The Fed Just Triggered The Next Recession (Worse Than 2008)

[00:00:00]Right now, while you're watching this, the floor is coming out from the most overvalued market in history. The Federal Reserve just took every single rate cut off the table. And the one thing holding this whole thing up, just disappeared. Stocks are crashing.

[00:00:13]Bitcoin is crashing. Even gold is crashing all at once on the same day because the one thing that every investor was leaning on, lower rates coming to save them, just got ripped away. Kevin Worsh, our brand new Fed chairman, in his very first meeting, erased the last cut from the Fed's own projections and put rate hikes back on the table for the first time in this entire cycle. The market was begging for relief, and the Fed chair told it no.

[00:00:38]And you have to understand what this is landing on top of. The S&P 500 is trading at a price to earnings ratio near 40, its most overvalued ratio in American history, second only to the peak of the dot bubble in 2000. Bank of America just flagged the market as overvalued on 17 of 20 valuation metrics with eight of them blowing past where they were at the top in 2000. This is by almost every measure that exists. The most expensive market ever assembled.

[00:01:05]Now stack the rest of the macro backdrop on top of it. Inflation just came roaring back above 4% for the first time since 2023, sitting at 4.2% and climbing. The war that caused it, the one that the headlines told you ended this week and it might be over, is hanging on by a thread that could snap any day. And the Fed just walked away from the one tool that the entire market was counting on. That is the setup. The most expensive market in history propped up on the promise of rate cuts that just got cancelled with inflation accelerating underneath it and a geopolitical fuse that nobody can actually put out. So, by the end of this video, you're going to understand exactly how dangerous this moment is, why Kevin Worst did this. now of all times and the one move he made yesterday that tells you the recession isn't just a risk anymore. It's actually the plan.

[00:01:52]And I'm going to show you where Bitcoin sits in all of it because Bitcoin already started pricing this in weeks before anyone in financial media said a word. And if you've been watching this channel for some time, you know that I've been talking about this for quite a while. Let's get into it. So, here's the chain I need you to hold on to for this entire video because every single thing in this video runs down it in order. We have oil to inflation to the Fed to the recession to Bitcoin. Five links. Oil drives inflation. Inflation traps the Fed. The Fed forces a recession. And the recession is the exact thing that sets Bitcoin up to run. Five links, one chain. I'm going to walk you down it.

[00:02:26]And I'm going to do it again until you can see the whole machine all at once.

[00:02:30]Oil, inflation, Fed, recession, Bitcoin.

[00:02:32]Lock that in. Remember it till the end of the video. So, let's start at the front of the chain with what actually happened because the headline number is the least important thing that happened yesterday. The Fed decided to hold rates at 3 and a half to 3.75%. 12 to nothing, unanimous decision on the Fed's part.

[00:02:49]That part is something that Wall Street saw coming. Markets were pricing a 97% chance of exactly what happened. So, if holding rates steady was the whole story, the market wouldn't have crashed.

[00:03:00]But, it did crash. The S&P 500 fell more than 2% into the close. The NASDAQ dropped 1 and a3. Both indexes hit their lows of the day in the final 15 minutes of trading, which tells you that money managers looked at what Kevin Worsh did, did the math, and decide to sell stocks aggressively into the end of the day.

[00:03:17]So, the question becomes, what were they reacting to? What caught them offguard if this was so expected? Well, it was three things and none of them was the rate decision itself. And this is why it matters so much to you. First is the statement as you could see here. So, for years, the Fed's policy statement has been a carefully worded document that markets dissect sentence by sentence.

[00:03:40]And Kevin Worsh just cut it in half. You could see all of the red lines here. He stripped out all of the language that hinted at future rate cuts, the so-called easing bias, which is the phrase that's been quietly telling markets relief is coming for the better part of a year. It's gone. In his words, the new statement just gives you the facts, no promises, no comfort. But that's exactly the kind of thing that causes markets to crash in a panic. And the second is the dot plot. You can see that here. This is just the grid where all 19 members of the Fed anonymously mark where they think rates are going.

[00:04:12]In March, the median dot showed that a rate cut was coming this year. But today, that cut is completely gone, erased, thanks to the inflation caused by the Iran war. Nine of the 18 officials who submitted now project a rate hike before the end of the year.

