Well, I promised you guys a video about the former head of the Dallas Fed.
He just did an interview yesterday with CNBC this young lady at CNBC,
and I want you guys to listen to a lot of the comments cuz he's,
she's asking him great questions.
She's asking him, basically, you know, there was so much infrastructure in the
new, in all the stimulus packages that we pumped out there, isn't that really
what caused a lot of this inflation?
And then also with the infrastructure bill and all the other stimulus
stuff, that's also the reason why we have employment not crashing.
So we stimulated the economy tremendously.
Put a bunch of money out there, inflation went up, but then the Feds
saying, well, the, you know, the jobs market isn't suffering well.
Let's review this interview, and I'm gonna pause it periodically and
put in more content or comments, and then you guys make a decision
what you think is on the horizon.
So let's get to it.
This is Robert Kaplan, former President of the Dallas Fed, and currently co-chair
of the Draper Richards Kaplan Foundation.
Welcome.
Thanks Kelly.
So, most significantly, let's tally up the impact.
How, and we've all seen, I'm driving on the highway now, they're doing work,
and it says, you know, funded by the, I forget which of the three bills.
There's 2 trillion in total, the last couple of years, 2 trillion in bills.
How big an impact are we talking here?
So at a 500,000 foot level, you're seeing construction spending is
dramatically higher as a percentage.
GDP to understand this better, you've gotta go into each local market.
And I do a lot of traveling around the country.
What you see is many states.
And the announcements are continuing, are announcing the largest infrastructure
project in the history of that state.
Okay.
Some of the comments he made there is he goes all over the place and
every segment is a little different.
So that's what we also say on this channel, we say, you can't brush
the whole country with one brush saying the whole economy's crushing,
but again, this is right from the Fed, so let's continue to watch it.
The impact of these government enabled construction projects, when I say
government enabled, cuz they're tend to be public, private partnerships
is they not only affect construction spending, but they have a multiplier
effect on the service sector.
In a lot of these markets that are being done, got very
tight labor markets already.
So people are gonna switch jobs to move into these new jobs.
And so at a high level, it may look somewhat immaterial at a local level,
it's having a very material effect.
On these local labor markets and service sector markets.
Yeah, and I think on the labor market in particular right now, when we look at
the claims number this morning and things haven't really, so they slowed last year.
We kind of saw the implosion of a lot of the high value, you know,
tech stuff and things like that.
But the resilience of the rest of the economy is the most
notable thing about this year.
That fun.
You made an interesting point the other day that some of the localities have to
spend this money before the end of 2024.
And I guess the question.
That's what's crazy out there too.
Let me interject there.
Cuz I have a lot of family members that work at city and state and localities
and things like that, and they get this stimulus money and basically,
they're forced to spend this stuff.
So like, here's a billion dollars, you have to use it by the end of
the year, we're gonna take it back..
Well, if you were offered that, what would you do?
I'm spending the money so you're not gonna give it back to the government when you're
there giving you basically free money.
So let's keep going with this thing.
The question is, do we want all this to happen?
Because if you looked at it glass half full, you'd say, wow, the
Fed's getting everything it wanted.
Inflation's coming down and the economy's still strong.
And isn't this, you know, is Biden on helping or is it, you know, counteracting
what the Fed is trying to do?
Okay, so let's stop there.
2 trillion.
Guys, imagine 2 trillion, okay.
Was in new spending by the government.
So we wonder why our taxes are going up.
We wonder why they're gonna have to cut some services, but they
don't want to cut any services.
But look, infrastructure Bill 1.2 trillion in inflation reduction Act, which was
basically the green deal pushed into the inflation reduction act of 430 billion.
And then the CHIPS Act.
That's helping manufacturers of chips, who their CEOs are making
millions and millions of dollars, they're helping them as well.
So I'll keep my comments to myself right now, but they're 2
trillion in government spending.
Basically giving it out there saying you spend it, and if you
don't, you gotta give it back to us.
So, not a good policy right there, but let's keep going.
It is, in my opinion, it's blunting to some extent what the Fed is trying to do.
