JEROME POWELL LIVESTREAM: Semiannual Monetary Policy Report to the Congress

What's going on guys, it's Ricky here with Techbook Solutions and Jerome Powell is going to be testifying in front of Congress today and we will be hosting that live stream and it should start in just a little bit. So here we go. All right, so should be starting in the next couple of minutes. What's up, good morning. How are you guys all doing today? We got NASDAQ market pretty much consolidating right now, no true direction. One of the things that we always talk about is again, anytime that you are unsure of market direction, just make sure you don't put yourself in a position where you can't tolerate worst case scenario, right? We do not know, no one can predict what is about to happen or what he's going to say or not say. I just know that the market as of right now is uncertain. And here he goes. All right, well, market's selling off and he hasn't even started speaking yet. There it goes, so any moment now you should be speaking. All right, nice little pop off, look at that NASDAQ market dropping. I guess market is just factoring in maybe a more aggressive interest rate hike. Yep, got NASDAQ with a really nice push down. If I cracked 1K I will join LPP, okay, sounds like a plan. All right, big push here. Look at that. There it goes, real damage, look at that, oh my goodness. So again, this is just the market reacting or getting prepared, he hasn't even started speaking yet. But again, we talked about it, right? Do not put yourself in a position in which you cannot tolerate. I do not think that the market... You might be asking what is causing the market to sell off right now. I think the uncertainty is the market will sell off if Jerome Powell comments on being more aggressive with future interest rate hikes. So what we mean by that is, well, if he reports that he's going to be more aggressive in raising rates in the next interest rate hike, which should be March 22nd of 2023, the market will most likely react in a negative way, right? Raising interest rates is never good for the overall economy, it means that it's more expensive to borrow money. Now if he says that he supports a lower interest rate hike, then that's a little bit different, right? That supports that, oh, we don't need to be as aggressive. So therefore, and look at that, super quick, we add SQQ up two percent on the day. But no, I mean to my understanding he has not started speaking yet. Okay, Jerome Powell is late, surprise, surprise. If you've watched any of his speeches before, we're not too surprised, right? But this is beautiful for if you're part of my LPP team, this is going hand in hand with what I had an opinion on. But again, it's just an opinion. I made a video yesterday, I talked about why I think that the market is going to sell off based off of recent economic data and based off of the unemployment report, the initial claims report. There's an unemployment report and non-farm payrolls that is about to be released this Friday. Initial claims and continuing claims have all been coming in lower than expected. I think that supports a stronger labor market, then I think that will only support a larger interest rate hike because our economy can take it. Here it goes.

I hear you. Will come to order. Welcome, Chair Powell, thank you for doing your duty.

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Are actually working, including how those actions affect American jobs and their paychecks. Prices are still too high across many parts of the economy. We know that who feels it the most when the cost of rent and groceries go up? It's not the economic pundits and politicians who lecture us about discipline and stability. It's not the corporate executives who pretend they're making tough choices about prices while reporting record profit increases quarter after quarter and doing more and more stock buybacks. So people working hourly jobs to make ends meet, it's seniors on fixed income and Social Security. It's everyone who gets their income from a paycheck each month, not an investment portfolio. So save Americans who stand to lose the most at the Fed's actions to curb inflation go too far. No matter what goes wrong in our economy, a global pandemic, a war in Eastern Europe, weather disasters, profits somehow always manage to go up. Workers are left paying the price. As you've noted, Chair Powell, the Fed's tools are only one element in our fight against inflation. It's a complex problem. Interest rates are a single, we know blunt tool. Raising interest rates can't rebuild our supply chains and fix demand imbalances from the pandemic. Raising interest rates won't end Russia's brutal invasion of Ukraine. Raising interest rates won't prevent avian flu from devastating one-third of our egg supply or weather disasters from destroying acute crops. And raising interest rates certainly won't stop big corporations from exploiting all of these crises to jack up prices far beyond the increase in their costs. Last year, corporate profits at a record high. Corporate PR chiefs assure us that these companies just have to raise prices, their costs are going up, the workers just want to be paid too much, they have no other choice, they tell us. Yet when you look at their profits, their executive salaries, and their stock buyback plans, sure doesn't look like corporations have exhausted every available alternative. So brazen, even global bankers call in the Fed to identify this profiteering is one of the biggest drivers of inflation. Paul Donovan, Chief Economist of Global Wealth Management at UBS, wrote: 'The Fed should make clear that raising profit margins are spurring inflation. Companies have passed higher costs onto consumers, but they've also taken advantage of circumstances to expand profit margins. The broadening of inflation beyond commodity prices is more profit margin expansion than wage cost pressures.' Think about that from a chief economist at UBS. I'll say it again: they've taken advantage, these companies have taken advantage of circumstances to expand profit margins. 'The broadening of inflation beyond commodity prices is more profit margin expansion than wage cost pressures,' unquote. The Fed understandably, the Fed can't force corporations to change their ways or rewrite the Wall Street business model on its own. But the Fed can talk about it. High interest rates, falling wages, increasing unemployment are all hallmarks of failed policies that end up helping Wall Street, the largest corporations in the country, the wealthiest people in the country. Because let's be clear what we're talking about. When people use the economic speed that can cloud this conversation, cooling the economy means laying off workers. Lowering demand means workers get fewer raises. Of course there are times when the Fed must act. We can't allow inflation to become entrenched. We've seen encouraging trends that that isn't happening. And there are other ways we can bring prices down instead of lowering demand, again making people poor, laying people off, denying worker raises. We can speed up and strengthen our supply chains. We can bring critical manufacturing back to the U.S. We can rebuild our infrastructure. It's what we're doing with the CHIPS Inflation Reduction Act, with the Bipartisan Infrastructure Bill. For the first time in decades, we're finally recognizing the damage that I and many of my colleagues warned corporate of the corporate offshoring would do to our economy. Look at East Palestine, Ohio, a community that Senator Vance and I have visited a number of times recently. America learned about this small town last month when a Norfolk Southern train derailed and spewed hazardous material into this community. East Palestine is more than just a disaster headline. Columbiana County was once the center of American ceramics manufacturing, at one time producing 80 percent of ceramics, of dishware in this country. One county produced 80 percent of it. When I was there last week, I was talking to the sheriff at the 1820 Candle Company. He was talking about how the last one closed just a few years back. Like so many industries, these jobs moved overseas. And we know why. The same reason Norfolk Southern cuts cost at the expense of safety, eliminating one-third, one-third of its workforce in the last 10 years. Then you're surprised with these derailments. It's the same reason corporations now keep prices high even as supply chains stabilize. It's the Wall Street business model. Chair Powell knows that, I know that, my Republican colleagues and Democratic colleagues know that. It's a Wall Street business model. Quarter after quarter, corporations are expected to cut costs at any cost. They skimp on safety, they move production overseas to countries where they can pay workers less because of trade deals that they lobbied for. And Wall Street demands they post profit increases even in the middle of a global pandemic. That's the problem with our economy. And not only will higher interest rates not solve it, if they're overdone, they'll make it worse. We can't risk undermining one of the successes of our current economy. For the first time in decades, workers are finally, finally starting to get a little power in this economy. Unemployment's at a historic low of 3.4. That's not just a number. That means Americans have more opportunities, more options even in places that haven't seen a lot in... wage raises and retirement security and paid sick days and some control over their schedules. It means more Americans have the dignity, have the dignity that comes with a good job that provides for your family. We must ensure that all Americans have the opportunity for that dignity of work. It's a critical time. The consequences of missteps could be severe. Mr. Chairman, two more things that affect your job. It's not just monetary policy that threatens American pocketbooks. Some of my colleagues have threatened the nation's full faith and credit by holding the debt ceiling hostage for partisan politics. Instead of paying our bills on time, they're threatening essentially threatening all Americans. The Fifth Circuit's Consumer Financial Protection Bureau ruling could also cause unimaginable instability and chaos for families, for consumers, but also as the chair knows, for a financial system. The Fifth Circuit is Wall Street's, no doubt about it. If this circuit is Wall Street's favorite courthouse, it recently ruled the CFPB's independent funding is unconstitutional. If the Supreme Court upholds the Fifth Circuit's ruling, it will not only devastate CFPB, it will threaten... lower lows forming on NASDAQ... federal agencies including the Federal Reserve... today's hearing... balance is still a mandate and continue to promote an economy where everyone who wants a good job could find one, an economy that works for everyone.

