NEAL CONAN, host:
This is TALK OF THE NATION. I'm Neal Conan in Washington.
There's been a lot of bad economic news of late. Inflation is up, so are foreclosures and unemployment. Gas and oil prices are high and some say going higher. The dollar is down. Economic growth is sluggish at best. And, not surprisingly, consumer confidence numbers are low. Though, President Bush said again today, he doesn't think we're going to go into a recession, plenty of economists disagree with him. And the combination of rising inflation and little or no growth has revived the term last used 30 years ago - stagflation.
Amid all the questions and concerns, a lot of people are reconsidering their options. So in the current economic climate, are you looking at your assets differently? Are you changing your medium- or long-range plans? Not to remodel, for example, or send your kid to public rather private school or postpone that new car. And what are your questions about stagflation.
Our number is 800-989-8255. E-mail is talk@npr.org. And you could tell us your story on our blog at npr.org/blogofthenation.
Later on in the program, David Gardner of the Motley Fool will join us to answer your questions about investments in the stock market and talk a little about my fantasy portfolio.
But first, economic plan Bs. We begin with Dean Baker, an economist and co-director of the Washington-based Center for Economic and Policy Research. And he's with us here in Studio 3A.
Good of you to come in today.
Mr. DEAN BAKER (Economist; Co-Director, Center for Economic and Policy Research): Thank for having me on.
CONAN: And stagflation. What is it exactly?
Mr. BAKER: Well, the basic story is that it's a mix of both inflation and slow growth. We usually think these are opposites. So, you know, we're used to having periods in which there is high unemployment, slow growth. And, typically, we think during those times inflation is slow. We might even have a problem with deflation, as we're worried about back - about five or six years ago.
Conversely, when inflation is high that's usually the time when we think that unemployment is low and the economy is growing rapidly. So to see the two together, stagflation where we have both inflation and slow growth and rising unemployment, that's unusual. That was a story we had back in the '70s driven primarily by higher oil prices, but also we had higher agricultural prices, then, too, a falling dollar.
Then we did have this combination of inflation and unemployment. But usually it's - usually that's not the way it is. And the big problem with stagflation is you don't know which one to hit. You know, if we simply had high employment, we have an easy story we could tell. We simply try and stimulate the economy. We have a stimulus package like Congress just passed. We have the Fed lower interest rates. That's an easy story to tell.
Conversely, if we want to fight inflation, we know how to do that. We try to tighten up. You know, we try to get down our budget deficit. We have the Federal Reserve Board raise interest rates. Those are the standard recipes. But that can't work when we're trying to combat both high inflation and slow growth at the same time.
CONAN: Yeah, Ben Bernanke, the chairman of the Federal Reserve, said today in front of Congress, you know, yes, we've got a dead growth going but this inflation really complicates our lives. But that combination you mentioned -higher oil prices - well, oil over $100 a barrel of late, wheat prices and other food commodities are going through the roof and unemployment is up, too -is this a recipe for stagflation of the same scale as we had in the '70s?
Mr. BAKER: Well, I think it's a different story. I mean, we are seeing both higher inflation and, you know, I think we are going to see a very severe recession, I think we're at the beginnings for that. It's a different story than what we had in the '70s, though.
In the '70s, we had a very different economy than we have today. Most importantly, we have a much more unionized economy that had the plus and minus. The plus was that workers had some protection against inflation. You know, that union could get higher wages when they saw higher prices. But the minus was that it gave us a way to price spiral. So we saw inflation continue to ratchet up through the '70s.
Today, we have a much less unionized economy. The contracts we used to have back in the '70s where wages we often indexed formally to the consumer price index, those are almost invisible now.
CONAN: Everybody remembers the old Cola, the Cost-of-Living Adjustment.
