1 00:00:05,000 --> 00:00:08,000 Speaker 1: On this episode of News World, it's a big week 2 00:00:08,000 --> 00:00:11,640 Speaker 1: in Washington as the Pelosi Ladhouse tries to pass the 3 00:00:11,720 --> 00:00:15,480 Speaker 1: trillion dollar infrastructure bill, make sure the government doesn't shut down, 4 00:00:15,920 --> 00:00:19,239 Speaker 1: works to pass bipartisan legislation on the death ceiling, to 5 00:00:19,360 --> 00:00:23,239 Speaker 1: make sure America's credit rating doesn't crash globally, and works 6 00:00:23,320 --> 00:00:27,560 Speaker 1: on the huge, big government socialist bill that Bernie Sanders 7 00:00:27,600 --> 00:00:31,720 Speaker 1: developed that people now concede. There's probably a five trillion 8 00:00:31,760 --> 00:00:34,960 Speaker 1: dollar bill with about a three trillion dollar tax increase. 9 00:00:35,479 --> 00:00:38,319 Speaker 1: But I want to take some time to discuss an 10 00:00:38,320 --> 00:00:42,080 Speaker 1: economic topic that's going to affect every American's pocketbook, and 11 00:00:42,120 --> 00:00:45,120 Speaker 1: that's inflation. And as a part of that story, I 12 00:00:45,159 --> 00:00:48,720 Speaker 1: want to look at the whole supply chain question, because 13 00:00:48,800 --> 00:00:52,879 Speaker 1: clearly there are things happening in terms of the availability 14 00:00:52,920 --> 00:00:57,720 Speaker 1: of everything from paint to computer chips for automobiles that 15 00:00:57,760 --> 00:01:02,400 Speaker 1: are affecting the supply chain that's then affecting both price 16 00:01:02,520 --> 00:01:06,800 Speaker 1: but also just playing availability. As Kamala Harris said when 17 00:01:06,800 --> 00:01:09,520 Speaker 1: she was in Vietnam, are we better shop earlier than 18 00:01:09,640 --> 00:01:12,759 Speaker 1: usual for our holiday gifts this year due to these 19 00:01:12,760 --> 00:01:15,800 Speaker 1: supply chain issues? Which people thought was a strange comment 20 00:01:16,080 --> 00:01:18,400 Speaker 1: to make. While you're on a state visit in Vietnam, 21 00:01:18,440 --> 00:01:20,360 Speaker 1: but I think she had just learned and been briefed 22 00:01:20,440 --> 00:01:23,839 Speaker 1: on the supply chain problem. We looked around for somebody 23 00:01:23,840 --> 00:01:27,840 Speaker 1: who could really help us understand inflation and supply chain issues, 24 00:01:28,319 --> 00:01:32,240 Speaker 1: and we found a senior research fellow at the Mercadis 25 00:01:32,319 --> 00:01:35,200 Speaker 1: Center at George Mason, somebody who also had written a 26 00:01:35,200 --> 00:01:39,319 Speaker 1: book called Boom and Bust Banking the Causes and Cures 27 00:01:39,319 --> 00:01:52,600 Speaker 1: of the Great Recession, and that's David Beckworth. David, I 28 00:01:52,680 --> 00:01:55,360 Speaker 1: really want to thank you for joining us. I think 29 00:01:55,400 --> 00:01:58,120 Speaker 1: part of what has the average American confused is they 30 00:01:58,160 --> 00:02:00,639 Speaker 1: go to the grocery store, they go to the gas station, 31 00:02:01,160 --> 00:02:05,160 Speaker 1: they see genuine rises and prices that are measurable about 32 00:02:05,200 --> 00:02:08,600 Speaker 1: commodities that they know because they buy them. And how 33 00:02:08,639 --> 00:02:12,160 Speaker 1: would you explain to them whether they should worry about 34 00:02:12,200 --> 00:02:15,400 Speaker 1: that or whether it will disappear as the supply chain 35 00:02:15,840 --> 00:02:18,880 Speaker 1: sort of unlocks itself. Well, thank you, mister speaker for 36 00:02:18,919 --> 00:02:22,160 Speaker 1: having me on your show. Great question. Yeah, this is 37 00:02:22,160 --> 00:02:25,840 Speaker 1: a very real pain that we are experiencing now. I 38 00:02:25,880 --> 00:02:28,959 Speaker 1: do think this will disappear, probably in a twenty twenty two, 39 00:02:28,960 --> 00:02:32,000 Speaker 1: maybe twenty twenty three, And let me just gives me 40 00:02:32,200 --> 00:02:35,440 Speaker 1: specific examples for the consumer, like oil, the price of gas. 41 00:02:35,440 --> 00:02:37,600 Speaker 1: Why are you paying that more for gas now than 42 00:02:37,639 --> 00:02:42,360 Speaker 1: you were last year? And there's several reasons. One of 43 00:02:42,400 --> 00:02:46,480 Speaker 1: them is that last year is the demand dropped dramatically 44 00:02:46,480 --> 00:02:49,000 Speaker 1: because we're all locked in because of COVID, and as 45 00:02:49,080 --> 00:02:51,880 Speaker 1: we reopened the economy and the economy this burst that 46 00:02:51,919 --> 00:02:54,960 Speaker 1: it's been growing rapidly. The demand for fuel around the 47 00:02:54,960 --> 00:02:57,120 Speaker 1: world is shot up through the roof, so there's a 48 00:02:57,240 --> 00:03:00,440 Speaker 1: huge spike in demand. Number one. Number two, Peck has 49 00:03:00,480 --> 00:03:03,960 Speaker 1: dialed back its production of oil, and oil production hasn't 50 00:03:04,040 --> 00:03:06,919 Speaker 1: quite yet responded to the price signal to make more fuel. 51 00:03:07,280 --> 00:03:09,359 Speaker 1: But I think those things will work out. I know 52 00:03:09,400 --> 00:03:12,200 Speaker 1: in the meantime it's not a pleasant story, but in 53 00:03:12,200 --> 00:03:15,560 Speaker 1: the meantime, people will have to pay higher prices. Grocery 54 00:03:15,560 --> 00:03:19,240 Speaker 1: store items, clothing, all of those are being affected as 55 00:03:19,240 --> 00:03:22,639 Speaker 1: well by a global supply chain story as well as 56 00:03:22,639 --> 00:03:24,440 Speaker 1: I think there's another piece I haven't mentioned, and that's 57 00:03:24,520 --> 00:03:27,000 Speaker 1: labor markets. There are a lot of people who haven't 58 00:03:27,040 --> 00:03:29,560 Speaker 1: returned to the labor force, So I know there's restaurants, 59 00:03:29,560 --> 00:03:33,040 Speaker 1: there's grocery stores, there's people trying to distribute food from 60 00:03:33,120 --> 00:03:36,040 Speaker 1: factories to grocery stores. They don't have people to drive trucks, 61 00:03:36,640 --> 00:03:40,119 Speaker 1: and there's a number of reasons, but the recovery has 62 00:03:40,200 --> 00:03:43,560 Speaker 1: not been proportionately met with a rise in labor, and 63 00:03:43,600 --> 00:03:45,560 Speaker 1: so there's a shortage of workers. Now, some of these 64 00:03:45,560 --> 00:03:47,480 Speaker 1: workers maybe have decided they don't want to go back 65 00:03:47,480 --> 00:03:49,920 