The video brilliantly exposes the Fed's circular logic, where they manufacture inflation expectations just to keep their policy tools from becoming obsolete. It reveals the "neutral rate" as a convenient academic fiction used to justify endless market manipulation.
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Good afternoon everybody, uneducated economist. What a beautiful sunny day here. Let me get the dice rolling for you. Going to be talking more about the Federal Reserve rate decision on what it is that they plan on doing going into the future. Many people have lost their mind on what it is that is now happening within the Federal Reserve. Especially when you consider the descent. This is like the most descent since 1992.
People are not very familiar with how it is that a Federal Reserve operation works. They look to wars to see what it is that's going to happen with interest rates. And very few people are truly internalizing what it is that's going on out there when it comes to the restrictiveness of the monetary policy and the Federal Reserve and how it is that they have position the Fed funds rate. Now, all this stuff is very confusing and it takes a lot of time to kind of filter through all the information in order to understand what it is that's going on from a bigger picture. It's not just necessarily one event that's going to take place that you're going to look at.
It's going to be a combination of many things that are happening over the course of a long period of time. And now as we as we study the monetary policy here at the uneducated economist, we are looking to speeches that were written 15, 20, 30 years ago in order to get a better understanding of the problems that the Federal Reserve was facing. And now to think about what it is that's going on with monetary policy, it's very important to understand that the Federal Reserve is sitting somewhere at what they assume is the high end of neutral.
And this is so confusing for a lot of people out there is they think just generally when the Federal Reserve raises rates that's restricts the economy and when you lower rates that eases the economy and you know for all intent purposes and logically speaking yeah that's fairly accurate but you also have to think about other components to this economy and part of that is understanding that the Fed funds rate itself sits in a neutral position and that neutral position isn't exactly observable. able and this is really where the confusion starts to come in and most people just abandon the idea of trying to understand it alto together and just go to money printer go burr prices go up what else do you need to know as I explain this stuff out there really when you start to hear it and then internalize the different components of it and start to see it it starts to ruin it for other YouTubers economic perspectives out there like when they go to watch other YouTubers and they listen to them they're Yeah, they're not getting it in the same way.
And I'm not trying to brag it up like, hey man, I'm like, you know, some super genius or something like that. That's not that's not what I'm getting at. What I'm getting at is that the information that I share is literally unique to the uneducated economist. other YouTubers, other, you know, articles and stuff like that will hit on the different components of it, but they don't necessarily grasp it in the bigger picture, at least from the way that I have grasped it from, if I can say the word right, from watching and listening to the Federal Reserve's own words and statements. And now this is important stuff to to think about because when it comes to the Federal Reserve and their ability to ease monetary policy, we really have to think about how it is that they can ease monetary policy when they have a neutral interest rate that is very close to the lower bound of zero. This is literally an impossibility for them because of the proximity of the Rstar in the lower bound of zero. The Fed can't drop interest rates enough to actually stimulate the economy. It just doesn't work. But now something interesting can stimulate the economy.
And it's not stimulating the economy in the way that a lot of people would anticipate. Like they think stimulating the economy means like handing out stimulus checks, right? And that's not what we're talking about here. And as most people kind of focus in and think, well, no, I'm looking that to be the stimulus that I'm talking about. Can you tell me about that? I was just like, well, I'm not going to talk about that because that's not what we're talking about. When it comes to the monetary policy, when the monetary policy eases financial conditions, it's the restrictiveness of that monetary policy that you have to look at. And that restrictiveness is very difficult to understand because again, that neutral interest rate is not observable in real time, right? You can't just go, hey, that's where it's at right now. There are estimates of it and then you have estimates of inflation. Ourstar estimates are almost impossible to understand. Like if you go and read the Federal Reserve and how it is that they estimate for RTAR. It's just like what whatever you know it's just like you guys come up with this huge mathematical formula and all kinds of crazy inputs to it and I'm like yeah okay whatever you say right it's like I mean I maybe I wouldn't understand if you were right or not because of the information that you had provided is so complicated on how it is that they estimate our star. So I don't even think they know right. In fact, they say they don't. You know, some like, you know, Wars is just like, "Hey, we got to abandon that whole RSTAR thing." Now, knowing what the RSAR means to monetary policy, this is important, all right? Because most people are going to miss this part of it. RSTAR is not observable in real time. And it's the moment that the Federal Reserve would be operating or the economy would be operating at its potential and low inflation, stable prices, and full employment. And it would be considered the sweet spot for the Federal Reserve.
And nobody knows where that's at. But they do have an estimate that is very close to zero, somewhere between 1 and 1.5%.
All right. Very complicated to understand, but you have to think it's a hypothetical position that is does exist in reality. Like I know that's so weird, right? It's like it's it's there somewhere, but we don't know exactly where. It's somewhere in here, right?
And yeah, maybe. Anyhow, knowing that to be the case that if the Federal Reserve wanted to stimulate the economy, they can't get far enough below that R star. Well, here's how it is that they can stimulate the economy, right?
Because this is important to understand is that it uses inflation, an inflation expectation. And when you raise that inflation expectation, now you have to put the Fed funds rate above the RSAR position in order to keep the economy neutral. With you have inflation rising, the Fed has to raise that Fed funds rate in order to remain neutral if you push the inflationary scenario. So the higher you push inflation, the further the Fed has to rise in the Fed funds rate in order to remain neutral. Now what we have experienced here over the last few years is something that is really epic when it comes to the understanding of monetary policy and how it is that it literally saved the Federal Reserve because that inflationary scenario that we experienced from CO had literally pulled that neutral interest rate dramatically high that forced the Federal Reserve way up with the Fed funds rate. Now they are no longer operating near the lower bound of zero.
This was the Federal Reserve's goal.
Okay. Now, I understand that that first seven minutes is very complicated and it's really the most of the information is right there to understand, but it goes so much deeper and I can't deliver it all in a 10-minute video. So, now we understand the situation that they were facing at the lower bound of zero. And they don't face that situation with inflation. If they have inflation now they can operate with above way above the lower bound of zero with that not being the constraint. Here's the problem with the constraint. No adjustment of interest rates can be done with inflation.
You can have adjustment of interest rates. Adjustment adjustments of inflation in Oh, good lord. Adjustment of interest rates with the inflationary scenario. There we go. Good lord. I'm having a hard time speaking. Okay.
So, how do we know that this was the goal? To raise inflation, to have it persistently high. All right? And this is the problem that I think a lot of times people face is that they think things happen so quickly. Like they learn the information for the first time and they think, "Bam, bam, bam, man.
This is happening right now." It's not.
It's an incredibly slow grind, right?
And it's very, very slow. Most people feel the pain instantaneously and they think it's fast, but it's not, right?
It's very slow. Okay, so this speech and I have and I'm going to bring it up forever and ever and ever because it definitely was telling the tell before COVID kicked in how it is that the Federal Reserve was facing this problem of operating at the lower bound of zero. Now this one section out of the speech I have probably said this section 500 times. All right, 5,000 times. This is like I mean every single day I bring this up. It says here, "Today we face an altogether different set of problems stemming from a very low neutral interest rate." Now again, this speech was given in November of 2018. Think about what I have just said over the last few minutes here talking about that low neutral interest rate. That is the short-term real interest rate consistent with an with an economy operating at its potential alongside low and stable inflation. Remember, that's the sweet spot, right? That's what he's talking about. When the Federal Reserve is operating at this sweet spot, the problem is very low close to the lower bound. Today, we face an altogether different set of problems stemming from a very low neutral interest rate. That is the short-term real interest rate consistent with an economy operating at its potential alongside low and stable inflation. Now, here it is. Ironically, the problem we need to solve these days is a risk of inflation that is persistently too low rather than too high. This rather than too high is what they wanted, right? The problem they needed to solve. It was too low. We would need it too high. This is the problem we need to solve. It's too low. We need it to be too high.
Persistently high inflation. This is what we got. To think that this was not their goal. It's it's missing it. It's missing it completely.
That one short paragraph, two sentences, literally spills the beans on what it is that was about ready to happen here. The problem we need to solve these days is a risk of inflation that was persistently too low rather than too high. How could that save their problem? Because it raises that neutral interest rate and it gets them off the lower bound of zero.
problem solved.
When I give this information to people and I share it to them and I have delivered this many times, I can give it to you from a thousand different angles.
Literally, people will hear the information, try to think about what I said and they go, well, the only thing I know is that the dollar is getting is losing value.
And I think to myself, please do tell me more because that is exactly how they're operating their monetary policy is with that expectation. When you raise the inflation expectation, you will pull that neutral interest rate higher. As the Federal Reserve threatens to raise rates, do you understand that the raising of interest rates to 6 months to a year, if not more, before it starts to impact the economy?
your belief system about it happens right away.
When the Federal Reserve is trying to remain neutral in an inflationary environment by raising rates, most people will think that they are moving into a restrictive economy. That is not correct.
They are staying neutral. It might be at the high end of neutral like Powell says, but if you have persistently high inflation, do I see that out there everywhere? Yep. you are going to raise that neutral interest rate. If the Federal Reserve remains still, this economy will become accommodating.
Now to understand how this operates is again very deep and very like I don't even know how many hours of information you have to internalize in order to understand this. But I have developed the school community just for that. I have put together an outon course so that people can internalize this information in a much better understanding because the Federal Reserve is about ready to turn off communications and this is going to leave the narrative wide open for rumors and speculation and I don't know manipulation of narrative like you wouldn't believe because there's going to be very few messages coming from the Federal Reserve itself.
This is part of the regime change. And so to understand these things ahead of time before the Federal Reserve starts to go quiet or starts to mumble their words out in incoherent and esoteric ways that make it almost impossible for the average person to internalize. We're going to be here dissecting all the information and sharing with you how it is that the monetary policy is truly easing or tightening on account of that neutral interest rate. because we're not focused in on things other than the expectation of inflation, which could have a very real outcome in the future. I get it, man. Pain and suffering to the people. I feel it. I drive a Suburban. I put $50 in gas and barely move the needle. So, now I understand the inflationary scenario just the same as everybody else from the working class position. I get it, man. I feel the pain just like everybody else does. But I've also attempted to position myself into assets by driving this old suburban. I've been able to hold on to a little bit of extra money, the money beyond the money I'm already making, so that I can position myself in a way that takes a benefit from the everinccreasing amounts of asset valuation due to a low neutral interest rate environment that is not restricted.
