WEBVTT - Fed Minutes and Could We go Lower? 0:00:00.080 --> 0:00:02.880 Hello everyone, and welcome to the latest episode from the 0:00:02.960 --> 0:00:06.320 midweek edition of the Coin bureau podcast. Every week, I 0:00:06.360 --> 0:00:09.040 pick out two of my favorite videos from coin bureaus 0:00:09.039 --> 0:00:12.400 YouTube channel to present to you in podcast form. The 0:00:12.440 --> 0:00:14.920 audio you're about to hear is from those videos I've 0:00:15.000 --> 0:00:18.079 chosen this week, and I hope you enjoy listening. You'll 0:00:18.079 --> 0:00:20.840 no doubt be pleased to hear that ft X doesn't 0:00:20.880 --> 0:00:24.560 feature prominently in either of the sections you'll hear today. 0:00:24.600 --> 0:00:27.640 It still hangs like a black cloud over the crypto industry, 0:00:27.920 --> 0:00:30.360 but there are other things we need to focus on, 0:00:30.680 --> 0:00:32.720 such as what Jerome Powell and his crew at the 0:00:32.720 --> 0:00:36.080 Federal Reserve are thinking about the economy and why the 0:00:36.120 --> 0:00:40.080 crypto market could still go lower from here. It's been 0:00:40.120 --> 0:00:42.479 a few weeks since the folks that the Fed last 0:00:42.560 --> 0:00:46.640 hiked interest rates, and many have been speculating or praying 0:00:47.000 --> 0:00:49.720 that they may ease off on raising them any further. 0:00:50.360 --> 0:00:53.760 As always, investors have been hanging on every scrap of 0:00:53.800 --> 0:00:57.160 information to emerge from Fed HQ, and we've got a 0:00:57.160 --> 0:00:59.640 whole dollarp of it recently, when the minutes of the 0:00:59.720 --> 0:01:02.440 last FED meeting were published a couple of weeks ago, 0:01:03.160 --> 0:01:05.600 so In the first part of today's video, you'll hear 0:01:05.680 --> 0:01:08.920 our analysis of those minutes and what they could signal 0:01:09.040 --> 0:01:12.280 for the US and other economies in the coming months. 0:01:12.880 --> 0:01:16.920 There's still lots to be concerned about. Speaking of things 0:01:16.959 --> 0:01:19.399 to be concerned about, the crypto bear market we're in 0:01:19.520 --> 0:01:23.920 could still get more well bearish before things start to 0:01:23.959 --> 0:01:27.160 look up. There are a number of macro and crypto 0:01:27.200 --> 0:01:30.839 specific factors that could yet push prices lower, and they're 0:01:30.840 --> 0:01:34.000 the topic for the second part of today's episode from 0:01:34.080 --> 0:01:36.840 yet more f t X Contagion. I knew we'd touch 0:01:36.880 --> 0:01:39.600 on it at some point too. Bitcoin miners struggling to 0:01:39.680 --> 0:01:43.280 the stock market and beyond. Crypto has a minefield to 0:01:43.319 --> 0:01:46.280 walk through before things can get better, and some of 0:01:46.280 --> 0:01:49.960 those minds contain a lot of explosives. Have a listen 0:01:50.600 --> 0:01:53.960 and watch your step. Thanks for listening to today's episode, 0:01:54.000 --> 0:01:56.720 and there'll be more coming your way soon. And if 0:01:56.760 --> 0:01:59.200 you want even more content from coin Bureau, be sure 0:01:59.240 --> 0:02:02.240 to subscribe to our YouTube channel and visit us on 0:02:02.320 --> 0:02:27.000 social media too. Last week, the Federal Reserve published the Minutes, 0:02:27.200 --> 0:02:30.880 that is summary of its most recent meeting. The minutes 0:02:30.919 --> 0:02:34.600 revealed that most Fed officials want to slow the pace 0:02:34.720 --> 0:02:38.720 of interest rate hikes going forward. The news caused markets 0:02:38.760 --> 0:02:41.760 to rally on the possibility that the FED will pivot. 0:02:42.320 --> 0:02:45.280 The problem is that slowing the pace of rate hikes 0:02:45.480 --> 0:02:48.920 is not the same thing as lowering rates themselves, and 0:02:49.120 --> 0:02:52.880 the headlines don't tell the full story. That's why today 0:02:52.960 --> 0:02:54.919 I'm going to take a closer look at the Fed's 0:02:55.000 --> 0:02:58.400 most recent minutes, summarize what they say in simple terms, 0:02:58.560 --> 0:03:01.080 and tell you exactly what it could mean for the 0:03:01.120 --> 0:03:05.400 markets in the coming months. Okay, let's start with a 0:03:05.440 --> 0:03:08.160 bit of background. As most of you will know, the 0:03:08.200 --> 0:03:11.480 Federal Reserve is the central bank of the United States. 