Recession Watch: Panic Fed Rate Cuts Coming Up

-edited

Fed fund futures say a rate cut cycle has started. The Fed disagrees but will soon come to its senses.

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

Comments (8)
No. 1-7
cienfuegos
cienfuegos

Bingo Mish.

Irondoor
Irondoor

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.

Mish
Mish

Editor

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

Bronco
Bronco

"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.

Greggg
Greggg

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.

caradoc-again
caradoc-again

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.

BanyanTree
BanyanTree

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!