Latest / Financial Survival Network / Can the Fed control inflation without blowing up the whole system? - Matthew Johnson #5788

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Can the Fed control inflation without blowing up the whole system? - Matthew Johnson #5788 · Financial Survival Network

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  Welcome you are listening to and watching the Financial Survival Network. I'm your
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  host, Carrie Letts. Well, good news yesterday, good news today.
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  US wholesale prices sank half a percent in March. Is it time to break
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  out the champagne? Inflation has been whipped? That reminds me of those buttons
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  that President Gerald Ford wore and I'm still trying to obtain them wind buttons,
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  which stood for whip inflation. Now, so the Fed has almost got inflation
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  whipped? And will they keep raising? Can you believe the numbers? CPI
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  dropped more than expected to five percent? But I seem to remember that inflation
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  was supposed to be transitory. And hey, can you ever believe the Fed?
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  They've missed every major event, or most of them, certainly for the
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  past decade. They missed the real estate collapse, and look if you're skeptical
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  about their ability to control events and the economy ahead, you have certainly have
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  every reason to be. But Matthew Johnson is with us. Now, Matthew,
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  you have a certain take here. You think the FED is succeeding.
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  Well, thanks for having me on, Carrie. It's good to be on
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  again. You know the numbers. I don't think lie now. I think
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  that there is definitely various different ways that we can read the CPI. We
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  know the CPI is actually broken into three different parts. They look at CPI,
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  they look at core CPI, and then they look at what they call
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  supercore. And the reality is is that things are indeed coming down. I
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  think the thing that gives most of us as investors in just as healand beings
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  in general, a lot of heartburn is the fact that not all these things
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  are coming down. In Unison, right, we still see that there's a
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  lot of inflation in our everyday life. But you're right, there is some
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  good news. We see that the CPI is dropped from six to five,
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  a little bit better than expected. We're seeing that the PPI today comes out
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  and it's down by half a percent. That's good news. We see the
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  morning straits have dropped just a little bit. So we look at all the
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  various different factors, we look at all the various different pieces of data that
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  we have access to as Americans, and we see that things are progressing.
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  But I think you bring up a good point. You know, in January
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  of the stock market, really it pulled the trigger too early. They were
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  thinking, oh, this is going to be a rate cut, right,
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  and all of a sudden they didn't get what they want. And the appreciation
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  that we saw in the market in January, we've given up quite a bit
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  of that. In February, we've given up some of that in March,
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  and unhus what we're going to see in the future months, but I believe
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  the Fed is going to have to raise interest rates. The thing that we
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  leaned, or that we've gleaned from the notes from the minutes of the Federal
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  Reserve that just came out yesterday was that there was quite a few of them
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  that actually were vying for a fifty basis point increase last month, and because
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  the banking scare and the banking crisis that was going on at the time,
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  they decided to relent and do twenty five basis points. Well, if they're
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  going to stay really stalwart, Carrie, I think getting this inflation number down
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  to two percent, which I think is very audacious in and of itself,
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  they're going to have to stick to their guns. They're going to have to
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  do another rate increase in May. I do believe that it's going to be
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  likely that they do a kind of a pause and see. But it was
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  also very evident for reading the Minute notes that they also are leaving the door
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  open for another rate increase in two and twenty three, even after the month
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  of May. So we have to be very careful to understand that these things
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  are going to be kind of a work in progress, and we don't exactly
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  know, as Dirrection it's going to go. Well, if we look at
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  the canary in the coal mine or the canary in the gold mine, we
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  see today as we're speaking on April thirteenth, Thursday, the gold is up
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  another twenty five dollars the ounce to two forty, a hair's breadth from its
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  prior high, which don't hold me to it, I believe was two thousand
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  and sixty nine. And even silver, which has been a perennial precious metal
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  under reformer, not just a precious metal, is approaching twenty six bucks.
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  So the ultimate haven people are, obviously, and I think this is a
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  global phenomena, have rediscovered the attraction of gold. You look at a bitcoin,
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  it's back over thirty thousand dollars, another an area in the gold mine.
