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​ In Flight #6 of the Pilot Money Guys, we discuss the return of the Boeing 737 MAX, although it seemed short-lived, and the Top 5 Myths About Government Debt and Inflation.


One of the Pilot Money Guys; Rob Eklund has just returned from the Boeing 737 MAX sim and recaps his take on the Boeing 737 Max MCAS training events.


Even more exciting is the financial topic for today.  And the most misunderstood financial topic of all time – Government Debt and Inflation!


The Pilot Money Guys address the Top 5 Myths About Government Debt and Inflation:


  1. Does the Federal Reserve print money?
  2. The crash of the US Dollar is imminent.  
  3. The government and Federal Reserve control interest rates. 
  4. Due to the recent COVID-19 stimulus packages, inflation is inevitable.  
  5. Government spending and debt is the biggest risk to your retirement plan. 

Finally, what can we all do to hedge against these risks of government debt and inflation specifically?


Please spread the word about our podcast.  Like and subscribe to help us get the podcast to more pilots like you. Let us know what you think! We are happy to discuss this topic more with you. Give us a call or shoot an email with your thoughts and questions! –



Thank you for listening!


Charlie Mattingly



[00:00:32] Rob: Hey folks. Welcome to the pilot money guys, podcast, where we aim to bring some light-hearted financial fun to your day.

[00:00:39] I’m your host, Rob Eklund. And with me today, we’ve got certified financial planner. Charlie Mattingly. And of course, a financial advisor, Ben Dickinson with us, who’s kind of our econ expert, uh, which is yeah. Important to today’s topic of Government Debt and Inflation.

[00:00:52] Charlie: your day to shine, Ben. Uh, it’s

[00:00:54] Rob: your day. I’m ready. I’m ready. It’s

[00:00:56] Ben: your day. If I know anything about, uh, being an econ grad it’s that you don’t know anything, so

[00:01:03] Charlie: yeah.

[00:01:03] That’s econ PhD for tomorrow.

[00:01:08] Rob: Awesome. Today we’re talking about. The return of the Boeing 737 MAX, which I just went through some training on that. So that’s some pretty cool stuff it’s back flying and then we’re going to get into Government Debt and Inflation. Whoa, very interesting topic, uh, appropriate right now with all the stimulus spending we have going on and we’re going to get into some myths and what we as investors can do about it.

[00:01:32] So that’s, that’s the timeline we’ve got here. Um, what do you guys got? You guys got any questions about this Boeing 737 MAX? I’m pretty excited. It’s back flying.

[00:01:42] Charlie: I did the trainees different time, man. You sound like you’re smooth.

[00:01:47] Rob: Yeah. Oh yeah. I got this new microphone. Thanks. Oh,

[00:01:53] Charlie: it’s sponsored by leading edge financial

[00:01:54] Rob: planning.

[00:01:55] I sound like Martha.

[00:01:59] Ben: It’s good. We all, we all sound great. I

[00:02:01] Rob: got to say. It’s better to sound good than to look at.

[00:02:04] Yeah,

[00:02:04] Charlie: I see. Absolutely.

[00:02:05] Ben: That’s why this is a podcast. Not a video or a movie,

[00:02:10] Rob: right? Right.

[00:02:12] Charlie: Absolutely. So, we’ve been told we’ve got all our podcasts. We’ve got, we’ve got what? Four podcasts out now.

[00:02:17] We’re like professionals. So no, but we have been told to be nicer to Ben today. Ben is going to be the man and he’s going to be talking to econ. Government debt and inflation myths today. I think we have five, maybe six of them, depending on how, how, how if we get rolled in or not. But first, like you said, Rob man, we’re dying to know.


Rob’s Boeing 737 MAX Training


[00:02:37] You just did the Boeing 737 MAX training. The Boeing 737 MAX is back online at American it’s back online. It’s a Southwest, several other alarms, of course. Maybe we should start like, Hey, tell us what you did. And then let’s back up and say, how the heck did we get here? This is a fascinating story, actually.

[00:02:54] Rob: Yeah, it really is.

[00:02:55] And it was a super exciting, I, you know, I’d been off, uh, on extended. Time off for a bit. So going back to retraining, it was a nine-day course overall. And at first, I was like, that’s way too long. And then I got back, and I was like, yeah, that’s actually probably about right. I need to, uh, knock some rust off.

[00:03:13] So it was, it was really good, but the Boeing 737 MAX training in particular was just phenomenal. Um, I hate to say how easy it is to fly that aircraft now. Not that it was hard, you know, too terribly hard before, but some of those, um, Systems that they had in place, you know, caused some problems, but now they’ve fixed and put a lot of safety redundancies into that.

[00:03:35] So they had us go through a lot of the scenarios and it’s a dream to fly. I got to say, at least in the simulator, I haven’t flown it, uh, for really, but yeah, it was, it was really good training and, uh, super easy in front of to, I,

[00:03:50] it’s. Probably the most scrutinized plane maybe ever. And, uh, it, it showed, you know, going through the training and the simulator.

[00:04:01] Charlie: So, Rob, I mean, thought was when I was flying, I was like, how can this training not be more than how can it be more than five minutes of stab, trim, cutout, switches cut out.

