High Frenquency Economics Carl Weinberg on the Economy

Suffice it to say that the stock market is down. It's down a lot we'll give you an update about ten minutes. Right now we're joined by Carl Weinberg. Carl is the chief economist at high frequency economics Karl good morning welcome to the show. Yeah good morning Mary thanks for having me on. They nothing makes me more nervous than the thought of high food prices. And -- there's a lot of reporting being done right now that would lead me to believe that we're gonna see fairly high rates of food inflation under in the next 24 months why is that. Well let's just to get people have food inflation is kind of misspoken term because what food prices go up it's not inflation. To expect him to seafood prices go up but not with all other prices rising along with it and that was wages rising along with and so it's a little bit actually more painful and inflation. The Department of Agriculture has a report out last week that said that inventories of Koreans are going to be down slightly next year worldwide. Compared to where they were this year. -- very preliminary report. But some level of inventories were really well last year it makes is -- that prices could rise again in the twelve months ahead. Wire that Green levels so low is it because of the droughts we had a few years ago they re is it just taking that long death. Catch up put our inventory. What's interesting you know when you look at world -- Koreans. He's -- vastly different pictures you find in the United States they're looking at actually increasing grain inventories for the next year. That's good news for us but. Mainstream developing world markets are -- declines in Asia in Russia. In Europe. Are projected for the year ahead. Now remember about it either overly sensitive -- based on planting intentions they don't have any indication about what the weather is going to do another variable factors but. This suggests that even -- this year's -- turns out better than expected. Personal still remain quite firm. Facility domestically we're in pretty good shape so -- our supplies. It would seem that way but remember farmers are going to sell their grains to their highest bidders somebody in Europe offers them a better price and we do our personal -- also. So what are we looking at because I've I've observed the price of chicken and beef increasing pretty dramatically bread has gone up and in price quite a bit. What what types of foods are we gonna see significant price increases in car. Well that's why we focused on grains and our recent report in high frequency economics. Greens -- at the bottom of the food chain. Greens become the feed for livestock let's start and makes input -- growing process again so it's really a fundamental foods that are going up. So we could see some upward pressure on food prices it's hard to put the metric on him now last year we saw a big rise in the price of grains. And that's the way you -- feeling right now in the price of secondary products. We may very well see more of that -- -- get a really big surprise out of our crops this year. You know -- -- we've been watching what's going on in Europe and last night it you know -- Greece can't even form a government because they can't agree on anything. But they did it seems like the focus us on Europe and I'm more concerned. About the American economy becoming like that of Japan is that a likelihood or has it already occurred. Well we don't think so in Japan Japan's big mistake. Thirty years ago. What has been lending too much money to its people which admittedly is a mistake that we made. And seeing its banks fell when and I its stock markets felt and then not so it's been about access to critical step that's different. Are we in the United States has made enormous progress in that fixing the bank under the Obama administration's story at the end of the Bush Administration. With the talk with the recapitalization. With the restrictions on dividends and bonuses until we get things fixed. So we've got banks back in good shape. In Japan that it reflects their backs and lingered on for years pretending that their banks were fixed when they weren't and that -- there's been no -- of the economy for a two and a half decades that's very bad -- Also in the -- difference then I think what you're telling us is that in Japan they're not making. Consumer and small business loans but where isn't here in the United States where at least the starting to see that re emerge. That's correct other than emergency landing for the earthquake in the last year. We haven't seen bank lending -- in Japan and over fifteen years imagine that imagine the US economy with no increase in bank lending to. We do you really stuck and they are. So American banks are getting healthier what about American consumers are American individuals still. Deleveraging in reducing the amount of debt that they -- are talking about things like. Credit cards student loans car loans home equity loans seems like everybody's refinanced into a much lower and sometimes smaller mortgage. Yeah absolutely absolutely and that's certainly the right thing to do it and we borrow too much. And now we're going to a period of -- and which were reducing the amount of the indebtedness that we have that's normal that's natural it's also painful. He gives us a slower growth rate in the economy because we're putting more money aside. To cover markers in the past rather than investing them in a new facets that make less money. But it's a process that is cyanide and intends to -- the underlying problems too much debt. That's where we were that was a problem were much better now gonna continue to get better but it will be slow growth until we get it under control. Now Karl students of modern monetary theory. Are not concerned about our national debt where do you fall in that -- RUS are you a proponent of modern monetary theory. Or are you very concerned about our 1516. Trillion dollar national debt. Well I'm concerned about it because the trend in which its been increasing in the last few years is unsustainable. I'm not concerned about its level. We could afford to services that we can afford. To pay it down without living beyond our means. To the extent that we're going to remind them that we can never hope to pay back. The US fiscal deficits have to be addressed at some point in time. I don't think right now is the exact right moment to do it I think we need to have. A little bit of a stronger company before we're ready to do it. The sometime in the next few years we have to address both the structural problems they're making our deficit larger than of these social security and healthcare issues. And then and we also have to raise our taxes and pay back a little markers or at least reduce the rate at which there. They're gonna pass. You know car I've been dying to ask you this question because when I look at the you refers structural problems as a relates to Medicare and Social Security. It occurs to me that the easy fix for all of this is simply to say to people. Lucky can't retire at 62 and collector Social Security early the early seeking to retire 65 and we're gonna reduce the amount we pay you and we're gonna push out the age at which you can collect benefits. And do the same thing to Medicare. Push out to engage in which you can collect. If you did that. I've got to believe that the you you're you're pushing you're you're you're you're not taking money out of the current economy why is that so hard for our political leaders to -- grapple. Well don't ask me to -- in the minds of politicians the finance Soviet is that the financial aspect of it is that. Pushing back Medicare and Social Security eligibility. Ages would certainly improve the finances. Of our nation. Although at the expense of breaking a promise that the government made to people working for years. I expect something like that will be part of the solution and it'll probably be phased in. It's not a question that we really have to address on the Social Security side. For another decade or decade and a half so we do have time to phase of it. Medicare is a much more urgent issue that needs to be addressed and that the Obama administration so he started taking steps in that direction. Well they they have but it just seems like if you forgive me for producer in the event. I would say the earlier you deal with the Social Security problem the better off you're gonna because of the medicines going to be less painful if you say to another ten years as you suggest. They then the problem's going to be that much -- car. Well I think that when I was suggesting was that we deal with it over the next ten years and now -- ten years to do it. There has to be standard I think for political purposes it have to be staggered. Pushing back of eligibility dates and that's just a reality. So I do that I agree with you yes we do have to do something starting soon but we don't have to do little and went cold Turkey movie can be a gradual adjustment. All right -- Karl I appreciate your time and thank you very much for joining us credit ownership. That was Carl Weinberg -- he's the chief economist at high frequency economics joining us today on the financial exchange.