I ask the question because the number came up in a recent JP Morgan publication.
8 Percent “Prediction” or “Possibility”?
This headline by TFTC caught my eye: JP Morgan Predicts Crushing 8% Interest Rate Spike
JP Morgan forecasts interest rates rising to 8%, potentially triggering a recession and banking crisis similar to past financial downturns.
JP Morgan, the largest bank in the United States, has released a 61-page shareholder letter predicting an increase in interest rates to 8%—a figure that hasn’t been seen since the era of the late eighties. This dire forecast comes on the heels of staggering stagflation numbers and warns of potentially catastrophic consequences for the economy and the banking system.
The last time the country grappled with 8% interest rates, it triggered the recession during the first Bush administration, resulting in mortgage rates soaring to 10% and ten-year bond yields hitting 9%. The implications of such rates in today’s climate could be devastating. An analysis suggests that the housing market, already struggling, would face further decline, with a 7% rate hike serving as a crippling blow to prospective young American homeowners, increasing their purchasing costs by an estimated 50%.
No Such Prediction
That sounds dire, and it surely would be. However, Jamie Dimon, CEO of JPMorgan, made no such prediction in its 2023 Annual Shareholder Letter (link repeated from above). Here is the pertinent snip:
Equity values, by most measures, are at the high end of the valuation range, and credit spreads are extremely tight. These markets seem to be pricing in at a 70% to 80% chance of a soft landing — modest growth along with declining inflation and interest rates. I believe the odds are a lot lower than that. In the meantime, there seems to be an enormous focus, too much so, on monthly inflation data and modest changes to interest rates. But the die may be cast — interest rates looking out a year or two may be predetermined by all of the factors I mentioned above. Small changes in interest rates today may have less impact on inflation in the future than many people believe.
Therefore, we are prepared for a very broad range of interest rates, from 2% to 8% or even more, with equally wide-ranging economic outcomes — from strong economic growth with moderate inflation (in this case, higher interest rates would result from higher demand for capital) to a recession with inflation; i.e., stagflation. Economically, the worst-case scenario would be stagflation, which would not only come with higher interest rates but also with higher credit losses, lower business volumes and more difficult markets. Under these many different scenarios, our company would continue to perform at least okay. Importantly, being prepared means we can continue to help our clients no matter what the future portends.
JP Morgan says it is prepared for a range of 2% to 8%. It is not predicting 8.0%. So the TFTC headline is observably false.
I fail to see how one can be prepared for either 8.0 percent or 2.0 percent other than by adopting to changing environments. So what we have above is a self-serving statement by Dimon.
Regardless, 8.0 percent is not at all out of the question for many simultaneous reasons.
10 Inflationary Concerns
- US budgets are out of control.
- Global wage arbitrage is over.
- Excessive regulations.
- Growing power of unions.
- End of just in time manufacturing.
- Trade wars no matter who wins in November.
- AI and the need for more energy
- Rare earth metals controlled by China
- Woke policies by states
- Threat of real wars with Russia of China
The Fed had ability to cut rates at the first sign of trouble for decades due to global wage arbitrage, outsourcing, and just in time manufacturing.
Those are all gone and there are seven additional concerns. There are some deflationary forces in play such as a boomer die off that will releases millions of homes.
But boomer demographics are not all one sided. The inflationary side is increased need for more medical services.
Trade War No Matter Who Wins in November
My big concern, and one hardly on anyone’s radar at the moment is a global trade war. This is barely on page 10 right now. By the end of the year, I expect trade wars to be page 1 news.
Trump has threatened to raise tariffs on China by 60 percent. Neither Trump nor Biden will allow Chinese cars into the US. The EU is making similar threats.
I will expand on this idea in a subsequent post, but if the US and EU are too aggressive in pursuit, China could respond by invading Taiwan or by blocking US access to rare earth minerals needed in phones, computers, military guidance systems, wind turbines, EVs, magnets, and microchips.
I don’t know the odds of 8.0 percent interest rates or of China invading Taiwan, nor does anyone else. So I am not making a prediction. But I am sure a global trade war looms and the consequences will not be good.
Computer Chip Sanctions Fail
On September 4, 2023, I noted US Sanctions Fail Again, China Now Produces Its Own Advanced Computer Chips
Trump and Biden both tried to cut off China’s supply of advanced microchips. The US wanted to knock Huawei out of the 5G market. Now, instead of China using US chips, it is producing its own chips.
China Bans iPhone Use for Government Officials
On September 7, in response to US actions, I asked China Bans iPhone Use for Government Officials, Just a Start?
And about that chip ban …
On February 18, 2024 I discussed How China Gets Around US Sanctions on Semiconductors
The US Threatens to Sanction Companies That Don’t Give a Damn
On April 23, I noted The US Threatens to Sanction Companies That Don’t Give a Damn
The Biden administration claims Chinese companies help Russia rebuild its war machine. Our sanction proposal counter is laughable. China’s counterthreat isn’t.
