Why Janet Ain’t Yellin’ “Higher Interest” Anymore: Jobs Worse than Expected and Far Worse than Reported…”You can put a toe tag on the Fed’s fake recovery now”
By David Haggith
TheGreatRecession.info
June 19, 2016
n the fall of 2015, I said the Federal Reserve would raise interest rates once in December then would not be able to fly any higher thereafter. The stock market would crash shortly after the Fed pulled up on the interest stick (which it did in what became the worst January in stock-market history), and then the Fed’s hopes of recovery would fade away.
I also said that, in spite of a continually degrading economic situation around the world, the Fed would badly want to lift its interest target again in order to prove its recovery had recovered from the first lift. The fact that it would not be able to without stalling the economy completely wouldn’t mean it wouldn’t try. If it did try, however, it would find out in hindsight that any additional pull back on the stick would crash the economy into the dust of the earth.
Here we are half a year later. The collapse did not continue down as quickly as I thought it would. The stock market and oil market stabilized and recovered after January, but the US and global economy remain on a downward flight path, evidenced by falling GDP stats and rapidly declining job numbers.
The Fed certainly appears to be trapped. Fed officials have pounded the pavement to talk about their intention to raise interest rates, but every month faces additional reasons that the Fed is unable to do so.
You can put a toe tag on the Fed’s fake recovery now
The Fed’s plane called Recovery is disintegrating slowly, rather than in one huge blow-up. Six months out from lift off, it is clear that the forces against another rate increase are growing worse month by month.
The Fed’s chances of pulling up any higher are getting rapidly smaller. Globally, there is talk of Brexit and Grexit, and China is looking like a mountainside that could slide any day now. Japan’s one-hundredth attempt at economic recovery through quantitative wheezing has failed completely. Much of the world had descended into Alice’s Wonderland of negative interest rates for the first time in world history, as a last-ditch attempt to recover from the Great Recession (and to recover from their central banks’ failed recovery attempts). Two major European banks are failing, and Venezuela and Brazil have collapsed into economic chaos. (And that’s just a sprinkling of current headlines.)
Yet, the worst news for the Fed is right at home. The Fed’s plane never made it more than a few feet above the runway when the illusory jobs recovery flew like a goose into the Fed’s left engine this week just as Captain Yellen was hoping to pull back on the stick for one more attempt to gain some interest altitude.
Yellen’s ground announcers had let the airshow crowd know they should watch her next trick, so the crowd was attentively watching for the much anticipated rate rise. Then down the plane’s nose dropped in what looked like a clumsily aborted take off, nearly skidding the nose cone back onto the runway. Whew! Many people must be asking, “Can she even fly that thing?”
The Rest…HERE
