🔴 Fed Serves the Banker Class, Powell's Shocking Admission & Truth About US Economy | Ryan McMaken

The Fed has always been there when asked to be there. And this has clearly a close connection to the presidency, to the elected government, and that's always been the way. So yeah, it's a complete fiction, this idea that they're just separated from whatever's going on in elections. That's fantasy land stuff, but I guess the Fed thinks it benefits from that impression. And the Fed always reports things as better off than they are, right? It's always never forget that in the spring of 2008, Ben Bernanke was telling us that there is no recession on the horizon and nothing in our data tells us that there's a recession coming. The U.S. was already in recession at that point. Welcome, everyone. Today, I'm very excited to welcome Ryan McMachen. Ryan is executive editor at the Mises Institute, former economist for the state of Colorado. And policy analyst at the Colorado legislature. Ryan is the author of Breaking Away, the Case of Secession, Radical Decentralization and Smaller Polities, and Commie Cowboys, the bourgeoisie and the nation state in the Western genre. I absolutely love that title. Ryan is a podcast host where he shares frequent updates on economics and politics. I'm a big fan of his. I will leave the link in the description below. Ryan, welcome. Thank you so much for being here. It's great to be with you. It's great to have an opportunity to connect. So several days ago during the press conference, following the FOMC meeting, Fed chair Jerome Powell was asked not once but twice if he would resign if Trump actually asked him to leave the position. Powell appeared to not quite appreciate those questions, and he simply responded no, followed by quite awkward silence. Obviously, there is much more going on behind the scenes. The press conference gave us a bit of a glimpse at perhaps a crisis that is unfolding. What is your take on that exchange and the possibility of Powell being removed or being asked to leave his position? Yeah, you're not exaggerating. There really was an awkward silence after he was asked, would you leave if resigned? His answer was simply a flat no, with no elaboration at all. I've never heard him speak that way, really, about anything. He's got word salad a lot of the time where he's trying to explain the Fed's position and how they're data-based or data-driven and all that stuff. He's got lots of words. He's a politician. This time, there was just no equivocation whatsoever. I had the video on. I was just listening. I perked right up when I heard this exchange because it was very unusual for Powell to react that clearly about something. This sets the stage, I think, for some level of political conflict. He's making it clear, I'm not going anywhere. I think that throws out a challenge to Trump. Now, I always doubted that Trump was going to really put on a full-blown effort to get rid of Powell. I never really bought that that was the endgame. I could definitely see him pressuring Powell in a variety of ways, but it really did highlight, I think, the attitude of the Fed overall, which is we're our own thing and that we're not part of the executive branch and we don't answer to the elected government of the United States. It really seemed to be the attitude here is the way I was interpreting it. I wrote up a column for Mises.org on this, saying basically, okay, if the president, it's ambiguous as to whether the president can remove the chairman of the Fed, so Congress should really just step in and assert its control over the Fed. If there's any sort of real political conflict here, it could be easily solved by simply Congress stepping in and showing the Federal Reserve who's boss because, of course, the Fed only exists because Congress has passed enabling legislation that creates the Fed. Historically, something that I've noted more than once in recent months is this idea of Fed independence that the Fed doesn't really answer to any of the elected branches of the government is this relatively new idea. This was never part of the original Federal Reserve Act. If we look historically, we can see there was really only since the 50s that the Fed really started to create this idea in the minds of the public to the extent that the public ever even thought about the Federal Reserve, but creating this idea that, oh, we have independence and our policy is completely without consultation to the elected government, all that and that sort of thing. Back in the 30s and throughout the 40s, it was clear that the Fed did, in fact, coordinate with the executive branch. They coordinated clearly on World War II and on World War I. The Fed existed to make sure that banks had enough money to buy liberty bonds. During World War II, the Fed pegged interest rates in such a way to allow the Treasury to basically sell Treasuries in an unlimited capacity without yields going up significantly. So there's always been a back and forth between the Treasury and the Fed. However, in recent decades, they've tried to create this idea that the Fed only creates policy based on economic science or that they're data-driven. This was never true at all. You can just look at the research, just a lot of the mainstream research about the Fed and its behavior during the 1970s, and it's clear that the Fed was happy to assist in the 70s with making sure that it continued to help fund these huge deficits that were building over this period. Then this, of course, only became broader and broader in terms of power after 2001 when Greenspan comes out and says explicitly, well, to get the economy going, we're going to blow up a housing bubble. This has been documented. Then, of course, after 2008, then all bets are off. The Fed just starts inventing new powers for itself where it's just going to start buying up mortgage-backed securities. It's going to buy trillions of dollars worth of Treasuries. The Fed really does its own thing now, but historically, that's certainly not the case. If the Fed is out