Mr. BAKER: Yeah. Yeah. Not many - in my place, we have COLAs - but not many other places will you find the Cost-of-Living Adjustments. It's very, very rare in the public or private sector these days. So we aren't going to see a wage price spiral like that. We also have a much more globalized economy. So back in '70s we were considerably more insular. If you look at non-oil, the non-oil portion of our trade is about twice as large relative to the economy as what it was back in the '70s.
So that means that, you know, we can't just pass on higher wages and higher prices. It's a very, very different world. On the other hand, the flipside of that, one of the causes of inflation right now is the falling dollar. We're paying a lot more for imports and expect that to continue. So that will be, you know, probably the main cause of inflation in the next year or two.
CONAN: Mm-hmm. And similarly, going back to the '70s, how did we get out of it then and does that bear lessons for our situation now?
Mr. BAKER: Well, yeah. How we got out of it is not a pretty story. We had the worst recession in the post-war period. You might recall Paul Volcker came in as head of the Federal Reserve Board at the end of 1979. Probably Jimmy Carter's (unintelligible) I gather his biggest mistake because he threw the economy into a recession. I mean, not deliberately, but he raised interest rates and he raised them enough to throw the economy on recession in the 1980s, Jimmy Carter was running for re-election.
And then he pulled back on that. And, you know, then we had 1981, he again tightened up on interest rates. The economy went into recession and unemployment went through the roof, eventually hit 11 percent at its peak in 1982. So it's a very long, very steep recession. We didn't get the unemployment rate back down to the pre-1980 levels until the end of that decade. So hopefully, we're not looking at something like that now.
CONAN: Our guest is Dean Baker, an economist and co-director of the Washington-based Center for Economic and Policy Research. If you'd like to join the conversation, 800-989-8255. E-mail us, talk@npr.org.
Let's begin with Roger(ph), Roger calling us from San Antonio in Texas.
ROGER (Caller): Hey, good afternoon. How are you doing?
CONAN: Okay.
ROGER: I guess - I was just trying to think of what are the prime factors as to why we're in this economic problem that we're in right now. I mean, how is the housing market keeps getting thrown up? But, I mean, what else is triggering this? Because I'm just kind of curious, you know, 10, 20 years from now, are we going to be looking at something similar like this where, I mean, we're kind of like in a perfect storm economically right now for everything kind of pointing downward.
Mr. BAKER: Yeah. Well, I think that's absolutely right. I mean, the housing market really does sit front and center here. I have to say it's incredible negligence on the part of policymakers. I mean, they put Alan Greenspan here front and center, but there are a lot of other people that share some of these blame.
The housing bubble was growing, you know, beyond leaps and bounds, beyond anything that made sense. And this in 20-20 hindsight, by the way, I've been talking about these for a number of years. I mean, house prices are nearly just tracking inflation. In the last decade, they outpaced inflation by about 70 percent. That created $8 trillion in housing bubble wealth.
What we're seeing now is the collapse that bubble, houses - house prices are falling at double-digit rate, construction is down by 50 percent, sales are down by 40 percent. That's what's throwing the economy into the recession.
The other part of the story - the inflation part - is we had an overvalued dollar. You know, in the late '90s, Robert Ruben and Bill Clinton thought it was a very good idea to have a high dollar. In the short term, that's nice in some ways. It means we can get cheap imports. But debt couldn't be sustained. We got a trade deficit that was over 800 billion a couple of years ago, 6 percent of the GDP. You simply can't sustain that. You could have that for a year or two years, three years, but it was unsustainable over a long term.
It was inevitable that the dollar would fall. And that's what we're seeing now. And unfortunately, we're seeing the two together - the collapse, the housing bubble - pushing the economy into a recession at the same time that the dollar is falling, you know, quite precipitously against some currency leading to higher prices and - higher import prices and inflation. So it was really bad policy that got us here.
CONAN: Roger, thanks for the call.
ROGER: Oh, thank you.
CONAN: Bye-bye.
