Speaker 1: Good morning, Joel, Morning Bill. All right, we've been talking
Speaker 1: about tariffs now this entire week. It has been a
Speaker 1: seesaw with the President saying tariffs are kicking in, then
Speaker 1: saying hold off on instituting tariffs, and then the last
Speaker 1: day he goes, nope, I'm going back in on tariffs.
Speaker 1: And you've got tariffs of twenty five percent that are
Speaker 1: hitting Canada, Mexico, twenty percent in China. Except because the
Speaker 1: car industry was going to be affected first and foremost
Speaker 1: and the heaviest between Canada and Mexico and the United States,
Speaker 1: which is they're so interlaced, he said, Okay, we'll hold
Speaker 1: that off for a month. So as that is an introduction,
Speaker 1: let's go talk about spending in relationship to tariffs.
Speaker 2: So what's going on, Joel, Yeah, So, well, it's amazing
Speaker 2: how just kind of the general economic consensus on tariffs
Speaker 2: has been has kind of been swept under the rug
Speaker 2: right now, and we are seeing I think the tariff
Speaker 2: idea is just it's not a good one and it's
Speaker 2: going to have impact. We're already seeing that shakeout in
Speaker 2: the economy, even predictions of stagflation starting to resurface. But
Speaker 2: I think what Americans are seeing there's they're starting to
Speaker 2: be fearful. They're nervous about what tariff implementation means and
Speaker 2: the predictions of higher prices because those inevitably materialize in
Speaker 2: an economy where tariffs are instituted. And so CNBC just
Speaker 2: had this this survey and they found that the more
Speaker 2: Americans one in five are are so called doom spending,
Speaker 2: and so people are saying, well, higher prices are likely
Speaker 2: around the corner, So I might as well just like
Speaker 2: buy extra now, because I'm concerned that if I hold
Speaker 2: off and by that thing weeks later or months later,
Speaker 2: it's going to cost a heck of a lot more
Speaker 2: because of these incoming tariffs.
Speaker 1: It's let me give you a quick story if I
Speaker 1: get because I have experienced that firsthand. As you know,
Speaker 1: I'm Brazilian, or I was born in Brazil, and so
Speaker 1: in my younger days i'd go to Brazil quite often,
Speaker 1: and I went down there once in the time of
Speaker 1: hyper inflation, much like Weimar Germany, when loaf of bread
Speaker 1: would cost you a barrel full of money, where the
Speaker 1: paper itself costs more than the money was worth. And
Speaker 1: so I was in Brazil and visiting family, and that's
Speaker 1: what was happening. Inflation was so I mean wiped out savings,
Speaker 1: I mean, pensions were wiped out. The only thing to
Speaker 1: buy is hard goods. And in the morning you saw
Speaker 1: a price of whatever, a refrigerator or a bag of oranges.
Speaker 1: By the afternoon, the prices had risen five or ten percent.
Speaker 1: And so that's exactly what happened. Every dying people had
Speaker 1: was going into hard goods and it was a disaster
Speaker 1: for the country until it was able to come out
Speaker 1: of it. And what you're saying is we may reach
Speaker 1: that point, not hyper inflation, of course, not like yeah, but.
Speaker 2: No, certainly not that. But we've never experienced something like
Speaker 2: that in our I mean think about just even the
Speaker 2: how people have reacted to increased inflation that is nothing
Speaker 2: like what many of the South American countries like Brazil
Speaker 2: have experienced over the past few years post COVID, and
Speaker 2: how much how difficult that was for consumers to endure,
Speaker 2: and how that led to essentially a political revolution to
Speaker 2: a certain extent, knocking out the last administration. People wanted
Speaker 2: to change. And it's because inflation is such a difficult
Speaker 2: thing to endure, and it's again, it's nowhere near what
Speaker 2: you experienced in Brazil, but uh. And then the other
Speaker 2: thing that it causes there is this sort of like
Speaker 2: self fulfilling prophecy where if people believe that prices are
Speaker 2: going to go up, then they start to act in
Speaker 2: that way by buying more stuff, by by pre purchasing
Speaker 2: things that they would have otherwise held held off on buying.
Speaker 2: And and then that leads to guess what, the cycle
Speaker 2: continuing higher prices.
Speaker 1: That's right, demand demand. The more demand, the more the
Speaker 1: prices can be asked for, and it is a cycle.