US actions have not yet posed a serious problem because Russia and China have found ways around them.
But if and when the US ever succeeds in its foolish trade restrictive policy and China gets upset enough, expect major ramifications.
Think back to why Japan attacked the US in WWII for what might happen.
Human history always has wars. WW3 is not a matter of if, but when. It’s not today but someday it will go down.
There is a near zero chance the Fed will raise interest rates from 5.5% to 8%. That sort of an increase would crush the economy and servicing the national debt would be near impossible. An inflationary policy is far more likely.
Of course, unlike Japan in the ’40’s, having defeated the Russian fleet in 1905, today the Russians and Chinese have nukes, among other countries, of which the US used two nukes to vaporize two Japanese cities. And given Russia’s historical war losses on a massive scale for ethnic survival over the centuries, I doubt MAD, mutually assured destruction, will be a technological deterrent to first use, overt and or covert given Biden’s wide open borders for smuggling weapons and people. And unlike Nord Stream 1 and 2’s destruction, Russian assets, ground zero doesn’t leave any evidence as the stock markets crash if London or Paris were vaporized in a “terrorist” incident. . . . . .
Nothing is more important to the debt fueled US than attracting purchasers of debt.
Do interest rate increases simply reflect the loss of US standing in the world?
US government is desperate to appear sound in order to keep the world buying the debt funding our bloated idiot filled parasitic; Military/Stasi/Govt. Propaganda/Police State.
There is a “stability/interest rate ratio” relationship between appearing stable/reliable and the interest rates you need to pay people to buy your debt. The sounder we appear, the lower the rates we can offer and still attract buyers of our debt.
Economic and social gerrymandering used to manufacture the appearance of US stability/prosperity/soundness, affect’s every component of the economy.
At some point, the second ordered, gerrymandering induced decay become impossible to ignore. (ie. Homelessness and CRE hollowed out cities are turning into dystopian no mans lands, mental illness, incivility etc..) At which point civility break down and everything begins feasting on everything else in one final orgy of exploitation. We are here now.
A declining empires remaining hope, is that the rest of the worlds “stability/interest rate ratio” looks competitively worse. That’s why you see 24/7 disparagement of China and Russia, that are in real terms, “totally kicking our ass.” Conversely you don’t hear much about industrial collapse taking place in Germany.
RATES:
Russia hums along at 16%. Of course, they’re one of the least indebted countries in the world.
How high do we need to go:
To reprice everything, pay the debt interest and regain economic velocity?
vs.
How high can we go?
Typically, the personal carnage resulting from raising rates to the moon is wholly irrelevant to a country with a Stasi Police state with total control over the civilians. The debt will be sold and the Stasi Military complex will get paid.
Movies were made about what this looks like.
Good points. Another reason interest rates need to be kept high is for foreign buyers to finance US deficits.
Interest rate increases simply reflect the cost of the dollar being debased by the immorality of the Republicans and Democrats. That these parties are still leading the polls reflect that the citizens are uninformed and unaware or apathetic and ignorant.
Tech innovation promises high productivity growth. Deflationary. AI and autonomous transportation — deflationary. Enough to outweigh inflationary governmental fiscal and monetary policy? Probably. But I am not buying long-dated bonds.
One can only speculate on Dimon’s motivation, but the fact is JPM is WEF Partner and a seller of US Bonds, so he knows the implications of the Great Reset / 4th Industrial Revolution and the planned war with Russia, which means higher interest rates. You listed war with Russia & China as the #10 reason, but don’t seem to prioritize it. Dimon also knows about another lock-down for climate change & maybe bird flu that’s planned before the election to force mail-in ballots.
Great points
Yes I think rates will exceed 8%. We won’t see a drastic reduction in prices until we’re in a depression.
That global trade war scenario is going to be a hoot after China invades Taiwan and captures all of TSMC’s gigafab factories that the entire world runs everything on.
Most people don’t realize how critical and irreplaceable a few industrial complexes in Taiwan are for operating the complexity of modern life across the globe.
The factories are all wired to be blown up should that happen.
???
Raise rates?
Certainly NOT before the Nov. election.
Real rates are still going up, BTW – a sign that the FFR is largely meaningless in any case. But we knew that already.
OT: 1940s Japan had been operating a world-class Blue Water navy for many DECADES before challenging the USA in the Pacific. OTOH, China is STILL decades away from sailing a Blue Water navy, which would be a first for that nation.
While the trade/economic scenarios may rhyme, the potential confrontation scenarios are VASTLY different. China will not challenge US military/naval dominance any time soon – not in my lifetime anyways… China is still DECADES from an operational Blue Water navy. There is no ‘counterpoint’ to this REALITY.
The fearmongering RE: China is ridiculous & only feeds the expired neoCon globalist narrative.
Back in the day you wanted a big blue water navy to show that you were important.
