hey this is tom nash and the fed apparently is running a ponzi scheme at least that's what dan moorhead the ceo of pantera capital seems to think now just pause this clip i haven't watched it we're gonna watch it together react to it and see if he actually makes some sense so let's check it out it went all in um so walk us through why policy is now a ponzi scheme well yeah so the fed used to just control the overnight rate and even that has been way behind where they should be the policy rate used to on average be about a percent a quarter above inflation it's now 700 basis points below inflation uh they've just gotten the overnight rate back to where it was right before the pandemic and when the pandemic started inflation in the u.s was 2.3 and it's now 8.3 in official terms and then there's a problem with the way they report housing the true inflation rates in double digits now so so far i agree with him a hundred percent uh the measurement of the cpi is completely garbage it's trash it's rubbish i agree with him it's about you know 12 to 13 and the current interest rate is nowhere near what it has to be to fight inflation so the first minute so far we seem to be on the same page that's that's a policy mistake but completely separately is there manipulation of the mortgage market the fed used to not invest in bonds didn't manipulate the long curve they let free market actors like pension plans mutual funds uh insurance companies do all the lending in the economy but in 2020 they decided to get involved in the mortgage market they ultimately bought 6 trillion of government and mortgage bonds and to put that in perspective the record year for issuance of mortgages to all americans was a quarter of that size so in two years they did 200 of all mortgage lending in the u.s and there's some big ramifications that unfortunately we're just seeing now so basically what he's saying here is very interesting point essentially what he's saying is the fed got involved with the real estate market so as you know the the fed the bed the bad fed has a balance sheet where they keep whatever it is they're buying on the free market whether it's mortgage-backed securities or government bonds whatever that may be now he's specifically talking about the mortgage-backed securities mbs now if you remember if you're old enough this is exactly the mechanism that collapsed the economy in 2008 but this is a whole different story now what he's saying here essentially is because the fed has been so aggressively purchasing mbs mortgage-backed securities in fact the numbers he's saying are quite staggering just to give you some more perspective not only that it's double or what 200 what it just said of the entire mortgage market in the past two years our own gdp is like 21 trillion dollars and six trillion the fed is holding in mbs so that's pretty wacky now what he's saying essentially here is because the fed actually created this and bubble by flooding the market with cheap money i know where he's going with this because what he's saying here is essentially the fed infused all of this cheap capital into an inflationary market where the real estate market was already kind of spiking on and essentially allowed all of these players in the real estate market to get basically free capital and everybody did with it what you expect them to do in installation times which is buy real estate which has caused a massive bubble i think i know where he's going with that but so far i have one problem with him and i'm gonna shut up in a second is it's still not a ponzi scheme it still sounds to me like bad policy i'm still not seeing the ponzi scheme element here now let's see maybe there's more hey dan so fed's credibility i i'm with you on this and we've been harping about a lot of different things what's the most credible thing they could do here uh because again you've got your own powell who people have been following the fed know at least this this guy was a died in the wool hawk guy who somehow got pulled in a different direction different times i'm not sure we we defend that um what's the most credible move they can make to to begin to build back yeah there's two things right they have to deal with the overnight rate and for a long time they said it was transitory or some supply chain issues uh and i think to build credibility they have to make it clear that uh it's not a couple container ships stuck off long beach harbor it's a supply of labor issue we have twice as many job openings in america as we have people looking for a job the unemployment claims in the u.s hit a all-time record low only one out of a thousand people uh filed for new unemployment claims which is kind of the odds of getting hit by a coconut um so they need to establish credibility on the short-term side but really they gotta stop manipulating long rates they have to let the free market do that and right he's mixing up a few things i'm going to react to it in a second um i don't necessarily agree with everything he just said so hold on let's let him finish saying whatever he has to say and now uh case-shiller housing index is still running above 20 percent uh nationwide that's not just hot markets that's everywhere and the fed is uh loaning money in short term at you know one and a half percent and even uh long term are are very cheap we've never had that much of a spread between the appreciation of housing at 20 and mortgages at five or six yeah that's literally double the previous wide in that