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hey guys what's up this is Tom Nash and on the screen right now you have a clip I'm about to play You by Muhammad alerian and he just said the FED should keep focusing on inflation even with economy wicking in really fast now it sounds like a boring economic discussion but trust me this is critical stuff this is literally do or die for the economy and the choice he's talking about is not trivial in fact making the wrong choice is literally going to be like cutting the wrong wire in one of the MacGyver movies it can lead to a disaster so I'm gonna actually take what he said here and strip away all this corporate talk and caveats and being careful I'm going to tell you exactly what it means because what he just said is mind-blowingly important so first of all let's play the clip and then I'll tell you what I think he meant which does it choose so I think we are back in that World um where every number is going to matter and there's quite a few numbers before the FED meets again in September um what's the fact going to choose I hope it focuses on getting the inflation Genie back into the bottle look I think the worst outcome is that next year we are in recession and inflation has proven very sticky that is the worst outcome so I don't think the FED can take its eye off the ball right now in terms of bringing inflation down otherwise it's going to be a double whammy that's going to be very difficult to get out of oh hey Muhammad did you hear uh Powell yesterday shut the door on my question about how you react to a recession he just didn't answer it at all yeah not just yours other questions too same thing we all got shut out on that one okay so beyond the drum Paul criticism I want to explain to you what he said here but first of all let me tell you a story so when I was a kid I had a friend in school and this friend always pleased everybody he never wanted to get anybody annoyed he always tried to be okay with every single person now you know what ended up happening this guy was miserable he was depressed he wasn't happy but mainly it ended up with everybody freaking hating him because he tried so hard to please everybody he pleased no one this is exactly what Mr allerian is talking about now we had two consecutive quarters of negative GDP negative 1.6 in the first quarter negative 0.9 in the second quarter now we can debate about whether this is a recession a technical recession a real recession it does not matter now look what matters here is that by definition we're looking at a Slowdown in the economy whether you want to call it a recession or a Slowdown is absolutely irrelevant it's an academic discussion I have zero interest in engaging in now if we have a Slowdown economy it's definitely coming from inflation we know it we've seen it look at the Target financials look at the Walmart financials the Walmart financials are literally right here in here basically telling you the same thing look people are spending less money on things they absolutely do not want to have as far as a necessity right they need gasoline they need shelter they need food everything else is not a priority so basically Walmart is saying the same thing Target was saying in their financials hey we're gonna make cheaper apparel electronics are going to be much much cheaper because otherwise we go out of business that means our margins are going to go down that means people will lose their jobs that means those people will have less money to spend and it's going to be a snowball effect of basically putting the economy into recession also collapsing the job market now look the reason I'm telling you this is because what alarion is actually alluding to is that people might use this argument to say well look Tom or Muhammad in this case natural decline of the economy due to inflation which is what we're seeing right now is going to kill demand and that is why we absolutely do not have to increase rates and suck the money out of the market we can just let the recession that's going to happen because inflation is going to hurt the economy kill demand for us and just basically sit tight wait for this to happen and then problem solved right wrong this is exactly what Muhammad alien is saying and 100 agree with him it just he has to be a little bit in Corporal tokland I can actually speak more freely but this is exactly what he's saying we absolutely cannot depend on this natural cannibalization of inflation by every stationary Market it's not going to be enough now we absolutely have to have money sucked out of the system which means coordinated quantitative tightening and also I mean look he's saying here and I'm gonna say it again like interest rates are nowhere near neutral I think he said it in a different clip more interest rate hikes is absolutely a must because we're not even close to even neutral not even talking about offensive so more hikes more aggressive approach even with the economy seemingly putting itself into recession now look what he's saying here the M clip listen to the end the end was super important he actually said something that should be a major warning to everybody he said look guys if we do not hit it hard right now what we're going to end up with is basically a market with massive amount of inflation and the recession at least let's kill inflation right now before we end up in a stagflationary market basically the job market will be destroyed recession is going to be rampant and inflation is going to be high we're going to go back to the 70s at least let's make hard decision right now before it's too late before the decision making option is taking away from us and I 100 agree with him I think the FED has to be aggressive despite this slowdown in the economy and in this case you can look at all the retail investors right now they're all looking at the same thing all these providers like Target like Walmart which we covered they're all talking about the same pain people aren't spending as much but if you look at what Muhammad learning is saying that's not going to be enough to stop inflation the FED cannot sit on the fence and just hope that the problem takes care of itself that's never a good recipe let me know below if you agree with him or me if you disagree as always this is not obviously Financial advice no not a financial advisor I'm just here to share my opinion with you which you can agree or disagree with in fact I would love to have a discussion with you in the comment section about what we just talked about especially if you disagree with me and you know go back to my previous videos you'll see I enjoy debating with people who don't agree with me that's fine don't be afraid to leave a comment see you in the next video and have a great weekend
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