Transcription
So, a few days ago, the United States and Iran signed a deal to end one of the most destructive wars in decades. And within just days, it fell apart just like we said it would. Israel kept on bombing Lebanon. The agreement broke and Iran shut the straight of Hermuz again. And that means no more oil for the world. And the crisis is sort of back on. And the question is, why did that happen?
Everyone says it's because of Israel and Netanyahu, and that's partially true. But there's a more encompassing theory that explains it better. And the theory says that what's actually happening right now is that there is an internal conflict in the profit-making machine that's between the military-industrial complex and the technological industrial complex. You see, the military's forever war model is being shut down to make room for the technological industrial complex's AI buildout because in order to build AI and data centers and the control grid, you need stability instead of war. And if that is right, it would explain why people who would have never criticized Israel are now criticizing Israel. I'm not happy with the way Israel has handled themselves with Lebanon and with Hezbollah. Without the United States, there would be no Israel. Israel would have been blown up a long time ago had I not gotten involved. Israel's fighting Hezbollah too long and too many people are being killed. And you don't have to knock down an apartment house every time you're looking for somebody. Now whether the forever war model holds or not really depends on oil because oil runs straight through the Federal Reserve and it's all connected.
So today I want to explain how no matter what happens, the most likely outcome that we're going to see in the next few years is that our money is going to be worth a lot less. And here's how that's going to be done. A few days ago, I made a video for the premium members predicting exactly what the Fed would do. It called the whole mess before it happened. And we accurately predicted what would happen to the federal fund rate, aka the interest rate. Because the truth is, we already knew what Kevin Worsh was going to do using that CME Fed watch tool. The market predicted over a 97% chance that interest rates stay the same. And that's exactly what happened. But I also said that what really mattered is what he was going to telegraph to the world about the future of the Federal Reserve. For example, I said if he didn't give the market what economists call a dovish signal, if he didn't hint that some kind of a relief was coming, stocks were going to go down. And that's exactly what happened. The S&P 500 closed down 1.2%. Which is a lot for the stock market.
So, in this video, I want to explain what actually happened and what their master plan actually is and how they're planning to rewrite the rules for the Federal Reserve itself. One of the ways they're going to do that, for example, is that Kevin Walsh said he's dropping what's called the forward guidance. That statement just gives you the facts as best we can judge it. Absson also is so-called forward guidance, which we agreed was not well suited to the current policy conjuncture, >> which is a fancy way of saying he told the market, "I'm not going to tell you guys what we're going to do next anymore." He's refusing to submit his own forecast. I however have refrained from offering any projections of my own consistent with my long-held views on the SCP at least as currently structured. And he also launched something called the five task forces which is meant to review everything from how the Fed talks to how it measures the economy and inflation. The third task force, the one on data, will evaluate new information sources and consider methodological changes to improve data gathering with the aim of giving policymakers more accurate, relevant, contemporaneous, and perhaps most important, actionable information on the state of our economy. So information and data are going to be a privilege for this administration. And I think there's a plan to craft a story that inflation is under control. Right? That is the official story it looks like they're creating. But the unofficial story is that they might be building a machine to do the exact opposite. And the key to this machine is controlling the data itself. And why they're building this machine is so they can do what they've always ultimately wanted to do, which is quantitative easing, aka printing money. This machine will allow them to do that by showing us that the data supports their plan. There's a lot of really interesting stuff to get through. So, with that said, let's get into it. Sure.
>> Hi, my name is Andre Jick. Hope you're doing well. Comfort the finance and stay for the stock market. Now, if you're watching this and you're not a finance nerd, there's a question I think we all have. Cuz Trump picked Kevin Worsh as his Fed chair. And Trump's been screaming for lower interest rates for years. He literally joked that he would sue his own federal chairman if he didn't lower the rates. And then on Wednesday, not only did Kevin Worsh not lower interest rates, the Fed's projections show nine of its members want to increase interest rates before the end of the year. So, the obvious question is, how long is it going to take Trump before he goes on Twitter and is like, "This guy's an idiot." And the answer to that question is basically this video. Hopefully, everything will make sense by the end of it. Here's the thing. About a week ago, right after a report came out showing inflation went up 4.2%, right, to the highest level in 3 years, Trump said, "I love inflation." That's a weird thing for him to say because he was partly elected on a promise to bring prices down and he's saying he loves inflation. Why? It's because as long as you can blame inflation on the Iran war and the price of oil, then it's nobody's fault. It's the war's fault. So, okay, why then did he hold the interest rate steady? It's because this is how he earns the right to lower interest rates later. Because imagine if he had done the opposite. If Kevin Wars just walked in on day one and is like, "I'm lowering interest rates, guys." Everyone would say that's just cuz Trump told you to. The bond market would have revolted and then interest rates would have went way up and he'd be branded a puppet, right? He would have no credibility. He'd have no independence. So right now he is doing the opposite because he gets to sound and look tough on inflation in the face of Trump. It creates the narrative that he is in fact independent. He takes the credibility and then later this year if this Iran deal supposedly goes through and oil actually comes back down, then inflation comes down by itself and he gets to lower interest rates and say, "The data told me to, so I did, right?" Kevin Walsh gets to look hawkish today so that later he can be dovish and lower the rates without being punched by the bond market.
