Today we’re talking about cash!
I’m joined by Gary Zimmerman, founder of MaxMyInterest (MAX), an online platform that helps you earn a higher return on your cash savings.
The best part about MAX?
You can earn higher interest rates on cash AND keep your existing banking relationship!
- The average American holds 58% of their assets in cash (65% for millennials!)
- Online banks have lower overhead costs, allowing them to offer higher interest rates on cash
- Automating cash management using technology can further increase yields on cash savings
If you want to learn more about MAX and how to boost the yield on your cash, you’re going to love this episode.
How to Listen to Today’s Episode
Episode Links & Resources:
- 👉 Get Your One-Time Retirement Plan
- Max – Intelligent Cash Management
- How Brokerages Use ‘Sweep Accounts’ and Cash In on Your Desire for Convenience [Barons]
- Brokers Profit From You Even if They Don’t Charge for Trading [Bloomberg]
MaxMyInterest: How to Boost Your Return on Cash With Gary Zimmerman
Gary Zimmerman: What Max does is it monitors interest rates every day and it looks for opportunities where you could be earning higher yield. And when it finds those opportunities, it presents you with a diagram that says, here's how you could reallocate your cash to earn even higher yield.
And then Max simply tells your banks to move funds between your own accounts.
Taylor Schulte: Welcome to the Stay Wealthy podcast. I'm your host, Taylor Schulte, and today we are talking about cash. Yes, the boring stuff sitting in your bank account or under the mattress that's earning close to nothing.
Right now I'm joined by Gary Zimmerman today, who is the founder of Max My Interest, an online platform that helps you earn a higher return on your cash. And the best part is you can keep your existing banking relationship.
So if you wanna learn more about Max and how to boost the yield on your cash savings, today's episode is for you.
For the links and resources mentioned, head over to youstaywealthy.com/94.
Last week on the podcast I shared that American households have $1 trillion more in cash today than they did one year ago. And I shared other words cash savings has more than doubled in one single year.
So I thought it'd be interesting to maybe start off by having you talk to us about cash as an asset class, just like we think about stocks and bonds and why it's important to have a cash management strategy. Maybe you can also weave in some of your comments on inflation into your response as well.
Gary Zimmerman: Taylor, thank you for having me. It's a pleasure to be on your show and always a pleasure to speak with fiduciary advisors who are really focused on what's best for their clients.
Cash is a really interesting asset class and it's funny because a lot of people don't even think of it as an asset class, but many people actually do end up making a deliberate allocation of their portfolio or of their overall assets to cash.
In fact, if we look at high net worth households across the country, on average, they keep about 23% of their liquid assets in cash. So it's really a very large, as you point out, multi-trillion dollar asset class.
What's funny about it is that despite it being nearly a quarter of people's assets, it's the asset class that tends to receive the least amount of attention. And I think part of that is that people have been conditioned to just assume that cash is a zero return asset class and it's sort of there as a holding pen, but it turns out that that's not actually true.
And in fact, that sort of formed the basis for my leaving my job on Wall Street to start max my interest because I discovered that here was this multi-trillion dollar asset class that very few people were paying proper attention to, and that there was in fact the ability to earn substantially higher yield without taking on any additional risk or giving up any liquidity.
As we think about cash, where to begin, where is the cash in the first place? I think that's the first question. And why is it there? And are people actively choosing to hold so much cash? And if so, why?
So I think there are a lot of questions to unpack here in terms of where it sits it, it tends to be partially held in people's sort of brokerage accounts or trading accounts and partially held in bank accounts. And sometimes it's held in other fixed income instruments like a money market fund or T-bills and like, but the preponderance of cash tends to actually sit in regular plain old brick and mortar bank accounts.
And this is what sort of fascinated me because much as we've seen the retail industry transform with the emergence of e-commerce, the very simple idea that once you issue the cost infrastructure associated with brick and mortar, you can buy items at a lower price.
It turns out the same is true for bank deposits that once you strip out the brick and mortar branch, the bank could actually afford to pay you much higher yield on those exact same deposits. So that was really the genesis of Max.