Here is an e-mail from Ginny(ph) in Colorado. I'd like to hear somebody address what rate of growth is better for sustainability and overall containment of over-consumption? Spending isn't the answer to everything. Perhaps a slower economy would be better for the planet.
Mr. BAKER: Well, I - that's a very good point. I mean, I take very seriously how we, you know, how we have to respect the planet and then, you know, we do have to do something to contain greenhouse gas emissions. We've been incredibly negligent on that. I don't think slow growth is going to be the answer though. I mean, at the end of the day, we're going to have to do things like have more fuel-efficient cars. We can drive less. It may be great if we got people in situations where they didn't have to drive as much, if they would rely more on public transit. If, you know, maybe they didn't have to commute to work as far or as frequently.
But that's, I think, actually done much better in a growing economy. And growing does not mean consuming more in the sense of buying more goods or bigger cars. It can mean, you know, that we go to more lectures or, you know, have better computers that we could, you know, download things from all over the world. That doesn't mean using more resources. So, we absolutely have to take seriously the fact that, you know, we have been doing great harm to the planet and try and reduce that, but I don't think slow growth is the way to get there.
CONAN: We're talking with Dean Baker, an economist. And we're asking listeners, what about their plan Bs? We're particularly talking about assets as you look ahead towards your plans for the medium and longer term. Are you changing your decision-making about sending a kid to public rather than to private school, postponing that new car, maybe? Give us a call, 800-989-8255. E-mail us talk@npr.org.
And let's go to Jeanie(ph). Jeanie is with us from Georgia.
JEANIE (Caller): Hi.
CONAN: Hi there.
JEANIE: I was just wondering, I'm 40, my husband's 48. We've been married 10 years and have no children, have no intention of having them. While everyone else is spending their money like crazy, we saved and scrimped and paid on our house and paid on our student loans, and now we thought we were in a position to finally spend some money and then this economy happens. I guess what I'm wanting to know is should we buckle down or can we buy some furniture and TVs and such?
Mr. BAKER: Well, it's a good question. You know, I'm reluctant to speak to anyone's specific situation. I guess what I'll just say is, you know, be cautious. If your house price had gone through the roof over the last decade and Georgia was one of the less affected areas - someone said there was no bubble there, but it was, you know, certainly not like Florida or Southern California or some of the other areas, including D.C. that, you know, prices in some cases triple - but, you know, if your house price did not go through the roof, it probably won't go through the floor.
So, you know, what I'd do is take a look at how much equity you have in your home, recognize that house prices can fall a little bit even if it didn't go up 100 percent - you know, if it went up 40 or 50 percent, maybe it'll fall back 10 percent, you know, that can happen. But if you'd be comfortable with that and then you'd still be able to, you know, afford the TV or whatever it is that, you know, you have on your shopping list, no reason not to do it, you know. It's, you know, you only live so long, so I'm not going to tell everyone to be, you know, save forever, you know, but just I'd urge you to be cautious.
JEANIE: All right. Thanks.
CONAN: Even so - thank you very much for the call, Jeanie - but people in her situation, if you're advising them to be cautious, that the spirit of consumer spending that might get the economy going again, you're suggesting this might not be the right time to expect that.
Mr. BAKER: Well, that's right. I mean, you know, that was part of the problem. When you look to trying to stimulate the economy, we're looking for different routes and, you know, Congress went one route with the tax rebate, and some of that money will be spent. And in many cases you have people literally living at the edge, so you give them a check of $500, they're going to spend it, they have no choice, you know? They need to do - to, you know, put the food on the table or whatever might be. But a lot of other people are going to make a decision that, you know, they see their house prices just plummeted, you know, and their stocks might have fallen as well, and they will save it.