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  You think that the BED is really capable of controlling this because look,
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  we've got deficits, trillion multi trillion dollar deficits as far as the eye can
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  see. That means by its very nature, they're going to be printing up
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  money like it's going out of style, more and more treasury debt issued.
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  Do you think they really have the ability to control inflation without blowing up the
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  whole system? We already saw regional banks are a disaster area. Money is
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  bank runs blowing out of there into the money center bank in search of safety.
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  You really think the FED has all this power and the ability even if
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  they do have the power to achieve these goals, Well, I think you're
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  asking a really good question, but I think it kind of boils down to
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  this. The FEDS are going to realize that they don't have the control to
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  be able to control everything. They don't have the ability of controlling human emotion,
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  human reaction, and there's way more of us than there is of them.
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  So if there's a run on the bank, if there's a run on
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  the market, you know, they only are limited in what they can do.
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  However, with that being said, I do believe that they're going to
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  exert doing what they feel that they can do to be able to bring us
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  to somewhat of a or rational economy with inflation. That's going to be within
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  reason. But I think that there's another thing that we may be wanting to
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  think about. You know, back in the two thousand and eight crisis,
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  they you mentioned earlier. You remember the name Ben Burnanky, right, Ben
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  Burninky did something that was kind of interesting from a strategic standpoint. There was
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  huge infusions of money that were going into the banks, and there was around
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  six trillion dollars that they ended up giving to the banks. But then they
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  convinced the banks to keep that money with them. Now here's the thing,
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  they quote unquote sterilize those six trillion dollars. But those six trillion dollars are
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  now costing our federal government around two hundred and seventy five million, excuse me
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  billion dollars per year. That's more than all of the veteran benefits in the
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  United States today in a year. So the question becomes can they keep a
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  lid on this? Because here's the deal. If they stop paying interest on
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  those dollars, then those dollars fled back into the economy and that creates a
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  multiple domino effect. You want to talk about inflation, you haven't even seen
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  inflation yet compared to what it could be if something like that happened. So
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  are they in control? No? Are they trying to give the personification that
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  they are in control. Absolutely? Do they want to try to keep the
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  average American fairly calm and reasonable? Yes. Are they doing what they're doing
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  because of good intention to try to bring the inflation down? I think that
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  they are. The problem is is that we have so many things that you
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  and I consume every single day that doesn't seem to correlate with what we're hearing
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  on the news. You know, when we go to buy dog food and
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  we're paying twenty one percent more today for dog food than we were a year
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  ago, it still kind of sticks in our crawl. Right when we're buying
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  our medicine, we're buying our eggs. Just Kim mccross, the client who's
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  got a great friend that lives in Alaska, and that friend was telling his
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  friend, he said, do you realize that I have to pay over twenty
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  dollars for a dozen eggs in Alaska? We're talking. There's not a lot
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  of correlation between what we're seeing from the numbers that the government's giving us the
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  news is reporting to us, compared to a howl of feeling. But I
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  think that there's another facet here. I know that diversification is such an important
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  thing. You talk about precious metals. It could be a safe haven,
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  and I believe that it is. But have we looked and really paid attention
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  to what stage of life we are in When I discuss precious metal investing with
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  my clients, carry it is certainly something that we can use as a diversification.
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  I think we should. Is it perfect? It isn't perfect. There
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  is no perfect tool, doesn't have limitations. Is it practical? All of
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  these various things, And I think people tend to, especially investors, they
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  begin to look at the book ends of the investment world and we fail to
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  see some of the other opportunities that we and use as tools on our toolbox,
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  along with the precious medals, along with the CDs, along with the
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  other various different things that people invest in. Then that's fixed income. And
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  when you think about fixed income investing, I don't know about you, but
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  there's many more corporations that I would choose to trust over the United States government.
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  When you think about the bank and you think about how very little if
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  there was a toll banking crisis, just a complete meltdown, how very little
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  the FDIC would matter. You know, how very limited and resource they are,
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  that they would be able to come in and take care of everyone who
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  has their name on an account and give them a quarter million dollars of protection.
