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We're currently on track for six years of near zero interest rates.
And while that's great for the housing market market my next guest says easy money could lead to a high inflation slow growth environment.
Known as stagflation with -- now Ben Stein.
And -- is very well -- to our viewers spent thanks for joining us today great to have you here my great pleasure I assure you.
So talk to me about this idea of stagflation what is it how would regular Americans experience it.
And also talk to us about this idea of the liquidity trap that you've been writing about.
Highway cited -- the liquidity throughout those invention of John Maynard Keynes averaged about one million times.
Smarter than I am but anyway -- stagflation could be when you have a stagnant economy -- demand.
-- -- poor employment figures but also rising inflation.
And we have some of that we have although the economy is -- recovery now it's a very very slow recovery.
But we definitely have in -- suspension commodity prices but it doesn't look to me as of the employees in the commodity prices.
Is being driven by the dollar actually the dollar vs the Euro has been pretty good and -- version of the yen not terribly bad.
They're the probably the commodity prices right now is that why an extraordinary demand from China although that slackening and to.
The incredibly volatile situation is terribly volatile in the Middle East -- -- -- right energy prices added that that really cannot be blamed.
-- I think on the Federal Reserve that but you but you correctly identified a real serious problem.
A -- is that a good citizen solid workers saver.
Gets no interest and that is really a cruel and especially grew older retirees.
Well you know Sarah bloom raskin who -- a Federal Reserve board member saying publicly.
Completely at a bearish to buy it.
That it doesn't matter what happens to people who were living off their savings that it's more important to keep the economy afloat but look.
Then you look at these numbers out there and what with the economy we may be on track for three.
Months the unemployment rate coming down we've seen housing numbers improves slightly when you look at sales not prices.
Isn't now time to start unwinding this incredible amount of stimulus for the Federal Reserve has been putting into this economy.
If Jerry if they're really an incredible amount of stimulus -- have a more stimulating the economy the economy is still operated with very high unemployment.
And housing while I believe it is recovering is recovering very solid but let let's flip it over residing -- every mag.
It's -- terribly hard on all people like me.
For us to get so as low interest and our CD's and bonds it's very hard on us.
But for home buyers it's a gift of manna from heaven and now is an incredibly opportune -- at least in my dangerous could be wrong.
To buy a house so that there are two sides is going but I agree it's cruel.
To have it as savers punished with such low interest rates.
But I think we do have -- easy money policy at this point it will it will on -- and soon enough and then people will be wishing they had bought a house well interference by the way.
Are you finally are you saying that we may need more stimulus -- want more government spending at this point is that your idea for solving our economic as well.
Now Bob I would like more members that in -- bigger area I'd like military people who paid a lot more so that's the only increase in government spending and I'm looking for.
But now I think we need -- we're gonna need drastic cuts in entitlement programs.
Some of the debt and then that wipes out the savings in the middle class so we we're now at a very serious situation and I don't think.
Obama has taken seriously and.
Inflation hit fourteen point 6% mortgage rates eighteen point 45%.
Back in October 1980 -- compare that to now.
You have that mortgage -- below four.
I when it was even worse there are very because we also had very high unemployment.
So he had what we -- the misery index.
Which is -- -- combination of the unemployment rate plus inflation rate.
And it was approaching 25%.
How we don't have any theatre near that bad now but but what it looks like -- You're really every time you go to the grocery stories start to cry and everybody's on your car's gas you start to cry and every -- you get your statement and banker mortgages start to -- As stagflation is a very ugly thing we have a little whiff of it now in terms of commodity prices.
But not -- too much elsewhere by the way I do all this shopping -- job in my family.
I cannot believe grocery price Oscar -- and that's I'm I'm afraid here -- -- I it's you know I think.
I think Ben Bernanke should go grocery shopping with the US -- and then we -- show into the higher prices if he doesn't believe we have them what I I.
I -- you know it's interesting Jerry I many many many years ago my father is chairman of the council of economic advisors.
And ever President Nixon Ford and -- would send them letters saying how -- you say inflation criticizes us look at what I just gave her rib -- And my father would do through it but if he left office when he was doing jobs yet resolved instead that they were double -- -- Well I it really takes being out in the marketplace -- now which your advice to people out there who are trying to figure out how to navigate.
This reality right now what should they be looking for higher prices or a slower economy.
I think we're gonna have a revived economy and act but I would say.
If I had Y be is advice for people right now it is if you do not have a home -- you think you like have a bigger better around now is an extremely good time to buy -- are still very low by historic standards.
And and law the last lenders are lending that this is that a tremendous change.
Just -- the last several weeks.
Lenders instead of looking the other way and says sort of avoiding your eyes and you -- -- them to borrow money are actually pushing money out the door.
For mortgages that's a big big change I think it's gonna lead to a revival maybe even a very hot revival was in the next few years.
In the housing.
At I I say to you may be sorry you didn't.
At least look into buying now.
I do believe that to be true we'll look back a couple years from now -- you'll say.
Why didn't I thought well that's it really -- -- -- first jumped.
Three and a half percent -- a fifteen year mortgage I was this -- not a vacation house so that that's incredibly lower end and I'm I'm gonna try to block -- -- but maybe I'm wrong -- make a great many mistakes by the women houses do look awfully cheap.
At -- -- in mortgage rates are stooped endlessly to.
And that makes the whole house cheaper -- thanks for coming in tonight we really thank you summit Gerri good to see.
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