> 00:19:26,640 Speaker 2: for the worker, and as they see inflation go, they 334 00:19:26,680 --> 00:19:30,400 Speaker 2: become more and more resentful of what is happening in 335 00:19:30,400 --> 00:19:33,440 Speaker 2: this country. And that's what makes for an unstable environment. 336 00:19:33,960 --> 00:19:37,680 Speaker 1: If you are telling the auto industry that it has 337 00:19:37,720 --> 00:19:40,399 Speaker 1: to make cars no one wants to buy, which I 338 00:19:40,400 --> 00:19:42,879 Speaker 1: always startled. The other day there was a poll that 339 00:19:43,000 --> 00:19:46,359 Speaker 1: said that six percent of the American people want to 340 00:19:46,400 --> 00:19:50,159 Speaker 1: buy electric vehicles, and the government wants it to be 341 00:19:50,200 --> 00:19:53,000 Speaker 1: one hundred percent. I don't think you can socially engineer, 342 00:19:53,040 --> 00:19:56,560 Speaker 1: in a free society a transition on that scale. So 343 00:19:56,640 --> 00:19:59,479 Speaker 1: you have downward pressures in terms of things that are 344 00:19:59,480 --> 00:20:01,679 Speaker 1: happening in the market. But let me go back just 345 00:20:01,680 --> 00:20:05,080 Speaker 1: for a second to the sort of Reagan era very 346 00:20:05,160 --> 00:20:07,200 Speaker 1: rapid growth, which we also achieved towards the end of 347 00:20:07,240 --> 00:20:10,360 Speaker 1: the Clinton years. If we got to three or three 348 00:20:10,359 --> 00:20:13,359 Speaker 1: and a half percent growth and sustained it for a 349 00:20:13,400 --> 00:20:16,639 Speaker 1: decade or more. Wouldn't that have a huge impact on 350 00:20:16,840 --> 00:20:19,320 Speaker 1: the viability of social security and medicare? 351 00:20:19,960 --> 00:20:22,600 Speaker 2: It certainly would, but we still have a problem there 352 00:20:22,640 --> 00:20:26,320 Speaker 2: because it's growing so much faster. To really address the debt, 353 00:20:26,680 --> 00:20:29,919 Speaker 2: I'm afraid you have to put those kinds of entitlements 354 00:20:30,080 --> 00:20:34,600 Speaker 2: at least up for consideration to moderate their future growth. 355 00:20:35,000 --> 00:20:38,359 Speaker 2: Not necessarily cut as people are concerned about, but moderate 356 00:20:38,400 --> 00:20:41,159 Speaker 2: their future growth, because if you get productivity up to 357 00:20:41,240 --> 00:20:44,320 Speaker 2: three three and a half percent, then the debt as 358 00:20:44,359 --> 00:20:47,880 Speaker 2: a percent of GP, the debt will grow faster than 359 00:20:47,920 --> 00:20:50,960 Speaker 2: the growth in GDP, and the burden will over time, 360 00:20:51,080 --> 00:20:54,600 Speaker 2: over ten or twenty years, become less. But I don't 361 00:20:54,600 --> 00:20:56,840 Speaker 2: think you can do that in today's environment because two 362 00:20:56,880 --> 00:21:00,200 Speaker 2: thirds of our government's budget is entitlements. Right now their 363 00:21:00,280 --> 00:21:03,359 Speaker 2: indexed those are kind of on their own, and that 364 00:21:03,480 --> 00:21:07,119 Speaker 2: leaves a third as discretionary, and part of that's interest 365 00:21:07,520 --> 00:21:09,879 Speaker 2: and that's going to grow rapidly because interest rates are 366 00:21:09,960 --> 00:21:12,320 Speaker 2: higher and the debt is going to continue to grow. 367 00:21:12,680 --> 00:21:15,479 Speaker 2: So that's an issue. And the other is defense, and 368 00:21:15,520 --> 00:21:18,480 Speaker 2: we can't be cutting defense if the world is shall 369 00:21:18,480 --> 00:21:22,760 Speaker 2: we say, almost on fire with breakouts everywhere. That's another issue. 