Now, if all of that sounded super confusing, let me explain the biggest changes going forward. What they're doing right now is they're creating a story for the master strategy. The story they need is that inflation will be low, driven by the end of the Iran war and the AI boom, which is disinflationary, which allows us to then lower rates and print money. But in order to justify those actions, they need to create a machine that sells that story. Let me explain how I think this machine is going to work. Now, before I get into that, this video is sponsored by Zachdoc. The American health care system is genuinely broken in a lot of ways. And one of the most absurd things about it is just how hard it is to book an appointment and see a health care provider. The average wait time in the US is 31 days, and in some cities it's over 40. You call, you get put on hold, and you find out they don't even take your insurance, and then you have to start all over. That's exactly what Zachdoc was designed to solve. It's a free app and website where you search for local doctors, filter by your insurance, read real patient reviews, and you can see their actual available appointment slots, and you can book instantly. There's no phone calls, no 6 week time. Most appointments on ZT Talk happen within 24 to 72 hours. And sometimes you can even get same day appointments. They have access to over 150,000 providers across over 200 specialties in all 50 states. If you've ever put off seeing the doctor because you don't want to deal with the hassle, Zach Do takes care of it for you. Check it out in my link in the description down below. And now, let's get back to it.
So, here's the machine that they're creating. Remember those five task forces? Well, one of them will be dedicated to collecting data like how the Fed collects it, where it comes from, like how it measures the economy, all the inflation. Right now, today, the data the government uses to run this whole country is genuinely broken. Things like our jobs report, all the inflation reports, they all come from surveys. So the government makes its best guess. It publishes a number and then the whole market starts to react to it and then months later the government has to revise it. And they do this all the time. There's huge revisions. We're talking about the government revising these numbers by the hundreds of thousands of jobs after the fact and more than once. Kevin Worsh calls the old data an echo of history and he's right. So he wants real time accurate data powered by AI. Now that's not why though they're updating this machine. They're updating it because there's a catch. And the catch is that right now there's two completely different stories about inflation. Story number one is the official data. The way they've always measured it using the CPI and the PCE. That data says inflation's high. It's at 4.2%. And the Fed is predicting that by the end of the year it'll be 3.6%. That is still high. That story says, well, you can't lower interest rates because inflation's too high. Okay. Story number two is oil has gone down almost 40% from its highs. And supposedly the Iran deal is getting signed this Friday. That story says inflation is going to crater, right? It's about to fall off a cliff. So, you can absolutely lower interest rates in that case. But the question is, who gets to decide which story we're going to use? Cuz whoever picks the data will pick the policy. If Kevin Worsh picks this official data, part one, right, he's trapped. So he has to stay hawkish, meaning rates have to stay higher for longer because the number says inflation's hot. But the second he gets to say, "Nah, we don't look at that lagging old data anymore, right? We look at this new realtime data driven by Palunteer, whatever it might be. Suddenly inflation is going down. And then he's free to lower interest rates. He's free to start reducing the Fed's balance sheet. He gets to say that it's all data driven, right? That's the whole game. But it's also his data. He gets to choose which true number the Fed will use. And he's obviously going to choose the one that conveniently gives him permission to do what he's always wanted to do anyway, which is QE. How we know this is because the Fed is considering changing how they measure inflation using that trimmed mean PCE. Basically, let's get rid of all the outliers like oil for example, which is kind of the whole reason why inflation is as high as it is. If we remove the extreme variables, we can make inflation look less bad. The point is that it's up to them. They can pick which story they want to go with.
