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[Ed. Note: To see exactly what this former Reagan insider has to say about Trump and the fiscal threats from politics and the debt ceiling, David Stockman is sending out a copy of his book Trumped! A Nation on the Brink of Ruin… And How to Bring It Back to any American willing to listen – before it is too late. To learn how to get your free copy CLICK HERE.]
The mules of Wall Street were back at it again yesterday, buying the dips after the overnight whoosh in the futures market.
Apparently, it will take an actual 2×4 between the eyes to break a habit that has been working for 96 months now since the March 2009 post-crisis bottom.
I think it is plain as day, however, that we are in a new ball game that the “stimulus” blinded mules don’t see coming at all. They have been juiced for eight years running by the Keynesian apparatchiks at the Fed who have run the printing presses full-tilt or rescued the market with a new round of QE or an extension of ZIRP whenever the indices began to wobble.
But now even the money printers have made it clear that they are done for this cycle, anyway; and that they will be belatedly but consistently raising interest rates for what ought to be a truly scary reason.
That is, the denizens of the Eccles Building have finally realized that they have not outlawed the business cycle after all, and need to raise rates toward 2-3% so that they have headroom to “cut” next time the economy slides into the ditch.
In effect, the Fed is saying to Wall Street: “price-in” a recession because we are!
After all, our monetary central planners are not reluctantly allowing interest rates to lift off the zero bound because they have become converts to the cause of honest price discovery — nor are they fixing to liberate money rates, debt yields and the prices of stocks and other financial assets to clear on the free market.
Instead, they are merely storing up monetary ammo for the next downturn.
But the Wall Street mules keep buying the dips anyway because they are under the preposterous delusion that one source of “stimulus” is just as good as the next. And since the gamblers have now decreed that the “stimulus” baton be handed off to fiscal policy, it only remains for Congress and the White House to shape up and get the job done with all deliberate speed.
But they won’t. Not in a million years. The massive Trump tax cut and infrastructure stimulus is DOA because Uncle Sam is broke and the U.S. economy has slithered into rickety old age.
In that context, it’s not remotely plausible that the Fed will flood the canyons of Wall Street with cash by buying another $80 billion of bonds with digital credits conjured from thin air.
Au contraire.
Fiscal policy is inherently an exercise in …read more
Source:: Daily Reckoning feed
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