Inflation has reached new heights. This information-packed episode sheds light on the ever-increasing prices with which we must confront each day.
Have you ever wondered why the cost of products and services keeps rising? You're not alone; a lot of people in the United States question the same thing. In a nutshell, the solution is a phenomenon known as inflation.
Financial readiness is one of the most important things you can do in your life to provide yourself and your family peace of mind.
While you can't prevent a disaster, like global food shortages, you can certainly be prepared for it. To help you with your preparation, Valley Food Storage is offering a special deal for our podcast listeners. Enjoy 15% off your entire order when you use the code PRACTICAL15.
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Don't know where to start? Download our free Survival Guide book today. It's packed with information on how to survive financially during tough economic times.
Transcription:
Alright everyone, welcome back. Another episode of The Practice. The Prepper podcast. I'm your host Nick and back in the hot seat for another episode. Broke a lot of records with the last one for the EMP podcast. We have it's. Andy joining us again and today we're going to be covering the topic of inflation. Everybody's favorite thing to talk about right now. Andy, how are you, my friend?
I'm good. Glad to be back
And glad to have you. Thanks for taking time out of your schedule to do this.
Let's talk the money.
Yes. Let's inform the American people what they should be doing, what they should be worried about.
All right, well, first off, let me just get the disclaimer out of the way that there's no right answer. There's so many schools of thought on inflation and macroeconomics and just like different schools of economic thought about how this plays out. So big picture, inflation is just the increase in prices over a given period of time. So let's say a cup of coffee in 1920 cost $0.10. Now a cup of coffee, depending where you are in the world, it costs like $4 at Starbucks. So things get more expensive over time. There's a million different drivers that go into that and there's quite a few different ways to look at it. I personally have my own opinions and I am willing to bet that other people have different opinions too.
Right? So let's just start with before we got started, we're kind of asking for some show notes and stuff and we were talking about the Big Mac chart and when he said that, I immediately thought we were going to have to explain what that is because I don't know what that means, but it's actually exactly what you think it is.
So yeah, so The Economist magazine, which is a great magazine, they've done this thing called the Big Mac Index and they've done it since probably 2000 or something like that. And every year they track the price change in a Big Mac from January to January all over the world. So every place McDonald's has a restaurant, they track the change and then they also like mix and match and weigh it against other things. So they just came out with a recent Big Mac Index in the last few weeks for 2021. But before they came out with it, I was part of the project that actually did our own study on this because we wanted to see what it was and they weren't moving fast enough. So essentially the CPI basket, good CPI, which is what you see everybody on the news and the TV talking about measures inflation. So they said in December it was 7%, then a roast was 7.5% in January of 2022. And so our team went down this road of Big Mac Index and we realized that the CPI, at least for a Big Mac, is 10%. So for example, the price of Big Mac was X in January 2021. Now, the price of Big Mac is $7 for just the sandwich in San Francisco, $6.80 for just the sandwich in New York City, like $5.50 in Atlanta, and six something in Chicago. Now, this is a 10% increase year over year. So you'll see that the CPI is not the best measurement of inflation, but it's what the Fed uses. And it's a popular method. Nobody knows it's not good. They take products and services that people use every day. They being like the Federal Reserve, and they put it all together and they say, all right, so these are milk, bread, cheese, meats services like oil change and some other stuff. They put it all in a basket and they say, how much have these prices been raised month over month? So they're saying 7%, 7.5%. I'm saying at least 10%. And you'll see other economists have different numbers that come out. You'll see, like, coffee is up 90 something percent since January 2021. Vehicles, because of the supply chain shortage, vehicles have gone up X amount. Something ridiculous. Used cars like 45%, I think. But all this is to say that we've got this drastic increase of inflation that now I'm going to go down the rabbit hole here, but this is my take on experience. There's a lot of other people's takes on this. So since the housing crisis in 2007 2008, the Federal Reservedecided to keep interest rates artificially low and keep pumping money into the economy through QE and things like that. Quantitative easing, which is essentially just a bond buying program. They're even buying equities and ETFs in the open market. No kidding. There's a secret building in New York City that the Fed runs, people who are like undercover buyers of ETFs, and they don't tell anyone. They don't tell brokers who they work for, and they'll go buy ETFs in the open market. So nobody knows who they are. And they'll have the technology. Very interesting, very cool. But they've just been pumping money into the economy, and they have been raising rates. So at some point we'll play this game of musical chairs and Kobe hits and hey, here we are. Everything is compounded. The snowball is moving at full speed, and now you got to pay the piper, right?
