Yet another day of gratuitous, grueling ups and downs, punctuated around mid-session by a swoon that had been nearly recouped by the time we went to press. If traders are thinking what I think they are thinking, they are expecting the stock market to find direction — possibly with a vengeance — once Trump’s inauguration is behind us. But suppose not? That would certainly seem paradoxical, since the transition from Obama to Trump arguably will represent the most radical political shift in American politics since the Civil War. For the moment, and perhaps for the next four years, it would appear that a quite sizable number of Americans still can’t believe November’s election results, let alone accept them. So how will Wall Street react now that the feel-good period is about to run out of steam? The good news is that it hardly matters, since the bull market has been fueled not by decision makers, but by a torrent of digital money created out of thin air by the central bank. The bad news is that there is no such thing as a perpetual motion machine, and sooner or later a stock market that has seemed to defy this immutable law will succumb to cyclical forces that lie not only beyond the control of hedge funds and money managers, but beyond all understanding.
The Good News, and the Bad…
- January 20, 2017, 12:50 pm
Accepting Deflation
Major ‘1 second event’ in accepting and acting upon Deflation.
The Fed began raising interest rates in 1977.
The Federal Funds rate was 11 percent when Carter appointed Volcker in August 1979. By the time Reagan took office in January 1981, Volcker had pushed the rate to 20 percent (the prime was 21 percent) and rates never went higher.
In the 1980 presidential election, Ronald Reagan defeated Carter. With the Fed in a position to play a crucial role in the success of the new administration, Reagan’s staff wanted to arrange a meeting between the new president and Volcker.
The two discussed several issues during the meeting. A member of Reagan’s Council of Economic Advisers noted on behalf of the administration that they recognized the Fed’s independence (Neikerk 1987). But that view was not held by everyone.
With interest rates high in the Volcker-led fight on inflation, the attacks came from both political parties. “We are destroying the small businessman. We are destroying Middle America. We are destroying the American dream,” conservative Congressman George Hansen said during a 1981 hearing (Todd 2012). During the same hearing, Democrat Frank Annunzio shouted and pounded his desk, accusing the Fed of favoring big business, and Texas Congressman Henry Gonzalez threatened to introduce a bill to impeach Volcker and most of the Fed’s other governors.
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01 20 2017,
“The date is the beginning to accept Deflation, and the start towards acting to end it.”
As, in the late 1970’s the same took place towards Inflation as the act to end it begin in the Carter years, and the extremes in sentiment towards the process ending in the Regan years.
The Prime Rate holds key in breaking the back of Deflation, as this is the ‘best customer rate’, observing a major low in all interest rates is dead ahead with breaking the back of Deflation by way of a Deflationary Crash.
A Deflationary Crash is characterized in part by a persistent, sustained, deep, general decline in people’s desire and ability to lend and borrow… The U.S. has experienced two major deflationary depressions, which lasted from 1835 to 1842 and from 1929 to 1932 respectively. Each one followed a period of substantial credit expansion.
Self-Liquidation and then latter Force Liquidation is the course.