How The Fed Bubble Ends | What You MUST KNOW

published on August 2, 2020

The markets they're booming right now thanks to the federal reserve and the federal government's massive stimulus money program but what happens when it ends or when it just no longer works well in this video

We're going to look at why the fed can't just keep printing money forever what risks it poses and then what are the warning signs of when it's finally going to end this is a massive bubble that's finally going

To burst and we're going to take a look at it so stay tuned all right welcome back if you're new to the channel my name is mark moss i like to talk about making money i like

To talk about investing our money the markets i like to talk about having overall success in life so if you like those topics which of course you do click on that like button right now so more people see

The videos click on the subscribe button right now hit that bell notification so you're notified every time i put a new video out now this is a standalone video

But it's also a continuation of the previous video that i did where i basically made the case that the markets still have a ways to go everyone's waiting for a crash in the previous video i said that hey the

Markets still have a ways to go and as i said in that video i can make the case really good either way i can argue that the markets are going to keep going up for a while i can

Argue that there should be crashing at any moment now in the other video it was the bullish case why should still go up in this video it's the bearish case so if you want to go see the other video

You'll see it right up here you can go watch that uh for now we're going to talk about when the bubble finally bursts when the fed finally runs out of ammo and of course

In this market that we're in i talk about it all the time we see this over and over where everybody basically says don't fight the fed now what does that mean the federal reserve

They have so much money they're printing they're pumping trillions of dollars in the market and it's pushing the market higher so it's kind of that old saying if you can't beat them join them and so don't try to beat the

Fed just bet with the fed we call it the fed put all right now the fed has made it abundantly clear that they do not want to let the markets crash

But at some point they're going to run out of ammo now for now as long as they keep pumping the markets full of liquidity then the markets should still keep going up so if the fed's going to do that like

I said then we just want to bet alongside them and so far it's been working it's easy to see if we go all the way back you know just until 2008 to the great financial crash you can see that the fed ballooned their

Balance sheets during the financial crash and then you can see in the markets how they shot higher from that stimulus you can see again in 2013 the fed increased their balance sheet

And again the markets took off higher you can also see in 2018 the fed began to taper their balance sheet trim it down and the market started to decline and then when they turned it back on

Again as you can see the markets they took off again so the markets are moving pretty much in lockstep with what the fed's doing the thing is though is that like i said they've made

It abundantly clear that they don't want to let the markets drop however they they've also given us mornings that people shouldn't just depend on that and the reason why is because eventually

No matter what eventually the fed's not going to be able to hold up the markets any longer all right the fed's interaction as they like to call it uh stimulation i guess as we call it or probably manipulation

It's always going to run into a problem and that is something called the law of diminishing returns and so basically the law of diminishing returns is an economic theory that predicts after some optimal level

Of capacity is reached adding additional is only going to result in smaller increases and eventually no effect and then adverse effects so the old you know if a little bit works how about

Give it more well that's good if a little bit's good how about more but then eventually it becomes a bad thing now there's a great book written on this for the financial markets written by

Bill bonner someone that i love to read it's called hormageddon you can see it up here and basically the the basis of the hormageddon book is that it's how too much of a good thing leads

To disaster and if you love my little mini history lessons that i do in my videos then you're absolutely gonna love this book bill bonner chases this law of diminishing returns throughout history

Um showing pro proof from the napoleonic invasion of russia the collapse of the us healthcare system world war ii war on terror and on and on and on and so anyway check that book out if you

Like history and you want to see how too much of a good thing is bad but really we can see this in our markets right where we can see basically every single pullback every single crash where the fed has to

Interact each response it has to be bigger and it has to be faster than last one because of diminishing returns and so each new crisis leads to bigger and bigger responses so

In 2008 the tarp bailout with the bank if you remember the great financial crash 2008 the banks collapsed and we had to bail out the banks they put together the tarp

Bailout and it was 700 billion dollars back in 2008 that was massive nobody could ever even imagine that 700 billion to bail at the banks but today it's trillions trillions of dollars two three four

Trillion dollars in just a couple of months which is exactly backing up my point it has to be more so each crisis it gets harder and harder to address this and so um and the fed not only does the

Response have to be bigger but they start running out of tools so typically the fed would just lower interest rates and by lowering interest rates that was enough in 2008 they actually had to start doing quantitative

