The Next Market Crash Risk [Explained].

hey everyone me kevin here don't mind

the well hoodie

instead let's talk about janet yellen

because she just mentioned something

that

is pretty impactful for her opinions of

a future market crash remember

we have massive fears in the economy of

inflation potentially coming

and creating a massive market crash in

fact

over this weekend i posted a video

called the

great or the coming great depression or

roaring 20s which is it going to be and

it's

all about inflation and the two sides to

this argument which

if you haven't watched that yet it's a

must see but

let's listen to what janet yellen talks

about when it comes to

inflation specifically we want to focus

on our inflation argument

and see what her opinions are because

they're a little unique from what we've

heard

before at least from jane yellen so

let's go ahead and

jump on in and listen on up just

remember that if you want to get up to

250 dollars with blockfy you could do so

by signing up for block five with the

link down below gonna met kevin.com

bf deposit money and you'll get up to

250 totally for free now i'm not going

to play the whole interview because

she spends like three minutes

summarizing the stimulus package we're

not going to listen to that we already

know it's in the stimulus package

let's focus on the economic related

issues and inflation here we go so um i

i believe there's

enough support in this package to

relieve

suffering and to get the economy quickly

back

on track i'm hopeful that

if we defeat the pandemic that

we can have the economy back near full

employment

next year and i think this is okay full

employment next year

very important statement why is it so

important because what is the dual

mandate of the federal reserve

and what was uh chand yellen the

chairwoman of

the federal reserve the dual mandate of

the federal reserve which she was the

chairwoman of

is price stability and maximum

employment now

she set full employment this is actually

a distinction

full employment generally means we're

back to

under four percent unemployment maximum

unemployment

means that all races and sexes

are under four percent approximately

there's no

uh hard and true or

a steadfast rule that says this is

exactly what it is but generally we

expect all of these levels

under four percent to be consistent with

full and maximum employment

she thinks we're going to get to full

employment let's listen to that again

because it's very important in terms of

when

economy back near full employment next

year

that's 2022 she thinks we're going to be

back in full employment

the federal reserve so far is widely

expected to raise rates

in 2023 potentially in 2024

if we get to full employment in 2022

we could potentially see that 18 month

warning shot

that i recommend you keep an eye out on

which is the fed

starting to taper bonds if the fed says

we're going to stop buying as many bonds

bond yields go up because you have less

buyers in the market

this to me means we could still have a

pretty glorious 2021

without the concerns that the fed's

going to act sooner that the fed's going

to taper sooner

every time we hear them speak we pretty

much hear jerome powell loud and clear

say

we're not doing anything in 21 stop it

it's all reiterating janet yellen she's

coming from the fed

so we've kind of got two j pals here one

at the treasure now

and one at the fed let's keep listening

i think this is the package we need to

do that

how about inflation though your

predecessor larry summers has warned of

the dangers economist mark zandi says

investors are underestimating the

dangers if we get back to full

employment could we see inflation surge

how big a problem is that yeah

now keep in mind where this question

comes from is very important as well

uh this question obviously comes from

the fact that you could still get 38

off today with that expiring coupon code

below for bundling up on any of my

courses or just individually getting

courses like the stocks and psychology

of money group

where i help you get through the crazy

down periods and not paper hand

and not be a paper-handed weenie the

time to sell remember is when the

market's going up

not down check out the tweet i sent and

look at the dates of my tweet that i

just retweeted

from well you'll see it go to realme

kevin on twitter

but anyway why does this come up if

we're going to full employment

why is there potentially this relation

to having inflation

this is because of something known as

the phillips curve now i'm not going to

go into an economics lecture here about

what the phillips curve

is in in some complicated way we're

going to keep this very simple

basically the phillips curve says when

unemployment goes down which means more

people are working

there is less supply of workers which

means the price of workers goes up

which means potentially we see inflation

because if the price of workers go up

the price of everything could go up the

price of input cost goes up because the

price of workers goes up

which means the price of the end good

goes up potentially

and we see inflation unfortunately for

literally the last

13 years we have not seen this be true

this has been true in the past but not

in the last 13 years

we've literally seen the unemployment

rate plummet

from probably its peak somewhere around

20 20 2010 off the top of my head

uh somewhere around the peak of

unemployment i believe but anyway

since approximately then we've had this

straight line

down of unemployment and inflation has

also been going down with him

it's literally the opposite of what you

would expect so this

question that george here is asking is

is a very

old school question well wait a minute

if you think we're going back to full

employment

that means you think inflation is coming

that's what he's asking

listen to the response because remember

big inflation

is totally what crashed the market what

could crash the market again

well you know policy making is about

identifying and addressing risks

and the the most significant risk we

face

is a workforce that's scarred by

a long period of unemployment people

being out of work

not able to find jobs can have a

permanent effect on their well-being

i think that's the most significant risk

is there a risk of inflation

i think there's a small risk and i think

it's

manageable you know prices fell

a lot last spring when

the pandemic surged i expect some of

those prices to move up again

as the economy recovers this spring and

summer

but that's a you know a temporary

movement in prices

to get a sustained high inflation like

we had

in the 1970s i absolutely don't expect

that

we've had a very well anchored inflation

expectations

and a federal reserve that's learned

about how to manage inflation

so i don't think it's a significant risk

and if it materializes we'll certainly

monitor for it

but we have tools to address it back

that is a huge a huge statement right

here

okay unpackaging this okay she says look

the odds of us having persistent

remember

persistent means it happens over and

over and over again

we expect that cup of coffee to get more

expensive not just this year