Sorry, sorry about sitting here looking at my... my prepared remarks, thinking about, hey, there's an opening coming or Vice Chair Brainard is moving on. I think it's really important for us to make sure that all the information that we need in order to make a good decision on the next time that we have in a timely fashion. So I would really implore the chair to make sure that happens, that every question, every question there that is asked from the person, we get every member of this committee has their questions answered in a timely fashion and that the staff has their answers in time of fashion.

Listening to Chairman Brown, I thought to myself, fascinating, truly fascinating. I concluded that, well, I know Chairman Brown pretty well, I am sure he is sincere in his rant. But let me just say this: spending and printing trillions of dollars, caving to the radical left in this country, market trying to recover, policies positive and then implemented that led to the worst inflation in 40 years. Seeing our inflation at 9.1 percent, seeing American families struggle because of the weight of the government on their shoulders, seeing the devastation from South Carolina to Ohio is unbelievable. That's progressives in this country who caused a 9.1 percent inflation within turn somewhere besides in the mirror to see the absolute devastation caused by their out of control spending is remarkable, remarkable. To stop the out of control inflation caused by the out of control spending, the Fed steps in to cool the economy. Well, the definition of cooling the economy is necessary because we've seen the most radical approach to a problem that was in our rearview mirror being used as a Trojan horse to bring in a level of socialism and spending that our nation has not seen in my lifetime. The facts are very simple. When you get to 9.1 inflation in this nation, as a kid who grew up in a single parent household mired in poverty, a 40 today, a hundred percent just a year ago increase in the gas prices devastates single mothers around this country. For seniors on fixed income whose savings are being depleted, average cost just last month of a $433 increase because of inflation. For my friends on the other side of the aisle to look any place besides a mirror, I find stunning. The truth is that when your food prices go up over 20 percent, when your electricity is up over 20 percent, you have to ask yourself where in the world are they? Cannot be in this universe, it must be an alternate universe where in fact it's okay for us to see prices go through the roof and our economy not stumble but fall into a ditch. Why are we in the ditch? Because progressives used the pandemic as a way to usher in a form of spending that takes the money out of the pockets of everyday Americans and puts it in the coffers of the government. There is a better way. The better way is to trust the American people. And when you do so, we don't have to have the Fed come in and raise interest rates so high to quell the challenges in our economy. So that today versus 18 months ago, the price of the same house for your mortgage payment is twice as high. Why? Because of the runaway spending of our friends on the other side of the aisle. Testing same support. I'm sure I do not have time for my opening comments, but I will say without any questions, as I look around the country and I ask myself, how devastating is it that today it costs $433 more dollars than it did a year ago? The answer is it is a crisis. When the average family in our country just a couple years ago didn't have $400 in their savings for an emergency, to have prices go up by this amount is devastating. To have a conversation about rents around the country, looking at the inflationary effect and the absolute devastation of a snarling supply chain we haven't seen in my lifetime.

Drop a thumbs up if you just want Jerome to speak already. Unbelievable.

But to get to you, Chairman Powell, one of the comments that you've made that I think is really important, and one of the speeches you gave in January, and I apologize for my rant, it's one of the bases of my... it's consistent with my friend here. It is essential, you said, that we stick to our statutory goals and authorities and that we resist the temptation to broaden our scope to address other important social issues of the day. Taking on new goals, however worthy, without a clear statutory mandate would undermine the case of our independence. You further noted, and I quote, 'Without explicit Congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals. We are not and will not be a climate policymaker.' Do you still stand by those comments?