So, you know, that's why some of us were advocating some other routes, you know? You could have given money to state and local governments so they don't have to make cutbacks that many of them are making. You could have spent some on infrastructure. You could have done a green tax credit, that was a proposal that one of the other callers a moment ago was saying, can we reduce the harm we're doing to a planet. Well, suppose we had given a tax credit for people that install energy-efficient windows, you know, increase the insulation in their home, you know? They use it or lose a tax credit. You have one year to do that. I think there are better ways to try and stimulate the economy than what Congress ended up doing. It was better than nothing, but it wouldn't have been my preferred course.
CONAN: Dean Baker, thanks very much for your time today. We appreciate it. Dean Baker is an economist and co-director of the Washington-based Center for Economic and Policy Research. He joined us here in studio 3A.
If you're taking a look at your assets in this fragile economy, maybe you're reappraising that Renoir or, heaven forfend, even thinking about putting your comic books on eBay, we'll have some answers for you. Your plan B next. 800-989-8255.
I'm Neal Conan. It's the TALK OF THE NATION from NPR News.
(Soundbite of music)
CONAN: This is TALK OF THE NATION. I'm Neal Conan in Washington.
We've just learned a little bit about a particularly buzzy economic term -stagflation. If you want to learn even more about the history of that term and find out why one economist thinks it's being misused today, you can go to our website at npr.org/talk.
Right now, we're taking it to and through the coffers of America. If you're eyeing your assets and dreaming up a plan B, thinking about selling your house, your second car, your Stradivarius, our phone number is 800-989-8255. E-mail us at talk@npr.org. You can read what other listeners have to say at our blog at npr.org/blogofthenation.
Joining us now from her home in Maryland is Michelle Singletary, financial correspondent for the Washington Post and personal finance contributor for NPR's DAY TO DAY. And, Michelle, nice to have you on the program.
MICHELLE SINGLETARY: Okay, good. Good to be here.
CONAN: And typically, I guess people's houses are the first thing you think of as their assets, but what else would qualify under that term?
SINGLETARY: Well, you know, the assets they have, the chance of appreciating would include, you know, any - a retirement account, you have stocks, bonds, CDs, money you've got in mutual funds, you know, all those kinds of things. Now, you can count your cars and assets, but generally speaking, most people or a lot of people are upside down on their cars, meaning they owe more than a car's worth. So, many people can't sell their cars to raise any money these days. So, you want to look to those things that have an appreciative value like your home and all the things that I just listed.
CONAN: And we're going to talk specifically about stocks later in the program with the Motley Fool. But there are also people who have collectibles. And there's other ways to ratchet down your spending - again, adjusting long-term plans, put off that decision to remodel, not buy the new car, send your kids to public school, maybe a public university rather than a private one.
SINGLETARY: That's right. And I like the last part where you talked about school. You know, think further out of the box. Listen, you can send your kid to a community college for two years. Get all those mandatory courses out of the way then send them to the four-year universities for half the cost. And that's a great way to save on college cost.
I mean, when it's times like these, I actually - you know, everybody is panicking, but I like these times, because it gives people time to pause and think and be scare. And you should be scared. If you're doing well, look at this time to take inventory of what you were doing right and continue to do it and even more. And if you're been trifling and you haven't done what you need to do, use this time to step back and develop a plan B if you didn't have one already.
CONAN: Let's see if we can get a caller in on this conversation, and go to Kevin(ph). Kevin is with us from North Carolina.
KEVIN (Caller): Hi.
CONAN: Hi, Kevin.
KEVIN: How are you?
SINGLETARY: Hi, Kevin.
KEVIN: Well, my comment is, because of the way the economy is, I've had to put off buying a new car. I had about 15 grand, I wanted to put into a new car but it's turning out that my income is going down. Because I have store, right, so - cell phone accessories - and there's not enough sale if people aren't buying, they're buying only what they actually have to have and not what they really want. So instead of buying a new car, I just fixed up my old used car and, you know, put a little money into that and decided I'm going to have to drive that for a few years until I can, you know, make more money and afford to buy a new car.
CONAN: And…
SINGLETARY: That's a great strategy, Kevin. Now, how old is your old car that you're talking about?
