Lori Walsh: The US unemployment rate has surged to 14.7%. Congress has spent $700 billion on the Payroll Protection Program, which was designed to keep people employed. Jobs are vanishing. Businesses are struggling to keep doors open. People are struggling to pay their May mortgage or rent. The First Cares Act sent stimulus payments to American taxpayers, but how are we going to pay for that stimulus? How do we pay for the Payroll Protection Program? Maybe how we pay for this as the wrong question to begin with. So today on In The Moment, we have two conversations coming your way about money and the national economy. Later in the hour, we welcome Gene Sperling. He's author of the new book, Economic Dignity. But first, South Dakota's own Rick Kahler is with us. He's the founder and president of the Kahler Financial Group, a pioneer in the field of financial therapy and he's the author of several financial books, including 2009's Wired for Wealth. He joins us on the phone. Rick, welcome back. Thanks for being here.
Rick Kahler: Thank you, Lori. Good to be with you.
Lori Walsh: I want to start with division in America. It's sort of a broad question, but we see so much division. We see so much emotion right now to the point where it's almost impossible to turn on social media and see people not arguing about wearing a mask or not wearing a mask, keeping economies open or ordering them to be shut down. Since you've done so much work with financial therapy, I'm wondering if as you watch this unfold, do you have some thoughts about what's going on?
Rick Kahler: I have more thoughts than we have time for. Absolutely.
Lori Walsh: We'll just keep giving you more time is what's going to happen here because there's a lot to get to the bottom of.
Rick Kahler: What really struck me today, I was doing some reading over the weekend and there was a pandemic in China in 1331 and it went to Europe. This was known as the Black Plague. A fellow wrote back then that he said, "Some are hiding in their homes, others refuse to accept the threat. Their way of coping is to drink heavily, enjoy life to the full, go around singing and merrymaking and gratify all of one's cravings when the opportunity emerged and shrug the whole thing off as one enormous joke." So what really strikes me, and we've talked about this before, is that our society, the world response to this pandemic is really nothing different from 700 years ago.
Inherently, pandemics inherently cause division and splitting of society. Just like it's human, we tend to whine up on one extreme or another. We see that, before the pandemic in our politics, in the US and just about the time we say, "You know, this can't get worse," it gets worse. I think this is pretty normal for the human condition to, one thing that it's called from a biblical perspective is something called scapegoating and that is this person or this group of people are wrong and if we could kind of get rid of them, then everything would be okay. And that's as old as a human condition.
Lori Walsh: You see that happening a lot with many groups we could use for example, but the media and media coverage is often a scapegoat in this. The media is making this a big deal when it's not. From a journalistic perspective, one of the great challenges of this story is that the facts are changing on a day ... you can't research this once and then go in and do a week's worth of shows. You have to be on top of everything, and we don't have the science.
The science is still coming out. The-peer reviewed journals are just now publishing information about what to understand about how this is transmitted. Part of our surprise is what I'm wondering, Rick, is that we think that we're beyond a hundred years ago because we have science on our side and we have communication technology on our side and therefore, we should be beyond this, but we're not. We're still very much human beings. By the way, the story is changing every hour.
Rick Kahler: Oh, I think you nailed it. You know, what hasn't changed are our brains and the fact that 90% of our decisions are made emotionally and that thinking is so difficult. So that's the real big difference. Yes, technology is making some difference because we have Zoom and no other pandemic has ever had the ability to virtual message and see one another, but we still have all of these emotions. We still have all these neural pathways in our brain. I was thinking yesterday, one example is, I think the evidence is showing us that this virus is transmitted asymptomatically. I think that's something most of us could agree on, the research is there.
