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the thumbs up when you come into the live stream by hitting that Thumbs Up Button we're going to get more people to join in on the live stream and it's always more fun to have more interesting questions down in the comment section so today's live stream is going to be talking about the FED funds rates and cutting rates and cutting interest rates what that means like I had somebody ask me this the other day they're like well what does this really mean and a lot of times I forget that people don't really study the economy like I do like I'm constantly doing research reading articles looking at you know fed documents speeches it's like a pretty constant thing that I'm doing and so when it comes to thinking about the interest rates cutting interest rates what kind of impact that has on the economy to me it's just kind of a regular thing that's happening I don't really think about what kind of impact I just already thinking of it impacting the economy so when somebody says well what does it mean when they cut rates and I'm thinking wow okay sure I have to step it back like I have to step it back and really explain things in a way that people have no clue about right in in order to and I'm not trying to say that the people I'm talking to out there are completely ignorant or something like that they're not it's just that this stuff isn't really talked about or described in a way that the average person is going to not only understand it but retain it so even if you're listening to the news a lot of times they speak in a way that just you know it blasty information right past you I know this is the way that I used to you know look at the news is like I'd be watching it and it'd be like I understand the words the definition of the words that they are using but I just don't seem to comprehend what it is that they are trying to talk about and so the more I started studying this stuff the more I realized okay yes they do kind of speak in a code it's not code it's just kind of this really unique way of using this lexicon in order to describe what it is that the that they're trying to convey when they speak it's it's not code but it is difficult to understand if you're not really you know privy to what it is that they're trying to communicate in the first place so understanding what it means when the FED Cuts rates or what does cutting rates really mean that is a very difficult question to answer inside of just a few seconds like you know even just trying to describe it over the course of a minute would be also kind of difficult to understand you know what it is that's taking place out there so I'm going to try to explain what it is that's taken place when the Federal Reserve goes to cut rates or when they just do interest rate adjustments in general and what that really means for the economy because things have evolved and changed over the last 10 years even 20 years or so but over the last 10 years especially when it comes to how it is that the Federal Reserve is conducting their monetary policy which is that adjustment of Interest rates so when we think okay so when they're cutting rates what does that mean right so like an individual who isn't really quite aware of the whole banking system central banks how the government interacts with it all that other stuff is going to listen to that and say okay they're going to cut rates meaning mortgage rates credit card rates you know all the rates all the interest rates that are that are out there they're going to cut these things but that's not true like that's not what they're they're adjusting they're not adjusting the credit card rate or the mortgage rates or anything like that now there is ways that they can adjust their balance sheet that would then manipulate the mortgage rates that are out there but when it comes to interest rate adjustments or the FED fed funds rates the monetary policy adjustments it's really a key overnight lending rate that they're trying to deal with and this is really important to understand so we're going to step it back to the way they conduct themselves now to the way that they used to conduct themselves because it's easy to understand how it is that they have evolved into the position that they are in today so the way that the Federal Reserve used to conduct themselves and it depends on how far back you really go with the story but we're just going to kind of go back prior to the great financial crisis and prior to the great financial crisis the way the Federal Reserve would typically conduct themselves is with an overnight lending rate amongst the big Banks so you have the big Banks the JP Morgans Goldman Sachs all these people out there they would have an overnight lending rate amongst them to meet a reserve requirement so the way the central banking system the Federal Reserve System was set up is that these big Banks had a reserve requirement in which at the end of the day they would have to have a certain amount of reserves on their on their balance sheet in order to operate for the next day now at the end of the day some of the banks would be in excess reserves and some of them would be in need of reserves now what would end up happening is the ones who were in need of reserves would borrow them from the ones who had exess reserves and this overnight lending rate that was the effective fund rate so this is the rate that they're trying to manipulate here right this overnight lending rate now the way that they would manipulate that rate is by buying and selling treasuries off these big Banks adjusting the reserves levels within them so if they have an excess amount of reserves the interest rates would start to come down as the overnight lending rate would also come down due to the fact that everybody had available reserves to lend to those who are in need of reserves but if they wanted the interest rates to rise then they would do the exact opposite and they would pull a bunch of reserves off these Banks which would then limit the amount of reserves that were out there the demand for those reserves would then increase which would then have the interest rates elevated and so this is how the Federal Reserve would adjust interest rates back in the day is with the overnight lending rate amongst these big Banks so hopefully you guys can understand that part so far again like most of the people who who follow me on this channel know this information inside it out but again there's a lot of people who are trying to figure this stuff out for the first time and it's important to understand how this works now do realize this isn't the way that they do it now right but this is the way that they had conducted themselves for a very long time so now it came to a point where they went into the great financial crisis so I'm going to kind of simplify a lot of this stuff too I'm going to skip over a lot of things but just to kind of understand how it is that they are adjusting interest rates they came to a point in which that they took those interest rates down to zero now this was a very difficult position for the Federal Reserve to be in because now it doesn't give them any ability to adjust rates if they are at zero so now they would like to adjust interest rates in order to deal with the economy especially when it came to unemployment right because really part of the federal reserve's dual mandate they have two positions low and stable prices or I'm sorry low inflation with stable prices I got to say that right it's not low low prices it's low with stable prices and full employment so now when the Federal Reserve would see that the unemployment would begin to rise they would try to manipulate rates down through the overnight lending rate of these big banks by bringing the rates down