Speaker 1: The Federal Reserve just came out with its latest announcement
Speaker 1: that holds the keys to your financial future. Jerome Powell
Speaker 1: had his big meeting and understanding what he said, holds
Speaker 1: the keys to determine if your business will survive or thrive,
Speaker 1: if your job will pay you more or you'll be
Speaker 1: on the unemployment line, and ultimately, what's your assets, your
Speaker 1: home price, and your retirement looks like in the long run.
Speaker 1: It's pretty insane when you think about what is going on.
Speaker 1: But this is the world that we live in now.
Speaker 1: Before I dig into that, if you just tune in,
Speaker 1: you're listening to the Mark Moss Show. I talk about
Speaker 1: the way the world is changing, breaking apart into globe deglobalization,
Speaker 1: and we look at it through the lens of politics, finance,
Speaker 1: and technology. Today we're looking at mostly the financial side,
Speaker 1: maybe a little bit of the political decisioning as to
Speaker 1: what is driving this financial movement. And unfortunately, we're forced
Speaker 1: to understand this, We're forced to pay attention, and we're
Speaker 1: forced to take action on this, or we can choose
Speaker 1: to put our head in the stand and ignore it. However,
Speaker 1: say that an ostrich can put its head in the sand.
Speaker 1: But it doesn't keep it from being eaten. One of
Speaker 1: my favorite authors, Ian Ran would say that you can
Speaker 1: choose to ignore reality, but you can't ignore the consequences
Speaker 1: of reality. Now, my story goes that, you know, I
Speaker 1: got out of high school, I started buying bank owned
Speaker 1: properties right off the bat, fixed and flipped a bunch
Speaker 1: of properties, built up a whole bunch of properties, sold
Speaker 1: a couple of businesses, and I was basically retired. And
Speaker 1: then two thousand and eight came and wiped me out.
Speaker 1: And part of the reason why is I was so
Speaker 1: focused on making money. I was really good at building
Speaker 1: businesses and exits and making money that way. But I
Speaker 1: wasn't paying attention to the business cycle, the debt cycles,
Speaker 1: and what the Federal Reserve was doing. It wasn't even
Speaker 1: on my radar. I didn't know about the Federal Reserve.
Speaker 1: I didn't I knew about it. I didn't think about it.
Speaker 1: But unfortunately, my head was in the sand, and unfortunately
Speaker 1: the games that Wall Street played with the Federal Reserve
Speaker 1: did pumping up the housing market. The games that Wall
Speaker 1: Street played had an effect on my life. They hate
Speaker 1: me even though my head was in the sand, and
Speaker 1: so I've sort of made it my mission ever since
Speaker 1: then to understand first of all, what was going on.
Speaker 1: And for the last five six years now, I've been
Speaker 1: talking to you about what is going on so you
Speaker 1: don't suffer the same fate that I did. And so
Speaker 1: we have to look at this. Shout out to Ron
Speaker 1: Paul who sort of led the charge on in the FED,
Speaker 1: in the FED and the FED that put a lot
Speaker 1: of attention on the FED. And here we are looking
Speaker 1: and talking about the FED. So I'm going to break
Speaker 1: down what the FED just did and it sort of
Speaker 1: sent the markets into a little bit of a tail spin,
Speaker 1: although they appear to be coming out of it now.
Speaker 1: But I want to talk about, regardless of what happens
Speaker 1: this month or next month, we understand what is going
Speaker 1: to happen because there's such thing as true constraints. I'm
Speaker 1: going to break down what these true constraints are. Why
Speaker 1: there's a there's a wall, there's a wall they can't
Speaker 1: get through. Now, there's some limited flexibility within those walls,
Speaker 1: which is where we see them operating today, but the
Speaker 1: walls are there. We're gonna break down that, and then
Speaker 1: we're going to talk about why the Federal Reserve and
Speaker 1: the US Treasury are fighting as opposed to working together,
Speaker 1: and ultimately how the Treasury is forcing their hand into
Speaker 1: action in a way they don't want to go. We're
Speaker 1: going to break all that down now to break to
Speaker 1: kind of kick this off, let's just talk about the
Speaker 1: fo MC meeting. That is the meaning where the Jerome
Speaker 1: Palle ahead of the rowerser comes out and basically again
Speaker 1: tells us our fate, sort of like what is that
Speaker 1: Groundhog Day where everybody watches TV. Does he punks the
Speaker 1: Tony phil the groundhog? If he comes out and if
Speaker 1: he sees his shadow one way or the other, it
Speaker 1: tells us spring is coming or spring's delayed or something
Speaker 1: like that. I've never really bought into it too much.
Speaker 1: I remember the movie Groundhog Day, but that's sort of
Speaker 1: what we see. We see Jerome Powell come out, and
Speaker 1: does he see his own shadow? And will we be
Speaker 1: in winter longer than we expected? Will we be in
Speaker 1: a quantitative tightening cycle longer than we expected? Or will
Speaker 1: he bring spring back and go back into a quantitative
Speaker 1: easing cycle, ease monetary policy and allow things to flourish again.
Speaker 1: You can think about the tightening and the easing sort
Speaker 1: of like the winter in the summer. This is the spring, right,
Speaker 1: and so that's sort of what we saw. Now. The
Speaker 1: market has been predicting that we would see six rate cuts,
Speaker 1: the FED lowering rates, making the price of money cheaper
Speaker 1: six times in twenty twenty four. The Federal Reserve Drome
Speaker 1: pal has been saying, no, no, no, no, you guys
Speaker 1: are wrong. It's only going to be three. Now, I
Speaker 1: am saying, what difference does it make if it's three
Speaker 1: or six? What ultimately matters is the total amount of movement,
Speaker 1: Meaning do we get a point and a half of
Speaker 1: movement this year? And if we get a point and
Speaker 1: a half, does it come through three half point moves
Speaker 1: or does it come from six quarter point moves or
Speaker 1: whatever the math is on that, And that doesn't really matter, right,
Speaker 1: it's the overall size of the move now if they
Speaker 1: move slower, And this is exactly what happened in the
Speaker 1: media esterday, Jerome Palace sort of came out and he
Speaker 1: did what we call FED speak or what we call
Speaker 1: jab owning the market through talking, he's influencing, he's moving
Speaker 1: the markets based off of this, and so he's saying
Speaker 1: we're going to do less. The market is saying we're
Speaker 1: going to do more, and after being very dubvish, meaning
Speaker 1: sort of signaling that they're going to be easy in
Speaker 1: monetary policy. In December, the markets have been taking off.