there claiming that, oh, our independence is being reined in too much, nothing could be further from the truth. If anything, the Fed has had far too much independence historically compared to the past. What have they done with that independence? They've massively inflated the money supply, like huge amounts, trillions of dollars beyond anything they've done before. We're seeing the worst price inflation in 40 years since 2022. That's all aggregate and cumulative. That's not going back to old prices. These are all things that the Fed has to answer for as a result of the Fed's very large amount of independence that they've had in recent decades. This idea that Powell is clearly pushing out there that we don't have to answer to anybody, well, we've seen what we get from the Fed when it doesn't have to answer to anybody. Maybe we should go back to more historical norms when the Fed was maybe a little bit more responsive to the elected government. I think that would probably be a good thing. It's actually very interesting because I recall in a fairly recent interview, and I believe it was 60 Minutes, Fed Chair John Powell said that politics has no impact whatsoever on the Fed's policies. Clearly, that was not a very accurate statement. No, there's no evidence ever of that. They've always been happy to coordinate if the Fed's assistance is necessary to help push interest rates down, to facilitate treasury purchases, and to help finance deficit spending. The Fed has always been there when asked to be there. This has clearly a close connection to the presidency, to the elected government, and that's always been the way. It's a complete fiction, this idea that they're just separated from whatever's going on in elections. That's fantasy land stuff, but I guess the Fed thinks it benefits from that impression. There is a very strong case to be made in favor of abolishing the Fed. Dr. Ron Paul is perhaps the most prominent proponent, supporter of this idea. I spoke to him several months ago, and he believes that abolishing the Federal Reserve should be the top priority. What is your take on this? Should the Fed be abolished? Certainly, that is the end goal, right? We are abolitionists at the Mises Institute, you might say, when it comes to the Fed. I like to throw out other in-between bits of legislation that we could do if Congress doesn't have the stomach to abolish the Fed. But yes, I always think the end goal is to abolish the Fed. America's greatest period of increases in the standard of living, industrialization, gains, and economic growth all took place when the United States did not have a central bank of any kind. Now, economists like to say, oh, look, there were all these financial crises that occurred in the latter half of the 19th century, and we needed a central bank to iron all that out. The reality, however, is that for ordinary Americans, they saw their standard of living go up faster and more so than any other historical period. So the fact that you had some ups and downs in the economy during that period clearly did not end up being a net problem for gains in the standard of living. So we can just look at the historical record and see that the Fed does not, in fact, make Americans better off as a whole. And so, of course, Ron Paul is right on this, that the Fed should be abolished. The Fed is primarily a servant of the regime and of the ruling classes. If we look at the whole issue of how money enters the economy and who benefits from monetary inflation, it's people who own assets already. It's not first-time home buyers. It's not the working class. It's not sorts of people who can benefit from the asset price inflation that results from all of this monetary inflation, the money printing. And we can see that there's been some good recent quantitative data on that as well. There was a book that came out a few years ago by Karen Petru, who's this seasoned Fed watcher, and her book was called Engine of Inequality. And I disagreed with her conclusions, but a lot of her quantitative analysis in that clearly showed that over the last 20 years, that it's been really just the upper levels of income that have benefited from all this loose Fed policy, that the home price increases have been largely limited to the coasts and places where home prices are very high. So if you're just a working class person living in middle America, you can't claim that you've benefited at least from the asset price inflation. The home prices have been much more modest in those places. So we see a geographic difference. We see an income level difference in who's helped by Fed policy. So Ron's thinking about that sort of thing when he's talking about abolishing the Fed. And of course, there's all those other issues, right? You could claim that it's unconstitutional and just point out that, right, it was the Fed that presided over the Great Depression. It was the Fed that presided over the huge inflation of the 1970s. It was the Fed that presided over the global financial crisis, and only solved that by bailing out these huge corporations, which benefits billionaires the most. So from both an economic standpoint and just a standpoint of political justice, absolutely, the Fed should be abolished. But at the very least, the Fed needs to be reined in. And so, yeah, we just need to at least start moving in that direction, even if we don't get all the way to abolition this year. Of course, I absolutely agree with you. You previously wrote that Congress should prohibit the Fed from buying any assets of any kind. Specifically, you spoke about mortgage-backed securities and government securities. Could you maybe elaborate on that a bit more and explain why that is the case? Yeah, sometimes we get asked, well, what's the one thing we could do to help make the Fed less bad? And that's one of the answers we often give, is we need to outlaw the Fed's purchasing of assets. Because remember, in the early days when the Fed was being sold to the American public, the Fed was always sold on this idea that it's the lender