That was a big thing and then so that Then the inflation that came it really Really arrived in the first quarter of 2021 was was a surprise it's a good World good World welcome back to real estate Mindset today's video is going to be Absolutely Bonkers now the data is in And what we'll do today is do a deep Dive and Analysis on what Jerome Powell Said during a speech at Stanford University he touched on some pretty Good stuff now most of it was just the Same repetitiveness my dual mandate blah Blah blah blah blah but he also said a Few things that I felt was interesting Now in other words guys what we're about To find out here is really the FED has No idea what to do next and really had No idea what was G to happen and had no Idea that inflation was sticky and so Here's the thing you guys here's my real Impression on Jerome Powell okay up Until I started following Danielle de Martino Booth I thought Jerome Powell Was an absolute clown I thought he was Horrible now we all know he was part of The problem including Danielle now Here's the thing when I started talking To Danielle she was like who else she Gonna who who else you gonna appoint and Thank God and this is her words thank God he remained elevated so he has a lot Of pressure on him to lower interest
Rates but he hasn't and so as time goes On and as he continues to keep interest Rates elevated I'm slowly understand Slowly starting slowly starting to have Faith That maybe and I said maybe and I'm just It's slowly starting okay I I haven't Fully you know jumped on the bandwagon Yet he might be doing the right thing I Mean it's possible that he's lying to us Like they're supposed to so that they Can continue the quantitative tightening Now again you guys my issue is is we Know he was part of the problem and also My issue is is we already had deflation Happen in 2023 in fact we needed this Level of interest rates back in 2023 During spring home buying season but we Didn't have that instead they made Something called the bank term funding Program and although many people don't Consider that a Traditional Bank bailout It's certainly curved or stopped the Spread of Bank runs and in that that Also postponed deflation and so you guys Again at this point in the game I'm Still leaning on to the side like I Don't trust Jerome he's part of the Problem what's he going to do about it But again I want to have faith in him It's just the problem is right now the Story is not done being told political Bias in service to the public we will Not always get it right no one does but
Our decisions talking about um Unemployment remaining low what's what Are the factors that have played out and And then the related question do we Think this will continue to happen over The next year or two yeah so I guess It's I've always had the view and always Said that because of the unusual origins Of this inflation and its differences From other prior episodes there was a Path to getting inflation back down re Restoring price stability getting Inflation back down sustainability to 2% Without the kind of large job losses and Increases in unemployment that have been Typical of Prior tightening cycles and The reason again was that some part of This was was independent of demand uh When when if you have to get all of the Inflation reduction gains from Suppressing demand that the chances are You that that will involve uh that will Weigh on on employment and and economic Activity pretty significantly but here We had we had you know the the situation For takes against semiconductors you Couldn't buy a car at the very time when People Wanted cars because they were Moving to the suburbs because they Didn't want to ride on public Transportation because of covid at that Precise time the supply of cars went Down dramatically because of the Shortage so what happened is the prices
Went way up that's how the market clears In our in our economy so on the other Side of that though without without Respect to demand once this this the Semiconductor Supply comes back you Should come right back down that curve And you could in principle uh get Inflation down significantly without Just ignoring demand for a second so I Always thought that was possible and I Would say something like that is is is Appears to be happening um sorry so then Your question is um how did that happen So more recently 200 we expected that to Happen at the very beginning and that's Why we thought the inflation was Transitory meaning it would go away Quickly without much effort from us that Turned out not to be the case and we Thought then in 2000 that was in 2021 And 2022 we thought the supply side Would recover more it really didn't and We began I certain began to wonder Whether that was going to happen and Then it really happened in 2023 right About the time we were almost ready to Give up on supply side recovery you got This significant increase in labor force Participation Accompanied by uh a significant move up In in in Immigration and you also got The unwinding of the supply side problem So what's happening is when when that Happens potential output is going up
Significantly the economy's productive Capacity so you have a situation where Productive capacity is going up even More than actual output and so the Economy actually isn't becoming tighter Which ordinarily would it's actually Becoming a little looser and that right There you guys is very very interesting When we really think about that because We have had a second round of inflation We see that in the CPI the tenure has Absolutely been skyrocketing now one of The things he doesn't touch on during This entire interview which I found Really crazy to me he is not calling out Government officials and that's another Reason why I'm leaning towards I don't Know if I like this guy he's not talking About deficit spending the deficit Spending you guys is obviously leading To inflation right so money printing Equals inflation deficit is money Printing deficit means we're using money That we don't have so we have have to Print that money now I did find it very Interesting that and I don't know if you Guys understood what he was saying here But he had mentioned and he tries to Stay away from this but he's now having To acknowledge the impact of immigration I myself hate talking about it I hate Talking about immigration but it's kind Of like now I'm starting to kind of be Forced to talk about it I'm not trying
