Valuetainment - May 18, 2021


The Danger of Inflation For The Future Of America

Topics
demand pull inflation rates manipulation
Hosted by
Patrick Bet-David
Mentioned
Buffett Powell Carter Reagan Trump Biden
Colonial Pipeline Reveals Threat to National Security The Mindset of Winners： Lessons from Kobe Bryant & Michael Jordan

Episode Stats


Length

9 minutes

Words per minute

214.82

Word count

2,048

Sentence count

217


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

Inflation is everywhere, people are telling us don t worry about it, there's no such thing as inflation, this is normal. Why is our gas prices up 49.6% in a year? What is inflation and what does it mean for the economy?

Transcript

Transcript generated with Whisper (turbo).
Topics generated with Qwen2.5-3B-Instruct.
Hosts, guests, and mentioned names generated with spaCy (en_core_web_sm), reconciled against Wikidata.
00:00:00.000 You cannot turn on a news today without seeing the word inflation, inflation, inflation, inflation.
00:00:03.640 It's everywhere. People are telling, don't worry about it. There's no such thing as inflation.
00:00:07.720 This is normal. Investors worry. Buffett is saying some stuff that's scaring some people.
00:00:12.560 Why is our gas prices up 49.6% last 12 months? The eggs alone is up 16% a month of April.
00:00:19.120 They said the inflation is only going to be 3.6% a month of April, ended up being 4.2%.
00:00:23.520 Beef is up 20%. Real estate's up 12%. What do we do and what does this inflation really mean?
00:00:29.400 We're going to cover all of that today.
00:00:36.140 So let's get right into it. In order to understand inflation, we have to first understand the cycles our economy goes through.
00:00:42.120 So expansion. This is spring. When things are kind of warming up, it's looking good.
00:00:46.480 Then we got peak. This is the hottest day this summer. Like the market is at the peak.
00:00:50.780 Everyone's making money. People are making lucky type of money.
00:00:53.620 Then all of a sudden we have contraction. That's the fall. Leaves fall in.
00:00:56.400 It's kind of a different spirit. And then you have trough, which is the coldest day in winter, right?
00:01:00.620 That's exactly how cycles work. This could be two to four years.
00:01:03.380 This could be five to ten years. And then you have a recession here if it lasts longer than six months.
00:01:07.220 So let's go a little bit deeper into what does expansion mean?
00:01:10.200 This is when inflation is around 2%. This is when GDP is growing 2% to 3%.
00:01:14.500 This is when unemployment is relatively between 4.5% to 5.5%.
00:01:18.140 That's a bull market. A lot of confidence. Jobs are looking good. People are not stressed out about money.
00:01:23.700 Peak. This is when GDP is around 3%. This is when things are overpriced.
00:01:28.940 This is when lucky money is being made.
00:01:30.820 When you see regular, all of a sudden, a bunch of people are making millions of dollars.
00:01:34.920 They're saying, how did this guy make the money? How did she make the money?
00:01:37.360 We may be around peak, which many are saying today's that time.
00:01:40.560 Then we have contraction, which is GDP falls below 2%.
00:01:44.420 Unemployment goes above 6%.
00:01:46.700 Markets down. Potential recession around the corner if it lasts more than six months.
00:01:51.520 And then we have trough, which is we've already experienced some bad times.
00:01:55.280 And things are kind of coming back when we've hit rock bottom.
00:01:58.580 You know, demand and production is kind of coming back up.
00:02:01.440 Unemployment's gone down, but it's kind of coming back up.
00:02:04.420 Markets starting to go up again.
00:02:06.040 And it's end of the recession.
00:02:07.260 So now that we've got an idea about how the economy goes, the different cycles we go through,
00:02:11.020 next is to understand what causes inflation.
00:02:13.360 By the way, stick around until the very end.
00:02:14.840 I'm going to have a PDF for you.
00:02:15.920 So let's take a look at this.
00:02:17.260 Three things cause inflation.
00:02:18.940 Number one is cost push inflation.
00:02:21.200 Two is demand pull inflation.
00:02:22.780 And last but not least, is printing money.
00:02:24.980 So let's take a look at the first one.
00:02:26.280 The other day, I'm at a Ducati dealership.
00:02:27.980 I bought a couple of Ducatis.
00:02:29.160 I'm talking to the guy.
00:02:30.040 I said, tell me about your dealership.
00:02:31.060 And one would.
00:02:31.920 He says, I'm shutting that one down and I'm moving to a different place.
00:02:34.340 I said, why is that?
00:02:34.960 It's because they doubled rent for me from what it was a few years ago to what it is today.
00:02:39.600 I either have to raise the prices of the Ducatis I'm selling.
