Fed ADMITS They're TOTALLY WRONG About Inflation

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Well earlier today the Federal Reserve did exactly what everybody expected them to do including yours truly

And that was leave interest rates unchanged the Fed funds rate remains at three and a half to three and three quarters

Of course the right thing to have done would have been a substantial rate hike

But of course that did not happen

But what I want to discuss before I get into the details of the Fed's decision and the press conference that followed

I want to talk about some of the economic data that came out before

We got the news that really set the tone for the markets particularly the precious metals markets

We got news on inflation producer prices and this is for the month of February so it's really before Trump started a war

And remember last week I went over the horrible GDP numbers

In fact, I went over them on the Schiff Gold Friday market wrap because I think we got the GDP numbers at the end of the week

So I didn't address them on my main podcast. I did it at Schiff Gold

Make sure you are a subscriber to the Schiff Gold YouTube channel to get the weekly Friday market wraps

But I went over the GDP numbers which shocked everybody in how weak it was

Q4 GDP grew at just 0.7 annualized

Annualized not even 1% economic growth

Donald Trump is talking about this economic boom this miraculous turnaround that he has presided over

And growth is anemic

In fact for all of 2025 GDP grew at 2.2 percent

That's 20 percent below the 2.8 percent

GDP growth from Biden's last year when we supposedly had the worst economy in the history of the world

And now that we have the greatest economy in the history of the world it's substantially weaker than what Trump describes as the worst

In fact there was not a single year where Biden was president where the GDP grew as slowly as it did during Trump's first year

So what is this guy talking about when he's talking about a boom right it's all a fantasy

No, I had listened to an interview with Chris Christie and I forget where he was interviewed

But he was reflecting a recollecting a dinner conversation he had with President Trump

And he said that Trump told him and I have no reason to believe that Chris Christie didn't remember this accurately

Because it seems like it's a statement that you would never forget

He said that the president told him hey Chris you know if you repeat a lie often enough it becomes true

Not that if you repeat a lie often enough people will believe it's true

But that it actually becomes true that you can kind of will a lie

Into being true if you just say it often enough

And that seems what what Trump does with with respect to everything

So he's talking about how the economy is great and hoping if he lies about it often enough that the economy will become great

Because he lies it into into greatness but we have a very weak economy

Now we have more confirmation that inflation is really on the rise

And of course Donald Trump has been taking credit for vanquishing inflation

It's gone it's dead and buried he killed it right we had horrible inflation under Biden and he's already gotten rid of it

The numbers that we got for February just like Q4 GDP numbers were barely growing before the war

Right so if the economy was that week before we were having a war

Imagine how much weaker is going to be now that there is a war assuming the war continues

The same thing with the PPI numbers

These are prices from February

Prices are much higher especially for energy oils about a hundred dollars of barrel right now I could check I got the live quote

99 and a half is West Texas a Brent is above a hundred and ten dollars a barrel

But so oil prices are at least 50% higher now than they were

In February right so wait till we get the March PPI numbers there probably going to be a lot worse but the February was already bad

So the prior increase the January increase was point five

Which in and of itself is a big number

Now the expectation was that it would cool off in February to an increase of point three

In fact point three was the upper end of the range

That had been expected the range went from point one

2.3

The actual number I don't have a drum the role but the actual number was

Point seven percent increase point seven more than double the upper end of the consensus forecast

Think about that number for a minute point seven if you annualize that because unlike GDP numbers that we get this is not an annualized number

Prices were up point seven percent on the month so if they did that every month

You would be looking at like eight point four percent inflation

Eight now this is not consumer prices these are producer prices

But obviously if prices are going up for producers what are they going to do they're not going to eat it right they're going to raise their prices right because

The first to feel the impact of inflation are the producers wholesale

It's not that they're just jacking up their prices right there costs have gone up

And consumers buy retail they don't buy wholesale in most cases

And so they only feel the effects of inflation

after the

Hose seller passes it on

So they get the price increase first and then they give the bad news to their consumers by raising their prices

So if producer prices are going up

Consumer prices are going to go up that's how it works that that's the process

So this is bad news on inflation

Now people are going to say oh Peter you're you know exaggerated you can't annualize point seven

Well why can't I I'm just taking the most recent month and annualizing it

But it's also possible that the next few months are actually worse than point seven

So it may be more than eight point four percent

Now if you just look at the year over a year number now

It's three point four percent so not as bad as my annualized February number but three point four percent

That's well above two

In fact the prior

Year over year increase the January number was two point nine

So in one month the year over year increase in producer prices has gone from two point nine two three point four

That is a huge move in the wrong direction the Fed wants prices to go down right has to get down to the two percent target

We're moving further and further away

Before the war before the increase in oil prices now if you take out food and energy it's actually worse

the

One month increase was actually not worse it was a point five

Which was still

Much hotter than the point three day expected but look at the year over year number three point nine year over year increase in

Core

PPI that's almost four

Double double the two percent target that the Fed claims to have

So this is really bad news the minute this news came out goal tanked

In fact before I even saw the news I saw goal was down about a hundred and fifty dollars. I was like what the hell what happened?

