Fed Will Continue Tightening Until Everything Breaks


Zero Hedge: Despite the fact that the Fed keeps raising rates as it tightens the noose around the supposed economic “recovery”, there are still many people out there who refuse to accept that the central bank would deliberately implode the fiscal bubble that it has spent the last ten years inflating.

Even today, I still see arguments proclaiming that the Fed will be forced to pull back if stocks fall beyond 15% to 20%. I also see claims that Fed officials like Jerome Powell had “better start looking for another job” because Donald Trump won’t be happy with Fed policies that could cause a crash. This is pure delusion from people who do not understand how the Fed operates.

First and foremost, let’s be clear, the Federal Reserve is an autonomous entity that does not answer to government oversight. more …

Opinion: There is an old Wall Street adage, ‘don’t fight the Fed’ meaning if you position your investments in direct opposition to what the Fed is trying to do with interest rates, you will lose.

So why then do investors constantly try to out-guess the Fed? Because the Federal Reserve Bank with all its Harvard, Princeton and Yale PhD’s have not forecast the last 10 recessions, including 2008 when Ben Bernanke assured the nation on January 17, 2008:

The U.S. economy remains extraordinarily resilient,” the U.S. central bank chief said in answering questions after testifying before the House of Representatives Budget Committee. Bernanke added that growth will be worse this year. “We currently see the economy as continuing to grow, but growing at a relatively slow pace”.

So the obvious question is why? Why is the Fed determined to raise interest rates despite clear warning signs from the global market that growth will slow in the coming year.

The reason is astounding. The only way the Fed can stimulate the economy out of a future recession is to lower interest rates. Since Bernanke and Yellen held interest rates historically low (zero to 1/4%) for over a decade, the Fed needs to raise rates now to have tools on hand for a future slowdown.

Therefore the Fed is willing to risk causing a recession so that they can lower rates when the recession they caused comes. A self-fulfilling prophecy.

Yesterday’s headline confirms the insanity:

“Powell credits Fed policy for the US economy being ‘in a good place”

Expect a recession by late 2019 or early 2020.