corporations companies businesses out there would then borrow money to expand on their companies and part of that borrowing the money and expanding on their companies was hiring people so they could get the unemployment to come down by lowering the interest rates and sparkings business investment so this was important to to kind of understand because this is the way that the FED would operate and this is why so many people would get upset with the Federal Reserve as well because an exact opposite of that if the Federal Reserve saw that inflation was running too hot what they would try to do is raise the interest rates to slow down on business investment which would put a cap on hiring or even bring unemployment up which would then slow the buying that was taking place the consuming that was happening from all the unemployment and then this would start bring the inflationary pressures down of course they don't want to say it like that because you know they came out and told people hey we're going to try and increase or decrease the availability of jobs out there in order to deal with the inflationary scenario people would lose their mind so they tell they talk about it in a way of consuming right it's just like put a put put a pressure on consuming and say that you know borrowing money to go out there and buy houses cars and go on vacation and stuff like that is the is the trigger for the economy when they are lowering interest rates like this is what they're attempting to do and I've said that myself and actually that's somewhat disingenuous right that's not really what they are attempting to do at least back then it wasn't I should clarify that not at that time because at that time they what they would be looking for is not necessarily people to consume from the debt but to consume from the employment that they got when the businesses went into hiring that's where they would want to see the consumption taking place as time evolved it changed from that right so again it's important to understand how it is that they used to conduct themselves so that we can move into how it is that they are operating today so when we think about when the Federal Reserve was running to the great financial crisis they knew that they were going to have issues with adjusting interest rates in order to stimulate the economy because they would hit the lower bound at zero once they hit zero that's it like they're done right so if they were to go in adjust rates below zero which there is is theoretically it has taken place amongst economies out there but there's no real Theory or evidence out there that it could actually do well within an economy like could operate at any kind of how should I put this like any kind of significance for any length of time like nobody's really operated in this sort of condition to to know exactly what that would look like being in a cash Society it's also very difficult cuz people start pulling a lot of money out in cash and then not not participate in the banking system so there's a lot of questions on whether or not they can get below zero on these things so when the Federal Reserve goes into quantitative easing which is the next step when they can no longer adjust interest rates what they are doing is they're buying up these treasuries from the United States government and so a lot of people would call this monetizing the debt and it's not necessarily monetizing the debt because the Federal Reserve doesn't go and buy treasury debt directly from the treasury these like government bonds what they do is they buy those from the secondary Market or from the market itself right which is from the primary dealer so it's it's already a a purchased item so it's like a secondary purchase right and so these treasury bonds when you think about it these are now all of a sudden in a position in which that they have a guaranteed buyer who has a printing press behind it so you can imagine what kind of impact psychologically that has not only on the banking system but the markets and everybody else out there in that there's going to be like an inflationary scenario from all this massive money Printing and and forcing that into the government um into into the government debt which would then put the governments into this unsustainable debt path and all this other stuff well the government goes out there and starts spending that money so now we have to understand like what is it that was taking place here because see there was a time in which the Federal Reserve would lower rates and then that would stimulate the economy because people would go out there borrow that money not only to do the business investment to get hiring going right people would start you know investing with into their business and hiring a lot of people and this all of a sudden would then bring a lot more income to the economy itself and the more purchasing or consuming that could take place from that extra hiring that was coming from the investment of the lowering of interest rates you get all that right okay and on top of that people are also using this lowering of interest rates to buy houses and cars and go on vacation so it really increases the economic activity when they lower the interest rates but when you get to a point where you lower the interest rates and you hit the lower bound at zero it doesn't stimulate the economy anymore it's just like you didn't drop them enough to get people out there to borrow that money to invest into the business or even enough to go out there and buy houses and cars and go on vacation so now what we thinking about like how is it that these rest of these interest rates are coming down when the Federal Reserve was lowering the FED funds rate well you have to think like the banking system itself right where is it that they're going to put their money so they can either lend it to you and me and take on risk or they can find less risk out there by buying into government bonds or even less risk than that by buying by depositing it with the Federal Reserve itself so every time they lend this money out there to one of these different entities like us being risky government BS being less risky and the Federal Reserve essentially no risk each one of these has a lesser interest rate attached to it right so you go all the way to the to the Federal Reserve and lending money to the Federal Reserve on the overnight lending rate or I'm sorry on the excess reserves that the banks have they're going to find a very small interest rate attached to that however if you start going into a position in which you're going to take on a little risk you can lend it to the government which is almost no risk or then you can lend it to you and me and so now this is where like the banking system starts to find these interest rate adjustments within the within the markets for things like credit cards and cars and you know mortgages or whatever is whether or not these Banks or these investors or anybody else out there wants to take on the risk beyond that of what it is that they can get from the government itself so say for example if the US 10year Treasury is trading at a particular level then you're going to start finding that most interest rates will follow whatever Direction the US 10year Treasury is moving because the banks could again they could loan it to them or they can loan it to you and me and they're not going to lend it to you and me for a lesser interest rate and take on the risk of us defaulting on our loan when they can loan it to the government for a higher interest rate and not worry about defaulting on the loan so anyway moving on so anyway when we think about it in this fashion now when the Federal Reserve goes to try and adjust rates when they're at the lower bound to zero it becomes a very difficult tool