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The Fed is playing around with words and misleading Americans on what is happening. We break down the REAL TRUTH of what Powell said at Jackson Hole.
Fed Chairman Powell reinforced the Fed's next move to reduce debt purchases, aka taper talk. Here is why that would lead to disaster.
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See Full Video Transcript Below
Hey everybody it's Rob Kientz of goldsilverpros.com it is Friday August 27 2021 and I'm doing a video today because we wanted to talk about Jackson Hole and Fed pals comments on the economy you think this is really important Jackson Hole is sort of their annual get-together for the Fed typically in person although this year for the second straight year it's been virtual due to concerns over the virus spreading but it's where they give guidance on what they may do the rest of the year and why this is important why I'm doing a video just on this is because in July Powell made some vague statements about what would need to happen the economy before the Fed changes position and he made vague segments on purpose we know that the Fed looks at lots of data points and looks a lot of things when they make the decisions but he's not giving away the secret sauce he's not giving away the secret formula of Coca-Cola so to speak but he did provide some very interesting statements here and I you know it's a lot of trying to not panic the market and not try to give too much information but provide some guidance and I also think that pal is basically full of here and that's what I want to talk about I some of his statements are absolutely astonishing when you look at the actual data and you guys know me former auditor I'm going to look at the data I'm a data geek right so I look at the data I look at what he says and I think he's not living in reality I think he actually knows reality but I think in his mind he can't he can't talk about reality because it would absolutely panic the markets and you don't want to panic the markets you want to crash the stock market so we are going to separate his comments from reality we're going to show you reality and I'm going to talk about why central bankers never really tell you the truth and how Powell unfortunately has become one of those and how basically he's full of crap but if you read between the lines I think we can see what he's going to do now he didn't give specific guidance on when they're going to do things specifically he just talked about what they could do this year so we'll talk to you about that and we'll get into it I'm going to look at Bloomberg and CNBC stories and kind of walk you through and then I'm going to take you through a series of data this video will probably be around anyway from 25 to 35 minutes all right here we go we're going to start here at Bloomberg and this is interesting this came out not too long ago a couple hours ago my time Powell says taper could start in 2021 with no rush on rate hike so two things we're talking about here two the biggest policy tools that the Fed has they have others the two of the biggest are one buying debt directly monetizing debt or central bank monetizing it from our treasury into raising or lowering interest rates they're saying nothing on the ladder they're not going to do anything with interest rates this year that's what they're saying but they could start the taper first so they're going to address all their bond buying now they have a 20 120 billion a month bond buying program they say tapering they're going to pull it back what happens when you taper that debt purchase it means somebody else has to buy that debt which means you run the risk of the treasury not being able to issue the debt that it wants to could affect the interest rates in the treasury market the liquidity of the treasury market it could have a big effect but the bigger thing that would have an effect on the stock market is interest rates and that's why they're not doing it yet they're gonna they're gonna tackle bonds first I think I'm interpreting see how that goes and then talk about interest rates next year let's get into what he said here the first paragraph basically gives you the sum of the story Federal reserve chair Jerome Powell said the central bank could begin reducing its monthly bond purchases this year although it won't be in a hurry to begin raising interest rates thereafter so in other words at some point in this year lowering their 120 billion bond buying program not stopping it necessarily but lowering it they could stop it but it says here tapering which means slowing it down maybe they drop a billion maybe they drop 50 billion I mean who knows and that they're not going to do interest rates this year most likely at least they're not in a rush to do it they're not going to raise interest rates obvious reasons for that but it doesn't say exactly when he's going to begin the tapering program okay so not a whole lot of clarity but if you take July and you take now Jackson Hole in August the Fed is going to cut its bond buying program it's going to do it it's set that expectation two straight months in the market if it doesn't do it the market's going to react how much they do it is what they're probably trying to figure out and I think they're trying to condition the markets to see how they will react before they actually decide how much and when and we're going to see here in a moment how that the markets are reacting very oddly to this news almost the opposite