Economic Parallels: 2007 and 2024 Federal Reserve Actions

History warns that despite claims of economic strength, patterns suggest a potential crisis looms ahead.

### Economic Parallels: October 2024 vs. October 2007
* 📉 There are striking similarities between October 2024 and October 2007, raising questions about a **potential new global financial crisis**, despite claims of a **strong economy**.
* 🏦 On September 18, 2024, the Federal Reserve cut interest rates by **50 basis points to 4.75%**, mirroring a similar unexpected move in 2007, which also sparked predictions of **accelerated economic growth and inflation**.
* 📊 Historical analysis reveals that after the 2007 rate cut, Wall Street reacted positively, with the **Dow Jones Industrial Average gaining 335 points**, but concerns about inflation soon arose, leading to **criticism of the Fed's actions**.
* 📈 In 2008, despite aggressive rate cuts, the Fed faced rising inflation, with the **Consumer Price Index climbing from 3.5% to 5.6%**, highlighting a potential miscalculation in their approach.
* 🔍 Currently, the 10-year treasury yield has risen since the recent rate cut, reflecting market fears of **inflation similar to those seen in 2008** when the Fed's actions were viewed as **too aggressive**.
* 🏗 Unlike 2007, credit spreads are currently **low**, and construction jobs have not seen significant declines, suggesting a **different economic landscape today**, despite ongoing fiscal deficit spending at **6% of GDP**.
* 📅 Non-farm payrolls and GDP projections also indicate a **stronger labor market** compared to 2007, yet historical revisions of economic data remind us that **appearances can be deceiving**.
* ⚠ Ultimately, while we may not be heading for another global financial crisis, it is crucial to **remain vigilant about potential risks**, as history often reveals that **optimism precedes downturns**.

There are some shocking similarities between October 2024 and October 2007. Does this mean we're headed for the next GFC, or are the people in the mainstream media and these experts correct? The economy is strong and resilient. This is a very strong economy by all measures, and it doesn't happen by accident. I'm going to answer these questions for you in three simple fast steps. Step number one, let's go over what just happened with these Fed rate cuts and compare it to history. Most of you know that on September 18th, the Fed cut rates all the way down to 4.75%. The range with the bottom of the range 4.75%. That was a 50 basis point cut, and for a lot of the market, this caught them off guard. This was very unexpected, and now what we're hearing as far as the narrative with these experts and the mainstream media is that this may spur or accelerate economic growth, and it could take us right back to inflation. This is probably why you're

seeing interest rates go up since the FED dropped by that 50 basis points. But before we move any further, I actually want to point out that this wasn't 2024; this was actually 2007. That's right, September 18th, 2007. The FED cut by 50 basis points, the exact same thing they did September 18th, 2024. And just like 2007, in 2024, they took interest rates down to 4.75. And just like 2007, for a lot of the market, it was completely unexpected. And now everyone is predicting that economic growth is going to accelerate to the point where we might even have Consumer Price inflation accelerate into the future. So this 50 basis point cut might have been a mistake. So what we have to do is we have to go back to 2007, which is what I did right here, and in 2008, and see exactly what happened, but not just with interest rates, with narrative editor. Go ahead and throw up this quote from the Wall Street Journal going back to September.

19th, 2007. The day after the FED cut by 50 basis points. The Federal Reserve lowered its short-term interest rates by half a percentage point to 4.75% to combat the effects of a weaker housing market and tighter credit in the broader economy. The steep reductions in the FED funds rate surprised many on Wall Street, who expected a more modest rate cut, in other words, 25 basis points. Stocks rose sharply after the fed's announcement, more on that just a moment, with the Dow Jones Industrial Average gaining 335 points. The rate cut should reduce payments on many home equity lines of credit, credit cards, and some car loans. In other words, we're headed for a soft landing. The FED has come in to save the day. Perversely, however, some economists say it could lead to higher rates down the road if bond markets expect the fed's move to spur higher economic growth or inflation. Again, quite literally the exact same thing that we're hearing in the mainstream media with these talking heads and these