Thank you. Finally, we're not a new question, I know I get it. Finally, yes, I knew the chairman would knock that from my time and I appreciate you doing so with a very humor. You're a great human. Finally, several of my Republican colleagues and I sent a letter to you discussing the Vice Chair of Supervision, Michael Barr's plan to conduct a holistic review of capital standards. I look forward to discussing those capital standards during my Q&A and I will thank you for our recent conversation that we had that helped illuminate some of the necessary challenges that we face as a nation and your answers to it. Thank you.

Speaking of illuminating, thank you. All right, thank you. Today we'll hear from Chair of the Federal Reserve Jerome Powell on monetary policy and the economy. And I don't expect Chair Powell to weigh in on the mini debate we just had, but I think we all know that the debt increase was much larger under President Trump and a Republican Senate than it has been since. Chair Powell, thank you for your service and your testimony today.

Thank you. Getting rejected by that EMA. Thank you, Mr. Chair. There are, watch out for selling pressure. Almost everyone will be here today.

I ask each of us to stay as close to the five-minute mark as we can because we have votes at 11:30. So thank you all for your cooperation. Chair Powell, thank you. Job growth is strong, unemployment remains historically low. You might not know that from the opening statements. Many drivers of inflation: corporate greed, rising inequality, supply chain disruptions, Russia's bestiality if you will in Ukraine, won't get better because of interest rate increases. Every indication is that this post-pandemic economy is different. Should we be worried, Mr. Chair, that the Fed is treating this economic period as it has in the past instead of reacting differently?

This guy needs to stop smoking.

Okay, understanding you have limited tools to address inflation. In our conversations in the past, to show my concern about continued rate increases that may not actually address the root cause of inflation, they hurt workers. And I just, like many of us, contend we can't follow the same old playbook. Question: last year, three banking... closed updates on the Community Reinvestment Act to account for changes in our banking system. My question is, does the Fed remain committed to work with FDIC and OCC to finalize the CRA rule, and when will that rule likely be finalized?

Okay, thank you. Banks weathered the shock of the COVID-19 shutdowns mostly because of the fiscal response provided by Congress. We now see a spike in loan delinquencies, an increase in overall risk. Banks are again plowing billions, billions, as many other corporate leaders always defended by people on that side of the aisle, into stock buybacks, which makes me concerned if there's a downturn in the economy, banks could end up with too little capital. That's why I'm worried about any potential rollbacks of safeguards or regulations. Can you assure me that the Fed will keep capital requirements strong and exercise more long-term forward-thinking than corporate CEOs that seem to be focused on the short term?

I didn't expect you to comment on, you don't give me an opinion about you're looking more forward than companies that look at the short-term benefits of stock buybacks. Mr. Chair, when you last testified, I asked you about the risk posed by crypto assets, stablecoin, the Fed and other regulated possibilities. How's the Fed evaluating the risks of crypto-related activities by your supervised institutions?

Thank you. And I will close with this. I long pushed for the Fed to prioritize workers and for the leadership of the Fed to reflect the diversity of our country. We've made progress, but our work is not done. We have a new opening. I understand it's not your job to appoint the new Fed member. We have a number of upcoming vacancies at the reserve banks. I support Senator Reed from Rhode Island, Senator Menendez from New Jersey, and other colleagues who are pushing for more diverse voices at the Fed.

Senator Scott. Thank you, Chairman. Obviously, the chairman and I both have strong passions about the challenges that we face in the country. The one thing that I do believe that we agree on is the importance of having a strong capital markets as it relates to making sure that Americans have the ability to continue to grow their businesses and to solve their challenges. And frankly, I hope that we get there. Building on the same comment that Chairman had on capital standards is where I'm going to go with my thoughts today. But I think back on these last few years, it's hard not to recognize the extraordinary efforts our financial institutions of all sizes frankly undertook to administer a program like the PPP, all while weathering the shutdown of our global economy. Higher thoughts, but from my viewpoint, our banking system was resilient. Our financial institutions stepped up and delivered aid to support families and businesses every single day. That's why Vice Chair Barr's careful comments around holistic review of our capital concern me so much. We should be laser focused on our economy and addressing the needs of everyday Americans trying to afford a new future and helping them open the door to opportunity. As you and I both know, capital and its quality must be continually scrutinized, but increased capital does not necessarily provide an increased benefit. And requiring banks to hold capital that is not risk-based and appropriately tailored to a bank's size, scope, and activities can cause more harm than good. At a time of record inflation where everyday needs are more expensive, we should not be pursuing actions that are harmful. Higher highs, rather we should be supporting the engine of our economy: small businesses. While I remain greatly concerned by the Vice Chair's comments, I am hopeful that you will ensure this review is appropriate, keeping the impacts on our banking system front and center. We must promote and further the growth of our economy and thereby our people. Anything less should be unacceptable. To that end, will you commit that any ongoing capital review by the Federal Reserve will follow the law and that any follow-on regulatory proposals will be risk-based and tailored to an institution's activity, size, and complexity, and not a one-size-fits-all?

Thank you very much. Two weeks ago, I sent a letter with Chairman McHenry to Chair Gensler regarding the SEC's climate disclosure rule, urging him to rescind his proposal and reminding him that the SEC is a market regulator, not a climate forecaster. Much like how Congress designed the SEC to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation, and not to advance progressive climate change policies. Congress designed the Federal Reserve to promote price stability and maximum employment, not to play politics. To that end, I find worrying the Fed's announcement of recent actions to consider climate-related scenarios, coupled with remarks by the Vice Chair of Supervision as attempts to incorporate broader ESG policies into the financial services system. Banks have and continue to account for weather-related risks in their risk management, but efforts that attempt to predict climate change far into the future fall outside the scope of their authority. Importantly, the level of speculation required in these models should highlight their arbitrary and capricious nature. At a time when our economy is suffering from historically high inflation, I expect our central bank to focus its time and resources on bringing inflation down, not on policy outside of its mandate. I noted in my opening statement a recent speech that you've given about the state of the Fed and how you should resist the temptation to broaden its scope and to address social issues. Do you agree that the Federal Reserve does not have the authority or statutory direction to use its monetary policy or supervisory tools to wade into ESG or other climate policies?