of what would happen but we live in a Alice in Wonderland world in which the economy does not react the way it should when you talk about the central bank anymore it says here the economy has now met the test of substantial further progress that was Powell's quote from July that was very vague and nobody met knows what it meant and he's still not telling us now toward the Fed's inflation objective the pal and his colleagues said would be a precondition for tapering the bond buying while the labor market has also made clear progress the Fed chief said Friday and prepared text of the Kansas city Fed's annual Jackson Hole symposium so I'm going to dispute those statements here in a moment with real data but let's get further into the article in the comments first and then let me rip all this apart for you guys at the Fed's most recent policy meeting in July Powell says I was of the view as for most participants that the economy evolved broadly anticipated it could be appropriate to start reducing the pace of asset purchases the intervening month that means between that means between July and now and August has brought more progress in the form of strong employment report for July no I'm sorry it hasn't but also the further spread of the delta variant he said we'll be carefully assessing investors took the news in stride the markets went up I'll show you the markets here in a moment it's ridiculous that they're up that the Fed is now going to stop supporting the debt market and now the companies that are relying on debt market rates are now going to trade up on the stock market explain that one to me chair Powell stuck to the script in his Jackson Hole speech anyone hoping for a steer on the timing of the taper will be disappointed because he didn't say when they're going to do it but it was never likely said Ian Shepherdson chief economist at pantheon macroeconomics at the July Federal open market committee FOMC meeting most Fed officials agreed it would probably be appropriate to begin tapering the Fed the bank's 120 billion a month bond buying program maybe as soon as as this month because that was last month in July but I don't think it's going to happen here I think it's going to happen sometime in the last four months of the year monetary policy makers would like to conclude the purchases before they begin raising interest rates and several in June saw a possible need for a rate increase as early 2022. so that's your signaling that they think that memories are in 2022 whether they actually do they're going to see what tapering does first before they touch interest rates now I will remind you the last time the central bank raised interest rates we had a 20 stock market correction in late 2018 so we'll see if they can actually do it now the Fed cut its benchmark right to nearly zero pre-pandemic crisis we purchased program last year at the onset of the quote-unquote pandemic every time I say pandemic it's going to be quote unquote because when you look at the definition of pandemic it's up to us to decide whether we agree with that so I'm going to use it in quotes I'm not supporting whether it's a pandemic or not I'm being Switzerland but it deserves quotes all right and that's my last comment on that Powell caution that a move to begin winding down the bond buying program should not be interpreted as a sign that rate hikes would soon follow timing pace of the coming reduction asset person would not be intended to carry direct say no writing time interest rate let's stop so we don't know about interest rate liftoff now here's where it gets really asinine and stupid listen to what he says here in this highlighted paragraph we have said that we will continue to hold the target rate for the Federal funds rate at its current level until economy reaches conditions listen consistent with maximum employment I'm going to show you that in a moment and inflation has reached two percent is on track to moderately exceed two percent for some time hasn't it been over four and over five percent the last four months of the year is he saying that it's still below two and hasn't stayed above two what in the are you talking about pal that makes no sense let me show you the data on the CPI in a moment he says we have much ground to cover to reach maximum employment yeah I'm going to show you how much ground and you're not going to get there because Fed policies have caused a plummeting rate of full employment and time will tell whether we have reached two percent inflation on a sustainable basis what the last four months hasn't told you that pal or five months because I think five months ago wasn't it 2.6 it's almost half a year how long do you need what do you consider you know okay anyway more stuff here quarterly projections in June showed seven of 18 FOMC participants I'd be appropriate to begin raising interest rates next year so not a consensus not even a plurality most of them don't but some saying maybe 2023 so that's your timeline a little bit less than half think 2022 maybe more by 2023 so somewhere in the middle between 2022 and the start of 2023 maybe when they begin doing it unless something happens in the economy before then something big it says on net tapering remains on track and the next question will be appropriate to hike blah, blah, blah total oh here's another one unemployment total US employment this is by Bloomberg it's still about 6 million jobs below pre-pandemic levels June and July were strong months for hiring as restrictions on surface