Tag Archives: Recession

The Real Reasons Why The Media Is Suddenly Admitting To The Recession Threat

(Brandon Smith) One thing that is important to understand about the mainstream media is that they do tell the truth on occasion. However, the truths they admit to are almost always wrapped in lies or told to the public far too late to make the information useful.   Dissecting mainstream media information and sifting out the truth from the propaganda is really the bulk of what the alternative media does (or should be doing).  In the past couple of weeks I have received a rush of emails asking about the sudden flood of recession and economic crash talk in the media.  Does this abrupt 180 degree turn by the MSM (and global banks) on the economy warrant concern?  Yes, it does.

The first inclination of a portion of the liberty movement will be to assume that mainstream reports of imminent economic crisis are merely an attempt to tarnish the image of the Trump Administration, and that the talk of recession is “overblown”.  This is partially true; Trump is meant to act as scapegoat, but this is not the big picture.  The fact is, the pattern the media is following today matches almost exactly with the pattern they followed leading up to the credit crash of 2008.  Make no mistake, a financial crash is indeed happening RIGHT NOW, just as it did after media warnings in 2007/2008, and the reasons why the MSM is admitting to it today are calculated.

Before we get to that, we should examine how the media reacted during the lead up to the crash of 2008.

Multiple mainstream outlets ignored all the crash signals in 2005 and 2006 despite ample warnings from alternative economists. In fact, they mostly laughed at the prospect of the biggest bull market in the history of stocks and housing (at that time) actually collapsing. Then abruptly the media and the globalist institutions that dictate how the news is disseminated shifted position and started talking about “recession” and “crash potential”. From the New York Times to The Telegraph to Reuters and others, as well as the IMF, BIS and Federal Reserve officials – Everyone suddenly started agreeing with alternative economists without actually deferring to them or giving them any credit for making the correct financial calls.

In 2007/2008, the discussion revolved around derivatives, a subject just complicated enough to confuse the majority of people and cause them to be disinterested in the root trigger for the economic crisis, which was central bankers creating and deflating bubbles through policy engineering. Instead, the public just wanted to know how the crash was going to be fixed. Yes, some blame went to the banking system, but almost no one at the top was punished (only one banker in the US actually faced fraud charges). Ultimately, the crisis was pinned on a “perfect storm” of coincidences, and the central banks were applauded for their “swift action” in using stimulus and QE to save us all from a depression level event. The bankers were being referred to as “heroes”.

Of course, central bank culpability was later explored, and Alan Greenspan even admitted partial responsibility, saying the Fed knew there was a bubble, but was “not aware” of how dangerous it really was. This was a lie. According to Fed minutes from 2004, Greenspan sought to silence any dissent on the housing bubble issue, saying that it would stir up debate on a process that “only the Fed understood”. Meaning, there was indeed discussion on housing and credit warning signs, but Greenspan snuffed it out to prevent the public from hearing about it.

Today we have a very similar dynamic. Use of the “R word” in the mainstream media and among central banks has been strictly contained for the past several years.  In the October 2012 Fed minutes, Jerome Powell specifically warned of what would happen if the Federal Reserve tightened liquidity and raised interest rates into economic weakness.  He warned that this would have negative effects on the stimulus addicted investment environment that the central bank had fostered.  This discussion was held back from the public until only a year-and-a-half ago.  As soon as Powell became chairman, he implemented those exact actions.

Only in the past year has talk of recession begun to break out, and only in the past couple of weeks have outlets become aggressive in pushing the notion that a financial crash is just around the corner. The reality is that if one removes the illusory support of central bank stimulus, our economy never left the “Great Recession” of 2008.  Signals of renewed sharp declines in economic fundamentals have been visible since before the 2016 elections.  Alarms have been blaring on housing, auto markets, manufacturing, freight and shipping, historic debt levels, the yield curve, etc. since at least winter of last year, just as the Fed raised rates to their neutral rate of inflation and increased asset cuts from the balance sheet to between $30 billion to $50 billion or more per month.

The media should have been reporting on economic crisis dangers for the past 2-3 years.  But, they didn’t give these problems much credence until recently.  So, what changed?