Like we were saying earlier, it's musical chairs, and the average person will be left without the chair.
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Exactly. So, yeah, the average person, they're not going to win in this scenario. The shrinking middle class is not going to win whatsoever. So you've got the Fed, who's been pumping money in since 2000 and 17,008, didn't raise rates, kept just throwing money into the economy. They've thrown so much money in the economy at this point that it just drives inflation higher. And nobody's measured it. Nobody's really paid attention to it until recently, until covid. So then you look at things, and now the Fed has to backpedal and try to raise interest rates to slow down the economy. However, while that's happening, everybody's raising prices again. This is all just my take on things. So what you'll see is, in January, companies started raising rates because it's a new year, so they started raising the prices on things similar to Big Mac. Right. So send off for Big Mac right now, and then they might raise them more as the year goes on to match the rates of inflation and cover down things. Because as we know, if a company makes 15% profit last year, they're not going to take less this year. That's not how prices work. So they'll have to adjust their prices to accommodate for that. It is what it is. So there's no going backwards. There's no going backwards.
Yeah. They will never be like it was before.
No. I have a very smart friend of mine who runs a few companies, and I said, hey, if the Fed can get the inflation rates down and everything kind of balance out, do you think you'll lower your prices? Because he raised prices as well for this reason. And he said, no, because I also had to give employees pay raises, and they're not going to take a pay cut. Yeah, I mean, if somebody takes a pay cut for all the increase in wages they've had because it was hard to find people to work, so you had to pay them more, things like that. All these compounding effects, they're not going to take a pay cut. So I'm not going to lower prices because I still need to make money, because I still need to be successful. This is capitalism. Let's go. If I make 18% this year, I need to make 19% next year at least. Yeah.
It's already proven that everybody, they're willing to pay it, but still making the money. So why would I say, okay, I'll back it down?
Yeah, yeah. There's no reason because your costs aren't going down.
I did read that, and it makes sense. So the last time that inflation really hit hard, it would seem that nobody under the age of 50 has truly experienced it in the way that it's going to be happening now, like the build up to what is happening. No one has ever seen it as bad as it had been.
Oh, yeah, exactly. That was like 79 to 80. Inflation was at almost 15%. There was that would be like a gas shortage and things like that. It was right after we got rotated off the gold standard, and there was a guy named Paul Volcker, and he did this thing called the Volker Shop, where essentially overnight, he had to raise interest rates overnight to stop this rapid inflation that was just going crazy, and he started a recession. So, I mean, that's what happens in this scenario. There's a recession. And I've been saying this to people for like a year and a half. I'm like nobody has the intestinal fortitude to pull a vulker shock and do it overnight. I mean, Jerome Pal, Sheriff, he's just good on trying to do the right thing, but nobody has the ability to be that hated in the world of social media overnight. It's just not going to happen. So we would like to see that happen. Nobody has seen that happen below 50. Also, I was talking to some fund managers recently and they're all, let's say like mid 30s. These guys are guys and gals are fund managers and banks and things like that. They've never been adults for a rising interest rate environment. So they managed money in an environment where bond rates were useless. Nobody bought bonds. It was risk on all the time because you knew the Fed would bail you out. They don't know how to kind of diversify and hedge and figure out what's next. Which is also kind of why we've got all these really not to say, I'm not going to say bad companies, but you've got PE multiples for companies that are ridiculous. You can look at Tesla as an example of Tesla before they could deliver cars. In that scenario, Tesla was not profitable for quite a few years. Their PE multiple was still ridiculous. The price of earnings multiple, bulk shares was so ridiculous and they didn't make any money for their shareholders, technically. But people are still betting on them. In a recession or in a rising rate environment or anything like that, you would be less likely to see fund managers or any kind of financial advisor put money into a company like that that's not making money. So again, musical chairs, these small startups like the WeWorks of the World, they did their community EBITDA valuation nonsense. Yeah, they're not going to cut it. They just go the way of the dodo. Yes, it's similar to maybe the.com bubble, but different scenarios.
