Brian Wesbury at Restoration Weekend

Can our economy survive the Biden administration?

Economist Brian Wesbury, economics editor for The American Spectator, spoke at the David Horowitz Freedom Center’s 2021 Restoration Weekend, held Nov. 11th-14th at the Breakers Resort in Palm Beach, Florida. He addressed the state of the economy under the Biden administration, the impact of COVID lockdowns, and the road ahead to the Great Reset.

Don't miss this vital talk. A transcript follows.


Brian Wesbury: This is my seventh speech this week. I started at Hillsdale on Tuesday night. Went to Austin, spoke 4 times for my company, and then I flew here last night. And the Hillsdale speech was different than all the others. Usually, I talk to financial advisors and we'll get to that, tell them how to get rich and all that stuff. But at Hillsdale, I talked about the alternative to the Great Reset and it will fit nicely in the midst of this.

I'm going to go quickly. We have too much to talk about, but let's start with the economy, the National Bureau of Economic Research -- all right, now you're asleep. But they are the group that tells us a year after the recession started, that it started, all right, and then they tell us a year after the recession ended. And it ended, and we're like, duh, and thank you, right?

Well, anyway, but the reason I bring this up is that what economics is, at least part of it, is the study of business cycles, all right, recessions, recoveries, recessions, recoveries. And if you look back at last year, what the National Bureau of Economic Research told us is that we had the shortest recession in U.S. economic history, it was 2 months. And then they say we're having a recovery now. Now I got to tell you, I got a pet peeve about this because this was not a recession.

I'm old enough to remember when Paul Volcker jacked interest grades up to 20% and caused a recession. This was a lockdown, all right. What we're experiencing now is an opening up. But when Joe Biden goes on TV and says, "I'm the president who has created more jobs than any other president in history in this recovery," it's a joke because this has nothing to do with policy. This is not normal. "Unprecedented" is my favorite word these days. Unprecedented means never, never have we locked down the economy; never have we printed $4 trillion; never have we borrowed $5 trillion from our kids, our grandkids and our great-grandkids to spend today. We haven't done those things ever.

So then you bring me up and say, how do you forecast when you're doing unprecedented things? And I'm like, I don't know, I'm leaving. All right. No, but what I'm getting to is that's where we are. So the way I have dealt with this is I've divided the world into 2 parts: the next 12 months, all right, and then after that, because right now, the next 12 months, we have 3 things going for us. Number one. I don't think we're going to shut down again. I'll talk about that in just a minute. They'll put vaccine mandates, they'll put mass mandates, but they won't make the mistake of -- it was the biggest mistake I think we've ever made in economic history, but nonetheless, they won't do that again.

Number two, we are riding a wave of 4 trillion new dollars that the federal reserve has printed, and we still are borrowing from the future and spending it today. And all of that means the economy, profits, jobs, retail, they're all going to grow in the next year.

Now the one thing that would keep me awake at night is if we were to lock down again, right? And I don't think we will. And I'll share with you the one chart that I believe helps us get there with our belief about the future. So there's 3 types of people in America today, actually in the world. The first is that dark-blue part at the bottom. Those are people that tested positive for COVID. Now the CDC says that for everyone that tested positive, there are 4 that didn't test, but had COVID, all right, just like the flu. We don't test everybody, but we assume -- all right. And then there's the vaccinated, no matter what you think about the vax.

And when you add all 3 of those up, it's over 130% of the population. So how is that possible? We all know if you -- some people that had COVID are vaccinated, but what I'm saying is that at 130 -- these numbers were so widely spread now, so many people have added. Vaccines, I do believe they stopped people from going to the hospital as much and dying as much, not perfectly, but I think they do slow it down. And so the bottom line is, I think we're there. We're not going to shut down again, and you can argue with me about that if you want, but I don't think we will.

Then we printed all this money, we borrowed all this money. And as a result, the next 12 months I think are easy. It's after that, that I worry about, all right. And so now we're going to talk about that. And here's government spending, and by the way, it's non-defense government spending. And the reason I do that is because when you put World War II in there, this goes all the way -- this chart, all the way back to 1930. If you put World War II in there, it always blows up every chart and I love charts, they look good. All right. So I take that out. All right.

And so actually, let me give you one thing first. 2.5% of GDP, that's how much the government spent in 1930. Today, it is 27% of GDP. Now those of you are quick with math, you realize what that says is government has grown 10 times faster than the economy in the last 90 years. You thought Warren Buffett was good at creating wealth. This isn't wealth; this is how they've created growth. They will tell us all the time we're the greedy ones, profit makes you greedy, high incomes make you greedy. But the government is the greediest institution on the face of the earth, all right?

