James Lavish: “We Were So Wrong! Everyone’s Missing the Fed’s Big Picture” #Finance

the last thing that the fed and the Treasury want is to destabilize the Treasury market by having a deflationary event mean if we have a spike in unemployment we have mass layoffs the the Stock Market uh sells off companies are making less

money um they’re laying people off their GDP goes down and there’s just not as much money to buy us treasuries that’s a problem why is that a problem well the problem is because we’re running massive deficits we’re running two trillion plus deficits $2 trillion doll

plus deficits annually in a time that we’re not even in a recession so that is an issue the job of the fed and the Treasury are to keep confidence in the dollar and they need to keep confidence in the dollar in order to keep selling treasuries in order to keep running these

deficits because it’s not stopping in the past year and a half Inflation has fallen from a high of 9% to a range between 2.5 % and 3% however questions remain about why the FED is considering lowering Interest Rates when Inflation is still

above its 2% Target one critical indicator the FED uses to assess economic health is the S rule developed by former fed Economist Claudia Sam this rule states that if the average unemployment rate for the past 3 months exceeds the lowest point of the Year by more than 0.5% the economy could be

headed for a recession in an interview with Felix James lavish drives home some key Central points including the Federal Reserve actions particularly its interest rate policy which is primarily focused on maintaining confidence in the US dollar and managing the nation’s massive

Debt rather than strictly adhering to its dual Mandate of controlling Inflation and maximizing employment lavish believes the fed’s job alongside the Treasury is to maintain confidence in the dollar which is essential for continuing to sell

treasuries and fund these deficits he states that stable prices and low unemployment will help sustain that confidence watch clips from the interview for further insights into James lavishes conversation with Felix please like this CashNews.co subscribe to the channel and turn on post notifications

for more content enjoy the CashNews.co but the point of this is that the Inflation has been stuck well above 2% you know 2 and a half to 3% for u a number of months now uh going into uh earlier this year and so you wonder well why is the Fed ready to lower rates all of a sudden if

Inflation is still above their 2% Target it’s a good question the second question is we did see unemployment rise it took it it Rose uh above if you if you look at um there’s one indicator that the FED really likes to look at it’s called the S Rule and the S rule

was was created by claudus am uh she was a Fed uh she was a Fed um employee uh and she Economist and uh and she came up with this rule after her after her time there I believe or at the end of her time there and uh and the rule says that if you take the average unemployment rate for the last three

months and compare it to the lowest point of this cycle of the last year then if it’s more than 50 basis points more than half a percent above that lowest rate so you know to put numbers on it if it if the lowest unemployment rate was three and a half percent and the average last three months

jumps over 4% technically we’re in a recession that means that the unemployment rate is rising fast enough that you are concerned that we’re about to have a spike in unemployment if you look back in time uh you can look at charts of unemployment versus recessions and every single

recession unemployment just spikes right right into it and so um and it happens right after it it crests that half a percent okay so now you’re saying you’re thinking well maybe oh God this means we’re going to go into recession we trip this Som rule you know two uh readings ago

and it looks like we’re going to be spiking right into recession we better lower rates you know is it Panic time and the answer is no um there’s a there’s a lot going on here um so typically in and we heard what what pal said two meetings ago so to lead up to this meeting you have

to think about two meetings ago and he said that the Dual mandate has come back better into balance meaning that they’re they’re doing well with the Inflation uh battle they’ve gotten Inflation down below 3% it’s going towards 2% in in his

words um I I think it’s kind of stuck at two and a half percent um but we’ll talk about that in a second but the second one is he saw Rising unemployment he’s concerned about that now they turned their attention to unemployment so they had their attention fully focused on on

Inflation now they’re like well now what about unemployment let’s let’s focus on that and so going into this meeting you knew that that was kind of on their mind trip the S rule um and uh and the second unemployment reading was kind of uh it was it was a little

bit it was a little bit noisy um but it didn’t jump so that was good news but then going into this meeting and looking at uh the and look at the press release uh you can read through the lines and hear what he said in the press conference afterwards the press conference afterwards he said

Powell said look um the unemployment rate you know it’s it’s stable um but the reason we we believe that the influx of you know many millions of immigrants have uh they’ve affected that rate and so when you have you know 5 10 15 20 million immigrants who knows how many there

really are somewhere between 10 and 20 million immigrants come into this country then um unemployment will go up but it’s an increase in labor Supply rather than a decrease in in available jobs and that’s a big deal James lavish explains that the Federal Reserve dual mandates are stable

pricing and maximum employment while maximum employment is flexible the focus is primarily on maintaining stable pricing defined as a 2% Inflation Target lavish notes that this target seems somewhat arbitrary possibly influenced by Inflation control strategies from