My interest and focus and maybe near obsession on cash as an asset class was really this curiosity around why are there still so many trillions of dollars of people's cash sitting at brick and mortar banks when that same cash could be earning more online.
The second aspect of that which you touched on is inflation. Inflation is a silent scourge of investment portfolios because if you think about it as much as sometimes people find it attractive when they're working to see their income go up two or 3% a year, those are really just nominal increases.
And once you strip out inflation, people aren't necessarily getting a raise at all. but the consequence of that inflation is that for people who are later in their career and who've saved all of these years and been very careful and disciplined about it, inflation is really taking your money away.
That's effectively the government's way of redistributing wealth from people who've saved to those who are younger and in the earning phases of their lives. As long as inflation levels are low, you can plan around that. But I think where there are unexpected bouts of inflation, that's where people can get caught off guard and have sort of permanent diminution of real value in their portfolios.
So it's a topic that a lot of people don't spend much time thinking about it, but it turns out it's very important.
Taylor Schulte: What do you say to somebody who says, look, I understand cash is important and cash management's important, but interest rates are so low, I'm getting paid 0% or I'm getting paid half of a percent, it's just not worth my time to focus on optimizing my cash. What's your response to that comment?
Gary Zimmerman: Typically, we completely agree with a caveat which is it's not worth your time, but it's the kind of task that a computer can be very good at. I began focusing on cash during the financial crisis and it's cause I was working at one of the big four banks and that bank had a near-death experience and it struck me that all of my cash that was sitting at that bank that was above the FDIC insurance limit basically left me as an unsecured creditor.
And so if the bank were to fail, I would be at risk of losing a lot of money. When you think about cash, the reason you hold cash is for safety and liquidity. So the idea that I could lose money that was sitting in cash was pretty terrifying. And so I began to focus on how can I keep that cash safe?
And it was sort of incidental to that search for how to keep it safe that I stumbled upon a way to earn higher yield on that cash. At the same time, the sort of odd thing about that is I then spent time actively managing cash every single month and I did it for about three and a half years.
And finally I got tired of doing it and I said, what am I doing? This is such a waste of my time. Why am I focused on cash and spending my Sundays managing these bank accounts? And I was about to stop and I looked back and I realized I had picked up an extra $40,000 or so of incremental risk-free return and I said, wait a minute, this is alpha. This is the sort of thing that people in finance search for their whole career is how can I find incremental return with that incremental risk?
And so I didn't wanna give up this opportunity, but I also didn't wanna spend my time chasing it. And so that's when we created Max my interest, which was this computer platform that would automatically help people manage their own bank accounts in a way that they could capture this incremental return without having to spend their time on it.
So I guess in summary, my response would be you shouldn't spend time on this ongoing basis, but you should spend a little bit of time, make a little investment of time upfront so that computers can help you capture this incremental return for the rest of your life.
Taylor Schulte: Maybe this is a good opportunity to share more about exactly what Max my interest is, how it works, the process.
Gary Zimmerman: Max My Interest is a software-based solution that helps you manage your own bank accounts in an optimal way. And it was designed really in response to the traditional ways of managing cash that have been employed by broker dealers for decades.
And the problem with those systems, we often refer to them as broker deposit systems that you might find at one of the other sort of broker dealers, is that they're designed to serve the interests of the broker dealer, not designed to serve the interests of the client. And as an individual looking for a better solution for myself, all I cared about was what was best for me as the client.
And so rather than these old broker deposit systems that are designed to sort of line the pockets of the major broker dealers, what we designed was a system that was, that was focused solely on what's best for the client.
So Max is really simple. You take your existing brick and mortar bank account, it could be at any of the major banks or brokerage firms, and through our software we help you open up a number of higher yielding online savings accounts. You might be familiar with online banks that advertise on CNBC and then the Wall Street Journal and other places, but they're basically no different than any other bank except that they don't have physical branches.
You strip up the cost of operating the branch, you're able to pay depositors a higher interest rate. So it's really that simple. It's no different than if you go on Amazon and buy a book there rather than at the corner bookstore, you know that you'll get a better price on Amazon because they just have better scale and logistics.