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  I think that this is where diversification comes into play. And if we
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  can make certain that our working capital is as safe as we possibly can make
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  it, and we can make certain that our working capital is actually producing something
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  for us in the way of interest, in the way of dividends, and
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  we can have various buckets of money doing various different things. This is what's
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  going to give us the greatest chance of success, regardless of whether things get
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  worse or whether things get better. Now I'm wholping for better. But what
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  I hope for and what becomes reality, as we all know, can be
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  two totally different things. What was that old saying that your mother used to
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  say, if wishes were I can't remember it now, but I get you
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  so multifaceted approach. If I interpret what you're saying correctly, maybe you should
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  have some gold and silver, maybe you should have some currency, and maybe
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  stocks will do better than having your money in the bank. But when you
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  talk about companies you trust more than the US government, I assume we weren't
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  more than member not at all. So I want to get back to this
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  just to be clear. When we think about the world of investing. Obviously
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  we've got equities, Okay, if you're in a position, whether you're on
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  the accumulation stage of your life Carrie as an investor who's got many more years
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  before they retire, versus the person who is maybe a year away from retirement
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  or maybe they're in retirement. If you're going to be looking at equities,
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  you can't forget to pay attention to free cash flowing companies that are going to
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  pay you a dividend. That dividend is your reward for being the shareholder,
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  right. But we have to not just look at the equity side. We
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  have to look at things like individual bonds. For many investors, they have
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  grown so accustomed because of the laziness of the financial services industry that the only
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  bonds are fixed income that they know is simply bond funds. Okay, they
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  may have their place, but bond funds are next to worthless compared to an
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  individual bond. When you own a bond to individually, you own a contract.
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  You are sitting in a position where you can rest easier, you can
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  sleep better at night because you know that that bond is going to be paying
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  you a contractual stream of interest income every year. You realize that if you
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  hold that bond to maturity, when that bond matures, you're going to get
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  your part value back. Even preferred stocks, which rank higher than common stock,
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  can bring consistency and steadiness to a person's portfolio. And when we have
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  dividends, we don't have to be as concerned. It's not that we're not
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  concerned, but we don't have to be as concerned with the underlying value of
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  our asset because we know that we have that income that we can spend if
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  we need it, and if we have got more income than we need,
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  we simply reinvest it back in more income, produce and things. Okay,
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  so what all right, So a diversified approach here, But you gotta believe
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  that this situation here is really, really kind of dire here. The regional
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  banks, they make most of the real estate loans that we know of here,
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  other than the big ones that the money center banks make. We've got
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  commercial real estate really lowing up all over the place, and at some point
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  the ability of the government to bail everybody out and the FED it's going to
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  be challenged, isn't it. Well one hundred percent, I agree one hundred
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  percent with that assessment, and I think it's going to become even more public.
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  You know, we're coming into earning season, and that means that there's
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  going to be a number of banks that are having to come out with their
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  numbers, and assuming that they're not fudging the numbers, I think that there's
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  going to be some pretty pretty big ugliness that's that's coming out, showing just
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  how desperate of a situation it is for many of them. With this,
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  we have to maintain understanding. This is the reason why you don't put all
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  your eggs in one basket. You know, who could fault the average American
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  today? If they're sitting in a bank that's maybe smaller, they're paying them
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  a smaller rate of interest, and they see the bank across the street and
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  is paying them, you know, two three tenths better interest. We know
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  that money is flowing out of banks. We know that even if you look
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  at a various asset class called the annuity, you know, fixed interests.
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  Annuities today are producing five five a quarter, even as much as five and
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  a half percent on a guaranteed basis. And people understand that if I invest
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  in a CD today and maybe I'm getting four and a half percent in one
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  year, assuming that the feverer Reserve follows through with their word and then begin
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  to taper interest rates in one year, that CD is not going to be
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  renewing at four and a half percent. It's going to be renewing maybe at
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  two and so people are looking for viable alternatives. And the good news is
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  that with this interest rate increase, it's giving people an opportunity, I think,
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  to better diversify. Think about it. The reason that we saw the
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  market blow up the way they did in two twenty one after twenty twenty was
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  because we had this abundance of liquidity, We had cheap interest rates. And
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  when people are looking at their fixed interest accounts and they're saying, gosh,
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  I'm not making anything there, I'm losing to inflation. Low interest rates drives
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  people further out onto the risk curve. It drives people into the market because
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  they get the sensation that that's the only place that you can make money.