[00:04:25]And six of them see two hikes. We only have one official that sees a cut. So the entire center of gravity at the Fed has moved from we're about to ease and provide support to the stock market to we are going to tighten in the span of just 3 months. And third, and this is the thing that almost nobody is talking about correctly, Kevin Worsh refused to submit his own projection. So the chairman of the Federal Reserve, brand new his first day, literally declined to tell you where he thinks rates are going. He said that offering a projection would not be helpful in the conduct of policy. So think about that for a second. The single most powerful voice in global finance was handed a microphone and asked one question. Where are rates going? And he said, I'm not telling you. This is the guy that literally decides where rates are going.

[00:05:10]Now, the official reason he gave is philosophical. Worsh has argued for years that the Fed talks too much and that forward guidance, which is just the Fed telling the market what it intends to do, traps the Fed into stale promises and that markets have just become a mirror reflecting the Fed's own words back at it instead of pricing in real information. He quoted that exact idea yesterday. He said, "When all the markets are doing is reflecting back what we've said, we're blind to the most important source of information we have." So, on the surface, it sounds reasonable. It sounds like good central banking. Take off the blinders. Let the markets price reality. But here's the mechanism nobody is understanding correctly. There is a difference between a Fed that goes quiet when everything is calm and a Fed that goes quiet because it's about to do something it doesn't want to announce in advance. When you remove forward guidance, you don't just remove a promise. You're actually removing the market's ability to frontr run you. You take away the one thing that lets investors prepare. And you would only do that if what's coming is something the market would violently reject if it saw it coming in advance.

[00:06:10]That's the open loop I want you to hold until the end of this video because we're going to come back to it. Why would a brand new Fed chairman in his very first meeting with a booming economy on paper choose to blind the market right now? Keep that question running. We're going to answer it in just a moment. So that's the third link, the Fed. But to understand why the Fed is trapped and why I'm even making this video, we have to back up to the first two links, those being oil and inflation, because that's where this whole thing gets interesting. Inflation is the proverbial gun on the table. CPI inflation just printed 4.2% year-over-year. That is above 4% for the first time since 2023 and well above the Fed's inflation target of 2% a year.

[00:06:48]Producer prices, the cost of goods before they even hit the shelves, are rising at the fastest pace since 2022 as well. The Fed's own projection for its preferred inflation gauge, which is core PCE, just got revised up to 3.6% for year end. And to top it all off, the Fed is now openly admitting that inflation is not coming back down to 2% until 2028.

[00:07:08]>> We've missed for five years. And uh and we're going to fix that. Inflation remains elevated relative to the committee's 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. That's the paragraph goes on to say, but to be clear, the Fed will deliver price stability. My own judgment is the committee spent quite a bit of time not just in two days but over iterations of a couple of weeks. That's what we're prepared to say about inflation but the commitment to deliver is strong, unanimous and unambiguous and that's I think an important message we've missed for 5 years and uh and we're going to fix that.

[00:07:48]>> So we're in for a long haul of really bad inflation here folks and here's why that matters and why rate hikes are even being discussed. The inflation that we have right now is not the normal kind.

[00:07:58]The normal kind, which is the kind that the Fed knows how to fight, comes from too much demand. Money is too cheap, so too much money is printed. People borrow too much and they buy too many things.

[00:08:08]Prices go up, so the Fed raises interest rates, choking off the borrowing. Demand cools, prices fall. That playbook works.

[00:08:16]But that is not the inflation that we have. The inflation we have came from oil, the first link in the chain. For nearly four months, the war with Iran kept the straight of Hormuz, the single most important oil choke point under threat. And chances are it's still closed. We don't know if the war is truly over. About 20% of the world's oil flows through that straight. Oil spiked, fuel cost spiked, and that cost worked its way into everything because everything you buy has to be moved, and moving things run on diesel. Not to mention the fact that most products today are downstream of petroleum itself. So, this is what's called cost push inflation. The price increases we're seeing are coming from the supply side, from input costs, not from overheated demand. And here is the trap.

[00:08:57]I want you to understand this. This is the box that the Fed is in. You cannot fix a supply shock by raising interest rates. Raising rates does nothing to put more oil in the straight. All it does is crush the consumer who is already getting squeezed by higher prices. So, if the Fed hightes rates into this, which they're planning on doing, they're not going to be fixing inflation.

