{"id":1107863,"date":"2019-03-27T21:26:45","date_gmt":"2019-03-27T21:26:45","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=107036"},"modified":"2019-03-27T21:26:45","modified_gmt":"2019-03-27T21:26:45","slug":"a-glimpse-of-the-future","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1107863","title":{"rendered":"A Glimpse of the Future"},"content":{"rendered":"

This post A Glimpse of the Future<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

Any simpleton can recognize an unfolding calamity…<\/p>\n

The two trains about to collide, the twister racing for the schoolhouse, the betrayed lover with a finger on the trigger.<\/p>\n

But you require a wider vision to perceive the chains of disaster coming together\u2026 link by fateful link…<\/p>\n

When a conductor gets his signals crossed, when the winds take a fatal shift, when someone takes the first bite of forbidden fruit.<\/p>\n

Today we attempt a wider view of future calamity presently taking shape.<\/p>\n

But first to a future calamity in its own right \u2014 the stock market.<\/p>\n

Global Growth Drags on Stocks<\/strong><\/h2>\n

Once again, the global economy throws a darkened shadow over Wall Street.<\/p>\n

We learn today that Chinese industrial profits have fallen 14% year over year \u2014 their largest fall since 2011.<\/p>\n

Meantime, European Central Bank (ECB) President Mario Draghi has drawn a dark sketch of the eurozone.<\/p>\n

Mr. Draghi cited \u201cweakness in world trade\u201d and a \u201cweakening growth picture.\u201d<\/p>\n

The ECB recently downgraded its 2019 eurozone GDP forecast from 1.7% to 1.1%.<\/p>\n

The Dow Jones gave back 32 points on the day. The S&P lost 13, the Nasdaq 48.<\/p>\n

By way of explanation Ed Yardeni, president and chief investment strategist at Yardeni Research:<\/p>\n

\n

There’s lots of angst about global economic growth. That’s understandable because it has been slowing significantly since early 2018. Furthermore, we can all observe that ultra-easy monetary and debt-financed fiscal policies aren’t as stimulative as policymakers have been hoping.<\/em><\/p>\n<\/blockquote>\n

Yes, Mr. Yardeni. We can all observe that ultra-easy monetary and debt-financed fiscal policies aren’t as stimulative as policymakers have been hoping.<\/p>\n

Except, perhaps, for the policymakers themselves.<\/p>\n

Failure is only indication that they need to double, triple or quadruple existing ultra-easy monetary and debt-financed fiscal policies.<\/p>\n

As said Wittgenstein:<\/p>\n

\u201cNothing is so difficult as not deceiving one\u2019s self.\u201d<\/p>\n

But we lift our gaze from the roiling present\u2026 and face the distant horizon.<\/p>\n

A Vision of Coming Recession\u00a0<\/strong><\/h2>\n

What do we spot?<\/p>\n

Unsurprisingly, a scene of coming recession…<\/p>\n

The present expansion is the second longest in United States history.<\/p>\n

If the economy can peg along until July, it will be crowned the longest expansion in United States history.<\/p>\n

But the signs of age are creeping in, like rust on a chassis\u2026<\/p>\n

Growth has been trending wrong two consecutive quarters \u2014 and going on three.<\/p>\n

Even the eternally optimistic Atlanta wing of the Federal Reserve projects first-quarter GDP to expand at 1.5%.<\/p>\n

JPMorgan Chase seers project the same 1.5% \u2014 but even that is subject to \u201cdownside risk.\u201d<\/p>\n

The reasons are close at hand…<\/p>\n

Housing prices are the softest in four years, manufacturing plumbs 21-month lows, retail stores are closing at alarming rates (5,279 year to date), the American consumer languishes under record levels of debt.<\/p>\n

And the yield curve has inverted \u2014 a recession indicator of supreme accuracy.<\/p>\n

Looking out beyond these pristine shores, we also find the global economy wobbling on its axis.<\/p>\n

As suggested above, China and Europe all go on unsteady legs. Japan is similarly afflicted.<\/p>\n

