The Zach Foust Show
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The Zach Foust Show
This Crash Indicator is FLASHING RED | ZFS 95
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Nobody taught us how bonds work in school, so I am going to teach you today, because the 30 year Treasury bond just hit a 19 year high and almost nobody is talking about it.
I am broadcasting from the producer chair and breaking down the one signal that cannot be spun by either party. The bond market. I walk you through what a bond actually is, what a yield actually means, how the Dutch auction sets the rate, and why when these long term bond rates climb, your mortgage rate climbs right along with them. I draw the whole thing out on the whiteboard so it finally makes sense.
Here is why it matters. The 30 year is sitting at 5.26%, higher than it was right before the 2008 crash. Our interest on the debt is now over $1.1 trillion a year, more than the defense budget. The Strategic Petroleum Reserve just fell to its lowest level since 1983 in its 18th straight weekly decline. And the Iran war keeps choking off oil, which pushes inflation, which keeps bond investors demanding higher yields because inflation is theft and they know it.
I also break down Kevin Warsh's latest Fed meeting where a single sentence about there being no soft inflation target moved both the stock and bond markets in under an hour. I close with exactly what I am doing with my own money in an economy that is telling us inflation is here to stay.
Oh, welcome into episode number 95 of the Zach Fouse Show. Today, broadcasting from the producer chair, we're gonna be going over some crash indicators that are indeed flashing red, why inflation will probably stick around, and how the bond market, the most non-partisan view of this economy, is starting to show signs of weakness. Hello, thank you for joining us. Thank you for joining us. And if you are in the chat, uh, we do do this live every single time on YouTube and Twitch. I hang around at the beginning and hang around at the end for some QA. Today, though, we're gonna get right into it. The 30-year treasury bond. Now, if I say the 30-year treasury bond, hold up. If I say the 30-year treasury bond, and your brain immediately goes blank, it goes numb, it wants no new information, and it's just I want nothing to do. What's a bond? James Bond's the only bond I know. My my uncle talked about war bonds, my mom said my grandma might give me some bonds. I what's a bond? We are gonna go into that, okay? So if this information doesn't hit you, because you don't fully grasp a bond, that's fine. They don't teach about bonds in school. They don't teach about bonds in school. Did you have a bond class? Did you have an economics class in high school that that taught you about the basics of supply and demand? Taught you about inventories, the the socioeconomic interaction with not only cultures but international economies with ours and trade. Did you learn about that?
SPEAKER_01You probably didn't. And if you did, if you did, that's cool.
SPEAKER_02But I'm gonna say the mass majority of public schooling systems did not, outside of having some form of elective bondage to you, Corman. That's another bond. We're gonna talk about bonds. But the big news that isn't really big news for some reason. It's not really big news, is that the third-year bond is spiking. Now I have a uh a gentleman here, Jim Bianco over on X saying the third year is up 12 basis points to 5.21%, a new 19-year high. The market is worried about inflation and wants the Fed to act. If it does not, the market will. Bond traders will stop panicking when the Fed starts panicking. Right now, the Fed and Warsh are not panicking. Now, one thing I do want to say about this post and many on X. Really, if you ever scroll on X, you have to take this into consideration. Every single time, every single time, every single, myself included, though poorly so, I'll state. Not well executed on my part. Every single time you are seeing somebody or something or some video or some image on X, they want your attention. And they're gonna try to do their best to grab it. Now that could be used for good, that could be used for evil, that could be used for leadership, it could be used for manipulation, it could be used for education, it could be used for indoctrination. A lot it could be used for. But this chart is trying to scare you. I mean, look at this hockey stick of a 30-year bond. Now, the the message within the text is accurate. The message within the uh the text is accurate. 30 years up 12 basis points of 5.21%. But the reason I don't like the use of this graph, this is the last three days. What use do we really have in seeing the last three days? And especially such when the last three days were such kind of neutral days, it flooded between 5.1 and 5.14 that this movement looks so much more dramatic in its move up to 5.2. So let's pull up the today graph. And as I show you here on the screen right now, for my audio listeners only, I have the third-year treasury year yield. I have a weird Lisp today. My Lisp has been upgraded. 5.262% is today. So it's actually 0.6% higher than it was in that post. So the reality is actually scary than scarier than what that graph was trying to give off in a way. But I want to be very clear. So I pulled back the graph. What you're seeing on the screen right now is 1980. And I'm gonna shrink down our chat a little bit. Love everyone chatting along, but I'm gonna shrink it down a little bit for everyone's viewing pleasure. Okay. The third-year treasury year old on screen right now at 5.26%. Again, we will get into what this is, what this means, and how it impacts you. And at the end of this, I'm gonna give you some steps that you can take with an inevitable future that maybe you agree with me on, okay, because this is the way I'm going to invest my money. I am not an investment advisor, a financial advisor, a stock portfolio advisor. I'm not. I'm not. I'm a real estate agent. I am a licensed realtor. Okay. Housing advice, I'm here for. And legally, I can give it to you as a fiduciary in a fiduciary manner.
