Finance Expert and Fox News Contributor Liz Peek Weighs in on Reckless Federal Spending and Impending Inflation
Live from Music Row Thursday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – host Leahy welcomed by Fox Business contributor and Wall Street expert Liz Peek on the newsmakers line to weigh in on Joe Biden’s Joint Session speech, ridiculous federal spending, and the prospects of inflation on the horizon.
Leahy: We are joined now on our newsmaker line by a great finance expert and Fox News contributor Liz Peek. Good morning, Liz.
Peek: Good morning. Happy to join you.
Leahy: Liz, did you watch President Biden’s speech last night and what does that portend for the economy?
Peek: Well, look, I mean, the speech was nothing. It was just a lot of platitudes that sort of reiterated talking points that he’s really been putting out there since the campaign. Obviously, what’s new is that these grandiose plans are taking shape and the way the bills are actually showing up in Congress and people expected to take them seriously. It is very disheartening to me that trillions of dollars now, trillions of dollars are being spent purposelessly.
There is no need for all this spending because what we know is that the economy was on a very steep ramp up even as Joe Biden took office. Personal income rose 10 percent in this country in January. That is remarkable. And yes, it was helped by the $400 checks that were approved in the December stimulus bill. But honestly, if you look back at job creation and where we are in employment and so forth, we didn’t need the $1.9 trillion rescue plan.
We sure don’t need another $4 trillion to be spent as Joe Biden thinks we should. I think it’s dangerous. We’re already seeing asset inflation, all kinds of, whether it’s stocks or cryptocurrency seas or whatever. All commodities are close to all-time highs and going up very rapidly. And the Fed is sitting there still pumping $130 billion a month into the economy into the money supply.
And there was a very good piece, I’ll shut up in a minute, in the last few days in The Wall Street Journal about the difference between now and back in 2008-9 when people also were concerned about inflation and it never materialized. And the reason is all that money that was pumped in then went into shoring up banks. It basically didn’t get into circulation because the banks needed to restore the reserves. Now, the opposite is true.
All this money is out there sloshing around. We know there are more than $2 trillion in excess savings. Most Americans I know this is hard to imagine, but the truth is, numerically, most Americans were not impacted by COVID. A Pew study or something or survey showed that I think two-thirds basically didn’t have a single person in their household whose income was reduced or whose job was lost by COVID.
The Democrats are using COVID still, even as it goes away as an excuse for these grandiose spending plans that basically just reward who? Big labor, teachers’ unions, and in particular minority groups that helped Joe Biden get elected. And I got to tell you, I think it’s alarming and very disheartening that the media is to sort of championing all this and not knowing any better. It’s really bad.
Leahy: Liz, it seems to me that we really haven’t had inflationary concerns since Ronald Reagan became President.
Peek: That’s correct. And again, there are good reasons for that. The reason now that there’s concern about it again. Again, you have to remember the amount of fiscal money that, in other words, government spending that is now being pushed down the pipe, if you will, is unprecedented since World War II. Do you think our country is in worse shape than it’s been in any time since World War II? No, it’s not. Consumer debt is down.
Consumers are actually fairly well off. And I understand yes, there are 10,000,000 people who need jobs but unfortunately, Congress, in its wisdom, supplied sufficient incremental unemployment insurance money, $300 a week, that now something like 80 percent of the people who lost their low-income jobs during this last several months are making more staying home. So they’re rational people.
They’re not going to go back to work at a minimum wage job if they don’t have to. And right now they don’t have to. And the Democrats extended that unemployment through September and they want to extend it even further. But anyway, yes, (Chuckles) words fail me because it’s all such a lie. This entire Joe Biden administration is founded on a lie. And unfortunately, the lie that we’re in a crisis, that’s the word he keeps using it simply isn’t true.
Leahy: Yeah. And it seems to me what’s going on in the Labor markets, particularly in restaurants now is a great example of the law of unintended consequences from bad legislation passed by Congress.
Peek: Exactly. That’s exactly right. You can’t hire people. I mean, Joe Biden, I don’t think, has ever had a private-sector job in his life. And I think many people in Congress are in the same position. I actually spent last weekend with some Congressmen Republicans and all of them had private sector experience. They had either operated businesses or ranches or whatever, but they kind of knew about supply and demand and incomes, et cetera.
I don’t think most people in Congress do. They don’t get it that if you reward people for not working, guess what? They won’t work. And right now we have 32 percent of the working-age population unemployed. Not because there are jobs out there. That’s the other thing. There is a survey called the Jolt Survey, which is the Job Opening and Labor Turnover Survey, which shows about seven million jobs available and that’s not far off from the number of people looking for jobs.
Leahy: You are always clear, concise, and on point. Liz here’s a story from The Financial Times published Wednesday or Tuesday rather. Over the next several months, investors should expect to witness an adjustment in consumer prices in the U.S., which will feel a lot like a lasting shift in inflation. The March U.S. Consumer Price Index report confirms the first step of this expected adjustment with core inflation up zero point three percent month on month. Readings for April and May could be similar. Headline, Inflation is likely to accelerate up to 3.5 percent per year on year by May, the fastest pace in a decade. Liz, is inflation coming and what should consumers do about it?