Mr. Chairman, I have 20 seconds left, but I'm going to defer because of my earlier questions of Albany State. Thank you, Senator Scott.

Senator Menendez is close but not here yet, so Senator Rounds, but nice try.

Thank you. Mr. Chairman, first of all, welcome. It's always good to have you in front of our committee. Core and headline inflation have remained persistently elevated, and over the past 12 months, real average hourly earnings fell by 1.8 percent, about four percent since President Biden took office. To make ends meet as prices increase, more Americans are leaning on credit cards. At the end of 2022, credit card debt hit a record of $930.6 billion, an 18.5 percent spike from a year earlier, and the average credit card balance rose to $5,805. Over the past year, the Fed has acted aggressively to tame inflation, and yet we are still seeing price increases. And as we've discussed this several times, but I recognize that it's been an ongoing discussion, but I believe that this further proves that we have long been feeling the effects of a policy-induced inflation resulting from decisions by the Biden administration, primarily cutting off the resources necessary to improve and increase domestic energy production. I continue to be concerned that if you attempt to use the tools that are available at this time for the Fed, that I believe that we're going to have a challenge of not being able to address specifically the challenges brought out when you have a policy... watch out what the resistance on the moving average... with regard to energy for all of our Bulls, as opposed to what you're trying to do, which is to bring down the total overall cost. I just wanted to ask, I guess, and you're going to think this is something that we've heard before, but do you believe that you currently have the monetary policy tools to actually reduce inflation? And I just put it in this perspective: in January of 2021, the CPI was 1.4 percent when the Biden administration began. In January of 2022, and this is before the Russian invasion of Ukraine, CPI was at seven and a half percent, 7.5 percent. Today, March of 2022, CPI is 8.5 percent. Wouldn't it be fair to assess that a lot of the inflation that we've seen here may very well be due to policy decisions by this administration?

In other words, you've got a limited number of tools available to you, and the limited number of tools that you have are designed to impact simply the reduction in prices and so forth. And yet, didn't reject it, there are competing forces out there that are pushing prices higher. You don't have the wherewithal to decide one tool versus another based on whether it's policy-induced or whether it is a matter of a shortage in supplies from outside or whether it's war-related.

So if there were policies in place that actually help to reduce inflation, in other words, and by that I'm just going to look at energy alone just as a good example, if policies were in place that were actually allowing energy prices to come down in the United States, then you would have less of a need to use the very blunt tools that you do right now with regard to increasing rate increases. Is that a fair statement, sir?

Yes, but I will say on energy, energy has tended over time to fluctuate up and down and is not mainly affected by our tools. So the things we look at are really things that are tightly linked to demand in the US economy. Those we can affect. And I think just the fact that you've been increasing interest rates and yet inflation continues to rise would suggest, just as you've just indicated, that when you have high energy prices, it's tough to impact that part of it with the power of monetary policy that you've got available to you.

Thank you. One last question. Last June, Vice Chairman of Supervision Michael Barr testified before this committee that he would defend... watch for the break below EMA navigation method as an alternative approach to the insurance capital standards, the ICS proposed by the IAIS. As the final compatibility criteria is set to come out later this year, can you confirm that you share Vice Chair Barr's views on this?

Okay, thank you. Thank you, Mr. Chairman.

Friendly reminder, Jerome Powell is also going to be speaking tomorrow and the CPI data report is next week on the 14th. I will be live streaming it for free on our YouTube channel. So all we literally ask you to do is drop a thumbs up and subscribe to the channel and most importantly turn on your post notifications because if you don't, YouTube will not notify you when we go live for this inflation report, probably even more important than these live streams.

Representation in the Federal Reserve's leadership. In the 109-year history of the Federal Reserve, there has never been a single member of the Board of Governors or regional bank president who has the lived experience of being Latino in the United States. And in practice, that means that the voices of nearly one-fifth of our country's people are repeatedly drowned out when the Fed is making critical decisions on economic policy, decisions that affect whether a Latino family can afford their first home, find a job that pays a living wage, send their children to college, save for a comfortable retirement, or get a loan to expand their business. Right now, the Biden administration has a clear opportunity to make history. Its next nomination to the Board of Governors... testing support range here... identified a number of all the five Latino candidates who have dedicated their career to the fields of economics, who are committed to the Fed's dual mandate... watch for the break below... independence of the central bank. The administration has rightly nominated and advocated for a number of diverse candidates with similar qualifications both at the Fed and elsewhere. But despite having five opportunities over the past two years to nominate a qualified Latino economist to serve at the Federal Reserve, this administration has repeatedly chosen not to. Representation, or lack thereof, does not happen by accident. It is a choice. And I hope the administration makes the right choice. I mean, I'm Latino myself. I have no understanding of what about anything to do. Would you say that what's currently going on is ridiculous? Is it true that the United States dollar is the reserve currency of choice of the world?

And that brings enormous benefits, does it not?

Now, 12 years ago, Republican House brought us to the brink of defaulting on the debt for the first time in the history of this country, jeopardizing our credit and the world economy. I'm getting a sense of deja vu because once again, Republicans are recklessly demanding Draconian spending cuts to programs that hardworking US families rely on in exchange for allowing the Treasury Department to pay for spending that Congress, including most of them, have already voted to authorize. You want to talk about spending cuts? It seems to me that the budget is the time to do that, but not to put the full faith and credit of the United States at risk. Chairman Powell, can you talk about the catastrophic damage a debt default would inflict on the economy? Look at this... because it really matters.

Well, I think that's a mild statement of what would happen. I understand I didn't ask you to engage in the congressional executive branch roles. I asked you about the abstract question of what happens if you have a debt default. Isn't even this constant fight putting into question the possibility that the United States will not honor its full faith and credit have consequences within the economy?

Now, seeing your testimony before the committee, you say that you'll do whatever is necessary to tame inflation.

And primarily that means additional rate increases, would it not? Because what other tool do you have?