SPEAKER_01But I will tell you what I'm doing with my money. That's not illegal. Someone look up if that's illegal. I don't think that's illegal. There's no one here.
SPEAKER_02I don't know who I pointed to. 5.261% is the 30-year treasury yield as of today. Now, the reason I want to bring up the 30-year 30 yield today is because of something very specific. Something very specific. I want you to look at where rates were just before the crash of 2008. If you're watching on the screen, I will read the numbers out for you. They peaked at a high of 5.44 in 2007.
SPEAKER_012007.
SPEAKER_02This is April of 2007. Then if we keep going on through 2008, we'll see in April of 2008, we're at 4.52. 4.52. Then we print some money, and all of a sudden it would start to drop. It would hit its low when we did our first big print in October of 2008 and it would close at 2.680. It would climb back up. It would hover in the 3 to 4% range all the way to and through COVID. Now, quick quiz. And this is for those that either know nothing about bonds or know a little bit of something, and this might be easy for you. But what happens when bond rates go low? Quick quiz. What happens when bond rates go low in the 10, 30, 5%, whatever year yield bond, a long-term bond, when long-term bond yields, when this percentage that's currently 5.263%, as we look at the screen, when that number is low, what is also low?
SPEAKER_01Get, get, get low when the whistle blow. Rates for you. Rates for you.
SPEAKER_02The answer is rates for you. When rates for bonds are high, so too is the cost of you getting a home.
SPEAKER_01Because the mortgage rate's going to be higher. Okay? Because the rate is higher. The mortgage rate.
SPEAKER_02The 30-year mortgage rate goes higher when long-term bonds go higher. Do you hear me? And we're going to walk through how this works. We're going to walk through how this works, okay? Let me bring up my board real quick. Let me bring this up, okay? So let's get a bond. I'm going to draw this out on the screen. I'm drawing out the word bond. Okay. When a bond yield is going up, okay, so when the percentage is going up, what does that mean?
SPEAKER_01Okay, so again, a bond over here. What is a yield? Anyone know what a yield on a bond is?
SPEAKER_02A yield on a bond is equal to the ROI. That's all I want you to think about when you hear the word yield. How much money is this going to yield me? Is a way you can remember it. A yield is the ROI. Okay. So the percentage that we're seeing, like say, on the 30-year treasury yield, is 5.263%. That means that when our government, okay, let me draw our government. How's this? Little titty on the top, little flag, couple columns. We'll call it good there, okay? How's a castle door look? I think our White House should have a castle door in an unnecessary mode. Okay. Here we go. Add some more pillars to the top, make it look more like the Congress. Actually, it doesn't have the titty at the top. What am I doing? I drew the Congress. We're just gonna keep it that way. So when the government needs more money to spend, okay, when the government needs more money to spend, when the deficit has risen, the debt's going higher, the cost of running our military is more expensive, the cost of giving health insurance to those that need it's more expensive, even though we're hardly doing that. The cost of everything that our country supports gets more expensive.
SPEAKER_01How do you think we get that money? Some may say, Zach, we print it. Yes, but oftentimes that printing is done for the benefit of the private markets.
SPEAKER_02You know, like congressionally, we bailed out the big banks in 2008. We didn't bail out the government, we bailed out the banks. Now, by bailing out the banks, did we keep people from suffering dramatically? And that was government intervention. So, yeah, the ties there, but it bailed out banks. And then the Federal Reserve infused money into, again, banks. So it didn't really benefit us. All right. So when the government needs more money, they go ahead and issue what's known as a bond. From the Treasury Department, they issue what's known as a treasury bond. The Treasury bond gets sold at a Dutch auction. Okay, you can't really buy bonds from a typical market fresh. What I mean by fresh is the moment it's issued from the government as a new bond, that is not accessible in a regular everyday market. It's accessible at these institutional banking auctions. And this Dutch auction works. I'm not even gonna explain how it works, to be honest with you, because it's it's a little complex, but also it's not. The Dutch auction is where the bond yield is decided. Here's how. So the government will walk in and say, hey, we need, let me go red real quick. We need $30 billion. We need 30 B's. We're gonna issue 30 B's worth of, let's say, 10-year treasury bonds. When the 10-year treasury bonds are issued, they're gonna be issued to banks to buy at a Dutch auction. Uh and that auction works like this.