00:02:42.900 I either have to let go of employees or I have to downsize or I simply move to a different place.
00:02:47.620 So that's when everything gets passed down to the consumer.
00:02:50.520 So oil prices goes up.
00:02:52.440 I'm running a shop.
00:02:53.420 I'm selling milk.
00:02:54.180 I have to raise the prices to the consumer.
00:02:56.460 So the second one is demand pull inflation, which is kind of like what happened with Trump.
00:03:00.040 He lowers the taxes from capital gains, corporate taxes, every tax went down.
00:03:03.740 So now people have more money.
00:03:05.240 So what do they do?
00:03:06.100 This house typically would have only two people making offers.
00:03:08.680 Now it's got seven offers.
00:03:10.200 So I have to pay $28,000 more for the house because there's several more people that want this house.
00:03:14.440 You were selling stuff that you only had a thousand of in your store and you were selling it for $1,000.
00:03:19.620 Now all of a sudden people are willing.
00:03:21.020 They want it so much because they have so much money.
00:03:22.580 Like I'm about to run out of this product.
00:03:24.480 I can't sell it for this price.
00:03:26.000 Let me raise it a little bit to slow down a little.
00:03:28.080 So you raise it 20%.
00:03:29.100 You raise it 30%.
00:03:29.740 That is demand pull inflation.
00:03:32.400 And last but not least is when the government prints money and they start sending money to people.
00:03:36.260 Kind of like what happened last year during COVID or even earlier.
00:03:38.960 This year last 12 months, somewhere around $6.5 trillion of money was printed.
00:03:42.600 So people now have money to spend.
00:03:44.360 So nobody really feels like, did we really go through a recession?
00:03:47.340 Did really anything happen because I have money to spend?
00:03:49.900 That's how the government influences the economy to keep moving, right?
00:03:52.520 So now that I know the three different things that cause inflation, the key now becomes how do we calculate inflation?
00:03:57.040 How does the government do it?
00:03:58.120 Well, it's called the Consumer Price Index and the formula is quite simple.
00:04:01.340 It's taking the cost of market basket in a year divided by cost of market basket in a base year.
00:04:07.140 In a year means this year in 2021, what I spent to do, you know, food, beverage, housing, clothes, transportation, medical care, recreation, education, other goods, cigarettes, funeral, whatever it is.
00:04:18.720 What I spent this year in a month of April versus what I spent last year in a month of April.
00:04:24.180 And then they get the difference.
00:04:25.160 Hey, it's up 2%.
00:04:25.960 It's up 4.2%.
00:04:27.020 They come out with that formula, right?
00:04:28.700 That's the Consumer Price Index formula.
00:04:30.620 And this leads me to who manages and controls inflation.
00:04:35.740 Who are the puppet masters of the market?
00:04:38.000 Well, you got two of them.
00:04:39.180 One is the Fed.
00:04:40.380 The other is the government.
00:04:41.860 The Feds, what they do is the following.
00:04:44.120 When there is bad times, the Fed manipulate the market by lowering the rates.
00:04:48.500 When there's bad times.
00:04:49.300 So if you look at the last 10 years where they've kept the rates really low, I'm talking below 1%, quarter, zero.
00:04:55.560 Some of these places have been really, really low for our rates.
00:04:58.240 It's because they believe we're in bad times, right?
00:05:01.800 During good times, they'll increase rates.
00:05:03.560 You know what?
00:05:03.820 Things are good.
00:05:04.500 We're paying off our debt.
00:05:05.560 We're looking good.
00:05:06.420 Let's raise the rates a little bit and they'll raise the rates.
00:05:09.220 That's how they control it.
00:05:10.140 The one part most people don't know about is we got 6,000 small banks in America, of which 80% of them are in a holding company that's owned by the Federal Reserve.
00:05:19.960 Let me say that one more time.
00:05:20.840 We got 6,000 small banks in America, give or take.
00:05:23.120 80% of those banks are in a holding company that's owned by the Federal Reserve.
00:05:29.440 So what they do is they use these small banks to kind of get a pulse of what's going on in the marketplace and then they go on, boom, control the knob.
00:05:36.380 Rates up, rates down.
00:05:37.600 Rates up, rates down.
00:05:39.040 That's why Powell is so powerful in the USA today.
00:05:42.260 Then the next one is the government.
00:05:43.440 What does the government do?
00:05:44.200 The government raises taxes, lowers taxes.
00:05:46.780 You got Republican Party comes in, they lower tax.
00:05:48.900 You got Democratic Party comes in, maybe they raise taxes.
00:05:51.180 You got parties come in, they want to deregulate.
