Home
Global Markets And Economies Are In Serious Trouble
6868 Views September 12, 2015 GOLD, KWN King World News
After another chaotic trading week in global markets, today one of the top economists in the world sent King World News an incredibly powerful piece warning that global markets and economies are in serious trouble. Below is the fantastic piece from Michael Pento.
By Michael Pento of Pento Portfolio Strategies
September 12 – (King World News) – One and Done Fed is a Wall Street Fantasy
One of the current myths promulgated by Wall Street is that the Federal Reserve will raise rates once this year, breathe a sigh of relief, and be done until the “12th of never.” But those who are familiar with our central bank’s history are aware that the Federal Open Market Committee (FOMC) has never tightened the Fed Funds Rate just once.
In the spring of 1988 fearing a rise in core inflation, the Fed went on a tightening cycle that lasted from April 1988 to March 1989. During that time the Fed funds rate increased more than 300 basis points. This episode was followed by a recession beginning in 1990, suggesting that the corrective policy actions may have worsened a weakening economy, and that the Fed is prone to being economically tone-deaf.
Then, during the fall of 1993, a rise in long rates represented a potential inflation scare and led the FOMC to raise the Funds Rate again another 300 basis points between February 1994 and February 1995.
And finally, as concerns over a potential housing bubble mounted, the Fed began to hike rates in June 2004 and continued through July of 2006, for a total increase of 425 basis points. Soon after, the subprime mortgage crisis was exposed and the Great Recession was in full throttle…
The Century’s Best Performing Asset
Eric Sprott, James Turk and George Soros all believe this company is advancing the digital payments revolution by helping people securely acquire, store, and now spend gold with unprecedented simplicity. Accounts are free and can be opened in minutes. They provide users with a secure vault account to purchase and hold gold, the ability to make and receive instant gold payments, and a prepaid card for spending gold at traditional points of sale. To hear what James Turk and others have to say about this company CLICK HERE.
Sponsored
Continue reading the Michael Pento piece below…
But we don’t have to be Fed soothsayers to predict the planned trajectory of the Funds Rate; the Fed makes its intentions public during four of its eight scheduled meetings. During those meetings the FOMC provides us with a model of the members’ expectations for policy rates in a chart known as the “dot plot” (see chart below).
While the FOMC is not bound by its “dot plot” predictions, it does provide insight into the committee’s monetary policy plans. The markets are aware of their intentions and will begin to price in future interest rates moves as soon as the Fed begins to tighten.
The latest dot plot shows that all 17 members of the FOMC believe the Federal Funds Rate should be under 1% by the end of 2015, with the median member seeing rates between 0.5% and 0.75%. That signals an end to ZIRP (zero interest rate policy). And although members differ on the level of rates at the end of 2016–with the median rate of around 1.6%–all members anticipate rates to rise throughout next year.
Therefore the market shouldn’t expect to see a “one and done” move on interest rates because the Fed has told us not to anticipate one. The only reason overnight rates won’t be moving above 1.5% by the end of 2016 will be if the unemployment rate moves higher due to a collapsing economy, which is not exactly good news for stock prices.
Furthermore, the Fed has worked very hard to be unconstrained by time; it has substituted the word “patient” for the phrase “data-dependent.” Therefore, when the Fed raises rates Ms. Yellen will not say at her press conference that it’s a one-and-done operation, or that the Fed will wait until some appointed future timeframe for the second rate hike to occur. Instead, the Fed can only proclaim that the next rate hike will be based on further progress toward their inflation target.
The problem with that is if you look at the core PCE Index, inflation is currently moving away from their target (see chart below).
So you ask, why would the Fed still move? Because the U-3 Unemployment rate is moving dangerously close to crossing what the FOMC believes is the inflationary Philips Curve Maginot line. This is the imaginary line where Keynesians believe a low unemployment rate triggers rising inflation.
The 1970s
However, anyone who lived through the stagflation of the 1970s or who looks historically at the relationship between inflation and unemployment rates can proclaim with absolute certainty that the Phillips Curve is completely bogus.
That’s because inflation doesn’t come from more people becoming productive; inflation is a function of the market losing faith in the purchasing power of a currency through its dilution.
Therefore, as long as the Obamacare economy keeps producing part-time food-service employees, the unemployment rate will continue to fall south of its current reading of 5.1%; and the Phillips-Curve-obsessed Fed will move more toward its dot plot goal in fear of employment inflation that is never coming.
The 2009 argument for a bull market was that the Fed would keep printing money until the stock market and economy improved. Now the complete opposite is true, the Fed will slowly hike interest rates simply to get off the zero-bound range it has been stuck at for seven years and because it is worried about a meaningless U-3 unemployment figure’s effect on inflation.
Global Markets And Economies Are In Serious Trouble
Nevertheless, for the first time in history it will be hiking rates into falling inflation, negative earnings and revenue growth on S&P 500 companies, and falling global GDP growth. Therefore, I predict the Fed will only be able to move the Fed Funds Rate higher by 50-75 bps before it becomes obvious even to the hopelessly confused FOMC that global markets and economies are in serious trouble.
This is the sad truth: Either the massively overvalued stock market and artificially inflated economy will continue the incipient rollover that began in the middle of August, causing the Fed to stay on hold; or the Fed will begin to slowly hike rates, causing the yield curve to quickly invert and the economy to completely fall apart. This is why wise investors should now be out of, or short, the stock market — at least until the S&P 500 trades near 1600, or the next round of QE is announced.
http://kingworldnews.com/global-markets-and-economies-are-in-serious-trouble/
6868 Views September 12, 2015 GOLD, KWN King World News
After another chaotic trading week in global markets, today one of the top economists in the world sent King World News an incredibly powerful piece warning that global markets and economies are in serious trouble. Below is the fantastic piece from Michael Pento.
By Michael Pento of Pento Portfolio Strategies
September 12 – (King World News) – One and Done Fed is a Wall Street Fantasy
One of the current myths promulgated by Wall Street is that the Federal Reserve will raise rates once this year, breathe a sigh of relief, and be done until the “12th of never.” But those who are familiar with our central bank’s history are aware that the Federal Open Market Committee (FOMC) has never tightened the Fed Funds Rate just once.
In the spring of 1988 fearing a rise in core inflation, the Fed went on a tightening cycle that lasted from April 1988 to March 1989. During that time the Fed funds rate increased more than 300 basis points. This episode was followed by a recession beginning in 1990, suggesting that the corrective policy actions may have worsened a weakening economy, and that the Fed is prone to being economically tone-deaf.
Then, during the fall of 1993, a rise in long rates represented a potential inflation scare and led the FOMC to raise the Funds Rate again another 300 basis points between February 1994 and February 1995.
And finally, as concerns over a potential housing bubble mounted, the Fed began to hike rates in June 2004 and continued through July of 2006, for a total increase of 425 basis points. Soon after, the subprime mortgage crisis was exposed and the Great Recession was in full throttle…
The Century’s Best Performing Asset
Eric Sprott, James Turk and George Soros all believe this company is advancing the digital payments revolution by helping people securely acquire, store, and now spend gold with unprecedented simplicity. Accounts are free and can be opened in minutes. They provide users with a secure vault account to purchase and hold gold, the ability to make and receive instant gold payments, and a prepaid card for spending gold at traditional points of sale. To hear what James Turk and others have to say about this company CLICK HERE.
SponsoredContinue reading the Michael Pento piece below…
But we don’t have to be Fed soothsayers to predict the planned trajectory of the Funds Rate; the Fed makes its intentions public during four of its eight scheduled meetings. During those meetings the FOMC provides us with a model of the members’ expectations for policy rates in a chart known as the “dot plot” (see chart below).
While the FOMC is not bound by its “dot plot” predictions, it does provide insight into the committee’s monetary policy plans. The markets are aware of their intentions and will begin to price in future interest rates moves as soon as the Fed begins to tighten.
The latest dot plot shows that all 17 members of the FOMC believe the Federal Funds Rate should be under 1% by the end of 2015, with the median member seeing rates between 0.5% and 0.75%. That signals an end to ZIRP (zero interest rate policy). And although members differ on the level of rates at the end of 2016–with the median rate of around 1.6%–all members anticipate rates to rise throughout next year.
Therefore the market shouldn’t expect to see a “one and done” move on interest rates because the Fed has told us not to anticipate one. The only reason overnight rates won’t be moving above 1.5% by the end of 2016 will be if the unemployment rate moves higher due to a collapsing economy, which is not exactly good news for stock prices.
Furthermore, the Fed has worked very hard to be unconstrained by time; it has substituted the word “patient” for the phrase “data-dependent.” Therefore, when the Fed raises rates Ms. Yellen will not say at her press conference that it’s a one-and-done operation, or that the Fed will wait until some appointed future timeframe for the second rate hike to occur. Instead, the Fed can only proclaim that the next rate hike will be based on further progress toward their inflation target.
The problem with that is if you look at the core PCE Index, inflation is currently moving away from their target (see chart below).