[00:09:16]They're going to kneecap an economy that is already absorbing an energy shock and they're going to be walking straight into a recession that they themselves are causing. And the thing that should scare you about this oil to inflation link is how it ends if the war doesn't resolve. If you run the clock forward, oil stays elevated, that 4.2% price inflation keeps climbing. We are mathematically on track for double-digit inflation this year. 10%. Which would perfectly rhyme with the 1970s, which is when the last oil shock that happened drove inflation to the double digits and it took the stock market down more than 50% with it. So, real quick, if you think we're heading for a 1970s style repeat of inflation without this war ending, comment the word inflation down below. One word, I want to see who thinks we're in for some bad inflation this year before things get better. So, now you understand the first three links. Oil drove inflation. Inflation trapped the Fed. And the Fed is stuck between a number that demands it to raise rates and an economy that can't survive it. Which brings us to the fourth link, the recession. The thing keeping this economy alive right now is not solid. About half of all consumer spending in this country now comes from the top 10% of earners. 50% of spending comes from the top 10. And for those of you who are unaware, the way that we measure economic growth is by spending.

[00:10:33]So, the entire economy is being propped up by wealthy people who feel rich only because the stock market is still near record highs. This is what's called a K-shaped economy. I've discussed it in prior videos, but essentially picture a letter K where the top is thriving and growing, and the bottom is declining and already in recession that it can feel in its own grocery store bill, in its gas prices, and just about everywhere else.

[00:10:54]Consumer sentiment just hit 44.8, which is the lowest reading since 1972. Let me say that again. Americans feel worse about the economy right now than in almost any point in the last 74 years, while the Dow prints record highs. That is the divergence from the top of the video. You have a family on one end of the country at the kitchen table trying to figure out how to pay bills this month and another family checking their stock portfolio while playing on the golf course. These families tell two completely opposite stories. And the entire thing is balanced on a stock market that is one shock away from taking the wealthy's confidence with it.

[00:11:27]And if you take the wealthy's confidence and they stop spending, the economy goes. So now we can answer the question that I told you to hold just a few minutes ago. Why is Kevin Worsh blinding the market right now in his first meeting on purpose? Here's the secret, and once you see it, you really can't unsee it. Look at the timing here. The war with Iran just ended.

[00:11:59]Both the US and Iran have signed the deal. Israel has yet to do so. But regardless, Trump confirmed the peace deal. The Street of Hormuz reopens. Oil has already fallen below $80 a barrel, dropping five straight days to its lowest level since March and almost at pre-war levels. Trump literally said out loud that the alternative to this deal was, in his words, a worldwide depression. So ask yourself, why did the war end now? Why are they working so hard at the very least to end it? Not 3 months ago, not next year, but now. It's because the only thing standing between this administration and the midterm elections is the economy and the stock market. That's the entire ball game. And the Fed just proved in the clearest possible terms that it will not cut rates to rescue asset prices while inflation is running this hot. Kevin Worsh just told everyone he's not going to bail out the stock market. Price stability comes first. So, if the Fed cannot drop inflation by cutting rates, there's only one other way to drop it.

[00:12:56]You have to kill the thing that's causing it. You have to go back to the first link in the chain. You have to end the war. You have to reopen the straight, let the oil flow, and let energy prices collapse. The war isn't ending because an actual peace deal was reached and these countries love each other suddenly. It's being ended because ending it is the only lever left to bring inflation down without the Fed having to cut, which it just refused to do. And if inflation doesn't come down, then the market crashes. Now, real quick, only about 16% of you watching right now are actually subscribed. So, if you're getting value out of this breakdown, if this is helping you see the board more clearly than the headlines are, do me a favor and hit the subscribe button. Drop a like on this video and turn on the bell so you get notified when the next breakdown drops.

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[00:13:51]The wait list is open now, so down in the description, sign up to know when it goes live. The link is at the top of the description, and founding members get pricing locked in for life. Now, back to the video. So, watch the full chain run forward now because this is the machine at work. If the war ends, then oil falls and over the next few months that lower oil works its way through the data and inflation begins to drop. I'm not saying it drops right away. Chances are we're in for several more months of inflation rising if the war truly does end. But the second inflation drops, the Fed's entire posture flips today. The Fed saying we might hike becomes we can finally cut. and rate cuts into a slowing economy with the war premium gone is the exact setup that has historically lit a fire under risk assets. That is link five, Bitcoin arriving right on schedule. But here's why Wars had to go dark to pull it off.

[00:14:43]He cannot tell you any of this in advance. He cannot stand at a podium and say, "We're going to hold a line, let the recession scare build, let inflation roll over, and then cut into the midterms." If he pre-announced that plan, the market would frontr run every step of it. the political optics would be a disaster and the inflation fight would lose all of its credibility. So, he just decided to remove forward guidance entirely. He turned off all of the instruments. Not because the plane is fine, but because he needs to fly through this storm without the passengers getting worried. The recession scare isn't a risk that he's worried about. On some level, it's the medicine. A cooling economy is what finally breaks the back of inflation and gives him the room to cut. So, he's not trying to avoid the turbulence. He's flying into it on purpose with the lights off. So nobody panics before he comes out on the other side. And on the other side, risk assets, Bitcoin included, stand to do extremely well.