Speaker 1: The real estate market took off, the stock markets are
Speaker 1: doing good, bitcoins holding up, oil, all of these things.
Speaker 1: Gold is doing great. And I think the market started
Speaker 1: getting too far ahead of itself. And so Jerome Powell again,
Speaker 1: the job owning isn't always doing something. A lot of
Speaker 1: times it's just saying something. We can look back to
Speaker 1: October when they really talk the market down. So they
Speaker 1: started talking about how they've done enough, how they're going
Speaker 1: to start easing, and just off of that talk, it
Speaker 1: pushed the market into rally into the end of the year.
Speaker 1: Then the markets started getting too far ahead of itself.
Speaker 1: Too much asset price inflation. People are spending too much money,
Speaker 1: as known as the wealth effect. Right when your house
Speaker 1: goes up in value, when your stock account, your retirement
Speaker 1: account goes up in value, you feel more wealthy, you
Speaker 1: feel more optimistic about your future. When that happens, you
Speaker 1: spend more money, You go out to the nery book davocation. Likewise,
Speaker 1: the opposite happens. When your house loses value, your stocks
Speaker 1: lose value, things like that, you feel more broke. Even
Speaker 1: though you don't need that money for decades, potentially, you
Speaker 1: still feel more broke. You still feel more pessimistic, and
Speaker 1: then you naturally spend less money. And so the FED
Speaker 1: has been trying to fight inflation, and so they're trying
Speaker 1: to control us and not allow us to spend too
Speaker 1: much money to push inflation up. But at the same
Speaker 1: time they're trying to walk this thin line of not
Speaker 1: crashing the market. So that's where they're operating. These are
Speaker 1: the constraints they're operating between one not letting the over
Speaker 1: exuberance and people driving the market back up, but at
Speaker 1: the same time not pessimism and then pushing the market
Speaker 1: back down. Pushing the market down would be deflation at
Speaker 1: price going up are inflation. That's the battle lines. These
Speaker 1: are the walls that they're playing within. The problem is
Speaker 1: they have natural constraints, and the natural constraints are really
Speaker 1: lined out between the battle that's being fought right now, Wager,
Speaker 1: the war that's being fought between Janet Yellen at the
Speaker 1: US Treasury and Rome Power at the Federal reserve. I've
Speaker 1: talked about this extensively on my main YouTube channel, Mark Moss.
Speaker 1: If you watch that. If you don't watch it, video
Speaker 1: should go check it out Mark Moss. You can just
Speaker 1: search Mark Moss. FED in the Treasury fighting each other.
Speaker 1: But this is all playing out right now. I want
Speaker 1: to lay out sort of what these true constraints are
Speaker 1: so you can sort of understand this. Then we're going
Speaker 1: to talk about how the Treasury is forcing the Fed
Speaker 1: into action that they don't want. Before we talk about
Speaker 1: forcing their action, let's just talk about what these true
Speaker 1: constraints are. So we've heard a lot as the FED
Speaker 1: went on the fastest rate hiking cycle in history, a
Speaker 1: lot of people would say that, well, they're going to
Speaker 1: raise rates until they break something. So what does that
Speaker 1: mean till they break something? Well, there's lots of things
Speaker 1: that could break. So, for example, as the FED raised
Speaker 1: rates at the fastest rate in history, that made the
Speaker 1: price of money more expensive. It made the bonds or
Speaker 1: the debt worth less, and so we saw banks start collapsing.
Speaker 1: In March of twenty twenty three, we saw three banks
Speaker 1: collapse in a matter of weeks or days. As a
Speaker 1: matter of fact, totally more than the bank collapse in
Speaker 1: two thousand and eight and the FED was forced to
Speaker 1: start easy. Now, technically they stayed in quantitative tightening, although
Speaker 1: they were easing by adding liquidity to the market. Now,
Speaker 1: this is the point that I really want to hit
Speaker 1: on here for a second. Pay attention to this because
Speaker 1: you have to understand the difference of doing something and
Speaker 1: doing something. What do I mean by that? A lot
Speaker 1: of very smart analysts and honestly smarter than I am,
Speaker 1: that understand the inner workings and plumbing of the financial markets,
Speaker 1: which are very complex, way too complex in my opinion,
Speaker 1: they shouldn't be that way. They understand it better. However,
Speaker 1: they get too technical, and I believe they're factually correct,
Speaker 1: but intellectually dishonest. What does that mean? They're factually correct,
Speaker 1: they're going to say, well, look, the markets went up
Speaker 1: and caused inflation, but the FED didn't do anything, meaning
Speaker 1: they didn't lower rates, they didn't inject money, and so
Speaker 1: factually they're correct. Technically, however, it's intellectually dishonest because by
Speaker 1: them saying they were going to do something, by them signaling,
Speaker 1: by them being more dubvish in their comments, that was
Speaker 1: enough to move the market. So technically they're correct. They
Speaker 1: didn't actually do something as far as the policy, but
Speaker 1: they're talking their opinions. Their dubbish sentiment statements were enough
Speaker 1: to move the market. And so you have to understand this.
Speaker 1: Just talking again back to the job on is enough.
