It is all but certain that negative rates will be here in the United States in short order (within a year). Despite the many voices of protest from several members of the Federal Reserve regarding the adoption of negative rates – it’s sad to say, but we don’t trust them as far as we can throw them. This is the same group that claimed only 1 1/2 years ago that the Fed’s balance sheet was on autopilot with respect to shrinking their balance sheet. Well fast forward to today and we have had several interest rate cuts, two of which transpired during emergency meetings that have taken us back to the zero bound. And what of the balance sheet? Oh yes, over the last two months the Fed has added over $2T in assets to its books. So excuse us if we do not believe the rhetoric from the Fed. After all, it’s no big secret that the Fed follows the market, especially during these types of events. Now of course, the Fed also tries to lead the markets with their rhetoric, which they claim is an effective tool in the kit – but the question remains, how effective and for how long? If the markets are always expecting the Fed to do more and the Fed can’t live up to the hype and the promises, then how will markets behave? Are we setting ourselves up for one of the biggest “buy the rumor and sell the fact” events?
The reason for today’s topic is because Jay Powell, Chairman of the Federal Reserve gave an interview this morning and so we thought it prudent to cover his remarks in greater detail. Some of the key takeaways were the following remarks from the Chairman: there is no bubble to pop, the usual suspects are not to blame, it is all the fault of COVID19, above and beyond what the Fed can do by law as outlined in their charter, will only take place with the direct approval of the Treasury Secretary (thus potentially shifting the blame to the government and not the Fed), once the crisis is over all of their tools will be put away, highlighted the important difference between a liquidity crisis and a solvency crisis, and how the Fed can only do so much and mainly on the liquidity side of that ledger, and lastly, how the fiscal side of the equation will likely have to carry more weight – thus calling out Congress to do more, but stopping short of giving them any recommendations. So there you have it – delusional comments about no bubbles and no issues prior to COVID19 – an unlimited amount of money to be printed, and seemingly an unlimited amount of federal spending is likely required and is perfectly fine with those soaring deficits and debts. We did tell you this is now a banana republic – enjoy the rum! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #EndTheFed #Bailouts #Debt #USA #Recession #Depression #Jobs #Gold
A very fitting title for today’s podcast as we digest further the national debt, national deficit, State and local debt, and household debt. With over $25T and growing, will this national debt ever be paid back and if so, how? Will it take the form of inflation, stagflation, hyperinflation, default, and/or some combination thereof? These are serious questions that have serious consequences. The American people need to wake up to the fact that the US economy is a Ponzi scheme – especially at the government level. Broken promises, whether that being Social Security, government and/or corporate pensions, Medicare, etc… These are huge price tags and it places an ever-increasing burden on younger and future generations and taxpayers – making this by default a Ponzi scheme. Why? Because the scheme relies upon new entrants/taxpayers/investors to come into the system to support earlier contributors. The Kapital News is of the mindset that the government in conjunction with the Federal Reserve are well aware of this and thus explains their insane response to printing and spending. These institutions know the fragility of the system. They know it is a Ponzi scheme and thus they are implementing such policies to the tune of several trillion dollars because they have to keep this fraudulent system alive. Otherwise the masses will awaken to such fraud and demand real change. So that old American dream of getting an education, a solid job with a pension and/or retirement plan, buying a house, starting a family, and hoping your kids have it better than you did – well, that dream is getting awfully expensive and is looking more and more like a nightmare. And the price tag just keeps going up!
