Hey guys, it's Sasha. Two days ago, the US Federal Reserve increased the Federal Funds rate by a quarter of a percent to a Target rate of 4.75 to 5. And this morning Deutsche Bank is the latest Bank staring at a petrol collapse looking to join Credit Suisse in the scrap Heap as their credit false swap spiked and the share price tanked in pre-market trading. Now I Am going to share exactly what I think about the Federal Reserve's increase and the implications, but the recent changes to YouTube guidelines say that excessive cuss words the beginning of video are a big No-No So I'm going to ease into it gently now.

I Recently gave Jerome Powell and the rest of the Fomc Circus the benefit of the doubt, but this week they have excelled themselves at making dumb decisions for dumb reasons. In the days before the rate hike announcement, three U.S Banks collapsed. First, it was Silvergate, but nobody really cared because you know it's crypto. Then it was Silicon Valley Bank And suddenly everybody cared because the startups in Silicon Valley were all using it.

and then it was Signature Bank A few days after that, and then a few days after that, Credit Suisse collapse. Now this one was a long time coming. Not quite the same sort of issues, but you know, while everybody else is collapsing too, why not join the party? So the FED is sitting there with their pants around their ankles. Because remember, as well as being utterly at managing the economy, the FED is also meant to be responsible for regulating the banks.

And instead of regulating the banks. they deregulated the banks. When Jerome Powell was first appointed, the small Banks were allowed a lot more freedom, which is precisely part of the reason why three small banks have now collapsed and the FED has failed at giving any whatsoever about ensuring that the banks that they regulate actually have well-structured balance sheets. But not only that, the banks of the FED regulates got precisely because the FED increased rates at the fastest rate in history.

And do you know the reason why they had to do that Well, The reason is that back in 2021 when inflation was exploding, Jerome Powell and Janet Yellen were busy saying about inflation being intransitory, going away all by itself for the first time in history in an episode of one-time price increases as the economy reopens is not the same thing as and is not likely to lead to persistently higher year over year in into inflation. Into the future, inflation at levels that are not consistent with our goal of two percent inflation, we know that the base effects will disappear in a few months now. Back in 2020 after Covet arrived, money flooded into the economy. and yes, it was the FED that printed that money in the first place.

You can see the Chain Reaction here, right? And in 2021, after the money tap was left on to the max, inflation started going up. It was going up all the way through 2021 from 1.4 percent in January to 6.8 percent in November. Every single indicator at the time was saying that inflation is running away. It was dangerous.

I was sitting right here making videos saying that the FED has to start increasing rates or the situation will get ugly because it was obvious. And what did Jerome Powell do? Absolutely nothing in the December Fomc meeting in 2021 that came two days after the November inflation data was published at 6.8 percent. Remember, 6.8 is a lot higher than the six percent it is today. Every single inflation indicator at the time was pointing to inflation increasing in the next six to 12 months.

and yet the FED did nothing. The rate remained at basically zero percent. and for some strange reason, this week when inflation has dropped to six percent is on the way down. Every indicator is saying that inflation will continue dropping.

in the next six to 12 months. The Fed rate is already at 4.75 percent. For some up reason, the FED felt that they had to increase rates this week. One big problem with the Federal Reserve is that they are meant to be an impartial organization.

The whole point is that the FED is apolitical. They are meant to make decisions based on data, based on knowledge, based on information and that only. but that in reality is not the case. Instead of you know looking at the economic factors, trying to actually understand what the is going on.

Jerome Power and the rest of the Fomc members are busy traveling around the country, giving endless speeches, attending fancy dinners, wearing black tie. And because the Fed was so late to react to inflation in the first place, the difference between the Fed rate and inflation dipped to the lowest ever level, going below minus eight percent in March 2022 before the First Rate hike happened way too late. And the reason for the collapse of Silicon Valley Bank is because they had to increase rates so fast afterwards. If they started increasing when inflation was first going up, the problem would be nowhere near as bad.

because a large portion of the deposits flowing into Silicon Valley Bank at the time would have been converted into bonds at higher rates and into mortgage based Securities at higher rates. If The Fed actually did their job. Instead of playing politics, we wouldn't have had this problem. We would definitely not have had this problem to this extent.

and now we are seeing the exact opposite happen. Oil is now down at 73 dollars as I'm recording this video roughly 35 percent lower than at this point last year. Natural gas is at 2.20 roughly 73 percent lower than at this point last year. That's right, the cost of natural gas the commodity is now down 73 percent compared to 12 months ago.