Speaker 1: The other reason why it's intellectually dishonest. Well, I gotta
Speaker 1: take a very quick break. I'll tell you whant to
Speaker 1: come back. If you just tune in, you listen to
Speaker 1: the Mark Mass Show talking about the fight between the
Speaker 1: Treasury and the Fed and how it's going to play
Speaker 1: out and what you should be doing about it. Don't
Speaker 1: go away. I'll be back with more a minute. All right,
Speaker 1: welcome back. If you're just tuned innial listening to the
Speaker 1: Mark Mass Show, we're talking about the battle between the
Speaker 1: Fed and the Treasury. I know they're both part of
Speaker 1: the US government, right, they should probably be getting along,
Speaker 1: but they're not. The reason why they're not is because
Speaker 1: they have different agendas. Before we get into what the
Speaker 1: different agendas are, I want to go back to the
Speaker 1: point I was making before the commercial break, which is
Speaker 1: why a lot of these very smart analysts are factually correct,
Speaker 1: technically correct but intellectually dishonest. So he talked about how
Speaker 1: they'll say, well, they didn't do anything. The didn't they
Speaker 1: didn't change rate policy, they didn't increase liquidity, so didn't
Speaker 1: do anything. But just their sentiment, just what they said,
Speaker 1: does it matters a lot, as we saw in October,
Speaker 1: as we just saw just this week, so we can
Speaker 1: see that. The other reason why is because they get
Speaker 1: too technical. So, for example, quantitative easing is when they're
Speaker 1: easing monetary policy, so tight monetary policy loose monetary policy,
Speaker 1: if we think about it like that. The problem is
Speaker 1: these analysts getting too smart for their own good, have
Speaker 1: a very specific technical definition of quantitative easing, and so
Speaker 1: if the Federal Reserve does easing, they inject liquidity through
Speaker 1: other means, they would say, well, that's not technically quantitative easing.
Speaker 1: So for example, when the banks collapsed in March of
Speaker 1: twenty twenty three, they set up a new funding facility
Speaker 1: called BTFP Bank Term Funding Facility. They gave over one
Speaker 1: hundred billion dollars to the market. That was easing. In
Speaker 1: my opinion, it propped up the market. It showed demonstrated
Speaker 1: to the world that the Fed put was active, and
Speaker 1: we saw the markets take off because of that, but
Speaker 1: the analysts are going to say, well that's not QE. Okay,
Speaker 1: you're right, and so the words are starting to lose definition, right,
Speaker 1: and so we're starting to see it. The other reason
Speaker 1: why I think they're wrong is again they don't understand.
Speaker 1: They're so smart on the technical analyst side, they're not
Speaker 1: taking into consideration other elements such as like human psychology,
Speaker 1: human greed and things like that, and those are important
Speaker 1: to understand. When it comes to trying to guess what
Speaker 1: somebody's going to do. You have to look at all
Speaker 1: of the reasons that they have in front of them,
Speaker 1: not just the technical, data driven ones, but you have
Speaker 1: to look at human incentives and things like that. I
Speaker 1: think that's why they're wrong as well. Now back to
Speaker 1: the true constraints. So the problem with the Federal Reserve
Speaker 1: is they're sort of boxed in, right, They're fighting between
Speaker 1: the Treasure and the Fed, and they want to continue
Speaker 1: to raise rates, make money more expensive, to slow down inflation.
Speaker 1: But the problem is as they do that, it starts
Speaker 1: to drag on the economy, starts to you know, it push.
Speaker 1: Their goal is to bring stock prices down, home price
Speaker 1: down things like that. The problem is when that happens
Speaker 1: is that you and I feel less wealthy, but we
Speaker 1: are a little bit less wealthy. So you're not selling
Speaker 1: as many stocks, and there's no capital gain taxes you're paying.
Speaker 1: You're not selling your home, you're not paying capital gains taxes.
Speaker 1: And when you're not paying those taxes, then the government,
Speaker 1: the US Treasury, doesn't receive as much tax revenue. So
Speaker 1: that's problem number one. The income for the government goes down,
Speaker 1: but the government's spending more money. The government needs more
Speaker 1: income to keep up with is high spending, but the
Speaker 1: income goes down, and at the same time, as the
Speaker 1: FED makes the debt more expensive, the Treasury's expenses go
Speaker 1: through the room. So the Treasury's income goes down, we're
Speaker 1: not paying taxes, and then their interest goes up because
Speaker 1: of the rate increases. And so the FED, by trying
Speaker 1: to fight inflation, is actually fighting against what the treasury wants.
Speaker 1: The Treasury needs their income to go up and their
Speaker 1: expenses to go down, which is the opposite of what
Speaker 1: the Treasury is doing. Now. A lot of people might
Speaker 1: say say that the FED is doing this. They will
Speaker 1: agree with me, but they'll say that the FED wins.
Speaker 1: But I would say, again putting my psychologists hat on,
Speaker 1: my human incentive hat back on, if I would, I
Speaker 1: understand the FED wants to regain control, they want to
Speaker 1: regain some legitimacy. They need to show that they can
Speaker 1: stop inflation. However, at what cost. You see, if they
Speaker 1: fight against the Treasury and they end up putting the
Speaker 1: government bankrupt out of business, then the dollar they're trying
Speaker 1: to protect basically falls apart as well. You see, they're
Speaker 1: all operating within these constraints. Now. The FED is losing
Speaker 1: a massive amount of money due to their own policies,
Speaker 1: but they're sort of putting those off of book. They're
Speaker 1: not really seeing those now. Like I said, I've been
Speaker 1: talking about this fight between the FED and the Treasury
Speaker 1: at length, probably over the last year. I've done several
Speaker 1: videos on my main YouTube, chanel Mark Moss about these.
Speaker 1: If you want to get more into that, just go
Speaker 1: to my main YouTube channel, Mark Moss and just search that.
Speaker 1: You'll find a bunch of videos talking about that. But
Speaker 1: what I want to talk about specifically is where we're
Speaker 1: at right now and what the Treasury is doing to
Speaker 1: force the Fed's hand and how this is playing out
Speaker 1: and what we should be doing about it? All right, now,
Speaker 1: the Treasury is in a tough spot. They don't like this.
