Fed JUST Warned on "Unsustainable" Spending, Rates, & Crypto

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Powell 발언을 인용하며 실업률 하락이 곧바로 금리 인상으로 이어지지 않으며, 인플레이션 우려는 단기적이고 금리 인상은 먼 미래라는 입장을 설명. 2008년 위기와 달리 팬데믹 충격은 금융시스템 취약성이 아닌 외생 충격이며 재정·통화정책이 빠르게 대응했다고 평가. 미국 재정은 지속가능하지 않지만 부채 수준 자체는 문제없다고 함. 테이퍼링은 충분한 사전 공지 후 진행될 것이라 함. CBDC·스테이블코인 연구를 우선순위로 두겠다고 함. 진행자는 비트코인을 '투기적이 아닌 변동성 자산'으로 보고 장기 긍정적 견해를 밝힘.

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01. hey everyone me kevin here i went through the entire one hour presentation or well podcast discussion that jerome powell had this morning and i cut this down to the most salient and most important pieces what i'm going to do is i'm going to play those pieces and i'm going to pause to add commentary as necessary and folks there's a lot of juicy stuff in this about the future of the market inflation is the course we're unsustainable in the united states what the heck is happening with stable coins and does that mean anything for cryptocurrencies folks buckle up let's listen to jpow the man with the money printer who by the way also probably would recommend that you get your free 51 dollars by depositing 100 with weeble and 100 with m1 finance you get 30 with m1 finance and 4 free stocks with weeble worth at least 21 and up to 1600 okay folks those links are below let's go listen to jerome we're no longer going to um to raise interest rates just because um for example if unemployment were to be well below again well below our current estimates of the natural rate of unemployment that wouldn't be a reason to raise interest rates unless we see uh troubling inflation or other imbalances that could threaten the achievement of our mandate and that is it that's a significant change if you if you read the transcripts that were released in 2015 there was a lot of discussion of the issue around could we let unemployment go below the natural rate we saw what happened i mean we were the first group on the committee to see a sustained period of very low in uh unemployment um in many years and we saw that it didn't produce troubling inflation and we very much took that on board in other words this is this becomes really important here because there are there's an old train of thought old school thinking and and this used to be true that the lower unemployment goes the faster inflation will go up the reason is if the unemployment rate goes down under let's say three percent well what happens unemployment rate goes below three percent now all of a sudden it's uh companies have to be more competitive to get people employed because there are so few employees available and so they offer those employees more money those employees have more money they get to go spend more money and boom you get more demand for products and services which increases the prices of those products and services which creates inflation and so there's there's this historic sort of belief related it's called the phillips curve by the way we'll hear about that in a moment but there's this belief that the lower unemployment goes the higher on inflation or the higher inflation will run and that that is sort of a natural expectation jerome powell here said no we're not going to raise rates anymore just because inflation is going down or because unemployment is going down rather so if you're worried that hey well what if unemployment goes back to like three percent what if we recover really well in 2021 here are we gonna get rates that automatically get pushed up because of that and jerome's saying no that interest rates are going to be totally disconnected from what unemployment does now yes one of the goals of the fed is to maintain maximum employment but that does not mean once that goal is achieved that interest rates will go up and at the other mandate the price stability mandate may have a lot of power in determining when is the fed going to raise rates we'll learn a lot more about when the fed's going to raise rates and what they're going to tell us about uh and how much notice they're going to give us in this video near term as the pandemic recedes and we see potentially a strong wave of spending as people return to their normal lives and begin consuming various services there could be quite exuberant spending and we could see some upward pressure on prices and by the way that's interesting that they see this here's the price stability aspect he's suggesting as the economy returns to normal we could see an insane amount of demand for products and services remember services are a big thing a lot of people not i mean a lot of people during the pandemic they don't have a house cleaner come anymore if you can afford a house cleaner uh a lot of people don't have as much babysitting anymore right like there's so many things so many types of services that have just kind of been put on hold oh i don't want to move yet so i don't need moving service i don't need a real estate agent that means i don't need escrow that means i don't need title all of these things these serve the service sector is so huge we frequently when we think about inflation we think about products but we got to forget about all the people who who make our society work and he's saying there could be some exuberant spending in the next uh year or two here as the economy goes back to normal at about the same time we'll be seeing measured inflation go up because of base effects as we lap the low readings of of the first of march and april of last year so in fact that's quite possible indeed that is in the forecast of many um many economists but um the real question is how large is that effect going to be and will it be persistent so because clearly a one-time increase in prices that isn't very large is is very