Clueless Politicians vs. Inflation

Video Transcript:

I understand inflation is a real challenge to American families. Today's inflation report confirm what America has already know. Putin's price hike is hitting America hard. To turn to another point, Chairman Powell, I realized there are a number of factors that play a role in the historic inflation that we're experiencing. So by changes, rupptions, regulations that constrain supply, we've got rising inflation expectations and excessive physical spending. But the problem hasn't sprung out of nowhere. And in January of 2021, inflation was at 1.4%. By December of 2021, it had risen to 7% of fivefold increase. Now since the war in Ukraine began in late February, the rate of inflation has risen incrementally, another 1.6% to a current level of 8.6%. So again, from 7% to 8.6%. Given how inflation has escalated over the past 18 months, would you say that the war in Ukraine is the primary driver of inflation in America? No, inflation was high certainly before the war in Ukraine broke out. Music Oh, right. Welcome to another macro discussion. And folks, I got a good one for you tonight. And it's going to be a big one, and a long one. So let's not waste any more time, buckle up your seat belts, and here it is. In focus tonight. The Wall of Fawri. Yep, we're going back to the Wall of Fawri. It's been a while since we talked about the Wall of Fawri. So here it is. And the items that we have in the Wall of Fawri, the brothel in DC. You're familiar with that. We're going to talk about it tonight. But we also have Russia. We have the thing in China. And of course, Gibraltar, the hawk. But here's the thing. Sometimes you stay in the Wall of Fawri for too long. You actually become a source of optimism. Yep, what do I mean by that? Take for example Russia remains a hot item in the Wall of Fawri, and things could get a lot worse. For example, the economic aspect of the war could get a lot worse. On top of that, the conflict could evolve into World War III into a nuclear war. But since Russia spent a lot of time in the Wall of Fawri, now it becomes a source of optimism. Folks are talking about a truce between Russia and Ukraine. And that stimulates optimism in the equity market. Why? Because if we have a truce between Russia and Ukraine, the assumption is, commodities prices will go down, the wheat will get out of Ukraine, oil prices might ease, etc., etc. And hence, it becomes a source of optimism. Likewise, when we talk about China, for example, China used to be a major source of worry. But now it is becoming a source of optimism. Since the draconian lockdowns are being lifted, we're seeing the pace of economic activities being resumed in China. So that becomes a source of hope. Not a source of worry, at least for now. Of course, we have a lot to worry about when it comes to China, specifically Taiwan. Another item is the Fed. And again, the Fed has been the Wall of Fawri for too long. Now it becomes a source of optimism. What does that mean? We know the Fed is hawkish and the expectations are. They're going to increase interest rates by 75 basis points in the next meeting. If inflation doesn't go down, they're going to have to be even more hawkish. But what if the Fed decides that they're not going to be as hawkish as the market is anticipating, for example? That could be a source of optimism, not a source of worry. So you see what's going on here. Things stay for too long in the Wall of Fawri. They become sort of priced in, and the market becomes so numb to the bad news coming from these items. But it gets excited if any source of optimism comes out of these items. We have at least three. Russia, China, and the Fed. Now what about the thing? Are we even talking about the thing anymore? Maybe. Maybe the thing will make a comeback right around the November elections. Speaking of the elections, we also have another item in the Wall of Fawri. That is the brothel in DC. Now are we worried about a certain policy that's about to come? Not really. There's nothing going on until the elections. Now the elections become a source of worry because the market has to price in. What if the Democrats hold the majority? What if the Republicans take over the majority? And that's going to become high as we get closer to November. But for now, what is the source of worry from DC when it comes to the stock market and the economy? The answer is the fact that these clueless morons have absolutely no idea how the economy works, have absolutely no idea how inflation works, and now it became a freak show. As you will see in a minute, it is a circus between the Democrats and the Republicans. On one hand, you have the Democrats. Embracing inflation, believe it or not, they're blaming inflation and Putin and the war. And whatever else, doesn't matter. Pick your pick. But their concern right now is what if the Fed tinds too much? Mr. Powell, please don't increase interest rates because you're going to cause higher unemployment. Maybe a sustained inflation is a bit of a scenario and a recession. Of course, the Democrats are looking at further rasses because they're about to get kicked in November. On the other hand, the Republicans, they're well aware that inflation has always been a monetary phenomenon. But of course, they're going to take advantage of the situation and play politics, and they're going to blame inflation on the Biden administration. Now, this channel talked in details about the missteps that the Biden administration took. The green energy lunacy, the anti-oil and gas policies, yadda yadda yadda. But at the end of the day, this is not the real source of inflation. The real source is the