[00:04:13] Um, but evidently it was, and you said it was useful. So can you give us an overview?

[00:04:20] Rob: Yeah, a lot of them, you know, just the knowledge that Boeing’s put out, we went through a lot of them. The computer-based training modules on that, and just getting familiar with some of those systems that maybe weren’t explained as much as they could have been in the past.

[00:04:34] And then now they’ve also been redesigned. So going through that training was good. Um, obviously did that before going down to the simulator and then getting in the simulator, you know, just getting comfortable with the little nuances that are the Boeing 737 MAX was helpful to just go out there and fly like a normal type, um, flight.

[00:04:53] And then go through some of the scenarios of, Hey, what happens when the maneuvering characteristics augmentation system, the  system, you know, goes, goes back and they’ve got the redundancy systems put in with the angle of attack where if it senses, it’s got two of them now, whereas before it just had the one, and if it senses that those disagree, it just shuts off the speed trim system.

[00:05:20] Which is what the MCAS system falls under. So, it’ll just be done for the flight and you just fly in. You’re just going to have to trim manually also, you know, you can kick it off really easily with, uh,

[00:05:32] Charlie: so whereas before, and you said the redundant system, but before, if it was just the captains, um, indicator.

[00:05:41] Which there’s an indicator on the left and, and an indicator on the right. We can talk about this specific, but, but now there’s both of the indicators have to be wrong for that system to kick in. Or they both have to read the same. Yeah. They got to

[00:05:55] Rob: be, they got to be within the tolerances, uh, for it to go up to, to Pitt.

[00:06:00] And that’s the big thing for those non pilots out there is the aircraft with pitch down, which obviously you don’t want when you’re close to the ground and taken off. And then, you know, that’s when those pilots got overwhelmed and yeah. Ethiopian flights there, um, there was lots of blame to go around, I think on it.

[00:06:19] And, uh, you know, definitely pilot training was, it was a factor. I don’t think anyone can deny that also, you know, the design. Was flawed in some ways, which they fixed all that. And now pilots are better trained, and we have memory items for, you know, when they went through it, they didn’t have memory items that your immediate action items, whatever you want to call it, bold for air force guys that you immediately do with, from memory.

[00:06:48] And you just do it and its base it’s real basic, right. You basically fly the aircraft and kick off the automation. And that’s what you do. And then if it continues, then you’re going to turn the staff stabilizer, trim, cutoffs, which is you’re going to shut those off so that you cut out anything that’s going on.

[00:07:08] And if that still doesn’t work, which yeah. Uh, you know, I can’t, I don’t know what the statistics are, but that’s got to be in the, you know, a very, very, very small percentage. Then you just grab the, the, uh, the trim wheel itself, which isn’t that hard to do. And fly, fly the aircraft. That’s the

[00:07:25] Charlie: first thing.

[00:07:27] Yeah, that was one, one thing that got missed. Of course. And again, that happens in a lot of accidents, not just this one is that we forget to fly the airplane when things get crazy. But for those folks out there listening that that are not pilots or that, you know, this was a while ago. Now it seems like forever ago with all that’s happened in between, but basically an October 29, 2018, we had the lion air six, six one zero flight out of Jakarta Indonesia.

[00:07:53] Crash. That was the first one. And then, you know, when that happened, I remember, um, a pilot error, of course, you know, about training, whatever inexperience, maybe, you know, just the typical quarterback in there, Rob, that you talked about that we shouldn’t do. Yeah. And

[00:08:07] Rob: just to jump in there, Charlie,  I believe that was the one where it had actually flown did the flight right prior to the, to the crash was flown.

[00:08:18] And they had a jump seat or they kind of helped them out and show them what to do and they wrote it up. But you know, it didn’t, didn’t get fixed obviously. And the next crew didn’t handle it as well. Yeah.

[00:08:28] Charlie: So, the then we have had that one and then, and, uh, just a few months later, March 2019, Ethiopian airlines crashed at Boeing 737 MAX

[00:08:38] And I’ll never forget when that happened. I walked in the kitchen and my, my wife said, Hey, another Boeing 737 MAX has crashed. And I said, no, no, that’s that happened in October. You know, that’s already happened. That’s old news. She goes, not a different one. So, I couldn’t believe it. So, when two of them have, you know, when that happens twice, you think, Oh, there’s something more here than just simple pilot error.

[00:08:59] But, uh, you know, um, there’s tons of issues.  There were some pilot training things. There there’s some conflict of interest, you know, Boeing is trying to sell airplanes to a country, um, where their training program is, let’s say substandard.

[00:09:17] And so they want to try to sell airplanes, but, but, uh, they also want to try to help them train. So there’s a lot of complex there. They’re trying to develop an airplane to keep up with the, the Airbus Neo. Remember the Neo came out. So then, uh, yeah. Boeing customers, meaning Southwest American, whoever else has the Boeing 737 MAX, I can’t remember.

