Trump will get his rate cuts by causing a global recession.
Trump on Interest Rates Truth Social Link
This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always “late,” but he could now change his image, and quickly. Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months – A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!
Conversation with Fed Chair Jerome H. Powell
Please consider a Conversation with Fed Chair Jerome H. Powell
Key Quotes
- Higher tariffs will be working their way through our economy and are likely to raise inflation in coming quarters. Near term inflation expectations have moved up.
- We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation. The new administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation.
- Our monetary policy stance is well-positioned to deal with the risks and uncertainties that we face as we gain a better understanding of the policy changes and their likely effects on the economy. It is not our role to comment on those policies.
- We have stressed that it is very difficult to assess the economic effects of higher tariffs until there is greater certainty about the details and the extent of any retaliation from our trading partners.
- While uncertainty remains elevated, it is now becoming clear that tariff increases will be significantly larger than expected. And the same is likely true with economic effects which will include higher inflation and slower growth. The size and duration of these effects remains uncertain.
- While tariffs are highly likely to generate at least a temporary rise in in inflation, it’s also possible that the effects could be more persistent.
- We are well-positioned to wait for greater clarity before considering any adjustments to our policy stance. It is too soon to say what the appropriate stance will be for monetary policy.
In response to a question Powell stated “In this situation, what we face is what I mentioned in my remarks, you actually have risks for higher unemployment and higher inflation. That’s difficult for a central bank because our tools either slow down or speed up the economy over time. Higher unemployment would call for speeding up the economy and higher inflation would call for slowing it down.”
Synopsis of Powell’s Speech and Q&A
Stagflation is a growing possibility. That is why we are in a wait-and-see mode.
Powell does not see that at the moment but he discussed the risks.
The bond market and commodities have reacted as if we have a strong slowdown that outweighs the inflation impacts of tariffs. That has been my general expectation as well.
One reader repeatedly asked where I saw the 10-year treasury yield a year from now. I don’t know anymore that Powell (or anyone else). I don’t know.
I will not be surprised by stagflation nor will I be surprised by a very strong credit deflation collapse with asset prices collapsing.
The risk is more to the latter. The Fed and Congress both played a role in blowing huge bubbles.
Rare Earth Risks
My base case is my opening statement “Trump will get his rate cuts by causing a global recession.“ But it is not at all clear what would happen if China cut off all rare earth access to the world.
I discussed rare earths in China Strikes Back With 34 Percent Tariffs, Stocks Plunge Second Day
China restricts 7 more rare earths, something I have warned about many times.
Related Posts
November 21, 2024: China’s Puts Export Curbs on Minerals US Needs for Weapons and Technology
In a warning shot to the Trump administration, China tightens export controls on some dual-use minerals.
December 3, 2024: China Halts Rare Exports Used by US Technology Companies and the Military
This is China’s advance salvo at Trump tariffs. It comes one day after the Biden administration expanded curbs on the sale of advanced American technology to China.
Today China retaliated by Immediately restricting exports of seven types of rare earths.
China can easily block rare earth exports to the world. If that happens, Trump will panic.
We should not be in this position, but we are.
Finally, please note Five Republican Senators Break Ranks With Trump Over His Tariff Madness
It’s always the omissions that define the DNC arguments. It’s now more than obvious that the half point cut a couple months before the DNC elections without any dot plot evidence was to pump up Harris and the rest of the cabals chances of victory.
Now. the Fed wants all the fools to “wait and see”.
Abolish the Ged.
Watching trillions of fiat inflation being vaporized POOF! makes me SMILE.
Interest rate should be 95% to more accurately reflect the real values and risks.
He won’t need rate cuts, if the Dow falls far enough.
I’d say anything below 30K would make rate cuts completely unnecessary.
I think the stock market was overvalued and unsustainable anyway.. I think we get recession before inflation and the Fed is forced to cut by June.
Again, we are doing the same thing countries do to us on the tariff front.
I think we are overdue for an actual recession. We will get much lower prices than people think because demand will collapse.
Long term Unemployed citizens don’t care if the system has to be remade to have a better life. They had nothing to lose anyway.
Treasury market dysfunction and the role of the central bankhttps://www.brookings.edu/articles/treasury-market-dysfunction-and-the-role-of-the-central-bank/?utm_source=substack&utm_medium=email
Powell should increase interest rates by 10% and then start buying back us gov debt at a lower price. Wouldn’t that be awesome! We could fix our balance sheet in 3 weeks! Maybe 20%??….