So you ask, why would the Fed still move? Because the U-3 Unemployment rate is moving dangerously close to crossing what the FOMC believes is the inflationary Philips Curve Maginot line. This is the imaginary line where Keynesians believe a low unemployment rate triggers rising inflation.
The 1970s
However, anyone who lived through the stagflation of the 1970s or who looks historically at the relationship between inflation and unemployment rates can proclaim with absolute certainty that the Phillips Curve is completely bogus.
That’s because inflation doesn’t come from more people becoming productive; inflation is a function of the market losing faith in the purchasing power of a currency through its dilution.
Therefore, as long as the Obamacare economy keeps producing part-time food-service employees, the unemployment rate will continue to fall south of its current reading of 5.1%; and the Phillips-Curve-obsessed Fed will move more toward its dot plot goal in fear of employment inflation that is never coming.
The 2009 argument for a bull market was that the Fed would keep printing money until the stock market and economy improved. Now the complete opposite is true, the Fed will slowly hike interest rates simply to get off the zero-bound range it has been stuck at for seven years and because it is worried about a meaningless U-3 unemployment figure’s effect on inflation.
Global Markets And Economies Are In Serious Trouble
Nevertheless, for the first time in history it will be hiking rates into falling inflation, negative earnings and revenue growth on S&P 500 companies, and falling global GDP growth. Therefore, I predict the Fed will only be able to move the Fed Funds Rate higher by 50-75 bps before it becomes obvious even to the hopelessly confused FOMC that global markets and economies are in serious trouble.
This is the sad truth: Either the massively overvalued stock market and artificially inflated economy will continue the incipient rollover that began in the middle of August, causing the Fed to stay on hold; or the Fed will begin to slowly hike rates, causing the yield curve to quickly invert and the economy to completely fall apart. This is why wise investors should now be out of, or short, the stock market — at least until the S&P 500 trades near 1600, or the next round of QE is announced.
http://kingworldnews.com/global-markets-and-economies-are-in-serious-trouble/
» MM&C The Iraqi Private Banks Association told NEWS: These are the results of the Prime Minister’s me
» After a break of more than 9 years.. the resumption of a government trade meeting between Iraq and A
» Deputy: The general amnesty law will be passed
» A change in the fuel smuggling map... “control” over the central ports and “laxity” in the north
» Al-Sudani takes three urgent decisions to block the wheat mafias in Iraq
» Electricity embarks on an 11-axis plan to develop the energy sector
» “Thug and smuggler.” A female representative talks about a crocodile in Parliament blackmailing exec
» Al-Sudani told the US State Department: Iraq is keen to strengthen its democratic system
» The Central Bank sells more than $275 million at auction today
» The Minister of Commerce stresses the observance of the Iraqi standard in the supply of goods
» The Iraqi Trade Bank announces its participation in the process of localizing the salaries of Kurdis
» Iraq adopts an advanced system to combat money laundering and terrorist financing
» Increase in Euphrates River levels due to Turkish water releases
» Demands the need to legislate the capital law
» Parliament decided to extend the legislative term by one month
» A bank participating in the process of localizing the salaries of employees in the region
» Parliamentary request to the Ministry of Finance regarding defense mobilization dues/document
» Dollar prices in Baghdad and Kurdistan today
» Al-Rasheed decides to increase the ceiling for granting “construction” loans to 75 million dinars
» A government plan to expand the construction of water harvesting dams
» Frozen or banned? An Iranian official reveals the fate of Tehran’s money in Baghdad
» The Iraqi Trade Bank participates in the process of localizing the salaries of Kurdistan Region empl
» Finance confirms the Iraqi government's desire to benefit from the expertise of French companies
» After targeting its branch in Kurdistan... Dana Gas announces a decrease in its profits to $38 milli
» A parliamentary understanding to extend the legislative term to approve the 2024 budget schedules
» Stopping the Commission’s procedures regarding the region’s elections
» Foreign oil companies violate Iraqi laws
» The position of Speaker of Parliament depends on the political agreement
» The Ministry of Finance decides to send the April salary to the Kurdistan region
» It did not reach the Council.. Parliament determines the mechanisms for dealing with the 2024 budget
» 88 projects awaiting resolution.. What will happen to the stalled laws in Parliament? - Urgent
» Al-Sudani receives the US Undersecretary of State
» It did not reach the Council.. Parliament determines the mechanisms for dealing with the 2024 budget
» Advisor to Al-Sudani: Sanctions on 32 private banks caused financial problems inside Iraq (video)
» An expert comments on the use of the Iraqi currency in commercial transactions with Iran
» Why does Iraq depend on foreign banks for dollar transfers?
