Latest / Financial Survival Network / Michael Pento -- Two Percent Inflation My Ass! #6039

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Michael Pento -- Two Percent Inflation My Ass! #6039 · Financial Survival Network

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The only way they could possibly survive or make their economies look solvent is to
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print money in massive quantities to buy sovereign debt. That's what Japan's doing,
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That's what the United States is doing, and I think that's going to increase
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in size and think quantity. So central bankers around the world are buying goal
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with reckless abandon not only because they know what they're doing to their carecies,
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but because they don't trust the United States Reserve system, So they don't trust
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our dollar and they don't trust our bond market any longer. You're listening to
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Carrie Letz's Financial Survival Network, where you get valuable information you just can't find
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anywhere else to thrive in today's trying times. You need the Financial Survival Network
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now more than ever. Go to Financial Survivalnetwork dot com and get your free
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newsletter and gift. Financial Survival Network now more than ever. Welcome you are
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listening to and watching the Financial Survival Network. I'm your host, Carrie Lutz.
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Well, hey, we're just barely passed the first day, the first
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week of aprils of April twenty twenty four, it's already hitting the fan goal
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trading at all time eyes well. Inflation, according to Janet Yellen is going
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back under two percent this year, and she's betting her job on it.
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I guess not as much good. Michael Pentapentaport dot com is here with us
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questions comments kl at Carrie Lutz dot com. Write your comments below. So,
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Michael, state of the disunion here. Inflation it's going below two percent?
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Yeah, based on what so for the past nine months, it's been
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stuck in the low breeze. So I don't know what gives Jenny Yellow the
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confidence is going to two percent. I think the only way is going to
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two percent and below is if we have a recession slash pressure, and that's
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a real possibility. I don't think she's gonna like that outcome. But if
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not, if you look at the soaring price of commodities, if you look
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at the real measurement or yardstick for the dollar, which is against real money
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or gold or even hard assets like commodities, it's tanking. It gets an
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F grade. Maybe not against the Maybe it's not tanking against the Euro or
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the end or the pound, but it certainly isn't tanking against real and honest
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money, which is gold. So inflation isn't going anywhere near two percent for
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quite some time, unless we have the economy fall off a cliff, which
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I think is a very real spot possibility. They seem hell bent on making
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that happen, don't they. It would appear so jerry, so so gold.
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Even if these a highly welled some might refer to them as inflated prices.
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I'm sure you can see the headlines. Experts surprised by gold and silver's
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recent strength, right, these x berts to get everything wrong. Yeah,
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well, you know, no one knows better what's happening with fiat currencies than
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central bankers around the world, and they know what they're doing. The only
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way they could possibly survive or make their economies look solvent is to print money
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in massive quantities to buy sovereign debt. That's what Japan's doing, That's what
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the United States is doing, and I think that's going to increase in size
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and in quantity. So central bankers around the world are buying gold with reckless
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abandon not only because they know what they're doing to their currencies, but because
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they don't trust the United States reserve system, So they don't trust our dollar,
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and they don't trust our bund market any longer. I mean, especially
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that's the case when the United States could just say, you know, you
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know, laterally your reserves are cut off. You no longer have access to
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your currency reserves, which are dollars in sovereign debt. So it makes a
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lot more sense for them just to buy gold. They hold the gold,
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and you know, they sell access of goods to the United States. Right,
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they have excess dollars, they usually would park them in treasuries, but
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instead of doing that, they go, let me just sell my dollars and
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buy some gold, and then they obviate the problem of being, you know,
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a victim of US dollar hegemony. Then he adds to that the fact
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that real interest rates nominal rates are rising, if you've noticed, but religious
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rates are falling because mister Powell's hell bent on cutting interest rates this year.
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Now one carry, Why would he do that? Why would he do that
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when you could I assume he looks at it short of the CRB index and
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it's just going up into the right like a rocket ship. Why would he
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do that? Why would he be cutting rates when inflation has been staying higher
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than fifty percent north of his target for nine months. How would he do
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that? And I think he's panicked because he knows that that America cannot issue
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debt north of five percent and remain solvent. He just can't do it.
