---
title: 'Video Q66r-YB_9R8'
source: 'https://youtube.com/watch?v=Q66r-YB_9R8'
video_id: 'Q66r-YB_9R8'
date: 2026-07-02
duration_sec: 1199
---

# Video Q66r-YB_9R8

> Source: [Video Q66r-YB_9R8](https://youtube.com/watch?v=Q66r-YB_9R8)

## Summary



## Transcript

We heard the Central Bank Forum at the European Central Forum. It's being held in Sintra, Portugal. And we heard from Christine Lagarde, Kevin Warsh, Andrew Bailey, and Pip over from Canada.
We're going to break down what all of them have said. And I actually think there's a lot more color we got this time from Kevin Warsh. Tara Eisen's pretty good, I think, at loosening these people up, asking them for quickies.
And let's just say I think we got a little bit more out of Warsh today than we've gotten out of him from the last press conference. What's actually remarkable is you can immediately look at the bond market's reaction, the difference between the 2 and the 10.
We can actually see that the 2-year yield has basically stayed flat here as the longer-term yield is rising. potentially a suggestion that maybe markets don't need to price in hikes as aggressively on the near term,
but maybe that productivity growth will be stronger in the longer term, leading to a little bit of a steepener here on the 10-2. But a lot of color for us to look at. Looking at the bond markets reaction in the first 10 minutes is always a little kooky.
Let's look at what was actually said. So, of course, we heard the classic, you know, we don't want to talk about forward guidance, but then they basically spent the whole time talking about what they think their concerns are for the future
and what the upside risks are for the future. So, both downside risks and upside risks. And I'm obviously going to start with Kevin Warsh on this, and then we'll circle back to some of the other posts. So, Kevin Warsh gave us some pretty good insight in that monetary policy spills over from one economy to another, he said.
It's worth knowing that the European Central Bank is basically facing Eurozone growth that's near zero. You've got the Bank of England that's facing growth that's at like half of a percent.
And you've got the Bank of Canada that's looking at growth that's like negative half of a percent. So all three of those economies are basically nowhere with GDP growth. And so if Kevin Warsh is like, yeah, you know, our monetary policy spills over from one economy to another,
I think what he's kind of implying is that all three of the other central bankers are going, Kevin, don't raise rates. You're going to screw us. To me, maybe that's too bullish of a read there, but that's what I'm gathering a little bit from what he's saying there.
Now, maybe he's also implying that hopefully we can spread our productivity boom to these other economies. He says the following, which is also a good insight. He says, quote, the US AI shock is leading to a boom in demand first, and the supply boom will come.
Wait a second. That's forward guided. Holy moly. He's basically, I mean, this is like we would understand that this is to happen, but for a central banker to say that bluntly is a way of saying, hey, guys, yeah, boy, we have quite the inflationary boom right now because everybody's buy, buy, buy.
But the supply side is going to come. And what happens when demand goes up and supply stays down? You should know this from Econ 101. Demand up, supply doesn't move. What happens to equilibrium price?
Price goes up. That's inflationary. What happens when supply goes up to catch up with demand? Equilibrium price goes down.
That's disinflationary. He basically used Econ 101 to tell us prices are going to come down. Then he tells us, by the way, we're working on new ways to measure inflation.
In fact, he gave us a time frame. He didn't give us this last time. I think Sarah hosed information out of these folks. You have to read between the lines a little bit. Sarah literally eked out of them the quickie that in the next nine to 12 months,
quote, we're going to use new technology, contemporaneous, real-time technology to measure inflation and economic activity.
We're no longer going to rely on older government data that's heavily subject to revision. Wait a sec. Nine to 12 months for your task forces to actually get something done?
Yes, basically. Which is in alignment with what Christine Lagarde said about committees. Christine Lagarde literally and bluntly said,
yeah you know we didn call them task forces We used committees but these take time Time in our case was one to two years at the European Central Bank Kevin Warsh just told us nine to twelve months and then we use
this new way of measuring inflation. Well, in my opinion, he's not going to want to do anything until his task forces are done, which in my opinion means we might end up being stable with
rates for the next 9 to 12 months, as long as there's not another inflationary shock, which in fairness, all of them also said that they're really grateful that oil prices have
come down. Christine Lagarde said it's great that oil prices have come down, but Kevin Warsh talked about how great it is that recently, over the last four weeks, inflation expectations have come down and bond yields have come down, which is another way of saying, you know,
the oil shock is over, which is good. In other words, hey, bond markets pricing less of a risk of runaway inflation, so we don't have to act this fast, right? All of it so far is in alignment when you put the pieces of the puzzle together.
