John Taylor: "We Are Going Into A Recession, Damn It"
John Taylor, a long-time outspoken critic of flawed monetary policy appeared on Bloomberg TV in the aftermath of Trichet's press conference which had an extremely hawkish tone to it, implying that the ECB may hike rates as soon as April (indicatively, those who play the lottery have a better chance of winning than an ECB hiking any time soon). When asked about his opinion where the Euro is going, the manager of the world's biggest FX hedge fund said "Higher." Although not for long: he believes that the slowing of the global growth is "slowing more in Europe than anywhere else" and logically any attempt to cut off inflation will result in an even further slow down in the European economy. Specifically, Taylor believes the Euro will peak at 1.45 by June, at which point it will start drifting lower as the market realizes the European (read German) export miracle is over. As for the US, Taylor has nothing good to say there either: "We are going into a recession, damn it" - this will be due to the Fed hiking rates at the end of Q3 should the current phase of artificial expansion continue. Taylor predicts a 4,3,2,1% rate of annualized GDP growth by quarter: "by the time the fourth comes, everyone will be screaming - 'Jeez we are going into a recession'." As for the US stock market, Taylor predicts stocks will continue rising for another few months, at which point the "coming recession" will take over. Of course, Taylor's premise is based on the assumption QE does not continue into the end of 2011 and further. Which is a very aggressive assumption. After all, we have trillions in debt to be monetized by some central bank. Alas, it will have to be our own, as everyone will be busy doing the same to their own debt.