‘Write-Downs To Zero’: The $1.8 Trillion Private Credit Warning - Danielle DiMartino Booth

We are breaking down the latest Federal Reserve split, Jamie Dimon's private credit warning, and why the K-shaped economy is masking a hidden middle-class recession. Kitco News Anchor Jeremy Szafron sits down with Fed insider Danielle DiMartino Booth, CEO of QI Research, to expose the real data behind the Wall Street headlines.

From the largest Fed committee dissent since 1992 to major private credit write-downs and hidden job losses in the labor market, DiMartino Booth explains why the central bank may be "too late" to the easing process. The discussion also covers commercial real estate stress, the freezing housing market, how AI is impacting temporary employment, and what Tether's $20 billion physical gold hoard signals for the U.S. dollar and global capital flows.

Recorded May 1 2026

What is the real inflation rate you are experiencing in your city right now? Let us know in the comments below!

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Timestamps:
00:00 Markets Send Mixed Signals
00:57 Fed Dissent And What It Means
02:34 Warsch Era And Hidden Labor Data
05:42 Bond Yields And CRE Stress
07:12 Private Credit Cracks Widen
10:45 K Shaped Economy Reality Check
12:52 Consumers Tapped Out And Travel Slump
14:07 Housing Freeze And Layoff Pressure
15:11 Jobs Data Mirage And AI Temps
18:25 Global Flows Gold And Final Takeaways

#DanielleDiMartinoBooth #FederalReserve #PrivateCredit #Economy #KitcoNews #GoldMarket #Inflation #InterestRates #Investing
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The videos are not intended to provide trading advice, and the views expressed do not necessarily reflect those of Kitco Metals Inc. Kitco News, its anchors, producers, and reporters are not responsible in any way for the performance or actions of any sponsor, advertiser or affiliate of Kitco News. In no event will Kitco and its employees be held liable for any indirect, special, incidental, or consequential damages arising out of the use of the content in this video.

Transcript

SPEAKER_02 0:00

KitCo News in Focus with Jeremy Safron.

SPEAKER_03 0:03

Welcome back. I'm Jeremy Safrin, and we're looking at some incredibly conflicting data in the markets today. Equities are extending their longest weekly rally since 2024, and jobless claims have dropped to levels we haven't seen since 1969. Yet the structural numbers point to a very different reality. U.S. publicly held debt just crossed $31.265 trillion, officially pushing past 100% of GDP. And we just witnessed an 8-4 split at the Federal Reserve, the largest committee dissent since 1992 over how to manage sticky inflation. And at the corporate level, Jamie Diamond out with a fresh warning that a credit-led recession could be much worse than anticipated. Of course, to help us read the actual data and understand where capital is moving, we're joined by Fed Insider Danielle DiMartino, both CEO of QI Research. Danielle, great to have you back on the show.

SPEAKER_00 0:53

It's great to be back with you, Jeremy. Thank you for having me.

SPEAKER_03 1:08

I mean, you now have Kashkari, uh Hammock, and Lori Logan explicitly coming out to say it's no longer appropriate to signal cuts. What does a split this kind of severe tell us about their actual control over the current inflation cycle?

SPEAKER_00 1:23

Um, you know what, it doesn't tell us much. It tells us that it tells us a Kashkari is a well-known, notorious dove. And the signal that it sends is good luck forming a consensus future chair, Kevin Warsh. And I think that that was the message that they were trying to send. This is not going to be your grandfather's Fed. You're going to have trouble really corralling the ranks and dissent may become part of your job on day one. And I think that that really is the signal that it was sending. There were there were payroll revisions out the same morning that the Fed met that showed that on average in the third quarter of 2025, 53,000 jobs were lost. And that followed Q2, where also on a monthly average rate, jobs were being destructed on a net basis. So two consecutive quarters in 2025 tells you that not only is it appropriate for the Fed to be in an easing bias, but that they should be easing now and that they're too late to the easing process.

SPEAKER_03 2:36

And you know, you bring you bring up Warsh. I mean, we got to talk about it. That major leadership shift is is approaching. I mean, he's on track to take the hell mid-May. Uh, how will a Walsh-led Fed approach this specific bind of, you know, also sticky inflation differently than the outgoing Powell regime?