And here's -- this is a miracle and a problem at the same time. Look at how government has grown over the last 90 years, and then remember how we've created wealth because we are wealthier today than we were in the '90s. We were wealthier in the '90s than we were in the '70s; we were wealthier in the '70s than we were in the 50s. How did that happen? Because every time I turned on the TV or listen to conservatives on the radio, they're telling me, you grow the government, we're going to be the Weimar Republic. You grow the government, we're going to have a depression.

Well, when it never happens, guess what? People start believing it doesn't matter. And that's just simply not true because what happens is the bigger the government gets, the slower we grow, but it doesn't mean we don't grow. And this is one of the hardest things I've had to deal with when I talk to investors because a lot of financial advisors and many of their clients are conservative and they get terrified. How can I invest when the government has grown like this? How can we avoid the Weimar Republic? How can we avoid having another depression? And the answer is because we're more productive today.

And let me share this way of looking at the world with you. If we go back to 1935, government was 10% of GDP, all right. And that's after the new deal. All right. So basically, you can sort of think of it as we had 10 people in the wagon and we had 90 people pulling it, right? Because the private sector has to pay for the government. It's not perfect because we built the Hoover Dam and stuff like that. And then you come to the end of the Great Society. Remember the -- like Johnson, Nixon, Ford, and Carter, the 4 horsemen of the apocalypse, all right. And we ended up with 17 people in the wagon. All right. And we had 83 people pulling. Which one of those wagons goes faster? All right. Today we have 27 people in the wagon and 73 people pulling. Now, by the way, that's not even correct because of those 73, 13 work for the government, so we should put them in the wagon too. All right.

But when you look at now you want -- back when Reagan and Clinton were actually able to cut the size of government relative to GDP, it's the aberration, it's the miracle, all right. And we grew real GDP in the United States, our real output, who's over 3% a year. I'm part of the Bush 4% a year growth project. There's no way we can come close to 4% if we have 27 people in the wagon, no way.

And today, since then, we've grown less than 2% a year. In fact, we're growing about 1.5% a year slower, and I could give you all the numbers that show how that affects wealth. But the bottom line is, it is massive. If you look at Europe, I think all this stuff is in front of people's faces every single day and yet they don't see it. You go to Rome, you go to Paris, there's nobody driving around in pickup trucks and SUV's except the Russians, all right. Nobody. Their cars are getting smaller and smaller and smaller. And everybody goes, well, we don't have any place to park. No, they can't afford an SUV because they've grown less than 2%, less than 1% for decades.

When we talk about affordable housing in the United States, and that's a big topic these days, we need rent control in St. Paul and Minneapolis because houses aren't affordable. The reason they aren't affordable is because we're not growing. And what happens is that when we grow the size of government, if we never cut it back, we will never grow faster. All right.

And so where I'm -- as a forecaster, it's really weird because I've been bullish for the last 13 years. And yet, this is what's happened to government. And people go, how can you be bullish? Well, because we are, if you think 73 people pulling 27 in the wagon, what's going on today is that those 73 people are stronger than they've ever been before. We use a backhoe to dig a ditch; 150 years ago, we used a shovel. We have the cloud, we have blockchain, we have Starlink, we have 5g. We have all these new technologies and they make us stronger and we can pull a bigger government. That doesn't mean we should have a bigger government, but we can.

And so it's really hard to make an argument against a bigger government when you're not in the midst of depression. Actually, it's one -- we'll talk about inflation in a minute. It's one reason I love inflation because independent voters don't have an idea about any of this, but they know that gasoline costs $4.50 a gallon. And so but once we fix it, they forget.

And so what's the underlying problem is this, and I'm going to change gears here for one quick second. And that is we all talk about we're growing slower, we don't create as many jobs. I just said our cars are getting smaller, gas is getting more expensive, living standards aren't growing as fast. All those are important, but that's not the most important thing. You see, if you're in the wagon, I actually believe -- I believe we are our brothers' keepers, our brothers' and sisters' keepers. I think we are, and I don't know how many people you think we need to keep. There are definitely people that have to be helped. All right. And I think it's probably 3 or 4 out of 100, which means there are 23 or 24 people in the wagon that shouldn't be there.

Well, get ready, get ready, because the next logical thought is what happens to you when you're in the wagon and you shouldn't be there? Your soul starts to die. God put us on earth to be creators, to be producers, to serve our fellow man. And when you hop in the wagon and you say, nope, my fellow man is supposed to serve me, I'm entitled -- your soul dies. And when souls die is when economies really get in trouble.