Montrepancy, the insane money printing. But the Republicans are playing this game of, oh, it's Biden's fault. Nadjaro on pound in the Fed, the guy who was testifying right in front of them last week. They did not hold a mechanical at all. So this is the background for the circus you're about to see. With that further ado, let's visit DC. And I want to be clear from your comments, publicly your comments to this committee today. You see the, you say the economy is not at the point of a recession, correct? I don't see the likelihood of a recession as particularly elevated right now. You should know that no one is very good at forecasting recessions. And very far out, we're just, no one's been able to do that regularly. So, but I would say that, you know, the US economy for now is strong. And spending is strong. Consumers are in good shape. Businesses are in good shape. Yeah, the economy is doing great. The consumer is doing great. Businesses are doing great. Nothing to see here. The economy is doing beautiful. Forget about chasing Revlon stock. Jerome Pound got the real makeup. He can put a lipstick on a pig. The economy is doing great, Mr. Pound. You mean your own Fed? The Atlanta Fed is down. Forecasting that the GDP will go down to zero in Q2. And this has yet to be updated by the way. The next update, the GDP forecast will probably go down to negative. But Jerome Pound says the economy is doing great. He says the consumer is doing great. Have you seen the consumer sentiment index, Mr. Pound, the lowest reading in history? He also said businesses doing great. Oh, really? Like the small business optimism index, for example, that is falling apart right now. Or how about the fact that we have only 19% of business leaders. Or confident in this economy. But according to Pound, things are doing great. More makeup tips by Jerome Pound. Take a look. Well, consumers are overall, not every consumer. But overall, the consumer sector is in very strong shape financially. There's, as you know, a very substantial accumulated quantity of savings on balance sheets. Meanwhile. Yeah, the savings rate is actually collapsing, Mr. Pound. And now it is reading below the 2008 readings. Hmm. A window would happen back then. You know what the real problem is, though? We have a popular opinion right now that says the Fed doesn't need to tie in as much because. In this case, the cure is worse than the illness. The illness in this case is inflation, while the cure is a recession. Of course, it didn't have to be that way. But the Fed is too late to the game. They've been saying inflation is transitory, transitory, transitory. And we're not thinking about thinking about thinking about thinking about raising interest rates. Now the chicken are coming home to roost. And the Fed has no other choice but to increase interest rates higher, causing a recession. Because at this stage, there's no other cure that will take inflation down besides the recession. But he have folks like Mama Kathy Wood, for example, Tesla witch Kathy Wood, who says that the Fed is being too aggressive right now. They shouldn't cause a recession with huge rate hikes, meaning Mama Kathy wants the racket to continue. Keep inflation high, who cares? Keep pumping that easy cheap money in the economy and the stock market. And that's the new normal. We have to live with higher inflation. Because that's a lot better than a recession. Here's this guy who says Jerome Powell is the worst Fed will reserve policy maker in my lifetime. I say he's the worst in history, but this guy says that he's the worst. And he's the worst in his lifetime because he's tightening too much. He's crushing the stock market too much. He's going to cause unemployment to go higher. He's going to cause a recession. Of course Jerome Powell has to do all of these things to clean up his mess. The mess of inflation that he created by unleashing the biggest wave of liquidity in human history. That tsunami of liquidity trillions and trillions of dollars, also known as the cocaine operation. And now yes, a recession is bad. Nobody wants a recession in the economy because if Powell lets this inflation go because he's afraid of causing a recession, well guess what? The stack inflation crisis in this country will intensify and stack inflation will kill the pace of economic activities and it will kill employment in the economy. We will see job losses anyways. The problem is in that scenario inflation will not go down. So take your medicine. Which one do you want? Do you want stack inflation to do the job slow and painful death of this economy? I know by the way at some point the Fed will realize that inflation is not going to go down to its own and they will have to tie in the monetary policy to kill inflation. But at that time the economy will be in shambles. High unemployment and a slower pace of economic activities. The other medicine is do it right now. High rates aggressively. Get ahead of inflation. Yes, you're going to cause a recession. We're going to lose lots of jobs, but inflation will go away. And then we can rebuild again. Which one do you want? These folks are saying just let inflation go. They don't understand that if you let inflation go it's going to morph into a stack inflation crisis and stack inflation will kill jobs anyways. This is from the LA Times saying that should we raise unemployment to fight inflation question mark? No, we need to protect jobs no matter what. Even if it means hyperinflation, even if it means stackflation. And among those supporting this theory is Senator Elizabeth Warren who's absolutely delusional right now going back and forth with Jerome Powell to get to the point Mr. Powell