And it makes sense because, I mean, look at oil prices right now. We just had WTI, the Western blend of oil, fall to $69. Too bad Sarah Eisen didn't talk about exactly where the oil price is.
But whatever. Brent down at 72. That's good. That's that disinflationary pressure on, you know, obviously oil prices, which were very inflationary recently,
and they do eventually feed through to all consumer goods and services, which isn't great. When that pressure goes away, you can afford the central bank more time. time. And the federal banks know they can't really do anything about oil prices
anyway. It's a supply shock, right? Alright, fine. So, what else did we get? Because in my opinion, so far, all of that is pointing to the same direction.
But, what's crazy is, we also had them talk about the potential risks to broader economies and how a productivity boom works and what
history tells us about productivity boom. This potentially has the R word built into it. We'll talk about that R word in just a moment. Do have to send a pitch though. We just, because we released
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And a lot of people say joining could be a tax write-off, so consider joining us over there. All right, so let's talk about central banks and the productivity boom. So Kevin Walsh tells us that productivity booms are broad-based and they don't have to be zero-sum.
Kevin Walsh tells us that we're in the first or second inning and that this is a really big moment because it's a moment for us to consider our policy and where we are in relation to jobs, productivity,
and the fact that Kevin Walsh believes that prosperity will be greater. But he says that there is a timing risk. He says it takes time for us to see the fruits of AI.
And now right now, he essentially says we have time. Why? Because he says, quote, we're in this price stability business. Expectations of inflation have come down and inflation risks have come down.
Basically we can afford to wait to see how this boom evolves But where is the risk that comes up Kevin Walsh says quote I still have scars from the financial crisis
I don't want to sound complacent. Potential growth looks like it has trended up, and we tend to go from cycles of low productivity to high productivity.
And we have to study history to understand that. Okay, so that sounds pretty basic, right? That doesn't sound like there's forward guidance in that, right? But wait a minute. What does history tell us?
You can ask any AI about this. You can ask any or read any book about this. What does history tell us about going from low productivity to high productivity? Two types of transitions.
One type of transition is the late cycle transition to recession. That's basically where, in the late cycle, you have low unemployment, and companies tolerate waste and inefficiency,
which is really interesting because remember the video we made yesterday about that ramp study? Remember this? If you didn't watch the ramp study video, you should really watch it, but here's that ramp study. They tell us that the earliest signs of employment growth are happening
when companies start adopting artificial intelligence in the tech sector. But what that doesn't tell us is what happens when companies go through the cleansing phase. The cleansing phase is where companies go, crap, it's harder to raise money.
It's time for us to be a little bit more productive. We need to lay people off. Well, what is the cleansing phase called when an entire economy goes through the cleansing phase and removes waste and inefficiency?
It's called a recession. that the Bank of England, the Bank of Canada, and the European Central Bank are all already facing near certain prospects of a recession.
That the U.S. is the outlier for now. But once we get into the cleansing phase, and you get layoffs happening, and more has to occur with fewer people, that's when you get a global recession. We saw that happen with the 19, or the dot-com bubble,
and we saw that obviously happen with prior economic booms, whether it was post-railroad or otherwise. Now, in fairness, history doesn't tell you that you're guaranteed going into a recession. You could boom like we did in the 90s, or we could boom like we did during the electrification of the roaring 20s,
in part driven by the assembly line and productivity because of Henry Ford's assembly line in the early part of the century. So, Kevin Warsh pointing out history, in my opinion, is again a reiteration that says,
Hey, look, inflation risks are coming down. Our task forces are going to take 9 to 12 months to figure out which direction to go. In the meantime, we're going to wait and see what other data we can get to tell us,
Are we going to have a roaring 20th electrification boom where we go from low productivity to higher productivity? Or are we potentially going to go from low productivity to high productivity through a recession?
Both can happen, and we're going to be mindful of the scars of the past. So, I think that's actually a pretty useful guidance. He's going to sit on his hands and wait for the data.
Now, Governor Bailey, we'll go into some of these other governors here, because some of these sort of reiterate what Warsh is saying as well. Governor Bailey acknowledges they've got a softening economy, the output gap is present, that AI is still in the experimenting phase.
He also tells us that there are tail risks that they're paying attention to, such as leverage in markets. He says that markets seem to be stretched. They're analyzing private credit.
