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Speaker 1: What's up, everybody? Welcome back to another episode of Financial Harsey,

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Speaker 1: where we discuss how money works so that you can

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Speaker 1: make more, keep more, and give more. One of the

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Speaker 1: mechanisms in the plumbing of the financial system is called

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Speaker 1: the repo market. Many people have no idea how the

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Speaker 1: repo market works, and when they hear about it, man,

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Speaker 1: it just seems like there are so many confusing things

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Speaker 1: going on inside the financial system that how are we

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Speaker 1: ever able supposed to understand all of this? And how

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Speaker 1: do we even find the information? And so what we're

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Speaker 1: gonna do here today is break down the repo market

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Speaker 1: in a way that's extremely easy to understand, because it's

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Speaker 1: important to know what these tools are that the Federal

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Speaker 1: Reserve uses in order to manipulate how much money there

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Speaker 1: is floating around in the system for financial institutions to

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Speaker 1: take advantage of. In order to understand this, we've got

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Speaker 1: to take a little bit of a trip back in

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Speaker 1: time too, before Lehman Brothers blew up in the Great

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Speaker 1: Financial Crisis. Prior to this, what you have is something

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Speaker 1: called a repo market. Now, I'm sure everybody has heard

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Speaker 1: of the repo like a re a repurchase. I'm sorry,

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Speaker 1: you're repossessing by banks of cars. So you've got uh

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Speaker 1: repo people who go out and they repo cars for

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Speaker 1: the banks. That's not what this is, UH. The repo

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Speaker 1: market for financial institutions, REPO stands for a repurchase. So

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Speaker 1: you have a situation where banks UH they don't have

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Speaker 1: all of the cash on hand that they need for

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Speaker 1: their daily operations. And obviously this is oversimplification of what

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Speaker 1: goes on here. But with the repo market, you basically

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Speaker 1: have a pawn shop for banks between each other. So

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Speaker 1: at the end of the day, you'll have all the

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Speaker 1: banks get together and they'll say, okay, um, I've got

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Speaker 1: a lot of collateral, a lot of assets, but I

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Speaker 1: don't have enough cash to finish out the day. And

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Speaker 1: you'll have another bank that says, okay, well I've got cash,

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Speaker 1: and so the two banks agree. They'll say, okay, I'll

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Speaker 1: buy this collateral from you. Usually it's like a U.

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Speaker 1: S treasury um, and then you promise to repurchase it

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Speaker 1: from me. That's where the word comes from repurchase rebo.

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Speaker 1: You promised to repurchase it from me at some later

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Speaker 1: date in the future, whether it's tomorrow or at a

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Speaker 1: later date than that um. And so in this repo market,

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Speaker 1: you have a pawn shop between banks where they fund

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Speaker 1: each other for their overnight expenses, and you have normally

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Speaker 1: a situation where everything nets out. You've got enough banks

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Speaker 1: with you know, the cash, and enough banks with the

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Speaker 1: collateral where everything is netted out. Well, it depends on

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Speaker 1: sometimes depends on the quality of the collateral, right, because

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Speaker 1: what if some bank says, Okay, I've got a lot

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Speaker 1: of collateral, I need some cash, and then another bank says, oh,

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Speaker 1: I actually don't want to buy that collateral from you

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Speaker 1: because I don't like the I don't like the risk

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Speaker 1: of that asset. Well, that's exactly what happened in the

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Speaker 1: financial crisis. Lehman Brothers said, hey, I need some cash.

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Speaker 1: Well I don't have enough cash. I've got a lot

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Speaker 1: of collateral, though, and I've got my collateral is mortgage

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Speaker 1: backed securities. And for years this had been fine. Everybody

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Speaker 1: had been playing with these. But suddenly none of the

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Speaker 1: banks wanted the mortgage backed securities anymore, and so nobody

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Speaker 1: would buy them from Lehman, and so they went belly up.

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Speaker 1: They have enough cash to make it to the next day. Now,

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Speaker 1: obviously this could have bled over because many banks had

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Speaker 1: mortgage backed securities as their collateral and this could have,

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Speaker 1: you know, spread to more and so that's why the

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Speaker 1: Federal Reserve and the Treasury stepped in like they did

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Speaker 1: um and so you had a situation where the collateral

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Speaker 1: was bad, and so the overnight funding market, the repo

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Speaker 1: market dried up and banks were not able to access

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Speaker 1: the cash that they needed. So that was the first

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Speaker 1: example of the repo market blowing up. UM. One indication

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Speaker 1: that that was going to happen was, at the same time,

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Speaker 1: like a day before, the interest straight being charged on

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Speaker 1: the cash was much higher than it normally would have been.

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Speaker 1: And so if you wanted to go get cash for

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Speaker 1: in the repo market, normally you pay like a very

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Speaker 1: small rate. Well, that rate that you pay for that

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Speaker 1: cash just increased a lot. So that was a uh,

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Speaker 1: you know, a canary in the coal mine saying, hey,

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Speaker 1: there's problems in the repo market because the only way

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Speaker 1: these people are willing to buy this cat this collateral,

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Speaker 1: which is bad collateral, is if they're getting paid to

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Speaker 1: compensate themselves for that risk. Well, if we fast forward

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Speaker 1: now to September of twenty nineteen, Uh, this was obviously

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Speaker 1: pre COVID, and so the memories of this financial event

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Speaker 1: kind of got forgotten because they were overshadowed by UM

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Speaker 1: all the money printing and everything that happened in But

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Speaker 1: if we go to September, something curious started to happen

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Speaker 1: in the repo market again. The intra straight being charged

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Speaker 1: in the repo market for cash went up. Its skyrocketed

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Speaker 1: to the highest level it had gotten to since Lehman

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Speaker 1: Brothers collapsed. This really scared a lot of people because

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Speaker 1: they were looking at this and saying, this is a

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Speaker 1: bad sign. The last time cash got this expensive, there

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Speaker 1: was a lot of bad collateral in the system, and

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Speaker 1: that's why cash got so expensive because nobody wanted that

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Speaker 1: bad collateral. So there are a lot of people scared

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Speaker 1: that this meant that there was a lot of bad

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Speaker 1: collateral that had built up in the system. Again, somehow, well,

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Speaker 1: it turned out that that wasn't the case. UM. Having

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Speaker 1: bad collateral is one reason why nobody would be willing

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Speaker 1: to lend cash at a low rate. But another reason

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Speaker 1: is there's just not enough cash in the system. So

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Speaker 1: it's like this pawn shop and all the banks went

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Speaker 1: to each other that that night and said hey, I

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Speaker 1: need cash, and everybody else said, well so do I.

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Speaker 1: And there was there are not a lot of people

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Speaker 1: with extra cash to lend, and so they were able

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Speaker 1: to say, okay, well everybody wants it, I'm going to

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Speaker 1: charge a really high interest right for because I'm the

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Speaker 1: only one that has it, so I can command a

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Speaker 1: high rate for it. So question is, well, where did

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Speaker 1: all of that money go? Where did all the cash go?

