The only way they could possibly survive or make their economies look solvent is to
print money in massive quantities to buy sovereign debt. That's what Japan's doing,
That's what the United States is doing, and I think that's going to increase
in size and think quantity. So central bankers around the world are buying goal
with reckless abandon not only because they know what they're doing to their carecies,
but because they don't trust the United States Reserve system, So they don't trust
our dollar and they don't trust our bond market any longer. You're listening to
Carrie Letz's Financial Survival Network, where you get valuable information you just can't find
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Well, hey, we're just barely passed the first day, the first
week of aprils of April twenty twenty four, it's already hitting the fan goal
trading at all time eyes well. Inflation, according to Janet Yellen is going
back under two percent this year, and she's betting her job on it.
I guess not as much good. Michael Pentapentaport dot com is here with us
questions comments kl at Carrie Lutz dot com. Write your comments below. So,
Michael, state of the disunion here. Inflation it's going below two percent?
Yeah, based on what so for the past nine months, it's been
stuck in the low breeze. So I don't know what gives Jenny Yellow the
confidence is going to two percent. I think the only way is going to
two percent and below is if we have a recession slash pressure, and that's
a real possibility. I don't think she's gonna like that outcome. But if
not, if you look at the soaring price of commodities, if you look
at the real measurement or yardstick for the dollar, which is against real money
or gold or even hard assets like commodities, it's tanking. It gets an
F grade. Maybe not against the Maybe it's not tanking against the Euro or
the end or the pound, but it certainly isn't tanking against real and honest
money, which is gold. So inflation isn't going anywhere near two percent for
quite some time, unless we have the economy fall off a cliff, which
I think is a very real spot possibility. They seem hell bent on making
that happen, don't they. It would appear so jerry, so so gold.
Even if these a highly welled some might refer to them as inflated prices.
I'm sure you can see the headlines. Experts surprised by gold and silver's
recent strength, right, these x berts to get everything wrong. Yeah,
well, you know, no one knows better what's happening with fiat currencies than
central bankers around the world, and they know what they're doing. The only
way they could possibly survive or make their economies look solvent is to print money
in massive quantities to buy sovereign debt. That's what Japan's doing, That's what
the United States is doing, and I think that's going to increase in size
and in quantity. So central bankers around the world are buying gold with reckless
abandon not only because they know what they're doing to their currencies, but because
they don't trust the United States reserve system, So they don't trust our dollar,
and they don't trust our bund market any longer. I mean, especially
that's the case when the United States could just say, you know, you
know, laterally your reserves are cut off. You no longer have access to
your currency reserves, which are dollars in sovereign debt. So it makes a
lot more sense for them just to buy gold. They hold the gold,
and you know, they sell access of goods to the United States. Right,
they have excess dollars, they usually would park them in treasuries, but
instead of doing that, they go, let me just sell my dollars and
buy some gold, and then they obviate the problem of being, you know,
a victim of US dollar hegemony. Then he adds to that the fact
that real interest rates nominal rates are rising, if you've noticed, but religious
rates are falling because mister Powell's hell bent on cutting interest rates this year.
Now one carry, Why would he do that? Why would he do that
when you could I assume he looks at it short of the CRB index and
it's just going up into the right like a rocket ship. Why would he
do that? Why would he be cutting rates when inflation has been staying higher
than fifty percent north of his target for nine months. How would he do
that? And I think he's panicked because he knows that that America cannot issue
debt north of five percent and remain solvent. He just can't do it.
And Corporate America with forty forty five percent of the Rustle two thousand being held
in companies that have no profits, no have no earnings, they have to
issue debt constantly. And they used to issue it at very low interest rates
close to zero, and now it's you know, eight percent for high yield
debt depending on the credit quality of the borrow. So Powell knows before he
has a recession or depression, which is what it really would be, he
needs to keep asset bubbles growing and he needs to keep the economy the rate
of GDP to increase. He needs had to happen because you know, when
you think about it having a recession, when acid prices are a little bit
above where they should be historically, it's not such a big deal. And
when debt levels aren't so extreme, this is a big deal. But when
you have a recession when asset prices, stock and real estate prices are fifty
percent above where they normally are historically, the ratio of total market cap to
GDP is fifty percent above where it should be historically speaking, the ratio of
home prices to medium family incomes is fifty percent above where it usually is historically.