Speaker 1: to the working conditions they had before. Some of them 66 00:03:49,960 --> 00:03:52,800 Speaker 1: might be tied to the generous unemployment benefits they've received 67 00:03:52,800 --> 00:03:54,720 Speaker 1: from the federal government. Those things will be ending soon. 68 00:03:54,800 --> 00:03:56,200 Speaker 1: So if that is a part of the story, I 69 00:03:56,200 --> 00:04:01,560 Speaker 1: think that will end. We need to increase capacity, shipping production, 70 00:04:01,960 --> 00:04:04,280 Speaker 1: We need more people to get back into the labor force, 71 00:04:04,800 --> 00:04:07,640 Speaker 1: and those things just take time, and hopefully by this 72 00:04:07,680 --> 00:04:10,920 Speaker 1: time next year we will see an improvement. You know, 73 00:04:10,960 --> 00:04:14,240 Speaker 1: all through the nineteenth century, we were actually the most 74 00:04:14,320 --> 00:04:18,040 Speaker 1: expensive labor economy in the world, and the result was 75 00:04:18,440 --> 00:04:21,080 Speaker 1: that we were also the most automated. And I think 76 00:04:21,120 --> 00:04:23,039 Speaker 1: you're going to see a lot of that in the 77 00:04:23,080 --> 00:04:25,279 Speaker 1: next two or three or four years. I was just 78 00:04:25,360 --> 00:04:27,680 Speaker 1: at a restaurant last night. They can't get enough workers. 79 00:04:28,080 --> 00:04:30,919 Speaker 1: I've been at two hotels recently where if you didn't 80 00:04:30,960 --> 00:04:33,600 Speaker 1: call and ask them to make up your room. They 81 00:04:33,600 --> 00:04:36,760 Speaker 1: didn't do it because they're now so short of employees. 82 00:04:37,200 --> 00:04:41,200 Speaker 1: And it's been interesting to watch and see different kinds 83 00:04:41,240 --> 00:04:44,960 Speaker 1: of shortages, including a labor shortage, and then how people 84 00:04:44,960 --> 00:04:47,560 Speaker 1: are sort of adjusting to try to cope with it. 85 00:04:47,960 --> 00:04:51,359 Speaker 1: But I do think probably we have a slight difference 86 00:04:51,360 --> 00:04:54,960 Speaker 1: in that it may be scarred by my having grown 87 00:04:55,080 --> 00:04:58,680 Speaker 1: up and lived through the seventies and the early eighties 88 00:04:58,680 --> 00:05:02,400 Speaker 1: and watched and once it gets out of control, because 89 00:05:02,440 --> 00:05:04,839 Speaker 1: it's a little bit like a wildfire, you have to 90 00:05:04,880 --> 00:05:07,800 Speaker 1: be very careful or it can really take off and 91 00:05:08,000 --> 00:05:11,400 Speaker 1: get built into expectations and then you have a real problem. 92 00:05:12,040 --> 00:05:16,400 Speaker 1: I'm curious because at least statistically, we both have had 93 00:05:16,480 --> 00:05:19,039 Speaker 1: a huge volume of savings. There's a lot of people 94 00:05:19,440 --> 00:05:22,040 Speaker 1: did not spend the money the government sent them. On 95 00:05:22,080 --> 00:05:24,400 Speaker 1: the other hand, we've also had an enormous explosion of 96 00:05:24,440 --> 00:05:28,080 Speaker 1: credit card debt. As an economist, how do you weigh 97 00:05:28,160 --> 00:05:31,840 Speaker 1: those two things and try to understand them well. I 98 00:05:31,880 --> 00:05:36,080 Speaker 1: think part of what happened with the checks the unemployment benefits, 99 00:05:36,080 --> 00:05:39,440 Speaker 1: people were saving them because of precautionary motives, they didn't 100 00:05:39,440 --> 00:05:41,960 Speaker 1: want to use them, and then some of the credit 101 00:05:42,000 --> 00:05:45,120 Speaker 1: you're talking about is tied to Durbill. Goods have been 102 00:05:45,160 --> 00:05:46,880 Speaker 1: purchased as well as housing. If you look at them 103 00:05:46,880 --> 00:05:50,640 Speaker 1: on a credit going to homes, people taking equity out 104 00:05:50,640 --> 00:05:54,640 Speaker 1: of their home, refinancing their mortgages. That has exploded as well. 105 00:05:55,200 --> 00:05:57,920 Speaker 1: So credit has gone up during this time even as 106 00:05:58,000 --> 00:06:00,680 Speaker 1: savings has gone up. Whicheems a little using, But here's 107 00:06:00,680 --> 00:06:02,160 Speaker 1: the rest of the story. If you look at the 108 00:06:02,200 --> 00:06:06,880 Speaker 1: total wealth of the US households, it's also exploded. So 109 00:06:07,240 --> 00:06:10,640 Speaker 1: if you take total credit, it's grown up and divided 110 00:06:10,680 --> 00:06:13,839 Speaker 1: by a total household wealth, it's still actually much below 111 00:06:13,880 --> 00:06:15,960 Speaker 1: where it was, say in two thousand and seven, when 112 00:06:16,000 --> 00:06:18,680 Speaker 1: we have the housing boom bus cycle, when the households 113 00:06:18,680 --> 00:06:22,039 Speaker 1: were highly in debt and things went south. So we're 114 00:06:22,080 --> 00:06:23,720 Speaker 1: a long wayte from that. And of course part of 115 00:06:23,760 --> 00:06:28,200 Speaker 1: the build up in household wealth has come from government checks, stimulus, 116 00:06:29,000 --> 00:06:33,440 Speaker 1: property prices have exploded, all those things. So balance sheets 117 00:06:33,480 --> 00:06:37,159 Speaker 1: for households are much healthier today, and I think that's 118 00:06:37,240 --> 00:06:40,000 Speaker 1: part of the story. We sort of transferred the debt 119 00:06:40,000 --> 00:06:42,880 Speaker 1: away from the households back to the government, that's right, 120 00:06:42,920 --> 00:06:45,800 Speaker 1: and you know, ultimately who is the government backed by taxpayers? 