Posted on 09/20/2015 11:30:44 AM PDT by Jack Hydrazine
Yellen has inherited a complete nightmare.
Thursday’s decision to delay yet again the long-awaited liftoff from zero interest rates is illustrating that the world economy is totally screwed.
There is a lot of speculation about why the Fed seems so reluctant to “normalize monetary policy”. There are of course the typical domestic issues that there is low inflation, weak wage gains in the face of strong job growth, a hike will increase the Federal deficit and then there is the argument that corporations that now have $12.5 trillion in debt. All that is nice, but with corporate debt, our clients are locking in long-term at these levels, not funding anything short-term. Those clients who have listened are preparing for what is to come unlike government which has been forced to shorten the average duration of their debts blind to what happens when rates rise, which will be set in motion by the markets – not Yellen.
The Fed is really caught between a rock and a very dark place. Yes, they have the IMF and the world pleading with them not to raise rates for it will hurt other debtors who borrowed excessively using dollars to save money.
The Fed is also caught between domestic policy objectives that dictate they MUST raise rates of they will bankrupt countless pension funds and international where emerging markets will go into default because commodities have collapsed and they have no way of paying off this debt that has risen to about 50% of the US national debt.
By avoiding the normalization of interest rates (hikes), the Fed has encouraged government to spend far more than they realize because money is cheap. This will eventually light the fire under the economy helping to fuel the Sovereign Debt Crisis. There appears to be no hope for the Fed and they will be forced to raise rates only when they see asset inflation in equities. Then they will have no choice.
This is the worst possible mess and the longer they have waited to normalize interest rates, the worst the total crisis is becoming for they will have zero control over the economy and once that is seen, holy Hell will break loose.
Nope. Personal debt won’t mean anything if SHTF.
“All of you folks in DEBT for Anything or Any Reason are going to be in a World of HURT.”
I think the ones who are owed are the ones in trouble.
Kicking it down the road for Republicans in 2017. They will blame this cause of a collapse on them and takers that vote on the dole will lack the ethical morality to see the truth or themselves as they really are.
When you see the Fed going with ZIRP for the past eight years and then decide to go with NIRP or QE4 it becomes pretty obvious the fragility of the economy and how the Fed has painted themselves into a corner.
“All of you folks in DEBT for Anything or Any Reason are going to be in a World of HURT.”
It’s rather funny that you put the word, “debt” in all caps. I just noticed the letters EBT as in Electronic Benefits Transfer in it!
What pensions and Social Insecurity?
Look at what happened to Argentina.
“...once EBT cards no longer work.”
I call them dEBT cards!
Let me throw another log on the fire of the aporcalypse!
Mark Spitznagel Warns: If Investors Thought August Was Scary, “They Ain’t Seen Nothin’ Yet”
http://www.zerohedge.com/news/2015-09-18/mark-spitznagel-warns-if-investors-thought-august-was-scary-they-aint-seen-nothin-ye
Those are going to be in great demand when the time is right!
Thanks for that!
Why would I pay off dept before an inflation cycle. That makes no sense.
Good analysis.
Good catch! Sadly our great, great, great grandchildren will be left to pay the final bill for thos dEBT cards!
That’s the truth. Some tend to overlook that fact.
Still going to need the wheel barrows to cart all that rope, tar and feathers around.
ping
Lead would be much easier.
In 08 I lost everything. I did not recover. I feel lucky to have a job, as opposed to a “career “...which I had, formerly.
As of today, I have no debt, but no assets either. I work at a large hospital so the job “security” is very good. But in a scenario like this, nothing will be really secure.
It’s like going through hurricane preparedness every summer...I’ve been hearing the economy is going apocalyptic for several years...and it hasn’t happened. Yet.
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