And so the same is true for online banks. They're still FDIC insured and same day liquid, just like any other bank account.
So the way that Max works is you simply link your existing checking account to your choice of these higher yielding online savings accounts. We built some patented software called the Max Common application that makes it easy to open multiple online savings accounts in less than a minute.
And then you tell Max how much money to keep in your existing checking account. You can think of that as sort of your personal working capital or the money that you need to pay your mortgage and bills and everything else that goes on in your life. And all of the cash above that can be swept to your higher yielding savings accounts.
And what Max does is it monitors interest rates every day and it looks for opportunities where you could be earning higher yield. And when it finds those opportunities, it presents you with a diagram that says, here's how you could reallocate your cash to earn even higher yield.
And then Max simply tells your banks to move funds between your own accounts. So you can think of it as sort of like an air traffic control tower for your bank accounts, and it's simply directing the flow of funds based on your instructions.
And in doing so, we're able to help clients achieve not just the best interest rates in the country, but we're actually able to help them achieve better than the best interest rates in the country because several of the banks that we support on our platform have chosen to offer preferential rates that aren't available anywhere else. And the reason that they do that is because that they don't have to spend money on advertising to attract these customers and deposits.
So it's really a win-win. It's better for the banks because they don't have to spend as much money on brick and mortar branches or on advertising. And it's better for the clients because they're able to earn interest rates that are higher than they could earn anywhere else.
Taylor Schulte: To recap, if I've got my primary checking account at, let's just say Bank of America and I want to earn a higher interest rate and I don't want to go shop the market and do this manually and rebalance my cash like you were doing prior to starting Max, I can keep my Bank of America account, I can join Max, I can link it up to Max.
You guys are going to open up multiple online high-yield savings accounts for me, and I can choose and tell you guys how much I want to keep at minimum in my primary checking accounts. I don't want less than $10,000 on my Bank of America checking account. Any cash above and beyond that will be swept into the MAX program and distributed across the highest yielding banks out there.
Maybe talk about some of the flexibility that you guys have built in there and some of the different settings that your users can change so they're not fearful of if they're in the middle of a transaction, if they're buying a house and their cash is you know not available, how can they control some of these different settings on the max platform?
Gary Zimmerman: First and foremost, the cash never leaves the client's own bank accounts own. So Max is not an intermediary. Max is not a bank. Max never touches any money, max doesn't take custody. So this is just your own money sitting in your own bank accounts and on any day you could call any of those banks directly and wire the funds out same day.
So there's no loss of liquidity. What Max does is it basically, it's an algorithm that figures out the optimal allocation of cash across your bank accounts, and it takes into account several factors that the client set. So one of the factors that you pointed out is that the client can tell our software how much money they wanna keep in their checking account.
So in your example, they want to keep at least $10,000 at Bank of America. So our system will respect that setting and then any cash above that target balance, we'll automatically flow to the client's own savings accounts.
And what our software does is it figures out the optimal way to allocate that cash while keeping everything below the FDIC insurance limits. So as an example, let's say that client had $450,000 of cash. Our software would say, okay, well client wants to keep 10,000 in checking. So that leaves $440,000 available to be allocated. The first $250,000 will go to the highest dealing bank and the remaining $190,000 will go to the second highest dealing bank.
Now if rates change three weeks from now and bank number two raises its rate and now their bank number one, then max software, we calculate that what we should actually do is reallocate $60,000 and move it between those two banks so that the highest dealing bank is always full up to the two 50,000 FDC limit.
So effectively what you're getting is an active cash strategy that seeks to always keep your cash in whichever bank is willing to pay you the highest rate each month.
Taylor Schulte: Talk to us about, we're gonna be opening up several different bank accounts by joining Max. I might have my primary checking account of Bank of America, and then I might have five high-yield savings accounts that are opened by joining Max.
Is there any downside to having multiple high-yield savings accounts out there? Am I gonna get littered with mail and statements? Am I just gonna overcomplicate my cash management? Are there any downsides to having multiple high-yield savings accounts? You trying to squeak out a little bit extra return on my cash?