SPEAKER_00 2:54

Well, um, A, I don't think it's an outgoing Powell regime.

SPEAKER_03 2:58

No, not yet.

SPEAKER_00 2:59

Um but but you know, but but I I'm gonna I'm gonna take a pause there for a second and say that during the press conference, he was so deferential, deferential to um to incoming Chair Warsh that I think he's going to be the least of Warsh's problems. He said he was gonna step back to a governor role and play that part, as opposed to try and be basically a shadow fed chair just because of his physical presence there. So I think there's a certain irony there. And I and I think that Warsh is going to do a good job of listening to some of Jay Powell's work that he's done on services disinflation, which is accelerating to the downside. And I think that Kevin Walsh is also young enough to appreciate alternative measures of employment that somebody might, like, oh, I don't know, like me, might point out that we have the lowest jobless claims since 1969. But Warsh might come back and say, that's great, but only one in four Americans who are unemployed, more than 7 million, are actually collecting benefits. And the exhaustion rate, in other words, any given state might give you 28 weeks of unemployment benefits, the exhaustion rate is 40%. So we're not actually looking at data through a true prism. And I think that Warsh may take a different approach to using alternative data sources that actually helps him be able to get in there and start cutting interest rates, citing things like, oh, I don't know, near record levels of small business bankruptcies.

SPEAKER_03 4:39

Yeah, yeah. These are things that I mean, you've been talking about, Danielle, for for years since you and I have been chatting on this program. I mean, on that point, because it sounds like you think Powell will kind of step out of the way. I mean, if he stays on as a governor after stepping down as chair, Walsh doesn't inherit a Fed with an internal opposition block from day one, then.

SPEAKER_00 4:58

No, no. In fact, um, he made a point about five times during that press conference of saying that it is going to be Walsh's Fed, and that he was not going to try and be um somebody who was getting in the way of that. It was, it was, it was very respectful, it was very deferential, and it showed a lot of integrity on the part of Jay Powell. I don't agree with Jay Powell's policies lately. I think he's been politically holding back on easing because he's been under attack by the Trump administration. But I thought that there I thought he showed a lot of integrity to say it's not going to be my Fed anymore. It's going to be Kevin Warsh's.

SPEAKER_03 5:43

Yeah, yeah, well said. Um, okay, well, I want to factor in. We'll stay on the Fed just for a second because I want to factor in the bond market because the 30-year treasury yield just tapped that 5% mark, and major banks like Morgan Stanley are completely scrapping their rate cut forecasts. I mean, if if the long end of the curve stays anchored this high, does the regulatory cover for regional banks and their commercial real estate loans finally break?

SPEAKER_00 6:06

Commercial real estate loans. You just retweeted out an opus that I wrote about commercial real estate. And um the the real problem here, we have to think back to 2018 when Jay Powell himself encountered a liquidity crisis. And that made all of the macroeconomic data go into the background because he had to address the liquidity crisis. If banks continue with this higher, as you say, long rate environment, banks have been waiting and waiting and waiting for interest rates to fall to get some kind of relief on these it's a five trillion dollars of commercial real estate loans and interest rates are going in the opposite direction, then you're going to see more loss realization. You're going to see the Wall Street Journal reported last week, you know, we're seeing 90% discounts on office properties. Office distress sales are at a decade high. The more losses that are realized in a high interest rate environment, the more lending standards are going to tighten. And the worse it's going to feed and bleed through into this private credit situation.

SPEAKER_03 7:14

Yeah, yeah. Actually, that was a good transition. I was going to ask you more on the maturities and kind of that refinancing failures, but I think we should talk about this private credit. I mean, Jamie Diamond, yet again, I know every week he almost has a headline here, but he he just came out and explicitly warned that a credit-led recession will be worse than what people think specifically in the private credit segment. Are the cracks, and I I rewatched our I haven't had you on since January. It's been so crazy, but I rewatched that interview and you were talking about these types of cracks. Is that what's finally breaking open here?