So the question is, when does that part of doing anything necessary to tame inflation come into conflict with your other mandate of maximum employment?

Thank you.

Watch for the reversal.

Thank you, Mr. Chairman. Chairman Powell, thank you for being here. Thank you to you and your team for helping to save the economy during the pandemic meltdown. For what it's worth, I'm generally supportive of the actions of the Fed right now, and I'm not going to ask you today to blame anybody. When Congress spends money, it stimulates the economy, does it not?

So money to spend even more, that stimulates the economy even more, does it not, at the margin?

Higher highs, watch out for the Bulls.

If Congress reduced the rate of growth in its spending and reduced the rate of growth in its debt accumulation, it would make your job easier in reducing inflation, would it not?

All right, let's try to unpack this then. I'm not trying to trick you. You're raising interest rates to slow the economy, are you not?

And one of the ways you measure that, your fluctuation in gross domestic product, is the unemployment rate, is it not?

Okay, so in effect, I'm not being critical, when you're slowing the economy, you're trying to put people out of work. That's your job, is it not?

No, you're trying to raise the unemployment rate, right? I know you don't like the phrase, so let me strike it. You're trying to raise the unemployment rate, are you not?

Channels like, for example, job openings — we put it in another way, okay. The Economist did a wonderful study. They looked at 10 disinflationary periods in America going all the way back to the 1950s. Disinflation is what you're trying to do — it's a slowing in the rate of inflation, am I right?

In other words, prices don't go down, they just don't go up as fast. Deflation is when prices actually go down. You're trying to achieve disinflation, are you not?

Based on history, in the 10 times that we got inflation down — disinflation since the 1950s — in order to reduce inflation by 2%, unemployment had to go up 3.6%. Now that's history, is it not?

Now, right now the current inflation rate is 6.5% and the current unemployment rate is 3.4%. Now if history is right — I'm not asking you to blame anybody — but if history is right, unless you get some help, in order to get inflation down from 6.4% to, let's say, 4.4%, the unemployment rate is going to rise to 7% based on history. That's what the record would say. And to get inflation down to 0.2%, unemployment would have to go to 10.6%, would it not?

I know you're reluctant to admit it and you don't want to get in the middle of this policy dispute, but I think it's undeniable that the only way we're going to get this sticky inflation down is to attack it on the monetary side, which you're doing, and on the fiscal side, which means Congress has got to reduce the rate of growth of spending and reduce the rate of growth of debt accumulation. Now I get that you don't want to get in the middle of that fight, but the more we help the bears are back on the fiscal side. Let me see it drop a thumbs up if you're a bear. Isn't that a fact? When you raise interest rates, it slows down the economy and unemployment goes up.

Thank you, sir. Thank you, sir.

Senator Reed of Rhode Island is recognized.

Thanks very much, Mr. Chairman. Thank you, Chairman Powell, for being here today. We saw in the wake of COVID the globalized supply chain disrupted significantly, and we're in the process in some respects of rebuilding a supply chain with emphasis on sourcing in the United States. To what extent did that disruptive supply chain contribute to inflation, and to what extent will the new supply chain that is located in the United States and other friendly countries affect inflation?

And is there anything you can do that would target that service area without affecting the other areas?

A different topic: you're probably aware the Fifth Circuit delivered a ruling in the Community Financial Services Association versus CFPB that the CFPB's funding mechanism is unconstitutional. Just like the Board of Governors, the CFPB is a bureau of the Federal Reserve. Both the Board of Governors and CFPB rely on the same source of funds and draw on those funds in virtually identical ways. If the Board of Governors' funding structure were found unconstitutional, what would the implications be for the country and monetary policy?

But it is certainly something that you've had people examine for possible ramifications?

You've indicated previously that wages have not been spiraling upwards necessarily and that inflation expectations are currently stable. But the impact of increased interest rates are usually felt more by low to moderate income people. Is there any way you can work yourself out of that dilemma?

Thank you very much, Mr. Chairman.

Thank you. I don't know about you guys, but you know how there's a limit on how old you must be? I feel like there should be a limit on how old you can be to still be in Congress or in any political position that will grant you access to creating policies for the next generation. I don't know about you guys, but I just feel like that's common sense. And 22.7% and in 2022 it was 6.5%. According to the U.S. Department of Agriculture, the cost of food went up 10% in 2022. Oh no, and the real effects of that is moms and dads across this nation that are working to put food on the table for their kids, for their babies, had a harder time doing that. This has devastated hard-working Americans, causing a kitchen table crisis in every corner of our country as the price of food, energy, and housing have all skyrocketed. In response, the Federal Reserve has raised the federal funds rate more than four percentage points. Being far from transient, inflation has remained persistent, high, and well above the Fed's long-run goal of remaining under 2%. In the coming year, what factors and indicators are you paying attention to as you and the Federal Open Market Committee decide on whether to increase rates? Clear and concise.

Looking at this policy discussion, an increase of energy production in this country — do you feel like that would help drive down inflation?

Right, understood. But I feel like the cost of energy is not just what you think — it ends up affecting every good. It's a great nation. Additionally, I'd like to ask you about participation. When you look at the unemployment rate, and we've heard my colleagues discuss people having to be displaced in order for us to maybe get to the inflation rate that we would like as a nation, I'd like to focus on the labor participation rate. Right now it's 62.4. If there were an increase in people coming back into the workforce, would that be a positive factor with regards to driving us down to the 2% rate that you would want to achieve?

Amen. I believe that increasing capital requirements on financial institutions would have a chilling effect on the economy and the availability of financial services. Last week, I joined many of my colleagues in sending you a letter that expressed concerns that if the Federal Reserve decides to conduct a holistic review of capital standards, as we heard Senator Scott talk about earlier, so is the Federal Reserve concerned that the impact to the economy of increasing capital requirements on financial institutions at a time when inflation remains persistently high would cause an issue?