Speaker 1: As I said, their income went down, their expenses went up.
Speaker 1: As a matter of fact, their expenses. The interest on
Speaker 1: the debt, because now it's more expensive, has now exceeded
Speaker 1: one trillion dollars just an interest alone. Now money is
Speaker 1: just going into the ether, if you will. And to
Speaker 1: think about how incredible it is to put it into
Speaker 1: some sort of numbers, it's now more than what the
Speaker 1: US government spends on its military. And that may not
Speaker 1: mean much to you, but for a frame of reference,
Speaker 1: the US spends more on its military than the next
Speaker 1: ten countries combined. So more than Russia, more than China,
Speaker 1: more than Iran, more than Brazil, more than all of
Speaker 1: them combined. Right, it's not just a big number, it's
Speaker 1: a massive number. And now we're spending more on our
Speaker 1: debt than that. To put it into another frame of reference,
Speaker 1: it took the United States government two hundred and five
Speaker 1: years to get to one trillion dollars in debt. Now
Speaker 1: we're thirty five trillion dollars in debt. But just the
Speaker 1: interest on the debt just the interest alone is more
Speaker 1: than what it took the government two hundred and five
Speaker 1: years to accumulate. It's amazing. So this is where the
Speaker 1: government is. They have to get this interest right down.
Speaker 1: That is the battle that we have. The FED needs
Speaker 1: raids up. They need them higher for longer to cool
Speaker 1: the market, to tame price and asset inflation, so they
Speaker 1: can regain the world's confidence. Right They've been in this
Speaker 1: tightening stance for over two years. But the Treasury they
Speaker 1: need the Fed to raise rates or lower rates back down.
Speaker 1: They want the Fed to switch back to easing, and
Speaker 1: they want it for two reasons right right, One they
Speaker 1: want to get the market's economy going so tax refeats
Speaker 1: go back up, and two they need the interest rate
Speaker 1: to go back down. Now, as this plays out, I
Speaker 1: believe they are forcing the Fed's hands. I believe this's
Speaker 1: actually they've taken over the last couple months that as
Speaker 1: much as Jerome Power wants to do job owned the
Speaker 1: market to cool down, it's not gonna cool down. We
Speaker 1: already know what's coming. If you're paying attention to this,
Speaker 1: I'm gonna tell you more. But I also want to
Speaker 1: let you know that next week I have a live
Speaker 1: event that I'm doing. It's not gonna be here pre recorded,
Speaker 1: It's gonna be live, and I'm gonna show you how
Speaker 1: to seize the upside of the Fed's you turn that's
Speaker 1: coming this year while side stepping market volatility. You can
Speaker 1: join me live. I have about thirty five slides. I'm
Speaker 1: gonna show you ish thirty five ISH and I'm gonna
Speaker 1: do all live Q and A. So if you have
Speaker 1: questions about this, you can ask me. Go dot one,
Speaker 1: Markmoss dot com, slash you turn again. That's go dot one,
Speaker 1: Markmoss dot com, slash U turn. But getting back in
Speaker 1: to sort of frame this up, like I said, we
Speaker 1: know the Fed's gonna pivot. Is it gonna be three
Speaker 1: times or six times? We don't know. But Jerome Power
Speaker 1: just kind of came out and said, oh, we're gonna
Speaker 1: drag our feet little bit. We're gonna try to push
Speaker 1: out from March until May. They say they want to
Speaker 1: push out as far as it can be pushed out.
Speaker 1: And so Jane Allen and the Treasury is like, Nope,
Speaker 1: that's not gonna work for us. We need it much sooner.
Speaker 1: We have all this debt that we need to refinance.
Speaker 1: We need rates to come down, and so we're going
Speaker 1: to have to force you into action. Now. Depending on
Speaker 1: who wins this policy battle, there's going to be very
Speaker 1: different outcomes for the economy, for the market, for our portfolios,
Speaker 1: and all of that. But if we want to dive
Speaker 1: into what the Treasury is doing right now, and we're
Speaker 1: and we can see what's going on in the market,
Speaker 1: so it makes better sense to you. We can see
Speaker 1: that historically, when the Treasury issues debt, right, they sell
Speaker 1: bonds to issue debt, on average, about twenty percent of
Speaker 1: the money raise comes from the sale of short term
Speaker 1: debt or less than one year's maturity. Those are what
Speaker 1: we call bills. The other eighty percent of the debt
Speaker 1: they sell are in longer term notes and bonds because
Speaker 1: notes and bonds carry interest rate or what we call
Speaker 1: duration risk, whereas the shorter term maturity bills they generally don't,
Speaker 1: So that way their effects on marketing the economy they
Speaker 1: differ substantially. Right, if I borrow money for longer, you
Speaker 1: want some more return. If I borrow twenty bucks off tomorrow,
Speaker 1: you don't really care. If you're just tune in, you're
Speaker 1: listening to the Marcomas Show. We're talking about the battle
Speaker 1: between the Fed and the Treasury, and we're going to
Speaker 1: talk about how this is going to play out in
Speaker 1: twenty twenty four, how the Treasury is forcing the Fed's hand.
Speaker 1: But I'm gonna take a very quick break, but I'm
Speaker 1: going to be right back. You don't want to miss
Speaker 1: what's coming up next, so don't go away. I'll be
Speaker 1: right back. All right, Welcome back. If you just tune in,
Speaker 1: you're listening to the Mark Mass Show. We're talking about
Speaker 1: the battle between the Treasury, the US Treasury with Janet
Speaker 1: Ellen and the Federal Reserve and Jerome Powell, and how
Speaker 1: that's going to affect markets this year in twenty twenty four. Now,
Speaker 1: I was talking about how the Treasury is taking action
Speaker 1: to force the Fed hand. The Fed is the Treasury
Speaker 1: needs policy to ease, They need rates to come back down.