I mean and I went and looked at the PPI and then I knew what happened

And silver was immediately dropped like two and a half bucks

Now the reason for this reaction is the minute this news came out the expectations for Fed rate cuts were paired back significantly

And that was later confirmed you know later today when we got the FOMC announced minute we saw the dots and what everybody is projecting

So the expectations of a rate cut were pushed back in fact a lot of people now believe that there won't be any rate cuts at all for the rest of the year and

The other opinion is that we might get one which is not that many

And and so because

The odds of a rate cut went down

Gold went way down because gold was pricing in or at least the traders believe that gold is pricing in

Rate cuts and now that the rate cuts aren't coming or aren't coming as soon as people had expected

The price of gold sold off it's probably programmed in an algorithm you get hot inflation numbers

You automatically sell gold, right? You don't even have to ask any questions. You just kind of do it automatically

but

This is not bearish for gold nor is it bullish for the dollar

What this does is validates what I have been saying all along what I have been saying for years

Because the Fed has been wrong wall street has been wrong

The Trump administration has been wrong. I've been right

What I've been saying is that inflation is not dead and buried. It's alive and well that it's going to

Make a comeback and it never really went away because the Fed never

Put out the flame that it aborted the fight prematurely that it never should have hiked rates all the rate cuts

That started in the summer of 2023 when the Fed funds rate was five and a quarter to five and a half that basic

You know 200 points almost 150

Basis point rate cuts or hundreds said whatever it was if they were all a mistake

And that the Fed never really put the inflation gd back in the bottle and and now it's you know

It's it's running amok and I've been saying that and so what this data confirms is that the Fed is way behind the curve

That inflation is running out of control and that the Fed has no ability to reign it back in

Because even if the Fed is going to put rate cuts on hold

It's not going to hike that is the key

So what is the reality is it's not that the Fed's failure to cut

Is bearish for gold

It's that the Fed's failure to hike is bullish for gold because it's not nominal rates that count

It's real rates. That's what matters and if inflation surges and the Fed sits on its hands

Even if it doesn't cut rates real rates are plunging. Let's say the Fed were to raise

The Fed funds rate which it isn't even doing

But let's say it raised the Fed funds rate from three and a half to four 50 basis points up

Oh the Fed is tightened

But what if during the same period of time

Inflation goes from three percent to six percent

What's happened to real rates?

They've gone way down. They've gone from positive

50 basis points to negative two hundred basis points

We that is bullish for gold that is bearish for the dollar the traders haven't figured that out yet

They're not thinking long term. They're not connecting the dots

Right, they're not playing chess here. They're just reacting to a move at phase value

And they're just saying oh the Fed's not going to cut. Yes, they're not going to cut

But the bigger point is that they're not going to hike either

Despite what was said today the Fed's not hiking and that is the problem

Inflation is running out of control and that's not bullish for bearish for gold

That is extremely bullish and you should buy today's dip as soon as this podcast is over

Go over to shift goal.com. I got a quick commercial break. We're coming right back. So don't go anywhere

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All right, now before I get to the the fed rate

Decision decision discussion. I want to talk about another

Data point that came out earlier today

That confirms

What I have been forecasting and that is the weakness in the housing market

In fact the housing market is a bigger bubble now than it was in the 2000s

And we're headed for as big if not a bigger decline in nationwide real estate prices now as we did then

Which means an even bigger financial crisis

Now

mortgage applications

collapsed in the most recent week

Led down by

Refinances that fell 18 and a half percent

So the total index was down almost 11% with purchase purchase mortgage purchases were pretty flat

But the refined market completely dried up

And the purchase market is going to be drying up because

Mortgage rates are rising along with bond yields

And that's despite the fact that the GSEs

purchased 200 billion dollars

Worth of mortgage-backed securities in order to artificially suppress

mortgage rates to

keep

Bubble-like home prices from deflating

Which of course would help solve the affordability problem

But Trump has made it clear that he doesn't want to solve that problem by creating another problem

Which is real estate prices going down

Which is going to happen

Because when real estate prices are this overpriced

And

Mortgage rates can't really

collapse

The only thing that can happen is prices go down because

Real estate prices are a function of what the buyers can pay

Because ultimately your house is worth what you can sell it for

Not what you want to fantasize about selling it for

Not what you want to pretend that you can sell it for because anybody can put a house on the market

