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Image | Off The Cuff: The Ghosts Of 2008 Have Returned To Haunt Us
Off The Cuff: The Ghosts Of 2008 Have Returned To Haunt Us
 PREVIEW
by Chris Martenson

In this week's Off The Cuff podcast, Chris and Nomi Prins discuss:

  • The Ghosts Of 2008
    • Are suddenly returning en masse to haunt us
  • Growing Central Bank Insecurity
    • Beginning to realize that they've cornered themselves
  • The War On Cash
    • Central planners continue to tighten restrictions
  • No Solutions For The Status Quo
    • A massive reset is the best we can hope for

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.

Off The Cuff: The Ghosts Of 2008 Have Returned To Haunt Us
 PREVIEW by Chris Martenson

In this week's Off The Cuff podcast, Chris and Nomi Prins discuss:

  • The Ghosts Of 2008
    • Are suddenly returning en masse to haunt us
  • Growing Central Bank Insecurity
    • Beginning to realize that they've cornered themselves
  • The War On Cash
    • Central planners continue to tighten restrictions
  • No Solutions For The Status Quo
    • A massive reset is the best we can hope for

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.

Image | The Global Credit Market Is Now A Lit Powderkeg
The Global Credit Market Is Now A Lit Powderkeg
by Brian Pretti

Although the Street seems to agonize over equity valuations and recent price volatility, as I see it the real issue is the global bond market. Why?

Globally, the value of outstanding credit instruments is three times the total value of publicly traded equities. Just which do you imagine is more important to institutional investors?
The Global Credit Market Is Now A Lit Powderkeg
 by Brian Pretti

Although the Street seems to agonize over equity valuations and recent price volatility, as I see it the real issue is the global bond market. Why?

Globally, the value of outstanding credit instruments is three times the total value of publicly traded equities. Just which do you imagine is more important to institutional investors?
Image | What Awaits Us In The Future Of Higher Interest Rates
What Awaits Us In The Future Of Higher Interest Rates
 PREVIEW
by Brian Pretti

Executive Summary

  • Expect a bond market bloodbath as rates rise
  • Municipal, corporate and sovereign defaults will soon follow
  • Liquidity suffers as necessary goods prices rise, but securities prices fall
  • The new, nuclear risk of a derivatives market collapse

If you have not yet read Part 1: The Global Credit Market Is Now A Lit Powderkeg available free to all readers, please click here to read it first.

You may remember that what caused then Fed Chairman Paul Volcker to drive interest rates up in the late 1970’s was embedded inflationary expectations on the part of investors and the public at large. Volcker needed to break that inflationary mindset. Once inflationary expectations take hold in any system, they are very hard to reverse.

A huge advantage for Central Bankers being able to “print money” in very large magnitude in the current cycle has been that inflationary expectations have remained subdued. In fact, consumer prices as measured by government statistics (CPI) have been very low in recent years.

When Central Bankers started to print money, many were worried this currency debasement would lead to rampant inflation. Again, that has not happened for a very specific reason. For the heightened levels of inflation to sustainably take hold, wage inflation must be present. I've studied historical inflationary cycles and have not been surprised at outcomes in the current cycle in the least, as in the current cycle, continued labor market pressures have resulted in the lowest wage growth of any cycle in recent memory. But is this about to change at the margin?

The chart below shows us…

What Awaits Us In The Future Of Higher Interest Rates
 PREVIEW by Brian Pretti

Executive Summary

  • Expect a bond market bloodbath as rates rise
  • Municipal, corporate and sovereign defaults will soon follow
  • Liquidity suffers as necessary goods prices rise, but securities prices fall
  • The new, nuclear risk of a derivatives market collapse

If you have not yet read Part 1: The Global Credit Market Is Now A Lit Powderkeg available free to all readers, please click here to read it first.

You may remember that what caused then Fed Chairman Paul Volcker to drive interest rates up in the late 1970’s was embedded inflationary expectations on the part of investors and the public at large. Volcker needed to break that inflationary mindset. Once inflationary expectations take hold in any system, they are very hard to reverse.

A huge advantage for Central Bankers being able to “print money” in very large magnitude in the current cycle has been that inflationary expectations have remained subdued. In fact, consumer prices as measured by government statistics (CPI) have been very low in recent years.

When Central Bankers started to print money, many were worried this currency debasement would lead to rampant inflation. Again, that has not happened for a very specific reason. For the heightened levels of inflation to sustainably take hold, wage inflation must be present. I've studied historical inflationary cycles and have not been surprised at outcomes in the current cycle in the least, as in the current cycle, continued labor market pressures have resulted in the lowest wage growth of any cycle in recent memory. But is this about to change at the margin?