SPEAKER_00 7:47

Oh, I think that that's definitely the case. And it's interesting because kind of the the financial media in the broadest sense is trying to gloss over a lot of what's happening. But when you see a headline that says Aries Capital writes down to zero, three big investments, you're like, wait a minute, zero? We've gone from par to zero. So the cracks continue to emerge, the distress continues to become more apparent. And I I happen to agree with Jamie Dimon. I think there's big trouble when you've had effectively a seven-year period of very low due diligence in making loans and levering companies up that are now blowing up because the assumption has always been there, you know, if anything goes wrong, the Fed's going to go to the zero bound. Well, that ain't happening.

SPEAKER_03 8:35

And I mean, following up on that, you just talked about it. Those credit players' errors, Blackstone just released what they're calling internal scorecards, trying to kind of prove their software loans are insulated from any AI disruption. Are these firms anticipating massive valuation markdowns right now?

SPEAKER_00 8:51

They are because that's usually what you see when you're watching a football game, and all of a sudden the offensive coordinator gets thrown off the field and the defensive coordinator comes in to play the lead role. And I think that that's what we're seeing here. I think we're going to see more large write downs. I think we're not going to see a cessation in high redemption requests from these funds. And again, the whole, the whole point right now of how oil prices and the persistence of high oil prices, right? We've got gasoline in the United States at untenably high levels. And how this filters through to higher interest rates is a death knell for all these private credit firms that keep hoping and praying, God give us low zero interest rate policy, or we're going to have to do major write downs. That's the juncture that we're at right now. And that's what Jamie Diamond is rightly recognizing.

SPEAKER_03 9:47

Yeah. I mean, you brought up illiquidity as well. I mean, we were also just learning this morning the financial stability board is officially examining the risks of retail investors piling into this, you know, $1.8 trillion private credit market. Are we watching the early stages of a real liquidity run in that space? I mean, feels like it.

SPEAKER_00 10:06

I I think we are because the liquidity run was preceded by public pensions and life insurance companies piling into this very illiquid um asset class. Now it's being followed by retail investors. But remember, retail investors get very skittish, or you wouldn't see blue owl stock trading like a penny stock. So they want their money immediately. And when the reality of gee, this stuff is not liquid, I better get out of it. That can cause problems for the broader market. Because if they're not able to get the redemptions that they're seeking, then they start to sell off whatever else they have that is that is liquid.

unknown 10:47

Yeah.

SPEAKER_03 10:48

You and I have talked about that K-shaped economy. I mean, I was looking at some of that data this morning. I mean, uh Wall Street is obviously celebrating because 81% of the S P 500 just beat their first quarter earnings. But TransUnion just released data showing debt payments are now eating up 16% of monthly income from subprime and near prime boroughs. I mean, is is this corporate earnings boom basically masking a middle class recession right now?

SPEAKER_00 11:13

It is. And I think that corporations were saying, you know, let's get past the tariff terror. Let let's but but that completely has changed. Completely has changed because now they're having to panic by again, which is killing their margins. I don't think corporate America was planning on having a kind of a redux, a sequel to this margin squeeze, and yet it's right upon them. We saw some very, very interesting data out of the ISM this morning on the manufacturing side where they're lowering their employment. Employment is contracting at a recessionary level among U.S. manufacturers, and yet they're increasing their orders. So they're trying to buy ahead of what they know are going to be higher input costs because of this energy crisis. But at the same time, they're reducing the only costs over which they have control, which is labor. And that tells you that this earnings boom is on it's on borrowed time.

SPEAKER_03 12:18

Yeah, yeah. I mean, that that that next phase of the margin squeeze, as you mentioned. So companies, I just want to get that for audience because companies kind of front-loaded inventory to beat tariffs. But now, I mean, weaker demand, higher carrying costs, less pricing power.

unknown 12:33

Yeah.

SPEAKER_00 12:33

And that's exactly what you're seeing from the transunion data. And it's spreading, it would not surprise me in the least to see the current administration say, oh, well, we were going to get really tougher on student loans starting on July the 1st. Let's just push that off until after the midterms comes and goes because the because at the bottom of the K, the distress is getting worse and worse.

SPEAKER_03 12:54

Yeah, yeah. And I mean, we talked about that personal savings rate. They just dipped to that lowest point since 2022. If the consumer is exhausting their savings just to keep up with the basic cost of living, I mean, how much longer can discretionary retail spending hold up?