This means that energy costs are going to start coming down in the next few months as these commodity prices filter through to Consumers. But as per usual, Energy prices go up immediately when commodity prices Spike But the corrupt then take months to bring them back down when the price collapses and the government is in cahoots and does absolutely nothing to stop the cartel. Anyway, energy has a weight of about 7.1 percent in the total Consumer Price Index But energy is also indirectly part of the cost of most other components as well. Food has a big energy component Transportation costs are obviously heavily based on energy, etc.

etc. so in total, Energy's contribution to inflation probably sits at somewhere roughly around 15, and while inflation is currently at six percent, the energy component 15 of that total are sitting at minus 35 and minus 73 percent when you're looking at the underlying cost of the Commodities. So in the coming months, energy is going to start pushing inflation down a lot. Food inflation has finally dropped below 10 in the CPI in February and the Producers Index has food fine on demand down 2.2 percent in February, which indicates that food prices are now moderating as well.

Shelter will keep increasing in the CPI because it lags real world rent and house price increases, but shelter is now sitting above the actual in increases, so there is a long-term downward pressure starting now on that as well. And Jerome Powell In his speech two days ago, said the FED is aware the shelter is on the way down, but will take some time to filter through. so inflation is falling. Every single metric you look at indicates that inflation will continue falling, employment is strong, and yet the FED still increased the rate by a quarter of a percent.

And the only reason that they did it is because they are trying to save face is because those morons went round giving speeches two weeks before that rate increase, saying that they will increase it and instead of looking at the data, reconsidering their assumptions, rethinking what they said, they went through and increased It Anyway despite three U.S banks collapsing in those two weeks. In the speech on Wednesday Jordan Powell said that there is no chance that there will be race reductions this year. Participants don't see rate Cuts this year, they just don't. And if you look at the DOT plot from the meeting, 17 out of 18 members of the Fomc think that the rate has to increase more this year.

One guy thinks it has to stay at this level and nobody, not one of the 18 people in that room thinks that it should go down. And everybody is listening to all of this. Jerome Powell's verbal diarrhea as though it's some kind of gospel in that December 2021 Fed meeting when inflation was much higher than it is today and the Fed rate was at zero, almost all of the members of the committee the same exact people thought that the rate would not have to go above one percent in 2022 and stay below 2 in 2023.. What does that tell you about their level of understanding and the ability of politics to maybe influence the that comes out of their mouth? And yeah, these are the guys in charge of the various U.S Federal Reserve Banks.

They have big CVS and they're all fancy and really, really smart people. I'm just out of schmuck on YouTube But just because they have a fancy job title and earn a lot of money does not mean that they understand what the they are doing. All the data is pointing to the exact opposite and you can see from the data that they completely missed inflation even though managing inflation is literally 50 of their job description. and right now it's the opposite.

The projection is that rates will now have to keep on going up while employment as strong inflation is coming down. All the data is pointing, but nobody seems to be looking at the data. Now the rate is sitting at five percent. What happens if inflation dips below five percent in May or June? What happens if inflation is down at three or four percent at some point in Q3 Is the Fed going to keep on increasing rates just because they said so? because increasing rates is now becoming the problem for the economy.

instead of rates being The instrument that can help the economy instead of it being the tool that the FED can use to adjust things and maybe try to help things that is now becoming the instrument that is the economy. Instead, each increase in the rate is making borrowing more expensive. It means people paying variable rates on debt are finding it harder to make ends meet. Mortgages are becoming much more expensive.