00:05:53.960 You got another party comes in, they want to overregulate.
00:05:56.120 Maybe they'll send money and they'll send Prince money and maybe they'll have a new infrastructure legislation.
00:06:01.020 You keep hearing about Biden's, you know, my infrastructure plan is this much.
00:06:04.300 Here's what we're going to do with it, right?
00:06:05.380 They're presenting.
00:06:06.180 But these two pretty much control what happens and they try to keep inflation at 2% by controlling the knob and moving the knob, right?
00:06:14.940 So that's that part.
00:06:15.660 So why is inflation so important?
00:06:18.020 Why should you and I be paying attention to it?
00:06:20.660 Here's why.
00:06:21.540 Back in 1981-82, Carter was ending his presidency.
00:06:25.080 Reagan took over.
00:06:26.360 At that time, mortgage rates got to 18.63%.
00:06:30.380 Let me say this one more time.
00:06:31.560 If you bought a 30-year fixed home loan, you got an 18.63% rate.
00:06:36.940 Unemployment at the time was 10.8%.
00:06:39.440 Dow Jones during a 20-year period hovered around 1,000.
00:06:43.440 Let me say this one more time to you.
00:06:45.280 Dow Jones hovered around 1,000.
00:06:46.920 We got the Dow going to 33, 34, 35, 32, 31 going up.
00:06:51.540 That was not the case for a 20-year period.
00:06:54.280 So a lot of people don't want to see this happening, especially that we hear the word inflation.
00:06:58.200 You know, inflation is going to happen pretty much every year, give or take, minus some years that we have deflation.
00:07:03.800 Inflation is 2% to 4% every year.
00:07:06.080 Deflation is when things actually, prices go lower because the economy is not looking good.
00:07:10.720 So prices go lower.
00:07:11.700 So it's the complete opposite.
00:07:12.840 It's negative inflation.
00:07:14.400 And last but not least, we have hyperinflation, which is inflation goes above 50% per month, roughly 5% to 10% a day, similar to what happened to Venezuela when they experienced between April of 2016 to 2019.
00:07:27.640 53,798,500% was the inflation.
00:07:33.080 And obviously, neither the government nor the feds nor a lot of people in the market want to see that happen in the states.
00:07:38.440 So when they're looking at gas prices being up, you know, 49.6% versus it was 22.5% in the month of March.
00:07:45.840 You know, oil is up 30.73% versus 20.2%.
00:07:50.380 You know, you got used cars being up 21%.
00:07:53.120 Since one has a used car become an investment, well, that's kind of what's going on today.
00:07:57.640 So last but not least, question you may ask.
00:07:59.440 What is a good investment to make during times of inflation?
00:08:02.540 Whatever I tell you, I want you to go talk to your advisor yourself to see what they'll tell you about it.
00:08:07.120 But these are some of the things that you'll hear people talk about that do well during inflation.
00:08:11.700 One is land.
00:08:12.520 Why?
00:08:12.940 Think about it this way.
00:08:13.940 Whatever you cannot copy and duplicate does well when inflation takes place.
00:08:19.560 Collectibles, cards, sporting cards does well when inflation is going up.
00:08:24.260 Real estate, commercial or residential.
00:08:27.100 Crypto, believe it or not.
00:08:28.180 Crypto, this is like heaven for crypto because they're sitting there saying there is a defined amount of numbers in mind.
00:08:33.880 We can figure this out.
00:08:34.900 There's a formula every four years.
00:08:36.440 This is what happens.
00:08:37.900 Commodities does well.
00:08:39.420 Lumber is on fire right now.
00:08:41.200 The stock market also does well because, again, it's something that you can go get that cannot be reprinted.
00:08:46.740 Then you got tips.
00:08:47.600 You hear about tips, but I would be very careful with tips.
00:08:50.180 Do some research before you do treasury inflation protected securities because they do very well if you can time inflation.
00:08:56.320 But they do horrible when there is deflation.
00:08:59.100 I'm talking about horrible when you have deflation.
00:09:02.040 But these are some of the things to be thinking about during inflation.
00:09:05.020 So hopefully this gave you a better idea about how inflation works on it.
00:09:07.620 If you want everything I covered today in a PDF, text the word inflation to 310-340-1132.
00:09:13.640 Once again, text the word inflation to 310-340-1132.
00:09:17.620 Or if you're not in the States, go down in the description, click on the link, subscribe to our newsletter, and we'll send a PDF to you as well.
00:09:24.460 If you enjoyed this video, I've got another video I want you to watch.
00:09:26.680 It's titled, The Next Market Crash.
00:09:28.980 Ten signs it is coming.
00:09:31.000 Take care, everybody.
00:09:31.760 Bye-bye.