The Fed Has LOST CONTROL Of The Economy

0:00Hello, everyone. The Fed has lost control of the US economy, the metals mania is continuing with industrial metals, and one of the world's wealthiest people just told us at Davos where he thinks asymmetric returns are going to come from moving forward. We're live today from the desk of Anthony Poppliano.

0:25Before we get into today's episode, I need your help. My goal is to get to 1 million subscribers on YouTube. Right now, we got 42 ,000 of you out there who hit the button. So if you haven't done it already, hit the subscribe button and let's get into today's show. All right, ladies and gentlemen, if you listen to the Federal Reserve for the last few decades, you made a lot of money. When the Fed was easing, all you had to do was plow your money into the market. When the Fed started tightening, all you had to do was sell everything and hide in cash for a few years. Investors have been yelling, don't fight the Fed for a very long time.

0:55But I don't think that old adage applies the same way anymore. At least it doesn't apply right now. So let me explain how I'm thinking about this. The U.S. economy and corresponding financial markets have been hypersensitive to the Fed's monetary policy decisions for like the last three decades. The central bank was cutting rates in the mid to late 1990s, and that helped propel the internet boom higher. Finally, when the Fed started to raise rates in the second half of 99, the tech bubble popped shortly afterwards and everything came back down to reality. During the global financial crisis, the Fed invented the insane quantitative easing policy that led to a prolonged period of 0 % interest rates and hundreds of billions of dollars being printed.

1:30This QE playbook kicked off a decade-long bull market that made every stock market bear look like an absolute fool. Finally, during the 2020 pandemic, the Federal Reserve dusted off that old QE playbook again. Interest rates went to 0 % with two emergency rate cuts, and the government decided to print trillions of dollars this time. That created more than 9 % inflation within a 24-month period. The main thing that stopped the 2021 party, that was the Fed's decision to reverse course and start hiking interest rates at the fastest pace in history. We went from 0 % to over 5 % rates in a very short period of time.

2:03The regime shift was so abrupt that multiple banks failed because of their inability to navigate the volatility. This brings us back to the don't fight the Fed adage. It made sense because the Federal Reserve would set policy and the world would react to those decisions. Quite literally, the Fed was in control and they were in control for a long time. But that doesn't seem to be the case right now. The current president and his administration have effectively taken control of the U.S. economy and financial markets. They have implemented a set of policies to reimagine the country. Those include deregulation, tax cuts, smaller government, and reshoring of American jobs and manufacturing.

2:38In taking this approach, the government is rapidly changing the economic conditions of the market and is putting the Fed on its back foot. The central bankers already had a hard enough time trying to make monetary policy decisions because they were based on faulty data from the Bureau of Labor Statistics. Now these folks are being asked to understand substantial changes across the economy, including policy differences and advancements in cutting edge technology like artificial intelligence. This is why I personally do not believe that the Fed is in control anymore. In fact, I think the exact opposite is true.

3:06The market is forcing the hand of the Fed. America's central bank begrudgingly cut interest rates at the end of 2025 because the labor market was softening at a much faster pace than forecasted. That softness in the labor market, it wasn't due to some normal business cycle development, but rather it was a combination of policy decisions and technology innovation. Jerome Powell essentially said he and his colleagues were more worried about the labor market than they were about inflation coming back. But the Fed's fight against the market is not over yet. My base case is that inflation is going to continue falling in the coming months.

3:37Trueflation, the real-time alternative metric, is reporting inflation at 1.2%. If you take the BLS's methodology and you replace the about 40 % of inputs that are estimations right now, then Truflation shows inflation would be less than 1 % year over year. The big takeaway from this situation is that inflation has collapsed from its recent peak. It has dropped 151 basis points in just three months. Truflation's real-time data, which sources over 14 million daily price points across 40 different independent providers, it is capturing this deceleration far faster than traditional metrics, and that reveals a pricing environment that shifted decisively towards disinflation.