To get political never never with you Guys do I want to get political but it's Starting to make an impact so you know That's kind of where services are needed Right demand is coming there if we have Massive amounts of immigration whether It's illegal or not it's going to have An impact and he says that throughout This interview however he only touches On it a little bit but I'm going to have This video Linked In the description There is a chapter in this video that Actually goes in specifically to Immigration I'm not going to go into it On this video let's move on to the next Thing I think you can point to uh Sectors of the economy and you you Mentioned a couple so if you're a Household that has a low interest Mortgage you're not feeling the the Effec of higher mortgage rates and many Companies as well uh took the Opportunity to term out their debt uh You know before rates went up so you Have you have a lot of companies that Have longer term fixed rate debt at Pretty low rates and they're not as Affected by it that's that's all true at The same time um again if you look at uh Interest sensitive spending either in Housing or durable goods you're seeing Very significant effects there um and I Do think you see the economy rebalancing So I don't I think it's
Not right and maybe too soon to conclude That there's some significant disconnect There in terms of monetary policy Transmission I would so but it still Leaves the question of of how the Economy can have grown over 3% during a Year in which yes monetary the the Federal funds rate is at a quarter Century High why wouldn't grow growth Have been lower and to me the answer to That is the supply side recovery I think That's what people need to understand is That you have this force from outside It's not just Interest rates in demand you've got a Supply side recovery that is creating New demand and new Supply and that's why You get a number like 3.1% at the same Time inflation is coming down yeah but We need but as American consumers we Need deflation because we can't afford This now I want to ask you guys what do You think these outside forces are do You think it's immigration do you think It's maybe foreign buyers coming into Our markets either way you know I find This very interesting he's not being Completely truthful he's not touching in Any capacity on the fact that our Government is overspending money nowhere In this does he you know acknowledge That but I do find it very interesting To see that he's acknowledging like Things like what we discussed now let's
Listen to a stance on bed policy we we Like I would go back to what I said in My remarks to start which is the we Think the risks are two-sided so there's A risk of if you cut too soon the risk Is that that the progress on inflation Will stop or that even it will reverse And we've seen that some in some Historical uh particularly in the 70s we Don't think that's what's happening here At all but but that's a risk that we Have to manage the other risk is that we Wait too long or move too slowly once we Do move and in that case you have you Know you have weakening in the labor Market and and economic output so we we You know we we're trying to steer Between those two risks obviously we're Trying to be in the middle and get it Get the timing right it's very Challenging there is no risk-free path But we're try we and I think we're in a Position to address the economy moving In either of those directions the so the Risk though of of moving too soon really Is that the economy uh you know really Does uh the inflation does move up and Then that's it really be would be quite Disruptive if we were to have to then Come back in we will do what what we Have to do to get inflation out of 2% But again it's it's about balancing Those risks it's it's never the case That you can confidently look at
Baseline and say this is what we're Going to do it's always about having a Baseline understanding but then knowing What the risks are and and and having The committee be in a position to be Able to address those should they Materialize and I think I think we're Very much in that position now Personally I don't think they're in that Position in fact I'm going to say this You guys and I have been saying this Interest rates have not been high enough I understand they exploded interest Rates comparatively they have interest Rates blew up but we know for sure that They weren't High Enough to combat the Inflation and all again inflation from Predominantly deficit spending not to Mention the the inflation from the money Printing during lockdowns and so what He's mentioning here guys is very Interesting is is The Balancing Act that They have to accomplish in other words If they raise rates too high the whole Market crashes which is kind of what we Want but if they don't raise them high Enough inflation comes back which is Exactly what we have right now so They're trying to time everything but Again when I step back and I looked at What happened on this CPI report Inflation is coming back we see it Especially in shelter especially in Housing and rent and prices and things