KEVIN: It's a '96.
SINGLETARY: And how many miles?
KEVIN: It's, like, 150,000 miles.
SINGLETARY: Okay, so that's good enough then, that's good enough then. Listen, I tell people keep your car until they push off the road. And, you know, Kevin with $15,000 you could take half of that and still buy a car that's much newer if you had to, I mean you don't - you didn't have to spend all of that money, you can buy a really nice used car for, you know, six and $7,000 and it'd be in great shape because there's a lot of knuckleheads out there who lease cars, had to turn them in, and they're in great shape.
So if by chance that clocker doesn't make it - I call it hoopies(ph), you could still get a car and still have that money saved up for your emergency until your store starts to get back some of those sales that you had.
CONAN: Kevin, good luck to you and we'll be looking out for you on the road.
KEVIN: All right, thank you.
SINGLETARY: Make sure you got AAA or something, you know.
(Soundbite of laughter)
CONAN: Let's see if we can go now to Michael(ph), Michael with us from Tulsa in Oklahoma.
MICHAEL (Caller): Hi.
CONAN: Hi.
MICHAEL: Hello.
CONAN: Sure.
MICHAEL: Well, what I was calling is that my wife and I are in our mid-40s, about 80k, your solid middle class and no kids. And we have - we're refinancing our house to get a lower mortgage payment. I'm actually at my bank's parking lot right now; I'm going in to sign the papers. We're going to put off some home remodeling that we were going to do. And my wife was seriously thinking about taking a two-year leave of absence going back to college to get her masters and now we're reconsidering that decision, maybe waiting a year or two to see if things improve.
We're in good shape but we're a little worried about the future, you know. It's like we've got some cash reserves. And as far as investments, we both have 401(k)s. We've got about 120K in them. And we've gone a little more conservative with them and we don't really worry too much about that, we figure if the market goes down we just get to buy more and eventually it'll all be able to go back up.
SINGLETARY: Right. But let me ask you this, you said you have a little bit of cash reserve, how much?
MICHAEL: Probably about 10,000.
SINGLETARY: So and that would cover about how long? If you lost your job and I think you said your wife was working (unintelligible).
MICHAEL: It's good for about six months if one of us lost our job with 10,000.
SINGLETARY: Oh, so that's good. So you're really, really good. Now, how are going to pay for that school when she goes back?
MICHAEL: Well, we're going to, we basically…
SINGLETARY: Don't say borrow.
(Soundbite of laughter)
SINGLETARY: All right? Don't say borrow. I will have to jump through this line. Don't say borrow.
MICHAEL: Well, no, it's - we were going to use (unintelligible) in the cash reserve. We're at the point of where we could pretty much pay for it over about a two-year period. We're planning ahead and…
SINGLETARY: From your cash reserve?
MICHAEL: One the reasons we're doing our cost cutting, refinancing for a lower mortgage, both our cars are in pretty good shape.
SINGLETARY: Okay. Wait, wait, hold up.
MICHAEL: I got rid of that my cable television and switched to direct TV because it was $50 a month cheaper.
SINGLETARY: Okay, but how are you going to pay? Now, you said that you've got the cash reserve, you're not going to touch that to pay for college.
MICHAEL: We are going to tighten up, basically.
SINGLETARY: Okay.
MICHAEL: We're going to do a lot of tightening up.
SINGLETARY: Okay.
MICHAEL: We're not going to take any vacations.
SINGLETARY: Good for you.
MICHAEL: That sort of thing.
CONAN: And, Michael, we'll choose to believe you, rather than Congress, when then say they're going to cut spending. So…
MICHAEL: Well, that's something else too. The tax rebate, the stimulus…
SINGLETARY: Mm-hmm.
MICHAEL: Now, we are in good - pretty good shape financially. A lot of our friends are about the same age, class and those. Most of us - and we've been talking about this at parties and things - when we get that check we're going to pay bills with it.
