Transcription
On May 15th, 2026, the Federal Reserve Bank is going to reset, and most people are not going to hear about it until they feel it in their wallet. What's happening on May 15th? The chairman at the Federal Reserve Bank is going to change, and he has a new plan on how to shrink the debt crisis here in the United States. The only problem is, you cannot fix the debt problem without causing some sort of pain. And that's the thing that most people don't understand. But it also creates opportunity for the financially savvy. And in this video, I want to break down what might be coming. That way, you can be better prepared, not just to not hurt financially, but also to find opportunity to grow your wealth even faster. So, let's break it all down.
Just so we're on the same page, the Federal Reserve Bank is the central bank here in the United States. And although they're called the Federal Reserve Bank, they're actually not a bank because you and I cannot go there to deposit money. And they're also not a reserve because they're not sitting on any cash reserves. And they're actually not federal. It says so on their website. And the reason why that matters is because that means the government cannot tell the Federal Reserve Bank what to do. You might have heard in 2025 and 2026 how vocal President Trump was against the chairman at the Federal Reserve Bank because the previous and current chairman at the Federal Reserve Bank did not want to cut interest rates as fast as President Trump would have liked. Now you might say, can't Trump just fire Jerome Powell, who was the current chairman at the Federal Reserve Bank? Well, the answer is no, because Jerome Powell is a chairman at the Federal Reserve Bank, and they're not federal. So, President Trump cannot tell him what to do, and he cannot fire him.
But this is where things are going to change on May 15th, because that's when Jerome Powell's term is going to expire. And once his term expires, that's when President Trump can appoint a new chairman at the Federal Reserve Bank. And the only reason he can do that is because Jerome Powell's term is expiring. And that's why on May 15th, a guy by the name of Kevin Worsh is supposed to be the new lead, the new chairman at the Federal Reserve Bank. And he has a very different agenda than General Powell.
Now, the reason why this is so important is because the Federal Reserve Bank controls the strongest currency in the world. The Federal Reserve Bank is in charge of controlling the United States dollar and the United States economy. And so when you have a new chairman at the Federal Reserve Bank, it could change the trajectory of the economy, the value of a dollar, and inflation. And Kevin Worsh is coming into the Federal Reserve Bank at a very important time because right now, the United States government has over $39 trillion of national debt, which is a problem. But the even bigger problem is the payments on this debt. Because the United States government has one form of revenue, and that revenue comes from tax dollars from taxpayers. And the fastest growing expense for the United States government is not the military. It's not infrastructure. It's not research and development. It is interest payments. Because now we are paying more than $1 trillion a year just on interest payments on this debt. And that means more and more of your tax dollars are being used not to provide you a service, not to benefit you, not to benefit your kids, but to just pay back previous expenses plus interest.
Now, before I get into the plan to try to erase the national debt, the other thing that I want you to be aware of is that when the Federal Reserve Bank makes a decision, whether it's to cut or raise interest rates, whether it's to print money, it has to be a majority vote decision at the Federal Reserve Bank. And there are 12 members that are voting inside of the Federal Reserve Bank. So, right now, Jerome Powell is doing things that President Trump at the government does not want. And now President Trump is working to replace Jerome Powell with somebody who will do what President Trump wants, which is Kevin Worsh, which is one more vote in favor of trying to do the things that President Trump wants, which are lower interest rates and potentially more money printing to stimulate the economy. Yes, there are consequences to that, which is inflation, but that's what President Trump wants.
This is where many people wrongly think that the way the government is going to solve this debt crisis is by paying off the debt. That's not what we've seen throughout history, because while history doesn't exactly repeat itself, it does rhyme. Let me show you how the government has tried to make their debt problems go away without paying off the debt, and in fact doing the opposite by taking a look at what we've seen happen in the United States in history. That way, we can better predict what might be coming in the future. And I want to remind you that these are the type of things that we've been keeping you posted on in Market Briefs. Market Briefs is my free daily newsletter for investors where every day my team is working to break down what's happening in things like the economy, housing, stocks, crypto, and global markets into a fun read and easy to read newsletter. It's read by hundreds of thousands of investors every morning. You can read it in less than 5 minutes every day. And as an added bonus, when you sign up for Market Briefs, you're also going to get access to my free investing master class as a bonus to level up your knowledge as an investor. So, if you want to get my investing newsletter, plus the free investing master class, all for free, all you have to do is sign up, and I have the link for you down in the description below.