So if we back it up to we're talking about obviously this is the top topic because they say that this was the all time highest inflation. Or you can go out there, you can Google it, you can see the headlines that say that 40 year high or something that they claim, let's put some truth or let's bust the myth.
All right, so let's bust myth. So 40 year high, probably not an all time high. Apples to apples. So the Volcker shop was 1980, that was at 14.8%. Let's say we're at seven and a half percent right now, according to CPI. However, if you personal think it's 10% at least, but it was close to 24% inflation. So we're not at an all time high, but apples to apples, we're getting there. We're creeping
and if we're just towing the line here, we're walking it. We're talking about inflation, what it is, what are the main drivers right now? What is causing it right now? And this is probably a huge broad question, they could go on 4 hours. But just go with in your opinion, what do you feel like?
Yeah, this is the part where everybody else has a different opinion. Like there's some people that might say that corporate greed is driving inflation because they are raising prices. Definitely can't weigh that out. That is a factor. There's also the fact that they have to raise prices because inputs are going up. Because covid started this whole supply chain slow down. And supply and demand is shifting in a way where things are becoming more expensive because they're harder to get. You can look at lumber to build houses. I'm going to say it was last year, like last summer, lumber, skyrocketing, cost of lumber. You couldn't get it to build a house. It was astronomical. So that means the price of the house is going to go up because the builders have to factor in that increase in the cost of lumber. So it goes back to these base commodities getting more expensive just because of the supply chain crunch. The labor crunch also plays a parts. My beef is the Fed piece and how they've just let this go for the last however long, since 2007, 2008. It just compounds and it begins and it's like snowballing kicking down the hill and here we go.
Yeah, like people, they want to be pissed. You wake up and everything's more expensive and you're just shaking your hands at the sky. You're cursing the world. The government their fault, everything has to be expensive. But if you think about it from the supply chain standpoint and like the lumber example, it's just basic math how this should work. If that's more expensive and it's more expensive for me to get it, then for my service after I buy that to then build the thing that you want me to build is now going to be more expensive. Exactly. So let's look at lumber, right? Like let's say you order lumber from South America, you live in Miami, you order lumber from South America and it has to get shipped to you in Miami and you're building houses there. So covid hits the people who the lumberjacks in South America who shot down the trees, only ten of them can show up to work because the other 70 of them are outstanding with COVID or social distancing or they have to slow down in some way, shape or form. So because it now takes you longer and then it's going to take the company, it's going to cost the company more money to get everything done. Some people might be out sick, some people might pass away, things like that. And then they have to get new people. The risk to the employees, they're going to say I'm not doing this for x amount of money. I need more money. Costs go up and as soon as, by the time it gets to Miami, you're paying three times what you did the year before. So once that lumber gets to the end stage of the house, you're the last one holding the bag and you have to pay more for the house, is what it is.
What about in the terms of gas now? Is that supply and demand or is that because I feel like it could be supply and demand, but I feel like since that's what war has been over since the beginning of time, it has a lot to do maybe with politicking.
So I have a good friend who was an oil and gas guy down in Texas, and I'm going to butcher this because there is so much to the oil market. I think there's like you said, there are about a million different things. You've got OPEC, plus you've got the Saudis and the Petrodollar. You've got the US as a net exporter. Right now we're also the number one net exporter in natural gas. But you're exactly. So gas is going through the roof for a lot of reasons. Right now it's going through the roof because of supply and demand concerns about Russia invading Ukraine and then Russia supplying that gas or gas to Europe. And then we will the US will then backfill Europe and hopefully sell them gas and natural gas at a higher price so we can make some cash. But there's a lot of that. There's a lot of supply and demand, a lot of OPEC Plus says we will only produce ex barrels at X price, and it's not a monopoly. What's the word? Of course, a cartel of the price, apex plus, does include Russia. So there's a plus. I'm going to butcher that. So feel free to get in the comments and explain how butchering that way.
