{"id":1099766,"date":"2019-02-12T21:45:24","date_gmt":"2019-02-12T21:45:24","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=106736"},"modified":"2019-02-12T21:45:24","modified_gmt":"2019-02-12T21:45:24","slug":"quantitative-easing-forever","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1099766","title":{"rendered":"Quantitative Easing Forever?"},"content":{"rendered":"

This post Quantitative Easing Forever?<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

Will quantitative easing soon become a permanent fixture of markets?<\/p>\n

Today we ponder the formerly impossible…<\/p>\n

But we begin with a conclusion:<\/p>\n

The Federal Reserve has lost its race with Old Man Time.<\/p>\n

The opening whistle blew in December 2015\u2026 and Janet Yellen came off the blocks with a 0.25% rate hike.<\/p>\n

If the Federal Reserve could make it across the 3.5% finishing line before recession struck,\u00a0 it could then tackle the next recession with a full barrel of steam.<\/p>\n

Jim Rickards:<\/p>\n

\n

Historically, it takes 300\u2013400 basis points of rate cuts (3\u20134%) to steer the U.S. economy out of recession. Fed policy today can be understood as a desperate race to get the fed funds rate to 3.5% before the next recession hits without actually causing a recession in the process.<\/em><\/p>\n<\/blockquote>\n

Alas… the Federal Reserve will not make it.<\/p>\n

Wall Street will not let it.<\/p>\n

It has already broken Jerome Powell. And it has him safely by the snout.<\/p>\n

Powell had the finish line in sight as recently as December\u2026 when he raised the fed funds rate to 2.50%.<\/p>\n

But the stock market plunged violently. It was within an ace of a bear market by Christmas.<\/p>\n

It took Powell\u2019s wind away. It left him doubled over, hands on knees, breathless\u2026 and conceding the race.<\/p>\n

Within days he announced a policy of \u201cpatience.\u201d<\/p>\n

As Jim Rickards explains, \u201cpatience\u201d is code for \u201cno rate hikes until we give you a clear signal.\u201d (See more below.)<\/p>\n

Stocks immediately proceeded to a lovely run of their own.<\/p>\n

The Dow Jones has recaptured some 3,000 points since its December low.<\/p>\n

At today\u2019s 25,425, it stands within hailing distance of its October high \u2014 26,828.<\/p>\n

But should Powell resume the race, Wall Street will be waiting for him… with its foot out.<\/p>\n

The world economy pegs along at a crawl as is. And recession could be coming up fast behind it.<\/p>\n

Now it is obvious to even the dense: The race is lost.<\/p>\n

You can expect no additional rate hikes.<\/p>\n

RBC Wealth Management\u2019s lead fixed-income strategist Craig Bishop agrees with us \u2014 the Federal Reserve is out of the race.<\/p>\n

\n

The global slowdown scenario in our opinion will keep the Fed sidelined indefinitely and, in effect, cap interest rates\u2026<\/em><\/p>\n

We think the Fed is done, the tightening cycle is over. We agree with market expectations that the next move will be a rate cut.<\/em><\/p>\n<\/blockquote>\n

The market is presently giving 97% odds that the Federal Reserve will either hold steady the rest of the year \u2014 or cut rates.<\/p>\n

In either instance\u2026 the market projects it will cut rates before raising them.<\/p>\n

Next we come to Janet Yellen herself\u2026<\/p>\n

La<\/em> Yellen opened the race against time before handing Powell the baton last February. Says she:<\/p>\n

\u201cIf global growth really weakens and that spills over to the United States… it\u2019s certainly possible that the next move is a cut.\u201d<\/p>\n

Just so.<\/p>\n

But we would remind<\/strong><\/a> the good lady and all concerned:<\/p>\n

The past three recessions fell within 90 days of the first rate cut that ended a hike cycle.<\/p>\n

The Daily Reckoning,<\/em> dated Jan. 15:<\/p>\n

\n

It may come as a surprise to many that the last three recessions all took place [within] three months of the first <\/em>rate cut after a hiking cycle!<\/em><\/p>\n<\/blockquote>\n

Will this time be different?<\/p>\n

But if the Federal Reserve cannot make it past a piddling 2.50%\u2026 how can it ever return to normal?<\/p>\n

And so we return to today\u2019s central question…<\/p>\n

Will quantitative easing soon become a permanent fixture?<\/p>\n

The Federal Reserve\u2019s San Francisco outpost recently released a report caroling the virtues of negative interest rates.<\/p>\n

Now its president \u2014 a certain Mary C. Daly \u2014 suggests the Federal Reserve could put quantitative easing on permanent market duty.<\/p>\n

That is, quantitative easing would attain general status \u2014 not restricted to emergency use only.<\/p>\n

Ms. Daly:<\/p>\n

\n

An important question is should those [tools like QE] always be in the toolkit? Should you always have them at your ready, or should you think about [how] those are only tools you use when you really hit the zero lower bound and you have no other things you can do?<\/em><\/p>\n<\/blockquote>\n

Would she frame the question in these sugary tones if the answer were no?<\/p>\n

Daly allows that interest rates would remain the Fed\u2019s primary cudgel. But QE would remain close by, always within the arm\u2019s reach:<\/p>\n

\u201cYou could imagine executing policy with your interest rate as your primary tool, and the balance sheet as a secondary tool, but one that you would use more readily.\u201d<\/p>\n

We can imagine it, yes \u2014 in the same way we can imagine a man kept in permanent addiction.<\/p>\n

And the doctor will never withdraw the needle\u2026<\/p>\n

Regards,<\/p>\n

Brian Maher
\nManaging editor, The Daily Reckoning<\/em><\/p>\n

The post Quantitative Easing Forever?<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post Quantitative Easing Forever?<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

The Federal Reserve has lost its race against time… Will quantitative easing soon become permanent policy?…<\/p>\n

The post Quantitative Easing Forever?<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[484,366,1506,463],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1099766"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1099766"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1099766\/revisions"}],"predecessor-version":[{"id":1099767,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1099766\/revisions\/1099767"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1099766"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1099766"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1099766"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}