Folks Banks and the entire Financial system are under unprecedented stress and many behind the scenes are freaking out. In fact, a major Bank CEO just this morning used the word panic quote panic when describing the credit markets. In these last four decades, we have built and then rebuilt and rebuilt again. This entire Financial system on simply very, very very low interest rates.

But now as rates rise, we are seeing that become undone in front of our very eyes and it is not pretty and everyone will have to pay for this, especially you. We will discuss everything you need to know in this video. I Will put the time stamps down below and today's video is brought to you by the powerful trading platform and broker. MooMoo and the up to 15 yes, 15 free stocks that U.S users can get when they sign up and deposit with them using our link down below.

Australian users can get up to 50 AUD cash back terms and conditions apply. Okay, let's get right to work. So today was another bloody day for the market. The NASDAQ hit a new two-year low I Submitted a formal petition with the SEC to change the name of the S P 500 to the S P Negative 500 You pull up the three-year charge.

We are roughly A 5.6 drop from reaching where we were in February 2020 Heights before the Covid Panic sell-off had started, which in the view of many prominent analysts is a point at which we are very likely to go and break below and go much farther below until the FED actually goes and pivots. Think about this for a second. If you had bought the S P 500 in February 2020 and held 23 months to January of 2022, you would have had a 40 return in just under two years. That is, despite the fact that the C19 lockdowns locked down, the entire economy enforced most businesses to operate at like half capacity for at least most of the time period, yet stocks still managed to grow at a much faster clip than they had in previous year years.

Why? Well, because of all that artificial liquidity that we pumped into the system and that liquidity is now being obliterated, Just completely obliterated at the same time where all of the major Global drivers of economic bounce imposed pandemic and really the last 10 years are now reversing and turning into economic sinkers. Remember, we are right now in a period of time where the Fed's job the Fed's number one goal is to Nuke the economy to bring down prices. Okay, they're not saying nuke the economy, but listen to what they actually are saying and you can see that what I am paraphrasing them is saying is actually pretty close to the truth. CNBC Reported this morning that Chicago Fed Branch President Charles Evans said quote.

If unemployment goes up, that is unfortunate. If it goes up a lot, that's really difficult, but prize stability makes the future better. AKA In translation: For us normal folk, it sucks if tons of people lose their jobs and it really sucks and is difficult if many tons of people lose their jobs. but we are focused not on them, but on price stability.

And why do people lose jobs in Mass Why does unemployment go up in Mass Well, because businesses are getting bludgeoned and are Contracting are losing tons and tons of money and have to start laying people off. Or maybe they go out of business entirely. So the FED here is not just saying hey, it sucks if people lose their jobs and it's difficult if people lose their jobs. But they're also saying here, hey, it sucks if tons of businesses lose money and go under.

It sucks if tons and tons of businesses lose money and go under. It's difficult. but read my lips. If you are a business and you are contributing to the circulation of capital AKA You're running a successful business, then guess what? You are in our way and we are going to plow through you.

We're going to get in our semi truck and we're going to run right over your business. Jerome Powell is going Choo Choo. Get out of the way Choo Choo. If you are somebody in this economy who is operating and you are operating healthily, the FED is saying wait a second That is Not good.

You cannot be operating healthily in this economy. You are supporting inflation, you are supporting and you are making it harder for us to reach our price stability goal. So that means that until we get back to our Target rate at two percent inflation, you are a Public Enemy Number One You are the enemy to our goal And so when we have gotten back down to that two percent, we don't really care if your collateral damage, We don't really care. We just need to get price stability.

But don't you worry. Once the FED has taken a lot of folks' jobs, once the FED has taken a lot of businesses out of business, then if you wait just a little bit of time the FED will turn around and all of a sudden they'll become your friend again. they'll be like oh here I'm here to help you with low interest rates again. I'm back to buying some Securities Congress of course.

Will then come back again with more stimulus which will come from money they don't have which will be borrowed from people that have to pay with higher inflation in the future or with other unforeseen circumstances. And then the cycle will repeat. Folks, this is the world and the reality that we live in. It sounds.

Bleak It sounds like a bunch of dirty bad news. But folks: I Don't think that it's fear-mongering to acknowledge reality I Think that it's it's actually empowering I Think it's important to say hey, wait a second I See this. BS Trend But instead of being a victim of the trend, instead of being a victim of a flawed system that creates these massive massive booms and then massive massive busts massively driven by the Fed. I'm going to go ahead and I'm going to figure out how I can exploit it and make money off it because that is how a lot of people generate wealth.