SPEAKER_01Let's look up the 10-year treasury yield. Okay, so the 10-year, you can see spiking too.
SPEAKER_02They move often in tandem, almost historically always in tandem. So the 10-year is at 4.73. So let's say the government comes in and says, hey, we're going to issue $30 billion worth of bonds at a 4.733% yield. Now you can get in things like coupon rates, maturity rates. Uh, the maturity rate, just simply put, is how long it will last. These are 10-year treasury bonds, so it'll be 10 years. All I want you to understand is that the 4.733% is what that investor would be making on an annual basis until he recoupes his original investment and they will hold this bond till its maturity date. So if I were to buy a little chunk of that 30B, that 30 billion, and I bought some of these bonds at the auction at 4.733%, if I bought a million's worth, I'm going to expect $47,333 in yield every single year from the government. Does that make sense? If I'm going too quick, chat, stop me. This is your responsibility to make sure the podcast flows. Let me pull up the debt clock. You guys seen the debt clock before? You guys seen the debt clock before? Let me pull it up real fast for you. So here's the debt clock. You see this or uh this yellow section right here that says interest on debt net, and it's $1.1 trillion, which is more than our at least current defense budget. Interest on debt. That is the money our government is paying the investors who are buying these bonds.
SPEAKER_01Am I going too fast? Our country owes $1.1 million every year to these investors just in interest. Only in interest. In interest alone.
SPEAKER_02So when this rate is going up, what does that mean? It means that the government at its baseline, at the start of this auction, has to say, we're willing to pay you 4.733%, which guess what is going to eat into our debt. So as this keeps going up, we have a problem. And the problem isn't just the debt being paid off, it's also for why they're buying it. Guys, do you know why a country or a company would buy bonds? Do you know what they're buying? Let me put it to you this way. Like, if you bought a stock in Apple. Okay, if you bought a stock in Apple, and nobody put a one in the chat, so I'm gonna slow this down. I'm gonna slow this down.
SPEAKER_01If you bought a stock at Apple, who are you investing in? You're investing in Apple. Okay, if I buy a stock in Tesla, if I give up money to buy a small portion, a share of the corporation of Tesla, who am I investing in? I'm investing in Tesla. Their longevity, their success, their profitability. Okay, does that make sense? Does that make sense? What is somebody getting when they invest in a bond? Well, they're investing in the country. They're investing in the country. Specifically, let's be specific here. Our dollar is the root of our country's economy. Our dollar is a root of our country's economy. So hear me out.
SPEAKER_02If I were to say, let me pull the screen back up. When I purchase a bond, let's just make up a new price. Actually, let's not. Let's say I buy this bond. No, I'm gonna make up a new price. Let's come over here real quick. So I were to buy a bond at 3%. You might say that's low for today.
SPEAKER_01It is. But let's say I bought a 10-year bond. 10-year treasury bond.
SPEAKER_02Stick with me. We're gonna understand this because we have to, guys, there's certain amounts of things they didn't teach us that we have to understand to understand where we're at economically, so that you can make the right moves with your money. Let's say we bought a 10-year treasury bond at a 3% rate, which by the way, you can buy these too. You can buy them through bond interdealers that sell them on the aftermarket when companies want to sell them early, or or countries, or anybody who gets them originally. You can purchase these. If I were to have gotten, check this, a 10-year bond at 3% in an economy that is inflating year over year, every year, by 3%.
SPEAKER_01Check this one more time.
SPEAKER_02So the baseline of our economy is the dollar. And every time our dollar inflates, it's losing value. Every time our dollar inflates, it's losing value. It's losing value based off the percentage of the inflation. So 3% inflation means the dollar is worth 3% less. Okay. So if I were investing in something that I was potentially going to have to hold for maybe 10 years, and I knew I was gonna get a 3% return on that investment, all while the dollar was gonna inflate every year by 3%, is this a good investment?
SPEAKER_01Think of it. You're getting 3% on your money from the time of investment every year, all while the dollar's getting 3% weaker.