Easing well today the interest rates are so low there's not a lot they can do so when the pandemic hit rates were already so low that moving them down to zero which is about as far

As they could go basically had almost no no effect minimal effect anyway so they had to go in and they had to do the qe again which they did they had to start

Buying bonds that wasn't enough they just start buying junk bonds and the problem is the fed starts running out of options now there's not a lot left for the fed to do as a matter of fact i talked about it in a

Recent video you can see right here that they only have really one or two more options left and then they're done so the question everybody wants to know is when when will it end now as i say over and

Over timing this thing is impossible so it's better to know how it ends all right so if we know how it ends then we can watch for the signs now i always talk about this it's like

Driving a car i got directions someone wrote him down turned right at the old mailbox turned left at the sign at the end of the fence turn right i don't know how long it's going to take to get there

But as i'm watching the signs i know i'm getting closer and closer and so we don't know when this is going to end but if we watch the signs we know when it's going to get closer and closer and so really there's

Two ways this ends all right there's two ways good and bad let me break it down so number one the good way is that the economy recovers and it closes the gap the second one is basically the fed goes till they blow

They they keep it pinned until they can't anymore so um number one basically like i said the economy recovers and it closes the gap and what do i mean by that so to put this into easy to

Understand terms think about your own personal finances and i already hear all the people in the comments the government's not like your personal finances well it kind of is we all follow the

Same laws but think about your own personal finance so if you were to take a hit to your income like maybe what happened with a pandemic you are short on income so you could live off of debt right you could live

Off of credit cards you could live off of a home equity line and what happens is you're hoping that your income returns pretty quickly all right so you're racking up debt your income takes a hit you're racking up

Debt but you're hoping that your income returns pretty quickly and then you can pay off the debt that you accumulated to get you through that rough patch okay that's how it works and so basically

That's exactly what the government's doing is doing the same thing so income and taxes have completely dropped well incomes drop because taxes aren't being paid because nobody's working right and

So the income has dropped for the government in addition they need all this additional spending all the stimulus and things like that they need to cover all that and so

Basically they're doing the same thing their hope is that the economy will catch back up tax revenues will catch back up the stimulus won't be needed anymore and they're hoping that it's going to

Be able to come back up enough to bring back enough revenue that they can start to pay back the debt they can justify the debt they can justify these sky-high stock valuations that they push things

Into but as you probably know from your own personal finances the more debt you take on the harder and harder this gets and so not only do we have massive debt but

Then globally we have record unemployment globally um and at this point there's real there's no real path to getting back to normal they say you know up to potentially 40

Of these jobs may never come back um a lot of industries are maybe kind of done as we know it we don't really know and so if we see this happening globally and there's really no path getting back

To normal then this whole theory of hoping to close the gap it seemed seems to be diminishing on its own right that seems to be getting further and further away

And so if it's not going to close the gap then what does that leave us with that leaves us with option number two and that is that the fed goes until they blow

But what does blowing look like what does that even mean what does that mean go to a blow what does it look like well what that means is it gets to a point where it doesn't work where nothing they do works anymore the system is just

Too far gone and then there's there's nothing that they can do um so you know adding more debt doesn't matter right it's like at some point if you're out of work for so long and you've taken on as many credit cards as

You can at some point it just doesn't matter and you're probably gonna have to declare bankruptcy and start over and so the government is racking up so much debt in fact the us debt um the debt to gdp

That's the amount of debt to the gross domestic product the debt to gdp ratio at the highest it's ever been so we can't just keep printing more debt printing debt to service the debt now of course we can do it we are doing it we

Can do it for a while just like you can with your own finances but eventually it ends now if a country could just print money forever then zimbabwe argentina venezuela they'd

All be rich but the problem is money printed eventually leads to massive inflation which of course we've seen in all those countries but but but but i

Hear it the us it's the reserve currency you say right so of course we can do it we're the reserve currency yes and so we've gotten away with it so far that allows us to get away with it

We it allows us to rack up this debt much higher and much longer than the other countries could get away with but nothing lasts forever and like i like i said we've well i've made several videos on the us

Dollar losing its reserve status it's being chipped away i've probably made a dozen videos about this and the us dollars reserve status is consi

