♪ ♪ >> THE 2020 PANDEMIC LINGERS WHEN LIMB MILT THING SPREAD OF CORONAVIRUS.

BUSINESSES SHUT DOWN.

THE UNEMPLOYMENT RATE REACHED 14.7% IN APRIL.

DID IT BREAK THE ECONOMY?

OR ARE THE FUNDAMENTALS IN PLACE FAR SPEEDY RECOVERY?

WE WILL DISCUSS FEDERAL ECONOMIC STIMULUS PAST AND PRESENT WITH THE AMERICAN RELIEF ACT AND THE ROLLOUT VACCINES ON WEST MICHIGAN WEEK.

THANK YOU FOR JOINING US ON WEST MICHIGAN WEEK.

THE PANDEMIC CONTINUES IMPACTING THE U.S. AND WORLD ECONOMIES.

THE MARKETS ARE RING A POSITIVELY TO THE ROLLOUTS OF VACCINES AND THE PROSPECT OF A $1.00 -9D TRILLION STIMULUS PACKAGE.

HOW HAS THE WEST AND SOUTHWEST MICHIGAN ECONOMIES WEATHERED THE RECESSION AND WHAT CAN WE EXPECT IN THE COMING MONTHS.

DR. PAUL ICINGLY IS ASSOCIATE DEAN AND THE COLLEGE OF BUSINESS AT GRAND VALLEY STATE UNIVERSITY.

THE ANNUAL ARE FORECASTS ARE SPOT ON FOR THE MOST PART.

WHAT ARE THE BIG TAKEWAYS FROM YOUR MOST CENT FORECAST?

>> YEAH.

WE ARE REALLY LOOKING A THE YEAR GOING FORWARD AND UNDERSTANDING THAT IT IS UNPRECEDENTED WHAT HAPPENED LAST YEAR.

BECAUSE IT WAS UNPRECEDENTED IT IS READY TO SEE AS WELL GOING FORWARD AND ARE BUT, WHAT WE ARE SEEING RIGHT NOW IN OUR SURVEYS WITH CEO'S ARE TELLINGS THAT YOU THE SECOND HALF OF THIS YEAR ISING ABOUT E GOING TO GROW REALLY FAST.

WE ARE EXPECTING EMPLOYMENT GROWTH ABOVE 3%.

WE ARE EXPECTING ECONOMIC GROWTH IN THE SECOND HALF OF THIS YEAR TO BE RUNNING ON THE ORDER OF 5%.

THIS IS, THIS IS SPEED, THAT WE HAVEN'T SEEN IN THE LAST FEW DECADES.

>> YOUR FORECAST, AS I MENTIONED, SPOT ON FOR THE MOST PART.

NOT ALWAYS 100%.

BUT YOU ARE VERY CLOSE EVERY YEAR.

HOW DOES THIS PREPRESENTATION STAKE UP TO YEAR'S PAST.

BECAUSE YOU SAID, THIS IS SO UNPRECEDENTED, WHAT IS IT LIKE IN A TYPICAL YEAR COMPARED TO THIS YEAR?

WELL, NORMALLY.

IN A TYPICAL YEAR.

I AM LOOK IN NOVEMBER, AND DECEMBER TO LOOK AT THE NEXT YEAR.

I CANNING IF YOU GURE WHERE WE'RE HEADING AND THAT CONCEPT DOESN'T CHANGE MUCH FOR THE FIRST QUARTER OF THE YEAR.

ROOM WE ARE RIGHT NOW IS EVERY PRESENTATION THAT I DO, EVERY WEEK THAT I TALK TO A NEW GROUP OF PEOPLE, I ALMOST HAVE TO REWRITE MY PRESENTATION.

WHAT HAPPENED LAST YEAR STAYS THE SAME?

WHAT IS LOOKING FORWARD IS CHANGING CONSTANTLY, THE ECONOMY MOVES VERY, VERY SLOWLY BY LOOK THE TITANIC.

RIGHT NOW, IT IS ZIPPING AROUND.

A LOT OF HAS TO DO WITH TRYING TO UNDERSTAND, WEEK TO WEEK, WHAT IS CHANGING WITH THE VIRUS.

TWEAK WEEK, WHAT IS CHANGING WITH STIMULUS PACKAGES.

WEEK TO WEEK.

HOW DOES THE CONSUMER FEEL?

ALL OF THESE MOVING PARTS ARE MUCH, MUCH HARDER TO DETERMINE RIGHT NOW.

WE DON'T HAVE HISTORICAL PATTERN TO LOOK AT.

>> YOUR 2021 FORECAST.

INTERESTING TITLE.

A VIRUS AND PUBLIC HEALTH RESPONSE NOT A BROKEN ECONOMY.

>> RIGHT.

>> SO, YOU KNOW, LET'S DIG INTO THIS A LITTLE BIT MORE BECAUSE, I THINK, A LOT OF PEOPLE FEEL THE ECONOMY IS BROKEN, BROKEN AND YOU ARE SAYING, HEY, IT WAIT A MINUTE.

