With war in the Middle East, oil prices up and growth slowing, people are talking about stagflation again. In Episode 030, Luke Tatum, Nicky P and Rob Brayton explain what stagflation is, why a CNBC article's advice to buy government bonds misses the point, and why Paul Volcker's high-rate fix from the 1970s isn't on the table with today's debt. They close with why it helps to have an asset that doesn't move with the market, at any stage of life.
“You do not wanna be selling when your portfolio is down.”
Nicky admits he's not totally sure what stagflation is, and he's even less sure why everyone is comparing today to the 1970s. Rob gives us the simple version, and then we look at what it would mean for your money and what you can actually do about it.
What We Covered
What is stagflation? Prices keep going up, but jobs and the economy don't grow, so everything feels stuck. Rob's plain-language version: things cost more, and the money and jobs aren't keeping up.
Why it's back in the news. The Fed decided not to cut rates, and war in the Middle East is pushing oil prices up. I'm not ready to declare we're in stagflation, since it's felt like a rough economy for a while, but the pieces are there.
GDP growth revised down. Rob points to fourth quarter GDP growth being revised down to 0.7%. We're not in a recession, but he says we're close to the edge, and businesses tend to hold onto capital and hire less when the signals turn negative.
“If it’s going to happen, why not be protected against it”
Buy government bonds? The CNBC article we looked at basically ends with: maybe buy some government bonds. I also warn that official data can be sliced to prove almost anything, so it's worth asking what any statistic actually counts.
What inflation really means. Rob reminds us that inflation originally meant an increase in the money supply, not just rising prices on a select basket of goods. Anyone who's been to the grocery store knows how far prices have climbed.
If you're about to retire. If everything you have is in a 401(k), this is a hard spot. You don't want to sell when your portfolio is down. The question is whether you can wait until it isn't.
“You either believe in luck or you create your own.”
An asset outside the market. Even if you never use infinite banking for financing, having an asset that isn't tied to the stock market helps a lot when you build retirement income. When the market is down, you can draw on that instead of selling low. Rob adds that this protects you from sequence of return risk.
Lessons from the 1970s. Nixon closed the gold window in 1971, and Paul Volcker later raised interest rates sharply to bring inflation down. With the national debt now over $39 trillion, I don't think rates anywhere near those levels are possible today without the interest cost exploding.
Chasing bigger quarterly profits. Businesses got used to the fast growth of the COVID era. Expecting bigger profits every single quarter, forever, is a systemic problem, and it's part of why so much money chases yield.
Key Takeaway
Nobody knows whether stagflation is coming or how long it would last. What you can control is whether you have money that doesn't rise and fall with the market. That's why we use dividend-paying whole life insurance at Perfect Spiral Capital as a savings tool: cash value grows on a contractually guaranteed basis, so you're not forced to sell when the market is down.
Key Moments
[1:00] Why Stagflation Is Back in the News
[3:00] GDP Growth Revised Down
[5:00] Buy Government Bonds?
[8:00] What Inflation Really Means
[10:00] If You're About to Retire
[12:00] An Asset Outside the Market
[14:00] Security and Sequence of Return Risk
[16:00] Lessons From the 1970s
[18:00] Over $39 Trillion in Debt
[21:00] Chasing Bigger Quarterly Profits
“Because scared people make bad decisions.”
Related Episodes
Episode 004: Is the Fed's Dual Mandate Failing America? Jerome Powell, the 2% Inflation Target and the Volcker Era
Episode 025: Who Is Kevin Warsh, and What Would He Mean for Interest Rates? Trump's Pick for Fed Chair
Episode 047: What If Rates Never Come Down? The Big Short Lesson Behind "Buy Now, Refinance Later"
Want the full conversation, including why Volcker's 1970s fix won't work with today's debt? Listen to the full episode and grab the free toolkit at PerfectSpiralCapital.com/podcast.
FAQ
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Stagflation is when prices keep rising while economic growth stalls and jobs get harder to find. It combines inflation with a stagnant economy. In Episode 030, Rob Brayton sums it up as things costing more while money and jobs don't keep up.
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Luke Tatum and Rob Brayton aren't ready to say so. At the time of the episode, the Fed had held off on rate cuts, oil prices were up with the war in the Middle East, and fourth quarter GDP growth had been revised down to 0.7%. They see the pieces in place but no official recession.