That is how they've done it in many, many other Cycles in the past and that's how they will continue to do it. But returning back to that question of will we see even more lower lows I side with the crowd saying absolutely Jamie Diamond CEO of Chase just came out this morning and said he thinks the US is heading for a recession I Guess the harder definition of a recession is what he means In the next six to nine months, Market Watch reported this morning that he thinks that the S P 500 could easily fall another 20 as the FED continues to raise rates. Another 20 is, of course not small chickens. The S P 500 right now is down already 24 on the year.

But but speaking of Jamie dimon and the overall baking industry, when asked where you're going to start seeing cracks, here is what he said. and listen carefully. The likely place you're going to see more of a crack and maybe a little bit more of a panic is in credit markets. So the CEO of arguably the most powerful non-central Bank in the world comes out and says what, You are likely to see more of a crack than we've already seen and maybe a panic.

A panic in credit markets. What grounds does he have to stand on here again If you take out central banks, JP Morgan is the number fifth biggest bank in the world by total assets managed and really, it's number one if you consider that these Chinese ones are really just centrally controlled. CCP Banks I Don't think that's a controversial thing to say. That's just what the system over there is like.

So when he says oh, I see credit as getting into a panic, he has a lot of ground to stand on. He is the biggest player in the overall credit space, and quite frankly, if you really look at what he has the gain, if things really go to shite, he has a lot more to gain than he has to lose. In fact, usually during periods of time where weaker bakes start going under bigger Banks really well run banks that are rich like Chase they tend to do very, very well because they can start buying up the smaller firms just like they did with WAMU back in 08. But that's besides the point right now.

If you think about it, when shite really hits the fan, where do you start seeing those cracks? Where do they start emerging? Do they start emerging at your next door neighbor Susan's house? Well, maybe, but they really start emerging in the banking sector in The Lending sector where people go to for all of their financial needs you have to watch Banks First and foremost to be able to really spot a massive pullback on the financial system in order to really spot where the economy is heading in the next three to six to nine months now. I Know a lot of people say Charlie Okay, we went through the great Financial Crisis. We could never ever have anything like that again because we learned there are some more regulations they put in. The reserves are a little bit higher so on and so so forth.

But if you take away the common rebuttals that say oh no more regulation, blah blah blah we've learned and you look at the bare bone data and facts, Well, the truth is that we rebuilt this system after the 08 crisis to be addicted. greatly addicted, like a junkie to very very very low interest rates and we have no idea whatsoever what the junkie is going to do when we start really taking him off of his medicine. This modern credit system was not built for higher interest rates. It simply wasn't and it took four decades to get down here.

But that last great crash really put us on the easy money policy junkie train. The modern credit system has never never been tested at the rates that we are heading into. Yes, we have had much higher rates 20 30 40 years ago, but these are different days. We have rebuilt the entire Financial system and we have not not tested it since then.

In fact, we did actually test that a little bit in 18 and guess what happened to the market? And then we had to go ahead and lower the rates again just to give it a little bit of a bounce. Now on the entire global economy is being shafted. We're going and doing this again and not expecting to have anything that looks painful. That is just wishful thinking.

That in my opinion is like the bullish version of fud. It's like fub fear, uncertainty and bullishness. Again, let me repeat this modern credit system was not built and has never experienced the rates that we are heading into, not post financial crisis and we cannot possibly not possibly understand how that is going to end up. And at the same time, keep in mind that there is more debt now than ever ever before straining this financial system as we raise these rates.

Here are some facts: Credit card debt in the US is at an all-time high At 930 billion dollars. You look at housing debt versus non-housing debt both at all-time highs. Both are at levels far above where we were when we hit the Great Financial Crisis of 08, which supposedly was so much more risky of a situation than it is. Now you look at the payment to income ratio versus 30-year rates.

Payment to income ratios are now at levels we haven't seen since 2008 and are exceeding them as 30-year rates go up. What does that mean? Well, it means that the percentage of someone's income being spent on housing payments is getting to levels that are almost 40 percent and at this pace could very quickly be at fifty percent soon. What happens if layoffs really start getting going across the economy and people can't pick up new jobs to replace them, Or those consumers who already are getting gutted by inflation simply aren't having their wages keep up enough to pay these payments? Well, all of a sudden they can't pay the banks. The banks see a lot of defaults and all of a sudden the banks start eating into a huge amount of their reserves.

if that happens in Mouse. All of a sudden you get into a situation where that government bailout of banks comes back into the picture. And again, we aren't just talking housing debt. we're talking credit card debt.