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And Corporate America with forty forty five percent of the Rustle two thousand being held
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in companies that have no profits, no have no earnings, they have to
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issue debt constantly. And they used to issue it at very low interest rates
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close to zero, and now it's you know, eight percent for high yield
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debt depending on the credit quality of the borrow. So Powell knows before he
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has a recession or depression, which is what it really would be, he
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needs to keep asset bubbles growing and he needs to keep the economy the rate
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of GDP to increase. He needs had to happen because you know, when
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you think about it having a recession, when acid prices are a little bit
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above where they should be historically, it's not such a big deal. And
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when debt levels aren't so extreme, this is a big deal. But when
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you have a recession when asset prices, stock and real estate prices are fifty
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percent above where they normally are historically, the ratio of total market cap to
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GDP is fifty percent above where it should be historically speaking, the ratio of
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home prices to medium family incomes is fifty percent above where it usually is historically.
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So if you have a recession, it could quickly become a depression.
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Carry you imagine what the banking system would look like if home prices and stock
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prices went down fifty percent. I mean this is I'm not making up number,
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I'm not being hyperbolic. I mean, if you have the home price
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to income ratio now is five point five, it was two point eight in
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the year two thousand, total market cap of equities to GDP is one hundred
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and eighty eight percent. It should be one hundred percent or even slightly less
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than that. If you go back to where it was in the eighties and
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nineties before we had this ZERP. You know this desert regime asert I'll see
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it. So after prices were to crash by fifty percent, what condition would
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the banking sector be in, what condition would the consumer be in? It
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wouldn't be a recession, will be depressions. And that is why Cole is
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hell bent and paddicking to get interest rates down, even though he's going to
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be cutting rates when he's nowhere near his inflation. To him, that's scary,
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a scary proposition. And so what about the dollar? Hell, how
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much longer can the dollar exist in this situation? Well, Kerry, like
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I said before, if you're measuring measuring the dollar against the euro, I
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mean quite a long time. Look it looks it looks fine, It looks
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fine. Yeah, it might only might only get hurt on the margins.
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I mean, how much is the dollar going to collapse against the end.
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They can't be that that retirement island can't even hardly get off zero. I
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mean they just go to off negative interest rates for five and a quarter with
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great so against the end and the euro maybe maybe not so bad. But
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measure the dollar again. Measure the dollar against oil, carry, measure the
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dollar against gold, it even silver, measure Measure that and tell me how
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you think it's doing. Measure it against Melas, against a latte from our
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least favorite right left wing coffee purveyor you know, stark about Live. Yeah,
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my latte has doubled in price in the past like three or four years,
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and they cut back on their customer disloyalty program. Uh, and I
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think sometimes you order a latte, you know, like you know, I
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order the medium and it's half filled with cream, yeah, you know,
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and then a quarters cool. That's my new site, the Inflation Inflation Dot
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Cafe. Well, you know what, you know what the sad part is,
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Carrie, that's seventy percent poll that came out to I'm going to go
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by Forbes in twenty twenty three, seventy eight percent. That's a lot of
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Americans are living paycheck to paycheck. That's friedmre because of the inflation that had
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been wrought against them by the very people who proclaim that they're for the middle
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class. We're doing this for full employment. We need full employment. We
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need to have stable prices, which sometimes means zero percent inflation. And then
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it became two percent inflation, and then it became nine percent inflation, and
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now it's three percent inflation. But hey, you know what, three percent
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inflation isn't so bad. We can't really get to two. Let's just talk
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about cutting interest rates now when inflation is still fifty percent above the target.
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And here's the thing that I think these gen there's four hundred PhD economists that
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work in the federal Reserve at all. I think this four hundred people.
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I was looking to hire one and I couldn't find any. Now I know
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you're all at the FED to disrupting things, Well, well you know you
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better go. You better off going to kindergarten and getting you know, a
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kindergartener to run your economic models. Because here's the thing that I think they're
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going to be most surprised about. What if the Federal Reserve starts cutting interest
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rates? The Fed Funds rate, that's the rate they control. They don't
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control long term rates and long term rates sure, because inflation becomes intractable.
