Chris Casey: The Market Is Ignoring the Biggest Risks Ahead

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**Chris Casey** (1:30)
Rate hikes down the road, which I think are already coming. We have a real solvency crisis, right? 39 trillion in debt, 32 trillion GDP. You're still running about $2 trillion deficit each year. Bonds are pretty precarious right now.

**Maggie Lake** (1:50)
Hello, and welcome to Wealthion, I'm Maggie Lake. Joining me to discuss the impact of the new Fed chair and his decisions on policy is Chris Casey, founder and managing director of Windrock Wealth Management. Hi Chris, great to see you.

**Chris Casey** (2:03)
Yeah, great seeing you again, Maggie.

**Maggie Lake** (2:05)
Why is this so important to you, the AI's impact on monetary policy? What are you watching there?

**Chris Casey** (2:10)
Well, he's mentioned it a number of times. He's very focused on it. I actually think it's a misstep by him. I think it's a misbelief on his part. Now, he's correct in that AI, two things he said about it. One, it's probably the most revolutionary technology we've had in our lifetimes. I agree with that.
Two, he said it could be extremely deflationary. I agree with that in part. It has a deflationary effect, but I think a good proxy for this, what he should be looking at, is the dot-com boom. The Internet is coming up. You can't tell me that the first five to 10 years of the Internet were not deflationary. They were. That doesn't show up in the CPI. You don't see that because it's dwarfed by the actions of the Federal Reserve as far as pumping up the money supply.
I think he's banking on AI having a vastly negative or deflationary impact on money supply. I think that's a big mess up on his place. Yes, it's real, but I think the magnitude is where he's misjudging that.

**Maggie Lake** (3:08)
Do you expect them to raise interest rates? Do we have an inflation problem?

**Chris Casey** (3:15)
When inflation is at 4.2%, I believe 2% was the latest print on that. So according to the Federal Reserve, they certainly have an inflation problem. Even if you look at so-called metrics they prefer, like the PCE, even if you look at Warsh's, because it's another thing he's doing, as part of his combating inflation initiative, he's also looking at how they measure inflation. He prefers, he doesn't like the core statistics where they strip out everything, because he'd rather have smoothed trending as far as the stats he's looking at to get a better picture.
So do we have an inflation problem? According to the Fed, yes, it's too high. According to Warsh, yes, they do have inflation problem. He spent a lot of time talking about it, way more than he talked about labor.

**Maggie Lake** (3:59)
Yeah.

**Chris Casey** (4:01)
He's mentioned that we've missed the target for a number of years, right? And I think that's actually another surprise that could be down here, down the road.
I think, theoretically, Warsh could come out here six months from now and be like, you know how I kept saying we're missing a 2% target? It should be a 0% target. I could see him doing that because the reality is, if you look into why they have this 2% target, you know what that 2% target is? Maggie, it's bar time. Remember in college, you're at a bar and they'd move the clock ahead by half an hour? I say college, it was last weekend, but they'd move the clock, right? They'd move it, so they shut everything off earlier. The 2% is solely for a margin, so they don't actually touch to 0% because they're so scared about deflation, right? That's the only justification. There's zero academic research backing it up. It's literally just a conversation that they've had internally and they've adopted a policy.