The lower the Yen goes, the more selling we see: Andy Brenner

Floor show Joining me now, Euro Pacific Asset Management Chief economist and market strategist, Peter Schiff and Nataline Securities Head of Global fixed Income, Andy Brenner. Andy, you were kind of the first a couple of weeks ago to say that July was a live meeting. Now how is that possible? The markets are showing at least fed funds futures that there's a very slim chance that we would see a rate move. Well, right now it's still 10 to one against, but you know, things are starting to perk up. Inflation's a little better. The economy continues to be weaker and weaker. And even though we don't see a recession, we see a continuing economic problems as well as a lot of stuff overseas. And let me bring up one other thing. You know, a lot of what we're seeing today and we pointed out first thing this morning is the fact that the end is is getting crushed. And so as the yen goes higher from higher means lower goes to 160 and 160.8 and so on and so forth against the greenback, right. Then you're getting selling out of Japanese entities who have taken massive losses because of their treasury holdings, but now they have currency profits to offset that. So the, the lower the yen goes, the more selling we're seeing. And I think that's what's affecting the 10 year. I don't think the 10 years looking at the Fed right now. And I think the PCE, the good numbers of PCE have already been built in. And the only surprise we could see on Friday would be a negative surprise. So I think we have to be very careful. Also what we saw in the trend, a lot of the longs have gotten sucked in, the Ctas who were short, forever flipped long and now I think they're going to be stopped out. So that's what I think is going on, Peter. OK, let me disagree with my good friend Amy Brenner. He says it's looking that the 10 year maybe is moving on the end. I think it's moving on what happened in the last 24 hours with Canadian inflation and Australia inflation. Canada just cut its rates by 1/4 of a percent. Well, quarter base, right? 25 basis points. June 5th and yesterday. Canada comes in with hotter than expected inflation. Australia overnight, hotter than expected inflation. Is this a cautionary tale that the Fed, if it cuts, is cutting way too early? Well, not only is it cutting too early, it stopped hiking too early. Rates are still much too low. the Fed never actually moved rates into restrictive territory. That's just not true. Credit continues to expand in the economy. Look at the federal deficit. Look at household debt. And now I read that the US government is soon going to be a guaranteeing second mortgages. That is a major expansion of credit. It is highly inflationary. So all the central banks that are cutting rates are doing it not really because they've won the war against inflation because, but because fighting inflation has caused other financial problems that are now a greater concern for the central banks. And I think the Fed is going to fall victim to the same concern. They are probably going to eventually cut rates and they're going to be fueling an inflation fire. And yet we're getting GDP, the final read on first quarter GDP. That's tomorrow and you, you, you look at that number and it's probably going to be a little bit 13. Not great. Yeah, exactly. A little anemic there. Look, the Saint Louis and yet the stock market is going to new record highs every other week. The stock market is looking and I'd like to get Peter's opinion on this because I'm sure he disagrees, but the stock market is looking at AI related stuff and they're they're just taking it too high. But you know what, what we've said in our commentary the last couple weeks, the first half of July, you get all the second-half money coming in. So July is usually pretty good. August and September are the two of the worst months of the 12 of the year. So if you're going to look for some kind of correction, it's going to be in August and September, probably more like September going to the first week of October. But coming out of the election, I'm, you know, and I can't predict what the election is going to show, but at least you're removing uncertainty. And I think you could rally into the end of the year. Yeah. You know, you mentioned earlier that they're going to be announcing the the stress tests on the bank. And those stress tests are really just a joke because the Fed never actually stresses or tests for the real stress, which is stagflation. They never look at a scenario where the economy goes into recession, but interest rates and inflation rise instead of fall. They don't test that because I think they assume that's impossible. But I think the real reason they don't test it is because every bank would fail. And that's really what's happening. And that's what's going to be putting pressure on the Fed. Almost as if the bank lobbyists are in their faces saying, you know, don't make this an ugly one, or at least the bar too high being you're looking at big financials. If we can pop those up, we've got Goldman Sachs down, JP Morgan, Morgan Stanley, City, Bank of America. Yeah, moving, moving in the red here. All of these banks, though, if they were forced to mark their unrealized losses to market, they'd all be insolvent. So we have a completely bankrupt financial system thanks to the Fed, thanks to the government. If we had a free market, we'd have a sound banking system, but unfortunately we don't. It's on the verge of collapse, which again, is why the Fed is going to have to allow inflation to run out of control because the alternative is a much worse financial crisis than 2008. So what, Andy, what? Let let me comment. Go ahead. Two things. One, Peter's absolutely right. If banks were marked to market, we'd have tremendous trouble. And you know who else if they marked the market would be out of business? The Fed itself with one 1.21 point, 3 trillion of losses. But Peter, your your point doesn't make sense. If you believe the banks are are in trouble in and I don't disagree with that point, then the Fed should be easy not tightening because you want you, you need to keep your bank solvent. Well, that's the point. But in order to do that, they have to unleash massive inflation. So I think ultimately, that's worse. Wiping out the value of your savings to inflation is worse than having the banks lose your savings. But politically, the government is going to choose to save the banks so that the public keeps its money. But what it's going to lose is its purchasing power because the bank, the value of your bank deposits is going to collapse. Of course, the government will blame it on greedy speculators, on, you know, on business, on the free market. If it did the right thing, it would be more obvious who the villain was. So they're very good at trying to shift the blame for inflation to third parties. But that's what's going to happen. But So what is the most important? We got to run. But what is the most important wind of change that we could see in the next 48 hours? Is it GDP, is it the bank stress tests or is it PCE? PCE. And don't lose sight of the fact that Paul speaks twice in the next two weeks, but he's got a different view than everyone else. Peter, really quick. And remember, inflation is not prices, it is money supply and credit which have grown dramatically. Rising prices are merely a a result of inflation. They aren't inflation, they don't cause it. And given how much money has been created and how much credit, prices have one way to go and that's way up. Great. My peanut butter, my organic peanut butter is going to be back to $12.00. Not happy. Good to see you both. Thank you for a very inspiring discussion.