This is How The Fed Just Ruined Your Life - George Gammon Goes Off

Summary

In 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

00:00

📉 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.

05:01

🤔 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.

10:03

🌧️ 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.

15:06

🗣️ 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.

20:08

👀 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.

25:09

💼 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.

30:11

🏦 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.

35:11

🌆 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.

40:12

🚨 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.

Keywords

💡FED

The Federal Reserve, often referred to as the FED, is the central banking system of the United States. It plays a key role in the video's discussion as it is central to decisions around interest rates and economic policy. The guest argues that the FED made a mistake by not cutting interest rates enough, suggesting that the FED typically follows the two-year treasury yield as an indicator for economic health.

💡Interest Rates

Interest rates are a key monetary tool used by central banks like the FED to control inflation and stabilize the economy. In the video, the discussion revolves around the FED's decision to cut interest rates by 50 basis points, with the guest arguing for more aggressive cuts to prevent a hard landing economically.

💡Two-year Treasury Yield

The yield on two-year Treasury securities is an important economic indicator that reflects market expectations for interest rates and economic activity. The guest in the video suggests that the FED typically follows this yield and that it was at an extreme before the rate cut, indicating the market's belief that the FED's rates were misaligned with market conditions.

💡Recession

A recession is a significant decline in economic activity lasting longer than a few months. The script discusses the possibility of a recession as an economic outcome, with the guest suggesting that the FED is always responding to a recession rather than preventing it, despite their rate cut actions.

💡Yield Curve

The yield curve is a graphical representation of the interest rates on debt for a range of maturities. In the video, the yield curve's inversion (short-term rates being higher than long-term rates) is discussed as a reliable predictor of a recession, aligning with historical economic patterns.

💡Gold

Gold is presented in the video as a safe-haven asset, something that retains value during economic downturns. The guest recommends holding gold as an insurance policy in a portfolio, suggesting it can protect purchasing power and act as a hedge against economic instability.

💡Asset Prices

Asset prices refer to the value of financial instruments like stocks and real estate. The video discusses how the FED's actions can prop up asset prices to prevent economic downturns, but also how an over-reliance on asset price inflation can lead to economic distortions and inequality.

💡Debt

Debt, specifically government debt, is a central theme in the video. The guest discusses the high levels of U.S. government debt and argues that while it's not causing a debt crisis, the level of government spending it represents is leading to economic distortions and a misallocation of resources.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is increasing. The video discusses how inflation typically drops during a recession, contrary to some expectations of hyperinflation, and is used as a reason to hold gold as a store of value.

💡Central Planning

Central planning refers to a system where economic decisions are made by a central authority, like a government. The video criticizes central planning for creating economic distortions and leading to societal issues like homelessness and addiction, as a result of government policies and stimulus measures.

💡Portfolio

A portfolio refers to a collection of financial assets, like stocks and bonds, held by an investor. The video gives advice on how to position a portfolio in anticipation of economic changes, recommending gold and liquidity in times of uncertainty.

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

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