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In the late 1970s and early 1980s, Paul Volcker raised interest rates sharply to bring inflation down. Luke Tatum's point is that with a national debt over $39 trillion, rates anywhere near those levels would send the government's interest costs soaring, so that tool is effectively off the table.
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Luke Tatum and Rob Brayton suggest holding some of your savings in an asset that doesn't move with the stock market, so you're not forced to sell when prices are down. They use dividend-paying whole life insurance for this. Cash value grows on a contractually guaranteed basis.
Show full transcript
Between The Lies: Episode 030 Transcript
Nicky P: You hear all the time about the stagflation of the seventies, and I gotta be honest, I'm not totally sure what it is. I'm even less sure since they're comparing it to where we are now. Welcome to the Between The Lies Podcast, your weekly lesson on how to approach an uncertain world with positivity and balance.
I'm Nicky P here with my good friends and money brains. Luke Tatum and Rob Brayton from Perfect Spiral Capital as they help us navigate the snares and pitfalls, you know, world of trust me bro economics. Stick around until the end of the video for their free toolkit and be sure to like and subscribe if you enjoy the video, gentlemen.
What Is Stagflation? [0:00]
Nicky P: What is stagflation anyway?
Luke Tatum: Well, Rob, do you want me to answer this one or do you wanna take it?
Rob Brayton: Hey, why not use AI, once in a while when it actually helps? Right. So the definition of stagflation is if you were eight years old, things cost more money. So prices are going up, people don't have as many jobs, and the economy isn't growing, so it feels stuck.
So prices are going up, but the money and jobs aren't. That's essentially the easiest way to explain what stagflation is.
Why Stagflation Is Back in the News [1:00]
Luke Tatum: Yeah. Well, I mean, this is a thing that, you know, unless you're like a financial bro or whatever, and you're like looking at this stuff all the time, you hear people talk about, you know, maybe you go get your oil changed or something, and CNBC is playing in the lobby, right?
And you just hear people talk about all these, you know, like econ terms. And so this is the kind of thing where. It's bad. I guess if you wanted to say, is stagflation good or bad? You'd say it's bad, right? Inflation is bad 'cause it makes things more expensive. Deflation is supposed to be this boogeyman specter that we're all supposed to hate because that's bad.
You know, it means that prices are going down, right? But we basically have a situation where. The Federal Reserve has decided not to cut interest rates. Trump was very much hoping for interest rate cuts. We covered on this very show, talking about the new guy, what's his name? Warsh, coming in as a hopeful to lock in, you know, and, and march to Trump's orders and cut rates and, you know, but we have a war and we have the Strait of Hormuz and oil issues and all of these things.
And so all these factors kind of coming together. Are creating concerns that we may enter stagflation. And a lot of people who are talking about this didn't even live through the seventies or whatnot. It's a lot of like fresh faces out there in the talking heads these days it seems like, but you know, it's.
Debatable, I guess you could say, whether we have stagflation at this moment or not. I don't know that I have a firm opinion on this 'cause it's felt like a relatively bad economic situation for quite some time. You know? I don't know that suddenly now it's stagflation in like my mind. I mean, do you have an opinion on that?
GDP Growth Revised Down [3:00]
Rob Brayton: Well, I would say one of the things that we haven't had officially happen. We haven't hit any sort of recession territory or anything like that yet with the economy, although I did just see, I think it was today or yesterday where they had download, there was a downward, correction to the GDP, and it was only 0.7%.
So we're kind of right on that precipice, of a potential recession as well, at least in terms of GDP growth. So. I would say we, you add in something like that taking place on top of all these other economic situations. Well, yeah. Then you could be in a, in a definite situation where we just are not gonna have that growth.
And if you get too many of those negative indicators, well businesses are gonna react to that. They're going to try and reserve as much capital as they possibly can. So you will see fewer jobs, you will see some of these negative things take place, which is not ideal. Any means? I would say like the sad thing is that a lot of it could probably be prevented, and doesn't, it really doesn't need to be happening.
Probably a different topic for a different time. But, regardless, you know, that that does seem to be that we're leading in that direction, and I think that's why you're starting to see some of these articles come up again.
