The Fed Said WHAT!? Latest Minutes Show What’s Coming!!

Markets have been crashing ever since The Federal Reserve started talking About raising interest rates back in November 2021 and the rate hikes we've Seen since March 2022 have continued to Take markets lower Last week the FED published the minutes That is summary of its December meeting Giving investors an insight into what The FED will do at its next meeting at The beginning of February so today I'm Going to summarize the minutes of the Fed's most recent meeting explain what They're about and tell you exactly what It could all mean for the crypto Market Let's start with a quick recap of the Current situation central banks have Been aggressively raising interest rates To fight inflation all eyes have been on The FED given that the US dollar is the World's Reserve currency Although inflation in the U.S has Started coming down the FED has not Backed off this is simply because the FED is worried that stopping its rate Hikes or lowering interest rates too Soon will result in a second wave of Inflation Fed chairman Jerome Powell has been Explicit in his intention to be like Paul volcker the former fed chairman who Killed inflation in the 1980s by Cranking up interest rates Meanwhile the markets have been eagerly

Anticipating when the FED will pause I.E Stop raising interest rates now to Clarify a pause is not a pivot which is When interest rates come down However investors know that a pause Means that a pivot won't be far away Despite what the FED might say This is why the markets have rallied Every single time the FED has said Anything that would hint that a pause is Coming the markets have also been Rallying when inflation readings have Come in lower than expected And the markets even rally when Employment reports suggest that Unemployment is on the rise This is because the FED has been citing Strong employment statistics as the Reason why it continues to raise Interest rates Now if you watched our video about Jerome's press conference from last December you'll know that the U.S Economy is short millions of wage slaves Due primarily to pandemic induced Retirements this supposed labor shortage Has caused wages to rise at a rate that Is higher than the fed's two percent Inflation Target While the FED also has a mandate to Ensure that unemployment remains at Around four percent Jerome has Repeatedly stated that bringing down Inflation is the only way to truly do

This in other words the only way to Bring down inflation is to increase Unemployment for more Americans to lose Their jobs so that wage growth slows In Practical terms this means creating a Recession which the markets are well not So eagerly anticipating So far a recession has yet to Materialize or so they say As such the FED has continued to raise Interest rates and is currently expected To raise them by another 0.25 or 25 Basis points at its next meeting which Is again scheduled for the 1st of February this will bring the fed's Short-term interest rate up to between 4.5 and 4.75 now this figure is Significant because most fed officials Have agreed on a terminal rate of 5 or More for anyone wondering the terminal Rate is how high interest rates will go During the current tightening cycle as This five percent Target approaches Markets will be extremely volatile as Expectations run rampant And this brings me to the minutes of the Fed's December meeting for context the FED decides how much it will raise Interest rates by every six weeks this Is announced immediately in a press Conference by the FED chairman but the Minutes which detail the fed's reasoning Aren't released until Weeks Later the FED schedule will be in the description

If you're interested I strongly suggest Bookmarking it now the fed's December Minutes begin with a breakdown of what's Been going on in the markets I couldn't Help but notice a section which reads Quote in other Market developments the Manager Pro tem noted the failure of a Prominent crypto asset Exchange Fed officials added that quote while the Spillovers from this situation had been Significant among other crypto lenders And exchanges the collapse was not seen As posing broader Market risks to the Financial system This makes me wonder what else they said About crypto after all the bank for International settlements or bis also Recently released standards for central Banks to hold cryptocurrencies on their Balance sheets starting in 2025. this is Big news considering that the bis is the Self-described bank for central banks More about that in the description Now fed officials also discuss something That's frequently overlooked and that's The fed's reverse repo facility The fed's reverse repo facility is Outside the scope of this video but the Tldr is that it's a place where Institutional investors can park their Assets to earn interest on said assets To my understanding the reverse repo Interest rate has been higher than any Other so-called safe interest rates

Offered by say U.S government debt This has resulted in record amounts of Capital being parked in the fed's Reverse repo Facility by institutions a Figure which recently eclipsed 2.5 Trillion USD Logically more money in the fed's Reverse repo facility means there's less Money in the markets fed officials seem To imply that the recent rally we've Seen in the markets is in part due to Money moving out of the reverse repo Facility but apparently they don't Believe this trend will continue Next the second section of the minutes Analyzes the current economic situation Fed officials identified a decline in Inflation and a rising unemployment rate As two welcome developments however they Noted that labor force participation has Fallen slightly contributing to the Already tight labor market As a result of this average hourly Earnings for workers in the United States increased by over five percent Over the last year recall that this is More than double the fed's two percent Inflation Target so long as this figure Remains elevated the FED will probably Not pause or pivot because higher wages Mean higher prices Interestingly fed officials also touched On the economic situation in other Countries and regions notably Europe and