of last resort, that in case of banking crises, that the Fed can step in and prevent bank runs by ensuring that there's enough liquidity for the financial system and for all the banks. And to do that, the Fed does not need the ability to purchase assets. But this has become more and more of an important tool for the Fed, just in terms of manipulating interest rates, which was not sold as one of the original purposes of the Fed. And also just for helping bail out banks and the financial system, when the old purpose was to simply bail out the depositors, right? That's how we prevent the bank runs, is we make sure depositors are made whole. That's morphed into this idea of now we're bailing out all the stockholders of all of these banks. All the people who run the banks, like Jamie Dimon, we're bailing out billionaires now, which is totally different from the old idea. And so in order to facilitate all those new powers, they've introduced all of these asset purchase powers, either legally through Congress or where the Fed just kind of makes it up and decides they're just going to start buying up trillions of dollars of mortgage-backed securities or treasuries. And the idea, of course, there was to artificially boost demand for both government treasuries, which would drive down yields. And then also, since so many of these banks had so much mortgage-backed security assets on their books in order to prevent these groups from basically ending up in bankruptcy, hey, we'll just purchase a bunch of this stuff and then hold it forever so that these banks don't have it on their books and it doesn't affect them. How did they get the money to purchase all these assets? They just print it. And that's a big driver of monetary inflation is this ability to purchase assets. And so they go out and they purchase all these assets, they print the money in order to buy it. And that's one of the most direct lines between Fed behavior and actual monetary inflation. There's lots of other things the Fed does that are much more roundabout and indirect in terms of causing price inflation. But all these asset purchases, which both cause price inflation and also distort the economy by bailing out rich corporations at the expense of dollar holders who then suffer from the resulting monetary inflation, this all goes back to the fact that the Fed can make these asset purchases. And you just look historically, right? If you pull up a graph from Fred, the St. Louis Fed, and you look at what were asset holdings at the central bank prior to 2008, there was almost nothing because the central bank bought, they bought and sold assets just enough to manipulate the federal funds rate as best they could. And that still was unnecessary and we should get rid of that too. But ever since 2008, just these trillions and trillions of dollars added to the balance sheet to benefit certain groups of people, certain politically well-connected groups. And that's just not good for any normal person and really creates a very corrupt federal political system as well. So if you had to pass one piece of legislation, it's just to get rid of the Fed's ability to purchase these assets. And still, you can still have your lender of last resort role for the Fed and prevent bank runs and all of that if Congress feels they still need that. But I think you've solved most of the problem of the Fed by simply getting rid of their asset purchasing power. This is fascinating. I'm curious to see how far we get with the initiative to abolish the Fed or at least to rein it in. I think there are conversations that we hear every so often, but then somehow nothing happens. And so this could be one of those times, but it could be different this time around. But let's switch to some of the key recent data. You mentioned bailouts and that immediately made me think about the banking sector. Given the commercial real estate loans and the portfolios that are held by midsize to small lenders that are sort of concentrated in that commercial mortgage sector, how much of a risk is it at this point? And Fed Chair Jerome Powell hasn't really said anything about it. I don't think during the press conference, at least I haven't really noticed any remarks regarding this. But what is your take on the overall health or stability, I should say, of the banking sector as it relates to the commercial real estate loans that banks are holding at this time? Well, it's always very hard. And I ask people myself when I interview them, okay, in this economy, the next time there is a serious financial crisis, what's this black swan event? What's the next one going to be? And it's always so hard to predict. But you look out there and you see some of the key economic sectors that are weakening and commercial mortgages are a big deal. And part of the reason I think that commercial mortgages are a danger is because they're not as protected by government bailouts as residential mortgages are. The whole residential mortgage system has Fannie and Freddie and all of these government institutions designed to purchase all this stuff on the secondary market. And it's all an implied guarantee that the federal government is going to bail all of this stuff out. And that makes that whole market much more stable because people are like, well, they'll just print money to bail all this stuff out. We don't have to worry. And there's a lot more danger of economic reality coming to the fore much more quickly. Now, you always end up paying for everything. You're going to end up paying in the end for all of that government-guaranteed residential mortgage stuff too, largely through inflation or potentially even through eventually some sort of sovereign debt crisis or something. But mortgage-backed securities, it's more connected to the real world of the economy. So unless there are major changes and the Fed just decides to guarantee all of that stuff too, which they could, you might end up bumping up against the harshness of reality in terms of commercial mortgage-backed securities. And that's what you're