let inflation go because letting inflation goes a lot better than higher unemployment and a recession. Take a look. Tent to drive. So I appreciate this and I do appreciate the explanation. But let me just see if I can just put a little more plain vanilla explanation of what's going on here. If I understand what you've said and what economists are saying across the board is that when you raise interest rate there's going to be less money to invest. And that is it's going to dampen business investment. Is that a fair statement? There's a lot of things I could say right now that I'm not going to say. I think the idea is to moderate demand so that it can be in better balance with supply. So it's going to make it more and as well in excess of supply in some areas of our more expensive to invest. Which in turn is going to throw workers out of work. Now she's right. Higher interest rates will cause higher unemployment. Why? We explained that in details in this channel. Companies will move from cap ex capital expenditure to capital preservation. What does that mean? Cutting expenses. Where can companies cut expenses easily? The answer is excess employment. Getting bread of employees specifically when the economy starts to slow down perhaps head into a recession due to higher interest rates. She's right. But what is the alternative senator? And when they're out of work they have less money to spend. So I get that rate increases stop companies from spending money to build new plans or to buy new trucks or to hire new people. Right, Sherpowl? When money is more expensive they're less inclined to do that. I think that's what you just said on asset pricing. Right? Well, in the labor market you have, as you know, you have a situation where there's a shortage of workers and there are two job vacancies for every person who's actively looking for work. So part of this is to get the labor market back into balance. Well, I appreciate you calling it back into balance from trying to get at though is what does the tool of raising rates do? And part of what you just said is that it increases, in effect, the cost to invest to buy those trucks or new plans or to hire new people. The reason I raise this and the reason I'm so concerned about this is rate increases make it more likely that companies will fire people and slash hours to shrink wage costs. Rate increases also make it more expensive for families to do things like borrow money for a house and so far the cost this year of a mortgage has already doubled inflation is like an illness and the medicine needs to be tailored to the specific problem. And why you could make things a lot worse and right now the Fed has no control over the main drivers of rising prices, but the Fed can slow demand by getting a lot of people fired and making families poor. And while President Biden is working to increase energy supplies and straighten out supply chain kinks and break up monopolies and bring down prices. You could actually tip this economy into recession. So I just want to say you know what's worse than high inflation and low unemployment. It's high inflation and a recession with millions of people out of work. And I hope you'll reconsider that as you drive this before you drive this economy off a cliff. Now this is a moronic take to say the least because she says higher mortgage rates will make housing unaffordable is housing affordable right now Senator. Of course not the American dream is dead. This is what inflation does. I'd rather have a crash hold tight but call out get the recession out of the way but get those prices down. And you know what we're going to have higher mortgage rates for a little while and then that's going to go down to but keeping this racket going look at the consumer sentiment index for example every time it goes down this much unemployment will go high. No matter what because inflation stack. So I think that's the job take your medicine now. Do you think this fool understands anything of course not and then she says all the Biden administration is working on solving this inflation by what by increasing supply by tackling monopolies and all of these fantasies as if she's absolutely illiterate when it comes to economics inflation has always always been a monetary phenomenon meaning the Fed is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer question is the right answer to the question is the right answer to the question is this question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer to the question is the right answer would you have to that analysis if any? It's another example of the people who produce the inflation finding this, of trying to find scapegoats for their own deficiencies. Of course the inflation will respond to monetary restraint. There is no such thing as cost-push inflation except in the form of the delayed effect of monetary inflation. If you have a monetary inflation that starts to push up prices, it tends to hit retail and wholesale prices first, the prices you and I pay. It's only later that it works its way through costs. But then, costs fall behind prices. And there's a makeup period. And during that period you have what looks like cost-push inflation. But there has never been an inflation in history that didn't respond to monetary restraint. If you look at American experience that restaurant part of the monetary restraint. If you take that roller coaster I was telling you. In each occasion the slowdown in the rate of inflation was preceded by a slower rate of monetary growth. And you have much more dramatic examples of that. Most dramatic example from American history of how inflation responds to monetary restraint was one that