experts today in 2024. All right, now let's get to this chart going back to April 07. Go from 0% up to 6%. Now this 50 basis point cut, we kind of take this stair stepper approach in editor. You can throw up the chart that we actually used from Fred, and it's kind of curved. I didn't really like it, so I created my own. We talked about this rate cut, but then they go ahead and cut 25 again in October, 25 again in December. What I want to highlight right here, January 22nd, just a week prior to their Fed meeting, they have an emergency meeting and cut by 75 basis points. So you would think at this time all the high-level economists and the PhDs working at the Fed would say, All right, now we probably got some problems, but you would be wrong. Editor, let's go right back to the Wall Street Journal. The central bank's move drew criticism. Bob Eisen, a former Executive Vice President of the Atlanta Fed, criticized Tuesday's rate cut.

characterizing it as premature in light of Fed policy committee's two-way meeting slated to begin January 29th. Again, this emergency meeting was just one week prior to them having a scheduled meeting where, oh by the way, they dropped by another 50 basis points. So, within one week's time, they dropped by 125 basis points. But getting back to the Wall Street Journal, Tuesday's move raises questions about whether the Fed has caved to market pressures. Wrote Mr. Eisenbeis, It's hard to conclude anything other than this move was geared to address market psychology rather than emerging weakness in the real sector. In other words, weakness in the real economy. So, my point is even when the Fed took interest rates from 5.25% straight down to 3% within the matter of just a few months, many of the experts were still saying that this was a mistake because the economy was strong. Oh, but wait, there is more. Look at this long pause that we have after aail, and at this point, they had taken rates from 5.25% all the way down to 2%, but then

the FED keeps them at 2% for quite a long period of time. Why? Well, once again, they thought that they had dropped rates so aggressively that they got ahead of any economic problem that could be lurking. More on that in just a moment, but I also want to point out October 9th. Today is October 8th. Editor, please go ahead and throw up a chart of the stock market. We'll say the Dow Jones Industrial Average, and you can see that right now, as we speak, the stock market is at or very near all-time highs. Well, where was it October 8th or 9th in 2007? Right at all-time highs. And then we go back to the chart when they start cutting rates in October. By this time, it is obvious that the stuff has hit the fan, and all of the talking heads and experts on CNBC are now screaming and yelling, saying that the FED has to do something. This is cataclysmic. This is a crisis. This is a global financial crisis.

these were the exact same people that were saying the economy is strong and resilient all the way from September 18th, 2007, to April 30th, 2008. Step number two. So, we discussed what the Fed was doing with short-term interest rates, but it's important we also dive into the details as to what was happening with long-term interest rates. You guys remember back in Step number one when I was showing that the FED paused their rate-cutting cycle in April of 2008, and they did this because the marketplace was more concerned about, believe it or not, inflation. Check this out, editor. Let's go right over to the Wall Street Journal before we get to these eye-popping, shocking, incredible charts from 2008. I'm reading from an article that came out the day after the headline CPI number was released for July 2008. The Consumer Price Index rose 0.8% from June, so that's month over month. I want to make it very clear that year-over-year, it rose to 5.6%. And before we move any further, I

want to point out the headline CPI number in September of 2007 when the FED first started cutting rates was right around 3.5%. So, September 18th, 2017, we get a 50 basis point cut, and then the FED drops rates straight down to 2%. So, this is a decrease of 325 basis points, in other words, 3.25%. And during this time, the headline CPI went from 3.5% up to 5.6%. Let's get back to the Wall Street Journal article that suggests Federal Reserve policymakers are unlikely to raise interest rates despite their policy statement last week that inflation remains a significant concern. The FED is generally expected to keep official interest rates steady until next year, though rate increases—let me read that again—though rate increases could end up back on the table later this year. And I want to point out this was August of 2008, just a couple of months later, interest rates were at 0%, and roughly a year later, the headline

