Best of the Week
Most Popular
1.Trump Delirium Triggers Stock Market Brexit Upwards Crash Towards Dow 20,000! - Nadeem_Walayat
2.The Future Price Of Gold Will Drop Below $1000 In 2017 -InvestingHaven
3.May Never Get Another Opportunity to Buy Gold at this Level Again - Chris_Vermeulen
4.Delirium - The Real Reason Why Donald Trump Won the US Presidential Election - Nadeem_Walayat
5.Why Nate Silver / Fivethirtyeight is one of the Most Reliable Election Forecasting Indicator? - Nadeem_Walayat
6.Gold Price Forecast: Nasty Naughty November Gold Price Trend - I_M_Vronsky
7.Gold Mining Stocks Screaming Buy! Q3’16 Fundamentals - Zeal_LLC
8.Delirium of Trump Mania Win's Mr BrExit US Presidential Election 2016 - Nadeem_Walayat
9.The War On Cash Goes Nuclear In India, Australia and Across The World - Jeff_Berwick
10.Hidden Signs for Gold and Silver - P_Radomski_CFA
Last 7 days
Gold And Silver – Do Not Expect Much Difference With Trump Compared To Obama - 3rd Dec 16
Gold, Currencies and Markets Critical 61.8% Retracements - 2nd Dec 16
Gold Junior Stocks Q3’16 Fundamentals - 2nd Dec 16
Adventures in Castro’s Cuba - 2nd Dec 16
We Are Putting Off the Inevitable - 2nd Dec 16
Macroeconomic Cycles & Demographics - A Fuse, An Explosive and The Igniting Catalyst - 2nd Dec 16
How Moving Averages Can Identify a Trade - 1st Dec 16
Silver Prices and Interest Rates - 1st Dec 16
America, is it Finally time for us to say Goodbye? - 1st Dec 16
Blockchain Technology – What Is It and How Will It Change Your Life? - 1st Dec 16
Burn the Flags, Can Trump Salvage The Sinking US Economic Ship? - 1st Dec 16
Will US Housing Real Estate Market Tank in 2017? - 1st Dec 16
Referendum Puts Italy's Government to the Test - 30th Nov 16
Why We Haven’t Seen Gold Price Rally after Trump Victory - 30th Nov 16
Breakdown and Slide in Crude Oil Price - 30th Nov 16
A 'Wicked Rally' in Gold Price Predicted - 30th Nov 16
Silver Market Sentiment Looks Golden - 30th Nov 16
Indian Demonetization Denotes Severe Stress in the Global Gold Market - 30th Nov 16
Owning Gold and Silver in Troubling Times - 29th Nov 16
Trump's Presidency - Stock Market Crash or Start of New Mega-Trends - 29th Nov 16
Prime Minister Modi's War Against Corruption, Black Money and Fake Currency Notes in India - 29th Nov 16
Can President Trump Really Drain the Swamp? - 29th Nov 16
President Trump’s Economic Plan Isn’t Going to Work - 29th Nov 16
The US Bond Bear Market Has Begun! - 29th Nov 16
Simple Yet Powerful Technical Trading Tools - 28th Nov 16
Public Infrastructure – Welcome to the World of Waste, Fraud, and Abuse - 28th Nov 16
Fifty Years Later, Moore's Computing Law Holds - 28th Nov 16
An Elusive Stock Market Top - 28th Nov 16
This Past Week in Gold - 27th Nov 16
Italian Bank Collapse European Sovereign Bond Carnage, Criss-Crossed Fuses & Lit Bonfire - 27th Nov 16
How to Beat UK Savings Crisis with Child Junior Cash ISA, Pension's and Life-time ISA - 27th Nov 16
Castro Was Not Who You Thought He Was - 27th Nov 16
Understanding the Trump Presidency , Beyond Merkel - 26th Nov 16
US Stocks Bull Market New All Time Highs - 26th Nov 16
Silver Mining Stocks Q3 2016 Fundamentals - 26th Nov 16
MSM's Stock Market Druck'n Suck-In Continues - 26th Nov 16
Gold Price Down 13.5% In 13 Days - Opportunity For Geometric Price Cost Averaging - 26th Nov 16
Tips for Trading Options with Elliott Waves - 26th Nov 16
Germany Pulls the Plug on Market Oracle site for 24 hours, German Election BrExit GerExit Warning Shot? - 26th Nov 16
New NS&I 2.2% Savings Bond Ahead of 2017 Stealth Inflation Theft of Purchasing Power - 24th Nov 16
Establishment Controlled Mainstream Media Launches War on Alternative 'Fake' News - 24th Nov 16
Black Friday Cheap Christmas Lights, How Long do they Last ? B&M Stores Review Video - 24th Nov 16
War On Cash Goes Global – India and Citibank In Australia - 24th Nov 16
Stocks, the Politically-Driven S.O.D. to Lose Again - 24th Nov 16
One of the best buying opportunities in history? - 24th Nov 16
Gold and Monetary Populism: The Oligarchs’ Mortal Enemies – The Peoples’ Salvation - 23rd Nov 16
The Winners and Losers of a Global Trade War - 23rd Nov 16
Why Mexico’s Oil Reform Is A Huge Opportunity For Investors - 23rd Nov 16
Silver and Gold - We Can’t Understand It for Them - 23rd Nov 16
A Review of Nedbank Private Wealth - 23rd Nov 16
Trump’s Financial Revolution! - 22nd Nov 16
Stock Market New All Tiime Highs & the Election Buried This HUGE Story - 22nd Nov 16
Will Crude Oil Price Rally to $50? - 22nd Nov 16
The Spreading Bondfire And The Rising Price Of Gold - 22nd Nov 16
Did The 'Trump Tantrum' Just Trigger The Next US Recession? - 22nd Nov 16
Cheap Money to Continue Flowing & Helicopter Money to Start after 2017 Market Crash - 22nd Nov 16
Gold Price Forecast: Nasty Naughty November Gold Price Trend - 22nd Nov 16
Stocks and Deby - Will Trump Bring Morning or Mourning in America? - 22nd Nov 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