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Speaker 1: And the answer is it went to the U. S. Government.

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Speaker 1: The US government had been borrowing a lot. When the

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Speaker 1: US government borrows, it creates a debt instrument called a bond,

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Speaker 1: it's a treasury. And the way that happens is when

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Speaker 1: that loan has created, that instrument is created, that bank

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Speaker 1: now owns that treasury. So they own a piece paper

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Speaker 1: that says that the government owes them cash at some

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Speaker 1: point in the future. And so all of the assets

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Speaker 1: on banks balance sheets at this time in nineteen it

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Speaker 1: was all U S treasuries. But the economy then at

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Speaker 1: that point, basically what happened was they had been the

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Speaker 1: government had maxed out its ability to borrow from the economy,

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Speaker 1: so all that cash had been sucked out of the

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Speaker 1: economy went to the government, and there was just a

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Speaker 1: bunch of treasuries sitting on banks balance sheets, and nobody

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Speaker 1: had any cash left to lend out to the other

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Speaker 1: banks for their overnight funding needs. At this point, the

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Speaker 1: Federal Reserve looked at this and said, well, this is

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Speaker 1: an emergency. There's no bad collateral, so we're not bailing

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Speaker 1: anybody out of making bad decisions. And so we're just

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Speaker 1: going to intervene in the repo market and we will

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Speaker 1: become the provider of cash for anybody who needs it

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Speaker 1: in the repo market. And so they entered with a

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Speaker 1: money printer and they said, anybody who needs cash overnight,

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Speaker 1: we will lend at the low interest rates that the

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Speaker 1: report market we think is supposed to be at, and um,

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Speaker 1: anybody can get the cash that they need from us

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Speaker 1: and um and give us the collateral and uh, then

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Speaker 1: you purchased that collateral back from us at some future date.

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Speaker 1: And so they started operating in the repo market. While

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Speaker 1: obviously not a lot of people were very happy about that.

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Speaker 1: It looked like an implicit bail at it looked like

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Speaker 1: they were injecting money into the system again, trying to

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Speaker 1: do undercover quei and all of that is actually kind

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Speaker 1: of true. There's there's some validity to that, absolutely. But

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Speaker 1: if we fast forward to then how they handled in

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Speaker 1: March and April, we can see that that was absolutely

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Speaker 1: nothing to the way that you know, they printed money

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Speaker 1: and bailed out the system in it all got overshadowed there,

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Speaker 1: So something else curious than happened when all the money

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Speaker 1: printing started. They printed trillions of dollars. That money went

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Speaker 1: to the U. S government. The US government then started

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Speaker 1: spending that money. And now you have cash entering the

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Speaker 1: system from everywhere. You have stimulus checks, you have mortgages

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Speaker 1: being refinanced, you have cash out refinances happening, you have

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Speaker 1: mortgage forbearances going on. So people have lower expenses and

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Speaker 1: a lot more cash coming in from all sides. The

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Speaker 1: government is spending money to businesses and to corporations, into organizations, nonprofits,

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Speaker 1: and politicians, So cash is entering the system from absolutely everywhere.

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Speaker 1: Where does that money go Like, Actually, when the government

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Speaker 1: spends money, it goes into somebody's bank account. So the

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Speaker 1: government spends money, whether it's to a politician their paycheck,

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Speaker 1: whether it's to government contractor whether it's a to an

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Speaker 1: organization in the form of a grant, or to an

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Speaker 1: individual in the form of a tax refund or a

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Speaker 1: stimulus check. That's all money that gets deposited in somebody's

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Speaker 1: bank account, and then when they spend it, where does

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Speaker 1: it go somebody else's bank account. Okay, so now we

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Speaker 1: have to ask the question how to banks handle deposits

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Speaker 1: because it's not like most people think, a deposit is

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Speaker 1: actually a liability for a bank, because when you give

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Speaker 1: that cash to the bank, let's say you give them

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Speaker 1: a hundred dollars, they now owe you one dollars. So

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Speaker 1: in terms of assets and liabilities, a deposit for a

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Speaker 1: bank shows up as a liability. Now, there are rules

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Speaker 1: that banks have to abide by in terms of how

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Speaker 1: how much they can have in liabilities versus assets. So

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Speaker 1: the more they get in deposits, the more assets they

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Speaker 1: have to buy to offset those liabilities. It's just the

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Speaker 1: way the banking rules work. And so as these cash

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Speaker 1: deposits flood into the banking syste them, banks are forced

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Speaker 1: to get go out into the uh system and get

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Speaker 1: more and more collateral. Well, for the first year, this

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Speaker 1: was no issue at all. For the first year, banks

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Speaker 1: did not need to go get collateral. Why is that Well,

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Speaker 1: because the rules were suspended. This is called the supplementary

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Speaker 1: leverage ratio, and the Federal Reserve didn't want there being

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Speaker 1: any banking issues because of arbitrary rules, and so the

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Speaker 1: Fed just said, all right, banks, you don't have to

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Speaker 1: worry about how much how many assets you have, how

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Speaker 1: much collateral you have to offset all your liabilities for

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Speaker 1: the next year. And so banks were able to accept

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Speaker 1: all the deposits and they didn't have to go out

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Speaker 1: there and find collateral tops set those liabilities. They just

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Speaker 1: accepted the deposits and it was fine because the rules

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Speaker 1: were had had temporarily changed. Well, March of the comes

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Speaker 1: around and that that suspension is set to expire. So

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Speaker 1: the banks were looking around and saying, hey, uh, we're

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Speaker 1: about to have to go out there and find a

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Speaker 1: bunch of collateral right now. What are we going to do,

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Speaker 1: like they were saying, Federal Reserve, like Jamie Diamond was saying,

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Speaker 1: please don't let this expire. Please give us an extension,

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Speaker 1: because that will cause a lot of a lot of

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Speaker 1: problems if all of us have to suddenly go out

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Speaker 1: and find collateral to offset all of these liabilities, and

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Speaker 1: the Federal Reserve just said, no, we don't care, you

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Speaker 1: can deal with it. We're gonna put those rules back

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Speaker 1: in place. But at the exact same time, the Federal

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Speaker 1: Reserve offered the reverse repo facility. Okay, so we already

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Speaker 1: know what the repo facility is from the FED. That

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Speaker 1: is the FED entering the regular repo market and saying

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Speaker 1: we will give cash if anybody needs cash, as long

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Speaker 1: as they give us collateral. Well, after nobody needed cash,

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Speaker 1: there was a flood of cash, but there was a

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Speaker 1: need for collateral once that suspension expired. So April comes

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Speaker 1: around and suddenly all the banks need collateral. Got a

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Speaker 1: lot of cash, but they need collateral. So you can't

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Speaker 1: go to the repot facility at the FED to get

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Speaker 1: collateral because that's where you go to get cash. So

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Speaker 1: you go to the reverse repo facility at the FED

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Speaker 1: because that's where you go to get collateral. So you

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Speaker 1: go to the reverse repo facility at the FED. You

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Speaker 1: give the FED the cash and they give you the collateral.