unlikely to mean persistently high inflation and that just is a function of the underlying inflation dynamics of the us economy as they have been in the last the last many years as you know we have a we have a flat phillips curve meaning there's there's still a small connection but you need a microscope to find it between slack in the labor market and inflation we've also got low persistence of inflation so that if inflation were to go up for any reason um it doesn't follow inflation doesn't stay up and that it used to be if you go back to when i was an undergrad at princeton you had a steep phillips curve and it was combined with highly persistent inflation and that's what gave you the inflation that i graduated into in 1975 and later later in that decade so dynamics will will change but they don't change we don't think they change you know quickly or on a dime you know and and we'll come back to that i also think let's say that does happen let's say we have a strong economy in the second half of the year and that continues remember we're a long way for maximum employment there's plenty of slack in the labor market unlikely that wage pressures are going to be reaching a level that would create support higher inflation also second the other factor i'd pointed is look around the world shortage of demand in um in lots of large advanced economy countries around the world with who began this crisis at deeply negative interest rates and have had little policy space with interest rates now there are other things they can do and they aren't doing but that all is going to be hang around for a while and you know i'm going to pause there for just a second because there's a lot to unpack here so this almost sounds a little counterintuitive because earlier he was saying that hey we're not going to raise rates when uh you know you know unemployment goes down that is we get closer to maximum employment now he's basically saying the same thing from a different angle though he says look it's it's actually even if there were a concern even if there were a concern that low unemployment aka lots of people having jobs would push prices up even if that were true jerome powell thinks it's going to be a while before we actually see that employment in fact we know based on the summary or the fed summary of economic projections we know that they don't actually think the unemployment rate is going to go down to under four percent until 2023 right here sure we're going to see that large decline here from that six to seven range into that five to maybe even four range by the end of 2021 but he still thinks there's going to be a good amount of slack until 2023 and beyond he's being consistent here but even if unemployment were low he's basically told us hey you know the the relationship between inflation and employment being really really low is like microscopic so aka if you're worried about inflation coming because people are going back to work don't worry about that so much maybe there's more of a concern that we might see inflation in the short term because as people go back and the economy opens up again yeah people might be exuberant and spend like crazy again because they've been cooped up for so freaking long anyway i'll sleep down u.s economy is strongly integrated with with the rest of the world and that's going to matter um i i should add of course if if inflation were to move up in ways that are unwelcome we have the tools for that and we'll use them we will use them no one should doubt that um that's in a way lower low to low inflation is the much more difficult problem to solve the big uptick in defaults that we thought we might see in non-financial corporates we really haven't seen it so um it's it's just not something we are feeling or have ever felt really we we will um when the time comes to raise interest rates uh you know we'll we'll certainly do that and that time by the way is is no time soon we do not have uh a lot of time-varying tools that are where we where we can see a particular situation and you can just quickly pause there and say it's a big statement it says that time is no time soon to raise rates there's a lot of talk that the fed might change their mind and that they might raise the rate sooner because maybe inflation will come and we'll hear more about jerome's inflation expectations here but he's being pretty consistent he's saying no we're not anywhere close to raising rates let's keep going after that situation and the history of those we've had them over history and it hasn't been a good history that it's very difficult uh uh to get the timing right and that sort of thing what we do have is i'm gonna pause quickly and just say what jerome powell here is saying is as the federal reserve with like 2 000 economists working for them they have trouble timing the market and this is a really good unless this is in my opinion a really great lesson if you're thinking about investing into stocks or investing into real estate or whatever the federal reserve here is telling us they suck at timing the market they just respond to the market it's a good lesson to keep in mind when we're thinking about investing because i know there are a lot of folks that might sit on the sidelines and say you know what i'm going to wait for the next crash and i get it it's prudent to have some cash around on the side less margin debt outstanding but keep that in mind even the fed here is saying they can't time the market let's keep listening on through the cycle tools so the idea is we're not going to rely on our ability to put these things in effect at the right time and in the right proportion we don't think we're very good at that we think we think it's better to you know as one of our mutual friends