This is important to understand. And most people see these elevated inflation, elevated interest rates of the Fed funds and they think that the economy is restricted. They feel the pain and suffering of it. And if we are and if you are in a working class position, I agree with you 100%.
But we got a two-tier economy happening, don't we? Right. There's some people who aren't feeling the pain and suffering and they're chugging right along like nothing ever went wrong. And who is that? The consumer. Where's the consumer? They're at the top. And now this is probably one of the most scariest things for people to realize once they get this is that once you are in a position in which that you are an asset allocator, this economy looks wonderful, but it's only for a handful of people.
And now what I think is funny about this is that most people think that they can't be one of those, that they can't be an asset allocator.
And I'm thinking now has is easier to do this than in any time in history. And people are literally denying themselves the opportunity to do it.
They like they look at it and they like literally have some sort of evil like they believe that there is some sort of evil intent by attempting to position yourself into asset allocations, rental properties, businesses, and stuff of this nature to try and be a capitalist.
They find that to be some sort of evil intent. And I think to myself, what are you going to You're going to fall into hell.
All right? You're going to fall into hell with that idea. And so, who is it that really has the evil intent? Is it you with your own operations of your own future and your own thoughts that's going to lead you to hell? Or is it going to be the capitalist who sees the position in which that they can cut back on their expenses, increase their capital flow, position themselves to, you know, gain in opportunities that they can see as far as business or skill sets or, you know, even return on their capital investments in any way. There's, you know, you pick your path. That's what it come down to.
And if you want to give it a meaning that it's an evil intent, then, you know, I I then go for it. I don't know what, you know, I don't know what to say from that. This world isn't going to change tomorrow because you believe that, you know, capitalists are evil.
And that's really not the case at all.
There's only two people who will live independently of the state.
Capitalist and property owners and that's it. And it's, you know, it's scary for a lot of people to internalize, but that's really this the case.
All right. 17 minutes into it. Again, first 10 minutes is where all the information is. You can get more of that information at the school community. I encourage everybody to join in. We do Saturday webinars and to be honest with you guys, I don't even want any more people like I do want people to join in on the webinar, but the webinars on Saturday are so awesome with the handful of guys that we got there. It's like it it's it's good, man. Like I almost want to make it exclusive to like just 12 people almost and then not make it any more than that and then rotate 12 people into that into that webinar because it is so good. Like the stuff that we talk about is just incredible. It's like it's not just economics. It's how to deal with the un with the with the unreal situation we have. But not only that, like the people who are there have internalized the credible threat theory and then now are sharing how it is that that credible threat theory has helped them and it's so unique to each person and how it is that they are operating.
It's so good. All right, let's read some comments here.
Uh cruise all the way up to the top here. We got Vulva with Hey Justin V.
All right. Hi Jamie says let's go let go from Japan. Let's go for all righters.
Hey everyone.
All right. Smoke that like button.
Deplorable in the house with the good afternoon all. Deja. Happy Memorial weekend all. Firefight financial firefighter with aloha from Hawaii.
All right. Tabitha says hello to Deja.
All right. Here we go. Did you hear about wars moving to a trimmed average PCE metric for inflation? Seems like just understating inflation more. Yeah, I just it doesn't really matter what it is that they state for inflation. They might as well just like I don't care what they do, right? It doesn't I mean whether they change it or keep it or manipulate it or whatever they're doing, it's just what it is. Um and I know that's sad to kind of just come to that understanding of it, but it's not for me to change or or whatever. It's their view of inflation comparatively to the neutral interest rate. And if they want to use that for their metric, okay, then so be it. How is it that they're going to view that in their metric to the neutral interest rate? Because Wars also wants to abandon the RSTAR idea and all these other things. And I'm going to find it very difficult to I I'm going to find it very difficult to believe that going into the future that individuals like John Williams who like wrote this speech, you know, New York Fed Press, like I just have a hard time believing that his whole monetary policy thought operation and strategy is going to abandon the RSTAR. Like he invented this estimate process, like the way they estimate this there. I doubt that's going to be the case. like he cannot change his belief system that way, you know, and so although it may be not talked about or addressed or something like that nature from Worsh cuz he does plan on really changing around the way that the Federal Reserve communicates and I could see like maybe communication about the neutral interest rate might be like abandoned or something like that, but the neutral interest rate exists regardless, right? So if the neutral interest rate exists and inflation exist and neither one of us, including you, me, or the Federal Reserve, know exactly what that is, it doesn't really matter what it is at that point. What do they think it is? Because whatever it is that they think it is, that's what they're going to base their monetary policy on.
Now, if we want to know is the economy going to become less or more restricted based on their monetary policy, then we have to look at these two metrics which don't really even seem right. But it doesn't really matter because again, we have to focus in on what it is that they plan on doing. Like I mean, I I I can't force them to do it the right way. I don't even know what the right way would be. And since I don't know what the right way would be, and I don't want to force them to do anything, I just have to understand what it is that they are looking at and why. and then I can understand why they are making the decisions that they do. Very few people are going to understand how it is that the Federal Reserve is going to raise rates and it's going to remain neutral.
People are not get that. They are not going to understand why that's the case.
They don't understand what it means to be at the high end of neutral right now.
All right. They don't understand how Myron, Trump's dude, who's who's, you know, no longer I I don't know if he's is he finally officially out of the Fed, but he's he was only temporarily there. He was adamant, adamant, adamant, adamant about getting interest rates back to the lower bound of zero or taking interest rates low, cutting interest rates dramatically.
And what I find very interesting about this whole thing, it's not because of Trump wanting to cut rates. Now, him and Trump might be on the same page, but his argument for wanting to lower rates is quite valid.
I don't know how many people know it.
And why we have it a such a dissent within why we have such dissenting votes within the Federal Reserve is because everybody can understand why it is that the Federal Reserve would want to raise rates. We got inflation. That's makes sense, right? Everybody knows that. It's like, duh. But very few people could come up with an argument on why it is that you would want to lower rates to zero immediately.
Now, how many people people can come up with that argument? Now, I can't cuz I read his speeches and I think about what it is that he had said because Federal Reserve and the Fed funds rate adjustment. It comes with a lag. I don't care what people want to say that it doesn't exist. It does. And that lag is 6 months to a year to even a year and a half. And that is so critical to understand that if you made an adjustment today, it may not hit the economy for another year and a half.
Holy [ __ ] Like Fed funds rate adjustments are so slow to the economy that it doesn't really affect the economy in the immediate sense at all.
People's expectations definitely change.
Market perceptions change. All this stuff happens immediately within the economy. But you actually have to participate with the lower interest rates. It means you have to go out there and get a loan and buy something with it. Not everybody in the economy is immediately going to go out there and snap up a loan the next day. Then interest rates fall. Those interest rates have to remain in the economy for a significant amount of time for people to take advantage of the low interest rates to then use those interest rates in the economy with transactions. That takes time. And the slower the economy is because the Federal Reserve is trying to get the economy going again, the longer it takes for those interest rates to actually impact the economy.
That's why it won't work. Rate adjustments won't work like people think it does. Right? And so now once we understand that this there's huge lag to the economy that come or to the interest rate setting policy and the in the economy and the effects on the economy we have to think again what is it my trying to say all this inflation it's going to go away he sees beyond it he says okay well this inflation this is temporary big time right that's what he's trying to argue and that the idea that the you Iran thing's going to end. The straighter moves are going to open up.
The flow is going to start happening again and the inflation expectation is going to fall and it's going to fall dramatically. And if that falls, it's going to have instantaneous reaction within the economy. Now, if the Federal Reserve was to try and deal with the economy and a slowing down of operations, a disinflationary, maybe even a deflationary scenario that could hit recession.
And that's expected a year or more down the road. You better move today.
Is that what people believe? That's what Myron believes. That's why we have such a disscent at the Federal Reserve. How many people can argue this from both sides like I can?
There's a serious situation we now face and you have to make a decision on your on your business, on your investments, on you know the job that you take, the the things that you buy. Are you going to buy that new truck, right? Are you going to do that going into an easing economy because you understand what it is that you are facing with that debt or are you going to be positioning yourself into asset allocations and looking for positioning and rental properties?
Consumer debt or cash flowing debt?
Which one are you going to take on?
It's very important to understand the position that the Federal Reserve is now facing and to understand what it means for the monetary policy in the interest rate adjustments. There is a narrative that is spoken out there that very much impacts the people's mindset and then there's an actual mechanical functioning that is very slow and very cumbersome and literally broken, right? It's broken because the low RSTAR environment. So adjusting interest rates wouldn't even matter. Even if even if Myron was 100% correct and the inflation disappears and you got to take the Fed funds rate back to zero, it wouldn't matter because even at that time, right, if that was to take place, there would be no way of the Federal Reserve to stimulate the economy because they wouldn't be able to be far enough below our star. But something interesting about it is is that if you do it today, you might be able to maintain elevated inflation expectations, which might actually work.
So you got to see it from all perspectives. Can you argue it from both sides? A reason for rate hikes and a reason for rate cuts. And the reasons for both of them being quite real, you know.
All right, man. I am babbling. Okay, we're going to give it another few more minutes. I'm going to try and keep these uh public live streams a little shorter.
We'll make the members only longer and we're going to do a speech here. In fact, you guys should join us on the membersonly portion of this channel.
We're going to be covering recent speech given by Christopher Waller. Let me bring it up here. Um it's really good too, guys, because you know, you have to think this is one of the sides of the of the view of it, right? So you have one side that says, "Hey man, let's cut rates." And then you have another side that says, "Hey, I want to I want to raise rates." And to be able to see both ends of that, right? To be able to argue both sides of that of that reasoning is going to give you a much better understanding of the dissension within the Federal Reserve. Let me see here.
Fed reserve Fed Reserve speeches.
