A special guest joins this mostly macro-level episode of The Milk Check. Dr. Andrew Novakovic compares today’s inflation with U.S. inflation eras past, and the group examines evidence toward the unlikelihood of another Great Recession as well as downward pressure holding back a forceful economic rebound.

Both Ted Jr. and T3 still see some upside in dairy markets, Dr. Novakovic sees a continuation of the trend toward larger farms finding more success and T3 expects inflation to “pull back significantly.” To close out the podcast, Ted Jr. and Dr. Novakovic talk Federal Orders, “urgent marketing” and the challenges in removing or updating federal regulations and/or terms of trade.

T3: Hello and welcome, everybody, to the Milk Check podcast. This month, we have the pleasure of welcoming Dr. Andrew Novakovic, professor emeritus at the Dyson School at Cornell University, professor of dairy markets and policy. Andy, it's a pleasure for us to have you on our podcast this month. Thank you very much for joining us.

Dr. Andrew Novakovic: Yeah. It's always a pleasure to work with you guys, and I'm anxious to see where the conversation goes.

T3: So we also have, besides the usual suspects, my father and Anna, Josh White, and Jacob Menge from our trading team are joining us as well. So I'd like to start off this conversation this month, Andy, by asking you a question that's been on my mind since you and I were talking a couple of months ago, and you mentioned this almost as a passing comment, but it really piqued my interest. And it was this. We were talking about inflation and how inflation was probably going to affect our economy. And you mentioned that the inflation we're going through this time in 2022 is a lot more like the inflation of the 1940s and '50s than it is like the inflation of the 1970s and '80s. What did you mean by that? What's the difference? What are we experiencing right now?

Dr. Andrew Novakovic: So of course, inflation means that prices pretty much across the board are rising, so it's not a sector event. It's not we had a bad corn crop, and that's having an impact on beef. It's something broad. So what kind of things have that broad sweep of effect? And like so many thing in economics, there's a supply side and a demand side that could theoretically be at play. And a lot of times when we look at inflationary periods, they come from a certain amount of government overheating, fiscal policy that's relaxed where money is kept in consumer pockets, as opposed to going into government coffers.

So we reduce taxes, and people get to keep more in their pocketbook, or we spend money in a way that gains income for people. It might be through jobs, it might be through direct income subsidies or what have you. Those people go out and spend that money, and that heats up the economy.

The other inflationary route is supply side, which is leading to cost. And there was an element of the '70s that for sure does relate to what we see now, and that's energy. OPEC had been around for a while. Their obvious goal was to monopolize, to a certain degree, world oil markets. The first time they tried that, it didn't really work. But in the '70s, they started to get their act together. And those of us who lived through that time can remember just this catapulting of gasoline prices going from 20, 30 cents a gallon to over a dollar a gallon. You had to change all the pumps to put on an extra digit. That was pretty remarkable. And of course, energy is a big part of what's going on now.

But when we were talking, what struck me is that when you think of all the supply chain stuff that's occurring now, lot has to do with labor, but computer chips and resin availability for plastics, and just a variety of things that are impacting supply chain. That reminds me a little bit more of post world war disruptions that we saw in the late teens, early '20s. Late teens also was a pandemic period,