This is How The Fed Just Ruined Your Life - George Gammon Goes Off
Summary
TLDRIn this episode of the Della Kon Show on ITM Trading, George Gamon of The Rebel Capitalist Show discusses the Federal Reserve's recent decision to cut rates by 50 basis points, which he believes is insufficient. He argues that historical patterns show the Fed typically cuts rates more aggressively when the two-year treasury yield and Fed funds rate align. Gamon anticipates further rate cuts and suggests investors should position their portfolios accordingly, favoring gold and treasuries over stocks due to an expected economic downturn. He also touches on the political landscape's impact on the economy and the importance of monitoring economic indicators for investment decisions.
Takeaways
- 📉 The guest, George Gamon, believes the Federal Reserve made a significant mistake by not cutting interest rates more aggressively, suggesting a 75 basis point cut was appropriate instead of 50.
- 🤔 Gamon discusses the Fed's tendency to follow the two-year treasury yield and how the market's expectations often lead to further rate cuts than initially provided by the Fed.
- 📈 Historically, when the Fed cuts rates, the two-year treasury yield continues to fall rather than stabilizing, indicating that the market anticipates more economic trouble.
- 🔍 The conversation emphasizes the importance of economic indicators like the yield curve, the Phillips curve, and the unemployment rate in predicting economic downturns.
- 💼 George Gamon criticizes the Fed's narrative that they can control the economy through interest rate adjustments and stimulate economic growth.
- 🏦 The script suggests that financial institutions are risk-averse, preferring to buy treasuries instead of lending to the real economy, contributing to an inverted yield curve.
- 🌐 The global demand for US treasuries, despite high levels of debt, indicates confidence in the US economy and the dollar's role in the global monetary system.
- 📊 Gamon forecasts more rate cuts by the Fed in the future, based on historical patterns of economic cycles and current economic indicators.
- 💵 The discussion points out the economic divide in the US, with the wealthy benefiting from asset inflation while the poor and middle class face a depression-like situation.
- 🏠 George recommends being prepared for potential buying opportunities in the stock market if a recession occurs and the Fed intervenes to stimulate the economy.
Q & A
What does George Gamon believe the Federal Reserve's big mistake was?
-George Gamon believes the Federal Reserve's big mistake was not cutting interest rates enough, specifically that they should have cut by 75 basis points instead of 50.
Why does Gamon reference the two-year treasury yield as an indicator?
-Gamon points out that the Federal Reserve often follows the two-year treasury yield, and historically, when the Fed cuts rates, the two-year yield doesn't stabilize but instead goes down further.
What is the 'neutral rate' or the 'terminal rate' that Gamon mentions?
-The 'neutral rate' or 'terminal rate' is a term used by the Federal Reserve to describe the ideal interest rate that neither stimulates nor contracts economic growth.
How does Gamon interpret the behavior of the two-year treasury after Fed rate cuts?
-Gamon interprets the continued decline of the two-year treasury yield even after Fed rate cuts as a sign that the market believes the Fed is still offside in its monetary policy.
What does Gamon suggest about the Federal Reserve's ability to orchestrate a soft landing for the economy?
-Gamon is skeptical about the Federal Reserve's ability to orchestrate a soft landing, stating that they are always behind the curve and have never been able to prevent a recession through rate cuts.
What is the significance of the yield curve inversion mentioned by Gamon?
-Gamon discusses yield curve inversion as a powerful economic indicator that typically precedes a recession, suggesting that a sustained inversion is a sign of upcoming economic downturn.
Why does Gamon criticize the Federal Reserve's narrative on the economy?
-Gamon criticizes the Federal Reserve's narrative because he believes it overstates the Fed's control over the economy and underestimates the potential for a recession, which he thinks is not in line with actual market indicators.
What is the Philips curve and why does Gamon mention it?
-The Philips curve is an economic concept that suggests a trade-off between inflation and unemployment. Gamon mentions it to criticize those who ignore its historically high accuracy in predicting economic conditions, such as the current risk of a recession.
How does Gamon view the current state of the US economy and the role of asset prices?
-Gamon views the current US economy as being propped up by asset prices rather than by actual production of goods and services, leading to a bifurcated economy where the wealthy benefit while the poor and middle class suffer.
What advice does Gamon give for portfolio positioning in the current economic climate?
-Gamon advises having a portion of the portfolio in gold as an insurance policy, preferring liquidity like T-bills, and being prepared for potential buying opportunities in the stock market if there is a significant downturn.
What does Gamon think about the government's response to economic recessions?
-Gamon believes that the government's response, such as stimulus checks and lockdowns, has created economic distortions and exacerbated issues like homelessness and drug addiction, rather than solving the underlying problems.
Outlines
📉 Fed's Mistake on Interest Rates
The paragraph discusses the Federal Reserve's decision to cut interest rates by 50 basis points, which the guest, George Gamon, believes was not enough. He argues that the Fed should have cut by 75 basis points, as they are typically slow to react to economic indicators like the two-year treasury yield. Historically, the Fed tends to cut rates aggressively after an economic cycle, rather than gradually. The conversation highlights the challenges of timing and magnitude in the Fed's rate-cutting decisions.
🤔 The Fed's Influence on the Economy
This section delves into whether the Fed's actions can prevent a recession. George Gamon suggests that while the Fed might soften the blow of a recession, they have never been able to prevent one. He discusses the narrative that the Fed wants people to believe, that they control the economy and can stimulate it through lower interest rates. However, he points out the fallacy in this narrative, given the current economic indicators and the historical inability of the Fed to orchestrate a soft landing.