$10000 Gold

As the Stimulus Fades U.S. Economy and Stock Market Loses Steam

Economics / US Economy Jun 16, 2010 - 09:10 AM GMT

By: Claus_Vogt

Economics

Best Financial Markets Analysis ArticleOver the past two years, we’ve seen the largest stimulus policies the world has ever produced.

As a result, sovereign debt and central banks’ balance sheet holdings have gone through the roof!


A glance at the monetary base chart below shows how extraordinary these policy measures have been in the U.S.

Board of Governers Chart

When a government and its central bank throw hundreds of billions in taxpayers’ dollars at the financial markets and the economy you’ll definitely see …

Desired and Undesired Consequences …

The official desired short-term consequences include the huge stock market rally off the March 2009 lows and the economic rebound since mid-2009.

On the other hand, the undesired, longer-term consequences will often be swept under the rug by short-sighted politicians and central banks.

So today I want to focus on two of those undesired consequences, ones Washington wants you to ignore:

Undesired Consequence #1— The Unstable Economy

The stock market rally since March 2009 has indeed been impressive. But according to many measures the economic rebound has been extremely weak …

The easiest way to understand how weak this recovery has been is to look at the work of the National Bureau of Economic Research (NBER).

Founded in 1920, the NBER is the nation’s leading nonprofit, economic research organization dedicated to promoting a greater understanding of how the economy works. And it is the official arbiter of recessions in the U.S. — giving notice when their researchers determine a recession has begun and when it has finally ended.

The number of jobs in the U.S. hasn't increased in 10 years.
The number of jobs in the U.S. hasn’t increased in 10 years.

And as recently as yesterday, the NBER has NOT declared an end to the recession that started in December 2007.

Especially troubling is the labor market …

According to the Federal Reserve, the number of working Americans isn’t any higher today than it was 10 years ago! Since Census figures show the U.S. population is growing by 2 to 3 million every year, this stagnation in job growth is a giant roadblock for an economy struggling to dig out of a recession.

Undesired Consequence #2— Weakening Financial Indicators

At the same time some important leading economic indicators have begun to roll over again. The most obvious is the stock market, which has declined more than what is considered a normal 10 percent correction since its April high.

This has to be rated as an ominous sign.

Then the Conference Board’s Index of Leading Economic Indicators (LEI) started to turn down in April. The year-over-year percentage change declined to 10.2 percent from 11.5 percent.

This reading is still far from a recession warning. But it may very well be the turning point for this cycle. And history shows the LEI can decline very quickly after the turnaround is in.

Finally, there is the Economic Cycle Research Institute’s (ECRI) Weekly Leading Index, another major leading indicator. It has just fallen to minus 3.5 percent — the lowest level in the last 10 months.

I’ve marked this level with a red horizontal line in the following chart. If it keeps falling, even by a little bit in the coming weeks, its message will be loud and clear: Double dip recession ahead!

Index GPOChart

As the Stimulus Fades the Economy Loses Steam

I’ve just given you some of the early, but usually reliable, signs of a deteriorating economy. But you shouldn’t be surprised about this sad development. The fact is, no matter how much money is thrown at the problem, the economy isn’t getting any traction. Nor has it entered a self-sustaining recovery.

The economic rebound we’ve seen in the past months is just the short-term reaction to the unprecedented stimulus programs. And as the stimulus money fades away, so does the economic recovery — and so does the stock market rally.

Best wishes,

Claus

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife