Janet Yellen Is Playing With Matches Next to a $555 Trillion Powder Keg

Phoenix Capital Research's picture

Janet Yellen continues to demonstrate that she is either profoundly ignorant or dishonest. Neither of those are positive qualities for a Fed Chair.

Having maintained interest rates at essentially ZERO for seven years during the Obama years, Yellen suddenly believes it would be “unwise” to wait too long to raise rates now.

It’s a bizarre claim, particularly when you consider:

1)   The US economy is limping along at best and entering a recession at worse (2016 GDP growth was a measly 1.9% and a the latest spate of data has all suggested a contraction is underway).

2)   The Fed owns some $2.4 trillion Treasuries, which would be negatively impacted by the Fed raising rates.

3)   There are over $555 TRILLION in interest-rate based derivatives floating around… which similarly would be negatively impacted by raising rates.

For the Fed to embark on an aggressive tightening cycle in the context of just one of these would be foolish… but when all three are in play? Either Janet Yellen is actively trying to sabotage the US economy for whatever reason or she has no remote understanding of economics (or possibly both).

Indeed, the whole notion of the US raising rates is particularly ridiculous when you compare the US’s economic data to that of Europe.

Europe is currently experiencing faster GDP growth and a more rapid acceleration of inflation and is engaging in a massive QE program.

Meanwhile, the US economy is barely growing and we’re supposed to be raising rates?

Again, this is nonsense. If Yellen persists in her folly and pushes for three rates hikes this year, she’ll unleash a stock market collapse at best and burst the US bond bubble at worst.

Originally published at http://gainspainscapital.com/

Graham Summers

Chief Market Strategist

Phoenix Capital Research 

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TrustbutVerify's picture

Buying American made products, not phony American brands that import their foreign made goods, will help us get through this. Its not all "somebody else's fault."

Basilian's picture

I wonder why we do not hear that number said loud and proud? Its OK we are only $20 trillion in debt in the USA ....... yeah right.

truthalwayswinsout's picture

Things are long overdue for a fix; and when this one comes it will forever be part of the history books the likes of which has never been seen.

Bay Area Guy's picture

The bankers will make the market work until they can't and by that time, they'll have leached every single dollar out of every single investment account, bank account, 401K, IRA and piggy bank in the world.

Then they'll pull it.  But they won't until there's no money left on the table.

OrangeyTheAssHat's picture
OrangeyTheAssHat (not verified) Feb 14, 2017 6:51 PM

She has no worries Trump is the stoog that gets the blame no matter. In fact that is his only job.

globozart's picture

damm it.

I clicked on a link by Phoenix Capital... , and only noticed after it was too late.

Snaffew's picture

If the Fed raises rates 3 times this year then the market surges...if the Fed doesn't raise rates any more this year then the market surges...if the US goes to war with Iran then the market surges...if GDP growth comes in negative then the market surges...if Trump gets impeached then the market surges...if the fed stops printing money to buy US Treasuries and stocks then the market crashes wildly.  As long as the Fed remains a buyer, then nothing stops this freight train of fools and insanity.

ali-ali-al-qomfri's picture

triple nickle trillion. (TNT)

 

a trillion f?cuking dollars, 555 times.

my little IBM 386/6k ram, just shit, "no registry is that big",

i heard it mumble before it jumped out the window.

wcvarones's picture

1)  Yes but inflation or stagflation are still possible

2)  The Fed doesn't give a shit about mark-to-market losses on its Treasury portfolio.

3) Derivatives are already pricing in 1-2 rate hikes this year.  3 hikes wouldn't be a black swan.