The Brian Gongol Show on WHO Radio
Brian Gongol

An approximate transcript of the show broadcast on December 16, 2012

Segment 1

Brian Gongol: And on a week like this it may be difficult sometimes, to think that tomorrow is going to be better than today. There was obviously a terrible tragedy in Connecticut this week and it's, it's just awful. I mean, there's really no getting around the fact that it's just awful. And there no way to call it anything, when people say it's unimaginable, no, it's not unimaginable. We've seen it happen before. And I think some people are going to say that's symptomatic of a nation that has too many guns. But depraved people have bombs and knives and poisons and sometimes they've used them.

I mean, there was a knife attack in China at a school on Friday in which 20 kids were stabbed by a person. And some people are going to say then it's symptomatic of a nation without enough guns. But I think it's purely an act of speculation to guess how, any kind of armed citizen inside the school might have responded. I mean and yes, sometimes armed citizens do fight back successfully. And other times, even the police hit innocent bystanders.

It happened just in August of this year. Some cops in New York, after a fellow started firing at people outside the Empire State Building. They fired back and hit three innocent bystanders in the process. Even the police sometimes hit the wrong people when they're armed.

So we do know though, for certain, we have a national and it's really in fact, a global problem with sensationalization. And frankly, here's the question I have to ask, if we really want to decide, if we want to discuss something like the shootings today. Can we really add anything sensible or meaningful to the situation by talking ourselves in circles right now? I don't think we can. I think the one thing we do know is that sensationalizing the name of the killer can plant the minds or seeds in the minds of other people who are sick. Who would go on to create further tragedies. And I frankly think it's our humane obligation. I don't think this should be a legal thing. There are people who are already saying there should be laws about this. I don't think you need it a legal thing. I think just the humane thing to do is not to speak the name of the gunman. And I don't want to give any fuel to the fire of depravity because that just may be all that we can do. So for that reason, I don't want to spend a great deal of time talking about the shooting in Connecticut. Because it's just, it's too painful and there's not really anything constructive I think that we could add to it. Other than perhaps this, I think we need to start addressing the very urgent need for sensible mental healthcare in America.

We have I think, a totally messed up notion that says that people who are screwed up need to show up on shows like "Hoarders" or "My Strange Addiction" or "Intervention." And we look at that and we say, "Well, they're just crazy." And we don't do ourselves any favors by stigmatizing mental healthcare instead of treating it just like every other kind of healthcare, like it's something that's part of the comprehensive need that we all have. And I think we need to be more sensible about that. We need to start thinking very carefully about addressing that need, destigmatizing it, using it and considering it as a more routine thing that we all get like immunizations or regular checkups at the doctor's office or the dentist's office. It just needs to be part of the whole equation for all of us.
And for those people who need help and are willing to get it and are willing to participate, we should make sure that they have it. And I think for those who refuse to get it, who may be a danger to society that we need to find ways to remove them from society in a way that doesn't endanger the rest of us. But I think that's really all that I can even remotely sensibly add to the conversation at this stage. So with that, unless Brian Dean, you have anything that you think sensibly adds to the conversation.

Brian Dean: Well, you know I really don't. Often times my role on a lot of the radio program is to add levity.

Gongol: Witticisms, yep. That's what you're good at.

Dean: Well, it is and then maybe this is one of those moments where my normal role is...maybe it's not the right time.

Gongol: That's fine. So that's then that's all that need be said at the moment about the tragedy in Connecticut other than that our deepest sympathies of course, go out to those families. And I think everybody needs to...maybe if you need to have a conversation about it, honestly, I think the place to have that is around the dinner table or with family, with friends, with clergy, with people you trust. But I think that's a personal conversation. I just don't know that we can add anything tonight.

Dean: One thing that I did notice church service today seemed very, very full.

Gongol: Mm-hmm.

Dean: At least, at least in Waukee.

Gongol: That wouldn't surprise me in the least, wouldn't surprise me at all. I can't say that mine was but it's affected more by the ebb and flow of the school year. I didn't notice that, but I certainly believe that a lot of places probably, saw that because there is a deep value there to getting together with a community to have a moment you know, about that and to have a grieving moment or at least, an introspective moment. Even if it was something that happened far away from us, I think, it's understandable we need to have that. But I don't know that we can add anything to it on the radio this Sunday night. So I don't think we will try.

I think when said, we will try to do is try to address some of the things that we can do something about. Some of the ways that we can make sure that...we may not be able to fix the small things. We can't affect individual instances like this. We can't do anything here really, about a single school in a state you know, more than 1,000 miles away. What we can look at what we can do in the aggregate to make sure that overall, life is better for as many people as we can make it in the long term. So that's what we'll try to focus on tonight here on WHO.

