In this video, the speakers will take a deep dive to the impact of inflation on the economy and how it lead to a recession, as well as the Federal Reserve’s response plan to mitigate its effects.
Inflation, the rate at which the general price level of goods and services increases, can have a significant impact on the economy.
When inflation rises too quickly, it can lead to a decrease in consumer spending, decreased business investment, and other negative economic consequences, which can then lead to a recession.
The speakers also responded to the questions given by the participants about inflation, recession and how it will impact in the real estate market.
Watch this video to find out!
Transcript:
Fed 00:00
All right. So if you look, this is what the Fed did in the different recessions to curb inflation, right? So these are the different recessions, everything, you know, the 22,008 2009 anomaly. But look where we started from another, we start from about zero, right? So now we’re up to a whopping 2.2 2.2 and a quarter, two and a half percent, the Fed raised up to two, two, which is almost nothing. So that’s not really putting a dent in anything right now. So people are saying, well, we need to wait for the time to run out to see what’s gonna do the economy. Well, rates are all time low. They’re only planned to go to three and a half. If they have to really go up, you’re talking maybe four and a half percent, which is below the five I mean, below the five here.
17% inflation, that’s what you saw over here, right? So you were that that era, and that was the cars fault. It was the guy before Mrs. Imber. I forget the guys name, he was the Fed guy they had before who just ignored inflation. Anyway, that’s a different story. But now we’re not gonna see that we’re gonna see. Now, who knows, I mean, there’s black swan events, there’s all kinds of things that’s going to happen. But the Fed believes that their goal was to jack it up to about three, three and a half percent, they may have to go for four and a half percent, depending on what inflation is doing. But we got some black swan events, kind of hanging over us out there. One of the biggest ones, Russia, if they kept gas supplies off to Europe, that would definitely send Europe into a big recession, which would have some fallout to us. And there’s other little black swan events out there that that could happen.
But if things are go as planned, that you know that for media for four and a half percent interest should do it. On the fifth was going to Taiwan. And you got Pelosi going to Taiwan. Those little potential triggers, right, is trying to take over Taiwan. There’s a little there’s little gotchas out there in the weeds. Not having a real strong administration worries me. Things to think things can happen. But from all indications, this is going to be fairly mild in Houston. We’re not gonna feel a whole lot. We’re so diverse, so diverse in the mortgage industry. They’ve already had 100,000 layoffs in the mortgage industry, right. So essentially, as national Rocket Mortgage, all these big mortgage companies, because these rates went up, the refi boom was most of that volume, and that went to zero. So some mortgage companies have just as he shut the doors.
So if you’re that person, that’s a recession to you right. Now recession to me, because I’m pretty much I’m busier than ever right now. But depends on you know, but in Houston. We did all this great stuff last few years without the participation of energy. Now energy is back. But mortgage business is down. There’s other businesses, they’re down. There’s always gonna be winners and losers. But he says, I mean, I just think the good Lord, I mean, he used to do in real estate, I think I think this is one of the best plants based places on earth be doing it. Was that more diversified? That’s a huge, there’s always people, there’s people that need help. There’s always stuff out there. And so no, but that’s just my, based on the data, we got the odds of getting much more than four, four and a half percent are pretty low, but disinflation is gonna be stingy because of energy for the most part.
Well, deflation inflation is at 9.1 now right? That’s because energy is where it’s at energy is affecting everything, not just the price you pay at the pump minimum right? Okay. So what you’d pay $30 a month for $40 a month more gas. That’s not going to change your lifestyle a whole lot. But every good and service that you’re that you get you get has an energy component to it. Your plastics if your food delivery and stuff. But what have WalMart reported right? earnings, if you pay attention, they got a surplus of inventory. That’s anti inflationary, because they got too much stuff. But other people haven’t gotten this stuff. Lumber prices come crashing down. copper prices have come cratering down.
So that’s good for builders, good for builders, but that’s anti inflationary because now the IRS can build more cheaper. And so it’s not going to there’s things that are a phony economy, and there’s things that aren’t stored in the Feds got In my opinion, they got their work cut out for this inflation getting it down to their goal of 2%. Is it going to happen quick, it’s not, there’s no way it can happen by the end of the year, they’ll be lucky to get down by the end of next year. So that’s, I mean, we’ll know he was, but he got between us two years $10 trillion out there.
And there’s really not. So this, there’s a lot of moving parts on this one. I just wish we had different administration in there. But they knew I mean, but before this, you know, I can’t really blame everything. On the one guy, when they started doing this money, because of COVID. They knew they had one or two problems, either they’re gonna have to pull out people on the street, or they’re gonna have to pay a lot of money to save people from going on the street. Decision was the devil, if to Devil’s it was better to deal with inflation later than it was with having all these people getting thrown out of their houses and apartments and, and such because you couldn’t make payments. So they there was a conscious decision they made back then, and they admitted it. But for this administration to say inflation was gonna be transitory. And I was like, What planet were they coming from? They knew this. I mean, it was easily predictable. They go on bail Shut up on that one. Because,
Tarek Moussa 06:28
guys, you know, I asked the question, almost have a fine, say there’s inflation. What does that change for you, though? At the end of the day? The reality is, it’s not just a US phenomenon. This is happening globally. Right. So where are you gonna go instead? Probably nowhere else you probably gonna say it in the US regardless. Right? The other factor too, of course, is it’s not just inflation in of itself. Record, corporate profits are at record highs now. So ultimately,
06:55
population is sure. Sure, 61% of the population is fortunately, unfortunately, 30.
Tarek Moussa 07:05
For sure, so over time, though, as that consumer demand comes down, because it can’t afford to buy stuff, ultimately, it will come down over time. Right. So there are factors at play that over the long run, kind of your original question, are they going to sea levels back back? And Carter, I think it’s unlikely because ultimately, this is a global problem, not just a localized matter. And I think you’re going to have these these matters where, where there is reduced demand that comes as a result of it, which is going to ultimately pull the prices back down.
And I think you also have the benefit of the fact that we are coming up on election cycle, it’s not popular to kill the economy. So you’re gonna have some stuff that are going to be promoting it things that are going to be favorable towards the economy, and getting things resolved in some some way. But at the end of the day, regards to what do we actually do based on this information? Regardless, the most fourth thing is to invest, right? I said, because ultimately, timing the market is more important than timing, the market, all that sort of stuff. Right.
And I think one study that I thought was probably the most he wants to me is a fidelity, right, one of the huge brokerage houses out there. They did a study across all their historical clients to see what was the most successful strategy, what for people, and the number one reason people that made the most money with them. percentage wise, of course, are people who died, people who passed away and they’ve basically held held their investments without selling or fear and exiting and so on. So timing, obviously was great. And then second most successful strategy was people who forgot their passwords. They couldn’t even log into trade if they wanted to. So I think there’s something said about that, where ultimately, there’s only so much you can control but what you can control of course, is deploying your capital, put it to work to do something rather than lose money just sitting on the sidelines.