Latest / Brian Thomas / Inside Scoop with Breitbart News - John Carney

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Inside Scoop with Breitbart News - John Carney · Brian Thomas

• 0:01
  Speaker 1: Ato six Here fifty five Carse the talk station. Happy Tuesday.
• 0:05
  Speaker 2: It's that time a week.
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  Speaker 1: I always turned to Breitbart dot com b R E
• 0:10
  Speaker 1: I T b A R T as one of the
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  Speaker 1: one of the sites I review in preparation for the
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  Speaker 1: fifty five KRC Morning Show. And we have the blessing.
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  Speaker 1: At least I perceive it as a blessing to talk
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  Speaker 1: to someone from bright Bart each Tuesday getting at eight
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  Speaker 1: oh five. Maybe call it the inside scoop at breit
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  Speaker 1: Bart News Today the return of bright Bart News Finance
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  Speaker 1: and Economics. Senator John Carney. John Carney, welcome back to
• 0:28
  Speaker 1: the fifty five KRSE Morning Show. My friend's always a
• 0:30
  Speaker 1: pleasure talking with you.
• 0:31
  Speaker 2: Good morning, and thanks for having me pleasure.
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  Speaker 1: Now, Bond yields. I understand Trump arrangement syndrome. It's everywhere.
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  Speaker 1: You can't turn away and find it. Well, it exists everywhere,
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  Speaker 1: But how is it the Trump dearrangement syndrome has misinterpreted
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  Speaker 1: the current thirty year treasury yield and the second others
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  Speaker 1: because it's gone up as I understand it, as you
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  Speaker 1: wrote in breit Bart thirty year treasury clond of a
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  Speaker 1: five point three percent yesterday, highest level since two thousand
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  Speaker 1: and seven. Now, some perceive this as a bad thing
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  Speaker 1: with inflation anxiety.
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  Speaker 2: I know you.
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  Speaker 1: One illustration is this you attributed to CNBC fears to
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  Speaker 1: attribute to fears, you worries growing among investors about persistent
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  Speaker 1: inflation and government borrowing. Now, got to break that one
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  Speaker 1: down for me. I always kind of thought, and here's
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  Speaker 1: where we get into an area where it might not
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  Speaker 1: be that learned that you raise treasury rates because people
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  Speaker 1: want a return on their investment. There's a million places
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  Speaker 1: people can park money, so you got to lure them
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  Speaker 1: over to buy the bonds, right, You got to pay
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  Speaker 1: a sufficient enough rate of return that it can compete.
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  Speaker 1: It's the stable investment. It is the least risky investment.
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  Speaker 1: But in return for that stability, you accept less than
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  Speaker 1: in terms of a percentage return than you would maybe
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  Speaker 1: in a stock market, which kind of runs around eight
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  Speaker 1: percent on average, or even more for some people. So
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  Speaker 1: why would I put something in a bond long term
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  Speaker 1: if it's only going to give me, say five point
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  Speaker 1: three percent, when I can put it in the stock
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  Speaker 1: market maybe make more money long term. So you've got
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  Speaker 1: to raise the rate to get people to invest and
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  Speaker 1: make that decision. Is is that kind of conceptually where
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  Speaker 1: where we are generally speaking, you know.
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  Speaker 2: I should just retire. You've got it exactly right.
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  Speaker 3: This is you know you have you can you can
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  Speaker 3: rate bripe our business. Yeah, no, this is this is no,
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  Speaker 3: that's exactly right. So what what when bond yields go up?
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  Speaker 3: It can mean two things. Well, it might mean that
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  Speaker 3: people are worried about inflation. So if you expect there
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  Speaker 3: to be a high rate of inflation, you don't want
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  Speaker 3: to park your money into a bond that's actually going
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  Speaker 3: to lose money over time because the rate of inflation
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  Speaker 3: will be so high that you know, if you think
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  Speaker 3: inflation is going to be three percent, you don't buy
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  Speaker 3: a bond that pays you two percent, right, because you'll
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  Speaker 3: lose money. But the other reason, and so that's the
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  Speaker 3: bad reason bonds could go up, and that's what a
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  Speaker 3: lot of commentators were claiming was happening when the bond
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  Speaker 3: yields rose to five point three percent. When the but
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  Speaker 3: the good reason bond yields can go up, And then
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  Speaker 3: I'll tell you how we can tell which is which
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  Speaker 3: the good reason they go up is exactly what you
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  Speaker 3: were saying, when people actually think the stock market is
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  Speaker 3: going to do well because they think the economy is
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  Speaker 3: going to grow, because they think profits are going to grow,
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  Speaker 3: then you actually have to people demand a higher return
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  Speaker 3: on the bonds because they think they can earn eight
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  Speaker 3: percent in the stock market. Yes, it's riskier, so you
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  Speaker 3: know you will put money into bonds even though the
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  Speaker 3: return isn't quite as high because there's less risk. But
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  Speaker 3: the the higher those expected returns on the stock market are,
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  Speaker 3: the higher the returns on bonds have to go. So
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  Speaker 3: when people have a good view of what's coming down
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  Speaker 3: in the economy.
