Joe Clark, Daryn Hardisty, Ronald Reagan discussed on Consider This with Big Joe Clark


Program. I'm your host, Joe Clark. And I'm Daryn Hardisty. Happy to have you along. Hey, you know I grew up in was born in the late sixties. So I got to experience late sixties mid sixties whose line? Um, I got to experience This rise of inflation, the gas lines that we had, you know, some of the crazy stuff that was going on. I got to watch this peak of inflation, which was actually 1980. The average 30 year mortgage in the United States that your pop quiz for the day. What was what was the average 30 year Mortgage Darren in 1980 think was wrong. 17% 18% pretty clothes on. I'll give you some credit Ronald Reagan and just taken office we actually had an engineer who had 22% was his 30 year mortgage rate. On and in Indianapolis. Know why, Darren Buddy? Your math guy, right? Your former math teacher. Why in the world do you suppose anybody would pay 22% for a mortgage. Well, I think the world would go crazy. If that was the case today, people wouldn't understand. But I I know that mortgage interest is tax deductible, so that would um possibly be a Some kind of a write off. So when you and Morgan decided to get your house today, right, you did it because you were getting a tax deduction. Absolutely not. Why did you do it? We wanted a home to live in. Well, why? So that we could raise our family. So you had three little kids, and you needed a place to put them to sleep right? And that's what mommies and daddies do right. So there is a big believer that The average consumer does stuff based on the interest rates. Right there. They, you know many act. Many economists believe that that is purely the driver. The Federal Reserve used to believe that they could raise interest rates to slow down the economy, like anybody want to slow down, right, but what you have inside of inflation. Write. Anything up to 4.5% is is really deemed okay. Once you go about 4.5 people start to quiver a little bit. You start to hear this word. Hyper inflation, right? You know, which has been a large part of my life, not I am not a conspiracy theorist at all. But I will tell you that I believe inflation is much higher than what you hear in the CPI I It's braced on two things, goods and services, right. I think services are accelerating at a much higher rate than the inflationary rate that we hear. Right and products that you're buying for your kitchen and everywhere else are deflating because we can get them from other. You know, we could get a couch from China, right? I can't have my hair cut in China, right? This the the people who help with the yard. Right. You know any of those services that you have have to be right here. Let's go ahead and and hit this. So what? What is the difference? And if you don't explain this to your kids back at school What is the difference between inflation and deflation? It follows explaining it. I would start with just the value of the dollar. You would say. How much can this dollar by and if you're experiencing a lot of inflation, your dollar just its purchasing power becomes less. It's just not gonna be able to buy as much. As it did before. Where deflation Your dollars. Going to be more valuable is going be able to buy more things than it did before. But there's consequences to both of those things. So why does if that's the case? Was pretty simplistic and accurate Answer. The widest deflation scare the heebie jeebies out of the Federal Reserve. Deflation means that the people who are providing services or goods are going to be making less. They're not gonna be able to stay. Um, you know, the last time we experienced major deflation was in the 19 thirties on we all know, the 19 thirties. You know, the economy just wasn't doing too great. So I think keeping the engine roaring and making sure that people are able to spend their money. People are able to sell their goods and services and make sure that you know, Rick constantly moving up. Is always a good thing. If you start to deflate you make that dollar more valuable than it needs to be. Then that just kind of drags the rest of the economy down with it just because you have too much and then people, you know they can't sell their items to have a profit and only only bad things come from there. Tax revenues. Fall wages tend to fall. Nothing good comes from it. But the biggest thing and I will tell you the federal Reserve. I think his delusionary and their ability to believe they can control the economy, but they certainly try and they have a mandate from Congress to attempt to do so right. They have What they call full employment on appropriate price appreciation, right? And so the belief on in Capitol Hill and in most business schools As if I raised the interest rate higher. By definition, I will slow the economy, right. Um in that might work when you're younger, But it doesn't work. The less debt you have, the less you could care about the interest rate, right? I mean, You know, it's if you're carrying a lot of dead on a credit card, Then you care about this right? But the older you get the less The less that impacts your the decisions that you make. There is no known mechanism to fight deflation. Right when when the cost of items go down By definition, I have more discretionary income. How do you speed me up? You can't put more money in the system. I've already got money. Right there. There is no known and so Now you just kind of sit there. You twiddle your thumbs and you pray, you know, that's that's something is going to drive. Drive you out of this and so You know, that really is the difference in terms of what's going on. You can. You know, we used to say we used to say you can only drop interest rate so far right to zero, And now we have negative rates, you know, So the feat of that kind of well, um, Yeah, well, you know, I've heard of interesting statistic between checking accounts and money market accounts or somewhere around $8 trillion in cash sitting in those accounts right now. Is that going to that much cash on the sidelines, you know, receiving all this stimulus money, All these things that are coming out all of the people who went through 2008 experiencing what it felt like to have that long period of time of, you know of the recession. Um, well, that having a deflationary impact by having that much cash that's not being put into the market actively go into the economy active, you know, The interesting thing is, if you put 30 economist in a room and asking that question, you'd have 37 answers. I mean, they won't even agree with themselves, right? I mean, there. There. There's um There's a lot of reasons to speculate. The answer to that question is both. Yes and no and it it really does come down to who gets the checks, right? So For those of you who have paid attention to the news lately in the marketplace, you've heard a lot about this place called Robin Hood. You know, And what happened is we watched a lot of people open up accounts that happen. Brokerage accounts for the first time in their lives that happen to be identical to the amount of stimulus money they got. Right. And so the money went into our market, pointing out and pretty much arguing that they didn't need the money right. It was going in. It went in tow my world into the investment world. And created some havoc for the record. But there's other people who really, really need it. I mean, we we live in a world and you never Now then you'll hear an economist talk about the difference in The separation of wages right that the rich are getting richer and the poor getting poor. That is perhaps never been so true is right now and and it's because of the wealth index. It's not the income index as much. It's the people who already have assets who are watching a market that's going up, you know, 45% and a quarter on D. Obviously, that doesn't happen all the time that it's been happening. Right. The market even had good returns through 2020 on so you the people who had assets have more. Yeah, right. And people who are starting out have less that by itself creates what should be inflationary pressure, but you've got to get people to want to buy it..

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