and colleagues likes to say better to build strong levees than try to predict hurricanes great quote better to build strong levees than to try to predict a hurricane it's so funny because there's so many youtube channels that exist right now that are like that's it this is the next spec that's going to the moon and you know if three out of 10 of them hit hey great they're a hero because then they'll only talk about the three that are winning uh personally uh that's fine this content exists i think it's very dangerous i think it's playing roulette i think it's speculative i actually do not think that bitcoin is speculative i think bitcoin is volatile but i do not think bitcoin is speculative but some of these spat companies that have no functioning sales and no functioning product very very scary to me so i really resonate with this quote build strong levees don't try to predict hurricanes this is the stuff that i teach in my courses and specifically when when i talk about investing in companies that we know are going to be here and be strong for the next 10 years maybe you you missed the boat on investing in amazon over the last 10 years that's fine amazon's still a good investment to make it's a relatively safe investment to me in my opinion but golly look at companies like wayfair and etsy that have a fraction of the market cap of amazon yet the attention that is growing on these platforms is out of this world pay attention i prefer etsy over wayfarer but wayfair is definitely in the running too both great companies i've done a complete analysis on both of those you could type that into youtube meet kevin etsy and wayfair and you'll find it all right let's keep going the tick of the decline in in the first and second quarters the covet shock was significantly larger but really the two episodes are just fundamentally different and the most important differences are are not really about size um so if you go back to the global financial crisis in the great recession they resulted from the build up of um unsustainable imbalances in the economy and the forming in the form of a housing bubble that popped and then an undercapitalized banking system amplified that shock rather than absorbing it and and that system ultimately needed to be bailed out by the taxpayers what he's doing here is he's drawing a parallel between 2008 or or responding to a request to draw a parallel between 2008 and the current crisis how different are they really there were also lots of points of failure uh in the non-bank part of the financial system as well and going into the crisis household indebtedness was quite high a lot of it in the form of completely unsupportable mortgages so when the housing bubble popped the housing sector was buried in debt and foreclosures came in and you were in right away and very very slow and painful and long recovery very different situation here the pandemic was effectively a natural disaster right and it struck an economy that was performing well now every economy and certainly our economy faces plenty of longer run challenges but i would say there were no obvious imbalances that threatened the long ongoing expansion you really can't identify something that looked like yeah this if this blows up it could blow up the expansion um the banking sector as i mentioned is was much better pay attention to that for a moment this is so important in 2019 i remember there were so many uh market crash videos about that's right the next market crash it's around the corner nobody was pointing to the potential of obviously a pandemic in fact i i remember talking on youtube about hey just be prepared for a potential black swan right black swan is something that comes out of nowhere which we got the pandemic but in terms of conventional red flags that were showing in the economy in 2019 there weren't that many and if any at all jerome powell feels the same is true right now he doesn't see many red flags now just like he didn't see many red flags then the issue becomes okay well what happens if something totally unexpected happens again like a natural disaster or pandemic you still had a strong banking system you still had a functioning economy let's listen into how he continues here it's very interesting capitalized had much more liquidity a far greater appreciation of its risks uh through thanks to stress testing and such we did see some problems this time in the non-financials not been on bank sector of the financial not the non-bank sector sorry of the financial sector uh but less so than in the gfc um households were in relatively good shape going into after many years of deleveraging corporate leverage was high as i mentioned but we haven't seen really the payoff there in a negative way so there's another energy pointed to this another critical difference is this time both fiscal and monetary authorities responded very quickly and very powerfully and in a sustained way critically it was sustained um and i i would just say this was a this was a particular shock that called for fiscal policy what we can do is we can we can restore market function and and sustain market function and then we can stimulate aggregate demand with highly accommodated monetary policy this situation with 25 30 million people out of work overnight effectively called for fiscal policy more than and and we got it you know in the form of the cares act very very large and very very aka he's drawing this this difference here that the 2008 crisis people were so highly leveraged in real estate whereas in this situation in 2019 people were actually paying down their debt people were becoming less leveraged relative to values corporate debt was a little bit elevated it was higher but it wasn't as dangerous that the types of