Oil, War and a Self-Inflicted Wound [4:00]
Luke Tatum: Yeah, I, you know, not to turn this into a formal critique of American Adventurism in the Middle East or what have you, but like yeah, there is definitely a sense in which this is self-inflicted.
You know, we live in an age of memes, you know, and so that's like all my Facebook feed is, if I log into social media is, you know, memes about what's going on in the Middle East and whatever. But the, you know. Effects here. We hear, we see oil prices, right? I believe the stat is 40%. We have a, across the board, 40% increase in, the price of oil right now.
We had a brief, you know, stock market kind of fluctuation. We had a huge crash followed by a swing back up and all this stuff. And so it's like, how do you, how do you plan around this? I mean, we were looking at a CNBC article that you found, Rob, and so the article is talking. About what stagnation could mean for your money.
Buy Government Bonds? [5:00]
Luke Tatum: And you know, it's kind of hilarious because the recommendation is, well, maybe you should buy some government bonds or something. That's kind of where it wraps up. But you know, I've seen stats like. New applicants for jobs are only about 42% likely to actually get one. And, and stats like that, it's very hard to actually pick that kind of data apart and to really know like.
What counts as getting a job? Are we talking about actual employment? Are we talking about underemployment, you know, all these different, like, you know, just data points that you can throw around to try to prove your point. And so I don't want us to ever be in that camp where we're just saying, haha, look at this chart.
This proves that I'm correct. You know, because at the next day, I would probably be more than happy to criticize that very government agency for the type of data that they collect. And so, you know. I think anybody, any American that's going to the grocery store knows that stuff is a hell of a lot more expensive than it was five, six years ago.
You know, even one year ago in a lot of cases. And going to the fuel pump, you know, like you got a lot of a gas that you gotta pump into your vehicle. Yeah. You're gonna feel that, you know? I've always kind of laughed. At gas prices being like such a big deal. 'cause it's like if you just are commuting to work or whatever, I mean, we're not talking about that big of a thing, like change some other aspect of your life a little bit and you're gonna save more money.
That's always seemed kind of weird to me, but I know it affects commercial trucking, you know, and things like that. The movement of goods, the bottom line price of how much it costs to get something to market, is heavily influenced by that. And so. You know, I mean, as a emotional respondent to this situation, I have to say, yeah, things are not great and we have nothing to do with this war in the Middle East, and we should be out of there.
We shouldn't have done this. You know, and I say we meaning the government. I have nothing to do with it. You know, I'm not the government, but you know, we talk about the definition of recession. The definition of stagflation. You know, these kind of things. Those things have changed over time and they tend to be edited ever so subtly to fit the agenda, whoever is in office at the time.
So it's funny, it's hard to say. I mean, I'm not ready to declare one way or the way.
What Inflation Really Means [8:00]
Rob Brayton: Yeah, I'm not either. You know, it's funny, you were talking about changing definitions and inflation obviously is one of those right? The true definition of inflation is an increase in the money supply, and we see that that just continues to go on and on.
Yet, what we are told by the media, by government is inflation is just the media, you know, media increase in the price of most of these goods that only fit in this bucket that we determined. So, and that, and that's why, just like you had said, when you're at the supermarket and you're buying beef that is, has increased three, four, maybe eight fold in price.
Like that's part of what you're seeing amongst and other market factors and stuff too, right? Like there's shortages and different stuff that play into there. But in a stagflation situation, if we were to get into that. We're only gonna see that go up and you will see the growth of the income flat line or stay flat.
What Can You Do About It? [9:00]
Rob Brayton: And that's hopefully something that does not happen. I don't think any of us want that situation, but I think from a perspective of, well, what can I do about it? You know, like if it's thinking about you, the viewer, what can you do about it? Well, it's where can you put. Your funds, where can you put things that would put you in a better position if this scenario takes place, what can you do about it?
And I think that's a lot of, a big part of about what we do and how we help people is putting the vast majority of your funds, flowing them through a system that you own and control that protect you against that in a lot of those ways. And if it, if the worst does happen, you're, you have capital available too.
You know, take advantage of some of those opportunities. Or if anything else, you're just able to weather the storm that much better than the average person. So Luke, I dunno if you wanna
If You're About to Retire [10:00]
Luke Tatum: Right? You know, there's situations that you find yourself in, right? There's phases of life. And so someone who is about to retire.