for them to operate in because lowering rates hits the lower bound at zero they can't stimulate the economy with that lowering of Interest rat so what they did is they move into quantitative easing instead and so this is where the asset purchases come in and again they can't buy directly from the treasury itself this is talking the Federal Reserve but they can put out the announcement hey we're going to buy buy $50 billion worth of treasuries and mortgage back securities every single month for the foreseeable future right and not really tell or maybe they even have a plan we're going to do it for the next 18 months or we'll do it for a certain dollar amount like you know we're going to do it for you know8 billion 8 trillion dollars or something they just I'm just making up numbers but this is what like quantitative easing is is this projection out there of them buying into the US government debt in a very like I don't know how to it's like not just a credible threat right because they're actually doing it it's more like a guaranteed promise there we go it's not because the credible threat is like hey we may or may not do this but this is a guaranteed promise that they are definitely going to be buying into these treasuries going into the future so now when we think about this is just like okay so the Federal Reserve is now moving into a position in which that the FED funds rate is hitting zero like right they can't drop it any further than that but they're putting out this announcement that they're going to be loading up their balance sheet which a bunch of treasure IES mortgage back Securities so now when you have a guaranteed buyer of mortgage back Securities and treasuries like the Federal Reserve is stating something very interesting happens with these bonds now again like if you're not familiar with bonds this is going to get you know kind of confusing in it but to understand that when the yields go down the prices are moving up and and again like understanding a bond within itself is is not that difficult once you understand it but to understand that the bond itself has a price tag attached to it that can daily that can change on a daily basis and so when interest rates or yields are coming down or people are willing to accept a lesser yield what they are really doing is paying a higher price for that Bond and so as the bond prices start to move up speculation begins to take place as people are looking not for the return on the investment from the yield itself but what they're looking for is a return on the speculation believing that the bond price is going to continue to rise so as the Federal Reserve saying hey for the next you know however many months we're going to buy this many trillions of dollars worth of these bonds the PE the market out there sees that and they say okay well we're going to front run the Federal Reserve if there is a definite guaranteed buyer of these bonds and they are going to be lowering the interest rates with this idea of buying up these bonds I can buy a bond today sit on it for just a few months and then sell it to the Federal Reserve or essentially back to the market when the prices move up and the yields come down so as they're adjusting yields down the market itself begins to participate inside of the idea of buying up these bonds which then lowers the yield not only in mortgage back Securities but treasuries and this happens in all kinds of things it ends up actually forcing when these yields come down in such dramatic fashion it ends up forcing a lot of these investors these fixed income investors into taking on risk and it starts moving a lot of money into corporate debt even junk bonds so like this is where a lot of Corporations end up finding funding right so as the central bank is say hey man we're buying up these treasuries everybody's getting really excited about it they're moving in trying to front run the Federal Reserve the fixed income investors who are normally buying into these safer assets at a particular yield or watching the yield fall and the prices rise then have to move into ever risk Assets in order to try and acquire that fixed income that they were looking for and so the safe and liquid asset the safe treasury debt no longer is the yield that they are looking for they start taking on risk moving into corporate debt now these corporations are finding funding that they'll go out there and use to buy equipment hire people do whatever it is that the businesses are going to do with that extra with that extra funding that they're finding now that the investors are like basically moving out of that treasury debt and moving into the higher risker higher risk corporate junk bond debt you see see how this is confusing like most like there's a lot of people who I I get are probably watching this going oh my God man he lost me a long time ago I get it man right because this stuff is really difficult to understand it's not something that is is going to be explained inside of just a couple of minutes like here we are 20 minutes into it and we're barely even getting started really all right so when we look at the Federal Reserve and how it is that quantitative easing begins to stimulate the economy in the fashion that they were looking for right because it isn't necessarily from the interest rates coming down but it comes more from the idea that the market is looking for that safe and liquid asset and starts driving the prices up and the yields down and then the investors are now having to move into the other markets other riskier markets out there which then puts that funding out there for them and this is and this is important to to know because it's essentially the Federal Reserve no longer using the adjusting of the FED funds rate to stimulate the economy right because this is essentially coming to an end they hit zero so it's just like okay we're going to have to set that tool aside right now and not use it anymore and we're going to have to go into quantitative easing and then use this to try and stimulate the economy with not only do you stimulate the economy with the idea that the government is now access all this debt and start spending like fiscal stimulus that's the government spending money into the economy whether it's you know stimulus checks or government programs or whatever but this is essentially the government going out there and spending the money because we're not borrowing it to spend into the economy so the so the government will do it for us essentially that's what's taken place but then the interest rates themselves are coming down due to the market looking to front run the Federal Reserve and then moving into that higher risk asset like corporate debt junk bonds and then funding essentially funding these corporations which and then in turn gets the hiring moving okay so when we think about like quantitative easing and what it does for the economy that's different from what a lowering of the FED funds rate did prior to the great financial crisis so you can see the difference that is now taking place and the Federal Reserve started adapting what they would refer to as forward guidance because now it's more about your activity within the economy than it is the activity that you do from the Federal Reserves adjustment see this is important to to know prior to prior to the to the great financial crisis the Federal Reserve was very very quiet with their communication like they did not communicate what it was that they were planning on doing and then when they did do something it was a surprise to the markets and this is how they conducted themselves for a very long time in fact you know most people when they listen to the Federal Reserve would have no idea what it was that was that was uh being said by these Central bankers