You can list your home for anything and pretend that's what it's worth

But at the end of the day, it's worth what you actually get when somebody buys it

And we're going to start to see some sales as the economy really goes into recession

And the war will help push it there as well as the higher prices that will result

And you're going to see big drops in real estate prices

Which is going to be a huge problem

And that is one of the reason

That shares of Fannie Mae and Freddie Mac have been imploding

In fact, they were probably the worst performers of the day

I think Fannie Mac was at about 13-15 percent

Fannie Mae rather, Freddie Mac and Fannie Mae

They're I mean, they're two separate companies

But you know, they're pretty much the same trade

But Fannie Mae

Closed at $4.63

It got to 16 bucks last year

Now it was a big run up to 16 bucks

On all the talk about an IPO or releasing them from conservatorship

And if you remember, I was saying that this was impossible to do

That you can't really privatize them unless you're willing to let mortgage rates go up

Which Trump doesn't want

So he wanted to have his cake and eat it too

He wanted to try to privatize it

But maintain the government implicit guarantee

Which would make the guarantee explicit which you I would be a disaster

So I was speculating that nothing was ever going to happen and it was just all a bunch of hype

So that some of his donors could cash out the Fannie and Freddie shares that they bought prior to the election

But I think one of the reasons that

The story is quickly evaporating

Not only because of

Fannie and Freddie having bought 200 billion of mortgages that they're now losing money on as mortgage rates are now rising

But I think that people are starting to realize

That Fannie and Freddie

ensures something like seven trillion dollars of mortgages

And if this is a real estate bubble which it is and the real estate bubble is going to pop which all bubbles do

There are massive losses that are coming for these GSEs

Probably bigger than the losses that bankrupted them last time

So who the hell wants to buy into that?

I had to privatize Fannie and Freddie ahead of massive losses

The whole idea was that these businesses are cash cows

They're cash cows as the bubble is inflating

The problem is you got to give all that cash back

When the air comes out

You know, that's what happened before before Fannie and Freddie went into conservative ship

Yeah, they were making money hand over a fist as they were underwriting and ensuring bad mortgages

Then of course when they all went bad was when all the losses piled up and the taxpayers got stuck with them

The same thing is going to happen again. It's ironic. They were talking about hey, let's privatize it

Right

And I'm you know, I knew this was a huge bubble. Yes, they've been making a lot of money

But all the profits of the past simply so the seeds for the losses of the future

Yes, the US government has got a lot of money in Pat prior years

Because of Fannie and Freddie now they're going to have to give all that money back

Because they've guaranteed all these mortgages. They're going to have to make good on the guarantee

Only this time it is explicit because they are in conservative ship

And so there's no doubt now that everybody who is holding debt that is guaranteed by Fannie and Freddie is going to get paid back

The question is where's the money going to come from? Well the money is going to be created out of thin air by the Fed

Just like they do everything else. So it's massive inflation

But you can see that so we got weak housing data

And even the federal knowledge is that housing is probably the weakest part of the economy and the economy is weak overall

And and the president is trying to prop up the market

But anything he does to prop up the market

Ultimately weakens it further and weakens the fundamentals of the economy

But so we've got weak economic data

We've got strong inflation data

And it was with that backdrop

That we got today's FOMC decision

It was nearly unanimous, but there was one descent you could guess who that was

Moran

The you know the president's lackey although

Last time there were three descents and I think there were there were two guys that wanted

A bigger cuffs or one guy that didn't want any cut, you know when they when they did a cut or I think it was

Was that what happened last time was a 20 phase based five basis point cut

But there was one descent who wanted a cut

25 I guess 25 basis point cut

But what is more significant is that not a single FOMC member wanted a hike

And based on the data

A hike is what we need because everything the Fed was claiming

Turns out to have been false the Fed has been wrong about everything

And they don't even admit that you know when when pal was given his prepared remarks

You know

He did mention inflation and he described it as being somewhat elevated

Which I think is one of the most you know

Gross understatement that you can make somewhat elevated

It's not just somewhat elevated. It's way above target

It's at least 50% above target

But if you look at the more recent data. It's more like double the target

So how is that somewhat elevated?