Right. I mean, I've got friends and clients and people that I know, you know, that, that are about to retire. This is not a great position for you to be in, like if all your stuff is in say, a 401k or something like that. Because we're not only seeing massive intraday swings when it comes to the value of mutual funds or whatever it might be in your portfolio.
But we're also. Talking about like, well, what if we have stagflation for an extended period? You know, we don't know. We don't know. And anyone that tells you that they know is probably wrong. Right? But if you had, say, relatively flat or even negative numbers getting posted and your accounts couple of years in a row, well you don't wanna sell when your portfolio's down, right?
That, that if you don't know anything else about. Getting into the stock market, know that you do not wanna be selling when your portfolio is down. And so the question becomes, can you weather the situation until your portfolio is not down? Right. And you know, we're, we talk about dividend paying whole life insurance all the time.
We're teaching people to implement Nelson Nash's infinite banking concept, all that kind of stuff. And it's very important. But even if you don't get into all of the stuff about financing, all of the things in your life, even if you're just approaching this in the most casual of ways, having an asset that is separate from the stock market that is not subject to the swings, you know, the animal spirits, you know, and all this stuff is such a boon and you'll end up so much further ahead.
An Asset Outside the Market [12:00]
Luke Tatum: As you structure out your retirement income, right, because when the market is down, you could tap this non-market correlated asset. You know, whole life policy is going to go up in value just by virtue of the fact that you're getting older, right? Well, you're alive again today. You know that literally it's morbid, but that's literally how it works.
And so, you know, you don't really have to, you don't have to worry about that. It's gonna do what it's gonna do regardless. Interest rates are gonna have an impact on maybe dividend performance, but it's gonna go up. I mean, it's going to. And so, being able to tap into something else, having some other stuff where you're not just totally subjected to the whims of the market or the whims of politicians or, you know, however you might view these particular problems, can be such a huge game changer.
If You're Just Starting Out [13:00]
Luke Tatum: So. And, but that's just one phase of life. You know, you might be looking at this maybe as a 30-year-old, you know, thinking I need to start saving for retirement. And so, I mean, that's a different question. It's a different conversation, but, you still don't wanna sell when the market is down. And maybe it might be beneficial to.
Have some of your other types of assets, being developed as well. Right? And to say the least, to say the least. So, Rob, you've done some great work over on your channel about, you know, kind of the mechanics of some of these situations and, and the how much of your money is going to financing things and why that matters.
You know, all these, all these things. But you know, again, just keeping it. A very, very tightly focused conversation for a second. I, this is not a good situation to be in. You know, there's a lot of uncertainty. Markets are scared right now. And what does that mean? Well, if you've got money on the sidelines, 'cause you've already been following our advice, you know, if you're a client of mine for the last six years or whatever, you probably are in a pretty good spot right now.
I just, you know, have to kind of say that you could probably deploy some capital and take advantage of some opportunities. Right now, you haven't talked to us, you haven't been doing this. You're all in on the stock market and now your portfolio's down. Yeah, I get that. It's not that time. It's not, it's not the right moment for you to, you know, redeploy that somewhere else or what have you.
But anyway, it's about creating opportunities, right? You either believe in luck or you create your own. And so,
Security and Sequence of Return Risk [14:00]
Rob Brayton: Well, it's not only the opportunities, I think it's the security, right? To not have to worry when type things like this happen because they do happen. It's just the ebbs and flows of our.
Our current system and the way that it's structured, it is going to happen. And if it's going to happen, why not be protected against it and set yourself up so that when you have these down years, rather than have, you know, be subject to that sequence of return risk, you're protecting yourself against it and you can tap something else in the meantime so that you don't have to take such a big hit when the market does come down.
You know, it's just not a good situation for anybody to be in. And, you know, I hope that we can make some better decisions as a nation in some different respects and maybe get ourselves out of this a little bit faster, and avoid some of the current course we're in, but. I'm not gonna hold my breath.
I don't, I wouldn't advise anybody else to do that either, but what I would encourage people to do is start looking at alternatives and, you know, at a minimum, you know, you owe it to yourself to at least explore this option as well and see if it might be a good fit. No one's saying that you have to do it, but I, you know, there's a lot of proof that it does actually help in these situations.