121 00:06:45,800 --> 00:06:48,680 Speaker 1: So at the end of the day, it's implicitly still 122 00:06:48,680 --> 00:06:51,359 Speaker 1: on our balance sheet. But yeah, it kind of masks 123 00:06:51,400 --> 00:06:54,200 Speaker 1: the risk. Yeah, it's an interesting circular process. We're in 124 00:06:54,200 --> 00:07:12,480 Speaker 1: the middle of it. In your New York Times article, 125 00:07:12,960 --> 00:07:16,320 Speaker 1: stop worrying about inflation, you say, if I can quote 126 00:07:16,360 --> 00:07:19,800 Speaker 1: you to you, so many influential voices are carrying on 127 00:07:19,840 --> 00:07:23,000 Speaker 1: as though we were about to relive the seventies, and frankly, 128 00:07:23,040 --> 00:07:25,600 Speaker 1: I've been one of them. So I'm fascinated to get 129 00:07:25,760 --> 00:07:30,160 Speaker 1: your interpretation of what you think is happening and what 130 00:07:30,320 --> 00:07:33,120 Speaker 1: we should or should not be concerned about in the 131 00:07:33,160 --> 00:07:36,440 Speaker 1: economy over the next few years. So that off head 132 00:07:36,480 --> 00:07:38,600 Speaker 1: was written a few months ago, and what we've seen 133 00:07:38,640 --> 00:07:41,400 Speaker 1: since then has given me some pause. We have seen 134 00:07:41,880 --> 00:07:44,920 Speaker 1: higher than expected inflation. Inflation is definitely higher than I 135 00:07:44,960 --> 00:07:47,640 Speaker 1: thought it would be. Before we get to the specifics 136 00:07:47,640 --> 00:07:50,280 Speaker 1: of what we've seen, maybe we can step back and 137 00:07:50,360 --> 00:07:55,280 Speaker 1: ask what is inflation? What drives inflation? And an easy 138 00:07:55,320 --> 00:07:57,560 Speaker 1: way for me to think about this is there's two 139 00:07:57,600 --> 00:08:01,320 Speaker 1: ways it emerges. One is to much government spending too 140 00:08:01,440 --> 00:08:04,600 Speaker 1: much money. The demand side, people are spending government spending. 141 00:08:05,280 --> 00:08:08,600 Speaker 1: The other side, though, is the supply side. You touched 142 00:08:08,640 --> 00:08:12,320 Speaker 1: on some of it the global supply chain, bottlenecks, computer 143 00:08:12,440 --> 00:08:15,480 Speaker 1: chips not being produced, ships being held off the coast 144 00:08:15,520 --> 00:08:19,960 Speaker 1: of California. Those type of inflationary measures are ones that 145 00:08:20,000 --> 00:08:24,040 Speaker 1: we can't meaningfully address by tightening interest rates cutting back 146 00:08:24,040 --> 00:08:27,000 Speaker 1: on spending. We can address the ones caused by too 147 00:08:27,080 --> 00:08:30,320 Speaker 1: much spending, too much money. And when I wrote that 148 00:08:30,440 --> 00:08:33,840 Speaker 1: piece to answer your question, what I was seeing and 149 00:08:34,200 --> 00:08:36,679 Speaker 1: too large. Except still some of it today is supply 150 00:08:36,920 --> 00:08:40,120 Speaker 1: side inflation. Let me give you an example. Lumber and 151 00:08:40,160 --> 00:08:43,199 Speaker 1: if I remember, lumber shot up really expensive so you 152 00:08:43,240 --> 00:08:45,559 Speaker 1: could buy I think about thousand feet of lumber future 153 00:08:45,600 --> 00:08:48,840 Speaker 1: contracts was about fifteen hundred dollars per contract. It's now 154 00:08:48,880 --> 00:08:51,960 Speaker 1: down to five hundred. And the way I look at 155 00:08:52,000 --> 00:08:54,840 Speaker 1: that is that's capitalism doing this magic. That's the wonder 156 00:08:54,880 --> 00:08:58,880 Speaker 1: of markets. Suppliers responded, But some things take a lot 157 00:08:58,920 --> 00:09:02,720 Speaker 1: longer to adjust. I mean oil price that's gone up 158 00:09:02,800 --> 00:09:05,400 Speaker 1: dramatically and it hasn't come back down. We would think, 159 00:09:05,440 --> 00:09:07,720 Speaker 1: you know, in a perfect world, markets would respond they'd 160 00:09:07,720 --> 00:09:10,120 Speaker 1: produced some oil. But there's a number of reasons that 161 00:09:10,160 --> 00:09:12,599 Speaker 1: hasn't happened. So I think it's important for us to 162 00:09:12,640 --> 00:09:15,760 Speaker 1: distinct between inflation caused by supply side which I think 163 00:09:15,760 --> 00:09:19,679 Speaker 1: eventually will pass through by next year or late next year, 164 00:09:19,800 --> 00:09:24,400 Speaker 1: versus demand side inflation, which emerges from a big government spending. 165 00:09:25,120 --> 00:09:29,160 Speaker 1: He mentioned oil as an example. Europe apparently is about 166 00:09:29,160 --> 00:09:35,560 Speaker 1: to hit a extraordinarily expensive winter for energy, partially because 167 00:09:35,640 --> 00:09:38,320 Speaker 1: the Russians, and I don't know the answer here. You 168 00:09:38,360 --> 00:09:42,240 Speaker 1: may know this, the Russians have really reduced the flow 169 00:09:42,240 --> 00:09:44,960 Speaker 1: of natural gas through their pipeline, and I don't know 170 00:09:45,000 --> 00:09:48,559 Speaker 1: whether that's a political gimmick or weather. In fact, they've 171 00:09:48,559 --> 00:09:53,079 Speaker 1: had problems in Russia because they have pretty obsolete equipment 172 00:09:53,720 --> 00:09:57,040 Speaker 1: and are prone to breaking down. And then, of course, 173 00:09:57,400 --> 00:10:00,800 Speaker 1: in a bizarre way, all of the various w production 174 00:10:00,880 --> 00:10:03,719 Speaker 1: that they had built, particularly in the English Channel there 175 00:10:03,760 --> 00:10:07,640 Speaker 1: apparently was in August no wind, which is you know, 176 00:10:07,679 --> 00:10:10,600 Speaker 1: you'd never quite think these things through. But the result 177 00:10:10,720 --> 00:10:15,000 Speaker 1: is that the renewables were really dropped dramatically and how 178 00:10:15,040 --> 00:10:17,840 Speaker 1: much energy they were producing at the same time that 179 00:10:17,880 --> 00:10:21,400 Speaker 1: the amount of natural gas available to fill it was dropping. 180 00:10:21,880 --> 00:10:24,720 Speaker 1: And so apparently there's a concern that Europe may have 181 00:10:25,320 --> 00:10:28,800 Speaker 1: a very big spike and energy prices this winter, which 182 00:10:28,880 --> 00:10:32,080 Speaker 1: is both tough on the economy, but it's also really 183 00:10:32,120 --> 00:10:34,760 Speaker 1: tough on poor people when you get that kind of 184 00:10:34,760 --> 00:10:37,840 Speaker 1: a spike. Rich people can afford it because they just 185 00:10:37,920 --> 00:10:40,520 Speaker 1: have the surplus money, but if you've got to put 186 00:10:40,600 --> 00:10:43,000 Speaker 1: money in your truck or your car just to get 187 00:10:43,040 --> 00:10:45,600 Speaker 1: to work, you know. I don't know that the European 188 00:10:45,640 --> 00:10:48,280 Speaker 1: problem is going to have any direct impact over here, 189 00:10:48,280 --> 00:10:51,360 Speaker 1: but oil and gas prices tend to be pretty fungible, 190 00:10:51,360 --> 00:10:53,400 Speaker 1: and if it goes up in Europe, the odds are 191 00:10:53,400 --> 00:10:55,559 Speaker 1: pretty good it's going to go up here. So that's 192 00:10:55,600 --> 00:11:00,280 Speaker 1: an example where the shortage the linkage points are a 193 00:11:00,280 --> 00:11:03,000 Speaker 1: big problem. I actually just drop a clist off a 194 00:11:03,240 --> 00:11:06,320 Speaker 1: car dealership to get her car fixed, and the guy 195 00:11:06,400 --> 00:11:09,680 Speaker 1: that she works with there was saying that they weren't 196 00:11:09,720 --> 00:11:14,440 Speaker 1: able to find the camera for the rear of the car, 197 00:11:14,679 --> 00:11:17,840 Speaker 1: so when you back up and so they're literally selling 198 00:11:17,880 --> 00:11:21,000 Speaker 1: the cars without the cameras with a promise that they'll 199 00:11:21,040 --> 00:11:24,720 Speaker 1: retro fit them once the supply chain works, because the 200 00:11:24,760 --> 00:11:27,800 Speaker 1: alternative was to stop the whole production line of the cars. 201 00:11:28,200 --> 00:11:31,120 Speaker 1: So he said, we're actually selling cars that have different 202 00:11:31,120 --> 00:11:34,839 Speaker 1: pieces missing because of the supply chain. And then we're 203 00:11:34,880 --> 00:11:38,640 Speaker 1: trying to get a house painted and the shortage of 204 00:11:38,679 --> 00:11:41,200 Speaker 1: paint is unbelievable. I mean, I don't know how all 205 00:11:41,240 --> 00:11:44,960 Speaker 1: these things fit together, but apparently they are like sixty 206 00:11:45,559 --> 00:11:49,120 Speaker 1: container ships sitting off Long Beach, and I think because 207 00:11:49,160 --> 00:11:52,240 Speaker 1: there aren't enough trucks to take them out of the port. 208 00:11:52,720 --> 00:11:56,679 Speaker 1: As an economist, how do you distinguish between the classic 209 00:11:57,240 --> 00:12:02,360 Speaker 1: sort of freedmanesque inflation based on too much money and 210 00:12:02,440 --> 00:12:07,960 Speaker 1: too few goods and a series of almost wartime like 211 00:12:08,559 --> 00:12:13,120 Speaker 1: shortages the drive up prices artificially, but aren't a function 212 00:12:13,160 --> 00:12:16,920 Speaker 1: of monetary policy. That's a great question, and be honest, 213 00:12:17,000 --> 00:12:20,760 Speaker 1: in real time, it's hard to know that difference, and 214 00:12:20,880 --> 00:12:23,320 Speaker 1: it can lead to policy mistakes because we don't know 215 00:12:23,400 --> 00:12:25,600 Speaker 1: what's driving it right here and now. And I think 216 00:12:25,640 --> 00:12:28,000 Speaker 1: this is a good year is a good example. So 217 00:12:28,160 --> 00:12:31,320 Speaker 1: all those things you've mentioned, all the supply side bottomnecks, 218 00:12:31,760 --> 00:12:33,880 Speaker 1: I think our plane a role. But I think you 219 00:12:33,920 --> 00:12:37,040 Speaker 1: can also reasonably say what the government has done with 220 00:12:37,120 --> 00:12:40,440 Speaker 1: the FETE has done is also potentially putting upward pressure 221 00:12:40,440 --> 00:12:43,000 Speaker 1: on prices as well. So how do you chease out 222 00:12:43,040 --> 00:12:45,599 Speaker 1: what part is due to the freedom mind story you 223 00:12:46,080 --> 00:12:51,640 Speaker 1: mentioned versus global supply chains. It's gonna feel very painful. 224 00:12:52,080 --> 00:12:54,480 Speaker 1: Speaking to the natural gas and oil, I've been reading 225 00:12:54,520 --> 00:12:57,160 Speaker 1: the same stories you have. It is likely we're going 226 00:12:57,200 --> 00:12:59,920 Speaker 1: to have high oil prices. Natural gas prices this one 227 00:13:00,120 --> 00:13:03,319 Speaker 1: term the US because it is fungible. It's a global 228 00:13:03,400 --> 00:13:05,880 Speaker 1: market for oil. And there's a lot of things that 229 00:13:05,920 --> 00:13:08,040 Speaker 1: have emerged the lead to this almost perfect storm of 230 00:13:08,080 --> 00:13:11,960 Speaker 1: supply side bottlenecks. Everything shut down during the pandemic, so 231 00:13:12,080 --> 00:13:15,440 Speaker 1: capacity went down and now we've rubbed it up really rapidly, 232 00:13:16,040 --> 00:13:18,120 Speaker 1: and we just haven't be able to keep up with it. 233 00:13:18,160 --> 00:13:20,120 Speaker 1: And I mean this speaks to a lot of issues. 234 00:13:20,120 --> 00:13:22,040 Speaker 1: I mean the importance of getting your trade deals right, 235 00:13:22,080 --> 00:13:25,040 Speaker 1: the importance of having labor markets. You can hire people 236 00:13:25,080 --> 00:13:27,120 Speaker 1: quickly to work at the docks. There's a lot of 237 00:13:27,120 --> 00:13:29,240 Speaker 1: moving parts here, and I just think sometimes it takes 238 00:13:29,240 --> 00:13:31,480 Speaker 1: time to work through then when you've gone through something 239 00:13:31,480 --> 00:13:34,920 Speaker 1: like a war or pandemic. But to answer your question, yes, 240 00:13:34,920 --> 00:13:36,920 Speaker 1: in real time, it is difficult to say is this 241 00:13:37,000 --> 00:13:40,360 Speaker 1: due to too much spending too much money, or is 242 00:13:40,400 --> 00:13:44,600 Speaker 1: it due to supply side bottlenecks? Well, and historically, part 243 00:13:44,600 --> 00:13:47,199 Speaker 1: of what I'm fascinated by goes back a little bit 244 00:13:47,200 --> 00:13:49,959 Speaker 1: to your boom and bust banking book and the whole 245 00:13:50,000 --> 00:13:54,679 Speaker 1: way in which that period emerged. There's a catastrophic shortage 246 00:13:55,200 --> 00:13:59,120 Speaker 1: of credit which led to almost paralyzing the system. I knows. 247 00:13:59,520 --> 00:14:03,240 Speaker 1: I think it a much closer run thing than people realized. 248 00:14:03,600 --> 00:14:06,079 Speaker 1: But essentis me the chairman Palet. The Federal Reserve has 249 00:14:06,080 --> 00:14:09,080 Speaker 1: a very similar problem that if you were to try 250 00:14:09,120 --> 00:14:14,880 Speaker 1: to contain inflation by driving up interest rates, the effect 251 00:14:15,000 --> 00:14:18,640 Speaker 1: that would have on the cost of servicing the federal 252 00:14:18,679 --> 00:14:23,720 Speaker 1: debt would be staggering in terms of the impact on 253 00:14:23,760 --> 00:14:27,240 Speaker 1: the whole budget system. And so it strikes me and 254 00:14:27,280 --> 00:14:29,760 Speaker 1: i'd be here to get your reaction that the FED 255 00:14:29,840 --> 00:14:35,840 Speaker 1: may have fewer weapons, fewer tools, and less maneuverability than 256 00:14:35,880 --> 00:14:40,120 Speaker 1: at any time in modern times. I definitely think the 257 00:14:40,200 --> 00:14:42,640 Speaker 1: FED in monetary pulsy in general booth here in the 258 00:14:42,720 --> 00:14:45,920 Speaker 1: US and overseas and other advanced economs like the Eurozone, 259 00:14:46,400 --> 00:14:49,200 Speaker 1: it definitely I think has fewer degrees of freedom. But 260 00:14:49,360 --> 00:14:51,120 Speaker 1: let me go back to this point you're raising about 261 00:14:51,160 --> 00:14:54,119 Speaker 1: the FED raising interest rates in response to the current inflation, 262 00:14:54,800 --> 00:14:57,880 Speaker 1: and it makes sense for the FED to raise interest 263 00:14:57,960 --> 00:14:59,760 Speaker 1: rates if it's the freedom minding story you mentioned. If 264 00:14:59,760 --> 00:15:02,320 Speaker 1: there's too much money out there too much spending. But 265 00:15:02,440 --> 00:15:05,640 Speaker 1: if the inflation is being driven by supply side bottlenecks, 266 00:15:06,400 --> 00:15:09,000 Speaker 1: the FED can only do more damage by raising interest rates. 