We all know the U.S. economy has been struggling, and the Federal government is trying to find the right moves to curb inflation and avoid a recession. During my weekly interview with Guy Williams, President and CEO of Gulf Coast Bank and Trust, I asked what the Fed - and key private businesses - could do amid the multitude of issues that contribute to our economic woes.
So the Fed is about to take about $95 million out of the economy. What does that mean for consumers, or folks looking to borrow money?
It means our money becomes more expensive. Right now, money is still readily available, there's still a lot of cash sloshing around in the economy. The traditional monetarist’s theory is that excess cash leads to inflation. It's beginning to look like that, but it's also compounded by the invasion in Ukraine, the shortage of workers and the breakdown of the global supply chain. So all these things push inflation while reducing productivity, and it makes for a very unstable economic situation.
Getting all of these factors to align has been really difficult for the Fed to figure out and steer the economy in the right direction.
I hope all economists want a soft landing for our economy. No one wants a recession because when the Fed says we have the tools to prevent high inflation, what they really mean is if they need to raise interest rates to the point that the economy will slow down, stop and reverse, they will. That means people will lose their jobs, businesses will close, and net worth will disappear… the longer inflation stays around, the worse it gets. Also, it doesn’t help that we have a horrible situation in Europe with Putin invading Ukraine, which is destroying supply.
There’s been a war of words Inside the Beltway over our energy policy. Everybody blaming everybody, natural gas prices are up, oil has dipped down a little... How do you see all of this playing out?
In October, lawmakers wanted American energy producers to reduce oil production, pointing to Europeans reducing their production. We know now Europeans were shutting down their own production and buying from Russia. Last week, the same Senate sub-committee, with no sense of irony or shame, called oil executives to produce more. U.S oil producers are doing what they can. Production is increasing, but the government's policy is still very anti-energy.
The cost of electricity in California has gone up because of the number of electric vehicles that are there. Demand is going up, but the supply of electricity is static.
The cost is going to have to go up. Another thing - a green car is not a hundred percent green. It's probably a 20% to 25% coal car until we actually have an interconnected grid and bring back nuclear power. Investing in green cars is a bit of a challenge. There’s a green-on-green fight about the future. There are environmental absolutists who don't want to do anything that would increase production. Well, if you have a green car, you need materials like cobalt, copper, lithium and other rare earth minerals. Those things come from some very rough places and have to be produced. If you're relying on China and Russia to produce your green car, it's really not that much of a green car. And you're empowering tyrants.