The global protests that we witnessed well before COVID19, are starting back up and we imagine they’ll be even more intense. Be on the lookout for civil war(s), government overthrows, and war(s) amongst nations. We stated for months that these protests were not transitory, but rather history in the making. And we ain’t seen nothing yet! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Debt #Bailouts #Recession #USA #Depression #Protests #Oil #Gold
Well we now have them both! As the Trump Administration readies yet another bailout package, Phase 4, they’re also openly discussing bailing out energy corporations. However, with respect to “assisting” the energy sector, a potential condition of extending any type of “capital” will come with strings attached – the government will take an equity stake. This is completely un-American and should not be tolerated nor considered. The government does not have the authority to lend money – it does have the ability to borrow money. It also does not have the authority to take equity stakes in companies. Well, US Constitution be damned as the government is preparing for exactly that. Furthermore, the US government is broke! We have a $24.5T national debt with a deficit that is likely to be north of $4T for FY2020. And the only way this can be financed is through the printing press. This is now a banana republic. Can you say hyperinflation?
On the negative rates side – we already have them and have had them for some time now on a real basis. However, when we consider the Fed’s own research in noting how balance sheet expansion and contraction also serves as a de facto rate cut or hike, respectively, now begs the question – do we now have nominal negative rates? Given their research and their past decisions, The Kapital News is of the mindset that the US now has de facto negative nominal interest rates. Look no further than the Fed’s balance sheet that now stands near $6.6T and counting. With over $2T added just over the last month. We would think that this would amount to a sizable rate cut. Understand that rates are already back to the zero bound at 0.00 – 0.25 bps. With this recent and continuing balance sheet expansion, it can be reasonably assumed that we are well into negative territory. This is detrimental to financial systems – look no further than to Japan and Europe for a case study.
The United States has failed and the only thing that can save it is a return to free-market capitalism, our Constitutional Republic, and liberty-loving men and women across this country that demand their country back! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Bailouts #Recession #Debt #Deficits #USA #Congress #Depression #Gold #Oil #EndTheFed #Revolution
This week is surely setting up to be one for the front pages. There will undoubtedly be further remarks and tweets from President Trump regarding an interim “Phase 1” trade deal with China. Short on specifics and reminiscent of this summer’s trade truce, we here at The Kapital News are highly skeptical of any deal of worth. Even if there is substance, this would simply take us back to where we were prior to the trade war in regards to the amount of agricultural products being purchased by the Chinese. Nevertheless, The White House will continue its jawboning and market manipulation tactics. Other market rallying headlines were the rumors of a Brexit deal in the works only to have conflicting stories come out this weekend claiming that there is still much work to do. The Queen’s Speech is also set to take place on Monday and if Parliament shoots down the vote on the Queen’s Speech then there is going to be much pressure on PM Boris Johnson to resign. This would only serve to throw another curveball in the Brexit saga. The Federal Reserve has started another round of QE. Welcome to QE4, but don’t you dare call it that – at least the Fed doesn’t want you calling it QE. Why? Because the Fed also claims that the US economy is strong and is in a good place, so then why would they need to engage in an emergency monetary policy? A rose by any other name is still as beautiful. #EndTheFed The Fed is also expanding their involvement in the overnight repo market. Recall it was initially just a one-off, then extended to 10 October, then extended to 4 November, now it’s going to last until at least January of 2020 (and it’s not likely going to be enough). There is also continuing escalation between Syria and the Turks. It is likely that if the Turkish military continues deeper into Syria that Syria will declare war against Turkey. Also, since President Trump has ordered the removal of US forces from Syria, the Kurds have now formed an alliance with the Syrian government in order to fight-off the Turkish military. This story has drawn the ire of Republicans and Democrats alike and are pressuring the President to hit Turkey with harsh sanctions to crumble their economy. It is unknown at this time as to what sanctions if any the White House will impose. President Trump is calling an end to these endless wars by withdrawing US forces from Syria, only to deploy thousands more to Saudi Arabia and surrounding countries to fend off Iranian aggression. Does this make any sense? Stay diversified, stay vigilant, and stay with The Kapital News. #Brexit #War #Peace #Economy #TradeWar #Politics #Impeachment #Whistleblower #Justice #Truth #Recession #Stocks
