Wharton professor Jeremy Siegel is warning that the Fed is being too aggressive with its rate hikes, which is creating an extremely high risk of our economy falling into a recession. “If they stay as tight as they say they will, continuing to hike rates through even the early part of next year, the risks of recession are extremely high,” he said. In a CNBC interview, he said that it was too late to the game and that the Fed should have started tightening its monetary policy much earlier. In other news, experts are also talking about recent job numbers. Economists say strong job gains and rising wages would be considered a good thing. But these days, they’re exactly what the U.S. economy doesn’t need.
Business Insider/Zahra Tayeb
Wharton professor Jeremy Siegel says the Fed is ‘slamming on the brakes way too hard’ – and the risk of a recession is very high
Wharton professor Jeremy Siegel has warned the Federal Reserve is being overly aggressive with its monetary policy, creating an extremely high risk of the US economy tumbling into a recession.
“The Fed is slamming on the brakes way too hard,” Siegel said in a CNBC interview on Friday, referring to the central bank rapidly hiking interest rates this year in a bid to curb raging inflation. It was too late to the game, and should have started tightening its monetary policy much earlier, he added.
Inflation surged to a 40-year high in June, spurring Fed officials to execute three consecutive rate hikes of 75 basis points in recent months. The central bank has now raised its benchmark rate to a range of 3% to 3.25%, and signaled further increases in the coming months.
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Friday’s jobs report could be a case where good news isn’t really good
Investors are closely watching the nonfarm payrolls report due out Friday, but not for the usual reasons.
In normal times, strong job gains and rising wages would be considered a good thing. But these days, they’re exactly what the U.S. economy doesn’t need as policymakers try to beat back an inflation problem that just won’t seem to go away.
“Bad news equals good news, good news equals bad news,” Vincent Reinhart, chief economist at Dreyfus-Mellon, said in describing investor sentiment heading into the key Bureau of Labor Statistics employment count. “Pretty much uniformly what is dominant in investors’ concerns is the Fed tightening. When they get bad news on the economy, that means the Fed is going to tighten less.”
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The Great Recession via GoldSeek/David Haggith
It’s Full Market Meltdown Mania and the Fire Truck Is on Fire
The stock market is smart in a dumb way, but it is currently unbelievably dumb in the way that it is smart. To understand that, you have to realize that today’s stock market is not a place for investing in businesses. It used to be that, but the players have all turned it into a casino for casting bets on what the Fed is going to do and then using the Fed’s money to do it. The stocks themselves — the little pieces that companies are carved into — are just chips. They are where and how you place your bets like setting your chips on squares on the craps table or roulette table.
So, investors have made their smartest moves (as measured in money made) by simply casting bets based on their knowledge that the Fed was creating money. It was the old “Don’t fight the Fed; buy every dip.” That is smart when no one is buying business anymore, but just betting on what all the others players are going to bet. It’s just a game, and in that game, bad news was always good news because it meant the Fed would create more money to play with.
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