A Recession Is Coming… And the Fed Can’t Stop It

A Recession Is Coming... And the Fed Can't Stop It

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Is the Fed ready for the next recession?

The answer is no.

Extensive research shows that it takes between 300 and 500 basis points of interest rate cuts by the Fed to pull the U.S. economy out of a recession. (One basis point is 1/100th of 1 percentage point, so 500 basis points of rate reduction means the Fed would have to cut rates 5 percentage points.)

Right now the Fed’s target rate for fed funds, the so-called “policy rate,” is 1.75%. How do you cut rates 3–5% when you’re starting at 1.75%? You can’t. Continue reading

US cannot stop China’s innovation advancements

It would appear that the US is seriously worried about China’s technological advancements. Fearing the loss of the last comparative advantage over the Asian superpower has caused a genuine concern over national defense and competitiveness among America’s ruling elite.

The US using every possible means to curb Asia’s technological rise, including the banning of sales of essential chips to ZTE for seven years, invoking Section 301 of the Trade Act to investigate China’s “unfair trade practices” and barring investment in the information-technology sector. The Donald Trump administration’s target might be the Asian power’s “Made in China 2025”, a strategy meant to make China self-sufficient in an array of technologies.

The 301 investigation was meant to slow down China’s technological advancements by imposing stiff tariffs on a host of Chinese imports and barring the sales of US technology to Chinese firms. In addition, the anti-China faction of the US Congress and the Trump administration have barred Chinese investment in technology sectors. Continue reading

The Central Bank Crisis on the Immediate Horizon

 

While the majority keep bashing the Federal Reserve, other central banks seem to escape any criticism. The European Central Bank under Mario Draghi has engaged in what history will call the Great Monetary Experiment of the 21st Century – the daring experiment of negative interest rates. A look behind the scenes reveals that this experiment has been not just a failure, it has undermined the entire global economic structure. Continue reading

Make-Believe America

Americans live a never-never-land existance. The politicians and presstitutes make sure of that.

Consider something as simple as the unemployment rate. The US is said to have full employment with a January 2018 unemployment rate of 4.1 percent, down from 9.8 percent in January 2010. https://data.bls.gov/timeseries/LNS14000000

However, the low rate of unemployment is contradicted by the long-term decline in the labor force participation rate. After a long rise during the Reagan 1980s, the labor force participation rate peaked in January 1990 at 66.8 percent, more or less holding to that rate for another decade until 2001 when decline set in accelerating in September 2008. https://fred.stlouisfed.org/series/CIVPART/

Today the labor force participation rate is the lowest since February 1978, reversing all of the gains of the Reagan years. Continue reading

The Secret Force Behind Today’s Rigged Markets

 

Markets were up again big today and volatility was down. But we haven’t seen the last of rising volatility, nor of the central banks’ attempts to thwart it.

This week, new Fed Chair Jerome Powell will be giving his first congressional testimony, and you can be sure that markets are waiting on his words with bated breath.

Before his testimony, the Fed will be releasing its Monetary Policy Report, which will also give an indication to the direction of Fed policy. Continue reading

The Federal Reserve May Secretly Want to Sink the Record-Breaking Stock Market

A big Federal Reserve meeting is coming up. Here is one thing that could happen if the Fed gets too aggressive.

Despite its independence, the Federal Reserve may quietly want a bear market that takes down a president that loves tweeting about the stock market. Continue reading

The Fed’s Built a Financial “Maginot Line”

 

Over the coming months, I believe we could see an economic meltdown at least six times the size of the 2007 subprime mortgage meltdown. That’s right: I believe we could see an economic meltdown at least six times the size of the 2007 subprime mortgage meltdown

Circumstances lead me to believe it could play out like the meltdown I experienced in 1998 after Long Term Capital Management (LTCM) failed.

This time, however, there will be several crucial differences that will leave investors and regulators unprepared.

In the national defense community, military commanders are known for fighting the last war. They study their prior failures in preparation for the next conflict. The problem is that each war inevitably involves new tactics for which they’re completely unprepared.

Continue reading

Federal Reserve Is Out of Tools During the Next Recession, Warns Peter Schiff

Thanks to years of easy money policies, veteran market forecaster Peter Schiff thinks the Federal Reserve will be out of options to rescue the economy and stock market during the next downturn.

That’s the assessment from Peter Schiff, CEO of Euro Pacific Capital.

Continue reading

Asset prices are high across the board. Is it time to worry?

 

With ultra-loose monetary policy coming to an end, it is best to tread carefully

IN HIS classic, “The Intelligent Investor”, first published in 1949, Benjamin Graham, a Wall Street sage, distilled what he called his secret of sound investment into three words: “margin of safety”. The price paid for a stock or a bond should allow for human error, bad luck or, indeed, many things going wrong at once. In a troubled world of trade tiffs and nuclear braggadocio, such advice should be especially worth heeding. Yet rarely have so many asset classes—from stocks to bonds to property to bitcoins—exhibited such a sense of invulnerability. Continue reading

The US Economy Is Failing — Paul Craig Roberts

Do the Wall Street Journal’s editorial page editors read their own newspaper?

The frontpage headline story for the Labor Day weekend was “Low Wage Growth Challenges Fed.” Despite an alleged 4.4% unemployment rate, which is full employment, there is no real growth in wages. The front page story pointed out correctly that an economy alleged to be expanding at full employment, but absent any wage growth or inflation, is “a puzzle that complicates Federal Reserve policy decisions.” Continue reading

2015.75 was Just the Beginning

 

QUESTION: Hello Mr Armstrong

I have not forgotten when I saw the reportage about you on TV when you announced that in October 2015 will start the big economic collapse. do you think that that date was bit early or really there is some thing happened?
Continue reading

A “Financial H-Bomb” Has Exploded

 

Somebody exploded an H-bomb last week, and it wasn’t North Korea. It was the U.S.

This was not a kinetic H-bomb, the kind that leaves a mushroom cloud.

It was a financial H-bomb. Continue reading

Trump Now Owns the Fed

 

Donald Trump has the opportunity to appoint a higher percentage of the Board of Governors of the Federal Reserve system at one time than any president since Woodrow Wilson.

President Wilson signed the Federal Reserve Act during the creation of the Fed in 1913 when they had a vacant board. At that time, the law said the secretary of the Treasury and the comptroller of the currency were automatically on the Fed’s board of governors. But besides that, President Wilson selected all five of the other participating members.

Now Trump has the opportunity to fill more seats on the Fed’s Board of Governors than any president since then.

Continue reading

Japan’s Shifting Power Alliances

 

I’ve just wrapped up a long trip to Japan. And I’ve taken away one lesson from all of my conversations, speeches and research: The rise of nationalism in the U.S. will cause massive shifts in global trade alliances.

One of the main beneficiaries will be Japan. Now, Japan might not be on your radar, day-to-day, but it’s about to play a very important role in the world of Donald Trump.

Here’s what I mean… Continue reading

Don’t Be Fooled – The Federal Reserve Will Continue Rate Hikes Despite Crisis

 

Though stock markets in general are meaningless and indicate nothing in terms of the health of the economy they still function as a form of hypnosis, or a kind of Pavlovian mechanism; a tool that central bankers can use to keep a population servile and salivating at the ring of a bell. As I have mentioned in the past, the only two elements of the economy that the average person pays attention to in the slightest are the unemployment rate and the Dow. As long as the first is down and the second is up, they aren’t going to take a second look at the health of our financial system. Continue reading