Central Bankers Can't Stop The Business Cycle

By: Gordon Long | Fri, Oct 21, 2016
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Nor The Death Blow Of The Post Us Election Recession

The central bankers are capable of achieving many extraordinary results but not all economic and financial problems can be solved by central bankers. Central Bankers for example have the power to solve liquidity issues, but it is impossible for them to solve solvency issues.  Central Bankers through Financial Repression can transfer risk , however they can't remove it from the system. Additionally, Central bankers may be able to delay a recession temporarily, but  they can't prevent the business cycle from running its natural course.

This inability to control the business cycle has the potential to be the unavoidable trigger that brings the great Central Bank Bubble to an end.

Bubbles

The US after eight years is by most comparisons overdue a recession. Unfortunately, the next recession is going to happen when the central bankers are least capable of further attempting to slow the inevitable. The central bankers may have delayed a US recession about as far as they are capable of doing.

Average Nominal Bond Yields


A Nearly Perfect Storm Brewing

The market technicians of all persuasions are almost unanimously now calling for a major correction. What is most troubling in their work is that their indicators are not just short and intermediate term measures but critical long term indicators:

Hierarchy of Macreconomic Cycles

The mal-investment that recessions normally purge as part of a healthy capitalist system has reached such a level that deteriorating real total business investment has diverged from the S&P 500 Index as well as C&I Loans. In our opinion (which we have labeled here), sound business investment has shifted from being distorted to what can now only be described as broken. Corporate profits, sales revenues, margins and EBITDA cash-flow are all falling or are rolling over.

Stock Prices, Real Business Investment and Commercial and Industrial Loans

Every recession on record since the end of WWII (but one) has signaled the four warnings outlined here. That one exception had a completely different economic climate than the current one. The chances of a US Recession in 2017 should be considered highly likely.

US Recession Warning Signals

The problem with the next US recession  is that the magnitude of distortions and leverage in the system will potentially  quickly cascade into a full scale, unmanageable economic problem and likely a full scale protracted recession (or even worse).


A "Whiff" of Inflation

Few market watchers appear to appreciate that inflation tends to rise into and during a recession.

Inflation Creepimng into statistics

Consumer prices in U.S. rose in September at the fastest pace in five months. The Year-over-Year inflation rate is now the highest it has been since October 2014. Few are yet paying attention.

Higher price tags

What this suggests is that the Fed will most likely remain on course for an interest-rate hike this year, immediately following the US Presidential election.

To many this is exactly the wrong medicine for the economy at exactly the wrong time especially when you consider Gross Domestic Income (GDI). Fed actions would almost assure the recession.

GDP and Gross Domestic income

All US Recession discussion (currently "embargoed" by the mainstream media) will become headline discussion immediately AFTER the election, as the blame game then ensues on how the unprecedented negative campaign rhetoric was actually the root cause. This will be the politicos "cover" for massive fiscal spending and increases in the Fed's balance sheet. Of course it won't stop the recession nor the financial damage that will ensue.

Don't say you weren't warned!

 


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Gordon Long

Author: Gordon Long

Gordon T. Long
Publisher - LONGWave

Gordon T. Long

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

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