Even though, it is still a very somber weekend here in America but I think, we do have to talk about ways that we can make life better because that's our one job really is to make sure that those who come after us can live a better, happier, healthier life than the ones that we were able to. I think that's how we try to pass that on.

And in that vein, in that note, I would like to start out tonight. By the way, I'm Brian Gongol. He's Brian Dean here on Newsradio WHO 1040. It's 9:14. And you can text us any time on the American Toppers and Accessories text line at 989-1040. You can call us at call us at 284-1040 or 1-800-469-4295. But again, you can text us at 515-989-1040.

I thought this was interesting, a research paper from the Chicago Federal Reserve. I read these things so you don't have to. Understand that.

Dean: Yep.

Gongol: I didn't expect you to read these things.

Dean: Thank you.

Gongol: But I thought this one was interesting.

Dean: I was just perusing a research paper in the Chicago...

Gongol: I throw myself in front of the bus on these ones.

Dean: You know.

Gongol: Yep. I'm there for you. And this one from the Chicago Federal Reserve says...

Dean: I was reading the online blog about Lindsay Lohan that's what I was doing.

Gongol: Hey that's your job there. And this one says that countries that did not respect property rights in the late 1800's are poorer today than the ones that did. Now think about that for just a minute. Countries that didn't respect property rights in the late 1800's are the ones that are poorer today than the ones that did.

Dean: So what could happen 100, 120 years ago can matter a great deal and we don't even think that it can but here is an example of it.

Gongol: And that is why I am so insistent that we look at the long term more than we do. We can never predict what's going to happen tomorrow or in a week or in a month. Anybody that tries to tell you that they know where the Dow Jones Industrial Average is going to be by the end of the year, well, the other person's a quack. The minute they try to make a prediction like that you should know to dismiss them because you can't predict where things are going to be. Things looked perfectly normal and fine on September 10th of 2001. You know, but any of us that went to work that next morning know that everything seems to have changed in an instant. We couldn't have predicted that event. We can't predict things from day to day, month to month, year to year. And we don't know where things are going to go but we can make plans. It would be hopeless if we didn't try.

It's like if you were a sailing ship captain. You know you're trying to cross the Atlantic Ocean. You know, you're leaving London and you got to make it with your goods to New York harbor but you don't know exactly what you're going to encounter along the way. But you do know, in general, you are going to need to point yourself west.

You can make broad plans. You can understand the broad consequences of your actions and you have to plan ahead and think ahead at least being flexible enough to respond to changes that get thrown at you but overall having a vision of where you're trying to go.

And I think this research paper from The Fed says decisions that were made over 100 years ago, coming up on a century and a half ago, are ones that decide how people are living today in countries all around the world.

Which to me, the lesson we need to take away from it, in America at the end of 2012 is that this whole short-termism that we have, this addiction that we have to the short term with the fiscal cliff for instance, should seem a lot more real right now. We really should stop kicking the can down the road.

We need to stop pretending that these, these behaviors and these actions and these choices don't have consequences because they do and they're very real consequences. Your grandkids may be cursing you for not making real decisions today because they will...those decisions we make or choose not to make, which is a decision in and of itself, the choice not to do something, that is also a decision. And if we keep on making non decision, decisions or bad decisions like we've been making our grandchildren may curse us for this.

We could be making, America 2090, America 2100, we could be making that a much poorer place than it should be, than it needs to be, than it, than it, by any reasonable set of rules or understanding of how the universe is supposed to work, we could be making that a much poorer place and that's wrong. We can't do that. We can't keep kicking the can down the road. We can't keep pretending like some budget cuts that we know have to be made and may have to be made in tandem with some tax increases. We've got to stop acting like that's a choice we can't make or that it's just too big or too dangerous for us.

Decisions have to be made. Adults have to show up. That's just it. Adults start, have to start showing up to the table. Whether it's in Congress or whether it's in the ballot box. The voting booth is a place to be an adult and it's time to start doing that and I think it's time to start doing that a lot more than we've shown the habit of being here in America. We've been kind of childish and we've been focused on me, me, me and what I want now. It's time to stop doing that. Because those institutions that we set up and that spending that we set up and those rules that we create for ourselves are going to have real consequences down the road and if we don't want America in a hundred years to be poorer than it should be, it's time to start thinking about the long term and time to start behaving like adults.
At least that's my thought. Your thoughts, 284-1040 or 1-800-469-4295 or again you can text us on the American Toppers and Accessories text line that number is 989-1040.

