A wilting, stifled economy is the story this week with the Fed. They’re trapped, unable to bolster the economy and they have no ammo to halt inflation.
Fed President Lacker Urging Preemptive Rate Increases
Regular Fed dissenter Jeffrey Lacker said this week he sees even bigger rate increases coming in if the Fed doesn’t start gradually tightening as soon as possible. His remarks sent precious metals tumbling. In his latest podcast, Peter Schiff discusses why the Fed can’t accomplish Lackers’ plan: “We have so much debt that if we try and fight inflation we’re going to have a worse financial crisis than 2008,” Peter said. “Because it can’t fight inflation, the Fed pretends it can do it.”
Fed Pushes Potential of November Hike, Nobody Takes Bait
Once again we repeat the cycle. The Fed has been warning investors not to overlook the chance of a rate hike during the November meeting. However, investor confidence is only tracking about a 25% probability of a hike in November. We think it even less probable given that the meeting is just a week before the election.
GDP Data Tracking Evidence of Decaying Economic Growth
Federal Reserve forecasts are slashing their expectations for the nation’s GDP growth this week. GDPNow’s prediction of 3.5% last month has been revised down by more than a percentage point. It seems more economists are finally factoring in all the bad data, with manufacturing and construction down significantly.
“Too Big to Fail” is over –Banks are Becoming “Too Weak to Survive”
The International Monetary Fund (IMF) released a report this week that didn’t contain great news for many of the world’s biggest banks. The report clearly laid out the need for drastic adjustments in worldwide banking stating the data “suggests the need for fundamental changes in both bank business models and system structure to ensure a vibrant and healthy banking system.”
The artificially low interest rates are crippling profits for the long-haul, causing this IMF report to read a lot like a final warning. According to them, reform in worldwide banking systems “can no longer be postponed.”