Something Is Seriously Wrong at the Federal Reserve

[00:00:00] Speaker 1: The Federal Reserve had their meeting this past Wednesday, and they decided to not raise interest rates, which I already covered in my previous video. So in today's video, I want to show you the highlights of the Federal Reserve press conference so that you're up to date with the current situation. The first highlight is that the Federal Reserve wants to change their meeting schedule. So here's what you need to know. The Federal Reserve meets eight times a year. And at each one of those eight meetings, they make policy decisions such as, you know, are they going to change the interest rates? Are they going to print more money? If they're going to print more money, you know, at what speed are they going to print more money, etc.? Okay, so they want to change it. Well, they are going to change it to now they still want eight meetings a year. But in 2027, they want to make decisions at just seven of those eight meetings. And in 2028, they want to make decisions at only six of those eight meetings. And that's important because, well, when they make decisions or change things, then it affects the stock market. [00:00:56] Speaker 2: It moves the stock market. So please take a look. And at every turn, good or bad, our job is to get monetary policy right. And that's exactly what we're doing. Now with this objective in mind, we've decided on a change in our FOMC schedule starting next fall. We believe eight meetings per year is the right number for the FOMC. But in 2027, one meeting will focus exclusively on broad monetary policy strategy with neither a vote on the federal funds rate nor a policy statement anticipated. The rest will be regular FOMC policy setting meetings. And I expect that in 2028, we'll have two meetings dedicated discussions of strategy and six for setting policy. [00:01:45] Speaker 1: Okay, now let's move on to the Q&A. The Federal Reserve did not raise interest rates at this meeting, even though the rate of inflation is elevated. And the reporter asks, there's been no progress on bringing down inflation. Then why didn't you raise interest rates today? So I want to first show you the question, and then I'm going to say something. [00:02:04] Colby Smith: Thank you. Colby Smith at the New York Times. There's been essentially no progress toward the 2% inflation target. The labor market remains stable, as you suggested in your opening statement. And most of your colleagues seem to be on board with raising rates in December. So why not just raise rates today? [00:02:22] Speaker 1: Okay, so you heard the question. It's a very straightforward question. And I kid you not, that Fed Chair Warsh took more than two minutes to not answer the question. Like if you believe me, then just, I'd say skip ahead, like in this video, two minutes ahead, save yourself the time. If you don't believe me, you want to confirm what I'm saying, then, you know, be my guest and just watch how he dances around the question. [00:02:45] Speaker 2: Insuring price stability, Colby, quashing inflation, is not about some fixed individual date on a calendar. Same way it's not about some isolated data point. If it were about those two things, this job would be easier, and we wouldn't be suffering from nearly six years of inflation above target. So what's this about? It's about ensuring we have clear objectives. And it's about a monetary policy strategy, which might sound to your ear and others like a change from the last several years. So let me step back. In the five months or so that I've been around, we've put in place what I describe as new monetary medicine. Well, what's been in that package of medicine? First thing we did when we showed up with my colleagues is we doubled down on the 2 percent inflation target. We said we own it. We're taking responsibility for it. And if you think that we're tolerating some inflation target somewhere in the 2s, let us disabuse you of it. That was the first part of this, new monetary medicine. Second part is we took responsibility. No anguish of central banking here. No blaming others. It's the third thing that we've done. We laid out for you and the world our framework. I did it in Jackson Hole. I was part of the discussion the last couple of days of the framework that many of my colleagues skew to as well. This is how we think about how monetary policy should work. These are the transmission mechanisms and this is how we're going to deliver. Then what we do? We interrogate reality. We do that periodically. That's a very useful thing to do. But we don't just talk, we act. And so in September, when we last met, we acted. We removed a dose of accommodation. So what are the signposts about how this new strategy is going? Inflation compensation as measured by swaps, prices, many other measures. Inflation compensation is going in the right way. Inflation expectations. The world is quite unsettled. If you'd say, absent the Fed, what would have happened to expectations? They might have gone the wrong way. They've gone the right way, too. So I feel good about those signposts. The period right in front of us is information rich. There is a lot that's happening in the world. My colleagues and I are keen to take notice of it. So in this coming period, what do I think we're going to be able to do? We're going to be able to figure out what's the appropriate protocol as part of this package that we started to deliver five months ago to deliver price stability. I'm encouraged by the progress we've made in a short period of time. But if the crux of your question is you haven't delivered yet, you haven't achieved price stability, you're right about that. But we're working on it. [00:05:41] Speaker 1: Okay. Now, moving on, a reporter asks, did you keep interest rates the same because the midterm elections are in six days? And this is important because the Federal Reserve is not a part of the government and should be making decisions independently of what's going on with the [00:05:56] Speaker 4: governments. So please take a look. Thanks so much, Elizabeth Schulze with ABC News. As you know, the midterm elections are in six days. Did the midterms factor into the Fed's decision to stay on hold? And if not, how can you assure the American public that politics were not at play here? [00:06:12] Speaker 2: So politics played no role in the decision. I just spent two days with my colleagues upstairs. I didn't hear an utterance about politics. I didn't hear a reference