The us economy and this is a big change. i don t think it is easily fixed. we are going back to normal and it is likely we are going to stay normal for a long period of time. paul: what about the impact of the federal reserve, chairman jay powell saying they are dedicated to that 2% inflation target they are going to get back to and if they raise rates and they will. to do so. you think they will raise rates higher? they may. i find that encouraging. another one might agree with me on this but jay powell has been consistent in saying the thing they want to avoid most are the stop and go monetary policies in which the fed bod inflation but had to fight inflation three times at successively higher levels. first time they beat inflation it was six, then they needed it
Paul: mortgage rates jump to the highest level in 20 years helping dr. mortgage applications to 3 decade low as borrowing costs surge and existing home sales tumbled, one of the many worries on wall street and main street as long-term interest rates rise. fed chairman jerome powell signaling interest rate increases could be coming. jason triggered is chairman and ceo of investment strategy firm. good to see you. why are long rates popping now? is it that investors here there is going to be more spending in government and more inflation or is it because they look at economic growth and it is higher than people estimate?
With that comes concern about inflation. is that playing a role? absolutely. we have a deficit 5% gdp with full employment. one should be worried about what that might look like if the unemployment rate were to rise or we had a recession. the interesting thing now follows the debt interest expense is skyrocketing because many administrations but this administration has focused on funding itself short. 50% of debt matures in the next three years. net interest expense is going to exceed that of the defense budget next year. once you get into a situation like this. it s very difficult to get out of it without pain. we are the early stages of some of the pain we may see over the
Blame when the cars are too expense of, there aren t enough chargers, supply chains to the metals the going to these batteries aren t available and it is just a going to be a crunch of consumer dissatisfaction ten years from now. paul: i will tell you what happens if that happens, politicians will increase subsidies and force you to purchase evs but they will pay you to purchase of them. that s my prediction. also the automakers will jack up prices of gas powered cars to couple those losses from ev. overall if you are the consumer it will be more costly with a lot fewer choices. maybe the government will try to help but that money will run out. paul: economic alarms going on across wall street as long-term interest rates rise. do investors see faster growth ahead or more spending and inflation? we will ask jason to render
i think largely of the fact that rates are normalizing. we had 12 years of quantitative easing, a fancy way, not quite the same as money printing. the fed is no buying treasuries, the balance sheets declining, means rates are normalizing. typically the 10 year treasury yield trades at 200 basis points below the rate of inflation. and it is not surprising rates go back to what s normal. and the global financial crisis the fed manipulates that and the most important price in the world. paul: all the deficits, growing economy, deficits 5% gdp which is extraordinary under historical circumstances.