Will Markets Keep Crashing!? Jackson Hole & Implications!!

Ever since the federal reserve announced Its crusade against inflation last November the crypto market has been Crashing hard with almost every speech From a fred official causing another dip The recent speech by fed chairman jerome Powell at jackson hole was no different In this regard and it has left many Wondering what the fed’s future words And actions could do to the crypto Market today i’m going to give you a Detailed analysis of what jerome said at Jackson hole tell you when the fed could Cause a recovery rally and explain why This recovery rally might not be coming Anytime soon If you’ve never heard of jackson hole Before here’s what you need to know The jackson hole symposium is an annual Conference of central bankers hosted by The kansas city federal reserve bank one Of the 12 federal reserve banks which Make up the federal reserve system the Usa’s central bank The jackson hole symposium is held in The town of jackson hole in the u.s State of wyoming and it was established In 1982 when then-fed chairman paul Volcker agreed to attend the conference But only because jackson hole has some Of the best fly fishing going which was Paul’s passion no i’m not joking now This is more significant than you think Because paul volcker is famous for

Raising interest rates to a whopping 18 To fight inflation in the united states In the early 1980s It should come as no surprise then that The theme for the first conference was Quote monetary policy issues in the 1980s Now this year’s theme was quote Reassessing constraints on the economy And policy and before i break down what Current fed chairman jerome powell said In his speech i want to give you a quick Recap of what jerome said in last year’s Speech so you can understand just how Different this year’s speech was The theme for last year’s jackson hole Symposium was quote macroeconomic policy In an uneven economy and in his opening Remarks jerome famously said that Inflation was transitory i.e temporary As it was due to short-term supply-side Pressures that the fed believed would be Quickly resolved For context inflation in the united States was at around 5 At the time and while this was already Well above the fed’s mandate of keeping Inflation around 2 Jerome argued that raising interest Rates too early would do unnecessary Damage to the economy if it turned out That inflation was indeed transitory as He claimed Now if you’ve watched any of our videos

About jerome’s testimonies you’ll know That he changed his tune on inflation Shortly after he was nominated by President joe biden to serve as fed Chairman for another term last november By then inflation was running even Hotter at around seven percent Today official inflation statistics in The united states are quickly Approaching the double digits with Unofficial statistics being much higher This has led to the consensus that the Fed is quote way behind the curve on Fighting inflation meaning it should Have started raising interest rates much Sooner Luckily for the fed official employment Statistics suggest the labor market is Still strong Given that the fed also targets a four Percent unemployment rate as part of its Dual mandate this has given jerome code The wiggle room they need to fight Inflation by raising interest rates with Record aggressiveness for reference Raising interest rates typically causes Inflation to fall and unemployment to Rise whereas lowering interest rates Typically causes inflation to rise and Unemployment to fall The fed’s job is to ensure stable prices Aka two percent inflation and full Employment aka four percent unemployment By changing interest rates on that note

If you want to know why the official Inflation statistics aren’t telling the Full story you can check out our video About how the cpi is calculated using The link in the description This brings me to jerome’s opening Speech at this year’s jackson hole Symposium which was surprisingly short And to the point Jerome began by specifying that quote I’ve spoken a lot at past jackson hole Conferences but this time my remarks Will be shorter and more direct Jerome went on to underscore the fact That the fed is committed to bringing Inflation back down to its two percent Target and though this will likely do Some damage to the labor market in the Short term without price stability the Labor market will be in an even worse Position in the long term Jerome then doubled down on his hawkish Rhetoric by saying the fed will quote Act forcefully to bring supply and Demand back into balance And warning that quote reducing Inflation will require a long period of Below trend growth In other words the fed is prepared to Cause a deep recession Jerome reiterated that a failure to Bring inflation under control will Result in much greater pain in the long Term and while the lower cpi and pce

Prints for july were promising the fed Needs to see more evidence that Inflation is slowing down before it Starts to contemplate pausing rate hikes Jerome also reminded everyone that the Fed is prepared to do another unusually Large rate hike when it returns from its Summer break at the end of september Something that many investors had no Longer been pricing in due to the lower Cpi print for july which was taken as a Sign that inflation was slowing Jerome admitted that the size of the Rate hike ultimately depends on the data The fed gets between now and then and That the fed is drawing on three Important lessons from the history of Its monetary policy to make its current Decisions The first lesson is that central banks Must take on the responsibility of Lowering inflation and while saying this Jerome acknowledged that inflation is a Global phenomenon acknowledged that most Of the inflation is coming from the Supply side and acknowledged that the Fed can only affect the demand side As far as jerome is concerned however None of this matters because the fed Must raise interest rates to fight Inflation with the tools it has come Hell or high water Jerome didn’t actually say it this way But i bet you’d believe me if i said he

