Ideally, a central bank would like the party to be rocking when it takes away the punch bowl. This party, however, is not cooperating. For every sign of exuberance (high-end real estate bubbles, equity and bond bull markets, job growth) there are five or six things going wrong, some of them in a big way. This morning’s news illustrates the point:
Oil slump resumes on U.S. supply build, expected Fed rate hike
Plunging energy prices are a tax cut for consumers but a calamity for the leveraged speculating community. And since finance now wags the economic dog, the latter effect is potentially a lot more serious. Look for a wave of bankruptcies and defaults across the energy world in 2016.
Why the current credit crisis might be 35 times worse than you thought
The failure of Third Avenue high yield fund spooked the market, leading many to wonder what would blow up next. Yahoo Finance crunched the numbers and found a long list of other funds in similar straits, most of which are concentrated in energy assets, and concluded that liquidity problems are about to become a lot more widespread.
Freight Shipments Hammered by Inventory Glut, Weak Demand
Wolf Richter’s blog notes that “In November, the number of freight shipments in North America plunged 5.1% from a year ago, according to the Cass Freight Index. It hit the worst level for any November since 2011.”
Baltic Dry Crashes To New Record Low As China “Demand Is Collapsing”
This measure of shipping rates fell to its lowest level ever, indicating that global trade is shrinking — something which simply doesn’t happen outside of recessions (and is rare even then).
US Markit flash manufacturing PMI slips to three-year low in December
This measure of the manufacturing sector’s health is still showing expansion, but at a dramatically slower rate. Another few months like the last one and this part of the economy will be back in recession.
US industrial output falls as manufacturing stays flat
From CNBC: “U.S. industrial production saw its sharpest decline in more than three and a half years in November as utilities dropped sharply, a sign of weakness that could moderate fourth-quarter growth. Industrial output slipped 0.6 percent after a downwardly revised 0.4 percent dip in October, the Federal Reserve said on Wednesday, marking the third straight month of declines. Economists polled by Reuters had forecast industrial production slipping 0.1 percent last month.
Brazil’s currency sinks after Fitch cuts rating to junk status
From MarketWatch:
“The Brazilian real dropped sharply Wednesday after Fitch Ratings cut the country’s credit to BB+, widely considered junk status, from BBB-. The real was slammed 1.1% lower against the dollar. The downgrade “reflects the economy’s deeper recession than previously anticipated, continued adverse fiscal developments and the increased political uncertainty that could further undermine the government’s capacity to effectively implement fiscal measures to stabilize the growing debt burden,” wrote Shelly Shetty, head of Latin American sovereign ratings at Fitch. Brazil’s rating could be downgraded further in part if a prolonged recession “further undermines government debt dynamics and stokes political and social instability,” said Fitch.
None of this is likely to stop the Fed from raising rates today, but it does illustrate the shocking variety of sectors and entities that are slowing, crashing, or imploding. The world’s industrial and financial systems, after three decades of excessive borrowing and almost supernaturally bad capital allocation, are much closer to generalized collapse than to the kind of sustainable growth that invites rising interest rates.
They won’t raise, not even a minuscule .25%
Well they did, by a minuscule 0.25%. All markets rocketed up. Did anyone think for a second that Yellen and company would do what they did without making sure there was a herd of HFTers ready to make sure the market response was WONDERFUL! The only real question is can they keep it up. We shall see.
“The only real question is can they keep it up.”
The only real question is can they keep it up…long enough to get the dragon-lady elected.”
FIFY.
And like the other side really has something to offer but be very afraid of the muslims.
At least muslims have a well-documented, easily-verifiable track record of actively murdering scores of innocent people.
Kinda like climate change.
Kinda like the Bush neocon stupidity. I’m sure there are innocent people who would rather have had Saddam Hussein still alive over what’s going on now. The torture has left a stain that will stay with us for a long time.
Your childish ignorance is laughable. You would compare ‘water-boarding’ with burning people alive in cages, stoning women to death, and throwing people off buildings?
The world doesn’t give a sh!t about Abu Ghraib. Not the Pope, nor Barack Obama, nor Bernie Sanders.
Stay safe in your precious, perfect, snow-flake world, Dan. We’ll make sure the world never asks anything substantive of you.
This won’t last 1 year…back down
Yet with al of this, the ONLY news on the news channels was the increase in housing starts which was at a 8 year high. also the low unemployment rate at 5%. The news media is nothing more then a press agent for the FED announcing all the “GOOD” news that is causing a rate increase. I do not believe anyone att he FED has any idea what is really going on. I hope they announce a 50 basis increase today and signal many more to come next year
(3,…2,…1,…) Release the Kraken….
Today marks the beginning of the coming collapse, just like in July of 2007.
That the world, really, the WORLD, revolves around the actions of a bunch of pointy headed, f’n academics who prognosticate like the Wizard of Oz shows is just how dearly we need a gold standard. Hell, ANY standard, beyond the clown car standard we have now.
Gold? Consider lead. You know, full metal jacket lead.
The Federal Raised short term rates vt 0.25 % to mop liquidity by a small % after 7 years low low rates near ZIRP, This would have series of effect on the currency market as USD now becomes a safe haven being stronger but it would have a series of effect Globally . In the meanwhile the white house and congressional leaders appears to have agreed on fiscal policies for end of the year tax increase as an additional liquidity mopping up of liquidity with new spending packet packet for the Government throughout 2016 but still where the Government deficit would also be increased by hundred of billions. A 40 year ban on the exports of crude was also lifted and has its own consequences for support of Obama’s health care but it would have an effect on US oil benchmark price with a giant windfall of US oil industry. The Government would also give some tax breaks for businesses and for other services where there is a need . WE can thus notice that both the monetary and Fiscal policies are mopping up liquidity now which means the people would face over tight liquidity problem except that the liquidity is now in the hands of Big Corporations like the OIL industry and in the hands of the Government. The pricing to be determined by the market would be lost would be lost with serious liquidity and related problems and Economic problems . These problems would have also Global effect especially in countries like Brazil ,Argentina Venezuela and China among many other nations . The currency war would further be intensify with China’s Yuan would be further distanced from the USD and Yuan may float or May be pegged with with a basket of weaker currencies for the YUAN to be competitive in international Trade and international services as against a stronger USD . The YUAN Backed by Gold would emerge as a stronger contender with more adopting Gold backed Yuan for international trade trade and in this way by default posing the most serious challenge to the USD as the main Global reserve currency . Saudi in order to retain a big Market control would now be forced to lower the price of Oil in the face of bigger competition from oil exports by US based oil Companies – I believe the US moves would created more serious Global volatility including Greater economic instability in the US too
My guess is that the ‘powers that be’ have decided that the only way to keep the entire global economy off life support is to ram the dollar higher. That way, the American consumer gets more buying power without an increase in wages. Our indebtedness will increase, but none of it is ever going to get paid in honest dollars anyway, so what’s the BFD.