🌧️ Economic Storm Clouds Gathering
The conversation turns to the reality beneath the economic narrative, with a focus on the labor market and the yield curve. Gamon discusses the Som Rule, which uses the unemployment rate as an economic indicator, and how it has been accurate in predicting past recessions. He also addresses the inverted yield curve and its significance as a predictor of economic downturns, suggesting that the bond market is reflecting lower expectations for future growth and inflation.
🗣️ Challenging Powell's Optimism
In this paragraph, Gamon is imagined challenging Fed Chairman Powell on his optimistic statements about the economy. He questions the rationale behind cutting rates by 50 basis points if the economy is indeed doing well, as Powell claims. Gamon also brings up the near-term forward spread, another indicator suggesting a recession, and criticizes the Fed's potential disconnect from the actual market signals.
👀 The 2024 Election and Economic Outlook
The discussion shifts to the upcoming election and its potential impact on the economy. Gamon expresses his disdain for both major candidates, Trump and Harris, calling them economically illiterate. He discusses his expectations for the Fed's actions in November, predicting more rate cuts, and outlines the typical sequence of economic indicators leading up to a recession.
💼 Positioning Portfolios in a Volatile Market
Gamon advises on portfolio positioning amidst economic uncertainty. He recommends the long end of the yield curve and gold as safe havens, while expressing caution about the stock market due to its overvaluation. He also discusses the potential for the Fed to intervene in the stock market, as has been done by other central banks, and the importance of being prepared for buying opportunities during market downturns.
🏦 The Reality of American Economic Distress
This section addresses the stark divide between the wealthy and the poor/middle class in the United States. Gamon argues that while asset prices prop up the appearance of a strong economy, the underlying reality is one of economic depression for many. He criticizes government spending and central planning for creating economic distortions and suggests that a significant shift in economic policy is necessary to address these issues.
🌆 Escaping Urban Decay
Gamon shares his personal observations on the state of urban areas in the United States, comparing the current situation unfavorably to past decades. He discusses the increase in security measures in stores and the visible signs of economic distress, such as homelessness and drug addiction. He concludes with advice to own gold as a hedge against counterparty risk and to be prepared for potential buying opportunities in the stock market.
🚨 Final Thoughts on Economic Indicators and Personal Preparedness
In the final paragraph, Gamon emphasizes the importance of personal preparedness and portfolio management in the face of economic uncertainty. He reiterates the need to own gold and maintain liquidity, and suggests setting up a watch list for potential investment opportunities. Gamon also stresses the importance of being prepared for market downturns and the likelihood of government intervention to support asset prices.
Mindmap
Keywords
💡FED
💡Interest Rates
💡Two-year Treasury Yield
💡Recession
💡Yield Curve
💡Gold
💡Asset Prices
💡Debt
💡Inflation
💡Central Planning
💡Portfolio
Highlights
Guest George Gamon believes the Fed made a mistake by not cutting interest rates more.
Gamon argues that the Fed typically follows the two-year treasury yield.
The market is signaling that the Fed is far offside with its rate decisions.
History shows the two-year treasury yield often drops further after Fed cuts.
Gamon suggests that the Fed should have cut rates by 75 basis points instead of 50.
Fed officials hinting at more aggressive rate cuts ahead.
Gamon discusses the objectives of the Fed's rate cut strategy.
The Fed's narrative about controlling the economy and stimulating it with lower rates.
Gamon criticizes the Fed's ability to orchestrate a soft landing for the economy.
The labor market and the yield curve are leading indicators of economic trouble.
Gamon talks about the misinformation in the Fed's communication.
The Fed's rate hiking cycles and the historical pattern of rate cuts.
Gamon's view on the Fed's ability to prevent or soften the blow of a recession.
The importance of watching the yield curve as a predictor of economic downturns.
Gamon discusses the impact of government spending on the economy and the poor/middle class divide.
His advice on portfolio positioning during potential economic downturns.
Gamon's outlook on gold as a safe-haven asset during economic instability.
The potential for the Fed to intervene in the stock market to prop up asset prices.
Gamon's thoughts on the current state of the US economy and the impact of central planning.
His recommendations for investors regarding stocks and bonds in the current climate.
Gamon's closing thoughts on the importance of being prepared for economic changes.
