recovery

What the Fed really decided Thursday was to ride the zero-bound right smack into the next recession. When that calamity happens not too many months from now, the 28-year experiment in monetary central planning inaugurated by a desperate Alan Greenspan after Black Monday in October 1987 will come to an abrupt and merciful halt. Yellen and Co should be so lucky as to only face torches and pitch forks.

The Fed is truly cornered. If it fails to hike rates it will have no ammo for when the next crisis hits the US. But it if hikes rates now while the economy is so weak (more on this in a moment), it’s likely to kick off or deepen a recession.

The divergence meme that is the center of the dollar bull narrative was never predicated on precise timing of Fed's lift-off.   To go from no hike in September to Fed will never raise interest rates, or QE4 is next, is a needless exaggeration.  

"Instead of acting via bond markets and banking sector, why shouldn’t public sector bypass markets altogether and inject stimulus directly into the ‘blood stream’?... CBs directly monetizing Government spending and funding projects would do the same. Whilst ultimately it would lead to stagflation (UK, 70s) or deflation (China, today), it could provide strong initial boost to generate impression of recovery and sustainable business cycle... What is probability of the above policy shift? Low over next six months; very high over the longer term."

It is time for a radical denationalization of money, a privatization of the monetary and banking system through a separation of government from money and all forms of financial intermediation. That is the pathway to ending the cycles of booms and busts, and creating the market-based institutional framework for sustainable economic growth and betterment. It is time for monetary freedom to replace the out-of-date belief in government monetary central planning.

Citing "continuing weakness in the medium-term growth outlook," Moody's has downgraded France:

*FRANCE CUT TO Aa2 FROM Aa1 BY MOODY'S, OUTLOOK TO STABLE

Apearing to blame The EU's "institutional and political constraints," Moody's expects French growth to be at most 1.5% and does not expect the debt burden to be materially reduced this decade.

The current surge in deflationary pressures is not just due to the recent fall in oil prices, but rather a global epidemic of slowing economic growth. While Janet Yellen addressed this "disinflationary" wave during her post-meeting press conference, the Fed still maintains the illusion of confidence that economic growth will return shortly. Unfortunately, this has been the Fed's "Unicorn" since 2011 as annual hopes of economic recovery have failed to materialize.

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.

"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)."

Now that the Fed appears to have made a grave policy error judging by the market's initial reaction, it is up to the ECB and BOJ to step up (even if as we warned two weeks ago both are running out of monetizable material) and try to preserve some confidence, i.e., halt the selling. Sure enough, that is precisely what happened earlier today when infamous ECB board member and hedge fund leaker Benoit Coeure hinted that if only the market drives 5Y5Y's even lower, i.e., inflation expectations, the ECB will have no choice but to boost QE.

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?

Our current monetary system is the root cause of many evils of today. Let’s take war, a topic we discussed in this article, as an example. Without a monetary system that creates currency out of thin air, most of the wars that we have had and still have would simply not be financeable. This system is controlled by a few, who change the rules to their own benefit. And as we have seen they use their privileges to finance wars and to bribe politicians. By holding your wealth in precious metals you are rejecting the current system and also protecting yourself from “financial tyranny”. This includes: capital controls, expropriation, bail-ins, bailouts, negative interest rates, market manipulation on a wide scale and massive paper currency fluctuations.

"What scares me, or what worries me, is what the next downturn in the economy looks like, with asset prices where they are and a lesser ability of central banks to ease monetary policy."

News That Matters

"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."