And somebody was telling me they like to go to um speeches given I think they were posted on the Bureau of International Settlements like the BIS and that gives like like what I go to is essentially just the speeches of the uh of the Federal Reserve because I'm I'm like really focused in on monetary policy of the Fed. But there are a lot of speeches out there given by central bankers that are really good. And to to know like all the different communications and what it is that these different central bankers are saying, it can be quite helpful because what you can end up finding is similarities within their speaking, right? And it's just like, well, this isn't just unique to one country. This is unique to many countries out there. when you think about the low RSTAR environment or the low neutral interest rate like that is not unique to just the United States uh Christopher Waller um and its policy risks have changed. This is a really good speech and again I'm going to read it in a membersonly live stream but I kind of wanted to go down to I think it was like towards the very last All right this is I'm going to give you guys this little little sneak preview of it. It's the very last two paragraphs of the entire thing but I think it's very ta telling of of what it is that he is saying throughout the rest of the speech but you know the whole speech is important and anyway here we go it says here so what I am anticipating as the path for forward for policy fortunately the labor market seems to have stabilized in recent months and while it could be negatively affected by higher prices unless it dramatically deteriorates I do not expect to be a major factor driving my view of the appropriate stance of monetary policy in the near term. How many times have I tried to say that to you guys? They don't care about the average everyday working-class individual. Your wage earners are not important to this. He just said it. He literally just said it out loud, right? You know, he was like, wage earners not important to my view.
Inflation, yeah, not important to my view of the wage earners being suffering the consequences of that. Not important.
Okay. Inflation on the other hand will be the driving force and I believe that inflation will largely be determined by the length of of this conflict. Uh it may end quickly or it may persist persistently high inflation. I am prepared to be patient in holding policy at its current restrictive setting pol setting at its current restrictive setting.
This is so good right? I am prepared to be patient in holding policy at its current restrictive setting as we watch how the conflict evolves and what impact there is on inflation and inflation expectations. Now, I can I can almost assure you if you are sitting here waiting to see if inflation expectations is going to rise into the future.
I mean, is that something that you really have to anticipate is going to happen?
That is so odd to me to think. Like you're g I don't really know if inflation expectation is going to rise.
We're gonna have to wait and see.
Do you really have to wait and see? Like it's obviously rising. Look at every news article you've ever read, right? I mean, they are pushing inflation expectation is definitely going to rise, right?
That's what I love, you know? It's just like, well, we have to wait and see. We don't know, you know? I mean, more may end blah blah blah. Okay. And it's very true. It could, right? It very well. It very well could says, "I am prepared to be p patient in holding policy at its current restrictive setting as we watch how conflict evolves and what impact there is on inflation and inflation expectations. If I believe inflation expectations, specifically says it, expectations." If I believe inflation expectations start to become unanchored, that's that long-term 2% goal. How many people still have the belief that the Federal Reserve is attempting to get to a 2% goal? Raise your hand. Everybody in the Everybody in the world, right? Everybody.
They don't think that they have control of the short-term inflation, but the long-term inflation goal, that's 2%.
Everybody knows that. So, he's worried about that becoming unanchored. And at this point, right, I would not hesitate to support an increase in the target range of the Fed funds rate. But at this point that action is premature.
It is to it is it is time to simply sit watch how the conflict and the data evolve. Now I am not like I mean I'm not trying to predict the future of anything out there but I'm pretty sure that it's going to be pretty difficult to remove the inflation expectations from the people's mindset.
Like it's pretty well locked in. Yeah.
Like I explain the neutral interest rate to people like we talked about in the first seven minutes of this video. I explain the neutral interest rate, how it eases the economy, all this other stuff. And the people come back to me and say, yeah, the only thing I know is that the dollar is devaluing over time.
And I'm thinking, okay, cool. That's what I needed to know. Because what we are looking for here is inflation expectations and where it is that they are going to move to in order for the Federal Reserve to be conducting of their monetary policy in a tightening cycle of increasing that interest rates which would remain neutral. It won't work.
Right? I'm the only one who talks about it and I don't get why. But we I'm not the only one who talks about it.
Everybody talks about it over on the school community too and you guys talk about it here on on the channel. But this is information that is so unlike everybody else out there. I mean I read so many articles and nobody ever ever ever clues on clues in on anything that I have I describe ever. They might hit it occasionally, like just graze the edge of it, but very few people have dove into it into the level that I have and created the the credible threat theory. And for me, when I think about it, the credible threat theory is probably going to be more relevant now than any time in since I've created it simply because the Federal Reserve is going to be turning off their communications.
And when they turn off their like deliberately stop the press like as many interviews and press conferences or maybe even the dot plot like these are the things they're talking about possibly removing. And if you start removing these communications it will create a void. What does that void get filled with? The credible threat theory is going to be so important. the the understanding of what is happening with the neutral interest rate off those people's expectations and that narrative that is filling that void if most people are going to be guided like sheep but if you have internalized the credible threat theory you will be watching the herd move that's the difference inside of it right all righty guys I'm going to read like one or two more comments and then I'm going to call it quits thank you for being here we got uh 97 people watching 36 likes. Be sure and hit the like button and share the video.
Tell people to watch the first 10 minutes of the video, right? That's all that's the important part of it. The rest of it is just discussion. Question. The Saturday 9:00 is a challenging for me to link in. Is there other ways to be a member and watch the videos later? Members only week. Now, unfortunately, these webinars I was going I had very much the intent to record them and post them for everybody to go and watch later. the communications that come from the heart from the people who are at the webinar knowing that they're not being recorded and that it's literally just a conversation that is is being had from the six people who happen to be watching. Um I don't know how else to describe it, but I just don't think the energy would be there with it with the recording, right? And so it's it's I if if we need to we'll set up another webinar sometime in the in another part of the week if you want to if you want to have another webinar type style. Um we might you know maybe consider something that in the future. But as far as those nine, like you guys don't understand the energy inside of that with the level of of like you have to think like the people who are there are like some of the smartest people. Like I mean I listen to the conversations and I'm like holy moly, man. Like it's just like it's way deep into stuff that like I have never even thought about or even contemplated. And like the the conversation is just like it's it's so good. Um, you know, I mean, I wish I could like it's a lot about investing.
It's a lot about personal, you know, conditions of of life, like where we are personally. It's how, you know, a lot of times people are seeing like the the trend shifts, you know, that are happening out there. It It's so good. I mean, it is just like it's just incredible. So, um, maybe we'll consider doing something else as far as another time goes. But uh but yeah, I'm not gonna record them because I just don't I just don't think it would be the same.
All right, one more question, one more comment, we're gonna call it quits. All right, we're going to go down. I'll give deplorable one. What does deplorable say? My question for Simon is how does an an expectation of rate hike influence inflation? Well, I mean, you have to think about it. Is the people anticipating a rake hike because of what? Right? Like if you didn't if you weren't told that the Federal Reserve may be raising rates, then you wouldn't care too much. I mean, you might see the inflationary scenario and they might push that a lot and you might complain about it, but you may not necessarily actively try to move, but if you think that the Federal Reserve is going to be raising rates and you actively think that that's going to happen, you're like, "A crap, I better take out this loan before that takes place." Well, then that I you know, that's actually a really good question. I wish I had. Let me see if I can find it. Um, deplorable, you're going to keep me out here longer than I should be. Um, dang it. Okay. Um there was an actual paper that I had found where they talk about that exact scenario where the expectation of rising interest rates actually influences people to go out there and start participating in the economy. Um was this it the role of inflationary policy there was maybe this is it. Um gosh, guys, I'm sorry. See, that's that was a really good question. And there's actually a really good um article written here. Let me see. It's called uh the role of inflation expectations in monetary policy delivered May 15th of 2023.
So, it's not too old. It's very quick.
Um, and it's it's not a very long read, but there was one particular section in there in which that the they talk about people's expectations of interest rates rising and them running out and actually participating in purchases before the before the uh the increase takes place.
And I'm not sure exactly where that is in here.
Anyway, it was a good question. Um, but ultimately, if you push the idea that they're going to raise rates into the future, people will go out there and start participating in the economy to try and take advantage of this current situation before it gets worse. Um, essentially take advantage of the situation before it gets worse. And then, holy [ __ ] did I get a 100 rubies?
Thank you so much for that. I really appreciate the support. Um, so what I'm I guess I'm saying at here is that they already know that if they push this information that they're going to be raising rates that that would have a stimulating effect within the economy.
Um, that would get people out there making purchases which would then essentially start creating the inflationary scenario within itself.
Right? If you own real assets, you'll be surprised inflation isn't making prices even higher. If you don't own real assets, any increase feels painful.
Yeah. You know, and that's kind of true.
Like, you know, really, if your assets are going up at the same time, that inflation is kind you kind of almost break even depending on how much ass I guess if you have a lot more assets than your cost of living. But really, for the most part, I think I would agree with that. Even though your assets are going up, like how much of a benefit is that really if you're facing an inflationary scenario other than trying to just tread and remain neutral, you know? So, that's a pretty good one. All righty, guys. And 200 rubies. You guys trying to keep me out here? You want to stick around for another Here, I tell you what. If you can get it up to 50 in the next 30 seconds, get it up to 50 likes in the next 30 seconds, I'll stick around for another 15, 20 minutes. All right. Meat inflation in Oregon. When that meat ban becomes law, I doubt that will become law. There goes my carnivore diet. Yeah, I very seriously doubt that's going to be the case. So, all right. How long can expectations last until the people get tired? See, that's just the thing. They can last forever because they always push a new out there. Okay, two more likes, guys.
Get it done. Um, they can always get the expectations out there. And that's really where I find it pretty interesting to think about how it is that they push like credible threats of COVID, credible threats of tariff, credible threats of war, credible threats of independence, credible threats of what the next thing is going to be. Who knows, right? But they constantly push this idea out there regularly in order to achieve their monetary policy goals. So when you say people get tired of the expectations, I don't necessarily believe that to be the case because people are always on the expectations. In fact, the last thing that they want is to be told exactly what it is over and over and over again.
I'm figuring this out for myself, but I'm trying to share with you how it is that the monetary policy is being conducted from a 20 year 30-year long strategy that I have been trying to develop. I mean, I could keep going back and I don't think going past 30 years is really necessary. I think the last 30 years is probably pretty good. Thank you, Deplorable. I really appreciate the support, brother.
But um I don't think like you know really things are are so dramatically changing to the monetary policy that I would have to change my tune right and this is really where I think a lot of times people are getting tired or just you know just wanting to hear something different I get it man but if there's nothing different to tell like this is it this is the monetary policy and I can share the newest information that comes in in relation to it, but I'm going to tell the same story over and over again and I'm just going to keep wearing that groove because there's only one right story and I can't change my story to something else if it's not right, you know, and everything that I have tried to share and learn here on this channel is boring, doublesome stuff. And most people want to know about how it is that they're going to die.