LET'S TAKE A STEP BACK, LOOK AT EVERYTHING.

>> YEAH.

AS WE LOOK AT THE ECONOMY RIGHT NOW.

WE HAD A REALLY ROUGH APRIL.

ALL RIGHT.

WE SAW THAT UNEMPLOYMENT RATE JUMPED TO OVER 14% AS YOU SAID IN THE OPENING.

WELL ABOVE THAT HERE IN MICHIGAN.

BECAUSE MICHIGAN'S SHUTDOWN WAS WON A OF THE HARSHEST SHUTDOWNS THEN UNITED STATES.

AT LEAST BY SOME MEASURES.

THE HARSHEST SHUTEDDOWN IN THE UNITED STATES.

AND WE CAME BACK VERY, VERY QUICKLY, AND WE SPENT ALMOST ALL SUM NERN UNITED STATES, ALMOST ALL SUMMER IN MICHIGAN POWERING ALONG AT A GAP, ABOUT A 10% GAP, A 5% GAP DOWN YEAR OVER YEAR.

IF YOU ADD UP THE PARTS OF THE ECONOMY THAT ARE REQUIRED TO BE SHUTDOWN BECAUSE OF TRYING TO BE SAFE FROM THE VIRUS, IT ADDS UP TO ALMOST EXACTLY THE AMOUNT THAT WE ARE DOWN.

THE THINGS THAT CAN OPERATE SAFELY IN A SOCIALLY DISTANCED MANNER ARE BACK AND THEY ARE BACK RELATIVELY STRONGLY.

HERE IN WEST MICHIGAN.

WE ARE BASICALLY AROUND 4% UNEMPLOYMENT LESS THAN THAT IN OILLET WEAKON.

EVEN IN DECEMBER WHEN THINGS CAME BACK UP.

ALL RIGHT.

4%.

WE HAD EMPLOYERS TELLING US THEY CANNOT FIND WORKERS BECAUSE THE WORKERS THEY NEED IN THE INDUSTRIES THEY ARE IN DON'T EXIST OR WON'T COME TO WORK.

>> ALL RIGHT.

SO WE REALLY, RIGHT NOW, IN A WORLD WHERE, ABOUT 80% OF THE ECONOMY IS TOOLING ALONG LIKE VERY LITTLE HAPPENING.

ABOUT 10% OF THE ECONOMY CAN'T RESTART IT ALL BECAUSE YOU CAN'T DO VENUES.

YOU CAN'T HAVE LARGE GROUPS OF PEOPLE.

YOU CAN'T HAVE THOSE TYPES OF ACTIVITIES AND TRAVEL IS DISRESULTED AND ABOUT 10% IS RUNNING ON LIFE SUPPORT.

SO YOU KNOW, WHAT PEOPLE ARE FEELING IS THEY ARE LOOKING, THEY KNOW PEOPLE IN THIS 20%, BECAUSE THEY KNOW PEOPLE IN THAT 20%, THEY ARE LIKE, OH, THAT IS REALLY BAD.

BUT THAT 80%.

WE ACTUALLY HAVE ALMOST 50% OF FIRMS IN WEST MICHIGAN SAYING THEY WILL BE BACK TO PRECOVID LEVELS BEFORE THE MIDDLE OF THIS YEAR.

ALL RIGHT.

AND ALMOST 75% SAY THEY WILL BE BACK TO PRECOVID LEVELS BY THE END OF THE YEAR.

SOME THAT IS A BIG JUMP HERE IN WEST MICHIGAN.

IT IS ONLY THAT LAST 20 TO 25% OF FIRMS THAT IS REALLY LOOKING LIKE THEY ARE GOING TO BE ROUGH OUT THERE FOR THE NEXT COUPLE OF YEARS HERE IN WEST MICHIGAN.

>> IL WILL JUMP AHEAD HERE.

I KNOW YOU GET TO VACCINES, BUT WE ARE SEEING A ROLLOUT, DISTRIBUTION OF VACCINES.

IT HAS BEEN A LITTLE SLOW.

WE ARE STILL WAITING, YOU KNOW, FOR THE EMERGENCY APPROVAL FOR THE JOHNSON AND JOHNSON VACCINE, BUT WE DO KNOW THAT VACCINES ARE ROLLING OUT, THAT THEY ARE RAMMING UP MORE PRODUCTION.

HOW DOES ALL OF THAT PLAY INTO WHERE YOU THINK WE WILL BE AS WE MOVE THROUGH THE SUMMER MONTHS?

>> YEAH.

I MEAN.

LOOKING THAT CAREFULLY.

BECAUSE WE KNOW THAT LIKELY IT MAY NOT HAPPEN THIS YEAR THAT WE REACHED HERD IMMUNITY PARTICULARLY WITH NOT BEING ABLE TO INOCULATE CHILDREN AND PARTICULARLY WITH CHILDREN NOT CHOOSING TO BECOME INOCULATED.