I can only theorize on why the media and the banking elites choose the timing they do to admit to the public what is about to happen. First, it is clear from their efforts to stifle free discussion that they do not want to let the populace know too far ahead of time that a crash is coming. According to the evidence, which I have outlined in-depth in previous articles, central banks and international banks sometimes engineer crash events in order to consolidate wealth and centralize their political power even further. Is it a conspiracy? Yes, it is, and it’s a provable one.

When they do finally release the facts, or allow their puppet media outlets to report on the facts, it seems that they allow for around 6-8 months of warning time before economic shock events occur. In the case of the current crash in fundamentals (and eventually stocks), the time may be shorter. Why? Because this time the banks and the media have a scapegoat in the form of Donald Trump, and by extension, they have a scapegoat in the form of conservatives, populists, and sovereignty activists.

The vast majority of articles flowing through mainstream news feeds on economic recession refer directly to Trump, his supporters and the trade war as the primary villains behind the downturn. The warnings from the Fed, the BIS and the IMF insinuate the same accusation.

Anyone who has read my work for the past few years knows I have been warning about Trump as a false prophet for the liberty movement and conservatives in general. And everyone knows my primary concern has been that the globalists will crash the Everything Bubble on Trump’s watch, and then blame all conservatives for the consequences.

To be clear, Trump is not the cause of the Everything Bubble, nor is he the cause of its current implosion. No president has the power to trigger a collapse of this magnitude, only central banks have that power. When Trump argues that the Fed is causing a downturn, he is telling the truth, but when he claims that recession fears are exaggerated, or “inappropriate”, he is lying.   What he is not telling the public is that his job is to HELP the Fed in this process of controlled economic demolition.

Admissions of crisis in the media are coinciding directly with Trump’s policy actions. In other words, Trump is providing perfect cover for the central banks to crash the economy without receiving any of the blame. Trump’s insistence on taking full credit for the bubble in stock markets as well as fraudulent GDP and employment numbers, after specifically warning about all of these things during his election campaign, has now tied the economy like a noose around the necks of conservatives. The tone of warning in the media indicates to me that the banking elites are about to tighten that noose.

Another factor on our timeline beyond Trump’s helpful geopolitical distractions is the possibility of a ‘No-Deal’ Brexit in October.  I continue to believe this outcome (or something very similar) has been pushed into inevitability by former Prime Minister Theresa May and EU globalists, and that it will be used as yet another scapegoat for the now accelerating crash in the EU.  With Germany on the verge of admitting recession, Deutsche Bank on the edge of insolvency, Italy nearing political and financial crisis, etc., it is only a matter of months before Europe sees its own “Lehman moment”.  The Brexit is, in my view, a marker for a timeline on when the crash will hit its stride.

To summarize, the mainstream media and global banking institutions have two goals in informing the public about recession right now – They are seeking to cover their own asses when the next shoe drops so they can say they “tried to warn us”, and, they are conditioning a majority of the public to automatically blame conservatives and sovereignty proponents when the consequences hit them without mercy.

As the truth of a recession smacks the public in the face, the media will likely pull back slightly, just as they did in 2008, and suggest that the downturn is “temporary”.  They will claim it’s “not a repeat of the credit crisis”, or that it will “subside after Trump is out of office”.  These will all be lies designed to keep the public complacent even as the house of cards collapses around them.  The fact is, the hard data shows that economic conditions in the US and in most of the world are far more unstable than they were in 2008.  We are not looking at the crash of a credit bubble, we are looking at the crash of the ‘Everything Bubble’.

The pace of the narrative is quickening, and I would suggest that a collapse of the bubble will move rather quickly, perhaps in the next four to six months. If it does, then it is likely that Trump is not slated for a second term as president in 2020. Trump’s highly divisive support for “Red Flag” gun laws, a move that will lose him considerable support among pro-gun conservatives, also indicates to me that it is likely he is not meant to be president in 2020.  This is another sign that a massive downturn is closing in.

As events are unfolding right now, it appears that Trump has served his purpose for the globalists and is slated to be replaced next year; probably by an extreme far-left Democrat.  There are only a couple of scenarios I can imagine in which Trump remains in office, one of them being a major war which might require him to retain the presidency so the globalists can finish out a regime change agenda in nations like Iran or Venezuela.  This could, however, be pursued under a Democrat president almost as easily as long as Trump and his elitist cabinet lay the groundwork beforehand.

