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