On July 31, Fed Chair Jerome Powell called the quarter-point cut a “Mid-Cycle” Adjustment.
Powell’s statement looks downright ridiculous as Major Currency Wars Escalate in response to “Tariff Man” placing more tariffs on China just a few days after Trump’s Lie of the Day when he actually stated “Trade Talks on Track“.
Trade talks on track indeed! China Halts All US Ag Imports, Trump Accuses China of Currency Manipulation
Baby Steps
Yesterday, I stated Expect Fed Baby Step Cuts Followed by Shock and Awe Panic. Check out the rate hike odds yesterday compared to the above chart.
Rate Hike Odds Yesterday
Remaining Calm No Longer an Option
Overnight, thanks to Trump, a 50% chance of just one more cut (assuming a rate cut in September), is now a 50% chance of three or four cuts total (two to three additional assuming September).
A recession is baked in the cake. Remaining calm is no longer a Fed option. The only question is when?
Recession Cause
When recession hits, many will blame Trump. Not me.
Fed bubble blowing policies and fractional reserve lending are to blame.
Trump will not “cause” a recession. However, Trump’s inane trade policies will make the recession much worse.
The current setup is very similar to the Smoot-Hawley Tariff Act of 1930.
Smoot-Hawley did not “cause” the Great Depression, but it did exacerbate the problem.
“Tariff Man” Trump is making the same foolish mistake.
Mike “Mish” Shedlock
Trump didn’t cause this recession. But he is making it bigger for his own political gain. He’s playing the Fed like a fiddle. He wants to juice the economy through the Fed so that everything looks GREAT going into the election cycle. They raise only 25bps. He increases tariffs. Now everyone expects 2 1/2 more cuts. Once the cuts take place, he’ll capitulate and the market (and the economy) will shoot for the moon during the election cycle.
Once he get re-elected, the day of reckoning will be that much worse. Hold onto your hats!
Dialogue needed, unlikely to happen.
Plan accordingly, possibly leading to armed conflict.
If Hong Kong is brought under tighter Chinese control by force, wait a while and Taiwan is next – war. Tibet was an example no one cared about.
The path is there, question is how fast do the parties involved travel down it.
Very dangerous. Without dialogue it will only stop by either side backing down or being scared into capitulation by visualising the consequences, mass slaughter.
This is looking to be a rinse and repeat process all the way into the election. The Trump administration trapped themselves. More tariffs, more monetary easing… they have exasperated the asset bubble bust.
“Overnight, thanks to Trump, a 50% chance of just one more cut (assuming a rate cut in September), is now a 50% chance of three or four cuts total (two to three additional assuming September).”
…
Same old, same old. Crises take forever and a day to arrive … then all at once.
Irondoor – would you continue to do stupid things proven time and time again to not work?
What the F does it take for people to understand that tariffs cannot fix the problem?
As for Hong Kong – I would welcome their independence – Best wishes
Getting a little testy.
The China trade policy of the last 20 years has not worked. The original idea behind engagement with China was that they would open their markets and they would increase freedoms for their people. That has not happened. So should we continue with this stupid policy?
I know you like the cheap goods and rare earth minerals. As long as the slave labor and human sacrifices are out of site, I guess we should be happy.
Will you be happy when they take the human organs market? Can’t see the slaughter and it will be a free market.
Would you continue to sell out our economic security and future to the Chinese for a relatively few dollars in the longer-term scheme of things? This day has been long in coming and there will be few heroes when it’s all over. The current heroes are the people of Hong Kong who are 7 million trapped like rats on a small island controlled by Communists who scavenge live human bodies to sell their parts. These protesting Hong Kong people will disappear into the gulags of Chinese prisons never to be heard from again. While you wring your hands over a few “Dow points” and exchange rates, countries and people across the world are being devoured by the Chinese Communists. And our leaders and major corporations have been funding this barbarism for 30 years.
Bingo Mish.