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Speaker 1: It's perfect. It's the opposite of the other facility. All

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Speaker 1: the banks have access to it, and so they are

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Speaker 1: able to go get the collateral that they need to

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Speaker 1: meet their meet their rules. And if if you want

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Speaker 1: to go check any of this, you can look at

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Speaker 1: the usage of the repo facility and the reverse repo

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Speaker 1: facility at the FED. You go to their website, it's

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Speaker 1: the St. Louis Fed website. It's UH. The titles f

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Speaker 1: R E D that's FRED. They have an app as well.

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Speaker 1: You can just Google it and find it and you

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Speaker 1: can look at these two charts and you can see

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Speaker 1: when the usage started. You can even look up other

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Speaker 1: charts that show the interest rates being paid in these facilities,

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Speaker 1: and so you can see that in April one, that

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Speaker 1: is when the usage of the reverse repot facility started

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Speaker 1: because that was the place as where banks had to

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Speaker 1: go to get collateral. There wasn't a lot of it

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Speaker 1: in the system outside of outside of there. Well, that

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Speaker 1: was working fine, and then the Federal Reserve decided to

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Speaker 1: start raising the Federal funds rate. They decided to start

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Speaker 1: raising interest rates. Well, when they decided to start raising

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Speaker 1: interest rates, what would happen is um all of that

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Speaker 1: cash would then go and start buying up these higher

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Speaker 1: interest rate um UH like T bills and treasuries for

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Speaker 1: the collateral because now there's a higher interest rate on them.

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Speaker 1: So what the Federal Reserve did not want to happen

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Speaker 1: was to see see interest rates go negative. They wanted

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Speaker 1: to make sure that they kept all that cash in

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Speaker 1: their reverse repo facility to keep control of the system.

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Speaker 1: And so what they did was they kept on raising

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Speaker 1: the reverse repo rate along with the federal funds rate.

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Speaker 1: And so at first it was like, you know, point

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Speaker 1: zero five percent, no big deal, and then it was

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Speaker 1: is half a percent higher than that? Then it was

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Speaker 1: a couple of percent higher than that. So we get

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Speaker 1: to the point we fast forward to today and in

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Speaker 1: the reverse repo facility, now there are over two trillion

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Speaker 1: dollars in the reverse repot facility. Now, remember the reverse

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Speaker 1: repo facility is where banks parked their cash in order

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Speaker 1: to get collateral. We know that the Federal Reserve is

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Speaker 1: the entity with the monopoly on the creation of money.

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Speaker 1: This means that the Federal Reserve is a lower risk

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Speaker 1: lender or barrower than the US government because if you

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Speaker 1: load money to the US government, they can always use

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Speaker 1: their military, they can always put somebody in jail, they

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Speaker 1: can always tax people more in order to get enough

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Speaker 1: money to be able to pay you back. However, there

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Speaker 1: are debt ceiling debates and political gridlock issues that happen,

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Speaker 1: you know, every single year, every single two years, and

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Speaker 1: there are potentially some funding issues, and so the UH

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Speaker 1: the credit rating of the United States has been downgraded.

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Speaker 1: We see the value of the debt from the United

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Speaker 1: States government actually fluctuates. So if you loan money to

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Speaker 1: the government and you need to sell sell that debt later,

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Speaker 1: you might have to sell it for less than UH

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Speaker 1: it would it would be worth if you held it

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Speaker 1: to maturity, So you might take a loss on that. Well,

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Speaker 1: that can't happen to the Federal Reserve. They are the

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Speaker 1: money printer. They don't deal with politics, they don't deal

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Speaker 1: with gridlock, they don't deal with that sealing issues. They

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Speaker 1: have the monopoly on the creation of money. So if

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Speaker 1: you are in a position where you can give some

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Speaker 1: cash to the Federal Reserve and they will pay you

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Speaker 1: three and a half percent three point eight five, which

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Speaker 1: is the current rate that is risk free, the Fed

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Speaker 1: cannot default on that further if they decide to lower

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Speaker 1: the interest rate that they're paying there. It's not as

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Speaker 1: if you then have to go sell an instrument. This

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Speaker 1: is an overnight facility. You can take that cash then

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Speaker 1: that you were getting three point five percent on that

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Speaker 1: maybe now you're only going to get three percent on

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Speaker 1: You could just take the full amount of that cash

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Speaker 1: back out and go get something else with it now,

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Speaker 1: So there is no risk to these financial institutions that

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Speaker 1: have two trillion dollars parked with the Federal Reserves reverse

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Speaker 1: repo facility. Right now they're able to get that three

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Speaker 1: point five percent completely risk free, and in doing so

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Speaker 1: they also get the collateral that they need for the

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Speaker 1: banking regulations. Well why in the world would the Federal

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Speaker 1: Reserve want to do this, Well, they're keeping cash out

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Speaker 1: of the system. This is out of the banking system

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Speaker 1: right now. It is on the sidelines. It's not being

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Speaker 1: used to purchase stocks, it's not being used to purchase

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Speaker 1: goods and services. It's not in circulation. The other thing

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Speaker 1: that it's doing is allowing interest rates to go up.

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Speaker 1: So what it looks like is a giant bazooka that

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Speaker 1: the Federal Reserve is keeping on the sidelines that nobody

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Speaker 1: knows about, because, as we know, the Federal Reserve is

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Speaker 1: fighting inflation right now, So if they let to trillion

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Speaker 1: dollars go right now, Inflation will continue to go up,

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Speaker 1: so they need to keep cash out of the system

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Speaker 1: right now. That's that's for sure. They want to make

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Speaker 1: sure that they continue to keep on fighting inflation, so

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Speaker 1: they don't want that to trillion dollars just flooding out

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Speaker 1: into the system and causing a big spike in prices again,

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Speaker 1: so they're keeping it out of there. However, very few

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Speaker 1: people understand how the repo market and the reverse repot

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Speaker 1: facility works at the FED, which means that let's say

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Speaker 1: inflation continues to the rate of inflation continues to drop.

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Speaker 1: It has started dropping. It looks like inflation has probably peaked.

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Speaker 1: Prices are still going up, but they're going up at

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Speaker 1: a slower pace than they were before. And so let's

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Speaker 1: say the Federal Reserve wants to maintain credibility, and so

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Speaker 1: they want to keep on selling assets off their balance sheet.

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Speaker 1: They want to keep on raising interest rates. However, let's

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Speaker 1: say they see an issue of solvency for somebody, like

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Speaker 1: maybe the United States government has nobody to borrow from

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Speaker 1: the United States government needs to pay its bills, and

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Speaker 1: they try and borrow, and there's nobody that wants to

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Speaker 1: lend to them. There's not enough cash. Let's say some

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Speaker 1: you know, the stock market needs a boost because everything

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Speaker 1: starts to collapse. Let's say they've gotten inflation down, uh

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Speaker 1: a little bit, but not all the way, and so

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Speaker 1: they have to keep on looking like they're tightening. But

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Speaker 1: they need to bail the system out. All they need

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Speaker 1: to do is lower the rate that they're paying in

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Speaker 1: that reverse rate of facility. Instead of paying point zero

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Speaker 1: five percent more than the federal funds rate, now you

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Speaker 1: drop it and you pay less, you only pay three.