Gary Zimmerman: There's really no downside, but it's interesting, Taylor people come to us all the time with questions like, am I allowed to have an account at more than one bank or am I allowed to have two checking accounts? And it's just not a very well-understood area.
But no, there's no downside, there's no impact to your credit for opening new savings accounts. And because our software can help you open multiple accounts simultaneously, we've been able to make that process really simple. When we first launched Max, it was much more difficult because you had to go to each online bank website yourself and fill out forms and to open each account.
And we found that that was pretty cumbersome. And so that's why we created a common application, which was actually modeled after the way that students apply for college these days. It used to be when I applied for college, I had to fill out a separate application for each school.
Nowadays students go online, they fill out one form, they click on the names of the schools to which they'd like to apply, and magic happens in the background. And so we took that same concept and we applied it to opening online savings accounts. You're right that you will have a direct relationship with whichever banks you choose and you can open one savings account or three or five. It depends on how much cash you have.
And what our software does is it will help you make sure that you always have a dollar in each account, so at least a dollar and that keeps the account open. But all of these banks have no minimums, no monthly fees, no transfer fees or anything like that.
So there's really no downside to having multiple bank accounts. The upside is that it gives you more optionality. So depending on which bank is willing to pay the most each month, the more banks you have, the more options you'll have.
Taylor Schulte: And when it comes time to closing these accounts, do we close them through Max or do we close them individually bank by bank
Gary Zimmerman: They're your accounts and they're yours to keep? There's really never any reason to close one of these accounts because there's no minimum balance required. But if you wanna close any of the accounts, that's your accounts. So you could just call up the bank directly and close the account if you wanna, but we don't have the authority to close accounts on client's behalf.
Taylor Schulte: And you mentioned that the partner banks that you guys work with, they're not charging any additional fees to the consumer. Maybe you can talk a little bit about Max and how you guys make money and what your fees are.
Gary Zimmerman: So we're really big believers in transparency, and part of how we built Max was in response to how the rest of the industry operated. So there are a lot of financial products that have a lot of hidden fees and to sort of provide a net return to the client. And unless you look closely at all the disclosures, you have no idea what you're paying.
So as an example, most money market funds today charge around 15 basis points in fees. In the grand scheme of things, 15 basis points isn't very much, but you are paying a fee, it's just deducted from the yield before you get any return.
With Max, we wanted everything to be really transparent. So a hundred percent of the yield earned from each bank goes directly to the client. Max doesn't earn any kind of scrape or fee or that sort of thing based on those deposits.
So clients get a hundred percent of the yield directly into their bank accounts, and then max charges a fee of two basis points or two, one hundredths of 1% per quarter. So that works out to eight basis points a year, which is $80 per hundred thousand dollars of cash. And to put that in perspective today, the top rate on the max platform is 20 basis points higher than any other nationally advertised online bank.
So even net of the Max fee, you're still earning significantly more than you could, but we're big believers in being transparent. So there's nothing hidden. We wanted it to be really clear to clients, here's the service, here's what it costs, and here's what you get.
Taylor Schulte: Before we started, I looked up the yield on one of the well-known online high-yield savings accounts or banks that are out there. And the advertising yield right now is half of a percent on Max's website. The advertising yield is upwards of 0.75%.
So a difference of about 25 basis points. You mentioned 20 basis points. I'm curious, is that the spread that you see? And second to that, when and if interest rates are higher and we start to see rates like we saw in the early two thousands, will that spread grow or do you anticipate it kind of staying the same around that 2025 basis points?
Gary Zimmerman: Rates can vary over time, but historically our top rate has been about 20 or 30 basis points higher than the rates that are advertised by deleting online banks in the country. And the reason is that they have to pay for advertising. I was digging into the financials of one of the leading online banks and they spend on average $600 to acquire each customer.
Sounds like a lot of money, but if you think about what it costs to advertise on CNBC or other places like that, it quickly adds up. So they spend $600 to acquire each customer and their advertised customer is only $30,000. So they're spending 200 basis points or 2% to acquire each customer. We think that's crazy.