Awash with Purchasing Manager Index (PMI), figures coming out over the last couple of days continues to highlight what we have been describing for months – a global economic slowdown. Much of the focus is on Germany, the US, and Japan, but also to the broader Eurozone area, Australia, and other periphery nations. All-in-all the net position is in the negative, either in contraction, a reading below 50, or a continuation of slower expansion, readings above 50. Perhaps the biggest declines were experienced in Germany, which is getting hit from all sides. Whether it’s the ongoing trade dispute between the US and China, the uncertainties around Brexit, the slowdown in China, the weakness of Europe’s financial system, or other ripple effects the world over, one thing is certain – it’s not good for Germany and it’s likely they are in or are nearing a recession. This will not bode well for the rest of Europe or the world, especially given the size of the German economy. Furthermore, there have been more aggressive calls by central bankers “suggesting” that governments also step up to the plate to “stimulate” their economies via fiscal policies, since monetary policy can only do so much. Well it’s going to be quite the move for the Germans to decide to take on more debt at the exact same time that their economy is slowing down. The Germans are quite fiscally prudent and not likely to turn on the debt spigot anytime soon. Further developments out of Europe over the weekend witnessed the failure of Thomas Cook, a UK hospitality and travel agency service, as they filed for bankruptcy. This company has been around since the 1850s and had to file for bankruptcy protection due to their outstanding debt load. Are they a canary in the coal mine? Their bankruptcy leaves thousands of people on holiday/vacation stranded, however, efforts are underway to ensure that proper arrangements are made. This also places up to 9,000 UK jobs in the crosshairs and will only add to the economic and political uncertainties that exist regarding Brexit. Stay diversified, stay vigilant, and stay with The Kapital News. #Recession #Economy #Debt #Politics #EndTheFed #TradeWar #Peace #WakeUpAmerica
Yesterday was the US Constitution day and today is Fed day. And the Fed did not disappoint. The markets were expecting a rate cut of 25 basis points and that’s exactly what the Fed did. There has been some chatter about the overnight lending market and how the Fed has had to intervene and inject tens of billions of dollars to ensure that markets were properly funded. This is basically QE, but by a different mechanism. QE was injecting around $50 billion a month into the system – this recent action was at least $54 billion on an overnight basis! When asked during his press conference about this, Jay Powell, the Chairman of the Fed, stated that it was due to corporate taxes being due as well as US Treasuries maturing. He also noted, perhaps ironically, or ominously, that this is “contained.” Former Fed Chairman, Ben Bernanke, said that sub-prime was “contained,” and we all know what happened next. The Kapital News continues to believe that the Fed will continue with its easing cycle. This does not mean that every meeting will result in a rate cut, but this will be the direction in both subsequent action and communication. The Fed was not the only central bank to cut rates today. The lineup includes: Hong Kong, Jordan, Brazil, Saudi Arabia, and UAE to name a few. In addition, the BOJ held steady, but signaled that more easing is likely in October. Further, we have higher unemployment in Australia, which is likely to lead to lower rates down-under as well. The Reserve Bank of Australia has made it explicitly clear that a lot of their rate decision making process will be predicated on unemployment – and we also know from recent meeting minutes that rates will be lower for longer. So, what we have here is a race to the bottom. And a thinly-veiled acknowledgement that lower interest rates, zero interest rates, negative interest rates, and QE are not working. Especially not to the extent that they “worked” a decade ago when these were “new” and “experimental” and “temporary” policies. Now they appear to be etched in stone and signed in blood with no end in sight. This is diminishing marginal returns at its best and this is a flawed and fraudulent monetary policy at its worse. There is much more to come and this simply pushes people, corporations, governments, and even central bankers, further out onto the risk curve. Stay diversified, stay vigilant, and stay with The Kapital News. #EndTheFed #Recession #Economy #Invest #InterestRates #Politics #Stocks #Peace #WakeUpAmerica
