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Tag Archives: Fed

  • Blog

    ‘Somebody’ Finally Cares About Gold

    And now that $1,400/oz has been breached, there's plenty of room to run
    by Adam Taggart

    Friday, June 21, 2019, 1:34 PM

    14

    On Tuesday, Mario Draghi apparently went rogue on his fellow policymakers and launched into a swan song version of his all-time hit “Whatever it takes”. The next day, Jerome Powell at the Fed confirmed his willingness to ease and let the market know he stands ready to cut rates multiple times over the next year.

    That — plus a downed US drone patrolling the Iran border — poured gasoline on gold, which spiked as high as $1,410/oz, finally breaking free of the $1,350 ceiling that had blocked its advance for years.

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  • Insider

    Off The Cuff: Into The Abyss

    The Fed's actions are quickly becoming the trigger that will blow up the system
    by Adam Taggart

    Thursday, June 13, 2019, 6:56 PM

    8

    In this week’s Off The Cuff podcast, Chris and John Rubino discuss:

    • The Fed’s Desperation
      • It’s just playing for time at this point
    • Why Lower Rates Will Blow Up The System
      • ZIRP/Negative rates create all sort of perversities
    • Italy Threatens To Revert To The Lira
      • Is the Eurozone about to break up?
    • Bad Corporate Debt Is The Ticking Time Bomb
      • There’s simply way too much of it now

    In this excellent analysis, John does an exceptional job clarifying the unique point in economic history in which we live. The Federal Reserve is truly out of ideas at this point; it is simply playing for time until the system breaks:

    The point in the cycle where we are now is a really unusual time to talk about lowering interest rates. Normally when the labor markets are this tight, and wage inflation is running around 3% which it is right now, the Fed is usually tightening. Wage inflation is a kind of inflation they understand. This is as opposed to stock prices going up, bond prices, or house prices going up. That is inflation, but they do not count it as inflation. When wages go up, they usually start raising interest rates. It is really telling that they are seeing things that lead them to maybe start easing again even with the economy, in theory at least, still growing ten years into the beginning of an expansion.

    I think they are recognizing the fact that the world – not just the US, but the whole global financial system – is so highly leveraged that any kind of downturn becomes systemically risky. In other words, a 20% drop in stock prices which is the definition of a bear market is something that happens all the time at least historically. This time around, it might knock down other dominos in a way that is uncontrollable. This is just because there is so much bad debt out there.

    When you take on huge amounts of debt, by definition a lot of it has to be bad debt. Usually the good credits have already done their borrowing. If you are going to expand that beyond that point, you are going to have to work your way down into the barrel to the bottom of the barrel. That is where we are now. A lot of people who have borrowed money cannot pay it back. They are only hanging on because the economy is growing and because their paychecks are there. If you take that away, then Boom!. The system starts to fall apart.

    These guys know that at the Fed. They are trying to delay the inevitable easing because they know that interest rates are already so low. The European Central Bank and the Bank of Japan never did get to raise interest rates. The Fed only got to raise interest rates a little bit, which means they have no ammo going into the next recession. Normally the Fed will cut interest rates by about 5 percentage points from peak to trough. This is as a way of reinvigorating the economy during a recession. If they were going to do that now, we would be at negative 2 or 3% on the Fed funds rate. It would be more deeply negative for Europe and Japan. That is uncharted territory.

    What the Fed is doing now is using words. They are trying to talk the market up. It works (for now). Whenever they announce the possibility of easing or the cessation of tightening, you get a nice pop in the stock market. They are hoping that they can elevate asset prices until the China trade deal gets signed and until the turmoil in the Middle East has settled. That will also give the markets a pop, and that will keep the economy growing for a while. It will allow them to raise interest rates another couple of percentage points at the short end of the spectrum to give them ammo for the next recession.

    They really do not want to start cutting right now. From here, they really do not have much room to cut. I think it is highly unlikely that they are going to get what they want. In other words, it is an economy that grows for the next three years and allows them to raise the Fed funds rate to 5 or 6%. That is really, really unlikely in the scheme of things. They are going to be forced in the recession that is probably imminent just because the expansion has been going on for way longer than a normal expansion. It is going to run out of steam pretty soon. They are going to be forced to cut interest rates to zero and beyond.

    That is why Powell was talking about that. Now he is talking about the effective lower bound of interest rates which is below 0%, we found out in this last cycle. We do not know how far below zero it is. That is what we are going to find out this time around. In other words, how negative can you make interest rates before it becomes the problem rather than the solution? From an economic theory standpoint, that is fascinating. That is the kind of experiment you never expect to see in the real world. We are going to do it this time.

    We are going to find out what the absolute lowest level interest rates can go to before it blows up the system. I do not use the words “blow up” lightly. That is what could really happen when interest rates get down to that point, and it turns out they do not work. Then it is game over.

    Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com’s other premium content.

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  • Blog

    The Company Store

    Leaves almost nothing to live on
    by Chris Martenson

    Friday, May 3, 2019, 1:33 PM

    20

    The scam enabled by today’s financial ““markets”” coupled with lots of easy cheap credit flowing to big monied interests is every bit as egregious as the company store of old; only today’s victims are mostly blind to the way that the system is rigged against them.

    Run this scam long enough and one day we’ll discover that the banks and their proxy agents — private equity funds, hedge funds, endowments, and family offices, etc — own all of the productive farmland, all of the mines, all of the oil wells, all of the timberland, and every other means of primary wealth production.

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  • Insider
    PeakProsperity.com

    Off The Cuff LIVE!

