Episode Transcript
[00:00:14] Speaker A: Hello, welcome to Call It Like I See it, presented by Disruption Now, I'm James Keys, and in this episode of Call It Like I See it, we're going to discuss the record gas prices and really the inflation we're seeing all across our economy.
And it's really seem to be putting a damper on all the good news. We're getting on the labor front with month after month, hundreds of thousands of jobs being created. And later on, we're going to consider whether we should be concerned about the negative trends that we're seeing as far as US Population growth over the last few years.
Joining me today is a man whose house is clean and his pool is warm.
[00:00:54] Speaker B: Tunde.
[00:00:54] Speaker A: Ogon.
[00:00:55] Speaker B: Lana Tunde.
[00:00:57] Speaker A: Are you planning to leave the door open for some fresh takes today?
[00:01:01] Speaker B: You shouldn't be giving away the insides of my abode like that.
[00:01:06] Speaker A: I'm pretty sure people have heard that one before.
[00:01:08] Speaker B: Not everyone needs to know how, you know, I got a pool and I don't. I'm not dirty. That I actually pick up.
I pick up laundry and I'm a good husband, you know, messing up the image of me.
[00:01:22] Speaker A: Well, I think, I think Z gets the credit for all that.
[00:01:25] Speaker B: Yeah.
[00:01:27] Speaker A: Now we're recording this.
[00:01:28] Speaker B: Now I got to stay silent.
Show's over.
[00:01:35] Speaker A: Now we're recording this on April 4, 2022. And today we wanted to take a closer look at the rising gas prices and more generally, the inflation we're seeing really hit the US economy.
Now reports are that as of March 30, we're seeing a national average of 424 a gallon, according to AAA. And incredibly, that's up 63 cents from a month ago when it was 361.
And the 424 is reported to be a record high for a national average.
And this is on top of what we already know, that prices for other items like food and rent and goods of all sorts have been trending up for months, if not longer. So, Tunde, to get us started, you have any general thoughts on what we're seeing with the gas prices and this spike that we're in right now, or also just inflation generally that we're seeing on things that we all rely on?
[00:02:28] Speaker B: Yeah, when I filled up my gas tank last week, there's somebody put a sticker on the, on the gas machine and it said that it's Biden's fault. So that's.
[00:02:41] Speaker A: The political messaging never stops.
[00:02:43] Speaker B: It's not that show.
Okay, sorry. No, look, there's, there's, you know, Good thing we're doing this is a longer show than just five minutes, because there are some complexities here. But yes, I mean, in early April of 2022, anybody who's not literally living under a rock in the United States and around the world, I'm sure understands and has felt higher energy costs, higher food costs, higher cost generally. And we all know of the negative environment over the global supply chain and all that.
I think that I look forward to this conversation today because there's several moving pieces with all of this, and that's what I know. We'll get partially stimulus, partially supply chain, partially what's going on with Russia in Europe right now, with the invasion of Ukraine, and we'll talk about all of it. But I want to say this, too, that I don't think it's talked about as much. I mean, part of it is the economy's on fire.
And so it's a very. I would say this inflation sucks and paying more for things sucks. So I'm not trying to paint a rosy picture here. I'm just saying that in general, these things are happening because the economy is very healthy post pandemic recession and that environment we had in 2020.
So in the long arc of looking at it, I would say that these inflationary pressures come from positive things generally, except for the war stuff.
[00:04:19] Speaker A: The war, the supply chain stuff. But we're going to get into that in terms of kind of what that means in a little bit.
[00:04:25] Speaker B: And what I think feels painful, though, this is the first time in about 40 years that we've had this environment. So for like, me and you as guys in our 40s, you know, we were babies back then.
So really, you've got to be, let's say, over your mid-50s to have remembered this somewhat and probably in your 60s, that you were actually old enough to be making your own money and buying your own stuff. So I would just say that the majority of Americans have not seen inflation at this rate in their lifetimes. And I think that's just feels different. It feels scary. And I think it's another one of those reminders that we've talked about in other shows, like maybe we haven't appreciated how good the system kind of became, was engineered to keep inflation down over this longer period of time.
[00:05:08] Speaker A: We almost need the negative in order to appreciate the positive. And if you get the positive first, it's hard to really appreciate it by the way our minds work. But I would push back on.
[00:05:18] Speaker B: That's why we don't eat dessert first.
[00:05:20] Speaker A: I Must be. But I would push back on you, I think. Well, with the gas in particular. Now, as far as the economy in general, I do think, yes, this is the first time we've seen inflation, just inflation period, happening like this, where it's happening across the board and these pressures are real and they don't have an end in sight right now as far as pushing prices up. But with gas, we have seen something like this. And it's really interesting to me how our perspective is on this, because I was looking at a breakdown of this. I believe it was in CNBC or Market Watch. I'll have it in the show Notes. But they were talking about if you adjust the cost of gas, if you actually do the math for price per gallon driven, then we're still doing better than we were 15 years ago or maybe 17 years ago, maybe 2005, because we had the higher prices then, but the dollar was worth less, Our purchasing power was less and our cars were less efficient, our vehicles were less efficient. And so actually we're getting sticker shock. And again, the spike does it to you because it's like, hold up, this is a month ago that we've gone up 60 cents, but the spike does it to you. So psychologically it's understandable why people are like, you know, what in the world is going on here? But it blew my mind when I read that because I remember being in college or I was in law school and then fresh out of law school, when it's like, whoa, the gas prices, it was a $50, and then now it's like $3, $350. And I'm sure it didn't happen overnight, but my recollection was just that, what it was. But yes, if you consider now how much our average fuel economy for cars is much better and our purchasing power for a doll, then it actually, like I said, the numbers, you look at the charts and we're actually doing pretty good relative to the last 40 years as far as what we're paying to drive around. And that doesn't even include electric cars and stuff that people have.
[00:07:04] Speaker B: That's true. We haven't appreciated, I think, in our country how our food and energy has not inflated that much, especially compared to other countries. Yeah, because we've been, look, we're the world's superpower and the world's greatest economic engine. So because of that, we do benefit by being able to keep kind of certain economies of scale. Now, I think part of the conversation is, why has that gone out of whack in the short run in the last year or two, why has it been so much different? And I think that's where we get into the realities of things like the supply chain backups. And then I would say this. Clearly the price of gasoline was going up prior to the invasion of Ukraine by Russia, the full invasion in late February of this year.