And financial stability matters because there is so much more leverage in the system now that financial stability could turn really rapidly. Now, that's interesting because it kind of tells you that Kevin Warsh should be paying attention
to financial stability as well, right? when they're all on a panel together there. Look at this, for example. Leveraged ETF assets under management. Ah, interesting. All-time highs.
Leveraged ETFs had about $47 billion in assets under management right after COVID. And those ran up to about $218 billion sitting in leveraged ETFs.
This is why when we see a red day, the end of the day tends to accelerate down, or on a green day, the end of the day tends to accelerate up now. This is a phenomenon driven by leveraged ETFs having to buy when the market is going up,
which is basically buying high, and then selling when the markets are going down, which is basically selling low. Leveraged ETFs are just amplifying bad investing. And so Andrew Bailey pointing out leverage in the system is very important I mean look at the concentration peaks we have in markets Historically we are sitting at a concentration peak
Nifty 50, Tech and Telecom, the Japan move, and then, of course, the big 10 stocks like NVIDIA that we're seeing right now. All of these concentration peaks peaked between 40% and 44%.
The concentration peak we just had was 41%. So these are real risks, and the central bankers seem to be paying attention to those, which is great. Now, the Bank of Canada says that right now they're somewhat comfortable where they are at 2.25%,
which is about 1.25% lower than where we are in the United States. And they argue that risks could shift quickly, that when inflation or disinflation arrives, we need to be humble about it.
And I think he leans towards disinflation because they also talk about how great it is that oil is falling. And being humble about it means, hey, cutting rates.
The Bank of Canada was really bearish on this idea of stagflation. They're like, no, we don't have inflation. Inflation expectations are low. We've seen this sort of stuff before.
And we don't need to be worried about stagflation. Yes, unemployment at 6.6% and inflation is at 3.2%, but it's nowhere near as bad as what we saw in the 70s.
Christine Lagarde jumped right on this, and she's like, yeah, no, we don't have a speculation, we have no speculation, but in fairness, all their economies are feeling like they're stagnating during a time we have elevated inflation. It's just not the inflation we saw in the 70s,
and the reason they have to fight against that so hard is because they don't want to seem like they've lost control of inflation, which was done in the 70s. They lost control. Now, Bank of Canada goes on to say that the Internet proved to be better than anybody imagined,
but we still ended up getting the Internet bubble bust. And the market can get ahead of itself. Another little, you know, elbow jab there to Kevin Warsh, right? There's a lot of saying, like, all of the other bankers were kind of like poking Warsh in the elbow,
going, hey, man, you know, things could hit. We could poop bricks pretty quickly here. Anyway, Christine Lagarde, she is really excited about more balanced risks
because of how quickly oil has gone down. She says stagflation is a concept stuck in the 70s, and that right now at least employment is still growing, but we've got to be mindful of the tail risks. And then we had Bailey, Andrew Bailey, who came out and said that,
hey, you know, we'll see what happens. This is the big thing that he said. We already touched on a lot of what he said. But the big thing that I wanted to go back to about him with how much he doubled down on how important financial stability is.
And I think it's really interesting because when you zoom out and look at all four of these bankers together, you kind of have Kevin Walsh sitting there going, look, we're going to wait 9 to 12 months for our task forces to tell us what to do.
All of the other governors were like, man, there are tailrifts to the economy. You know, things could go bad. Valuations are stretched. There's a lot of debt. boy isn't it nice that oil prices came down
huh and so when you kind of bottom line it all you had three people up there going ah inflation is probably going to go away here over time
but our economy has real risks of overheating because of AI and potentially falling into a recession and the bubble popping and then you have Kevin Walsh going yeah we're going to wait and see how all this crap plays out for 9 to 12 months
They're kind of all in the same place. So, that's my breakdown of what was just said. I actually think this was much, much more insightful than what we got out of the said meeting.
So, now remember to go to meetkevin.com, join the alpha membership. Keep in mind, because we have released the Reinvest Homes AI product, as soon as we update the website over here for Reinvest, we're going to be raising the price a lot on this product.
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so anyway, thanks so much for being here really useful discussion and we'll see you in the next one So goodbye out there, and as always, good luck. I don't even want to advertise these things that you told us here. I feel like nobody else knows about this.
We'll try a little advertising and see how it goes. Congratulations, man. You have done so much. People love you. People look up to you. Kevin, talk left there. Bye. Nice to meet you. And you too, bud. Meet Kevin. Always great to get your take.