Yesterday officials of the Federal Reserve decided to raise raised its benchmark interest rate by a quarter point to a range between 2.25% and 2.5%. This is the 4th such time by the FED this year. During the next years we will see multiple more interest rates ‘hikes’ with it the tightening of credit and also quantitative tightening which will send stock markets down the drain. This week brought the DOW down by 1,500 points making it a complete disaster. It was the DOW’s worst week since 2008. This is now reminiscent of the job market where a survey showed that 3 of 5 workers haven’t gotten a pay raise in a year.
Equity markets worldwide are experiencing a downward trend, most notably the DOW Industrial and Transportation averages already crossed the line of the death cross, meaning the bear has arrived. The U.S. corporate debt is up to 73.5% of the GDP already and the situation in emerging markets aren’t rosy either. The Shanghai Composite is down 27% since the beginning of this year while Germany’s DAX only faired a bit better slipping down by 20%.
“The death cross is a signal that short-term momentum in a stock or stock index is slowing, but the death cross is not always a reliable indicator that a bull market is about to end. Typically, the most common moving averages used in this pattern are the 50-day and 200-day moving averages. The death cross indicator has proven an accurate predictor of the most severe bear markets of the past century: 1929, 1938, 1974 and 2008. Investors who got out of the stock market at the start of these bear markets avoided large losses that were as high as 90% in the 1930s. Because a death cross is a long-term indicator […]” – Source
Turkey is already experiencing an economic crisis its currency, the lira fell by 40% just this year. The U.S. sanctions and tariffs imposed on the country are of very political nature, they are essentially punishing Turkey for realigning herself with Russia and providing some assistance for Syrian president Al-Assad who is fighting Western-backed proxy armies popularly dubbed terrorist groups within the border of his own country. Back in September, the central bank of Turkey raised interest rates to 24% aiming to combat inflation.
As I have stated before, the U.S. is already in a recession because of the inversion of the 2-5 and 3-5 yield curves while the 2-10 is surely going to invert soon it’s only a matter of time now.
Dire signals are emanating from both the International Monetary Fund (IMF) and the International Bank of Settlements (IBS) – the central bank of central banks, both of these institutions raising their concerns about the current situation, a predicament which is much worse than 2008 was. Both of these institutions are calling for a “One World Currency” and world governance (aka world government) the only way to prevent the impeding crisis and the fall of the United States which will closely resemble to collapse of the Soviet Union (last days of the USSR – pictures).
The job market is ‘too good to be true’ U.S. unemployment is at 3.7% the lowest in nearly 50 years. Of course, the definition of unemployed only includes those a fraction of de facto unemployed people.
According to ILO (International Labour Organization) definition, unemployment rate is the proportion of unemployed persons among all economically active (employed and unemployed) persons of a certain age group.
“Here ‘unemployed according to ILO definition’ is a person which satisfies the following three conditions:
- (a) did not have a job during the survey week;
- (b) has been actively seeking a job1 during the past four weeks;
- (c) is ready to start working within two weeks if a suitable job is offered.” – Source
So if you aren’t working since Ronald Reagan but you are still looking for a job, you aren’t included.
If we look at the graphs and compare the unemployment rate with U.S. recessions we can quickly determine that before a recession the unemployment rate is very low, in this case about the lowest in 50 years signaling the possibility of an even deeper economic crisis.
Meanwhile, storm clouds are gathering above Deutsche Bank, it’s stock hit a new record low yesterday of just 6.84 euros before bouncing back just a bit. Nobody is interested in taking on all the toxic assets the bank has been collecting over the years, its derivative exposure is now $60 trillion, only second to Goldman Sacs’. Remember, Deutsche Bank is impossible to bail out since that $60 trillion is about 3 times of the annual U.S. GDP and greater than 16 times of German GDP. If Deutsche Bank goes so does the financial sector of Europe creating havoc and wrecking the shores of the United States.
Interestingly so the topic of Deutsche Bank with other interesting discussions, like debt forgiveness and why the Chinese economy can grow at the rate it does, was mentioned in yesterday’s edition of the Keiser report.