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Deutsche Bank Economists Say the Fed Will Create More Inflation in 2024
Deutsche Bank Economists Say the Fed Will Create More Inflation in 2024
Deutsche Bank economists say the Federal Reserve will create more inflation in 2024.
OK, that’s not exactly what they said. But that is the implication of their latest forecast.
The Deutsche Bank analyst forecast that the Fed will cut rates by 175 basis points in 2024 in response to a “mild” recession. That would drive the Federal Reserve funds rate down to between 3.5% and 3.75%.
This loosening monetary policy, by definition, would create more inflation.
The Fed currently has interest rates set at between 5.25% and 5.5%.
Most mainstream analysts now think the central bank will cut rates next year, but not as steeply as Deutsche Bank economists.
The dominant narrative today is that the Fed has successfully beaten down price inflation. A cooler-than-expected CPI report for October reinforced this notion. With inflation on the run, mainstream analysts think that the Fed has initiated its last hike and will pivot to rate cuts next year to guide the economy to a “soft landing.” Even before the CPI data release markets were pricing in 75 basis points of rate decreases in 2024.
Many mainstream analysts and financial news network pundits have taken a recession completely off the table. But Deutsche Bank senior US economist Brett Ryan told Reuters he expects the US economy to hit a “soft patch” that will lead to a “more aggressive cutting profile.”
Ryan said he expects this economic weakness to further ease inflationary pressure.
The Problems With the Forecast
There are several problems with the Deutsche Bank projections, and the entire mainstream narrative more generally.
In the first place, the death of inflation is greatly exaggerated. No matter how you slice and dice the data, none of the numbers come close to the Fed’s 2% target. Core CPI is still double that number.
…click on the above link to read the rest…
The Future for Fiat
The Future for Fiat
The day of reckoning for unproductive credit is in sight.
With G7 national finances spiraling out of control, debt traps are being sprung on all of them, with the sole exception of Germany.
Malinvestments of the last fifty years are being exposed by the rise in interest rates, increases which are driven by a combination of declining faith in the value of major currencies and contracting bank credit. The rise in interest rates is becoming unstoppable.
Do not be surprised to see a US Government deficit exceeding $3 trillion this fiscal year, half of which will be interest payments. And in the run-up to a presidential election, there’s every sign of deficit spending increasing even further.
We now face America and her allies being dragged into another expensive conflict in the Middle East, likely to drive oil and natural gas prices higher; far higher if Iran becomes a target. With the Muslim world united against Western imperialism more than ever before, do not discount the closure of Hormuz, and even Suez, with unimaginable consequences for energy prices.
The era of interest rate suppression is over. G7 central banks are all deeply in negative equity, in other words technically bankrupt, a situation which can only be addressed by issuing yet more unproductive credit. These are the institutions tasked with ensuring the integrity of the entire system of bank credit.
This is not a good background for a dollar-based global credit system that is staring into the black hole of its own extinction.
The end for the dollar is nigh
There are a number of events coming together that suggest we are about to undergo a major upheaval in world economic, financial, and monetary affairs…
…click on the above link to read the rest…
Peter Schiff: A Crisis Is Already Playing Out Under the Radar
Peter Schiff: A Crisis Is Already Playing Out Under the Radar
The mainstream remains optimistic about the trajectory of the economy. Price inflation has supposedly been beaten down. GDP growth was even better than expected, and most economists have tabled their recession predictions. But in his podcast, Peter Schiff explained that it’s all an illusion. The financial crisis has already started, and it continues to play out beneath the radar.
Nobody understands that this crisis has started. But believe me, it has. This was the way the 2008 financial crisis started. It didn’t just happen when Lehman Brothers went bankrupt.”
By the time Lehman went under, everybody knew there was a crisis. But it was obvious long before that.
That’s the reason it went under. It didn’t just go out of business out of the dark. It wasn’t just happenstance. The reason that Lehman Brothers, and Bear Sterns, and Fanny and Freddy, and AIG, and all these companies went under was their exposure to the mortgage market. That exposure was obvious to me for years, but particularly in 2007 when the subprime market blew up. That was the point where even the village idiot should have been able to figure out what was coming. The problem was most people on Wall Street weren’t even smart enough to qualify as the village idiot, so they still couldn’t figure it out.”
They needed the proverbial anvil to fall on their head. That finally happened in 2008. But even in the summer of ’08, a lot of people were oblivious.
So, if you’re wondering, ‘Peter, how can we be so close to this massive crisis, in fact, how could this crisis have already started if nobody is talking about it?’ Well, just go back to the summer of 2008. Nobody was talking about it.”
