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Moneybeat: Economic growth back to pre-pandemic levels


WORLD Radio - Moneybeat: Economic growth back to pre-pandemic levels

Plus, the Biden administration makes a bad call on liquefied natural gas and defining the Phillips Curve

Traders work on the New York Stock Exchange floor in New York. Associated Press/Photo by Ted Shaffrey

MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: It's time now to talk business markets and the economy with financial analyst and advisor, David Bahnsen. David is head of the wealth management firm, the Bahnsen Group, and he is here now. David, good morning.

DAVID BAHNSEN: Well, good morning, Nick, good to be with you.

EICHER: Well, the final GDP report from 2023 is in, David. It comes in at 3.1% for the year. Is that not the kind of number we've striven for economic growth in the 3threes instead of the ones or the twos? In fact, were we not under 1% just last year?

BAHNSEN: Well, that's exactly what we want, although what we want is to have it year over year over year - you want a repeated pattern of 3% plus real GDP growth, and to get it in 2023 is wonderful. It's obviously anti-recessionary. And yet, the long-term trend line, unfortunately, is not improved. I think that certain parts of the real economic growth of '23 come out of real economic growth in '24 some of the inventory side, and also the low business investment. And so I do think that we're going to be avoiding a recession. And I do think that nevertheless, we're going to be going below 3% this year. So it's a mixed bag in the sense that the trendline continues to concern me. But the 2023 number is very, very good.

And if I could just very quickly comment, I believe that the 2017 to 2019 economy, that would have then become a 2020 economy apart from what ended up happening with COVID, is what we're seeing right now in ‘23. I think that there was just a really structural improvement that came from the repatriation of a significant amount, about a trillion and a half dollars of foreign profits coming back on shore. I think a lower corporate income rate incentivized a lot of business activity. I think that you did see a great pickup in CapEx [capital expenditures] in 2018. These things fertilize the economic environment to some degree. And it became very difficult for any economist who has any integrity at all, to properly analyze these things because you have one of the most monumental news events of the last 100 years interrupt economic calculation for almost three years. 2020 through '22, became this sort of really significant footnote. And now I think a lot of people were caught off-sides by the fact that the economic growth in ‘23 and heading into ‘24 looks more positive.

And so what's really interesting, paradoxically, especially for those of us who tend to view things through a partisan lens, is the two people that might be upset about what I'm saying, are those that: A. don't like who was president in 2017 through '19, when a lot of these really good things were happening, or [B] people who don't like the President ‘23 and ‘24, when some of this economic growth is taking place. But really, when you divorce yourself from the political biases that everybody kind of has, to some degree, what I just said is extremely objectively true, economically, that there is a good economy right now in these categories that I'm talking about, regardless of who's president, and that a lot of the things that helped create that took place a number of years back, regardless who was president then.

EICHER: All right, well, per The Wall Street Journal: The Biden administration effectively froze the approval process for the export of liquefied natural gas.

This happened Friday. President Biden said the administration will pause export application reviews as it takes stock of the recent development that the US is the largest exporter of liquid natural gas in the world.

Biden’s statement said: “We will take a hard look at the impacts of LNG exports on energy costs, [on] America’s energy security, and [on] our environment. This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time.” So what do you say about that, David?

BAHNSEN: Well, the first thing to say is that the biggest danger of it is the rhetoric that we are exporting more liquefied natural gas right now than we ever have. And the administration is well aware of the fact that there is a crisis to get the proper amount of fuel necessary to allies who are trading partners in both Asia and especially Europe, and that this was exacerbated by the Russia sanctions and the Putin invasion of Ukraine. The rhetoric of it, though, is playing footsies with naive extremism that's rooted in ignorance that they are well aware is untrue, that natural gas is resulting in a lower CO2 emission, that those who do not get LNG from us will then have to replace that need with coal and, to a lesser degree, crude oil. But both cases that emit more carbon, especially obviously, on the coal side. Natural gas is a better solution environmentally, economically and geopolitically. This is a hyper-ignorant decision.

The only comfort I take is I don't think they mean it for a second. This idea of we need to run a study - the EPA has run the study showing that the carbon emissions come significantly lower from greater use of natural gas. They already have some terminals built that have massively increased their output. We need more terminals built in Europe to receive liquefied natural gas. But you need to make the investment in new terminals now to feed what the growth need will be in 3, 5, 7, 10 years. So this is a really disappointing decision in the rhetoric.

But by the way, the idea that the oil and gas companies are upset about it, those who already own the export terminals, all their stocks flew higher after this announcement, because once again, all it does is bid up the value of the assets we already have when he threatens to not allow there to be any new assets. Terrible energy policy from the Biden administration.

EICHER: All right, David, before we go, let's define terms for this week. We've talked about this one a few times before, but it bears repeating, I think, because this concept in so many ways drives what we talked about last week monetary policy or the activities of the Federal Reserve, our central bank. So the term to define this week is the Phillips Curve.

BAHNSEN: The Phillips Curve is an economic theory that believes growth in the economy is inflationary, and therefore with economic growth comes more jobs, but therefore more inflation. And when you have less jobs, less inflation. It puts a relationship that is stable, but inverse, okay, between unemployment and inflation, and it is a hyper naive and disproven theory that the Federal Reserve right now---I attended lunch with Jay Powell in October, he said the Phillips Curve just doesn't seem to work anymore, it seems to be antiquated. I don't believe it has worked for 50 years. The 1970s was a period of high inflation and high unemployment where if the Phillips Curve was true, high unemployment should have created lower inflation. But fundamentally, the flaw comes because they don't understand that economic growth is not inflationary. Production of goods and services does not lead to more inflation. And so I believe that the Phillips Curve trying to make a relationship between unemployment and inflation is the best way to understand it. And the only place I'm aware of where this model is still taken seriously, is inside certain Ivy League universities.

EICHER: Ok, David Bahnsen is founder, managing partner, and chief investment officer of The Bahnsen Group.

David’s personal website is His Dividend Cafe each week you can find at

Thank you, David!

BAHNSEN: Thanks so much, Nick.

WORLD Radio transcripts are created on a rush deadline. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of WORLD Radio programming is the audio record.


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