And let me put this -- I've been working on this for 20 years. Gallup does a survey every year. They ask people are you a member of a church or a synagogue? And back in the 1970s, it was about 70%, 75% of all people were members of a church or synagogue, or they would answer the question that way. And then we got into the late -- mid 2000s, and it was down to about 60. Last year, it's the lowest on record, 47%. The bigger government gets, the less affiliation people have with God. And as a result, government becomes your savior and this will undermine America.

It's not the growth, it's not the little cars, it's the loss of souls, and that's what we have to fight. And I don't know how to -- I can't do it on my own and I don't know exactly how we do it. Ronald Reagan is unfortunately not with us anymore. We need somebody like him. But the bottom line is that's the underlying problem with our economy today.

If you go back in history, the United Kingdom had a gin problem, and then they had an awakening. Russia had a vodka problem. We have an opioid problem, but these are cultural, societal, Godly problems. They're not economic problems completely, and we have a lot of work to do.

And so let me close up with this. The other thing that I'm worried about today is what the Federal Reserve is doing. And so this is a chart of [M2] Milton Friedman, who I was lucky enough to meet, and Rose told me to watch that; he didn't tell me personally, and I read that in his books, but he told me other stuff when I met him, But [M2] and this is year-over-year growth, and there are a lot of people today who go, well, wait a minute, we're doing quantitative easing today, and you keep telling me we're going to have inflation. But we did quantitative easing after 2008, we didn't have inflation. So how can you say it's inflationary this time?

Well, back here in 2008, we did QE1, QE2, QE3, everybody remembers those. But what we did is we shoveled money in with one hand, and we hammered banks with regulation with the other. And so, yes, the Federal Reserve was buying a lot of government bonds, printing a lot of money, but they wouldn't let the banks push it into the system because they raised capital requirements. Those regulations made it harder to make loans, all that stuff.

This time, we paid banks to be part of the stimulus spending. PPP loans, banks got paid to do it. We direct-deposited checks into people's accounts. We've never done anything like this where the fed prints money and it goes straight into the banking system as deposits. And that's what M2 is, and so M2 peaked at about 27%. Remember this is year-over-year percent change and that's September-over-September. And now it's down to about 13. This money supply growth is faster than anything we we've seen since the 1970s.

And if you look at this, where we are today, now remember, this is a year-over-year percent change. I'm going to talk about the absolute amount of M2 in the economy because right now today, we have 38% more M2 in the system -- this is bank deposits -- than we had in February of 20 20, 38% more money. This is unprecedented, never in history.

So how do we think about this? Well, here's how I think about it. And that is, I think -- actually, I think economics is simple, I really do. Some people make it so convoluted and complicated, and you have to know graduate school derivatives to figure it out, whatever. And it's not that hard. Here's how simple it is. We have an economy, there are 10 dollars, there are also 10 apples. How much does each apple cost? A dollar. Now we increase the number of dollars to 14 dollars and we still only have 10 apples. Now, how much does each apple cost? $1.40. That's where inflation comes from.

Now by the way, we have a double problem today because Gretchen Whitmer made everybody leave the apple orchards in Michigan. So they all died and we only have 5 apples instead of 10. It's not exactly true, but that's my supply chain story.

Audience Member: (Inaudible).

Mr. Wesbury: Yes, I'm close. So now we have $14 and 5 apples, and each apple costs $2.80. And you just wait because once we get the apples going back up, and they go back to 10, the price is going to fall from 2.80 back to $1.40. And everybody's going to say, "See, I told you, transitory." By the way, transitory is not the right word; transit is the root; it means going from one place to the next. So I finally figured out that what the fed really means is we're going to go from low inflation to high inflation. Then they weren't lying ever. All right.

But the bottom line is that prices are going to come down as supply chains do get fixed, but we're still -- apple prices are still going to be 40% higher than they were. We have a permanently higher price system today. And by the way, the Federal Reserve, if they try to stop it, they're going to cause a recession. This is what Paul Volcker did. Like he and Ronald Reagan had the guts to throw us into really bad recessions in order to fix the economy. All right. They don't have the guts today, they do not. They will not shrink the money supply; they will not turn us back to where we were. And as a result, I think we're going to have higher inflation in the years ahead.

Now having said all of this, all right, in the next 12 months, corporate profits are going to rise about 30% from where they are right now. And the Federal Reserve is going to hold interest rates low and that's the 2 ingredients that lead to a stock price. And so when profits go up and interest rates stay low, the stock market will keep going up.