LARGER AND LARGER CHUNKS ARE GETTING INOCULATE AND ONLY A SMIDGE BEHIND DECEMBER, SO YOU KNOW, PEOPLE ARE LIKE, THIS IS PAINFULLY SLOW, IT IS PRETTY CLOSE TO WHAT WE WERE PROJECTING IN THE BEGINNING OF THE YEAR, SOB WHAT WE DO KNOW IS THAT NEXT MONTH, THERE IS A BIG SURGE PROVIDED THAT JOHNSON AND JOHNSON GETS APPROVED AND THE MONTH AFTER THAT, WE EXPECTED ALMOST A DOUBLING AND SO BY THE TIME WE REACHED JUNE, VIRTUALLY, EVERYBODY WHO REALLY, REALLY WANTS TO HAVE A VACCINE IS GOING TO PROBABLY HAVE AN OPPORTUNITY TO GET ONE.

SO UNDER THAT CONDITION, AS WE REACH JULY, THERE IS GOING TO BE A TON OF PENT UP DEMAND.

ALL RIGHT.

HE IS THERE PEOPLE WHO SAY, I HAVE BEEN COOPED UP FOR A YEAR AND A HALF.

I WANT TO GO AND DO SOMETHING.

AND SO FOR THE SEOND HALF OF THIS YEAR, SO AS WE GET TO THE THIRD QUARTER OF THIS YEAR, THERE IS GOING TO BE PENT UP ACTIVITY THAT STARTS TO HAPPEN.

AND IT IS FACILITATED BY THE FACT, THAT PEOPLE ACTUALLY HAVE MORE SAVINGS TODAY, THAN THEY DID LAST YEAR AT THIS TIME.

IN FACT, MORE THAN DOUBLE THE SAVING THEY HAD LAST YEAR AT TIME.

SON THE FINALLY ABLE TO FEEL SAFE AND SPEND MONEY.

THEY ARE GOING TO SPEND MONEY.

THAT IS WHY WE'RE GOING TO SEE THAT BIG POP IN THE SECOND HALF OF THIS YEAR.

TALK TOED ABOUT THE SAVINGS.

DOES THAT HAVE TO DO WITH A LITTLE BIT OF STIMULUS.

WE WILL TALK ABOUT THAT IN THE COMING MIN MACHINES HERE.

BUT IS IT ABOUT NOT BEING ABLE TO GET OUT TO ENJOY THE SERVICE SECTOR AS WE NORMALLY WOULD?

>> YEAH.

>> AND SO ARE YOU KIND OF TELEGRAPHING WHAT ITS COMING WHEN IT COMES TO THE SERVICE SECTOR BECAUSE MANUFACTURING HAS BEEN DOING GREAT AND SOON WILL REPOUND.

YEAH.

YEAH.

WELL, I THINK, I THINK IF WE, IF YOU BELIEVE THAT PEOPLE WILL NOT FEEL SCARED OR THAT A LARGE CHUNK OF PEOPLE WILL NOT FEEL SCARED AS WE REACHED THINK SECOND HALF OF SUMMER, THAT IS GOING TO REALLY FACILITATE A STRONG SUMMER.

WORE ALREADY SEEING.

WE'RE ALREADY SEEING ECONOMIC DEVELOPMENT.

PEOPLE TALK ABOUT THE FACT THAT AIRBNB'S ALONG THE LAKESHORE ARE FILLING UP AND GETTING HARD TO FIND DATES.

WE'RE HEARING VENUES TALK ABOUT WEDDING WITHS THAT ARE TRYING TO GET BOOKED AND RESEMS FOR WEDDINGS LAST YEAR THAT WANT TOP HAVE A RECEPTION THIS YEAR TRYING TO GET BOOKED IF YOU START LOOKING ON-LINE FOR YOUR FAVORITE BAND, YOU START TO SEE AUGUST DATES STARTING TO POP UP FOR WHEN THEIR NEXT LIVE PERFORMANCE IS GOING TO BE.

SO A LOT OF THE ECONOMY IS REALLY SAYING, WE ARE SHUT DOWN BECAUSE WE HAVE TO BE SHUTDOWN FOR THE SAFETY OF PUBLIC HEALTH.

BUT AS SOON AS WE DON'T HAVE TO BE, WE ARE GOING TO START AGAIN.

NOW, WHAT IS GOING TO HOLD US BACK IS RIGHT NOW.

ACROSS MICHIGAN, ABOUT 25% OF OUR RESTAURANTS THAT ARE NOT BIG CHAINS, SO SO NOT THE MCDONALD'S.

NOT THE APPLEBEE'S, THOSE TYPES OF BIG CHAINS.

ABOUT 2 AREN'T OF THOSE RESTAURANTS ARE PROBABLY PERMANENTLY CLOSED AT THIS POINT.