But it's undeniable that it's also spiked since then. And when you have one OPEC country that produces 10% of the world's gasoline and petroleum kind of thing, that when they go to war and there's a risk premium, what they call it, on the commodity, that it goes up and.
[00:08:18] Speaker A: That doesn't include the people that have said they don't want to do business with that person. Also you're just talking about just pure, the people who are pricing it out like, oh, we got to charge more for this now because there's more risk involved.
[00:08:29] Speaker B: Yeah. And so I think that all that has to be taken into consideration. And it's interesting too because markets tend to be forward looking. So we've talked about this on other shows like the stock market being a leading indicator. And I would say all the markets. Right. Commodity markets, which would include, let's say, oil.
So if people listening remember where two years ago, I mean literally it was late March and early April of 2020, remember when gas prices hit zero. Sorry, not gas, oil. The price of oil hit zero and then actually went negative for the first time in its history.
And the reason was because the whole world had stopped. So the market, the markets behaved as if oil was never going to be used again, put it that way. And that's why I went negative because you had container chips just sitting off there and companies were saying, we'll pay you to take our oil.
[00:09:20] Speaker A: Well, I would think you're overstating it there. It's not that they would never be used again, but just not in the short term. This isn't going to be used in the next three months or whatever. So these ships that are floating around, all these places where they're going to go to unload, those places are still going to be full because. And so I think it was more of a short term. They were just like, well, until the dam breaks here, there's no need for this stuff.
[00:09:42] Speaker B: Well, and so that's what I mean by their leading indicators because it's the assumption that people have. So just like the stock market going down 35, 40%, the assumption was, well, if the whole world shut down, no one's going to be doing commerce and no one's going to be buying gasoline, blah, blah, blah. Right.
[00:09:56] Speaker A: So now your point being that it going down was not based on the earnings report for the previous quarter.
[00:10:01] Speaker B: Correct.
[00:10:02] Speaker A: It was based on what people thought based on what was happening in the world, what would the earnings report would be for the next quarter.
[00:10:08] Speaker B: Correct. And so now it's almost like the opposite. Right. You've got coming out of and we'll get into this later in this discussion kind of maybe why is the supply chain was so disrupted coming out of the pandemic.
So that obviously has led to issues with even the supply of oil around the world. Right. So that causes price increases. But then you've got like you said, the risk premium on the war in Europe with an OPEC country kind of leading the charge in that war.
So now the market is behaving as if these current conditions are going to go on for an extremely long period of time. And usually like with most how about.
[00:10:48] Speaker A: This indefinite period of time from an indefinite period of time.
[00:10:52] Speaker B: And that's what I'm getting at is just like it was almost indefinite because you couldn't see the way out of the bottom of the kind of lows of the pandemic of the March, April 2020 time.
Now people, the markets can't see across the horizon to get when we're going to be out of this one. So that's really my point is saying that if we understand markets, this too shall change. At some point either the war is going to stop or supply chains get better or both happen. Hopefully at that point there won't be a premium on petroleum. But right now there is and that's going to continue to cause this inflation because remember, we're just talking gasoline, but a lot of products like rubber, plastics, all that are made out of petroleum as well.
[00:11:37] Speaker A: So the synthetics. Yeah.
[00:11:39] Speaker B: Correct. Yeah. Companies that are making those things will have to pay more too for the petroleum product. Yeah.
[00:11:45] Speaker A: And then the other thing I was, I mean with diesel and I want to do, I do want to jump to because we're actually going to take a look, you know, at the big picture here. But diesel is one like we talk about gasoline because that's what I'm putting in my car, so to speak. But diesels keeps going up.
It's gone up more from the standpoint than just regular gasoline, what we're talking about. So that's how everything gets around once it's here. Once it's here. And so that's going to be very inflationary as well. So the interesting thing about that is how we can see when the energy prices go up that we know we're going to feel that in other places there's going to be another shoe to drop or another domino to fall on that. Because all the things that we use are produce, food is grown, you need diesel for that or whatever.
Energy is used not only by us directly, but it's also used to produce everything. So we know that's going to trickle down and again, that's going to be joined into the inflation we've already seen as far as food and staples and so forth and just across the economy in general. So let's move to that next part is how much of this or how do you track this to the overall economic environment? You know, like. Because that's like we've mentioned supply chain disruptions, but we also have, you know, like low unemployment, which can. Can create inflationary pressures as well. And then also, I mean, the one that you and I have talked about many times is just having more money in the system, like every month. You know, we're just pumping more money into the system, the Fed is, and so forth. And these massive stimulus, which actually stimulus plans we've seen over the past few years, which have put that money into a lot of people's hands, a lot of people's pockets, so to speak, which was you. So all of those things, all of that stuff can create inflationary pressures. And so, you know, like, how do you track this overall to end that? You know, do you look at it as more one thing or another or just like we're getting hit from all angles and we just got to ride this out?
[00:13:37] Speaker B: Yeah, I think it's a little bit of the latter. Like, we are getting hit from many angles and we're going to have to ride this out. I mean, there's no secret sauce type of thing. I think the Federal Reserve, as we've seen over recent years, even recent decades, at this point, has done what I would consider a good job navigating through new environments. Like the great financial crisis was new. And they basically said, okay, let's not do what happened in 29, 1929. And so a lot of, since 2009, these have just been new kind of situations for the nation, for the economy. And I think we've generally.
[00:14:13] Speaker A: And for the world, by the way, with the interconnected world economy.
[00:14:17] Speaker B: Exactly. And I think we've generally navigated it well. The fact that we basically had the longest bull market up until 2020 in US history, from 2009 to 2020. And a lot of people were very short sighted in our discourse today. Everybody's stuck in their ecosystem and wants to point the finger at someone else. But the reality is what most people don't want to just acknowledge is that the American system is awesome.