Meantime, the Federal Reserve has just executed perhaps its most dramatic retreat in its history.<\/p>\n

It has essentially guaranteed no rate hikes on the year. As recently as December it had penciled in two.<\/p>\n

Would it throw up the sponge if it were confident in the future?<\/p>\n

But the Federal Reserve has conceded defeat to a superior and determined foe \u2014 the stock market.<\/p>\n

Jerome Powell ran his white flag up the pole in late December, after the market raged against his promises of additional tightening.<\/p>\n

We are forced to conclude that the Federal Reserve cannot lift interest rates much above the present 2.50%… or restore its balance sheet to levels approaching pre-2008 levels.<\/p>\n

That is, the economy cannot withstand interest rates that are still historically low. And the stock market will roar in protest if rates rise only slightly.<\/p>\n

The \u201cReal\u201d Interest Rate<\/strong><\/h2>\n

But the \u201creal\u201d interest rate \u2014 the nominal rate minus the inflation rate \u2014 is even lower than face value suggests.<\/p>\n

Thus we find the real fed funds rate not 2.50%, but as low as 0.25%.<\/p>\n

By way of comparison\u2026<\/p>\n

The real fed funds rate scaled 2.75% when the Federal Reserve\u2019s last tightening cycle concluded in 2006.<\/p>\n

And 4% when the previous cycle ended in 2000.<\/p>\n

But sticking to the nominal rate, history argues convincingly that rates between 4% and 5% are required to beat back recession.<\/p>\n

Only with that much \u201cdry powder\u201d can the Federal Reserve cut enough to lift the economy from its wallows.<\/p>\n

But when recession does besiege us \u2014 this year, next year or the year following \u2014 the Federal Reserve will scarcely be at half-strength.<\/p>\n

Imagine a one-armed gladiator battling in the arena\u2026 or a flyweight taking on the heavyweight champion of the world.<\/p>\n

And so the Federal Reserve is in an awful bind…<\/p>\n

It must raise rates to build its steam against the next recession. But it cannot raise rates above present levels without bringing the Furies crashing down upon it.<\/p>\n

A conundrum to ponder of a blue day.<\/p>\n

But we now return our binoculars to the purple horizon…<\/p>\n

Recession in Fall 2020 Could Sink Trump<\/strong><\/h2>\n

The next presidential election falls in November 2020 \u2014 1.5 years from today.<\/p>\n

Given the present drift, the economy may well be sunk in recession by that time.<\/p>\n

Recessions are notoriously poor portents for incumbent presidents.<\/p>\n

Since the Civil War the economy was in recession eight occasions during presidential election season.<\/p>\n

These years were 1876, 1884, 1896, 1920, 1932, 1960, 1980… and 2008.<\/p>\n

In all eight instances \u2014 all eight \u2014 the opposition party was voted in.<\/p>\n

If the economy plunges into recession by next fall, could the sitting president defy the odds?<\/p>\n

It would not be the first time.<\/p>\n

But every man\u2019s luck has its limits. Eventually the gods plot against him.<\/p>\n

And recall the Federal Reserve will likely enter the next recession with barely a half barrel of steam.<\/p>\n

Recession will roll over it like a thundering locomotive over a rat.<\/p>\n

And the cries will go out:<\/p>\n

\u201cCapitalism has failed yet again!\u201d… \u201cThis is all Donald Trump\u2019s fault!\u201d… \u201cIt is time to reclaim the economy for the people!\u201d<\/p>\n

At this point our vision of the future begins.<\/p>\n

Part II tomorrow…<\/p>\n

Regards,<\/p>\n

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

The post A Glimpse of the Future<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post A Glimpse of the Future<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

The global economy once again weighs on Wall Street…  The Federal Reserve is trapped between a rock and a very hard place… A preview of the 2020 presidential election…<\/p>\n

The post A Glimpse of the Future<\/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":[484,366,818,2155,463,806],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1107863"}],"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=1107863"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1107863\/revisions"}],"predecessor-version":[{"id":1107864,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1107863\/revisions\/1107864"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1107863"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1107863"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1107863"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}