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Speaker 1: Maybe that pushes half a trillion dollars out. And now

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Speaker 1: that money goes out to the open market, and it

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Speaker 1: buys tea bills, it buys treasuries, It gives the government

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Speaker 1: an extra little amount of fund. Dame. What does the

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Speaker 1: government do when it gets funding? It spends it. Where

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Speaker 1: does that money go? It spends it into people's bank accounts.

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Speaker 1: And then those bank accounts are people that get those

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Speaker 1: that that money, they're able to spend that on things,

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Speaker 1: and prices get a little boost. That money starts to

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Speaker 1: work its way throughout the system again. And then maybe

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Speaker 1: that half a trillion dollars isn't enough, So the Federal

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Speaker 1: Reserve lowers the rate on the reverse rate of facility

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Speaker 1: again to two, and that forces a full trillion dollars

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Speaker 1: out of the system. Gives a nice another little boost

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00:19:29,080 --> 00:19:32,840
Speaker 1: to the system. So they've got two trillion dollars that

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Speaker 1: they are keeping on the sidelines that at any moment

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Speaker 1: they can start to lower the rate that they're paying

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Speaker 1: on it, it will force that cash out and really

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Speaker 1: act as a huge stimulus to the entire economy through

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Speaker 1: government spending first as its mechanism. As that happens, they

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Speaker 1: will continue to tighten. This is the thing that a

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Speaker 1: lot of people, I don't think get about this, that

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Speaker 1: we're not going to see a direct pivot from the

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Speaker 1: Fed anytime soon. They're going to keep on raising interest rates.

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Speaker 1: They're going to keep on selling assets off of their

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Speaker 1: balance sheet. At a certain point, I think they're aware

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Speaker 1: they won't be able to continue to do that without

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Speaker 1: completely crushing the economy. And that point might happen before

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Speaker 1: they've brought inflation down to that two percent number that

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Speaker 1: they keep on talking about. So if they need to,

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Speaker 1: they might be in a position where they need to

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Speaker 1: bail out the system provide some stimulus without actually looking

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Speaker 1: like they're providing stimulus for the system. And so they

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Speaker 1: will need to push that two trillion dollars out by

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Speaker 1: stopping paying anything on it, and that will take all

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Speaker 1: that cash and everybody who has put their money in

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Speaker 1: the reverse free FOT facility, which by the way, is

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Speaker 1: not available for you and I. This is an individuals,

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Speaker 1: this is financial institutions only. All that money will then

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Speaker 1: have to go out into the open marketplace to find

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Speaker 1: collateral that is worth it because it's a higher interest

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Speaker 1: right now. So all of these financial inst too scuitions. Yes,

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Speaker 1: they're losing their risk free rate that they're getting from

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Speaker 1: the Fed, but they're getting a much higher rate now

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Speaker 1: than is available from the Fed. Now. They're getting that

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Speaker 1: by going out to the open market, and that will

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Speaker 1: increase prices, lower rates temporarily, and allow the Federal Reserve

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Speaker 1: to continue with the facade of tightening while they're pushing

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Speaker 1: two trillion dollars out into the system. So what is

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Speaker 1: the significance of this and why should we care about this? Well,

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Speaker 1: first of all, we know the impact that uh that

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Speaker 1: the money supply has on prices overall in economy. We've

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Speaker 1: seen this over the last couple of years. The first

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Speaker 1: thing that new money does to an economy is it

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Speaker 1: pushes up asset prices. This is something called the Cantyon effect.

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Speaker 1: It was discovered and written about by Richard Canton. He

401
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Speaker 1: was somebody who existed during the Mississippi Bubble. Um. The

402
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Speaker 1: Mississippi Bubble happened three hundred years ago. There was a

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Speaker 1: guy named John Law who who got control of the

404
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Speaker 1: central bank in France. He took everybody's golden silver and

405
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Speaker 1: issued paper money instead. That paper money was backed by

406
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Speaker 1: gold and silver and land in the United States, the

407
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Speaker 1: Mississippi Company, with the Mississippi Company and um the UH.

408
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Speaker 1: The purpose of this was he was going to spend money,

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Speaker 1: uh in order to stimulate the local economy in France,

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Speaker 1: and so he was going to do this through the

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Speaker 1: central bank. So he he took everybody's golden silver, backed

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Speaker 1: the new money with gold and silver and shares of

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Speaker 1: his Mississippi Company, which was backed by the land in Mississippi,

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Speaker 1: and started spending money. While this caused a lot of

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Speaker 1: inflation and eventually big bubbles, hyper inflation and then a

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Speaker 1: big collapse. UH. You know story that's as old as time.

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Speaker 1: That we've talked about a few times on this podcast

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Speaker 1: and UM and so Richard Canton was one of the

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Speaker 1: people who got rich from this because he saw his

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Speaker 1: prices were going up. He realized what was happening in

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Speaker 1: what the inevitable result was, and he turned in all

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Speaker 1: of his paper and bought gold and silver, and then

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Speaker 1: when everything collapsed, he is massively wealthy and got to

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Speaker 1: buy things that huge discounts. So this is called the

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Speaker 1: canty On effect. Basically, when new money is created, the

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Speaker 1: first thing that happens is asset prices go up. Why

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00:23:17,400 --> 00:23:20,399
Speaker 1: is this Well, because the new money typically hits the

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Speaker 1: hands of the rich first, and the rich don't need

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Speaker 1: to drastically increase their consumption of goods and services, and

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Speaker 1: so they buy assets instead. UM. The other thing that

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Speaker 1: happens is as asset prices then start to go up,

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Speaker 1: manias are introduced, and everybody then tries to buy assets

433
00:23:37,240 --> 00:23:40,040
Speaker 1: because just because the prices are going up, and that

434
00:23:40,080 --> 00:23:42,920
Speaker 1: fuels the bubbles even more. So that's the first thing

435
00:23:42,960 --> 00:23:48,000
Speaker 1: that happens. But eventually, let's say a fixed supply of

436
00:23:48,040 --> 00:23:51,080
Speaker 1: money UM or there was just a fixed increase in

437
00:23:51,119 --> 00:23:53,520
Speaker 1: the supply of money, so the total money goes from

438
00:23:53,560 --> 00:23:57,560
Speaker 1: one trillion to two trillion UM, well, then the prices

439
00:23:57,600 --> 00:24:00,639
Speaker 1: will increase. But eventually all that new money has already

440
00:24:00,640 --> 00:24:03,840
Speaker 1: worked its way into asset prices. Uh, there's no more

441
00:24:03,920 --> 00:24:06,639
Speaker 1: new money coming in to continue buying at higher and

442
00:24:06,720 --> 00:24:09,400
Speaker 1: higher and higher prices. There's only enough money to continue

443
00:24:09,440 --> 00:24:12,359
Speaker 1: to support the current prices. Well, when most people have

444
00:24:12,520 --> 00:24:15,440
Speaker 1: bought an asset just because the price is going up,

445
00:24:16,080 --> 00:24:18,320
Speaker 1: what are they gonna do when the price stops going up.