Student loan debt, Auto loan debt. Other types of debt as well. Yes, I Know the White House is trying to forgive some of these student loan debt. We'll see how far that goes.

It'll likely just create more issues on another side of the totem pole. But again, debt is a massive, massive risk factor When you are looking at consumers that are getting gutted more and more and more. If they can't afford to pay basic food items, how are they going to pay back their debt on their credit card? How are they going to pay back their debt for houses? How are they going to pay back debt for anything? Sure, right now, as the Fed's main effects haven't been felt yet, they can pay it back. But what about in a year from now? What about just like six months from now? Wait until we go through this earnings season and you see how companies are already reporting about Q3 and then you're going to start seeing how bad it's going to be.

Q1 Q2 of 2023 and I Think a lot of people forget that the entire Financial system is built on a thing called trust the dirty T word. For example, you give your money to Banks and they lend out like 90 plus of it if their borrowers start defaulting in mass and all of a sudden you start seeing people want to go and take their money out of banks. What happens? Well, Banks don't have money to give you. You go from a period of time where you had massive massive liquidity to no liquidity at all and that's what the FED is inducing.

A lot of folks don't realize that the FDIC the program that was specifically set up to ensure deposits and stop Bank runs all the way back in like 1933. Well guess what? Guess how much money is in that entire program? Well, it's about 121 billion dollars. And guess how many total U.S deposits there are that that is supposedly covering 20 trillion. So you have 121 billion dollars set aside to ensure 20 trillion dollars.

Why is that acceptable? Well, because of a little thing called the full Faith and Credit of the US Government. Again, going back to trust people. Trust the US government to go in and bail out to whatever means necessary any sort of institutional problem that we may come across in the future. The problem though, is that before that happens, a lot of pain, death, and destruction tends to precursor that by the time the Fed and the government steps in, there's already been a lot of damage, right? The Government May print you up enough money to get your savings back if it's FDIC insured, but it's going to take you a lot longer to get your money back from the different assets that you held in the stock market or in the real estate market and the actual value of the dollars that you're saving and recovering.

Well, that is probably going to be decimated as well, but you will get the numeric value of it back. So like I said, the entire system is built on trust and it's a big house of Cards just waiting to collapse as Nobel Laureate Douglas Diamond said today in regards to the potential of having another 2008 style Global Financial Crisis He said quote the problem is that these vulnerabilities, the fear of runs and dislocation crisis can show up anywhere in the financial system. He said it doesn't have to be commercial Banks And would you listen very, very carefully to this part because I find it very interesting according to Market Watch Diamond said it's possible, but it isn't necessarily desirable to never have a financial crisis because in many circumstances, the very thing that leads the financial system to crisis is creating more liquid assets that Savers would like to hold out of less liquid assets, longer term illiquid assets, physical plant, and Equipment things like that. He concludes it is very difficult to have both the creation of extra liquidity that the financial sector does combined with universal Financial stability He said.

So what is he saying here? He's saying crashes in the system? Well, they are not an error of the system, but an actual feature. We should have crashes. That is what the system we've built needs to have in order for it to have a natural progression and not overvalue things too much. This is supposed to happen, the FED is supposed to pop things up too much and the FED is supposed to belonging things too much and destroy a lot of businesses and jobs and asset prizes.

So for people who say oh no, a crash can be avoided by wishful thinking if we just all think positively at the same time and just praise Jerome Powell everything's gonna work out hey, he's saying no, no This is a natural feature. We want to have a crash and we want it to be painful. Finally, let me go ahead and read you off some events that you should probably know as we head into the end of this week. So Wednesday we have the OPEC Oil report.

Then on that same day we have the PPI the Producer Price Index release which is a reliable inflation gauge. We also have the FED Fomc meeting minutes released on Wednesday which should reveal some big Bombshells some bombing, Bombshells on what the Fed's true thoughts and what they really were saying behind the scenes and what they are and then the much awaited CPI report will be coming out on Thursday Look very, very carefully at what core inflation is doing and know that markets are going to be very, very anxious on that point. Anyways, have a good rest of your day. Make sure to get your up to 15 free stocks with MooMoo down below.

Make sure to take advantage of the 40 off flash 40 coupon code on zip Trader U linked down below and have a good rest of your day and I will see you in the next video.