was once dug up by a student of mine when he was writing a dissertation on inflation in the Confederacy during the Civil War. And in the later parts of that war, you know, the South financed the war almost entirely by printing press money. And the rate of inflation during the Civil War in the South, I don't know, got up to something like four or five percent a month or more. But at one point in the later part of the war, the Northern Army over ran the place in the South where they were printing money. And for two weeks the printing presses could not operate and lo and behold within two weeks the inflation stopped. Meaning that the problem is over stimulation of the demand of the economy. And if your solution and your remedy is we have to bump up the supply to catch up with that level of demand that is unsustainable by the way, you're going to run into the opposite problem in the future, which is too much supply and very little demand. What does that do? That in itself crashes the economy and causes not just the recession, but a deep pressure. Look for example of what happened in 2020 when the demand in oil suddenly dropped of the face of the earth and the market became oversupplied. Oil prices went negative in the futures. And we saw bankruptcies and shut downs of refrineries and oil facilities, oil companies, fracking companies, shale companies, oil went bankrupt. And now we have the problem of shortage in refiners, in oil producers because then ever came back. Another example is what happened to Peloton. Peloton assumed that the insane demand that they got back in 2020 during the lockdowns is sustainable. And they ordered the supply chain to increase the supply dramatically, assuming that that kind of demand will be sustainable. They ran into the opposite problem, the stock crashed and now we have a massive risk that this company could go bust, delaying off employees. Increasing the supply to meet an insane, add a whack level of demand is not the solution. And it's not going to take inflation down. The evidence to support that is, look at the Biden administration's policy, for releasing about 1 million barrels a day from the strategic petroleum reserve, did that take oil prices down? Of course not, matter of fact, oil prices shot up higher in response to that. Why? Because the underlying conditions to feed this inflation are still alive. What are the underlying conditions feeding this inflation? The answer is the easy money policy by the Fed will reserve. So long as interest rates continue to be lower, so long as the balance sheet and the money printing continues to go on, the stimulation of demand will continue to go on. And now you have to increase the supply by even more. And now it becomes a cat and mouse kind of game. This is not the solution. These people want their cake and the one I eat it to. Well, it doesn't work that way. You got to slay the inflation dragon right now. And the only way to do it is to take the hard pill. Here's from Larry Summers. Look, I think David that our recession is almost inevitable. Probably a 75% 80% chance within the next two years. And there's certainly a real risk that it will come sooner. That's going to be a very difficult thing, though, as I say, I think it may be inevitable, given where we are. But I think it's going to be very important to make sure that if we're going to go through a period of pain, we do slay the inflation dragon. There have been many failures, particularly the 1970s of a classic example of where economic policy makers did the equivalent of stopping their antibiotic when they felt better, but before the 10-day dose was through. And so it's a very, very difficult set of balances and challenges that the Fed is going to have. I very much hope that they make wise choices. Because what Senator Warren doesn't understand, and anybody who believes that the Fed has to take it easy because unemployment and the recession is worse than inflation, what they don't understand is if you increase the supply, what does that require? It requires hiring employees, building factories. Well, that takes time, but besides that, it also takes employees. You're going to have to hire thousands, millions of employees to produce that supply. That causes more and more inflation. Wage inflation in this case, and the catch is inflation will continue to move higher, outpacing the growth rate in wages. A net net where we're seeing right now in this economy is negative real wages. Is Senator Warren happy to see that when your real wages are actually down by 4% when you factor in inflation? This is unsustainable, folks. You're going to take the hard medicine, the blunt force tools courtesy of Jerome Powell. Clearly financial conditions have tightened, and you're seeing growth slow from the very elevated levels of last year associated with the reopening. You're seeing the beginnings of job growth slowing to more sustainable levels. There's risk in that. There's obviously risk in that. Monetary policy is famously a blunt tool. There's risk that weaker outcomes are certainly possible, but they're not our intent. Again, it didn't have to be this way. All of this could have been avoided. Had the Fed acted rationally and started increasing interest rates and tapering earlier last year. When us critics said you have to do so, to the Fed, but the Fed was stubborn. Jerome Powell kept saying transitory. He's not thinking about thinking about thinking, and now he rear. But it's not just the Democrats and Senator Warren, who believe in all of that. Even the Republicans, here's Senator Rounds, I believe, North or South Dakota. He also believes in this crap. He believes that there is a difference