Yeah, I mean inflation was not anywhere near below

The 2% target as it is now above it

Mentioned the housing market is weak and again, I think that's an understatement because it's massively weak

It's about as weak as it's ever been

I mean just you know before the collapse because the reason it's so weak is that nobody can afford to buy houses

Because the prices are too high

Well, we know how that's going to be resolved

But he said that the Fed is attentive to both sides

Of the market but that they are well positioned to deal

With either side meaning that the Fed feels

That if the economy weakens

their positioned

To cut rates and if inflation

Worse gets worse

There's somehow in position to do something there as well, which I don't know what they're going to do

I mean not not cut rates because that's not going to cut it right if inflation is getting worse and all you do is nothing

You know, you're not going to put out the fire by doing nothing right you need you need to hike rates

And you know that ain't happening for a number of reasons

um

So

Pal basically said look we think the Fed funds is pretty much going to stay in the current neighborhood 3.4

Maybe as low as 3.1 over the course of the next year. So maybe a cut right

But he also admitted that policy is not on a preset course

You know that you know, we're going to

remain dated dependent

And it depends on what's on what's on what's going to happen

Anyway, of course most of the interesting stuff

Was not in the prepared remarks

But in the Q&A that followed and again looking at the markets

Most of the damage in the market so though the the the markets ended up closing on their lows gold was down

Close to like 200 bucks $190 silver was down over $4 the Dow was down. I think over 700 points

percentage-wise. I think the Nasdaq was down a little bit less

You know Bitcoin, which had rallied

You know back over 74,000. I think over 75,000

Was down now. It's down about 71,000. It's still hanging in there. I mean, I don't know what's keeping it up

I mean, it's going to collapse any day

But it got another bounce. I mean a lot of buying from Michael sailor. There's a lot of pumping going on

Trying to keep this market from imploding

But you know, it was down

Um, so there you know, it it wasn't as much

But there was one particular comment and I'm going to get to that

You know shortly

That was made during

The Q&A that caused the markets to hit new lows

Including precious metals and I want to take a look at what's going on

In in the markets right now and that's a and is a good opportunity

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One of the things I've already done is I set up a a watch list of a lot of the stocks I own

And I'm scrolling through them now you can see that most of the stocks are in the red right because my stocks

I own a lot of gold stocks that got clobbered most of the green on my screen

Were stocks that went up overnight like in Asia that weren't impacted by the us sell off

And of course, I own a lot of oil stocks and the oil stocks were pretty much all in the green today

But most of my my holdings were in the red

You know the biggest drops in the mining sector

But again, this is a great buying opportunity for those gold mining stocks because the traders

Have got it completely wrong we be 55% off not 50% oh maybe they are

All right, well, I don't know I guess the I guess the sale is 55% off

And then I get an extra 15% on top of that is that is that the deal

Anyway, hopefully that's it, but but we either way. It's a great deal

So just just use my link, but these

This the the gold stocks really sold off they were down like what six percent seven percent

Again, investors don't get it

Higher inflation is good for gold. It's not bad for gold

It doesn't mean that oh no, the Fed is going to just leave rates alone and that's going to do it

That's going to do the trick. It's not going to do the trick

the Fed needs to go

Paul Volker

On inflation and that's not going to happen right we had the Fed has to get medieval and you know

It there's no chance there's no chance of that happening and you can easily

Figure that out if you listen to the press conference, but anyway, let me talk about some of the stuff that went on during today's press conference

So

The first question he got

We should defend look through the war related

Increased in oil prices now first of all oil prices were going up before the war right

But now they're going up even faster

and

defend basically

Or power rather

Basically said look, we're not even going to think about that right now because we're still trying to figure out the effect of tariffs

We're still trying to figure out if the tariff effect is over and that seems to be the more important thing right now

Before we start thinking about oil

Um

And and the guy also said the same guy that asked this question

As pal look you know

You've been above target for five years

In your inflation

Which is true well above target for five years now

And he said

Does the fact that you've basically been so wrong for so long

Does that influence how you're thinking and again

Pal just fell back onto tariffs and he said well, you know

We've had things happen to interfere with our progress

And he said tariffs did that okay, but that was last year

20 tariffs are only an issue in 2025

That's one year out of the five years that they've been way above target

So what's your excuse for all the other years you want to blame 20 25 on tariffs?

Okay, what about 2024? What about 2023? What's your excuse there?

I mean obviously the Fed doesn't have any

They don't want to acknowledge how wrong they've been because you go back

To their forecasts and it's always two percent inflation is coming two percent inflation is coming

And two percent inflation

Never arrives now another reporter asked a good question

Said okay given the fact that the inflation numbers have been hotter than you thought

What is the basis?

for

Cutting why is the committee looking to cut rates and by the way of the of the 19

members, right

12

I think that there'll be one more cut

Between now and the end of the year and seven

Think there'll be no more cuts

Right that the cuts won't happen until 2027, right

But there's still a bias to cutting right because you got 12 members thinking they're going to cut rates

But why if inflation is now higher than it was before

Why are you still thinking about cutting rates when you're not making any progress?