And generally I know we got problems, so I know someone can poke holes and say what about this, what about that? But generally think about it. Like I said 09 to now. Think about the different types of leaders we've had in this country, the different threats to our economies, the different issues we've had globally. All that. And we're still here. Generally most Americans living very well. And like you just said, the lowest unemployment rate basically since 2019, since pre pandemic.
[00:15:12] Speaker A: And that's incredible to snap back that quickly. Yeah, that's, that's. I mean we did. We should take a second to look at that and be like, okay. To be able to bounce back from a pandemic. Global pandemics have wiped out economies for like a century.
[00:15:25] Speaker B: Yeah.
[00:15:25] Speaker A: In the past. You know, like this is stuff that can wipe you out for a long time. And so being able to weather that is pretty, I mean to your point is pretty incredible. I have a question for you though, just because you brought it up and I want to know like just your take on this, just I guess you're not prepared for it. But how is it not impossible that we would have had a bull market with the amount of money printing that was happening since 2009?
I agree with you that it's a good thing. We've had it. But I question whether or not it was inevitable if you're pumping that much money into the economy nonstop, seemingly the economy would continue to grow. You would have a bull market the whole time. Or am I wrong?
[00:16:06] Speaker B: I would say the idea. So here's the thing. That's a very good question.
[00:16:11] Speaker A: Yeah. I'm not trying to be funny.
[00:16:13] Speaker B: No. But by printing money, think about it. The whole fear going into 09 with all the money printing was that we would end up like Germany in the 30s or maybe like Venezuela kind of in the last decade or Zimbabwe 20 years ago that we'd have this hyper runaway inflation that would cause basically a collapse of the economy and not inflation.
[00:16:34] Speaker A: Like what we're talking about, what we have now like inflation, like 10, 20, 100 times that.
[00:16:39] Speaker B: Yeah. You know, bread costs 10 bucks by the end of the week.
[00:16:42] Speaker A: That.
[00:16:42] Speaker B: And then the next week it's by, it's 30 bucks. And so the, the thing is is that that didn't happen. And so the. So. So why is that? Right. So that's what. To answer your first question. So printing money doesn't always lead to bull markets.
[00:16:55] Speaker A: So I think that's, you know, that's my question, really. Like, would it have been inevitable, based on the amount of money that was printed, that a lot of that money just goes to the stock market and maybe how printed and it was the way it was distributed.
[00:17:06] Speaker B: Yeah, well, that's what I was going to say, and that's why I said to sell system. You know, I realized the system that we have is robust and good in the sense that, yeah, there was money printing, but it was printed in a way that was controlled and organized. So it wasn't. See what happened. If you look at the way money was printed under the CARES act, money was kind of thrown at everybody in the last two years, both under the last year of the Trump administration and then the first year of the Biden administration.
The CARES act was a massive stimulus thrown at the country, and then Biden had a stimulus where everyone got like $1,400 checks or something, I think at the beginning or early in his tenure in 2021.
So that's different than when you had what was called quantitative easing for the majority of the last 12, 13 years, because the quantitative easing was controlled by the Federal Reserve. And really that was about purchasing assets like bonds initially in 2008, 9. It was actually just. Remember, the tarp stood for they were.
[00:18:09] Speaker A: Buying bad debt too. Right.
[00:18:10] Speaker B: That's what I was going to say. Toxic Asset Relief Program. That's exactly what it was. They were buying toxic assets. So in that sense, it wasn't the same as just printing money like we've seen the last two years. It was kind of exchanging stuff. It was saying to banks and financial institutions, we'll take this debt off your books. That is bad, because the system.
[00:18:33] Speaker A: Well, yeah, it was trying to keep the wheels greased, so to speak. So we'll take your bad assets so you can keep lending and you can keep doing the things that'll make the economy continue to work.
[00:18:42] Speaker B: And that was a stimulative effect and a supporting effect by the central bank. But it was different than outright printing money and just putting it right into.
[00:18:51] Speaker A: Just putting it into the city.
[00:18:52] Speaker B: The general population stands like we've seen since 2020. And I think that's. So it's interesting because I know we talked about this offline, like, what's the difference? And I think that's the main difference. When we Started really thinking about it and trying to look into this is quantitative easing was a formal organized process between the financial system like itself internally and then we benefited as citizens of the country by like you said, the banks and the system got greased enough behind the scenes that by 2011, 2012 we could get mortgages. And remember the whole thing with the great financial crisis was banks no longer trusted each other. There was a lot of that counterparty risk once Lehman imploded. So the kind of stimulative effects that took place back then worked because it allowed banks in the financial sector to trust each other again, which then allowed them to trust consumers to lend out again and get this thing started again. Whereas, and this is no knock to anybody in power at the time because again the pandemic was something new. Never at once has the whole world literally shut down together.
So with that said, the CARES act made sense. Right. Because I thought we'd be in a depression. Remember we were losing 7,8 million jobs a week in March of 2020. So I guess it was. And I've had people say to me oh maybe they should have just done tax cuts instead of the stimulus. And I think eh, when I think about it, that's not what people needed then. Remember March of 2020 every people were shut down, people weren't working, businesses didn't know if they could pay people. Remember that?
[00:20:26] Speaker A: Yeah.
[00:20:26] Speaker B: So to tell a company and to tell me and you, hey, we're just not going to pay any taxes at the end of the year we'd been like okay, that's great but I still need to eat, you know, like, and people still need to get payroll. So I'm not, I think it was the right thing to do what they did. I just think this is the, this is the unintended consequence.