[00:09:37] United does basically said we want a competitor to that, and we don’t want it to be different. We don’t want a new type rating. We don’t want new training. We don’t want new Sims. So, Boeing goes back to the drawing board and says, all right, we’ve got this Boeing 737 MAX, bigger engines, more efficiencies, but there was a problem with that.

[00:10:00] So the problem is. That the stall characteristics were different, different than the standard Boeing 737 MAX. So, this is a problem where while install, characteristics are different than we might have to have different training, different type rating, different airplane altogether, and that cost money for everyone.

[00:10:19] So then the Boeing engineers came up with the M Cass to mimic the stall characteristics on the standard Boeing 737. So, but it was so. Um, you know, supposed to be so benign that they didn’t put it in the regulations, they didn’t talk about it. We didn’t train to it. We didn’t even know about it, but, but you know, one of the things Rob, I remember when those things happened was I was like, gosh, the, the flight regime that you have to be in for that system to, to start is first of all, some, a regime that will never be in an airplane at an, in an airline, or I should say clearly it kicked on because of what you said earlier in that, that captain’s AOA indicator was.

[00:11:00] Malfunctioning and it was not redundant. So, it kicked on when they were not in that regime of flight and that’s where the troubles began. So, it’s fascinating. All these different factors come together. Rob, you’ve got a cultural factor. You got a training pilot training; you’ve got pilot error. You’ve got, you know, some, some bad, let’s just face it, bad leadership at Boeing.

[00:11:21] You know, I think that was pretty well known that there was not good leadership at that time at the leadership has changed since then. Uh, obviously, so those are all those things came in to make that situation possible. Uh, unfortunately it’s terribly

[00:11:36] Rob: tragic.

[00:11:37] Charlie: So just to summarize this discussion, the training, I mean, again, I’m trying to re I’m trying to think about you’re in the SIM, uh, SIM instructor says here’s the M cast failure, the nose pitches down.

[00:11:51] You maintain aircraft control you, I guess you turn off the autopilot, even though it works without the autopilot, right. That was one of the conditions. So, you turn off the autopilot anyway, cause that’s what we always do. And you reach down, and you touch, you flipped the stab trim, cutout, switches to cut out.

[00:12:06] And then what do you do? What do you do with the other two hours of SIM time?

[00:12:12] Rob: Oh yeah. Well, you, you practice that air speed unreliable, you know, I guess there’s different. There’s some different, uh, emergencies that they throw at you. Airspeed unreliable obviously is one of the things here I’ll get your attention.

[00:12:25] Um, so all, you know, I guess I was talking more about running a runaway stabilizer when I was talking about how to handle that. Yeah. Which, you know, the M cast kind of was, so you can kind of throw that in there, but yeah. Yeah, it w it was interesting. It wasn’t a really long scenario by any means it wasn’t nine days of, uh, Boeing 737 MAX training.

[00:12:43] That’s for sure. In

[00:12:44] Charlie: past nine

[00:12:45] Rob: days of no, it was a, um, uh, morning. Um, yeah. For us in addition to the community computer-based training.

[00:12:54] Charlie: Well, anyway, fascinating stuff I’ve been, I’m glad it’s back. It’s an amazing airplane. And so,

[00:12:58] Rob: and it was a joy. Charlie was, she could get in the same, maybe getting the Simpson diamond for it because you’re going to be like, oh my gosh, this is easy.

[00:13:04] We did, you know, go arounds and, and, uh, all kinds of different things. You’re like, oh my gosh, this is. This is really

[00:13:11] Charlie: easy. I did get to fly it last year. Is that any different than what it was before? I mean,

[00:13:16] Rob: yeah, some of the characteristics are just different because of the, because of that trim that they’ve, they’ve redesigned and, and it is, is pretty easy and it’s nice.

[00:13:27] It’s a nice, nice, uh, aircraft to fly. So, I’m excited to actually get out there and fly.

[00:13:32] Charlie: Hey, let’s talk about something more exciting.

[00:13:37] Rob: What could I segue? Yeah, they say we, Charlie, what could


Top 5 Government Debt and Inflation Myths


[00:13:40] Charlie: be more exciting than taxes? We could talk about taxes really. And talk. I was dying to talk about Government debt and inflation.

[00:13:47] Anybody else? Oh my gosh. Yeah. I have been waiting a

[00:13:51] Ben: long time for

[00:13:52] Rob: this. Oh, Ben. You’re on deck

[00:13:56] Charlie: buddy. We’ve got five government debt and inflation myth. The only change one word in that title, just so as not to completely copy off of. JP Morgan asset management. We’ll give them a lot of credit for this, some of this material, because we’ve been having this discussion.

[00:14:12] Yeah, exactly. Copyright laws. Um, we’ve been having these discussions around government debt and inflation since about 2008, if you all remember. Yeah. Ben. Oh yeah. I remember that.

[00:14:24] Ben: Were you, were you born

[00:14:25] Charlie: here?

[00:14:27] Ben: I was born, um,

[00:14:29] Charlie: barely,

[00:14:31] Rob: this one is a tough, dense topic.  Ben’s the biggest economist we have here. I, I am not an economist, so I’m just going to hit the high level, the low hanging fruit. If you will, that a hundred-thousand-foot view, what is inflation?