In fact, you're going backwards, right? And this was his answer again. I'm not making this up

Powell said that the reason that they are forecasting

Rate cuts even though

inflation is headed in the wrong direction

Is because their forecast is that they're going to make progress on inflation

Their their forecast is that inflation is going to go down

And because they are forecasting that inflation is going to go down

They are assuming that they're going to cut rates

but

Based on what have they assumed that inflation is going to go down based on nothing

because remember

It at an earlier FOMC meeting

Powell let the cat out of the bag

He said the reason that they forecast two percent inflation is because that's their mandate

And they believe they're going to achieve their mandate

So because their mandate is 2% inflation

They forecast 2% inflation. Not because there's any actual evidence that inflation is going to be 2%

It's because their mandate is 2%

So that's what they want to forecast. And that's what they're doing here

They believe they're going to make progress on inflation because they believe they're going to achieve their mandate

Because our mandate is 2%, they're not going to say we're not going to achieve our mandates.

So they want to say, yes, we believe we're going to achieve our mandate.

And because we believe we're going to achieve our mandate, we believe we're going to cut

rates.

But it's all based on belief and the belief is based on nothing other than a wish.

It's a fantasy.

It's make believe.

This is what they hope.

They're basically saying we hope inflation comes down.

And because we hope inflation comes down and we hope that we're right, we're forecasting

rate cuts based on what we hope happens, happens.

That's basically what they're saying and pal actually admitted that he's made no progress.

He said, despite the fact that we've made no progress, we still believe we're going

to make progress in the future, even though we're basically making no progress in the past.

Now, another question, he said, do you think the higher inflation is based just on the

oil shock?

And he really didn't have an answer to that.

The other he kept saying about oil shocks is that history shows that you should look

past them.

Not really.

I don't know where he's reading that, what history books.

In fact, it didn't work out too well when we looked past it in the 1970s, but he immediately

pivoted that question back to terrorists and he implied or not just implied flat out

stated that the slow progress now was due to terrorists that if it wasn't for these

terrorists, maybe we would be at 2%, but the terrorists have got it all screwed up.

But he also asked him a good question, said, what gives you confidence that inflation

will return to target if your policy is only moderately restrictive, which is a good question.

And the answer is it won't, right?

They even admit that they're not very restrictive, they're, they're, they're moderately restrictive.

No, I don't think they're restrictive at all.

I think they're easy.

I think they're accommodative.

I think rates are way too low.

So they are stoking the inflation fire.

They're not putting it out, they're, they're adding fuel, right?

And, but the reporter said, well, what makes you so confident?

And he didn't even answer the question.

He just pivoted over to tariffs again.

And he said, well, we're waiting to see what happens with tariffs.

He says that we're hoping that when the tariffs worked our way through, that we're going

to go back to the low goods inflation that we had of the past.

He said, back in the past, goods prices didn't really go up very much.

They were flat to negative.

And so we're just hoping that it goes back to the way it was in the past.

Well, why?

Why should it go back to the way it was in the past?

Look at all the money we've created.

Look at all the inflation we've created.

And look at what's happening with the dollar.

We know, and look at what's happening with trade.

Why would we go back to the way things were in the past?

There's no reason to expect that.

It's actually different.

The cheap goods that we got in the past are in the past.

In fact, Donald Trump has made that clear.

The goal of the Trump administration is to stop importing cheap products.

That's the whole purpose of the tariffs.

That's what Trump wants.

He wants the world to stop ripping us off by selling us cheap stuff.

Well, the reason we got cheap goods in the past was because of that ripoff.

Because we got to import all this stuff.

Well, if we can't import it all because the tariffs make it more expensive.

And now we got to make the stuff ourselves.

When we do that, it costs more money.

Well, that benign effect, those low goods prices that Powell is counting on to bail us out

to come back.

They're not going to happen.

You know, he's got like an ostrich.

He's got his head in his sand and he can't see what's going on.

So he should have no confidence.

There is no way inflation is going back to 2%.

Either the Fed knows that and just doesn't want to admit it or they don't know it.

Because that's how ignorant they are.

Now somebody asked them to how high, like you know, would would prices have to go up?

Oh, I'm going to hold that hold out for a second.

Now he reiterated that there is a risk that inflation could go higher and there's a risk

that the economy and the labor market can get weaker.

And Powell said we are prepared that if the economy gets weaker than we think, if the

labor market gets weaker, we can cut rates.

And that is the appropriate policy for weakness in the labor market is to cut rates.

And he said, however, if inflation is higher and basically the way they assess the risks

and at least they assess it correctly.

The risk to the labor market is that it gets weaker and the risk to inflation that it

gets higher.

So there are risks to both sides of the mandate that have opposite policy responses.

And he acknowledged that dilemma, although he downplayed significantly the extent of it.

But he said we're ready to cut rates if we need to.

But if inflation is stronger than we think, we can raise rates because that argues for

higher rates.

And then he immediately corrected himself and said, well, we can at least not cut them.

