It’s impossible to dig yourself out of a hole by digging the hole you’re in deeper, while you’re in it.
Tragically, that’s what the Federal Reserve System’s doing to our economic and capitalist future.
By manipulating interest rates so low for so long, and by extension forcing other central banks to cut interest rates increasingly into negative territory, the Fed’s perverted all monetary and fiscal realities.
The end, when it comes, and we’ll know it’s here when a president and party in power actively pursue Modern Monetary Theory (MMT), will be economic ruin and the final conversion of the most successful and powerful capitalist democracy the world’s ever seen, into a sycophantic socialist oligarchy.
What a week last week was. And what a week we’re looking forward to.
If nothing else, last week’s rally was unexpected on the heels of the previous week’s nasty selloff – culminating in a more than 600 point drop two Fridays ago.
But futures last Monday reversed their pre-open tanking and led the way from the open through the week.
Trade talk, as mixed as it was, moved stocks higher last week.
What seemed unexpected about that is the fact that President Trump said the Chinese called and wanted to get back to the table. Too bad for the President the Chinese news agencies reported there was no call.
Not everyone likes to hear good news about the economy.
Typically, political parties out of power want to see seated opponents get clobbered by economic failure.
In this age a real, or virtual recession, could be manufactured given today’s media reach and technological tools when leading to an election if even just in the minds of voters.
So, you need to ask yourself: Is a recession being manufactured right now? Who benefits from a failing economy or just pushing the recession narrative? Could a manufactured recession or incessant recession fearmongering crash the stock market? And, what would happen to you?
Since you just asked by reading those questions, I’m going to answer them for you.
Only, you’re not going to like what’s really happening and how bad it’s going to get.
This week could be a make or break week for the markets. It could also be a lot of nothing.
There’s a big difference.
A lot of nothing ultimately means very little net movement by the close this Friday from where we closed last Friday.
And less than noting means a flat week on noticeably diminished volume.
That’s a possibility because we’re coming to the end of summer, the end of traders and big decision-makers being on vacation. So, it wouldn’t be surprising to see a lot of nothing going on over the next two weeks leading up to Labor Day weekend.
On the other hand, there’s already been a lot of big-wig vacationers calling into their offices barking trading instruction to their minions from their Hamptons homes and the resorts of Southern Europe, on account of not being able to relax as news flow moves markets more than usual in the usually quiet half summer.
Back in the 1992 presidential race, James Carville, Bill Clinton’s campaign strategist wanted his candidate to blame incumbent George H.W. Bush for the recession the country was facing and pressed the Clinton team into focusing on that key talking point by telling them, “It’s the economy, stupid.”
That phrase is still used today.
But it shouldn’t be when it comes to the stock market.
In fact, anyone who thinks the market’s wobbling because the economy is wobbling might be stupid.
The market is having an ugly bout of hiccups, not because there are any problems with the economy, it’s hiccupping because the Federal Reserve is stupid.
President Trump just forced the Fed’s hand by calling out China as a currency manipulator.
What the President couldn’t do by publicly ripping the Fed via Tweets for raising rates and demanding to lower them, he accomplished by a more acceptable, and politically brilliant maneuver.
Calling out China for lowering the value of its currency to make its exports cheaper as it struggles with U.S. tariffs and slowing economic growth draws attention to how the value of the U.S. dollar rises against currencies that are manipulated lower, making U.S. exports more expensive, imports cheaper, inflation lower, and U.S. multinational companies’ overseas earnings weaker when they are translated back into more expensive dollars.
To offset a strengthening dollar and its negative implications the Fed can and will lower rates to at least match other central banks lowering their benchmark rates.
President Trump just guaranteed that, and at the same time gave the Fed cover to sell the public on it lowering rates again come September, on account of potentially negative economic implications stemming from the ongoing trade war with China.
They won’t say they’re lowering because the President forced their hand, or because they want to soften up the dollar. They’re too independent to admit they’ve been played.
But central banks are kowtowing to politicians, like never before, and it’s going to end badly.
On national television this morning, I shared what you already knew almost two weeks ago: The European economy is in big, and I mean real big, trouble. Over the past few weeks, I’ve laid out exactly how bad the economy in Europe is getting here, especially with how the European Central Bank is in dire circumstances dealing with the big scandals of Deutsche Bank, which you can read again here. Now see for yourself here how America will profit from Europe that made even Nigel Farage, the leader of the Brexit Party, chuckle… Click here to watch.
Not surprisingly, Elizabeth Warren, Democrat senator from Massachusetts and ranting politician with a knack for blowing smoke up everyone’s backsides, is promising she knows about “The Coming Economic Crash and How to Stop It.”
That’s because she predicted the last economic crash, she says. And, she sees into the future.
While her history of predictions is what it is – revisionist history – she only ever made general statements about the economy and housing as far back as 2003, 2004, and 2005, years before the real bubbles were inflating. Then she got on the bandwagon as the bubble became main street news, this time she’s sure another crash is coming.
Talk about fear mongering. Is that all she’s got to offer America?
It’s more than likely going to be another week of sloppy trading.
Besides being an extension of last week when the Dow Jones Industrials rose gently on Monday, flat lined on Tuesday, dipped Wednesday, rallied Thursday, and ended Friday drooping into the close, there’s nothing monumental right in front of markets right now.
A rate cut at the end of the month is a foregone conclusion.
Thank you, Federal Reserve, for your cheerleading.
It’s going to be a quarter point, not a half point as some overzealous analysts were touting.