Fed’s Biggest Rate Cut in Year ; Here’s Why it Will Wreck the Economy
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The Federal Reserve is expected to announce a rate cut today, and financial analysts and economists are eagerly waiting to see what it will be. Will it be a 25-basis point cut or more? And more importantly, what will the impact be on inflation, the economy, and the price of gold? In a recent discussion with Daniela Cambone, financial expert Todd “Bubba” Horwitz shared his insights on these topics, offering a clear perspective on what these decisions mean for both the average American and savvy investors.
Understanding Federal Reserve Rate Cuts
When the Federal Reserve cuts interest rates, it can have widespread effects on the economy. While many people focus on how it might lower the cost of borrowing or affect mortgage rates, the bigger picture reveals more significant consequences. As Todd Bubba Horwitz explained, federal reserve rate cuts could contribute to inflationary pressures, particularly when the economy is already experiencing challenges.
Horwitz notes that many are expecting a 25-basis point cut, which the markets have largely priced in. However, if the cut reaches 50 or 75 basis points, it could signal a more significant concern—an admission that the U.S. is already in a recession. “A 75-basis point cut would be the end of the world,” Horwitz warns, as such a drastic move could trigger a major market meltdown. The potential for a recession is high, and many fear that rate cuts, while seemingly a quick fix, may only worsen the long-term economic outlook.
The Hidden Tax of Inflation
One of the most concerning impacts of federal reserve rate cuts is how they contribute to inflation. Inflation can act as a hidden tax, eating away at the purchasing power of everyday Americans. As Horwitz explains, higher inflation increases the cost of goods and services, from groceries to gasoline, making it more expensive to live day by day.
The federal government benefits from inflation through increased tax revenues, since higher prices result in more sales tax collected. But this also means that individuals are left paying more for less, as their dollars are worth less in real terms. This is why Horwitz argues that the Fed should not be cutting rates, as it could further erode the value of the U.S. dollar and create economic instability.
Why Physical Gold is a Safe Haven
With so much uncertainty surrounding the economy, more people are turning to physical gold as a way to protect their wealth. Historically, gold has been seen as a safe haven during times of economic turmoil. When inflation rises or when there is concern about the future value of currency, physical gold offers stability. This is because gold retains intrinsic value, regardless of what happens with fiat currencies like the U.S. dollar.
Recently, Daniela Cambone reported that many major banks are bullish on gold. Bank of America, for instance, predicts that gold could reach $3,000 per ounce in the near future, while ING also sees strong potential for continued growth. This surge in the value of physical gold is not surprising given the global economic environment. Central banks around the world, including those in Russia and China, have been increasing their gold reserves as a hedge against currency devaluation.
Horwitz explains that this trend could signal a return to gold as a form of currency. In times of crisis, gold becomes more than just a commodity; it becomes a lifeline. Investors who want to safeguard their wealth during uncertain times are wise to consider gold as part of their strategy.
How Gold Performs During a Recession
Many financial experts, including Horwitz, believe we are either on the brink of or already in a recession. Economic slowdowns, rising consumer debt, and negative savings rates are all signs pointing to tough times ahead. But what does this mean for gold investors?
Historically, gold performs well during a recession. As the value of fiat currencies declines and stock markets experience volatility, gold tends to rise in value. Investors often seek refuge in physical gold, which acts as a hedge against both inflation and economic downturns.
Horwitz predicts that gold could continue to rise significantly in the coming months. While he stops short of predicting a specific price target, he suggests that $3,000 an ounce is within reach if the Federal Reserve’s monetary policies lead to a deeper recession. In addition, silver, another precious metal, may also see a substantial rise, particularly if there is an increased demand for it in industrial applications such as solar panel production.
The Bigger Picture: The Role of Central Banks
One of the most critical points made during the discussion with Daniela Cambone is the role central banks play in shaping global economic policy. The Federal Reserve is just one of many central banks that control the flow of money in the global economy. In fact, Horwitz argues that central banks have a long history of destroying economies by manipulating currencies and creating debt.
“Since the 1600s, central banks have done nothing but destroy economies,” Horwitz says. This is a bold statement, but it reflects the growing concern that our current financial system, based on fiat currencies, may not be sustainable in the long run.
