Speaker 1: Let's start today with a discussion about the economy.
Is the economy a disaster?
Well, many on the right say that it is.
Now we're going to look at the most important metrics for evaluating how the economy is
doing.
The reason I'm doing this is whether you're on the left or on the right.
My suggestion is don't make this political.
Many on the right who say the Biden economy is a disaster are making this political.
And you know that while I have my political opinions, I don't think we should have a death
penalty.
I think abortion should be legal and accessible and affordable in most cases.
I believe in the decriminalization, if not legalization of many drugs.
These are opinions of mine when it comes to things like gas prices, debt and deficit,
the economy.
My preference is to take an extremely sober empirical approach, and we can always predict
a recession is coming.
The type of economic system we have, at least historically, has always eventually gotten
to a recession or a depression.
Could we enter into one tomorrow?
Sure.
Will we probably get into one at some point?
Yeah, probably.
But when people come to you, maybe with tears in their eyes and then they say the Biden
economy is a disaster, I would challenge you to say that.
Which underlying metric tells us that let's look at the most important ones.
GDP growth, the last few quarters, 3.2% growth, 2.6% growth, 1.3% growth.
Very unremarkable, not mind blowingly explosive the way we saw during the immediate COVID
recovery and not problematic.
Right.
I mean, you zoom out and you see GDP growth has been in this relatively tight range.
Big decline for COVID.
Big recovery in that quarter after the big decline and then just fine GDP growth numbers.
So we said, is GDP indicative of an economic problem?
No, it is not.
We then go to the unemployment rate.
One of the lowest unemployment rates we've had.
The chart on the screen goes back before 1950.
Looks like it starts around 1948.
And we see periods where unemployment has been down in the 3% range, a period in the
early fifties, a period in the late sixties, touching the the very high threes around the
year 2000, the dot com boom and then spiking right when COVID hit.
And we are now down to 3.6% unemployment, one of the lowest unemployment rates in history.
So we say, well, the picture painted by GDP and unemployment certainly is not indicative
of an economic crisis as of today.
We then look at the inflation rate.
But David, sir, everything is so expensive because of the Biden inflation.
Well, if you actually look, that inflationary period started well before Biden, it has been
historically higher than we saw during the period starting in the mid-nineties.
But inflation has now declined, declined declined to just below right around 5%, exactly where
I predicted we would be towards the end of the summer.
I said somewhere between four and 5%.
It seems like we will be there.
This is not hugely shocking.
If you've been following the trend line and you see that while we still have higher inflation
than we've had, you have to go back to, you know, around 2010, we had a little bit of
a spike in inflation.
And then you look at around 1990 and then certainly in the mid seventies, very high
inflation, World War two era OC inflation has been higher.
It's coming down.
So now we build the picture GDP, unemployment, inflation.
It doesn't look like a crisis.
We then look at the consumer confidence index.
Now this is an opinion based index admittedly, and you do see that when we were in the thick
of COVID, consumer confidence declined significantly.
It is important.
It is important to look at the Y axis here and see that it goes from 96 to 102.
This is a relatively tight range.
It is absolutely true that right before the dot com bust, consumer confidence was very
high.
And then in the midst of the 2829 recession, consumer confidence was low.
It got very low during COVID and it has now recovered to a level that we saw around 2012
and to a level we saw during the recovery from 2008 and in the early nineties.
So consumer confidence has been low, but it is climbing.
Well, what about stock market performance, David?
Let's look at that.
S&P500 4%, one year return.
Not amazing, but certainly not a crisis year to date, 11% return from the S&P 500.
The three year is now a 10% annualized return.
Very, very healthy.
You look at five year, 9% return and ten year 10% return.
The stock market is basically fine.
Yes, we see these erratic, erratic up and down days sporadically.
That's something that's been part of the stock market.
So we're not finding any red flags.
Well, maybe unemployment is low and GDP is okay and consumer confidence is increasing
and the stock market is doing fine.
But what about wages?
Well, we look at the federal wage growth tracker and you see that wage growth sustained now
starting about a year and a quarter ago has been at some of the highest levels that we've
seen dating all the way back to 1980 wage growth.
But these are crappy jobs.
Well, wages are going up and you actually see very nice wage growth.
So the fine we have many jobs, but they are crap.
Wage growth seems to be doing okay.
We then look at the balance of trade and you see that we still have a trade deficit.
But after bottoming out a couple of years ago, the trade deficit has been reduced, reduced,
reduced.
It's really important to understand, if you look at this chart, you'll see that we've
had trade deficits dating all the way back to the mid seventies.
We have had trade deficits in the United States since 1976 because we have become a country
that imports a ton of oil and consumer products.
Okay?
The trade balance is not particularly shocking if you understand the American economy.
And then lastly, well, what about interest rates?
Yes, we are seeing an increase in interest rates.
This is making mortgages more expensive.
This is also making it so that you can get 5% in a high yield savings account, which
is pretty damn attractive.
I will tell you what you have to understand about interest rates.
And we have a chart up on the screen where you see extremely high in.
Interest rates in the early eighties.
And then you see extremely low interest rates, almost zero from about 2008 up until about
2016.
Interest rates in the US reached their highest level in 1981 and you can see it on the chart
because the Fed raised rates to combat soaring inflation and to try to stabilize the economy.
That's the story of high interest rates in 81.
Since then, we've seen interest rates basically decline for 40 years, all the way down to
essentially zero levels in 2010 after the global financial crisis.
Again, in 2020, they dropped back to zero after the COVID pandemic.
And now interest rates are going back up to a level that we saw in 2006.
Still below where we saw right before 911, well below what we had in the late eighties.
So there is really no big dramatic story on interest rates as well.
So I continue to recommend when these economy doom and gloom ers come to you and they start
telling you these stories about the Biden economy, the first thing to say is, listen,
the less regulated the version of capitalism we have, the more endemic to the system booms
and busts will be.
There may well be in a recession or a depression coming, but what current indicator is suggestive
of that?
Now, the one I didn't mention, which they might go to is labor participation rate.
The population of the country continues to go up.
And so it is true that at most times there are more people than ever working and more
people than ever not working.
It is not a particularly particularly reliable indicator of economic health, and that's why
I didn't even include it.
Ask them for the facts.
Show them the receipts