Welcome to today’s episode of The Creating Wealth Show where Jason Hartman reminds you that there is an important distinction to make between interest rates, housing affordability and the ability to qualify for a loan based on the usual things, such as credit score and debt-to-income ratio. There's a general overriding concept of credit availability, not directly related to interest rates: this is the willingness of lenders to lend and the ability of borrowers to borrow, measured by the Mortgage Credit Availability Index (MCAI). The credit supply is down, meaning it is now harder to get a mortgage than it used to be.

Jason Hartman welcomes Patrick Ceresna, Founder of Big Picture Trading and host of the MacroVoices Podcast to the show to talk about the current macroeconomic picture we are facing today. Patrick explains why our inflation problems are not going away anytime soon. The only mechanism which the central banks have to slow an economy is the cost of credit, reflected in interest rate policy. However, the problem in this cycle is that when the inflation is not driven by massive demand, but rather supply issues, then the ability for monetary policy to actually have an impact diminishes.

We are in the midst of a bear market on asset prices which may not have fully reflected into the real estate markets yet, but in terms of stock markets, bond markets, even slowly into commodities and other things, there has been a deflationary cycle in assets, while there's huge economic inflation because the central banks have begun a very important process of trying to attack inflation by slowing the economy. The only mechanism which the central banks have to slow an economy is the cost of credit, reflected in interest rate policy.

However, the problem in this cycle, and why you have the debate of inflation, stagflation, or deflation is that when the inflation is not driven by massive demand, but rather supply issues, then the ability for monetary policy to actually have an impact diminishes.

We’ve created all sorts of supply shocks that add further stress points that create additional cost delays and shipping and all sorts of other issues that are not going away. And it's not going to be solved by the Fed increasing another 75 basis points next month. This is a problem where inflation has to be solved by a bigger cycle playing out. And that, unfortunately, is not one that ends in three months. It's a problem that resolves over a couple years. Inflation is an issue that's not going away anytime soon.

Key Takeaways:

0:28 Welcome Empowered Investors from 189 countries world wide

1:07 Mortgage Credit Availability Index (MCAI)

2:21 The Great Recession, the mortgage meltdown and The Big Short

4:22 Credit supply in a credit based economy

5:54 Empowered Investor Pro - EmpoweredInvestor.com

8:08 Wall Street is the modern version of organized crime

9:18 Regulating the food supply

10:42 Messaging apps and insider trading

13:51 Last week, the Euro reached parity with the dollar

17:14 Downward pressure on the inflationary spiral

18:21 Why Dave Ramsey is wrong

20:46 Today’s guest PATRICK CERESNA, Founder of Big Picture Trading

21:34 Patrick’s current macroeconomic picture

23:41 Energy shortage - oil vs green

27:11 CPI inflation numbers could come down, but it’s no merit of the Fed

28:49 The 70s had three waves of inflation

30:38 The global pandemic was a unique event

33:24 What investments do you own in an environment like this?

37:35 Could derivatives crash the global economy?

40:41 There a global system risk, not just American

43:09 We are in a fourth turning and there will be some major financial institution reset eventually

45:20 The destruction of purchasing value is the driver of a monetary driven inflation

46:46 The US dollar rising right now is going to keep inflation in check

49:10 At the end of every bear market is a once a decade opportunity to buy a lot of cheap stuff

50:56 A good investor or trader knows when to leave a party and go to a new one

52:54 Learn more at BigPictureTrading.com and check out Patrick’s podcasts: MacroVoices and Market Huddle

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Jason Hartman invites Joseph Wang aka The Fed Guy, to the show today. Who better to talk about the inner workings of the Federal Reserve than someone who actually worked there! Joseph Wang is a former senior trader on the open markets desk at the Federal Reserve and the author of Central Banking 101.

Jason and Joseph tackle the biggest question on everyone’s mind: will mortgage rates go higher? How much higher can they go? Why did the Fed wait so long to start quantitative tightening and raise rates? Why didn’t they do it more gradually?

