Summary
Transcript
But more importantly, we’re going to look at why these two charts matter, what these two charts are telling us about what to expect in 2024. We’re going to look at the few big black swans that could disrupt all of this, and, of course, actionable information on what we should all be doing with this information if we want to continue to win in 2024. So let’s go. All right, welcome to the channel if you’re new.
My name is Mark Moss, and I make these videos to change the way you think about money because, yes, almost everything you’ve learned is wrong. And it’s always been my goal since I first started this channel to take these very complex subjects of money and make them easy to understand so anybody can grasp in them and know what to do. And today we’re going to really make it simple.
We’re going to basically simplify all of this into two simple charts. So let’s just go ahead and just jump right in. But warning, just want to let you know, don’t disregard the simplicity of this. All right? Make sure you stick around for why these charts matter and what we can expect as this year unfolds. Okay, so the first chart that I want to bring your attention to really drives the more important second chart.
All right? So the first one sort of pushes the second chart, and it’s the actual hard constraints. It’s the hard constraints of governments around the world. And basically what I’m talking about is their spending. This seems to me be the biggest blind spot that most analysts make. They don’t realize that the governments, the central banks, their hands are forced, and they’re forced because of this chart, their spending.
We can see the US, UK, Japan, Brazil, et cetera. They’re all spending like drunken sailors, and there’s no returning from this. So the first chart is of the fiscal deficits that these governments are running right now. None of these governments are able to live within their means, and all are having to continue to add more debt just to keep the lights on, so to speak. And deficit spending is highly inflationary, and it’s mandatory the government can’t cut this back.
Once they start spending, they can’t cut it back. It never goes back down as we see with the debt filling debates in the US all the time. Now if you take a look at the global government expenditures as a percentage of GDP, you can see that most of the world is spending about 40% of their GDP of the gross mexican product. And look at the trend. You can see the trend is up and to the right.
It’s not the right direction for this and it’s not going to change. And this matters because no matter how much tightening the Fed and the central banks do, making you and I broke so that we don’t spend as much, no matter how much they make us broke. It’s the government spending that’s driving this. It’s the government spending that’s pushing the economy along and it’s not going to slow down.
We’re past the 90%, what’s known as the Kenzian multiplier, which means that in Kenzian economics they want to spend debt to get growth. Once you’re past 90%, the Kenzian multiplier basically means that you’re not getting enough growth for the amount of debt that you’re taking on. So this debt they’re taking on for the 40% deficit is only digging themselves deeper in the hole. It’s only accelerating this problem which is why we’re adding a trillion dollars of debt in the United States about every quarter right now.
Now as you can see from the chart on the screen right now, the federal debt just keeps shooting higher while GDP is down. And it’s not just down, it’s flat. This is not a good combo. It means debt’s growing but the economy’s not. The economy is growing at about one, one and a half percent, but yet the debt is, like I said, a trillion dollars a quarter. And the Congressional Budget Office, the CBO, basically the government, they project it’s only going to get worse from here.
This is their own report. They predict the US government debt will continue to skyrocket as you can see on the chart on the screen. Now with federal spending continuing to grow to $10 trillion by 2033, I almost have to laugh about that growing to $10 trillion and at the same time government revenue or tax receipts are projected to continue to fall. Now you can see how this divergence just means the deficit is only getting bigger and this is the best case scenario.
What I mean by that is the CBO projects that there will be no recessions for the next ten years. Now, of course, I don’t know where at with the recession. We’re going to come back to this at the end, but they project no recessions for the next ten years because, well, they can’t afford it. If we have a recession, then tax receipts plunge and the deficits are only going to grow even bigger, which means more debt, which means more monetary.
Well, we’ll come back to the monetary policy. All right. Now, the second chart that you need to be watching, and really it’s the most important chart. If there was only one chart I could look at to predict where markets would be going, it would be this one chart. All right? And it’s the global liquidity, not just us liquidity. You see a lot of people throwing around like m two things like that.
That’s us. It’s not us liquidity. I’m talking about global liquidity. Now, next week I’m going to be hosting a live virtual event with some of the biggest names in finance in multiple areas and disciplines. And I have one of the leading gold experts coming on, a Fed treasury expert, a market data driven economy expert, an analyst, a real estate expert. And I want to do this all live, and I’m gonna do it all for free.
I want to do that because together we’re going to be digging deep into this data. We’re going to be looking at each one of these sectors and how they work or contradict each other. We’re going to do it all live and we’re going to try to discover one thing, what they think will happen in 2024, and how to position yourself to play along with it. Now, I want to get different opinions and I want to get different viewpoints, which is we all need different viewpoints so we can make the best decisions.
And since it’s live, I’m going to give you, the viewer, a chance to ask them questions, and it’s all for free. So don’t miss out on this chance to join us live for free. There’s a link down below if you want to join this expert session to plan 2024. But let’s get back to the second chart. The second chart again is the global liquidity. You can see it up on the screen right now.
Now, very simply, global liquidity drives asset prices. When monetary policy is easing, we get more liquidity. When it’s easy, we get more of it. When more liquidity comes into the market, we mean, or that means higher asset prices. And this chart shows us the easing happening in the policy right now, basically showing us the policy and central banks either raising or cutting rates, either making money more expensive or less expensive.
To understand this, just remember that economics is actually very simple when you look at it from a first principles level. For example, there are all types of models that explain prices, right? You’ve seen hundreds of them. But at the end of the day, prices are always just the equilibrium of supply and demand. If the price of money goes down, people buy more of it. And when the price of money goes up, people buy less of it.
So this policy shows it’s easing, it’s getting cheaper, which means more liquidity come into the system. And when we have more liquidity, more money, it creates more demand for goods and services. Which is why I consider inflation from the austrian viewpoint of the money supply. When the money supply increases, we have inflation. That’s inflation. We inflated the money supply. And prices going up is not the inflation. Prices going up is the result of the inflation.