We don't know if it's 5% or 35%, but think of our brains. Our brains are conditioned that if somebody sneezes, somebody coughs, there can be some fear that says, "Oh, you're sick. Let me get away from you." But when nobody is presenting that, this is a whole reprogramming of our brain to say, "This person could be sick. This person could be infecting me," and with something that's relatively violent, but we have no neural pathways that suggest that. So it takes actual thinking to think, "Wait a minute, this person doesn't have a mask on. That's to protect me. I need to be concerned about this." You've got to stop and think and that is so hard for the human brain to create that new way of being.
Lori Walsh: Which is why people around the world are having a hard time sleeping or having weird dreams and nightmares, or having increased heart attacks and anxiety attacks. There's a whole lot going on and we're all going through it at the same time, but we're all coping in different ways.
Rick Kahler: Absolutely, and that is a symptom. There's a direct correlation between unemployment and suicide. There's no question about it. We saw suicide increase in 2008, 2009 when went from a 4% unemployment to a 10% unemployment. As you pointed out, we're now at, I think, 14.7 officially. If you do the numbers, we're probably around 22 to 25%, and at levels we've never seen in our lifetime. So what does that mean? So when you hear people passionately arguing for opening up, they're not all wrong. When you hear people passionately arguing for social distancing and staying home and limiting contact and wearing masks, they're not all wrong.
Lori Walsh: Let's talk about policy then. As we have this understanding that we're all humans, and yet we have this government that we want to trust to solve some of these problems or work with us to solve problems and we are worried about spending money to keep ... $700 billion for the Payroll Protection Program, but yet we're in the 20%, most likely, for unemployment.
How do those two numbers work together because wasn't the Payroll Protection Program designed to keep people off the unemployment rolls? So that's the first question I want to ask you if you have any insight into that? Then the second question is this fear that people have about when the bill comes due for some of this economic stabilization and stimulus work being done by the Federal Government and the State.
Rick Kahler: I was a great resistor of the stimulus package back in 2008, 2009 and in 10 years, I've done a complete flip. I have to admit I was wrong in 2008, 2009. What they did then probably saved us from a depression. So I have to applaud the government and our representatives there for moving quickly with the intent of injecting money into the economy to try and give a little bit of cushion. Now, the way it's been done has been one step from a disaster. They were just not set up to spend $700 billion into the economy quickly.
So it's been a little bit of crazy and a whole emotional roller coaster in itself too. Of eight businesses I know that were approved for PPP, six of them sent the money back. They were all small businesses, average loans of say, $100,000 because they feared retribution. They feared Monday morning quarterbacking, that would say, "Oh, you didn't need that money." So that's been a real sad commentary on this whole thing. But the very fact that they're trying to do something and trying to interject money into the economy is, I think at this juncture, a pretty wise thing.
Lori Walsh: Should be, be worried about how to pay for it? What are some of the theories about what happens in that? We kind of have an idea that if nothing is done, real human lives are impacted. More people are out of work. We've already are hearing from people who are doing food distribution to needy families, that their number of requests and clients has doubled. So we know there are suffering on real people's lives. Should we be thinking about the suffering for generations to come because of the money that we're infusing into the economy, which clearly isn't, maybe not even enough and there should be more?
Rick Kahler: Yeah, and we're talking trillions of dollars. Here's how I explain and how I understand what's going on and this is somewhat simplistic, but I think it's accurate. We hear all the time that this is going to come out of taxpayers' pockets, that you just can't go borrow two, three, four trillion. You got to pay it back. Where is the income going to come from? All of us relate to this. We are all constrained by we can't have more going out than is coming in, or we eventually go bankrupt. That's true on an individual level. It's true on a company level. It's true for cities. It's true for states, but there is one entity that that's not true for. It's the Federal Government. Why? Because the Federal Government, our government, has the ability to print money and any sovereign government has this ability, Japan, the UK, for example.