Speaker 1: The Fed wants to keep them higher for longer. Jerome
Speaker 1: Powell just had their meeting and he said that we're
Speaker 1: going to keep them higher for longer than most people want.
Speaker 1: And Janet Allen's like, uh no, you're not. I'm going
Speaker 1: to force you into action. So how is she doing that? Well?
Speaker 1: I was saying, as they issue debt, they have to
Speaker 1: sell bonds, bonds, bills, notes. Twenty percent is short term,
Speaker 1: eighty percent is long term. That's historically, But what we're
Speaker 1: seeing right now, if we dig into the bond market,
Speaker 1: we can see that instead of historically the eighty twenty
Speaker 1: net issuance on the short term bill side, in twenty
Speaker 1: twenty three we saw a net issuance of almost two
Speaker 1: trillion dollars in bills and negative net issuance in the
Speaker 1: longer dated notes. So what does that mean. What that
Speaker 1: means is that more notes were redeemed in dollar terms
Speaker 1: than they were issued. And as far as I know,
Speaker 1: we haven't seen negative net issuance in notes since the
Speaker 1: Clinton era surpluses. It's been a long time. And it's
Speaker 1: not just that they're easing up on the note issuances.
Speaker 1: What they've done is they've brought it down to negative.
Speaker 1: And the key pieces right here is that they're front
Speaker 1: loading everything they can into short term bills. So normally
Speaker 1: they sell on the long end, right now they're selling
Speaker 1: on the short end. Now, if you look at some charts,
Speaker 1: you can see just how extreme this is. But they
Speaker 1: are really loading this in now again to catch you up.
Speaker 1: Bills are short term paper, so that's typically you know,
Speaker 1: less than a year. Notes are longer dated two years
Speaker 1: to ten years. Right now, I've talked about this, you
Speaker 1: probably heard me. Many people, include myself, have thought that
Speaker 1: the Treasury had no choice but to issue all these
Speaker 1: bills on this short side because interest rates were so high,
Speaker 1: and they were pushed up and they were held high
Speaker 1: by the Fed, and the Treasury didn't want to lock
Speaker 1: in that debt long term, right, so we just had
Speaker 1: you know, zero percent one percent rates. And I thought
Speaker 1: the Treasury should have locked all that long term dead
Speaker 1: in at zero percent, Like why didn't they now it's
Speaker 1: at five percent. They don't want to lock it in
Speaker 1: for thirty years or ten years at those levels. And
Speaker 1: so I thought Janet Yellen was like the worst trader
Speaker 1: in history. We have all these homeowners like myself locked
Speaker 1: in some mortgages thirty year mortgages in the three percent range.
Speaker 1: You have all these corporations who locked in long term
Speaker 1: corporate debt at these rates. But yet Yellen, who probably
Speaker 1: knew more than anybody had insider information, didn't lock in
Speaker 1: the government at those rates. So I thought that was
Speaker 1: a pretty big mistake. But now that I'm looking at
Speaker 1: this from a different lens, it looks like what's happening
Speaker 1: is she's loading it all on the short term rate
Speaker 1: to force the Fed's hands. It looks like it's deliberate
Speaker 1: by yelling and the Treasury to fight against FED policy
Speaker 1: and then ultimately force them into taking action the action
Speaker 1: they don't want to do. Now, there was an article
Speaker 1: I was just reading by Steven Moran. He's from the
Speaker 1: Manhattan Institute. He's a former senior advisor at the US Treasury,
Speaker 1: just in twenty twenty one, so he's pretty in tune
Speaker 1: with the inner workings over there. He said that quote,
Speaker 1: the Treasury Department has offset QT quantitative tightening by increasing
Speaker 1: the share of total issuance for bills far beyond the norm.
Speaker 1: That's what I'm saying, right. Traditionally there's more on the
Speaker 1: back end. Now they're doing it much more on the
Speaker 1: short end. He goes on to say the increased duration
Speaker 1: risk that QT quantitative tightening supplies to the market has
Speaker 1: been nullified by the reduced duration risks supplied to the
Speaker 1: market by changes to the Treasury's issue, it's profile and
Speaker 1: political actors at the Treasury have managed to run rough
Speaker 1: shod over the stance of monetary policy end quote. So
Speaker 1: he said it right there, he said, the Treasury is
Speaker 1: running rough shod. I don't know if you know what
Speaker 1: that word means. I had to look it up. I'm
Speaker 1: just kidding. But in normal like non FED speak, basically
Speaker 1: what that means is the Treasury is having their way
Speaker 1: with the Fed. Right, it means that the Treasury is
Speaker 1: forcing their will on the FED. They're forcing their own
Speaker 1: agenda on the FED. So a lot of people think
Speaker 1: the Fed's going to win. As I kind of laid
Speaker 1: out before I even went into this, them winning means
Speaker 1: the government loses. That's probably not going to work out.
Speaker 1: And as we can see right now, it looks like
Speaker 1: the Treasury is having their way. So how exactly does
Speaker 1: it do this? What's the mechanism there? So what happens
Speaker 1: is by issuing so many short term bills, the Treasury
Speaker 1: is effectively printing money. Now, the FED is in quantitative tightening,
Speaker 1: they're trying to tighten the money supply, but the Treasury
Speaker 1: is effectively printing money by doing this, which counteracts them.
Speaker 1: In the article that I was just read, and Stephan
Speaker 1: ron is saying that Janet Yellen is draining the reverse
Speaker 1: repo facility on purpose, so the Fed is forced to
Speaker 1: stop quantitative tightening. He says, quote, by increasing the bill issuance,
Speaker 1: the Treasury ensures the RRP drains more quickly. By keeping
Speaker 1: bill issuance high, the Treasury is able to not only
Speaker 1: to counteract quantitative tightening performed by the Fed, but also
Speaker 1: is the key piece, but also to force the Fed
Speaker 1: to taper QT or to shut it down. This is
Speaker 1: an abomination monetary policy under the control of fiscal authorities.
