The Fed Is Out Of Bullets - It Will Soon Be Obvious

U.S. Has No Ammunition To Deal With Another Recession

The U.S. economy hasn’t completely recovered from its last recession – what some have called the biggest since the Great Depression – but another one could be just around the corner, according to one economist.
In an opinion piece in the Financial Times, Monday, HSBC chief economist Stephen King said that historical trends shows that recessions hit every eight or nine years and the last one in the U.S. ended six years ago. If history is any indication, the U.S. could be facing another recession in the next three years. What’s worse, he said, is that policy makers don’t appear to have the ammunition needed to fight another one.
King noted that there could be several triggers for the next recession; a collapse in “overvalued equity markets,” leading to an “implosion of demand;” a sizeable slowdown in the Chinese economy; systemic failures across the pension fund and life-insurance industries; even a premature tightening of interest rates from the Federal Reserve.
My view:

We have long suggested on this site that the Federal Reserve can not revive the economy with its magical monetary policies.

Yes, statistics can be manipulated to make the economy appear better than the average citizen experiences, but over time, credibility of the headlines becomes questionable.

Tomorrow is another day where FOMC minutes are released.  Some observers suggest the Fed will hike interest rates a bit later this year.  While this is theoretically possible, it would be quite a surprise given the poor statistics that have trickled in over the past six months.  As we head into the summer months we can expect to see more mediocre to poor economic performance measures.  At some point soon, reality will not be deniable any longer.  The Fed will need to abandon its interest rate hike plan for 2015.

If it does hike, watch for fireworks in the stock market.

If it doesn't hike watch for drama in the bond market.

Either way, the Fed is out of bullets, and many Americans are out of patience 6 years into a so called "recovery".



  1. love the analysis, really helps. Great work!

    Everyone keeps saying this market is about to crash, what a load of crap.

    Have a look at this guy from the US, his calls on the market have been killer and rediculously accurate ==>

    He is saying we are about to ROCKET higher on the stock market!

    And to think I listened to those dummies from CNBC say the EARNINGS season was gunna be HORRIFIC!!! those buggers….I have been had yet again!! Pack of liars….pissed me off


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