CPI was negative 2, meaning 2% deflation. So now, let's fast forward back to 2024 and think about what the 10-year treasury yield has done since the FED dropped rates by 50 basis points. Now again, we're talking about September 18th, 2024, not 2007. And you guys probably know from watching my videos that interest rates, just using the 10-year treasury as a proxy, have pretty much gone straight up. Why? Because now the market is concerned that the FED dropped interest rates too much and therefore we will see an acceleration of inflation. The exact same thing they were worried about in August of 2008. And if we go back to 2008 and zoom in on a chart from January 22nd when the FED did that emergency 75 basis point rate cut to June or July when the CPI numbers started to go up to five and then five 5.6%. As you would expect, the 10-year treasury yield went from 3.51% all the way up to

4.27%, and again this was because the market was concerned that the Fed was dropping rates too aggressively into a strong and resilient economy, and that's what was creating the increase in the headlines CPI. And just 6 months after the 10-year treasury peaked at 4.27% because of inflation concerns, the 10-year treasury dropped all the way down to almost 2% because the market thought the global economy, including the US economy, was going into the greatest deflationary depression we had seen since the 1930s. Step number three. So we've gone over just some of the shocking similarities between October 2007 and October 2024, but now let's go over some differences. Like I say in my videos, there are no certainties, there are only probabilities. So let's start by looking at a chart going all the way back to July 2007 to January of 2009. H, I forgot to put 2009 there. And on the left, we go from 0% up

to 22.5%. So, these are just credit spreads, and in this case, we're comparing junk debt or high-yield corporate debt with their corresponding treasuries. So, we can see we start at 2.5%, and then we gradually go up to the point where the Fed did that first rate cut. It was right around, let's say, 5%. Then it gradually goes up and up and up. What I want to point out here first and foremost is that it actually declined going into that CPI report that we went over in step number two. So, the marketplace was way off sides, way off sides when we know what happened just a couple of months later where credit spreads completely blew out when the stuff was hitting the fan, going all the way up to 22.5%. So, this begs the question: where are credit spreads right now? Well, editor, go ahead and throw up a chart, and we can see that they are extremely low, and they're not really going up. If anything, they're going down. I believe they're right around 2.5%.

Right about where we started on this chart, but that's not all. Let's go ahead and look at construction jobs, and this is something that people tweet at me all the time, and they've got a good point. So, if we look at this Fred chart, we can see that every single time the economy is slowing down and we're going into a recession, construction jobs decline significantly. But now we have not seen that decline. Also, fiscal deficit spending. This could definitely be propping up the economy. Back in 2007, it was right around 3% of GDP. Today, we're at 6% of GDP, and that doesn't even include what China is doing with all of their quote-unquote stimulus. But I would like to point out that during 2008, the United States was doing their version of stimulus as well. If I recall correctly, it was right around January of 2008 when they were doing that emergency meeting and that drop of 75 basis points. And in one week's time, they dropped rates by 150 basis points. But oddly enough, many

In the mainstream media, they were saying that this stimulus is unnecessary because we only had maybe one bad month of data, but it was preceded by very, very strong or solid economic data. But let's not forget about nonfarm payrolls. I mean, just the other day, we had that blowout number where the market was expecting maybe 140,000 to 150,000 new jobs, and we got 255,000. That's much higher than we saw back in 2007. And initial claims are also a lot lower than they were in October of 2007. But I'd also like to point out that non-farm payrolls were also increasing back in 2007, September 18th, when the FED did their first 50 basis point cut. Let's also look at GDP because right now, people are expecting a blowout number based on what the projections are from the Atlanta Fed. And back during this time frame, the GDP, at least the headline number, wasn't that hot. But I'd also like to remind everyone it's a common theme that we're going through.