I'm just looking at the we have a chart here that says price changes since January 2021. So I was just kind of going down the list and just trying to, I guess, crack the code behind some of them. So some people feel like, oh, this is a mystery to me as why X is now more expensive. Like rent, for example, up 13%.
Yes. So here's what happened. Remember when they said that landlords couldn't raise rent for a year and a half?
Yeah.
They were still incurring the costs. Some people didn't pay their rent. So you have to balance. Let's say if you're a landlord and you have ten properties, you have to balance. I have five people who didn't pay rent for a year, but I still have to keep paying my mortgage on these ten properties. So I then need to work, like as soon as the government allows me to raise the rent again, I have to raise the rent to make the money up from the money I lost from the five people in the five properties who never paid me and then left. And I can't do anything about it. So these are, again, covid essentially pulled the curtain back the federal Reserve was doing this balancing act of turning on QE and turning off QE, calling it different names and kind of moving things on off the balance sheet. As a matter of fact, they were doing it for so long that there was a pattern of the Fed would say, hey, we're going to raise rates. We're going to talk about it at our next meeting. The market would sell off the institutional investors and institutional money would essentially hold the Fed hostage. So the Fed wouldn't raise rates and then they would just go back and forth. And they did that from 2019 essentially, but then took it hits. And the Fed has no choice because of these compounding problems. If people aren't at work, it halted the economy until in some countries today, if you look at Turkey inflation, so we're at 7.5% of what we're talking about here in the US. Last week or two weeks ago, the inflation rate in Turkey was 50%. It's chaos over there. In other countries, it's chaos as well. Then there's still people protesting in the streets in Europe and different places.
Well, that level of inflation, that's to change the fabric of life. Everything is different forever. That's crazy.
Until there's a coup in that country and then Erdogan goes away and they find a new guy around the Central Bank. But things like that, it's an international issue right now. We've just got to raise the rates and kind of manipulate some things that way.
The rent thing is really bizarre to me because of how during COVID, they extend the olive branch of you don't have to pay for this, but then return to normalcy, which is what everybody wanted. So you want to return to normalcy, but you don't want to have to pay the rent. I just saw a photo of it, like protesting in the street. And I was Atlanta. I had pulled up here. There's like a faction called Cancel the Rents. I don't understand because they want to stop immediate evictions and stuff like that. But what do you expect to happen? We may cancel the rent. You can't just say, okay, you can't charge me to live here anymore. Well, it's not your place to live. That's why I'm paying rent.
Oh, exactly. So think about it. The same thing with I might be getting off the tangent here again, this is just my opinion, but it's the same thing with canceling student debt. Just, hey, people say, hey, I just write it off, just make it disappear. Somebody has to eat that cost. Who's going to be taxpayers going to eat that cost then? Same thing with the rent. However, as I'm not paying rent for nine months, but I'm still somehow getting an income where I probably could pay rent, but if I don't have to, I'm not going to because now I just have more money in my pocket to buy TVs, PlayStation five, new shoes, whatever, right? But because there's no contract for me to pay rent. And I have a loophole. I will take that loophole every time. It's human nature. It is what it is.
And a lot of loopholes have shown up. covid 19 was like the airing out of, like, oh, here's all of the ways, and people took full advantage of it. We were talking about that on the last episode that I did, about how people just people were making more money staying at home and doing absolutely nothing. And so what would be the drive for them to be like, oh, I'm going to return to work, outside of you just being having a good moral compass, and this is the only way that this country will continue to work, because if we all just sit home and say, Give me money, we're in deep shit,
we have a problem. Like you just said, that brings up another great point about the driver of inflation. So people are making more money to sit at home. They're making, like, 60 grand to sit at home. They've got their siblings.
You got more kids. They're just throwing money at you.
