Jerome Powell Admits The Fed Was WRONG On Inflation

0:28Hello, everyone. need your help. My goal is to get to 1 million subscribers on YouTube, but we only have 25 ,529 of you. So hit that subscribe button, push us closer to the goal, and let's get into it today. All right, ladies and gentlemen, people tend to have amnesia when it comes to financial markets. It was only just a few months ago that Mac's fear was spreading like wildfire all across Wall Street. People were promising us recessions and depressions. They swore on their life that tariffs would bring sky-high inflation to American consumers. And if you turned on your television, That was the fastest way to get duped into dumping every asset you owned.

1:03And they were telling you to do it before financial Armageddon showed up. Now, of course, this all looks ridiculous in hindsight. Everyone take a deep breath and calm down. It was literally insane. The U.S. government put economic policies in place that protected U.S. companies. Those policies encouraged GDP growth, and they didn't require an increase in prices for American consumers. Now, that last part will have some of you reeling in disgust. You're going to argue that tariffs were inflationary. By placing the tariffs on imports, you're going to claim that consumers are required to pay a higher price.

1:33That would make tariffs a tax. That's what your economics professor taught you, right? That hasn't happened. You don't have to believe me either. Federal Reserve Chairman Jerome Powell, the boss, he said it himself yesterday. Here's what he had to say. We're now collecting a good bit of revenue. The government is, the federal government, collecting a good chunk of revenue, three or four hundred, three or four hundred billion dollars a year apace. And the question is, who's paying that? And the candidates for paying those tariffs would be the exporter, the foreign exporter, or someone on our shores.

2:04It could be a company or a retailer. Someone is using the imported product to manufacture something, or the end consumer. And so far, in its incredibly early days, it doesn't look like the overseas exporters are carrying the bulk of it. It looks like it's that middle group. It's retailers and it's importers. and they're not passing along to consumers that much of the cost. So the actual effects on inflation have been quite modest so far. It's really not – it's a small amount. But, I mean, for example, I mentioned that core PCE inflation is 2.9%. Maybe 0.3 or 0.4 of that is tariffs. So it's not the big factor.

2:49It's not a big, big inflationary thing. but it is something that is driving up inflation a bit. And the question is, are companies then, are they going to eventually be able to pass that stuff through? And then that might drive inflation up a little higher. So there you have it. The leader of the United States Central Bank is telling you the previous consensus on tariffs was completely wrong. Tariffs have not been inflationary. In fact, Truflation shows that inflation has dropped from over 3 % at the start of the year to only 2.05 % as of this morning. So the Fed's telling you tariffs didn't bring inflation.

3:24Truflation is telling you inflation went down this year instead of up. But there's still going to be plenty of you people who will not believe it. More importantly, this entire situation was very obvious from the start. On April 3rd, one day after Liberation Day, I tweeted, stocks and Bitcoin will likely be at all-time highs again before the end of the year. All this noise will quickly be forgotten. People were laughing at me. They thought I had lost my mind. Many people accused me of being some MAGA shill. Whatever their critique, they simply could not fathom that tariffs would not be destructive.

3:56They didn't understand that there was a high likelihood that stocks would go back to all-time highs by year-end. But here we are, though. Asset prices are at or near all-time high prices. Stocks, Bitcoin, gold, and more. Everything has come flying back. Inflation isn't a problem. The Federal Reserve is waving the white flag. They're capitulating on interest rate cuts. And maybe most importantly, GDP is surging higher as the impact of artificial intelligence seeps into every corner of the economy. Companies are growing faster and they're doing it with less employees. Efficiency is taking over the market.

4:29Investors, they're seeing their portfolios skyrocket in value. The government is also capturing hundreds of billions of dollars in this newfound tariff revenue. Now, there are still some bears out there. They're predicting the next big market crash. But history tells us things are likely to keep improving for the foreseeable future. Cutting interest rates with stocks at all-time highs? That's unlikely to make stocks go down. So stop listening to your insane neighbor or your favorite economics professor on TV. Just look at the data. Study history. Do the work by seeking out the source material.