0:03:12.120 --> 0:03:14.360 What most of you may not know is that the 0:03:14.360 --> 0:03:18.280 FED itself consists of twelve regional banks that are scattered 0:03:18.320 --> 0:03:22.240 across the United States, each of which has its own president. 0:03:22.800 --> 0:03:25.040 As most of you will know, the FED is governed 0:03:25.080 --> 0:03:29.680 by seven governors, which include FED Chairman Jerome Powell. What 0:03:29.880 --> 0:03:32.600 some of you may not also know is that the 0:03:32.639 --> 0:03:36.640 central banks monetary policy is decided by the Federal Open 0:03:36.760 --> 0:03:40.160 Markets Committee, or f o m C. The f o 0:03:40.360 --> 0:03:44.440 m C consists of the feds seven governors, the president 0:03:44.560 --> 0:03:47.480 of the New York Fed, and four of the other 0:03:47.560 --> 0:03:52.040 presidents of the fed's other regional banks. The regional FED 0:03:52.080 --> 0:03:54.760 presidents who sit on the f o m C change 0:03:54.920 --> 0:03:57.880 every year, save of course, for the President of the 0:03:57.920 --> 0:04:01.880 New York Fed, who has a permanent seat. In theory, 0:04:01.920 --> 0:04:04.280 each member of the f o m C casts a 0:04:04.360 --> 0:04:08.200 vote supporting or opposing the committee's decision on whether or 0:04:08.240 --> 0:04:11.080 not to raise or lower interest rates, and the final 0:04:11.160 --> 0:04:15.160 vote determines the rate hike. In practice, however, the FED 0:04:15.240 --> 0:04:19.720 Chairman in this case, Jerome, apparently has the final say. 0:04:20.320 --> 0:04:23.159 In addition to Jerome, the f o m C currently 0:04:23.200 --> 0:04:28.760 consists of the following personnel. Fed Governor's Lele Brainard, Michael Barr, 0:04:28.960 --> 0:04:34.120 Michelle Bowman, Lisa Cook, Philip Jefferson, and Christopher Waller, New 0:04:34.200 --> 0:04:39.279 York FED President John Williams, Boston Fed President Susan Collins, St. 0:04:39.320 --> 0:04:44.040 Louis Fed President James Bullard, Kansas City President Esther George 0:04:44.160 --> 0:04:48.800 and Cleveland FED President Loretta J. Mester. I'll quickly note 0:04:49.040 --> 0:04:52.279 that Michael Barr actually wrote the law that created the 0:04:52.279 --> 0:04:56.159 position of Vice chair for supervision, which he now holds. 0:04:56.800 --> 0:04:59.400 Michael seems to be intent on using the laws he 0:04:59.480 --> 0:05:02.039 wrote in the aftermath of two thousand and eight to 0:05:02.120 --> 0:05:05.320 crack down on crypto. More about that using the link 0:05:05.400 --> 0:05:09.800 in the description. Now, all twelve f O m C 0:05:09.960 --> 0:05:13.440 officials were present at the FEDS last meeting. This is 0:05:13.480 --> 0:05:17.719 in addition to around fifty other academics and economists who 0:05:17.800 --> 0:05:21.000 work for the FED, including members of the fed's other 0:05:21.200 --> 0:05:24.960 regional banks. The f O m c's last meeting took 0:05:24.960 --> 0:05:28.720 place on the first and second of November. To clarify, 0:05:28.880 --> 0:05:31.679 the minutes of these meetings are not released until around 0:05:31.839 --> 0:05:35.640 three weeks after the meeting in question takes place. This 0:05:35.720 --> 0:05:39.159 is presumably to give the markets guidance about interest rates 0:05:39.160 --> 0:05:43.960 between FED meetings, which occur around every six weeks. Obviously, 0:05:44.200 --> 0:05:47.240 what investors look for in the FEDS minutes is evidence 0:05:47.360 --> 0:05:51.560 of the central bank's plans regarding interest rates. Every single 0:05:51.680 --> 0:05:54.640 word is scrutinized to see if the f O m 0:05:54.640 --> 0:05:57.560 C is being hawkish i e. Planning on raising interest 0:05:57.640 --> 0:06:01.760 rates or dovish i e. Planning on lowering them. As 0:06:01.800 --> 0:06:04.880 almost all of you will know, raising interest rates tends 0:06:04.920 --> 0:06:08.039 to cause markets to crash, whereas lowering them tends to 0:06:08.080 --> 0:06:12.720 cause markets to rally. Because markets are forward looking, assets 0:06:12.800 --> 0:06:15.880 tend to react