Hey this is tom, and i really had enough of it so you're being lied to by your government. It's as simple as that. Now, if you ask anybody who's in a power position, they're going to tell you that inflation is transitory, i'm not going to name names, but those people are lying. Quite simple, clear cut, there's no two ways about it.
So, by definition, the government was always lying about inflation, because the way they measure inflation is pretty much now in case you haven't heard this term cpi, which is a consumer price index, is the way the government measures, inflation. I'm sure some of you heard about core inflation, core inflation and cpi is essentially the same thing and by definition this is already a a way to measure inflation because it does include food or energy or housing real estate market stock market. So pretty much anything that that's anything is excluded. So when they tell you four percent yeah, it's like asking a dude, how many chicks you know he dated you're gon na get.
You know, you're, not always gon na get the most accurate numbers and vice versa. You know, i think both genders tend to exaggerate or undersell their their dating numbers, but it doesn't matter. The thing is that now it's getting even worse, because now, even the cpi, which is what the government uses to measure inflation, is in the 30-year all-time high. I don't know if you could say a 38 all-time high, but i'm russian i can say, but essentially it means it's the highest.
It's been in 30 years, so pretty much it's an all-time high and we're almost at four and a half percent. Even this measly cpi is four and a half percent, but you keep asking well tom, how do we know the inflation so bad and it's not a hunch just look at the numbers, i'm going to add two more parameters to today's video, which i shared with my Private community on patreon before, but i'm going to do this for everybody, because this is important, so the other two parameters you have to take a look at one would be the buffet indicator which i'll explain shortly. The other one would be the repo market, repurchase agreements. Now, most of you probably heard about the buffett indicator and the buffett indicator, essentially the comparison between market cap and gdp, essentially the total market cap of all u.s, publicly traded companies to the gross domestic product of the us.
Basically, how much public companies are valued at versus how much goods and services the u.s produces in a year and for the most part, the average used to be around 100 and like 107, would be high. 140 would be insane and just to give an example. We're currently at 230 percent, which is unprecedented and a lot of people, will tell you, like exemptions. They'll tell you well, tom u.s companies have gone overseas and that's why the gdp is no longer reflective.
It's skewed! Well, u.s companies have been overseas for 15 years. Why? Don't you take market cap gdp like five or six years ago? It wasn't 230 percent, so this is a excuse just to exempt you from you know from your own thinking. I suggest you be critical even of what i say check me on this think critically. Now, excluding even this there's a very big problem lurking, which is even bigger than the profit indicator, because the buffer indicator is just an academic way to measure. You know: inflation in the way at least inflation in the stock market, there's a bigger problem. The problem is that the banks are now basically stuck with a ton of money. They don't have any idea what to do with, which is the biggest educational inflation i can think of now right now we have the banking system sitting on a pile of cash. They can't find a deal to which is insane to think about, because the banks, basically you know, carry the responsibility of of allocating funds to good investments.
I mean that's their job, so what am i talking about? So in the us? We have this arrangement called the reverse, purchase agreements or, let's call them repos so, but these repos is essentially a device or mechanism that was contrived to prevent banks and not meeting certain certain compliance regulatory constraints, essentially just to keep it simple and not over complicate. Yet. Basically, the banks treat cash as a liability, not as an asset, unlike you and me or or any business right bank holds cash on behalf of its clients and that's why, for a bank, cash is on the liability side and banks can't have too much cash. They have to invest it real quick because otherwise they create liabilities and essentially every night, whatever cash they cannot allocate, which is uh, basically puts them over the tipping point.
They can just sell it to the federal reserve and get some shares. This collateral blah blah blah, but basically it's an overnight transaction. They get it back in the morning, but then they don't go to sleep with a with too much liability. So to speak, it's a little bit fake.
But it's not about me making a moral judgment towards this mechanism, but it just exists. The problem is that it says pretty much never been really used that much, because the banks usually can find to do with money, but over the past two years it's skyrocketed. I mean even bro december 2020. We literally had zero dollars in reverse reapers, it's just a marginal thing: it's such an obscure, marginal uh fringe device, so zero zero dollars in december 2010.
So if you go and check me now right now we're at 1.5 trillion dollars that the banks can't find what to do with and the reason they can find what to do with is because everything is just too expensive. Previously, this is expensive. The stock market is too expensive. They'd rather get very little interest in overnight from the federal reserve than to risk it.
In this current pricing system, which means the banks thinks that everything is just too expensive to invest in and for the most part i would. I would claim that the banks are not idiots so combining that with the overall, i'm sure gut feeling that you have about how things are becoming slowly more expensive. I think it's safe to assume that we're pretty much screwed and the people who are supposed to wean now basically say with enough of this, and those are the same people that doesn't seem to you know, want to do their job. So at this point it remains to be seen and whether john paul, the federal reserve, will push the button because inflation - and this is me more becoming philosophical uh - has a very strange pattern and i've lived through hyperinflation in russia. So inflation starts like a pandemic. It says very, very slow one case here, two cases there five cases there and then like ten thousand, a hundred thousand a million cases, so it doesn't have a linear progression when it goes under control just too late. So they got ta stop this now um. But let's see what happens, i mean first, they got ta admit they have a problem which i haven't seen to do yet so far, we're just hearing transitory transitory, no problem, nothing to see here, but i just wanted to educate you a little bit on.
What really is going on? I know this video is not gon na get a lot of views, couldn't care less. This is for my hardcore audience the geeks who care about macroeconomics. I love you all huge shout out to the channel members. The papians has.
By Stock Chat
where the coffee is hot and so is the chat
US companies have expanded way more overseas than 50 years ago. You are just too much of a boomer about the Buffet indicator. The whole world has an iphone, the whole world uses microsoft, google, amazon. No company 50 years ago had such a huge amount of revenue from overseas.