Segment 2

Going to keep on looking at ways we can make life better because it's maybe the thing that we can hold on to right now. So we're going to keep trying to do that for you here at 9:20 on Newsradio 1040 WHO.

And we do those things and talk about those things because they are intended to make life better for those who follow us, for everybody who becomes our descendants whether it's our literal descendants or whether it just happens to be the same people who occupy the same couple of square feet that we happen to occupy during our time here. But it's important I think to look at ways we can make life better for them and in the process we're going to make ourselves better, better off if we're looking at the long term as well.

It's interesting I was telling Brian Dean in the preshow conversation that I had read a book about 20 years too late. It was a book that came out substantial time ago. It's called, "Built to Last," and I really should have read this a long time ago. It was published actually in 1994 so this book is nearly 20 years old now.

Dean: '94.

Gongol: Yeah. '94. I mean, and it's probably the kind of nerd book I would have read back in 1994 anyway.

Dean: I was thinking. Yeah.

Gongol: Yeah. You know, if I read Federal Reserve publications for fun now I probably would have read this for fun then too, you know. Either way it's a surprisingly engaging book and it's a surprisingly readable book about how about a dozen companies in America are great visionary companies. They're the ones that have really endured much more successfully than their direct competitors. And why, why there are differences there. And so I'm not really saying anything new to anybody who's read this book already. But if you haven't picked it up before and you're interested in why, just frankly, some companies just are better than others and are better to work for and produce better things, are more productive than others and just seem to have fewer troubles when bad times roll around. It's a really interesting book. I would definitely recommend it. Again, it's called, "Built to Last." It...very, very interesting. And so I read it and got deeply into it and it was really engaging because it get...when we're talking about Hostess right now for instance. You know, the company that's now famously fallen apart here.

Dean: Did you notice by the way, that there are fake cupcakes...

Gongol: Yes.

Dean: the vending machine? They're different...fake... they're different company.

Gongol: There's a different brand. There's an off...

Dean: Yeah. There's a different brand.

Gongol: I took a picture.

Dean: They look funny. Don't they?

Gongol: Yep. I took a picture and I was going to upload it last week and I totally forgot about that.

Dean: And how in the world could that be worth the $1.25?

Gongol: It's not the same as the high quality...

Dean: It is not.

Gongol: ...that we were expecting. I don't know.

Dean: It cannot be. Maybe it is better. I guess I, everyone should try it.

Gongol: We should probably give 'em a shot. Give 'em a chance. But yeah, you're right they've already, the copycats have already shown up. And interestingly, Hostess the brands, like we predicted, are up for sale and there's a lot of interest. In fact, some insiders supposedly, are saying that two dozen different companies are interested in the various assets of Hostess. I mean, two dozen different bidders.

Dean: Mm-hmm. But isn't that how bankruptcy is supposed to work?

Gongol: Exactly. And it's exactly what we expected to happen. You know, this is...none of this should be surprising that even though the company itself has fallen apart that there's still value to the brand name Twinkie. I mean, it's just there. You know, Ho-Ho has a brand value. Wonder Bread has a brand value. Somebody wants that.

Dean: I had an off brand Ho-Ho this week.

Gongol: Mm-hmm.

Dean: It was just...

Gongol: Not the same experience for you?

Dean: It was not. It was OK.

Gongol: What about...I want to know about the off brand Zingers. That's the brand from Hostess that I'm most worried about.

Dean: Right. Right, yeah, because we are Zinger backers here. You pre-, you know, I prefer the chocolaty ones and you prefer the, what the...

Gongol: The pink coconut.

Dean: Yeah. The...yeah.

Gongol: And to those who will say, "That's not a Hostess brand." Oh yes, it is. Yes, it is. We looked it up.

Dean: I think it originally was a competitor.

Gongol: It was separate. Yes, I believe was it a Dolly Madison bakery I believe and then it got absorbed into Hostess. So it's, it's a Hostess brand. So we want to see those continue. But it's, it's interesting that at a time that, you know, it's a very high...

Dean: The official snack food...

Gongol: Of this show.

Dean: ...of this show.

Gongol: Not even an endorsement, we just like 'em. We would love to have it be an endorsement deal.

Dean: We have our favorite taco place and we have our favorite, you know, snack food.