Not so much in the age of satellites, nuclear subs and missiles.
Goldbugs are a bore. Interest rates down, time to buy gold. Interest rates up, time to buy gold. Is there ever a bad time to buy gold? According to them, not apparently. Please go hock your wares elsewhere, no one is buying here.
There is one large deflationary concern, debt deflation. We’re at this point because of irresponsibility and short cuts from the powers that be.
Whether we have deflation or inflation depends entirely on government action. No government action means deflation and a reduction in DC cronyism and power. Government action results in cost shifting to protect the politically powerful and results in money printing and stagflation. The swamp creature will chose stagflation.
Probably so. I’d be all for whatever helps the common man, who always gets screwed in a fiat ponzi monetary regime. Taking 2% of a money’s purchasing power through inflation is theft, which is the equivalent of stealing 2% of the time someone spent laboring to earn the money. Stealing all of someone’s time is murder, so theft in my book is murder lite. If and when the people rise up in outrage against the current system. I won’t feel sorry for the perpetrators. There is a reason why they had to use fake names to all surreptitiously travel to Jekyll Island to plan out what became the Federal Reserve, and there is a reason why they had to get the Act passed in late December 1913 after most Senators and Congressmen had left The Swamp for the holidays.
Regarding Mish’s question, Powell is no Volcker, so I’d say the odds are nil unless Powell’s back is forced up against the wall. If he’d have taken the FFR up several hundred basis points above inflation in the beginning, he’d have probably quashed inflation by now.
To DC, the USD is the goose that lays golden eggs. It is the source of their power and wealth. But it can become exhausted and fragile such as it is now. However they will protect it at all costs, even if it means suffering through another period of debt destruction and taking down some players.
Trade wars are not talked about much because it is now a given. Biden’s doing it. Trump will do it and the Europeans are very keen to do it even more than before. It is not ideology driving the move but concrete examples of the Chinese targeting and destroying US and European industries so I really do not expect that the few Free-traders left will have an impact on the elections anywhere. Japan didn’t attack Pearl Harbor because the US refused to sell them oil and scape metal. Japan attacked because they saw their window of opportunity closing as the US started rearming because of events in Europe and Japan’s war on China.
Yes, Japanese imperialism was getting ahead of US imperialism in Southeast Asia.
That’s the rainbow crowd take. Us bad. Everyone else good.
“..Chinese targeting and destroying US and European industries..”
What’s targeting and destroying Western industry, is being robbed by debasement and regulations aimed at propping up and keeping a pure leeching class of negative-value-add “investors,” “home owners” and other non-productives in;always unearned; splendor. Deadweights like Dimon and his welfare collecting, Fed enabled empire of nothing but idiocy, incompetency, stolen-wealth handouts and waste.
Not some magical superpowers of a bunch commies.
Communism, totalitarianism, five year planning nor government “targeting” and winner-picking, is neither efficient not competitive.
What is is, is less inefficient; and hence less uncompetitive; than financialization, “ownership society” nonsense and all the ensuing pathologies which destroyed The West. China wins because competitive victory goes to the freest society. And “we” are an almost infinitely less free society than China is now. Economically illiterate indocrinati uncritically spewing whatever partyline they are told to, while clinging on to quaint “land of the free” taglines from a century or more ago, will never change that.
I asked Perplexity AI:
Q. How many times has the Federal Reserve raised or lowered interest rates in a presidential election year over the past 60 years?
A. According to the search results, the Federal Reserve has raised interest rates in 3 presidential election years and lowered rates in 3 presidential election years over the past 60 years:
[2] The chart shows the Fed has raised its target rate in 3 presidential election years – 2000, 2004, and 2016. It has lowered its target rate in 3 presidential election years – 1992, 2008, and 2020.
[3] The article also notes that the Fed has been active in every election year since 2004, either raising or lowering rates.
So in total, the Federal Reserve has raised interest rates in 3 presidential election years and lowered rates in 3 presidential election years over the past 60 years, based on the information provided in the search results.
Citations:
[1] https://www.forbes.com/sites/billconerly/2024/03/27/the-fed-will-ignore-election-cut-interest-rates-second-half-of-2024/?sh=58d6ec602e73
[2] https://bankingjournal.aba.com/2024/04/monetary-policy-and-presidential-politics/
[3] https://www.westernasset.com/us/en/research/blog/the-fed-in-election-years-three-observations-from-recent-history-2024-03-20.cfm
[4] https://www.nytimes.com/2024/05/01/business/economy/federal-reserve-presidential-election.html
[5] https://www.cnn.com/2024/03/17/economy/stocks-week-ahead-fed-presidential-election-interest-rate-cut/index.html
Highly doubt the Fed is really going anywhere with interest rates but they love to talk about them …may be a quarter of one percent down to make some noise to try to help the Biden administration Before the election, but long-term … interest rates are going up and so is inflation … with all the excess business regulation and new taxes now and coming in the future if Biden gets reelected the economic situation for the US i Will be disastrous for all companies, big and small … The experiment is coming to an end … We just don’t know when …
The Fed, Central Banks and governments around the world are going to have a bigger demographic and employment problem with AI. The modern economic system is not setup for humans anymore. Maybe everyone can all let an AI bot trade stocks for them while they enjoy life.