Speaker 1: H That's what he said. So let's think about that
Speaker 1: for a minute. Now, you hear a lot of people,
Speaker 1: will probably other analysts on TV, on YouTube, et cetera,
Speaker 1: talking about the reverse repo window. Now, the reverse repo
Speaker 1: is where banks put money with the FED and it
Speaker 1: goes to overnight settlement. And we saw that number explode
Speaker 1: after the pandemic, and now it's being drained. A lot
Speaker 1: of people you'll find no shorts of people saying that
Speaker 1: as this gets drained, it's a big problem. And once
Speaker 1: it hits zero or close to that, back to normal
Speaker 1: means it's going to be a big problem. And the
Speaker 1: whole thing is going to come crashing down. That's what
Speaker 1: they'll say. However, basically, what this article from Steve Mourana
Speaker 1: is saying a Treasury person, he's saying that they're draining
Speaker 1: the RRP on purpose, and the reason they want to
Speaker 1: drain it on purpose is so that the Fed is
Speaker 1: forced into easy and back into the market again. Now,
Speaker 1: why would Yellen try to force the Fed back into
Speaker 1: quantitay easing from a tightening position. It's a good question. Now,
Speaker 1: before I answer that, let's look at the Fed's dilemma.
Speaker 1: Why would the Fed not want to do that? Why
Speaker 1: would it be a disact? Why do they have to
Speaker 1: be forced into it? Why don't they just adopt it? Right? Well,
Speaker 1: it's because the Fed has a dual mandate. Now they
Speaker 1: probably have a third mandate, but they have a dual
Speaker 1: mandate one stable prices, two full employment. Now, if we
Speaker 1: look at the stable prices side, how stable have prices been?
Speaker 1: It looks like the price of everything went up by
Speaker 1: about fifty per Now prices are coming back down on
Speaker 1: certain things. They're anything but stable. Their goal is two
Speaker 1: percent price inflation. So even though inflation is stepped, it's
Speaker 1: still in our purchasing power still in our life, if
Speaker 1: you will. At least, if it's at two percent, it's
Speaker 1: predictable as much as they're going up. The problem is
Speaker 1: when it goes from zero percent to negative percent to
Speaker 1: nine percent like we saw, then it drops all the
Speaker 1: way back down to two or three, and that's anything
Speaker 1: but stable. And when it's not stable, how do we
Speaker 1: plan our lives? And more importantly, how do we plan
Speaker 1: our businesses? Do I buy supplies now and lock in
Speaker 1: the prices now or do I wait till later, like
Speaker 1: when during the pandemic, like lumber shot through the roof,
Speaker 1: Oh my gosh, is it going to keep going higher?
Speaker 1: Or should I lock it in right now? When everything
Speaker 1: is shooting higher, people are rushing out to buy things,
Speaker 1: and so they obviously didn't keep things stable, say the least,
Speaker 1: then they have the full employment right, and so we
Speaker 1: can see that that inflation wrecking ball messes up a
Speaker 1: lot of things, messes up the way businesses can operate,
Speaker 1: and mess up the way the economy works, and more
Speaker 1: importantly makes the FED look horrible, because again they have
Speaker 1: a mandate. If they can't achieve their goals they want
Speaker 1: to achieve, then what do we have them for anyway.
Speaker 1: They you know, let's let's look at some of their truck.
Speaker 1: They told us that inflation wasn't a problem. They couldn't
Speaker 1: get inflation. We can't get enough. We're gonna keep going, going, going,
Speaker 1: he said, Joe, and prose, we're gonna let it run hot.
Speaker 1: We're just gonna we're gonna overstimulate the market. And then
Speaker 1: if we overshoot our targets so up, then as we
Speaker 1: got the inflation, it's not a problem. It's not a problem.
Speaker 1: It's not a problem. Then it's transitory it you know,
Speaker 1: it's gonna go away. Then it ran way too hot,
Speaker 1: and then eventually they were forced to scramble. And then
Speaker 1: they scrambled so fast at this knee jerk reaction. And
Speaker 1: now they went too far right. Now they've gone too
Speaker 1: far and too fast the other way, tightening everything back up.
Speaker 1: And I think, you know, in their sort of race
Speaker 1: to their desperation to regain confidence, the confidence of the people,
Speaker 1: the government and the government, uh you know, Powell and
Speaker 1: the Fed, they're so focused on the war on inflation
Speaker 1: that they've let it just go too far right. And
Speaker 1: as I said before, in order for the FED to
Speaker 1: win the war of inflation, then the Treasury has to lose.
Speaker 1: It's a zero sum game here, that's the problem. They've
Speaker 1: been trying to play this dance. But the end of
Speaker 1: the day, the Treasury is gonna have to get their way.
Speaker 1: So that's the stage for the battle. That's the stage
Speaker 1: we've been watching over the last year. It's the stage
Speaker 1: I've been talking about for a long time. Now I'm
Speaker 1: gonna tell you how you can play this, how we
Speaker 1: can set ourselves up to profit from this and not lose.
Speaker 1: I'm gonna break that down for you in a minute.
Speaker 1: But if you're just tune in you're listening to the
Speaker 1: Mark Mass Show, I'm gonna be back with what I
Speaker 1: think happens with the Fed and the Treasury battle that's
Speaker 1: playing out, and how we position ourselves to profit and
Speaker 1: sidestep the volatility. So'll be right back. Don't go away,
Speaker 1: all right, Welcome back. If you're just tune in, you're
Speaker 1: listening to the Mark Mass Show, we're talking about the
Speaker 1: battle between the Fed and the Treasury and what happened
Speaker 1: as this plays out, who ultimately wins, and more importantly,
Speaker 1: how we win regardless. Now we've already seen the Fed
Speaker 1: pause on raising rates, right, they paused them, and then
Speaker 1: they started raising them again, and now they paused them again.