Don't confuse that with everything being fine, because what we're doing today, it's like we've had a car accident and they pump us full of morphine. And you think everything's fine, but it's not. So get prepared. Buy commodities, hold onto that real estate, lock it in with the longest loan you can get at a low interest rate because we will pay a price for this. We're just not going to pay it soon like -- or at least tomorrow, I guess, is my point.

One last quick thing, and I don't know whether you were going to ask me about bitcoin or not, but think about bitcoin. You can only make 21 million of them. If you're the Federal Reserve and bitcoin is your money, can you do quantitative easing? No. They could've never gotten away with what they did last year. That's why I love bitcoin; that's why I love a gold standard. But they will never let it be, ever.

And so this idea that bitcoin is going to take over and be our money, I don't buy it, I don't buy it at all. And I will just give one more analogy. People like gold, people buy gold, and at least, gold you can hold. But what they say about gold is you got to have gold and guns, right, because if you have gold, but no guns, you don't have gold. All right. And with bitcoin, they may not be able to decode it, but all they got to do is turn off your electricity. You need bitcoin and electricity.

So this idea that it's the perfect substitute for gold or money, it's not true. And so I like the idea, I love the idea. We should be on a bitcoin standard, we should be on a gold standard. I like hard money, I don't like the fed being able to play around.

But anyway, that's the point I'm going to get to and close on today, and that is that we're in the morphine period and it feels really good. But don't believe you're a genius investor; don't believe it's going to last forever. And be prepared to get on the defensive because eventually, we're going to have to, and then we have to fight like hell to get back to where we are. Thank you very, very much.

1965 (inaudible) for 17 years, don’t forget that can happen. So I'm not calling for (inaudible) still under-valued today and (inaudible) this high and interest rates are this low. So 2 things can change that (inaudible) or interest rates drop. So I do worry if all of a sudden (inaudible) from under, and then they replace Jerome Powell with him, okay, get ready because here we go, we're going to fix it. I actually think we're in a fire drill now and (inaudible) which is hard to do, but we're going to do it and they don't care because they don't (inaudible) but we're on the morphine, enjoy it.

Audience Member: So actually, I've got two questions. The first one is the chart that was startling to me was the one on religious participation. And this seems to also track wokeness and also tracks a lot of other things. That was a startling chart. I don't know if you could provide some color behind that and what the motivations were behind that.

The other issue is that the idea of forced inflation, or trying to increase wages, but clearly inflation is outstripping any increase in wages is a deadly formula for the Democrats to try to win the next election because they're effectively taking money out of the middle class. If you're in equities, it's great; everything moves, everything tracks up as long as that keeps going.

But I'm interested in -- really, the first question is really the religious issue and what that's all about.

Mr. Wesbury: Yes, so I'll answer the second one (inaudible) the question is the (inaudible). Well, in the internet, where we live today, everything goes faster, all right, and it's amazing how quickly. It's been less than a year that these policies were (inaudible) in place (inaudible) and gasoline prices go (inaudible) all right, and that's where we are.

The second thing, the church membership, it is woke; it is looking at government as your higher power. I believe churches -- and I'm not -- I'm even talking about some churches I've been affiliated with, Evangelical churches believe that we're our brother's keeper and we ought to use the government to do that. And I try to tell my friends, these pastors, that you're undermining the church. Their role -- the church has a role, the family has a role, the individual has a role, the government has a role. And so -- and when the government takes the church's role, you undermine the church and you build up the government.

And then just one quick thing, we don't have any time to talk about this, but the metaverse, this is Facebook new naming. I get it, you become an avatar, like I'd love to see your avatar. But anyway like -- and you live in some like -- there's -- what they try to make it mean, but think about metaverse. So postmodernism, the (indiscernible) the philosopher, in French philosopher, said "Postmodernism is incredulity at the meta-narrative."

All right. We don't believe -- you tell me the founding fathers were guided by God. You tell me Washington couldn't lie about the cherry tree; you tell me that Jesus was here to take care of our sense. Those are all meta narratives. And what the postmodernism will say is you just make up those stories because you're a capitalist and you want -- you don't want to -- you want to keep your money. You're a racist, you're whatever it -- you believe these narratives. And so what's the alternative in postmodernism to the meta-narrative that all of us grew up with? And that is it's my own experiences. That's what matters, my own experiences.

And when you think about Facebook, that's exactly what it's about. We all share our pictures with our family and it's all -- and it's our own experiences and that's the competition to the meta narratives that are out there and it's the competition to the church. And I hope I made that connection correctly, but somewhere in there, or at least what's in my brain about this stuff. Thank you.