[00:14:45] The price of a basket of goods and services as it increases that that’s kind of what we’re talking about here. That it’s the whole, the old saying of too many dollars chasing too few goods, two types of cost, push inflation and inflation and demand, pull inflation cost, push Gershwin businesses. You know, they’re, they’re going around long.

[00:15:08] Uh, making products and they see that there that the cost to make that product or service rises. So, what do they do? They obviously raise the price. They pass that onto the consumer. And which may be another business. So that has a rippling effect throughout the economy. Uh, the other businesses raised their prices.

[00:15:28] The consumer, then who’s working for a company, says, Hey, I want a pay raise to pay for the same and maintain that same standard of living for my family that I had prior to the price increase. Which causes the, the cost of the goods to go up because they’re working to produce some of those goods. And so, as a, uh, do another round of price increase that’s the cost push.

[00:15:51] Anything to add on that? I didn’t understand a

[00:15:52] Charlie: word you just said bad star.

[00:15:56] Rob: You want me to say it again? Say all that again, please. Basically, cost more cost around supply and demand. It’s all about supply and demand


Myth #1: The FED Prints Money


[00:16:05] Charlie: Government debt and inflation myth. Number one, the fed prints money Ben true or false, false.

[00:16:13] Ben: The fed does not print

[00:16:15] Charlie: money. What does the fed do? What the heck? Why don’t we, why does somebody say the Fed’s printing money? What does that

[00:16:21] Ben: mean? Yeah, I mean, and a little bit of that she’s tongue in cheek. People saying that I think, but, but no, they do not print money. Uh, that would be, uh, the treasury department.

[00:16:29] They usually only do that to, to get out the old currency and make new, uh, Place old beat-up dollars. But, um, but no, before I do jump into that though, uh, I did want to just clarify that there’s, there’s two parts of the government that really affect the economy. Uh, the first one’s going to be a fiscal policy.

[00:16:44] You’ve probably heard that term before. Um, we saw a lot of that this year. Uh that’s the government. Yeah. Specifically, Congress increasing government spending. Uh, again, we saw that a lot this year, uh, also controlling taxes, increasing, and decreasing taxes. Um, so when you think of fiscal policy, think Congress, um, now if we’re talking monetary policy, that’s the federal reserve.

[00:17:05] And so this is where people get a little confused. Yes, they do affect the money supply. But that does not mean they print money. So, they have three real responsibilities. Um, now they can set the reserve requirement for banks.  Um,  they also control , the discount rate and that’s a, the rate that,  big banks,  , will have to pay to get money lint.

[00:17:25] From the, uh, from the federal reserve banks. Um, and so, and then the last one, I know Charlie, you’re going to touch on this one here soon,  they also can buy and sell us treasuries and that’s, that’s a lot of what they do. Um, so buying and selling of government bonds,  And government treasuries.

[00:17:41] And  that’s a pretty, pretty much an overview of what they do, but they do not  print money. They do affect the money supply. And I just wanted to  make sure,  that was clear that there are two separate,  Parts of the U S government do affect the economy. They work together to some degree.

[00:17:55] Um, if you look at Congress, for instance, they’ll set budgets and, taxes, and then the federal reserve would say, okay, how do we stabilize the economy within  these limits here?  And just briefly their three main priorities are maximum employment, stable prices, and moderate long-term interest rates.

[00:18:11] So, um, yeah,

[00:18:12] Charlie: so, the print money is just a figure of speech. So, what the fed does is they buy and sell us. Treasury is the fed has its own balance sheet.

[00:18:21] They’re like a person, a very wealthy person that buys and sells investments. So, when they buy treasuries and sell treasuries that are either injecting money into or out of the economy, this happens regularly. It happens all the time. Even before 2008. And during, and after the federal open market committee meets eight times a year,  and they decide, Hey, is there too much money floating around in the economy?

[00:18:46] Is the money supply too much? Or is it too little? And  , if for example, they say, Hey, it’s, there’s too much money and it’s going to cause inflation, the economy is heating up and Rob, like you said, the demand is picking up along with a supply. You have to have both to have inflation by the way.

[00:19:01] That’s why when the, when you can dump trillions of dollars into an economy, when there’s COVID the government’s shut down, excuse me, the economy shutdown. You cannot have inflation. There’s no demand. Now you can’t subsequently. So, so basically the federal open market committee says, Hey, we’ve got too much money in the economy.

[00:19:19] We need to remove some; the economy is going to overheat. Inflation is going to, is going to increase significantly so they will sell some of their treasuries so that when they sell it, someone else is buying it and they’re removing money from the economy. So  that’s the one of the ways, the other way.

[00:19:37]  , they also can control the reserve, uh, federal reserve bank. A reserve supply saying that, right. The reserve requirements, there we go. So, they, therefore they would encourage or discourage banks from loaning money essentially. So that’s another way that they can inject liquidity into the economy.

[00:19:59] And the whole goal of that when they inject liquidity into the economy, meaning money is that people take that money, borrow that money at cheap rates probably, and they go do stuff. They build houses, they build factories. Therefore, putting people back to work , get,  unemployment where it’s supposed to be.

