Why there will be no big Fed pivot in 2024… (Part 2)

We are living through a period of historic change right now. And if you don’t know where things are heading… your financial plan is in serious jeopardy.

That’s because the rules of money are changing. The conventional wisdom of the last forty years has hit a dead-end.

Because for the first time in its history…

The Fed No Longer Has A Free Hand

It all comes down to the inner workings of the US credit market.

Treasury bonds are the bedrock of the US financial system. The yield paid by Treasury bonds is considered the “risk-free” rate of return.

As such, Treasury bond yields often serves as a benchmark for other fixed income investments. Thus, Treasury bonds influence interest rates across the entire economy.

This is why Treasury bonds are seen as a reliable reserve asset across the world of global finance. In fact, American banks, financial institutions, and insurance companies own roughly $12 trillion worth of US Treasuries right now.

But here’s the thing – the US government is now running annual deficits greater than $1 trillion a year. The only way to finance those deficits is to sell more Treasury bonds.

Treasuries are a simply a loan to the US government. And in return, the government pays bondholders the stated rate of return.

Thus, US Treasuries have to provide a reasonable yield to attract buyers. And financing over $1 trillion a year requires a lot of buyers.

This is a big part of what the Federal Reserve’s (the Fed’s) aggressive rate-hiking campaign in 2022 was about.

The financial media tells us that Fed Chairman Jerome Powell was trying his best to fight off inflation by raising rates. The idea here is that when inflation slows, Powell would cut rates dramatically again.

That’s not going to happen. Here’s why…

Powell is fighting to save the legacy financial system and the US dollar.

By raising rates so aggressively, Powell has made US Treasuries an attractive investment for global capital again. That hasn’t been the case since the 2008 financial crisis – when the Fed cut interest rates to zero.

And there’s a lot of intrigue within this story…

Not only is Powell looking at a challenger to US dollar supremacy in the BRICS bloc as we discussed two days ago

He also has to fight off a globalist faction inside his own government.

The Western world’s globalist faction is pushing for what it calls the “Great Reset”.

It’s a plot to overthrow the traditional economic order and make globalist institutions the ultimate arbiter of money and credit. The plan requires the commercial banking system to be neutered or eliminated entirely.

So Powell’s Fed is fighting a multi-front war. I find this fascinating.

And here’s why all this matters to you…

The more global capital the Fed can direct into US Treasury bonds, the better it will be able to thwart the globalist plot and deter the BRICS bloc from abandoning the dollar en masse. At least in the near-term.

This is why there will be no true “Fed pivot”.

Sure, Powell may make a few token rate cuts in the years to come. But they will be of the 25 or 50 basis point variety.

He’s not going so slash rates back down to zero… because he can’t.

Powell isn’t trying to “tame” inflation…

He’s trying to save the legacy financial system. And to do that, he has to normalize interest rates and keep the US dollar at the forefront of global finance.

That means the “Fed put” is dead. The Fed won’t be able to backstop the stock market going forward. Simply because it can’t support the Treasury bond market and the stock market at the same time.

And that means the traditional approach to financial planning is going to be seriously lacking going forward. I believe that 401(k) and IRA will become dirty words in the years to come.

The good news is that there is a solution.

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Here’s my angle…

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We weren’t able to provide customized research for people. Every suggestion we made had to be suitable for our entire subscriber base. And we weren’t able to offer real-time support or help with implementation either.

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I’m sharing this with you today because we only open our doors to new members periodically throughout the year… and this is one of those times.

We do this because we take the time to onboard each new member personally. I want to make sure that everyone knows exactly how our resources, our investments, and our network can work for their personal situation.

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-Joe Withrow

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