immediately to the FEDS minutes even though 0:06:16.000 --> 0:06:19.560 the rate hike or rate cut hasn't actually happened yet. 0:06:20.520 --> 0:06:24.000 So with that background under your belt, let's see what 0:06:24.040 --> 0:06:27.360 the f o m C had to say. The first 0:06:27.400 --> 0:06:30.360 part of the fed's meeting was a quote ethics discussion, 0:06:30.440 --> 0:06:34.159 wherein FED Chairman Jerome Powell reminded everyone present to be 0:06:34.240 --> 0:06:37.719 on their best behavior. In other words, no sharing of 0:06:37.760 --> 0:06:42.320 insider information, no insider trading, and make sure to report 0:06:42.440 --> 0:06:46.960 all your investments. Nudge nudge, wink wink. With that bit 0:06:47.000 --> 0:06:49.920 of business done, the second part of the meeting was 0:06:50.040 --> 0:06:53.840 about rate hikes. F O m C officials discussed how 0:06:53.880 --> 0:06:56.600 they're planning to raise interest rates higher than they had 0:06:56.600 --> 0:06:59.960 planned in September, something that Jerome had told the public 0:07:00.200 --> 0:07:04.440 in the fed's subsequent press conference. We actually summarized Jerome's 0:07:04.440 --> 0:07:08.440 press conference too, that will also be in the description now. 0:07:08.560 --> 0:07:11.400 One thing that Jerome didn't tell the public during his 0:07:11.440 --> 0:07:14.880 press conference was that most f o MC officials see 0:07:14.920 --> 0:07:18.120 a fifty basis point hike as being appropriate at the 0:07:18.120 --> 0:07:22.200 fed's next meeting. For context, the FED has been aggressively 0:07:22.280 --> 0:07:25.280 raising rates at seventy five basis points a pop for 0:07:25.400 --> 0:07:29.640 the last few months. This basically confirms what Jerome denied, 0:07:29.720 --> 0:07:32.480 which is that the FED is planning on slowing the 0:07:32.520 --> 0:07:36.160 pace of rate hikes. As I mentioned in the introduction, 0:07:36.360 --> 0:07:39.680 this caused markets to rally across the board, except for 0:07:39.720 --> 0:07:42.400 crypto because it was busy getting wrecked by the ft 0:07:42.600 --> 0:07:46.440 X Alameda situation. The f o m C also mentioned 0:07:46.480 --> 0:07:49.800 the blow up in UK government bonds in September and 0:07:49.920 --> 0:07:53.200 cautioned that the early warning signs of a similar event 0:07:53.320 --> 0:07:58.080 are starting to emerge in the US, namely low liquidity. 0:07:58.320 --> 0:08:00.800 The f o m C also touched on how other 0:08:00.880 --> 0:08:04.480 currencies are collapsing against the US dollar, but didn't have 0:08:04.720 --> 0:08:08.280 much to say on the matter. What's interesting is that 0:08:08.320 --> 0:08:11.040 the f o m C reveals that the Federal Reserve 0:08:11.200 --> 0:08:15.080 and other central banks are actively losing money due to 0:08:15.200 --> 0:08:18.960 higher interest rates. Fortunately for the central banks, they don't 0:08:19.160 --> 0:08:22.360 technically need to be profitable, even though the FED is 0:08:22.400 --> 0:08:26.760 technically a private company. The more you know, now. The 0:08:26.920 --> 0:08:30.720 third part of the Fed's meeting was about the economy. 0:08:30.960 --> 0:08:34.440 The f O m C officials discussed the surprisingly positive 0:08:34.480 --> 0:08:37.600 GDP print for Q three in the United States, the 0:08:37.679 --> 0:08:41.600 continually tight labor market, and the increase in the Personal 0:08:41.640 --> 0:08:47.280 Consumption Expenditures Index or PCE, the feds favorite inflation gauge. 0:08:47.760 --> 0:08:51.240 Oddly enough, the FED went on to discuss how labor 0:08:51.280 --> 0:08:55.280 market conditions are looking for different minority groups, and seem 0:08:55.320 --> 0:08:58.440 to blame most of the economic issues we're facing on 0:08:58.559 --> 0:09:03.000 the war in Ukraine, China's zero COVID policy, and tighter 0:09:03.200 --> 0:09:07.680 financial conditions as a result of higher interest rates. The 0:09:07.840 --> 0:09:11.080 f O m C also touched on the rising inflation 0:09:11.240 --> 0:09:15.360 in other countries, caused primarily by disruptions to energy supplies. 