between core and actual inflation. He thinks that the Fed has controlled only over core inflation, but the Fed has no control at all over energy and food prices, and therefore it is a supply problem, not a demand problem. And the Fed should not crush the demand in the economy. Take a listen. The prices are instead, I believe, a direct result of policy decisions made by the Biden administration, like prohibiting new oil and gas leases on public lands and waters, and choking off future access through the Keystone XL pipeline, and increasing US dependence on foreign energy sources by actively calling on OPEC to produce more oil. All of these seem to send a terrible message to the market about the future of investing in oil and gas processes within the United States. Here we go again. It is Biden's fault. Biden is causing energy and food prices to go higher. Once we get rid of Biden, energy and food prices will go down, and therefore Mr. Powell, you don't have to do anything here. You don't have to increase interest rates. You don't have to cause unemployment. You don't have to cause a recession. All of this is a fantasy. Is Joe Biden responsible for some of this information? Yes. But is canceling the Keystone pipeline also causing energy prices in Britain to move higher? Of course not. If they should move higher because it is a monetary phenomenon. The Fed printed too much money over stimulating the economy. That money doesn't disappear in a black hole. It goes into spending in the economy. A lot of demand chasing very little supply. It goes into speculation in the commodities market, pushing oil and commodities prices higher. When the Fed does that, commodities for the most part are dollarized. They're traded in the US dollar. So it doesn't matter if you live in India, maybe the Indian central bank did not print too much money. But the American central bank did. You have to buy commodities on the global market using US dollars. When you pay higher prices for commodities, you're going to pass that all the way to the end consumer. Whether you live in India, in Norway, in Japan, in China doesn't matter. And hence the saying, when the US sneezes, the entire world catches AIDS. It's all about the Fed would reserve. That is the primary source of inflation. Back in the 70s, the US Fed would reserve printed too much money. Not just in the 70s, but in the 60s too, to fund the Vietnam War, etc., etc. Inflation became contagious in the 70s. A global phenomenon, even though some of these countries that suffered from inflation did not print too much money. But so long as the US does it, everybody gets hurt. And now you know why the rest of the world hates this country, continuing. At the same time, Mr. Chairman, your tools are designed, as we've discussed in the past, to impact not necessarily the supply side, but the demand side of inflation. So if you attempt to use your tools that are available at this time to address what I believe to be the policy-induced side of inflation, do you risk hurting the economy by using these interest rate increases when, in effect, as you've indicated earlier here in this meeting, that you really can't impact the price of gas or the price of food. I think that's right. We know that our tools can't affect certain aspects of inflation, and that would include certainly energy inflation and food inflation. So nonetheless, our statutory goal is headline inflation. But we also know that core inflation is actually a better indicator of headline inflation, than headline inflation itself is, because food and energy tend to be quite volatile. They tend to move up and move down, and that's been the history. So core enables us to look through that volatility. And so we focus very much on that as a better representation of what underlying inflation of the economy is at any given time. And I think, but in this particular case, that core inflation, if we're not going to include some of those, what I think earlier we thought would be transitory and nature portions of inflation, they have proven not to be transitory. In fact, South Dakotans are now paying $682 more per month on goods and services, and they were when President Biden took office due to inflation. The administration is claiming the Federal Reserve can fix our inflation problem. But as you've just indicated, you focus on core, and your tools might very well work on core, but not on those really heavy drivers to inflation that South Dakotans are seeing like the rest of the country. See, Mr. Chairman, what I believe is going to happen here, and I just share this clearly you are aware that you're going to be the person that takes the fall if inflation is not brought under control. And this administration is going to point to you and to the Federal Reserve saying, you have the tools to fix inflation and you're not doing your job. When in essence, the portion of inflation which Americans are feeling today may not just be the core inflation that some of your tools do, but the total cost of inflation that my citizens in South Dakota feel to the tune of $682 more per month in living expenses and what they were when this administration took office. So we're focused on the part of it that we can't address, and that is there's a job to do on demand here. There are parts of the economy where demand exceeds supply, and that's where we think our tools can help, and that's what we're focused on. In that issue, control over demand versus supply by the Fed brings up the conflict between the two mandates, price stability and lower unemployment. Those of us who say Mr. Powell, you need to increase interest rates higher to tackle inflation are concerned about price