As in 2007/2008, it is unlikely that the mainstream would admit to a downturn that is not coming soon. Using the behavior of the media and of banking institutions as a guide, we can predict with some measure of certainty a crisis within the economy in the near term. Clearly, a major breakdown is slated to take place before the election of 2020, if not much sooner.

Source: by Brandon Smith | Alt-Market.com

Recession Alarm: US Manufacturing PMI Unexpectedly Crashes Into Contraction With Lowest Print In 10 Years

With all eyes focused squarely on Germany’s dismal PMI prints, which have been in contraction for over half a year, the investing public forgot that the US economy is similarly slowing down. And moments ago it got a jarring reminder when Markit reported that the US manufacturing PMI unexpectedly tumbled into contraction territory, down from 50.4 last month, and badly missing expectations of a 50.5 rebound. This was the first print below the 50.0 expansion threshold for the first time since September 2009.

But wait, there’s more, because whereas until now the US services segment appeared immune to the slowdown in US manufacturing, in August the service PMI tumbled to 50.9, down from 53.0 in July, matching the lowest print in at least 3 years, and well below the 52.8 consensus expectation.  According to Markit, subdued demand conditions continued to act as a brake on growth, with the latest rise in new work the slowest since March 2016. This contributed to a decline in backlogs of work for the first time in 2019 to date.

Meanwhile, business expectations among service providers for the next 12 months eased in August and were the lowest since this index began nearly a decade ago.

As the report further notes, the decline in the headline PMI mainly reflected a much weaker contribution from new orders, which offset a stabilization in employment and fractionally faster output growth.

This however was offset by new business received by manufacturing companies, which fell for the second time in the past four months during August. Although only marginal, the latest downturn in order books was the sharpest for exactly 10 years. The data also signaled the fastest reduction in export sales since August 2009.

Survey respondents indicated that a drop in sales often cited a soft patch across the automotive sector, alongside a headwind to manufacturing exports from weaker global economic conditions. Meanwhile, manufacturing companies continued to trim their inventory levels in August, which was mainly linked to concerns about the demand outlook. Pre-production inventories fell for the fourth month running, while stocks of finished goods decreased to the greatest extent since June 2014 fastest reduction in export sales since August 2009.

Survey respondents indicated that a drop in sales often cited a soft patch across the automotive sector, alongside a headwind to manufacturing exports from weaker global economic conditions.

Commenting on the flash PMI data, Tim Moore, Economics Associate Director at IHS Markit said:

“August’s survey data provides a clear signal that economic growth has continued to soften in the third quarter. The PMIs for manufacturing and services remain much weaker than at the beginning of 2019 and collectively point to annualized GDP growth of around 1.5%.

The most concerning aspect of the latest data is a slowdown in new business growth to its weakest in a decade, driven by a sharp loss of momentum across the service sector. Survey respondents commented on a headwind from subdued corporate spending as softer growth expectations at home and internationally encouraged tighter budget setting.

“Manufacturing companies continued to feel the impact of slowing global economic conditions, with new export sales falling at the fastest pace since August 2009.

“Business expectations for the year ahead became more gloomy in August and remain the lowest since comparable data were first available in 2012. The continued slide in corporate growth projections suggests that firms may exert greater caution in relation to spending, investment and staff hiring during the coming months.”

An interesting nuance as noted by Viraj Patel of Arkera, is that while German economic sentiment may be troughing (granting in very contractionary territory), it is now America’s turn to slump into recession:

 

A few days ago ZeroHedge reported that the easiest way for Trump to get the Fed to launch QE was to i) start a global economic war or ii) send the US economy into recession. Based on today’s data, Trump is making great progress on the latter, and we are confident the former can’t be far behind.

Source: ZeroHedge

It’s Not Too Soon For A Fed Rate Cut, According To This Chart

  • The time between the Fed’s final interest rate hike and its first rate cut in the past five cycles has averaged just 6.6 months, according to Natixis economist Joseph LaVorgna. 
  • The bond market  has quickly pivoted, and fed funds futures are pricing in a quarter point of easing for this year, just days after the Fed forecast no more hikes for this year. 
  • LaVorgna said there are three conditions required for a Fed reversal, and that of a soft economy could soon be met.