See, the United States doesn't try to pay off their debt. They try to inflate their debt away. Let me show you what we did in the past. In the 1940s, after the Great Depression, after World War II, national debt in the United States exploded, and it created a debt crisis. And the way the United States solved this debt crisis was not paying off the debt. It was by doing something called financial repression. To keep this as simple as possible, I'm going to start by showing you the numbers. That way, you can see the impact of financial repression. And then I'll tell you how the government actually did this financial repression.
In 1946, after the national debt exploded from the Great Depression and World War II, we had $271 billion of national debt. While our economy, which is measured through a number called GDP, was $222 billion large, which means we had a debt to GDP ratio of 106%. We had more national debt than the size of our economy. And this was the beginning of the financial repression in the United States, because this was a problem. We had so much debt that we had more debt than the size of our economy.
Now, fast forward a few decades and look at what happened next. The national debt went up, not down. The national debt went up to around $475 billion, while the GDP grew even faster. The economy grew to $1.55 trillion in 1974, which means that the debt to GDP ratio now fell to about 25%. And I'm rounding here, which means yes, the national debt went up, but the economy grew even faster. And so this debt to GDP ratio looks a lot more manageable.
Now, take a look at where we were back in 2025. In 2025, our national debt hit right around $38 trillion, while our economy was about $30 trillion large, which means yes, our national debt exploded, but our economy didn't grow as fast, because now in 2025, our debt to GDP ratio grew to something like 125%. This is why people are concerned about the debt crisis, because it's even worse in 2025 and 2026 than it was in 1946 when we had this debt crisis. And now the question on everybody's mind is, what's going to be coming next? Are we going to see a financial repression like we saw happen after the 1940s to bring this debt to GDP ratio number down?
Now I want to talk about what this financial repression was. But the reason why this debt to GDP number matters is because think of it like the economy, the GDP is the collateral. If you wanted to buy a $500,000 house, most banks are not going to give you a $500,000 loan today. They're going to ask you to put 5% down, 20% down. And that down payment is your equity. But if the house value goes up, well, now you can take out more cash. So this GDP is the collateral. The debt is the debt. And when you have more debt than collateral, that's when you can start to see the problem. That's where the discussions about this financial repression come in.
So, how did it actually play out in the 40s, 50s, 60s, and into the 70s? The goal of a financial repression is two things. Number one is to make the government richer by making savers poorer. Let me show you how that works. It's a two-pronged approach between the Federal Reserve Bank and the government, where they kind of work hand in hand. The first thing that the Federal Reserve Bank does is they have to keep interest rates artificially low. And when I say artificially low, that means that they keep interest rates at a level that's lower than inflation. That's the first key factor. And then the second thing that happens is that the government kind of forces you to buy bonds at very low interest rates. Let me explain what that means.
During this time in the late 1940s, the Federal Reserve Bank cut interest rates close to 0%, while inflation was high. So after World War II ended, we had an inflation problem here in the United States where inflation was at 5%, 6%, 7%, sometimes even close to 10%. And now you know how inflation works. If the prices of things are growing by 5 to 10%, your savings, your cash has to grow by more than that in order for your savings to maintain its value. And this is where a couple of interesting things happened. The Federal Reserve Bank during that time set very low interest rates. They were almost at 0%. Well, what does that mean? That means if you're going to save your money in a bank, you're going to earn almost nothing in a bank. Well, if you earn 1% in a bank and inflation is 5%, you're losing a lot of value. So, why would anybody want to do that?
Well, this is where the government almost forced people to buy bonds. But what does that mean? Well, the United States government spends money they don't have. How do we know? Because we can just take a look at this national debt. This national debt is because the government is spending money they don't have. Well, when the government is spending money they don't have, that means they have to borrow that money. When the government borrows this money, that means that they issue something called a treasury. A treasury is a fancy way of saying a loan to the United States government. Well, these loans to the United States government now had very low interest rates because the Federal Reserve Bank cut interest rates significantly, which meant if you wanted to lend money to the United States government, you might only make 2% in interest on your loan. Well, if inflation is 5%, 7%, 9%. Why would you want to make a loan where you're going to make two or 3%? Right?