370 00:21:22,880 --> 00:21:28,440 Speaker 2: So just growing is absolutely essential for controlling our ability 371 00:21:28,720 --> 00:21:31,720 Speaker 2: or enabling our ability to manage the debt. But also 372 00:21:31,800 --> 00:21:35,399 Speaker 2: we have to address our spending across the board. It 373 00:21:35,400 --> 00:21:37,679 Speaker 2: can't be just one small sector. It has to be 374 00:21:37,880 --> 00:21:43,440 Speaker 2: across the board. So growth plus watching our spending going forward, Yes, 375 00:21:43,520 --> 00:21:47,119 Speaker 2: we can manage this problem. Yes we can allow productivity 376 00:21:47,359 --> 00:21:51,119 Speaker 2: to occur at higher rates, but it isn't going to 377 00:21:51,160 --> 00:21:52,040 Speaker 2: happen on its own. 378 00:21:52,600 --> 00:21:55,359 Speaker 1: Even though the US is running a fairly large amount 379 00:21:55,400 --> 00:21:58,360 Speaker 1: of debt, we still seem to be a place where 380 00:21:58,359 --> 00:22:02,399 Speaker 1: you get a flight to safety, so that the world 381 00:22:02,480 --> 00:22:04,840 Speaker 1: seems to be willing to absorb a remarkable amount of 382 00:22:04,880 --> 00:22:07,280 Speaker 1: American debt. I mean, is that a function of the 383 00:22:07,320 --> 00:22:10,720 Speaker 1: differential of threat to your money in different countries? 384 00:22:11,800 --> 00:22:15,680 Speaker 2: Well? Yes, partially we are the safe haven. However, China 385 00:22:15,720 --> 00:22:18,560 Speaker 2: isn't buying her debt as they once did. Japan probably 386 00:22:18,600 --> 00:22:21,040 Speaker 2: isn't buying her debt. It seems to be slowing as well. 387 00:22:21,440 --> 00:22:26,399 Speaker 2: That's because our debt relative to theirs is becoming less preferable, 388 00:22:27,000 --> 00:22:31,160 Speaker 2: and that will slowly occur over time. But I will 389 00:22:31,160 --> 00:22:33,760 Speaker 2: tell you this, Yes, if you think about our debt 390 00:22:34,080 --> 00:22:37,760 Speaker 2: relative to other countries, we are still the greatest country. 391 00:22:38,119 --> 00:22:40,560 Speaker 2: We still have the best rule of law, We still 392 00:22:40,600 --> 00:22:43,600 Speaker 2: are the best pace to locate for investment, so that 393 00:22:43,800 --> 00:22:46,800 Speaker 2: advantage hasn't left us, but it's not as strong as 394 00:22:46,800 --> 00:22:47,439 Speaker 2: it once was. 395 00:22:48,280 --> 00:22:51,840 Speaker 1: In my opinion, What is your sense tell you about 396 00:22:51,880 --> 00:22:55,119 Speaker 1: how the economy is going to play out in the election? 397 00:22:55,840 --> 00:22:58,040 Speaker 2: Who knows for sure, right, so I'm kind of giving 398 00:22:58,080 --> 00:23:00,960 Speaker 2: you my thoughts on it. I think in election years 399 00:23:01,560 --> 00:23:04,600 Speaker 2: you usually do not go into a recession. Now doesn't 400 00:23:04,640 --> 00:23:08,000 Speaker 2: mean you won't, but you usually don't because, as I've 401 00:23:08,000 --> 00:23:11,320 Speaker 2: already said, the Congress, both sides are saying we want 402 00:23:11,359 --> 00:23:13,720 Speaker 2: to increase spending in the Democrats, the other is we 403 00:23:13,960 --> 00:23:17,680 Speaker 2: want to make sure taxes stay low. Have those declines, 404 00:23:17,760 --> 00:23:20,800 Speaker 2: so our debt will continue to grow. The Fed will 405 00:23:20,840 --> 00:23:23,879 Speaker 2: come under increasing pressure. They're already talking about three to 406 00:23:23,960 --> 00:23:27,160 Speaker 2: five cuts this year that they be in the market, 407 00:23:27,359 --> 00:23:30,200 Speaker 2: and the Fed itself says we're not raising rates any longer. 