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The End Game Is Near: US On the Brink of Recession

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The Fed cannot win this game.

Christopher-LemieuxSMBullion.Directory precious metals analysis 4 June, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Twitter @Lemieux_26

The end game is near, and the Fed will stand to loose all of its credibility as the house of cards crumble. In a shocking move, the International Monetary Fund (IMF) managing director Christine Lagarde voiced that the Federal Reserve should not raise rates until 2016.

Although it is unlikely that the Fed will raise rates given the current deteriorating economic environment and low headline inflation, it is the first time the IMF head openly voiced what the Fed should do in regards to monetary policy.

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It is conspicuous how weak the US and global economy is and how greatly a rate hike could throw financial markets into chaos. However, as Lagarde asked the Fed to kindly postpone the rate hike, she tried to cover it up by saying “we still believe the underpinnings for continued expansion are in place (Bloomberg).” The IMF believes the US is continued for expansion so much that it cut the growth forecast from 3.1 percent to 2.5 percent – in line with the QE-capped growth rate.

With the IMF still believing the best is to come, there is a brave individual willing to stick his neck out and say the US will be in a recession this year! Raoul Pal, the Global Marco Investor newsletter, has pointed out key data points (the same data points that have been put forth on Bullion.Directory) as to why the US will be in recession, including industrial production that has declined for five straight months. He also pointed out that retail sales and durable goods are hinting at a recession of CNBC today. Pal said the likelihood of a recession is growing.

Pal also believes the dollar will continue to strengthen, potentially to 120-125, which will cause crude to plummet to$20-30 per barrel. Personally, I do not believe the dollar will reach those levels without the Federal Reserve stepping in.

However, it goes to show what kind of picture is painted when all off the economic data is looked at and not just the humdrum 200k non-farm payroll numbers because even that is flawed.

There is no way the Fed can successfully tighten monetary policy under current circumstances, and the awareness is spreading.

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