| This week I spoke with Dr. Lacy Hunt, executive vice president of Hoisington Asset Management and author of both “A Time to Be Rich'' and “Dynamics of Forecasting: Financial Cycles,Theory and Techniques.” We discussed the consequences of the Federal Reserve’s actions, the impact of higher interest rates, and the durability of inflation. In this edition you’ll hear Lacy and I discuss: - How the Fed’s slow shift from “lender of last resort” to “spender of first resort” could have far-reaching consequences for the economy… - Why the Fed’s greatest policy obligation moving forward should favor modest- and moderate-income households… - What increased housing prices means for the cost of living in other areas of the economy… - Why despite economic resilience there is still “significant risk of a hard landing.” - How soaring interest rates are negatively affecting household savings… - Why the Fed’s long-term credibility may be severely damaged… Dr. Lacy Hunt’s quarterly review and outlook can be found here → https://hoisington.com/economic_overview.html —------------------------------------------------------------------------------------------ 0:00 - Introduction 1:47 - A brief explanation of what federal interest rates are 2:01 - How federal interest rates work 3:16 - What the fed funds rate actually is 4:09 - The inversion of the yield curve 5:03 - How monetary economics looks at macroeconomics 5:46 - The largest rate hikes since 1994 6:04 - The Fed’s liquidity issue 6:25 - Is the Fed “really” data dependent? 7:03 - The money price-wage spiral 7:52 - Inflation has peaked but is still relatively high… 8:03 - The worst cost-of-living crisis in 42 years 8:39 - The Federal Reserve oversteps its bounds 9:25 - The Fed is behind on its balance sheet 10:02 - What the Fed could and should do to reduce liquidity 10:53 - Why the Fed’s credibility is greatly reduced 11:08 - Leaving the confines of the Federal Reserve Act 12:02 - The increase in cost of living 12:48 - Housing’s unexpected effect on the rest of the economy 13:15 - The highest interest rates in years 13:46 - The soaring cost of living 14:10 - Monetary policy as a leading indicator of economic activity 14:49 - The housing sector and the greater economy 16:03 - The inversion of the yield curve 17:05 - The likelihood of a hard landing 17:42 - The reduction in household savings 19:46 - The increase in credit card debt 20:47 - The Fed versus the ECB 21:24 - The Fed’s priorities? Modest- and moderate-income households 22:45 - The dollar’s outsized strength 23:10 - Debt and growth outside the United States 24:05 - The Fed’s political failure 25:30 - The likelihood of recession 26:40 - The cost and availability of labor 27:49 - Bond investing’s bright outlook 28:20 - Closing thoughts |
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