debts that were outstanding weren't as risky as the type of debt that was outstanding leading into the 2008 recession and of course market crash and so this is where jerome powell is really saying hey in this pandemic hit things happen so fast it really takes congress responding to that and they did with the cares act and we'll go into cryptocurrency and stable coins and inflation a little bit in just one moment here quickly there's no close precedent at all since really since the depression for what happened um and and both reactions were swift and and overpowering so that was a big difference and i think we did learn that we learned come in early and come in hard and and and don't leave until the job is done the last thing i'll say other differences just completely different is the primacy of health care policy the single most important economic policy in this is healthcare policy and this is jerome really taking a step back out of what's happening in the economy by saying hey look the biggest thing that changes this economy right now is people getting vaccinated not monetary or fiscal policy it's getting the pandemic dealt with it's two things it's getting control of the spread of the virus which we have not been able to do with much success yet but it's also developing you know medical innovations for treatment and ultimately vaccination now we're going to talk about the u.s debt there is so much fear that the amount of debt the united states takes on to deficit spend which we're going to get a lot more of when biden unveils his stimulus proposal it's gonna be big it's gonna be probably 1.5 plus trillion dollars let's see what jerome powell's take is on debt relatively soon and the key to that the key thing there is maybe we'll be able to avoid a lot of the a lot of the damage to people's lives but what you know what we call labor market scarring but what it really amounts to is people losing the life they've made in the workforce and that's that's really the thing that we're most focused on is is getting this getting back to a strong labor market quickly enough that people's lives can be can get back to where they want to be because we were in a good place in february of of 2020 and uh we think we can get back there i would say much sooner than we had feared i just would say first of all the u.s is not on a sustainable path at the federal government level in the simple sense that the debt is growing substantially faster than the economy and that means by definition it's unsustainable that's not to say that the level of debt is unsustainable and it's not unsustainable it's far from unsustainable and so i i i think we're a long long way from fiscal dominance uh in the united states if we ever get to that place and it certainly is not a factor that we consider in any way at this time so pausing there okay so you need to know that fiscal dominance means that basically your gdp is growing faster than the debt is and right now jerome powell is saying we're not on a sustainable path with the amount of debt that we have that means our economy is not growing faster than our debt is growing our debt is ballooning and the economy cannot keep pace with this that is very bad but he says the level of debt is not a problem that's because interest rates are low he said that in prior remarks uh and so what we really need to do now is transition to not necessarily being worried about the debt but quickly transitioning to getting the economy firing on all cylinders again so that way the economy is growing faster than the level of debt is growing bottom line debt doesn't matter much right now focus on getting the economy moving but we can't keep this debt going if the economy is going to stay stagnant i public debt in no way impacts monetary policy now we we are squarely focused on serving the public through our new framework to achieve maximum employment and stable prices let me start by agreeing that now is not the time to be talking about exit i think that another lesson of the of the global financial crisis is be careful not to exit too early and by the way don't try not to talk about exit all the time if you're not you know if you're selling that signal because the markets are listening the economy is far from our goals and as i mentioned a couple times we're we're strongly committed to our framework into using our monetary policy tools until the job is well and truly done um and i think the taper tantrum you know as you asked about the taper tantrum it it focus highlights i think this the real sensitivity that markets can have about the path of asset purchases basically here what he's saying is hey taper tantrum is what happened in 2013 and 18 when the market started crashing short term uh because the fed's like all right we're going to stop buying as many bonds jerome powell is like oh no no don't worry we're not going to stop we're going to change anything for the time being because he doesn't want to upset the market he's like markets are very reactive to that um so uh you know we know we need to be very careful in communicating about asset purchases and i'll come back to that in a second um uh a couple of general caveats is we always try to avoid an excessive focus on a particular likely path the most likely or modal path for the economy because monetary policy is only sometimes about the most likely path it's often about how do you conduct risk management to avoid you know downside cases so that's that's a little bit why our guidance on both rates and uh and asset purchases is not time based it's it's outcome based you know it requires the achievement of various uh objectives and and those will those objectives will come when they come rather than when when you know one might mark a