to politics, elections, what's happening in the next week or so. I didn't hear anything about it. And I don't believe it had any role in the decision, not just for me, but my colleagues around the room. But I will say it's an information-rich interval in the coming period, having nothing to do with [00:06:47] Speaker 1: politics. Okay, moving on to the next highlights. The next Federal Reserve meeting is on December 9th, and that's going to be the last meeting for the year. In the Federal Reserve's most recent projections, they forecasted another interest rate increase in 2026. So the question is, will you raise interest [00:07:04] Speaker 5: rates in December? Please take a look. I know you don't like the statement of economic projections, but last month they did, your colleagues penciled in another rate hike for this year. And so could you give us your sense from this meeting, whether you still see widespread support [00:07:21] Speaker 2: for another hike this year around the table? Thank you. So the blackout period for them ends, I think on Friday or at some point over the weekend. So they might indulge you in that discussion. [00:07:34] Speaker 1: I don't believe in forward guidance. Okay, since we can't get a straight answer on this guy, a different reporter asks basically in a different way. So the question is, is the current interest rate appropriate? And Warsh basically responds with, I don't know yet. [00:07:51] Speaker 6: Please take a look. Thank you, Chair Warsh. So if I could, this statement says that the accumulation of more information will help the committee determine the policy stance appropriate to ensure a timely return of inflation to the 2 percent goal. Does that mean that the current level of the Fed funds rate [00:08:08] Speaker 2: might already be the right one? Well, we've got to determine the appropriate protocol. What we've done in this monetary medicine is starting to work some, but there's no firm conclusions. If we had a firm conclusion about the conduct of monetary policy, we'd announce it to much fanfare today. What we decided to do was to call these question, take stock of where we are, evaluate what we're seeing out the window, ask ourselves whether the period right in front of us is likely to provide more clarity on the appropriate protocol. My judgment, the judgment of my overwhelming number of colleagues is that it would. [00:09:03] Speaker 1: Okay. Now this last video clip that I'm going to show you is a very important question. So you know how if the Federal Reserve prints a ton of money and they flood the system with money, then we get inflation, right? And I just want to illustrate with a very exaggerated example. So let's just say that the Federal Reserve prints a ton of money, they give you a billion dollars, they give me a billion dollars, they give all Americans a billion dollars. Now in this scenario, do you think that the median price home in the US is going to remain at $400,000? And of course it's not because you've got a billion dollars. I got a billion dollars. If I want to buy a median priced home in the US, I'll pay a million dollars. I'll pay $5 million. I'll pay $50 million because I got a billion dollars like you do too. So in that case, of course, we're going to get inflation price, the prices of just about everything's going to go up. Okay. Now the opposite of that, the opposite of money printing is taking money out of the system. And then if you take money out of the system, there's going to be less money floating out, you know, in the system, out there in the system, right? And then what's going to happen? Prices are going to come down. So the thing is that Fed Chair Warsh was talking a big game about how he's going to take money out of the system to bring down prices, you know, which would come at the expense of creating a recession or perhaps even a depression. And I just want to say that Warsh is just, well, he's not, he's not following through, I guess, you know, technically speaking, that's called a lie. He, I guess he's a liar. Again, that's not an opinion. That is a fact. If you look at the fact that the Federal Reserve continues to print money, which I've already covered the data in a separate video. And the question is, if you remove money out of the system, have you thought about the consequences of that for other countries that have lent money to the U.S. governments? Because those international investors could take heavy losses if they take money out of the system. And then they would essentially stop lending money to the U.S. governments, which would cause interest rates to surge higher. And I want you to take a look at how Warsh responds. [00:11:12] Speaker 7: Hi. My name is Sang Eun Lee from the Korea Economic Daily newspaper. I got a question as a foreign press. You have spoken several times about the possibility of the Fed shrinking its balance sheet further. If that plan moves forward later, how would you avoid the disrupting foreign official holders of treasuries or dollar funding markets abroad, like South Korea and Japan? [00:11:36] Speaker 2: So thank you for your question. First off, I would say I pay probably more attention to the Korean economy than you might think, because when I'm looking at the feedstocks effectively for this new surge in technology, a lot of it's coming from Japan and Korea, some from Singapore. So I'm particularly interested in what's happening in the Korean economy, usually because it's telling me what's on planes and ships coming this way. Secondly, I should say that your new central bank governor is someone I've known for 20 years and is a very talented guy and a good friend. So I'm glad he's in that post. He and I met actually about 20 years ago, amid the global financial crisis, as it would come to be known. And I remember this is a generation of discussions with him about the use of the balance sheet in exigent circumstances like we had then. All right. You know, I'm just going to step in. I'm [00:12:35] Speaker 1: going to cut off Warsh because long story short, he doesn't end up answering the question. Big surprise, right? So my assessment is that you and me, like we are without effective leadership. There is no plan. Like the Federal Reserve, they don't know what they're doing. Like, what can I say? You tell me if, like you disagree with that, but that's just my, that's my assessment. Anyways, please subscribe. I'll keep you updated on whatever happens. Thank you so much and wish you a very nice day. Take care.