Few people understand how the Federal Reserve actually works— and frankly, I’m not sure the President or Treasury Secretary are among them. That’s not an insult, just based on what they say. Let me explain. Most people think the Fed sets “the interest rate” for everything—mortgages, car loans, 10-year yields. But that’s not how it works. The Fed only sets a very narrow rate—the overnight lending rate between banks. Everything else, from your mortgage to the government’s long-term borrowing costs, is determined by the bond market. And as America’s debt spirals past $37 trillion, the bond market—not the Fed—is in control. This misunderstanding matters. Because when Treasury Secretary Bessent says he’s going to “get rates down,” what he really means is printing money. That’s the only lever left: the Federal Reserve creates money electronically and uses it to buy government bonds. The consequence of that is inflation: more money in the system means higher prices. Sometimes it shows up in financial assets—stocks, bonds, real estate—can also surge to record highs as a result of inflation. Other times inflation hits the grocery store, your utility bill, or your insurance premiums. Lately, it’s been both. Inflation is everywhere. But this administration is also openly floating the idea of a sovereign wealth fund—borrowing billions (or trillions) and putting that money directly into the stock market. Intel. Nvidia. Strategic stakes in American companies. It’s not socialism, and it’s not free markets. It’s something in between: a blending of state and corporate power. Call it National Capitalism. If that sounds far-fetched, remember—they’re already talking about taking a stake in Intel. Why would they stop there? This administration is full of people whose entire background is borrowing massive sums of money at low interest, pouring it into enormous projects, and pocketing the spread. There’s nothing wrong with that. That’s what they know. That’s what they do. Trump is a very successful real estate developer who has personally borrowed billions of dollars throughout his career. So of course when they look at the economy, their instinct is to repeat the same playbook on a national scale—borrow cheap, buy big, and hope the gap between cost and return pays for everything. But when the government itself becomes one of the biggest stock buyers, what happens to markets? They explode higher. And you’re going to want to own assets when that happens. This is the subject of today’s podcast. We dive into: Why the Fed’s “rate cuts” don’t control the 10-year or 30-year Treasury yields—and why the bond market is now in charge. How the U.S. is spending $1.2 trillion a year just on interest payments, and why refinancing old debt at today’s higher rates keeps driving costs up. The Fed’s true method of lowering rates: creating new money, buying bonds, and fueling asset bubbles—at the cost of more inflation. The absurdity of how the US banking system works. How every time the Fed “prints money” to bail out a crisis—9/11, 2008, the pandemic—it ends up inflating specific bubbles: housing, stocks, crypto, collectibles, and now consumer prices across the board. And we wrap up with a quick look at Total Access—our highest level membership built around forging lasting relationships with other members in extraordinary settings. It combines world-class networking and internationalization strategies with unforgettable, once-in-a-lifetime travel experiences. Right now, Total Access membership is open for a limited time. You can learn more here. And you can listen to the full podcast here. https://www.youtube.com/watch?v=6g22tNN5YNo The podcast transcript is available here.
