Latest / Financial Survival Network / Stagflation: The Coming Economic Storm in the US - Dennis Tubbergen #6050

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Stagflation: The Coming Economic Storm in the US - Dennis Tubbergen #6050 · Financial Survival Network

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I define stagflation as an environment where consumer prices are rising and the economy is
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contracting. So we've got an official recession and at the same time we have
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consumer prices rising. So it is just to speak in plain terms, it
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is an environment that's just economically miserable. You are listening to Carrie Lutz's Financial
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Survival Network, where you get valuable information you just can't find anywhere else to
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Financial Survival Network now more than ever. And welcome. You are listening
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to and watching the Financial Survival Network. I'm your host, Carrie Lutz.
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A one of my favorite guests is back on with us. Dennis Tobergen.
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Dennis author, speaker, really well known financial advisor, expert, financial expert.
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I'd say you're a financial expert, Dennis, and you can find him
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and his free book which I highly recommend you you download, called The Revenue
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Sourcingbook dot com. Dennis, welcome back. So Hey, we're talking pre
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call. We both kind of believe that even though how over promised on rate
1:30
cuts. We're in the middle of an election season. I once read in
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Baron's magazine, Baron's newspaper that what the Feed is doing what it does best,
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which is helping a president get re elected or get unelected if they don't
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like him. You see this coming, well, I think, Terry.
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Yes. I think, even though the bed is not supposed to be pole
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at a goal, those in power have power of appointment. So I think
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it's very safe to say, no matter which side of the political aisle you
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may find yourself, that the FED certainly leans towards the party in powers.
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So I think you're going to see interest rate cuts coming. The hot March
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inflation report be damned. I think the FED has one bullet left in the
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gun. Is the only bullet they've been able to shoot over the past a
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few years or so, and I think they're going to shoot it again because
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it's the only option they have or an economy that, in my view,
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is headed for stagflation. All right, you know many of you out there
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don't know what stagflation is. How do you define stagflation, Dennis? I
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define stagflation as an environment where consumer prices are rising and the economy is contracting,
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So we've got an official recession and at the same time we have consumer
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prices rising. So it is just to speak in plane terms, it is
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an environment that's just economically miserable. By that definition. We've had accilation for
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a while, haven't we, I think so. Yeah. I mean,
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if you look at the fourth quarter GDP report, these numbers are going to
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be close. But I think the GDP expanded by about three hundred and forty
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three billion dollars, and yet the government added about eight hundred and fifty billion
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dollars to debt. So if the government was not spending money that they didn't
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have, you'd find that we'd already be in an official recession. In fact,
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the government spent two dollars and fifty cents that they didn't have to get
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a dollar's worth of growth, So I'm not sure you could actually even classify
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that as growth. So yeah, I believe take the artificial stimulus, the
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artificial spending, and debt accumulation out of the economy, and I think we
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have a recession presently. So, assuming we get a replacement at the White
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House, can the next president to a little good name list, can he
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follow the example of Argentina's president Mila and just cut, cut, cut and
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dump all these agencies. You're thinking he will he do it? Does he
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have the political will to do it? Because really we see that Argentina.
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We can take this bet right now, Dennis, and I'm sure you'll bet
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with me, not against me, ten years from now, if they follow
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these policies, it will be the most prosperous country in Latin America. I
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couldn't agree more. And it takes someone would really, Can I say,
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Big Cahuna's on your show, Sure I just loot, well beleep it if
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if our digital lo of lords don't like it, Dennis, I mean,
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think about that. Here's a guy that Kate came into office and in nine
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weeks he balanced the budget and he cuts spending across the board fifty percent.
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I've interviewed on my program professor Lawrence Khalikov, who tracks such thing, and
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according to him, if you have to cut spending here in the ua US
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across the board by over forty percent, I think it was forty one or
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forty two percent to balance the budget. So essentially the numbers are not far
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off from what Argentina was dealing with. So there's a lot of fallout there.