Powell is a non-entity.
That would send so much cash into the system that inflation would skyrocket plus make a mortal enemy of every institution that has to hold bonds for collateral like every single financial institution in the world has to.
@MPO45v2 and @PapaDave – I appreciate your willingness to share what you’re doing, though I disagree with you often.
Personally I prefer to wait for the shorts to start covering and for the market to show some actual strength before joining in.
I’d half-expected the market to rebound 2% or so into the close, on end-of-week short-covering, but that didn’t happen. For me, that’s a grim sign.
Also, several sectors that had been holding up, suddenly got weak today: consumer staples and utilities, gold, JNK… even TLT has a weak candle.
Are you also getting the sense that some market participants are starting to “sell whatever” because they need cash?
“Are you also getting the sense that some market participants are starting to “sell whatever” because they need cash?”
Trump’s policies will cause massive layoffs. Most people know this and many are already likely experiencing it today or will be soon. Those that get laid off will need cash to pay their bills and most will liquidate their investments/401ks to do so.
Additionally, no business can forecast anything with this level of uncertainty so the best thing to do is just wait and sit on cash or raise cash until the dust settles.
As for my trades/investments they typically all hedge parts of my portfolio in one way or another. Bonds protect against stock losses, real estate protects against bond losses, stocks against real estate/bond, foreign currencies against USD, etc.
I’ve been loading up on municipal bonds for a while now too to hedge against taxes that will certainly rise at some point. We may end up with another lost decade in all asset classes though so hedge wisely.
So to what extent, if any, do you leverage?
I also trade options which by their nature are leveraged. Buying puts or selling cash secured puts to get stocks cheaper. I also sell calls and then buy them back. Collar strategies are the way to go now but you only get a fixed return for you time window.
I may take a gamble and buy deep ITM call LEAPS on IWM or NVDA as far out as I can go but I’m juggling many buckets of money now and we still have more downside to go. So many money trains so little time.
there was a lot of advice out there the last year that short term Treasury was the place to be with some international. also, Berkshire was making news for not finding investments.
that be written, It’s obvious now we can’t trust Trump, the DNC, the FED, the courts, Congress, FBI, our Universities and our media. Maybe, that is the good of all this. Now is the time to slowly move back into investments that have real sustainable demand behind them on an international basis. And, i don’t mean based on slave labor of third world countries.
I’m surprised it wasn’t mentioned what’ll happen if foreign buyers of longer-term treasuries like China and Japan stop buying, or worse, sell their positions to punish us. It would be harming themselves too, but we’re rapidly getting to the point that might not matter. The Fed can cut fed funds to zero and the ten year will keep selling off. Unless the Fed does QE and hoovers up everything, I guess.
The beginning of the end when that happens.
We buy our own debt. Its called Monetizing the debt. We are hardly the first country to do it. Tho I think bad things happen when you do it.
Of course, but it would be a heavier lift with fewer organic buyers?
We did it. Bad things are happening. Certain people got very very rich though… so hooray America?
Our chapter in the history books will be about kleptocracy, and paralleled with the downfall of the Soviet Union. Putin got us back.
You mean hyper-inflation?
If they run no trade surplus with the US they can stop buying dollars. They still hold immense positions.
China needs ample foreign currency reserves because no one trusts their government, no one outside China uses RMB, even Chinese natives would prefer to hold foreign currency as a hedge, and certainly no foreigner wants to hold Chinese debt after Evergrande etc. I don’t see any of that changing under Dictator-for-Life Xi.
china already has layed off their dollars and treasuries in long term contracts to purchase or lease hard assets all over the globe.
It would be helpful to the posts and threads to see less overt mental illness in responses. Thank you in advance for your attention to this matter.
Can people with Down Syndrome post responses or do you label them as mentally ill?
zion don is our fearless mentally ill, ubermensch. it’s ok now to post insanity. from my vantage point at the criminally insane asylum, it’s awesome.
Ill also mention that duration doesnt matter. The Fed creates a trillion and buys every bond it can find, increasing their price and driving the interest rates down, short and long. Midnight disagrees. I think Im gonna be right this time. Japan is already doing the same thing.
I told Midnight and Ill say it again .. Trump wants zero percent rates, by any means necessary
Well the EU is supposed to announce their tariff response next week so we may see another 2000 point drop in the market. At some point, JPOW will need to do something to keep it all from falling apart.
