John Taylor: "We Are Going Into A Recession, Damn It"

Tyler Durden's picture

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.


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buzzsaw99's picture

this will be due to the Fed hiking rates at the end of Q3...

Two flawed assuptions in that one little blurb.

Johnny Lawrence's picture

Agree 100% with you.

Everyone and their mother are saying rates are going up. 

MarketTruth's picture

Perhaps the ECB can raise rates, yet if the US Fed raises interest rates then their crappy balance sheet filled with junk implodes/explodes.

Shameful's picture

There is just no way. The bloodletting would be spectacular, and on the banks balance sheets. With rising interest rates I'm sure all that commercial and residential real estate will look just peachy, not to mention all the interest rate swaps. If the Fed stops QE and raises rates then we can expect an outright default on debts, which is the last thing the big boys want.

snowball777's picture

You assume playing vulture with all those underwater properties isn't part of the plan. Who cares what it's 'worth' if you never have to mark to market, right? You think they don't have the hubris to think it's time or gall to set up QE3 in earnest?

Shameful's picture

The problem is everyone defaults, which slays the leveraged banks. And when I say everyone I mean most everyone including all levels of government.

Now having said that I totally agree that owning land and property might be on the table, but that fits in well with QE3. With the banks getting infinite free money they can speculate for profits or go in and buy underwater assets and mark them to myth. But that is still priming the QE pump. It certainly would world to flood the banks with infinitive dollars and then have them bid on real things in the collapsing real economy. Hard to bid against the guy with bottomless pockets.

kaiserhoff's picture

What you say is true, but how much does the truth matter?

Oblubber needs a scape goat, and Ben isn't looking too good.  You always have the full faith and confidence of the President,... until you don't.

The banks have been dead for three years.  Who cares?  Is Sheila going to shut them down?  Tee Hee.  Why not recapitalize them with poison frog turds and sea shells?  No one would notice except a few pesky accountants, and FASB can always be rolled by the lawyers and economists.  Problem solved, and coming to a screen near you;)

Citxmech's picture

No shit huh?  Good call!

Regarding going "into a recession," I wasn't aware we had come out of the current depression...

samsara's picture

He is right Damn-it

TradingJoe's picture

I will be far, far away when the inevitable will take place! Off the radar and self-sufficient! Keeping a low a profile as possible! All of this we are debating here on ZH for years now wont have a "happy ending" for neither the rich nor the poor! Total Devastation will be the outcome! And all because one mad man and his buddies who think they are "entitled" and "deserving" and have no one to fear but their own doings! Well, i'll come out when its over an I really hope there will be something to come out to, When Its Over! 

Cognitive Dissonance's picture

"I think this is Trichet at his best, right? Where he's very very aggressive at following his...............orders."

Careful John, you don't want to expose too much of the hidden hand if you wish to grow older.

jus_lite_reading's picture

When did we ever leave the recession? I believe he meant "We are going into the Greatest Depression, damn it!"

Watch 'n learn. The clock stops at 3/15/11

sabra1's picture

isn't 3/11/11? day of rage in saudi arabia, muslim brotherhood to reclaim jerusalem, oil doubles, hell breaks loose!

Shameful's picture

Wow the new iPad will do all that? Man people must really be nuts for tech toys :)

Oh regional Indian's picture

Beware the Ides of March. I told someoen that today and their eyes bugged out.

It's special all right. Equinox is round the corner and then the Sun disease really really kicks in. Mercury goes full be timed perfectly with increasing need for good communication due to rapidly deteriorating global everything.

Yup, I had that feelign really strongly today.


Freddie's picture

John Taylor? Isn't he the bass player in Duran Duran? Man he got old.

We never left the Obama Depression.  QE1,QE2 and QE3 did not do jack shit.

HedgeFundLIVE's picture

yep, QE2 is coming to an end. Do I need to recap how many of the pundits referred to the rally of the last 3 months as the QE rally? Then we will see the first real inflationary cycle in this country that we have seen in many years:

Cash_is_Trash's picture


Name the early 21st century event that pushed millions of Americans into poverty, starvation, protests and worldwide government repression and massive collapse in living standard and the fiat currency regimes in Europe, Japan, U.S. and others.


What is the Monetization War?

Lord Peter Pipsqueak's picture

Absolutely Buzz,unless the Bernank is pulling the biggest bait and switch in history,they are going to come out with QE3,Taylor has got it plain wrong or he is talking his book.

DosZap's picture


We WILL have a QE3, by another name.

Otherwise its Civil War.

baby_BLYTHE's picture

Was Bernanke & Ron Paul trying to give us a clue yesterday that Gold & Silver are a bubble?

Since we are in a recovery and QE3 is DOA, why should precious metals scream higher?