Transcripts
[Music]
hi this is dellaa Kon welcome back to
the dellaa Kon show here on itm trading
well my guest today says the FED made a
huge mistake huge cutting 50 basis
points so now what does he think that
even more fed officials are coming out
saying more is needed more Cuts more
aggressive George gamon The Man Behind
The Rebel capitalist show welcome back
so good to see you my friend oh thanks
for having me back it's always fun to
talk yeah well let's talk about what you
call a very big mistake made by Powell
and Company tell me why and then I'll
get to the second part tell me why well
first of all I think the big mistake
they made is they didn't cut more not
that they it's not that they cut too
much they didn't cut enough and uh just
very simple if you look at two-year
treasury yield gunlock always points
this out that the FED just follows a
two-year and if you look at the Delta
between the two-year in fed funds where
it was prior to the 50 basis point cut
you see that it was pretty much at an
all-time extreme going back to the GFC
so what this is is the market telling us
how far off sides it thinks the FED is
the Fed likes to use the term the
neutral rate or The Terminal rate or R
star something like that to determine
you know where the the goldie the
Goldilocks interest rate should be for
fed funds and uh but that's just simple
just look at the two-year Treasury and
if you go back and look at history what
happens is when the FED tries to catch
up with the two-year treasury what ends
up happening is the two-year treasury
doesn't flatten out or it doesn't start
to go back up it goes down even further
so as an example let's say you've got
the FED funds at
5.25% and you've got the twoe treasury
trading at let's just say it's trading
at
3.5 and then let's just say that the FED
Cuts all the way down to
3.5 at that point you never see the
two-year treasury just flatten out and
say okay the FED is done all the cuts
already baked in they've done their job
we're in this Goldilocks economy now the
two-year treasury just goes forward
maybe two you know 3.5 3.55 3.6
something like that that's not what
happens d
they cut down to 3.5 or they're getting
close to that Mark and then the 2-year
treasury just keeps going down further
and further and further and
further so so the FED if you look at
these uh interest rate hiking Cycles
which obviously we have to have to get
to the rate Cuts you see that they never
go in kind of this gradual fashion like
if you look at the dot plots or you look
at the their projections for where
interest rates the FED funds is going to
be in let's say the end of the year uh
or maybe the end of next year it's
always this nice slow decline but then
when you look at reality and you compare
that with history you see that they
never drop rates in just a slow fashion
it's always like Wet n Wild it's always
like one of those water slides where you
just start here it's like a Wy coyote
thing and the only time that I can see
going back to to call it the 1980s or so
where they had a rate hiking cycle where
they didn't cut dramatically was back in
the mid 1990s uh this was 1995
1996 uh but during that time you didn't
have an inverted curve and you didn't
have the unemployment rate spiking uh
which we can see just using the Som rule
as a broad proxy so anytime that you
have those factors those huge those very
powerful economic indicators especially
when they're lined up when you have
unemployment spiking and you have not
only an inversion but an
uninversity curve uh you always and
that's preceded by a Fed rate hiking
cycle you always see a decline in fed
funds at a very uh well again the Wet n
Wild scenario so that's why I said the
FED probably made a mistake but it
wasn't that they cut 50 instead of 25
it's that they didn't cut by
75 so are you are you happy to hear that
you know we're speaking ahead of a lot
of other fed official sours lat to speak
but I mean just the ones that spoke
earlier today Chicago fed Chief Atlanta
fed Chief echoing that the FED will have
to move uh more aggressively here and
and and you know with more rate Cuts
ahead um is this the right path
it depends on yes well it it depends on
what your objectives
are so if your objective is
to soften the blow let's say of a
recession then yeah that's that's the
right path uh I'm not going to say that
they're going to avoid a recession
because they've never ever ever ever
been able to stop a recession through
these rate cuts when we have all these
other economic factors or uh indicators
that are lined up so they're always
responding to a recession they're never
preventing a recession but like I said
it doesn't mean that they can't soften
the blow to a certain degree um you know
it they make it better than it otherwise
would be but that doesn't mean that it's
still not a hard Landing or it's still
not devastating I mean we look at the
GFC as a perfect example you could say
that yes it would have been worse maybe
it would have been but it was still
pretty darn bad even though they cut
rates I I was going to say because
Powell you know would would would be the
you know Mount Rushmore of uh Central
Bankers if he is able to orchestrate the
soft Landing uh but you know based on
what you're saying you don't think he's
going to get it well they never have so
you just have to ask the question why
have they never orchestrated a soft
Landing in the past it's because they're
always behind the curve that's why they
always follow the
two-year and so if this time isn't
different which I don't know why it
would be uh then they need to follow the
2-year down even more uh because we're
headed for a hard Landing that they
can't really prevent uh but they again
they might be able to make the recession
uh a little better than it otherwise
would have
been you did a great uh video and I urge
everyone to check it out on yourtube
your YouTube channel where you go into
detail about the fed's decision here and
you bring up a very key point about the
narrative The Narrative that the Fed
wants us to believe so if we can go a
little bit more in depth here about what
are what do they want us to be thinking
right now they want you to think that
they control the economy they they want
you to think that lower interest rates
uh means that they're providing
liquidity or that lower interest rates
or lower interest uh lower interest
rates excuse me mean that they're quote
unquote stimulating the economy and
therefore if they just lower these
interest rates then all of a sudden
we're going to see the unemployment rate
flatten out and then go back down to 3.7
or 3.4 and they do that while at the
same time the inflation rate as measured
by the CPI goes down to let's say 2.2
2.1 uh uh 2% something like that and
then We're Off to the Races and it why
because the FED just dialed it in
perfectly you know it's like this
thermostat on the wall and it's 69° a
