Rickards and DDB Unreserved About the Fed

Jim and Danielle talked about another Fed hike during their livestream. [The Rude Awakening] May 19, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Rickards and DDB Unreserved About the Fed - Jim Rickards thinks there may be a 25 bps hike in June. - Danielle DiMartino Booth joined Jim on the livestream and talked about the Fed tightening into a recession. - Will Powell hike, or won’t he? Unless much changes between now and the meeting, it looks like a hike is coming. [WATCH: America’s #1 Income Investor]( Let me introduce you to one of my close financial contacts... He might be the most successful investor in America right now. In fact, [his unique income philosophy has allowed him to generate years’ worth of returns – in as little as 2 days](. I have never seen anything quite like it. That’s why I’m urging you to [watch this video]( he made ASAP. He’s agreed to show you how anyone could make rapid ‘income trades’ for themselves. [Watch this video to learn about a trade that could make up to 166% in 10 days](. [Click Here To Learn More]( [Sean Ring] SEAN RING Dear Reader, Good morning! I’ll be in Asti by the time you read this. But I’m writing from Hartsfield Jackson Atlanta International Airport in the Delta Sky Lounge. I have another 3 hours to wait until I take off, so I thought I’d write now. Yesterday’s Rude was about how a few of us at Paradigm Press are starting to think the Fed will hike again this June meeting. That conversation took place right before Jim and Danielle’s livestream. But what’s interesting to me is what Jim and Danielle said about that very topic during the livestream. Jim Rickards’ Managing Editor, Frank DeVechio, straordinario paesano, gave me a copy of the transcript before we departed from Jekyll Island. Thank goodness for Frank! If you attended the livestream, this will help refresh your memory. If you didn’t, no worries! It’s tough getting time off at 1 pm on a Wednesday afternoon. We know that and totally understand. So you don’t miss what Jim and Danielle said, it’s on the livestream below. The Conversation Danielle DiMartino Booth: Because remember, at this juncture, any of Powell's three predecessors would've buckled under the pressure by now. And right now, there's what? There's a 23% chance that there's going to be another rate hike on June 14th. So it is business as usual. However, we're in a tightening regime, in recession. We had revisions to January and February retail control that feed into the GDP calculus. That was an annual revision. We don't... Every time... We're chasing ourselves right now. We've had three months of revisions in a row to non-farm payrolls. That is a recession indicator, not lagging, but it tells you that we're currently in recession, and the Fed's tightening into it. So we're in uncharted territory right now. And I would venture to say the closest corollary that you could draw right now, and I don't know, Jim, if you would agree with me or not, would be the double dip recession of the early 1980s. Jim Rickards: That has a lot of the characteristics, and it may be more true when going-forward basis. Not to get too far in the weeds, but Powell, right now, and the board, are facing one of the most critical decisions. Are they going to raise rates in June or not? They have a meeting on June 14th. Now Wall Street consensus is, they're done. The pause is in. Paul Tudor Jones was on TV the other day. Ray Dalio, like now this is it. Wall Street's putting out the message. The pause is in, they're not going to raise rates, so buy stocks. And so Wall Street's punchline is buy stocks. I'm not so sure. I think they might raise rates in June. Now I'm not ready to put a stake in the ground and say that's definitely going to happen. By the way, we'll know before the meeting what they're going to do. This is the no-drama Fed. Powell will leak it out. But we might not know until a few days before. The correct answer is the Fed doesn't know. It's not like they know, and they've got locked in a vault. We got to crack the safe. They don't know themselves. There is no consensus. When they say data dependent, they mean data dependent. So between now and then, we're going to get some data. We're going to get a May employment report on June 2nd or June 3rd. We're going to have at least one more CPI, at least one more PCE, maybe two, before June 14th. And we'll have a pretty good read on second-quarter GDP. We won't have the final numbers until the end of July, but we'll have a good sense. And then a lot of other indicators, Danielle's referred to some of them. So they're going to look at all that data. But are there warning signs? Absolutely. And Danielle's right about that. But, at the more superficial