Horwitz emphasizes that we are witnessing the collapse of the fiat currency system, which is why so many investors and even governments are turning to physical gold. Gold, unlike fiat currency, cannot be printed or manipulated by central banks. This makes it a valuable asset in times of financial crisis, and many experts believe it will play a crucial role in the future of the global economy.
Conclusion
As the Federal Reserve prepares to announce its next move, it’s important to understand the far-reaching impacts of federal reserve rate cuts. While they may provide short-term relief, the long-term consequences could be devastating, leading to higher inflation, a deepening recession, and a continued loss of purchasing power for everyday Americans.
For those looking to protect their wealth, physical gold offers a time-tested solution. With central banks around the world increasing their gold reserves and major financial institutions predicting higher gold prices, now may be the time to consider adding physical gold to your portfolio. At ITM Trading, we specialize in helping individuals understand the role of gold and silver in wealth preservation. Contact us today at 866-706-9061 to schedule a strategy session and learn how physical gold can safeguard your financial future.
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CHAPTERS:
00:00 Fed’s rate cuts
5:24 Gold
8:52 Central bank system
9:18 Russia’s purchasing on gold
10:29 Tariffs
11:55 Silver
13:52 Harris fracking ban
16:21 US consumer spending/savings
19:01 Money paying for debt
21:03 Trump’s second assassination attempt
22:44 Concluding words
TRANSCRIPT FROM VIDEO:
00:00
The gold price has just made a new record all time high. Banks are now jumping on the bandwagon with ING saying that the gold rally is just getting started. Bank of America also sees gold hitting $3,000 an ounce. If you haven’t reached out to us at ITM Trading, I strongly urge you to book a strategy session where someone will reach out and connect with you and educate you.
00:28
about creating a wealth preservation strategy centered around owning physical gold and silver. Do it, you won’t regret it.
00:47
It’s going to be a big week for central banks around the world with a slew of rate hikes coming in and all eyes, of course, will be on the Federal Reserve here in the United States coming to you from the heart of New York City here in Times Square. I’m Daniela Cambone. Welcome back to the Daniela Cambone Show here on ITM Trading and join now by Todd Bubba Horwitz of BubbaTrading.com.
01:12
He has seen it all folks through these markets and he is here to give us the lowdown today. Bubba always good to see you. Danny, it’s always a pleasure to be with you. You know, obviously there’s a lot of stuff to talk about in the news and we’re going to get there, but first let’s deal with the fed and then we’ll put it aside and talk about more important stuff. But your take on what the fed’s going to do here, I mean, they know, we know they’re going to cut, but is it 25? Is it 50? And does it matter?
01:41
It does matter. And I first of all, they have no business cutting. Let’s be clear about that. Now, the, the, the cutting is more a government angle because anything they cut will spike inflation, whether it’s 25 or 50, or of course, the democratic senators have now sent a letter to a chair of power that they want 75 basis points. Any cut wouldn’t be no good for anybody, because again, it’s going to spike the inflation, which means that the taxes are going to be higher because of course the federal government collects taxes.
02:10
on everything that you buy, whether they’re grocery store, gas, or whatever. So it increases the tax base that you’re paying. It’s known as the hidden tax of inflation. But 25 is expected. And now there may be a talk of 50. If 50 basis points gets cut, that says that they’re admitting that we’re in a recession, that there’s a problem. And if they go to 75, that’s the end of the world. And I would, I would suspect that no matter what the numbers come out as the markets are going lower.
02:37
after the announcement, whether it’ll be less if it’s 25, because that’s expected, but it’s already really been priced in. I mean, we’ve been pricing it in. It’s going on a year now, Danny. Last October was when we’re going to have all these rate cuts, which propelled these markets higher. If they go 50, I think the markets get clobbered, because again, that’s admitting to a recession. If they happen to go to 75, I think you better duck, because I think it could be a massive meltdown in these markets.
03:07
Well, because we know that our politicians have no idea of what’s going on in the real economy. They have no idea what a free market is. And they think that if they get it 75, that it will help the election and help Kamala Harris or comrade Kamala get elected to a job that she is not qualified for. What, which outcome do you think Trump would want to see with the cuts? 25, 50? I think Trump would be happy with 25 basis points. I, in fact, he might be happy before he’s elected.
