18 Times The Fed Has Gone Through A Rate Hiking Cycle, And 18 Times It Has Caused A Huge Stock Market Decline And/Or A Recession
Since 1913, the Federal Reserve has engaged in 18 distinct interest rate hiking campaigns, and in every single one of those instances the end result was a large stock market decline, a recession, or both. Now we are in the 19th rate tightening cycle since 1913, but many of the experts are insisting that things will somehow be different this time. They assure us that the U.S. economy will continue to grow and that stock prices will continue to soar. Of course the truth is that if something happens 18 times in a row, there is a really, really good chance that it will happen on the 19th time too. For years I have been trying to get people to understand that our country has been on an endless roller coaster ride ever since the Fed was created back in 1913. Things can seem quite pleasant when the economy is on one of the upswings, but the downswings can be extremely painful.
It was economist Lance Roberts that pointed out this correlation between rate hiking cycles and economic troubles. When I came across his most recent article, it really got my attention…
To support his claims, he posted this chart…
So far, however, there hasn’t been a huge stock market drop or a recession during this rate hiking cycle.
Has something changed?
Is the 19th time going to be fundamentally different?
Roberts believes that the unprecedented intervention by the Fed that we have seen in recent years that has fueled corporate buybacks has successfully “delayed the inevitable stock market correction”…
I definitely agree with Roberts – a colossal stock market correction is inevitably coming.
And the warning signs are all around us. As I have discussed so many times before, junk bonds are often an early warning sign for a major financial crisis, and it is extremely interesting to note that it looks like Deutsche Bank is planning a “fire sale” of their energy junk bonds. The following analysis comes from Zero Hedge…
To me, that is one of the strongest indications yet that things are about to take a major turn for the worse for the global financial system.
And even former Federal Reserve chair Ben Bernanke is sounding quite pessimistic these days. The following comes from a Bloomberg article entitled “Bernanke Says U.S. Economy Faces a ‘Wile E. Coyote’ Moment in 2020”…
When you read that quote, alarm bells should have been going off in your head.
If his forecast is accurate, that means that the U.S. economy’s Wile E. Coyote moment will come just in time for the 2020 election…
Wouldn’t that be convenient for the elite?
U.S. voters tend to be extremely influenced by the performance of the economy, and so a major economic downturn would not bode well for Trump’s chances.
Similarly, if a major crisis erupts during the second half of this year, it will probably mean big problems for Republicans in November. Timing is everything in politics, and when the next crisis comes most voters won’t even consider the fact that it had been building for a very, very long time. All they will care about is who is in office at the time.
But for the moment, most of the “experts” are assuring us that things will be rosy for the foreseeable future. For example, a couple of prominent analysts over at Goldman Sachs are saying that tech stock prices are likely to continue to rise…
And the optimists will continue to be right up until the moment that the bubble finally bursts.
Whenever the Federal Reserve starts raising rates, it always results in a bad ending.
This time will be no different, and anyone that is trying to convince you otherwise is just being delusional.
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