[00:20:43] Speaker A: Yeah. The result ultimately is one that you can quibble with details on it like you, you can quibble with the details on the quantitative easing as well, you know. So I think that there's legitimate questions that can be asked about that. Because while the ultimate result ended up is one we can live with and the ultimate result of the CARES act and what was happening over the last two years is one we can live with. That's not to say it couldn't have been better more so I just like to get it, get to the understanding of what had happened and why a lot of times because with that we can inform ourselves as we can continue to move forward, you know, so because like ultimately what we're doing now is we're Dealing with multiple. And this is, you know, look at, and I look at that question as far as how much. How do you look at this in the context of the overall economic environment? There's a lot of things that are putting inflationary pressures on society. I mean, I'm one that thinks higher wages is good, but higher wages does create inflationary pressure, particularly if you don't do anything to control the higher wages, to change the distribution of how wages are being. Are being spent. If everybody just gets a 10% bump across the whole company, then that's going to be inflationary no matter what. You know, if you can focus that and people at the bottom get higher raises or whatever, that that could be work out differently. But it's inflationary, you know, and that's what we're living with. So, yes, people are making more money, but that is going to cause businesses to charge more. That's inflationary. The, I think that the fuel thing and the energy thing is. I mean, we see that that's a truck coming down the road at us, you know, like it is like, all right, yeah, we're feeling that now and we're going to feel that in three months and six months or whatever. And at least with that one, though, I think we can look at significant geopolitical reasons for why energy prices are higher. It's interesting. You anticipated that was another question I was going to ask you as far as the nature of how we're seeing the energy prices go up immediately once these things happen. And it's like, well, it's because there's a. I was going to ask you, is this going to be a leading. Is this happening in a leading indicator way, in the same way that like the stock market does? Because we observed that, you and I, when the stock market was going down or getting hit in the pre Covid time, you know, when it was like, oh, nothing's even happened yet, but the stock market is taking a hit. And so all of that stuff and then the supply chain, which I know we're going to spend a short period with or a little bit that we have, and we talked about this last year, at the end of last year, the supply chain, not something that's been advertised but was so deflationary on our economy for so long.
And what I mean by that is, but the efficiency in which we could move things around kept increasing. And so that means you can produce things further away, you can move things around for cheaper and cheaper and cheaper. And that's just putting deflationary pressure on that was going on for so long. And we kind of just took it for granted that if that just goes neutral, even if the supply chain, it might be inflationary now because it's costing more to move things around, but even if the supply chain just stopped becoming deflationary, that would put inflationary pressure on everything. So, yeah, I mean, I look at it. Yeah. I also agree with you that we're just getting hit from all sides and it's like, whatever we can do. I don't. The Fed's already talking about, or they already did, I think, raise the rates once and raise the interest rate once to try to fight against this. And it seems like we're at the, at the precipice of this. We're not at the tail end, you know, like we're going into the storm right now.
[00:23:58] Speaker B: Yeah. I think we got a few more years of this type of disruptions. And you're right. So just to unpack that real quick, the Federal Reserve raising rates is to really slow down what is called the terms in the industry velocity of money.
Money moves around the system. And when rates are low, that's what I mean.
They did what they needed to do after the financial crisis by putting rates to zero to promote people still feeling good about borrowing money and buying assets.
[00:24:27] Speaker A: Promote people to take chances.
[00:24:28] Speaker B: Yeah, exactly. Take risks. Because you're right, because if people were still getting 6,7% on CDs in the bank in 2010, 2009, with a recent memory of the stock market crash, they'd all be in CDs. So you wouldn't have the velocity money just whipping around the system like it did the last decade.
This is why we haven't seen this type of rise in interest rates in 40 years, because we haven't seen this kind of inflationary pressure. So the idea for rising rates is really just to slow down that velocity of money so that the system can have time to heal and people can start saving again and all that and not have these runaway prices that could lead to a real negative style inflation like we talked about a few minutes ago in these other countries that they've seen in parts of their history. But going back to the 2020 supply chain, first disruption, I think let's go back to that idea of leading indicators. And people don't realize that the economies and markets are interesting because there's kind of a pseudoscience is not perfect like gravity or like math, but they involve things like math. Right. The finance.
[00:25:39] Speaker A: Yeah.
[00:25:39] Speaker B: Everyone knows it involves numbers, but what.
[00:25:41] Speaker A: Happens there's also A predictable element as well.
[00:25:43] Speaker B: Correct. Well, there's. There's the human element.
[00:25:45] Speaker A: Yeah.
[00:25:46] Speaker B: Which in.
[00:25:47] Speaker A: That's the one.
[00:25:47] Speaker B: Yeah. Well, in long periods of time, human behavior, you know, is predictable over patterns like, you know, people will stampede out the door together with something or they'll, like, now they'll buy into euphoric things like crypto and all that. You know, the bubbles can be created. And so, but in this very short term, six months, a year, two years, behavior is unpredictable. So what's happening, though, is what I'm getting at is the behavior of the leading indicator idea is pretty predictable, meaning no matter what the topic is, people tend to think that it's always going to be this way. So what I'm getting at is during the initial phase of the shutdown in March of 2020, the business community. Think about it. Companies have been rolling for years understanding supply and demand in their various industries. So the widget company knew that if it had to get. If it's in Missouri and it's got to get its widgets imported from China, it knows it's selling this many generally per year, they need to import this many. They need to keep so much on inventory, blah, blah, blah. Right.
So what happened is the assumption generally from all the business community in March of 2020 was, wow, the world shut down. What did I just say? Right. We were losing 7,8 million jobs a week in the United States. I'm sure every other country in the world was facing similar pressures. So the idea was that we could be in a depression and what we could be facing is like, what happened in 09, remember 09 to 2010, people didn't have money and stores were empty.
So a lot of businesses also didn't plan on replenishing their inventory and their supplies. Then you had what we talked about on a previous show, which was the change in patterns of spending. Right. People like me, they used to drive 2,000 miles a month, driving around all over the place. I stopped driving, but I started spending money on other things. So businesses weren't prepared. The Home Depots weren't prepared to have everybody fixing their home up in 2020 and 2021. So they didn't have enough plywood and enough PVC pipe. Right. And so.
[00:27:52] Speaker A: And they had too much of other things that.
[00:27:53] Speaker B: Yeah. And they had too much of other things. And then the last thing in there, which we've all learned, I think at this point, is why it's not, again, one leader in any country's fault or not, is just the different ways that different countries dealt with COVID China's still shutting down whole cities right now. They just shut down Shanghai in March. 21 million people because of some Covid outbreak. We aren't doing that anymore. Spain and Italy and other countries that have factories that produce things that go around the world also had Covid outbreaks and their stuff. So all this has led to. And then I'll get off my high horse here. The classic economic dilemma.
Too much demand and not enough supply.