I get it, right? Like they want to know when the market crashes and how everybody's going to die. that will get you popular. All right, I get it. But to try and share information that is just like, hey, this is going to be boring.
This is going to take a long time to figure out. You're going to have to change your belief systems around.
You're going to have to change your understandings of how it is that the Federal Reserve uses communications. All these things are very slow to learn. And I can imagine that if you are very much in the conspiratorial mindset like I was back you know say in probably I don't know maybe 15 20 years ago right I was very much in a very deep conspiratorial mindset very deep into it and it didn't benefit me none right like none at all and so to try and realize man this stuff is deteriorating my life in an un unstoppable way man it is just going to hell. I had to think about it things differently. And when I started looking at it differently and saying, "Okay, I'm going to start like cutting out all the noise and I'm just going to start following the money, right?" And so I started reading the Fed's speeches and I would read these speeches and not have any idea what the hell they were talking about. Like zero, none, right? I would read these speeches and go like, "What the?" And I'd read it again and be like, "What in the hell are they talking about?" You know, and I would literally feel that way, man. You guys, thank you so much for all the support coming in.
I'm going to go look at all those super chats here in a second.
And I kept looking at these speech going, man, what the hell are these people talking about? Right? And so, I would just take one section at a time and I would just read it over and over again until I finally understood it. I would go and research the things that they were talking about. And sometimes it would take me a week, two weeks to get through a speech to finally understand what it was that they were talking about. And I did this over and over and over again until I finally got to the point where I could read a speech and I'm like, man, this just like it's easy. I can just totally read right through it and just, you know, and totally understand what it is that they're talking about. Let's go check out some of these super chats, guys.
Thank you so much for the support.
Deplorable five bucks. Thank you, Simon.
Thank you, Deplorable. I really appreciate the support, man. Uh Jesse with the $5. In the off chance they would let rates, would you borrow heavy info assets that bring in cash? Okay, that's a very good question. And if I was in a position in which that I wasn't sitting in debt right now, like I don't really want to talk too much about it in my personal life, but I had to incur on some debt that I was I mean I knew it was coming, but I didn't think it was going to be to what it was. So I have some to deal with. So when it comes into this, I'm not really focused in on assets. I'm focused in on the assets that I've had and that I've acquired. But as the economy becomes unrestricted, I'm going to look for easier money flow to then acquire to get my debts paid off. If I wasn't in debt, then yes, I would be looking for cash flowing assets and I would be looking for rental properties.
That would be my ultimate goal, right? I have other positions that I have taken.
I got stocks, I got bonds, I got precious metals, I got real estate in this house as far as like, you know, I am stepping into it. So, I have broadened my capabilities as far as like where it is I can position money into, but I would love to get more into the rental property aspect, something that is going to pay me, right? Dividend paying stocks is a good kind of way to go about it and I have some, but ultimately I want to do like, you know, the rental property kind of thing or start some businesses, right? And those are the only two. And really starting business at a slow time is really the time you would want to do it. So if there was any time that I would want to start a business, it would be when things are crappy. Not when things are good. You get used to when it's good and you're not able to handle the crappy times. But if you have built a business off of crappy times and it goes moves into good times, right? Think about that for, you know, like that's the time that you want to you want to buy low, sell high, right? So if it was me and I had like the right mindset of business, I would start a business that would probably not do very well in the first few little bit. But as we move into an unrestricted economy, if that is to take place and you know was to happen, most likely that business will do well and you sell it, right? You sell it off during the good times and then let somebody else, you know, fortunately have to deal with the slow times. It's just like any other, right? Buy low, sell high.
Thank you guys for all the support. I really appreciate it, man. So, yeah, if it was me, like I said, I right now I wouldn't be like I wouldn't be so out of the realms of even trying to stack up some dry powder, right? Because of the volatility that's going to be coming to to an economy of such uncertainty and, you know, mass confusion about what it is that's going on out there. Don't think that there won't be volatility like nothing will move in a straight line up. Like, you know, I'm to be honest with you, I'm surprised that the value of this house didn't drop more considering how much real estate up in other locations and the dramatic rise that this one took, right? Cuz it shot up like after when the interest rates went up in 2022 and the housing market shot up, this place went ridiculous. Like all the property around here was just like everybody talks about how stupid it was. This was like it was like ridiculously stupid on impossible. So when the prices started to come down and they came down dramatically, I was just like, "Yeah, here we go." And this is now coming back down to like, you know, ridiculous, but at least it ain't stupid anymore, right? And when it came down to this ridiculous level, it just plateaued and it stayed that way and it never moved really. I mean, it kind of bounces around. So other places didn't experience it quite in that same fashion, right? So great location to be in. I happened to get a good good spot at the good time. Didn't know it at the time, right? It felt horrible at the time, but I guess everybody feels that way when it comes to buying real estate.
It's never the right time and never feels good and it's always going to be the one that sinks you. And that's what everybody says when they buy their first 40 properties. So, I could only assume that everybody's going to feel that way when it comes to buying real estate.
When it comes to buying into like, you know, the right stock, the right moves, that is trend, picking the right trends.
And to me, like it's amazing on how it is that I pick up on the trend. like I'm way ahead of time and then not think to invest into it, right? You know, it's just like I see all these things. It's like, you know, as an economist, I'm always viewing what it is that's going on out there. So, I'm not necessarily looking for money. I'm just looking to see how money flows, right? And it's like, oh, that's curious, man. Look how that's working. You go to my town and here it is. Like, here's a situation that's happening. Here's a good example of it. There's a situation that's happening within our town. There's this cute little arcade that's down on the corner. It's I don't know how to put it, but it's like, you know, a divy arcade to to say the least. It's cool. I love it, man. They got pinball there. The kids love it. They got hot dogs and, you know, just lot, you know, this is cool, right? So, we go there like maybe once a month and go and play, you know, play video games there. Now, unfortunately for them, there's also right down the street is like like a a ser a homeless service kind of center, right? And so there's a lot of like kind of the homeless hang out in this kind of general area. Well, they have issues with that, you know, with the doorway and, you know, blocking the doorway and leaving, you know, stuff in the doorway.
Anyhow, this was kind of one of the issues with it. Well, other businesses in the area, although complain about the same thing, it wasn't to the like the level of this one, right? And everybody's like, "Well, what can we do?" What? And I was like, "Hey, I love this this little place. I absolutely love it. When I go in there, it's like it feels like home, man. I like, you know, I like everything about it. But it's also geared for the average wage earner. It's not a luxurious experience.
Not by any means, right? It's not a luxurious thing. And we live in a luxurious town to luxurious people, right? They're uppidity. They like fancy stuff, right? They don't want to hang out in the grime, right? They want to hang out in the unique and the awesome.
And so if this place was a facility of luxury as opposed to enjoyment and convenience and awesomeness for the wage earner, it might actually do well in this town, right? But this town, it it it's not really geared for the wage earner. It's geared for the luxurious experience.
There was a time when we were loggers and fishermen here and that was the majority of the new money that came in.
That business would have kicked ass. It would have been the number one like everybody would have been hanging out there would have been packed all the time. But that's when we were logger and fishermen and that's the businesses that they would have frequented.
That's not the case anymore. You got, you know, remote workers and retirees and hospital district and, you know, unfortunately, they don't want to play pinball at a divey little bar, right?
They want to eat fancy foods and eat unique or drink unique beers and, you know, live that kind of existence. And so, it's not hard to see why it is that some businesses do so much better in particular areas than others. Because if it was 30 years ago, that little that little arcade would have kicked ass. It would have done so well, you know.
All right, let's read some more of these super chats.
All right. Um, Peter the Squatchy, I love the name. Thank you for the $10 because we appreciate the info you're putting out and we try to digest and understand. Thank you, Simon. Well, thank you very much, man. I really appreciate the support. I see you're a member of the channel, too. So, thank you for being a member of the channel and the support. We got $5 from Deplorable. We appreciate your time, Simon. Thank you, Deplorable. I appreciate you being here. Even though sometimes I get argumentative with you, but I think that's actually a good lesson for me to like chill out and not argue with you.
It's like lessons in life are learned.
Everybody's a teacher, right?
Deplorable.
You're teaching me lessons. All right.
Almost an hour into the stream, man. All right. My cousin ran a Tilt arcade in the '9s. He still has a lot of junk silver quarters. Oh, there you go. All right. They don't get the the grime in and of itself, the unique and awesome.
That's right. you know, and that's really where like, you know, the bar that I work at, um, where I call bingo at, it it's not the diviest bar in town, but it came from one of the diviest bars in towns, and it still held on to a lot of it. It's getting a little bit more on the trendy.
She, you know, the owner of the bar has really done a number. Oh god, you guys should see it. I stayed at one of the Airbnbs that she has. So, there's uh apartments around the building. So, the bar is like the business. Then there's apartments above the bar and then there's um there's two of them in the back and she just opened a brand new one in the back and it is so cool, man. It is like I remember this place being like this nasty storage unit. You got to think I've been there longer than anybody else has. I'm like the oldest employee there. I've been there essentially, you know, longer than the owner and all the other employees and pretty much all the customers too, you know. Um, which is kind of sad. Uh, anyway, that room was like this filthy little storage unit. And although it had a toilet and like a sink in it, that's about it. Like you could put a bed in there, I guess. This place now it's like I didn't even realize there was like space above the ceiling. So, she knocked out the ceiling. There's now like a loft where the bed is. It's all done up super nice and just like I I couldn't believe I walked into the same room. Anyway, very cool place. Um, and it's up for rent. So, you know, if you guys are looking for Airbnbs out in Atoria, consider the workers. It's a really cool place to to to rent room.
Uh, do we make deal with the Chinese? Are they coming to America with their car industry? Oh, I don't know. Until it happens, I wouldn't believe anything.
You know, it's kind of like I think, you know, kind of learning the lessons from being a carpenter, you know, and working job sites, especially uh like framing carpentry because it's it's very quick, right? Like soon when like once you're done framing, you have to move on to the next job. And so, it's always about the next job. It's never the one that you're on, right? The one you're on is going to be done here pretty soon. It's the it's always the next one that you're moving to.