Speaker 1: And like I said, they're admitting that we're going to
Speaker 1: have lower rates this year, but they're dragging their feet, right,
Speaker 1: They're trying to delay the cuts as long as possible.
Speaker 1: But if we go back to the question that I
Speaker 1: posed earlier, that I told you, I answer, why would
Speaker 1: Yellen try to force the Fed back into qe would?
Speaker 1: Why would why would she want them to go from
Speaker 1: QT tightening back to easing? And I already told you
Speaker 1: why they wouldn't want to, But why does Yellen want that? Well,
Speaker 1: it's a math problem. It's a math problem, and it's
Speaker 1: a political problem. Let's start with the math first. So
Speaker 1: let's look at the math. If the Fed sells ten
Speaker 1: year notes, ten year paper at five percent, then that rate,
Speaker 1: the five percent, is locked in for ten years. And
Speaker 1: the problem with locking in that money for ten years
Speaker 1: is the Treasury can't afford that in order to afford
Speaker 1: the debt that we have now, but more importantly, the
Speaker 1: death that's about to come for the rest of the
Speaker 1: year probably, I mean, we've been adding a trillion dollars
Speaker 1: every quarter I will probably add another trillion dollars of
Speaker 1: debt this year, So not just the debt that we have,
Speaker 1: but the debt we're going to add in order to
Speaker 1: afford that. Janet Allen, the Treasury needs rates to be
Speaker 1: back to zero. She wants to get rates back down
Speaker 1: potentially close to zero before she starts issuing the notes,
Speaker 1: the longer duration notes in any serious quantity, and she
Speaker 1: needs to issue some serious quantity to keep the government's
Speaker 1: runaway spending programs going. They cannot quit spending. I think
Speaker 1: it was two point seven or I think it was
Speaker 1: two point seven trillion added to the national debt last year.
Speaker 1: My guess is it's over three trillion this year, specifically
Speaker 1: in an election year with wars going on, and more importantly,
Speaker 1: because the government just continues to grow. You know, I thought,
Speaker 1: you know, when I was watching these debt ceiling debates
Speaker 1: go down, the Republicans that thrown out an offer to
Speaker 1: the Democrats saying let's just hold spending down or let's
Speaker 1: just go back to like spending and where we were
Speaker 1: in twenty twenty before the pandemic, and I'm like, life
Speaker 1: wasn't horrible, and you know, before the pandemic twenty twenty,
Speaker 1: or saying at twenty nineteen like that wasn't catastrophic, Like
Speaker 1: why couldn't we just go back to spending like we
Speaker 1: did in twenty nineteen, right, Like we had plenty of
Speaker 1: government programs and social programs and you know whatever the
Speaker 1: roads were there, Like, why couldn't we go back to that?
Speaker 1: And part of the reason why is because the government
Speaker 1: has grown so much. If we were to take it back,
Speaker 1: I mean, millions of people are going to be affected
Speaker 1: by this. All types of jobs will be lost, and
Speaker 1: programs will be cut and things like that. And so
Speaker 1: the government continues to get bigger and bigger and bigger,
Speaker 1: and there's no way to reverse that. So they need
Speaker 1: to continue spending, and they need the rates to be
Speaker 1: lower ones they can finance that debt. And two, like
Speaker 1: I said, so that taxes go back up as we
Speaker 1: sell our stocks, as we sell our homes, things like that,
Speaker 1: all right now at the current rates, to give you
Speaker 1: sort of an idea of how bad this is at
Speaker 1: the current rates. Right now, the US what we call
Speaker 1: true interest expense is more than all of the US
Speaker 1: tax re seats. Now that's just true expenses. What are
Speaker 1: true expenses. True expenses is what is mandatory, what has
Speaker 1: to be spent. That's just the interest on the debt
Speaker 1: and the entitlement spending. So that's Medicare, Medicaid, SEB, security,
Speaker 1: things like that. That's money we owe to people that
Speaker 1: has to be paid. That's just that alone is more
Speaker 1: than all the US tax receeats. So the Treasury is
Speaker 1: in a super tough spot now. The last big note
Speaker 1: issuance when we issued them on the longer end of
Speaker 1: the spectrum, was back in twenty twenty one when rates
Speaker 1: were still at zero, and so now Yellen is trying
Speaker 1: to force the Fed back into that range before she
Speaker 1: can start flooding the market with those notes. Again, that's
Speaker 1: why she's trying to drain the RRP with the bill issuance.
Speaker 1: So that's the math problem, but it's also a political problem.
Speaker 1: The political problem is that we're an electioneer and with
Speaker 1: the economy sort of teetering on the brink, we gonna
Speaker 1: have a recession? Are We're not gonna have recession. Yellen,
Speaker 1: who's part of the Bide administration, they have an agenda,
Speaker 1: and their agenda is to win, right. They want to
Speaker 1: win the election. They want to maintain power. They want
Speaker 1: the Democrats to maintain power, and so because of that,
Speaker 1: they cannot have a recession. I made a video on
Speaker 1: my man YouTube channel saying they couldn't afford a recession.
Speaker 1: They can't afford a recession because if there is a recession,
Speaker 1: that means tax receipts go down even more. Remember the
Speaker 1: spending doesn't, just the income goes down. They can't afford
Speaker 1: what they have now, how could they afford it in
Speaker 1: a recession? They can't. And so because of that, Yellen
Speaker 1: is trying to force their hands. She's continuing trying to
Speaker 1: stack the short term paper, continuing to drain the RRP.
Speaker 1: Now will she win? Is that checkmate? Or do you know?
Speaker 1: Does the Fed have another rabbit out of their hat?
Speaker 1: Do they fight back? Well, my guess. Before I guess,
Speaker 1: let me tell you. Let's see. I think as I
Speaker 1: kind of started out by saying, one of these financial
Speaker 1: analysts who are smarter than me and a lot of
Speaker 1: the inner workings and plumbings of this, but maybe fail
Speaker 1: to look at other things. They don't look at all
Speaker 1: the information in my opinion, right, so one of the
Speaker 1: things like Harry Dent Junior, I hate to pick on him.
