The Bond Market Is in Revolt — Is Money Printing Next?

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Trey Reik (1:30)

The bond market is in complete revolt. These are all totally unprecedented events. We're moving towards yield curve control, which is essentially money printing life. This is the opportunity you've been waiting for.

Maggie Lake (1:50)

Hello, and welcome to Wealthion and Maggie Lake. Thank you for joining me to bring us up to date on what is happening with the Fed, Treasury, and what it all means for gold is Trey Reik, GBI Chief Economist. Hey, Trey. Thanks for coming on and helping us make sense of all of these headlines that have been coming at us fast and furious. We have a lot to focus on, and listen, there are a lot of cross currents.

They've been coming up in conversations that we've been having on the channel, but we're like, let's get with Trey because we have a lot of these conversations between ourselves, these editorial conversations, and just set the table for everybody, I think is helpful. I want to start with some of the events that we're going to be watching. Let's start with the Federal Reserve. The Central Bank Policy Committee meets this week. The consensus seems to be that they are going to raise rates. Is that what you think is likely to happen? What is the chatter you're hearing?

Trey Reik (2:40)

Okay. That's a really important question, and if you had asked me last Friday, I would have had a different answer, and you know from our past discussions that just very briefly, there are three sort of underlying underpinnings which make a rate hike unlikely or, you know, probably not the best decision. One are outstanding debt loads is the negative net national savings rate, et cetera, and the negative US savings rate. But what's happened in the past three or four days, five days of last week, probabilities are now up to 90 percent for a 125 basis point rate hike. And I think worse is in a position where not to follow through with those market expectations would probably be a negative. So if you'd asked me last week, I would have said 50-50.

But just looking and reading over the weekend and seeing the current probabilities and everything that's happened, I think he's pretty much forced into a rate hike.

Maggie Lake (3:56)

Yeah. Credibility on the line after the inflation readings. And we could see the kind of market pushing him that way. And he said he was going to listen to the market. Now, I think that folks are looking at that and, okay, we have the feds going to say they've got to watch out for price stability. They've got to react to the inflation data. It's coming in a little hotter than they would like. But then you have the Treasury Secretary who announced bond buybacks because he's trying to push interest rates lower. Are they working at odds with each other now?

Trey Reik (4:28)

100%. But let's go back to your credibility comment. I am a big fan of the Powell to Warsh change over because as you know, I've been sort of a fed detractor for the past decade and their analytical framework and inflation expectations. I think that's all very positive and that's one of the reasons that I thought we wouldn't have a rate hike because even though oil prices are very high, Warsh likes to look back on the 147 oil price in 2008

As an example where the Fed and the ECB overreacted, the Fed talked up the long end of the curve and the ECB actually raised rates even though the EU was in recession and the US financial system was starting to disintegrate. So I really believed again that Warsh would be the deciding factor in not focusing on that short term. But I do believe that the whole oil price rise, everything has just gotten to the point where he needs to maybe do one rate hike to calm everything, calm everyone and everything down. Oh, I remember what I was saying when you said credibility. That's what got me on this tangent. I think Warsh's credibility is very high. The market's getting used to his definition of credibility. That's where I got off track. And so I think his credibility is increasing the Fed's pedigree.