Alan Greenspan is confused – again. The man who admitted to the world a decade ago he didn’t know much if anything about interest rates is now trying to change that reputation by suggesting yet again interest rates are set to rise.
After Wednesday’s policy statements by the Fed and Bank of Japan, a harsh light is being shined on the incredible nature of their communications. It would be wise in the current environment to structure investment portfolios with a pro-volatility bias.
Unwittingly, the Fed has now become co-dependent on the markets. If they move to tighten monetary policy, the market sells-off impacting consumer confidence and pushes economic growth rates lower. With economic growth already running below 2%, there is very little leeway for the Fed to make a policy error at this juncture. Therefore, the Fed remains trapped between keeping the financial markets happy and trying to resolve their monetary dilemma. The problem is that eventually something has to give and it will likely not be the outcome the Fed continues to hope for.
Tiger cub Robert Citrone said “we believe we are in the midst of the market correction we have been expecting," adding “It will likely persist over the next 3-4 months and be the largest correction since the 2008 crisis."
The priesthood's insane obsession with forcing people to spend their savings by punishing savers with ZIRP/NIRP has failed spectacularly for a simple reason: it completely misunderstands human psychology.
"...anybody with any objective, critical, independent mind can tell this is an unsustainable, very ephemeral rally in stocks that has occurred since 2009. And when the bond market breaks, when that bubble bursts, it will wipe out every asset -- everything will collapse together -- because everything is geared off of that so-called 'risk free' rate of return."
"...after every single two-term presidential election (i.e. when the incumbent changes) and there is a 100% track record of a recession within the next 12 months. It either starts just beforehand or starts afterward, but within 12 months there is a 100% chance of a recession... Even if they do raise rates, the yield curve will flatten like crazy... I think the Fed is almost an irrelevance at this point."
Alan Greenspan is shamelessly trying to get ahead of what he seems to be calling the mob, the crazies who at some point will start digging into what he actually did at the Fed rather than simply accepting the myths that he still manages to live by.