The Expert Podcast

…So where did all the money go ? There are companies that are laying off employees. The stock market's going down. People are getting laid off even though. Over the last year or two it seems like employment has gone up It's really just replacing employees that lost jobs in the pandemic 2000 19 20 and beginning of 21…People are starting to lose jobs and they'll happen in the future.. Where'd all the money go. Well first of all you have a stock market decline that as of now according to this article you see on the screen, it's $3 trillion worth of. Wealth that's been removed from the stock market. But that's not the biggest part of it. There's another $10 trillion. that has been erased from the economy because it was temporary to begin with Where did that come from Well, After the pandemic. There was $5 trillion. Of stimulus money. Put into consumer's hands and pockets. That came from the stimulus checks that we got two or three times. That came from extended unemployment benefits It came from PPP. Benefits It came from E I D L loans. There was $5 trillion pumped into the economy over the course of about 18 months. In addition there was another 5 trillion that came from the fed. In liquidity to businesses loan facilities. And other funding that just went right into the economy So you have those that $10 trillion. Plus the stock market went up 3 trillion…Well, that's all gone. Because that money is all spent. The stock market is down 3 trillion. There's. more stimulus money coming in…At the same time the prices of all our products have gone up. So not only do you have that $13 trillion unlucky 13 removed from the market. You also now have prices that are higher. How much has $13 trillion though compared to the big picture ? Well, the entire GDP…Of the U S is about about $20 trillion. So that 13 trillion…That was in the market. As extra money…Well the entire GDP of the United States is 20 trillion. So if you have $13 trillion put into the economy in a year and a half or so, that's more than half of the overall economy of the U S pumped in all at one time. That gives people an artificial sense of wealth and artificial sense of wellbeing. And financial security. Now when you pull all that out, You might say well it's back to normal It's not because the prices are now higher. If you go back to back to the future, drive your DeLorean…Time machine…To 2018, the prices of everything was 30% lower than what they are now 40% for some products. So it's not just that the 13 trillion is no longer available for people to spend. It's Now the things you do have to buy without that money now costs more. What does that going to do for the economy Well it's going to hit it pretty hard. Over the next. Eight to 16 maybe 18 months. You're going to have more job cuts Companies are going to start laying off again. You're going to have. companies that go out of business, you're going to have consumers. That run out of cash There's already a much lower. Wealth savings rate. Then it was even two years ago. All the cash people saved up. It's gone., why is it different now ? Then it was five years ago If you had cash why did you spend it so fast Well here's the reason. It's the lotto effect. Many of the people that all of a sudden had cash in 2020 and 21 from stimulus and unemployment. Never had that much cash before. They were always living paycheck to paycheck And all of a sudden you have five thousand six thousand eight thousand dollars. Or if you're a business owner that filed for a PPP and got 30 grand, you maybe never had that much liquid cash in your business. And so you operated differently. You ever see those stories about somebody who wins the lotto ? And then two years later they're bankrupt. Because they're not used to…retaining capital. they're not used to retaining money. So they don't plan accordingly and the money's all gone and they overspend and set up a lifestyle with a higher income That's why a lot of people quit their jobs because they had the extra cash They figured they didn't need a job. This is going to end badly. In 2000. into 23, where…the people who don't have jobs that all of a sudden need them again. We're not going to be available. People that already have jobs to kind of get laid off. We've seen many layoffs Carvana. Mortgage companies. Tech companies are already laying off lots of people In fact, some of the companies. are de-hiring people that were offered a job and telling them Hey just kidding. That job you were going to start next month Forget it. This is all happening Very suddenly. So you have all these people out of work You have prices higher. You have inflation continuing. No more stimulus money. Where's the answer going to come from ? Well they can't do stimulus again…10,000 I mean there are 10 trillion is all the money that anybody ever had…You can't. Jack up rates too much. They're going to do that anyways. They're going to probably go. 75 basis points. In August. Which means everybody's credit card rate will go up. New car loan rates will go up Mortgage rates will go up again Mortgage rates will probably be near 7%. Probably by the end of the year Right now they're five point something. They'll probably be 7% by the end of the year…So that's going to put a big crimp on the new home market And also more importantly, the home equity line market, because there's some people that are flushed with equity in their house because the market went up and now all of a sudden they need cash and they may think well I'll just tap an equity line. Well guess what Equity line at 3% or two and a half percent that's not happening anymore. Your equity line now might be 8% because when 30 year mortgages for primary resident, Purchase. Is at seven. Equity lines are usually a point higher. So you're gonna be 8%. Well, if you take out a hundred thousand dollar credit line, At 8%, you're spending $700 a month. Now some consumers might need that hundred thousand just to cover their bills. Or if you lose your job you might need that to cover your expenses for a year or two and a half or two maybe. But now all of a sudden you have an extra $800 a month bill that you didn't have before. That's going to hurt. Credit card rates are gonna go up So if you're spending $300 minimum payment on a credit card now it might be 400. On top of the extra a hundred for gas the extra 200 for. Groceries. Right. So this is all converging like a perfect storm…Too. Create even more pressure on the economy. Not many people are talking about the R word recession or even depression, but I suspect. Within the next 60 90 days You'll hear those two words a lot more than you are right now Tell us what you think of the comments. See if you're seeing any of these factors in your business and your personal life and your finances. If you're a business owner do you see that ? Happening Do you see clients starting to pull back ? Are you starting to pull back ? Tell us what you think.