SPEAKER_02And technically there's a difference between the rising 3% and the lowering 3%, but all for all intents and purposes, this is a bad investment. Because the money you'd be making is bad being eliminated by inflation. Guys, inflation is theft. They're stealing the power of the money. They do not have to steal the dollar out of your pocket to steal it from you. They simply have to steal the power from the dollar that sits in your pocket. And inflation, because it is so rampant, well, guess what? Investors do not want to invest at 3%. When we have inflation rates that are at 3.5%, when we've had reports that are 4 plus percent, I know I did that backwards. All right, guess what investors want from their yield? They want to be safe from inflation. So if they're gonna buy a long-term bond, they're gonna want more than market rate inflation. Does that make sense? Bond investors want higher than market rate inflation for the future. And they see a war going on causing an energy crisis, they see tariffs rule wrecking through the corporate economy, they see unaffordability wrecking through the working class economy, and they see that internationally we're losing so much soft power. And the dollar is a large part of that soft power. So the dollar is inflating, there's no real trust you could give the country as a company. Like if you were to give the company of America a quick synopsis from a business angle, it's had better days. So when an investor is expecting a higher number, this means that debt is now more expensive. Okay, that means the debt that you can obtain or banks could obtain is more expensive. That is air 10, 20, and 30 year treasury bonds. So let me show you this real quick. Okay, so if you don't have your screen pulled up, pull it up real fast. I'm gonna pull up the last five years of the 10-year treasury bond. And then I'm gonna pull up the last 10 years.
SPEAKER_03Jeffrey Epstein alluded to sexual encounters.
SPEAKER_02Well, intro came on. Gotta fix that hotkey. Can't be there. Okay, let me pull up the last five years real quick. Okay, this is the 10-year treasure yield. You see it? Pull it up on the screen real quick if you're not looking. Real quick, if you're driving, don't look. You see a steady climb out of 2021, 2022 into 2023 where rates got high and stayed high. Okay, why did that happen? Because the tenure did the same exact thing. Because debt got more expensive. Let's look at the third year. Coming out of 2021 into 2023, rates got high and they stayed high. It's because of the 10-year treasury yield, guys. It's because of the 10 year treasury yield. So when people say to me, by the way, like, Zach, you're so political. Why are you talking about politics so much? You don't know anything about war. Yeah, you're you're right, but everything that has to do with the living American in this economy has to do with inflation. And if we're spending a shit ton of money on a war that doesn't matter, having to give up a bunch of money to the enemy that we were trying to displace, all while shutting down an economically I mean, imperative, imperatively important. Straight for more than five months now. I mean, that's going to affect the normal everyday life of everybody in America economically. The economy isn't just math. Well, let's bring up some math. The other reason that the war matters is the strategic petroleum reserve. It fell another 3.8 million last week to 308 million barrels, the lowest it's been since March 1983 when it was being built up. It uh started in the mid-70s in response to the Yom Kippur War. This marks the 18th consecutive weekly decline, the longest since 2023 per zero hedge. During this period, the U.S. oil reserves in the SPR have fallen 108 million barrels or 26%. Meanwhile, commercial crude oil stocks, excluding the SPR, dropped 7.2 million barrels to 405 million barrels, the lowest it's been since October of 2018. This is also 7% below the five-year average for the first time of the year. America's oil buffer is slowly evaporating.
SPEAKER_01When oil costs more, energy costs more, when energy costs more, everything costs more.
SPEAKER_02And people at the Fed are realizing Fed officials who voted to hike rates say action is needed now against inflation. Did you catch the latest Fed Reserve meeting? Don't worry if you didn't. I watched it for you, and I'm pulling the TV screen in because we're gonna watch a little movie. You remember in school when the teacher pulled in a screen? Screens don't even excite you anymore, do they? Screens don't even excite you anymore. You feel nothing when you see a screen. You feel absolutely nothing. You would see a TV roll into a classroom and you think you'd be looking at a relic. That's not an iPad. You feel nothing. You're a monster. This is Kevin Warsh, Federal Reserve Chairman. Speaking this last Wednesday, July 29th, 2026, his opening remarks. About a minute in, he has a sentence that moved both the bond market and stock market in a mere hour. Let's hear that sentence. Let's hear his opening remarks. Kevin Warsh.
SPEAKER_00Good day. Whoo, that was fire. My second FOMC committee meeting as chairman has come quickly. It's probably too early to call it a streak, but our discussions again were collegial and constructive. I'm truly lucky to work with colleagues so capable and mission focused.
SPEAKER_02Also, this is a great leader after coming out of a meeting where you just argued with one another. This is a great opening bit as a leader. As a leader, as a corporate functioning leader, when you when you you have disagreements with with your with your other people in your positions, your other shift managers, and you're the head manager, you know, you come out, you say, you know, I'm so lucky to be able to work with these people. Man, I love these people. They're so uh strong, uh, they're so uh you know hard on themselves and ensuring that we do the right thing here. And I I I couldn't be around a better set of people. It's exactly what you say after that.