4:16So for investors, this signals a fundamental reset in cost pressures that official data is only going to show you weeks and weeks in advance. So what's my big takeaway from the situation? The Federal Reserve has lost control of the economy. They are serving at the pleasure of market forces now. The labor market is weakening. Inflation is falling aggressively. Artificial intelligence is a very real deflationary force, and productivity is booming thanks to deregulation, tax cuts, and reshoring. It does not matter what the Fed thinks that they should do right now. The old playbook is out the window.

4:45We have supply-side economics taking over. We are seeing high growth and low inflation, and the Fed's having their hand forced. They need to cut interest rates by about 100 basis points in the next few months, but they also will have to participate in the timeless act of printing more money. The U.S. economy may be booming, yet the inflation data is telling us that we could have a major problem on our hands if the Fed doesn't stimulate more economic activity. For the trigger, happy Fed, this should be their Super Bowl. Cut rates and let the economy fly, baby. Hopefully, the great people at our central bank are paying attention and they ain't asleep at the wheel.

5:20The metals mania is continuing. Gold is up nearly 80 % over the last year. Silver's up 250%. Copper's up 40%. And public.com here shows us that platinum is up nearly 200 % as well. Now, the big question is why are the metals going up? And it's not a one-size-fits-all answer. I I think that's really important. See, gold is being bought by central banks. It seems that we are having some sort of de-dollarization, but really it's a de-fiating of the world. We now have gold being put into the central bank reserves at a very fast rate, and that's driving enormous amount of demand for an asset that doesn't have a lot of supply and therefore price goes up.

5:56But if you go and you look at something like silver, silver actually has the best of both worlds. Some people use it as a store of value, but it also has industrial use cases. And then things like copper and platinum obviously are very heavily used in all sorts of different industrial use cases. And so when you look at the metals, some of it's for store value, some of it's for industrial use cases. As we get more robotics and self-driving cars and many other innovative technologies, these metals are gonna be important. And if you look at something like platinum, there's enormous amount of supply that is not in the market.

6:26So when you have constrained supply and increasing demand, an asset can go up 200 % in a year. That's what we're seeing in all of this. But don't take my word for it. Jordy Visser, the GOAT, He and I recently sat down for a conversation down in Miami live podcast, and he explained why he thinks that these metals are doing so well. Take a listen to what Jordy had to say here. Silver is not a precious metal, guys. So I hate to break everyone's kind of association with it. It might be in there. It is a critical mineral for technology. Drones are the new tanks. drones take an enormous amount of silver and they are disposable they get blown up and then you build another one so the percentage of silver that is necessary for drones compared to tanks off the charts every single part of technology everything semiconductors uh solar massive for solar so the energy that powers you're going to start to hear more and more uh over the course of this year, people talk about this.

7:30So Venezuela, Greenland, I'm giving you some inside information. Something will go on with Cuba very, very soon for the exact same reason. Part of it is strategic from a military basis, but part of it is also making sure that the hemisphere does not have Russia, China, Iran, and also that the critical minerals that are in all of these places are also something that the U.S. has access to. So all of this stuff is happening. And I think when you're looking at things like silver, it again gets brought back into artificial intelligence. Jensen Yuang says this, but so you get this whole process of going from energy.

8:12So think of it as anything you want, gas, oil, but the physical fossil fuel side, it needs eventually to be converted into intelligence. With inside that conversion are two tracks. One shortage is in high bandwidth memory. That is the chips that are necessary. So the reason Micron, SanDisk, Western Digital, SK, Hynix, Samsung have all gone banana zone is because there's a scarcity right now relative to the demand. There's a race to buy this in massive size. On the other side, you have the conversion in the efficiency side for energy. And that's where transformers fit in, gas turbines fit in, silver fits in, silver fits in on both components.

8:57You're just at a point where all of the utility side, those charts are going higher. And so eventually you will get to the point, and this is why Ethereum to me will be the one to watch for the breakout, and then Bitcoin will go with it because we're now at a point where people are talking about silver. They're not talking about gold as much. And the reason is because silver is going up at two times the pace of gold. And I think you'll start to see that in crypto the same way. So there you have it, ladies and gentlemen. Metals have followed the utility. It's an AI and an energy trade, according to Jordy.