SINGLETARY: Good for you.
MICHAEL: We're not going to spend it. Well, they want you to spend it but we're not going to, we're going to send it to MasterCard.
SINGLETARY: Now, you said you have bills, how much do you have in bills? I see how you talk to people about (unintelligible) coming out. How much credit card debt do you have?
MICHAEL: We've got about seven or $8,000, and I should have it paid off in about nine months.
SINGLETARY: Oh, wonderful. Yeah, you…
MICHAEL: We used a lot of it for home remodeling.
SINGLETARY: Oh, okay. Now, what I want you to do going forward - you are going great and you are an example…
MICHAEL: Our total mortgages are only two-thirds of yearly gross income.
SINGLETARY: Well, basically, you want to keep it - I look at it on a monthly basis, you want to keep your mortgage anyway for 28 to 35 percent of your net monthly and…
MICHAEL: Fifteen percent right now.
SINGLETARY: So, that's wonderful. Get rid of that credit card debt, you're absolutely right. And going forward, Mike, for your plan B is to never borrow again if you don't have to.
CONAN: Michael, good luck.
MICHAEL: All right, thank you.
CONAN: Thanks very much for the call.
Here's an e-mail from Eleanor(ph) in Topeka, Kansas. I'm 79 years old, lived primarily on Social Security with a small income from freelance editing and writing. It's been tight but workable, until recently. Now, prices are going sky-high, where do I find a plan B?
SINGLETARY: You know, that's tough because how else can you, you know, get more income. I would ask her to see if there's some way that perhaps she could rent out a room or take in a roommate, and I know some people out there is going, what are you talking about, she's 79. But when things get tight and she can't -I mean, I would hope that she doesn't have to take another job to certainly think of some ways to generate some more income and that's one way.
You know, if she's in an area where there's lots of families with little kids maybe she can volunteer - not volunteer - but, you know, do some baby-sitting for some families. I would love to hire a grandmother to watch my three rugrats. So, you got to think outside of the box when you're in that kind of position.
CONAN: Let's go now to Bill(ph), Bill with us fro Shelton in Connecticut.
BILL (Caller): Yes, sir. How are you?
CONAN: I'm well, thank you.
BILL: Well, good. I've been a longtime listener for your show and I enjoy it.
CONAN: Thank you for that.
BILL: Thank you for doing it. Welcome to your guest.
SINGLETARY: Thank you very much.
BILL: I've been listening to comments and things and they're very interesting. I live in Southern Connecticut, up around the Fairfield County area.
SINGLETARY: Mm-hmm.
BILL: And two years ago, I purchased a house - I'm a carpenter contractor, and I purchased a house, totally renovated it, took it down to the studs, okay, and reinstalled everything and everything, you know, we did the whole house over. And so, now, I'm kind of sitting around on it, okay. So, you were talking about plan B?
CONAN: Yeah.
BILL: Well, a while ago what I had thought of doing and would like some advice from you guys on is since the New England market didn't bubble as much as the Mid-West and the West Coast, we're all kind of holding on to our prices.
SINGLETARY: Mm-hmm.
BILL: And I've had my house on the market now since August of last year. And I really only dropped my price a little bit, but we seem to be holding our, you know, we're not dropping our prices up here.
SINGLETARY: So what's the question? Whether you - should you sell, rent? Are you renting it right now?
BILL: What I'm wanting to do is to rent it out or to rent it to a non-profit organization like Homefront or a battered women shelter or something like that, while I wait out the market.
SINGLETARY: Well, I mean, if you can rent it and it can pay for the mortgage, I assume you have a mortgage on it…
BILL: Yes, I do.
SINGLETARY: …and it can comfortably pay, sure. That's definitely an option, I mean no one could tell what the market is going to do and anybody is who says that is a liar.
BILL: Yeah.