408 00:23:30,640 --> 00:23:32,840 Speaker 2: It's more likely we're going to cut. We don't know 409 00:23:32,880 --> 00:23:36,320 Speaker 2: when that is, but that means we get through twenty 410 00:23:36,359 --> 00:23:40,160 Speaker 2: twenty four, perhaps without a recession. But what about twenty 411 00:23:40,200 --> 00:23:43,920 Speaker 2: twenty five if we continue to run these debts, if 412 00:23:43,920 --> 00:23:46,680 Speaker 2: the fed. If they do ease rates and they continue 413 00:23:46,720 --> 00:23:49,720 Speaker 2: to print money, the inflation will reignite. That was the 414 00:23:49,760 --> 00:23:53,200 Speaker 2: experience in the seventies, and that's what we have to avoid. 415 00:23:53,720 --> 00:23:56,520 Speaker 2: It is something we cannot take for granted. I do 416 00:23:56,640 --> 00:24:00,159 Speaker 2: think this year we will, but after this year we're 417 00:24:00,160 --> 00:24:01,760 Speaker 2: going to have to pay some pain. I think there 418 00:24:01,840 --> 00:24:04,359 Speaker 2: is a recession ahead. I just don't know the timing. 419 00:24:04,880 --> 00:24:08,119 Speaker 1: I remember because I got elected in seventy eight, and 420 00:24:08,160 --> 00:24:11,240 Speaker 1: then I was a sophomore with Reagan in eighty one. 421 00:24:11,560 --> 00:24:14,679 Speaker 1: You know, his first two years were very tough. Morning 422 00:24:14,720 --> 00:24:17,400 Speaker 1: in America would not have been a successful campaign ad 423 00:24:17,720 --> 00:24:22,720 Speaker 1: in eighty two, but somehow, by getting through it, we 424 00:24:22,720 --> 00:24:25,920 Speaker 1: we sort of a takeoff stage that was pretty astonishing. 425 00:24:26,520 --> 00:24:29,399 Speaker 2: Exactly right. I mean, we had fourteen percent inflation in 426 00:24:29,440 --> 00:24:32,240 Speaker 2: this country because we dabbled through the seventies and didn't 427 00:24:32,240 --> 00:24:36,680 Speaker 2: address it firmly. So then Folk comes in. We would 428 00:24:36,720 --> 00:24:39,879 Speaker 2: go through a terrible time, I mean a major recession, 429 00:24:39,960 --> 00:24:43,280 Speaker 2: a double dip recession. But we got inflation back down 430 00:24:43,359 --> 00:24:47,040 Speaker 2: closer to four and a half percent and felt comfortable 431 00:24:47,040 --> 00:24:49,359 Speaker 2: that it would continue at that point from a very 432 00:24:49,440 --> 00:24:53,160 Speaker 2: high fourteen and things took off and inflation did come 433 00:24:53,200 --> 00:24:55,920 Speaker 2: down further. So that's what we have to look for 434 00:24:56,240 --> 00:24:59,159 Speaker 2: as we go forward from here. But remember inflation in 435 00:24:59,200 --> 00:25:01,320 Speaker 2: the seventies moved from one and a half percent to 436 00:25:01,400 --> 00:25:03,760 Speaker 2: three percent four and a half percent when Nixon put 437 00:25:04,000 --> 00:25:07,200 Speaker 2: waging price controls on, and then we went back down 438 00:25:07,280 --> 00:25:09,320 Speaker 2: and then it went up to nine percent, came back 439 00:25:09,359 --> 00:25:12,800 Speaker 2: down and then went to fourteen because they weren't resolute 440 00:25:13,280 --> 00:25:15,920 Speaker 2: in the saying we're bringing this down and a staying down. 441 00:25:16,359 --> 00:25:18,399 Speaker 2: That's what the challenge is ahead for the FED. 442 00:25:18,920 --> 00:25:21,520 Speaker 1: Yeah, I mean, I think whoever wins this election is 443 00:25:21,560 --> 00:25:25,240 Speaker 1: going to have to enter twenty five with a determination 444 00:25:26,119 --> 00:25:30,920 Speaker 1: to really try to turn the whole thing around pretty aggressively. 