446
00:24:18,800 --> 00:24:22,760
Speaker 1: They're gonna sell because if the only reason you bought

447
00:24:22,800 --> 00:24:24,800
Speaker 1: it is because it was going up, if it stops

448
00:24:24,800 --> 00:24:27,960
Speaker 1: going up, well you're gonna sell. And so then when

449
00:24:27,960 --> 00:24:30,960
Speaker 1: the selling starts, what happens to the price The price

450
00:24:31,000 --> 00:24:34,440
Speaker 1: goes down. And then when the price goes down, then

451
00:24:34,560 --> 00:24:39,080
Speaker 1: everybody starts to sell because the price is going down.

452
00:24:39,440 --> 00:24:41,840
Speaker 1: And so new money introduced into a system will cause

453
00:24:41,880 --> 00:24:45,159
Speaker 1: a bubble, and that's the that's mechanic. But as the

454
00:24:45,160 --> 00:24:49,359
Speaker 1: prices go down, then um of the assets that money

455
00:24:49,359 --> 00:24:51,959
Speaker 1: starts to work its way throughout the economy into goods

456
00:24:52,000 --> 00:24:55,520
Speaker 1: and services, and so as people then have to sell

457
00:24:55,560 --> 00:24:59,040
Speaker 1: their assets to afford the higher prices, those new dollars

458
00:24:59,359 --> 00:25:01,680
Speaker 1: work their way through the system bidding up the prices.

459
00:25:01,720 --> 00:25:05,040
Speaker 1: It's more money chasing the same amount of goods and services.

460
00:25:05,040 --> 00:25:07,360
Speaker 1: We've talked about the mechanics of this in the first

461
00:25:07,440 --> 00:25:11,360
Speaker 1: couple of episodes. And so then you have an increase

462
00:25:11,400 --> 00:25:14,560
Speaker 1: in the price of goods and services. So first UH

463
00:25:14,920 --> 00:25:19,080
Speaker 1: money money money supply changes hit assets, then they hit

464
00:25:19,080 --> 00:25:22,720
Speaker 1: goods and services. And then when people can't afford uh

465
00:25:23,080 --> 00:25:27,280
Speaker 1: their their cost of living anymore, then uh employers have

466
00:25:27,400 --> 00:25:30,119
Speaker 1: to start paying more, and so then prices hit wages.

467
00:25:30,160 --> 00:25:32,440
Speaker 1: But by that time, people have already been spending a

468
00:25:32,440 --> 00:25:34,440
Speaker 1: lot more money and are already worse off. And so

469
00:25:34,520 --> 00:25:37,600
Speaker 1: that's the that's the progression by which new money works

470
00:25:37,600 --> 00:25:40,920
Speaker 1: its way throughout the economy assets first, than goods and services,

471
00:25:41,119 --> 00:25:46,639
Speaker 1: than wages. Now, interestingly, this is the same progression for

472
00:25:46,720 --> 00:25:51,320
Speaker 1: deflation as well. And so let's say the money supply decreases, Well,

473
00:25:51,480 --> 00:25:54,480
Speaker 1: that's going to hit asset prices first, and then it's

474
00:25:54,480 --> 00:25:58,720
Speaker 1: gonna hit goods and services, and then it's gonna hit wages.

475
00:25:59,280 --> 00:26:03,560
Speaker 1: And so when you have systemic long term deflation like

476
00:26:03,560 --> 00:26:06,440
Speaker 1: we've had throughout most of human history, what you see

477
00:26:06,640 --> 00:26:10,200
Speaker 1: is the opposite of the mechanism we have today, where

478
00:26:10,200 --> 00:26:13,080
Speaker 1: purchasing power is continuously transferred from the poor to the rich,

479
00:26:13,359 --> 00:26:16,280
Speaker 1: you have the opposite take place, where savers increase their

480
00:26:16,280 --> 00:26:18,960
Speaker 1: purchasing power over time because life gets cheaper. You want

481
00:26:19,000 --> 00:26:20,440
Speaker 1: to know more about that, go listen to the first

482
00:26:20,480 --> 00:26:24,040
Speaker 1: three episodes of this podcast, the three part series on

483
00:26:24,119 --> 00:26:27,720
Speaker 1: money and its History and where It's going now. If

484
00:26:27,800 --> 00:26:32,560
Speaker 1: we take a look at the last few years, what

485
00:26:32,680 --> 00:26:37,240
Speaker 1: we see is this exact same thing taking place. When

486
00:26:37,280 --> 00:26:40,480
Speaker 1: we take a look at the initial money printing that

487
00:26:40,520 --> 00:26:44,080
Speaker 1: happened in what was the very first thing that happened.

488
00:26:44,920 --> 00:26:52,880
Speaker 1: Asset prices like stocks, gold, real estate, bitcoin, crypto all skyrocketed.

489
00:26:53,160 --> 00:26:56,239
Speaker 1: That was the very first thing that happened. When you

490
00:26:56,280 --> 00:27:01,240
Speaker 1: look at April, that was the bottom of everything. Everything

491
00:27:01,280 --> 00:27:04,159
Speaker 1: went just up from there and many things went up

492
00:27:04,320 --> 00:27:09,480
Speaker 1: parabolically from their massive, enormous, huge returns on many assets.

493
00:27:09,800 --> 00:27:13,520
Speaker 1: Lots of people felt rich. Interestingly, at the exact same time,

494
00:27:13,720 --> 00:27:17,200
Speaker 1: guess what the inflation rate was. It was it was zero.

495
00:27:17,400 --> 00:27:20,679
Speaker 1: In fact, for the first couple of months in the

496
00:27:20,680 --> 00:27:23,480
Speaker 1: inflation rate actually did hit zero. There was a little

497
00:27:23,480 --> 00:27:26,240
Speaker 1: bit of deflation in some things as well, and so

498
00:27:26,720 --> 00:27:31,040
Speaker 1: you saw the asset prices respond massively upwards. As soon

499
00:27:31,119 --> 00:27:34,080
Speaker 1: as the new money hit. Then what happened, well, in

500
00:27:34,119 --> 00:27:40,000
Speaker 1: about January, then the inflation set in on goods and services.

501
00:27:40,400 --> 00:27:43,760
Speaker 1: So first prices of assets went up, and then prices

502
00:27:43,800 --> 00:27:47,920
Speaker 1: of stuff started to go up, and then you started

503
00:27:47,920 --> 00:27:50,480
Speaker 1: to see towards the end of twenty one what what happened.

504
00:27:50,760 --> 00:27:53,720
Speaker 1: You started to see people talk about the Great Resignation.