So if you have a recession, it could quickly become a depression.
Carry you imagine what the banking system would look like if home prices and stock
prices went down fifty percent. I mean this is I'm not making up number,
I'm not being hyperbolic. I mean, if you have the home price
to income ratio now is five point five, it was two point eight in
the year two thousand, total market cap of equities to GDP is one hundred
and eighty eight percent. It should be one hundred percent or even slightly less
than that. If you go back to where it was in the eighties and
nineties before we had this ZERP. You know this desert regime asert I'll see
it. So after prices were to crash by fifty percent, what condition would
the banking sector be in, what condition would the consumer be in? It
wouldn't be a recession, will be depressions. And that is why Cole is
hell bent and paddicking to get interest rates down, even though he's going to
be cutting rates when he's nowhere near his inflation. To him, that's scary,
a scary proposition. And so what about the dollar? Hell, how
much longer can the dollar exist in this situation? Well, Kerry, like
I said before, if you're measuring measuring the dollar against the euro, I
mean quite a long time. Look it looks it looks fine, It looks
fine. Yeah, it might only might only get hurt on the margins.
I mean, how much is the dollar going to collapse against the end.
They can't be that that retirement island can't even hardly get off zero. I
mean they just go to off negative interest rates for five and a quarter with
great so against the end and the euro maybe maybe not so bad. But
measure the dollar again. Measure the dollar against oil, carry, measure the
dollar against gold, it even silver, measure Measure that and tell me how
you think it's doing. Measure it against Melas, against a latte from our
least favorite right left wing coffee purveyor you know, stark about Live. Yeah,
my latte has doubled in price in the past like three or four years,
and they cut back on their customer disloyalty program. Uh, and I
think sometimes you order a latte, you know, like you know, I
order the medium and it's half filled with cream, yeah, you know,
and then a quarters cool. That's my new site, the Inflation Inflation Dot
Cafe. Well, you know what, you know what the sad part is,
Carrie, that's seventy percent poll that came out to I'm going to go
by Forbes in twenty twenty three, seventy eight percent. That's a lot of
Americans are living paycheck to paycheck. That's friedmre because of the inflation that had
been wrought against them by the very people who proclaim that they're for the middle
class. We're doing this for full employment. We need full employment. We
need to have stable prices, which sometimes means zero percent inflation. And then
it became two percent inflation, and then it became nine percent inflation, and
now it's three percent inflation. But hey, you know what, three percent
inflation isn't so bad. We can't really get to two. Let's just talk
about cutting interest rates now when inflation is still fifty percent above the target.
And here's the thing that I think these gen there's four hundred PhD economists that
work in the federal Reserve at all. I think this four hundred people.
I was looking to hire one and I couldn't find any. Now I know
you're all at the FED to disrupting things, Well, well you know you
better go. You better off going to kindergarten and getting you know, a
kindergartener to run your economic models. Because here's the thing that I think they're
going to be most surprised about. What if the Federal Reserve starts cutting interest
rates? The Fed Funds rate, that's the rate they control. They don't
control long term rates and long term rates sure, because inflation becomes intractable.
