While the world has learned to take Alan Greenspan's forecasts with a grain of salt, earlier today the former Fed chairman was on Bloomberg TV with another bombastic prediction, warning of a substantial surge in US long-term interest rates, should inflation take hold: "I think up in the area of 3 to 4, or 5 percent, eventually. That’s what it’s been historically."
On the heels of the major rebound in Manufacturing PMI data, the final US Services PMI for October printed 54.8 - the highest since Nov 2015 - following the massive spike in ISM Services in September (which reverted lower to match the PMI at 54.8). However, more signs of stagflation appear as business activity faded but prices paid soared.
Despite a final October print for PMI at 53.4 (highest since Oct 2015), US manufacturers remain skeptical and, as Markit notes, "hiring is also being subdued partly by worries about escalating costs, with the October survey recording the largest monthly rise in factory prices for five years." Following disappointments from regional Fed surveys (Dallas and Chicago notably), ISM Manufacturing rose to 51.9 (with prices paid rising and new orders tumbling).
Following September's bounce, October's Chicago PMI plunged to 5-month lows. The 50.4 print is a four standard-deviation miss with new orders sliding, production tumbling, but prices paid surging to the highest since Nov 2014. So, stagflation looms as inflationary pressures build but economic growth outlooks decline.
According to several British newspaper, including The Times and Mail Online, Mark Carney’s "self-imposed deadline" for declaring whether he will stay in office beyond 2018 is fast approaching, and the central banker may decide to step down as soon as next week. The 51-year old Canadian may announce his decision "within days" at his next scheduled public appearance on Thursday.
"I believe 2017--2021 will represent the end and reversal of that multi-decade trend - as the debt bubble bursts and bond markets begin to crash... Each phase was a desperate battle between centralized, governmental control of currency versus universal, hard-asset based currency. And each phase saw the acceleration and intensification of that battle take hold in the ‘7’ year."
"Our current debt may be manageable at a time of unprecedentedly low interest rates. But if we let our debt grow, and interest rates normalize, the interest burden alone would choke our budget and squeeze out other essential spending. There would be no room for the infrastructure programs and the defense rebuilding that today have wide support."
Who says there is no wage growth? Certainly not the Labor Department, at least when it comes to black workers. In a release on Thursday, the DOL reported that seven years after the "end" of the recession, median wages for full-time black workers jumped by 9.8% in the Q3 - the biggest quarterly jump since record began in 2000.
The Bank of England’s inept monetary policies under Mark Carney’s governorship seem certain to expose the fragility of fiat sterling to wider public attention and skepticism. If the consequences weren’t so serious, we might thank him for unwittingly toppling the status quo. But the inevitable crisis, many times worse than that faced in 1975, cannot be embraced even by the most extreme financial masochist. This is why people in Britain and America will increasingly find solace in gold.
On November 8th, the US Presidential election will take place. Below Bank of America lists eight trades, all specific to the election, some applicable to whoever wins, some dependent on the election result:
A Clinton Presidency would assuredly mean a continuation of the ruinous policies of Greenspan and his successors. The election of Donald Trump could not only mean a new direction in monetary policy, but the public demotion of the likes of Alan Greenspan who will hopefully fade into the sunset never to be heard or seen from again.
"The Fed is increasingly F#ked," exclaimed one veteran market participant as Core CPI - among The Fed's favorite inflation indicators - surged to +2.3% YoY, the highest since Sept 2008. This is the 10th month in a row above the Fed's mandated 2% 'stable' growth as shelter and healthcare costs continue to surge.