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That's a salient and viable risk. And if that's the case, they will
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not provide any salve for anything. If that's if that happens, m you
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think that's a viable option here? I mean, is that is that really
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going to happen where they cut the rates and then rates go up? Well,
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I mean we let's just let's just normally speaking, historically speaking, the
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ten year treasurino ads commensurately with inflation plus real GDP growth. So if inflation
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is at three percent and let's just say real GDP growth around two three percent,
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Atlanta Fed has it at two and a half, that's five and a
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half percent. A ten year note is nowhere near five and a half percent
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right now, What if, in an environment of a soft landing, supposedly
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purportedly so, the FED start to slash interest rates? What do you think
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is going to happen with commodity prices? Which what do you think is gonna
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happen with the dollar? They're going to crash, right right? A dollar
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would crash, mind prices didn't sort. Is that going to be good for
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inflation or bad for inflation? I think it's going to be pretty bad for
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inflation. Well if three inflation goes up. So if you have real GDP
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at two percent three percent plus inflation at four or five, six seven percent,
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what the hell or why in God's good name would anybody buy a ten
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year note yielding four and a hared percent? It doesn't make any sense to
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me, especially when the Fed has, you know, at least tacitly admitted
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to you that they can never control inflation without destroying the economy. So so
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they're stuck. In other words, right, yeah, I think they're I
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think they're stuck. I think they're in a I think they're in a dilemma
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of epic proportions because if they do nothing and keep their interest rates where they
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are already. You know, we just had the n FIB Small Bism Optimism
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Index come out that has strung for twenty seven months in a row. Twenty
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seven months in a row. Household net interest income has plunged by two hundred
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billion dollars in this current Fed tightening signal. That's because you know, back
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in back in the two thousand and six Fed raised rates, but it was
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an inaggregate, households gained income because they have you know, their interest income
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went up. But now we have a lot more percentage of debt, household
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debt that's in a variable rate environment, personal loans, credit card debt,
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you know, revolve day. So net interest income has plunged. We have
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a near perfect recession indicator. It's called the yield curve. It's been inverted
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for a record amount of time. Positive real interest rates that have existed for
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about almost a year now. When that is the case, when you have
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real a real Fed fund rate, so the Fed fund rates five and a
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quarter to five and a half, the effective Fed fundrate is five point three
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subtracted by inflations around two percent. Whenever you get that for about a year,
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the economy has tended to melt down in the past. Howell knows all
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this. We've had the most corporate defaults in Q one in twenty twenty four
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CITs to global financial crisis. Wow, at a loan and credit card.
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The faults are soaring. The consumer, oh, you know, not only
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the consumer in the corporation. They can't handle these interest rates. But you
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know what, the government can't handle these interest rates either. Imagine paying two
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trillion dollars a year on interest. That's crazy. So they have to unilize
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the debt, right, they're going to be monetizing, which is basically q
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E. Right. Uh, it's not it's exactly what it is. It's
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exactly what it is. How much how much debt can they buy before the
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game blows up? I guess they can buy the debt and uh, basically
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quarantine it, right, basically sterilize the money, make the banks keep it
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on deposit with the Fed. Right, so then the money doesn't get unleashed.
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Yeah, but you know what happened. You know that that's a that's
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a possibility. But what's going to happen with the currency if they do that.
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I mean, I can't see the Fed's balance sheet going back to nine
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trullion and higher without destroying the purchasing power of the middle class, which is
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already on life support. I just can't see it happening. Mhm. They
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could. They could try to do that. That that's for sure. But
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but you know, if they credal is inflation and you know, they give
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all these back the banks have these reserves, I mean, we couldn't be
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We couldn't be Japan. We could turn into Japan. But is that is
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that really our model that we want to pursue? That is that the model
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we want to follow? And is the is the IF going to buy?
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Is that they're going to buy corporate debt too? Are they going to buy
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mortgage backed securities too? I mean, are they going to buy everything on
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the planet and then pay an enormous amount of interest on excess reserves? Is
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that what they're going to do? I guess as possible, I can.
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I guess they can do that, but I think they can just they would
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destroy the dollars purchasing power against hard assets. I think that would be a
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very big outcome, negative outcome. So so it's not like back in two
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thousand and nine when they just monetize the debt and said everything's fine, right,
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We're not there now. You notice that two thousand and nine didn't solve
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anything. I mean we haven't. We have still have. We still have
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record asset bubbles, record ascid bubbles. I mean what right now that I
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mentioned it, seventy eight percent of Americans living page check to paycheck. Who
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can afford a home anymore? You know, the market for first time old
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buyers is gone, I get afford it. So you know, the FA
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has to make some very serious choices coming up. What do they want to
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do? They do they want to usurp the market price of assets forever and
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see if that See how that works. I mean, we could be that,
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we could be we could become Japan. That's a nation that's been mired
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in growth that's low floating, you know, around zero for decades. That's
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what we want to do. That's fun. Yeah, yeah, well we
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see how well that works? Right? Yeah? You see, you know
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the whole thing is about you burst and arrogance. At some point we have
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to decide to let markets function freely or just have the state take care,
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take care of everything, control everything. That is where Japan is right now.
