Simone Wapler – La Chronique Agora (France) –
Some signs show that a recession is approaching. This time, the central bankers – the Fed in the lead – will be held directly responsible.
If you remember our ” investor compass “, knowing where we are in inflation and deflation is important for your investments.
At the beginning of the fall of 2017, some signs on the financial markets suggested for some of a return of inflation. Long rates in the United States were starting to rise.
Today, almost six months later, deflation is more likely to be the order of the day. Long-term rates have fallen again, with the traditional explanation being that stock market shocks have once again attracted security enthusiasts to the so-called ultimate safe haven: US Treasuries.
It’s all the more difficult to find that central bankers and other big planners are working to blur price signals, Bill Bonner explains. But, despite this interventionism, some unpleasant signs begin to appear.
“The rapid flattening of the US yield curve has been telling us for some time that the US economic recovery may not be doing so well.
But is this only possible while consumer and business optimism is at its highest and the ISM manufacturing index makes one of its very few forays over 60?
The optimists knew their winning moment. These data reflect above all an illusion of prosperity. The markets are now sniffing a stench of rotting debt. It is said that fish rots by the head.
Unlike what happened during the 2008 crisis, this time I expect the Fed to be held responsible for another debt crisis. Do not expect his independence to survive. »(1)
Albert Edwards, Economist, March 29, 2018
Are your nostrils finally filling the sickly aroma of recession?
The fabulous illusion of prosperity in which we live has only one origin: the falsification of the credit market and the use of unlimited debt.
On this chart, here is the evolution of equities compared to that of the 10-year US Treasury bond.
Click on the graph to enlarge
As you can see, the fabulous expansion of equities coincides with the continuing decline in interest rates that began in 1981.
At each recession or tentative correction, interest rates were artificially lowered.
Today, the system is in abeyance.
At the next recession, the room for maneuver will no longer be sufficient.
We will go west of our compass. It remains to be seen whether we will explore the north (inflationary depression) or the south (depression and general price decline). [Editor’s note: Whatever the face of the next crisis, find out what you can do now to protect your savings by clicking here .]
To claim knowledge would be vain. We can only make two hypotheses.
In the first place, faced with “doing nothing and letting depression happen” or “doing something,” the authorities always choose the second path.
In the second place, this “doing something” is always summed up in the old strings: more money creation.
Finally, as Albert Edwards says, this time the central bankers will be held directly responsible. Which will mean the death of the monetary system we know – and it is unlikely that it will be resurrected in three days. Perhaps we will know the end of the economy of miracles.
(1) The rapid flattening of the US yield curve has been telling us for some time that it could not be with the US economic recovery. But how can that be with consumer and business optimism at extreme highs, and the US manufacturing Ism making one of its very rare forays above the heady 60 mark? The optimists have had their day. This data is a reflection of the illusion of prosperity. The markets are now sniffing out a rising stench from decaying debt. They say a fish rots from the head down. Unlike the 2008 financial crisis, this time, I expect it to be a crisis. Do not expect their independence to survive.