“The job of the Federal Reserve is to take away the punch bowl just when the party is getting good.”
— William McChesney Martin
It’s all over the news, friends.
Inflation is high and it’s getting higher.
What is the Federal Reserve going to do?
I’m making the case that the Fed will actually lower rates.
They won’t continue raising interest rates when we get to December.
I have a couple of specific reasons for this.
Make sure to read until the end so you can find out!
But one thing is clear: Things are a mess.
I’m gonna make sense of it in three easy steps.
1. Rates Will Start Going Down by December
I am strongly convinced that rates will go down by December.
Why do I think this?
Everything is saying rates will go up!
They started raising rates in March.
The Fed waited a long time – probably too long.
Historically, rates go up for a period of about two years.
That’s the historical average.
The longest they’ve raised rates for is three years.
Whenever things stop going up, that’s when they start lowering rates.
It’s typically not a long time.
I think rates are going to stop even sooner.
Danielle DiMartino Booth says we’re in recession.
I believe it.
This is something that will break in the financial system.
That means a group – maybe airlines, maybe it’s finance – will not be able to get debt.
From there, the Fed will have to reverse course.
If there’s one thing you need to know about the financial system, it’s that the system is very complex.
There are lots of different moving parts.
It’s hard to predict what is going to happen.
The interest rates have doubled on a lot of things very recently.
Those costs will start showing up everywhere.
Somewhere, it’s gonna break.
I work in multifamily real estate.
I don’t think it’ll be multifamily or real estate in general.
I think some other industry will break and have to reverse course.
2. Midterm Elections Are in November
There’s also another reason why I think interest rates will fall:
The midterm elections are coming up in November.
People are talking about a red wave because Biden has a very low approval rating.
If you look at what happened with Jimmy Carter, a lot of it was to do with inflation.
Ronald Reagan once asked: Are you better off than you were four years ago?
The answer of course was no because inflation was high.
There was a lot of pain.
People were paying more at gas pumps.
Right now a lot of people are paying $7 per gallon in California.
Politicians know this.
There’s so much pain happening to people at the pump and with rent.
People are sick of it.
At some point, politicians will have to reverse course.
The Fed has said historically that they are an independent organization.
This is not true.
The presidential administration throughout the last 10 years has commented on the Fed.
They speak on what they should do, what they shouldn’t do, and it’s not independent.
They are swayed.
Sometimes the Fed will want to throw a bone to a politician to keep them going.
At some point they’ll have to lower the Fed’s fund rate.
The really interesting thing in all this is that these rising costs are actually caused by stimulus and money printing.
They’ve put all this new money into circulation.
There was 40.9% new currency created, physical or digital between February 2020 and February 2022.
I’ve talked about this before.
It’s a massive, never-before-seen infusion of cash.
That’s why we’re having inflation.
Milton Friedman says inflation is a monetary phenomenon.
If you increase the monetary supply, you’ll have monetary inflation.
That’s exactly what we’re seeing.
The Fed will drop rates.
If you look at the trend of the last 15 years on this chart you can see where rates have been going.
Rates have been trending negative.
Every single time there’s a recession or any sort of trouble, they lower rates.
There will come a point in the very near future where rates may actually go negative.
You might think I’m absolutely crazy!
But just look at the trend line.
Where is the natural next spot for it to go?
It’s already happened in Europe and it could absolutely happen here.
They’ll see a struggling economy and try to do anything they can to support it.
3. Fear Not, Take Action Now!
What should you do with this information?
Fear not, take action!
There’s a window of opportunity here.
If you take action, you can use this to your advantage.
We talked about the 40.9% of new currency in the system.
Debt is still really cheap compared to inflation with all this new money.
It’s important to see that inflation is here to stay.
I’m not a fan of the Federal Reserve.
There’s a big movement now to end the Fed, which I think would be amazing.
It was created in 1913.
Prior to that, there was very little or no inflation.
In just over a hundred years since the federal reserve was created, we’ve had a 98% loss in the dollar’s purchasing power.
The plan is to continue to do more debt, more debt, and more debt.
You can take advantage of this.
You can take advantage of the easy money and use it to grow your wealth.
So don’t resist it.
Don’t hold cash; ride the wave.
My new eBook, How to Use Inflation to Your Advantage, talks about three specific ways to do this.
You can use debt.
You can buy real assets that have cash flow and get paid to hold them.
There’s also a case for precious metals where you can get out a fiat.
Now I want to hear from you!
Do you think the Fed will lower rates by December?
Do you think I’m out of my mind?
I’d love to see your thoughts down in the comments below!
If you haven’t downloaded my new free eBook, you can find it here.
Before you leave, make sure to check out our special report about investing. It compares the stock market to real estate, and it also includes how the pandemic affects your investment future.
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Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.