Speaker 2: That's why, like the economists and the FED are always
Speaker 2: looking towards inflation expectations that consumers have because they want
Speaker 2: to quell that. They're like, Okay, inflation might f bee
Speaker 2: a little out of control, but what do people think
Speaker 2: inflation is going to be a year from now? And
Speaker 2: if that number takes higher, that's when they really start
Speaker 2: to freak out, because if people expect it, that's when
Speaker 2: they start to change their habits. And so I just
Speaker 2: want people to know that, yes, we are kind of
Speaker 2: in a period of economic uncertainty right now, with tariffs,
Speaker 2: with inflation still not fully resolved, and I just want
Speaker 2: people to be careful about buying more stuff now because
Speaker 2: they're expecting prices to be higher. I think that is
Speaker 2: a recipe, especially especially if you're taking on debt to
Speaker 2: buy those goods or to buy those services. Be careful
Speaker 2: because I would rather see people save more, and I
Speaker 2: would rather see people continue to invest to grow their
Speaker 2: net worth and not say, let me just go out
Speaker 2: there and rack up more credit card debt and buy
Speaker 2: more stuff because it's going to get more expensive. Because
Speaker 2: you know, especially with where credit card interest rates are
Speaker 2: right now, if you're putting it on the credit card,
Speaker 2: it's it's still a really bad find interview.
Speaker 1: The other side of the coin is that is anything
Speaker 1: you can pay for that is a fixed rate, a
Speaker 1: mortgage payment that's fixed at two point eight percent or
Speaker 1: even three point five percent, or a car payment, then
Speaker 1: what happens is inflation helps you because it becomes cheaper
Speaker 1: and cheaper and cheaper. By the way, we're a thirty
Speaker 1: six trillion dollar debt national debt. The only way we're
Speaker 1: ever going to be able to deal with it is
Speaker 1: inflate ourselves out of it. It may take it may
Speaker 1: take one hundred years, but that's what's going to happen.
Speaker 2: Yeah, And I think you make a good point, which
Speaker 2: is which is why too when when I get asked
Speaker 2: the question about paying off mortgage debt, my advice is
Speaker 2: it's it depends on what your mortgage debt looks like, right,
Speaker 2: But for the vast majority of people they have that
Speaker 2: upper two's lower three sort of mortgage debt hanging around,
Speaker 2: they can earn more by sticking that money in a
Speaker 2: savings account. If you're comparing, you know, payoff mortgage debt
Speaker 2: versus buying more stuff, then pay off the debt. But
Speaker 2: if we're talking about they're just more productive things you
Speaker 2: can do with your money, even non risky stuff.
Speaker 1: Yeah. Of course the problem is do people put away
Speaker 1: that money and invest it? Nobody does or very few
Speaker 1: or very few people do, right, behavioral problem? No kidding,
Speaker 1: all right, Joel. Student loan borrowers are kind of spinning.
Speaker 1: What's going on? I mean there are two groups of
Speaker 1: people that are spinning. Three groups. One illegal migrants not
Speaker 1: doing well, two federal workers not sleeping well. Student loan
Speaker 1: borrowers not so good either. What's going on?
Speaker 2: This has been one of those things that's been tied
Speaker 2: up in the courts, And there was just another ruling
Speaker 2: recently that the Safe Plan, which was like the really
Speaker 2: really generous repayment plan that the Biden administration instituted. You know,
Speaker 2: they tried to kind of create blanket student loan forgiveness,
Speaker 2: at least up to a certain point. That failed, and
Speaker 2: then they were like, well, let's do forgive us by
Speaker 2: another name. Let's institute a new repayment plan that creates
Speaker 2: a much shorter timeline to forgive us and essentially brings
Speaker 2: down payments substantially for borrowers. And that also has not
Speaker 2: stood the test of time in the courts. And so
Speaker 2: right now, man, student loan borrowers are in this massive
Speaker 2: limbo space where maybebe they have signed up for the
Speaker 2: Save Plan and now it's in limbo. They're not sure
Speaker 2: what's going to happen. And you can't even go on
Speaker 2: the Department of Education's website at this point and switch
Speaker 2: to another forgiveness or another excuse me, student loan repayment plan.
Speaker 2: And so there are a lot of folks out there
Speaker 2: who are kind of not sure how to proceed, and
Speaker 2: there are a lot of borrowers, especially because we think
Speaker 2: about how long we punted student loan payments for basically
Speaker 2: three and a half years, who aren't used to that
Speaker 2: in their budget, and now they're like, they're like, oh crap,
Speaker 2: I have to start paying my student loans again. They're
Speaker 2: not used to it. And a lot of people have
Speaker 2: not been paying their student loan balances to the tune
Speaker 2: of millions of people, it seems like. And we're seeing
Speaker 2: more and more people see credits score drops because they're
Speaker 2: not making on time payment.
Speaker 1: Trains themar student loans are concerned the moratorium on paying
Speaker 1: them does interest a crew or everything was put on
Speaker 1: hold until students could start paying back their loan.