(by Patti Domm) The bond market has quickly priced in a Federal Reserve interest rate cut this year, just days after the Fed said it would stop raising rates.

That has been a surprise to many investors, but it shouldn’t be — if history is a guide.

Joseph LaVorgna, Natixis’ economist for the Americas, studied the last five tightening cycles and found there was an average of just 6.6 months from the Federal Reserve’s last interest rate hike in a hiking cycle to its first rate cut.

The economist points out, however, that the amount of time between hike and cut has been lengthening.

“For example, there was only one month from the last tightening in August 1984 to the first easing in September 1984. This was followed by a four-month window succeeding the July 1989 increase in rates, a five-month gap after the February 1995 hike, an eight-month interlude from May 2000 to January 2001, and then a record 15- month span between June 2006 and September 2007,” he wrote.

The Fed last hiked interest rates by a quarter point in December. Last week, it confirmed a new dovish policy stance by eliminating two rate hikes from its forecast for this year. That would leave interest rates unchanged for the balance of the year, with the Fed expecting one more increase next year.

But the fed funds futures market has quickly moved to price in a full fledged 25 basis point easing, or cut, for this year.

“The market’s saying it’s going to happen in December,” said LaVorgna.

There are three conditions that need to be met for the Fed to reverse course and cut interest rates, LaVorgna said. First, the economy’s bounce back after the first quarter slump would have to be weaker than expected, with growth just around potential. Secondly, there would have to be signs that inflation is either undershooting the Fed’s 2 percent target or even decelerating. Finally, the Fed would have to see a tightening of financial conditions, with stock prices under pressure and credit spreads widening.

LaVorgna said the condition of a sluggish economy could be met.

“I don’t think the economy did very well in the first quarter just based on the fact the momentum downshifted hard from Q4, sentiment was awful, production was soft,” he said. ’I’m worried growth is close to zero in the first quarter.”

LaVorgna said he does not see much of a snap back in the second quarter.

In the current cycle, the Federal Reserve began raising interest rates in December 2015 after taking the fed funds target rate to zero during the financial crisis.

Source: by Patti Domm | CNBC

***

Americans Are Only Now Starting To Seek Higher Deposit Rates… Just As The Fed Prepares To Cut

 

Yield Curve Inverts For The First Time Since 2007: Recession Countdown Begins

The most prescient recession indicator in the market just inverted for the first time since 2007.

https://www.zerohedge.com/s3/files/inline-images/bfm960.jpg?itok=c0gP8hQC

https://i0.wp.com/northmantrader.com/wp-content/uploads/2019/03/yield.png?ssl=1

Don’t believe us? Here is Larry Kudlow last summer explaining that everyone freaking out about the 2s10s spread is silly, they focus on the 3-month to 10-year spread that has preceded every recession in the last 50 years (with few if any false positives)… (fwd to 4:20)

As we noted below, on six occasions over the past 50 years when the three-month yield exceeded that of the 10-year, economic recession invariably followed, commencing an average of 311 days after the initial signal. 

And here is Bloomberg showing how the yield curve inverted in 1989, in 2000 and in 2006, with recessions prompting starting in 1990, 2001 and 2008. This time won’t be different.

https://www.zerohedge.com/s3/files/inline-images/prior%20inversions.jpg?itok=BgnEMjCQ

On the heels of a dismal German PMI print, world bond yields have tumbled, extending US Treasuries’ rate collapse since The Fed flip-flopped full dovetard.

https://www.zerohedge.com/s3/files/inline-images/bfm14B0.jpg?itok=Ez0lIVd_

The yield curve is now inverted through 7Y…

https://www.zerohedge.com/s3/files/inline-images/bfm1EA4.jpg?itok=xPH6zVO8

With the 7Y-Fed-Funds spread negative…

https://www.zerohedge.com/s3/files/inline-images/bfm2864.jpg?itok=HqnSx1RR

Bonds and stocks bid after Powell threw in the towell last week…

https://www.zerohedge.com/s3/files/inline-images/bfmA98E.jpg?itok=D4zUXHf3

But the message from the collapse in bond yields is too loud to ignore. 10Y yields have crashed below 2.50% for the first time since Jan 2018…