5:02The pessimists always sound smart, but they rarely make money. And 2025 is just the latest example. In the words of Warren Buffett, never ever bet against America. We're winning. And I don't see that stopping anytime soon. I recently sat down with John Pompliano, my brother, and he asked me a really interesting question. He asked, should the Federal Reserve be replaced by artificial intelligence? And I gotta say, I got pretty excited about this. Here's what I had to tell him. How do you plan your life if you do not know what the cost of capital is going to be, not only in five years, but in six months?

5:36Right now, if you pull Wall Street and Main Street and you ask them, what is going to be the federal funds rate in January of 2026? You're all over the place. If you go into the Federal Reserve Board Governor meeting, which they did in September, and they said, show us what's going to happen through the end of the year. One person said that they should hike interest rates. Another guy, Stephen Myron, said that they should cut interest rates five times. Hold on a second here. The 12 people that are responsible for creating monetary policy in this human-led centric model, they don't even agree in unison on whether we should hike or cut, let alone the severity and the number of moves.

6:24This is chaos going on. So it comes back to this idea of programmatic monetary policy is better because a programmatic monetary policy tells you what the cost of capital is going to be in the future. If you know what the cost of capital is going to be in the future, you can then plan your life. And so what we are requiring people to do is to guess what the humans are going to guess about in the future. To make matters worse, the Federal Reserve, they, again, I'm going to give them the benefit of the doubt, say they're not intentionally misleading people, but they have misled the market multiple times in the last six years.

6:56In 2020 and 2021, they said that interest rates are going to remain suppressed near 0 % for an extended period of time. in 2022, they said, just kidding. And they hiked interest rates at the fastest rate in history to the point where they brought professional risk managers who run banks down to their knees and put them out of business. Crazy. Now, were the banks wrong for not managing risk? Well, enough, of course. But also the Fed told them that interest rates were going to be near zero. And so if the banks got it wrong, do you think Joe on Main Street or Sally walking around Manhattan? You think they got it right?

7:33You think they're smarter than the banks are whose entire job is to do risk management and to trade around interest rate decisions? No. So it's just a completely asinine model that not only has been destructive to the everyday lives of Americans, but on top of that, it has been inaccurate. And we've seen that. They continue to be behind the curve. Why are they behind the curve? Because they're reacting to the world. They wait to see what's going to happen in the world. It happens. Then they act. Duh. Of course, you're going to be reactive. Right? So the problem becomes now there's psychological scarring at the Federal Reserve.

8:11They don't want to be reactive. They're trying now to become predictors of the future. That's even worse because not only were they bad at looking at the data and making decisions, now we're telling them to predict what the data is going to be and then make this. This is crazy. This is crazy. And so what you will see is in all of the language, you're going to see that they used to talk about being data dependent. How is it data dependent? If you're telling us that inflation is coming now, you and my three-year-old should go talk about unicorns because y 'all just making shit up. Right. Cause I guess what?

8:45I didn't think inflation was coming. They thought inflation was coming. They also said inflation was transitory. They said inflation was transferable. I mean, you just go through all these things. Right. So again, And it comes back to, you're asking humans to do a job that humans are not well-suited to do. Now, I don't know about you guys, but it feels like a computer can do the job of an economist much better than the economist can do. So let me know in the comments what you think there. Now, one of the things we got to talk about is that gold is up 40 % in 2025. This is the single best year that gold has had since 1979.

9:14And people want to know, why is the precious metal going higher? What is it that's driving people to go and buy gold? Well, I think there's two things. The first is that central banks are buying a lot of gold. And some of that may be because of geopolitics or they're worried about some sort of sanctions type risk. But I actually think the bigger driver is that this chart, M2 money supply, it continues to go higher. M2 money supply just hit a brand new all-time high of$22.2 trillion. So if they're gonna keep printing money, which we're very good at doing and we're never gonna stop, then that debases the currency.

9:46If the currency is being debased, you can't keep all of your wealth in dollars. So you gotta go into a store of value. gold's winning big right now and Bitcoin's done pretty well as well. But I think that gold will continue winning through the end of the year and then Bitcoin's going to follow. And you're going to see both of these assets continue to be very popular with investors as long as they debase the currency. And so why is gold going up? It's because they're printing money and gold will stop going up once they stop printing money. But they're never going to stop printing money. So gold's going to continue to go up and gold and Bitcoin.

10:14Those are going to be big winners in portfolios over the next decade. I had the pleasure of recently sitting down with John Najarian. We did it at the Independent Investor Summit, and John gave me a breakdown of how he's seeing U.S. financial markets right now. He had some really interesting anecdotes as to what he's seeing in the market, and then given his decades of experience, he had a little word of caution as well. Here's my conversation with John Najarian. Things feel different, but they feel the same. And I think that as someone who's watched financial markets for a long time, you develop a personal algorithm.

10:49You get a lot of data, you start to build intuition. Are you worried right now about what we're seeing in the market? No, I'm not. And I'll tell you why. A lot of the MAG7 stocks are still doing fantastic. They're not the only things driving the market, but we're basically at a situation right now, Pomp, where we've got half the stocks are up on the year and half the stocks are down on the year. The thing that I do, folks, and that I've done since 1999 using computers, and before that I had to use my head, which was much slower, was I look for that unusual activity. And I'll just define it very quickly.

11:35When I was down on the trading floor and we had, for instance, IBM, I would see every option that traded in IBM. I would see the Schwab broker coming in, the Merrill broker coming in, Lehman, Bear Stearns, you name it, Drexel back in the day. And they did have some great brokers, by the way. But they would come into the pit, buy or sell something in size. The market would move in that direction. The tail does wag the dog. I mean, when I started in this business, we were doing 400 ,000 options a day. Now we average almost 60 million a day. That's a whole year's worth of volume in 1981 in one day.

12:17And that tail does wag the dog. When we see, you know, virtually every hedge fund worth its salt, worth the fees, is in their trading options to enhance their position, to get the leverage and so forth. So if they come in, and here's one example from yesterday. Yesterday, I was doing a show that I do every day at three o 'clock for our subscribers called Three at Three. I show them three stocks that are moving and why I think they're going to go up the next day. Well, somebody rolled a big position from the 340 calls in Tesla to 360,$20 higher. Now, they were right at 340, and they pulled$100 million off the table in less than a week on that trade.

13:11Then they went in yesterday and bought 40 ,000 calls at 360. Now, the stock was right there at 360. Today, the stock's through 390. So do you think whoever was buying those calls yesterday had a pretty good idea that we'd have a good day in Tesla today? Now, it's not 100%, but it's a hell of a lot better than a weather report. It's not like flipping a coin. The odds are that the person buying that many calls is gonna be right. That's 4 million share equivalent when you buy 40 ,000 options. So 40 ,000 options and basically of a$360 stock yesterday. It's$120 million that they put on the table. It's$1.2 billion in how much stock they're controlling if they want to.

14:07And today, like I said, they tripled their money today from yesterday. Now, you could have bought Tesla at$360 yesterday. or at 360 yesterday, sold it at 390 today. Congratulations on every 1 ,000 shares you bought, and you had to have$360 ,000 for every 1 ,000 shares you bought. It went to, you made 30 bucks on it. Wouldn't you rather triple your money? That's what options do. And so when you ask me, well, John, how do you feel? It's always the same or it's different this time. It's the same. and the fear and greed on Wall Street, we saw all of it. We saw April, fear. We've seen greed since then.

14:52And the greed has picked up more and more in many of these names like Tesla. By the way, the Minnesota governor called the bottom on the market in Tesla. When he came, when he was up on stage cheering for Tesla to go down and he was saying, here it is, look at my phone. It's 220. $220. Anybody that bought it at$220 is a happy camper. And his own treasury, the citizens of the state of Minnesota, own shares in Tesla, and he's cheering for it to go down just because he doesn't like Elon Musk's politics. Okay. I'm one of those guys, Pomp, that I don't, I mean, I do care who the president is, but I'm going to be able to trade just like you guys.

15:42I'm not better than you. I'm going to be able to trade and make money if it's Democrat, Republican, or communist, like you guys are likely to have here in New York. I knew we couldn't get through the day without someone commenting. Well, I mean, in fact, that would probably move markets a lot in New York if we could isolate down to individual things. And that's one of the things, folks, that I love is that, number one, I'm an inquisitive guy, sort of like this gentleman here. And I love learning new things and so forth. And I love defining my bet, Pomp, when I see a pure play, for instance, if there is a pure play in a given thing.