SPEAKER_00And so determined, like I am, to sharpen the performance of the Federal Reserve. Today, as you know, our committee decided to vote by a nine to three vote to maintain the target range for the federal funds rate at three and one-half to three and three quarters percent. The committee is continuing its policy of making ample reserves in the banking system. The economy is showing impressive resilience. Really? Even with recent shocks, the trends are positive and reveal solid growth.
SPEAKER_02Job Which ones? The layoffs, the 500,000 people that went from employed to non-employed status, the eight hundred thousand that went from unemployed to not participating in the labor force status, the five plus percent unemployment rate of those coming out of college with a fresh degree being a whole percent higher than the general populace unemployment. Is it the rise in electric costs or the rise in oil prices via the supply shock? Is it the supply shock of urea uh pushing farmers into more expensive fertilizer? Which indicator? That's because a lot of people left the workforce.
SPEAKER_00Inflation remains elevated relative to the committee's 2% goal. The committee remains resolute. You've heard this before, but we will deliver price stability.
SPEAKER_02And price stability are not price decreases. Just to be clear, this is political pandering. Oh, we're gonna bring price stability. That means they're gonna slow down the price increase. Not that they're gonna drop prices. I know that's somebody said, but it's what's alluded. And it's what the GOP will take and say, we're gonna get prices down.
SPEAKER_00As before, the policy statement conveys just the facts. It's steering clear of forecasting. A choice we consider especially prudent at these uncertain times. Uncertainty, however, does not mean a lack of clarity. For some households, businesses, and market professionals, five years of high inflation have left a mistaken impression that's hard to shake, that the Fed's implicit inflation target was somehow above two percent. Let me reiterate there is no soft inflation target. There is no soft implicit target. Not on this committee's watch. There's only a target, and it's two percent.
SPEAKER_02Not one did you catch the sentence? That was the sentence. Let me rerun it for you.
SPEAKER_00There is no soft implicit target. Right here. Not on this committee's watch. There's only a target, and it's two percent. Not so that the Fed's implicit inflation target was somehow above two percent. Let me reiterate there is no soft inflation target.
SPEAKER_02There is no soft inflation target. Now, I've pulled up the definition real quick. So oh, I thought I pulled up the definition. I was just gonna read it for betum. Hard inflation versus soft inflation. Uh, soft inflation more was uh resulting in smaller numbers, hard inflation being more persistent long term. Let me look that back up again just so I can read it verbatim. The central bank raising interest rates just enough to lower inflation to 2%, being a soft goal uh where hard interest rates go up too fast, too high, causing a sharp economic downturn, lower business activity, and rising unemployment. That's not it. That's a soft landing versus a hard landing.
SPEAKER_01Let's pull up this article. Oop.
SPEAKER_02Fed Wars says there's no soft target for inflation, only a 2% goal. Uh so what that means is for some households, businesses, and market professionals, five years of high inflation have left. Uh mistaken, uh wait, this isn't actually giving any. See, this is what happens when I prepare for a podcast 20 minutes beforehand. This is all on me. Guys, I woke up, my back was reeling. I couldn't even get out of bed. I could not even get out of bed. I rolled out of it. I got my steps in, did some stretching, I got a heating pad on, got some biofreeze on it. But basically what he is saying here is there's no soft target. We're not going for anything next month, we're not going for anything even probably this year. We're looking for the long-standing approach of our Federal Reserve to look after the inflation of the future, to get past where we're at right now. We inherited an inflated economy. We inherited an inflating economy. We are gonna do our best to steer clear of stagflation. We're gonna do our best to steer to clear of historic inflation, and that's essentially what he is saying here. That statement, though, sent markets up. Let's go back over to the or I'm sorry, up in arms, not up, up in arms. So here we see on the screen the SP 500 graph. If we scroll all the way over to Wednesday, which is when he was speaking, 3 p.m. 7443 was the SP 500 index upon just his words. And since we're covered, because we're in a very volatile market, but just his words dropped the stock market by over a hundred points. Isn't that crazy? Am I the only nerd that geeks out? Like, look at this, look at that. Look at words, words did that. That's crazy. And I know sentiment and words do that all the time, but but just just continuing to watch it and then watching it completely rebound immediately because like 80% of all trades are done by AI and robots. That's a real stat. Okay, so let's go back over here again. Reissue on the bond. When the bond is issued, it's issued by the government to the banks, the big arms of the Federal Reserve and others that help assist our country running efficiently through a Dutch auction. Here's how that Dutch auction works. So the government will say, hey, 4.733%. That's what we're doing. Now let's say there's 30 bill on the table. Let's say a few people come in and let me switch colors real quick. Let's say a few people come in and they buy 10 bill.
SPEAKER_01They say, I will go ahead and buy 10 bill at 4.733%. Sounds good. Sounds good.