SO AS WE REACHED THE SECOND HALF OF THIS YEAR, PEOPLE ARE GOING TO WANT TO GO OUT TO EAT.

THEY HAVE THE OPPORTUNITY LIKELY TO GO OUT TO EAT THEN THEY HAVE FEWER PLACES TO GO.

SO THE PLACES THAT ARE OPEN ARE PROBABLY GOING TO DO PRETTY WELL.

BECAUSE OF THAT, WE ARE ACTUALLY HEARING LOTS OF, LOTS OF PEOPLE WHOM WERE TRYING ABOUT STARTING A REST RENT A YEAR OR TWO AGO SAYING NOW IS THE TIME I NEED TO GET IN.

BECAUSE THERE IS A LOT OF MONEY TO MAKE THIS SUMMER.

>> SO YOU PUT AN END TO ANTICIPATION.

DO YOU SEE INVESTMENT FLOWING INTO THE POPULAR RESTAURANTS THAT HAVE HAD A HARD TIME.

>> YEAH.

>> WELL, I SEE, I SEE IF THEY CAN MAKE IT TO THAT POINT.

SO REALIZE, THIS SUMMER, IF WE HAVE A SUMMER LIKE LAST SUMMER.

WE TAKE ADVANTAGE OF BEING OUTSIDE AND TAKINGED A TRUDGE OF THOSE OPPORTUNITIES LIKE WE LAST YEAR.

BUT IF YOU CAN ALSO AUGMENT THAT WITH INSIDE, PEOPLE FEEL SAFE.

THIS SAVINGS WILL GET BROKEN LOOSE.

AND SINCE THAT SAVINGS WILL GET BROKEN LOOSE.

THAT IS A BIG SURGE IN OPPORTUNITIES THIS SUMMER.

>> ALL RIGHT.

LET'S TACKLE THE BIG ISSUE HERE AND THAT IS ANOTHER ROUND OF FEDERAL RELIEF, THE AMERICAN RELIEF AC, $1.9 TRILLION.

THAT IS A LOT OF MONEY.

>> YEAH.

A TON OF MONEY.

THINK ABOUT THIS.

WE HAD LITTLE OVER $2 TRILLION LAST APRIL AND MAY.

AND IT WAS ENOUGH TO CREATE A 33% SAVINGS RATE IN MAY.

THINK ABOUT THAT.

33%.

SO WE HAD THAT.

WE HAD ANOTHER $900 BILLION.

NOW IF WE GOT THE FULL $1.09.

THE FULL $1.09 WON'T HAPPEN.

IF WE GET THAT, THEN, WE ARE ON THE ORDER OF $5 TRILLION.

IN A NORMAL YEAR.

THE U.S. GOVERNMENT SPENDS ABOUT $4.5 TRILLION.

THIS IS MORE THAN 100% INCREASE IN FEDERAL GOVERNMENT SPENDING IN ONE YEAR.

THE LAST TIME WE HAD MORE THAN 100% INCREASE IN ONE YEAR WAS DURING WORMED WAR II.

WORLD WAR I IX.

ALL RIGHT.

THINK ABOUT THAT.

WE'RE TALKING ABOUT THIS TYPE OF MAGNITUDE OF FISCAL SPENDING THAT HAS NOT HAPPENED SINCE THAT TIME.

AND WHAT WE ARE SEEING IS A LOT OF THAT MONEY GOING INTO SAVINGS.

BECAUSE A LOT THAT MONEY IS BEING SPREAD AROUND SO THAT 80% OF THE ECONOMY THAT IS TOOLING ALONG JUST FINE, AND SINCE IT IS TOOLING ALONG JUST FINE WHEN THEY GET THESE ONE-TIME INCOMES, THEY ARE ABLE TO SAVETTE TO WHEN THEY CAN SPEND IT.

NOW, THAT OTHER 20% WHICH IS HURTING OR CANNOT OPEN UP, THEY BADLY NEED THIS MONEY BECAUSE THEY NEED TO MAKE IT TO SUMMER OR TO NEXT FALL WHEN THEIR BUSINESSES CAN RESTART.

SO THERE IS, THERE IS A PUSH AND PULL IN THE ECONOMY RIGHT NOW BETWEEN THAT 20% OF THE SECTOR THAT REALLY NEEDS HELP AND THAT 80% THAT PROBABLY COULD GET WITH NOTHING MORE.

BE A HOW DO YOU TARGET THAT 20%?

THEY HAVE NOT FIGURED THAT OUT OR THEY DON'T WANT TO FIGURE THAT OUT.

>> THAT IS WHAT I WAS GOING TO ASK YOU.

IF YOU COULD TARGET SOME OF THAT AID, MAKE SURE IT TRULY GETS TO THOSE PEOPLE, THOSE ORGANIZATIONS THAT NEED IT MOST, YOU JUST TO GET THROUGH AND SURVIVE, BUT WHEN YOU HAVE AN INJECTION LIKE $1.9 TRILLION, WHAT DOES THAT DO TO THE ECONOMY?