Every dollar that a bank spends to attract you as a customer is a dollar less than they could afford to pay you. That's one of the reasons why we've been able to attract banks onto the platform that are willing to pay a premium rate that may not be available anywhere else.
Taylor Schulte: Outside of making sure the bank provides FDIC insurance. When you're evaluating an online bank, is there anything else that you should look for or any questions that you should ask? I know personally some of the pushback that I get from clients or people I speak to is I just feel more comfortable with a brick and mortar bank.
I know I can touch it and feel it and go in and walk in and get my money if I want it. So is there anything else that as people become more accustomed to using online banks, is there anything else that they should be looking for outside of just basic FDIC insurance?
Gary Zimmerman: I think the pandemic has taught a lot of us to change our routines. There are a lot of people who up until the pandemic never would've dreamed of interacting with their bank online and then the bank branch closed and they had no choice. And so they downloaded the app and they signed up and they got more accustomed to it.
The sort of great equalizing matter here is that all of these banks are FDIC insured and FDIC insurance really commodifies banks because fundamentally you're not taking the credit risk of the bank, you're taking the credit risk of the US government. That's basically FDIC insurance is backed by the full faith and credit of the US government.
So from that perspective, these accounts really are commodities where we see some difference between different banks. And it's part of our diligence process as we're deciding who to include on the platform is really more a function of terms and customer service.
We've been very careful to curate a group of banks on the platform who have no fees, no minimums, very generous transfer limits. I'll give you an example. Actually one of the first banks that we added to the max common application for a regular customer who goes to their website and opens up an account, they had a daily transfer limit of $50,000.
And when we explained to the bank how the MAC system works and how we've actually been able to reduce risk for banks, they said, okay, well for customers using Max, we're gonna increase that daily transfer limit to 5 million per person per day.
So dramatic increase in liquidity. And again, it's really sort of a function of how the MAX system works to make it safer for banks. But those are sort of the key criteria we look for in a banker. Can they provide good customer service? Do they understand how to work with affluent customers? Can they provide accounts that have terms that are compatible with our platform to make sure that our customers have plenty of liquidity?
Taylor Schulte: About how many banks are you guys partnered with and if you're able to share about how much do you guys oversee? I know you guys don't custody in the assets, but do you have those numbers? Are you able to share those publicly?
Gary Zimmerman: The max platform, there's sort of two different types of banks that we support on the platform. There's that existing checking account and then that checking account links into your choice of these higher yielding savings accounts. So today we support 18 of the largest banks and brokerage firms as that central checking account.
So if you have an account at any of the major banks that should be compatible. We also added our own branded checking account called Max Checking that you can also open up instantly with the max common application. And with that you can link max to any of thousands of financial institutions across the country.
And we're finding actually that about half of our customers are choosing to use Max checking rather than their existing account at Chase or Bank of America because Max checking in and of itself is a better checking account. It's a high-yield checking account, it has free ATM access anywhere in the world, free wire transfers. It's really easy to use.
Anyway, so that's the checking account. And then today we support online savings accounts at nine online banks across the country. Five of those banks are integrated into the max common application and we expect to add a few more banks over the course of this year as well.
So the network continues to grow and as we add more banks, that creates an even more customer-friendly dynamic on the platform as more banks are sort of competing for your deposits.
Taylor Schulte: Who is the ideal client for Max? You know that Max will really benefit somebody who has cash above and beyond FDIC insurance limits and they don't want to move cash around and be balancing multiple different banks. But I also know that there's value here for people that aren't up against those limits.
I still have to think you need to have a certain amount of cash in order for all of this to be worth your efforts. And I don't know if you draw a line somewhere or if you see an average cash balance among your customers or if you guys talk about internally like who the perfect client is for Max.
Gary Zimmerman: We wanted Max to be open to anyone, so we don't impose any sort of minimum balance requirement.
In fact, a lot of our largest customers started by opening an account and setting up Max and playing around with $500 or a thousand dollars just to test it out and get comfortable and see how it worked. And then once they saw that it was just their own money in their own bank accounts, then they started bringing much more significant balances. So we don't have any minimum balance requirement.
