Name: Warren Buffett Just Sent a Powerful Message
Uploaded: 2025-07-27T18:27:15.000Z
Duration: 15 min 33 s
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This is one of the worst crises the United States has ever faced in its 250-year-old  And when Warren Buffett was asked about it, he made it clear that it can turn into a great disaster.

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If you have a central bank that is bowing to the will of Congress, either directly or indirectly through some of the various mechanisms, it would be a disaster.

In fact, according to Warren Buffett, this was one of the main reasons behind the Great Recession of 2008.

Over the last few months since Donald Trump has taken office, he has continuously criticized the chairman of the Fed.

He thrown words, he called him names, and he wants the Fed to lower down the interest rates.

And he does not understand why Europe has cut rates 10 times already while the United States hasn't cut the rates a single time.

Back at the end of the last year, experts were expecting the Fed to lower down interest rates.

However, nothing like that has happened, and if the Fed will lower down interest rates under the pressure of the White House, it can turn into a catastrophe or a disaster, at least according to Warren Buffett.

So let's try to answer a couple of questions.

Why Warren Buffett is so worried about the Fed?

Why does he believe that this could break the entire US economy?

And why Donald Trump is so obsessed about the chairman of the Fed?

If you are ready, give this video a thumbs up and let's get right into it.

Fannie Mae and Freddie Mac are the two corporations that are backed by the government but supposed to be independent were created to make it much easier for you to get a mortgage. 30-year mortgages are very risky, especially for banks that give them for the next 30 years.

What's going to happen in 30 years from now?

So the bank is taking a very huge risk, which is why it doesn't want to take a risk for the next 30 years.

However, this is possible because the bank can take that mortgage and sell it to these corporations since they are backed by the government, which is why banks such as JP Morgan, Chase, or even much smaller banks than them often provide a 30-year mortgage, which is the most popular type of mortgage in the US.

These two corporations will take these mortgages, bundle them together under mortgage-backed securities and will sell them to investors.

Investors will gladly buy these securities because they have an assumption or there is an assumption that house prices will always go up and government is backing these two corporations, which makes these securities essentially risk-free.

This is why 30-year mortgages exist in the US.

However, something fundamentally changed in the early 2000s when the government decided to encourage these corporations to start loaning or buying more riskier assets or riskier mortgages.

Before providing you with a mortgage, the bank looks at your background, whether you are financially responsible, do you have a stable job, do you have any kind of savings, and the less riskier you are, the lower will be your mortgage rate.

On the other side, if you don't have a stable job, if you don't have any kind of savings, and by looking at your credit history, it seems like you are not financially responsible, the banks usually won't give you a mortgage.

However, since the government encouraged these two corporations to make sure that every American has a house, they signaled to the banks that they are ready to buy even riskier mortgages, which is why these banks started providing very risky mortgages to people who cannot possibly afford them, because they know that they can take them, turn around and sell them to Fannie Mae and Freddie Mac.

These two corporations will take very good mortgages and very risky mortgages, mix them together and bundle them under one security and sell them to corporations.

And they did it primarily because the government encouraged them to do so.

And this was primarily the main reason why the 2008 great recession happened.

Because once we realized that we have given out too many risky loans, too many risky mortgages, and people began to default on them, investors took a very deep look and realized that the entire housing market is totally inflated and if it wasn't for the government's action, it wouldn't be this bad and the entire system has collapsed.

But if these two corporations were fully independent and weren't encouraged by the government to buy those risky loans, we would not have the 2008 financial crisis.

And that takes us to the current problem that we have right now.

The Fed Reserve is an independent entity even though that it's part of the government.

The chairman of the Fed is appointed by the president of the United States.

However, they must be approved by the senate.

So the entire government works together to appoint the head of the Fed who is going to govern the Fed.

The chairman of the Fed and the people who run the Fed have full authority to do what they want.

It doesn't matter what the president wants.

It doesn't matter what the congress wants.

The independence of the Fed is what makes the Fed Reserve such a unique central bank.

In fact, any central bank should be entirely independent from the will of the president.

These two people are accountable to the entire world. 57% of global reserve currencies are held in US dollars, or around almost 13 trillion dollars.

And if those central banks across the globe will no longer believe in the independence of the Fed, they will start getting rid of their dollars because they don't know whether the dollar will hold its value.

