{"id":1122217,"date":"2019-06-19T13:11:07","date_gmt":"2019-06-19T13:11:07","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=107534"},"modified":"2019-06-19T13:11:07","modified_gmt":"2019-06-19T13:11:07","slug":"capitalism-is-broken","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1122217","title":{"rendered":"Capitalism Is Broken"},"content":{"rendered":"

This post Capitalism Is Broken<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

The announcement came rolling from the Eccles Building at 2 p.m. Eastern\u2026<\/p>\n

No rate hike today.<\/p>\n

Jerome Powell has decided to sit on his hands \u2014 for now.<\/p>\n

In his very words:<\/p>\n

\n

It\u2019s important that monetary policy not overreact to any one data point\u2026 The FOMC will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.<\/em><\/p>\n<\/blockquote>\n

That is precisely why the next move will be a rate cut.<\/p>\n

We have reckoned lots lately about the inverted yield curve\u2026 and the recessionary menace it represents.<\/p>\n

The 10-year versus 3-month yield curve recently inverted to its lowest level since April 2007.<\/p>\n

Meantime, 10-year Treasury yields hover at two-year lows \u2014 2.04%. One Bloomberg opinion piece instructs us to prepare for 1% yields.<\/p>\n

As the old-timers know\u2026 the bond market gives a truer economic forecast than the chronically dizzied stock market.<\/p>\n

Meantime, the New York Fed\u2019s recession model reveals a 30% probability of recession within the next year.<\/p>\n

It last gave those same odds in July 2007 \u2014 merely five months before the Great Recession was underway.<\/p>\n

JP Morgan places the odds of recession in the second half of this year at 40%.<\/p>\n

And Morgan Stanley gives a 60% likelihood of recession within the next year \u2014 the highest since the financial crisis.<\/p>\n

Yes, the Federal Reserve will soon be cutting rates.<\/p>\n

One clue?<\/p>\n

Conspicuously absent from today\u2019s statement was the word \u201cpatient.\u201d Thus Mr. Powell telegraphs that he is ready to move.<\/p>\n

Federal funds futures presently give nearly 90% odds of a July rate cut.<\/p>\n

The market further expects as many as three rate cuts by this time next year \u2014 perhaps four.<\/p>\n

We are compelled to restate the blindingly obvious:<\/p>\n

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

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

If the Federal Reserve could cross the 4% finishing line in time, it could tackle the next recession with a full barrel of steam.<\/p>\n

Alas\u2026 it never made it past 2.50%.<\/p>\n

The Federal Reserve cannot return to \u201cnormal.\u201d<\/p>\n

The stock market will yell blue murder and take to violent rebellion if it tried \u2014 as happened last December.<\/p>\n

No, Wall Street has Mr. Powell in its hip pocket \u2014 as it had Janet Yellen, as it had Ben Bernanke, as it had Alan Greenspan before him.<\/p>\n

But it is not only the Federal Reserve…<\/p>\n

Last year the world\u2019s major central banks were pledging to \u201cnormalize.\u201d<\/p>\n

But now they are in panicked retreat\u2026<\/p>\n

All have taken to their heels, hoofing 180 degrees the other way.<\/p>\n

For example:<\/p>\n

Both the Bank of Japan and European Central Bank are now gabbling openly about rate cuts and\/or additional quantitative easing.<\/p>\n

\u201cIt\u2019s all in the open now. Front and center. The new global easing cycle has begun before the last one ended.\u201d<\/p>\n

This is the considered judgment of Sven Henrich, he of NorthmanTrader.<\/p>\n

We must agree.<\/p>\n

Yet the central banks have only themselves to blame…<\/p>\n

They grabbed hold of the poisoned apple during the financial crisis.<\/p>\n

They gulped\u2026 and took the first fateful nibble. It proved nectar to the stock market.<\/p>\n

Encouraged by the results, they soon munched the full dose\u2026 and later went plowing through the entire tainted orchard:<\/p>\n

Zero interest rates, QE 1, 2 and 3 \u2014 Operation Twist \u2014 the lot of it.<\/p>\n

Even with trade war raging and recession hovering, stocks are within 1% of record heights.<\/p>\n

And so the banks are too far gone in sin to turn back now.<\/p>\n

Their greatest casualty?<\/p>\n

Capitalism itself.<\/p>\n

Henrich on the wages of central bank sin:<\/p>\n

\n

Let\u2019s call a spade a spade: Equity markets and capitalism are broken. Neither can function on any sort of growth trajectory without the helping hand of monetary stimulus. Global growth figures, expectations and projections are collapsing all around us and markets are held up with promises of more easy money, in fact are jumping from central bank speech to central bank speech while bond markets scream slowdown.<\/em><\/p>\n<\/blockquote>\n

We fear Mr. Henrich is correct.<\/p>\n

We further fear capitalism will get another good round pummeling in the years to come\u2026<\/p>\n

The Federal Reserve\u2019s false fireworks will land as duds against the next recession.<\/p>\n

Cries will then go out for the artificial savior of government spending \u2014 Modern Monetary Theory (MMT).<\/p>\n

Free college tuition\u2026 universal Medicare\u2026 jobs for all\u2026 a $15 minimum wage\u2026a possible Green New Deal…<\/p>\n

These and more will be in prospect.<\/p>\n

Politicians will go running through the Treasury as a bull runs through a china shop\u2026 and leave the nation\u2019s finances a shambles.<\/p>\n

Only then \u2014 too late \u2014 will they discover that debt and deficits matter after all…<\/p>\n

Regards,<\/p>\n

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

The post Capitalism Is Broken<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post Capitalism Is Broken<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

No rate hike… “It’s all in the open now. Front and center. The new global easing cycle has begun before the last one ended”…<\/p>\n

The post Capitalism Is Broken<\/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":"default","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":"","ast-disable-related-posts":"","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-opacity":"","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-opacity":"","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-opacity":"","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-opacity":"","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-opacity":"","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-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[503,366,818,2902,2903,463],"tags":[],"class_list":["post-1122217","post","type-post","status-publish","format-standard","hentry","category-capitalism","category-dailyreckoning","category-federal-reserve","category-global-easing-cycle","category-rate-hike","category-the-daily-reckoning"],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1122217","targetHints":{"allow":["GET"]}}],"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=1122217"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1122217\/revisions"}],"predecessor-version":[{"id":1122218,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1122217\/revisions\/1122218"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1122217"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1122217"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1122217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}