That said, we also don't advertise. So we're not looking to attract tens of millions of small balanced customers because we do agree with you. We think that the platform makes most sense for people with larger balances. There's no specific cutoff, but our typical customer is someone with somewhere between $50,000 of cash and a few million of cash. And I think our average is a few hundred thousand.
It can be used by anyone, but typically those are the people who find it most useful, both because of Max's ability to help you achieve more or obtain more FDIC insurance coverage, but also because earning an extra 50 or 70 basis points on cash just makes a bigger difference in nominal terms. If you're sitting on a few hundred thousand dollars of cash then if you're just sitting on a few thousand dollars of cash.
Taylor Schulte: Is there anything else about the Max platform that I haven't asked that I should have asked or anything else that you wanna share before I move into my final question here?
Gary Zimmerman: The main thing about Max is it's a very mission-driven company in the sense that I didn't start this company because I had any interest in starting a company. I had a perfectly good job on Wall Street and was very happy doing it.
I started it because I became fascinated by this multi-trillion dollar market that was seemingly so inefficient and it really puzzled me as to how could it be that there was such a big opportunity for people to earn so much more on this asset class and really why weren't people earning more? And that sort of led me down an interesting discovery as I started delving into the business models of the major broker dealers.
And what I found is that the broker dealers, the sort of the Merrill Lynch's and Morgan Stanley's of the world make more than 50% of their profit in wealth management by keeping spread on client cash, which means basically taking in these deposits, paying the customer almost nothing on it, and then turning around and lending it at higher rates.
So it sort of presented this really interesting conflict of interest. In fact, one of the broker dealers was just sued by the SEC over this very practice and that in turn helped me discover more about a new and emerging business model in wealth management, which is the registered investment advisor who is a fiduciary, who has a legal obligation to do what's best for the client.
And it really drew into stark contrast the difference between the broker dealers who are really salespeople and the registered investment advisors who are truly advisors and focused on doing what's best for the client. And that's really where Max has been growing very rapidly.
We now work with advisors for more than 1200 wealth management firms. The vast, vast majority of them are RIAs because they're the ones who are looking out for what's best for the client. That overall mission really motivates everything that we do and that's why we have very strict privacy policies. We don't sell customer information, we don't cross-sell other products.
I can't tell you how many people have said, well, why don't you add on a RoboAdvisor? No, that's not the point. The point is we're really focused very narrowly on this one asset class, which happens to be several trillion dollars in size. And how can we help people be better off by creating what we believe to be the industry's best solution for cash?
Taylor Schulte: Are there competitors to the Max platform that are out there? Do you guys have a really strong moat around this due to your proprietary common application process? I'm just kinda curious about the competitive landscape and what you guys are up against.
Gary Zimmerman: We built this company very quietly and with very little fanfare, and in doing so, we were able to really create a unique offering and build up a large intellectual property portfolio around it as well.
So we now have three issued patents with several more in the works, and there's really no one who does what we do the way that we do it. There are a couple of legacy companies that are what we call deposit brokers, which are sort of the solutions that the old broker dealers have used for decades to try to earn extra money from clients.
We're not aware of any other solution that does what we do, which is focused solely on what's in the best interest of the client. When we think of competitors though, we actually think of three words, which is awareness, apathy and inertia. So what does that mean?
Well, awareness is that the vast majority of people don't even know to ask the question, could I be earning more on cash? They just assume that they're cash always pays zero or close to it. Awareness is number one, and it's really an educational mission of how can we wake people up to the fact that every day that they're not earning as much as they could on cash, they're falling behind.
The second is inertia, which is a really powerful force because earning more on your cash is never going to be the top item on your to-do list. Your job is to go out and live your life. And that's why a lot of people work with financial advisors who can help them focus on the financial aspects of their life while they go out and live the other parts of their life.
Inertia's a really powerful force and what we found is it was really important to make the max set up process really fast and quick because the people could move on to the rest of their day. And so that's been a big focus of ours over the last several years, just making this as quick and simple as possible to get started. And then once it's set up, it just runs in perpetuity.
So it's sort of a one-time investment and then it returns thousands or tens of thousands of dollars of incremental return every year.
