Well, it’s “T minus 1” until the most ballyhooed FOMC decision of all time – in which, ironically, they appear to be targeting the “policy error” that will once and for all destroy their “credibility.” So much so, that David Stockman, whose “Great Deformation” concept has shaped my historically bearish economic outlook, had a special conference call last night to discuss the ugly ramifications of the “watershed event” a rate hike will be. Not that ¼ point has any real economic impact. However, such a move will likely, once and for all, demonstrate that the Fed has run out of excuses to “push the string” of zero rates any longer, given how long it has purported the mythical U.S. “recovery.” Even if, comically, the “recovery” only exists in the fabricated “unemployment rate” they themselves stopped using as a quantitative input to monetary policy two years ago.
To that end, recall that in December 2012, when said “unemployment rate” was 7.7%, the Fed said it would raise rates if it fell to 6.5% – only to removed said “threshold” 16 months later; when it plunged through 6.5%, en route to today’s “5.0%.” Which, as it turns out, is the identical rate as the boom times of April 2008, when jobs were plentiful at the top of the biggest housing bubble of our lifetimes – just before it horribly crashed, permanently destroying the global economy and monetary system.
Yes, 14 months since ending overt QE – and quite obviously, replacing it with covert manipulation at least as powerful – the Fed clearly feels backed into a corner; in that, if they don’t raise rates now, the markets may assume it never will. That said, if they do, they are likely to, to paraphrase David Stockman, permanently end an historic era of “Bubble Finance.” And this, with the CRB Commodity Index at a 40-year low; the average currency at or near its all-time low; and essentially all nations in recession. Meanwhile, the few global equity indices not in bear markets – like the PPT-supported “Dow Jones Propaganda Average” – are trading at their highest-ever valuations, amidst their weakest-ever fundamentals; with even Wall Street and the MSM claiming such valuations are justified by “low interest rates.” Heck, a full 75% of S&P 500 stocks are trading below their 200 day moving averages – with highly economically-sensitive sectors, like transportation and high-yield bonds, in freefall. Regarding the former, the late, great Richard Russell’s “Dow Theory” would be screaming recession, given that the Dow Transportation Index – i.e., the “Trannies” – has fallen for four straight quarters.
But don’t worry, the PPT was in top form yesterday, seeking to “protect” the Fed’s rate hike aspirations following Friday’s commodity and high-yield bond-led market bloodbath. Consequently, despite junk bonds trading another 1% lower – nudging the “high yield” market to within two-months of the record 15-month string of elevated default rates experienced during the 2008-09 financial crisis – the PPT mounted spirited “dead ringer” and “hail mary” rallies to reverse what could have – and should have – been a debilitating equity collapse, that may well have threatened the Fed’s decision. Whilst, of course, attacking paper Precious Metal prices. And given that today is the day before an FOMC decision – in which, coupled with “FOMC days” like tomorrow – 80% of the stock market’s (manipulated) gains have occurred since the global economy peaked at the turn of the century, Dow Futures are of course sharply higher this morning.
As for the collapsing global economy that the Fed is suicidally hell-bent on raising rates into, it took a significant “reality hit” last night, when Chinese officials in several provinces admitted to not only fabricating economic data, but doing so massively; as in the Liaoning and Jilin provinces, whose 2012 GDP growth rates were “revised” from 9.5% and 12.0%, respectively, to 2.7% and 6.3%. In other words, further shouting to the world that government-produced economic data is suspect – particularly, politically-sensitive “island of lies” reports like GDP, inflation, and employment.
That said, an even more damning story, – mere days before the Fed may well catalyze an economic maelstrom by raising rates, emanated from Deutsche Bank’s research team – which calculated that in dollar terms, global GDP plunged by a whopping 20% this year; i.e., the biggest annual decline since the mid-1960s. As you can see, the only times in at least 70 years that nominal global GDP growth has been lower have been in the post-2008 era; and in dollar terms, even 2008 wasn’t as weak as 2015. And this, before the debilitating economic impact of the fourth quarter’s 10% commodity index implosion has been realized – whilst the Baltic Dry and Chinese Containerized Freight Indices plunged to all-time lows, taking countless “commodity currencies” with them.
In other words, 2016 is indeed setting up to be the “watershed event” described by Stockman. But hey, nine months ago Janet Yellen claimed the risks to the corporate bond market to be just “moderate.” So now that they – and nearly all other markets – are plunging like early 2009, it’s clearly an optimal time to raise interest rates. Right?
To which we can only espouse, as vehemently as possible, that the terrifying ramifications of such an event will likely be as widespread as they are crippling, to an economy amidst its “worst global GDP recession in 50 years.” And thus, more likely than not, to accelerate the Central bank money printing orgy exponentially, at a time when physical gold and silver demand are already at record highs; amidst an environment of vanishing inventories and plunging production. In other words, the time to protect oneself from what’s coming is now; and if you do, we hope you’ll give Miles Franklin the opportunity to earn your business.