And so you would hear about like, oh, we're moving to this job. And then by the time like, you know, you get about halfway through the current project you're on, that next job isn't happening. And it's a whole different job that's going to be taking place. And so it it's so weird to think that it's never it never seems to come up and well, I mean, at least it didn't for me, and maybe other people work differently, but it never seemed to come up to be like we had the next 12 jobs lined up. It was never that way. It was always we had like the next one and then trying to figure out what the next one was after that, right? And although you had like a menu of operations that you could do, lining up the subcontractors, getting those projects off the ground, doing all the other stuff, I mean, there was a lot to it, especially when it was a young business trying to get started. And so when I thought about it, it was just like I told my buddy, you know, I was just like, until you are on that job site with bags on swinging hammers, you're not that's not the next job, right? I don't care what they say. I don't care. You could go to it, look at it, stand on it until you're there swinging hammers. That's not the next job.
Um, oh, terrible with time budget. You're so right, Kirk.
All right.
Not teach a professor. One cannot teach if the other is not willing to learn.
Then it's just professing. Yeah, that's true.
My biggest problem with all this inflation as I am too much of a soft touch and I have a hard time passing on the increased cost on to my customers.
Unfortunately, I'm going to have to nut up. Jeff, that's just the way it is, right? I mean, what are you going to do?
I mean, you you have to you have to fall in line with what it is that's going on within the economy itself. I'm not going to be like, "Oh, man, bro, you're not making a profit on it. That sucks. Well, you don't have to give me a raise this year." Like I'm not going to be that way, right? I'm going to be like, I don't it sucks, man. We're all like, yeah, we're all in it together, right?
Floating all boats, right? So, I'm going to have to search for more money and just the same as everybody else is. And that's the unfortunate part about it now. Raising raising your prices is is expected at this point. And I'm not telling you it's okay to do it. I'm just saying that's just what's happening, right? And to expect it to not hurt you by by holding back. Like I mean if you can still gain the same profit off of it, then okay, cool, right? But for the most part, you're probably losing profit off of it and therefore you're not going to be able to benefit anybody in your life, you know, as far as that goes, whether it's an employee or your family or yourself. So you got to you got to, you know, you got to roll with the wind, right? You know, and and if the inflation is going to be pushing prices higher, I know that inflation is going to be pushing like I'm going to be pushing my wages higher, you know, whatever it is I want to ask for out there.
Yeah, I sent that to Deja, too.
Uh, let's see here. Let's cruise back up here a little bit. All right. Uh, Buffett stocked up on dry powder and is ready to pounce into whatever sector becomes attractive. Yeah. And I mean I would I would agree with some of that, you know. I mean I've always said having, you know, some dry powder on hand is a good idea because cash is king. Like it doesn't matter even if it's not like a buying opportunity and an investment in stocks. How many times have you seen somebody who was just like desperate for money and they were willing to sell off some toy that they bought and they're willing to do it cheap right now cuz they need the cash and it's just like boom here. Put that in your pocket and let me tell you tell me how it feels. Right? And they're like there you go man. Here it is. If you have it in hand, that's that's the key to it, right? Like you can't say, "Oh, okay. Well, give me two weeks, right?"
You know, it's just like, "No, it doesn't work like that." You got to have it right now. Boom. You know, Simon, have you seen any pickup in business at work? Some of these construction related stocks have been gaining traction recently. Yeah, investors investor eyes. Um, I personally have not yet. Now, I'm in an area that lags. So, things will be active here when it slows down in other areas and then it'll be slow here when it starts to pick up in other areas. So, I'm in a lagging area. It's it's very much um and so I haven't necessarily seen the uptick in in activity as far as prices go or I'm not I'm sorry, as far as transactions go. Prices are starting to move a little bit in lumber. They are still elevated in a lot of other building materials. But something that I found quite interesting is that when I first got into this business and the composite deck industry came out, nobody used it, right? And as time went on, it became more and more popular.
And uh now when I think about just over the course of like what happened prior to CO to after CO like pre and post prior to co I would sell a lot of wood decks like I don't know if I was to put it on a percentage it would be somewhere around 70%.
would have been wood decks, you know, whether it would be if it was cedar or or pressuret treated like typically it's not pressuretreated. Like a lot of times people refer to as pressuret treated like you know the terms crossover. You got the kind with the little holes poked in it the insizers like that's insized.
that's generally ground contact pressure treated and then you have like an outdoor wood or you know there's brand names to it or decking deck wood like treated deck wood or something of this nature I don't know everybody has a different name for it they all have their brand name but anyway so there's these two different types of like treated type of boards and now you got the deck boards that was probably the most popular as far as building a deck with like everybody like you know 50% of decks went out almost all of them used you know this outdoor wood or treated type of decking.
That was prior to CO. As CO kicked in, more and more people started buying cedar and then they moved into composite decking. And now composite decking was always popular. Like you know, you had, you know, quite a few people would buy it. But again, it would be about 30% prior to CO. Now it's like completely flipped around. It's like 70% of the decks that I do are composite decks.
Almost no treated at all. almost none.
All right. And the cedar decks, um, they're they're about the same, right? I would say it's about the same amount that I'm selling in cedar decking as it was before.
So, the composite decking has pretty much it's like flipped. And so, I'm thinking like, well, what happened here?
Like, how come it is all of a sudden like, you know, this town was huge into wood decks, treated deck boards to now it's composite deck? And I think, well, it's the property owners, right? The wood decks take more maintenance. And now, if you're average workingass wage earner, maintenancing your deck is kind of like expected. That's what you do.
You know, that's what wage earners do is they buy stuff and they maintain their stuff. Asset holders buy stuff and then they pay other people to maintain it, right? And so, they buy the highest end stuff that's easiest to maintain. And that's really what it comes down to is that they don't plan on maintaining this themselves. And that's a lot of work that they have to pay for to maintain this thing. So when they look at it, it's like they get a higher quality product in in their mind, right? Cuz it lasts longer and all that. I don't know.
There's a lot of issues with composite deck that has a good badness to it, whatever. Um, but it's essentially it's a it's a more of a luxurious product over the wood deck, right? It's less issues with it. It's easier to to maintain. And since most wage earners would buy the cheaper as opposed to the more expensive and plan on maintaining it themselves, this is an obvious change within the within the property owners just where I'm at myself, like within the experience that I'm at here at the lumberyard. So, one of the things that I'm seeing here to to get to the point of it is that people had been from what I had, you know, seen before, the average homeowner working on their property to now it's people who have bought property that pay other people to work on it. And this is the difference that I'm now seeing. The products that they buy, they buy the higherend products that are longerlasting and easier to maintain, right? Because paying other people to maintain them, they think about these things into the future.
It's pretty interesting really, you know, to see this change. But as far as like a dramatic pickup, no, it's still quite slow. Retail is slow. Um, contracting is slow.
Uh, but I could honestly say like it's not slow wing, it's just slow. Like it's and like a little bit of maybe a little bit of pickup, but that's kind of expected for the summer and I would have thought more. So I don't want to say like, yeah, I'm seeing a pickup in summer activity. This is typical like you know summertime was when you would see more people coming in to buy stuff you especially when it comes to you know the outdoor projects and I think a lot of that um is is being postponed at this point just because of all the uncertainty out there with what's going on. So anyway, moving on. All right, composite decks get super hot. My deck has some 16footers that need replaced. My yard says it's special order. Yeah, we special order in all composite decking. I we do stock one color of one brand. Uh to get the best deal, you have to be a stocking dealer.
So, here's a little, you know, insider trick. If you have a particular brand of decking that you want, like a particular composite decking that you're after, whether it's, you know, this brand name as opposed to that brand name, don't just go to your local lumber yard, the one that you like to get that particular brand, unless they are a stocking dealer of it. If they are a stocking dealer, then they're going to get the best price for for that particular brand. So, every one of these lumber yards is not everyone. Most most lumber yards will take on a particular brand, right? Whether you know brand name of it. And then in order to be a stocking dealer, they generally have to order so many units. And most of the time, unless they are a big yard that moves a lot of material, they're probably just going to pick one color, the most popular color out there, and buy just enough to fill the demand to be a stocking dealer or the fulfillment of that. So, if you can find those particular dealers out there, then you can get your color that you're looking for of your brand of decking that you want by, you know, literally figuring out which one of the yards is the stocking dealer of that particular brand and then you'll get the best price from them or at least the potential of getting the best price. Cuz if you go to like, you know, you go to a dealer who doesn't who has stocked a completely different one, what they end up doing is they can get the the decking. That's not the problem. like no no no problem getting the deck, but they don't get unit pricing. They get broken unit pricing, right? So immediately the price that they're going to pay for it has jumped up. And now if you're a stocking dealer and you're trying to push this stuff, your margins are cut really thin, right? So you don't mark your decking up very much because you're trying to get the you're trying to sell the pressuret treated framing, the hardware, you know, all the screws, all the other stuff that go with it. And so the decking if you're a stocking dealer, although you will make a profit off of it, will be somewhat of a loss leader trying to to get it in. You not it's not a loss. You will make money off of it, but not as much as if you would be like just ordering a special order deck if if you weren't a stocking dealer. All right. So with that being said, not only do you get a better price, but your margin are cut really thin. So now here it is. If I'm like going to buy something from a different vendor of a of a company that I'm not stocking, I can get the material, but they're going to most likely I'm not going to buy a whole unit of it cuz I don't want to stock the remainder of in my yard. Nobody will ever buy it. So, I only buy the pieces that the customer needs. I bring in those. It's a broken unit charge. So now automatically I'm paying a higher price and I'm having to go through all the cumbersome of doing the special order which means that my margin has to be a little bit higher than if I was stocking it, right? Because I have to handle all this material and so therefore my competitiveness on it is just now out the window, right? It was just like I could do it and be as competitive as them and then not make any money off of it. and that, you know, I mean, if you have enough of the other material, if there's like, you know, if there's a bigger project in mind and it's just the deck is just kind of like the smaller portion of it, then okay, maybe you can get away with it. But otherwise, you have to make your money. You have to make your margin. And if you're, you know, and if you're going up against a stocking dealer, most likely you're not going to be as competitive. It just can't happen.
All right. Oh, the title. Yeah, we drifted off into something. That's why like it's the first 20 minutes of the videos that are important, right? After that, we just kind of babble off about anything, you know, everything and anything, you know? But since you guys went ahead and paid for the video, I figured I didn't have to worry about trying to catch algorithm. I don't even worry about I'm not like I'm not going to even worry about algorithm anymore.
