원문 보기
so now inflation is a huge problem see inflation was the government's solution to the problem until inflation has now become the problem and so inflation is going to get much worse forget about what these Central bankers and politicians are saying about their commitment to fight inflation how they're Resolute and how they're determined no matter what to bring the inflation rate back down to 2% that's never going to happen we're going to see 20% inflation before we see 2% inflation and this pretend war against inflation is going to come to an end soon and the central banks are going to surrender and inflation is going to win look we've already seen the First Central Bank capitulate and wave the right white flag and that was the bank of England the bank of England a week or two ago was every bit as committed to fighting inflation as the FED until the inflation fight threatened the financial crisis and then they towered out turned around and they're back to quantitative easing they went from quantitative tightening to open-ended quantitative easing in fact the bank of England said we're going to print as many pounds as we have to we're going to keep on buying guilts we're not going to let interest rates go up they have to let interest rates go up if you want to fight inflation you got to let interest rates go up but the other thing you have to do to fight inflation is to make government spending go down because government spending is the source of that inflation governments are running deficits and the central banks are monetizing those deficits by creating inflation governments are actually funding themselves through inflation when you have a budget deficit you're not getting government for free every nickel that the government spends has to be paid for by the citizens and if they don't pay for it with a tax then how are they paying for it through inflation so when price prices go up that's the tax that you're paying for all these government programs and so if the government wants to get rid of inflation well then it has to get rid of those programs or it has to raise taxes to finance those programs and that's not happening that's not happening anywhere nowhere in the world despite all these governments that claim they want to fight inflation no government is actually doing it nobody is cutting spending in fact in the UK they cut taxes well when you cut taxes you increase the inflation tax so the British were claiming that they wanted to fight inflation while at the same time creating even more of it that is the problem but the same thing is going to happen to the Federal Reserve in the United States you cannot raise interest rates without creating a financial crisis the the financial crisis we had in 2008 was a result of a normalization of interest rates it wasn't simply a subprime problem the reason subprime was the problem was because it was debt people borrowed money and they couldn't pay it back why were they able to borrow the money because it was cheap the FED lowered interest rates to 1% they created a housing bubble housing prices went up people borrowed money against those inflated property values they borrowed money with artificially low interest rates and when interest rates went up property prices went down people didn't want to pay their mortgages you get a financial crisis because now the banks didn't get their money back they loaned all this money out they didn't get it back that was why had a crisis well today we have much more debt than we had in 2008 we had 0% interest rates for almost 10 years think about all the debt that was taken on during those 10 years by not only the government corporations private citizens do you think they can repay that debt when rates normalize of course not and what happens when rates go up asset prices come down it's like the other side of a seesaw the lower interest rates are the more expensive expensive stocks are the more expensive real estate is but as interest rates go up those prices come down because it's all a function of interest rates so if I borrowed a bunch of money to buy a house and now the house goes down I have no equity and my mortgage payments are up I'm I'm mailing in the keys but you have all these companies in America that have been losing money in fact in 2021 it was a record year in America for money losing companies going public now how do all these money losing companies stay in business because the company is supposed to generate a profit to stay in business how do you lose a bunch of money and still stay in business how do you pay your employees how do you pay your rent right how do you do anything well the companies were selling stock to the public they were raising money by selling stock and a lot of companies were borrowing money to pay their expenses Tak it on debt but it was all great when rates were at zero and people were willing to buy buy these overpriced stocks when rates were at zero they're not willing to do it when rates are at 4% and in order to fight inflation they got to go much higher than 4% despite the rate increases federal funds rate in the United States right now is about 3 and a/4 to 3 and a half% inflation even the way the government measures it is 8 and 1/4% that's -5% real interest rates you're not going to fight in inflation with NE 5% rates you're going to create more inflation the only way that you can fight inflation with higher interest rates is if the interest rate is higher than the inflation rate and it can't just be a little bit higher it's got to be meaningfully higher in 1981 when Paul vulker raised interest rates or allowed interest rates to go up short-term rates went to 21% the highest inflation got was 13 12 so that's what it took people had real interest rates the reason you need that is because you've got to stop people from spending money that's what's the demand it's spending you've got to get people to stop spending and start saving because that accomplishes two things it reduces demand but it increases Supply how does it increase Supply well when you spend money I mean when you save money and you