seeing in terms of these empty office buildings, in terms of retail that's having big problems. They're just not cash-flowing and these owners aren't going to be able to get the rents necessary to keep these mortgages going. And we're seeing huge gaps now in terms of what needs the cashflow that's necessary versus what is locked into these older mortgages. So I do think you're going to see some significant problems there. It's just so still difficult to predict how that's going to end up. I do think that will be certainly part of the problem when we do start to see some significant movement in terms of markets. Commercial mortgages, I don't see how that can be sustained when we look at how job markets are out there right now, when we're looking at what sort of income are retail outlets bringing in. This is where we're starting to see some of the key weakness in the economy right now. So I would expect to see that be one of the first places where the economy starts to become really, really obvious. Now, it is obvious to people who keep an eye on that all the time, but people who aren't paying close attention because they have normal things to do all day long, I think that's one of the first things they'll start to notice in terms of the breakdown in the current bubble economy. But when and how exactly that will unravel is always just so difficult to say. Of course. No, I completely see what you're saying. I think it's impossible to say, especially now, given that there's going to be a new administration, new policies, and so much is going on in the world that it's really impossible to know what will happen. I know our viewers would love to hear your thoughts on the state of the economy and more specifically on the labor market. Following the FOMC meeting, Powell said that the labor market is solid. There's nothing to worry about, he said. However, we had a massive revision of 818,000, I believe, jobs as of the end of the first quarter alone, followed by virtually monthly downward revisions since then. Layoffs have increased as well, and companies are now hiring at a much slower pace. So how strong is the labor market in the United States? Well, it's not strong. I think the word I use often is stagnation, because you can't point right now to, at least in the official data, you can't point to big declines in employed people or in total number of payroll jobs, because there's no evidence of big drops there. What you have seen are big declines in, say, job openings. Big drops there, and job openings are now back to where they were in 2018. When you look at just how far that's dropped from the peak levels, this is just huge. However, thanks to that $6 trillion the Fed printed back in 2020 and 2021, you had this huge buildup in job openings that occurred over that period. But that's completely gone now. It's completely evaporated. And now, of course, you've got ongoing unemployment insurance, not new claims, but continuing claims are now back up to where they were in 2018, 2019. So you're back to very much a normal or a flat economy when we look at some of the other data. Now, what I like to in the analysis we do for Mises.org is I always look at both the Household Survey as well as the Establishment Survey. There's two surveys of employment. And the Establishment Survey, this is the one that they always tout in the headlines that their XYZ number of jobs were created this term. And the Establishment Survey has become more and more iffy over the last couple of years, because it keeps showing these blowout job reports. And it's really started to diverge from the Household Survey. The two different surveys used to follow together quite well for many, many years. And then they really just started to diverge back in 2021. So now, you just had nonstop gains in the Establishment Survey and jobs, whereas the Household Survey just went flat. And you make a distinction here where the Establishment Survey measures jobs. So that includes both full-time and part-time jobs, whereas the Household Survey measures employed persons. So if we start to dig deeper, what we see is that, okay, nonstop job creation, but number of persons employed is flat. And that tells us there's a lot of growth then in part-time jobs, people, multiple job holders, people taking on more jobs in order to make ends meet as real wages stagnate, as price inflation continues to go up. And we do see that playing out in the data as well. We see that full-time jobs were down year over year by a million, and that most of the growth then we're seeing is in part-time work. And obviously, given that there are now actually slightly fewer employed people in America as of the October survey versus one year earlier, so the total number of employed persons has gone nowhere. And yet, so all of it's all part-time jobs. And then in terms of the jobs that have been created, what we find is a lot of that's even government jobs. Because then when we look at the Establishment Survey, we saw that private sector employment actually went down by 28,000. That's right. And government employment went up by 40,000. So without government employment, there would have been just an overall drop in all employment, except, of course, the way the Fed reports it and the way the media reports it, they just report this big aggregate number and that's included in government jobs. So people are getting jobs. They're getting part-time jobs. They're managing to tread water fairly well. But the burden following on those taxpayers to pay for more government jobs, while all this is going on, just keeps getting bigger and bigger. And this is a point made by Daniel Akaiye, who is one of our writers at the Mises Institute. And he points out that so much of this government growth that the Fed keeps touting all the time, both job growth and GDP growth, it's fueled by huge government deficits. If we just look at overall growth in government and GDP and in jobs, and we hold it up against the size of government spending, we see what's a pretty clear correlation between