Speaker 1: I have no choice but to admit that we have a remarkable economic situation right
now.
The situation is not that we will never again have a recession.
In fact, we almost certainly will unless something changes permanently about the type of economy
that we have, at some point there will be a recession or worse, because that's the way
that things have worked for a very long time.
But when we look at the latest inflation numbers and we look at all of the other data that
we have, it is quite an extraordinary situation.
We have new inflation numbers out today.
It's July, so the numbers are from June.
And for the 12 month period ending in June of 2023 and year over year, inflation is down
to 3%.
3%.
I have been talking about for over a year now.
I've been saying I believe that by August of 23, inflation will be down to the low fours
or the high threes, which would be a dramatic improvement from where it was a year and a
half ago.
I don't know anything.
It was just my sense of the direction things were going and I actually was too conservative
in my estimate.
Inflation.
Consumer prices in June rose at slowest annual rate since March of 2021, according to the
latest data from the Bureau of Labor Statistics.
Now, these right wingers who just don't like these numbers will say, you can't believe
these numbers.
That's not real.
Okay.
Well, when when you like the numbers, you believe the numbers from the Bureau of Labor
Statistics and now the goal.
But eggs are expensive.
I saw the other day we don't judge these numbers by what one person, season one grocery store.
This is actually a metric that is extraordinarily detailed and nuanced.
The consumer price index went up 0.2% last month and that prior year number, it is now
a 3% increase, a 3% increase as of last month.
We had a 4% year over year increase.
We are now down to a 3% year over year increase.
These are really good numbers.
And it is not just inflation in a vacuum that looks really good.
And I'll come back to what we mean when we say inflation looks good, wages are rising
and are now higher than they were before the pandemic.
Inflation adjusted again.
The detractors, the the MAGA pessimists will say, well, sure, nominally wages are higher,
but inflation has been crazy.
No, no, no, no, no.
Inflation adjusted wages, real wages are now higher than they were before the pandemic.
If you look at the G7 countries, the U.S. has the lowest inflation of all, all of them.
If you look at gas prices, gas prices are now down about a buck 50 a gallon.
The unemployment rate is at 3.6%.
That is under 4% for the longest stretch in 50 years, 50 years.
And of course, they will come back and they will say, oh, but a lot of these are low quality
jobs or a lot of people have stopped looking for work.
These are always things that can be said.
It's the way these metrics work.
You can't only say that when it's to your advantage.
These are the real numbers.
Now, let's talk about inflation a little bit.
I want to remind you that the target for inflation is not zero.
The target for inflation is considered to be 2%.
We're basically there.
We're at 3%.
The target is 2%.
So we are getting down to an inflation level.
That is what you would want for what would be considered by traditional economic measures,
a good inflation number.
Let me remind you why.
And I know that there are people who have heard me say this before, but I do think it's
it's such an important basic economic concept to understand that I want to explain it again.
If inflation is really high, we know why that's bad.
People can't afford stuff.
If inflation is 8% and wages are only up 2%, things become unaffordable.
So people stop buying them, which is bad for businesses.
So businesses have to lay people off and then the people they lay off don't have money to
buy things.
So then more businesses have to lay people off.
So very high inflation.
It's pretty self-evident why that's bad.
Some people might say, well, shouldn't we want zero inflation or even deflation?
Prices coming down would be so great everybody can afford what they want.
Wrong.
If there is a deflationary situation, you would expect things to be cheaper in the future
than they are now.
And so save for absolute necessities like food, you need food to survive.
If you expect prices to be lower in the future, you would delay economic activity.
If I'm looking at a car and I say, Well, the car is going to be 3% cheaper in six months,
I wouldn't buy it.
And it has a similar effect as things being on affordably expensive, which is you're not
buying and that's bad for businesses.
They lay off workers and you have the same thing.
The reason that by traditional economic measures we say 2% inflation roughly is what we want
is that that 2% inflation is what drives economic growth and expansion.
Now, of course, when we step out of this traditional economic analysis, we say, well, the planet
is of limited size and resources.
You can't have indefinite growth.
And that is also theoretically true.
And in some sense it's practically true.
Before we get to that point, we may be off to mining asteroids or who knows what.
So it starts to get a little theoretical and philosophical.
But that's the reason why a little bit of inflation is considered good.
I also want to remind you there are many aspects to inflation that have nothing to do with
the president.
So I'm not here to tell you we're going to bow and pray at the altar of Joe Biden.
That would be because of what we're seeing, much the same way that it wasn't exclusively
Trump's fault that inflation was high.
There are many aspects to inflation that don't relate to the president.
This includes changes to the money supply, supply and demand shocks like, for example,
natural disasters, COVID, whatever the case may be, expectations about inflation become
self-fulfilling prophecies.
These things are bigger than the president.
And remember, inflation is coming down in all G7 countries, but it's coming down more
in the United States.
What presidents can do is fiscal policy like government spending, taxation, etc., and indirectly
money, monetary policy.
Remember, the president doesn't control monetary policy directly.
The Fed does.
But the president does decide who is in charge at the Fed.
So no reason to play political games, no reason to sugarcoat or to do Sky is falling stuff.
These numbers are what they are.
They only slightly relate to Joe Biden, but this is a good sign.
Overall, doesn't mean it's a perfect economy, doesn't mean there won't be a downturn at
some point in the future