The Time to Act Was 10 YEARS AGO
The Time to Act Was 10 YEARS AGO By Owen Sullivan – Laissez Faire Books – LFB.org
Just because I’m on vacation this week, doesn’t mean the rest of the team at Money & Crisis are slacking off.
I’ve asked some of my colleagues, as well as top industry experts, to fill in for me while I’m gone. These folks know more about crisis, money and personal liberty than anyone I’ve ever met.
Today’s issue comes to you courtesy of Jim Rickards, economist and author of New York Times bestseller Currency Wars.
All the best,
Editor, Money & Crisis
P.S. Jim Rickards was one of the few big name economists who actually predicted the 2008 financial crisis. For a limited time, you can grab a free copy of his new book The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis as a reader of Money & Crisis. In it, Jim reveals the powerful strategies you can take to protect your money and your family from the next crisis. Claim your FREE copy now.
The Fed’s Lost Opportunity to Return to Normal
Current Fed policy will push the U.S. economy to the brink of recession, possibly by later this year.
When that happens, the Fed will have to reverse course and ease monetary policy.
Meanwhile, the economic cheerleaders recite recent GDP figures and the stimulative effects of the Trump tax cuts.
There’s one problem with the happy talk about 3–4% growth.
We’ve seen this movie before.
Brown Shoots and the Summer That Never Came
In 2009, almost every economic forecaster and commentator was talking about “green shoots.” In 2010, then-Secretary of the Treasury Tim Geithner forecast the “recovery summer.” In 2017, the global monetary elites were praising the arrival (at last) of “synchronized global growth.”
None of this wishful thinking panned out. The green shoots turned brown, the recovery summer never came and the synchronized global growth was over almost as soon as it began.
Strong quarters have been followed by much weaker quarters within six months on six separate occasions in the past nine years. There’s no reason to believe this time will be any different.
This expansion has been extraordinarily long — over 30% longer than average — indicating that a recession should be expected sooner rather than later.
Into this mix of weak growth comes the Federal Reserve, which is tightening monetary policy, reducing the base money supply and supporting a strong dollar. All of these policies are associated with slower growth ahead and a high probability of recession.
In a typical business cycle, the economy starts from a low base, then gradually business starts expanding, hiring picks up, more people spend money and businesses expand.
Eventually, industrial capacity is used up, labor markets tighten and resources are stretched. Prices rise, inflation picks up and the Fed comes along and says “Aha! There’s some inflation. We’d better snuff it.”
So it raises rates, usually for a full cycle.