16:26And occasionally there are. And There are a whole bunch of examples that your last speaker just had for, you know, those pure plays. You know, so when I looked, by the way, before I came over here, folks, I looked and saw there are 145 dats. And if I asked you guys, you know what it is, but that's what he does. You know, it's a digital asset treasury play. In some cases, they are plays like HUD-8, where they mine, or Riot, and they mine, and so those are pure coins that they earned through their work and their proof of work and so forth. There are also a lot of, just like ProCap, that have gone out and bought these assets and put them in a treasury.

17:17and right now there are a little over 800 ,000 Bitcoins in DATS. 800 ,000. So if I told you that there were 21 million shares, because that's how many Bitcoins there could ultimately be, you guys know that, but if I told you there were 21 million shares only of Apple and 800 ,000 of them plus whatever's been lost are off the market, are put into somebody's pocket, I'd say that's kind of like a hand under the market. That's what I would view it as. And I would say that that liquidity not being in the market would be something that, for instance, I'd love to be on that side of the trade. So that's where I am.

18:02Now, Bitcoin, obviously, is something I spend a lot of time on. But now I start to see Ethereum, Solana. I heard that there's a Dogecoin one. And I probably couldn't even sit here and name all the coins that people are trying to do these treasury companies with. You've been on Wall Street a long time. How deep do you think the interest can go? Is it like, hey, anyone who's got any sort of volume, somebody will be there to trade it? Or do you think that there is some rational end to how deep in the coins this thing can go? None of the trees grow all the way to the sky, so nothing goes straight up.

18:47There's an exhaustion point for any of these kinds of investments. We're not near that yet, in my opinion. I'm with a group called Satoshi BTC. They are a DAT of DATs, meaning that they, of course, they own other digital asset treasuries, and they're kind of like a Berkshire Hathaway of these treasuries and so forth. They own a bunch of them. So one of them is going to be BTC. It is already. One of them is going to be BNB, Binance, and so forth and so on. So of the top names, you hit the top three, of course, Solana, Ethereum, Bitcoin. But it's going to go deeper than that. People will have to diversify into other treasury assets like this.

19:38And as we've all sort of learned, Bitcoin has a limited, when Satoshi himself or herself or the group, whatever it is, when they created Bitcoin and set the number at 21 million coins and how you would have to mine those coins and prove through the blockchain and so forth with this formula that you have to do. I think that that sets Bitcoin apart. That's why I'm not surprised that Pomp went for that because some of these others have billions of tokens, billions. And when you have billions of tokens, it's a lot harder to say what I just said about Bitcoin with that hand under the market. If I have billions of tokens and I buy, you know, 500 ,000 or 800 ,000 Solana, not that I would, I do own Solana.

20:30But if I did that, there is not that same driving force that there is with your investment, Pomp, with Bitcoin. But overseas, there are many areas, Thailand, Saudi Arabia, and so forth, where people can't own these digital assets, but they can own the stocks. So they can own Pomp stock, ProCap, in Saudi Arabia, I believe. Right, Pomp? Yeah. When you think of in the market, you pay so much attention to what's going on in the order books and the market itself. We haven't talked about it all with anyone today. The president of the United States literally called the bottom of the stock market in April.

21:18Now, it's a very unique dynamic. Forget a second who the president is because people's brains break as soon as you start talking about Trump, right? But just the president of the United States has immense oversight, control on what happens in the economy. Not full control, but definitely can influence things. If you tweet and say, buy stocks, you could reverse the market or you could know that it's close to the bottom and then you could tweet it, right? So it's kind of like chicken or egg, what causes what? But if you're sitting looking just at order books, if you're looking at fundamentals, if you're looking at kind of what I'll call like the traditional analysis, you missed the tweet or the true social post, right?

