Uncovering the Truth: Is the Federal Reserve Hiding Something?

hey everyone me Kevin here call me crazy

but I think the Federal Reserve isn't

being entirely truthful with us going

forward now I'm saying going forward

because we know they probably haven't

been in the past with this idea that oh

don't worry we can still print money in

March of

2022. inflation is transitory it's all

going to be just fine it wasn't all just

fine it really wasn't we had to go a lot

higher for a lot longer than everybody

anticipated and the reality is uh maybe

the track record of the FED isn't one to

really believe much in but that's

actually potentially why I think what

the FED is suggesting now could be

entirely misleading and I think it's

important to at least consider so I

figured I'd make a quick video and slap

together with Nick T from The Wall

Street Journal just said that the walls

or that the Federal Reserve is up to and

I'm going to provide my context and

commentary about it remember that today

is the 31st and that means tomorrow is

June 1st which means tomorrow night we

will have another price increase for all

the programs and building your wealth

down below we do raise the prices not

because we think we want to charge

people more money but because we're

constantly providing more content so

that way people who buy an early get

rewarded and lock in the best prices so

consider that for either the

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care of okay so in the Wall Street

Journal article Nick T just suggested

that the Federal Reserve is preparing to

skip a rate increase in June but may

raise rates at a later date this summer

now that's fascinating because when it

comes from Nick T it's usually

considered a leak from the FED basically

we think one of the either one or some

of the FED Governors or even jpow

directly send a quick little texty

Doodle over to Nick T at the Wall Street

Journal because he basically never gets

it wrong and that's not to say that he

has a crystal ball it's to say that

basically when the FED wants to

communicate something clearly to the

public the easiest way to do that is to

just leak it to the Wall Street Journal

that makes a lot of sense because

everybody in finance generally reads the

walls through Journal especially when it

has to do with Nick T's stuff so it's

the most convenient way to just happen

to guide the market in a specific

Direction well there's this suggestion

now according to Nick T that officials

want more time to assess the economic

effects of Prior rate Rises and recent

banking stress although we don't

actually think the banking stress is

really banking stress anymore and you

know we're getting a mix of data like

Chicago pmis were soft jolts was hot we

don't know is that seasonal summer

hiring is it serious hiring what's going

to happen on the jobs report this Friday

Friday morning 5 30 a.m I'll stream it

what's going to happen with CPI on the

13th we'll see we'll stream it but even

beyond that you have Loretta Master

suggesting look there's all always going

to be more data what's the point of

waiting for more data like as soon as we

get that more data we're just going to

go like there's more data like we don't

need to pause and then you've got other

people suggesting you yeah well you know

maybe it would just make sense to pause

for June and then we could always hike

again in the future if we want to for

example Philip Jefferson one of the new

fed Governors here says the decision to

hold our policy rate constant at a

coming meeting should not be interpreted

to mean that we have reached a peak rate

for the cycle indeed skipping a rate

hike at a coming meeting would allow the

committee to see more data before making

decisions about the extent of policy

firming and Neil kashcari for example

suggests I can make the argument either

way and he's been kind of the bearer

that's been like oh no we don't want to

pause

so here's my take on all of this my take

is the Fed has made so many mistakes the

last thing they really want to do is

repeat even more mistakes of the past

probably the biggest mistake of the past

was during the Arthur Burns era okay

this is from 1970 to 1978. this is a

pretty critically important period of

time and what I encourage you to do is

look at the FED funds rate right here

you can actually see that on screen fomc

fed funds rate on the left I'm at 1967

and the right there is probably 1885 or

so so basically just look in the middle

you see it's very very volatile and what

I'll go ahead and do is just kind of go

through some of these numbers here I

want you to consider this we raised

rates in 71 going up through 71 then

late 71 starting in September October we

started lowering rates probably because

of pressure from Nixon and

administration suggesting hey like this

is crimp in my style man we get a lower

rate so they did they lowered rates then

they started but then they lowered rates

and they started raising rates again as

soon as February of 72 raised rates then

we got to 73 then we lowered rates then

in 74 we raised rates again late 74 we

lowered rates again then in 75 we paused

in May and then we raised rates again

going through September then we lowered

rates again going through February and

March of 76 raised rates again in 76

lowered rates again later in uh 76 early

77 then raised rates going all the way

into

1979 when Paul volcker took over we know

what happened there Paul volcker

basically took over this era of oh my

gosh inflation expectations have been

ruined by somebody certainly enough I've

had before me and I gotta fix this crap

by putting on big boy pants and rug

bowling everyone

expectations entirely unanchored they

became a complete disaster everybody

thought inflation was going to Skyrocket

it never would go back down today we

already know inflation expectations are

reasonably anchored low yes we get some

volatility because of the news cycle and

the University of Michigan consumer

sentiment report however the five-year

break-even is at the lowest place it has

been in the last year uh probably over

actually the last 14 months and that is

our generally the best measure of the

Market's expectations for inflation so

inflation expectations are anchored is

great and a mouthful but why do I bring

up history well I bring up history

because the pause and then lower and

then let's just hike again later and

then the pause and then lower and then

let's hike again later that led to

Broken inflation expectations I do not

believe the Federal Reserve wants to

repeat those same mistakes this time

around they already have a credibility

problem why do we want to repeat those

mistakes again you're better off just

staying at five for longer like you're

better off just saying stay at five and

if we were going to you know originally

if like if we were going to let's say

pause in June and then hike in July and

then cut in January let's just go to

five and then stay at five until March

instead of another hike and then an

earlier cut because solely and squarely

and of course is my opinion but it's my

opinion that the Federal Reserve does

not once again want to make the mistake

that they made of

1970-1978 because the mistake of this

absolutely no idea what they're doing is

literally what led to the Paul volcker

era of the early 80s where we had a

recession in 1980 that unfortunately

never controlled inflation of course we

had some other elements causing

inflationary problems back then as well

like in the early 80s we're like you

know we just went through a decade where

inflation never went down no matter what

the FED did we left the gold standard

price caps got removed we had an oil

crisis you had a lot of crap going on in

the 70s and while you had great music

you had horrible fed policy and it

wasn't until Paul volcker cleaned it up

in 1982 with the second reel putting on

the pants because he didn't even get it

right in 1980. I know people really

Revere Paul volcker but he didn't get it

right in 1980. it took 1982 to actually

get it right so in other words almost

sort of two smaller recessions which

together other led to a lot of

unemployment Peak unemployment of well

over 10 percent and this is what Jerome

Powell I believe does not want to cause

he doesn't want to cause this roller

coaster because it breaks The fed's

credibility even more and in addition to

that honestly I think Jerome Powell

looks at his legacy and says do I really

need to create a recession if inflation

expectations are low and inflation is

plummeting I mean look at what just

happened in Germany inflation

expectation or inflation fell well below

expectations we've been trending down

nicely maybe let's just pause here and

wait because if we can actually stick a

soft Landing guess who goes down as a

hero Jade Powell my take so in other

words when you hear about this pause in

June hike in July I don't buy it unless

the data comes in ugly of course then

we're gonna have multiple hikes ahead of

us but if that doesn't happen it's

bullcrap my opinion