The Recession is ABOUT to HIT | George Gammon.

George gamon thinks we are within months

of a recession striking his reason for

this has to do with the plummeting of

the 2-year treasury yield yesterday I

had the privilege of speaking at one of

his events in Dallas Texas not only did

I have the honor of speaking at the

event but I also had the honor of

interviewing him going on His Rebel

capitalist show and interviewing James

Hartman Ken melroy boy we've got some

amazing interviews dropping so make sure

to subscribe but George gamon's argument

which you'll hear a lot about and fully

explained in the interview that'll drop

between myself and him has to do with

the two-year treasury dropping and what

that is telling us when it drops 25

basis points suddenly out of very little

news when the tenure isn't dropping that

fast is that a sign that the recession

is potentially months away well in this

video I'm going to point out two

segments from the interview that we did

on his show because there are two things

that are virtually opposite to either

what could happen or comparisons to

history which I think are useful for

investors whether you're a bull or a

bear I think the concepts that we're

about to touch on are going to be very

very important for understanding are we

indeed going into a recession that is

just months away so the first segment

I'd like to talk about is this right

here now this segment has to do with the

difference between comparing our supply

chain shortages and the expansion of the

money supply that we've seen today

during covid with war and I want to

touch a little bit on my response here

as well as georg's response and then

we're going to get into a very clear

difference that I found between my

expectations for inflations uh for

inflation and George's and how we could

actually both be in alignment of what

the outcome is very interesting let's

get into it I think it's it's like Lynn

says it's much more like the 1940s where

you've got the supply chain disruptions

and you have the money supply growth as

a result of fiscal and not necessarily

what's going on in the banking yeah I

there there are nuances though in in war

versus pandemics somewhat you have loss

of life in both but interestingly you

probably have much less destruction of

industry in a pandemic than you do after

the war so theoretically those prices

would come back down a lot faster

because the supply chains are able to go

back to as close to normal you're not

retooling so to speak or rebuilding

right in fact instead of

retooling or rebuilding we are just

building so so we're so this is a

reference to war versus pandemics and

it's very important to consider that

look yes we had postor War II inflation

but something that we also had post

World War II was a retooling of

manufacturing remember the thesis of

guns and butter we're going to take

factories and we were going to make

Warheads we're going to make bullets

we're going to make bombs and we're

going to limit the production of goods

that people need at their homes uh and

we were going to use a lot of

Commodities that we could be using to

build homes and instead use them in war

frankly so there

is post pandemic and post-war inflation

generally in both cases uh however your

ability to get rapid deflation or at

least rapid

disinflation statistically is easier

after a pandemic because again in both

cases you lose lives but in a pandemic

you didn't retool the auto manufacturer

into a bomb making facility instead

what's happening in today's economy is

actually virtually the opposite of what

we saw saw after the war which is rather

than having to go from basically this

neet negative place of uh manufacturing

capacity our manufacturing capacity

didn't go down what happened was our

demand went way up right so our

manufacturing capacity stayed the same

well that demand has since come way down

but what's happened to our manufacturing

capacity it's gone way up so let's think

about it very simply let's say you're at

a 0 manufacturing covid Z manufacturing

War zer well Manufacturing in war goes

down 10 and then you add 20 let's say

now you're positive 10 manufacturing

after the war well today think

manufacturing never went down if

anything we've just added a ton of

fiscal spending on top of manufacturing

we've exploded our investments into

manufacturing so we're probably plus 30

to Manufacturing wall demands come down

so in other words we've created this

really like scrunched up rubber band

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I don't have a rubber band handy but I