and most of the time people just didn't care right I mean they just waited for the next Federal Reserve statement to come out and say hey this is where the interest rates are and then they would start conducting themselves in ance to that interest rate adjustment whenever it had taken place well as the Federal Reserve was moving towards a position in which that they were going to hit the lower bound at zero and this overnight lending rate was no longer going to be an effective tool for stimulating the economy they had to change the way that they were going to do things and this is where the quantitative easing really stepped in and the use of that forward guidance which is them basically talking about what it is that they plan on doing going into the future because this communication about what it is that they plan on doing like if nobody understood what quantitative easing was and they were like man quantitative easing and it was just like it was never reported on the news nobody ever talked about it it was this very esoteric thing that is very you know very far off in the distance that nobody could understand then it wouldn't have worked everybody had to know that it was the money printer going off and they did massive communication about that in every single direction right money printer go right and everybody knew for sure that it was going to create inflationary scenarios I mean I know I was back in the great financial crisis I was watching my job disappear and thought for sure that silver was going to go to you know $500,000 an ounce because of all the hyperinflation that was going to come from all the quantitative easing you have to think it was far more money printing taking place back in the great financial crisis than took place during Co I mean it was more money in a dollar like in a number basis but it was far more on a percentage basis back in the Great financial crisis it took the fed's balance sheet from $850 billion to over 4.5 trillion I mean it was better than a quadrupling of the balance sheet I mean we all lost our minds right I mean everybody who was you know paid attention to what was going on at the time we we were like everybody was losing it like they just thought for sure that there was no recovery from any of this but to understand that most of that money did not enter the market like it it did enter into the banking system but it essentially just sat as reserves on the big Banks balance sheets and never really did get into the economy because it essentially has to get lent into the economy and so if it's just sitting there not really chasing goods and services then it's not going to create any kind of inflationary scenario and this is essentially what ended up happening to the Federal Reserve since they couldn't find their 2% Target like not after all that money Printing and from 200 eight all the way up into 2018 there was like very little inflation and when they did find inflation above 2% it was very short-lived they can't land at 2% they never have ever ever ever ever has the Federal Reserve ever been able to consistently be at 2% for any length of time so that's why I find it funny that a lot of people are thinking that's what they're trying to do today it's just like they've never been able to do it before I don't know why they would think they could do it today but anyway moving back to these fed funds rates and what that really means all right are you guys confused yet are you guys having fun we got 167 people watching with 44 likes if you guys are really liking this video and liking the information go hit that like button get more people to join in on this YouTube video where we're discussing what fed Cuts mean right what does it mean when they cut interest rates all right so something interesting took place with the Federal Reserve when it came to September of 2019 because even though they had this quantitative easing and all this other you know changes to the way that they were conducting the monetary policy they were actually trying to conduct themselves back in that traditional sense where they were going to raise the raise the FED funds rate and then try and be restrictive on the economy and then use it for their ammunition to try and stimulate the economy again during the next downturn this was like very much their idea right so if they could raise the FED funds rate if the economy was operating at its potential and they were able to like incrementally raise the FED funds rate and get it up to a particular level that felt appropriate for stimulating the the economy during a down term meaning that you would have to be able to drop it in order to stimulate again this is what the Federal Reserve was really hoping that they were going to be able to do right and so what they said is like hey this is going to be a really boring tightening cycle we're going to be on what we refer to as autopilot where we're going to raise a quarter point every quarter for the foreseeable future until we get the FED funds rate up to a restrictive level that we find appropriate right and so they kind of just basically left it at that saying hey we're on autopilot and we're not going to do or say anything different then this thing is just going to continue to operate in that fashion well it was tapering is what they were referring this as and then they had taper tantrum where the markets were very disgusted with this idea so they were like Okay so this isn't really going to end up working out very well for us talking about the Federal Reserve they had the FED funds rate up at 25% and this is going like you know back towards 2018 going into 2019 right this is when this is starting to take place and so something very interesting started to take place in the idea that the Federal Reserve had a lot of government spending taking place which then had the primary dealers loaded up with treasury debt now this is something interesting to think about within the banking system is that treasury debt short-term treasury debt is looked at almost as good as cash right and now it's not cash but it's like really close to cash and so a lot of times these big banks will be sitting on a lot of excess or a lot of these reserves that are are uh treasury debt right and because the government was doing all this government spending they had a lot of this treasury debt sitting on their balance sheet now in September of 2019 something very interesting took place because again the Federal Reserve would try to use that overnight lending rate amongst these big banks in order to adjust the FED funds rate which they had you know somewhere up around there that 2% they um sorry so what they would try to do is try to I'm sorry guys let me see where I was at on this so what they had oh this is September of 2019 they were still operating in this overnight lending rate right amongst the big Banks but something interesting had taken place and that there was a huge corporate tax payment that was made and it took a lot of the cash away from the big Banks and it moved it over to the treasury general account which is an account over at the Federal Reserve but the point is is that it took it away from the big Banks and their ability to use that cash right because it was this tax payment that had taken place so now they're sitting on all these like government debt from all this government spending that was taking place at the time and they don't have enough cash to operate the next day and that overnight lending rate shoots up to like 10% on amongst these big Banks and the Federal Reserve was like oh no this is not going to take place now what they did is they fired up something called the repo facility now the repo facility has already been used it's part of the Federal Reserve System but it was like a pressure relief