03:35
with no cut because that would send the markets probably reeling as well. But I think that he’ll be satisfied with 25 basis points. I think when he’s in office, he would try to work on things to get things better for the American people. But again, I think we’re making a mistake and this is one thing that the Federal Reserve doesn’t understand nor do politicians understand and that is the work of a free market. The free market will price interest rates because the fact of the matter is is that interest rates could be much higher.
04:02
And all you have to do is look at what we call the peer to peer lenders, the prospers, the cabbages and all those different ones. Their average rate is around 12% and people are paying it. So the bottom line is, is that if the free markets were at work, the interest rates would be higher than they are now instead of letting the, the federal reserve, which is more of a cartel and the central banking system. Because again, if we look, they have done nothing but destroy economies. So going back to the 1600s in England.
04:29
This would be the first rate cut, just to remind everyone, since 2020, when Powell took rates to zero in response to the global COVID shock. We also have policy decisions coming up from Brazil, South Africa, UK, and Japan. Is it fair to say those pale in comparison to what the Fed will decide, or will you be paying attention here, Bubba? Well, I won’t be paying much attention, but it will pale in comparison. I mean, Japan’s already done some things.
04:56
going forward and of course, just in Japan’s been basically at zero since 1992, I believe it is when they bought Pebble Beach at a record price and have lost money on it ever since. So I think that whatever anybody else does is not as important what we do because of course we’re the biggest economy in the world. And of course we affect everybody because most things are priced in US dollars as well. So it does have a dramatic effect on whatever everybody else does. Let’s talk about the bullish.
05:26
outcomes banks are expecting for gold now. I mean, are you surprised to see that, you know, pending a rate cut, right? ING saying, you know, it’s going to be off to the races for gold prices. You know, I’ve seen Bank of America come out saying gold’s going to be headed to 3,000. So banks taking bullish bets on gold now, again, should there be a rate cut, which everyone’s expecting here.
05:51
Well, I think gold’s been pretty bullish. Anyways, you and I have talked about this for a while. And since gold was at 22,000, you and I said that it was going to 23, 24, 25, 26 and maybe next 27. I can’t say 3000 yet because of course, there’s enough levels that will prevent, you know, that there’ll be some selling coming in. But certainly the rumor is, is that the central banks and banks have been buying up a lot of the gold, which is part of the rally. Remember, everybody’s got to remember one thing. Okay. The old story, buy the news, buy the rumor, sell the news.
06:20
or sell the rumor, buy the news. The news is out. We already know what they’re expecting. So more likely, gold would probably see a little bit of a sell-off. And again, not that that’s bearish for the market. We have to remember that markets go up and down. Are they stair-stepping higher, which would remain bullish, or are they going to collapse through the stairs and fall down the elevator shaft? That’s the real key. I think gold looks tremendous, and I think it’s got a good chance to see 27, 28. And it would not surprise me if we got to 3,000 by the end of the year.
06:50
because I do think that people are starting to realize that gold may be needed as a currency again. This is something that we’ve talked about last time. And again, the destruction of the currency around the globe, the phony manipulated fiat currency system, which has no backing, people are starting to get concerned that they might not have money to spend because the money is really worthless when you think about it. And of course they continue to make such massive debt. So gold is becoming more in play.
07:18
because it may be needed as a currency as well as silver. And I think that silver is about ready to make a big push as well. And you know, I don’t make big bold predictions, but certainly I would expect silver to get into the mid thirties now. I look for the thirties and I do think we’re gonna get into the mid thirties if we can get some action. We’re right now about 31. And certainly there’s a chance if we get a panic, it could get back into the forties. I don’t see a new all time high getting silver at 49, but again, I do see.
07:47
It continued to rally because I think people are genuinely worried that there is a potential that we may need a currency alternative to the dollar or wherever you are, because I think the central banking system is trying to make it collapse. Okay. The central banking system. Yes, the central banking system. Like the world. The world central banking system. You know, we’re on this path to globalism. And of course, the Fed is the one that we all recognize, but England’s got a central bank.