    Axel Merk, John Rubino & Wolf Richter together on stage
    by Adam Taggart

    Thursday, May 2, 2019, 10:37 AM

    2

    What’s better than an Off The Cuff with John Rubino? Or Wolf Richter? Or Axel Merk?

    How about one with ALL of them?

    That’s what attendees of last weekend’s Peak Prosperity annual seminar were able to enjoy, live on stage.

    This meeting of the minds was the first time Axel, Wolf and John had ever met one another in person. And the idea-exchange that ensued was pure magic.

    For this week’s Off The Cuff, we’re giving you a huge treat. A chance to watch these great thinkers in action.

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  • Insider

    The Fed Is Dangerously Wrong

    It's reaction to its failed policy? We just need to do more!
    by Chris Martenson

    Wednesday, April 17, 2019, 7:24 AM

    10

    More voices are starting to join ours in criticizing the Fed.

    More and more prominent people from the world of finance and politics are beginning to realize that the Fed’s actions have benefitted the few at the expense of the many.

    The 0.01% has gained enormously, while the bottom 80% have lost ground. This deeply unfair outcome is increasingly becoming politicized, meaning that the Fed’s era of free reign to shovel ever more money to their Too Big To Fail bank owners and the ultra-wealthy is coming to a close.

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  • Blog
    EHSToday

    The Bull(y) Rally

    Something unnatural is going on
    by Adam Taggart

    Sunday, April 14, 2019, 3:00 PM

    17

    “A bully is always a coward.”

    ~ Thomas Chandler Haliburton

    The current market rally is like a playground bully; shoving to the ground anyone in its path.

    But like all bullies, the braggadocio belies an underlying cowardice.

    Those in charge of the status quo must be absolutely terrified to resort to the unnatural lengths they are going to right now to keep the current rally intact.

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  • Insider

    Off The Cuff: Inflationary Pressures Are Rising

    Wage growth, other factors, now pushing inflation higher
    by Adam Taggart

    Tuesday, March 19, 2019, 4:47 PM

    6

    In this week's Off The Cuff podcast, Chris and Axel Merk discuss:

    • Powell's Non-Message
      • He's trying to be as boring as possible to keep the markets placid
    • Rising Inflation
      • We may quickly go from “too little” inflation to “too much”
    • Good Times?
      • Many of the metrics the Fed looks at are still green
    • The Boeing Crash & Energy
      • Why one is related to the other

    Fresh off his own reaction to Jerome Powell's appearance on 60 Minutes, Chris sits down with Fed watcher Axel Merk to hear his seasoned perspective on the central bank's future moves:

    Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com's other premium content.

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  • Blog

    Hair-Trigger Markets

    Bull market liftoff? Or bear rally rollover?
    by Adam Taggart

    Saturday, March 16, 2019, 10:33 PM

    4

    The market looks very much paused at the brink of a breakout here. The question is: up or down?

    The bulls are expecting a sharp rebound in GDP from Q1, which they claim was artificially low due the government shutdown. They point to 2018's solid 3% economic growth, claiming the US is humming along fine and about to get a shot of adrenaline once America and China announce an end to their trade war. In their eyes, the S&P is poised to rocket higher once it punches vigorously above 2820.

    The bears see a topping out of a classic bear market rally, one that has been propelled by no convincing fundamentals — only central bank jawboning/easing and continued massive buyback programs (plus this week's rare Quad Witch options expiration). They see an extremely overbought market, with stocks ready to break down to new lows for the year.

    Which way will thing break?

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  • Blog
    Peak Prosperity

    VIDEO: The Fed Stooges

    Laughing (and crying) at the recent '60 Minutes' interview
    by Adam Taggart

    Tuesday, March 12, 2019, 6:39 PM

    2

    On Sunday night, 60 Minutes treated the American public to a sit-down interview with the current Federal Reserve chairman and his two immediate predecessors.

    Hilarity ensued.

    Not really…unless you enjoy gallows humor.

    In the below video, Chris explains why this relatively gentle puff-piece assisting the Fed's hawking of its “All is well!” message is an intentional soporific, designed to keep the populace slumbering in ignorance of the extreme danger reckless central bank monetary policy has placed society in.

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  • Insider

    Off The Cuff: Bad Assumptions = Bad Outcomes

    Both the market & the Fed are making dangerous assumptions
    by Adam Taggart

    Thursday, February 28, 2019, 8:20 AM

    11

    In this week’s Off The Cuff podcast, Chris and Wolf Richter discuss:

    • The Market Is Making Some Dangerous Assumptions
      • Right now it’s confident the Fed won’t hike this year. But will that be the case?
    • A Rate Surprise Would Shock The Markets
      • But the massive rebound seen since Jan supports hiking
    • Higher Rates Would Help The Fed Address The Coming Recession
      • Yet another reason rates can still go up
    • But There’s No Guarantee The Fed Can Ride To The Rescue
      • One day its stimulus will stop working, no matter how large

    There’s been a lot of releases from the Federal Reserve lately which Chris and Wolf deconstruct here. Wolf is of the mind that the markets are interpreting the Fed’s recent dovish moves as complete capitulation. He’s not so sure about that — he thinks the Fed will raise rates if given the opportunity. And the massive market recovery since the start of the year is giving it more and more validation for further hikes. So Wolf warns that the market could be in for a nasty surprise should the Fed hike later this year.

    But he also warns that the Fed is guilty of making some shaky assumptions of its own. Here he explains why its stimulus playbook may not work as expected when the next recession arrives:

    Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com’s other premium content.

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