it wasn't meant to be used in a consistent like standing facility it was just there in casee of emergency purposes so here you have this huge September tax payment that took a lot of the cash away from the big Banks this is September of 2019 takes it out of the banking system leaving the banks uh short of cash overnight lending rate shoots up to like 10% fed fires up the repo and says hey you give us treasuries we give you cash we'll do this flip every single day and this this essentially became what they referred to as the N not the FED but everybody in the market referred to as the non QE QE because the Fed was injecting cash into the system but really what they were doing was these overnight swaps these these uh overnight repos and so this is how they were able to get cash back into the system get the liquidity back in there after this huge tax payment had taken place and all this government spending had loaded the banks up with all this government debt this is how they were able to keep cash in the system and they just kept rolling like this for a very long time so now what ended up happening at this point is that that overnight lending rate was no longer an overnight lending rate in the fact that they had an Market that was finding it the repo facility was now injecting liquidity into the system and it was finding an interest rate there so what ended up taking place as time moved on and we eventually fell into covid and then the Federal Reserve fired up the real quantitative easing is that the repo facility ended up becoming the place in which that a lot of people were parking excess cash right and getting a smaller return on their interest on of a of an interest rate on it the overnight lending rate was essentially ineffective because the Federal Reserve had lower requirements uh reserve requirements to zero and moved into what they refer to as an abundant Reserve System so all these big Banks were sitting on abundant reserves they didn't have a place to go as far as lending to those who were in need of reserves so the overnight lending rate was essentially non-existent in that fashion so the overnight lending within the repo facility became the place where the FED funds rate was finding the effective funds right or where the fed or Reserve was finding the effective funds rate and this is again this is I understand this is difficult but if you can hold on to this this is really where it's better to understand how it is that they are conducting themselves today right so all of a sudden here we have the repo facility that is acting as a floor or as yeah as a floor for interest rates and then they also have a place that they could put uh money called the account on excess reserves and so between these two accounts the repo facility and the account on excess reserves they were able to channel where it is that they wanted the FED funds rates to be so the effective fund rate had moved from the overnight lending rate over to the repo facility in this overnight interest rates um or the interest rate on excess reserves so this is where they found the place to adjust interest rates from is what these two two different accounts that the big Banks were finding a place to park their excess liquidity to okay so now when it comes to the idea of them being in quantitative tightening right because now the excess reserves are going to start drying up and there's already talk about that is just like hey the repo facility getting less use sometimes it gets more use or what ever this is the liquidity finding its way out of the market and it's due to the fact that the Federal Reserve is in quantitative tightening like as much as people don't really want to believe it and they think that the money printer is just constantly going off and never never stopping that's not necessarily true like at the Federal Reserve chose to do nothing at all then quantitative tightening would just automatically take place as the maturity on the balance sheet of their assets would then start bringing cash back to the Federal Reserve and they rolled that back into new debt then that cash would essentially be pulled out of the out of the system alog together so when the Federal Reserve chooses to do nothing at all that is essentially a form of quantitative tightening but then they can push that by actually selling treasury debt off or mortgage back Securities or whatever asset they have on their balance sheet as opposed to just allowing stuff to roll off at a particular pace and that's essentially what is happening right now is the Federal Reserve is allowing a certain amount to come off the balance sheet every single month which is bringing in the cash which is a form of quantitative tightening and it will eventually dry the system up of of of cash of liquidity right and so here like a lot of people are getting very excited about this you're like okay so they're going to lose control oh cool uh I just saw an eagle flyby anyway they're going to lose control over interest rates or they're going to lose control over the market because you can see it this whole repo facility is getting questionable and I'm thinking well not really because the repo facility was like you know supposed to be a short-term temporary tool for dealing with the issues that they were having at the time but it wasn't necessarily meant to be a standing facility for the Federal Reserve that has only recently taken place that it is a standing facility and as people are looking at it saying oh man this is a questionable thing I'm thinking well that's a fairly new facility that they are using and if you really pull the cash back out you wouldn't need that repo facility what you would need is a place that you can actually go to to get liquidity from the Federal Reserve in a fashion that is more traditional to the Federal Reserve which is something that they refer to as the discount window right so now here's another component to the whole thing is that when these big Banks start looking for liquidity out there and they are finding it difficult to F to to get from these other Banks as things are starting to dry up and the Federal Reserve is pulling in more and more of this liquidity trying to tighten up the the monetary policy to slow the economy down you and get the inflation down as they're in this quantitative tightening position some of these banks are eventually going to find a time in which that they're going to need liquidity right they're going to need they're going to need some sort of of overnight lending to have taken place and if the other Banks out there are stressed and not able to lend them the money then they go to the discount window now this discount window for the longest time has been considered a very bad place to go to if you one of these big Banks who is going to the discount window in order to get credit to find liquidity so that you can operate everybody points at you and says oh bro you're in bad shape like you can't get liquidity from anywhere else you can't borrow from anybody you have to go to the discount window that's a bad sign it shows like you're in like it's like kind of like going to the food bank or something I don't know it's like you know it has this it has the stigma attached to that says man you're not doing well if you're going to if you're going to the discount window but yet this is the traditional place that the Federal Reserve would typically offer up cash to these Banks but it since it had gotten abused and you know all this cash was coming out of the discount window moving into like speculative assets and stuff like that it became something of a discouragement to use the discount window from these big Banks and then eventually you know caught on as a you know as a bad deal for these big Banks to use it but really the