[00:20:17] And, um, at the same time preventing what they’re really afraid of, which is deflation, right? Deflation is a really scary one because if you have deflation, you’re in a world of hurt. So. That’s my 2 cents on the, on the fed and money print. Yeah, a little, a

[00:20:34] Ben: little confusing there, money supply, but uh, not printing money, but yeah, I just wanted to make sure, uh, monetary policy, fiscal policy and, and yet do not print out.

[00:20:44] Charlie: Yeah. In the news we’ve got, uh, uh, we’ve got the big infrastructure bill going on, right? The $2 trillion infrastructure bill, uh, the Biden administration that would be. Fiscal, some kind of fiscal injection of money, which takes time. It’s going to take a long time for that to happen. That’s why the fed has much quicker weapons, so to speak.

[00:21:03] When it comes to, uh, injecting liquidity into the economy, Rob, would you go?

[00:21:08] Rob: Uh, the only thing I was going to mention is we’re talking inflation and just for, uh, folks new to the topic is inflation, but don’t, we always have inflation is inflation bad.

[00:21:21]Charlie:  Yeah, you’re right.   They have an inflation goal. I think it’s about 2% right now that might change. Yeah. But they want a little bit of inflation, uh, cause you’re right. Cause it a little bit is healthy.

[00:21:32] And again, the one that. Thing that they’re really afraid of is deflation where prices go down over time, which is, which is

[00:21:40] Rob: Japan’s the big, uh, uh, warning sign of deflation, right? I think in the eighties, nineties, uh, there were, they had deflation in it. It is interesting and a behavioral, you know, uh, project on itself, but when it gets a hold of, of, uh, society, it gets pretty, pretty interesting to be expecting prices to go down so they don’t go out.

[00:22:08] Charlie: There you go. You nailed it. That’s what I was going to say. I mean, can you, and I want a new truck. Ben knows I want a new truck. , if that brand new Silverado that I want was going down in price instead of up, I would certainly wait a while before I bought it.

[00:22:24] Cause it’s going down in price. Why would I buy it now? So, can you imagine that kind of behavior on a macro scale? Yeah. And then what’s that you’re not

[00:22:32] Rob: going to buy it. What’s that what’s that truck a company going to do to stimulate they lower the price even more. Yeah. It’s a

[00:22:41] Charlie: downward

[00:22:41] Rob: spiral downward spiral.

[00:22:43] Anyway. My whole point with that is a little bit inflation’s good because it gives you. Um, you know, the central banks and the FOMC, the levers to help adjust so that we don’t get deflation.

[00:22:55] Ben: Absolutely. Yep. And also, when people are buying products at a lower price, then they’re receiving less income because the prices are now lower.

[00:23:04] So it’s a continual spiral. Then you have less purchasing. Purchasing power. You continue to spiral down. So

[00:23:11]Charlie:  So that’s this number one Government Debt and inflation myth, the fed and we, we covered a couple more government debt and inflation myths, I think, in, in, uh, in that discussion, which is hard not to do, but government debt and Inflation myth number one, the fed, the fed does not physically  print money.


Myth # 2: The Dollar Will Crash


[00:23:23] That department of treasury does, uh, government debt and inflation myth number two, the dollar will crash. What the heck? That sounds scary. Has the dollar ever crashed before? Um, anybody know anywhere now has the dollar crashed. Yeah, I think it depends on what you define as a crash of the dollar. If you go Google it. Yeah. The dollar crashed in the eighties when interest rates went sky high, but you know, what is the, what is the, the strict definition it’s going to be hard to find, but basically, we’re not going to spend a ton of time here because  This is a confusing and tough one.

[00:23:56] Basically there’s two conditions required. You need underlying weakness and that in the dollar we’re telling us dollar here. You need an underlying weakness in our government. You need an underlying weakness and the economy, and you need a viable alternative people probably thought we had the first two boxes checked there when I was talking, but a viable alternative.

[00:24:16] So people think, um, our economy is in bad shape. People think our political system is crazy. Probably those are both true. But in our world, it is whose political system is the least crazy. And whose economy at this moment is the least. Bad.

[00:24:37] Rob: That’s a technical term. Those are terms. Yeah. Yeah.

[00:24:41] Charlie: Um,

[00:24:42] you know, people say, does China own us?

[00:24:45] China owns us. They own so much, so much of our treasuries. And, uh, they want our dollar to crash, I guess, maybe as an argument, uh, that’s not true. Uh, China owns right now about $1 trillion in us treasuries, which is a lot, but Japan owns 1.2 trillion in us. Treasuries. Should, you know, if anybody owns us as Japan now, The, the truth of the matter is that both of those countries want a strong dollar.

[00:25:11] And   China really wants a strong dollar because they get to sell their goods, they get to export their goods. So, their biggest market in the world, which is the U S. So as long as they have a strong dollar, they’re happy now, if they dumped all those treasures, it would, it would cause the U S to go into a recession.

[00:25:28] It would cause a dollar to decline significantly. It would cause problems, but it would cause justice just as many problems for China as it would for the U S so they don’t want that. So that’s, uh, you know, again, uh, the extent of my knowledge there, but it’s, it is dispelling a myth where, Hey, China owns us.