Peek: Well, actually, the economist group I follow most intently, ISI Evercore number one group on the Street. And I think they’re almost always right. They say inflation is here, it’s not coming. And it’s shown up in all kinds of ways. Oil prices are up, gasoline prices are up at the pump, home prices, consumer price index, the PPI, the number that you all were just talking about, it’s here. What should consumers do about it?
Obviously, if you’re on a fixed income, that is the group of people who are most impacted by inflation. And what can you do? You can invest in equities as opposed to debt. In other words, rely on dividends. And companies that have the pricing power to pass along inflation in their pricing will presumably be able to continue to increase earnings and pass along those increased earnings in the way of rising dividends.
The people who get stuck right now, if you put all your savings and you’re retired and you’re living on a fixed income again, those are the people who get hurt. And this hasn’t happened in decades. And it may not happen now. But the Feds argument is, yes, we’re going to have a few months here where, I love the word adjustment, higher prices is a better way of putting it, but it will be transitory.
It’ll be temporary and a year from now that we won’t see such pressure. I don’t really know why that is such an article of faith. I think what we’ll have to look for and watch for and your listeners should be on the alert for is what happens with wages. In the 70s the cycle that got us into trouble with too much growth in the money supply. And now that’s up to 27.7 percent year over year. So it’s gigantic.
Pushing prices of goods and services higher and then pushing wage demands higher. The thing that may save us, sadly, is again, that 32 percent of people not in the workforce, labor markets may be slack enough that there is not a great push for increased wages. But we’re already seeing interestingly, some companies offering bonuses and higher pay to bring people back because of this unemployment excess or unemployment payments that the federal government is dolling out.
So we may already be seeing some of that. Time will tell. I don’t have a crystal ball. But I got to tell you that this continued insertion of so much money into the money supply, I think, is worrisome because that’s money chasing something. And right now it looks like it’s going to start chasing prices higher.
Leahy: So I’m not an economist, Liz, but when I look at this huge proposed spending plan from Joe Biden and the outrageous increase in the already outrageous federal deficit and the federal debt that will come out of it, I don’t see how you come to any other conclusion other than this will be inflationary.
Peek: Well, I would agree. And actually, there are some elements of this spending program. This spend-a-thon that Joe Biden is on that is definitely inflationary. For example, guaranteed minimum wage, which he’s done by Tick Tock for all federal contractors. That’s a pretty big number. If you think about all the organizations that service the military, for example, all of a sudden you’re pushing through a pretty big wage increase for people working on supplying food to Army basis, things like that.
It sounds like a small item. It’s not. The Department of Defense is still one of the biggest spending items in our budget. So the impact of that is far-reaching. Also, I don’t think that Biden is going to get through a lot of this infrastructure plan. And I hope not, because so much of it is wasteful. But that waste, that pushing money into organizations and industries that are government spending is by definition wasteful, and inflationary because it’s not efficient.
Government contractors are not always attuned to looking for the best price or the best financial outcome or whatever. In fact, sadly, for taxpayers, they rarely are. I think that the debts and deficits are definitely an inflationary pressure. And I just think the way the government is going about spending all this money is also extremely inflationary.
So, again, we don’t know whether this will be a six-month phenomenon or a six-year phenomenon. My own inclination is everyone is so comfortable that that’s probably the mistake. I mean, my guess is that we are too complacent about the inflation that may show up. By the way, it’s also showing up now in China and in Europe.
It’s not just the United States that has seen a tick up in that number. And right now, obviously, all of our economies are somewhat linked. And that pass-through of higher commodity prices seeing, it really affects the entire world.
Leahy: Well, one thing also that we’re seeing here, and it may be localized in Nashville, perhaps in Texas and Florida, is the real estate market here, particularly in Nashville is through the roof.
Peek: You’re completely right. And what does that stir? It means more home building because one of the things that have happened is there’s no inventory of homes. I think after the financial crisis and the housing bust more than a decade ago, there was just a dearth of building. And so we have no supply right now. You’ve probably seen maybe that lumber prices are up like 80 percent.
You can’t buy what you need to build houses, and people can’t buy houses because there’s none being built. It’s really a Catch 22. But that is a sector of the economy, a pretty big sector, by the way, and certainly, it was back in 2008-9 that up until actually this time last year probably was sort of slow. And that is yet another reason to be very confident that this economy is strong. It’s not in crisis mode, as Joe Biden would have you believe.
Leahy: And I think we’re seeing a lot of adjustments in the supply chain. Adjustments that were started with the pandemic when, for instance, a car rental. It’s very expensive to rent a car these days. And apparently, that’s because the car rental companies during the pandemic to keep afloat we’re selling off their inventory. Now, there’s not enough supply of them, apparently.
Peek: Yes. And that shouldn’t surprise anyone. The pandemic created all kinds of really frightened responses on the part of manufacturers and all kinds of businesses. And legitimately, they had no idea what was going to happen next. So if you go shopping, which everyone is doing now, you find that there’s almost no inventory in the stores.
Stores of course were not doing well even before the pandemic, and we’re very reluctant to stock up on inventory. And so they didn’t. And now there’s not much to buy. And ditto. Your case is a very apt one. All kinds of businesses cut back on investing and spending on their own supply. Here’s another place where I think prices are going to soar, is on travel.
Already airlines are jacking up airfares enormously. Someone I know bought a ticket to take her family home to Hawaii in December, and it was exactly twice what it was a year ago. So all these things are going to be going up because they can. People are desperate to live their lives and spend some money.
Listen to the full second hour here:
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