And I know, out of respect for the chairman and trying to stay in my time, I will just end by saying I heard what you said. Obviously, as you have said, the Federal Reserve is not and will not be a climate policy maker. I just want to thank you for your public statement on that. I agree with you that there's a difference between policy makers and financial regulators, and certainly look forward to working with you in the future.

I like her, she's my favorite out of everyone else. Thank you, Mr. Chairman.

Chairman Powell, good to see you again. Let me start by saying anyone who's asking questions is either pounding you for how quickly we're going to drive that inflation back to 2% or pounding you on making sure that we don't push the economy into a recession and try to drive up unemployment. I got to tell you, these are maybe not the cheap seats, but I actually think you've done a pretty good job in terms of both ratcheting up rates and then starting to tail off a little bit. I think we all were concerned by the January numbers where it popped up a little bit more. I wish, Mr. Chairman, we were actually having this hearing two weeks from now because we're going to have a lot more data later this week and next week. But net net, we've still got ways to go and the January numbers were concerning, but I do think your tailored approach — we can all second guess, but I think it has been the right approach. I'm going to commend you on that. I want to get two questions in. One of the areas that I am very worried about is commercial debt. We've got a Bloomberg story here showing we're going to hit a $6 trillion wall this year on refinancing. Where I'm particularly concerned is the issue around commercial real estate. As we recover from COVID, a lot of things are getting back to normal, but clearly the transformation of where people work is going through a fundamental transition. I hope people return more to the office, but lots of folks prefer working elsewhere. That's going to fundamentally change the real estate market on the commercial side, and I do believe we're going to hit a cliff of a totally unexpected problem in terms of commercial real estate. How are you looking at that issue?

Well, that will morph me into my last question. Something we've talked about, and a lot of my colleagues have talked about, with the large institutions — I mean, I do think even some of the biggest critics of Dodd-Frank would acknowledge the banking system is a heck of a lot stronger and was able to withstand COVID in a very healthy way. But a vast amount of financial institutions move beyond the regulatory perimeter. The fact that we now have way over half of mortgage origination coming from non-financing institutions, because a lot of the large entities — hedge funds, other funds — may be doing some of this commercial debt or some of the CRE debt. I'd like you to talk generally, in the last 40 seconds or so, about how you think about this regulatory perimeter. I'm a big believer, and I know some of my colleagues are, that we ought to look less at charter and look at same risk, same regulation as a guiding principle. There's a vast amount of activity taking place outside the regulatory perimeter. How should we be thinking about that, and how do we make sure that doesn't create the kind of crisis that snuck up in 2008 on the non-regulated side of the house?

Thank you so much.

Senator Vance? I'm sorry, Senator Hagerty of Tennessee.

Thank you, Chairman Brown. Thank you very much, Ranking Member Scott, for holding this hearing. Chairman, it's great to see you again here. I appreciate your presence and I appreciate the opportunity to talk with you about an item that I'm particularly concerned about, and that's the holistic review that Senator Britt just brought up that Vice Chair Barr is undertaking right now, which is generating a sense that higher capital requirements are on the horizon for us. As I think about that in the context of what we've weathered, you think about the situation in 2020 — it was an acute, real-life stress test, if you will, and I think our financial system navigated that admirably. In the past year, you told this committee that our financial system has proven resilient through 2020 and that the capital levels at that point in time — and I would note those capital levels are at multi-decade highs — are in aggregate adequate. I just wanted to follow up on those prior statements and see if you still feel that way.

Well, as the review is underway, and I appreciate that context, one aspect of it seems to be an apparent willingness to undo the tailoring requirements that were enacted as part of S.2155. I understand nothing has been finalized regarding the regulations, but it's a concerning prospect if that's the case. The Fed's general counsel just yesterday alluded to undoing 2155 by pushing down the Basel requirements on banks that were intentionally given relief in that bill. So I want to be perfectly clear that the banking regulators themselves can't just simply ignore or selectively enforce the laws. And again, I realize the details of the study haven't been finalized and made public, but if the proposal put forth by Vice Chair Barr is either unduly aggressive or appears to contradict the spirit of S.2155, will you vote for it?

Again, given the legislative intent here and the concerns that we maintain that in the face of what general counsel said just yesterday, I appreciate your perspective in terms of keeping that in place. I'd like to come with my next question, Chairman. Starting the question by underscoring the importance of the independence of the Fed's monetary policy. Right now, the economic picture is about as uncertain as I can remember. We've had large companies in the private sector who are in the midst of planning layoffs and forecasting serious economic weakness in the quarters to come. Yet on the other hand, the current economic data seems to be robust. Inflation showed some signs of softening in the past several releases. So I just hope Chair Powell could briefly tell us how you synthesize these seemingly contradictory data.

And then in that context of thinking about where the tightening goes and when it might let up, where do you see the terminal fed funds rate landing in this cycle?

I got it. Thank you, Mr. Chairman.

What data is he talking about? We have non-farm payrolls. Oh, thank you, Mr. Unemployment rate. So the Fed has raised interest rates eight times over the last year in what's been the most extreme hiking cycle in 40 years. The Fed's goal is to slow inflation, and your tool — raising interest rates — is designed to slow the economy and throw people out of work. So far, you haven't tipped the economy into recession, but you don't have inflation entirely under control either. And maybe the reason for that is that other things are also keeping prices high — things you can't fix with high interest rates, like price gouging, supply chain kinks, and a war in Ukraine. But you're determined to continue to raise interest rates. So I want to take a look at where you're headed. In December, the Fed released its projections on the state of the economy under your monetary policy plan. According to the Fed's own report, if you continue raising interest rates as you plan, unemployment will be 4.6% by the end of the year — more than a full point higher than it is today. Chair Powell, if you hit your projections, do you know how many people who are currently working, going about their lives, will lose their jobs?

Well, but it is in your report, and that would be people who would lose their jobs — people who are working right now, making their mortgages. So Chair Powell, if you could speak directly to the 2 million hard-working people who have decent jobs today who you're planning to get fired over the next year, what would you say to them? How would you explain your view that they need to lose their jobs?