China they pointed out the declining Economic activity in Europe and China's Gradual reopening This is interesting because it suggests The FED might be concerned about the Latter's effect on other economies The third section of the minutes takes a Closer look at Financial conditions fed Officials highlighted the ongoing crash In the housing market as well as rising Interest rates on more volatile types of Debt such as credit card debt and auto Loans note that credit card debt Recently hit a record high totally fine Not surprisingly this has been affecting The lowest income earners the hardest Something that the FED officials Acknowledge a little later they also Acknowledge that many people are Starting to default on these debts and It looks like auto loans are leading the Charge they note that this trend will Likely continue In the fourth section of the minutes fed Officials revealed their economic Outlook they project that labor force Participation will continue to decline Many analysts believe this phenomenon is Why this recession will be different People may not lose their jobs on mass Because there's no one else to hire As far as fed officials are concerned However all this means is that they will Need to keep interest rates higher for

Longer to crush inflation this is why They simultaneously project a more Gradual increase in the unemployment Rate which could last until as late as 2025. That would be a long recession Now the Silver Lining is that the FED Also projects that housing costs will Finally start to come down later this Year and they're confident that Inflation of all kinds will come down by 2025. this of course assumes that Nothing in the financial system will Break but it appears they didn't dwell On this possibility instead they focused On the fact that inflation is more Likely to rise than fall in the short Term and how the fed's response is Likely to result in a recession in the U.S later this year this has been the Consensus view for months now the only Question is how deep this recession will Be and how long it will last In the fifth section of the minutes fed Officials return to the topic of current Economic conditions fed officials seem To imply that the reason why they Believe inflation is more likely to Increase than decrease is not because of The tight labor market but because of The pandemic and the Ukraine war in case You missed the memo we're still Technically in a pandemic and remaining Restrictions continue to choke Supply

Chains the war in Ukraine has Contributed to this supply chain crisis And has also disrupted if not broken Important energy and commodity Relationships between Russia and the West if you watched our video about all The upcoming bullish catalysts for the Crypto Market you'll know that an Official end to the pandemic and a Resolution to the war in Ukraine are two Such catalysts It's too soon to say when these issues Will be resolved but the moment they are The FED could start to ease until that Happens though we will continue to get Squeezed by a combination of high Inflation and Rising interest rates Case in point fed officials finally Admitted that the supposedly higher Savings rates they've been ranting about Only apply to the upper class everyone Else is getting crushed that said There's a case to be made for the fed's Approach higher inflation would do more Damage to the economy in the long run How much harder the economy has to be Hit ultimately depends on whether the FED starts to see convincing signs that Inflation is coming back to its two Percent Target investors have been under The impression that what the FED is Looking for is a continued decline in Headline inflation but the minutes Suggests this isn't enough even though

The FED is happy about this decline it's Not what they're looking for they need To see wage growth down and unemployment Up The FED is also obsessed with inflation Expectations that's because if people Think that inflation will continue then They will act in ways which ensure that It does a self-fulfilling prophecy if You will it's actually expectations Which turn High inflation into Hyperinflation the more you know Now fed officials went on to Pat Themselves on the back for moving so Swiftly to address inflation this is a Bit Rich considering that jeromenko had Originally insisted that inflation was Transitory in any case they underscored The fact that the FED will be slowing Its pace of rate hikes going forward This is because the FED knows that it Takes time for its monetary policies to Affect the actual economy the lag is Anywhere between a few months and more Than a year Jerome initially argued that There wasn't much of a lag due to the Financialization of the economy but has Since been quiet on that front that's Probably because the FED is starting to Become concerned that something in the Economy could break if you're wondering What that means well the short answer is That either a big bank or Corporation Will go bankrupt or the markets for