And then the third one is apathy, and that's in some cases the hardest one to overcome. Apathy says, I know that I could be earning more, but I just don't care. And that's really behavioral. That's been a function of it being drilled into us for all of these years that no, you shouldn't focus on cash.
But if you think about it, if you were shown two different S&P 500 index funds, they ought to be basically equivalent. They ought to be near commodities and one of them had a fee structure of 25 basis points and another had a fee structure of 75 basis points.
Wouldn't you pick the one with the lower fee structure because you'd be saving 50 basis points every single year? Well, that's really the same dynamic with cash. It's just instead of cash can have a higher return rather than a lower fee, but it's the same 50 basis points. So that's really the biggest one to get over.
There's awareness, inertia and apathy and getting people to care about this asset class. That could be a quarter of their assets, which could be creating a drag on their portfolio if they're not really thoughtful about where they put their cash. That's really perhaps the biggest competitor per se.
Taylor Schulte: As we all know, we have a new administration in the White House this year and I'm just curious if you have any comments or opinions on what we might expect in terms of fed policy, interest rates, what we might expect from our cash here in the near future. Do you anticipate any changes? I thought I would just pose that question given kind of where things are at today.
Gary Zimmerman: It's a really good question, Taylor, because obviously the Fed cut rates pretty significantly in the spring of 2020 as the pandemic set in and it became clear that we were gonna have material impact on our economy. There is an interesting choice between fiscal policy and monetary policy.
So the Fed cutting rates is monetary policy and conventional wisdom goes that monetary policy is the quickest way to create a big jolt in the economy. Cause you're effectively lowering the discount rate and making more investment projects economic, and so you should have more capital spending and that sort of thing.
The problem with that logic is that in the case of the pandemic, this is not really a supply side shock. It's a demand side shock in the sense that what's hurting the economy is that people don't feel safe going out to dinner, traveling, they're not going to plays in the theater and film games and that sort of thing.
And so when you have that sort of demand shock, it's not that people can't afford to do these things, it's that they don't feel safe or in some jurisdictions not permitted to do these things.
It strikes me that in that context, the more appropriate policy may be fiscal policy, which is government spending, and I think we're likely to see what well, the Trump administration was characterized by a big focus on monetary policy to the point where Chairman Powell basically said, look, there's nothing else I can do.
We really need fiscal policy. I think that the Biden administration will air towards fiscal policy and that will mean more government spending, maybe more spend on infrastructure and other things that can trigger the economy in other ways.
What does that all mean? Well, I think it likely means greater inflationary pressure. And so well, the Fed up until this point has been pretty clearly stated that they don't anticipate interest rates rising until 2023.
My personal view is that as a larger percentage of the population is vaccinated and people feel safer going about their daily lives, we could actually see a significant uptick in inflation driven by pent up demand. So if you think about it over the last year, how many times did you go on vacation? How many times did you travel? How many times did you go to a restaurant? How many times did you go to a sporting event?
And if you look at your sort of bucket list for what am I gonna do once this pandemic is over, a lot of those items are very high in your list and there's limited capacity, the limited capacity in restaurants in part because a large percentage of them may have gone under during this long period. There's limited capacity on airline seats and hotel rooms.
I think we're going to see significant inflationary pressure starting in the fall and into 2022. And as a result, I would expect that we're gonna see increases in interest rates probably sooner and faster than people are anticipating right now. So check back in a year and we'll see if I'm right.
Taylor Schulte: I appreciate that. I know it's always a bit daunting to try and make predictions about the future, but I appreciate you opening up and sharing your candid and impersonal opinions there.
Gary, I wanna thank you publicly very much for coming on and joining the show today. I know you and I had a chance to connect years ago. We finally made this happen, so I've followed you guys for a really long time.
I love what you're doing. I really appreciate you coming on here, being an open book, sharing your story. I look forward to getting it out into more people's hands and helping people maximize their cash.
Thank you very much for your time today. I look forward to staying in touch. Thanks so much. Have a great 2021.
Gary Zimmerman: Absolutely. Thank you, Taylor. You too.
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