Gongol: That's just what happens and we just happen to agree on these things. And it's...but while we're talking about a, you know, a very high profile bankruptcy here. You have to wonder well why is it that some companies fall apart and other companies don't and it all comes back to how far down the line their looking. It really seems like it's a question of, how serious are they about working for the long term. And not to just trying to make a profit today, although, of course, that's part of your job, but also to make sure you're still making a profit five or ten or 25 years down the road. And it's a, it's a point that I've harped on before and that I will repeat, I will come back to every time it's necessary here on WHO radio.

That it's important to not just look at what's happening tomorrow but to think about the long term and to think about what's important to do so that you keep having further success. And again, I total recommend this book, "Built to Last," if you're interested in the very same subject. It's very intriguing. It may even in part explain, well one of the comparisons they make is between General Motors and Ford, and they talk about the differences between these two. And now remember, the book was written in 1994. That was nearly 20, well, it was about 15 years before this bankruptcy proceeding that General Motors went through. Ford didn't have to. It's very interesting that, to read a book that's talking about why one company is stronger than a competitor that's almost 20 years old now and to look at how they're still stronger today.

Dean: General Motors didn't officially go through bankruptcy as say, Hostess is going through bankruptcy.

Gongol: Right. They went through a different flavor.

Dean: Different. Yeah.

Gongol: Flavor. Yes. Very different.

Dean: Oh that was so funny. Yeah.

Gongol: That was an unintentional pun there. But it did. It went through a different flavor of bankruptcy. And yet Ford didn't. Ford remained much stronger. Even though Ford wasn't, you know, powerful through the whole financial panic that overtook so many folks and did so much damage to the Detroit motor industry but Ford didn't have the same problems and Ford was highlighted in the book as one of the stronger of the two. And it's, it's really a very interesting take on things. And I think as a country we have to think about this, as a state we have to think about this, as communities we have to think about these things.

What are we doing to make sure that we're going to be better off 25 years, 50 years, 100 years down the road. Because if we're just trying to reap the rewards for now and we're essentially just trying to take as much as we can out of the system in the short run and then just saying, "Well, you know, I got mine. That's good enough." Well then we're no better than a lot of the folks that people would term "corporate raiders." You know, folks who come in and borrow a bunch of money to buy up a company and then cash out as much as they can and then really don't care I whether they leave behind a skeleton. They just don't care. You know, that's, that kind of raiding is something we could be doing as well. And we are doing in my view to the public trust right now and the public treasury. And it's an awful thing for us to do. We've got to think longer term than this and not just be so keen on taking everything that we can in the very short run and just being, sort of, childish about it. In my view stupid about it and harmful about it as well because one of the things that we will face here is the national debt, the enormous national debt, more than $50,000 for every man, woman, and child in this country. You could even start counting dogs and cats and it's still a ton of money.

We just owe a huge amount and we've got to stop doing that. One of the fears that's out there right now is that the government will try to lean on the Federal Reserve and say, "Well now it's time to start inflating our way out of this." It's historically been done in a lot of countries to get out of debt you just, just print more money. You can get away with that. Now there are some safe guards built into the system in America that should keep that from happening. Federal Reserve is not really the government. And it's not really part of the government. It is independent of the government. That's a good thing. There are a lot of folks who get angry about that and say, "Well, no, there should be more oversight. There should be more congressional oversight. Audit the fed," that kind of thing. But to be honest with you, there needs to be a very strongly independent Federal Reserve.

It needs to be a different thing because if it isn't then the government could just come along and say, "Let's just start printing more money and that'll do away with the national debt." 'Cuz they could print $10 trillion if they wanted to. They could print $15 trillion if they wanted to. And if they just released it into the system well sure, they could use that to pay off the debt and that's fine. It's just that then any of us who still have dollars would find them to be worth far less than they are today. And that punishes savers. And that punishes people who have been thrifty and who have made good choices about what they are going to do. And that's, that's clearly punitive. And that's a tax on basically people who were doing what they were supposed to do the whole time. That would be terrible.

Interestingly though, they just came out with a report from the Bureau of Labor Statistics, and I think the Department of Labor did this, about the consumer price index. Did a little looking here and it turns out the prices actually fell on a lot of stuff here in the last couple months.

Dean: Well we've seen probably what most people are really looking at gas prices.

Gongol: Gas prices lead the way.

Dean: Quite a bit yeah.

Gongol: Substantially, but so did several other components of what they use to measure inflation. I mean, like you said, gas prices by far lead the way. I mean, a big drop obviously we saw here in Des Moines.

Dean: 2.979 here in the Des Moines area.

Gongol: Pretty cheap.

Dean: I wouldn't say pretty cheap but...

Gongol: Well pretty cheap compared to what it's been.

Dean: Yeah.