0:09:15.720 --> 0:09:19.440 They noted that foreign central banks have raised interest rates 0:09:19.480 --> 0:09:22.520 to try and fight this inflation, but have slowed their 0:09:22.600 --> 0:09:26.240 rate hikes as they realize there's only so much demand 0:09:26.679 --> 0:09:30.199 they can destroy. The fourth part of the fed's meeting 0:09:30.480 --> 0:09:33.719 was about financial conditions. There's a lot to cover here, 0:09:33.800 --> 0:09:36.959 so i'll just give you the highlights. First, the f 0:09:37.080 --> 0:09:39.840 O m C seemingly took issue with the recovery in 0:09:39.880 --> 0:09:43.320 the stock market that started in mid October. This would 0:09:43.400 --> 0:09:48.520 make sense as it's essentially the markets challenging the Fed. Second, 0:09:48.640 --> 0:09:52.559 investors have been selling off foreign assets and deploying that 0:09:52.640 --> 0:09:56.400 dry powder into US s sts, mainly US government debt. 0:09:56.840 --> 0:10:00.000 This makes sense given that US government debt is provided 0:10:00.240 --> 0:10:03.959 increasingly higher interest rates and is also considered to be 0:10:04.000 --> 0:10:08.920 the safest asset in the eyes of institutional investors. This 0:10:09.000 --> 0:10:12.600 phenomenon of money flowing into the United States is actually 0:10:12.640 --> 0:10:16.199 part of the so called dollar milkshake theory proposed by 0:10:16.240 --> 0:10:20.640 an increasingly popular macro analyst named Brent Johnson. The t 0:10:20.840 --> 0:10:23.480 l d R is that most of the world's money 0:10:23.520 --> 0:10:28.200 will flow into the US as foreign countries and currencies collapse. 0:10:29.120 --> 0:10:32.199 You'd think that this would be incredibly bullish for the U. 0:10:32.360 --> 0:10:35.080 S Dollar and US assets, and it will be for 0:10:35.120 --> 0:10:38.319 a while. The thing is that the dollar milkshake theory 0:10:38.480 --> 0:10:42.160 ends with the US dollar and US assets collapsing. To 0:10:43.120 --> 0:10:46.720 note that this process will take many years and possibly 0:10:46.920 --> 0:10:51.720 decades to play out, assuming Brent's theory is true. Now. 0:10:51.840 --> 0:10:54.120 The third thing that caught my eye in the f 0:10:54.240 --> 0:10:57.320 O m c S Financial overview was the rapidly rising 0:10:57.360 --> 0:11:00.480 interest rates on credit card debt in the United States. 0:11:01.520 --> 0:11:04.760 This is concerning because credit card debt in the United 0:11:04.800 --> 0:11:07.920 States recently hit an all time high of over nine 0:11:08.480 --> 0:11:13.520 thirty billion dollars I reckon one trillion is just weeks away. 0:11:15.080 --> 0:11:17.720 This relates to the fourth takeaway, and that's that the 0:11:17.800 --> 0:11:21.240 housing market continues to slide on the back of rising 0:11:21.240 --> 0:11:24.800 interest rates and that banks are becoming less eager to 0:11:24.960 --> 0:11:28.920 lend to consumers. This is essentially true of auto loans 0:11:29.000 --> 0:11:32.600 and credit card related loans, which is understandable given the 0:11:32.679 --> 0:11:38.439 statistics I just mentioned regarding financial stability. Stress tests conducted 0:11:38.480 --> 0:11:42.000 in conjunction with the largest US banks suggest that they 0:11:42.000 --> 0:11:46.840 would be resilient in the event of a severe economic downturn. However, 0:11:47.080 --> 0:11:49.200 the f o m C couldn't say the same for 0:11:49.280 --> 0:11:52.680 hedge funds and other entities in the financial sector due 0:11:52.760 --> 0:11:57.520 to their high levels of leverage. This ties into the 0:11:57.559 --> 0:12:00.559 fifth part of the fed's meeting, which was about its 0:12:00.640 --> 0:12:03.920 economic outlook. If I understand correctly, the f o m 0:12:03.960 --> 0:12:06.920 C is projecting that output of the U S economy 0:12:06.960 --> 0:12:12.200 will be quote below potential until five and that unemployment 0:12:12.360 --> 0:12:18.280 will simultaneously stay above four until that time. This might 0:12:18.360 --> 0:12:20.040 have something to do with the fact that the f 0:12:20.160 --> 0:12:25.280 o m C raised its inflation projections for the coming quarters. Logically, 0:12:25.640 --> 0:12:28.640 this means that the FED will have to continue raising 0:12:28.679 --> 0:12:31.760 interest rates, or at least keep them higher for longer 0:12:31.960 --> 0:12:36.480 to fight this inflation, resulting in the aforementioned economic conditions. 