Now, going beyond that though, Kevin Worsh is also removing all the ways we might be able to catch him doing this, aka no more dot plot. The dotplot, by the way, is a survey for what other central bankers on the Fed want to do with interest rates. So, no more forward guidance. There's going to be a brand new framework that is going to be designed inhouse. The old data, though, as broken as it was, right? It was at least everybody's data. It was public and you could check it. So, if you're sitting at home and you're like, "Grocities still feel pretty insane to me, but the Fed is telling you that inflation's under control and they're cutting rates to celebrate." you're not going to be able to point to a number and say, "Hey, what's going on here?" Right? That's wrong. Because the number will be whatever they decided for it to be. So that is one of the gears of this machine. It's to control the data. So you can justify the easing and then you could say it's all good. Now justifying all of this is just half of the job. They still have to do the actual easing, the actual money printing without anyone seeing it as money printing so that people don't get mad that their dollar buys them less. And that's exactly where the banks come in. Now, let me show you exactly how that's going to work. Remember, there was that rule that came out of the 2008 financial crisis called the supplemental leverage ratio or SLR for short. All it really does is limit how much a bank can hold relative to its own money, including treasury bonds. And when COVID hit in 2020 and the banks needed help, the Fed temporarily exempted treasuries from that rule for about a year. What happened then was banks piled their money into treasuries, hundreds of billions of dollars worth. The bond market started to run really smooth, but when the exemption expired in March of 2021, the bond market did not like it and it got really choppy. Now, why this is so important to our story is now we can put these two pieces together and hopefully this machine makes a little bit more sense. On one hand, Kevin Wars talks about shrinking the Fed's balance sheet. He wants the Fed to have fewer bonds. He wants the line on this chart to go down. He wants to show this data because that would mean or that would imply less inflation. Awesome. On the other hand, he also wants to deregulate the banks. he will hand them back their treasury exemption from the SLR. And the second he does that, the banks will step in and scoop up all the bonds the Fed was selling. Except the banks will do it with huge amounts of leverage cuz borrowing to buy is what banks do. But then if that's the case, ask yourself, what is the difference? Right? The Fed sells the bonds and then the banks buy them. The net effect of the bond market is the same thing as if the Fed just bought the bonds itself, right? That is quantitative easing. That is money printing. It's just laundered through the commercial banking system instead of showing up on the Fed's balance sheet where a guy on some social media can be like, "Look, they're printing money because the line's going up." Now, that will not be as easy to do. That is control of data. That's the beauty of it. When someone asks, "Well, aren't you guys printing money? Isn't that why my dollar is buying me less now?" They will get to say, "No, right? We're actually shrinking our balance sheet." They'll say, "Look, we're tightening. We are letting go of our bonds. There's no inflation, but the money still gets printed anyway. Your dollar will still buy you less." The reasoning for it will be, "Hey, we're freeing the banks to lend to Main Street instead of Wall Street. We're helping small businesses and there's enough truth in it to make it impossible to argue against. So follow the incentive. That is the machine. They will control the data which they can then deregulate the banks with. So then they can do the quantitative easing without it looking like money printing. And it all works beautifully on paper because the data will support all of it.
Now unfortunately for their master plan to work there's a couple very big problems they first have to solve. The first problem is that the bond market doesn't believe them. The bond market just sent Kevin Walsh a very loud clear message. In this chart, we can see what just happened to interest rates on Wednesday. Bond rates have gone up, but not evenly. Look at what happened to the short end versus the long end. The 2-year Treasury bond, which basically the market's bet on what the Fed's going to do over the next couple of years, that went up the most, up to about 4.2%. 2%. But the 30-year Treasury rate that barely moved at all. So, the front of the curve went up and the back of it just kind of sitting here. Now, why that's so important is because in nerd speak from my last video, that's called a flattening of the yield curve. Investors are basically saying, "We think the Fed is going to keep rates higher for longer because we think inflation is worse than what you're telling us it is. We also did not hear you say in your meeting that you're going to lower interest rates later this year and nine of your other members want to increase interest rates, pay us more money, right? That's why the 2-year Treasury bond is going up. Unfortunately, for the banks, part of the plan to work right now, Kevin Worsh needs to get the yield curve steeper. He needs a bigger gap between short and long-term rates. He needs the short rates to be low and long-term rates to be higher because this gap, that's where banks make money. So, what the market did on Wednesday was it flattened the curve. It raised on the short end. It did the opposite of what their plan needs them to do. Kevin Worsh also said he's going to drop the forward guidance. He's like, I'm not going to tell you guys what we're doing anymore. Now, from a bond investor's point of view, when the Fed used to tell you what it was planning, you could buy your bonds with confidence, right? You can kind of plan ahead. But now Kevin War says, "I'm not going to tell you guys anything." So investors are like, "Okay, pay me more for this uncertainty." That extra payment in the investment world has a name. It's called a risk premium.