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  Speaker 2: Bond yields go up.
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  Speaker 3: The way we can tell which one is happening at
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  Speaker 3: any given time is the government actually sells something called
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  Speaker 3: a treasury Inflation, protect and Security. The acronym is TIPS,
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  Speaker 3: and these tell us how much inflation people expect down
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  Speaker 3: the road. And what we've seen in recent months and
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  Speaker 3: weeks is that the TIPS yield actually hasn't gone up,
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  Speaker 3: meaning people don't expect more inflation, and yet the bond
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  Speaker 3: yield has gone up. So why is it that tells
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  Speaker 3: us that people expect better returns in the broader economy
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  Speaker 3: and therefore demanding higher yields.
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  Speaker 2: To park their money in a bond for thirty years.
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  Speaker 1: Okay, Now, I don't know if it's confusion or now.
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  Speaker 1: But the clarity I'm seeking here is that some perceive
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  Speaker 1: these rates increasing because no one wants to buy American
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  Speaker 1: bonds because they're too much of a risk, just as
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  Speaker 1: something as an investment, ignoring inflation, inflation, I don't want
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  Speaker 1: to put my money even though it's been historically a
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  Speaker 1: sound investment. The rate of return it isn't sufficient for
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  Speaker 1: me to even take the gamble. The world props up
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  Speaker 1: our economy based upon their purchase of T bills. You know,
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  Speaker 1: the Chinese own them, the Russians owe them, foreign powers
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  Speaker 1: that we're not exactly friendly with. They know it's a
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  Speaker 1: safe place to park their money. But I want to
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  Speaker 1: pivot over to the concept of like a junk bond.
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  Speaker 1: Junk bonds are terrible investments, but they come with a
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  Speaker 1: very high rate of return. Is there analogy that could
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  Speaker 1: be drawn and these naysayers and these concerned people's worries
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  Speaker 1: that they're they're they're reaching the conclusion that the United
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  Speaker 1: States bonds are reaching junk bond status, that this rate
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  Speaker 1: of return has to be paid in order to get
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  Speaker 1: people to even buy them.
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  Speaker 3: No, there's because there's a huge difference between junk bonds and.
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  Speaker 2: US treasuries.
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  Speaker 3: The US Treasury can actually never default in a way.
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  Speaker 3: When you buy a junk bond, a company, usually it's
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  Speaker 3: a company that's already over indebted may not have enough
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  Speaker 3: money to pay back the bonds. The US government will
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  Speaker 3: always have enough money to pay back its bonds because
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  Speaker 3: it controls the printing press, where a private company doesn't.
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  Speaker 2: They have to sell goods to get cash to be
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  Speaker 2: able to pay off the bond holders.
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  Speaker 3: The US government, yes, it raises money through taxes, it
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  Speaker 3: raises money through fees.
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  Speaker 2: But if it came down to it, it could literally
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  Speaker 2: print money.
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  Speaker 3: So the only real risk investors in treasury space is inflation.
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  Speaker 3: That if you printed money, you know, just to pay
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  Speaker 3: off your bonds, then it would most likely produce way
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  Speaker 3: too much inflation. So that's the risk when you're buying treasuries,
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  Speaker 3: not that they could default like a corporate bond might.
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  Speaker 1: Okay, so maybe someone out there has a grand idea, well, well,
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  Speaker 1: you're forty trillion dollars in debt, just print forty trillion
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  Speaker 1: dollars on the printing press and we're done, which inflates
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  Speaker 1: ourselves out of the debt, but also renders our currency valueless.
