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Fed Policy and Monetary Velocity with Dr. Lacy Hunt – Global Macro Update

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 →


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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John Mauldin
Each week, investors and financial professionals around the globe turn to John Mauldin to better understand Wall Street, global markets, and the drivers of the world economy. And for good reason. John is a noted financial expert, a New York Times best-selling author, a pioneering online commentator, and the publisher of one of the first publications to provide investors with free, unbiased information and guidance—Thoughts from the Frontline—one of the most widely read investment newsletters in the world.
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