Many of the early stage companies sit on corporate debt that has to be continuously refinanced and instead of investing in growth, they are now spending that cash on paying interest instead of stimulating the economy instead of getting out of this financial crisis instead of getting out of GDP being slow. Instead of that, they're just paying more interest to the banks for no reason at all other than Jerome Powell's political Ambitions The last time we had Banks collapse, seeing low confidence in the economy and the stock market taking you're beating at the same time was in 2008. in July 2008, 8 inflation had increased to 5.6 percent in March 2008, just a little bit before that base turns collapsed and the banking sector became jittery. Then, just five days before that August Fed meeting, Freddie Mac and Fannie Mae collapsed and Congress passed the housing and economic Recovery Act to effectively take them over and pump money into them.

So you know, just before that meeting, financial institutions were collapsing right, left and center. The economy wasn't the and the Fomc statement in August 2008 had this paragraph. In the middle, inflation has been high spurred by the earlier increases in the prices of energy and some other Commodities and some indicators of inflation expectations have been elevated. The committee expects inflation to moderate later this year and next year, but the inflation Outlook remains highly uncertain And you know what the Fed rate was.

At the time, it was two percent and in that meeting, the FED chose not to increase it and just four weeks later, Lehman Brothers collapsed at the beginning of September and the whole economy came crashing down anyway. Ben Bernanke was the chair of the FED at the time, and on the 22nd of August 2008 two weeks after that Fed meeting and two weeks before the Lehman Brothers collapsed, he gave a speech and in that speech, he said, in view of the weakening Outlook and the downside risks to growth, the Federal Open Market Committee has maintained a relatively low Target for the Federal funds rate despite an increase in inflationary pressures. Then, a few sentences later, he said the second element of a response has been to offer liquidity support to the financial markets through a variety of collateralized lending programs. I Have discussed these Landing facilities in their rationale in some detail on other occasions.

Briefly, these programs are intended to mitigate what have been at times of very severe strains in short-term funding markets and by providing an additional source of financing to allow Banks and other financial institutions to deleverage in a more orderly manner. Sounds eerily familiar, right? Well, the situation in 2008 was very different and the banking sector did the time have a major systemic problem which is itself very different to the situation we have today. But in the Q a this week after during power speech, he was asked why the FED doesn't work with the government for example, and using fiscal policy instead of just bluntly raising rates where perhaps there is no good reason to do so. Do you need help from the fiscal side to get inflation down faster? We don't assume that we don't give advice to the fiscal authorities, And we do.

We assume that um, we take fiscal policy as as it comes to our front door. So the U.S financial system isn't a crisis. Point Multiple banks have just collapsed, the FED is having to print hundreds of billions of dollars to stop more Banks collapsing, But the FED can't pick up the phone to the government and work this thing out together because you know it's not that responsibility, division of responsibilities. They do their bit, we do a bit.

What? The actual Why Is the Fed Acting like a dumbass middle manager in a company that doesn't want to do anything outside their job description because they are just two bone? Idol We are now in a situation where the rate increase itself is likely to cause slower growth is likely to potentially screw the economy, which is incredibly frustrating when you can clearly see that there is no sound basis for the increase in the first place. So suppose Deutsche Bank collapses in the next few days. or maybe it'll be First Republic Bank or somebody else. And then let's say the Common Nation of Confidence evaporating the cost of debt skyrocketing cause a much worse recession than we would otherwise have had.

Maybe we wouldn't even be having this conversation. The FED is going to sit there giving speeches saying how sad it is that the economy is not doing well and who could possibly have predicted this despite being a big off reason, the FED being a big reason why the economy is not doing well in the first place. But hey, I guess Saving Face and increasing rates to justify that you said before, regardless of what the data is saying is more important than the economy, people's livelihoods and people's jobs. I Look forward to hearing your own power be very surprised when inflation drops completely unexpectedly.

Nobody could possibly predict this, and the FED is once again left standing there holding their private parts in their hands because they completely overreacted and completely missed it again.