505
00:27:54,080 --> 00:27:57,800
Speaker 1: People were getting massive pay raises because everybody was leaving

506
00:27:57,800 --> 00:28:00,000
Speaker 1: their jobs and going and getting new jobs that pay

507
00:28:00,000 --> 00:28:03,919
Speaker 1: aid more. And this spurt that this caused churn in

508
00:28:04,080 --> 00:28:06,080
Speaker 1: jobs and companies had to pay more and more and more,

509
00:28:06,400 --> 00:28:09,200
Speaker 1: and you have people going and getting better and better jobs,

510
00:28:09,480 --> 00:28:13,880
Speaker 1: and so it hit income and wages last, all right,

511
00:28:14,080 --> 00:28:17,760
Speaker 1: So now we fast forward to the end of one.

512
00:28:18,000 --> 00:28:20,920
Speaker 1: That's when the money printers actually shut off the end

513
00:28:20,920 --> 00:28:24,840
Speaker 1: of one. If you look at the money supply, this

514
00:28:24,920 --> 00:28:27,800
Speaker 1: is a measurement called M two. There are a few

515
00:28:27,800 --> 00:28:30,639
Speaker 1: different ways to measure the total amount of money in

516
00:28:30,680 --> 00:28:34,000
Speaker 1: the economy. M two is one of the most widely

517
00:28:34,040 --> 00:28:37,480
Speaker 1: accepted ways to measure the amount of money. When you

518
00:28:37,480 --> 00:28:39,520
Speaker 1: look at the chart of M two, you can see

519
00:28:39,720 --> 00:28:45,720
Speaker 1: that since January of I'm sorry, since December um the

520
00:28:45,760 --> 00:28:49,400
Speaker 1: money supply has not increased. It is flatlined. So the

521
00:28:49,480 --> 00:28:53,760
Speaker 1: money supply increased in all of it, and then in

522
00:28:53,760 --> 00:28:57,640
Speaker 1: all and then we get to the end of December,

523
00:28:58,320 --> 00:29:01,800
Speaker 1: money supply stopped to in stopped increasing. The money printer

524
00:29:01,960 --> 00:29:05,440
Speaker 1: shut off, and since then the money supply has only

525
00:29:05,600 --> 00:29:08,520
Speaker 1: moved sideways. So we got a huge increase in the

526
00:29:08,520 --> 00:29:11,640
Speaker 1: money supply for a little a little under two years,

527
00:29:11,880 --> 00:29:14,440
Speaker 1: and then it shut off and the money supply did

528
00:29:14,440 --> 00:29:18,840
Speaker 1: not expand anymore. Well, what happened to the stock market

529
00:29:18,880 --> 00:29:23,840
Speaker 1: at the end of it topped? That was the highest

530
00:29:24,040 --> 00:29:30,160
Speaker 1: the stock market reached was in December January. That's when

531
00:29:30,200 --> 00:29:33,000
Speaker 1: the stock market peaked, the exact moment that the money

532
00:29:33,000 --> 00:29:37,440
Speaker 1: printer shut off. Well, what happened to asset prices then

533
00:29:37,480 --> 00:29:43,280
Speaker 1: at that point? Did they stay at their all time highs? No, Because,

534
00:29:43,400 --> 00:29:47,320
Speaker 1: just like the mechanism that I described earlier, when people

535
00:29:47,520 --> 00:29:50,920
Speaker 1: buy assets just because they're going up, what do they

536
00:29:50,960 --> 00:29:53,880
Speaker 1: do when they stop going up? They sell them? And

537
00:29:53,920 --> 00:29:56,760
Speaker 1: then what do those asset prices do when people start selling,

538
00:29:57,280 --> 00:30:01,920
Speaker 1: They fall. And so starting in January two, asset prices

539
00:30:01,960 --> 00:30:05,760
Speaker 1: started to fall. The money supply did not fall, It

540
00:30:05,800 --> 00:30:08,640
Speaker 1: has not fallen. It has stayed the same for the

541
00:30:08,840 --> 00:30:13,480
Speaker 1: entire year of two, but asset prices have fallen. We

542
00:30:13,520 --> 00:30:16,480
Speaker 1: have a bear market in virtually every asset class except

543
00:30:16,520 --> 00:30:21,200
Speaker 1: real estate, and so asset prices responded first. Now, what

544
00:30:21,280 --> 00:30:24,120
Speaker 1: is the inflation rate of goods and services? The inflation

545
00:30:24,200 --> 00:30:27,120
Speaker 1: rate of goods and services is still high six seven

546
00:30:27,200 --> 00:30:29,200
Speaker 1: eight percent, depending on how you measure, might be a

547
00:30:29,200 --> 00:30:32,400
Speaker 1: lot more. But all the official numbers show that inflation

548
00:30:32,440 --> 00:30:34,200
Speaker 1: is coming down a little bit, but still pretty much

549
00:30:34,240 --> 00:30:39,600
Speaker 1: near uh, near huge highs, multi decade highs. Well, how

550
00:30:39,640 --> 00:30:42,600
Speaker 1: long does it take for this transition, Well, it takes

551
00:30:42,640 --> 00:30:44,920
Speaker 1: about a year. That's how long it took for the

552
00:30:45,000 --> 00:30:49,120
Speaker 1: inflation to hit go from assets to goods and then wages,

553
00:30:49,440 --> 00:30:53,840
Speaker 1: and so now it's gonna take deflation the prices falling

554
00:30:54,280 --> 00:30:57,120
Speaker 1: about the same amount of time to move from assets

555
00:30:57,200 --> 00:31:01,800
Speaker 1: tikas and services to wages. And so we already saw assets.

556
00:31:01,960 --> 00:31:05,120
Speaker 1: It's been about almost a year now, so probably in

557
00:31:05,160 --> 00:31:11,760
Speaker 1: about January, maybe February, we're gonna see broadly on average

558
00:31:12,160 --> 00:31:16,640
Speaker 1: goods and services deflation. We're gonna see prices start to fall. Uh.

559
00:31:16,720 --> 00:31:19,479
Speaker 1: This is something that most people do not agree with.

560
00:31:19,640 --> 00:31:22,280
Speaker 1: Most people think that we're going to continue to see

561
00:31:22,320 --> 00:31:25,520
Speaker 1: inflation across goods and services. But guess what, the asset

562
00:31:25,520 --> 00:31:28,120
Speaker 1: prices have already fallen. We do not have an increase

563
00:31:28,120 --> 00:31:32,080
Speaker 1: in the money supply anymore. The money supplies flatlined since December.

