Morning Wire XX
[0] Despite persistent inflation and fears of recession still looming, Americans are spending at a record pace this year and are set to spend billions more this Black Friday.
[1] In this episode of Morning Wire, we talked to an expert about consumer habits and why Americans are on a record -breaking spending spree.
[2] I'm Daily Wire, editor -in -chief John Bickley, with Georgia Howe.
[3] It's Friday, November 24th.
[4] We hope you had a wonderful Thanksgiving.
[5] This is a Black Friday edition of Morning Wire.
[6] In this Black Friday episode, Daily Wire's senior editor, Caput Phillips, speaks with New York Times bestselling author and former investment banker, Carol Roth.
[7] Carol, thank you very much for joining us.
[8] So we'll get to Black Friday, but first let's start with just a broader look at consumer spending this year, which has been surprisingly strong given the overall state of the economy.
[9] Yes, well, a couple things that you need to remember.
[10] First of all, is that the consumer is the majority of the economy.
[11] account for about 70 % of the GDP, and the American consumer likes to spend.
[12] So when they have jobs, they try to find ways to go ahead and do that.
[13] Unfortunately, that has been to the detriment of their personal balance sheets.
[14] They have been dipping into their savings.
[15] They have been increasing their debt levels.
[16] We know that credit card debt is now pretty close to $1 .1 trillion a record, as well as overall household debt.
[17] But because they feel pretty confident on the job front, they have been spending.
[18] They haven't been happy about the fact that they have to spend more in terms of prices, but they have kept their spending up.
[19] So is there any end in sight here?
[20] How long can people continue spending at this pace?
[21] And is there a breaking point coming?
[22] That is a loaded question on whether a breaking point.
[23] is coming or not.
[24] I think it really depends on whether we see a crack in the labor market, whether we see a shift in inflation and that flare back up again.
[25] We are certainly on the precipice of meeting historical levels, not just of overall spending, but kind of via percentages of net worth and things like that.
[26] So we haven't quite gotten to that crack yet, but the trend isn't in a really great direction.
[27] Okay.
[28] Walk us through the consumer mindset right now.
[29] We know people are saving less money than at any point in decades.
[30] The cost of living is higher than ever.
[31] Housing prices have skyrocketed.
[32] Why are folks continuing to spend money at a time when you would think they'd be pulling back?
[33] Well, first of all, you have to remember that retail sales are not inflation -adjusted.
[34] So part of the increased in spending is not necessarily meaning the volume, of spending is up, but it means that the prices are up.
[35] And that's something that I think is important to remember is that people are just treading water and trying to keep pace with what they've done in the past, again, still having jobs and the like.
[36] So I think that's a piece of it.
[37] Gen Z does concern me. They come up with all these, you know, cute little names.
[38] They first had they quite quitting.
[39] And now they have soft savings.
[40] And soft savings is not saving.
[41] It's not saving for retirement.
[42] It's saying that I don't think I'm going to be able to retire.
[43] so I'm just going to enjoy myself while I can.
[44] And that's frightening to me as somebody who advocates for economic freedom and wealth creation opportunities.
[45] First, because obviously you want to have the opportunity to not retire, but that should be based on your own decision, not because you can't retire because of your financial situation.
[46] Also, we are flying in the face of what's Albert Einstein called the Eighth Wonder of the world, and that is compound interest, those who understand it, earn it, and those who don't end up paying it.
[47] When you're young, that's when you should be trying to sock away money so that it has the opportunity to grow and value over time if you invest it in assets that appreciate, and you can benefit from that price appreciation.
[48] So seeing younger people being a little bit more despondent about their future is very concerning in terms of what that will look like for them financially and their ability to really seize the American dream.
[49] All right.
[50] So let's get to Black Friday.
[51] We've heard projections some people saying this is going to be a record Black Friday to Cyber Monday spending window.
[52] What are you expecting to see?
[53] So I tend to go with the National Retail Federation.
[54] I think they have the broadest and best sort of sense on what's going to happen.
[55] And obviously, this is a guess.
[56] People can surprise us.
[57] But the shopping season did start earlier this year.
[58] People were looking at deals as far back as October.
[59] So the projections there are in sort of the three to four percent range, which was really a slowdown in terms of year -over -year growth for the past several years.