industry were lifted but the recent spread of the delta variant is raising uncertainty about prospects for the months ahead so in other words we haven't really gotten to full employment anywhere near and listen to his comments on wage price spiral that's when wages keep going up because there's pressure on finding talent and also price increases cause wages to have to go up to keep to keep up with it as employees demand higher wages so Powell noted that there's little evidence of a wage price spiral will pay increases might threaten excessive inflation yeah because there's not full employment I'll get to that in a minute he points to inflation expectations measures as a sign that consumers businesses investors also share that assessment so on and so forth so they go on to talk about some global factors blah, blah, blah, let's get into the CNBC article I just want to read the bullet points for you here to start off with he Powell indicated Friday the central bank is likely to begin tapering he said rate hearts rate hikes and interest rates are not imminent there's still much ground to cover what does that mean much ground to cover and it was part of Jackson Hole summit let's go down here and read something that's here we go the timing and pace of the coming reduction in asset purchases will not be intended to carry a directional guarding the time of interest rate liftoff we read that in the Bloomberg article markets reacted positively Powell's comments sending major stock index indexes to record highs while government bond yields move lower again why would this stock market indicates go to record highs this makes no sense to me if the central bank's going to stop supporting the debt markets and potentially raise interest rates why are the stock markets going up again the way the algorithms are trading this market as any news is good news it's not the traders it's algorithms I think that's what happened so in other words anytime the Fed says something that could be contrary to what the economy should says something that could affect the overall economy the stock market acts contrary to that by ramping it up as a signal to investors keep pouring money in the stock market in other words they don't want people to come out of the stock market they need the money in the stock market for reasons I'll cover in another video at a later time they need that money so the algorithm will trade up the stock market even when news comes out that should negatively affect the economy in the long run okay so don't look to the stock market as your key signal look to the underlying data the Fed has used the term substantial further progress as a benchmark for windows start tightening policy Powell said the test has been met where inflation were for inflation where there's been clear progress towards maximum employment no there hasn't at last year's Jackson Hole summit this is a year ago Powell outlined a bold new policy initiative in which the Fed committed to full inclusive employment even meant allowing inflation to run hot for a while so here's the thing the Fed thought that if they kept their policies in place and bought more debt and kept interest rates low and it got full employment they were okay with inflation running hot now we haven't flushed running high but we don't have full employment and so the Fed has failed and I'll show you that so let's just get into the data first of all the Dow jumps 250 points s p 500 makes no sense I've talked about that that's absolutely silly let's look at the consumer price index this is the BLS report for July this is the latest day that we have month over month over the last 12 months month over month the July CPI was 5.4 percent that's much higher than two okay and if you look at the trend here's the month over month but if you look at the overall trend it's much higher for several months it's been over two for a long time it's been over two since April okay so what's pal saying that it hasn't been comfortably above their target of two percent before they would see substantial progress and begin the tapering how long did he need that to happen it makes no sense what he's saying I don't think he's actually looking at the CPI data I think he has an alternative plan for doing what he's doing and he's lying to the market about CPI it's been high enough that you could have talked about tapering at this point here's the overall from BLS.gov breakdown on CPI the latest energy is up over 25 of course we all use energy to heat our homes to power our vehicles all that kind of stuff even if you use an iPhone you're using energy and those prices are substantially higher than the 5.4 percent for July food this one's actually higher we'll get into that moment with shadow stats all items and all times less food and energy so energy's driving it according to CPI but you look at real inflation it's higher so if you look at inflation measures you and today using 1980 government numbers in other words compare apples to apples so if we want to compare the way we measured inflation 1980 to now so that we can compare periods you see that the CPI has spiked to about I want to say 13 over 13 almost 14 percent so in 1980 if we'd been reporting the consumer price index or the inflation it would have been 14 okay now they're reporting it much lower because about 5.4 because what they've done is they've made hedonic adjustments geometric weighting all those things and they're suppressing the price of like food and all these other items using those things