445 00:25:31,400 --> 00:25:33,320 Speaker 2: They have to, and I'm not sure we'll get that. 446 00:25:33,320 --> 00:25:35,960 Speaker 2: That's what we have to do, otherwise we will, I think, 447 00:25:36,080 --> 00:25:39,960 Speaker 2: face an outlook that the CBO projected an enormous increase 448 00:25:40,000 --> 00:25:43,679 Speaker 2: in our debt, they reduced productivity in our country, and 449 00:25:43,800 --> 00:25:46,120 Speaker 2: we will fall further behind and it will be more 450 00:25:46,240 --> 00:25:48,520 Speaker 2: challenging to come out of it. So we have to 451 00:25:48,520 --> 00:25:51,560 Speaker 2: do it sooner rather than later. And that's the message 452 00:25:51,640 --> 00:25:53,920 Speaker 2: I think the American people are waiting for. That's why 453 00:25:53,960 --> 00:25:56,080 Speaker 2: I think they're not optimistic right now because they're not 454 00:25:56,119 --> 00:26:14,520 Speaker 2: hearing that message. They're not hearing that message, you know. 455 00:26:14,600 --> 00:26:16,879 Speaker 1: I think, in addition to talking at the big level, 456 00:26:17,320 --> 00:26:21,560 Speaker 1: it's really helpful to talk about personal finances and personal decisions. 457 00:26:21,920 --> 00:26:24,800 Speaker 1: And I'm curious, given the depth of your knowledge, what's 458 00:26:24,840 --> 00:26:27,040 Speaker 1: your advice to the average American at a time when 459 00:26:27,400 --> 00:26:30,200 Speaker 1: we have far too much credit card debt and where 460 00:26:30,240 --> 00:26:33,640 Speaker 1: people are very often virtually without adequate savings. What would 461 00:26:33,720 --> 00:26:36,879 Speaker 1: you advise the average couple or the average individual about 462 00:26:36,920 --> 00:26:40,119 Speaker 1: what their personal financial strategy ought to be in this 463 00:26:40,240 --> 00:26:41,000 Speaker 1: kind of environment. 464 00:26:41,840 --> 00:26:44,240 Speaker 2: Well, I think it's like so many other things. They 465 00:26:44,320 --> 00:26:47,359 Speaker 2: have an inflation issue, so they're worried about that, So 466 00:26:47,400 --> 00:26:50,439 Speaker 2: you tend to spend sooner to avoid the higher prices 467 00:26:50,480 --> 00:26:52,479 Speaker 2: down the road. But what we have to do, they 468 00:26:52,520 --> 00:26:55,200 Speaker 2: cannot spend more than they make on a continuing basis, 469 00:26:55,240 --> 00:26:57,320 Speaker 2: and they cannot leverage themselves up or they will have 470 00:26:57,320 --> 00:27:00,320 Speaker 2: a crisis in a year or two years, whenever it is. 471 00:27:00,800 --> 00:27:03,760 Speaker 2: So you have to redo your budget to make sure 472 00:27:03,800 --> 00:27:06,560 Speaker 2: that your income, and just like the government, your income 473 00:27:06,720 --> 00:27:09,439 Speaker 2: and your spending is in line. If you avoid doing that, 474 00:27:09,600 --> 00:27:12,320 Speaker 2: and all you do is borrow against the future you 475 00:27:12,359 --> 00:27:15,000 Speaker 