[00:25:45] They control us, et cetera, et cetera, this kind of not true.

[00:25:50] Ben: And in general, I mean, if you’re trying to crash the currency of a country whose treasuries you own, I mean, that’s just bad business right there as far as I’m concerned.

[00:26:00] Charlie: Absolutely.

[00:26:01] Rob: That’s a good point. Yeah.


Myth #3: The Fed Determines Interest Rates


[00:26:03] Charlie: Excellent, Government Debt and Inflation Myth Number three, the government.

[00:26:06] Oh, and over the fed had been, this is what you were saying, you know, fiscal or monetary policy, the fed determines interest rates. The government or the fed determines interest rates, myth number three. So, this is kind of true and kind of false, whereas yeah, the fed can set short-term interest rates called the fed funds rate.

[00:26:23] And so they tell the other federal banks what interest to loan money at  and that happens in the short term. However, uh, there are other types of interest rates out there. That the fed does not have control over, and they certainly do not have control over the long-term interest rates that is much more of a supply and demand situation.

[00:26:43]Rob:  ,

[00:26:43] that’s just one of those levers that we were talking about earlier. It’s exactly those levers that they control  , but they have more ways to affect the. Uh, economy and inflation than they used to, you know, in decades past.

[00:26:59] Is that a true statement? Ben

[00:27:01] Ben: certainly, seem to act quicker. Um, and they. Maybe use the precedent set in 2008, but I don’t know about

[00:27:09] Charlie: new

[00:27:09] Rob: tools, this one in particular, but I think they have more ways to, I think they’re more willing. Yeah. Or maybe more willing. Yeah, that

[00:27:17] Charlie: might be, yeah. Uh, the great depression was an example of where the government did not step in, didn’t do anything.

[00:27:23] And some people would argue. In fact, Ben Bernanke was his, uh, his thesis. His specialty was the great depression, just so happens that he was the. , the  fed chair in, the great recession 2008. So, if there was anybody in the world, that was a perfect person for that job, it was probably him. So, but that was, you know, since then that was an experiment.

[00:27:44] We didn’t know what was going to happen. So maybe Rob, the answer is they’re more willing to pull these lovers than they used to be. Yeah,

[00:27:52] Ben: I would agree with definitely willing, but also, I would argue, expecting, did, uh, to step in and pull those levers. , like you said, in 2008, they came in and helped to minimize that recession.

[00:28:04], and now you’re expected as a politician, especially, you’ve got a lot of pressure you want. Yeah. The economy to be as strong as possible. So, you’re going to want to go in and act. , we obviously saw that a lot this year. , and then also I think you’ve got expectations from the people from, from our citizens, , that, Hey, last time they came in and helped out, they helped save my job.

[00:28:24] So this time you better do that exact same thing. , we’re in the past, they may have been a little bit more hands-off and let the recession

[00:28:31] Charlie: do its course. So, we’ve got three myths out of the way. Myth number one fed actually prints money. False dollar will crash. Well, what does a crash mean as it happened before?


Myth #4: Inflation is Inevitable


[00:28:40] Yeah, it could happen again. Maybe China does not want it though. Uh, Government Debt and Inflation myth number three, the government fed determined interest rates kind of. Yes. And the short-term kind of knowing the long term back to supply and demand there. Government Debt and Inflation Myth number floor, four ,not floor before inflation is inevitable. You know, where you’ve injected all this money into the economy.

[00:29:01] We just had. Was that our second stimulus or third, I can’t even keep track anymore. These one you’re talking about. Yeah. These numbers are insane. So we just dumped another 2 trillion, uh, handed out checks and, and whatnot. So clearly inflation is inevitable. Is that  true or false.

[00:29:22] Ben: Well, we’ll see.

[00:29:27] Charlie: inevitable. It is absolutely not inevitable.

[00:29:29] Ben: Yeah. And,  Charlie,   we’re looking right now at a lot of, uh, supply chain issues. These supply chains have been crushed during. Yeah. COVID uh, for instance, lumber prices, VC, how expensive lumber is, will. A lot of that has to do with the fact that there’s not much lumber out there.

[00:29:45] Um, those lumberyards in Canada for instance, have been shut down. So, so we’re not seeing a lot of that, but that is not necessarily the backout of inflation. That’s more on the supply side, which does seem to be temporary. Yeah. Uh, and yeah,

[00:29:58] Charlie: and again, we go back to the definition of inflation. You’ve got to have.

[00:30:01] You’ve got to have a supply and demand subsequent demand with that supply. So, they’re just trying to prime the pump, so to speak, of demand. When the demand picks up, you’ll see prices rise. We’ve seen prices of fuel come up. We’ve seen prices of food come up and we could certainly have a short-term S uh, I don’t even want to use the word spike.

[00:30:21] We could have a short-term increase. We probably will have a short-term increase in inflation, but the

[00:30:25] Rob: longer the Suez Canal getting did you block that big shortage? Ben supply chain shortages. That disruption be

[00:30:35] Charlie: helpful. That’s right. So, you know, the lows are, but those are short term short term.