Gongol: That's pretty good work. I mean, that, that fell by quite a lot. I mean, motor fuels overall falling by seven or eight percent in the last month. But that wasn't the only thing clothing costs fell by about a percentage and a half that dropped down. Just energy in general, you know, electricity some of those prices fell. Food even fell. Some food prices fell marginally, not a lot but a little and just enough to matter. And because of all these falling prices the consumer price index overall fell. In other words stuff overall actually got cheaper from October into November of this last year.

Dean: OK. And so that sounds good in some ways for the consumer but that might mean less profit or it might be this gosh if it's a certain price now and it's going, just like you might buy now because you think it'll be more expensive later you might hold off on purchasing because it might be cheaper.

Gongol: Exactly.

Dean: I mean, that's how I look at some things.

Gongol: Exactly. And that is our next little component here that we're going to talk about on WHO. Now nobody wants the hyper-inflation that could occur if the government gets too much influence over what is done with the printing of the money supply and the use and the circulation of the money supply. We don't want to get into the hyper-inflation that's possible but I will get into, in just a moment here, why falling prices are fun for now but we don't want them to keep going. We'll do that in just a moment. Stick around. It's 9:34 with the Brian Gongol Show on Newsradio 1040 WHO.

Segment 3

And at 9:37 here's your Newsradio 1040 WHO three-day weather forecast from TV 13. For tonight mostly cloudy skies, an overnight low of 32. For tomorrow mostly cloudy early then clearing, an high of 42. And then on Tuesday, day three, partly sunny, a little bit warmer, the high 49. Frankly, not feeling all that seasonal for December but I don't think any of us are complaining. And again for tonight mostly cloudy skies, an overnight low of 32 degrees and right now cloudy and well actually, maybe we should actually drop that low down because right now it's reporting 31. But it should stick around this temperature. Cloudy skies tend to help with that in general. Winds from the northwest at 9 making it feel like about 23 outside. So really not too bad for late December, mid to late December.

Dean: Can't really complain about it, no. No. We've had what, one inch of snow, so far?

Gongol: Right.

Dean: Yeah. At least in the Des Moines area.

Gongol: and we've actually gotten some rain here lately. Which we desperately needed.

Dean: It's nice to get some rain because the ground is not frozen...

Gongol: Mm-hmm.

Dean: ...or it's not frozen very much.

Gongol: No.

Dean: So...

Gongol: And we need it to soak in as badly as humanly possible. We are still...taking a look here at the weather graph that the National Weather Service offers. We are sitting at 25 inches of precipitation for the year right now.

Dean: Ooh.

Gongol: We were only briefly above normal for a very short span in late April, early May. Then the rest of the year we have been short on precipitation. We should have had 35, 36 inches by now. We have had 25. We have really been about 10 inches short all year long.

Dean: Well and folks we probably can't make up ten inches in snowfall.

Gongol: No. We are...

Dean: You know, because that would mean 100 inches of snow...

Gongol: Exactly.

Dean: ...which is an unreal amount.

Gongol: It's not a, a, yeah. Yeah, we don't...we do not need to be Buffalo, New York. All right. And we are way behind on snowfall actually, for this season as well. I mean, we, by this point, we should've had by historical standards probably about four to six inches at least.

Dean: Yeah. I was going to say a half a foot by now on average.

Gongol: Yeah. And we don't. We don't have anything close to that.

Dean: Not necessarily a half foot snowfall.

Gongol: Mm-hmm.

Dean: We can have some of those. We have had some of those. But, yeah.

Gongol: But total accumulatively four to six inches of snow. We have not had that. We have not had anything close to that. And that's why it's still dry.

Dean: There's the potential for some, a little bit of percepitation what, later in the week.

Gongol: Mm-hmm.

Dean: So...

Gongol: Could happen. And if you want to see something interesting go over to the website of the National Weather Service, the Des Moines office. They actually have a picture that compares what Saylorville Lake usually looks like and what it looked like in 2010 to what it looks like right now...

Dean: Ooh. Very interesting.

Gongol: ...and how profoundly dry it is right now. It's exceptional. And I'll post a link to that over on our Facebook page in just a moment here. When I'm, when I'm done chatting with you here in a moment, I'll post that over on the WHO Facebook page. So you can check it out for yourself. Very interesting there.

But falling prices, OK. So that was the news earlier this week in the world of money and spending and what we do with what we've got. And so prices have actually fallen. They fell between October and November and there's a good chance that we'll see some continuing price decreases November into December because gas prices which are a major component of this keep going down. Made a big difference to me when I was driving this week. I think I put 1400 miles on the car this week. So definitely gas prices made a difference to me.

