DOLLARS IN NEW GOVERNMENT
SPENDING AND BILLIONS IN TAX
INCREASES INSIDE OF IT.
NEIL: LET’S GO TO A FORMER
REAGAN ECONOMIST.
I JUST READ THAT FROM THE
RESUME HE GAVE ME.
IT IS ALWAYS GOOD TO HAVE YOU.
I WANT TO BOUNCE THIS OFF -- I
DON’T REMEMBER ANY GOVERNMENT
SPENDING INITIATIVE OF ANY
SIZE.
THAT EVER REDUCED INFLATION OR
FOR THAT MATTER DEFICITS.
>> THEY CAN’T.
WHEN PEOPLE GIVE YOU FREE MONEY
THEY WILL CHOOSE MORE LEADER
AND BE LESS PRODUCTIVE OF GOODS
AND SERVICES.
THAT BY ITSELF IS INFLATIONARY.
IT WILL HAVE TO BE FUNDED AND
FINANCED IN THE CAPITAL MARKETS
AND IF THE FED IS CONTROLLING
INTEREST RATES IT WILL EXPAND
THE FED’S BALANCE SHEET WHICH
IT HAS DONE, $9 TRILLION NUMBER
AND THAT WILL PROVIDE MORE
MONEY AND LESS GOODS, PURE
INFLATION.
TOO MUCH MONEY FOR CHASING TOO
FEW GOOD INCREASING MONEY AND
REDUCING THE AMOUNT OF GOODS IS
AN INFLATIONARY STRATEGY.
NEIL: HERE WE ARE WITH THE
FEDERAL RESERVE SAYING ALL THIS
MUST STOP.
SINCE JEROME POWER MADE THOSE
REMARKS IN JACKSON HOLE AND
TRYING TO DRAG -- DIG OUT OF
THAT.
IT IS TIME FOR THE REALITY THAT
HE MEANS WHAT HE SAYS AND HE
SAYS WHAT HE MEANS.
>> THAT IS TRUE.
THE WAY HE SHOULD DO IT IS
REMOVING THE PRICE CONTROLS ON
INTEREST RATES RIGHT NOW.
LET INTEREST RATES SEEK THEIR OWN LEVEL LIKE PAUL VOLCKER
OWN LEVEL LIKE PAUL VOLCKER
DID.
WE HAD INTEREST RATES, IT IS
20%.
THAT IS HOW THEY TAKE CONTROL
OF INFLATION.
NEIL: HE DID RAISE RATES HE
COULD CONTROL.
IT HAD THAT EFFECT.
HE DIDN’T COME IN AND STAND
BACK AND WATCH IT.
>> HE LET INTEREST RATES GO UP
AND REDUCED MONETARY BASE
SIMULTANEOUSLY AND MADE TIGHT
MONEY WHICH IS WHAT YOU NEED TO
STOP INFLATION AND REAGAN
INCREASED SUPPLY OF GOODS AND
THE TWO TOGETHER BROUGHT
INFLATION DOWN LIKE A STONE. IF YOU REMEMBER THE TIME WE HAD
IF YOU REMEMBER THE TIME WE HAD
MORTGAGE RATES 16, 17%, YOU ARE
JUST A BABY.
NEIL: DID I TELL YOU WHEN MY
WIFE AND I PAID FOR OUR FIRST
MORTGAGE?
50 TIMES I TOLD YOU THAT.
NOW WE HAVE NEW SPENDING GOING
ON.
THE ADMINISTRATION, IT WILL NOT
BE INFLATIONARY, THE COLLEGE
LOAN RELIEF, I AM WONDERING HOW
LIKELY THAT IS BECAUSE IT WILL
COMPLICATE THE FEDERAL RESERVE.
WHAT DO YOU THINK?
>> DON’T CARE WHAT TYPE OF
ECONOMIST YOU ARE, KEYNESIAN OR
SUPPLY-SIDE, BUT IF YOU LOOK AT
IT SCIENTIFICALLY AND MOST
AGREE THE GIVEAWAY ON THE LOANS
WILL INCREASE INFLATION.
THAT WILL INCREASE INFLATION.
SPENDING BILLS WILL INCREASE
INFLATION.
THEY ADD TO THE MONETARY BASE
AND REDUCE THE SUPPLY OF GOODS
AND SERVICES WHICH IS
INFLATIONARY ACROSS THE BOARD.
WHERE WE DISAGREE IS HOW TO
SOLVE IT.
THAT THE HUGE DIFFERENCE
BETWEEN LARRY SUMMERS AND ME.
I WANT TO CUT TAX RATES AND
EXPAND THE SUPPLY OF GOODS AND
RELEASE INTEREST RATES OF THE
MONETARY BASE COMES DOWN AND
THEY DON’T WANT TO DO THEY.
THEY WANT TO INCREASE DEMAND
AND YOU CAN ALSO REDUCE
INFLATION AND THAT WILL LEAD TO
A RECESSION SLOW DOWN.
MY SOLUTION WILL BE LIKE A
REAGAN SOLUTION, LEADING TO THE
BOOM OF THE 1980s AS INFLATION
COLLAPSES BEFORE OUR EYES.
NEIL: THIS NOTION WE ARE PAYING
FOR THIS, WE HACKED AWAY AT THE
DEFICIT THE WAY I LIKENED IT IS
PAYING THAT WITH EXPANDED
CREDIT LINE AND THAT ISN’T CASH
ON HAND.
>> IT’S THE WAY THEY CAN
FORMULATE ARGUMENTS BEYOND BELIEF.
WHAT IS THE FED BALANCE SHEET?
THAT’S THE MONETARY BASE,
THAT’S $9 TRILLION, 45 YEARS
AGO IT WAS IN THE BILLIONS, NOT
TRILLIONS.
THEY EXPANDED THE MONETARY
BASE, THE ECONOMY SLOWED
DRAMATICALLY.
WHETHER IT WAS RECESSION OR NOT
THEY WILL ARGUE HOW MANY ANGELS DANCE ON THE HEAD UP IN BUT THE
DANCE ON THE HEAD UP IN BUT THE
TRUTH IS WE HAVE SLOW GROWTH
AND WE’VE NOT PROGRESSED SINCE
FEBRUARY OF 2,020.
A SLOW ECONOMY NEEDS THE SUPPLY
OF GOODS IS SHORT, THE MONEY IS
LONG AND THAT IS INFLATIONARY
PERIOD.
THAT IS WHAT YOU WILL SEE.
I DON’T THINK NEXT NEXT MONTH’S
NUMBERS WILL BE BIG BUT ONCE WE
GET PAST THE SPOT COMMODITY
PRICE CHANGE YOU WILL SEE
INFLATION NUMBERS COMING BACK
SUBSTANTIALLY.
SHELTER, WHICH IS ONE THIRD OF
THE INDEX IS GOING STRAIGHT UP.
THAT IS A RENTAL FROM YOUR OWN
HOME AS WELL AS RENT AND THAT
NUMBER IS NOT TAPERING OFF AT
ALL.
WE HAVE AN INFLATION PROBLEM
FOR A LONG TIME TO COME AND