08:16
Everybody’s got a central bank that is involved, that is manipulating their currency. This is the problem because they have the ability to create new money. And of course, if you recognize the definition of a Ponzi scheme, you create new money to satisfy old debt, which is what we’ve done forever, but we can’t seem to catch up to the debt. And this is a very, very big problem when you look at our central bank, our federal reserve, plus the central banks around the globe.
08:45
So the World Economic Forum? The World Economic Joke, okay? This is, they do nothing, okay? The world groups do nothing but basically steal it from the middle class and the poor and help the wealthier get much wealthier by making everything in their favor and help them to get their way. And don’t worry about the people that actually support the economies around the globe, which is the middle class.
09:14
Let me, let me, so just one more point about gold, because you were saying, you know, that we might have to, people are realizing that we might have to just get back to gold. One country that gets it, Bob, and I’m sure you saw the news headlines, is Russia taking a huge bet, upping their purchases of gold and currencies by 600%. They’re on this, you know, daily month, daily buying spree of gold up until October. What’s your take on Russia here, really?
09:43
upping up their gold play? Well, I think that Russia is being very prudent and very smart and ahead of the curve. You know, as President Biden and others try to push their rhetoric and that they’re about sanctions and things on Russia because of what’s going on in Ukraine, you know, they’re just continuing to sock in the dollars and make a fortune throughout all of these things that we continue to hear that they’re not doing well. And of course they’re making all this money and they’re now turning it into gold because they also realize
10:12
that the fiat currency system itself is really false and is not a very good system. Because when you have nothing that backs your currency, all you are doing is creating massive amounts of debt and reducing value, which obviously creates higher inflation. To your point about currency collapses, I mean, you’ve seen Trump be very vocal with tariffs and imposing them and not trying away from imposing them for countries that
10:41
continue to turn their back on the US dollar. Now, some have criticized it saying this would be utter disaster for the US economy. And what’s your take on tariffs if countries shun away from the dollar? Well, listen, I don’t really believe that they can do that. One of the things you have to remember is that currency is supposed to be backed by the full faith and credit of the government that it’s represented, which is why dollars flow into the US dollar when there is problems.
11:10
You see the US dollar rise along with gold. And again, I think that the rhetoric we hear from around the country is really nonsense because of course, we are more of the supporter to many of these countries and helping them survive as you go back to NATO and the other things that we’re looking at. So there’s a lot of lip service when we talk about it. But at the end of the day, until the dollar gets replaced as a reserve currency.
11:38
And I don’t see that happening anytime soon. I believe that that’s just nonsense and that it’s, that means nothing. We mean, we’ve heard how long we heard about the bricks nation is switching over to a new currency. And yet here we are. The U S dollar is still King dollar, as they say. You brought up silver before, and I want to tie it in because we didn’t speak since the Trump Harris debate. Uh, and.
12:03
I don’t know if, you know, what you were thinking when they actually were speaking about solar panels. I thought, oh, silver investors must be rejoicing here. Um, you know, what, what did you, did you catch that part? And do you think it would help silver’s game in the long run here? Because obviously you need silver to make solar panels. I think it’s a bunch of garbage. Uh, again, I’m not a big believer in all this. And again, the markets already know.
12:29
what the amount of silver that’s going to be needed for these potential solar panels that they’re talking about. And I think of silver, although it is an industrial metal as well, I also think of it more as an investment vehicle and a protection against and of course that would go to my theory that you may need metals for a currency where you would need silver because it’s a smaller price of metal. You’re going to need some change, right? You got to make change. I don’t know how they’re going to use the amount tender the cashier is now, but you’re going to have to make some change.
12:58
And I do believe that, you know, again, the industrial part is already pretty much priced in. It is really the investment part what we’re waiting for and waiting for that big expansion of silver that’s been really stuck in a range for a couple of years here now, and is finally starting to try and break out to the upside. But again, remember, markets are so smart and so efficient right now that they are much faster at recognizing that that industrial use is already pretty much priced in. And of course, it hasn’t…
13:28
created a massive rally. What’s going to create a massive rally in gold is that, Aaron Silver, is that new money will come in and realize that gold has, silver has a better value and more than just for solar panels and more than just for industrial use, but actually for currency use. And I think that’s what will really be the end that will push silver much higher. I know one topic dear to your heart since before this election has been fracking, Baba. So I definitely thought of you during that debate.
