So the markets reacted yesterday very aggressively to what John Paul said. We saw everything become green because John Paul Actually for the first time we heard him say it that they're going to consider slowing down the rate of rate increases now. We actually had a similar statement come out in the minutes they published just a few weeks ago, but this was the first time where John Powell actually say that and voiced that. Now the problem with that I think there's a lot of hopium in here and I'm here to protect you guys now I don't know what's going to happen I left my crystal ball at home.

but I want to be the voice of reason and I want to warn you if I see a trap coming and I fear this might be a little bit of a trap now I don't know how much this ride is going to continue for. but here's the Scoop look I think everybody is misunderstanding a little bit of what John Paul actually said yesterday. What he said yesterday is that in 2023, the interest rates will continue to go up. If he said that they're starting to slow down, that means that 2023, we're still going to have rate increases.

They're going to be slower, but it's still going to keep increasing. Probably in 2024. That's where they're actually going to test out a flat they're not going to raise. They're not going to reduce and see what happens in 2024..

So in 2023, 2024, we're going to have high interest environment, elevated interest, environment, expensive money. Now look the most important part of what John Paul was talking about I Don't think was the interest rates because we know that we're going into a couple of years of a very restrictive monetary policy. Let's put it this way and that's fine. But the more important part that he said and he said it multiple times, is that they're actually going to try and reach higher unemployment level because employment is just too low.

Sorry, unemployment is just too low. Which means that the job market is too hot. Which means the economy is just too damn strong right now. And if we're trying to reduce inflation, we have to address the fact that there's just too much demand for goods and services right now.

I mean essentially saying things are too good right now everybody's spending money Crazy Prices are still elevated for goods and services. Now what he's talking about is a very important metric. and I Know it might seem trivial to you, because look, right now, we're 3.7 unemployment And what John Paul is aiming is at five percent unemployment, four and a half to five percent employment. Now that might seem trivial to you, you might say, well, Tom what's the difference between 3.7 and 5? It's a huge difference.

Unemployment shifts are very, very important. I'll explain. There's a very famous rule I'm not going to repeat it here. It's very, very complicated.

but in Simplicity essentially if unemployment goes up above the three-month average during the following year, half a percent or more. That's the definition of a massive recession. Now, we might already be in the recession, so that's my, you know might be another definition of an x-ray session. But what I'm saying is what John Paul is telling you is hey, we're going to keep money expensive and we're going to aim at 1.3 increase in unemployment over the next year year and a half.

Now, There's no way in hell that you can increase unemployment by more than one percent in the year and not cause a massive recession. And I'll explain. The third is telling you this illusion of we're going to try to create a soft Landing Now their experts will tell you well, Tom not me. But they'll tell you well, we can get from 3.7 to 5 super super slow.

We'll just do it little by little so it doesn't happen like within a year. But here's the problem. It's a whole. it's It's a horseshit and I explain why in history I Don't know why I said it Like in history in history.

If you go back all the way to the 1970s, all the way to now, in the last 50 years, unemployment has never gone up slowly or go down slowly. Unemployment is an extremely volatile thing. It either goes up sharply or goes down sharply. It doesn't move slowly.

Go back and check me on this. Go on. Google Research This unemployment. Never, ever, ever just slowly goes up or slowly goes down.

It's very violent moves. so they're telling you, hey, we're not going to cause this violent move. We're going to slowly get it to happen. But the problem is in the past 50 to 60 years, that has never happened.

The monetary policy has never allowed that. No. Central Bank In the US Ever Ever they ever cause unemployment to go up and down slowly, That's just not happen. So the whole soft Landing narrative is a lot of opium in there.

There's a lot of wishful thinking I Believe it's a whole a whole bunch of now. The problem is is that unemployment here is the key to our economy or rather employment. Because think about it this way. we have a pyramid, right? People go to work, They get paid, They use that money to spend on stuff they need.

Economy does better, and then the businesses that you know get that. Revenue They hire more employees because their business is doing better, so more employees have more money, etc. etc. There's a very nice cycle.

that's why Christmas and all our other Um celebrations are basically intended to boost the economy. Christmas I Think one of the most smartest holidays out there. And the problem is that if you cause unemployment and if you cause sharp prey of unemployment all of a sudden, you put a monkey range into the system. people spend less because they're not securing their job, businesses fire people because there's not as much income and it starts this vicious cycle and the FED officials.

They keep telling us well, everything is fine. Look, people are still spending like crazy. Don't forget we have pumped four trillion dollars into this economy. Four trillion dollars.

That's the whole pandemic cash dump that we had, so that money is still working its way through the system. So that's why you see a lot of spending. I showed you metrics uh, like the Disposable personal income and the you know the rate of savings out of the Disposable personal income. Um, people are running out of their savings, but the money is still in the system so it's working its way through the system.

The problem is that the FED is selling you an illusion and I'm just afraid that a lot of people will get caught up in this Rally or the next rally. I Don't know how many more Riley's we're going to have. might have a few, but if I'm looking at 2023 as a whole year, I'm very pessimistic. I Think a recession is not only unavoidable, it's going to be very, very violent.

So I'm saying the hell away. and I'm very careful from this. Market I Know you guys see this dips and you see these crazy rallies and it's really enticing and there's a lot of formal. but I'm just here to warn you that things are not going to get better long term for a long while.

So unless the economy in the stock market will be completely uncorrelated, which I don't think they will I think the stock market long term is going to have a lot of painful times ahead and I would be very, very careful from jumping on these rallies again. Might make a lot of money, might not I don't know. just my opinion. might be wrong, might be knackered.

Might be remedies of amendment as always, don't click nothingness. Nothing. Don't buy nothing. See you next video.