just huge amounts of government spending out of control, far beyond the tax revenue collected. And lo and behold, when government just keeps spending, spending, spending, regardless of how much revenue it takes in, it can afford to hire more government workers. It can afford to just push more money out into the economy, which even the private sector then can benefit from in terms of... Because government employees, they go out and they spend that money, or there's government contractors, which aren't counted as government employees a lot of the time. But it's government spending that's keeping this ship going and making it look like there's a bunch of growth. And if we were to remove all of that, as we get hints of it in the employment data, I think we would see a much, much worse picture in terms of employment. And we're not the only ones that think that way. Anna Wong at Bloomberg, a couple of months ago, she was talking about how the establishment survey just simply isn't reliable anymore. It's just really overestimating the number of jobs and the employment situation, and that we definitely do have to look at the household survey to get a more accurate picture. Because as you noted, there's always these downward revisions that come later. And so you really have to almost have like a job where you're analyzing this data all the time in order to follow along with what the reality is. If you're just a casual observer of economic news, you would think that things were great. However, going back to the FOMC press conference, a great question was asked by at least one reporter, I think maybe two different reporters asked, to the effect of, if the economy is so great, Chairman Powell, why did Donald Trump win? Because, of course, he ran on the economy being lousy in many respects. And so clearly there's a problem out there with ordinary people in terms of how they see their economic fortunes. And I did see, this is the first time I've ever seen Powell admit this. Powell actually admitted that, yes, the aggregate data on economic growth and jobs, that shows everything's pretty darn good. But if you'd start to disaggregate, Powell's saying, then what you find is that a lot of the lower income people, they're not doing nearly as well. And I've never seen Powell admit that before. But this is now, I guess, the reality is so clear that you can no longer totally hide it. You have to admit that, yeah, people at the top are doing very well in this economy. People down in the middle or below that, it's not nearly so good. What do you make of the monthly revisions, well, virtually monthly revisions? It seems to me that the problem could be either data, which may not come in on a timely basis. So obviously you have to make some revisions, which I think would be appropriate. But the scale and the frequency, those things are concerning. But then it could be the data, the timeliness of the data, or it could be your software or something where you're maybe pre-processed, not so much software, but the process that you're using to produce these reports on a monthly basis isn't effective or it lacks a certain degree of accuracy. So those two things come to mind. How would you explain these revisions that are truly concerning, just given their scale and the frequency with which they're made? Well, of course, a lot of people in my circles think this is on purpose, right, that the government with every passing month, this initial outburst of media coverage of the job situation, if you can make that look good in terms of the numbers, that's what the media reports. And then far fewer outlets will report the downward revisions that come later in the month. And there's far less reporting of the quarterly, say, Census Bureau data that is more accurate. And so there's just not nearly the focus on that. However, supposedly sophisticated market actors, they respond to the establishment survey, they respond to the numbers that's thrown out there a few days after the previous month ends. And so clearly, some people are paying attention to the number and putting some value in it. But let's just assume that the government is not trying to deceive us on purpose. Now, I'm certainly willing to believe that the government is trying to deceive us on purpose. And in my mind, the burden of proof is always on taxpayer-funded entities to prove that they're doing their job properly. It's not my job to prove that they're not doing a great job. But yeah, let's say they're doing fine in terms of honesty. Okay. Well, what we have seen is that over the last couple of years, first of all, the sample size continues to get worse on the sampling efforts that they're doing. So they send out surveys and they collect them and it just keeps getting smaller and smaller. So how useful is that? I mean, survey data has always been fairly iffy, but the smaller your sample size, that's not impressive. And then yes, the speed with which they put these numbers out for a huge, about a $20 trillion economy, depending on how you measure it. And then you're breaking it all down to these numbers. That should always be taken with a grain of salt, no matter what. And these numbers are huge. And of course, they're also just surveying some of the larger employers. I don't think you have the randomness there that you maybe get through the household survey. And so it's just not, it's just not all that impressive in terms of the methods and the fact that they get it out just a few days after the previous month. And so we should always have been skeptical of these numbers, but the fact that it just always seems to favor the administration month after month after month, I mean, that should cause us a bit of concern and doubt, I would think. And then the birth-death model, that's the other thing there too, is this absurd birth-death model that just simply wishes into existence a variety of small businesses that supposedly exist. And we could delve more deeply into that number too. We know that a lot of the assumed business creation was a result of changes