Screw that algorithm stuff. All right.
Uh because I know QE didn't cause inflation.
If China housing market crashes, does it affect us? Well, I would assume that there is going to be some some issue, some contingency that comes from it, but you know, it's it's hard to give a what if or a hypothetical to something that we don't know to what level it's going to be. Like, you could sit there and just imagine whatifs all day long, you know. Uh, I don't know. My stockings are on the run.
All right. Bone up on the What was that up? Ow.
on the rosameron skills.
Huh? What are those? Get your $2,000 into your Robin Hood trading account, boys. It's about to get volatile.
All right. I have too many kids to day trade. I would get hooked like fantasy football.
Um, so I don't know. I mean, do we go back into talking about interest rate?
I started saying chuckle cuz I interest rate uh cuts again. In all my reading about the history of economics, I've never heard about China real estate affecting us, but I know China owns a lot of real estate here.
Simon, your analysis of the explanation for the change in demand for composite decking just now was awesome. Total victory, lab, hats off. Oh, thanks.
Yeah. Well, I appreciate it, Brody. Um, but these things are becoming a lot more obvious to me and and you know, really it's just like once you kind of internalize these economic forces, you just see them everywhere. You don't even really you can't it's almost like impossible not to see them. And it's just like you you look out there and you think about how it is that the demand for logging operations here were like what everybody talked about. It it was like, you know, it was the conversations that you would have like, you know, what was going on up in the hills, what was the demand for logs, what was the lumber, like everybody, that was like the common communication around here.
Well, now like you go and you hear about like maybe are the charter fisherman catching fish out there, like you know, you hear it about like uh you know, I don't know, just the next festival that's taking place or the next fancy restaurant that's opening up. It's not anything like the conversations that we used to have back in the day. And so it's pretty easy once you kind of understand it from the economic force what it is that's taking place out there. And once you go from like an industrial nation or an industrial state or a condition to one of new money coming in through luxury essentially and I'm not saying that being retired is a luxury but it's somewhat you know you're not you're not work you've worked for it but you're not working anything as far as an industry goes bringing in the new money. It's just you know you just you're a person who brings in new money and starts spending it. So it's just like it's coming in from outside force essentially and not being produced within the the working individual themselves, right? So it's new money coming in from the top.
It's the same thing when you think about hospital district or you know anybody else here, remote workers. This isn't like average everyday workers sharing the experience with each other. This is money coming in from outside forces driving driving the everinccreasing for demand for fanciness. All right. It's what the property owners want. It's not what the It's not It's not a matter of what is the goodness for the people out there. It's the decisions of the property owners and what they do with their money. So, it doesn't really matter who makes the laws, right? It's what the people do with their money.
And I guess it does. I mean, in a lot of ways, like you can drive people out of particular areas, like, you know, Bezos left Washington because he wanted to cash in on a bunch of uh a bunch of stock sales and not make any and not have to make any tax payment on it. And I mean, so, you know, there's laws that push people around in those, you know, in that particular way.
Uh, what's that?
Oh, come on. There we go.
All right. Purchasing the foreign debt.
Could that be China? Interesting.
I don't know.
Uh, try to lose weight to get in my Ross dress for less jeans.
I lost 50 lbs. Now a 32 waist. Looking for someone with 38 ways to swap pants.
Yes. Go on about the interest rate cuts.
I I mean I don't like I don't I I don't think about what it is that the Federal Reserve is going to do outside of the inflation expectation that has taken place. If the infl like if you see people like stop talking about gas prices and groceries and whatever out there when you when you hear that conversation die off then I would think about the Federal Reserve lowering rates.
But as long as the conversation is how painful the experience is, then the Federal Reserve is going to keep interest rates elevated.
Now knowing that it's all based on the inflation expectation of it, I don't really have to look too much else, right? I mean, yeah, oil prices and all this other stuff, it's painful and they're very impactful to the individual's life. I get that part of it. But when I try to understand what's happening with monetary policy, it's more about what it is that people feel and believe about what it is that's going to happen with inflation and inflation expectations.
This part is like it's like following the bouncing neutral rate ball. That's the only like that's that's it, you know. And once you see how that thing is being manipulated off of the off of the narrative, everything else becomes like, you know, an issue to that, like does that move this thing around, you know? And so it's just like you hear all this noise and you're like, okay, what did the neutral interest rate do? Right? And you hear some more noise and you look over there at that and you Okay. What did the neutral interest rate do? Right? Because that's the only thing I'm doing. Like everything like they're painful. Like all of a sudden you hear about all these people who got blown up.
You know, like good god, you know, it's just like this is horrible experience out there. And then people take it very personally and they think, oh man, this is the end of the world coming and stuff. And I'm like, well, yeah, I guess everybody kind of feels that way at any given time, no matter where you are. You know, you're always feeling like to everybody. I don't know where you're at, but you know, I mean, there's some point somebody's probably feeling like it's the end of the world, but to the rest of the world, it's not, right? And that's really where I think like a lot of times people almost look at this like it's a game as as opposed to reality.
And and that's, you know, like, haha, I was successful at calling it out, right?
Like, I win, you know, and it was just like, you win what? You know, you don't win anything. There's nothing to win.
And I mean, I guess if you were investing and you got a right investment, then you win. You technically win. But to me, that's not like it's not a game that you win. It's it's a game that you understand. It's not even a game. This is a real life situation that you have to understand to position yourself in. And as many people feel like it's a game cuz there's like all this strategy that's involved with it, it's it's far from it because people's lives are at stake here. It's a real consequence. So, you know, everybody has to look at it their own way, but to me, it's not a game, you know? It's not it's not even like I don't look at it like that at all.
All right. How long are we going to go for, guys? Are we going to cut it here at the hour and a half mark?
All right. Wait. Yes. What is the neutral rate and is it accommodating or restricting? All right. the neutral interest rate. Right now, we have to think there's there's two ways to look at this, and I explained it earlier in the video, but that's okay. I love talking about this subject. There's two ways to look at the neutral interest rate. There's RSAR, which is the Fed's estimate of where the Fed funds rate would be if the economy was operating at its potential alongside low inflation with stable prices and full employment.
It's like the sweet spot, the imaginary sweet spot for the Federal Reserve. Now, that R star, nobody knows exactly where it is. It's an estimate and it's somewhere between a half and 1 and a.5% right like I say 1% somewhere around there. They don't know exactly where this is at. Now the point here is is that if the Federal Reserve was operating in an economy at its potential alongside low inflation with full employment, stable prices and full employment, the Fed funds rate would be somewhere around 1%. This is a major problem for the Federal Reserve. This is the biggest problem in the entire world that nobody talks about in the fact that this has not changed.
None of this has changed. This has been the same condition since prior to COVID, right? Since the great financial crisis.
This RSTAR being at the lower bound of zero gives the Federal Reserve zero ability to stimulate the economy. None.
they drop interest rates, the Fed funds rate to zero. They will not be far enough below our star before running into the lower bound of zero zero interest rate policy and that will not be far enough below the neutral to actually stimulate the economy. Lowering interest rates is not an effective tool for the Federal Reserve. Okay, understanding that part of things now has a component that we add to it because if the Federal Reserve was operating at its potential or the if the economy was operating at its potential and the Federal Reserve was at you know our star with the full employment and low low inflation with stable prices it would be somewhere around 1%. But now if we start impacting it with an inflationary scenario the Fed has to start raising rates. So if you start putting an inflationary scenario on top of this potentially perfect economy, right, oper, you know, operating at its potential, the Federal Reserve would have to raise the Fed funds rate in order to remain neutral, right? Because now you have an inflationary scenario stacked on top of it. The further you push the inflationary scenario, the higher you have to raise the Fed funds rate in order to remain neutral, right?
So there's two ways to look at this.
There's RSAR and there's the Fed's neutral position with the inflationary scenario.
>> You heading off to work?
>> Yeah.
>> Yeah. See you.
>> Yeah.
And so we have to look at it in these two ways. So there's our star and then there's the Fed funds rate in an in a neutral position on account of the inflationary scenario. So they have to look at it in these two fashions because understanding that if the Federal Reserve was to lose the inflation expectations within the economy like all of a sudden war ends, nobody's considering wars a problem, whatever. Like all this stuff like nobody's talking about anything and all this inflation expectation falls. Well, now the Federal Reserve would have to start lowering the Fed funds rate to remain neutral, right? So, as the inflation falls, the Fed funds rate has to fall in order for them to stay neutral. Remember, Powell just recently said it that they're at the high end of neutral. Well, if the inflation rises, that means they're going to run the center of neutral. This is very important to understand because the inflationary scenario is impacting the Fed's restrictiveness on the economy.
So now when we think about this, if the inflation starts to fall and the Fed starts fall following the inflationary scenario down, they would be remaining neutral the entire time until they hit RAR.
At that time, if they were to continue to lower rates, they may find some accommodation to the economy before running into the lower bound of zero.
that short tiny little bit of accommodation will not be impactful to the economy in any way.
Most of the time they would be doing this because of unemployment. If unemployment rises, they will be lowering those interest rates to deal with that. That is not a concern. It's not a concern of the Federal Reserve.
Not now, not yesterday, not last year, not 5 years ago. The flattening of the Phillips curve prior to the COVID pandemic proved to the Federal Reserve that the wage earner is no longer relevant to their monetary policy. And that is scary sad for a lot of people to discover. But that's what the case is after the after the after the great financial crisis and the quantitative easing and the lowering of interest rates to the zero zero lower bounds. Zer, you remember zero interest rate policy. Unemployment went to historically low levels, right? Obama was talking about it. Trump bragged it up. Best jobs numbers in the history since the ' 60s or something. 50s,60s. I can't remember exactly what he said. All these people were bragging it up. It was just awesome. Woohoo. Right. Everybody's gone to work. Everybody was flipping jobs like they didn't care. Ghosting their ghosting their jobs so they could go and get another 50 cents someplace else. Everybody was just like like not understanding what it was that was taking place at the time. But the Federal Reserve was just like, "Oh, damn.
All these people are working. All these people are consuming, but it isn't driving inflation up."
Big time problem. Big time problem. the flattening of the Phillips curve. It didn't work anymore. All these people going to work and spending that money and being a consumer has failed to increase the inflationary scenario. It failed to increase the aggregate demand enough. All those people working having all those jobs didn't do it.