13:57
Because it became a hot button issue, right? Mostly surrounding the fact that, you know, Harris had vowed she would not enact a national ban on fracking despite having voiced support for anti-drilling measures back in 2019. So maybe you can help explain to the folks why fracking is so pivotal and people should be paying attention to it. And if there were to be a ban, how detrimental would it be?
14:28
Well, first of all, I mean, that is our support. That is our oil. You know, we have in this country, without getting too deep in the environment, about a 200 year supply based on current usage of fossil fuels. Now, again, if you’re a believer in climate change, which I personally am not. OK, I don’t believe in what they sell us. I don’t believe in what they’re telling us. I believe that that’s more of a money raise for the government when they get try to handle all these things about the change.
14:56
But until we have a better system and a better power grid, we’re gonna continue to need fossil fuels. Now it’s interesting, we are drilling more, or we have more production of oil than we’ve had in the past, but we’re our number one supplier for the United States citizens is still Saudi Arabia. Fracking not only helps us support ourselves, it’s an immense amount of jobs that are involved in fracking. There are many American companies that are involved in fracking.
15:23
And those are good, solid paying jobs. I mean, when they first started fracking and shell producing in North Dakota, people were driving 150 miles a day to go to work because they couldn’t get homes there because it was so busy. But they were making in those days, $150,000 a year. OK, great product. It’s great for the U.S. to be oil independent, because I believe that in my opinion, I’d like to see the United States become an island. I’m tired of supporting the Ukraine war with our things. I’m tired of helping China.
15:53
I’m tired of helping everybody. I want the United States to be self-independent and enough of the stealing of our money, okay, and by eliminating programs that help American people, especially the middle class, because the Biden administration has basically destroyed the middle class with their energy policies, which have been horrific. You know, I was watching an interview earlier on…
16:20
on Maria Bartiromo’s show, she had Tennessee Senator Haggerty on, and he was saying how the U.S. is coming to a crisis point very, very soon. And to your point, Bubba, I saw consumer debt hitting a record again in July. So people are spending, even if they know they don’t have the money, they’re still spending. And here’s another very concerning…
16:50
News item, US consumer savings are completely gone. US net savings as a percentage of gross national income fell to negative 0.9% in Q2 2024. This is the lowest level since the great financial crisis. Savings have been negative for the last six quarters, the second longest streak in at least 70 years. Well, it’s not a- The US consumer, yeah.
17:19
I mean, this is bad, Baba. Well, if you look at the PCE, Danny, we’ve been spending more than we’ve been making for years. Okay, again, this is not news. This comes out every month. The PCE deflator shows the income increase versus the increase in the spending. And the spending has always been above the amount of your taking in. Plus the fact that you have, again, the dollar amounts are hard to justify, but the amount of people that are at max on their credit card.
17:48
Okay, paying the minimum is at a record number. It’s never been there. Again, that are maxed out their credit card. Yet they still spend and they don’t care. And of course, you know, when you’re paying those usury rates for credit cards, which is 25, 26, 27%, you can never get out of debt. And of course, we know that the credit card lobbyist is so strong that they got the ability to go bankrupt on your credit card. Again, you cannot bankrupt yourself against credit card debt. So you have…
18:18
a government, an administration has created the ability for people to go in massive amounts of debt. And of course, now all these people are stuck. So they need more federal spending. And of course, the government continues to want inflation to go higher because they need the tax dollars, because the tax base and the Ponzi scheme that they’re running, it’s starting to fail. And they’re starting to panic a little bit. And this is a problem, which is why they’re so hard on trying to get these rate cuts down, because they need to create more new money at lower rates.
18:48
Yeah, you’re raising such a key point here, Bubba, and I think it almost deserves a segment or really deep-dived in itself in the sense that, you know, where is this runaway consumerism stemming from? I mean, where can we find the root of it? I think you alluded to it a bit here, where people just feel they can just continue spending money they don’t have and…
19:13
There’s just this need to keep up with the Joneses or have the latest boots or television or whatever. It’s a disease. It’s an addiction. And it’s also that the suppliers through government has made borrowing so easy. Again, we forget that there’s so many banks that are in trouble now because of their over lending and going past their fractional banking laws of 10 to one.