Peter emphasized that this crisis is much bigger because the problems driving it are much bigger.
…click on the above link to read the rest…
The Myth of the Invincible Dollar
The Myth of the Invincible Dollar
I write a lot about the national debt.
And most people don’t care.
That’s because there’s a widespread belief that the dollar is invincible.
It isn’t.
The prevailing attitude is that the US government can borrow and spend indefinitely. After all, it hasn’t caused a problem so far. But a long fuse can burn for a long time before it finally reaches the powder keg.
I don’t know how long we have before the debt bomb explodes, but I do know we get closer and closer every day. And sadly, very few people care enough to address the problem.
The recent government shutdown drama is a case in point.
A stopgap spending deal swept the shutdown threat out of the headlines, but it’s still there lurking in the shadows of the halls of Congress. If lawmakers don’t figure something out by Nov. 17, the government will be forced to shut down.
There isn’t much talk about a shutdown right now, but when people do discuss the possibility, they almost always focus on the mythical crisis that shuttering the federal government might cause. That sidesteps the real problem — out of control government spending.
Conventional wisdom is that Congress needs to do whatever it takes to avoid a shutdown. If that means maintaining spending at current levels or even increasing spending, so be it. The handful of intransigent members of Congress who want to hold out for spending cuts are always cast as the bad guys in this kabuki theater. As economist Daniel Lacalle put it in a recent article published by Mises Wire, “The narrative seems to be that governments and the public sector should never have to implement responsible budget decisions, and spending must continue indefinitely.”
…click on the above link to read the rest…
Unwinding the Financial System
Unwinding the Financial System
This article looks at the collateral side of financial transactions and some significant problems that are already emerging.
At a time when there is a veritable tsunami of dollar credit in foreign hands overhanging markets, it is obvious that continually falling bond prices will ensure bear markets in all financial asset values leading to dollar liquidation. This unwinding corrects an accumulation of foreign-owned dollars and dollar-denominated assets since the Second World War both in and outside the US financial system.
Furthermore, collapsing collateral values, which are increasingly required backing for changing values in over $400 trillion nominal in interest rate swaps are a new driver for the crisis, forcing bond liquidation, driving prices down and yields higher: we are in a doom-loop.
What action can the authorities take to ensure that counterparty risk from widespread failures won’t take out inadequately capitalised regulated exchanges?
It seems that they acted some time ago by giving central security depositories (The Depository Trust and Clearing Corporation, Euroclear, and Clearstream) the right to pool securities on their registers and lend them out as collateral. Your investments, which you think you may own can be absorbed into the failing financial system without your knowledge.
This seems particularly relevant, given the appointment of JPMorgan Chase as custodian of the large gold ETF, SPDR Trust (ticker GLD). In a test case in the New York courts concerning Lehman’s failure, JPMC was given legal protection should it seize its customer’s assets.
This important erosion of property rights is poorly understood. But as the financial distortions are unwound, leading to unintended consequences such as bank failures and ultimately the collapse of the dollar-based fiat currency regime, the implication is that holders of physical gold ETFs will be left owning an empty shell at a time when they might have expected some protection from the collapse of the value of credit.
…click on the above link to read the rest…
Hedging the End of Fiat
Hedging the End of Fiat
It is slowly coming clear that the fiat dollar’s hegemony is drawing to a close. That’s what the BRICS summit in Johannesburg is all about — rats, if you like, deserting the dollar’s ship. With the dollar’s backing being no more than a precarious faith in it, it is bound to be sold down by foreign holders. Being only fiat, it could even become valueless, threatening to take down the other western alliance fiat currencies as well.
How do you protect your paper wealth from this outcome? Some swear by bitcoin and others by gold.
This article looks at what is likely to emerge as a replacement currency system, and concludes that from practical and legal aspects, bitcoin and the entire cryptocurrency industry will fail with fiat, while mankind will return to gold, as it has always done in the past when state control over currency fails
Introduction
It is gradually dawning on market participants that the era of fiat currencies is drawing to a close. Monetarists, who first warned us of the inflationary consequences of the expansion of money and credit were also the first to warn us that the slowdown in monetary expansion would lead to recession, and since then we have seen broad money statistics flatline, with bank lending beginning to contract. This is interpreted by macroeconomists as the end of inflation, and the return to lower interest rates to stave off recession.
Unfortunately, this black-and-white interpretation of either inflation or recession but never both has been challenged by bond yields around the world which are rising to new highs. And the charts tell us that they are likely to go considerably higher. Consequently, conviction that inflation of producer and consumer prices will prove to be a temporary phenomenon is infected with doubt.
…click on the above link to read the rest…
The US Banking System Is Sound?