267 00:15:09,000 --> 00:15:10,840 Speaker 1: I mean, there's nothing good that can come out of 268 00:15:10,960 --> 00:15:13,200 Speaker 1: you if you have a shortage of raw material, shortage 269 00:15:13,240 --> 00:15:16,760 Speaker 1: of people, shortage of supplies, Jacking up interest rates is 270 00:15:16,800 --> 00:15:18,320 Speaker 1: just gonna make it far worse. You're going to have 271 00:15:18,360 --> 00:15:21,560 Speaker 1: far more people unemployed. It is important to get that distinction. 272 00:15:21,760 --> 00:15:24,800 Speaker 1: Is it supply side inflation or demand side inflation. Let 273 00:15:24,800 --> 00:15:27,640 Speaker 1: me give you an example of this. So you mentioned 274 00:15:27,640 --> 00:15:30,760 Speaker 1: the thousand boom bus cycle two thousand and eight. You 275 00:15:30,920 --> 00:15:33,760 Speaker 1: probably recall during those years leading up to that, like 276 00:15:33,800 --> 00:15:35,720 Speaker 1: two thousand and six or two thousand and eight, commodity 277 00:15:35,760 --> 00:15:39,520 Speaker 1: prices really exploded. Oil was expensive, all kinds of things 278 00:15:39,520 --> 00:15:44,400 Speaker 1: were expensive, and the Fed actually got nervous and during 279 00:15:44,440 --> 00:15:46,960 Speaker 1: the year of two thousand and eight, between April and October, 280 00:15:47,480 --> 00:15:49,720 Speaker 1: they did not cut rates even though the economy was 281 00:15:49,760 --> 00:15:52,280 Speaker 1: in free fall, because they were worried about inflation. But 282 00:15:52,320 --> 00:15:55,240 Speaker 1: they were responding to the wrong top of inflation. Over 283 00:15:55,320 --> 00:15:59,040 Speaker 1: in Europe, the ECB actually tightened policy and then in 284 00:15:59,040 --> 00:16:02,080 Speaker 1: two thleven s been similar happened, Commodity prices went through 285 00:16:02,080 --> 00:16:06,040 Speaker 1: the roof the ECB race rates twice, so it's important 286 00:16:06,080 --> 00:16:10,560 Speaker 1: to get the underlying causes of inflation down correctly. In 287 00:16:10,640 --> 00:16:13,040 Speaker 1: terms of though the second part of your question relating 288 00:16:13,080 --> 00:16:15,880 Speaker 1: to the Fed have the less ability to respond. Yeah, 289 00:16:15,880 --> 00:16:18,280 Speaker 1: there are a lot more pressures on it. I would 290 00:16:18,320 --> 00:16:21,560 Speaker 1: point out though, that if there's any silver lining in this, 291 00:16:22,360 --> 00:16:24,920 Speaker 1: it's that the world still seems to be buying up 292 00:16:24,920 --> 00:16:28,640 Speaker 1: our debt and keeping interstrate pressures down. So if you look, 293 00:16:28,760 --> 00:16:31,960 Speaker 1: for example, to date, the ten year treasury it's at 294 00:16:32,000 --> 00:16:35,200 Speaker 1: one and a half percent. Just think about that. People 295 00:16:35,200 --> 00:16:37,800 Speaker 1: around the world are willing to buy a ten year 296 00:16:37,880 --> 00:16:39,640 Speaker 1: treasury bond at one and a half percent, and we 297 00:16:39,680 --> 00:16:42,880 Speaker 1: probably will at least have two percent inflation over that horizon. 298 00:16:42,960 --> 00:16:45,880 Speaker 1: So in real inflation adjusted terms, they're actually willing to 299 00:16:45,920 --> 00:16:48,920 Speaker 1: take a hit just to have a safe store of value. 300 00:16:49,400 --> 00:16:51,960 Speaker 1: And there's a number of reasons for this. There's demand 301 00:16:52,000 --> 00:16:55,760 Speaker 1: for safe assets like treasury bonds that despite the run 302 00:16:55,800 --> 00:16:57,600 Speaker 1: up on public debt over the past year, apparently has 303 00:16:57,640 --> 00:17:00,480 Speaker 1: not been satiated. When we look in Europe, it's very similar. 304 00:17:00,840 --> 00:17:04,800 Speaker 1: So those forces are keeping rates low, and I think 305 00:17:05,000 --> 00:17:07,359 Speaker 1: That is probably the more interesting story and probably the 306 00:17:07,400 --> 00:17:11,240 Speaker 1: bigger reason why the FED does find itself with less 307 00:17:11,240 --> 00:17:30,600 Speaker 1: stability to respond to situations like this. To what excent 308 00:17:30,720 --> 00:17:34,520 Speaker 1: do you worry is all of this unfolds that we 309 00:17:36,119 --> 00:17:40,720 Speaker 1: may gradually lose the role of being the world's reserve currency. 310 00:17:40,720 --> 00:17:43,680 Speaker 1: I mean, since World War Two, that's been an enormous 311 00:17:43,760 --> 00:17:47,639 Speaker 1: advantage that most Americans aren't aware of, don't pay attention to. 312 00:17:48,200 --> 00:17:50,280 Speaker 1: But somebody once said to me, it's probably worth more 313 00:17:50,280 --> 00:17:53,000 Speaker 1: than all of our aircraft carriers in terms of being 314 00:17:53,000 --> 00:17:55,159 Speaker 1: a net advantage of the country. To what excent do 315 00:17:55,160 --> 00:17:59,080 Speaker 1: you worry that that gradually decays? I think, if anything, 316 00:17:59,119 --> 00:18:02,080 Speaker 1: what we've seen is it's getting stronger. And let me 317 00:18:02,080 --> 00:18:04,399 Speaker 1: give you some evidence again, interest rates to be the 318 00:18:04,400 --> 00:18:07,760 Speaker 1: first evidence. We have exploded our debt, and yet the 319 00:18:07,800 --> 00:18:10,040 Speaker 1: world continues to gobble it up, which means they want 320 00:18:10,160 --> 00:18:13,560 Speaker 1: dollars denominated assets, and to be clear, it's treasuries. But 321 00:18:13,600 --> 00:18:15,720 Speaker 1: if you look at one thing that we do well, 322 00:18:16,280 --> 00:18:18,880 Speaker 1: one thing that we export. You know, I always said 323 00:18:18,920 --> 00:18:21,280 Speaker 1: President Trump should have looked at all the financial assets 324 00:18:21,280 --> 00:18:23,120 