So then in order for you to go back to work, they have to make it worth your while. So these companies are starting to be like, listen, all right, $25 an hour. Come on, before school. Let's go. Whatever it takes to get you back to work, because I have a company that I need to run, and that's how Ifeed my family. And if I have to pay for $25 an hour for the guidance off the floor, then I'm going to charge you $50 an hour for the widgets. Yes. $50 an hour to eat, or I'm going to charge you a steak dinner. That was $16.99 when you come back in. Well, now it's $28.99, because that guy back there mopping the floor. These are the dots. This is like just making it clear for somebody who just doesn't really maybe they don't get why it's like this. These are the dots.
This is the map. This is how we got here.
Yeah, this is definitely how we got here. And like we said in the beginning, the guy mop on the floor for $25 an hour is going to take a pay cut. So there's no real reason to drop the price of that big dinner, because if you show up and you're going to pay $25 a month before, and one day they're like, hey, covid’s gone everything's going back to normal. So we're dropping your pay down to 15. You can throw that mop on the ground.
Exactly. So then we're right back to square one.
Exactly. Like you said, covid exposed everything. It exposed this kind of ponzi house of cards that we were playing with. And here we are now, right now. And now the question is, how do you have it? The answer to that question is also
not easier, many angles.
It's going to take some time. In my personal opinion, and again, no relist to me because I'm a moron, but in my personal opinion, we're going to see a recession. You'll see the 100% sign of the recession is you see the yield curve invert and everybody on TV will be talking about it on CNBC and all the talking heads I always talk about all the time, oh, the yield curve is about to invert the two years minus the ten-year. And when the yield curve inverts, literally it's a textbook sign of like, we are now in a recession. If you look up the yield curve version, recession right next to it, it's a test question for everything. But so when that happens, things are going to get tighter. Prices won't go down. People will just stop spending on frivolous things. So the middle class is just going to say, all right, we're going to tighten the belts. We're going to have to eat this, we're going to have to not eat that. We're not going to go to Whole Foods and spend $300 on
you got to dial it back and maybe you're not going to get everything you want when you go to the store type of thing.
You're going to have to start being a little bit you're going to have to choose things and you might have to budget a little bit. Some people haven't had to budget in quite some time because forever, because money has been plentiful. They were sending you $1,000 checks in the mail. They were just like, cool,
let's go do nothing.
That's what's coming next, coming soon.
Well, so I want to talk about the and I know this gets said a lot and obviously the listenership, there are people out there that are like, oh, I know why this isn't possible, but it's possible that there are other people out there that really don't understand why this is not possible. So we should just get it out there and talk about it. When people just say, well, why don't we just print more money?
We've been doing that. Yeah, we've definitely been printing a lot of money. And if you look at the money that's in circulation, I forget the statistic, but it's like in the last two years we've printed more money than the last 40 or something ridiculous like that. If you look at the chart, the charges goes straight vertical since 2020. And that's the feminine is like, everybody's getting these checks, why are we getting them? We're printing, baby, we're putting the printer in overdrive. J Pallis is out there just with his hand. This crank is a printer going nuts. So why can't we just print more money? Monetary policy has been printing more money and that's kind of what got me into this mess since 20 07 20 08 there's more to it, I know, but essentially we've just been printing more money we just keep rates low, keep buying, buying bonds, buying ETFs, open market operations and things like that, and keep the economy just growing and growing and growing or perceiving that it's growing. So there's different ways, there are different levers the Fed can pull. From a monetary policy standpoint, it's not as easy as printing money. So you've got the overnight repo rate, which is essentially loans to other central banks, which they pay interest on every day. Somebody's going to have to fact check on something. The overnight repo rates might be a little bit off on those, but then you've got bank reserve requirements. They can raise or lower those. So let's say I don't know exact numbers. Let's say bank of America has to have 5 billion on hand at all times and they can't go any lower than that. Then that means they won't loan out less than that. However, the Fed can say, hey, you only need to have 2.5 billion on hand right now. So that means they will then get out more loans and stimulate the economy that way. However, that may or may not work in this area. But that's one of the historic way that the Fed has dealt with monetary policy. And right after 20 07, 20 08 is when they drastically change that. I forget specifically what they did. So short term interest rates, which is what we're talking about right now, the bond rates is the major thing because they've been so low for so long. And now when they increase rates of treasury bonds, that means, let's say rates have been like 1% or something like that for a long time now. I think they're like two and a half percent right now for ten years. But if you buy a bond you can take $100 and you buy $100 worth of bond, then you'll get two and a half percent back in ten years. So it used to be 1% back. That's nothing. You could make more money just doing anything else other than that. Yeah. So now the goal is to have retirement funds, pension plans, ETF, things like that, be enticed to buy these US Treasury bonds. And then that way you have these safe assets and you have your money in them. And in ten years the government, they get theirs. In ten years they give it back to you two and a half percent or whatever. So what will happen then is you'll see risk off cycles where people start buying bonds and they sell off equities and stocks or other assets that are more risky than bonds because the risk outweighs the rewards, I think. So you'll kind of see that that's the goal right now of Fed policy to stop the money printing is the bond rate is what they're going for. And again, what they have done before to get us into this stuff was to stimulate the economy, was QE and different forms of QE and buying. Their own bonds and doing open market operations, which was out there buying ETFs in their secret office and stuff like that. But that was another way that they were just stimulating the economy.
