With John Rubino & Gordon T Long
24 Minute Video
John Rubino and Gordon T Long discuss the September FOMC decision, Brazil, Japan in the context of the large number and size of recent international bank layoff announcements. They talk about what is really going on here that no one wants to talk about publicly.
FOMC Decision - An Incredibly Fragile Situation
Rubino says "It would have been a surprise if the Fed had raised rates! What is going out there is mostly pretty bad. The Fed is in a box right now and anything they do cares the potential for some sort of very serious unintended consequences.If they don't act in raising interest rates then that implies to the rest of the world that the Fed sees slow growth which scares the markets to do what they are doing (see chart to the right)."
"We are so leveraged right now that even a 'garden variety' equity bear market of -20% in the US and abroad cares the potential of pushing us into some sort of deflationary crash or 1930's style depression!"
"THE GUYS IN CHARGE HAVE NO IDEA WHAT TO DO! EXPECT A SHIFT TOWARDS RENEWED EASING.... ITS GOING TO BE 'BIGGER AND BADDER'.... 2016 is going to be a fascinating year for continued monetary experimentation."
We are currently seeing the build up in the intellectual framework from which this will happen.
Brazil for a period of time was the Latin American country that initially got it right! They appeared to be on the verge of becoming a 'developed country' before it all fell apart. The US dollar spiked and Brazilian investment companies that had borrowed a lot of US dollars, investing them in high yielding Brazilian bonds of extraction oriented commodity companies. Now they are on the wrong site of the 'carry' with corruption concerns steadily surfacing.
"The corruption seems to have gone all the way to the top of the government! They have a political crisis as well as an economic crisis."
Japan has had the most aggressive debt monetization program of anyone in the world over the last three years where they basically tripled the balance sheet of the BOJ. It hasn't worked and Japan is not growing anymore! There inflation rate is basically zero and potentially dropping into deflation AFTER all this new money creation.
"It is clear what they do next, but proposals are now coming out of the woodwork from the easy money, Keynesian side of the spectrum which involves massive increases in money creation and government spending."
WE WILL SEE INTEREST RATES PUSHED TO NEGATIVE LEVELS IN MOST OF THE DEVELOPED WORLD AND CASH (ONE WAY OR THE OTHER) BE HOBBLED AS A STORE OF VALUE TO MAKE THAT HAPPEN!"
"For a long time global trade grew faster than GDP. More and more of our wealth was coming from trade. It turns out that most of that was do to China borrowing $15-$20 Trillion to snap up most of the global commodities. Everyone was getting richer on paper but that is turning out to be a mirage."
... there is much, much more in this 24 minute video discussion.