564
00:31:33,200 --> 00:31:37,840
Speaker 1: There is no mechanism by which broadly prices can continue

565
00:31:37,840 --> 00:31:41,440
Speaker 1: to increase. There is not enough money to continue to

566
00:31:41,600 --> 00:31:44,720
Speaker 1: buy things at higher and higher prices. There's not enough

567
00:31:44,720 --> 00:31:47,400
Speaker 1: money to go around to support those higher and higher prices. Therefore,

568
00:31:47,640 --> 00:31:50,800
Speaker 1: prices must fall because there's just not enough money to

569
00:31:50,880 --> 00:31:53,320
Speaker 1: keep it up there. People can't afford it. You can't

570
00:31:53,360 --> 00:31:55,360
Speaker 1: keep on buying things without the money to buy things,

571
00:31:55,560 --> 00:31:57,520
Speaker 1: So prices have to come down if you want those

572
00:31:57,520 --> 00:32:00,040
Speaker 1: things to get bought, And prices will come down to

573
00:32:00,040 --> 00:32:02,840
Speaker 1: allow people to keep on buying them, otherwise they won't

574
00:32:02,840 --> 00:32:05,760
Speaker 1: get bought. So companies will lower prices. Well, what happens

575
00:32:05,760 --> 00:32:09,040
Speaker 1: when companies start selling things at lower and lower prices,

576
00:32:09,040 --> 00:32:12,360
Speaker 1: marking prices down, offering things on discount, offering things on sale. Well,

577
00:32:12,400 --> 00:32:16,400
Speaker 1: eventually their earnings go down. When earnings go down, profits

578
00:32:16,440 --> 00:32:24,840
Speaker 1: go down. What happens to employees furloughs, pay cuts, job losses, firing, layoffs,

579
00:32:25,320 --> 00:32:29,280
Speaker 1: The whole nine yards, and so wages will then respond

580
00:32:29,520 --> 00:32:32,040
Speaker 1: after you know, whether it's a couple of months or

581
00:32:32,040 --> 00:32:35,920
Speaker 1: whether it's a year, wages will start to respond. On average,

582
00:32:36,440 --> 00:32:40,080
Speaker 1: average incomes will go down as a result of this

583
00:32:40,240 --> 00:32:44,080
Speaker 1: broad deflation. Now, the question is how long can this

584
00:32:44,200 --> 00:32:47,160
Speaker 1: pain last? And this is where we come full circle

585
00:32:47,240 --> 00:32:51,280
Speaker 1: to this reverse reboth facility, because if the pain becomes

586
00:32:51,320 --> 00:32:57,360
Speaker 1: too acute for some large financial players, some major corporations,

587
00:32:57,360 --> 00:33:00,640
Speaker 1: some large financial institutions, and no I'm not talking about

588
00:33:00,840 --> 00:33:04,320
Speaker 1: large crypto institutions like ft X or anything like that.

589
00:33:04,320 --> 00:33:07,600
Speaker 1: That's just a result of the bubble and the mania collapsing.

590
00:33:07,960 --> 00:33:11,960
Speaker 1: I'm talking about big banks, the legal ponzi schemes um

591
00:33:12,080 --> 00:33:15,200
Speaker 1: not the illegal ones. I'm talking about the legal ones,

592
00:33:15,280 --> 00:33:19,400
Speaker 1: the licensed ones, the national monopoly on the creation of money,

593
00:33:19,400 --> 00:33:22,560
Speaker 1: ponzi schemes and counterfeiting and fraud called the US dollar,

594
00:33:22,720 --> 00:33:27,880
Speaker 1: and and banks and fractional reserve banking. As we see

595
00:33:28,000 --> 00:33:31,160
Speaker 1: problems crop up in the economy, it's very possible that

596
00:33:31,240 --> 00:33:36,239
Speaker 1: we see some major issues in the financial plumbing, the

597
00:33:36,400 --> 00:33:40,240
Speaker 1: plumbing of the financial system. If that becomes the case,

598
00:33:41,200 --> 00:33:44,680
Speaker 1: then the federal reserve will likely flush out the reverse

599
00:33:44,760 --> 00:33:48,040
Speaker 1: rep off facility in order to deal with that. I

600
00:33:48,160 --> 00:33:51,240
Speaker 1: do not think that they will flush out the reverse

601
00:33:51,280 --> 00:33:55,160
Speaker 1: repuff facility just to deal with some household economic pain.

602
00:33:56,160 --> 00:34:00,320
Speaker 1: They are looking to cause demand destruction in order to

603
00:34:00,480 --> 00:34:03,600
Speaker 1: solve their inflation problem. They printed a bunch of money

604
00:34:03,600 --> 00:34:06,600
Speaker 1: and made a bunch of people feel rich. That caused

605
00:34:06,680 --> 00:34:09,719
Speaker 1: prices to go up. Now to stop prices from going up,

606
00:34:09,800 --> 00:34:11,960
Speaker 1: they need to make people feel poor. And the way

607
00:34:11,960 --> 00:34:14,359
Speaker 1: to make Americans feel poors to make them actually poor,

608
00:34:14,800 --> 00:34:18,600
Speaker 1: and so demand destruction will be the way that they

609
00:34:18,640 --> 00:34:23,279
Speaker 1: achieve a victory over inflation. And what that means in

610
00:34:23,480 --> 00:34:27,319
Speaker 1: regular words is that the Federal Reserve is going to

611
00:34:27,400 --> 00:34:32,280
Speaker 1: make debt extremely expensive so that all of the overleveraged

612
00:34:32,320 --> 00:34:37,080
Speaker 1: households default, can't pay their bills and therefore can't keep

613
00:34:37,080 --> 00:34:38,959
Speaker 1: on buying a bunch of stuff that they don't need,

614
00:34:39,200 --> 00:34:43,719
Speaker 1: and have to stop buying things and can't afford basic necessities.

615
00:34:44,200 --> 00:34:48,400
Speaker 1: When the average American starts spending less money, then prices

616
00:34:48,520 --> 00:34:51,680
Speaker 1: will start to come back down. And the only way

617
00:34:51,800 --> 00:34:54,239
Speaker 1: that they see to up Americans from spending so much

618
00:34:54,280 --> 00:34:57,240
Speaker 1: money is to force them into it by forcing households

619
00:34:57,280 --> 00:35:00,480
Speaker 1: into default in bankruptcy and so I you think that

620
00:35:00,560 --> 00:35:02,680
Speaker 1: households have a lot of economic pain ahead of them.

621
00:35:02,920 --> 00:35:06,160
Speaker 1: But if we see some big issues with large corporations,

622
00:35:06,640 --> 00:35:12,040
Speaker 1: the federal government, or with financial institutions, then I think

623
00:35:12,080 --> 00:35:15,960
Speaker 1: we see the Federal Reserve flushing the reverse repo facility,

624
00:35:16,040 --> 00:35:19,279
Speaker 1: forcing two trillion dollars back out into the system to

625
00:35:19,400 --> 00:35:23,000
Speaker 1: cause some stimulus to rescue the system from one of

626
00:35:23,000 --> 00:35:28,200
Speaker 1: the big players failing. But even in the midst of that,

627
00:35:28,239 --> 00:35:32,759
Speaker 1: they will still be tightening. Uh. For the average individual,

628
00:35:33,560 --> 00:35:36,439
Speaker 1: Lending rates will still be going up. Your credit card

629
00:35:36,480 --> 00:35:39,720
Speaker 1: will get more expensive, your car loans new car loans