little too a little too cold uh 71° a
little too hot so we're just going to
dial it right into 70° and then the
economy is going to respond people are
going to take out more debt because now
interest rates are lower this is going
to increase aggregate demand and because
aggregate demand goes up that's what uh
prevents us from going into the
recession and that's how they
orchestrate the no Landing soft Landing
this is the narrative and this is what
they want you to believe but it never
ever ever ever works out that
way you also say if you look underneath
the hood at the reality of it all let's
talk about the reality not the narrative
they want us to believe you see the
economic storm clouds Brewing is the
labor market leading that leading that
pack for you of the Brewing problems
yeah I mean you just look at the Som Ral
it's a simple proxy and all that is is
just a 3-month moving average of the
unemployment rate Rel relative to I
believe it's also a 3-month moving
average of the low in the unemployment
rate over the past 12 months and I mean
take that back to the
1950s and it's pretty much 100% accurate
and so the Claudia s comes out now I
don't know why she's doing this maybe
because she's a Democrat or something
like that and she's saying that oh we'll
just ignore the PS rule even though it's
been right every single time because of
immigration uh you know so they've got x
amount of people people that are
unemployed and therefore if you increase
the
denominator uh then well that doesn't
mean that you know the demand side is
weak that just means that the supply
side is the reason why the unemployment
rate is going up well this is a
completely bogus uh answer because
number one they calculate the
unemployment rate using Census Data from
2022 before you had this huge spike in
Immigration so although it may impact
the rate of inflation it wouldn't impact
the rate of change you see and the rate
of change is what the P rule is
obviously all about and then also if you
want to argue that you'd have to say
that the 1970s should have also debunked
the Som rule because we had the labor
force participation increasing because
of women coming into the workforce so
why on Earth was it just as accurate the
1970s as it was in the 1980s and the
1990s and the 2000s so that's the the
one main thing that's staring you in the
face but also interest rates I mean look
if the US economy was running on all
eight cylinders you wouldn't see the
10-year treasury trading at I don't know
where it is now but call it 125 basis
Points Plus under the the FED funds rate
I mean that that's not a sign of a
healthy economy it's it's crazy that you
actually have to point that out you say
hey this is kind of unusual this is very
unnatural what that is it's the bond
market telling you that future growth
and inflation expectations are lower
lower than where they are right now and
that you should and why is that because
the banks are just taking that balance
sheet capacity and a lot of the
financial institutions and instead of
lending that money out to the real
economy they see that as too risky so
instead they just buy
treasuries and they buy treasuries
because that's quote unquote risk-free
and that's where you've got the most
liquidity so when whenever the market is
riskof they're going to go into the
safest most liquid asset and globally uh
you know whether we like it or not that
is the US Treasury and more specifically
the long end of the curve and so that's
why you see the yield curve invert
because it's
the players in the global economy that
have uh I call it information asymmetry
Daniela uh these play players in the
treasury market that that really move it
one way or the other they have a lot
more information than you and I will
ever have oh yeah in fact I would argue
they have way more information than the
FED will ever have because they're the
ones that are talking to these Global
banks in the euro dollar system they're
the ones that are talking to these
multinational corporations that are
doing business that are doing the
borrowing and so they get this Intel
first and foremost and that's what
prompts them to do X Y and Z with their
balance sheet or a and C whether it's
okay I'm hearing from all these
multinational corporations that business
is great business is booming and
therefore yeah I'm going to keep lending
because I'm going to try to go for that
higher reward I'm going to go for that
higher yield because the risk reward
makes sense but if you're hearing the
complete opposite then you're like no
way am I going to lend out to this
environment because I'm worried about
being paid back and even though I might
be able to get a little higher interest
rate the risk reward doesn't make sense
when I could just sit here in 10year
treasuries and collect
3.5% and they're doing this Daniela
while the FED increases interest rates
at the front end of the curve and that's
what inverts it and that's why the in my
view the yield curve is such a powerful
predictor and that's why it has almost a
100% accuracy rate it's because it's
it's it's functioning the underlying
uh the underlying
fundamentals that or the
underlying actions by the market
participants that drive the yield curve
is in my view based on Insider
information and Insider information is
is a great way to trade just ask Nancy
Pelosi
right oh um let me ask you this George
because I don't know if you caught the
press conference at the end of Powell's
uh
uh you know speech yeah what if you were
in the room what is the one question you
would have asked Powell or challenged
him on what's the one question I would
have asked him how on Earth can you sit
there with a straight face and say the
economy is doing fine and the the the
consumer is resilient and the economy is
running on all eight cylinders if the
economy is doing so great why the hell
did you just cut by 50 basis points I
mean let's remember that the last time
they cut by 50 basis points was the GFC
and the time before that it was the bust
so I I don't get it he he's completely
contradicting himself by saying that the
economy is doing fine but yet we're
going to have to cut by 50 if the
economy was doing fine you wouldn't have
to cut by anything let alone 50 basis
points and then I'd ask him about the
two-year Treasury and I would say uh you
know are you guys just following
following the two-year and are you
concerned that you're just cutting 50
basis points when you look at what the
interest rate markets are actually
telling you and then I'd point at their
own tools that they've said in the past
they P pay most attention to which is
something called the near-term forward
spread and the near-term forward spread
is screaming recession just as much if
not more than the inversion in the
treasury
curve we're going to talk the election
um but were you surprised that the Trump
campaign didn't seize the moment and
jump on that and highlight the fact that