While the oil markets continued their ascent in today’s trading session on the back of the attacks in Saudi Arabia – we now have to ask, is the shock over? While many nations are pointing the finger at Iran, despite the fact that the Yemeni Houthi’s have claimed responsibility, President Trump appears to be pulling back from the hostile language. In a tweet yesterday, the President said the US was “locked and loaded” waiting on confirmation that it was Iran. Today, President Trump claims that this is not a big deal and that there are plenty of avenues to make up for the loss in oil. The President needs to be commended for not escalating this further – at least in rhetoric. This is oil and metal that was affected at the processing facility – not American lives. So, will prices stabilize or will this escalate further? It’s anybody’s guess, but let’s pray for de-escalation and peace. Starting tomorrow, the Federal Reserve will begin their two-day FOMC meeting where they are likely going to conclude that further interest rate cuts are warranted. With this recent oil geopolitical risk, the Fed now has cover to go in other direction – to cut or not to cut? Higher oil may translate into higher inflation – don’t cut and perhaps exude their independence because the President and Wall Street want cuts. Or, cut by 25-50bps because this is a geopolitical risk that may escalate and would cause a deepening of the current global economic slowdown – thus cuts are warranted to fend off the downward pressures. This too is anyone’s guess, but the Fed is going to do what the Fed wants to do either way. We still anticipate a cut of 25 basis points. For certain, all eyes will be on the Fed. Stay diversified, stay vigilant, and stay with The Kapital News. #EndTheFed #Recession #Oil #Politics #Invest #Peace #WakeUpAmerica
It’s breaking news by tweet on a near daily basis. Well today and this evening we came across two newsworthy stories. First, President Trump is now calling for the Federal Reserve to cut interest rates to 0 or perhaps even lower. This of course would mean bringing negative interest rates to the US. The very monetary policy that is destroying the financial system in Europe and Japan is now being called for by the commander-in-chief of the US. This is in addition to repeated calls for not only lower rates, but also further rounds of QE. These are emergency monetary measures that were implemented during the depths of the Great Recession – why then would the President call for such measures? We have a multi-decade low unemployment figure at 3.7%, inflation nearing the Fed’s target of 2%, and the major stock market indexes nearing all-time highs. In addition, the President repeatedly claims that this is the greatest economy in US history – so why call for emergency monetary measures, Mr. President? The second round of tweets sent out this evening was in regards to the US-China trade war. The increase from 25% to 30% that was set to go into effect on 1 October will now be delayed, in the name of “good will,” until 15 October. Just the other day, the Chinese added a handful of US products to their tariff exemption list and so this is the US reciprocating to some degree. The 1 October date is also the 70th anniversary of China. Stay diversified, stay vigilant, and stay with The Kapital News. #Recession #NegativeRates #USChinaTrade #TradeWar #Economics #EndTheFed #WakeUpAmerica #Politics #2020 #Peace #FireNavarro
The G-20 meeting in Japan is underway and all eyes and ears are awaiting the conclusion of the trade talks between Presidents Trump and Xi. It has been reported today that President Xi will present his case for what the USA needs to do to reach a trade truce at this juncture. These bullet points highlight the divide between the two nations and it will be near next to impossible for President Trump to acquiesce to these demands. They are centered around removing the ban that the US has placed on Chinese tech firm, Huawei. This company has been and is considered a national security threat to the US – so how can Trump simply put this aside? Next, China wants all punitive tariffs removed – again, same question as above considering how “effective” President Trump claims they have been for the US. It must also be considered that a major sticking point from the US side is that the Trump administration wants an enforceable deal – wouldn’t this imply that tariffs will remain in tact to some degree until the Chinese make good on the agreement? Lastly, President Xi is expected to tell President Trump that the US needs to remove the demand that China needs/has to buy more US goods and services. This will be another challenge to President Trump as he has promised farmers and ranchers a great deal with China, thus increasing the sales of their crops and livestock. So the question remains – is the trade war ending this weekend, or just getting started?
Ep. 18B - Central Bank Mania + Recession on the Rise?
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Global central banks are out of control and some continue to purchase equities and ETFs outright. If things are so good, why are these professional money-printers pumping up stocks? More data points to the downside – recession on the horizon?
