You know inflation is like an old russian refrigerator once it hits you. It's pretty painful and i've been telling you for the past year that inflation ain't going away, it's definitely not transitory. In the end, it will be transitory and uh. However, there were a few people in the industry defending the fed and still saying inflation was transitory.

Just a month ago, weight of the evidence is finally going pal's way. Team transitory is going to win. Of course, just two weeks later, the fed themselves came out and said: well, i think it's, it's probably a good time to retire that that uh word and try to explain more clearly team, transitory, have skipped out of town, took the first flight out and basically left A whole lot of blank just being silly, don't be silly. However, surprisingly, i'm not even mad at jim cramer.

For saying this i mean it would be like being mad at a donkey for being a donkey or a door being a door. I mean it's just a door, it's just gym. Just in june he told you he's giving you his blessing to invest in deity check. This out got my blessing to bet on dede.

I would try to get as many shares as you can. D-I-D-I global ride-hailing giant deedee now saying it will d-list from the new york stock exchange less than six months after going public dd shares have been under a lot of pressure since that ipo in june, and then we obviously know how the dd story panned out 60. Later we're talking about one of the biggest fails in history, jim cramer has been known to make a few mistakes, so i'm not really mad at him. For saying this, the question is: how do we feel about the federal reserve? The incoming data are are very much consistent with with the view that these are.

These are factors that will wane over time and that inflation will then move down. The federal reserve had one job. You only had one job, which is to keep a stable pricing environment for the people, basically to be able to buy bread, shoes and housing. They failed somehow the guy who was in charge, who completely got their call wrong, calling it transitory for the year now got his job back.

I mean: do you know of anybody in any industry who would screw up completely like a 180 scrub, completely get the call wrong, get people in a lot of trouble and get his job back, and it's like nothing just happened, and now we're stuck whether you think Covert is serious or you think it's not. It doesn't really matter because all ads your government thinks it is, which means it's going to be way more aggressive about working, remotely, less travel and whatnot, essentially increasing unemployment. So what you're getting in the next upcoming year is a lot more unemployment, a lot more inflation, and that is the definition of stagflation. The problem is the federal reserve acted like a rookie in the military.

They went out on their first mission, heard the noise in the bushes and empty the whole magazine on that noise. Now the bad guys are coming from the other end. They have nothing in the clip. All they can do is hold the cajones and pray for the best.

That's literally what the fed just did they empty their load the first time around, not stopping not preserving any ammo. Now we're going back or omicron whatever is coming next, it doesn't seem like covert. Is going away at least the way governments perceive it? It seems it's still here to stay, but the fed can't print any more money. It's done because at this point, look at inflation.

But if you ask the fed well, they haven't done anything wrong while they cooked you like lobster, essentially telling you well. This is completely transitory. We think it's a little bit more persistent, but it's okay and then going all the way to well. We think transitory was kind of you know, misunderstood and then really going all out saying.

Well we're retiring the word transitory. They cooked you like a lobster and you did notice. The problem is that we left these guys in charge over our kids, essentially the economy. Now, instead of having two responsible adults, two responsible babysitters, we got freaking harry and marv from home alone that fed the kids, pizza and candies for a whole week and pretty much.

The only excuse, they'll give you well, the kids asked for this: they threw a tantrum. They really wanted the candy and the pizza they would not eat their vegetables, so we just you know, gave it to them for a whole week and just to make sure you understand how horrible this week was. Let's look at the past 22 months in the past 22 months, the united states printed 80 percent of all time dollar. Printing, yes, 80 of the dollar, was printed in the past 22 months.