SPEAKER_02Now the thing about a Dutch auction is what's different from a typical auction, is they will not close the auction until everything is sold.
SPEAKER_01They have to sell it all. Just like a Dutch oven. They gotta sell it all.
SPEAKER_02So let's say somebody else comes in, another like five, six, seven, six, seven institutions, individuals, countries, hedge firms, say we'll buy 15 bill, but you know, we'll do it at uh we'll do it at 4.76.
SPEAKER_01Or 7, let's do 743 basis points. That would mean, okay, these guys are getting a better deal. Why? They're getting a higher return. They're getting a higher return.
SPEAKER_02In a Dutch auction, this means that the people who bought at 10 bill at the lower return are now also gonna get the higher return number. Does that make sense? The Dutch auction works that the highest yield that exits that auction is the yield that everyone who bid at any time gets. So if the demand for bonds is high, you will see this get eaten up. If the demand for bonds are low, you will see the bond rate continue to go higher. And let me look so again, we have 30 billion in total, 25 billion. So let's say another 5 billion, no one wants to buy anymore at the 4.74. The last five bill gets sold at 4.75. And I'm sure there's somebody in here that has experience with like bond dealing and intertrading and all that things like that, and they're gonna be like, you're you're oversimplifying this. Yes. Uh terminology and stuff like that we can get into. And I highly suggest, by the way, if you're interested in stuff like this, look up these specific terms. Like, what is a coupon rate? Like, look that stuff up. Like, okay, well, how does a Dutch bond auction work? Like, look that stuff up. People have great visuals, great animations, uh, that are much better better um ways to maybe learn these specific topics. Really, I want us to understand why bond rates going high is a big deal. Because when bond rates are going high, it means a couple things. One, it means our credit's more expensive. The second thing it means is that companies and countries want our debt a little bit less. Usually means they want it a little bit less when these rates are higher. Because if the government were to come in and say, when the market rate is 4.733, hey, we're gonna sell you these bonds at 4.4%, no one's gonna buy. And the reason is because of things like inflation. So inflation is not only affecting us, it's affecting countries, it's affecting companies, it's affecting investors, and it's affecting our credit. One of the biggest things affecting the bond market right now is no secret, it is Iran. This from President Trump this morning at 11 14 a.m. July 31st. Welcome to the end of the month. President Trump says the United States will continue carrying out powerful strikes against Iran, insisting that Tehran will eventually have no choice but to back down. President Trump says the military campaign against Iran is progressing successfully, describing the conflict as quote, going very well, unquote. President Trump adds the U.S. forces are continuing to achieve what he described as major victories, the ongoing operation against Iran. Guys, let me lay this out real easy.
SPEAKER_01Real easy, okay? Okay, war leads to a need for oil. And in this case, this war is also limiting the flow of oil. Oil is also used for shipping. Infrastructure. Manufacturing.
SPEAKER_02And all other things, from deaf to diesel, oil is affecting all things that run by machinery. So in turn, because all these things are getting more expensive because there is less oil, and when there is less of something, the price typically goes up, the cost of all of these things are going up. Meaning inflation is happening. It's and the number keeps going up. Does that make sense? So when war is stifling the oil supply, all while we need more money and more oil to continue it, and it's affecting everything in the middle class society's economy, causing inflation, why should you not care about the war? And you might say, Zach, well, you can't do anything about it. You're right, but there are some financial things that I can look at to say, hmm, maybe I can kind of see the writing on the wall. Let me bring up another camera real quick. And this is how we're gonna end it, guys.
SPEAKER_01This is how we're gonna end it. I want to tell you a little bit about maybe what you can do with your money. And I don't even want to say those words. I'm gonna tell you what I do with my money. Oh, this is a thumbnail of it. The actual one. Oh, there it is. Okay.
SPEAKER_02So this is a Canva graphic we did, I think it was for episode somewhere in the 30s, high thirties, on our economy's fallout and what's gonna lead up to it. We went through about a dozen of the reasons why our economy feels the way that it does. Housing pressure, the gaslighting from our political figures, potential bank failure, credit cracks, rate drops, uh, and then walked through what that fallout will feel like. Okay. What that will feel like. We talked about market misdirection, we talked about the household squeeze and the money squeeze, and then we talked about there's some point where the system snaps. Now, I want to pull up a graph real quick.
SPEAKER_01Fed Reserve assets.
SPEAKER_02The invention was named Quantitative Easing. Now, what's quantitative easing? Now, this is the reason why you need to know that.
SPEAKER_03Jeffrey Epstein, alluded to sexual encounters.