So if you going along with all this, the printing of more money obviously results in the devaluation of the US dollar eventually. Yes. And noo?
Yes, it does. And they do other things to strengthen the dollar. The dollar is a weird thing.
I know you obviously don't want a weak currency, but what really is the dollar being worth less than a dollar, what's the big deal behind it, other than foreign trade?
Foreign trade is kind of a big thing. So you've got the international currency basket, which is made up of five different currencies. It's the … in there and the euro might be the pound, but anyway, so it's made up of those. But the dollar is the largest portion of that basket because the US dollar is used internationally because it is perceived as the safest and most steady currency, the Turkish lira. Because of this 50% inflation, the Turkish lira fell through the floor overnight, essentially. So people use the US dollars and that doesn't happen. It's very stable. And then you'll see that there is so much USD in circulation internationally that it's not just US companies doing deals, let's say, with France. And they'll write that deal like, hey, we're going to pay you in USD. That's how this deal would be structured. It's also other companies doing deals in US dollars, like a French company doing business with a Moroccan company. They will also do it in USD because they know that that is a steady value. I don't have arbitrage losses because if I'm a Turkish company and I sell something to Morocco and we say, I want to use the Turkish lira, I'll give you whatever, I give you 500 Turkish alara for this contract, and the contract tracks over. Now, the Turkish clearer is worth absolutely nothing. So they've just lost all that money because their currency has fluctuated so much. So, to avoid that, the US dollar is seen internationally as the standard, because there's little fluctuation.
A couple of years ago, maybe, was it Venezuela, where they were burning all their money in the street to cause it to be worth absolutely nothing?
Yeah, Venezuela, they use a lot of cryptocurrency that people in Miami run for them and they'll send back and forth to get people in there so they can use it in Venezuela because their money is worth absolutely nothing.
So the value of the dollar, it's a strange thing because it's like if I have physical money in my pocket and we leave this room and I asked the next ten people, hey, how much is this worth? It's worth one dollars. Whether it's not worth the dollar or it's not. Like here it says in 2021 the dollar was worth one dollars. Six, 2022, the dollar is worth a dollar ten. But in reality, in the United States it's just a dollar. Yeah. Starting new exchange rates and stuff like that changes all the time and there's like daily spot rates and things like that. But again, the power of the dollar cannot be underestimated because you can go anywhere on this planet and whip out a $10 bill and you can get like people will accept it. Yeah, if I go to China right now and start whipping out Venezuelan dollars, whatever it is, if I whip those out, people are going to laugh at me and they're going to ask that I bring in stacks of them to buy a candy bar. I've been to China and I was over there and I had some weird monetary policy over there. You only pay by the app on your phone for cash and this is or your TV, they recently, I think they just recently went like all crypto. But when I was there, you could go to the ATM and get cash or something like that. But I also had a bunch of USD and I could go to store with USD and use it to buy things and people accept, yeah, okay, USD, I can do something with this.
But is it like that? It makes sense in China that it would be like that, but in other places I don't feel like it's maybe like when I was in Europe or the Netherlands, I don't feel like it pulls the same it's obviously a widely known and it's a respected form of currency, but obviously they just don't, it won't accept it.