Secondly, the US bond market worth 51 trillion dollars.

And 37 trillion dollars of that belongs to the US government.

Out of that loan, 25% is being owned by foreign entities or foreign countries such as China that holds 800 billion dollars of US debt, Japan holds around 1.2 trillion dollars of US debt, and 55% of that debt is being held by the public.

So Fed's main objective is price stability or keeping the value of the dollar.

Even though there is always some kind of inflation and dollar keeps devaluing anyways every single year, but if that devaluation is 2% annually, then it's understandable.

But because the Fed is independent, everybody across the globe believes in the independence of the Fed and the value of the dollar and they keep getting the dollars as a reserve currency and using the dollar as the global currency for trade and also buying the US government debt.

But why Trump wants lower interest rates?

First of all, lower interest rates is going to create faster GDP growth.

More money will be flowing into the economy, getting a mortgage will be much easier, borrowing money will be much easier, and that will inflate the economy.

And if you are the president, that is the only thing that you want.

A faster economic growth is what every president strives to achieve.

Secondly, the government is running a deficit, a 2 trillion dollar deficit.

And one way to fix that deficit isn't to cut costs, which you can certainly always do, but instead of cutting costs, how about we start making more money.

And if we lower down interest rates, the economy grows faster and the income is going to grow and we will be able to balance the budget over time.

Thirdly, every single percentage costs the government hundreds of billions of dollars.

Now think about it this way, the government has like 37 trillion dollars of debt which is a lot of money and it pays interest on that.

Now 1% on 37 trillion dollars is 370 billion dollars.

This year and next year together, the government will have to refinance 20 trillion dollars of debt.

And it will refinance it at the current interest rates.

If we lower down interest rates, then less money will be allocated and paid into interest payments and the government will have more money for border security, for infrastructure projects or any other projects that Donald Trump has in front of himself, including expanding the military and building a much larger military than the US has right now.

I don't even know how you can have a much larger military, even though this is literally the world's largest military that has ever existed in history, but that's a story for another time.

Donald Trump is also right that other central banks have lowered down their interest rates.

The UK has lowered down interest rates even this year.

The European central banks have been even more aggressive than that and had multiple cuts already, including this year as well.

They went from as high as 4.5% last year to as low as a little 2%.

That is probably what Donald Trump wants in the US.

At 2% interest rate, the US will probably have half of the interest payments that it's having right now.

Because according to the recent reports, with the current rates that we have with the Fed, the interest payments are going to be around 1.1 trillion dollars by the end of the year.

But if we cut the rates to a little over 2%, then interest payments will instantly go to around 500 to 600 billion dollars, which will allow the government to be much more flexible with its budget.

So why did they lower the interest rates in the first place?

You see, if you look at this country's economies, you suddenly realize something.

Unemployment in the UK has been surging since 2022, and it's over 5% right now.

And the British economy is suffering tremendously.

There are so many problems with the British economy.

They barely signed a humiliating trade deal with the United States.

They don't know how to actually get the economy out of the crisis.

And it's very clear that probably by next year maximum, the UK will be in a recession.

So if we want to avoid that recession, then we have to start lowering down interest rates now.

And they haven't even lowered them as much as the European Central Bank, because the UK is still struggling with the inflation, which is even higher than the US inflation.

The same thing applies with the European countries.

Take a look at Germany, which is the largest economy in the European Union.

Their unemployment rate has grown from around 5% to as high as 6.3%.

Secondly, Europe is facing a lot of challenges in front of them.

First of all, they no longer buy cheap Russian guys, and they have exchanged it for or replaced it with expensive American gas that is being shipped from the United States to the European Union, including Germany, that created a lot of inflation.

That forced a lot of factories to close down, which caused unemployment to spike.

They're facing a security problem with their eastern borders.

They're facing so many economic challenges that unemployment keeps rising.

And if they don't lower down interest rates, then the entire European Union is going to face a very serious recession in the foreseeable future.

In fact, I believe that a recession is imminent in the next two years, and it will be much worse than the US recession.

In fact, the US economy has actually been growing tremendously over the last five years.

However, if you look at the European economies, they have been suffering since then.

Another thing to consider is that European economies actually have much less debt than the United States.