the economy is in dire
traits I don't know they're both idiots
Danel I I try not I try to pay as little
attention to to Trump and Harris they're
they're both just uh economic knuckle
draggers I mean they have absolutely no
idea you got one person that's just pure
evil and obviously that's Camala Harris
and then you've got another guy that's
just a complete megalomaniac that has no
uh principles you know he has no uh kind
of
uh moral North Star that guides his
decision-making process it's just
completely all over the place right now
if I had to choose between the two
obviously I'd go with Trump because the
number one concern for me or I think the
number one concern for Americans in
general or maybe the entire developed
West is freedom of
speech so if you're going to be a one uh
on topic voter uh I think that topic
should definitely be censorship and
you've got to go with the party that is
going to censor Free Speech the least
and uh that's obviously Trump so um you
know I don't like him but he's a hell of
a lot better than Harris but the bottom
line is I can't stand listening to
either of
them well you know November's going to
one heck of a month George with the
election and then the next FC so what
I'm hearing from you you're expecting
the FED to do we can expect more Cuts in
November
basically oh absolutely yeah I mean if
the the way this typically plays out is
uh and
again I want to make it very very clear
there are no certainties there are only
probabilities and when you look at these
economic indicators you can't use them
to sit there in time specifically when
you're going to go into a recession uh
what we have to do is say how have these
Cycles played out in the past so if you
look you see okay the first thing that
happens is the curve
inverts the next thing that happens is
the curve starts to steepen out due to a
bull steepener which is the front end
going down faster than the long end the
next thing that happens is the
unemployment rate spikes the next thing
that happens is you have an uninversity
that's that it that is
sustained right the next thing that
happens is the Fed drops rates which uh
makes that which steepens out the curve
and then the stuff hits the fan and then
a year later you have the NBR come out
and say oh yeah by the way this whole
past 12 months when we were telling you
that the economy was strong and
resilient yeah go ahead and disregard
that we lied it was actually in a
recession this exactly what they did in
2008 where they announced in December of
2008 that we that we had been in a
recession since January you it's like oh
thanks a lot I appreciate that and this
is the way these things play out so what
we have to do Danielle is just go
through our checklist and then we can
determine the probabilities of it
playing out the same way so check so
check number one is inversion of the
curve we got that y okay next we got the
bull steeper boom check that one off the
list the next one is is the unemployment
rate spiking we got that one off the
list the next one is the unversioned the
curve that sustained we got that one off
the list because now the 2-year is
trading under the 10-year next thing is
we got the FED dropping rates boom check
that off the list so the only other
thing there is the recession in the NBR
now it is true we may have a no Landing
we may have a soft Landing or something
like that but the bottom line is so far
so far this cycle has played out the
exact same way that every single cycle
has played out going all the way back to
the 1950s when you have an inversion of
the curve and you have the all these
other you know the Som Rule and the
spike it this is the way it always plays
out so I don't know why it would now you
could say it's on 100% probability but
the probability is extremely high and
that's really how you want to position
your portfolio Okay let me take Okay so
let's take a one step further if we can
forecast and you know figure out this is
the probability of how it's going to
work out how should we be positioning
our portfolio who wins who loses in
these
scenarios uh well me personally I've got
the bets on the long end of the curve uh
now I would prefer to bet on the
two-year I wish I could do that but
there's really not a great vehicle uh
that that gives you some good bang for
your buck on betting on the two-year you
know just buy the 2-year but that's
you're not going to get too many price
moves even if they drop rates or even if
the interest rate on the two-year goes
down substantially so you know calls on
the TLT is something that's interesting
if you can get some liquidity uh gold is
interesting if we don't have a liquidity
event and obviously I love the chart on
gold I mean you can't the chart on gold
is just absolutely fantastic so uh the
only issue with gold I have is if you go
back and look at recessions where we
have have a liquidity crunch the first
thing people usually sell is gold
because it's doing its job gold is
insurance and gold doesn't have
counterparty risk and you're always
going to get a bid so when we go into
like a GFC type Leman event you're going
to see gold sell off because that's the
only thing that people can actually sell
and and that's and again it's because
gold is doing its job and so but if you
look at a recession where we don't have
a liquidity event then uh gold there's
no reason for gold to sell off and
usually that's just uh you know what the
central planners do to try to get
through the recession is a huge huge
huge Tailwind typically uh for the price
so um for me I'm very comfortable just
holding 10% of my portfolio in Gold just
as an insurance policy uh but that's all
I do and then just you know sit back and
look at the chart and see these things
play out but uh I I would be very
hesitant with the stock market right now
uh for obvious reasons because it's
completely overvalued and if you're
going into a recession you really don't
want to bet on the stock market a lot of
people think that if the FED drops rates
then that means the S&P 500 will go up
but if you look at uh the past Fed rate
Cuts you see that that's only applicable
if you don't go into recession so if
you've got all of these things lined up
like we talked about earlier in the
discussion then the odds are that once
the FED drops rates that's actually
negative for the s&p500 over the next
six months but on that note it depends
if we get a liquidity event Daniel I
don't put it past them to buy stocks I
the bank of Japan did it so why on Earth
wouldn't the fed and they understand
just as much as we do that the entire
economy is is just built uh or propped
up by asset prices I mean right now
we're in a depression we are in an
economic depression uh when you look at
the poor and the middle class there is
no different between the lot of the poor
and middle class right now in the United
States in 2024 than in the
1930s the only thing that would add to
