The 3 Waves of Inflation are JUST Starting | Prepare for Stagflation.

people are going crazy about this

particular chart on Twitter they are

saying we are basically screwed because

look somebody put a blue arrow here and

said you are here the first wave of

inflation is rotating down and guess

what you have ahead of You Hell Followed

by hope followed by more hell and the

world is coming to an end because there

are going to be three waves of inflation

and if you think you got hurt over the

last year in the stock market and you're

back in because you have hope well that

prepare to get screwed because

inflation's absolutely going to ruin

this economy the dollar is going to be

worth less than the German Mark and

we're going to war with China and Russia

is going to start using nukes and the

world is over

that's what you generally get when

you're on Twitter

it's not actually what I believe let's

break this down and explain why this is

unlikely or is it likely I don't know

we'll explain in this video but first

when I went on Twitter briefly to

explore I actually saw this which I

thought was really cool look at this

Elon Musk liked your tweet I wrote

unpopular opinion those who drive

distracted texting tweeting trading

should have Tesla FSD Force enabled not

disabled of course that led to a bunch

of people going yeah but then you're

just gonna encourage bad behavior do I

honestly don't think there's a single

person who texts and drives who's like

I'm texting and driving because uh be

because I have FSD and I could just do

it safer it's like people are going to

text and drive whether they have FSC or

not I don't think you're encouraging bad

behavior so people are going to do what

they're gonna do anyway it's kind of

like I gotta says

it's not a good thing I'm not saying

it's right it's just saying people are

going to do it it's kind of like why why

in some places do people give uh you

know clean needles to people uh because

well because they have an addiction and

you don't want them to die and you don't

want them to throw needles around on the

floor and in fact other people so you

set up kind of safe spaces for people

right again not saying you want to

incentivize people using needles and

stuff

way things are you know people are going

to do what they're going to do anyway

that's a big societal debate we don't

need to get into right now because

instead we need to be talking about

these three waves of inflation so

are we going to face a 1970 style

reanimation of inflation and that is the

big question and in order to understand

this we really have to understand

history so back in 1965 this inflation

crisis of the 70s started and I'll give

you an Abridged history okay so 1965 the

inflation crisis started part of it was

due to uh Nixon inheriting the Vietnam

War and massive war deficits you had the

guns and butter Theory back then massive

spending on the war effort which ended

up being not the best war to be involved

in and in 1972 we ended up expanding

Social Security Nixon came out and said

he was a Keynesian right the year before

that he ended up imposing wage and price

controls fueling shortages and we left

the gold standard in 1971. so hold on a

second that was a lot of information

there but what happened was you went

from somewhere around one less than two

percent inflation in the mid 60s to so

by 1973 8.8 inflation why well big

reason was the initial imposition of

wage and price controls which is a fancy

way of saying we're going to put a

ceiling on how much wages can be so

instead of a minimum wage it was like a

Max wage to try to prevent a wage price

spiral and limited uh prices of things

like gas during the oil embargo when we

basically said Fu OPEC we don't need you

prices went through the roof but because

Nixon and other administrations set

price controls and prices were limited

what happens well you should remember

this from econ 101 when you set a price

ceiling what you do is you create

shortages that's bad and shortages

mess-ups and break Supply chains

remember the images of people and gas

lines waiting for to get gas at gas

stations gas was cheap but instead of

paying with your money you paid with

your time so economically the impact was

actually worse so you hurt the economy

more because now people are paying with

their time not being productive members

of society free market can't set prices

because of these price controls and so

what ends up happening when all of a

sudden the economy softens and the

government's like oh we shouldn't be

doing this and they remove the price

controls businesses try to raise prices

again so in the early 70s you had a

massive disaster you literally had more

spending via expanded Social Security

and a war you had the uh these this

removal of wage and price controls now

combined with the fact that you left the

gold standard so you destroyed people's

belief that government could have any

control over

inflation that's really really bad

because it breaks something known as

inflation expectations and inflation

expectations would end up proving to be

something that the FED called into

credibility questions throughout the

rest of the next decade which is a big

problem because if people believe that

the FED has lost control on inflation

and there's basically nothing that can

be done to bring those inflation

expectations back in you end up having

to force a massive recession to reign in

inflation again that ends up being what

happened in the early 80s but the first

wave again Vietnam War Social Security

inflation goes from about 1.6 percent to

6.5 percent in a matter of five years

and then bumps up another 2.3 percent in

just the next three years to 8.8 percent

it's a big deal it's a lot of inflation

and at the same time you started solving

the problem of inflation and inflation

started coming down what you had ended

up having was this reanimation this

right here was caused by the price

controls by the way so here you have

price controls and now all of a sudden

you remove the price controls you

actually let inflation come back because

you've removed the price controls

because you've created a recession now

you're in the second wave of inflation

well what happened in the third wave of

inflation well this gets interesting see

the third wave of inflation because

these price caps were removed you

actually induce something known as a

wage price spiral and that's really bad

that's actually what here in 2022 and

2023 the Federal Reserve has been

convinced that they will never allow

happen again because they realized it

led to uncontrollable inflation in the

early 1980s so the point where the

Federal Reserve had to raise rates to 20