19:40
But you go to the store, they give you credit. Do you go anywhere, they give you credit. Because again, a store or a lender doesn’t have to collect from everybody. They only have to collect from about 40% of their borrowers to make any money. And they make a lot of money. So the real problem is, is they’re giving accessibility. And of course, we saw what President Biden tried to do with student loans. And we’ve heard Kamala Harris talk about…
20:05
You know, giving money away for this, giving money away for that, giving money away for that. Well, that money’s got to come from somewhere. And what people don’t understand is it’s coming from you. It’s coming from the taxpayer. Government makes no money. They make debt. OK, they don’t earn anything. And of course, we go back to the jobs. The jobs created in the Biden administration, 66 percent of the jobs went to illegal immigrants. Thirty three percent went to Americans and half of the 33 percent went to government jobs.
20:35
We don’t need any more government jobs. We need people, we need production, we need manufacturing. We need people that can make real money doing real things and real jobs. And this is the problem that they’re creating with all of this debt and making money so easy to get to because really what they’re creating is a dependence on government, which we need to get away from a dependence on government because the Federal Reserve or the Federal Government was never meant to be the biggest employer in the world.
21:02
As we wrap here, Baba, of course, I need to get your reaction to the horrific events, you know, from this past weekend, a second assassination attempt on Trump. I mean, could this election get any crazier? What are your thoughts here? Well, I mean, it’s ridiculous. I mean, here’s a president that’s been attempted twice in the last two months to be assassinated. He’s been hounded by the Democratic Party since he’s been in office. OK?
21:32
Now, again, listen, we all think you got different thoughts and things about different people, but the amount of abuse and power that they’ve been able to put over Donald Trump is really ridiculous. I mean, you should not be able to go to court against your political opponent and try to control them. And of course, there is rumor, and again, I want to make clear this is just rumor, but we know that the debate, if you watch, it was three against one. But there’s also rumor that Kamala Harris was fed the questions ahead of time.
22:01
and was able to prepare for him. Now, make no mistake, Trump did not have a good debate. But supposedly, and rumor, again, I say rumor because I don’t know for a fact, but they were fed questions. I mean, this whole setup of our political system is broken down. And you can see who’s trying to break it down because look at the three major states in this country. Or look at two of them anyways, New York and California. If you wanna throw Illinois into that, look at the damage and destruction that’s been done to those three states.
22:29
not only over the last 20 years, but over the last four years especially because of this administration.
22:38
So when are we going to see you in Springfield, Ohio? You know, there is some truth to that. There is some truth to that. You know, I mean, it’s not all truth. And again, obviously there’s a lot of stuff that flies around, but there is a fact that they have taken some of the ducks and geese out of the, out of the ponds. Now, again, I’m not saying they’re taking pets. I don’t want to get into that whole deal. Again, I don’t, I try to stay away from things that I can’t prove. Okay. Unless I tell you it’s an opinion.
23:08
But I would not be surprised at many of the things that I’ve heard. But isn’t it amazing that we hear a candidate making a complete turnabout from where she was before when she debated Joe Biden to be president in 2020?
23:25
Like I said, we would need a different segment on this, but I asked about Springfield because I know how much you love dogs. So I just want. I’m getting a new dog next Saturday, Danny. All right. I’m just trying to throw some fur. We have to keep it a little light, right? It’s all everything just nasty happening around us here. All right. We’re going to see you soon, my friend. Todd Bubba-Horwitz, BubbaTrading.com. Thank you so much.
23:55
Thanks Dani, always great to be with you. And thank you all for watching. We’ll have more coming your way so be sure to stay tuned to the Daniela Cambone show here on ITM Trading and sign up at danielacambone.com to stay on top of it all. See you soon.
SOURCES:
https://think.ing.com/articles/gold-monthly-golds-rally-is-just-getting-started/
https://finance.yahoo.com/news/consumer-debt-hit-another-record-220228841.html