2: will find yourself in greater problem, and the incentive right 476 00:27:15,040 --> 00:27:18,080 Speaker 2: now is to spend to avoid that. And there is this, 477 00:27:18,520 --> 00:27:21,520 Speaker 2: I think, this presumption that the FED is going to 478 00:27:22,160 --> 00:27:26,120 Speaker 2: ease sooner rather than later, and therefore they will wait 479 00:27:26,160 --> 00:27:29,080 Speaker 2: for that period to come and that will stimulate things 480 00:27:29,400 --> 00:27:31,199 Speaker 2: as they go forward. But I think to count on 481 00:27:31,240 --> 00:27:33,479 Speaker 2: that as a mistake, and one way or the other, 482 00:27:33,480 --> 00:27:36,000 Speaker 2: we're going to see a slowing and spending. Hopefully it 483 00:27:36,080 --> 00:27:39,720 Speaker 2: is done in a way that balances their budgets and 484 00:27:39,760 --> 00:27:42,800 Speaker 2: allows the economy to continue to grow modestly as we 485 00:27:42,840 --> 00:27:45,800 Speaker 2: move forward. But I would not recommend speculating in the 486 00:27:45,960 --> 00:27:48,800 Speaker 2: stock market at this point. It's at an all time high. 487 00:27:48,800 --> 00:27:52,119 Speaker 2: As you mentioned, the odds are that it will have 488 00:27:52,200 --> 00:27:54,919 Speaker 2: to adjust down now. That may be bad advice, but 489 00:27:54,960 --> 00:27:58,040 Speaker 2: that's my concern as far as how strong that stock 490 00:27:58,080 --> 00:28:01,239 Speaker 2: market is the best advice in the world. There are 491 00:28:01,320 --> 00:28:03,919 Speaker 2: financial planners. I guess you do better, but that's my 492 00:28:04,119 --> 00:28:06,840 Speaker 2: general take on things as we go forward from here. 493 00:28:07,000 --> 00:28:11,000 Speaker 1: Well, you may not be a financial advisor, you nonetheless 494 00:28:11,040 --> 00:28:13,879 Speaker 1: know so much about finance and so much about the 495 00:28:13,920 --> 00:28:17,000 Speaker 1: economy that it's pretty useful advice for folks to think 496 00:28:17,040 --> 00:28:19,600 Speaker 1: about I hope. So, you know, one of the things 497 00:28:19,600 --> 00:28:23,040 Speaker 1: I'm curious about when you watch people who are overextended 498 00:28:23,480 --> 00:28:26,639 Speaker 1: get more over extended, I think partially because it's so 499 00:28:26,720 --> 00:28:29,879 Speaker 1: easy now to go online and buy things. To what 500 00:28:30,040 --> 00:28:33,480 Speaker 1: extent do you think that COVID sort of jarred their 501 00:28:33,520 --> 00:28:37,120 Speaker 1: whole sense of stability and there's kind of a why 502 00:28:37,240 --> 00:28:39,520 Speaker 1: not spend it now, who knows what's going to happen next, 503 00:28:40,040 --> 00:28:41,000 Speaker 1: kind of attitude. 504 00:28:41,440 --> 00:28:43,560 Speaker 2: I don't know that that was the effect as much 505 00:28:43,680 --> 00:28:47,480 Speaker 2: as there was so much wealth transferred from the government 506 00:28:47,800 --> 00:28:50,480 Speaker 2: to the consumer, and I mean consumers that were making 507 00:28:50,480 --> 00:28:53,000 Speaker 2: over one hundred thousand dollars still getting checks from the 508 00:28:53,040 --> 00:28:58,040 Speaker 2: government into their accounts, and so the excess savings, which 509 00:28:58,120 --> 00:29:00,320 Speaker 2: was over two and a half trellion dollars, was there, 510 00:29:00,680 --> 00:29:04,000 Speaker 2: and so then you feel wealthier. You are wealthier, and 511 00:29:04,040 --> 00:29:05,760 