in law that required the gig economy, right? All these people who are involved in the gig economy, they had to go out and register as businesses due to IRS policy and changes in law at the state level. So you had all these immense amounts of business creation that have taken place over the last couple of years, which didn't really signal new economic activity. These were just a legal distinction that had to be addressed in terms of business application. And they looked at the bean counters of the administration, they looked down and they said, oh, look at all these huge amounts of new businesses being created, and we should factor that into our birth-death model. So they've used that as justification, these legally created new businesses that already really existed before, and factored that in to this birth-death model. So, oh, look at all these jobs that were created because we saw all these new businesses created. Well, that was always pretty questionable as well. And then when I did an article on that, I'm like, well, do we see any other evidence that business, that the small business economy is doing magnificently as all these business creation numbers would suggest? We didn't see any of that. We look at NFIB, the National Federation of Independent Businesses, we look at their data in terms of small business sentiment. None of that has gone up significantly and would justify the sorts of numbers that we've seen in new business creation. So yet again, we need to be really skeptical of these sorts of numbers because if we look just beyond these one bullet point pieces of data that the feds are putting out there, it doesn't look nearly so rosy. As an economist, when you see these red flags that we just discussed in the labor market and in sort of the business creation framework and numbers, what other indicators are you considering when you try to gain a better understanding of where the economy might be heading in the short term, let's say in the next 12 months? Well, of course, we might look at all of these public, but often private sector produced data. We could look at, well, in terms of the public data, we just look at the manufacturing indexes that come out of the Philly Fed or the Richmond Fed. And that's all been, I think the Richmond Fed has been mostly negative for a long, long time at this point, for over a year. The Philly Fed has been kind of bouncing around zero. So if it's below this benchmark level, then you know that the manufacturing sector is contracting and we've seen a lot of months of contraction. With the Philly Fed, we can look at these PMI numbers that are coming out showing that manufacturing is weak. What else could we look at? We could, of course, look at the number of mortgage applications in many cases. And of course, that's been in the tank because of high interest rates. In spite of the Fed's efforts to push down interest rates, 30-year mortgages have only been going up. And so we haven't seen any revival in residential real estate there as well. So when we look beyond that, and then we just look at a lot of the more anecdotal stuff. And of course, anecdotes are data. They're just not aggregated in a large amount. But even the Fed's own data, looking at their beige book, and we see the sort of language they're using, what we're seeing is saying eight out of 12 of the Fed districts, they're reporting that things are either flat or stagnant or actually declining in a number of cases. And the Fed always reports things as better off than they are. It's always never forget that in the spring of 2008, Ben Bernanke was telling us that there is no recession on the horizon and nothing in our data tells us that there's a recession coming. The US was already in recession at that point. So A, the Fed either has no special insight or B, the Fed lies in terms of where they see the economy going. I'm not sure which. It could be both depending on the time period. But just looking at what the Fed says, the fact that it's lacking so much in enthusiasm, that's a red flag right there because the Fed generally talks up how great the economy is. And if they're saying, oh, things are pretty flat, things are pretty lackluster, to me, that says, oh, things aren't going very well at all. And so you just got to consider all of this together when you're looking at some of this federal data as well. You know, this reminds me of those very notorious Jim Cramer memes where he says, invest in this stock, you should know that you actually need to do something completely the opposite. So I feel like when the Fed says, well, the labor market is doing well, that should give us a good indication that it's probably not doing very well at all. Yeah. Inverse Jim Cramer is one of my favorite Twitter accounts because, yes, no matter what he says, you're sure the opposite is going to happen. And yes, if the Fed becomes really enthusiastic about telling us how amazing job numbers are, even though your gut feeling is that something that the opposite is maybe true, consider your gut feeling. And yeah, just consider the fact that Powell just had to admit, yes, it turns out that if you're not wealthy, things maybe aren't so great. So what more do they have to tell us if they're willing to disaggregate the data as well? What is the reality there? And they just give us so little to go with because they come out of their FOMC meetings and they just say, they use all of these pre-prepared words, probably focus group produced words in terms of, well, the state of the economy is solid or it's moderating or it's growing. They don't pick these words just off the cuff. They consider these long and hard before they put them into the FOMC press release. And so, of course, we've got plenty of Fed data watchers who pick apart every single word in all of these press releases. And you do see that the Fed just is not overly confident. And of course, they've long since abandoned forward guidance. They're not even attempting to claim that they have some sort of long-term plan. What they're just saying over