have this watch handy so I always like

the analogy of of this rubber band of

where like what we've done is we've

created so much extra capacity and

capability for manufacturers to

manufacturer that we could add a lot of

demand and actually fill up those Supply

chains which are now ready and do not

want to miss out on the demand that we

saw in 2021 the next time we go into a

boom cycle so we overproduce

manufacturing and so what happens that

rubber band can fill in and it can still

be very loose unlike the pandemic where

it's like like super stretched and it's

ripping and

breaking so that's one thing that I

think is really important but it also

relates to part two of our discussion uh

in that Rebel capitalist video a lot of

supporters uh uh watch George gamon as

well and George is amazing you know he

he came to testify for me uh in in court

when I was running for governor and how

was trying to fight the system uh for

for uh uh ballot naming so really good

guy uh but anyway listen to this segment

here this is a very interesting one

because it relates to the Baseline that

we just created my ,000 in my savings

account but I'd much prefer to have 5.5

if I buy a three-month treasury so I'm

gonna go ahead and take that savings I'm

going to give it to Janet Young she's

going to give me a treasury that's

paying

5.5% but then what she's going to do is

she's going to take that money and she's

going to spend it as as let's just say

stemi checks yeah so now that money has

gone from zero velocity to a lot to a

lot from savings into checking but yet

M2 has not changed at all velocity

increased therefore all being equal you

would expect consumer prices to go up I

think that in my mind that's the easiest

way

to this is a very simple argument as the

money supply expands inflation up I

actually agree with this in fact listen

to my response but notice where we defer

it's a very

important so that's so your POV is that

we'll sum that and call it easing easing

turns into inflation yeah I think easing

turns into no deflation so okay so it's

it's anti- deflationary that's well the

easing will create inflation but it will

only offset the capitalistic deflation

that's occurring oh okay okay so uh

without that your base case is let's say

we have 2% deflation because of the

advances in technology AI cathywood

stuff yeah exactly and and so but what

you're thinking is that we're going to

have maybe a slight downturn or maybe

the fed's going to get ahead of it or

the government's going to get ahead

let's let's remember it's an election

year yes so they're going to try to get

ahead of it with all of this uh fiscal

spending that's going to go into

checking go from savings into checking

in increasing velocity which outside of

the deflationary pressures would give us

let's say 5% inflation but with the 2%

deflationary pressures due to Ai and all

this stuff we end up at a net at two or

three % CPI which is right around where

yes okay yeah yeah

which so this was a really interesting

back and forth because first of all

usually I I I don't get George in a

place where he's like huh yeah because

like I I I think I think there's a

little bit of a moment there of like huh

there is an argument there right because

ordinarily we look at the yield curve

the inverted yield curve and we're like

okay this is going to guarantee

recession

but the yield curve is also very bizarre

because yes look at the yield curve for

a moment the yield curve here recently

has inverted during recessions uh but

then we look at for example the 81

inversion of the yield curve for 82 uh

and GDP in 81 and 82 stayed positive

this is the percent change from a year

ago and we actually inverted here but

kept GDP substantially positive uh in

both 81 uh and 82 that doesn't mean you

don't have a recession uh but you

certainly don't have this this uh this

crash that you had like in 2008 then

again we've also had positive GDP going

through the dotc bubble which was also

defined as a recession usually those

recessions are driven by Massive

joblessness so you absolutely had a

higher unemployment rate during these

Cycles that's why we had a recession so

it doesn't necessarily mean our GDP has

to go negative we could absolutely go

into into a recession and I actually

think that one thing that could lead us

into a recession is a joblessness

recession but I'll tell you what's weird

about the inverted yield curve is let's

go back into history and look at this

when we go before

1930 we actually pretty much had a

negative yield curve from 1900 to 1930

now there are potential reasons for this

uh that are different from today uh that

is we were on a gold standard back then

our banking system system wasn't as

built out we didn't have a Federal

Reserve dinking with our economy uh we

had limited government spend and and

government intervention of course we

also had uh you know uh a depression and

what's crazy is during the Depression

here what actually happened is you went

from inverted by about 70 basis points

to inverted as low as 300 basis points

so you went from like inverted to even

more inverted but it's really

interesting because we always say oh

yeah absolutely the inverted yield curve

means a recession is coming but but wait

a minute we we were inverted which is

all of the red section here for 30 years

and we didn't have 30 years of recession

in the early 19 uh uh you know hundreds

now of course we had the depression of

21 the depression of the late uh 1920s

uh and then of course we had war and and

there there were a lot of panics don't

get me wrong I mean you had the Panic of

1907 you had the recession that were

like between 02 and 04 1900s you had a

panic between 1910 1911 uh 1913 to 1914

uh and then again you went 6 OR7 years

before you had the war so there were

definitely boom

times uh during the early 1900s where

the yield curve was also

inverted now I don't think that's a

perfect comparison to today though

because well again things are so

structurally different we're probably

much better off looking at the inverted