» Deputy: The fuel smuggling map in Iraq has “radically changed” from what it was years ago
» Petroleum Products announces a decrease in gasoline imports by about 8 million liters
» Government advisor: Collections will shift almost completely to electronic payment in the middle of
» Complete decisions of the Council of Ministers session
» Al-Sudani chairs the first meeting to restructure the government apparatus
» The National University holds its second international scientific conference with the participation
» Parliamentary proposals to extend the legislative term of the House of Representatives to resolve th
» Hanoun: We are working on preparing a six-year strategy to combat corruption based on technology
» The Ministerial Council for the Economy decides to stop the import of 6 crops due to their abundance
» Minister of Industry: He turned to Chinese companies to supply Iraq with spongy iron ores
» A foreign report reveals the existence of an undeclared Iraqi-British agreement regarding asylum see
» “Fares Issa” visits the Ministry of Finance and Economy in the Kurdistan Region
» Nechirvan Barzani: We want to address all problems with Iran and begin a new phase of relations
» The position of Speaker of Parliament.. Representatives confirm: “There is no amendment to the bylaw
» Demands to put an end to foreign workers
» Iranian official: We do not have frozen funds in Iraq
» Entering 31 countries in the world without a visa.. A look at the Iraqi passport during 2024
» An Iranian plan to export goods to Iraq worth $3 billion
» The Board of Commissioners decides to suspend the technical and financial procedures for the Kurdist
» Baghdad Governorate approves the two paths of the development road
» Mawazine publishes the full decisions of the Council of Ministers at its session today
» Asaib: The Sunnis are accustomed to having an external actor leading them
» The Iranian ambassador in Baghdad: The Sudanese government enjoys the support of the Shiite and Sunn
» Politician: Representatives of Taqadum “hurt” Al-Halbousi and their party
» “Deficit” is the password.. Parliamentary Finance decodes the budget delay
» Al-Sudani: The tourism sector will be a substitute resource for oil in the coming years
» Finance confirms the Iraqi government's desire to benefit from the expertise of French companies
» utube 5/4/24 MM&C Iraq Dinar- IQD Update - No Float of Exchange Rate - Budget -2024 - Schedules -
» After a break of more than 9 years.. the resumption of a government trade meeting between Iraq and A
» A deputy in finance expects the Council of Ministers to approve the budget schedules in today’s sess
» A deputy resolves the controversy over the “transfer supplement” in two ministries
» Al-Halbousi’s “vacant” seat.. Will the coordination framework end the “Taqaddum” dream of an allianc
» The Federal Government issues a state order to stop the Commission’s work procedures regarding the K
» Including the freedom to choose the bank and withdraw the salary for “free”... “My Account” features
» The Central Bank sells more than $250 million during its daily auction
» Al-Sudani receives a delegation from the Union of Arab Banks
» Iraq and the United States of America hold trade meetings in Washington
» In pictures... The activities of the Union of Arab Banks conference in Baghdad, “Day Two”
» The Director General of Ports announces the completion of berths (3) and (4) in Al-Faw Grand Port
» The Council of Ministers holds its regular session headed by Al-Sudani
» Parliament publishes the agenda of its session for next Thursday
» A government measure to reduce "money laundering" using the buying and selling of real estate in Ira
» Iraq proposes establishing a specialized council to combat corruption in Arab countries
» Al-Mawarid intends to establish infrastructure and investment projects for the water sector in Iraq
» The Federal Court issues a decision regarding postponing the election of the Speaker of the House of
» A government meeting to discuss financing and implementation mechanisms for the Development Road Pro
» Al-Sudani: Iraqi banks are on the right track with financial transfers
» Al-Khazali: The Turkish side is still imposing its conditions on Iraq
» Rights: We refuse to amend the bylaws of Parliament under political influence and desires
» Nechirvan Barzani: We want to address all problems with Iran and begin a new phase of relations
» Today, Iraq and Iran signed the minutes of a joint meeting related to trade
» KPMG International begins auditing the revenues of telephone companies operating in Iraq
» Oil: The seventh batch of equipment for the gas manufacturing project in the Nasiriyah and Gharraf f
» Al-Sudani assures the French ambassador of Iraq’s openness to “fruitful” partnerships
» Government move to install gold screening devices at 4 airports
» Sudanese Advisor: The oil sector is witnessing a rapid renaissance
» Opening offices specialized in employing people with disabilities
» Infrastructure and investment projects for the water sector in Iraq
» Adopting the electronic system in the next census
» Al-Sudani chairs the first meeting to restructure the government apparatus
» Business Council: Efforts to open a branch of the Chinese Bank in Iraq
» Iraqi diplomacy is balanced openness