Did Jokes aside the second lesson from History the fed is focusing on is that Inflation expectations set the path of Inflation This was the case in the 1970s and 1980s When higher inflation became quote Entrenched in the economy because Individuals and institutions expected High inflation to continue Jerome then quoted paul volcker who said That inflation quote feeds in part on Itself And that the fed must therefore break This feedback loop of inflation Expectations by raising interest rates So aggressively that long-term inflation Expectations come quickly back to the Fed’s 2 target Jerome went on to explain that quote Inflation must be small enough not to Attract everyone’s attention and right Now inflation is attracting everyone’s Attention Now the third lesson from history jerome Said the fed is factoring in is that Quote we must keep at it until the job Is done and that quote we will keep at It until the job is done the job being Bringing demand back in line with supply By raising interest rates And with that jerome calmly hobbled off Stage Meanwhile the stock market crashed by a

Staggering 1.2 trillion dollars and the Crypto market crashed by about another 100 billion creating a sea of red across All price charts If you’re wondering why it’s simply Because higher interest rates increase The cost of companies servicing their Debts This means that their earnings will come Under pressure which should of course Impact their share price it’s all Forward-looking Now there is a silver lining to jerome’s Speech and it’s easy to spot if you pay Extra close attention Let’s start with an easy silver streak And that’s that the fed wants to see More signs that inflation is slowing Down before it stops raising interest Rates as i mentioned earlier the cpi and Pce prints for july Came in lower than the cpi and pce Prints for june This is again important because it’s a Sign that inflation is slowing down Which is why the markets rallied when Those figures came out the assumption Was that the fed is seeing the same Slowing trend Clearly that assumption was incorrect And it begs the question of just how Much more data the fed needs to see Before it’s convinced that inflation is Coming back down to its two percent

Target Unfortunately this is anyone’s guess Because jerome didn’t really specify how Much more data he and his colleagues Need to see Even so consider that the cpi figure for August will be coming out on the 13th of September If the cpi for august comes in even Lower than it did for july this could be Another nugget of data that would nudge The fed into being less aggressive with Its next rate hike towards the end of September specifically the 21st Now what sucks is that the pce figure For august will be coming out on the 30th of september well after the fed has Made its next interest rate decision For those who don’t know the pce is the Fed’s preferred inflation figure but What’s strange is that pce prints don’t Affect the markets nearly as much as cpi Prints This ties into the second silver streak In jerome’s speech and that’s that the Fed will stop raising interest rates Once inflation expectations come back Down to the two percent target the fed Is shooting for As you can see consumer inflation Expectations are still extremely high at 6.2 percent just off the record high of 6.8 percent funnily enough the consumer Inflation expectation statistics for

August will be released on the 12th of September the day before the cpi print Comes out Logically if the consumer inflation Expectation statistics for august come In lower than they did for july this Could be another nugget of data to nudge The fed and recall that fighting Inflation isn’t the fed’s only mandate Although jerome was explicit about the Fed’s willingness to do damage to Employment to bring inflation back down There’s obviously a limit to how much Destruction the fed is willing to Inflict Where this limit lies is once again Anyone’s guess but history suggests that The fed began lowering interest rates Around the time that unemployment rose To roughly 10 percent i reckon it’s Reasonable to assume that an Unemployment rate of eight percent is The point of max payne as it’s double The fed’s mandate As i mentioned in this week’s crypto Review the sudden weakness we’re Starting to see in the housing market is A sign that unemployment could start to Rise in a few months and analysis by Former portfolio manager alfonso Pecatiello suggests that unemployment Should hit six percent sometime early Next year Now assuming inflation is in a strong

Downtrend by that time the rapid rise in Unemployment could be enough to force The fed to pivot Note that we’re likely to see the bottom Of the crypto market between now and Then so be sure to set aside some dry Powder to accumulate your favorite Crypto projects Now i’d be remiss if i didn’t mention a Few factors that could force the fed to Continue raising interest rates and the First is fiscal policy a.k.a reckless Spending by the us government which Continues despite all the surging Inflation it claims to want to kill For example there’s the 900 billion Defense bill that was passed in july Which included a substantial increase in The minimum wage for all federal workers And contractors Now don’t get me wrong i’m happy that People are making more money but this Move will undoubtedly increase inflation Next we have the ironically titled Inflation reduction act which passed in August and will see another 737 billion dollars injected into the U.s economy better yet the bill includes A 370 billion dollar investment into Renewable energy at a time when the World is gasping for oil and gas Again there’s a time and a place More recently the current u.s Administration announced a controversial