The Fed looked at it and they said, "All right, well that's that. Wage earners are not the important part of our monetary policy anymore. We're going to have to focus in on those who are consuming. Since we are in a debtor based consumer economy and if they are not consuming, they the consumer is not operating in this economy. Then we don't have an economy to operate in. And where's the consumer?
It's not at the wage earners. Not anymore. They used to be there, but not since the great financial crisis, 2008, that ended that. Now the wage earner it's up at the top the top 10 20% of household incomes. So the relevance of a labor market not that important. As long as the unemploy unemployment stays somewhat low that's it. That's the best that you can hope for is that there is a job to go to. Not that it's a good job. Not that it's going to pay you. Not that it's going to have a living wage. But there will be at least one to go to.
That's what we will face. See, this is like you can think about it. This is the exact same thing that Greenspan was warning us about back in the day when he said that you can print and pay any debt of the United States to any size to any length into the future you want. There is zero chance of default when it comes to the Federal Reserve and their and their ability to print up whatever amount of money they want for the government to pay any debt it wants.
Now, here's the problem that Greenspan talked about. And it's the same problem that the wage earners are going to face.
He was specifically talking about fixed income debt holders, right? The retirees holding US Treasury debt and ultimately saying they the government can pay those debts to any length, to any size, to any degree, right? It doesn't matter. But what they cannot guarantee is that those benefits, the payments that come to the debt holders, the the people who hold those US treasuries, the benefits that come to them, the money that they get may not be able to buy the real goods and services because we don't produce real goods and services here in the United States.
That's the same thing for the wage earner.
It doesn't matter if you're one of the US Treasury debt holders. It's the same money that we're getting, right? if they get $2,000 a month off of it or we earn $2,000 a month from wages, which is pretty low to think, but anyway, it doesn't matter, right? It's the same $2,000 that we're getting.
And if those $2,000 can't buy anything, it doesn't matter if it's coming from fixed debt or if it's coming from wage earners. The problem that we face is that if you are getting this money in and it's not benefiting you, what good is it? You could have all the jobs in the world, plenty of work, anywhere you want to work, right? But all the work doesn't provide you with anything of any kind of real value to it. That's the unfortunate consequence that we're falling we're moving into. This is why there's this wedge being driven. This is why people are feeling the pain of their standard of living depleting into the future even though they had a good job today. A good job sucks. It doesn't matter anymore. If you are not using your good job to position yourself into asset allocation, then you will be forced down the wedge. It's just that's the way it just goes. like, you know, I mean, we can like pretend that the politicians can change that.
They won't.
They won't. They're not going to change that. Like, would you literally do something that says, "Okay, you know what? You're right. I'm not going to acquire anymore. I'm going to lower my standard of living, and I'm going to be very generous and give all my wealth to other people out there.
Does that sound like something that the average human is going to do, especially politicians?
No, of course not. So, it's not going to happen. And so, to understand the situation we now face is better than to think that we can change the situation, right?
All righty, guys. We're an hour and a half into this live stream. I don't know. Do you guys want to continue on? I think, you know, if we're at 72 likes and 115 people, if you can get it up to 100 likes and say like, I don't know, 2 or 3 minutes, then we'll stick it out.
Otherwise, I think an hour and a half is plenty long. The problem is is that people don't like clicking on an hour and a half long video, right? So, they even complain about it even though they know all the information's in the first 20 minutes, right? Buying treasury bills. Simon, do you have any thoughts on this? I I mean I think it's part of a of a bigger strategy, but I wouldn't be like 100% into treasuries unless you are like I mean unless you were planning like on not buying anything else. Like if you just like you're old like you're just like the last few years of your life or something like that then I can understand like why you'd want to be in treasuries and hopefully beat the inflation area or at least remain neutral to the inflation. So in that sort of sense then I think that would be fairly you know strategic you know that you would be like less worrisome you know in that sense. Um, but o ultimately like I think treasuries as a 100% position I I think that's probably not the greatest in the world, you know.
I mean, but each your own. All right.
Missed the first part of the message about treasuries. Um again I think it's about the position that you would take like if you are looking for the the security or the short-term position like you know you're at the end like you're in toward the end of life kind of area and you're not necessarily wanting to take on risk. I think treasuries at 4% are pretty probably doing pretty good. Even if you have an inflationary scenario, like it may not be great, but really you're only dealing, you know, with a shorter period of time. Um, you know, for for somebody else who's much younger in life, unless you are just trying to build up a portfolio and have that in part of the position of the portfolio, I don't know if that would necessarily be like the first place that I would go to. me, I would probably step out of the third party risk and get into like gold and silver um as far as a first position goes and then after that start considering what it is that I can do to try and you know spread out the uh the diversification of the portfolio itself.
All right. Politicians are bound by economic laws. See canon if you want to know what the politicians can do. That's it. Justin, you're so right about that.
Doesn't the Fed just follow the 10-year yield? No, I I I've heard a lot of people say that.
Now, I have to disagree with this so wholeheartedly and right and now I'm going to give you a good example and we've talked about this Moses and you've heard me actually refer to this story before and this is a good example of why it is that we know that the Federal Reserve isn't following anything. They are guiding expectations.
And now, for example, everybody can look to the um like if you want to know where mortgage rates are going to go, you just kind of follow the 10 year, right? If the 10-year moves, then the mortgage rates are going to probably move with that 10 year. Something very interesting that I know about mortgage rates and what it is that the Federal Reserve had delivered for information prior to them raising rates is that when they said, "Hey, at the next M, we are going to start raising rates." What happened immediately? Those rates started taking off. mortgage rates shot up, 10 year yield shot up and all this other stuff.
So, are they following the 10 year or they deliver the message?
This is why I disagree with it. See, people say, "Well, the Federal Reserve didn't act until much later." And it was just like, "That's not true. They were acting when they talked about it."
That's the point of the credible threat theory, right? It's not a matter of the interest rate adjustment. It's the communication about it. And so, as people say, "Oh, no, man. Look at you're way late, dude. This thing took off and then later the Federal Reserve moved.
And I'm like, you are missing the communications that were being that were being conducted at that time, right?
Because those communications started impacting the markets and the rates started to rise and then the Federal Reserve was just like here we are. No impact to the economy whatsoever. So as by the time they got there with the interest rate adjustments, literally nothing happened to the economy because all the interest rate adjustments had already occurred, not before the Federal Reserve, because of the Federal Reserve's delivery of the message.
That's why most people miss this. Right, Moses? You're right in line with the narrative and how it is that most people address it. But we here on the uneducated economist don't forget and we don't forget what it is that was being said at the time because we were looking at it through the lens of the credible threat theory and calling them out at the time saying no no no man if you put out this information it's going to raise rates ahead of them and that's exactly what ended up happening is the credible threat pushed rates higher prior to the Federal Reserve moving and then everybody says look the Federal Reserve is a late late to act and I'm like that is not true they were acting months ago when they said that they were going to raise rates. Now that they're doing it, there's literally no impact to the economy because all the rate adjustments had already occurred off of their delivery of the message. That's why I disagree. Okay.
It's what Michael Bar said about the Fed's balance sheet buying more Treasury bills.
Uh well, you got to Okay, that's another thing. Like that's a form of quantitative easing in a sense that it's adding like a lot of liquidity to the banking system in the sense that they're buying these short-term treasuries, but everything that they do gets unwound within a year, right? So, this isn't like a long-term liquidity injection.
It's a year-long liquidity injection.
And if they're doing it today, they it's going to all be gone in a year, right?
Because they're buying, you know, one year or less. And so at least I don't know maybe they've changed that the the scope of that operation but from what I understand the composition of what it is that they were buying was 10 year was one years and was one year terms and less and so everything is shortterm and and that liquidity injection would be almost instantaneously unwound right the moment that they stop doing it. So, as far as providing liquidity for the banking system, I see how that is is helping, you know, as far as keeping the banks liquid, but I don't necessarily look at it as like a quantitative easing thing because of how quickly that can be unwound.
All right. T bills have been being auctioned was a was the success.
Yeah. I mean, I would assume that anytime the auction is successful, then it was good. So, the Federal Reserve is going to go silent, keeping higher for longer, forever. I would think so. Yeah.
Like, how many times have I put out a video, once you're high, you never want to come down, getting high and staying high. The Fed loves being high, you know? I mean, I just like I don't know how many times I put out videos trying to talk about this is going to be the case forever. People need to think about elevated inflation, inflation expectations being the monetary policy goal because right it raises that neutral interest rate and it makes the economy less restricted. Now they have a way of operating monetary policy that is not at the lower bound of zero. So being high and staying high is absolutely critical for the monetary policy. Can they operate at the lower bound of zero?
Sure. They got all kinds of things that they can do there. There's even the real possibility that negative interest rates could occur with the central bank digital currency and negative in uh cashless society sort of sort of ideas.
But that's not that's not in that's not in play yet, right? So until it's actually again until we're on the job site swinging a hammer until it's in play, I'm not I mean I can see it coming. I've been seeing it coming for 10 years now. I did videos talking about this exact scenario of them replacing dollars with an ecurrency to go into negative interest rates. I did that video like seven, eight years ago. So, it's not it's not like new information coming out there.
Although, most people who will look at it will say, "Oh, man. There here they come. They're going to screw you over or whatever." And I'm thinking, well, you know, they've been doing that for seven years now. Where were you? You know, you know, if you all these other YouTubers out there are like kind of getting this information for the first time and trying to spread it and they're like, "Oh my god, look what they're And I'm like seven years 8 n years ago. What are you talking about, man? This has been going on for a very long time. And to think of what it is that they're really doing it for is not for the control and deceiving ideas that all these people want to do.
Is that part of it? Absolutely.
Absolutely. The control, the manipulation, the taxing, the shutting off of your of your digital wallet, whatever, all that is part of it. Yeah, absolutely. But what is the real goal?
Negative interest rate environment because the Federal Reserve has no more downward adjustment to monetary policy after running into the lower bound of zero. That's the problem, right? And so to think how is it that you can go into negative interest rates? The setting up of the Genius Act is that how long into the future does it take? I don't know, right? And then as long as you can keep inflation expectations go, you can probably go for a long time, you know?
uh tokenization for the poor and stable coins for the corporations. I'm guessing I couldn't tell you what it's going to look like, but I can only assume that it's going to be like like a two-tiered system with UBI kind of applications to it. And I can only assume that those UBI payments are going to be a different type of currency than what the elite are using, you know. All right. Uh, my THC level is always at expected raised rates.