[60] And again, that's not adjusted for inflation.
[61] So if we're looking at this on an inflation -adjusted basis, again, they're really just trying to keep pace with what I'll say is reported inflation.
[62] I personally think that number, you know, is held down by all the changes they've made over the years to how inflation is reported.
[63] So on a net basis, you know, I don't think that growth is going to look that great inflation adjusted.
[64] But on a nominal basis, you know, we're getting close.
[65] We're kind of at the $958 to $900 and almost $90 billion, getting close to that trillion dollar mark in spending, not just for Black Friday, but really.
[66] for the entire holiday period.
[67] And I do expect that we will continue to see the shift where more of the spending is done online, something that we saw accelerate during the pandemic.
[68] And I think people are just used to spending more time shopping from their computer, from their phones than they are going to the stores.
[69] So I think a bigger chunk of that overall spend, not just on Black Friday, but for the overall season you'll see coming from online shopping.
[70] So you've touched on inflation a lot.
[71] We've seen the White House come out and say things like inflation is going down.
[72] So your Thanksgiving meal this year is going to be cheaper than last year.
[73] We've seen other say you're going to get more deals this year.
[74] The cost of goods are going down.
[75] What do you make of those claims?
[76] I hate when the administration or these elite economists talk about inflation the way that wonky economists want to talk about it and sort of gaslight the average Americans who are really looking at it on a cumulative basis.
[77] So my best analogy is weight gain.
[78] Imagine that you had kept your weight constant for years and then all of a sudden one year you gain 10 pounds.
[79] And you go to the doctor and the doctor says, you know, you really got to get your weight under control.
[80] Well, the next year you come back and now you've gained an additional and incremental three and a half pounds.
[81] Your doctor doesn't go, oh my God, that's amazing.
[82] You only gained three and a half pounds this year and it was 10 last year.
[83] He goes, over the last two years, you're up 13 and a half pounds.
[84] Your pants don't fit.
[85] You're fat.
[86] You need to go on a diet.
[87] And that's what Americans are feeling, but they're feeling that's, you know, not obviously around their stomachs as much as they are in their wallets.
[88] And it's not increasing.
[89] It's decreasing.
[90] And so that's what people really care about.
[91] Over the last couple of years, how much more am I paying for the basics in my life as well as during the holiday season for holiday shopping?
[92] That's what they care about.
[93] So the idea that we've gotten this growth under control and we don't have the spike growth, not that it's a bad thing because we don't want to see the opposite, but it doesn't translate into what middle class Americans are feeling when they're going about their day to day.
[94] I personally will consider it a victory if I only added 10 pounds this holiday season.
[95] So in closing, we keep hearing mention of this ever -elusive soft landing.
[96] We've heard more talk there in the last month.
[97] We still see some predictions here for recession coming.
[98] What are you going to be keeping an eye on in the next few months that will help predict which way we go on that front?
[99] My focus is a little bit more mid to long term versus, you know, what we might get over a couple months period.
[100] Because the reality is that we have debt to GDP levels that are around 120%.
[101] If we were an emerging market, we would have a currency crisis, but we do have the World's Reserve currency that's provided a backstop to that.
[102] We have deficits that are running about 8 % of GDP, which is more than double the historical average.
[103] if we get a recession and there is no sort of shift in spending, then that deficit as a percentage of GDP could end up being even larger.
[104] The recession impacts tax receipts.
[105] But either way, we have to get the spending under control because the government is putting a huge burden on the economy by taking away capital and spending more money on things like interest expense, which is now annualized about a trillion dollars a year that could be going towards something that's productive versus something that we've, you know, quote unquote, already paid for.
[106] So I think the long -term non -health of the U .S. government is going to create ongoing issues.
[107] And so even if everyone wants to pat themselves on the back for a couple month period, we have a long road ahead of us and something needs to shift or the issues that we're facing with inflation and other economic issues are going to be long -term and not short -term.
[108] All right, we'll leave it there.
[109] Carol Roth, always a pleasure getting to talk to you.
[110] Thanks for joining us.
[111] You as well.
[112] That was Daily Wire Senior Editor Cabot Phillips talking with best -selling author Carol Roth.
[113] Thanks for waking up with us on this Black Friday morning.
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