And that means prices go up. Because you got all this money out there that people have both through stimulus and through things like markets based stock market, cryptocurrency, real estate market. Everything's been on fire. So people got a lot of money to spend, but the supply chain still hurting. So there's not enough supply. You got too much demand, prices go up.
[00:29:00] Speaker A: Yep. Well, no. And that's, that's, that's basic.
[00:29:02] Speaker B: I'm just trying to figure out who to be mad at. That's what I want to know.
[00:29:05] Speaker A: You need somebody mad at. I got to forget all the stuff you just said. You should just.
[00:29:09] Speaker B: I know I got to just turn to tv, any news channel and they're going to tell me who to be mad at.
[00:29:13] Speaker A: Yeah, they'll give you somebody, but. So my question should have been that whether the bull market was inevitable not just because of printing money, but the entire monetary policy. Basically it's the printing money and the interest rate. It was the two together basically that created the environment. Because like you said, if the interest rates are 0 and you're getting 1 point or 0.9 for a CD, it's like, well, no, you're better off putting that in the stock market.
[00:29:38] Speaker B: It's interesting because I think a lot of these things have also, I think disrupted even the narratives in my own head of how I was trained with view economics.
A lot of our economic theory over the last hundred years comes from people like John Maynard Keynes and Moskowitz and Milton Friedman and modern portfolio theory, things like this. Guys like me were trained deep on this and kind of traditional supply and demand. And it's just interesting because you look at, you know, all this additional supply of money into the system, then it drove things like price earning ratios and certain kind of key statistics that you might use to measure whether you're going to buy a stock or not and all that. And you had to account for these things like, well, there's all this extra money in the system. So generally the price of the market would be. It's almost like that quote that the Rising tide lifts all boats in a certain way. It's true that the rising tide does lift asset prices, whether you're sitting in that boat or not.
That might be an individual might benefit or not. But the fact that the asset price goes up. Goes up.
[00:30:47] Speaker A: Well, you made that point when we were talking about the inequality of the gains and how it was kind of just. It was the nature of who was owning and. Cause the asset prices went up and.
[00:30:58] Speaker B: Who was owning assets. Yeah, you just were in good shape. Yeah.
[00:31:01] Speaker A: And if you weren't, if you were just a wage earner, and I don't say that, you know, like if you were earning wages with no asset, then the wages weren't going up like the assets were. So it was kind of an unfortunate just result of the way things played out.
[00:31:14] Speaker B: Yeah. And so that's where I think that's why it's just interesting this last decade to watch it all. Because a lot of things that we thought would break the system, like printing being 30 trillion in debt, haven't necessarily broken the system. Right.
[00:31:29] Speaker A: So it's just somebody in 1990 that.
[00:31:33] Speaker B: No, I know, but that's the point.
Think about it. Think about 2009, when we printed 800 billion in TARP. I mean, that was the biggest number I ever heard in my life. I couldn't believe it. I was like, wow, they're going to print all this.
[00:31:45] Speaker A: And we were still at like 10 or 11 at that point in debt.
[00:31:48] Speaker B: That's what I mean. It's just interesting how it's all played out because like you said, you know, 15 years ago, Savita said we're at 30 trillion in debt as a country. I mean, people would have been like, wow, this, we'd be all been like, you're saying either hyperinflation or we're in a depression or whatever. And I think that who knows where it goes from here in that sense. But I do think that it's just an interesting. Because it allows us to see that stimulus is doing work.
They can go out of control.
Right. But there is a stimulant. I mean, that's why the word, the definition. Right. Stimulative effect of the printing the money. It did stimulate growth. It just now has to be reined in.
[00:32:25] Speaker A: But then you have these other effects. I mean, and that's actually, it's interesting and I want to get out of this conversation. But one thing I'll mention is that the next time people bring up the universal basic income, this would be something, I think if you want to have A substantive conversation. This would be something to talk about. Like, okay, well, hold on. So if we're going to do something like that, then how are we going to account for the stimulative effects of something like that? Because we know for a fact that if we do something like that, it's going to have, or excuse me, an inflationary effect on it. You know, it's going to have an inflationary effect we don't want. If we start doing universal basic income, how do we stop milk from costing $10, you know, like. And that would be the question we have to answer if we're going to look at something like that. Like I said, looking at it substantively, you know, not saying whether you do it or not, but just having a discussion on it.
[00:33:10] Speaker B: And we still need to figure out what people are going to do all day because I think having them sitting on social media has proven that it's probably not going to end well if.
[00:33:16] Speaker A: Everybody'S people are going to be rushing capitals all over.
[00:33:18] Speaker B: Man, just got this, got all this money, but they're not actually doing something all day. But yeah, but no. And lastly, I just want to say before we move to the next topic on this, just the theme that we're talking about today on inflation, what I want to kind of warn my concern going forward, if I can be bold enough to make a prediction, is as we said, there are several factors playing into this moment. So one of them being the conflict in Europe right now.
It's been talked about generally, but a lot of people still don't realize that 30% of the world's wheat, like grain, comes from both Russia and Ukraine.
50% of Asia's wheat comes from Ukraine.
So my concern is that there's not going to be a harvest coming out of Ukraine this year. And Russia's got sanctions and no one's going to be buying wheat from them. So we could see continued inflation from our food supply through this year as the lack of harvest and the lack of being able to ship food.
Again, we talked about the supply chain, how companies have prepared over years of knowing their supply and demand stuff, that what kind of inventories they have. Well, it's no different for food companies like General Mills or Kellogg or Pepsi and then restaurants, too. So this is now going to be another massive disruption in the supply chain of food, which was maybe not as predictable as the pandemic stuff because it was a war. That's all I'm saying.
[00:34:47] Speaker A: Yeah, well, I mean, I think across the board, we don't see the Fever breaking on inflation. Like it seems all the factors have led us there seem to still be in place. And then as you pointed out, some of them are. There's still some that are looking to affect us even more, the energy one being the big one. But then also, as you point out, if Ukraine and Russia are producing so much wheat in the world, and we have an economy that's interconnected in the world, so if there is less wheat that is available to be bought in China or in Brazil, then that's going to raise the price across the world, around the world.
[00:35:22] Speaker B: And so that's going to raise the price of beer and whiskey, bro.