Constantly being chipped away constantly being eroded even if we don't ever lose the reserve status the other risk is that we create sky-high inflation massive inflation

Massive inflation leads to larger wealth gaps right those who own the assets see their wealth rise because they own assets those who don't own any assets they just work for their wages well they see their

Purchasing power drop and what that does is that just continues to get the the gap between rich and poor bigger and bigger the further and further the poor fall behind so that's not going to work

Either so the fed they're going to have to stop if they start to see the inflation now in the previous video i talked about this where i mentioned that the fed has a new policy

And they're going to quote run hot let the economy run hot until they pass the two percent target inflation which i made the case that you can't hit that accurately there's just no way so typically they

Start slowing down as they get there but they're basically saying we're not going to slow down we're going to let it run hot which in my mind means that they're going to overshoot their target

Which will eventually lead to a big a bigger bubble it's going to get bigger and bigger and bigger which leads us to the question how long will we believe the market only matters if the feds buys stocks

Right if everybody knows the market's only being propped up for the fed how long is that going to be okay how long is that going to be acceptable everybody knows that the economy has to

Catch up at some point so what is that point now it's it's uh it's fantasyland to think that it can just work forever right we're already seeing the signs from this what we call the

Smart money the billionaires the hedge funds where they're basically opting out the smart money's out and the dumb money that's me and you the retail investors

The dumb money we're jumping in and i made this case over and over so the warren buffets and the druckenmillers uh they're out but the robin hood traders the gamblers because vegas is shut down

They're in and so how long is it going to work like that even with the fed running full steam it's just not realistic right to keep it going i think i think it is realistic to see a 10

20 30 market drop sometime over the next 12 months and i say that because the smart money they're scared the smart money is on the sidelines and we should be listening so how does it end that's the question

How does it end so if the real economy can grow it could close the gap okay then there's no bust then that's the ideal scenario that's what we want to happen but if we have slow growth which it looks like it's

Going to happen like these businesses aren't coming back we have slow growth then the closing that graph that gap becomes less realistic and the fed's going to have to walk away and if they do that when i say walk away

Meaning they can't keep injecting forever and when they do that just like we saw in 2018 the market stopped crashing so we can't have that so the next option is the fed just keeps pumping they keep

Pumping pumping pumping until it doesn't work anymore hence what i said they're going to go till they blow and if so if that's the option then how long will it take to get there

Now that's the question everybody wants to know how long will it take when will that happen and i hate to tell you that i don't know but again we're watching the signs and i do

Know that you need to be prepared you need to be prepared for anything because in this market it's super volatile it's most frosty at the top we're having huge run-ups and we're having huge

Corrections which like i said to see a 20 to 30 correction sometime in the next 12 months is totally probable totally realistic and we can continue to pop up higher

From there so we need to be prepared for anything we need to be prepared to stay in the market as they push the asset prices higher and higher and higher and faster than anyone could imagine but we also

Have to be prepared for the crash that can happen without warning and there is a way to do both sounds a little bit crazy most people think they should just stay out of the market but if you stay out of the market

You risk getting left behind as assets keep pushing up but if you're just jumping in blindly buying stuff you risk getting caught in the crash and losing everything so there is a

Right way to do this you just need to have the right strategy now i know this video is already going long so i can't break the whole strategy down for you there's quite a bit to it however i am

Having a one hour training where i'm gonna break this whole strategy down exactly how you can figure it out for you custom tailored plan so you can stay in the market and stay long and get this massive upside but

Also be ready for the market when it turns on a dime there is a way if you build up the strategy and so i'm going to put this one hour training together it's all for free you can click on the link it's in the

Description so you can sign up and you can get the more information from that and that's it i hope to see you there let me know what you think about this video do you think the market is going

To close the gap as the feds hope that's uh the easy that's the hopeful solution number one or do you think number two the fed's gonna go until they blow and we're gonna see this whole

Thing go until the market burst which one do you think is going to happen give me a one for uh closing the gap give me a number two for go till you blow and then make sure you're prepared

Anything can happen if you've got it on your own good good job good luck if you want a little bit of help come to the hour long training i'm doing there's a link down there

It's for free i highly advise you to come check it out and that's it that's what i got for you to your success you

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