Do you think Powell really thought inflation was transitory as he kept saying? It seems there was a political basis for him thinking that way, which filtered into policy and partially resulted in the huge inflation we're seeing right now. But what gives? If you don’t raise rates in order to avoid increased unemployment, then inflation will continue.

Joseph Wang also gives his take on the Fed’s response during times of economic crisis such as the Great Recession and the recent pandemic. Was it right of the Fed to get involved and stimulate the economy, or should they have let the economy and markets work themselves out?

Is the Fed part of a greater conspiracy? Is there a man behind the curtain pulling the strings? Joseph Wang tells all!

FedGuy.com

Key Takeaways:

0:28 Welcome Joseph Wang, former senior trader on the open markets desk at the Federal Reserve, author of Central Banking 101

1:33 Interest rates and mortgage backed securities

4:03 Quantitative easing - buying mortgages and treasuries, quantitative tightening - higher mortgage rates

7:21 Raising the borrowing rate above the inflation rate

9:33 Rents are going higher

11:36 Short term vs long term interest rates

12:55 Decreased labor supply and higher wages

14:33 China is the fastest aging country in the entire world

17:24 The Fed is absolutely political

21:37 Debt to GDP ratio and the dollar collapse

24:22 Why do other countries buy dollars?

27:53 Bloodbath in the cryptocurrency markets

29:53 Understanding the Fed - is there a man behind the curtain?

31:56 Was the Fed right to interfere during Covid and the Great Recession?

34:53 What is a shadow bank?

36:56 The story behind Long Term Capital Management

37:58 Economic outlook: be cautious with financial assets

39:36 Joseph Wang’s book Central Banking 101, learn more at FedGuy.com, follow Joseph on Twitter @FedGuy12

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Peter Zeihan, author and geopolitical strategist, is back on the show with Jason Hartman to discuss inflation, the breakdown of supply chains and global manufacturing, the labor shortage, generational demographics, the Russia Ukraine conflict, and so much more!

“In his timely new book, The End of the World is Just the Beginning: Mapping the Collapse of Globalization, author and geopolitical strategist Peter Zeihan maps out
the next world: a world where countries or regions will have no choice but to make their own goods, grow their own food, secure their own energy, fight their own battles, and do it all with populations that are both shrinking and aging.

The list of countries that make it all work is smaller than you think. Which means everything about our interconnected world - from how we manufacture products, to how we grow food, to how we keep the lights on, to how we shuttle stuff about, to how we pay for it all - is about to change. A world ending. A world beginning. Zeihan brings readers along for an illuminating (and a bit terrifying) ride packed with foresight, wit, and his trademark irreverence.”

At the moment, the labor disconnect is the single largest issue behind our inflation numbers and the worker shortage will increase every year until 2030. The advanced worker cadre of baby boomers is moving into retirement and the need for government spending to keep these people alive will skyrocket.

The very core of globalization is that anyone can go anywhere to get anything. This will change as China is no longer a reliable manufacturing partner and many companies are on their way out. Also, when we talk about the breakdown of supply chains, we're entering into a world where raw commodity access is no longer guaranteed, so we can look forward to large portions of the world losing access to the inputs that are necessary to attempt a modern lifestyle. Take silicon for semiconductors for example; 95% of it comes from one mine in North Carolina. So it's one thing to control global food or global energy - it's another thing when you can control the only input that allows digitization to even theoretically happen.

The sourcing of raw materials is critical. Now that the world's top wheat exporter has invaded the world's number four wheat exporter, what short and long term consequences can we expect? Not to mention that Russia is also the world's largest exporter of fertilizer and the components necessary so people can make it. We're in the early stages of a multi year shortage in all things agricultural.

Key Takeaways:

0:00 Welcome Peter Zeihan, he just released his new book The End of the World is Just the Beginning: Mapping the Collapse of Globalization

1:54 Globalization is unique to this period in history

3:19 Mass explosion of economic activity around the world

4:43 Aging demographics around the world

6:00 China crammed 200 years of economic advancement into 40 years

10:03 Historically, capital and demographics have not been intertwined

12:22  The link between inflation capital availability and demographics - Boomers are retiring in large numbers

13:25 We have a 400,000 workers shortage and that will increase every year until 2030

15:14 The labor disconnect is the single largest issue behind our inflation numbers

18:00 Labor market over the next 20 years

19:22 Can China take over the world?

