Watch and Listen to U.S. Money Reserve's Coy Wells and Patrick Brunson talk about tariffs, the effect on the American dollar, the stock market, and how to be proactive about the upcoming recession.
Could Tariffs be the Cause of the Next Recession?- Video Transcription
Coy Wells: 00:00
Good morning and thank you for watching Daily Market Insights. Today we've got, Patrick Brunson with us and we're going to be talking today a little bit about tariffs. As you know, uh, the trade wars have already begun. This is something that's being talked about and has been talked about for several months now, especially since January. Since the trade wars have gone into effect, we're now placing tariffs on goods going into the United States. If you are a consumer that was watching the information that is on national television, it is already affecting the value of the u s dollar and is already starting to pull- have pullbacks by foreign countries such as Russia, China, South Africa. These countries are starting to pull back, do more business with China and reduce their dependency on the United States. Trump announced this morning that he's wanting to place an additional ten, a hundred million billion dollars, in tariffs to China.
Coy Wells: 00:45
China has already stated that they are going to do everything possible to retaliate the tariffs being placed by Donald Trump. This is huge folks. And if you study this and if you're watching CNBC news, there's several economic forecasters, big ones, that are talking about now a recession or a depression. Some of them are even talking about going back to the last time we placed tariffs on the foreign countries. That was around 1913 that United States did that. It also was commented by several forecasters that the great depression was led by the misappropriation of interest rates and tariffs being placed on foreign countries is what caused the great depression. We're not saying that a massive depression is going to happen, but what it does mean is that we need to be ultra cautious with what's going on in the markets.
Coy Wells: 01:30
Uh, Mr Brunson is also going to talk to us this morning a little bit on why this is important to understand in regards to the dollar and what kind of effect is going to have on the US stock market over the course of time. So they've been talking a lot about this on the business news, Fox business news, CNBC about what this is going to lead to and they've been interviewing a lot of financial experts and CEOs from major hedge funds and financial institutions and they're all saying the same thing. They're all saying that this is going to lead to a recession and that this is going to lead to a major, major downturn in the stock market. So you know, the question is when. we don't know, nobody has a crystal ball obviously, but the key thing is to make sure that you're proactive this next go round, not reactive.
Coy Wells: 02:13
It seems as if you look at history, every single market crash or a correction that we've had that was followed by a recession has been two to three times worse than the last one. Well, if that's the case, we have a pretty nasty recession coming and it's, it's going to be real bad for the value of the dollar itself. If you look at the point scale- and me and Mr. Brunson have been looking at this, you can look at the point scale and the amount of loss in the stock market since January of this year and you compare it to all the drops in the stock market over the course of time. There's only really been one time in history that the stock market has lost this rapidly in the shortest amount of time and that compares to 1929 . Sure we saw a massive drops that took place from October of 2007 through about March of 2008 but that point drop was really about 23, 2400 points over about a six to seven maybe eight month time frame.
Coy Wells: 03:03
We've seen the same point drop equivalent to that from January to March and if you've studied the long term effects of the stock market, the only other time that we've been able to identify that we've seen that sharp of correction is going back to the year of 1929. So these are some key factors that we need to look at. The Shiller index is one that me and Mr. Brunson look at on a regular basis. And I think today we looked at it, it said 32.31 which puts it at the second highest level against 1921 or 1929 in history. That means that right now the overvaluation in the stock market is severely high. So I think that what we're seeing here is that we're seeing some measures made by the current administration to drum up additional revenue in the country, which we've talked about in our past interviews. Well, here's what's scary about the whole thing is that if we're projected to be in a recession in the next 12 to 18 months, it's, it may be a little bit worse this next go round.
Coy Wells: 03:54
And the reason being is because over the last year, Donald Trump has been implementing tools that we would usually use to get ourselves out of a recession. Unless we're already in one. He's doing tax cuts, infrastructure spending, new trade deals. If we go into recession before the next election and like most economists are talking about, what tools are we going to have left in our bag to get ourselves out of it? And I think that's why they're saying that this next recession may last for longer than a generation according to the Treasury Department. That's 25 years. And as we've talked, we're talking about our session that could last 25 years. This was in a report that was put out by the Treasury Department several years ago, but even if the government's wrong and has missed that projection by 50%, we're still talking about a recession lasting 12 and a half years and a loss and a dollar that's a twice as bad as anything that we've experienced in our lifetime.
Coy Wells: 04:41
And it would be twice as bad as anything that most retirees here in the United States have experienced in their lifetime. Uh, and Patrick is exactly right. What we're seeing today is post recessionary measures, things that we would normally do in the midst of a recession. The one thing that we really haven't heard a lot about, is quantitative easing or the additional printing of money. And we're probably not going to hear that or see that and the reason for that is is that these countries that are holding US treasury bonds that have been dumping US treasury bonds- they're not going to deal with the United States printing any additional money. If they print more money you and I both know this is going to treat the value of the dollar down a little bit further and if those are countries that are holding US treasury bonds, it will reduce the value of those as well.
Coy Wells: 05:18
From a purchasing power standpoint, that means more will be coming back at a faster rate. So we've really as a country kind of painted ourselves in a corner here. And the question now becomes is if we go into a full blown recession, what tools does the current administration have currently to be able to get us out of that recession if they're using tools today, that would normally be the case. If you think about it, Donald Trump took office, the US dollar took a parabolic rise and it rose about a dollar and 13 cents. Got him to about a dollar 13. And that's normal When a new president as he comes in, a new president comes in, means there's new instilled confidence in the president. Uh, there's new changes that will be coming and there's a new influx of new money and a strength in the US economy and dollar temporarily. Since then, as about two days ago, the US dollar sat in at about 89.69 cents on the dollar.
Coy Wells: 06:03
That means we've lost 24 cents on the dollar in about nine months. I mean, that's what about three quarters of what we saw in 2008. And we're not in a recession. Uh, there was a total loss in six or five years of 33 cents on the dollar. And then, what was it in 2000? Oh, it was close to 20% right after the .com bubble. So if we've lost 24 cents and lost 20 during the.com bubble, which lasted six years, we should be classified in a recession here folks. So hopefully the information is helpful today. Uh, we're in a very crucial and critical point for the u s economy. As always thank you for watching daily market insights. Uh, this report here is something we put out and again, we're now seeing more states talk about the pension plans being borrowed against, uh, here in the United States. Chicago last week,
Coy Wells: 06:47
again another judicial windfall for the state, allowing uh, the state to go in and take those pension plans to help pay down the debt of the country. Uh, Rhode Island just did the same thing to help pay down the deficit of the state. This year we'll tell you where your state sits and if you're a government employee or state employee, this will help you understand how much at risk your pension plan is. As always, thank you for watching. Click on the link or call the phone number below and uh, make sure you put a comment in there. We're starting to have some customers put some comments in there and give us a little bit and we'll get right back to you to help you out or give us a phone call. As always, thank you for watching daily market insights.