So putting 2 million people out of work is just part of the cost and they just have to bear it?

Let me ask you about what happens. Since the end of World War II, there have been 12 times in which the unemployment rate has increased by one percentage point within one year — exactly what you're aiming to do right now. How many of those times did the U.S. economy avoid falling into a recession?

I've written a book on this. There have been 12 times — we're going to ask him a question and not let him speak. The unemployment rate in a year — that's exactly what your Fed report has put out as the projection and the plan based on how you're going to keep raising these interest rates. How many times did the economy fail to fall into a recession after doing that? Out of 12 times, I think the number is zero. I think the number is zero. That's exactly right. So then the question becomes: we've got 2 million people out of work. Can you stop it at 2 million people? History suggests that the Fed has a terrible track record of containing modest increases in the unemployment rate. Once the economy starts shedding jobs, it's kind of like a runaway train — it is really hard to stop. In fact, in 11 out of the 12 times that the unemployment rate increased by a full percentage point within one year, unemployment went on to rise another full percentage point on top of that. If that's what happens this time, we'd be looking at at least 3.5 million people who would lose their jobs. So Chair Powell, if you reach your goal and 2 million people get laid off by the end of this year, and then just like in 11 out of 12 times that unemployment has risen by a point in a single year it keeps on rising, and then we've got 2.5 million people out of work, about 3 million people who get laid off, we've got 3.5 million people who get laid off — what's your plan?

I'm looking at your projections. Do you call laying off 2 million people this year not a sharp increase? That to the 2 million families who are going to be out of work — we're not again targeting any of that, but I would say even 4.5% unemployment is well better than most of the time for the last 75 years. In other words, you don't have a plan to stop a runaway train if it occurs. Chair Powell, you are gambling with people's lives. There's a pile of data showing that price gouging, supply chain kinks, and the war in Ukraine are driving up prices. You cling to the idea that there's only one solution: lay off millions of workers. We need a Fed that will fight for families, and if you're not going to lead that charge, we need someone at the Fed who will.

Senator Vance of Ohio.

How often do you get to talk to the Federal Reserve chairman? So I might as well ask it. To give some context, my family comes from Appalachia, particularly my grandparents grew up in southeastern Kentucky coal country and then moved to southern Ohio, where I now have the honor of representing all of Ohio. One of the things you hear a lot when you study the regional history of Appalachia is it's often described as possessing a resource curse. There's a lot of coal in central Appalachia that enables a certain amount of consumption — obviously consumption is good, people need food and medicine — but there's also a pretty good argument that for a host of reasons it causes malinvestment in the region, and consequently you have lower productivity growth, lower innovation, and an economy that's much less diversified and much less dynamic. I'm wondering, when I hear about the history of Appalachia and the resource curse, I'm struck by the idea that you could make a similar argument about the reserve currency status of the United States dollar. Americans have enjoyed one of the greatest privileges of the international economy for the last nearly eight decades: a strong dollar that acts as the world's reserve currency. You know that better than I do. This has obviously been great for American purchasing power — we enjoy cheaper imports, Americans when they travel abroad benefit from lower costs — but it does come at a cost to American producers. I think in some ways you can argue that the reserve currency status is a massive subsidy to American consumers but a massive tax on American producers. Now I know the strong dollar is sort of a sacred cow of the Washington consensus, but when I survey the American economy and I see our mass consumption of mostly useless imports on the one hand and our hollowed-out industrial base on the other hand, I wonder if the reserve currency status also has some downsides and not just some upsides as well. Let me just put a final point on this and I'd love to get your thoughts on that, Chairman Powell. We're of course now the main supporter of a massive land war in Europe between the Russians and the Ukrainians. I read recently — and I'm not going to comment on how perfect or precise these estimates are — but I read recently that the United States is trying to ramp up production from 14,000 artillery shells to 20,000 artillery shells per month, while the Russians are firing 20,000 artillery shells in Ukraine per day. When I look at the American economy, we have a lot of financial engineers and a lot of diversity consultants; we don't have a lot of people making things. I worry that the reserve currency status and the lack of control we have of our currency is perhaps driving that. I'd love to get your feedback on that. What are the upsides and downsides of the reserve currency?

Do you think it gives us less control over our own currency, the fact that it's become the world's reserve currency?

Do you think it makes it harder for us to affect or fight back against currency manipulation, to control the export and import flows in a way that stabilizes our own manufacturing sector?

Thanks, Chairman.

Senator Van Hollen of Maryland is recognized.

Thank you, Mr. Chairman. Chairman Powell, thank you for being here and for your service. I know the Fed is experiencing lots of challenges these days. I've got a couple questions that are just basic yes or no's and then some longer questions. Would you agree that changes in the size of corporate profits can be one of the factors that affects the inflation rate?

Now, recently we saw that the Employment Cost Index, which as you know measures the growth of wages and benefit costs, grew at roughly 4% on an annualized basis in the fourth quarter of 2022. Is that right?

So if corporate profits were to decline from the extremely high levels that we saw recently, would it be possible to sustain the 4% growth rate in the Employment Cost Index for an extended period of time even as we get inflation down to the target of 2%?

So you would not, without a very large increase in productivity — which would be great but we don't expect — you wouldn't be able to sustain 4% wage inflation over the longer term. Over the shorter term, though, yes. So over the shorter term, that would not be a justification in and of itself for raising rates, is that right?

But that's more a prediction about your efforts to fight inflation. Are you saying that simply looking at the current 4% growth rate in the short term is an excuse for jacking up interest rates?

I think the larger point here, based on your response to that first question about growth and profits, is right: these corporations have a decision as to whether they're going to pocket more for profit, which they can, or provide higher wages to their employees. If you actually lowered your profit margins, you could sustain a higher wage increase without violating the 2% inflation target. Isn't that right?