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  Speaker 1: We've seen that in other countries over the course of history.
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  Speaker 2: Right, that's right.
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  Speaker 3: You do not want to ever be in the position
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  Speaker 3: where you need to inflate your way out of your debt,
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  Speaker 3: which is a reason why people can become concerned.
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  Speaker 2: If you become if your debt is.
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  Speaker 3: Too too high, if they don't believe that your economy
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  Speaker 3: can support that level of government debt, then yes, you
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  Speaker 3: will see people's expectations for inflation start to rise.
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  Speaker 2: The thing that's.
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  Speaker 3: Happened net And look, I have to say, I think.
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  Speaker 2: The government borrows too much money.
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  Speaker 3: We do need to figure out how to get the
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  Speaker 3: rate of our borrowing below the rate of the growth
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  Speaker 3: of the economy so that the debt doesn't keep climbing.
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  Speaker 2: The best way to do that is to cut spend money.
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  Speaker 3: We do need to cut spending, but also grow the
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  Speaker 3: economy faster. You wait, you know, when you take on
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  Speaker 3: money to say, buy a house, you've taken on an
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  Speaker 3: enormous amount of debt.
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  Speaker 2: But that's not a problem for.
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  Speaker 3: You as long as you are continuing to grow your income,
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  Speaker 3: and if your income is growing frankly faster than your debt,
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  Speaker 3: then you are totally fine. That's what we need to
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  Speaker 3: do as a country to support the debt that we have.
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  Speaker 3: Grow the economy faster and grow government spending much slower.
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  Speaker 1: Well, economy is growing, which is great. You and I
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  Speaker 1: could probably come up with a list, you know, fifteen
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  Speaker 1: pages long about ways we could grow the economy, like
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  Speaker 1: regulatory form low. We just go on and on. But
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  Speaker 1: the thing that I think a lot of people lose
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  Speaker 1: sight of because you know, I'm staring in an article
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  Speaker 1: about that. You know, the price of hamburger is still
• 8:29
  Speaker 1: through the roof and there's no end in sight on that.
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  Speaker 1: Because you know, there's not enough cows out there in
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  Speaker 1: the world to lower the price of beef. That's an
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  Speaker 1: economic supply and demand issue. There isn't sufficient supply of beef,
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  Speaker 1: ergo limited supply. Higher prices great. The currently we are
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  Speaker 1: struggling with inflationary realities in the price of gasoline. Why
• 8:46
  Speaker 1: straight off horror Moses is closed. If there wasn't a
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  Speaker 1: war for things probably would be stable and there would
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  Speaker 1: be an abundance of oil flowing around the world. That's
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  Speaker 1: an economic inflationary reality brought about by a temporary problem,
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  Speaker 1: not a supply issue, but in interruption of the chain
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  Speaker 1: of a delivery issue. But the problem we had with
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  Speaker 1: inflation largely, and you can correct me if I'm wrong,
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  Speaker 1: economics editor John Carney from Breitbart. Our dollar is worth
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  Speaker 1: one third lesson it was, I think was since twenty nineteen.
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  Speaker 1: Why because of the printing press. You know, you can
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  Speaker 1: blame Republicans and Democrats were running the printing press. But
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  Speaker 1: we watered down the value of the dollar along the
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  Speaker 1: lines of the illustration about printing out forty trillion dollars
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  Speaker 1: a deal with our dad. We chucked in trillions of
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  Speaker 1: additional freshly printed, minted dollars, which eroded our borrowing power.
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  Speaker 1: I mean, you can't lay that at Donald Trump's feet
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  Speaker 1: in terms of the price of how that impacted our
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  Speaker 1: dollars buying ability, can you?
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  Speaker 3: No, You're absolutely right. What happened was, Look, we entered
• 9:47
  Speaker 3: an economic emergency. We ordered and we had to increase
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  Speaker 3: the deficits. When we were ordering businesses to close down,
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  Speaker 3: people were losing their jobs.
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  Speaker 1: On themself inflicted boons. We created the problem. Then we're
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  Speaker 1: here to solve the problem with the Prince Press.
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  Speaker 2: And then we did something that made it much much worse.
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  Speaker 3: If we had just stuck to all right, you know,
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  Speaker 3: we ordered things to close.
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  Speaker 2: We didn't know how bad the pandemic was.