Federal Reserve has talked about trying to get this discount window up and running again in a fashion that was more traditional to the way that they had originally used it and so what they are doing right now as the repo facility is becoming like you know the tool in question they are actually establishing the discount window as a new effective tool for liqu bringing liquidity to the banking system in a way that doesn't hold that stigma anymore and what they are doing is they are essentially forcing all the banks to have an account and then use that account at least like once or twice a year I can't remember what the what the idea behind it is but it's something like in that nature like you have to you have to step up to the discount window at some point throughout the year and borrow money like I mean I guess that's the easiest way to kind of explain it and by doing this nobody knows exactly who it is that's in trouble when they go to the discount window because they can essentially just say hey man we're forced to kind of do it at least once a year so we're taking our moment now right and now whether or not they're in bad shape or you know need to do it they can always have that kind of excuse behind it that says we're not in bad shape we're just being forced to do this instead and now we have this availability of using the discount window and nobody is really going to point the finger at us and say hey man you're in bad shape or whatever you're you know all right um where was I going with that I don't know what are you guys talking about 40 minutes into this I think we've gotten quite a bit going on here all right suit trash can says suit yourself I just call in the next step after nism cash purchase of house the Repo Man is always bad if you can't afford it don't buy it again note the difference between buying and owning possessions is 9/10 of the law all right uh anyone can buy anything with debt you but you don't own it you're just a glorified renter what if you uh what if you borrow money to buy a tattoo all right are you a glorified renter at that point I mean like good luck repossessing you know all right because it's fractional uh truck aod hello UI just because you were born you have to work your a off all your life yeah essentially yeah that's what you get for being born you know and this is where the struggle really begins because I think a lot of times people think man this sucks why is it that we're put on the earth just to have to work as hard as we do but then you know really I don't know if people realize it as much as they do but working as hard as they do is it's like I mean I don't even how quite how to explain this but it was the reasonings why you're here right like I think about it myself though times that I have worked really hard and you know kind of screwed my shoulders up and stuff like that I think like man why did I why was I gone through all that punishment why did I have to do all this why was the you know essentially the suffering was there but now I look back on those times and if I didn't go through all that stuff I never would have learned how to be in the position that I am today like I never would have learned lessons or skills or abilities or knowledge or all that other stuff every single bit of it and at the time it seems ridiculous and I know it sounds really cliche when you know say just like man what doesn't kill you only makes you stronger or something like that but that's really the truth behind it all it's like every single person in your life was a teacher no matter who it was whether you liked them or hated them it would didn't matter they taught you something and if you took the lesson from it then you learned and moved on but if you didn't take the lesson from it you're probably going to engage somebody who's very much similar like that person right and so every time that we have a struggle or a challenge or a reward or an accomplishment or all this other stuff it's just another step in in the progress of what it is that we are doing to try and figure out why it is that we are on this planet to begin with which is generally to figure out our passion right like for me it's talking economics and I just love this topic I can sit here and just talk it all day long every day from now on no doubt about it but for other people it might be playing music or it might be doing some other form of of art it might be you know cooking you know which is in my opinion another form of art yeah so anyway moving on all tattoos were the only thing the ancient Kelts could keep when they fell in battle all right buying ver is owning yeah Force what is that incarceration is the real reason we are here Incarnation is that what that says oh man I don't know Incarnation forced Incarnation all right maybe all right it's seriously screwed up when they have to devise a whole division of study to make up things why they should have the right to steal our money got to love modern monetary Theory while they Ste steal our money this is something that's interesting to think about um they don't steal our money what we are doing is we are using their Federal Reserve notes which we really shouldn't be doing like that's our choice to do that we shouldn't be doing it but because we do it now we have to suffer the consequences of that established rules that they put within the use of their Federal Reserve notes we should be using gold and silver and then they wouldn't be able to inflict a lot of the pain that they do upon the people however there would be a whole different set of pain that would would be different from you know from the economic forces that take place by having a limited currency out there but if you really don't want to use the Federal Reserve notes then don't I think everybody should B abandon the idea of using the Federal Reserve notes nobody's going to do that every single person's retirement every single person's business every single person's job every single bill every everything that they have is all tied to the Federal Reserve Note and whether or not they can cash out for it like everybody is in that same boat like nobody's thinking oh man I hope I can cash out for Bitcoin I hope I can cash out for silver like I'm going to you know sell this computer off here for anything other than a dollar is going to be a very unlikely chance like I might find somebody who can trade me Bitcoin or silver for but everybody like if I was to sell it or somebody wanted to buy it everybody's going to have dollars to do it and so therefore you are forced into that system but it's a complete volunt system you do not have to use it we choose to we choose to use it out of convenience too you know Lumber video you guys want Lumber videos yeah Lumber is down right now I was thinking about doing just a regular like a short video like an 8 minute video talking about Lumber uh but Lumber is down right now we're at like 550 per th 560 per th000 I didn't check it before I started this which is a position in which that I know that these Mills do not want to operate in and anytime you get below that 600 you start getting into 550 per th000 you're going to find that the Mills are going to continue to pull back on their production we had a bit of production increase when it ran up to 600 per thousand but it wasn't significant it was like up at 600 we had depleted inventory at the time you know the idea that the Federal Reserve was lowering interest rates I think kind of got in got excited into the market and you saw a lot of people buying into the Futures but it didn't like raise the future significant L it went from like I don't know it was like at 610 I think just slightly over 600 per th000 and now we're at 550 per th000 so it is a pretty dramatic drop but this is right where we have been