calendar should you really can't do that in advance um we but we will of course be very very uh uh transparent as this comes as we get as we get close so i would just say this on the current situation when it does become appropriate for the committee to discuss you know specific dates and that will be when we have clear evidence that we're making progress toward our goals and that we're on track to make substantial further progress toward our goals when that happens and we can see that clearly we'll let the world know we will communicate very clearly clearly to the public and will do so by the way well in advance of active consideration of being beginning a gradual table of paper of asset purchases so that's how we're that's that's good so here he's saying hey look we will let you know well in advance of any changes if we're going to change there's been a lot of speculation and rumor going around that that's it jerome powell he's going to realize inflation is coming he's going to flip he's going to change his opinion sooner especially since we're expecting in march and april because we had such a trough that we bailed out of from last year you know that's going to freak out markets and and so john powell is saying don't worry like we're not going to change anything we're going to have lots of notice i'm gonna do this very slowly last time jerome powell did this he was fast he did this in 2018 he pissed off the market so hardcore the market sold off like 16 percent in 60 days uh real estate market fell like 12 it was ugly um uh on on i'll start let's say something about cbdc so we don't have um okay these are cryptocurrency uh stable coins an explicit plan to do what you articulated but the way since we are the world's reserve currency we actually think we we need to get this right and um and we don't we don't feel an urge or need to be to be first we effectively it means we already have a first mover advantage because we're the we're the reserve currency so and i i think there are um both benefits and potential costs and unresolved questions around cbdc and so we're committed to just so you know the acronym because it might be bothering you it's central bank digital currency and it would be probably maybe a stable coin or something like that they are testing this uh i by the way the more i research about crypto the more i'm interested in it and the more i think that and i've said this i think in this video already before i do not think that bitcoin is speculative volatile but not speculative keep going technology has made this possible and um you know it's effectively uh private sector actors can create the equivalent of digital money we know that in the past when private sector money the public sometimes just thinks of it as money and then at some point they they find out that it's not money and that's that's a really bad thing we we need to avoid so we're going to look at it very very carefully and you know where we and we're investing heavily in understanding the technology and analyzing the policy uh policy questions the many policy questions that come we will also do as we as we go through this process we'll do a great deal of outreach to every constituency that would be interested including you know elected representatives including financial sector participants including as we did with with the monetary policy review the people we serve uh you know to try to understand what are the use cases do we need this how would it help what are the benefits uh and i think all of that will will inform our uh our thinking as we go through it so i think we're we're determined to do this right rather than quickly and it will take some time i think uh it'll take you know measured in years rather than months but i would say since it's possible and private sector is already kind of doing it i think this is something we need to take very very seriously that's big that's big jerome powell here saying that research into stable coins and cryptocurrency technology is a very very high priority and while the united states might not be the first to have a central bank digital currency they will definitely have a first mover advantage since they are the world's currency reserve now whether that means a central bank stablecoin will take over the us dollar at some point uh in the future maybe that's entirely possible will bitcoin take over as the world's currency probably not i i do not see that ever happening because you can't create more bitcoin and come on do you think the printers want to run dry at governments it ain't gonna happen it takes too much control away from governments uh bitcoin will be a very fascinating investment in long run i think a very profitable investment to make but for the time being the more talk we get from central banks considering stable term uh coins or currencies the more we actually legitimize cryptocurrencies the more cryptocurrencies get legitimized well the more bitcoin goes to the moon it's that simple uh and it's it's absolutely incredible because there's still so many people that are absolutely clueless about cryptocurrencies and i consider myself next to clueless i feel like i've i've been on the uh this sort of oh what's it called a mario party circle where i'm in the red circle on mario party the bad one uh and uh that is the clueless about crypto currency circle and i have now moved one stamp off of that but i still have a puzzle a piece or a puzzle ahead of me anyway uh very fascinating comments here from jerome powell gives us some reiterations on his opinions on unemployment's impact on inflation inflation itself the impact of uh you know stimulus and also stable coins and cryptocurrency and some of his thoughts around that very fascinating talk this morning ]