I think that it has been the trend for the past century to increase “efficiency” in all aspects of sourcing, production, and distribution through automation — that is, using machines and not people.
We’re now entering the final phase. The consequence is now too many people with decreasing abilities to find a meaningful job (afford a house, etc.) in the future work force. Just low-skilled jobs.
I have no answers for this. It is something I’ve pondered for a long time.
It’s very simple. You drive the banks out of the savings business (which doesn’t reduce the payment system’s size). Of course, the ABA will object, but it will make their banks more profitable.
For me there’s plenty of manual labor to be done trying to keep my car and home clean and running that no AI robot is anywhere near being able to do.
The Kremlin is paying 17% and I trust them more than Joe Biden.
If I were president, I would instruct the FBI to find out who you are, remove your USA citizenship and deposit you at the Moscow airport.
If I were President I’d arm the Palestinians and ship you back to israel.
Americans don’t have the freedom to fly to Moscow. Only people in countries like Iceland, Argentina, Peru, Colombia, Mexico, China, India, Thailand, Brazil, Switzerland, Mongolia, et cetera, can fly there because of American police state restrictions.
Your response demonstrates exactly what is wrong with this country. Jojo, you must be a Democrat.
You don’t think Trump will try and do this to his perceived enemies?
The FBI can divert some of their agents from infiltrating public school board meetings, catholic latin language masses and book store bible purchasers records.
If I were president I would buy some land in Hawaii next to Mark’s place and resign.
Which rate would be 8%? Fed funds? 2 year, 5 year, 10 year? Without specifying the maturity, this is a useless post and a useless discussion. Useless links, too. A range of 2% to 8%? Am I the only one who doesn’t take any of this even remotely seriously?
comments come as US interest rates rest in the range of 5.25% to 5.5%
Fair enough, but the yield curve is usually steeper. This would be more informative if a discussion of the yield curve. Plus the wide forecast range makes the whole thing meaningless anyway.
Don’t they have to? Actually, don’t they all have to (it’s like gas $ so follow the leader). I do think 8% is a good starting point to put the breaks on hard, but not to the floor. People with money is who they are looking to lend to after all, so that’s who will get the loans, as they come seeking. For now anyway, many will still qualify.
Co-Signers will get harder to come by, and many won’t qualify now anyway. If it’s a small amount, then Family and Friends might be enough, but don’t dare burn any bridges, or that will end miserably.
For those that appear to have money, Liquidity is the name of the game. Lots of stuff (cars, bikes, campers, water gear etc.) goes quickly and fairly cheaply, as for many it was bought on credit, so it’s actually paid for / in possession of, in terms of resale anyway. This Group will not be looking to buy anything.
The trick will be when they run out of qualified applicants. Now the rates have already started to rise, but at this point they will have to jump way up (think potential 70’s, 16%-18% out of nowhere).
It is then, and only then, until the “Party Ends”. A slight depression scenario, due to Baby Boomers wealth being distributed as they pass, or because they are going to soon, etc. That’s my guess! We are talking about quite the pool of possibilities to rise up, and many will have the means to do so IMO.
After that happens, if I am correct, then it’s anybody’s guess how it was handled, after such a gift was potentially handed to them?
God Speed
Oh, forget what companies can do, as they will not have many consumers/customers to service. Banks won’t have much money to lend, and chaos is everywhere with layoffs, and money from various places being slung all over the place.
AI as disinflationary? Enormous energy consumption aside.
AI is mostly hype. Some see it as an existential threat to humanity, others as its panacea.
I think it is the latest get-rich scheme.
Hard to know at this point. The same thing was said about computers, the internet, e-commerce, and smartphones.
Higher interest rates are already having an impact. They hurt companies that need to borrow. That is one reason that some renewable energy projects are being postponed or cancelled. They don’t make as much economic sense at higher rates.
Meanwhile, most oil companies have been using their big free cash flows to pay down or even pay off their debt. As their “low or no” debt targets are reached, many are committing to return 50%, 75% and even 100% of free cash flow to shareholders through increased dividends and/or share buybacks. This week, both Cenovus and Tourmaline announced dividend increases plus special dividend payments for this quarter.
Got oil?
You should change you repetitive slogan to: Got cheap oil, because at EROI 3:1, oil isn’t going to be cheap.
Nope. I don’t care much if it’s cheap or expensive, as long as the companies are gushing copious amounts of free cash flow.
Oil companies (like other resource companies) are price takers. Prices are set by worldwide supply and demand, and cost of substitution.