Dean: Sure.

Gongol: I'd like to see them, you know, obviously in the short term at least I, I don't mind seeing lower prices. That's a good thing feels like.

Dean: Well and demand, relative demand anyway continues to go down because vehicles get better gas mileage too.

Gongol: Absolutely. I mean, I'm, I'm driving a vehicle it's an SUV but it gets usually 25 miles to the gallon on the highway. That's pretty good. I mean, you know.

Dean: Yeah. And maybe 10 or 15 years prior to that an SUV would've been 16, 12. Gongol: Oh yeah. Yeah, exactly.

Dean: Right.

Gongol: Exactly. This is not bad and it's enough that I was hauling equipment and tools and all kinds of stuff with me so I really felt kind of good about that. The thing is though we do like falling prices at least in the short term but we don't want them to perpetuate. We don't want them to go on forever and ever and ever. And here's why. There are certain people who, especially when you get folks who are very serious about wanting seeing a "stable strong dollar," they'll say. Sometimes they will overlook what can happen if it's a little bit too strong for too long. If the prices on everything fall perpetually it can be a problem.

Short run it's kind of, like getting a bonus. It's like getting a bonus in your paycheck. Falling prices are that equivalent. But if they persist and turn into something more like deflation bad things can happen. 'Cuz, first of all, if employers think that price pressure is going to consistently press things downward then what do you think they're going to do when it comes time to offer employees raises for the next year? They're going to be able to turn around and say, "Look, the prices for the things you're buying are falling and the prices that we are getting for our products or services are falling. We can't pay you more." So it puts downward pressure on wages and on salaries if it persists, I mean, if deflation keeps on going. We like it when we are consumers but not when we're the producers. And ultimately we're all producers of one sort or another. So you don't want it to go on so long that it becomes persistent.

Now secondly, persistent deflation, as Brian Dean was mentioning, discourages people from spending. I mean, why would you spend a dollar right now if you know that it's going to really be worth a dollar ten in today's money if you just sit on it. If you do nothing with it and you can just buy more stuff later. You're going to put off at least your non-essential purchases. You know, if you know that you're going to be able to buy a much cheaper television set in six months just by sitting on it. Well, you might be able to put up with that kind of crappy old TV that you've got.

Dean: You know and the beauty of that too if you are collecting some interest...

Gongol: Mm-hmm. You're doing even better.

Dean: You are.

Gongol: Yeah. Absolutely.

Dean: Even with the miniscule interest that one might be getting in a, in a savings account.

Gongol: And they are, those rates are unbelievable right now. They are unbelievably bad right now and there's nothing anybody can do about them and we'll get into that in just a moment. But you know, that's the problem if people hold back on their consumer spending that's 70 percent of all spending done in America every year. 70 percent of our economy is consumer spending. So even if you hold back on let's say, let's say 10 percent of what you spend is just fun money is just stuff you're spending on wants, not on needs. 10 percent of that 70 percent is still 7 percent of the total economy and if everybody is holding back on that, that slows down the economy even further and if consumers hold off on that you can end up depressing the lion's share of the economic activity and that can be huge. And that leads into this, while it would seem then that a currency that buys more over time would be a nice way to encourage savings, it's not a very good way to encourage useful investment. Because, again, if, just like the consumer may think that they can get something better by waiting a little longer well so do companies if they think they can get something better by waiting just a little ways down the road by just holding back for a little bit longer well then they might. And that further slows the amount of investment that's taking place. So it's fine in the short run you know, for savers because, like Brian Dean mentioned, you know, you get effectively a higher interest rate. But for useful investment in things that need to be spent upon, you know companies need to buy equipment and they need to hire people and they need to do training and all kinds of things but if they just keep holding back on that deflation can become a very dangerous spiral. So there's a reason that you always want, much to the contrary of what you'll hear from people who are gold bugs, people who are just crazy about a hard currency and having a gold backed currency, the thing is you want a little bit of inflation you always want prices to be rising by just a little bit, not much, but just a little bit. Because if people think that prices will be falling over time lots of bad things happen. Everybody holds back and then that brings the whole system grinding to a halt. That's what's happening in Japan.