0:12:37.360 --> 0:12:39.880 For what it's worth, the f O m C expects 0:12:39.920 --> 0:12:43.480 inflation to come back down to two percent as measured 0:12:43.520 --> 0:12:49.040 by the core PC in This is expected given that 0:12:49.120 --> 0:12:51.679 what the f O m C is effectively forecasting is 0:12:51.720 --> 0:12:54.720 a long recession that will last at least two years, 0:12:54.760 --> 0:12:59.480 and recessions tend to reduce inflation. As a cherry on top, 0:12:59.600 --> 0:13:02.960 the fo MC cautioned that their baseline projections are quote 0:13:03.160 --> 0:13:06.760 skewed to the down side. Put simply, they know that 0:13:06.800 --> 0:13:10.640 their economic projections are likely to get worse, not better, 0:13:11.000 --> 0:13:14.559 as more economic data comes in. This makes sense given 0:13:14.600 --> 0:13:17.880 that an energy crisis could happen over the winter. More 0:13:17.920 --> 0:13:21.680 about that in the description. Anyways, The sixth part of 0:13:21.760 --> 0:13:25.840 the Fed's meeting was again about current economic conditions. The 0:13:26.000 --> 0:13:29.200 f O m C again blames Russia's invasion of Ukraine 0:13:29.280 --> 0:13:32.680 as being a primary driver of inflation. I'll just remind 0:13:32.720 --> 0:13:36.599 you that central banks printed trillions upon trillions of dollars 0:13:36.679 --> 0:13:41.319 in response to the pandemic in early Most of the 0:13:41.360 --> 0:13:45.280 inflation related to Russia's invasion of Ukraine also has to 0:13:45.320 --> 0:13:48.559 do with sanctions that don't seem to be working. But 0:13:49.000 --> 0:13:52.400 let's not go there. Funnily enough, the f O m 0:13:52.400 --> 0:13:56.000 C says that another decline in real GDP would be 0:13:56.080 --> 0:13:59.959 helpful in bringing inflation back down. As a fun fact, 0:14:00.240 --> 0:14:03.280 Bank for America seems to have predicted the sudden g 0:14:03.400 --> 0:14:06.400 d P spike in Q three this year. The rest 0:14:06.440 --> 0:14:09.200 of its projection says that real g d P will 0:14:09.240 --> 0:14:14.079 again go negative starting next year. Take note. The f 0:14:14.200 --> 0:14:17.960 O m C also discussed the status of household balance sheets. 0:14:18.280 --> 0:14:21.120 Believe it or not, but the still record levels of 0:14:21.280 --> 0:14:24.400 savings in the U S economy thanks to all the 0:14:24.480 --> 0:14:28.080 pandemic stimulus. The catch is that most of these savings 0:14:28.160 --> 0:14:33.640 are concentrated with wealthier individuals and institutions. There's a surprise. 0:14:34.720 --> 0:14:38.640 On the lower end, individuals and institutions are starting to 0:14:38.680 --> 0:14:42.760 report financial stress. I reckon the record levels of credit 0:14:42.800 --> 0:14:46.920 card debt say it all. Even so. Jerome mentioned at 0:14:46.960 --> 0:14:50.080 the fed's most recent press conference that the higher overall 0:14:50.120 --> 0:14:54.640 savings should cushion the U. S economy from a severe recession. 0:14:55.240 --> 0:14:58.320 Makes you wonder whether it was all planned. More about 0:14:58.360 --> 0:15:03.760 that in the description. Now, after discussing the collective effects 0:15:03.800 --> 0:15:06.320 the rising interest rates of central banks are having on 0:15:06.360 --> 0:15:09.040 the global economy, the f o m C focused on 0:15:09.120 --> 0:15:12.800 the supposedly tight labor market in the United States. I 0:15:12.880 --> 0:15:16.840 say supposedly because there's lots of debate about how accurate 0:15:16.960 --> 0:15:21.880 the unemployment statistics are. Case and point tech companies have 0:15:22.040 --> 0:15:25.800 literally laid off over one hundred thousand people over the 0:15:25.880 --> 0:15:29.360 last few months and are planning to lay off hundreds 0:15:29.360 --> 0:15:33.680 of thousands more going forward. This might just be a 0:15:33.680 --> 0:15:36.840 case of media bias, but it really looks like people 0:15:36.880 --> 0:15:40.280 are starting to lose their jobs across the board. This 0:15:40.400 --> 0:15:42.640 is implied by