SPEAKER_00 13:09

Look, the conference board just reported the lowest number on record of Americans planning to take a vacation by car. Right. And that's like that's like road trips, summertime, summer vacations are being canceled by families. And, you know, the the other interesting connection to make there is that food at home in the CPI report was 0.0. Zero. I mean, the implication is that people are actually, because they're they're having to spend more to fill up their gas tank, that they're spending less at the grocery store. I mean, these are some very distressing signals coming out of households and services disinflation, which Powell watches very closely, is going to become one of what Kevin Warsh talks about a lot. There's an offset. There's only so much money you can squeeze out of a deflationary wage environment. And you're going to see that in services disinflation, which is exactly what the travel industry is communicating to us.

SPEAKER_03 14:08

That's wild, some of those stats. Uh, we got to talk about houses just quick. I mean, U.S. mortgage rates just jumped back to 6.3%, effectively freezing the spring housing market for new buyers. Right. I mean, with affordability, this kind of constrained, I mean, are we are we heading for a structural breakdown in the housing market or is this just kind of a prolonged freeze?

SPEAKER_00 14:28

Well, I don't think it's a prolonged freeze anymore because we're seeing relistings go up so much. So there were a lot of sellers who said a year ago, you know what, I'm gonna, I'm just gonna pull my house off the market. I'm just gonna wait for mortgage rates to fall. That's gonna benefit me and allow me to get the price that I want for my home. That's not an option right now. Yeah. And they still, a lot of them still need to sell their home. We we know that layoffs, you know, Estee Lauder announced this morning, Meta announced big layoffs. The the Chicago Board of, I think that it was either the CME or the CBOE said that it was reducing its workforce by 20%. I mean, in these types of environments, there's only so much you're gonna get out of the consumer, and the layoffs just keep coming.

SPEAKER_03 15:13

Yeah, yeah. That leads into the labor market. I mean, we we talked about that initial jobless claims just dropped to 189,000. Uh, but six weeks or six months ago, when you were on this show, you you kind of pointed out that laid-off workers were living on severance packages. We're kind of skewing the data. Are are we about to see that severance cliff hit the employment numbers here?

SPEAKER_00 15:32

Remember, in October, we had this massive, huge number of layoffs that was followed again with another huge number in January. And you're right, these people only have those have those severance payments for so long. You know, the most telling anecdote that I have heard of late is that a friend of mine was leaving a sports tournament with his high schooler, and the head coach had a lift sticker on his car. I mean, there's something wrong when in 2019, for every entry-level job position, there were 100 applicants, and today there are 300, 300 applicants for every new open job. Uh underemployment and unemployment among college graduates is going to become very problematic and very political, by the way, headed into these midterms.

SPEAKER_03 16:24

Yeah. Right?

SPEAKER_00 16:25

Gen Z, Gen Z and millennials at it together are 52.5% of U.S. voters.

SPEAKER_03 16:32

Yeah, wild. Uh, and you know, I don't know if you said there's a new report this morning. Staffing firms are now saying companies are leaning more on temporary workers and contractors instead of any permanent hires, partly because of that AI and stuff. I mean, does that tell us the labor market's not collapsing, but just really low quality at this point, too?

SPEAKER_00 16:50

It is low quality. And I lay you money that a lot of these temporary workers who are being brought on are being brought on to execute AI such that they don't, A, they don't need the temporary worker anymore. And then they don't need to replace the temporary worker with a permanent worker if the temporary worker has successfully executed AI, reducing the number of jobs that are needed in any given company.

SPEAKER_03 17:13

Uh let's get back to, I just want to touch on the structural inflation argument. There, John uh authors recently argued that the retiring boomers and shrinking workforce are going to drive up service inflation, regardless of what central banks do. If if demographics are taking the wheel here, does the Fed even have the tools left to get us back to 2%?

SPEAKER_00 17:33

That yeah, that's uh that is a very, very good question. But with deference to John, who does wonderful work, I read I read everything he writes, there's only so much that they're going to be able to spend when healthcare inflation is still not under control. So we're living longer, home prices for baby boomers are falling, they're gonna look to monetize the asset that is their biggest asset on their balance sheet just so that they can sustain their living. And if the Fed is forced to lower interest rates too late because of what Jamie Diamond is referencing, a potential liquidity event, and and therefore they're making even less on their savings. So they're not making 3% on their savings, they're making 2% on their savings. There's just going to be less money for them to spend. They're gonna want to go take a cruise, but will they be able to?

