The Fed's Inflation Plan is DOOMED | BIG Failure Warning.

video we're going to take a look at a

Deutsche Bank research report that tells

us what historically happens looking at

hundreds of instances both in developed

markets and emerging markets in terms of

the result after inflation hits eight

percent throughout history on average

through all these different markets how

quickly does eight percent inflation go

back down and how do today's consensus

C's compare to the reality of history

and has the reality of History changed

that is worthy 1920s the 1950s or the

1970s periods of high inflation any

different from how consensus fares today

well that's exactly what we're going to

address in this video

brought to you by Roman but more on them

later and as usual we'll have timestamps

linked down below folks let's get into

this Deutsche Bank report because it is

absolutely phenomenal so first

historically in the last 18 months

economists have been failing to properly

predict inflations magnitude and

Direction so in other words the size of

inflation has been substantially

underestimated and the direction of

inflation has been underestimated we

thought the peak was March

and we thought the peak was July now we

think the peak is August hopefully it

actually is the peak but the point is

economists have been vastly wrong so far

in fact take a look at this the

Bloomberg consensus estimates for

inflation are written out via these

lines here this would be expectations in

December of 2020. here is March of 2021

June of 21 September of 21 December of

21 March of 22 June of 22. notice how

every single time we're moving these

estimates up that is Economist estimates

are moving up but every X here marks

what actual results were and they were

always higher than what economists were

predicting the actual curve has shown

that economists have really failed at

properly predicting this inflationary

cycle as a result Deutsche Bank is

trying to analyze well what happens

historically not what economists are

predicting but what historically happens

when inflation hits eight percent

well let's take a look so when we look

at 318 Global episodes of inflation

hitting eight percent going back to

1920.

whether we split them into developed

markets or Emerging Markets really makes

very little difference and so when we

put them together

this is what we get all sampled

countries

showed that once inflation hit an eight

percent level

it took through the median so at the

midpoint

it took this long this many months for

inflation to come down

so in this case it took for inflation to

go from eight percent roughly here it

took about two years or 24 months for

inflation to get down to six percent and

it took five years for inflation to get

back down uh to lower levels in fact

here's 60 months lower levels really

sitting around four to five percent

notice how we're nowhere near that two

percent level even five years after an

eight percent Spike it's very rare to

get back to that two percent level even

in five years it took the Federal

Reserve in the 1970s

two years to get from high inflation of

around 18 down to like nine percent but

then it took a whole nother 15 years to

get down to two percent

that's just one scenario in the 70s

again right now this chart tells us 318

observations we have a chance of maybe

threading this needle and actually

seeing inflation plummet the way

economists are expecting but economists

are expecting that within two years or

24 months as denoted by these dots right

here Bloomberg consensus the gray dots

being the European cycle the Red Dot

being the U.S cycle we have about a 25

chance of actually threading this needle

if these observations from 1920 hold

true we have about a 25 chance of

actually being correct that inflation is

going to plummet back down to below four

percent within two years 25 chance but

wait don't stop there because this is

based on the 1920s

and Deutsche Bank actually gives us

three scenarios they say first we look

at the 1920s then we run the model from

the 1950s and then we run the model from

the 1970s and what you're about to see

is scary but it's not as scary as hair

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at the samples now run from the 1950s

and how realistic are our expectations

that inflation is going to plummet like

Bloomberg is estimating that it will and

economists are expecting expecting it

will how realistic is that when we

sample all countries developed and

emerging going back to 1950. well going

back to 1950 you could see the median is

this blue line here

and uh oh we can actually see that our

consensus right here falls off of the 25

percentile chance that is if this it

represents here the odds of us happen

like this actually happening we fall

below the 25 chance of this happening uh

within about 15 months so in other words

yeah there's a chance still a small

chance we can align with expectations

for the next year but we probably won't

actually align with expectations if this

chart has anything uh has any truth to

it today anymore uh averaging out

inflation to the 1950s again showing

that we're much more likely in the

24-month period to still be sitting

around six to eight percent inflation

and after five years still sitting in

the five percent inflation category

yikes

but then folks oh boy let's look at this

since the 1970s period Well if we look

at since the 1970s period which was a

period of Fiat money uh oh the

observations look even worse out of 126

observations of inflation exceeding

eight percent within 24 months the

median inflation fell to about eight

percent on the low end we fell to about

six percent which makes our Rosy Outlook

that inflation is going to fall to two

to four percent look pretty dang

ridiculous right now and that is not

exactly what you want to see and so

unfortunately here this is where you

have Deutsche Bank saying that the

disinflationary thesis perpetuated by

folks even true like Kathy Wood whom I'd

like to agree with

seem wildly optimistic and even though

this 1970s period is heavily influenced

by the Paul volcker era it is still one

where we represent Fiat money and what

happens here well central banks policies

are likely to have to remain high not

just for longer but for a very long time

and that's scary because that means more

pain for longer and that means not only

is that real estate recovery but that

stock recovery might be a lot slower

than we might be expecting and so I

think all of this calls for patience

stay out of debt increase your income

DCA stay away from speculation and make

sure you subscribe to the channel thanks

so much for watching and we'll see you

the next one