It's not all bad.
Because it means, I think without these projects, we might have
otherwise been in a recession by now.
So the economy stayed resilient.
Many of these projects are good projects.
These battery manufacturing projects are necessary, but many local
officials are telling me, we've had this project that we've been looking
at for 30 years, and because of the government money, it was marginal
until we got the government money.
And so I'd recommend is I think it means if I were on
the FMC, I'd be leaning toward.
One more rate increase, although I'd have an open mind going in the meeting,
but I would be urging if I were at the Oklahoma City I'd be urging the Fed to
do a lot more work and understanding not only what's been announced,
but what's the forward pipeline.
Because if this money were to dry up right in the out years, I think you'll see these
rate increases be have a lot more teeth than it looks like they have right now.
And Chair Powell, he was asked about this at the last press conference.
He kind of downplayed the impact he did.
And we always know there's a reluctance to kind of weigh in on what you
know, the administration is doing.
And I think he said it was immaterial, although it's helping construction and
maybe at a high level it looks that way.
But think this feeds right into the wheelhouse of the Fed.
You got 12 reserve banks in these local markets that I go to.
It's having an impact.
Anything other than immaterial.
Yes.
And I'm hearing, look at the local papers.
I mean, you know, again, I grew up outside of Syracuse, the
Micron plant up there, 20 billion.
That's all they talk about.
We talked about some of the Midwest locations.
Look at what's happening in Arizona.
This is absolutely driving the narrative in a lot of these economies.
It is, and I don't think it's gonna change the action for the Fed in
the next meeting, but there'll be a point at which they're gonna have
to decide, should we really pause?
For an indefinite period.
And I think you've gotta understand what the forward pipeline is, because
I think there's a lot more coming.
We're not done on inflation reduction ACT projects, infrastructure act projects.
Even since I talked to you just four or six weeks ago, there've been a
whole series of new announcements since you and I spoke about it.
Wow.
And I just think it would behoove all of us just to get a better grip
on what the forward pipeline is.
That's a fantastic article, so let me pause it there.
And so you can see how he just kind debunked a lot of things.
The government is sending so much money out there in these infrastructure
bills and everything else.
So they're pumping still a lot of these cities.
And remember they said parts of Arizona, you know, think of Arizona, austin, Texas.
They're putting in, I think there's a huge hub down there for chips.
So think of the pods throughout the country that has these
infrastructure bills.
They're usually some of the bigger cities.
They're getting billions and trillions of dollars to do this infrastructure.
So think about it.
They're pushing this money into the economy.
How with supply of, they need labor to build this stuff.
They need raw materials to build this stuff.
So to do that, they need the labor to get the raw materials out.
So that's why we're not seeing an employment crash because they keep
pumping the economy full of all this stimulus stuff at some point.
At some point the system's gotta crack folks.
So that's the concern here is the Federal Reserve kind of, kind of get off the
wagon of, you know, pushing down the pedal on, in, on the interest rate hikes.
But also our federal government has to realize you just
can't keep throwing money.
That we don't have and we keep putting on it on our credit card,
on our national credit card debt.
You can't keep pumping that money out there over and over and expect
nothing to happen in inflation.
And then the economy just to, you to suffer.
So this was a huge point that I wanted to make to everybody.
So, I hope you enjoyed the information that you I provided here.
Hope you get some context.
And that's from the former Fed.
The person who sat at the Dallas Fed, he ran that fed so he knows,
and he's now not in the Fed, so he can actually speak his piece.
You remember how he's saying?
Well, they're still looking on the, at the top, way down from a 500 mile view,
he said, but if you get your boots on the ground, It's a much different story.
So I greatly appreciate you guys watching this video.
I hope you found information from it.
And all I ask you to do like I usually do is one thing.
Please don't forget to give us a thumbs up.
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So my name is Dan Frio.
I do this on a daily basis to provide you guys the economic news
on what's affecting real estate.
God bless guys.
Thanks so much for watching and I hope you'll leave some comments down below.
See you soon.
Bye-bye.