Australia or New Zealand in the 1970s however the real reason behind this target he says is the need to expand the money supply to manage the growing national Debt this expansion allows for future Debt to be repaid with cheaper dollars lavish also comments on the

recent rise in unemployment triggered by the S rule though he stresses that the FED isn’t overly concerned he states that Powell attributes the increase to an influx of immigrants which expands the labor Supply rather than signaling job losses lavish points to the massive $2 trillion annual

deficits in his view a deflationary event such as a Stock Market decline or corporate layoffs could reduce demand for us treasuries and undermine confidence in the dollar ultimately the fed’s priority is maintaining this confidence to keep the economy stable and deficit

sustainable well I mean people are thinking rationally in a in a rational world the FED ought to be tackling Inflation a little bit harder here and and they would they would be concerned that we’re going to have that Spike that we saw back in the 1980s right we’re gonna

have a Resurgence of Inflation then why wouldn’t the FED just cramp down on this and uh and and make sure that the that we don’t have asset Inflation the reason is because asset Inflation is good for the Treasury

ultimately because the market going up as long as it doesn’t go into a bubble and we have a deflationary crash the market going up stair stepping up is good for them because we are a highly financialized um economy in the United States and so um the disconnect is seeing all of this and seeing

how we have Inflation and why are they not bringing Inflation down harder okay now let’s talk through that what can the FED do truly they can raise rates they can keep raising rates they could keep raising rates and it it it hasn’t had the effect that

we thought it was going to have if you think about it if they’re saying that the if if the neutral rate is closer to somewhere around 3% meaning that if we get fed funds back down to 3% that doesn’t that’s not expansionary uh and it it it it doesn’t uh it’s not

contractionary right so it doesn’t it doesn’t make the economy contract or expand it’s kind of just level it just keeps it where it is if that’s where they’re trying to get to if you look back how how much did five and a half percent really impact the market why did

did that if it’s over if it’s five and a half percent is really contractionary right restrictive if it is the word that you really are we’re looking for here is if it’s if if five and per is really restrictive and they’re trying to get back to three and a half percent

well why is Inflation stuck at three and a half percent okay there’s a few reasons number one we have massive spending coming out of Congress out of the out of DC that spending is Inflationary they’re spending money just gen they’re just creating

do basically just creating dollars to spend money and you can see the money supply is expanding now um you can pull up M2 and it’s EXP standing but um it they’re they’re pouring money into the economy and the majority of jobs that have been created over the last 18 months were

from the government they’re not private so that tells you that that spending out of the government is keeping the economy going is it fake it’s not fake because it’s real you know real dollars going into the economy and people use those in the service sectors but it’s

it’s not as is productive you know the government isn’t spending money that’s on productive projects and productive uh you know um businesses that’s Private Industry that’s doing that those are those are the Elon musks and you know Tesla and all that they’re or

Ford or cocac colola and all as bad as these companies can be you know they’re the ones who are inv viia you know they’re they’re productive they’re creating products that people are buying and using and um and creating productivity out of it that’s an important

distinction so but because of that you see you see Inflation just kind of stick at three two and a half to 3% okay that’s one thing the second reason that the so that that that means that it’s been a headwind for those high in those High uh Interest

Rates the second headwind is that it’s not really a headwind but it’s just it it means that they weren’t as effective is that we ran zero interest rate policy for you know a decade and a half basically you had a small period there in 2018 2017 2018 2019 where rates were

ticking up but I mean it wasn’t really it wasn’t really restrictive you had so many people borrowing and locking in low interest rate mortgages low interest rate lines of Credit you know companies that that issued Bonds Bonds that were

very low interest rate meanwhile at the time of writing Bitcoin is trading at $ 62,939 in the last 24 hours The Surge follows a significant and unexpected rate cut by the Federal Reserve which surprised many analysts despite the bullish momentum it remains uncertain whether this trend will hold

historically September has been a challenging month for Bitcoin with average returns of minus 4.5% earlier this month on September 6th Bitcoin dropped to 52,54 to however this September appears to be bucking the trend showing signs of a positive performance the outlook for Bitcoin in the fourth

quarter is also optimistic driven by an improving macroeconomic environment historically Bitcoin tends to perform well in October and November fueling further optimism among investors Tom Lee of fundstrat has consistently maintained a bullish stance Forecasting that Bitcoin could

reach $150,000 by the end of the year as the market watches closely the question remains whether Bitcoin will maintain its upward trajectory amid favorable economic conditions as we come to a close what are your thoughts on the government’s role and the FED mandate in the present

Inflation do you think Bitcoin can play a significant role in lessening Inflation or do you have other thoughts please share your thoughts in the comments below share this CashNews.co and hit your thumbs on the like button thanks for watching and don’t forget

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