Now think of this, if you can print money, you cannot go bankrupt for any debt that is denominated in dollar bills. So if the Federal Government needs money for social security dollars, if they need dollars for any type of stimulus program, if they need dollars to pay back their debt, if they need dollars to pay their interest, which they do need dollars for all of that, the treasury can simply quote, borrow money from the lender of last resort, which is the Federal Reserve. Now we all learned that in economics, but what does that mean? Where does the Federal Reserve get their money? They don't go out and borrow the money. They create it. The Federal Reserve can create money with keystrokes on a computer and just debit the account of the treasury. So this is kind of like, imagine yourself going to your balance sheet today and putting that you have a million dollar note owed to you.
All of a sudden, your assets increase a million dollars and in the liability section, you put that you owe a million. Now, your net worth didn't change, did it? Because it's your right hand owing your left hand. You write a debt to yourself. That is what the Federal Government's done. So the Federal Government can't go bankrupt. Anytime we hear a politician saying that the US can go bankrupt, that is not factually true. That's a politician that doesn't understand how the system works and honestly, that's 99% of politicians. So now, I'm sure if you're listening to this and it took me 18 months to get this, Lori, so this is not a simple concept as I'm presenting it. You're probably thinking, "Wait a minute, Rick. Wait, hold on. You mean we can just print money and everything's good?"
Well, no, there's one thing that can happen and that's inflation. So we are constrained by inflation. If we print trillions and trillions and trillions of dollars, at some point in time, somebody says, "You know, that American dollar is worthless. They just print money over there like crazy," and what happens? Inflation takes off. Hyperinflation takes off. This is what I was so concerned about in 2008, 2009. What happened? How much hyperinflation did we have for the four trillion that was put in this economy in 2008, 2009? Nothing, really. Japan, case in point, over 20 years, they have owed, I think their national debt is 220% at GDP. We're at about 103, I think.
They haven't had any inflation to speak of. They've had actual deflation for 20 years. So printing money, as I once thought, is not synonymous with inflation. So as a point, and I know this is pretty heady, but my point to help relieve anxiety is if I'm feeling anxious, because where are we going to get all this money? How are we going to pay this all back? How are we going to tax people enough? Because it's the Federal Government, it's not as critical as if this were a state spending money like this, or you and me. So this is a big, big difference. Quite frankly, Lori, this has helped more of my clients breathe a sigh of relief around the federal debt than any one thing I can think of.
Lori Walsh: So when you use the analogy of our personal sort of finances, which we all understand are different from the Federal Government I believe at this point, what matters a great deal in my personal finances is what I do with the money that I do have. I'm guessing, and you can help me understand more clearly, that what matters a great deal is what the Federal Government does with that money that they print, because the $1,200 check that I got from the Federal Government is now my asset. I need to do something with it, but they've given it to me. What do we know about how to use this money and how to invest it in a way that grows the economy and is good for individual Americans and good for the country and overall economic growth? That must make a big difference in printing it and spending it how.
Rick Kahler: I'm chuckling, because your question is so good. It's just a dichotomy. What is good for the economy? What is good for others is not necessarily what is good for me personally, when it comes to spending the 1,200. Because we're a consumer based society, we need money in circulation. We need consumers spending money. Yet, when you get that 1,200 ... I had one person tell me, "Well, I'm saving that because I needed an emergency reserve. So I've put that in the bank to make sure I've got something to fall back on." Well, that doesn't help the economy, but that is a brilliant, a very wise decision for that individual. So it's hard to have a good answer because you could say, "Well, hey, I'm going to be altruistic. I'm going to go out and I'm going to spend this at restaurants, or I'm going to spend this doing some good for people." Yet you leave yourself in the lurch because you don't have an emergency reserve. It's tough.
Lori Walsh: On the big scale though, what should the Federal Government invest in that creates economic growth? So to a certain extent, they've chosen to invest in me by giving me this money and sort of encouraging me to spend it in the economy and keep money flowing. But what about bigger projects, infrastructure projects, or healthcare infrastructure at this point? How do you weigh those decisions about where that money should be invested? If we all agree that to a certain extent, as long as inflation is ... where do you balance against the risk of inflation? How do you figure that out?
