- Tomorrow we have the most highly anticipated Fed meeting ever, but this will not be the last time I’ll say this
- We’ll also be anticipating October and December if the Fed does not raise interest rates in September
- The odds are they won’t do it
- I put a Bloomberg story on my Facebook page: Yellen’s former aid says a rate hike would be a serious error
- Why? The official target for the Fed Funds Rate now is at a range of 0 to .25 basis points
- The Fed is contemplating a rate of .25 which is the high end of the existing range
- If they decide to keep the rate at .25, all they’ve done is fixed the rate at the high end of the range
- This is not even a rate hike
- Why would this be a disaster?
- Isn’t that an admission that the economy is fragile?
- When Alan Greenspan lowered interest rates to 1% after the dot com bubble and after Sept 11, people though, this is ridiculous!
- Now we are talking about raising rates to a quarter of that and it is considered a disaster
- What is going to change between September and October and October and December – unless they get worse
- The serious error is to prick the bubble economy
- The more serious error is for the Fed to raise rates and then admit that it was a mistake they lose credibility
- We’re going into recession regardless
- If they raise rates, they will have to launch QE4 sooner
- Any rate hike will sow the seed of a rate cut
- On the topic of a recession, let’s talk about the economic news we got today
- The first release we got was August Retail Sales
- A rise of .3 was expected and we got a gain of .2
- These are not great numbers
- The worse number of the day was Empire State Manufacturing: last month’s horrible number was -14.92 the lowest since 2009
- Wall Street was looking for -.5
- September was -14.67; barely an improvement
- Back to back the worse numbers since the great recession
- The media barely reported on this number at all, but if it were good, it would have been in the headlines
- The Redbook Year over Year Same Store Sales Index has collapsed – right now it is at 1.3
- Previous years ranged between 3% and 5%
- Industrial Production was expected to fall by .2, but fell by .4
- Capacity Utilization dropped from 78 last month to 77.6
- Manufacturing output dropped as well to -.5
- Auto manufacturing had its biggest drop in 4 years
- I have been talking on this podcast about the Auto Bubble and we are getting more evidence that the bubble has burst
- The biggest decline in manufacturing in 4 years is pretty good evidence
- The fact that there is a huge inventory of unsold cars on dealers’ lots is evidence that the market is saturated
- We got more news from business inventories: up .1 as expected
- Sales are also falling, so the inventory to sales ration is still 1.36, a notch below the record high from the ’08 financial crisis
- Inventories have to come down a lot more because sales are not there
- They are not there because the economy is weak
- Earlier strong GDP growth was from inventory buildup
- All the evidence points to recession
- Employment numbers, which are theoretically good, are a lagging indicator
- All the leading indicators of the economy are flashing a warning
- Yet the media is ignoring the warnings and paying attention to Janet Yellen
- She is pretending the economy is strong so she can pretend to raise rates
- We need to allow the economy to go through that unfortunate crisis and allow the bubble economy to burst and the real economy to heal
- The Federal Reserve shot us up with all these monetary drugs so unfortunately we have to check into monetary rehab
- The alternative is to die of a overdose in the form of a currency crisis
- In any event we will find out on Thursday and you will get my take on it late Thursday afternoon here on my podcast
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