Recently released data from the Census Bureau is nothing short of devastating to anyone who has been pushing the absurd meme of a strong U.S. economy.
The Fed remains in a box of its own making. We are beginning to doubt whether central bank will ever be hike rates again voluntarily. What is however eventually highly likely to happen is that the markets will force the Fed to act – or as Bill Fleckenstein puts it, “the bond market may take the printing press away from them”.
"Asia banks indicate in coming weeks markets at early stage of crisis; Q3 EPS shows recessionary global economy. Crowded Discretionary, Banks, Tech & Eurozone most at risk should peak liquidity coincide with EPS recession, SPX<1870, GT30<2.8%, DXY<93...at least until new extreme policies introduced (Fed QE4, China QE1 or a G7 shift toward fiscal policy stimulus)."
What was one "one and done", just became "none and done" as the Fed will no longer hike in 2015 and will certainly think twice before hiking ahead of the presidential election in 2016. By then the inventory liquidation-driven recession will be upon the US and the Fed will be looking at either NIRP or QE4. Worse, the Fed just admitted it is as, if not more concerned, with the market than with the economy. Worst, suddenly the market no longer wants a... dovish Fed?
"I don’t expect that we’re going to be in a path of providing additional accommodation. But if the outlook were to change in a way that most of my colleagues and I do not expect, and we found ourselves with a weak economy that needed additional stimulus, we would look at all of our available tools. And that would be something that we would evaluate in that kind of context."
- Janet Yellen.
"There have been a number of studies that have been done recently that have tried to take account of many different ways in which monetary policy acting through different parts of the transmission mechanism affect inequality, and there's a lot of guesswork involved, and different analyses can come up with different things. But a pretty recent paper that's quite comprehensive concludes that the -- that Fed policy has not exacerbated income inequality."
Maxine Waters Congratulates Yellen On Not Hiking Rates, Says ZIRP Is Precisely What "Minorities" NeedSubmitted by Tyler Durden on 09/17/2015 15:36 -0400
"I am pleased the Federal Reserve under the leadership of Chair Yellen has chosen to exercise a prudent and cautious approach to safeguarding our economy by carefully weighing the full range of economic data in assessing whether to raise interest rates. Moving to prematurely raise rates will endanger the critical economic progress we have made, and threaten any gains minorities have only begun to make on the tail end of this recovery. "
We advise investors to fade out the short term noise emanating from the Fed today and from Janet Yellen and focus on the reality
Historical comparisons, suggest to the FOMC to be extra careful, and don’t underestimate the trust the markets have for the FOMC to act rationally. We all expect the FOMC to act counter-cyclically; a rate rise now would be pro-cyclical, or making the problem worse. Anything FOMC members say after a ‘philosophical’ rate rise would greatly diminish its value. This comparison with Japan suggests that raising rates prematurely is detrimental and avoidable.
Below we show what the latest, September, response is to the question "what investors consider the biggest tail risk" as well as evolution of this answer in the three months preceding. Curiously both #1 and #2 risks, namely "China recession" and "EM Debt Crisis", are an indirect function of the recent and ongoing surge in the dollar, which will likely be exacerbated should the Fed indeed launch its first rate hike cycle in 9 years.
The simple fact that the Fed is struggling to increase interest rates from near 0% after seven long years should give pause for concern. It underlines the vulnerability of the U.S. economy and means that another recession is very likely. Indeed, the huge levels of debt at all levels of U.S. society and the significant increase in global debt levels during the last seven years mean that another recession is almost certain.
How did our financial system weaken to the point where a quarter of a percent increase in rates is more than it can handle?
With a complex and disaster-prone system of interdependence causing social strife and chaos, why not just simplify everything with a global currency and perhaps even global governance? The elites will squeeze the collapse for all it’s worth if they can, and a Fed rate hike may be exactly what they need to begin the final descent.
News That Matters
"Every day brings another reason why the Federal Reserve should hold off before raising interest rates... First and foremost there was the recent plunge in stock prices."