Speaker 2: Yeah, everything was put on hold essentially for those for
Speaker 2: those three and a half years. And even people think
Speaker 2: about people in the Public Service Student Loan Plan, those
Speaker 2: are in PSLF. Those folks in particular are made out
Speaker 2: like bandits because they weren't paying a dime, and yet
Speaker 2: every single month that they weren't paying a dime was
Speaker 2: counting towards that forgiveness timeline of ten years, and so
Speaker 2: that was like for those people, it was incredible, and
Speaker 2: a lot lot of people did really well under those times.
Speaker 2: What I said, the whole time for every single month
Speaker 2: essentially for all of those years, was make sure to
Speaker 2: carve out that amount of money that's going towards your
Speaker 2: student loans, sticking into savings. If you're doing well with savings,
Speaker 2: invest some of it, payoff debt, do productive things so
Speaker 2: that you come out of this three and a half
Speaker 2: years ahead, so that you've made financial progress. A lot
Speaker 2: of people didn't do that. They factored that, and they're spending.
Speaker 2: And it makes sense because prices were going up to
Speaker 2: inflation was hitting people hard, and they're like, great, I
Speaker 2: don't have a student loan now that I can afford
Speaker 2: at least to put that towards my bills. But then
Speaker 2: they didn't have any sort of financial cushion on the backside,
Speaker 2: and a lot of people are in a much harder
Speaker 2: position when it comes to paying their student loan debt
Speaker 2: right now.
Speaker 1: Now, are we only talking about federal student loans where
Speaker 1: the government has loan money or these are private loans
Speaker 1: where the government guarantees that money.
Speaker 2: So we're talking about federal student loans. There are private
Speaker 2: student loans. They're just a fraction of the overall student
Speaker 2: loan market, though, and some people, if they refinanced at
Speaker 2: the right time. They have, you know, incredibly low rate
Speaker 2: on their student loans because they because they took it,
Speaker 2: they took them away from being federal and they refinanced
Speaker 2: them into a private student loan. But those also don't
Speaker 2: come with the same benefits, and you don't have the
Speaker 2: option to enroll in one of these income based repayment plans.
Speaker 2: But then again, federal borrows right now can't really opt
Speaker 2: into one of these different income based repayment plans either,
Speaker 2: because the Department of Education is essentially taking that off
Speaker 2: the website, and so it's a really awkward position to
Speaker 2: be in as a student loan borrow. I think when
Speaker 2: it comes to talking to parents of kids who are
Speaker 2: getting close to going to college, I think it's even
Speaker 2: more important than ever to say, be careful how much
Speaker 2: debt you take out. We don't know what the student
Speaker 2: loan space is going to look like in the coming years,
Speaker 2: and I just worry, you know, about people taking on
Speaker 2: so much student loan debt and then they're not being
Speaker 2: some sort of generous plan to you pay that offer
Speaker 2: to find forgiveness. We just don't know where income based
Speaker 2: repayment plans are going to go from here.
Speaker 1: Yeah. And I guess for those of you that want
Speaker 1: to be a doctor, by the way and get into
Speaker 1: a specialty, and maybe get into a super specialty being
Speaker 1: a going through a fellowship, be prepared for six seven
Speaker 1: hundred thousand dollars of student loan. It's going to be
Speaker 1: wonderful real quickly. The affordabilities are what is that? And
Speaker 1: are we getting one?
Speaker 2: So it sounds like there's this new government position that's
Speaker 2: just been created. And you know, a czar for everything
Speaker 2: these days, but now there's going to be somebody appointed
Speaker 2: to overseeing the prices of everything in this country as
Speaker 2: they've kind of gotten out of whack. I'm curious to
Speaker 2: see how this shakes out. I don't necessarily have a
Speaker 2: ton of faith, especially when they're talking about we want
Speaker 2: to lower prices on homes and cars and groceries and electronics.
Speaker 2: And we live in a free market economy where it's
Speaker 2: really hard for the government to have pricing impact, and
Speaker 2: oftentimes when the government tries to involve itself in the
Speaker 2: private markets, uh, it backfires. I will say, maybe the
Speaker 2: one place the affordable affordabilities are could have some uh
Speaker 2: they could make some some headway is in the healthcare front,
Speaker 2: if they mandate or create more price transparency on that front.
Speaker 2: But I think ultimately, uh, you know, listeners need to
Speaker 2: become become their own affordabilities are and part of that
Speaker 2: means listening to how the Money every Sunday, Bill.
Speaker 1: Yeah, makes sense. And hopefully we get a cars ar
Speaker 1: uh and a ZAR for alliteration.
Speaker 2: Because I like cars are Ryan's sounds.
Speaker 1: Yeah. No, it's very strong, very strong. And you're right, Uh,
Speaker 1: well we have ZAR, so why wouldn't we have others ours? Right? Yes,
Speaker 1: all right, Joel, thank you, you're right. Sunday How to
Speaker 1: Money twelve to two pm. We'll catch you next Thursday.
Speaker 1: And this Sunday sounds good.
Speaker 2: Thanks Bill,