So at first he said that we may raise raise and he's well, well, no, we'll just not

cut them.

So that's how they're going to fight inflation by not cutting rates, not by hiking them,

but simply by not cutting them.

But that's not enough, that won't cut it.

If inflation is going up, you need to get ahead of the curve, you need to get aggressive

on your rate cuts.

If you just leave rates where they are, you fall further and further behind the curve

as inflation accelerates and you're staying still, right?

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But what really got pal is somebody asked him or got the markets rather somebody asked

pal about rate hikes if the subject had come up.

And he said, yes, in their discussion, the possibility that the next move on rates could

be a hike that was raised.

So they talked about it.

Maybe for the first time they talked about, is it possible?

Maybe we'll have to raise rates.

Now he downplayed it by saying, look, nobody believes we're going to raise rates.

Nobody has that in their model, but the possibility did come up and that really hit the markets

again.

But I'm sure if somebody brought up the possibility, it was quickly shot down, they're not going

to do it.

And I think that was obvious when pal corrected himself about hiking rates in response to

higher inflation and walking that back to not cutting them.

So basically there are two things that the Fed is considering, cutting rates or not cutting

rates.

They're not considering hiking rates, but by any objective measure, that's what they

should do.

Now of course we have a weak economy.

So hiking rates are going to harm the economy, but you know what, that's what you have to do.

We had a weak economy when Volker put interest rates up to 20% and in fact it made the economy

weaker obviously.

So we've got a big inflation problem and it can't be solved without some sacrifice.

You're going to have to weaken the economy, especially when the economy is a bubble.

Part of the reason for inflation is excess consumption, excess spending as a result of cheap

money.

You take the cheap money away, you take this consumption away, you take the spending away.

Well, there's all the GDP.

So the GDP has to collapse.

You can't get rid of the inflation without getting rid of the phony GDP growth that the

inflation has created, which is why they're not going to do it.

Now one of the most ridiculous responses had to do with stagnation.

Somebody asked Powell has the Fed considered the risks of stagnation.

Now of course, we already have stagnation.

So they're basically saying have you considered what's actually happening?

The actual economic environment that we're in can best be described as stagnation.

So it's already there.

I mean, so you're basically saying have you considered the actual reality of the current

situation?

Has that ever come up?

And Trump, I mean, Powell immediately caught, you know, distance the economy from

stagnation by saying, look, we don't even have anything close to the stagnation.

He says, I don't know how you define stagnation, but I define it as what happened in the

1970s and he said there we had double digit inflation.

We had very high unemployment and he said today it's nothing like that.

He said we have historically low unemployment and inflation is only 1% above our target.

So we have low inflation, we have low unemployment.

So I don't even consider this stagnation.

So I don't know why you're even talking about it, right?

So first of all, stagnation doesn't only relate to the 1970s.

It simply is a condition of slow economic growth, check, we got that and higher inflation.

Check, check, we got that too.

Yes, we don't have double digit inflation yet.

We're not in recession yet, but those are not conditions that make stagnation possible.

They just mean it's a lot worse.

If you have recession, not just stagnation.

If you have really high inflation, then I think it's like an inflationary depression.

That's really where we're headed.

But you can't forget that one of the reasons that if you just do a numbers to numbers comparison,

which is what Powell was doing.

If you just compare the official inflation rate today to the official inflation rate in

the 70s, and you compare the official unemployment rate with the official unemployment rate.

You're not making an apples to apples comparison.

I don't even think you're making an apples to orange a comparison, right?

You're making an apples to bricks.

They have nothing to do with one another because the methodology for computing, both unemployment

and inflation, has so dramatically changed over the decades that they have no relation

to one another.

If you wanted to compare inflation and unemployment now to the 70s, you would have to adjust how

we compute it now.

You would have to use the same methodology that we use in the 70s to the same data sets.

And if you did that, you would find that both inflation and unemployment are at least

double what we are currently reporting.

And if you double our inflation rate and double our unemployment rate, you get similar

to what we had for most of the 1970s, which we concede was bad.

We have the same thing today, which is not acknowledging it.

We're pretending it doesn't exist because we've made it disappear through the magic of

government statistics.

But the other thing that Powell said about the 1970s was he said that the risks that we

face now are nothing like the 1970s, meaning that the 70s were way worse than, I mean,

we got it easy now.

I mean, don't worry, it's not nearly as bad as the 70s.

He said all we got now was a little tension between our policy goals, right?

Nothing to really be concerned about.

I mean, the one thing he got right in a way was what he said that it's nothing like

the 1970s.

And in that sense, I agree only in that it's way worse than the 1970s.

That is the difference.

See in the 1970s, the national debt was not even a trillion dollars.

It didn't even get to a trillion until the early 80s.

