In case you did not know, Neel Kashkari is on the short list to be nominated as the next Chairman of the Federal Reserve board. Who is Neel, what does this mean? Neel Kashkari is the President of the Federal Reserve Bank of Minneapolis. Prior to assuming this role, he was an interim Assistant Secretary of the Treasury for Financial Stability from October 2008 to May 2009. During that time, he oversaw the Troubled Asset Relief Program (TARP) that was a major component of the U.S. government’s response to the financial crisis of 2007–08. A Republican, he unsuccessfully ran for Governor of California in the 2014 election. He became an expert on how to deal on managing the U.S. financial crisis … on the job!
This along with many other signals suggest that a bloodbath is on the horizon.
In a recent essay posted both on the Minneapolis Fed website and on Medium, titled “A Strategy to Re-anchor Inflation Expectations”, Kashkari writes that “In the Federal Open Market Committee meeting that concluded on Wednesday of this week, I advocated for a 50-basis-point rate cut to 1.75 percent to 2.00 percent and a commitment not to raise rates again until core inflation reaches our 2 percent target on a sustained basis.”
Why? “I believe an aggressive policy action such as this is required to re-anchor inflation expectations at our target” and adds that “Given that it has taken years for the markets to learn our current reaction function, I don’t believe a rate cut or two in isolation will do much to boost inflation expectations. That is why I argued we should also commit to not raising rates from the new lower level until we see core inflation sustainably reach our target”
It turns out that it is possible the US will enter a recession later this year. It is also clear that the 3.2% GDP growth in Q1 was a farce, since it is a result of a change in the methodology. Consumption — the main factor of American GDP growth — is stagnant.
There are many signals suggesting a recession is imminent.
- Trucking: When economic activity is on the decline, the trucking industry sees decreasing demand for their services and freight rates tend to go down. Unfortunately, the numbers that the U.S. trucking industry is reporting right now are abysmal. Freight rates have now fallen for six months in a row on a year-over-year basis, and according to Business Insider during the month of May loads on the spot market fell “by a chilling 62.6%” compared to last year. If demand does not start rebounding soon, we are going to see many more trucking companies go bankrupt. The irony of all this is, that these truckers, are the very Trumptards that voted for Trump! Now he’s putting them out of business!
- Housing: In a research report in which Zillow (the online real estate company) polled 100 real estate experts and economists about their predictions for the housing market, it disclosed that nearly half of all survey respondents said the next recession will commence in 2020, with the first quarter of the year cited the most as to when the recession will start. Again, it is so ironic – your Joe the plumber, John the contractor, Fred the realtor (yes, your all white, Republican) will the first ones impacted by Trump’s economic mess!
- Auto Loans: A record 7 million Americans who are 90 days or more behind on their auto loan payments. It’s a signal, economists say, that Americans are struggling to pay bills despite other indications of a strong economy and low unemployment. Approximately 6.5% of all auto finance loans are 90-plus days past due. Student loan debt edged higher, hitting $1.46 trillion in the fourth quarter, and serious delinquency rates in the category continue to be much higher than any other debt type. And Mortgage debt has hit a record $9.12 trillion in the fourth quarter 2018. What does this tell you? Its Joe, John, and Fred who haven’t paid their auto loans in months!
- LIBOR: The London Inter-bank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans. Libor has staged a dramatic reversal recently. It generally follows the path taken by the effective fed funds rate after the Fed’s dovish reversal and so on recently it was fixed lower by 4.3bps, the largest drop since May 2009, falling to 2.34313% from 2.38613% on June 19 as the short end of the fixed-income market catches up in pricing Federal Reserve rate cuts. As a result, the Libor-OIS spread, has narrowed to 17.7bps from 20.6bps prior session.
If you look at every business metric, retail sales, household income, real employment – it’s hard to conclude that the U.S. is not already in a recession. Forty-seven million Americans said their financial situation was worse than it was before the Great Recession, according to a new survey from personal finance website Bankrate.com. It’s hard to state this nicely, but what we are witnessing right now is nothing short of a “bloodbath”
Formerly the Federal Reserve conducted monetary policy with the purpose of minimizing inflation and unemployment, but today and for the past decade the Federal Reserve conducts monetary policy for the purpose of protecting the balance sheets of the banks that are “too big to fail” and other favored financial institutions. Therefore, it is problematic to expect the same results.
Today it is possible to have a recession and to maintain high prices of financial instruments due to Fed support of the instruments. Today it is possible for the Fed to prevent a stock market decline by purchasing S&P futures. And to prevent a gold price rise by having its agents dump naked gold shorts in the gold futures market.
This type of intervention originated in the plunge protection team created by the Bush people in the last year of the Reagan administration. Once the Fed learned how to use these instruments, it has done so more aggressively.
The US government, reckless in its arrogance, hubris, and utter ignorance, has done all in its power to cause flight from the dollar. The US government uses the dollar-based financial system to coerce other countries to accommodate American interests at their expense. Sanctions on other countries, threats of sanctions, asset freezes and confiscations, and so forth have driven large chunks of the world—Russia, China, India, Iran—into non-dollar transactions that reduce the demand for dollars. Threats against Europeans for purchasing Russian energy and Chinese technology products are alienating elements of Washington’s European empire. A country with the massive indebtedness of the US government would quickly be reduced to Third World status if the value of the dollar collapsed from lack of demand.
There are many countries in the world that have bad leadership, but US leadership is the worst of all. Never very good, US leadership went into precipitous and continuous decline with the advent of the Clintons, continuing through Bush, Obama, and Trump. American credibility is at a low point. Fools like John Bolton and Pompeo think they can restore credibility by blowing up countries. Unless the dangerous fools are fired, we will all have to experience how wrong they are… in our pocket books.
This is a pervasive pattern with republican administrations. There is an initial ‘run’ and then it peters out. Both Bushes drove the economy into a ditch, while Clinton and Obama engineered a massive, long-term and sustainable rebuilding of the U.S. economy.
As for Trump, he may well do to the U.S. what he did to his own businesses – which is to completely bankrupt the ‘empire’! He refuses to share his tax returns with the public, but an objective look at his finances will reveal that in real terms he really is not that wealthy at all – and that he really hasn’t done much with the $372 Million his dad gave him some 50 years ago.
One thing though is for certain, regardless of Trump’s theatrics or optics, the economy is heading south! He is definitely not making America great again. That is a fact.