Transcript
Clark Howard (0:00)
This message is brought to you by Apple Card. Apple Card is a no fee credit card that gives you daily cash back every day. That's 3% back at Apple and 2% back on every purchase made with Apple Card using Apple Pay. Apply for Apple Card in the Wallet app on your iPhone today, subject to credit approval. Variable APRs for Apple Card range from 18.24% to 28.49% based on creditworthiness rates as of January 1, 2025. Apple Card issued by Goldman Sachs Bank USA Salt Lake City Branch terms and more at applecard.com youm're the owner of.
Krista (0:33)
A small business, which means you're also the tech guy and HR and personal assistant and head honcho and intern. You could use another pair of hands like the experts you'll find at Verizon small business days, April 21 through 27. Get a free tech check, special deals and more. Call 1-800-483-4428 or visit verizon.com smallbusiness Book your appointment. Verizon Business it's my pleasure to welcome you here to the Clark Howard Show. You know, our mission is to serve you with advice and information that empowers you to make better financial decisions in your life. I'm going to begin today's show with a Clarkonomics session on something you may have been hearing about in the news. The possibility of stagflation. What is it? How do you prepare for it? And what's the potential of stagflation anyway? Also something I hate paying for. Buy now, pay later. However you want to say paying for. Not only does it stink, it's getting worse. Wait till you hear how bad it's become and why you should just say no, it's coming up later. So stagflation is something that you have to go in the Wayback machine. But we had stagflation in the late 70s into the early 80s. Stagflation was a really bad scenario and economists hate because it puts an economy kind of in a straight jacket, hard for it to break out of. And stagflation happens when you have both a slowing economy or a recession and inflation going higher or high inflation at the same time. Now are we going to have stagflation this year or maybe in 26? Hard to say. The signs are possible. Some economists would say probable, that we're headed to stagflation. And so there are things you've got to think about with your own wallet. Inflation seemed to be bending the right direction, but the economic uncertainty we have going on in the country right now has been a twofer, pushing prices up more than they were going up and at the same time slowing the economy. And it usually so most of the time, an economy functions almost separate from what goes on in Washington. But there can be policy mistakes from Washington that can lead to stagflation conditions. In the late 70s, it was actually foreign actors who were trying to bring the United States to its knees at a time when we lived overwhelmingly on imported oil. And our enemies at that time among oil producers were trying to devastate the U.S. economy. And they succeeded. And so we ended up in a declining economic cycle with rapid inflation. And some mistakes in that era by the Federal Reserve magnified the inflationary effect. Our conditions today are mild in the direction of stagflation from anything. If you, if you have relatives that were alive and adults back then, they can tell you what stagflation was like. It was bad. It was a bad economic environment. It was rough. We're not there, but let's call it stagflation light. What kind of things do you see? Well, I was talking briefly in response to a question last week and felt like I always get worried if I give like a quick answer to an individual question that I have not explained thoroughly the results that can happen. So as people get worried about the stock market and they may sell some of their positions or take money they might have put in the stock market, and they don't, where does the money tend to go? It goes into savings accounts or CDs. So suddenly banks and credit unions see more money coming their way for savings accounts and CDs. So what happens in the marketplace? The rates you can earn go down. So that's why we're seeing a lot of interest rate cuts that you and I can earn on savings and CDs. But there's a window right now here in mid April where you can still put money to work in an online savings account at a decent rate. Not the higher rates that we were seeing months ago and CDs, decent rates, but not the high rates we were seeing a year ago. But you can almost certainly still earn somewhere upper threes to mid fours on a savings account, an online savings account, with the rates changing, they can change every day. But the opportunity, if you've got money that you want to put in a cd, money you're not going to need for a year or so, there's still a window with a lot of the online banks where you can earn somewhere around four and a half percent plus or minus on the one year. And it might be harder to find as you go out in term find a rate at that kind of level. But the one thing not to do, not to do, and you'll hear me say this over and over again, unless you hate your wallet and hate your money, you do not put money in a savings account or a CD in a traditional bank branch because they wake up every day trying to figure out how they're going to cheat you out of a decent return on your money. And with the biggest banks, you put money in a savings account with them, you might be earning 1/100th of 1% where with an online bank you could be earning 4point something percent. It's your money. Make the choice. Now the other side of the stagflation light as I'm calling it, is that because of the inflationary expectations building in the economy and the number of defaults on credit cards and vehicle loans right now, interest rates, even as the economy slows, interest rates on loans are going to stay stubbornly high and could even go up from here even as what you can earn on savings is going down. It's why stagflation is a very anti consumer and any worker kind of environment.