the only reason why we're not at
negative GDP is just because you've got
the top 20% of people who own assets and
they're getting rich and they're the
ones that are out there buying the
Ferraris and popping bottles of
Champaign and going to all the
restaurants and doing all the shopping
on Amazon the the poor in middle class
are are to struggling to say the least
and that's a wild understatement so you
have this massive bifurcation in the
economy and the FED knows that so my
point is if the fed's going to try to uh
respond to a recession they're going to
do it by trying to prop up asset prices
because that's the only thing they have
you make me think of another question
here George
of the the line between the poor in the
middle class I mean uh what What's the
number where middle class starts a
family that makes how much per year
George well I would say I would you know
just broadly speaking I think anyone in
the United States right now that's
making under $100,000 a year is is
saying what booming economy all I see is
is recession and then anyone making over
let's just say $150,000 a year that has
assets they're they're Scrooge McDuck
you know they're swimming around in
their in their safe full of gold coins
and whatnot and uh you know just saying
what on Earth are these fools talking
about we're not even close to a
recession this is the greatest economy
that I've ever seen in my life and so
this is the the contrast so you just
have to ask yourself you know what is
making that happen and it goes right
back to asset prices so you you got to
think about what the US economy would
look like if you had asset prices go
down by 50% like we saw in 2008 I'm
talking about the S&P I'm talking about
the housing market from 2006 to 2012 I'm
not saying that's going to happen I'm
just saying go through that thought
experiment and what would happen so that
crippled that crippled the US economy in
uh in 2008 2009 2010 uh and but I would
argue that the economy was far less
dependent on asset prices back then than
it is now as far as aggate demand I
where's the aggregate all this aggregate
demand that you're seeing you know we're
past whole simmies we're past the PPP
we're past the point where the a lot of
people don't have to pay their mortgage
or pay their rent so where is all this
aggregate demand coming from right and
the answer is the stock market the
answer is housing prices this is all
just paper wealth this is not the fact
that we're producing more goods and
services and this is complete nonsense
it's just paper wealth that and that
paper wealth can evaporate very very
quickly
you know while as you were speaking
about uh gold it made me think of the
headline and I'm sure you saw
billionaire John Paulson um saying he'd
be looking to pull out his stocks
completely and go all in cash and gold
you know this would be Amplified
scenario should there be a Harris win
thoughts on
that yeah I mean I think he's being
political too I I don't think it I mean
again for the stock market is it going
to crash if Harris gets elected and if
Donald Trump gets elected is it going to
Skyrocket I I I doubt it I mean it it is
true that if she pulls one of these
numbers like a a unrealized capital
gains tax or something or Price controls
yeah that's that that is that's terrible
uh for the markets that's for sure can
she get that through I don't know and is
and our price controls any more insane
than tariffs ones that that Donald Trump
is is talking about or then he just came
out the other day and he and he you know
he's supposed to be a free market guy
and a champion of small government and
then he's saying how he wants to cap
interest rates on credit cards at
10% what look as if he's Milton Freedman
or something like that I me come on this
is they're all terrible they're all
terrible it's just which one is is the
least horrific
Daniela it's just you know just to to
wrap here George just bringing it home
for the folks cuz I have some people
that that emailed me and just feel like
there's no end in sight right now it
just feels like you know what no one's
even talking about the debt right it's
like how how how do we get out of this
George well the and I brought this up I
brought this up to sorry not to
interrupt I brought this up to Brian
Lundy and I know you're speaking at his
conference yeah uh he has one of the
best conferences out there and I said
it's almost like you need someone drast
like a Malay drastic because or else how
do you how do we get out of this well
look at how Argentina got out of it you
have to get to a point where you're just
absolutely desperate yeah and the United
States is not at that point so you know
I mean look at history how have uh other
societies gotten out of their Mala it's
because they have to hit rock bottom
they have to hit rock bottom and and I
hope we don't have to do that in the
United States but I think the the
probability is uh very low now the good
news is we don't have to worry about a
debt crisis that's the good new that's
the the least of people's concerns you
don't have to worry about the dollar
crashing and you don't have to worry
about the treasury market going no bid
you don't have to worry about how we're
going to finance deficits ask the 10year
treasury Daniela the 10year treasury
right now is trading less than it was in
2009 when the debt was 9 trillion I'd
like to remind your viewers that right
now the debt is 35 trillion 35 trillion
and the dollar as measured by the dxy is
higher than it was in 2009 and the
10-year treasury is trading lower so if
we had a debt problem if we had a
problem financing the debt because now
all of a sudden the interest payments
are over a trillion dollars and blah
blah blah blah blah blah blah the
10-year treasury would not would I
repeat would not be Trading at
3.6 what what moves the long end of the
curve isn't really supply of treasuries
it seems very counterintuitive but what
it is is it's really growth in inflation
expectations and this is why you can add
$25 trillion of Supply in treasuries
over the last 15 years and interest
rates go down they don't go up I mean
even compared to 2019 we're at 22
trillion in debt back then so we added
$13 trillion in debt just since the
beginning of the seresa sickness and the
10year treasury yield is 125 basis
points under fed funds and so what
happens here is Wake Me Up When the
10-year treasury is trading at 8 n 10%
until we get to that point you've got
nothing to worry about as far as
handling the debt because there's
massive massive demand out there and
don't take my word on it don't take my
word forget gamon just look at the
treasury market they're telling you that
demand is almost insatiable for these
treasuries right now so the problem with
the debt and I I always argue this I say
look the um the the real crisis is that
there is not a debt crisis I wish there
was because then we could pull back this