[00:15:32]That's the whole thesis. Now, let me take you to the final link, Bitcoin, and show you why it's the cleanest way to position for it, and why Bitcoin has been screaming this story for months while stocks were in denial and still reaching record highs. Here's the tension. Bitcoin is down about 27% this year. It's trading around $65,000, as you can see behind me, down from $126,000 last April. Bitcoin and gold are the two worst performing major assets of 2026 so far, which is something that we've basically never seen in a single calendar year. If you only looked at the price, you'd think Bitcoin is broken. But as I've said before, Bitcoin is not broken. It is simply early. It is the most sensitive instrument on the entire dashboard. It is the best global proxy for actual risk conditions. It is the purest play on global liquidity and the cost of money that exists. So, when rates are high and the Fed is hawkish and yields are at record levels, Bitcoin has never faced, which is exactly where we are right now with the 10-year at 4 and a.5%, Bitcoin gets crushed. That's not a flaw. That's just the asset doing exactly what it should at this point in the cycle. It's sold off first. It's sold off hardest because it feels the cost of money rising before anything else does. It's the first link in the chain of dominoes that reacts even though it sits at the end of the story, which means it will turn first, too. That's the entire point. Bitcoin is the first asset to top and it's always the first asset to begin rising again after bottoming. The same sensitivity that makes Bitcoin the worst performer on the way down makes it the best performer on the way back up, the moment that liquidity loosens. And we just walked the whole chain to get here.

[00:17:10]The war is ending. Allegedly, oil is falling. Inflation is going to roll over and a Fed that refused to cut will be cutting within a few quarters. Look at what's already happening underneath the price. The selling that drove Bitcoin down here was concentrated and identifiable. Spot ETF saw around $3 billion of outflows over 10 straight days. Wales sold into it. Strategy Michael Sailor's company sold Bitcoin for the first time in nearly four years.

[00:17:34]A tiny amount, 32 coins, but symbolically it shook confidence and dropped the market even further. That is what a flush looks like. That is forced and fearful selling clearing out the weak hands at the bottom of a cycle, not the start of a collapse. And the structural story has not moved an inch.

[00:17:50]There will only ever be 21 million Bitcoin. The 2024 having already cut new supply issuance in half. And every cycle, the strongest gains have come 12 to 24 months after the having, which puts the back half of this year and 2027 squarely in the window for Bitcoin's next bull run. The demand side is bruised, but the supply side is mathematically fixed. When the liquidity comes back, whether we get a recession because the war won't end or we avoid a recession and the rates come down anyway, it is chasing a supply that cannot expand to meet it. That is the whole trait. So, let me bring this home.

[00:18:23]I gave you a chain at the start. We have oil, inflation, Fed, recession, and Bitcoin. I want to explain it to you one last time all at once at full speed. Oil spiked from the war and it drove inflation to 4.2% 2% and chances are it's going to continue rising over the next several months. That inflation trapped the Fed because it's the wrong kind of inflation to hike against, but it's too hot to cut into. So, the Fed decided to go dark and they're refusing to rescue the market, which means the only way to kill inflation is to kill the cause, which is why the war is ending exactly right now. Oil falls, inflation rolls over, the recession scared, does the Fed's dirty work, and the cuts come right into the midterms.

[00:19:03]And Bitcoin, the asset that fell to all of this first and sold off the hardest, is the one that moves first and moves hardest when the money gets cheap again.

[00:19:11]Five links, one machine. It only looks like chaos if you can't see the chain.

[00:19:17]The Fed turned off the lights and told you everything is fine. The lights going off is the signal. The people who can see the entire sequence of events here several steps ahead are going to be positioned long before the ones who are still waiting for the Fed to tell them what to do because the Fed just told you that it's never going to tell you again.

[00:19:34]If you want the full picture on where Bitcoin goes from here, go watch my last video where I broke down the four-year cycle and why Bitcoin probably has one more leg down or at the very least some choppiness before this fully bottoms out in October because everything in it is connecting what just happened. And I'll see you over there. channel members got this video early. Hit the join button down below to support the channel and become a member. And if you haven't already, subscribe to the channel and hit the bell to get notified whenever a new video goes live. And if you want first access to the community I'm launching, the weight list link is right at the top of the description. You can also book a one-on-one session with me at the link down below. I'll see you in the next one.