It won't pull the same in Europe because they have the euro and things like that and euro and the USD, they move relatively. It's not a oneonone ratio, but they're steady together. It's always yeah, it's like a dollar to a dollar service. But point being, if you go there, if you don't have time to convert money, they will take it, they won't turn it away. Like my Venezuelan Chuck Cheesebucks
in talking about the level of inflation that we're at now, I know you were talking about the mythical 10%. That's where you see it going. So how bad do you feel like it's going to get in the US. Again, there's another question with the same disclaimer, many different angles, many different avenues this can be viewed from, because obviously people don't want to just think, well, this is just going to keep getting worse and worse forever. Like obviously it has a glass ceiling that will break. Balloon Pops this is just bags and flows throughout history, same thing. But like, how bad do you think it's going to get before pressures relieved?
Okay, so there's a fund manager in Miami. His name is Kappy. K-U-P-P-Y. Follow on Twitter. Great guy. He calls this operation Zimbabwe because essentially Zimbabwe imploded. And there's always a joke that Zimbabwe, they printed million dollar bills and you can buy them on Amazon. Just put them on your wall, right? So that's how much their inflation rose until it went like a very bad place. But I don't think we'll be full on Operation Zimbabwe. However, it's going to get bad before it gets worse, I think. Personally, the Fed says they're going to raise rates four times a year. I think it was like 3.7 was the technical number. So I assume the Fed will raise rates four times. They might get through two of them before the market sell-offs get a little bit wonky. And then that's where the recession kicks in, I'd say sometime around midsummer. And that's when it's belt tightening time. So in order to get ahead of that, you start tightening your belt. Now. You start saying, well, I don't need to spend money on fruitless stuff right now. Nature of the beef. If I don't need it, I shouldn't buy it. You shouldn't be spending extra money on Amazon just because think about how many things maybe it's just me, but I can think of a lot of money I've spent on Amazon for something like sits in a corner of a room over in our box. I just never use it once. I'm like, this is going to be a great idea. This is a great investment. I'll use it all the time. I use it once and I never use it again. So you're welcome in. But the belt tightening should start now. Summertime is probably when we're going to see more of a legitimate recession again. This is my personal opinion. I think it's going to take a few months for people to start to understand where these prices are going right now. Homebuyers. In the last few weeks, they just raised the rates to 4%. It was a three day race before, but you're going to see people not that takes another 100,000 or 200,000 people out from buying a home or whatever the number is going to be so that those people who can't buy a home anymore because the rates are too high and they can't afford the mortgage, they will start to see. They'll start to start tightening their belt because they're understanding a little bit better themselves. But it's going to hit everybody a little bit differently timing wise. And I think by summer we'll be all caught up.
So you're saying summer is the time?
I think so. I think by then everyone will start to understand that everything is getting more expensive. They'll be like, oh, I've gone to this restaurant for six months and I always get the same thing and always pay the same price. And one day it would just click. And you're paying $10 more now for the same exact thing? Yeah. You're paying $20 for breakfast. Something like $10.06 seven months ago. Oh, yeah.
Well, the restaurant example I gave was a real time thing. I used to go to this little local restaurant all the time. They had a filet deal. You got a salad, a filet, and a baked potato. With 16.99, it was Thursdays and it was super popular. You had to get there early. They only made so many. The guy would drive to Detroit each week and get these loins and bring them back. So the meat was super fresh. It was amazing. They got so expensive so fast as you can go to the grocery store and see it now, how expensive a filet is it's down now? But at one point, it was like 33.99 a pound. And now it's so expensive that they just straight up they don't even do it anymore. It's not even like an option. Like you could pay this. They're just like, that's it.