[00:30:41] And in most people would say, uh, experts, expert economists will say that the long-term outlook for inflation has not changed. And the outlook for inflation long-term is more dictated by believe it or not demographics, the aging population. You know, each country has different demographics. Japan is a great example.

[00:31:01] They have an aging population, they have a very little, or a lot fewer natural resources and economic capability than the us has. So, they have less demand for money. So, they have no inflation. In fact, they’ve had deflation. So those things determine long-term, uh, Inflation and technology is a great example.

[00:31:25] Look at what technology does to prices. You know, can you go buy something on Facebook marketplace, pretty cheap. I mean, do that, that holds prices down, you know, Craig’s list and all these online dealers. I mean, my, uh, my teenage daughter is selling clothes out of her closet on these online dealers. I mean that, those little things and that behavior on a macro level holds prices down, which is  anti-inflammatory

[00:31:51] Rob: just the thought here, or I’m going to inject my own thought on this. Charlie too, is we’re talking about it. Yeah.  and it’s not necessarily a little bit of inflation is what we want, or at least the fed wants too much inflation. You don’t want hyperinflation. That’s the scary part.

[00:32:07] That’s when it’s bad, it gets to the seventies and eighties. Talking to my dad. And he was telling me how you know that the gas shortage, um, Charlie, you probably remember those actually. Uh, but uh, you, you know, you had to wait in line for gas and they would fill their car up and get the, get a, get a gas can, which apparently was pretty hard to get in those times, but they got one, they put it in their trunk and then later on, they found out, well, the fumes could kill you.

[00:32:32] Or if somebody hits you in the back, that could explode. So that’s probably not the best answer, but he still did it just so he could get, you know, get home to, uh, to me, I guess there you go. Pretty, pretty scary stuff, but a little bit of inflation and you know, isn’t terrible when you think about some things, right?

[00:32:52] If you’re a worker and inflation is happening, you’re going to get a pay raise. And if you bought a house in locked in a locked in a rate 30-year fixed rate loan, say you got it in 2020 for 2.7, 5% or something like that. Inflation occurs over the next few years. You’re still paying that same rate, but you, your wages have increased.

[00:33:10] So not everything’s terrible with inflation.

[00:33:15] Charlie: Yeah, you’re right. Yeah, you’re right. I mean, it’s hard to have inflation if you don’t have wage increases. You know, we, we, uh, from 2008, till 2019 people said, well, where’s the inflation then? Well, we didn’t have a whole lot of wage increases until. Way down, you know, after the great recession 2008.

[00:33:36] So that was one in vocational that nobody can afford to raise prices because nobody can, nobody’s getting a raise, you know, it took a long time for that to happen.

[00:33:47] Rob: Yeah. The last few decades we’ve had very little inflation. Uh, so yeah. Interesting. Yeah. Yeah.

[00:33:55] Ben: And I think every year people have predicted that we would see.

[00:34:01] Potential hyperinflation over the last 10 years. I, I definitely have seen that on a lot of different articles and videos. And

[00:34:09] Rob: I believe in terms of inflation are not as smart as they think. Yes. And inflation monitoring

[00:34:16] Charlie: the inflation monitor. Yeah. There are studies done that show that if you are overly pessimistic on any topic, you appear to be smarter.

[00:34:23] Just want to throw that out there. Optimist to not appear to be very smart at all. So

[00:34:29] Ben: next podcast, hyperinflation coming. Now

[00:34:36] Rob: that’s a fact. A half empty. Sorry.


Myth #5: The Biggest Risk to Investors is Government Debt


[00:34:40] Charlie: So, Government Debt and Inflation myth number five, we are number five already. So, this will be our last one. I know I’ve got six Government Debt and Inflation here. I think I’m missing numbered or something. I got confused, but I guess risk place, you will do

[00:34:49] Rob: that to you right there.

[00:34:51] Charlie: The biggest risk investors is the government debt. The biggest risk to investors is government debt. What do y’all think about that one?

[00:34:59] Rob: Oh that

[00:35:00] Ben: one’s yeah, we increased it a little bit this year. Yeah. It just depends on which economist you ask as we’ve learned at the beginning. Not always do they agree.

[00:35:10] Charlie: That’s so, no, no, it’s not the biggest risk to investors.

[00:35:14] Uh, it is a risk and it’s not good. In fact,   current debt to GDP is a hundred percent. Uh, that’s the highest since world war II, 108% in 1946. But we’re continuing to rise. I mean, we’re not showing signs of slowing down on that one, so that’s going to go up.  And the most important thing about the government debt level is the cost of servicing that debt.

[00:35:36] , , let’s say you’re an individual and you’re paying interest on your credit card. Well, that takes the place of buying a new car. You know, if I got to a huge interest payment that I’m paying on my house or my credit card, Well, that just means I can’t do other things.

[00:35:50] And that applies to the U S government too. If the, if the interest payment on the government debt becomes so large, that it squeezes out other projects that they want to do, then that’s when it becomes a problem. So, at some point interest rates will rise and government debt and inflation will have to be tackled through spending cuts and or tax increases.

