Are Fed Actions Working? Parsing the New Data

After April’s downturn, the first two weeks of May have not seen substantial improvement. By Thursday, May 12, markets were dangerously close to bear territory. The Fed enacted a 50-basis point increase in the Fed funds rate at the May FOMC meeting, and we also now have April’s key data. In addition, Fed Chairman Powell sat for an interview in which he discussed his definition of a “soft landing” and what it will take to get there.

Our three main points are the labor markets, interest rate hikes, and economic growth as measured by GDP. Let’s dive in.

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GMB Ep #117: A Top Economist’s Take on Personal Finance With Dr. Laurence Kotlikoff

 

Economics applies to every industry at the individual, national, and global level. In this week’s episode, we have a distinguished guest who is on a mission to make economics useful at all levels. Dr. Laurence Kotlikoff is an economics professor at Boston University. He is also the author of Money Magic, a personal finance book written from an economist’s standpoint. Today’s podcast examines his book and financial outlook, which frequently counters conventional economic theories. Throughout the podcast, he shares his experience in handling personal financial decisions while also discussing some insightful observations about the state of our country.

 

 

Show Notes

[03:38] Introduction – Laurence introduces himself and discusses his current career emphasis.

[06:22] Personal Financial Decision Making – We must see individual financial decisions through the prism of consumption smoothing. Laurence explains what this is and why it is essential.

[12:42] IRA and Mortgage – Laurence outlines why under certain circumstances, it makes sense to withdraw funds from the IRA to pay off the mortgage.

[18:43] Investments – Laurence discusses investments, stocks, and the importance of making sound investment decisions. Furthermore, he evaluates the risk associated with each sort of investment.

[32:06] Social Security – Laurence discusses how individuals can navigate the complex social security web.

[34:10] Viability – Laurence discusses the Social Security system’s viability and what individuals may do to prop it up.

[42:54] Massive Deficits – Whether it is the aggregate federal deficit, unfunded liabilities, or Social Security, taxing one’s way out of some deficits is politically unappealing. Laurence discusses his approach to enormous deficits.

[48:28] Politics and Economics – Laurence discusses the causes of present crises, relating them to a lack of synergy between politics and economics.

[51:33] Campaign Trail – Laurence reflects on his 2016 presidential campaign experience, and shares what he would do differently in 2024 if he was running with an unlimited campaign budget.

 

Resources

Connect with Laurence:

Website: kotlikoff.net/

LinkedIn: linkedin.com/in/laurencekotlikoff/

 

Mentioned in the episode:

Maxifi: maxifiplanner.com/

Economic Security Planning: economicsecurityplanning.com/

Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life: goodreads.com/book/show/56620849-money-magic