spread we had uh it around five percent in the seventies we had uh about uh seven percent just before the global financial crisis and obviously both of those ended up disasters so defense really created a huge housing bubble and they kind of have to get out of the housing market before that's going to correct so a few things with him what i don't agree with what i do agree with so mostly i agree with him it sounds like he knows what he's talking about so far i have not seen any evidence of a ponzi scheme presented so i think it was just clickbait a good job cnbc i mean one click beta to another i can appreciate a good clickbait game but maybe there's more later so as far as what he's saying so the first part what he said was complete garbage so he says in the first part well inflation is not about supply chains it's about the supply of labor we don't have enough employee employees in this market and that's what's causing inflation that's absolute horseshit makes absolutely no sense whatsoever the reason we have inflation and the only reason we have inflation is printing money we printed too much money we caused inflation everything else they're telling you is the complete fabrication lie just to shift the blame to somebody else it's not the saudis fault it's on opec fault it's not putin's fault it's not anybody's fault besides the government who printed a ton of money has nothing to do with the supply of employees my guy so that part was complete horseshit however in the second part when he started talking about real estate which seems to be something he definitely knows a lot about probably more than me but i do understand common sense and his common sense is quite simple as a businessman here's what he's saying if you have a ton of opportunities to borrow money and you can borrow a lot of money and put it into real estate projects so let's say what he's actually right so the real estate projects probably yield you what like 20 25 and the money you can borrow at five percent it's a no-brainer deal it's free money the only problem is that this money is going to the wrong places so when you have this kind of arbitrage deal it's the rich it's the connected with the networks with the ton of capital with a ton of connections with the speculative mindset who absolutely abused the market using this mechanism when you have such a spread when you're getting cheap money and you can put it into projects which give you five times more what happens is the market gets flooded with speculation with people who just buy and sell for you know the greater full theory it's not people who actually buy homes to live in them and they get great deals there's definitely those but for the most part this sort of market conditions that have been created in the real estate market which is absolutely out of control right now is because of all this free money attracted a lot of speculates in the market who pumped the price up and as long as the fed continues giving them cheap money that's what he's saying here they're going to continue doing that because that's just human nature so let's let them finish dan it's karen feinerman let me just follow up on that part so we know now that they're going to as part of qt mortgage backs will they'll be selling and how do you think that market will absorb that and if you follow that through what will happen to housing prices yeah so they have uh really not sold any mortgages they're just saying that they shouldn't replace all of those that mature you know unfortunately i think they have to start online he's on point by the way uh that's a common mistake this guy knows what he's talking about as far as the a real estate market and the mbs stuff getting their book and letting the free market uh establish the correct rate um housing has been a huge windfall for homeowners and in particular speculators you know one of the biggest exactly issues with this policy mistake is it's not like you know everyone in america owns a home is all great for everybody thirty-five percent of americans don't own a home they're trying to buy a home and even own a home you know might be wanting to expand into a larger home for their family and twenty percent of all homes in the us last year were sold to speculators institutional speculators with money they borrow from the fed right so precisely it's really not advantaging uh most americans the majority of americans you know this is not a great policy so they have to get out of the market reduce their holdings and let the free market find the right rate um obviously housing has is up 38 since they started this policy which is insane that's never happened in our country before it probably can't keep going up and at some point unfortunately i think you know housing has to come back off and it does seem likely a recession is coming so what he's saying here is that eventually this party will have to be over much like the raid party is now over the balance sheet of the fed has to be reduced what he's saying here obviously is going to push prices down real estate and that will have a recessionary effect 100 agree with him by the way those who are saying that there's going to be a real estate market crash i do not agree with them and also notice that this guy who knows a lot about real estate it seems is not saying there's going to be a real estate market crash he's talking about a correction and 100 agree with him there's too many checks and balances put in the market post 2008 crash that will never