to mask it but if you just straight look at price with no adjustments then you're sitting at about 13 to 14 I think this is a true inflation number so again makes Powell look like an idiot when you look at true price inflation just what is the measure of the prices you know now from prior periods in real terms without making all these goofy adjustments to try to lower that so what's happened to unemployment so the U6 the unemployment rate has gone down it's gone down since the beginning of the year from about 6.3 percent down to the 5.4 so if you're only looking at the U6 rate yeah it looks like unemployment's come down we're not at max employment obviously still got 5.4 but I could see where pal would say okay yeah we've had improvement on unemployment you know since the beginning of the year and if we go back to 2020 and we can see the mass unemployment we had after the quote-unquote pandemic got to almost 15 it has come down which is good it means some people are hiring people are back in the service industry those industry most affected airline service so on and so forth have had a nice recovery but is that the end of the story on unemployment no it's labor force participation rate so I want to make a distinction between unemployment and labor force participation rate for those of you that haven't been watching my program and I haven't covered this in a wee bit in a couple of months I'm going to go over it again the labor force participation rate is the net how many eligible employees do you have in a society period net how many are actually working so the unemployment rate the U6 what it does is after you've been what I call a disaffected employee and you haven't had a job for a year it just drops you so there's structural what I call structural unemployment are those people have been unemployed for over a year and fall off the U6 number that's structural unemployment that the structure of society the monetary system the economic facts of society are that a certain amount of people after a year can't find jobs but that still affects the overall quality of living in America are overall GDP production the ability to collect taxes ability to grow how much we're going to spend on social programs all that stuff so it matters so to me the labor force participation rate always matters more than the U6 because when this gets lower it means more money spent on government programs less economic growth more crime I've showed you that in a previous video when I the Nixon video when I map since 1971 to now how drug use and crime has absolutely exploded so that's what this matters when you have less people employed you've got all those things that matter and that's not captured in the U6 rate so even though this rate's going down that's good that's measuring only a subset of the less basically less than one year unemployed it doesn't it doesn't measure what I call the structural unemployment so the second point I want to make is look at what the Fed has done with monetary policy and how it has not helped this number but hurt it so when you look at like 1965 when you have a low about 58.6 actually 1955 when it was down here 57 summit looks 58.1 to its peak in about 1999 right before the tech crash this is the tech crash here we had peak of employment about 67.3 that's about a little over two out of every three eligible people employed that was our high dating back to the 1950s or 1948 according to this chart right here okay so since 1948 right before the tech crash in 1999 we had more total people employed than ever look at what's happened since the last two crises and all of the Fed's easing programs and printing money look at that okay and then you had the crash down here in labor force participation rate due to the quote-unquote pandemic and then you had all the money printing and it got it up a little bit this is this is the difference so what you're seeing here this little rise here in the labor force participation rate is reflected in this number okay this number from 15 down to 5.4 is this on the total what I'll call the total employment rate or the labor force participation rate notice how that increase never got us back to where we were before the quote-unquote pandemic nor our previous high in 1999. so we're still sitting at a cyclical low although we had a nice little bump but a cyclical low and have not recovered as the Bloomberg article mentioned pre-pandemic so even if we keep recovering to the pandemic level we're still at a cyclical low compared to where we've been over the long term okay does that make sense so this U6 does not tell you that if you go back to say let's do o101 2000. so it'll do 61, oh wait, let's do 43831 so if you go to it's not gonna let me do it it's not gonna let me go let's do max okay if you go back to the 1950s the U6 was substantially lower than employer substantial order so even on the U6 you see how it's still higher than it was but what it misses in this number is the disaffected that just fall off that's what the labor force participation rate gives you now the second point I want to make does the Fed policy actually work because we're talking in the public and the Bloomberg and the CNBC article and the stock market and all these economists max employment inflation rate things like that are you know the mandates of the Fed has the Fed policy actually supported unemployment rate no you can see in the labor force participation rate okay look at what they printed last year look at how much they printed to get it from