SINGLETARY: So, if you feel as if you can eek out some more and you can get a renter in it to cover the mortgage, that's certainly a great plan B strategy. Or, if you're really crunched in your other, you know, resources and you do need to sell, you may not get as much as you thought because, you know, lots of prices were inflated. So, you know, it's not settling, but it's being realistic about what you can get for that home.
CONAN: Interestingly, we've got an e-mail along these same lines, though from the other coast, from Matt(ph) in Lancaster, California. My wife and I bought five houses this year, we're remodeling to rent. These houses were foreclosed properties and were all extremely cheap. Additionally, we're refinancing our own home and the rate seemed to be very favorable.
BILL: Right, yeah. Well, I can understand that but, you know, for myself I would do one at a time.
SINGLETARY: I agree with him.
BILL: Right, yeah.
SINGLETARY: You know, listen, this is what got us all in a housing mess.
BILL: (Unintelligible), you know.
SINGLETARY: People brought all these properties and they couldn't carry the mortgages. If that family in California has enough in savings to carry those while they're renovating and trying to get renters, fine, but it's not get of them.
BILL: Right, right. Well, I know you have enough coming segment that you got - you've just mentioned before that you picked up on my line, and that I also have a portfolio.
CONAN: Well, we'll talk about that…
BILL: (Unintelligible) balance the two.
CONAN: Yeah, we'll talk about that with The Motley Fool in just a few minutes. But, anyway…
BILL: It's, yeah, which I'm looking for to hearing.
CONAN: Good. Stay with us, Bill. Appreciate it.
Here's an e-mail we have from Alison(ph) in Idaho. My husband and I moved to Idaho in order to raise our son near my extended family. We thought my husband could commute to his out-of-state job only until he could find a job here. Now, it looks like he's going to continue to fly to work Monday mornings and fly home Thursday evenings indefinitely.
Boy, the job market really figures into a lot of people's plans, doesn't it, Michelle Singletary?
SINGLETARY: It sure does. It sure does. You know, I understand people do what they feel is necessary, that's a lot of time away from the family. You know, when I tell to people who make this kind of decisions you need to look at the entire picture including what is going to happen to your family life. And so, if it works for them and they can afford it, you know, certainly go forward with that. You know I'd be a little concerned about him on the road that much, flying away from the family.
CONAN: We're talking with Michelle Singletary, the financial correspondent for the Washington Post and a personal finance contributor to NPR's DAY TO DAY. If you'd like to join us, 800-989-8255. E-mail us, talk@npr.org.
And this is TALK OF THE NATION coming to you from NPR News.
Let's talk with, excuse me, let's talk with Rich(ph), Rich is with us from Savannah in Georgia.
RICH (Caller): Hello there. How are you guys doing?
CONAN: Very well, thanks.
RICH: I just want to call in and talk a little about the oil inflation thing. And I've been investing commodities and doing quite well that you're going to think one place you can invest in with virtual certainties right now is if you invest in things which are inflation proof or not in the U.S. dollars, you're going to do pretty well. Because the U.S. is going to keep spending, putting money that it doesn't have, and as money flows into the markets it's going to adjust, it's going to inflate, it's almost a certainty.
CONAN: When you're saying commodities, what are you talking about gold?
RICH: Gold, silver, oil, these kinds of things. I mean, everybody knows that the gold has broken all of its records and silver is an upward choice.
SINGLETARY: But only now, only now. Listen, I understand what you're saying, but I think - and obviously on your next segment, Neal, I'm sure that The Motley Fools folks will talk about this. So, the average person - you need to look at your plan overall and not just try to invest when times are like this, like rush to gold. You need to have a diversified plan that, yes, invest in inflation-proof things but also invest in things that are cyclical. You need to have some exposure to the international market - bonds, cash. You need to have a diversified portfolio.
This is not the time to try segment your investing because gold wasn't always done as well as it has now, and I think when people say things like that it leads people to jump out, you know, plans that had been set and are good for them to try to change returns. And that's not what you want to do.