Speaker 1: we're exporting. He would have loved to seeing the trade 325 00:18:23,119 --> 00:18:26,359 Speaker 1: surplus there. But we export lots and lots of dollars 326 00:18:26,400 --> 00:18:30,520 Speaker 1: assets public government debt, private bonds, commercial paper, things like that. 327 00:18:30,880 --> 00:18:33,600 Speaker 1: The world still wants it. Every month we run these 328 00:18:33,640 --> 00:18:36,320 Speaker 1: trade deficits, we're effectively selling financial assets to the world 329 00:18:36,320 --> 00:18:40,080 Speaker 1: to pay for our imports. Moreover, if you look overseas 330 00:18:40,119 --> 00:18:42,480 Speaker 1: and the Bank for International Settlements keeps track of this, 331 00:18:43,240 --> 00:18:45,760 Speaker 1: people love dollars so much that they're beginning to issue 332 00:18:45,760 --> 00:18:49,199 Speaker 1: their own dollar liabilities overseas, so places outside that there 333 00:18:49,200 --> 00:18:51,960 Speaker 1: aren't backstop of the US government are doing so. In 334 00:18:52,000 --> 00:18:55,960 Speaker 1: the BIS estimates, there's about thirteen trillion dollars in dollar 335 00:18:56,040 --> 00:19:00,840 Speaker 1: denominated debt issued outside the US and it continues to grow, 336 00:19:01,640 --> 00:19:04,439 Speaker 1: and it's just a huge amount of dollar denominated. If 337 00:19:04,440 --> 00:19:09,040 Speaker 1: you add that thirteen trillion, there's about twenty trillion dollar 338 00:19:09,080 --> 00:19:12,280 Speaker 1: assets that we've exported the world, so close to thirty trillion. 339 00:19:12,840 --> 00:19:15,439 Speaker 1: And what makes that interesting is that it's gonna be 340 00:19:15,480 --> 00:19:18,200 Speaker 1: really hard for someone to break into a market that big. 341 00:19:18,240 --> 00:19:20,399 Speaker 1: If you want to compete with the dollar as a 342 00:19:20,440 --> 00:19:22,200 Speaker 1: dominant currency of the world, you've got to be able 343 00:19:22,240 --> 00:19:25,480 Speaker 1: to scale up, and at least in the near term future, 344 00:19:25,480 --> 00:19:28,000 Speaker 1: I don't see that happening. I know people talk about China. 345 00:19:28,080 --> 00:19:32,040 Speaker 1: For example, China has a digital currency, but China's institutions 346 00:19:32,080 --> 00:19:34,400 Speaker 1: are not great. As you know. If anything, China's going 347 00:19:34,440 --> 00:19:38,920 Speaker 1: more socialistic. They're cracking down on tech industry, They're doing 348 00:19:38,960 --> 00:19:42,359 Speaker 1: things that really don't install confidence in the system over there. Moreover, 349 00:19:42,520 --> 00:19:45,040 Speaker 1: they have strict capital controls, so it's hard to move 350 00:19:45,240 --> 00:19:47,840 Speaker 1: money in and out of China. So China, maybe fifty 351 00:19:47,840 --> 00:19:49,639 Speaker 1: one hundred years down the road, might be a threat, 352 00:19:49,640 --> 00:19:52,480 Speaker 1: but in the near term, if anything, what we see 353 00:19:52,560 --> 00:19:56,360 Speaker 1: is during crisis, the demand for a US government debt 354 00:19:56,359 --> 00:19:59,320 Speaker 1: actually goes up because people want to safe store of value, 355 00:19:59,680 --> 00:20:01,679 Speaker 1: which is ironic. I mean, go back to two thousand 356 00:20:01,680 --> 00:20:04,240 Speaker 1: and eight, right the housing crisis started in the US. 357 00:20:04,840 --> 00:20:07,840 Speaker 1: What happened people raced buy treasures from around the world. 358 00:20:07,840 --> 00:20:10,080 Speaker 1: That pushed the dollar up and pushed treasury prices up, 359 00:20:10,080 --> 00:20:12,280 Speaker 1: pushing interest rates down. So we're in a kind of 360 00:20:12,280 --> 00:20:16,000 Speaker 1: a bizarre world where people are literally knocking at our 361 00:20:16,040 --> 00:20:19,000 Speaker 1: door and knocking at the treasure secretary's door, please give 362 00:20:19,040 --> 00:20:21,400 Speaker 1: me more debt. Now, I want to be clear, we 363 00:20:21,480 --> 00:20:24,800 Speaker 1: can at some point abuse that privilege, and we need 364 00:20:24,840 --> 00:20:27,439 Speaker 1: to be mindful and careful, not just spin Willy nilly, 365 00:20:27,520 --> 00:20:30,000 Speaker 1: But for the time being, it looks like we still 366 00:20:30,040 --> 00:20:33,280 Speaker 1: have that exorbitant privilege you've talked about. Claire Christenson and 367 00:20:33,320 --> 00:20:35,960 Speaker 1: I wrote a book on China and Trump a couple 368 00:20:35,920 --> 00:20:38,760 Speaker 1: of years ago that I think it was very very 369 00:20:38,760 --> 00:20:41,840 Speaker 1: well received and sort of captured what at the time 370 00:20:42,000 --> 00:20:46,000 Speaker 1: jij and Ping was doing. But here since then has 371 00:20:46,119 --> 00:20:49,480 Speaker 1: really made almost one hundred and eighty degree turn from 372 00:20:49,520 --> 00:20:53,080 Speaker 1: the Dung Shaupeing model and is really becoming more of 373 00:20:53,119 --> 00:20:56,440 Speaker 1: a mallist and the things he's doing to the economy, 374 00:20:56,480 --> 00:20:59,720 Speaker 1: the things he's doing. You know, they took the highest 375 00:21:00,040 --> 00:21:04,600 Speaker 1: aid and most popular movie star in China has been disappeared, 376 00:21:05,600 --> 00:21:10,200 Speaker 1: they argue because of taxes. The billionaires have all been intimidated. 377 00:21:10,600 --> 00:21:13,159 Speaker 1: It's almost like jes and Ping decided that there was 378 00:21:13,200 --> 00:21:17,800 Speaker 1: this alternative competitive model beginning to grow, and that for 379 00:21:17,880 --> 00:21:20,800 Speaker 1: the party to retain its monopoly, you had to crush 380 00:21:20,840 --> 00:21:23,000 Speaker 1: the model, which is the opposite of what Dung Cheu 381 00:21:23,040 --> 00:21:27,160 Speaker 1: Ping had suggested. And so I would say today, while 382 00:21:27,160 --> 00:21:30,080 Speaker 1: I worry a lot about the Chinese militarily, I worry 383 00:21:30,160 --> 00:21:32,760 Speaker 1: less about them economically than I did three years ago. 384 00:21:32,800 --> 00:21:35,199 Speaker 1: I don't know if you have any similar sense of 385 00:21:35,280 --> 00:21:38,480 Speaker 1: watching how they're operating. I think that's right. In fact, 386 00:21:38,480 --> 00:21:40,600 Speaker 1: I read a recent article in the Wall Street Journal. 