Well, that's where the government almost forced people to lend money to the United States government at very low interest rates. And I'm not talking about people. I'm talking about banks and pension funds and other institutions. They made it so that you almost had no choice but to lend your money to the United States government at these losing costs, because that's what allowed them to do this financial repression. How did they do that? Well, the United States government then created new laws, new regulations, which essentially said if you're a bank, you're a pension fund, you're a big financial institution, you essentially have no choice but now to take some of your money and lend it to the United States government. They didn't force you to do it, but they made it very unattractive to not do it. So now you had these institutions that are now lending money to the United States government.
And why does that matter? Because the United States government's interest payments that they have to pay don't just depend on how much debt that they have, but it depends on the interest rate on that debt. So now when interest rates go down, the value of the debt is not as much, because you're paying that debt back with a lower interest rate. So what they ultimately meant is that the United States government got to borrow this money for essentially free, because they had these super low interest rates, and these super low interest rates were lower than the inflation rate. So the government is borrowing this money for essentially free. They get to invest it into the economy by spending more money. And as they spend more money, they're working to grow the economy, because the government is borrowing money for essentially free. Then they work to grow the economy. And they were able to grow the economy faster than the national debt.
But somebody had to pay the price, because that meant that the people that lent money to the United States government that were essentially forced to do so had to lose money, because you're getting 2% in interest on your money while inflation is 5%, 6%, 7%, 8%. So the people that lent money, that saved money, that were just holding on to cash, they lost value. The government got richer and was able to grow the GDP.
But there's one key difference between the economy today and the economy back in the 40s, 50s, 60s, and 70s. And that difference is the length of these treasuries. Because back then, when the United States was borrowing this money, they would do long-term loans. They would borrow money for 10 years, 20 years, 30 years, which means they would lock in these loans for very low interest rates for decades. Today, when the United States government is borrowing money, they're not locking in 10, 20, 30 year loans. They're locking in one-year loans and two-year loans. So, it's almost like the United States government now has an adjustable rate mortgage on this $39 trillion of debt. Well, why does that matter? Because if interest rates go up, that means now this cost becomes a lot more expensive. Not just because we have more debt, but because the cost of servicing the debt would go up, because now we have to pay higher interest rates on all of this debt. If interest rates go down, well, that means this debt becomes a whole lot cheaper.
So, now that you understand the history lesson, let's talk about what might actually be coming in May, because Kevin Worsh has talked about a three-point plan of things that he wants to do once he enters office at the Federal Reserve Bank.
Number one, Kevin Worsh wants to cut interest rates. This is one of the reasons why President Trump wants a new chairman at the Federal Reserve Bank, because President Trump has said time and time again that he wants the United States to have the lowest interest rates of any developed country in the world. Now, you can start to see why the government would want lower interest rates. Reason number one is our $39 trillion of debt would become cheaper, because we have these shorter-term loans. So if we have a lower interest rate, the cost of servicing that $39 trillion would go lower, which means the government would spend less tax dollars on our national debt because the interest rate is lower. Reason number two has to do with this financial repression concept. Because if inflation is around 3%, well, interest rates would have to be lower than that for the government to be able to borrow free money. That way, the government would get richer while the savers get poorer. By the way, at the time of me recording this video, interest rates right now set by the Federal Reserve Bank are around 3.75%, and Kevin Worsh says that he wants to reduce interest rates by one full percent in 2026, which means yes, if inflation stays at 3% and interest rates fall to 2.75%, now we're fully entering this financial repression mode.
