WHEN WILL YOU PEOPLE FINALLY REALIZE THAT THIS IS WORSE THAN EVER BEFORE
>Banks may be better off today than they were leading up to the Great Recession but the government and Fed's balance sheets have become insolvent in the wake of their inane effort to borrow and print the economy back to health. As a result, the federal government's debt has now soared to nearly 600 percent of total revenue. And the Fed has spent the last eight years leveraging up its balance sheet 77-to-1 in its goal to peg short-term interest rates at zero.
>Therefore, this inevitable, and by all accounts brutal upcoming recession, will coincide with two unprecedented and extremely dangerous conditions that should make the next downturn worse than 2008.
>First, the Fed will not be able to lower interest rates and provide any debt-service relief for the economy. In the wake of the Great Recession, former Fed Chair Ben Bernanke took the overnight interbank lending rate down to zero percent from 5.25 percent and printed $3.7 trillion. The Fed bought longer-term debt in order to push mortgages and nearly every other form of debt to record lows.
>The best the Fed can do now is to take away its 0.25 percent rate hike made in December.
>Second, the federal government increased the amount of publicly-traded debt by $8.5 trillion (an increase of 170 percent), and ran $1.5 trillion deficits to try to boost consumption through transfer payments. Another such ramp up in deficits and debt, which are a normal function of recessions after revenue collapses, would cause an interest-rate spike that would turn this next recession into a devastating depression.
>It is my belief that, in order to avoid the surging cost of debt-service payments on both the public and private-sector level, the Fed will feel compelled to launch a massive and unlimited round of bond purchases. However, not only are interest rates already at historic lows, but faith in the ability of central banks to provide sustainable GDP growth will have already been destroyed, given their failed eight-year experiment in QE.
>Therefore, the ability of government to save the markets and the economy this time around will be extremely difficult, if not impossible. Look for chaos in currency, bond and equity markets on an international scale throughout 2016. Indeed, it already has begun.
They can, and will, go to negative interest rates. This will coincide with the banning of cash, and further erosion of our privacy and other rights.
Negative interest rates will save the economy's ass, but at what cost.
No, silly. With cash gone, you have to keep your money in the bank. And every bank will have negative interest for savings.
The negative interest on loans will only apply to banks loading from the Fed. Joe Schmoe will have to pay the bank as usual.
No nancy permabear
The qe moneys being held by banks who we pay slightly hogher than interest to not release the money
They can just release it in a controlled fashion as they increase interest rates and create a balance between interest rates and inflation
The banks arent better off today than they were pre 2008 their derivative exposure is higher and now there are less too big to fail banks that are far larger than there were before. The government has far more debt and is even more bankrupt than pre 2008 and the dollar is weaker than it was then.
Oh yeah, OP, it is sooo awful...I am shaking already...NOT
The DOW is universally regarded as one of the most retarded and irrelevant indexes in the US by any serious investors.
Only braindead mouth breathers look at it and think it says anything at all about the US economy as a whole.
Stay in your fucking containment board.
Not to mention a great deal of the US economy growth the last years have been due to fracking, which is most definately loosing money, and we will see a host of defaults within the next 2 years, with tens or hundreds of billions of loans not being paid back.
Also not sure why the dude is saying it is bad for the banks to be in treasuries and consumer loans. Treasuries are safe as hell and loans to consumers is what banks do. Not like commercial loans are safer.
What would be the effect of such a recession on the dollar's strength relative to the euro?
I keep my savings in both (I live in Europe but also have a small US company) so I would like to optimize my savings for any big rate changes.
>Why do you think that?
Well a number of reasons.
Germany is getting hit hard with autos right now and is basically the China of Europe.
Europe in general had a longer great recession than the US with a much longer recovery period.
Also the Europeans still have big debt issues.