That's a salient and viable risk. And if that's the case, they will
not provide any salve for anything. If that's if that happens, m you
think that's a viable option here? I mean, is that is that really
going to happen where they cut the rates and then rates go up? Well,
I mean we let's just let's just normally speaking, historically speaking, the
ten year treasurino ads commensurately with inflation plus real GDP growth. So if inflation
is at three percent and let's just say real GDP growth around two three percent,
Atlanta Fed has it at two and a half, that's five and a
half percent. A ten year note is nowhere near five and a half percent
right now, What if, in an environment of a soft landing, supposedly
purportedly so, the FED start to slash interest rates? What do you think
is going to happen with commodity prices? Which what do you think is gonna
happen with the dollar? They're going to crash, right right? A dollar
would crash, mind prices didn't sort. Is that going to be good for
inflation or bad for inflation? I think it's going to be pretty bad for
inflation. Well if three inflation goes up. So if you have real GDP
at two percent three percent plus inflation at four or five, six seven percent,
what the hell or why in God's good name would anybody buy a ten
year note yielding four and a hared percent? It doesn't make any sense to
me, especially when the Fed has, you know, at least tacitly admitted
to you that they can never control inflation without destroying the economy. So so
they're stuck. In other words, right, yeah, I think they're I
think they're stuck. I think they're in a I think they're in a dilemma
of epic proportions because if they do nothing and keep their interest rates where they
are already. You know, we just had the n FIB Small Bism Optimism
Index come out that has strung for twenty seven months in a row. Twenty
seven months in a row. Household net interest income has plunged by two hundred
billion dollars in this current Fed tightening signal. That's because you know, back
in back in the two thousand and six Fed raised rates, but it was
an inaggregate, households gained income because they have you know, their interest income
went up. But now we have a lot more percentage of debt, household
debt that's in a variable rate environment, personal loans, credit card debt,
you know, revolve day. So net interest income has plunged. We have
a near perfect recession indicator. It's called the yield curve. It's been inverted
for a record amount of time. Positive real interest rates that have existed for
about almost a year now. When that is the case, when you have
real a real Fed fund rate, so the Fed fund rates five and a
quarter to five and a half, the effective Fed fundrate is five point three
subtracted by inflations around two percent. Whenever you get that for about a year,
the economy has tended to melt down in the past. Howell knows all
this. We've had the most corporate defaults in Q one in twenty twenty four
CITs to global financial crisis. Wow, at a loan and credit card.
The faults are soaring. The consumer, oh, you know, not only
the consumer in the corporation. They can't handle these interest rates. But you
know what, the government can't handle these interest rates either. Imagine paying two
trillion dollars a year on interest. That's crazy. So they have to unilize
the debt, right, they're going to be monetizing, which is basically q
E. Right. Uh, it's not it's exactly what it is. It's
exactly what it is. How much how much debt can they buy before the
game blows up? I guess they can buy the debt and uh, basically
quarantine it, right, basically sterilize the money, make the banks keep it
on deposit with the Fed. Right, so then the money doesn't get unleashed.
Yeah, but you know what happened. You know that that's a that's
a possibility. But what's going to happen with the currency if they do that.
I mean, I can't see the Fed's balance sheet going back to nine
trullion and higher without destroying the purchasing power of the middle class, which is
already on life support. I just can't see it happening. Mhm. They
could. They could try to do that. That that's for sure. But
but you know, if they credal is inflation and you know, they give
all these back the banks have these reserves, I mean, we couldn't be
We couldn't be Japan. We could turn into Japan. But is that is
that really our model that we want to pursue? That is that the model
we want to follow? And is the is the IF going to buy?
Is that they're going to buy corporate debt too? Are they going to buy
mortgage backed securities too? I mean, are they going to buy everything on
the planet and then pay an enormous amount of interest on excess reserves? Is
that what they're going to do? I guess as possible, I can.
I guess they can do that, but I think they can just they would
destroy the dollars purchasing power against hard assets. I think that would be a
very big outcome, negative outcome. So so it's not like back in two
thousand and nine when they just monetize the debt and said everything's fine, right,
We're not there now. You notice that two thousand and nine didn't solve
anything. I mean we haven't. We have still have. We still have
record asset bubbles, record ascid bubbles. I mean what right now that I
mentioned it, seventy eight percent of Americans living page check to paycheck. Who
can afford a home anymore? You know, the market for first time old
buyers is gone, I get afford it. So you know, the FA
has to make some very serious choices coming up. What do they want to
do? They do they want to usurp the market price of assets forever and
see if that See how that works. I mean, we could be that,
we could be we could become Japan. That's a nation that's been mired
in growth that's low floating, you know, around zero for decades. That's
what we want to do. That's fun. Yeah, yeah, well we
see how well that works? Right? Yeah? You see, you know
the whole thing is about you burst and arrogance. At some point we have
to decide to let markets function freely or just have the state take care,
take care of everything, control everything. That is where Japan is right now.