and over again is, we'll wait and see what the data says next month. And what that tells me is the Fed's just waiting to see what they can get away with next month in terms of policy and in terms of politics, because pressure is going to come down from elsewhere and there's going to be political implications to what they do. And all they're really doing is moving month to month, just waiting to see what happens next. And in this respect, they're not different from anybody else. But for many people, there's this aura around the central bank that they have special insights into the economy. But I think what the past two or three recessions have made it clear is they don't, and either they're being hit out of left field and they didn't see it coming at all, or they were just deceiving us till the very end until they couldn't deny it anymore. And so I just follow them every month and I kind of wait to see what it is they say. And so far it's all just, well, wait until next month and we'll decide next month. And they've got nothing else that they can tell you. I mean, I can tell you that in terms of what the economy is doing. And so that's what has all just become now is a waiting game to see what's happening next month in terms of jobs data. But they, of course, had an excuse for the jobs data at this meeting, which was, oh, the decline in private sector jobs, the very lackluster jobs numbers, those were because of the hurricane and because of some strikes that were occurring. And we fully expect jobs to bounce back next month. Well, I mean, anything's possible. But if you look at the larger trend, it's been all a clear, smooth decline in terms of month to month job growth that we've seen over and over again for the past 18 months. So then are we really supposed to believe this trend is going to magically reverse itself? I mean, that's what they want us to believe. It's the whole soft landing narrative. But the soft landing thing never seems to work out. If you go back and you look at the press clippings from 2000, from 2007, 2008, they're always talking about a soft landing and it never seems to materialize. So that just seems to be where we are right now. The Fed also said that inflation is heading towards the 2 percent target rate. They love that target rate. Personally, I haven't really noticed any price declines in my area for a long time. So what is going on with the rate of inflation, would you say? And with these rate cuts, what should we expect within the next 12 months or so? Well, of course, Jerome Powell has been saying for a very long time that we're heading back to the 2 percent price target or the 2 percent inflation target. And so we're confident that we've slayed the inflation dragon. And so we can start cutting rates again. Well, apparently the bond markets don't agree. This came up during the meeting because in spite of the Fed's efforts, the long end of the bond market has seen yields go up the 10 year, the 20 year, even the seven year. And so the question is, why is that happening? Now, a reporter brought this up and asked, yeah, are you concerned about the fact that yields are going up? Doesn't that suggest maybe that there's expectations for more price inflation? Certainly expectations for more deficits would be the guess, because, of course, if there's more deficits, that's going to drive more treasury issuances and that's going to then drive up yields, all else being equal, right? And Powell just kind of give it a hand wave and he said, well, actually, I think yields are heading up because there's expectations for growth. And I just don't think it's driven by any inflation expectations. Of course, he didn't have any explanation for why he thought that. But of course, he had to say that, right? He wasn't going to say, yep, we're losing control over the long end of the bond market. He's not going to say that in a million years. And so why is that happening? I think it's because with Trump coming in, right, we all know that Trump is not going to be a budget cutter in terms of any significant and drastic cuts to federal spending. So bond investors have every reason to believe there's going to be more price inflation driven perhaps by deficits. And that if the Fed's cutting now while claiming the economy's fine, but that jobs are still pretty flat. They haven't fallen into a black hole. The Fed's already cutting, trying to stave off any sort of significant job losses. Well, that doesn't bode well for inflation, I think, for price inflation. I think the fear is, as Powell used to say for a number of years in 2022, even 2021, was, right, we don't want to blink too soon. We don't want to start cutting rates too soon because we know that inflation could come back. That was the old Jerome Powell, sounded very reasonable. Of course, don't be fooled. I mean, Powell still kept rates rock bottom throughout 2018, 2019, just allowed a slight tick upward in 2019, then quickly reversed himself when the repo crisis hit. So this idea that Powell's some sort of hard money guy, sort of like the new Paul Volcker, I've never found convincing. But he did say a lot of reasonable things in terms of, we shouldn't cut too soon because inflation will come back. Clearly, he had some fear in terms of being the next Arthur Burns, right? He knew what happened in the 70s. He knew that the Fed didn't have the guts to keep interest rates climbing or at a higher level until the inflation dragon was truly slain. And of course, a lot of this goes back to our question of, is the Fed really independent? No, the Fed didn't have the guts to let interest rates go higher because the Fed wanted to facilitate more deficit spending and to help out the federal government, just as it usually does. So he didn't want to be known as the next Arthur Burns. But he seems to have kind of been losing his nerve on that. He's not the slightly more hawkish Powell that we saw a couple of years ago. But that was back when times were better, when it was a little easier maybe to guess where the economy was going. And