Speaker 1: I think his work is brilliant. I've read five of
Speaker 1: his books. I continue to read his books because his
Speaker 1: research is correct. The assumptions are wrong, And the reason
Speaker 1: why the assumptions are wrong is they fail to take
Speaker 1: into consideration how many magic tricks the FED has up
Speaker 1: their sleep. So, for example, when the banks collapsed, Oh
Speaker 1: my god, this is it. The whole thing's crashing down. Okay, Sure,
Speaker 1: or they just paper over it and they just take
Speaker 1: that debt on their books. Oh but Mark, don't you
Speaker 1: know that the commercial real estate mortgage security market is
Speaker 1: going to crash two point nine trillion dollars going to
Speaker 1: sink all the regional banks. Sure, or the FED just
Speaker 1: takes all those bonds on their books. I mean, they've
Speaker 1: taken real estate bonds on their books before. Oh but Mark,
Speaker 1: don't you know there's a receession coming. All these people
Speaker 1: are going to lose their job. Yeah. Sure, the government
Speaker 1: just sends everybody a thousand dollars STEMI check, like they
Speaker 1: did just a couple of years ago. Right, You see
Speaker 1: what I'm saying. And so the point is is that
Speaker 1: these are the things that we already know about. How
Speaker 1: many other things can they come up with that we
Speaker 1: don't even know about. And that's the point that I
Speaker 1: try to make on this. It's like, look, we think,
Speaker 1: we keep thinking it's going to be checkmate. I thought
Speaker 1: it was going to be checkmate back in twenty twelve,
Speaker 1: A lot of people did. Harry Dent's been calling for
Speaker 1: a crash for twelve years. Now, eventually they'll be right.
Speaker 1: But how many more tricks stay up their sleeve? So
Speaker 1: is it checkmate or are there more tricks of their sleeve? Well,
Speaker 1: I think it's checkmate in a sense that they're going
Speaker 1: to force the FED into action. Now, some of it
Speaker 1: when it's not checkmate, is that it's going to be hidden.
Speaker 1: It's gonna be obfuscated. They're gonna say, well, we're not easy,
Speaker 1: sort of like they're still officially in a quantitative tightening mode,
Speaker 1: but they injected one hundred billion dollars into the banking industry,
Speaker 1: so they're in tightening. However, they're actually easing, so their
Speaker 1: potential policy stance could say the same. So for example,
Speaker 1: maybe they don't lower rates as as soon as maybe
Speaker 1: people would think, but they start injecting liquidity into other places.
Speaker 1: So there's a lot of games that they can play here.
Speaker 1: And that's the point. However, back to these smarter people
Speaker 1: are factually correct, intellectually dishonest, factually, it might not be
Speaker 1: a pivot factually technically, but it could still be easing
Speaker 1: in a hundred other ways. Right, And so for you
Speaker 1: and I, we don't need to get into the weeds
Speaker 1: on this. We just need to know are we in
Speaker 1: easy or are we untighten? Is the Fed going to
Speaker 1: push prices up? Are they going to push prices down?
Speaker 1: And in my opinion, it's going to push prices up.
Speaker 1: I've been talking about this for a year and a half.
Speaker 1: I am an inflation bowl. Look, this isn't good. It's
Speaker 1: not good at all. As a matter of fact, it's worse.
Speaker 1: Having prices crashed back down would be better because at
Speaker 1: least it gives us another chance to get back in.
Speaker 1: It gives my kids a chance, the millennials a chance
Speaker 1: to get back in. The problem is, I don't think
Speaker 1: that's going to happen. I think it's going to continue
Speaker 1: going higher, higher, higher, which sounds good if you own assets,
Speaker 1: but it's worse for society. It's worse for most people.
Speaker 1: We'd like things to reset. So we all have a
Speaker 1: chance to get back in the game. It's like if
Speaker 1: you're playing a board game and you got out or
Speaker 1: you haven't got a chance to get back in. You're
Speaker 1: waiting for the game to be reset so you can
Speaker 1: jump in and play the game with everybody, or you
Speaker 1: can get back in. But if they don't ever reset
Speaker 1: the game, then you don't get in the game. And
Speaker 1: that's exactly what it looks like is happening now. If
Speaker 1: you want to know exactly what is going on with
Speaker 1: this from a much more detailed level, I'm having a
Speaker 1: live presentation. You can join me live hang out. It's
Speaker 1: titled Seize the Upside of the Feds You Turn in
Speaker 1: twenty twenty four Walls side Stepping the Market of All Tilly.
Speaker 1: If that sounds interesting, come join me live. I've got
Speaker 1: a whole bunch of charts and graphs I want to
Speaker 1: show you, not just talk to you about. Go to
Speaker 1: go dot one, Markmoss dot com, slash you turn to
Speaker 1: join me. Not only am I going to go through
Speaker 1: all the charts and graphs, I'm gonna answer all your
Speaker 1: questions live, So we're gonna be hanging out. You're gonna
Speaker 1: ask the questions. I'm gonna be answering them. Just go
Speaker 1: to go dot one, Markmoss dot com, slash you turn,
Speaker 1: go dot one, Markmoss dot com, slash you turn, join
Speaker 1: me live and uh boy, that's what I got. This
Speaker 1: is what's happening. It's happening this year. It's all going down.
Speaker 1: I believe that it's sort of checkmate. Maybe not officially,
Speaker 1: but the FED is going to be easy and they
Speaker 1: have to with then do any good to put the
Speaker 1: government out of business. Anyway, you're listening to the Mark
Speaker 1: Mash Show talking about this topic. Hopefully that makes sense.
Speaker 1: Let me know if you're listening on hit me up
Speaker 1: on social media. And that's what I got. Thanks so
Speaker 1: much for listening.