It's going to make me and you very excited.
[00:35:30] Speaker A: That could cause a revolt.
[00:35:31] Speaker B: I wonder, is rye whiskey, is that off weed or is that rye something else?
[00:35:38] Speaker A: But I do want to move to the next topic and it's a different direction, so to speak, but it's something that is all the time worth talking about, and that is we're seeing reports of just a trending collapse of US Population growth. So that's not the population itself, but that's the US has relied on and benefited greatly from continued growth in population. A lot of times once nations get wealthy, their population growth slows down or flattens out or goes down. And so but the US has been able to sustain over a period of prosperity, high growth in population, and which has allowed it to continue to grow and continue to grow and continue to grow. It's referred to, quote, unquote, a cheat code as far as our ability to grow. And now that over the last two years, two, three years or so, that's slowing down, so how concerned should we be? Is this just pandemic, or do you think that the factors that are being raised and talked about with this are ones we really should be worried about?
[00:36:40] Speaker B: No, it's because I got a vasectomy.
No, I'm just kidding. And just for your knowledge, I haven't had a vasectomy, but. Oh, hey, man, that man.
No. But yeah, I guess I'm telling the audience no one really cares. But let me answer your question then.
I would say this. I think it's a little bit. It's interesting you bring up the pandemic because I do think kind of like the conversation we just had earlier in part one, where this inflation stuff doesn't just have one root cause and has several factors that kind of played in over this last couple of years. I think to get us here on the inflationary and the economic side, I would say the same Thing I think with our population, I think it's good you bring up the pandemic because I think it's important to recognize, yeah, we had an unexpected 2 million people, sorry, 1 million people die in the last two years.
So that again, our statisticians are used to a certain birth and death rate in the United States, just like companies are used to selling certain products and knowing what kind of inventories they needed. And the pandemic threw that out of the way. And it threw out, you know, kind of our birth death ratio out of whack too.
[00:37:48] Speaker A: So that's just that, I mean, the ratio. But also, remember, the pandemic was so disruptive that it also would have affected people having kids as well, like job insecurity overall, just like, oh, do I. The fact that it's a lockdown, do I want to have, you know, do I want to be while in lockdown, having a baby? You know, things like that, like all of that stuff would affect the calculations that people would normally make on whether or not to have a child at a given moment. And so, yeah, so the birth. And just for the, we looked at a piece from the Atlantic on this, which I'll have in the, in the show notes, but it talks about, you know, the three factors that you and as you would imagine for a nation that contribute to population growth or, you know, the growth rate. One is births, one is deaths, and the other is immigration. And so how the different factors and the pandemic affects the immigration one as well.
But it also looked at some of the longer term things on the birth rate and on immigration that aren't just pandemic related. So there is more to it. But the pandemic, it's difficult, I think, to look at anything, a snapshot over the last two years and come away with too much because the last two years have been pretty eventful to say.
[00:39:02] Speaker B: Yeah, well, it's interesting you bring up kind of the behavior aspect too. It's not just the deaths that I mentioned, but it's a good point because it reminds me, I mean, I remember talking to some younger couples, newly married and all, that maybe they got married in 2019 and they were saying that they chose not to have a baby, they were planning on having kids immediately. But then after the pandemic, like you're saying, a lot of women didn't feel like going into a hospital at the height of the pandemic, when everybody was still scared of COVID and being pregnant and trying to have a baby with a mask on.
And so I think that's real. I think it's also real that people don't want to acknowledge some of the more reality part of human life. Right. When you shut down the nation and then you shut. Some states were shut down for a lot longer. Right. Like heavily populated places like California and New York that have half this country's population, probably in both states. Look at how. Think about how many people 18 to 25, weren't going out to clubs and all that, you know, millions and millions of people not partying.
[00:40:02] Speaker A: So you're saying this is due to the lack of recreational sector?
[00:40:05] Speaker B: Yeah, yeah. No, I'm saying.
But think about it. If you had 50 million people in the summer of 2020 or, you know, partying normally, maybe half a million babies will come out of that a year later. I mean, that's what I'm saying. People don't want to discuss it, but a lot of people do have kids with people they don't know that well when they're young. In certain parts of the country, that's just life.
[00:40:25] Speaker A: So I understand what you're saying.
[00:40:27] Speaker B: You know what I mean? So that's all part of it. But I do think the other parts of the article too were very interesting to me. One was as a kind of an advanced economy, like what's been happening in Western Europe and certain parts of Asia, like Japan, it's been historically kind of assessed, I guess, and proven that as economies mature, as women have more rights, for example. Right. And can go to school and work, there tend to be less babies coming out of those societies.
[00:40:56] Speaker A: That's actually a known thing across many societies that as women get more rights, that you will see a normalization or flattening of the birth rate.
[00:41:08] Speaker B: Correct. As opposed to, let's say, in Afghanistan, unfortunately, where it looks like the women's rights been rolled back a bit since we left. But there's not much else for a young woman in those type of societies, unfortunately, except for once they hit puberty, they get married to some dude, usually in a Marine marriage, and they just start having babies.
[00:41:24] Speaker A: Well, I mean, there's also a lack of agency that is involved.
[00:41:27] Speaker B: They don't have control of their own destiny. Exactly.
[00:41:30] Speaker A: There's, you know, like there's a certain societal expectation, you know, and I think also options and then also expectation and.
[00:41:36] Speaker B: Things that we have even talked about on our show about our country in the past, when our country was more rural and all that. I mean, in these less advanced economies, they need more kids because they still farming and they're still Doing things that, you know, it's kind of having kids as part of your own survival as a human being long term.
[00:41:54] Speaker A: Let me piggyback on that real quick, because what I think one of the things that stood out to me, like all of that stuff considered on the birth rate, the one that stood out to me though, was the idea that in cities in particular, we're seeing birth rates go down it compared to birth rate like in Los Angeles now and 20 years ago, how many live births in Los Angeles County. And it's a big drop.
