Both the Fed and the Treasury have come forward with predictions that we are not headed into a recession, though many experts disagree— some arguing that a recession is already occurring. “The U.S. economy is obviously performing exceptionally well, with continued solid job creation, inflation gradually moving down, robust consumer spending,” said Treasury Secretary Yellen just last month. “I’m not anticipating a downturn in the economy.” However, the Fed’s own quarterly report on household debt and credit points to a significant slowdown. According to Morgan Stanley’s Mike Wilson, investors will lose no matter how the debt-ceiling deadlock ends, suffering from either accelerated volatility or a slowdown in spending. While a debt default draws near, gold has been approaching its record high, with central banks adding 228 metric tons to their reserves in the first quarter. Gold’s rise during this period of high interest rates rings warning bells about the dollar’s global status.
Quoth the Raven
Our Economic Arrogance Will Be Our Undoing
Think seriously for a moment about what we were told about inflation over the last two years. As everybody knows, both the government and the Federal Reserve swore up and down to us that inflation was going to be transitory and they were, of course, dead wrong.
This wholly incorrect prognostication will be filed next to Ben Bernanke’s “subprime is contained” statement as one of the all-time worst pieces of financial and monetary analysis provided by those who are supposed to have mastery of the subject at a consequential time, ever.
Putting aside whether or not the Fed is nefarious or simply incompetent, what is far more alarming is that we continue to ascribe credibility and relevance to the same people who not only seem to have a poor understanding of the basics of economics, but also a willingness to either put their stupidity on display, or lie to the public with a straight face.
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Barron’s/Randall W. Forsyth
Gold Could Be a Winner if Debt Crisis Gets Ugly
The debt ceiling is getting to be like the weather: Everybody talks about it, but nobody does much about it. Continued confabs are slated in Washington, but the impasse between the White House and congressional Republicans continues. Based on history, it’s unlikely to be resolved until just before the X date—when the Treasury’s cash coffers are finally empty.
With that date put at June 1 by Treasury Secretary Janet Yellen, Wall Street has been moving mostly sideways with a distinct lack of volatility, for now. The most likely impetus for a deal would be a stock market tantrum, as noted here a couple of weeks ago.
There will be time enough to panic. Indeed, longtime Washington watcher Greg Valliere, chief U.S. policy strategist at AGF Investments, thinks that Congress will likely kick the can again as default approaches, perhaps until the July 4 recess or even to the end of the current fiscal year on Sept. 30.
You can read the full article, here.
Markets Insider/George Glover
The debt-ceiling standoff may be a ‘lose-lose’ situation for stocks, Morgan Stanley’s top strategist says
Investors face a can’t-win situation no matter how the debt-ceiling deadlock in Washington ends, according to Morgan Stanley’s Mike Wilson.
The bank’s chief US equity strategist indicated Monday that he agreed with clients’ view that the ongoing standoff is “a lose-lose event for markets”, with stocks suffering due to either heightened volatility or a future slowdown in spending.
“Assuming the debt ceiling is not resolved before the x-date, volatility is likely to accelerate near-term,” Wilson wrote in a research note, referring to the date the government runs out of cash.
You can read the full article, here.