let that happen there's too much equity there's too much regulation there's too much compliance there's just way too much um preventative measures in the market right now to replay 2008 so there's no market you know real estate market crash coming the the great reset and all that stuff but however the market entire market really said included will go through correction this is actually not a bad explanation but again i i don't know if it was his idea or whose idea was it to call it a ponzi scheme there's absolutely zero evidence presented of a ponzi scheme all i see is just stupidity and bad policy i don't see any ill will or ponzi scheming going on but let's keep watching so so dan i mean we're grateful to get both your be able to get both your global macro sort of take on things as well as your crypto take so can you just sort of play this scenario out if we do head down this path and you say a recession is likely how are you positioning your portfolio i mean do you i would think with somebody with such strong views you do have some macro trades on in addition to your crypto positions yeah so one of our essential views is that although you know obviously interest rates have to impact bonds mathematically and they almost certainly have to impact stocks uh and then other things like real estate will certainly be targets to the fed there are some asset classes like cryptocurrencies that should be uh uncorrelated or disconnected from the interest rate markets so although it hasn't happened yet uh crypto's been very correlated with risk assets i can easily see a world and say a year when stocks are down bonds are down um you know real estate's down but crypto is rallying and trading on its own very much like gold does or soft commodities like corn soybeans are all doing very well so that's the uh world that i think we'll see by the way one point of criticism here i tend to agree with him long term but in the short term um cryptocurrencies have been correlating with the entire market long term i've always said this crypto tends to bounce back faster and if you agree with dan and myself you might want to consider dca dollar cost averaging into bitcoin with our sponsor for today's video ftx us fdx us is a u.s regulated cryptocurrency exchange also allows you to trade stocks quite soon best free structure in the business absolutely easy to use and understand infrastructure the ui ux is absolutely beautiful all my bitcoin is invested through ftx us i absolutely love what they're doing i don't have a lot of exposure to cryptocurrencies i don't play around with these coins i invest mainly bitcoin a little bit of ethereum but everything i do i do through ftx us they're the best in the business the most established conservative and safe place to handle my own business they work with the best in the industry tom brady steph curry they absolutely are the dominant force in this industry and i'm proud to be associated with them and if you want to check out their platform for yourself and let me know what you think obviously comment below but make sure you use the link in my description section and my code name tom nash one word because if you do that obviously i'm gonna get paid a little bit but also you'll get a free crypto if you trade above ten dollars it's not a bad deal at all thank you ftx us let's keep watching the clip let's see what he has to say more about crypto maybe but real estate let's keep watching because so far nothing about ponzi schemes so basically in six to 12 months or so or longer um all the asset classes are down except for crypto could be including commodities and other things that are not can any kind of fix she doesn't agree with him did you see the look on her face can we rewind the look on their face though was epic she's like my guy she's like what are you on but i do think he has a point i don't know if all the assets classes are down and bitcoin is up i have absolutely no idea but i do think that bitcoin has a faster recovery rate which i think what he should have said instead of agreeing to her to her um suggested headline but um yeah it's she kind of set him up she says sit him up i mean he's he's not a media guy a little bit of a setup but okay it's not not too harmful there are things that are not any kind of fixed quantity thing that doesn't have a direct connection to interest rates could uh keep rallying because you know the fundamentals in crypto were still very positive obviously we had a huge uh bull market and now a huge bear market but i've been through five of those so far and in 10 years we've been investing in crypto so it's not you know this is not unprecedented we've seen it a lot okay so we just heard dan moorhead i agree with him about the real estate market i agree with him certainly at least partially about the bitcoin trajectory and the cryptocurrency trajectory i completely disagree with him about the source of inflation and the main thing that i don't see here is any ponzi scheming going on it wasn't even mentioned i mean the fact that she didn't push back on that kind of weird but i guess it's click bait nature i'm not one to complain about clickbait no issues at all good video good arguments some right some wrong you know when you're on tv every day you say sometimes stupid you know god knows i've done that before as always thank you for ftx us for sponsoring this video if you want to become a channel remember your patreon the link is below it's five bucks per month see you next video.