Like that and so again that tells me That he didn't he's not winning the Fight at this point on inflation because It is going back up right at spring and So therefore rates are not high enough Now would they be high enough if there Wasn't as much deficit spending yeah They probably it actually might be high Enough but the overwhelming amount of Deficit spending that include government Jobs is just so unfathomably high it's Just not working not yet anyways and so They have this whole war with inflation Versus deflation and all of us raise Your hand if you want deflation we want Deflation now the point I always trying To make is you need to make sure your Purchasing power is maintained through a Recession because odds are your Purchasing power will go down through a Recession because of things like credit Tightening and the difficulty to get Cash which is why you you need to make Sure you're qualified right now and Patient now let's go into a few of the Challenges that Jerome Powell is Acknowledging yes it's well it's Certainly been a turbulent time I will Say to to uh Dean Levan's points it's Been um really a lot of things and Things that weren't expected you know For for 20 plus years around the world Uh econ economy suffered from you know Lower interest rates lower inflation
Slow growth low productivity bad Demographics and a lot of monetary Economists were working on how do how do You make your tools work at a time when You're you're going to be bounded by Zero and you won't be able to cut and Make and you know and support the Economy so this was a big and that was a Big thing and then so that then the Inflation that came it really really Arrived in the first quarter of 2021 was Was a surprise to most people and again The macroecon Economist generally Thought surprised that it would go away Over time not everyone there there were Some concerns expressed and ultimately It is coming down significantly so that Was uh you know we had To we had to Pivot on that and we did When when it became clear really in the Fall of 2021 it became clear through the Labor market data the inflation data the Growth data that the economy was not Moving back toward price stability and We pivoted and when we pivoted we really Moved so because you know I I that was The right thing to do um so the good News about monetary policy is it can Move quickly the emergency tools we have As I mentioned are are agile compared to Other government policies and they have A significant effect on the economy so I Think we've gotten to what is knock on Wood a pretty good place we're using our
Tools now to try to you know try to Bring inflation down the rest of the way To 2% all right well first of all guys You know here's the thing I really like How he said we're going to get to 2% in Inflation no matter what I mean when he Said that he was EXT he was extremely confident but again When he's talking about the challenges He continuously leaves out of those Comments anything about the Administration anything about politics Anything about the Senate whether Republican Or democrats the spending is On both sides and he's not talking about That he's not talking about the real Problem which is the spending that's Going on right now now obviously Consumer spending is also a problem Although it's very interesting because I'm sitting here saying hey you spending Recklessly is a problem yet the economy Needs you to do that and that's why we Can get ahead when we don't do that when We don't spend recklessly when we Re-budget and when we save and when we Make goals and when we stay disciplined Don't forget you guys most people don't Do that and I'll also say this you guys I don't know if he's lying or he's not Lying but it's kind of scary to me how Many times he mentioned that he was Surprised by by data and he was Surprised by inflation I mean how can
You possibly be surprised by inflation When they had trillions and trillions of Dollars of money printing how does that Inflation surprise you remember he said Inflation is transitory and so so far You guys I am not saying I'm not joining The bandwagon for Jerome Powell I'm Leaning towards it slowly but so far no I'm not I'm not because he was part of The problem he's constantly you know Getting all these surprises but I will Say this I am happy though I I will give I will acknowledge this thank God he Didn't flip thank God he didn't pivot Thank God he didn't decrease interest Rates thank goodness he is remaining Strong and keeping the interest rates Elevated and no more quantitative easing In the form of buying mortgage back Securities obviously there's deficit Spending so maybe the deficit spending Is the new QE okay so I'll acknowledge That but from a mortgage back security Standpoint that has stopped now again You guys I think it needs to speed up Don't I don't care about the Corporations you know I say crash them I Don't I didn't like the bank bailout I Think that I think that we should have Let them fail I mean it's all rich People anyways that made a killing off Of us multiple millions of dollars off Of us and so I don't care I want you to Do well I want the consumers that don't
Have a house yet to do well I want the People that are renting to do well I Want Americans to do well good people to Do well now anyways guys that's enough Of my rambling as always I appreciate You don't forget I have a free home Buying course if you want want to study Up on how to buy real estate in the Future maybe right now is a really bad Time right most of the time it's Horrible is there a great deal every Once in a while maybe here and there you Can find one but overall it's a super Bad market now other than that guys if You are out there investing on real Estate you guys already know I wish you Luck and I hope you win