So we didn't have all this debt.

You know, I think our debt to GDP back then, I don't know, was it 30, 40 percent?

Let me take a look at that, let's see if I have it, national hold on, because I wanted

to bring this up anyway, but let me look at the national debt, let's see if it has that

just off the top of the head, debt to GDP.

So 1980, yeah, so 1980, our debt to GDP was 34 and a half percent, 34 and a half.

Now it's 125 percent of GDP.

It was 34 and a half, again, this is just a bond of debt.

I'm not talking about any of the unfunded liabilities.

And obviously during the 70s, it may have been a little less than that because we were

racking up a lot of debt, you know, in the 70s.

So during the 70s, it was, it was probably a bit lower than that.

But let's say, let's, you know, it's 34 percent.

And so we had the ability in 1980 to put an end to the high inflation.

We were able to raise interest rates to 20 percent because we could afford to pay 20

percent because we didn't have a lot of debt.

And the majority of the debt that we had was financed with 30 year bonds.

So even though we had to pay 20% to issue new bonds, we still had locked in a lot of

debt at very low rates that we didn't have to worry about.

Contrast that to the current situation where we have 39 trillion in debt.

In fact, just yesterday, for the first time, the national debt, it clips 39 trillion.

So we will be at 40 trillion shortly.

In fact, the war is going to make sure we get there even faster.

In fact, Donald Trump, they're already thinking about an extra 50 billion in an emergency

defense appropriation to fund the war, which of course is just going to be a down payment.

Now nobody is asking for a tax hike to cover that.

Nobody is saying, hey, let's cut spending someplace else to offset the extra 50 billion for

defense.

No, let's just borrow it, throw it on top of the debt pile with everything else.

Again, Donald Trump says we have to sacrifice to win the war.

And by sacrifice, he means higher gas prices, right?

We need some short term pain for long term gain.

Okay, how about let's sacrifice and pay for the war?

How about government spending cuts or tax hikes to cover the 50 billion, which again,

is just a down payment.

What about the next 50 billion and the next 50 billion?

Where's all that going to come from?

Well, we know where it's going to come from.

We're going to borrow it.

It's going to be more debt and it's going to be more inflation.

In fact, I think there is a chance that during the remainder of Trump's term, which is

what, about three years, the national debt might hit 50 trillion, 50 trillion.

That would be an extra 11 trillion, which is what three and a half trillion a year in

debt.

Very easy to do that.

We go into recession that lowers tax revenue, increases expenditures.

We know interest rates are going up that increases the cost of pay, of servicing the debt.

And the war is going to add a tremendous amount of spending, even if we win, we're going

to have to pay to rebuild.

So even if there's peace, we get stuck with another tab after we pay for the war.

So this is going to be a massive increase, but the point I'm making about the comparison

between now and the 1970s is that we have all this short term debt.

And so if interest rates just went to 10%, let alone 20%, let's not even talk about 20.

Let's talk about 10.

And obviously, if rates went to 20% in 1980, when we were a much better credit risk than

we are now, when our debt to GDP was only 35%, and now it's 125%, when we had a trade

surplus instead of a trade deficit, when we were a creditor nation instead of a debtor

nation.

In fact, we were the world's biggest creditor, now we're the world's biggest debtor.

We were a much better credit risk in the 70s than we are now.

And so given the deterioration in our credit quality, we should be paying higher interest

rates that we paid back then.

But let's assume that it's only 10%.

How are we going to pay 10% on 40 trillion in debt?

That's $4 trillion a year in interest.

The government only collects $5.4 trillion in taxes, but how much tax revenue would

the government collect if interest rates were 10% of fraction of what it is now?

In fact, my belief is that if interest rates went to 10%, government tax revenue would

collapse and they wouldn't even get $4 trillion a year in tax revenue.

But we would owe $4 trillion a year in interest on the debt, not right away.

It would take a few years to cycle through.

But remember, we keep adding debt.

If we're adding $3 or $4 trillion of new debt a year, all of that new debt has to be

financed at 10% and all the debt that matures has to be rolled over at 10%.

It's not going to be long before our interest expense exceeds 100% of our tax revenue.

Now of course, before we got anywhere close to that, we would have a major sovereign

debt crisis, which we could be having soon.

So when Powell just brushes over stagflation and claims, oh, we got nothing to worry about.

It's nowhere as near as bad as the 1970s.

We got a lot to worry about because we're in much worse financial position than we were

in the 1970s and he knows he can't hike rates.

All the Fed is thinking about doing to fight inflation is to not cut rates, but that won't

work.

If rates are already too low, when money supply is growing, when credit supply is growing,

and it's continuing to grow, we have a massive problem.

