Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Trump-Defying Fed Enters Danger Zone for Economy and Markets

Stock-Markets / Financial Markets 2018 Dec 21, 2018 - 02:51 PM GMT

By: MoneyMetals

Stock-Markets

The Fed blinked – but didn’t flinch away from another rate hike. On Wednesday, Federal Open Market Committee (FOMC) policymakers rejected President Donald Trump’s call for a pause. They raised their benchmark rate by a quarter point to a range up to 2.5%.

The only concession Fed chairman Jerome Powell offered to Trump and nervous stock market investors was a revised, less hawkish outlook for 2019. Powell and company now indicate they intend to hike just twice next year.


They claim the additional hikes are needed to bring rates further into “neutral” territory.

But with economic data and inflation indicators dipping over the past few months and the stock market not taking well to the Fed’s latest actions, the FOMC may be eying the other side of “neutral” by the time it meets again in late January.

Inflation pressures swung dramatically mid-year. Through this summer, inflation had been trending steadily higher and threatening to far exceed the Fed’s 2% target.

Crude oil prices hit $75/barrel by the end of June. Following a failed breakout attempt in September, oil prices proceeded to plunge for several weeks running. They fell nearly 10% this week to record a 16-month low at $46/barrel.

Selling in other key commodities hasn’t been as severe.

Gold prices have actually firmed up over the past four months. Silver has been forming a potentially bullish base as well. But falling energy costs have dominated the headlines, helping to drag down inflation indicators and inflationary expectations.

The Consumer Price Index (CPI) report for November showed price levels for the month flat at 0% (though still running near 2% year over year).

The bond market is now pricing in a disinflationary trend. Over the past few weeks, long-term interest rates have been moving down, with the 10-year yield hitting a 6-month low on Wednesday.

The “break even” inflation rate in the market for Treasury Inflation Protected Securities just hit a 14-month low of 1.82%.

Falling long-term interest rates are converging toward rising short-term rates to produce a flattening yield curve. The spread between the 10-year yield and 2-year yield comes in at just 10 basis points.

The yield curve is in danger of inverting as the new year approaches – meaning the shorter-term note would yield more than the longer-term note. An inverted yield curve is historically a reliable warning sign of an economic downturn. It warned ahead of both the 2008 and 2001-2002 meltdowns.

The Fed is now operating in a danger zone – in more ways than one.

The official U.S. national debt will enter 2019 at about $22 trillion. That’s double what it was just 10 years prior. It is projected to double again in 10 years. That’s powerful exponential growth.

Unfortunately, the economy won’t keep pace, meaning the debt to GDP ratio will grow to dangerous levels that can either trigger a default or a currency crisis.

If a corporation had an insurmountable and growing debt load, then investors would rightly begin to anticipate its eventual collapse into bankruptcy. Absent some solution to its debt problem, the troubled company’s share values could be expected to steadily deflate.

But what if that corporation had access to an unlimited credit line? Then it could keep borrowing in perpetuity in order to keep business operations going as well as to pay the interest owed to creditors. Its growing debt load would no longer entail deflationary implications for its shares because it could always bail itself out of financial trouble.

The U.S. government has what amounts to an unlimited credit line with its banker, the Federal Reserve.

The more the government owes, the more the Fed stands ready to digitally print currency into existence for the purpose of buying government debt.

Under our unlimited fiat currency system, the bigger… the more unsustainable… the more unpayable the government’s liabilities, the more the currency supply will have to inflate.

Dollar depreciation ultimately gets reflected in precious metals markets. They can be ignored while other markets are doing well. Or suppressed in the futures markets while central bankers do their dirty work. But physical gold and silver supplies cannot be created out of thin air like Federal Reserve notes.

When investors wake up to the need for the security money metals provide as contra-dollar safe havens, that increase in demand will force a great revaluation to much higher levels.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2018 Stefan Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 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