IF YOU TALK TO THE PEOPLE AT THE FRED AND IF HE TREASURY THEY SAY DON'T WORRY ABOUT INFLATION.

HOW DO YOU LOOK AT THIS, AND DOES IT HELP TO PROPEL THE ECONOMY BACK TO FULL STRENGTHth SOONER RATHER THAN LETTING IT SLOWLY WORK THE WAY BACK?

>> WELL, I CAN TELL YOU.

IN CLASSES, I HAVE STUDENTS DO THE SIMULATION ALL THE TIME.

WHERE WE SHOCK THE ECONOMY WITH A DEEP RECESSION.

THEN, HAVE THEM DO FISCAL POLL CITY TO TRY GET IT OF IT.

BY AND LARGE WHAT THEY DO IS TRY BRING THEM BACK REALLY FAST TO FULL EMPLOYMENT AND WHEN YOU DO THAT, ALMOST ALWAYS, YOU OVERSHOOT.

OK. THAT CREATES INFLATION.

OTHER COMPONENTS.

WHAT WE ARE SEEING RIGHT NOW IS A HUGE INCREASE IN THE AMOUNT OF MONEY AND CIRCULATION.

SO THINK ABOUT THIS.

IF YOU HAVE A HUGE INCREASE IN THE NUMBER OF BASEBALL ACCOUNTS AVAILABLE.

WHAT HAPPENS TO THE VAL SUE BASEBALL CARDS?

IT GOES DOWN.

THE SAME THING HAPPENS TO MONEY.

PHYSICAL THE HAVE OFF A MONEY GOES DOWN.

THAT MEANS THE PRICE OF THINGS GOES UP.

SO WE HAVE THAT.

WE HAD A HUGE SURGE PROIN DUESER PRICE INDEX IN JANUARY.

OK.

SO YEAR OVER YEAR, WE JUST SAW A BIG POP IN PRODUCER PRICE INDICES.

THAT IS SAYING THAT IT IS GETTING MORE EXPENSIVE FOR FIRMS TO PURCHASE THINGS.

WE HAVE THE PHONES FOR $12-$15 MINIMUM WAGE.

THAT IS GOING TO INCREASE WAGES AND WE ALREADY SEEN WAGES INCREASING FASTER THAN THEY DID BEFORE.

SO WE HAVE TO PAY WORKERS MORE.

WE ARE HERE TO SPEND MORE MONEY TO BUILD, TO BUY OTHER GOODS THEN THOUGH MONEY WE HAVE IS WORTH LESS.

WHAT IS GOING TO HAPPEN TO PRICES?

PRICES ARE GOING TO GO UP.

SO I UNDERSTAND THAT, BE THAT TREASURY SECRETARY YELLEN DISAGREES WITH THIS.

ACTUALLY, SHE SAYS THAT, THAT SHE EXPECTS MORE INFLATION THAN WHAT IS HAPPENING LAST YEAR.

SHE JUST DIDN'T THINK THAT PROBLEM IS AS BIG AS PAYING OFF THAT 20%.

THINK THAT WE ARE GOING TO BE SEEING INFLATION WELL ABOVE WHAT SOME PEOPLE ARE TALKING ABOUT.

AND CERTAINLY, IF YOU TAKE THE AVERAGE ECONOMISTS, THEY ARE LOOK AT BETWEEN INTEREST RATES, AND PRICES, UM, SOMEWHERE BETWEEN $150 TO $20,050 BASIS POINTS ABOVE LATE WAS LAST YEAR.

WHAT MEANS IS 100 BASIS POINTS IS ONE PERCENT EACH POINT INCREASE.

SO LAST YEAR, INFLATION WAS ABOUT 1.5%.

SO THIS YEAR, WE HAVE SPENT INFLATION TO BE 2.5 TO 3%.

OK. AND WE EXPECT INTEREST RATES TO GO UP BY MAYBE 50 BASIS POINTS NEAR THE END OF CLEAR.

AT THE BE GOING OF THE YEAR.

WE SEE LITTLE STUFF HAPPENING.

WE WON'T SEE SHORT TERM INTEREST RATES PROBABLY GO UP UNTIL NEXT YEAR.

BUT THOSE LONGER TERM INTEREST RATES LIKE MORTGAGES YOU MAY SEE 50 BY THE END OF THIS YEAR.

>> BUT IT WOULD BRING THE ECONOMY BACK TO BALANCE, AT LEAST, A LITTLE BIT, IF WE ARE LOOKING AT THE INTEREST RATES, RIGHT?

BECAUSE WE HAVE BEEN HISTORIC LOWS FOR LONG.

RIGHT.

BUT REMEMBER ONE OF THE ECONOMICS IS THAT IT DOESN'T MATTER WHAT THE LEVEL IS.

IT MATTER WHAT'S THE LEVEL WAS LAST YEAR COMPARED TO THIS YEAR.

IT IS THE CHANGE THAT AFFECTS THE ECONOMY.

SO JUST BECAUSE INTEREST RATES ARE WELL BELOW INTEREST RATE IN THE EARLY 1980'S.

A 50 BASIS POINT INCREASE IS A SUBSTANTIAL PERCENTAGE INCREASE IN INTEREST RATES.

AND SUBSTANTIALLY AFFECT THE ABILITY OF PEOPLE TO BUY HOUSES.

IT WILL SUBSTANTIALLY RESULT IN CHANGES IN WHAT PEOPLE CAN SAY.

THINK ABOUT IT THIS WAY.

IF WE HAVE AN ADDITIONAL ONE PERCENT OF INFLATION.

RIGHT.

SO INSTEAD OF 1.5 LAST YEAR.

.5 THIS YEAR.

THAT IS PRETTY CLOSE TO WHAT WE ARE SEEING IN A LOT OF SURVEYS.

AND EXTRA 1% IN OF DECLEANS VALUE HERE IN OF THE MONEY FOR THE AVERAGE PERSON WOULD BE THE EFFECT OF ADDING DECREASING THE SPENDING POWER BY $700.

ALL RIGHT.

SO WE KNOW THAT THERE IS GOING TO BE PRICE PRESSURES.

WE KNOW THERE IS GOING TO BE INTEREST RATE PRESSURES BECAUSE OF THIS.

AND SON REMEMBER, REMEMBER, SPEND K MONEY NOW MEANS THAT TWO OR THREE YEARS FROM NOW, YOU ARE SHAVING OFF THE PEAK, THAT IS HAPPENING IN ORDER TO FILL IN HERE.

SO IF YOU FILL IN A LOT HERE.

YOU HAVE TO SHAVE A LOT MORE OFF OF THAT PEAK.

THAT SHAVING OFF OF THE PEAK HAPPENS BECAUSE OF INFLATION, AND BECAUSE OF HIGHER I INTEREST RATES.

>> DO YOU THINK THE FULL, YOU HAVE ALREADY SAID, $1.9 TRILLION WON'T HAPPEN.

YEAH.

>> $15 MINIMUM WAGE PROBABLY WON'T HAPPEN.

THERE IS A WHOLE LOT IN THIS PACKAGE, INCLUDING VACCINATIONS, AND EVERYTHING ELSE.

MAKING SURE THAT SCHOOLS ARE BACK TO IN PERSON AND EDUCATING SO WHERE DO YOU THINK THE NUMBER COMES IN.

WHAT THIS IS GUESS.

WELL, IF YOU LOOK AT WHAT IS LEFT THAT GOES EASILY THROUGH A RECONCILIATION AND THAN THE VOTES MODERATE DEMOCRATS ARE WILLING TO ACCEPT.

YOU CERTAINLY GET STILL NAUM BER NORTH OF $1 TRILLION AND IT IS IN THE BOTTOM, BUT, BUT MORE THAN $1 TRILLION.

AND WE LIKELY WILL HAVE INCREASE IN THE MINIMUM WAGE THIS YEAR.

IT JUST LIKELY WON'T REACH $15 IF YOU DON'T USE RECONCILIATION.

>> YOU GAVE US A LESSON ON IN IN FLATION AND OTHER THINGS HERE.

ANOTHER LESSON.

THE DEFICIT HAWKS ARE SWOOPING IN RIGHT NOW.

THEY ARE FEARFUL OF $1.9 TRILLION ADDING TO IT THE DEFICIT.

EXPLAIN HOW THE ARGUMENT THAT EVENTUALLY IS YOU KNOW, YOU PRAIL YOUR HOUSEHOLD AND YOUR SMALL BUSINESS ON A BUDGET, THE GOVERNMENT NEEDS TO DO THE SAME THING.

I HAVE BEEN IN THAT VERY ROOM WHERE YOU ARE IN FRONT OF THAT DRY ERASE BOARD, AND YOU HAVE EXPLAINED THIS TO ME.

MY HOUSEHOLD AND MY SMALL BUSINESS IS NOT RUN LOOK THE GOVERNMENT.

EXPLAIN TO PEOPLE HOW THAT IS SO.

>> WELL, IT IS A DIFFERENT TYPE OF BUDGET.

IT IS A DIFFERENT TYPE OF BUDGET BECAUSE THE LIFE OF A GOVERNMENT DOESN'T END.

THE U.S. COUNTRY DOESN'T END.

IF IT DOES END, WE HAVE A LOT OF THINGS TO WORRY ABOUT OTHER THAN THE ECONOMY.

OK.

SO, SOB BECAUSE OF THAT, YOU DON'T HAVE TO SAB FOR RETIREMENT.

ALL RIGHT.

AND ON TOP OF THAT, YOU MAKE THE MONEY.

SO AND YOU VALUE THE MONEY IN SOMETHING THAT YOU ARE PRINTING.