Here, the best thing you can have is just a teensy bit of inflation, one percent or two percent. And this has been in the news this past week because the Federal Reserve had its meetings and Ben Bernake had to stand out front there and tell everybody in front of the cameras and the reporters and everyone what the plans were for the Federal Reserve and what they were going to do to put money out there in the economy and he had to say, "Look, we're doing everything we can for borrowing super cheap because we want people to borrow right now because we want companies to expand and we want consumers to buy things and if we don't do that we can't put people to work." Because they're also trying to keep or trying to get the unemployment rate lower than it is. We really want an unemployment rate that's below 7 percent. So they're trying to balance a whole bunch of funny things right now because they want the prices to rise but just by a teensy little bit but not by too much. They don't want these things to keep falling because if prices fall perpetually people will pull back and that will make it harder to put people to work. So we're asking a lot of the Federal Reserve right now. I would not want to be Ben Bernake. Not for a million dollars I would want to be that guy right now. He's walking a tight rope and it's a really challenging one right now. And it's why right now if you are saving money and you are trying to put money away into a CD right now or into anything really that's a savings type of instrument good luck. I mean, just good luck. I speak as someone in full disclosure. I speak as one who is a member of the investment committee at a credit union locally here. I am on the board. And we face the same thing everybody else does. Right now, all the pressure in the universe is to get people to borrow and spend right now and nobody seems to want to do it. And so you can't reward people for saving if absolutely nobody is comfortable with borrowing. And so it's a challenge we're going to see going on for a while and interestingly enough as we talk about ways to make things better in the long term.

There may be some consequences to these really low rates that people haven't realized yet. Read this one just the other day in, it was actually online from Forbes. The observation is this, interest rates for mortgages right now are next to nothing, I mean you can literally get some mortgages for under three percent if you want to get 'em on a 15 year mortgage and these are fixed rates by the way.

Dean: Yeah, which is amazing.

Gongol: It's just unbelievable. It's insanely low. 30 year mortgages in the low three percentage point range. I had passbook savings accounts when I was a kid that paid me five percent interest. I was paid five percent on the $50 or whatever it was I was able to put away in my kiddie savings account. And yet today you can't possibly come away with that. They can't pay savers anything close to that. When mortgage rates, 30 year mortgage rates are at like three and a quarter percent you know, if you've got decent credit. It's insanely low. What's interesting about this and again shared from a column in Forbes is interesting. I maybe had this in the back of my head but I hadn't sat down and chewed on this one and I think it's an interesting point. If mortgage rates are so insanely low right now and everybody's buying as much house as they really can find right now. Which would make sense I mean with rates this low why wouldn't you try to expand as much as you can? It's again what the government is trying to get you to do by the way because they want construction spending to go somewhere. So they want everybody to be buying as much house as they can afford right now. But if that happens and it just stays there, the problem is, people may get locked into that same home 'cuz it's all they could possible afford now you may be stuck there for a long time to come. Because if mortgage rates just up to normal kinds of levels say five, six, seven, eight, nine percent somewhere in that range then you can't buy more house, I'm using air quotes here, but you can't buy "more house" for the same price that you've got now in fact you would be able to afford "less house" than you can afford at today's rates. Which means that if rates just go up marginally, like they're going to have to in the next couple of years, nobody is going to be able to buy, "more house" for the same money nor "more house" for even a lot more money. We're all going to be, sort of, stuck in the houses that we're in now because nobody is going to be able to get into something better with a better mortgage than a couple years from now.

It could have a really interesting impact on what they call labor mobility. The ability the people have to just leave one town and move to another whether the company asks you to do it or whether you decide to do so on your own.

I had a friend who just encountered this trying to sell a house in Ohio where prices there have gone down they haven't gone up. And that's with the mortgage rates still falling.

Dean: Sure.

Gongol: He couldn't even make a lateral move.

Dean: But if you're just getting into the housing market isn't that pretty exciting for you?

Gongol: Well if you're just getting into the market that's great. Absolutely. But these rates will have to rise. I mean, a couple years down the road. And this is not me making a prediction about when it will happen or how quickly it will happen but at some point those mortgage rates are going to have to be higher than they are right now. It's impossible for them to stay this low for very long. They just cannot stay this low for very long. So when they ultimately do rise it's going to be very difficult then for, like you mentioned, the new home owners, you know the couple that just got married and they're off to find their starter home. Well if they're going to pay twice as much, three times as much on the interest rates as we're paying right now which wouldn't be too hard to do. They're going to be able to afford less house than anybody has right now or that anybody is going to be interested in selling.

Dean: Mm. Yeah. I suppose that...

Gongol: Because everybody else then if their moving out of their starter homes into bigger homes will have to bite off a much bigger mortgage payment than they're paying now. And see, you know, if you can't prime the pump that way. You can't get people to move up a stage in the housing that their buying because they can't afford to.

Dean: So the starter homes won't be there that's what you're saying.

Gongol: They might, they might not be.

Dean: The starter homes won't be there because the person won't be able to go to the next level.