What they can control are their costs. And many of the oil companies I own shares in have breakeven costs in the $30/bbl range. Which is why they are gushing cash flow with prices around $80.
I agree EROEI at 3:1 is better financially than 10:1 if oil is scarce and $100/barrel compared to a glut at $20/barrel as many marginal fields become very profitable at $100.
As for those commenting about the boomers dying off I’d point out that the average 70 year old will live on average for another 15 years so the process of releasing their houses to the market will take another generation especially as the younger boomers have an average 25 years left.
Yes. At $80 WTI many of the oil companies are generating 15-25% free cash flow. Add or subtract 5% for each $10 change in WTI.
Agree. Some folks here are simply haters. Whether they hate boomers, millennials, muslims, jews, blacks, asians, immigrants, democrats, etc doesn’t really matter. They are full of hate and wish to see others harmed. It’s disgusting. And a waste of time. Better to spend your time on productive things that improve your life and make it more enjoyable.
“….Some folks here are simply haters. Whether they hate boomers, millennials, muslims, jews, blacks, asians, immigrants, democrats, etc doesn’t really matter….”
Yup, that kinda crap is all over the internet. The Boomer hate is especially bizarre to me. The younger folks act as though they’d do things differently had they been in the Boomer’s shoes. Given human nature, I highly doubt anything would be different. Regardless, the current reality is what it is. Bitching and finger pointing isn’t gonna change it. It’s always easier to point the finger at a third party than at yourself when one’s life isn’t where they want it to be. Doing this does nothing to move you closer to your life goals nor does it improve your life situation. The American grit and stubbornness while being nipped by the jaws of defeat is gone. Now it’s just whinning and complaining……ho hum…..
Completely agree.
Boomers were all brainwashed in college by the infiltration of Frankfurt school ideologies who told them they were second in line for chosen status.
They really do believe they are (((special))) which is strange, when all they did was destroy America and it’s family structure. Hypocritical, banal, immoral, incredibly boring, selfish and stupid. They are the least charming oldsters in American history – utterly charmless and devoid of humor. They make me ill.
Everyone under 30 despises boomers.
I almost made a web platform called “Die Boomer Die” that featured news footage of goateed boomers who kill themselves on Harley’s.
Without a second thought – boomers became that which they despised “the establishment.”
I won’t waste my cognitive resources explaining it all since 50 years of TV rearchitected their brains to download status only. The programming /brainwashing left boomers incapable of self reflection or acknowledging the roll they played in the decline of the US into a dystopian hellscape.
Papa Dave is perfect example of the selfish “I Got Mine Boomer “. Most of what they believe are delusions downloaded into their minds. They don’t question those either.
We need action done, and not words. People need to stop complaining about what they don’t like, what they and others should do, and just start getting it done!
“oil isn’t going to be cheap”
That depends on whom gets elected doesn’t it? If Biden Inc. wins, then we continue down the path of stupid, and yes oil will skyrocket.
If DJT wins, then it’s “Drill Baby Drill” and Oil will flow freely. My guess is that DJT will fill the SPR immediately, as it’s our Military Gas Reserve, and never should have been siphoned off for China.
Same with NG, which we will be sending everywhere and anywhere we can. One thing DJT knows, and that’s Business, and how to operate within constraints when times are tough. He truly is “The Man” for the Job!!!
Nope.
First: It depends on worldwide supply and demand. And “drill baby drill” is no longer the mantra of oil companies. It’s “profits and cash flow baby”. Why drill your brains out in order to increase supply, lower prices and put yourself out of business?
Second: All presidents want lower oil, and gasoline prices. Hard to get re-elected with high prices. That’s why Biden released so much of the SPR, and turns a blind eye on sanctions on Venezuela, Iran, and Russia. He says things about reducing oil production but his actions actually encourage production. US production of both oil and NG have risen to record levels during his tenure. Surprise!
Exactly.
Trump will probably bankrupt the US.
But then he will figure out how to borrow enough money to start over.
Too late Lisa. The US is already bankrupt. Barrowing more money to hide that fact has worked for decades. I bet you even think that Bill Clinton’s Budget Surplus Hoax was one of his greatest Legacies. Stock up on MREs.
All true
Oil for the win
“China could respond by invading Taiwan or by blocking US access to rare earth minerals needed in phones, computers, military guidance systems, wind turbines, EVs, magnets, and microchips”…..and PHARMACEUTICALS!
There is considerable confusion as to how many OTC drugs and PRESCRIBED (pharmacy supplied) drugs are sourced from China.
THERE WILL be an impact.
Tracking down global supply chains has become impossible because of runaway outsourcing. You need a pandemic or war to find out.
It is reasonable to assume that most basic materials originate in China, because it has the most complete supply chain, which it aggressively pursued from Australia to Africa.
Anecdotally, China has monopoly on pharmaceutical primers, so in many cases hospitals would have to shut down if China used used counter-sanctions.
Biden’s handlers are trembling while imposing sanctions left and right.