But profits are the margin. They're going up beyond what they were before, which means that even with the increases in cost because of the supply chains, they're making more profits. They can do that, but my point is that as a contributor to inflation, as you indicated in response to the first question, let me ask you about the tight labor market. One of the issues in a tight labor market is parents with kids, including a lot of moms, who would like to go back into the market but are not able to do so because of lack of affordable child care. The other issue is immigration. I know you've got some recent data on how some immigration figures have softened a little bit the tightness in the labor market. Can you just talk broadly about those two factors — affordable child care and more legal immigration — and how they could affect labor force participation and therefore also reduce inflation pressures?

Thank you.

Thank you, Mr. Chairman. Thank you, Chairman Powell, for being here. I can't resist responding to a few things that my friends on the left have said. For example, in his opening statement, Chairman Brown had a long list of things that raising interest rates won't do. I'm going to fill in the blank with a couple things. How about raising interest rates won't stop Senate Democrats and President Biden from overtaxing, overspending, overborrowing, overregulating? Chairman Brown said we should rebuild our supply chain by curbing offshoring. I agree. He talked a lot about corporate greed contributing to inflation. Okay, but how about regulatory greed contributing to corporate greed? How do you expect corporations to reinvest money if you overregulate their ability to invest that money right here in the United States of America? You want to onshore some things? How about energy policy? How about instead of looking to Venezuela or Iran for oil supply, or Russia, or rather than looking to China for electric vehicles and chips and solar panels, how about we have a strategy that onsures those things by reducing regulation, reducing taxes, and letting those corporations reinvest their profits rather than stock buybacks or dividends? This idea that somehow the Federal Reserve is supposed to keep inflation in check while half of the government works against it is mind-boggling. Now, I know, Mr. Chairman, you don't like to comment on policy. You and I went around and around about this. You were anxious to advise us to spend lots of money during the pandemic — I don't think a lot of people blame you for that — but you wouldn't respond to efforts by the Biden administration after we had a robust recovery to not spend so much money. I can appreciate the change. But now we're in this debate between Republicans and Democrats, particularly between the House Speaker and the President, on how to raise the debt ceiling. You've made some pretty strong comments about raising the debt ceiling absent structural reforms that would actually help us get back to reasonable growth. So I just warn you again: if you're going to make political comments, if you're going to advise us on policy, be consistent with it. Now I want to get back to the greening of the Federal Reserve. These stress tests — you can call them whatever we call them — but I'm concerned that now the Federal Reserve is starting down this path, maybe slightly at first, about climate stress testing. I just want to ask you this: if we're going to go down that path, if the Federal Reserve is now going to become part of the federal climate police force, are we going to consider the ramifications of having entire communities and economies, factories and manufacturers, energy entities, large server farms, leaving them susceptible to a very unreliable, very expensive energy source? Is that part of the stress test?

Well, yeah, I would like you to, because again, if we're going to start doing stress tests for the six largest financial institutions related to climate — which really is more weather than climate — then are we going to consider the effects of an unreliable energy source at several locations throughout our country?

Okay, and I completely agree, and I hope you stick to that.

All right guys, I'm going to close out the live stream here. So Jerome Powell hasn't necessarily said anything that is out of left field. I feel like the market is pretty much just digesting or getting ready in case he does say something. Once this live stream closes, just know that the market direction can completely change. Right, we did sell off a little bit. Market direction can begin to recover. So all I'm saying is if you're shorting the market — I'm shorting the market, as you saw I was covering part of my position in QQQ — and the reason why is because once this speech ends, I could see the chance of the market beginning to recover because nothing horrible was said. So I'm just making you aware because I want to make sure you keep some of the profits, especially if you're shorting the market. If you're a bull and the market begins to recover, then again, just watch your position size and wait for that proper confirmation. I really do appreciate the time that you guys have taken to watch this live stream. I will be live streaming this again tomorrow. For those that are unaware, Jerome Powell is going to testify in front of Congress again tomorrow, 30 minutes after the market opens, and I will be live streaming it for free on this YouTube channel for the people that are subscribed. So all we ask you to do is get this video to over 2,500 likes, make sure you subscribe to the channel, and again make sure you turn on your post notifications so you are alerted when it is that I go live. I host these live streams for free all the time, and again would love to be of value for you. One of the things that I do want to remind you is again we are running our biggest giveaway. I know a lot of you guys have been asking for our discount — it's $150 off. I do trade live every single morning. It's a one-time payment, lifetime access, and right now we're running our 2019 Nissan GTR giveaway or $50,000 cash. Yes, you are hearing that correct. We're giving away a 2019 Nissan GTR or $50,000 cash, and a way to enter is by signing up for Learn Plan Profit 2.0 right now, or earn you 5,000 entries for a chance to win this GTR or $50,000 cash. So again, if you've been waiting to join, now you can kill two birds with one stone: not only do you get our biggest discount, not only do you get to join our LPP team and watch me trade live every day, but you also get entered 5,000 times. If you want to enter another way, the only other way to enter is by heading on over to shoptackbutts.com or the fourth link in the description down below, and for every $1 that you spend, it equals five automatic entries. So again, you can buy a crew neck — that's 300 entries — a t-shirt, that's 150 entries. Everything is provided for you on shoptackbutts.com or the fourth link down below. So again, if you want to join LPP, biggest discount, second link, or Tack Butts apparel, that's going to be the fourth link down below. If you have any questions, feel free to message me either via Instagram or Discord, and that's the first or third link in the description down below. Other than that, I do appreciate you guys' time. I'll see you in tomorrow's live stream, but most importantly, I hope that you guys did well today with the market selling off. We've talked about it, we had an expectation, and finally today it went according to plan. Now make sure you hold yourself accountable, you stay disciplined, and you lock in those profits once and if there begins to be a change of direction. Remember, there is no time for needing or trying to be a perfect trader. You will never be a perfect trader. I will never be a perfect trader. That is okay, as long as you begin to show signs of progress, and that's what's always most important. So I appreciate your time. Hope that we're in a thumbs up. Please consider subscribing. Again, second or fourth link in the description down below are how you can join the giveaway. And I'm using the Weeble trading application, and if you want to use it, it's the fifth link in the description down below. Like always, let's make sure that we're in the year on agree. Now take it easy, team.