stability. Those the likes of Senator rounds and Senator Warren for example are concerned about unemployment. They want to keep unemployment low, even if that means no price stability. So we have a conflict here between the two mandates. How would the Fed sort that out? Take a listen. I'd like to turn to the situation we find ourselves in now tightening. A recent survey of global CEOs showed that more than 60% of executives expect to recession in the next 18 months. Meanwhile, per its most recent forecast, the Fed will be tightening monetary policy for the next two and a half years. Thus the Fed could soon find itself in the challenging position of potentially exacerbating an economic downturn in order to address the historic inflation that's been unleashed by the Biden administration. So Mr. Chairman, as you know, the Fed has a dual mandate, stable prices and maximum employment. As we look to the fall, how do you think about balancing this potential tension between the Fed's two mandates, particularly of the economic outlook worsens, but inflation remains elevated? So we do have a dual mandate as you point out. Right now, the labor market is extremely tight and I would say unsustainably hot. And there's a mismatch between supply and demand there. As you know, there's more job openings than there are by a factor of two to one, then there are unemployed people looking for work. On the inflation side, we're very far from our target. So we think that we have to restore price stability to put the economy back in a place where in the medium and longer term, we can have an sustained period of what we would call maximum employment. So that's how we're thinking about it. Of course, we're not trying to provoke and don't think that we will need to provoke a recession, but we do think it's absolutely essential that we restore price stability really for the benefit of the labor market as much as anything else. In other words, what Mr. Pal is saying, just Jerome Pal about that. What Jerome Pal is saying is to serve the two mandates, we have to have some sort of a balance. For now, the unemployment rate is too low. Meanwhile, inflation, when it comes to price stability, is too high. And therefore, what Jerome Pal is saying, we need a recession, we need higher unemployment, need to give a little bit in the unemployment rate to make sure that we have price stability. To get that inflation rate down, now what Pal doesn't understand is the following, what is the balance here? What is the sweet spot to balance the two mandates? Pal thinks 4% unemployment will do the job. 4% is not that bad, but inflation is going to go down. That's a fantasy. For this kind of inflation to go down, the unemployment rate has to go higher, much higher. Above 5%, some would argue 8% to 10%. Now Maverick, why should the unemployment rate shoot up that high? 8% to 10% to tackle this inflation? The answer is, look at the insane demand in the economy. We're out of pilots, we're out of homes, we're out of chips, we're out of cars. You really think a 1% or 2% increase in the unemployment rate will do the job? No. This inflation will only go down if we have a severe shock to the economy. And that shock requires a high unemployment rate to loosen the demand and free up supply, because you're not going to have supply right away. It takes time to build more homes. It takes time to produce more chips. It takes time to produce more cars. It takes time to train pilots to fly planes. In the meantime, if you wait till that happens, inflation will continue to move higher. Enroding, wealth, eroding, the purchasing power, eroding, the wage gains of workers. You like working for free, matter of fact, working and losing money, your wages are down 4%, you like that, and again, all of this would have been avoidable if the Fed acted responsibly. If they listened to this channel, all of this crisis would have been averted. But anyways, here's the question about housing. Just so you understand that to solve this inflation problem, it will require a lot of pain, lots of unemployment, much higher interest rates, and a crash in stocks and real estate values. Because tackling inflation down according to Jerome Powell is a fantasy of, oh, the unemployment rate will just go higher to 4% and that'll do the job. There is something he's hiding. He's not being honest with you. Take a look. Chairman Powell has the Fed raises its interest rates. What is the Fed doing to prevent this rate increase from further exacerbating the housing crisis? Well, so... By raising rates, what you're seeing is a slowing housing market now. You're seeing because of higher interest rates, mortgage rates have gone up pretty substantially, and you're seeing a slowing in the housing market. That should mean, one of the things that should mean is that housing prices should stop going up at such remarkably rapid rates. Since the beginning of the pandemic, we've had a very, very hot labor market, sorry, housing market all around the country. What should take place is as demand moderates in demand for housing moderates, for new and existing homes. You should see prices stop going up quite so fast. You're also going to see fewer home sales and just generally a lower rate of activity in the housing market. So, really, what needs to happen is housing supply and demand need to get back into better alignment. And, you know, the part of that that we can control is really by moderating demand so that prices stop going up quite so much and that we can get back to a housing market where supply and demand are... Now, we don't control supply and there's all... There are issues in this country around housing supply. So, what Pound is