“Biden’s handlers are trembling while imposing sanctions left and right.”
They’re all Ivy League fools. Truly the inmates are running the asylum.
They don’t know that they don’t know. Living in the bubble.
I get annoyed at misspelled words, and saw enough in Mish’s blog and in earlier comments to complain and remark on some of them. I also misspell, but I try and proof-read and fix them.
You (and I) immediately understood what he meant, so his ideas were conveyed just as effectively with the misspellings as they would’ve been without them. I prefer the current format with rapid-fire posts so he can move on and write the next information-packed one than Mish spending all day and night with his nose in dictionaries and grammar books in order to write everything to Mrs.Barnes’ English class specifications.
Exactly. Now if only Homer and Shakespeare would have written faster and without checking we would have more of their stuff. Then again, what’s the value of Mish’s writing after a few years or even a month.
FWIW – I read just about everything Mish writes. It’s a wonderful sugar high.
Wish I had a euro for every time I proofread something several times and still errors get through. Oh well.
Who cares? Everyone makes typos. It’s one thing to be personally anal-retentive, it’s another to share the fact with the world.
Your comment adds no value to the discussion — only serves to massage your self-perception.
Thanks.
That’s a problem with kids’ short attention span these days.
No corrections, no progress.
Especially annoying considering how much I have to pay to read the blog. At the prices Mish charges, spelling counts. He should hire a copyeditor. I feel cheated.
I have a spelling checker
Won came with my PC
It clearly marks fore my revue
Mistakes to small two sea
Its quite a help to have it
Sense proofing’s such a boar
I can not bare to reed to much
It makes my write I soar
I never look in Websters’s
I haven’t thyme to waist
This soft wear is remarkable
Four dealing with my haste
Working here we right a lot
But too me that’s grate
Technology will save my but
If my boss cant weight
I’ve run this poem threw it
Eye new you’d like to no
The words are rite in every weigh
My checker tolled me sew
The Fed WILL be forced to raise rates above 8.0% in the next 10 years as the next peak in the 54 year interest rate cycle approaches. Even now, the FED is holding rates below what the market is setting, which is stimulative.
Oh, much sooner than 10
…but not before Nov.’24.
the Fed is not political (!!) /sarc
I hope. I’d LOVE to look at the CDs offered on Fidelity and see some with 8% or 10% yields.
11. Spike in energy costs by an all out war in the Middle East.
I’m surprised the markets shot up at a time the Russians are taking vast swaths of Ukraine
Most of the Ukraine ‘aid’ has been / is going directly to U.S. MIC stock companies.
Avery2, nailed it! Can’t let a war go to waste.
Will add one more option.
USD is the primary reserve currency.
With all its international obligations that need funding America can not afford to lose that status. It would be the end of Empire.
As clearly exhibited this afternoon Mish post, of head of council of economic advisers, USA is run by complete incompetents.
As this observation sinks into thoughts of international markets a run on USD from loss of confidence has good probability of occurring.
Were that to happen Jay Baby would have to raise interest rates to quell any Currency Run. He would not have option of doing interest rate control as Japan has pursued as that would give same result as Japan a dramatically weakening currency. That would reinforce any Run on the Buck.
Have outlined a very real reason here for why getting out of debt that has to get repaid or refinanced in USD is a legitimate course of action.
Everyone believes it all is going to end in an inflationary blow-off and have positioned for that. However USD Reserve Currency Status is of a higher level priority for US Empire.
Higher interest rates as consequence is definitely possible.
Also consider that Fed actions to date have been taken to shore up USD with higher rates then other major currencies. That should be a warning of things to come.
Interest rates do not necessarily need go higher but that USD will have higher rates relative to others to keep Reserve status is most likely scenario. Another Helicopter Ben abuse of USD doubtful will reoccur without all other majors going there first.
“…run on USD from loss of confidence has good probability of occurring.”
A run to where? Gold? Bitcoin? LOL.
Gold for sure Crypto No thank you
Am talking about currency market of which there are considerable numbers of them.
USD as reserve currency if a loss of confidence were to occur would see a dramatic drain out of US Treasuries, Bonds going back to home currency of all those Nations holding them.
USD has been experiencing a Lower share of CB reserves as its status has been greatly tarnished.
As of now there have been several Nations repatriating Gold back to Home country out of US jurisdiction. That is a form of Loss of confidence in US.
Rise in Asia of Gold market bypassing London another example of a developing International Trend.
Loss of confidence can take different forms. End result would be higher US rates to draw Capital back.
Apologize for stringing posts, as one stream of thought ends then begins another. But this is a Blog.
Consider also the Days of US arrogance “our currency your problem”
are ending. Since there are growing alternatives to USD the ability of Fed to do as it likes are diminishing.
MIC is not happy with consequences of that. Projecting weakness and confusion are making life difficult for MIC. Make of that what you will when it comes to Biden re-election prospects.