They buy they buy almost every single bond issued by the Japanese Central Bank.
I mean every JGB is bought by the government, and the government owns
I think about half of all of ETF's outstanding. So if that's what we
want to do, that's fine, all right. So inflation's going up.
Interest rates are going to go up because they're going to cut them and it's
going to cause them to go up. So the only safe have ins We're
looking at precious metals, right well, so when you enter sectors four and
five and right now where I believe we're in sector four of my inflation deflation
spectrum, that's an increase in the rate of inflation and a second derivative basis.
So you look at energy, you look at gold, and you look
at shorting the bond market, and that's what we're you know, we're headaches
towards that sector Sector four and five right now, kind of like I said,
between three and four, which is stasis, which is a stability in
the second derivative of inflation. But let's just see what Powell does that we
have a problem coming up around June and July, and that's when the excess
reserves from the reverse repol facility run dry. And that's provided all the liquidity
for the bond market and all the liquidity for the stock market. When that
ends, we could have a serious problem with both stocks and bonds. Bond
yields could soar and stock prices could plumme it because the liquidity affor those assets
dries up. So we'll see what his decision is. It's it's up to
Powerfull and the FOMC. They are a very powerful institution. I know some
people come on financial media and say, oh, they're irrelevant. They just
no, they're not irrelevant. They provide the liquidity, they control the base
money supply. They control liquidity for the banking system. And if you think
the banking system is irrelevant in the United States, that I'll disagree with you.
So let's see what he does. I mean, I think my own
belief is he'll flirt with reality, and when reality blows up in his face,
he'll acquies that. He'll cut interest rates, he'll go back to QI,
he'll buy all the government debt, he'll take have the bonds like you
said, taking off the bank's balance sheets and sitting at the federal reserve.
They'll pay the bank's excess interests on those excess reserves. And you know,
all this comes down to one thing. The rich will get richer and the
poor will get poorer. Those that spend thirty forty fifty percent of their income
on clothing and shelter and food will be moved further towards penurine. And people
like us who own multiple houses and have you know, multimillionaires, which just
get richer and richer. I don't, I deny, and I don't like.
Yeah, do I enjoy being wealthy? You enjoy being wealthy? I
guess we do. But it's just not fair and it's not a viable way
to run a country because you just can't have a country run without a middle
class, a functioning and viable middle class. Yeah no, can't. We
see what's happening in China now, right? The country had a more fragile
middle class than they thought, and now they've done everything they could to destroy
it, and now they're reaping the fruits of their policies, as every country
eventually does. Right. Yeah, it's risky for the this country to go
down the road of looking more and more like a Banana republic in their monetary
policy, their fiscal policy, and even in the way we transition power from
one administration to the next. You know, when you try to influence elections
by putting people who are running for office in jail, it's right, it's
you in other words, And I'm a libertarian, I'm not a Republican,
So don't don't anyone same say so when you try to surp the power of
the people to decide who they want to be president, that leads to big
problems. So when you have political chaos financial uh, when you have monetary
chaos and you have a fiscal chaos, it leads to economic chaos. That's
where we are, and that's where we're headed in a more salient fashion.
All right, On that note, we will let you go. Michael.
I know you have a busy day ahead of you. A questions comments for
Michael myself k L at kerrie Lets dot com. Write your comments below in
the YouTube channel and make sure you go over to pentoport dot com. It's
in the show notes this interview on Financial Survival Network dot com. And while
you're there, please sign up for our free newsletter. Michael, always a
pleasure, even if the topic is somewhat somber and I'm not depressing you know,
well, it's unfortunately. You know what else? What other conclusion can
you arrive at? If you're an independent thinker, look around and tell me
if you think this is a viable situation And the answer is sadly no,
absolutely, all right, We appreciate you, we'll talk to you, and
soon you'll be well. Thank you, carry you too, Thanks for listening
to Carrie Letz's Financial Survival Network, your solution to today's trying times. For
the latest, go to Financial Survivalnetwork dot com. Financial Survival Network now more
than ever,