Audience Member: Great, thanks.

Mr. Wesbury: Yes, thank you. Thank you.

Audience Member: Quick question -- can you comment on the far-left of Secretary Yellen or the potential of the Comptroller Omarova?

Mr. Wesbury: Yes, part of the great reset is to take over the U.S. financial system, to take over the global financial system. And I'm not out there -- they want to -- well, they just came straight out. Nancy Pelosi put it in the bill, everything. Every transaction over $600, we want it recorded. Every -- and then they changed it to 10,000 in a year, which is -- actually, that's less than $600. If you get paid $500 a week and you spend $500 a week, you're over that cap, that's it. It's actually $500 a month if you get paid. If you're a kid cutting lawns, you're going to cross the 10,000. So they want to take over the financial system.

The fed -- by the way, the fed used to be relatively small versus the economy. The fed is now basically equal to almost to the economy. It's 50% of the economy. They control the entire banking system. And so it's every institution that's out there and they all just grow and grow and grow and grow. I don't know, I'm kind of right here. I don't know how to stop it. Like what should have happened is that President Trump should have appointed new heads of every single agency, and they should have fired everyone on the second tier. And then they start sun-setting stuff.

As far as I know, there's only one person that got rid of -- they put in charge of an agency and they got rid of it. And he was a professor of Cornell; Carter appointed him to head the aircraft -- it was the predecessor to the FAA. I'm sorry. I forget it.

Audience Member: Yes, [Mel Kahn].

Mr. Wesbury: Yes, [Mel Kahn], and he got rid of the Civil Aeronautics Board. And wow, I pulled that one out. And he's the only one ever to get rid of a government agency. Otherwise, all these bureaucrats -- to me, that's what the deep state is. It's not some cabal that's been around since George Washington's cousin got cut out of the family will. And it's none of that. It's just self-interested bureaucrats and we have to get rid of all that stuff. That's the only way to shrink the size of the government.

And by the way, just if the New Deal was so great, and the Great Society was so much better, why do we need to Build Back Better? I'm like get rid of the New Deal, get rid of the Great Society. Then you can build back better. All right. But anyway --

Audience Member: Just to amplify the last question -- and there are 2 members of Congress in the room -- Saule Omarova, President Joe Biden's nominee to head the Office of the Controller of the Currency, is refusing to hand over to the Senate Banking Committee, her university thesis on Marxism written during her time in the Soviet Union. Republican Senator Pat Toomey, Pennsylvania, sent her a letter asking the Cornell Law School professor to hand over her Moscow State University thesis entitled Karl Marx's Economic Analysis and the Theory of Revolution in the Capital, up for Senate confirmation.

Mr. Wesbury: Yes, yes, Build Back Better is Marxism, there's no doubt about it. By the way, modern monetary theory is Keynesianism on steroids (indiscernible) they just ratcheted it up.

Audience Member: (Inaudible).

Mr. Wesbury: Yes, real quick.

Audience Member: Thank you --

Mr. Wesbury: Thank you.

Audience Member: -- for enlightening talk. You were talking about what's going to happen in the next 12 months. Are you able to give us some clue what's going to happen after that?

Mr. Wesbury: Here's sort of the way I've always dealt with investing in a changing world. It's like a baseball game; if the umpires grab us at the beginning of the game, and they tell us that in the 7th inning, the rules are going to change, all right. Either AOC makes the rules and home runs are only worth a half, all right, or Trump comes back and makes the rules and home runs are worth two. All right. One of those two is going to happen. But we don't know until the 7th inning.

So how do you play the first 6 innings? And I would say you play the team you brought; you play the team you gave scholarships to; you pay -- you play the team you drafted. That's who you -- that's how you play. Then the 7th inning comes, the rules change, then you change. So far, we haven't put in new entitlements yet. We have printed lots of money, we're having inflation. I told you that. Buy commodities, buy -- don't buy one, buy a bunch, buy -- expose yourself to real assets.

But we haven't changed the rules yet, the real rules, the tax rates, the entitlements yet. And so we're not in the 7th inning yet. So play normal, play like the first 6 innings. Hope that made sense.

Audience Member: 20 seconds left.

Mr. Wesbury: Yes, 20 seconds left, yep.

Audience Member: Thank you. Rebecca Dunn from Tampa. Very quickly -- you brought up metaverse, Facebook going to metaverse. And I do not speak Hebrew, but I have heard, and it has sort of been backed up by my searches, that meta in Hebrew means death. Could you elaborate?

Mr. Wesbury: Yes, I can't. I believe you, and thank you very much for that.

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