“USD as reserve currency if a loss of confidence were to occur…”
They would kill their own to keep the scam going. That’s why we’re seeing high interest rates with an election only months away
It is really difficult to see the future of what will transpire with USD.
Current Economic model in use based upon debt creation in order to consume.
Bulk of investments and mountain of debt points towards a form of debt default thru currency debasement. Fed already has their announced 2% model for debt debasement.
So does that announcement go to 3% or possibly 4%. Lot of people have taken positions that would make them huge winners should Fed alter parameters and let go of 2% model.
Downside to that is what happens if a Sound USD gets adopted instead due to geopolitical concerns. Re-shoring of manufacturing is being attempted and .this should raise some concerns for people betting that USD will get sacrificed on altar of Globalization.
A Sound USD would trap many into a debt slavery situation as they could not possibly pay off or service Debt already in place.
This tradeoff of Real Rates of interest vs. Fed Reserve preannounced rate of debasement will determine future Interest rate levels.
Am of mind we are in blowoff stage of inflation so going forward there will be some sting to Interest rates and some actions towards a return to a Sound USD
Thus reducing or eliminating Debt is viewed by me as selling in effect into a market Top.
gold? yes.
bitcoin? yes.
coffee, cigarettes & hoarding of necessities? yes.
…and Oct.’24 will mark the launch of a BRICS currency/settlement system.
King Dollar is a 20th century paradigm whose expiration can be ignored, but not avoided.
“BRICS currency/settlement system”
The rest of the world yawns
Jaime Dimon is perfectly correct and I’ll repost a comment that I made on another post with notes in ()…
It’s 2024 but it sure feels like 1974. If the same track holds, we can expect some type of recession late this year or early 2025 then inflation will come down (and so will interest rates maybe down to 2 percent) temporarily and it will roar back up from 2026 thru 2030 and possibly beyond (possibly rates all the way to 8 percent or higher).
Here’s the playbook in graph form.
link to fred.stlouisfed.org
If home prices crash in 2025 then it’s buy! buy! buy! because they will roar back if history holds true in late ’26 thru ’30.
And Mish you left out the most important inflationary reason: Demographics. Too many people retiring and not enough young people born. Attitudes have also changed and no one wants to work at slave wages anymore. Boomers receiving $120+billion/month and growing will spend like they are on their last dying days.
Two big agreements this week with Mish. The second is his commentary on trade wars. He’s right. The problem is that trade wars are generally political winners…..in the short term. That’s why Biden and Trump appear to always be doubling down. The problem is pretty much everything the U.S. exports has alternate sources. Boeing used to be the exception to that rule but that is no longer the case. Trade wars are actually not easy to win despite all the yapping to the contrary.
It is highly unlikely short rates go to 8%, or long rates, in the short to intermediate term
Couple things. Global wage arbitrage is not over. It may have subsided somewhat, but there is certainly still a global wage arbitrage in place
Just in time inventory is also not over. Again, it may have subsided somewhat and keeps getting messed up by the idiotic wars and sanctions our idiotic and thoroughly evil government keeps overplaying
Inflation and growth are the 2 primary determinants of rates, especially long rates.
r* is NOT higher, it is lower as our debt explodes
Growth decreases as debt increases over 100%. You can simulate growth as the US is doing now with insipid government spending, but in the longer term almost all of it has a negative multiplier
AI and the utterly idiotic “energy transition” are supposed to lead to growth, if you work at Bloomberg. Unlikely. The energy side will result in more poverty and lower spending and outright deaths. So I think and hope it gets short-circuited
AI is an open question. Hundreds of billions are on the table to pay for new data centers and electricity generation. I have my doubts that AI in this iteration is going to prove economically transformative for a variety of reasons.
Inflation on the other hand has many dynamics, many of which are still deflationary, but several of which have become more inflationary
And it probably does not matter who is president as Biden will spend us to high inflation but as Trumps Time interview demonstrates, Trump will ALSO spend us into high inflation
So in the intermediate term, we are going to have 8% rates, but probably not until they go to 1 or 2% first in the coming 2-3 year depression.
…the Fed Hikes Interest Rates to 8 Percent?
When pigs are observed flying to and making soft landings on Uranus.
That letter is just Dr. Snakeoil Salesman blowing smoke up the nether regions of his marks.
“A French ironmaster says: “We must protect ourselves from the invasion of English iron!” An English landlord cries: “We must repel the invasion of French wheat!” And they urge the erection of barriers between the two nations. Barriers result in isolation; isolation gives rise to hatred; hatred, to war; war, to invasion. “What difference does it make?” say the two sophists. “Is it not better to risk the possibility of invasion than to accept the certainty of invasion?” And the people believe them, and the barriers remain standing.”
Claude Frédéric Bastiat
Any distress at banks or trading desks or wacky over leveraged brokers and the FED will have emergency meetings all weekend long and have a bailout saving solution before the markets open Monday morning. They will drop their pants and rates to zero and buy trillions in bonds/MBS over a scamdemic and it will take only a few days.