Uh, what else we got here? Do we want to keep going, guys? It's late. 85 likes, 112 people watching.
GM team.
All right. Big opportunity. I see when that happens.
>> Well, I think there's big opportunities for a lot of people out there. And unfortunately, like I'm looking at this in a way that it was just like, damn, you know, this is how the universe works. Like, if you don't if you're not paying attention to what you're doing, it's going to it's going to set you up, right? And and I think about it not as a punishment, but as a lesson well learned and what it is that I need to do in order to have the best advantages for opportunities when they show up. And if I have literally denied myself the opportunity that I am describing here for years coming up because I have positioned myself in inappropriately, that lesson is going to be well learned and I am going to take every day of that lesson into consideration going into the future. So I come out here and I share the information on what it is that's going to happen, but every single person really needs to internalize it for themselves and what it is that they need for their own lives in the in the condition in which that they have put themselves in. If you hold bet, I would use this opportunity to get out of it.
If the money if the money becomes unrestricted, if the if the financial markets become unrestricted in a sense, the money will start to flow. It takes time, right? It's not going to happen tomorrow. It's not going to happen the next week, right? It takes time. But over the course of the next, you know, 6 months to a year, considering the situation we are now rolling into, if it is to continue, this is the probably the biggest part. If the Federal Reserve is to stay still, because we know what it is that the neutral interest rate means when the inflation expectation rises, if that happens, then we know that the economy is going to become unrestricted.
If the Fed moves up with it, they are probably most likely going to remain neutral. either one of those is not restricted.
And that's the that's the kind of like almost backwards thinking from what most people are going to see out there as they watch the inflation rise. They're going to think about how the economy is becoming restricted. And that's exactly opposite of what it is that's going on.
Think about 2022. All right? Like I mean the the Fed funds rate was a screaming higher and real estate went to the moon, right? It was like things that nobody would ever have anticipated happening at the same time. But once we understand why it was occurring because elevated inflation had made the essentially the real interest rates negative during that time, it makes total sense why the housing market shot up like a bullet.
and that that could be a situation we go into in the future. And I mean there's there's no telling what it is that the Federal Reserve is going to do with the Fed funds rate. But as far as I can tell, it looks like they're trying to remain neutral. And now remaining neutral is not restricted. And I think that's the important part of it. Okay.
So for me, I'm going to get out of debt as possible so I can take advantage of asset allocation. But ultimately, if you have debt, there's no point in investing, right? And that's what ended up, you know, it's just like h anyway, it's all good. It's it doesn't matter. It's all part of life, right, man? It's just another thing. Thank you guys for the support. I really appreciate it. You guys have been awesome tonight.
Um, an hour and 42 minutes into it. I appreciate your perspective. I understand what you are saying. Well, thank you, man.
No one can really call the next roll of the dice. Nope. You're right, Deja. You guys want to make a call? Go ahead and make a call before I spin it. Type them up.
All right, here we go.
Uh, what is that?
Dibs. Dibs production.
Dibs IP production.
All right.
The Fed will do what's best for the Fed.
Oh, yeah. Dry powder, baby. Ride the wave coming. Yeah.
All right. 11 on the dice. Is that what it came up as? Yeah. That's kind of I can kind of see that.
All right. Anything else we're going to talk about or we calling it quits?
Because I've really rambled on for what, an hour and 45. Um, yeah. I guess if there was anything to take from this video, I mean, I would I would consider what it is that is happening within the dension. If there was two ways to look at how it is that the Federal Reserve would cut or raise rates and to understand the argument on both of those. And I really feel like if you watch the first 20 minutes of this video, you'll probably get a better understanding of that situation that is now happening at the Federal Reserve and why it is that they have these two different communications. Ultimately, I think that's part of it. Like having the monetary policy in such, you know, essentially such disarray, you know, kind of feeling is ultimately making out for their better policy because now the uncertainty allows them to use their either their actual interest rate adjustment more more productively or to actually use the void within the communications to fill with the narrative of whatever it is that they want. Um, to me, I think those two things are going to end up taking place and we're going to watch out for them.
All right, guys. Super cool for you all to be here. Going to go watch the beginning after this because I missed it. Yeah, the first I would say the first 20 minutes of it were pretty good.
Uh, that thumbs up is cruising for a bruise and make it happen, captain.
Thank you, Allnighter. Uh, investor eyes one for everyone expecting a crash soon.
Yeah, I don't know. I just don't think we're going to have the crashes like we once had in the economy. You got to think like what did the crash really come from? It came from like people who stopped consuming, right? So, if you lost your job, layoffs started to rise, you didn't do as much consumption and then the economy started to slow down on that aggregate demand falling, then the corporations would start to collapse and you see the stock market crumble. But the but the working class, whether they go to work or not, it doesn't matter.
The consumer keeps going. And so when I think about like what is it that would create a crash, it's like I don't know if there's really like a financial crisis that can be had inside of this new style of economy where the average everyday wage earner isn't really relevant to it anymore. I don't know.
All right. Banks don't have a reason to hoard reserves since they aren't earning usually high returns on them. Unusually high. Banks also don't have a reason to avoid holding reserves since the opportunity cost is low. Yeah. So, banks behave normally and continue lending to households and businesses.
Yeah, that's a good way of saying it.
It's going to be interesting. That's for sure. Yeah. I can't believe how many one plus m homes selling so fast here in San Diego. The more expensive the home, the more likely it is going to sell. It's the you got to think it's the average everyday wager earner home that isn't going to sell. Like they might go to an investor, you know, who's going to fix it up and make it a million- dollar home again or rent it out. But the the idea of like homes going to the average everyday, that's not that's not the economy anymore.
There was a time that was the case cuz the average everyday wage earner could go out there and build themselves a home. But if you can't do that anymore, you can't trade your skills and effort for other people when it comes to having that. That's a luxurious experience. So the more expensive it is, the more likely it's probably going to sell. You know, I would be worried if the top 20 stop consuming their bigger problems for everyone. Well, I would be too, but what would what would what would do that, right? Other than the Federal Reserve literally creating a quantitative tightening position, shutting down all operations as far as keeping the banks liquid and all that other stuff. Like I just don't see that being the case.
Unemployment would rise, their mandate would kick in, and they would be forced back into what it is that they're doing right now, which is essentially going to be continuing on benefiting the consumer. Because the consumer goes and consumes, then the average everyday person has a job. And both of the dual mandates are solved.
and I mean solved by it is like they have a long-term anchor of 2% in them in a persistently attempt to get there, right? So, as long as the 2% anchor is anchored, that's they have achieved their mandate, right? Regardless of where the current position is, yeah, they're trying to get back to 2%, but they have never ever once in the history of their time ever done that. There's no reason to think that they can. I I don't I mean I don't know how many other people think that they're going to get to 2% and then try to maintain 2%. Infl Like is that a thing? Is that a real thing?
Does that happen? Like I've never seen that happen. There's nothing in their history that says they can do that. I don't know why anybody would think that they could going into the future outside of like the narrative telling them that.
But there's no reality to that situation. So, as far as I'm concerned, the Federal Reserve is conducting themselves exactly where they want to be. Like, this is not like they're like looking at each other going, "Damn, guys. We're nailing this." All right.
Hello, beautiful people.
I would be screwed if the rip stop caring to having a yard. Oh, no. They care about their yard. That's that's that's the you know like when people drive past their house that's what they look like. That's what they look at is the yard. Yeah. Uh we'll see markets drop followed by V-shaped recoveries for the foreseeable future. In my opinion, bottom picking is much more difficult than dollar cost averaging for the most people though. I Yeah. Um I am not a good market timer. I just dollar cost average when I can. Yeah.
Uh silent the Fed. I silent fed I wonder the narratives. Oh man, I do too. Like I am looking forward to it. And that's really probably going to be the benefit to those who understand the credible threat theory the most is that they are going to be able to recognize what is being stated within the narrative that is going to conduct monetary policy.
Like we know how that works. We understand it. And typically it was becoming a very frequent message coming from the Fed. Now, a lot of people couldn't hear it, but if you knew what to look for and what it is that those messages were delivering, it made it very easy to understand how it is that the Federal Reserve was conducting their monetary policy with it. It's difficult for most people because they heard the language of the Federal Reserve but didn't think about the reaction that people would have to it because that was the important part. They listened to the language and then thought about what it is that they had said and how this is strategy and all this other stuff. And I would listen to the words that they said and then go and what did the people think? Because that was the strategy, right? What did the people have to say about what they just said? Because that's what's going on with monetary policy. It's pushing that expectations around. Once that gets removed from the Federal Reserve's own community, like once they stop communicating, that void will get filled. I mean, there will be people like, "What's going on? I want to know. I've been listening to this this whole time. where's the information?
That sort of thing is going to get hijacked, you know, at some like whether or not it was done on purpose, deliberately, whatever, but it's something's going to fill that.
I told my buddy that Bitcoin is going to drop and my buddy said, "Great. I'm going to buy some more." He's super rich. I guess different strokes for different folks. Imagine the noise from the media and YouTubers when that happens.
Hey UEIE, happy Sunday. Happy Sunday.
Anybody in the Atoria area, if you want to enjoy some good times down Oh, my phone's going to die here pretty soon. Uh down at the workers tonight, we are calling bingo. Place is going to be freaking packed. I know it.
There's probably going to be 60 70 people down there tonight.
If you want a seat, you're going to have to get down there like now, like before 4:00, if you can even find anything.
Last week, I kid you not, I start the I start the game at 6:30. The place was completely packed, ready to play at 4:00. There was a buddy of mine showed up. He says, "Dude, there was one seat left at the bar." And it's been packed ever since. And I started calling at 6:30 and went till 9:00, and the place just did nothing but fill up with more people. So, really good time. I'm looking forward to it tonight. So, I'm going to go get something to eat, get rested up, and then go call the bingo game. Uh, tomorrow, we're going to come back out here and do the membersonly live stream for the recent speech that was given by the Federal Reserve. We're going to break that down in its entirety. Um, so, you know, be sure and check that out. And, um, yeah. All right. Until next time.
Uneducated economist, you guys. Let me know.
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