9:27I don't disagree with them. And my guess is that we are going to continue to see these metals do pretty well. But don't believe that there's not going to be volatility along the way. Anytime an asset goes parabolic like this, you always got to be careful. But if you think over the next 10 years or so, AI and energy, I don't think those are going away. and you're still going to need atoms in the real world, like these metals, to actually go ahead and build all this stuff. So the metals are probably going to keep doing pretty well and all the people who are holding gold, silver, copper, and platinum, they're going to be very happy in the future.

9:57One of the beauties of the internet is that you can get enormous access to the smartest people in the world. Recently, we saw Binance's CZ sit down at Davos and he shared a couple of very interesting things. The first is that he says that Binance has been stress tested in a way that would take down traditional banks. I found this very interesting. Take a listen to what he said. In December 2023, in one day, there was maximum withdrawal of$7 billion US dollars equivalent of assets from Binance.com. No issues. In that week, there was a few days before that, it was up like, you know, a couple hundred million, a billion, a billion, and then seven billion, and then a billion, a billion, billion.

10:32In that week, total$14 billion US dollars worth of assets got withdrawn from the platform. No issues. In a bank, I don't know of any bank that can handle that. Now, the second thing that CZ talked about on stage that I found fascinating is that U.S. regulation is needed, and he actually wants to see a global playbook, global regulation. Take a listen to why he thinks that's important. Banking industry, the securities industry, the regulations are highly developed, highly mature, and they are highly similar across countries. I know there are differences. This is probably a novice person looking at a problem in a very simplistic way.

11:03Whereas for crypto regulations, it's different, very different in every country right now. and to be honest Binance has like what 22, 23 licenses all around the world but the majority of countries don't have licensing regimes today in the world and we also see US is progressing very quickly but it's in progress so the market structure, well the clarity bill the market structure bill, the genius was passed last year, so like 6, 7 months ago, we think that obviously more clarity, more consistency will be much much better but I don't think a global regulator will work. Well, it's possible at this moment.

11:41Different countries have different priorities, different agendas, different considerations. So a global regulator will be quite difficult. We would love to see it, especially if that global regulator can put in a positive regulatory framework that's relatively pro-innovation and that'll make the industry player's job a lot easier. But to be honest, logically, it should be like that, right? Because crypto is the same in every country. We don't want to change country to country. So there should be an optimum framework that we should be able to put in. So I'm actually spending a lot of my time trying to figure out what that is and how to work with different countries.

12:17Now, last but not least, everyone wants to know, CZ, you're pretty wealthy. You've been pretty successful. How do I make money? What themes should I be paying attention to? CZ explains that in the crypto industry, exchanges and stablecoins are two proven businesses. But he's got an idea for three new ones that are coming down the pipe. Take a listen to what CZ thinks here. But right now in the crypto space, there's really two proven industries. There's exchanges and stable coins. Those are large businesses. I'm really excited about three new more. I think tokenization is a huge one. I'm talking with probably a dozen governments about tokenizing some of their assets.

12:52Because this way the government can actually realize the financial gains first. and use that to develop those industries, extractions, the trading markets, etc. Payments is something that we've tried, have not really conquered, well, have not really started in crypto. We tried, but nobody really pays in crypto. But I think now we're seeing the convergence of traditional payment methods behind the scenes being supported by crypto. So the spenders swipe a card, crypto gets deducted from their account, the merchants get US dollars or euros or whatever they get. So now when we have those bridges, I think payments is going to come pretty big.

13:29The third one is what you guys all mentioned is AI. The native currency for AI agent is going to be crypto. So there you have it. Tokenization, payments, and AI. Those are the three areas that CZ thinks is going to be really, really powerful moving forward. I don't disagree with them. And I think that there's a lot of asymmetry in each one of those areas. It's always great to hear somebody who's so smart and successful up on stage explaining exactly what's happening in the world. And CZ's done a pretty good job building Binance. I think that listening to these people is pretty helpful when you're thinking about allocating capital in your portfolio.

14:00That's it for today's show. Thank you guys so much for watching. Please remember to subscribe on YouTube and I'll see you guys live tomorrow from the desk of Anthony Pompliano.