BUT if consumers are getting shafted, losing purchasing power by the week, getting financially crushed, asset prices skyrocketing while food banks are exploding due to inflation, the FED will fist try and pass it off as transitory for a year. Then they will admit inflation is real but “oh sorry, we still have an already scheduled FIRM QE in place for 6 more months.”
Then they will take a year to slowly raise rates and roll off their illegal balance sheet, then try and convince everyone they are serious and then 4 YEARS after prices first spiked, they will hmmmm n haw and talk some more while MORE people are getting crushed by inflation in the face of RE-surging higher prices. And even have the gaslighted balls to say they are slowing the balance sheet QT that they FAILED to even do confirming their bullshit lies and “plans”
…. so 4 YEARS LATER and they are still fukin around with inflation. The FEDERAL RESERVE HATES YOU
We can NOT DESPISE them enough
Zero chance. The Federal govt is not alone in the orgy of borrowed money we now are all on the hook for. If you think Japan/MMT is in trouble, you aint seen nothing yet in an America which would owe 8% on trillions and trillions of borrowed dollars. Zero percent in 2025.
The real question is, is JPM prepared for the earth’s magnetic pole reversal, weakening of the magnetic shield and impending solar/space storms?
What do you mean by “impending” ? This year? Next year? Within 10 years?
The last time earth’s magnetic pole reversed was 780,000 years ago. And once the process begins, it takes as long as 7000 years to complete.
And the changes in the first several hundred years are barely noticeable.
So, I wouldn’t be too worried about this “impending”’doom.
Ditto climate crisis. Its political chicanery.
Sure. Thanks for explaining the science so thoroughly.
The Poles wander often without flipping. This is likely just another excursion though I believe we are overdue for a flip based on the magnetic reversals observed in the Atlantic Rift
The impending doom that IS certainly coming is a Carrington type event. And the odds are increased when the earth’s magnetic field has weakened as it has now
Imagine an event like that, a slightly weaker version of which also happened in 1923 I believe and another even weaker one in the 1980s which shut down electricity in Quebec
If we get a STRONG one, and they happen frequently, with the current reliance humanity has on electrical appliances, the results will be dire. Like Deagel dire.
Hardening the grid to handle it and prevent a large portion of the transformers from blowing out, which cannot be replaced quickly…would cost less than we have spent on Ukraine.
The grid certainly needs to be improved. Who should pay for it? An extra user fee?
I am very worried by the Heat Death of the Universe. We should be putting a lot of money into finding ways to reverse Entropy but short-sighted politicians don’t see the danger.
Awesome!
As an experiment, send letters of concern to your federal Democratic Congress critters and I bet you’ll get a sincere and concerned response. Sadly.
Heat death is billions of years in the future, as we all know.
The real problem we need to prepare for IMMEDIATELY is this HUGE black hole, which is ONLY 1560 light years away, a mere hop, skip & a jump on the scale of the universe! To illustrate just how small 1560 light years are, the vast majority of news sources reporting on this are rounding the number up to 2000 light years, likely to make readers feel more comfortable that they have an extra 440 years to prepare for getting eaten by the black hole.
April 17, 2024
Astronomers Discover Milky Way’s ‘Sleeping Giant’ Black Hole Shockingly Close to Earth
A black hole weighing as much as 33 suns lurks a mere 2,000 light-years away from our solar system
By Robert Lea & SPACE.com
…
https://www.scientificamerican.com/article/milky-way-sleeping-giant-black-hole-shockingly-close-to-earth/
Heat death is an annual thing. Has been for thousands of years. The only problem now is that with a warming planet, it will get worse. Not everyone can get relief in air conditioned homes, autos, and offices. The poorest suffer the most.
lol
INSUFFICIENT DATA FOR MEANINGFUL ANSWER.
Sorry I couldn’t resist the Asimov tie-in
WE’RE ALL GONNA DIE!
Yes. The death rate remains stubbornly at 100%.
Yes. We all pay taxes and die.
We will have to be experiencing a considerably higher rate of inflation for The Fed to raise rates as high as 8%. (Actual inflation at 15-19%, “reported” inflation at 10-14% for a sustained period of time).
Looking at it from this perspective, it does not seem like such a far-fetched scenario.
Is there a Paul Volker statue anywhere or did it get torn down during the peaceful protests 4 years ago when all the $,$$$,$$$,$$$,$$$ was spewing out during Covid Theater?
Should have been at 8% by the fall of 2022 and we could have had a shot at the inflation fight. It’s too late now as the failure Powell has all but assured even 8% won’t be enough. Ffs it’s not that hard but that SOB refuses to fight inflation and crush asset prices. He belongs in prison
Agreed. The Okeefe footage of the FED insider saying Powell was politically motivated to try to help Biden by keeping rates low is enough for treason and tar and feathering.