SPEAKER_02Oh, this is such a chaotic podcast. My Jesus, I'm so sorry. I can't hear it, guys. I can't hear it in my ears. I can't hear it in my ears.
SPEAKER_01This is a problem. It's a problem, and we're gonna fix it. It's a problem, and we're gonna fix it. Okay. 2008. They invented something called quantitative easing. So mad right now. It's okay. It's okay. Jesus Lord, it's okay.
SPEAKER_022008. They invented something called quantitative easing. Hear me. Why did they decide to do that? Why did they decide to do that? Guys, guys, guys, guys, guys, guys, guys, guys, guys, guys, guys, guys, guys. Why did they decide to do quantitative easing? Zen, what's quantitative easing? Quantitative easing was when the Federal Reserve decided that they were going, I'm not gonna pull up a graph, that they were going to introduce themselves into the free market economy by doing what? By buying bonds and mortgage securities, but we're gonna focus on bonds. Why did they buy up bonds? Let me bring up this graph one more time. Why were they buying up bonds? So they bought up billions of bonds after the second bank failure.
SPEAKER_01Why? Two reasons. What money do you think that they used to buy the bonds? It's not a trick question. They made it up. Magic money computer.
SPEAKER_02They call up a bank and they say, hey, we're gonna buy these bonds and securities off of you. Here's money. Where'd the money come from? It came from thin air.
SPEAKER_01Fagazzi, Fagozi. It's not real. It's fake. So they were able to move money into a system that needed liquidity, and here's the lesser talked about part. You wanna hear the lesser talked about part? You wanna hear the lesser talked about part? Alright, so here it is. You all? Scoot it over. Let's keep going. Alright. What else do you think fell during that time period?
SPEAKER_02What do you think was starting to spike up that they wanted to control? Rates. The bond markets were going high. Ever since we started letting banks be whatever the heck they wanted, started to go up. And yes, you can see it was much more uh higher beforehand, but frankly, there was a lot less money and a lot less credit flowing through the system at that point. So going up, Jesus Christ. I'm gonna I'm gonna lose my mind. This is never gonna happen ever again in the history of this podcast. I promise.
SPEAKER_01Making the hotkey three was the worst decision of my life. How am I supposed to teach in these conditions?
SPEAKER_02They wanted the rate to come lower. Why? They wanted the rate to come lower so more credit would open up. So they started printing over the years, over the years. And guess what started happening to the rate? It started going lower and lower. Why? Why would the rate start going lower just because the Federal Reserve is printing money? It's because they're buying bonds.
SPEAKER_01Remember earlier? Remember earlier? Okay.
SPEAKER_02So what happens when the bond rates are going so high and all these investors are like, we want even higher rates. This is great. We love this. Fantastic. Yay, high rates means high returns for us. What happens when they're not buying them? What happens when they're not buying, and even so much when they're not buying at the lower percentages? It means that our financing is more expensive. Getting a car, getting a home, anything is more expensive. In 2008, it was too expensive, the rates were, new money was, to save our economy. We needed to expand credit. We're a credit-based usury, fractional reserve, macro corporate neoliberal economy. We have to create new money. And that new money is normally created through loans. When the rates are too high, no one's getting loans. 2008, no one's getting loans. So when they bought up the bonds, guess what they were doing? Typically, these bonds would go to auction and they go for a certain percentage based off the market. This is the market. The Dutch auction showcases the market. What someone's willing to pay for something. Everything has a market.
SPEAKER_01Would you pay a dollar for a banana? Would you pay $20 for it? Everything has a market.
SPEAKER_02So when they're buying it themselves and lessening the supply, well, when the supply goes down on a product that still has decent demand for it, the value of it goes up. And if a bond is more valuable, a real estate investor is willing to take a lower ROI on it. I know this is so much information, and I'm not explaining it perfectly.
SPEAKER_01When the value of a yield is higher, a bond is higher.