And you know, what's interesting to me on this is that it is we know economically, you know, from just a development standpoint for millennials, for young people coming out of college or whatever, it's harder to get on your feet now than it used to be. And it's harder to get ahead. And so that definitely could have, for young families, put pressure on having either delaying having kids or having less kids than if you're feeling more secure as far as bringing more kids into the world, as far as, oh, I feel like I'm in a good place. I'm not in a one bedroom apartment or whatever in this large city. So the idea of how city life, and particularly, you know, because things are so expensive in the cities, but how this could be something that in the cities could be just the way things are developing is something that's putting pressure on it from a birth standpoint as well, which, you know, like I said, just interesting that I did something I hadn't thought of just from the standpoint of it might be harder to get ahead, you know, in the cities nowadays than in the larger cities. Again, you know, like the big, the New Yorks, the la's or whatever.
[00:43:17] Speaker B: It's also a trend that we've seen for the last few generations where people are just having kids older.
So I think about it, I mean, you know, in today's America, right, a lot of kids are still on their parents, some sort of dime, you know, by.
[00:43:32] Speaker A: Still my. Yeah, yeah.
[00:43:34] Speaker B: And so. And so, you know, whereas 100 years ago, by the time you're 25, you're already on your second kid. For in most parts of this country, that wasn't abnormal. You know, most people married their high school sweetheart and started a family pretty quickly thereafter.
[00:43:46] Speaker A: But also most people, you know, you didn't necessarily need super education to get a decent job or a job that could take care of your necessities. We still had one earner households that could be middle class at that time.
Pretty regular, you know, pretty widespread. So there's a lot of factors in that standpoint that would lead, like I know you spoke about the unplanned pregnancies that may be down, but that would also lead to less planned pregnancies.
[00:44:10] Speaker B: Yeah, yeah, exactly. So, you know, one of the last things that I think from the article that talked about, if we talk about from, you know, pandemic being a potential factor in the last couple years, but then from a longer trend standpoint, you've got things like two earner households, all that affecting the rates of birth, so on and so forth, and different cultural things like kids living at home longer and being weaned on their parents longer. The last one to me is immigration, and I've heard these kind of things said before, that societies that allow for kind of continual immigration tend to have growing economies in the long run and that these are some of the things we've heard of in Western Europe, that part of their issue with their shrinking economies is the fact that they're having less births and they're not having a robust immigration system coming to make up for those lower birth rates. And so there was something here that cited that since 2016, it's been a seven figure decline annually in immigration, legal immigration as well as illegal immigration, clearly. So that has also kind of, like I said, a lot of people don't want to realize that people do still have one night stands and end up getting pregnant from it as part of the reason why babies are born.
A lot of people don't want to recognize that immigration is a positive, a net positive effect to the economy, period. Yeah, yeah.
[00:45:42] Speaker A: I mean, may not like that, but.
[00:45:43] Speaker B: The stats don't lie.
[00:45:44] Speaker A: A substantial one. Like that's, I mean, that to me is the biggest takeaway here is, you know, the birth rate stuff. A lot of the stuff that's happening with the birth rate is kind of just the normal stuff that happens. Like again, taking out the pandemic stuff. We can do things better from a social and economic standpoint to make it so that families are able to more easily have the number of kids they want to have or whatever. But the big takeaway here is that our immigration policy is undermining us, you know, and that if we want, like this is the thing that's always gotten me like the immigrant, the immigrant in a society is the person who got up off their butt and left everything they know in order to, for the chance of something better. That kind of mentality seems to be the kind of mentality you'd want in Your country. Like that's not the person that's just sitting on their couch all day. That's the person that's super motivated and is a risk taker and all this other stuff. Like those are the kind of characteristics so I've never understood.
I mean, obviously there's an emotional component to this, but just from a thought standpoint, it's like, well, these are the kind of people you want to come to. The country is the people that are super motivated, that are willing to take risks, that are willing to leap and not necessarily know where they're gonna land and so forth. And so our hostility towards immigration is self defeating.
And we're seeing that in terms of. Now, this trend started before the pandemic, but we're seeing that now play out in some of these numbers. And this has always been, it's not really a secret.
Prior to 1865, America had this huge advantage because they had this huge unpaid slave labor force on site. Not like in some far away place, but they had slavery basically, and it was on site and it was a huge advantage. After slavery, America had huge influx of immigrants every year. Another advantage. It's no secret why the country's economy became the biggest and the baddest the world has ever seen. And so now, wait, now I don't want to go back to the slavery, so I want to keep the immigration thing going. Because if we keep turning off all the, we turn off that advantage, then we're going to be seeing here what happens in a lot of countries once they get to a certain level of development and wealth and that, you know, I'd like us to keep growing like we have.
[00:47:56] Speaker B: Or you could go back to slavery.
[00:47:58] Speaker A: That's the one I said.
[00:47:59] Speaker B: That's always.
[00:48:00] Speaker A: I didn't want to go back to that one.
[00:48:02] Speaker B: We don't have to enslave black people. We could do it a different way, but.
[00:48:07] Speaker A: Oh man.
[00:48:08] Speaker B: So anyway, I see us going there. Yeah, I did. I was waiting.
[00:48:13] Speaker A: Oh yeah, that joke, right?
[00:48:14] Speaker B: You gave me an alley oop, dude. I had to stuff it, bro.
All right.
[00:48:20] Speaker A: I'm glad my live. Yeah, I'm glad the live was in the right spot for you.
[00:48:23] Speaker B: It was one handed too.
I had to come in. Just one hand, make it pretty, not even two.
But it's interesting the points you make because that's where we get to, I mean off the economic topic, right? The culture, the politics and kind of xenophobia. And in general, I think most native born people in any society can't appreciate what you're Saying because they didn't immigrate here.
[00:48:45] Speaker A: Oh, yeah. I mean, that's the greatest hits. That's not limited to America. Like the greatest hits of politicians is to demonize immigrants all over the world, all society.
[00:48:54] Speaker B: I mean, reality is, you know, taking away the fear of Muslim terrorists and all that kind of stuff. The Syrian refugees going into Europe's probably, you know, if we look back 50 years from now, I bet you the descendants of those immigrants are gonna be all owning little businesses and thriving.
[00:49:08] Speaker A: That's what the numbers say.
[00:49:09] Speaker B: Exactly. They're gonna be working their butt off once they get there to be part of that economy and that world.