Three Years of Questions [16:00]
Luke Tatum: More knowledge is always better. Right? And if you have to weigh these things back and forth, I mean, so be it. I considered all the things that I do every day now for three years before I started doing it, I was like, there's gotta be something more to this. I'm not getting, there's gotta be a reason that this is just some sales pitch, right?
Lessons From the 1970s [16:00]
Luke Tatum: And then here I am. But, before we, you know. Wrap or anything? I do wanna maybe talk a little bit more about the seventies and eighties and some of these things because I think it's a legitimate concern. I was not around for the seventies stagflation, but of course I've read about these things and so you had Nixon closing the gold window in 71.
You had, you know, president Carter, president Ford, you know, kind of during this period. But also importantly, you had Volcker as the Fed chair and. Volcker, you know, is famous slash notorious, right? For really raising the interest rates. And there's this notion that he was able to tame inflation by raising interest rates.
And it's like we're talking about, you know, pushing on different levers and trying to balance out the effects of other things. But the money printing did not get better. It was just a high interest rate, you know? This moment that we are in right now, that is not on the table. We can't have 15 or 20% general interest rates.
Why Volcker's Playbook Won't Work Now [17:00]
Luke Tatum: You know, like Prime can't go up like that because our entire national debt is gigantic and getting bigger by the second, and, you know. A tiny shift upwards in interest rates just piles on faster and faster and faster. You know, I know Thomas Massie has been posting all kinds of things about this.
You know, he's got some kinda little device that he keeps posting pictures of on the internet, you know, like, showing how much interest per second and all this stuff is happening.
Nicky P: The one billboard in town that does that. It break by family by day, by a minute, like how much you owe at any given time, and it's just literally click clicks up all day every day
Luke Tatum: As of today.
Over $39 Trillion in Debt [18:00]
Luke Tatum: We're over $39 trillion, you know, national debt. And when I first started like studying finance and really going, Hey, I want to understand the world of money better because I feel like there's something I'm missing. When I very, very first started this journey, I was learning about Austrian economics and all this stuff.
I remember going, oh my gosh, we're it. Nearly $8 trillion, you know? And it's like that, it seemed like. It was, it seemed like, yeah. Such an insurmountably, huge thing. You know, Ben Bernanke is the Fed chair. People made fun of him because he was Helicopter Ben. He was throwing money out of a helicopter like that was gonna solve the problems.
Apparently they call him that at his college. Like he's still known as Helicopter Ben, like internally at the school where he used to teach and stuff. It's, you know, funny stuff. I don't know if that's true or not, but it's like he's nothing. Compared to some of the stuff that we've done since then, you know, the COVID era, you know, inflationary spending and whatnot.
And I would never, I would, I didn't expect to see 10 trillion, you know, for a long time. And then 10 came and, and went, and 20 came and went, and 30 came and went. And it's bad.
Nicky P: COVID did a lot to make those numbers move real fast. But it was when they kept going after that, the things got real wonky
Luke Tatum: And, and businesses, you know, and I don't wanna get way off track, but businesses became very quickly addicted to the idea that we were gonna have this extremely high growth every year.
You know? It's like, oh wait, we have to adjust to the reality that every single year is not gonna have every consumer locked in their home, you know? And all this stuff. It's like entertainment companies and stuff. They have to go, wait a minute, we're not gonna have revenue like that on an ongoing basis.
You know, people are gonna go back to work and stuff like that.
Nicky P: So let's talk parallels then. What is this thing that we've got going on then in that case? Is everybody chasing that percentage? They're chasing that yield. They're chasing that any way we can to keep that money rolling in.
Chasing Bigger Quarterly Profits [21:00]
Luke Tatum: Oh, we talk about private credit and we talk about all this stuff and, you know, quarterly shareholder meetings and, and like, how do you get to continue to post bigger and bigger and bigger quarterly profits, right?
That is a systemic problem. You have to understand that that cannot be every quarter, forever. It can't.
Right. Right. Yeah. It's easier to show profit when the money's not worth anything. Right. You know, if we had trillion dollar bills, it'd be like, wow, we've got a hundred trillion percent year over year growth. Oh, you only get that once. I'm sorry. That's the end of the economy. Right. So. I know we wanna end on a positive note and whatnot, but I think we already kind of did in the middle.