[00:36:12] Right? Yeah.

[00:36:14] Rob: And I think a lot of the countries. In the world are in the same boat. They don’t want it. They don’t want, they’ve got government debt as well. And they don’t want to see their interest rates go up right now either. Yeah.

[00:36:24] Charlie: Yeah. That’s right. Okay. So, you know, that’s the, that’s the risk, the risk is that it damages long-term growth,  , and it hurts the economy of your country.

[00:36:34] So that’s the risk now to us, what’s the risk.   we just said it to us as the damages, our economy, that’s not good for us either. However, . We as investors, I think this becomes a distraction. I’ll be honest with you. I think it’s a big deal. We need to, you know, the thing we can do about it as a vote,  , vote with your values and go out there and do what you think you need to do.

[00:36:58] But as, as an individual investor, you know, we cannot be afraid of the next big recession, the next big,  , government debt crisis. We have to do. What we would do for our own business, and that is spend less than we make, save our money, invest wisely. Um, and there are certain investments we can utilize to help us with inflation, which is the result of some of this stuff.

[00:37:21] What, what do you all think about that types of investments? Yeah,


How Can we Prepare for Inflation as Investors?


[00:37:25] Rob: I was thinking, you know, as we go through this and whether inflation happens, or it doesn’t. You know, that’s up for debate, big brains, big, big economic brains, economists disagree about this. So, we don’t know, here are some of the facts that we talked about, and then this is maybe the, well, not, maybe this is the most important part of this podcast is what is you as an investor going to do about it.

[00:37:52] And so we start thinking about what you’re going to invest in. Some things that people talk about right off the bat are gold. It is actually not the best protection against inflation at this point. Um, one thing that a lot of people are, are looking to is real estate and real material goods. So, uh, the real estate investment trusts you can get in on those and get on real, real, uh, real estate, if you will.

[00:38:21] Uh, equities,  , as well as you know, those companies we were talking about when they write raise prices on those goods, uh, they inflate, well, that means they’re getting more money. So, their stock price also increases. So, it’s a pretty good, uh, holder of money when inflation happens as well.

[00:38:39] And then the last one that I would throw out there. Is, uh, tips. Yeah.

[00:38:44] Charlie: Which tips is given treasury inflation protected securities. So those are good if you’re nearer to retirement and   tips are a good, they’re a good diversifier for the bond portion of your portfolio.

[00:38:56] , and all of us, regardless of what stage of our lives, we’re in retirement, pre-retirement, we’re going to have equities. We need to have equities. That is the number one way to outpace inflation. You know, that’s why, that’s the only reason why a retiree would have equities, why would you even bother with them at all? .

[00:39:13] So again, even somebody that’s in retirement is going to have some equity so that they can continue to outpace inflation. And of course, like you said, Rob tips are REITs real estate investment trusts are great ways to do that. Um, you’ll see, uh, if you Google it, you’ll see gold. You’ll see commodities.

[00:39:29] However. You’re going to have some of those holdings within your regular equity. You know, if you’re properly diversified, you’re going to own some of those materials. You’re going to own some of those things. And, and again, like you said, all, all of the equities normally are great, uh, protectors of inflation.

[00:39:44] So that’s why you have to have a diversified portfolio globally. You know what if our dollar crashes, while you own global, you know, companies all over the world. So, uh, that is another protector for some of these things we’re talking about. And

[00:39:56] Rob: that’s a, that’s a great point. Cause we were talking about this a little bit for, we can’t have a podcast without talking about Bitcoin, right?

[00:40:03] Similar to those REITs and commodities and, and those kinds of things where you, if you own an S and P or an index fund, those companies are going to have those types of holdings within their company. Th some of the companies now are also, they have, they own Bitcoin or at least they’re accepting Bitcoin like Tesla.

[00:40:19] So you do have some exposure. I’ll just throw it out there. Yeah. You’re right.

[00:40:24] Charlie: Obligatory a Bitcoin, a

[00:40:25] Rob: plug. Yup. Uh, mandated to do that. That’s right. That’s right.

[00:40:29] Charlie: Uh, so anyway, uh, that’s, that’s the last of the myths. So hopefully we did some myth busting today, financial myth busting, or at least a different perspective.


[00:40:40] All right. Anything you want to add, Ben? No, I think we covered it all. I think we did. What else do you want to know about Government Debt and Inflation? What else you want to know about the Boeing 737 MAX?

[00:40:49] . All

[00:40:49] Charlie: right.

[00:40:50]Rob:  . I’m going to leave you with the top gun quote, as opposed to a financial coach, although it could be used as a financial quote as well. And that comes from Viper. A good pilot is compelled to evaluate what’s happened so he can apply what he’s learned.

[00:41:07] That’s all I got. Thanks for joining us for a discussion on government debt and inflation on THE PILOT MONEY GUYS PODCAST, if you have any questions, shoot me an email. Robert leading edge If you liked what you heard hit that subscribe button. Remember, as Emerson said, the world makes way for those who know where they’re going. So, plan accordingly routing here.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this Podcast will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 05/06/2021 and are subject to change at any time due to the changes in market or economic conditions.

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