saying by increasing interest rates and increasing the mortgage rate, this will cause the pace of economic activities in the housing market to slow down. Meaning, prices will stop increasing, but prices will not go down. You see the catch? The Jerome Pound that's victory, that's defeating inflation, but in reality, the average Joe and Jane, housing prices right now are unsustainable and unaffordable, even if they stop increasing from this point on. These prices are not affordable, giving the shitty wages that we have right now. And Jerome Pound, by the way, admitted all of that last year when he gave the definition of transitory. Take a look. The concept of transitory is really this. It is that the increases will happen. We're not saying they will reverse. That's not what transitory means. It means that the increases in prices will happen, so there will be inflation, but that the process of inflation will stop so that there won't be... When we think of inflation, we really think of inflation going up year upon year upon year upon year. That's inflation. When you have inflation for 12 months or whatever it may be, I'm just taking an example, not making an estimate, then you have a price increase, but you don't have an inflation process. Part of that just is that if it doesn't affect longer term inflation expectations, then it's very likely not to affect the process of inflation going forward. What I mean by transitory is just something that doesn't leave a permanent mark on the inflation process. Again, we don't mean. I don't mean that producers are going to take those prices increases back. That's not the idea. It's just that they won't go on indefinitely. What is the point of saying inflation is gone if prices stop moving higher? They're still high. They're still unaffordable. The purchasing power of the consumer is still crushed. The standard of living is down big. The middle class is getting crushed. You can celebrate all you want. The prices are not going higher anymore. And thus inflation has peaked and it's done. The prices remain too high for the consumer. What does that mean? Increasing interest rates by a little bit to slow down inflation is not going to cut the deal. What's going to cut the deal is higher unemployment, much higher unemployment. Because if you want housing prices to go down, we need to see four closures. We need to see freeing up the supply. And that requires higher unemployment. And that's why folks losing their jobs, not being able to afford paying their mortgages anymore. And they have to move out of their houses. That will cause housing prices to go down, but the mild approach of pound by increasing interest rates slightly and being too careful about increasing unemployment higher will keep prices elevated. Now you might say that's a lot better than causing unemployment for closures. What's wrong with you, Maverick? It's not what's wrong with me. It's what's wrong with the Fed. The Fed got us to this, the hunger games of wishing for higher unemployment for folks to lose their homes. So other folks who are lucky enough to keep their jobs can take their place. And now they can afford a home. Folks, I did not design the economic system that we have. It is here. We have to play with the rules. Unfortunately, the rules we're playing with right now are the jungle rules, winners, losers, predators, and praise. Lastly, let's finish with this because I believe that I found the dumbest member of the government. And she comes from Nevada, my former hometown. According to this lady, inflation was not caused by the reckless monetary policy or even the hostile fiscal policy against oil and gas. The green energy, lunacy, yada, yada, yada. Instead, what's causing inflation is price gouging by the oil industry. Yep, take a look. Thank you, Mr. Chairman. Chairman Powell, thank you for being here. Let me start with the high prices because not only in Nevada, but across the country, we're seeing high food, housing, and gas prices, which really is creating a financial hardship for too many families. And I want to start with gas prices first. In Nevada, average price of gas is $5.60. In Las Vegas, about $5.60 in Reno at $6.00 a gallon. And as gas prices rise across the country, oil and gas companies, we know, are making record profits, but are using that money to continue to consolidate their industry and pay for stock buybacks instead of investing in increased oil production. Yeah, how dare they do buybacks just like the technology companies? It's okay when the tech companies do it because they pay my paycheck, but not the oil and gas companies. And oh, by the way, they should invest more in refineries and increasing supply, even though we have the most hostile policies against oil and gas. And the end oil and gas, how come they're not investing in their own death says the Senator from Nevada? On one of them and what I've heard is over 9,000 permits that they have that are unused drilling permits. Or they're not expanding their refining capacity. We also know that reduced finding capacity is a particular problem that has been caused in large part by decades of oil industry consolidation. And is driving gas price hikes to be as much as 61 cents a gallon higher than expected. So when considering the drivers of inflation, how much do federal reserve economists consider consolidation in an industry? And what else can we do to hold these industries accountable for their contributions to rising prices? So those are really questions for the competition authorities, questions of industry structure and consolidation. But there really aren't questions that we directly address. We raise interest rates and our job