here to unemployment from here to here okay they printed 40 or almost 50 of all money ever created m1 money supply ever created in one year and they only got it up this much so does central bank policy really affect overall unemployment that much no now recently unemployed workers yes if you print a bunch of money you can help recently unemployed workers not the long-term disaffected that are structurally unemployed through the system because that's a longer-term effect of how what the economy has done to the employment prospects of Americans okay and even though you print all this money you only get this effect so the point here being does the Fed policy actually affect employment and should we even be considering anymore if you look at the long-term cyclical effect the monetary supply the monetary policy by the Fed hasn't helped things overall with overall employment rates the overall amount of people that want to work that find work and certainly last year when they dumped all that money and it only had a slight bump and didn't even get us as the Bloomberg article pointed out to pre quote unquote pandemic levels okay even all this spike in m1 didn't do it so what is the tempering is the tapering gonna get us up here probably not because you're reducing the amount of central bank support if they raise interest rates and it causes companies to pay more for debt and raise their capital expenditure financing costs is that going to help companies hire more people probably not so do we see that number going up from here if the Fed tapers and in 2022 or 2023 raises interest rates no I see this going down so we're going to have another down cycle if they do as I actually said in labor force participation rate which will not be reflected overall in this number it this number is not going to tell you the unemployment rate the U6 but you'll see this quote in the press this masked the structural unemployment and it masks the long-term effects of all this money printing has done to the employer and society okay I think I hammered that I really wanted to get back to talking about this to show to explain to you central bank policy and how it affects our individual economic outcomes the outcomes economic outcomes of our overall society with the same time showing you that whatever pal is saying here at Jackson Hole he's full of crap okay all the central bankers are full of crap don't believe what they tell you look at the data the data does not lie even the manipulated data doesn't lie anymore because even the manipulations of the hedonic adjustments to your extra weighting all those other things they've done to the CPI you know substituting ramp for mortgage costs and all that kind of stuff even those manipulations they've done since 1980 can't hide the fact that their monetary policy is an absolute failure when it comes to our economic incomes in terms of employment and runaway inflation okay I just want to make that point the last thing there's a really nice article here business insider talking about the labor shorts so a lot of people talked about labor storage yes there's a labor shortage in a small portion of the economy now obviously there's not a labor shortage in terms of total people but it's a labor shortage quote unquote with certain types of positions and there are things affecting it and I want to talk about that in this article three explanations for the labor shortage according to Morgan Stanley, they say there's a disconnect between open jobs and what workers want in other words there are some jobs available but they're often less than what these workers are qualified for so this is another measure of unemployment even though you have a job so even though we've reduced this unemployment rate the other measure of it's not just that you have a job because if you're working at a barista at Starbucks but you formerly were a programmer or a NASA engineer even though you're employed you're making less money have less lifestyle that is also a measure of economic outcomes not reflecting this usage this U6 will not tell you that this U6 does not talk about share salary share of GDP which I've shown before and it doesn't talk about people taking jobs less fit or that doesn't make them happy so their overall just happiness i.e the pursuit of happiness in the constitution Morgan Stanley says some temporary forces are holding back but there's a bigger mismatch and the big question is migration how big and permanent is it and what jobs will result it's unprecedented scale mysteriousness origins the labor shortage there's never been such a reluctance by the unemployed to go into open roles wages are up although not as up as much as inflation I'd like to point out the number of people quitting jobs is consistently near record highs and there are more open roles than job seekers what do these gasps persist with millions of Americans still unemployed the answer is more complicated school closures are playing a role blah blah mismatch between the industry hiring and worker seeking jobs this is the big one you can get a degree when you have a 50% unemployment rate on the millennials and college degrees and now soon to be the Gen Z'ers from the jobs that they want that's underemployment now they may get a job or they may elect just to stay out in either way that's a measure of unemployment because if they get a job as a barista or doing something lower paying or a different field they want that is a measure of economic outcome that's not reflected in the raw numbers