SPEAKER_03 18:27

Yeah, yeah. And I mean, looking globally, I mean Brent today on some new reports, it's pulled back from its recent highs, which also seems partly tied to the Bank of Japan likely spending $34.5 billion in a single intervention to prop up the yen. Uh, I'm bringing it up because I just want you to kind of explain how this foreign intervention changes the flow of global capital?

SPEAKER_00 18:48

Well, look, there are there are energy exporters on a net basis and energy importers on a net basis. And again, there are estimates that suggest that there's been upwards of two trillion dollars, excuse me, I think trillion dollars of infrastructure damage in the Middle East. It's gonna take a long time to build this back up. So there are going to be countries that are constantly trying to make life affordable if they're net energy importers. So it will change global capital flows. It will change what happens at U.S. Treasury auctions as well.

SPEAKER_03 19:22

Um, I want to get to gold for our KICO audience, obviously. I mean, it's been impressive to watch. I mean, I saw the headlines this morning. Tether is expanding its buying spree right now. They're holding almost $20 billion in bullion. Um, when crypto giants are kind of stockpiling physical gold alongside the central banks here. I mean, what is that signaling about institutional trust in the US dollar right now?

SPEAKER_00 19:44

Well, again, I'm gonna go back to politics, even though I'm not trying to be political. Right. But if underemployment with young Americans continues to rise, if unemployment among college graduates continues to rise, and there is a massive blue wave, and uh the idea that the United States is going to take one step closer to being a socialist type of economy, meaning double-digit inflation as far as the eye can see, determined at the polls, then the dollar is going to be under increased attack because it costs a lot of money to implement those kinds of universal basic income types of policies. We saw that right after the pandemic came, and it was, oh, I don't know, $15 trillion that they had to spend to pay people to not work. If that's the direction that we're going in politically, then yes, the dollar is going to be under increased threat.

SPEAKER_03 20:43

Right, right. And I mean you bring up the midterms.

SPEAKER_00 20:46

Meaning gold is going to be more important.

SPEAKER_03 20:48

Yeah, I mean, it's certainly has been. I'm just watching it sitting here.

SPEAKER_00 20:52

I'm wearing the right color today.

SPEAKER_03 20:54

Yeah, yeah, exactly. Uh, you are, you are. Um, okay, well, I'll let you go. But before we do that, I mean, you mentioned the midterms. Let's even before that, as we head into these summer months. I mean, what is kind of a big biggest single kind of data point that you're tracking right now that you feel the market is ignoring?

SPEAKER_00 21:09

So, what I'm tracking right now is the the is the panic buying ahead of what is expected to be higher input costs while manufacturers are lowering their hiring. I think we're gonna see a cliff dive in manufacturing and a realization this summer that we've gone right back into an industrial recession.

SPEAKER_03 21:30

Yeah. All right. I'll raise a reality check. Daniel DiMartino Booth, CI CEO of QI Research. And of course, our viewers should also check out uh your newsletter, the Daily Feather. I was on it this morning uh going through some of this to prep. And again, our January interview. I mean, you've been talking about this, so I appreciate your time.

SPEAKER_00 21:48

And you thank you for having me as always. But let's not wait another this many months to come back and visit again. Okay.

SPEAKER_03 21:56

We'll get you back on soon here. Uh the honestly, the viewers demand it. So appreciate. Daniel, thanks for making the time.

SPEAKER_00 22:01

Take care.

SPEAKER_03 22:02

All right, that was Danielle DiMartino booth. We have lots of conflicting data to digest from record low jobless claims to the 31 trillion in national debt, a split Fed, cracks in private data. You have to look past the headlines to understand the full picture. So if you appreciate getting the actual numbers, do me a favor, hit that subscribe button right now. Leave a comment below with the real inflation rate you're experiencing in your city. I do read them all and it helps us shape these interviews. I'm Jeremy Saffron. Thanks for watching.

SPEAKER_02 22:29

KitCo News in Focus with Jeremy Saffron.

SPEAKER_01 22:33

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