Yeah. The meat industry and the poultry industry took a huge hit. I know cattle ranchers and cattle producers out west, they had to get maybe it was maybe it was a billion dollar mail out. Maybe it was 100 million. I forget from the federal government, because again, I'm going to butcher this good buddy. But there's essentially, like four producers, four plants, or companies like Tyson's Chicken and three others that handle all this. And because of the covid slowdowns, they couldn't produce fast enough. The ranchers weren't getting they were telling ranchers, they're like, well, I have to offer you less for your cattle because of these hard times that we're in. So the ranchers were taking less money, but they were still charging you more money at the grocery store. And the ranchers were like, we're not going to do this. What are you doing? But because there's only four or so of these companies, they can make these rules because they have kind of like an oligopoly along. Yes, that's why that was because, funny story. I went to a Buffalo Wild Wings, and on the menu, I noticed they had new menu. So I go down to look and see what six boneless wings cost, and it says market price. I've never seen anything that says market price outside of fish.
You know, like going into it, I know this restaurant is going to have the market prices on there, which, as you know, it's expensive.
Those restaurants have to dress up, get a reservation. I expect market guys, not Buffalo. Wild win.
If I walk in there and they want market price, I'm out. We have submissions. I had to ask, what does this mean? She said, oh, market price changed all the time.
Yeah, inflation gone too far. They took all the Wild Wings from us. And that's just unforgivable.
It blew my mind. Wow, that's insane. But I'm not surprised. So in talking about getting prepared and the belt-tightening and everything for summer are there any other ways that you would I won't say recommend, but that you could just loosely say that this might be a good idea if we're talking financial wise or something to get prepared.
Yeah. This is not financial advice. I'm a financial war on don't do what I'm telling you to do. However, I was talking to a friend of mine as a fund manager at Colorado and we were just going back and forth about options to safeguard money in these kinds of situations and it essentially came down to blue-chip stocks, which is like the apples,
Oldl reliables.
Yeah, the thing, you know, are not going to yeah, I can't even say bank stocks, that's not a great one. But like the apples of the world, things like that, commodities, so oil, natural gas, copper, doctor copper is always a good one and just stay away from the speculative stuff. There's a whole argument about crypto and things like that, but again, that's a whole different ballgame. I will say that I don't think crypto is as safe of an asset class as people lead you to believe. And I only say that because of the Canada stuff recently and about trudeau taking people's wallets from them and freezing their assets that way.
The crypto is supposed to be untouchable. It's in a hard wallet or whatever. That's not when you hook your hard wallet
back up to the network and then have the number flagged because it's your wallet address and you can't do business with anybody. So I don't know. I don't know if crypto is going to hold the same kind of value as it used to. Gold. Everybody always says gold. I'm not a gold bug. I think my opinion is on gold. I'm kind of off the gold standard. Peter Schiff, the sky is falling. He's the gold guy. I'd say blue chip stocks and commodities very well and have professionals manage your money. Don't do it yourself.
Yeah, absolutely. Well, I feel like we just barely scratched the surface here on a topic that it would be impossible to cover it all and leave people being like, yeah, I know exactly what to do now, how to combat this. It's a day by day battle that we're all going through and fighting. So do you have anything else to add that maybe we didn't completely touch on?
No, I think we hit everything. I just want to say that there's going to be some adversity, let me manage the doom and gloom. And if you're uncertainty, it's not going to be like some flash crash sell off, like everything burns up tomorrow. It's not going to be that. It'll just be a gradual slowdown and you'll start to see the stock market is not the economy and you'll start to see the stock market match where the economy has been for the last six months. Yeah, but it's not going to be like go out and put your money in your mattress type thing because obviously if your money's not getting you 7.5%, you're just losing money at this point anyway, right? Yeah. There's no need to freak out. Just know that it might be time to type the bell a little bit.
Yeah, start living a little more frugally just for learning than normal, right? Well, I appreciate your time. Thanks so much for talking to us about installation. Hopefully you guys found some helpful little nuggets in there and start tightening those belts. So all right, buddy, thanks so much. I appreciate it.
Thank you.
All right, everyone, what's an information filled episode about inflation. That one was. That one might be a two or three listing for you guys. Lots to unpack in there, lots of digest. Please feel free to let us know how you liked it and what other topics you would like to hear about. We're open to any and all suggestions. Also, thank you to our sponsor, valley Food Storage. As always, you can take 15% off your first order with the code Practical 15 at checkout. And that's exclusively for you guys who listens of the podcast, and they make it all the way to the end. All right, well, until next time, I really appreciate it. Thanks.