387 00:21:40,640 --> 00:21:42,600 Speaker 1: I forget who the author was, but it spoke to 388 00:21:42,680 --> 00:21:47,000 Speaker 1: this transformation of jes Ping. We see evidence of that. 389 00:21:47,080 --> 00:21:50,680 Speaker 1: He's cracked down on cryptocurrency. Cryptocurrency is illegal there in China. 390 00:21:50,760 --> 00:21:53,440 Speaker 1: Now he's cracked down on some of these big real 391 00:21:53,520 --> 00:21:56,360 Speaker 1: estate conglomerates that over there. And to be clear, they 392 00:21:56,400 --> 00:21:59,600 Speaker 1: do have internal contradictions, too much debt, things like that 393 00:21:59,600 --> 00:22:02,879 Speaker 1: that will if they don't address, will create problems. But 394 00:22:02,920 --> 00:22:05,040 Speaker 1: it is striking to me that he wants to go 395 00:22:05,119 --> 00:22:08,480 Speaker 1: and try socialism again. I thought we've had enough evidence 396 00:22:08,480 --> 00:22:12,120 Speaker 1: to suggest that won't work. But he's headed down that path. 397 00:22:12,160 --> 00:22:14,399 Speaker 1: And that's the kind of thing I think that really, 398 00:22:14,600 --> 00:22:17,359 Speaker 1: over the long run, is going to undermine China's ability 399 00:22:17,400 --> 00:22:20,640 Speaker 1: to compete that. Plus, you know, their demographic situation, as 400 00:22:20,640 --> 00:22:24,280 Speaker 1: you know, is really horrible. The one child policy, their 401 00:22:24,359 --> 00:22:26,960 Speaker 1: population growth rate, you know, is going to go down dramatically, 402 00:22:26,960 --> 00:22:29,200 Speaker 1: which is going to create huge problems in the future 403 00:22:29,240 --> 00:22:33,280 Speaker 1: for them. There's at least one projection that our population 404 00:22:33,359 --> 00:22:38,359 Speaker 1: will pass there's late in the century because we continue 405 00:22:38,400 --> 00:22:41,520 Speaker 1: both through migration, and by having a higher birth rate, 406 00:22:41,880 --> 00:22:45,400 Speaker 1: we continue to grow, and that they actually have an 407 00:22:45,400 --> 00:22:51,080 Speaker 1: amazing scale of incline in total population. Meanwhile, India is 408 00:22:51,160 --> 00:22:54,359 Speaker 1: cheerfully growing like crazy. South Korea is kind of the 409 00:22:54,440 --> 00:22:56,960 Speaker 1: forerunner of that because it turned out that if you 410 00:22:57,040 --> 00:23:00,160 Speaker 1: really want to slow the number of births, give i'm 411 00:23:00,240 --> 00:23:02,000 Speaker 1: a chance to get off the farm and work and 412 00:23:02,040 --> 00:23:04,479 Speaker 1: live in an apartment, and they just don't have very 413 00:23:04,480 --> 00:23:06,920 Speaker 1: many children. I mean, so the South Korean has actually 414 00:23:06,960 --> 00:23:10,639 Speaker 1: had the biggest decline person per capita of childbirth in 415 00:23:10,680 --> 00:23:13,680 Speaker 1: the world, and the Japanese have a similar problem. Now 416 00:23:14,160 --> 00:23:16,600 Speaker 1: you mentioned one of the things I candidly don't understand 417 00:23:16,720 --> 00:23:20,360 Speaker 1: very well, and that's the whole notion of cryptocurrency. I 418 00:23:20,400 --> 00:23:23,679 Speaker 1: was talking over the weekend with somebody whose son is 419 00:23:23,720 --> 00:23:26,720 Speaker 1: now deeply involved in a company that'll be the largest 420 00:23:27,160 --> 00:23:30,439 Speaker 1: bitcoin mining company in the United States, And since I 421 00:23:30,440 --> 00:23:32,879 Speaker 1: don't have a clue what that is, I'm curious as 422 00:23:32,880 --> 00:23:35,560 Speaker 1: an economist, as you watch all this, what's your take 423 00:23:35,600 --> 00:23:39,360 Speaker 1: on cryptocurrency. Well, I think there's different types of cryptocurrency. 424 00:23:39,440 --> 00:23:44,320 Speaker 1: Bit Bitcoin obviously is the most famous bitcoin, and cryptocurrencies 425 00:23:44,359 --> 00:23:47,320 Speaker 1: like that are very speculative. At this point, it's a 426 00:23:47,359 --> 00:23:50,000 Speaker 1: bit of a gamble. It depends on how much others 427 00:23:50,520 --> 00:23:54,000 Speaker 1: want to use it. But the original motivation for cryptocurrency 428 00:23:54,080 --> 00:23:56,240 Speaker 1: was to come up with an alternative form of money, 429 00:23:56,280 --> 00:23:59,639 Speaker 1: a medium of exchange, and bitcoin really isn't a medium 430 00:23:59,640 --> 00:24:01,520 Speaker 1: of exchange. There's some places that take it, but it's 431 00:24:01,640 --> 00:24:04,680 Speaker 1: largely being used as a way to store value and 432 00:24:04,720 --> 00:24:07,400 Speaker 1: hopefully you gain value along the way. I think it's 433 00:24:07,480 --> 00:24:11,600 Speaker 1: more interesting cryptocurrency is going is like stable coins, and 434 00:24:11,680 --> 00:24:14,400 Speaker 1: these are a form of cryptocurrency that's backed up by 435 00:24:14,640 --> 00:24:20,040 Speaker 1: solid ass It's like treasuries, cash, maybe commercial paper, and 436 00:24:20,080 --> 00:24:23,200 Speaker 1: those are providing a useful service or filling a niche 437 00:24:23,240 --> 00:24:25,919 Speaker 1: that isn't being met by banks, by money market funds, 438 00:24:26,359 --> 00:24:30,320 Speaker 1: a form of liquidity. And what's interesting is these things 439 00:24:30,359 --> 00:24:33,880 Speaker 1: begin to kind of emerge, and we call these fintech companies. 440 00:24:33,880 --> 00:24:35,920 Speaker 1: They're trying to provide alternative ways for people to have 441 00:24:35,960 --> 00:24:39,399 Speaker 1: access to money, including the unbanked. But looks like Biden 442 00:24:39,400 --> 00:24:43,360 Speaker 1: administrations cracking down on what stable coins will be able 443 00:24:43,400 --> 00:24:49,520 Speaker 1: to do, even bitcoin and cryptocurrencies. The SEC Commissioner Gary Gensler, 444 00:24:49,520 --> 00:24:51,280 Speaker 1: who came out with his talk where he's really going 445 00:24:51,359 --> 00:24:55,280 Speaker 1: to treat these things as an investment, So it's going 446 00:24:55,320 --> 00:24:57,159 Speaker 1: to kind of remove some of the innovation. There is 447 00:24:57,160 --> 00:24:58,879 Speaker 1: a little bit of a wild quest feel to it, 448 00:24:58,880 --> 00:25:01,320 Speaker 1: but that's where you discover or new markets, new opportunities, 449 00:25:01,359 --> 00:25:03,879 Speaker 1: And it looks like even in our country that's going 450 00:25:03,920 --> 00:25:05,439 Speaker 1: to be tapped down a little bit. But I do 451 00:25:05,480 --> 00:25:08,200 Speaker 1: think it's a useful innovation and