339: The Great Distortion: Dr. Nomi Prins

The last 15 years have been a game of chicken between the Federal Reserve and the financial markets. Think about the old movies where the kids would speed in their cars towards each other until someone decided to quickly turn out of the way and avoid collision and certain death. Similarly, the financial markets and the Federal Reserve have been trying to figure out who would chicken out first for the past several years. Let me give you an example. Despite COVID shutting down the entire country, the asset markets (after quickly blinking) went sky high. Why? Because investors knew that the Fed would come to the rescue and they did. Rates dropped to zero, quantitative easing controlled the bond markets and all of that helped to embolden investors and reinforce the concept that the Fed will always come to the rescue. If you were at a Casino, wouldn't you keep playing if the house guaranteed you wouldn't lose money at the end of the night? That's the way investors came to see the Fed—as an insurance policy. So then we got this inflation thing because of the massive amount of helicopter money injected into the system and supply chains creating huge demand. Of course, the Fed started raising rates again. At first, the markets shrugged it off. Playing chicken again. Then the Fed showed some cajones and kept raising rates and now all of the sudden it's not quite as clear if they will blink first. The Fed has been clear about getting inflation under control. They know it has to be done. That's finally getting through to some investors…or is it? We also know that we can only raise rates so much because of sovereign debt issues. And what if we end up in a massive recession because of the rate increases? Many investors think that's exactly what's going to happen. The moral of the story is that there is now a well-established disconnect between the economy and financial markets. The question is where does this all lead us? Dr. Nomi Prins is one of the smartest financial authors out there and she's just released a new book on this very topic. She's going to tell about this great distortion and what it means for us in the long term. DO NOT MISS THIS SHOW!