Number two, Kevin Worsh says he wants to shrink the balance sheet. Now, what that means is the Federal Reserve Bank is sitting on assets. What assets? They are treasuries. Remember, these treasuries are loans to the United States government. What does that mean? Well, the United States government is spending a lot of money that they don't have. And when the government goes to borrow this money, they can borrow this money from regular people, people like you and me. They can borrow this money from pension funds and institutions, or they can borrow this money from foreign countries. Well, what we've seen throughout time is that there's not enough money out there to lend to the United States government. And that's where the Federal Reserve Bank comes in. And they can lend money to the United States government. But there's one problem. The Federal Reserve Bank is not a reserve. They don't have cash reserves. Which means the Federal Reserve Bank, when they want to lend money to the United States government, they have to print that money first. So they print these trillions of dollars, and then they lend it to the United States government. And this new loan made by the Federal Reserve Bank sits on the Federal Reserve Bank's balance sheet.
Well, there's a couple of things you have to understand. This means that the Federal Reserve Bank has created trillions of dollars. And what Kevin Worsh is saying, if we now start to sell off some of these treasuries, well, now this money leaves the economy. We're essentially pulling money out of the economy to help shrink inflation, which is what Kevin Worsh says that if we pull money out of the economy, we're not going to have an inflation problem. Because yes, I can cut interest rates while reducing the number of dollars in the economic system, and now we won't have an inflation problem.
But there's one other thing that I want you to think about, which is supply and demand. When you go and do anything, you want to buy a piece of gold, you want to buy a house, you want to buy a stock, the price of this thing depends on supply and demand. If you and 10 other people want to buy the same house for $200,000, well, now it's going to be a bidding war, and it might sell for $275,000. Well, the same thing happens in the United States Treasury market. When everybody is trying to lend money to the United States government, it doesn't need to incentivize you with high interest rates, because everybody's lending money to the government, so they can bring interest rates down. So instead of paying you 3%, maybe the government only offers a 2.5% interest rate loan. Well, one of the biggest buyers, meaning lenders, to the United States government is the Federal Reserve Bank, because the Federal Reserve Bank is printing money and then they're lending it to the United States government. Well, if the Fed goes from a buyer of treasuries to a seller of treasuries, that could switch. Because now, if the Fed is selling these treasuries, well, now there's more sellers than there are buyers. And if people are selling off these treasuries, what's going to happen with treasury rates, meaning interest rates by the government? Generally, they would go up, not down. Because if the government now has to incentivize people to lend money to the government because the Fed is not buying them, they're going to have to incentivize you with higher interest rates.
Well, why does that matter? Because that seems counterintuitive to this financial repression. Because shouldn't the government want to borrow money for very cheap at a rate lower than inflation for this financial repression to happen? Well, this is where Kevin Worsh says no. He believes that if the Federal Reserve Bank starts selling off these treasuries, there will be enough private demand, demand by people like you and me, demand by pension funds and banks and other institutions and other foreign countries, that say, "We want to lend our money to the United States government." And that private demand will make up for this loss from the Federal Reserve Bank.
Now, one thing that I want you to keep in mind is that during this time from the 40s to the 70s, the government passed laws. They created regulations to almost force institutions to lend money to the United States government. If there's not enough demand from the private markets to lend money to the United States government, could we see new laws, new regulations by the government to force people or institutions to lend their money to the government instead of other places? I don't know, but we've seen it happen in the past. So, something you want to keep your eye on.
And then this is where Kevin Worsh says that AI is going to help with this process, because Kevin Worsh says that the Federal Reserve Bank can cut interest rates and not have an inflation problem, because AI is going to bring the cost of things down. It's going to help businesses run at a lower cost with more productivity. And if businesses have a lower cost, we're not going to see as high of inflation, even if the Federal Reserve Bank cuts interest rates. And that's going to help tame the inflation problem.
So, those are the three things that Kevin Worsh says that we're going to cut interest rates, we're going to shrink the balance sheet, maybe the government is going to be involved here to entice people to lend money to the government. I don't know, but that's what we saw happen in the past. And then Kevin Worsh says the AI is going to help keep inflation down.