It's a whole lot of pizza and a whole lot of candy. So at this point, you're all probably basically on the floor, what can we do tom? What can the government do here? It's a little bit of a tricky situation because it's basically a storm i'll, explain why back in the 80s, paul volcker actually raised interest way up high and it took a while, but you know it stabilized inflation. Now, a lot of people seem to think that this is the only solution, and this sole solution is just raising interest rates, but raising interest rates on their own will not help the economy and i'll explain a second. Why that's exactly why raising interest rates never worked in the 70s before paul walker? If you actually go, and you know research, some history, people seem to think it's, because the us will go bankrupt if they just raise interest rates right now, that's not how it works.

I'll explain: basically, there is a certain rule that tells you how much interest you need in the market to actually fight inflation and it's called the taylor rule. It doesn't really matter right now, it's basically 150 of your inflation. So let's say we have a 30 inflation in normal market, so we're probably looking at four and a half percent interest problem is right now we're looking at a whole lot more than three percent. In fact, right now, it's seven percent as of november, probably going to end q1 at 10 percent.

If everything goes to plan, i don't know whose plan. But let's say we have a 10. You know what, let's just stay with seven. Let's say it's seven percent.

Let's say that inflation stops growing right now, just stays at seven right now, we're looking at ten and a half percent interest. This is what we need today to stop inflation. The problem is that, according to all data right now, we have four times more government debt than what we had in the 80s. So essentially every single percent you're gon na raise interest.

It will cost the government 220 billion dollars more in interest because the government, you know it - has to repay this debt and every percent will cost 220 billion. So let's do a quick math, we're talking about 10 and a half percent, so roughly 2.4 trillion dollars more in debt repayments for the government if they raise interest right now to 10 and a half percent. Now the problem is and a lot of people get. This thing wrong is they think.

Well, this is going to bankrupt the u.s government. That's not really how it works. The u.s government can't really go bankrupt. They can print as much money as they want, but if your solution to basically having to pay 2.4 trillion dollars more because you're trying to fight inflation by printing more money, essentially you did nothing.

So let me explain because in this situation this is just a cyclical transaction. Nothing really happened, there's nothing! You did here to alleviate inflation now. The other end of the spectrum will tell you well tom. They can just raise taxes like crazy, go back to 70 taxes and that's how you want me to actually print more money and that's how you can alleviate inflation.

The problem is that 2021 is in 1980, there's a lot more global mobility and there's a race to the bottom in tax. So if the u.s raises taxes, the flight from the us and by flight, i don't mean the one you take to the vacation, they mean by escape by corporations and wealthy individuals. The ones that actually pay a lot more tax than the rest of the population will be insane so they're going to run away to cheaper locations, tax, wise and that's actually pretty insanely shown by the laffer curve. You can clearly see that beyond a certain point, increases taxes actually reduces your tax collection and right now, and that's not me saying that, according to the oecd data, the equilibrium point for corporate tax is about 21.

That's exactly where the u.s is at right now, so raising corporate rates to 40 50 is actually going to end up with less tax collections for the us, meaning they'll have to print more money, winning no solution for inflation. So how do you solve this because so far it sounds like a doomsday solution. Well, you solve this by combination of two things, and one of them is going to sound insanely, radically uh kind of illogical to you and that'll expand. So the first thing you do have to raise interest rates at least to 10 to 5, which is radical, but i mean walker did it in the 80s.

You still have to do it today because it's the same situation and unfortunately most people forget or don't know that, while paul volcker was increasing interest rates in the 80s, there was another factor in play. There was complete deregulation and lowering of taxations by the reagan administration. So this government, while raising interest rates, was creating a nice little infrastructure for an economic boom by lowering tax rates and removing regulation. When you do it essentially you're giving the market the power to explode out of the stratosphere - and i know it sounds radical but contrary to what you've been told, lowering taxes, deregulating will end up actually with the u.s collecting way more tax than they ever did.

Ending up paying the 2.4 trillion, they need to raise interest to above 10 percent, which they absolutely have to do in the near future, because otherwise we have to simply take jerome powell's word that inflation and encoding will be transitory in the end. And if inflation is still not transitory, it's okay, it just means it's not the end yet see you tomorrow.