spending and then we could get a Malay
type situation but unfortunately the
real problem with the debt in the United
States is not servicing it it's the
economic distortions that are created by
the government
spending you see so we we we've to sit
there and say that we've got this
exorbitant privilege I would say it's
the exact opposite from a standpoint of
this just allows us to continue to
charge the credit card more and more and
more and more and more and more and more
and more because of the Dynamics of the
global monetary system the way the
monetary system is set up outside the
United States where all these dollars
are created in the euro dollar system I
I won't go into great detail but it sets
a bid for treasuries that's why if you
go back and look at uh you know this
explosion in debt the explosion in
deficits you have to ask yourself why
have we not seen the rubber meet the
road already why why are interest rates
at 3.6 and not already at 10 you think
the treasury market doesn't know about
the unfunded
liabilities you think the treasury
market doesn't know about the
dollarization you think they don't know
about the G bricks currency you think
they don't know about Social Security
payments and the Social Security fund
going broke of course they do of course
remember there's a there's uh
information asymmetry Daniela meaning
that we have the least amount of
information all of that is already
priced in to the treasury curve or
excuse me it's already priced in to the
interest rates themselves and what
they're telling you is we want more why
because because this is really the
underpinning this the collateral the
treasuries is the underpinning for the
global monetary system ah and I I and I
don't like it and and also too i' i'
remind you that as the global economy
slows down that means the demand for the
collateral that underpins the global
monetary system increases right and that
just gives the United States the ability
to spend more and more and more and more
and more and more and more
which creates these economic distortions
which is why which is why the poor in
the middle class right now are suffering
through a Great Depression it's why when
I go to Tucson Arizona I see a zombie
apocalypse of of of drug addicted
homeless people walking around with
heroin needles sticking out of their arm
that's why it's because the government
spending created that the central
planners and authoritarians that gave
everyone this stimy check and
then locked everyone in a cage for two
years and told them that they couldn't
produce any goods and services because
they were
non-essential that's why we've got the
drug problem that's why we've got the
poor middle class in an economic
depression and unfortunately there's
nothing that stops IT because there's
this insatiable demand for treasuries
because of the way the global monetary
system is constructed to begin
with you just uh you brought up a very
very valid points and I'm sure someone's
yelling at the screen saying well George
what would you label 35 trillion in debt
then if it's not a debt crisis what is
35 trillion in debt it's 35 trillion in
government spending
above and beyond taxes for heaven's
sakes but I think a better way to look
at it is the government spending as a
percentage of GDP that's your problem
that's your problem so as the government
spending as a percentage of GDP goes up
and up and up the economic efficiency
goes down down down down down that's why
central planning and communism doesn't
work right that's why those economies
don't produce a lot of goods and
services right because they're centrally
planned meaning government spending is
100% of GDP so right now we're about 50%
so as the government spending goes
higher and higher and higher which it
absolutely will I'm not sitting here
saying that the deficits are going to
improve or that the ud debt is not going
to explode it absolutely is in fact I
would probably argue that it's going to
go a lot higher and it's going to get a
lot worse than most people that claim
the uh treasury market is going to blow
up I would say as far as the deficits in
the debt you know I'd say it's going to
go way higher I would not be surprised
if in the next 5 years the debt is well
north of 50 trillion well maybe even
three years you know especially if we
have a recession and the deficit to GDP
goes up to who knows 15 20% but that
doesn't mean that the price is going to
be paid in the treasury market that
doesn't mean that we're going to have a
hard time financing our debt or our
deficits it just means that we're going
to have an additional amount of spend
government spending that is going to
continue and exacerbate the problem of
misallocation of resources and
malinvestment so the bottom line is look
at what the economy has done since
2019 look at what has happened as far as
the bifurcation that we were just
talking about look at what has happened
to the POR middle class getting squeezed
so my point is you've got to expect that
at an accelerated Pace moving forward
into the next five years because we
don't have a debt crisis we have a
government spending crisis yeah and
those two things are completely
different and I get so frustrated with
all my friends that are that go to the
New Orleans investment conference
because they sit there and they focus on
the wrong thing they sit there and focus
on the long and of the curve blowing out
but forget that forget that don't waste
any time on that look at the past 25
years
and if you can't tell me why we have not
yet had a debt problem then that means
your models suck that means your models
are broken and you've got to re-evaluate
your models for heaven's sakes and when
you do re-evaluate your models you see
exactly what I'm talking about well
that's why there's such good debates at
that show because you're there are no
everyone's on the exact same page it's
say me and Brent Johnson debating the
the other 45 speakers that are there
yeah but but you know what you you
brought up just you know just I I you
know you brought up a really really good
point
um when you were referring to the the
druggies and the and the home the
homeless situation right now because I
was having this conversation with my
in-laws this weekend who are you know
true New Yorkers I'm from Montreal I've
been living here 10 years but so I
haven't seen all the cycles of the city
but they've lived through you know the
60s the 70s the 80s the 90s you know the
Giuliani decade all
and they were reflecting back on how bad
New York was in
the80s and making comparisons to how bad
it is today when I asked them you know
they were saying it was bad but you
didn't see the homeless that you see
today and I said well how come where
were they why didn't you see like it was
dangerous yes and there were issues yes
but you didn't see the homelessness that
you see today why is that so Amplified