No disagreement here.
If there’s another 2000 point drop, JPOW trying a panic fix is unlikely to reassure anyone. I doubt he’d do it.
If trump can evict him from the fed, and replace him with a special needs cronie (Maybe Dr. Oz knows somebody), it will happen, with the same probability of evoking even more panic.
powell stays until next summer. lutnick will be fed chair for zion don. this market won’t bottom for another year or three. maybe 10.
Like Peter Sellers’ classic role as Chase Gardiner in “Being There”. “I like to watch!”
Chance…. short for Chauncy.
We’re living in a world halfway between “Being There” and “A Face in the Crowd”. Might make a nice double feature.
i watched face in the crowd, when i caught Zion Don live 2 weeks after he announced in july 2015. i was awestruck. freedom fest. little marco spoke to the crowd the same day, ha ha ha. both such great pitch men like face in the crowd.
Long time readers know I had been loading up on TLT. Some people here even questioned why I was buying TLT if I thought inflation would be going up. I said it was a hedge and here we are riding the money train to profitville. I’ll probably sell calls on TLT next week for additional profit or just let the money train ride, if JPOW does an emergency rate cut, the train will go faster.
NVDA has a nice drop today so I picked up some more shares for the long (10+ years) term. I also bought back calls on TSN for a 70% return, seems China’s move worked out exactly as I expected. Another money train to profitville.
Americans traded in a juggernaut economy for a juggerhead one. You reap what you sow. Choo! choo!
For all you whinging about Orange Hitler and tariff apocalypse, aren’t you a little early on the charts for bottom fishing NVDA? That’s a rhetorical question. Long bonds, smart trade.
People questioned me on the exact same thing on TLT. Here’s a hint for profits, programmatic data based trades and leave the emotion/panic out of it. Most people can’t do that so they fail.
I don’t know when NVDA will bottom out and neither do you, I do know 10 years from now NVDA will be at least triple or more from where it is now.
There will be another dead cat bounce at some point, perfect time to sell OTM calls then watch it all go down all over again. Buy back calls, rinse and repeat.
“I don’t know when NVDA will bottom out and neither do you, I do know 10 years from now NVDA will be at least triple or more from where it is now.”
Wow, what hubris. You’re old enough to remember the dot-com bubble and I’m not talking about pets.com or webvan. Companies like JDSU and Cisco never fully recovered and I think Cisco was the biggest company in the world at that time in market cap. Sound familiar? The internet survived and thrived like AI probably will, but it won’t necessarily be the same set of players when the dust settles. Full disclosure: I also own NVDA but not as confidently.
Cisco provided networking equipment. NVDA is providing chips that will power the future. I expect AI chips in cars, airplanes, trains, robots, manufacturing, and every computer on the planet and who knows what else and we are no way near that time yet.
But the real trick to NVDA is that no one else is matching what they are doing with their technology, no one. That may change over time but it will take years.
Of course, I’m not saying to sell the farm and buy NVDA, I’m saying I like some of it in my portfolio. The options premium on it has been amazing.
that dude is delusional. he’s convinced. like some preacher in some church. spent a career trading on wall street. these types are a dime a dozen. i love it for the entertainment value. i usually just egg them on in real life. online it’s not as fun.
What ever happened to Eddie the Dentist from Austin.
When you think you ‘know’ the future is when the trouble starts.
A triple from here would be a nearly $7 trillion market cap. That would mean another mania is going on or the Fed had lost control of the money supply.
Did you realize when NVDA and MSFT were both $3+ trillion market cap companies that those two combined were supposedly “worth” around 30% of the entire US M2 money supply?
If the money supply does not grow correspondingly you are calling for an even more absurd unsustainable valuation than the above.
“If the money supply does not grow correspondingly you are calling for an even more absurd unsustainable valuation than the above.”
The only way out of the debt mess is to inflate away the debt or default. In either event, it will be bad for everyone except asset owners of money producing firms. NVDA is part of my “gold” hedge.
“Trump will get his rate cuts by causing a global recession.”
This is going to be the most prescient statement.
Not that the financial system isn’t f.up already thanks to other groupthink actors.
Any surprise tinkering can turn into depression, but Trump is throwing a wrench into it.
Starting to put cash to work today. Picking up some incredible bargains in the market.
Names and prices, or it doesn’t count!
I’m gonna wait for the EU to hit. They were mad at us before the tariffs started.
I picked up a littleTIMEX today on the dip.