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There's a lot of pain that deals with with cutting a budget like that.
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But Argentina had two hundred and fifty percent inflation. That's painful too.
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And if the US dollar didn't have reserve status, you know, I think
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that we potentially would be Argentina. Yeah, yep, yep. And hey,
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let's go back to the turn of the nineteenth century. Going into the
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twentieth century, Argentina's economy was the fifth highest in the world. And then
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they you know, you look at the wealth that was there when you go
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to Buenos Aire's it's it's impressive. The architecture. You could be you know,
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you could be in Rome, or you could be in any first world
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country. I wouldn't say that Argentina became a world country, but it certainly
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dropped from the ranks without a doubt. And it's one hundred percent traceable,
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in my humble opinion, to policy. You know, when you when you
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try to appease everyone, I mean, you can go back to the Roman
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Empire and one of the one of the big problems with the Roman Empire is,
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yeah, you know, the the mantra. You know, we're going
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to make the rich pay their fair shares. Started to the Roman Empire.
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There there's nothing new under the sun. These politicians are taking the same playbook,
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and there's only a few pages in the playbook, and they keep using
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them over and over and the outcomes tend to be the same every time.
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So this is really not a mystery for anybody that studied history. Yeah,
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well, you would have to cut social programs, right, Uh, you'd
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have to do something. Well, you'd have to do something about the medical
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system, all right, because it's just a license to steal from the uh,
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from Medicare and medicaid. It's turned into that. You know, does
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the country have the political will to go through something like that, because it's
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like you're given the kid the bad medicine and say, oh, I hate
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this, but it's good for you. Just drink it down. You know.
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That's kind of the situation where in the cure to most people is worse
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than the disease because they really don't even understand the disease. Well, I
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think that's exactly right, and I tell people, look, we will have
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a reset. So the question is do you want to have a reset that
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is proactive like Argentina it's going to be painful, but ultimately the end result
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is going to be economic health. But there's going to be a lot of
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pain to get through in the interim. Or do you wait and have a
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reset that's reactive, And I think that's likely where we end up, because
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at that point politicians point fingers and blame things other than the policies that have
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been enforce and I think ultimately that's how this plays out. Now, going
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back to what you said, does the next occupant of the world White House,
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if it's a different occupant, have the political will to get this done.
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I would be doubtful. I think that that's going to be a very
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very difficult thing to do. I think that you know, he's been in
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the White House in the past, and certainly he was not afraid of deficit
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spending. So I think we're going to go to stagflation and ultimately this reset
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is going to be reactionary at some future point. Yeah, I'm inclined to
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agree with you, But on the other hand, a lot of policies that
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he tried to enact he couldn't because he had everybody around him, you know.
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Sticking daggers in his back is like a modern day Julius Caesar here,
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but death by a thousand cuts. So maybe there's some cause for optimism because
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we know that he understands gold, we know that he understands inflation right,
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understands all these issues. But the amount of pain that the country has to
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go through they're going to go through at any that's what people have to understand.
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Regardless whether we do it now or we do it later, it's going
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to have to be done. The IMF noted just issued a warning saying things
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can't continue the way they are. Yeah, you've got Bank of America saying
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that a financial a financial collapse or reset, I forget the term, but
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they use the term imminent. You know that that means it's nigh, it's
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coming. And you know when you look at economic pain. I don't know
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if you saw this carry but credit card that now is approaching one point for
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trillion dollars, So is more earth than are Yeah, there's more revolving credit
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out there, people carrying more balances on credit cards than the entire outlay for
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Social Security annually. To put that in perspective, So you could certainly make
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an argument that the economic pain is here personal savings rate is an all time
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low. That tells you how people are dealing with inflation. And credit scores
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by COO scores are dropping for the first time in a decade. And this
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is after they did all this stuff to make them go up, artificial stuff
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like removing different types of debt, tax leans, things like that. So
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obviously things aren't great. And then you've got subprime auto loans. They're imploding.