The US Banking System Is Sound?
Treasury Secretary Janet Yellen keeps insisting that the banking system is “sound.” Is it though? Because it doesn’t look particularly sound.
In fact, we just witnessed the second-largest US bank failure ever.
Government regulators seized control of First Republic Bank over the weekend and sold the majority of the bank’s operations to JP Morgan Chase. It was the third major bank failure this year and the biggest bank to collapse since the 2008 financial crisis. It was the second-largest bank by assets to fail in US history.
First Republic went under after it revealed $100 billion in deposit losses in the first quarter.
The beleaguered bank has been struggling for a while. It was initially bailed out back in March with $30 billion in deposits from several large banks, including JP Morgan and Wells Fargo. The bank also borrowed heavily from the Federal Reserve’s bank bailout program. First Republic shares tumbled 75% last week before the FDIC stepped in.
While JP Morgan is taking over First Republic’s business, the FDIC will provide “shared-loss agreements.” As the FDIC website explains it, “the FDIC absorbs a portion of the loss on a specified pool of assets sold through the resolution of a failing bank – in effect sharing the loss with the purchaser of the failing bank.”
If we are to believe the mainstream narrative, the failures of Silicon Valley Bank, Signature Bank and First Republic Bank were isolated events and do not reflect a broader problem in the banking system. But as we have reported, these bank failures are just the tip of the iceberg. A report by the Wall Street Journal cites a study from Stanford and Columbia Universities that found 186 US banks are in distress.
…click on the above link to read the rest…
Franklin D. Roosevelt’s Gold Heist
Franklin D. Roosevelt’s Gold Heist
Yesterday (April 5) marked the anniversary 0f the signing of Executive Order 6102 by President Franklin D. Roosevelt. It was touted as a measure to stop gold hoarding, but it was in reality, an attempt to remove gold from public hands.
Many people refer to EO-6102 as a gold confiscation order. But confiscation is probably not the best word for what happened in practice.
The order required private citizens, partnerships, associations and corporations to turn in all but small amounts of gold to the Federal Reserve in exchange for $20.67 per ounce.
The executive order was one of several steps Roosevelt took toward ending the gold standard in the US.
With the dollar tied to gold, the Federal Reserve found it difficult to increase the money supply during the Great Depression. It couldn’t simply fire up the printing press as it can today. The Federal Reserve Act required all notes to have 40% gold backing. But the Fed was low on gold and up against the limit. By enticing the public to give up its gold, the Fed was able to boost its own gold holdings and create more dollars.
EO 6102 followed on the heels of an order Roosevelt issued just weeks before prohibiting banks from paying out or exporting gold. Just two months after the enactment of EO 6102, the US effectively went off the gold standard when Congress enacted a joint resolution erasing the right of creditors to demand payment in gold. Then, in 1934, the government’s fixed price for gold was increased to $35 per ounce. This effectively increased the value of gold on the Federal Reserve’s balance sheet by 69%. By increasing its gold stores through the confiscation of private gold holdings, and declaring a higher exchange rate, the Fed could circulate more notes. In effect, the hoarding of gold by the government allowed it to inflate the money supply.
…click on the above link to read the rest…
BRICS Nations Developing “New Currency” as Quest for Global De-Dollarization Accelerates
BRICS Nations Developing “New Currency” as Quest for Global De-Dollarization Accelerates
China and Brazil recently finalized a trade deal in their own currencies completely bypassing the dollar, but that’s not the only bad news for the world’s reserve currency.
Last week, a Russian official announced that the BRICS nations are working to develop a “new currency,” yet another sign that dollar dominance is waning.
State Duma (the Russian legislative assembly) deputy chairman Alexander Babakov said the transition to settlements in national currencies is the first step. We’ve already seen this occur with recent oil deals between India and Russia being settled in currencies other than dollars.
The next one is to provide the circulation of digital or any other form of a fundamentally new currency in the nearest future. I think that at the BRICS [leaders’ summit], the readiness to realize this project will be announced, such works are underway.”
That summit is scheduled for August.
Babakov said the BRICS nations are developing a strategy that “does not defend the dollar or euro” and that “a single currency” would likely emerge within BRICS, pegged to gold or “other groups of products, rare-earth elements, or soil.”
Brazil, Russia, India, China, and South Africa make up the BRICS block. It accounts for about 40% of the global population and a quarter of the global GDP.
Last year, Iran officially applied to join BRICS, and according to a report by The Cradle, several nations have expressed interest in joining the bloc, including Saudi Arabia, Algeria, UAE, Egypt, Argentina, Mexico, and Nigeria.