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  Speaker 3: Going to be, and we're going to support the economy
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  Speaker 3: with some extra government borrowing for a little while.
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  Speaker 2: That would have been fine.
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  Speaker 3: The problem was Joe Biden got elected president and the
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  Speaker 3: Democratic Party saw this as an opportunity to wildly increase
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  Speaker 3: government spending, and they did it. So they poured trillions
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  Speaker 3: of extra deficit spending, and then the Federal Reserve kept
• 10:39
  Speaker 3: interest rates very low, which then printed money to pay for.
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  Speaker 2: That extra spending. That is what caused inflation to go
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  Speaker 2: through the roof.
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  Speaker 3: If we had done things and this is one of
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  Speaker 3: the problems with the concept of using the government to
• 10:54
  Speaker 3: come in to spend when the economy is not doing well.
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  Speaker 2: Probably the right idea.
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  Speaker 3: The problem is, over and over again, we keep learning
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  Speaker 3: that we're not good at stopping that when we need to.
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  Speaker 3: That's it, right, You spend in the crisis, and then
• 11:07
  Speaker 3: you stop spending when you're not in the crisis. The
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  Speaker 3: Democrats treated it like the crisis would be permanent, and they,
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  Speaker 3: you know, they passed they called it the American Rescue Act,
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  Speaker 3: but the economy was already rescued. We didn't need another
• 11:19
  Speaker 3: two trillion dollars. That's what caused the problem. It's not
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  Speaker 3: Donald Trump's fault, but you know, and it very much
• 11:27
  Speaker 3: is the Democrat Party's fault. It very much is Joe
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  Speaker 3: Biden's fault. And it's the Federal Reserve's fault. The Federal
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  Speaker 3: Reserves should have said, Okay, you guys are spending too much.
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  Speaker 3: We need to increase interest rates so that inflation doesn't
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  Speaker 3: get out of control. They didn't do that, and they
• 11:44
  Speaker 3: let it get, you know, beyond anything. I think even
• 11:48
  Speaker 3: pessimists thought it wouldn't get as bad as it did.
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  Speaker 3: It was the worst inflation in forty years.
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  Speaker 1: Well, never let a good crisis go to ways. They
• 11:55
  Speaker 1: use the crisis opportunity to justify the printing press run
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  Speaker 1: and the passage of legislation, which is by its own
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  Speaker 1: creation finite. We're doing this because of the current crisis,
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  Speaker 1: and ergo that presumes at the outset it's going to
• 12:10
  Speaker 1: go away at some point. And then they rip their
• 12:12
  Speaker 1: bloody hair out about how we're taking away benefits from
• 12:14
  Speaker 1: people who need them predicated on that temporary relief that
• 12:17
  Speaker 1: they enshrined in law during the crisis period.
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  Speaker 2: I mean, that's right.
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  Speaker 3: And every time you try to pull down some level
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  Speaker 3: of emergency spending, they will present the.
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  Speaker 2: Most sympathetic case.
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  Speaker 3: Oh, you are taking away the benefit that this mother
• 12:37
  Speaker 3: of four needs for her children.
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  Speaker 2: And the problem is that happens.
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  Speaker 3: That's true every time you increase spending and then you
• 12:45
  Speaker 3: try to bring it back down. When you try to
• 12:47
  Speaker 3: bring it back down, by definition, you will be.
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  Speaker 2: Taking away benefits from someone. It's the danger of ramping
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  Speaker 2: up spending.
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  Speaker 3: And it is one of the things, frankly, that we
• 12:59
  Speaker 3: don't have a good you should do. It does happen
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  Speaker 3: in almost every crisis. We continue to spend for much
• 13:06
  Speaker 3: longer than we should. And we can blame lots of things,
• 13:12
  Speaker 3: but not and not to be too negative, but the
• 13:14
  Speaker 3: American people themselves aren't very good at recognizing some that
• 13:19
  Speaker 3: we need to be more disciplined when it comes to
• 13:22
  Speaker 3: this that.
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  Speaker 2: We cannot continue to spend.
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  Speaker 3: You know, have deficits that are six percent of GDP
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  Speaker 3: forever that will be a disaster.
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  Speaker 1: Well, John Carney, along those lines, I'm just convinced that
• 13:32
  Speaker 1: most people just simply do not pay attention to this.