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Defaults on auto loans and credit cards up up in a way, So
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it's already coming. Whether we try to be proactive or not, it's going
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to be here. Well yeah, I mean you mentioned subprime auto loans.
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Well we don't even know what the default rate is on student loan debt because
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conveniently that is not going to get reported now until January of twenty twenty five.
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I'm sure it's just a coincidence that that reporting is going to start after
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the election. But last I knew, of course, those numbers were big
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numbers also, and then when you look at what happened just month over month,
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housing starts in March down almost fifteen percent from February building permits, so
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you're seeing, really housing has the potential here to fall off a cliff,
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and certainly March numbers were dismal. Yeah, yeah, and yet the homebuilders
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are still trading at the pretty high prices that are near all time highs,
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right, yeah, they are for the time being. I think that.
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You know, I've talked to people whose opinions I respect, and they say,
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watch the homebuilder stocks because that's the canary in the coal mine for housing.
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And they haven't quite reacted yet, but I fully expect that they will.
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Yeah, no doubt, no doubt. I mean, yeah, I've
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been watching these homebuilders and they seem to be defying gravity. You know,
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there's still like a lot of people will not move because, yeah, they're
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at all time highs now Lenar, it's up three and a half percent today,
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you can believe it, and it seems to be defying gravity here.
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Well, you know, the old saying is that markets can stay irrational a
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lot longer than you can say it's stay solvent. So I would say that
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might apply to home builder stocks here. Inclined to agree with you, I
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should say they're close to all time highs. So the all time high was
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hit on March twenty fifth. For Lenar, they seem to be the Bellweather
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housing stock now, but all of them are in the same boat, right,
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so you know, and that seems to be also making the case for
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lower interest rates, right I think so. And you know, the the
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underlying the bottom line here, in my view, Carrie, is inflation is
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still the big story. We are a consumer spending dependent economy. Over seventy
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percent of the US economy is dependent on consumer spending, and inflation is really
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making a lot of that discretionary income evaporate. And all you need to do
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if you want to know what the real inflation rate is is look at what
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gold has done. As we see housing starts fall off, we have gold
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now at all time new highs. I'm expecting we might see a little bit
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of a pull back here, but I think we're just getting started here.
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And raid cuts, I think are just going to add to the bullishness that
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I feel for that precious metal sector. Correct, as we speak now on
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kitkoa golds at twenty three to twenty three and change, it's only down three
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and a half dollars today. It started out it was a double digit loss
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over ten bucks. I think last night it was up to twenty or thirty
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and now it's making a comeback here today. So everything seems to be pointing
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to the stagflation, lower interest rate environment. I mean, look the banks,
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what about the banking crisis that hasn't gone away, hasn't. I think
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that what we saw last year was the beginning of what we're likely going to
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see this year. The statistic that I find very ominous is the fact that
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we've got about a trillion dollars in commercial real estate loans that are resetting here.
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Yet this year they're going to reset up much higher interest rates. And
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we've already seen statistics of the lead Canadian pension fund selling their interest in a
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Manhattan office building for a dollar, the tallest building in Brooklyn now going up
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for a foreclosure auction in June. So you're seeing commercial real estate, I
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think, is really going to lead this this collapse, if you will.
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And I expected residential real estate will follow suit to some extent that I expect
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stocks will also follow suit. Yeah, And you look at the tens of
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millions, hundreds of millions the square feet of office space. It's virtually empty
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or highly underutilized, and it's just big companies waiting for their leases to end,
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right, Yeah, and you know, Michael Snyder had interesting piece that
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he put together from various articles out there when you look at the downtown areas.
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He focused on Saint Louis, comparing Saint Louis from the time the world
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Bear was there about a century ago till now. But San Francisco, New
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York. Granted, the work from home trend has made it tough for commercial
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real estate, but so has unenforced crime and a lot of these big cities
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and nobody really wants to be there. And you have this movement away from
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big cities to more rural areas, and it's a cycle that feeds on itself.