Now, I'm going to talk about how this creates opportunity in just a second, but let me just make sure that we're all on the same page. The Federal Reserve Bank is separate from the United States government. On May 15th, there's going to be a new chairman at the Federal Reserve Bank, a guy by the name of Kevin Worsh. Why does this matter? Because right now, the United States is facing a debt crisis. Our debt to GDP ratio is higher than we saw after World War II. Now, after World War II, the United States government worked to solve the debt crisis, not by paying off the debt, but by doing something called financial repression. And we saw the impact of that. Between 1946 and 1974, our national debt increased significantly, but the economy grew even faster. So, our debt to GDP ratio went from 106% to a much more manageable 25%. Well, now we're at a 125% debt to GDP ratio. And this is where, come May 15th, we're going to have a new chairman at the Federal Reserve Bank that might try to do the same financial repression. Because while history doesn't exactly repeat itself, it does rhyme. We know we have a debt crisis, and so now what is going to be done?
Well, what we saw for financial repression to happen is that number one, the Federal Reserve Bank had to have extremely low interest rates, lower than inflation. And then number two, the government created regulations to entice and almost force institutions, pension funds, and banks to save their money at the government at a losing interest rate. Well, now when we take a look at what Kevin Worsh wants to do, number one is he wants to cut interest rates. Well, inflation is roughly at around 3%, and the Federal Reserve Bank's interest rate is 3.75%. Kevin Worsh says he wants to bring interest rates down by one full percent in about the next 12 months, which would mean that we now have interest rates lower than inflation, which would be starting off this financial repression.
At the same time, Kevin Worsh says that he wants to shrink the balance sheet. He wants to start selling off of these treasuries. Well, if he starts selling off treasuries, normally treasury interest rates go up, which would be the opposite of this financial repression. But this is where Kevin Worsh says that, you know what, I think that we can save this whole thing because there's going to be a lot of private demand for treasuries, that regular people, institutions, banks, pension funds, foreign governments are going to want to lend money to the United States government. So I don't think it's going to be a problem that the Federal Reserve Bank is selling these off. Now, if it doesn't work, potentially we could see more regulation happen. I'm not saying it's going to happen, I'm just saying that's what happened in the past, and history doesn't exactly repeat itself, but it does rhyme. Something you want to pay attention to.
And then Kevin Worsh says that because of AI, we will be able to do these two things without creating an inflation problem, that because of AI, we'll be able to cut costs, increase productivity, increase efficiency, and not have an inflation problem. Well, what does this mean now as an investor? Because there were clear winners and there were clear losers. By the way, again, we've been keeping you posted here with Market Briefs. We've covered all of this. So, if you haven't joined yet, I have the link for you down in the description. But the people that were losers were these savers, because if you're earning 1% at the bank and inflation is 3%, you're a loser. So, the person that was saving money at the bank, the person that was saving money in a CD, the person that was hoarding cash, inflation is bad for savers, but it made the investors wealthier. And what we saw throughout many decades is there were periods where stocks were the leader. There were periods where real estate was the leader. There were periods when gold was a leader. And at the end of the day, what we've seen throughout time is that some are going to do better than others at different periods. Some people will say stocks are the best. Some people will say real estate is the best. Other people say gold is the best. Other people will say Bitcoin is the best. At the end of the day, the key is you need to do something outside of just cash and saving money. You have to own assets, because inflation makes the rich wealthier. Inflation makes the average saver poorer, because we've seen throughout time that with inflation, the average person's income does not rise fast enough to keep up with inflation. And if we continue to see an inflation problem, well, the rich are going to continue getting richer. Asset prices are going to continue going higher, well, the average person continues to become poorer. That's why it's so important for you to understand this, because it is essential for you to know how to not spend all of your money, turn a piece of your paycheck into assets, into investments that will, when all this happens, you can get some of the benefit, because as asset prices go up, your wealth also goes up. Now, it doesn't mean that markets always go up. We saw multiple recessions and market crashes during this period of time. But over the long run, we have seen asset prices go up, despite the recessions, despite the market crashes. So, a lot of changes coming. We'll be keeping you posted here and on the Market Briefs newsletter. If you got value out of this video, the best thank you is a referral. So, if you could please share this video with a friend, family member, colleague, or fellow investor. That way, we can continue to spread this type of financial education. Thank you.
Our economy is going through some of the biggest changes we have seen in our lifetime, all in 2026. This economic craziness has caused the stock market to go wild in 2026 and it's made people scared to invest their money. But do you want to know something else? This economic craziness actually creates some of the best investment opportunities.