We kind of did a negative sandwich today. You know, we talked about, we talked about our solution, our advice, our strategy that we use. You know, everybody on this call uses to weather the ups and downs and to, you know, kind of stay out of. This wildly fluctuating, you know, tumultuous sea of chaos that we live in day to day.
And it's in infinite banking. It's the idea that you can understand and implement a system that doesn't do that. And it's pretty easy. It's pretty easy to do, you know, just, you have to start, you have to be willing to open your mind to it, and then you have to start. And then, you know, to the extent that you do that, you have that much more control about what is going on.
You know, you don't have to live in a fearful way if you are willing to invest a little time and learn, right? And so we've got some great educational stuff that we would love to give to you for free and it will have a tremendous impact on you over time. And that is a couple of free video courses.
A copy of my book, between the Lies, how to Reclaim Your Future from the Banks of Wall Street. I think it's over here somewhere. I'll try to hold it up for the camera. So that is all available for you. It's a digital copy of the book, but, that's it. perfectspiralcapital.com/podcast. And just plug in your email address and we're, I mean, we're gonna load you up with tons of resources that you can.
You know, within a couple of hours, be like ready to have a serious conversation about how to change your financial environment that you operate in a big way.
Nicky P: I know that we talk a, like, talk about this at the end of every episode we pitch it and like, oh folks, education and education.
And, and as Luke's smarter, the thing that I want him to illustrate is, yeah, sure there's education, but what this really is. This is the x-ray specs to see the world as it actually is. This is how you get to actually fight. This is how you get to fight back, how to do something for you, how to find your way out of the nonsense because un until you read the book, until you learn it, you're just kinda fighting shadows in a room full of shadows.
From the Finance World to IBC [24:00]
Rob Brayton: I mean, I don't know if I would even be here today if I hadn't read Luke's book and then taking it into Becoming Your Own Banker and then kind of going down that journey of seeing it for what it is. I lived it, I know what that's like to go through that process and you're like, am I getting ahead? Am I keeping up with where I need to be?
It's very stressful and I can tell you like it is so worth investing that time to read the books. Get that education because that value on the other side, it's so nice to not have to worry nearly as much as what other people do.
Nicky P: You'd be probably the first to say, Rob, you're probably the one that was most bought in, I think prior to all this.
Like you actually work in the money industry yourself. You were kind of, you're in that world and so you know it's coming from you. It speaks a lot to me personally because it's like there's a guy who's outta the, you know, 180 degrees the other way and found his way here, so.
Luke Tatum: It is funny. A lot of people will end up in this from the like, very, very.
Polish the wonkish like finance world, you know, kind of thing. It's like, wait a minute, that's not correct. You know, maybe there's an alternative to some of this, you know? And so, it is a lot of fun and be sure to check out, like if you want more of Rob's personal journey and some of these things that, you know, I mean, he does great videos really breaking down if you're, if you're a technical person, especially like he's got some excellent stuff over his channel.
So, it's Rob Brayton, PSC, for Perfect Spiral Capital. So you find that here on YouTube as well, but, yeah, I mean, when you get on CNBC, when you get on CNN, you get on Fox News, you get on any of these websites and you read any of these articles, it's just like, it is easy to be overwhelmed and to get into a very negative mind space because all they do, all they do is throw around talking points, you know?
And so if you, if you have the equipment. On hand to be able to navigate that conversation. I just, it just makes a huge difference.
Nicky P: Why would they do that, Rob? Why would they do that? Because scared people make bad decisions.
Rob Brayton: Yeah, absolutely.
Outro and Free Toolkit [26:00]
Luke Tatum: Go buy government bonds. That's what they want. They want you to buy government bonds.
Please do not go try to sign up for TIPS. Treasury, what is it? Oh my gosh. Treasury inflation protected securities, please. I don't read this article and go do that. Anyway, so y'all, this has been a fun episode. I hope you got some value out of it. Thank you gentlemen, as always for the good time.
Good laughs. But you know, if you wanna get our free toolkit or we've got all that. All that stuff, and it is educational stuff, but it's, you know, we try to make it as fun as we can. It's perfectspiralcapital.com/podcast. Thank you all for watching, and we will see you next week.