Student loan forgiveness program which Is estimated to cost 500 billion dollars Dollars that will come from Well Somewhere In practical terms millions of americans Could see their student loans reduced by Up to 20k as many people have pointed Out this program effectively amounts to Another round of stimulus as it’s more Than likely that those who qualify for The program will eventually spend even More money knowing that they have less Debts that they must pay back Immediately and in the future Note that this is just the demand side Of the inflation equation There’s no shortage of potential issues On the supply side of the equation and Most of these have to do with energy While these energy issues appear to be Limited to europe for the most part they Could quickly spill over to the united States According to expert macro analyst luke Groman europe will have to make a very Difficult choice come winter and that’s To either cave to russia’s demands to Ensure they have enough energy or to Convince the united states to send more Of its oil and gas overseas to prevent An energy crisis Now i am no geopolitical expert but i Reckon europe will do everything in its

Power to not cave to russia’s demands Which means that it will have to source Its energy from elsewhere this will Inevitably lead to more inflation in Places where that energy is coming from In this case the united states This relates to the final factor at play For the fed and that’s the upcoming Midterm elections in the united states Which will happen in early november Some investors are expecting the fed to Pause its rate hikes prior to the Midterms so that the markets aren’t Crashing when voters head to the polls However other investors are expecting The fed will hike rates even more Aggressively prior to the midterms Because inflation is basically the Number one issue for american voters and This continues to be the case despite All the other issues the mainstream Media is trying to bring attention to Speaking of which if you’re wondering How you can keep up with inflation or Even conquer it you can check out our Video about that using the link in the Description Now to wrap things up i want to touch on Something else the fed is up to that’s Been overlooked and that’s quantitative Tightening Without getting too technical Quantitative tightening or qt is when The feds start selling the assets it

Holds on its balance sheet The fed’s balance sheet ballooned to a Total size of nine trillion dollars at The start of the pandemic and this Balance has been trickling down since June as the fed has been slowly selling Off its assets which are primarily us Treasuries aka government debt and Mortgage-backed securities aka housing Debt Starting this month the fed will be Accelerating its selling activities and This could have a profound impact on Interest rates That’s because the interest rates on u.s Treasuries and mortgage-backed Securities are essentially determined by Price with a lower price resulting in Higher interest rates With the fed selling off billions of Dollars of these assets while the Economy continues to slow down it’s Unclear whether there will be enough Buyers to absorb the shock meaning Prices will drop This means that interest rates could Rise faster than investors can handle And cause markets to crash even more Now this is exactly what happened when The fed started reducing its balance Sheet in 2018. It took about six months of selling for The stock market to begin to buckle and By december 2018 the s p 500 had fallen

By about 20 percent Given that cryptocurrency is highly Correlated to the stock market with more Volatility this could translate to a 40 Drop for the largest coins and tokens With 60 or even 80 drops for most medium And small cap altcoins with the absolute Bottom being sometime early next year If history is any indication bitcoin’s Btc will experience the lowest losses in Percentage terms as altcoin holders Rotate whatever profits they have left Into this de facto digital gold even Then the losses could still be more than Most crypto holders can stomach To be blunt there won’t really be a safe Haven in crypto when the crash comes Around besides stable coins which may Not be the best place to park your dry Powder since u.s politicians are working On stable coin regulations that could Come as soon as this autumn Not only that but there are growing Concerns that validators on ethereum’s Beacon chain could be forced to apply Regulations at the protocol level after It transitions to proof of stake later This month since many of them are based In the united states and ethereum is Where most stable coins are circulating You can learn more about the concerns Around the merge and whether or not These concerns are justified by checking Out our recent video about ethereum

Using the link in the description In sum it’s going to be a rough few Months for the crypto market but i’ll Repeat that you should consider this Period as an opportunity to accumulate The cryptos you think will moon when the Bull market comes back around If you do your research it should be Easy to find a few future 100 x’s i Believe in you guys go forth and conquer That’s all for today’s video about Jerome pals jackson hole speech if you Found it informative smash that like Button if you want to make sure you Don’t miss the next one subscribe to the Channel and ping that notification bell Also consider checking out coin bureau Clips for weekly live streams and tune In to the coin bureau podcast to fall Down crypto rabbit holes with myself and Mad mike You can also follow me on twitter tik Tok and instagram to get my thoughts About the crypto market and join my Telegram channel for quality crypto info You won’t find anywhere else If you want to know what cryptos i hold As part of my portfolio how i’m Adjusting it week to week and why you Can find out by subscribing to my weekly Newsletter where i also give you my Exclusive take on what comes next for The crypto market If you want to support the channel head

On over to the coin bureau merch store And get yourself a hoodie sweater or tea That reflects your crypto personality You can find your way to these resources And more using the links in the Description as always thank you so much For watching and i’ll see you next time Remember to stay cool and stay crypto That Is an order [Music]