Gongol: They may simply not be there. Exactly. It could be a very interesting impact. And again, it could be really difficult, you know...we don't see it so much here because we didn't have a housing boom here in central Iowa so we didn't really have a housing bust. You know we did have a couple of builders you know who went a little crazy. But it's not like there were huge you know developments that got built and then that kind of thing.

Dean: Well and there wasn't a giant run up of prices.

Gongol: Right, more importantly. So we really didn't see that impact but a lot of other places around the country a lot of markets saw huge drops in prices.

Dean: There were places that had say a $200,000 became a $5 or $600,000 house in a very short period of time.

Gongol: Absolutely. And if you imagine those prices went up and then now they've crashed but people are stuck there because they can't afford to walk away from their mortgages and they can't afford to sell short or anything like that well this very same impact could last well into the future with these mortgage rates being as insanely low as they are now. Just an observation that I thought was really kind of interesting. I'll share a link to that article over on the Brian Gongol Show page on So we'll have that here in just a few moments. Anyway we've got just a final segment coming up so stick around. We'll be right back. It is 9:52. I'm Brian Gongol here along with Brian Dean as we talk about making money and having fun on Newsradio 1040 WHO.

Segment 4

So did you hear about this one? Delta, yeah, Delta Airlines which at one point in my memory was kind of the third airline in America, at most. It was, you know, it was behind America and United. They were much bigger and much stronger. They just bought out 49% of Virgin Atlantic. So trying to get their way into the transatlantic market even more strongly than they've had up until now. And it was onlu four years ago that Delta bought out Northwest which made it the world's largest airline. So this I mean, 49 percent isn't a majority share but it's as much as they can buy of a European airline.

Dean: Mm-hmm. Sure.

Gongol: And so 49 percent now of Virgin Atlantic now belongs to Delta.

Dean: It's interesting though with the airlines.

Gongol: Yeah.

Dean: You know.

Gongol: I mean...

Dean: There a lot like Hostess in some ways, right? Because they have...

Gongol: They are.

Dean: ...gone through bankruptcy and they've absorbed other airlines and they're much different from what we may remember from 20, 30, 40 years ago or more. Where's TWA? Where's PanAm?

Gongol: Oh yeah. And to paraphrase Warren Buffet one of my favorite investing gurus out there, he said that if a capitalist would have been there when Wilbur and Orville Wright were testing out their airplane at Kitty Hawk he would've shot 'em down. Because over time the airline industry has lost tons and tons and tons of money. Over time it's not historically overall in aggregate has not ever been profitable. Commercial air travel in America it's always cost the investors more money than it's cost the fliers.

Dean: Huh, I did not know that.

Gongol: Yeah. It's pretty bad. So historically speaking it's been a loser. Because there have been so many bankruptcies and there have been so many troubles that they've had. I just thought it was kind of interesting you know that Delta is now not only the world's biggest but it's buying out big chunks of other airlines now too. We're like, I, just kind of fascinating especially 'cuz Delta has such a strong presence here because we are so close to Minneapolis which used to be Northwest and now it's Delta. And so it's just kind of interesting to me. I thought that was kind of well just intriguing. Anyway that was just a little piece of news.

Now for the Yay Capitalism Baby prize. I have to point out that sometimes people are nostalgic about weird things but yet they've figured it out. Some nostalgic geeks have found out ways to recreate the start button in Windows 8. Now Microsoft has come out with a new version of Windows.

Dean: Sure, the start button has been a part of Windows at least back in what 3.1.

Gongol: Exactly and it's annoyed a lot of people because in order to shut the computer down you have to click start. I mean that, that's bothered people. You know, it has been a point of complete forever.

Dean: Same thing with the cell phone though

Gongol: Oh yeah.

Dean: the same thing. It's the same button.

Gongol: The power button, exactly. I just find it interesting that some people are so nostalgic now that they have found ways with this product that they just love it so much they want the start button back that they've found ways to recreate it. Even though the company tried to take it away to create a better product. Nope, they just want it back.

Now, on the other hand we have the Tin Foil Hat award this week which is one that I actually shared when I was in for Simon Conway the other day here on WHO. But I think it bears repeating. Outgoing Representative Barney Frank, leaving Congress after decades in office, said this and I quote and he said this to the New York Times, "Liberals should say we think government's a good thing done right and we're for expanding it." Again that's Barney Frank and I quote, "We think government's a good think done right and we're for expanding it." Now we all think government's a good thing when done right but expanding it? I think I need a little more proof than that. We'll talk to you next Sunday night here on WHO.