AS A RESULT, THE ECONOMY IS GROWING EVERY YEAR AND AS LONG AS YOUR DEFICIT IS -- YOUR DEBT IS GROWING SLOWER THAN THE GROWTH OF YOUR ECONOMY, IN ACTUALITY, YOU COULD DO THAT FOR PERPETUITY FOREVER.

IN YOU CAN'T DO THAT AS AN INDIVIDUAL BUS AT SOME POINT, YOU HAVE TO STOP EARNING MONEY.

WHEN YOU STOP EARNING MONEY, YOU CAN'T GROW YOUR WAY OUT OF THAT DEBT.

IT IS THE REASON WHY YOUNG PEOPLE BORROW MONEY.

OLD PEOPLE SAVE MONEY.

ALL RIGHT.

AS A YOUNG PERSON, YOU BORROW MONEY BECAUSE YOU KNOW YOU ARE GOING TO BE EARNING FOR A LOT OF YEARS AND YOUR INCOME IS GOING TO BE INCREASING, SO YOU BORROW THAT MONEY TO BORROW SOME OF THAT FUTURE INCOME TO TODAY.

AND THEN, AS YOU GET OLDER, YOU CANNOT DO IT ANY MORE.

WELL, THE ECONOMY, THE GOVERNMENT NEVER GETS OLD.

SO THEY CAN ALWAYS BORROW A LITTLE BIT OFF THE FUTURE.

THEY JUST HAVE TO BE CAREFUL NOT TO BORROW TOO MUCH OVER TOO LONG OF A TIME.

SO ECONOMISTS TEND NOT TO WORRY VERY MUCH ABOUT TRANSTORY DEBT LIKE WHAT WE'RE SEEING HERE.

A ONE-TIME POP.

OK. WE DO WORRY ABOUT DEBT THAT IS SYSTEMIC AND LASTS FOR LONG PERIODS OF TIME.

SO ECONOMISTS ARE FAR MORE WORRIED ABOUT SOCIAL SECURITY, MEDICARE, THINGS LIKE THAT.

AND THE RELATIONSHIPS TO TAXES AND THAN WE ARE ABOUT ONE-TIME SPENDING MONEY.

>> THANK YOU, I APPRECIATATED THAT.

IT IS ONE OF MY FAVORITE LESSONS FROM YOU.

IN YOUR FORECAST, YOU MENTIONED THAT WE NEED TO WATCH FOR TWO WARNING SIGNS.

I MEAN, YOU GIVEN GREAT NEWS HERE, A ARE THESE WARNING SIGNS?

>> , WE HAVE SA COUPLE OF DIFFERENT WARNING WITH SIGNS WE HAVE TO WORRY ABOUT.

ALL RIGHT.

AND WHEN WE START WORRYING ABOUT THESE THINGS.

WE HAVE TO WORRY ABOUT THE RACE OF THE VACCINE.

OK?

WE KNOW THAT WE HAVE NEW VARIANTS COMING INTO PLAY.

WE KNOW THAT THAT COULD SPEED UP THE TRANSMISSION OF THE VIRUS AND THE FASTER WE GET MORE PEOPLE VACCINATED, THE SOONER WE'LL GET TO A POINT WHERE THOSE NEW VARIANTS WILL HAVE MUCH LOWER EFFECT ON THE ECONOMY.

SO FROM AN ECONOMY ECONOMIST POINT OF VIEW.

WANT TO HAVE AS MANY VACCINATED AS FAST AS POSSIBLE TO ROPE THE ECONOMY.

SO THAT IS REALLY THE FIRST THING.

THE SECOND THING IS, WE ARE REALLY WORRIED ABOUT PRICES.

WE REALLY WANT PEOPLE TO BE WATCHING THAT AS WE GET TO THE SECOND HALF OF THIS YEAR.

SO THOSE PRICES COULD SLOW THINGS DOWN AND PARTICULARLY NOW THAT WE ARE GOING TO HAVE INCREASED ENERGY PRICES FOR AT LAST THE NEXT THREE TO SIX WEEKS BECAUSE OF WHAT IS HAPPENING IN TEXAS.

THAT IS GOING TO ACCELERATE THE POTENTIAL FOR PRICE INCREASES.

OFTEN PRICE INCREASES THAT SHOULD HAPPEN DON'T HAPPEN BUS PEOPLE ARE NOT EXPECTING THEY SHOULD.

BUT IF WE START SEEING PRICES GO UP, THEN, PEOPLE EXPECT PRICES TO GO UP.

AND IT EASIER FOR PRICES TO GO UP.

SO IT BECOMES A SELF-FULFILLING PROPHECY AND THIS COULD KICK THAT UP SO BE WATCHING THAT VERY I HAVE CAREFULLY.

ALSO IN THE FORECAST, IT IS ONE OF THE FAV RILT TOPICS AND SPEAK OF PRICE INCREASES, HOUSING.

THERE IS HOUSING CONCERNS YOU ARE KEEPING AN EYE ON.

YEAH.

YEAH.