SPEAKER_02When its value goes up, its yield goes down. Because they require less money back on their investment because they see the value in the bond. And when you take billions of dollars of bonds off the market, you are in turn making it more valuable. Just like if you had a Pokemon card that was insanely valuable due to the fact there was only like three of them, and then you find out there's 300 of them. What happens to the value of the Pokemon card? It goes down in value. That's the same thing that happened to your dollar when they started printing money. And if we zoom back this graph, that was just 2008. Look at the last sorry, let me max this out. This is that graph we were just looking at, 2008, right here. See how dramatic that looks? Now let's look at it all. Here's 2008. Look what we did during COVID. Look what we're doing now. We're starting to print more. We printed money to infiltrate the bond market, to open up credit for our economy, simultaneously weakening our dollar and creating inflation. And now we are reaping the debts of the mistakes we've made. It's it's not talked about enough that everything changed in the way that we reacted to 2008. The knee-jerk reaction of money printing is the poison. It's the poison. And I do think we're gonna have a crack. I do think we're gonna see inflated assets in the future after that crack because I think we're gonna print more money. I think we have to. I think our hegemonic control over the world's economy is slipping. I think our soft power is slipping. I think that the uh value of having an economy that can actually afford life is much more valuable than our government is giving it, and they're gonna realize that. And I think with the uh approach of AI and other infrastructure, there's gonna have to be a way to bail out through maybe even universal income uh the labor class economy. I would say at this very moment, if you're saying, Zach, what should I invest in for the next 10, 20 years? What I'm doing, gold, silver, index funds, and Bitcoin. Those are the only four that I'm in. I've conglomerated my crypto assets into just Bitcoin. I've been convinced.
SPEAKER_01It's 25, 25, 50.
SPEAKER_02Revolt when the food runs out. Listen, I want you to understand why bonds matter so much. You're not going to hear bonds talked about. You're not going to hear bonds talked about. They're not sexy. Your grandparents talked about bonds. Bonds aren't hot, but bonds are the way that we can see how the big money is looking at our country. How big money views our economy, how big money views the future of inflation. Kevin Walsh, just so you're aware, the current chairman that we saw on the Federal Reserve, do you know that he worked at the Federal Reserve before? It's not his first stint. He was on the board of governors. And this is really going to put a feather in the cap of all the conspiracy theorizers of this is all big and controlled, it's all orchestrated. If you wanted to say, put a guy in charge of the Federal Reserve in a time where you know there's a massive transfer of wealth and crash coming, maybe put in a guy with some experience.
SPEAKER_01The last time he served on the Federal Reserve as a governor? 2006 through 2011. Pre-crash, crash, and post-crash, he was there. Then he was out, now he's back. Son-in-law of Ron Lauder. He's back. What do we do about that? What do we do about any of this?
SPEAKER_02Well, for one, I would say hold an asset. Hold an asset and never let go of it. Could be a house, could be crypto, could be a stock, could be an index fund, could be uh something that you think is just gonna hold value over time. Could be your business, could be your mental health, guys. Your mental health is an asset, your body is an asset, your spiritual presence on this earth is an asset, how valuable you are and your kindness is an asset, how well you can communicate makes you an asset. Your skill set, especially with your hands and your feet, is an asset. So let me tell you right now, the greatest asset on the planet is you. You have control over you, and I want you to disconnect. I want you to disconnect. I want you to disconnect from all the algorithms that are siphoning out your dopamine. I want you to disconnect from all of the different monopolized marketing uh tactics that are used on every TV show and streaming service to try to get you to spend more and think a certain way. I want you to get out of the realm of the news and politics and warfare. You can stay up to date with a show like this, or you could get rid of YouTube, Spotify, wherever you're watching this on, and never watch this again. If it meant that you were gonna be able to detach from the world, find peace within yourself, find some virtue within yourself, find some more uh just fortified mental health, I love it. Grow a garden, go to the gym, go for a walk. Stop scrolling at night. Protect your brain, protect your body. It's all that you have. And these things can be debilitating. I'm here for educational purposes. I'm not here to teach you what to do with your money. I'm also not here to blackpill you. I'm definitely not here for that. I love you. You have a God that created you that loved you. You can believe in whichever God that is. That's cool. It was created in some way, shape, or form. And I'll have that debate with you. It's it's it takes a lot more to believe that it wasn't. And uh, I believe you got a purpose. I believe you're here for something. I really believe that. I want you to take care of yourself. I mean it. That starts today if you haven't been. It starts today if you haven't been. Yeah, uh in the chat, it's a beautiful one. Join uh interworking community stuff, coffee clubs, DD leagues, uh go out and play soccer in the local community, do those local things. Uh go out to the local T-ball outing if your kid's in T ball. Don't just go watch kids play baseball if you don't have a kid in T. That's forget that one. Go on a walk. Um, I love you. I want you to take care of yourself. I'm gonna stick around for a little Q ⁇ A chit-chat with everybody on the live. But for those listening in on Spotify, Apple, or on the recording on YouTube, love you so much. We'll be broadcasting on Monday at 10:30 a.m. our new Twitch and YouTube live stream long time or long form. Long stream, long time. Going through what you missed on the weekend and what's coming up this next week. So you can stay up to date as you work hard to survive in this crazy economy in a waning world. A waning world is beautiful, filled with money and beautiful, beautiful ladies. I love women and ladies, but I'm also the president, so I have to do that right now. I love you. See you next time.