levels, like, hey, unemployment's the lowest since the 1960s. Atlanta Fed right now has got second-quarter GDP at 2.7%. So some of these things are depending on what indicators you're looking at. And by the way, inflation's still around 5%. Now, they got it from nine to five. Nice job. But five's a far cry from two, and it gets progressively more difficult. Considering everything they've done. Volker was famous for raising interest rates to 20%, but he didn't do 5% in one year, which is what we've just seen. So this curve, this rate hike curve, it's kind of a step, what was it? Greenspan. This thing goes parabolic. So enormous monetary tightening, reducing the balance sheet, not rolling over maturing securities. We see what's... Well, I mean banks, there are about a trillion dollars of losses not marked to market, but on all bank portfolios in the entire system, they're underwater by about a trillion dollars. Now, they're not marked to market, it's not on the income statement, but that's a big loss that they've had to absorb as a result of... So with all that in place, inflation's still 5%, what do you got for an encore? Right? And, to Danielle's point, it kind of looks like '80, '81, here's what happened then. Volker got in in, I think, in August 1979. He started raising interest rates almost immediately because that's why he was appointed, to do something about inflation. We had G. William Miller, who was possibly the worst Fed chairman ever. And before that, you had Arthur Burns who was well regarded, but just put the pedal to the medal for Nixon's reelection and a lot else. So inflation was out of control, and Volker was there to stop it. But in the middle of that, there was a very sharp recession in 1980, about a year after Volker came in that had nothing to do with monetary policy. The card administration put a cap on interest that banks could charge on credit cards. So there's no better way to shut down the economy than say you can't use your credit. Well, the banks could stop issuing credit. It's not like individuals didn't want to use the cards, but the banks said, "We're not issuing you credit if we have to adhere to that cap," sort of like slamming on the brakes. So the economy crashed in 1980. So this is when farmers were surrounding the Fed with heavy equipment and driving tractors and steps and all that. So Volker cut… [Have you opted-out of the radical democrats “green new scam”?]( If you live in any of the following 43 states… [Click here to learn more]( You need to [click here and prepare for Biden’s next attack on American patriots.]( [Click Here To Learn More]( Danielle DiMartino Booth: That was very, very short. It was six months. Jim Rickards: Six months. Danielle DiMartino Booth: So until 2020, that was the shortest recession in US history. Jim Rickards: That's correct. But that's because Congress realized a mistake, the White House realized a mistake and they reversed course. So that recession had nothing to do with monetary policy. It was a regulatory blunder by the Carter White House. But Volker sitting there, chairman of the Fed, he's being like burned in effigy. He cut interest rates, seven points, not percent, not seven-tenths, but seven points to deal with the recession. He thought that was his job. To this day, that's known as the Volker mistake. In other words, it wasn't mission accomplished. Inflation was not under control. The recession was there, yeah. But when he cut rates that much, the inflation came roaring back, and then his job was twice as difficult. So that's why it was in 1981, that interest rates hit 20%, and we went into the second recession that Danielle referred to. This economist debate, where is that back to back, or was it one big recession? Probably back to back is the correct interpretation. But that '82 recession that resulted from that, at the time, was the worst since the Great Depression. Wrap Up Jim and Danielle’s livestream was excellent. I hope you enjoyed this snippet. I certainly did. I always worry if I disagree with Jim and Danielle. Have a great weekend! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( In Case You Missed It… Worst. President. Ever. And It Ain’t Biden… [Sean Ring] SEAN RING Hi Reader, Good morning from Jacksonville International Airport, where I’m waiting for my flight to Atlanta. And from there, I’ll fly all the way to Milan. What a wonderful time it’s been here! I got to meet most of my colleagues, who are some of the best people I know. We’ve closed the bar down in the Jekyll Island Resort Club every night. Brian Maher, the venerable editor of the Daily Reckoning, has been instrumental in that endeavor and excellent company to boot. Sitting down with Jim Rickards, Matt Insley, Doug Hill, Zach Scheidt, Dan Amoss and Byron King for our Whisky (no “e,” thank you very much!) Bar was a fantastic experience. We'll let you know as soon as we finish editing the film on that. Our very own Miss Moneypenny, Lydia England, deserves all the credit in the world for organizing the event. Dustin Weisbecker, Patrick McKelvey, Frank DeVechio, Jonathan Eaton, Amanda Stiltner, Brian Damario, Rick Barnard, Emily Graham, Chris Harris, Ben Gurtshaw, Marilyn Herbst and Zach Fowler all deserve immense gratitude for their hard work behind the scenes. Thank you! If I missed anyone, please forgive the unintentional omission. At this grand old hotel and resort, we got to absorb history. And while I was mulling over the Fed, the history started to come together… Dinner, Two Nights Ago Paradigm’s very own Gandalf the Grey, Byron King, and his lovely wife, Barbara, are a treat to spend time with. We shared a great dinner at Eighty Ocean Kitchen and Bar on the ocean side of Jekyll Island. I remain amazed by the quality of conversation whenever I’m with Byron. And as you’d guess, Mrs. King is just as erudite and intelligent as her leading man. Oh, and she’s beautiful, too! To top it off, we somehow wound up with an Italian native as our waiter. Being a native Tuscan, Alex ribbed me about choosing Piedmont over his impossibly beautiful region. Byron and Barbara left after dessert while I stayed behind to imbibe more of the American ales with the rest of the Paradigm crew. Snacks, Yesterday Afternoon I went down to the Pantry to say goodbye to Matt Insley, who was rushing back to Maryland to see his newborn daughter. (Congrats to the whole Insley family!) Luckily, I ran into Byron and Barbara and sat down with them for about 30 minutes. And boy, did that clear up a few things. I told Byron, “You know, we’re here talking about the Fed and everything that entails. But Woodrow Wilson was a mess. He also introduced the Fed, Prohibition, and dragged us into World War I!” Byron looked at me seriously and added, “And don’t forget about the income tax!” [Governors warn of “Biden Blackouts”]( [James Altucher]( A former advisor to the CIA and Pentagon just made this dark prediction: Calamity Joe’s sabotage of the Nord Stream pipeline [His Evidence Here]( was suicide. In the next 75 days, Americans will face fuel shortages… …widespread BLACKOUTS… …empty grocery shelves… …up to $1000 energy bills… …drained retirement accounts, and… …a massive crime wave. [>>Welcome to Biden’s American Energy Armageddon<<]( [Click Here To Learn More]( Temperance and the Tax (1913) Of course! The [Second Plank of the Communist Manifesto]( was introduced in 1913 as well. How Wilson is ranked in the Top 10 of Presidents is beyond my comprehension. Byron went on to explain the situation. I’ll paraphrase his wise words. Well, Wilson was a supporter of the temperance movement. But you have to realize something. At the time, the US government took up only 3% of GDP. Not 13%. Not 33%. Only 3%. That 3% was funded this way: One-third came from tariffs. One-third came from selling postage stamps. And the final third came from taxes on alcohol. But if you’re going to “temper” - or cut out altogether - your ability to tax alcohol, you’ve got to come up with something else. That’s why the income tax was introduced. An astute reader like you may be thinking, “Hang on, the income tax (1913) preceded Prohibition (1919) by six years. How could the income tax be a result of Prohibition?” Great question. The short answer is that the temperance movement cut into the revenues. Prohibition was merely the codification of what was already happening on the ground. Government revenues from alcohol sales experienced a significant decline before Prohibition was introduced. The temperance movement gained considerable momentum in the late 19th and early 20th centuries, driven by concerns about the social, moral, and health impacts of alcohol consumption. As a result, many states and localities started implementing restrictions on alcohol sales and consumption. This led to a decrease in alcohol production and sales, subsequently reducing the revenue generated from alcohol-related taxes and fees. Add to it that several states had already implemented their own prohibition laws before the 18th Amendment (Prohibition) was ratified. These state-level prohibition measures, often referred to as "dry laws," further restricted or banned the sale and production of alcohol within their jurisdictions. Of course, government revenues from alcohol sales declined even before the nationwide implementation of Prohibition. The declining revenues from alcohol, coupled with the growing influence of the temperance movement, contributed to the overall push for Prohibition at the federal level. But