don't spend it that money can Finance capital investment that will lead to more production of goods and so you increase the supply of goods while decreasing demand for goods prices can come down or stop going up that's what you need to do now if interest rates are negative that is not going to encourage anybody to save if NE rates are Nega 5% you're going to lose 5% a year on any money you save why the hell would you save you wouldn't you're going to spend your money as quickly as you get it you're not going to save it and lose 5% a year now if the the Federal Reserve raise interest rates up to let's say 10% or 15% then you might save your money hell I could put my money in the bank and earn 15% I'm not going to spend it even if inflation is 8% I'm still 7% ahead I'm going to save my money I'm going to earn all that interest I'm going to spend my money in the future because then I'm going to be able to spend the interest that I earned on my money that's what the Federal Reserve needs to do but they're not doing that also we are running $2 trillion a year deficits in the United States where's the money coming from it's coming from the Federal Reserve or it was there's no other source because if the Federal Reserve isn't going to print all that money then the private sector is going to have to buy all those treasuries but the private sector doesn't want those treasuries foreign central banks don't want those treasuries they want they need to sell the treasuries they've already got they don't need to buy anymore there is no way to finance these deficits so the government has to cut spending but they haven't cut any spending in fact if you look at the inflation reduction act that was a spending bill they increased spending to fight inflation how are you supposed to do that it's the spending that is the source of the inflation because the spending is being monetized by the central bank so instead of fighting inflation they created additional inflation instead of putting out the fire they poured gasoline on the fire and just pretended that they were going to put it yeah but everything we're doing we just were forgiving student loans in fact we told people that have student loans you don't have to pay those loans just go out and spend the money on other stuff buy more Goods buy more services push the prices even higher you see this the Federal Reserve and other central banks are at an inflection point they're really in a situation where they're between a rock and a hard place and they're damned if they do and they're damned if they don't because for years they they were able to Kick the Can down the road by creating inflation and sweeping the problem under the rug but now that inflation has become the problem they can't solve the inflation Problem by creating more inflation because the solution to every problem has been inflation the economy is weak print money lower interest rates companies are failing let's bail them out how do we pay for that print money create inflation so inflation has been kind of the one trick pony it's been a cure all whatever alss us just inflation is going to be the Cure well now that inflation is the disease where's the Cure there is none any more stimulus and we end up with an overdose and that is where we are right now and what's keeping everything going the reason that we haven't already seen a collapse in the bond market or collapse in the value of the US dollar the reason we've had a rally in the dollar is because the world is still are still has faith in the Federal Reserve the world still believes that the Federal Reserve is serious about bringing inflation back down to 2% and that it has the ability to bring inflation back down but it doesn't remember it was the Federal Reserve back in 2008 or 27 that said not to worry about the subprime market it was contained of course we saw how contained that was but even before the subprime problems they told us there were no problems they said there wasn't a real estate bu and they said even if the real estate prices went down it wouldn't hurt the economy because it was so strong so the FED has a very bad track record and more recently with respect to inflation first the Federal Reserve said we didn't have enough inflation then when inflation got to 2% they said oh well we need to have it a little bit higher than 2% to make up for all the years that it was a little bit below 2% and then when it got much higher than 2% they said don't worry about it it's transitory it's all going to go away out on its own and they said that for a year as inflation got worse and worse and worse until they finally admitted that it wasn't transitory and so now they're claiming that they're going to solve the problem but that's another lie it's just like the transitory lie they knew inflation wasn't transitory so why didn't they admit it because they couldn't fight it because they knew that fighting inflation would crash the house of cards that was built on a foundation of inflation everything the Federal Reserve has done has been to artificially prop up an overly leveraged economy well the minute they try to fight inflation they knock out those props and everything comes collapsing down that's why they pretended it was transitory because they didn't have the guts to do something about it it was only when the problem became such a big political uh uh you know H poat and everybody was worried about inflation that the Federal Reserve finally said okay we're you know we're going to do something about riging inflation but they don't have the ability to actually live up to those commitments now they can pretend and they can hope that inflation just goes back down to 2% all by itself because they're talking about how committed they are to bringing it down but they can't do it without creating a financial crisis in fact the rate hikes that they've already delivered even if there's nothing else behind it will create a financial crisis it's just a question of how much time see they already happened in the UK okay or would have happened and we're very close to that point now
Comments 0