it won't go way 452 00:25:08,240 --> 00:25:12,560 Speaker 1: anytime soon. It's fascinating. So to go back and summarize, 453 00:25:13,119 --> 00:25:16,240 Speaker 1: as you've thought since you wrote your article on not 454 00:25:16,400 --> 00:25:20,760 Speaker 1: worrying about inflation, how do you see the next couple 455 00:25:20,760 --> 00:25:23,199 Speaker 1: of years evolving? I mean, is it's clearly not going 456 00:25:23,240 --> 00:25:26,720 Speaker 1: to be a Jimmy Carter hyper inflation moment. But do 457 00:25:26,760 --> 00:25:31,080 Speaker 1: you see inflation just gradually declining as a concern or 458 00:25:31,080 --> 00:25:34,240 Speaker 1: do you see if we can mop up the various 459 00:25:34,240 --> 00:25:38,040 Speaker 1: supply chain shortages, do things begin to return to normal 460 00:25:38,080 --> 00:25:40,880 Speaker 1: in twenty two or twenty three. Yeah, I think that's 461 00:25:40,960 --> 00:25:42,920 Speaker 1: exactly what's going to happen. Is we're going to see 462 00:25:42,920 --> 00:25:45,240 Speaker 1: a sharp decline in the inflation rate over the next 463 00:25:45,240 --> 00:25:47,840 Speaker 1: two years. And I'm not alone. Look at the bond 464 00:25:47,880 --> 00:25:49,800 Speaker 1: market day of a forecast of inflation. So these are 465 00:25:49,800 --> 00:25:52,040 Speaker 1: people who've skin in the game. They're treating bonds and 466 00:25:52,119 --> 00:25:54,160 Speaker 1: you can tease out of that a forecast of inflation, 467 00:25:54,200 --> 00:25:57,439 Speaker 1: but they all show inflation returning it between two and 468 00:25:57,480 --> 00:25:59,880 Speaker 1: three percent of the next two years, and then eventually 469 00:26:00,000 --> 00:26:01,840 Speaker 1: that's settling down close to two percent, which is what 470 00:26:01,840 --> 00:26:05,560 Speaker 1: the FIT is targeting. And I think that makes sense again, 471 00:26:05,600 --> 00:26:08,240 Speaker 1: given that most of this inflation is supply side. Bottlenecks 472 00:26:08,240 --> 00:26:10,639 Speaker 1: will eventually get worked out if markets are allowed to 473 00:26:10,640 --> 00:26:13,359 Speaker 1: do their magic. Now, you know, the flip side of 474 00:26:13,400 --> 00:26:14,840 Speaker 1: this is, well, what about the three and a half 475 00:26:14,880 --> 00:26:17,520 Speaker 1: trilling five trillion package that you mentioned that gets through? Right, 476 00:26:17,560 --> 00:26:21,040 Speaker 1: we just had, you know, big stimulus packages. There's been 477 00:26:21,080 --> 00:26:22,680 Speaker 1: a lot of debt that's built up over the past 478 00:26:22,720 --> 00:26:26,239 Speaker 1: few years. And the way I think about that is, 479 00:26:26,760 --> 00:26:30,840 Speaker 1: if we continue to get package after package like that, 480 00:26:30,840 --> 00:26:33,159 Speaker 1: then I would start to worry about, you know, the 481 00:26:33,200 --> 00:26:37,280 Speaker 1: Freeman Night version of too much inflation. But as we've seen, 482 00:26:37,840 --> 00:26:39,520 Speaker 1: you know, it looks like it's gonna be hard to 483 00:26:39,520 --> 00:26:41,520 Speaker 1: get even this package through and it's not going to 484 00:26:41,560 --> 00:26:44,440 Speaker 1: be a repeat. In order to get an inflation, inflation 485 00:26:44,480 --> 00:26:47,280 Speaker 1: is at persistent rise in prices. You need a persistent 486 00:26:47,320 --> 00:26:50,560 Speaker 1: growth in money and government debt above and beyond what 487 00:26:50,600 --> 00:26:52,840 Speaker 1: we've had, and I just think that's not in the 488 00:26:52,880 --> 00:26:55,480 Speaker 1: cards politically. I mean, I think Republicans will take the 489 00:26:55,480 --> 00:26:58,800 Speaker 1: house back next year. I just think even the Democratic Party, 490 00:26:58,840 --> 00:27:01,439 Speaker 1: you know, Joe Mansion, Senator, there are checks in our 491 00:27:01,480 --> 00:27:04,000 Speaker 1: system that will prevent us from having to worry about 492 00:27:04,040 --> 00:27:07,720 Speaker 1: that type of inflation moving forward. That's great. I really 493 00:27:07,760 --> 00:27:10,240 Speaker 1: appreciate you're joining us. We're going to have a link 494 00:27:10,320 --> 00:27:13,960 Speaker 1: to your recent articles about inflation and also here twenty 495 00:27:14,160 --> 00:27:17,760 Speaker 1: twelve book Boom and Bust Banking the Causes and Cures 496 00:27:17,760 --> 00:27:20,280 Speaker 1: of the Great Recession. They'll be on our showpage at 497 00:27:20,359 --> 00:27:22,560 Speaker 1: newtsworld dot com. And I hope we can stay in 498 00:27:22,600 --> 00:27:25,760 Speaker 1: touch with you as you continue to evaluate and watch 499 00:27:25,800 --> 00:27:28,760 Speaker 1: the economy. And I think that all of our listeners 500 00:27:28,800 --> 00:27:31,240 Speaker 1: will have found us to be a very useful conversation, 501 00:27:31,359 --> 00:27:33,680 Speaker 1: so I'm very grateful that you will take the time 502 00:27:33,720 --> 00:27:36,119 Speaker 1: to chat with us. Well, thank you, Spigger Gingwich, the 503 00:27:36,119 --> 00:27:43,160 Speaker 1: owner's own line. Thank you to my guests, David Beckworth. 504 00:27:43,560 --> 00:27:46,600 Speaker 1: You can read more about inflation and the disruption of 505 00:27:46,640 --> 00:27:50,520 Speaker 1: the global supply chain on our show page at Newtsworld 506 00:27:50,560 --> 00:27:55,600 Speaker 1: dot com. Newtsworld is produced by Gingwich Sweet sixty and iHeartMedia. 507 00:27:55,960 --> 00:27:59,920 Speaker 1: Our executive producer is Debbie Myers, our producer is garn 508 00:28:00,080 --> 00:28:04,120 Speaker 1: Z Sloan, and our researcher is Rachel Peterson. The artwork 509 00:28:04,160 --> 00:28:08,240 Speaker 1: for the show was created by Steve Penley. Special thanks 510 00:28:08,240 --> 00:28:11,359 Speaker 1: to the team at Gingridge three sixty. If you've been 511 00:28:11,440 --> 00:28:14,879 Speaker 1: enjoying Newtsworld, I hope you'll go to Apple Podcast and 512 00:28:15,000 --> 00:28:17,840 Speaker 1: both rate us with five stars and give us a 513 00:28:17,920 --> 00:28:21,680 Speaker 1: review so others can learn what it's all about. Right now, 514 00:28:22,000 --> 00:28:25,639 Speaker 1: listeners of Newtsworld can sign up for my three free 515 00:28:25,680 --> 00:28:30,320 Speaker 1: weekly columns at Gingwich three sixty dot com slash newsletter. 516 00:28:30,800 --> 00:28:33,320 Speaker 1: I'm Newt Gingrich. This is Newtsworld.