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They buy they buy almost every single bond issued by the Japanese Central Bank.
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I mean every JGB is bought by the government, and the government owns
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I think about half of all of ETF's outstanding. So if that's what we
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want to do, that's fine, all right. So inflation's going up.
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Interest rates are going to go up because they're going to cut them and it's
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going to cause them to go up. So the only safe have ins We're
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looking at precious metals, right well, so when you enter sectors four and
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five and right now where I believe we're in sector four of my inflation deflation
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spectrum, that's an increase in the rate of inflation and a second derivative basis.
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So you look at energy, you look at gold, and you look
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at shorting the bond market, and that's what we're you know, we're headaches
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towards that sector Sector four and five right now, kind of like I said,
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between three and four, which is stasis, which is a stability in
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the second derivative of inflation. But let's just see what Powell does that we
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have a problem coming up around June and July, and that's when the excess
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reserves from the reverse repol facility run dry. And that's provided all the liquidity
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for the bond market and all the liquidity for the stock market. When that
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ends, we could have a serious problem with both stocks and bonds. Bond
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yields could soar and stock prices could plumme it because the liquidity affor those assets
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dries up. So we'll see what his decision is. It's it's up to
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Powerfull and the FOMC. They are a very powerful institution. I know some
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people come on financial media and say, oh, they're irrelevant. They just
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no, they're not irrelevant. They provide the liquidity, they control the base
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money supply. They control liquidity for the banking system. And if you think
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the banking system is irrelevant in the United States, that I'll disagree with you.
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So let's see what he does. I mean, I think my own
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belief is he'll flirt with reality, and when reality blows up in his face,
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he'll acquies that. He'll cut interest rates, he'll go back to QI,
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he'll buy all the government debt, he'll take have the bonds like you
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said, taking off the bank's balance sheets and sitting at the federal reserve.
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They'll pay the bank's excess interests on those excess reserves. And you know,
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all this comes down to one thing. The rich will get richer and the
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poor will get poorer. Those that spend thirty forty fifty percent of their income
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on clothing and shelter and food will be moved further towards penurine. And people
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like us who own multiple houses and have you know, multimillionaires, which just
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get richer and richer. I don't, I deny, and I don't like.
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Yeah, do I enjoy being wealthy? You enjoy being wealthy? I
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guess we do. But it's just not fair and it's not a viable way
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to run a country because you just can't have a country run without a middle
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class, a functioning and viable middle class. Yeah no, can't. We
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see what's happening in China now, right? The country had a more fragile
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middle class than they thought, and now they've done everything they could to destroy
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it, and now they're reaping the fruits of their policies, as every country
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eventually does. Right. Yeah, it's risky for the this country to go
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down the road of looking more and more like a Banana republic in their monetary
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policy, their fiscal policy, and even in the way we transition power from
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one administration to the next. You know, when you try to influence elections
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by putting people who are running for office in jail, it's right, it's
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you in other words, And I'm a libertarian, I'm not a Republican,
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So don't don't anyone same say so when you try to surp the power of
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the people to decide who they want to be president, that leads to big
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problems. So when you have political chaos financial uh, when you have monetary
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chaos and you have a fiscal chaos, it leads to economic chaos. That's
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where we are, and that's where we're headed in a more salient fashion.
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All right, On that note, we will let you go. Michael.
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I know you have a busy day ahead of you. A questions comments for
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Michael myself k L at kerrie Lets dot com. Write your comments below in
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the YouTube channel and make sure you go over to pentoport dot com. It's
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in the show notes this interview on Financial Survival Network dot com. And while
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you're there, please sign up for our free newsletter. Michael, always a
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pleasure, even if the topic is somewhat somber and I'm not depressing you know,
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well, it's unfortunately. You know what else? What other conclusion can
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you arrive at? If you're an independent thinker, look around and tell me
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if you think this is a viable situation And the answer is sadly no,
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absolutely, all right, We appreciate you, we'll talk to you, and
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soon you'll be well. Thank you, carry you too, Thanks for listening
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to Carrie Letz's Financial Survival Network, your solution to today's trying times. For
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the latest, go to Financial Survivalnetwork dot com. Financial Survival Network now more
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