now that things are a lot more unstable and that there's a lot more question about where the things are going, I think we're starting to see Powell's true colors that he's much more willing to hit the panic button and really just start cutting rates. So unless we had seen, right, remember, he's cutting rates without the price inflation returning to under 3%. Yeah, he managed to get it down to like 2.9%, 2.8% in very recent months. But for most of this period, when they were already saying, yep, we're going to start cutting again this fall, we were still looking at 3.5%, which is not 2%. That's significantly higher than 2% in terms of percentages. I don't know why everybody's acting like 3.8% is basically 2% or something like that. It's not. And of course, they're just saying then, yeah, it's heading back that way so we can just start easy money again. And one of the great questions that came up during the press conference also was, well, since you had inflation up at 7%, that's it, the core PCE inflation went higher than that on the headline inflation number. Since it was up at 7%, this is my new favorite reporter. I can't remember, her last name was Jung. And so she asked, well, since you have an average 2% goal, shouldn't you now run under 2% in order to bring down that average to 2% faster? And he said, nope, that's not how we do things. We're never going to actually target below 2%. So what that tells me is that the 2% average, as they call it, isn't really what they're talking about. The 2% is a floor, and they're not really interested in using basic premises of averages to bring a high number down fast and quickly. They'll never want to undershoot 2%. And they'll just say anything then apparently, yeah, it's 3%, it's 3.5%. Well, as long as it's heading in the right direction, we can just start easy money again, and I'm sure it'll all end up fine. But I'm not sure that many investors buy that narrative, and that seems to be playing out at least somewhat in the bond market. I'm not saying that all bond investors are totally and fully motivated by inflation fears, but that's clearly a part of it as far as I can see. And that complicates Powell's narrative that he wants to do. And I think we really need to be more skeptical and keep an eye out for inflation, which is not 2% in spite of their acting like it is. I absolutely agree with you. So maybe last question for today. If you were in Jerome Powell's position today, what would be your top priorities, let's say, to help turn the ship around and address some of those biggest mistakes that were made by the Federal Reserve in the past several years? Well, this makes me sound really not radical, especially after my calling for Congress to take action, right? So I'm thinking like a Fed chairman, right? So I'm not going to call for any changes in legislation or anything like this. I still think that should be abolished and that they should take away all purchasing. But of course, as a Fed chairman, we could simply stop purchasing things. We could simply stop manipulating the interest rate. You could think how good that would be for actual free markets if the Fed just stopped doing things. And if the Fed just said, okay, we're not going to intervene, we're no longer going to use the Federal Open Market Committee to intervene in the economy. We're not going to purchase. Heck, we're not even going to sell any assets right now. We're just going to let the market look at the situation in terms of what our portfolio is, what our assets are, where our interest rates right now. And we're going to let the market take that information and be the market and do its own thing. And we're just not going to do anything. And sure, we'll still be the lender of last resort even. Fine, whatever. We'll function on a 1920 type mandate. Great. But the Fed doesn't actually have to do anything to let the economy start to heal in the sense of letting markets take over again. But I mean, you see this all the time, right? It's like Wall Street doesn't even care about fundamentals anymore, right? What's determining stock prices? What's determining what's going to happen next in the economy? Everybody, all eyes on the Fed, right? What's the Fed going to do next in terms of policy? That's really screwed up to have the economy so dependent on whatever the Fed is doing next. So the Fed should just go back, me as Fed chair, I'm just going back and say, I'm not doing anything. Not doing anything like ever. As long as I'm Fed chairman in terms of interest rates, we're not going to manipulate any of this. We're going to continue. We're not even going to sell the assets. We're just going to let it all continue to roll off. And then anybody could look at that and see what the schedule is as it rolls off. That would add so much more stability to the market in terms of allowing markets to actually provide some level of real rational market activity that has not existed there for so many years. Because you're always constantly being whipsawed around by the Fed and everyone's taking bets about what the Fed's going to do next. In reality, the Fed should do nothing next. And I think that's probably the number one thing a Fed chairman could do without any changes in law, without any big drastic changes. Just FOMC is going on vacation. It's not coming back anytime soon. And you market, you need to deal with what loanable funds are out there in the economy with savings. That's all up to you market now. That would just be an incredible thing for the marketplace and would allow the market to finally start to heal from all of these decades of intervention that blew up all of these bubbles and created all this malinvestment and was just so problematic. And now we're living in this world where the Fed is the economy. And that's just awful. And we need to get away from that as soon as we can. Brian, it has been such a pleasure to host you. Thank you so much for joining today and for such an interesting conversation. I would love to connect with you again soon. Thank you very much.