people moved during the epidemic but jobs didn't yeah there was some movement but a lot of people were moving to places like Texas which had stronger employment rates and more job creation so this is a pretty good article business insider picking apart the labor force shortage what it really is in reality is the people the jobs that are available are not meeting what people are educated for what people want to be happy and so we have an underemployment situation either they're taking a job that they don't want or overall they're not taking a job at all they're staying out maybe taking some government assistance or living with their parents or moving in with roommates or whatever the case may be and I know a lot of personal cases where this is true so this is taper talk I want to talk about Jackson Hole I want to talk about Powell I want to talk about how the center bankers are always full of crap and how to read between the lines how you guys can look at data to essentially understand what's really going on and how you can dig a little bit deeper into some of the numbers and if you just get a raw number like a CPI number or U6 number it doesn't really tell you what's going on so I wanted to make sure that you guys understood that it's vitally important that you guys understand how to read between the lines not just listen to policymakers and the mainstream media which won't break this down for you we'll do it here at this channel so as we get more reporting on this type of stuff in the economy we're going to go back to basics and keep reporting on this and we're going to do more on the gold and silver talk so more economy talk more gold and silver that's what you guys want and opportunities like this for Jackson Hole for us to educate the market as to what the truth really is so that you guys really know so that you can make your plans for the future if you're one of those that's economically underemployed or can't find a job and is what I call structurally unemployed or facing turning down a job that doesn't meet your requirements you're going to need to make plans because if the Fed tapers and if they raise interest rates over the next year to year and a half it ain't going to help you in terms of your economic outcome in terms of jobs available and sure as hell isn't going to help you in terms of inflation and sure as hell is not going to help you in terms of it interest rates when it comes to things like student loans mortgages and stuff like that so these things can affect you long term and it's worthwhile understanding them so that you can make proper preparations guys I also wanted to bring an update over a company silver company that we've covered before and some news that they had for those of you that are my stock investors a lot of you are so we'd like to include those on the program we've got a press release here from Abrasilver Resources Corp we have covered them they came to the conference and we covered them prior they've got interesting news about extending mineralization over 600 meters towards northeast behind Occultozone and they also intersected 7.5 meters grading 8.2 grams per tonne gold equivalent so as you can see they've got the drawer hall results here they're pleased to report significant results received from the latest four diamond drill Holes of the company's ongoing face tree drill program on his wholly owned diablos property in Salta province Argentina now salted province Argentina is according to Frazier institute one of the best mining areas in all of Latin America I think it was rated as a number one according to Fraser institute in all of north America people may not think that in Argentina but Argentina is very regional and so it's ranked above most of the mining districts in the US and Mexico as a matter of fact it's very very good and so no worries there and they've got all these drill results they got you see here 108 grams per ton silver equivalent 243 grams per ton 613.6 so really, really good solid draw results throughout if you look at the equivalent if you break down the actual gold and the silver itself you get 95.7 grams per ton silver 69 4.65 grams per ton gold all throughout here you see really solid numbers this is a really good Hole 21-027 had 193.8 grams for 10 silver and a quarter gram per 10 gold that's nice the gold is just to throw in at that point to reduce overall mining costs so here's where they're drilling if you look at the map you can see where they're drilling we blow this up a little bit for you guys where they're putting their Holes okay right here all across here and that's where they're finding their silver so really good they got 7.5 meters of 4.65 grams per ton gold 7.5 meters at the width and that's a really good width to get four and a half grams per ton gold and also in that not only the gold but the 40.6 grams per 10 silver and copper now they're poly metallic they have gold silver and copper 2.1.8 percent copper is pretty good the gold silver and copper together is really good they got some other drill results here you guys can go to their website and take a look at that Abrasilver Resource Corp at abrasiver.com we'll put the ticker below if you guys are interested in taking a look at them and their share prices on the markets that's going to wrap up today's video and we at GoldSilverPros will tell you the truth and we'll analyze it and break it all down for you thank you guys so much you have a good weekend and we will see you
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