RICH: Well, the…
CONAN: Rich, I suspect you disagree, but in any case we'll have to see how it works out.
RICH: Well, the whole system - well, I just - I want to say this one thing.
CONAN: Quickly, if you will.
RICH: Every fiat currency that ever existed in history has collapsed, and that's all.
CONAN: All right. Thanks, Rich.
RICH: Right.
CONAN: And interesting, Michelle Singletary, we didn't get the calls that we might have expected about collectibles or pieces of art. Is this a time for people to reconsider what to do with that - well, me mentioned the comic book collection?
SINGLETARY: You know, listen, it's really hard to make money in this. Some people can do it really well. I mean, if that's something that you love to do and you happen to make money of it, sure. I'm not one of these people who think that this is the time to do that. I mean, you know, for the average person you don't have the money for this and you're not going to make it. So, you know, the best way to do if you're concerned is to have a well-diversified portfolio and some of that could include collectibles. But me, you know, I'm leaving the comic books to the comic pages, because it's a lot cheaper.
CONAN: Let's see if we can get another caller in. This is Ashley(ph), Ashley with us from Charlotte, North Carolina.
ASHLEY (Caller): Hi.
CONAN: Go ahead.
ASHLEY: My question for you guest today is what do you do if don't have a - if you don't need a plan B but you need a plan A?
(Soundbite of laughter)
ASHLEY: I have a fine arts undergraduate degree, I work as a waitress, I have $30,000 in student loan and credit card debt, I rent, and I just can't dig myself out of my hole.
SINGLETARY: Right. Do you leave near family, Ashley?
ASHLEY: I do.
SINGLETARY: So, are you living out on your own?
ASHLEY: I do. I live by myself.
SINGLETARY: Okay, you need to go back home to mama.
(Soundbite of laughter)
SINGLETARY: No, seriously, you can't do it all, right? That's what you found out.
ASHLEY: Right.
SINGLETARY: And you've got a lot of expenses and if you've got a good relationship with your parents or your auntie or your grandma, go home and try to save on that rent and all those expenses and pay down that debt. Now, is that $30,000 is just a student loan debt or student loan and credit card debt?
ASHLEY: I have $4,000 over my car, $23,000 student loan debt and the rest is credit card.
SINGLETARY: So, and then - I don't know if you're driving or listening, but when you ever get to a place that you can stop, I want you to reach in that wallet, now I want you to pull out all those cards and I want you to cut them up.
ASHLEY: Actually, they're in my freezer. I put them in a jar (unintelligible).
SINGLETARY: Good, good. So, you made that first step. And so that's part of plan A, to not use anymore credit, and should stay away from debt, but if you can I would - I don't know when your lease is up, but when it's up, is it up soon?
ASHLEY: It's up in November.
SINGLETARY: November, that's not soon enough. Can you get out of it? Can you talk to the landlord?
ASHLEY: I would have to.
SINGLETARY: Talk to the landlord and see, you know, typically in some places if they can find another renter, they'll let you out and you won't be charged those extra months. But if you can't, stay there until November. When that lease is up, go back home so that you can start to save some money and pay down that debt.
CONAN: And, Ashley, we know you don't pay for call waiting because we would have heard the click of your mother calling on your line.
(Soundbite of laughter)
CONAN: Thanks very much for the call, Ashley.
ASHLEY: I don't.
CONAN: Good luck.
ASHLEY: Thank you.
CONAN: And Michelle Singletary, thanks as always. We really, really, appreciate your time today.
SINGLETARY: You're so welcome.
CONAN: Michelle Singletary, financial correspondent for the Washington Post, personal finance contributor for NPR's DAY TO DAY with us by phone today from her home in Maryland.
Coming up, another asset you might be thinking about liquidating is your stock portfolio, but wait The Motley Fool arrives shortly.
I'm Neal Conan. Stay with us. It's the TALK OF THE NATION from NPR News.
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