22:43 China’s severe lockdown measures

24:45 China in Africa

27:01 Will automation destroy jobs?

29:49 The future of manufacturing

31:53 Was the Bretton Woods Agreement a good system?

34:47 Peter Zeihan on industrial commodities

37:46 What’s next for the economy?

40:42 Building material shortage

42:49 Learn more at Zeihan.com. Follow Peter on Twitter @PeterZeihan and check out his new book - The End of the World is Just the Beginning: Mapping the Collapse of Globalization

PETER ZEIHAN is an expert in geopolitics: the study of how place impacts financial, economic, cultural, political and military developments. He presents customized executive briefings to a wide array of audiences which include, but are not limited to, financial professionals, Fortune 500 firms, energy investors, and a mix of industrial, power, agricultural and consulting associations and corporations. Mr. Zeihan has been featured in, and cited by, numerous newspapers and broadcasts including The Wall Street Journal, Forbes, AP, Bloomberg, CNN, ABC, The New York Times, Fox News and MarketWatch.

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Is the World Economic Forum in Davos a serious discussion about climate change and injustice, or just a chance for billionaires to get together and do business? Find out as Jason Hartman interviews Peter S. Goodman, Global Economic Correspondent for The New York Times, as they discuss his new book, Davos Man: How the Billionaires Devoured the World.

The World Economic Forum institution was started by German economist Klaus Schwab back in the 70s, on the proposition that if you got businesses and governments together, you could solve a lot of problems. Schwab claims to be interested in public private partnerships and win-win solutions. But somewhere along the way, the WEF has become, under the guise of a nonprofit foundation, a highly lucrative enterprise. Schwab brings in heads of state from around the world to meet with billionaires, public intellectuals, a whole lot of journalists, the odd Hollywood celebrity, musicians etc. But according to Goodman, it’s a charade; they are there to do business.

The WEF 2022 recently took place last May. Peter profiles the “Davos Man” as someone who makes himself the solution where he is the problem: just allow us to do our deals, and have our conversations about how to solve the big problems of the day and we will take care of that and all of the benefits will just magically trickle down throughout society. Let’s not kid ourselves. That is something that has in reality happened zero times…

Watch the video HERE.

Key Takeaways:

0:00 Welcome Peter S. Goodman, Global Economic Correspondent for The New York Times, author of Davos Man: How the Billionaires Devoured the World

1:02 World Economic Forum conference in Davos - is this a shadow government?

3:01 Rent-seeking behavior in Davos

3:56 The WEF was started by German economist Klaus Schwab back in the 70s

5:04 A chance for the billionaire class to virtue signal

7:08 Who is the “Davos Man?”

9:27 Marc Benioff, philanthropy, Trump tax cuts and capitalism

11:50 Big companies avoid taxes by using foreign subsidiaries

16:56 Christian Smalls, Amazon warehouse worker

19:38 “Davos Man” makes himself the solution where he is the problem

23:57 Bankers get bailed out, but homeowners don’t

24:52 Healthcare system and surprise billing

29:03 Generating profit opportunities for themselves at social expense

35:08 Is Trump the “Anti-Davos Man?”

37:56 China is a complex challenge for the global trading system

43:06 China's WTO session was driven by the interests of American shareholders

44:38 Our democratic society is under threat from this inequality

45:57 We need three things: progressive taxation, antitrust enforcement and collective bargaining

46:50 Get more info at PeterSGoodman.com. Follow Peter on Twitter @petersgoodman

About Peter S. Goodman

Peter S. Goodman is the global economic correspondent for The New York Times, based in New York. He appears regularly on The Daily podcast, as well as major broadcast outlets like CNN, the BBC, Sky News, MSNBC, and Monocle Radio.
​
He was previously Executive Global News and Business Editor of the Huffington Post, where he oversaw award-winning investigative, international, business, and technology reporting.

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