Name: Things are only getting worse…
Uploaded: 2025-06-17T16:42:54.000Z
Duration: 17 min 54 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

is literally a war going on between the white house and the chairman of the fed.

To-infinitive

On one side, we have Donald Trump who wants to lower down interest rates.

Future simple

Because interest rates will have a profound impact on the entire economy and the GDP will grow faster.

On the other side, we have the chairman of the fed who's been trying to lower down the inflation from as far as 9% to as low as 2.4%.

And that's not an easy job, it cost the fed a lot.

Because in the process, so many companies went bankrupt, the economy slowed down, but inflation also slowed down.

So a single mistake right now could undo everything that the fed has done over the last two and a half years.

Imagine you have caused so much chaos in the entire economy, only to find out that a single mistake is going to cause you to go back to the inflation of 5 to 9%.

So it might take the fed another 2 to 3 years to fix that, which is why the fed is not going to rush.

But on the other side, trump wants to lower down interest rates.

There is going to be a press conference on 18th of june and some people were expecting that the fed is actually going to lower down the interest rates, since there was a meeting between jay paul and donald trump.

And since a lot of central banks across the globe have already lowered down the interest rates, let me give you an example, the european union, who also experienced very high inflation.

Now, the inflation of 2020 wasn't just a US problem, it was a global problem, since everybody across the globe started printing so much money.

I mean, if you exclude china and a few other countries, but if you check the united states and its allies, such as canada, european union, england, all of these countries printed so much money and in result saw so much inflation.

But the interest rates in the european union have been lowered down from 4.5% to as low as 2%.

So the question is that, why isn't the united states doing the exact same thing?

Recently, a couple of months ago, the bank of england has also lowered down interest rates.

And that's what confusing to donald trump and the white house right now.

On the other hand, if you look at the US economy, the numbers are very strong.

The reason we have an average CPI and core CPI is because we have to exclude energy and food prices.

Since energy and food prices are very volatile and aren't always in the hands of the fed.

So energy prices can significantly rise, whether you want it or not, because something has happened on the other side of the world.

Most of the food is getting imported from the rest of the world.

So if they have a bad harvest on the other side of the world, suddenly there is going to be a deficit in the market and that will increase prices as well.

Yes, it might not be as great as it was back in 2022 and 2023, but back in the days, we had almost 0% interest rates, where borrowing money was so cheap.

Companies borrowed unbelievable amounts of money.

They started new projects, they invested in new factories, they started hiring people, they started paying everybody as much as they wanted.

Another reason for the interest rates to be dropped is because there is a deal between China and the United States.

Remember in the last press conference, the chairman of the fed made it clear.

We cannot possibly lower down interest rates because we don't know what is going to be the final outcome of the trade war that Donald Trump has started.

On one side, we want to lower down interest rates.

On the other side, what if these tariffs are going to import a lot of smartphones, electronics and a lot of things from China.

And the trade war wasn't just with China, it was with literally every country on earth.

And the only deal that the United States back in the day have reached was with the United Kingdom.

And now a deal with China is actually a good reason for the Fed to consider maybe it's time to lower down interest rates.

But despite all of these great reasons that we have to lower down interest rates, seems like that's not going to happen.

So here in this video, let me explain what exactly has changed and why the Fed most likely will keep the interest rates at their current rates.

Interest rates have the most profound impact on the entire global economy, especially the United States, but specifically the stock market.

Now, it doesn't matter what happens to the economy.

If interest rates are being lowered, they will have real instant on the entire stock market.

Some stocks will rise and some stocks will fall.

And that's because they either make the future cash flow more expensive or cheaper.

Now, most of the tech companies do not make a lot of money.

In fact, they operate at a loss for many years to come, and sometime in the future, they promise to make astronomical amounts of money.

Amazon was running at a loss for over 20 years, and suddenly they are competing with Walmart, and they are one of the biggest and largest companies in the entire world.

Tesla is making some money right now, but at the end of the day, the reason that Tesla is being valued at around a trillion dollars isn't based on how much money they make right now, but rather because they promise to make a ton of money sometime in the future.

That future might be 5 years from now, 10 years from now, and we have different valuation metrics to find out how much possibly these companies make.

Now, but what is the true value of that money that will come sometime in the future?

Because according to the basic laws of economics, a dollar today worth a lot more than a dollar tomorrow.

So if Tesla is going to make a hundred billion dollars a hundred years from now, what is the value of that hundred billion dollars?

They don't worth as much as they are worth right because look at the dollar, over the last 5-6 decades, dollar lost 97 of its value.

So we have something called finding the present value of that future cash flow, and whenever interest rates are dropped, that future cash flow becomes much more valuable.

Let's say hypothetically that we have a company that promises to make a thousand dollars a year from now, and interest rates are 10%.

Now, we have to deduct 10% because if we had that thousand dollars today in our pocket, we could have invested that money.

We might have simply kept it in the bank as a safe deposit and earn interest of 10%.

