Everyone, this is jerome powell for an emergency press conference. I have to come clean. I f'ed up. Inflation is not transitory.

Yet for once in my life, something is larger and longer lasting than expected and look when the pandemic struck. We were all scared. Banks were tightening up lending, getting ready to freeze credit lines and stop new lending. Businesses were laying off employees and cutting ad spending, and consumers started cutting spending back as well.

The economy looked like it had just hit the e-brake, so we had to put some grease on the e-brake to keep it moving uh. We can't afford a recession because that hurts too many people. We don't want to hurt people, so the easiest option is just to print more money and that's exactly what we did. We printed trillions of dollars, potentially over 25 percent of the money in circulation in america and now there's a fear, we're going to run up against rampant inflation and i get it.

I've got bullard, hawker, boston and mestre up my ass. Every time we have a meeting about tapering, faster and raising rates sooner, i need to get them off my back, i'm not as hawkish as they are so this week we're likely going to announce the beginning of our taper. We expect it to start with a 15 billion dollar taper, reducing our monthly bond purchases from 120 billion dollars per month to 105 billion dollars per month. This is expected to reduce some of the money printing, that's happening because we're going to be spinning the money printer a little bit slower, it's going to be moving about 12.5 percent slower, but we're still going to be printing about 105 billion dollars per month.

So don't worry, we're still going to be printing like crazy. Now there have been some accusations that what i'm doing is going to lead to hyperinflation. Well, let's look at the facts. First headline inflation is measured in year-over-year terms and in 2020 we experienced a massive reduction in spending.

We saw prices fall and between march and july prices were depressed very depressed, so it makes sense that in march through july 2021, we saw high year-over-year figures. We also regularly stated that inflation would also occur as the economy reopens, that there would be a burst of spending as individuals reintegrate into the economy after being trapped at home. Listening to youtubers for months. This has led to substantial shortages for products that individuals and companies are looking for or seeking to buy with their newfound wealth thanks to asset valuations at all-time highs, we're seeing shortages in chips, autos, shipping and delivery constraints, labor constraints and a market jump in material and Input costs but don't worry, these are transitory, eventually, costs and price increases both uh and all of these actually are expected to be results of really just going through the pandemic and while transitory is lasting longer, we do expect this transitory to begin its end in 2022 And now there are three reasons: we think that inflation will begin to inflict downwards substantially in 2022.

First, since we measure headline inflation on a year-over-year basis, we do expect to see some negative inflation readings by the summer of 2022 and 2023 as we'll be comparing the inflated prices from 2021 to potentially lower prices in 2022 and 23.. We don't expect to see most prices continue to go up year after year after year. Now we likely won't see headline deflation. We likely won't see deflation in all categories, especially as rents and wages are likely to continue upward, and their movement is likely to continue their pace for the next two to five years.

We again do not expect rents and wages to relax their growth over the medium term. However, product costs measured by the consumer price index are likely to plummet in many different categories. Here's why once supply chains catch up, we're likely to see an oversupply of chips, used cars, products and things that folks have been demanding during this pandemic? As we hit an oversupply of manufacturers stocking up on chips or products and input products, we expect to see the massive demand that we see now on. Commodity prices will substantially wane, as manufacturers relax their ordering manufacturers right now are double and triple ordering to make sure they have enough just to meet the demand they have.

Manufacturers are soon likely to realize that they have stockpiles of not just commodities and input products. Like chips or aluminum, or steel or lumber, but also massive stockpiles of finished products as well as a result, not only are manufacturers likely to substantially reduce their demand for commodities, reducing commodity prices, but we expect prices of products will also fall as manufacturers, wholesalers and retailers Encourage more spending with lower prices to finally clear the now overstocked shelves they have. This is why we expect that prices will decrease substantially for many products and commodities in 2022. This will also be an opportunity for companies to beat record revenues from 2021, which were thought to potentially be impossible to be beaten, and that is, as companies reduce prices, we expect demand to increase even more now.