Speaker 2: so you spend it. And once you get into that 512 00:29:05,800 --> 00:29:08,760 Speaker 2: habit of spending, then is the savings fall down? Well, 513 00:29:08,840 --> 00:29:11,080 Speaker 2: you have your credit card and so you begin to 514 00:29:11,160 --> 00:29:13,880 Speaker 2: leverage yourself. And that's what we're seeing again. So I'm 515 00:29:13,920 --> 00:29:18,040 Speaker 2: worried that the carryover from COVID is the feeling or 516 00:29:18,080 --> 00:29:21,040 Speaker 2: the understanding that, well, if anything goes wrong, the government 517 00:29:21,040 --> 00:29:23,080 Speaker 2: will step in and make transfer payments and we'll be 518 00:29:23,160 --> 00:29:25,880 Speaker 2: bailed out of this again. Either the federill print more money, 519 00:29:26,080 --> 00:29:29,360 Speaker 2: the government will continue to spend for the consumer, transfer 520 00:29:29,520 --> 00:29:31,440 Speaker 2: the wealth to the consumer as they have in the past. 521 00:29:31,640 --> 00:29:34,040 Speaker 2: And so I'm going to take my chances and spend 522 00:29:34,040 --> 00:29:36,360 Speaker 2: the money I have or leverage up because I think 523 00:29:36,400 --> 00:29:38,360 Speaker 2: the government will take care of me. Now that may 524 00:29:38,400 --> 00:29:42,120 Speaker 2: be conspiratorial in one sense, but it's what I worry 525 00:29:42,160 --> 00:29:45,840 Speaker 2: about is that people have forgotten and got out of 526 00:29:45,880 --> 00:29:48,680 Speaker 2: the habit of saving for the future. It's I've got 527 00:29:48,680 --> 00:29:50,360 Speaker 2: all this money, I'm going to spend while I have it, 528 00:29:50,800 --> 00:29:53,440 Speaker 2: enjoy it, and we'll worry about the future later. 529 00:29:53,760 --> 00:29:56,000 Speaker 1: To put it crudely, Tom, I really want to thank 530 00:29:56,040 --> 00:29:58,600 Speaker 1: you for joining me. I want to let our listeners 531 00:29:58,600 --> 00:30:01,400 Speaker 1: know they can find out more more about the Mercadas 532 00:30:01,440 --> 00:30:04,640 Speaker 1: Center of George Mason University and the work you're doing 533 00:30:04,680 --> 00:30:06,760 Speaker 1: there at mercadis dot org. 534 00:30:07,400 --> 00:30:08,280 Speaker 2: Thank you very much. 535 00:30:11,560 --> 00:30:13,840 Speaker 1: Thank you to my guest Thomas Hunting. You can learn 536 00:30:13,880 --> 00:30:16,600 Speaker 1: more about the state of our economy on our show 537 00:30:16,640 --> 00:30:20,280 Speaker 1: page at Newtsworld dot com. News World is produced by 538 00:30:20,320 --> 00:30:25,760 Speaker 1: Ginglish three sixty and iHeartMedia. Our executive producer is Guarnsey Sloan. 539 00:30:26,080 --> 00:30:30,200 Speaker 1: Our researcher is Rachel Peterson. The artwork for the show 540 00:30:30,720 --> 00:30:34,600 Speaker 1: was created by Steve Penley. Special thanks to the team 541 00:30:34,640 --> 00:30:38,360 Speaker 1: at Gingrishtree sixty. If you've been enjoying Newtsworld, I hope 542 00:30:38,360 --> 00:30:41,040 Speaker 1: you'll go to Apple Podcast and both rate us with 543 00:30:41,120 --> 00:30:44,239 Speaker 1: five stars and give us a review so others can 544 00:30:44,320 --> 00:30:48,080 Speaker 1: learn what it's all about. Right now, listeners of Newtsworld 545 00:30:48,080 --> 00:30:52,240 Speaker 1: concern up from my three freeweekly columns at Gingishtree sixty 546 00:30:52,240 --> 00:30:57,400 Speaker 1: dot com slash newsletter. I'm Newt Gingrich. This is Newtsworld.