Rick Kahler: There's some that will say that the stimulus so far, has been rescue money, it hasn't really been stimulus because we can all choose to save that money and not spend it into the economy. So as you alluded to, if you had actual infrastructure projects where you're going to be building roads and bridges or expanding internet capacity, things of this type, that's money that actually directly get spent into the economy. That's similar to a FDR's program back in the '30s. That's when the Black Hills Playhouse was built. I think it was the program with CCC, actual infrastructure spending. But that takes a while to ramp up, doesn't it? You can drop money into everybody's accounts very quickly, but actual direct spending stimulus into the economy takes a while.
Lori Walsh: I'm letting this sort of all float around in my brain for a minute.
Rick Kahler: There's a lot to float here. I'd say it's like so many things.
Lori Walsh: Right. We care so much about our personal bottom lines, but we're also thinking about this broader thing as far as what happens next? We had a conversation last week on Giving Tuesday when we asked about Governor Kristi Noem's desire to have more flexibility in the Cares Act money that has come to the state, which was one issue. But the question was, "Well, what could be done with that money that might help us be a more resilient economy and be hit less hard with some of these things?" My guest at the time said, "Investment in affordable housing."
I guess that brought up a broader question with is that even possible? Is that a good idea? So people are thinking broadly politically, and they're thinking broadly about their health and about what they buy and how they spend their money. The word unprecedented is used far too much, but this is new territory because so many people are not just thinking about how to get back to normal, but they're thinking about how do we do this better? Are you hearing that from your clients that they're really thinking not only about the emergency that's in front of them, but how could so much have gone wrong so quickly?
Rick Kahler: Yeah, that's on everybody's mind. I think that's going to be discussed and dissected a lot as we move forward. I heard something like that coming into work. I come to work every day. I'm the only person here and how there's not too many examples of a country that handled this right, that were ready, certainly not in Western countries. We just were caught pretty flat-footed. We'll see how a lot of things turn out because you've got the arguments over herd immunity, Sweden practicing that. You had Britain that was going down that path and then changed.
Then you have Germany that has been on the opposite end of that. How is all that going to play out? You have Japan that has 2% of the death rate that we do. I think they had 21 deaths here the other day and we had over 2000 deaths. Now what are they doing that the rest of us aren't doing? So this is going to be really, really studied. How can we go forward? And we're going to have to figure it out because I don't think this virus is going to drop off the face of the earth. Maybe it will, but I think it's going to be with us for several years.
Lori Walsh: I want to close by going back to the beginning of our conversation, which is looking to history and seeing how people cope. Most of us, again, in school learned some very basics about what happened to Americans after the stock market crash. What happened in people's lives during the great depression? Let's talk about coping and some of the ways to sort of focus on our emotions right now as we talk to one another and as we look in our own personal balance sheets and have pretty big questions, most of which cannot be answered right now. So in our remaining minute, let's just bring it back to those emotions and talk about feeling those feelings and how do you get clarity to make some good decisions?
Rick Kahler: Yeah, the way to clarity is feeling our emotions and acknowledging them. So one of the most important things to do is when I'm hit with a wave of sadness or a wave of fear is not to shame myself into, "I shouldn't be feeling that fear. I shouldn't be feeling sadness. I should look at the good side of things. I'm healthy. I have food," and minimizing it. The important thing is to just stop and feel that feeling because we know the benefit of feeling a feeling is clarity.
It passes through the system, and then we can have clarity. I have found myself several times during this whole thing, just hit with a wave of a sadness. I just stopped and I just let tears come and just acknowledge that sadness. It can come like after the death of a person or you just hear some place and you hear something and immediately this wave of sadness and it can come on us like that. The important thing is to honor that and not to shame ourselves for feeling it because clarity is the reward.
Lori Walsh: Rick Kahler, I look forward to our next conversation. Thank you so much for this one today. So important.
Rick Kahler: Thank you, Lori. Always great to be with you.