22:00But that actually seems like that was probably one of the biggest pieces of information to have in hindsight over the first half of the year. And so how do you start to navigate this world where you're looking at the traditional metrics, you're looking at the traditional order books, but now you almost have this whole new world of, I got to pay attention to what's happening on social media or these other areas. And they have this profound impact on what happens in markets. Right. Well, and I think all of us learned during COVID about Reddit. I mean, we all, many of us knew about Reddit prior to that, of course, but once you saw GameStop, once you saw many of these stocks that were babies that had been thrown out with the bathwater, there was no reason to own some of these stocks.

22:42But all of a sudden, somebody mentions it on Reddit, and a whole bunch of people line up against the big shorts on the institutional side and said, let's hurt these guys. Let's buy this. And they acted in concert and drove those stocks to stupid levels. Chamath talked about it. I've talked about it. You've talked about it. I mean, the president can absolutely move stocks, move the market, and do all kinds of other things. But a group of investors, now that we have this instant communication with Reddit, with X, with TikTok, if somebody's credible and they come out and say something, Tom Lee, for instance, as well, we see a lot of people pile into that.

23:30And so if you have the long-term perspective of an investor, you don't need to pay attention to that, in my opinion. If you have a trader's mentality and you want to catch these waves quickly and trade in and out of it, then by all means. You have to be looking at Reddit. You have to be looking at X. Those are my two favorites. And then those others that I mentioned as well. You have to. And there are lots of clues throughout the day. I love that. It's what makes it exciting for me to be in the markets and to basically, as I said at the beginning, I'm a curious guy. When I see something moving and I know they don't have a new product introduction coming, they don't have earnings coming out, they don't have an FDA announcement expected or whatever, but somebody just stepped in and bought a ton of calls, I'm bullish on that stock.

24:23No fundamentals. I don't care about fundamentals. I'm trading. So when I'm trading, Pomp, completely different thing than if I'm buying ProCap to own it for 10 years or something like that. But trading, I've got to pay attention to all those news sources that you and I just spoke of. One of the things about being around for a long time, being personable, having a brother that is not as good looking as you, because he's not here. So it's true. You say that. Not nearly as good looking. Is you meet a lot of people. You build a lot of friendships, right? And so you talk to a lot of people across Wall Street.

25:00What are they saying about the regulatory change that's happened in Bitcoin and cryptocurrencies? Yeah, and obviously very leading question because had the election gone the other way, this guy wouldn't be smiling as big. You guys wouldn't be as happy. And that's not for politics. It's for policy. A central bank, CBDC, for instance, central bank digital currency would have been horrible for the United States. Having Gary Gensler in there, who I've said over and over again, is an idiot. I don't care if he taught at MIT. He didn't know what he was talking about, apparently. He didn't listen to his own speeches about digital assets and so forth because he was such an impediment to them.

25:50And I think if we would have had David Sachs or somebody else, you, as that head of the SEC or CFTC. Yeah, that sounds like a great idea. Yeah, I know. I'm sure you would not want to. Retail free for all. Yeah. I think we could have avoided FTX. I really do. Because we should have had ETFs on Bitcoin a long time ago. Gary Gensler was a big impediment to that. He wanted to basically regulate through basically prosecution. He said, well, the rules are pretty clear, just, you know, if you go on the wrong side, we're going to go after you. And so people were able to pretend that they were making money on some arbitrage of grayscale or whatever against Bitcoin.

26:46And people were throwing billions of dollars at this particular trade. And they were borrowing all these tokens from places that ended up going broke when they didn't pay him back. And I think that could have been avoided, Pomp. And I think Bankman-Fried may not have been able to do what he did in the way that he and his team took money from other people's wallets or at least from the deposited funds at FTX. So I view the fact that we have more clear regulation now than we've ever had in Bitcoin and in digital assets. The fact that he's opened it up to 401ks and retirement accounts, I think is great.

27:35Do I think we should all pile into Bitcoin with 90 % of our IRAs and so forth? No, but I've always said that we should have some percentage of money in those kinds of assets, including Solana and Ethereum. I think Ethereum outperforms Bitcoin over the next couple of years. I might be wrong. That's why I own ProCap, just in case I'm wrong. But I think that there's so much potential in this. And just to throw one more out there, I'm an advisor to the CEO over at LiveOne. LiveOne is a podcasting network, guys. But they have now bought$6 million worth of Bitcoin. They're going to buy another million next week, another million the week after that and so forth.