Benjamin Cowen|01. Mai
Jerome Powell: "I Won't See You Next Time"
Fed Independence and Market Implications: A Nuanced Analysis
This video analyzes the latest FOMC meeting and the potential consequences of Jerome Powell's departure as Fed Chair. The author warns against simplistic political narratives, arguing that institutional credibility is often more valuable than short-term political gains.
Powell vs. Trump: Fact-Checking the Interest Rate Cycle
- Objective Rate Development: Under the previous administration (Trump), the Fed raised rates from 0.25% to 5.5%. The recent, slight rate drop is often portrayed as politically motivated, but rates were trending in one direction for years: upward.
- Reactive Policy: The author criticizes the current administration's demand for rapid rate cuts. He points out that rising energy prices (due to geopolitical conflicts) put the Fed in a difficult position. Had energy prices not risen, the Fed would have already cut rates multiple times in 2026. Instead, rate cuts are now not expected until late 2027.
- The Fallacy of Falling Mortgage Rates: A key point: Lower policy rates do not automatically lead to lower mortgage rates. The Fed only controls the short end of the yield curve. If it cuts rates too early, the long end (30-year Treasury) can actually rise, making mortgages more expensive. The author argues that higher rates (5.5%) would cool the economy more and lower long-term rates, paradoxically easing the housing market.
The Parallel to the SEC: A Warning about Celebrations (The Gensler Effect)
- Case Study: Gary Gensler's Departure (SEC): The crypto community celebrated his resignation on January 20, 2025. Bitcoin was at $109,000. Since then, the sector has since fallen: Bitcoin is down 59% against Gold.
- Cause: According to the author, Gensler's departure opened the floodgates for meme coins without regulatory consequences. This led to a massive misallocation of capital. Retail investors were repeatedly scammed ("rugged") and lost faith in the industry. Social interest in crypto has been declining ever since.
- The Lesson: Celebrating the departure of an unpopular figure marked a market turning point for the worse. The author warns**. The author warns this could happen with the Fed as well: "The markets were better off with Powell than without him."
The Future: Recession vs. Soft Landing
- The New Fed Chair's Challenge: The new chair faces the same dilemma: Cutting rates amid rising inflation (energy crisis) risks a new wave of inflation. Cutting too late risks a recession once the labor market collapses.
- Historical Parallel: The author compares this to 2020/2021. Printing money solved short-term problems but created a massive bubble. Current examples like Target (retail), whose stock fell below its pandemic low, show this is not a sustainable solution.
- Baseline Scenario: The author expects a recession within the next two years (the end of the current cycle). Higher-risk assets (altcoins) are bleeding to Bitcoin, and Bitcoin is bleeding to Gold. The stock market might still rally short-term, but its long-term trend (measured against Gold) points to a recession.
- Key Takeaway: The author advocates for patience. Markets have been moving in a risky direction for years. The change at the top of the Fed could be the trigger for the final downturn, similar to the change at the SEC for crypto. Not every change that is celebrated is good for the market.
Core Message: The Fed's institutional credibility is more valuable than short-term rate cuts. The market may only realize the mistakes of the past (meme coins, premature rate cuts) years later.