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The worst it gets, the worst it gets, and I think that
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that's going to contribute to the demise of commercial real estate as well. Well,
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we've got the phenomena here, Dennis, of failing states and failing cities,
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right, And there's a reason why people are leaving certain states and going
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to others, right, So it's going to eventually lead to the breakup of
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the United States. Well, I can think of several mainstream news sources that
16:03
have published what I would consider to be credible people talking about secession. I
16:11
don't ever recall seeing that up until the last few years. So you know,
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you've got the whole movement out in California, and you've got citizens that
16:18
are just fed up with a lot of these policies. And once it starts
16:23
to affect your pocketbook and your lifestyle and your family, people start to wake
16:26
up. And I think that's happening. Yeah, so political realignment and not
16:32
so much between the parties here really, but just a kind of awakening to
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things cannot keep going that the way they're going, it's unsustainable, and the
16:44
crash is inevitable. I think the crash is inevitable. I'll be very interested
16:49
to see how the rest of twenty twenty four plays out. I don't think
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we get through this year without more significant issues in the banking sector, like
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we just discussed. I think you're going to see real estate do poorly.
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I think that the FED made take some action, as we talked about here
17:07
in June. I think we're in agreement on that. But the FED also
17:11
has been known to help pump up the stock market. You know, when
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Richard Fisher retired as Dallas Federal Reserve Bank president, he did an interview shortly
17:18
after he retired and said, yeah, we dumped a trillion dollars into the
17:22
market. We were looking for a wealth effect from juicing the market. He
17:26
said, we juiced the market, but we didn't get the wealth effect.
17:27
So there's precedent out there that a lot of these markets can be manipulated.
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Also, yes, yeah, so true, so true. But we're I
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think we're getting to the end of fake money here what it can do to
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really boost an economy and boost the market. Yeah, I completely agree,
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and I think it'll be interesting to see if the FED does try to cut
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raids our will markets react. I mean, when you look at what's happened
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just to the yield on a ten year US Treasury note this year, interest
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rates are up because the US is not the credit risk they once were.
18:07
So I think the FED is going to be faced with becoming largely the buyer
18:11
of last resort for a lot of US treasuries if this deficit spending continues,
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and every indication has me believing that it will, and that does nothing but
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accelerate this stagflation cycle. Yeah, correct, direct, no question about it.
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And yeah it's a bit scary, you know. So when you think
18:36
the interest rate cuts inevitable, interest rate cuts are coming, I think sooner
18:40
rather than later. I would say the over under is June. Okay,
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I'll buy that. I could be a little earlier end in May. If
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the economy really starts falling off a cliff cliff, they're going to padic right
18:55
like they always do well, and they're going to do the only thing that
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they can do. Money, like I said, is the only bullet they
19:03
have left in the gun. Yeah, yeah, So hey, what are
19:07
three things Joe blow? As a certain Michigan the liberal movie producer director,
19:15
who would call them, what should Joe blow? Joe six pack? And
19:19
Steve Shardonay, what should you be doing? Well? I would certainly own
19:23
assets that cannot be printed. So my favorites would be silver one, gold
19:30
too, maybe agricultural real estate three. Those have been my favorite asset classes
19:36
for probably in the last sext months. They remain so think tangible. Think
19:41
about things he printed crypto. You know, I wish I would have bought
19:47
crypto me both crypto became a thing I did not. I still lean towards
19:53
tangible. I think I lean a little bit more old school. I'm a
19:56
big believer in what Voltaire said and the I think it was your nearly seventeen
20:00
hundreds that all currencies eventually return to their intrinsic value of cryptos as well.
20:07
Hey, so you know there's this thing coming up with bitcoin called the having.