but next year next year next year next

year that's persistent inflation

temporary inflation is ah damn my coffee

was way more expensive this year than

was last year

but next year it's still the same price

about right that's persistent versus

temporary inflation very very important

and by the way i get these comments

every time i just have to quit tangent

okay

i hear all the time kevin but kevin

inflation is the expansion of the money

of the money supply

no in my opinion and everybody's got

their own opinion okay but when you're

watching my channel

inflation is the reduction in purchase

power

ironically just because you're printing

more money does not mean your purchasing

power goes down i know that's

weird but again watch watch the great uh

depres the coming great depression

versus the roaring 20s and you'll

understand that a little bit more so

big thing that janet yellen just said

small but

manageable risk manageable means

they're ready to act if the risk

becomes extended very important

then she also says and this is very

common because we hear people have these

concerns that we're going to see this 10

12 13 14 inflation reading again like we

saw in the 70s or 80s

she's saying i absolutely don't

expect that those are her like she

picked those blunt words

she said the word absolutely she

absolutely does not expect to return to

the 70s style inflation

and she gives reasons for that saying

that our

inflation expectations are too low that

we think inflation might be

two or three percent but nobody's

thinking it's time to see inflation go

go to uh 10 11 percent and if people

don't believe

that then it often doesn't manifest

because inflation is one of those things

where

if we expect prices to go up we go buy

more

now so that we don't end up buying when

prices are up

later this is kind of exactly like when

i say the coupon code expires down below

you probably incentivized to at least

check it out

because the price of the course goes up

over time

as i add more content the price goes up

but let's go ahead and keep listening to

what janet yellen has to say

2017 he testified that long-term budget

production should keep people awake at

night

the situation is worse now federal debt

expected to exceed gdp for the first

time

since world war ii so are you getting

any sleep

um i am getting sleep i've my views have

changed somewhat about fiscal

sustainability

um in part because what we're okay

that's interesting hold on

he kind of just called her out there

he's kind of like wait a minute

three years ago you're complaining while

trump is in office

about how we have too much debt now

you're in office

as treasury secretary and now your views

have changed

that was actually a really good question

okay props to abc on that one that was a

good question

seen all around the world is a trend

toward very low interest rates

interest rates in the united states are

much lower than they were in past

decades and you see that in all

developed countries

around the world and it reflects

structural

trends that are not going to disappear

soon

and i think about when i think about the

burden of debt

i think about it mainly in terms of

the interest payments that the

government needs to pay on those

on that debt and in spite of the fact

that the debt has increased

substantially

um interest payments relative to the

share to the size of the economy

have remained quite low no higher than

they were back in 2007

but of course we have to make sure that

the economy that the budget is on a

sustainable path and this is something

that we can afford

in the longer run we need to get

deficits under control

to make sure that our fiscal situation

is sustainable

in other words now that i'm in office we

got to focus on people not being

unemployed because that's going to

create more damage to our economic

engine and it's interesting she says

this right here she says

interest rates are tending to trend down

lower interest rates aka also lower

inflation

are the expectation and that's because

of structural

trends that won't disappear soon what

are structural trends

well structural trends could be the

deflationary aspect of technology

the deflationary aspect of price

competitiveness where you've got people

like

elon musk going look we don't need a

more expensive car we need a cheaper car

cheaper car cheaper charge cheaper car

but also higher quality and this price

competitiveness

is a structural trend driven by

technology

let's keep listening and that means

raising revenue to pay for future

programs what do you think of senator

warren's call for a wealth tax

well president biden has put forward a

number of

proposals he hasn't proposed a wealth

tax but

he has proposed that corporations and

wealthy individuals

should pay more in order to

meet the needs of the economy the

spending we need to do

and over time i expect that

we will be putting forth proposals to

get deficits under control

but no wealth tax well

that's something that we haven't decided

yet and

can look at but you know president

president biden during the campaign

proposed a higher tax rate on

corporations

on individuals and on uh

payments capital gains and dividend

payments

that are received and those are

alternatives

that address that are

similar in their impact to a wealth tax

now these items right here by the way

are expected to be announced by joe

biden as potentially part of his next

infrastructure package

whether or not he gets through these

higher taxes

that's going to be up for debate maybe

republicans come in and say look we'll

give you the 10 votes you need

as long as you get rid of these taxes

we'll see what mitch mcconnell is

capable of doing mitch mcconnell has

already expressed his unhappiness with

the idea

about higher potential taxes but very

interesting i mean we

we have uh really a treasury secretary

here just like the federal reserve

uh and and they are redefining uh how we

look at debt

we used to look at debt in this country

as how much it is

now we're looking at it as how much it

costs and by redefining that oh well now

our debt looks cheap

so you know there are arguments to be

made on both sides here

what kind of narrative were we being fed

by the government

versus and the fed because apparently

they're separate they are

uh technically uh but anyway versus what

our actual expectations are and this is

why the market is so

confused this is why when bond yields go

up

the market goes well we're going to

trust the bond yields instead of the

government and the fed

so this is really going to be an

interesting next few years here i think

most of you know

what side i'm on and you get a little

bit more insight again if you take a

look at that video on

the coming great depression versus

the roaring 20s what are we gonna have

let me know your thoughts down below

take a look at that coupon code that

gets you that 38 off expiring today

i don't have my sound board ah but i do

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and if i hold it with my left hand it's

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follow me on twitter at real me kevin

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and folks see you next video