https://www.zerohedge.com/s3/files/inline-images/bfm5670.jpg?itok=rocy5sKV

Crushing the spread between 3-month and 10-year Treasury rates to just 2.4bps – a smidge away from flashing a big red recession warning…

https://www.zerohedge.com/s3/files/inline-images/bfm36A8.jpg?itok=3cfUyMJ1

Critically, as Jim Grant noted recently, the spread between the 10-year and three-month yields is an important indicator, James Bianco, president and eponym of Bianco Research LLC notes today. On six occasions over the past 50 years when the three-month yield exceeded that of the 10-year, economic recession invariably followed, commencing an average of 311 days after the initial signal. 

Bianco concludes that the market, like Trump, believes that the current Funds rate isn’t low enough:

While Powell stressed over and over that the Fed is at “neutral,” . . . the market is saying the rate hike cycle ended last December and the economy will weaken enough for the Fed to see a reason to cut in less than a year.

https://www.zerohedge.com/s3/files/inline-images/bfm1B73_0.jpg?itok=iZGfa7C7

Equity markets remain ignorant of this risk, seemingly banking it all on The Powell Put. We give the last word to DoubleLine’s Jeff Gundlach as a word of caution on the massive decoupling between bonds and stocks…

“Just because things seem invincible doesn’t mean they are invincible. There is kryptonite everywhere. Yesterday’s move created more uncertainty.”

Source: ZeroHedge

10Y Treasury Yield Tumbles Below 2.50% As 7Y Inverts

The bond bull market is alive and well with yesterday’s bond-bear-battering by The Fed extending this morning.

10Y Yields are back below 2.50% for the first time since Jan 2018…

https://www.zerohedge.com/s3/files/inline-images/bfmCA1F.jpg?itok=_jgnif7R

…completely decoupled from equity markets….

https://www.zerohedge.com/s3/files/inline-images/bfm51AD.jpg?itok=s4YZh3r-

The yield is now massively inverted to Fed Funds…

https://www.zerohedge.com/s3/files/inline-images/bfm8BAA.jpg?itok=hEx0M8LV

With 7Y yields now below effective fed funds rate…

https://www.zerohedge.com/s3/files/inline-images/bfm5F7C.jpg?itok=yYvetY6-

Source: ZeroHedge

Recession Signal Getting Louder: 5-Year Yield Inverts With 3-Month Yield

The yield curve is inverted in 11 different spots. The latest is 5-year to 3-month inversion.

https://www.zerohedge.com/s3/files/inline-images/2019-02-27_5-47-38.jpg?itok=PW46u5cc

The yield curve recession signal is louder and louder. Inversions are persistent and growing.

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2810%29_1.jpg?itok=a4nvYnOV

Let’s compare the spreads today to that of December 18, the start of the December 2018 FOMC meeting.

Yield Curve 2019-02-26 vs December and October 2018

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2811%29_1.jpg?itok=fBQyAcf-

Yield Curve Spread Analysis

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2812%29_1.jpg?itok=rSGh9O9m

Spread Changes

  • Yellow: Spreads Collapsed Since October (1 Month to 5 Years)
  • Pink: Spreads Remained Roughly the Same (7 Year)
  • Blue: Spreads Increased (30-Year and 10-Year)

Something Happening

Something is happening. What is it?

https://www.zerohedge.com/s3/files/inline-images/2019-02-27_5-51-51.jpg?itok=EnviRvls

Possibilities

  1. The bond market is staring to worry about trillion dollar deficits as far as the eye can see
  2. The bond market has stagflation worries
  3. The bond bull market is over or approaching

My take is number one and possibly all three.

An in regards to recession the economy is weakening fast.

Source: by Mike Shedlock via MishTalk| ZeroHedge

***

Core US Factory Orders Suffer Worst Slump In 3 Years

US core factory orders (ex transports) fell for the second month in a row in December. This is the worst sequential drop since Feb 2016.

New orders ex-trans fell 0.6% in Dec. after falling 1.3% the prior month.

https://www.zerohedge.com/s3/files/inline-images/2019-02-27_7-13-00.jpg?itok=bUbibSEj

The headline factory orders rose 0.1% MoM (well below the 0.6% MoM gain expected).