We might think that this would lead to more inflation, but don't worry we're going to invest our stocks appropriately before any of the movements happen in the market. So that way we can print attendees while also printing money, but for now we've got to consider the fact. Shipping backlogs are already beginning to ease in six months. We expect these to be almost entirely cleared when shipping backlogs are almost entirely cleared.

Wholesalers, retailers manufacturers will no longer have to double or triple order to stockpile. They will already have a stockpile and even if they didn't have a stockpile, they would not have to pre-order as much once we have shipping delays cleared. All of this stockpiling and a reduction of shipping delays are expected to reduce commodity prices substantially again supply for lumber steel, silica aluminum are all expected to be adequate in 2022. We then expect finished product costs to plummet as again companies lower prices.

That means consumers will. Finally, be able to select products based on price and quality again and not just on what's available see. Today, consumers have so little choice, they're paying higher prices for speed rather than having the luxury of choice. This is leading to the inflationary increase that we're seeing.

This is exacerbated by the wealth effect that those with retirement accounts, stocks and real estate are feeling richer, as asset valuations are at all-time highs. This is also why we've seen many two-income households become one-income households and more individuals retiring earlier. These also being factories or factors. Rather, and keeping the labor market extremely tight, all this means is that at some point during 2022, we expect to see a substantial inflection to the downside in many categories of inflation, with the exception of rents and wages.

We hope that this inflection point occurs before the summer of 2022, but i always thought that transitory would come by the end of 2021 and i was wrong. We are likely going to have to wait until the middle of 2022 or potentially through the end of 2022. This means that we will have transitory inflation eventually, but if we do get to this inflection point in the summer of 2022, i will personally be very happy that way. I can get the other board members off my ass and we can finish the taper but delay raising rates.

Otherwise the others will want me to raise rates starting in june. The moment we expect to complete our taper. Now i'd like to respond to fears of hyperinflation. Shout out jack dorsey: first household savings rates are sky high and so are household investing rates.

This is substantially lowering the velocity of money, which basically means we're able to print trillions of dollars, literally without creating substantial inflation. Imagine that we can print 25 of the money supply and, if money moves 25 slower, we can print 25 of the money supply without having any inflation, and that is what we expect. In fact, that's literally what we're seeing now if the velocity of money went back up to previous levels, i'd probably lose my job because we'd be screwed to hyperinflation, but i will make it my career's mission to make sure that jack dorsey is wrong and so far He's wrong he's very wrong because take a look at this this right here folks, is the velocity of money chart, as you can see by where my mouse is, the velocity of money has plummeted from 1.37 prior to the pandemic to 1.1. This is a substantial reduction, in fact, if we measure it from q4 of 2019 at 1.4 1.423 - and we divide that by where we sit, we have seen a reduction of about 22.7 percent in the velocity of money.

We printed about 25 percent of the money, so we have a teeny little bit of extra inflation and we expect that to remain manifested with increased wages and increased rents. But we do expect commodity and consumer prices to fall substantially in 2022 and 2023. We will not stay at five percent forever unless of course, this chart goes up, in which case i will lose my job, but anyway it is possible that we will have to raise rates at least once in 2022, but, ironically, the stock market appears to be cheering. The potential for rate increases, which is quite unexpected, especially after what i went through in 2018, when donny t almost fired me for raising rates.

That's because there are still so many inflationary fears in the market and markets, see rising rates or raise me raising rates. As a good sign that inflation will be prevented by the act of raising rates, and i promise you, i will make sure that inflation is prevented, but for now it is going to be transitory for longer, and this is why we now declare that inflation is transitory. Eventually, because as much as i like the money printer to go bur, i like stocks and real estate to go burr more after all, we need to make sure that everybody can participate in the rocket ship. That is, the stock market and the housing market.

And we need to make sure that minorities and low income participants in the market, especially amongst our women, black and hispanic community, have an opportunity to participate in the economic gains available and so far they've been left behind as they've been disproportionately affected by low vaccination rates. Joblessness and pandemic era restrictions. So if you want to help contribute to inflation, being transitory, eventually make sure to get your fouchy algae subscribe and stop worrying about inflation, because rents are going to go up and wages are going to go up, but everything else is going to come down eventually. Thank you for watching this emergency press conference.

Goodbye.