for months now and the Mills again I know are not going to be excited about producing at 550 per th000 they are going to tighten up production and we are going to find the inventory levels dropping they are producing right now 2x4 2x6 plate stock and studs now this is the most common length and the most common size Lumber that is out there right now that is going to be purchased this is what the Mills want to want to produce the is the things that are going to sell 2x8 2x10 2x 12 those longer lengths those not so much demand for so why would they produce them if they're not going to sell the problem with this is is that now those products are coming in such short supply that we're finding that the price of them is starting to really dramatically rise like like a complete disconnect from the rest of the items that are out there to give you an example like I was looking at some price sheets the other day and 2x 12 8 foot and 10ft Boards right just the 8f Footers the 10-footers on a 2x12 standing and better KD I think they were selling somewhere around I want to say like I think they had them listed at like 585 per thousand right it was pretty low and then you go up to the 16s the 18s and the 20s and they're up at like 11 or 1,200 per thousand so like almost double the price like you take two units you put them side by side you put them end to end and it's the same length as buying one that isn't cut down the middle and it's twice the price going to the to the longer lengths it's simply because the amount of inventory that is out there is very depleted where the amount of 2 x 128 is probably quite large right cuz like 2x 12 8 Footers and 10 Footers are not a very popular size I mean most of the time when you're buying a 2x12 you're using it for like a joist store rafter or something of that nature and they're usually kind of a longer length not necessarily an eight or 10f footer so you know here you have plenty of inventory on the eights and T and it's reflective in the price being down around 5 or 600 550 to 600 per thousand but then you get into the diminished inventory of the long longer lengths and it's like twice the price and that's obvious to me that there is huge gaps in inventory and so if we have this situation continuing where we have a low Futures price which is not going to encourage the Mills to go out there and produce a lot other than what it is that is selling you're going to find that there is going to be ever more depletion of those other items beams beams is another big one there was a recent Mill shutdown up in Washington permanent shutdown and all of a sudden it became very difficult to Source out a lot of the beam stock that was that was available out there I mean now it is available cuz you start finding it you know it starts flowing in from other places but when that Mill shut down it had a definite impact in our area for a few weeks as it became very difficult to Source out a lot of the beams um you know 6 by material especially so anyway we're going to do a better uh Lumber video going into the you know here in the future all right a long story short $2 thank you so much what's the worst lumber mill injury you saw I've never been in actually I've never worked in a lumber mill itself right I do Lumber retail sales for a living now I do live in the Pacific Northwest so there is a lot of Mills around here and a lot of logging operations and sorting yards and stuff like that when I was a kid you would hear about logging injuries more than necessarily Mill injuries right now the mill injuries you would find like you know especially like the oldtimers you would find like around town they'd be missing fingers and stuff like that because the way that they operated back in the day was a hell of a lot more dangerous than the a lot of the automated ways that they do things today now logging on the other hand that is an incredibly dangerous job like I mean it's pretty much done the same way that they've always done it where you go and you fall these trees down a hill right it's not easy to get equipment down there so what they do is they run cables down hook up all these logs and then yard them up the hill running off of these cables and logs can go swinging and flying all over the place and it's like it's hard work it's dangerous it's hard to move around and you know everything about it is like you know is difficult so I think like when it comes to injuries You' probably find that there would be more injuries within the logging industry itself than there would be within the mill industry you know so and as for me like I do like lumber yard stuff right so we're not like sorting out logs and running like running saws or anything like that we're taking units of lumber off of trucks breaking it down into smaller units and then sending those units out to people who are building houses or building their deck or you know remodeling or window packages or door trim or whatever it is that they got going on all right uh market crash coming in January January or February question will it pop the personal and federal debt bubble I don't know do you really want to end the Federal Reserve actually you know ending the Federal Reserve is like is that something that I really want to do it's not something that I don't want to do like you know it's not something that I would I would go against but honestly to end the Federal Reserve I think it would probably be best done by having people understanding what the Federal Reserve really means to them and then simply making them insignificant that's how I think we should end the Federal Reserve I don't think we should take like control through Congressional means or you know legislation or Administration or whatever should step in I think really we as the people if we were to truly understand what it meant to end the Federal Reserve it would mean that we' just make them insignificant in our life and if we could learn how to do that on an individual basis to say okay here's the things that I need in my life and here's the way that I can go about it in order to exclude them out of it I can save in silver and cryptocurrencies for one so that I am not part of inside of the banking system and then if I am part of the banking system to only use it in the absolute most limited fashion that can absolutely find and if you can start conditioning yourself in this in this way and then again you you also have to be in like the mindset that says I don't want to enjoy any of this for pleasure but then take out debts to buy cash flowing assets so that it is nothing but 100% of benefit to the people themselves as opposed to people slave wages slave wages trying to pay for a luxurious debt right you see where I'm kind of getting in like this is literally taking the mindset of the people themselves in order to do it like I don't think there's any organization any group of lawyers any whatever who can come together and say hey we're going to end the Federal Reserve and make a better way I think us as individual people can think man I want to end the Federal Reserve on my own and how do I do that how do I make them insignificant in my life and all of us do that in together and it would work it would totally work because the use of the Federal Reserve and the Federal Reserve notes is voluntary we are choosing to do it every single day right and as much as we want a [ __ ] and complain about it that it is in a right system or whatever every day you're pulling cash out of your pocket or you're swiping a debit card or you're you know inside of a cash denominated asset or wanting to be paid in cash at the end of the day so again you are voluntarily voluntarily doing this uh no such thing could exist inflation of the money supply would dictate it I suppose there wouldn't be