Former Goldman Sachs chief economist Jim O’Neill coined the BRIC acronym. In a recent paper published by Global Policy Journal, he urged the expansion of BRICS.
“The US dollar plays a far too dominant role in global finance,” he wrote. “Whenever the Federal Reserve Board has embarked on periods of monetary tightening, or the opposite, loosening, the consequences on the value of the dollar and the knock-on effects have been dramatic.”
…click on the above link to read the rest…
Peter Schiff: Bank Bailouts Will Devalue the Dollar
Peter Schiff: Bank Bailouts Will Devalue the Dollar
Peter Schiff appeared on NTD News to talk about the bank bailout and the March Federal Reserve meeting. During the conversation, Peter explained that everybody is going to pay for these bailouts because they will ultimately devalue the dollar as inflation skyrockets.
During his press conference after the March FOMC meeting, Jerome Powell said the banking system is “sound and resilient.” Peter said it’s not sound at all.
It’s a house of cards that is starting to collapse.”
Peter explained how the banking system became so unsound.
First, the Federal Reserve kept interest rates at zero for over a decade. During that time, banks loaded up on low-yielding, long-term Treasuries and mortgage-backed securities. With interest rates so low, they had to go out further on the yield curve. And the reason they were able to take so much risk is because the government guarantees bank accounts. That created a moral hazard. Customers didn’t care what the banks did with their money because they knew the government would bail them out.
Thanks to the mistakes the Fed has made since the 2008 crisis, we have a much bigger bubble now. The Fed caused the bubble that led to the financial crisis of 2008, and then they inflated a bigger bubble to try to paper over those mistakes and kick the can down the road so that we wouldn’t have to deal with the full consequences of resolving all those mistakes. And of course, we just compounded the problem with bigger mistakes and now the US economy is poised on the biggest economic disaster in its history.”
…click on the above link to read the rest…
If You Can’t Hold It, It’s Not Really Yours
If You Can’t Hold It, It’s Not Really Yours
The failure of Silicon Valley Bank and Signature Bank reminds us of a very important truth — if you can’t hold it in your hand, you don’t really own it.
That’s why it’s wise to hold at least some of your wealth in hard assets like gold and silver that are in your direct possession or at least stored in a secure, allocated, segregated, and insured storage facility.
The FDIC insures bank deposits up to $250,000. If you have more than that in a financial institution, you could lose everything above that limit if a bank fails.
Depositors at SVB and Signature Bank lucked out. The government has made provisions to cover uninsured deposits. But there’s no guarantee that will happen when the next bank goes under.
And even if you don’t have more than $250,000 in the bank, you could easily find yourself locked out of your account. Just last week, a computer glitch caused money in some Wells Fargo accounts to disappear.
There are also more nefarious reasons you could lose access to funds. The Nigerian central bank recently limited bank withdrawals in order to incentivize people to use its new central bank digital currency. In 2017, India faced cash shortages when the government declared that 1,000 and 500 rupee notes would no longer be valid with just a four-hour notice. And during its crisis, the Greek government shuttered banks and seized some bank deposits.
Most people assume “that can’t happen here” in the US. But as we saw over last week, the US banking system is vulnerable to collapse.
…click on the above link to read the rest…
War on Cash: India Rolling Out Retail Pilot Program for Digital Rupee
War on Cash: India Rolling Out Retail Pilot Program for Digital Rupee
We recently reported that the Federal Reserve plans to launch a 12-week pilot program in partnership with several large commercial banks to test the feasibility of a central bank digital currency (CBDC). The US isn’t alone in experimenting with digital currency. India is working on developing a digital rupee and recently announced the second phase of testing.
After successfully running a pilot program to test its digital currency at the wholesale level, the Reserve Bank of India (RBI) has announced it will test the digital rupee in a retail setting.
According to the RBI, the central bank digital currency “is a legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different.”
Digital currencies are similar to bitcoin and other cryptocurrencies. They exist as virtual banknotes or coins held in a digital wallet on your computer or smartphone. The difference between a government digital currency and bitcoin is the value of the digital currency is backed and controlled by the state, just like traditional fiat currency.
As the RBI put it, “Unlike cryptocurrencies, a CBDC isn’t a commodity or claims on commodities or digital assets. Cryptocurrencies have no issuer. They are not money (certainly not currency) as the word has come to be understood historically.”
According to a report in the Economic Times of India, the National Payments Corporation of India will host the platform for the digital rupee payment system during the testing phase. The Reserve Bank of India wants each commercial bank in the pilot to test retail use of the digital rupee with 10,000 to 50,000 users.