Now, the second problem the US has is the US government has to refinance something like $8 trillion worth of debt over the next year. That means short-term interest rates right now are very important. They need them to come down. But ever since around 2014, foreign central banks basically stopped buying our Treasury bonds. That makes it harder for rates to come down. And who's actually buying our bonds right now are highly leveraged hedge funds. In fact, a Fed paper found that funds based in the Cayman Islands bought up something like 37% of all the new government notes and bonds issued since 2022. So now when stocks go down and the market gets scared, those hedge funds could be hit with margin calls and then they're forced to sell. And what do they sell? They sell their treasuries. That is why now more than ever, we need more buyers of treasuries at a time when there are less and less, right? We need someone to bail out the bond market without it looking like the Fed is doing it. So instead of stocks down, bonds up, which is what investors have always relied on happening, we're now getting stocks down and bonds down and their yields are up at the same time. That's what happened on Wednesday. The S&P went down over 1% and bond yields went up. So the old safety net that investors have always relied on, right? It's not there anymore.
Okay, let's just forget about the bond market for a second. There is a second problem that might be even bigger that's sort of like the deciding X factor on whether any of this works or not. And that is the price of oil. A huge reason why inflation is as bad as it is right now is because of oil. If it stays high, then Kevin Walsh never gets his excuse to lower those rates. Oil decides everything. So, what's happening to oil right now? Right now, oil is going down because the market thinks the Iran deal is about to get signed. On paper, this is perfect timing for Kevin Worsh. Oil crashes, inflation cools down, and right on Q, he gets his reason to lower interest rates in the future. How do we get the oil down? Couple different ways. We can manipulate short-term prices through the oil futures market. We can do it through the media and the strategic petroleum reserve, the SPR. In my last video, I said that that would run out in under 80 days, which is why this Iran deal was so important and it needed to get done ASAP. Well, listen to what Trump himself said about why he stopped bombing Iran.
>> If we if we keep bombing, those ships won't be going. And you're talking about 500600700 million dollar a day. It's a lot of money. A lot of money. That's why the world is okay. It's liquid. It's fine. Also, we run out of reserves in about four weeks. You know, there are reserves all over the world. And we would really run out and there'll be a time when you wouldn't be able to get it. And you want to see bedum?
>> He said if we keep bombing the ships won't be able to move and then we run out of reserves in about 4 weeks. So, he just admitted the reason for this deal. The reason he's pulling out has nothing to do with winning a war. It's about getting oil flowing again before the US economy blows up. Trump basically told us what I've been saying in all these videos. Now, unfortunately, the deal hasn't actually happened yet, thanks to Israel. And even if they eventually sign a deal, getting oil to actually flow back to normal is going to take months. There's something like 500 ships stuck in that region right now. The insurance companies and the shipping giants are still scared to send the tankers through it. Analysts are saying it could take 2 to 3 months just to get traffic back to normal. And that's if everything goes perfectly, which we now know it won't be.
So now the real question for me as an investor is, well, okay then, what can we expect from the stock market? Let me show you what history says will happen. Take a look at this chart. This is from Barclays in Bloomberg and it shows what this S&P 500 has done in the first 3 months after a new Fed chair takes over. If you go down the list, almost every single time we got a new Fed chair, the market goes negative. On average, the stock market falls about 12% in the first 3 months of a new chairman. Some of them, like when Alan Greenspan took over, the market went down by 33%. Another one way back went down 32%. Look at who had the smaller drops. It was Powell, Yelen, Bernani. Those were the continuity guys, but the giant drops in the market like the 30% plus ones that happened when a new chairman came in and changed the game. Right? The bigger the change, the bigger the drop. I could see that happening in the stock market. It is very possible that by October, November time frame, we see the market down. Although it is also possible that we thread the needle, the deal gets done, inflation based on this new data comes down and then we go right into printing money. It kind of depends on what happens with this Iran deal. Anything is possible and nothing is certain, but I'm still invested.
According to Luke Groman from FFTT, here's how you know everything from this video will come true about their master plan. There's five signs to look for to know their plan is working. And that is a weaker dollar, higher stocks, lower 10-year yields, higher gold prices, and higher Bitcoin prices. On Wednesday, every single one of those signs flashed the opposite. dollar up, stocks down, 10-year Treasury yields up, gold down, and Bitcoin down, which means their plan is failing, at least for now. But time will tell. If you're interested in seeing how I'm preparing and how I'm investing, those videos live in the premium member section. You'll also gain access to my main videos earlier. If that's valuable to you, the link is down below. It also allows me to make more videos like this one, take on fewer sponsors. Thank you for watching. I hope you have a wonderful rest of your day. Smash the like button. I'd love to see you next time. Thank you for being premium member and take