Source: Daily Reckoning

“Will quantitative easing soon become a permanent fixture of markets?…The Federal Reserve has lost its race with Old Man Time. The opening whistle blew in December 2015… and Janet Yellen came off the blocks with a 0.25% rate hike. If the Federal Reserve could make it across the 3.5% finishing line before recession struck,  it could then tackle the next recession with a full barrel of steam. Jim Rickards: ‘Historically, it takes 300–400 basis points of rate cuts (3–4%) to steer the U.S. economy out of recession.’ Alas… the Federal Reserve will not make it. Wall Street will not let it. It has already broken Jerome Powell. And it has him safely by the snout. Powell had the finish line in sight as recently as December… when he raised the fed funds rate to 2.50%. But the stock market plunged violently. It was within an ace of a bear market by Christmas. It took Powell’s wind away. It left him doubled over, hands on knees, breathless… and conceding the race. Within days he announced a policy of ‘patience’…code for ‘no rate hikes until we give you a clear signal.’ Stocks immediately proceeded to a lovely run of their own…But should Powell resume the race, Wall Street will be waiting for him… with its foot out. The world economy pegs along at a crawl as is. And recession could be coming up fast behind it. Now it is obvious to even the dense: The race is lost. You can expect no additional rate hikes…The market is presently giving 97% odds that the Federal Reserve will either hold steady the rest of the year — or cut rates. In either instance… the market projects it will cut rates before raising them.”

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