630
00:35:39,719 --> 00:35:43,239
Speaker 1: will be going up. Mortgages will probably be higher. So

631
00:35:43,280 --> 00:35:47,160
Speaker 1: we're going to see conditions for individuals get harder and

632
00:35:47,280 --> 00:35:50,560
Speaker 1: harder and harder. Even if we get this reverse bailout

633
00:35:50,600 --> 00:35:54,440
Speaker 1: reverse repo bailout from the FED. The thing to watch though,

634
00:35:54,800 --> 00:35:58,400
Speaker 1: is this reverse repo bailout, because the effect on assets

635
00:35:58,440 --> 00:36:01,040
Speaker 1: will likely still be the same. So once we see

636
00:36:01,080 --> 00:36:04,000
Speaker 1: the reverse repo facilities start to drain, even if it's

637
00:36:04,040 --> 00:36:07,000
Speaker 1: just to bail out the big boys, stocks will likely

638
00:36:07,400 --> 00:36:10,319
Speaker 1: have a boost from it. It may be short term,

639
00:36:10,360 --> 00:36:13,359
Speaker 1: temporary boost, but it'll probably be longer lasting. It will

640
00:36:13,440 --> 00:36:18,480
Speaker 1: probably signal the UM the bottom of the market. The

641
00:36:18,520 --> 00:36:20,799
Speaker 1: bottom of the market will probably already be in by

642
00:36:20,840 --> 00:36:24,799
Speaker 1: this time, but it'll be a very good signal UH

643
00:36:25,080 --> 00:36:28,319
Speaker 1: that the stock market has turned around, and it would

644
00:36:28,360 --> 00:36:31,760
Speaker 1: be UM a decent time to bet on the future

645
00:36:32,000 --> 00:36:35,600
Speaker 1: prices in the stock market going up rather than going down,

646
00:36:35,840 --> 00:36:39,040
Speaker 1: because at that point the system needs bailing out. It'll

647
00:36:39,080 --> 00:36:41,280
Speaker 1: start to get it, but it's only a two trillion

648
00:36:41,320 --> 00:36:43,839
Speaker 1: dollar band aid. A two trillion dollar band aid will

649
00:36:43,920 --> 00:36:46,680
Speaker 1: last a while, but it's not permanent. And if the

650
00:36:46,719 --> 00:36:50,319
Speaker 1: two trillion dollar band aid doesn't fix things permanently, then

651
00:36:50,600 --> 00:36:54,040
Speaker 1: the real bail out, the real money printer quantitative easing

652
00:36:54,360 --> 00:36:57,719
Speaker 1: will come back into play. And when quantitative easing comes

653
00:36:57,760 --> 00:37:01,720
Speaker 1: back into play, that'll be that'll be a game changer,

654
00:37:01,760 --> 00:37:04,800
Speaker 1: and we could be risking hyper inflation and the collapse

655
00:37:04,920 --> 00:37:09,279
Speaker 1: of the currency at that point. However, quantitative easing is

656
00:37:09,480 --> 00:37:14,120
Speaker 1: a discussion for a whole another episode UM to explain

657
00:37:14,120 --> 00:37:17,520
Speaker 1: the dynamics and the mechanics of what that is and

658
00:37:17,560 --> 00:37:20,960
Speaker 1: how that works. So for this episode we will stop

659
00:37:20,960 --> 00:37:25,799
Speaker 1: about here talking about the reverse repo facility. UM. In summary,

660
00:37:26,040 --> 00:37:29,480
Speaker 1: keep an eye on the reverse repo facility it's two

661
00:37:29,520 --> 00:37:33,160
Speaker 1: trillion dollars at the Federal Reserve has as that if

662
00:37:33,160 --> 00:37:36,120
Speaker 1: they start to drain, that that's when you will start

663
00:37:36,160 --> 00:37:40,640
Speaker 1: to see economic conditions turn around in terms of prices,

664
00:37:41,000 --> 00:37:44,800
Speaker 1: because prices will have to respond accordingly for the new money.

665
00:37:44,840 --> 00:37:47,480
Speaker 1: But until that happens, there will be less and less

666
00:37:47,520 --> 00:37:50,200
Speaker 1: money going around, which means conditions will get harder and

667
00:37:50,280 --> 00:37:53,880
Speaker 1: harder and tighter and tighter. So that is the reverse

668
00:37:54,040 --> 00:37:57,839
Speaker 1: repo market. And really appreciate you guys. Hope you all

669
00:37:57,920 --> 00:38:02,000
Speaker 1: have a really great Thanksgiving weekend, good time with family,

670
00:38:02,280 --> 00:38:06,120
Speaker 1: good time off from work, relaxing that you get a

671
00:38:06,160 --> 00:38:10,320
Speaker 1: good amount of recharge here. And uh, if you haven't already,

672
00:38:10,840 --> 00:38:15,160
Speaker 1: start focusing on putting your finances in order because times

673
00:38:15,160 --> 00:38:17,960
Speaker 1: are going to continue to get tough for a while here,

674
00:38:18,000 --> 00:38:22,720
Speaker 1: at least the next few months. So pay down unnecessary

675
00:38:22,800 --> 00:38:26,279
Speaker 1: high interest rate debt, get rid of any adjustable rate debt,

676
00:38:26,800 --> 00:38:30,920
Speaker 1: don't carry balances on your credit cards, start saving um

677
00:38:31,000 --> 00:38:33,680
Speaker 1: and get yourself in a position because there are some

678
00:38:33,800 --> 00:38:37,160
Speaker 1: deals on assets available already, and the longer things go

679
00:38:37,320 --> 00:38:40,080
Speaker 1: like this, the more deals we're gonna see. And so

680
00:38:40,440 --> 00:38:42,479
Speaker 1: the goal is to be able to buy when there's

681
00:38:42,480 --> 00:38:45,959
Speaker 1: blood in the streets, uh, and hopefully that blood isn't

682
00:38:46,000 --> 00:38:47,759
Speaker 1: your own. And so you want to be able to

683
00:38:47,840 --> 00:38:50,759
Speaker 1: have some dry powder, some cash on sidelines. You don't

684
00:38:50,800 --> 00:38:52,600
Speaker 1: want to be one of those people that's hurting and

685
00:38:52,640 --> 00:38:54,600
Speaker 1: that's in need of a bill it yourself. You want

686
00:38:54,640 --> 00:38:57,640
Speaker 1: to be the ones that are ready to take advantage

687
00:38:58,040 --> 00:39:02,080
Speaker 1: of those prices going out and those assets being on sale.

688
00:39:02,400 --> 00:39:04,960
Speaker 1: So make sure that you are not taking on additional

689
00:39:05,040 --> 00:39:09,960
Speaker 1: risk for no reason. Get things tight in order, and

690
00:39:10,160 --> 00:39:14,200
Speaker 1: uh and just wait because deals are coming. So again,

691
00:39:14,360 --> 00:39:17,600
Speaker 1: thank you so much for listening, and we will see

692
00:39:17,600 --> 00:39:21,839
Speaker 1: you next week, next week, next week,