Capital goods non-defense ex aircraft new orders for Dec. fall 1% after falling 1.1% in Nov.

Non-durables shipments for Dec. fall 1% after falling 2% in Nov.

Not a pretty picture, but it was an 8.0% drop in Defense spending that triggered the weakness – so we’re gonna need moar war.

What Caused the Recession of 2019-2021?

The banquet of consequences is now being served, but the good seats have all been taken.

(Charles Hugh Smith) As I discussed in We’re Overdue for a Sell-Everything/No-Fed-Rescue Recession, recessions have a proximate cause and a structural cause. The proximate cause is often a spike in energy costs (1973, 1990) or a financial crisis triggered by excesses of speculation and debt (2000 and 2008) or inflation (1980).

Structural causes are imbalances that build up over time: imbalances in trade or currency flows, capital investment, debt, speculation, labor compensation, wealth-income inequality, energy supply and consumption, etc. These structural distortions and imbalances tend to interact in self-reinforcing dynamics that overlap with normal business / credit cycles.

The current recession has not yet been acknowledged, but this is standard operating procedure: recessions are only declared long after they actually start due to statistical reporting lags. Maybe the recession of 2019-21 will be declared at some point in the future to have begun in Q2 or Q3, but the actual date is not that meaningful; what matters is what caused the recession and how the structural imbalances are resolved.

So what caused the recession of 2019-21? Apparently nothing: oil costs are relatively low, U.S. banks are relatively well-capitalized, geopolitical issues are on the backburner and stocks, bonds and real estate are all well-bid (i.e. there is no liquidity crisis).

This lack of apparent trigger will mystify conventional economists who generally avoid the enormous structural imbalances in our economy because those imbalances are the only possible output of our Neofeudal Power Structure in which a New Nobility/Oligarchy dominates financial and political power and skims the vast majority of gains the economy generates.

The cause of the recession of 2019-21 is exhaustion: exhaustion of the pell-mell expansion of credit (i.e. credit exhaustion/saturation), exhaustion in the household and small business sectors as real-world price increases continue exceeding wage and revenue gains, exhaustion of margin expansion in stocks, and exhaustion of Corporate America’s policy of masking inflation by reducing quality and quantity: at some point, the toilet paper roll is so visibly diminished (i.e. stealth inflation) that companies can no longer reduce the quantity: at that point, they must raise prices to remain profitable, and this explains the recent surge in the sticker price of consumer staples.

Conventional economics has no answer for exhaustion: the only “solution” in a Keynesian universe is to goose borrowing by lowering interest rates and sluicing limitless liquidity into the financial system.

But if everyone who is qualified to borrow more has no interest in borrowing more, lenders turn to unqualified borrowers who will soon default. This sets up a destruction of debt, collateral and wealth that also has no policy answer. The credit impulse doesn’t expire, it simply fades away, along with “growth,” rising stock markets, higher tax revenues, etc.

The second “solution” is to substitute government spending for private spending. But in case nobody noticed, please observe that state/local and federal borrowing and spending has been soaring at insanely unsustainable rates since 2008.

https://www.oftwominds.com/photos2018/federal-debt2-19a.png

Exhaustion overtook the global economy in 2016, but central banks injected massive doses of financial adrenaline to shock the comatose patient. This “solution” continues to this day, as China’s central bank reportedly injected an unprecedented $1.2 trillion into credit markets in January alone.

The problem with financial adrenaline is that every dose reduces the impact of the next dose. At some point, the patient fails to respond. The positive effects of the stimulus become toxic, and attempts to increase dosage will only push the patient into collapse.

That’s where the global economy is today. The exhaustion that was taking hold in 2016 was stimulated away by unprecedented injections of monetary stimulus. The response to current massive injections is between tepid and zero. Adding debt to stimulate “growth” no longer works, and injecting the patient with higher doses of stimulus will only cause collapse.

https://www.oftwominds.com/photos2018/TCMDO3-18.png

The banquet of consequences is now being served, but the good seats have all been taken by those with no debt, unimpaired collateral and little dependence on central bank stimulus or central state legerdemain. All that’s left are the bad seats with horrendous consequences for perverse, distorting policies that refused to deal directly with painfully obvious imbalances.

Source: by Charles Hugh Smith | Of Two Minds