the f O m C in the Minutes, 0:15:42.880 --> 0:15:45.800 as they note the supply of labor coming in line 0:15:46.000 --> 0:15:49.800 with the demand for labor. They also note that most 0:15:49.920 --> 0:15:52.640 of the demand for labor is coming from low skilled, 0:15:52.880 --> 0:15:56.840 low paying jobs that recently fired six figure salaried software 0:15:56.880 --> 0:16:01.720 developers probably won't be doing any time and soon. What 0:16:01.960 --> 0:16:04.800 sucks is that the people working these low skilled, low 0:16:04.840 --> 0:16:08.960 paying jobs are being squeezed the most by inflation. The 0:16:09.000 --> 0:16:12.360 element that's been hitting most people the hardest is the 0:16:12.400 --> 0:16:17.440 cost of accommodation i e. Rents. What really sucks is 0:16:17.480 --> 0:16:19.720 the f O m C projects rents will be one 0:16:19.760 --> 0:16:23.600 of the last inflation dominoes to fall now when it 0:16:23.640 --> 0:16:27.640 comes to inflation expectations, the f O m C observed 0:16:27.760 --> 0:16:31.920 that long term inflation expectations remain quote well anchored, as 0:16:32.000 --> 0:16:36.160 Jerome loves to say. However, they cautioned that if long 0:16:36.280 --> 0:16:39.920 term inflation expectations start to rise again, then it could 0:16:39.960 --> 0:16:45.040 make their fight against inflation that much fiercer. What's fascinating 0:16:45.160 --> 0:16:46.960 is that the f O m C seems to have 0:16:46.960 --> 0:16:49.960 gotten into a small argument over how long it takes 0:16:50.200 --> 0:16:53.200 for the Fed's rate hikes to affect the economy. The 0:16:53.240 --> 0:16:56.040 section of the minutes breaking down this exchange is one 0:16:56.080 --> 0:16:58.960 of the lengthiest by far, which is why I suspect 0:16:59.160 --> 0:17:01.720 there was a lot of back and forth there. For 0:17:01.760 --> 0:17:04.520 those who don't know, Jerome seems to believe that the 0:17:04.520 --> 0:17:08.160 FEDS rate hikes have a near immediate impact on the economy. 0:17:08.800 --> 0:17:12.480 His reasoning is that the economy has become so financialized 0:17:12.720 --> 0:17:15.280 that it doesn't take more than a few months for 0:17:15.320 --> 0:17:18.760 the effects of rate hikes to be felt. By contrast, 0:17:19.080 --> 0:17:21.760 the academics on the f O m C argue that 0:17:21.840 --> 0:17:24.840 it takes much longer for rate hikes to impact the economy. 0:17:25.320 --> 0:17:28.359 This is because history suggests that it takes up to 0:17:28.480 --> 0:17:31.480 eighteen months for the effects of rate hikes to be felt. 0:17:32.160 --> 0:17:35.040 Jerome seems to have pushed back by pointing out that 0:17:35.080 --> 0:17:38.840 this historical data is shaky at best. The f O 0:17:38.960 --> 0:17:42.880 m C quote generally noted that their economic projections are 0:17:43.080 --> 0:17:46.080 uncertain and they believe that inflation is more likely to 0:17:46.160 --> 0:17:49.840 increase than decrease in the short to medium term. Some 0:17:49.920 --> 0:17:53.080 members once again repeated that this is all Russia and 0:17:53.160 --> 0:17:57.399 China's fault. Good thing, Jerome knows what's up. In terms 0:17:57.520 --> 0:17:59.919 of U S. Treasuries, the f O m C one 0:18:00.160 --> 0:18:04.680 again acknowledged that markets for US government debt are lacking liquidity, 0:18:04.680 --> 0:18:09.840 but remain quote orderly. If you're wondering why liquidity is important, 0:18:09.960 --> 0:18:12.919 that's because high liquidity means that you can sell a 0:18:13.040 --> 0:18:16.920 large amount of an asset without moving its price. Now 0:18:16.960 --> 0:18:19.679 I couldn't help but notice that some members of the 0:18:19.720 --> 0:18:22.920 f O m C quote noted the risks posed by 0:18:23.000 --> 0:18:26.760 non bank financial institutions amid the rapid global tightening of 0:18:26.800 --> 0:18:30.240 monetary policy and the potential for hidden leverage in these 0:18:30.280 --> 0:18:35.879 institutions to amplify shocks. I see you, Michael Barr. The 0:18:36.000 --> 0:18:38.760 f O m C went on to agree on raising 0:18:38.800 --> 0:18:42.080 interest rates by another seventy five basis points and patted 0:18:42.080 --> 0:18:45.520 themselves on the back for raising rates so aggressively. They 0:18:45.560 --> 0:18:48.439 agreed that the labor market is tight, at least on paper, 0:18:48.800 --> 0:18:52.240 and that means they can continue raising interest rates while 0:18:52.280 --> 0:18:56.520 claiming the economy is fine. After repeating the mantra that 0:18:56.560 --> 0:18:59.280 the Fed is committed to bringing inflation back down to 0:18:59.359 --> 0:19:02.320 its two pc target, the f O m C reiterated 0:19:02.400 --> 0:19:05.480 that they want to slow the pace of rate hikes. 