The chart below shows us…

Image | Credit Market Warning
Credit Market Warning
by Chris Martenson

There are large signs of stress now present in the credit markets. You might not know it from today's multi-generationally low interest rates, but other key measures such as liquidity and volatility are flashing worrying signs.
Credit Market Warning
 by Chris Martenson

There are large signs of stress now present in the credit markets. You might not know it from today's multi-generationally low interest rates, but other key measures such as liquidity and volatility are flashing worrying signs.
Image | As Goes The Credit Market, So Goes The World
As Goes The Credit Market, So Goes The World
by Brian Pretti

During the prior economic cycle of 2003-2007, one question I asked again and again was: Is the US running on a business cycle or a credit cycle?

That question was prompted by a series of data I have tracked for decades; data that tells a very important story about the character of the US economy. Specifically, that data series is the relationship of total US Credit Market Debt relative to US GDP.
As Goes The Credit Market, So Goes The World
 by Brian Pretti

During the prior economic cycle of 2003-2007, one question I asked again and again was: Is the US running on a business cycle or a credit cycle?

That question was prompted by a series of data I have tracked for decades; data that tells a very important story about the character of the US economy. Specifically, that data series is the relationship of total US Credit Market Debt relative to US GDP.
Image | Steen Jakobsen: Get Ready For The Biggest Margin Call In History
Steen Jakobsen: Get Ready For The Biggest Margin Call In History
by Chris Martenson

Economist Steen Jakobsen, Chief Investment Officer of Saxo Bank, believes 2015 will be another "lost year" for the economy. And he predicts the Federal Reserve will indeed start to raise rates later this year, surprising the market and taking the wind of out asset prices.

He recommends building cash and waiting to see how the coming storm — which he calls the "greatest margin call in history" — plays out.
Steen Jakobsen: Get Ready For The Biggest Margin Call In History
 by Chris Martenson

Economist Steen Jakobsen, Chief Investment Officer of Saxo Bank, believes 2015 will be another "lost year" for the economy. And he predicts the Federal Reserve will indeed start to raise rates later this year, surprising the market and taking the wind of out asset prices.

He recommends building cash and waiting to see how the coming storm — which he calls the "greatest margin call in history" — plays out.
Image | The Future Of Interest Rates
The Future Of Interest Rates
 PREVIEW
by Brian Pretti

Executive Summary

  • Why the Fed may no be able to raise rates from here
  • Will the Fed go to negative interest rates instead?
  • Why the next recession will limit the Fed's options greatly
  • Why it may well be too late for the Fed at this point to act

If you have not yet read Part 1: Has The Fed Already Lost? available free to all readers, please click here to read it first.

What If The Fed Isn't Actually Able To Raise Rates From Here?

Let’s start with a look at the history of the Federal Funds rate (the shortest maturity interest rate the Fed directly controls).  Alongside the historical rhythm of the Funds rate are official US recession periods in the shaded blue bars.   

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Chart Source:  St. Louis Federal Reserve

Of course there is one striking and completely consistent historical commonality in the behavior of the Funds rate over time.  The Fed has lowered the Federal Funds rate in every recession since 1954 at least.  There are no exceptions.  You can see the punchline coming, can’t you?  Just how does one lower interest rates from zero to stimulate a potential slowdown in the economy?

Of course in the banking system…

The Future Of Interest Rates
 PREVIEW by Brian Pretti

Executive Summary

  • Why the Fed may no be able to raise rates from here
  • Will the Fed go to negative interest rates instead?
  • Why the next recession will limit the Fed's options greatly
  • Why it may well be too late for the Fed at this point to act

If you have not yet read Part 1: Has The Fed Already Lost? available free to all readers, please click here to read it first.

What If The Fed Isn't Actually Able To Raise Rates From Here?

Let’s start with a look at the history of the Federal Funds rate (the shortest maturity interest rate the Fed directly controls).  Alongside the historical rhythm of the Funds rate are official US recession periods in the shaded blue bars.   

src=

Chart Source:  St. Louis Federal Reserve

Of course there is one striking and completely consistent historical commonality in the behavior of the Funds rate over time.  The Fed has lowered the Federal Funds rate in every recession since 1954 at least.  There are no exceptions.  You can see the punchline coming, can’t you?  Just how does one lower interest rates from zero to stimulate a potential slowdown in the economy?

Of course in the banking system…

Image | Central Planners Are In A State of Panic
Central Planners Are In A State of Panic
by Chris Martenson

Everything the central planners have tried has failed to bring widespread prosperity and has instead concentrated it dangerously at the top.   Whether by coincidence or conspiracy, every possible escape hatch for 99.5% of the people has been welded shut.  We are all captives in a dysfunctional system of money, run by a few for the few, and it is headed for complete disaster.

To understand why, in all its terrible and fascinating glory, we need look no further than Japan.
Central Planners Are In A State of Panic
 by Chris Martenson

Everything the central planners have tried has failed to bring widespread prosperity and has instead concentrated it dangerously at the top.   Whether by coincidence or conspiracy, every possible escape hatch for 99.5% of the people has been welded shut.  We are all captives in a dysfunctional system of money, run by a few for the few, and it is headed for complete disaster.

To understand why, in all its terrible and fascinating glory, we need look no further than Japan.
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