Fed risks repeating Lehman blunder as US recession storm gathers

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The Telegraph: “The risk of a US recession next year is rising fast. The Federal Reserve has no margin for error.

Liquidity is suddenly drying up. Early warning indicators from US ‘flow of funds’ data point to an incipient squeeze, the long-feared capitulation after five successive quarters of declining corporate profits.”

Opinion: I can’t help but remember when people complained that the wait at the US Post Office was too long and the government’s solution was to eliminate clocks.

In the same way, when the Obama government decided that GDP (Gross Domestic Product) continued to show weak economic growth they decided to change how GDP is calculated.

That is exactly what happened in 2013 when the government added a bunch of dubious calculations to GDP to show healthy, but phony, economic growth.

Wham-o, things didn’t look as gloomy and President Obama crowed on endlessly about how his plan was working.

But even with the sleight of hand, the US economy is now growing at an anemic 1%, which is 2 percentage points below what is needed to provide jobs for new workers coming into the labor force.

The Federal Reserve’s main tool for stimulating the economy is to lower short-term interest rates. But since rates have been at zero or near zero for a decade that option has been off the table.

That is why the Fed wants to raise rates so badly. The problem is that when they raised by 1/4 point in December 2015 the markets went into a nose dive.

The Fed has experimented with dubious schemes like QE and Twist which are nothing more than creating counterfeit money, handing it to the big banks and letting them drive equity, bond, and real estate prices higher.

Once again, we can look to the word of God for guidance. In Genesis 41:28-30 Joseph interpreted the dreams of Pharaoh:

“ …. God has shown to Pharaoh what He is about to do. There will come seven years of great plenty throughout all the land of Egypt, but after them there will arise seven years of famine, and all the plenty will be forgotten in the land of Egypt. “

The last recession ended in 2009.