"I wouldn't be surprised" if we see additional $8T dollars provided into the economy: Expert

Edelman Financial Engines Founder Ric Edelman joins Yahoo Finance’s Zack Guzman and Brian Cheung to discuss how Congress and the Trump administration is responding to the coronavirus outbreak.

Video Transcript

ZACK GUZMAN: Meantime, though, we're also watching back here at home how the stimulus package, the $2 trillion stimulus package will play out for the economy moving forward as more workers fear that they may be getting let go as well here, following in the footsteps of some of the other companies we've seen out there, and what that might mean for a phase 4 stimulus package as well coming down the chute.

For more on that, I want to bring in Edelman Financial Engines founder Ric Edelman, who joins us back on the show right now. And Ric, when we look at it, a lot of people are saying that, yes, this may be the largest stimulus package we've seen in a response like this, but $2 trillion sounds big on paper. When you think about what we're getting hit with here, you're inevitably going to need that phase 4 package, and a lot of people have called for more money to be redirected back to these states that are dealing with it on the front lines. So how do you assess whether or not it is enough and where we might go from here?

RIC EDELMAN: Yeah, I think you're absolutely right. We ain't seen nothing yet. This crisis is of a magnitude greater than anything any of us have seen in our lifetimes, much of it unprecedented. And the government is going to do exactly what is necessary-- flood the markets with whatever cash we need to get us through this. So the stimulus package most recently of $2.2 trillion, that's going to be repeated probably 2, 3, maybe 4 times. I wouldn't be surprised if we see $6, $8, even more trillion dollars provided into the economy to help businesses, American families, nonprofit organizations get through this crisis.

ZACK GUZMAN: Yeah. Even House Speaker Nancy Pelosi referred to the $2 trillion package as a very big down payment, kind of insinuating that there would be more here. We've heard the same from her compadre in the Senate in Senator Schumer. But when we look at it, obviously, states are dealing with a big shortfall here if you have tax revenues falling, as well as costs going up, as we've heard from Governor Cuomo. Potentially, a $15 billion shortfall in a state like New York, and that could play out in others.

So how do you see that impacting budgets across the country, since we know states have to balance these things, or what cuts could come, and how the federal government and the Fed can counteract that and avoid a situation like we saw back in 2008, where the contraction there actually stifled the recovery that a lot of people were hoping for?

RIC EDELMAN: You're absolutely right, and that's why there is not going to be any limit to the amount of money that the federal government, the Federal Reserve provides to every entity, organization, individual in this country. Not just businesses and families, but governments as well, state and local, because of the issues you've identified.

And as long as we know that that checkbook is going to be very much available on an as-needed basis as quickly as needed, that will provide the confidence that we all need that we don't have to worry about money, we don't have to worry about finances. We can focus on health, and safety, and family, because at the end of the day, that's all that really does matter.

BRIAN CHEUNG: Hey, Ric, it's Brian Cheung here. It seems like the optimism in markets is predicated on the fact that we did get that stimulus relief bill passed last week. But all of that is assuming that the health response is going to be adequate to get us out of this rut, hopefully, in let's say the next month or two. I'm wondering what other types of possible changes in that outlook could result in maybe us realizing that this isn't the bottom here, if that is the case?

RIC EDELMAN: Yeah, I think it's a very valid concern, Brian, and I believe that the markets are going to discover, through their classic short termism, that the good news of last week with the stimulus package will soon be forgotten. As soon as we get to next week's numbers, and we see a dramatic increase in the number of infections, and hospitalizations, and the number of people on ventilators, the markets are going to get upset all over again. And the government will respond with yet more stimulus, the markets will get happy again.

And we're going to see this yo-yo continuing until, in fact, the virus is fully defeated. And all the medical experts are telling us that that's not going to happen before Q4.

ZACK GUZMAN: Yeah, and Rick, when we talk about-- and I don't want to dwell too much on short termism, because we know what that'll do, and I want to look at the longer picture here, and if you try and compare-- I've got a Bitcoin pillow behind me. A lot of people in that community back in 2008 were talking about the Fed printing money, throwing it out there, that there was inevitably going to be this huge inflation bubble that would follow. That did not happen. We didn't see that happen.

But when you look at it-- we're dealing with a very different crisis on our hands this time if you expect what Wall Street and analysts are saying, that you'll get this huge bounce back. And with all that money sloshing around out there when we get to Q4, your thoughts on what the Fed might need to do differently than what we saw back then to not see a lot of those inflation fears come to fruition.

RIC EDELMAN: Yeah, we're going to have to wait and see how it plays out. This is unprecedented. And we do know with history-- we had a 9/11 and with 2008-- that inflation did not follow. And that was great news, reassuring, and a big relief for everybody.

The question is this time, if the Fed does come up with $4 trillion, $6 trillion, $8 trillion, will that trigger a round of inflation once we get past this crisis? Nobody knows. We're going to have to worry about it later.

For now, we've got a burning house, and we've got to put out the flames. We really can't worry about water damage to the walls. We'll worry about that later.

ZACK GUZMAN: Yeah, not a lot of time to worry about what potential deficit impacts there might be as well, since you got to put that fire out. But for now, Ric Edelman, want to appreciate you and say thanks for taking the time to chat with us today.

RIC EDELMAN: Happy to be with you, Zack.