yield curve more recently but it is

interesting because it kind of makes us

scratch our heads and go huh maybe I

didn't know that the yield curve was

also inverted for 30 years between 1900

and 1930 uh with the exception of a

couple short periods of time so now you

wonder okay so let's let's take a step

back here let's think

about where we sit now we sit in an

economically challenged time what

happens when the Federal Reserve eases

well I ideally you prevent job loss if

job loss has already begun and you've

already started a self-fulfilling cycle

of job loss we're screwed we're in a

recession whether GDP goes negative or

not doesn't matter the unemployment rate

alone will drive us into a recession

rapidly it's a lagging indicator once it

happens it's too late we're screwed and

you do not want this job loss sucks

right now most people think if they lose

their jobs they can find another one

very difficult in a recession

okay now what if the Federal Reserve and

I'm not trying to give them credit but

I'm just saying it's a possibility what

if they realize that they start easing

early because they recognize that Supply

chains are like the crunched up rubber

band and we won't necessarily see

consumer prices go up with easing

remember easing can cause a lower

unemployment rate and it could lead to

more spend more spend does not mean more

inflation if you have companies that are

like please buy more stuff from us if

companies want to grow their revenues

and grow their profits without laying

off people you need more demand you need

the top line to go up you need more

units sold with flat prices not more

units sold at higher prices because if

you raise prices you lose unit volume

which you don't want you want units to

grow and profit to grow how do you get

that units up profit up with an eased

economy now if it's ease too far to

where Supply chains are constrained

again that's when you get prices going

up that's a very capitalistic and normal

environment so my belief is that yes we

can have a situation where uh uh we have

inflation

from easing but it will come from a

negative position it will come from

preventing companies from dropping

prices too rapidly because you drop

prices too rapidly recession or

depression I I know people are

frustrated by this because it's sudden

of like prices have gone up 30% please

let prices come down I agree it's insane

okay I don't want to pay $300 for

freaking lifting

any or the groceries or whatever it is

right but I'm just warning that one of

the ways the system could be manipulated

is that we are basically knocking on the

door of recession companies realize that

they start cutting prices rapidly we

actually walk into deflation before we

get the joblessness the FED eases

pulling us out of any kind of realized

deflation and all of a sudden we're at

2% inflation simply by having printed

our way so to speak or easing the money

supply out of deflation it's a crazy

argument I realize it but it's actually

one that I think is true because if you

think of Jerome Powell we know he does

not want deflation we we know he does

not want joblessness we know he does not

want to reignite inflation that's the

risk factor to this strategy if he

believes well inflation's still at 3% if

we start easing now we're going to go up

from three then you're screwed so it

really depends on where you're measuring

from so the best generally way to

measure is by looking at 3 six and 12

month annualized uh reports of recent

inflationary data because it tells you

where the inflation is today year over

year is much more lagged so when you do

that you actually see a chart like Niki

leak shares over here that inflation is

sitting between 2.5 to

2.7% if it continues on this trend for

the next two inflation reports going

into March and all of a sudden we're at

a flexible average inflation Target of

2% and the FED can begin to ease

remember easing a little bit doesn't

really make that much of a difference

yet uh you could you could actually

follow this curve down and start going

minus 25 - 25 25 and that that line can

still go down they just don't want to

add even more pressure to the economy by

keeping rates high for too long as

inflation spreads down because then your

real level of tightening which is the

difference between the two

expands okay so bottom line out of all

of this the FED can absolutely

cut the FED can also probably cut

rapidly and avoid a joblessness

recession and if we don't get

joblessness in this cycle I think we're

going to avoid a recession will get

inflation back to expectations and we'll

actually be able to look at the inverted

yield curve as something that pulled off

more of a

1982 or a

mid90s than what most people look at the

inverted yield curve likely being able

to pull off and that's because I think

we're sitting here in the aftershocks

kind of like we got hit by an earthquake

and see this blue line here see how

volatile the inverted yield curve is

here we got this volatile earthquake

which was the rapid rising of interest

rates like you saw from Paul vulker and

now we're dealing with sort of the

aftershocks of that and so technically

we could argue we've already had the

recession of the

2019 inverted yield curve so inverted

yield curve of 2019 created all of the

insanity we've had over the last four

years and so we're not saying this time

is different the inverted yield curve is

wrong we're actually saying the inverted

yield curve was right it was just right

already it's already done it's already

been correct uh and then then uh you

know you could go into a 10-year boom

cycle who knows who knows but it is a

consideration uh so we'll see I'd love

to hear your comments on this down below

and we'll see you soon thanks so much

goodbye so remember go check out the

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goes congratulations man you have done

so much people love you people look up

to you Kevin paffrath there financial

analyst and YouTuber meet Kevin always

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