we’ll get to Prohibition later. Let’s review Wilson’s enormous mistakes first. The Federal Reserve Act (1913) We’ve beaten this horse to death this week. But, after that fateful November 1910 meeting here on Jekyll Island, President Wilson signed what would become known as the Federal Reserve Act of 1913 [with his four gold pens](. Entry Into World War I (1917) Wilson campaigned for re-election in 1916 on a platform of maintaining neutrality and keeping the United States out of World War I. So much for that. What contributed to his decision to enter the U.S. into the war just months after his re-election? Let’s count the ways: - German submarine warfare: Germany's use of unrestricted submarine warfare, which targeted and sank both military and civilian ships, played a significant role in shifting public opinion and Wilson's stance on the war. The sinking of the British passenger liner RMS Lusitania in 1915, resulting in the loss of American lives, had already strained U.S.-German relations. - The Zimmermann Telegram: In early 1917, the British intercepted and decoded a secret telegram from German Foreign Minister Arthur Zimmermann to the German ambassador in Mexico. The telegram proposed a military alliance between Germany and Mexico, with the promise of supporting Mexico in reclaiming lost territories from the United States. The revelation of this telegram further fueled anti-German sentiment and outraged the American public. - Public opinion and pressure: While Wilson campaigned on a platform of neutrality, there was a growing segment of the American population, particularly among certain influential groups and the media, that supported U.S. intervention in the war. Over time, public sentiment shifted, and there was increasing pressure on Wilson to take a more active role in the conflict. - Economic interests: The war presented economic opportunities for the United States. As the conflict continued, American businesses saw profits from supplying goods to the Allied powers. Wilson likely recognized the potential economic benefits of U.S. involvement in the war, as it could boost the American economy and position the country as a major player on the world stage. - Wilson's naive idealism: Wilson believed that the United States had a unique opportunity to shape the post-war world and establish a lasting peace. He developed his vision, known as the Fourteen Points, which outlined principles for peace. This included self-determination for nations and the establishment of a League of Nations. Wilson saw U.S. intervention in the war as necessary to achieve his vision and ensure a just and lasting peace. Whether Wilson walked us into the war or he pushed us, is inconclusive. Ultimately, it was a combination of factors that got us into the conflict. Prohibition (1919) My grandfather was born in 1919. I’m so glad I wasn’t around for this tomfoolery. During his presidency, Wilson publicly expressed his support for Prohibition. He saw it as a moral duty and an opportunity to promote social order and increase productivity, particularly during World War I. Wilson believed that banning alcohol would help conserve resources, maintain discipline among the troops, and bolster the war effort. While Wilson didn’t actively push for the amendment himself, his endorsement and influence helped sway public opinion and create political pressure on state legislatures to ratify the amendment. The ratification of the 18th Amendment in 1919, which prohibited the manufacture, sale, and transportation of alcoholic beverages, Prohibition became the law of the land. Of course, Prohibition did not go as planned, leading to unintended consequences such as the rise of illegal activities and the growth of organized crime. Thank heavens the ban on alcohol was eventually repealed with the ratification of the 21st Amendment in 1933. Wrap Up How Woodrow Wilson is considered anything other than a complete screw-up is beyond my comprehension. He was a warmongering, income-taxing, central banking monster. And he deprived the citizenry of a stiff drink as he did all this! Oh, the shame of it all. The Federal Reserve vexes us daily. The income tax redistributes your hard-earned cash to someone else every April 15th. And you can certainly argue America’s interventionist, itchy trigger finger is a direct descendant of Wilson’s damn fool crusading. At least, we can have a martini. Perhaps we can reverse some of his other awful decisions one day. Let me know what you think by emailing me [here](mailto:feedback@dailyreckoning.com). See you next week! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com Twitter: [@seaniechaos]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. 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