David Bahnsen, chief investment officer at the Bahnsen Group, spoke with Breitbart News about how the combination of Democrats’ massive spending and shutdowns contributed to the record-high inflation Americans are dealing with today.
Bahnsen spoke with Breitbart News Saturday host Matthew Boyle, who noted the most recent inflation report shows that prices rose 8.2 percent compared to last year, despite the Democrat’s Inflation Reduction Act that purportedly solved the inflation crisis.
Bahnsen explained that the Inflation Reduction Act has nothing to do with driving down inflation. Instead, inflation will go down because the housing market is crashing.
“The rate of inflation was 8.9 percent a few months ago. It’s 8.2 percent now. And yet, the areas in which people feel it the most, you know, food is a great example, is continued to go higher, the overall rate of inflation will start to drop, when the numbers reflect the reality of how much housing is dropping and rents are having to drop now,” Bahnsen said.
Bahnsen explained that today’s downtrodden economy is due to excessive government intervention.
“First of all, anything that happens to lower the inflation rate is obviously not going to be connected to the Inflation Reduction Act, which had nothing to do with economic policy or driving down the rate of inflation. And what will cause it is the fact that we’ll go back to the level of declining growth, declining activity, not because the Fed raised interest rates so much, but because they have spent so much money that it crowds out the private sector and takes away incentives for investment and output and productive economic activity. So they’re kind of damned if they do, damned if they don’t. I think that this is what you get with excessive government intervention into the economy,” he said.
Boyle then asked Bahnsen to provide his economic forecast for the coming months. Bahnsen predicted that inflation will start to come down around the start of next year, but we may also see increased unemployment.
“I think that you will see the rate of inflation start to go down in December and January as a result of the fact that housing and rents are about 25% of what makes up CPI,” he said.
Bahnsen said the combination of Democrats’ spending and shutdowns during the coronavirus pandemic contributed to the current economy.
“The economics of it are very simple. You got a sugar high in the economy when these idiots somehow underestimated that people wanted their lives back. And so I don’t think it is merely a matter of the Biden administration created inflation. It’s a matter of, they shut the world down and so you cut off the ability to create supply of new goods and services. Then the world reopened and people wanted their lives back, but we had an inadequate amount of supply and inadequate amount of labor an inadequate amount of goods that push prices higher. So, of course, that will self-correct at some point,” he continued.
“And it’s 1970s Phillips Curve thinking that somehow inflation and employment are inversely correlated. It’s not true. And that’s where I think this is headed. So you’ll get a inflation start to go down, but then you’ll get employment start to go down as a matter of byproduct of the bad policy,” Bahnsen said.
“That will be, by the way, even worse for the Biden administration, and the Democrats politically. People don’t like inflation, but they really don’t like high unemployment either,” he continued.
Boyle noted that Republican gubernatorial candidate Tudor Dixon just pressed Michigan Gov. Gretchen Whitmer (D) over her role in shutting down the state’s economy in their recent debate and based Bahnsen to expound on how shutdowns led to our current economic crisis.
Bahnsen noted that Republican presidents “have not exactly been great at controlling spending,” but there was never inflation until now because the economy was not shut down.
So the problem is not that government spending immediately picked inflation. It was the lockdowns of COVID, that cut off our ability to create enough supply, the demand is not higher now than it was pre COVID. So you have the exact same amount of oils, barrels of oil, being consumed per day that you did in 2019, is actually a little bit less. And yet the price is $40. a barrel higher. How is that because we stopped making the same level of production, it is purely about the dual whammy of shutting down the economy and then reopening it and thinking that people were going to behave differently.
He cautioned against only blaming Democrat spending for the inflation rates.
“So when we only focus on the government spending part, here’s what we’re doing, inflation will come lower because the cure for high prices is high prices. And then the Democrats will say, ‘Well, you blamed us for causing it with our spending. So obviously, the other policies we did must be to blame must be responsible for curing it,’” Bahnsen said.
“And I don’t want to empower the Fed or Washington with saying you guys have your hands on the knobs of what controls prices, just give us our freedom and human activity will take care of the rest,” he added.
Bahnsen, who recently launched a free economics course on his website, told Boyle that our current economic policy is similar to an alcoholic who drinks alcohol to cure a hangover, but now “there’s no fun party anymore.”
“Okay, think of someone who drinks too much, and so now they’re hung over. Then they say okay, what am I gonna do with this hangover? Oh, you know what I should drink again,” Bahnsen said.
“So what did we do? We exacerbated a boom bust cycle by asking the Fed to come manipulate the economy,” Bahnsen said. “When things get a little tight, we want the Fed to come control it, where we want government to spend more with Keynesian policies, and you get a diminishing return.”
“You can’t stimulate with monetary and fiscal policy anymore, you’ve gone too far, it doesn’t work. And yet you can run up debt, you can take away from the private sector, you can extract resources from the healthy parts of the economy,” he continued. “So you’re getting all the bad parts of, to use my analogy, continuing to drink, but none of the good parts. There’s no fun party anymore, just a hangover.”
Bahnsen noted, “It’s taken years of government malfeasance to create a lot of these problems.”
“Like you said, Gov. Whitmer was out doing things three years ago, that created the problem today,” Bahnsen said. “And that’s what we have to realize at some point: we don’t need the government to fix the problems that they solve.”
Breitbart News Saturday airs on SiriusXM Patriot 125 from 10:00 a.m. to 1:00 p.m. Eastern.