So because interest rates that are set by the Fed at 10%, we only deduct 10%, which means that the true value of that thousand dollars today is $90.

If suddenly the next day, Fed is going to lower down interest rates from 10% to 5%.

Now, we only have to deduct 5%, which means that the present value of the thousand dollars just increased from $90 to $95.

Which is why whenever you see that the Fed has lowered down interest rates, instantly those companies that promise to make astronomical amounts of profits sometime in the future, their valuation instantly rise in the market, their prices instantly rise in the market, even though they did not come up with any kind of a new product, their valuations on paper instantly rises.

The second most important thing is, of course, the cost of capital goes down, and that's great both for businesses and personally for you, because mortgage rates go down as well.

When you have more access to the capital, more money is being spent by corporations, which means more jobs will be available.

And this is probably the most are going to boost the GDP during his presidential term.

But most importantly, it is going to increase government spending.

All you have to do is to take a look at the national debt of the United States, and suddenly you see a huge problem.

But guess what happens when the cost of capital goes down?

The government becomes even more hungry, and it starts borrowing more money, and it starts spending more money, which is on one side is great for the economy, but on the other side, maybe that's why the Fed is like, wait a second, should we actually lower down interest rates?

Because the government is already in trouble, and now by lowering down interest rates, we might make the entire situation much, much worse.

But this is the reason why most likely the Fed is going to flip on their decisions and interest rates will not be lowered.

And that's because oil prices are playing havoc with us again.

If you look at oil prices, they always has been extremely volatile.

At least in the last 30 years, either they go up instantly whenever there is a conflict in the world, or suddenly whenever there is a crisis, you see oil prices are crushing from as far as $140 to as low as $60.

Iran is certainly one of the largest oil producers in the world, but their oil does not hit the entire Iran has been under sanctions for many years, which is why they produce around 3.5 million barrels per day.

If you compare that to Russia, that's only a third of what Russia produces.

And when the Russo-Ukrainian war started, suddenly, everybody thought that there is going to be a huge deficit of oil in the market, since first of all, they sanctioned Russia.

Secondly, if that war would have been dragged into the entire Russia, that could actually create a huge market, which is why you see that oil prices have risen dramatically from as low as $50 per barrel to as high as $114.

If I am not mistaken, they went into as far as $125 at certain point during that time.

Such a significant rise in oil prices was one of the primary reasons of inflation hitting so high back in 2022.

Yes, oil prices have decreased since then.

Yes, Iran is not such a major oil producing country such as Russia, and the United States right now is oil sufficient.

There is a tiny strait in the entire Persian Gulf where a third of all the oil in the world passes.

So you have Saudi Arabia, Qatar, Bahrain, Kuwait, all of these countries produce most of the oil in the world, and their tankers pass through this entire strait, which means that if Iran is going be dragged into a corner, they will certainly start hitting all the tankers that cross this strait, which means that there is a possibility that there will be a shortage of a third of all the oil in the world.

Yes, there is a possibility to entwine the entire logistics of oil, there is a possibility that oil will no longer be passing through the strait of Hormuz, there is a possibility to redirect the entire logistics of oil, but that will take hundreds of billions of dollars of investment, and it's not being done instantly, it will take some time for that to be done.

And if the entire global supply chains are going to be halted for some time, even for a few weeks, it is going to have a devastating impact.

Remember the covid crisis in 2020, when those logistics or the global supply chains were being halted for a couple of months, they caused havoc for the entire global economy, and it took years for them to be restored, which is exactly what is going to happen in this case, which means that there is a possibility for oil prices to go beyond a hundred dollars within the next couple of weeks, which is again, is making the fed very nervous.

Even though that Saudi Arabia is a neighbor of Iran, they are interested for this conflict to be dragged for as long as possible.

They are against the entire war in the region because it's going to have devastating implications on everybody.

But having these two countries in tension and fighting this little war by sending rockets on each other, yes, it's not a full-blown war, but it's creating so much tension in the entire global markets that people are afraid that this is going to turn into a huge war, which means that people are scared and they will start buying more oil, which means that the demand for oil starts rising, which means that the Saudi budget is going to be filled with hundreds of dollars.

Especially when Saudi Arabia is going through a serious crisis, they are trying to transform the entire country and they no longer have those trillions of dollars that they had back in the days, since the demand for oil is going down.

Secondly, Russia is interested for this conflict to prolong for as long as possible, since they are also very dependent on oil prices, and high oil prices is going to fill their budget with hundreds of billions of dollars.

Oil companies in the US are also interested in that, which means that they will start lobbying other politicians to make sure that this conflict is going to be prolonged for as long as possible, since the higher the oil prices, the more money Exxon is going to make, the more money BP is going to make, and they have a huge lobbying presence in Washington.

This guy has been going into Fox News and other network channels to promote that United States must get involved into this war.

And that's another problem, because a war creates uncertainty.

We don't know how this war is going to end.

The one thing as a business you don't want is uncertainty.