I don't want to get caught with my pants down. Everyone buys into a bubble at some point in their trading careers.

I don't want to be on the losing side of this one

trav7777's picture

are ordinary people levering to buy and flip PMs?

That is what a bubble is.  In every classic bubble case, you had 2 ingredients- leverage and ordinary people.  Houses, .coms, tulips, etc.

If your answer to these questions is yes, then it is a bubble.  If no, then it is not.

Shameful's picture

If there is no QE then there will be shuddering massive defaults. Since the dollar is based on faith and debt, what happens when both of those pillars are brought into question? Either path leads us to dollar death. Well unless the political class get tough, reign in the bankers, cut spending massively (Hello SS, Medicare, Military), and learn about thrift and frugality. So if that happens you have no worries because you are already dead and are in heaven, but we, the living, will experience something quite different.

Captain Kink's picture

I think it is too late for us to avoid the end game.  Frugality, etc. will not save the dollar at this point.  and maybe that's best..  I am trying to imagine the fallout, embrace it.  Tough times, methinks.

pendragon's picture

no mention of soveign issues at all. portugal is toast. when is their next pgb auction? how many billions will trichet have buy up to stop the colon falling out of that one?

trav7777's picture

without monetization, there is no bid for USTs.

If rates were allowed to float, the prevailing 10yr would be far, far higher, and the interest cost on the debt would function as an effective massive spending cut.  Let's recall that presently, interest is like the #3 or 4 line-item expenditure in total amount, and would very quickly become half of revenues were rates to go where people think they will.

Also, this simply isn't 1973, where there is still a lot of economic activity to be had, where profits could be made even at high rates.  People in this economic climate would not be desirous of levering up at high rates; there is precious little demand for credit at 0% now.  How much less would there be at 5%?

ivana's picture

great point at the end ... leads to much more "free space" for powerz utilities to manipulate global markets.

Funny thing on several different markets is disapearance of living souls on both sides of trade and lack of liquidity ... than powers take control.

PM market is the only relatively normal trade right now and I suspect that gov force will act there when it suits powerz.

cougar_w's picture

My suspicion is that they are simply going to take your PMs. Holding PMs will be seen as a threat to the State (don't ask me how they'll justify that, they just will) and they'll seize what they can find and tax the fuck out of everyone on top of that. High enough taxes and those holding PMs have to liquidate, so the State win both ways.

Don't know how they'll do it in the end. But when they do they'll pay fiat for PMs at some arbitrary assessed value (1/10th of street) and everyone who held much will go BK and no longer represent an economic threat. The few that fight it will be used to demonstrate how powerless everyone really is.

My guess is the MSM will collaborate with the State to demonize evil PM "hoarders" as greasy bankster unAmerican Jewish subversives, and a holdover from an earlier period of licensed theft by the few from the many. Pretty ironic if they took that approach, but the "banksters are bad" meme is already out there, the Jewish banker class backlash is building, and a large part of this movement is alive right here at ZH.

I'm not in favor of any of the above, but I know how the oligarch mind works and that's one scenario of how it will go down. And don't expect the American sheeple to stand up against any of this either. Once they smell blood in the water they'll be out with pitchforks and torches, and they won't care much whose blood it is so long as they exact their pound of flesh for being played as fools. Even though fools they will remain, even to the end.

Those who know me here will understand that I'm not trolling. That really is how I see it, or one likely scenario. Please think about how this can be combated for the day may come, and if you intend to fight it there is not much time left in which to figure out how to go about it. Hint: Ammo, MREs and 100 acres in Montana are not going to save any of us.

Shameful's picture

Honestly why?

Really, why would the oligarchs give a damn? So what 1% of the US has any real PM holdings? Among them how many moved all in? How many true believers are even all in on PMs? It's not worth it to rob them. When you are looting 99% of the people for most of their wealth why expend an undue amount of resources to try to pick up the last penny on the floor?

Besides if they actually bring in a stable medium of exchange most PM holders will cash out and the cycle continues unabated. The masses ready to be looted again 20-40 years later. And those that cash in, then who cares they are not involved in commerce. The oligarchs don't need the gold, they own most everything else. So why use resources to force a fight when the expected return will not cover the cost of the fight?

These guys will have billions or trillions in assets and own most everything. What will they care if a few isolated individuals were able to protected hundreds of thousands or millions? And if someone they don't like pulls a Hunt, then just use the cops to seize their property on a drug charge, no fuss no muss. To me the ignoring/demonizing of gold in MSM is more to keep a lid on the game and keep the gold canary as quiet as possible while the pillage rages on.