that after 2008, the Bureau of Economic Analysis went back and revised all of their numbers, not just down but way down for 2008 and also for some quarters of 2007. You say, Well, George, okay, how steep were those revisions? Well, editor, let's cut right to the Fed's website and hear it straight from the horse's mouth. During the Great Recession, the advanced releases of GDP sometimes bore little relation to the numbers that now appear in the official record. With the passing of time, the data were revised down, thus bringing the decline in GDP to an eye-watering minus 8.4% annually. And I love what they say next: Policymakers understood the gravity of the situation in real time. Of course, they did. The Fed always trying to make the central planners look like a hero. But let's go back to step number two when they were talking about inflation worries and increasing interest rates in August of 2008, just a couple of months before they dropped rates to 0%, and then a year later, we had actual -2%.

deflation doesn't really sound like policymakers knew what was going on in real time. The point of this video is not to say we are definitely going into a GFC 2.0; we may or we may not be. We won't know until this plays out again. There are no certainties; there are only probabilities. But we can't bury our head in the sand regarding the risks. I always say ignorance is a very poor investment strategy. And just because the mainstream media, the talking heads, and the quote-unquote experts right now are saying the economy is strong, the economy is resilient, and we've really got to be concerned about future inflation, it doesn't necessarily mean that in six months' time or a year's time we won't be talking about 0% interest rates and who knows, possibly outright deflation. The bottom line is every single time we go through one of these cycles that results in a recession or a hard landing, the vast majority of the people just prior to that hard landing, recession or

maybe even worse are always claiming the FED has engineered the perfect soft landing or even no landing and this time it's different. The exact same thing they're saying today. History might not repeat, but it sure does rhyme. For more content that'll help you build wealth and thrive in a world of out-of-control central banks and big governments, check out this playlist right here, and I will see you on the next video.

October 2007 vs. October 2024 (Similarities Are SHOCKING)

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Parallels Between October 2024 and October 2007

The Fed's recent 50 basis point rate cut to 4.

75% on September 18th, 2024, mirrors the same move in 2007, raising concerns about a potential economic downturn.

Both rate cuts caught the market off guard and led to predictions of accelerated economic growth and rising inflation.

The similarities in the narratives from experts and the mainstream media between the two years raise questions about the potential impact of the Fed's actions on the economy.

The Federal Reserve's Rate Cuts and Criticism

The Federal Reserve implemented a series of rate cuts in 2024, starting with a 50 basis point cut, followed by two 25 basis point cuts in October and December.

An emergency meeting in January 2024 led to a 75 basis point cut, raising questions about the Fed's decision-making and its response to market pressures.

Despite aggressively lowering rates from 5.

25% to 2%, experts criticized the moves as premature, and the stock market's all-time highs in October 2007 mirrored the current situation, raising concerns about a potential financial crisis.

The Impact of Federal Reserve's Interest Rate Changes

The Federal Reserve's rate-cutting cycle from September 2007 to April 2008 aimed to address economic concerns, but long-term interest rates continued to rise due to inflation worries.

The Consumer Price Index (CPI) increased from 3.

6% by July 2008, despite the Fed's efforts to lower rates.

Fast forward to 2024, the 10-year treasury yield has been rising, reflecting market concerns about potential inflation from the Fed's rate cuts, similar to the situation in 2008.

Comparing Economic Trends: October 2007 vs.

27% due to inflation concerns but later dropped to almost 2% as the market anticipated a deflationary depression.

Credit spreads for junk debt and treasuries started at 2.

5% in 2007 and gradually increased, while current credit spreads are low and declining.

Construction jobs have not declined significantly this time, and fiscal deficit spending is higher now, potentially propping up the economy.

Mainstream media argues that the recent stimulus is unnecessary, citing only one bad month of data.

However, nonfarm payrolls have shown a significant increase, exceeding expectations and reflecting a stronger job market than in 2007.

GDP projections are also indicating a potential blowout number, but historical data revisions from the Bureau of Economic Analysis raise concerns about the accuracy of economic indicators during that period.

Policymakers often struggle to understand real-time economic conditions, making it difficult to predict future outcomes.

While some experts claim the economy is strong, there is a possibility of facing 0% interest rates and deflation in the future.

History tends to repeat itself, with many people confidently predicting a perfect economic landing just before a recession or hard landing occurs.