quantitative easing they would have to find buyers for the debt at free market rates wait well first of all they wouldn't be able to find anybody to buy the debt because there wouldn't be any debt to issue because we would not be a manufacturing state that would then give us the ability to pay back that debt because we could get new money in from being a producting production saving Nation so we wouldn't be able to find people to buy our debt right that wouldn't it wouldn't it wouldn't work that way and then we wouldn't be able to pay back anyway because we would default on it considering that it would most likely be gold or silver or something of that nature and then we wouldn't have of it because we're not a productive Nation all right in order for a thing to qualify as money it needs to increase in Supply well I think that would be I don't know is that is that an order all right wait for there is wait there is no debt laugh out loud never mind my brain is stuck in the debt based currency thinking magically magical thinking Simon I'm not sure no fed means no Lumber well there was Lumber before the Fed so I don't know if that's true right and again I don't necessarily think that we even need to end the Federal Reserve understanding why it is or how it is that you could do that and then be in a position in which that you could ex essentially condu conduct yourself in a way that says hey If the Fed was here or not it would make no difference to me right that's what I think is really where the mindset of the people should go to the Federal Reserve is going to continue to create a situation in which that the inequality is going to grow I don't want that I don't like that idea and I mean it's not whether I want it or don't doesn't really make any difference on the grand scheme of things because what I want is different from what everybody else wants but the Federal Reserve and being in existence is going to create a situation in which that the inequality will continue to grow and so knowing that there is going to be issues not only for my kids but for the grandkids if they that happens to ever come into existence and going into the future so long as the Federal Reserve is entering new money into the system we're going to find that it's going to be ever increasingly more difficult to find your way onto the other side of the wedge I don't like that idea right now understanding how that happens now gives me an ability to say whether or not I like it or dislike it it doesn't matter right that part is really is neither here nor there the fact that it is taking place now requires me to do something about it for myself like I can't change other people's minds I can't tell other people what to do with their lives I can't tell them how to think but what I can do is see that other people think and believe and act in certain ways and now I can conduct myself in a way that says this is the most appropriate position that I need to take part of that is working a lot right I work a --five job I come out and do YouTube I got a side hustle that I do I put a lot of effort out there in order to have some of the things in my life that I do which isn't material possessions but it's living in a house right it's being able to save for in stocks or crypto or silver or whatever it is that I'm buying at the time this is the reason why I do it as much as I do it's not so I can have F fancy things in my life it's because I see out there that there's a lot of other people out there who are not trying their hardest and what they are trying for is luxurious and so I'm thinking okay I need to do the opposite of that I need to try extra hard and not get into luxuries and try to be as disciplined as I possibly can for because this isn't no joke right I mean I'm not trying to figure out a better system out there there isn't a better system there's only this system and what it is that you're doing with it central banks were a great solution to a problem that occurred 150 years ago local banks issuing their own bank notes and then going under may not may not so needed in 2024 yeah and I kind of agree with that there was it was trying to figure out a way that they could have an elastic money supply that would smooth out the business Cycles which would make a lot of sense like at the time you know there was people people out there who would absolutely lose everything they had overnight in Bank runs and just terrible Economic Times and we have to think like this is humans on the like inventing stuff on the Fly Right like this isn't like people have figured it out over time that if they have a certain amount of currency that's limited and then they put people in debt then they you know they can have slaves in a in that sort of fashion like I mean I get that part of it but ultimately when it comes to to the money system that we use today it was completely invented out of necessity essentially we all want to do transactions we want to trade carrots for fish and we couldn't figure out exactly how to do that efficiently and there was people out there who says you know this gold thing seems to work out pretty good for like you know trading around for everybody and so Begins the banking systems right you know it was just it was just a matter of time and I'm not trying to say that there isn't people out there who have taken advantage of the situation and manipulated the the concept to put themselves in the best position I'm yeah that definitely happens out there but again it's all voluntary you know all right we are economic animals money isn't funny no you're right we do the best we can with what we have human nature isn't easy you're absolutely right human nature is not easy you know and it's the more I the cuz trying to figure out exactly what ended up happening to me when I got when this channel took off and all of a sudden it was just like my whole world is changing and I don't even understand why like you know I got a lot of networking that is all of a sudden just building up like crazy I have money that's flowing in I'm getting invites to do things that I have never done before and I could not figure out what the hell what it was what it was that was going on and so you know trying to go back and and kind of reverse engineer what it was that was taking place studying up on a lot of psychological things that you know people end up going through like for me it was it was like this impostor syndrome like what in the hell am I doing here like I am not somebody who should be talking economics on this level have this many subscribers all this other stuff like I felt very out of place by it all because I just simply just didn't understand what it was that was taken what was happening right you know the more that time went on the more I realized man this is a genu genuine feeling that a lot of people end up getting when all of a sudden it's just this major change has happened to them right and much like I was experiencing with the growth of the YouTube channel so understanding human nature and learning a lot about economics and what it is that human nature does for economics and especially when it comes to like a lot of the economic forces that are out there understanding human nature in the desires and impulse impulsive behaviors and just general like aspects of what it is that's a human it really has a major impact on how it is that you see the economy like it's no wonder when I see out there people who are making absolute horrible decisions with their finances like people who are living paycheck to paycheck and they figure out a way to get a new car and then now they're now they're paycheck to paycheck with a new car and they feel really excited about this at first right and I'm thinking man this is all like internal dopamine stuff like happening