Now having said that agree on land. Think it's a piss asset. Since it's impossible to really own land in the US owning it outright is a fools game. No way to know if the locals will tax you off the land and little recourse. And if you are forced to pay taxes to keep your land then in my mind you don't really own it. Would rather have my assets in a manner that they can be moved, and land is a mother to move!

Cognitive Dissonance's picture

Really, why would the oligarchs give a damn? So what 1% of the US has any real PM holdings?

The simple answer is to give the masses something, someone to hate, to focus the attention of a desperate populous on ghosts and boogie men. It's a tried and true technique of population control all the way back to the Egyptian pharaohs.

kridkrid's picture

They are laying the groundwork, IMO.  There was an article a day or two ago about the Pentagon's take on financial terrorism leading to 2008.  They'll throw spaghetti at the wall to see what will stick... and it won't be hard.  Look at the have nots battling it out in Wisconsin... Tea Partiers vs. Unions workers.  If not for some random twist of fate... 99% of those people could just as easily have found themselves in the other camp.  These are the same people divided into two groups to fight with each other.

Shameful's picture

Well I would argue the methodology of the Egyptians was more based on religion and the all seeing eye of Ra watching them. We already have enough of Big Sis and/or God watching us. Well that and buying a way into heaven. Those priests knew the trick to the afterlife, and it required cash. Buying that stairway to Heaven.

However if one needed a scape goat, then they must be allowed to succeed. Can't scapegoat the tiny gold holders if they are bankrupted with the masses. In which case start by running neutral to slightly negative stories of rags to riches PM holders, then let the MSM turn more and more negative about their antics. Many will act quite flamboyantly anyway, the inflation experiences of Hungary, Austria, Germany showed us this. Those smart enough to front run the currency death often showed off their wealth and garnered the hate/envy of the public. So happens that many of the people who were smart enough to see the currency problem happen were Jewish, see how that turned out.

Shameful's picture

Also if I was going to pick a scapegoat in modern America I pick the old. I blame the boomers, and lord knows they made their mistakes. It would be quite easy to build a case that the boomers bankrupted the US, and then of course that we must cut them off and pay off the debts and problems that they have created. Sure the boomers are a big voting block but young and possibly violent youth can have a reign of terror.

The boomers are a much more viable target then the stereotypical gold holder. As portrayed in media the red neck, uneducated, survivalist, gun totting, bible thumping, neo-confederate gold holders. After all can they really say that stereotype brought down the US, or was it the greed of the boomers?

Cognitive Dissonance's picture

Most people remain in denial of the problems and solutions so that they can remain in denial over their responsibility to themselves and to their local community. As long as the blame can be shifted to someone else further up the food chain, no one need lift a finger. People have forgotten that the food chain, like politics, is always and ultimately a local thing.

BTW Cougar, how is your next chapter progressing?

cougar_w's picture

how is your next chapter progressing?

I hit a block and had to take a break. However there is an angle where Diamond might get paid for some "wet work" as she calls it. Paid twenty pieces of silver in fact but it's not the kind of wet you might be thinking.

Beware the betraying Judas for blood money will eat, and the shadows are full of knives.

Cognitive Dissonance's picture

Thanks for the update. I find myself thinking about the girls often. I pulled out the prior chapters over the weekend and took a trip down memory lane.

DosZap's picture

If they try this, all I can say is,

"Do not fear the dark,fear that which hunts in the dark."

NO Mercy.

I  refuse to get screwed twice without many pounds of flesh.

DosZap's picture

If they try this, all I can say is,

"Do not fear the dark,fear that which hunts in the dark."

NO Mercy.

I  refuse to get screwed twice without many pounds of flesh.

kridkrid's picture

It's so bleeping simple that I don't understand why more people don't get it.... to the point where I question my own sanity somewhat... wondering if I have some sort of Cassandra Complex.  I mean this is simple, isn't it?  The fed pretty much has no choice here... continue to monetize... exporting and inviting dollar price inflation and all of the unrest that it brings, or pull out and watch it collapse.  This is the box they are in.

Huck T's picture

It's so bleeping simple that I don't understand why more people don't get it.... to the point where I question my own sanity somewhat... wondering if I have some sort of Cassandra Complex.  I mean this is simple, isn't it? 


you've pretty much nailed modernity there, bubba

and in forty words


cougar_w's picture

I'll repeat my predictions from last year:

First half of 2011 will be a gradual realization (admission actually) that the music stopped a year earlier.

Second half will be a rapid series of retrenchments. Increased profit taking, repositioning, insider deals, market exits, moving hot money around.

2012 will open with the theater on fire; massive profit taking and exit from markets, including commodities. PMs will probably hit historical records.

By March 2012 the implosion will be wholesale and the fires spread. Second half, war.

2013? Not a clue.

Dr. Porkchop's picture

The numbers are fantastic?