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Um, another thing that that that Powell mentioned, and they do this all the time to try to deflect

blame when he talked about the big inflation that we had coming out of the pandemic.

He said that we had this inflation all over the world and it happened everywhere.

And the reason the Fed likes to remind everybody that inflation was a global problem and not

an America problem is to try to say, look, it wasn't our fault.

There was nothing we could do.

Inflation happened all over the world so you can't blame us.

And that is all BS.

The reason inflation happened all over the world is central banks all over the world

made the exact same mistake.

So that doesn't get the Fed off the hook.

Just be false.

The ECB had bad policy just because the bank in Japan had bad policy just because all these

other central banks had bad monetary policy and they all slashed interest rates and printed

a lot of money, doesn't let the Fed off the hook for doing the same thing.

In fact, the fact that there was inflation all over the world in response to the fact

that every country in the world did the same wrong thing that just proves it, right?

No country escaped inflation because every country made this mistake, right?

Every country said, oh, we got to cut interest rates.

We got to print money.

We got to have our people stay home and we got to flood the economy with cash, right?

That was a boneheaded move, but all the central bankers made it because they all read from

the exact same playbook.

The final point I want to make before I sign off for today, Powell did acknowledge that

he is not going anywhere.

Even after his term is up and we have a new Fed chair, as long as the investigation,

the criminal investigation, grand jury investigation against him is open.

He ain't resigning.

He's staying at the Fed.

And I think the reason he's doing that is leverage because he knows that Trump wants him

gone so he can, Trump can replace Powell with another one of his lackeys.

And so what Powell's going to say as well as long as you're going to continue to investigate

me, I ain't going anywhere.

And so the only way that Powell's going to resign is if they close the investigation

and give him a clean bill of health, which I know from experience, they never do, right?

You know, the government investigated me for tax evasion and money laundering for over

two years.

And that was, you know, 20, 20 is they started the investigation in 2020.

They ended it mid 2022, right?

Found no evidence that I did anything wrong.

So the grand jury disbanded, nobody was indicted, nobody at the bank was indicted, none of

the customers have ever been indicted.

Nobody associated with the bank was ever indicted.

I was never indicted.

But the government never closes the investigation.

I asked my lawyer about this.

He said, look, can we get the government to officially say the investigation is over and

we didn't find anything.

And they said, no, they never do that.

They never admit that they found nothing.

They never admit that they stopped investigating you.

It's just, they just don't do anything, right?

They don't charge you, but they don't say, you know, you're innocent.

They just don't do anything.

And which I think is unfair, especially when they illegally leak the investigation.

And in my case, it was worse because they implied that I was guilty, even though they knew

I was innocent.

But if they know that the investigation has been leaked, the least they could do is

admit, you know what, we didn't find anything, the guy was clean.

But they don't do that, even in my case.

Now obviously the PAL investigation wasn't leaked, everybody knows, right?

You know, it's not a secret investigation.

They made the whole thing public that PAL is under investigation by this grand jury.

But even then, it would be a stretch to actually get the government to do this.

But maybe PAL is trying to leverage the fact that he's got this one card he can play,

which is I ain't leaving.

And see if you can get the Trump administration and the Justice Department to do something

they never do.

And that is admit that an investigation is over and that they found no evidence of wrong

doing.

But anyway, that's it for today again, I'm going to do a shift gold Friday market wrap

on Friday.

We'll see if we get a big bounce back in the price of gold and silver, maybe cooler heads

will prevail.

You know, we're at 4834 right now on gold.

So we're below 5,000.

I've been saying that any move below 5,000 probably won't hold and that we won't stay below

5,000 for long.

We'll see if I'm right.

We can get back above 5,000 by the end of the week.

Silver is about 75, 66.

It's been very volatile, but it's still all the volatility is way north of the $50 break

out.

So silver is still a massive breakout as far as I'm concerned.

So by golden silver, but the biggest pullback has been in the mining stocks.

They have been killed 25, 30% from their peak prices still positive on the year, unlike

the US stock market, which is negative on the year.

But we're going to get some phenomenal earnings, even if the price of gold and silver

don't recover if they just stay where they are.

The earnings should be phenomenal.

Gold companies should have huge beats and I don't even think the earnings that they're

going to beat have been factored into their stock prices, let alone the beats.

So take advantage and get yourself some of these mining stocks.

If you were under invested, now's your opportunity to bring up your investing, bring up your

waiting.

Do yourself, talk to my advisors at Europe, Europe Pacific asset management, your impact.com,

or just buy my fund.

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The advisor class EPG IX is on the platform of every major discount broker.

So do yourself a favor and take advantage of people who don't understand inflation, don't

understand the Fed, don't understand money and don't understand gold and who have been

selling into what amounts to very bullish news for precious metals.

Bye for now.

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