20:12
What if we did that with like fiat currencies, Like you're only allowed
20:18
to print up so much and then every like two years you have to cut
20:22
the amount you're printing by half. Well, Carrie, if that's your platform,
20:26
you have my vote. Hey, I mean, I think we need
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a having for the US dollar, right, could not agree more? Hey,
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so our central bank digital currency is inevitable? Is that what we're going
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to be left with? You know? I think that that is the dream
20:44
of a central bankers, the dream of a politician, because I think it's
20:47
more about control than anything else. I am skeptical that they're going to make
20:52
that work on a widespread basis, simply because I think that whenever you look
20:56
at currency changes historically, you know, look at John Laws France for example,
21:02
that pops to mind, and I think there's a lot of very similar
21:07
circumstances today as compared to France in the early seventeen hundreds, And whenever you
21:11
have a currency change, you typically have two currencies circulating at the same time,
21:18
so people get used to it, and then you can pull away one.
21:22
So for example, with John Law, they had claim checks or paper
21:26
currency that could be redeemed for precious metal. It's not the only time that's
21:30
happened, but once it's circulated and people got used to the paper currency,
21:34
they pulled the coins containing precious metals out of circulation. I think to implement
21:40
a central bag issued cryptocurrency, you're going to have to do the same,
21:44
And I'm wondering if there's time to get that done without an uprising from the
21:49
masses. I think that I think that we may see currency changes more quickly
21:53
than that can be implemented. Yeah, it's interesting though, because people just
21:59
don't care cash anymore Tennis, you know, because every day it's less and
22:03
less. I mean, even myself, big proponent of cash, I carry
22:07
cash, but I don't use it much. Yeah, I carry cash and
22:11
I probably use it. I use it less than I used to, but
22:15
I probably still use it for about a third of my transactions. So I
22:19
realize I'm a dinosaur here. But there are a lot of people out there
22:22
that use that use cash, not not as many. I agree and certainly
22:26
I think that's generational. Yeah, for sure, Like my kids generation,
22:33
they just don't really understand the benefits of cash. I mean, they don't
22:38
listen to me. But what else is new there? Kids never do but
22:44
the cash list economy, I mean, it just seems to go more and
22:48
more every day, agreed. I you know, I guess I'm not sure
22:51
we're quite there yet. Because of my top three, you might you might
22:55
pay me as a little bit old school, and I certainly wouldn't argue with
22:57
that, but I think we're a little bit away from a cash list economy.
23:03
But I'm not right all the time either. Hey, when the casinos
23:07
in Vegas stop giving out cash, then we'll know where there it's that.
23:11
It's one place, Vegas where cash is still king. And I've been to
23:15
other countries where they're not as far along in electronic payments as the West.
23:23
Places like Colombia it's cash economy, Thailand, Southeast Asia, they're really into
23:32
cash. And you know, they've got the same inflation going on, worse
23:37
inflation in Colombia and they're still hooked on cash. So interesting figure. Hey,
23:42
just tell us again where to find you, Dennis, How to get
23:47
your book again. Yeah, you can go to Revenue Sourcingbook dot com and
23:51
Carrie will even send a paper and ink copy of the book out so you'll
23:55
get the real thing when you go to Revenue sourcingbook dot com. Well you
23:59
are a die, or aren't you? Yeah, paper and egg, you
24:02
can dog your pages, you can write notes on the mar margin. We
24:03
will be trees. It's so like twentieth century. All right. Well,
24:11
hey, you got a question for Dennis myself, shoot me an email kl
24:15
at Carrie LUTs dot com. And the link to Dennis's site is on the
24:21
show notes to this interview on Financial Survival Network dot com. And while you're
24:26
there, please go sign up for your free newsletter. Dennis, always a
24:30
pleasure, always enlightening. We'll talk to you again real soon. Thanks for
24:33
having me, Carrie, Thanks for listening to Carrie Letz's Financial Survival Network,
24:38
your solution to today's trying times. For the latest, go to Financial Survivalnetwork
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dot com. Financial Survival Network now more than ever