…click on the above link to read the rest…
Peter Schiff: Very Scary Admissions from the Fed
Peter Schiff: Very Scary Admissions from the Fed
Last week, the Federal Reserve delivered a 75-basis point rate hike, but Fed Chair Jerome Powell failed to deliver the more doveish rhetoric that many expected. The messaging did not indicate much softening in the stance on the future trajectory of rate hikes, despite an apparent “soft pivot” the week before.
In his podcast, Peter broke down Powell’s messaging and pointed out a number of very scary admissions that came out of the Fed meeting.
Peter said the Fed did do a soft pivot but was able to back off when the bond market stabilized.
I believe the Fed was forced into making that pivot because it stood on the precipice of a bond market crash, which was in the process of happening. And I think the only way the Fed was able to stop that slow-motion crash from playing out accelerating was by throwing a bone to the markets and indicating through the Wall Street Journal that there was going to be some type of statement that was going to go along with the rate hike that would indicate that maybe there was going to be a pause in the pace, a slowdown in the pace, that the Fed was going to take a step back and reflect and assess, and maybe acknowledge the progress that had been made without indicating complete victory, but at least acknowledging that victory was at least in sight and that the Fed could take a more cautious approach going forward. … Something to that effect was expected.”
However, the Fed didn’t deliver anything close to that.
Initially, the markets thought the Fed was going more doveish. The statement released by the FOMC left some wiggle room for a slowdown in hiking or even a pause with language about monetary policy “lags” and “cumulative” effects.
…click on the above link to read the rest…
Peter Schiff: A Massive Fiscal Time Bomb
Peter Schiff: A Massive Fiscal Time Bomb
Federal Reserve Chairman Jerome Powell knew fighting inflation would cause big problems in a bubble economy loaded up with debt. He put it off as long as he could, calling inflation “transitory.” But once inflation became a huge problem, the central bank had no choice but to get into the fight and start tightening monetary policy. The problem is, the Fed’s plan won’t work. And one reason it won’t work is the massive national debt.
Peter Schiff talked about it in this clip from his podcast.
The federal government already spends about $500 billion per year on interest payments on the $31 trillion debt. Peter noted a CNBC discussion where they speculated that in 10 years, the US government could be paying $1 trillion per year on interest alone.
Ten years? We could be paying $1 trillion in interest in one year! How are these guys getting 10 years?”
Four percent of the $31 trillion debt is $1.25 trillion. The average maturity on the debt is under five years. A third of the debt will mature in the next year. Meanwhile, the debt continues to skyrocket. The national debt grew by $1 trillion in just eight months even with pandemic spending programs winding down.
Five years from now, the national debt will be over $40 trillion, and we’re going to have to pay an interest rate probably more than 5% on that. So, a $1 trillion tab for interest on the national debt isn’t a decade away. It’s a year, maybe two away. That’s how close this crisis is.”
That raises an important question: where is the government going to get the money to pay for this? It will cost something like 30% of all tax revenue just to pay the interest on the debt. Huge interest payments will mean even more borrowing.
This is a massive fiscal time bomb.”
…click on the above link to read the rest of the article…
Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government
Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government
It appears somebody at the Federal Reserve has figured out that the central bank can’t tame inflation, so it’s setting up a scapegoat – Uncle Sam.
A paper co-authored by Leonardo Melosi of the Federal Reserve Bank of Chicago and John Hopkins University economist Francesco Bianchi and published by the Kansas City Federal Reserve argues that central bank monetary policy alone can’t control inflation.
The paper’s abstract asserts, “This increase in inflation could not have been averted by simply tightening monetary policy.”
In a nutshell, Melosi and Bianchi argue that the Fed can’t control inflation alone. US government fiscal policy contributes to inflationary pressure and makes it impossible for the Fed to do its job.
Trend inflation is fully controlled by the monetary authority only when public debt can be successfully stabilized by credible future fiscal plans. When the fiscal authority is not perceived as fully responsible for covering the existing fiscal imbalances, the private sector expects that inflation will rise to ensure sustainability of national debt. As a result, a large fiscal imbalance combined with a weakening fiscal credibility may lead trend inflation to drift away from the long-run target chosen by the monetary authority.”
There are a couple of startling admissions in this single paragraph.
First, the authors acknowledge that the federal government uses inflation as a tool to handle its debt. In other words, it acknowledges that we’re all paying an inflation tax.
Peter Schiff talked about this inflation tax in an interview on Rob Schmitt Tonight.
Inflation is a tax. It’s the way government finances deficit spending. Government spends money. It doesn’t collect enough taxes, so it has to run deficits. The Federal Reserve monetizes those deficits – prints money. They call it quantitative easing, but that’s inflation…
…click on the above link to read the rest of the article…