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  But you and I both know that there is many other alternatives that are safer
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  havens, many other alternatives that we could put our money to help us be
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  better diversified, to be able to help us create real income that we can
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  spend just some number on the statement, And that's what we really need to
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  be focused on. There's many things in this world we cannot control. There's
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  many institutions that I would not trust. But my money is my responsibility.
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  And this is the reason why we have to listen to all various data coming
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  into us and then make logical decisions that are comfortable to us. Right,
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  gotcha? And all right, So we live in an uncertain world. We
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  know that, and you know things are happening, trends. You can't not
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  be aware of it. What do you think the role of AI is going
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  to be in the whole next emerging financial crisis, the next one that comes.
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  Is it going to cause it? Is it going to be the solution?
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  What are your thoughts? Well, It's funny that you ask that,
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  because I've had a number of different interviews and conversations with different individuals, and
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  you know, the latest worry for so many people has been that, only
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  goodness, the government's going to be going to digital currency, all right,
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  So I personally believe Kerry that we're going to eventually become a cash lest society.
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  I don't know exactly when that's going to happen, but I believe that
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  it's going to happen, right, Yeah, exactly. Getting there myself,
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  you have to pay for a lot of things in cash, and now the
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  only thing I pay in cash or basically is the maid. That's right,
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  she'll probably be on Zell shortly likely, so, but I think we would
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  be. I think that this is kind of the same argument that my dad
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  had twenty five years ago, and he said, oh, you know the
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  Internet, that thing is just a fad. Okay, Well no, it's
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  it's not a fad, dad, It's it's going to be a very real
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  thing. And we know that artificial intelligence is becoming more and more part of
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  our life. We know that so many companies, so many businesses, are
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  implementing it, and in many respects, I want to believe that in in
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  the majority the scheme of things, it's going to be benefiting our life.
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  It's going to allow greater efficiency, it's going to allow more accuracy. But
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  you know what, there's always that possibility carry that we could see some really
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  bad implications as a result of its misuse or the lack of following through and
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  making certain word thinking through all of the various different ways that it could be
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  a detriment to society. And we see an awful large emphasis in today's society
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  that I think is, you know, they're awoke society that believes that,
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  you know, the nation owes them a living, and there's you don't have
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  to work for a living, you don't have to learn tangible skills, and
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  that you can do everything that you want to do behind our computer screen,
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  behind a keyboard, and in many respects, I think that this is where
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  a lot of motivation is coming from. The world is becoming more technical,
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  but we can't forget the human element to this, and so I hope for
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  the best, but I don't know what it's going to become. All right,
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  we agree there, Well, Matthew, appreciate your coming on again and
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  sharing this with us. Where is the best place to find you these days?
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  Or can certainly go to my website. They can go to Johnson Wim
• 21:22
  dot com, which is your website. They can also go to my YouTube
• 21:26
  channel which is the Capitalized Life Channel, and they can watch our my weekly
• 21:33
  videos there. If they go to the website, they can hear my Saturday
• 21:34
  morning radio show that I produce each Saturday. And the website is just full
• 21:40
  of all sorts of information to help educate the average investor and retiring on what
• 21:47
  they can do to make more conservative, suitable decisions for their money and be
• 21:52
  safer and enjoy the retirement that they deserve, a retirement that is full of
• 21:56
  income instead of anxiety and stress. All right, well, we appreciate you
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  coming on. If you've got a question from Matthew, shoot us an email
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  kl at kryltz dot com. Make sure you go over to the site subscribe
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  to you free newsletter Financial Survival Network dot com. Matthew, We'll talk to
• 22:12
  you again soon. Appreciate you stopping by. Thanks Carry, thanks for listening
• 22:18
  to Carrie Letz's Financial Survival Network, your solution to today's trying times. For
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  the latest, go to Financial Survival Network dot Com Financial Survival Network now more than ever