0:19:06.000 --> 0:19:08.560 This is because they want to see how much the 0:19:08.600 --> 0:19:12.040 already high interest rates will affect the economy and don't 0:19:12.040 --> 0:19:15.439 want to risk breaking something. Now. The last part of 0:19:15.440 --> 0:19:17.600 the Fed's meeting was about the f O m c 0:19:17.800 --> 0:19:21.760 s monetary policy decisions. This part of the minute mostly 0:19:21.880 --> 0:19:25.760 repeats everything from the previous sections. I couldn't help but 0:19:25.840 --> 0:19:29.600 notice that the wording is almost identical to what Jerome 0:19:29.840 --> 0:19:34.720 said during his press conferences. Copy paste is a powerful tool. Indeed, 0:19:35.440 --> 0:19:38.000 in all seriousness, the f O m C agreed that 0:19:38.080 --> 0:19:40.159 it must make it clear to the public that it 0:19:40.200 --> 0:19:43.480 will continue to monitor incoming data when it comes to 0:19:43.600 --> 0:19:47.320 future rate hikes. It seems that this is not being 0:19:47.440 --> 0:19:51.760 underscored enough because what's currently being priced in by investors 0:19:51.920 --> 0:19:54.840 is that the FED will pause and then pivot in 0:19:54.880 --> 0:19:58.000 any case, The f O m C also agreed to 0:19:58.119 --> 0:20:02.000 continue selling assets the central Bank's balance sheet. If you 0:20:02.040 --> 0:20:05.159 watched our video about Jerome Pal's testa means to politicians, 0:20:05.520 --> 0:20:09.080 you'll know he tacitly admitted that this balance sheet run 0:20:09.119 --> 0:20:13.879 off will eventually lead to higher interest rates. Also something 0:20:14.280 --> 0:20:18.920 nobody is noticing. Surprisingly, all members of the f O 0:20:19.080 --> 0:20:22.080 m C voted in favor of the seventy five basis 0:20:22.119 --> 0:20:25.520 point great hike and the other ongoing actions being taken 0:20:25.600 --> 0:20:28.280 by the FED, such as the balance sheet run off. 0:20:28.920 --> 0:20:31.960 This is surprising because it suggests that even the more 0:20:32.080 --> 0:20:34.800 dovish members of the f O m C realize that 0:20:34.920 --> 0:20:39.760 inflation will stick around for a while. This brings me 0:20:39.800 --> 0:20:42.160 to the big question, and that's what all this means 0:20:42.200 --> 0:20:45.199 for the markets in the coming months. In short, it 0:20:45.320 --> 0:20:48.800 could really go either way. From where I'm standing, the 0:20:48.840 --> 0:20:51.719 Fed has made it clear that it will adjust interest 0:20:51.800 --> 0:20:55.880 rates in response to inflation and employment statistics. In case 0:20:55.960 --> 0:20:59.080 you haven't noticed, things aren't looking too good on the 0:20:59.119 --> 0:21:03.240 inflation front. Large amounts of stimulus, supply chain issues caused 0:21:03.240 --> 0:21:06.720 by pandemic restrictions and yes, the war in Ukraine and China, 0:21:06.880 --> 0:21:10.080 zero COVID policies all look like they're going to keep 0:21:10.160 --> 0:21:14.520 inflation high. The most inflationary factor, however, seems to be 0:21:14.720 --> 0:21:19.359 the reassuring of supply chains. The disruptions to supply chains 0:21:19.440 --> 0:21:22.520 caused by all the above has pushed many countries to 0:21:22.640 --> 0:21:27.760 start bringing manufacturing back within their borders, especially the manufacturing 0:21:27.840 --> 0:21:31.840 of microchips. If you watched our recent video about Goldman 0:21:31.880 --> 0:21:35.400 Saxes analysis of the fed's two percent target, you'll know 0:21:35.520 --> 0:21:38.880 it's possible that we will be entering a prolonged period 0:21:39.000 --> 0:21:42.679 of higher inflation as a result. This begs the question 