Figured it wasn’t transitory last month. thanks for you input Tom. So what does well in high inflation environment?
Dude, the goverment lies? WHAAAAAAA?!?!? lol Like Biden, Trump, Obama…. They all lie like a dog and put us down. We are the serfs….. Yet NOBODY mentions this. Please tell me how this is different. from feudalism? Where a few rich people control all the labor? Sound familiar?
They’ve been lying to everyone for the past 5 years: the Russia collusion, Hunter Biden, Joe Biden, Whistleblowers, pandemic source, treatments, insurrection, protests/riots, borders, lockdowns, stimulus, IRS monitoring, inflation, ….it goes on and on. These Mofos are doing whatever the hell they want and tell us lies straight to our faces. These are dark times and we have no idea what’s around the corner. Hope and resilience are what we need to get through it.
If fears of inflation take hold, all that cash will be deployed in a rush, everything will become even more "expensive" relative to the historical norm. It will also be important to see where it's allocated, if unproductive assets are the choice, the real economy will buckle, but if the allocation is spread out expect money velocity to rise, inflation will then go brrrrrrrrr
Tom. You’re so serious. We’re all being played. You need a vacation!
Is this what grandpa sounds like after he starts rambling after a few tumblers of wodka?
The govt should be more transparent about inflation but also inflation is many things, isn't it? One thing I would like to know are how much of price increases are due to supply/demand issues and how much is due to inflationary pressure, i.e. changing or altering the money supply. Is there a way this is measured? Also Tom, feel free to be as judgy as you want about the repo market. It's like looking behind the curtains in Emerald City lol.
Can't inflation ultimately be deflationary?
Great informaron that the Ave Joe does not care to hear.
We all know how the pandemic forced govts all over the world to print money to support their economies…. at the time, I wasn't expecting such levels of support and I was scared for everyone's futures,but now I'm grateful they did it. However, I said at the time that we were all going to have to pay for it and I see this as the start of the inevitable rebalancing (on a global scale) that has to occur. I just hope that we continue to support each other through the post-pandemic recovery in the same selfless manner as we did through the midst of it.
Tom, you said PayPal was undervalued at greater than 60 pe don’t give me this buffet indicator and think critically crap. The f is wrong with you
How do u have an American last name but you’re Russian? Im more confused about ethnic background than inflation
Tom, what will happen? Can the banks just keep using reverse repo forever? Are you taking any action to hedge against the inflation risk?
as I told my son (who appears to be your age)
give me courage to deal with the things I CANNOT CONTROL (inflation)
give me strength to deal with the things I CAN CONTROL (your spending – and understanding the inflation)
and give me the wisdom to see the difference so I don't get pissed on the Big Lie.
I’m one of those economic geeks … thank you for what happens to money in the banks… it is frightening…. That probably why Buffett is holding so much cash…. like the banks….
Love you too brother! Keep up the amazing work!
the US companies overseas increased so much in the last ten years
Lol tom. Why u have been doing this big closeup videos haha.. thanks tom
Do you understand they are looking to collapse the economy on purpose, keep voting Democrat until they put you in chains.
I can think of several ways to spend that money with great returns on investment…but, I'm not going to tell you.
Remember Chairman of Fed Reserve Powell wanted to raise the interest rate 3 yrs ago Trump tnreatened to fire him so Powell folded like an old accordian to stay the big shot. Its at the point now if they the Fed Reserve raise rates now the market will collapse and not 20% more like 80% . Everything Supreme court, Fed Reserve and everything else are to politized. I agree with you but now what.
What would happen to the YouTube Algorithm if we spam the like button a couple hundred times each one of us..? Or dislike and then like the video? 🤔 I think more humans need to see and hear what's about to happen… thank you.
The FED knew what they were doing when they took the actions they did since 2009 — They knew they would create hyperinflation and asset distortions across the board — If you doubt that — Consider the fact that Fed Chairman Powell, vice chair, and several Fed Presidents were all trading based on their actions — They know what they are doing — The outcome will be ultra rich — everyone else poor and living off credit —
The Federal Reserve mandate is to prop up and inflate the assets of the rich. They are succeeding very well. Over 80% of equity’s are owned by the 1%. What you have seen here is a heist of the largest criminal proportion ever.
I have been screaming for a while inflation is not transitory. Its all bullshit they can lie with no problem since the ones in government will not be effected or effected a little.
But I was told inflation would be temporary.. lol
As always thank you. Simple terms for the masses to understand the repo market!
100 % agree with you. Fed is lying and manipulating and many reserve bank governor are taking the cue from fed and parroting same lies. Funny how they are changing the defination of Transitory to suit their vested biased narrative. Earlier transitory was few quarter and now kicked to mid 2022 – Note next year will again push when inflation will not come down.
Whether inflation is transitory or not, the stock market is not meaningfully linked to everyday prices, and the cash you’re talking about (bank reserves) are definitely a bank asset, not a liability to banks, only bank deposits are a liability. It’s true that banks want to minimize unproductive assets (reserves over the Fed requirements), but the reason they participate in reverse repos is because it’s risk-free income on cash assets that would otherwise sit idle. Reserves have very little (if any) impact on available deposits for normal people, and do not impact lending decisions by bank loan officers, so there’s very little chance for those reserves to “leak” into the real economy to cause any inflation we see… general price inflation will come from either supply chain issues or excess government spending, but not from changes in bank reserves.
The artificial pumping of assets like stocks and housing WILL increase inequality though, and obviously reduce housing affordability.
I think we are seeing a combination of supply chain driven inflation (likely transient, but might last another year or so), specific asset inflation from low interest rates (stocks and houses), and some gov spending inflation from pandemic relief programs which could become “locked in” depending on the next actions Congress takes.