percent to rate in upwards of 14 to 15

percent inflation that's because wages

were Rising so quickly increasing the

input costs that businesses businesses

then raise prices but because people

made more money people were willing to

pay those higher prices but then

businesses wanted to preserve their

margin Jensen because prices went up

people started realizing oh crap my

wages are going up businesses are like

crap I need to keep raising wages to

allow my employees to actually survive

so they get paid even more the prices

get raised again because people are able

to afford it so you get the spiraling up

of inflation and that's exactly what you

had during the third wave and one of the

reasons you had that explosion was

because inflation expectations were

completely broken so Carter appointed a

chairman volcker in 1979 and um volcker

was somebody who actually preferred

controlling inflation over low

employment compared to Aaron burns the

prior fed chairperson during the 70s you

actually had a completely different

Theory now you might think this theory

is wild but the theory in the 70s was we

will tolerate more inflation as long as

the economy is growing that is the total

opposite of today it's actually volcker

who started the theory of no no no we

can not tolerate High inflation at all

we must accept higher unemployment to

kill inflation so you had a complete

flip-flop at the FED not just in how

high rates went but also in strategy

Burns was also somebody who communicated

in a way that made him seem like a Nixon

shill that the price controls were

normal and volcker was somebody who's

like no we need to control inflation and

he was very straightforward in his

communication with the public and so

volcker ended up raising rates very

clearly forcing a recession and made it

clear that the Federal Reserve would not

tolerate inflation ever and that the

only way to restore credibility was to

prove that inflation was a number one

priority in fact yesterday I was reading

some of the notes from the 1980s because

you could actually go through the

transcripts from the 1980s and go

through and see what the Federal Reserve

Board of Governors were saying in their

meetings at the time of these crises in

fact take a look at this here's one of

the notes from August 1980 that it was

that I was reading it seems to me

despite our roller coaster ride we have

not dented inflation expectations very

much I think we have a real Groundswell

for an explosive development on the side

of inflation again in spite of all we've

done we haven't laid to rest the

inflation expectations very much this is

literally out of a 90-page document here

I was reading yesterday on page 17 you

see them talk about the pain of not

controlling inflation expectations and

trying to figure out crap things are

about to get worse this is terrible this

is word for word what's said at the fomc

meetings it's really fascinating to read

but how does today compare to the 1970s

because obviously there are some

similarities right some of the

similarities would be hey then we had

the Vietnam War and today we have this

crisis in Ukraine then we had a supply

shock because of uh OPEC we had actually

two oil shocks we had oil shock in 73

and 79 we don't actually have an oil

shock as bad as we did then then oil

quadrupled and doubled today oil prices

are still two-thirds of what they were

in 2008. so if you think there's an oil

shock today it doesn't even compare to

the oil shock that we had in the 70s but

we did have a supply shock thanks to the

pandemic right so you have war and you

have a pandemic and you also have

printing money while inflation is up we

expanded the money supply in the 70s

just like we expanded the money supply

at the beginning of the 2022 era while

inflation was high we were still

printing money

but what are the differences and are the

differences the key here and the answer

in my opinion is absolutely

in the 1970s we faced a wage price

spiral where wages were Rising faster

than inflation and showed no sign of

stopping we do not have that today we do

not have a wage price spiral we also

have the correct monetary stance

inflation over everything we have very

clear communication that inflation is

the number one enemy and we're willing

to suffer unemployment to get inflation

down we have the same stance as volcker

not like the mistakes of the burns

Administration we also had uh have have

a very clear clearly anchored set of

inflation expectations today

and we still today face the structural

deflation of innovation that we've seen

over the last 40 years

and our money supply is shrinking so

when you combine all of those factors

inflation expectations structural

deflation lack of stimulus proper

communication and the proper strategy at

the FED with no wage price spiral you

really can't compare today to the 1970s

so this is one of my beefs with Twitter

even though I started off with having a

like from Elon Musk which makes me just

tinkle inside and get all happy makes me

want to tweet more I have to say Twitter

is the one place to go for Content where

I could look at things that are taken

completely out of context and then make

a 10 minute video on them try to try to

unwind what was the stupidity that was

put together in one damn chart it's a

lot of work this is the kind of stuff I

teach in my courses on building your

wealth link down below this is why I

think it's easy for anybody who watches

me to be actually become a millionaire

investing in real estate and learn about

the psychology of money through the

programs linked down below but bottom

line line out of all of this do I

actually think we're going to face three

waves of inflation again no absolutely

not could I be wrong I look yeah

absolutely am I 100 going right here no

but I will tell you I'll be the first to

flip-flop and let you know that I was

wrong I don't care about being wrong I'm

willing to be wrong and I'm willing to

share my thesis with you but I have to

say I get very frustrated when I see

stuff like this shared on Twitter and

then I compare it to history and I'm

like how could you possibly compare then

to now without addressing all of the

differences but then again that's the

difference in my opinion between the

short tweets you get on Twitter and the

theory uh and sort of the longer

analysis that you can get on YouTube and

as a result I hope you subscribe and

always come back join me either in the

videos when I post them or the meet

Kevin report every morning at some point

before the Market opens thank you so

much for being here going over the

course member livestream now we're going

to do some Fundy analysis so we'll see

you soon thanks bye