0:21:43.000 --> 0:21:45.400 of whether the FED would accept a three or four 0:21:45.440 --> 0:21:49.959 percent inflation rate, and the answer currently isn't clear. On 0:21:50.000 --> 0:21:53.960 the employment side, things are looking kind of sketchy. I am, 0:21:54.040 --> 0:21:56.960 by no means an expert in employment statistics, but I've 0:21:56.960 --> 0:22:00.640 been hearing in many macro podcasts that these stats are 0:22:00.680 --> 0:22:06.160 calculated in questionable ways. The same is true of inflation statistics, 0:22:06.160 --> 0:22:09.479 but we all knew that already. This begs the question 0:22:09.560 --> 0:22:12.280 of just how much the books can be cooked to 0:22:12.359 --> 0:22:15.000 convince the American public that the job market is doing 0:22:15.040 --> 0:22:18.280 just fine, or rather how hard. The f o MC 0:22:18.440 --> 0:22:21.480 can squint at the numbers until they see what they want. 0:22:22.080 --> 0:22:24.440 I reckon it'll be hard to keep up the illusion 0:22:24.480 --> 0:22:27.439 when the average person's own lying eyes start to notice 0:22:27.600 --> 0:22:31.400 that everyone around them is losing their job. I'm sure 0:22:31.440 --> 0:22:33.720 the fact checkers will come in with full force on 0:22:33.800 --> 0:22:36.720 that one, But so long as free speech on Twitter exists, 0:22:36.880 --> 0:22:41.400 the truth will find its way out. Thanks Ellen. In 0:22:41.480 --> 0:22:44.560 some then, it's going to be a very uncertain few 0:22:44.560 --> 0:22:48.800 months for both the FED and therefore the markets. Assuming 0:22:48.880 --> 0:22:51.239 the FED follows through on slowing the pace of rate 0:22:51.320 --> 0:22:55.400 hikes and pausing sometime early next year, we could finally 0:22:55.440 --> 0:22:59.800 see some recovery rallies in stocks, cryptocurrencies, and other assets. 0:23:00.480 --> 0:23:03.359 That said, I have a bad feeling that we're going 0:23:03.400 --> 0:23:07.000 to see a bearish catalyst that takes all assets much 0:23:07.200 --> 0:23:10.960 lower than they currently are, a catalyst that will shake 0:23:11.160 --> 0:23:15.119 retail investors to the corps and cause institutional investors to 0:23:15.200 --> 0:23:18.720 run screaming into the arms of the FED. Let's hope 0:23:18.840 --> 0:23:27.600 I'm wrong about that one. Earlier this year, we made 0:23:27.680 --> 0:23:32.280 two very important videos about crypto. One was about when 0:23:32.320 --> 0:23:35.399 the crypto bear market could end, and the other was 0:23:35.440 --> 0:23:39.240 about how low cryptocurrencies could go during the bear market. 0:23:39.960 --> 0:23:42.600 Over the last few months, we've been keeping a close 0:23:42.680 --> 0:23:46.760 eye on the indicators we identified in those two videos. Now, 0:23:46.840 --> 0:23:49.080 the good news is that they seem to be accurate. 0:23:49.359 --> 0:23:53.840 The bad news is that the bottom isn't in yet. Today, 0:23:53.920 --> 0:23:56.800 I'm going to explain why the crypto bear market will 0:23:56.880 --> 0:24:00.960 likely continue, when it's likely to end, and estimate how 0:24:01.040 --> 0:24:05.280 low cryptocurrencies could go before it's over. This is a 0:24:05.359 --> 0:24:08.879 video you don't want to miss. I want to start 0:24:08.920 --> 0:24:12.040 by saying that nobody knows the future, not even me. 0:24:12.720 --> 0:24:15.639 Everything in this video is based on the best information 0:24:15.680 --> 0:24:18.520 my research team and I could find. Note that this 0:24:18.680 --> 0:24:22.520 is information that could change at a moment's notice. It 0:24:22.560 --> 0:24:25.399 should also go without saying that nothing in this video 0:24:25.880 --> 0:24:30.480 is financial advice. That said, the first reason why the 0:24:30.480 --> 0:24:34.320 crypto bear market is likely to continue is because retail 0:24:34.359 --> 0:24:39.000 investors haven't capitulated yet. In other words, lots of regular 0:24:39.040 --> 0:24:42.239 crypto investors are still holding on to their coins and 0:24:42.280 --> 0:24:47.119 tokens despite some massive losses. This is also true for 0:24:47.240 --> 0:24:51.240 stocks and other assets with retail exposure. Now, that second 0:24:51.240 --> 0:24:54.840