is maximum employment. But I have to push back. You have to consider that. I mean, you're considering what's happening in Ukraine as a variable on inflation on high prices. So you have to consider the fact that we have these oil companies. They are exclusively controlled. This commodity that is key for this country. We know that not only do they produce and decide how and when they're going to drill crude oil. We also know the refineries, and quite honestly, the refineries in this country are not prepared to refine the domestic oil that even comes from Texas and the Dakotas. The refineries are prepared to refine the oil that comes from out of this country. And we also know that many of the oil companies have their own traders that are trading on the price of crude oil in this country. And listen, you just talked about an outside agency. This is why this is so important and why I am a co-sponsored the Transportation Fuel Market Transparency Act. Glencore was just fine. 1.1 billion dollars because they were manipulating the fuel oil prices to their benefit. So that is something you have to take into consideration when we have an industry like these gas and oil companies that are so consolidated. They are having an impact on the prices to the detriment of the people in my state. So that has to be something you consider and take into consideration when you're looking at the impact that people across the country are seeing from these high prices. I hope it is. Please tell me you are. Okay, A, were you okay when JP Morgan was manipulating the precious metals market, for example, suppressing the prices of gold and silver? B, how come the oil companies Exxon and the likes did not use the Magic Wand of price gouging and their army of traders to manipulate oil prices higher during the crash of 2020? Or even the bear market of oil back in 2014 all the way to 2018? Hmm, maybe because the Senator doesn't know what she's talking about. I mean, I almost feel bad for Jerome Powell here. Well, I think we see that the global oil prices which have very important effects on gas prices here at home are set on the global market. And as we mentioned earlier, there's a large cartel that is responsible to a significant extent. We're setting those prices. We take that as given. So do you pay attention to what is Wall Street is saying and what these cartels are doing when you say cartels, these are these big oil companies and they're indicating that? Well, I'm not going to drill because I'm making profits because the price of gas is so high. So you would assume I would hope that you would take that into consideration that it's going to continue these high prices because there is a challenge in holding these oil companies accountable. So in principle, we pay attention to anything that could affect the use of our tools and the need to use our tools. And I think with the, you know, with the future price of oil, the best thing you can probably do is look at oil futures because that futures in theory should be taking into account, taking into account all of these factors. And that's what we do. But ultimately, the question for us is, do we raise or lower interest rates? We don't have tools that would address these practices that you're discussing. They're not really, of course, we understand them. Well, do you have concerns that these oil companies are manipulating or controlling the prices that we have right now? Does that, do you take that into consideration with the tools that you need to reduce inflation and reduce these costs? Honestly, those are not judgments for us to make. We're, you know, the questions about industry structure and competition are really not, it's not our assignment. Our assignment is the outcome of the outcome of that infrastructure is something you've got to take into consideration. Yes, they're. Unless they change, the prices are not coming down. Unless they stop giving profits and sharing that with their shareholders and start addressing and looking at actually the consumer at the other end of this, who is bearing the brunt of it, these prices are not going to come down. Yeah, how dare the oil companies make profits? They're supposed to be charities. They're supposed to lose money. What a fool. These are for-profit companies, not the Salvation Army. I'm a critic of capitalism too, but until then, come right, these companies are in business to make money. This lady says they should lose money. Why? Because the voters are paying more of the pump and got forbidden. We might lose our elections and to avoid that, oil companies must lose money. Let's see what happens when oil companies lose money because they don't employ people, right? They don't have to pay people. They don't have to pay employees. Some of them might live in your state. By the way, how are they going to invest in refineries and supplying more when they're losing money? You see how moronic and stupid this lady is? This is just a small sample from the DC Freak Show. The clowns. The clueless clowns who are running the economic policy of this country. And you wonder why we're doing so bad. The answer starts with the incompetence of these fools. It is true, though, that mortgage rates have gone up and that will slow down demand. And there's some pain involved in that. For people paying higher mortgage rates and also some people will be priced out of the mortgage market. But that is ultimately what needs to happen if we are to get back to price stability to a place where people's wages aren't being eaten up by inflation. So the greatest pain would be if we allow this high inflation to just continue. We're ready to serve you when in fact we're serving ourselves.