• 13:35
  Speaker 1: Maybe it's a consequence of the education system which has
• 13:38
  Speaker 1: failed them. They don't understand mathematics, they can't read, or
• 13:40
  Speaker 1: speak or write. I mean, this is a huge problem.
• 13:42
  Speaker 1: People are getting dumber and dumber every year we graduate
• 13:44
  Speaker 1: in other classes of high schoolers. They seem to be
• 13:48
  Speaker 1: well less equipped to deal with the problems of the world.
• 13:50
  Speaker 1: And lord knows, I mean, politics is competing for the
• 13:54
  Speaker 1: precious minutes in our lives versus social media and streaming
• 13:58
  Speaker 1: video and streaming audio. People don't have time to pay
• 14:00
  Speaker 1: attention to these kind of things. John, That's that's what
• 14:03
  Speaker 1: really concerns me. And then when crisis hits them and
• 14:06
  Speaker 1: they go to the grocery store and realize groceries are
• 14:08
  Speaker 1: through loop, they want to look for someone to blame,
• 14:09
  Speaker 1: but don't understand who to blame for it and what
• 14:11
  Speaker 1: the solutions are.
• 14:13
  Speaker 2: That's right, and what we what we really need to
• 14:16
  Speaker 2: do is.
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  Speaker 3: If we're able to continue to grow the economy, we
• 14:22
  Speaker 3: will pass through this.
• 14:24
  Speaker 2: Inflation has come down a lot.
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  Speaker 3: In fact, we're getting very close to if you take
• 14:31
  Speaker 3: and I know this annoys people when I say this,
• 14:32
  Speaker 3: but just take out the price of gas for a minute,
• 14:35
  Speaker 3: because that is gone up because of the strait of
• 14:38
  Speaker 3: her mood, because oil's gone so but if you take
• 14:41
  Speaker 3: that out, we're actually pretty close to two percent inflation.
• 14:44
  Speaker 3: We're still a little too high. And frankly, even when
• 14:47
  Speaker 3: we get to two percent, which is what the Fed
• 14:50
  Speaker 3: wants to have, prices will feel too high for several
• 14:54
  Speaker 3: years in the future because they went up at a
• 14:58
  Speaker 3: nine percent greedy oric for so long, right, exactly that
• 15:03
  Speaker 3: that you will feel every time you go to You know,
• 15:06
  Speaker 3: I feel this every time I go to eat. I
• 15:09
  Speaker 3: got invited by some friends step dinner out at a restaurant.
• 15:13
  Speaker 3: I looked at the menu and for a moment I thought,
• 15:15
  Speaker 3: did they bring me to the nicest restaurant I have
• 15:17
  Speaker 3: ever been to?
• 15:19
  Speaker 2: You know, how could the prices beat as high?
• 15:21
  Speaker 3: And then I, you know, said, oh no, I'm just
• 15:25
  Speaker 3: you know, thinking back to what prices you used to
• 15:27
  Speaker 3: be back in two and eighteen.
• 15:29
  Speaker 2: This is what things cost us, and it will take
• 15:31
  Speaker 2: us a long time to get get used to it.
• 15:34
  Speaker 1: John, They're not going to go back down. The buying
• 15:36
  Speaker 1: power of the dollar has been eroded. Thanks to the
• 15:38
  Speaker 1: printing Press's right. John Carr, the bright Bart News Finance
• 15:41
  Speaker 1: and Economics senator. Read what he has to say over
• 15:43
  Speaker 1: at brightbart dot com. John, thank you so much for
• 15:45
  Speaker 1: the economics lesson and the analysis this morning. I truly
• 15:47
  Speaker 1: appreciate it and I'll look forward to having me back
• 15:49
  Speaker 1: on the fifty five KRC Morning Show as soon as possible.
• 15:53
  Speaker 2: Yeah, thanks for having me.
• 15:54
  Speaker 3: And uh, you know, if you have free time, you
• 15:56
  Speaker 3: can come over and write bright Bart Business dijects because
• 15:58
  Speaker 3: you get the bottom.
• 15:59
  Speaker 1: Thank you, John for that vote of confidence. I'm not
• 16:02
  Speaker 1: worthy of it, but I sure appreciate it. Take care
• 16:04
  Speaker 1: of brother day twenty two right now, don't go worry
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  Speaker 1: the Daniel Davis deep dive coming your way. Oh that's right. Cover, Sincy,
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