[00:49:15] Speaker A: And also what we said earlier, you don't really appreciate something until you don't have it. And a lot of times we're in a situation where we've had it the whole time and then we lose. And it's like, oh, no. And we never appreciated when we did. Immigrants didn't have it. They come into the country appreciating the stuff because they're coming from a place that doesn't have that. So that's what I was born. Don't have the appreciation for those things that the immigrants do.
[00:49:40] Speaker B: Unless your parents immigrated, I'll say for us, because we're in America here to the US Right?
Or maybe your grandparents, if you had a chance to have them around long enough. I mean, most Americans don't appreciate that because they haven't seen. If you're prior to your grandparents or great grandparents, your ancestry was American. You've never seen anyone with your own eyes in your family that has those stories.
I do think it's interesting, but for the United States specifically, just to end on this, where it's dangerous, of how we've been dealing with immigrants. And I know that when we talk immigration, it creates this visual of people crossing the Rio Grande or trying to climb over some wall or something. Right.
[00:50:26] Speaker A: You know, it only does that if that is your focus, because your focus defines your reality. So if you're focused on that, then that's what it'll be.
[00:50:33] Speaker B: But a lot of people in our country have been made to be focused on. They are, so I'll put it that way. But.
So of course, the illegal immigrants kind of get lumped into the legal immigrants in this conversation. But one thing we've had with these HB1 visas and whatever, I don't even know if I'm getting my number letter combos right. But we've been able to attract the best and brightest from around the world. Things like Engineering, software, computing, and think about that's a national security play in reality. Because what we're doing is we're siphoning off the smartest people from other countries and we're getting here.
[00:51:07] Speaker A: No, we're getting the smartest, the most motivated.
All of these things like yo, to me it seems like a great idea.
[00:51:13] Speaker B: That's my point. Yeah, I'd rather have them here than somewhere else. So that's number one. Number two is the problem is that we could get ourselves caught into a downward spiral of this kind of xenophobism. Because if we start having a zero sum mentality in this country where you can't come in because you're going to take something from me, which again, I've never seen one American that wants to go pick tomatoes for less than minimum wage, but I guess there must be people out there that want to, then what's going to happen is then we're going to continue to create an environment that goes against this pro growth that we're talking about. Because what I think a lot of Americans don't understand about our system, capitalism needs to feed on something and it needs to feed, like you said at one point, it fed on no wages, which was called slavery.
Now what we need is it needs to feed on lower wages. And I'm not talking about that. I want to see people live in poverty. What I'm saying is that we all know the janitor can't make the same as a CEO in the system. It just doesn't work like that.
So because Americans have shown they don't want to do certain labor for low wages, then how else are we going to get those jobs filled without bringing people in and having a constant conveyor belt? Now I'm not saying you let people sneak into the country en masse, but there's ways you could do this without always making it into some hyper polarizing conversation, that's all.
[00:52:39] Speaker A: Yeah, I mean, and I don't even think it needs to be that they're trying to do work that you don't want to do. I mean, what it is is you're bringing in more people. And so, and they may be more willing, generally speaking, native born of a country, generally speaking will be more entitled. Like that's just kind of the way it goes. Whereas the immigrant is one, generally speaking, again, I'm speaking in generalities, that is more willing to see their journey as a stepping stone. There's a progress, you know, along the way. So I mean ultimately what you want is just more people that are willing to work and whatever they end up doing, they could be coming in as doctors, they could be coming in as janitors, they could be coming in or whatever. But as long as they're coming to because they want to work, because they want. Because they look at what we're doing and say, that's cool. I want to be a part of that. That's kind of. That's how you. That's how you have the growth mentality. Otherwise, if you, like you said, the real risk. Risk is. And we've seen this happens in countries, this has happened to countries in Europe where you kind of close your borders and you lock everything up and you're not able to have that growth kind of mindset, that growth approach in your economy anymore. Your economy. You're just fighting to keep things level at that point, which that's not something we're accustomed to. And as long as we want to be the biggest and the baddest economy in the world, that's not something that we're going to be able to do. So. So ultimately, it's one of those things that I think it requires a kind of mentality shift amongst Americans now. The business community already has this kind of mentality by and large. I mean, they're the ones that have always been pushing for.
They're the ones who have pushed for it and everything. But it seems, like I said, political greatest hits. It's always been something that a leader can demonize immigrants and gain a lot of support from. That's something like, take that anywhere, any society, anywhere in the world, and there's certain people that will be responsive to that message. So, I mean, it's almost like part of the. Just the human condition that we're going to deal with, this resistance to immigration, to xenophobia. But if we can keep our eyes on the ball and the big picture, ideally, we can still take it. We still leverage the strengths that immigration can bring us and not end up in a situation where our population growth, which is trending towards lower than it's ever been now or lower than it's ever been in recent memory, not have that actually go into the negative where we're not growing or where even flat, is not going to help us as far as having a growth mindset in the economy. So I think we can wrap from there.
[00:55:05] Speaker B: So we could just shut the border.
That could solve it, right?
[00:55:10] Speaker A: That would not. That would.
[00:55:12] Speaker B: You could stop, shut the border and make more babies. How about that, huh?
Pay those babies minimum wage, right?
[00:55:19] Speaker A: You think you're up for that one.
No, I'm already. You gonna contribute to that effort?
[00:55:24] Speaker B: No, I'm too.
[00:55:25] Speaker A: You already said you were still capable.
[00:55:27] Speaker B: No, I was joking. Now that you challenged me, I gotta go, you know, put my tail between my legs and go home.
[00:55:33] Speaker A: I'm out.
[00:55:34] Speaker B: That's good.
[00:55:35] Speaker A: That's good. Well, we appreciate everybody for joining us on this episode of Call It Like.
[00:55:39] Speaker B: I'm Going to sleep. I'm tired.
[00:55:42] Speaker A: Yeah, we. You can get us wherever you get your podcast. Subscribe to the podcast, rate it, us. Review us, tell your friends about it, send your. Send it to your friend. And until next time, I'm James Keys.
[00:55:51] Speaker B: I'm tuned up.
[00:55:52] Speaker A: All right, and we'll talk to you next time.