Government debt will become illiquid Causing all sorts of issues and if you Want to know what that looks like look No further than the UK where the Government's guilt Market went haywire After Poor fiscal policy Decisions by Short-lived former prime minister Liz Truss you can find out more about what Happened there using the link in the Description moving on Now another thing the FED minutes reveal Is that the central bank is dead set on Keeping interest rates at five percent Or higher until the end of the year Notwithstanding a breakage of the sort I Just described what's annoying is that Fed officials don't give any details Regarding exactly how much they will Raise rates going forward And then came the middle finger quote Participants noted that because monetary Policy worked importantly through Financial markets and unwarranted easing In financial conditions especially if Driven by a misperception by the public Of the committee's reaction function Would complicate the committee's effort To restore price stability translation If markets continue to Rally the way They have been over the last couple of Weeks then the FED will be forced to Keep raising interest rates or at least Keep rates much higher for much longer This is the clearest sign the FED has

Sent to the financial markets so far That they want everything to crash fed Officials also reiterated that they want To see inflation fall below the fed's Interest rate target before they think Of pivoting in the past Jerome specified That interest rates across the entire Yield curve must be higher than Inflation meaning not just short-term Interest rates but long term too to put Things into perspective the lowest Interest rate on the yield curve is Currently around 3.5 percent this means That inflation will have to fall below 3.5 percent for the FED to pump the Brakes note that this lower range could Change as the FED continues to raise Rates let's hope it rises rather than Falls Now the sixth and final section of the Minutes essentially give a summary of The fed's current stance by now you'll Note that this stance can be summarized As inflation being too high labor market Being too tight pandemic in Ukraine war Causing inflationary pressure and a Recession is coming soon Fed officials also noted that the FED Will continue to sell assets from its Balance sheet this is yet another Important fed Factor that's been Overlooked that's a problem because the FED selling of government debt and Mortgage Debt is likely causing interest

Rates to rise on the longer end of the Yield curve speaking of which the final Section of the minutes also mentions the Reverse repo facility I mentioned Earlier it notes that the interest rate Offered on assets in the reverse repo Facility should be set at a minimum of 4.5 percent effectively offering a Completely risk-free interest rate to Institutions this begs the question of Whether the FED will continue to raise The interest rate offered by the reverse Repo facility given that it seems to Suck money from financial markets and Causes them to crash I suppose we'll Find out when the FED releases its next Meeting minutes sometime in late February and I'll quickly note that this Reverse repo thing is not something that Was noticed by me it was noticed by a Crypto and macro analyst named Felix Jova who seems to have the right idea When it comes to the effects of Liquidity on cryptocurrency I'll leave a Link to an interview with him in the Description And now for the big question what does This all mean for the crypto Market well It all depends on how quickly the FED Will hit its five percent Target and how Long it will take until inflation Falls Below interest rates across the yield Curve As entertaining as other potential

Factors are it's clear that the FED is On a mission when it comes to how Quickly the FED will hit its five Percent Target it looks like this will Happen in mid-march this assumes that The FED will hike by 25 basis points at The beginning of February and by another 25 basis points in March funnily enough This would be consistent with historical Tightening Cycles which last about one Year now I want to say that the crypto Market will rally when the FED pauses But I don't think that will happen Besides the fact that the FED is now Explicitly telling investors to calm Down there's no shortage of macro and Crypto factors that could take the Crypto Market lower more about those in The description Now it's the second part of this Equation where crypto could shine if Inflation Falls faster than the FED is Expecting and the labor market cools off Enough then the FED may not have to hold Interest rates high for very long at all The subsequent pivot to support the Economy could cause a crypto rally then Again fed pivots have historically Corresponded to Market bottoms this is Because the FED only tends to Pivot when Something in the financial system is Breaking or when the economy is in Really bad shape This pivot Paradox is important to

Remember but I suppose history doesn't Always repeat in the case of the crypto Market it's been a lot less correlated To the stock market recently I suspect This is because institutions have mostly Cashed out of their crypto positions This means it's mostly retail investors Involved and I reckon that most of them Don't care too much about what the FED Does the thing is that your Run-of-the-mill retail investor is Probably being squeezed by Rising Interest rates and high inflation more Than most people as credit card bills And auto loan payments continue to climb Alongside the cost of living we could See lots of forced selling in the coming Months the Silver Lining to this Situation is that the crypto Market has A cycle just like all other asset Classes we seem to be entering the worst Stage of the crypto cycle where the Market bottoms and people stop paying Attention make no mistake this is the Time when winners are made not Financial Advice [Music]


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