When that Palantir guy sold that rang the bell at the top.
For once the fed is right!! Don’t cut rates!!
Inflation is more damaging than anything. You can get your job back. YOu can never get your money back.
during the recession average length of unemplyment was 9 months. That’s average. restassured if you had a resume gap of 9 months chances of an interview were about nil. That is much much worse affect on somebody then have to tighten the belt/budget better due to inflation
Balancing the budget is the goal here for me. Deflation will be the result. Price declines are great for consumers. Productive people will still have jobs. Wasteful spending on silly jobs will go away. Tariffs are a great catalyst to a better tomorrow. There will be pain in the process – you can’t escape debt fueled spending binges without a hangover. Keep your eye on the prize – a better tomorrow.
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You may want read up on debt deflation……
i’m guessing zion don will default on much of the debt. argentina does it every decade or two without much recourse.
You should have suggested 20 – 30 years ago. Interest alone you’re paying over 1 trillion now and increasing. Deflation will make the debt burden heavier.
he’ll just default on debt. it’s a tried and true technique in world history. yawn.
Are we looking at stagflation or a deflationary collapse? Unlike the 1970s we don’t have a middle class that can absorb higher costs, and people have maxed out their credit.
We didn’t absorb higher costs. The economy got shellacked. The economy did not turn around until Reagan took over.
people don’t need to shop for junk so much. we did not have massive amounts of storage units in 70s and idiots buying junk houses and refilling them with garbage furniture every 5 or 10 years.
The ‘Madness’ is that the unfair global tariffs on American made products has been allowed to go on this long! Now when a President has the balls to do something so many idiots are crying.
It would behoove you to stop believing trump bullsh*t on what tariffs other nations put on the US.
Do some research and post back.
Any Sears catalog prior to 1990 noting where the products were made is a history book in of itself.
The circus tents in Bentonville Arkansas can’t collapse fast enough.
“ah feel your pain”
After today’s very strong job report, and since more US jobs will be created from the tariff policy, Powell made the right move. Rate cuts are not needed. Well located real estate and short term treasuries as well as other hard assets are the way forward.
This. 10 year will decline if it needs to whether Fed cuts or not. They follow the market….except before elections when they want to influence them
If you think the Fed “follows the market” (as MIsh has disproved multiple times), you either know zero about economic markets, or you only post politically
I’m discussing long rates. Not short. They don’t control short which is why Yellin is an utter failure for not terming out the debt. She belongs in prison.
More gooblygook from you. Are your thumbs getting in the way in your text posts?
If you’re discussing the Fed, by implementation you are discussing short rates because that’s all the Fed directly controls. And they do control short-term rates, thus the 3-month T-bill rate being at the same basic level as the publicized and predicted Fed funds rate.
Yellin belonging in prison is another politically motivated hack post. Why do you even post on an economics blog?
It is truly entertaining to see the cult try to fit a square peg in a round hole then try to explain why it won’t go in through some convoluted reasoning. Endless logical paradoxes with this lot. It’s like watching 2 and 3 year old children play with their wild imaginations.
I as usual disagree. See my posts to you above.
Never leave a market’s behind! Its the FED motto.
the fed has only one mandate. to keep her owners, the nyc banks solvent and in high cotton. the rest is just pure BS for the rubes that think otherwise. read history. it helps.
cap rates ware gonna be so sweet in another 2 years.
They sure were willing to cut 50bps in September with no rationale whatsoever in front on an election. Hmmm
… and now you’re an inflation apologist. Pick a lane.
Hardly, though its pretty obvious you are the old musk troll so this will be your last response. I was openly against any cuts. At that time and since. As Mike said, the Fed blew bubbles.
Old musk troll? Is that a D&D reference or something? I’m not up on the kid’s slang.
Mine That Bird in 2009 Kentucky Derby
Don’t forget the other side of that coin.
Trump and his devotees (ahem…) said no way the Fed should have cut in September. 6 months later, Trump says it’s political if the Fed does not cut even more. Are cuts warranted or not?
LOL, only in Trump’s head…
The sad thing is he has only the vaguest idea what a rate cut even IS. He’s just babbling back what the people around him say. The oligarchy is riding him around like a pony, like they rode second term Regan.
correct. raygun was just a lifetime pitchman for GE and MICC and stood for nothing. zion don is just 100x better actor than the old corpse was.
Sad to say i have to agree. If the economy was stable and great why did they do anything ?