WHAT WE KNOW HERE IN WEST MICHIGAN IS THAT HOUSING PRICES IN THE HOUSING PRICE UNDECKS CONTINUE TO RISE AUM THE WAY THROUGH THIS RECESSION THAT WE JUST BEEN THROUGH OR WILL BE GETTING OUT OF US.

AND THAT IS GOING TO CONTINUE INTO THIS COMING YEAR.

PARTICULARLY ON THE BOTTOM HALF OF THE HOUSING MARKET BELOW LIKE 350,000.

THERE IS STILL MANY BIRDS WE ARE HAVING LOTS OF FIGHTING OVER GETTING HOUSES BECAUSE OF THE BUILTUP SAVINGS WE HAVE PEOPLE WITH MONEY TO GET INTO HOUSING THAT WERE UNABLE TO GET INTO HOUSE SOG WE HAVE A LOT OF PEOPLE WHO WANT TO BUY HOUSES BUT WE ALSO HAVE A LOT OF PEOPLE WHO ARE FEARFUL BECAUSE OF THE VIRUS OR MAYBE THEY LOST THEIR JOB OR MAYBE THEIR SPOUSE LOST THEIR JOB AND AS A RESULT, THERE IS NOT AS MANY HOUSE ON THE MARKET.

SO REALLY PUMPING UP THOSE PRICES PARTICULARLY IN AREAS, I KNOW HE KNOW, IT IS DOING SO IN ALL AREAS INCLUDING DOWNTOWN AREAS, BUT IN SUBURBAN AREAS WHERE YOU ARE GAINING A LITTLE BIT FURTHER AWAY FROM OTHER PEOPLE, DURING PANDEMIC, THAT IS EVEN RESULTED IN A BIGGER PROBLEM.

WE EXPECTED THAT TO CONTINUE THIS YEAR.

THERE IS GOING TO CONTINUE TO BE UPWARD PRICE PRESSURE ALL YEAR LONG FOR SINGLE FAMILY.

>> THERE IS A DANGER TO THIS?

>> WELL, THERE IS ALWAYS A DANGER, BUT IN REALLITY, THIS IS MUCH DIFFERENT THAN WHAT WE SAW BACK IN 2007, '08, '09, 10.

WE'RE NOT SEEING THE PEOPLE GETTING LATE ON THEIR MORTGAGES THAT WE DID THEN.

SO PEOPLE ARE NOT LOSING THE VALUE, SO IF YOU ARE IN A HOUSE, YOUR HOUSE IS GOING UP IN VALUE.

WHICH MEANS THAT YOU HAVE AN ASSET YOU CAN SELL WHICH YOU COULD NOT DO IN SIX, SEVEN, TO NINE.

ALL RIGHT.

SO THAT IS ACTUALLY A GOOD THING.

THEN THE REASON PRICES ARE GOING UP IS BECAUSE THERE IS A LOT OF PEOPLE WHO WANT TO BUY THEM WHO HAVE THE MONEY TO BUY THEM.

THAT IS NOT A BUBBLE.

THAT IS GOOD IF YOU OWN SOMETHING.

>> IT IS GOODS IF WAGES ARE GOING UP.

THE LAST MINUTE WE HAVE HERE.

WHAT ARE WE LOOKING AT WITH WAGES?

THEY ARE GOING TO GO UP FAST ARE THIS YEAR THAN THEY DID LAST YEAR.

THEY WENT UP FAST LEARAR.

LAST YEAR.

BEX THIS WILL BE THE DECADE OF LABOR.

THAT LABOR FOR THIS ENTIRE DECADE IS GOING TO GAIN POWER OVER CAPITAL AND SON WE EXPECT WAGES TO INCREASE AND THOSE WAGE INCREASES WILL RESULT IN PRICE INCREASES WE WILL SEE LATER.

ALL RIGHT.

YOU MENTIONED BASEBALL CARDS EARLIER.

YOU AND I PROBABLY ROUGHLY THE SAME AGE.

I ALWAYS GOT THE RUSTY CARDS.

SO MANY RUSTY AND YOU ARE WASHINGTON.

DON'T KNOW WHAT YOU GOT IN YOUR PACKS.

>> YEAH.

I DON'T EVEN REMEMBER BECAUSE THAT IS SO LONG AGO NOW FOR ME.

JA.

>> ALL RIGHT.

WELL I LOOK FORWARD TO THE NEXT FORECAST 2022.

SKY IS THE LUM MIT IT SOUNDS LIKE WE ARE ON SMOOTH PATH COMING OUT OF THIS YEAR INTO NEXT YEAR.

DR. PAUL EISLEY, ASSOCIATE DEAN IN THE COLLEGE OF BUSINESS AT GRAND VALLEY STATE UNIVERSITY.

THANKS SO MUCH.

>> THANK YOU.

>> THANK YOU FOR JOINING US.

WE'LL SEE YOU AGAIN SOON ♪ ♪ ♪