Okay, so now we’ve looked at the charts. Fiscal deficits, government spending, liquidity, monetary policy, and whether it’s easing or tightening. So we want to watch these two charts, and we also want to try to predict where these charts are going. Now, we know almost for certain that the government’s spending and deficits, they’re not going down. I mean, the government’s own office, the CBO projects, they’re not. So really, we just have to guess about the policy and either how tight or how loose it will be.
This is the long anticipated Fed pivot that we talk about all the time. The Fed pivot going from a tight policy to a loose policy. Now, as of right now, the markets are betting on a 150 basis point rate cut in 2024 and even showing a 24% chance of a 175 basis point rate cut next year. Now, the Fed, they’ve been trying to project this in advance, trying to tell us what’s happening.
But last month, in December, the Fed said they were expecting three rate cuts in 2024. But then already this month in January, they’re saying only two rate cuts. Well, meanwhile, the markets, they’re expecting them to cut six times in 2024. Now, it’s worth noting, the markets, they’re usually right. And the Fed and the government data, it’s usually wrong. Either they get caught off sides, maybe that they’re super incompetent, maybe both, or they’re gaslighting us.
I’m going to let you decide which one. But as you can see on the chart, on the screen since 2013, they’ve been wrong. Not just wrong, they’ve been very, very wrong with all these rate forecasts. So the question is really only how loose will monetary policy, how loose will monetary conditions get? Will they get two or six cuts? When will they come? And will it be 150 or 175 basis points? It’s not really a question of if, it’s just how much.
Now before I get too far, let me address some of the objections that I can already hear going into the comments section down below. Like what about reverse repo? It’s ending. What about the bank reserves? They’re dwindling. What about the BTFP program that’s expiring in March? What about the commercial real estate, mortgage backed securities that are going to blow up? What about the recession that’s coming? What about the government spending all of these things? Right? I want to address all of those because they could all potentially derail this.
So I’m going to break them all down. But again, I’m going to break them down with my opinion, and it’s important that you hear both sides of the debate. So make sure to join me next week for the live virtual event that I’m hosting with some of the biggest names in finance and like I said, multiple disciplines, gold, fed and treasury policy, economic data, real estate. It’s all going to be live.
It’s all going to be free. We’re going to dig deep into these sectors and I’m going to give you a chance to ask questions so you know how to position yourself to win in 2024. All right, like I said, it’s all live, it’s all free. There’s a link down below if you want to join me, but let’s get back to the whatabouts. What about reverse repo when it ends? Well, you can see from the chart on the screen, reverse repo hasn’t really been a thing going back pretty far.
It’s only been pretty recent. And if that runs out, that just means the Fed has to pump even more liquidity into the system. What about the bank reserves dwindling? Well, we sort of have this 3 trillion line, but what happens if we breach it? Well, we can see back in history, we’ve been below that before. And as we saw in March of 2023 when the banks blew up, the Fed just papered over them as well.
Which brings us to the next one, which is the BTFP, the bank term funding program, which is what the Fed set up to save the banks, and it’s expiring in March. But what makes you think they won’t just extend it? What makes you think they won’t just increase it. If the banks are about to go under, they’ll probably create another facility or keep this one going. What about the mortgage backed securities in the commercial real estate mortgage, Mark? Well, can’t the Fed just put those on their books? I mean, they already put mortgage backed securities on their books.
Why not commercial? You see, each one of these, in my opinion, leads to just more liquidity. And more liquidity equals, yes, more prices going up, which is why I believe in a reverse market crash. I believe in an inflationary crash, is what we’re seeing now. What about the recession in 2024? Well, we can see that there’s about a 50 50 chance from the experts right now, a 50 50 chance.
You might as well flip coin. But as you can see, the experts are wrong again. All right. And then the last what about, what about inflation, Mark? There’s no way the Fed can go into easing when they haven’t tamed inflation yet. Okay, well, as I’ve been talking about for years now, the fed and the central banks, they’re forced to choose. They’re stuck between the rock and the hard place.
The rock and the hard place, either massive deflation, which basically wipes out everything the government owns and probably gets a revolt happening, that’s massive deflation, or they have inflation. Which do they choose? Well, no time in history has a government with the ability to print money ever allowed themselves to go bankrupt. So when they’re forced to choose between inflation and deflation, they’re going to choose inflation every single time.
So what does all this mean? Well, for me, what it means is I am staying risk on in the markets. I’ve been talking about this since about November of 2022. I’m staying risk on in the market. Most of my cash is deployed, and I expect 2024 to finish higher than it started. But I’m also expecting lots of volatility. Lots and lots of volatility. We have wars that probably going to get bigger.
We have unmanageable debt that’s going to get bigger. We have an election year that’s going to be completely wild. And so I would expect lots of volatility. So I’m hedging my positions. I’m moving forward with caution. I’m paying attention to these two charts and a bunch of other ones. So don’t ride this year alone. So if you don’t want to ride alone, come hang out with me, other leading financial advisors, next week live so you can figure out what we’re doing and how you can move forward with success in the year again, it’s all free.
There’s a link down below. But whatever you do, don’t go this alone and let me know what you think. Do you think that the government and the central bank’s backs are against the wall and it’s only a matter of how much easing it, or do you think they’re going to choose deflation over inflation? Let me know in the comments down below. Inflation or deflation? Which one will they choose? Of course, as always, give me a thumbs up if you like the video.
If you don’t, you can give me thumbs down. That’s okay. But at least tell me why in the comments down below. Oh, yeah. Subscribe if you’re not already subscribed. And that’s what I got to your success. I’m out. .