so I thank you for hitting hitting on
that not only that but but look back in
2019 you could you could go into Walmart
and actually buy
something now you can't in Tucson you
can't even buy anything without getting
some gal to come over and open up the
the cage for you I I went into Walmart
Danielle when I was just there and I was
trying to buy fingernail clippers
fingernail clippers from China these
things were
$218 and that was lock huh yeah and that
was locked yes and I get some gal to
come over and actually unlock this
because it's all behind like iron bars
or whatever it is so she has to unlock
this just so I can get the little uh
fingernail clippers and not only that
this Walmart had been completely
remodeled to the point where the the
section that's like a CVS you know
within Walmart where they sell those
things and like the hair care products
and whatnot yeah yeah yeah they they had
they had recreated it within the Walmart
so there was a uh kind of a funneling
system right to where there was a
bottleneck where they had a security
guard so the only way to get in and out
of that section was through this
bottleneck where they had this security
guard sitting there fulltime and then
within that section within the Walmart
they had the gal walking around so if
you wanted to get a bottle of shampoo or
some you know $2 piece of metal from
China she could open up the thing for
you and then you could walk by the
security guard so he could see that she
actually opened it for you to know that
you weren't stealing it for heaven's
sakes and guess what Danielle I live in
Columbia medine Columbia everyone sits
there oh are you scared of being in a
third world country a third world
country and all this complete nonsense
well you know what when I go down to a a
CVS down here or my local drugstore
guess what I don't have to do I don't
have to get the gal to come over and
open up the cage just so I can get a
bottle of shampoo because no one's
stealing right here in the third
world country so that in and of itself
what does that tell you about what's
happening to the overall economy in the
United States and we've got one thing to
blame and that's the central planners
and the authorit and the authoritarians
creating these economic distortions well
you just gave me goosebumps with that uh
bring it in bringing it home for
everyone watching because I know people
are going to be saying okay George you
just blew my mind with this
segment what what am I supposed to be
doing with this information now what do
what do we do with this information
portfolio as far as portfolio yeah I
mean I just want to say as far as yeah
like your portfolio you mentioned yeah
let's talk there let's just wrap it
bring it home but also just in terms of
Life are we still
smiling you're smiling but I would get
the hell out of an urban area that's for
sure I wouldn't be within well I
shouldn't say that I would I I would be
at least probably 10 to 20 miles away
from an urban area uh that's number one
and then I would start looking into Plan
B stuff you know our good friend Doug
Casey talks about that all the time so
I'm sure your viewers are familiar um
but then as far as my portfolio I mean
obviously you have to you have to own
gold at all times I mean that's just a
no-brainer but you especially have to
own gold in these times it's not because
of you know hyperinflation or anything
like that I would like to remind your
viewers that we have never in the United
States gone through a recession where
you had unemployment rate Spike and you
did not see the inflation rate go down
never not once not even once I just did
a video on this about a half an hour ago
so people like to reference back to the
1970s and say oh my gosh we had this
inflationary recession inflationary
recession no we didn't no we didn't in
the 7475 recession in 1980 when you saw
the unemployment rate Spike at the end
of this recession or in the middle of it
you saw the inflation rate go down not
up not up so the my point is you own
gold right now because as far as I can
tell gold really doesn't always respond
to inflation it doesn't always respond
to geopolitical risk in my view what it
usually responds to is counterparty risk
and Faith or lack thereof in the system
and based on everything that I'm seeing
right now I I personally have a lot less
faith in the system and I think that's
the main reason why gold is catching a
bid and if you're a long-term investor
you know sure you could see a dip if we
get this liquidity uh so I'd be very
very careful there I want to be clear
but if you're a long-term investor um
you know I or not even an investor if
you're just someone that's trying to
protect your purchasing power for
heaven's sakes uh you've got to have a
certain portion of your portfolio on
gold but then like I said I like uh
liquidity I like the the t- bills I like
rolling those I like if you want to get
cute you know you could play the long
into The Curve but then I want to start
setting up a watch list just like I I
had thank goodness going
into the surve of sickness because you
know March of 2020 when everything went
on sale and that's when you want to be
buying and that's the hardest time so if
it is true that this time is not
different then what that leads us to
believe is that over the next six months
or a year we could see the S&P 500 go
down maybe 15 20% and that could lead to
some very very very very interesting
buying opportunities for those people
that are prepared and then when the
central planners come back out and muck
up everything else once again by doing
stimulus or Ubi or who knows what the
hell they're going to do to try to get
us out of this recession that's when you
can ride the next wave up because the
one thing we know definitively is they
cannot afford to have a sustained or I
should say a dramatic um decrease in the
level of asset prices uh it's it's
terrible it's great for those who own
assets uh but it's terrible for the
United States and Society at
large there you have it folks George
gamon on a silver platter gold platter
uh I love the energy I love the content
Rebel capitalist is the show George does
tremendous work check him out we adore
you George thank you for coming back on
the show I appreciate it thanks for
inviting me
we'll see you soon and uh we'll see all
of you soon here again on the Danel
cambon show here on itm trading don't
forget to subscribe to our Channel and
to sign up at damon.com so you stay on
top of it all that's it for me thanks
for watching
[Music]
関連動画をさらに表示
“Dedollarisation?” 🛑 THIS is what EVERYONE is MISSING | George Gammon
OMG!! The Fed Just Made A HUGE Mistake
What the Fed's interest rate cut means for the bond market
Fed Cuts Rates 0.5%. What's Next for Stocks?
They Just Declared WAR on Your Gold & Silver Investments - Peter Schiff New Interview
「薩姆規則」觸發⚠美國1500萬人將失業😱?|又一「衰退警號」?|聯儲局不減息屬玩火|投資甚麼自保?🙏【施追擊】#股市 #美股 #投資 #crypto
5.0 / 5 (0 votes)